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02 Executive summary
06 Evolution to revolution
2
The fight for the customer
Almost 70% of annual auto sales (about 19 million units or $40 billion) will be
digitally influenced by 2020, a ~2.3x increase from today’s $18 billion
High digital influence is shaping brand Younger consumers will lead the digital charge:
consideration: Digital will influence 49% of consumers younger than 35 report digital
consideration in 60% of consumers by influence on the consideration set compared with
2020, up from about 45% today. 40% of those older than 35.
Most Indian automotive OEMs are behind the curve in digital investments.
They must redefine their marketing and customer engagement
efforts to reflect the current behaviour and usage patterns of automobile buyers.
3
The fight for relevance
As mobility mindsets evolve, disruptive mobility models and new competitors
create threats—and opportunities—for OEMs.
New mobility models are gaining acceptance. More than 40% of lead consumers report
using app-based taxi services like Ola and Uber more than three or four times per week.
Experiences in other markets indicate significant room for growth: India’s annual rides
per capita (adjusted for cities where these operators are present) is 3.3, compared with
17.1 in China.
While the demand for automobile ownership in India will likely remain robust,
we will continue to see the proliferation of alternative mobility models. OEMs must
begin to think of themselves as mobility providers rather than vehicle manufacturers.
4
We anticipate five critical imperatives for automotive OEMs to consider in this
new competitive landscape:
1 3 5
FOLLOW
DEALERSHIP IN THE
THE PROFIT:
OF THE BACKBONE:
Evolve business
FUTURE: Build
models to tap
Differentiate data and
into shifting
the retail analytics
profit pools
format capabilities
CHANGE
2 4
FOLLOW THE THE GAME:
CUSTOMER: Use product
Radically change digitisation to
the investment create deeper
mix to follow the ongoing
customer online customer
relationships
5
EVOLUTION TO REVOLUTION
6
R&D/ Supply Prod- Marketing/ Fin. After-
Vehicle The auto industry today is
usage/
Design chain uction Sales Services sales
mobility witnessing several
Internet of
disruptions across
Things (IoT) Automotive interconnectivity (IoT)
the value chain
Big Data Big data & analytics
7
New kids on the block:
YEARS IN MARKET
Players from outside the EXISTENCE CAPITALISATION
traditional auto industry
are upending the
competitive landscape 6 Ola $4B
7 Uber $70B
Notes: Valuations as of December 2016; 1 USD=67.8 INR; 1 EUR=1.05 USD; 1 USD=1,201 KRW
Source: Bain analysis
8
AUTOMOTIVE PROFIT POOLS (2015-2025)
The next decade will
Absolute change
35%
(2015-2025) witness a redistribution of
$306B
345%
$409B profits as a result of these
-68%
New players
Traditional taxi
value chain shifts
Used cars
-25%
Parts,
Over time, this shift in business models and
repair and
33% maintenance sources of competitive advantage will cause
the auto industry’s profit pools to shift.
Component
manufacturing
72% and
suppliers
9
DIGITAL INFLUENCE ON THE
AUTO CUSTOMER JOURNEY
10
As of December 2016
India is witnessing the
rise of a large mobile-first
1B+ 220M+ digital population
mobile phones smartphone users
China: 1.3B+ China: 550M+
US: 327M+ US: 200M+
11
INDIA AUTO SALES: 2016 AND 2020
70% of auto sales, or $40
billion, will be digitally-
$36B $58B
influenced by 2020, up
from ~$18 billion today
DIGITALLY
INFLUENCED 2.3X
2016 2020
Notes: Digital influence percentage for 2016 is based on ‘market representative’ consumers n=736; digital influence
percentage for 2020 is based on ‘lead’ consumers n=815
Source: Bain India Automobile Customer Survey, December 2016–January 2017 (n=1551)
12
Digital influence is set to increase significantly in the
early part of purchase journey and post-purchase
PERCENT OF AUTO BUYERS
Purchase trigger TODAY 2020
Notes: Digital influence percentage for 2016 is based on ‘market representative’ consumers n=736; digital influence percentage for 2020 is based on ‘lead’ consumers n=815
Source: Bain India Automobile Customer Survey, December 2016–January 2017 (n=1551)
13
DIGITAL INFLUENCE ON CONSIDERATION
Social media and search Percentage of respondents TODAY 2020
will each influence ~40%
of sales ($23 billion) by Recommendation from
family/friends
92% 91%
Offline Ads
32% 34%
(Radio, Print, OOH)
Notes: Digital influence percentage for 2016 is based on ‘market representative’ consumers n=736; digital influence
percentage for 2020 is based on ‘lead’ consumers n=815
Source: Bain India Automobile Customer Survey, December 2016–January 2017 (n=1551)
14
DOMINANT DEVICE USAGE FOR
ONLINE RESEARCH Mobiles are the most
Proportion of online research time spent on each device
important part of the
device mix
MOBILE LAPTOP
DESKTOP TABLET
7% 2%
15
AGE-BASED DIFFERENCES IN DIGITAL INFLUENCE
Percentage of respondents
Younger buyers will lead </= 35 years
DIGITAL INFLUENCES
CONSIDERATION
40%
Digital channels influenced the consideration
set of 49% of consumers younger than 35
years compared with 40% of those older
52%
than 35. Similarly, 52% of consumers
younger than 35 years conducted online RESEARCHING
research during their purchase journey ONLINE
compared with 42% of those over the age of 42%
35 years.
16
DECISIONS MADE PRIOR TO VISITING A Digital will force a
DEALERSHIP rethink of dealer role:
Percentage of respondents
50% of consumers have
made brand and model
Price point/ choice before dealer visit
budget
81%
Variant 40%
17
Dealers are still not using MOST POPULAR FORMS OF DEALER OUTREACH
digital media to their full Percentage of respondents
potential—SMS, calling
and print are still
dominant Database
Bulk SMS 87% 86%
calling
OOH
OOH 68% Radio 37%
18
POST-PURCHASE PREFERENCES
Post-purchase is the next
Which of the following would you consider doing online?
digital frontier: We expect
Percentage of respondents
to see a 2-3x digital
uptick over today
19
OPENNESS TO VIRTUAL REALITY-ENABLED
India is likely to witness TEST DRIVES
digital leapfrogging given Percentage of respondents
consumers’ openness to
new technologies UK DE US
Source: Bain Global Automobile consumer survey 2017 (n=1,000 per country [UK, US, DE, CN, IN])
20
Despite these significant digital shifts, auto OEMs lag consumers
spending just 10% to 11% of total ad budgets on digital media
60%
New Zealand
Netherlands
Canada
40
USA
Sweden
World Russia South
Korea
Germany
Japan
Mexico
Spain
France Finland
Brazil Italy
20
Indonesia Argentina
Thailand
Chile
India Overall Colombia
India Auto Peru
0
0 20 40 60 80 100%
Sources: Global Digital Ad Spending 2016, eMarketer; Euromonitor; Group M; Bain analysis 21
Customer Journey: Prerna, 26 year old tech-savvy working
professional (recent promotion, fulfilling her dream of buying a car)
options
CHANNEL
“Segment of one” targeting of prospective buyers by placement of One-stop app with features like
relevant content in social media and other digital feeds live chat, dealer contacts and
online payments for a seamless
Digital-enabled advocacy marketing to enable user-generated content to user experience
influence prospective buyers
22
POST PURCHASE
Completes VEHICLE
CONFIGURATION AT DEALER
Gets SERVICE
REMINDERS from SHOPS ONLINE
dealer through text for vehicle
messages and calls accessories
3D projections of model variants in the Mobile app that enables service reminders, scheduling and
dealership to provide customers actual look payment, online purchase of accessories and spares, and
and feel across variants while reducing ongoing vehicle health monitoring
inventory
Online community of lifelong promoters connected through a
Options for online vehicle configuration and common program
customization
23
Customer Journey: Mukesh, 50 year old businessman
(seeking to upgrade to a high-end German luxury car)
Predictive placement of targeted content on digital feeds of both On-demand dealer visit at home
prospective buyer and his younger family members who are key decision or in office with VR-enabled
influencers visualization of different models
and variants
24
POST PURCHASE
SENDS OFFICE
RECEIVES CALLS ASSISTANT TO
PERIODICALLY SERVICE CENTER
regarding service with car for service
needs and payment
CHECKS NO CONTACT/
AVAILABILITY OF RELATIONSHIP
NEAREST SERVICE with dealer until
CENTER and places next car purchase
service request
26
App-based cab aggregators: India presence
CITIES New mobility models like
WEEKLY RIDES COVERED ride hailing have
witnessed rapid growth
= 1 million rides
8
2013 The adoption of digital technologies is
extending beyond the purchase process and
in-car experience. Structural changes such
62
as urban congestion combined with
2014 technology enablers are leading to the
emergence of new types of mobility
solutions and shifts in the mobility mindsets
of customers.
2015 Consider app-based cab aggregators like
124
Ola and Uber. Virtually nonexistent in 2013,
they collectively grew to account for an
estimated 13 million weekly rides by the
end of 2016.
2016
131
27
Among lead consumers, these new mobility models are
overtaking own vehicle use for certain occasions
Local trains,
Metros, etc.
1–2 times per
Buses month
3W
City taxis
App-based
taxi
3–4 times
per week
Own vehicle
Daily
• Kuaidi Dache and • The two entities merged to form • More than 300
Didi Dache were Didi Chuxing (formerly known million users spread
established as as Didi Kuaidi) across 400-plus cities
independent • More than 150 million users in China
entities spread across 300-plus cities • More than 11 million
daily rides
Note: *Adjusted for population of cities where ride-hailing services such as Uber, Ola are available
Sources: Euromonitor; Bain analysis
29
Other models are also Turo Cityflo Redbus
emerging to gradually
shape a seamless • App-based P2P private car-sharing • Tap into the demand for
30
GO-JEK HAS EVOLVED INTO A ONE-STOP MOBILITY
SERVICE PROVIDER IN INDONESIA
Some of the new players
in this mobility ecosystem
could evolve into
comprehensive mobility
service providers
31
CRITICAL IMPERATIVES TO WIN:
THE FIVE GEAR SHIFTS
32
Five critical imperatives—“gearshifts”—for Indian
auto OEMs to thrive in this changing landscape
Follow the profit: Evolve • Explore partnerships and targeted investments both forward
business models to tap into and backward in the value chain to participate in profitable
shifting profit pools future businesses
Build the dealership of the • Convert dealerships into brand experience centers by
future: Differentiate the developing differentiated retail formats with innovative virtual
retail format physical layouts
Change the game: Use • Use product digitisation to move from one-time engagement to
product digitisation to enable deeper on-going customer relationships
deeper ongoing customer • Offer value-added services like pay-per-use insurance and
relationships smart maintenance
33
OEMS are attempting to increase reach across
Follow the profit: Evolve the value chain
business models to tap
into shifting profit pools
Parts,
Components Mfg. & Financial Mobility
repair & Used cars
and systems sales services services
maintenance
34
DIGITAL AD SPENDING
(AS A PERCENTAGE OF TOTAL AD SPENDING) Follow the customer:
Radically change
54%
investment mix to follow
~$250M– the customer online
$300M
OPPORTUNITY
35
Follow the customer: TRADITIONAL DISRUPTED
WORKFLOW WORKFLOW
Invest disproportionately NEW PRODUCT DEVELOPED
in discovery and
consideration using digital Behavioural
technologies Demographic
segmentation
segments crafted
with big data
analytics
Digital channels allow for accurate and One-time pricing Dynamic real-time
predictive content targeting to influence based on historical pricing based on
sales variety of inputs
consideration. Given the vast amounts of
data that customers generate online, digital
channels provide automotive OEMs the
ability to target "segments of one" with the Rule-based ad and
right marketing content relevant to the Purchase one set of offer deployment
stage of the purchase process. radio and print ads through multiple
channels
Monitor sales
Customer interaction
through
tracked, analysed
various
and offer is revised
channels
36
Case Study: Hyundai’s success with Rockar store
in London Build the dealership of the
future: Differentiate the
• Primarily digital showroom with only retail format
four cars on display; entire purchase
process digital
• Showrooms located in high-street
locations to increase customer access
and convenience OEMs must think about how to differentiate
the offline brand experience.
37
Change the game: Use INFOTAINMENT USAGE-BASED
SERVICES SERVICES
product digitisation to
In-car delivery of music and Customised insurance
enable deeper post- television shows, downloadable programmes based on mileage
purchase relationships applications, smartphone
integration, voice and
and vehicle health, driving style
support and fuel optimisation tips
communication services and
social media integration
38
Change the game: Go bold with a 360˚digital approach to
ensure a truly differentiating customer experience
Purchased Phone #s
The power of analytics that use internal
data from various sales and marketing
real-time sources
is well understood.
Gather and
continually update
While it is critical to develop the business Run analytics on data in real-time
case and applications for analytics solutions, external data on single platform
the true complexity is in the data layer. With
the growing amount of data from disparate Run separate
sources, it is critical to invest in a well- analytics on
internal data
designed data and meta-data layer with
clearly defined objectives of the system,
along with the right technology solution. Integrate data across
Doing so will help automotive OEMs fully sources into single
harness the power of digital technologies. platform
Present data to
analysts in visual and
usable format
Enable marketing to
rapidly share insights
with broader org
40
41
About Bain & Company,
India
Bain’s consulting practice in India has About Facebook
worked with clients in sectors including
consumer products, retail, apparel, Founded in 2004, Facebook’s mission
industrial goods and services, is to give people the power to share
infrastructure, healthcare, technology, and make the world more open and
telecom, financial services, automotive, connected. Over 1.86 billion people
agriculture and private equity. Its globally and 180 million people in
project experience includes growth India use Facebook to connect and
strategy, mergers and acquisitions/due share the things they care about and
diligence, post-merger integration, to discover what’s going on in the
organisational redesign, full potential, world. Facebook for Business’
market entry, performance improvement Marketing Tools help businesses find
and change management. Bain’s robust new customers and build lasting
analytic toolkit and fact-based approach relationships with them. Whether
enables it to deliver innovative and you’re just getting started with
pragmatic strategies that create value. Facebook for your business, or you’re
ready to optimize your Facebook
Consulting Magazine has rated Bain & presence to meet specific goals,
Company the best consulting firm to Facebook for business is here to help.
work for 11 times since 2003. In India, Facebook IQ is a team of world-
Bain has served clients since 1995 and leading experts on data analysis and
formally opened its consulting office in storytelling, who provide marketers a
2006 in Gurugram near New Delhi, in true understanding of people, and
2009 in Mumbai and in 2015 in what drives them to stop, look, feel,
Bengaluru. share, do and buy. We then translate
what these insights mean for brands.
For more information, visit
www.bain.com and www.bain.in.
42
ABOUT THE AUTHORS
Srivatsan Rajan is chairman of Bain & Company’s India offices. He is an active contributor to the firm’s Customer
Strategy & Marketing practice.
Joydeep Bhattacharya is a partner in Bain & Company’s New Delhi office. He is the head of Bain India’s Consumer
Products and Retail practices.
Yaquta Mandviwala is a partner in Bain & Company’s Mumbai office. She leads Bain India’s Customer Strategy &
Marketing practice.
Deepak Jain is a partner in Bain & Company’s New Delhi office and is a member of Bain’s Industrial Goods & Services
practice.
ACKNOWLEDGMENTS
A joint team from Facebook India and Bain & Company, India conducted this study. The key members of the Bain team
are Srivatsan Rajan, partner; Joydeep Bhattacharya, partner; Yaquta Mandviwala, partner; Deepak Jain, partner; Aarthi
Rao, Arup Mazumdar, Preeti Kumar, Gobin Chandra, Krithika Sriram, Siddhant Mittal, Siddha Jain, Ankur Sapra, Dushyant
Khanduja and Shashank Jain. The Facebook India team members are Umang Bedi, Prasanjeet Dutta Baruah, Sudarshan
Sarma, Balendu Shrivastava, Sunita G.R. and Aditi Nargundkar.
The team would like to thank all the companies, executives, employees and experts who generously shared their
perspectives with us. We would also like to thank Bain & Company global partners for their expertise and input on
various global case examples.