Autobytel

Marketing Strategy

Marketing Management (MKG1010)
International University of Japan, Fall 2005


Nishino Kei
Pham Thi Thuy Ha
Suwannathat Sanpat
Tan Siew Siew
Zha Li


Executive Summary

Autobytel is the first mover in the internet new car buying service in the US. It enjoyed miracle growth during its early stage but now is facing strong competition from many sources relating to car buying services. In such increasing competition, it has to reposition itself to differentiate from competitors by offering new services and products such as selling cars direct to consumers and increasing the numbers of dealers and reduce costs. Existing marketing mix should be reviewed to find a balance between efficiency and profitability by focusing on internet advertising and personal touch with dealers.

Facing strong competition in the internet new car buying service

As the number of dealers using online buying services is dramatically increasing, Autobuytel is facing intense competition with other online car-buying service providers such as Microsoft, Dell, who had entered the market, set up dealer networks in a short period, and are nearly catching up with Autobytel by using their brands and existing networks or partnership with companies which already have car dealer network bases. They are not only price-competitive, but also have a wide variety of services like car delivery service by CarsDirect.com. Car manufacturers and dealers also start direct online car-selling service. These competitions make Autobytel difficult to differentiate itself from other online car buying service providers in pricing and servicing.

Restructuring costs for revenue growth

Autobytel’s operating cost is extremely high in comparison with revenues, but increasing at slower rate. In 1996, revenues grew 1733% (Exhibit 1), but costs increased at 757%. In 1997, costs increased at slower rate. As the cost is increasing at a slower rate than revenue, it can still manage cost reduction. Competition will not get easier in the future as it has less than 1% market share. Therefore, it should implement cost control program by setting cost according to revenues. It should be very cautious regarding the budget spent on sales and marketing as the profitable and long lasting business should not spend more than its gain. For example, it should target a certain percentage as its net profit margin before spending on sales and marketing.

Offering new products and adding new dealers and services to grow revenues
Autobytel can sell cars directly to customer because this service will be more efficient and convenient to customers. As the internet purchase is the future trend, by doing so it will definitely becoming a market leader in internet car sales. Thus it can acquire more consumers and get more marginal profits than just as being a liaison. However, it should be cautious in launching this service as not to jeopardize business of existing dealers and also it should consider the cost incurred in this venture. It should first limit this service in area near to car manufacturer sites to avoid incurring inventory cost and increase efficiency of car delivery to customers.

Autobytel should explore its dealer network since 89% of its revenues come from dealer subscription fees. To do so, it needs to help dealers increase sales volumes by granting them a larger geographical territory than car manufacturers do. It also needs to give its dealers support (training services) so that they are not fired by having poor service quality. This will definitely help in increasing the number of dealers and position itself as the synergistic partner for dealers to venture into the new era for business through the internet. Providing training to sales persons will increase the efficiency of the dealer. This will not only strengthened the rapport between Autobytel and existing dealer, but also boost up its reputation as the premium.com company. However, it should restrict its dealers from signing up with competitors to protect its investment and to maintain its competitive advantage (Autobytel University).

Autobytel should add new features into its products and services. First it should develop the current consumer-to-consumer and business-to-business car sales markets into one of its major products and charge the successful transaction at a reasonable price. This is because this service can increase the number of business buyers and consumers via its websites. It needs to focus more on used car sales because these sales can give dealers more margins than new cars do. It should also offer truck, van and bus online buying service with the same system by focusing on business-to-business transactions. This new business is very potential since no one has done it. It should create a “buyer chat room” on its website where buyers can talk with its dealers and other buyers about purchasing decisions so that they feel that they make right choices.

Repositioning and marketing mix programs

Autobytel has to position itself as the complete car guide website which provides not only information on car purchase. The new position statement should be ‘More Than Cars’ where it offers simple way of getting all kinds of information and services related to cars. It should strengthen and maintain its competitive edge by referring consumer to reliable and low-price dealer and service centers. That is to brand Autobytel equivalent to other successful online companies like Amazon.com.

In order to achieve the new positioning, a new set of marketing mix is called for. Autobytel should focus on two ends: the consumer and the dealer. On the consumer, internet marketing and advertising should be continued as the target consumers are those pro-internet shoppers. Traditional advertising should not be continued as it was too costly.

As for the dealer, personal selling is the best way to maintain and gain new dealers. Mass advertising is not recommended as it is not cost effective for Autobytel. This is because Autobytel did not want to target all dealers, but only selected dealers in a certain area that is reliable and have a high reputation.

Conclusion

In short, to growth sustainablly in fierce competition, Autobytel needs to reposition itself to differentiate it from its competitors. To do so, it should take a course of actions to accelerate its revenues such as restructuring costs, offering new products and services, adding new features on its websites as well as exploring its dealer network. Moreover, it needs to change its positioning statement with a set of new marketing mix programs focusing on both customers and dealers.