The shake-up of the automotive sector

Initially published on 5 Sep, 2018 11:16 am

Digital is transforming the automotive industry. How is the customer journey being disrupted in this new era?

Sophie Desroseaux, Paul Seguineau and Quentin Michard, experts from Ekimetrics, a data science consultancy, discuss their vision on the future of the automotive industry. 

Automotive – a sector in a permanent state of change

The automotive industry is a very competitive sector which has always been driven by product-focused development strategies. This complex and demanding business sector requires the development of a strong innovation culture, to continuously develop new products and technologies in order to stay ahead of the game. This includes offering WiFi in vehicles, using mobile phones to lock cars, developing hi-tech driver assistance systems and adding increased connectivity.

The automotive sector has not escaped the digital revolution. From the production line, to the customer journey, to vehicles themselves – all have been subject to major disruption. The key success factors for manufacturers today are to adapt their product range and business models along with organisational and technological capacities. As previously observed in retail and manufacturing sectors, today marketing is at a pivotal point for the automotive industry, involving the transition from a totally-product centred strategy to a much more customer-centric strategy, particularly in after-sales. This is a promising opening, although a tricky manoeuvre to pull off, since the challenge lies in knowing where to invest resources.

Digitisation is changing the balance of power

Customer expectations are becoming more sophisticated
Ten years ago, the driving experience was at the centre of consumer expectations. Test-driving the vehicle was central to the act of purchasing. For some years now, the explosion in technologies and digital opportunities has been modifying these expectations and the customer experience has changed dramatically. Whereas driving pleasure was the Holy Grail for drivers in the past, the range of services is now taking on a whole new importance. In particular the experience inside de vehicle has become a key criterion in the purchasing decision, a totally new and unexpected phenomenon. Connectivity, driver recognition, personalisation, etc. are becoming increasingly important and reshaping the sector.
"Whereas driving pleasure was the Holy Grail for drivers in the past, the range of services is now taking on a whole new importance."
A disrupted customer journey
The customer journey has also been disrupted, with 21% of customers no longer test-driving cars at the dealership. A TNS/Google survey (of 515 purchasers of a new vehicle) also revealed that 
on average, buyers of new vehicles are now performing only 1.1 test drives, compared to 1.3 in 2016 and 2.6 in 2010. Why such a change? Car dealerships have traditionally been the only ones to own information about their vehicles such as price, colours, options, rankings, etc. But now the internet has given everyone access to everything and online configuration tools are able to take care of most of the searching and personalisation work. Easily accessible on the web, test-drives and owner reviews help accelerate the process. This major change clearly reduces the importance of car dealerships in the purchasing cycle, to such an extent that e-commerce, which was previously the preserve of the second-hand car market, is being seen by some leaders in the sector as an increasingly serious alternative... This bold move would enable them to re-establish a direct link with customers, collect owners' data as well as bypass the traditional manufacturer-customer-dealership relationship. The short-term reality is more nuanced however. Car dealerships remain strong points of contact in the after-sales period, meaning that they are also vital collection points for data (on servicing, breakdowns, frequency of visits, vehicle maintenance, etc.) for vehicle manufacturers.

Darwinism and marketing departments

The promise of a high-value customer experience
This access to information is not one-sided and companies are also benefiting. Social networks have given consumers a voice and it is a fantastic opportunity for car manufacturers to streamline their product portfolio, adjust their service offering according to customer feedback and position themselves at crossroads which really matter in the customer journey. This is creating a new deal in the manufacturer-customer relationship, helping companies to identify niche opportunities while, in theory, ensuring consumers benefit from more targeted products. This heralds an era of transparency, with a new, more holistic approach to communications and repositioning value-creation at the centre of the dialogue between manufacturers and customers.

From product-centric to customer-centric
In the automotive sector, the game isn't over with the conclusion of a sale. Far from it! Four critical periods are traditionally identified, each requiring its own relationship approach: prospecting, purchase of the vehicle, delivery and after-sales. Ideally, the cycle begins again with a re-purchase. It is therefore crucial in this business sector to exploit opportunities for contact with the customer once the vehicle has been sold, particularly since it has been proved that there is a direct correlation between after-sales relations, loyalty and re-purchase.

In a context of fierce competition – led by traditional manufacturers, as well as by less traditional players, digital natives and pure players such as Norauto, Feu vert, Roady, Speedy, etc. – we are seeing increasingly sophisticated CRM practices in automotive, illustrating manufacturers' desire to invest more in digital, through more structured and sophisticated loyalty strategies.

AI technologies, algorithms, predictive analyses and marketing automation are reviving the art of customer retention while increasing customer knowledge via scoring, predictive analyses and digital strategies. That now makes it possible to segment behaviours, re-design the customer after-sales journey, understand the impact of contact points in online and offline channels, for example, and potentially anticipate the propensity to re-purchase, the final stage in a winning loyalty strategy. Enhanced connectivity in vehicles provides the raw data for this analytical potential, allowing details of drivers' behaviour behind the wheel to be monitored whenever they use the vehicle.
"Enhanced connectivity in vehicles provides the raw data for this analytical potential, allowing details of drivers' behaviour behind the wheel to be monitored whenever they use the vehicle."

Data to promote performance
The democratic access to data is allowing leaders in the sector to fortify their marketing and advertising investments. Most leaders in the automotive sector use the Marketing Mix Modelling (MMM) technique to measure the impact of their investments and ensure optimised and efficient budget allocation. This involves knowing where to invest, divesting, quantifying expected ROI, defining growth targets by country, product, range, market, channel, etc. For the most mature companies, advanced statistics have made performance more transparent. Data science, combined with business expertise, is now used as a deciding factor when making strategic decisions, making it possible to construct neutral, quantified languages, leading to new collective intelligence.

Data - a strategic exchange currency

Autonomy, connectivity, vehicle-sharing – the digital transformation takes many forms and it is currently too early to say which strategy will pay off. The sector has particularly complex production and distribution processes, so the long-term impact of new digital native entrants remains to be seen. One of the most fundamental issues, however, the common thread running through all these new uses, is ownership of the data – or at least access to it. The question of ownership will be decisive in selecting the main winners in this market.

This article is also available in French. 
Chief Marketing Officer Ekimetrics
Senior Partner and Head of Ekimetrics France
Senior Partner and Head of Ekimetrics London
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