Marketing Exec Leads Internet Site Panel in Discussing Price Transparency

Price negotiation for most consumers is often described as one of the most arduous parts of the purchase process, according to Joel Ewanick, managing partner of Global Automotive Systems, Inc. The former GM chief marketing officer led a panel discussion about “Vehicle Price Transparency” with four third-party website executives at the October J.D. Power Automotive Marketing Roundtable (AMR) in Las Vegas, NV. Excerpts from the panel discussion are highlighted in this post.

Moderator: Joel Ewanick, managing partner, Global Auto Systems, Inc.

 Panel Members:

Seth Berkowitz, president and COO, Edmunds.com

Larry Dominique, executive vice president, TrueCar, Inc.

Jared Rowe, President, Kelley Blue Book

Alex Vetter, senior vice president, Cars.com

Third-Party Website Leaders Define Business Models

Joel: I see that companies like yours are trying to help the consumer through the process. Can you explain what you do, what your business model is, and then we’ll start to compare and contrast?

Seth (Edmunds): “At Edmunds, we’re working through a major transition. For years, we’ve been an information and pricing authority. We probably have the largest repository of automotive information on the Internet with somewhere in the neighborhood of 3.5 million pages of content. We’ve decided that being this comprehensive encyclopedia of automotive information isn’t enough. . . We’ve decided to make car buying easier. We are going to do this by fostering trust—which is at an all-time low— between consumers and dealers.”

Joel: Trust is a great word. Car manufacturers end up getting residual impact of that lack of trust in the buying process. So you are actually helping the OEMs.

Larry (TrueCar): “The whole discussion about trust and the relationship between the consumer and the dealer is something that is lacking. It’s really scary when our U.S. Congress is rated higher than the salespeople on the trust factor. . . We are a lower funnel performance-based company.

“Most people come through our network when they are ready to buy a car. They’ve interacted with a lot of the other sites prior to coming to us. Our goal is to connect the introduction of a consumer with the dealer with transparency on pricing. We now have over 6,500 dealers on the network. . . We are seeing an increase in sales on a monthly basis . . . because we believe price transparency is allowing the customers to gain trust with the dealers.”

Jared (Kelley Blue Book): “Kelley Blue Book is an 87-year-old company. We’ve evolved several times. We’ve been in the new-car pricing business since 1966. We think about Kelley as being an industry institution. . . Over 50% of all consumers visit Kelley—whether buying a new or used car—it’s part of the shopping process. Kelley is there to validate pricing—in terms of market context. . . Ultimately, we believe that if you can create common expectations between buyers and sellers, as well as other disparate parties who have a piece of this transaction, you can remove a small piece of friction that occurs naturally when a consumer moves from the online world to the offline world.”

Alex (Cars.com): Cars.com is a 15-year old company. . . We provide deep, rich editorial content with consumer and expert reviews. However, with 20,000 dealers in our network, we’re able to seamlessly connect them into the retail storefront all in a common platform and a common interface that spans both traditional computer usage and mobile devices.”

Joel: So how do you make money on this? Where’s the revenue stream for your business model?

Alex (Cars.com): “We make the majority of our money off of dealer subscription revenue and manufacturer advertising. About 80% of our total revenue comes in through local dealers. The other 20% comes in from manufacturer-sponsorships and advertising.”

Seth (Edmunds): “Edmunds is very similar in terms of the sources of revenue. We’re also an end-to-end company. We have 6,000 dealers in our network—much more new-car focused than used-car focused. Cars.com came from the newspaper industry. Our revenue skews about 60% manufacturer advertising. Our strongest growing area is with retailers and it’s now about 40% and it will be 50-50 in 2014.”

Joel: You throw around “performance based.” What does that mean?

Larry (TrueCar): “We believe that we shouldn’t get any revenue from our customers—our dealers—unless they actually sell the car. We don’t charge the dealers anything to be in our network. . . There are) five states—Texas for one—where we have to do subscriptions.”

Seth (Edmunds): “There are differences between our models. . . All of us are performance-based and judged by the cars that we sell. A dealer pays us a monthly subscription fee. . . We touch 59% of all automotive transactions in the United States at the research level. Now with our 6,000-dealer network, and our Price-Promise program, we’re closer to what’s happening at that lower funnel performance.”

Jared (Kelley Blue Book): Our mix is traditional like everybody on the panel—it’s roughly 70%-30%. We’re part of the AutoTrader Group of companies, which means we are part of Cox Automotive. The dealer side of the business is very important to us. Some 67% of the consumers who come to us are there to get consumer pricing information. . . At Kelley, if we bring buyers and sellers together, and if we can help remove some of the friction, the model will come.”

Note: A second post tomorrow will feature more excerpts from a panel discussion on vehicle price transparency during the October J.D. Power Automotive Marketing Roundtable (AMR) in Las Vegas, NV.

 

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