It’s not about the car of the future; it’s about the car company of the future
The companies that will survive and thrive are changing the way they engage with their customers and what drives their revenue streams, writes Sabrina McPherson
With all the talk of self-driving cars and electric vehicles and fleets replacing personal transportation, it is easy to miss the even larger, more essential transformation in the auto industry: the companies that will survive and thrive are changing the way they engage with their customers and what drives their revenue streams. Doubling down on digitally enabled customer experiences, capturing value pools beyond just car sales, and building an enterprise that can develop digital services and products like a technology company are key to the future. The car company of the future needs to be focused on meeting consumers’ broader mobility needs, not just on selling cars.
Doubling down on customer experience
Today’s consumers expect things to be simple and always available; this stems from the ease with which they access online banking, shopping, or booking travel. Car companies also need to embrace this as the standards of what consumers want is set outside of the auto industry. There should be websites and apps that let owners of each car brand quickly find the closest dealer to them and book an appointment; it should be as easy as booking a dinner reservation on OpenTable. But for the most part, this isn’t happening. When someone needs to service their vehicle, they are still left on their own to figure out where to go. They have to make phone calls in order to see if a particular dealer offers what they need and book an appointment.
The car company of the future needs to be focused on meeting consumers’ broader mobility needs, not just on selling cars
In addition to creating platforms that make things like an oil change simple and frictionless, car companies need to constantly communicate in a personalised way with vehicle owners. Think about the way retailers send out coupons after recent purchases, often targeted toward items that customers would prefer based on past purchases, or the change of season. Car companies should be doing the same thing: sending out a reminder that it’s time for a 30,000-mile check-up and including a coupon good for use at any certified dealership. Or, if someone hasn’t been driving much lately, perhaps they can suggest a membership on a car-sharing platform. Additionally, if they have recently moved from the suburbs to the city, car companies can offer a coupon for an electric bike. All these things are possible with data, and the OEMs that use data to understand and predict needs and behaviours, and create seamless experiences, will build sustainable competitive advantage.
Capturing additional value pools
Selling cars is no longer sufficient to drive long-term profitable growth. Increasingly today and in the future, the money lies in keeping customers in a brand’s ecosystem (the Apple business model and winning playbook). This means that OEMs need to think more about how they can offer added-value and more services. This is why more car makers are offering insurance packages, emergency services, and concierge services. Extra, but often essential, services allow car companies to maximise the value of each customer and give them a reason to stay. To be done well, this requires smart use of data and personalised communication in order to reach the appropriate customers with relevant offers and services. The focus needs to shift from the goal of selling the car or multiple cars to seeing the car sale as step one into the ecosystem, and everything that comes after that as the key objective. To win, OEMs must maximise customer lifetime value versus just maximising one-off vehicle sales.
Building a tech enterprise
Tesla is a continued big threat to OEMs today. But Tesla is not a car company; it is a tech company. For OEMs to dominate the vehicle market, they also need to become tech companies. Carmakers must focus more on software and software engineering, which requires a shift in mindset, a new operating model, and new types of talent. For many OEMs, this requires a complete overhaul of how they organise and operate. This is no longer a choice. A car today is about much more than its engine, or even engine efficiency. It is about building a device that is compatible with consumers’ other devices and with the modern world. It’s about being able to operate much of a car from a mobile phone and connecting drivers with charging stations and other services through a tap on a screen.
The days of winning on safety and efficiency alone are gone. In today’s world, car companies need to focus on how convenient it is to buy, update, and maintain vehicles while meeting other broader mobility needs of consumers. When someone buys a car today, the purchase is just the beginning of the relationship and of the revenue stream for the OEM—but only if the OEM can adapt to this new reality.
About the author: Sabrina McPherson is Senior Managing Director at digital consultancy Publicis Sapient