RelationshipResearch & Analysis

Relationship
Latest Research: Evolution of The Car Shopping Journey in 2020

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CarGurus and GfK recently studied the digital path to purchase of over 3,000 car shoppers. We dug into that data, as well as data from a series of  COVID-19 Sentiment Studies  we conducted this year, to see how the shopping journey has evolved.  What we found is that today’s car buyers aren’t experts on car shopping anymore. Since many only replace their vehicles every five years, a lot can change between purchases. As a result, the process takes around five weeks for most. This leaves lots of time for shoppers to spend hours researching online and comparing options across multiple devices — all with the goal of finding a reliable vehicle at a price point they’re comfortable with.  Car Shoppers Are Full of Uncertainty at the Start of the Journey  Today’s consumers are increasingly beginning the research and shopping process full of uncertainty. In 2020, 41% of shoppers were undecided on the price they’re willing to pay for a vehicle — up 25% in just two years . Similarly, uncertainty around whether to buy new or used has also increased since 2018, going from 26% to 32%. To fill in the gaps and inform the many decisions they must make along the journey, shoppers turn to online sources to research their options. Shoppers estimate roughly 60% of their shopping process is spent online, researching, and comparing options.  While there are many online resources shoppers can use, including dealership, OEM, and industry sites, auto shopping sites are the most commonly used resource by car buyers: 93% of shoppers use auto shopping sites. And they visit this category of sites multiple times: the average shopper visits auto shopping sites 12 times before buying a vehicle, with the use of these sites only accelerating as the purchase nears. In comparison, 63% of car shoppers visit OEM sites, and 58% visit dealership sites, with the average shopper visiting them only 5.5 times total before purchase.  Car Shoppers Have Different Objectives When Using Desktop and Mobile Devices More and more consumers use a combination of desktop and mobile, switching continually between devices while shopping for their next vehicle. Though this makes it clear that the shopping experience must be optimized across all devices, each device plays a specific role throughout the process: Desktop drives vehicle comparisons and selection.  Desktop sessions deliver more engagement and play a critical role in the journey, especially as the purchase nears. Car shoppers spend 2x as long per session on desktop as on mobile, likely because the desktop experience provides a larger screen for comparisons and is free from distractions like text messages and push notifications.   Mobile is used at the dealership and to prepare for negotiations.  More than two-thirds of car buyers continue to research mobile during the dealership visit because of its convenience. The use of mobile devices on the lot has been steadily increasing — from 59% in  2018 , to 64% in  2019 , to 67% in 2020.  Vehicle and Dealership Selection Come Down to Price and Reliability When it comes to dealership selection, price greatly influences where consumers buy. That doesn’t necessarily mean shoppers are only looking for the lowest price though. It’s that they want to feel confident they’re paying a fair price for the vehicle they’re purchasing. On CarGurus, 81% of all leads go to vehicles with a fair deal rating or better, with the biggest percentage (37%) going to Fair deals.  Ultimately, reliability is paramount to consumers when choosing a vehicle. And it tends to be especially important to shoppers searching for a vehicle less than $10,000 (58%) and Gen X shoppers (49%).  Interest in Digital Retail Has Surged Since the Spread of COVID During this rollercoaster of a year, it’s not just car dealers who have been forced to adapt and evolve — consumers’ preferences around buying have also changed. Among car shoppers, both openness and preference for buying online roughly doubled due to the pandemic and, despite dealers re-opening to foot traffic, have not declined. Before Covid, 32% of car shoppers were open to buying online. According to CarGurus’ recent  COVID-19 Sentiment Study , now 60% are. Similarly, 37% would now prefer to buy online — up from 19%.  Ultimately, car shoppers are spending more time online, leaving fewer decisions to be made during the dealership visit. Optimizing the car shopping experience across both desktop and mobile, providing digital retail solutions, and offering competitively priced, reliable vehicles will increase your dealership’s likelihood of converting more shoppers into buyers.
This Is How Automotive Retail is Transforming

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In the earliest of days, weeks, and even months for auto dealerships returning to business (open doors at the facility), we are getting some encouraging early indications of leads being a decent volume, retail sales bouncing back a bit, and revenue and profit returning to levels of operational survival. At least that seems to be the narrative. Inventory depending on the brand and model can be challenging, but nonetheless, a fairly good bounce back from the days of March through May, by most indications. As being reported by Ward's and others, June auto sales will defy bragging about compared to year-over-year and by expected standards, but at least they're on an upward trend. July retail deliveries aren't expected to set off firecrackers either, and fleet sales with the rental agency bankruptcy and economic woes deflate total volume as well.   On a yearly forecasted perspective, there is some upwardly hope as well. Wards Intelligence expects June's seasonally adjusted annual rate to total 12.9 million units  (See chart below).  That compares with May's 12.2 million and April's awful 8.7 million. Moreover, it is well below June 2019's 17.2 million-unit SAAR and the 16.8 million deliveries that were predicted, pre-pandemic, for 2020. Yes, unemployment and production start-up and interruptions, consumer confidence, the pandemic, and fears of normalcy all weigh in on this. But are we looking at the right figures and metrics to see what is really happening?   Are we even evaluating the right measures?   I would also argue that we will have to shift, and in fact, transform the very way in which we both "sell" cars and evaluate the industry as a whole. While some indicators may not be entirely easy to quantify, there are new measures and KPI's that we must start considering, and in fact running our retail business by and guiding our new business practices and operations towards. Some examples of the new metrics that I believe will 1) drive survival through this crisis, and 2) transform your retail business into a next normal thriver, include: Now I am not going to suggest we throw out the old standard measures, but in order to transform, in order to think differently, we must establish new targets and metrics. These new measures will keep us focused on what the needs of consumers are and will be and how we fulfill them. In order to accomplish an auto retail industry and business transformation, I believe there are four major components (or capabilities) to consider: 1. Not vehicle sales, but vehicle usage The industry analysts, OEMs, captives and banks, third party retail portals, and certainly dealers must all monitor shifts to measuring and supporting vehicle usage over vehicle sales. I won't go into a ton of detail why the world of vehicle sales, vehicle needs, and vehicle mobility has been disrupted forever, but I think most of us realize it has. What we knew as daily work and social commutes, weekend get-aways, road trips, and all of our life is under dramatic shift and unknown future. What will be constant is our need for mobility when we want, how we want, and where we want.   This provides both a challenge and an opportunity for auto retailers. How do I support the market for people to gain access or usage of a vehicle, and provide the product, the service, and/or the experience to do so and make it a profitable endeavor for my business? In fact, how may that actually become the guidepost for my business of the future? Dealers (and OEMs and financial institutions) will need to redefine what success looks like and how it can be profitable. It will have to include the idea and strategy and measurement of providing access to vehicles, and not just the transaction of vehicles. This may or may not include versions of providing fleet and rental, subscription or license options, car sharing and car riding, new flexible lease and mileage options, other vehicle and service options like electric charging, vehicle and fleet disinfecting, pick up and drop off (not just to the dealership but as a more mobile customer journey service), and much more that will be supportive of overall customer vehicle usage and customer mobility. That is the target for future success. 2. Focus on customer experience The idea and practice of customer experience are certainly not new, but it did take on a magnified focus with the pandemic crisis shifting how many people interacted and expected any retail business to operate and accommodate. I even wrote about "experience" needs to be the North Star for an organization. It should be the ultimate goal, and the functional operations and capabilities need to be transformed and configured to deliver upon it. Customer experience and fulfilling customer expectations will be the very thing that defines the auto retail industry of the future as we work through this shifting landscape.   In auto retail, this is even more of an imperative. Consumers are now more than ever walking from one industry and one experience to the next, expecting a certain standard. We must follow the customer's lead. How can we serve them and empathize with their journey and daily life and intersect in a meaningful and valuable way? This absolutely means pick-up, drop-off, driveway delivery, "no touch" servicing, mobile service, omni-channel and preferred channel access, and support for their mobility needs. It will mean even more yet to be determined. The customers are telling us what they want and need. The key is, are we listening?   Be sure to listen. Apply your own experiences and expectations of other organizations and industries. Start by supporting customer empathy and customer experience, and you will find the revenue and opportunities from it. Customers will pay for better experiences. 3. Don't simply digitize current processes This is a pitfall too many businesses and too many dealers fall into. If I just add technology, it will help, and things will get better. The technology is then either not adopted, does not work well with the current business operation, and overcomplicates and becomes cumbersome for the users. Digital change ultimately comes through People + Process + Technology. But process is first! Understand what the goals are, the North Star of customer and employee experience, and then make sure all processes are focused on delivering value to that end. If the process is not aimed at value for the customer or employee experience, it is simply adding unproductive and unsatisfactory work and noise. A lot of current dealership processes need to change. It is great we have added more online selling and scheduling tools. But the workflows and processes need to support an efficient value-add process. There is no reason after conducting a majority of a sales process online that a customer should have to be at a dealership for, on average 3.5 hours to finish paperwork and take delivery. There is just not! It is the number one dissatisfaction with the car buying process and is just one of many that need to change. I can buy and sign for a house in less time. Before any technology is ever implemented or added, make sure to consider and re-design the processes it will support. It is your opportunity for transformation. It is the best chance to advance and leapfrog ahead of a current state. 4. Become flexible, agile, transformative Inherent in all of the above components and capabilities is the core principle to be agile and flexible. What does that mean? It means don't do business as usual. It means you may have to get uncomfortable. It means you may have to pivot and shift from a plan or previous strategy based on results and feedback and customer interest. Your transformation strategy and plan should be a living guidepost. One that can be altered and changed to adapt to conditions and opportunities. To be agile, flexible and transformative is an actual capability; and probably the most valuable one. It will allow you to not get stuck chasing decaying margins or performing tasks that are not valuable. A lot of insight and direction will come from your data, the old and new measures suggested your customers and a general sense of the business opportunities. Listen for it! Be agile, flexible, and humble enough to follow it. This is not an overnight challenge or change. What I am suggesting is that life as we know it has changed. How we interact with retail has changed. How we use our vehicles or need mobility has changed. All has changed at least for quite a while, and some like the raised customer expectations have changed forever. So, let's understand those factors before we simply try to optimize some already archaic retail processes. We must measure factors that are the real evaluation of what is happening with mobility, vehicle usage and access as well as customer mobility expectations. Those measurements are where we need to drive our future business to operate and perform. Those will indicate new capabilities an auto retailer must develop to keep evolving and transforming to a future state of what's next and what's successful. Start with a North Star guide of what you want to deliver as an experience to customers and to employees. From there, create a plan and roadmap to build towards the capabilities necessary to deliver upon it; the people, process and technology. But always be agile, adaptive and flexible. Listen, pivot as needed, and pursue the customer experience. That will lead auto retailing through this crisis and into a new era of high value, high engagement and high satisfaction retailing experiences.
Loyalty
Prepaid and Complimentary Maintenance Plans Equal Loyalty From Next Gen Customers

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While most dealerships offer some degree of prepaid maintenance (PPM) or complimentary dealer and OEM maintenance plans, many questions how effective these plans really are and if they do in fact provide the intended retention and ROI. Good news—research shows that they do and additionally they provide the unique opportunity to tap into the highly desirable younger market segment. DMEautomotive’s recent national consumer survey provides fresh insight into the state of prepaid and complimentary maintenance plans, along with evidence of their powerful ability to provide consistent dealer retention. Research shows that strong programs can keep customers coming back for repairs long after the expiration of their respective maintenance package—shifting business that typically bleeds into the aftermarket, into firm dealership territory. Below are some of the key findings of DMEautomotive’s recent survey: Roughly one in four U.S. vehicle owners have a dealer or OEM prepaid or free service plan. Free or prepaid, 35 percent of customers are not using plan for all maintenance. While 65 percent use plans for all scheduled maintenance, a surprising 25 percent only use it for “some” and nine percent have not used it at all. Plan usage and satisfaction levels align: those using their plans for all scheduled service at the dealership report the highest satisfaction and 75 percent are either “extremely satisfied” or “satisfied.” Next-generation servicers (under 35) are more likely to have a plan (31 percent) than those over 35 (18 percent) making these plans a powerful tool for young, dealer-disloyal servicers. Plans drive long-term retention as 56 percent of consumers with a prepaid or “complementary” service plan report they are likely to continue servicing their vehicle at their dealership after the plan expiration. Loyalty during plans impacts future loyalty—almost twice as many consumers who use their plan for all maintenance (versus those who only use it for some ) report they’re “very likely” to continue servicing their vehicle with that dealer at plan-end (30 percent versus 17 percent). One of the most valuable pieces of information gathered from the survey is that there is a new way to reach our younger customers. Results show that younger consumers are significantly more likely to use their plans for all maintenance than older consumer segments. Notably, 84 percent of those aged 25-34 (who used the plan for all maintenance) reported high plan satisfaction, in addition to 62 percent stating they are likely to service at the dealership post-plan. Given that the 25-34-year-old age range is typically the largest group of dealer-disloyalists, it’s clear that maintenance plans can be yielded as a uniquely powerful tool. While maintenance plans provide a powerful opportunity, they do take effort. We have learned that customers covered by maintenance plans often stray from the dealership for repairs. While this may initially be seen as a profit gain, research shows that customers who stray are more likely to take servicing needs elsewhere upon expiration—demonstrating the importance of consistently engaging with customers post-sale; something to keep in mind as you manage your ongoing customer relationships. Mary Sheridan is a CRM insights analyst for DMEautomotive’s strategy and analytics team, which is focused on producing cutting-edge research on service customer behavior to help automotive retailers build greater customer loyalty and retention. Sheridan has a PhD in clinical psychology and has nearly a decade’s experience in primary research, including over four years in customer experience and loyalty.