Research, purchase and virtual test drive: The digitalization of the car trade

Research, purchase and virtual test drive: The digitalization of the car trade

The automotive industry is not exactly a leader when it comes to digital transformation, especially the digitalization of sales channels. There is no way around it a la lounge. The consulting firm Publicis Sapient, in partnership with Sitecore and Microsoft, has conducted a global study on industry-specific customer needs in digital change, the so-called Automotive Customer Report 2021. 

11,000 vehicle owners from 16 countries were surveyed about their preferences and requirements. The independent survey provides insights into the potential of digital experiences in customer acquisition and retention, the future of D2C sales and the role of car dealerships. There are clear differences between the regions and the expectations of the generations.

As it turns out, digital channels already dominate research. Here, however, the dealers are in the pole position: The majority of those surveyed, specifically no less than 69%, use dealer websites for research, followed only by manufacturer websites (56%) as the primary source of information. Social media is playing an increasingly important role among younger target groups.

When it comes to vehicle purchasing itself, digital channels are, unsurprisingly, much more relevant for Generation Z and Millennials than for older consumers. In general, however, two thirds of those surveyed prefer to buy from a dealer. When it comes to new cars, 64% go to a car dealership and 59% go to used cars. But only a quarter of vehicle owners (26%) believe their car dealer knows what they want. This percentage is only 14 and 16% in Sweden and France, respectively. In India and the Arab world, people have even more trust in car dealers: there, more than 50% of those surveyed believe that their car dealer knows what they want.

Value creation drivers

The purchase decision of 15% of those surveyed is influenced solely by arguments such as price, customer service and convenience. Which sales channel doesn't matter to you.

More than half of respondents (54%) said the online experience is an important factor in their purchasing decision. The digital-savvy and mobile-first markets of Asia and the Middle East set the technological pace. For respondents from China (83%), India (84%) and the United Arab Emirates (79%), digital experiences play a much more important role than for Europeans, for example.

The majority of respondents show an affinity for D2C sales models, i.e. direct-to-consumer. Buying directly from the manufacturer is particularly popular in the United Arab Emirates, China and India. In Germany, 77% show at least a certain affinity for D2C. 

An important tool on the way to a new car is the good old test drive. But this is not a must, as the survey shows: one in three (37%) would even be willing to buy a car without a test drive first. One in two respondents (46%) who insist on a test drive before buying would consider a virtual test drive as an alternative. Younger generations are generally more willing to buy a car without a test drive or to prefer a virtual test drive. Virtual test drives definitely have the potential to replace real ones.

Loyalty is a question of age

Incidentally, brand loyalty decreases as age increases among those surveyed. At the same time, younger vehicle owners have higher expectations of digital channels. So the most demanding customers are the youngest, the least loyal. But it pays to encourage brand loyalty because loyal customers are far less price sensitive (58%), they buy more often (4%) and are more likely to participate in loyalty programs (12%).

The report also offers recommendations for action for car manufacturers and dealers in order to be successful in the long term. Despite the increasing importance and demand of D2C, the authors of the study still identify major deficits in the relevant offerings from car manufacturers. In fact, they now have the historically unique opportunity to reach customers directly with digital platforms. But that also means a lot of effort, because these platforms would have to be well made and offer customers a high level of personalization and convenience in their online shopping experience - from car configuration to payment processing. The days when the customer experience could be left almost exclusively to the retailers are over. And one has to face a harsh reality in the digital world: customers are lost just as quickly, almost in real time, as they are gained.

The authors of the study see dealers as having an advantage in that, despite all the manufacturers' tendencies towards direct interaction with potential buyers, they are still the first and most important contact person who mediates between the car and the consumer. Car dealers should use this valuable “face time” (the report is written in English) to give their customers the best possible advice, gain their trust and understand them as best as possible. Of course, manufacturers' direct sales are naturally a danger for car dealers. These would now have to make themselves as irreplaceable as possible with individual services.  

Inquired

The automotive industry asked Matthias von Alten, VP, Management Consulting Lead Transportation & Mobility at the consulting firm Publicis Sapient, about the study: 

Which result from the report surprised you most personally and why?

I observed with great interest the differences between the different age groups, especially the various requirements of the generations when purchasing vehicles. The diversity of preferences and needs has not yet been fully taken into account by either manufacturers or retailers. It means increased effort and makes it essential for market participants to accelerate their change process in order to implement customer centricity across all channels.

What would you specifically advise a small to medium-sized car dealership in Austria based on the results of the report?

I am still convinced that physical car trading will continue to play an important role in the future. The results of our study demonstrate its relevance. Many interested parties and customers are looking for personal contact with the brand. The automobile trade is predestined to be this link. This is exactly where there is potential. Customers today expect significantly more individual support than before. You no longer just want to be accompanied until the purchase contract is signed, but far beyond. Retailers should therefore focus on the entire customer life cycle. It is important to approach customers proactively and offer them solutions that are tailored to their personal needs. This requires comprehensive data and tools. The future requires new types of collaboration between retailers and manufacturers.

Will the trend towards online trading lead to a consolidation of the industry in the longer term, at the end of which only a few large players will remain?
In my opinion, online trading will not be the driver of industry consolidation. Over the past five to six years, the automotive industry has been influenced by various parameters, the simultaneous occurrence of which has massively increased complexity. There has never been a comparable situation in the history of the industry. Factors such as the general growth forecast, sustainability, regulation, the increase in mobility costs and new workplace models have significantly shaped the industry. In addition, consolidation continues to progress, as evidenced by the PSA and FCA merger to form the Stellantis Group or the Ford and Volkswagen car alliance. I am convinced that brands that focus on creating added value and lasting customer orientation will continue to play an important role in the future. However, differentiation based on the product alone will no longer be enough to stand out from the competition. The ecosystem of services, connectivity and data will make the difference. Partnerships are essential for this.