Agency sales model Part 2

Dealerships as trailblazers for automotive sales transformation

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Dealers continue to be a key success factor in the adoption of the agency sales model. Our exclusive survey shows how dealers are reacting to automotive sales model transformation, and which framework conditions must be observed.

In our first blog post, we highlighted the challenges faced by the automotive industry and opportunities that result from introducing the agency sales model. The Capgemini Invent Agency Sales Framework developed for this purpose contains six overarching principles that help to achieve a sustainable competitive advantage.

This blog focuses on two dimensions of the framework, Structure and Strengthen, to highlight the way OEMs and dealers should interact.

Figure 1: The Capgemini Invent Agency Sales Framework – Structure and Strengthen

“The customer needs must be the intrinsic motivation for our daily business…this is the only way to make the sales model of the future economical and sustainable for all stakeholders.”
(Managing Director, automotive dealership, Germany)

Dealerships must be seen as the customer’s primary contact and partner. The results from more than 50 dealer interviews (in Germany, Sweden, China, Spain, France, and the UK) highlight that 96% of dealers rate the existing sales model as out of date.

We combined the findings from our dealer interviews with those of a consumer survey showing that 92% of consumers consider personal contact when buying a vehicle to be essential. This enabled us to identify further challenges and success factors for the agency model and make recommendations about the best way to introduce it. One thing is certain – in the sales model of the future, personal contact between customer and dealer during the sales process will still play a fundamental role.

Structure – parallel sales models on the way to customer centricity

The first principle of the Capgemini Invent Agency Sales Framework, Structure, defines the basis for the introduction of a new sales model (keyword: parallelization of sales models). The objective of providing a customer-centered ecosystem sets the strategic orientation for this move, whether the OEM decides on a full agency model or what we call an intermediate model. The OEM must carefully select the product and customer groups to be moved to the new model and then design the remuneration structure to ensure a sustainable, economically viable participation by all stakeholders.

Strengthen – partnership between dealers and OEMs as a central success factor in future sales

Linked to Structure is the Strengthen principle. This consists of a joint design approach for the new sales model, and it requires a strong commitment from both dealers and OEMs to developing the new model and implementing it over the medium to long term.

According to our research, dealers and OEMs agree that the introduction of a new sales model, even in these difficult times, is a necessary step to ensure survival and to be able to remain in the market together in the long term.

“For me, agency sales is the most powerful model for the future. For the time being, it requires an enormous investment from all parties, but it strengthens all stakeholders in the long term – and that can only be done in close cooperation.”
(Managing Director, automotive dealership council of an OEM, Germany)

Reasons dealers are keen to transform the sales landscape include the high costs of retail they face, which can already exceed the earnings potential and lead to a need for non-automotive activities to cross-subsidize the original core business. Furthermore, faced with competition from new startups (e.g. Carwow, HeyCar, CarOnSale), it is necessary to counteract this pressure with appropriate solutions.

“If I have to sell sports bags and toy cars to ensure my profitability, the existing automotive retail system seems to be flawed!”
(Sales Director, automotive dealership, Sweden)

Agency sales can only be successful if there is an equal partnership between OEMs and dealers. Despite the current difficult conditions, the building blocks of our Capgemini Sales Recovery Framework can help to steer the company towards the future, both financially strengthened and with a greater customer focus.

The dealers surveyed all agree that the transformation to an agency sales model is a central aspect of the industry’s future. As many as 80% of the dealership managers interviewed could see their future as an agent – far fewer as a classic dealer or pure service provider.

“As sales experts, we represent the local face of the brand and provide the expertise. In the longer term, we’ll provide online and offline accessibility within the agency model as well.”
(Managing Director, automotive dealership, France)

Below, we discuss three success factors that are crucial to the viability of agency sales.

Figure 2: Success factors from automotive dealers’ perspective

1. Fair and sustainable remuneration model to ensure customer centricity

The level of remuneration – replacing the sales margin (difference between purchase and sales price) – is seen as a key success factor at all levels. A decisive success factor, emphasized by all dealers surveyed regardless of size, is that all agents must receive the same commission and all customers must be charged the same price. Uniform provisioning is required to ensure dealer satisfaction and a move to customer centricity.

“Adequate commission is a prerequisite for making the model attractive.”
(Managing Director, automotive dealership, UK)

2. Price transparency and competition as a lever for increased customer satisfaction

Specification of uniform prices by OEMs can spare the customer the average 2.5 visits that they currently make to dealers, mainly for price negotiations. A transparent and uniform price guarantees dealers better planning with secured margins (approximately 2%) as well as reduced intra- and inter-brand competition. While customers get a better experience across multiple channels, including online sales offers, dealers can strengthen their focus on the customer – which means greater satisfaction for all stakeholders.

“Customers do not want to feel that they have missed out on a better offer – price transparency is the answer.”
(Managing Director, automotive dealership, Germany)

3. New IT infrastructure and processes to optimize the customer approach

Changes to retail contracts associated with the introduction of agency sales will promote sharing of data between dealers and OEMs. Better access to data will enable dealers to approach customers in a more targeted and analytics-based manner. Here too, increased transparency in the lead management process and an improved 360-degree customer perspective can open up new sales opportunities. A consistent IT infrastructure and new processes adapted to digital channels are necessary.

“Customers are the main driver of change, so their requirements for an integrated customer experience must be met by appropriate IT and new processes.”
(Managing Director, automotive dealership, China)

What’s next?

For a successful introduction of the agency sales model, OEMs and dealers must quickly form the right alliances. We recommend following the principles of the Capgemini Invent Agency Sales Model Framework which can provide the cornerstones for the transformation. The overarching agency sales strategy, the investment case, and the omnichannel enablement must be designed sustainably by the OEM, considering aspects relevant to the dealers:

  • Creation of a sustainable remuneration model for dealers
  • Introduction of a high-performance IT landscape including an online sales platform
  • Reduction of intra- and inter-brand competition through price transparency
  • Trustful cooperation through early involvement and transparent communication.

During implementation of agency sales and parallel running with current sales models, there will always be new challenges. If OEMs fail to find the appropriate answers for all sales levels, there will not only be customer churn, but also intensification – perhaps to a critical extent – of dealership consolidation.

This blog has also been co-authored by Nepomuk Kessler, Christopher Jeckl and Charlotte Schindler. Please get in touch if you have questions or need further information. We look forward to exchanging ideas on this particularly current topic.

For more insights, please also read our recently published Agency Sales Model Point of View.

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