Cost-plus or product-driven pricing is used by many business
Cost-plus or product-driven pricing is used by many businesses to set prices,but ultimately consumers decide where they will pay for what is being offered,and if they won’t pay the price set by management,the price must be adjusted or the product or service must be dropped.Therefore,consumer-based pricing is a much more realistic method of setting prices.With consumer-based pricing,companies first determine what customers want,what they are wiling to pay for it,and then figure out a way to deliver that product and service at the desirable price.
There are many other methods of pricing besides cost-plus and consumer-based pricing.One is competitive pricing.With competitive pricing,hotels base room rates on what competitors charge.This strategy can work only as long as consumers see all of the hotels in the area as being equal.If there is a perceivable difference (such as hotel being grand-new while the others are much older),then competitive,pricing will favor the hotel that appears to offer the most,the newest,or the nicest facilities.Another problem with competitive pricing is that your competitors may be willing to lose money,or have lower costs,and can therefore make money charging prices that would mean losses for you.