Much of the connected vehicle discussion has centered around the technology, but increasingly we are having discussions about monetizing these opportunities. There are certainly a wide variety of services and value propositions, however, it is not clear in each case how that value will ultimately be monetized, or which products and services will deliver the greatest profits.
This is especially true in passenger vehicles where the value of services is harder to quantify compared to commercial vehicle use cases. Furthermore, consumer perception, circumstances, likes and dislikes may drive value assignment at any given time in B2C models.
For example, take two consumers that both have "connected cars" and travel the same route to work every day. They are both offered a $1 coupon from a fast-food retailer through their car's location-based services. They can also both participate in a pay-as-you-drive (PAYD) insurance program.
- Consumer-A is avoiding fast food so ignores the coupon. At the same time, she believes that she is an extremely safe driver so decides to participate in the PAYD insurance program, to potentially save $20 per month on her insurance.
- Consumer-B knows his driving record is not great and dislikes the idea of being monitored by his insurance company (lest his policy rate get even higher), so opts out of PAYD. At the same time, Consumer B stops for breakfast on his way to work every day and saves $1 using his coupon, adding up to about $20 a month.
While both consumers stand to save about $20 a month, it is clear that to the consumers, the value propositions of these two connected vehicle services are not congruent. The bottom line is this: The value of a service will ultimately be in the eye of the beholder. Clearly there are a wide range of consumers and value determination is very personal.
Therefore, as stakeholders in the connected vehicle service-delivery value chain work to articulate the value of their products and services, they must rely upon not only network partnerships, but in some cases large volumes of data which will help them predict who will be the consumers of their offering. Whether that is the end consumer, or another partner in the connected vehicle value chain, the unique value proposition of each stakeholder needs to be extremely crisp and targeted.
Also, consider that many services are difficult to place a value on, such as the productivity gains from using automatic toll charging or the security in knowing someone will be notified if you have an accident.
Buyers may need persuading, using 'what if' scenarios, and example savings calculations. Execution will require that ecosystem participants collaborate effectively, as well as be extremely cost efficient in how they deliver their products and services to remain profitable. Furthermore, it could be that competitors or other emerging players are developing the same or similar capabilities, so getting new value propositions to market before competitors will also be vital. Strategic use of IT and collaborative partnerships will be key in this process.
Ultimately the end consumer has a finite amount of resources to spend on convenience and value-added services derived from the connected vehicle, and those funds will be divided accordingly among stakeholders. And, while it may be more difficult in some cases, in order to obtain a share of the consumer's wallet, the real or perceived value must be demonstrated to the targeted audience.
Please let us know of your company's journey in getting to customer value with connected vehicles. Subscribers can also read more detail in the report Business Strategy: Harnessing Connected Vehicle Ecosystem B2X Opportunities.