Why Your Parts Pricing Strategy Might Be Failing

Many dealerships invest significant time and effort into developing parts pricing strategies, often relying on a pricing matrix to optimize profits and enhance customer satisfaction. Yet, despite these efforts, the results often fall short of expectations. So, what’s going wrong?

The Missing Piece: Dynamic Sources

One of the critical reasons parts pricing strategies falter is the lack of dynamic sourcing in the dealership's management system (DMS). Think of the sources in your DMS like a well-organized file cabinet where specific types of parts are grouped together. With hundreds of thousands of part numbers, it’s crucial to have a detailed and organized system. While most dealerships only utilize about 10 sources, maybe 30, we recommend setting up between 50 to 100. This allows for much more precise control—so much so that you can assign one type of part to a specific source with tailored matrix pricing. This especially makes a difference ifyou're large in wholesale.

When a dealership is limited to just 10 sources, it leads to "sale-proofing," where the pricing matrix is frequently overridden, causing inconsistent pricing, frustrated customers, and a general distrust of the pricing strategy among your staff. Although some services and vendors can identify where the matrix is falling short (and we can do this too), making the necessary adjustments within the DMS is a different challenge altogether.

The Importance of Proper DMS Setup

A well-organized DMS allows you to segment parts into dynamic sources that reflect clear demand and other key factors. This segmentation enables the pricing matrix to function as intended, adjusting prices dynamically and ensuring that your parts are competitively priced without resorting to unnecessary discounts. Without a DMS that’s set up with a granular, detailed source template aligned with your business operations, it’s nearly impossible to have an effective pricing matrix. Each source needs to have a clear purpose and be organized in a way that supports the overall strategy. Only then can you maximize gross profit and ensure your pricing matrix works as intended.

Sale-Proofing vs. Smart Pricing

Another pitfall we often see is the tendency to “sale-proof” parts because of the matrix. This approach can alienate customers and lead to lost sales. Instead, focus on creating a pricing strategy that allows flexibility and adjusts to changes in the market. When your DMS is set up to manage and organize parts effectively, it becomes easier to implement a dynamic pricing matrix that adapts to real-time data without sacrificing profitability.

The Bottom Line: It's All in the Setup

If your pricing matrix isn’t delivering the results you expect, it’s time to take a closer look at how your parts are organized and managed within your DMS. The key to a successful parts pricing strategy isn’t just in the matrix itself—it’s in ensuring that your DMS is properly set up to support and enhance that matrix. With the right approach, you can move beyond static pricing and develop a strategy that boosts sales, enhances customer satisfaction, and drives profitability.

Ready to Optimize Your Parts Pricing Strategy?

At PartsEdge, we specialize in helping dealerships like yours unlock the full potential of their DMS and pricing strategies. Contact us today to learn how we can help you implement a dynamic, effective parts pricing matrix that delivers results.