The automotive industry is thinking about subscriptions all wrong
With the digitalization of the automotive industry, there are some excellent opportunities for car manufacturers to provide value through products and services while improving the brand experience. Imagine more useful touchpoints with customers as they update their car’s features and functionalities.
Plus, we can’t forget that the global subscription market is set to reach $12.5 billion by 2026, allowing auto manufacturers to increase revenue (and likely profit).
But here’s the dilemma.
Consumers don’t like your subscriptions.
A 2022 survey (aptly named “The subscription apocalypse”) found that 40% of consumers think they have too many subscriptions. And some car enthusiasts have taken to online communities to voice their opinions on paying monthly for heated seats.
Subscription fatigue is real, and brands that don’t carefully deploy them will face stagnant growth in digital.
Changing consumer behaviors
To get subscriptions right, you need to increase customer value. To do that, you’ll need to create new behaviors–a big hurdle to get over.
Automotive brands have two critical questions to answer:
- What do we sell that adds value to customers?
- How do we sell it so consumers want to buy it?
What you sell is a complex question since you’re now selling a digital product. If you sell something historically “standard” (e.g., heated seats), consumers will feel ripped off. If you sell something ubiquitous (e.g., an in-car music streaming platform), consumers will ignore you in favor of their current app.
You’ve got to find out what incremental service offers unique utility. What will allow you to add value to the car-driving experience? If you remove a once-had feature, does it damage customer relationships?
Figuring what to sell comes down to digital product innovation.
Product innovation is a never-ending list of challenges, from flimsy processes to ineffective market research to the undeniable difficulty that is coming up with incremental product offerings. Then, of course, you need to align and execute.
While there’s no magic approach to conceiving a homerun product idea, it starts with getting your teams ready for continuous innovation. The brands that find success are the ones that create a culture where innovation happens out of regular habit.
How you sell is even more challenging
To create a successful subscription, you need to create a new behavior. But the subscription pricing models of today are too binary to do this.
Typically, consumers have two options:
- Buy it month to month
- Buy it annually
The gaps between price and perceived value are too wide. The average consumer isn’t willing to risk a lengthy subscription commitment for an unknown utility. To get consumers hooked, you must create a bridge to subscription land. You need to show them what you sell is worth it. This might be pay-as-you-go, pay-by-the-mile, on-demand access, limited bundles, or the freemium model.
Just enough to make them want more. And then do it again and again.
All automotive companies should be testing various pricing models to find out what works and what doesn’t.
Then there’s marketing. We’re not going there right now because it would be a novel, but marketing a digital product is unique compared to marketing a physical one. Navigating app stores, over-the-air updates, and bugs requires a digital product marketing approach.
How to get subscriptions right
Figuring out what and how to sell it is neither simple nor easy. And certainly not the same between car manufacturers. Someone driving a Ford F150 will probably value different things than someone driving a G-Wagon, for instance. Figuring these things out requires a trifecta of consumer research, product innovation, and experimentation.
To get subscriptions right, car manufacturers need to:
- Understand what new offerings can be delivered through subscription models. Customers already have a lot of technology, so what’s something valuable that you can offer?
- Understand why people choose your brand. If customers choose you for reliability, safety, and design aesthetic, how does that shape your subscription strategy?
- Experiment. There’s no point in offering a great subscription if customers don’t make the leap. How do you use customer data and innovation to sustain your acquisition efforts?
Brands that fumble will see backlash, bitterness, and unreliable revenue. Brands that figure it out will improve brand loyalty, diversify revenue, and–the holy grail–turn skeptics into delighted fans.
VP of Growth