So, are you sure you are doing all you can to identify the optimum price to quote in every situation? Do you invest as much into determining the price to quote as you invest in, say, setting residual values or maintenance budgets?

Contract hire companies have an abundance of data that could be used to sharpen up their pricing. They know the prices they have recently quoted on every make, model, term and mileage of vehicle, with and without maintenance and other services, for every client and every type of client. They know the proportion of these quotes that have been accepted and which have been rejected.

Almost all of them subscribe to external market data that provide useful insights into where their current pricing approach is working and where it isn’t, and the direction in which they need to move their prices because they are too cheap or too expensive.

On average, just under 10% of every contract hire company’s quote convert into orders. This may seem low but it includes quotes issued to fleet managers for benchmarking purposes, and of course some company car drivers get lots of quotes to work out which car they can afford before deciding which to order.

So you might think that the ratio of orders to quotes is a poor determinant of your competitiveness on a particular make, model, period or mileage (MMPM).

Nonetheless, if last month you issued 100 quotes on one MMPM and 45% of these converted into orders, and another 100 quotes on another MMPM where just 5% converted into orders, this is probably providing you with good insight into your relative competitiveness on those two deals that could help you decide how to price them next month.

Having made that decision, change the prices. If the change increases your net contribution, use that new insight to help you decide your next step.

Perhaps the best approach is to ask yourself this question: if I received a quote request from a client today on a particular MMPM, and had the luxury of being allowed two weeks before I needed to go back with a quote, what information would I assemble to help me decide what to quote. How would I use that information? Then work out how to automate that whole process so that it doesn’t take two weeks. You should aspire to deliver the result within a few milliseconds of a fleet manager pressing the Enter button when asking for a quote from your website.

Is this achievable? Price optimisation is perhaps one of the greatest challenges to this industry. If margins are to be preserved and the industry is to achieve an adequate return for the massive amount of value it delivers, it’s not so much a question of whether price optimisation is achievable, it simply must be achieved.

Pricing requires a time commitment, some analysis to measure elasticity of demand at the most granular level and a willingness to see this as a long term process rather than a one off exercise.