The automotive industry is undergoing significant disruption as private car ownership continues to decline partially caused by the rise of shared mobility in many parts of the world. In these new ecosystems, the touchpoints with end-customers is quickly shifting away from automotive aftersales service providers (OEMs). The market is rapidly shifting from B2C to B2B2C and OEMs must shift now to take advantage of new ecosystems to survive.
Customer touchpoints in the automotive industry will continue to evolve and change as shared mobility becomes more prevalent. The direct relationships between OEMs and the end customer are changing to include third parties, thereby removing the existing relationships. Information about customer preferences and buying patterns will no longer be visible to OEMs. Automotive manufacturers and OEMs will need to find alternative ways to understand customer needs and preferences to position themselves to retain their existing revenue streams and sell new and existing products. To accomplish this, there are two major priorities for them: 1) Create new opportunities to build customer touchpoints that are both online and offline and 2) Leverage creative ways of gathering, leveraging data and analytics to provide insight into customer needs and wants will become absolutely vital for automotive OEMs to survive. They can already act by using Software Over the Air (SOTA) to differentiate. They can also leverage ecosystems to enrich their ability to leverage new types of data. The message is that they must act now.
- Automotive OEMs must act now to reinvent their customer relationships or be reduced to hardware providers.
- Reinventing Customer Touchpoints is necessary for OEMs to survive. It is not optional
- OEMs must shape their own ecosystems to gain insight into what customers want.
- Leverage customer touchpoint data assets to monetize and invent new revenue streams
- Expand the ecosystem: OEMs must leverage ecosystems they do not manage and orchestrate others.
- Utilize the concept of digital business events to seek new opportunities to understand your customers
- Customer intelligence and intimacy will be key to secure customer relationships of tomorrow.
Current Customer Touchpoints for OEMs are Disappearing
More than a century after Henry Ford’s time, the new era of mobility is rapidly changing the paradigm of the global automotive market: customers no longer care only about the color of the car, long-term leasing is increasing in popularity, and the concept of automotive ownership as a status symbol is resulting in diminishing status consciousness. These factors are resulting in a decline in personal car ownership. As a result, it is increasingly more challenging and complex for OEMs to stay competitive. They can no longer rely simply on the reputation of their brand. Differentiation is not solely based on the color of a car nor its horsepower. Increasingly, new digital services, innovative customer experiences, and after-sales service excellence will play a significant part in enabling OEMs to remain competitive.
In the coming years, the automotive industry will continue to be impacted by multiple, game-changing technological, economic and societal trends. An inevitable evolution towards new powertrains such as the electric car will result in reduced reliance on after-sales services, a pillar of the OEM’s profitability. The automotive after-sales service market currently generates profit margins of over 20% 1, which is much higher than margins for new vehicle sales. Other trends such as autonomous driving, shared mobility and long-term leasing will continue to impact the importance of individual - car ownership resulting in a reduction of the number of OEM B2C customers of OEMs. These factors will result in customer touchpoints for OEMs to change or even disappear.
Increasing urbanization, the promotion of alternative mobility concepts combined with increasing disincentives for car ownership such as high fuel cost, vehicle taxation, insurance costs, and the increasing numbers of car-free zones in major cities are resulting in the reduction of car ownership in many regions. 1
In many western countries, the automobile as a status symbol is changing as well. According to BearingPoint research, conducted in 20192, both western Europeans and North Americans do not indicate any significant determining factor when deciding on a vehicle brand or a carsharing service. Features such as horsepower, and interior features do not significantly impact decision making in any of the countries we surveyed. In China, status symbols continue to be important but owning a car is somewhat less important.3 The Chinese are open to car sharing, especially the rising middle-class who see car ownership as expensive.
Customers are increasingly accustomed to expecting more digital interactions in their everyday lives. They have become business as usual when buying products or services. This trend is continuing as customers use mobile phones and devices to conduct daily business interactions.4 Automotive OEMs must react now to address these customer trends or be forced to accept they are commodity providers with reduced profit margins.
Customer Intimacy is More Critical than Ever as Current Customer Touchpoints Evaporate
OEMs rely on after sales services to provide important customer touchpoints where customer needs and preferences indicate and create opportunities for cross-selling or upselling. As an example, the classic after-sales service discloses data related to the customer’s decision-making process and provides the opportunity for the automotive OEM to create strong physical touchpoints at the dealership. This data may indicate or strengthen an existing emotional association with the brand. However, the move to electric vehicles will result in declining physical touchpoints with the dealer as these automobiles requires less frequent servicing. Autonomous vehicles might even take themselves to the dealership. Mobility vehicles eliminate the current direct touchpoint with the end customers.
OEMs must realize that today’s differentiators are rapidly becoming business as usual. Customers are becoming more demanding for new features and functions. While software updates are considered essential leveraging SOTA, OEMs should realize that these updates create new experiences for the customers. One is example is how the iPhone feels ‘like new’ whenever a new iOS is installed. The same concept can be leveraged by automotive OEMs.
As the automotive industry continues to evolve and leverages more data resulting from increasing digital interactions, how will OEMs reinvent their customer touchpoints to continue to impact the end customer’s journey and maintain the relevance of their products and services?
Customer intimacy is key in the new automotive industry. Automotive OEMs must be looking for new ways to establish and maintain customer intimacy through whatever means are possible. OEMs must create and leverage data to react to changing customer requirements and preferences and maintain existing profit margins while creating new revenue streams. However, the window of opportunity is closing very quickly.
Create, Reinvent, and Multiply Digital Touchpoints at every Opportunity
To be successful in the new aftersales service market, OEMs need to address the following business challenges:
- Understand how they can protect access to the current customer install base information
- Determine how they can create or reinvent digital touchpoints with customers and create new revenue streams
OEMs must continue to improve the customer aftersales experience by multiplying digital touchpoints, offering a seamless online and offline customer journey, and providing new services enabled by proprietary data and the digital content that enables the sales of after sales services, spare parts, and accessories.
Understand and Influence Customer Demands Using Multiple Sources of Data
It will be key for OEMs to obtain relevant customer data and influence customer touchpoints regardless of where they might exist. This translates first to developing ever more impactful touchpoints. For example, Porsche uses videos to communicate with its customers to keep them informed about the vehicles’ production status when a new automobile is ordered. In addition, video is used to keep the customer informed about newly available options once the sale is completed. Video is used both as a communication method but also as a customer touchpoint because the customer can approve or decline additional options. This data can then be used to understand customer preferences.
In July 2019, Tesla added the ability to contact roadside assistance in its mobile app. The customer can contact roadside assistance within the app and the reason for the breakdown as well as GPS data is transmitted. However, this new feature to automate roadside assistance has introduced some new shortfalls. Customers who need roadside assistance may also want to speak with a human being in an emergency. Automotive OEMs must also develop personalized and seamless customer journeys and not rely solely on technology to improve service. Understanding the customer’s needs and preferences for where and how to reach as customer is vital. Knowing when to leverage both online and offline touch points will be critical for a personalized customer journey
Digital channels and the quality of product content will certainly drive sales. But physical locations and human beings still play a critical role in inspiring a customer’s purchasing decision and customer journey. OEMs must optimize those experiences as well as the digital ones. Connecting physical spaces and human interactions must be seamless and positive. Applying learnings from luxury retail or high-tech brands can be very useful. For instance, Apple understands the importance of seamlessly connecting in-store interactions with digital ones given the fact that 90 percent of shopping is conducted through digital channels. Consumers can make Genius Bar appointments online or using a mobile app. They can then be welcomed in the store to complete the transaction seamlessly. Automotive OEMs should leverage this approach in the way that Byton does by integrating online direct sales with physical automotive experience at selected stores.
Build and Orchestrate New Ecosystems to Discover New Customer Touchpoints
Ideally, OEMs must leverage the ecosystem edge6 to become ecosystem leaders for all automobile and location-related services. Many OEMs have already experimented with location-based digital services such as suggestions for restaurants, petrol stations and shops on the road, discount vouchers, and mobile payments for parking. However, very few automotive OEMs have managed to scale these efforts and become profitable in this activity. OEMs must develop new and innovative digital services where they can have a competitive advantage over other actors in the ecosystem. They must become the orchestrators of new ecosystems of services related automobile and its lifecycle enabled by new types of proprietary data that only OEMs own and control.
Other ecosystems, not owned or controlled by OEMs, will become even more important to understand customer needs and preferences. New types of ecosystems will emerge as organizations continue to leverage new digital product and service offerings to transform their business. Examples include mobility or technology companies who will own customer touch points. OEMs must determine how they can become ecosystem members and leverage data from these touchpoints. But this requires a different way of thinking. Opportunities to leverage these ecosystems may not be immediately obvious. It is why we have already recommended in a previous note that organizations must designate who in the organization will be responsible for ecosystems.7
It will be important to explore new ways of obtaining relevant customer data and influence touchpoints across company boundaries. This involves investing in data-driven marketing in order to develop ever more impactful touchpoints. Additionally, it also means to embrace co-creation with cross-industry players, ranging from telecommunication companies to household electronics manufacturers to providers of smart grids and smart cities.
Smart sensors and intelligent algorithms within big cities will begin to shape the future of mobility behavior tremendously. City planners can now adjust traffic lights and speed controls based on vehicle movement and the concentration of vehicles on the road at any given time. What information can this data provide us about driving patterns and speed controls to integrate into automobiles and into navigation software?
Cooperation with smart home services could be another opportunity. Data captured from IoT sensors can make it possible for a refrigerator to notify a driver about what and where to buy food for the evening meal. The vehicle sensors can also be leveraged to recognize a driver's preference for what he or she plans to do when they arrive home. This could result in preparing the lighting, temperature, and music for the evening. Data sharing in a such seamless manner can make the individual feel calm and relaxed even if they are using a shared vehicle, translating into a new customer experience. e possibilities can be limitless but will require a non-linear type of thinking to enable the ability to leverage data coming from various ecosystems. This can result in spurring new ideas for co-creation and innovation to address the changing landscape of the automotive industry.
Use Software to Differentiate Products
Product differentiation in the digital era is no longer about engine features nor reliance on a well-established reputable brand. It is about new, differentiating, and innovative services. Software functionality in the automotive industry has increasingly become more important than the automobile itself.
New automotive features can be delivered by software in the car or by a mixture of in-car software and cloud-based software services optionally combined with smartphone apps. The use-cases are numerous: examples include vehicle status, remote door-locking, remote pre-heating, GPS tracking, journey logs, and a plethora of in-vehicle infotainment.
Software Over the Air (SOTA) technology allows to configure the car upon the client needs. Tesla has been the pioneer in this area by leveraging SOTA to modify automotive horsepower and perform remote upgrades. However, the full potential of SOTA has not yet been fully exploited by OEMs. As an example, there are still opportunities for OEMs to use SOTA to provide mobility solutions that remotely adapt to changing customer needs and preferences. Additionally, SOTA technology combined with a leasing business model could be a cutting-edge offer to customers as secondary owners in the automotive industry. For example, a young couple living in the city can initially subscribe to a low-cost leasing rate but activate more features while traveling during their holidays. This will result in increased revenues to the OEM. SOTA is especially relevant in the used vehicle market as the second owner of a car may wish to change the configuration and activate features that the first owner did not use or buy when the car was originally purchased.
Leverage New Business Models to Achieve New Revenue Streams
The share of new vehicle sales used for new mobility modes such as ride-hailing and car-sharing ranges between 15% in the US and Europe and up to 35% in China by 2025 5. OEMs must establish themselves as key players in the fast-growing urban mobility market rather than new market entrants such as shared mobility platforms, mobility-as-a-service operators, and parking operators to realize the value themselves.
One example is BMW Group and Daimler AG who, in 2019, invested more than €1 billion to create a new global offering that provides sustainable urban mobility for customers. The two companies formed Your Now with the intention of offering their combined mobility services. These services include car sharing, ride-hailing, parking, electric car charging, and multi-model transport to form a one-stop shop for mobility services. These existing services brought a combined customer base of 60 million individuals. The goal is to form a single mobility service portfolio with an all-electric, self-driving fleet of vehicles that charge and park autonomously and interconnect with the other modes of transport.
Group PSA has deployed a similar strategy with Free2Move, which makes it easier for customers to use carsharing services. Using one application, they can view all available vehicles located nearby from various carsharing providers. They can also book their desired car, bicycle, or scooter. PSA plans to eventually sell this platform to other automotive manufacturers resulting in a true platform business model.
Naturally, new business models take time to become viable new offerings and gain market traction. As it is still early days, OEMs will need to monitor the success of these new business models carefully.
In the new age of mobility, automotive manufacturers must find new ways to connect to the customer during the after-sales lifecycle. To do this, they must leverage new digital products and services which enables more innovative product differentiation, always with the goal of leveraging seamless, positive customer experiences along their individual journey to generate new revenue streams. Staying in touch with the customer will only be possible, if OEMs are ready to open up to new digital ecosystems and include new partners. This will unfold new ways of understanding customer preferences and behavior. Staying connected with their customers will be key in the shared mobility era.
3 BearingPoint survey of 900 participants in Germany, USA, and China, December 2018
5 BearingPoint survey of 900 participants in Germany, USA, and China, December 2018
6 Ecosystem Edge, Peter J. Williamson (Author), Arnoud De Meyer (Author), April 14, 2020, https://www.amazon.co.uk/Ecosystem-Edge-Peter-J-Williamson/dp/1503610217/ref=sr_1_1?dchild=1&keywords=Ecosystem+edge&qid=1586772727&sr=8-1