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Is This the Beginning of the End for TrueCar?

TrueCar has had a rollercoaster ride in the automotive retail industry over the past few years. However, it appears things may be taking a turn for the worse (both for TrueCar as well as its participating dealer clients). Read on, as I reveal their new policy changes that will have a negative impact on dealers, as well as my in-depth interview with a top eCommerce Directors about this change.

Cliff Notes:


Having aggregated so much data to benefit consumers over the years, TrueCar challenged the retail market to deliver competitive pricing to their online shoppers. However, as more shoppers funneled into their site (and partnering sites), it was obvious that dealers needed to take notice of the TrueCar machine. Fairly quickly. dealers began taking issue with the way TrueCar came about some of the consumer-facing data that was being shared. Then the “dust-up” happened. Industry leaders such as Jim Ziegler and Jerry Thibeau led the charge against TrueCar, and urged dealers to cease the data extraction they were allowing TrueCar as it was only being used to bite them in the proverbial backside. TrueCar (after an unnecessarily long battle to prove what they were doing was acceptable), reconvened with others in the industry and reengineered their site to be more dealer-friendly. Since then, TrueCar has once again dominated the third-party lead segment (with the help of venture capital backing and strong corporate relationships with affiliate partners). My dealers, for instance, all seem to have significant success with TrueCar opportunities. However, there were questionable charges that frequently popped up. In most instances, TrueCar relented and maintained that the “customer is always right”. In this case, their customer is the dealer. That is about to change.

The Bombshell:

As of September 1st 2013, TrueCar is altering their “Write-Off Policy” for dealers. Essentially, TrueCar states that their customers are so much more “deep-in-funnel” than all other lead providers, dealers on their Per-Sale payment model will no longer be allowed to request write-offs. Whether or not those sold customer originated in their CRM before becoming a TrueCar lead no longer matters. In other words, even if you sold a customer four vehicles in the past, and that customer submitted a lead on Edmunds the month prior that arrives in your CRM, AND comes in and speaks to a sales associate, leaves the dealership, goes on TrueCar, submits their information again, and inevitably purchases from your dealership, the dealer will be unable to request a full write-off.

I’ve attached a version of the new TrueCar Write-Off Policy, effective September 1st 2013, at the bottom. In the end, the dealer will have to pay. You will see that partial write-offs (up to $100) will be granted to those dealers on the Pay-per-sale model, but only for extenuating circumstances. Subscription-based dealers have no write-offs.

The Reason:

As an automotive consultant, I can see this policy change happening for only a couple of reasons. Let it be known that I did not once take to a public forum during the previously described “dust up” to wage war against TrueCar. I believe their business model was a profitable one, and sense consumer-facing data will rule our industry sooner rather than later. I made no indictments of them, but did educate the clients of DealerKnows about TrueCar’s initiatives. However, we did this during our normal, one-on-one consulting times and not online. I feel, though, as an advocate for our dealer industry, I should bring to light this policy change that could have a negative impact on both DealerKnows clients and all participating TrueCar customers. (They’ll know soon enough).

TrueCar states that they are not a lead generator, but simply a new consumer strategy with which to purchase automobiles from dealers. For that reason, if another lead provider sends a dealer a lead that predates the time TrueCar sends the same customer’s info, it doesn’t matter. TrueCar still deserves credit because the customer obviously prefers the TrueCar way of shopping, so they say. From the outside, it appeared TrueCar was back on their way to dominating the lead market, but this type of policy change must mean they are struggling internally with a cash flow problem or that they are just showing their true stripes. Maybe they are the cash-grabbing corporation they were originally assumed to be. It has to be one of those two reasons. Making this policy change will end up costing dealers more money. (At least, it will to those dealers that pay attention to the Per-Sale invoices they receive and attempt to legitimize said charges.)

This was admittedly brought to my attention by a respected eCommerce Director from one of our DealerKnows clients in Chicago. This individual prefers to remain anonymous. I thought I’d get his perspective on this policy change, how it affects his dealership, and his thoughts.

My Interview:

Joe: In a few words, tell me about how you viewed your relationship with TrueCar prior to this policy change?

eCommerce Director: I’ve had a 7-year relationship with them. When everything went down with TrueCar over a year ago, we got off the program for two months, but then back on. At the time, we had felt like they had gotten checked back into place and straightened up their act. They promised to be better dealer partners. We came back aboard and had relative success with them. We still didn’t close them at the rate I’d like, but made an additional 5-7 sales per month per store (about 25 sales total a month). Even with the $399 cost-per-sale and a lower margin than usual, this was in line with what I accepted. But I was writing off a lot of their supposed claimed sales.

Joe: How many TrueCar sales per month would you say were questionable?

eCommerce Director: 50%.

Joe: Holy crap!

eCommerce Director: Over the past year, we’ve written off half of the sales they attempted to take credit for. My friend at another store writes off 60% of his claimed sales. Whether they were duplicates, customers we were already working, past customers, owner referrals, or even if someone at the same address of a sold customer – roommate for instance – goes on TrueCar, they would attempt to invoice us for the sale. They’d just send the bill because their system will grab anything and everything that might possibly be a link and charge dealers for it.

Things got complicated six months ago when they attempted to charge me for phone calls that were coming from Yahoo Autos. Even if we hadn’t picked up the call, and even though TrueCar sent no info of this customer into the CRM, they would somehow match it up with sold customers from our database. I found this unacceptable and pushed to get away from receiving “phone leads”. If it doesn’t originate in my CRM from them, I have no way to verify its validity. So it is useless to me and I couldn’t, in good conscience, pay for those sales.

Joe: On average, what was your experience like getting write-offs?

eCommerce Director: Up until this last year, it was relatively easy. We didn’t have many serious arguments. The last 90 days it has been a battle though. They seem smug about writing something off now. More combative. I think they have investors trying to tell them how to make more money, and, just like last year, it slapped them in the face. Now, this Write-Off Policy is another sleazy way to extract dollars from dealers. They claim they never had a write-off policy before, and now they’re going to hit every dealer on Sept. 1st with the bad news, giving them no adequate time to make a decision. A good dealer partner would never hit a valued customer with a major policy change with no notice like that.

Joe: What do you think this Write-off Policy will end up costing your group additionally each month?

eCommerce Director: It’s $399 cost per sale and I was writing off 50% of the total sales. I was already paying for the 25 legitimate sales as a group per month. This policy change just bumped my cost for TrueCar an additional $10,000. That is a huge pill for any dealer to swallow.

Joe: Do you feel this has broken the relationship and will this affect the longevity of your partnership with them?

eCommerce Director: Right now, they’re on the chopping block. I’m just waiting for permission from the owners to rededicate the money elsewhere. I can spend $20g elsewhere and get 25 legitimate units per month, that’s no problem. And probably with higher margins. I’m not going to waste my time taking screenshots of customers to get only a quarter percent of the write-offs solely so they can double their profits. Not cool.

Joe: Why do you think TrueCar made this policy change now? Especially since they seemed to have won back the dealership trust they had lost during the “Kill the Beast” debacle?

eCommerce Director: I think back to how the founder of TrueCar was promising to be a better dealer partner in the future. The fact that we are a week away from this policy change date and the greater percentage of their dealer network doesn’t know about it proves to me that they don’t care about us dealers and don’t belong in this industry. That it is one year after a massive online, state, and national battle and they’re doing this undermining crap solely to double their own profits, it’s unbelievable. I don’t know how they’ll recover without, once again, getting knocked down by the dealer population and having to rethink their strategy.

I look at TrueCar as the spoiled only-child in a family that always got their way, would misbehave with no punishment. They keep misbehaving and misbehaving until their parents, in this case the dealers, give them a good spanking. (Not that I ever strike my kids, but you get the picture of what must happen to correct this negative behavior.) Only then does the child fall in line. Eventually, they’ll start getting spoiled and misbehaving again. It’s happening here.

Joe: Thanks so much for your input.

Click here to view The Write-Off Policy

Joe Webb

Views: 1882

Tags: automotive, consulting, dealerknows, dealership, joe webb, lead provider, policy, policy change, training, true car, More…truecar, write off, write-off policy, write-offs

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Comment by Michael Timmons on August 29, 2013 at 11:03am

@Paul

I couldn't agree with you more that the delivery of our formal policy was less than ideal. I doubt that any company wants their communication strategy to be an advanced copy of something that ends up in the media prior to distribution to their customers. Unfortunately, that is what happened and we are already in design of a better communication mechanism on our dealer portal. 

Your statement is true in that "Your store only sees an invoice when one of our introductions/leads buys a new or preowned car." This is what makes TrueCar different than other companies that connect dealers and consumers. In states where allowed, we don't charge up front fees or charge for introductions and so we have skin in the game with our dealers. Because of this willingness to take all the upfront marketing risk, we have to be disciplined in our business practices and have policies with clear guidelines. TrueCar dealers are on pace to sell over 500,000 cars in the next year through the TC platform. As a result, it has become impossible to handle all write off request on an individual basis without providing this much needed clarity.

We fully appreciate that not every TrueCar dealer will totally agree with all the aspects of the policy. We firmly believe that the policy provides a fair balance given our performance based business model. There will always be some fringe cases that we will address individually with our dealers and our dealer team will be happy to answer any additional questions. Ken Potter, our Vice President of Dealer Development and I will be at AutoCon next week and will be happy to schedule time with any past, future and most importantly current dealers.

 

Comment by Paul Schnell on August 28, 2013 at 10:58am

Great article again Joe, and thanks for bringing this to our collective attention.  I've been with TrueCar for 18 months or so and was quite surprised to see this.  I received NO NOTIFICATION from TrueCar about this at all and it's still not posted on their dealer portal.

When I asked my rep about it, the first thing I got was a phone call.  "Do you have any questions about it?"  I just had one...can you send me the damn thing so I can see what kind of questions I might have?!

I'm most bothered by their attempt to set themselves apart - not as a "different kind of lead provider" but as "not a lead provider."  The fact is, they are a lead provider, or were.  This via email in our initial approach from TrueCar in December 2011: From Greg Kelley, Area Sales Manager, TrueCar "...Your store only sees an invoice when one of our introductions/leads buys a new or preowned car."  Sounds like a lead provider, doesn't it? (p.s. By the way, Truecar, that's what we PAY you for.)

All write-offs I've requested from TrueCar have been based on that statement.  If their introduction bought a car, I authorized payment.  Seems like a simple policy.  Yet they tried to step back on this policy a few months ago. Now, since that attempt failed, they're swinging the hammer again. And they tried to hit us in the back of the head instead of delivering the sour news in person.

The policy is not right and they delivered it all wrong.  All stores in our group have cancelled or intend to by the end of the week.

Comment by Joe Webb on August 28, 2013 at 8:56am

It saddens me that, once again, they are simply going to put up blinders and place on earmuffs to the dealers they serve.  They'll once again continue forward with their own directives until it blows up in their face all over again.  That they don't simply revise the policy is amazingly short-sighted to me.

Comment by Jon Floyd on August 28, 2013 at 8:38am

Joe Webb, this was well laid out and a very interesting article. Over 3000 dealers out there can be given a better deal and protected from the Mafia attitude. I always feel sorry for a company that has lost its way, but you can help and profit from their mistakes. You can also learn, never get greedy or disparate. Always think of your customers first, and take care of them. You are never too big to fail!


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Comment by Rob Fontano on August 22, 2013 at 7:25pm

Joe is spot on with his assessment. TrueCar is a consumer facing product that grinds dealers for payment of their services. TrueCar has never changed their intended business model designed to disrupt the way automobiles are sold.

They are convinced that their way is the way of the future. Regardless of what transpired a year and a half ago, Scott Painters words rings out like a battle cry. “They’re trying to say Honda’s are worth more than invoice, but if everybody’s paying less than invoice, that’s not true.” So “Everybody” is paying invoice? or would TrueCar prefer that everybody paid invoice and they were paid list for the lead?

TrueCar is a business model that is genius in that it targets a vulnerable retail industry that in many cases is stuck in the past. Those that deliver value in their customer interactions and excellent service beyond the sale have no business employing TrueCar as method of blowing out 7 or 8 extra cars a month. Ironically the more digitally savvy dealers are their best customer.

Ron; Your response to this article is right in line with your companies past interactions with upset dealers and consultants. Somehow you manage to miss the nuance of the concerns that dealers have and merely focus on the sarcastic deniability of a shady old used car salesman.

I must also point out that noticeably absent from this debate round with TrueCar are those who reached an equitable settlement via AUTOmotive CONference sponsorship.

Comment by Joe Webb on August 22, 2013 at 7:00pm

Thanks for the support, Stanley.  A TrueCar rep is attacking me on my own blog at http://dealerknows.com.  Sad that they spend time barking at me instead of simply rewriting their policy to benefit both parties.

Comment by Stanley Esposito on August 22, 2013 at 5:47pm

You just can't lay it out any better. Thanks Joe!

Comment by Joe Webb on August 22, 2013 at 1:22pm

Amanda - from some of the horror stories I'm hearing from multiple dealers recently, it sounds lucky that you were able to get out of paying for that sale, even before the write-off policy goes into effect.

Comment by Amanda Marsal on August 22, 2013 at 9:44am

Wow! I had no idea this was about to happen, and I am in the Truecar dealer portal everyday. This would be a huge disadvantage to dealers, as I to keep track of the leads that come in through GM 3rd Party or other lead providers. I have a huge issue with this as USAA is major provider for us, and we do a considerable amount of business with them. Let me give you a for instance: We have an employee that is a BDC rep that I met after she and her boyfriend had purchased two cars from us and then I recruited her. Her boyfriend wanted to trade out of his third vehicle he bought from us, and is a USAA member. I was working on putting a deal together for him and received a USAA (TrueCar) lead with his name on it. There was no way I was going to pay for that sale. So, with these changes now I would be charged for that.... NONSENSE

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