Subscription-based business models and automotive ... it's a difficult relationship

Through our in-depth research in the automotive and mobility sector over the last 18 months, we have seen an enormous opportunity to create mobility subscription-based business models both in and outside the vehicle that would benefit the bottom line and customers tremendously. Accomplishing that requires thoughtful but difficult decisions. It requires a transformation from product-centricity to a customer-centric organization. That's easier said than done, of course, but were are here to help.

Subscription-based opportunities in the automotive industry

In a recent foresight-focused project, one scenario explored our world, but everything we would typically buy would become a form of subscription. We would be users, not customers. It's by no means a new idea. All of us have some experience with that. Whether it's a lease on a car or, as in the case of Apple, where you don't purchase an iPhone anymore. Instead, you subscribe to a service that includes a brand-new smartphone or tablet device. That has the benefit of fulfilling the needs of both the customer and, in this case, Apple. The customer, facing an increasingly steep price for a brand-new Apple device, would otherwise be very reluctant to spend on a new one. For Apple, it's also a win-win. It lowers the barrier for new products and allows Apple to upsell some of the services in its portfolio. You might not be inclined to spend a lot of money on additional services if you have purchased a smartphone for 1400 Euros, but you might do it if, say, Apple would charge you for Apple Care a monthly fee instead of the 250 Euros they used to do before.

There are many more reasons the turn toward Everything-as-a-Service development. Income inequality is one. Wall Street rewarding companies with subscription-based business models is another. Congruently companies that are still reasonably successful in what they are doing feel the need to show both customers and Wall Street (mostly Wall Street) that they, too, can do something with subscriptions. That feeling that they need to prove something results in bad strategic decisions and, more importantly, an awful User Experience. Take, for example, the last foray of a car manufacturer – Mercedes – into the realm of subscriptions.

The $1,200 yearly subscription improves performance by boosting output from the motors by 20–24 percent, increasing torque, and shaving around 0.8 to 0.9 seconds off 0–60 mph acceleration when in Dynamic drive mode

That's 100 Dollars per month for functionality that the car you bought (well, really, you most likely leased it) can do, but then somebody was like: let us use software to restrict that functionality and charge people money for it instead.

As I said before: that's a bad user experience and bad for your communication. Those two combined make a company like Mercedes – a premium brand, after all – look cheap. Not quite as cheap as BMW trying to charge people 18 bucks for heating seats per month, but still cheap. Keep that in mind the next time some of them talke about "customer centricity." Coming back to the opportunities that we see. Let's start with the fact that, in most cases, it is not a good idea to charge people for hardware features restricted by software. Committing to learning and listening to customers is a necessary step on this journey for any organization. Too many decisions are being made based on individual managers' opinions instead of genuine and committed research that exposes opportunities and risks. A truly customer-centric organization is confident enough to build products and services even when some of those solutions aren't something the individuals working on them would like to use themselves.

Feel free to reach out if you have questions, comments, or advice on how to approach this topic. This article was originally published here.