Cap Gemini Ernst & Young Report: Auto Makers Way Off Target Communicating With Buyers
Consumers Hold the Key to Margin Growth as Automotive Industry Faces Uncertain Times, According to New Survey From Cap Gemini Ernst & Young
PARIS and DETROIT, Oct. 13, 2003; Consumers are not getting everything they want from automotive dealers and vehicle manufacturers, according to the fifth annual Cars Online study from Cap Gemini Ernst & Young. Across the vehicle lifecycle, consumers demonstrate needs, wants and preferences that the industry does not appear to be aware of. As a result, automotive companies are missing important opportunities to unlock hidden value.
The major new study revealed misalignment in areas such as advertising and marketing, Internet capabilities and aftersales servicing. However, it also identified strong consumer loyalty to automotive brands, but less to dealers. According to the report, the brands inspiring the greatest loyalty were Toyota, Audi and Volvo.
The study, which surveyed consumers, dealers and manufacturers in Canada, United States, United Kingdom, France, Germany, Sweden and Italy, compares consumers' actual needs, demands and preferences with dealers' and vehicle manufacturers' perceptions. The report focuses on topics such as consumer behavior, data capture/demand sensing, the Internet, the aftersales experience and European Block Exemption Review.
"Cars Online 2003 makes it clear that the automotive industry must gain a better understanding of how consumers shop for vehicles and what factors lead them to buy," says Michael Wujciak, Vice President and Leader of Cap Gemini Ernst & Young's Global Automotive Practice. "Gaining this understanding is absolutely vital to unlocking hidden value and improving performance throughout the industry, particularly in today's challenging environment. At a time when the industry faces generally stagnant sales, eroding margins, oversupply of vehicles and heightened competition, this study provides valuable insight into the factors that drive automotive buying behavior and impact consumers' relationships with vehicle manufacturers and dealers."
The Cars Online 2003 study revealed a number of key findings, many of which identify potential areas of hidden value, including customer acquisition and retention, improved channel mix and opportunities stemming from changes to Block Exemption:
* Dealers and OEMs are wasting money focusing primarily on broad-based marketing/advertising efforts instead of taking a more integrated campaign approach that includes increased use of targeted direct marketing: Only 18% of consumers said TV advertising influenced their buying decisions, compared with 76% of dealers and 57% of vehicle manufacturers who believed TV ads were influential. In contrast, almost half of consumers said a direct-mail offer or ad from a dealer or manufacturer would be influential.
* Loyalty lies with the brand not with the dealer: Three-quarters of consumers said they expect to purchase the same make as their current car, while only 38% said they were likely to go back to the same dealer. Leading the brand loyalty list were Toyota, Audi, Volvo, BMW and Ford (U.S.).
* Consumer segmentation is critical to profitability but goes largely unrecognized by the industry: Dealers and vehicle manufacturers appear to treat consumers as one mass market rather than a segmented group of individuals with varying needs and preferences. Cars Online 2003 identified distinct consumer cohorts among car buyers: "utilitarian" vs. "trendy"; used vs. new car buyers; and build-to-order vs. buying from the lot.
* Manufacturers' Internet capabilities are misdirected and inadequate to meet consumers' needs: A high proportion of consumers start the vehicle research process six months before purchase, with the Internet increasingly being used as a research medium. Almost two-thirds of consumers want to find detailed price information on the web, 53% want cost calculators and 50% want trade-in information. Yet, only 41% of vehicle manufacturers offer detailed price information on their websites, 30% offer cost calculators and 11% offer trade-in information.
* Improved speed of response will keep customers from going away silently: Most consumers said they expect a response to an e-mail or web query within 24 hours. And slow response time would lead them to walk -- 81% said they would look for a new dealer if the response time was too long and close to half would look for a new manufacturer.
* Incentives are here to stay: 57% of consumers said "0%/low financing" was an important factor in their buying decisions, but only 30% of vehicle manufacturers believed financial incentives were important to consumers.
* Dealers are missing the mark with many of the aftersales service features they emphasize: "Friendly staff" ranked as the leading feature consumers look for when choosing a dealer for servicing and was named by 81% of respondents. However, only 42% of dealers said they focus on friendly staff. The leading service differentiator identified by dealers was one-stop shop (servicing, insurance, accessories, financing all under one roof), named by 63% of dealer respondents. Less than half of consumers said this was important.
* Many vehicle manufacturers do not have tactics in place for the post- Block Exemption market: Dealers generally appear loyal to the manufacturer, but they seem more pessimistic than manufacturers about the potential impact of changes to Block Exemption and the role of new channels. Dealers expect to see erosion of margins on new cars and increased inter-brand competition. Manufacturers are much less certain about the impact. "The strong brand loyalty demonstrated by consumers in our Cars Online study presents vehicle manufacturers with an ideal opportunity to build a direct relationship with consumers in order to gain a better understanding of their customers," said Wujciak. "This improved understanding can in turn help auto companies reduce costs, build more effective customer relationship management programs, better manage their marketing and promotional efforts, and increase the effectiveness of their aftersales operations as they strive to accurately meet consumer needs and demands."
About Cap Gemini Ernst & Young
The Cap Gemini Ernst & Young Group is one of the world's largest providers of Consulting, Technology and Outsourcing services. The company helps businesses implement growth strategies and leverage technology. The organization employs approximately 50,000 people worldwide and reported 2002 global revenues of 7.047 billion euros.
Cap Gemini Ernst & Young's automotive practice serves 13 of the world's 14 largest vehicle manufacturers and many of the largest automotive suppliers. Our automotive sector generates value for companies through automotive-specific service offerings and global delivery capabilities. Working with CGE&Y, automotive companies have been able to reduce supply chain costs, increase customer satisfaction, improve Collaborative Product Development and Product Lifecycle Management, and deploy complex e-business solutions. Our automotive practice produces thought-leading research and points of view, including The Future Automotive Enterprise, Cars Online and the annual PACE Awards. To learn more, click on "industries" at www.cgey.com.
