Cost Based Pricing Strategy
injectedproblem
Cost based pricing or mark-up pricing strategy
One way to determine price is to total all the costs associated with a product and add a percentage margin.This is termed cost-based pricing. It is a relatively easy pricing method and, provided the mark-up is not excessive, it is seen as equitable and reasonable. It sets the price of an organization must charge to attain its level of profitability. the price floor is the lowest acceptable price it can charge and achieve its profit goal.
The main problem with cost based pricing is that the manufacturer may miss profit opportunities, either by charging a lower price than that which would be acceptable to a large proportion of the market, or by drastically reducing unit sales by over-pricing.