CYNICS may dismiss vehicle subscription as simply rental or leasing under a newer and perhaps more ‘hip’ name.
However, while many of the resources required to deliver subscription may indeed come from established car manufacturers, franchised dealers and the leasing and daily rental companies, subscription customers don’t see themselves as purchasing, leasing or even renting a car.
They view car subscription through the lens they’ve developed to consider the raft of products and services exploding out of the subscription economy. In essence, customers seek simple, convenient and flexible access to an unmet demand for mobility resources.
Subscription providers will be unwise to address emerging demand with outdated products and promotion.
Subscription Throughout the Broader Economy
The global subscription economy has grown at a compound annual rate of about 18% since 2011 or nearly six times the rate of the broader economy.
Prior to the Covid pandemic, McKinsey & Company surveyed online shoppers to find that about half had subscribed to at least one product or service.
Of course, media streaming services dominate the market, but subscription now includes a panoply of services from software to mobile telephony, from food and beverages to toiletries and cosmetics, from apparel to gym memberships and now, mobility services.
Whether consciously or not, both B2B SME customers and B2C customers have developed a fulsome set of expectations around what to expect from their subscription services.
All providers want to be the ‘Netflix’ of their sector, but appropriating marketing buzzwords seldom delivers satisfied paying customers. Instead, customers seek subscription services that satisfy unmet demand for convenience, simplicity and flexibility.
The Value Of Subscription
In a much more recent McKinsey survey, customers identified ‘good value for price’ as the most powerful motivation for engaging a subscription service. However, customers will define value in several different ways including customer experience, the mitigation of unnecessary hassle and other factors.
In vehicle subscription, both consumers and SME fleet customers are likely to see value as a function of:
- Flexibility in commitment term, pricing structure and cash flow;
- The convenience of an end-to-end on-line experience; and
- The simplicity of bundling nearly all car costs into one simple payment.
Subscription is fundamentally the transfer of ownership from an under-resourced operator to a cost- and risk-optimised fleet service provider. Sure, the service provider must solve the flexibility/pricing problem and establish convenient customer engagement, but it may well be cost simplicity that offers the greatest value.
Bundled Subscription Yields Fleet Management Resources
A recent survey of 7,000 German households indicates that people under-estimate the total cost of vehicle ownership by more than 50%. Including depreciation, funding, insurance, service and other factors, the monthly price of subscription can instil a form of ‘sticker shock’ (particularly when compared with longer-term leasing products featuring substantial initial rentals). However, it is just this bundling of services that comprises something of a fleet management resource that leasing companies have historically reserved for their larger fleet customers.
BCG identify a number of additional reasons for enhanced consumer and commercial interest in car subscription:
- Buying a car is tedious and car ownership is losing its lustre.
Customers see the forecourt experience as difficult, confusing and uncomfortable. However, while analysts highlight decreasing demand for car ownership (particularly among younger people), few predict a decline in miles driven. - Ownership and longer-term leasing are far less flexible modalities that place more risk upon the driver/customer. This appears equally valid for B2C and B2B customers seeking simpler and more flexible fleet/vehicle access.
- Subscriptions are a low-risk avenue to EV adoption.
While legislation and ecological imperatives compel this fundamental shift, customers uniformly resist significant financial commitment to new emergent technologies.
Vehicle Subscription is Not About the Vehicle
So, while “good value for price” is the driving factor toward customer adoption, the retention of subscribers is all about delivering a delightful customer experience. Some of the more successful providers promote car subscription as a form of membership organisation.
In the case of Norwegian EV subscription provider imove, such membership is constructed around the theme of climate preservation.
As their platform promotes, “It’s not about the car, it’s a lifestyle”. So long as imove consistently delights its customers with a positive experience that is simple, convenient and flexible, their customers will even tolerate perceived price premium.
The driving force in subscription provision must be a constant assessment of customer demand, operating model adjustments to constantly delight. In avoiding the incumbent paradigm of car ownership (complicated, uncomfortable and inflexible), customers demonstrate a tolerance for price premium.
So What Do We Make Of Car Subscription Services?
Customers perceive car subscriptions in the context of services they already engage for media, software, telephony and a variety of other services. To them, subscription isn’t rental, leasing or ownership with a new name. Rather, it’s a simpler, more convenient and more flexible way to meet their transportation demands.
While the operational and fleet-related resources required to deliver the service are certainly to be derived from car makers, dealer groups, leasing companies, daily rental providers and other established fleet service providers, subscription providers would be unwise to approach new demand with incumbent product and promotion.
Subscription delivers valuable fleet management resources to even the smallest fleet operators. And above all, they are simple to use.
Alex Georgianna
What Do The Car Subscription Providers Say?
Here’s how some of the leading car subscription providers describe themselves on their company websites.
SOGO Mobility
SOGO Flexi – It’s all inclusive. No upfront payments. Month by month contracts and more.
Visit the SOGO Website
ONTO
The all-inclusive electric car subscription.
Visit the ONTO website
Wagonex
Vehicle Ownership Reimagined: Discover a range of flexible, all-inclusive subscriptions from established providers.
Visit the Wagonex website
Cazoo
Flexible, all-inclusive car subscriptions. One monthly payment. All you need to do is add fuel.
Visit the Cazoo website
Pivotal Subscription by Jaguar and Land Rover
Subscribe and drive away with the best from the Jaguar and Land Rover range. We take care of everything for you: insurance, tax, and servicing. If after 3 months your priorities change, you can simply pause your subscription and return the vehicle with no extra charge.
Visit the Pivotal Subscription by Jaguar website
Care By Volvo
The flexible car subscription from Volvo. Order a new car online or at your local retailer. No deposit or hidden costs.
Visit the Care By Volvo website
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