As a follow up to my post Thoughts on the Automotive Industry – Do we really need dealers? where I wrote my thoughts about the role the dealers play in the automotive industry business model and wondered about a different model, I would now like to elaborate on alternatives to the franchise model as we know it. After all, if you don’t come up with a solution, you are part of the problem.
But before I do, I would like to reinforce 2 of the premises I outlined in that initial post:
1. The power of a strong brand
2. The power of an awesome product.
The alternative model I am about to outline relies on the power of an awesome product, a product that people just GOT TO HAVE. A product they would do anything to buy. Very much like the iPhone and the Apple stores.
It also relies on the power of a strong brand, a brand that draws consumers beyond the products it sells. A brand people want to be identified with, learn more about and, ultimately, become its ambassadors.
THE PROBLEM. Today’s model is inefficient, expensive and conflictive.
Dealer franchises are independent business, which eventually makes dealers from the same brand, direct competitors. While competition might be healthy, it is not if it is detrimental to the customer and to the brand.
Geographic coverage (network planning) is a delicate thing and customer (and lead) allocation to dealers become a tricky practice.
Coverage it key, so it is very important to have dealerships located at key spots. These key spots are at times very expensive ones. It is like the old marketing model, where it was all about exposure. Lots of media dollars bought more exposure on TV. We all know that is an old model and we are seeing the evolution of it to a more sophisticated, targeted and personal marketing. But, why is the dealer network approach stagnant? Why is it not evolving to the evolving customer? Coverage is only needed if you are weak and you need to buy your way into the consumer’s mind.
You could argue convenience is what drives this pursuit for full coverage, but I would counter argue 2 things:
1. Is coverage what drives sales of Apple products? I don’t think so. You want their products SO BAD that you are happy to drive anywhere just to buy them or even see them.
2. If you want to talk convenience, as a customer I want a car delivered to my doorstep (or picked up for service). Now that is convenience, not forcing me to go to a dealership.
Another problem is the actual experience at the dealership. It is well known that customers dread going to a car dealership. It is up there with “going to the dentist” on the list of least favorite places to go. So why do brands keep on wanting to draw people to their dealerships? And once there, there is no chance to learn more about the brand itself, the heritage, what it stands for. They are sterile hard selling spaces. Not pleasant…
And this network is pretty expensive to maintain. For the brand, the amount of costs in the form of sales allowances and sales persons’ commissions they have to bear makes the margin in each car tiny. Let alone the marketing materials, campaigns, media dollars, training, qualified employees, signage, stock management costs… I could go on and on…
THE SOLUTION – The way I envision it to be
If a brand is strong and its cars are awesome, the manufacturer should build, own and manage directly macro Brand Experience Centers.
These centers would be bigger than a typical dealership and would play several roles;
- Car show. All models, colors and trim levels would be in stock.
- Brand experience center. Where customers could learn more about the brand, enjoy brand content and build a stronger like towards the brand.
- Test drive centers, where all models, colors and trim levels would be available for test drives.
- Complete service points. With service bays for maintenance and repairs.
The employees at these centers would be brand enthusiasts and product experts, but not necessarily salesmen. The purchase decision is often made outside the dealership and sometimes the customer who walks into a dealership finds out he knows more about the product and its competitors from what he has gathered on the Internet than the salesperson himself.
These employees would be young, energetic, web savvy and passionate about cars and people. This profile sounds much easier to recruit…
There would be an army or drivers who would deliver and pick up a test drive car or a car due for service from and to customers’ doorstep should the customer decide to.
A customer wouldn’t need to come in for service as his car would be picked up and delivered back. I see lots of dealers investing money in a better waiting room (internet connection, vending machines, free food, Wii for the kids…). But what they don’t realize is that the customer does not want to go back to the dealership ever, let alone wait there while the car is being serviced! Instead, investing in a picking up and delivering program would be a much better experience that would build a stronger loyalty and, ultimately a better customer experience.
I envision these centers to be great looking places where people WANT to go to check out cars and brands, and there is no fear of being harassed or ripped off.
I envision these centers to be the Apple stores of the automotive industry. Why not? After all Apple is much more profitable that many car companies and that many dealers.
They must be doing something well….