Telematics: In Search of the Right Value Proposition

Krystyna

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11th February 2010

Randy Frank reports on the importance of identifying new value propositions for customers
By Randy Frank

While ‘value proposition’ is a frequently used term these days, a rapidly evolving area such as telematics needs frequent reviews and revisions to reaffirm the value customers associate with products and services. “New value propositions are needed that capture drivers’ and passengers’ connected information needs,” says Thilo Koslowski, vice president and automotive practice leader, Gartner Industry Advisory Services.
Koslowski has identified new value propositions as one of four key elements for telematics success, the other three being automobile product differentiation beyond mechanical differences, automobiles as the ultimate mobile devices, and the ‘ecosystem’ definition of the successful connected vehicle. Here’s how new value propositions are influencing the development of navigation, subscription services, and synergy with emerging electric plug-in hybrid vehicles.
Beyond point A to point B
For navigation, Koslowski thinks the value proposition has to change. Users have come to expect more than just the capability of getting directions from point A to point B. Shifting to personal navigation services, such as intelligent routing, could provide a valuable personal approach. With intelligent routing, users are provided alternatives if normal traffic patterns change. The alternative routes are based specifically on their destination and other information, such as estimated time of arrival.
“It becomes a much easier justification for consumers to buy into something like this because it is a different concept,” Koslowski says. It can also save the user time and avoid frustration.
Pent up demand
Subscription services also need to offer customers new value, if only because otherwise they won’t be willing to pay for them.
Steve West, senior director, Emerging Technology and Media, Alcatel-Lucent, says he’s seen his company offer a lot of services, but telematics has exceptional potential: “I have seen very few services and applications with the type of pent up demand that the connected automotive experience has.” His research shows that 60% of consumers would make buying decisions based on the fact that their car is connected.
Customers may be willing to pay for subscription services but other options may still be preferred. “I think the real opportunity here is for a lot of the ‘on demand’ and ‘a la carte’ types of data streams,” says West.
One example is connecting to a secure carrier environment for vehicle-based purchases. Like intelligent routing, the big payoff for users is saving time. Plus, with a properly crafted a la carte service, users could also get savings on their purchases, through more competitive pricing, coupons or similar measures.
While on demand and a la carte services may reduce revenue from service subscribers, the number of users could substantially increase as consumers recognize the value of on demand-style services.
Connecting EVs
“I think customers are going to find the sweet spot of what will work for them in a simple way,” says Nick Pudar, vice-president, Planning and Business Development with OnStar. Take the remote start function for heaters, for example. In cold climates, this could be a popular feature.
Remote starting for heaters is just one of the apps that could be offered to buyers of the Chevy Volt when it becomes available later this year. “The reason we are starting with the Volt is because we sense there is a very real relevant use and application,” explains Pudar.
Apps to “connect the car not only to the information grid but to the energy grid” will pay off for suppliers and customers, according to Partha Goswami, technology manager, General Motors. For example, programming a vehicle for off-peak rates can actually provide a cost savings potential worth paying for. The ongoing savings could cover the cost of the app—and then some.
Development around “smart charging, smart road management and smart metering is a huge innovation waiting to happen,” says Goswami.
To find the right value proposition, suppliers must evaluate the potential of going beyond existing products and services, offering a la carte services, and establishing synergy with other new vehicle developments. Reassessing the value proposition is imperative. After all, the competition is probably already doing it.