Comments for AM Marketplace feature on guides and valuation
Mike Hind, CAP Communications Manager
Is pricing an art or a science?
The short answer is both, because it’s a combination of taking a robust research sample, analysing it intelligently and using genuine human expertise to interpret and refine the final figures. We believe that any approach that turns trade pricing purely into a pure science via automatic sampling, slicing, dicing and publication processes is doomed to mislead end users. The real world is always more complex than bald numbers in spread sheets and computers and that is why we have a team of editors out in the marketplace, seeing the dynamics for themselves, talking to the trade and taking informed decisions on what price changes to publish. The difference is, we don’t call it ‘art’, we call it ‘market expertise’.
Should gut instinct be relied on?
There will always be times when there is no substitute for great trade knowledge and gut instinct borne of experience. But the market is simply too complex these days for gut instinct to be enough all the time. An up to date benchmark or ‘sanity check’ value is a must, especially when unexpected market price trends are emerging. Gut instinct might tell you what you expect to happen – a robust, up to date pricing tool will tell you what is happening.
How good are the pricing tools and can they be relied on?
CAP looked at the traditional monthly trade price publication model and, in all honesty, decided it was no longer good enough for today’s market. That is why we developed Black Book Live, the ‘real time’ trade pricing tool. It may be controversial for the publisher of a monthly Black Book to say this but a monthly price guide is, by definition, out of date almost as soon as it appears. Of course it still has value as a benchmark but in those times when the market is moving rapidly – think 2008/09 – the only truly reliable valuation tool is one that constantly updates values.
One of the biggest pain points for the users of a monthly guide is when the market turns just after a book deadline and it is already behind the curve on publication day. In that instance it is fair to say that a fixed point in time pricing tool cannot be relied on to alert users to market trends.
This principle is well illustrated by the following example of a Ford Focus 1.4 Style 3dr.
Source: Black Book Live
Here, users of Black Book Live were regularly alerted during the course of July and into August to the upward trajectory of values – giving them a far better opportunity to fine tune their decision making than they would have had using a traditional monthly guide.
Of course we still publish Black Book monthly as well as Black Book Live, because some customers who do not necessarily need full sight of real time market changes still need an independent fixed point benchmark. However, we believe Black Book Live is the tool that can really be relied on for up to the minute accuracy.
With the move to online, a dealer's experience of pricing to meet local demand may be good. But if customers are increasingly searching nationally, is that a relevant skill anymore?
No one knows the local market as well as a seasoned trade ‘pro’ on his own patch. That means he knows who his customers are, where they come from, what they want and how much they’ll pay. In our experience it is simplistic to assume that every consumer is prepared to range far and wide just to drive the cheapest deal. It is a fact that many good dealers win on great service, building lasting relationships with local customers and that includes knowing their local pricing points. Knowing your local market – and how to price cars for it – will always be a relevant skill.