Cost-based pricing is a strategy where the price of your product is determined by calculating the total cost of production (materials, labor, overhead) and adding a markup to ensure profit.
Price = Cost + Markup
Why it matters for startups
It’s one of the simplest pricing models to apply—especially in early stages when you’re still figuring out demand. But it doesn’t consider what customers are actually willing to pay or what competitors are charging, which can lead to pricing misalignment in the market.
What’s the difference between cost-based and value-based pricing?
Cost-based is internal—focused on your costs. Value-based is external—focused on what customers are willing to pay.
Is cost-based pricing good for SaaS startups?
Not really. SaaS has low marginal costs, so value-based or usage-based pricing usually performs better.
Can I start with cost-based and evolve later?
Yes. Many startups use cost-based as a baseline, then shift to more strategic models as they validate market demand.
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