A new beginning for automotive?

I’ve spent the last few weeks looking around for a new car.

This is actually quite difficult for me as I’m one of those people who makes snap decisions and if I walk into a dealership I’ll walk out with a car. 

So knowing that, I’ve been researching cars online and it has been an eye-opening experience just how bad and how backward the automotive industry is.

The problem is that my expectations have been set by other industries.  If I was looking for training shoes I could completely personalise them from style to colour and have these custom manufactured and delivered to my home.  If I was buying music I could order the CD, download the track or listen to it on demand.  If I was buying a book I could order it online, preview it online or download it immediately to my e-reader. 

So why is it when I start looking for a car the experience is so different.  Here’s what I’m trying to do - I want to design the car I like, then price it, then work out ways to finance it and then I want to know if they have a used model with same spec.  I want to compare the car with a loan, with Personal Contract Plan, with difference deposits.  When I get stuck, I’d like to ask someone a question – no strings attached – and get an honest and accurate answer.

In short – when buying anything, I want to play with all the options, in real time, in my time and online.

The first hurdle though is just finding information on it.  Take Mazda for example - on their website I can request a brochure, find my dealer and arrange a test drive.  All very last century.  Oh, and I can see some glossy photographs (and download a wall paper) and a view videos.  What I can’t do is build my own car and have it priced. (So that's the RX-8 out!)

Then I want to understand how much it costs.  Now I could only find Audi willing to show me finance options online – everyone else wants me to speak to the finance team at the dealer.  Not even my bank expects me to have to go into a branch these days.  In fact I don’t have a bank branch, I don’t have a post office and I don’t want a dealer – I just want answers and I want them at 11pm on a Saturday night.

When I want to ask questions there are few options available as you basically have to go through dealers and that can be experience in itself. 

I sent emails to 4 different dealers asking for finance options on a number of different cars.  Honda was the only one to come back to me quickly and accurately.  Two different Audi dealers either failed to respond at all, or responded to only part of my query and incorrectly (so no TT!). 

In one email where I had explicitly said that I didn’t want to chat on the phone and to only communicate via email, I was surprised when within seconds my phone rang with a salesman on the line.  Top marks for being on the ball - but they completely failed to deal with me on the channel I wanted.  If I’d wanted to speak on the phone, I’d have picked up the phone.

So is it me – am I expecting too much?  Well it seems not as Wired.com recently had an article discussing this exact issue.  They put it succinctly when they said

“in the age of Amazon, it seems almost quaint that there’s no way for you to choose your options for a new car on a manufacturer’s site and push a “buy” button”

Some of the issues are the way that the automotive sales channel is structured.  Car manufactures in many cases cannot sell direct to consumers and individual dealers don’t have resources to create the online experience required. 

However, another issue is how the sales staff are remunerated.  As many of them are bonused, anything which might take away sales - such as online purchases  - or might not result in immediate sales - such as an email question - doesn’t get priority.

In fact when the salesman who rang me found out that I didn’t want to setup an appointment that weekend, he basically just put the phone down – so there’s another one off my list.

This culture wasn’t just limited to automotive, but other industries have seen the writing on the wall and are changing.

Both Carphone Warehouse and Comet have recently announced changes to how sales staff are compensated so that there is less focus on the sale and more focus on the customer.  When trialled by Carphone Warehouse, contrary to expectation, staff retention actually went up and the trial has been deemed a success. 

Staff are now rewarded not on sales but on net promoter score post sale – essentially on how the customer found the whole process and whether they would recommend them to someone else. 

It is reported that promoters are nearly 10 times more likely than detractors to repurchase or lease a vehicle of the same make or brand as their current one.

Given the recent reports on customer expectations for service overall and their willingness to drop any brand not meeting them and the strong link between customer experience and loyalty, this is not an area any industry can afford to underperform in – especially one in such dire straits as automotive.

On the upside, it is expected that as automotive companies emerge from this crisis, especially in the US there could be be changes to the buying processing.  Craig Cather, CEO of forecasting firm CSM Worldwide says "A lot of new business models could emerge,  we could see some crazy things in the next few years."

In the article in Wired, they put forth their vision for an automotive customer experience saying:-

“What would a car industry without dealerships look like? In our dreams, they’d be a lean network of showrooms offering hands-on experience with a range of vehicles from a variety of manufacturers and help from salaried employees who won’t lose a commission if you walk.”

That sounds like a vision I’d like and if they could just integrate the offline with the online I may actually enjoy looking for a new car. 

Until then I will continue to be underwhelmed by the search, uncomfortable with the negotiation and ultimately feel like I’ve been ripped off when I actually own it – but I’m happy to be proved wrong.

The Game of Life

Guess a number between 1 and 100…

5? 37? 56? 82?

I’ve no idea what you’ll have selected but I can guess it will be pretty random so lets change the rules a little.

What if I ask everyone reading this blog to guess a number between 1 and 100, but the person who’s guess is closest to two-thirds of the average value selected by everyone else wins £100.

Now what number have you chosen…

Well to save you time, it can’t be over 66 (2/3 of 100 = 66.6)- but then if everyone works that out we have a problem as no one will guess more than 66. So do you assume that everyone gets it and go for two-thirds of 66, which is 44? But then you might not be the only one thinking this way…

Interestingly it seems that for most normal people the average value comes out around 22 and indeed in one test run by Danish newspaper Politiken, over 19,000 people took part and the winning value was 21.6 with the prize of 5000 Kroner.

What’s interesting about this is that with a reasonable incentive ($1000) people actually thought about how to achieve this reward by working out what other people would be thinking.

They essentially came up with a strategy to win and changed their behaviour to follow it.

This is known as the “Two-Thirds Game” and is just one example of Gaming Theory (and there are lots of other games too).

It shows that with an element of competition and an incentive you can begin to direct behaviour. Games like Dollar Auction also show how people will actually take a course of action which seems irrational just to not lose the game (or the most money).

This isn’t just about games or mathematics - this approach can actually be used in the real world to change peoples behaviour

A great example of this was in an article on Wired.com which discussed how using gaming elements could change or encourage behaviour. In one example a developer launched a social networking application called “foursquare” which allowed people to track places they visited and publish these to friends. The application awarded points for visiting the same place multiple times in a day and badges for roaming far from home, with a leader board to provide an element competition. The result - he says “We created a monster here”, people were racking up points and checking in dozens of times a day.

And its not just for entertainment. The classic loyalty example of the frequent flyer programme which had people making return flights for no other reason than to achieve the required points to reach a tier upgrade shows the lengths people will go to to reach a goal and gain a reward.

We’ve been doing this for years one way or another within channel and employee programmes, using league tables and comparisons to create competition between participants.

A more tangible and better design example however is that used by LTSB for an internal employee ideas programme. As I’ve discussed previously, this programme known as the Innovation Market creates a game out of ideas, using a currency and a stock market type environment. As James Gardner, Head of Innovation and Research at LTSB says “we coupled ideation and innovation together in a way that's fun. It was an interesting revelation to us”.

An example of a loyalty programme using gaming is that run by Ladbrokes, a offline/online betting company in the UK with its OddsOn! programme. Within this scheme customers earn points for every £1 of money staked but can then redeem these points for bonus vouchers which can increase the winnings of any bet by 5%-20%. In essence these vouchers are acting as wild cards, letting punters change the odds in their favour. How and when they use this voucher will differ by customer, but it changes the rules and allows the loyalty programme to actually become part of the game.

At a recent O'Reilly Emerging Technology Conference, Jane McGonigal, a well known game designer and researcher said

"Games create drama and excitement - we've done that for years with videogames, and now we can apply that thinking to the rest of life."

I have to say I agree with Jane and think that applying the gaming approach specifically to loyalty programme design could have dramatic effects on engagement and activity.

There is no denying that at a basic level, the loyalty programme itself could be viewed as a game, with rewards for certain activities and features such as tiering to encourage customers to “play the game”. Indeed, some programmes include features such as progress charts – showing a participants distance from the next reward.

Whilst these features can all be somewhat motivating to the individual, it’s not going to unlock the competitive streak you’d see if your friend was getting there quicker.

Indeed, as social media expands into more mainstream loyalty programmes, this opens up the possibility and acceptability of peer-to-peer comparison and the naturally competitive nature this will engender if the right types of gaming elements can be created.

I think using gaming to motivate and change customer behaviour is an interesting concept and applying it within the context of a loyalty programme could be, quite literally - game changing.

Why do (some) loyalty marketers throw out the rule book?

Traditional promotional marketing tends to use a combination of activities which includes "push" based techniques - whereby trade based promotions are utilised to encourage wholesalers and retailers to stock a product - as well as “pull” based techniques which use more above the line methods and consumer promotions to create demand.

When done right the combination of "pull" and "push" techniques can work very well to ensure the product is in the retailer for the consumer and that consumers are buying the product from the retailer.

Given that most marketers understand this it raises the question as to why so many loyalty programmes seem to throw the rules out of the window. Whether it's channel loyalty programmes that are used to reward intermediaries, employee incentive programmes rewarding sales, or consumer loyalty programmes rewarding purchasers - very rarely are these combined to maximise the effect.

I was quite pleased then when attending Loyalty World this year to actually see someone who is actively doing this. The new programme for GHD (blessed) is a very clever loyalty programme which essentially engages their sales channel (salons) in the programme (the “push”) along with engaging consumers through their online activities (the “pull”). Although the roll out is only small at the moment, the programme has a number of design features which make it very interesting.

GHD want customers to purchase their products which are stocked by salons and the salons would like repeat custom. By creating a programme which works for and incentivises both, it helps to ensure the programme is well promoted by the salon and the consumer is keen to take part. Key design characteristics such as surprise and delight mailings - which the consumer is notified about but has to pickup in-store - help to ensure that this symbiotic relationship continues to thrive.

However the real success is that - because it's one programme - the push and the pull work together, so the salon feels like consumers are genuinely interested and the consumer feels like the retailer is genuinely engaged – moving the conversation from selling to that holy grail of marketing... personal recommendation