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Rate of Return Pricing

 

DisciplinesMarketing > Pricing > Rate of Return Pricing

Description | Example | Discussion | See also

 

Description

Define your price based on some form of 'rate of return'. Ways to do this include as a percentage of:

  • Attributable product costs
  • Overall cost of business operation
  • Sales revenue
  • Capital investment
  • Bank rate

How often price is set may depend on how often knowledge about this basis changes. This may be annually, quarterly, monthly or even on an ongoing basis.

Example

A mineral company sets its prices based on a 10% rate of return above annual mining costs.

A service company borrows money to finance the company and sets its prices 5% above these costs.

Discussion

Fixing the price in this way takes no real notice of what customers are willing or able to pay. As such, it tends to be a method used when the company setting the price is not in a competitive situation, for example when they have a monopoly or customers are tied into contracts. It is also difficult to use this method in a situation of change.

This method may be preferred by those who seek certainty in their business model, for example accountants who just want a neat and predictable margin, rather than face an uncertain situation where profitability can be hard to determine.

While this method may be non-competitive, it could also result in potential profits not being made, for example where an innovative or fashionable product could be sold at a much higher price than that based on a relatively thin marginal load.

See also

Fixed Pricing, Target Pricing

 

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Site Menu

| Home | Top | Quick Links | Settings |

Main sections: | Disciplines | Techniques | Principles | Explanations | Theories |

Other sections: | Blog! | Quotes | Guest articles | Analysis | Books | Help |

More pages: | Contact | Caveat | About | Students | Webmasters | Awards | Guestbook | Feedback | Sitemap | Changes |

Settings: | Computer layout | Mobile layout | Small font | Medium font | Large font | Translate |

 

 

Please help and share:

 

Quick links

Disciplines

* Argument
* Brand management
* Change Management
* Coaching
* Communication
* Counseling
* Game Design
* Human Resources
* Job-finding
* Leadership
* Marketing
* Politics
* Propaganda
* Rhetoric
* Negotiation
* Psychoanalysis
* Sales
* Sociology
* Storytelling
* Teaching
* Warfare
* Workplace design

Techniques

* Assertiveness
* Body language
* Change techniques
* Closing techniques
* Conversation
* Confidence tricks
* Conversion
* Creative techniques
* General techniques
* Happiness
* Hypnotism
* Interrogation
* Language
* Listening
* Negotiation tactics
* Objection handling
* Propaganda
* Problem-solving
* Public speaking
* Questioning
* Using repetition
* Resisting persuasion
* Self-development
* Sequential requests
* Storytelling
* Stress Management
* Tipping
* Using humor
* Willpower

Principles

+ Principles

Explanations

* Behaviors
* Beliefs
* Brain stuff
* Conditioning
* Coping Mechanisms
* Critical Theory
* Culture
* Decisions
* Emotions
* Evolution
* Gender
* Games
* Groups
* Habit
* Identity
* Learning
* Meaning
* Memory
* Motivation
* Models
* Needs
* Personality
* Power
* Preferences
* Research
* Relationships
* SIFT Model
* Social Research
* Stress
* Trust
* Values

Theories

* Alphabetic list
* Theory types

And

About
Guest Articles
Blog!
Books
Changes
Contact
Guestbook
Quotes
Students
Webmasters

 

| Home | Top | Menu | Quick Links |

© Changing Works 2002-
Massive Content — Maximum Speed