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Auto digital retailing is here. But for it to succeed, large national and regional dealers need to take the lead in designing and orchestrating the end-to-end purchase experience for customers.
Buying and selling vehicles online. It's been happening for years. And there's no need to reinvent the wheel. Right? Wrong.
It's true that most customers start their vehicle shopping on the internet. And many dealers already offer digital services to customers, such as online finance comparison tools. But it's uncommon for customers to complete the full vehicle purchase process online. And even where they can, this process is neither as seamless nor as optimized as it could be.
The market, however, is ripe for end-to-end automotive digital retailing. COVID-19 accelerated the shift from offline to online across industries. And according to a recent McKinsey study, almost 60% of customers under 45 would prefer to purchase a vehicle online. The good news? A lot of work has already gone into taking aspects of vehicle purchasing online. The not-so-good news? Systemic issues – namely, the complex web of relationships between dealers, banks, third-party intermediaries, and technology platform providers — are putting the brakes on frictionless delivery at the commercial decisioning and financing stage. Someone needs to take charge. But who? And how?
Large national and regional dealers are in pole position to take the lead in automotive digital retailing. After all, they have strong existing customer relationships and access to the data that's needed to build the kind of seamless, end-to-end digital solutions that today's customers have come to expect.
But these dealers also face two problems. First, time is not on their side. The auto market is primed for disruption, and other players have realized that whoever gets to the customer first, wins. As a result, startup technology firms, such as Carvana, are already disintermediating dealers. And banks are reversing the traditional purchasing journey to offer 'finance first' solutions – with Auto Navigator from Capital One and Chase Auto from JPMorgan Chase being two such examples. Second, dealers are only one piece of the puzzle. To deliver what customers want, they'll need their partners' cooperation.
So how can these dealers seize this opportunity? The answer lies in designing and orchestrating the end-to-end digital purchasing experience for auto customers. Here are three key steps dealers will need to consider:
1. Connect the players in the ecosystem
Dealers need to look at the entire purchasing journey from the customer's perspective. Then, they need to identify each player on that journey and secure their cooperation to deliver a seamless front-end experience to the customer.
By connecting these ecosystem players, dealers can bind together the customer's digital journey and the real-world logistics of procuring and delivering a physical asset. This means dealers need to facilitate a connected digital solution and also respond to customers' need for human contact along the way — such as the opportunity to take a test drive or talk to a sales agent.
2. Make use of data – at the right time, and for a lifetime
Dealers should also make intelligent use of the volumes of data they and their ecosystem partners possess.
Because of their central position in the transaction, dealers have a unique, 360-degree view of the customer for the duration of at least one contract, if not more. By collecting and analyzing this data, they can deeply understand the entire customer journey. Done right, such an analysis will reveal customer pain points, opportunities for additional product sales, and areas where digital retailing can offer a better customer experience than traditional auto retailing for both the short and long term.
Data allows dealers to improve their sales strategies and tactics too, by more intelligently timing the steps of the sales process. Today, a customer can spend hours trapped at a dealership choosing products and services to go with their vehicle as frustration and decision fatigue take hold. But it doesn't have to be this way. Dealers can help customers to make the large, vehicle purchase decision first, creating a positive experience that acts as an incentive for future interactions. Then, using data, they can come back to the customer later (when they're more amenable to persuasion) to help them make smaller, more discrete decisions about servicing and aftermarket products.
For example, using data such as a customer's driving behavior, life stage, and household mobility requirements, dealers can intelligently segment customers and select, time, and target aftermarket sales. Does the customer regularly take long road trips? If so, then they'd likely benefit from a tire warranty to go with their new car. Does the customer have two toddlers? Then they might just need a pair of car seats. By applying data-backed digital solutions in this aftermarket stage, dealers can remove friction across the entire purchasing journey and expand their share of the customer's wallet –not just over the length of the vehicle contract but even over the span of the customer's driving lifetime.
3. Take the lead in technology
Dealers have an opportunity to take the lead not just on connecting ecosystem partners and making intelligent use of customer data but also on stitching together the technology capabilities required to deliver auto digital retailing.
Specifically, dealers can build (or buy) and orchestrate different application programming interfaces (APIs) on the back end to cover every aspect of the customer journey. For example, dealers can use APIs to connect to third-party systems that allow customers to compare and select vehicles beyond those that may exist in their own inventory (for example, from auction houses), sign contracts associated with their vehicle purchase, and have the vehicle delivered to their driveway.
Whether they choose to build or buy these APIs, however, dealers should observe two unbreakable rules: the technology solution must match the customer journey step for step, and it must deliver personalized outcomes.
If large, national, and regional dealers can become orchestrators of ecosystem players, data, and platform technologies, the impact for both customers and the dealers themselves promises to grow powerful.
Better customer experiences generate trust and therefore loyalty, meaning repeat business for dealers. Well-orchestrated purchase journeys mean more efficient, error-free deals, which enable dealers to grow and scale their businesses. This strategy will help dealers expand their relevance in the highly competitive space of customer acquisition, collect data that improves their ability to meet new and developing customer needs, and ultimately improve their margins.
Meanwhile, the customer gets on-demand access to a purchasing experience that offers increased personalization of vehicles and products, better and more transparent pricing, a greater number of financing options, a quicker and more seamless transaction, and improved aftercare over the term of their contract and driving lifetime.
But dealers don't have long. They need to move quickly to prevent finance and technology disruptors from engulfing large shares of the market. To keep and increase their reach, they should do nothing short of redefining the vehicle buying experience by focusing on the entire customer journey – from search to driveway and beyond – to create seamless digital solutions that delight and deliver. So, dealers… Start your engines.
This article first appeared in Auto Finance Journal. It was authored by Kanta Mishra, global auto finance practice leader, Genpact, and Damien Scott, global head of customer experience for banking and capital markets at Rightpoint, a Genpact company.