Wednesday, Dec. 14, 2011, 02:00 AM UPDATED 3:12 PMBy Auto Group Editor Jennifer Reed
SANTA MONICA, Calif. -
In an industry known for its outspokenness, a new business model has taken front and center as new cause for debate — TrueCar.com. And Scott Painter, company founder, has addressed this head on in the form of an open letter to the automotive community.
TrueCar, which recently signed an exclusive deal with Yahoo Autos, as well as rolling out a national advertising campaign and ClearBook 2.0, boasts it can save consumers money by helping them find the lowest price on a new or used vehicle online. Its dealer partners set the online prices and then pay for a consumer lead only if a vehicle is sold.
The company relies on a variety of sources to provide consumers with additional data, including from DMVs to insurers to DMS providers and more.
Some dealers contend that giving all this information to consumers is forcing them to go lower on price than they would like, thus eating into profit potential and hurting business. They appear to believe TrueCar is giving up too much information.
Discussing the revamped ClearBook with Auto Remarketing earlier this month, Painter said this tool can break down used values to the ZIP code level.
Painter explained, “One in every three introductions to the dealer buys a car. We see ClearBook 2.0 as a huge time savings. We help customers be confident and informed, which means more likely to buy. We are not trying to do this at the expense of the dealer. We just want to show the facts.
“We want to offer enough depth of data and transaction data to give a very accurate picture to the buyers and sellers of cars, so they know what they should pay and what a car could ultimately sell for. We’re very excited about our data. We are looking to reflect the market," he added.
While TrueCar has recently gone national with its business plan, the idea has been around longer. Prior to announcing TrueCar, the entrepreneur behind it launched Zag. This platform powers online and mobile car buying programs for more than 40 prominent membership-based organizations, including USAA, AAA and others. Dealers have been involved with this program for several years.
However, not all dealers are in support and those who are not are very outspoken. In an effort to address these concerns, Painter issued this open letter to the industry on Monday:
"Our world is changing. Unprecedented access to information and a massive shift in consumer behavior has resulted in a challenging new automotive retail landscape. It has also enabled a consumer appetite for data transparency. To hide from evolving consumer behavior is to deny change. At TrueCar, we embrace this opportunity. We also believe that transparency is the centerpiece of trusting relationships. Some in the industry disagree. We would like to make our position clear.
"Our goal at TrueCar is to foster healthier relationships between manufacturers, dealers and consumers through data transparency. To deliver on this promise, we require a high standard from our 5,800 dealer partners – an upfront competitive price and a commitment to a great customer experience. A discoverable upfront price is the cost of getting noticed. Contrary to popular concerns this does not create a “race to the bottom.” The lowest price only secures the sale 19.2% of the time within the TrueCar network. The sale is still won by location, selection and good old-fashioned customer service.
"At TrueCar, we believe that upfront price is at the core of a good buying experience for dealer and consumer. Informed consumers buy more confidently and are more satisfied. At TrueCar, we publish the most accurate reflection of the retail market that has ever been available. The goal is to establish an objective, credible and transparent baseline for fairness – both for the customer and the dealer. That being said, TrueCar does not set this market. Our dealer partners set their own prices 100% of the time.
"Dealers earn their business every day and we believe that their marketing programs should too. TrueCar is the only fully accountable source of new business where our dealer partners only pay when they sell a car. Gone are the days when dealers have to assume all of the marketing risk and pay for advertising and for leads as a primary way to secure new customers.
"TrueCar requires DMS integration for tracking of this accountable model, the core of what makes us unique. We use DMS feeds from our dealer partners for tracking and optimization of introductions made to the dealership. We don’t use our dealer partners’ information to populate the TrueCar pricing curve. That information comes from entirely separate sources of anonymized data that represent nearly 90% of all vehicle transactions in the U.S.
"At TrueCar, data integrity, security and privacy are job #1. Our policies, systems and technology have passed the scrutiny of partners like USAA, Consumer Reports, American Express, AAA and many others. TrueCar has never, and will never, sell or repurpose DMS data for any reason.
"In spite of all this, we recognize that change is threatening for some. Ours will always be a high-touch industry. The service of our dealer partners and highly-trained sales professionals becomes increasingly important the more consumers know. At TrueCar, our commitment is to relieve those professionals from needing to resort to high-pressure sales tactics or misdirection. These tactics have been an albatross for our industry and they are at the heart of why consumers have become generally mistrustful of the car shopping experience in the first place.
"Is TrueCar good for all dealers? There will always be those that resist change. To our dealer partners, we applaud your understanding that truth, transparency, and customer service is at the center of success in our changing market. And, to those that still have questions, we invite an open dialogue. One of the great virtues of transparency is that we have nothing to hide.
—Scott Painter, founder and chief executive officer.
To read Auto Remarketing’s article on the launch of ClearBook 2.0 and the Yahoo Autos deal, click here.
To see Painter's letter, as well as industry response, click here.