Spinning the Wheel Online

Automotive Spinning the Wheel Online Online Transformation in the Automobile Industry Content Foreword 3 Executive Summary 4 1. Motivation of the study 7 2. Methodology/ Demographics 8 3. How “online transformation” is shaping customers’ behavior 9 4. The industry’s readiness to take up the challenge of “online transformation” 22 5. Five key lessons for OEMs and dealers 30 Authors: Fabrizio Arena Nabil Hedayati Partner Manager Automotive & Manufacturing Group Automotive & Manufacturing Group [email protected] [email protected] Rosa Meckseper Katharina Träger Principal Consultant Automotive & Manufacturing Group Strategy & Organization Practice [email protected] [email protected] Astrid Busse Research and Business Development Automotive & Manufacturing Group We would like to thank Maximilian Martin for his [email protected] comprehensive data analysis support and Daniel Roos for his thoughtful feedback. Foreword The internet and online applications are growing at a rapid pace, tangible for all of us in our daily lives. However, the implications for many industries have also achieved enormous momentum and the differences between winning and losing in this environment are not that far apart. Arthur D. Little observes with reflective awareness the growing importance of ‘online’ and its impact to the automotive industry. It seems that the emotional aspect accompanying the process of choosing and buying a car represents a clear barrier to the acceleration towards ‘online.’ Nevertheless, many other sectors have successfully taken the step to online transformation and have improved the effectiveness and efficiency of sales and the underlying processes. Most automotive manufacturers have initiated transformation programs, often using an experimental approach to new marketing tools or new ways of managing different customer touch points. Arthur D. Little has supported several leading manufacturers to find answers to how and when the automotive industry will be significantly affected by the digital transformation of our society and how to cope with it. The picture we want to give to the market is the importance of the transformation process as a general trend, having specific relevance for the major customer touch points. We think that those who are prepared to abandon the old patterns that have characterized the amazing story of success for the automotive industry of the past century will discover that customers are ready to participate with enthusiasm in new forms of communication and interaction with automotive manufacturers - and dealers. We would like to thank all those who have accompanied us in the last six months in the preparation of this study and who have helped us to generate this important point of view. We are confident that the automotive industry will benefit from the analysis and details provided within the study to better address its processes of change. Sincerely, Giancarlo Agresti Partner, Head of the Global Automotive & Manufacturing Group [email protected] 3 Spinning the Wheel Online Executive Summary For the past 125 years, the automotive industry has been n Research happens online and drives offline sales steadily evolving on a global scale. Yet, in this ever-changing – The research phase has been dramatically shrinking world, automobile manufacturers and dealers are constantly over time: 80% of surveyed customers stated that they confronted with new and unexpected challenges. In the 21st performed the whole pre-purchase research within 8 century, certain mega trends have changed the automotive weeks industry in such a way that the future is less predictable than – The online channel has potential for being a catalyst ever before. for purchase intentions: nearly 70% of surveyed customers spend more time online than offline for pre- Online transformation is one of these megatrends emerging purchase information gathering, with a relevant number all over the world; it affects mature economies as well as researching online only. All interviewed customers developing markets. As for retail business, E-commerce’s share considered the online channel the preferred way to of total retail will continue to grow at a high pace in mature interact with the brand by landing on the OEM’s website, markets, e.g. 6% CAGR ’10 to’20 in the US and it is even engaging with social media activities or with mobile accelerating in emerging markets, taking China as an example applications with an expected CAGR of 31% ‘10 to ’20. Having conducted a study on the online new car sales channel in 2009, Arthur n Online transformation is expected to have an impact on D. Little was keen to obtain more recent views on this topic – the whole value chain especially on how the automotive sector will be affected by the 87% of interviewed OEMs and 66% of dealers expect an online transformation megatrend. evolving scenario for retail formats and the overall network organization. In this report, we have analyzed how online transformation is affecting customer behavior in purchasing cars and parts, as well n Marketing goes online - but few OEMs are ahead of the as how the automotive industry is coping with the undergoing learning curve disruptive changes and opportunities. We have also performed a Online channels (including mobile) are rapidly taking the lead comprehensive analysis to illustrate the current status and key in marketer’s preferences for brand promotion and CRM learnings for the future to enable manufacturers and dealers to initiatives at the expense of traditional media. take advantage of online transformation and stay ahead of the competition. Which are the evolving trends for online transformation in the industry? How does the online transformation impact the n OEMs and dealers are not providing the expected automotive industry today? dialogue ability: the current approach is not matching The key findings of our study confirm that online transformation the emerging customers’ needs has a significant impact for customers and automotive In our survey, we investigated the dialogue ability in terms manufacturers (OEMs)/ dealers: of the average response time for customer inquiries and n The online channel has changed the rules of the game the ability to provide consultation services outside the showroom. Most customers asked for 24/7 realtime Customers are switching between various OEM’s own and response time. In this field, although the dealers are independent sales channels, expecting seamless integration mitigating the gap with an average response time of 9.2 across touch points and through multiple devices; it is a new hours – OEMs are still targeting a service level of around 24 challenge for OEMs and dealers to control the customer hours: this is a relevant mismatch to take into account when experience in this context – customers are in the driver’s seat. 4 Spinning the Wheel Online discussing possible ways to improve lead conversion and Therefore the majority of both premium and volume OEMs getting ready for the launch of online sales. provide a configurator seamlessly across the online website, Furthermore, we have learned that more than 70% of social media and mobile applications. customers would appreciate getting advice at a location On the other hand, by having a closer look into configurator of their choice. OEMs are still lagging behind customers’ features favored by customers – we identified a gap: OEMs needs: only half of them would offer alternative ways of seem to focus on elements like technical stability and ease consultation, the majority being premium players. of configuration while customers also value a more tangible experience such as a 360° exterior and interior view. n Social media and “user generated content” are still unexploited levers for most OEMs and dealers n Nearly 40 % of customers considering purchasing a car Although social media plays a secondary role in influencing online in the future, expect price advantage and the the actual sales conversion, it represents a very important mitigation of hurdles such as hidden errors or lack of and cost effective way to increase loyalty and actively product experience manage the brand image. As of today most automotive Our report shows that the industry does not have an answer players are just ‘taking their first steps’ in this field and on how to cope with the fact that a major motivation for provide fairly little content. customers to purchase online is the expectation to achieve a price advantage compared to the purchase at a dealer site. n Customers ask for dealers’ proximity and express Automotive players still consider other factors, like anytime preference for test drive delivery at alternative availability, to be the key. locations Among the main potential barriers to finalize the purchase 60% of customers are not willing to drive more than 20 km online, the majority of customers stated the inability to to reach dealership showrooms and this evidence seems detect product errors before the purchase (of used cars) to support the trend of an increasing number of inner- and the generic fear to not have direct product experience city showrooms. Customer preferences differ in regional ahead of final contract. Also in this field the industry seems markets (inner-city showrooms are positively rated in China, unaligned with customers’ sentiment as OEMs focus on US, UK and Italy, while rated ‘indifferent’ by Swedish, rather advanced hurdles such as limitations for trade-in German and Japanese customers).

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