When is the last time you bought a CD or DVD instead of streaming directly from Spotify or Netflix? Today’s consumer is becoming increasingly interested in subscription-based services, and the concept is quickly making its way into the automotive space.
Vehicle subscription services are a relatively new way to access mobility services as an alternative to ownership. Users pay a flat monthly fee to a manufacturer or third-party provider in return for on-demand access to several vehicle models.
The fee covers insurance, maintenance, and roadside assistance. And just like their subscriptions to movies or music, the service can be turned off or on at the click of a button.
Awareness of and interest in subscription offerings are on the rise. It’s a good time to ask how this shift will affect your dealership. Here are five impacts you will feel in the years ahead:
1. You Will Be Responsible for Service.
For decades, when a vehicle required maintenance or repairs, the onus was on the customer to schedule and facilitate the repair. Today, that responsibility — and the related costs — is shifting back to the factory and, by proxy, the dealer.
In the new subscription model, dealers will essentially become fleet managers. You will work with your factory to install systems and processes that will (a) ensure vehicles are ready when and where customers want them and (b) preemptively order maintenance before a failure ever occurs.
2. Pricing Will Be More Important Than Ever.
The way OEMs and, subsequently, dealers price goods and services will evolve. First and foremost, the factory will now be responsible for pricing service contracts. OEMs will transition from strictly selling new products to selling outcomes; in this case, it’s unlimited access to a vehicle.
As dealers transition into fleet manager mode, your factories must ensure that, when determining service contract pricing, your bottom line is kept in mind.
3. Remanufactured Parts Will Proliferate.
When a part is removed from a subscription vehicle, rather than discarding it, you can send it back to the OEM to be remanufactured or refurbished. It’s a more sustainable practice. But it adds complexities to the supply chain.
OEMs will need to invest in the appropriate technologies to handle this added layer. They also will need to encourage dealers to participate in the program and train your personnel.
4. The PaaS Model Will Dominate.
“Product as a service” is the concept of selling the services and outcomes a product provides rather than the product itself. In a fully subscription-centered environment, this is exactly what your factories will be doing.
You will benefit by recouping more post-warranty service revenue. In a subscription model, 100% of the required maintenance and repairs takes place at the dealership — putting your capacity and capabilities to the test.
5. Proactive Service Will Replace Reactive Service.
Why wait for a vehicle to break before you fix it? The subscription model gives OEMs the ability to offer service proactively, leveraging IoT and predictive analytics to stay ahead of mechanical issues and parts failures.
The benefit to your bottom line is clear: If you own the exclusive rights to send a notification that a specific part is about to fail and preemptively schedule the repair, the great majority of the customers you reach will come to you.
As the industry continues to navigate the subscription model, you will have to make a series of adjustments while the OEMs do their part to ensure your teams are well-trained and well-equipped. You will find the investments made on both sides today will pay off with increased customer loyalty in the near future.
Gary Brooks is CMO of Syncron and a 20-year marketing veteran with expertise in revenue-focused B2B campaigns. Contact him at [email protected].