Wednesday, January 27, 2010

Value Positioning – The Economy, Pricing and Value Positioning in the Auto Industry

Why $25,000 is Magic for Cars

With the current state of the economy, the automotive industry has been hit extremely hard. This article discussed the auto industry's recent struggle with price positioning, and the resulting discovery of a "sweet spot" in pricing. Car dealers have determined $25,000 as a price that effectively lures in customers by offering "the same for less".

Several companies have lowered the sticker price of their basic models by around $1,000 to get them into the $25,000 range. This brings the cost of the basic car into the customer’s price range, and offers something they feel is worth the price. Plus, they are often then willing to spend a little bit extra for added features, dependent on their individual valuation of each item, even if they otherwise would have been turned off of a specific model due to sticker price.

As the economy changed, several car companies (like Subaru) had to re-evaluate their value positions, offering the same for less to maintain customers they already had under better economic circumstances. This shows the effects the macro environment can have on a company or industry’s value positioning strategy.

Samantha Bowman
Section E

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