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Who is
Working to Create the Market?
Telematics
is the combination of electronics, safety, communications, and location (GPS)
services that electronically connect a car to a service supplier. In the U.S.,
if you buy a Mercedes Benz, one of 36 GM, most BMW 7 series, or several Lexus,
Jaguar, Acura, or Lincoln/Mercury vehicles, you'll get telematics service at no
extra charge. The breadth of the services is wide, from unlocking your door for
you, to telling the supplier when your airbag has opened (allowing the company
to call 911 for you), to giving you directions, to finding your car if stolen,
to checking weather and traffic, to web shopping, to doing your smog check
while you drive.
Each of the
long list of suppliers has something at stake here. The car companies want more
brand loyalty and driver usage details for marketing. The dealers want to keep
you from using independent repair shops. The wireless telecom companies hope
for volumes of air time. The service companies (OnStar, ATX, others) supply the
infrastructure to answer the calls you or your car make. The software companies
(Siebel, Reynolds & Reynolds) provide the tools to track you from first
purchase until you trade in your car. Others want to sell you products and
services as you drive. Countless software, hardware, and consumer electronics
suppliers can make products to help this work.
What Is
the Market?
No two
vendors or analysts agree on how to define the telematics market. For the sake
of this Index, we define the market as people willing to pay separately for
two-way communications between their car and an information supplier. Perhaps 3
million users have telematics today, all but a thousand or so as a "required
option" in a new car. Of these, we do not know how many have been willing to
pay their own money to renew the service, and at what level.
How Are
These Companies Working to Create That Market?
The most
successful and repeatable path to creating a new market is to solve a specific
problem that your prospective customers strongly feel. Another path, harder to
follow, is to pick a less critical problem and then reduce the customer's cost
of solving that problem to the noise level.
In this
market it is not clear what problem consumers are willing to pay to solve. The
evidence is not good. The LoJack service to find stolen cars through police
departments, has 2 million customers. None pay ongoing fees. OnStar has around
2 million active telematics customers who got the service as part of their car.
The company reports that the two most common services are to unlock doors and
to get driving directions. ATX (which supplies the services for Mercedes Benz,
BMW, and others) reports that the most common reasons to pay to renew are for
collision detection and tracking stolen vehicles. (Less than 1 percent of all
ATX calls are for those and other emergencies.)
None of these
is a problem that consumers urgently feel. For them, telematics is a solution
looking for a problem. To succeed, telematics vendors must find a stronger set
of problems. This means selling to other suppliers rather than to consumers.
What These
Companies Are Doing to Create the Telematics Market
The strategy
of the car manufacturers is to supply the service at no cost when you buy a
car. This keeps you closer to the company's service chain, where the
after-market parts and product sales are profitable. The longer you keep using
the in-car communications, the more likely you are to use the dealer for
service, and the more information the company collects about you. That market
information can become an asset to the car company, and to other companies.
NetworkCar
and Reynolds & Reynolds are using a different strategy. Since the vast
majority of cars on the road are not new, these companies will retrofit cars
through independent repair shops. Again, part of the key benefit is "owning"
information about and access to the car owner.
What Is
the Benefit?
You can get
many services via telematics. These include: Track stolen vehicles; Get
directions; Weather updates; Accident alerts; Roadside assistance; Unlock your
door; Tire monitoring; Smog checks; Reading and writing E-mail; Web surfing;
Shopping based on location; Concierge services; Mobile entertainment; Managing
your schedule; and Reverse telematics, the ability to control your garage door
and thermostats from your car.
The benefits
to the suppliers include: Increased loyalty; Detailed customer usage
information; Increased volume in air minutes; Mobile commerce opportunities;
Early knowledge of service needs; and Creating the new consumer electronic
products.
Is the
New Market Working?
A critical
factor for success in existing markets is the skill of the supplier to handle
basic operational and delivery requirements. These skills are less critical in
new markets, but they are still important. The question is: If the suppliers
all show superb competence, will enough users convert to paying for telematics?
Our answer is no, the benefits listed above do not solve real problems. They
are not attractive enough to garner $30 a month from millions of consumers or
the necessary subsidies from dozens of suppliers. The other approach is to ask:
Will the suppliers pay the bill, making telematics free to consumers, to get
access to the drivers and customer usage information? This is uncomfortably
similar to on-line advertising or some other dot-com strategies. No supplier
seems to have a big enough problem to justify the expense.
Telematics is
not a likely market for the most fundamental of reasons. The problem doesn't
justify the solution.
For more
information, please contact Peter Meyer at 831/439-9607 or Peter@MeyerGrp.com.
Copr. 2002 by the Meyer Group, all rights reserved. Much of the process used to
evaluate new markets is contained in "Creating and Dominating New Markets"
published by AMACOM in March of 2002. |
