Last week, the media picked up that BMW is selling heated seat subscriptions for $18/month. Is there a better way to add subscriptions to a car? Almost definitely.
If you provide infrastructure that you build and support and I want to use, then that seems a reasonable target for a subscription, to help you defray the cost of the infrastructure. If you provide hardware that I've paid for that doesn't need that infrastructure, then charging a subscription is a ripoff.
If I've already paid for them to put the heaters, and whatever other hardware, in my car (they aren't going to put them in for free in hopes I'll subscribe down the line) charging me to turn them on is heinous. That stuff is all local, and doesn't need BMW-supplied infrastructure to operate. It would be like Particle charging me a subscription to enable the bluetooth or wifi on the chips I've bought from you, whereas charging me to use your cloud and its features is reasonable.
When they come up with features that actually need infrastructure support, then they can start looking at subscriptions. This is just another way to extract more money from their customers.
I'll never go subscription anything. No way man, if I pay for a vehicle, everything will be done up front. Call me old school but I don't even like any software that charges by subscription (ie Microsoft 360). I'd rather buy the entire package and use it for 5-7 years - who cares if its 'out of date' (I still use Office 2010 on the older machines in our shop).
BMW just gave me another reason to never buy one (other than their horribly unreliable vehicles).
Excellent post and I agree with your approach - BMW missed the mark on this and your suggestion would not only be more palatable but, as you point out they could add new features to grow revenue or increase the subscription rate.
One thought on this though. It is much easier to make this model work if the offering is primarily implemented in software. If these is a significant (expensive) hardware component, you will have two unattractive options: recoup the cost of the hardware in the base cost or recoup the cost in the cost of the optional subscription. In the former, people are paying for something they will not use and in the latter, you are charing subscribers more than what you might otherwise.
I wonder if, in certain cases, you could avoid this with some sort of minimal hardware / module to enable capabilities such as what Tesla does Homelink.
I think part of the problem is framing. Consider the classic example from marketing psychology:
If you have two gas stations, one selling gas for $2 with 10 cents off if you pay cash, and a second one selling gas for $1.90 with a 10 cent surcharge for using credit cards. The prices are exactly the same but people HATE the surcharge; it's all in the framing.
Right now, the BMW framing is awful because these are features that previously did not require software mediation. Heated seats used to be just a button; the software paywall is framed like a money grab on a previously non-subscription item. It feels like a surcharge.
Subscription messaging needs to get the framing right. "Hey, normally these features are $8,000 extra - how about you just rent them when you want them?" BMW needs to anchor their messaging around getting a deal.
Switching gears, it goes without saying this creates a cottage industry for firmware hackers who will unlock these features permanently, and right-to-repair laws will give just enough gray area for them to operate. BMW needs to recognize that a firmware arms race is the cost of the subscription model, and that will have financial, security, and PR implications.
I would never pay a subscription for hardware in a car. I think it is cheaper in production. You can finish a car in full series and let the owner pay for the additions. New production technology. Do not buy it guys.
So, a customer takes his Beemer in for service and their diagnostic checks reveal that the heated seats feature has an electrical short circuit (while the customer is not subscribed to any winter driving pkg)...so who pays to fix that defect? Certainly not the customer. He's not using that piece of hardware.
If you provide infrastructure that you build and support and I want to use, then that seems a reasonable target for a subscription, to help you defray the cost of the infrastructure. If you provide hardware that I've paid for that doesn't need that infrastructure, then charging a subscription is a ripoff.
If I've already paid for them to put the heaters, and whatever other hardware, in my car (they aren't going to put them in for free in hopes I'll subscribe down the line) charging me to turn them on is heinous. That stuff is all local, and doesn't need BMW-supplied infrastructure to operate. It would be like Particle charging me a subscription to enable the bluetooth or wifi on the chips I've bought from you, whereas charging me to use your cloud and its features is reasonable.
When they come up with features that actually need infrastructure support, then they can start looking at subscriptions. This is just another way to extract more money from their customers.
I'll never go subscription anything. No way man, if I pay for a vehicle, everything will be done up front. Call me old school but I don't even like any software that charges by subscription (ie Microsoft 360). I'd rather buy the entire package and use it for 5-7 years - who cares if its 'out of date' (I still use Office 2010 on the older machines in our shop).
BMW just gave me another reason to never buy one (other than their horribly unreliable vehicles).
Excellent post and I agree with your approach - BMW missed the mark on this and your suggestion would not only be more palatable but, as you point out they could add new features to grow revenue or increase the subscription rate.
One thought on this though. It is much easier to make this model work if the offering is primarily implemented in software. If these is a significant (expensive) hardware component, you will have two unattractive options: recoup the cost of the hardware in the base cost or recoup the cost in the cost of the optional subscription. In the former, people are paying for something they will not use and in the latter, you are charing subscribers more than what you might otherwise.
I wonder if, in certain cases, you could avoid this with some sort of minimal hardware / module to enable capabilities such as what Tesla does Homelink.
Chip
I think part of the problem is framing. Consider the classic example from marketing psychology:
If you have two gas stations, one selling gas for $2 with 10 cents off if you pay cash, and a second one selling gas for $1.90 with a 10 cent surcharge for using credit cards. The prices are exactly the same but people HATE the surcharge; it's all in the framing.
Right now, the BMW framing is awful because these are features that previously did not require software mediation. Heated seats used to be just a button; the software paywall is framed like a money grab on a previously non-subscription item. It feels like a surcharge.
Subscription messaging needs to get the framing right. "Hey, normally these features are $8,000 extra - how about you just rent them when you want them?" BMW needs to anchor their messaging around getting a deal.
Switching gears, it goes without saying this creates a cottage industry for firmware hackers who will unlock these features permanently, and right-to-repair laws will give just enough gray area for them to operate. BMW needs to recognize that a firmware arms race is the cost of the subscription model, and that will have financial, security, and PR implications.
I would never pay a subscription for hardware in a car. I think it is cheaper in production. You can finish a car in full series and let the owner pay for the additions. New production technology. Do not buy it guys.
I loved this post: I will keep it to read ten years from now!
So, a customer takes his Beemer in for service and their diagnostic checks reveal that the heated seats feature has an electrical short circuit (while the customer is not subscribed to any winter driving pkg)...so who pays to fix that defect? Certainly not the customer. He's not using that piece of hardware.
Is it heated seats connected to my phone that needs paying (infrastructure) or just heated seats? Id never pay for later, perfectly fine on former
I would never pay for features in my car where the hardware exists. Ever.