Many companies today understand that the wave after wave of digital technology is a phenomenon they need to respond to as quickly as possible, as digitisation can significantly affect them not only in terms of making their products and services sophisticated but also in creating seamless customer experience. In this article, the author elaborates on the approach of short, medium and long-term digital fixes that companies, in this case automakers, can execute to address critical touchpoints, improve customer experience and eventually yield true lifetime value.
Adapting to the ongoing digitisation of the economy, and of society in general, is arguably the most challenging transformation every business is currently facing. Nearly all industries are being disrupted and by now many organisations are aware that they must either transform or risk being replaced by innovative competitors that could come from completely different industries. Take the automotive sector as an example which is under increasing pressure. There are two converging trends that together threaten the traditional business model of the automaker. First, rapid advances in technology are reducing the incentive to own cars. Secondly, governments are also trying to reduce car ownership, especially those propelled by internal combustion engines.
The need of local and national governments to reduce congestion and pollution simultaneously is lending support to car sharing schemes and putting a huge emphasis on the development of hybrid and electric vehicles. As has recently been reported, Norway is planning to completely ban petrol cars by 2025. France and the UK are following suit, promising to phase out petrol cars by 2040.
This leaves automakers with three major challenges. First, a potentially much smaller market for their current products as car sharing schemes reduce the incentive to own a car. Such schemes may also dampen loyalty to particular car brands as customers who can borrow a car at short notice through the use of an app could favour mobility platforms over car brands.
Secondly, well entrenched business models and manufacturing portfolios are likely to be severely tested as they have to give way to new norms. Proud car makers, especially in Germany that pride themselves on their engineering prowess of internal combustion-driven cars, will have to leave their heritage behind and start making even more electric vehicles that are less complex. Forecasting car sales has always been a challenge, but these challenges are likely to make it even harder.
Third, digital technologies like virtual reality and augmented reality are expected to change driving habits. While car usage has traditionally been driven by the convenience and independence implied in car ownership, technology is changing the game. Customers can spend less time behind the wheel by using digital technologies to better plan driving holidays or outings. Professionals can leverage increasingly sophisticated technologies to work at home and reduce commuting time in the car. Technology is even changing the way consumers purchase cars. According to one luxury automaker I am working with, visits to car dealerships ahead of purchase are dropping massively from over eight to less than two in the last 10 years. Empowered with the internet, customers spend more of their time reading product reviews, watching video reviews on YouTube, designing cars with 3D-configurators and gaining knowledge about a brand and its engineering before walking into a dealership.
This is a far cry from the early days of the Michelin Guide, which would present drivers with a reason to drive more often in search of culinary delights. Michelin developed its guide to increase driving and therefore the use of its tires, so that customers would end up needing to buy more of them. Customers are now empowered like never before to reduce their dependence on the car altogether. Furthermore, they’re also waking up to the need to reduce their carbon footprints. Even if people still buy cars, the two cars per family norm so pervasive in Europe is arguably under threat.
That leaves automakers and executives in many other industries with a dilemma. They can choose responsiveness, to jump in feet first and take their companies in a completely new direction or do nothing and see if the trends dissipate. However, there is a third option that represents an opportunity to help the company buy time and make a successful transition to a new technology and new consumer expectations.
I call this option the short, mid-term and long-term fix. The emergence and abundance of digital technologies present companies with an opportunity to refresh the customer experience, maintain their customers’ loyalty and ultimately respond to them in the long term with new features or entirely new products.
One thing car companies in particular still have going for them is that car buyers appear to be staying loyal to the brands they like, at least for the time being.
The automaker I have been working with is moving quickly to capitalise on this. Its short-term fix is to rejig customer communication from a linear conversation, company to customer, to a two-way conversation.
It is doing this by visualising the entire customer journey and optimising the touchpoints between the customer and the company. The company is leveraging digital tools to keep communications relevant to customers in their fast-paced lives and in a fast-changing industry. By “embedding” the customer in the entire business, the company is aiming to produce cars, or better experiences, that outperform the market even in the most turbulent times.
For this carmaker, its customers currently either lease or own vehicles from the brand. But given car sharing schemes are likely to become more prevalent and less risky, customers might have less incentive to own a car. To give the automaker a competitive edge, they have identified crucial touchpoints that represent customer experiences with the brand and the points at which they might depart from the brand.
Traditionally, this company acted like many others. In the pre-sales phase, for example, the marketing department played the role of answering customer questions and reaching out with marketing materials. At the point of sale, the sales team would handle sale and transfer ownership. After sales was responsible for maintaining the vehicle. It sought to create a more seamless experience with a central CRM team that ensured each part of the organisation was part of a bigger whole, making it more responsive to customer needs.
By putting the customer at the centre of the organisation, rather than the product, it enables the company to customise the experience. It employs an array of digital trends and tools like mobile, augmented reality, robotics, social media or a 3D-car configurator to engage deeply with customers in the pre-purchase phase, through sale to post-purchase phase. It is putting the customer at the centre of product development by allowing them to custom-build their cars, then stay updated on the manufacturing progress with photos of the car as it’s being made in the factory. Customers are able to change their minds along the way and the CRM team informs the parts of the organisation responsible to respond. This reassures customers that they’ve made the right purchase decision.
It also employs VR headgear for customers to view digital models of new cars when they come to dealerships, which also cuts the cost of shipping full-scale models.
The company identified customers coming to the end of a leasing contract as a critical opportunity. It uses the CRM team to keep customers aware of the options available by sending marketing collaterals or invitations to test drive a successor car.
Its mid-term fix is going beyond the two-way communication. The company is using digital tools to gain information on its new and existing customers. The company employs machine-learning techniques leveraging electronic sensors in each car to improve infotainment, applications and understand driving habits to adapt products. This crucial data enabled the company to understand how drivers in different geographies behaved. For instance, those in urban areas spend a lot of time in traffic. This information was translated into marketing about more comfortable interior designs. GPS data also enables marketing campaigns for new cars matched to specific kinds of driving behaviour.
Its long-term fix will eventually be completely new cars or even mobility concepts that meet customer needs. The carmaker is monitoring product satisfaction and vehicle dependability through its vehicle data. The data could even be used to personalise the next car-purchase of the same customer. These kinds of changes, however, don’t come without challenges. Putting the customer at the centre of the company’s activity will involve all parts of the company that touch the customer’s experience – so almost everybody in the organisation. That also means that organisations need to have the right enablers in place. It is not enough to just think about the customer-facing side – companies need to provide an environment with the right culture, an innovative mindset and a leadership approach that allows for digital transformation. In addition companies need processes, governance rules and most importantly an IT (and technology) infrastructure that supports a fast and agile approach to customer centricity. There is no room for organisational or data silos. In a digital world there are far too many moving parts for decisions to get stuck between silos and slowed down.
It is likely that some parts of the organisation will resist digitising certain touchpoints. But it has been consistently shown that companies ensuring a seamless digital customer experience throughout the consumer journey will reap the benefits of increased profitability and put themselves in a position to capitalise on future opportunities.
Optimising customer experiences at their touchpoints enabled this company to improve its prospects and has since yielded promising growth projections. The age-old adage of putting the customer first rings truer than ever. The approach of short, medium and long-term digital fixes can identify low-hanging fruits and start working on the bigger things that customers expect in the mid-term and long-term.
About the Author
Joerg Niessing is Affiliate Marketing Professor at INSEAD and is passionate about bridging the academic and the business world on topics related to customer centricity, digital transformation and data analytics. He holds a PhD in Marketing from the University of Muenster. His credentials do not only come from his academic career, but also from 14+ years in management consulting. Joerg is a regular keynote speaker and consults for a number of organisations in his area of expertise.