This article is adapted from our article published in Auto Retail Bulletin in May 2022.

Current Position

I have written and collaborated on several articles on the topic of Direct Sales or Agency since July 2020. Back then, which seems like ages ago, very few OEMs had publicly stated they were considering a move to the Agency model.

Today, it is very different. Most have broken cover and announced their plans. Or, they’ve announced they are sticking with the existing franchise model for the foreseeable future.

Many OEMs have their blueprints, some of which have reached the market deployment phase. It means that their National Sales Companies will now be figuring out how to tailor them to their market.

One area that will require some head scratching is customer service. When a customer buys a car direct from the OEM, there is a risk that they head straight back to them if there is an issue during the life of the car. Just think how many thousands of tiny issues are resolved by retailers each week. Imagine the size of the contact centre required to cope with them!

For this article, I have collaborated with Jonathan Spence, who has worked with many household names in the area of customer service and marketing. This includes as Marketing Director at Hyundai when they launched the first five year warranty.

We examine how things are and might be, taking into account that OEMs and Retailers have to work in partnership to deliver great customer service.

The Long and Winding Road

In the mid-1990s, BMW re-launched its flagship model, the 7 Series. Eagerly awaited and well received by both the press and consumers, then came the shock – there was a flaw. The engine pinked. It was claimed that the cause was an unannounced specification change to petrol by the oil companies.  Seeing the potential tarnishing of its brand image, however, BMW acted quickly, decisively and proactively. It recalled every new BMW 7 Series and replaced the engine, free of charge. Whilst it cost BMW a reported £2,500 per car, it saved millions in brand reputation and served to underscore that BMW was The Ultimate Driving Machine.

Direct Sales Has Been Tried Before

The 1990s was also the decade of Daewoo, a Korean brand that saw an opportunity to address criticisms of the customer service received from automotive manufacturers and franchise dealers. Central to the proposition were brand owned showrooms and a fixed price (no haggling). Fast forward to today and you have manufacturers like Tesla and Polestar already operating a direct sales model, and now a raft of other brands considering it.  The main focus of brands planning to go direct seems to be fixed pricing. But will there be a ’Direct Service’ proposition and does there need to be one?

What Do Customers Think?

Since 2008, the UK Institute of Customer Service has been running regular surveys on UK customer satisfaction across thirteen market sectors, including automotive. In the most recent survey (January 2022), it did reasonably well, coming fourth behind Leisure, Retail (non-food) and Retail (food). However, twenty per cent of buyers were still dissatisfied with the service that they received.

Interestingly, it was value and mainstream brands that performed best. Skoda came top in the sector and sixth overall. Nissan came second in the sector and equal ninth position overall. Suzuki, which is likely to maintain its current distribution arrangements, was in third place and in equal seventeenth place in the overall rankings. BMW was fourth in automotive, number twenty overall and the top ranked premium brand. The next three brands were Dacia, Toyota and Hyundai.

Customers May Pay More!

Perhaps the most compelling statistic, however, that shows why car brands should create a new Direct Service model to accompany a Direct Sales model, is that the automotive sector had (by far) the highest agreement (43.5%) with the statement that customers are willing to pay more for excellent service. Whether this is an opportunity to encourage additional revenue or a need to improve service, it indicates that service, pre and post purchase, needs fresh thinking, particularly most of the premium brands.

Higher Expectations

One possible consequence of becoming a direct customer of the manufacturer will be a higher level of expectation from the customer about the quality of service that they should expect, particularly from premium brands. The resource and capability to manage this could prove quite a drag on manufacturers’ national sales offices. However, the positive is that it could lead to manufacturers really understanding customer needs and designing processes around them, whilst ensuring that the basics are right.

Helping Customers Use Their Cars

One basic issue that is a struggle for most brands is providing the customer with enough insight and interest in the full capability of the car. The amount of new technology and functionality has grown exponentially, so many owners are probably not aware of much of it, let alone using it. Leaving it to the handbook, whether paper or digital, doesn’t seem to work, so manufacturers will have to consider new ways for owners to get the full value out of their purchase, which will become more of an imperative and also easier if the relationship with the customer becomes direct.

We all knew that there was a knowledge gap to fill with the advent of electric cars and that work is ongoing, daily, it seems. However, no one expected the massive hike in fuel costs, driving up fossil fuels and electricity prices. There is an opportunity, or more probably, a need for OEMs and their partners to be helping customers use their cars more efficiently.

The approach taken by each manufacturer will be dictated to a great degree by the specification of their ranges, which highlights a broader issue about the opportunity for manufacturers to really design a customer experience based upon the brand’s positioning, proposition and values. In other words, a service strategy that is more distinctive and relevant by brand or to be even more precise to provide service that delivers the minimum level required supplemented by the brand service added value.

Nobody ‘Owns’ The Customer

When doing this, however, it is essential that manufacturers don’t fall into the attitudinal and linguistic mistake that has been heard before and could be again as direct relationships are established with buyers. The idea of “owning” the customers can become akin to a type of medieval feudalism and should be replaced by the idea of serving and satisfying customers, which is at the heart of being truly customer centric.

Bespoke Treatments

In reality, it is likely that there will be less of a uniform approach to customer and channel management from brands than has historically been the case, particularly with the development of new platforms. Also, the perceived wisdom is that each OEM’s Direct Sales model will be unique and so will require differing Direct Service Models. Whether or not a brand sticks with the current sales and service model, moves one hundred per cent to a truly direct relationship or somewhere in between, there will be a need for a defined, relevant and distinctive direct service strategy for new (and approved used) cars, which covers any channels or platforms served.

So What Does This Mean?

In our opinion, it is likely that those Direct Sales blueprints, mentioned above, were designed with carefully thought through customer journeys, contact centre organisations and so on. Retail Direct Sales is in its infancy, so the blueprint may not quite work. It is also a test for the National Sales Companies to tailor the blueprint to the market, while making sure the customer is properly served. The learning curve will be steep and the ride may be bumpy!

And obviously, if this strikes a cord, please get in touch.

Authors Stuart Copeland and Jonathan Spence