Ecommerce Pricing Strategies: A 2025 Comparison

Proven strategies to set ecommerce product prices that reflect your brand’s value and increase profit margins.

In ecommerce, knowing how to price products isn’t altogether unlike the game show The Price Is Right.

Set your price too high and you’ll be knocked out of the game, with shoppers leaving their carts abandoned. But aim too low and another brand might come out on top as the winner.

For many online stores, determining a pricing strategy is often as simple as referring to the manufacturer’s suggested retail price (MSRP) or using a cost-plus pricing strategy, a method in which a retailer calculates the total cost and adds a markup.

But for scaling ecommerce businesses, deciding how much to charge for your products is a bit more complex. Ultimately, customers aren’t thinking about what your potential production costs are—they’re considering what a product is worth, which is entirely subjective.

When it comes to setting product prices, your goal shouldn’t just be your bottom line—it should also be your brand’s reputation. Here is everything you need to know about pricing strategies in ecommerce.

What are pricing strategies in ecommerce?

A pricing strategy is a method that an ecommerce merchant or retailer uses to price their products, taking into account production costs and revenue goals, including average order value (AOV) and lifetime customer value.

Understanding pricing strategy

What a pricing strategy is not, however, is simply a discounted price—although discounting techniques can certainly be part of your overall pricing strategy.

Your pricing strategy helps you determine what price point will result in the highest customer acquisition, customer retention, sales, profits or conversion rates—it all depends on what your goal is. Your pricing strategy influences a customer’s purchase decision.

For example, if you price your products too high, you’ll risk abandoned carts and lost sales. But if you price your products too low, you’ll lose out on profits.

Deciding how much to charge for your products is also more complex due to fluctuating market conditions.

Pricing strategies for ecommerce

There are dozens of pricing strategies, but here are eight of the strategies most commonly used by scaling ecommerce businesses.

1. Competitive pricing

Competitive pricing is a strategy that takes consumer behavior into consideration by setting a price based on what your competition charges.

It’s simple and low risk, but it doesn’t take into account your customers’ perceived value of your products. Simply put? You could miss out on profits by pricing your products too low in a “race to the bottom.”

There are apps to help track competitor pricing and apply dynamic prices for your products. For example, with Prisync you can automatically adjust prices in real time whenever a competitor’s price changes.

Pros:

• Simple to implement
• Low risk
• Helps maintain market competitiveness

Cons:

• Doesn't consider customers' perceived value
• May lead to reduced profits
• Can result in a "race to the bottom"

2. Value-based pricing

The preferred method of many ecommerce pricing analysts, value-based pricing is a strategy in which you set a price based on how much customers believe your products are worth.

Compared to competitive pricing and cost-plus pricing, value-based pricing typically results in higher markups and more profit, making it ideal for scaling businesses that are thinking long-term strategy. The goal is to set a fair price based on how much customers believe your product is worth.

This pricing strategy also works particularly well for brands that have a loyal following, such as those selling art, collectibles, and luxury or status goods.

However, it’s more difficult to set a price using this method, as it requires extensive market research and analysis. And even if your brand is a household name, you can’t rest on your laurels alone when it comes to value-based pricing.

Pros:

• Typically results in higher markups
• More profitable
• Ideal for scaling businesses
• Works well for brands with high customer loyalty

Cons:

• Requires extensive market research and analysis
• More difficult to set prices
• Risk of damaging reputation if perceived value doesn't match actual value

3. Price skimming

If you’re selling a product that’s truly innovative or one of a kind, price skimming may be the winning strategy. It involves setting a high price and lowering it when more competitors emerge and begin offering a similar product. This allows merchants to drive revenue when competition is low, then lower prices to remain competitive later down the line.

Price skimming is most frequently used by tech giants who trust that early adopters will buy a new product immediately. This is key, as price skimming isn’t successful unless you’re confident your product will be in high demand, allowing you to capitalize on early adopters willing to pay more.

Pros:

• Allows for high initial revenue
• Works well for innovative or unique products
• Can capitalize on early adopters

Cons:

• May not be sustainable long-term
• Requires confidence in product quality and exclusivity
• Risk of losing customers when competitors enter the market

4. Penetration pricing

Basically the opposite of price skimming, penetration pricing works best for a brand entering an already competitive marketplace. The key is to set your prices low to start, and raise them later. This is also where discount codes and strategies can play a critical role in winning over new customers to help develop brand awareness.

The danger of penetration pricing is that it may damage your brand’s reputation, or cause consumers to undervalue your products or perceive them as being low-quality.

Pros:

• Helps gain market share in competitive markets
• Can attract new customers quickly
• Useful for building brand awareness

Cons:

• May lead to initial losses
• Can damage brand reputation if prices are too low
• Customers might perceive products as low-quality

5. Bundle pricing

The product bundle pricing strategy is when retailers sell multiple products together for a single price. There are several approaches to bundling, with upsells, cross-sells and buy one, get one (BOGO) discounts being some of the most common.

While bundle pricing can increase sales volume, it can also run the risk of reducing profits if not done properly.

Pros:

• Can increase sales volume
• Encourages customers to buy more
• Effective for clearing inventory

Cons:

• Risk of reducing profits if not done properly
• May devalue individual products
• Customers might not want all items in the bundle

6. Psychological pricing

A technique dating back to the 1880s, psychological pricing strategies—also known as charm pricing—are the reason merchants are more likely to price something at $19.99 than $20.

Countless studies have shown that prices ending in odd numbers—particularly those ending in the number 9—tend to have substantially higher conversion rates. In Priceless: The Myth of Fair Value (and How to Take Advantage of It), author William Poundstone writes that charm prices increase sales by an average of 24% when compared to rounded numbers.

While reducing prices by one cent is the most traditional psychological pricing strategy, other methods include offering installment payments or using anchor pricing, in which a higher initial price is slashed out next to a new sale price to make the lower price seem like a better deal.

There are some tried and true tricks to putting psychological pricing into play, but most merchants determine which are most effective using A/B testing.

Pros:

• Can significantly increase conversion rates
• Leverages consumer psychology
• Various methods available (e.g., charm pricing, anchor pricing)

Cons:

• Effect may diminish over time as customers become aware
• May not work for all types of products or markets
• Requires testing to determine effectiveness

7. Cost-plus pricing

Cost-plus pricing is a strategy in which a business determines the selling price of a product by calculating the total cost of producing it and then adding a predetermined markup or profit margin. 

The markup is typically a percentage of the total cost, and is designed to ensure the business makes a profit on each sale. This method is commonly used in manufacturing and retail industries in which production costs are relatively stable and predictable.

Pros:

• Simple to calculate and implement
• Guarantees a specific profit margin
• Easy to justify prices to customers or regulators
• Provides pricing stability

Cons:

• Ignores market demand and competition
• May lead to overpricing or underpricing
• Lacks flexibility for market changes
• Doesn't consider customer perceived value
• May not incentivize cost reduction

8. Loss-leader pricing

Loss-leader pricing is a pricing strategy in which a product is sold at a loss (or a very low profit) to attract customers to the store or website in order to sell other more profitable items to them. 

While both loss-leader and penetration pricing involve offering low prices to attract customers, they differ in scope and duration. Loss-leader pricing typically applies to specific products for short-term promotions, while penetration pricing is usually a broader, longer-term strategy applied to a whole product line or brand.

Pros:

• Attracts new customers quickly
• Increases store traffic and visibility
• Effective for clearing old inventory
• Builds brand awareness

Cons:

• Initial losses on the discounted products
• Risk of customers only buying the loss leaders
• May upset competitors, potentially leading to price wars
• Can devalue the brand if overused
• Illegal in some jurisdictions if seen as predatory pricing

How to choose an effective pricing strategy

1. Define your objectives

Which pricing strategy is the best for your business largely depends on what you perceive your brand to be—and what you envision it will look like in the future.

• Is your goal to increase your profit margins or AOV?
• Do you want to retain current customers or focus on attracting new buyers?
• Do you just want to offload excess warehouse stock?
• Do you plan on launching your online business internationally?

If the latter is true, you may want to consider employing different pricing strategies according to the regions you’re selling in.

2. Know your customers

Understanding your market demographic, what they value, and how much they’re willing to spend for products is integral to setting the best price and choosing an appropriate pricing strategy.

3. Consider hiring a pricing analyst

For scaling an ecommerce store, creating the right ecommerce pricing strategy is often far more complex than just relying on competitor-based pricing alone.

If your business is growing, it may be time to consider hiring an ecommerce pricing analyst, who can assist you in assessing your production costs, analyzing consumer and market behavior, and monitoring the prices of your competition.

Examples of ecommerce pricing strategies

Fashion Nova

Fashion Nova’s influencer marketing strategy was just one of the reasons for their meteoric rise within the ecommerce fashion industry. The other reason? Their competitive pricing strategy.

Customers are encouraged to buy products at full price, with an estimated 95% of the brand’s products retailing for less than $50. Even the higher price tags won’t break the bank—you can buy a formal dress for just $75.

This isn’t very different from Fashion Nova competitors like Forever 21, and that’s exactly the point. Affordability is built-in, so the products are accessible to even more price-sensitive customers.

Klean Kanteen

Value-based pricing isn’t exclusive to luxury brands. Family-owned and B Corp–certified brand Klean Kanteen knows their target demographic well. While their insulated bottles and thermoses are priced at around $30 to $45, similar products can be found on Amazon for just $15.

So why are customers willing to pay more? It’s not just about Klean Kanteen’s advertised high performance and durability (their products come with a lifetime guarantee). It’s also that their customers are interested in buying from a company that is supporting and preserving the outdoor spaces they adventure in.

Apple

Apple is perhaps the most famous user of the price-skimming strategy frequently used by tech brands. They focus on offering a small number of high-end products and creating a halo effect, which makes customers thirst for new products. Then, once the early adopters have got the goods and competitors emerge, prices drop.

For example, when the first iPad was released in 2010 (a novel product at the time), a 64-gigabyte model would have set you back $699. With inflation, that’s about $850. But a decade later, the market is flooded with tablets from a range of manufacturers. Now, you can get a brand-new 64-gigabyte iPad for just $329.

Netflix

When Netflix launched in the late ’90s, Blockbuster still controlled the home video market. While Blockbuster was the place to go for Friday date-night movie selection, they offered some drawbacks—namely high rental fees. It cost $4.99 for a three-day rental—and even more if you returned it late.

Enter Netflix: They eliminated late fees and offered low pricing, like four movies for less than $16 per month, to penetrate the market. Once consumers were familiar with the Netflix brand and the competition was entirely wiped out, they were able to raise prices to maximize profit margins.

Roma Designer Jewelry

Working with Shopify partner Rebuy, a platform that provides personalization, marketing, and conversion optimization services, Roma Designer Jewelry employed bundle pricing in 2019 to increase their AOV.

When shoppers added an item to their cart, a pop-up offered a “Bundle and Save” option with a recommended product to pair. As a result of using cross-sell widgets, the company saw an increase of over 21% in AOV, with one in five shoppers buying a product recommended by Rebuy.

“We're constantly rotating through suggestions," Deven Davis, Roma’s cofounder told Rebuy. "We’re trying different approaches to get relevant pieces in front of our shoppers.”

Death Wish Coffee

You don’t have to look far to find examples of charm pricing—it’s on nearly every ecommerce site.

Death Wish Coffee sells their bags of beans using the number nine: One pound will cost you $19.99.

But this isn’t the only psychological pricing method Death Wish relies on: They also do a version of anchor pricing, by putting the price for one pound ($19.99) directly beside the price for two pounds ($37.99) and five pounds ($79.99). It doesn’t take a math wizard to determine that buying in bulk results in big savings, resulting in a higher AOV.

Finding the right pricing strategy for success

Choosing the right pricing strategy can mean the difference between making it to the Showcase Showdown or going home empty-handed. But that doesn’t mean you need to rely on one tactic alone—particularly as illustrated through the growth in dynamic pricing.

The same method used by airlines and hotels to sell rooms and flights over peak and slow periods is an algorithm-driven approach that adjusts prices based on market and consumer data. It's already being used by eBay and Amazon—it’s estimated that the latter changes its prices more than 2.5 million times a day to set prices lower than their competition.

As an online retailer, you want to test different pricing models to see which works best. The strategies above are a great place to start.

Ecommerce pricing strategy FAQ

What is the three-step process to determine pricing?

The three-step process to determine pricing includes:

• Define your objectives.
• Know your target audience.
• Consider hiring a pricing analyst.

What are the four types of pricing tactics?

The four types of pricing tactics are:

• Competition-based pricing
• Cost-based pricing
• Value-based pricing
• Premium pricing

What are the three C's of pricing?

The three C's of pricing are:

• Cost: The total cost of creating and selling the product, including development, production, distribution, and marketing.
• Competition: The pricing strategies and charges of competitors.
• Customer value: How customers perceive your brand and its products.

What is the difference between price anchoring and price skimming?

Price anchoring is when a company lists both a discounted price and an original price to show how much a customer can save. Price skimming is when a company charges a higher price initially and then reduces it over time.