It's Not a Smartphone: Why Automotive Brands Should Think Different About Subscriptions

Over the past few months, several automotive manufacturers have introduced 'subscription' models as an alternative to ownership. These subscriptions have been touted as being 'just like how you might buy a smartphone'. The smartphone analogy generally refers to the relatively short term commitments to the vehicles and the flexibility to upgrade at will.

But are smartphones and cars really analogous? While the automotive and smartphone plans may resemble each other on the surface, there are a few key differences that create an opportunity for auto makers to really change the game by charting their own course in tailoring subscriptions that best match user needs.

The first difference between the categories is the core value proposition. Volvo, Cadillac, Mercedes, and BMW have all launched subscription models, but there are differences across brands in cost and flexibility. BMW's plan is the costliest and most flexible with monthly rates ranging from $2,000 - $3700 per month. Volvo's plan is the least flexible and most affordable, with rates starting at $600/month. But even at $600/month, these models appear more expensive than a traditional retail contract or lease payment, likely making them appealing to only a small segment of the market. On the other hand, smartphone subscription plans tend to make the phone affordable, and therefore accessible to more users.

The second difference is in the way the hardware is used. The fact is that in the US, the average car sits idle for ~95% of the time, with the average driver making 2.3 trips per day. In contrast, the average smartphone sits idle for 80% of the time, but it is used an average of 85 times during the day in small bursts from morning 'til night. Yet all the existing automotive subscriptions are based on the car being in your possession, devoted to your usage 100% of the time...just like your smartphone is.

And that difference in user behavior creates opportunities for innovative, needs based automotive subscription models--models that would obviate the need to trade off flexibility for choice. Instead, they could be tailored to fit specific individual's lifestyles, while at the same time maximizing utilization rates and fleet efficiencies.

For instance, the same vehicle could be used by subscribers to the 'Carpool Plan' during commuting hours, and the 'Soccer Mom Plan' during the day. Other specific usage plans like a 'Night Owl' subscription or a 'Weekender Getaway Plan' could round out fleet utilization, and lower subscription costs. This would also provide the added value of defraying the cost and hassle of parking, as a concierge could arrange for pick up and delivery. Moving from a 95% utilization rate to even a 70% utilization rate would mean the the car now takes 13.8 trips per day, by 6 different subscribers. This would significantly lower cost, and make subscriptions available to a much larger market. Over time, tsubscriptions could outnumber sales or leases.

So why would car companies want to swap sales for subscriptions? According to Deloitte, by 2030, more than half of new vehicles will be used in car sharing. This could take many forms, including ride sharing services like Uber, or unbranded car sharing like Zip Car, or even rental car services. That percentage rises to over 80% by 2040 as autonomous vehicles become more commonplace, facilitating delivery and pick up. The fact is that all these categories are converging and car companies need to think differently.

Subscription plans that add value could help to drive brand loyalty and stave off new competition. Customized subscriptions that take into account user's needs are suited to offer added value through amenities. What if the car was delivered with after school snacks in the 'Soccer Mom Plan' or piping hot coffee in the 'Carpool Plan'? 

There is also an opportunity to tap into incremental revenue streams by bundling incremental relevant services like WiFi for commuters or streaming children's programming into the kid's shuttle. 

And while car sharing may seem scary to car brands worried about shrinking volume, this is not likely to be the case. That is because the projected number of miles driven will continue to increase. Even at a 30% utilization rate, shared cars would be driven over 80,000 miles per year, a 6 fold increase over the 13,476 US average today. Thus, the fleet would need to be refreshed on a more frequent basis to compensate for greater usage, leading many experts to predict that volume will not go down.

As it seems that change is inevitable,  perhaps it's time for automotive brands to start thinking seriously about different subscription models as a powerful tool to  lead this change! 


  

Automotive Innovation: Addressing New Needs or Hedging Bets?

The automotive business is undergoing its own climate change. A change in the  environmental, social and political climate that has recalibrated transportation needs to mandate a fundamental shift in the business.

Knowing that the world around them is changing, almost every traditional automaker has redefined their business as 'mobility'. It's a nice word, but what does it mean? It's actually just a catch all phrase that hedges their bets. They are hedging their bets by dabbling in new powertrain technologies like electric or hydrogen and business models like car sharing and subscription services. 

But instead of jumping in with both feet and leading the inevitable revolution, they are
treating these new initiatives as contingency plans for an uncertain future. They are largely ignoring society's changing needs by sticking to their core offerings. And they are hoping like crazy that if they close their eyes and drag their feet, they can slow down the change and milk the legacy business that they are so heavily invested in for as long as they can...and hoping that the new wave of start ups will run out of capital before they can make a difference. 

Are they right, or will they end up up like Kodak or Sears, by waiting too long for change? Thus far, Tesla is the only start up that has reached a level of success, but even Tesla is struggling to move from niche to mainstream. So will there be another breakout start up?

Much will depend on the approach that they take. Likely the one that strips away as many of the vestiges of the traditional car business to squarely address future needs states will be the one that wins. Lucid, SF Motors, Faraday Future, and the newest, Evelozity have all stated that they are out to revolutionize the industry.

 What approach is each taking? 

Lucid Motors

• Lucid promises 'a new era of luxury mobility' by offering 'forward-looking design with groundbreaking technology to establish an entirely new class of vehicle, one with unparalleled comfort, performance, and convenience'.  They will launch with the Lucid Air, starting at $60,000. The car is expected to be built in a Lucid factory in Arizona.
  

SF Motors

• SF Motors is offering 'premium seamlessly connected vehicles' to 'transform human mobility though intelligent EV's'. They will offer 2 models, the SF7 and SF5, both shaped like 'traditional luxury cars', to be built in one of two of SF motors factories, in the US and China.
  

Faraday Future

• Faraday Future is offering 'A New Species of premium, seamlessly connected electric vehicles'. They are slated to launch the FF91 by the end of 2018 in China for around $300,000. Faraday Future has broken ground on its factory in California.
  

Evelozity

• Evelozity is offering 'Urban mobility vehicles for modern urban life'. They will offer 3 purpose built vehicles: one personal urban vehicle that will eschew the traditional '3 box' design and will cost under $50,000, one designed for last mile delivery, and the third designed specifically for ride hailing. Evelozity will be outsourcing manufacturing.
  
  
  
  
  

Lucid, SF, and Faraday Future, all sporting similar designs, appear to be trying to 'out Tesla' Tesla, by offering more sophisticated luxury EV's. And while they may turn out to be better than Tesla, are they really addressing the changing needs of society that are bigger than electric? And can they beat the odds to avoid succumbing to the enormous capital requirements that have thwarted so many automotive start up dreams? Time will tell.

Evelozity, on the other hand is starting by looking at future transportation needs and organizing its portfolio of offerings around those specific needs. And despite raising an initial $1 billion dollars, it has chosen not to burn that capital on a manufacturing facility. Perhaps, then Evelozity could really accelerate the inevitable change that traditional automakers hope will never come, because they seem to be the only one solving real needs with real solutions.

Dos and Don'ts -- My advice to Ford on their agency review

Over the past couple of years, Ford Motor Company has  struggled to compete in an industry in transition. In addition to several high level management changes, another casualty of this struggle has been their agency, Global Team Blue (GTB). Last week, Ford put its ad business up for review. GTB was purpose built by holding company WPP to be fully integrated and solely dedicated to Ford's business. Ford has had a relationship with WPP agencies that goes back 75 years. From firsthand experience, I can attest to the fact that GTB has some great talent. But sometimes talent is stifled by structure, relationships and briefs.

So what should Ford look for in this review to ensure that they get the best talent and the best structure to guide them into the future?

• Don't try to develop another purpose built agency. While it may make you feel good that there will be no distractions from your business, agencies with only one client can become insular and begin to resemble that client--maybe just a little too much. Furthermore, agencies with only one client are not able to bring perspective and experience from other brands to bear on your business. When I was working on the Nissan account at TBWA, we were fortunate to be able to look to brands like Apple, Addidas, McDonald's and Pepsi for inspiration and innovation.
• Don't go for a holding company solution. Instead, embrace an agency brand (be it part of a holding company or not) that has a specific point of view, and is willing to stay the course on that point of view through thick and thin. When the business is managed at the holding company level, individual agencies become commodities for holding company management to use as expeditious solutions to client/agency disagreements. But any agency who agrees 100% with their client is not giving their clients the thinking and perspective that they need.
• Do look for for an agency that has experience with clients who are in categories that have undergone technology induced disruptions. Categories like telecom, retail, and entertainment all fit the bill. These agencies can use their experience to guide you through the technology induced disruptions that are impacting the automotive industry today.
• Do look for an agency who believes that brand building is more than just the next advertising campaign, or ad tech. The right agency should have the capability to help you transform your business by delivering innovative ideas beyond advertising. The right agency can help you find your brands North Star. A North Star that will rejuvenate your business and help  your brand remain strong regardless of what the future looks like.
• Do look for an agency that adds value to a brief by modifying it to ensure that it has a clear purpose in solving a specific business problem. As you brief the agencies in this review, give them a problem to solve, and latitude on how to solve it. Allow them to get into all aspects of your business. During TBWA's long global tenure with Nissan, we frequently partnered with our client to develop new product briefs, ideas for CSR initiatives, and portfolio strategies that went way beyond advertising campaigns. Both TBWA and Nissan were better for it. 
  

As I've written in previous blog posts (see below), Ford's Brand DNA will allow them to build the bridge to the future perhaps better than any other traditional car company. Now they just need to hire the right agency partner, in the right form to help them harness their DNA in service of both the business and the brand.

(http://creatingbrandtraction.blogspot.com/2017/05/building-bridge-to-future-why-ford-can.html)

What Most Super Bowl Advertisers Failed to Ask: What's My Story?

I've never been a fan of American Football, but, I've watched the Super Bowl year in and year out for one reason -- to see the ads. But this year, I actually found the game to be more interesting than most of the ads. 

What makes a good Super Bowl ad? Of course it has to be entertaining. It must stand out from the 60+ ads that are being shown in the course of the game. And if brand owners are to really get their moneys worth, it must reinforce and advance the brand story. 

That's where most marketers seemed to lose the plot this year--trying so hard to stay in the 'cultural conversation', garner shares and 'likes' and become 'the next Darth Vader', they seem to have forgotten to consider who they are, how to communicate it, and why that matters. 

Losing the Plot

FCA, the parent company of Jeep and Ram, clearly demonstrated that the right hand had no idea what the left hand was doing within or across their brands.

Ram ran a somber, manifesto-like spot using a recording of Martin Luther King Jr, and espousing the idea of service as the highest human ideal. Ram also ran a slapstick, pun-driven ad showing Vikings making the long trek over land and sea to Minneapolis, only to turn around when they realize that the football Vikings are not in the Super Bowl. How one brand could deliver two more disparate messages in one program is beyond comprehension. If Ram was going for the highest ratings in audience confusion, they might be on to something.

If that wasn't bad enough, Jeep ran 3 ads that were equally as confusing. While not as pretentious as the Ram ad, 'The Road' was also manifesto-like in its delivery. Another ad starred Jeff Goldblum in a Jurassic Park flashback where his Jeep helps him outsmart a dinosaur. But the pièce de résistance was their 'Anti Manifesto' ad, that could been seen as dissing both 'The Road' and the Ram Service ad!  My hair hurts just thinking about how this could have happened!

They weren't the only brands to miss the mark. Bud Light was high on epic production, but low on expected laughs; Coke chose to muddle it's usually simple message of inclusion with a lesson in brand architecture; And Diet Coke was trying so hard to be what it wasn't that it was excruciatingly painful to watch. 

How the Underdog Won

So what worked well?

It might help to revisit the granddaddy of all Super Bowl ads, 1984. Apple took a simple brand truth -- that it was for people who think differently -- and brought it to life in an extraordinary fashion that broke through the clutter. While the line 'think different' did not appear until 1997, that brand narrative began with 1984.

This year, while several brands, including Amazon, Australian Tourism and Doritos managed to deliver fun stuff, what brand did this the best? Well, perhaps it's appropriate that in a Super Bowl in which the underdog won, it was not a car brand, nor a beer brand, nor a soft drink brand, but rather, a detergent brand. Detergent -- a category that should be as entertaining and interesting as watching paint dry. P&G's Tide took a simple brand idea 'the absence of stains' and brought it to life in an entertaining, tongue-in-cheek, effective way. They even managed to give a knowing wink to other famous advertising campaigns, including those of other P&G brands. Moreover, this story likely has legs beyond the Super Bowl. Tide has begun a brand narrative that could very well rival that of the Energizer Bunny in its longevity, while having seemingly limitless possibilities to extend that narrative across media channels.

So instead of starting with the goal of being the next Darth Vader ad in shares and likes, perhaps brands should start by looking inward again to find the simple truth that lives within their brand, and tell the most fantastic story about that truth. In doing so, they will earn not just shares and likes, but they will also earn long-term brand value.

The New Automotive Challenger Brands--Are They Doing It All Wrong?

As the automotive industry nears a huge inflection point, there is no shortage of startups looking to 'reinvent personal mobility'. According to the dictionary, to reinvent is 'to change someone or something so much that the person or thing seems completely new'. So why is it that virtually every startup is building an organization that looks exactly like a traditional automotive company? 

Likely because they are mostly automotive people doing what they know best, what they've always done, engineer and build a car--albeit an electric one with semi to fully autonomous capabilities. But guess what? Traditional automotive companies are doing the same thing and they have a 100 year head start in that department. And the reality is that no one is clamoring for a new car brand that goes a little faster, or has a slightly longer battery range. It is doubtful that any of these startups is going to engineer a car that is so much better that it will 'reinvent personal mobility'. So instead of poaching the best automotive talent who know how to engineer and build a brand new car, perhaps they should be looking beyond automotive for talent who can help them to package and architect a new brand of mobility experiences.

What does this mean? It means to start from day one by preparing for future brand differentiation. In a future autonomous world, cars are going to be more like mobile devices and less like horse and carriages. In that world, the hardware, aka the car is likely to become commoditized. Accepting this as a starting point creates an opportunity to truly reinvent mobility to focus on what will really matter to customers.

So why not source the commoditized underpinnings from other car makers? Why not outsource production? This is exactly what Apple does. It sources many components from direct competitors who excel in a specific expertise. Outsourcing components and production allows Apple to focus its resources on it's brand strength--developing and marketing beautiful designs that facilitate ease of use. They leave everything else to third parties. 

To ensure success, new car brands should likewise focus on what sets them apart. At the very beginning, they should clearly define their brand ambition--what they will bring to the market better than anyone else selling 'personal mobility' . Then they should go all out to poach talent from the appropriate category, and invest their resources on excelling in that area. Some thought starters:

• Be the brand that offers the best in-car user experiences possible. Concentrate solely on passenger experiences because in the not too distant future, all users will be passengers. Poach airplane interior designers and leading user Interface designers. Build your products and brand around them.
• Establish industry infrastructure standards and force others to follow. Poach experts in urban planning, autonomous technology  and traffic engineering to work with municipalities and regulators to pave the way for your technology dominate. Think VHS vs Beta, and knock those who only offer better performance and range out of the game.
• Focus on personal service and pampering. Invest in developing the ground breaking  CRM technology and poach heavily from the hospitality, luxury goods categories. Then assemble hardware that will facilitate this experience.
• Superior fleet management will be key, as autonomous adoption accelerates car sharing adoption. Brands looking to dominate should poach the best logistics specialists from commercial trucking and transportation enterprises, and assemble a fleet of vehicles that will best serve those needs.

Of course there will be a need for some car experts who know how to put the vehicle hardware together. But this requires a fraction of the resources that engineering and building a car from scratch requires. So in the end, the car may be the easiest part and most inconsequential part. On the other hand, redefining mobility will require brands to set their sights on excelling in future focused areas of expertise that will truly bring ground breaking experiences to customers.

World Series Ads---Context Matters

One of the most exciting World Series in years is about to end. And while I'm still waiting for the outcome of the game, no matter which team wins, some of the ads I've seen tonight have left a bad taste in my mouth. 

As DVR's and streaming alternatives have driven advertisers to live events like the WorldSseries where they still have an opportunity to reach audiences, some have forgotten that context matters!

A few examples:

Lexus, in an effort to raise its profile to a large audience ran a 'December to Remember' ad...on November 1st. Sorry, my pumpkin is still breathing...it's too early!

Likewise, Target ran a holiday ad that was equally out of context. Baseball is better associated with the 4th of July!

But perhaps one of the most disturbing disconnects between message and context came from Southwest Airlines.

Eager to push their changeable fares before the holidays, they ran an ad in which a coach pledged that their team was going all the way, only to lose and have to change their travel plans. Running this on the 7th game of the World Series is the biggest buzzkill ever! No fan wants to be demoralized by an ad before it's over! 

So advertisers, before you jump on the live tv bandwagon, understanding the context! other wise you could do more damage than good!

Changing the Game: When Words Lead to Action

While actions may speak louder than words, words can lead to game changing actions. That is how brands can use language to set themselves apart. This is true whether they are looking to differentiate themselves in an existing category, or looking to change the category game. 

Great brands often use words to help drive brand behaviors that put them in a category of one. Disneyland does not have 'employees', they have 'cast members'. Cast members behave differently than employees. When they are at the park they are acting their role to create a truly immersive experience for their 'guests'...another word that drives behavior. This is why everyone 'cast members' will reach out to 'guests' to make them feel welcome and personally cared for. This is also why Disney keeps its 'set' spotless and does not tolerate trash on the sidewalk. 

American Express does not have card holders, but, rather 'members'. That's why American Express behaves like an exclusive club that builds member only airport lounges and offers personal Concierge services.

American Express Centurion 'Member' Lounge

Furthermore, when brands lead a category with breakthrough innovation, they have the opportunity to create a new language that drives with fundamental changes in human behavior. Before iPhone and iTunes, there was no such thing as 'downloading an app'. Sometimes the brand itself becomes synonymous those new behaviors. We no longer 'ship' packages, we 'FedEx' them. We no longer 'search' online, we 'Google'. We don't take a 'taxi', we 'Uber' home.

With the automotive category about to undergo significant change, how might language drive new behaviors?

If the pundits are true, in the not so very distant future fully electric vehicles will be driving themselves...and we might just be sharing them with others.  In this scenario, many words, like 'driver' and 'owners' will become obsolete, as will all the brand behaviors that are geared towards these words. Moreover, many of the category values like 'fun to drive' and 'gas mileage' will no longer be applicable. 

So what might the new language look like? How might it guide new brand behavior? And is there an opportunity for a brand to own the new category language?

If you are not driving you are a passenger or a rider. If you do not own the car, you are a user. Brands that begin to use and embrace this language could be ahead of the curve in being prepared for the future.

With that shift in language, everything from product development to advertising would change. For riders, the focus for product development would move from centering around enhancing the driving experience to giving more thought into the rest of the interior and the cars impact on passengers. Forget the ever growing size of screens in the cockpit...how about screens for all passengers? Forget step by step driving directions on GPS, how about narrated guided tours that give passengers more insight on local history and points of interest? Forget perfecting acceleration and handling...how about exploring technology that mitigates motion sickness? How about trademarking that technology to own it? 

Advertising would focus on amplifying these new experiences--no more romancing the sheetmetal or windy country roads. Ads might feel more like technology, entertainment or hospitality ads. 

If you go once step further from passenger to user, transportation service providers would begin to think and behave more like AT&T or Netflix, focusing on generating the highest possible average revenue per user (ARPU) by bundling more and more services. After all, what are users going to do with all those screens while they're riding? And, just like telecommunications service providers built their networks, electric transportation service providers would be investing in charging networks that could be bundled into these subscriptions.

These nuances in language are only the beginning of a long list of new words that are about to be infused into the category. Interestingly, almost every car company now defines themselves in the business of 'mobility'. As of yet, however, a change in language has not resulted in a change in behavior. Perhaps that is because, as a very knowledgeable student of the industry pointed out to me just last week, this is not a new word at all. Mobility is at the very root of the word automobile which is derived from the French for 'self moving'. . 

That said, perhaps there is still an opportunity car brand to breathe new life into the meaning of the word 'auto-mobile', by embracing the corresponding behaviors that purveyors of 'self-moving' devices would adopt.