Technology is disrupting the way most products and services are sold, and automotive retail is no exception. Car buyer expectations have grown exponentially over the past several years because of the power they hold in the palm of their hands – and their expectations are being shaped by experiences in other retail verticals. Plus, with pervasive vehicle quality improvements and the multitude of great product choices consumers have, it’s becoming more difficult for manufacturers and dealers to differentiate themselves.

Hyundai is tackling the need to differentiate head on by making the car buying process faster, easier and more convenient. They hired Root & Associates to research customer pain points and to get feedback on an industry-first program they were considering, designed to create a better retail experience.

The Approach

Root & Associates spent last summer visiting consumers in their homes and documenting how they researched and shopped for new cars. We drilled down to the emotions that guide them as they choose auto brands as well as one dealership over another. For busy consumers today, much of their frustration is related to the inconvenience of buying a car; it’s more stressful and more time consuming than purchasing most other products.

“Frictionless retail is happening all around us,” says Dean Evans, Hyundai Motor America’s CMO, But the “elephant in the room” is that car buying “doesn’t always pass the frictionless test” especially for millennials, who want to handle as much of the process online as possible. “Speed is the number one consumer demand today,” he added. That insight was then used to refine Hyundai’s new program, Shopper Assurance. It’s designed to make the car buying process more frictionless and make it simpler and less time consuming for customers. The four components of the Shopper Assurance program are:

• Transparent Pricing
• Streamlined Purchase
• Flexible Test Drive
• 3-Day Money Back Guarantee

 
Hyundai’s goal is to create a better car buying experience by making it faster, more convenient and more enjoyable. And to ultimately give their dealers tangible ways to differentiate themselves from local competitors. 

The Results

Does this improved buying convenience resonate with buyers? Hyundai asked that question too. We were surprised by what we heard during the concept testing; 84% of consumers told us that if all other things were equal, they would purchase from a dealership that offered these services over one that did not.

The consumes who were responding to the concepts initially did not know what brand was evaluating them. Once consumers learned who was behind these programs, consumers who said they would consider the Hyundai brand tripled (going from 20% to 66%), beating out volume brands like Honda, Toyota and Ford. That’s powerful.

After the initial concept testing, Hyundai piloted the program in four markets and Root & Associates surveyed buyers who actually experienced Shopper Assurance in action, as well as those who learned about it while at the dealership.

The results? Of those who used one or more components of Shopper Assurance Over half (56%) said that it played a role in their decision to purchase a Hyundai.

For both the dealer and the brand, trust, confidence and satisfaction dramatically increased. Of those who used a component during their purchase, 70% loved the process of buying their car and 65% said it was much better than their previous car purchase experiences.

With those kind of results, it’s not surprising that Hyundai’s Shopper Assurance program is rolling out nationally.

Like anything new, it’s not perfect in every way, but it does illustrate that focusing on improving convenience in the automotive retail shopping process goes a very long way with consumers. For Hyundai, it means that focusing on convenience and improving the consumer experience is not the exclusive domain of luxury brands any longer. For their dealers participating in the program, it is a tangible competitive differentiator and gives them the ability to compete on the customer’s experience.

Cheers,

Kevin

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Most people think of research as a means to validate product or business concepts, to determine market opportunities, or for competitive differentiation. But most overlook it as a way to win new business. Here is a proven process to do exactly that.

This approach has been refined and validated in over 20 years of practice. It’s not theory and has been utilized successfully to win business with several of the industry’s largest firms.

Background – In winning new clients, one of the biggest challenges is often getting to the senior decision makers. They typically rely on organization structure and gate-keepers to filter out those charged with winning new business.

The following is a technique that is designed to engage the senior decision makers, as well as  their trusted associates. The secret? Bring something of value to them—and do so in a unique way. Here is a step by step way how to do it.

1. List your key prospects

Make a short list of the leading prospects you are trying to win. Ideally, they may be different firms within the same industry or function. For example, let’s say they are OEMs. Now narrow the list down to the leading 3-5.

2. Identify the problem to be solved

Your business is likely built upon creating solutions to some sort of business problem. Your prospects likely deal with those same problems in some sort of way. You and your team want to spend quality time identifying topics that are ideally shared by both you and your best prospects. Though your firm and the prospect may come at them from different angles, at the core, the problem is the same.

This is the toughest and most important step because you have to really nail a topic that is worthy of a research investment by your own firm AND is extremely relevant AND timely for your best prospects. Typically identifying a topic that is important to your firm is not as difficult as identifying one that is key to your prospect, but if you can think about their business and how fresh insights will help them and think about it in a way that is unique, you will be on the right path.

Keeping with our example, think about the themes that most OEMs today are focused on:

• Brand differentiation: how to attract new buyers to the brand
• Reducing churn or brand defection by previous owners
• Improving customer experience
• Dealer acceptance of new tools and processes like online retailing

Looking carefully at these broad topics, think about those that best line up to your core business and would provide solid return on investment for your firm in either service or product advancement.  

3. Develop a hypothesis

What do you want to learn? What do you think you may uncover and what do you want to prove or disprove? Flesh out the top 3-5 key things your research will solve for.

Write out a short but detailed project brief, including the background, objective (how this will be used), what you want to learn from this, and how the learnings will be used (both internally and externally). Define your target audience to get insight from (consumers in general/shoppers/recent purchases/dealers, etc). How will the insight be applied (i.e.,product plans, training, product line extension, thought leadership, etc.) Be very clear on the value to your firm and how you will return the investment to your firm. Do one version that is external facing that can be used to send to forward to the prospects.

Keep it to real research, ideally done by a well-regarded third-party research firm. This ensures your data will hold up to scrutiny of the industry and won’t be immediately written off as findings engineered internally to support marketing needs. The fact that you are not doing it internally will signal to your prospect that the findings will be credible.

Get a bid from a research provider, ideally one with depth of experience in the topic you want to dive into – not just experience in doing research. Why? You don’t want to spend a ton of time teaching them about the intricacies of your business, the industry, the market, consumer habits and the key players within the industry. This takes up more valuable time and typically your findings won’t be as actionable.

4. Reach out to your key prospects with the offer

Once you have internal support and approval to move forward, have your top BD or account management team member reach out to your prospect with a simple offer along these lines: “We are planning on doing this research study and thought we would ask if you have a few questions that you would like to include it. If we end up using your questions, we will be happy to share the results with you. There is no charge for this report.” You also forward your (external facing version) research brief to give them a feel for the study, the approach, and the insights you will uncover from it.

This puts your firm in a position of providing value to them, not simply trying to sell them something like most of your competitors. If you have conceived the study right, they will be inclined to participate. In many cases, they will say they don’t have any questions to contribute but will be interested in learning the findings. Either way, this is exactly the outcome you want.

If you get input from them, which can be actual questions but more often is directional input, try to work it in. This will also help you further your relationship as it will provide you with deeper insight to where they are going—and how your firm can contribute.

5. Prospect follow up

When the study is fielded, drop them a line to let them know it’s in the works and that some of their questions were selected. Also provide them with an updated timeline as to when the final results are scheduled to be completed.

Finalize your study and, if at all possible, develop a derivative work—the ability to illustrate data that is unique to your key prospect or prospects. Using our OEM example, develop additional insights to what customers shopping for your prospect OEM brand thinks, identify any outlying data (i.e., consumers like this in all cases, except for Luxury shoppers who don’t like this, they like that, and so forth). You might show how customers from OEM brand A feel about something contrasted to the industry average or to OEM B or C who should be the key competitors to OEM A (your key prospect). Again, all valuable to you AND your key prospect, but also needs to be designed into your project from the start.

6. Bringing it home

Once you are close to having your final report and your special key prospect derivatives nearly complete, this is when you need to reach out again to your prospect representative with a special offer.

I have found success in the following many times: You send a status update email letting them know you are nearly complete and indicate that the data was so compelling that you were able to do a special cut that examines their ________ “product, customers, shopping patterns, etc.” and compares it to their ________ competitors (or whatever version you did).

You include one or two top-line sample stats to support this. Choose those wisely. You want them to want to know more. You make the following offer: “We would be willing to deliver both the public findings as well as the special (and confidential) version we did for your brand to you in person to better facilitate question and answers AND we may be able to do this before we release the main study publicly—if we are able to schedule something reasonably soon.”

“We only have one request in return and that is that you commit to having at least one VP or high-level representative in the meeting when we deliver the findings.”  It’s a reasonable offer. They get free insight—not only about a topic they are interested in, but one that has data about their brand as well. All they have to do is have a VP in the room, which is not too difficult if the topic is one that they are trying to resolve. You make it clear that you’re not selling anything in this meeting, just delivering the goods, but that you are interested in developing a relationship—should the opportunity present itself.

Then you and your head of BD do the meeting. You deliver the findings and address all questions. Keep it pure and don’t go into sales mode—keep it just about the research. Your BD guy is there to make introductions, collect business cards, and to begin establishing that ever important relationship with the key execs. The last time I did this I was blown away by having not one, but three VPs in the meeting. And this was one of the largest volume OEMs in the business.

Also, I would never go to the meeting with a hard copy to hand out. Why? Because I want to improve my chances of getting email addresses. Inevitably they will ask for copies of the report which we would gladly provide, via email.

At this point your firm has demonstrated highly relevant and timely knowledge about a topic that is important to your prospect. Frequently they are looking for solutions and it is very typical that during the research delivery, questions would begin to surface from the prospects’ personnel inquiring how we would address X or if we have seen success with Y.

This is the outcome you are looking for. You have the key decision makers in the room. You have the insight and you have the stage to tell them how you can resolve their problem(s). If done correctly, you may have just earned a seat at the table or at least the ability to be considered as a solution provider. If nothing else, you stand apart from your competitive crowd—plus you have insight that can be used for product development, sales and marketing support, true thought leadership, and to help you stand out in the industry. This technique can be repeated with your top 3-5 prospects.

A big tip: When people think of research they tend to think about surveys or quantitative research (stats and charts) which are good to answer how many people think, feel, or did something. When designing your study, don’t overlook qualitative research especially when you’re examining topics that need to answer “why” the people think, feel, or do things. The combination of the two (qualitative and quantitative) are usually far more compelling than one over the other. Qualitative also has one extra major benefit: video.

Capturing people in the moment of using your product, fumbling with a website or software tool, shopping for a car, or interacting with real sales reps is powerful stuff. When video of actual shoppers is combined with a study it makes the delivery of the final results so much more compelling for the audience as it brings the stats to life with expressions of real users or intenders—and addresses not only how many people think this way, but “why” they do as well,which is typically what surfaces the solution that you are seeking.

Timing: Many of our customers have technology production cycles tied to the first quarter and that’s because they like to release products at or around NADA. This means that Q4 is a big period for research releases. This is due to several factors:

1. Many research studies are designed to support new product concepts and sales/marketing support.
2. The fall conferences like Digital Dealer, JD Power & Associates, and DrivingSales provide prime opportunities to deliver fresh industry insight and establish thought leadership. Those conferences lead right into NADA in early first quarter.
3. Budget season. For many firms the third quarter is when budgets are set for the following year. Those looking to lock in sales frequently have to lock in a place on their prospects’ budget and having fresh insights during this time of year puts you top of mind with the budget owners while they are creating the budget for next year.

Strategic Planning: Don’t fall into the trap of thinking about doing your research 45 or 90 days before you want to be on stage. By then you will have most likely missed the boat. Most conferences require submission for speaking months in advance. For NADA this can be nearly eight months in advance (typically mid May for a February conference). If you want to use this technique to be in front of your key prospects one month before the fall conferences to offer them the preview and be ahead of the budgets being finalized, your study needs to be completed in early September—at the LATEST. The average study is 90 days in duration (from initial discussion to delivery). That means that April and May are exactly the right months to get moving on your research project.  

Good luck and happy hunting!

– Kevin

Read more of my expert analysis here

Google, Apple and Microsoft are all reported to have large scale Virtual Reality projects in development. Google had announced that their Daydream VR platform will join Facebook’s Oculus and Samsung’s Gear VR in the mobile platform provider space.

Google’s announcement is significant. As a platform provider, they have the ability to create a standard – a kind of Android operating system for VR. This will likely lead to more mainstream adoption by developers and consumers and that will usher in a whole new marketing tool for a variety of retailers including automotive OEMs – and dealers.

Much has been written about how the automotive OEMs are using or plan to use Virtual Reality. Audi rolled out their VR system at CES this year and reports they will install the system in a number of locations worldwide. Volvo already offers consumers the ability to take test drives of the XC90 using Google’s low cost Cardboard VR headset and Toyota let visitors at the NY Auto Show test safety features using VR.

So is VR the next marketing fad or a serious tool? The answer may lie in how consumers feel about using it. We set out to answer that question and in March, Root & Associates agile research team put it to a panel of 700 in-market car shoppers.* We wanted to go beyond the gee-whiz factor of a pretend drive along a curvy coastline and understand if VR could provide actual value for real vehicle shoppers.

The scenario we developed involved a consumer downloading a dealer-provided VR app to their smartphone which enabled them to walk around the vehicle, open the back doors of a sedan, look at the grain of the leather and the stitching on the seats, then reach for a virtual child’s car seat and put it in place. Then get into the back seat next to it and evaluate the amount of available room. Next they could compare another model the same way – all from the convenience of their home or office.

64% of in-market car shoppers said they would definitely or probably use it while only 20% said they would not.**  More importantly, 70% said they would choose a dealership website that offered this capability over one that did not.**  Some sub groups, including Asian Americans and IT professionals, were decidedly more likely to feel that VR-assisted shopping could help select a dealership from which to buy a new car.

Our study also found that consumers with higher levels of education and those with children expressed even more interest in VR-assisted auto shopping. The stated benefits center around the convenience of narrowing down a make or model before arriving at the dealership.

So while VR today is more of a novelty than a marketing tool, what are the real chances of seeing widespread adoption? That will rely on consumers acquiring headsets. Bloomberg’s Intelligence analyst Jitendra Waral estimates that headset sales may top $1 billion this year and reach $21 billion by 2020. This is something that has not escaped the attention of leading auto technology providers. “It could happen as early as late this year or next year” said CDK’s Max Steckler, VP Global Product and Solutions, when asked when he thought VR-enabled dealer websites might become reality. “Content will drive the best consumer experiences for the foreseeable future” he added.

Why would dealers want to embrace such a tool? Efficiency. Savvy dealers are actively looking for ways to reduce the time consumers have to spend in the dealership to purchase a car. VR-assisted shopping has strong potential to help consumers greatly narrow their selection before they arrive at the showroom, which will improve overall efficiency for both sales reps and shoppers.

My bet is that we will see VR-enabled marketing tools at more than one booth at NADA in 2017.  Time to expand the marketing tool belt.

Cheers,

Kevin

Read more of my analysis on my Insights Blog.

**Source: Root & Associates, Agile Insights, Automotive Website Concept Evaluations March 2016

Some prognosticators say that within the next decade the human population won’t be able to tell if they are conversing with another human or a chatbot. Despite setbacks and historic failures, chatbots have been used in applications earlier than you may think—the first chatbot, ELIZA, was created in 1966 by Joseph Weizenbaum and was touted as the first natural language processing computer program.

Today, chatbots may even advise you in your own home by the alias Alexa, Cortana, Siri, or Google. Chatbots are proliferating on the messenger app Telegram and range from trivia bots to poker game bots. Some bots even connect users like a dating website would.

In automotive, Carla and AutoEQ have bas developed by Carlabs. As a product, Carla has been wowing critics and inspiring hope for the auto industry. Why would a chatbot inspire hope? The auto industry has seen their sales process evolve over the years driven by a heightened focus on improving customer experience. It is here that chatbots may provide the greatest benefits for the in-dealership experience.

We believe that the initial place for chatbots and digital assistants to provide the highest value is in augmenting repetitive tasks by humans, not replacing them. They will learn with experience and repetition, but perform best when applied to a particular focus area verses trying to address all things for all people. With that in mind, here are our opinions on where dealerships may benefit the most (technology solution providers: are you listening?):

1. Sales Reps – Some of the most frequent questions sales reps get are “is that vehicle still available?” and “what vehicles should I consider for $xxx per month?” By marrying inventory data with pricing parameters, combined with trade-in and simple financing guidelines, sales reps will be more efficient and effective in guiding consumers to the proper vehicles, which saves everyone time.
2. Trade-In Valuations – The UC or inventory manager today is armed with great inventory management tools, but they require a lot of manual interaction. That process could be far more efficient if those operating the mobile tools were able to speak to the application to enter basic trade info and then ask the application for input like price to market or supply and demand scores.
3. Service Scheduling – Scheduling and service loading have not changed much over the years. A chatbot for the consumer to interact with while requesting an online service appointment and a slightly different version for the service advisor to use while in the service lane—with the ability to advise and inform on the fly (think automated recall notice or previous declined service notification)—would be a welcomed addition.
4. F&I – The leading drag on reducing the in-dealership sales time is typically the prep needed by the F&I manager as they check the data to ensure the forms are correct. This starts with proper data input. While dealerships are involving the consumers more in that process, many don’t do it with the diligence they should (inputting their first name as “Bob” instead of their legal name “Robert” for example) and customers quickly become bored when faced with a screen full of questions. A friendly chatbot would certainly improve this customer experience and likely increase the accuracy of the data.

Will chatbots and digital assistants revolutionize the industry? No, not in the near term anyway. Will they play a role in incrementally improving the customer experience? They certainly will, if done with a fair amount of careful product development and usability testing upfront. This technology holds plenty of promise.

Cheers,

Kevin

(Image License: Creative Commons 3 – CC BY-SA 3.0 The Blue Diamond Gallery)

Find more original research and analysis on my Insights Blog.

A generational shift is underway in America: Baby Boomers are retiring, while Millennials are taking the wheel. According to Rainmaker Thinking, by 2020 under 6% of the workforce will be first wave baby boomers (1946-1950).

Simultaneously, Millennials have been growing. The second wave of Millennials (1990-2000) alone will make up more than 28% of the workforce by 2020.

1. Fastest growing: Millennials make up the fastest growing segment among vehicle buyers and likely will represent about 40 percent of the U.S. new-vehicle market by 2020. Last year, they accounted for 4.1 million vehicles in the US—about 29% of the market according to J.D. Power and Associates PIN data.

Millennials, as noted by a few observers, are late to the party. Because they entered the job market during the recession, they were slower to move out of home, slower to start a family, and slower to purchase their first car. However, as the economy improved significantly, so has the number of Millennials purchasing cars.

Millennials are also causing changes in the market—changes that are likely to shift the way the auto industry promotes, builds, prices, and distributes their products.

2. Why they buy: Millennials tend to buy cars out of need, not want. They care far more about the affordability of a monthly payment than the total purchase price. Typically, the more affordable alternate to buying new are used cars. However, because of the shortage of supply in the used car market, they are not priced as competitive pointing Millennials to new cars.

3. How they finance: 84% of Millennials said they planned to buy new cars instead of used vehicles. Edmunds reports that of those Millennials who bought a vehicle last year, 32% leased, up from 21% in 2011. Leasing enables this group to get a new vehicle for a lower payment as they seek vehicles with advanced safety features and newer technologies which they crave.

As for product lines, OEMs are shifting to providing better value compact vehicles, crossovers, and SUVs as Millennials are beginning to enter life’s milestones. The prices for these vehicles are typically between $15,000 and $34,000, as Millennials have a lower budget and shorter line of credit (Source: Autoweek.com).

4. Impact of Ride-sharing: It has been speculated that Millennials are deciding not to purchase vehicles because they might as well hitch a ride from an Uber driver. These ride-sharing apps are so popular, so why would Millennials need cars? They haven’t been purchasing them, so this must be the answer…right?

But the data tells us this is not the case. Rather, Millennials have entered the market later because of the recession. And since Millennials entered the market after the recession, they often have the mindset that they need an extra source of income. Forty percent of them are taking on side gigs according to a recent CareerBuilder survey.

There is a connection to Uber and Lyft. About one in six millennial car buyers (roughly 15% of them) expect to drive for Lyft, Uber, or some similar service compared to 9% of the general population (Source: Boston Globe).

All of these factors have added motivation for Millennials to get a new car. If they can drive for Uber on the weekends, they are able to have additional income to support their lifestyle.

5. What they feel is missing: But what are the largest differences between Millennials and the segments they are replacing? It’s how they want to conduct the transaction. Boomers expect to visit the store and generally have very low trust and high anxiety when they do. Millennials want to transact efficiently online, just as they do for most everything else. Surprisingly, they have higher trust and lower anxiety going into the purchase. This is because their expectations have not been negatively colored by previous purchase experiences.

OEMs, suppliers, solution providers, and marketers are all paying very close attention to Millennials. Their influence is driving change up and down the industry, with one notable exception: the way cars are sold. Though as this last bastion of the industry is finally beginning to evolve, I suspect one day we will all thank the Millennial generation for being the group that changed that part of the industry in a meaningful way as well.

Cheers,

Kevin

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Check out my insights blog for exclusive automotive industry research and analysis.