A Glimpse at the Future Automotive Experience

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Here are the key trends to watch in the rapidly evolving car industry.
Customer Experience

The automotive space, along with other industries, is undergoing rapid changes due to customer behaviors and innovative technology. Consumers today have a bevy of information at their fingertips, allowing them to research products and services at their convenience while often bypassing sales associates.

Startups like Uber and Lyft are also redefining the car services industry, leading huge auto companies like General Motors and Toyota to partner with some of these young companies. As the automotive experience continues to evolve, here are the trends to watch.

This year was the first time Millennials surpassed Gen Xers in new-car purchases, reported J.D. Power and Associates. Consumers born between 1977 and 1994 accounted for 26 percent of new-vehicle sales, while those born between 1965 and 1976 accounted for 24 percent in the first half of 2014, according to the research firm. Millennial sales volume is expected to increase 17 percent by the end of the year while Gen X sales volume is estimated to grow by only 6 percent.

As the Millennial customer base grows, businesses need to be attuned to their preferences. J.D. Power's research shows that when it comes to sales and service, convenience is important for Gen Y customers. In a survey, more than half of the respondents said they would prefer to purchase a vehicle without negotiating, and 44 percent would pay for a dealer to pick up their car for repairs. Additionally, Millennials were 16 percent more comfortable with the idea of self-driving vehicles than Gen Xers or Boomers.

"As new-vehicle demand among Gen Y consumers increases, it will be important for automakers to respond to the needs of these consumers, not only in terms of the vehicle design, but also the marketing, sales, and service experience," comments Thomas King, vice president of J.D. Power's Power Information Network, in a press release.

Dealerships are adapting to the shift toward digital-first consumers by providing interactive digital showrooms and hybrid services that let customers research vehicles at their leisure and speak with a salesperson when they need more information. Lexus, for example, lets customers "build" their ideal car by selecting exterior and interior features online, find the nearest dealer that carries that car, as well as watch car documentaries and a series of branded TV shows on the L/Studio page of its website.

Audi is experimenting with digital showrooms within 16 dealerships in several countries like Germany, the U.K., and China. The digital showroom or "Audi City" lets visitors customize their automobiles and view the concepts on ceiling-high video screens. From there, customers can schedule a test drive or place an order for the car while they are in the showroom. Eventually, all Audi dealers will be able to add modules into their dealerships such as touch-sensitive kiosks for model configuration, a digital wall, and a private lounge for consultations.

Videos and interactive showrooms can get customers excited about a car and prompt them to visit a dealership, notes Kerri Wise, director of dealer insights at car-shopping site Edmunds.com. "Looking at a car online versus actually sitting in one is still a different experience but we encourage salespeople to use digital technology to connect with their customers," she says. "For example, we recommend that salespeople send a video or photos showcasing the vehicle after customers make an appointment as a reminder of what they can look forward to."

Raj Gill, vice president of automotive for the marketing firm Amobee, agrees that digital content has become the bridge between consumers and dealerships. "We know people are spending more time on different mobile devices," Gill notes, "so cross-device campaigns are a huge trend."

As an example, Gill pointed to a campaign Amobee worked on with digital ad agency Team Detroit to promote the 2014 Ford F-150 pickup truck. The goal of the campaign was to drive user engagement with the vehicle. Amobee created a mobile ad unit featuring a motion-sensitive banner that expands into a full-screen 3D creative model of the truck.

The ad, which appeared on tablets and smartphones, gave consumers 14 color options for changing the truck's exterior, a 360-degree view of the truck in four different work settings, as well as the ability to "load" the truck bed with heavy items to showcase its heavy-duty capacity. Consumers could also watch two videos in the ad that further showcase the truck's performance in work environments.

The ad was displayed for several weeks in November 2013 and it garnered more than 20 million impressions as well as a 40.4 percent increase in the purchase consideration rate. Campaigns that leverage location data and analytics to communicate with consumers at relevant times are also growing, Gill adds. "All brands, not just automotives, want to understand their audience's interests and how to create relevant experiences, so brand intelligence is the key," he says.

Additionally, the sharing economy-where consumers are being matched with providers while eliminating traditional middlemen-is upending entrenched markets, including the automotive industry. At $13 billion, the 6-year-old startup Airbnb has snagged a higher valuation than some hotel chains and Uber is valued at about $41 billion, making it worth more than Hertz and Avis combined.

But rather than miss out on new business opportunities, some firms are looking for ways to collaborate. General Motors and Toyota, for example, have struck deals with Uber to offer discounts to Uber drivers, and Lyft has partnered with MetLife Auto & Home to develop insurance policies for drivers and passengers. Mark Jenney, chief executive officer of RVShare.com, saw an opportunity to create a peer-to-peer recreational vehicle rental marketplace and partner with traditional dealerships.

On RVShare.com, owners create a profile of their vehicle by selecting their RV model, year and length, in addition to adding photos and a description of the vehicle. Renters can search RVs by location and model. Annual earnings of owners vary based on the duration of the rental periods, location, and type of RV, but estimated earnings range from $19,200 to $48,400, according to the company.

"We have leveled the playing field allowing any average Joe who owns an RV to put that RV to use and start making money with it by renting it out," says Jenney. "We've also been able to increase the inventory in the market which is great for consumers."

Founded last year, RVShare.com's marketplace includes approximately 4,000 RV listings from owners across the U.S. VC firms have reached out to the company, but Jenney says he is not accepting outside funding for now.

The company is focused on engaging and growing its user base. In addition to having company representatives contact owners to verify information about the vehicles, RVShare.com will be launching a feature that allows customers to add reviews of their rental experience, according to Jenney.

Jenney also knew it would be more beneficial to work with the RV dealers instead of competing against them. However, collaborating with traditional RV dealerships was a challenge. "In the beginning RV dealerships did not like the idea [of a peer-to-peer marketplace]," Jenney notes. "Some dealerships were scared that private owners would take away business from them."

Dealerships eventually warmed up to RVShare.com when it positioned itself as a way to close more sales. As prospective customers look over the RVs in a dealer's lot, dealers can tell them that RV owners earn revenue by renting their vehicles on RVShare.com. "This has allowed us to work in partnership with dealers so that everyone wins," Jenney notes. "Private owners can generate extra money renting their RVs when they aren't using them and dealers can sell more RVs."

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