Could BMW’s subscription plan put it in the hot seat?

Zerotrillion's Aubrey Podolsky explains why short-term revenue might not be worth the trade-off for long-term brand love.
BMW

By Aubrey Podolsky

What’s the feature most people are willing to pay more for the next time they buy a car?

A study of 90,000 car buyers by market research firm AutoPacific found that heated seats were the most desired feature for their next new car purchase (66% want ‘em).

So, you have consumer desire for a feature, and an automotive industry desperately seeking new revenue streams as costs continue to rise and electric upends everything. You can almost picture auto executives looking longingly at the monthly recurring revenue earned by all those software companies and asking, how can we get in on that action?

Consumers are used to some monthly subscriptions for value-added services like roadside assistance or SiriusXM, but BMW is making headlines in multiple markets by deciding to charge an $18 monthly subscription for heated seats. The offering is currently being sold on BMW digital stores in the U.K., Germany, New Zealand and South Africa.

Why not charge a subscription for this in-demand feature? What could go wrong?

Well, quite a lot.

Another survey by Cox Automotive specifically looked at willingness to pay for car features via a subscription model and found 75% of car buyers would refuse to pay for those features on an ongoing basis. And this skyrockets to 92% when talking about “physical” features of the car – like heated or cooled seats.

The problem is that there is no additional consumer benefit to charging for heated seats. It’s entirely artificial. They’re already installed in the car. When consumers pay for a subscription, their expectation is continued value exchange: “I pay you X dollars per month, and you add Y value to my life.” Incremental value comes in multiple forms – fresh content, ongoing service, the promise of updates and upgrades, and so on. Subscription services could easily be organized into two camps – features that add incremental value, and features that don’t.

The idea of paying to avoid a company “turning off” a feature like heated seats (or heated steering wheels) is built on a power strategy, not a value exchange strategy. They are doing this because they can, and if you want the car, you have to deal with it. Long term, charging monthly for a feature that doesn’t continue to add incremental value will lead to people seeking an alternative.

It’s possible BMW is forging ahead with the hopes that other luxury auto manufacturers follow suit, rising tides for all ships. And according to Consumer Reports, Audi, Cadillac, Porsche and Tesla are all exploring subscription services.

There are three potential negative impacts on the brand which may arise, ultimately making this a trade-off not worth making for a relatively small new revenue stream.

The consumer may question the overall BMW brand value equation. People have a value equation in mind, even when it comes to luxury. The danger is that people begin to believe that the premium they pay for a BMW is not worth it.

Some of the brand’s most loyal buyers may be turned off. Imagine going into the dealership to buy yet another BMW, and you’re told you have to pay monthly to heat your seats? Isn’t that Benz dealership just around the corner?

The pride of ownership might erode. Being a “BMW Owner” is a status symbol, and the brand begets serious and committed advocates. This policy makes me feel like a renter, not an Owner, and certainly not like an advocate.

Where is all this leading? The closest approximation I can think of is if Apple or Samsung charged a monthly subscription to use the camera on your phone. I’m not going to pay for that, either.

Incredible brands take a long time to build but are relatively easy to destroy. A cash grab like a heated seat subscription won’t destroy this storied brand, but it is indeed a trade-off: brand equity for short-term revenue. Make that choice too many times, and people will stop choosing your brand entirely.

Aubrey Podolsky is global chief strategy officer at Zerotrillion.