Cost-Plus Pricing

Cost-plus pricing is a method in which the selling price is set by evaluating all variable costs a company incurs and adding a markup percentage to establish the price.

Cost-Plus Pricing Examples

    You make a product for $15 and want a 50% profit margin so you price it $30
    Every retailer does this in some way to maximize profits

Deeper Insights

Many clothing retailers use this method to price the merchandise in stores. Generally, they figure out the overall cost they incurred to make a shirt and take a percentage of that cost to set as the markup value. Pricing like this is focused on covering all costs, which doesn’t take into consideration what customers value in the product.

Since cost-plus pricing is not an optimized way to calculate a price, it shouldn't be your only way of finding price. Take into account costs, market value, customer value, and more to find an optimal price for your products.

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Related Keywords: Value-Based Pricing, Competitor-Based Pricing, Dynamic Pricing, Premium Pricing