Under what circumstances, if any, would specifying 'COM + 10%' be a strategically justifiable approach to furniture pricing, especially when project parameters are ill-defined?
Understand the Problem
The question asks about the justification for using a 'Cost Of Materials + 10%' (COM + 10%) pricing strategy for furniture when project details are unclear. It presents four scenarios and asks which, if any, would make this approach strategically justifiable.
Answer
When project parameters are ill-defined, 'Cost of Materials + 10%' pricing offers flexibility and ensures profitability by covering unforeseen costs and complexities.
Specifying 'Cost of Materials (COM) + 10%' for furniture pricing can be strategically justifiable when project parameters are ill-defined, offering flexibility and ensuring profitability by covering unforeseen costs and complexities. This approach is best suited for projects where the final scope is uncertain but provides transparency and customer reassurance.
Answer for screen readers
Specifying 'Cost of Materials (COM) + 10%' for furniture pricing can be strategically justifiable when project parameters are ill-defined, offering flexibility and ensuring profitability by covering unforeseen costs and complexities. This approach is best suited for projects where the final scope is uncertain but provides transparency and customer reassurance.
More Information
Using 'Cost Plus' pricing allows businesses to pass on the direct cost of materials and a percentage to cover overhead. This is especially useful if there is no means of estimating true cost when the project has been defined.
Tips
When using a Cost Plus model, you should be clear about what elements attract extra cost beyond the initial estimate.
Sources
- Effective Pricing Strategies for Furniture Stores - EZ Process Pro - ezprocesspro.com
- Project Based Pricing: Best Practices & When to Use - spp.co
- 16 pricing strategies + examples - Zapier - zapier.com
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