Perceived value, acceptance and willingness to pay by customers for new services in the automotive trade - An empirical study as a basis for the development of business models

Type de publication:

Conference Paper


Gerpisa colloquium, Paris (2017)


Perceived value, acceptance and willingness to pay
by customers for new services in the automotive trade
- An empirical study
as a basis for the development of business models
Prof. Dr. Heike Proff* & Dr. Thomas M. Fojcik & Gregor Szybisty
The automotive trade has been relatively unprofitable to date with a range of activity generally comprising three business areas: 1. (The sale of) new cars, 2. (The sale of) used cars and 3. Customer and technical services as well as spare parts and accessories and other services (in the automotive trade e.g. car sharing, fleet management and consultancy). The average return on sales of German car dealers between 2000 and 2008 was less than one percent (Scholly 2013), in 2013 the figure was 1.3 percent and in 2014 it fell once more to around just one percent (Autohaus 2015). The variance in the return on sales shows that in 2014 around 30 percent of car dealers were making losses, and almost the same number did not even achieve half a percent of profit.
The already low profitability in the automotive trade will drop still further with the increasing market share of electric mobility. Up to now, German car dealers do not seem to have taken electric mobility on board properly: sales of electrified new cars are sluggish (Kienbaum 2014), electric vehicles are not well placed and so far there are practically no sales of used electric vehicles. It is to be expected, however, that repair and maintenance will fall by just under 15 percent for electric vehicles and that safety requirements will be higher (Emobil BW 2014). Interviews with 30 multi-brand dealers and a written survey of the largest brand dealers from the 93 largest multi-brand dealers in Germany have found similar results. Handling high-voltage grids requires the corresponding equipment for workshops and test stations as well as qualified employees, organisational safety measures and training (ibid.). Safety equipment for handling batteries is mandatory. However, some of the multi-brand dealers surveyed also see opportunities in the transition to electric mobility, e.g. by offering e-car-sharing or managing fleets with electric vehicles.
Despite the still negative profit impact of electric mobility for the car dealers at present, ma-nufacturers' current low confidence in the automotive trade at least should also give the dealers food for thought. From the vehicle generations after next (market launch around 2024), the manufacturers will be putting new product architectures together with the new drives. However, the manufacturers already currently see the present dealers more as backward-looking with old staff than as partners. While the manufacturers are already reviewing options for new drive systems beyond the traditional car trade, many car dealers are passive and pursuing a "wait and see" policy.
It is therefore important, particularly for multi-brand dealers, to develop new service innovations for electric mobility and develop new business models for it. This article considers multi-brand dealers because, in contrast to single-brand dealers, they are likely to have greater scope for decision making vis-a-vis the automotive manufacturers and innovative business models require certain entrepreneurial degrees of freedom which will grow as companies increase in size (IFA 2014, p. 57) and become increasingly brand-independent.
Service innovations must be oriented towards customer needs (Steinhoff and Schröder 2009) and offer a value proposition (Chesborough and Rosenbloom, 2002; Osterwalder, 2004). The value proposition was initially explained from the point of view of a "goods dominant logic" (Vargo and Lusch, 2004), which explains a basic and added value of the good or service offered by a company to the customer on a market-oriented basis. A value proposition was taken in that case to mean the offer of a potential value to the customer by a company (Barnes et al., 2009: 23; Payne and Frow, 2014: 240), which in other words was developed in the company and then communicated to the customer (Lanning and Michaelis, 1988; Schleiffer, 2017). More recent explanations of the value proposition are based on a “service-dominant logic” (Vargo and Lusch, 2004; Lusch and Nambisan, 2015) which thinks of the value proposition and value to the customer together. It considers the process of joint value creation by the company and the customer ("value co-creation") from the development of the good or service to its use ("value-in-use", Skảlén et al., 2015). According to this, the value proposition of a comprehensive customer solution has to offer three linked partial value propositions: an integration proposition through the value-creating integration of multiple linked products and services (e.g. Storbacka and Pennanen, 2014), an interaction proposition through the interactive design of the value creation together with the customer (Ranjan and Read, 2016) and an individualisation proposition through efficient individualisation of products and services in accordance with the customers' needs (cf. Storbacka and Pennanen, 2014 and Schleiffer, 2017). If these partial value propositions are developed together with the customer, they create a "perceived value" for the customer (Schmitz and Lerch, 2017).
Service innovations lead via the value proposition to new, innovative business models. Even if there is no consensus to date as to how business models and business model innovations should be defined, the value proposition forms part of every definition of business models. Business models are made up of decisions about five components: resource allocation, competitive advantages, the value architecture, the value proposition and the profit model (cf. e.g. Proff and Fojcik, 2.15). Business model innovations (e.g. Anderson and Tushman, 1990; Bucherer et al., 2012) mean changes in at least two of these components (Lindgarth et al., 2009 and similarly Khanagha et al., 2014: 324).
With the help of a literature review, a quantitative survey of 114 brand dealers (business area level) by division and car showroom in 2016 and focus group discussions with customers, four possible service innovations could be identified for the automotive trade:
1. Electric vehicle showrooms offering comprehensive information and advice on the subject of electric mobility, particularly cost comparisons of the different types of drive, introductions to electric mobility, loan or test drives, charging infrastructure for "green electricity" and photovoltaic systems. They should also take batteries back.
2. The offering of energy houses to network electric vehicles with real estate, e.g. a (solar) house, charging infrastructure and renewable energies.
3. Intermodal mobility platforms and apps such as e.g. park and refuel apps, travel app, apps for offers of lifts, mobility app and mobility card (in cooperation with other providers as well), not just for electric mobility.
4. Management of fleets with electric vehicles for their business clients.
To assess the service innovations for which new business models are worthwhile, in addition to thinking about the decision on the allocation of resources to the service innovations, the implementation of the competitive advantages pursued by the dealers to date and the value architecture (what part of the product or service they produce themselves and what they source from elsewhere), it is important to look at whether customers also see the value proposition as useful, accept it and are ready to pay a higher price for it. For this purpose, by the time of the Gerpisa Conference all corporate and private customers at a major German multi-brand dealer will be asked to participate in a survey and the results will be analysed. We will generate a profit model for a typical multi-brand dealer and use it to estimate which business models will be profitable in the automotive trade for which of the four service innovations in the transition to electric mobility.
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