CAMBRIDGE, Mass. -

When you want to buy a song or album, you might first think “iTunes.”

When a car shopper begins his or her purchase journey, Langley Steinert and crew want that consumer to think “CarGurus.”

The company that Steinert founded in 2006 has 23 million unique monthly users coming to its website each month and over 22,000 subscribing dealers.

While those numbers may be staggering, the CarGurus team readily acknowledges that awareness of the company among the general public isn’t quite where they would like it to be.

To that end, the online auto shopping platform launched its first mass-media awareness ad campaign in April, which included two TV advertisements in select markets that would also air nationwide on YouTube.

“We want to get people to think first and foremost about us as their shopping destination when buying a car comes to mind. And I think that’s something we have work to do on,” said Steinert, who is also chief executive officer at CarGurus

“We have a huge audience already,” he said during the June interview with Auto Remarketing at CarGurus headquarters, while adding that the goal is to push awareness.

“We’d like to be as synonymous for car-buying as buying a book on Amazon or buying music on iTunes,” Steinert said.

With these efforts underway, CarGurus also aims to reach a new audience: people who are in the early stages of the car-shopping process, says Amy Mueller, the company’s vice president of communications. 

“People that come to our site are typically very end-of-funnel, bottom-of-funnel shoppers that are about to buy, and we’re hoping we can engage people a little higher up in the funnel, as well,” Mueller said.

CarGurus is looking to find new audiences overseas, as well.  At the time of the interview, the company was already operating in Canada and England and had just officially launched in Germany.

“We think this concept that we’ve championed here in the US is certainly applicable to those markets,” Steinert said. “The early returns from Canada and England are actually quite favorable.”

Transparency in car shopping process

Speaking of globetrotting, Steinert — before he launched CarGurus more than a decade ago — co-founded TripAdvisor and was chairman of the travel website.

The model that he and his team aspired to at CarGurus is similar to his mission at TripAdvisor: “unbiased transparency.”

“At TripAdvisor, we were trying to bring transparency to the hotel and vacation shopping process,” Steinert said.

“Because historically, before TripAdvisor came along … (consumers would) go look at the glossy pictures of a hotel online and it looked great. And they didn’t realize that perhaps people hadn’t had such a good experience,” he said. “And so I think we did a pretty good job of bringing transparency to hotel quality, flight search. So when I started this company, it was the same concept of, ‘how do we bring transparency to the auto shopping process?’”

There are two components to that, the first of which is price of the vehicle. Each vehicle listed on the CarGurus site is designated a great deal, good deal, fair deal or overpriced

The second element involves the dealer’s reputation, which can often be unclear. So much like TripAdvisor, CarGurus utilizes user reviews, generating close to 900 dealer reviews each day.

“And using that to help people understand not just is the price valid or is it a good deal, but is this a reputable dealer?” Steinert said.

And both elements come into play when it comes how the vehicles are listed on the site. For instance, even if a car’s price is a good deal, if customers are giving poor reviews of the store, the listing will be placed farther down in search results

While the listing platform caused some concern among dealers that it would be a “race to the bottom” in pricing and put pressure on margins, a number of factors helped calm those fears, Steinert said.

One of which is the explanation CarGurus provided them about its price evaluation model.

The model is based on a normally distributive curve, where there are a few “deviations from the mean,” but 70 percent of the price points are contained within the middle ground curve. The “tails” represent the points within lowest and highest 15 percentiles, respectively – the two areas a dealer isn’t recommend to price their cars, he said.

“You don’t to be the highest-priced car, and actually, ironically, you don’t want to be the lowest-priced car … what you want to (is) be right in the middle,” Steinert said. “Customers, most of the time if you talk to them, they don’t really care if they got a deal. What they care about is, ‘was the car fairly priced?’”

The thinking is, dealers can price their cars based on what’s fair for the market, and then compete on things like service and the uniqueness of that specific unit (i.e. it’s the only white Ford Focus with tan interior for 80 miles).

And Steinert contends that dealers should use pricing tools and not just wing it. Use analytics and then price the vehicle within one standard deviation of the mean, he says.

What also helped CarGurus overcome any pushback from dealers was the scale of the company and the free pricing tool it provides.

‘We’re a technology company’

So, how, you might wonder, does CarGurus distinguish itself in a crowded space? Steinert said the company is not providing leads, but rather “delivering people that are really qualified to buy a car.”

“Because they’ve been on a site which provides third-party validation around price, the condition of the car and the dealer’s reputation, so when they show up on that lot for that car, they want to buy that car,” he said. “They’re probably not looking at eight cars; they’re looking at that one car, because it’s the best deal in their area.”

He later adds: “From a dealer’s perspective, they don’t want leads. They want buyers. And I think because we have this third-party validation around price and reputation, we would argue — and I think the data proves it out — that we have really high close rates. So we’re sending people to buy cars to the dealers.”

Another difference, Steinert said, is that CarGurus not consider itself a media company.

“We’re a technology company,” he said.

And in his visits with dealers, “I’m always shocked at how overwhelmed they are by technology, how frustrated they are that none of this stuff talks to each other,” Steinert said.

“And I think there’s a great opportunity for someone to come into this space and unify it, simplify it, make it all talk to each other, make it more cloud-based,” in a manner to what Google has done,  he said.

When Google was venturing into enterprise software, he thought was that Google wouldn’t be able to compete with Microsoft when it came to things like spreadsheets, word processing and the like.

“And then, look what happened,” Steinert said. “Because Google was a technology company and they’re really good at providing really easy-to-use cloud-based tools.

“So, you’ll see in the coming months more announcements from us about how other tools we can provide to dealers to make their lives a little bit easier.”

While not providing any specifics at this point, CarGurus is aiming to go beyond its listing product and display ad product and move into other parts of the car dealer business.

“Hopefully every aspect of how a dealer operates their store is something we’d like to be helpful in,” he said.

 

Editor's Note: During that same visit to CarGurus headquarters, Auto Remarketing recorded a podcast with chief revenue office Sam Zales, which can be found below.