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New Consumers in a Post-COVID World: Some thoughts for the Automotive sector

Thursday 4 June 2020 Data Insight & Analytics

James Debenham's picture
By James Debenham

At the time of writing the UK is moving out of lock-down with Car Dealerships one of the first to be given the go-ahead to re-open.  As we move into the next phase of the Coronavirus response and start the road back to recovery, the focus for all of us is: how do we plan for the “New Normal”.

Even before the COVID19 pandemic, shifts in consumer demand meant that Manufacturers were being challenged to change the ways in which they planned their dealer networks and their wider marketing and sales operations.  The headwinds were already blowing, but what further adjustments will the market face now?

In the context of the wider economy - particularly retail and leisure - the lockdown has precipitated unprecedented changes in consumer behaviour.  Of course, many of these were inflicted through circumstance but the lockdown has also accelerated some behaviours that were already underway. And many will be here to stay.

To understand these changes, CACI have been tracking consumer attitudes through the lockdown. Our recent report reveals 7 main trends that are shaping new consumer behaviours.  Each different sector of the economy will face its own distinct challenges for how to react to these trends.  In this blog I will outline the implications for Automotive Retailing.

 

The Drive for Value

In any period of economic shock, consumers always re-evaluate their purchasing decisions with different consumer types having different attitudes towards what they might consider to be a “Postponable” purchase. Now restrictions are lifted the key question is: when will the customers return, and how will consumer confidence impact the recovery of the new car market?

Throughout the lockdown period there have been some surveys published in the Automotive Press suggesting that between a fifth and a quarter of consumers who were already looking will want to buy a car as soon as possible. Our research confirms this, with 23% saying they will buy a car straightaway and rising to 41% to include those who say they will defer only 3-6 months.

But a deeper dive into this using Acorn (CACI’s classification of UK consumers) reveals some differences in terms of the consumer types who are driving this.  Clearly affluence plays its part as the higher income consumer Categories are most likely to want to purchase immediately.  However the spike evident in “Urban Adversity” is perhaps indicative of a desire to reduce reliance on Public Transport in urban areas.

 

The more middle-income “Comfortable Communities” are perhaps more reticent to buy, as expected with a degree of economic uncertainty.  They are also most likely to say they will put off a purchase altogether, so keeping these consumers engaged will be crucial. And, it is logical to think that, given their more cautious approach, when these consumers do buy a car they are very likely to stick with “what they know” so it is expected that we will see an entrenchment of existing Marque loyalty here.

Clearly overall economic security matters but so too does disposable income.  Interestingly, the wider CACI consumer research suggested that the more affluent younger “Rising Prosperity” expect that they will have more disposable income after lockdown, suggesting a more bullish view of their economic circumstances and perhaps restricted opportunities to spend on retail and leisure and this is reflected in their attitude towards purchasing a car in the short-to-medium term.

 

No Digital Divide and The Death of Channel – The time for Online Retailing?

Our research finds clear evidence of more consumer spend moving online and of groups that were previously reticent to engage digitally having now made the switch through necessity. So now is a good time to ask whether this could be the catalyst to push the Automotive industry further towards online sales.

But buying a car online is very different to buying groceries or clothes.  Pre-COVID it was always suggested that some consumer types would not be keen on buying a car online and our research suggests this has not yet changed.  When asked if they would be prepared to purchase a car online rather than visit a showroom, only 26% answered that they would.  And again, the variation by consumer type is instructive.

But far from deterring Manufacturers from considering online as an option, this should instead be used as springboard to think about what incremental consumers an online offering will attract to their brand and, crucially, how to optimise an effective multi-channel strategy; maintaining the physical sales experience for those that value the personal touch while also providing an accessible and convenient digital channel.  Knowing how and with whom this will be effective will be critical.

 

Flexible Working & Love Community – How we Engage with Places and How We Get There

CACI’s research expects that where we travel, how often and for what purpose will change considerably.  More people expect to be working from home on a regular basis and we have seen a shift to favouring more local interactions – for instance choosing the local high street rather than out of town retail.  And how we get there will change too, with many consumer groups indicating a future reduction in the use of public transport.

All this provides some interesting paradoxes for the sector.  We are going to be travelling fewer miles, but we are going to see a greater reliance on private transport.  Yet as that reliance becomes entrenched it does not mean car ownership will increase; households with reduced mileage may decide to consolidate the number of cars that they own.  But if going down from a two-car to a one-car family, it is likely that many (particularly those with an optimistic view of their disposable income) will want to trade up to a better-quality model. 

The conflicts on some consumer groups as they weigh up their mobility needs will be extreme, perhaps further widening the divide between those consumer types who see driving as a function and those for whom it is more of a lifestyle or experiential choice.  For many, the previously attractive subscription schemes and car-sharing services will now be considerably less appealing unless they can ensure exclusive usage (which will come at a premium).  This may push some (particularly younger more urban types) who weren’t previously considering it to now look to buy a car. 

Understanding which consumers to target, where they are, and how to communicate with them effectively will be more essential than ever as our mobility trends adapt to our new circumstances.

 

Safety First and Sustainability

The final two trends deal with the perception of risk and sustainability are impacting consumer behaviours.  And again, there are interesting implications for Automotive.

As we go forwards, consumers will clearly value brands and retailers that put the safety of their customers and their staff over anything else.  This could further imbed marque loyalty trends as consumers are now more likely to stick with brands that they already trust. So the tireless work that many Manufacturers and dealers are doing to make their showrooms and service workshops “COVID-safe” and ready for reopening, and communicating this information effectively with consumers, will reap dividends.

Sustainability has now become a key issue for consumers as it becomes clear that that the impacts of our individual actions can have wider implications.  The links between sustainability and the environment are endemic and this has caused many to question whether the in post-COVID world we will see an increase in demand for Electric Vehicles.

Since lock-down started much has been written about “nature healing itself”, often with a focus on lower air pollution and reduced noise levels in built-up areas.  The sense of a chance for new beginning will undoubtedly be a factor that could drive an uptick in EV demand for some.  Similarly, if consumers see reduced mobility, fewer business miles and more localised shopping trips then it is logical that range anxiety will diminish for many.  Furthermore, with some public pressure for the Government to focus on a “Green Recovery” for the economy, it is possible that further investment, such as public charging infrastructure, will be prioritised.

While these are all undoubtedly “push factors” for EV demand, for many potential buyers the weighing-up of short-term and long-term personal finances (higher price-point at purchase versus lower long-term running costs) will still be critical and may continue to deter some.  The overall consumer confidence showed by the more affluent Acorn Groups (especially Mature Money and Career Climbers) suggests that their current appetite for EVs may not be diminished. And there may be an increase in demand from the City Sophisticates who look for an alternative but clean urban mobility solution to public transport.  But elsewhere, the overall caution showed by other consumer Groups might indicate that the recent acceleration of EV demand could flatten marginally for the short to medium-term.

 

Understanding your Customers is the Key to Success

At CACI we believe that these wider consumer changes, while profound, open interesting opportunities for your business. And this is as true for the Automotive sector as for any else. New behaviours require new strategies, with each customer group having different requirements. So, understanding your customer profile will enable you to better meet their post-lockdown needs.  Specific consumer groups will have very different behaviours and the geographical concentrations of those could have implications for the way you organise your sales strategy.  Brands that better understand their customers will be better able to keep customers engaged, and thereby win or retain business as lockdown ends and consumer confidence grows.

To find out more about what this means for your business and how we can help you understand your customer markets contact us now…..

 

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New Consumers in a Post-COVID World: Some thoughts for the Automotive sector