Cost-based pricing: what is it and its benefits?

Posted on 10 March by Simon Gomez in Pricing strategies


If you are an online seller, you know you must have a pricing strategy to sell your products. That is the key to increasing your sales and profits. If you go online and try to sell your products with no pricing strategies, the chances are that you are going to fail. Of course, the goal of having a pricing strategy is to boost your sales. It is the map that leads you to more profits. One of the pricing strategies that helps you with that is the cost-based pricing strategy.  

The cost-based pricing strategy involves setting the price of a product or service based on the cost. Then, add a margin to obtain the selling price. For example, it costs $2,000 to make a computer. Then, the manufacturer decides to add 30% of the cost to get the selling price. So, in this case, the selling price would be $2,600. This strategy is popular among manufacturers. 

Let's go over the advantages a cost-based pricing strategy brings to your company. 

You can add conditions to your pricing rules and the percentage margin you want to add. Source: PriceTweakers 

1- Few resources 

Cost-based pricing does not require a lot of market research. It is a simple pricing strategy that does not take much time to implement. All you need to know is the cost of production of its products to apply this strategy, and most companies know this. That is why it is a popular choice among small and large businesses.    

2- Helps you when you do not have full information 

When you do not have information regarding your competitors or the customer’s willingness to pay, the cost-based strategy comes in perfectly for your company. As we mentioned in point #1, all the data you need is the cost of production of your products to implement it. 

3- Ensures profit 

A cost-based pricing strategy guarantees your company a profit. You will always secure a profit because you are adding an extra margin to your production costs, regardless of the state of the industry your company is in.    

4- Simple for customers 

Occasionally, you have to raise your prices, and customers do not like that. But with a cost-based pricing strategy, you can defend yourself from any accusation, and customers will understand. Citing that the production costs are high for you as a company and for that reason, you must raise your prices. Customers will have a soft spot for you and will understand your reasoning. 

Conclusion 

Having a pricing strategy is the key for a business if they want to sell online. A cost-based pricing strategy brings any company many benefits that we mentioned above. PriceTweakers offers your company software where you can pick this strategy (and many more!), follow your competitors automatically, and much more. PriceTweakers will help your company increase your sales and your margins. Are you interested? Contact us here!     


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