Pricing Strategies by Industry – A Comprehensive Guide

In enterprise-level pricing, every company is unique, which can make choosing the best pricing strategies by industry difficult. To make matters worse, the sheer number of pricing strategies out there can exacerbate that challenge.

Here at Pricefx, as a leading cloud-native pricing software company, we understand that a well-crafted pricing strategy is not just a choice, it’s imperative for staying ahead in today’s dynamic business landscape.

In this article, we’ll cover the pricing strategies that are common to most industries today, as well as call out the pricing strategies most associated with specific industries, to enable your company to choose a strategy that fits its business objectives.

Common Pricing Strategies in All Industries

In this article, we’ll discuss the pricing strategies most used or associated with each of the following major industries:

1. Manufacturing
2. Chemical and Process Manufacturing
3. Distribution
4. Food and Beverage

But first, we find that a few pricing strategies are universally applicable across all industries mentioned, so we’ll spare you the repetition and address these first.

Competitive Pricing

Given competitiveness is the end goal in the marketplace, nearly every enterprise-level business employs competitive pricing. A competitive pricing strategy is a pricing method that involves setting prices for products in response to competitor pricing.

Here are a few examples of how competitive pricing is used across industries:

• Distributors and manufacturers use competitive pricing to align their prices with competitors offering similar products in the same market.
• Competitive pricing helps chemical companies stay competitive in global markets, especially as commodity chemicals are often subject to pricing battles.
• The food and beverage industry uses competitive pricing to offer consumers the most competitive prices for common consumer goods and adjust prices to match (or undercut) competitors.

Value-Based Pricing

Customer perception of value is a key ingredient in influencing buying decisions, so value-based pricing is another pricing strategy these industries share.

Value-based pricing involves setting product prices based on the perceived value of those products to customers; in other words, how much customers believe the product is worth.

These are a few ways the value-based pricing strategy is used in each industry, including:

• In the manufacturing industry, value-based pricing is used when marketing new and innovative products to align pricing with the benefits these products offer.
• Chemical companies often employ value-based pricing to price specialized chemicals with unique properties based on the benefits they offer customers.
• Food and beverage companies often use value-based pricing to price organic or health-conscious products which customers perceive to hold higher value than standard products.
• Distribution companies use value-based pricing by offering additional services or features in exchange for higher prices, such as providing expedited delivery or extensive support services.

Most Used Pricing Strategies by Industry

Now, let’s take a look at the pricing strategies that are commonly employed within each industry, as some are more strategic than others in tackling their unique problems.

1.     Manufacturing Industry

The manufacturing industry is also a sector known for its diversity, serving as the starting line for most of the products we use today. The breadth of its product range demands a nuanced approach to pricing; manufacturers consider multiple factors simultaneously in their pricing strategies, such as production cost fluctuation and commodity-based competition, to set competitive prices.

Let’s examine a few of the pricing strategies most used in the industry today:

Equipment as a Service Pricing

Equipment as a serving pricing (EaaS) is an emerging pricing strategy in the manufacturing industry and is in essence a pay-per-use pricing model for machines and equipment. The strategy allows manufacturers to easily adjust production levels and cut down on operational costs by aligning costs with actual usage.

Supersession Pricing

Supersession pricing involves replacing a previously premium-priced product with a new model and selling it at a higher price. This strategy is commonly found in the auto manufacturing industry; engineering changes in new car models can render older spare parts obsolete, which then requires their replacement with upgraded parts at higher price points.

Price Skimming

Price skimming involves pricing a product high initially and gradually lowering it over time to appeal to a larger pool of consumers. The strategy is often used to set introductory prices for innovative or high-tech products, for example, new smartphones or tablets, and is a favorite in the tech industry (Apple, Samsung, and LG are a few examples).

2.    Chemical and Process Manufacturing Industries

Historically, the chemical industry has relied on cost-plus strategies in much of its pricing. However, in recent years, the industry has faced several macroeconomic changes that demand more market-driven approaches to pricing, with volatile energy costs, global inflation, and fractured supply chains among the most decisive.

Due to the inherent complexity of the industry, several pricing strategies are appropriate here depending on a company’s objectives.

That said, there are a few trending best practices in chemical pricing strategies today:

Focus on Value

Base chemicals are difficult to differentiate, which makes charging more for these products on their own a difficult sell. To stay competitive, companies can offer value-added services and charge their customers more for benefits that go beyond the standard offer, such as providing storage in their own warehouses or conducting extensive quality control.

Portfolio Diversification

Maintaining a well-balanced product portfolio of base and specialty chemicals is another way to address the commodity issue. Companies can then price the more specialty chemicals at a premium price that captures its value perception by customers.

Monitor Cost to Serve

Cost elements, especially cost to serve, are an important concern in chemical pricing in the face of energy cost fluctuations and limited distribution resources, such as labor and freight. Increased visibility into these costs will ensure they are passed on to customers rather than continually absorbed by the organization.

3.   Distribution Industry 

The distribution industry occupies a unique position at the crossroads of manufacturing and retail, which means the impact of disruptions on both sides, such as labor and freight shortages, is felt twice.  

Given its complexity, there is no one-size-fits-all pricing strategy in distribution – each company’s pricing strategy is unique to its goals and selling channel.  

That said, some pricing strategies come up more often than others in distribution, which include: 

Cost-Plus Pricing

Cost-plus pricing, or markup pricing, is a strategy in which a fixed profit margin is added on top of production costs to arrive at the selling price. This strategy is a simple and effective means to ensure the distributor gets a certain profit margin in an otherwise unstable marketplace.  

Competitive Pricing

 Competitive pricing in distribution, sometimes known as a ‘Manufacturer-Aligned Pricing Strategy’ in this sector, involves setting product prices relative to competitors. Distributors frequently adopt this approach by selling identical products from the same manufacturer at the manufacturer’s recommended price, offered referred to as a Manufacturer List Price. This strategy ensures competitiveness by aligning with prevailing market rates and maintaining consistency across distributors.  

Value-Based Pricing

Value-based pricing is a strategy that focuses on setting prices based on how much customers perceive the value of a product or service. It’s often referred to as customer-focused pricing because it showcases what truly matters to them. In distribution, a successful value-based pricing strategy should also consider the value that distributors place on their products.  

Additionally, with a shift towards a service-minded business approach to differentiate offers from competitors, distributors can leverage value-based pricing to price their special services favorably for customers, both in line with the value they represent and the real costs involved in providing them. 

4.   Food and Beverage Industry

Pricing in the food and beverage industry often centers on delivering perceived value to consumers. Here are some strategies used in the sector to communicate this idea:

Value-Based Pricing

Value-based pricing is a strategy that involves setting prices based on consumer value perception, or how much they believe the product is worth. For example, pricing bio or eco-friendly products at higher price points than standard products reinforces the premium consumers place on sustainability.

Bundle Pricing

Bundle pricing in the food and beverage industry is a strategy that encourages customers to buy more by selling related items together at a lower price than if bought on their own. For example, a grocery store chain might offer a summer promotion by selling barbeque supplies, hot dogs and buns at a lower price when purchased together.

Ready to Implement a Pricing Strategy in Your Industry?

We hope you’ve found this article has helped you uncover common pricing strategies across industries and understand why some are more strategic than others in specific sectors. If your company is ready to implement a pricing strategy or adjust its existing strategy, consider taking a look at our comprehensive article below:

Happy pricing!