Tactical Pricing Strategy for a major automobile manufacturer in response to curtailed demand and Microchip shortages.
01. Confronting Challenges
A global automobile manufacturer was gradually discontinuing its affordable vehicle line and positioning itself to target the premium market in Mexico. The commercial team wanted to adopt a scientifically informed decision-making process to:
- Defend market share from the new Chinese and Korean brands.
- Use differential pricing to accommodate the opportunity loss faced due to microchip shortage.
- Analyze scenarios that would yield optimal volumes and shares while ensuring profitability.
- Understand the short-term and long-term impacts of price changes in the market.
02. The Methodical Approach
As a result of a series of discussions, the Decision Point team has proposed the following approach to reduce the impact of the price increase.
03. DP’s Price Volume Profit Analysis Solution
The Pricing Analytics approach that Decision Point uses for automobile manufacturers incorporates the following:
As a result of the advanced analytics model delivered by Decision Point, the Global Automobile Company was able to:
- Developed the portfolio pricing strategy with the client to maximize profits and market share.
- Integration of Pricing elasticities, volume transfer metric and financial value-chains in one place to understand the impact of pricing changes of sales (Volume), Profit and share, with long term planning.
- Planning and implementing judicious pricing increases to increase top-line sales.
- Our tactical price increase plan was developed to take advantage of the curtailed market demand & drive strategic increases across a variety of vehicles.
- Using the regional sensitivities, the team identified the key regions most likely to be impacted by the price changes. In part, the differential promotions helped offset that loss.