The market for automotive financial services is highly competitive. Until now, the success of captives has been based in particular on supporting their retail partners at the point of sale (POS) with a tailored range of credit, leasing and insurance products. New competitors, such as FinTechs, brokerage platforms, insurers and car sharing providers, are increasingly putting this business model to the test. In addition, new social megatrends, such as the changing understanding of mobility and increasing digitalization, are intensifying competition.
Field Study: How Captives Are Dealing with Disruptive Trends and increasing Competition
As part of a cooperation with the University of Applied Sciences in Neu-Ulm (HNU) and the Master of Advanced Management program there, students investigated how captives deal with disruptive trends and competition and looked for innovative solutions to overcome current challenges. To this end, the sales process for automotive financial services was analyzed over a period of four months. The focus was on the sale of cars, including financing and leasing offers, via dealers to private customers. At the end of 2015, the captives achieved a historic high in terms of contract volume (value of all contracts in the portfolio) of around 104 billion euros. Today, around 75 percent of all new car registrations are leased or financed. This corresponds to an annual credit volume of around 47.7 billion euros [1].
As part of this study, the students used silent shopping, conducted interviews and analyzed the results from secondary sources. The key findings are outlined below.
Right at the start of the study, clear shortcomings in the customer journey became apparent. The purchasing process for automotive financial services is characterized by media disruptions, waiting times, information gaps and an overall lack of transparency. The dependence on the dealer both in the provision of information and during the contract conclusion process was perceived as particularly striking.
Results of the Field Study: Inadequate Mapping of the purchasing Processes
Retailers needed a large number of different software systems to conclude a contract easily. The inadequate digital integration of these systems led to the loss of customer data and configuration requests, made duplicate entries necessary, created media disruptions, increased the probability of errors and caused time losses.
What does this mean in terms of the customer journey?
Dr. Heinz-Peter Renkel's quality pyramid, which is based on Maslow's pyramid of needs, was used to classify the results [2]. This quality pyramid specifically shows customer requirements with regard to automotive financing:
Source: Stenner (2015). Handbook automotive banks. Financial service providers for mobility [2]
A classification of the analyzed problems in the quality pyramid gives a clear picture: Particularly in the area of minimum standards and convenience, there is a need for action for captives with regard to an optimized customer experience. As Harry and Schroeder noted back in 2000: "[...] ultimately, only consistent customer orientation offers opportunities to gain competitive advantages [3]."
Figure: Comparison of the actual/target processes
What can an optimized Customer Experience look like?
To achieve minimum standards and convenience, a holistic approach for all participants in the value chain can be a solution. An all-in-one system that can be accessed by manufacturers, retailers, captives, service providers and consumers enables the mapping of an optimized customer journey. This should enable online sales via the websites of the various stakeholders as well as on-site sales via the retailer. This could be realized via various login systems with a systematic rights structure for the respective stakeholders. For example, a retailer confirms a purchase contract in its login, which the consumer has already filled out completely digitally using a digital signature and online bank check. This enables captives to meet the different convenience requirements of consumers. An optimized digital customer journey also offers the opportunity to use the additional customer touchpoint to provide further services online or to expand advisory services, e.g. through online advice via chat and video chat.
As a study by the banks of the automotive industry (BDA) shows, consumers are willing to purchase vehicles and financing online:
Source: Arbeitskreis der Banken und Leasinggesellschaften der Automobilwirtschaft (AKA) (2016). Automotive banks 2016 - sales promotion, worry-free mobility, customer loyalty, potential [4]
Customers want to be inspired
So far, we have looked at how captives can optimize their purchasing process in terms of minimum standards and convenience. But how can they inspire their customers?
As soon as the lower areas of the quality pyramid are sufficiently "served", the various stakeholders can turn their attention to the aspect of customer delight. New disruptive technologies, such as virtual or augmented reality (VR / AR), offer great potential here. At Audi, for example, customers can already view the configuration of their desired vehicle live in 3D in VR showrooms [5]. Initial attempts to carry out a virtual test drive in a car configured in this way have already been launched.
When it comes to customer enthusiasm, creativity is required and the possibilities seem almost limitless. Retailers could offer the VR experience regardless of time and place, for example. This could be made possible, for example, by using inexpensive cardboard smartphone holders if the customer does not have their own VR glasses. Google is currently working on the development of new VR headsets that could be suitable for this [6].
A look beyond the horizon: best practices
BMW is taking a similarly innovative approach to Audi. In the Netherlands, BMW is already testing how customers can order their cars from home. The solution here: the BMW Sales Force Holland. Mobile sales advisors visit customers at home, configure the desired vehicle together with them and conclude the purchase contract with them. The launch of the BMW i3 in summer 2013 also attracted a lot of attention. Experts discussed drive technology, design, carbon construction, the elaborately staged simultaneous presentation in New York, London and Beijing on the one hand and the Group's new sales orientation on the other. Under the heading "Future Retail", BMW is implementing a new multi-channel sales approach for the sale of its electric vehicles. In addition to a few selected retail partners, so-called "agents" and multimedia Customer Interaction Centers (CIC), the new cars are to be sold using an online sales platform. All sales channels are fully integrated so that customers can easily switch between the various sales channels during the entire sales process [2].
Recognizing the need for Action, seizing opportunities
The results of the study make it clear that the ongoing digitalization of the sales process for automotive financial services is leading to numerous challenges in the customer journey and that there is a clear need for action on the part of captives. At the same time, however, digitalization also opens up great opportunities and potential to stand out from the competition with innovative solutions, to respond to current mega-trends - not least to inspire customers and increase sales.
The afb Market and Innovation Event 2017, which will take place in Munich on May 4, 2017, will focus on digital transformation and the future of the customer experience. How can companies create a new level of digitalization through the optimal combination of processes and modern, disruptive technologies, such as augmented reality, and implement them effectively? Take a look at impressions of the afb Market and Innovation Event 2016 and make a reservation for 2017.
Sources
1 VDA (2016). Annual Report 2016 The automotive industry in facts and figures. URL: www.vda.de/de/services/Publikationen/jahresbericht-2016.html
2 Stenner F. (2015). Handbuch Automobilbanken. Financial service providers for mobility, 2nd edition, Springer-Verlag Heidelberg.
3 Bruhn M., Meffert H. (2013). Exzellenz im Dienstleistungsmarketing: Fallstudien zur Kundenorientierung, illustrated, Springer-Verlag Heidelberg 4 Arbeitskreis der Banken und Leasinggesellschaften der Automobilwirtschaft (AKA) (2016). Automotive banks 2016 - Sales promotion, worry-free mobility, customer loyalty, potentials.
5 Ilg P., (2017). Advantage through virtual reality. URL: www.zeit.de/mobilitaet/2017-01/audi-virtual-reality-autohaus-vertrieb-verkaufsprozess
6 Janssen J.-K. (2016). Google on virtual reality course: high-end cardboard and standalone VR glasses. URL: www.heise.de/newsticker/meldung/Google-auf-Virtual-Reality-Kurs-Highend-Cardboard-und-Standalone-VR-Brille-3100378.html
