Although chip shortage challenges are expected to resolve by 2024, vehicle supply is still an issue today. Meanwhile, customer demand is rising, both for new and used cars. High demand combined with low inventory is driving shifts in consumer behavior, such as more cross-shopping and less brand loyalty as consumers search for their next car. Location technology offers a unique window into these shifts, shedding light on the places people go in the physical world and helping businesses adapt accordingly.
Here are some key trends we’re keeping an eye on in the automotive industry in 2022 and beyond.
Automotive Supply Issues Loom Until 2024
Unfortunately, auto sales are not expected to reach pre-pandemic levels until 2024, due to supply issues. Chip shortages that occurred in 2021 had cost the global auto industry $210 billion in revenue and an estimated 7.7 million less vehicles were manufactured, according to forecasting company IHS Markit. However, even with these challenges, automotive sales are projected to recover by 2024, with an expected growth of 17% from 2021, as stated on Statista. As sales momentum continues, it is crucial for auto brands to understand changes in consumers’ behavior.
Less Brand Loyalty
Today’s automotive shoppers are less loyal to one specific brand – only 58% of customers bought the same brand car they previously purchased, compared to 62% in 2020, according to Automotive News. Additionally, due to the lack of inventory, 48% of consumers bought a used car instead of a new one. Supply issues can also mean that shoppers have to travel farther to reach a dealership with the make and model they’re looking for – Foursquare’s location data indicates that 8.46 miles is the average distance traveled from home to reach an auto dealership. Auto brands are using location data to understand their catchment area, as well as where else their visitors are shopping for competitive intelligence. Fresh, accurate points of interest and foot traffic can also inform optimal site selection for dealerships to capitalize on cross-shopping behaviors.
Rise In Auto Ad Spending
In order to win customers and drive sales, automotive brands are investing in advertising across channels. In fact, ad spend as a whole in the auto category is projected to grow 27% by 2023, according to Statista. In order to maximize the impact of this spending, savvy auto brands are identifying auto shoppers not only based on their online behaviors but also based on their real-world behaviors, capitalizing on moments of receptivity and targeting them across multiple channels including CTV/OTT. In 2021, CTV/OTT saw a 36% increase in ad spend from auto brands, while auto spend is projected to increase an additional 20% in 2022, reaching $1.7 billion, according to a recent study.
Upticks In Shopping Around Holidays
Holidays are a prime time for people to shop for cars – location data indicates that auto dealerships saw an uptick in foot traffic one week prior to 3 day holiday weekends and 1 month before Christmas in 2021. However, with new car inventories down, and prices up, Americans are searching for pre-owned vehicles instead. Foursquare data reveals an uptick of roughly +10% in traffic to CarMax, the largest retailer of used vehicles in the U.S., during Memorial Day and Labor Day weekends in 2021. Auto brands can lean into this buyer behavior by focusing their marketing efforts on the month before holiday weekends.
New Motivations For Shopping
Foursquare’s location data reveals how other behavioral trends may intersect with car purchases. For example, we’ve seen an uptick in road tripping since the pandemic, with customers traveling by car rather than flying. These individuals may be motivated to buy a vehicle because of all the travel they’re doing. The housing boom may also be a contributing factor, as location data proves that new homeowners are more likely than the average consumer to visit auto dealerships. In order to capitalize on these shifts, it’s important for brands to keep in mind that in-market auto intenders’ lifestyle and path to purchase can vary widely across different types of vehicles, and tailor their strategies accordingly. For example, luxury auto shoppers are more likely to be older empty nesters and foodies visiting college campuses and gourmet shops. Meanwhile, non-luxury auto shoppers may be younger parents and value seekers, going to elementary schools and discount stores prior to the dealership, and afterwards going to indoor play areas and big box stores. With location technology, auto brands are intercepting shoppers with relevant messaging across channels based on the places they go before and after a visit to the dealership.
Sustainability & Electric Vehicle Market Growth
The importance of sustainability has been top of mind for most American consumers, prompting them to make changes in their day to day lives. According to Nielsen IQ, 73% of consumers say they would change their behavior to reduce negative impacts on the planet. In response, auto brands have committed to increasing their electric vehicle offerings, which is expected to increase almost 3x by 2024. Additionally, IHS Markit states that electric vehicles are projected to make up 32% of auto sales by 2030, which is a 26% point increase from 2021.
Auto brands investing in electric vehicles can use location technology to target eco-conscious customers and those with an online interest for alternative fuel vehicles. By building audience segments (e.g. family fun-seekers, outdoor enthusiasts, date night foodies, and health-conscious professionals) based on their customer journey to an EV Charging Station, auto brands will be able to reach the eco-conscious customers in real-time throughout the day. Auto brands are also using location data to identify regions, cities, and even neighborhoods where eco-conscious behavior is taking off, focusing their sustainability initiatives accordingly.
Shift To Online Auto Shopping
With the rise of a digital consumer base, the automotive industry is now focusing more resources on online sales. For example, savvy marketers are reaching individuals who show an online interest for auto and are seen visiting an auto dealership, using both online and offline signals to detect that a person is farther along in their buying journey and may be ready to make a purchase. Automotive brands are increasingly driving conversions online – the global online car buying market generated $238B in 2020 and is expected to garner $723B by 2030, according to Allied Market Research. Furthermore, Cox Automotive Inc. found that 84% of consumers say the ability to have dealer interactions online saves them time during the buying process. In this case, Foursquare’s Closed Loop Attribution is an effective omnichannel measurement solution to better understand consumers’ online and offline relationship with auto brands and dealers.
If brands neglect to adapt to changing trends, they will risk leaving money on the table and falling behind in the automotive market. It’s more important now than ever for the automotive industry to understand who its customers are, how their behaviors are changing, and how to adapt.
Originally published on Localogy.