Thursday, March 5, 2009

Costco's Cost Plus Pricing

The March issue of Costco Connection includes a note from editor David Fuller, talking about the retailer's pricing policy (see bottom of p. 5). He notes that the company operates on a "cost plus" pricing basis, instead of a "what the market will bear" pricing basis. A quote:
The "cost plus" approach is based on the idea that a business can operate on a fair markup and still pay all of its bills; pricing is determined by carefully examining true costs, and profits are maintained by stringently controlling costs.
Fuller goes on to write that the pricing exemplifies a company that wants to be fair to all stakeholders, so "no need to be anything but transparent, to use a voguish word." Transparent pricing--new concept for my next textbook revision?

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