DIGITAL MARKETING SUCCESS IN THE AUTOMOTIVE INDUSTRY

By Lincoln Graham, Director, Strategy, iCrossing

With Bill Connolly, Content Marketing Manager, iCrossing

And Steve Bava, VP, Managing Director, iCrossing

Successful carmakers of the future must adapt to changing technology, engaging consumers through digital up to, and after, the point of sale.

ICROSSING PERSPECTIVE:

INTRODUCTION

Today, the automotive industry has largely bounced back from the financial crisis with a historic

five consecutive years of year-on-year sales increases. However, there are many challenges facing

automotive original equipment manufacturers (OEMs) because of industry changes and disruption.

It is not the time to relax and breathe a sigh of relief. Carmakers must put their figurative foot on the

gas, finding new ways to engage consumers to create deeper, more profitable relationships. There are

shifts in the automotive industry that will reshape it over the next decade, many of which are outside

the control of carmakers – which have historically had a good grip on communicating with consumers

via traditional channels. Changing digital consumer behaviors combined with consolidation of industry

players is driving this shifting paradigm, creating a new car-shopping environment and resulting

in a more level playing field for organizations. While this new reality may appear daunting, it also

presents an enormous opportunity for automotive companies willing to adapt. By embracing these

digital trends, organizations will achieve better targeting and be able to provide a more meaningful

and intimate experience to consumers.

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THE NEW TIERED SYSTEMOne symptom of the digital age has been the reshaping of the tiered system in the automotive industry. Traditionally, tier-1 (OEMs) are

responsible for brand marketing, while tier-2 (dealer groups) and tier-3 (dealers) are responsible for selling. Yet as the car shopping

process has migrated more online, the lines between these responsibilities have blurred. Now, they are disappearing altogether, and

not in a good way. Many OEMs have invested heavily on new websites to provide branding and selling tools for consumers. Similarly,

tier-2 and 3 organizations have developed their own websites to help sell cars, and this digital redundancy has caused unintended

competition and confusion among consumers.

Certainly, success in automotive requires a strong Internet presence, as 75% of all cars purchased are first researched online. As

a result, there is an ongoing battle between OEMs and dealers to capture these shoppers during their research and consideration

phase. Instead, there must be a more cohesive strategy among various tiers to reach, and engage these consumers. Car review sites

and social media are increasingly influential in a consumer’s purchase decision, and needs to be taken seriously because they are

outside the direct control of any tier. This further muddies the water for tier organizations, and essentially reshapes the tiered structure

for the automotive industry moving forward. Let’s further discuss this new environment, and what the changes means to the industry.

Tier-0

Car review sites like Edmunds.com and Cars.com have become a dominant resource for independent car research. Most of these

sites outrank OEMs in search results, a significant note given that search is a major starting point for anyone considering buying a car.

We also know that recommendations from family and friends (word of mouth) have a big influence on selection. Beyond that, people

are turning to social media to ask for advice. Interestingly, according to Nielsen, a whopping 70% of global consumers indicate that

they trust consumer reviews through social media. As these resources grow in dominance, consumers are visiting the OEM website

later in the process, after they have narrowed their selection. Together, online review sites and social media have become a tier of

their own, let’s call it “tier-0.” Organizations must develop strategies to utilize this tier for positive influence.

Lead Aggregator & Dealer Consolidation

As tier-0 grows, so does the volume of the leads they generate. Recently Autobytel acquired AutoUSA from AutoNation dealer group

– creating the largest lead aggregator in the market. Additionally, there are giant consolidated dealer groups like AutoNation, Sonic

and Penske that are multi-billion dollar revenue-generating organizations. Recently Warren Buffet’s Berkshire Hathaway Inc. bought

Van Tuyl, America’s fifth largest dealer group. Warren Buffet said that he wanted to “launch a consolidation of the highly fragmented

business.” What impact will these consolidations at the ends of the tiered system have on the OEMs? For the most part, it levels

the playing field. Dealer groups have increased capital to provide online experience to rival the OEMs and generate their own leads.

Lead aggregators insert themselves ahead of OEMs in the sales cycle. When you consider that a buyer can go onto Edmunds.com,

do their research, submit a lead directly to a dealer, and then purchase a car – they essentially bypass the OEMs digital properties

entirely. OEMs will need to rethink their role in the buying process in this digitally driven environment.

Tier 1 Tier 0

Tier 2Tier 1

Tier 3

Tier 2

Tier 3

Old Tier System New Tier System

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DEVELOPMENT OF TARGET AUDIENCESThe disparate digital landscape has created a plethora of desirable audiences for automotive organizations; however, targeting them

has become increasingly difficult. Digital journeys are not linear, and in today’s world, the Alison Fischer purchase funnel is rendered

archaic. There seems to be a fear of shifting from a world of mass media and single messaging to a world of targeted experiences

and content. Yet, organizations that are transitioning are realizing the immense benefits of a more targeted approach. By developing

communication platforms with targeted messaging by audience segment, organizations are able to engage consumers with the right

message on the right channel in the right moment, leading to increased sales and consumer satisfaction. The fact is that automotive

consumers are seeking engagement, and are willing to change their mind about a brand. According to research conducted by

Google, 63% of car shoppers started out with a brand in mind, with only 20% sticking to the original choice. This means that 43%

of all car shoppers divert, and 37% are acquired. Therefore car brands can acquire new customers with wider and more targeted

upper-funnel tactics.

The Influence of Women

Women purchase 51% of cars in America. Extrapolating their influence to their families, women influence 85% of purchases

overall, making them the most important, albeit broad, demographic. In fact, in the U.S. there are 1.4 million more women with

driver’s licenses than men, and on average they spend more time in a car than men. Despite this, women still report bad consumer

experiences when purchasing a car. Car companies continue to focus communications at men, fearing a shift in focus will

alienate the male demographic. Marketing in the automotive industry was built around the Alison Fischer sales funnel that was

designed specifically for the way men shop. Women shop differently, and have different needs. Retrofitting female-focused content

into outmoded marketing strategies will not work – and in some cases might seem more patronizing. Instead, a new model of

communication is needed that is designed to match the way that women make purchasing decisions. iCrossing recently launched

ResponsiveAi, a game-changing service aimed at solving this disconnect for organizations. ResponsiveAi is a responsive web

design offering that delivers contextually-relevant content and experiences based on device as well as which audience segment is

viewing the content, including specific attributes such as age, gender, income, education, and interests.

Marketing to Millennials

Millennials are a difficult yet vastly important cohort for automotive marketers. On one hand, they have grown up in a digital world

and have digital expectations that offer multiple opportunities to engage them. On the other hand, they are less enthusiastic about

car ownership and their engagement with OEMs is at a historic low. Why is this? Well, there are a couple of reasons. More and more

Americans, especially young people, are moving to urban areas, where it is rather impractical to own a car. According to the U.S.

Census, from 2000 to 2010, urban populations grew by roughly 12%, with 80.7% of Americans now living in urban areas, up from

79% in 2000. Additionally, Millennials carry an enormous amount of student debt, and this financial burden is leading them to delay

many traditional life goals such as purchasing a car, buying property, or getting married. The impact has certainly been felt, as from

2007 to 2011 there was a nearly 30% drop in the number of cars purchased by Millennials. Furthermore, from 2001 to 2009, the

annual number of vehicle-miles driven by 16-to-34-year-olds decreased by 23%.

If fewer people own cars, then how are they getting around? In urban areas, public transportation is a popular solution. Ride-sharing

services like Zipcar and taxi-replacement services like Uber and Lyft are other extremely popular trends for young, social individuals.

But at the same time they are disrupting the industry.

To be fair, there is conflicting research suggesting this drop in Millennial ownership hasn’t yet impacted overall current or near-term

sales. Either way, marketers are now tasked with not only trying to market their brand and products to Millennials, but also promote

the benefits of car ownership to the skeptics.

Perhaps the most alarming insight comes from the overlap of the two groups mentioned above. The significant decline in car

ownership of the Millennial female is a prime consideration, because as the most influential future buyers of cars a new marketing

approach to them is critical. According to a survey conducted in June 2012, female Millennials accounted for just 11.58% of visits

to automotive websites, compared to 16.30% for their male counterparts. Again, this is not entirely surprising as the content has

largely been developed for a male audience. Employing dynamic messaging through services such as iCrossing’s SearchAi (SEM)

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or ResponsiveAi (web) is one way to target these specific groups with content that will resonate and lead to purchase. Recently,

iCrossing client Toyota looked to solve this issue at our Collaboratory #hatch event.

DRIVING INNOVATIONInstead of fighting these trends, some OEMs are embracing it as a way to directly connect with potential buyers. Recently, Uber

announced an initiative with GM and Toyota to help potential buyers of Uber vehicles get discounted loans to buy their cars. The

idea is that the loan will be less risky given that the vehicle would come with a built-in stream of income. This type of collaboration

illustrates that a change in transportation norms does not have to mean peril for OEMs and automotive organizations overall. Let’s

consider some areas that automotive organizations are innovating.

Omnichannel Dreams

OEMs have struggled to grasp omnichannel, and this is primarily a symptom of the fragmented industry makeup. With separate

organizations, disparate data sources, and competing marketing initiatives, the automotive industry will continue to lag in the

omnichannel world. The only OEM that will not have this problem is Tesla. No other car company has such a full view of a customer

as Tesla. Tesla owns the sales with their own dealerships. Tesla has a hyper-connected car that is linked to the “mother-ship.” Tesla

has a recharge-station network, knowing who recharges when and where. This will give Tesla a massive advantage against other

competitors when it comes to customer experiences and relations.

Making Ownership an Experience

In the past, automotive marketers focused on making the sale. Now, organizations are realizing the importance of the lifetime value

of a consumer, and how important the ownership experience is for retention and incremental revenue. With increased transparency

on pricing and consumer-friendly advice, dealerships are not making the margins they used to. Therefore they are looking for that lost

revenue in the service departments. Technology is the key to supporting these ownership experiences. Car telematics allows a car to

speak for itself. It also opens a channel of communication between driver, dealer and OEM. Mobile devices offer constant connection

for easier communication and vehicle management. In essence, technology offers a whole new world of ownership between the

driver and the car, and between the dealership and manufacturer.

iCrossing worked with Mitsubishi on its new website, MitsubishiCars.com; a large emphasis of the project centered on a more robust

“Owner’s Portal,” engaging existing owners throughout the lifetime of their vehicles. By using various data sources, including digital

behavior, OEMs are able to better understand ownership experience and adjust offerings to compliment the process.

Turning a Car into a Companion

According to leadership expert Simon Sinek, “people don’t buy what you do, they buy why you do it.” In this new digital economy,

automotive marketers must focus not on the features of a new car, but why they can fit the personality of each driver segment. Using

data, mobile, and other emerging technologies, automotive companies have an opportunity to create more connected cars that

become more than a mode of transportation; they become an extension of the owner. Creating apps through mobile devices that

can make a car more useful and intuitive is one way to achieve this goal.

For example, consider a new app from Volkswagen aimed at matching a driving experience with the personality of the driver. It’s

called the “Play the Road” app, and combines data from the car’s engine management system with the iPhone’s accelerometer to

detect several parameters from the driver such as speed, turns, gear changes and driving style. It then matches that profile to music

in real-time to create the “perfect driving soundtrack.” The app creates a dynamic version of a given track produced exclusively by

electronic group Underworld. Does this app increase the ability of the car to drive from point A to point B? No. But it does make the

hardware more connected to its user, which is a desirable trait.

How you’re connected to your car changes the relationship you have with it. If it is connected to the Internet it has an entirely new

awareness of its surroundings, making it a more useful tool. Perhaps if the car knows it’s not parked somewhere safe (by looking up

online the crime rates for the area), it can proactively suggest you move it. Or if you have an hour to get somewhere and are low on

gas, your car can tell you that you need an extra 10 minutes given the likely gas station location you would stop at. Suddenly, your

car becomes a companion, not just a hunk of metal.

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RECOMMENDATIONSFor today’s automotive marketers, it’s clear that the environment is challenging. However, by integrating a digital approach, you will

be able to better target and engage consumers, enhance lifetime value, and develop strong, loyal customer advocates. Here are

three ways you can initiate this approach within your organization.

Smarter Data

There has been a lot of discussion about Big Data. It is a good discussion, and one fueled by technology (faster processors and more

storage). But it is not the whole story. The real revolution is not big data, but smart data: a large storehouse of data is less important

than the ability to integrate it with other data sets to come up with a very clear vision of how people live their lives, make decisions

and engage with content. This elevates the level of sophistication far above just capturing all of the data generated by the devices

and behaviors in a consumer’s life. This is the work of a next generation platform and an experienced group of data scientists who

are specially trained to find the deeper truths inside the mountains of data that really matter to business success.

Think Outside the Funnel

OEMs need to move out of their comfort zones, which historically has been their owned domains. By the time consumers touch

owned domains they have already narrowed their list. Successful OEMs of the future need to:

+ Engage consumers outside the funnel to ensure they remain part of the consideration set

+ Develop a tier-0 strategy

+ Develop separate messaging/experiences for various online tribes

+ Have a new focus on their retention strategies through the ownership experience – with better collaboration between the tiers.

Prepare for the Connected Car Revolution

While the connected car gains momentum, perception of the technology by consumers is still lagging. For the most part it remains

confusing and frustrating to users. Connected cars are made up of a mish-mash of technologies that are still clunky and lacking

in features to be compelling. Connected car technologies are also driven by engineering departments with little to no input from

marketing and communications. This technology is not mechanical, helping to move the car along, it is a communication platform

between a car and a driver (and ultimately, a window to the world while you are in your car). If one considers how Nike+ changed the

way Nike communicated with consumers (from using communications to drive consumers to products – to using products to drive

consumers into communication), you can get an idea how the connected car will ultimately change the relationship between OEMs

and consumers, and for the first time, offer a direct relationship with consumers. Car companies need better alignment between

departments when developing the connected car technology, and how it can build closer and more personal relationships with

consumers.

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