Entries from December 2009 ↓

Kbb recently introduced Blue Book CPO Values, bringing greater price transparency to the CPO process. From a user perspective, the process follows the same steps as kbb’s standard used-vehicle pricing and the results page is keyed entirely to CPO – value, inventory, CPO program descriptions, etc.

So far, so good. However, once I dug in further, I was a bit underwhelmed.

First, not all the CPO rules seem to be baked into the tool logic. I was able to derive CPO values on an Audi A4 with 65,000 miles, but since Audi has a CPO requirement of 60,000 or less, this vehicle shouldn’t exist.

More disappointing was the calculation of the CPO value: too often, it’s simply a premium over the Suggested Retail Value. The logic is sound: a used vehicle sold by a dealer is assumed to be in excellent condition, having undergone reconditioning to prepare it for sale. CPO involves additional steps plus an extended warranty, so an additional premium makes sense.

Unfortunately, the premium is too often a static number. For instance, most Audi CPO values ran a $1,900 premium over the Suggest Retail Value, regardless of model, trim, mileage, or year. The CPO premium on a 2006 Audi A4 is the same as the CPO premium on a 2007 Audi A8, despite the latter costing nearly twice as much.

Kbb seems to have a set CPO premium for almost every automotive brand. Luxury marques generally command higher premiums, with all except Acura valued at $1,000 or more. A premium of $450 applies to all of Chrysler’s and GM’s non-luxury brands, despite the wide differences between the makes and models under their umbrellas (and differences between the two company’s programs). Ford’s three marques fall neatly into the $700-$750 range.

BMW is the only brand with a more realistic range of CPO premiums, at $1,250 on the low end for the 3-Series (although that premium doesn’t change across trims, mileage, etc.) and $3,200 at the high end for the entire M lineup (including the M3, M5, and M6).

I don’t doubt that the information is useful for consumers, but assigning a straight CPO premium across an entire brand’s lineup seems problematic. Perhaps kbb just needs more time to refine its algorithm and/or accumulate more data (esp. model-specific).

Twitter, as does other social media, provides a means by which automotive manufacturers can connect directly with consumers. Many have jumped in – some are merely testing the waters, while others have more fully committed. Prime examples of the latter category include Ford and GM. Interestingly, both use multiple Twitter account to reach different audiences.

Ford utilizes ten different Twitter account, each for a different purpose. @Ford is the primary corporate site, tweeting about all things Ford Motor Company. There are also channels for the Fiesta Movement campaign (@FordFiesta), environmental (@FordDriveGreen), racing (@FordRacing), and even Spanish-audience (@FordLatino), among others. There is no twitter presence for the individual brands – it all flows through Ford.

GM’s twitter presence seems a little less managed. The primary channel is @GMblogs, which ties into GM’s well-established blog presence. There are two regional channels: @GMNewsSoCal and @GMTexas. And there are brand channels: @Cadillac (replacing @CadillacCulture), @Chevrolet, @pontiac, @Buick, and @ThisIsGMC.

Ford’s more focused strategy seems to have produced more traction, at least in terms of followers. Seven of Ford’s ten corporate channels have at least 3,500 followers. Some people want environmental information, while others want to follow racing. The Mustang has a loyal following. And so on.

On the other hand, GM’s presence doesn’t seem quite as strong. Of the seven brand and regional accounts, only three have even 1,000 followers and only one (@ThisIsGMC) crosses the 2k mark. One problem may be brand affinity – how many people want up-to-the-minute news from only a specific brand?

GM’s approach also seems to create more overlap, e.g. we see a pattern of retweeting from other corporate channels. For instance, 5% of @GMTexas tweets and 8% of @GMNewsSoCal tweets from are retweets of @GMblogs.

Other manufacturers seem to be content with just one or two Twitter accounts. This may be deliberate, but I suspect that in some cases it’s indicative of a still-conservative approach to the medium. Honda, which has been active in other forms of social media, has a corporate channel (@Honda) and an official spokesperson (@alicia_at_honda). Toyota has a primary corporate account (@Toyota, 12,460 followers) and one for Scion (@scion).

It’s important to remember that many OEMs still don’t have an active U.S. Twitter presence. Twitter is still very much at an early stage in its lifecycle and OEMs (like the rest of us) are still trying to figure out how best to utlize the medium.

I spent some time earlier this year at the Grand Bazaar in Istanbul, Turkey – a mammoth marketplace where the price of everything is negotiable. In other words, pretty much like buying a new car at your local dealer. To feel good about the price you pay in the Grand Bazaar, market knowledge is critical.

Finding out what other buyers paid, whether they negotiated aggressively, and knowing if the competition a few stalls down sold the same product all help inform the potential buyer on what a fair and reasonable price for the item might be. And if people will take the time to gather market information to negotiate a price on a $30 silk purse, it is no wonder they want the same market knowledge when buying a $30,000 SUV.

In the automotive marketplace, Consumer Reports has been providing new car market insight (and charging a fee) for many years. Kelley Blue Book has been providing market values on the used vehicle side. However, in recent years this key component desired by car buyers….the “new car market price” ……has now become almost a required “free” component of any automotive web site.

Edmunds, Yahoo!, Cars.com, KBB, AOL, TrueCar, Vincentric, and others compile or publish new vehicle market pricing, with different methodologies, including transaction driven calculations as well as economic estimates based on the supply and demand of the vehicles. Regardless of the methodology used, the objective is to provide consumers (and dealers) insight on a fair and reasonable price to create a more efficient and balanced buying experience at the dealership.

Of course “fair and reasonable” often means different things to the dealer vs. the buyer. A buyer might walk into the showroom waving a web site printout, and want to buy a specific vehicle for that price, from that dealer, at that time…with no negotiation. The reality is that all published market prices are based on averages….which includes at least an average amount of negotiation time, an average amount of negotiation skill, an average amount of dealer shopping, and an average amount of inventory at that dealer.

So when a buyer gets an incredulous look from the sales manager when “demanding” a specific price for a specific make/model/trim, it doesn’t mean the market price estimate is wrong, or that the dealership is trying to gouge the buyer….at Vincentric we’ve found that it more likely means that the negotiation process is still in the early stages, or that a different dealer might provide a different response, or the buyer researched the price for a base vehicle but is trying to by a vehicle built with additional options, or someone thought the market price included destination charge when it didn’t.

What does it all mean to users of the market price information? The availability of automotive market price data doesn’t mean that a vehicle can now be brought to the cash register and purchased like it is a loaf of bread. The market price – regardless of the source – is a key piece of information, with value not because it replaces the need for negotiation, but because it creates a more efficient, balanced, and transparent negotiation in the “grand bazaar” of the automotive marketplace.

Dave Freed leads the Business Development and Market Analysis organizations at Vincentric, an automotive data firm headquartered in Bingham Farms, Michigan.

Driving around and looking at the vehicles actually on dealers lots has always been the primary means for shoppers to find their used vehicles. As recently as 2005, 33% of used-vehicle buyers found the vehicle they purchased by looking at dealer lots vs. 12% utilizing Internet/Online Classifieds (Autotrader, cars.com, etc.)

In 2009, online classifieds (31%) finally surpassed driving by dealer lots (28%) as the primary means for used-vehicle buyers to find their vehicle.

Availability plays a major role in this shift – there are simply far more places to find inventory online these days: dealerships are savvier about upgrading their sites, listing their inventory, and driving traffic to their sites; more manufacturers are displaying inventory (primarily CPO) on their brand sites; and third-party sites such as kbb, Edmunds, and craigslist are bigger players in the inventory game.

Shoppers are also more willing to go online for vehicle research. The Automotive Internet Usage (AIU) rate, the percentage of buyers going online during the shopping process, has continued to rise for both new- and used-vehicle shoppers.

Despite the increasing presence and importance of the Internet, driving by dealer lots is still a critical shopping avenue and must be part of any dealer’s marketing approach. Make used-vehicle inventory visible right on the lot, not in the back or on a remote lot. IN total, 59% of used-vehicle buyers find their vehicle either on the lot or online, so dealer must maintain high inventory visibility wherever their buyers are shopping.

Understanding where exactly to locate new-vehicle buyers online is challenging, especially when you want to make sure your marketing message is seen by new vehicle buyers. In the past, demographic targeting and behavioral targeting were the only ways to find your target audience online. The good news is that there is now a way to target that new-vehicle buyer online using the true behavior of verified new-vehicle buyers.

The J.D. Power and Associates/Compete Inc. 2009 In-Market Buyer Behavior (IMBB) Tool is designed to help automotive marketers and media planners determine where and how to allocate their online advertising and marketing communications resources in the most targeted manner. This tool uses clickstream technology to examine new-vehicle buyer Web site visitation in the 6 months prior to purchase. Now auto marketers and media planners have the ability to answer challenging questions surrounding their online marketing activities such as:

• Which Web sites best reach the target audience?
• What portion of media budget should be spent on each site?
• How much time are target vehicle buyers spending on these sites?

In-Market Buyer Behavior allows you to compare thousands of sites from a variety of categories. Let’s take a look at just how well lifestyle sites can deliver new-vehicle buyers in the month of purchase. In the Wave 2 release (November 2009) we see that qualityhealth.com has roughly 2 million unique visitors in a month, which is about one-third of edmunds.com’s 6 million monthly visitors. However, the In-Market Buyer Behavior tool highlights the composition differences between the two sites. In this particular case, qualityhealth.com’s index of 1,845 (that is, a new-vehicle buyers is over 18 times more likely to be on the qualityhealth.com site compared to the general Internet population) is much stronger than popular automotive site edmunds.com’s index of 325.

This occurs because so much of edmunds.com traffic is made up of shoppers who either initially intend or ultimately end up buying used, as well as visitors who are not in-market at all. We can also observe that in the month of purchase qualityhealth.com delivers 159,258 new-vehicle buyers to edmunds’ 81,447 buyers. Having information like this allows you to target more effectively and efficiently, and perhaps even leverage the cost structure of current relationships.

Targeting even further into the type of new-vehicle buyers is also possible with this tool, going all the way down to specific vehicle segments and customizable competitive sets. Want to target effectively for the new Mercedes-Benz C-class? What works for some segments doesn’t necessarily work for all segments. Take babycenter.com for example, only 3% of Midsize Conventional buyers (which includes vehicles such as the Toyota Camry and Ford Fusion) are visiting the site in the month of purchase with an index of 120. On the other hand, 13% of Compact Premium Conventional buyers (which includes vehicles such as the Mercedes-Benz C-class, and the BMW 3-Series) visit in the month of purchase (index of 507). Nuggets such as these are not only possible to find using this In-Market Buyer Behavior tool, it is what the tool was designed for.

This isn’t to suggest that automotive marketers shouldn’t place advertising on automotive sites. Quite the contrary: segment by segment, the more traditional third-party automotive sites also provide different levels of targeting efficiencies. Understanding which vehicle segments and competitive sets are best suited for advertising dollars among the third party sites also provides opportunities for efficiencies and smart marketing decisions. For example, taking the same vehicle segment as above, the compact premium conventional segment, it is possible to identify a site like automotive.com, which has an index of 216 compared to the general new-vehicle buyer market. That is, beyond a higher propensity for this segment of buyers to visit automotive.com compared to the general Internet population, they are also more likely to visit automotive.com as compared to the new-vehicle buyer population.

In order to learn more about how you can use these new tools, please contact your J.D. Power and Associates account representative.

The growing capabilities and popularity of the mobile Internet has allowed automotive sites to go beyond just time- and location-specific information to provide more in-depth vehicle research. Car and Driver offers on such mobile research site with vehicle reviews drawn from the parent Web site. Unfortunately, the reviews are highly unorganized – there’s a list of uncategorized reviews, which isn’t going to be useful to the average consumer.

Car and Driver’s iPhone application, on the other hand, is much easier to use. The main page provides quick access to model-level information, as shown below.

Unfortunately, the Car and Driver application doesn’t offer critical specifications data (e.g. power, fuel efficiency, capacity) that are critical to the automotive research process. While there is a placeholder in the form of a “specs” tab, it doesn’t seem to work. I was unable to load up any specifications data on any vehicle.

Despite the well-designed interfaces, the limited iPhone screen real estate makes it difficult to use the vehicle browsing functionality. For instance, the browse path Vehicle Type – /> Sporty and Fun -> Convertible returns a scrollable list of hundreds of alphabetically-listed models, starting with the 2010 Alfa Romeo 8C Spider and ending with the 2009 Volvo C70.

Users have other mobile research options, including mobile sites from cars.com, Edmunds, kbb, and many OEMs, and yet all these sites remain supplements to the full online experience. Car and Driver’s iPhone application provides a more robust experience, but clearly we’re only the surface of this medium’s potential.

A new report by Borrell Associates projects that 2009 new vehicle advertising spending in the U.S. will decline by 17% over the previous year. In dollars terms, the largest drop is in television spending (down by over $1.6 billion), followed by newspaper (down over $1.3 billion). Newspaper also represents the largest percentage drop, which makes sense given the long-term decline of the newspaper industry and the flight of advertising dollars to other mediums.

It’s therefore a little surprising that newspapers still comprise 19% of total new vehicle ad spending in 2009, which seems out of line with the decreasing influence of the medium. These figures include expenditures by manufacturers, dealer associations, and dealers – since manufacturers don’t invest heavily in newspapers, it’s obvious that dealers continue to spend too much on newspapers even for the new vehicle side of the business.

While no one knows for sure what will happen in 2010, Borrel projects that overall new vehicle ad spending will increase to $19.2 billion next year with online ad spending jumping to $4.3 billion.