Value through innovation: key points of the 2021 strategic plan of the leaders of the automotive financing industry
In today’s connected world, we are notified when our Amazon order is only three stops away, then receive a text message with a photo of the package when it is on our front porch. While this disruptive technology seemed innovative not so long ago, it is now a service all customers have come to expect.
Even as you use digital technologies in your personal life and automate your processes, are you just a practitioner or are you looking for productive ways to improve your life and the lives of your clients through innovative technology?
Key takeaways from 2021 strategic plan for automotive finance executives highlight the importance and urgency of innovation to ensure long-term growth with long-standing clients and advocates.
Breaking the traditional business cycle
It is well known that the traditional auto financing process is cumbersome and often falls short of a great customer experience. Just like other areas of their lives, customers want digital, flexible and innovative services that are highly personalized and easy to adapt to their changing needs. This is further punctuated by historically low levels of new and used car inventories due to the COVID-19 pandemic disrupting global supply chains.
Industry leaders admit that the âtraditionalâ financial process is seldom customer-centric. They need to move from a single transactional business model to one that leverages innovative technology to create a positive customer experience and a long-term relationship.
One way to nurture these relationships is to personalize the customer experience. While a 50-year-old may be more inclined to buy a new car, young digital natives with increasing purchasing power are looking for car subscriptions.
Flexible services and lifelong customer relationships
The key to maintaining lifelong customer relationships is flexible services like subscription products and short-term leases. The benefits of this key differentiator in a crowded financial market include:
- Customers are more likely to stay loyal if they have the option to switch to the vehicle of their choice in the same finance deal.
- Consumers are not required to make a long-term commitment as the minimum rental period typically ranges from one month to six months.
- Shorter contract terms allow finance companies and dealers to maintain regular contact with customers, which improves the customer experience and generates loyalty.
Data control and service sales strategies
Most new cars offer connectivity technology that gives live access to mileage and vehicle condition, enabling predictive maintenance and creating a unique customer journey with personalized services. This type of rewarding relationship goes beyond the final sale or lease to keeping the customer engaged and making sure they return to the dealership for service, accessories, or a vehicle upgrade.
The value of the data is enormous and helps create a personalized experience. Rather than simply offering a newer model of the current vehicle at the end of a contract, the dealer could recommend a more suitable one based on the use of the existing car. Dealers can also anticipate wait times by engaging customers with enough time to order the new vehicle before the end of their current contract.
Create products that customers understand
While customers can browse, buy, and finance cars online, they may need human interaction to better understand the deal.
One of the main advantages of online processes is that frequently asked questions can be answered easily and eliminate surprises. Funders, or even chatbots, can provide detailed advice on how products work with step-by-step instructions. Other questions may include when they can return a car, any additional charges – such as delivery and collection – and how to get their financial settlement figure.
Digitization with a human touch creates a transparent and positive end-to-end journey for customers.
Electric vehicles could lead to the switch to subscriptions
Electric vehicles could be the springboard for expanding subscription services.
Some customers may be reluctant to enter into a long-term financing arrangement with electric vehicles because they are different from traditional internal combustion vehicles. A subscription financing model gives them peace of mind since they can cancel or trade in for another car.
Digital natives are more comfortable with a subscription service, and this digital innovation can ensure future loyalty and deliver lifelong value to this demographic.
Support the loyalty cycle
The increase in online vehicle purchases is an issue that keeps auto finance lenders from sleeping at night. They worry about the impact of the digital sales journey on their physical activity. For example, online disruptors such as Carvana offer fully online purchasing paths, including the valuation of trade-ins and financing – which eliminates the need to physically visit a dealership.
Traditional auto dealers are responding by investing time and resources to improve their online presence to reach the connected customer.
Experts believe that the traditional car buying experience still has a place, and to stay competitive, they recommend that dealers adopt digital technology that generates efficiency gains such as automation. Plus, they can differentiate themselves with a hybrid omnichannel approach, delivering an exceptional online experience while retaining personal elements.
Five steps to innovate
Based on the collective opinions of leaders in the auto finance industry, the following five steps will ensure customer loyalty and lifetime value through innovation:
- Building a customer-centric approach to innovation. Implement flexible customer-driven innovation.
- Engage with the dealer community. Find out how auto finance companies can best help dealerships create a compelling customer journey to compete with online companies.
- Leverage data to drive product development. Unleash the power of data to drive new revenue streams and make informed recommendations to customers during renewal periods.
- Prepare a roadmap for electric vehicles. Tailor products to consumer needs, such as electric vehicles and subscription services.
- Take a strategic big tent approach. Many changes are coming for the auto finance industry. Now is the perfect time to network and partner with digital innovation experts to help you define your future strategy.
Shim mannan is Executive Vice President of Product and Business Development in the Americas for IDS (formerly White Clarke Group).