Target pricing: Exploring the drawbacks and alternatives
Published on April 15, 2024
A successful pricing strategy produces consistent, reliable profits and customer satisfaction. Businesses that aim for reliable results often explore a target pricing strategy. But what is target pricing and what are its benefits and drawbacks? And is it really that reliable?
What is a target pricing strategy?
The target pricing method determines pricing based on a target profit margin. It is based on the costs of producing and delivering your product or service and what customers will pay for it. You first decide how much profit you need to make then set the price based on that.
The set price meets two key requirements:
- It produces a reasonable profit for your business.
- Customers are willing to pay that price.
When you apply target pricing, you are methodically selecting the best price based on:
