Digital Garage GET READY FOR THE DIGITAL RIDE

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Digital Garage GET READY FOR THE DIGITAL RIDE The Boston Consulting Group (BCG) is a global management consulting firm and the world s leading advisor on business strategy. We partner with clients from
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Digital Garage GET READY FOR THE DIGITAL RIDE The Boston Consulting Group (BCG) is a global management consulting firm and the world s leading advisor on business strategy. We partner with clients from the private, public and not-forprofit sectors in all regions to identify their highest-value opportunities, address their most critical challenges and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations and secure lasting results. Founded in 1963, BCG is a private company with 85 offices in 48 countries. For more information, please visit bcg.com. GirnarSoft, the parent company of CarDekho.com, is a leading auto-technology company catering to the entire auto ecosystem. It is the #1 destination for auto research and lead generation/ management in India with monthly page views of over 100 mn (across CarDekho.com, Gaadi.com and ZigWheels.com) and more than 30 mn visitors. CarDekho.com has been voted the website of the year in the automotive category for 5 years. GirnarSoft has partnered with leading auto Original Equipment Manufacturers (OEMs), financial institutions, and over 5000 new and used auto dealers to enable seamless access across auto research, comparison, finance, transaction, and ownership. In 2015, GirnarSoft went international under the brand name CarBay, covering various countries in South Asia. GirnarSoft is backed by leading investors including Sequoia Capital, Tybourne Capital, Hillhouse Capital, HDFC Bank, Google Capital, Times Internet and Mr. Ratan Tata. For more details, please visit or DIGITAL GARAGE GET READY FOR THE DIGITAL RIDE SHARAD VERMA KANIKA SANGHI NALIN KAPOOR VIBHOR SAHARE SHOBHIT MATHUR February 2017 The Boston Consulting Group CarDekho.com 2 Digital Garage Contents DIGITAL transforming Indian consumers 6 influencing car buying 8 shifting gears in car purchase 10 changing the game for industry players 18 The Boston Consulting Group CarDekho.com 3 EXECUTIVE SUMMARY India is seeing a digital transformation. This is happening at breakneck pace owing to the technological advancements in mobile gadgets and the proliferation of wireless data networks. Ease of access to the internet has led to a significant increase in the digital consumer base, pervading even through older age groups, rural areas and smaller cities. The prevalence of digital platforms in the automotive industry is far stronger. As per a 2016 consumer survey, three out of four car buyers carry out research online prior to purchase and 43 percent have already decided on the brand before they make their first visit to a dealership. Third-party aggregator websites particularly have seen a significant growth in traffic. They have grown at an annual rate of more than 50 percent, most of it being on mobile phones. These third-party sites provide a plethora of information in a very concise manner across various brands, cars and models. Five broad themes emerge as we look at the influence of digital channels on car purchase. The first major difference in digital usage is observed between a first-time car buyer and a repeat buyer. The next is the difference in usage based on the digital age of the customer. Consumers thereby can be classified into four archetypes based on these factors, namely the experienced, the open-minded, the evolving, and the traditional buyer. Based on the archetype, there are significant differences in the level of digital engagement and the nature of the role played by dealers. Contrasting Digital Journeys 55 percent of all digital journeys are short, where the consumer spends a total of 25 minutes over seven weeks online. The focus of research in such journeys is more on revalidating. As against this, 24 percent of journeys are involved, where the consumer spends 2 hours over 15 weeks. These consumers do plenty of research online including that on variants. Evolving Expectations of Customers The consumer outlook towards the car buying process is constantly advancing. Increased exposure to novel features in other industries is causing a parallel evolution in the customer expectation of both online and offline car purchase channels. They are looking for greater ease, increased customisation and a considerably seamless experience. Currently, a majority of the new car purchasers are not satisfied with the amount of time spent during the various stages of buying a new car. Same Destination, But Different Paths Think Micro-Markets, Not Cities Significant differences in digital engagement levels exist across micro-markets within a city. Contrasting behaviour is noticeable even amidst areas with the same affluence levels in a city, driven by differences in the socio-cultural profile of residents in the area. This calls for a geo-local marketing approach across micro-markets within a city. 4 Digital Garage New Car Models Need to Win Digitally New car models see a disproportionately large share in digital traffic, although they account for a significantly lower percentage of market share. Similarly, new car segments such as utility vehicles command very high share in online traffic. This highlights the importance of digital as a channel to connect with consumers for such cars. These themes are discussed in more depth in the report. In this context, there is a need for OEMs to remodel their strategies. There are six key implications for them. First, they need to enhance their digital platforms, keeping in mind the growing digital influence and the evolving customer expectations. Online activities like price comparisons and deals and discounts, which are offered by third-party sites, need to be incorporated in a customised manner. They also need to provide seamless access on mobile phones. Second, it is crucial to offer an effortless personalised experience as consumers are increasingly straddling both online and offline channels. The Customer Relationship Management (CRM) system can efficiently integrate the online-offline experience by generating a complete picture of every customer. Third, digital solutions can also be used to smoothen the financing process. Online data can be used to find consumers who are eligible for a pre-approved loan, thereby speeding up the entire procedure. Further digital-based strategies like online service scheduling and maintenance can be offered. Fourth, there is a need to effectively leverage the abundance of digital data which is getting created, in order to develop targeted marketing strategies. OEMs need to consolidate consumer data across different databases and run rich analytics on it to derive actionable insights. Fifth, OEMs need to re-imagine the retail space. The role played by dealerships is changing, thereby creating a need to develop novel formats which can be more asset light and digital intensive. Multiple global players have already started experimenting in this regard. Sixth, there is a need to go very micro while coming up with marketing strategies for a city. This is owing to the sizeable differences seen within the micro-market profiles of various cities. By efficiently leveraging the extensive amounts of data available for a city such as affluence levels, sales potential, online engagement etc., unique profiles can be constructed for each micro-market. Based on the micro-market profile, a different combination of digital and offline marketing techniques can be used for different micro-markets within the same city. Digital is opening up a whole new set of opportunities for the OEMs. It is time that they revamp and stay in the game. If they don t, they could become disconnected from the modern-day consumer. This report is focused on strategies that can be undertaken to reach the evolving digital customer, by discussing the why, the what and the how of digital transformation in the automotive sector. The Boston Consulting Group CarDekho.com 5 DIGITAL: TRANSFORMING INDIAN CONSUMERS The digital revolution is now! India, 1.3 billion strong, is on the cusp of this revolution. Omnipresent mobile handsets and wireless data networks have significantly changed the common man s lifestyle. The number of internet users is expected to reach 650 million by 2020 from 330 million in Along with this growth, the profile of internet users is likely to change significantly. The number of rural internet users is expected to expand around 2.5 times by 2020 from the current 125 million. Internet consumption is also moving beyond the younger age groups. By 2020, more than one third of internet users are expected to be 35 years or older. Digital is increasingly becoming a central part of how people make choices around products and services. Consumers are gradually using more digital channels in their research and purchase processes. While one third of the urban population go online before deciding on what products or services to buy, around one fourth of them, make the final purchase online. These ratios are only expected to go up drastically in the next few years. By 2020, almost half of the urban population is estimated to engage in online activities before purchase, followed by almost one third of the urban population making the final product or service purchase online. (See Exhibit 1) EXHIBIT 1 Half of the Consumers have Access to Internet, While One-Third of the Consumers are Looking up Online Before Purchase % of urban consumers 75%-80% % 50%-55% 23% 30% 23% 35%-40% 9% 3% Digital Footprint Digital Influence Digital Buyers Digital footprint Percentage consumers who had access to internet in the last 3 months; Digital Influence Percentage consumers who used internet during purchase process for any product/service; Digital buyers Percentage consumers who purchased anything online. Urban population above 18 years considered. Sources: BCG CCI Digital Influence Study 2013 and 2016, BCG analysis. 6 Digital Garage The Boston Consulting Group CarDekho.com 7 DIGITAL: INFLUENCING CAR BUYING In recent years, digital platforms have become central to the process of purchasing new cars. A study from 2016 has revealed some staggering numbers regarding digital users. Around 76 percent of the consumers researched online before purchasing a new car, with around 43 percent making their final decision on the model even before their first visit to a dealership. Approximately 42 percent of all car buyers consider the internet as the primary source of information for researching and short-listing cars. (See Exhibit 2) A majority of this research is being carried out at auto aggregator websites. Over the past 2 years, the total traffic on auto aggregator websites has been twice that of all OEM websites put together. Standard for- EXHIBIT 2 Three out of Four New Car Buyers Research Online Before Purchasing a Car 3 out of 4 new car buyers research online before purchase ~43% of buyers are decided on the model before the first dealership visit ~42% buyers consider internet as the most important source of information for shortlisting cars % of respondents % of respondents % of respondents 76% Used digital 43% I had finalised the car I wanted to buy 42% 32% Internet Own past experience 47% I had shortlisted 2-3 cars 13% Friends and Family 24% Did not use digital 10% I had not shortlisted any car, had just started looking for cars 12% 1% Dealership Showroom Other Source: Consumer survey conducted in November 2016 (n = 1,200). 8 Digital Garage mats for information across models, availability of information on prices, easy comparisons etc., add to the popularity of aggregator websites. Mobile phones have become the primary device to access internet for consumers. The proportion of internet users who use mobile phones as the primary internet device has increased from 76 percent in 2013 to 91 percent currently. This trend is noticed across all categories of cities and consumer segments, enabling buyers to access an abundance of information with a few taps of their fingertips. The same trend is visible in the research process for new cars as well. Desktop traffic has seen a 3 percent growth in the number of online portal sessions, whereas mobile traffic has grown at 150 percent y-o-y. (See Exhibit 3) EXHIBIT 3 ~50% Annual Growth in Sessions on Auto Portals in the Last Four Years; Mobile Contributing to Majority of this Growth Sessions (million) Sessions (million) Steady growth observed in the traffic visiting the auto portals 51% Desktop users have remained stable +3% FY13 FY14 FY15 FY FY13 FY14 FY15 FY16 traffic from mobile has grown at 151% CAGR Sessions (million) +151% FY13 FY14 FY15 FY16 Sources: Website, Mobile site, Mobile App traffic on CarDekho.com. The Boston Consulting Group CarDekho.com 9 DIGITAL: SHIFTING GEARS IN CAR PURCHASE As we look at the evolution of digital in the consumer s car purchase journey, we observe five key trends. Same Destination, But Different Paths Consumers follow different paths in order to purchase their car with varying levels of digital influence along the journey. There are two primary factors which determine the level of digital influence in the journey. First, if the customer is a first-time buyer versus a repeat buyer. A repeat buyer, given his previous experience, is more comfortable with the process as compared to a first car purchaser, who tends to be more cautious in his approach. A repeat buyer is much more likely to leverage digital actively as a source of influence. The second factor is the digital age of the consumer. Digital age implies the number of years for which the buyer has been an internet user. In our work, we have observed that digital age and not any of the other demographics such as age, income etc. is the primary determinant of the intensity of digital activities of a consumer. Consumers with a high digital age ( 2-3 years) are much more comfortable using digital in their decision-making as against consumers with low digital age. Based on these drivers, four customer archetypes emerge. Significant differences in the extent and nature of usage of digital channels / dealerships spring up across four major archetypes. (See Exhibit 4) The Experienced Buyer The Experienced Buyer uses online channels extensively as a means of doing research before purchasing a car. He uses digital platforms to research cars, compare prices, contact dealerships, etc. An experienced buyer s digital journey starts early and lasts anywhere between 2 to 4 months with frequent lengthy sessions online, culminating towards making the final choice of the car even before visiting the dealership. The dealership plays a negligible role in his choice, with the one or two visits, mostly aimed at test drives, final price negotiations, and closing the deal. The Open-minded Buyer The Open-minded Buyer is mostly a first-car purchaser who is proficient with internet usage. Although he uses digital platforms to research, perform price and model comparisons and look for discounts online, being a first-time buyer, he doesn t want to go wrong, and hence, explores multiple channels before making the purchase. He has multiple short sessions on various online portals, going as far as shortlisting models online. He looks up to the dealer for offers and discounts as well as to validate his final choice. The Evolving Buyer The Evolving Buyer is new to the internet and uses online for specific activities, such as price check, offers and discounts, and a quick validation before purchase. The dealership plays a significant role in his decision-making since they provide him with details about technical aspects of the car. 10 Digital Garage The Traditional Buyer The Traditional Buyer is the conventional buyer who hardly uses digital platforms during the purchase process. The dealerships, therefore, play a major role in his entire journey, right from developing the initial shortlist to making his final choice. Contrasting Digital Journeys The typical digital journey of a customer, on an average, includes around 40 minutes of online activity over a span of 2 to 3 months. During this period, the time spent and the activity in focus change as the digital journey progresses. EXHIBIT 4 Four Key Customer Archetypes Emerge Based on Differences in 'How They Buy' First-time buyer The Traditional Buyer The Open-minded Buyer Conventional buyer; looks upto the dealer / friends for information Minimal digital Use Very high influence of dealership Young new buyer; comfortable with digital explores both online and offline channels before final purchase Significant digital use Moderate influence of dealership Low digital age The Evolving Buyer Customer Archetypes The Experienced Buyer High digital age Familiar with car purchasing, buyer more comfortable with offline interactions Digitally savvy; self-reliant likes to make his / her choice independently Moderate digital use Significant influence of dealership High digital use Minimal influence of dealership Repeat buyer Extent of digital use Role of dealership Source: In-depth consumer interviews. The Boston Consulting Group CarDekho.com 11 Journey of an Experienced Buyer Name: Age: Location: Occupation: Sunil 45 years Delhi Doctor Need for purchase Bought a car for his daughter who was turning 21 Car purchased Car owned before Internet Usage Honda City Hyundai i10 Digitally savvy person who has been using internet for over 6 years I get very excited browsing for things on the internet. Online discounts and offers are incredible nowadays. For my last car, the internet gave me all the information I needed. I used different sites and blogs to research. I wish that I don't need to go to the dealership at all for my next car. Sources of information Digital Offline Third-party websites Google Search Word of mouth / Friends Dealerships Ads/ Incidents Need Identification Need Detailing He goes to Google, which directs him to 3P websites Focuses on fixing purchase criteria Sunil considering 7-8 models simultaneously; Model overview, prices key focus of research He speaks to friends on what options fit the key purchase criteria Sunil realises he needs to buy a car for his daughter Stages of consumer journey Looking for Information Model Decision Final Purchase He then sees and compares models, variants, pictures Models under active consideration reduces to 4 His shortlist set ~3; Focused research on them only Sunil then narrows down to 1 option searches mainly for prices. offers He now actively searches for offers and discounts, searches for last 5 shortlisted cars once more Sunil uses digital /offline sources in tandem Sunil speaks to his friends to get actual user feedback Insurance, Car Loan arranged by Dealership Insurance Visits 2 different Honda dealerships to validate his choice Sunil then visited his preferred Honda dealership to close the deal Final Booking made at dealership 12 Digital Garage Journey of a Traditional Buyer Name: Age: Location: Occupation: Need for purchase Car purchased Car owned before Internet Usage Sachin 35 years Mumbai Businessman Growing family so he wanted a car for commute Maruti Ciaz None Started using internet recently, mainly for news and videos I do not use internet much mainly for news or YouTube videos. Also, I know the people at dealerships well, so do not really see how internet can help me Sources of information Customer journey Word of mouth / Friends Offline Dealerships Ads/ Incidents Need Identification He saw an attractive Datsun Go ad on TV and print and began considering it Need Detailing Sachin realised he wanted to buy a new car because of a growing family cars of friends, family gave him a shortlist of cars to start with He spoke to his friends who own cars and explained his needs / budget Stages of consumer journey Looking for Information He spoke to his friends to get actual user feedback on t
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