Is this the start of an automotive subscription trend?
Demed L’Her believes the pay-as-you-go subscription model represents a huge opportunity for the automotive industry
The auto industry is on the cusp of a major shift. Car manufacturers are beginning to explore new business models that move away from traditional car ownership. One of the most promising of these new models is the pay-as-you-go subscription service, which allows customers greater freedom to use cars without the pressure of purchasing and owning one.
Recent announcements from car manufacturers such as Mercedes, BMW, and Volvo indicate that the industry is moving in this direction. Mercedes, for example, recently announced that it will be charging customers a flat-rate subscription fee to unlock higher speeds in certain cars from its new electric range. While the news wasn’t well received by some customers, it seems that other manufacturers are also exploring similar options.
So, what does the future of car ownership look like?
We can certainly expect to see more manufacturers introducing subscription-based models and features. This could include everything from flat-rate subscriptions that give customers access to a range of different cars. Or pay-per-use features that allow drivers to unlock higher speeds or in-car entertainment options.
The key to success for manufacturers will be in finding the right balance between offering customers the flexibility and freedom they crave, while still providing them with the features and capabilities they expect. This will require a deep understanding of customer needs and preferences, as well as a willingness to experiment with new models and features.
The benefits of a subscription model
While this shift in business model may seem daunting to some, it has the potential to bring significant benefits to both manufacturers and customers. For manufacturers, subscription-based models can provide a more predictable revenue stream, as well as valuable data on customer usage and preferences.
By analysing usage data businesses can gain insights into customer behaviour, preferences, and patterns. For example, by tracking usage data, a car manufacturer can determine which features or services are being used most frequently. This can help them to identify which features are most important to their customers, and which ones can be removed or modified. Additionally, by monitoring usage data, companies can determine the best times to offer promotions or discounts, or to introduce new services. Tracking data can give a reliable gauge on when tyres might need changing before they become unsafe, for example.
It’s also a potential revenue boost. Automotive companies can significantly increase their revenue with a subscription model by offering different levels of service or tiers. These should come with different levels of features or benefits at different price points. This can allow customers to choose a subscription that best fits their needs and budget. Another way to increase revenue is by offering add-on services or perks, such as concierge services or discounts on maintenance and repairs. With full understanding of customer usage, sales teams can make well informed decisions on which customers to upsell these higher tiers or additional services to with more success.
We can certainly expect to see more manufacturers introducing subscription-based models and features
For customers, pay-as-you-go services offer greater flexibility and freedom, allowing them to use cars when and how they need them, without the pressure of committing to a long-term purchase. This will be particularly welcome amongst consumers as high inflation and rising household bills is putting a strain on most people’s budgets. Therefore, the freedom to use a car when necessary, rather than making a big purchase will undoubtedly be popular with many.
How to communicate effectively
However, for this new model to be successful, car manufacturers will need to communicate the benefits and reasons why subscription-based services come at an additional cost to some customers. One way for automotive companies to effectively communicate the change is to provide detailed information on the company’s website and through customer service channels. This could include clear explanations of the subscription options, pricing, and any associated costs. Additionally, companies can conduct customer research to gain insight into what customers are looking for in a subscription service and use this information to tailor their messaging.
Despite some challenges, the pay-as-you-go subscription model represents a huge opportunity for the auto industry. It has the potential to revolutionise the way we think about car ownership, and to bring greater benefits to both manufacturers and customers. As more and more manufacturers begin to explore this new business model, it will be interesting to see how the industry adapts and evolves in the years to come.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Demed L’Her is Chief Technology Officer at DigitalRoute
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