Zag was founded on the simple premise that buying a car should be easier than it is. For consumers, the buying process doesn’t have to be so frustrating and stressful. For dealers, the selling process can be much more efficient and cost-effective. Zag is uniquely suited to tackle that challenge – combining deep roots within the industry, state-of-the-art technology, a business process that instills trust between buyer and seller, and a commitment to pushing the industry to the next level in its evolution.
Zag is a technology and services company that operates a robust auto shopping, research and pricing technology that enables consumers to get the information and upfront pricing they need in order to be in control of the process – and get a great deal. Zag works closely with a select nationwide network of pre-qualified dealers that have agreed to provide upfront discounted pricing and a no-hassle delivery process – dealers that share Zag’s commitment to improving the process for buyers.
Zag provides its platform on a private-label basis to affinity buying groups, like Capital One, for the Capital One Auto Buying service – www.driveone.com, and Automotive Invitational Services (AIS), an auto-buying program operator that serves members of 12 AAA clubs. Through its affinity partners, Zag connects dealers with a combined total audience of more than 60 million members.
The company has raised almost $50 million in debt and equity. Its goal is to help sell 250,000 cars per year and to direct 2.4 million buyers to dealers within five years.
Zag was founded by Scott Painter, a visionary with a passion for making car buying better. As founder and CEO of CarsDirect.com, and later as founder and chairman of BuildToOrder.com, Painter was instrumental in bringing car shopping online.
“For consumers, the Zag platform will deliver the best, most transparent and hassle-free car-buying experience possible,” said Painter. “For dealers, Zag will deliver sales, not just leads – resulting in a much more efficient business model.”
In 2006, Zag zoomed onto Entrepreneur magazine’s “Hot 100” list of the fastest-growing companies (as determined by PricewaterhouseCoopers), and was named one of the InfoWorld 100 – which honors the most creative and cutting-edge implementations of enterprise technology.
Automotive Industries spoke with Scott Painter, founder of Zag.
AI: What do you think will be the next wave in car buying?
The next wave in car buying will be upfront and transparent pricing. In fact, this transformation is already underway – all dealers that work with Zag agree to provide these things.
Here’s why they’re important: When people research a car purchase online today, they get reams of detailed product data, and they can request to be connected with a dealer by submitting an email address or phone number. But this falls short of complete upfront and transparent pricing – buyers are still left to negotiate at the dealership.
This situation isn’t ideal for dealers, either. Online marketing channels that function as lead generators are not aligned with the dealer’s goals. Because they sell leads, they are not motivated to opt for quality over quantity. So dealers end up buying a lot of worthless leads – either the contact information is not accurate, or the consumer isn’t a serious in-market buyer. Zag only charges dealers per sale – rather than per lead – so Zag shares the dealer’s motivation: to close a sale as efficiently as possible.
For buyers, Zag takes the informational advantage to the next level by giving them an upfront price – guaranteed in writing with a printable certificate – in real time online (meaning, the consumer doesn’t have to provide personal information or wait for an email response). Consumers are empowered to either take that price to the dealer (and Zag only works with pre-qualified, premier dealers) and buy the car with no hassle and no haggle, or they can use it as a negotiating point and continue their research. Either way, the consumer is armed with the most important piece of information – a bottom line, guaranteed price from a premier dealer.
Zag only partners with dealers that agree to provide this information. Soon, consumers will start demanding this from all dealers.
AI: What do consumers today want when buying a car?
Consumers want to know they’re getting a fair deal. A car is a big purchase, and they want the assurance that they’re not making a bad decision. That requires upfront and transparent pricing, and relevant price comparisons. The only way to know if you’re getting a good deal is to know what other people in your area have paid for the same car over the past month or so. Zag collects that data and requires that its participating dealers offer an upfront price that does not exceed the market average.
AI: How can Zag help?
Zag has a network of dealers that provide an upfront price, guaranteed in writing – one that doesn’t exceed the average price people have paid for that same car over the past 30 days. We eliminate the haggle from the transaction, while giving buyers an objective way to make sure they’re getting a good price – thus instilling a whole new level of trust in the dealer/consumer relationship, and easing buyers’ fears about getting a bad deal.
AI: How close are you to meeting your initial targets? Or have you exceeded them?
Yes, we’ve met our targets and we’re pleased with our success so far. We’ve raised almost $50 million in equity capital to get where we are today, we’ve met our internal goals, and we’ve exceeded customer satisfaction based on our commitment to providing a better car buying experience. That said, we’re always pushing for more.
Our first step was to build the technology we’d need to make this happen – to build the most robust, deep shopping experience and upfront pricing system available. That job is done – we achieved that. We invested more than $30 million in a platform that surpasses anything else available today.
The second step was to build out our dealer network, which takes two phases: first, a sprint for coverage, to make sure we could meet demand. We’ve done that. Now our focus is on making sure we have the right dealers in the right markets based on our customer traffic – we want to provide the perfect match between someone who’s about to buy and a dealer committed to upfront and transparent pricing and to providing a superior buying experience for their customers.
AI: What are some of the problems you face in convincing consumers of the efficacy of Zag’s service?
In car buying, the biggest consumer challenge is removing suspicion at the dealer level and restoring trust to a relationship that can often be adversarial. This is Zag’s core mission, and one that we’re uniquely suited to overcome – with our business model that prioritizes upfront and transparent pricing, and a structure that positions us as a proving ground/clearinghouse for quality dealers. Our philosophy is: by the time a consumer gets to the dealership, he or she should be ready to buy, and the transaction should be quick and hassle-free.
I can’t emphasize enough the importance of the upfront and transparent pricing in making the experience better for buyers (and, by extension, better for dealers – since they’ll grab more market share by providing buyers with a better experience).
This is a little harder than it sounds. Our challenge is to provide the upfront price, make sure it’s a good price, and then convince skeptical consumers that it’s a good price. Zag is able to do this because of the way we’ve structured our technology platform and our business model. We only work with dealers that agree to provide upfront pricing, and our platform won’t allow any prices that are higher than the market average (we determine market average based on objective sales data). So, consumers know that a price from a Zag dealer is a good one, and it’s guaranteed in writing with a printable certificate. We may not be able to convince buyers every single time – but as a system and a process, this is the most compelling and consistent way to get to a good price.
AI: Are your existing tie-ups enough to fuel Zag’s growth or are you looking to extend your affiliations? If so, to which companies/associations is Zag hoping to tie up with?
The power of a platform like Zag’s is that it scales incredibly well – we can scale without having to invest in an infrastructure. Today we have a very active list of customers and prospects with whom we’re talking about launching auto buying programs. Stay tuned for some announcements about new partners over the next several months.
In choosing our affinity group partners, there are a few types of organizations that we love. First, any organization that’s already in an automotive dialogue with its members – insurance companies, direct lenders, etc. They carry the credibility that comes from a relevant relationship, and their members are likely to want to buy – and that enables us to provide more sales to our dealer partners.
But we also like organizations with “cult-like” followings – those groups with members who are so loyal that they highly regard the recommendations of those affinity groups. When consumers already trust a brand, and that brand gives them a way to research a car, find an upfront price and connect with a dealer – the issue of “suspicion” is already overcome. The affinity groups know they’re offering their members a great service, and the members know that service can be trusted. Dealers benefit from trust-by-association.
AI: Will Zag ever offer its services internationally?
The opportunity to improve the car buying experience here in the United States will likely keep us busy for a while, so we’re firmly focused on what lies ahead for us here and we’re not thinking international at this point. That said, the platform and the approach are certainly scalable to any environment.
AI: What are some of the new services Zag hopes to offer in the future?
As a three-year-old company, we want to focus on achieving positive cash flow, because that’s the most important validation of our value proposition. Our overriding prime directive is to make buying a car better and easier – empower buyers, remove the hassle and haggle, and bring greater joy to consumers.
These benefits all translate directly to our dealer partners, of course. Ultimately we’re improving the efficiency and results at dealership level – dealers we work with will be more efficient, more profitable and sell more cars.
We’ll pursue whatever we believe will help us achieve these goals.