There are the familiar approaches of direct sales and leasing or renting. A third approach is time-share, as practised by Executive Jet. The customer gets immediate access to an important piece of equipment and HP stands to earn a lot more than the price of a machine. Once companies have decided upon their pricing , they need to think about the business model and, in particular, target costing. To arrive at the cost target for the business to generate a decent profit, they should start at their strategic price and subtract the desired profit margin.
Companies have three ways to hit the cost target without compromising on price or utility.
First, they can replace familiar raw materials with unconventional, less expensive ones. Instead of metal, it used plastic. And instead of expensive packaging made of velvet and leather-like cardboard, Swatch supplied a clear envelope. Again, Swatch is an example. It eliminated the screws for closing its watches and used ultrasonic welding to seal them.