Cost-plus pricing
Setting a price by taking the cost to deliver and adding a fixed markup or margin on top. Simple, but it ignores the value the work creates for the client.
For example, if a campaign costs an agency $8,000 in time to deliver, cost-plus pricing at a 50% markup gives a $12,000 price. It guarantees a margin, but a high-impact campaign could often command far more under value-based pricing.
Why it matters to your firm: cost-plus pricing is easy and protects against losing money, which is why many agencies start there. Its weakness is that it caps your upside - tying price to your costs rather than the client's outcome - so it tends to leave money on the table for high-value work.
Common mistakes
- Pricing off your costs and ignoring the value to the client.
- Exposing your internal margin to the client.
- Leaving no upside when you deliver more efficiently.