Market Focus: Automotive -- Detroit: Driven to Distraction
The automotive industry is trying to shift gears -- again -- and this time it's counting on having CRM at the wheel. Over the past few years, original equipment manufacturers (OEMs) and automotive dealers have been stuck in heavy data traffic without an exit in sight. What they must do now is put all that data to use, going beyond the initial sale to engage in a lasting relationship with the customer, a process that requires more than just throwing in a free air freshener.
The industry overall seems to be doing well with consumers, reaching a relatively high index score of 82 on the American Customer Satisfaction Index (ACSI) in the second quarter of 2007; but within the industry, American companies continue to lag behind their foreign competitors. According to Claes Fornell, founder of the ACSI, the systems used by domestic carmakers to measure customer satisfaction "have been very primitive compared to most other companies and certainly compared to Japanese and European automotive companies."
Fornell points to two underlying factors: the industry's reliance on short-term strategic thinking, and its primitive means of measuring and analyzing customer satisfaction. In order to capture sales, automotive companies are often tempted to launch promotions and promotional discounts. Unfortunately, such deals cause customers to demand even more discounts and lower prices the next time around; thus, dealers are stuck providing a price that increasingly fails to correlate with rising costs. To make matters worse, while the automotive industry is relatively innovative in its means of capturing consumer data, carmakers are "still using statistical analysis from the 1920s," Fornell says. "When it comes to processing that data, analyzing it, and figuring out what it means -- I think [that's] where [the] big challenge is."
According to a study by Capgemini, 80 percent of automotive consumers use the Internet as their first stop in the shopping experience, a change in the marketplace. More than one-third of that group reported that they expect a response to their inquiry within four hours. Now, with the majority of leads coming from online channels -- whether it's from the OEM, the dealer, or a third party's site -- many companies are faced with the challenge of responding to the influx.
"Most local dealers don't have the time to have a dedicated person sitting at a computer waiting for online leads, so the phone call is what's vital to them," says Dan Obregon, marketing communications manager for click-to-call/click-to-chat provider eStara, which attempts to bridge the gap between online and offline channels for companies such as Radiator.com. Once faced with an average closing rate of 2 percent to 3 percent, Radiator.com now reports conversion rates of 35 percent to 40 percent. Moreover, Obregon says, sales cycles for customers going through Web sites for Chrysler, Jeep, and Dodge were reduced from a 30-to-45-day range down to a range of just three to five days.
Unfortunately, with so many leads coming in, it's likely that dealers are "cherry-picking by default," says Katherine Kress, vice president of practice development and management at lead-scoring solution provider Urban Science. As a result, without the ability to differentiate, dealers are missing the opportunity to address very qualified leads. By incorporating lead-scoring technology, dealers can handle "urgent," "priority," or "standard" leads accordingly.
While it's important to get the sale, the automotive industry relies on nurturing the post-sale relationship as well. For most car companies, a significant portion of revenue comes from maintenance, service, and, potentially, future sales.
To some extent, General Motors' OnStar car-safety device can be viewed as an important component in automotive CRM, says Dennis Virag, president of Automotive Consulting Group. Typically, when customers have a problem, they bring their car in, and the transaction gets recorded. However, the problem is rarely resolved in real time and the information often fails to be registered in order to proactively address the issue and prevent future occurrences. OnStar can diagnose a car remotely and suggest a course of action for the owner.
In addition, customers want to be in the know -- and technology is making this possible. Messages delivered directly to cellphones, status updates and history reports accessible on company Web sites, online payment methods, and email notifications are all ways to communicate with the consumer. By staying on top of the car's condition, dealers and OEMs are able to bank on any future opportunities, and, in turn, earn customer satisfaction. "The searching is important. The buying is important. But the long-term relationship really is the key," Virag says. "How you continuously monitor and communicate and take care of your customer in that long-term ownership period is really one of the keys to success."
Top 2 Vendors: Dealer Management Services (DMS)
- Reynolds and Reynolds
Top 3 Vendors: Original Equipment Manufacturers (OEMs)
Sources: Automotive Consulting Group and J.D. Power and Associates
- Oracle's Siebel