The encyclopedia · Marketing & Brand · Marketing decision · 2007
Chrysler planned $45B of incentives with a dealer-data pricing model
Chrysler and J.D. Power built PIN, a logit-based planner using ~10,000 dealers' daily data for the auto industry's ~$45B-a-year US incentive market.
Chrysler Group
the move
Automakers keep manufacturer's suggested retail prices and wholesale prices fixed through the model year, customizing price with incentives - roughly $45 billion per year in the US market.
Chrysler, a pioneer in science-based pricing, engaged J.D. Power and Associates to implement an incentive planning model.
The approach uses a random-effects multinomial nested logit model of vehicle, acquisition (cash, finance, lease), and program-type choice, trained on sales transaction data collected daily from approximately 10,000 dealerships.
why it works
- The logit model predicted how incentives change share
- Daily dealer data kept the model current
- Nested choice captured vehicle, finance, and program trade-offs
- Planning against response, not budgets, priced the $45B market
what transfers
When a market spends tens of billions on one lever, build the demand model first: predicting share response per incentive dollar turns promotion planning into an allocation problem.
what came after
Chrysler Group and J.D. Power and Associates were named 2007 Franz Edelman Award finalists for PIN. The Interfaces paper documented the model and its role in planning automobile manufacturers' pricing and promotions.
references
- Chrysler and J. D. Power: Pioneering Scientific Price Customization in the Automobile Industry
- Coca-Cola, HP, Chrysler among best cases finalists
spotted an error? The archive wants to know.