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A Major Step Forward for TrueCar, Inc.

By Daniel Miller – Mar 31, 2016 at 12:12PM

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It's easy to walk away from TrueCar's Dealer Pledge presentation thinking things could turn around for the company.

Being a middleman is a tough business. That's especially true when you're a company like TrueCar (NASDAQ: TRUE), the middleman between consumers, who have long distrusted car dealerships, and a network of dealerships that help fuel your business.

After arguably TrueCar's bumpiest ride in company history over the past 12 months, newly appointed CEO Chip Perry has laid out the beginning stages of a rebuilding plan. It's pretty clear what the first and foremost goal is: Get on the same page as its dealership network.

What's the plan?
While fixing the relationship between TrueCar and its network of dealerships is the first priority, it involves a few different factors. TrueCar recently rolled out a "Pledge to Dealers" detailing its plans. One of the improvements the company is making is to change the way its website displays dealerships.

When consumers registered on TrueCar's website, at some point, there would be a list of prices for a specified vehicle from unnamed dealerships. That process commoditized dealerships and left them faceless, competing on price alone -- not a healthy way to do business considering the dealerships are TrueCar's customers.

Going forward, the website will look more appealing and will have a much improved dealer branding page, enabling the dealerships to compete on factors other than simply price.

Image source: TrueCar's Dealer Pledge presentation.

Another way TrueCar is improving its relationship with dealerships is by making its sales matching process more transparent. Sure, in a perfect world, a consumer would log on to TrueCar's website at home, dig into some research and pricing data, then head to the dealership ready to make a purchase and save a little cash. But, as we all know, this is far from a perfect world.

So, what happens if a consumer has already decided to buy a car, heads to the dealership, and at the last second, uses TrueCar for some pricing information? Does that count as a sales lead that the dealership should pay TrueCar for? No, that wouldn't count as a sales lead. That's one of many murky scenarios that complicate the business between TrueCar and dealerships.

One way TrueCar is improving that scenario is by making its credit for showroomers -- customers who logged on to TrueCar for the first time on the dealership lot -- more dealership-friendly by introducing an online credit submission portal to speed up the process.

Furthermore, for additional transparency, TrueCar is redesigning and better communicating its data policies. It will delete any nonpublic personal customer information supplied by a participating dealer if it has not been matched to a purchase after 90 days. Essentially, someone who registered with TrueCar won't be considered a sales lead requiring payment if their next purchase is potentially years down the road. TrueCar also plans to commission a third-party entity to validate its adherence to the data policies, which should help dealerships sleep more soundly at night.

Those are two of the major changes among many that TrueCar hopes will help mend the relationship between it and its network of dealerships. But what about the other end of this operation -- the consumer?

Consumer benefit
One of the largest frustrations facing consumers using TrueCar was getting to the dealership and finding out that the exact vehicle for which the price guarantee was printed didn't exist as a 100% match. That causes friction at the dealerships and makes it difficult for TrueCar and dealerships to provide a positive consumer experience.

Now, in coordination with dealerships, TrueCar's website will show VIN-based offers. That will help make a much more seamless transition from the website to the dealership for the consumer.

Furthermore, TrueCar is strengthening its pricing curve with data that's more focused on local markets, which will help consumers have more accurate insight into new-vehicle pricing in their area. That should help make for a more accurate and enjoyable experience.

Looking through TrueCar's Dealer Pledge presentation, it's easy to walk away thinking that better days are ahead for the young company, despite all of the bumps in the road over the past year. One thing for investors to watch is simply how TrueCar balances the value it offers both sides as a middleman between consumers and dealerships. This is a huge step toward providing more value to dealerships, and we can expect more steps like that later this year.

Daniel Miller owns shares of TrueCar. The Motley Fool recommends TrueCar. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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