strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: November 29, 2005

 
 

Building a Better Matchmaker

How a “customer-sensing capability” can do a better job of connecting people to the cars — and other purchases — of their dreams.

Photograph by Holly Lindem
“The big gap in our information system was at the retail level,” complained the CEO of a prominent automobile manufacturer. “We were not in touch with the actual retail market. This method — or lack of it — limited our sensitivity to changing market trends and required the staff at headquarters to base its sales forecasts on figures that were not only weak but also several weeks old.”

How little has changed over the past 50 years. That passage was written by former General Motors CEO Alfred P. Sloan Jr. It appeared in his 1964 autobiography, My Years with General Motors. But it could have been voiced by any major auto company chief executive today. Car dealers still display habits that date back to their heritage in horse-trading. They offer steep discounts on cars in their lots to ensure that customers don’t “walk.” Those few dealers who routinely collect customer data tend to guard it jealously, thus preventing manufacturers from getting a jump on the styling, performance, and pricing trends that could prompt the next generation of successful products. Without reliable data on customer demand, automakers depend on their intuition, which in turn leads them to misinterpret their markets.

In short, at the dawn of the motor vehicle’s second century, the customer experience for most automobile purchases remains mired in the marketing methods of a past age. Or, to put it more harshly, it’s an age that should finally pass. And it could — but not without a transformation of the quality of interaction among manufacturers, dealers, and customers.

An emerging set of organizational practices could make such a transformation possible during the next decade. These problems don’t have a generally accepted name just yet, but they could be thought of as a “customer-sensing capability” (CSC) — the organizational capacity to differentiate customers, detect their needs, tailor information and offers for them, and ultimately develop products and services in real time. Dealers would no longer be horse traders. They would be matchmakers, connecting each customer with the cars, customer experiences, and option packages that fit best.

The CSC is made possible in part by computer systems based on the “inference engine” principles of heuristic programming. Software rules (“If the customer requires extra passenger space, suggest the wagon model, third-row seating, and a rooftop carrier for excess luggage”) combine to provide sophisticated analyses of complex data, without requiring a human expert to draw inferences or conclusions. Referred to as “matching tools” by the Wall Street Journal in July 2005, these online services are also called “expert systems,” because they can be programmed to capture and play back the decision-making strategies of the most successful experts in an organization.

But a customer-sensing capability is not primarily a computer-based tool. It is itself a hybrid of operations, information technology, and marketing management, integrating expert systems with new sales practices to develop incisive intelligence about the trade-offs that people are (and are not) willing to make among such factors as price, availability, and vehicle attributes. The relevant tools and practices for this kind of matchmaking fall under diverse functional realms, such as customer relationship management (CRM), information technology, and sales force management. A true customer-sensing capability brings them all together. CSC has potentially far-reaching implications for the automotive industry — and for other industries, such as appliances, travel, and construction, as well — because it changes the market ecosystem of the automobile purchasing process, shifting the incentives and interrelationships that shape behavior and making it much harder to treat all customers the same way.

Imagine that a customer, when buying a car, starts by tapping into a computer system that calls up specifications and options to meet any concern or whim. As the system goes through its paces, it systematically gathers and analyzes information about customer needs and desires. What is more important to this customer — safety or style? Comfort or performance? Does the customer have children? Does he or she take frequent long trips or commute primarily in the city? Given those factors, what kinds of options and accessories (like cupholders and media systems) would make a difference? What kinds would be ignored? What type of warranty or finance plan would fit this customer’s stage of life and profile? The answers set up the trade-offs that allow the CSC to best match an entire offer bundle to this specific customer’s preferences.

 
 
 
Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store

 

Resources

  1. Marco Iansiti and Gregg Rosenberg, “Beyond the IT Monolith,” 2004, Harvard Business School White Paper no. 9-604-070: Principles and practices for “less is more”–style information technologies; useful for designers of computer systems oriented around customer-sensing capability. Click here.
  2. Bill Jackson and Conrad Winkler, “Building the Advantaged Supply Network,” s+b, Fall 2004: The back end of an effective customer-sensing capability. Click here.
  3. B. Joseph Pine II and James H. Gilmore, “Why Experience Marketing Pays,” s+b, Fall 2004: American Girl and REI Web sites as examples for this kind of “customer-sensing” marketing. Click here.
  4. C.K. Prahalad and Venkatram Ramaswamy, “The Co-Creation Connection,” s+b, Summer 2002: Manifesto advocating integration of marketing, information technology, and the supply chain to form a combined vehicle for customer-based product development. Click here.
  5. Jennifer Saranow, “It’s a Match! As Buyers Head to the Web for Research, Car Makers Are Trying to Make Sure They Find What They Want,” Wall Street Journal, July 25, 2005: Comprehensively and engagingly portrays the range of online services for car buyers today.
  6. Barry Schwartz, The Paradox of Choice: Why More Is Less (Ecco, 2004): A reminder of the danger of overwhelming people with too many choices.
  7. Steven Wheeler, “How the Auto Industry Should Embrace CRM,” s+b enews, 05/01/02: A step along the way to the thinking underlying this article, with the additional element of telematics. Click here.
 
Close
Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.

Close