Pricing Your Product or Service

4. Marking Up

4.1 Cost-plus pricing is a traditional method, usually based on two elements:

• The mark-up you must add to the cost to make the desired profit, and
• The mark-up used by competitors.

4.2 Ensure all your costs (see 2) have been factored in before applying the mark-up.

• If the final price looks uncompetitive, review the size of the mark-up. Never obliterate the mark-up to make the price competitive. Try to change the cost base rather than give up potential profit.

4.3 Different products and businesses apply hugely different mark-ups. For example, retail mark-ups include:

• Fridges: cost plus 25 per cent.
• Branded clothing: cost plus 135 per cent.
• Jewellery: cost plus 250 per cent or more.