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 SYSTEM
One 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 frst 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 infuential in a consumers 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. Lets 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 signifcant 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 infuence 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, lets call it tier-0. Organizations must develop strategies to utilize this tier for positive infuence.
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 Buffets Berkshire Hathaway Inc. bought
Van Tuyl, Americas ffth 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 feld. 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 2
Tier 1
Tier 3
Tier 2
Tier 3
Old Tier System New Tier System
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DEVELOPMENT OF TARGET AUDIENCES
The disparate digital landscape has created a plethora of desirable audiences for automotive organizations; however, targeting them
has become increasingly diffcult. Digital journeys are not linear, and in todays 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 benefts 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 Infuence of Women
Women purchase 51% of cars in America. Extrapolating their infuence to their families, women infuence 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
drivers 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 specifcally for the way men shop. Women shop differently, and have different needs. Retroftting 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 specifc attributes such as age, gender, income, education, and interests.
Marketing to Millennials
Millennials are a diffcult 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 fnancial 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 conficting research suggesting this drop in Millennial ownership hasnt 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 benefts of car ownership to the skeptics.
Perhaps the most alarming insight comes from the overlap of the two groups mentioned above. The signifcant decline in car
ownership of the Millennial female is a prime consideration, because as the most infuential 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 iCrossings SearchAi (SEM)
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or ResponsiveAi (web) is one way to target these specifc 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 INNOVATION
Instead of fghting 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. Lets
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
Owners 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 dont 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 ft 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. Its
called the Play the Road app, and combines data from the cars engine management system with the iPhones accelerometer to
detect several parameters from the driver such as speed, turns, gear changes and driving style. It then matches that profle 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 youre 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 its 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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RECOMMENDATIONS
For todays automotive marketers, its 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 consumers life. This is the work of a next generation platform and an experienced group of data scientists who
are specially trained to fnd 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 frst 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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