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 / Winter 2005 / Issue 41(originally published by Booz & Company)


Building a Better Matchmaker

The answers are then validated in real time, by detailed statistical analysis of responses from elsewhere in the database. For existing customers, this includes past purchases or inquiries. (“You commute to and from work every day. Are you interested in seeing our highly fuel-efficient models with hybrid engines?”) For all customers, it draws on comparable searches by other purchasers. (“Other safety-focused people like you were interested in supplemental rear-seat airbags. Would you like to consider these?”) At the same time, the system generates analytically informed offers that the dealer and manufacturer can present to the customer — not just specifying the kind of car and its options, but how the customer might want to buy it (options for customizing and financing the vehicle) and how he or she might want to own it (the various follow-up warranty, service, and customer-support packages available). Some of these options may be triggered by inferences generated through the software. (“Your address is four blocks from the ocean. Would you like an extra coating to protect the undercarriage from sea spray?”)

Customers engage with this system in a variety of ways. Some start directly with the car manufacturer, through its Web site or call center. Others seek information at the Web sites of local dealers before showing up in person. Still others use kiosks on the showroom floor to learn about the vehicles, and then confirm their preferences by test-driving the cars. Some customers walk around the lot with a sales associate who holds a PDA; others are interviewed by a salesperson who types the information into a desktop computer. These salespeople are now contact points between customers and the wide knowledge base that is held jointly by the dealers and the manufacturer.

The result is a stronger value proposition for everyone concerned. Dealers close more sales and improve the profitability of every transaction. Salespeople on the showroom floor can market a wider range of products and services by choosing those more likely to be of value to each particular customer. They price more flexibly, factoring in the franchise’s overstock data or the customer’s lifetime future potential. And they obtain market intelligence on purchasing behavior that will help direct future sales. Dealers thus need fewer discounts and rebates.

Manufacturers, meanwhile, gain a wealth of information about customer preferences for colors, options, and accessories. This makes them better equipped, with tailored reports on sales and inventory performance, to anticipate which products are more likely to sell, and to tailor their wares to customers’ actual needs and desires. The effects may include a more efficient and responsive supply chain, lower dealer inventories, a vehicle mix tailored to local dealer geographies, a higher level of customer interest in higher-margin options, and a general reduction in costs as time and money spent on unsold models are reduced.

And the customer? He or she gets an engaging, inviting experience, designed with a recognition of the most common traits of car customers these days: the desire for a good deal, diverse transportation needs, the ability to gather a lot of information as an individual with a Web browser, and limited time to choose. A highly refined CSC tends to make customers feel they’ve made the right decision, because they can make choices aligned with their own needs and temperament. That feeling continues long past the purchase date, because the ultimate package — the car, the options, the accessories, the wraparound services, and the price — is well suited to each customer’s specific needs, whether or not that customer knew what he or she wanted before entering the real or virtual showroom.

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  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.
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