市场学case11pricingstrategies.doc

Company case 11 (pricing strategies) CIRCUIT CITY: SELLING USED CARS LIKE STEREOS A Hassle! Buying a used car! Just mention the subject, and anyone with experience will probably frown and immediately launch into a sad story about his or her last purchase. The used car salesperson, in fact, is often what people have in mind when they think about marketing’s excesses. So why would Circuit City, a company that has succeeded in selling stereos, televisions, car radios, and other electronic items through its 300 superstores, suddenly try selling used cars? Why, when management consultants advise companies to “stick to the knitting,” would an electronics retailer try its hand at used cars. The used car market The answer is simple – new car prices. During the past 10 years, the average new-car price has risen 70 percent to about $19,500. government-mandated pollution controls and safety features have driven the price increases. Over that same period, however, median family income and the consumer price index have risen only about 40 percent. For some consumers, today’s new cars cost as much as their houses! Consumers also understand that new-car quality has improved and that the average used car on dealers’ lots today is only 3.5 years old. Thus, they reason, they can get a low-mileage used car that will be very reliable and save $5,000 to $10,000 in the process. Moreover, surveys show that the value consumers place on new cars as a status symbol has steadily declined and that used cars have increased in status. Besides growing demand for used cars, supply has also increased. To encourage consumers to buy new cars, many manufacturers and dealers have turned to leasing programs that allow consumers to drive new cars and turn them in after two to three years. The dealers then resell the used cars. Further, the growth of the rental car business has resulted in a growing supply of used rental cars as the companies turn over their fleets. Moreover, although it used to be diffic