Executive View: Success of the agency model hinges on industry collaboration

The automotive industry has seen its fair share of challenges over recent years – from Covid impacting dealership visits, to supply chain issues and the knock-on effects of the global computer chip shortage. These constraints have both tested and fortified the industry, says Keyloop’s Graham Stokes.

As the sector continues to undergo rapid transformation, OEMs and retailers are exploring new operating models that better suit the needs of today’s consumer. This includes a move towards the agency model – whereby retailers take on an “agent” role directly representing the OEM – which is anticipated to bring about significant change to the way retailers, OEMs and consumers interact and engage with each other.

Different models, same goal

There is currently no set framework or industry standard regarding the implementation of the agency model, and this is being pursued in different ways by manufacturers across different countries and regions.

Some OEMs have fully embraced the model, while others are implementing it for specific product lines. There are also those who have retained the traditional franchise approach or are establishing new, hybrid models based on their experience of both. Examples include:

• In January 2023, Mercedes Benz retailers in the UK officially switched to agency agreements. The move was first announced by the OEM in 2021, allowing a two-year implementation period, and making it one of the first manufacturers to embrace the agency model in the UK.
• Having previously planned to move to an agency and direct-to-consumer model, Jaguar Land Rover recently announced it would be refocussing on its traditional franchised model with “elevated concierge levels of client care”.
• Toyota has developed its own interpretation of “mobility-as-a-service” through the development of its Kinto brand, which offers mobility services to users across Europe through full service or subscription-based leasing, car-sharing and car-pooling services.

Despite these different approaches, there is an obvious, common thread at the heart of each strategy: putting the customer experience first.

Under the agency model, retailers are increasingly moving away from the traditional “salesperson” role and towards a broader “agent” or advisory role, better equipped to provide additional value – for all stakeholders – by ensuring that customers are getting everything they want as part of the transaction.  Retailers have the distinct advantage of bringing the human touch to the customer, because they’re simply closer to them. When done properly, each interaction becomes an opportunity to boost levels of trust and reinforce loyalty.

Ultimately, this is about shifting mindsets away from a single sale, to a long-term consumer relationship. But how do we achieve this?

More than just a sale

Traditionally, a customer would enquire with a dealership about a specific vehicle, and the dealership would fulfil that customer’s request – even if this meant they were left waiting 10-12 months for the car to be delivered.

However, this contrasts with the modern consumer’s expectations and desires. When buying a car, customers want an enjoyable and personalised experience – they don’t want to enter into lengthy, complex transactional processes. They want to choose when and how they interact with a dealership – and expect a seamless and joined-up experience across channels – whether online, offline or in-person. When they come up against “dead ends” or need to provide the same information on multiple occasions, this creates friction and frustration.

By spending more time understanding the needs of the customer and making sure that all of their requirements are being met, dealers are able to deliver on those expectations – providing better guidance, improving customer satisfaction rates and, in many cases, reducing lead times.

Overcoming data silos

Retailers and OEMs equally acknowledge that one of their main challenges is a lack of integration in systems and processes. This leads to data fragmentation, and the risk of customers falling through the gaps.

Another concern is ensuring a seamless transition from sales to aftersales. Where does the data sit and how to ensure there are clear, consistent processes and tools to move the data from the sales system – which may sit within the retail unit – into the core business systems?

The answer to this is close collaboration between the retailer, the OEM, and, crucially, with technology providers. Indeed, the latter play a vital role in helping uncover where existing processes may be lacking and provide solutions to help fix these data gaps.

During the transition phase to the agency model, OEMs need to work closely with their retail and technology partners to agilely respond to challenges that may arise – quickly establishing what the problem is and how to resolve it. This collaboration will naturally lead to an evolution of the model, which should be welcomed. Iteration and evolution of the agency model will benefit the retailer, the OEM and, perhaps most importantly, the customer.

Collaboration in the age of experience

More than ever before, consumers have a wealth of options and information available to them when it comes to buying a vehicle, and it is up to the retailers and OEMS to support them in their decision-making. In turn, a range of business models are currently being tested by the industry, to assess which may best suit the needs of today’s, and tomorrow’s customer.

We find ourselves at a crossroads. However, this presents a genuine opportunity for the automotive industry to reflect on how it operates to ensure that customers are getting great service and a great experience.

To succeed, OEMs and retailers can no longer ignore the data gaps and fragmentation that currently exist across the industry. Working together with systems providers, they need to adopt a collaborative and holistic approach. Those that do will unlock greater efficiencies and an improved awareness of customer needs – in turn allowing them to engage with customers in a seamless manner and maximise every opportunity across the sales, and aftersales journey.

Graham Stokes is VP, sales UKI & APAC, at Keyloop