Sharp Turns Ahead: How Automakers and Car Dealers Can ...

Sharp Turns Ahead

How Automakers & Car Dealers Can Compete More Effectively in a Data-Driven World

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"More connectivity gives you more data and insights, and that means more opportunities to put contextually relevant messaging in front of customers and prospects."

--Tim Hayden Brain+Trust Partners

The industry we used to know as "automotive" is now more accurately described as the "mobility" industry. Dynamic shifts are in process, and massive changes have occurred in the two short years since Arm Treasure Data and Brain+Trust Partners first published the paper, "Harnessing Automotive Data Analytics."

New disruptors--both inside and outside the industry--are continuously reshaping consumer and mobility behaviors:

Companies like Carvana, Vroom, and Power Band Solutions, unaffiliated with any original equipment manufacturer (OEM), are eating into the market share of used car dealers.

Automakers like Tesla, Polestar, and Rivian are creating new vehicles and business models that eliminate car dealerships altogether.

Subscription models, which allow drivers to use multiple vehicles for a monthly fee that includes all insurance and maintenance costs, are also redefining what it means to "own" a car.

Micro-mobility platforms that deploy and manage on-demand and connected scooters, bicycles, and motorbikes are giving people new reasons to ditch their automobiles and mass transit for short and first- and last-mile trips.

Convenience services that quickly deliver meals, groceries, and even vehicles themselves (concierge service, new car delivery by a dealership) are shifting the consumer mindset away from using a car in the traditional sense.

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Mobility Is Moving the Industry Away from Traditional Dealerships

According to the 2019 KPMG Global Automotive Executive Survey, the number of retail outlets for automobiles will decrease 30 to 50 percent by 2025. "The pivot point here is true mobility, splitting modes for getting from one place to another," says Tim Hayden, president and co-managing partner of the digital transformation consultancy Brain+Trust Partners. "In the past, an automotive brand was a personal identifier, often indicative of social status. Generation X and Millennials were the first to embrace utility and efficiency beyond brand and style, and many who are recently of driving age don't even care if they own a car. Today's consumers have myriad ways of achieving mobility, whether that means commuting to work, going places, or having goods and experiences delivered to their front door." Even though vehicle purchases are down and the use of non-owned vehicles is up, people do still buy cars and trucks. But the types of vehicles being bought is shifting and that impacts dealerships, too. For example, the steady sales growth of electric vehicles, which have a fraction of the maintenance and repair requirements of internal combustion vehicles, threatens the fixed operations and repair order (RO) revenue of dealerships. Electric cars are expected to enjoy nearly 8 percent of U.S. market share by 2026. They already meet or exceed that number in several Scandinavian countries, with Norway leading the pack at 49.1 percent penetration.

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Electric vehicle share of car market

Electric vehicles are expected to account for 7.6 percent of the U.S. automotive market in 2026, up from 1.2 percent in 2018.

The good news for dealers in all of this is that 75 percent of car-buying consumers aren't ready to buy a vehicle without a dealership involved, according to the Urban Science and Harris Poll 2019 Dealer Survey. The even better news is that automakers and auto dealers who leverage customer data together can compete more effectively and deliver profitable, loyalty-building customer experiences. In this paper, we've outlined five key actions to help OEMs and dealers do just that.

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"Companies across all industries, especially automotive, must be able to take control of the information they have about customers who've bought from them in the past, to influence them and similar consumers to buy in the future."

--Tim Hayden

1. Focus on the Customer--Together

Complex customer buying journeys, which include cross-channel shopping and a never-ending river of vehicle options and alternatives, have created a data explosion that automakers and dealers can no longer ignore. In addition, by 2023, 70 percent of all vehicles will be shipped with factory-installed connectivity, IDC predicts.

Connected cars, meaning vehicles connected wirelessly to other devices, already collect a vast amount of data that can be used to gather insights about drivers and passengers. Onboard devices for vehicle diagnostics and smartphone integration with in-car interfaces combine to make the data coming from the "mobility" experience as rich and personal as anything else. After all, the car itself is now a personal consumer electronic device.

All of this ultimately means additional opportunities to strengthen customer relationships. In the short term, data that provides customer insights will improve acquisition and retention efforts targeted at a shrinking car-buying audience. In the long term, data from customers, competitors, and cars themselves will help automakers, dealers, and ancillary companies better prepare for whatever the future has in store. Subscriptions? EVs? Self-driving? Hoverboards?

"To retain what remains of dealer loyalty and brand affinity, dealers and OEMs must holistically know their customers beyond simple transactional sales and service insights," Hayden says. "Companies across all industries, especially automotive, must be able to take control of the information they have about customers who've bought from them in the past, to influence them and similar consumers to buy in the future."

At the 2020 NADA Show in Las Vegas, many dealers were talking about the value of data. According to Hayden, "There are dealers who understand how to collect and analyze data, and many who are able to persuade even the most reluctant buyers in the most challenging of markets. Fewer, however, are truly able to get to know those buyers over time to capitalize on behavior changes and future sales opportunities."

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2. Align Messaging to Consumer Channel Preferences

Automotive marketers need to effectively communicate with customers and prospects inside dealerships and while they're doing online research. Proven tactics, such as device-responsive web pages and location-based messaging, can go a long way toward reaching consumers who would rather search their phones than speak to sales associates. Sixty-nine percent of consumers said they look up reviews on their phones while shopping in a store, and 53 percent said they search for deals before asking an employee, according to a RetailMeNot study. Delivering contextually relevant messages to the right people at the right time on the right platform is arguably the greatest challenge for the automotive industry. Consumer behavior has evolved, but automotive has been slower to shift media spending to digital channels than global industry averages. Auto marketers must now adjust investment schedules to reach consumers where they are and leverage data regardless of the platforms they use. eMarketer predicted the U.S. automotive industry would increase its digital ad spending by 15.8 percent to $15.91 billion in 2019--slower than the 19.1 percent growth expected in other industries.

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"Strategic shifts in media investment strategy--such as setting goals and aggregating data from video viewership versus siloing television, cable, digital video, and connected TV with over-the-top campaigns--allow brands to understand the impact of video by channel, geography, and audience segment. This is key to communicating effectively with a diverse audience," says Tracy Arrington, EVP of marketing and media at Brain+Trust Partners. No matter the channel mix, delivering a personalized customer experience and spending efficiently and effectively in media can only be accomplished with a unified view of each customer. "Managing frequency, content, and timing, and understanding the business impact of both online and offline spending, requires a sophisticated data infrastructure that consistently delivers insights and opportunities to optimize," Arrington says.

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"There's more data out there than anyone knows what to do with. Before insights can be extracted, data governance policies must be put in place to ensure that data can be collected, accessed, and analyzed in a secure way."

--Tim Hayden

3. Share Ownership of the Customer Relationship

Often, dealers own the primary dialog with the customer while OEMs host the initial consideration, option builds, and financing inquiries before referring a prospective buyer to a dealership's sales team. Instead, automakers must think about the customer journey in more experiential terms. This means working with dealers to improve the buying experience and making it consistent across the entire dealer network.

Part of this requires defining where digital lives in an automotive organization, as digital customer experiences now occur across marketing, sales, finance and insurance, and service. Additionally, sales organizations and regional dealer agencies will be most successful when given access to a cadence of digital analytics and customer experience insights.

A critical factor is the collaboration between dealers and OEMs. "Who owns the relationship with the customer?" Hayden asks. "To what extent are dealers obligated to tell OEMs about local issues related to customer service and customer feedback? And likewise, how seamless do OEMs share market and individual customer insights with the local and originating dealer?"

Typically, OEMs and dealers aren't coordinated when it comes to understanding customers along their buying journeys. However, this lack of data coordination can be immediately addressed for a big impact. For example, OEMs can get a better handle on media attribution and business outcomes at the individual dealership level to learn which leads purchased a vehicle in response to national or regional media.

The coordination of dealer management systems (DMS), OEM systems, and vehicle operations systems should be a top priority across the industry. Current and interested buyers may be responsibly monitored (while respecting privacy at all times) through the purchase process and beyond, as they become customers. This will help automotive marketers communicate more meaningfully to consumers who visit their websites, abandon a shopping cart, make a dealer appointment, visit a dealer, become a customer, or purchase a vehicle from another source, such as a different dealership or manufacturer.

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