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3 main reasons pricing is adjusted

We have analyzed and studied what made sales managers adjust the price most frequently, and it's not what you think. The relationship between drastic pricing changes is not directly proportional to what is going on in the market, instead sales managers adjust their price more based on internal factors. When utilizing our algorithm pricing and inventory solutions, we align our pricing models to one thing, "how can we get you the greatest return on investment." Most dealers assume sales managers have the same motivations, but we found that the greatest amount of price changes were due to internal factors, and not tied to profitability.

Root decision making greatest price changes

  1. Like vehicle stocking levels. We found that when dealerships get a large supply of like models (GLC, GLE, Range Rover, X3, etc...) it is found that they generally discount the greatest amounts. Notice that it is based on like vehicles in stock, not market days supply. For humans the greater determination was "We have 10 GLE's in stock, sell them quick."

  2. Month to Date Volume. We find that dealers mid month change the pricing most when they are off target. This means managers focus more on hitting unit objectives, not maximizing profits. @ Alpha Price, we ensure both, so if you're off mid month not hitting your numbers, we don't just discount everything to cheapest in market, instead we find the ideal cars to sell in the next 7 days and focus and make sure they are priced accordingly.

  3. Cost to market. This one may come as a surprise, but the cost to market relationship was one of the highest determining factors for how often and how much a sales manager discounts. The more gross a vehicle has, we find that it gets discounted the most and fastest. A high cost to market (lowest gross), dealers in general hold on to these vehicles longest and not discount.

Overall, these are rookie mistakes for managing pricing. If you owned stocks and traded them based on how many shares you own, how high you own them for, or what profits you've made to date, you miss the whole point of buying and selling stocks-TO MAKE A PROFIT. Our favorite question we ask is not what you own a car for, but what will it be worth in the future?

Alpha Price is a first in class solution that prices your inventory and manages it based on multiple factors you provide: ideal turn rate, volume, and ideal profit target. We build out your strategies and manage your inventory like a financial advisor.



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