Cost-plus pricing is a pricing strategy in which the selling price of a product or service is calculated on the basis of the production or manufacturing costs. A fixed profit margin is then added to these costs.
The basic idea is simple: all costs incurred are covered, and a defined profit is also made.
The calculation is typically carried out according to the following principle:
- Total costs (materials, production, staff, etc.)
-
- Mark-up (e.g. profit margin as a percentage)
- = Selling price
Cost-plus pricing is often used because it:
- is easy to understand and put into practice
- enables prices to be determined quickly
- ensures cost control
- Predictability in costing creates
However, the method also has clear limitations:
- Market prices and competition are not taken into account
- Customers’ perception of value is not taken into account
- Potential for revenue optimisation is not being fully realised
- The risk of prices being too high or too low
For start-ups in particular, cost-plus pricing can be a practical initial approach, especially when there is little market data available. In the long term, however, the pricing strategy is often refined, moving towards more market-oriented or value-based models.
innoWerft helps start-ups to develop appropriate pricing strategies, test market positioning and design business models in such a way that price, customer value and growth are optimally aligned.