With the auto sector potentially set to undergo one of the biggest transformations in its history, here’s why deploying the right business performance management solution would be so crucial to a successful transition to an agency model.
The last two years have been tough on the auto sector: The pandemic; semiconductor chip shortages; the continuing fallout from Brexit; the disruption caused by EVs. The upheaval has often felt endless. It’s led to all stakeholders – from OEMs to franchise dealerships – having to adapt, even pivot, to meet such unprecedented challenges.
But there’s now another game-changer potentially looming large on the horizon: How cars are sold. If the sector decides to proceed, out will go dealers buying autos wholesale and managing the entire sales process themselves. In will come OEMs, selling cars directly to consumers with dealers recast as ‘customer experience agents’.
Special agent
This potential seismic shift is being considered because of the rush to digitise all aspects of business and consumer life in the wake of the pandemic. As customers have become increasingly reliant on ordering online, it’s made them more confident and willing to digitally assess and buy a car, even without a test drive. Need proof? Just ask industry disruptor Tesla about the advanced UK order volumes of its Model Y.
Within this digitised landscape, the role of dealer would change to address the remapped buyer’s journey, moving away from sales to customer experience with dealerships transformed into ‘experience centres’; in other words, an agency model. No longer sales-focused, dealers would instead add value to the buyer’s journey through one-to-one sales consultations, test drives, handovers, and other customer-centric actions. Commissions would likely be based on a combination of dealership visitors, test drives and/or handovers.
Digital first
While OEMs and dealers unpick the practical and cultural ramifications of the proposed change, a key element to successfully transitioning would be business performance management, which enables the tracking of data and insights from every touch point across the buying journey. Currently, many car makers can struggle to gain access to dealer sales data and other key metrics due to the proliferation of non-compatible DMS systems at the dealer end.
Such intelligence gaps hamstring an OEM’s ability to identify trends and issues that may require action on a national, regional or individual dealership basis. It’s what makes Loop such a crucial ally for clients including Honda, Volkswagen and Lotus. It offers them the ability to bring together disparate data sets and garner insights from a single source of truth. Importantly, Loop also allows them to create KPIs as well as set actions – down to individual dealership level – and monitor progress on the fly.
The need to exchange and act on key information would become critical to the proposed agency model’s success whether on a micro level – such as monitoring how long customers spend in an individual dealership – or on a macro level. The ability to go macro would be especially important, enabling OEMS to create standardised experiences, audit nationwide consistency of customer experiences, and identify any dealers who can adopt learnings from better performing dealers within the network.
Benefits of disruption
There’s no doubt adopting an agency model would prove disruptive in the short term as both OEMs and dealers adjust to the new sales infrastructure. However, such a change does offer huge potential. It promises to optimise and standardise the buying process for customers while enabling auto makers to manage their offerings more cohesively. As importantly, dealers would finally benefit from a set price model, sidestepping the race to the bottom represented by discounting that can prove so damaging to dealer profit margins.
Finally, by introducing Loop, any disruption that might flare up in the short term could be managed efficiently, allowing OEMs and dealers to work more closely and effectively together than ever before. And that’s an ideal outcome for everyone’s bottom line especially in these challenging times.
Further reading
As reported by Automotive Management in September 2021, a report from the Capgemini Research Institute, ‘Next Destination: Software — How automotive OEMs can harness the potential of software-driven transformation,’ highlights how software-driven transformation is expected to deliver benefits for automotive OEMs in the next five years, such as such as improving productivity up to 40%, reducing costs by 37%, and improving customer satisfaction by 23%.
Last year, Volkswagen AG confirmed its intention to implement an agency model for the sale of battery electric vehicles of the brands Volkswagen, Volkswagen Commercial Vehicles, Skoda, Audi and Cupra.
