Omnichannel increasingly part of vehicle buying process in key markets

12 December 2017

While changes in the automotive industry are transforming cars, a new study has examined how shifting customer expectations around the car buying process are set to affect how car dealers are perceived. The omnichannel experience, in particular, may play a key part of the wider purchasing process.

The automotive industry is undergoing significant changes, as climate changing pollutants and various health damaging pollutants are increasingly removed from the wider transport value chain, largely by a shift to electric vehicles and renewable energy generation. Automation  is on the horizon too, while new sharing models and connected vehicles shift ownership and change how vehicles are used.

A new report considers how dealership may change as well, as customers increasingly shift to online channels as part of their wider purchasing journeys. A new Bain & Company report, titled ‘The Future of Car Sales Is Omnichannel’, explores the effect of changing consumer behaviour on dealerships whose models, by and large, haven’t changed from traditional dealership methods and channels.Headline results

The 5,000 car buyers involved hailed from five of the world’s largest markets, namely China, Germany, India, the UK and US. The headline results regarding how consumers are now engaging with the car market, highlights increased inter-action between online and offline shopping channels.

For instance, around half of respondents begin their purchase journey online, while the research to purchase process takes 9 weeks on average. Buying online has become a norm among some of the group, with 25% noted as potential users of such a service by the firm

changes in omnichannel journeyThe research sought to identify the interactions between online and offline behaviour, and how those interactions resulted in eventual purchasing decisions. While almost 50% started online, a good proportion would then go on to visit a dealership, before returning to an online channel.The second touch point noted a higher proportion of those who use an online channel (47%) to those who visit a dealership (41%).

By the third touch point, 31% of respondents had made a purchase, while the split between online and offline touch point stood relatively evenly at 35% and 34% respectively. The split between those who shifted from an online to an offline channel was relatively consistent throughout the shift between touch-points, which points to a relative interplay between channels.Test drivesThe research also found that dealerships are frequented less, on average, than in previous years – now 2.4 times before a purchase decision. The dealership remains a key touch-point, with test drives remaining a particularly important part of the process, particularly in India and China with 3.1 and 2.7 such drives respectively, while UK drivers required 1.9 such trips.

Test drives are not the only type of use that respondents make of the dealership. The research found that, in addition to testing, determining final configuration and making the actual purchase in person at the dealership were also key factors.Key decision points already madeOne area that dealers need to take into account is that various decisions are often already made prior to visiting the dealership. Customers in India (75%) are particularly set on key decisions, including price, brand and model. In general, decisions around price stand at around 65% for pre-determined decision making, while it comes closer to 70% for brand. Decisions on model are somewhat lower, at around 60%.

In recent years, brand loyalty has decreased with customers, with the report noting that the pre-determined decisions do not necessarily stem from loyalty as such. One area that impacted on decision making, was word of mouth from friends, family and colleagues, which represents a key information source for 44% of respondents; online reviews and test sites were relied on by 30% of respondents; while dealers come in third at 26% of respondents.Car configuration sourceFinally, when it comes to configuring the vehicle, various external sources were leveraged for advice. Dealers remain a key decision support, although the website of the manufacturer comes relatively close as a proportion of the total. Brochures come a distant third, while few rely on an app produced by a manufacturer. The respondents also noted that dealers tend to be the most recommended source in terms of net promoter score (at a net 48), followed by websites and app (38 respectively). Brochures are relatively underutilised.

“Automakers and dealers must adjust to the changing expectations and needs of the digital natives, whose importance to the broad automobile market continues to grow,” explained Bain partner Dr. Klaus Stricker, co-author of the brief and head of the firm’s global Automotive Practice. "Enabling customers to seamlessly interact between digital and traditional channels requires enormous investments in omnichannel concepts."

Recently, BCG Digital Ventures demonstrated how digital natives may change the nature of car dealerships. The digital solutions arm of the consulting firm helped VW leverage a new web platform to sell second hand vehicles, partnering with a number of second hand dealerships to ensure quality and pricing control.


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Four ways digitalisation is transforming car brands and dealers

16 April 2019

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”