The New Consumer Decision Journey

December 28, 2015
steve@automotive.ventures

McKinsey has revised their “Consumer Decision Journey” model, and car dealers might want to take notice of the implications of this new framework.

For years, empowered consumers have held the upper hand when it comes to making purchasing decisions. But McKinsey finds that companies are successfully fighting back.

In the November 2015 issue of the Harvard Business Review, authors David Edelman and Marc Singer write about Competing on Customer Journeys.

The recent flare-up around advertising blockers on mobile devices is just the latest salvo in the digital-technology “arms race” that has made today’s consumer a formidable force. From social media to mobile devices, technologies have given consumers unprecedented power to compare prices, complain loudly, and find the best deals.

This tipping of the balance of power in favor of consumers has been evident for years. In 2009, McKinsey declared that the traditional “funnel” model—in which consumers began with a set number of brands in mind and whittled them down until they decided what to buy—had been replaced by what they called “the consumer decision journey.”

This journey involved shoppers taking advantage of technology to evaluate products and services more actively, adding and removing choices over time. And it included a feedback loop, where customers kept evaluating products and services after purchase, pressuring products to perform and brands to deliver a superior experience on an ongoing basis.

McKinsey now believes that their consumer decision journey model needs updating.

What’s changed? In one word, “technology”.

In the past few years, brands have been playing catch-up, investing in new technologies and capabilities in a bid to regain relevance with shoppers and exert greater influence over how they make purchasing decisions.

McKinsey’s experience advising more than 50 companies and researching more than 200 on best practices for building digital capabilities—coupled with detailed conversations with dozens of chief digital officers and more than 100 digital-business leaders worldwide—has convinced them that brands today can not only react to customers as they make purchasing decisions but also actively shape those decision journeys.

A set of technologies is underpinning this change, allowing companies to design and continuously optimize decision journeys. More important, companies today can use journeys to deliver value to both the customer and the brand. Companies that do this well can radically compress the consideration and evaluation phases—and in some cases even eliminate them—during the purchase process and catapult a consumer right to the loyalty phase of the relationship.

The journey itself is becoming the defining source of competitive advantage.

 

McKinsey new consumer decision journey

In fact, a recent Association of National Advertisers survey found top performing advertisers understood the entire customer journey much better than their peers (20 percent versus 6 percent) and had much better processes for capturing insights about customers and feeding them back into their marketing programs to improve performance (30 percent versus 11 percent). They also valued automation as a critical capability to respond to disruption and deliver both consistent and personalized customer experiences (30 percent versus 11 percent).

McKinsey has found that a company’s ability to deliver that value relies on four distinct but interconnected capabilities:

  1. Automation streamlines journey steps. One example is letting people take a picture of a check and deposit it through the bank’s app rather than doing it in person. While automation of processes is highly technical, the focus is on enabling simple, useful, and increasingly engaging experiences.
  2. Proactive personalization uses information about a customer—either based on past interactions or collected from external sources—to instantaneously customize the experience. Remembering customer preferences is a basic example of this capability, but it extends to personalizing and optimizing the next steps in a customer’s journey, such as immediately putting a valued traveler on an upgrade list.
  3. Contextual interaction uses knowledge about where a customer is in a journey to deliver them to the next set of interactions, such as a retail site showing a customer the status of a recent order on the home page. Some hotels are experimenting with using their app to operate like a key when a customer gets to his or her room.
  4. Journey innovation extends the interaction to new sources of value, such as new services, for both the customer and the brand. Companies mine their data and insights about a customer to figure out what adjacent service he or she might appreciate. The best companies design journeys that enable open-ended testing to allow for constant prototyping of new services or features. This may include, for example, an airline’s app that has the ability to integrate with a taxi service so that travelers can book cars to pick them up when they arrive at their destination.

Implications to Dealers

So what are the implications to the automotive industry, and car dealerships in particular? The auto industry isn’t exactly known to be cutting-edge in technology innovation and adoption, but what we’ll likely see is the following:

  1. Customization and personalization will get better: Nearly all consumers now conduct their car shopping online, and the best technology providers will harness these online shopping activities to provide a much more customized/personalized experience. The OEMs and dealers that do this right will win consumer loyalty and convert to sales at a higher rate. But they can’t do this alone. This change has to be facilitated through product innovation of their technology providers.
  2. Dealership websites will get smarter: As a result of better tracking and understanding consumers (see point immediately above), dealership websites will evolve past the current ugly, templated style that too often has far too many widgets and calls to action shoehorned in, and will allow the dealer to speak to the individual needs of the unique consumer – to both anticipate and satisfy their particular needs. But a lot of innovation will need to occur with dealer website providers to evolve to get to this point.
  3. Dealers that do the best job can “accelerate” the consumer’s journey (and thus decision-making process): Look at the growing success of companies like Carvana and Vroom, who are offering an almost “too good to be true” value proposition (all negotiation done online in an easy to use consumer interface, vehicle is delivered to the driveway, consumer has seven days to test drive and return it – no questions asked). Progressive dealers will need to keep a keen eye on those business models that are gaining traction and be prepared to match the value offered to remain relevant and competitive (for example, delivering vehicles to consumers driveways, providing a short guaranteed buyback period, making the service interaction easy and quick).

All three of the implications to the industry listed above will necessitate far greater technology innovation in the automotive space than we’re currently experiencing; but the reward for consumers will be a better experience, and the reward for dealers and OEMs will ultimately mean more business and profit, and a competitive advantage based on superior customer experience.