One of the crucial challenges to be addressed in the automotive aftermarket industry is the pricing strategies of replacement parts. The importance of competitive pricing is more important now than ever, especially with the increasing number of sellers online and the global comparability of prices. These 7 Automotive Parts Pricing Strategy 2020 will help you drive trough these challenging times.
If you’re a seasoned operator in this fiercely competitive market, you know that a higher sales volume doesn’t always translate to more profits. To drive profits and run a sustainable business, you have to identify the different factors that impact sales as well as the right price points for your auto spare parts.
That’s why in this article, we bring you 7 marketing challenges and winning strategies to address them to help your automotive parts business achieve commercial success.
1. Parts Classification Challenge & Strategy
Challenge: How to effectively classify thousands of spare parts (or even millions in some cases).
Strategy: Segmentation & grouping. You can start grouping from a high level and break it down until you get to a level where you have detailed control of your overall product portfolio.
For example, extremely competitive parts could be grouped under a commodity segment. Parts with little or no alternative competitive products could be grouped in another segment, while some get the value-added segment.
All in all, relevant dimensions you can use to group replacement parts include the intensity of competition, perceived value of parts, part’s market share, and lifecycle position of a part.
2. Price positioning Challenge & Strategy
Price positioning: Setting the Right Prices for Sustainable Profitability
Challenge: How to allocate prices across different product segments. The second challenge is to manage all the segments well by placing value-added products right next to commodity products as they both give you margin and volume.
Strategy: Decide which segment gives you more elasticity and those you want to price more aggressively. You can start from commodity and work your way down to the value-added products.
Your marketing strategy for the commodity segment should be to price the parts at market prices. For the value-added products, you may want to either beat or meet the price of a particular competitor.
3. Margin Level Challenge & Strategy
Deciding the Margin Level across the Parts Segments
Challenge: The margin spread to choose from is very large ranging from 2% to 50%.
Strategy: Counting on the two previous steps, you now have a clear idea of parts’ pricing and how they should be positioned… Spot and correct anomalies.
4. Sales Volume Challenge & Strategy
Fluctuating Sales Volume of Spare Parts
Challenge: Your sales are peaking for some products, and some are staggering.
Strategy: Establish a link between the parts and the models they fit.
5. Roles Challenge & Strategy
Roles of OES, OEMs, Importers, and Retailers
Challenge: The value chain is long for spare parts. OES, OEMs, importers, and retailers all play a crucial role. Wherever you stand on the chain, you have to consider the other players.
Strategy: Always examine your suppliers’ and customers’ tolerance as you are literally just between them.
6. Cross-selling Challenge & Strategy
Challenge: Cross-selling is a major issue if your operating zone is close to bordering countries as every country has its own buying and selling prices.
Strategy: Find out how your prices compare to the neighboring countries. Once you know that, analyze if this position is sustainable or should be changed.
7. Discounts Challenge & Strategy
Challenge: The practice of discounting is widespread and it comes in various forms.
Strategy: Keep an up-to-date record of the discounts received and given since they will vary throughout the time. Have an accurate view because their effects on profit and sales can be significant.
7 Automotive Parts Pricing Strategies 2020
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The author: Baydhir Badjoko, Managing Director at The Consultants bvba https://www.linkedin.com/in/theconsultants/