Target Profit Pricing

1. A pricing method in which a seller sets prices with the intent to make a certain amount of money.



When using target profit pricing, it is important to consider your product's demand curve. Because changing the price will change the amount of product customers will be willing to buy, it is not enough to simply multiply unit contribution by a fixed number of units. Instead, profit for a given price must be estimated as:

Expected Profit = Unit Contribution*Demand Function{Price}-Fixed Costs

Where Demand Function{Price} returns expected unit sales.
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