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  • Automotive the way we see it Cars Online 09/10 Understanding Consumer Buying Behavior in a Volatile Market
  • Contents Introduction 2 Executive Summary 3 Developing Markets: Buying Trends Evolve Rapidly 5 How Consumers Buy: Target Your Marketing Mix 8 Green Vehicles: A Force for the Future 11 The Role of the Web: Consumer Usage Pattern Emerges 14 Online Buying: No Hassles, No Negotiations 17 Customer Interaction: Loyalty and Satisfaction Rates Improve 20 Aftersales/Servicing: Focusing on the Post-Sale Experience 24 Conclusion and Recommendations 27
  • Automotive the way we see it Introduction Mergers and acquisitions. Bankruptcy This years report focuses on both filings. Government intervention. mature and developing markets. The Vehicle scrapping and rebate research involved more than 3,000 programs. The past 12 months have consumers in Brazil, China, France, brought fundamental changes to the Germany, India, Russia, the United automotive industry around the globe. Kingdom and the United Sates. Last year ushered in an unprecedented In this edition we take a deeper look global downturn that originated in at top-of-mind issues such as online 2007. What started as a financial buying of vehicles and crisis soon expanded into the larger parts/accessories, alternative-fuel economy, affecting mature and vehicles and aftersales/servicing. In developing markets alike. The addition, we asked consumers to automotive industry has been one of think about the biggest changes they the hardest-hit sectors. The downturn expect to make in how they shop for has led most automotive businesses to and buy vehicles in the coming years. put in place initiatives aimed at short- Their responses provide valuable term survival and mid-term stability insight into consumer expectations with the focus largely on cost cutting about the future of the vehicle buying and cash preservation. Tomorrows process. Look for their direct quotes winners, however, will shift their throughout the report. focus to longer-term prosperity with the emphasis on future differentiation We hope that the findings of Cars and competitive advantage. Online 09/10 will provide automotive manufacturers and dealers with To achieve this objective and regain insights into changing consumer their footing, automotive companies dynamics in both mature and must have a deep understanding of developing markets, and will help the consumer buying behavior. Cars industry gain a better understanding Online 09/10 Capgeminis 11th of consumer buying behavior in annual global automotive study todays turbulent climate. aims to provide insight into how consumers shop for vehicles, what leads them to buy and what they are really looking for from the full vehicle lifecycle experience. I believe the whole car industry will soon look very different. Those companies owned by the government and unions will be bust. Those that listen to the public and offer value, fair prices and the right features will prosper. U.S. consumer Cars Online 09/10 2
  • Executive Summary With vehicle sales suffering in most experts or other consumers in-market environment as the primary reason: markets today and automotive is an important trend, which grew 26%, up from 19% the previous year. companies focused on cost cutting strongly this year. Traditional This trend was particularly evident in and cash preservation, its easy to take information sources such as TV the U.S. your eye off the consumer. But, in a advertising remain important in climate characterized by volatility, developing countries, however, and Improvements in brand and consumer insight is more important than ever as buying behavior patterns should be part of the marketing mix. 4 dealer loyalty and overall satisfaction with the buying process evolve rapidly. How do car buyers Consumers want to buy vehicles bode well for the industry. With research vehicles? What types of cars are they looking for? What triggers 2 and parts and accessories online as they look for lower prices plenty of bad news for automotive companies these days, our research them to buy? Where and how do and an alternative to the traditional uncovered a bit of good news. More they want to buy? How do they want dealer model. Nearly 40% of than two-thirds of respondents said to communicate with manufacturers respondents said they would like to they were likely to purchase the same and dealers? buy a car over the Internet (the make/brand as their current vehicle, complete end-to-end process) and half up from 61% last year. Similarly, Capgeminis Cars Online research aims would buy parts and accessories. dealer loyalty also rose, with 63% of to answer these questions and more to While lower price is the leading consumers saying they were likely to provide insight that can help reason, many respondents said they purchase from the same dealer where automotive companies respond faster simply did not want to negotiate price they bought their current car, up from and more effectively to changing or interact with the dealer in person. 59% the year before. consumer needs and demands. Consumers seem to be polarized in their desire to negotiate: about one- Satisfaction with the overall buying Key Findings quarter wanted the ability to negotiate process was also up somewhat. The research uncovered a number of a better deal, but another one-quarter However, consumer approval was key findings: felt this was something they preferred more muted in the mature markets, to avoid. demonstrating that there is still work Usage of the web as a key to be done to improve the customer 1 information source during the vehicle buying process has become 3 Green vehicle ownership continues to rise as experience in the U.S. and Western Europe. pervasive across most markets. environmental concerns grow. Almost 90% of consumers today use Consumers indicate a growing Developing markets show early the Internet to research vehicles, up from 61% in 2005. A clear online confidence in their understanding of so-called green vehicles. This 5 signs of trending toward mature markets, as consumers in the BRIC usage pattern has emerged, with increased knowledge is influencing countries become more familiar consumers turning initially to search buying decisions. In this years study, with buying cars. For example, this engines, which jumped up the list of 41% of consumers said they currently year the gap between the factors that information sources this year; then to own a fuel-efficient or alternative-fuel impact vehicle decisions in mature vs. manufacturer and dealer sites for vehicle, up from 36% the year before. developing markets was much factual information about vehicles, Another 30% said they plan to buy a smaller. Greater convergence will prices and availability; and finally to fuel-efficient or alternative-fuel vehicle. likely still take a number of years, and consumer-to-consumer tools like market differences will remain for discussion sites for qualitative Interestingly, the reasons behind these some time. For instance, mature information and opinions. buying decisions are evolving. While markets increasingly look for fuel economy remains the leading information online, whereas The ability to interact online and hold driver, a growing number of developing markets are still keen to real-time discussions with automotive respondents named impact on the get information from more traditional 3
  • Automotive the way we see it Many of the formalities of car purchases will soon be a thing of the past. The selection and purchase process will be faster, easier and nicer. Russian consumer sources such as TV advertising and manufacturer to respond to an online trade shows. And mature markets inquiry within four hours. In China, focus on permanent value when consumers are even more demanding, choosing a vehicle, whereas with more than half expecting a developing markets show greater response within an hour. In addition, interest in more transactional almost one-quarter of respondents marketing such as cash-back bonuses. point to ease and speed of transaction as the key reason for buying a vehicle Now is the time for automotive online, and 30% say it is the driving companies to focus attention on factor behind their desire to purchase providing a positive customer parts and accessories over the web. It experience in developing countries is important to note that most of these About the Study while loyalty and satisfaction levels factors leading to consumer remain higher than in mature frustration seem to be down to poor markets. basic management and are in the Capgemini worked with SmartRevenue, industrys own hands to resolve. a Ridgefield, Connecticut-based As the duration of the vehicle 6 buying cycle contracts, automotive companies have less 8 Less than half of consumers with cars still in-warranty have research firm, to conduct the survey for Cars Online 09/10. All analysis and interpretation of the data has been time to influence purchases. their vehicles serviced at the made by Capgemini in collaboration Consumers today can quickly and purchasing dealership. This with the Car Internet Research Program easily get vast amounts of information represents a significant missed (CIRP) of the University of Ottawa, about the vehicles they are interested aftersales opportunity for dealers. Canada. In total, more than 3,000 consumers were surveyed in eight in, resulting in a shrinking buying And it may also impact repurchase countries: Brazil, China, France, cycle. What used to take six months is decisions, as consumers tend to be Germany, India, Russia, the United now likely to take only four, with more likely to buy their next vehicle Kingdom and the United States. showroom visits coming ever closer to from the servicing dealer rather than the point of purchase. More than two- the prior purchasing dealer. The composition of the consumer thirds of respondents begin the sample in each country was based on research process two to four months While this topline review provides a projectable national samples before they plan to buy and 60% visit summary of key findings from this representative of the population in terms the showroom for the first time within years Cars Online study, the sections of region, age and gender. All two months of purchase. that follow offer more in-depth data consumers surveyed were in-market and analysis focused on key topics (24% plan to buy or lease a vehicle within three months; 29% in four to six Connecting with shoppers during the such as buying behavior patterns, web months; 11% in seven to nine months; research period and providing them usage, online buying, customer and 36% in 10 to 12 months). with the right tools and information is interaction and aftersales/servicing critical in influencing buying expectations. decisions. By the time they visit the showroom it is often too late. Consumers want the car buying 7 process to be easier and faster. A number of indicators point to a growing desire for improved ease and speed of transaction. For example, more consumers expect a dealer or Cars Online 09/10 4
  • Developing Markets: Buying Trends Evolve Rapidly Developing markets are not alike in every respect, as our research identifies variances in buying behavior from one country to another. Dont Call Them Emerging The developing markets have seen On a recent visit to a large Chinese strong vehicle sales growth in recent automotive manufacturer, we years. However, just like the mature discussed the market and its potential. markets, they have suffered somewhat During the conversation, a company in the past 12 months. For example, executive took issue with the term according to the Association of emerging, often used to describe the European Businesses, Russian car Chinese market. He noted that given sales fell by 49% in the first half of the size and growth of the automotive 2009, and a similar drop is projected business in his country, emerging for the second half of the year. In hardly seemed accurate anymore. Brazil, ANFAVEA (the Brazilian National Association of Motor Vehicle We took his point. This year we refer Manufacturers) expects car sales to fall to the BRIC countries as developing this year for the first time since 2003.1 markets, because as the Chinese The picture is brighter in China and executive pointed out, these markets India. Nevertheless, the potential for have already emerged. significant long-term growth remains strong in all four markets. In this years study we again track consumer buying behavior in the Following are some of the key trends developing markets of Brazil, Russia, noted in the developing regions. India and China. The findings from Additional variances by market are the four BRIC countries offer a glimpse discussed throughout the full report. of how these dynamic and growing automotive markets are evolving. Signs of Convergence Appear This year we found early signs of convergence in Russia, Brazil and India as consumers in these markets become more familiar with buying cars. As a result, some of the trends are beginning to move closer toward those in the mature markets. We have seen a similar rationalization in China in recent years too. For example, this year the gap between the factors that impact vehicle decisions in mature vs. developing markets was much smaller. Last year, consumers in the BRIC countries tended to rate all of the factors as more important than did respondents in mature markets. This year, the numbers were much 1 April car sales in Brazil fall 13.7% from the previous month, sales-in-brazil-fall-13.7-from-the-previous-month, May 8, 2009 5
  • Automotive the way we see it closer to those in the mature markets, with the exception of short-term Consumers in Developing Markets Consider More Vehicles (% consumers saying) factors such as low financing and cash-back incentives, which are still How many different makes/models of vehicles more important in developing are you currently considering? countries than in mature markets. 2 1 100% 1 4 Customer loyalty and online buying 14 trends also show signs of convergence, with slight declines in some of the 27 80% developing markets as they begin to More than 7 move closer to the levels typically 6-7 seen in the mature markets. 60% 4-5 The shift toward convergence is 2-3 67 particularly pronounced in Russia, 1 where many vehicle buying patterns resemble those in western markets, a 40% 60 trend that was apparent last year as well. For example, Russian consumers are more likely than those in the other 20% developing markets to rely on web- based information sources and less so on traditional sources such as TV 16 8 advertising and auto shows. This pattern 0% mirrors consumer behavior in the Mature Markets Developing Markets mature markets, particularly the U.S. Source: Capgemini A similar trend is apparent in the type of vehicle consumers plan to buy. Russian respondents are more likely Differences Between Developing than their counterparts in the other and Mature Markets Remain BRIC countries to want to buy a used vehicle, no doubt helped by recent government tax changes. About one- quarter said they plan to buy a used Despite the trend toward convergence, significant differences between developing markets and mature markets remain. For example, I have confidence that we will see big changes in the kinds of cars we buy; car, which is about the same as the consumers in most of the developing they will be friendly to the number in the U.S. The stronger used countries are more likely to rely on environment and to my car market in both the U.S. and traditional information sources such pocket. Brazilian consumer Russia likely accounts for the fact that consumers in those countries are more inclined to use service stations and auto repair shops for servicing. In as TV advertising when researching vehicles. Respondents from mature markets primarily use web-based sources. This is likely due to the fact addition, Russian consumers show that consumers in the developing strong interest in buying a sports markets are still new to the car buying utility vehicle, again similar to process and want as much consumers in the U.S. information as possible from a wide range of sources. Cars Online 09/10 6
  • Dealer Visits Vary in Developing Markets (% consumers saying) How many dealerships will you visit before purchasing/leasing your next vehicle? 60% 50% Dont know 40% More than 5 4-5 30% 3-4 2-3 1-2 20% 1 10% 0% Total U.S. Western Russia Brazil India China Europe Source: Capgemini Interestingly, however, respondents in Variances in Buying Behavior Differences were also apparent in developing countries who do use the Among BRIC Markets terms of the types of vehicles Internet are more likely than their It is important to note that all consumers plan to buy. Brazilian counterparts in mature markets to developing markets are not alike in respondents show a much greater turn to new tools such as blogs, video every respect and that we see tendency toward buying smaller cars sites and RSS feeds. They may be new variances in buying behavior from one and place greater emphasis on hybrid to the vehicle buying process, but not country to another. or other alternative-fuel cars. to technology. Brazil stands out in a number of Consumers in developing markets are respects. For example, Brazilian also more likely than those in mature consumers are more likely than their markets to consider a greater number counterparts in the other developing of makes and models before buying. countries to look at a greater number One-third of respondents from the BRIC countries look at four or more makes/models, compared with only 17% in the mature markets. of vehicles. More than half said they will consider four or more makes/models. I would like to see a point system for providing feedback on a blog or Russian consumers tend to visit more forum site, which would In addition, consumers in developing dealers than do shoppers in the other enable you to get some markets are prepared to spend a developing markets. Almost one-third kind of discount from the significantly higher proportion of their of respondents in Russia said they will dealer or manufacturer. income on a vehicle. In the U.S., for visit four or more dealers before example, the majority of respondents buying, compared with only 7% in Indian consumer expect to spend less than 25% of their Brazil, 13% in India and 4% in China. annual income on their next vehicle, This may be due to the fact that there compared with the developing are more dealerships in Russia to markets where the majority of choose from than in countries such as consumers will spend up to 50% of India and China. their income. In Russia, one-third are prepared to spend more than 50%. 7
  • Automotive the way we see it How Consumers Buy: Target Your Marketing Mix Vehicle buyers are taking less time to research and visit showrooms and are increasingly turning to web-based information sources. Vehicle Buying Cycle Shrinks Understanding the shifting timeframe Traditionally, the vehicle buying cycle is vital, as the research period is the has been shown to last about six critical time to reach in-market months. Our research indicates that consumers with the right information this period is compressing as consumers and the right response mechanisms. are able to gather significant By the time a consumer visits the information about vehicles quickly showroom, it is often too late to and easily over the web. More than influence the vehicle decision. two-thirds of respondents begin the research process two to four months What triggers a consumer to move before they plan to buy and 60% visit from the research stage into the the showroom for the first time within showroom? It is not so much a two months of purchase. This pattern particular point in time but rather a is fairly consistent across markets. shift in mindset. The Shrinking Vehicle Buying Cycle (% consumers saying) How long before your planned vehicle purchase/lease How long before your planned vehicle purchase/lease did/will you begin to research vehicles? will/did you visit a dealership showroom? 12 months 30% 30% 25% 25% 20% 20% 25 23 27 15% 15% 17 23 22 10% 14 10% 11 5% 7 5% 11 6 3 3 3 1 1 1 2 0% 0% Total Total Source: Capgemini Cars Online 09/10 8
  • In earlier consumer research conducted Ensuring that your showroom is by the Car Internet Research Program among those visited by consumers is a (CIRP) and Capgemini, we found that challenge as consumers visit fewer the switch from researching to dealer dealerships today than in past years. visits typically occurs when enough About one-quarter of respondents said information has been gathered and a consumer feels ready to negotiate. Of course, what constitutes enough they visit only one or two dealerships before buying a vehicle. There should be a real price for a vehicle and a real warranty with no fine information will vary from one buyer The Search for Information print. U.S. consumer to another. However, from a power- struggle perspective, it typically means that the customer knows what he wants and how much he is ready to Where do consumers go for their information during the research stage? Most turn to the web. Almost 90% of consumers say they use the Internet to pay. When that state of mind is research vehicles. This year, the use of search engines reached, the buyer is ready to enter jumped considerably, moving up to the showroom. the third spot from seventh position last year. Search engines are increasingly becoming a key starting Expected Use of Information Sources (% consumers saying) point for consumers as they search for new models and brands, as well as Dealer websites information about automotive-related blogs, reviews and other types of Manufacturer Internet sites resources that might help them during the research process. Search engine Family and friends Usage of manufacturer websites as well as automotive blogs, forums and Information websites discussion groups also increased. Independent car While most web-based sources show valuation services gains in mature markets this year, the Manufacturer-specific franchise dealer use of more traditional sources such Used car dealer as TV advertising and auto shows, continues to decline among Western Specialist motoring/ automotive press car buyers. In contrast, while Internet news sites consumers in developing markets use the web to research vehicles, they still Print advertising rely on traditional sources too. This is Mature Markets Independent particularly true in Brazil, India and Developing Markets e-tailer sites China, though less so in Russia. For Auto shows example, 30% of consumers in the BRIC regions use and value TV TV advertising advertising, compared with only 16% Web forums, blogs or of respondents in the mature markets. Internet discussion groups 0% 10% 20% 30% 40% 50% 60% These trends point to the importance of targeting your marketing mix to the Source: Capgemini specific market. This approach has 9
  • Automotive the way we see it Importance of Factors in Consumers Choice of Vehicle (% consumers saying important/very important) Reliability of brand Petrol vehicles will become a thing of the past and more emphasis will be Safety placed on safety, the Price of vehicle environment and Fuel economy economical vehicles. I will Vehicle availability and/or reliability of sales and delivery date concentrate more on Quality of interior styling manufacturer and Aftersales service government websites for Brand name of vehicles, information. UK consumer products and services Extra options at no cost Treatment by the manufacturer during my previous ownership cycle Treatment by the dealer during my previous ownership cycle Mature Markets Ability to research information Developing Markets on the Internet Low emissions Product features/options to fit my needs 0% or low financing Cash-back incentive Option for additional warranty coverage or service credit Coupons/options for third-party providers Hybrid or other alternative-fuel cars 0% 20% 40% 60% 80% 100% Source: Capgemini already resulted in some significant vehicle that a consumer chooses? As shifts in spending. For example, in the in prior years, the top four factors U.S. local broadcast TV spending in across the board are reliability, safety, the automotive category fell more price and fuel economy. In a than 50% in the first quarter of 2009, continuation of our findings from according to the Television Bureau of last year, consumers in developing Advertising.2 markets are more likely than their counterparts in mature markets to Reliability and Safety emphasize transitory factors, such as Matter Most cash-back incentives and coupons/ Once the research process is complete, options for third-party providers. what factors ultimately determine the 2 A World Without Local Car Dealer Ads? Advertising Age, June 12, 2009 Cars Online 09/10 10
  • Green Vehicles: A Force for the Future Growing interest in fuel-efficient and alternative-fuel vehicles will lead to fundamental shifts in consumer buying behavior over the coming years. Time We Got Off the Oil Brazil, which is not surprising given Wagon that ethanol-based and flex-fuel When consumers were asked vehicles have been sold in that country about the changes they expect to see for a number of years. Almost 90% of in the way they buy vehicles over Brazilian respondents say they have a the next decade, mentions of more strong understanding of green vehicles. environmentally friendly cars vied with online buying as the major Evidence of rationalization between change. I am hoping that soon my developing and mature markets is choices for alternative-fuel/green vehicles apparent in this area. Confidence in will be much larger. Its time we got off green knowledge was up in the U.S. the oil wagon, said one respondent and level in Western Europe, but down from the U.S. somewhat in developing markets. That sentiment was echoed throughout the eight markets studied. Even in Germany, where vehicle performance was a key factor for many consumers, one respondent noted that A fast car is not exciting if it consumes a lot of fuel. Considerable focus today is being put I think the auto industry is going to make a complete change within 10 on developing more fuel-efficient and alternative-fuel vehicles by most major to 15 years. I hope there car manufacturers, as well as will be no emissions, 100% governments, energy companies and clean fuel. U.S. consumer other industries. This growing focus on green is being strongly fueled by consumer demand stemming from economic and environmental factors. In our research, 41% of consumers said they currently own a fuel-efficient or alternative-fuel vehicle, up from 36% the year before. And another 30% said they plan to buy a fuel- efficient or alternative-fuel vehicle. Consumer Confidence About Green Knowledge Is High Consumers in most markets today are gaining a better understanding of what green really means. Three- quarters of all respondents say they are confident or very confident in their knowledge of green vehicles. The degree of confidence is highest in 11
  • Automotive the way we see it Brazil, ethanol or gasoline/ethanol Ownership of Green Vehicles Increases (% consumers saying) flex-fuel cars are popular. Own a fuel-efficient/ 41 It is not surprising that electric vehicles, alternative-fuel vehicle 36 particularly hybrid gas/electric cars, would be at the top of consumers list of alternative-fuel choices. They Plan to buy a fuel-efficient/ 30 are the most commercially mature alternative-fuel vehicle 30 and viable of the various kinds of alternative vehicles and have Thinking seriously about demonstrated the potential to 16 2009 buying a fuel-efficient/ reduce fuel consumption and alternative-fuel vehicle 2008 19 exhaust emission. Do not own/not interested 13 I think we will start seeing an awful lot in buying a fuel-efficient/ more cars available in electric form, alternative-fuel vehicle 15 said a consumer from the UK. And 0% 10% 20% 30% 40% 50% greater pressure will be put on drivers to be more green aware. Source: Capgemini Although sales of hybrid electric vehicles still represent only a small Why Consumers Buy Green Most of the developing markets also share of overall car sales and despite While fuel economy remains the saw an increase in the focus on the slower sales this year, future demand number one reason that consumers environment. In India, for example, is expected to grow. This is own or plan to buy a fuel-efficient or 32% of respondents pointed to the particularly true in markets like the alternative-fuel vehicle, environmental environmental impact, up 10 percentage U.S. and Japan as prices of hybrid and impact is a growing factor. An points from the prior year. Similarly in other types of electric vehicles begin increasing focus on environmental China, 32% identified environmental to drop. By some estimates, global issues overall, combined with lower impact as the primary reason behind sales of hybrid electric vehicles may fuel prices during the past year are the green vehicle decisions, an increase surge at a compound annual growth likely drivers. The trend was from 20% in 2008. rate as high as 12% over the next few particularly apparent in the U.S. years. Developing markets like Brazil, where 20% of respondents said the Hybrids Lead the Way India and China are also expected to environment was their primary reason According to our research, gas/electric contribute to this growth as they put for choosing a fuel-efficient or hybrids are the primary type of more focus on environmental issues alternative-fuel car, up from just 9% alternative-fuel vehicle that consumers such as CO2 reduction. the previous year. currently own or plan to buy. This is particularly true in the Western Consumers in Western Europe markets. In the U.S., for example, remain the most focused on the 60% say they own or plan to buy a environment, with 31% indicating gas/electric hybrid car, up from 52% that environmental impact is the in 2008. Gas/electric hybrids are less primary reason for owning or dominant in the developing markets, planning to buy a fuel-efficient or where consumer interest is also alternative-fuel car. This number is focused on natural gas or natural gas up from 22% the year before. hybrids and all-electric vehicles. In Cars Online 09/10 12
  • Why Consumers Buy Green Vehicles (% consumers saying) 100% 2 1 3 1 2 1 4 11 9 11 11 6 13 2 17 3 6 4 2 6 80% 3 19 20 Other 26 22 32 32 31 Preserve residual value of vehicle 60% Cost Tax credit 69 40% Impact on the environment 63 59 Fuel economy 57 46 54 52 20% 0% Total U.S. Western Russia Brazil India China Europe Source: Capgemini Base: Consumers who own/plan to buy a fuel-efficient or alternative-fuel vehicle Will Consumers Pay for Green? But I hope that prices will come down as While consumer interest in green it will encourage others to purchase this vehicles is strong and growing, cost type of vehicle as well. remains an issue. Our research found I would consider a hydrogen-powered sedan. The maintenance is that consumers show some willingness to pay for improved fuel efficiency, although about 70% of respondents said they would pay no Prices are expected to drop over the coming years, but it is still early in the cost-reduction curve. Government- sponsored programs in the form of affordable and its good for more than 10% extra for a fuel- both consumer credits/rebates and efficient or alternative-fuel vehicle. battery development incentives in the the environment too. German consumer And in the mature markets, close to 20% said they were not prepared to pay any premium at all. electric vehicle business provide some cost relief. However, the price gap between gas-powered and alternative- fuel vehicles will need to shrink I will purchase an alternative-fuel car as considerably if the mass market is to I am very concerned about the accept green cars. environment, said a U.S. consumer. 13
  • Automotive the way we see it The Role of the Web: Consumer Usage Pattern Emerges As Internet sophistication grows, consumers look to different kinds of sites for targeted information. Use of the web during the vehicle The importance of features such as buying process is now at nearly full comparators and configurators was saturation in most markets. The down somewhat this year. Least exception is China, where Internet important to consumers are features penetration remains low in some such as dynamic graphics, the ability regions. A clear pattern has emerged, to check dealer inventory, availability with many consumers starting their of a website in their native language, research with search engines, then and online information about the moving to manufacturer and dealer latest ads and promotions. sites, and finally to consumer-to- consumer tools like blogs and Some differences were apparent by discussion sites. market. For example, comparators and cost calculators were somewhat What Consumers Want more important to consumers in the from the Web mature markets, especially the U.S. As Internet sophistication grows, Respondents in the developing consumers look to different kinds of markets, particularly those from India, sites for targeted information. From were interested in the ability to get manufacturer and dealer sites, guidance and advice over the web and respondents say they want to find a to communicate with their dealer or full range of product information and car company online to solve base pricing above everything else. problems, buy accessories, etc. This has been the case now for a number of years. Wide Use of the Internet to Research Vehicles (% consumers saying) 100% I want to look for a vehicle that is more fuel efficient and will be 80% researching at green websites and different 60% 2009 car blogs because 2008 consumer opinions really matter to me. 2007 40% 2006 U.S. consumer 2005 20% 0% Total U.S. Western Russia Brazil India China Europe Source: Capgemini Note: Russia, Brazil and India were not included in the research until 2008 Cars Online 09/10 14
  • New Tools Provide New Reasons for Using Consumer-to-Consumer Online Tools (% consumers saying) Information After doing research via manufacturer and dealer websites, an increasing Opinions/reviews about specific car brands/makes number of consumers are turning to online consumer-to-consumer tools Discussions with other consumers such as automotive blogs, forums, News about new vehicles discussion groups, video sites and RSS feeds. The use of these tools during Helpful hints the research process has grown in Discussions with automotive experts recent years and is particularly high in the developing markets. Information about vehicle recalls Opinions/reviews about Indian consumers are among the most specific car dealers likely to use automotive blogs (46% of Indian respondents vs. an average of Personal stories 2009 40%), online video sites (50%, compared Discussions about a specific automotive topic with the average of 32%); and RSS 2008 Information about automotive feeds (28% vs. 12% overall). Respondents events/auto shows 2007 from Brazil are the most likely to use Other car images/videos social messaging/micro-blog sites like Twitter (30% vs. the average of 13%) Spy photos/videos and mobile phone applications (27%, 0% 10% 20% 30% 40% 50% 60% compared with 10% overall). Source: Capgemini Consumers rely on these sites Note: Multiple responses allowed Base: Consumers who use consumer-to-consumer online tools to research vehicles primarily to gain more qualitative, objective information about vehicles and dealers. This year respondents placed growing emphasis on interactive discussion sites, rather than static information such as vehicle news. For example, 29% said they look for discussions with other consumers, up from 21% in 2007; and 28% participate in discussions I would like to see one centralized website where it would be possible to find information on all offers for all brands. It would be a more flexible and simple way to with automotive experts, an increase from 20% two years ago. Not only do these kinds of tools choose a car. Russian consumer provide consumers with additional information as part of the research 15
  • Automotive the way we see it process, they can influence buying decisions. More than two-thirds of consumers said they would be more likely to purchase a particular vehicle or buy from a certain dealer if they found positive comments posted on blogs, forums and the like. The numbers were even higher in Brazil and India. Conversely, 57% of respondents said they would be less likely to buy a particular make or from a specific dealer if they found negative comments on these kinds of sites. Building Relationships Via the Web What if consumers had the chance to speak to a vehicle manufacturer adviser as they narrowed down their vehicle selections? Someone who could help them by answering technical questions, or identifying resolutions to their specific needs (as a hotline would); or by being reassuring offering an ear, a human voice and advice (like a coach). In research conducted by the Car Internet Research Program (CIRP) and Capgemini, we found that consumers saw value in pioneering flexible web services, such as virtual assistance, particularly during the critical time period during the research process before they enter the dealer showroom.3 Our research made it clear that implementing a service like a Virtual Adviser into a manufacturers web model can engage early-phase shoppers interactively and set the stage for building a superior customer relationship experience. This can provide the following benefits: Enhance the probability of a shopper choosing your brand as one of the two models they will closely examine. Increase the likelihood that your dealership will be the one they visit. Improve the chances that the shopper will arrive at the dealership feeling more comfortable, with a greater level of trust. Complement the dealership distribution model by providing broader consumer coverage, particularly in new or expanding markets. Most importantly, we found that a Virtual Adviser program has the potential to drive an enhanced prospect funnel with improved conversion rates. 3 Before the Door, Car Internet Research Program (CIRP) and Capgemini, 2009 Cars Online 09/10 16
  • Online Buying: No Hassles, No Negotiations Consumers want a cheaper, faster, easier way to buy cars. Their answer: the Internet. In 10 years, I expect buying a car online cars and parts/accessories, a trend we Western Europe and Russia, the will be more like buying a replacement began tracking in our Cars Online results were consistent with last year. mirror on eBay. Choose which one you research two years ago after not want, pay for it and have it shipped to having focused on it for a number of Consumers are more likely to want to your front door. No hassles and no years. This year, we explored the topic buy a new rather than a used car over salesman negotiations. U.S. consumer more deeply. the Internet. This is no doubt due to the fact that new cars are presumed to It will be possible to order a car and all Nearly 40% of consumers said they be of a high quality and in good working the necessary features online pay, get a would buy a vehicle online (the condition. Consumers are less willing loan, insure and arrange a pick-up complete end-to-end transaction) if to buy a used car sight unseen. location (delivery to home or a sales that capability existed. This was down center). All this without leaving your a few percentage points from last year, Why Buy Online? house. Russian consumer reflecting a rationalization in the While price discount is the leading developing markets. Brazil, India and reason consumers are interested in There is no question that consumers China all experienced a drop in the buying a car over the Internet, more expect to buy their vehicles over the number of respondents saying they than one-quarter said they wanted to Internet in 10 years time. But many were likely to buy a vehicle online, avoid interaction or price negotiation are not willing to wait that long. although the rates are still far higher with the dealer in person. Consumers than those in the mature markets. The also expect an online transaction to be Consumers today have demonstrated number increased to 21% in the U.S., easier and faster. a clear interest in online buying of from 17% the previous year. And in In India and China, respondents were particularly inclined to prefer the Likelihood to Purchase Vehicle Over the Internet (% consumers saying) Internet in order to avoid interacting with the dealer. In those markets, a 100% 12 14 8 price discount was a secondary reason for buying a car online. 17 80% 25 27 It is important to point out that while many consumers dislike the price 5 (Very likely) 25 negotiation that typically goes on 60% 4 inside the dealership, others actually 23 3 21 enjoy bargaining over price and say 2 that the inability to negotiate price 40% 22 1 (Not at all likely) would be a barrier to buying online. 18 17 This dichotomy in negotiation 20% preferences was apparent in earlier 28 22 21 research published by the Car Internet Research Program (CIRP) and 0% Capgemini.4 In that study, we found Total Consumers Consumers intending to that the process of negotiating the intending to acquire acquire purchase or lease of a vehicle arouses NEW vehicle USED vehicle strong emotions and corresponding Source: Capgemini reactions. Different consumers adopt 4 Am I Being Taken? Inside the Dealership: The Impact of Consumer Negotiation Preferences and Strategy, Car Internet Research Program (CIRP) and Capgemini, 2008 17
  • Automotive the way we see it I would like to buy a car totally on the Internet and have it delivered to my Primary Reason to Purchase Vehicle Over the Internet (% consumers saying) home. Perhaps there would be only one Price discount 36 dealership in town with Do not want to one of each model for test interact/negotiate price 28 in person with dealer drives and to look over. Ease and speed 22 Then you would go home of transaction Ability to purchase and order over the Internet vehicle that is not 8 the car you want with the available locally options you want. Do not want to be talked into buying something 6 I do not want U.S. consumer 0% 10% 20% 30% 40% Source: Capgemini different types of negotiation strategies; For example, a car could easily be in some cases they are more opaque brought to a consumers home for a and in others they are fairly transparent. test drive. Some consumers even suggested using virtual reality tools to Transparent shoppers are at ease with make online test drives possible. the salesperson and are open about their interest in the vehicle as well as Some differences by market were why they like it. They are more likely apparent, with test drives being more to enjoy the negotiation process. of a concern in mature markets and Opaque consumers, on the other the lack of information about a hand, are less confident in their ability vehicles history a greater concern in to get a good price, and so do not developing regions. enjoy the bargaining process. This second group of car buyers represents Many respondents do not rule out a a potential market for online vehicle role for the dealer in online vehicle buying. buying. Close to one-third said price negotiation would be the primary role Barriers to Online Buying of the dealership, while 28% pointed Again this year, we asked respondents to test drives and 17% said providing to identify the barriers they see to service packages. Additional functions online vehicle buying. And again, we included serving as a location to pick were struck by the fact that the up a vehicle after buying it online, as primary hurdles such as the well as a place to view the vehicle in inability to test drive a vehicle, see person and to acquire additional photos/video of the vehicle or receive information before buying online. full product and price information are clearly surmountable. Cars Online 09/10 18
  • It will soon be possible to order everything online, starting from the build and color and finishing with accessories. Russian consumer Barriers to Online Buying (% consumers saying) Price discounts and dissatisfaction with the dealer/retailer process are the key reasons consumers want to buy Inability to test drive vehicle before making final decision parts and accessories over the web. Inability to see photos/video Overall, 35% of consumers expect a of the vehicle inside and out Inability to receive full price discount when they buy vehicle product/price information parts and accessories online; 30% Inability to negotiate pricing online point to ease and speed of transaction Inability to receive a report detailing the vehicles history as the key reason; 21% look for wider Inability to contact and interact with a representative online or by phone selection and availability; and 10% do Inability to match a vehicle not want to interact in person with a to my exact specifications dealer or parts retailer. Inability to conduct final negotiation online Inability to negotiate trade-in Mature Markets These reasons are fairly consistent of old vehicle online Inability to apply for financing and Developing Markets across markets, with a few exceptions. conduct financing approval process online Inability to have vehicle In Russia, the wider selection and delivered to your home availability of parts and accessories Other resonated most strongly with car 0% 10% 20% 30% 40% 50% 60% buyers. In India, ease and speed of transaction was somewhat more Source: Capgemini Note: Multiple responses allowed important than price discount. And in China, 31% of respondents said they did not want to interact in person However, many consumers do not A similar sentiment was echoed by a with a dealer or parts retailer. expect to see dealer lots full of cars if respondent from the U.S., who said, online buying takes off. There will be Talking one-on-one with a real person to Practical Items Lead the List only test cars, said a U.S. respondent. finalize a purchase is invaluable. I doubt Overall, respondents want to buy Cars will be made to your specifications, that I would ever purchase a vehicle from practical items such as seat covers, thus eliminating dealer inventory on the the Internet, no matter how easy it is to floor mats and tires online rather than sales floor. research makes, models, pricing, extras. custom accessories like spoilers, specialty headlights/taillights and Some respondents see a grim future Significant Interest in Buying custom wheels. There were some for dealers. Dealerships will become Parts/Accessories Online notable market differences, however. history, said a consumer in India. This year we took a closer look at the Everyone will buy their cars online and business of selling parts and accessories For example, in-car entertainment have them delivered at their doorsteps. over the Internet, an area of considerable devices and systems lead the list in interest to consumers. Half of Russia, named by about half of Not everyone is sold on online respondents said they would like to respondents, compared with an buying, however. I hope that well still buy parts and accessories online. As average of 34%. Consumers in India have our local dealers because of their with online vehicle buying, the trend were also more likely than average to proximity and their knowledge of their is growing in the U.S., is consistent in consider buying in-car entertainment customers, said a consumer from Western Europe and Russia, and is systems over the web, while these France. I think that most of the research down somewhat in the other items were at the bottom of the list for will be done on the Internet but finalizing developing markets. Chinese respondents. the deal will be face-to-face with the salesman. Its too important a purchase for everything to be done virtually. 19
  • Automotive the way we see it Customer Interaction: Loyalty and Satisfaction Rates Improve In a year full of bad news for the automotive industry, our research found bright spots in brand and dealer loyalty and customer satisfaction with the vehicle buying process. Automotive companies could use a bit of consumers are likely to return to of good news and our research the same dealer, and where, in fact, provides it in the form of improved one-quarter of consumers would customer loyalty. This year we saw a actively search out a new dealer for spike in brand loyalty in most their next vehicle purchase. countries, perhaps a reflection of the ever-increasing reliability of most Building Loyalty Through vehicles on the market today as well Communication as improved lead management and So what can dealers and manufacturers customer communication programs. do to maintain customer loyalty? Communication is key. Consumers Overall, 68% of respondents said they show a strong receptivity to a wide were likely to purchase the same range of communications, such as make/brand as their current vehicle, brochures about the vehicle up from 61% last year. Improvements bought/leased, service reminders, were seen in the mature markets as post-test drive surveys, welcome well as most of the developing packs, satisfaction surveys and countries, with the exception of India. personalized repurchase offers. Similarly, dealer loyalty also rose, However, those items that are with 63% of consumers saying they intrinsically most useful, such as were likely to purchase from the service reminders and personalized same dealer where they bought their repurchase offers near the end of a current car, up from 59% the year lease or warranty period, are more before. This may be due to the likely to influence future buying contraction in the dealer business as decisions. For example, 30% of well as improvements in quality and consumers said these two items would service resulting from investments in make them more likely to buy their customer lifecycle management next vehicle from the same dealer or systems. manufacturer, the highest rating for any form of communication. Some variances by market are Personalized repurchase offers are apparent. The U.S., Western Europe particularly influential in the U.S., and Russia all registered small Western Europe and Russia, but less increases in dealer loyalty, while so in the other developing markets. China saw a bigger jump. However, both Brazil and India recorded small Some consumers suggested that declines, which again may be a sign of manufacturers go even further in their convergence beginning to occur in communication initiatives and involve some of the developing markets. consumers in the development of new vehicles. It would be good to use online Despite this years gains, dealer loyalty surveys to get views and guidance from still remains lower than brand loyalty, existing users before manufacturing new indicating that consumers are more vehicles, said a respondent from India. likely to trade dealers than trade brands. This is particularly true in mature markets, where less than half Cars Online 09/10 20
  • Consumer Views on Communication (% consumers saying) Brochures about the vehicle bought/leased Service reminders Post-test drive survey Welcome pack after purchase/lease Customer satisfaction survey after purchase Customer satisfaction survey after service Personalized repurchase offer 2 years after purchase Personalized communication/gift after a complaint Valuable/useful Brand magazine More likely to purchase as a result Newsletters Invitations to special events, clubs, open-house days Other sales offers 0% 20% 40% 60% 80% Source: Capgemini In addition to various types of possibility to schedule service communications, some companies appointments online, and online Buying a car will be rely on member clubs to drive loyalty availability of a vehicles service more convenient and and a positive customer experience. history. Less important are invitations quicker. There will be more Consumer interest in these kinds of to owners club events and the clubs varies by country, with possibility to meet, blog or chat with services but fewer considerably less interest in the other owners. documents, and a shorter mature markets. For example, only waiting period for vehicle 24% of U.S. consumers and 22% of Consumers in the developing markets those in Western Europe say they are show a much greater willingness to delivery. Chinese consumer currently or would consider becoming a member of a vehicle owners club. This compares with 76% of respondents from Brazil, 64% from pay for these kinds of features, compared with their counterparts in the U.S. and Western Europe. India, 56% from Russia and 47% from Speed Is of the Essence China. While consumers demonstrate a willingness to interact with The features of an owners club manufacturers and dealers, they deemed most valuable or useful tend expect responsiveness when they do. to be practical items, such as vouchers Every year, consumers become more for service and accessories, the demanding about the speed of 21
  • Automotive the way we see it Required Speed of Response from Manufacturer/Dealer to Consumer Query response to inquiries. This year is no (% consumers saying) exception. More than half of all consumers surveyed expect to receive 100% 1 2 1 1 1 1 1 1 2 1 2 2 a response within four hours, up 3 11 9 11 6 7 several percentage points from last 14 22 year. The increase was particularly 80% 30 16 notable in the U.S. with a jump of 10 Dont know percentage points. 35 46 23 More than 48 hours 51 40 20 60% 24-48 hours China remains especially demanding,