Cost-plus pricing, n. gerund, delusional.
Going beyond Nagle & Holden cost-plus prices:
- miss psychological price points
- effectively destabilize the business because they’re set with no perception of customer value in mind (if the prices are set irrationally, customer behavior will be irrational
- assume that all the costs are cost-competitive, right? Wrong.
- temporarily shield uncompetitive procurement/costing/product management
- prevent the necessary and creative tension between pricing (these products are not cost competitive!) and costing/procurement (“oh yes they are!”) to help improve the business as whole
- are very apparent to professional purchasers & purchasing depts. and can be exploited accordingly
- would be severely lagged and ineffective when used for life-cycle and X-rate management
- can be easily gamed by the competition: it’s very obvious when a company doesn’t set its price competitively
- wait, don’t tell me that with cost-plus pricing you don’t even bother with competitive analysis either ….?
Any more?
