Tier 2 - Cost

Cost or expense is an area that most feel that they have covered.  They can just move on to the next item on Tier 2.  Well not so fast. Cost when speaking in terms of pricing is not just about Cost of Goods Sold (CoGS), understanding Fixed vs. Variable expenses or being able to understand a P&L.  To truly understand cost, you must understand the effect that Price has on Cost, specifically; Profit Volume Ratios, Break Even Analysis, Capacity and Demand.  A change in price can have a cascading effect that ripples across your P&L and subsequently your profitability.  Having a complete understanding of your cost drivers is an essential starting point on your journey to price optimization.