Edmunds TMV vs TrueCar - Dealers, wake up!

[Anonymous (blog)]

A race to the bottom is exactly what's happening, and ironically it fosters behavior in some that makes the problem these guys claim they're trying to solve even worse. 

How many of you have heard stories of customers being lured in by insane ZAG pricing only to find that the price didn't include "mandatory" add-on products?  And how often has ZAG done anything about it?

As for making it up in F&I, about half of the ZAG customers come in with pre-approved financing from their member program.

 

[Garnett Wilson]

Car dealers have always and will always live in a 30-day world. Even the dealer groups live this way, so no one is going to forgo the Edmunds or USAA Zag leads just to stand up to an onerous data contract. They will all cave (they always do) for fear that their competitors will sign up and get those leads. 

Nice job Jeff, but dealers are expert marksmen when it comes to shooting themselves in the foot. (No offense, it's true.) 

 

[Guest]

Jeff,

As always I love that your site is an open forum for people to share their opinions. 

Since you and I have spoken over the past year you know that I actually launched and ran their first pilot market for the direct program so there are a few things that I can clarify on here. 

Before I do that let me say this...I respect anyone's opinion so this isn't a pissing match. I want to only fill in some things that were possibly misunderstood in regard to this Direct Program.

And I will say - I'm still helping them on a Contract Basis by meeting with dealers to break down what the program means in their market. I tell you this so there's no misconception that you think an Edmunds person is 'sneaking on here' to argue their value. I do see the value, I do contract work for them and will continue to because, as you'll see below, I think it's a good program for consumer and dealer alike.

First - Almost every OEM was participating in this program and that means many dealers were on it and getting clients from Edmunds, they just didn't know it. From the dealers I've met with who were able to track it (certain OEM had that ability) - they were excited to jump in direct.

Second - It's exhausting when people whine about not holding gross anymore. Edmunds didn't do it to you and neither did anyone else. Usually we can't hold gross because we got lazy, rely on our CRM and every other tool we've purchased, to do the work for us rather than making sure our staff knows how to sell the benefits of the store, the product and themselves. I know a Chevy Buick GMC dealer in the Middle TN area who averages over $3K per copy on their NEW vehicle sales (across the board so not just edmunds customers).

AND BEFORE YOU ASK - yes, I'm that skeptic who had him pull it up in the DMS and prove that he wasn't completely full of crap.

Third - Joe W, I wasn't a fan of Edmunds either in my dozen years on the retail side. I really didn't care for any site that told a consumer about the things I held so dear (Invoice) and I really didn't appreciate them telling a consumer how to come and do battle with me. That said, this new direct program is created to actually make the transaction smoother for the consumer AND the dealer - and YES - Edmunds still does and always will care more about the consumer than they do about you or me BUT let me explain how this is actually better for the dealer than the previous setup where you got Edmunds people thru the OEM or your Tier 2 (ABT, AUSA, DEALIX).

DMS Polling - The biggest gripe a lot of folks have is that TMV is causing them to give away gross because it tells the consumer they should buy the car super cheap. That data currently had come from limited sales transaction data that is shared by the DMV or manufacturer and Edmunds receives only a small portion of that info as the above sources send it over. By getting true transaction data it will help 'right' the TMV so that the pricing suggested by Edmunds is consistent with what dealers actually have been selling the vehicles for. This concept (assuming it works) will make the transaction easier on consumer and dealer because you will be comfortable with the deal, they will too, and it will go faster as well allowing you the time to serve more customers. 

TMV Misconception and Edmunds Pricing - Anthony mentioned that he didn't understand why you would 'pay someone to help you give away gross'. If that's the case you'd drop all your advertisers because if I'm a betting man you're not advertising retail prices now are you? We as dealers are the main reason that profit is low because rather than learning to sell we all advertise ridiculous prices to entice the consumer then we whine about why we make no money. TMV doesn't say buy for invoice, it says 'buy for what the DEALER has been selling it for in this region.' If you don't like that number, learn to hold gross and the number will go up.

PRICING ON EDMUNDS SITE FOR PARTICIPATING DEALERS - Unlike EVERY other major Ad Vendor you buy ads from right now, the Edmunds listings actually PREVENT a price war. Perhaps nobody who's complaining has taken the time to look at the structure but here is fact:

AutoTrader.com sorts inventory by what? Whomever pays the most, then by price. If you want to be competitive with New Cars you have to list a price that will yank the consumers eyes from everyone else so you can get them on your car. Roughly translated - you have to be in a price war.

Cars.com sorts inventory by what? Price. See above concept.

Do you even know how Edmunds sorts? I'll make it simple. One dealer in each location is the 'Premier' dealer. You will NEVER see two Premier dealers in the same DMA for the same Make. It's designed to put the local dealer 1st on the list and then it sorts by geography.

What about pricing? ALL CARS ARE LISTED AT MSRP. Why would Edmunds do that if they're trying to cost dealers gross? Great question - they aren't trying to cost us gross, they're trying to create a better buying experience for the customers. 

By using that model it only sets the dealer apart in two ways: 

1. If you're participating, you get branded as the premier dealer in your area on Edmunds.com and in your area you're always top of list in inventory, RFQ and Find a dealer. 

2. The ratings and reviews will make a dealer stand out as one who a consumer should or shouldn't choose. NOTE: I know that not everyone likes ratings and reviews but the reality is this, even taco Bell has them and usually the dealers who don't want them have a reason - they treat customers poorly.

Fourth - Joe P you are correct when you say consumers don't go to Edmunds to buy a car, they go there to do research. This is one of the biggest benefits to dealers that do business with them because you don't get a bunch of tire kickers on the site who are emailing and bothering you way before they're ready to purchase a vehicle. Once they get to the end of the research cycle, they come across a list of dealers who they can choose from and by the time they make it there they're further down the purchase funnel than most. 

Finally to my main man Stan Sher - Brother, most of the Edmunds consumers that contact a dealer aren't 50 miles away if the dealer sets up the proper radius, that's just like anything else. The problem is that most dealers want to reach out 100 miles to play in someone else's playground then they gripe about getting leads from too far away. It's like advertising that you serve bad credit then complaining about all the bad credit that comes in. Use your head when you set it up and you end up with good results right? (But I know you know that already so I'm preaching to the choir on that one)

Ultimately gang, this isn't a 'high volume pay per lead program'. This is a low funnel (by the time they contact you), lower volume, high quality buyer program. Instead of sorting through 100 people to find 3-10 good ones you sort through 20 or 30 to find the 3-10 good ones.

I personally opted in to help with this when it was a pilot because I saw value in it, even though I wasn't an Edmunds fan. I really saw it as a better way to connect with new car buyers. I opted to continue to help because they've refined it more and made it even better.

At the end of the day there are a few truths that transcend all of our opinions:

1. Edmunds isn't going away and consumers are going to be on there
2. When they get to the point of finishing research they will either see you if you participate or they will see your competitor of you don't. It isn't rocket science.

As with any advertiser we as dealers can just say no if we don't see the value in a program but I can say with complete and total confidence that I've recommended it to my friends locally in the business and Edmunds doesn't write me any bigger check if they're on or not.

I'd say Edmunds is trying the best way they know how to make it 'safe' for you as a dealer since UNLIKE THE OTHER GUYS WHO LIST YOUR INVENTORY they are: Month to month with a 30 day out.

Edmunds knows it works and they're not holding anyone's feet to the fire. I'd say, before you crucify the program verbally, check it out so you can speak from experience versus speculation. I've talked to dealers from Middle TN to Miami to NJ to LA and of those that are on board the response has been overwhelmingly positive.

Hope that answered a few questions but if you have more please reach out to me at my personal email and I'll get back to you as soon as I can.

Helping the best get better,
Mat Koenig
Founder
AutosalestrainingTV
[email protected]

 

[Tchappell]

I work for Edmunds with dealers in the south - When I survey customers who submitted a lead through Edmunds.com, I find that most of them purchase vehicles! Edmunds.com can absolutely be a PURCHASE DECISION site.

 

[Dennis Galbraith]

Mat, your explanation is a great example of what you were always capable of. You make your old boss proud. 
The Readers Digest version would be to simply say "game theory." Dealers act in their own individual best interest and are incapable of forming any meaningful collective bargaining team. The result is that all dealers are forced to make these decisions in their own best interest or financially underperform relative to their true potential. This is why most of the Ivy League talent coming into the industry to capitalize on its inefficiencies -- generally by minimizing them -- are coming in on the vendor side, not the retailer side. Advantage is generally found in the portion of the production or distribution chain with the fewest competitors.
Joe's points are spot on. The marginal cost per vehicle is greater than the stated cost per vehicle for these services. One must account for cannibalization and waste in any algorithm comparing the value of various traffic-now advertising campaigns. 
The right decision is not the same for all dealers, but the right way to do the math necessary to make that decision generally is the same. No matter how hard I try, most dealers refuse to do the math or align themselves with a trusted person who can do it for them. This is why over $1Billion per year in dealer dollars are wasted on bad advertising decisions or poor advertising execution. That is where thousands of individual, self-serving dealers can make a difference for themselves and the industry, by properly crunching the numbers and acting accordingly.

 

[Ralph Ebersole]

Ok.  It's time to take off the gloves and speak the absolute truth about these organizations:

Zag and True Car:  Remember, they were started by former CarsDirect folks--Scott Painter and Mark Miller.  When they were at CarsDirect, the company had a well deserved reputation for advertising phantom cars, and when they received and order, literally  beating up dealers to sell them below any reasonable price.  They purchased a bunch of vehicle, put them in storage and advertised the below market value prices to drive down the price and put the dealers on the defensive.  After they left, more level heads took over at CarDirect, and they became very dealer friendly.

Edmunds:  No matter if the send quality leads or not, this site is anti-dealer.  Go read their advise for yourself:  http://www.edmunds.com/car-buying/confessions-of-a-car-salesman.html; http://www.edmunds.com/car-care/confessions-from-the-dealership-service-department.html; http://www.edmunds.com/car-buying/confessions-of-an-auto-finance-manager.html.

These people purposely frame the dealer as the enemy.  It should not matter how "great" their leads are, in my opinion, dealers are feeding the souce who bits their hands.  

Both of these companies are "Pro-consumer" but they are really anti-dealer.  Both have in their contracts the right to rifle a dealers DMS for their own use.  Both are trying to fool dealers.  When I spoke with an Edmunds Sales Director, he said "we have a partnership (AT.com) that touches 80% of the dealers and gets us 30% of the revenue.  We are now going to touch 30% of the dealers and get 80% more revenue.  

Look dealers, do what you will.  I just wonder if dealing with these folks is like buying asbestos.  It will protect you from fire.  (But the cancer that comes later does not make it worthwhile. 

 

[Jeff Kershner]

Hummmm.

 

[David Kain]

Jeff this would be entertaining if it wasn't such a serious matter.  I appreciate the bright lights you are giving the subject.  Using a "PRE-SELLER" like Zag and Edmunds is somewhat like hiring someone to stand on the street in front of your dealership and greet your customers before they walk in your showroom with a message that they can get you a better deal than the guy who owns the cars and services them after the sale.  It seems kind of strange that this model is growing in popularity with dealers especially when they own the inventory and there are other methods to sell efficiently at better profit levels.  Some dealers are managing Zag and Edmunds with extreme skill and doing excellent with their sales and profit results so like all services...great dealerships can generally mold them into what is ultimately good for your dealership.  The Permission based DATA LEAK is the biggest concern because it gives complete strangers intimate access to the most important files in the dealership.  If a dealer feels they will use a dealership's most intimate data to the advantage of a dealer is risky.  It's not in their "nature" to do what is best for dealers.  Who owns the inventory?  The dealer does...which makes them the BOSS.  Dealers are smart people and have shown an uncanny ability to not only survive but to thrive in the most trying of times.  Just drive from town to town and see who serves on Bank Boards, who leads the United Way Campaigns and Chambers of Commerce and Hospital Boards.  Dealers!Most dealers are great, smart and capable business people. My family's dealership just celebrated their 50th anniversary as a Ford Dealer and this didn't happen by dumb luck. (well...maybe when I was operating the store). Manufacturers and Dealer Associations are paying close attention to both of these models as are State Attorney Generals and Motor Vehicle Boards so there are balancing mechanisms that will impact this regardless of the ambitions of the business owners at Zag and Edmunds.  They are simply pushing the envelope to their own advantage as many others have tried to do in the past.  The sky is not falling and Edmunds and Zag may make a difference in how consumers consider dealers and purchase some cars but it's a big market and there are a lot of shifts that will take place in the next 5 to 10 years that may make this just a blip on the radar.  I wasn't Googling 10 years ago and wasn't Facebooking 5 years ago and wasn't 4 Squaring a year ago.  I have a nice set of golf clubs I received from a company called CarOrder.com in 2000 who offered them in exchange for talking to them about selling their store for megabucks and spending their days playing golf.  Their online direct sales model was not quite what consumers were looking for.  When all is said and done Jeff's advice is critical for the benefit of all dealers.  Read every line of every agreement and make sure any service you use is one that fits your business needs.  If Zag and Edmunds fit your business needs then you should use them.  If their business models are bad and they hurt the very dealers they need to earn revenue to survive, then I feel like they will either fail or adjust their models to keep the "host" alive.  It's not smart for a parasite to kill the animal they are feeding from.  However, there are tales of misplaced trust that we should remind ourselves of from time to time...like the Scorpion and the Frog.  The famous line of the scorpion trying to get a ride across the river from the wary frog who countered with..."If I try to kill you, then I would die too, for you see I cannot swim" and in the end said as they reached their inevitable end "I could not help myself.  It is my nature".   Great work Jeff.  Keep the good guys aware and shine the spotlight on things that can potentially harm our collective business.  Let's hope in the end all parties can benefit and keep each other thriving.David

 

[TuneyFish]

"This is why most of the Ivy League talent coming into the industry to capitalize on its inefficiencies -- generally by minimizing them -- are coming in on the vendor side, not the retailer side."

This is exactly what's happening today, sad isn't it?

Well they're headed down the right path, just let em go. They want the consumer to view the dealer as the enemy, or they'd have no service to provide.

Keep your head buried in their useless tools, and demos and meetings and conferences and you'll just prolong it. Start listening and engaging and reaching out and blogging and the customers will show up because you made an effort.

The most important thing you can do for your business, is give people the indication your actually there in any possible way other than advertising.

I love that a big company can get put in there place with only a blog post, as Jeff has done right here.

It's coming, the blogs and the blog-nots, only this time having too much money might insinuate you were part of the problem and not the solution.

 

[Guest]

Ralph- were the links you posted at Edmunds live when yu made the post yesterday?  Because they're not live now.  Looking at the URLs, I do remember this series of articles, though.  Just curious if Edmunds has removed the pages since yesterday (and if I remember correctly, those articles were written years ago).  Interesting that they suddenly disappeared.