Google experts say dealers and automakers should share more data

By the time customers sit down with a dealer, most of them have made a decision on which car to buy after searching on the Internet. Google automotive retail experts, Christian Richter and Riki Stadeler, both based in Germany, talked about what matters most in online sales in an interview with Automotive News Europe sister publication Automobilwoche.

How much did the coronavirus pandemic change car buying behavior?

Richter: Digital sales got an extreme boost during the pandemic. Our search queries show that. The interesting thing is that the search volume has remained at this high level ever since.

What does the typical customer journey currently look like?

Stadeler: The Gearshift study, our annual study on the new car buying process, shows that many car buyer journeys start at Google but do not follow a linear process. Customers jump back and forth between makes and models, search for dealers and vehicle features, find out about prices, and then jump back a few steps and look at alternatives. YouTube is used heavily for this. Across the entire customer journey, we measured about 900 digital and physical data exchanges when buying a new car, whether at the manufacturer or dealer, on third-party sites such as Mobile.de and Autoscout, on YouTube, in the CRM customer service, sales, and marketing platforms, and also in call centers.

Do car buyers still pick up the phone?

Richter: More often than you might think. Many people want to shop online more, but physical dealerships are still very important. Around 80 percent of car buyers want a physical interaction at some point. That is why we always say: gather the data from the call centers, the dealer and the manufacturer, together with the data that is coming in digitally. Try to measure holistically so you know which parts of the journey are mostly contributing to the car purchase. Often automakers and dealers do not know which campaign triggers a call.  Pulling together as much data as possible helps to tailor offers that may lead to a purchase decision.

How can data be used to bring about a purchase decision?

Richter: It's all about probability calculation. That means we take all the data that comes in through the various channels and correlate it with the data where there was a buying decision at the end. If the treasure trove of data is large enough, you can anonymously identify groups of customers who are either very likely or unlikely to buy a car. In the next step, it is possible to target customers with a high likelihood of purchase and thus use the advertising budget more efficiently.

To achieve this, manufacturers and retailers need to collate date. Are they already that far along?

Stadeler: A lot has happened in the past three to five years. Automakers and retailers are moving closer and closer together. We no longer see the strict separation of data that existed just a few years ago. This is indeed a major challenge. A great deal has already been done in recent years to tackle this and, ideally, to merge data. We no longer see such a strict separation of data, but rather the common goal of understanding the customer as best as possible - and building even closer customer relationships not only in new customer acquisition, but also in service in particular.

Dealers value customer data. Many have reservations about handing over all of it because they believe it weakens their position with automakers. How do you counter this position?

Richter: We have this discussion very often with our customers. I can well understand the concerns. Nevertheless, it is essential that manufacturers and retailers cooperate closely and find an arrangement that benefits both. If they do not, they both lose. Customers go where they have the best customer experience. They will find it where automakers and retailers have a common technology infrastructure that makes it easy to exchange and measure data. That brings me back to the 900 data exchanges. If there are separate data silos -- one at the retailer, one at the call center, one at the manufacturer -- then the customer will only get a restricted offer.

Some automakers such as BMW are moving to an agency retail model in Europe where manufacturer sets the pricing and manage the online relationship with buyers and the dealership acts as an agent. Is this a good way forward?

Richter: Personally, I do not think it necessarily has to be the agency model. Cooperation can also be achieved well with conventional franchise agreements. The important thing is the will to cooperate.

Automakers and their dealership networks must now against new online players such as Auto1, Cazoo, or Carvana. Is that the real challenge now?

Stadeler: These players are very well positioned in the used car sector. The online sales platforms have been well positioned for some time, with a particular focus on the used car sector. Above all, they use Google search as a crucial sales channel and have gained many years of experience in how to make the best use of digital. If manufacturers and dealers act even more collaboratively to place their offerings in the best possible way in search, the end user will be presented with a broader picture to choose from. In any case, the market is very large -- so both sides can find their place.
Richter: I see it the same way. That there will be shifts is beyond question. But what these will look like in detail and who will have the larger share in five to ten years is completely open. But even if purely digital sales channels become established as far as possible, retail on the ground will still be necessary. One reason is that at some point, every car will have to be serviced. This requires a physical network. And that is often the traditional dealer, on whose collaboration the purely online players will also depend.

You said that currently around 80 percent of car buyers want some kind of physical interaction. Where will that be in the future?

Richter: I think there will be some physical experience in the majority of sales. But it may well be that it's just the vehicle handover or a final viewing before the purchase. Much of the decision-making process, such as on make, model and ownership concept, will happen digitally beforehand. When the customer meets the physical network, a large part of the customer journey has already been completed.

If you enter "buy a car" in Google search, only offers from online players such as Mobile, Autoscout or Autohero appear in the top results. Offers from traditional dealers come far down the list. Is the race already over?

Stadeler: No. Put simply, the principle of Google search is that whoever is most relevant is also the most visible. In case of doubt, the pure players you mentioned have more experience and more resources, simply because it's their core business. But as I said, many retailers, together with their manufacturers, have adapted to using Google as a business and lead channel and have geared their websites to this. This becomes very clear when they make specific search queries, for example by saying: I want to buy model X from brand Y in Munich. You will suddenly find many offers from dealers and manufacturers in the search results. The decisive factor for success is not so much size, but that it is understood and accepted at management level how important the digital sales channel is. In the end, the decisive factor for a retailer's good visibility is the importance attached to digital and also search by the retailer. Ideally, that starts at the general manager level.

You introduced the Vehicle Ads format in the U.S. last March. When car buyers search for models, they are shown dealer offers directly in the search results. What is your assessment of the new offering?

Richter: Very positive. Large dealer groups in particular, such as Asbury, Ken Garff and CarMax, have taken up the offer immediately. At the Asbury Group, the number of conversions has increased by 35 percent and the conversion value by twelve percent. In the meantime, we are also cooperating with some manufacturers. However, we are not yet communicating their figures. We can only say that they are in a similar range to those of the retail groups. We hope that we will soon be able to offer the format in Europe as well. Unfortunately, however, we do not yet have a timetable for this. But I can only advise every retailer to prepare for inventory-level advertising and experiment with it. This is clearly the trend. This means that as a dealer, you mirror the merchandise that is in the showroom and in the yard not only on your own website, but also in a digital inventory feed and then play it out in all kinds of online channels with a local focus. Vehicle Ads is just one format for this. Third-party platforms such as Mobile.de and Autoscout also use such inventory feeds. On the part of Google, text search ads can already be customized in Germany on the basis of the feed. In the display or YouTube network, for example, dynamic display ads are possible. For parts and accessories, Google Shopping Ads can be used.

What have you observed in the U.S.? Are retailers there increasingly relying on Vehicle Ads as the sole format or do other platforms remain relevant, such as Mobile.de here in Germany?

Stadeler: Most retailers use many channels at the same time. But what the most successful of them do is measure exactly which channel is working and how well.

And what does not work is discarded?

Richter: Either that, or the budget is reallocated depending on the effectiveness of the channel. The latter is our recommendation. Only those who are active on all channels have comparative data.

If you were to come to Germany with Vehicle Ads, it would be a frontal attack on the two market forerunners Mobile.de and Autoscout.

Richter: I would not say that. Vehicle Ads can also be used by providers like Mobile and Autoscout. Our goal is just to bring the user directly to the inventory. Whether that is offered by Mobile and Autoscout or by the dealer is open. In the U.S., Vehicle Ads are used by dealers and manufacturers as well as third-party platforms.

Google itself then earns by marketing sponsored spots in search results?

Richter: That is right. That works just like traditional search ads through our auction system.

However, in view of the good figures for U.S. retailers, it stands to reason that you will secure a portion of the marketing budgets of retailers and manufacturers that have so far ended up on other platforms?

Richter: I do not see that we could drive the big aggregators out of the market - we do not intend to do that either. They are very successful with their offerings. Our goal is always to make the entire ecosystem more efficient and successful - automakers, dealers, aggregators.