Price, along with product, place, and promotion, are the variables that the marketing manager controls. Pricing is extremely important since it so directly affects an organization's sales and profits. Naturally, profit objectives will guide pricing decisions. The marketing manager has to decide whether to maximize profits or establish a target return. A particular target might be a certain percentage return on sales or a certain percentage return on investment or, for a small family operation, the return might be a fixed dollar amount of profit to cover overhead and living expenses. With any objective, the time factor is crucial. What is an appropriate objective for the short-term may not be for the long-term and vice- versa. Marketers are concerned with all the factors affecting price, in order to keep their products from faring poorly in a widely variable atmosphere. Even in service areas such as passenger fares and freight rates, where detailed prices are printed and distributed, influences may cause fluctuation. The marketing manager knows that the costs of the separate elements of the marketing mix can be recovered by proper pricing. The cost of the product itself-the promotion and selling associated with it, the distribution expenses, and profit - are all directly related to price. Thus price knits together the elements of the marketing mix and pays for their respective contributions. The marketing manager must analyze and reconcile the various elements of those variables which influence price, and must then decide on an optimal price policy. The most fundamental part of any marketing analysis is the recognition of the competitive structure of the industry. Where there are many competitors offering the same type of product, price competition will be active. When there are great numbers of similar offerings, products tend to lose their individuality. Then differentiation becomes difficult, and marketers have little discretionary power to influence prices. It is in this circumstance that marketers and merchants alike look to sales techniques. Disposing of goods at reduced prices draws attention to the specific brand, in the hope that customers will continue to buy when prices return to "normal." A target return is …

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A target return is a specific financial goal that a company aims to achieve through its pricing strategy. This can be defined in various ways, depending on the objectives of the organization. Here are some key points to understand about target return:

• Definition: A target return typically refers to a predetermined percentage return on sales or investment that a business wants to achieve. For example, a company might set a goal of achieving a 15% return on its investment.
• Types of Target Returns:
  • Return on Sales: This is calculated as a percentage of sales revenue. For instance, if a company has a target return of 20% on sales and expects to generate $100,000 in sales, it aims for a profit of $20,000.
  • Return on Investment (ROI): This is a broader measure that looks at the profit generated relative to the total investment made. For example, if a company invests $50,000 in a new product and aims for a 25% ROI, it expects to make $12,500 in profit.
  • Fixed Dollar Amount: In some cases, especially for smaller businesses, the target return might be a specific dollar amount that covers overhead and living expenses. For example, a family-run business might set a target return of $5,000 to ensure they can cover their basic costs.
• Short-term vs Long-term Objectives: It's important to note that what might be an appropriate target return for the short term may not hold true in the long term. For instance, a company may prioritize quick sales to gain market share initially, but later shift its focus to sustainable profitability.
• Competitive Environment: The target return can also be influenced by the competitive structure of the industry. In highly competitive markets, companies might have to adjust their target returns based on pricing pressures and competitor actions.

In summary, a target return serves as a guiding principle for pricing decisions and overall marketing strategies. It helps businesses focus on their financial goals while navigating the complexities of market dynamics.