Three megatrends are disrupting conventional pricing
Traditionally, OEMs set a high list price which was gradually discounted at the different sales levels, until the consumer haggled for the best deal at a retailer of choice. Now the industry faces three major challenges at once that are having powerful implications on pricing: e-commerce, direct sales and electric vehicles. The combination of these megatrends is profoundly disruptive and, as a consequence, pricing practices need to be revamped even faster than before.
OEMs face full price transparency and increasing competition from third parties.
Unlike before, OEMs need capabilities to set, steer and harmonize transaction prices across all sales channels.
EV-specific vehicle economics imply new pricing challenges, but also significant opportunities.
Core premises for future car pricing
1. Pricing will be channel-agnostic
69% of consumers expect the same online and offline prices.
2. Price negotiations will become a thing of the past
More than 2/3 of potential buyers find it cumbersome to research and bargain for discounts.
3. Leasing will fully outpace car ownership
For almost half of potential buyers, leasing is the most or second most preferred option for acquiring a car.
4. Subscription models will continue to grow
27% of potential buyers rate “low capital requirements” as the main advantage of subscription.
5. Data availability and quantity will increase
Millions of data points processed each day will help OEMs develop advanced analytics in pricing.
6. OEMs will establish end-to-end revenue management
OEMs can start managing vehicle transaction prices centrally based on price elasticities.
A pricing transformation roadmap
Based on these six premises, we developed a transformation roadmap for pricing in a world of omni-channel direct sales. We examine in detail the roles of price strategy, data and analytics, as well as IT and technology. We then suggest how OEMs can enhance their pricing strategies.
Achieve full control over prices across all sales channels with centrally steered campaigns.
Data & Analytics
Adopt AI-based pricing based on parametrized price rules and fully automated data harvesting.
IT & Technology
Embed a cloud-based IT environment with a central data lake as input for machine learning algorithms.
OEMs need to act now
With these three megatrends collectively impacting the industry, traditional pricing practices need to be revamped faster than ever. OEMs must gradually centralize all pricing activities and fundamentally innovate their pricing strategy and models, as well as their data and IT landscapes. Cumbersome price negotiations, gratuitous special discounts from salespeople, or staggered pricing approaches at different sales levels will become a thing of the past faster than most might anticipate today.
To keep up in today’s ever-changing marketplace, OEMs need to embark on a pricing transformation journey. It will be fueled by the advantages of e-commerce and direct sales, such as higher data availability and quantity. Advanced analytics and state-of-the-art software solutions that use this data will bring pricing to the next level and help OEMs better manage margin-volume trade-offs and win the customers of tomorrow.