Cost-plus pricing is a pricing method where a company sets prices by adding a fixed markup to the cost of producing a product or delivering a service.

The formula is straightforward: total cost + desired margin = price. Costs may include production, labor, overhead, and other expenses, with a markup applied to ensure profitability.

This approach is commonly used because it is easy to calculate and ensures that costs are covered. However, it does not account for customer willingness to pay, competitive positioning, or perceived value.

In B2B, cost-plus pricing can lead to underpricing if customers are willing to pay more, or overpricing if the market does not support the price. It also disconnects pricing from value, which can limit revenue growth and reduce competitiveness.

While cost-plus pricing can be useful as a baseline or internal reference, most companies move beyond it toward value-based or segmented pricing to better capture value and improve margin.