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Don't get me wrong.  We are a TrueCar.com affiliate, and I am a true believer in the power of online transparency, so please don't think I don't appreciate their value as a marketing partner.  In fact, TrueCar (formerly known as ZAG) leads have typically been at the top of our list of sales-producing third-party sources.

I wish we could sell every customer, but we cannot.

Often, the transparency of the data TrueCar.com shares with an online shopper is overshadowed by that Really Low Price Quote, and good, old-fashioned wishful thinking.  We're talking quotes of $2,000 and $3,000 below what's really doable, in our view, but they are competing quotes, nevertheless, which we frequently contend with.

When an online customer prices a new Silverado, for example, on TrueCar.com, she or he gets three competing dealership quotes -- and this clear, easy to read bell-shaped curve of what actual transaction prices (sale price minus cash incentives) have been over the past six months, polled from real dealership DMS data. 

On the USAA Auto Circle web page, powered by TrueCar.com, members can click on a link to "view what others really paid."  If you do, you'll see a similar bell-shaped curve which graphs MSRP, invoice, the average price paid, plus the dealer cost with incentives subtracted, and the competing dealer prices quotes (also with incentives subtracted).  This graph is real data provided by dealers; in this case, it is of 433 transactions in the past six months.  TrueCar.com, and its affiliated marketing partners such as USAA, gets the data via participating dealerships who agree to give them access to real transactional pricing in order to participate in the program.
 
The screen shot above is a graph, with TrueCar.com competing price quotes along side, for a $37,070 MSRP Silverado.  Did 433 customers purchase the same exact equipment on a $37,070 MSRP Silverado?  Not really, but TrueCar.com adjusts the data relative to each vehicle's option content and price, for comparison purposes.  I can live with that.

The main thing is, this graph tells tells your customer the way things really are, regardless of what that ridiculously low quote out there purports to be.
 
Point being, if customers were really purchasing at that $27,558 quote ($3,050 below the highest of the the three quotes, and $2,067 below dealer cost), why is that low, low price nowhere near the $31,784 average price paid?  In other words, if that dealer, 107 miles away, readily sold comparable trucks at $27.5k, more or less, wouldn't buyers flock to them?  As a matter of fact, that quote comes from a large-volume dealership (ostensibly the reason they can afford to sell so low).  So, wouldn't their transaction prices have a strong influence on the market average? And since their nearby competitors would have to also price closely to sell anything themselves, wouldn't that market dominance further influence the average price paid in the whole region?

That $27,558 price quote is so far down on the left side of the graph, it's statistically insignificant.  Chances are, it represents closer to 0% of the prices customers actually paid, than anything else.  The bell-shaped curve tells the true story.  Doesn't it?
 

 

Views: 905

Tags: Data, Market, Transparency, TrueCar.com, ZAG

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Comment by Jason Manning on November 4, 2011 at 11:09am




This has all started out
of Dealer Leaks. Dealers giving away their data for free when they sign
contracts with vendors who share their information with "affiliates,
subsidiaries, partners" etc. When dealers decide to become independent
again and take off the vendor training wheels, the profits will rise. Those
leads will be their genuine leads. Those advertising dollars will work again
because the consumer is not finding "the lowest price."



It's funny. I had a
customer on the phone the other day. He was probably in his late 60's judging
by his references in conversation. We were talking about a Silverado Crew Cab
diesel purchase that he had passed on at another dealer. I was talking value to
him when he said, "You know, when They opened up the computers,
they gave away all your secrets. You don't have any secrets anymore." Of
course I had a running dialogue going in my head ("I know. I just don't
understand why dealers have decided to 'open up their computers'.") I went
on in conversation and made him understand that "the computers" had
confused him and that he passed on a great deal. He understood my point,
easily.





We're one of the only
industries that gives away secrets with our ignorance to vendors and the path
of our data. Dealers went into survival mode during the Recession and they got
backdoored by their vendors. It's time to pull our heads out of the sand, find
businesses that secure and protect our data completely or build them ourselves.
That is the greatest need in our future. There is more than one company now
that monitors inventory for your dealer. Find a secure one.
Comment by Charles Kim on October 31, 2011 at 9:22pm
@...I think the biggest potential issue with vehicle configurators like ours, Edmunds, OEMs, etc. is that they allow customers to " virtually" configure a specific vehicle they would like to have, but that does not necessarily exist in a dealer's inventory.  Yet the customer may have the expectation that, because it COULD be configured, that it MUST exist.  Yes, it could theoretically be custom-ordered, but the customer often has the expectation that it is in stock at the dealership now.  I had plenty of customers come into our dealership with a printout of a specific vehicle from an OEM website, Edmunds, etc., or submit a lead for that vehicle, expecting to purchase THAT specific vehicle for a given price.  But more often than not, that exact vehicle simply did not exist anywhere in the U.S. (e.g. a luxury SUV with no power moonroof and FWD).  The closest vehicle we had, in the case of that luxury SUV example, was about $4,500 more expensive.  That absolutely created price friction because we were talking about two different option levels for a given model/trim with a big price difference.  In the case of Edmunds TMV, I actually liked when customers brought in those reports because it gave me a credible 3rd party basis on which to rationally counter the customer's asking price using that same data "against" the customer, and we credibly closed more deals as a result.  In the case of TrueCar (where there is significantly more data, accuracy, and pricing context via the curve and histogram), I can argue the case even more effectively with a customer, and close even more deals (because of the dynamics of pricing context, why customers really shop 3 to 5 dealers, etc.).  And like you, we also used KBB at the dealership for the exact same reasons you do...pricing context and 3rd party validation.  And we even did that knowing full-well that KBB was not as accurate as Black Book, Manheim, NADA, and even Galves in certain markets.  But I submit to you that if we can use any of these sites to help us justify vehicle values and selling prices, then it would make sense that a site with significantly more accurate data would be even more helpful, no?  In any case, as mentioned previously, we are developing a VIN-specific solution that should help resolve this issue.

@...yes, it is true that TrueCar is a business, but so is Edmunds, AutoTrader, KBB, dealerships, OEMs, Costco, Dealix, CarWoo, AutoNation Direct, and thousands of other businesses in the auto industry....so that doesn't necessarily mean anything by itself.  However, one thing is true...TrueCar does NOT use "[dealer] sales data...to generate leads for the same dealers that supply the data."  Data alone does not generate leads (though one could argue that OEMs and finance institutions could do this with their customers along with appended data from someone like Acxiom). And like any business, it would be also be fair to say that we provide a wide range of in-demand products/services to car buyers, dealers, OEMs, media, and industry affiliates (all are whom are customers of TrueCar).
Comment by Manuel Martinez on October 31, 2011 at 6:21pm
Lets also be honest about Truecar.com it is a for profit business and it uses the sales data from dealers to generate leads for the same dealers that supply the data. So who kidding who? Truecar.com is using the dealers for their data to generate profits. Wow!!!
Comment by Charles Kim on October 31, 2011 at 6:20pm
Sorry Tom...to clarify, I literally meant our PARTNER'S customers and/or members, be it USAA, AAA, Consumer Reports, NRA, GEICO, Nationwide, Progressive, and 80+ others.  These TrueCar partners collectively have tens of millions of their own members/customers who are able to purchase vehicles through the auto purchase program within those partner websites.  Sorry for the confusion!
Comment by Richard Lucy on October 31, 2011 at 6:15pm

Charles....you are comparing your "new vehicle transactional data" to "virtual vehicle configurators."  You're saying that it's the configurators that "create price friction issues."  How is that possible?

You are stating that your prices reflect actual transactions.  I would assume that a customer is going to think they can buy for those same prices.  A configurator states fact.  This is the invoice.  This is the MSRP.  This is what options cost.  Nowhere on a configurator that I know of does it say anything about transactional data or guaranteed pricing.  It educates the consumer on what the dealer pays and encourages the customer to work towards that point.  Good job.  If anything, it relieves price friction because the customer understands that somewhere there is a floor we cannot cross and they have a decent idea of where that is.  Edmunds TMV may be a slight exception, but the TMV is separate from the fact-based configurator.  We have never had any major issues with Edmunds TMV.  In fact, we can use TMV and KBB values on their trade-in to make the deal.

Giving someone a previously transacted price that may not be attainable puts a customer in a absolute price friction (i like the term) environment.  They expect a number that can't happen and the dealer becomes the liar when it doesn't.  They grind you into the ground and when they drive away with the best deal anyone got all month they kill you on the survey because some website told them there was more.

Customer + Configurators > Customer + Transactional Data.  Now that I typed it, let it settle for a second.  I, the dealer, actually just typed into a Internet window the phrase Customer + Transactional Data.  That's ridiculous.  I want transactional data on the groceries I buy tonight.  I'll let you know how that goes.

Comment by Tom Gorham on October 31, 2011 at 5:36pm
I'm not weighing in on the merits of TrueCar at this moment, Charles, but one thing you stated several posts ago struck me.  You stated, "TrueCar and partner customers receive a fair price on a vehicle".  Is that something that evolved from the term I usually hear from vendors, "partner dealers"?
Comment by Charles Kim on October 31, 2011 at 2:25pm

Good point Josh.  One note...as I mentioned, TrueCar does NOT set pricing (only dealers set pricing, just as they do in AutoTrader, via e-mail responses, through ResponseLogix or other similar response and CRM systems, in the newspaper, etc.), and all TrueCar Certified dealers are REQUIRED to honor the upfront price for that specific model and trim that they provide.  Some of the challenges you suggest stem from virtual vehicle configurators, which Edmunds, KBB, all OEM sites, et al use.  Since virtual configuration inherently can create certain price friction issues during the vehicle purchase process, we are addressing that with a VIN-specific system under development which should eliminate this virtual configurator issue.  And as I also mentioned, we have revolutionary new dealer tools in development that will help dealers use our data to close TrueCar and non-TrueCar sales, maximize sales velocity and profitability, and more. 

 

Hope that helps.  Thanks.

Comment by Joshua Michael Friedman on October 31, 2011 at 1:27pm

Decades of horse-trading and all-around bad customer experiences have driven the demand for consumer information in the car business.  We all get that.

 

So, I ask the forum: does this service provide real market transaction data that discourages hassling and haggling in order to improve the customer experience and win loyal customers to the dealership, or does it in fact enable the very practices that it purports to eliminate by offering price quotes that aren't a true reflection of an attainable sale price?  Does it do both things?

Comment by Charles Kim on October 31, 2011 at 12:46pm

(continued...)

 

All that said, if anyone has any specific questions, please feel free to contact your TrueCar ASM or AM (if you're a dealer), or e-mail me at charles@truecar.com...we'd be happy to answer any questions or concerns you may have.  Have a great day and week, and good luck with the sales close today!

Comment by Charles Kim on October 31, 2011 at 12:44pm
(continued…)

4) Manuel is absolutely correct that car buying satisfaction relative to other industries is low.  If "traditional" car buying was such a great experience, this relative satisfaction deficiency wouldn't be true, nor would there be growing demand for TrueCar, Edmunds, CarWoo, AutoNation Direct, Costco, etc.  Over 200,000 sales will go through the TrueCar Certified dealer network of 5,400 dealers this year, with over 600,000 vehicle sales projected to go through our Certified Dealer network next year.  All of these alternative car-buying channels are experiencing strong growth because of an accelerated shift in consumer demand with the car-buying experience.  Personally, I hate buying new vehicles…most of my friends rank it right up there with going to the dentist.  I just sold my '08 Rubicon Unlimited and am honestly dreading buying a new vehicle to replace it.  I went to a few dealers the other day to test drive some vehicles, and the experience was miserable.  One sales consultant even begged me to come back into the showroom from the parking lot to introduce me to her manager so that she "wouldn't get in trouble and marked down for it."  Seriously?!  And this was at a VERY good dealer in the area.  But nothing beats my experience last year…

I visited a Honda dealer in Orange County, CA to test drive an Insight.  During the test drive (I never tell dealers I am in the car biz so as to get a more authentic experience), I asked the "experienced" sales consultant a nice "softball" question as to why I should buy an Insight over a Prius.  His response?  "Because it's a Honda."  Brilliant.  A little later, I asked what were the technological advantages/differences between the two.  His response was, "Well, I don't really know about the technical differences between them because I don't know exactly what the Prius has."  Strike two.  When we got back to the dealership, the sales manager came out on the annoying "soft" t.o.  After a little introduction and chit chat, I asked him my initial question to see what he'd say.  His response?  "Well, I can guarantee you that our gas pedals won't stick!"  Strike three.  Seriously, you can't make this stuff up.  In all fairness, 6 of the 12 dealers I went to (Honda, Hyundai, BMW, Mercedes, Ford, VW) were equally bad (though the BMW dealer was the worst for sure…that one was up in L.A. County), 4 were mediocre, and 2 were actually pleasant.  I'm tempted to just ride my Harley to work and forego getting a new vehicle to postpone the pain as long as I can!

5) The high level of transparency within the auto industry is the result of several unique economic and behavioral factors.  Having been on both sides of the sales desk, I happen to support transparency on either side of that desk.  As a dealer, transparency helps solve a few fundamental problems around vehicle pricing…overnegotiation (which improves grosses), pricing context (which improves closing rates), and price friction (which imrpoves CSI).  As a consumer, it helps reduce price friction, and ensures I get a fair price on a vehicle.  In all seriousness, how many of you in this thread have ever bought a new vehicle without doing ANY research on pricing and incentives through TrueCar, Edmunds, KBB, etc.?  I never have, nor have any of my friends, and I suspect the same goes for everyone here too.  So to use such data to your OWN personal benefit (or that of your family and friends whom you help) while simultaneously being strongly against that very same transparency for the industry is somewhat hypocritical, yes?  Again, I love transparency on either side of the sales desk.

The fact is that consumers are increasingly demanding a major change in the car-buying experience, and the dealers/OEMs/vendors/suppliers able to adapt and meet those rapidly changing demands will succeed, while the rest will go the way of Blockbuster, Borders, etc.  I think the next decade or so will be very inte

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