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True Car and ZAG - Cyber Bandits or Good for the Business?

Jim Ziegler asks...

I am hearing a lot of discussion about True Car and ZAG.  I continually scratch my head and wonder if  desperate dealers are doing the marketing limbo "How Low Can You Go?" 

Are we so bad at what we do that we have to line up and pay vendors to lose money? AND, who is giving these people access to your data that is used against you? 

 

Who owns these companies and what might be their ulterior motive?  Sometimes I ask questions to which I already know the answer. 

 

Am I wrong?


What do you think... JIM

 

 

 

 

 

 

EDITOR'S NOTE: The ADM Professional Community has assigned a short-cut domain name to this blog post by Jim Ziegler to make it very easy for ADM members and readers to refer others to this web page. Please use the following URL:

www.TrueCarDealer.com

 

Jim Ziegler's Guidance and Recommended Action Plan:

Ten Areas We Need to Concentrate on to Bring This Monster to It's Knees...

  1. Government investigation of ALL Data Aggregators taking consumer information from dealers' DMS. Sadly enough, dealers who do business with TrueCar are exposed to  liability charges. Cut off all access to unecessary data, no matter who takes it from the dealers DMS and make it illegal to "resell identifiable consumer data" and "transactional data".
  2. Educate Your Fellow Dealers; If anyone takes financial transactional data, they expose the dealer that allowed it to violations, especially if it is passed on to other vendors or shared.
  3. Educate Consumers to what they're doing with their information...
    a. You buy a car from a dealer, do you really want your personal information, and maybe even your financial information, passed along and sold and shared by "God knows who?"
    b. These People Charge the Dealer $300 which the dealers have to build into the deal
    c. Your Privacy and the Security of your Information could theoretically compromise your identity if you do business a company that takes data from the dealership.
  4. Educate Investors and potential investors they could possibly be mislead if anyone is telling them this is a safe investment because of all of the dealers pushing back, associations pushing back, and government regulators in many states coming after TrueCar's business model as NOT compliant, in some cases they're saying it is Not Legal.
  5. AMEX, USAA and all of their affiliates do not want the bad consumer relations this push back is creating with their members and customers.
  6. Cancel your dealership's Affilation with TrueCar. Tell people with TrueCar certificates that YOU don't honor TrueCar and you feel the company is NOT reputable. Educate consumers as to perceived data exposure if they buy from a TrueCar dealer. Make sure that each consumer knows that using TrueCar actually increases their vehicle cost by $300 to $400.
  7. Make the dealers selling at huge losses take all of those deals. Big problem right now is too many Nissan Dealers and others are taking huge losers to get the factory money. The TrueCar reverse-auction business model will continually push those numbers down until the factory money is non-existent. Consumers need to hear from many dealers, "We don't do TrueCar"
  8. Keep calling your National and State Dealer Associations demanding they get involved and stay involved... No excuses.
  9. Get the Manufacturers into the game. If GM, Ford, Toyota, and other majors change the rules about how we advertise and do business to protect the dealers, we can cut off their ability to set pricing. So keep it up at every dealer meeting. Call your Dealer Council Members and protest to your factory reps. Tell the manufacturers, if they want showroom and facility improvements, we need the ability to make fair profits.
  10. Tell everyone you know. Educate other dealers and industry people. Watch the Painter interviews... I believe this is the first time a vendor has publicly announced they intend to bring down the dealers and hijack our business, taking our profits and starving us out with our own data. Painter has said manufacturers and dealers should go bankrupt and he, in his God-like way "will control distribution..."
    When the TrueCar-Yahoo Deal kicks in we need to stand firm and "Just Say No" we don't honor TrueCar deals.

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Comment by Ray McGowan on January 6, 2012 at 8:25pm

Great stuff Dave!  Tom (not Mr. Kelly, lol), that is in fact brokering a deal.  When you make a consorted effort to have another party lower a price, you are in fact brokering a deal.  When you sell a home and the real estate agent (broker) believes a lower price is in order and they are working with another agent, they a brokering the deal.  If you own a business and consign an automobile and make the attempt to request the owner lower the asking price, you are brokering the deal.  I know this from an experience of consigning several vehicles and having an attorney ask me if I was brokering the deal.  In any event, a Truecar rep making a request to lower pricing further is acting as a broker.  If this is in fact true that TrueCar is requesting a price concession, it also could be considered price fixing.


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Comment by Thomas A. Kelly on January 6, 2012 at 7:18pm

David’s points are very well put. Something he said really caught my attention,

"Zag reps weren’t calling me every month telling me to lower my prices so they could fundamentally change my business for the better.  They wanted me to bottom out my pricing to trigger Zag sales because that’s the only way Zag generated revenue."

This is the second time I have heard a dealer say this in the last 24 hours, referring to their rep calling them and asking them to adjust their prices. I heard one dealer make a public comment "3-4 times a week we get a call, we need you to adjust your price" from the rep. At best this activity by Zag/TC should disprove their claim as not being brokers and at worst; it appears to be an attempt on their part to fix a price because the rep/Zag has pricing info from all participants in their program at hand. Since David was the second dealer in such a short period of time to make that claim, I am beginning to think there may be a pattern here and not just an event.

1. Can a rep call one or any participant in their program and advise them in any way as to how they should price?

2. Does the fact that they are seeing all the prices when they make that call have any relevance on the issue?

3. If they did/do make calls to dealers and ask them to change/adjust pricing, does that in and of itself make them a broker in most states?

Anyone have a qualified opinion?

Thanks, Tom

Comment by Matt Tucker on January 6, 2012 at 7:06pm
Wow David, brilliant. Couldn't agree more.

It seems as if they are still not getting it. They are in a desperate race to "fix" the legal isses that they are completely ignoring the very hand that feeds them. In fact, from my discussions with local dealers who are still signed up with them, they are biting that hand by grasping for more bird-dog fees for sales they had nothing to do with and not allowing dealers to prove otherwise.
Comment by Keith Shetterly on January 6, 2012 at 6:39pm

@ David Flowers:  THAT was a helluva post.  You are now officially My Hero.  THANK YOU!  

By the way, again, for those reading, TrueCar/Zag did NOT win dealers over using TrueCar.com.  Zag was arguably incremental business from affiliates; TrueCar built on that existing Zag dealer base, it didn't "win" many of them over.  TrueCar.com inserts itself between you and your customer by marketing to your customer on price, you take the short deal and any heat, and you pay them $300.  Not a problem at incremental-by-affiliate sale percentages of your business.  A HUGE problem as it grows further into your natural customers without providing further INCREMENTAL business.

We'll sell 13.5million units in more in 2012 with or without TrueCar.  They won't sell a thing without US.  We don't need them.  They need US.

So, they forgot their customers (us!) while lecturing (and I mean lecturing) us, here and elsewhere, on how far less of us are needed, we don't get our customers needs, that we provide the old sales/fine print experience, etc..  The irony in their behavior isn't lost on a lot of us, though they seem to still haven't gotten it.  The fine print in their CURRENT contract on their marketing to your customers tells quite a tale in itself.

Essentially, they provided us, their customers who pay their income, the same exact poor experience they claim we provide and that justifies their existence.  Amazing hubris, really.  

Comment by David Flowers on January 6, 2012 at 5:11pm

Keith, you hit the nail on the head.  There are certainly significant concerns with doing business with TrueCar.  But what this really boils down to is a vendor that does not understand its own customers. 

Let's put aside the philosophical discussion about what is or isn't the future of the auto retailing business and talk about the real business at hand.  TrueCar, just like auto dealers, is in business to make money.  They have structured their business where a primary source of their revenue comes from auto dealers.  In addition, the critical element for their success is dealer participation.  However, they seem to view themselves, and they certainly portray themselves in advertising, as a consumer advocacy resource and as some sort of benevolent institution with the noble charge of saving the auto retail industry from itself.  To me, that identity crisis is the bigger threat to their business than any of the regulatory issues that have come up.

When I talk with other dealers and TrueCar comes up, the discussion rarely gets as far as the looming regulatory problems because so few of us still see value in it.  The question is always, what in the hell are/were we paying for?  I can have “transparent” pricing or any other pricing philosophy I so choose without TrueCar.  I can purchase and analyze market data without TrueCar.  I can reach just as many consumers through traditional and online advertising without TrueCar.  I can completely agree with Scott Painter’s vision of how automobiles should be sold and structure my business accordingly.  And I can do it without paying TrueCar a dime.  Bottom line, is TrueCar needs me a whole hell of a lot more than I need TrueCar.   Zag reps weren’t calling me every month telling me to lower my prices so they could fundamentally change my business for the better.  They wanted me to bottom out my pricing to trigger Zag sales because that’s the only way Zag generated revenue.  Let’s cut the whimsical BS about changing the world and call a spade a spade. 

The true nature of the relationship between TrueCar and the dealer seems lost on TrueCar.  Dealers are not your “partners.”  That term is insulting.  They’re your customers.  And if you want their money, you better damn well cater to their needs, not respond to dealer dissention with airbrushed, Obama-esque doublespeak as if an audience as skilled at reading people as automobile dealers wouldn’t see right through what you’re saying.  Otherwise, hit the bricks and figure out a different way to make money.

Comment by James A. Ziegler on January 6, 2012 at 3:36pm
Comment by James A. Ziegler on January 6, 2012 at 3:31pm

Sorry...partial false alarm. I received a call from California but it was NOT a state regulatory agency. Something about Mercedes guidance to their dealers similar to Honda. I am tracking the story down now. JIM

Comment by Matt Tucker on January 6, 2012 at 3:20pm

Well, if they have access to every dealers DMS data, they could in theory be correct, but with only 5200 on board and less every day from here on out, that will NEVER happen.

Comment by Matt Tucker on January 6, 2012 at 3:17pm

@Keith-

 

We have a local carpet store that somehow file for bankruptcy and then reopens under a different name about every 6 mos. They are always having "going out of business" sales and advertising prices that are "not sustainable" for other carpet stores.

What does that do for them?  It drives consumer frenzy. TrueCar knows what they are doing by placing a 'warning'. They are saying "The big, bad dealership wants to keep more of your money, so they make us put this warning on here."

Truth be told, the actual cost of selling a vehicle can only be determined on a deal by deal basis and is different for each store front. You can't aggregate data and show what is "dealer cost" without justification. 

 

In my state, Missouri, the Attorney General has guidelines that state we can't advertise with words such as "invoice" or "dealer cost". Why?  The consumer has no way to verify what these actual costs are for each individual dealership or vehicle. But yet, with a magical algorithim, TrueCar thinks they can and have.  I think that no matter what they change, their 'formula' will never be 100% compliant with most, if not all, state laws. It fundementally can't be.

Comment by James A. Ziegler on January 6, 2012 at 3:11pm

Just got a strange call from a California dealer

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