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Pricing Strategy

As the articles mentioned, GMC and other auto manufactures have used pricing incentives extensively to sell vehicles. In Sep-Oct 2005, GMC and Ford tried a "value" pricing approach of lower price with little or no incentives, however sales dropped off and in Nov 2005 considerable price incentives were being offered again. Toyota and some other manufactures offer some "cash back" promotions, but not as large as GMC or Ford. What do you think is the more effective pricing strategy for autos, the use of periodic incentives with deep discounts or a more standard, somewhat lower pricing (value pricing) with minor "cash back" or some reduced financing charge? Why?

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Hi there,

I think the key to understanding this question has to do with understanding your target market. Before a pricing strategy is to be undertaken, one must have a grasp of who might be in the market for your car and why they would be interested in purchasing your car. My impression of GM and Ford and their customer base, is that the people that purchase them are highly price sensitive. The reason that they purchase these cars is not necessarily because they believe they are getting the absolutely best car on the market. They are purchasing these cars because the customer thinks that they are getting the best 'deal'. A history of giving large cash incentives plays a large role in that process. GM and Ford customers have grown to become accustomed to receiving a certain deal, and is part of the incentive for purchasing those cars. When GM and Ford switch their strategy and try to offer a strategy of 'value', with no discounts, their customers probably became confused, and figured that their cars were now more expensive than in the past. Now, in relation to your question, what is the best strategy for pricing autos, I think it all depends on ...