From the course: Pricing Strategy Explained

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Cost-based pricing pros and cons

Cost-based pricing pros and cons

From the course: Pricing Strategy Explained

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Cost-based pricing pros and cons

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- So our first model is cost-based pricing. So in cost-based pricing, basically all it is is taking a look at what your costs are, and then there's a normal markup in the indrusty. It's actually set by the industry, or it's set by the product or service that you're selling, 'cause everybody uses the same markup, and that's the problem with it. There's not a lot of flexibility in the pricing, there's not a lot of imagination that you can input into the pricing, as well. It kind of is what it is. Now, this is generally applied to commodity-based products, right. Also, it can be applied to products that have little or no differentiation, so it's really hard for a consumer to tell one product or another. Since it's commoditized, they can really just close their eyes and pick a product, and they're going to be fine, and that, really, then suggests why cost-based pricing is actually used. Some examples of cost-based pricing…

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