Every customer journey begins with an emotional decision in favor of a vehicle brand and model. This is quickly followed by the rational question: what does it cost? In addition to the purchase, other costs must be factored in for vehicle use, such as registration, insurance, taxes, service and repair, depreciation, fuel and maintenance.
In classic vehicle financing, the acquisition costs are adjusted to the customer's monthly income situation via a suitable financing structure, such as an installment loan, 3-way loan or mileage leasing with the levers "term", "final installment" or "residual value": The longer the term or the higher the final installment or residual value, the lower the monthly installment. The customer is exempt from any residual value risks. The costs of ongoing vehicle use are not known with certainty in terms of amount and/or future due dates when the contract is concluded. The conclusion of a suitable insurance package, which can be selected by the customer, creates planning security here: in this way, the expenditure risks of automotive mobility are passed on to the insurer against payment of a monthly premium. The combination of vehicle financing and an insurance package for a flat monthly rate has been offered for some time under the name "flat rate" or "mobility package".
Source: Frost & Sullivan
New user groups with new wishes
While the communication flat rate finances the purchase of a smartphone and its flat-rate use of telephony, text messaging and internet in return for payment of a monthly rate, the mobility flat rate covers the costs of financing and using a car, with the exception of fuel costs. For example, "Ford Flatrate", "Renault Relax Pro" or "Sixt Fullservice Leasing". There is no provision for changing the object of use within the agreed contract term
This is increasingly a problem for digital natives from Generation Z. For example, those who are used to streaming films at any time for a monthly fee and watching them on their laptop, TV, smartphone or tablet without a long-term contract commitment also want to be able to easily change their vehicle and adapt it to their needs.
This is where the concept of car subscriptions comes in. By paying a monthly flat rate, customers can use different vehicles of their choice one after the other. Depending on the program, these can be new cars or young used cars. Only the fuel costs have to be paid separately. The vehicle is subscribed to digitally via an app on the smartphone. Examples include "Mercedes me Flexperience": drive a different Mercedes-Benz every month for a year. "Porsche Passport" in the USA: flip into a new model as often as you would like. "Care by Volvo": change vehicle every two months. "Sixt Flat Seasons": a new car every 12 weeks. Cluno car subscription: a new car every three months.
Car subscription change the customer journey
The car subscription is thus positioned as a short-term leasing option between vehicle rental, i.e. car sharing and car rental, and the classic mobility package on a leasing basis. It is based on the customer's desire for a variety of vehicle models, such as convertibles, SUVs, saloons - including different brands, the simplicity and speed of the digital contract, the manageability and predictability of the vehicle costs and the flexible contract design. There is no down payment, final installment or any surprises resulting from residual value changes. In view of the strong demand for such subscription programs in North America and Europe, Frost&Sullivan expects the volume of vehicles used to reach 16.3 million new and used vehicles in 2025. The proportion of used cars is estimated at 80 percent - around 10 percent of new car sales will be sold through subscription programs.
Source: Author
The customer journey therefore does not end with the decision to buy the desired car, but continues from one vehicle change to the next. The numerous touchpoints become a challenge for customer loyalty. The digital platform takes the place of the brand, manufacturer or dealership. It offers access to automotive mobility that the customer designs according to their own ideas. Traditional vehicle ownership is no longer in demand. According to the DAT Report 2019, one in five new car buyers is already considering these new mobility solutions.
Simple value proposition with less risk for customers
Automobile mobility at a manageable cost. This simple value proposition is fulfilled by the promising car subscriptions offered by manufacturers and brand-independent start-ups. Without the risks associated with vehicle ownership, mobility flat rates offer young customers in particular access to flexible vehicle use and change the traditional customer relationship.
Sources
1 Bandmann, A.: Vom Ratenkredit zum Mobilitätspaket - Innovationen in der Kundenfinanzierung, in: Handbuch der Automobilbanken, Finanzdienstleistungen für Mobilität, 2nd edition, Berlin, Heidelberg 2015, edited by Frank Stenner
2 Becker, T.; Taskinsoy, T.: Mobility "On Demand". What do subscription models offer and are they economically attractive? White Paper, Horvárth & Partner GmbH, 2019
3 Frost & Sullivan: Unlocking Vehicle Subscription: Growing Opportunities for Automotive OEMs, Dealerships, Startups and New Entrants, 2018 Link: ww2.frost.com/event/calendar/unlocking-vehicle-subscription-growing-opportunities-automotive-oems-dealerships-startups-and-new-entrants/
4 Stenner, F.: Flat rates in demand, in: Kfzbetrieb, issue 13 2019, p 36-37
