The challenges currently facing the car industry

8th April 2016

• The Global car industry is growing and has broken record after record in recent years• However, the sector is facing unprecedented challenges and change is

happening at an incredible pace• consumer expectations are transforming• new technologies are dramatically changing the product and how they’re

purchased – from great strides in fuel efficiency to the advent of the ‘connected car’ to software competence becoming an increasingly important differentiator• continuous pressure to reduce costs, reduce emissions and become more

capital-efficient

• The following slides outline 10 of these challenges and the implications / corresponding opportunities from a marcomms perspective

Introduction

Challenge 1: complexityRetail is only half the story - there are numerous Consumer and Fleet segments with overlap between the 2 (User Choosers)

Source: SMMT Motor Industry Facts 2015

Top 5 new car registrations in 20142014 registrations by sales type

Implication: you need a ‘top down’ integrated Brand and Model / Segment strategy

• The market is focused on supporting the Dealer networks and, therefore, Broadcast activity dominates• There’s enormous scope to optimise business around customer

requirements and it’s no longer enough to repeated showcase the car in a 30” spot / 48 sheet, more dialogue is needed with customers• For example, it would require substance behind the message to shift

perceptions from ‘efficiency’ to ‘sustainability’ • Content also affords the opportunity to Retarget prospects and move

them along the funnel with sequential messaging

Challenge 2: evolving from ‘Push’ dominance to more ‘Pull’ Henry Ford's first production line started with a "supply-push" philosophy to keep the factories busy and covering high fixed costs. Dealer networks were created as logical extensions of this model.

Challenge 2: evolving from ‘Push’ dominance to more ‘Pull’ Recent research has suggested 3 buyer types derived from actual behavioural data (how long the search was, how many cars shortlisted, how much active research undertaken), psychological traits research, and self-reported data (interest in cars, knowledge about and confidence about cars).

Source: COG Research 2015

Word of mouth 3rd party reviews

Endorsement by other

enthusiasts / influencers

Implication: the critical touchpoints identified by this research are firmly in Pull territory, rather than traditional Product Push

Implication: Brand makes the difference. A focal point for creating an emotional connection and the surest way to stand out from the crowd.

Number of cars on shortlist varies between 3 & 10 prior to final choice

Challenge 3: clutter and the ‘Tyranny of Choice’*There’s no shortage of competition and product differentiation keeps getting more difficult - the differences between Premium and Volume segments and between Manufacturers are reducing.

* the more choices we have the harder it is to make a decisionSource: COG Research 2015

Challenge 3: clutter and the ‘Tyranny of Choice’There are 32 million+ cars currently on UK roads – having a best selling model drives both latent awareness and word of mouth

Source: SMMT Motor Industry Facts 2015

Challenge 3: clutter and the ‘Tyranny of Choice’A specific challenge for Mazda is that their best selling model is in a declining segment - down 42% 2004-2014

Source: SMMT Motor Industry Facts 2015

Implication: a ‘hero’ product in one segment is not a sustainable point of differentiation.

Challenge 4: Big Data Digital has transformed the way we buy cars – 10 out of 13.25 hours spent researching a new car happen online and ½ now visit just one dealer before buying and test drive just 1.3 cars.

21

Brochure Requests

Test Drive Requests

Model configuration

Website visits (trends, dwell time, click stream data)

Dealership visits / footfall

Test drive booking / feedback

Sales info (New vs. Used)

Aftersales Residual value / repayments

Service history / Residual value

NPS / Customer Satisfaction /

Advocacy

Finance / Parity

Customer relationship management

Evaluating how familiarity & engagement are built

over time

Cross-device media interactions, Search, Retargeting, CRM/Email, Social Listening/Buzz Monitoring

Campaign management

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Test, measure, optimise

81% of car sellers are more inclined to visit a dealership if they

are offered an online part-exchange guide

price in advance

Challenge 5: downsizingPetrol prices, changing household dynamics, etc. are prompting downsizing and growth of sub-segments serving to drive more distance between traditional product and behavioural segments

Source: SMMT Motor Industry Facts 2015

Challenge 6: Test DrivesTest Drives remain critical to final decision-making and are a ‘make or break’ moment - either followed by a sale or lost business to the competition. They typically occur late in the process and not every consumer takes one

Implication: with 1/2 of car buyers visiting just one dealership before buying (Auto Trader), manufacturers to ensure theirs is one visited

Challenge 6: Test DrivesA challenge for the industry is ensuring they are fulfilled to the customer’s satisfaction - The Test drive should be a moment of pleasure, but for many consumers is a frustrating experience. For example, the dealer sits beside them & talks too much, the car isn’t as expected, the test drive is shorter than expected

Source: Google ‘Gearshift’

Opportunity: new technologies, such as reality headsets, offer an opportunity to demonstrate innovation and showcase the product

82%of those disappointed

with response to a query will

switch/evaluate another manufacturer

1 in 5consumers continue their online research whilst on location at

the dealership

• Demand-based selling / sharing of under-used assets on a short-term basis enabled by digital technology

• By 2050, 42% of people believe that City Dwellers will be more likely to share a Car than own one

• Do brands need to shift from building Cars to providing personal travel solution?• Opportunity for Mazda – offering trial before purchase

Challenge 7: the Rental Economy From Owning to Sharing. Willingness to consider alternatives to car ownership (such as car sharing) is growing in mature markets.

Implication: Understanding mobility and car culture in the future

Challenge 7: the Rental Economy Ford announced the Smart Mobility plan at CES to use innovation to take company to next level in connectivity, mobility, autonomous vehicles, the customer experience and big data. 25 global mobility experiments will test new ideas and address emerging transportation challenges. Resultant insights will shape Ford’s future investments

Challenge 8: blurring of boundaries between the digital & physical worldsBy 2020 95% of new cars will have SIM cards. Digital Customers and Connected Vehicles are disrupting the sector. So much so, that for the first time connected cars overshadowed video games at CES 2015

97%

use the internet for research ahead of a purchase

73%are more likely to

buy a specificmodel or brand if they find positive

comments onsocial media

74%

would be willing to consider an alternative testdrive location

44%

are willing to buy a vehicle online

Source: Cap Gemini ‘Generation Connected’: Cars Online 2014

Implication: you need to continually innovate / collaborate with innovators to ensure you keep up with the ever shorter technology cycles, e.g. mobility providers

(Uber), tech giants (such as Apple or Google) and specialists (Tesla)

Despite the focus in recent years, the research suggests no one is yet doing ‘social’ wellWhile 82% say that Facebook is a good place to interact with brands1, only 1 in 5 fans of

automotive brands has ever posted a comment or question on a liked page2

Challenge 9: SocialWhilst 85% of people who engage with automotive brands do so online, social media isn’t yet playing an important role in decision-making

Source: 1. Lab42, 2. Mintel Car Purchasing Process

Implication: given the importance of Word of Mouth, Product Reviews & Enthusiasts, you need a comprehensive Social Strategy to act a platform for

leveraging customer advocacy, Retargeting prospects, seeding 3rd Party Content, etc.

45%of car buyers are likely to

post about their experience on Social Media

(Cap Gemini)

Challenge 10: the rise of personal contracts According to research from Experian, the list price of cars is becoming increasingly irrelevant. Instead monthly payments are fast becoming the benchmark – something the Financial Regulators are increasingly focused on

Source: Google ‘Gearshift’

Opportunity: more personalised monthly payment messaging further up the purchase funnel

705kpeople used PCP to buy new cars in the 12mths to

July 2015

59%of all private

new cars sold in the UK during

that period

Opportunity: extend use of tools such as Blippar into Dealerships to provide a more immersive / personalised experience and make the decision of choosing the new

Mazda an absolute no brainer

Challenge 10: the rise of personal contracts Despite (or perhaps because of) unparalleled access to information, the car buying process is taking consumers longer. Consumers spending more time on their car buying journey provides both an opportunity and a threat. Monthly Payment comparisons enable people to compare models more readily, which raises the risk of prospects getting caught in a ‘buyer’s paradox’ – repeatedly asking “what can I afford?” & “what do I actually want?”

The automotive industry is facing its biggest transition since the launch of the Model TBrands that will win in this new landscape will do so by shifting their focus from product to customerProfitable growth can be achieved by creating more personalised experiences and a more integrated, more agile way of working which is underpinned by data

In summary

Thank you