Target return pricing
Target return pricing is a pricing strategy where a company sets the price of a product based on a specific target return on investment. This approach involves calculating the desired profit margin and then determining the price that will achieve this margin.
For example, if a company wants to achieve a 20% return on investment for a product that costs $50 to produce, they would need to set the selling price at $62.50 ($50 / 0.80 = $62.50).
This pricing strategy is commonly used in industries where companies have a specific target return they want to achieve, such as luxury goods or high-end electronics.
By using target return pricing, companies can ensure that they are making a profit on their products while also meeting their financial goals.
- Advantages of target return pricing:
- Helps companies achieve their desired profit margins
- Allows for greater control over pricing strategies
- Can help companies stay competitive in the market
Overall, target return pricing can be an effective strategy for companies looking to maximize their profits and achieve their financial goals.
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