Tired of subscriptions? Heated seats in cars are the latest cost to test consumer limits
A warm leather seat in a luxury car is how many BMW owners imagine their driving experience on a cold winter road.
But if those drivers live in the UK or South Korea, they might have to pay monthly for the heated butt experience, among other features.
The luxury carmaker has introduced monthly fees in these markets to activate heated seats in their vehicles, as well as features such as traffic camera alerts or driver assistance.
Although BMW is not yet introducing the practice in Canada or the United States for heated seats, it has raised questions about whether the business model is changing for how consumers pay for goods that were traditionally purchases. unique.
Pay once, own forever becomes pay forever, never own
“Businesses love subscription services,” said Yann Cornil, assistant professor at the UBC Sauder School of Business.
The practice helps smooth out a company’s revenue over time, he said. A business can expect a steady stream of more predictable revenue, rather than big bursts of cash every time a purchase is made.
“It’s much easier to predict future earnings. It reduces earnings volatility,” he said.
Companies and their investors appreciate this predictability, according to Cornil, a specialist in marketing and behavioral science.
Another potential business benefit is that consumers may not want to cancel the service once they have tried it, ensuring a lifetime monthly revenue stream for a business.
Cornil describes this as part of what behavioral scientists call the “endowment effect,” or the idea that once you feel like you’ve owned something — like, say, heated seats – it’s hard to lose access even if it means you keep paying for it.
“People quickly adjust to the increased comfort level…I suspect it will become a lot harder to stop that subscription, a lot harder to adjust to a lower comfort level by stopping the subscription,” a- he declared.
Not a new concept in the automotive industry
Floating the idea of monthly charging for features built into other vehicles is not a new concept for BMW.
In 2019, the company been the subject of some criticism to charge subscription fee for Apple CarPlay function in vehicles. It’s later dropped the charge.
Tesla also launched subscription packages in some markets for features such as autonomous driving or automatic parking.
BMW allows Canadian consumers to add new features after initially purchasing through a software download, but said systems such as heated seats are not part of this offer.
“We don’t have a subscription-based business model in Canada, but like the United States, we give customers the ability to add new software features to their vehicle through software downloads using hardware already in their car,” said Barb of BMW Group Canada. Pitblado in an emailed statement to CBC News.
Pitblado also pointed out that heated seats and steering wheels come standard in most Canadian models offered by the company.
Car expert says customers can go elsewhere
According to auto industry writer Lauren Fix, car buyers can go elsewhere if they subscribe to features that were previously permanent purchases.
“This vehicle has heated seats, which you have to pay extra for, and the switch is already there? It makes people unhappy, uncomfortable,” said Fix, editor of Car Coach Reports.
Fix said knowing that a feature like heated seats is physically present in a vehicle, but simply isn’t working due to a financial choice, can be aggravating for customers and can drive away business. .
“The idea is that you want loyal customers and if you start nickel-and-diming customers, they’ll go somewhere else,” she said.
Will subscriptions be like permanent purchases?
However, marketing experts say that while the idea of subscribing to physical features and items might seem new and frustrating to consumers in some contexts, it’s not going anywhere.
“It’s a fundamentally different way of thinking about devices,” said Joanne McNeish, associate professor at Toronto Metropolitan University’s Ted Rogers School of Management.
McNeish’s research focuses on how people respond to new technologies, and she pointed out that consumers are, in some ways, already used to the concept of subscription for full functionality.
“My phone doesn’t work if I don’t have internet… I can still type some things. However, full functionality isn’t available if I don’t pay for it or it doesn’t work,” McNeish said.
McNeish thinks consumers have been primed over the past two decades to move away from traditional ownership and embrace more of a rental model for many products, pointing out that whole motor vehicle leasing is, in and of itself, not , not uncommon.
“Owning physical things involves controlling how we use them, how long we keep them, and what we do with them when we’re done. This new model says you don’t own things anymore, so you can’t decide everything. These things, but if you want to have access to them, you will have to pay for them.
Even though BMW isn’t charging a monthly fee for heated seats in Canada at this point, should the commercial model become more popular, experts like McNeish expect an initial backlash.
“Consumers will object,” she said, adding that currently people are used to receiving many products – like heated seats – “for free” with their purchase.
“It’s going to be pretty hard to stop having those things.”