Goal return pricing is a pricing technique the place an organization units the worth of its services or products to realize a selected desired price of return on funding (ROI). For instance, if an organization invests $1 million in creating a brand new product and goals for a 20% ROI, it’s going to set a worth that generates $200,000 in revenue. This technique necessitates cautious consideration of projected gross sales quantity and related prices.
This strategy affords a transparent monetary goal and facilitates long-term planning by guaranteeing profitability aligns with funding objectives. Traditionally, its roots lie in industries with important capital investments, akin to manufacturing and utilities, the place guaranteeing a predictable return on substantial outlays is essential. By tying pricing choices on to profitability targets, companies could make knowledgeable funding choices and successfully consider challenge viability.
