Dynamic Pricing Strategy – Build Wholesale Gross Profit

Wholesale Dynamic Pricing Strategy

In it’s most advanced form, a dynamic pricing strategy uses AI bots to set an instant price for a web customer.  For a car dealer, it offers the right price for the right part and can help increase gross profit.  Setting pricing is one of the most difficult things to get right in any business and. If you set prices too high and you lose customers, and if you set prices too low you lose revenue. 

Most dealers use either cost plus pricing or straight discounts when setting wholesale prices, but this often leaves sales and gross profit on the table. Forward thinking dealers use a dynamic pricing strategy that applies different pricing strategies to increase revenue and gross profit.

Provide a Full Set of Services

As a wholesale dealer, you are not just selling parts, you are bundling product with the right services for a higher price. So, before you implement a dynamic pricing strategy, remember that good service brings gross profit. So, make sure you offer fast delivery, good return policies, and reasonable warranties so you don’t give up margin to capture sales.

Understand Why Your Customers Buy

Wholesale Parts Pricing is a center of your marketing strategy and can help you sell more parts. Keep in mind that premium pricing is most effective if paired with good service. So, while you’re setting your dynamic pricing strategy, talk with you customers about their needs.

Wholesale shops are looking for pricing that offers high gross profits. Keeping this front and center as you build your dynamic pricing strategy can make customers happy and bring good margins. 

Wholesale dealerships can sell more parts with pricing and service that helps shops remain balanced. And remember, you are selling a premium brand, so don’t be afraid to charge a high price for your services.

Different Pricing Strategies

Discounts and markups make it easy for your parts team but isn’t good policy. Instead, a dynamic pricing strategy can fold in different pricing strategies to capture more sales AND more profits. 

As a car dealer, you have a premium product so you should be implementing a premium price strategy. The key is to set it up to succeed. And the DMS providers such as Reynolds and CDK make it easy to implement a dynamic pricing strategy

Skimming Pricing Strategy

A skimming strategy is a fancy way of saying not underprice parts you can sell for a premium. This is most commonly applied with new technology sold to early adopters.

In the Parts Department, price skimming is best at the part category level. Since not all parts have the same demand, different price strategies should be applied in your dynamic pricing strategy. So, parts like starters and alternators should receive economy pricing, while parts like sensors and ECUs should be sold at premium pricing.

Price Skimming also allows your dealership to set Premium pricing to premium products or services. So, if you are selling high-demand OE accessories, captive parts or new products, don’t be afraid to set a high initial price and adjust your pricing as demand cools.

Bundle Pricing Strategy

Deeper discounts are only financially beneficial when you sell more volume. Implementing price bundling can help apply economy pricing to your customers who purchase more volume.

There are several ways to price bundle, and the simplest is to initiate an upsell. So, offering a product bundle that includes the Water Pump AND coolant, hoses and the thermostat at a bundled discount is a great price bundle.

There are some disadvantages of bundle pricing to watch out for, namely

  • Keep your product bundling simple.
  • Compare the additional profit to the discount to make sure you aren’t giving away all your Gross Profit
  • Teach your team to ask for the product bundle

Price Against the Competition

Most dealers purchase about 10% of their parts from a local aftermarket supplier. A good way to understand your competitive pricing is to compare the prices you pay for parts against your wholesale parts pricing. 

This data can be used to set a pricing matrix that can both help you understand what to charge and how to target wholesale parts pricing by category. So set your matrix to price more aggressively on parts where the competition is lower and price for margin for categories where your pricing is low.  

Stock and Sell Second Line and Reman

Dealers should stock reman and second-line OE parts. These parts offer competitive economy pricing. So, stocking and selling these parts offers competitive prices that get you in the door.

Hire a Dynamic Pricing Strategy Advisor

Matrix pricing is easy to implement, but difficult to get right. Pricing theory can be complicated and a pricing strategy advisor at 3NG Consulting can help you set up a pricing matrix that will help increase sales and maximize profitability.

We can also review your pricing and adjust your dynamic pricing strategy to keep you pricing fresh. Our team can also fine tune your systems for great performance and conduct competitor Market Research, so you know how you stack up against the competition.

Picture of Karl Krug

Karl Krug

Karl Krug is the Chief Strategy Officer of 3NG Consulting and specializes in automotive parts and service solutions and marketing. 

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