Eliminate price lists to boost profits: the case of Mercedes

Dear Friends,

Mercedes, one of the world’s leading automotive producers, is drastically changing its commercial model and pricing. Price lists have been killed: they are no longer visible when you want to buy your Mercedes. ?

Let’s deep dive this case below.

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The case of Mercedes-Benz: elimination of price lists

Mercedes abolishes prices lists! Really?

Yes, and this is not a joke! No more prices lists: neither for cars nor for options.

What is going on here?

Since around a week this luxury car brand is no longer sharing prices lists, that do no longer exist for clients. If you want to purchase a Mercedes in Germany you can only find it in the online-configurator or get it from the dealer. Prices of options will also be hidden from now on.

And how does Mercedes comment this change?

Abolishing prices lists is supposed to be good for the customer, to make things more convenient: ‘customers will not have the hassle of comparing prices between dealers’.

And what is the resulting issue for customers?

Discounts and discount details are no longer disclosed directly, which could also lead to more dynamic pricing. This allows Mercedes to dynamically adjust prices to demand - almost daily, without revealing details of the discount amount to the buyer.

What you can see are then only non-negotiable fixed prices! These will differ by customer.

Critics doubt the promised transparency and fear that comparing options will be restricted. By abolishing the price lists, the Stuttgart-based company is certainly acting purely in its own interests instead of responding more closely to customer needs and wishes, others suspect. As a result, Mercedes-Benz will no longer provide the transparency of prices that it used to have.

True, but only until the purchase. Once the customer has configured her/his vehicle, a price is shown as current total price. However, this is no longer transparent and of course can dynamically vary!

This enables a wide range of possibilities, e.g:

• Cars ordered on weekends cost 10% less.
• If you are a Mercedes-Benz Club member you pay 5% more.
• If you drive a BMW, you get 12% off.
• If your already bought a Mercedes in the last 3 years you pay 5% more.
• If you are located in Eastern vs. Western Germany you pay 2% less.
• and you name it!

Is this way of pricing not an offence against competition law?

No: Mercedes has switched to agency sales in 2023. This means that the "dealer" now sells the car on behalf of and for the account of Mercedes. The sales agent only receives a commission. This also means that the manufacturer can set the end consumer prices as variably as it wishes (provided there is no market dominance).

The Mercedes-Benz sales department recently wrote to its dealers (now called sales agencies): "With the introduction of the agency model last year, we took an innovative step towards a transparent and customer-orientated sales model. We are now taking the next step and have decided to only display the potential end customer price (transaction price) at our online touchpoints (configurators, product websites, store, etc.) in future and to refrain from displaying individual discount components and list prices in order to further increase price transparency“.? With regard to the change in price lists, the following statement was made: "No publication or communication of the Mercedes-Benz passenger car price lists to our customers".

Will this new pricing strategy be successful?

A prerequisite for the success is to have a very strong brand and a value proposition that leaves the competition far behind. The question that now naturally rises is how strong this brand is. Of course its is a premium brand. But the value proposition seems to have an issue: as reported by Frankfurter Allgemeine Zeitung sales figures are dropping and with them Ebit was down in Q2 2024 by 20%. The share prices that was in April at around 80 euros fell to 56 euros. What a disaster!

Only time will tell to what extent the changeover will have a positive effect on vehicle sales. If you are still looking for the previous price lists, you can find them here.

What do you think: is abolishing list prices a smart move or a fatal error?

Kudos to Sigfried Lettermann for his inspiring research on this topic.

Interested in learning more about pricing? You will find a deep dive on all this in these two books below:

‘The 10 Rules of Highly Effective Pricing’ – get your copy here.

‘The Pricing Model Revolution’ – get your copy here.

You are most welcome to share your views, feedbacks and own pricing experiences. Thanks a lot for your interest and support!