FEATURE. How digital technologies can elevate the car-buying experience. Dan Bolger, Ethan Forchette, Srinivasa Reddy Tummalapalli, and Ryan Robinson

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1 FEATURE How digital technologies can elevate the car-buying experience Dan Bolger, Ethan Forchette, Srinivasa Reddy Tummalapalli, and Ryan Robinson

2 Digital technologies are starting to fundamentally change the way people buy cars, but manufacturers and dealers should think carefully about where to invest in order to elevate the customer experience. SOME OF THE best experiences people have in their lives are those that are customized and connected on a personal level. People increasingly expect these enhanced experiences across all of their brand interactions, whether it s paying for a coffee, ordering groceries online, or buying a car. One of the ways that companies across the retail spectrum are meeting this challenge is by integrating advanced, digital technologies into the buying process. As a result, many automotive manufacturers and dealers in the United States are making significant investments in a variety of digital technologies, ranging from tablet-based product guides to virtual reality (VR)-enabled assets and applications to improve customer engagement on the showroom floor. But are those the right investments? Are those efforts delivering significant returns to the business? If they are, could there be missed opportunities to capture additional value? In our experience and based on insights from the 2018 Deloitte Global Automotive Consumer Study, manufacturers and dealers should be thinking more broadly about their definition of digital transformation. For instance, study results indicate that brand and dealer websites are pivotal sources of information for people researching for new-car purchases. As much as 36 percent of car owners report that dealer websites had a significant impact on their choice of vehicle, equaling the influence of friends and family on a purchase decision (figure 1). The importance of identifying, intercepting, and FIGURE 1 Top information sources in order of impact: Buyers across generations are influenced the most by dealer websites Percent of buyers that rated each information source highly (4 or 5) on a 5-point scale. 36% Dealer websites 36% Family, friends, coworkers 34% Safety-related websites Manufacturer 32% websites Salespeople at 29% the dealership Third-party 26% websites Retail 21% Websites Financial provider websites Other (media reviews, magazines) 17% 15% 14% Social media Source: Deloitte Global Automotive Consumer Study, Deloitte Insights deloitte.com/insights 2

3 influencing potential buyers online is also underlined by the fact that half of US auto buyers do not engage in any dealer cross-shopping once they make the leap to showroom visits. Indeed, 30 percent buy a vehicle the very same day they step onto a dealer s lot, so being on the top of their mind when people head out to kick some tires can significantly increase the odds of a sale. However, creating a truly engaging online experience that compels people to visit a physical retail location can be harder than it looks. Study results indicate that over half of all auto shoppers find manufacturer and dealer websites to be merely meeting expectations. But this pervasive mediocrity might actually be good news as it means there is likely ample opportunity for brands and dealers to create a differentiated digital experience via their websites. Useful ideas that could be adapted to the auto industry can be taken from sectors such as consumer electronics and online retailing that have a demonstrated track record of generating brand affinity through an engaging online presence. Building a strong bridge that encourages a seamless move from online research to a physical shopping experience should be an important target for digital investment. For example, ensuring that critical information such as vehicle pricing remains consistent as consumers make the transition to a dealer showroom could add to the customer experience. There may also be a compelling argument for making digital investments that directly address customer pain points in the vehicle-buying process. Study results confirm the longstanding notion that vehicle buyers dislike excessive paperwork and the overall length of time it takes to buy a car. Digital investments designed to streamline processes, such as creating a seamless flow of customer information across several dealer systems and remote document e-signing, 1 can elevate the overall shopping experience. This can potentially increase the likelihood of a successful sale and provide the necessary conditions for the creation of a long-term customer relationship. Many people shopping for their next vehicle have yet to fully embrace digital sales aids, a fact that automakers and dealers must recognize. Findings from this year s study show that shoppers across all generations prefer more low-tech information tools while they are in a dealer showroom. In fact, 80 percent of US vehicle buyers rate conversations with salespeople as the most useful information channel, followed by printed brochures and spec sheets (figure 2). Tablets, interactive kiosks, and VR headsets are not yet perceived to be as helpful even at a showroom. This preference for traditional information tools could be caused by a number of factors, including a consumer base that does not yet fully understand the types of enhanced user experiences these technologies can create. Nonetheless, Study data reveals two demographic groups that stand out for their alignment with an enhanced digital showroom experience. Millennials and younger buyers are interested in the use of digital sales aids, but they ultimately favor their own mobile devices to access the information they need. In fact, two-thirds of Generation Y and Z vehicle shoppers prefer using their own mobile devices as a source of information rather than exploring advanced digital technologies, such as VR headsets and interactive computer 3

4 FIGURE 2 Usefulness of information channels at a dealership: Auto buyers across generations prefer traditional channels Percent of people that rated each information source as somewhat/very useful. Baby boomers and older Generation X Generations Y and Z Traditional Conversation with a salesperson 74% 83% 81% Overall 80% Printed brochures and specification sheets Digital 61% 59% 61% 61% Own mobile device 24% 54% 67% 46% A tablet device provided by the dealership 7% 18% 43% 22% Interactive computer kiosks 9% 23% 39% 23% Augmented/virtual reality headset provided by the dealership 6% 16% 36% 19% Source: Deloitte Global Automotive Consumer Study, kiosks provided by the dealer. This compares to only 54 percent of Generation X shoppers and only 24 percent of baby boomers. The other group interested in a digital dealer experience is premium car brand owners nearly one-third (31 percent) find tablet devices to be helpful while shopping at a vehicle dealer, compared to only 21 percent of nonpremium car owners. Digital transformation isn t easy to crack several aspects of the vehicle buying process can be hard to digitize. For example, nearly nine out of 10 shoppers prefer the immediate, tactile experience of physically interacting with a vehicle before buying it. Further, 70 percent of buyers indicate they prefer in-person interactions at the dealership. Also, nearly two-thirds of buyers indicate a preference to 4

5 conduct price negotiations in person to secure the best deal. These responses imply that auto buyers have yet to envision a fully digital future for the vehicle-purchasing experience. It also may go a long way in explaining why the wave of online shopping that is taking over many retail subsectors has yet to fully disrupt the way vehicles are purchased. Having said that, 60 percent of US consumers are at least interested in the overall concept of buying their next vehicle directly from a manufacturer via an online process. This should be a wake-up call for auto dealers that despite some current reservations, the expectation of a completely digital buying experience could be closer than they think. Considerations for automotive manufacturers and dealers: 2 1. Engage potential buyers during the online research phase with targeted, tailored digital messaging. Retain the data collected during the research phase to help create a seamless, tailored experience at the dealership. 2. Leverage related online capabilities, such as financing preapprovals, to accelerate the carbuying transaction and create horizontal data aggregation capabilities that integrate information across dealer systems to reduce friction in the vehicle-purchasing process. 3. Expand the pool of available customer data by exploring strategic partnerships with mobile device providers, social networks, application developers, location-based service providers, and network services that are already seeking to position themselves as the integration points for an individual s mobility profile. In a market where competition for consumer attention is likely to intensify in the face of softening overall demand, 3 the need to embrace new technologies designed to improve the car-buying experience seems critical. However, digital transformation can mean a variety of things, and investments should be prioritized in the areas where customers can see the most value. Endnotes 1. Brad Rogers, How dealership tools that play nice together engage buyers, Dealer Marketing Magazine, July 27, Andrew Dinsdale, Philipp Willigmann, Scott Corwin, and Jeff Glueck, The future of auto retailing: Preparing for the evolving mobility ecosystem, Deloitte, Steven Hilfinger, Forecasting the North American sales and production footprint in uncertain times, Mondaq Business Briefing, August 8,

6 About the authors DAN BOLGER is the leader of the Dealer Services Group for Deloitte & Touche LLP. He is responsible for delivering the firm s suite of solutions to help global automotive companies and their dealer networks understand and enhance dealer performance; and assure compliance with shareholder, regulatory, and customer demands. He is based in Detroit, Michigan. ETHAN FORCHETTE is the senior manager for the Dealer Services practice at Deloitte & Touche LLP and has nearly two decades of experience in the automotive and financial service sectors focused on retail network performance management, OEM/dealer relations, and retail process enhancement. He is based in Atlanta, Georgia. SRINIVASA REDDY TUMMALAPALLI is a senior research consultant supporting Deloitte s global Automotive practice. He has more than a decade of experience in financial modeling, market intelligence, and the development of engaging, actionable insights. He is based in Hyderabad, India. RYAN ROBINSON is the lead researcher supporting the global Automotive practice at Deloitte LLP. For the past two decades, his primary focus has been to create actionable insights that support strategic client decisions. He has been a frequent speaker at industry conferences and has been quoted as a subject matter expert in major media outlets around the world. He is based in Toronto, Canada. Contact Dan Bolger Principal, Dealer Services leader Deloitte & Touche LLP dbolger@deloitte.com 6

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