Nowhere is this virtuous cycle for growth more welcome than in the auto sector, where new competitors, business models, and exacting customer demands have tamped down growth and exerted massive pressures on the industry.
Advanced analytics is powering this shift from selling cars to maximizing the profitability of each vehicle for as long as it’s on the road. When executed correctly, we have seen a strategy based on the virtuous cycle add up to 12 to 15 percent to margin growth while also growing revenue. In addition, companies experience faster sales of their most profitable products, enhance brand equity, and build a stronger bond with their customers.
There are six elements of the virtuous cycle that can contribute to profitable growth for automakers (see Exhibit 1). It is critical to keep in mind that the elements are all interconnected; a failure to manage any single element correctly can trigger risk—and destroy value—in the others. Carmakers can guard against this by adopting a life-cycle approach and using advanced data and analytical techniques.