Frost & Sullivan Auto Industry Research: Where Do We Go from Here?

Where does the auto industry go from here? That’s the question that Treasure Data partnered with Frost & Sullivan to answer with interesting new research based on interviews with auto-industry execs.

It’s a question that has taken on new urgency with every twist and turn of 2020. Only a year ago, the automotive industry was undergoing a digital transformation, but the need was not necessarily urgent, so the pace was likely slower than many execs preferred. After all, significant undertakings like digital transformation take time—lots of time. Or so we thought.

The coronavirus pandemic accelerated efforts to expand digital marketing and invest in more sophisticated digital capabilities as quickly as possible. Projects that would have taken years wrapped up in several short months instead. And now that the “new normal” is starting to become just plain old normal, it’s time to revisit which opportunities remain for the auto industry, and ask, “Where do we go from here?”

The Frost & Sullivan research provides four key findings. Let’s take a closer look at each of these.

1. Digital marketing initiatives and investment have accelerated due to COVID-19.

Not surprisingly, 72% of physical dealerships reported a decrease in customer traffic between March and July 2020. Conversely, more than 50% of OEMs and dealerships reported a net increase in digital traffic.

OEMs observed that 21% of dealers started their online presence during COVID, and the dealers reported a 7 percentage point increase in online sales over the previous year (2019). While these trends shouldn’t come as a surprise, the data confirms that consumers were quick to switch their car shopping from in-person to online. As the pandemic continues, having a sophisticated digital presence is crucial for the success of automakers and dealerships.

2. Digital interactions with customers are now a major component in managing customer relationships and customer journeys.

Both auto manufacturers and dealerships have a variety of marketing technology at their disposal for digitally interacting with customers, but OEMs and dealerships vary in how they use their martech.

For automakers, nearly three quarters (72%) of customer interactions are digital. This is compared to less than half (49%) of customer interactions from dealerships, which still rely heavily on one-on-one emails and phone conversations to interact with customers.

Among auto manufacturers, use of customer data platforms (CDPs), programmatic advertising, and DMPs is higher while dealerships depend more on mobile apps and alerts.

A majority of OEMs and dealerships share customer data with each other, but more OEMs are planning to collect data from telematic alerts, mobile apps, and third-party data sources in the next 12 months.

With more car shoppers going digital, dealers need to find where their customers are and engage with them using the right message at the right time. The most popular advertising channels are search engines, email, social media, and OEM and dealership websites. But the most effective advertising channels include dealership websites, search engines, and price comparison sites.

3. Significant gaps in digital marketing capabilities remain for both OEMs and dealerships.

Despite significant investment in digital marketing tools, both OEMs and dealerships have identified several areas where they want to develop greater capabilities.

For automakers, areas of potential improvement include:

• Keeping customers satisfied and loyal (customer retention)
• Acquiring a deeper understanding of customers through data analytics and AI
• Predicting and preempting potential customer churn

Like automakers, dealerships identified similar gaps in their digital marketing capabilities. Specifically, gaps in dealership satisfaction include:

• Tracking and measuring marketing spend and ROI
• Uncovering meaningful and actionable customer segments
• Acquiring a deeper understanding of customers through data analytics and AI
• Predicting and preempting potential customer churn

Dealerships are generally satisfied with the digital marketing support from OEMs, but OEMs are less satisfied with how they support dealerships, especially in the area of timeliness of prospect data and providing analytics capabilities. In addition, privacy is a top concern among dealerships when sharing customer data with OEMs.

4. Unification of customer data remains a critical opportunity for OEMs and dealerships to provide personalization.

Surprisingly, a mere 2% of OEMs are confident with their ability to effectively leverage customer data to personalize customer interactions, and only 8% are confident with their ability to unify customer data from all sources. On the other hand, two-thirds (68%) of OEMs suspect they have the budget they need in order to improve their data management capabilities.

To fully leverage the customer data OEMs already have, they need to unify data silos and create personalized digital experiences for their customers, often accomplished by using a CDP.

In fact, for both OEMs and dealerships, the two key underlying predictors of high satisfaction with their digital marketing capabilities are CDP-related—the ability to provide a seamless customer experience across multiple channels and being able to unify customer data from various channels.

This suggests that CDPs are an underrated driver of satisfaction with digital marketing capabilities, acting as a quiet cornerstone to enable most of the other, more motivating, benefits of digital marketing.

To learn more about how Treasure Data helps industry leaders reinvent the car-buying experience, visit our automotive solutions page.