World War Gen Z
Members of Generation Z are the anti-Millennials, and they’re coming to a dealership near you.
July 2016, Auto Dealer Today - Feature
Put down the selfie stick. And while you’re at it, move on from the endless debate about when Millennials are going to buy cars. They will, and are, in ever-increasing numbers. According to Bloomberg Business, Millennials are now the second-largest group of new-car buyers; Dealertrack’s 2015 credit application findings show that Millennials are taking a 35% share of unique auto applications — 10% more than the previous year.
But as strange as it might seem, Millennials are yesterday’s news. As the generation defined by self-portraits, helicopter parenting and Facebook move into the years of cars, houses, soccer and scouts, it’s their little sister’s turn to buy her first car — and she wants to do so in a very big way.
What Do You Want?
According to the “Gen Z Automotive Study” commissioned by Autotrader and Kelley Blue Book, 92% of Gen Z survey respondents either own or plan to own a vehicle. That’s vastly different than their older siblings, and the contrasts don’t end there. Gen Z is realistic, always connected, more prone to the instant eye candy of Snapchat than Facebook, and, frankly, a little skeptical.
Where Millennials have idealized ride sharing and public transportation, just 8% of Gen Zers surveyed want ridesharing services to replace vehicle ownership, and a scant 15% would prefer improved public transportation to either. And while an “environmentally friendly” car is important to them, price was viewed as most important (77%).
The bottom line? They want the keys. And in four short years, the youngsters will wield $3.2 trillion in purchasing power, according to the latest figures from MaritzCX. That’s more than enough power to rock the automotive retail market. The question is, how do we deliver all these keys to this practical generation of go-getters and freedom seekers? The study found that selling cars to Gen Z is about leveraging online and one-to-one relationships within an information-heavy experience that puts a premium on convenience. As such, this generation will usher in three distinct changes to the car-buying process:
1. Gen Z buyers will expect the online to in-store process to become blended across the entire experience. The youngest car buyers are not interested in having two separate experiences. They want and will soon demand one seamless, cohesive journey from research to purchase that spans multiple devices and physical locations.
To a generation born into the digital world — where anything they want is available online — placing borders and barriers around the transaction experience will create a frustrating deal-breaker. Where the old-school method of forced steps may have annoyed Millennials, doing it to a Gen Z buyer is likely to result in blank stares and incredulous looks. These are shoppers who expect the experience to flow easily between online and instore freely, with multiple digital sessions and dealership visits. Anything else is simply a foreign language. The generation that grew up with Zappos and Amazon will neither anticipate nor appreciate having to follow a rigid order of linear steps to make a purchase.
2. But that doesn’t mean Gen Z is looking for a “shopping cart” experience. In fact, they’re most interested in the total experience and value the expertise they get in the showroom. The aforementioned survey found that a positive experience topped convenience and even price in terms of priorities, and that experience overwhelmingly included a personal relationship.
According to the study, 68% of Gen Zers felt that face-to-face interactions are important. Demos are also critical for Gen Z; 52% said they need to test-drive a vehicle at least twice before making a decision.
3. These factors support what we call “connection commerce.” At the heart of connection commerce is the belief that the automotive retail environment is a relationship-based selling environment, so buyers must make a personal connection and establish trust in order to buy.
Connection commerce means building these one-to-one relationships online and connecting them to the instore experience. With connection commerce, shoppers make deals through an online communication platform while dealers stay in control of their retail business. It delivers the online buying experience your customers expect across the digital and showroom environments.
Connection commerce also means dealers need to “go first” in the relationship with customers by offering monthly payments and terms on their website and third-party classified inventory pages. Allowing consumers to engage with these payments and personalize them puts them in control of their own buying process, which in turn starts a two-way, transparent dialogue about how that customer really wants to go about buying the car — including deal structure, monthly budget, realistic trade-in valuation, and other purchase requirements. Online dealmaking translates into a fast and positive experience, something that’s high on the list of priorities for Gen Z.
According to studies by Autotrader, KBB and MaritzCX, fewer than 10% of Gen Zers prefer ridesharing to vehicle ownership, and only 15% would prefer improved public transportation to either.
Sensible Gen Z buyers will be more interested in F&I products, but they will demand that F&I be part of the digital experience. Remember that this crowd is more practical and prudent than those carefree Millennials. As a result, they are more inclined to buy products that insulate them from risk, increase safety, and protect their purchases. In fact, regarding safety, 43% put more relevance on safety, compared to just 25% of Millennials (as teenagers).
The emphasis for Gen Z, however, is in the approach. Remember, the next generation of car buyers doesn’t want two separate, forced steps. They fall right in line with the preferences of most consumers when it comes to F&I products. In fact, Autotrader’s groundbreaking 2015 “Car Buyer of the Future Study” found that 70% of young car buyers wanted to shop F&I products online.
The trend is unmistakable: Buyers find value in F&I products, but they think that high-pressure tactics are a dealbreaker. Gen Z will expect a digital automotive retail experience that includes online and in-store experiences, all of which add up to a positive and convenient experience.
Finally, Gen Z buyers will also expect their car-buying experience to be authentic, credible and based on trust. Where Millennials identified with performance luxury brands such as Audi and BMW as teenagers, Gen Z again takes a more practical, conservative approach. Their preferred brands are Chevrolet, Ford and Honda, because they identify those marques as reflecting values of trust, practicality and traditional ideals.
Even as teens, this is already a group of savvy, budget-conscious shoppers. They prioritize experiences over material things and value over brands. That’s distinctly different than their Millennial counterparts, and as they approach car buyer status, it’s an important fact to remember.
Gen Z expectations will lead us all to build industrial-strength digital retailing that blends online and physical experiences while promoting an environment of trust, transparency and value. Dealerships that fail to realize that this generation doesn’t see any difference between online and in-store interaction will fail to capture their part of this emerging and powerful market.
Mike Burgiss is the founder and general manager of MakeMyDeal and vice president of digital retailing for Cox Automotive. Email him at [email protected].