As automakers gather this week and last in Detroit at the North American International Auto Show, they’re celebrating impressive 2017 sales—especially of trucks and SUVs that generate big profits. But the outlook for 2018 and beyond is a little less clear.
Consumers aren’t buying as many vehicles overall, oil prices are rising (recently hitting their highest prices since 2014), and manufacturers continue to rely heavily on discounts to “move metal.” This could be compounded as interest rates rise, young consumers show less interest in buying cars, and the supply of used cars grows. In the face of these challenges, automakers acknowledge they need to gain share of a shrinking market. And much of this burden falls to their marketing teams.
OEMs that want to succeed moving forward will have to take advantage of several trends in the auto industry that present significant new opportunity. This post outlines three key industry evolutions that may be keeping automakers and their marketers up at night—but actually present the opportunities they need to gain that coveted market share:
- The changing retail experience
- The connected car and IoT
- Changing mobility behavior
Read on to get the specifics on each trend and how auto marketers should be considering each opportunity.
1. Changing retail experience
One of the biggest things happening in the auto world that's perplexing marketing teams is that customers are changing the way that they buy cars. Dealerships used to be where the buyer’s journey started. For many, the dealership has now become the last step in the journey after doing research on financing, reliability, warranty, maintenance, etc. By the time they visit the dealership, consumers have often narrowed their selection down, and they know what they want and what it will cost them—making the test drive and dealer experience all about closing the deal.
The most savvy OEMs are beginning to adapt to this new paradigm by using their dealerships to deliver engaging experiences rather than just to sell cars and provide repair services.
BMW, for example, has turned dealerships into experience centers that let customers immerse themselves in the brand and what it means to be part of the BMW family—rather than pushing car sales. For people that have never engaged with brand before, this is a great way to bring them into family and get them engaged at ground level.
Many other dealers have created café-style environments where customers can sit and relax while cars are being serviced with multiple TVs, gaming for kids, and more accessories to browse through.
The ongoing challenge will be not only how to deliver a delightful experience at the dealership, but also how to engage more consumers earlier in their journey with the brand.
2. The connected car and IoT
IHS Markit predicts that by 2020, there will likely be a market generating approximately $14.5 billion in revenue from data assets created by the auto value chain.
The potential for incremental revenue based on data generated by connected cars and the Internet of Things is big, to say the least. But most of the data generated today isn't going anywhere or benefiting anyone.
For example, one large OEM that I’ve worked with has a homegrown database that's about 10 years old with 75 different data sources flowing into it—they do not have a single view of the customer. They cannot look at an individual driver in the moment and know what's happening with them. The data is there, but they are not using it to their advantage.
OEMs have a new revenue channel opening up for them with the connected car, a subscription model similar to cell phone. Monthly data service packages like GM’s OnStar will grow exponentially, generating huge revenue for automakers. Being able to harness that data will provide perspective into driving behavior that has never been available before.
Automotive marketers are challenged now—and will be challenged increasingly in the future—to make better use of the IoT and data it generates to drive consumers toward a desired action. The low hanging fruit is using data to generate service visits for the dealership. Driving behavior (such as what geography the car is being driven in and how aggressively it's being driven) affects the frequency in which vehicles will need new brakes, transmissions, etc. Auto marketers should be harnessing this driving behavior data from the connected car to recommend appropriate service the car needs in the near future. The more information automakers can glean about how the customer is driving, the more they can use this knowledge to educate the owner about how to keep the car running as well and as long as possible.
With the amount of data that cars generate, the opportunity for highly personalized communication with their owners is huge. Consider being able to identify specific lifestyle segments of drivers, such as "weekend warriors" that drive little during the week but hundreds of adventurous miles on the weekends. Marketers could use information like this to maximize communications with these drivers to encourage proper service, but also to market new cars that may be a good fit for their lifestyles.
3. Changing mobility behavior
Consumer mobility behavior is also changing, which is mostly cost-driven. Services like Uber and Lyft are making it cheaper than it has ever been before to travel with a ride service. For example, I live in New Jersey; if I were to drive to the Newark airport and park overnight, it would cost me about $60. I can hail a ride through Uber both ways for more like $15. Ridesharing services like Zipcar are making it possible for consumers to avoid buying a car altogether, allowing them to borrow vehicles as the need arises.
Overall, people are beginning to look at cars differently than they used to—they're no longer a requirement for getting around on your own terms. This trend is leading to up to one out of ten cars sold in 2030 potentially being a shared vehicle and the subsequent rise of a market for fit-for-purpose mobility solutions (McKinsey).
This is a tricky problem for OEMs and their marketers to address. One place to start may be altering our approach to segmentation.
Whereas we may have done fairly well segmenting by country or region in the past, it will likely be necessary to begin segmenting our audiences more granularly, looking at the type of city or town they live and work in.
Is it a city with a well-developed public transit system? Do ride sharing services operate successfully in this town? How many Uber and Lyft drivers are registered to drive in this geography? All of these factors may influence mobility behavior and could call for different vehicle product offerings and messaging. This ties back into IoT—marketers could be making using of vehicle-generated data to better understand the driving behavior in different locales, segment these drivers more effectively and subsequently offer more relevant conversations.
But OEMs will likely need to go beyond better segmentation to solve for this trend. They will need to consider deeper product and service innovation to meet changing customer needs. Book by Cadillac is one such innovation and reinvents the traditional model of leasing a car. With Book, you pay one monthly fee to keep a car—a Cadillac—but any time during the month, you may swap for another car. Remember that "weekend warrior?" He may want an economic sedan as he commutes to the office during the week and trade for a rugged SUV to hit the backcountry slopes on the weekend.
This approach by Cadillac diverges sharply from the typical mindset of just pushing cars off the lot. Other OEMs need to look carefully at their customers' unmet needs and think on this scale to earn their mobility business. For example, another opportunity is for OEMs to be able to harness the in-car experience. If fewer consumers will purchase cars, they’ll still need to use cars and will likely purchase cars in the future. Being able to capture all in-car behavior data (driving, locations, infotainment, etc.) will be key intel to use for future marketing campaigns.
It all comes down to knowing the customer
What all of these automotive trends point to is the need for auto marketers to have a better understanding of the customer and operate in a more agile and innovative manner to meet the needs of this new customer. It's a new world out there for OEMs, and making the transition to a more customer-centric approach to business and marketing will be challenging. But it's possible—and it will eventually be necessary to survive.
Stay tuned for more posts on how to address these changes in the marketplace by uncovering and delivering on customer needs.
You might also want to check out this case study: Luxury Auto Maker Champions CRM 3.0, Focuses on the Customer.