Top 3 Pricing Strategies for Small Businesses

Choosing the perfect pricing strategy for your business is a complex endeavor. There are many factors to consider if you want to get it right. Set your price too high and people won’t buy anything from you. Set it too low and you won’t be able to stay in business at all. Yet, you do need to stand out from all the others in a competitive marketplace. So how do you find the sweet spot when it comes to charging your customers?

Ideally, you would always base your pricing strategy on hard facts and data. In reality, prices are often determined by guesswork and estimations, especially in beginning businesses. That’s why Software Advice, a company that helps buyers find Point Of Sale systems, conducted a study into the popularity of different pricing strategies among retailers (figure 1) and their effectiveness in different sectors (figure 2).

The results of this research may help you make an informed decision as to which pricing strategy you should use for your business.

Different pricing strategies

First it is important to note that a majority of retailers in the study indicated that they actually use multiple different pricing strategies simultaneously.

“Without a doubt, the most surprising trend we identified from the study is that a majority of retailers (52 percent) are implementing more than 10 pricing strategies”

Said Justin Guinn of Software Advice.

Out of the wide selection pricing strategies that retailers mentioned in the study, these are the ones they indicated as the most popular and effective:

  1. Discount pricing strategy

Discounts are effective in terms of driving sales by tying cost reductions to quantity, loyalty or special promotions. They are a quick and easy way of attracting people to your store and increasing your revenue. Accordingly, 97% of retailers in the study use discounts as a pricing strategy for their store. 48% of department store retailers even labelled it extremely effective. 70% of specialty retailers prefer discounts over any other pricing strategy. The same goes for 85% of grocery retailers and 66% of eCommerce businesses.

“This isn’t too shocking since pretty much any business can discount their prices in some way.” Says Guinn. “From our data, it’s clear that ‘Discount’ is go-to approach for almost every retailer.”

  1. Bundling pricing strategy

Product bundles are multiple products sold together for a lower price than they would be if purchased individually. For example a book series sold in its entirety or a fast-food menu including a burger, fries and a drink. Bundles generally are a solid way of increasing sales volumes and upping your margins. 90% of retailers in the study indicated bundling as a pricing strategy they use. 26% of department retailers even labelled it extremely effective. 70% of specialty retailers deemed it effective as well. Guinn explains why:

If a business is looking to unload some surplus inventory, bundling is a great incentive for consumers to not just take more off the shelves, but spend more while they’re doing it.” 

  1. Below competition pricing strategy

Pricing your products below your direct competitors is very likely to positively affect your sales and revenue. However, this strategy is difficult to maintain over a long period of time and therefore is mostly used to accomplish short-term goals. 90% of retailers in the sample indicated below competition is a pricing strategy they use. It was deemed extremely effective by department retailers with 31% and grocery retailers with 54%. 62% of eCommerce retailers even rated below competition pricing as the most effective pricing strategy.

Other pricing strategies mentioned in the study were Manufacturer Suggested Retail Price (MSRP), which entails selling your products at the price your manufacturer suggests. Odd Pricing, or having your prices end in odd figures, for example £9,99, was a popular pricing strategy as well. Price Lining, Dynamic Pricing, and High-Low Pricing were mentioned by retailers in the study too.

Figure 1 - most used pricing strategies

Figure 1 – most used pricing strategies


Figure 2 - Pricing strategies per sector

Figure 2 – Pricing strategies per sector

Using your Point Of Sale to choose pricing

Nowadays, it is no longer necessary to determine pricing by the use of an old school calculator alone. 51% of retailers indicated they use software to determine the right price for their products instead. 61% state that the software they use is actually integrated in their Point Of Sale.

Their Point Of Sale lets them track sales, inventory and transactions in real time. This enables retailers to test which pricing strategies actually work best for their business, for example by applying different strategies to different product categories or even in different stores.

“This is nice example of the functionality of the retail software these businesses have implemented.” Guinn says. “By properly utilizing pricing software, retailers can reach a variety of customer demos with the pricing tactics that are right for them. This usually equates to a higher number of customers spending more money, more frequently.”

About the research

The study was conducted among 395 retailers from The U.S., India, Mexico, the U.K., Germany and more. The retailers asked to participate (figure 3) are responsible for the pricing strategies of their respective businesses and are moderately to very knowledgeable on the subject. You can read the full report and results here.


Figure 3 – Research participants


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