The Future of Automotive: Redefining Loyalty and Driving Sustainability

The automotive sector is experiencing a seismic shift. Standing alongside ‘older’ legacy customers are consumers who expect an exceptional experience every time and won’t hesitate to look elsewhere if those demands aren’t met.

Traditional automakers and tech giants, coupled with the rise of Mobility-as-a-Service (MaaS), represent significant and unrelenting competition. Throw in factors like macroeconomic shifts, the electric vehicle (EV) revolution, and rapidly evolving industry trends like AI and IoT, and you have a sector that presents formidable challenges. Your future in it depends on your ability to adapt, innovate and connect with a consumer base whose wishes and demands are ever-changing.

So what steps are you taking to stand out, stay ahead, and attract and retain customers to achieve success?

This was the question posed to a number of of the automotive industry’s most disruptive leaders at a private breakfast roundtable on the morning of November 22. Hosted by Perficient at an iconic venue, The Club at The Ivy, a panel of the sector’s leading experts discussed ways of decoding the next generation’s mindset and pushing CX boundaries throughout the automotive lifecycle; new approaches to customer acquisition, sales conversion and sustainability; and much more.

Leading the conversation around the tables that morning was Keith Tomatore, Global Automotive Industry Lead at Perficient. Joining him were:

• Mark Felix, Chief Commercial Officer and Group Chief Marketing Officer at The AA
• Martin Taverner, CTO HCL Commerce Cloud EMEA at HCLSoftware

Here is a summary of some of the morning’s key topics:

The Loyalty Dilemma

Keith opened the discussion by pointing out that the automotive industry is witnessing a shift in the objectives of Original Equipment Manufacturers (OEMs) toward fostering stronger customer connections amidst technological transformation. With 50% of automotive consumers being millennials, there’s been a distinct mindset shift. The relevance of loyalty in this dynamic market raises a crucial question: Does loyalty pertain to the brand itself —and is the concept of loyalty even relevant in today’s market?

To address the loyalty dilemma, automotive companies must formulate comprehensive strategies that go beyond conventional approaches. Rather than focusing solely on product features, the emphasis should be on creating holistic customer experiences. Loyalty programmes, personalised services, and transparent communication channels are instrumental in fostering lasting relationships with customers.

Contemporary consumers define loyalty in a nuanced manner. It transcends mere transactional relationships and involves a deep connection based on shared values and experiences. For electric vehicles (EVs), this means not only addressing functional aspects like range and charging infrastructure, but also emphasising environmental sustainability and aligning with the values of socially conscious consumers.

Mark stated that traditional loyalty models, which offered modest returns over time, are being replaced by an instant-gratification approach from retail giants like Tesco, Boots and Sainsbury's. The AA faces the challenge of aligning club membership and car purchase with the demand for swift rewards. Apathy in loyalty programmes necessitates a more considered approach for instant gratification, which could prove critical in the automotive space.

Adapting to the Future and Embracing Technology

Innovation is crucial for automotive sector success, extending beyond product development to reshape the entire customer journey. This includes integrating AI and IoT to enhance user experiences, predict maintenance needs, and provide real-time insights.

The future of the automotive industry relies on adapting to evolving consumer preferences and industry dynamics, with data playing a pivotal role. Martin highlighted challenges related to privacy and data sharing, shaped by legislation like GDPR and cookie laws. Extracting meaningful insights from the substantial data produced by vehicles, especially EVs, requires consent and poses a significant challenge.

Retailers are increasingly turning to AI and machine learning to gain real-time insights by interpreting patterns in anonymous data. This shift from storing personal preferences to analysing streaming data allows for more targeted suggestions. Martin emphasised that the automotive industry can draw valuable insights from these practices in the retail sector.

Staying relevant means understanding the desires of the next generation—prioritising sustainability, embracing technology, and valuing seamless mobility. OEMs must align with these values by developing EVs and incorporating advanced technologies like autonomous driving. AI can enhance predictive maintenance, personalise in-car experiences, and improve safety. Advances in battery technology, such as solid-state batteries, address concerns about the range and charging speed of electric vehicles.

Optimising the Customer Journey

Keith expanded on how OEM-dealer collaboration raises concerns among dealers, particularly regarding potential exclusion. Dealers fear that OEMs may prioritise direct subscriptions and online sales, reducing dealers to service providers, especially for software updates. In the US, Chrysler’s experiment with online vehicle ordering at seven dealerships, and Nissan’s similar approach, exemplify this shift.

Virtual test drives—allowing potential customers to experience a vehicle from home—are a technological advancement expected to differentiate brands and accelerate conversions. Despite initial apprehensions, Keith said the direct-to-customer (DTC) model is inevitable due to consumer demand, and that OEMs will likely find ways to collaborate with dealers.

Martin spoke about the transformation of OEM-consumer relationships in the automotive industry, shifting from traditional point-of-purchase interactions at dealerships to a more digital approach. The contemporary customer journey starts online, encompassing web searches and visits to manufacturer websites, and extending beyond the sale to subscriptions, warranties, maintenance, and considerations for remanufacturing and sustainability.

The surge in subscription-based models signifies a departure from traditional ownership structures. Driven by the desire for personalisation and convenience, subscribers access a variety of vehicles and services based on individual needs. The subscription model’s allure lies in seamless software updates, keeping vehicles technologically current without physical interventions. As car brands embrace this approach, the subscription model represents a strategic pivot toward a more dynamic and service-oriented paradigm in the automotive industry.

Embracing Sustainability

Sustainability is now a fundamental consideration for environmentally conscious consumers. However, Mark noted that its importance varies among customers, with some prioritising it while others focus on pricing. Balancing sustainability and cost pose a challenge, as evidenced by a relatively small segment willing to pay a premium for eco-friendly practices. Price and convenience continue to dominate consumer decisions.

Aligning sustainability initiatives with customer expectations is delicate, reiterating the crucial factors of perceived value and pricing fairness. For most, value remains paramount, requiring that environmental considerations be integrated without compromising affordability. The challenge lies in finding the sweet spot where customers feel good about contributing to sustainability without exceeding their perceived fair pricing. The AA, for example, underscores the environmental impact of maintaining existing vehicles, promoting sustainability through longevity.

Martin suggested that while sustainability is crucial for EVs, their carbon footprint may not be as favourable as believed. Despite this, a comprehensive approach manages sustainability in the supply chain, emphasising reusable components in car design. This introduces challenges for OEMs, dealers, and potential aftermarket solutions.

Lifecycle management extends from production to remanufacturing, prompting considerations on refurbishing and repurposing EVs. The industry push in this direction is evident, aiming to treat used cars as new for resale, contributing to sustainability. Experimentation with repurposing strategies in other sectors, such as clothing retailers like Superdry and Selfridges, suggests the EV sector will also evolve to maintain its sustainability credentials.

Overall, the automotive industry can redefine mobility through advanced technologies. EVs, alongside autonomous driving and connected mobility solutions, contribute to a holistic and futuristic approach. OEMs should position themselves as contributors to a broad, sustainable and interconnected mobility ecosystem, emphasising integrated and efficient transportation solutions over individual vehicle ownership.

• Perficient is a global digital consultancy with thousands of skilled strategists and technologists in the U.S., Latin America, and India. It’s making a difference by transforming how the world’s biggest brands connect with customers and grow their business. With Perficient, you get experience and expertise, speed and agility, and a healthy dose of pragmatism to drive your business forward.
• Founded in 1905, The AA provides vehicle insurance, driving lessons, breakdown cover, loans, motoring advice, road maps and other services. It has been a public limited company since 2014. In 2002 the AA Motoring Trust was created to continue its public interest and road safety activities.
• HCLSoftware, a division of HCLTech, develops, markets, sells, and supports software for AI and Automation, Data, Analytics and Insights, Digital Transformation, and Enterprise Security. HCLSoftware is the cloud-native solution factory for enterprise software and powers millions of apps at more than 20,000 organizations, including more than half of the Fortune 1000 and Global 2000 companies.