Online Auto Shopping to Significantly Impact Price Competition, Put More Emphasis on Test Driving
12 January 2000
The Polk Company: Online Auto Shopping to Significantly Impact Price Competition, Put More Emphasis on Test Driving
Polk Study Also Shows Manufacturers and Dealers
Will Need to Focus More on Loyalty
DETROIT, Jan. 12 -- Will the Internet make auto dealerships
extinct? Not likely, according to a new study released today by The Polk
Company.
The 1999 Model Year Polk Automotive Internet Activity Analysis reveals
that increased Internet shopping for new vehicles will impact price
competition and the level of test-driving at dealerships, creating a busier
atmosphere for most dealerships. The study also shows that, as online
shopping for new vehicles rises, manufacturers and dealers will have to work
even harder at building customer loyalty.
Polk's Internet study shows that the test drives and previous experience
with the vehicle are important to all consumers, but Internet shoppers place
more importance on the test drive than do traditional shoppers. "Although the
Internet enables consumers to make more informed decisions about their vehicle
purchases, the dealership will continue to play a key role in the vehicle
purchase process," said Karen Piurkowski, director of loyalty at Polk.
"Dealerships can provide that one key piece of information that consumers
cannot access on-line -- the actual driving experience."
According to Polk, the trend toward gathering vehicle information via the
Internet will also require manufacturers and dealers to provide their
customers with as much vehicle information as possible. Merely providing a
dealer or manufacturer website will not suffice.
"By the time Internet shoppers actually visit the dealership, they're
already armed with a wealth of information about the vehicles they want to
buy," Piurkowski said. "So, besides the test drive, pricing is their key
focus. Internet usage will have a significant impact on price competition in
the near future. Information-savvy consumers will be in a much better
position to comparison shop and to negotiate the price of their new vehicle."
Piurkowski underscored the importance of vehicle exposure via other
sources like consumer and automotive magazines and awards for superior
performance (such as the Polk Automotive Loyalty Awards) that impact the
purchase decisions of information-hungry Internet shoppers as well.
The Polk study revealed that Internet shoppers believe in doing their
homework. According to Polk, online shoppers used other sources of
information more often than traditional shoppers. Consumer magazines, awards
for superior performance, word-of-mouth, automotive magazines, newspaper
articles, manufacturer brochures and dealership promotional materials
influenced them to a considerable degree.
"Manufacturers have to ensure that a wealth of information about their
products is available to Internet shoppers from a variety of sources,"
Piurkowski said. "Traditional shoppers, on the other hand, place more
emphasis on 'relationship-type' information. Previous experience with the
vehicle (i.e., their relationship with the vehicle) and the dealership
salesperson had more impact on these shoppers than on Internet shoppers."
Importance of Selected Information Sources*
(Average ratings)
Source Internet Shoppers Traditional Shoppers
Test drive 3.58# 3.14
Previous experience with the vehicle 3.03 3.15#
Dealership salesperson 2.93 3.01#
Consumer magazines 3.08# 2.49
Awards for superior performance 2.83# 2.57
Vehicles seen on the road 2.76# 2.60
Word-of-Mouth 2.53# 2.31
Auto magazines 2.66# 2.18
Manufacturer brochures 2.48# 2.22
Dealer promotional materials 2.27# 2.17
Newspaper articles 2.21# 1.95
Source: Polk's Automotive Internet Activity Analysis
* Based upon a scale of 1-5; 1 = "not at all important" and 5 = "of
critical importance"
# Indicates significantly higher mean rating.
The focus of Internet shoppers on information gathering and competitive
pricing could translate into less loyal customers, according to the Polk
study's conclusions. Internet shoppers are less likely than traditional
shoppers to be loyal to a particular manufacturer, make or even vehicle
segment. Just over a third of Internet shoppers repurchased the same make,
compared to half of traditional shoppers. At the manufacturer level, 54
percent of Internet shoppers repurchased from the same manufacturer, compared
to 64 percent of traditional shoppers.
"With this increased focus on information gathering and evaluation,
manufacturers and dealers must increase their efforts in building loyalty
among their customers," Piurkowski said. "In order to do so, they'll have to
put more effort into proving that their vehicle is the best choice for these
customers, not merely saying so in their advertising."
LOYALTY RATES
Traditional Shoppers Internet Shoppers Internet Buyers
Manufacturer Loyalty 64.07% 53.59% 46.09%
Make Loyalty 49.89% 35.88% 35.52%
Segment Loyalty 46.19% 36.56% 37.35%
Source: Polk Automotive Internet Usage Study - 1999 Model Year -
First 6 mos.
The Polk study was based on a mail survey of more than 13,000 new vehicle
owners who acquired a vehicle between October 1, 1998 and March 30, 1999.
Among new vehicle buyers, about 56 percent reported that they regularly use
the Internet, up from just under 50 percent during the same time period in the
previous year. Twenty-nine percent of new vehicle buyers said they used the
Internet to gather information before selecting their new vehicle. The study
also showed that nearly three percent (2.6%) of consumers actually purchased
their new vehicles via the Internet.
INTERNET USAGE
1995 MY 1997 MY 1998 MY 1999 MY
Entire Yr. 1st half 2nd half 1st half 2nd half 1st half
Regular Internet
Users 17.0% 40.8% 43.6% 49.9% 52.9% 56.1%
Internet
Shoppers 2.0% 18.6% 22.7% 27.2% 26.6% 29.4%
Source: Polk Automotive Internet Usage Study - 1999 Model Year -
First 6 mos.
Attitudinal data for the Automotive Internet Activity Analysis was
obtained from Polk's Manufacturer Loyalty Excelerator(TM) product. Introduced
to the automotive industry in 1995, Polk's Manufacturer Loyalty
Excelerator(TM) is used to determine Polk's Automotive Loyalty Awards; to
provide loyalty percentages for the entire automotive industry; to allow for
cross-industry comparisons of loyalty behavior; and to examine loyalty at
various levels.
Polk is a global company delivering multi-dimensional intelligence to the
auto industry to enhance the relationships consumers have with brands.
Through lifetime understanding of individuals, Polk helps clients maintain
current customers, win new ones and build their brand loyalty. Based in
Southfield, Mich., Polk is a privately held firm currently operating in
Australia, Canada, China, France, Germany, Holland, Spain, the United Kingdom,
and the United States.