Question

Howl Motors is a car dealership located in Moore, OK. The marketing team is having internal discussions about how to price their two main types of selling automobiles, the new and the new SUV. T sports car hey are looking to set prices in a way that reflects the market, and also to understand which product is more profitable for the firm to help them decide how to allocate internal resources ts cars at a cost of $22.500 each (the unit cost) and marks them up to sell Howl Motors buys spor at a profit. They buy their SUVs at $31,000, which they also mark up to sell at profit. Market research has shown that other dealerships in the region are selling the same sports car for as low as $25,000 and as high as $32.500. The same SUV is being sold in the region for anywhere between $37,000 and $44,999. Last year Howl Motors sold 2.200 sports cars and 1,700 SUVs, and they project unit sales to be the same this year.

The owners at Howl Motors have indicated they prefer to price their cars and SUVs on the lower end of the pricing range utilizing a volume-maximization strategy
Considering all of these factors, you need to provide an analysis on what price points Howl motors results will be at different price point.

Answer 1

Howl Motors should set prices for sports cars and SUVs near the lower end of the competitive market rates; around $25,000 for sports cars and $37,000 for SUVs to maximize sales volume and profitability.

Step-by-step explanation:

To determine the optimal pricing strategy for Howl Motors, we must consider the provided market data, internal costs, and preferred strategy. The company purchases sports cars at $22,500 and SUVs at $31,000. To maximize volume, they should price both vehicles on the lower end of the competitive market rates.

For sports cars, given the market range of $25,000 to $32,500, a pricing point closer to $25,000 would likely drive higher sales, considering their volume-maximization goal and provided the market’s willingness to pay remains consistent. For SUVs, with a competitive pricing range of $37,000 to $44,999, setting a price near the lower bound of $37,000 will be ideal for the same reason.

Given last year's sales figures, they sold 2,200 sports cars and 1,700 SUVs. To estimate profitability, Howl Motors would subtract its unit costs from the determined selling prices and then multiply by projected unit sales, keeping in mind the potential for increased sales volume due to lower pricing.