Pricing Strategy for Automobile Industry

Future Trend of Automotive Pricing Strategy

Publish Date : October, 2018
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Exclusive Global Automotive Industry Pricing Analysis

Mankind always has a tendency to look for the best products available in the market at the least possible price rates. The company to gain consumer trust will have merged the two factors in the most appropriate manner and set a price for the product.

Product development, Promotion, Branding, and After Sales are important parameters for any business. Firms successful at creating "Value for money"  with the other marketing/ branding activities must still capture some of this value in the prices they earn. For any Automotive product, it is a smart decision if they focus to sell value and not price.  Historically, price plays a key role affecting buyer decision. In our latest study on pricing, however, other nonprice elements also gained attention. Still Every part of the world, Even so, price remains one of the key parameters that determine a firm’s Sales Volume, market share, Revenue, and profitability.

The most complex and highly intense procedure is the pricing of any product. The pricing of the product is the result of a number of calculations on the sale rate, research work on the market, risk-taking ability and understanding of the market trends and the consumer requirements. 

Pricing Strategy and profit loss relation

The company needs to make the balance between cost and Buyers perception. "Remember that Low price" does not mean "Value price". Sometimes low price responsible for backfire on sales volume.

It is hard to calculate the value customers attach to its vehicle. For example, calculating the cost of vehicle-based on BOM and Running operating economy, the Resale value is relatively easy. But assigning a value to other measures of satisfaction/ Delight such as Reliability, Features, Customer support soft skill, Customer savvy image, and status is very hard. Such value is subjective; it varies both for different consumers and different situations. For example, MAN Truck (India) Value price was workable for its tipper segment but it was not workable for its Rigid Haulage segment. The company needs convenience to its buyers what is the value of the vehicle behind the price. Maruti Suzuki is the example for most of its product for the Middle-class segment. 

Automotive Pricing Strategy Analysis

The future of pricing will work on a new concept. "Good-value pricing"—offering the perfect combination of vehicle quality and good service at a fair price. In the USA, Mercedes-Benz launched its CLA Class, entry-level models starting at $31,500 now it starts with $41,500. With attractive features and specs, the CLA Class gives customers “The Art of Seduction. At a price reduction. "Value-added price" is another concept which some companies use. Toyota Innova is the example which gives excellent product performance for commercial use rather than lowering the price. There are some other kinds of pricing strategy like competition based, customer preferences, willingness to pay, price elasticity, cost-based, Profit targeting and so on. What principle should guide decisions about prices to charge relative to those of competitors? The answer is simple in concept but often difficult in practice: No matter what price you charge—Priemium, low, or in between—but make sure to give customers delight value for that price.  If you are targeting Zone C or D (As per exhibit), it is important to note that it misinterpretation that customers will immediately recognize and pay for a truly innovative, Quality,  and superior product. The company must have the strategy to educate customers, create buzz and effectively communicate through a different channel about superior value to customers before linking price to value. Let first Customers have perception and understand the value in order to be willing to pay more for value rather than taking buying decision solely on basis of price.

Automotive Pricing Trend Analysis

We cover the following points in our Pricing Consulting Project:

  • How to set the best price? How to choose the best price bracket that's attractive to customers and profitable for business? 
  • Competitors' products priced analysis, and how valuable/position product or service relative to competitors? 
  • The business case to check how many customers are expected to purchase a product at various price bracket? 
  • Set price to get maximize profit? 
  • How to select the price at different product lifecycle and Economy condition? 
  • Select price based on Demand?

 

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