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Drucker Seven Deadly Sins: Target Costing vs Market Pricing

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Drucker argues that one of the seven deadly business sins is to base prices on costs, which means first measuring the current cost of a product or service and then "marking it up" by adding a profit margin. He blames the disappearance of the US consumer-electronics industry in part on its practice of basing prices on costs. Can a domestic industry disappear because of its pricing practice? What is an alternative to basing prices on costs? What does this alternative require that is different from basing prices on costs?

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Solution Summary

Your tutorial is brief, 149 words, and explains that product can be extinguished by poor pricing and explains the alternative.

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Yes, pricing can cause a product to disappear. If you price your product too high customers may not want it, even if there are no substitutes. Of course if there is demand but the price is too high, competitors will either undercut ...

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