Pricing Strategies for Services: How to Choose Right Pricing?

Running a service business is a complex job. Service business owners face more issues with the pricing model than anybody else. 

Effective pricing strategies are one of the trickiest parts of a business. Even though competitive pricing is essential in pricing products, it is not the only factor. 

Apart from competition-based pricing, value-based pricing, economy pricing, premium pricing, penetration pricing, dynamic pricing, bundle pricing, psychological pricing, service pricing, hourly pricing, price skimming strategy, and project-based pricing are some other significant pricing models. 

When so many pricing models come into the picture, it is natural for service businesses to get confused. If the different pricing strategies puzzle you, you have come to the right place. 

This article will take you through the various pricing strategies for services, help you choose the best pricing strategy, enlighten you on the significance of selecting the right pricing strategy, and answer some of the most frequently asked questions. 

Continue reading to gain a deeper insight:

What are the Pricing Strategies?

Pricing strategy is the approach businesses adopt to price their goods or services. The pricing strategies take into consideration many factors, like profit margin, cost price, overhead costs, fixed costs, pricing model, and customers’ willingness to pay, amongst a variety of other components.

While competent pricing strategies can help a business thrive, poor pricing policies and techniques can lead to the doom of a business.

Importance of Pricing Strategy

Pricing strategies can help make or break a business. Selling your goods or services at the right price is more important than you think. Here are a few points that will make you realize the significance of pricing strategies:

  • Helps grow a business: Pricing strategies determine how many potential customers you attract to your business. While it is important to cater to your existing clientele, meeting the needs of your probable customers is also equally pertinent. A decent pricing strategy plays a pivotal role in growing a business. 
  • Assists in establishing a good brand image: Trial and error method does not work well in the case of pricing strategies. Stable price points make your clients trust you. Fluctuations and random pricing policies can dissuade buyers from buying from your business. 
  • Helpful in beating the competition: Lack of a decisive attitude can put your firm in a tough spot. Thus, it is absolutely necessary to figure out a pricing strategy that puts you ahead of your competitors.

Adopting techniques like psychological pricing, competitive pricing, and penetration pricing strategy can give you an edge over other businesses.  

The ultimate goal of learning about pricing strategy is to earn better profits and expand the clientele. If you are also looking for ways to increase your profit margins and optimize your business, we have a quick suggestion for you! 

FieldCamp will provide you with some pertinent pricing services, such as tiered pricing, wherein you provide your customers with multiple options for the same service. 

They can also assist you in coming up with the right pricing strategy, setting prices, and more. Apart from pricing services, FieldCamp also helps you communicate with your employees in the best possible way. 

Other features of the software involve scheduling and managing jobs, storing clients’ details, tracking and organizing field technicians, generating invoices, and processing online payments. 

Since it does so many things, you might confuse it with a complicated app. But that is not at all true. FieldCamp is extremely simple to use. 

It is also pretty organized, can be used by a plethora of different industries, and automates almost your entire business. Thus, FieldCamp is a handy app for all service businesses.  If pricing strategies confuse you, FieldCamp is a must-try!

13 Pricing Strategies for Services Business

Pricing strategies have a major impact on your business. They can either make your business float or sink beyond recovery. Here is a pricing strategy guide comprising many different pricing strategies to help you choose the best one for your business. Consider the following common pricing strategies that help small businesses flourish:

1. Penetration pricing 

Penetration pricing is one of the topmost pricing strategies. It is obtaining technique organizations use to draw in new clients by offering lower costs than their rivals.

This system is normally put to use when a new product or service is supposed to enter a competitive market. The business tempts target customers with a more reasonable pricing policy, further aiming to retain the clientele forever. 

Low introductory costs, free trials, and But One Get One (BOGO) offers are some common examples of penetration pricing. This pricing strategy has its fair share of pros and cons. 

The establishment of a customer base, increased efficiency, captured market share, and competition elimination are some of its pros. The cons involve reduced profit margins, unsuitability for certain products/services, and risk of failure.

2. Dynamic pricing strategy

Service businesses utilize the dynamic pricing technique pretty often as one cannot really put a price tag on a certain service. This technique is also known as flexible pricing strategy as it involves pricing the products based on market demand.  

Dynamic pricing takes into account multiple factors like competitive pricing, customer demand, supply, and other pertinent external factors. Segmented, time-based, and peak pricing are some important types of dynamic pricing.

Maximization of profits increased scope for customization, and time and cost-saving are some of the key advantages of the dynamic pricing strategy. 

The cons include the risk of cost battles, triggering negative consumer emotions, and complexity.  

3. Competitive pricing strategy 

One of the most popular pricing strategies, competitive pricing, refers to the marketing strategy where a business adjusts the price of its product or service against that of its competitors. 

Competitive pricing is the most prevalent in places where multiple firms deal in the same or similar product or service. Price skimming, lower prices, and price matching are the three kinds of competitive pricing. 

Incremented traffic, prevention of market share losses, and increased profit margins are some of the biggest pros of this pricing strategy. 

The cons of this policy include inaccuracy, lost potential profits, and decreased uniqueness. 

4. Cost plus pricing 

Cost plus pricing policy includes coming up with a selling cost by adding the markup to the price of the labor and products. 

This pricing method requires business owners to add the direct price of the materials, the cost of labor, and the products’ overhead costs, along with the fixed markup percentage of the product.  

The advantages of cost-plus pricing include simplicity of use, stable rate of return, and justifiable pricing. The disadvantages involve unsure regarding cost recovery, and higher price of product/service than required, among other things. 

5. Value-based pricing 

Value-based pricing requires businesses to switch their business model completely. This method involves pricing goods or services on the basis of their perceived value rather than their historical value. 

Perceived value entails deciphering how much the consumer is willing to pay for a particular product or service.   

This strategy works well in cases where either the emotional value of the goods/services is high or they are scarce. If your business has something unique to offer, the value-based pricing technique may work perfectly fine for you. 

Balanced demand and supply, improved quality, higher customer focus, and easy entry into the market are some of the best features of value-based pricing. 

The cons include difficulty in gauging the perceived value, especially when the client count is huge, extensive research, and complexity in fixing prices.

6. Premium pricing

The premium price strategy involves charging a greater price from your customers as opposed to your competitors. The premium pricing makes the consumers believe that your goods or services are top-notch quality. 

This is the best pricing strategy for well-established and popular firms like Apple. The pros involve increased profit margins, competitive edge, and better brand popularity. 

The cons include exclusivity, high marketing costs, limited clientele, etc. 

7. Economy pricing 

One of the most common pricing strategies, economy pricing, is mostly practiced by grocery and generic medicine stores. In this pricing strategy, goods or services are sold at lower prices to make the customers feel like they have hit a bargain. 

The profit margin is kept low in the hopes of selling more goods. Businesses earn profits through volume and not margins. 

Easy implementation, lower price, and high appeal to the customer are some of its greatest advantages. 

Putting constant effort into minimizing operational costs is essential to sustain this pricing model. Moreover, a firm needs to get a regular flow of orders to make this business model function well. 

8. Bundle pricing

Bundle pricing is a pricing strategy where multiple similar products are offered to the customer for a lower price than each item bought individually. 

McD value meals are a classic example of the bundle pricing strategy. Same item bundling, joint bundling, leader bundling, and mixed item bundling are some types of bundle pricing. 

Increased sales in general, increased sales of the products that weren’t selling quickly, and better customer satisfaction are some pros of bundle pricing. 

The cons incorporate extensive precision in the execution of the policy, customer resistance, and difficult market penetration.  

9. Psychological pricing 

Psychological pricing is one of the key pricing strategies where the prices of products or services are not rounded off. This gives customers the satisfaction that the products are of a fair price. 

Some other psychological pricing techniques include placing lower priced products next to higher priced items, buy one get one offers, and ending the products’ prices with either 9 or 5.   

Improved brand awareness, better rate of interest, and pleasing customers with plenty of choices are some of the prime advantages of this marketing strategy. 

The cons are customers growing weary of the price fluctuations, market saturation, and expectation of the lowest price.   

10. Surge pricing 

In a dynamic pricing strategy, surge pricing entails increasing the price of a product or service when the demand for it is high. 

Service businesses often use this technique to expand their profit margins and filter out excess clientele. However, it can damage your firm’s reputation. 

11. Hourly pricing 

Hourly pricing strategy is only applicable to a service business. The business owner will have to predetermine the price of a particular service, keeping in mind a number of factors. 

While its advantages include a definite profit margin and increased customer satisfaction, the downside is its complexity. A misjudgment in the overhead expenses can cause you losses! 

12. Tiered pricing 

The tiered pricing strategy incorporates segmenting the prices on the basis of the number of articles bought. After a certain number, the price of the subsequent items decreases. 

Tiered pricing helps you attract more customers and sell products quickly. Its major drawback is that it is not a very customer-friendly scheme.

13. Project pricing

Involving a lot of internal and external factors, project pricing is a complex pricing strategy. It implies a business model in which you will gauge the expenses of the project, evaluate its financial worth, and bill for the task. Normally, the project cost is paid by the undertaking client to the contractor.

A sense of security, timely payments, and definitive profit margins are the biggest pros of project pricing. However, it is a time-consuming method. Although, taking the help of a field service software like FieldCamp can render the job much easier for you.

Grow Your Service Business

Schedule and dispatch jobs, create invoices, get paid, generate service reports with our all-in-one service business Software.


Penetration pricing strategy, price skimming, economy pricing strategy, and premium pricing are the four main pricing strategies.
Cost plus pricing, competitive pricing, progressive pricing, penetrating pricing, and value-based pricing are the five levels of strategic pricing.

Firstly, take all the costs into account, including overhead costs, variable costs, direct costs, fixed costs, product production costs, service costs, and indirect costs.

Secondly, research the competitive market, and lastly, fix reasonable profit margins. Follow the above-mentioned steps for pricing your product or service.

Service pricing is the flat fee service businesses charge for a particular service. The ideal way to run a successful business is to price your services in such a way that neither do they seem unreasonable to the potential customers nor do they compromise on your profit margins.


An effective pricing strategy can help your business bloom. While pricing strategies play a significant role for all business types, service businesses may have a harder time figuring out the system. 

Since service pricing is relatively tough, one might need scheduler software for service businesses! Investing in a good field service application can take you a long way by helping you devise competent pricing policies, deal with clients, manage your workforce, and more.  

Thus, we can conclude by saying that learning about the different pricing strategies, utilizing an effective pricing strategy, and taking the assistance of a field service application is a foolproof way of running a successful business.

Author Bio

Gaurang Bhatt

Gaurang Bhatt is a techie in himself with an ability to solve problems technically and present solutions in the form of a product. He is one of the pioneers to curate FieldCamp with his 15+ years of knowledge and expertise in providing solutions to home service industries. Gaurang aims to overcome challenges faced by service business owners through software solutions and blogs.