A Business Model Detour


TrueCar.com started out as a data and analytics company, offering insight to consumers as to the actual prices being paid for specific makes and models of cars in their local area. The idea was to aggregate multiple data sources, including actual sales data from dealers themselves to build as much precision as possible into this pricing information. In many respects, TrueCar was duplicating the approach taken by established industry powerhouse Edmunds.com. What TrueCar didn’t duplicate was the business model of Edmunds. Indeed, TrueCar took an entirely different route.

TrueCar moved beyond providing estimates of new car prices to delivering actual prices that dealers would accept. Simply hand your TrueCar number to the dealer, and the car would be yours for that price. It was a fresh approach, and particularly compelling to those consumers not fond of haggling with car dealers.

The idea took off. TrueCar signed up thousands of dealers to accept its pricing. Then, according to published reports, it started marketing itself as offering the lowest prices for new cars. Turns out, its dealers weren’t thrilled with that positioning, in large part because they weren’t offering the lowest prices, and large numbers of them canceled their affiliation with TrueCar.

TrueCar recovered from this, but in an odd way. It now represents itself as offering “fair prices” instead of lowest prices. And from a quick look at its site, you can see that it has morphed into a lead generation service for car dealers. I asked for a price on a car from dealers near my zip code and was presented with three prices from three dealers. That’s a big move away from presenting objective pricing based on aggregated sale price and other data.

So, the TrueCar value proposition has pivoted from providing objective data to providing consumers with a price in advance that certain dealers will honor, thus avoiding the stress and uncertainty of having to negotiate a price. If you look at the TrueCar website now, you’ll be repeatedly assured you are getting a fair, competitive price, but if there’s any data to back up that claim, the company’s no longer talking about it.

TrueCar claims to be responsible for 2.3% of all cars sold annually in the United States, so it seems to have tapped into a real need in the marketplace. At the same time, it’s a rare pivot away from a data-driven business model, to a model that as far as I can see doesn’t require any data at all.

Of course there’s a great lesson here in profiting from adversity, but there’s another lesson here as well: if you dive into the data business without a clear business model, you’ll probably find yourself needing to make an expensive and dangerous u-turn.

 

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