TrueCar Insider Information

I have a friend who works for a major automotive lead provider... She sent the following bullet pointed lists to me, and asked that I do not disclose her identity.  She copied these lists out of an email that her company's newest VP (who came from True Car and worked directly for Scott Painter) sent to their internal team.

• Zag model is still the core which is the affiliate model of becoming the provider for (USAA, AAA, AMEX, Costco, etc…)
• The only way a dealer can get the leads for these customers is by partnering with TC
• Sales Team of 8 outside (# as of last summer, most likely a lot more now) go out and build the affiliate network
• Inside & Outside sales teams call on dealers to recruit for the program – 12 inside sales reps that handle a variety of duties
• They similar to Direct sign up 3 dealers in a “market”
• Dealers use an online tool to submit pricing, and won’t be picked as a match to a customer unless they have good pricing that is closing salesIt’s what goes into the algo that tell a consumer where there best dealer match is that drives the sales probability and is the call to action for the consumer
  • Waiting list of dealers in most markets
  • There is a sophisticated algorithm that looks at
    • dealer distance to consumer
    • price of vehicle submitted by dealer
    • what’s available on the dealers lot
    • how many deals the dealer has closed
    • Consumer is always presented 3 dealer options
    • Secret Sauce is how they present the dealer options to the consumer:
      • Based on their matching criteria they have data on close rates that will match a customer to a dealer who may not be priced the best or the closest, but the are the right choice based on what the algo spits out as best close rates by dealer
      • If your not closing sales as a dealer you will show up less often, and you get a visit from the TC rep and they may bring in another dealer
      • Dealers do end up competing to be one of the 3 dealers & then really working hard to try to close as many as possible
      • The more deals you close as a dealer the more business that comes your way
      • Thought it was $280/sale from the dealer invoiced to TC, but then thought it might just be flat $300
      • The key is the dealer has to give them DMS access to their sale data and they have a big team of folks analyzing that data to determine if a car sold:
        • Doesn’t have to be the car on the lead, dealer must pay if that customer (wife, son, daughter, they match the data) buys a car from the store
        • They boast a 99% success rate in determining if a TC customer bought a car there
        • 5K – 8K dealers signed up – waiting list
        • They use the DMS data they are pulling (Don’t have AN DMS Data) to populate local pricing offered
        • TC runs at a net loss, Zag piece (affiliate programs) break even with the 2 combined – trying to get consumer mind share subsidizing TC with Zag profits
        • Getting the DMS data is giving them a bunch more data that their analytics team uses to fuel their dealer option algorithms, and set pricing. ALG acquisition helps on the data side as well.
        • Outside Sales
          • New dealers for their Zag/Affiliate program
          • Dealers competing for that seat
          • Pricing drives down through competition, dealers submit pricing online
          • If a dealer low balls the price, the algo calcs the % of deals closed, how many times the price is presented, and with dealers waiting to earn the spot they manage themselves to stay honest to the model. If a dealer is playing games then they get a visit from a rep and dealers are removed.
          • The hope is customers bring in the quotes branded as TruCar, and with the TV & Radio offline ads they build a name where dealers feel like they have to be a part of the program. Dealers fight to be preferred dealers and they hope the feeling is they cant afford to not play
          • Inside c/s svc QA team does work on post sales with customer to see how their experience was, but there is no pre-sale consumer interaction
            • They QA the dealer, make sure sale went through, and dealers service was good
            • Inside Sales team calls dealers to train, work on pricing, and showing dealers how to submit competitive pricing
            • They have a big team doing data extracts like we do on ESP to make sure they know if a customer bought a car
              • They have an algorithm that automates a piece of this data extract as well – again 99% success rate quoted in matching sale data
              • THE SPECIAL SAUCE
                • Evidently they have done a ton of work to calculate the probability of sale to figure out which 3 dealers to present to the consumer and how exactly to present those choices to give the best chance of closing the sale – and it works!
                • The website will say:
                  • Dealer ABC is 50 miles away, match, best price
                  • Dealer XYZ is 10 miles away, ok match, 2^nd best price
                  • Dealer 123 is 15 miles away, perfect match between distance & price
• The webpage drives the consumer decision, and all prices are within 3% generally
• They close more sales by presenting the “right” alternative
• Comes down to how you present the dealer options based mostly on: It may not be the biggest dealer in a market that is the best match, often it is not
  • Dealer Location
  • Dealer Price
  • Close Rate
• They look at who performs the best also from their affiliate (Zag) dealer network and closing ratio’s there
• Big issues – Consumers pissed that they got hosed on their trade-in (They are close to rolling out TrueTrade model) – not working with AN on it
• Dealer not honoring price cert – Consumer gets switched at the store, and feels like price was bogus
• www.clearbook.com is their used car channel http://clearbook.truecar.com/- truetrade built from this model
  • They are scraping the DMS systems of dealers to get data, aggregate the online listings like vAuto
  • Phase 1 – Here is where to price your trade
  • Phase 2 – CR – Condition Report – Use 3^rd Party Inspection company (Data Scan, AiM, AutoVin/Adesa, EAA, others…)
  • Phase 3 – Cash offer for car (see my AutoNation notes on how they suggest to do it)
  • Newer COO/Pres Steve Hanson is a good operator
  • DMS extraction is key for them to get the data that drives their complicated algorithms
  • They are getting a ton of data from the DMS extractions and using it against the dealer to drive pricing down – this is a big risk for them, if dealers cut them off they are hosed.
  • Their customer matching process catches customers who change cars, names, address, phone #, email, etc… so they get paid on every customer they send to a dealer if a car is sold, any car is sold
  • They want to convince dealers to pull all of their 3^rd party ad dollars back (Trader, cars, us, etc…), and use that money to help drive unit pricing down so they can drive volume to the stores
  • AutoNation just ended their relationship and cut TC off completely
    • Rxx Fxxx was an exec at Zag (CEO I think he said, or COO) – he knows the secret sauce and stated they would never agree to let TC have access to their DMS data – they do get their CRM data
    • Rxx is not a fan and thinks dealers are going to come around and not let TC have DMS access
    • Brought up trade-in value issues TC is having
    • Also brought up lack of control at the store to mitigate bait and switch

Select Affinity Partners (No-Haggle Auto Buying Program) – Zag traditional model – only premium dealers get these leads

• American Automobile Association (AAA)
• American Express
• Bank of America
• Capital One
• eBay Motors
• Geico
• The Hartford Financial Services
• Liberty Mutual
• National Education Association (NEA)
• Overstock
• Progressive
• Nationwide Insurance
• Pentagon Federal Credit Union (PenFed)
• United Services Automobile Association (USAA)
• UPromise

Distribution Partners (TrueCar Price Reports)

• Automobile Magazine
• Car Buying Tips
• Car Price Secrets
• HomeNet Automotive
• Honk
• Motor Trend Magazine
• New Cars
• Price Quotes
• The Car Connection
• US News Rankings and Reviews
• Vehix
• vLane
• Web2Carz
• Why Pay Sticker

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