The Direct-to-Consumer Conundrum of the Automotive Industry

The automotive industry has a big, largely unspoken problem: Automakers don’t sell directly to consumers. They work with dealerships, who in turn sell cars to consumers. It’s a model that’s been around for decades — but is it really working in today’s service-oriented world?

Most people hate car dealerships, and for good reason. The moment a consumer walks in the door, they enter an unpleasant, sales-y environment. Pushy salespeople who care more about their commission than meeting consumers’ needs overwhelm consumers with their sales pitch. They might try to sell things the consumer doesn’t really need, instead of trying to understand the consumer’s actual needs.

Car dealerships overwhelm customers with a shiny sales pitch that does not help much after you leave the door in your new car.

When we think about how most people make purchases in other consumer verticals, this model makes even less sense. Today’s consumers can easily access a wealth of information about any product they might want to purchase, including hundreds of consumer reviews. They can order a product online, or just browse Amazon reviews as they shop in a brick and mortar store. The consumer is in control of the entire process, empowered by information.

So if this is how product selection works for a blender, why is the model so outdated for a product that is far more expensive and impactful to people’s everyday lives?

The problem with the dealership model

Despite the hype about ridesharing, the truth is that personally owned cars are still the norm. 87% of daily trips happen in personal vehicles. For commutes to work, that figure rises to 91%. So clearly people still want to own cars and are relying on them heavily.

The experience of purchasing a car is still incredibly onerous. According to a 2018 survey from Deloitte, many consumers have subpar experiences when buying cars at dealerships. 57% say they had to fill out too much paperwork and 42% feel that the overall process just took too long.

If the experience of purchasing a new car is bad, then the post-purchase experience usually isn’t much better. Consumers receive little support from either dealerships or automakers after their purchase. 48% of consumers say the manufacturer never contacted them after a purchase, and 22% weren’t contacted by the dealer. That’s pretty surprising given how important cars are to everyday life. Even the retailers who sell tube socks on Amazon usually follow up on the purchase to ensure consumer satisfaction.

Basically, car manufacturers are treating cars like a set-it-and-forget-it type of product (much like those tube socks). But that doesn’t make much sense when we consider the fact that most Americans spend hours per week in their cars. If manufacturers can improve the in-car experience, they will do much to improve brand loyalty among consumers. Currently, cultivating brand loyalty is a major challenge for automakers. According to data from CarMax, 80.6% of buyers switch brands when purchasing a new vehicle.

Set-it-and-forget-it car sales model does not really work any more because consumers are looking for continuous value and stellar services in contemporary world

The fundamental problem comes back to the dealership model. When a customer buys a car from a dealer, they’re not developing a connection to the actual brand. Meanwhile, the salesman at the dealer controls messaging around the car. They typically empathize car specs and other technical information, even though this information is of little interest to most consumers.

Even most advertisements put out by automakers replicate the problem. Most car commercials have a lot of talk about horsepower and tire features, but little on the actual experience of being in the car and driving it around.

Fortunately, there’s a solution to this problem.

The platform model

When considering how to better sell cars to consumers, it’s worth looking at an unlikely model: ridesharing platforms. In contrast to automakers, Uber and Lyft understand that they’re selling a mobility experience, not just a one-time product. Their marketing emphasizes the convenience of hailing a ride and the ways in which regular usage of ridesharing can improve people’s lifestyle.

The ridesharing experience itself further confirms that ridesharing is a service, not a one-off product. Many drivers provide water, snacks, and a charging cord. Riders feel taken care of when they’re in the car. The ridesharing platforms are even giving users new options to further customize the experience. Now, people who hail premium rides on Uber can select their preferred temperature and specify whether or not they’re up for conversation with the driver.

Automakers can benefit from looking to ridesharing apps for inspiration. Instead of simply selling the car as a product, manufacturers can sell cars as a platform which, like Uber and Lyft, offers an enjoyable transportation experience but is still owned by the driver.

Of course, successfully selling cars as a platform will require automakers to rethink their offerings in addition to their messaging. They need to start delivering more features that continuously improve the driving experience, including through regular over-the-air software updates. Infotainment systems are a start, but if cars could better enable the driving and navigation process itself, that would be even better.

Imagine this. A driver turns the key to the ignition and says they want to go to a restaurant. Then, the car itself informs the driver of potential destinations nearby. The car helps the driver navigate a fast route to the restaurant. Once they arrive, the car helps the driver find an open parking space quickly, without wasting time circling the block. The restaurant is then notified when the driver will enter the door to best serve their loyal customer.

If cars can provide drivers with this kind of experience, they can really become a platform and not just a product. Luckily, the technology is already here.

The future of selling cars

Selling cars as one-off products at dealerships isn’t working out well for either automakers or consumers. At Parkofon, we envision a different future. Cars are a major part of our lives, and should be sold as a platform that enables freedom and mobility.

By incorporating features that make cars into a true transportation platform, automakers can secure their future and stop languishing under the dealership model. Cars are part of our future, but we can’t keep selling them in the same old way.