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Julia Manoukian


June 19, 2018

Premium Automotive Brands Must Embrace Technology Before the Next Wave of Disruption

Julia Manoukian

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Sales numbers for premium automotive brands have been trending upward despite technological disruption claiming scores of well-known brands in other industries. The intensified focus on improving the customer experience has played right into the strengths of luxury brands so far. In 2018, Jaguar, Land Rover, and Porsche have all enjoyed modest but respectable revenue boosts.

However, in all the media coverage about how disruption redefines mature industries, one factor that no one seems to be talking about is that brand premiums themselves have to change in the face of evolving customer expectations.

The Fractured Experience at Mercedes

What that means for luxury brands in the automotive industry is that hard-won reputations for quality in engineering won’t matter so much in the future. One of the first automotive brands to realize this subtle signs of changing priorities was Mercedes-Benz, which shifted gears in its branding from engineering excellence to enhanced software and a better customer journey.

Discussing the disjointed experience as customers drifted between platforms, Thomas Seibert, lead digital architect for Mercedes-Benz, said, “It was a clearly broken customer journey and on top of that we didn’t gain any coherent knowledge of the customer or their intentions.”

They found success by aligning the buying experience with the driving experience. For premium automotive brands to retain their differentiation status, they will need to pay closer attention to what’s going on inside the customer’s head. Fortunately, technology not only is creating the problem but offering solutions to address it at the same time.

From the Frame to the Brain

A report on digital disruption in auto industry by Morgan Stanley concluded that the perceived value of a vehicle from the customer’s perspective is rapidly shifting from traditional performance metrics to the driving experience.

Connectivity, predictive analytics, identity recognition, immersive entertainment systems, augmented reality heads up displays, and AI may all be as essential as wheels for the car of the future. Today, internal software only accounts for about 10 percent of a car’s perceived value, but by 2022 that percentage is expected to rise to 60 percent.

Along the same lines, a closer look into digital’s role in car sales by Bain & Co reported that:

  • Half of all car buyers began their search online, and that number is growing
  • Buyers typically switch from online to offline channels 4 times, and they expect a consistent experience wherever they go
  • 40 percent of car buyers turn to friends and family as their most trusted influencers

Their recommendations were that dealers win when they adapt to new purchase pathways, strengthen customer relationships in social networks, build their analytic capabilities, and employ more experiential marketing techniques.

Mass Personalization and VR

As personalization tech grows more prevalent in every industry, customers have come to expect intelligent and relevant messaging, especially from premium auto brands. Almost 77 percent of car buyers prefer brands that connect with them on a more personal level. They recommend these preferred brands more often within their social networks and are more likely to stay loyal.

Personalization is also a way for luxury brands to expand into new markets because more than half of car buyers (54 percent) said they would rather make a purchase from a dealer who offers a superior experience than the one who offers the best price.

For brands like Lexus and Cadillac, virtual reality is proving to be one to the keys to driving that kind of superior experience. Todd Lewis, events marketing strategist at Lexus, explained, “Lexus and Team One took the Virtual Showroom on the road to support dealer launches, create interest at events and inspire preorders.”

Emerging Competition from Tech Firms

The danger in idling while technological changes sweep the industry is that software companies, from Apple to Google to Qualcomm, are building the infrastructure to take business away from automakers. As self-driving and connected cars become common, buyers may feel more comfortable trusting a brand that has shown it understands how to make software than one that understands gas engines.

AT Kearney’s investigation into auto sales beyond 2025 revealed that 45 percent of car owners say they would consider switching brands to a car made by a tech company. In the next few years, you can expect to see 35 million new vehicles purchased online only, opening up around $105 billion to be claimed by either forward-looking existing players or new entrants.

Tesla represents one of this new breed that straddles the line between vehicle manufacturing and the tech industry, as it expands beyond luxury cars to the consumer market and truck manufacturing.

Insights for the Road

The takeaway is that even as premium automotive brands today enjoy the fruits of a more choosey, experience-minded consumer, technology is redefining brand value from the ground up.

Car buyers are switching lanes to a definition of driving that incorporates connectivity and digital experiences. This opens up the industry to new competitors from other industries who have a better grasp of the underlying technology car buyers want. Experiential marketing, personalization, and data analytics are the best tools traditional luxury brands have in staying current with what matters to customers now.

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