How CarFax came to dominate the automobile industry is an amazing success story, and it’s particularly instructive of clever marketing strategies that you can use for your own business.
When CarFax entered the auto market in 1984, they were very smart about how they went about doing it. Their business model was based on getting all the auto dealerships in the country to sign up for their monthly car-history tracking and reporting program.
But rather than pitching their service directly to the auto dealers, they positioned themselves as an expert in the market directly between the consumer and the auto dealer.
Spending hundreds of millions of dollars on advertising, they taught auto shoppers to request a free CarFax report whenever they went shopping at a used automobile dealership. Recognize their tagline? “Just ask for the CarFax.”
What they did, essentially, was establish a new standard for automobile buying in consumers’ minds – before you buy a vehicle, you need to get your free CarFax report for that vehicle from the dealer. Consumers listened, learned, and embraced it, naturally, because it was a great service and it didn’t cost them a dime.
So when potential car customers started showing up at dealerships asking for their CarFax reports, auto dealers were quickly confronted with a choice. The dealers that didn’t subscribe to CarFax’s monthly service soon figured out that prospective car buyers didn’t trust them as much as the dealerships who did offer free CarFax reports to their potential buyers.
Guess which dealerships’ sales started to really soar? That’s right – the ones who chose to subscribe to this new service and give free CarFax report to their prospects.
Other auto dealers finally realized the deck was stacked against them and after losing lots of business to their competitors, they started signing up in droves. CarFax was officially born and hasn't looked back since.
CarFax’s strategy allowed consumers to think that dealerships who gave their customers CarFax reports were more reputable than those dealers who didn’t. What, no CarFax? Gee, I wonder what they're trying to hide?
There are several valuable marketing lessons to be learned here -
Positioning. Where you position your company can make all the difference. CarFax positioned itself between the dealerships they wanted to partner with and the car-buying consumers the dealerships needed. CarFax radically changed the balance of power in that buyer-seller relationship by inserting itself right in the middle.
Authority. Consumers quickly recognized the practical value of having a CarFax report handy while they considered buying a used car. This "value recognition" helped brand CarFax as an authority in the automotive world practically overnight.
Trust. A CarFax report reveals a car's mechanical and ownership histories, common risk areas that a used car might subject a buyer to. Trust is in short supply these day, and let's face it - there are few types of business people perceived to be less trustworthy than used car salesmen, justly or unjustly. When you can instill confidence about yourself and your products / services in potential buyers, you make it easier for them to choose you to do business with.
The pressure CarFax brought to bear on dealerships to provide a valuable trust product - the report - was too much to bear, and they were basically forced to sign up for their services (which they should have been offering already.)
Can you put any of these savvy marketing strategies to work for yourself?