Current and future trends facing automotive retailers with a particular focus on electrification, digital opportunities and changing consumer behaviour, were the key themes discussed at this year’s NFDA Driving Digital, which took place at Villa Park on Wednesday 8 September 2021.
The event started with a welcome from NFDA Chief Executive Sue Robinson who touched upon NFDA’s current activities from the association’s most relevant lobbying works to agency models and the upcoming changes to Block Exemption Regulations.
Following a brief introduction from JudgeService’s Founder and Driving Digital Host, Neil Addley, Catherine Faiers COO of Auto Trader analysed how car buying has changed and “what’s next” for automotive retailers.
Catherine highlighted key changes in car buying that are impacting retailers’ activities.
Using Auto Trader’s data, she showed how attitudes towards car ownership are now more positive, with 30% of car buyers thinking that owning a car is more important now than before the pandemic and 11% buying a car to avoid public transport.
She demonstrated that the “digital-first” approach is here to stay and that 49% of consumers are currently more likely to visit dealers with covid related safety measures in place.
She also demonstrated that data-driven decisions are currently paying off for retailers, with businesses who are “leading with digital” achieving more.
Catherine provided an overview of the current outlook of the market. She demonstrated that consumer confidence has “never been so high” and is “ahead of pre-pandemic levels”, however, the potential of the market is being affected by global component shortages that are having a huge impact on supply.
Despite the significant supply constraints, 46% of consumers are only willing to wait up to four weeks for their new car with 74% admitting they would purchase a used car instead where a new one is not available, contributing to the continued growth in demand in the used car market.
Digitalisation is key: Catherine argued the majority of consumers will want to continue their buying experience through an omni-channel journey. As a result, it is crucial for retailers to be able to “sell anywhere”, focusing on the product they sell and their customers’ experience.
In terms of electrification, the wider choice of electric vehicle available is having a positive impact, with interest in EVs growing. One in six Auto Trader users are considering an EV as their next car, however, the conversion to actual EV buyers is significantly lower, with three in four people looking at EVs with “low intent”. This is primarily due to a “mismatch” between the price of the cars available and people’s budget, with BEVs remaining significantly more expensive than comparable ICE models. Achieving price parity and the challenges around the charging infrastructure remain the top two obstacles for mass-market adoption.
Despite the sustained progress, Auto Trader believes we are behind the pace required to reach the 2030 target.
Driving Towards a Digital Future: Anita Fox, Head of Automotive at Facebook, was the second speaker of the day.
Anita focused on what’s changing in consumers’ thinking behaviour.
She started by highlighting how the use of jargon can be detrimental to electrification. For instance, “electric cars” was 1.8 times more used than “electric vehicles” across Facebook in 2020.
Anita used Facebook’s research to show that the key reasons why people buy electric cars are strictly linked to three areas: pleasure, status and utility.
“The key motivators are emotional and the key barriers are functional”.
Crucially, the key emotional driver tends to come after purchase, with EVs being “fun”, “smooth” and “calm”. Another key driver is “status”, which encompasses a mix of positive associations. Owning an electric car is often linked to being cool, modern, caring and savvy. In terms of practicality, however, there are many “reasons to wait and not enough to buy”, namely, and in line with the findings from Auto Trader: infrastructure, cost and the choice of cars available.
EV owners love the status they feel an EV gives them, they have adapted to the charging logistics (benefiting from the value for money) and, of course, they enjoy the experience. EV “considerers” are motivated by these aspects, although the experience element remains “abstract”.
Overall, 48% of consumers are considering an electric car as their next vehicle. These are mostly early tech adopters, environmentally conscious and the least price sensitive. Considerers are more likely to be young, urban and more affluent. Interestingly, 41% of them know someone who owns an EV.
Those currently “on the fence” should be retailers’ target. These currently represent around 24% of all “auto intenders”, they tend to be technologically curious, environmentally aware and price sensitive.
Among the considerers, 67% are Millennials or Generation X, 73% live in an urban or suburban area, 23% plan to buy in the next 3 months, 30% are considering a luxury car and 29% personally know an EV owner.
While EV owners are “the most trusted” source of information, followed by friends and family, in terms of advertising, statistics indicate that people under 55s spend more time on their mobile phones than watching TV. Anita showed that Facebook retains the largest media reach in the UK with 40% of recent new car buyers visiting the social media profile of dealership before buying a vehicle.
John O’Hanlon, Chief Executive of Waylands and Chairman of the NFDA EV Working Group, focused on electric cars and discussed NFDA’s Electric Vehicle Approved (EVA) accreditation scheme
“The world of cars is becoming electric” with the rise of environmental concerns, forthcoming Corporate Average Fuel Economy (CAFE) standards, COP26, as well as a generally increasing acceptance of EVs and a continued improvement to the charging infrastructure.
John gave an overview of NFDA’s Electric Vehicle Approved (EVA) accreditation scheme which was developed following the pilot phase in 2019. The scheme is co-funded and endorsed by the Office for Zero Emission Vehicles (OZEV) with Energy Saving Trust independently auditing retailers to ensure that they meet EVA’s standards. There are over 200 already accredited retailers.
John explained how EVA was developed to help dealers. He explained the reasoning behind the EVA standards which cover retail, aftersales and the overall dealership experience. He emphasised that it is very important for an EVA accredited retailer to be able to provide impartial advice to customers, allowing them to make the right decision.
“The EVA standards are all about making sure there is a fantastic relationship with the customer”, O’Hanlon added.
EVA accredited dealers need to have a level of advocacy about EVs and John said Waylands “use the EVA logo as much as possible”.
He highlighted some of the key topics that are regularly covered by the NFDA EV working group, including infrastructure cost and strategies, manufacturer requirements, customer expectations, future technology, impact on aftersales as well as Government policy and consultations. He explained that policy is central to the NFDA EV working group’s activities, with the Government’s decarbonisation paper being a key part of the current discussions.
He listed a number of policy milestones we can expect over the coming years, including the CO2 regulation consultation in 2022, the potential introduction of road pricing in 2024 and the removal of BIK incentives in 2025.
He concluded by describing some of the successes achieved by the NFDA EV Group including regular engagement with the Department for Transport (DfT), in particular about the Plug-in Car Grant (PiCG). Additionally, he explained how NFDA is using Drive My Career to help dealers attract talented people to fill the skills shortage and meet the demand for different skillsets.
“EV is fundamental, EV is now and as dealers, we need to plan our strategy”.
Neil Addley, Founder of JudgeService, discussed the organisation’s latest findings about consumers’ behaviour.
Emerging from the pandemic
Echoing previous speakers, Neil showed how car usage has increased as we came out of the pandemic. Interestingly, JudgeService’s data suggests dealers improved significantly at dealing with phone and online enquiries, with consumers’ satisfaction levels rising in these areas. The industry has “geared up” to the challenge and elements such as contacting customers after delivery will remain crucial to build a successful relationship.
Neil used JudgeService’s data to show that interest in hybrids and electric cars is rising, but there is still a lot of indecision, which presents a clear opportunity for retailers. The large majority of current EV owners will most likely also buy an EV as their next car (90% BEV, 7% hybrid).
Breaking down the respondents by age, data show those most likely to buy an electric vehicle next are aged between 46 and 55 (15.3%), followed by 35 to 45 years old (14.9%) and 26 to 35 (13.8%).
Interestingly, half of those surveyed do not have access to home charging, indicating one of the most significant barriers.
Neil claimed people are now prepared to travel further to buy a car, although, there remains a proportion of consumers who are ‘hyperlocal’.
The vast majority of people want to visit physical dealerships to buy their next vehicle, however, the upward trend linked to the proportion of customers coming from online is continuing.
Nearly 75% of respondents indicated they would be happy to visit a showroom with social distancing measures in place, with around 25% stating they will buy when they can visit a dealership after the pandemic has passed. The remaining, marginal percentage was equally split between “buying through click and collect” and “buying online with home delivery”.
Regarding the source of enquiries, online continues to dominate with 31.4% of respondents saying they found the car they want on a website. Overall, prestige brands are those driving the largest volumes from their websites.
Following a dip last year, the importance of recommendations from friends and family are “bouncing back” post pandemic in terms of how influential they are for customers’ decisions.
Neil concluded this section demonstrating that dealer reviews are extremely important for customers with more than 80% of respondents agreeing to some extent that they would “always” read a review before making a vehicle purchase decision.
The fourth presentation of the day ended with a curious correlation between “success” and “love for driving”, with the majority of people liking to “feel successful” as much as they like driving.
Digital retailing “From forced experiment to permanent change”; Ian Plummer, Commercial Director at Auto Trader.
The fifth speaker started by illustrating how the pandemic has forced retailers to change and adapt in order to meet consumers’ demand; now, many of these changes are here to stay and can help retailers prosper.
Consumers have been wanting to be able to do most of their car buying “jobs” online for a long time, according to Auto Trader, and the current shift is presenting an opportunity for retailers. By adapting to these changes, retailers have been “future proofing” their businesses, said Ian. The future will be a blended model and if retailers manage to adapt, this new process will enable people to buy cars more frequently.
There are a number of “pain points” customers experience when they buy a car and digitalising models can help overcome these challenges. While stating that there are many jobs that can be done online, Ian recognised that there are also many emotional aspects of buying a car: consumers want a “flexible” experience. Currently, the majority of buyers are “proactive showroom visitors”, but Auto trader expects this balance to shift, creating a majority of those who will do much more online although “we still need to satisfy those preferring the physical”. As buyers would prefer to conduct around two thirds of the car buying jobs online and the biggest opportunity for retailers is to “grow through digital solutions”.
Technology, data and experience are the three key areas the best retailers are focusing on.
Three in four buyers worry that online information is not accurate; this can be damaging, especially if we consider that technology can help reduce “manual work” and contribute to creating a better buying experience.
There can be huge differences geographically in terms of consumer preferences, meaning that it is key for retailers to source the best car for a given geographic area.
Regarding customers’ experience, digital tools can help speed up the process, providing a transparent experience to consumers and increasing conversion. For instance, two in three buyers want to build their personalised finance offer online and 61% want to sort out their part exchange digitally.
Ian used US based used car retailer Carmax as a case study of a business that is leading the way in terms of optimal usage of technology and data to, ultimately, build a positive customer experience.
Mark Lavery, CEO of Cambria, was the final speaker at Driving Digital. He described the period of enormous changes the automotive industry has been facing, with technology evolving “7 years in 7 months”, the significant supply issues currently disrupting new car sales and the phenomenal growth in used car prices.
How has Cambria reacted? During the pandemic, clear and consistent messages had to be communicated to all staff and customers to reassure them. In particular, building trust with consumers has been vital for the group.
Guests had to feel “safe” when dealing with Cambria, Lavery insisted, and positive reviews demonstrated this resonated with those who interacted with the group.
“The safety of consumers and staff is the epicentre of everything that the group does”.
When lockdown 1 happened, the organisation faced a degree of rationalisation to ensure it could be leaner and more guest focused. The company’s marketing spend was reduced and partners were encouraged to work closely with dealers through the challenging times.
Cambria started to hold daily operation calls and organised biweekly podcasts to keep colleagues engaged and informed. One of the key learning from lockdown 1 was “doing the basics right”, focusing on what Mark Lavery called “good habits”: response times, follow-ups and merchandising.
He described Cambria’s “click. collect. drive” scheme which allowed customers to shop for their next vehicle “from the comfort of anywhere, anytime”. Having implemented a click & collect reserve facility in 2016, Cambria was “ready” to overcome the challenges brought by lockdown 2 and volumes continued to increase.
The group focused on producing exceptional content to complement their click and collect offering by “bringing the dealership to the consumer”. This included live car viewing videos, as well as “thank you” and personalised videos created ad-hoc for guests.
Adverts were populated with as many details as possible, high-quality imagery, humanised descriptions and used intelligent, optimised feeds to third parties. Additionally, the company trained dealers on how to maximise their stock visibility and reach through social media channels and Google My Business.
Cambria’s marketing strategy focused on a number of “new automotive marketing KPIs” including Engagement per Session (EPS), Cost per Engagement (CPE), Zero Engagement Pages (ZEP) – to identify and remove bot traffic, and Form Completion rates (FCR), which increased by 40% through UX testing and form improvements.
Echoing comments from previous speakers, Mark reiterated that the omnichannel approach “will continue” and will get “more digitalised”.
While recognising the challenges, he concluded: “If we stand together and if we stand with the NFDA, we will become stronger”.
For more information about Driving Digital, please email firstname.lastname@example.org. Next week, we will publish the video recorded sessions of the event.