By Peter M. DeLorenzo
Detroit. Let’s face it, as consumers of all media, from a la carte apps to additional TV platforms on the Internet, we’ve become used to the financial hosing we have to put up with each and every month. Let me rephrase that: We’re not used to it at all; we just put up with it. And lately, it seems consumers are starting to push back on the concept of a la carte viewing options, finding out that the dizzying smorgasbord of opt-ins actually ends up costing more than the old cable package plus a few extra movie and sports channels.
That this isn’t sitting well with consumers is not hard to understand. We can only take so much before we get really agitated. And when it comes to getting “nickel and dimed” to death every time we turn around, it tends to instigate short fuses all around.
Wading into this swirling maelstrom – three years too late and woefully out of touch with consumer perspectives per usual – comes the automobile industry, whose collective “Big Idea” to accelerate future profitability is to monetize just about everything that moves in your vehicle. Want heated seats? It’ll cost ya. Want a heated steering wheel? It’ll cost ya. Want advanced connectivity and the latest access to entertainment, mapping and communication? It’ll cost ya. Want your advanced performance and safety systems to be engaged and ready? Well, let’s see, that’s a package that will definitely cost ya – every damn month. Let’s just call it for what it is: Hosing on Demand.
That this is the strategy that the brainiacs in the auto industry have come up with speaks volumes. I blame it on the flawed – and deeply held – logic that suggests that our future vehicles will simply be software platforms that the auto companies can mine for data and boatloads of ca$h-ola with impunity. This concept originates from certain thought leaders (cough, hack) in the industry who have a deep-seated inferiority complex that revolves around the belief that they are second-class citizens when compared to the “geniuses” in Silicon Valley. These CEOs and COOs are so desperate for legitimacy in the larger business arena that they believe that forcing “software monetization” down consumers’ throats will give them the credibility they crave.
Have you ever wondered why every announcement about a top-level executive appointment coming out of the Detroit-based auto companies of late is an executive with Silicon Valley credentials? The “software monetization” angle is why. As for the wider spectrum of automobile companies out there, the transition to EVs has auto execs licking their chops at what they see as unlimited profitability from “software monetization.” In their collective minds it’s a sure thing-can’t miss. But something tells me that their expectations are wildly optimistic. And as if right on cue, there’s a different perspective out there that has just arrived on the scene.
Cox Automotive has released new consumer research that suggests automakers may face challenges if they expect to generate significant revenue from subscription-type features, also known as Features on Demand (FoD). The Research & Market Intelligence team at Cox Automotive understands the importance of the trend toward Features on Demand, and the new study “Software Monetization: The Emergence of Vehicle Features on Demand” is the team’s first comprehensive look at the topic.
The study was undertaken to gauge consumer awareness of automakers offering Features on Demand as part of their new-vehicle sales strategies, including the belief that FoD was likely to become a growing trend in the automotive industry. The team surveyed more than 2,000 in-market vehicle shoppers in late December and early January to determine their interest in vehicle features through subscription-type services. Additionally, the study explored the consumer benefits and barriers for FoD.
“Our initial research indicates that the transition to Features on Demand will be an uphill battle for many automakers,” said Vanessa Ton, senior manager of market and customer research at Cox Automotive, who helped lead the research project. “In the market right now, there is low consumer awareness and some skepticism on the part of shoppers. To gain consumer acceptance, automakers must ensure consumers perceive subscription-based features as a good value and not just a money-grab.”
“Some skepticism on the part of shoppers”? I predict that skepticism will grow into a loud drumbeat against what is, as Ms. Ton suggested, a money-grab.
The Cox research also shows that, at least initially, most shoppers (58%) expect an FoD approach to be too expensive, and there are concerns about data security and privacy. Skepticism was apparent in the research, as three out of four respondents agreed with the statement, ‘Features on Demand will allow automakers to make more money’. Further, 69% of respondents indicated that if certain features were available only via subscription, they would likely shop elsewhere.
“As consumer familiarity is low, automakers will have to be careful in how they present an FoD strategy and make sure not to turn off shoppers from the start,” added Ton. “Our research suggests that free trial periods might be one way to approach the issue.”
I predict that free trial periods will not work either. Why? Because people are wary of sign-ons for features at an initial inexpensive rate, which predictably jumps to an entirely different rate after a given trial period. Have trouble keeping track of all of your various streaming services now? Just imagine trying to keep up with the menu of car features that you signed up for – at least the ones you remember anyway.
It’s obvious that manufacturer operatives have huge dollar signs in their eyes with the promise of “Software Monetization” and “Features on Demand.” And the transition to EVs is only fueling their optimistic greed. But if they can’t build EVs fast enough without catastrophic quality issues to meet – the alleged – demand, and the national and local infrastructure isn’t even close to being there, then what are we talking about here?
We’re talking about auto company CEOs and COOs making flawed assumptions about the future of profitability, fumbling their way out of the car business and stumbling deep into Software Hell, aka Hosing on Demand.
I’ve seen this movie before; it never ends well.
And that’s the High-Octane Truth for this week.
Editor’s Note: You can access previous issues of AE by clicking on “Next 1 Entries” below. – WG
