Car Dealers Can Profit by Connecting with Millennials

REDMOND – May 27, 2010 – With several million Millennials – those born in the 1980s and early 1990s – entering the workforce in the next decade, a tremendous new buying force is emerging for the American auto industry. According to a recent Microsoft survey conducted by Wakefield Research, which explored the car-buying habits of this powerful generation, auto makers and dealers have a real opportunity to entice this vital generation into their dealerships, but have some work to do before they can meet the needs of Millennial buyers.

The study shows that two-thirds (67 percent) of Millennials believe buying a car is one of the most intimidating purchases a person can make, and approximately 85 percent of respondents dislike at least one part of the car purchase procedure. The problem, it appears, is partly in the process of visiting the dealership.

“The sales model hasn’t really changed since the days of the Model T—you walk into a dealership and see a line of desks,” says David Graff, director of U.S. Automotive and Industrial Equipment Industry Solutions at Microsoft. “Then someone jumps up from one of the desks and tries to sell you something.”

This makes no sense these days, he says. Today’s car buyers have too much information and are too technologically savvy to believe a car salesperson is their only means for making a purchase. The Millennial generation has grown up with the Internet, new media sites such as Facebook, and new means of communicating – from email to texting. “These are people who are as comfortable interacting with devices as they are with people,” says Graff. “This means the old sales model for cars may not work anymore.”

The Wakefield research showcases how car-buying habits have changed. On average, Millennials conduct 16 hours of research before making a car-buying decision, typically using an automotive company’s website (58 percent), auto sites such as MSN Auto (53 percent) and automotive blogs (28 percent). In the eyes of many Millennials, the dealer is irrelevant, with 70 percent believing that the dealers actually make the process of buying a car harder, not easier. “They aren’t going to a dealer to find out about a car,” says Graff. “In 16 hours they become as educated about a car as 95 percent of the salespeople in dealerships.”

To take advantage of car buyers’ savvy, Graff says, auto makers and dealers should consider IT capabilities that Millennials like and embrace. Millennials are looking for a dealership that can offer technological resources such as Web-enabled computers on the showroom floor (64 percent) and self-service touch screens (60 percent) that could allow them to custom “build” their desired vehicles and lead them through the buying process. Auto makers and dealers also could install devices that interact with customers’ smartphones, such as tools that allow customers to quickly download information about a specific car’s features.

Today’s customers also want more transparency in the buying process, Graff says. The survey data shows that 84 percent of Millennials think Internet access during a transaction would make the process more fair and transparent. So instead of having salespeople sit behind PC monitors with screens the buyers can’t see, dealers could offer automated financing systems either using in-house PCs or customers’ own laptops. “That way people could conduct the transaction without being bothered,” Graff says.

As much as Millennials dislike the in-store buying experience, they are willing to rethink the relationship, and clear market opportunities are available for dealers that respond to the technology preferences of Millennials. In fact, more than two in three (67 percent) Millennials agree that it is important to establish a real relationship with their dealers when buying cars. And, according to the study, more than eight in 10 (81 percent) Millennials would make an additional visit to the dealer within the first year in exchange for software updates for their cars.

Car dealers and manufacturers need to appreciate that purchasing a new vehicle remains one of the biggest financial decisions people make, says Graff. Today the average cost of a new car is around $28,000, according to the National Automobile Dealers Association. “There’s a lot of anxiety associated with buying a car,” says Graff. “In our survey 56 percent of the people we talked to likened buying a car to going to a dentist. If I’m a car dealer, I need to be thinking of ways to make the process much more enjoyable.”

Technologies for the 20th Century Dealer

Microsoft offers several technologies that could help, Graff says. Microsoft Surface multi-touch computers offer a wide range of useful capabilities for dealers. These range from allowing customers to design their own car, to interacting with mobile devices and uploading car data and photos.

In addition, touchscreen capabilities built into Windows 7 make that sort of technology more affordable, says Graff – today, for $2,000 a dealer can purchase a large touch-enabled monitor. Microsoft Tag is another useful technology, allowing dealers to Tag-mark cars with information that a customer can upload to a smartphone simply by reading the Tag.

Technology, says Graff, can help make buying a car simpler and faster. “You can show a video of how a hybrid works rather than explain it, or I can use my mobile device to swipe a Tag and get detailed information about each VIN [Vehicle Identification Number] on the lot,” he says. “That’s what today’s car buyer is looking for.”

Cars Need an Upgrade too

As the study shows, it is not only the dealerships that need to add more technology capabilities for Millennials — it is also the cars. In fact, more than a quarter (27 percent) say the technology they would most associate with cars today is a 1980s desktop computer or a typewriter, indicating that there is plenty of room for improved in-car technology in automakers’ future lines.

Millennials don’t just want it all when it comes to their new wheels — they want it to come standard. The top two features seen as a necessity are GPS (67 percent) and a port for music players (54 percent), and (44 percent) asked for a software feature that could track their fuel consumption. That’s far more than those who indicated that popular items like Bluetooth (36 percent), satellite radio (32 percent) or an in-car hard drive (21 percent) were a necessity.

“Technology ultimately opens up new opportunities for ongoing relationships between automakers, dealers and Millennials, and those who invest in the digital capabilities required of this new car-buying generation will reap the benefits,” Graff says. “And, as more automakers integrate updateable software platforms like Sync and Windows Embedded into their future car lines, the dealers who have established relationships with the modern car buyer can turn that loyalty into future revenue streams.”