Buycentives’ Targeted Marketing Software Is Out to Break the One-Size-Fits All Tradition for Automobile Incentives

10/6/10Follow @xconomy

When it comes to the incentive deals offered by auto companies to potential car buyers, little has changed, despite advances in technology. Customers may be starting their auto purchases online, but automakers are still trying to reel them in with deals that are marketed more like the coupons found in a newspaper or Sunday flyer, says entrepreneur Sean Murphy.

The incentives, say $1,000 off the purchase of a certain car type in the next month, go out en masse to consumers, and car makers have no way of determining whether a slightly larger incentive or a different deal entirely would have more power in attracting a certain customer, says Murphy. It’s a problem his Ann Arbor-based startup, Buycentives, is trying to fix with its software.

“We’ll be able to take that consumer information, using software we developed, and we’ll be able to determine what the appropriate incentive is for the consumer to generate a sale or buy a car,” says co-founder Murphy, a veteran of the product strategy and marketing side of the auto industry.

Many automobile makers generate sales leads when interested shoppers start their car search online, through sites like Kelley Blue Book, Edmonds.com, and Yahoo! Autos. And rather than putting out the same offer to all consumers, Buycentives’ software would enable companies to automate incentive offers to these shoppers, tailoring the deals based on things like the person’s budget, past vehicle ownership, geographic location, and so forth. Buycentives would offer this tailored discount from the automaker right at the site of purchase, if customers are buying online, or would immediately e-mail the customer a certificate to bring into a dealership.

“We’re developing a probability model that allows us to segment customers based on information we know, and go into developing a very specific incentive,” he says.

More customized sales incentives could enable automakers to get the most out of their incentive budgets, Murphy says. For example, certain customers might not be inclined to buy a car with a $1,000-off incentive, but a slightly larger $1,500 discount could sway them. A company might break its budget offering that big of a discount to everyone—wasting the extra money on those who are already willing to buy for $1,000 off—so traditionally companies err on the side of keeping offers lower and in doing so lose some customers, he says. But the Buycentives tool could identify which customers would likely be convinced by the slightly bigger incentive, and offer the deal only to those prospective buyers, Murphy explains. The software could track these types of consumers based on information about their previous purchases, and or by tracking their interest in purchasing a competing brand, which may be offering a lower rebate. It could also offer these attractive deals to consumers in certain geographies where automakers are trying to unload inventory.

Buycentives’ software can also help tailor automobile deals to develop stronger relationships with customers, Murphy says.

“With deal advertising, the only message that you’re communicating is that we’re cheaper than everyone else,” he says. “If that’s the reason that [the customers] are buying it, typically they’re less connected to the product and the brand, and less likely to repurchase it.” Instead of cheapening the brand by advertising to the broader public, automakers could personally connect with individual car shoppers early on in their searches through targeted e-mails, Murphy says. This could develop a positive, closer relationship with the customer, rather than simply communicating a car costs less. Luxury car brands could also offer different incentives—like a trip to a performance driving course—to prospective customers, who may not be as likely to be persuaded with cash rebates, Murphy says.

Buycentives will charge automobile companies on a pay-for-performance model, likely at a flat rate for each sale generated by its tool, Murphy says. The startup, founded in 2009 and incubated at the Ann Arbor Spark program, is talking with potential customers in the auto space and is looking to begin a pilot program in the coming months. The company received a loan earlier this year through the Michigan Microloan Fund Program at Spark, and is starting to talk to seed and angel investors, Murphy says. Buycentives didn’t disclose the exact size of its loan, but in February Spark announced it had given a loan worth a total of $95,000 to Buycentives and two other area startups. Individual loans through the program range $10,000 to $50,000.

Automobiles will be the big focus for Buycentives initially, but there are broader applications for its technology, for things like large electronics purchases, Murphy says. “It’s for anything where a consumer is doing some shopping and spending a significant amount of money—for a brand to communicate a specific discount to a specific customer while shopping.”

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