Online accessibility concerns in shaping consumer relationships in the automotive industry
| Published date | 20 February 2009 |
| Date | 20 February 2009 |
| Pages | 77-95 |
| DOI | https://doi.org/10.1108/14684520910944409 |
| Author | Alan D. Smith |
| Subject Matter | Information & knowledge management,Library & information science |
Online accessibility concerns in
shaping consumer relationships
in the automotive industry
Alan D. Smith
Robert Morris University, Pittsburgh, Pennsylvania, USA
Abstract
Purpose – The purpose of this paper is to provide practitioners of management and information
technology a sense of how the automobile industry uses the internet to market its products.
Design/methodology/approach – A review of the applied literature on practices and actual
examples of companies’ practices (obtained through personal interviews and basic empirical analysis
of managers located in Pittsburgh, PA) was conducted. An analysis of data derived from web-enabled
and highly educated professionals from the metropolitan area of Pittsburgh, PA, resulted in 60
interviews from an initial sample of over 155 professionals from three area firms. Techniques reviewed
include online advertising, data mining from web sites, other conventional advertising of the company
web site and positioning their vehicles among the various search engines.
Findings – The statistical findings lead to the general conclusion that people are using the internet
with greater regularity to gain information about vehicle purchases. However, the vast majority of
those surveyed still preferred to ultimately complete the purchase in person.
Practical implications – Thefindings show that while dealers are forced to be more competitive in
terms of financing and pricing, dealerships are not in danger of being cut from the vehicle purchase
model, at least not in the short-term.
Originality/value – The internet has proven to be an invaluable tool for consumers who are either
considering the purchase of a new car or actually in the process of doing so. In today’s market,
automotive manufacturers must have a significant market presence to compete and, in many cases,
just to survive in a business environment where several of the major automotive manufacturers must
find new markets overseas.
Keywords Automotive industry,Consumer behaviour, Marketingstrategy, Internet shopping,
Competitive advantage, United Statesof America
Paper type Research paper
Introduction
Online access and customer empowerment
Traditionally, the experience of purchasing a new car has not been a pleasurable task
for many buyers. However, the anxiety and uncertainty associated with traditional car
purchasing may potentially be greatly alleviated by the tools that the internet provides
to the web-enabled consumer. Use of the internet for research among car shoppers has
soared. For example, in the early 2000s only about 25 per cent of buyers went online to
gather information about cars and dealers, but by late 2004 that figure had risen to 64
per cent for new-car buyers and 54 per cent for used-car buyers (Incantalupo, 2005).
Online access to dealer prices, trade-in values and manufacturer incentives has
empowered the consumer and potentially levelled the playing field between buyer and
seller (Viswanathan et al., 2007). In a similar vein, manufacturers and dealers have
benefited from the increased consumer traffic that the internet offers to them.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1468-4527.htm
Online
accessibility
concerns
77
Refereed article received
30 September 2007
Approved for publication
10 September 2008
Online Information Review
Vol. 33 No. 1, 2009
pp. 77-95
qEmerald Group Publishing Limited
1468-4527
DOI 10.1108/14684520910944409
Initially, many dealers and manufacturers expected the internet to impact negatively
on their industry and they balked at using it as a tool in their dealerships, preferring
instead to emphasise traditional methods of consumer interaction and transactional
strategies that had proven to be successful in the past (Evans and Wurster, 1997).
Likewise, consumers were slow to take up the options that the internet could provide.
Today many manufacturers, dealers and consumers alike have accepted and, in many
cases, embraced the changes that the internet has spawned in the automotive industry.
These changes are most evident in the distribution side of the automotive industry.
Cornish and Kleiner (1999) argued that this area is a logical place for the most radical
changes, since distribution costs typically account for 30 per cent of a vehicle’s price.
Porter (2001a, b) classified the internet as a tool and suggested that firms would be
better off if they sharedthis perspective. According to Porter,the internet should be used
as a complement to traditional business strategy – it does not remove the need to create
sustainable competitive advantage and nor does it change industry structure. Other
researchers have argued that the internet does alter the basic structure of the service
offerings of a firm and what constitutes value, and that it empowers the consumer
(Evans and Wurster, 1997; Smith, 2007a, b, c, d). The structural attractiveness of an
industry is still determined by competitive forces, which are the level of rivalry among
competitors, barriers to entry, the threat of substitute products and the respective
bargaining power of suppliers and buyers (Porter, 1996).
Companies that have been built strictly on the internet alone perhaps resemble a
house of cards with no real value, with extremely high price-earnings ratios, as
demonstrated in the past by the large number of dot.coms that failed miserably and
lost money for many stockholders who had been enticed by the hype and the promise
of short-term gains.
As outlined by Porter (2001b), the internet can influence industry structure through
its ability to disseminate more information to a greater number of people. But it does
not change the basic structure or eliminate the major competitive forces. The levelling
effect of the internet actually makes it more difficult for companies to use the internet’s
benefits to gain profitability. There is a proliferation of information, which makes
purchasing and marketing easier for everyone. However, there is relatively little
opportunity for firms to differentiate themselves.
Initially, many firms thought that the lack of barriers to entry and the need for fewer
assets would make them profitable simply because they would have to spend less
money to start conducting business. For most, this ended up being untrue. There was
still a need for warehouses, inventory, electronic data interchange (EDI) systems and
sales forces. With a lack of product distinction, internet sellers were reduced to
competing on price. With so much information on other products and prices available
online, profits were so depressed that few were making any kind of profit that could
sustain an organisation.
The myth of switching costs drove many to rush into internet businesses. Business
executives, owners and managers thought that if they were the first to set up their
businesses on the internet, customers who were using their platform would sustain
high switching costs if they were to change suppliers. However, this is untrue of the
internet, where switching is actually simpler than in other more traditio nal modes of
business. Also, the expected network effect never eventuated. The openness and ease
of operation of the internet for customers again had a levelling effect on networks.
OIR
33,1
78
To continue reading
Request your trial