3 Approaches to Pricing

Approaches to pricing can be categorized into three groups that are based on either costs, competition or customer value (Ingenbleek et al. 2003, p. 291).

Cost-plus pricing

Cost-plus pricing implies the determination of prices based on fixed and variable costs. While the implementation of cost-plus pricing is straightforward (Simon & Fassnacht 2009, p. 190) – e.g., by adding a profit margin to average costs (Avlonitis & Indounas 2005, p. 48) – this approach is unlikely to yield optimal prices (Simon & Fassnacht 2009, p. 191), as concentrating on costs offers no insights into whether or not the resulting prices are acceptable for buyers.…

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