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