Dealerships are key to an auto industry turnaround

Dealerships are key to an auto industry turnaround, states new report from Arthur D. Little

New study warns OEMs that without brand experience at the dealership level, manufacturers risk losing market share to more brand-savvy competitors

A new report released today by management consultancy Arthur D. Little warns OEMs that they must do more to achieve customer brand loyalty at the retail level, and predicts that dealerships will be the cornerstone of automotive brand building in the future. With 2008 new car sales having reached record lows in most developed markets, global automotive companies are under more pressure than ever to avoid collapse. Nearly 80% of all car purchases are still done face-to-face, Arthur D. Little’s “Delivering the Brand,” warns that as the industry faces a growing number of new competitive pressures, global automotive brands must develop dealership management initiatives to ensure their retail networks are building and reinforcing brand loyalty from the test drive through to after sales service.

According to Arthur D. Little’s latest report, even before the full impact of the global credit crisis hit the automotive industry in the second half of 2008, the sector faced major changes to its competitive arena, which were brought about by: regulatory pressure on CO2 emissions, international safety standards, high oil prices, and changing customer lifestyles. Competition amongst global players has been pushed even further as a dramatic increase in overall vehicle quality over the past decade had progressively weakened the role of the product itself as the key differentiator.

Fabrizio Arena, the report’s author and a Senior Manager in Arthur D. Little’s Global Automotive & Manufacturing Group, commented on the report’s key findings:

"Dealerships have a major role to play in delivering an excellent brand experience that will attract new customers and retain the existing base. Despite product differentiators, more responsibility for the customer’s overall brand experience must lie with the dealer, and automotive brands are ultimately reliant on their dealer networks to manage customers’ in-store buying experience from start to finish in order to build the global brand.”

Improving the brand experience

Based on an analysis of and research into each aspect of the automotive purchasing experience, Arthur D. Little’s latest report outlines a four step approach for global automotive brands to manage customer satisfaction through their retail networks. Ensuring results and investment decisions are consistent with customers’ expectations and its dealerships’ capabilities are key to implementing an effective global brand strategy that will reinforce the products’ desirability through a positive customer brand experience.

Fabrizio Arena continued: "To be successful, a global customer satisfaction improvement program for the automotive industry requires a clearly defined relationship between the OEM headquarters and the local market profit center (local branches). Defining roles and setting consistent, measurable targets will allow local branches to adapt the corporate brand strategy into the local market context in a meaningful way.

Citing an example from the report, Arena concluded: “Customer satisfaction is an urgent concern for OEMs looking to move ahead of their competitors in an environment where simple survival is every brand’s primary objective for the year ahead. By adopting such an approach, a local branch of a world-leading OEM we’ve worked with has improved its customer satisfaction performance by approximately 16% in a single year, and moved up several places in the New Car Buyers’ Survey, a key industry benchmark.”

The aim of Arthur D. Little’s report is to offer OEMs the full range of considerations necessary to successfully implement a brand strategy that links product performance with customer experience satisfaction. With the credit crunch forcing unprecedented competition for those consumers still on the market for a new car, loyalty and retention programs must be a vital element of a global OEMs survival strategy.

Delivering the Brand is now available for download at www.adl.com/delivering_the_brand.

Dealerships are key to an auto industry turnaround

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