For Edmunds's car-buying service, should we emphasize a wider network of dealerships or negotiate deeper discounts with a select few partners?

Introduction

The trade-off we're examining for Edmunds's car-buying service is between expanding our dealership network or negotiating deeper discounts with select partners. This decision will significantly impact our value proposition, user experience, and business model. I'll analyze this trade-off by considering user needs, business objectives, and market dynamics.

Step 1

Clarifying Questions (3 minutes)

• Business Context: I'm thinking our revenue model might be based on a combination of lead generation and transaction fees. Could you clarify our primary revenue streams for the car-buying service?

Why it matters: Helps determine which approach aligns better with our revenue model. Expected answer: Revenue split between lead generation and transaction fees. Impact on approach: Higher lead generation focus might favor wider network; transaction fee focus could lean towards deeper discounts.

• User Impact: Based on user behavior, I'm assuming price is a primary factor in car-buying decisions. How do our users typically prioritize price versus dealer convenience or selection?

Why it matters: Informs which approach would resonate more with our user base. Expected answer: Price is important, but convenience also plays a significant role. Impact on approach: If price is paramount, deeper discounts might be more attractive; if convenience is key, a wider network could be preferable.

• Technical Feasibility: Considering our current platform, I'm thinking scaling to a wider network might require significant technical investment. What's our current capacity for onboarding and managing dealerships?

Why it matters: Determines the feasibility and cost of expanding our network. Expected answer: Current system can handle moderate growth, but major expansion would require upgrades. Impact on approach: Limited capacity might favor focusing on select partners for deeper discounts.

• Resource Allocation: Given our team structure, I'm assuming we have dedicated partnership and negotiation teams. How are our resources currently split between partner acquisition and relationship management?

Why it matters: Helps understand our capacity to pursue either strategy effectively. Expected answer: Resources are currently balanced, with slightly more emphasis on acquisition. Impact on approach: Strong relationship management team might favor deeper discount strategy; robust acquisition team could support network expansion.

• Timeline and Urgency: Considering market dynamics, I'm thinking this decision might be driven by upcoming competitive pressures or market opportunities. Is there a specific timeline or event driving this decision?

Why it matters: Influences the urgency and scope of our strategy. Expected answer: Aiming to implement changes before the next peak car-buying season. Impact on approach: Short timeline might favor leveraging existing relationships for deeper discounts; longer timeline could allow for network expansion.