Grocery stores are constantly inundating us with ads: ‘TODAY only 50% off!’, ‘Buy 1 get 1 half off!’- you know the type. By constantly reviewing and adapting these pricing strategies, grocers are able to get the most out of their inventory by offloading unnecessary excess, incentivizing purchases, and clearing valuable shelf space for better-selling products. Now think about your dealership. When was the last time you audited your pricing strategies? Truth is, most dealerships’ pricing strategies are rarely or never changed or reviewed. Talk about a missed opportunity! Today we’ll explore the four steps to optimizing your parts pricing strategies and employing new tactics to get the most profit for the parts on your shelves.  

The Four Steps To Building An Effective Pricing Strategy

The first step is to evaluate your current inventory and pricing strategies. You’ll want to look out for parts that aren’t selling at a 40% profit margin. To do this, Pull a Customer Pay Parts Sales Report from your inventory and collect just the parts numbers, costs, and list prices. Put this into a spreadsheet and create two columns. In one, subtract the cost from the list price. On the other, divide the difference between cost and list into the list price to get a gross profit percentage. Sort the report by gross profit and break it into three groups: Parts with a gross profit under 40%, Parts with a gross profit right at 40%, and Parts with a gross profit above 40%

Once you’ve identified an escalator category that could use improvement, the next step is to investigate. To determine the profit percentage for a category, multiply your Cost or List field times your escalated percentage, subtract the Escalated Retail Price from Cost, then divide the difference into the Escalated Retail Price for a percentage.

Next, to implement the appropriate strategy for said category. You might:

  • Increase the sale price on menu-priced items. 
  • Isolate low gross parts in a given source to track profit. 
  • Create a sub-sale account if you are locked into these low-priced parts. 
  • Eliminate the Overrides as much as possible. 
  • Adjust the Escalator Table as necessary.

Finally, while it’s important to give a pricing strategy time to collect data on what’s working and what isn’t, regular reviews are essential to keeping your strategies relevant to demands. Download our free Maximizing Parts Profits ebook to see example matrix settings, get in-depth charts, and more. 

PartsEdge is your dedicated inventory optimization partner and secret weapon for creating a custom pricing matrix for maximum profits. Designed by a Parts Manager and a DMS specialist who saw the gap between the demands on Parts Managers’ and the lack of resources to get everything done, we take all the guesswork out of DMS management and sourcing setup and optimization and, as a result, our clients see on average a 20% drop in total inventory, 15% less idle inventory, a 50% increase in ROI, and a 20% increase in parts sales. That means more of the inventory you really need and less of that you don’t. We’ve been helping Parts Managers make their inventories work better for over 20 years and our testimonials speak for themselves. Want to learn more about how PartsEdge helps Parts Managers and their teams? Send us a message.