The stony path to realizing the agent model

ecided to implement the agent model? What now?

In our recent publication „Dealer vs. Agent” we have concluded a draw (3:3) between the classic “Dealer Model” and the direct sales “Agency Model”.

Nevertheless, it appears the Agent’s following is growing, not least due to the need to keep track with the cost efficiency of new, direct selling entrants. A desire to reap the benefits of digitalization and to cater to the customers’ expectations when it comes to a premium sales and service experience are other factors.

Authors

Arthur Kipferler

Managing Director UK

arthur.kipferler@berylls.com

Dr. Jürgen Simon

Principal

juergen.simon@berylls.com

Chapter

FOUR DIMENSIONS

TARGET PICTURE

PREPARATION

TAKE-AWAYS

Current Topic

Together with the evaluation of direct sales via agents as a new go-to-market model you must immediately ask “How can we make this transformation work?” To help we want to draw a potential path for a successful sales model transformation in this article.

Structure helps, so here is our three-step approach:

Obtain full clarity across your whole organization about the targets of this transformation: what should the agent model deliver for your brand? And what are you willing to give up in return? Remember: There ain’t no free lunch…
Plot the best path to the final target: It might ease implementation to scale up the agent model over time via regions, markets, brands, models, channels, etc – an optimized roll-out roadmap is a key success factor
Fully understand and resource for the additional tasks and capabilities that are moved from retail to wholesale. This requires thinking through and realizing new capabilities, structures, processes and systems

1. Don’t start implementing without being clear about what you want to achieve – and how to pay for it

Direct sales can beat a dealer-based wholesale model on four dimensions – but you will have to pick your battles, not all of them can be at the same time:

A better customer experience by removing haggling from the process with fixed, centrally set and fully transparent prices. No wholesale organisation is prepared to deliver this overnight.
The direct customer relationship guarantees full data access for the OEM, which must be leveraged for better understanding of the customer and thus better addressing of needs and wishes through personalized offers. To achieve this a lot has to change in the sales organisation (customer journey, required systems, etc.).
Better price realization certainly will play a major role for many OEMs switching to the agent model. But as outlined in our previous article, avoiding intra-brand competition and increasing transaction prices, is not a given – competition with potentially more aggressive brands will still happen. And getting transaction prices right is a new capability.
Reducing the cost of retail certainly lures many brands towards the agent model. While this is possible in principle, keep in mind the transformation cost and set clear cost reduction targets by phase on your roadmap. And ensure that you move all the levers under your control in the right direction, including network density retail design & operating standards.

2. Find the best path to your final target picture

Like for every successful journey, finding the best route comes right after setting the destination. Nobody can realistically switch over a decade-old global go-to-market structure in one go – identifying the right steps and the best way to scale up is a key success factor. And there are a number of building blocks for this roadmap:

Markets are the obvious choice to scale the roll-out. Factors to consider here are certainly the respective regulatory frameworks, your volumes, existing dealer contracts and periods. Also consider the impact on achievement of the objectives: increasing price realization will be difficult if in a free-trade region like Europe some markets are becoming sources of discounted vehicles.
For which brands (or sub-brands) the agent model is to be introduced can be another tricky question. Brands (within groups) are often sharing showrooms, dealer sites and staff. Dealers and their staff will be quick to optimise their efforts to maximise their income – which can make a new agent system a still-born baby.
Model lines are being used as roadmap elements – but they can also create a risk for unintended incentives, that needs to be mitigated somehow.
Another major parameter is the channel Introducing the agent model at first only for sales via the OEM online channel might seem a feasible path – but certainly not without caveats. Dealers might focus on their own proprietary or 3^rd party online channels. Unintended channel competition would replace the traditional intrabrand competition. And the arguments arising from leads showing up in both channels will strain the relationship.

3. Prepare well for the agent model affecting your sales (and other) operations

Figure 1

Implementing any direct sales model inevitably leads to a shift of tasks from the former dealer to the OEM across the whole customer journey, as shown in Figure 1. OEMs have to take on new and complex tasks, such as pricing or inventory planning – with on the retail level have much higher frequency and granularity that what NSC and regional staff are used to from their matching wholesale tasks. Process performance and integration with the agents must be excellent from the switch-over date to achieve a seamless customer journey.

Lead Generation: While already a joint task of OEMs and dealers, a higher involvement of the OEM is likely, after shifting to the agent model. Nevertheless, the OEM remains heavily limited to digital lead generation. Since effective local physical lead generation and lead management continues to be success-critical you must avoid that agents reduce their activities, in the false belief that agents can exclusively rely on their OEM for lead generation.
Test Drive: They will remain important for many prospects – not least for the many first time BEV buyers over the next ten years. It will be critically important to deliver seamless integration between booking in the OEM’s digital sphere and execution by the agent. The efficient provision of demo cars for use by the agents also needs a carefully crafted system.
Offer: The shift of the offer responsibility from the former dealer to the OEM is one of the key changes in agency model. The OEM as the contracting party suddenly has to provide pricing up to thousands of times per day – instead of the quarterly campaign pricing they provided in the dealer system. Or move to a rigid fixed pricing approach that will inevitably weaken competitiveness or price realization.

Financing and Digital Services remain largely unchanged, since they are widely in OEM hands already today. The Used Car Business will largely remain under control of the agents.

Of course, in addition to the tasks along the customer journey, there are also new or changed tasks for the OEM around agent steering, interaction management, data management, etc. which require careful setup before the switch-over – from the organisation design along the steering, process, and structural dimension to the design and creation of the supporting IT systems and not ending at recruiting and onboarding the additional staff.

The Take-Aways

It all starts with the objectives – it is crucial to make the transition for the right reasons. Ensure alignment across your whole organisation, once on the way it will be really difficult to shift priorities. Strictly guard your target hierarchy also in interim stages – an improved customer experience cannot be expected if different sales models have to co-exist under the same retail rooftop. Be more than aware of the additional tasks for the wholesale level – it will in essence also become your retail level. And expecting immediate cost reduction effects in a transition phase with increasing structural costs can only lead to disappointment.

Most importantly, keep putting yourself in your customers’ shoes: you need to deliver a customer experience where OEM and agent work hand in hand, where online and offline touch-points are well-connected. In an agent model it will always be the OEM that is in the driver seat, using the agents as extended arms into the local markets. This orchestration across the omnichannel system requires clear governance and effective steering since – unfortunately – objectives between agents and OEMs are not always aligned.

Keep all this in mind when you are designing the details of your future agent system – it is not just a new dealer contract you are about to implement.

ABOUT THE AUTHOR

Arthur Kipferler (1963) started his career in 1989 at the Boston Consulting Group, where he consulted for 13 years in the automotive industry. After consulting, Arthur Kipferler held senior management positions at Toyota in Europe and the U.S. From 2013 to 2014, he was global head of the BMW Group’s Future Retail program. Subsequently, he had leading roles in strategy, corporate planning and transformation management at Jaguar Land Rover in Coventry, UK. Arthur Kipferler complements the expertise of the Berylls partner team in the fields of market & customer, technologies, sales, and digitalization, as well as in the development and implementation of corporate, product, and regional strategies.

Mechanical engineering, production engineering, at the Technical University of Munich (TUM); MBA in Strategy, Marketing and Organizational Behavior at INSEAD Business School, France.

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