Photo: Juan Madrigal
To win back customers and fend off competitors, auto giant General Motors is retooling its corporate culture. According to a recent cover story in Fast Company, GM CEO Mary Barra is leading the automaker’s comeback by instilling startup-like thinking in the company and eliminating bureaucracy.
"In this area of rapid transformation, you have to have a culture that’s agile," Barra says. The CEO reiterates that while GM is currently on a hot streak, the company still has a lot of work to do. In addition to culture, Barra is focusing on partnerships and new products to remain ahead of competition.
GM’s turnaround effort is just another sign that the automotive industry is on the cusp of major disruption. Reeling from its near-collapse in 2008, the industry regained some of its momentum but still faces an uphill battle. Since 2015, light vehicle sales have declined and sales for 2017 are expected to remain flat. Tightening sales have driven incentives to their highest point since the recession, putting downward pressure on profit for both dealers and manufacturers.
The issues facing the automotive industry are complex. Focusing on a customer-centric culture and investing in customer intelligence will help auto manufacturers and dealers remain relevant. Here’s why.
Customers demand and expect a seamless experience.
The 2016 Car Buyer Journey report by IHS Automotive reveals that vehicle buyers spend an average of three hours in the dealership during the purchase process. Half of that time is spent negotiating or doing paperwork. This long process negatively impacts customer satisfaction: a dismal 56 percent of car buyers rate their experience as satisfactory. A separate study from Autotrader shows that less than one percent of shoppers agree that the current car purchasing process is ideal.
A dismal 56 percent of car buyers rate their experience as satisfactory.
Consumers today will not tolerate such poor customer experience. Many industries already recognize that customer experience is the new battlefield and a real source of competitive advantage. The auto industry should embrace the same mentality to fix the car buying experience.
One potential solution is to revisit traditional retailing models. According to EY’s Future of Automotive Retail, the move towards digitalization, changes in regulations and evolving customer needs mean “the retail model needs serious retooling.”
While creating a seamless brand experience across multiple channels is a shared challenge among many industries, doing so is especially tough in the auto business. Automakers face the added complexity of executing a consistent experience through a network of independently owned, franchised dealers. And while companies like Tesla and Geely’s new brand Lynk & Co. are challenging traditional distribution with a direct-to-consumer sales model, this gambit is plagued with regulation issues. At least in the short term, established companies aren’t very likely to adopt new distribution models.
In the meantime, automakers need to work with partners, dealerships and customers to find a better solution. Engaging with customers directly will help companies identify both long-term and short-term opportunities for improvements by identifying pain points in the car buying journey. More importantly, ongoing engagement will help companies continue to tweak and improve the experience as customer needs and expectations evolve in the future.
New players are determined to win the innovation race.
Many unlikely companies have their eyes set on the massive auto market. It’s no secret that Google has been working on self-driving car for some time now. Ride-sharing company Uber is working on a similar project. Despite recent setbacks, Apple is also reportedly working on autonomous vehicles (or at least the software that will power them). Of course, vehicle upstarts like Tesla and Lynk & Co. can’t be ignored, either.
To be fair, established companies have already put the pedal to the innovation metal. In fact, GM launched the first mass-market electric car, beating Tesla. Similarly, Ford has been pushing its driver-assist technologies. Not to be outdone, Volvo has also invested in semi-autonomous vehicles.
To remain relevant, however, big auto companies can’t afford to slow down. If anything, they must go faster. Companies should take an ‘angle of pursuit’ approach. Instead of simply catching up with other innovators, automakers need a more forward-looking approach. Anticipating where customers are going tomorrow, not where they are today, is key.
At the same time, given the high costs of product failures, auto companies need a more agile approach to product development. After all, there isn’t a shortage of ideas on what tomorrow’s cars should look like—the real challenge is validating and testing ideas quickly and effectively, and condensing the product development cycle. Companies must screen concepts and ideas early, so they can prioritize projects with the highest chances of success. Likewise, manufacturers need timely, actionable customer insight before, during and after products launch, to ensure customer satisfaction and drive loyalty.
Young consumers want to see new business models.
Millennials are simply not as car-crazy as their parents. Between 2007 and 2011, for instance, the number of cars purchased by people aged 18 to 34 fell by almost 30 percent.
In past generations, cars represented freedom, but that’s no longer the case for young people today, who are more likely to spend their money on laptops, smartphones and experiences.
To add fuel to the fire, the rise of the collaborative or sharing economy means consumers, both young and old, are less interested in owning a car today. More and more people are choosing to get around using Uber or Lyft and forego the headaches and costs associated with car ownership.
The confluence of these societal attitudinal changes means companies need to rethink their business models. It’s not a question of if disruption will come—it’s a question of when. And it’s coming soon. According to a 2016 KPMG report, 82 percent of automotive industry executives expect a business model disruption in the next five years. Between 2015 and 2016, the number of executives who think disruption is extremely likely increased almost 10 times.
More and more people are choosing to get around using Uber or Lyft and forego the headaches and costs associated with car ownership.
Automakers are trying a few things to get ahead. GM has launched Maven, a Zipcar-like, proprietary program that will “give customers access to highly personalized, on-demand mobility services.” The company also invested $500 million in the ride-sharing service Lyft. BMW has made similar moves, launching Uber-like car-sharing initiatives.
But these moves are reactive. For the most part, automakers are simply following the lead of other industries, letting the Ubers of the world dictate the business models of the future. To take control of their own destiny, established players need to get ahead of trends by developing a deeper understanding of consumer attitudes and motivations.
Putting customers in the driver seat.
The challenges facing the auto industry are significant and complex, but they share something in common: they’re driven by rapidly changing customer expectations. That’s why, to remain relevant, auto companies need deep customer intelligence that will allow them to make better decisions.
The good news: the industry isn’t suffering from a shortage of data. From transactional data, to robust CRM systems, to survey data (like CSAT) and advanced analytics, companies have a lot of information to start with. The challenge is understanding the people and attitudes that answer the why behind the data. This insight will enable automakers to glean meaningful, actionable customer intelligence, and use it to inform all the business decisions that influence the customer journey.
In the end, big auto companies like GM don’t necessarily have to get smaller or act like a startup to win. Real competitive advantage comes from truly understanding customers—and adjusting your innovation, customer experience and business strategy based on what you know.
To learn more, download the Enterprise Guide to Customer Intelligence.