Industry Today: The World of Manufacturing
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 Date:10/6/2009 Dollars & Sense |
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Will Your Customer Be True? For the auto industry, customer loyalty is always good - like motherhood and apple pie - but never more so than during an economic downturn, claims Andrew Dinsdale, Senior Manager, Deloitte Consulting LLC. 
Now that the dust has settled on the Cash for Clunkers program, auto sales have stalled again. The people who wanted (or needed) to buy a car will likely have done so while other potential customers retreat back into wait-and-see cautiousness. This means that for OEMs, two questions still loom: “When will people (really) start buying cars again?” and “How can we make sure current owners come back to us?” The longer an owner waits to buy a new car, the greater the likelihood that he or she will switch brands. Even in the best of times, a customer’s engagement with a brand follows a predictable, downward curve. Following purchase, engagement is high; the owner connects with the brand. Over a few years, that connection becomes progressively tenuous. During the same time, new models come out ¯ maybe they’re more appealing than the “old” car, maybe the customer’s eye starts to wander: “Is the new XYZ Brand more attractive than my ABC Brand?” Also, the consumer’s needs might change after significant lifecycle events: a baby is born, a teenager goes to college. The extended period created by the downturn exaggerates the potential disconnect between the customer and the brand. On top of this, when money’s tight no one wants a new, higher car payment. The option of leasing has also become prohibitively more expensive during the downturn, aggravated by hammered residual values. So, what can an OEM do to keep a customer loyal? Here are some ideas to consider. First, stay in touch. Of course a car company could communicate with all owners – but continuous contact can be very costly. OEMs can improve their bets by integrating and mining data to find and focus on owners sitting on the fence and likely to be in market. How can you predict loyalty? Certain indicators provide hints:
How can you determine who’s likely to be buying soon? Various signs, from explicit online browsing or inquiries to recurring service visits, can indicate that an owner is returning to market. Better yet, various data elements can be combined to build an in-market propensity scoring model that can be applied to the customer database. An obvious source, however, are the owners at the end of a lease. If they’re on the fence, they could respond favorably to some personal attention. But what’s the typical car company doing to motivate that potential buyer? In most cases, not enough. Armed with the right data, marketing messages, incentive offers and even goodwill in the call center can be refined. By segmenting and modeling the data, an OEM can invest in the owners likely to be responsive and better yet earn incremental sales by converting more fence-sitters. Second, get customers to the dealer. The owner should be encouraged to use the dealer for checkups – revenue now and loyalty later; in tough times, maintenance can be promoted as an effective way to improve vehicle performance, fuel efficiency and extend the life of a car. Unfortunately, pulling customers to the dealership is potentially problematic. No one enjoys going to their dentist, their doctor, or their dealer. So, that makes it incumbent on the OEM to do anything in its power to improve the “go to the dealer” experience. The dealer is responsible for its own operations and environment, but the OEM can set standards and exert pressure by putting teeth into dealer certification programs. An oil change should not take two hours – and it should be priced competitively. Why are so many dealers’ service areas closed on the weekend? Why are the waiting rooms and bathrooms dirty? If the dealer experience does not create loyalty, it certainly could create disloyalty. Certainly, on their own, some dealers have worked to create an environment which attracts customers complete with valet parking, free carwashes, internet cafes, coffee bars and playgrounds, but this is not the norm. Third, mix in some real value. Give the customer something he or she really wants. In this industry, reward programs could be a lot more, well, rewarding. Why not pay back loyal behavior with points that are redeemable for great stuff? Like airline tickets, or passes to theme parks, or restaurant vouchers? Maybe loyalty comes with a three-year discount at a bookstore or a five-year family membership to a museum. If a customer gives up the brand, he or she loses the reward, any points accrued become switching costs. Also, what can be done to turn owners into advocates? Social media and consumer-generated content has taken off, yet, for most car makers, social media is languishing in the PR department. Customers are now less trusting of marketers, preferring to listen to peers, their network and the “crowd,” all easy to find on public and private networks like Facebook and Twitter. Auto companies need to assist and engage owners in new collaborative ways, provide incentives to affiliate on behalf of the brand and in doing so, create fans that wear the brand badge. The whole is equal to more than the sum of its parts Many OEMs think about loyalty like this: “Get the product right, get the deal right, get the brand right, throw in the service, and – presto – loyalty.” However, for the most part, all these variables are considered and managed separately. That’s a problem because, for the customer, these are not separate; they’re a bundle of value. Take service, for example. For the buyer, it’s not an after-sales event; it’s part of the product offering. And “service” is not just the dealer: it’s the Web site and the call center; it’s any touch point with the OEM. Accordingly, customer loyalty is a cross-functional challenge. Everyone – new product development, quality assurance, the call center, finance, brand management, the dealer – has to pull in the same direction. In an ideal world, the OEM would get these people together on a regular basis so they could think through the issues and work together. Quality issues are discussed between engineers, marketers and the customer service people on the front lines. Auto company employees can be the best source of ideas for change – they are captive customers who have a true desire to see the brand succeed yet usually feel ignored when it comes to the insight they can offer. The bottom line: the OEM has to make every customer engagement and experience relevant because each one is an opportunity to create (or destroy) value and value creates loyalty and advocacy. Andrew Dinsdale is Senior Manager, Deloitte Consulting LLC This publication contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication. As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Copyright © 2009 Deloitte Development LLC, All rights reserved. |