Cost-Based Pricing VS Value-Based Pricing

When it comes to pricing your products, you have 2 options. You can choose based on cost or value.

The question is, how are you aware of which one is right for you? It helps to have a mutual understanding of what each pricing model means. So, to assist you to decide how to price your products, listed below you will find the key points you need to know about cost versus value pricing.

What Is Cost-Based Pricing?

With cost-based pricing, you price items according to how a lot it costs to produce them and the profit you want to earn. So, if an item costs $150 to produce, you might want to earn a $50 profit. This means you would certainly sell the item for $200.

If you will be shipping the products to customers, these costs can also be factored in. A lot of customers prefer free shipping nowadays, so you might need to up the market price to skillfully cover the “free shipping” costs.

What Is Value-Based Pricing?

With value-based pricing, you price the products according to the value they provide to customers. You will be setting an expense accordinged to how a lot your customers will want to spend on the products or solution.

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