CarMax 2009 Annual Report Download - page 12

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were transferred at customer request. Our Certified Quality Inspection assures that every vehicle we offer for sale
meets stringent mechanical, electrical and safety standards. We back every vehicle with a 5-day, money-back
guarantee and at least a 30-day limited warranty. Other competitive advantages include our ability to offer or
arrange customer financing with competitive terms and the comprehensiveness and cost of the extended service
plans we offer. We believe that we are competitive in all of these areas and that we enjoy advantages over
competitors that employ traditional high-pressure, negotiation-oriented sales techniques.
Our sales consultants play a significant role in ensuring a customer-friendly sales process. A sales consultant is paid
a commission based on a fixed dollars-per-unit standard, thereby earning the same dollar sales commission
regardless of the gross profit on the vehicle being sold. The sales consultant normally receives no commission on
the finance process. This ensures that the sales consultant’ s primary objective is helping customers find the right
vehicles for their needs at prices they can afford. In contrast, sales and finance personnel at traditional dealerships
typically receive higher commissions for negotiating higher prices and interest rates, and for steering customers
toward vehicles with higher gross profit.
In the new vehicle market, we compete with other franchised dealers. Historically, the new vehicle market has been
served primarily by dealerships employing traditional automotive selling methods. We believe our customer-
friendly, low-pressure sales methods are points of competitive differentiation.
In our wholesale auctions, we compete with other automotive auction houses. We believe our principal competitive
advantages include our high vehicle sales rate, our conditional announcement and arbitration policies, our broad
geographic distribution and our dealer-friendly practices. Because we own the cars that we auction, we generally
sell between 97% and 100% of the vehicles offered, which is substantially higher than the sales rate at most other
auto auctions. Our policy of making conditional announcements, noting mechanical and other issues found during
our appraisal process, is also not a typical practice used at other auctions of older, higher mileage vehicles.
Together, these factors make our auctions attractive to dealers, and they allow us to achieve a dealer-to-car
attendance ratio that is much higher than the typical auto auction.
Marketing and Advertising. Our marketing strategies are focused on developing awareness of the advantages of
shopping at our stores and on attracting customers who are already considering buying or selling a vehicle. We use
market awareness and customer satisfaction surveys to help tailor our marketing efforts to the purchasing habits and
preferences of customers in each market area. Our marketing strategies are implemented primarily through
television and radio broadcasts, carmax.com, Internet search engines and online classified listings. Television and
radio broadcast advertisements are designed to build consumer awareness of the CarMax name, carmax.com and key
components of the CarMax offer. Broadcast and Internet advertisements are designed to drive customers to our
stores and to carmax.com. Newspaper advertisements promote our broad selection of vehicles and price
competitiveness, targeting consumers with immediate purchase intentions.
We continue to adjust our marketing programs in response to the evolving media landscape. We have customized
our marketing program based on awareness levels in each market. In many markets, we have expanded the use of
Internet-based advertising while curtailing the use of newspaper advertising. We are building awareness and driving
traffic to our stores and carmax.com by listing every retail vehicle on both AutoTrader.com and cars.com. Through
their syndicated networks, AutoTrader.com and cars.com vehicle listings appear on sites that we believe are visited
by a majority of buyers of late-model used vehicles who use the Internet in their shopping process. Our advertising
on the Internet also includes banner and keyword advertisements on search engines, such as Google and Yahoo!
Our website, carmax.com, is a marketing tool for communicating the CarMax consumer offer in detail, a
sophisticated search engine for finding the right vehicle and a sales channel for customers who prefer to complete a
part of the shopping and sales process online. The website offers complete inventory and pricing search capabilities.
Information on each of the thousands of cars available in our nationwide inventory is updated daily. Carmax.com
includes detailed information, such as vehicle photos, prices, features, specifications and store locations, as well as
advanced feature-based search capabilities, and sorting and comparison tools that allow consumers to easily
compare vehicles. The site also includes features such as detailed vehicle reviews, payment calculators and email
alerts when new inventory arrives. Virtually any used vehicle in our nationwide inventory can be transferred at
customer request to their local superstore. Customers can contact sales consultants online via carmax.com, by
telephone or by fax. Customers can work with these sales consultants from the comfort of home, including applying
for financing, and they need to visit the store only to sign the paperwork and pay for and pick up their vehicle. Our
survey data indicates that during fiscal 2009, more than 70% of customers who purchased a vehicle from us had
visited our website first.