Cost-plus pricing is a simple pricing method where the final price equals the total cost plus a predetermined profit margin. While easy to calculate, it often underprices high-value products and does not reflect market dynamics.

Example: A SaaS company with $30 monthly COGS per customer applies a 200% cost-plus markup, setting the price at $90/month. However, if competitors charge $150 for similar value, this approach leaves significant revenue on the table.