The COVID-19 pandemic is a brutal reminder that black swan events are real and capable of dramatically altering the course of businesses and industries. In the wake of the current pandemic, the globally integrated automotive industry seems especially vulnerable and exposed and, is expected to have a deep economic impact in the coming quarters. However, the automotive supply chains will adapt quickly as evinced by China, which is coming back on track faster than normal. Discussions with supply chain professionals indicate that due to already low capacity utilization and availability of enough unsold buffer stock, most companies have the wherewithal to ride out the immediate crisis.
While most companies instinctively and immediately focus on supply constraints, many fail to see this as a demand issue, wherein customers are going to be impacted in ways that are yet indeterminate. For that, it is imperative to understand how consumer psyche will evolve as a result of the pandemic.
As economies emerge economically and emotionally from COVID-19, it will not be business as usual. Consumer confidence will be severely impacted due to imminent job losses and pay cuts, thus forcing many to postpone discretionary purchases like buying a vehicle. According to a WSJ article, consumer confidence is shattered globally – not many people would even want to think about buying a vehicle, right after the pandemic passes.
While in China we see that extreme monetary inducements by all key stakeholders across the automotive value chain (right from OEM’s, financiers, dealers to the government) seem to work – bringing customers back to showrooms, it appears that they are primarily for lease replacements, buying cheaper variants of expensive models or buying vehicles to avoid public transportation (recent poll by IPSOS in China indicates a 22% increase in propensity to use personal cars, and an even larger 32% reduction in the propensity to use public transportation due to social distancing norms).
Living up to consumer expectations
One thing we do know is that consumers in the post-COVID world will be different – think differently and act differently. In the coming quarters, customer behavior will continue to evolve, and OEMs will have to innovate to identify customer needs and address them. We see four major shifts that will either be new or will give impetus to already existing albeit slowly evolving trends.
Values-driven vs Value-seeking: With unpredictability looming large, consumers will find comfort and direction in brands with values they can relate to. In the post-COVID world, consumers will be more risk-averse. They will gravitate towards known brands that are safe buys. Trailing OEM’s have no other option but to counter this by providing a richer customer experience, highlighted by the personal touch and superior brand promise.
Automakers globally will realize the power and the necessity of focusing on their brand values, over regular sales promotions and discount tactics. It will also get increasingly important for global auto OEMs to invest in making their brands relevant to the local diaspora to cater to native sensibilities. This will be a key differentiating factor for OEMs in the run-up to restoring demand to recover from this crisis, as consumers switch sides from being value-driven to values-driven.
Digital Connect vs Conventional Selling: In the new normal, OEMs and dealers will be forced to enhance customer connect increasingly through new-age digital offerings such as virtual tours, negotiations over video calls, and no-contact car buying experiences, complete with the delivery of a sanitized automobile at the customer’s home, and the keys right at the doorstep delivered via a drone! Identifying and pre-empting innovative new-age solutions for pivotal customer events can act as magnets that align the business with its customers and their newfound choices.
Influence-driven vs. affluence-driven: COVID-19 will undoubtedly leave behind a transformed industry. And in the new environment, OEMs will need to be sensitive to evolving consumer behaviors as they shift rapidly from being “affluence-driven” to being “influence-led”. Consumers are likely to seek healthier experiences with a preference for hyper-personalization of their demands.
Health-related features like hygienic air filters, co-rider separation shields, mobile in-car offices, anti-bacterial materials, and such others will garner a lot more pull among consumers. Most consumers are already hyperconnected and socially influenced and will tend to build their expectations on their social media exposures. To address the new demands, OEMs will have to necessitate fundamental design changes and pricing tweaks, highlighted by omnichannel superior customer experience and customized product solutions.
Advocacy vs advertisement: When the COVID-19 cloud clears, consumers will be inundated with brand advertisements and deal information, all aiming to capture consumers’ mind share. The onslaught of advertisements and information will clutter the consumers’ minds and create chaos of options. As a natural reaction, they will move towards being elusive and even indifferent and will take to blocking these messages.
OEMs need to think ahead, and steer clear of independent product campaigns and focus on building overall brand advocacy. The idea should be to create brand advocates and to supercharge word-of-mouth. Rapid scale-up of advocates will be key for new successful launches. In the coming quarters, as OEMs prepare to respond to and recover from the pandemic, advocacy will be the most powerful instrument to seek customer attention and ensure sustenance and memorability of a product/service.
As they say, we cannot change the direction of the wind, but we can adjust our sails. We are undoubtedly in the middle of tough times and it is important for auto OEMs to make the right moves to rise above the clutter. The good news is that beyond all the noise and speculation, there is visible opportunity albeit in a transformed demand landscape.
To respond optimally, OEMs must begin developing immersive and memorable experiences to engage advocates, who in turn will create a lasting impact on potential consumers. And OEMs must create engaging brand experiences for advocates to know and understand the products first-hand, in a safe and sanitized environment. Poor experiences will make already reluctant consumers and intenders abandon the brand completely. And to reacquire them will at least be seven times more expensive than retaining them.
The COVID-19 pandemic will clearly have a significant impact on the customers, but the extent of this will be clear only when the situation stabilizes. The only thing certain in the coming months is that demand will not continue to be in a slump in the longer-term. And when it begins reviving, consumers and their choices will be influencing products and services like never before. OEMs should be ready then with timely advocacy, hyper-personalized product variants and superlative omnichannel consumer experiences to translate the improving demand landscape into higher revenues and margins.
Authors: Ram Kidambi, Partner, Kearney, Shipra Biswas Bhattacharyya, Principal, Kearney and Rahul Mishra, Principal, Kearney
Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or its employees.
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