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6 Considerations for Automotive in Difficult Times

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Martin Brierley
Creative Partner

Many brands have grown and strengthened through the Pandemic - with ecommerce driving much of the growth.

 

The UK has seen a 35% growth in online retail in 2020 (emarketer). Not surprisingly growth wasn’t a feature of the automotive sector. The industry is being hit hard by changed circumstances. 

Just as the Pandemic struck and dealerships were closed by the lockdowns - leading to a 30% fall in new car registrations in 2020 (SMMT Data) - the automotive industry was headed into a cyclical downturn with potential for much greater threat coming from disruptors new to the market, technology shifts, and legislative demands driving up costs.  

As if it wasn’t enough to suddenly be required to sell only electric vehicles in the UK in less than ten years time, manufacturers are being threatened by new players in the market and by technology advances which would potentially see the end of driving for pleasure!

Add to this the radical shift in consumer behaviours as buyers look to more digital engagement with auto brands right through the purchase funnel to the point of purchase and beyond, and you realise auto manufacturers are potentially looking down the barrel of a gun.

But it's not all doom and gloom. There are learnings to be taken from other sectors and there are actions that can be taken right now which will mitigate some if not all of those threats.

Many automotive brands have fallen behind the behaviors of their customers. We know that customer service is a key differentiator but a key part of customer service is the consideration of every touchpoint a brand has with its customers through the funnel. Increasingly, and because of changed behaviours, many of those touch points will be digital so it is now mission critical that digital is front of mind, from pre-sale through conversion to after-sale service. 

 

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Listen to the customer

Always start with the customer. It’s the way you deliver the sweetspot where your business demands meet their needs. It's clear that the pandemic has pushed people online. From our own report we saw brands experiencing exponential uplift in online sales of upto 1200%. Will those customers be prepared to buy their next car online? An increasing number of them will, and some won’t. But it's clear that digital tools will enable stronger connection, brand engagement, enable sales growth, do much of the administrative heavy lifting ... and inevitably many buyers will transact digitally.

It’s also clear that simply buying a car by walking into a dealership and writing a check is over. It’s not clear if buyers will move to a completely digital purchase - but it's clearly going to need to be an option - the used car platforms have proven this. CAZOO is one of Britain's fastest growing businesses with revenue of £150m in its first year and a valuation of 2billion after two years trading. Only eighteen months ago you’d have raised eyebrows at the notion that online purchase and delivery to your door would generate that kind of eye watering revenue.

 

New models for financing

For many the appeal of subscription models, bundling running costs, reducing capital outlay and providing different ways of amortising the cost of a car over a variable number of years is clearly appealing. It’s also a behaviour that more and more of us are adopting, as we commit to monthly content streaming packages, beauty products and beer.  Clever ways to address the changed driving habits of a more digital, urban dwelling, greener Gen X and Gen Z , will need to be on the table. 

Ride sharing, co-ownership or purchase based on hourly or mileage usage will become the norm. Look at Drover ! Just as the new battery technologies of the electrification revolution, will potentially enable car owners to recoup costs by charging off-peak  and reselling  that energy back to the grid at peak times.

 

The Dealer Networks

Many auto manufacturers rely on a network of dealers who might or might not play the digital game - or play it at the required speed. After all they are not digital experts, their expertise is in the real world “hard” or “gentle” sell. Close collaboration with those key players will be essential. Giving them the right digital tools and the understanding of how to use them is necessarily mission critical. After all frictionless engagement for the customer is everything and when their journey to purchase almost certainly starts online it's clear that even if this doesn’t end with an online transaction the ability to make the journey pain free is essential. The separation of brand from dealer in the online experience can also have unseen costs - fracturing data infrastructure and facilitating more drop off. Bringing dealers on board with the digital transformation will reap rewards. 

 

Partnerships

As we stand at the crossroads, moving towards Carbon net Zero there’s a clear need to bring on partners who can facilitate charging stations and mapping, or energy reselling; who can help manage and make sense of the massive new accumulations of data; or simply those digital and system experts who can assist with the most fundamental systemic changes, from sales and marketing through to supply chain management. 

These are global challenges for global brands that will need to be actioned in local markets with real focus and determination. Find partners who bring your business real value and understand the new terrain, engage real digital experts driven by the passion to deliver what your customers will love. 

 

The Value of Data

The accumulation of data over the last decade has gained extraordinary pace facilitated by cloud technology and by in-car or on-car smart computing. Those data points in themselves are of huge and often under exploited value. As long ago as 2016 Ford CEO Mark Fields suggested the blue lozenge giant would become a ‘data company’ if it were to be able to compete with the anticipated disruptors driving towards vehicle autonomy - Apple or Google to name just two.

In order to understand which cars to build the best way is to gain granular understanding of customers and that’s going to be achieved through data. Data will drive design criteria, will enable a frictionless journey through the purchase funnel and will ultimately ensure the attainment of the holy grail, customer loyalty. 

Establishing a clear and joined up data architecture right now that enables manufacturers to anticipate, optimise and personalize experience of their brand will be a key differentiator. That data may well also be a cross industry revenue generator in its own right if we take the example of what Rolls Royce (insert link to Yocova Case study) is doing in the aviation sector.

 

Rapid and Agile Decision Making

What has become clear over the last ten months, since the beginning of lockdown and the first closure of car showrooms is the urgency of digital transformation. And it’s not just Ian McLaren of GOVIA Thameslink (insert link to our report) said that the rail industry has seen three years of transformation in as many months and the Pandemic has accelerated transformation across sectors from FMCG, through Alcohol to Aviation. 

The ability of boards to respond rapidly and with flexibility to the new normal, reallocating budgets and understanding the dynamic pace of change,  has separated the wheat from the chaff. These are hard times for all but the ability to captain your business - that must sometimes feel like a lumbering ocean liner - with the vision and foresight of Ben Ainslie, will ensure you are first to the finish line. 

 

And finally 2021 and beyond...

This new year may not yet see buyers in dealerships but should be seeing auto brands reflecting on the rapid actions to be taken. First on the list must be to fast track new digital buyer solutions, supporting dealers as they attempt to invigorate with re engineered digital platforms and tools fit for delivering the sweetspot where customer’s changed expectations meet business ambition.

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