How does one practice Cost-Based Pricing and what is the advantage and disadvantage of this method? What is Cost-Plus method of pricing?
One practices cost based pricing by setting prices based on the costs of producing, distributing and selling the product plus a fair rate of return for effort and risk. Advantages are that one can work to be a low cost provider and focus on selling more or keep costs high and use this as justification for charging more. The disadvantage of this model is that it does not focus on adding value to the consumer experience, which can be dangerous. Cost-Plus pricing is a method by which the price is determined by adding a standard markup for profit to the cost of the product.
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Principles of Marketing
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