10 emerging considerations to shape the design of the next generation of automotive retailing

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I currently have the opportunity of working with one of the major automotive manufacturers to define the next generation of their retail dealerships. We have been anticipating their challenge for a while.

Not only is the automotive retail model a bit stale to begin with, but the emerging economic conditions have certainly changed everything in their domain. Whether by plan or by attrition, there certainly will be many fewer dealerships out there. The product portfolio of every manufacturer is getting smaller. Investment in events, advertising and marketing is shrinking, and even the major North American auto shows were much smaller in content and attendance this year.

Our charge is to accept that these symptoms are, in fact, the new fundamentals of the marketplace, and that the dealership of the future must have a significantly smaller footprint. This original mission, borne of current circumstance, pressure or opportunity, seems tactical compared to the potential richness that we see in the long turn of subject. I feel comfortable however that as the conversation continues we will all find a way to broaden our perspective and lengthen our view.

I am looking ahead like this because I am fascinated and interested in the tangential and circumstantial influences that appear even before my research begins.

A couple of examples that have appeared in random readings over the past couple of days—

  • “Plan B” is the expression that many of us have used to describe a fallback position when the primary goal becomes unattainable. In a nice exploration of the impact of the economy on these alternative dreams in the New York Times today, David Segal quotes a Miami real estate investor. “I got rid of everything luxurious,” he says. “I drive a Ford pickup truck. I used to drive a BMW 5 Series, and I was going to upgrade from there, to the 6 Series convertible.”
  • Ben Terrett, in his blog, Noisy Decent Graphics, admits to hating cars. But he is tuned to an awareness of how media might affect purchasing decisions. He’s announced a project, he calls “the long car purchase.” He describes his plan like this—“So under The Long Car Purchase I’m going to note down all the significant interactions I have with car advertising and branding over four years (or whatever) and then maybe we’ll see a picture build up of how that affects my purchase. Maybe we won’t. It’s an experiment.”
  • The google-izing of the industry seems to be a frequent evocation for exploration of new models for the business. Jeff Jarvis challenged the industry in an article in the new issue of Business Week. He offers the Goggle design process as a remedy for the disconnect between Detroit and drivers and suggests a radical redesign for the business. Rita McGrath took up the subject in her Harvard Business blog, but then her colleague, Bill Taylor, suggested she and Jarvis both ought to look elsewhere.

This is a very small but, I’d say, typical sample. They are mostly about the products themselves, but what implications might these random readings have on the design of the dealership and the retail business?

For the moment, I make the assumption that the current, emerging and enduring economic conditions generate these conditions—

  • Buying a car is going to take more time
  • Car manufacturers will bend to greater consideration of the customer (choice) than the car (production)
  • The retail business must become more pull than push

Here, then, are ten emerging considerations for a new business model, ten considerations that can shape a program for a new kind of dealership design.

  1. Build a new cache around products that did not have charm before. How can I arrive at this event in a Ford pickup and not lose the attention and associated credibility I did when I arrived in a BMW 6? Manufacturer’s ads, local dealer’s ads, and the dealer’s sales people all contribute to the success of brand transitions.
  2. Become a place of learning rather than a place of selling. The emerging electric and hybrid technologies are unfamiliar. There’s a lot of lore out there about sustainability, environmentalism, fuel consumption and emissions, cost of ownership, etc. The last place many people would think to look for credible information and instruction is the dealership. How does this transformation from creepiness to credibility take place?
  3. Make it a ceremony not a transaction. Delivery is a nominal process, mostly. It may have achieved its height in those fantasy Saturn commercials, where the hand-off of the keys was an emotional event. Ceremony and ritual imply shared values, time, community, culture and other factors not currently expressed in, say, the Toyotathon.
  4. Accommodate personalizing, resist packaging. Dealership economics as well as production efficiencies have meant that we’ve had to take what someone else imagined for us rather than what we wanted or needed. Each of the articles I cited above imply a significant devaluation of what you chose for me and a real value associated with what I can make for myself.
  5. Utility is the new luxury. Satisfaction of what I need and what I need to get done feels really rich right now. More than that is corrupt.
  6. Eliminate the lot. The car lot has never been a good experience, and ought to be abolished. It is a huge burden on the dealer’s business, is an environmental nightmare and community blight, and is irrelevant when time is on my side. I remember a phrase from sitting in a demo vehicle with my Dad when I was a kid—“We’ll build your car and it will be delivered in six weeks.” I want my next car from the factory and built for me, not from the lot. You, dealer, should be happy.
  7. Sell experiences not products, but experiences beyond the product. In the convention of asking what business are we really in, the car becomes defined as a vessel of navigation, entertainment, business, and socialization as well as carrying the associations (performance, sex, utility) that have defined brands for ages. Ignoring for a moment the threats associated with on-board technologies, the fact of the matter is that while moving from place to place, the car is place—living room, game room, office—and contains all of the experience associated with its extended functionality.
  8. Consider the implications of conditional ownership. As the world urbanizes, more will have the options that allow Ben Terrett to hate, or not have, a car. Hyundai, in these ugly times, even offers a conditional ownership model—lose your job and we’ll take back your car. ZipCar, and others, offer a model that looks like rentals, but feels different. Should conventional ownership stand outside of this model. Can I come in for an update to my technology, for example? Who will do this—the dealership or the technology brand?
  9. Consider the implications of a multi-point relationship. Remember those relatively silly secondary branded vehicles—the Eddie Bauer Edition? Remember the building expectations for “Intel Inside” for cars? As a car is embedded with utilities for navigation, communication, entertainment, safety, comfort and other user-defined attributes, realize that others may make or shape the brand image and the associated relationship experience.
  10. It’s not about you, it’s about the embedded brands. Jarvis complains about the radio and Tarrett seeks an audio satisfaction, while iPhone delivers communication, entertainment, socialization, connection, information and so very much more. The iPhone advertises content and utility—“need a cab in an unfamiliar city?”—not the iPhone itself. What are the experiential utilities in the cars you are selling?

I am sure we’ll return to these and other subjects as our conversation continues. In the meantime, what are you looking for?

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