Why there is so much consternation about Tesla rapid pricing changes

[u00mem9]

I didn’t mean to offend your profession. Your original statement was so absolute it actually included the word.

you have absolutely zero idea how good or bad a price you will be paying, nor what the previous or subsequent customer has paid or will pay. NO IDEA AT ALL. NEVER.

The system continues because some buyers meet your description and the reward is more revenue. I agree it’s a wasteful use of resources to have a bunch of amateur psychologists trained to squeeze a few extra dollars out of the least informed buyers. But capitalism.

I’m still waiting to hear how Tesla’s plan to eliminate this extra profit is brilliant. But hey, by the ‘genius’ standard established, I still have 2 more days to completely reverse my position, right?

 

[ac_power]

You also should be aware that were you to go to a traditional dealership, you have absolutely zero idea how good or bad a price you will be paying, nor what the previous or subsequent customer has paid or will pay. NO IDEA AT ALL. NEVER.

Doesn't matter. As long as MSRP stays stable, both perceived and resale values are OK.

• Costco's 30-day (not 60-day) "match the price" policy is a superb marketing tactic; one of which I have taken advantage several times. It is close to unique in the world - I, for one, know of no merchant who copies it. I would not expect Tesla to match that policy.

Fry's Electronics and Best Buy have external price match guarantee (vs. online or another store), to name a couple. Apparently this is not applicable, except maybe against traditional dealers.
However, most commodity stores have internal price match guarantee, which means you can get refund if the item got discounted within 30 days. And there's a simple rationale behind it - if the customer can return an item and re-buy it at lower price, why not to just refund the difference and let him keep his open box.

 

[jbcarioca]

Doesn't matter. As long as MSRP stays stable, both perceived and resale values are OK.

Fry's Electronics and Best Buy have external price match guarantee (vs. online or another store), to name a couple. Apparently this is not applicable, except maybe against traditional dealers.
However, most commodity stores have internal price match guarantee, which means you can get refund if the item got discounted within 30 days. And there's a simple rationale behind it - if the customer can return an item and re-buy it at lower price, why not to just refund the difference and let him keep his open box.

Oops, methinks you've missed something in your logic.

First, MSRP in the vehicle industry (Cars, trucks, busses, airplanes, etc) IS AN ARTIFICE. Sorry to shout, but Neither Boeing nor any auto company bases very much on MSRP. It is there to provide for a starting point on negotiations, with much of the logic being to allow the buyers to claim they made a spectacular deal.
Ask ANY senior airline executive, proudly justifying their aircraft order by how big their 'discount' was. Ditto fleet buyers. MSRP has next to nothing to do with resale values although there might be a few ignorant buyers whose perceptions are so warped that they see a connection.

It is interesting that Fry's and Best Buy are reference points for price match. First both specialize in products that often have unique sku's so exact matches only work in true generic cases. Second, there might be benefit from using a currently successful example. Best Buy is struggling for survival and Fry's infamously had "the double H" to avoid giving refunds.

Beyond that the internal option is very effective. I recall an analytic project I led for a famous women's clothing chain who later employed that tactic. 85% of their total revenues were from heavily discounted merchandise bought by roughly 8% of their customers. That internal price match ended out increasing their margins by attracting more of their most frequent buyers, while returns actually dropped by >11%. After some experimentation they ended out with better gross margins. (I had to search for that data in old project files). The benefits have nothing to do with fulfillment of the promise, which they do often enough to keep the word of mouth active.

 

[jbcarioca]

... I agree it’s a wasteful use of resources to have a bunch of amateur psychologists trained to squeeze a few extra dollars out of the least informed buyers. But capitalism...

.

A tiny clarification. Most of us who've made a living doing this nefarious activity, with or without the pejorative implications you implied, have a Ph.D. from seemingly reputable universities, many with more that one. The best such teams usually include both statisticians and psychologists as well as people with specialized knowledge in the specific channels under consideration. The channel specialists may or may not have the academic credentials. Not that I see anything wrong with amateurs, because amateurs often come with serious analytic skills. Make no mistake, without pretty serious analytics such offers tend to produce unexpected results (see Sears, Borders, Toys 'R Us). The ones that screw this up also tend to lose on channel management.

In sum, this debate has very much to do with Tesla strategy. Direct sales, over-the-air updates, on-line ordering. These are not the stuff of traditional vehicle marketing. All these rapid pricing and feature changes are partly because Tesla actually knows almost instantly how their sales process is working. No other auto manufacturer has a clue about that for months. So, Tesla can execute tweaks almost instantly too. Frustrating? Not to me. I think we all will benefit, especially if we are shareholders.

 

[jbcarioca]

...

But unfortunately, the few companies that dictate leasing residuals are going to punish Tesla for these moves. Residuals will probably reflect the lower (end of quarter) transaction prices and that will increase lease cost and ultimately make Tesla a more expensive car for the consumer.

Residual values are established by the lessor. There are indeed, for the US, only two real competitors in publishing recommended values, but every lessor makes the decision. Some have manufacturer or dealer subvention, some do not. Either way the generic guides use some fairly crude methods, despite their widespread use. Over a longer period actual auction values tend to influence such publications. In Tesla specifics the lack of substantial auction values inhibits traditional residual value establishment. The short term pricing fluctuations will have high FUD value but little fundamental effects.

Of course, IMHO

 

[u00mem9]

All these rapid pricing and feature changes are partly because Tesla actually knows almost instantly how their sales process is working. No other auto manufacturer has a clue about that for months. So, Tesla can execute tweaks almost instantly too. Frustrating? Not to me. I think we all will benefit, especially if we are shareholders.

I invite you to read a few threads in the Model 3 forum for clarity.
Model 3: Ordering, Production, Delivery

You can witness first hand how ‘genius’ it is to have a guy picking up his pride and joy, while the same car has already been reduced several thousand dollars. While you’re marveling at the implications of real-time pricing, they are calculating the value of delivery vs cancellation & reorder.

Genius.

 

[ac_power]

First, MSRP in the vehicle industry (Cars, trucks, busses, airplanes, etc) IS AN ARTIFICE. Sorry to shout, but Neither Boeing nor any auto company bases very much on MSRP. It is there to provide for a starting point on negotiations, with much of the logic being to allow the buyers to claim they made a spectacular deal.

Doesn't matter as well. Is it a real number or abstract - if it's stable, and has direct relationship with actual sale price, it does the job in keeping values stable. When everyone knows that majority of the sales of certain make are around 90% of MSRP (or 80% or whatever), then that coefficient just factors out.

It is interesting that Fry's and Best Buy are reference points for price match. First both specialize in products that often have unique sku's so exact matches only work in true generic cases. Second, there might be benefit from using a currently successful example. Best Buy is struggling for survival and Fry's infamously had "the double H" to avoid giving refunds.

But those issues aren't caused by price match policies, and like I already noted before, external price match is rather extreme practice which is not applicable and/or not expected to be a standard anywhere. Unlike internal one, which makes perfect sense from both sides' practical perspective, and which you seem to support here (and I agree):

Beyond that the internal option is very effective. I recall an analytic project I led for a famous women's clothing chain who later employed that tactic. 85% of their total revenues were from heavily discounted merchandise bought by roughly 8% of their customers. That internal price match ended out increasing their margins by attracting more of their most frequent buyers, while returns actually dropped by >11%. After some experimentation they ended out with better gross margins. (I had to search for that data in old project files). The benefits have nothing to do with fulfillment of the promise, which they do often enough to keep the word of mouth active.