Cost based pricing is relatively simple; you figure out your cost of goods, set a desired margin for each unit, add that margin onto your costs and you have your price. Cost based pricing doesn’t require the detailed level of analysis and value measurement necessary to employ a value-based pricing strategy. Because it’s simple, many companies fall into a trap of cost-based pricing. But as far as smart pricing goes, cost-based pricing strategies are anything but. So if it’s simple, why does it suck? Here are three reasons why:
