Goal return pricing is a pricing technique the place an organization units the value of its services or products to realize a selected 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 can set a worth that generates $200,000 in revenue. This methodology necessitates cautious consideration of projected gross sales quantity and related prices.
This strategy presents a transparent monetary goal and facilitates long-term planning by making certain profitability aligns with funding targets. Traditionally, its roots lie in industries with important capital investments, comparable to manufacturing and utilities, the place making certain 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 mission viability.
