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Tuesday
Feb022016

Dynamic Pricing

Remember from way back in the day when new vehicles had a suggested retail price (MSRP) and knowing the dealer cost (invoice) was all the rage. At another time folks discovered "holdback" as an additional negotiating tool.

 

They were also the days when the "spread" between dealer cost and retail price was approximately 15%, now in many instances its less than 10% and shrinking.

Recently the auto business thrives on dynamic pricing, the retail price is a constant, but the retail incentive, program, subsidy varies on a monthly basis. Additional incentives to the dealer also vary on a monthly basis.

From a consumer's perspective, that you know the cost, the various programs, there are still a few pieces of the puzzle that are missing. That you configure a new vehicle online, that you can calculate the value of your trade in online provides an idea of the parameters of the deal.

There is a ton of big data that is available to manufacturers to calibrate monthly dynamic pricing for the various models. There is another ton of big data that is available to dealers to see which customers are more responsive than others to a precise dynamic pricing moment for a specific model.

Since the auto industry must move metal to thrive, there are additional call them "back room" incentives, considerations between manufacturers and dealers to move metal and achieve objectives.

You are an empowered consumer, interfacing with monthly dynamic pricing to close a deal in a showroom. Reflect on this for a moment...now factor in a trade in, and how do you close a deal?

As consumers we all know that be it at the grocery store, buying a plane ticket, with dynamic pricing timing is of the essence, and you will often save here and drop some money elsewhere. The cheap flight is the one leaving at 5:48 AM as an example, and 3 days later its no longer a cheap flight.

From a consumer's perspective...

Informed / Empowered

As a consumer I am informed and empowered having done my due diligence to find metal that resonates, I have an idea of the price within the time frame (month). Obvious also have a good idea of the value of my trade in.

Price / Payment Point

With incentives swirling around on a monthly basis, I have a price point or monthly payment point where I will make a decision to close a deal.

Big Data

As a consumer I'm at a distinct disadvantage to access "big data", I can access information, values, what is offered in the market to name a few. The information I access is slow compared to the big data of manufacturers and dealers.

Timing

Manufacturers offer monthly incentives which are published and static for the month, although they are adjusted for various regions of Canada. Monthly sales are reviewed on a 10 day basis (decades). As a consumer the last 10 days of the month are more auspicious to do an additionally favourable deal, since there might be additional "back room" incentives motivating the dealer.

Agreed...CMS (Citizen Main Street) already knows that doing a deal towards the end of the month has its advantages.

Humans

Keep in mind we are all humans, and spending big money will always involve emotions, and a gut feel. Especially once the metal resonates.

 

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