Third-Party Auto Website Executives Offer Insight on Business Models

Automotive Marketing Roundtable 2013 DSC_4280-SThird-party automotive website executives offered their observations about vehicle price transparency during a panel discussion at the October J.D. Power Automotive Marketing Roundtable (AMR) in Las Vegas, NV. More excerpts from the panel discussion that was moderated by Joel Ewanick, former automotive marketing executive and now managing partner of Global Auto Systems, are highlighted in today’s 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

Joel: You’re very different in how you collect your data—so tell me Seth (Edmunds) why is your data so much better than their data?

 Seth (Edmunds): “I guess we see ourselves across the panel as being least competitive with Cars.com. We respect what they are doing: with the classifieds industry and what they have done in used cars—that’s not really our core space. That might change in the future. I think our biggest differences are with TrueCar and with Kelley Blue Book. . . While we were the company 20 years ago that introduced invoice price, and published it for the first time, we’re actually moving in a completely different direction. . . We are going to have dealers provide actual prices on individual vehicles and then we are going to tell what other people are paying. We have our Price-Promise program, now where you get those actual prices. . . Over the coming months, you’re going to see invoice stripped off behind warning labels where you have to click to get it because we believe that it’s not servicing people anymore and it creates confusion.”

Alex (Cars.com): “Putting a price on a transaction that we know is wildly complex creates distrust in the industry. The expectation that this is the price you are going to pay—is not something that any website [represented] here can actually deliver because so much goes into the pricing at the retail store. We rely on dealer participation to drive that pricing.”

Jared (Kelley Blue Book): “It’s not just about being accurate, you also need to be relevant. . . We don’t go into point pricing. If you look at our approach now, it’s range-based pricing. It’s what’s going on in the market. . . At Kelley, we set the market context: be neutral to the transaction, whether it be new or used, whether it be trade-in, or residual value. We are a full-end provider of values. We understand how that number is going to be used offline.”

Larry (TrueCar): “None of us from an Internet base set one price. Prices are set by the dealers. The dealers determine what they are going to show on any of our websites. We show what we want to show—a detailed graph, with a histogram and bell curve—the distribution between highs and lows, which has narrowed as price transparency has become more relevant. . . Dealer margin was compressed but dealer margin is pretty static right now. Dealers have learned to operate within this transparent environment. We know from all of our data that most of the time, the lowest price doesn’t win. We know that proximity plays a much bigger role.”

Seth (Edmunds): “We have seen dealer grosses rise for the people in our network who are using the Price-Promise program. We are saying to consumers that you can get an actual price before you get to the store and in doing so, you’re going to have a better, more streamlined experience.”

Jared (Kelley Blue Book): “I agree with that because ultimately if you set the right expectation from a consumer perspective, it allows a dealer and an OEM to do what they are supposed to be doing—sell the value—sell the relationship—sell the product. It isn’t just pure price negotiation. None of us should be just focused on pure price negotiation.”

Alex (Cars.com): “As marketers—price is on one hand and value on the other. . . We think it’s more important to tell the unqiue value proposition and the unique selling story. People know on the Internet they are not going to go in and pay an outrageously different price than in the market. The Internet has enabled that. Mobile phones allow them to price check while they are in the store.”

Seth (Edmunds): “We just ran a study where we asked people: what are your unmet needs? Seven out of the top 10 needs had the word price in them. You could say that maybe we have contributed to that atmosphere, and I wouldn’t even deny that. But the reality is the people who visit our website are focused on price.”

Larry (TrueCar): Getting through that price discussion affects the trust factor. Some of our dealers have made it clear to us: help us establish this relationship with our consumer. Help us explain, what’s the benefit of my store? But they’ve got to get through that price discussion before they get to the relationship.

Auto. Marketing Roundtable 2013 DSC_4575-MJoel: Are we actually seeing more satisfied customers?

Seth (Edmunds): Yes. People’s memories are short—and the satisfaction from having that new shiny object, even a used car, is so high that the words that people use are happiness, excitement—it’s a very pleasurable thing. Even though the retail and research experience is painful for that week or two, people are generally happy. . . When dealers make promises, and keep them with consumers, we’ve actually seen as much as a 10% bump—in our ratings and reviews—if a dealer had 4 out of 5 stars—that dealer will have 4.4 stars—that’s a meaningful move.”

Alex (Cars.com): We launched dealer reviews on our site over two years ago and I would agree with that assessment. We think pricing transparency manifests itself in different ways—ultimately in the volume of transactions

. . . We see a direct correlation between the successful dealers that are focused on transparency in terms of what they are going to do to make this an easy process and the positive sentiment that is created in terms of other people saying, yes, I did buy from the store. . . Most people want to know who to buy from, and what the quality of the service department is at the dealership. If they see a strong service reputation, they are willing to pay more than the lowest price.”

Jared (Kelley Blue Book): “When you look at our brand affinity scores, consumers do trust Kelley. They want Kelley to stand outside of the transaction and validate their choice. It’s not the only aspect of the deal—it’s a component of the deal. We don’t just exist online. We exist offline. Governments use us. Finance institutions use us. Dealers use us on the lot.”

Joel: When you start to add financing into this—what is the impact of financing on transparency and pricing?

Seth (Edmunds): “Financing makes everything very complex. . .Our next product to add to our Promise suite is the promised lease price. It’s a thicket from a regulatory vantage point. We’re tackling it, one state—one dealership at a time—right now on a pilot basis.”

Joel: “As a marketer, I appreciate what you are doing. . . The weak link in our industry has been and seems to be the transaction—in the retail environment. If you have anything you can do to make it better—you can help the OEMs make more money; you can help the dealers make more money; and you have a more satisfied customer base. In the end everybody wins.”

 

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