The circular economy
While the concepts listed above are reasonably unconventional, they still rely on in-vehicle services and traditional single transactions to add value. To truly shift their focus to servicing customer relationships and providing long-lasting value instead of individual transactions, OEMs need to look at maximizing the vehicle usage period. Joining the circular economy is their best way of achieving this.
The circular economy refers to the sharing, leasing, reusing, repairing, refurbishing and recycling of existing materials and products (in this case, vehicles) for as long as possible. Some OEMs may think of this idea as costly—if they reduce their focus on individual transactions, isn’t a loss of income inevitable? This isn’t necessarily true; by diversifying their offerings into in-vehicle services and subscriptions, OEMs can maintain their revenue and drive growth by refocusing on long-term customer value.
One potential subscription to offer is a city-wide mobility service. As an alternative to a singular purchase, companies might allow the option to pick up specific vehicles as necessary. Vehicle sharing works especially well in urban center settings, where users have a wide variety of vehicles and locations to pick up from.
On top of the value these services offer, joining the circular economy can improve customer loyalty by appealing to customer preferences. The circular economy particularly advocates sustainability, and consumers right now are more conscious of their environmental impact and resource consumption than ever.
Note that joining the circular economy will require cooperation with other industries. Offering vehicle recycling programs or utilizing remanufactured components are also ways to embrace collaborative consumption, appeal to eco-conscious customers, and improve CLV. However, they may require the use of resources not readily available to the OEM at this time.
Automakers need new ways of thinking to drive customer lifetime value in the future
In many other industries, consumers no longer see personalized experiences and digital services as additional benefits but as necessities—such behavioral changes increasingly impact the automotive industry as well. From a volume perspective, new car sales are stagnating, and customers want more digital convenience and flexibility. These changes require a reinvention of how OEMs perceive value in their customers and their services.
These five factors are just a few ways a business can maximize customer lifetime value. However, the key takeaway is that new thinking is needed in order to maximize customer lifetime value; with the traditional single-transaction model no longer as viable as it once was, companies within the automotive industry need to refocus on CLV and the long term.
Delivering value at speed, and doing so without compromising on any promises made to customers, is vital for success. Building on those successes with data-based insights is also crucial if ideas are to deliver value for the customer and the business in the future.
Industry players must stay attuned to emerging trends that may not yet be in the spotlight if they are to stay competitive into 2024 and beyond.