As COVID-19 has caused the automotive industry to grind to a halt, it has also resulted in a new sense of urgency to develop long-awaited resiliency, better collaboration and improved customer experience. While dealerships have been forced to shutter their operations, limiting their ability to engage with potential buyers, they’ve also managed to identify new methods and means of driving sales. Despite economic reopening, COVID-19 likely will continue to dictate customer behavior for the near future, requiring original equipment manufacturers (OEMs) and dealerships to rely on digital channels to build and maintain relationships with buyers and communicate COVID-19 precautions.
While the effect of COVID-19 on the automotive industry remains uncertain, OEMs are positioned to help their dealer networks return to growth. The following illustrate strategic maneuvers OEMs must consider to help dealers emerge from the crisis stronger than before.
Activate a Dealer Advisory Reopening Taskforce
As reopening builds momentum, customers are looking for specific changes in dealer operations to ensure their safety, including increased cleaning, employee gloves and mask requirements, customer mask requirements, in-dealer customer limit and distancing in customer lines. Without a guarantee that dealerships are following concrete and defined safety practices, car buyers may hesitate to re-enter dealerships during COVID-19. Reopening instructions and planning for dealers should be coming from a single, centralized OEM team working directly with dealers that need guidance during their reopening process.
Enter the Dealer Advisory Reopening Taskforce (DART); a cross-functional, geographically distributed team representing appropriate business units across the organization. The objectives of DART should be to draft and update a general COVID-19 playbook, and manage and educate dealers who need extra support to ensure employee and customer safety during reopening. Ideally, this team is co-staffed with members from the dealer community to share accountability and drive change management necessary at the local level.
The DART’s playbook will be critical for dealers. The playbook should be function-specific at the level of sales, customer fulfillment, service and maintenance and day-to-day operations guidelines. It should also be inclusive of supporting assets such as marketing materials, sanitation and cleaning best practices, operations checklists and drafted communications for dealers to adapt locally. In executing the playbook, DART members should make themselves available for the dealers during their adoption of reopening guidelines, providing hands-on guidance to ensure that dealers have what they need to initiate reopening. The playbook and associated assets will help dealers jumpstart their reopening process, and bolster confidence in reopening with the backing of the OEM.
A three-stage approach to reopening should align to plans outlined at the state and local level:
- Serving customers digitally and remotely: Dealers should be enabled to service customers in sales, service and fulfillment with contactless or minimal contact options. Dealership showrooms should remain closed to customers to eliminate unnecessary interaction
- Limited reopening: Customers will be allowed to return to dealerships by appointment only with strict interaction and cleanliness guidelines to limit the number of customers at any given time and give dealership staff the ability to provide one-on-one service
- Business as usual: Dealership showrooms will open and begin to return to some semblance of normal operations
Improve the overall car shopping and buying experience
As trust is built between OEM and dealer, the DART can begin to advise and suggest that dealers experiment with novel ways to engage their customers that enhance the customer journey. The browsing and shopping stage of the journey should be contactless, digital interactions between customers and retail staff. Forty-six percent of consumers want to minimize visits to dealerships and primarily use online channels for information search and purchase.
Technologies such as virtual and augmented reality enable dealers to mimic the in-person experience by allowing customers to visually shop the dealership, zoom in on inventory, ask questions and access detailed specs about vehicles of interest. Virtual showrooms like those offered by Volkswagen and Jaguar Land Rover give customers a chance to make informed decisions and get the information they need on vehicles from the comfort of their home, with or without the interaction of a salesperson. This opportunity space is only expected to grow, as the global augmented reality market gains are projected to top $133.8 billion by 2021.
However, in the automotive industry, the stark reality is that the online experience is disjointed and merely used to book a car followed by a cumbersome process that requires buyers to visit a dealership, sign paperwork and pick up the car. To-date, only a select few players have cracked the e-commerce code, namely, Tesla, Carvana, Vroom and RumbleOn by successfully navigating dealer network hurdles. While OEMs should accelerate direct-to-consumer capabilities, they can begin by helping dealers streamline the purchasing experience for buyers.
Dealers can allow customers to submit financing applications through their website, and field payments over the phone for transactions that take place via the automated clearing house (ACH). For dealers willing to incur higher transaction fees, PayPal provides a familiar and flexible option to customers looking to make a vehicle purchase. Finally, e-signatures allow customers to complete applications and transactions from home in order to avoid visiting the dealership. Buyers will appreciate these improvements, as a 2019 Cox Automotive survey learned, pricing and paperwork are the two most hated aspects of the car buying process.
Drive adaptable strategy through joint dealer-OEM scenario planning
COVID-19’s lessons will have lasting effects on business and disruption will occur again. By partnering with dealers in routine risk-management activities, OEMs can avoid reactionary responses in times of uncertainty.
Dealers and OEMs should hypothesize scenarios against political, economic, societal, technological, legal and environmental climate. Then, they should create and apply a risk-assessment framework to each scenario. The frameworks should address each scenario’s potential effect. Common themes should emerge to create strategic imperatives to plan against.
The concept of planning for low-probability, high-consequence events is outlined in Nassim Nicholas Taleb's book, The Black Swan, and is a strategic activity that most boards and c-suites march through on an annual basis to hedge risks and identify opportunities. In 2014 and 2015, Rolls-Royce found their commercial and corporate jet businesses and their nuclear power business stunted by unforeseen macroeconomic factors and a natural disaster. Faced with this challenge, a group of managers championed uncovering scenarios that could affect the company by the year 2040. This exercise yielded three potential scenarios endorsed by the Rolls-Royce management team and were used as the basis for their 2016 and 2017 strategic planning process companywide.
The benefits of scenario planning are clear: It provides a common framework around which business opportunities and challenges can be explored, creates an understanding of potential future outcomes the business may face and helps identify patterns that signal the likely trajectory of change; enabling the pre-planning of responses. Finally, it ensures that aspects of the future that can be shaped or influenced are fully considered.
Embrace a culture of partnering and collaboration
The power of a strong cultural undercurrent within a business is not to be taken lightly and no strategy can standup to its potential when executed in a failed culture. The impact of culture shifts can be seen in companies like Microsoft, where Satya Nadella's ability to pivot from a “fixed mind-set” to a "growth mind-set" helped increase its stock valuation from $45 when he assumed the role of CEO in 2014, to more than $185 by the spring of 2020. Culture resides within the OEMs, its employees, its dealers, and even its suppliers, customers and shareholders. Culture is what drives behavior and determines how times of uncertainty are handled; it is driven from the top down. OEMs are expected to set the tone, and keep the tone.
The OEM has a responsibility to demonstrate on an ongoing basis the behaviors of trust, collaboration, transparency and leadership. Additional behaviors of putting its people first, agility and innovation can also distinguish OEMs from one another. Regardless of what is chosen, it is critical that these behaviors be core to the OEM brand and ensure a positive ongoing engagement between dealer and OEM.