What’s the first thing you look at when you’re torn between two comparable products?

Well, if you’re anything like me, it’s pricing. Also known as price skimming. Ok, not just me.

A 2022 survey reported that upwards of 80% of buyers1 assess competitor prices before deciding to purchase.

As the business, your pricing strategy needs to be competitive and adaptable to shifting markets.

Fortunately, CPQ (Configure, Price, Quote) is a tool that can process data and cut down on admin and guesswork to help you know your ideal price point.

Before we dig a little deeper into mastering your pricing strategy, let’s discuss what CPQ is and how it can help when it comes to setting prices.

What is CPQ?

Configure, Price, Quote software is a system that allows businesses to configure pricing products on a complex level, in addition to generating quotes.

Sales teams are able to easily peek at consumer data to adjust pricing as needed.

The automation features built into CPQ also significantly cut down on time spent in administrative tasks.

That way, stakeholders can focus on big picture items like pricing strategy and tactics.

HAAS Alert reported saving over 120 hours of admin work each month, which led to a 66.67% increase in efficiency by utilizing PandaDoc CPQ for HubSpot.

Bonus: We recently launched PandaDoc CPQ for HubSpot to help you improve the buying experience and streamline consistency with pricing.

Now you can create accurate quotes for complex products & services with ease. Learn more here.

Different pricing strategies

things to consider for pricing strategy

Pricing isn’t about blindly throwing a dart at a board and choosing whatever number you land on.

There’s a few common pricing strategies with intentional tactics behind them.

What best applies to your marketing strategy comes down to what you’re selling and your ideal customer.

Let’s go over some of the most common pricing models, along with their pros and cons.

What is the best pricing strategy for you?

Let’s go over some pricing strategy examples, as only you can decide on your pricing method of choice.

Cost-plus pricing

Cost-plus pricing model is as basic as it sounds. Take the cost of your product, and mark it up.

Pro: Easy, simple way to create pricing and margin profits.

Con: Not strategic. Doesn’t take into account competitor pricing or a customer’s willingness to pay (WTP).

This is particularly a disadvantage in the SaaS industry, where a value-based approach resonates best with targeted consumers when it comes to the bottom line.

Competitor-based pricing

Competitor-based pricing is, yep, you guessed it, pricing based on your competitors.

Whether it’s having a lower price to edge out the competition, or a higher price to convey perceived value, this competitive pricing strategy can be hit or miss.

Pro: Watching your competitors helps you stay within market range and adjust to changes as needed.

Con: If this is your sole focus, you risk losing sight of a value-based approach and may lose revenue and customers with too many fluctuations.

Value-based pricing

This one is a bit more ambiguous, but with the right data can be a highly effective approach.

Industries like SaaS are value-based, and need to position themselves as such to stand out from the crowd.

Also known as the premium pricing strategy.
Ahem speaking of, you are reading a PandaDoc blog, did you know we offer a free 14-day trial?

Pro: Most effective for maximizing revenue with the WTP approach.

Con: Diligent research and a constant ear to the ground are required to stay on top of things and remain in-tune with consumer reviews.

Penetration pricing strategy

This strategy is often utilized by those moving fast. It’s the tactic of setting a low initial price to attract customers and get their foot in the bigger market with the intent to gradually raise prices later.

Pro: Helpful when coming into a saturated market, as consumers will be more likely to give you a try if your price is exceptionally lower than the competition.

When done right, this can be a highly effective pricing strategy.

Con: With high reward comes higher risk.

You could be losing long-term revenue and customers as pricing increases. Especially if done too often, and too quickly.

Dynamic pricing strategy

An effective strategy that utilizes real-time market trends and data from inventory levels and customer demand.

Pro: Flexible with a shifting market, giving businesses more leverage with profit margins.

Con: Too many price adjustments risks losing customers and having the business come off as lacking confidence in their value and positioning in the marketplace.

Mastering your pricing strategy

Alright, as promised, now comes the meat and potatoes part of the blog.

You may be sitting here nodding, scrolling, ready to sink your teeth into how to utilize your (new) knowledge of CPQ and pricing models to your advantage.

pricing strategy matrix

Here’s what you need to ask yourself when crafting your perfect price:

Value & Market Position:

  • While lower pricing may be effective initially, it can also be associated with a cheaper product. How do you plan to market your value to consumers? Also known as, value-based pricing.

Business Goals:

  • Which matters more to you right now, market share or long-term value?
  • Are you aiming to be cost-based, or going off the value of your product?
  • Depending on your product, have you factored in the cost of production, and consumer demand?

Customer Perception:

  • How do you plan to clearly communicate price fluctuations to your customers?
  • What are the pain points customers currently have in your industry, and how can you best solve for their needs to promote customer value?

Competitors:

  • Who are your biggest competitors? Look for 3-5, depending on your industry.
  • What are their prices, and how do they vary?
  • Are your services/products comparable, or do you have specifics they may not?
  • Based on market research, do they offer freemium pricing or bundle pricing options, and will you?
retail pricing strategy

On the flip side, it’s equally important to understand what makes a weak pricing strategy.

Poor targeting:

  • Not marketing correctly, reaching the wrong customers and losing out on the right ones.
  • A high price with too much markup for the customer base.

Incorrect value portrayal

  • Exaggerating what the consumer will get with their purchase, pricing too low for a high-value product, etc.

Not finding the sweet spot:

  • Prices too high or too low compared to similar products will cause potential buyers to hesitate.
  • Sales volume and price-sensitivity aren’t factored into decision making.

Pricing strategy case studies

If you’re overwhelmed narrowing down the best selling price, we’ve got you.

Sometimes it helps to look at historical data of companies who have been there, done that, and reported back on the trial-and-error of pricing strategies for you.

Disney+ and penetration pricing

Back in 2019, Disney+ was far from the first big studio to launch a streaming platform.

In fact, many considered them late to the game.

While Disney is a major household name, Netflix and Hulu dominated the market.

Method

So, what did Disney do?

They adopted the penetration pricing model2 to break into market shares and get traction by starting out with a fiercely-competitive low price of only $6.99 a month.

This business model positioned them to be the option with economy pricing for new customers, while still having a high-quality product.

Outcome

This strategy worked well for Disney+, who steadily increased their prices after accumulating a large customer base of monthly subscribers.

Part of the effect was positioning their value with more original content, such as The Mandalorian, and making access to all Marvel (a Disney company) and Disney content exclusive to their platform.

Canva and value-based pricing

The go-to graphic design site for non-graphic designers has moved through a few iterations since coming onto the scene in 2012.

In 2019, Canva had a flat-rate pricing model for a monthly subscription of $12.95 in addition to keeping their free basic plan.

Now, there’s also Canva for Teams at $14.99 monthly for 5 seats.

Outcome

Canva took the slow and steady approach3, letting customers discover and try them out before ever asking for money.

As word spread and use increased, they launched their first monthly subscription plan, backed by the added-value of new and improved features.

If someone didn’t need that, they could simply keep their free version.

Another few years later, they added a third-tier value package for companies for a very small amount more, making the incentive to purchase the package rather than 5 individual Pro accounts.
At present, Canva has over half a million team subscriptions. Some are from large corporations, such as Zoom and Marriott.

Near the end of 2023, their customer subscriptions surpassed $2 billion4.

In their case, the slow and steady value-based pricing model was highly successful.

CPQ and dynamic pricing

Enterprise companies in fields such as Saas benefit highly from CPQ when deciding their pricing model.

CPQ’s ability to simplify complex products and integrate with CRM and ERP systems allows it to tailor solutions and provide accurate pricing for higher profitability.

CPQ and pricing tools

CPQ’s ability to provide data-driven pricing gives its users a competitive edge.

Sales processes are streamlined, time is saved, pricing configuration can be automated, and tailored. Need we say more?

According to a Forbes article, sales teams spend an estimated low of 35% of their time actually selling.

Quickening the sales cycle is one of the key benefits of implementing CPQ software.

Depending on your needs, and if you already have a CRM in place, there are a few options when it comes to choosing a CPQ software that’s right for you.

We’ve done the research so you don’t have to.

By taking a look at the above blog you can see some of the highlights of the most commonly used CPQ software, and how PandaDoc stacks up against the competition.

PandaDoc CPQ is competitive in the landscape by streamlining your tools.

You can easily connect them so you don’t have to switch between programs, while ensuring all relevant teams have transparency and access for quick and easy alignment.

CPQ has transformed our quoting process. Our quoting is not only more efficient but also much more attractive, offering an Amazon-esque experience to our customers. It has significantly streamlined our operations and enables reps to generate proposals in real time.”

Mike McCormick, Director of Employee Education

PandaDoc CPQ includes:

  • CRM integrations for easy set-up
  • Pricing rules
  • Drag-and-drop editor
  • Approval workflows
  • Step-by-step selling
  • Embedding trusted payment options to make closing easy

PandaDoc CPQ allows your team to easily managed all parts of the sales process.

Deciding on your pricing strategy is a crucial part of any businesses success.

Reaching your target audience and standing out to potential customers works when you have the right price for your product.

Said another way—your value proposition.

No matter what method you go with, remember, it’s a competitive market.

Market conditions fluctuate, and the right pricing strategy for you will with it. If it doesn’t work out, try another. Better, have CPQ do it for you.

Get a demo of PandaDoc CPQ For HubSpot and see how it can help your team interpret data and maximize revenue with pricing strategies.

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