CarGurus: Bringing Brand Credibility to Used Car Shopping

CarGurus is disrupting the auto sales industry with a customer-centric model built on trust and transparency. Learn how they leveraged word of mouth and brand credibility to grow into the number one car shopping platform in the US.

CarGurus is changing the auto sales industry with brand credibility.

Buying a used car can be a smart investment—or one of the worst decisions of your life. It often feels like there’s no way to tell whether you’ll end up with a good car or a lemon. This quandary is so common that it inspired a Nobel Prize-winning economic theory.

In “The Market for Lemons,” economist George Akerlof draws on the used car market to illustrate an asymmetric market—one in which sellers have more information than buyers. In this case, sellers know more about cars in general than the average consumer, and they have access to key information on specific vehicles. They know if a vehicle has any technical problems, if it has been in an accident, and if it was kept in good condition by its previous owner—and they can choose not to disclose these facts to buyers.

Since buyers don’t have access to this information, they have no way to know whether they’re getting a good car or a lemon. The purchase turns into a high-risk gamble in which they’re reluctant to invest. This generates a vicious cycle: sellers have no incentive to offer better service or higher quality because people aren’t willing to pay higher prices. Asides from spawning the notorious ‘used car salesman’ figure, this market sowed deep consumer distrust in the auto sales industry.

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Disrupting the lemons market

Fortunately, the lemons market is less bitter for consumers and sellers nowadays. Starting in the 1980s, services like Carfax and classifieds websites slightly tipped the scales in buyers’ favor, arming them with crucial information on vehicles’ history. But, while consumers had access to more data, dealers continued to have the upper hand. Plus, other than word-of-mouth, there was no way for people to know whether a particular dealership was trustworthy. 

It wasn’t until the rise of the sharing economy in the 2000s that the lemons problem finally got a solution. Websites, social media, and forums enabled consumers to share information on cars and dealers, as well as the general experience of shopping for used vehicles. One of these early websites was CarGurus—a platform created by Tripadvisor co-founder Langley Steinert to bring the reviews and stars system that he’d pioneered in the travel industry into auto sales. 

CarGurus brings brand credibility into the auto sales industry

CarGurus’ brand credibility is centered around trust and transparency. Their platform helps car buyers find good deals on used and new cars by combining vehicle information with historical sales data and dealer ratings. 

The company aimed to disrupt the auto sales industry from the beginning by offering a customer-centered model, setting it apart from competitors focused on serving dealers’ and automakers’ interests. One of the product’s biggest strengths is that it was built on top of a community—and that community continues to play a crucial role in its success.

CarGurus’ users contribute a key part of its value proposition: dealer reviews and ratings. Just as Tripadvisor and Yelp created an accountability system for hotels and restaurants, CarGurus’ dealer reviews pulled dealerships into the trust economy and forced them to step up their game. This reviews and ratings system helps CarGurus solve one of the remaining pieces of the lemons problem: identifying trustworthy businesses.

Though dealerships may not be too happy about online reviews at first, this system benefits all parties involved in the long term. Informed consumers shop with greater confidence. Dealers who go the extra mile to provide great experiences and quality products get rewarded with higher ratings and more business. And CarGurus gets free and unbiased third-party reviews that bolster its brand credibility as a reliable information source.

Data and tech create transparency

Beyond providing dealer reviews, the core of CarGuru’s value proposition is its technology. The platform collects unstructured data from dealers and normalizes it through an algorithm that generates an instant market value (IVM) score. This algorithm integrates over 52 million vehicle data points with analytics to cleanse data and control for irregularities. Once the IVM has been settled, it’s combined with dealer reviews to generate a simple deal rating that helps users decide whether a specific car is a good choice.

For each vehicle, users have access to telling information that would be difficult to obtain in person or through other websites, such as accident history, how long the car has been sitting unsold, and any price changes. With this information, CarGurus addresses one of car shoppers’ greatest fears: getting smooth-talked into purchasing a lemon by an agent desperate to reach their monthly quota and cash in on a commission. 

Build brand credibility by putting people over profits

One of the cornerstones of CarGurus’ platform is how it presents information to users. Their algorithm is designed to prioritize relevance instead of monetization. When users search for a car, they can be confident that they’ll see the most relevant listings first—not the ones that CarGurus will monetize best. 

Although the platform does show sponsored listings, it limits them to three per page. Dealers can’t buy their way into the top spot of a search results page the same way they would in a classifieds site. To be featured, listings must fit users’ search criteria and have a deal rating of ‘Fair’ or higher. 

While prioritizing relevance over monetization may not make sense in the short term, putting people over profits pays off in the long run. In just ten years, CarGurus grew into the number one car research platform in the US, almost exclusively on word-of-mouth referrals from customers. Outside of digital ads and SEO, the company did not need to invest in traditional advertising until 2017, when it launched its first TV spot. There’s no amount of marketing dollars that can buy that level of brand credibility.

Regal Credit Management expanded its business

Having developed a thriving credit management business stateside, Regal Credit Management wanted to expand to the United Kingdom. However, with scarce experience across the Atlantic, it was hard to get the right tone for British customers, especially ones unfamiliar with credit management. But after tapping MarketSmiths (especially the resident Brits!) Regal—known as PM Credit Management in the U.K.—soon found the right path. With tight deadlines, we revamped everything from Regal’s website to promotional flyers to product names—all to make them sing for new British audiences. Our hard work soon paid off. Regal quickly saw increased client interest, and used our copy to boost its credentials with partners in London. In short, we’ve helped secure Regal a foothold in the old world—and get the British public on the road to stronger credit. 

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Centering customers is a marketing strategy

When describing Amazon’s choice to include both good and bad reviews for products Jeff Bezos stated:

“…We make money when we help customers make purchase decisions. Negative reviews are helpful in making purchase decisions. So it’s a very customer-centric point of view. Negative reviews will be helpful for customers, and that will ultimately sell more products than if you tried to cherry-pick the reviews.”

Helping people make better shopping decisions is what built Amazon’s brand credibility and turned it into one of the biggest names on the internet. And it’s what’s helped CarGurus become the leading car shopping platform in the US. 

CarGurus took a universally hated chore fraught with uncertainty and turned it into a simple online transaction where consumers have access to everything they need to make an informed decision in one place. They built a product to serve the needs of their community and have continued to prioritize those needs.

In a saturated market where consumers are hungry for transparency, brands that can leverage technology to turn bitter problems into sweet experiences stand to win the most. And sometimes the most innovative thing you can do for people is empowering them to make better decisions. 

Need sweet and refreshing copy that builds a loyal following? The MarketSmiths team can help! 

Carol Guasp

Carol Guasp

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