Analyzing the customer life cycle helps uncover issues where customers drop off before completing a sale, enabling the automotive industry to better understand customer preferences and bridge any existing gaps.
Buying a car is a common experience for many, and historically, the car buying process is standard: buyers compare features and variations, prices from different manufacturers, talk to friends and family, tour dealerships, and finally sign on the dotted line. Analytics may offer a way to change that.
Why? But beginning with the COVID-19 pandemic, the way people purchase vehicles began to change, especially for younger buyers. Nearly 60% of potential car buyers under the age of 45 prefer to research prospective vehicles online. The same is true for only 45% of customers aged 65 and above.
With more buyers relying on internet research to validate, engage, interact with sales and service, and ultimately purchase new vehicles, the industry is in the middle of a tectonic shift in buying behavior.
The automotive industry is highly competitive. The sales landscape is driven by the near-constant release of new products and features. Because customers increasingly prefer an online buying experience but still want to test out features in person, automotive makers and retailers must create an engaging “phygital” (physical + digital) experience.
Meeting “phygital” customer expectations creates a challenge for both customer success and sales and marketing teams. With a robust analytics strategy, brands can use customer data to build a cross-functional strategy that strengthens the customer-brand relationship.
When done correctly, this strategy is mutually beneficial for the customers and the company. For example, customers expect an engaging brand experience, personalization, loyalty, and timely responsiveness from their automotive dealer. On the flip side, the sales and marketing teams value better prospects, quicker conversions, opportunities for cross-selling and upselling, referrals, and customer retention. As a result, successful sales and marketing teams, with buy-in from upper-level management, can use analytics to inform their go-to-market strategies and outperform their competitors.
What Does the Customer Want? Let’s Start with the History
Though it gained popularity during the pandemic, buying and selling cars online is not a new practice. In 1997, Autotrader.com, a US-based online marketplace, sold new and used cars from dealers and private sellers.
As broadband internet rapidly expanded, several other online retailers emerged. In 2021, the global automotive e-commerce market was valued at $38.67 billion and is expected to reach $176.24 billion in 2031. While indicative of strong momentum, these numbers do not reflect a complete shift toward online sales.
Deloitte’s 2021 Global Automotive Consumer Study revealed that 71% of consumers prefer buying a car in person. While the majority still favor in-person sales, many consumers are slowly and increasingly opting for online sales from retailers like Cars.com and Carvana. Even still, they expect physical touchpoints — indicating that automakers must combine the most successful elements of both online and offline sales:
- Seamless “phygital” experiences: Retailers understand they must offer a showroom-like experience through their digital channels. This is only likely to increase as augmented and virtual reality become more mainstream.
- Digital engagement: It’s difficult to replicate the feeling of buying a car in person online. Retailers can enhance their digital buying experience by offering detailed video tutorials or partnering with influencers on social media. Customers also expect 1-on-1 attention from customer service or sales representatives like they would have on the lot — making it essential to create an infrastructure that allows for quick responses to customer queries. Digital engagement ensures that automakers position themselves as “digital innovators” and present a stellar buying experience to the customer.
- Personalized customer touchpoints: Personalization is a key component of building customer loyalty. Dealerships can personalize their marketing efforts by sending unique discount offers and deals based on purchase history. For high-value customers, automakers can invite customers to exclusive launch events to help solidify an enduring relationship.
To continue to be successful, digitally mature automakers need to offer better online-to-offline transactions, use curated content to differentiate themselves from the competition, appeal to customers’ personal preferences by establishing opportunities for cross-channel interactions, provide a 360-degree view of the customer journey for targeted selling, and leverage data-based personalization to wow the customer.
The Automotive and Analytics Play
To deliver exceptional customer value and enhance customer intimacy, the automotive industry must focus on creating mutually beneficial outcomes for their dealerships, which are crucial for driving customer experience and sales transactions. By optimizing segment focus and continuously improving sales and service experiences, automakers can set their dealerships up for success.
Categorizing dealerships based on predefined characteristics and implementing an online-offline approach with customer segmentation by demographics, geographic reach, size and scale, and vehicle coverage is an effective strategy. To further optimize dealerships, auto brands can leverage micro-catalogs that utilize historical sales trends to guide dealers’ efforts toward a subset of vehicles that align with past sales and segment trends.
Other important parameters include stock holdings based on sales volume and frequency, such as booking value, delivery wait time, inventory turnover, and category growth. Service improvements should also be a priority for automakers, as they can apply predictive service performance service-level agreements (SLAs) to ensure accurate diagnostics and service coverage. Additionally, customer Net Promoter Score (NPS) surveys, analysis, and social dealership reviews provide valuable insights into customer behavior post-purchase and servicing, allowing for refinements in the dealership experience.
By mapping the unique customer journeys, automakers can identify opportunities to enhance online-to-offline transitions and implement attribution modeling to understand how sales and conversion credit should be assigned to touchpoints in conversion paths. Analyzing the customer life cycle helps uncover issues where customers drop off before completing a sale, enabling the automotive industry to better understand customer preferences and bridge any existing gaps. Analytics plays a significant role in enhancing automotive performance, and there are various ways it can be utilized:
- Hypertargeting: Delivering the right content and media mix to specific interest-based customer segments, ensuring tailored messaging and effective calls to action.
- Consumer behavior analysis: Identifying the factors that influence customers and fine-tuning dealer campaigns and segments accordingly.
- Developing flexible and unique dynamic service bundles: Catering to individual customer preferences for repeat service business and fostering loyalty.
- A 360-degree customer view: Generating focused campaigns that target specific segments by leveraging a comprehensive understanding of customers.
- Behavioral targeting: Personalizing marketing efforts and implementing micro-segmentation of audience segments.
- Integrated customer feedback loop: Aggregating feedback across channels and analyzing social sentiments to act on the Voice of the Customer (VoC), building trust, enhancing brand perception, and delivering successful marketing campaigns.
Closing Thoughts on the Role of Analytics
Analytics is a vital tool for bridging the gap between the physical and digital realms in the automotive industry and attracting customers by providing comprehensive and tailored experiences both online and offline. Throughout the customer journey, brands can leverage analytics to understand preferences, predict behavior, and optimize marketing campaigns. By analyzing data, it is possible to identify top-selling brand segments, address social perceptions, reduce costs, and develop new products.
The customer analytics framework holds significant implications for the automotive industry, encompassing business value, analytics use cases, and data foundation. As the number of informed and tech-savvy customers continues to rise, automakers are prepared to face the challenge head-on, using customer analytics as a competitive advantage to translate their brand vision into transformative experiences for their customers.