Cost-plus SaaS pricing strategy [Video]

This strategy embodies what people basically mean by business — selling items for more than the cost of production. It is the most widespread strategy for manufacturing and retailing companies.

Cost-plus pricing’s advantages are its simplicity and predictability.

Let’s say, you spend $2 to brew some coffee and want a 50% markup that makes $1. Slap the numbers together and voila, you get $3 and put it on a price tag. You’re guaranteed to make that $1 growth profit on every sale.

Cost-plus pricing requires no formulas, and it doesn’t need a deep understanding of your market or your customer:
• It’s easy to figure out
• You can quickly apply this pricing strategy to any product
• Customers get why the price is what it is

But the cost-plus pricing model lacks the flexibility to fit SaaS companies:
• It doesn’t correlate with the benefits your product offers to clients
• And creates obstacles in altering the price when needed.