Why transitioning to an agency model can help automotive brands increase sales, improve retention, and transform customer experience.

In the first instalment of “Agency Sales and Beyond” – Capgemini’s in-depth series exploring key challenges and opportunities in the automotive industry – learn why the transition to an agency model can be worthwhile, and how Capgemini Invent can help you increase sales, improve retention and transform customer experience.

The agency model revolution: breaking free from tradition.

Over the last five years, a defining trend within the automotive industry has been the shift away from traditional wholesale sales models towards an agency sales model. New market entrants such as Tesla and Polestar have proven that an extensive dealer network is no longer a pre-requisite for retail sales, and shown that without the shackles of legacy infrastructure, agency models can be extremely powerful. Since then, many established OEMs began to follow suit, with 24 major European automotive brands confirming that they already have or will be undergoing sales model transformations by 2030. However, over the last few years market conditions have shifted considerably.

Market shifts and confidence challenges.

With vehicle supply restored, a cost-of-living crisis, and the ZEV mandate looming, confidence in the direct-to-consumer model is, for some, beginning to wane. Many of the early movers have since shifted towards a Minimal Viable Product (MVP) approach to ensure rapid implementation, while others mulled delays and, in some cases, even U-turns (JLR and Ford have both recently scrapped their plans to implement agency model). The prevailing question now seems to be whether an agency model is still optimal for the current market landscape. And if it is, what balance should OEMs aim for between implementation speed and solution maturity to ensure maximum success?

Navigating MVP implementation challenges.

So far, most early movers have understandably opted for speed over performance, implementing an MVP solution which focuses on the absolute core sales functionalities. This approach, however, has in some cases resulted in an over-reliance on manual workarounds, gaps in functionality and fewer sales levers to fall back on in comparison to the traditional model. Manual processes are particularly problematic as they often inhibit the seamless omnichannel customer journey promised as one of an agency model’s key benefits. Similarly, a solution that lacks full functionality results in crucial areas of sales volume remaining unexplored: with low focus on active customer acquisition and prospect conversion, as well as an inability to engage in the ownership gap. Finally, due to time constraints many OEMs have decided to shoehorn their existing customer journeys into their new platforms, in some cases retaining old inefficient sales practices.

These teething problems with initial MVP implementations have left many OEMs with sales journeys that do not fully utilise the power of an agency model. OEMs will now be forced to look beyond just an MVP IT implementation, toward an all-encompassing customer ecosystem which not only harnesses the powerful technology platforms but is operationally capable to leverage the ownership of the customer and take new responsibility to increase sales, improve retention and transform customer experience within the brand.

So, what are the hotspots for priority iteration above the MVP?

Over the next few issues of the Agency Sales and Beyond series we will be exploring each of these in more detail.

Short-term OEM focus should shift to leveraging their new responsibility at the top of the sales funnel; to generate and convert enough business to perform against targets that have unlikely reduced in ambition. To achieve this, there are 3 key pillars that should be in priority focus:

1.       Price and incentive management

2.       Tailored communications

3.       Creating demand and optimising conversion

These, balanced with a longer-term focus on filling the engagement gap in ownership phase, will pay-forward future success with the aim of building a bedrock of order pipeline from a strong re-purchase rate and lessening the chase to close out months and quarters where the sales leverage is now most reduced.

With the help of technology, car buying can be enjoyably positioned against non-automotive counterparts and provide the omnichannel experience at the heart of customer desires and OEM goals.

Keep an eye out for the next publication on this, discussing targeted end-to-end renewals and activating ownership.