The automotive market in Indonesia continues to suffer from the impact of economic slowdown, as car sales remain stagnant at around 1.2 million units over the past two years. The industry is little optimistic of any significant recovery this year, as January-November 2015 sales hover around 940,317 units, as per GAIKINDO (Indonesian Automotive Industry Association) data. The association predicts the overall 2015 car sales to be around 1.1 million vehicles, projecting a 15% y/y decline. Motorcycle sales too have declined over the past several months, though industry observers attribute the year-end sales decline to seasonal trends.
Source: GAIKINDO; *TBA
A recent Fitch Ratings report said car and motorcycle market in Indonesia will continue to face pressure in view of a weakening consumer sentiment. The industry is also impacted by rupiah depreciation (which makes imported spare parts more expensive) and high interest rates, though the Central Bank, on its part, did cut the down payment requirements earlier this year, in a bid to revive demand. According to the revised regulations, when financing vehicles, for cars, buyers would now need to contribute a 25% down-payment from 30% earlier, while for motorcycles, it is set at 20%, from 25% previously.
Since the impact from the regulation revision isn’t quite apparent in the wake of weak demand, car manufacturers and dealers are scrambling to stir up sales, typically by offering large discounts. A tried and tested route to manage aging inventory it may be, but it also augments the price wars and further pressurises margins.
LCGCs – Carving a Niche Customer Base
At a time when automakers are hit by a slowdown, a ray of hope appears to be Indonesian consumers’ rising interest in newer segments, such as the low cost green cars (LCGCs) and sports utility vehicles (SUVs). While MPVs have traditionally been the most popular vehicle segment in Indonesia, LCGCs and SUVs are enjoying rising popularity, in part due to the former’s affordability and SUV’s freshness. A major reason for MPVs’ popularity in Indonesia is the comfort and seating capacity, as Indonesians tend to have large family sizes and mostly travel together. While MPVs continue to be in popular demand, LCGCs and SUVs seemed to have found their niche buyer segments. For example, apart from their attractive price, LCGS are also appearing as a potential choice for second household cars among the upper middle and emerging affluent customers. They seem to be an apt choice for city dwelling customers, who need a small, agile vehicle to get around town, easily driveable by the females in the family. Originally targeted as an affordable four-wheeled option to lower income buyers, automakers are also offering extra features on LCGCs to make them more stylish and attractive to buyers including working women, millennial professionals, and stay-home mums.
Sporty Design but Utility Not Compromised!
SUVs, on the other hand, are enjoying rising popularity thanks to their sporty design, combined with utility in terms of seating space. They are highly appealing to young urban buyers, who want freshness (as compared to the fairly common MPVs) as well as performance. In fact, SUVs’ ruggedness is also making them popular among drivers in rough terrains, like those in Papua, according to industry experts.
Based on their needs, consumers can choose from large, spacious, and premium SUVs such as Hyundai Santa Fe, to compact ones such as Toyota Rush and Daihatsu Terios, which are bestsellers thanks to their affordability. According to data from GAIKINDO, between January and October 2015, SUV sales reached 109,194 units. Other popular models include premium offerings such as the Honda CR-V and Toyota Fortuner.
Automakers including Nissan and Chevrolet are also admittedly putting more focus on the SUV market in Indonesia, having planned to bring up new models in the market. Luxury carmaker BMW too is not untouched by the SUV wave in Indonesia, having launched two new SUVs in the market this year, the X5 and X6M.
Crossovers, which offer the best of both worlds by combining SUV’s sportiness and car’s agility, are also increasingly more preferred. Honda BR-V, launched earlier this month in Indonesia, received great attention as the first official crossover vehicle in Indonesia, when it premiered at the 2015 GIIAS in August 2015, having gathered 4000 plus bookings since then. Though LCGCs and MPVS are expected to continue as two top vehicle segments contributing to overall sales in Indonesia, eventually, customers might see changing preferences towards crossovers and compact SUVs owing to their more economical prices as well as fresh styling.
Customer Service is the New Marketing
While the macroeconomic factors would inevitably take time to improve, it is a must for manufacturers and auto dealers to focus more closely on areas where they have greater control; for example, by pursuing more effective marketing communication and consistently improving customer service.
Traditionally two different departments, customer service, and marketing today go hand in hand, in this connectivity era, where customers increasingly reach out for more information about brands across multiple channels, from website visits to digital marketing channels such as social media. It is increasingly evident from research how consumers feel averse to traditional advertising methods and have shorter attention spans. The ultimate way, it seems, to gain and keep their attention, then would be to provide such an excellent level of customer service that not only makes them adopt your product, but to go ahead and recommend it to others. That’s the essence of WOW Marketing, where customers transition from Awareness to Advocacy.
Source: MarkPlus Analysis
Creating a better customer service is at the heart of new marketing. Since marketers play a role across all touch points through the customer path, it is imperative for them to make the most of each interaction by providing excellent customer service.
The concept holds great relevance for auto dealerships today, where customer service would potentially make all the difference to buyers’ decisions, from informed sales personnel to timely help with processing documentation and delivery of vehicle and post-sales service.
Digital to Drive Engagement
Further, there is no lack of evidence on how car buyers have evolved into embracing digital channels to gather more information on their buying preferences. From car review websites to online classified listings and social media, potential car buyers are exposed to heaps of information, while also dramatically altering the role traditional dealerships play in the customer journey. In fact, a Capgemini research showed around a third of car shoppers would prefer to make the entire purchase online, never wanting to go to an auto dealer.
While that may be still be far into future – as long as vehicles remain the prized purchases mostly warranting personal test drives – it is critical to understand how manufacturers and dealerships can leverage digital marketing more effectively. While having a website or a social media page is a no-brainer these days, it is increasingly important to enrich these web pages with engaging content that creates interest among consumers, and not only for spreading mundane promo information.
Also make time to customise newsletters with customer preferences, for example, for customers searching for a particular type of vehicles, it would be quite useful to receive related offers via his/her email. Social media can be used to create a two-way communication with your customers, which adds to the effort of personalisation. Finally, the ultimate customer experience would be more or less shaped by the service he/she gets at the physical dealer outlet, which is why it is crucial to deliver excellent customer service, both pre-sales and post-sales, which is a critical factor in driving recommendation, both online, and offline.