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From left Berkowitz Dominique Rowe and Vetter
<p> <strong>From left, Berkowitz, Dominique, Rowe and Vetter.</strong></p>

Pricing-Transparency Discussion Gets Lively

Conference panelists mix it up when discussing a hot industry topic.&nbsp;

LAS VEGAS – Executives of automotive marketplace websites get competitive and a bit contentious during a panel discussion centering on pricing transparency.

That topic gets ample coverage, but comments drift to other areas, including whose website is better. Some darts are tossed at competitors, mainly TrueCar.com, a company with a controversial past.

“I thought this was supposed to be a discussion about pricing transparency, not about each other’s business models,” Larry Dominique, TrueCar’s executive vice president, says at one point during the session “Vehicle Price Transparency: What’s Driving It and What Is Its Impact?” at J.D. Power’s Automotive Marketing Roundtable here.

Moderator Joel Ewanick describes his role as that of “a referee.” The audience seems to like the lively tone of the talk. “I wish it went on longer,” an attendee says after the hour-long session.

Three of the four represented websites provide competitive pricing to car consumers. All four sell online sales leads to dealers. In varying degrees, their pricing information focuses on best market prices, with data coming from assorted sources, including dealership computer systems.  

“We have one data point of what customers are paying,” says Seth Berowitz, Edmunds.com’s president and chief operating officer. He adds that Edmunds markedly differs from TrueCar.

“We don’t want customers having unreasonable expectations and dealers having to explain things,” he says.

Kelley Blue Book doesn’t post specific market vehicle prices, says its president, Jared Rowe. “We offer a range. We set realistic expectations.”

In providing pricing information, TrueCar ensures one consumer isn’t paying way more than another for the same product, Dominque says. “The distribution between highs and lows has narrowed. It’s about fair price, not lowest price.”

TrueCar changed its business model last year after losing thousands of dealer clients who complained the company spurred massive discounting.

CEO Scott Painter acknowledges flawed past policies caused “a race to the bottom” among hyper-competitive dealers offering ridiculously low prices as consumers pitted retailer against retailer.

TrueCar since has reduced the number of sources from which it gets numbers to crunch. It no longer reveals which dealer is offering the lowest price. It requires its website users to register and provide personal information such as name and email address.

TrueCar went from 5,700 lead-buying dealer clients to 3,107 during the height of the controversy. The company has reversed that trend and now works with nearly 6,000 dealers, Dominique says.

Even though it is supposed to be best-offer pricing, price posters on the conference panel acknowledge some bargain-hunters use the information as a starting point in dealership negotiations.

A survey indicates seven of the top 10 cited customer needs involve pricing issues of some sort, Berkowitz says. “People are focused on price, so you can’t ignore that.”

Rowe adds: “People are mistaken if they don’t think those online numbers aren’t going to be used offline. But if you set the right price expectation, it allows dealers to sell the experience. It isn’t all about pricing. ”

Although polls indicate the majority of car buyers dislike negotiating, some of them avidly partake in it. “Most just want a fair price,” Dominique says. “We say, ‘Don’t overpay.’ But there is no reason dealers have to price as low as some have.”

Yet fellow panelist Alex Vetter, Cars.com’s senior vice president, bluntly tells Dominique: “Your consumer advertising (message) is quite different than that.”

Cars.com is unlike TrueCar, Edmunds and Kelley in that it provides dealer inventory listings with asking prices, but not what customers are paying for particular vehicles.

When taken to an extreme, pricing transparency claws into dealer profits,

Dealers who lose money or barely break even on a new-vehicle transaction try to compensate for it elsewhere, such as in trade-in value or selling finance and insurance products, Berkowitz says.

But low trade-in offers and high-pressure aftermarket sales presentations can turn off customers.

A car deal involves more than just the price, Vetter says. “It is more important to tell the value proposition. People today know there is not a big pricing fluctuation. Customers are looking for fair treatment from straightforward dealers.”

Cars.com’s site includes dealer ratings. “Dealers who play games and switch deals get bad reviews, even if their prices are low,” Vetter says. 

TrueCar has rules of conduct to discourage showroom misbehavior, Dominique says. “We survey customers. In some cases, we’ve ‘fired’ dealers.”

Dealer margins on new-car sales are low to begin with, Vetter says. “And when you make it all about price, it creates more problems. Do we want to have the investments we’ve put in this industry – things like dealer facilities, car quality, technology – all about price, about a race to the bottom?”

Edmunds plans to expand its pricing transparency. “Next for us is leasing,” Berkowitz says. “That’s completely new. It’s such a bear, no one has tackled it before.”

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