Estimation of the number of VolvoNet users

Basis for estimation of the number of VolvoNet users

Volvo is a well-known brand name in Sweden and is widely spread among car consumers, whether they are Internet users or not. Approximately 21 percent of the cars sold in Sweden are Volvos (Motormännens Riksförbund). Although companies such as Autobytel and Bilweb may be known to experienced Internet users they are not by far as well known among other Swedish consumers as Volvo is. When searching for a car brokering service for the first time it should therefore be a higher possibility to find VolvoNet than less established brokering services on the Internet, under the prerequisite that the customer is interested in a Volvo of course.

In the U.S., approximately 75 percent of customers that buy cars over the Internet visit manufacturer sites during their buying process (J.D. Power, 14/09/98). These statistics suggests that manufacturers’ sites are commonly used for information gathering when shopping for a car on the Internet.

A more important implication than the ease at which a well-known brand name can be found on the Internet is the reassuring affect it has upon the customer. As a brand name works as an identifier it reassures the customer if it is already familiar to her. That is, the customer knows what to expect from the brand and thereby from the product or service (Kapferer, 1997). For products, an established brand name also leads to a higher number of repeated
purchases than a new brand (Kapferer, 1997). If the same holds for brokering services, a known brand can be expected to make first time visitors return to the site to a larger extent than less known service brands. It is worth noticing that even though manufacturer sites are widely used for information gathering, it is up to the owner of the site to keep the visitors from proceeding to other competing services.

Reliability

There is of course no single way of estimating the future number of VolvoNet users. We have chosen to make estimates based on Swedish and U.S. statistics available. We have also chosen to divide the users in four different user groups depending on their probability to use the service. The first group represents the high quality customers who actually buy a new Volvo, the second those who actually buy a pre-owned Volvo, the third group are those who consider buying a new Volvo, but also consider other makes. The last group consists of users who represent the remaining car buyers.

When using U.S. statistics, one must keep in mind the Americans longer Internet experience; that they have a higher percentage of users as well as frequency of usage compared to Sweden. Other important aspects are that the USA is the biggest car market in the world and that the car plays a more important role in the Americans’ life than in Swedes’. We still suggest the use of U.S. statistics for a variety of reasons.

Looking back, Sweden has followed in the footsteps of the U.S. so far, when it comes to the Internet. According to a research done by (Öhrlings Cooper & Lybrand), 18 percent of the Internet users in Sweden are shopping capital goods online and 70 percent says they would like to do it in the future. Furthermore, 90 percent wishes to book tickets online in the future. Sweden has the highest rate of online shoppers in Europe compared to the number of Internet users. According to (IT research), Sweden has most computers, and the most modern too, per household in the world. It has also been shown that Sweden does not lag far behind the U.S.A. when it comes to percentage of Internet users. The Americans have now been using the Internet for buying cars for the last two years. Although
there are only a few Swedish car brokering sites in service today, there is a considerable interest in online brokering.

Bilweb for instance, has had more than 180,000 visits since the launch (Ottoson, 30/10/98). We can hence assume that Sweden will follow U.S.A. when it comes to using the Internet for car information and online brokering offers. The Internet usage curve in Sweden can also be expected to continue accelerating as companies are allowed to sell computers cheap to their personnel, made possible by sponsoring by the Swedish state. According to a research done by Volvo Finans, most of the Volvo customers who are using the Internet believe that they will use the Internet
much more in the future compared to today (Öström, 11/1/99). Most of them also believe that they will use the Internet for surfing and buying (Ibid).

Estimating the number of visitors for one year

In 1998 about 53,000 new Volvos were sold (Motormännens Riksförbund). In Sweden about 40 percent of the people in appropriate car buying age group (18-74) are Internet users (Öhrlings Cooper & Lybrand). The typical
Swedish Internet user is a man with an over average income, in his mid 30’s and is married or living with a woman. As this is also a fair picture of the average Volvo customer, we can assume that at least 40 percent of the Volvo customers are Internet users. Also, according to a research made by Volvo Finans, Volvo buyers are not less frequent users than the average Swede (Öström, 11/1/99), thus 18,000 of the new Volvo car buyers each year
are Internet users. Up to 80 percent of those are using the Internet each week (Öhrlings Cooper & Lybrand).

If we do not account for the less frequent users, it would mean that 14.400 of the Volvo buyers each year are frequent Internet users. Assuming that 75 percent of those frequent users will use the Internet in some way before the purchase, leaves us with 10,800 visitors. In the U.S., 75 percent of the car buyers use the Internet to get information before buying a car, visit car manufacturers’ web sites (J.D. Power, 14/09/98). Assuming that the
same conditions prevail in Sweden leaves us with 8,100 high quality visitors. Summarising, we estimate that 18 percent of the first group of users, those who buy a new Volvo, will visit VolvoNet.

We can also estimate this figure another way. In the U.S. 75 percent of the new car buyers use the Internet for information before their purchase (J.D. Power, 14/09/98). For high prestige makes, the figure is even higher. According to SAAB (Engzell-Larsson, 23/02/98), high prestige car makes lie between 35-40 percent. For SAAB in the U.S., it is even higher – 60 percent. Using the 25 percent figure would mean that 11,250 Volvo buyers would make use of the Internet and 75 percent of those would visit the car makers’ web site, i.e. 8,400 high quality visitors.

There are about 53,000 pre-owned Volvos sold in Sweden each year. Assuming the same share of Internet users and interest in the car makers’ brokering services makes another 9,500 quality customers. They make up the second group of users. They might not request an offer on VolvoNet, but they may at least contribute to some of the other utilities.

Finally, assuming from new car registration statistics divided by make, there are about 250,000 new cars sold each year, of which about 43,000 (Motormännens Riksförbund) are cars from Volvo’s main competitors – BMW, Mercedes, SAAB, and Audi – according to Illes (07/12/98).

Assuming that the conditions above are appropriate also for those customers and that 20 percent of those who visit “their” manufacturer web site also makes a visit to VolvoNet gives another 1,370 customers. These are customers who might be persuaded to choosing a Volvo instead of “their” make and constitute the third group of users.

To estimate the fourth, and last, group of users, we can use what we know from car registration statistics. Except for the main competitors’ 43,000 customers above and the 106,000 people buying a Volvo each year, there are about
380,000 other car buyers each year on the market (pre-owned and new). Assuming that one percent of those visits VolvoNet makes about 3,800 additional visitors who may not really be interested in a Volvo but may contribute to an increase in the value of the brand name as well as word-of-mouth.

Potential VolvoNet visitors

There are of course less serious visitors who, although not requesting an offer, nevertheless are contributing to the value of VolvoNet.

According to (SCB)’s population statistics for Sweden, about 6.9 million people are in the age group for car buying (18 or older). About 40 percent of those, i.e. 2.76 million people are Internet users (Öhrlings Cooper & Lybrand). According to (The Industry Standard), 30 percent of the U.S. Internet users shop for autos online. If this also holds
true for Sweden, it means that there are 828,000 potential visitors to VolvoNet (30% × 2,76 million). Volvo has about 21 percent of the car market. Assuming that 21 percent of the 828,000 potential customers pays a visit to VolvoNet gives 174,000 potential VolvoNet visitors that are interested in buying a Volvo.

Conclusions

We have in this thesis studied a pilot service for car brokering on the Internet and made an attempt to identify the possible future benefits and utilities for the operator (Volvo) from a launch of the service on the Swedish market. We have also quantified these utilities and suggested formulas for calculation of their economical contribution. To accomplish this we have used the GRT model which we developed in the first part of this thesis (GRT – A Valuation Model for IT Investments). The model may be used as a general tool for valuation of Internet services. In
this part of the thesis, though, it has been slightly adapted for a valuation of VolvoNet. During the course of valuation, the GRT model’s various parts have proved to be working for our case (which excluded costs).

From our viewpoint, the model has successfully been used to identify the benefits and utilities of launching VolvoNet in Sweden. As the Internet market for car brokering develops, some of the utilities will disappear or diminish and others may appear. We have been able to highlight many of the areas where profits can be made compared to if the
service is not being launched. It is important to notice that actual profits from these utilities are not guaranteed, profits are merely made possible by the launch of the service. For this reason, we hope that this model will not only be used for decision support in the process of deciding whether to launch the service or not, but also for deciding which actions should be taken to capitalise on the various utilities.

The Internet market, and specifically Internet car brokering in Sweden, is immature and little is yet known of its potential and future development. This fact, as well as the qualitative nature of many of the utilities connected to
the investment, have affected the reliability of the results of our valuation model for VolvoNet. The model has no intention of measuring the exact results of the investment. It is to be used for providing more accurate estimations of the results. The accuracy of the results will obviously rely on the accuracy of the numbers entered into the formulas.

The complexity of evaluation and valuation of IT investments also implies that further studies could be made in order to further establish the utility and profitability of the service. This research ought to include risk- and cost analysis.

Implications for Volvo of the identified benefits and utilities

From the benefits identified we have concluded that there are strong incentives for a launch of the service. In order to maximise the payoff of the benefits connected to the investment, the service should be implemented as soon as possible on the Swedish market. This holds true as long as satisfactory service can be guaranteed the customer. Recommending a launch without taking the costs involved into account can be regarded as a strong statement, but from our viewpoint it is necessary to follow the development of the market and the demands of the customers. It is better to enter and influence the development of the market than being forced to an entry at a later point of time. The recommendation is further strengthened by the fact that other independent services as well as other manufacturer services can be expected to enter the market of car brokering on the Internet in the near future. Even more important for our recommendation are the discussions in the Direct benefits and utilities for Volvo from launching VolvoNet section which in our opinion provide enough arguments for that Volvo will benefit from a market entry, even if the costs turn out to be fairly high.

Moreover, the connected dealers and customers will also benefit from VolvoNet. The market description and the dealer benefits presented in this thesis may also be used for convincing the dealers of the necessity of joining the service as well as providing arguments for that the service is favourable for them as well.

Indirect utilities for Volvo from customer benefits

VolvoNet certainly makes a positive contribution for the potential Volvo customer who uses the Internet for information gathering. As consumers use the site they take advantage of and enjoy the value added of VolvoNet.
Fortunately for Volvo there is a great deal to learn from the VolvoNet visitors. We have previously discussed how Volvo exposes its brand and communicates a uniform image through VolvoNet. We also discussed how they capture market intelligence data from VolvoNet visitors.

The main indirect utilities are, however, derived from an increased customer satisfaction. We have in this section shown that VolvoNet brings a value added to its customers. If VolvoNet can live up to or even exceed customer expectations, this will have a positive effect on customer retention and also attract new customers. The more the customers appreciate VolvoNet the more loyal they become to it and the company. Thus, the better Volvo and its dealers can convey the benefits of using the Internet and VolvoNet the more loyal they can make their customers. As is commonly known in marketing, it always costs more to attract new customers than to retain current
customers. With a loyal customer, Volvo can look forward to a relationship that will result in repeated purchases of Volvo products including insurance, cars, spare parts, accessories etc., and thus an increase in ACV.

We recommend Volvo, while estimating the value from customer benefits, not to consider those of the customer benefits with VolvoNet that actually are general benefits with the Internet, nor those that are provided by the competitors, e.g. reading unbiased magazine articles on test runs of different car models. The reason for this is that although the customers might appreciate them, get more satisfied, and give Volvo credit for them, we understand that most of the Internet users in Sweden today, who are interested in car brokering services over the Internet, are experienced users who regard those benefits as standard services. Though, as a web service provider, it is still important to consider these benefits as the customers take them for granted and will be disappointed if they
are not being provided.

Benefits and utilities for the customers from launching VolvoNet

Consumers get more and more accustomed to using the Internet for seeking information. As the Swedish auto industry enters the Internet market it is essential to capture the consumers attention and interest. The actors on the market must therefore give the consumers good reasons and incentives in order to make the consumers visit their web services.

In this section we will point out the customer benefits that are unique for VolvoNet. As we have not been in contact with any customers that have used the Belgian VolvoNet we have described below the benefits that we have found
possible and reasonable. The benefits described can only be utilised by the customers if they go through VolvoNet, or at least the benefits will have greater implications when they are using VolvoNet. These benefits are also of interest to Volvo as they indirectly benefit their business.

Convenient and comfortable services

These benefits facilitate the information gathering and buying process. Extensive information and services are provided in a convenient way.

VolvoNet provides comprehensive and complete information

VolvoNet provides more information about Volvo cars than any other site. Thus, VolvoNet can assist the customer to a buying process where the dealer’s influence on the customer is less than for customers who are going through a
third party broker or using traditional channels. VolvoNet empowers the customer, so to speak. If you can configure all optional attributes of the car on the Internet it is possible for the customer to decide what configuration to purchase even without visiting a dealer. Thus, the customer has the freedom to decide upon what model to buy and how it should be configured without being informed or influenced by a dealer. Hence, avoiding the feeling of being talked into buying more than needed. A condition for being able to make a decision so early is that the information on possible configurations is comprehensive. VolvoNet’s information, when it comes to Volvo cars, is as comprehensive as you can expect in such an early stage. The third party brokers existing as of December 1998 in Sweden, on the other hand, have a lot of information about several different car makes. But, since they are offering such a wide range of makes they cannot be expected to be as comprehensive as VolvoNet for every single make and model. Thus, a customer who goes through a third party broker can decide upon a car before arriving at the dealer location. But if the information is not comprehensive there is a risk that the customer finds out at the dealer that there are more alternatives of colours, engines, optional packages etc., and thus find themselves, once again, under the influence of the car dealer.

The information avaliable when e.g. comparing cars between different makes is delivered by an independent information provider, (JATO). By having all information and services for Volvo cars concentrated to one site, the customer does not have to visit several different sites before being able to make a decision. The possibility to compare the price and configuration of Volvo cars to other brands and models makes it less necessary for the customer to visit other car manufacturers’ sites. This results in time saving for the customer and thus makes the
process of information gathering prior to a purchase decision easier.

The utilities derived from this benefit are thereby customer empowerment and saved customer time.

VolvoNet allows customers to book a test-drive

The customer can book a test-drive online by filling in a form giving information on how she can be contacted, as well as the preferred day, and time of the day. This makes it possible for the dealer to better prepare for the test-drive and can thereby serve the customer in a better way. By booking the test-drive in advance the dealer can put the model the customer wants to test-drive aside, and the customer knows that the desired model will be available. It is possible to book a specific model such as V40, C70 or S80 and to choose petrol or diesel engine online, but it is not possible to book a specific engine (2.0 litres or 2.5 litres etc.) or configuration.

VolvoNet allows customers to choose dealers

There is a difference between how different brokering services choose which dealers should be allowed to send an offer to the customer. Both Autobytel.se and Bilweb have some criteria for choosing between dealers’ offers and does not let the customer choose her own. (For a more detailed description see Autobytel.se and Bilweb respectively.)
By choosing for the customer, the service prevents the customer from choosing a specific dealer, one that maybe does not have the best offer according to the broker’s criteria. But the customer does not necessarily want to choose dealer from the same criteria. On Bilweb, the customer can choose which criteria too choose dealers from; delivery time, concordance of model, or lowest price. But due to the fact that Volvo only builds cars upon order, all Volvo dealers have the same delivery time and an exhaustive range of models (Eneqvist, 25/11/98). Thus, the real difference is only the price when it comes to Volvo cars.

When using VolvoNet the customer can choose any dealer connected to the service. Thereby the customer can be
contacted by the dealer that fulfils the customer’s criteria whether it would be a familiar dealer, a low price, or a
convenient location. The fact that Volvo will try to connect every authorised dealer to VolvoNet (Illes,07/12/98) implies that there will be a large selection of dealers to choose from. As a comparison it can be mentioned that Autobytel.se will connect all Bilia dealers and are not interested in connecting private Volvo dealers located geographically close to Bilia dealers for obvious reasons. As an example, Lööv does not expect to be invited to join Autobytel.se due to his geographical location, close to Bilia dealers (Lööv, 24/11/98).

VolvoNet offers online ordering of brochures

Reading a lot of information about different models on the web has its advantages, but some customers still prefer reading a brochure. Although the Internet is a convenient medium there are people who prefer to read longer texts on paper print and there are situations when customers want to be able to read the information away from the computer. On VolvoNet, the customer can order brochures for every Volvo model on sale. Hence, the customer can receive a brochure without having to visit the dealer or make a phone call. It is convenient for the customer that, if she chooses to read a paper print, she can receive a brochure conveniently.

Brand and image

By the use of the Volvo brand on VolvoNet the customer is communicated the image of the brand and what it stands for. The use of a brand can help the customer decrease the perceived risk but also, hopefully, communicate the image that the customer desire.

Volvo’s well-known brand name decreases customers’ perceived insecurity

When doing business with a company with a well-known brand name you have a rather good idea of what you get. The Swedish customers know what the brand Volvo stands for. A well-known brand that is famous for its high security standards will decrease the customer’s sense of insecurity that is more or less connected to all kinds of purchases (Kapferer, 1997, p.30). An unfamiliar brand, like for instance Autobytel.se, cannot be used to lower the risk since it has not developed an image in the customers’ minds. Thus, using a web service with an unknown brand is connected to a higher risk. Hence, the customers are less probable to use such a service but rather rely upon established brands with less perceived risk.

The fact that VolvoNet dealers are authorised by Volvo can also decrease the risk and feeling of insecurity for the customer. A customer can be assumed to better trust a dealer connected to a car manufacturer’s service, such as VolvoNet, than a dealer connected to any third party broker due to the reassuring effect of the established brand (Kapferer, 1997, p.30). When using VolvoNet everything is connected to Volvo; the car, the dealer, and the site. Thus, the brand name’s reassuring effect affects the customer throughout the buying process.

The sought modern image of VolvoNet is coherent with the sought image of Volvo

The image is an important factor when buying exclusive cars. A buyer of an exclusive car does not want to buy his car in a showroom that also shows cheap makes. (Otterbeck, 09/11/98) As an example, Toyota who owns Lexus (which is marketed as an exclusive car), uses another distribution net for Lexus cars than for Toyotas to differentiate
their brand names. They use specific Lexus dealers and attempt to remove the connection to Toyota (lexus.vicinity.com/lexus).

Branded products may be used for transferring the image of the product to the buyer. Thus, a buyer of an exclusive car is looking for a car that possesses positive and desired properties, i.e. the image of the car should be coherent with the desired image of the customer. (Kapferer, 1997, p.30.) As we have mentioned earlier, Volvo has been trying to change the identity of their cars and thereby the way customers perceive the image of the cars. (See section VolvoNet enhances the image as a company of the future for details.) The image of being a modern car manufacturer can be enhanced further by the use of the Internet as a brokering channel, as well as by the relatively advanced possibilities for configuring the different models. In other words, VolvoNet must convey an image coherent with the image conveyed by the cars. You could compare this with having the same image of the product and the
store; if the product image and the store image is coherent the total effect of the image is enhanced (Assael, 1995, p.136). By enhancing the image, the customer’s self-image is also enhanced (Kapferer, 1997, p.30). The utility for the customer is thus that VolvoNet makes the image conveyed to the customer more distinct.

Increased price competition makes haggling margin disappear

As of today, dealers have a haggling margin on their price to the customers (Eneqvist, 25/11/98). That is, the price can be negotiated to somewhere within this margin without the dealer making a loss. Due to the increased price competition caused by the new brokering channel, Internet, this margin will probably disappear and so will the haggling process (Eneqvist, 25/11/98). The price in the dealers’ offers and showroom will be non-negotiable. This
benefit does not only lower the price, it also decreases the risk of the customers feeling that they have been fooled. The possessed amount of information becomes more equally distributed between dealers and customers and thereby, the car purchase becomes more of a fair play.

Indirect utilities for Volvo from dealer benefits

As we have seen, not only Volvo gain from introducing VolvoNet, also dealers can derive substantial benefits from the new communication tool. These benefits and utilities must be communicated to the dealers by Volvo as the dealer benefits also have an indirect positive effect on Volvo. As we have shown, there are several areas from which the dealer can benefit from joining VolvoNet compared to its competitors. This will make it reasonably easy for Volvo in their efforts to market the service.

Volvo benefits from the fact that dealers are able to, for example, retain financing sales and that the revenue is kept within the “Volvo family”. Thus, keeping the Volvo dealers competitive and giving them a leading edge.

As customers request offers and dealers get advance knowledge of customer preferences, the dealers can give the customer a visit of higher quality. As a result customers save time and the dealers receive more high quality visitors
resulting in more closed deals. Volvo gains from both a closer partnership with the dealers and a higher customer satisfaction rate.

As requests are monitored and information gathered by dealers, Volvo could use this electronically gathered information to further develop and enhance their products. This market information can later be used for individual marketing hopefully resulting in higher after sale customer interaction and a higher ACV.

With the ambition to connect all of the Volvo dealers to VolvoNet, the company would communicate and further enhance the image of a homogenous company all the way from manufacturer to sales representatives. Hence, increasing the customer confidence in Volvo as a whole, as Volvo and its dealers are seen as one unit. This will benefit both ends.

With these benefits dealers should not have to see the brokering services as a threat. Instead they should recognize it as an opportunity and by taking advantage of the opportunities given by Volvo and VolvoNet they can maintain or
even increase their efficiency and business.

Benefits and utilities for the Volvo dealers from launching VolvoNet

The dealers we have been in contact with do not see brokering services as a choice but as a necessity, no matter whether it is good or bad for them. Car brokering services will be launched whether the dealers want them or not, thus, it is necessary for the dealers to join in an early stage in order not to lag behind. (Lööv, 24/11/98, Eneqvist, 25/11/98)

In this situation it is important that Volvo conveys the benefits and utilities of being connected to VolvoNet for the dealers. By doing this dealers can be more co-operative and contribute in the work of making VolvoNet competitive. It also becomes important to explain the specific benefits of joining VolvoNet instead of third party brokers such
as Bilweb or Autobytel.se, although many dealers may choose to join several different services.

The benefits presented below are specific for the dealers and VolvoNet. These benefits can only be utilised by Volvo dealers if they become a part of VolvoNet, or at least the benefits will have greater effect coming through VolvoNet
than through a third party broker. These dealer benefits will in turn benefit Volvo indirectly.

Closer co-operation with Volvo

Volvo dealers have been working with Volvo before through the traditional channels. By continuing to work with Volvo on the Internet the co-operation will be strengthened and enable dealers to gain from some of the utilities below together with Volvo.

VolvoNet enables dealers to take advantage of a well-known brand name

VolvoNet has an advantage by being used in connection with a very strong brand name compared to third party brokering services that have to establish a new brand and communicate it to the consumers’ minds. By co-operating with an already well-known and established brand such as Volvo, which they already do through the traditional channels, the dealer can take advantage of the already existing goodwill and market awareness of that brand. The dealer will be exposed together with the Volvo brand on VolvoNet. This means that the dealer can
capitalise on Volvo’s goodwill and be perceived by all visitors as a recognised part of the Volvo association. The Volvo dealers tied up to VolvoNet will also be helped along with their promotion of the web site, that is, Volvo will subsidise the dealers’ promotion when they combine it with promotion of VolvoNet (Eneqvist, 25/11/98). By joining VolvoNet, the dealers’ partnerships with Volvo will deepen.

As mentioned in the estimations of the number of VolvoNet users, using a well-known brand for a brokering service may cause a higher proportional market share on the Internet car brokering market; higher than the share on the ordinary market. If Volvo sells morecars over the Internet, the dealers benefit thereof.

VolvoNet enables a deepened partnership between dealers and Volvo

Many dealers are family owned companies, who have been working with Volvo for decades. The mutual trust and knowledge of working processes built up during their previous co-operation will mean that the need for organisational changes for the dealers will be of smaller proportions with an introduction of the VolvoNet as opposed to other brokering services. The benefits can also be greater, as VolvoNet is a part of the whole concept of communications tools between Volvo and its dealers. The other services are just that, services bought and paid for, without any deeper co-operation. VolvoNet also brings dealers and Volvo closer together. An example would be
that information derived from VolvoNet could be integrated with the already functioning inter-organisational computer system. The fact that dealers are familiar with whom they are working also helps decreasing the risk and insecurity attached to a project such as entering the market of car brokering over the Internet. Establishing and building a serious relationship with a new company is costly, demands a higher degree of commitment from the dealer, and it also increases the risk with entering the Internet. Instead of just one new uncertainty factor, i.e. the Internet as a new commercial channel, another one is added; the new and unknown partner.

VolvoNet increases information exchange

VolvoNet will lead to the benefit that a large amount of customer information can be gathered by Volvo as well as by the dealers. Dealers can for example notice how the customers are affected by VolvoNet and give feedback to Volvo. Information of customer preferences and interests exchanged between the two will give both parties a competitive advantage. If you look at the only online service functioning today, Bilweb, there is no information exchange except for the request mediation and the offer, thus no statistics or other customer information is exchanged (Eneqvist, 25/11/98). Nor does Autobytel.se plan to have any information exchange of this type between the dealers and Autobytel.se (Nordh, 19/11/98).

More efficient handling of the customers

By the increased amount of information exchange to and from customers, the dealers are able to handle
customers more efficiently and be better prepared for the customers.

VolvoNet makes customers more knowledgeable

VolvoNet offers its visitors the most comprehensive information of Volvo cars and related information available on the Internet. You can therefore expect that the VolvoNet customer, who has actually made a request for a car, have better knowledge of the product than any other potential Internet customer has. That is, the gap for a Volvo buyer between product received and product expected is the least from a VolvoNet customer. The better knowledge thereby decreases the customer’s perceived risk of the purchase, which brings the customer closer to the time of purchase (Assael, 1995, p.252p). This in turn means that the closing rate of a VolvoNet customer, who has made a request, can be expected to be higher than for Volvo customers from any other Internet brokering service as well as higher than for a traditional customer. Although, it should be noticed that early numbers of closing rates for Internet car brokering in Sweden point in the opposite direction. Jan Lööv (24/11/98) estimated the closing rate for traditional
customers to be 1 out of 25 – 30 while the equivalent for Internet customers was 1 to 50. These numbers could be explained by the fact that brokering services for new cars are new and scarce, and people as well as competitors and other interested parties want to try them out. We believe that as the services become more accepted the ratios will change.

Furthermore, customers who are interested in buying a car and have configured a car on VolvoNet already know quite accurately what they want. If going through Autobytel.se or Bilweb, that does not have the full range of offers, the customer may find out about new models or optional packages when arriving at the dealer and then has to reconsider the requested offer. Since VolvoNet has an extensive list of optional packages, colours, engines etc. the customer will not find any new options when arriving at the dealer’s location. Hence, the dealer does not have to spend time informing customers of different models, versions, prices, colours etc.. The implications for the dealers from this utility should be seen in a long–term perspective. Due to the current low frequency of requests generated by the Internet services, the two dealers we have been in contact with do not see any possibilities for rationalisations in the short run. However, Jan Lööv (24/11/98) estimated that a customer who has made a request over the Internet saves up to 30 minutes of the salesperson’s time. Bear in mind that the negative effect of this is that the salesperson
loses half an hour of relationship building with the customer. Another drawback for the dealers, due to the benefit, is the customer empowerment it leads to.

As mentioned earlier in the VolvoNet satisfies customers’ information needs section, more informed customers could contribute to a decreased demand for brochures. Thereby the dealers’ cost for handling requests and distribution of brochures should be decreased as well. Fewer brochure requests save working hours and fewer brochures to send out save distribution cost.

It should also be mentioned that the brokering services function as important information channels although they do not always lead to online requests. A customer can gather information on VolvoNet and then decide to buy the car
through traditional channels, but VolvoNet has still contributed to the enhancement of the buying process both for the customer as well as for the dealer.

VolvoNet facilitates planning for test-drives

The visitors of VolvoNet can ask the dealer to contact them in order to book a test-drive with requests for a certain day and certain time, i.e. the customer can request a certain day of the week and approximate time for the test-drive.
This gives the dealer knowledge of customer needs and requirements in advance and enables the dealer at an early stage to anticipate the inventory and work effort needed. Although the booking of the date and exact time is realised over the phone, and not over the Internet, the customer is at least encouraged to book a test-drive, which facilitates time scheduling. The alternative being that the customer turns up at the showroom for a spontaneous test-drive or does not even bother to test-drive a car at all.

Dealers maintain revenue from financing services

Dealers risk losing parts of the car financing business unless they can offer a financing service on
the Internet like the third party brokers do.

Analogous to Volvo with insurance (see section VolvoNet offers insurance for Volvo cars for details), the dealers lose revenue if customers cannot go through VolvoNet. As Bilweb and Autobytel.se co-operate with other financing institutions than Volvo Finans, dealers lose potential revenue from online Volvo customers, who choose the competitors’ services. A launch of VolvoNet would retain some of the lost financing revenues.

Identifying benefits and utilities of VolvoNet

As we strive to identify the benefits and utilities of VolvoNet, we must have some point of reference. We have chosen to compare the consequences of an investment with the market situation that exists today, i.e. without the investment. This process has been realised under two assumptions, first that Volvo’s Swedish version of VolvoNet will include the same services as VolvoNet in Belgium does, when launched in Sweden. Secondly, that Autobytel.se will offer the same services as Autobytel.com when it is launched in January 1999. Both these assumptions have been considered reasonable by respective party. We thought it necessary to include Autobytel.se in the analysis
as they offer a comparable service for new cars and are believed to become an important actor on the market. The second third party service provider considered is Bilweb as they also offer a new cars service. Although the service for new cars is functioning today, the service is to be fully launched in January 1999 (Andersson, 17/11/98).

Another important factor to consider before analysing the benefits is to consider whose utilities are to be analysed. We are interested in the utilities from a Volvo perspective, how VolvoNet contributes to the manufacturer. With
these assumptions as a starting point we have divided the benefits identified into three groups. First, the direct benefits and utilities for Volvo, second, benefits for dealers with VolvoNet, and third, benefits for the customers with VolvoNet.

Having customers visiting VolvoNet and dealers connecting to this service are prerequisites for the direct benefits and utilities to have an effect for Volvo. As a result of this, Volvo has to convey the indirect benefits to the customers and dealers to make the service attractive for both the dealers and the customers. The two latter groups are also
interesting due to that their benefits can be considered to be indirect utilities for Volvo. For example if the service gives a higher customer satisfaction than other services it is not only a benefit for the customers, but also an indirect utility for Volvo as more satisfied customers also means a higher probability of retaining the customers and increased future sales.

We thereby have to appreciate whether the service brings enough value to the customers and dealers compared
to the competition, and whether a critical mass of customers and dealers will prefer VolvoNet to the competition. With the identified benefits in the Benefits and utilities for the Volvo dealers from launching VolvoNet and the Benefits and utilities for the customers from launching VolvoNet sections as a basis we consider VolvoNet to be competitive.

From U.S. and Swedish statistics we have made an estimation of the number of visitors. From the results in the appendix section Estimation of the number of VolvoNet users, we believe that a critical mass of users can be attained. It should be mentioned though, the definition of a critical mass is up to Volvo to make.

Assuming that VolvoNet will be launched, we can continue identifying the benefits and utilities for the concerned parties.

It is important to remember that the utilities we identify in the following sections are not necessarily the result of the investment in VolvoNet. VolvoNet merely enables these benefits and utilities to be taken advantage of. It is then up to the parties involved to adapt their organisations and business processes to harvest the fruits of the investment (Wikström, 1998, p. 17). Moreover, it is also important to recognise that these utilities must not have an instant effect, the effects may be delayed until the Internet becomes more mature and a natural part of life, much like
television has become.

There are general benefits from using the Internet as a marketing and sales tool. Here though, we are concerned with the specific competitive benefits that VolvoNet can provide that in the end can be of utility for Volvo. Thus, benefits that can be utilised by Volvo directly as well as benefits that can be of utility for Volvo indirectly through dealers’ and customers’ benefits. It is important to notice that we are comparing the situation if VolvoNet is being launched with the situation if it is not.

From the benefits to be mentioned in the next sections, several utilities can be derived from brokering cars on the
Internet instead of through the ordinary channels. Hence, the larger share of cars brokered via the Internet channel and the more visitors there are, the better it is for Volvo.