| Article ID: | iaor200947200 |
| Country: | United States |
| Volume: | 38 |
| Issue: | 1 |
| Start Page Number: | 26 |
| End Page Number: | 39 |
| Publication Date: | Jan 2008 |
| Journal: | Interfaces |
| Authors: | SilvaRisso Jorge, Shearin William V, Ionova Irina, Khavaev Alexei, Borrego Deirdre |
| Keywords: | marketing |
Pricing is a critical component in the marketing–mix plans of automobile manufacturers. Because they tend to keep their manufacturer's suggested retail prices (MSRPs) and wholesale prices fixed throughout the model year, they customize pricing to reflect supply and demand by using incentives; in the US market, they represent approximately $45 billion per year. In addition, variations in capacity utilization have immediate and substantial effects on profitability. This, together with legacy costs and inflexible labor contracts, makes the effectiveness and efficiency of price–customization decisions particularly vital for the industry.