Under cost pricing the marketer primarily looks at production costs as the key factor in determining the initial price. This method offers the advantage of being easy to implement as long as costs are known. But one major disadvantage is that it does not take into consideration the target market’s demand for the product. This could present major problems if the product is operating in a highly competitive market where competitors frequently alter their prices.
There are several types of cost pricing including:
- Markup Pricing
- Cost-Plus Pricing
- Breakeven Pricing