Car pricing case study


I got a case study question few months back on how will I go about the pricing a new car ?

No data was given. I think he wanted to know the process. Can anyone share their inputs?


In this was an interview question, I am sure this was to see your structured thinking and logical approach. Here is one way I would have approached the question. The answer really depends on how much time do you have to solve it. But, here is one approach:

First, I would list down a set of features which might be of value to a customer. These could be Brand, Safety, Interiors_quality, looks, mileaage etc. Next you find ways to measure each of these. For example, Brand could be measured through Brand perception or Brand awareness. Safety could be measured by number of airbags and quality of brakes, so on and so forth.

Ideally, you would want to score all of them on a score of 1 - 10. Next, you will need to arrive at a value the customer might attribute to each feature. These become your coefficients for each of them parameters. Finally, your price equation would become something like this:

 Price = Feature 1 x coeff1 + Feature2 x coeff2 + ........+ Featuren x coeffn + intercept

Once this is ready, you can benchmark this with other cars in the market and iteratively improving the co-efficients.

Car        Brand        Safety         Interiors        Exteriors      Mileage  .......Price
Car1         7           8                3                  5         9                 X
Car2                                                                                                                                                                               Y

You should be able to minimize the error by using your coefficients.

Other way of doing this could be cost approach, where you calculate your cost per car through life cycel of a factory and then apply a margin on it. But I think that would be more complex than what could be intended.

Hope this helps.



Thanks @kunal.