Digital marketing is poised to revolutionize the automotive industry as it transforms how consumers research, evaluate, purchase and interact with vehicles. While automakers have begun using social media and online platforms, the full potential of digital marketing remains largely untapped. Customers now rely heavily on digital channels for information gathering and half would consider online vehicle purchases. To understand digital's impact, McKinsey conducted a survey of 600 car buyers, dealerships, and experts, finding that a strategic, systematic approach to digital could significantly boost operations and revenues through opportunities like digital lead generation, product co-creation, and retail innovation.

1. Marketing & Sales
Digital marketing in automotive –
revolution ahead
Digital marketing is not entirely new to the automotive industry: Facebook
and other social media, YouTube, and further innovative online activities
are well established. However, looking at the extent to which OEMs are
leveraging them vis a vis the potential changes digital marketing can
bring about, we feel that only the tip of the iceberg has been uncovered.
In this context, automakers still have a lot to learn and exploit from more
integrated and compelling digital marketing strategies.

3. 3
Already today, changes are visible along the entire automotive consumer decision
journey (CDJ) – consideration, evaluation, purchase, and experience. In automotive,
for 60 percent of customers, digital channels are the primary source for information
gathering in the consideration phase and about 50 percent of customers would
consider making the actual purchase transaction online if it were possible. And buying
behavior is changing drastically. Previously, customers made an average five dealer
visits before purchasing a car – now they come well informed for only one visit. Hence,
digital is leading to fundamental changes, and OEMs need to speed up to fully grasp
the opportunity.
To build the comprehensive knowledge needed to tackle these questions,
McKinsey & Company wanted to gain a better understanding of the true potential of
digital and its impact on OEMs, so we conducted a multifaceted empirical research
effort. The heart of the research is a survey on digital usage among 600 car buyers
in the US, the UK, and Germany, covering the entire consumer decision journey. In
addition, representatives of more than 50 car dealerships in Germany were surveyed
to understand their current usage of digital technologies and gauge their plans for
future digital usage. Finally, interviews were conducted with a wide range of industry
experts. The research was structured along a holistic model of the CDJ (Exhibit 1).
The insights gained from this course of study reveal the tremendous potential of a
systematic, strategic digital approach and highlight the key factors for implementing
it successfully.
This document is organized along seven core beliefs that summarize the findings from
our market research, followed by learnings from other industries and implications for
the three most important OEM opportunities.
Digital marketing in
automotive –
revolution ahead
Capturing the full digital opportunity means addressing the consumer
decision journey holistically
SOURCE: McKinsey
Create brand
awareness and
promote traffic,
e.g., through online
advertisement
Strengthen the
relationship with
consumers and create
brand activists
Strengthen online
channels for sales
and/or use them to
steer sales to
offline channels
Engage consumers in the
search and buying
process, e.g., by providing
comparison tools
Buy
Advocate
Evaluate
Consider
Experience
Bond,
service
Strategic objectives along the consumer decision journey (CDJ)
Leverage digital to stay in
touch with consumers
beyond purchase, e.g., via
social media communities
Exhibit 1

4. 4
Seven core beliefs
From our market research with consumers and car dealers, seven core beliefs emerge
(Exhibit 2):
1. The survey asked customers about the biggest influence on their car purchasing
decisions. Here, digital information channels are already the no. 1 influencing
factor noted. At the top of the list are dealer visits and OEM Web sites – both
named by 52 percent of respondents as important information sources. These are
followed by dealers’ online offerings. Consequently, OEMs should ensure a state-
of-the-art Web presence with a continuous improvement process in order to adapt
to technology development.
2. Digital has given rise to a new type of customer. Today’s car buyer is extremely
well-informed and turns to digital platforms to gather pre-purchase information,
e.g., seek advice and compare prices. Car dealers themselves report that only
5 percent of their customers are not extensively informed upon their first dealer
visit. Therefore, the purchase process needs to be adjusted to capture the far-more
specific customer requests.
3. More than half of the customers surveyed said they would consider buying a
car online if it were possible and if some preconditions were met. Two-thirds
stated the necessity of a test drive, but nearly half indicated that some other way of
experiencing the car might suffice. At the moment, no OEM has proven success in
selling cars online, but a transition to more online sales is inevitable and car makers
will need to properly test and prepare for this development.
4. Digital has also brought about a change in the role of the retail outlet. As
showroom visits continue to drastically decline, dealerships will need to contend
The digital revolution – 7 core beliefs
SOURCE: McKinsey
Digital is becoming the no. 1 customer-influencing, information, and
transaction channel
Digital will turn the existing retail model upside down
Digital sales is a matter of prerequisites and of a value proposition
OEMs and dealers are opening to digital but have not yet fully grasped
the digital opportunity
The true digital revolution is still in front of us, with last challenges to be
addressed
Digital has given rise to a new type of customer
The way to digital is a joint journey that both OEMs and dealers need
to be taken on
1
2
3
4
5
6
7
Exhibit 2

5. 5
with the reality that their outlets no longer serve as prime information sources in
the customer’s consideration stage, with respective consequences for their sales
approach (i.e., the need to “connect” with the customer in digital pre-purchase
channels). In addition, the variety of retail formats will increase to address new
customer needs, e.g., city store formats, pure test-drive centers.
5. Dealers are slowly opening up to the ways digital enhances the customer
experience. Three-fourths of them believe that tablets for sales staff, lifesize display
screens, and interactive model displays are helpful. However, they also express
concerns about “overdoing” the tech angle, as they believe their customers aren’t
tech-savvy enough and still require personal interaction. This skepticism needs to
be taken seriously when creating a digital strategy that both involves and onboards
the dealers.
6. While the shift toward digital sales in automotive is certainly under way, it’s still
in its infancy. From the customer’s perspective, an incomplete physical experience
and data privacy concerns are hurdles to a real optimization of digital and offline
customer experiences.
7. OEMs and dealers are still missing out on the full digital potential that is only
possible through greater cooperation. An overwhelming majority of dealers cite
their support of OEMs in their digital marketing efforts, but barely half of them pass
on their customer information to OEMs. This level of information-sharing would
certainly improve CRM and offer mutual benefits, but competitive concern limits the
flow of information.
Lessons from other industries
While OEMs and dealers are not in totally uncharted territory when it comes to
digital and the consumer decision journey, the focus thus far has been primarily on
marketing and less on sales. In this context, other industries are much farther ahead.
Banking, retail, and consumer goods are solidly on this journey, and best practices
from these industries are applicable to automotive (Exhibit 3). We compiled more than
200 relevant case examples during our research efforts, and we observed valuable
best practices at each stage of the CDJ. Some examples follow:
Consideration. A leading retail bank leverages data on customer Web searches –
including elements of customers’ online journeys such as how they arrived at the
company’s site and their geographical locations – to estimate customer-group risks
and present segment-specific offers, i.e., different customer groups get directed to
different Web sites. This type of customer segmentation could also help OEMs tailor
marketing messages toward the different customer needs.
Evaluation. A sportswear retailer extensively uses digital equipment in the showroom.
Large, interactive touchscreens allow customers to research technical information and
visualize the shoe of their choice in real-life perspective, as well as to tune in to social
media buzz on its products. Product co-creation can generate marketing attention and
also provide new customer insights to OEMs.

6. 6
Purchase. A leading retail player successfully established itself in a new market with
­a digital sales approach meeting the needs of the market’s urban population. Posters
in key traffic areas of subway stations advertise the retailer’s most popular products. QR
codes on the posters allow customers to get more information on the product, purchase
it, and have it delivered to their homes with a simple scan of their smart phones. These
codes allow for customer interaction between the sales and service touchpoints, which
are often very rare and limit OEMs’ customer interaction after the initial purchase.
Experience. A motorcycle manufacturer created a novel customer experience
by holding a special online sale for the first 1,000 units of a newly launched bike.
The bikes sold out in less than an hour, and the campaign created high visibility for
the company within the motorcycle community. This was a successful first step in
promoting online sales.
Digital in action – OEM opportunities
The bottom line of the digital opportunity for OEMs is enhanced operations and
increased revenues. At a more granular level, McKinsey research reveals three primary
opportunity areas for digital implementation: digital lead generation, co-creation, and
retail innovation (Exhibit 4).
Lead generation
OEMs get millions of potential leads from Web sites, car configurators, search
engines, and Facebook likes. The question, however, is how to determine who
among this vast number of prospective customers has an actual intent to purchase
(Exhibit 5). Then, how can OEMs get their hands on the contact details of these
would-be purchasers and link them to existing customer data? To follow potential
Players in other industries demonstrate how best practices translate into
higher earnings
SOURCE: McKinsey
A leading sportswear retailer
creates an unrivaled customer
experience using cutting-
edge visualization technol-
ogies in its digital store
A leading consumer
goods company
systematically digitizes
retail experience and
tests innovative
formats integrating
on- and offline
A leading retail bank exploits
digital data to automate and
enhance customer
segmentations
A technology company
has a sophisticated
training concept for
employees that become
digital brand ambassadors
and a state-of-the-art
social media listening
command center A chemicals player
conquers new customer
segments with a
digitized low-cost
channel for value buyers
A motorcycle manu-
facturer leverages
online channels to
create attention for newly
launched motorcycles
Buy
Advocate
Evaluate
Consider
Experience
Bond,
service
Exhibit 3

7. 7
customers through the Web, many retailers use re-targeting. If a customer shows
interest in a product but does not buy it, an advertisement for exactly this product is
placed on Web sites that the user visits afterwards. These types of techniques and
a smart link between online and offline CRM data can help OEMs leverage much
more of the terabits of generated lead data. McKinsey has developed a systematic
approach that is based upon digital customer segmentation and provides guidance
on how to cluster and follow online users. Digital experts from retail and consumer
goods industries can also support implementation of these approaches.
Co-creation
This next digital opportunity capitalizes on the increasing bidirectional nature of
media communication. While traditional advertisement “pushes” brand messages
to the audience, digital has empowered customers to interact with other customers
and with OEMs, e.g., to share their thoughts on attractive product features. The
opportunity for OEMs here is to use this wealth of consumer insight to improve
product and service design.
A successful co-creation project starts with a clear scope and target for customer
involvement informed by external best practices. The second step identifies the cus-
tomer segments most appropriate for the effort and the channels (e.g., Facebook,
Twitter) that will serve as the co-creation platform. Next, OEMs will enlist their
marketing departments to create content and institutionalize the interface between
consumers’ ideas and the engineering department’s efforts. The final step is the
launch of the campaign, ensuring usable and prioritized outcomes.
The core beliefs translate into 3 types of digital opportunities
SOURCE: McKinsey
Core beliefsOpportunities
Digital lead generation
Generate high-quality
contacts online and transfer
them to real leads
Digital retail innovation
and sales
Revolutionize the way of
selling cars with innovative
retail formats
Digital co-creation
Involve customer in product/
service design and devise
products/services closer to
customer needs
Digital is becoming the no. 1 customer-
influencing, information, and trans-
action channel
Digital will turn the existing retail model
upside down
Digital sales is a matter of prerequisites
and of a value proposition
OEMs and dealers are opening to digital
but have not yet fully grasped the digital
opportunity
Digital has given rise to a new type of
customer
1
2
3
4
5
The true digital
revolution is
still in front of
us, with last
challenges to
be addressed
The way to
digital is a
journey that
both OEMs
and dealers
need to be
taken on
6
7
Exhibit 4

8. 8
Retail innovation
Car buyers are already conducting significant portions of the consumer decision
journey digitally. Despite the remaining concerns, many even consider making the final
purchase transaction online as well. This “new openness to digital” means considerable
opportunities for OEMs to fundamentally reimagine their distribution/retailing approach.
By digitizing dealerships, OEMs can take advantage of customers’ comfort with digital
methods and market their models in a customer-oriented and cost-efficient way.
OEMs are already beginning to test online car sales, e.g., Dacia tested selling limited
editions online in Italy. For dealers, test-drive simulators and life-size configurators save
showroom space, reduce the test-drive fleet, and boost upsell potential. Customers will
be able to visualize the increasing variety of car options produced by the current mass-
customization trend and receive much better information about the models they are
interested in.
Beyond the advantages from dealership digitization, digital paves the way for innovative
retail formats that optimally address new requirements from evolving customer traffic,
geographic development, company resources, and customer needs (Exhibit 6). There
is no one-size-fits-all format for the evolution of retail. In fact, depending on the OEM,
one might decide to set up a digital online channel for a specific car model, while
another might fundamentally restructure its retail network and substitute retail outlets
in suburbs with highly-digitized “city center stores” and a full-service “test-drive center”
nearby to reach an increasingly urban population.
Digital marketing efforts should clearly focus on those users that are
most likely to buy
SOURCE: McKinsey
▪ So far, strategic focus
is mostly on the
dimension availability
of contacts and efforts
to identify the users
▪ True challenge and key
to a focused digital
marketing approach
is to understand which
leads have a real
purchasing intent and
should therefore be the
focus of efforts and
investments
Available
Not
available
Availability
of contact
details at
OEM
Possible purchase Probable purchase
Purchasing intent
Explore
Known fly-bys
Unknown
surfers
Unknown
potential
buyers
Can’t failLeads
Priority
conquest
Exhibit 5

9. 9
  
McKinsey’s comprehensive course of research among automotive consumers and
key industry players points to major changes in the way people shop for cars. An
increasing comfort with digital technologies and a growing reliance on Internet-based
research has created a more independent and highly-knowledgeable customer.
OEMs have an opportunity to capitalize on this shift, turning it into buyer leads, better
products, and more relevant retail formats.
SOURCE: Car dealer survey; McKinsey team analysis
Dealer digitization and new customer needs open the door
for new approaches to retailing cars
Purchasing
transaction
Brand
experience
Concept pop-up
stores
▪ Stores set up at changing, high-traffic locations to advertise a specific
product and create buzz
Car super
store
▪ Large stores at city outskirts with extensive range of vehicles for buyers
interested in having a car on the spot, staff answers all kinds of questions
▪ Ability to settle purchase, financing, and insurance agreements
Potential new retail formats
Brand
experience
centers
▪ Larger concept stores in central locations exhibiting a selected number of
flagship products
▪ Focus on conveying brand image and product experience
OEM online
channel
▪ Online sales shop providing enhanced and easy-to-use configuration, visuali-
zation/simulation tools for buyers who want to take most purchasing steps online
▪ Complemented by offline channels, e.g., test drive center
Small city
center stores
▪ Small stores in prime, high-traffic city center locations exhibiting products
either physically or through visualization technology (e.g., 3D screens)
▪ Focus on conveying brand image, product experience, specialist questions
Independent
intermediary
online channel
▪ Digital presence of third-party providers, e.g., online platforms bringing
together buyers and dealers/OEMs
▪ Facilities in central/easy-to-reach urban locations with broad range of cars
for test drives, staff answers all kinds of questions
▪ Attached sales office facilitates purchase (including financing, insurance)
Test-drive
centers
Exhibit 6

12. Marketing Sales
July 2013
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www.mckinsey.com
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