Most brands with a bricks and mortar retail presence have long since accepted that their business models must change for a digital age. But few have as much relish for that change as auto manufacturers seem to.
It’s not that it’s particularly easy for auto brands to overhaul their sale and distribution models to reflect a new digitally driven consumer journey. Far from it: revamping the path to purchase is a long-term investment and brands have a great deal to lose if they opt for the wrong approach. But despite this, auto manufacturers are more than happy to plan for a future in which their vehicles are sold differently. Their appetite for change is easily explained: the more of the purchase journey takes place online, the less power resides with potentially troublesome dealer networks; some even imagine a world where the logical solution is to dispense with such networks altogether.
But manufacturers anticipating that they can trim dealer-related costs in the knowledge that consumers will navigate the purchase journey online are jumping the gun, as I was quoted in an article on auto dealership design. Worse, they are guilty of an assumption that has so far proven almost entirely unfounded. Digital platforms and social media may be exerting an ever-greater influence over the auto path to purchase but they are certainly not undermining the role of the dealer; if anything the opposite is true.
Auto buyers’ navigator of choice
Whether in developed or rapid growth markets, there is one clear winner when you ask potential auto buyers whom they think is the most reliable guide for their purchase decision. It’s not auto brands – and it’s not peer views on social networks. In the US, over a quarter of buyers say that dealers are the most reliable source of information they have; in China it’s over a third. Both of these markets feature increasingly tech-savvy consumers who make greater and greater use of digital media in auto research; yet dealers remain almost twice as trusted as these online sources.
It’s not just the trust with which dealers are perceived that should give brands pause for thought; it’s the way that this influence is wielded throughout the new, digital path to purchase. Kantar TNS’s studies of the auto purchase journey in both the US and China show buyers visiting dealers at every stage of the process, with visits playing different roles according to how far advanced the purchase cycle is, and dealers at their most influential in the crucial middle stages when consumers are narrowing down their choices.
The hub of the marketing wheel
Manufacturers are well aware of the advertising budgets they spend driving traffic to dealerships, but the contribution that those dealers themselves make to marketing effectiveness is often overlooked. Contact with dealers has a significant positive impact on all subsequent forms of advertising awareness, priming consumers to notice that brand’s models amid the messages of competing manufacturers. And this effect is just as marked for online and mobile advertising as it is for TV campaigns. If there is an integrated hub for auto brands’ marketing then that hub is the dealership, and its importance is only increasing as digital channels proliferate.
It’s not (just) about the test drive
Where does this tenacious influence come from? The reasons vary slightly by market but in each case perceived independence is crucial. In the US, dealers are seen as a more credible alternative to blogs that savvy consumers have identified as being seeded by brands themselves; in China, a human face that can be interrogated is the most credible perceived source of information. Nor do dealers owe their importance wholly to the need for test drives. US auto buyers may insist on these, but their Chinese equivalents are happy to buy vehicles without one.
Where dealers do need a change of gear
A proper understanding of dealer-consumer relationships is therefore vital for auto brands planning to evolve how they do business in the digital age. But it’s also crucial for dealers themselves if they are to maintain the influence they currently enjoy. For that influence comes under serious threat the moment that auto buyers start to part-exchange the vehicles that they previously bought from them new. Kantar TNS research identifies this as the point at which the levels of trust previously built up between consumer and dealer break down almost completely. It is a point in the customer cycle that large numbers of buyers in rapid-growth markets such as China will soon start to reach. If dealers are serious about maintaining their influence in an age where negative sentiment flows rapidly through social networks, then this is an area in which their own business model may need to evolve.