Naomi manages the selling organization for Navitol, a national distributor for industrial building supplies and roofing materials. Naomi instructs her sales representatives that their goal is to generate at least a 45 percent margin on all of the industrial building supplies and roofing materials they sell in order for her to achieve a 20% return on controllable investment (primarily inventory). Naomi is using a ________ pricing strategy.

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13-07-2022
Business

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Naomi manages the selling organization for Navitol, a national distributor for industrial building supplies and roofing materials. Naomi instructs her sales representatives that their goal is to generate at least a 45 percent margin on all of the industrial building supplies and roofing materials they sell in order for her to achieve a 20% return on controllable investment (primarily inventory). Naomi is using a ________ pricing strategy.

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tutorconsortium203 tutorconsortium203 · Answer 1 · 2022-07-19T09:23:53+02:00

Naomi is to generate at least 45% margin on all of the industrial building supplies and roofing materials they sell in order for her to achieve a 20% return on controllable investment (primarily inventory). Naomi is using a "target return pricing" strategy.

What is target return pricing?

A pricing technique that involves using a formula to determine the price that must be set for a product in order to provide the desired profit or rate of return on investment, presuming that a specific quantity of the product is sold.

The advantages of target return pricing are-

It is a dynamic form of pricing that considers and reacts to supply and demand elements in the market when calculating the selling price.
By lowering expenses due to the predetermined selling price, it increases corporate profitability.

Calculate the target cost of a new product using following methods-

Examine the market environment.
Establish the desired pricing for the product.
Decide on your desired profit margin.
Determine the desired price.

To know more about return on investment (ROI),

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