Starting situation – changes to general legal requirements
In 2002, there was an amendment to the Motor Vehicle Block Exemption Regulation (MVBER) that had a significant impact on the parts trade. In particular, the permission granted to suppliers to sell spare parts as original parts directly to independent workshops created substantial pricing pressure for OEMs. Given the lack of transparency concerning the customer benefits of particular parts, there was a lack of decision-making information needed to determine the price elasticity functions for each part. This restricted the ability to react to the market situation. The fully calculated margins currently generated for each spare part formed another missing component needed for the price restructuring.
Project approach – restructuring the product range and pricing
A holistic analysis of the spare parts market, focusing in particular on what customers were willing to pay in independent workshops, formed the basis for evaluating the existing product range. A comparison of market prices and purchase prices in conjunction with a mark-up for sales and admin resulted in the product range being revised to include only profitable and strategically important spare parts, and to a pricing adjustment. The bonus system for sales staff was adjusted in line with the sales strategy.
Finding – changing market conditions require a completely new way of thinking
The abolition of a monopoly-like market position as the result of new regulations led to significant changes in the market. In this environment, unless a company reacts quickly and comprehensively, their own customers will transfer their loyalties to the new competitors that spring up, and it will take a lot of effort to win them back.
- Product result calculation introduced as a basis for decision-making
- Pricing strategy revised, with a move towards market-based pricing
- Sales reorganized in order to keep abreast of the competition