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Sticker Price and Pricing Strategy in Cars

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Need help discussing the following: Columnist Dave Barry jokes that federal law requires this message under the sticker price of new cars: "Warning to stupid people: Do not pay this amount." Discuss why the sticker price is generally higher than the actual selling price of a car. Tell how you think car dealers set the actual prices of the cars they sell. 250 word minimum.Cite work.

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Solution Summary

This solution explains sticker price, also known as manufacturer's suggested retail price ( MSRP) and describes it in terms of how it is determined. Since it is normally negotiable, the actual selling price becomes lower. In the case of cars/automobiles, pricing policy is determined by considering key factors such as pricing objective, pricing method, demand, costs, and competitors' price, costs, and other offers. This reporter believes that perceived-value pricing method is utilized.

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STICKER PRICE, ACTUAL SELLING PRICE, AND PRICING STRATEGY: THE CASE OF CARS

How do companies set price?
According to Kotler and Keller (2006), companies do their pricing in a variety of ways. In small companies, prices are set by the boss or the owner. In large companies ( e.g. car manufacturing), pricing is handled by division and product-line managers. The top management sets general pricing objectives & policies and approves the prices proposed in the lower levels of management.

Why the sticker price is generally higher than the ...

Solution provided by:
Elisa Valdez, PhD
Education
  • Bachelor of Science in Business Administration, University of the Philippines
  • Master in Business Administration, Saint Mary's University
  • Doctor of Philosophy in Education, University of the Philippines
  • Doctor in Business Adminstration (IP), Polytechnic University of the Philippines
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