Which pricing strategy focuses on achieving a specific return on investment?

Target profit pricing is a strategy that specifically aims to achieve a predetermined return on investment (ROI). This method involves setting prices based on the desired profit level, allowing businesses to estimate how much they need to charge per unit to reach that profit target. This strategy is particularly useful for firms that have clearly defined financial goals and need to ensure that their revenue covers both costs and desired profits.

In contrast, maximizing profits focuses on setting prices to achieve the highest possible profit overall, which may not strictly consider a specific return on investment. Competitive parity pricing involves setting prices in comparison to competitors, which does not take into account the company’s specific ROI objectives. Sales-oriented pricing aims to increase sales volume and market share rather than focusing on profitability or investment returns, placing less emphasis on achieving a certain ROI. Therefore, target profit pricing stands out as the strategy that most directly addresses the goal of securing a specific return on investment.