Question

You are the marketing manager for a multi-state auto dealership in the Midwest. It is that time of year when your fleet of autos goes through major model year changes. You are putting the final touches on your pricing strategy to facilitate getting your inventory of autos low enough to make room for the new models.

​What is the practical problem involved in using your current sales and commission data to make pricing decisions?What pricing strategy solution would best address that problem?
1. ​Problem: You have a clearer knowledge of the supply side of the pricing equation than you do of the demand side. Solution: Periodic discounting to keep pace with demand.
2. ​Problem: You are committed to the idea of maximizing profits for last year's models. Solution: Increase the price of last year's models, emphasizing their future unavailability.
3. ​Problem: Your current sales and commission data are hard to quantify to formulate a pricing strategy. Solution: When a potential customer appears interested, formulate an individualized price for that person.
4. ​Problem: You are committed to the idea of maximizing profits for next year's models. Solution: Keep the prices of last year's model the same, so that the new model's prices look more desirable.
5. Problem: Your commissions add to the cost of the cars, decreasing their attractiveness as bargains. Solution: Eliminate your commissions to reduce inventory.

Answer 1

1. Problem: I have a clearer knowledge of the supply side of the pricing equation than I do of the demand side. Solution: Periodic discounting to keep pace with demand.

Explanation: There is an established relationship between the demand and supply of goods and services as price changes, so it is necessary I as the marketing manager I reduce the price or give some percentage discount in order to increase the demand,this knowledge is effective in managing the supply of goods and services which will help to prevent wastages especially as it has to do with product whose demand tends to be seasonal.