The way manufacturers and distributors sell has changed. Purchasing decisions no longer rest with one buyer but with larger groups across operations, finance, and engineering. This makes the cons of cost plus pricing clear, as simple markups no longer meet the demands of complex buying groups.

 

Buyers also do more research before speaking to sales. Around 85 per cent start online, often on supplier websites, comparing specifications, case studies, and independent reviews. They want to see value before they discuss price.

 

Buyers no longer settle for the lowest upfront cost. They expect lifecycle value, technical proof, and reliability. When manufacturers demand this from their suppliers, their own customers demand the same. Cost-plus pricing cannot defend margins because it fails to link price to what customers actually value.

 

>Download Now: Free PDF How to Drive Pricing Strategy to Accelerate Sales & EBIT Growth

 

The Cons of Cost Plus Pricing Method Are Becoming Obvious

 

Cost-plus pricing has always felt safe. You take your costs, add a margin, and call it a day. But the cons of cost plus pricing are clear—safe no longer works.

 

This cost plus pricing method ignores how willingness to pay changes over time and across customer groups. It also assumes buyers care about your costs, when in reality, they care only about the value they receive. As a result, the cost plus method of pricing often leads to two mistakes: setting prices too low and leaving profit on the table, or setting them too high and losing deals to competitors who demonstrate more value.

 

Research shows that companies moving away from cost-plus towards value-based pricing can increase return on sales by 5–10 per cent. That is not just a small uplift—it can be the difference between struggling with shrinking margins and leading the market. In short, cost-plus is not neutral. It actively erodes competitiveness in pricing in B2B markets.

 

Capability Building Programmes For Pricing & Sales Teams!

 

Evolving Customer Expectations and the Opportunity for Growth

 

Modern buyers demand evidence at every step. They expect:

 

1. Lifecycle value: Customers now ask, “What will this cost me to operate and maintain over the next 10 years?” They want clarity on total cost of ownership, not just a purchase price.

 

2. Technical proof: They look for hard evidence—detailed specifications, test data, performance benchmarks, and case studies. Without this, your price feels like guesswork.

 

3. Risk reduction and reliability: Reliability is now a top concern. Buyers want assurance that a solution will perform consistently, reduce downtime, and lower risk across the lifecycle.

 

These evolving customer expectations highlight the cons of cost plus pricing. If you only apply the cost plus pricing method, buyers see no link between what they pay and what they gain. That weakens trust and puts you at the mercy of competitors who frame pricing in B2B around measurable outcomes.

 

Building a Pricing Ecosystem 🌍 Podcast Ep. 103!

 

Risks of Sticking to Outdated Pricing Methods

 

Continuing to rely on cost-plus pricing comes with real dangers:

 

1. Margin erosion: Buyers demand discounts because they see no reason why your margin is justified. Without proof of value, sales teams give in.

 

2. Lost deals: Competitors who clearly show lifecycle savings and performance benefits look more credible and win the business.

 

3. Price-taker behaviour: You stop leading with value and start following the market. Customers set the reference point for price, and you follow.

 

4. Commoditisation: If you cannot explain why your solution is worth more, buyers treat it as interchangeable with cheaper alternatives.

 

The cons of cost plus pricing are clear. The cost plus method of pricing makes you vulnerable. Instead of controlling the pricing in B2B conversations, you hand that control to your customers.

 

 

 

What Pricing Teams Must Do to Overcome the Cons of Cost Plus Pricing

 

Pricing teams play a critical role in changing this dynamic. The focus must shift from cost to value. This is where the knowing the cons of cost plus pricing become even more important. Teams must:

 

1. Building evidence: Use hard data, detailed comparisons, and customer case studies to prove lifecycle savings. Show, don’t just tell, how your solution performs over time.

 

2. Creating value maps: Compare your offer to alternatives in the market. Highlight not just price, but the economic value delivered in terms of efficiency, performance, and reduced risk.

 

3. Segmenting by willingness to pay: Not every customer values the same thing. Tailor pricing models to reflect different buyer needs and their willingness to pay for specific outcomes.

 

4. Communicating differentiation: Make your unique advantages clear in every proposal. Explain how your product solves a problem better than anyone else, and show why that justifies your price.

 

Done well, this approach moves beyond the cost plus pricing method and turns pricing in B2B from a calculation into a strategic sales tool.

 

Pricing Recruitment For Pricing Managers!

 

What Executives Must Do to Address the Cons of Cost Plus Pricing

 

Executives cannot ignore the cons of cost plus pricing or leave pricing to the back office. It must be treated as a core strategic function. That means:

 

1. Championing pricing: Recognise pricing as one of the most powerful levers for growth and profitability.

 

2. Investing in capability: Equip pricing teams with analytics tools, training, and access to reliable third-party data. Without this, they cannot build credible value arguments.

 

3. Driving board-level alignment: Ensure pricing messages reflect business priorities such as ROI, stability, and resilience. When executives speak the language of value, it cascades through the organisation.

 

4. Backing the team in negotiations: Sales teams need confidence that leadership stands behind the price. If executives cave easily, customers know the price is negotiable.

 

In pricing in B2B, if you cannot explain your price, customers will decide it for you—and their version will always be lower.

 

〉〉〉 Get Your FREE Pricing Audit  〉〉〉

 

From Cost-Plus Pricing to Value Leadership in B2B

 

Manufacturing purchasing has changed, and pricing must change with it. Buyers demand transparency, technical proof, and long-term value. The cons of cost plus pricing are clear—it cannot provide this and leaves firms exposed to margin erosion, commoditisation, and lost deals. The path forward is value-based pricing.

 

Now is the time to rethink how your business prices and protects margins. That’s where we can help. We work with businesses like yours to move beyond the cost plus pricing method and build strategies and organisational practices that drive growth and resilience. Let’s start the conversation—reach out today and see how we can make your pricing work harder for you.

 

For a comprehensive view of maximising growth in your company, Download a complimentary whitepaper on How to Drive Pricing Strategy to Accelerate Sales & EBIT Growth.

 

Are you a business in need of help aligning your pricing strategy, people and operations to deliver an immediate impact on profit?

If so, please call (+61) 2 9000 1115.

You can also email us at team@taylorwells.com.au if you have any further questions.

Make your pricing world-class!