What is Cost Based Pricing?
Cost based pricing is the most common type of pricing model for new businesses, especially those in a niche market.
The goal with cost-based pricing is to charge based on your production cost & an added fixed % of profit margin.
This means that you make profit according to how much money it takes for you to produce an item or provide a service.
Cost-plus pricing includes setting prices by adding on whatever was spent making the product or providing the service plus some kind of markup percentage amount so that there's still a margin for profit.
Example
Cost-based pricing is when a company sets the price of their product or service based on what it costs to produce.
For instance, if you sell your handmade jewelry at $30 per piece and your production cost for each piece was $15 (including materials),you are using cost + 100% markup.
What is Differential Pricing?
Differential pricing means setting different prices depending on who buys from them: individuals versus organizations, heavy versus light users, or high-value versus low-value.
For example, a family of four might pay $50 for an annual pass to the amusement park while stand alone adults would purchase tickets at a higher price point.
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