By Mike Hastings and Dan Rubin
Yes, storm clouds are gathering for the automotive industry. In 2017, annual vehicle sales dropped for the first time since the financial crisis while GDP grew 2.3%. Industry disruptions like e-hailing and car sharing are gaining momentum as oil prices continue to rise. And driverless cars are no longer a beta idea but a reality with Waymo’s launch in Phoenix.
None of this bodes well for the industry.
Auto marketers can best respond by focusing on three major areas: the retail experience, the connected car, and new mobility patterns. Out of these three areas, we suspect a major shakeout in the digital phase of the retail experience will happen first. Those brands that radically enhance their ability to digitally connect with auto buyers and make their digital marketing more human will enjoy outsized rewards.
Efforts in the automotive industry to impact the retail experience—or the buyer’s journey—occur in four areas:
Recent industry innovation has been particularly pronounced on the dealer side of the equation. In 2012 GM required Cadillac dealers to designate two employees as certified Cadillac User Experience (CUE) specialists. The same year, Lexus created the delivery and technology specialist position at its dealerships. BMW Geniuses were launched across the US in 2014. These positions largely perform customer education and assistance tasks that were previously assigned to salespeople. As a rule, these roles are non-commissioned and focused on customer satisfaction rather than closing sales.
Dealers are also taking great strides to improve the service experience. They now emphasize a pleasant, end-to-end service experience. Complimentary loaner cars, café-style waiting rooms with multiple TVs, free food and drinks, gaming for kids, and enticing car accessory shopping are common components of the enriched service experience.
Less noticeable are enhancements in digital marketing. Even though carmakers have expanded their websites with increased functionality over the last five years, they are not winning the digital battle for customer attention. For example, new car buyers typically start their research by visiting independent sites, not the OEM’s sites. This fact begs the question: How can OEMs become the first and preferred stop in the digital phase of the car buyer’s journey?
Poor Bottom Line Results
Some retail experience improvements are paying off. For example, last year’s J.D. Power Customer Service Index (CSI) rose over 3%. Unfortunately, overall car buyer satisfaction is stuck in low.
- The American Customer Satisfaction Index (ACSI) for autos and light vehicles dropped 1.2% in 2017—despite the improvements on the service side.
- A 2016 survey by Beepi and Harris Poll reported 87% of Americans dislike something about buying a vehicle at a traditional car dealership.
The above measures constitute a very poor bottom line score for marketers.
Some of the decline in the ACSI can be attributed to specific brands. The mass-market automakers with the largest losses were Honda (-6%), Dodge (-4%), Ford (-2%), and Chevrolet (-2%). The luxury brands with the largest declines were Lincoln (-5%) and BMW (-4%).
Where is the Problem?
The most likely culprit behind low customer satisfaction is a poor digital retail experience. Consider these arguments:
- Efforts to improve service center experience were successful, but overall customer satisfaction still declined.
- Two-thirds of the marketing budget is spent on purchase incentives, something customer have come to expect. And how much do incentives truly work when there’s always a deal to be had? It hardly makes sense to increase this expenditure. If anything, it is a Band-Aid for low customer satisfaction, not a cure.
- Traditional automotive advertising has been unable to reverse the decline in customer satisfaction. Perhaps recent industry efforts in social issue marketing will have an impact, but it is too early to tell.
- Significant, innovative efforts over the last five years to enhance the dealer sales experience failed to improve overall satisfaction. We suspect the reason is because car buyers tend to be very far down the path of solidifying their vehicle decision (e.g., new or used, make, model) before they visit a dealer. In other words, perhaps buyer satisfaction is low before they visit the dealer.
- Most of the information gathered before visiting a dealer is sourced digitally, not through traditional advertising. This is also where buyers spend the most time. This makes digital marketing the make-or-break component of the total automotive marketing mix and potentially the most critical part of the automotive buyer’s journey. If the customer isn’t interested after their digital experience, will they cross that brand off their list?
It could be argued that the “tried that” objection could be applied to digital marketing as well. Automakers already provide ample digital information: vehicle photos and videos, prices, features, options, specifications, and even local new and used car inventories. Car magazines and reviewers publish a wide array of test drives and statistics. Social media provides large numbers of personal comments, photos and videos. So, what’s missing?
What are the Digital Jobs to be Done?
The automotive industry proves that tons of digital information does not create a favorable digital experience. People are still dissatisfied with the car buying experience. To turn this around, automakers need a firm grasp of what the customer is looking for—the ‘jobs’ they are trying to do during the digital portion of their buyer’s journey. Understanding the gap between what customers want and their current experience is essential for developing innovations that better satisfy car buyers during the digital phase of their journeys.
As marketers know all too well, the innovation process is cursed with high failure rates. Tony Ulwick, a long-time practitioner in product innovation, places the average success rate at 17%. His research tells us that the success rate jumps to 86% when the innovation process rests on jobs-to-be-done research. More specifically, radically higher success rates can be achieved by following the Outcome-Driven Innovation (ODI) methodology.
Once the desired outcomes are defined, it is possible to:
- Assess how well their needs are being satisfied.
- Segment customers based on how well their needs are being served.
- Identify which markets are most underserved and would be most responsive to experience enhancement.
Responding in the Digital Moment
A macro-level trend in digital marketing is to make the digital shopping experience more human. Posting text and media on web pages is nowhere close to responding in the moment. Buyers want their online experience to approximate an actual face-to-face dialogue. They want brands to show they are listening to them.
When a buyer is conducting research and they visit an automotive web site, the highly difficult questions to answer are: Where are they in their journey? Are they just starting? Are they a return customer? If returning, what was their previous experience like? If they are a new customer, what brands did they drive before? Why are they considering us?
Before the internet, when a customer walked into a dealership, a good salesperson would welcome them and ask if they could be of service. In other words, they were polite and respectful. There was a give and take. The salesperson asked a question, and the customer responded.
It is exceedingly difficult to replicate face-to-face conversation in the digital realm. As a marketer, you have no body language or verbal cues to guide you. You only have digital breadcrumbs left by the customer, either before they visited your site, or during their current visit. The opportunity is to use these breadcrumbs to understand where each individual is and what they want or need to accomplish to be satisfied.
Despite the extremely high barriers to full customer engagement on the internet, customers still give no quarter. They expect the marketer to divine where they have been, where they are going, and what will help them get to the finish line. In short, they expect automakers to conduct a modern, digital conversation with them.
Why do car buyers have such high expectations? Because leading brands in other industries (e.g., Starbucks in coffee, Apple in computers, Lowes in home improvement) already monitor where the customer has been, anticipate their needs, and make spot-on offers of assistance, engaging at the right time with relevant content. Car buyers want the same level of attentiveness.
The automotive industry needs to hear the buyer’s complaint: you are not listening to me during the digital phase of my journey! This situation is both a threat and an opportunity. Low industry-wide satisfaction makes the industry highly vulnerable to disruption. But the opportunities are equally compelling. For example, the rise from the lowest mass-market brand (Dodge) to the highest (Toyota) in the ACSI survey mentioned earlier is almost 15%. In other words, when you demonstrate to car buyers that you are listening very carefully, they reward you with sales and loyalty.
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