A nicely heated leather seat in a luxury car is what many BMW owners imagine their driving experience on a cold winter road.
But if those drivers live in the UK or South Korea, they may have to pay monthly for the warm-butt experience – among other things.
The luxury carmaker has introduced monthly fees in these markets to activate heated seats in its vehicles, along with features such as traffic camera alerts or assistance service.
While BMW is not yet bringing the practice to Canada or the United States for heated seats, it has raised questions about whether the business model is changing in how consumers pay for what has traditionally been a one-time purchase.
Pay once, own forever becomes pay forever, own never
“Businesses love subscription-based services,” said Yann Cornil, assistant professor at the UBC Sauder School of Business.
The practice helps smooth out the company’s revenue over time, he said. The company can expect a steady stream of more predictable income, rather than a large influx of cash whenever a purchase is made.
“It’s much easier to predict future returns. It reduces the volatility of returns,” he said.
According to Cornil, who specializes in marketing and behavioral science, businesses and their investors appreciate this predictability.
Another potential business benefit is that consumers may not want to cancel the service once they’ve tried it, guaranteeing the company a lifetime source of monthly income.
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—say, heated seats—it’s hard to lose access, even if it means you’re still paying for it. it.
“People will adapt quickly to the increased comfort level … I suspect it will be much harder to stop that subscription, it will be much harder to adjust to the lower comfort level by stopping the subscription,” he said.
It’s not a new concept in the automotive industry
Applying the idea of charging a monthly fee for features that are built into other vehicles is not a new concept for BMW.
In 2019, the company faced some criticism for charging a subscription for the Apple CarPlay feature in vehicles. That later dropped the charges.
Tesla also started operations subscription packages in some markets for features such as self-driving or automatic parking.
BMW allows Canadian consumers to add new features after they have initially purchased via software download, but said systems such as heated seats are not part of this offering.
“We don’t have a subscription-based business model in Canada, but just like in the US, we give customers the ability to add new software features to their vehicle by uploading the software using the hardware they already have in the car,” said BMW Group Canada’s Barb. Pitblado in an emailed statement to CBC News.
Pitblado also pointed out that heated seats and steering wheels come standard on most Canadian models offered by the company.
Auto expert says customers can go elsewhere
According to auto industry writer Lauren Fix, car shoppers may switch if subscription features that were previously permanent purchases catch on.
“This vehicle has heated seats that you have to pay extra for, and the switch is already there? It makes people unhappy, uncomfortable,” said Fix, who is editor-in-chief of Car Coach Reports.
Fix said knowing that a feature like heated seats is physically present in a vehicle but simply doesn’t work because of a financial choice can be aggravating for customers and can drive away business.
“The idea is that you want repeat customers, and if you start nickel-plating customers, they’ll go elsewhere,” she said.
Will subscriptions be permanent purchases?
But marketing experts say that while the idea of subscribing to physical features and items may seem novel and frustrating to consumers in some contexts — it’s not going anywhere.
“It’s a fundamentally different way of thinking about facilities,” said Joanne McNeish, an associate professor at the Ted Rogers School of Management at Metropolitan University of Toronto.
McNeish’s research focuses on how people respond to new technologies, and she pointed out that consumers are in some ways already accustomed to the concept of a full-featured subscription.
“My phone doesn’t work when I don’t have internet… I can still type some things. But the full functionality isn’t there unless I pay for it or it doesn’t work,” McNeish said.
McNeish believes that over the past two decades, consumers have been ready to move away from traditional ownership and towards a leasing model for many products, and points out that whole motor vehicle leasing itself is not uncommon.
“Owning physical things means having control over 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 don’t have to make decisions about them.” these things. But if you want access to them, you’ll have to pay for them.”
While BMW doesn’t currently charge monthly fees for heated seats in Canada, should the business model become more popular, experts like McNeish expect initial resistance.
“Consumers will fight back,” she said, adding that nowadays people are used to getting many products – such as heated seats – “free” with their purchase.
“It’s going to be pretty hard to stop getting those things.
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