Are launch prices of cars adjusted based on market feedback?

In certain cases, what looks like a manufacturer's proactiveness to market response is actually a strategy based on other factors.

BHPian Emvi recently shared this with other enthusiasts.

Launching cars in a phased manner has become a sort of norm these days. Concept- Design sketches- Prototypes- Test Mules- Name Reveal- Teasers- Product Unveil- Unofficial Booking- Media Drive(and embargo)- Official Booking Date Announcement- Variants Disclosure- and finally Price Reveal. It's given that the events might not be in the exact order as mentioned. Is this a strategy from manufacturers to arrive at the 'right' pricing? Do market response/sentiments, media drive reviews/feedback influence the pricing strategy?

Quoting from recent launches:

Mahindra XUV7OO: When the teasers were out and test mules were being spied day in and day out, the general feedback about the design wasn't really encouraging. Actually, people started bashing Mahindra left, right, and centre. With all the negativity around, what did Mahindra do? Priced the XUV aggressively, perhaps to shut the noise and they sure did. Not that the design is just plain pathetic, but it is made to look more majestic primarily due to the super-aggressive pricing. I have little doubt that Mahindra will jack up the price bigtime across the variants shortly and perhaps completely do away with a few lower variants as well in the future to create a space for the planned XUV 5OO.

Skoda Kushaq: This vehicle from Skoda excited people like none before. Even with the infamous 'Skoda issues', a fair chunk of people were willing to put their money on the car. Furthermore, drive reports and reviews were promising. What did Skoda do? Probably buoyed by all the hype and unprecedented interest, they priced it a tad higher(IMO) than they actually should have.

Tata Punch: Barring its nomenclature (and the claimed performance figures to an extent), the market response to date has been largely positive. In fact, Punch has become quite a sensation on the internet. It is probably more feature-loaded than it was expected to be. Now the all-important question- Will this hype make Tata greedy and price it higher than they would have initially thought of?

I have only quoted two recent examples and I am pretty sure these are not the only ones adhering to the perspective. On a side note, this reminds me of Ford Ecosport's pre-launch hype leading to rather an over-enthusiastic pricing at the launch and a mega price correction post the Brezza launch about 3 years later. Pricing is a well thought out process, no doubt. In spite of this, do manufacturers arrive at the final or the 'right' pricing based on the aforementioned factors?

Here's what GTO had to say on the matter:

From what I have heard, the pricing is pretty much decided by the time that the previews & drives take place. In rare cases, the pricing might be tweaked, but again, it's the exception rather than the norm. The maker himself knows what is good & not good about his car, so the initial feedback isn't all that surprising to the OEM.

I'll give you an example of a stupid strategy that *didn't* react to the market. Ford decided to price the 6th-gen Fiesta bang against the Honda City in 2011. Weeks before the Fiesta's launch, Honda slashed the City's prices. Instead of reacting to Honda, Ford ended up like deer caught in the headlights. They foolishly went ahead with the originally decided prices & the Fiesta sank faster than the Titanic.

Here's what BHPian RavenAvi had to say on the matter:

Like GTO said, the corporates already have a pricing range for their upcoming product before they go public with the new product exposure and then gauge how the paying public reacts to their new product through media hypes, media & TD drives, displays, roadshows, etc. This pricing list is usually sent to dealership GMs via email in Excel file attachments and stays a guarded secret until the official price announcement day.

Case in point - the 2015 Hyundai Creta. I was shown the ex-showroom prices which were received by the dealership GM (a very good friend of mine) about 10 days prior to the official launch & price reveal and share the same here in our forum (keeping my source's name secret, but of course). The Creta had by then garnered huge interest online and offline and was destined to become a blockbuster.

Come launch day on 21st June 2015, and all variants across the range had seen a steep hike of ~50K-95K ex-showroom, from the prices I had seen in that official Excel sheet!

My source helplessly told me that they had received an updated email with revised prices on the morning of the launch day itself, and he had no time to update me with the same.

So yes, public interest in the new product does have a say in the final pricing decided by the corporates - keep the same to make it look attractive and/or competitive upon launch, go slightly down if interest isn't up to expectations or grab some extra sales vis-a-vis competition, or jack it up if it's a runaway hit and is seeing a lot of pre-launch demand.

Some floater prices are also teased by "sources" of these companies across media channels - Facebook, Twitter, etc. Public reaction to these "leaked" price lists are also studied and that too influence the final official pricing.

Also remember, most companies resort to posting prices as "introductory". They reserve the right to change/modify the prices of a new product depending on how it performs in sales in the coming months. Addition/deletion of features/variants are also dependent on sales performances, and that too is a reserved right.

Nobody would have forgotten the S-Cross fiasco in January 2016, in that regard.

I have pointed it before in the Punch thread - one of my sources booked the Punch base in Mumbai and was quoted a price of Rs 6.70L OTR for the same, which comes to around 5.50L ex-showroom.

The same was conveyed by another birdie yesterday from Kerala, so it's pretty much decided that the range should start from 5.50L if there's no last-minute change to that from Tata Motors.

Here's what BHPian hrishig had to say on the matter:

If the above is true, I don't understand what Citron management was doing during the price announcement of C5. Based on the discussion with the sales rep more than 50% of bookings were cancelled within just a few days after the price announcement. Not a good way to make an impression during the very first product launch. A fantastic engineered car is killed only due to poor product pricing.

Here's what BHPian 84.monsoon had to say on the matter:

Don't be under the faintest doubt that all this was just based on M&M listening to customer feedback and responding magically with two new variants in days! There is no way a company can plan, source, market two completely new variants in 5 days! This was all pre-planned for the day. Here is what the internal game plan within M&M XUV 700 team would have been like:

• Launch on September 30th
• Get all press and social media coverage as the car that tops out at 19.79 lakhs for Diesel AT - ("wow so much cheaper than Safari!")
• Introduce fine print about the Luxury pack that takes top-end pricing to 21.59 lakhs ("Wow, still not bad for all the features one gets! - it is still cheaper than the Safari top end!")
• Pretend to respond to customer feedback and launch top-end AWD with Luxury Pack on October 5th at 22.89 lakhs (Quiet voices, hoarse from all the screaming "Ra-Ra-XUV700" in the last few days go "Now this is more pricey than the Safari, but guess it is worth it because it has the all-wheel-drive?" By now the social media is tired and confused so less coverage about being the most expensive SUV in the sub-segment of Hector Plus/Alcazar/ Safari/ XU700.
• Mission accomplished!

Check out BHPian comments for more insights and information.