The customer in control: Where next for the automotive industry?

Traditional automotive marketing approaches are running out of road, forcing carmakers to explore new routes to their customers’ minds, hearts and wallets.

Vorsprung durch Technik. The Ultimate Driving Machine. If only everything in life was as reliable as an automotive industry marketing slogan. Carmakers have long understood that their customers are buying much more than a form of transportation. They have spent years refining sophisticated brand images designed to appeal to those customers’ self-image, hopes and dreams.

Now, all that hard effort seems to be in jeopardy. Luxury vehicle manufacturers promoting powerful engines and sumptuous interiors are losing sales to upstart rivals offering a future of touchscreen displays and silent electric propulsion. Young people, we are assured, view car ownership as an inconvenience rather than an aspiration. Even in emerging markets, which the major automakers see as important sources of long-term growth, customers are eschewing big-name players in the mid-market in favor of a new generation of local producers.

It is important not to overestimate the impact of these trends. The big picture of the car industry is one of slowing growth rather than precipitous decline. Worldwide passenger car sales are expected to be around the 77-million mark in 2019, down just a little from their 2017 peak of 79 million. Volkswagen and Toyota, the two largest carmaking groups, are still getting bigger, even if some of their close rivals have seen sales slide.

What is becoming clear, however, is that automotive companies cannot rely on momentum to maintain their competitive position. They are having to work harder to acquire new customers, and harder still to retain them. Recognizing that, carmakers around the world are looking for ways to revamp their marketing, sales and service activities. Their approaches are diverse, but the objective is simple: to put the customer at the center of everything they do.

CHANGING THE DEAL: Thanks to the internet, dealerships are not the first port of call for car customers.

A new dealer

The dealership has traditionally been the car industry’s primary touchpoint with its customers. People would visit their dealers to learn about, see and experience the product. They would negotiate the terms of their purchase in person. And they would return to the dealer periodically through the duration of their ownership for servicing and repair activities.

Carmakers spend a lot of time and money on their dealer networks, ensuring their showrooms comply with brand values and training sales and service staff. And they know how important they are. While customers rank the quality of the product as the number one reason they prefer certain brands, the quality of aftersale service and the help and support they receive from dealers are their second and third priorities.

Worryingly, however, today’s dealers don’t seem to be meeting customer needs. Consultancy Deloitte found that fewer than half of U.S. consumers had a positive attitude toward car dealers, with many feeling that dealers treated them unfairly or with disrespect. U.K. consumers trust automotive companies less than supermarkets, hotels, airlines or travel websites.

Worse, dealers have fewer opportunities to persuade customers of their good points. EY, another consultancy, found that 80% of customers begin their research into vehicles, dealerships and offers online, spending around 10 hours on the web before they set foot inside a showroom. By the time they do cross the dealer’s threshold, the purchasing decision is largely made: The same research suggests that 80% of customers buy from the first salesperson they come into contact with. Most dealers organize events designed to attract customers and introduce new products, but only a third of customers say they are interested in attending.

Changes in store

To change this dispiriting picture, car brands are encouraging their dealers to adapt their offerings and presentation to better reflect the tastes of their local customers. Audi’s dealership in Broomfield, Colorado, for example, keeps a stock of high-end bicycles alongside the cars on display. Customers bringing their cars in for service can borrow a bike while they wait and cruise the city’s extensive network of bike paths and mountain bike trails.

Other carmakers are adopting new formats, designed to make experiencing their product easier and more accessible. Tesla has eschewed the conventional dealership model altogether. Instead, the electric carmaker runs a network of “stores” inside shopping malls and other high-footfall areas. Customers visiting the stores can see and touch the product, but they are directed to the company’s website to finalize their purchase.

In China, Ford is running a partnership with e-commerce giant Alibaba. The two companies have opened an automatic car “vending machine” in the city of Guangzhou, the first of a network planned across the country. Customers can use Alibaba’s Tmall app to book a test drive of the exact make and model they want. They then visit the five-storey machine at the appointed time, enter their credentials at a touch screen terminal and their chosen car is dispensed to them automatically.

MACHINE ORDERS: Ford and Alibaba have opened an automatic car “vending machine” in the city of Guangzhou, China.

The digital opportunity

Even if customers eventually end up at a conventional dealer to make their purchase – as most do – car companies are striving to build purchasing “journeys” that seamlessly connect the real and virtual worlds. Consultancy Bain & Company estimates that customers are likely to switch between different online and offline channels at least four times as they research, configure and eventually buy a new vehicle. Those customers get frustrated if they have to supply the same information repeatedly through the process, creating the need for effective “omnichannel” customer management tools.

Digitalization is also key to car companies’ efforts to play a more active role in the car ownership experience, building closer and more personal relationships with their customers during the periods between purchase decisions. When Daimler launched its first battery electric vehicle earlier this year, the German carmaker placed as much emphasis on the associated services as on the product itself. Customers can opt into a collect-and-return service that means they no longer have to travel to a dealer for routine maintenance, for example. As they drive, meanwhile, a smart climate control system will adjust the interior ambiance based on a range of data, including the length of the planned journey, the traffic conditions and even information on the driver’s stress levels provided by the biometric sensors in their smartwatch.

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One car, many customers

At the extreme, this personalization approach involves a shift away from outright sales entirely. Porsche, for example, has launched the Porsche Passport service in five cities in the U.S. and Canada. Under the scheme, customers pay a fixed monthly fee for access to a fleet of Porsche vehicles. They can “flip” cars as often as they want during the subscription period, perhaps using an SUV during the week and a two-door sports car at weekends. Vehicle change requests are executed using a mobile phone app, and all the annoying details of car ownership, like insurance, maintenance and cleaning, are handled by the company.

Companies aren’t just targeting wealthy customers with these new flexible ownership options. Volkswagen, which established a car assembly facility in Rwanda last year, is using shared mobility services as a central element of its activities in the country. Under the Move brand, the company offers a range of sharing options in Rwanda – from conventional fleet management services for corporate customers to on-demand ride-hailing options for hotels or individuals. As well as opening up access to its products in the country, which currently has very low levels of car ownership, VW is also using its experience in Rwanda to test the viability of different mobility solutions in sub-Saharan Africa.

EW ROUTE: Porsche has expanded its Porsche Passport service to more North American cities.

Logistics in motion

What does the new focus on customer centricity mean for car companies’ logistics activities? According to Fathi Tlatli, President of the Global Auto-Mobility Sector at DHL, the new logistics challenges can be summarized in three words: segmentation, service and sustainability.

“The automotive sector is not going to be able to serve all its customers with a single approach,” he explains. “Different customer groups, product types and business models will all have their own unique logistics requirements.” The growth of e-commerce as a vehicle sales channel will require car companies or their distribution partners to find new places to store inventory prior to sale, for example, as well as new last-mile delivery approaches. Car-sharing schemes create the need to continually reposition vehicles throughout their life cycles, so customers have access to the cars they want, when they want them.

When it comes to the aftermarket supply of spare parts and consumables, meanwhile, there will be everincreasing pressure to guarantee high levels of availability and rapid delivery. “In Europe, around 50% of all new cars are already owned by fleets rather than individuals, and the growth of new mobility services will push that figure even higher,” says Tlatli. “A fleet vehicle is a business asset, and it needs to be on the road, paying its way.” Fleet owners, increasingly including the car companies themselves, will not be willing to tolerate a two- or three-day wait for essential components, he says.

Finally, while the other pressures will tend to drive up demand for logistics, the industry is acutely aware that moving cars and parts around has a significant environmental footprint. As carmakers invest billions in new generations of low- and zero-emission vehicles, they are also keen to minimize the carbon footprint of their own manufacturing and service operations. “At the moment, we’re doing a lot of work with our automotive customers on carbon optimization programs,” he says. “They’re interested in everything from reducing the number of kilometers traveled by shipments to new ultra-efficient warehouses.” — Jonathan Ward

Published: November 2019

Images: iStock; DHL

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