This article explains how Cost-Plus Pricing and Market-Based Pricing work and outlines when each method is most effective. Both options are available within Products, and each offers a different approach for calculating retail prices. Cost-Plus methods incorporate cost directly into pricing, while Market-Based methods focus on predetermined retail values set on individual components. Understanding the difference helps you choose the model that aligns best with production needs, profit goals, and pricing strategy.
Table of Contents
- Understanding Cost-Plus Pricing
- How Cost-Plus Pricing Works
- Understanding Market-Based Pricing
- When to Use Each Pricing Method
- Related Articles
Understanding Cost-Plus Pricing
Cost-Plus Pricing uses your actual Material, Labor, and Machine costs to calculate a price. CoreBridge stores all cost values for reporting and then applies a margin or markup to determine the retail price. This approach ensures your pricing always accounts for true production costs and is the recommended method for most sign industry workflows.
Cost-Plus Pricing includes two options: Cost Plus - Margin and Cost Plus - Markup.
How Cost-Plus Pricing Works
Cost-Plus Pricing is cost-driven. The system completes the following steps to calculate price:
1. Adds Material, Labor, and Machine costs together.
2. Establishes the total cost.
3. Applies either a margin or markup percentage from your pricing tables.
4. Adds any optional custom charges, such as custom waste.
This method is recommended when production costs fluctuate, when maintaining consistent profit percentages is important, or when you want pricing to automatically adjust with changes in Materials or Labor.
Cost Plus - Margin
This method applies a margin percentage to total cost to calculate a price. Margin is based on the portion of the final price that becomes profit. Margin tables allow you to create different pricing levels based on your defined variables, such as total square footage.
Cost Plus - Markup
This method applies a markup percentage to total cost. Markup represents a percentage added on top of cost and is commonly used when you want predictable price increases over cost.
Use Cost-Plus Pricing when:
- You prefer pricing that adjusts automatically with changes to your components.
- Reporting based on true production cost is a priority.
- You need consistent profit percentages across jobs.
- Material, Machine, or Labor costs fluctuate regularly.
- You want pricing that always covers cost.
Understanding Market-Based Pricing
Market-Based Pricing - also referred to as square footage pricing, area-based pricing, or square meter pricing - uses predefined retail values rather than production cost to calculate a price. Material, Labor, and Machine costs are still stored for reporting, but they are not used in the pricing formula. Instead, price is determined by the retail value set on each component. For example, a Material with a retail price of $2.00 per square foot on a 100-square-foot job calculates to a price of $200.00.
Note: Because market-based prices remain fixed while production costs fluctuate, this method can lead to inconsistent profit margins over time - and in some cases may not cover production costs. For most sign industry workflows, Cost-Plus Pricing is the recommended approach.
Market-Based Pricing includes two options: Market - Product/Modifier and Market - Component.
Market - Product/Modifier
This method calculates price by multiplying quantity by a unit price from the selected pricing tier. It does not use cost for the retail price calculation. It works well when you want pricing consistency based on fixed market rates regardless of internal production variances.
Market - Component
This method calculates price by adding the retail price of each component in the Product. Like Market - Product, cost is stored for reporting but is not used in the retail price calculation.
Some customers use Market-Based Pricing when:
- Prices are fixed and well-established based on market rates or competitive benchmarks.
- Pricing is not expected to vary based on internal production costs.
- Customer-facing prices need to remain consistent regardless of production method.
- The business uses fixed price lists that are managed separately from production costs.
Note: Fixed market-based prices do not adjust as production costs change. Review pricing regularly to ensure profitability when using this method.
When to Use Each Pricing Method
For most sign industry workflows, Cost-Plus Pricing is recommended because it adjusts automatically with production costs, ensuring consistent profitability on every job. Market-Based Pricing may be appropriate if your pricing is fixed and stable, but requires regular review as costs change. Both options are available within Products in CoreBridge; select the model that aligns best with your pricing strategy.
Use Cost-Plus Pricing When:
- You want pricing that always covers cost.
- Material, Machine, or Labor costs fluctuate regularly.
- You need consistent profit percentages across jobs.
- Reporting based on true production cost is a priority.
- You prefer pricing that adjusts automatically with changes to your Components.
Use Market-Based Pricing When:
- You want retail prices driven by market expectations or competitive benchmarks.
- Your pricing strategy is based on fixed price lists.
- You want simplified pricing that does not vary based on internal costs.
- You want consistent customer-facing prices regardless of production method.
- You're selling products where market rates are well established (e.g., garments, promotional items, pre-defined products).