The automotive industry is experiencing new avenues of growth through data-driven business models centered around a breakthrough in technology; Features on Demand (FoD).
In this article we will discuss what FoD is, why it provides an appealing value proposition to end consumers, and finally highlight some key challenges this concept has been facing.
As an expert network, our team at Infoquest has the ability to connect you to global subject matter experts who will provide you with direct insights into this emerging market. This will allow you to assess your readiness for this new era, understand the opportunities that lie, and finally highlight key challenges you will need to overcome.
What is FoD?
Features on Demand refer to an emerging concept in the automotive industry where customers have the ability to activate or access certain features or functionalities in their vehicles after the initial purchase, via a subscription model. Basically, similar to how you can download apps to access additional features on your mobile device, you can now ‘download’ additional software and hardware features after the purchase of your vehicle.
Some of the features include:
1. Infotainment Upgrades: Activate premium audio systems, navigation systems, or advanced multimedia features
2. Driver Assistance Features: Opt for additional safety features such as adaptive cruise control, lane-keeping assist, blind-spot monitoring, or parking assistance.
3. Performance Enhancements: Sport mode, adjustable suspension settings, or turbocharger upgrade.
4. Connectivity and Communication Services: Wi-Fi hotspots, smartphone integration, and advanced telematics system.
5. Interior Comfort and Convenience: Heated seats, ambient lighting, automatic climate control, or advanced seating configurations
6. Personalization Options: Customized paint colors, interior trims, wheel designs, or upholstery materials.
7. Over-the-Air Updates: Vehicles can receive software updates remotely, enabling the addition of new functionalities, bug fixes, and performance improvements without requiring a physical visit to a service center.
The Value of FoD:
Whilst this concept might seem odd at first glance, Features on Demand offer significant value to both the customer and the OEM in several ways.
Some key advantages include:
1. Increased customer personalization: Customers can choose the features they want, paying only for the functionalities they need as this evolves over time. This flexibility enhances the overall ownership experience and allows for greater personalization, catering to individual preferences.
2. Upselling and revenue generation: OEMs can offer premium features as optional extras, generating additional revenue beyond the initial vehicle sale. This approach enables them to capture more value by providing ongoing services and upgrades throughout the vehicle’s lifecycle.
3. Adaptability and future-proofing: Features on Demand enable OEMs to introduce new technologies and functionalities to existing vehicles, extending their lifespan and adapting to evolving customer demands. Instead of requiring customers to purchase a new vehicle to access the latest features, they can simply activate them in their current vehicle.
4. Cost optimization: OEMs can streamline production by offering a base vehicle with fewer features and reducing complexity in manufacturing. This approach allows for more efficient inventory management and cost optimization, as customers only pay for the features they choose to activate, making their vehicles more affordable.
5. Enhanced safety and security: Connected vehicles can receive over-the-air updates, allowing OEMs to deliver critical safety enhancements and security patches to vehicles already on the road. This ability ensures that customers have access to the latest safety technologies and protection against potential vulnerabilities.
The Challenges of FoD:
As highlighted, the advantages can be immense and there is no doubt that the automotive business model is heading toward this interesting concept; However, OEMs, strategists and investors need to be vary of key challenges that may arise:
1. Complexity and Integration: Implementing Features on Demand requires a more intricate system of hardware and software integration. OEMs must develop robust systems to enable the activation and deactivation of features seamlessly. This complexity may lead to additional challenges in terms of development, testing, and quality assurance.
2. Cost Structure: Features on Demand may introduce a more variable cost structure for customers. While this offers flexibility, it can also result in higher costs for activating specific features, especially if they are used infrequently. Customers need to carefully evaluate the costs associated with activating and deactivating features to ensure it aligns with their usage patterns.
3. Connectivity and Reliability: Features on Demand heavily rely on connectivity to activate or update features remotely. In areas with limited network coverage or during network outages, the ability to access and manage features may be temporarily affected.
4. Customer Education: Shifting from the traditional model to Features on Demand requires educating customers about the available options, benefits, and the process of activating and deactivating features.
5. Long-Term Support: OEMs need to ensure long-term support for the features offered on demand. This includes providing updates, maintenance, and compatibility with future vehicle models or software upgrades. Managing a wide range of feature options and ensuring their continued functionality can be challenging and may require substantial investment in ongoing support infrastructure.
6. Resale Value: The impact of Features on Demand on the resale value of vehicles is yet to be fully determined. Potential buyers may have varying preferences for pre-activated features, and the demand for vehicles with customized features may differ from the traditional model where features are fixed.
It is worth noting that Infoquest’s Expert Network firm has an extensive network of industry experts who have proven experience with this emerging concept, we are able to connect you to subject matter experts who have on-the-ground experience working directly with OEMs to implement and overcome the aforementioned challenges. Feel free to reach out to info@iqnetwork.co for more information, or simply fill out the inquiry form found at https://www.iqnetwork.co.