Extreme Disruption in Auto – People become more important not less
In this in-depth content series, Professor Francis Farrelly and Sam McOrist consider the future of autotive post pandemic, this week exploring the monumental shift the industry must make from a product centric approach to one that puts people and experience first.
This article is the second of a three-part series that follows on from the Extreme Disruption in Auto series of 2019 (which turned out to be the most read special story series of the year). Read article 1 here.
The automotive industry is in the midst a period of unprecedented change that is set to play out for many years to come. At the epicentre of this change is a shift towards digitisation, automation and omni-channel retail that might suggest that interpersonal experiences are on the way out. In the second article of this series, Professor Francis Farrelly and Sam McOrist present a counter view. That the industry is shifting away from an industrialised, product driven mentality to a value and service based orientation – in this space people become more important, not less.
“Any customer can have a car painted any colour that he wants, so long as it is black.”
Henry Ford’s famous quote refers to The Model T Ford which only came in black to improve production efficiency and quality control. Albeit an extreme and well-worn example, it still surprisingly enough holds true in the automotive industry in that it must make a fundamental shift from an industrialised and product centric mindset to one that is service, experience and value focussed. And that change will be one of the greatest challenges it has faced in its history. Just how effective companies are in making that change will have an enormous baring on their capacity to compete.
The big shift
Historically the automotive industry has maintained a product dominant logic whereby services were something that was ‘add on’ to the product as an additional feature. Until recently, this has been evident in most dealerships with sales, service, finance and aftersales working as separate functions often patched together in a logical sequence at the point of sale but otherwise operating as discrete business units. Consider that in the context of a mobile phone purchase where all these functions become a part of a holistic service package and you can see why shifting consumer expectations can be problematic for a business that focuses on ‘product with service on the side’.
Nevertheless, these changing expectations bring great opportunity for automotive companies to embrace a service orientation with customer experience and value at its core. This involves a philosophical shift to place people (employees and consumers) at the centre of every decision and to develop a holistic view of service as a complex network of relationships involved in value exchange as opposed to a series of transactional interactions and events.
One technology highlighting the need for this shift is the advent of connected vehicles. Through the exchange of information between a vehicle, dealership and manufacturer, the customer relationship now extends well beyond the point of sale to become an ongoing conversation and opportunity to co-create value. Companies that understand employee roles, capabilities and collaborations as contributing ‘parts to a whole’ consumer experience over time, will ultimately build stronger relationships internally and externally and offer opportunities for a sustainable competitive advantage. This may however require ‘punctuating the equilibrium’ in terms of recognising and genuinely believing in the opportunity to reconceive how people work to add value based on a total customer experience, including making structural changes to how the business operates.
The digital landscape of business and retail has created revolutionary enablers for new types of service delivery and despite the ability of new technology to automate and augment our daily lives, people remain at the heart of services. With increased technology and choice comes an increase of complexity and for many people that complexity is stifling. In his work on the paradox of choice, American psychologist Barry Swhartz argues that having too many options to choose from rather than increasing value for consumers actually problematises the decision making process and causes stress. If we consider the process of purchasing wine at a restaurant, it is often the exhaustive wine list that prompts a customer to ask for a recommendation. When shopping for a vehicle, there are now more options, accessories and finance options than ever before coupled with an increase in mobility options more broadly. Within this fog of complexity, people will seek trusted advisors to explain value. This requires an empathetic view of the customer as well as new knowledge, capabilities and skills to communicate value and sell solutions. This also requires a more complete understanding of where changing cars fit with changing lifestyles!
Creating a valued experience
Historically, buying a car has often been a low trust, high stress, low transparency experience for many customers, and this was often compounded by the fact they did not build relationships at the dealer level due to the transactional nature of the business or high staff turnover. Now with rising expectations and a proliferation of online services offering auto information, product reviews, price comparisons and market aggregation, it is imperative that the sales function evolves to add genuine value and that the business seeks to build relationships with its customers where the opportunity exists to do so.
We can’t lose sight of the fact that buying a car is still a high risk and personal choice for many buyers. High involvement purchases like these benefit from human interaction and a sense of shared values and trust. Now with cars becoming the third space in our lives, and with the host of innovations that will appear with the evolution of CASE (connected, autonomous, shared and electric vehicles), there is even greater opportunity for collaborative approaches to selling – effectively co-creating value with customers to establish how the product caters to their lifestyle and how innovations genuinely add value. This will require a clear-eyed view of why new technology offers meaningful value rather than buzzwords and benefit statements.
Also critical is the need to motivate and enable staff in this challenging service-based environment, and to that end, it is critical that they identify strongly with brand and understanding their role in delivering the consumer experience consistent with the brand message. One way to achieve this is through effective reward and recognition programs, however these too need to ensure they not only reward but enable the right aspects of service. Creating a balanced scorecard for employees that moves beyond industrialised metrics such as efficiency and units sold, to one that underpins employee alignment with customer relationships (and contribution to a larger strategic objective) can humanise the system while building value for the customer.
Designing for change
To facilitate this change some companies are now adopting Human Centred Design (HCD) practices to ensure service experiences are built around the human experience. Moving away from a siloed view of business, firms are now beginning to understand how services (and value provision) as a network of interactions can be designed with multiple touchpoints, and how service quality can be measured by how well these touchpoints work together to eliminate friction and create valued experiences. Companies like Tesla that have been built from the ground up using these philosophies have formulated service ecosystems that are integrated and seamless, while also cultivating a strong brand culture and employee engagement. To compete, heritage brands with complex dealership networks should consider a design-led approach to creating end-to-end service experience involving manufacture, dealership, staff and customers. By doing this, not only may these brands identify opportunities to add value throughout the system, but also at the dealership level through local partnerships and community engagement. Lastly, the need for this value and experience driven approach will only become more pronounced with fast evolving CASE technologies enabling customisation at multiple levels. As an example, autonomous vehicles of the future may place greater emphasis on luxury appointments and rider experience, requiring consultants and technicians to work with customers to create a customised offer. Combine this with electric drive train options, charge stations, and digital cockpits where the services (and value opportunities) are delivered to cars, the need to simplify while value-adding the buying and ownership experience will increase exponentially.
The road ahead
Unlike a product, services are co-produced by people. As the automotive industry begins to shift and embrace a service orientation in response to major level change (resulting from digitisation and CASE), people must be at the heart of that change. By understanding this and ensuring that services are purpose-built to meet human needs (employee and consumer) by simplifying decisions, reducing friction and adding value, automotive companies can create a far more competitive position than what can be achieved through a conventional product orientation.
This article is the second in a three-part series examining the marketing implications of extreme disruption in the automotive industry. Stay tuned for part three in this series.
About the research
Destination, a leading strategic events agency with a strong automotive client base, is partnering with RMIT to fund research into the fundamental changes occurring in the automotive industry and how this will impact on existing players and new entrants. Destination will leverage the research to tailor the marketing-related content of its Engagement and Business Insights Programs (EBIPs), experiential learning programs conducted in inspirational locations for high-performing automotive personnel.
Francis Farrelly is the Professor of Marketing at RMIT University.
Sam McOrist is the Director of Strategy at Destination.