For the past century, cars have been an integral part of the American dream. Owning a vehicle provides more than just convenience. Cars represent freedom, fun and self-expression. At least until recently, having a car was synonymous with independence, especially for young people.
All of that’s about to change. In the near future, car sharing and mobility platforms will become an attractive alternative to car ownership. While there are differing points of view on how quickly this will happen, there’s little doubt it’s coming. With the advent of autonomous vehicles and advances in technology, the market for mobility is expected to grow. The market for cars themselves, on the other hand, is predicted to shrink dramatically.
In the meantime, while personal vehicles continue to bring joy to those of us who love driving, they can also bring stress and frustration. As a self-professed car enthusiast recently pointed out in a LinkedIn post, “car ownership today stinks.”
To re-invigorate sales, automakers and dealers must address the factors that contribute to customer frustration. Improving the experience, starting the moment when a consumer decides to buy a car, is key.
Why the Car Buying Experience Is Broken
To provide a better shopping experience, automakers need to focus on pain points in the customer journey. If you’re a business leader in the auto industry, improving the following four issues should be a priority.
1. A long, bumpy road to purchase
Owning a car is a huge investment. In a typical household, it’s usually the second biggest expense after housing, with the total cost of ownership for a new 2016-17 model averaging over $10,000 per year, according to Vincentric. And buying a car takes a lot of time. A study from Millward Brown Digital found that shoppers spend four months researching cars online.
Many aspects of the experience are also confusing. Six out of 10 car buyers are undecided from the onset. To narrow their options, buyers check a wide range of information sources, including manufacturer sites, dealer sites, auto review sites, blogs, forums, social media and third party shopping sites like Autotrader, Kelley Blue Book, Cars.com and TrueCar. To complicate matters, vehicle information—packages, pricing and inventory, for example—are often inconsistent across different sites.
Looking at transactional data helps, but qualitative feedback is also needed to identify the drivers behind consumer behavior.
To fix the complex car shopping experience, you need to understand the end-to-end customer journey. It’s not enough to know what happens at every step. Making real improvement requires understanding your customers’ mindset, knowing how they feel and why they act. Looking at transactional data helps, but qualitative feedback is also needed to identify the drivers behind consumer behavior. It’s this knowledge that often leads to valuable ‘aha’ moments.
2. A not-so-customer-centric pricing strategy and lack of trust
Car shoppers are barraged by a multitude of factors: sticker price, invoice price, sales price, internet price and a host of incentives they may not even qualify for. Unfortunately, the auto industry has historically taken advantage of consumers’ lack of knowledge, which has resulted in distrust. Shoppers who have used the manufacturer’s website to "build and price," for instance, suddenly find that the same car at the dealership is hundreds or thousands of dollars more expensive. Naturally, shoppers don’t understand why there’s a discrepancy.
Pricing is tricky because consumers have conflicting attitudes regarding price negotiation. Millennials, for instance, are accustomed to comparing prices and expect transparency. Yet, counter-intuitively, an Autotrader Car Buyer of the Future study found that 56 percent of buyers—including Millennials—want to negotiate the price because they don’t trust flat-rate pricing.
Given the number of considerations, there’s no silver bullet to solve the industry’s pricing conundrum. Clarity, transparency and consistency are useful in rebuilding trust. Ultimately, you must find ways to listen effectively so you can understand the needs of different segments in your target market and implement pricing strategies that better align with their changing expectations.
3. A fractured—and awkward—relationship with dealers
Automakers sometimes have competing interests with their franchised dealers, and the customer experience suffers as a result. Manufacturers strive to create a consistent brand experience, so they instill similar processes for their retail network to follow.
Dealers, however, want to create a compelling reason for customers to purchase from their store, instead of another dealer selling the same vehicle. To achieve differentiation, they often choose to deviate from the guidelines set up by automakers.
Alignment with retailers is critical. Dealerships control the final stage of the car purchasing process, where many customer experience challenges could derail the purchase. According to an Autotrader study, less than one percent of shoppers described the car buying process as their ideal experience. Two thirds of car shoppers don’t want to be pressured during the test drive, and 56 percent prefer being anonymous to the dealership until they lock in their purchase terms. Yet, according to IHS Automotive, shoppers spend an average of three hours in the dealership—much of that time spent on negotiations and paperwork.
Less than one percent of shoppers described the car buying process as their ideal experience.
Although not universally true, dealers have earned a reputation for slipping in additional fees and services at the last minute. Customers are often pressured to buy protection packages such as maintenance plans and extended warranties after investing hours in the buying process. At that point, shoppers aren’t in a position to research prices or fully consider whether a product is right for them. This allows unscrupulous operators to sell high-margin products that customers may later regret purchasing.
Automakers and their retail networks can’t survive without both parties being healthy and profitable. Collaboration helps identify and address areas of conflicting interest. Giving customers their preferred experience will ultimately benefit both parties. That’s why you should involve your customers from the onset, gather their input and use customer intelligence to align your brand and retail experience with their needs.
4. An incentive system that rewards the wrong behaviors
When shoppers buy, lease or service a car at a dealership, they typically receive multiple customer satisfaction (CSAT) surveys from the automaker, retailer, finance company and third-party research companies. These surveys are often very long. Car companies use the results to gauge product quality, purchase and service experience, and to support advertising claims.
Car manufacturers also use CSAT surveys to reward dealers with financial incentives. This practice is problematic because it encourages overzealous salespeople and service advisors to ask customers to give them the highest possible score. Gaming the system this way leads to artificially high scores, even if the experience was actually poor for customers.
Re-examine your use of CSAT surveys. Getting an accurate sense of customer satisfaction is important, but you should consider using methods that enhance the overall customer experience, not detract from it. Tools that are permission-based work better because they allow shoppers to opt-in, setting the expectation that your company will follow-up in the future. Opt-in tools like online communities also provide a platform to gather qualitative feedback, to help answer the ‘why’ behind the transactional data and make the insights actionable.
Getting an accurate sense of customer satisfaction is important, but you should consider using methods that enhance the overall customer experience, not detract from it.
More importantly, CSAT surveys, because of their ad hoc nature, don’t enable a two-way conversation with consumers. After shoppers provide their feedback, they have no idea what happens to their input, and they’re often asked to answer the same questions over and over through multiple surveys. To earn loyalty, you need an approach that builds engagement. Remember what customers have previously told you and share back information with them. That’s the best way to show you value the feedback of your customers, build trust and create a more authentic relationship with them over time.
To Fix the Car-Buying Experience, Engage Your Customers
The issues in the car-buying process are complex, but the auto industry can’t afford to stall. We can and must do better by our customers. Tech companies and startups are charging into the lucrative mobility market, and they don’t have legacy processes that restrain traditional automakers and dealers. With disruption underway, the companies that truly understand customers and provide a better experience will leave their competitors in the dust.