Marketing is not just about colouring in a brochure or updating a website, it is about looking at what customers want and how best they can be served with the products or services available. Technology is really important to success in the automotive market but, if the customer doesn't understand it or is unable to buy it, it is not effective enough to develop and establish a winning formula. For example, if the technology is there but customers are not ready for the change, automakers need to find a way of incorporating these innovations into business models and inform people how this technology will benefit their day-to-day lives.
Chris Kirby, Director of Automotive at Clarity, explains that the automotive industry’s transformation has created two separate markets: “You have one market that is selling cars, which the OEMs are so well suited to through dealer networks and other established routes that cater for their customers. We then see mobility as a separate market to this, which will operate in a completely new and innovative way through such models as subscription services,” he says. As we have seen, there are a few automakers at different levels who are aware of this transition and are working towards these new models, however there are many companies that are working on a day-to-day level, not thinking about moving into the connected car era. They are only thinking about how they can sell more cars today and not focusing on the future.
“When this second market emerges for the customer in a way that becomes appealing, such as lower costs and better services, it is going to be a compelling proposition,” says Kirby, “so it becomes a case of who will offer these services first. If OEMs do not change their business models over time to move from today's market into the future market, rivals will take their customers.” We are still some distance away from this shift but there is a lot of groundwork needed to grow and develop in the moving market. Kirby tells me that he does not see it being a slow transition, but a sudden switch between the two separate markets when people stop buying cars and turn their attention to mobility services. “There is the big question of whether customers actually want mobility services at present. I have had some really interesting discussions with customers about this and, when you describe these services to them, they immediately jump to the conclusion that they like having a car. What people don't realise is that they are already using mobility as a service when they use things like Uber. Then they start to become interested in what mobility could become and change their perspective when they realise the benefits, such as being half the price of owning a car.” This shows how important education is, although this will not happen overnight. Eventually, there will be a tipping point and, if they are not prepared, OEMs will struggle to compete.
A lot of OEMs are buying startups, which is good, although it seems that all the focus is on the technology and not on the customer. A company may obtain advanced technology from a software specialist or put a lot of effort into research and development, but they are not thinking how they can take the technology and turn it into something for the customer. “Clearly, this can happen later on, however this is the bit that is missing from the jigsaw and that is why, apart from Uber, nobody in the mobility space is making any money right now,” Kirby stresses, highlighting the difference between Uber and its competitors. “It may look like a fancy app, and it is, but it has millions of users around the world; that’s where the value is.” Ultimately, there may be better technology around, but if it is not turned into a product that customers can purchase, it cannot compete.
Ironically, a simple application is the sort of platform that more advanced technology is going to thrive on and that is where it is going to be easier, such as allowing a customer to simply go onto their phone and choose what they want from there. Simplicity for customers is key in the development of this kind of technology. Kirby explains that having a customer point of view is so beneficial for companies like Uber as they can start to plan future technology. “If we look towards autonomous vehicles, Uber's customers will automatically get a better service, with no need to convince them. The brand just informs the customer that there are new services that will make their lives much easier and cheaper,” he says. “Companies who have autonomous technology will have difficulties getting the customers and automakers who do not have this kind of software yet will probably not want to buy it in the future as they believe that it is not where the value lies.” Companies like Uber and big technology players are going to be the ones with the customer relationships and that is really going to change the perspective of things. It is now down to how the OEMs factor this into all of their business models before these competitors run away with customers.
When you look at a company like Google, which is working on autonomous software, it is evident that it will not bother manufacturing vehicles itself. It will instead focus on its established customer relationships and look to existing manufacturing when it starts to provide such things as ridesharing services with autonomous software. This will create a lot of difficulties for manufacturers, which will no longer be consumer brands anymore. These automakers will thus become business-to-business companies, forced to start selling to other companies and this presents a huge risk. We will soon no longer need 30 car manufactures globally. Instead, you will only need three or four.
“There could be a serious cut down on OEMs once mobility services and autonomous software comes into play, with people already starting to care less and less about the vehicle itself,” Kirby adds. “If customers stop buying cars then, ultimately, there doesn't need to be as many vehicles being made. There will still be different levels of vehicles through different levels of service, but it will be much more narrow than what we see today. I think that we will see this through the interior of the vehicle, through premium finishes and different luxuries.”
Now, the first thing that springs to mind here is mergers and purchases between automotive brands in the future, with which Kirby agrees. “From an OEM point of view, I imagine that a lot of them are going to want to keep the customer relationships, but there cannot be 15 or 20 competitors in a single market. There really won't be any space for over five options when it comes to autonomous vehicles. Not every car manufacturer can have their own mobility division, it simply will not work,” he warns. This again stresses the importance of companies moving into this space quickly and efficiently, as the ones that do not develop will disappear.
Overall, data is becoming really important within a car, but it is crucial that a customer base is established. If you own the relationship with the customer, you own the data that is associated with that customer, such as where they have been, where they are going and their habits. “This is where the real value comes into the new mobility world, but this is quite a long way away. In terms of where we are today, there are loads of extra layers of data that are being produced by cars but, for us, it's always about the customer and looking at how we can use this data to benefit them,” says Kirby. “This is what a lot of OEMs are struggling with today as they try to find out how to add some value to the customer. Whoever holds the data will be the ones with all the power.” Automotive businesses need to look at this transition more from a customer's perspective than just the technology itself, as this will allow them to find a role in the 'new world' of automotive because, otherwise, they may not have one. These companies can then work out how they will develop their current product portfolio into more mobility-based product, shifting that customer mindset and gaining success in the competitive segment.