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


Building a Better Matchmaker

And those are three of the most sophisticated uses of expert systems in marketing to date. A company that wants to realize profitability, productivity, and customer satisfaction needs to build a better matchmaker than those that exist today. This in turn requires a design and implementation process that starts not with the technology, but with a better understanding of the customer.

Meeting Customers Halfway
Analyses by Booz Allen Hamilton, J.D. Power, and other researchers over the years have shown that customer satisfaction — not simply with the offer for the car, but with the experience of buying it, owning it, and replacing it — varies dramatically by brand, by dealership, and even by the individual salespeople that customers encountered within a specific dealership. Satisfied customers remain loyal to both their brands and their dealer, reducing the need for expensive acquisition marketing and sales training programs.

But there are several reasons that customers have become less loyal in recent years. First, as competition has increased, the complexity of consumer choice has intensified. In every major automotive category, there are five or 10 competing brands. The few exceptions, like the Chrysler PT Cruiser and the Volkswagen Beetle, are niche products — and even they offer the same basic functionality of a commonplace station wagon or sedan. Car buyers also face hundreds of amenities and options to choose from, including technologically complex features like navigation systems and computer-controlled seat positioners. There is also a dizzying array of financial and after-purchase options for owning the car: leases, warranties, service contracts, and safety-oriented service agreements like the General Motors OnStar system, which dispatches help to car owners in difficulty. Not coincidentally, research shows a strong inverse correlation between sales satisfaction and time spent making decisions at the dealer — the less time spent, the happier the customer.

Even when it’s relatively straightforward, the car-buying process is still discomfiting for many purchasers. The days of the “blitz” (an assault on a customer by high-pressure sales teams) and the “highball” (backtracking on an agreed-upon trade-in price after the sales contract is signed) may be largely over, but recent volume demands made by many manufacturers have shifted dealers’ focus back to “selling metal” rather than creating a positive purchase experience for customers. Customers don’t know how much to believe of what salespeople tell them — about the price of the new car, the trade-in price for their old car, or the value of competing options, such as dealer financing versus outside financing.

Compounding the problem are the extraordinarily high annual turnover rates among automotive salespeople — hovering around 100 percent, according to CNW Marketing/Research in Bandon, Ore. This results in loss of knowledge, repeated investments in training, diminished interest in long-term customer relationships, and short-term financial pressure.

Finally, customers themselves are more diverse than they used to be. For example, the Internet has changed the way some people research automobiles; according to J.D. Power, more than 60 percent of the consumers who buy cars use the Web (visiting an average of seven sites) to research their choice. More customers than ever before walk into showrooms already knowing something about the car they want to buy, because of either their own research or the recommendations of friends and acquaintances. At the same time, a significant number of customers still haven’t done any research, and they are more baffled than ever by the choices facing them. Salespeople who treat all customers the same way risk wasting the time of the first group by delivering information they already have, or driving away the second group by confusing them further.

Fine-Tuning the Technology
Marketers can be profitable in this environment by finding the sweet spot of complexity: the balance between too much choice and too little. The most salient designs for customer-sensing technology help marketers find that sweet spot by tracking customer preferences and needs. John Hauser, Kirin Professor of Marketing at MIT’s Sloan School of Management and head of its Virtual Customer Initiative (VCI), argues that this kind of “virtual-customer” technology can spark profound changes in a company’s operations, turning around the internal focus that many managers unconsciously adopt. “In an organization, people used to listen to the loudest vice president,” he says. Now, virtual-customer technology “gives everyone a chance to listen to the voice of the customer.”

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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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