Pricing Strategy Recommendations

B2B PricingRahul GuptaPeter Morelli

Jorge RosalesMuchen Zhang

Situation and Complication

1Cox owns many products (KBB and AT, others)

2Market leading platform connecting car buyers and dealers

provide maximum vehicle inventory

offering a “tiered pricing” model.

3Declining growth rate for Autotrader.com

Good: dealers understanding digital channels and their power

Challenge: dealers demanded more “proof” of ROI on advertising spend

4Representative complaints from sales reps about dealer dissatisfaction with AT.com pricing and value

2

Autotrader can take steps to increase revenues

Pricing Tiers

Capture WTP from each dealer segment

Business Model

Deliver value to each segment based on

their needs (reach vs. engagement vs. leads)

Segmentation

Implement 3-tier menu pricing to induce self-

selection by each segment

Value Prop

“Reach and Influence the most shoppers

throughout the journey to purchase”

Implementing the recommendations is expected toincrease revenue by more than $380M (29% increase)

3

Autotrader can impact the entire customer sales funnel with its scale and platform capabilities

Present

Future

# of dealers

Engagement

Reach

Transparency to dealers

Perceived Value

Monthly Subscription Plan(Used Cars)

Premium

15

Spotlights Days

14

20 14

7 7

- -

Max

Plus

Featured

Core

Featured

Platinum Spotlights Spotlights DaysPlatinum

Spotlights

12

6

-

-

- 14

5 14

4 7

2 7

4

-

-

-

7 days

Current 2-tier pricing structure is confusing

5

Disparities in pricing drive dissatisfaction and missed opportunities to capture value

Brand Focused (High Value)

Digital Savvy (Medium Value)

ROI Focused (Low Value)

$0.66

$1.90

$2.92

Price per Dealer per Day per Car ($)

Small dealers pay 440% more per car than Brand focused dealers; driving dissatisfaction with pricing and value

Current value proposition and pricing strategy do not align with dealers’ needs, resulting in missed revenue opportunities

Brand Fo-cused; 312

Digital Savvy; 826

ROI Fo-cused; 173

Current Revenue ($M)

6

Competitors do not price based on what’s most relevant to dealers (views, clicks and leads)

Autotrader Cars.com CarGurus Edmunds TrueCar Craigslist

● Scale● Reach

● Quality engagement

● Quality engagement

● Quality/fast leads

● Proven sales

● Low cost● No analytics

Pricing Structure

• Two-tiered pricing

• Based on ad views

• Single price• Based on ad

views

• $10-$15 monthly subscription fee

• Based on leads

N/A • $299/transaction

• Based on transaction

N/A

7

Autotrader should improve target market segmentation for better differentiation

Each segment has different needs

High Value Medium Value Low Value

Leads

Clicks

Views

Current pricing model only captures this amount

8

Leads

Clicks

Views

High Segment

Mid Segment

Low Segment

Salesforce should be trained to help thedealers select relevant packages

9

High Value Mid Value Low Value

Leads SRP Brand Awareness

Lot Visits VDP Shopper Sessions

Website Visits Contacts Banner Impressions

Plan Price Features

Base Plan $1/Car/Day Reach

CTR Pack $3.50/Click-to-Website Engagement

Leads Pack $12.50/Lead Leads

The new pricing strategy is win-win for both Autotrader and dealers

Segments Old Pay WTP Measure Unit

High Value $0.66 $12.5 per lead

Medium Value $1.90 $3.50 per CTR

Low Value $2.92 $1 per view

Leads Revenue• $171M

Clicks Revenue• $552.8M

Views Revenue• $970.2M

New Revenue $1,694,014,500 Old Revenue $1,310,925,000

29% 10

Autotrader should continue to focus on improving value for the dealers

11

Improve platform attraction to dealers Transparency through KBB

Cross-sell add-on servicesIncentivize dealers to increase

their digital spend

Long Term Strategy

QUESTIONS?

12

APPENDIX

13

Benefit Analysis Companies Consumer Perceived

BenefitsDealers Perceived Benefits Pricing Structure Advertising

Strategy Notes

Autotrader max. inventory● Value to dealers

● expensive

tiered pricing Traditional N/A

Cars.com “clear, simple and direct”● providing exposure opportunity at all times● lower cost than

Autotrader

single price Traditional most direct competitor

but offer fewer advertising options for

dealers compared to Autotrader

CarGurus making the online car shopping experience more

transparent

● Provide dealer with “leads”

● Pay only the leads

monthly subscription fee = $10-$15 per lead * #of

leads

SEM/SEO

Edmunds “get instant savings” “lead” information to the dealer

TrueCar “Never Overpay” “Lower Selling Expenses” $299/transaction Traditional

14

15

% of Dealers

Annual Ad Spend

Digital Slice

Dealer Brand Focused 30% $630K 30%

Digital Savvy 55% $390K 70%

Small ROI Focused 15% $280K 75%

Willingness To Pay

High Value $5-20

Medium Value $2-5

Low Value $1

Dealers: 12K (Franchised) + 10K (Independent) = 22K (Total)

% of Dealers

No. of Dealers

Annual Ad Spend

Digital Slice

Overall Digital

Spending

Autotrader Share per

Dealer (25%)

Total Revenue

Brand Focused 30% 6,600 $630K 30% $189K $47.25K $311.85M

Digital Savvy 55% 12,100 $390K 70% $273K $68.25K $825.82M

Small ROI Focused 15% 3,300 $280K 75% $210K $52.50K $173.25M

12,000 $1,310.92M

16

No. of Dealers

Total Revenue No. of Cars (Monthly

Inventory)

Revenueper Dealer per Month

per Car

Priceper Dealer

per Day per Car

Brand Focused 6,600 $311.85M 200 $19.69 $0.66

Digital Savvy 12,100 $825.82M 100 $56.88 $1.90

Small ROI Focused 3,300 $173.25M 50 $87.50 $2.92

12,000 $1,310.92M

No. of Ads: 30

17

Segment # Dealers Cars Base Revenue Click RevenueLead

RevenueSale

Revenue Monthly Visitors 19,000,000

Low 3,300 50 $59,400,000 $0 $0 $0 CTR 3.26%

Medium 12,100 100 $435,600,000 $357,703,500 $0 $0Dealers per Visitor per Car 2.5

High 6,600 200 $475,200,000 $195,111,000 $171,000,000 $136,800,000Cars per Visitor per Dealer 10

$970,200,000 $552,814,500 $171,000,000 $136,800,000 Total Dealer Visits 475,000,000

Base Fee $1 # Ads per Car per Month 30Lead Fee $12.50

Total Dealers 22,000Visitors per Dealer 863.64# Leads per Dealer 172.73

Click Fee $3.50 Total Clicks to all Dealers 15,485,000Clicks per Dealer 704

Sale Fee $200 Total Sales 190,000Sales per Dealer 8.64

Total Revenue 1,694,014,500