Delivering a Superior Automotive Customer Experience in Developing Markets Customer experience is becoming a crucial differentiator as the industry matures in developing markets.
It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages. Henry Ford In developing countries, these words by auto industry pioneer Henry Ford ring as true as ever for automotive companies. Competition is ramping up and customers are growing more experienced and demanding. To succeed in today s market, you ve got to make customers happy during the sales process or else they ll go find another automaker. Customer satisfaction, however, can only come when automakers and their dealership partners readjust their focus. Yes, making good cars will always be important, but that alone won t cut it in crowded markets where several manufacturers make quality, innovative, well-designed vehicles of all sizes and styles. Creating a good experience opens the door to a long-lasting brand connection with buyers, who will go from that first car to a second while referring their friends and family. All in all, improving the customer experience could increase annual sales by as much as 0 percent within a country. We recently sought to find out how automakers are faring in customer experience across developing markets. We conducted a study of customer experience at dealerships in three high-growth yet different developing markets: Brazil, India, and China. This paper examines the findings of that study and what automakers in these and other developing markets can do to achieve best-in-class customer experience. The Customer Experience in Brazil, India, and China The three markets we studied up close share similarities, starting with an impressive array of choices regarding brand and model, including the latest products from most major manufacturers. Chinese car buyers, for example, can choose from more than 500 models, 9 brands, and 6 manufacturers. All three markets also feature experienced buyers; in all three, at least 0 percent of all customers have purchased a car previously. Lastly, demand in each country varies significantly between urban and rural areas, requiring carmakers to differentiate the customer experiences for different buyer groups. These markets also differ in several important ways. For one, major income groups have varying access to automobiles, reflected in different car penetration rates. For example, members of the lower and middle classes are far more likely to own a vehicle in Brazil than in China or India. In China and India, ownership are high in large cities but very low in rural areas. China and India, starting at a lower maturity level, have seen greater sales growth over the past decade; China saw annual growth of 0 to 0 percent between 007 and 00. Also, looking at our stages of excellence for customer experience, Brazil and China rate higher than India (see figure on page ). For our study, we assessed customer experience performance for the six leading manufacturers in each market, selecting cities where the share of experienced buyers is higher. Using a mystery shopping approach, we visited dealerships and assessed the shopping experience. Our
Figure The customer experience stages of excellence Customer neutral No customer reception Poor knowledge of car features No comparison information No online presence and limited general promotions Automakers in India Customer aware Dealers focus on what customers say they want Customer reception Comparison tools focused on brands Consistent information on features Limited competitor knowledge Advertisements in social media Automakers in Brazil and China Automakers in North America and Europe Customer motivated Dealers focus on product strengths Graphical and interactive tools for features at dealerships Needs-based analyses Promotions, subscriptions, event launches in social media Global leaders in customer experience Customer centric Customized product presentation with detailed needs-based analyses Good knowledge of competition Graphical and interactive tools for features Extensive comparison tools Personalized interactions and active use of social media for feedback Source: A.T. Kearney analysis predefined process evaluated dealerships on six crucial dimensions of the purchase process, which are often the difference between a sale made and a customer lost: customer greetings; salesperson knowledge about the brand and competitive vehicles; test drive experience; pricing and incentives; closing and follow-up; and dealership environment (see figure ). Our research shows good but varying levels of customer experience, with plenty of room for improvement to reach Western benchmarks. In the following sections, we will look in depth at each market s state of customer experience. Figure The dealership visit s pivotal role in the auto sales process New car sales After sales Awareness Research Dealership visit Purchase Ownership Replacement Elements of the customer experience Product presentation Customer Brand and Test drive Pricing, incentives, 5 Closing and 6 Dealership greeting competitive and financing follow-up environment vehicle knowledge Source: A.T. Kearney analysis
China In the last decade, China has grown rapidly to become the largest auto market in the world. However, China s customer experience performance differs widely by region, with its largest cities and coastal areas more advanced than more rural inland provinces. On the whole, customer experience lags Western markets. China s automotive dealers have high levels of brand and vehicle knowledge and have created excellent dealership environments, a product of the country s intense competition and more experienced customers, particularly in major urban areas (see figure ). Many of the best-performing dealers in our study opened during China s auto market peak in the late 000s. As a result, these dealers are better designed for displaying and are more likely to follow their brands targeted sales and after-sales processes. Figure The automotive customer experience in China, India, and Brazil China India Brazil 6 6 6 0 0 0 5 5 5 Best Average Worst (0-poor, -high) Customer greeting Brand and competitor vehicle knowledge Test drive Pricing, incentives, and financing 5 Closing and follow-up 6 Dealership environment Source: A.T. Kearney analysis China s dealerships have room for improvement in several areas, including prompt customer greetings; explanations about different models; consistent test drive offers; better explanation of the costs and benefits of ownership, including pricing and financing options; and follow-up contact. India India s dealership environment gets high marks for attractive store layouts, but other dimensions have low rankings, as demonstrated in figure. Most dealerships only make a basic assessment of buyer needs, with product presentation usually driven by customers stated interest rather than a concerted, structured approach to drawing buyers to certain products. Knowledge of competitive products also tends to be limited.
In the past, Indian buyers were known for taking a long time to make purchase decisions, but that has changed dramatically in recent years. Half of consumers today start their research just two months prior to purchase, and almost 0 percent visit a dealership for the first time just one month before purchase. Manufacturers now have less time to influence buyer decisions, which makes the quality of dealership interactions that much more important particularly in a country where many family members are often involved in the process. Yet, Indian dealers seem to struggle with training sales personnel, adhering to basic sales processes, standardizing infrastructure, and, above all, demonstrating the passion needed to deliver a positive customer experience. To improve conversion rates and upsell models or options, Indian dealerships can conduct high-level needs assessments to determine customers real needs and fine-tune special offers, understand competitive positioning, create a superior test-drive experience, forge a stronger emotional connection with customers, help customers understand total cost of ownership, offer alternative financial options, explain after-sales service support, and develop stronger closing and follow-up processes. Brazil Brazil s market has grown significantly in the past two decades, and preferences are evolving. Today s buyers are increasingly choosing small vehicles with small engines, balancing out the product mix and creating a more challenging environment for major-brand dealerships. Dealers have had to adapt their showrooms for all car types small cars, large cars, and high-end models. In other words, carmakers are serving different buyer groups within the same dealerships. To meet these challenges, many dealerships in Brazil are investing in better serving mid- and large-size car buyers, improving sales and after-sales processes, and revamping facilities, scoring high rankings as demonstrated in figure. However, not all manufacturers have pushed forward in this regard. The small-car segment s growth led to new dealership networks focused more on price-sensitive car buyers. To capture higher-end buyers, these dealers have to adjust their showroom layouts and vehicle displays to incorporate new models. Brazil s major improvement opportunities include standardizing dealership facilities and sales and after-sales processes; segmenting the customer experience so that different buyer groups get more focused services; and enhancing the test-drive experience (see sidebar: Test-Drive Performance). Test-Drive Performance One area in our study was consistently problematic in all three countries: test drives. The variation within this category was the greatest of the six dimensions we studied: Top performers offer immediate test drives and interact effectively with their customers during the process, while the lowest performers did not offer test drives at all. Test driving is one of the most difficult services to perform at a dealership but also one of the most important steps in the customer experience. More than any other step, it is the one that can create that strong emotional connection between car and driver. Doing it well requires properly designed processes, good management of car availability, and understanding of customer behavior and habits based on local culture. 5
Best-in-Class Customer Experience Every market is different, but players in each have plenty of room for improvement in terms of customer experience. Improving, however, can only happen when you look beyond products and seek to shape all dimensions of customer experience. Localization is the biggest sticking point for multinational manufacturers as they seek to create dealer sales processes that meet local customer requirements and cultural norms while maintaining brand standards. For example, Chinese dealers may need the ability to adjust test-drive experiences for customers who don t have a lot of time to spend. Balancing network expansion and the consistency of the brand experience throughout all dealerships is always a big challenge, and multinational automakers will have to work jointly with local franchises to achieve these goals. For domestic automakers, clearly defining sales and after-sales processes and standards at dealerships is crucial. This is particularly the case in terms of customer greetings, closing, and follow-up, where soft skills are needed to attract more experienced buyers who are less sensitive to price. In other words, for all automakers, improving the customer experience requires a holistic approach that spans multiple factors in the customer experience framework. Best practices from both inside and outside the auto industry offer a way forward in customer experience from Lexus s comfortable, customer-centered, service-driven dealership environments, to the unique customer experiences that Starbucks and Apple have created in industries that feature intense competition and a need for close customer interaction. In particular, best practices in several areas are particularly relevant for automakers in developing markets (see figure ). Figure Customer experience framework The experience promise Organizational alignment Culture Process and infrastructure Voice of the customer Performance metrics Source: A.T. Kearney analysis 6
The experience promise. Leaders in customer service go beyond merely measuring customer experience and comparing their performance with competitors. These companies make customer service part of their corporate DNA by ensuring that their commitment to customers is boldly communicated to all levels of the organization. For example, Starbucks communicates its experience promise to employees through frequent discussions and in its Green Apron Book, which contains guidelines for keeping that promise. Organizational alignment. Front-line staffers need some measure of authority to adapt to their local markets. Decentralizing decision making will ensure that the organization is designed around customer experience. At the same time, clear guidelines and training guarantee that you are meeting the interests of the broader organization. Southwest Airlines is a good example of one form of organization alignment; there, normally non-customer-facing employees are assigned customers and play a role in the customer experience. Similarly, Starbucks executives are trained and periodically serve as customer-facing baristas so that they can better understand the product and customer, and keep a strategic focus on customer experience. For all automakers, improving the customer experience requires a holistic approach that spans multiple factors in the customer experience framework. Culture. Hiring workers with strong customer-oriented skills and providing ongoing training will develop a culture empowered to support superior customer experience. Starbucks has developed a two-pronged training approach that, in addition to the hard skills they are directly responsible for, also focuses on soft skills required to connect with customers welcoming them into the store, establishing eye contact, and building relationships. Similarly, Singapore Airlines trains all in-flight crew members to manage the customer experience throughout their travel. Process and infrastructure. Keeping the above elements running smoothly requires underlying systems, processes, and infrastructure. Leaders in customer experience pay great attention to detail. Singapore Airlines uses two different-colored tongs for serving wet towels and then collecting them. Lexus offers complimentary flatbed pickup and delivery of cars (for service or repairs) in certain regions, and flat-screen TVs, coffee bars, and even putting greens at many dealerships. Voice of the customer. Customer experience leaders capture the voice of the customer in surveys as a way of collecting continuous feedback with which to improve operational processes and drive customer loyalty. Ritz-Carlton, for example, conducts more than 0 interviews per month for all of its properties to collect in-depth qualitative and quantitative data. Performance metrics. Performance measurement only gets you part way there customer experience leaders embed these metrics into business processes and corporate scorecards to align the organization against common goals. FedEx and Texas Instruments tie their customer experience metrics to operations by integrating internal and external perspectives. These metrics are continuously tested, evaluated, and balanced with other critical business measures. 7
Staying Ahead of the Curve The automotive customer experience in Brazil, India, and China is progressing, but there is still plenty of room for improvement. Basic processes and service skills are in place in most dealerships, but to truly differentiate, automakers will need to further emphasize the purchase experience by enhancing test drives, customer profiling and needs identification, and competitor comparison seemingly small steps that can make a big difference in delivering a satisfying customer experience. To achieve these goals, remember Henry Ford s statement about the customer paying the bills and then embed a clear vision and the supporting processes necessary to make it a reality. Authors Shiv Shivaraman, partner, Mumbai Stephen Dyer, partner, Shanghai stephen.dyer@atkearney.com Dario Gaspar, partner, São Paulo dario.gaspar@atkearney.com Andreas Graef, principal, Shanghai andreas.graef@atkearney.com Vinod Kumar, principal, Mumbai vinod.kumar@atkearney.com Fabio Fera, consultant, São Paulo fabio.fera@atkearney.com The authors wish to thank Yue Cao and Sharon Serrao for their valuable contributions to this paper. 8
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