Automotive

Connected car opportunities Speed up to keep up

OEMs have to accelerate their connectivity strategies to keep up with other auto brands and technology giants.

Remy Pothet

Global Automotive Head

TNS

For OEMs, connected cars represent a huge opportunity to

differentiate and increase brand loyalty. Internet connected

and brimming with safety, assistance and entertainment

features, cars are once again, cutting-edge cool. Navigation,

driver assistance and entertainment is just the tip of the

technological iceberg.

Cars that learn their driver’s personal habits and can anticipate

their preferences and cars as contactless payment devices and

self-driving cars are just a few years away. You’d think that the

road ahead for OEMs was smooth, long and gently sloping

downhill. And with the right strategies in place it could be.

However, looking down that road right now, there appear to be as

many threats as opportunities.

OEMs have to accelerate their connectivity strategies to keep up

with other auto brands and stay ahead of technology giants.

Remy Pothet

© TNS 2016

Automotive

© TNS 2016

Automotive

Invisible, yet incredibly attractive

Drivers and their passengers have fallen head over heels in love with connected car features.

Whether it’s text message speaking, auto-parking or just more

choice and control of in-car entertainment, the tech is a big hit.

In a recent TNS / BearingPoint study, almost two thirds of

connected car users said the features influenced their vehicle

choice, with almost one quarter of them acknowledging it was

one of the main reasons behind their decision. Just pause for a

moment and take that in – technology, which has nothing to

do with how the car performs or what it looks like is playing a

massive role in the car buying process.

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Automotive

A new business model for new car models

Car connectivity has the potential to open up an entirely new business model for OEMs, based on software and services that deliver driver and passenger benefits.

Selling connected services, whether developed in-house or as

part of a multi-player portfolio has the potential to boost sales,

differentiate brands and increase customer preference in a highly

competitive market, for brands that act quickly. Transitioning to

this model is also a compellingly cost-effective route. Developing

cutting edge connected car features takes much less investment

than innovating new engineering solutions. Coding a sector-

changing app costs a tiny fraction compared to designing, testing

and manufacturing a new engine or chassis.

There’s also a strong argument for connected car tech unlocking

a whole new way for brands to increase customer preference

and loyalty. Once users get familiar with a particular OEM’s apps

they are predisposed to keep using them. And in the same way

that Apple or Android smartphone users are reluctant to change

operating system or preferences when they upgrade their phone,

the same is becoming true with car owners when it’s time for

a new model. Of course, this also presents a new challenge for

manufacturers – how to deal with the differing product life cycle

of apps, operating systems and car models.

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Automotive

Get personal to build stronger relationships

We already know that the cocoon of a car’s cabin is a very

personal space. And now it’s even more so with connected

car features used by drivers in a very individual way. Yes, it’s

technology, but it’s tactile and in close proximity. Over time it

becomes an invaluable friend and the perfect opportunity for

OEMs to build a strong relationship with devoted users.

And behind the scenes and under the bonnet, manufacturers can use the data that’s being constantly collected to offer revolutionary new services and benefits to owners.

Servicing reminders based on accurate engine management data

rather than a mileage or time-based best-guess; remote software

updates delivered when the car is parked up for the night and

therefore causing no inconvenience to the owner; or relevant

special offers and seasonal deals sent into the car as it passes

retail outlets.

This is the car as a lifestyle benefit as much as a lifestyle statement.

And as customers rely and enjoy more connected features

they will become closer to the OEM. It’s an opportunity for the

manufacturer to stay in touch with them regularly and importantly,

for a genuine reason. Building trust and adding authentic value

now becomes an on-going customer conversation, not a once-

every-three-years intensive burst of over-anxious salesmanship.

© TNS 2016

Automotive

The data driven threat

OEMs can use the millions of pieces of collected data being

continuously beamed back to their servers about driver behaviour

and preferences to be more specific and relevant in their brand

and advertising activity. But of course the current biggest prize

of all, autonomous cars, rely almost entirely on connectivity.

And the experts at data tracking and serving up relevant, timely

information are right behind it.

This is where one of the biggest threats to the OEM connected car

business model appears. Think for a moment about which brand

is trailblazing the driverless car, in the PR stakes at least. Google

– a non-auto player is making the most noise and seemingly, the

fastest progress. Uber, the smartphone app-driven taxi and car

pool service is pioneering intelligent geo-location solutions,

while Apple continues to up the ante on in-car entertainment

and experience.

The software and tech companies are becoming a genuine threat to the sizeable investment auto OEMs have already made in connected car ingenuity.

© TNS 2016

Automotive

Built-in versus brought-in

Smartphones are already integrating entertainment and navigation

functionality with existing on-board operating systems. Apple’s Car

Play and the Google powered Open Automotive Alliance are just

two examples. Smartphone apps can help drivers find their cars if

they’ve forgotten where they parked, unlock them remotely and

even prepare the interior temperature long before the driver and

passengers climb inside.

To seize the opportunities presented by connected car features and to keep control of the agenda, OEMs have to act fast.

It’s not something they are used to or very good at, but if they are

too slow the opportunity may get away from them. If they don’t

pioneer new technology and stay ahead of non-auto players’

developments in ‘brought-in’ apps, they could end up looking like

hardware providers whose software is inferior. Remember Sega

and Kodak? The OEM features need to be as good if not better

than the software specialists’ products. If they aren’t, the service

will become commoditised and a race to the cheapest will ensue.

© TNS 2016

Automotive

Closing the gap by creating an ecosystem

The technology gap is a huge threat but there may be a way

to keep it narrow or even close it completely. Just as with

smartphones, third party developers will create apps for use on

different operating systems. Savvy OEMs can capitalise on this by

funnelling the sale of these apps through their own dedicated

online ‘store’ - selling upgrades and new features directly to their

customers and taking a commission from the developers. They

can also partner with the best developers, ensuring that they are

at the forefront of app capability and trend. And they could tap

into the tech companies’ superior experience in developing and

selling apps, as well as a proven track record of successful online

sales strategies. Creating and controlling their own connected car

‘ecosystem’ is an intelligent move.

There’s a clear choice for OEMs and the direction they take will

depend on how confident they feel and how visionary they

are. They can continue to invest vast sums in connected feature

development or they can form strategic partnerships with

non-traditional auto companies. Of course they could also acquire

the developers completely, as Audi, BMW and Mercedes have

recently done with their $3 billion purchase of the Nokia/Microsoft

HERE map and navigation platform. Or smarter still, partner with

each other to develop their own proprietary technology, rather

than continuing to go it alone and cause further fragmentation in a

market that already has too many players.

One thing is for sure, OEMs need to keep innovating.

Once on the road to a software driven business model, they need to keep investing in it. Deciding which direction to take is now their most critical call.

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Automotive

Humans: technology’s weakest link

There is a blind spot however that could stall or even completely

halt the connected car opportunity for OEMs, even for those at

the forefront of tech development with the smartest affiliations

and the most progressive vision.

OEMs have invested substantially in developing connectivity and

are keen to embrace the software-driven business model. Yet we

found that many, if not most, have a long way to go and more

work to do before they can fully seize the opportunities available.

They might have developed the technology but their customers

are slow to adopt the features on offer – strange because we

know how much drivers love connected tech.

The issue, it seems, is that they aren’t aware of what their cars

can actually do.

It sounds crazy, but it’s true. OEMs have developed the technology.

Consumers love it. Yet the uptake is slow compared to other

technology sectors.

In recent research commissioned by TNS and Bearing Point, almost 40% of connected car users were unaware of their car’s connected features.

It would be easy to blame technophobia or a lack of curiosity on

the owners’ part. However, delving a bit deeper into the cause

reveals that it actually is down to human error. But not the owners

or users. It’s caused by the humans known to everyone as car

salespeople and marketers.

Of the respondents interviewed who said they were aware of

their car’s connected capability, half of them said that the features

were demonstrated to them in the showroom or on the test drive.

When non-users were asked the same question, less than a fifth

of them had the features demonstrated. From this, it’s clear that

explaining and showing the technical capabilities of the car at the

on-boarding phase of the sales process is key to the uptake and

use of connectivity.

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Automotive

Show me and I’ll remember. Tell me and I’ll forget.

Marketing has a role to play too. Presenting the benefits of the

technology with clarity and not merely the feature would increase

use. Delighting the customer will help to ensure loyalty to the car

brand and crucially, to its software apps. This can play a significant

part of advertising and promotion as it not only educates, it

differentiates. OEMs need better training for dealership staff in

demonstrating the features and understanding what they can do.

Customers in the survey often complained that dealership staff

didn’t know much about how the connected features worked,

with many buyers saying they knew almost as much themselves!

And user interface and experience designers need to rethink

the way their ingenuity operates in the real world. Many users

expressed frustration at the complex, unintuitive controls. Perhaps

they have become too used to the elegantly thought-out apps on

their smartphones to spend more than a few minutes trying to

understand something much more clunky and complicated.

Consumers love clever, connected solutions, but only if they’re simple to use.

If this sounds blatantly obvious, we agree, it is. But for all their

investment in visionary car connectedness, the auto sector is still a

very traditional marketing animal, not that comfortable with taking

a risk on an unproven strategy. It’s a conundrum they are going to

have to solve if they are to maximise the opportunities that exist.

© TNS 2016

Automotive

The biggest opportunity is also the fastest moving

Car connectivity is the biggest opportunity for OEMs in

a generation.

Not since anti-lock brakes and airbags, have they had a marketing

proposition that consumers can readily relate to. And we know

drivers love it – when they actually know it’s there. It actively

influences their purchasing decisions and is an incredibly cost-

effective way to increase brand loyalty by locking people into a

proprietary operating system.

But we also believe the future of car connectedness and the

opportunities it presents could very quickly slip through OEMs’

fingers if they don’t act fast. OEMs keen to embrace software-

driven business models need to create, control and protect their

own ecosystem, starting right now. Not waiting tentatively to see

the success or failure of others before making a move. They need

to show people what their car can do – by creating more impact

at on-boarding in the showroom – but also through smarter

marketing and intuitive design.

The future of the connected car isn’t far away. It isn’t even round the corner. It’s right here, right now. Smart, strategic decisions taken quickly could smoothly pave the road ahead for OEMs.

About TNS Automotive

We are a team of over 800 Automotive experts around the world on

a mission to help our clients make better decisions. We offer a unique

breadth of experience – from innovation to customer relationships

and tapping into future trends.

We believe in the power of simplicity to create powerful opportunities

in the complex Automotive marketplace.

About TNS

TNS advises clients on specific growth strategies around new market

entry, innovation, brand switching and customer and employee

relationships, based on long-established expertise and market-leading

solutions. With a presence in over 80 countries, TNS has more

conversations with the world’s consumers than anyone else and

understands individual human behaviours and attitudes across every

cultural, economic and political region of the world.

TNS is part of Kantar, the data investment management division

of WPP and one of the world’s largest insight, information and

consultancy groups.

© TNS 2016

Automotive

Contact

About the Author

Remy Pothet is Global Automotive Sector Head at TNS.

He is responsible for TNS’s automotive sector strategy, including

business development and global account management.

He leads a group of global experts focused on helping clients

make better decisions based on automotive insights. With 30

years of experience in consulting and market research, Rémy has

extensive understanding of research. He is passionate about the

impact of digital, technology and innovation on the future of the

automotive industry.

Get in touch

For further information and to find out how we can unlock

growth and create new opportunities for your business

please contact:

Remy Pothet

Global Head of Automotive

+33 140 92 28 02

remy.pothet@tnsglobal.com

Or go to tnsglobal.com/automotive

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