Case Study: CARFAX Business Model
Stemming from some research that I did for a redesign side project with my friends...
Backstory
A friend majoring in computer science, a friend majoring in HCI/UX (human-computer interaction / user experience), and I (product manager) teamed up to work on side projects as a way to build experiences and skills via real-life applications. We’ve decided to start with a mobile app redesign project before starting something from scratch because there were either too many ideas or no good ideas 🤣
The app we chose was CARFAX Car Care because we all love cars and own cars that need to be cared for. We all use the app to track maintenance needs and have strong opinions about why the app has huge room for improvement. And before we dive into the actual redesign, it’s crucial to get some high-level pictures in order to get as close to reality as possible…
Disclaimer: I try my best to research and gather information online, and I intend to formulate some hypotheses based on what I’ve learned. These should not be treated as facts since I do not work for CARFAX and cannot access their internal information. If you spot any errors or concerns, please feel free to comment or DM me on Substack or via LinkedIn.
CARFAX Intro
In short, CARFAX is a vehicle data company.
Longer version:
CarFax is a commercial web-based service that supplies vehicle history reports to individuals and businesses on used cars and light trucks for the US and Canadian consumers. These reports provide detailed information regarding the history of a particular vehicle, including any accidents, title information, odometer readings, and sometimes repair history. This service aims to help potential buyers understand the history of a vehicle before making a purchase decision, thus reducing the likelihood of buying a lemon. By leveraging a database of more than 17 billion records, CarFax has established itself as a reputable source of vehicle history information for buyers, sellers, and the automotive industry.1
According to CARFAX2, it has 30B+ records from 13K+ sources, including U.S. state title and registration records, auto and salvage auctions, rental companies, inspection stations, insurance companies, fire and police departments, etc. It has a webpage dedicated to its data sources.
(Apparently ChatGPT’s version has an outdated record count)
Let’s dive into the business model for CARFAX 👇
CARFAX Business Model Canvas
(In case you need a refresher on business model canvas: here)
Key Partners
Governmental agencies
DMVs
Fire departments
Police departments
State inspection stations
Auto auctions
Auto service facilities (collision repair, maintenance, etc)
Insurance, banks, or other financial companies
Rental companies
Car dealerships
Manufacturers
The above list contains mostly data source providers (some of them would be 2-way data transmission). Other partnerships that I’m guessing are:
Research institutes (e.g. universities, independent/private labs)
Automobile and/or peripheral startups
Tech companies/startups (smart city, AI, big data, etc)
Key Activities
Vehicle data collection
Tech development for data injection/access
API
Platforms for partners
Platforms for private customers/users
Advertising and other business development activities
Blogs/Research
Key Resources
Vehicle history data
Tech
Data source partners
(The amount of data CARFAX has accumulated is truly a competitive edge. I tried to find some numbers from direct/indirect competitors but can’t seem to find anything that could rival on a similar scale. If you know any other large vehicle history data providers, please let me know!)
Value Propositions
…be the leading source of vehicle history information for buyers and sellers of used cars.3
Although the above single line pretty much sums up CARFAX’s core value proposition, I want to expand it a little:
History/information transparency that offers peace of mind
Trust building for private sellers, dealerships, or online auto listings
(For insurance/financial companies) risk management
Help businesses that use CARFAX (like auto repair shops) to improve reputation and customer satisfaction
Customer Relationships
Self-service platform to obtain vehicle history reports (purchase the report simply by using the VIN) or the mobile app for access to full maintenance history
Customer support
Channels
Online
Advertising (SEO, paid ads, etc)
Platforms (CARFAX website, CARFAX Car Care app, used car listing sites, partnerships, etc)
Offline
Advertising (TVs, local events, banners, etc)
Partner shops (a repair shop I went to in the past printed the complete report for me free of charge as a part of their service)
WOM (Words of mouth) - buyer/seller ask for a CARFAX report
Customer Segments
Individual buyers/sellers (vehicle history reports)
For example, “Using the CARFAX Total Loss Valuation app and robust data set, claims adjusters can evaluate the vehicle’s value faster and more accurately.”4
Police
“CARFAX for Police is a mobile/web app that streamlines the process of filing accident reports.”5
Cost Structure
Costs associated with data acquisition and management
Technology development and maintenance costs
Marketing and advertising expenses
Operational and administrative costs
Revenue Streams
Sales of vehicle history reports
Subscription services for B2B customers (dealerships, auto service shops, insurance companies, etc)
Advertising revenue (dealership listing promotion on CARFAX website, auto service shop promotion on CARFAX Car Care app, etc)
Conclusion & Discussion
It was interesting to see that CARFAX has expanded to other B2B areas, such as the app for police car accident reporting and the tool for insurance companies when a vehicle is totaled. I originally thought of CARFAX only doing vehicle history data and reports (private users and used car dealerships) and didn’t look beyond that. Now, I think we have a better picture of what CARFAX does and how we should consider its different business aspects while approaching the redesign project.
There are never too few ideas to pursue, but since the goal is to gain real-life experiences, the “simulation” needs to be as realistic as possible (aka whether it has great impacts, whether it is a big bet, whether it generates big bucks, etc).
If you’ve read this far, thank you!
Would appreciate your thoughts and input on how I can improve :D
ChatGPT
https://www.prnewswire.com/news-releases/carfax-hits-30-billion-records-in-vehicle-history-database-301696301.html
https://www.carfax.com/company/about
https://www.3pillarglobal.com/case-studies/carfax-b2b-solutions/
https://www.3pillarglobal.com/case-studies/carfax-b2b-solutions/