Demystifying KBB Pulling back the curtain on KBB values & the buyer / seller relationship

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Demystifying KBB Pulling back the curtain on KBB values & the buyer / seller relationship
Demystifying KBB
Pulling back the
curtain on KBB values &
the buyer / seller relationship

Rob Lange
Interactive Dealer Summit

rlange@kbb.com
Demystifying KBB Pulling back the curtain on KBB values & the buyer / seller relationship
Introduction

           • Joined car business in 1980;
               Internet sales in 1996

           • Candid conversation

           • What is important to you?
Demystifying KBB Pulling back the curtain on KBB values & the buyer / seller relationship
Agenda

1. KBB market position
2. A look at the KBB.com and
   online consumer
3. KBB Valuation methodology
4. 3 common ways consumers
   use KBB Values to validate
   trade in, new and used car
   transactions
Demystifying KBB Pulling back the curtain on KBB values & the buyer / seller relationship
Top 10 searched auto shopping keywords

Consumer awareness = “in market” shoppers

                                          1. cars
                                          2. auto
                                          3. blue book
                                          4. autotrader.com
                                          5. kelley blue book
                                          6. used cars
                                          7. kelley blue
                                          8. ebay
                                          9. toyota
                                          10. sales

Source: Google Insights Jan – June 2012
Demystifying KBB Pulling back the curtain on KBB values & the buyer / seller relationship
KBB.com- the “hub” of the shopping
process
                                                     % of competitor visitors                                % of KBB.com visitors
                                                        visiting KBB.com                                      visiting competitor

                                                                                  66%                               55% edmunds.com
                                                                                   65%                 4%                    autobytel
                                                                                   64%                 9%                    Craigslist
                                                                                   64%                      25%              AutoTrader.com
                                                                                   63%                4%                     AOL Autos
                                                                                    60%                     25%              Cars.com
                                                                                    59%               6%                     TRUECar
                                                                                    59%                10%                   eBay Motors
                                                                                     57%                       39%           Consumer Reports
                                                                                     55%               10%                   Yahoo! Autos

    2013 J.D. Power and Associates New Car Auto Shopper Study Base: New car AIUs
    Q11 and Q12: Please indicate which of the following (“member” in Q11) third-party websites you visited on any device before
5   purchasing your vehicle.
Demystifying KBB Pulling back the curtain on KBB values & the buyer / seller relationship
Most used third-party site: KBB.com
Third-party site visitation by AIUs

                                                                                     57%
            Used Car Buyers

                                 Autotrader.com                               39%
                                       craigslist                       28%
                                       edmunds                         25%
                                      Cars.com                       21%

                                                                               44%
            New Car Buyers

                                      edmunds                               36%
                              Consumer Reports                            30%
                                     Cars.com                       18%
                                                                                      MSN Autos: 4%

                                Autotrader.com                      17%               TRUECar: 4%
                                                                                      AOL Autos: 2%

Source: J.D. Power and Associates 2012 Used Vehicle Market Report
        J.D. Power and Associates 2012 New Autoshopper.com Study
Demystifying KBB Pulling back the curtain on KBB values & the buyer / seller relationship
EXTENSIVE CONSUMER ADVERTISING
Driving record traffic growth

                                 7
Demystifying KBB Pulling back the curtain on KBB values & the buyer / seller relationship
On KBB.com, two-thirds of visits result in a
    pricing report

               Site Visits                                        Pricing Report Share by Value Type
                                                                                                6.6%
                                                                            2.8%
          No
        Pricing
        Report                                                                  13.4%              30.9%
         33%                Pricing
                            Report
                                                                               18.5%
                             67%
                                                                                               27.9%

                                                             Private Party Value (Owners)        Trade-In Value (Owners)
                                                             Private Party Value (UC Buyers)     Suggested Retail Price (UC Buyers)
                                                             CPO Value (UC Buyers)               New Car Price (NC Buyers)

Source: Web Analytics - Visitation to key value types July 2012
Demystifying KBB Pulling back the curtain on KBB values & the buyer / seller relationship
A look at KBB.com and
the online consumer

Consumer use of
pricing guidance
Demystifying KBB Pulling back the curtain on KBB values & the buyer / seller relationship
Consumers are using what they can find
Current usage of valuations
            New vehicle buyers                    Used vehicle buyers
               MSRP                           Asking Price
  Estimated Monthly…
                                               Fair Market
      Trade-in Value                              Price
       Dealer Invoice                         Est. Monthly
  Retail Asking Price                           Payment
Average Asking Price                              Trade-in
  Out-the-Door Price
                                           Average Asking
    Fair Market Price                           Price
        Resale Value                         Private Party
   Guaranteed Price                           Sale Value
 5 Year Cost-to-Own                          Resale Value
   Private Party Sale…
                                                             0%   50%   100%
                    0%   20%   40%   60%   80%
But, they don’t understand it
      New vehicle buyers: not              Used vehicle buyers: not
      understood/understood                understood/understood

 Guaranteed Price          43%
   -57%                           Average Asking Price        49%
                                        -51%
Average Asking Price       43%
   -57%
                                     Fair Market Value        52%
  Retail Asking Price      44%          -49%
   -56%
Private Party Sale Value                 Private Party
                           52%
     -48%                                  Sale Value          59%
                                         -41%
  5 Year Cost to Own        59%
      -41%
                                         Resale Value            67%
      Resale Value          60%
      -40%                                 -33%
And when they do, priorities change
     New Vehicle Buyers: Hierarchy of                                               Used Vehicle Buyers: Hierarchy of
     Importance with Education                                                      Importance with Education

            Out-the-Door Price                                                       Fair Market Price

             Fair Market Value

            Estimated Monthly                                                   Est. Monthly Payment
                 Payment

              Guaranteed Price                                                           Asking Price

             Retail Asking Price
                                                                                 Average Asking Price
                  Dealer Invoice

            5-Year Cost to Own                                                          Retail Asking

                            MSRP
                                                                                             Trade-in
                 Trade-In Value

      Private Party Sale Value                                                           Private Party

                   Resale Value
                                                                                               Resale
                                   0%           20%       40%         60%
                                                                                                         0%   10%     20%   30%   40%   50%

 Source: KBB Valuations Survey; May-June 2012

12
                                ©2013 Kelley Blue Book Co., Inc. - Confidential and Proprietary - Do Not Distribute
Resulting in a disconnect when it comes to
         satisfaction with the buying process……….
                76%

                                   63%
                                                                                                                          Offline
                                                     62%

                                                                       57%           56%
                                                                                                      52%

                                                                                                                      47%
                                                                                                                                    43%

                                                                                                                                                                 37%

             Researching       Searching       Finding info on Finding the best Finding the right Negotiating a    Filling out   Applying for                 Receiving a
           vehicle features    dealership        incentives,      deal/price       dealership     purchase price   paperwork      financing                  trade-in offer
              & options        inventory          specials &
                                                   rebates

         2011 AutoTrader.com / R.L. Polk Automotive Influence Study
- 13 -   CONFIDENTIAL - Copyright 2012 Kelley Blue Book. All Rights Reserved.                                                          In partnership with
KBB’s evolving new/ used car strategy…

 Create consumers who are ready to take the next step
 through realistic pricing education
 Help consumers evaluate, connect, and transact with
 confidence.

 Provide consumers, dealers, & OEMs a better
 New /Used Car product
 • More advertising opportunities & better influencing
   tools
 • Consumers that are ready to take the next step
   (qualified & educated consumers)
KBB valuation
methodology
This valuation methodology allows us to:

        Remain neutral to the transaction

        Be market relevant; timely and local

        Provide thoughtful transparency

        Remove friction from the process

16
Many customers utilizing values….
     Dealers   OEMs/Portals      Integrators

    Finance     Insurance     Government/Fleet
KBB Wholesale Focused Values

                Auction    Trade-
                 Value    In Value

                     Lending
                      Value

18
KBB Retail Focused Values

                              UC Fair
                Suggested
                             Purchase
                  Retail
                               Price

                       NC Fair
                    Purchase Price

19
Comprehensive view of the market
                                                                                          Retail New Car Transactions
                                                                                          • Approx. 30% market
                                                                                            coverage
                                                                                          •Retail
                                                                                            Approx.   300,000
                                                                                                   Used     Car Transactions
                                                                                            transactions/mo
                                         Retail New                                       • Approx. 10% market
                                            Car                                             coverage
                    TIM Cash                                   Retail Used                •Wholesale
                                                                                            Approx. 350,000Auction Transactions
                      Offers                                       Car                      transactions/mo.
                                                                                          • Approx. 85% market
                                                                                            coverage
                                                                                          •Vehicle
                                                                                            Approx. 400,000
                                                                                                      Listings
                                                                                            transactions/mo.
       Vehicle                                                                 Vehicle    • Full ATC New & Used Listings
      Appraisals                                                               Listings     from vAuto
                                   250+ Data Sources                                      •Macro
                                                                                            Daily feed  of approx. Factors
                                                                                                     Economic      4M      / C&I
                                                                                            active listings
                                       50+ Terabytes                                      • Fuel prices, interest rates
                                2.9 Trillion Data Points                                  • Incentives, rebates, offers
      Vehicle                                                                 Wholesale   Base Vehicle Data
    Registrations                                                              Auction    • Year, make model, trim
                                                                                          • Major equipment, options,
                                                                                            specificationsBehavior
                                                                                          Consumer
                                                        Macro                             • Website activity, leads,
                    Consumer
                                                      Economic                              advertising
                                                                                          Vehicle    Registrations
                    Behavior
                                        Base Vehicle Factors / C&I                        • Includes transaction price
                                           Data
                                                                                          Vehicle Appraisals
                                                                                          • Daily feed from vAuto
                                                                                            dealers
                                                                                          TIM   Cash Offers
                                                                                          • Approx. 7,000 offers weekly
- 20 - CONFIDENTIAL - Copyright 2012 Kelley Blue Book. All Rights Reserved.                 from BBT              In partnership with
KBB field analyst – data collection
                         Northwest
                                                                 Central                                   Northeast
                                   id
                             WA
                                                                                                                           ME
                                                 MT        ND
                                                                      MN
                        OR                                                                                       VT
                                                                                                                   NH
                                        ID                                       WI                                MA
                                                           SD
                                                                                                            NY    CN
                                                  WY                                        MI                             RI

                                                                       IA                                  PA    NJ
                              NV                           NE
                                                                                                 OH                   DE
                                                                                       IN
                                         UT                                       IL
                                                                                                      WV              MD
                                                      CO
                                                                                                           VA         DC
                       CA                                       KS         MO
                                                                                            KY
                                                                                                           NC
                                                                                       TN
                                        AZ                       OK
                                                  NM                       AR                          SC

                                                                                  MS   AL        GA

              Western                                                       LA                                  Southeast
                                                            TX
                                                                                                      FL

Auction Field Analyst Location & Assigned Zone
Detailed Vehicle Data Capture
Field Analysts
• Detailed Vehicle
  Data Capture
       Condition
       Equipment
       Mileage
       Color

• Sophisticated
  Hand-Held
  Computer
• Nationwide
  Presence
Comprehensive view of the market
                                                                                          Retail New Car Transactions
                                                                                          • Approx. 30% market
                                                                                            coverage
                                                                                          •Retail
                                                                                            Approx.   300,000
                                                                                                   Used     Car Transactions
                                                                                            transactions/mo
                                         Retail New                                       • Approx. 10% market
                                            Car                                             coverage
                    TIM Cash                                   Retail Used                •Wholesale
                                                                                            Approx. 350,000Auction Transactions
                      Offers                                       Car                      transactions/mo.
                                                                                          • Approx. 60% market
                                                                                            coverage
                                                                                          •Vehicle
                                                                                            Approx. 400,000
                                                                                                      Listings
                                                                                            transactions/mo.
       Vehicle                                                                 Vehicle    • Full ATC New & Used Listings
      Appraisals                                                               Listings     from vAuto
                                   250+ Data Sources                                      •Macro
                                                                                            Daily feed  of approx. Factors
                                                                                                     Economic      4M      / C&I
                                                                                            active listings
                                       50+ Terabytes                                      • Fuel prices, interest rates
                                2.9 Trillion Data Points                                  • Incentives, rebates, offers
      Vehicle                                                                 Wholesale   Base Vehicle Data
    Registrations                                                              Auction    • Year, make model, trim
                                                                                          • Major equipment, options,
                                                                                            specificationsBehavior
                                                                                          Consumer
                                                        Macro                             • Website activity, leads,
                    Consumer
                                                      Economic                              advertising
                                                                                          Vehicle    Registrations
                    Behavior
                                        Base Vehicle Factors / C&I                        • Includes transaction price
                                           Data
                                                                                          Vehicle Appraisals
                                                                                          • Daily feed from vAuto
                                                                                            dealers
                                                                                          TIM   Cash Offers
                                                                                          • Approx. 7,000 offers weekly
- 23 - CONFIDENTIAL - Copyright 2012 Kelley Blue Book. All Rights Reserved.                 from BBT              In partnership with
Comprehensive Valuation Portfolio
  Kia Optima SX – New & Used Values

                                                                                  Certified New Car
                                                                                                     Residual  5-Year
                 Trade-In       Auction  Private   Lending Used Car Fair Suggeste   Pre-      Fair
 Vehicle Model                                                                                      Value – 36 Cost to
                  Value         Value* Party Value Value* Purchase Price d Retail Owned Purchase
                                                                                                      mos.      Own
                                                                                   Price     Price
2011 Kia Optima
                $16,650          $17,750        $18,405         $18,950   $20,505   $21,205   $21,655
      SX
2014 Kia Optima
                                                                                                        $24,166   $13,546   $38,752
      SX
 24              * Industry values not disclosed to consumers
Forecast model data preparation – normalize
transactions and trim outliers

Each transaction normalized for data analysis.
THE ART AND SCIENCE OF VALUATIONS

                 PREDICTIVE ANALYTICS TEAM
                 (QUALITATIVE)
                  • Review Forecasts
                  • Set Values
                  • Team of 9 Automotive
                    Industry Analysts           KBB
                                              Valuation
                                              Portfolio
                 PREDICTIVE ANALYTICS TEAM
                 (QUANTITATIVE)
                  • Develop Models
                  • Produce Forecasts
                  • Team of 5 Statisticians

                                                          27
Reflect the market, not make the market
3 most common ways
customers use KBB
Values?
NOW DISPLAYS CONDITION BASED VALUE RANGE RATHER
            THAN SINGLE POINT VALUE

                                            32 32
A simple tip to diffuse trade value
pressure

Question: How often do you get tangled up in
conversation about trade value prior to settling on
specific vehicle to purchase?
It’s All in the Presentation

• “We recently traded ___ cars similar to yours
  and were able to allow them _______.”

• “We had our used-car manager look at your
  car, made a couple of calls and are able to
  allow you a trade allowance of __________.

These examples instigate pushback!!!!
CONFIDENTIAL - Copyright 2012 Kelley Blue Book. All Rights Reserved.   In partnership with
Stop winning the battle, but losing the war.
The point is to set appointments to sell a
car, not justify why their car is worth less
than they hoped.

                                                           Presentation Sets Expectations

 CONFIDENTIAL - Copyright 2012 Kelley Blue Book. All Rights Reserved.                       In partnership with
Diffuse trade value pressure…
I understand you are considering trading in your vehicle?

“To allow the greatest trade allowances we handle trades a
bit differently than most places. I think you’ll like it … Would
it be OK if I shared it with you?” (Desire to win)

“To fully grasp the market value of any vehicle at any given time
we rely on 4-5 different sources ...one of them being you
since you are most familiar.” (Level the playing field)

“Since I find that most of my internet customers’ focus is to
save time and make a comfortable educated
decision, we help do the leg work so you don’t have to.”
(Save time/ reduce stress)
Diffuse trade value pressure…
The values we gather come from:

1.   You (engage)
2.   Several independent buyers to see who has the most interest
3.   Our own valuation expert
4.   Trusted third party consumer resources like (use their source),
     Kelley Blue Book, TIM, Edmunds (level the playing field)

     (ask them to use evaluate the vehicle as if they were going to buy it)

– Easiest way is to start by seeing your car and you’ll be able to drive the new
  one during the evaluation

– Based on the total feedback we’ll find the most that anyone will be willing to
  pay for a particular vehicle at any given time

– Customer’s appreciate receiving top dollar /ease of getting it.
  (solve problem/desire to win)
SET REALISTIC PRICING EXPECTATIONS AND DIFFUSE DOWNWARD
PRESSURE……..

  The KBB.com Price Advisor
New Car Experience:                        Used Car Experience:
Launched:                                  Launched:
Oct 15 2013                                Feb 12, 2014

                                                                  38
We quant tested 5 concepts…
3 new concepts

                                                  Trim Compare
                     Simple Bar
   Gauge

      A                     B                            C

Competitor                        Baseline
                                  Reality Check
           Brand X

                D                           E
Gauge outperformed
                                                                     other designs/competitor

                 Overall Score                                                                       Price Pressure
     Gauge                                                                          25
                                                                                                       $20,936
     Simple Bar                                                                14                             $20,792

     Trim Compare                                     -7                                                      $20,867

     Competitor                              -32                                                        $20,301
     Composite Quantitative Score                                                        Avg. Price Expected to Pay

40
        CONFIDENTIAL - Copyright 2012 Kelley Blue Book. All Rights Reserved.                                          In partnership with
Gauge outperformed other
designs/competitor             MSRP:
                              $22,670

                             Avg/FPP:
                              $21,106

                           Factory Inv:
                              $20,692
New Car Pricing Competitive Benchmark

                  Average Discount from MSRP

42
BUT, IT IS ABOUT MORE THAN PRICE

                Seek Dealer Information                                                  Ready To Connect

                             77%                                                          40%
               Would Seek                                                           Ready To Connect With A
          Dealership Information                                                    Dealer From The Market
         From The Market Report                                                             Report*
                                                                                                             Get a price quote from a dealership
                                                                                                                     Print & take to a dealership
                                                                                                     Find a local dealer to contact using this site
                                                                                               Write it down and take it with me to a dealership
Q69. How likely would you be to search for dealership information from this tool?
Q63. What would you do next with the pricing information?
Source: 2012 KBB New Car Concept Test, Keynote

- 43 -   CONFIDENTIAL - Copyright 2012 Kelley Blue Book. All Rights Reserved.                               In partnership with
Market Report flows to Dealer Pages

- 44 -   CONFIDENTIAL - Copyright 2012 Kelley Blue Book. All Rights Reserved.   In partnership with
Dealer Pages
 Centered in Price Context
 • Allows consumers to learn about the
   dealer before connecting

 Matching Shopper Needs
 • Integrating listings outside of
   classifieds
 • Reviews, Ratings, Specials,
   Inventory, Services Amenities, etc...

 KBB positioning
 • Market Report Continuity
 • Leveraging KBB’s brand
 • Values, content, reviews
                               Specials    Inventory   Rating & Review   Social Feed   About Us

                                                                                                  45

45
EXPLAINING OUR ENHANCED
Used Car experience

                          46
REVAMPED BUYERS EXPERIENCE

                             47 47
KBB Cost to Market   (Gap to Used Car FPP vs. Retail Listing)

48
Questions?
Rob Lange
rlange@kbb.com
Interactive Dealer Summit
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