Pricing Strategy

Pricing Strategy, non barriers & product differentiation

Big Drive Auto operates a multi-state dealership, with car sales that includes other services, such as the sale of motor oil, coolant and tires. Pricing is important to compete in the market place. Several elements should be considered when looking at a cost structure for short term or long-term goals. What costs are incurred should be distributed, promoted and production costs should be considered. Even with all these items, Big Drive Auto must account for the competition and consumer. An organizations profit depends on large on its own pricing strategy and that of its rivals (McConnell, Brue and Flynn, p.232). In an effort to capture consumers and continue servicing the current customers, Big Drive’s management needs to establish a reasonable price with an effort to remain profitable. In reviewing the historical data, it does appear that the company has been stable in its pricing from 1998 through 2007, in respect to vehicle sales in 2002 through 2003 slight decrease. The company does face some tough challenges ahead including the current and future downturn of the economy when many people put off car purchases and auto repair work. Management needs to evaluate each area as its own sector to focus on fixed and variable cost associated with product and service, supply and demand of each product will show the lowest mark point. This effort will establish how they can continue being economically stable. Drilling down to the bare essentials can also contribute to what nonprice barriers can be introduced to support other services. Penetration pricing is the organization way of setting low prices to increase sales and market share (Pricing Strategies, 2009). Creating pricing in this fashion helps increase the sales and increase volume of product sales for the service area. Inter-relating where available, can entice customers to visit your dealership over another.

In the service area where the dealership...