Table of Content
1.1 Market Trends
2. Digital Enterprise
2.1.1 Social Media Marketing
2.2.1. Online vehicle sales and vehicle configurators
2.2.2. Virtual reality at dealers or showrooms
2.3. Agile Project Methods
2.3.1. Design Thinking
2.4. Human Resources
2.4.1. New jobs
2.4.2. Chief Digital Officer
2.5. Digital Manufacturing
2.5.1 Industry 4.0
2.5.2 Internet of Things
2.5.3 Connected Supply Chain
3.1. View in the future of automotive industry
1. Market Trends
Nowadays you can observe global trends that are pushing the digitalization.
According to the World Economic Forum there are three macro trends that are disrupting the traditional market and competitive boundaries.
The first one is Urbanization. More and more people live in urban areas, meanwhile it´s more than half of the world´s population and the number is predicted to swell to 66% by 2050. The lifestyle of urban consumers is more sophisticated, more demanding and more digitally engaged. For them, mobility is very important. The number of urban kilometers travelled is expected to triple by 2050.
The second trend is the shifting global population dynamic. Not only more and more people live in the cities, but also the total number of the global population will increase from 7 billion today to 11 billion by 2100, according to “The Guardian”. The average age of the population rises and, additionally, the emerging markets (Countries like Brazil, Russia, India or China) get more and more important. The automotive industry must follow these trends. They need to understand and anticipate the consumer needs, aspirations and behaviors.
The last trend is the rapid expansion in global connectivity. Using technologies like social media, e-commerce, big data and analytics, cloud computing, mobility and broadband connectivity or the Internet of Things, the world economy is transforming into a digital economy. With more than 28,1 Billion connected devices by 2020, our World has never been this connected. For the automotive industry this means that it´s their task to adapt and stay relevant in this environment. The focus will be on new thinking, flexibility and speed.
The digital transformation is noticeable in nearly every sector of society and commerce. In the automotive industry there have been disruptive innovations like mass production and the assembly line and huge developments in safety, build and performance. “[Nevertheless,] digitization will drive more innovation in the automotive industry in the next 20 years than there has been in the past 100 years.” [World Economic Forum 2016]i
2. Digital Enterprise
Marketing has dramatically changed in the recent years. Digital devices lead to a strongly changed user behavior. Just the smartphone had a percentage mobile Internet usage of 48.3%, laptops and notebooks had an Internet usage of 24.2% and it increased constantly [Biesel 2018]ii. The changed user behavior of customers has huge impacts on the tasks of marketing. Big tasks for the marketing in big firms of automotive industry will be to be present in Social media and to show each customer a personalized approach or advertisement as well as to be the top of ranking in the World Wide Web.
2.1.1. Social Media Marketing
All big firms of automotive industry are present on social media, for example Audi, BMW and Opel. It is becoming increasingly important to establish a more personal contact between manufacturer and customers, to win their trust and to inspire them with the products on communication channels. There are no better channels than Facebook, Instagram, YouTube, Twitter, LinkedIn/XING, Google+ and Pinterest [Biesel 2018]iii to do that. These channels have a high reach and many active users. The companies benefit from this new marketing strategy. They get a positive corporate image and have a fast communication with the customer as well as a quick feedback for the companies. The Premium car manufacturer AUDI from Ingolstadt reported in the press release of the global social media budget to We Are Social: "We have come to realize that we need to increasingly target our target groups via social media."
The companies use the social media for different parts of marketing. First, they want to have a close contact to the customer [Falát 2017]iv. They can see the behavior of each customer and can do a Social media monitoring [Winkelhake 2017]v to get to know the customers better about their behavior. What do they like, do they already have a car or do they want a new car? Through such analyzes the automotive industry can use it to monitor the activities of the community and can identify and monitor conversations about specific topics, keywords or people on the social web [Grabs 2016]vi. With such monitoring tools they can measure if their goals are achieved as well as for target group analysis when a new product is launched on the market.
Facebook has 1 billion active users daily [Grabs 2016]vii and is the largest international social network in the world. The big car manufacturers also want to benefit from this and create new content on their profiles every day, and create paid advertising to reach as many users as possible. With advertising on Facebook, companies can find the right people, grab their attention, and achieve results.
A good application for Facebook marketing is the German car manufacturer BMW in UK [Facebook Case BMW]viii. They were able, by switching to Facebook lead ads, to reduce their cost per lead by 56% and increase their leads by 2.8 times. Another application is Opel, also a German car manufacturer [Facebook Case Opel]ix. The company used a highly targeted video campaign on Facebook to increase the popularity of their cars. The Facebook marketing has paid off for Opel: "With just 7% of our media budget, we achieved 17% of our campaigning effectiveness. We haven't only reached many people, we also have evidence that the Facebook campaign has changed people's brand perception.” (Tina Müller, Chief Marketing Officer, Member of the Management Board Opel Group GmbH, Opel)
With the social media channel Instagram, it all comes down to pictures and videos, inspiring users with appealing content and following the page of companies or single users. For automotive companies that want to raise awareness of their brand or just launch a new product, it is just the thing that works great on Instagram. The automotive industry is introducing this modern marketing strategy as it will reach many people with the hope that they will choose a car of their brand when buying or leasing. It is a collaboration with a credible person with a high reach (called Influencer) and many followers in social media channels. For a certain period of time the Influencer gets a car provided from the car manufacture and the person will post it on itselfs Instagram account and report positive about the car and company. Therefore, the attention is directed to the car brand and the car itself and many people get in touch with this post of the influencer and get inspired. The conditions of each post can vary from cooperation to cooperation. Seth Godin explains the term influencer marketing in his book "Flipping the Funnel" especially well: “Turn strangers into friends. Then turn friends into customers. And then do the most important job: Turn your customer into salespeople.”
An application of influencer marketing is the Instagram account "willy" [Instagram Case]x. He has close to 80 thousand followers and a very good reach. The picture below shows that “willy” presents the A7 Sportback from Audi with a striking and appealing photo on Instagram and writes a short text about it. That Audi is running influencer marketing here is shown by the upper label "Paid partnership with audi_de".
2.2.1. Online vehicle sales and vehicle configurators
Today, every big automotive company has its own online vehicle sales and vehicle configurator. They have many great appealing images and meaningful texts at their online sales. This solution of online purchase of cars provides the customers a comfortable shopping and user experience. They make it very easy for customers to buy a car in a few steps online or even to configure the car according to their own wishes on the manufacturer’s website. For example, BMW in the UK has set up a dialogue-oriented option on its Internet site for online purchases [Winkelhake 2017]xi.
In the online purchase process of BMW, the customers are led to a vehicle configurator, in which the perfect vehicle is to be put together. The first step for the customer is to choose his driving environment, for the shown configurator, with different options like a city or a country. The next steps are to select the future passenger number as well as the typical luggage type. After these basic steps, the configurator asks for the lifestyle that the car should have. In these steps they can choose everything imaginable which BMW is offering. After the process of configuration there is the option to lease the car, if desired. The online sale also gives customers the opportunity to visit a dealer, when they want to see the car in real.
2.2.2. Virtual reality at dealers and showrooms
The Gartner Hype Cycle for Emerging Technologies of 2017 [Gartner 2017]xii, shows us that virtual reality technology is just before the breakthrough of productive applications. The automotive industry is already showing us how to use this technology productively in sales.
The big firms in the automotive industry are now increasingly trying to provide the customer with an unforgettable experience. It starts from the opening of the manufacturer website and ends at the dealer or showroom with virtual reality technology. The virtual reality technology should make it easier for customers to make a purchase decision. The best example for that is definitely Audi, because the premium manufacturer has already implemented it in more than 400 individual car dealerships in Germany, Great Britain and Spain [Audi Media Center 2017]xiii. Virtual reality awakens enthusiasm and emotions. Audi uses it for itself with customer private lounges [Audi Media Center 2016]xiv, and equips selected dealers with virtual reality glasses. With such glasses the customer can configure their own car or open their homemade configuration, view it from all sides, open doors and experience the car as it were actually in front of them. The result of the created car can then be shared directly on social media channels [Interview 2018]xv.
Showrooms have an even higher customer experience than the dealer with the virtual reality glasses and are usually located in a top inner city location so that as many people as possible become aware of it and visit it. As an example the "Audi City" in Berlin, London, Paris, Istanbul and Moskow [Audi City]xvi. All Audi models appear on high-resolution large screens in almost real size. Operation is done via gesture control or multi-touch tables. The customer can select his already configured vehicle from at home and display it in different situations, change the color or the equipment and motorization and view all this in a virtual world almost on a 1:1 scale. The systems are equipped with augmented reality devices as well as sound machines to make the customer experience even more realistic [Audi Media Center 2016]xvii.
2.3. Agile Project Methods
The automobile manufacturers want to achieve fast project success [Winkelhake 2017]xviii. As you can see in the following chart, the best way to achieve quick success is with agile methods like Design Thinking or Scrum. In order to work effectively with these methods on a project, teams are put together with employees from different areas.
The chart shows that the method Scrum is always over 70% in the points Quality of Results, Employee Motivation, Teamwork, Punctuality, Efficiency, Customer-focus and Transparency. Also Design Thinking is in all points over 50%. Comparing all agile methods with the classical project management, the graphs show very clearly, agile methods are in all the above mentioned points significantly lower in percentage and is not effective enough for fast project success. Today Agile methods are being used more and more often and are almost indispensable in the automotive industry. Classical project management methods can be used, for example, as a waterfall or spiral model. Agile and Classical Methods have distinct differences, such as agile methods, which are very flexible due to self-organized teams and person-centric thinking [Hutanu 2017]xix. All Traditional Methods do not have that. Flexibility is very important, especially for the automotive industry, to respond to customer requests and respond quickly to the market in order to remain competitive.
2.3.1. Design Thinking
Design Thinking is an interactive method to use creative techniques to develop many new ideas and solve problems [Winkelhake 2017]xx. The teams work in an appealing atmosphere, which gives additional boost to creativity. Design Thinking highly rated in the areas employee motivation, teamwork and customer relation. There is a Design Thinking process which has 6 steps to work as efficiently as possible and it should also ensure a close cooperation with customers.
Close collaboration between the automotive industry and customers is very important. In the design thinking process, the product is tested at an early stage. In this way, the product can be adapted and improved in the early phase of development to customer requirements. So the automotive manufacturer can be sure that the customer like the product and it will be sold. This process can be used in the automotive industry in departments that develop ideas and solutions for products and therefore need to be creative, for example in product development or marketing. According to the Hasso Plattner Institute, automotive manufacturers BMW and Volkswagen [Schiedgen 2015]xxi are already using the Design Thinking method.
Scrum is the best rated [Hutanu 2017]xxii in agile methods and is already used by many automotive manufacturers. Also with this method, a self-organized team works in the same way, which meets for sporadic meetings and so again the communication and the exchange between the employees is in the foreground. In addition to the team, there are two more people who make the Scrum process to the best agile method. The product owner, he represents the end customer. This ensures that the team do not miss the target and the team think and work in any case customer-centric. The second person to support the team and be responsible for organizational matters is the Scrum Master.
2.4. Human Resources
2.4.1. New jobs
Digitization is changing society and business very much. Therefore, there will be big changes in processes and organizations. The generations are changing as well. The generation "Digital Natives" come into professional life and bring the necessary know- how into the company. Digitization in the automotive industry is becoming an ever greater task. There are new departments and jobs that have never been there before, but the staff with the know-how is missing. But the digital natives will probably be the driving force behind the digital transformation [Winkelhake 2017]xxiii. An example of a new department at Audi AG is the "Digital Business" department and the jobs it contains.
2.4.2 Chief Digital Officer (CDO)
Companies need to be able to handle the change well in the era of digital transformation and also try to stay competitive. Before the profession Chief Digital Officer (CDO) was born, there was just the Chief Information Officer (CIO). The CIO takes the role of Strategic IT specialist and the CDO is now hired as a digital transformation specialist in the company. Especially in large companies, this new profession is very important and is to take it serious. The CDO is an executive and has to report to the CEO.
- Quote paper
- Lukas Heisler (Author)Lisa Krapf (Author), 2018, Digitalization in big firms. Review of advances in the automotive industry, Munich, GRIN Verlag, https://www.grin.com/document/430736