BDC Outlines 5 Common Pricing Strategies for Businesses

The Business Development Bank of Canada (BDC) has published guidance detailing five common pricing strategies available to businesses. The article underscores that selecting the correct price point is critical for both profitability and sales volume.

Strategies discussed include cost-plus pricing, competitive pricing, price skimming for new products, penetration pricing for market entry, and value-based pricing. BDC emphasizes that customer perception of value significantly influences pricing, often more than the seller's production costs.

Cost-plus pricing involves calculating costs and adding a desired profit margin. Competitive pricing aligns product or service prices with those of similar offerings on the market. Price skimming strategy begins with a high price for new or innovative products, which is then lowered over time.

Penetration pricing is used to enter a competitive market with a low price, intended to be raised later. Value-based pricing bases the price on what a customer believes the product or service is worth. The BDC provides resources to aid businesses in choosing the most suitable strategy for their specific circumstances.