by Automotive News
The commercial model for selling cars is shifting, with manufacturers adopting the direct-to-consumer (also know as the agency model) trend being witnessed by a wide variety of business sectors as people look to simplify the buying process.
This is a sea change for vehicle producers. It’s also complicated to navigate in terms of the agreements that will still be required with dealerships.
The net result is that automakers are experiencing major and sustained pressure on their bottom lines.
Tackling the industry’s shifting vehicle retail sands requires a three-pronged approach: sell more; sell better; seek out new sales streams.
Of course, it looks obvious on paper. But far from being a rousing sales team pep talk, these concrete steps form the basis of the modern motor trade. Let’s look at them in detail.
This is not the obvious admonishment to sell more vehicles (although that of course is important); rather it focuses on increasing the ‘extras’ sold to someone who has purchased a car.
Currently a buyer visiting the manufacturer’s website a week after placing their order is likely to be offered another car. This doesn’t work for anyone.
Contrast that with a consumer buying a car who, on returning to the website, is shown a range of available ancillary options — extended warranties, accessories, service specials etc (and even specific offerings such as seasonal items, based on their geographic location — snow-tires in winter for example).
This personalized approach, undertaken in close collaboration with dealers, extends the carmaker’s relationship with the buyer from the current period of one to two years, potentially to between five and eight years. And by increasing this customer lifetime value, it opens up a range of revenue-generating opportunities that add value to the end user.
Telecom company Orange, for example, sells a wide variety of accessories such as earbuds and phone cases as a result of the personalization of its website and after sales advertising campaigns.
And travel specialist Pierre & Vacances Center Parcs, operating a voucher system as the pandemic forced people to cancel their holidays, encouraged travelers to supplement trips planned for the future with incentives such as bigger rooms and additional activities.
Making these as appealing as possible required the company to minutely analyse its customer data in order to offer experiences that were relevant to different customers; leveraging the initial ‘big’ purchase to position the follow-up messages in order to sell more to already acquired customers and realise more profit is a key piece of the most effective digital strategy.
Currently carmakers control only a small part of the purchasing experience.
A potential buyer might approach the manufacturer, only to be guided to the nearest car dealership, where they test drive the car, negotiate the price, agree a sale, provide their details and with whom they arrange subsequent services. This information is all vital — but it belongs to the distributor.
However, as DTC selling becomes more prevalent, data ownership will evolve and change, and manufacturers will preside over increasing amounts of valuable insight about their customers and prospects.
Armed with this information, the manufacturer can improve their sales conversion rate because they know more about who buys their cars and why — and therefore how to attract them and retain their interest throughout the sales funnel. At the same time, this knowledge sharpens their targeting ability and enables them to decrease their acquisition costs.
Ultimately “selling better” is about marketing, and within that truly understanding how to use digital tracking tools (such as Google analytics) in order to mine the wealth of information that already exists. Armed with these details, digital ad spend can be optimised based on real and accurate business and customer data (such as customer lifetime value, actual purchase details and online behaviours), rather than generic media KPIs.
Toyota Canada is one manufacturer actively demonstrating an advanced approach. Using a scoring model based on first party data such as online behavior, it identified the people with the highest propensity to buy a vehicle; targeting these new audiences drove a conversation rate six times higher than the previous tactic of re-engaging website visitors, while reducing the cost-per-acquisition by 80 percent. More advanced activity will include using increasing amounts of first party data to steer advertising campaigns.
Seek out new sales streams
Extending the car-buying experience gives manufacturers the opportunity to build up a picture of their customers — the environment they live in (rural or urban), the type of car they need, how they use it and potentially where they go.
Anonymizing these details and adding them to the vast amounts of first-party data that the industry already owns, puts manufacturers in charge of a lucrative, mainly unrealised, revenue stream that can be unlocked via data partnerships.
Data partnerships enable an organization to access the first-party data of another organization, either paying for it directly, or reciprocating with its own first-party data. The strategy enables both enterprises to explore new routes to new customers. For the automotive industry, partnerships with insurance companies are an obvious link, but this approach is easily broadened — hotels and holiday companies are key contenders for understanding more about peoples’ driving and travelling habits for example.
The structure and organization of data partnerships is still new. It’s therefore a value-generating differentiator for manufacturers that are prepared to be trailblazers and invest time and effort getting it right now before it reaches maturity.
In short, finding more value is about manufacturers complementing the traditional way of selling cars and using creative thinking to make money from everything they know about the people that buy their products, in a way that enhances the customer experience.
The data ‘glue’
So what is the link that holds together the modus operandi outlined above? Data. Data, data and more data.
This calls for a change of mindset in the car industry. Instead of one organization selling new cars, another selling used ones, another offering spare parts and yet another selling services, with each keeping their data separate, the vision of tomorrow relies on one central data hub that benefits everyone. Sometimes referred to as a Customer Data Platform (CDP), today’s cloud solutions for the different tech components keep costs manageable, and make it feasible and relatively uncomplex for most enterprises.
With a CDP established, data management and analysis can deliver relevant insight that adds value and generates revenue opportunities throughout the complete customer lifetime.
However, this isn’t a “tick box” exercise; the work of a data-marketer is never done… Data, and especially business data, is continually added to the CDP, and with it the picture of customers becomes clearer, richer and more granular — giving manufacturers and dealers ever more accurate tools with which to sell more, sell smart and develop new sales streams.
Article originally appeared on Automotive News.
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