With apologies to Elon Musk, Google’s self-driving car initiative and even the rumored Apple car, Silicon Valley isn’t going to outperform Ford, GM, or Toyota on the assembly line.
Mass producing cars just isn’t a core competency of Silicon Valley. What Silicon Valley excels at is disrupting analog distribution models and replacing them with streamlined digital distribution that’s more efficient, cost effective and accountable.
The real threat from Silicon Valley is not the tech that goes into the car, but rather the tech that turns car ownership into something on par with an Amazon Prime subscription.
The battle to own that model is far from won. Today’s automotive brands sell approximately 17 million new cars and trucks a year.
If they cultivate that first-party data over three to five years, they can architect a new business model that puts attribution and measurement at the center of the automotive ecosystem. But to do that, automotive brands must first abandon a legacy dealer marketing model that’s predicated on spraying their message as wide as possible and praying that the right people hear it.
The current model isn’t just broken; it keeps automotive in the dark
Auto dealers will tell you that the biggest driver of new sales and profit is service. And yet, automotive manufacturers and dealers spend billions on national and local television, as indicated in the linked eMarketer story.
They support an exotic dealership sales culture, build dealer websites, drive traffic to those sites via search, social and digital media, and, despite the fact that these standard mass-market tactics (for the auto industry) offer little in the way of marketing attribution, the cycle repeats every year.
Walk across the street to the Tesla showroom and it’s a different story. They aren’t selling cars at the same scale as their competitors, but they aren’t wasting their marketing budgets on a lot of unaccountable media either. According to Bloomberg, GM and Ford spent about $5 billion and $4 billion last year on marketing (respectively), compared to Tesla, which spent $48 million. So, what is Tesla doing?
Think about the data that comes from a Tesla vehicle. Sure, all that reporting and analytics is designed to optimize driving performance, but it optimizes marketing performance as well.
Compared to their counterparts at Tesla, most automotive manufacturers have only the vaguest idea when their existing customers — the people most likely to buy next year’s model — are in the market for a new car. To be blunt, unless the customer leases a car for a set number of months, the dealer’s mechanic probably has a better idea when an existing customer is ready to make a purchase than the sales and marketing teams combined.
How Silicon Valley sees your business
Amazon isn’t just designed to sell you a book or a bag of groceries, it’s a holistic marketing and distribution system designed to become your default access point for purchasing groceries, entertainment and perhaps — one day soon — new cars.
But to Amazon, it’s not about selling a car; it’s about vertically integrating around a consumer’s life stage and buying cycles for all products and services. In other words, it’s about the value of the consumer as a lifetime subscriber.
The key to unlocking that lifetime subscriber relationship is marketing attribution. The rise of digital has made all brands, including those in automotive, cognizant of proving that each category of your marketing budget is delivering the proper return.
But for the most part, talk about attribution still revolves around a pretty limited definition that focuses on measuring sales outcomes and trying to come up with ROI metrics at a campaign level. In automotive terms, it’s a little like putting a cellphone mount and heads-up display onto a Model T — you’ve made a big improvement, but you’re still relying on a business model that’s probably 50 years old.
Inside companies that think digital-first, attribution is part of the ethos. It’s part of a systemic process designed to evaluate and prove the merit of every interaction with a consumer. That’s why attribution at firms like Apple and Amazon not only inform the way products are marketed, it informs product definitions.
Attribution is how they know what their customers will want next … and next year. Good attribution solutions provide meaningful insights that are always informing future cycles of products and reinforce an already sticky customer relationship.
Turn the funnel upside down
Dealers and suppliers currently wield enormous power — being closest to the party that writes the check has always been their historic advantage. But right now, most of the energy in automotive marketing is focused on hunting for new customers by using data to guess at who is most likely buy a new car. This is why the automotive marketing funnel is notoriously costly. In order to make some of those guesses pay off, you need to throw a lot of inefficient money at prospects for up to a year or more.
Why not turn the funnel upside down? Instead of spending mass-marketing dollars to troll for a few new prospects, why not focus on personalizing your message to existing customers and turning them into lifelong subscribers? Automotive may be uniquely suited to do this. What if the industry recalibrated its marketing and promotional spend and transformed itself into a vehicle independent service model?
Leasing a service around the broader category of transportation services could open opportunities to vertically integrate, returning higher satisfaction at a lower cost, and with better margins. Identifying and responding to what really matters elevates customer loyalty and could make cars as sticky as our phones and email accounts.
Ray Kingman is the chief executive officer of Semcasting, Inc.,a data-as-a-service (DaaS) provider. More information can be found at Semcasting.com.