The most common pricing model for most products and businesses is ‘cost-plus’ – where the sale price is set by adding a margin to the cost of purchase or manufacture. The cost-plus model is simple and easy to apply. It also represents a practical approach to determining the viability of a product. But cost-plus […]

  The most common pricing model for most products and businesses is ‘cost-plus’ – where the sale price is set by adding a margin to the cost of purchase or manufacture. The cost-plus model is simple and easy to apply. It also represents a practical approach to determining the viability of a product. But cost-plus is just one of many pricing models. It is rarely the best. While it has its strengths, cost-plus pricing has serious limitations – the most importantly, it does not consider the customer’s willingness to pay. What if the customer is prepared to pay more than the cost-plus pricing model determines? How do you know whether the price and, therefore, margins are as high as they could be? What if the price set by way of the cost-plus or a competitive pricing model devalues your product, negatively impacting the brand image? While the cost-plus pricing model…