Effective pricing is one of the most powerful levers to drive profitable growth, with even small price changes yielding outsized impacts on margins. Any solid go-to-market strategy needs a well-structured pricing approach to capture value, win customers, and sustain competitive advantage.
In this blog post, we’ll go over the core elements typically featured in a pricing strategy presentation from a data-based starting point to a systematic and analytical approach to pricing changes on to implementing these in practice. Let’s dive in.
Pricing strategy is essentially deciding what the prices are for your company’s products and services. Prices are both how much you charge (e.g., $20) and how you charge your customers (e.g., a subscription model).
However, within that definition there is plenty of room to range and pricing strategy also refers to the overarching approach your company chooses for their pricing. For example, a company looking to gain traction and users may lean towards a free or freemium model for consumers (think players like Facebook or Spotify), while a luxury goods company may explicitly choose a premium pricing strategy to maintain exclusivity.
In general, there are three levels of decisions in a pricing strategy:
A good pricing strategy should be built on an analytical, data-driven understanding of your customers, your competitors, and your own unit economics. It must ultimately ensure profitability and a sustainable business model, meaning the pricing strategy should thread the needle between appeal to customers and their perceived value of your goods and services, while covering costs and delivering on financial targets.
The pricing strategy presentation will often include a section on current prices and potential leaks or improvement opportunities, a section on competitive or comparative products and services to serve as benchmarks, and a section on chosen pricing approach and detailed pricing structure and tactics.
Pricing strategy is important for a number of reasons. First and foremost, your pricing strategy determines whether you’re actually able to turn a profit and make money on a per unit basis. Pricing is one of the single greatest drivers to increase revenue and profitability.
Second, pricing strategy is crucial for ensuring your products are attractive to your customer segments and for finding the optimal structure and price point to maximize your business objectives.
Third, having a robust pricing strategy and continuous optimization and pricing governance means you are able to systematically set and update prices, and are no longer flying blind in price setting.
Creating a McKinsey-level pricing strategy requires a simple but systematic approach. Here we go over nine steps for you to follow to build your own best-practice strategy.
The first step is to build a solid understanding of your point of departure. In practice, this means using data to understand a) which restrictions you have on pricing in terms of unit economics etc., b) how your pricing strategy is current fairing in terms of potential price leakage, unprofitable customers or products etc. and c) understanding how sophisticated your organization currently is at pricing and how prices are set and updated.
A pricing strategy must ultimately ensure profitability and a sustainable business model. While pricing to customer value is paramount, companies cannot ignore their cost structure and margin requirements. Prices need to cover costs and deliver on financial targets, so understanding unit economics is critical.
In best-practice pricing, costs serve as the pricing floor, and companies meticulously manage margins by controlling discounts and cost-to-serve. McKinsey emphasizes having clear insight into margin leakage – knowing where and how the “pennies roll off the table” – and exercising discipline to plug those leaks.
This means identifying unprofitable deals, excessive discounting, or cost overruns that erode margins, and then adjusting pricing or policies to fix them. Tools like a pricing waterfall (which breaks down list price to net price after all discounts and costs) are often used to spot margin leakage points. By tracking profitability by segment, product, and channel, companies can refine prices or eliminate offerings that don’t meet profit objectives.
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An example of a waterfall analysis template to find price leaks from the Slideworks Go-To-Market Strategy template
No pricing strategy exists in a vacuum – it must account for the competitive landscape. Customers will compare your offering’s price-value equation to alternatives, so understanding competitors’ pricing and market positioning is essential. In practice, customer value sets the price ceiling (the most you can charge based on benefits) and costs set the price floor, while competitors’ prices help calibrate a reasonable range in between (see more in this article from BCG).
For example, if competitors offer lower-priced options, you must decide whether to match, undercut, or justify a higher price through superior value. Therefore, you need to have a clear, data-driven view of what the competitive landscape looks like to help inform which pricing strategy you should follow and what the price points should ultimately be.
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Pricing decisions should be guided by the business goals – whether maximizing early market share, driving high margins, or reinforcing a premium brand position. For example, a company aiming to penetrate a new market might adopt introductory pricing or “freemium” models to attract users, whereas a firm focused on profit would set prices to capture more value per sale. By ensuring that price strategy aligns with the broader go-to-market strategy and value proposition, you can create a coherent message and maximize your chance of market success.
Step 1 should have given you an understanding of where your price opportunities are and which internal restrictions you may have on pricing from e.g., production costs. Step 2 should have given you some external benchmarks and a view of the competitive landscape. Based on this, you are now ready to choose your overall pricing strategy/approach that aligns with your business objectives.
Use the above framework or look further into pricing approaches in our associated article here to determine which strategy works best in your situation.
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With your overall approach in hand from step 3, it’s now time to start detailing this in actual prices. The first part of this is understanding your customers and their willingness to pay.
Best-practice pricing is value-based, meaning prices are set according to the perceived value for different customer segments, rather than simply cost-plus or copying competitors. Different segments often value features or outcomes differently, so tailoring prices to these segments lets a company capture more of each segment’s maximum willingness to pay.
This may involve creating tiered offerings (e.g., “good-better-best” packages) or bespoke solutions for segments, each priced commensurate with the delivered value. By segmenting customers and aligning price points with the segment-specific value, businesses can boost both customer satisfaction and revenue – charging premium prices where high value is delivered and offering budget options for price-sensitive groups.
To do this, you need to have a clear view of your customer segments and associated products and value propositions. You may just have a single product or service, where different customer segments value different elements of the product. According to Bain, companies should develop a deep understanding of the value their solution provides to each segment and what benefits matter most to those customers.
Based on your segments, you may want to run some small experiments to understand price elasticity (see an example of this in practice with Superhuman here), and potentially other levers to pull to support pricing.
The outcome of this should give you an idea of “how much” to charge.
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Beyond “how much” to charge, best-practice pricing strategy also addresses how you charge. The pricing model and structure should align with customer buying preferences and your revenue goals. Successful businesses often innovate in their pricing models to unlock value – for example, adopting subscription or usage-based models, offering product bundles, or setting tiered price levels. McKinsey notes that companies can drive growth by deploying tactics like introductory offers for new customers, subscription pricing to grow lifetime value, or bundling products to increase revenue per customer.
Choosing the right model is crucial: a SaaS software might use a monthly subscription with tiered plans; an equipment manufacturer might price per-use or offer “product-as-a-service” contracts; consumer services might use freemium or volume discounts. Alongside the overall model/structure, how your prices scale with volume, features, or time should be designed to maximize value capture across segments.
For instance, a “good-better-best” tiered structure can anchor customer perceptions and encourage upgrades, while add-on fees or service bundles can monetize additional value. The key is to structure pricing in a way that is clear to customers and encourages the desired purchasing behavior, all while aligning with the overall go-to-market plan (e.g. lower entry price to drive adoption, or packaged offerings to cross-sell multiple products).
Use the insights you gained from your customer research and competitive analysis to define potential models and structures to use. Consider testing different models with potential customers.
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Flat fee
Definition: Single fixed price for all customers
Advantages: Simple and easy to understand
Challenges: Can deter some customers, or not capture full value from others
Volume-based
Definition: Offers discounts for volume orders
Advantages: Incentivizes larger orders and loyal customers
Challenges: Lowers per unit profitability
Bundle
Definition: Combines multiple products or services into single discounted bundle
Advantages: Increases avg. basket size
Challenges: Can cannibalize individual sales
Per user
Definition: Charge based on number of users of product
Advantages: Makes initial cost seem manageable
Challenges: Can become expensive for larger organizations or deter adding new users
Per feature
Definition: Charge based on number of features or components used
Advantages: Perceived value is often higher for customers
Challenges: Requires careful management to avoid complexity and confusion
A visual representation of different price models from the Slideworks Go-To-Market Strategy template
How pricing is communicated to customers can significantly influence go-to-market success. Price perception – customers’ belief about whether a price is fair or a bargain – can be as important as the price itself. Therefore, a best-practice pricing strategy includes a plan for communicating value and shaping positive price perceptions. Even if you’ve set the “right” price based on value, customers need to clearly understand the value they are receiving for that price. Many pricing efforts fail because not enough emphasis is placed on value communication and preparing the organization for value selling.
Effective go-to-market execution means marketing and sales teams articulate the product’s benefits in financial or emotional terms that resonate with customers’ priorities. Tactics can range from highlighting cost savings or ROI, to emphasizing premium qualities and differentiation that justify a higher price. Internally, arming the sales force with clear value stories, ROI calculators, and competitive comparison points builds confidence to defend prices. Externally, pricing messaging should reinforce the desired positioning – for example, using ending-in-9 pricing or visible “reference prices” to signal a deal, or avoiding complex price structures that confuse customers.
The goal is to ensure customers perceive they are getting more value relative to price than they would with competitors.
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Below is an example of different ways of communicating prices that support different strategies. Walmart emphasizes the perception of great deals by using decimals, bright yellow colors, large numbers, and multiple price points on a single tag. Apple takes a premium, value-driven approach which is underscored by simple, understated price tags that are not noticeable at first glance.
Promotions and discounts are tactical elements of pricing that need careful management in any go-to-market strategy. While promotional pricing (sales, coupons, volume discounts, etc.) can boost short-term volume or attract new customers, they must be designed to support – not undermine – the overall pricing strategy. Best-practice companies align promotions with their pricing structure and target them to the right customers.
In steps 1-6 you aligned your base pricing to customer segments and competitive position. Your focus can now turn to optimizing promotions to drive sales with minimal margin erosion or brand damage.
Rather than blanket discounts for everyone, consider using data on customer segments and purchase behavior to tailor promotions – offering the biggest incentives to customers who value them most or to stimulate specific behaviors. For example, a retailer might give loyal high-value customers an exclusive deal (to reward and retain them), instead of a broad coupon that many would ignore. It’s also vital to regularly review promotional effectiveness; many businesses discover a portion of promotions yield little incremental revenue or simply cannibalize full-price sales. Best practices include killing “bad” promotions that don’t profitably boost sales and doubling down on effective ones.
In a go-to-market context, a disciplined discounting strategy helps preserve the intended price positioning (e.g. premium brands avoid deep discounts that dilute their image) and maintains profitability while still allowing tactical flexibility to respond to market opportunities.
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Even a brilliantly crafted pricing strategy can falter without strong execution and governance. Pricing governance refers to the processes, controls, and organizational ownership that ensure pricing is implemented consistently and optimized over time. Top companies invest in dedicated pricing functions or “pricing control towers” that oversee pricing decisions, guidelines, and performance.
For instance, a centralized pricing team can set list prices, establish discount approval rules, and coordinate between product, sales, and finance departments. A long-term pricing advantage – contributing significantly to profit – often stems from building such pricing capabilities and infrastructure.
Clear policies are key: define who can authorize discounts and on what criteria, ensure sales teams have guardrails (so they don’t erode margins in pursuit of volume), and use tools for quote management and price analytics. Leading companies also train their sales and channel teams in pricing strategy and value selling, so that frontline negotiators don’t resort to ad-hoc concessions that give away value. Setting up tiered discount limits (e.g. larger discounts require senior approval) is a common practice to balance agility with control.
In summary, pricing governance provides the framework to “set and get” the right prices – it aligns internal teams, prevents chaotic or inconsistent pricing in the market, and ensures the pricing strategy envisioned in the go-to-market plan is actually realized in every deal and transaction.
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You’ve officially set your prices and are ready to enter the market. The last and final step of any good pricing strategy is to make sure you continue to optimize and refine your pricing. In other words, monitor performance and be ready to adjust.
For example, if sales are far exceeding targets, it might signal an opportunity to raise prices or reduce discounting; if a competitor launches a new discount campaign, a strategic response might be needed. Continuous improvement also means learning from on-the-ground execution: Are there patterns of discount requests pointing to unmet value needs? Which customer segments are most sensitive to price changes? By treating pricing as an ongoing experiment and adjustment cycle, you can ensure your pricing strategy and broader go-to-market plan stays relevant and effective over time, leading to sustained revenue optimization.
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In summary, a robust pricing strategy encompasses a range of elements – from aligning with the value proposition and segmenting customers, to positioning against competitors, choosing the right pricing models, and executing with discipline. Industry leaders like McKinsey, BCG, and Bain consistently stress the importance of these fundamentals.
By following these relatively simple steps, you should be able to create your own best-practice pricing strategy and become better equipped to win in the market and achieve profitable growth.
