What can Big Automotive Players Do When a Brand Means Less to Consumers than Cost and Convenience?

What can Big Automotive Players Do When a Brand Means Less to Consumers than Cost and Convenience?

In a decade’s time, you will no longer care about what brand of car you sit into in the morning, but you will care about that vehicle’s safety credentials, and how well it integrates into your digital lifestyle

That is the claim of IBM, in the Automotive 2030: Racing toward a digital future report on how IBM sees the motor industry adapting to technological advances by 2030.

It is not that brands will not matter at all in the motoring sphere by then – but that specifically within the autonomous car and ride-hailing market, the brand appeal will become less and less significant.

The automotive industry has operated for 100 years on one business model—design, produce, sell, and service vehicles. But radical change is coming.

Also read: How to Build a Growth Marketing Team to Scale, Emre Tok Growth Marketing Champions EP 01

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Technology advancements and consumer expectations are the constant drivers of change over the next 10 years. Sustainability is driving the focus on electric cars, and the need for new skills is causing shortages in the workforce.

Personal mobility serves as an even greater influence as the sharing economy grows. At the same time, the influx of outside competition delivers new value and displaces traditional automotive companies.

Regardless of how quickly the future materialises, two things are certain:

⦁ First, digital technologies create entirely new ways to foster seamless touchpoints with consumers. They provide insights that deliver personalised services and integrate the vehicle with various aspects of a person’s life.

⦁ Second, consumers expect the digital experiences they get from the vehicle to be as good or better than those they get from their other smart devices.

But back to the question raised in my opening paragraph – what happens when consumers decide that the brand you have worked so hard to cultivate and elevate isn’t so important to them, but cost and convenience are?

After interviewing 11,500 consumers to better understand what they expect from mobile digital experiences, IBM found that as consumers move from vehicle ownership to vehicle usage, 48 per cent of consumers surveyed say that a vehicle’s brand would not matter as long as the vehicle is cost-effective and convenient to access.

According to the findings, consumers are putting less emphasis on automotive brands and more on access to vehicles and service when and where they need them most.

IBM also surveyed 1,500 automotive executives globally to determine what they see as the external influences impacting the automotive industry today, and how they will change the auto ecosystem in the next ten years.

The executives concluded that the ability of a vehicle to learn about its occupants, integrate with their devices and have a natural conversation with them will lead to greater brand eminence and loyalty.

This presents an opportunity for automakers to redefine their brand differentiators by embracing open digital platforms, changing the way they work and accelerating reskilling efforts.

“Around the world, automakers are preparing for an industry in which less than 50 percent consider their brand to be a competitive differentiator,” said Ben Stanley, Global Automotive Research Lead – Institute for Business Value, IBM.

“In the next decade, as cars evolve into networked machines dominated by software, the concept of an auto brand may be facing a digital revolution that will require prioritising in-vehicle digital experiences over driving features to separate from the pack.”

Many predictions by other parties about the automotive industry in 2030 support this vision:

⦁ Every person will own 15 connected devices.
⦁ Up to 15 per cent of new cars sold could be fully autonomous by 2030.
⦁ Software will account for 90 per cent of innovations in the vehicle and lines of code will be a hundredfold what they are today.³
⦁ Car-sharing could make up 26 per cent of global miles travelled.⁴

Half of the automotive executives surveyed by IBM say that to succeed or even survive in the next ten years, they need to reinvent their organisations with digital technologies, supported by data.

In fact, 83 per cent of executive respondents say they understand the strategic value of data in their industry. This data can fuel everything from operational efficiencies to new business models to the consumer-facing digital experiences such as integration with other personal devices, personalised services and the ability to connect into other aspects of a person’s life.

Yet only 18 per cent of those responding say they are operating on a digital data platform today. The automotive industry is precariously positioned at another fork in the road. In the short term, with widespread concern about coronavirus contagion, we have seen a spiked revival of consumers’ interest in owning their own car.

However, this will have only a minor impact on the industry. Instead, it will be digital technologies and consumer expectations that have the most profound impact – on all aspects of the business. Even the core business model, one that has sustained the industry for over a century, is under attack.

To add to the confusion, an industry that was once closed to others is now open to any entrepreneurial venture that can provide a mobility experience of value to consumers.

In January 2020, Tesla (a company whose first automobile was released in 2008) became by far the most valuable car company in America. And had a capitalisation of USD$93 billion, compared to USD$50 billion for General Motors and USD$37 billion for Ford.

This is even more remarkable because GM sold around 20 times as many cars as Tesla in 2019, while Ford sold more than six times as many.

Automotive companies have a decision to make as they ponder which road to take. They can seize the opportunity to reinvent their organisations through digital technology – unleashing new experiences, new focus, new ways to work, and new workforce skills. Or they can continue down their current path, running down the clock and risking obsolescence.

The actions they must take should revolve around three themes:

⦁ Create loyal customers with personalised experiences that ‘stick’.
⦁ Innovate, do not isolate – build platforms to promote purposeful collaboration.
⦁ Get agile and change fast.

Also read: Merkles COVID-19 Customer Engagement Report Finds 52% of Marketers Increased Spend Since the Pandemic Outbreak

About the IBM Institute for Business Value

The IBM Institute for Business Value (IBV), part of IBM Services, develops fact-based, strategic insights for senior business executives on critical public and private sector issues.

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