• February 1, 2009
  • By Jessica Tsai, Assistant Editor, CRM magazine

Market Focus: Automotive—Running on Empty

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Not to mix transportation metaphors, but Detroit's Big Three automakers—General Motors, Ford, and Chrysler—are clearing their decks in a desperate attempt to stay afloat, or rather, hoping someone (that is, the government) will throw them a lifeline. At press time, General Motors was asking for $18 billion in loans; Ford, $9 billion; and Chrysler, $7 billion, according to Time.com. Sales in November did little to offer any reassurance for a quick turnaround—and American automakers were hardly the only ones feeling the pain: Nissan reported a 44 percent drop in sales; Chrysler, 42 percent; GM, 41 percent; Toyota and Honda, 35 percent each; and Ford, 30 percent.

The good news is that the industry overall has done little to rattle its all-time high score of 82 out of a 100-point scale on the American Consumer Satisfaction Index (ACSI). Satisfaction with domestic brands is decreasing, however.

"The approach of the domestic [manufacturers] is really not changing a great deal from...the last several years," says David Van Amburg, managing director of the ACSI, citing price-war competition as a big culprit. "The bottom line for the domestic automakers is that if they continue to put out a product that consumers don't rate as high in terms of quality as foreign competition they'll just continue to see their market share erode."

Mark Garms, since December 2008 the executive vice president and chief operating officer at California-based automotive marketing services company Autobytel, says that the Big Three have come a long way. The difference, he says, involves the type of cars. In a market where consumers are being more cost-conscious, it helps to have energy-efficient vehicles. An Autobytel survey released in October found that, in addition to increases in used-car purchases, 90 percent of dealers reported an increase in sales of fuel-efficient cars. Unfortunately, trucks and sports-utility vehicles (SUVs) still populate the car lots of America.

Despite the belated push on fuel-efficient vehicles, the issue involves more than just swapping models, Garms says. For one thing, fuel-efficient vehicles have lower profit margins, and so long as there's still a demand, the Big Three will hold out with the larger vehicles. "As soon as [fuel prices] come back down, it doesn't seem to take long before we're back into the SUVs," Garms says. Realistically, however, he says that "it's very hard to believe that a world where 50 percent of your sales comes from trucks and SUVs is going to last going forward." Survival will require a fundamental change.

Revving up Revenue
Autobytel provides a service where consumers can research and request quotes from dealerships in their region. Although site traffic has remained relatively stable, Garms has seen a 10 percent decline in consumer requests, which reflects the general decline in potential buyers. As such, dealers report that their top priority now is to improve their processes and long-term follow-up on Internet leads.

Customer satisfaction measurement provider iPerceptions surveyed more than 30,000 site visitors in the latter half of 2008 and found that consumers planning to purchase a car within one month of taking the survey decreased from 17 percent to 13 percent; in October 2008, 39 percent said that an automobile purchase was more than six months out.

While Autobytel focuses strictly on customer acquisitions, California-based Auto Point provides technology for the entire life cycle, from purchase to post-sale to maintenance to repurchase. Jim Roche, Auto Point's president, says that most dealers are plagued by fragmentation in their customer interactions. They often rely on separate vendors to deliver service updates, newsletters, referral requests, or even birthday wishes, resulting in significant waste spent on overlapping processes.

With customers simply buying less, a streamlined communication channel is critical for dealers looking to bolster the revenue stream. That, Roche says, enables dealers to effectively mine existing customer bases. Auto Point digs into the past four years of transaction data and segments customers into the appropriate life cycle. Results, he says, have been phenomenal: October 2008 was a painful month for the industry and yet the service-and-parts department of one Auto Point client managed to achieve record high sales.

Declining gas prices will help, but Autobytel's Garms says the industry's only hope for a comeback is for consumers to be able to get the financing they need. Though poor financing policies seem to be what started this crisis in the first place, vehicles (unlike mortgages) are much more static in their value, he says. Under the right terms, lenders can minimize their risk and get consumers buying again.

Garms remains hopeful that the industry will get the help it needs. "I find it very hard to imagine that a company or set of companies as critical as the automotive industry is going to be allowed to fail as we go through a really difficult period of time." 

SIDEBAR: Top 3 Vendors in Automotive     [Source: Jim Roche, president of Auto Point]

  • Applied Virtual Vision (AVV)
  • The Cobalt Group
  • The Reynolds and Reynolds Company

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