Goal return pricing is a pricing technique the place an organization units the value of its services or products to attain 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 can set a value that generates $200,000 in revenue. This technique necessitates cautious consideration of projected gross sales quantity and related prices.
This method 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, resembling manufacturing and utilities, the place guaranteeing a predictable return on substantial outlays is important. By tying pricing choices on to profitability targets, companies could make knowledgeable funding choices and successfully consider undertaking viability.
