Reviewed by the SEOPointz team · Last reviewed June 2026. The strategies below combine established pricing research with margin math we use on real stores — we’ve avoided quoting vendor stats we couldn’t stand behind. SEOPointz may earn a commission from some links; it never changes what we recommend.
Pricing is the only lever in your business that affects revenue and margin at the same time, instantly, with no extra spend. Drop a price and you might win volume but bleed profit; raise it and you might protect margin but lose the sale. The goal isn’t the “lowest” price or even the “highest” the market will bear — it’s the price that maximises profit per visitor over time. Pricing research has long made one point clear: small improvements in how well you price flow almost entirely to the bottom line, because there are no added costs to absorb them. That’s why pricing deserves more deliberate thought than most stores give it.
Start from your real costs, then stop calling it a strategy
Cost-plus pricing — landed cost plus a markup — is the natural starting point, and you do need it to know your floor. The mistake is treating it as your whole pricing strategy. Cost-plus ignores what customers are willing to pay and what competitors charge, so it routinely leaves money on the table for desirable products and overprices commodity ones. Use cost-plus to set the absolute minimum below which you lose money, then decide your actual price using the demand-side methods below. And be honest about “cost”: include payment fees, shipping, returns, and platform fees, not just the wholesale price, or your margins are fiction.
Value-based and competitive pricing: the two real anchors
Value-based pricing sets the price by what the outcome is worth to the customer, not what it costs you to provide. It’s the most profitable approach for differentiated or branded products, but it demands that you genuinely understand your buyer’s alternatives and the problem you solve. Competitive pricing — benchmarking against rivals — is unavoidable for commodities and price-comparison-heavy categories, where shoppers can see everyone’s number in two clicks. Most stores need both: value-based thinking to justify a premium where you’ve earned it, and competitive awareness so you’re not invisibly priced out on identical SKUs.
Psychological pricing: real, but a tactic not a foundation
Once your price level is right, presentation can nudge perception. The well-documented techniques are worth using because they’re cheap to apply:
- Charm pricing — ending in .99 or .95 makes a price read as a lower band ($19.99 feels closer to $19 than $20). It works best for value-positioned products; for premium goods, round numbers ($200) can signal quality instead.
- Anchoring — showing a higher reference or original price next to the current one makes the current price feel like a deal. This only works if the reference is real; fake “was” prices are illegal in many markets and corrode trust.
- Decoy and tiered pricing — offering three options makes the middle (your target) feel like the sensible choice. A deliberately less attractive high tier exists to sell the middle one.
These adjust perception by a few percent; they don’t fix a fundamentally wrong price.
Comparing the core pricing approaches
| Strategy | How the price is set | Best for | Main risk |
|---|---|---|---|
| Cost-plus | Landed cost + fixed markup | Setting your minimum floor | Ignores demand; leaves money on the table |
| Value-based | What the outcome is worth to the buyer | Branded / differentiated products | Needs real customer insight to get right |
| Competitive | Benchmarked against rivals | Commodities & comparison-heavy niches | Race to the bottom on margin |
| Dynamic | Adjusts to demand, time, or inventory | High-volume, fast-moving catalogs | Can feel unfair if customers notice swings |
| Bundle / tiered | Grouped or laddered offers | Raising average order value | Over-complex menus reduce conversions |
Protect margin without a price war
When a competitor undercuts you, matching them is the lazy and usually wrong response — it trains your market to wait for discounts and shrinks everyone’s margins. Better moves: raise the perceived value (bundles, faster shipping, a stronger guarantee) so a direct price comparison no longer applies; segment your range so you have a fighting-priced entry product and higher-margin premium options; and use free-shipping thresholds to lift average order value rather than cutting unit prices. The aim is to compete on total value, not on a single number.
Measure the right thing: profit per visitor
The most common pricing mistake is optimising conversion rate in isolation. A lower price almost always converts better — and can still lose you money. Track revenue (and ideally profit) per visitor alongside conversion rate, so you can see when a price cut that boosts orders actually shrinks total profit. Test changes on a meaningful sample, give them long enough to capture returns and repeat behaviour, and remember that the “winning” price for a launch isn’t always the winning price for a mature product.
Frequently asked questions
Is cost-plus pricing ever the right choice?
As your only method, rarely. It’s essential for knowing your break-even floor, but it ignores demand and competition. Use it to set your minimum, then price upward based on value and the market.
Does charm pricing (.99) still work?
For value- and deal-oriented products, generally yes — it nudges the price into a lower perceived band. For premium or luxury positioning, clean round numbers often signal quality better. Match the tactic to your brand, and test rather than assume.
Should I lower prices to beat a competitor?
Usually no. Cutting prices to match invites a margin-destroying race to the bottom and conditions buyers to wait for discounts. Compete on value — bundles, service, guarantees — and only adjust price when your costs or positioning genuinely justify it.
Pricing works best when it’s tied to the rest of your revenue model rather than tuned in isolation. To go further, see our guides on setting free-shipping thresholds for maximum revenue and building recurring revenue with ecommerce subscription models.
