Sunday, February 26, 2006
What side is you analyst on?
I finally bought a new car this weekend bringing to end the long and sometimes painful car buying process. As with any major purchased, I tried to do as much research as possible. Like most, my main concern was determining the actual market price for both my trade-in and the new vehicle. The Internet is great for finding this information with countless web sites offering seemingly "insider information" on what dealers pay for cars.
In the end all these sites have to make money and therefore they all have some kind of motivation. Like many industries, the automotive information web sites fall into one of two broad catergories: buy side and sell side. I have become a devout Consumer Reports online subscriber and I believe they are the truest buy-side analyst. That is they take no money from manufacturers/vendors and don't offer any consulting services. They provide reports and analysis that is written for consumers and ultimately paid for by consumers. Knowing this I took advantage of several of the Consumer Reports buying services. The most important reports were the pricing reports for both my trade-in and new car. With this information in hand, I ventured out to the dealership to start negotiations.
I produced the Consumer Reports information to the dealer and made my offer. In the spirit of Getting to Yes, I felt I had identified an unbiased source of information, shared that information with the dealer, and made what I felt was a fair offer based on this market data. The dealer then counter offered using reports from Kelley Blue Book, which not surprisingly listed the car at a higher price. The difference is the Kelley information is listed for free. From what I can surmise, Kelley makes it's money by selling advertising to among others car manufactures and dealers. To me this makes Kelley a sell-side analyst. The most important customers to Kelley are the dealer and car manufactures and therefore it's only natural the Kelley prices were more "dealer friendly."
There is a need for both the sell-side and buy-side firms, I accept that. I only wish that sell-side firms would become more open about their bias. This doesn't just apply to Kelley Blue Book but all analyst firms across a variety of industries. It would be great if all these analyst firms just posted the percentage of revenue the received from the various manufactures/vendors. No one is saying they shouldn't make money, it would be great if they were more up front about it. ¶ 4:51 PM
In the end all these sites have to make money and therefore they all have some kind of motivation. Like many industries, the automotive information web sites fall into one of two broad catergories: buy side and sell side. I have become a devout Consumer Reports online subscriber and I believe they are the truest buy-side analyst. That is they take no money from manufacturers/vendors and don't offer any consulting services. They provide reports and analysis that is written for consumers and ultimately paid for by consumers. Knowing this I took advantage of several of the Consumer Reports buying services. The most important reports were the pricing reports for both my trade-in and new car. With this information in hand, I ventured out to the dealership to start negotiations.
I produced the Consumer Reports information to the dealer and made my offer. In the spirit of Getting to Yes, I felt I had identified an unbiased source of information, shared that information with the dealer, and made what I felt was a fair offer based on this market data. The dealer then counter offered using reports from Kelley Blue Book, which not surprisingly listed the car at a higher price. The difference is the Kelley information is listed for free. From what I can surmise, Kelley makes it's money by selling advertising to among others car manufactures and dealers. To me this makes Kelley a sell-side analyst. The most important customers to Kelley are the dealer and car manufactures and therefore it's only natural the Kelley prices were more "dealer friendly."
There is a need for both the sell-side and buy-side firms, I accept that. I only wish that sell-side firms would become more open about their bias. This doesn't just apply to Kelley Blue Book but all analyst firms across a variety of industries. It would be great if all these analyst firms just posted the percentage of revenue the received from the various manufactures/vendors. No one is saying they shouldn't make money, it would be great if they were more up front about it. ¶ 4:51 PM
