Balancing the needs of subscribers and dealers in a subscription marketplace

What is a vehicle subscription?
The ‘Netflix’ of vehicle subscription may be out there already, but a clear definition of the standard features for the market has not yet emerged. Vehicle subscription programs are so new that a consistent subscription model has not yet emerged. The current subscription players all have a few things in common:

  1. The subscriber experience centers around a mobile application.
  2. The subscription terms are often shorter than other traditional offerings.
  3. The process is quick and paperless.
  4. The offering is typically comprehensive (one bundle) and includes insurance, maintenance, and roadside assistance.

The vehicles offered by these subscription services range from dealer-owned inventory, to OEM-backed programs, to 3rd party fleets owned by the subscription provider. Today, we are going to focus on those programs that utilize dealer-owned vehicles.

For a dealer-owned fleet, we believe a dealer partner’s profitability has to be on an equal footing with the subscriber’s experience and satisfaction. Finding the balance between dealer profitability and subscriber value is key to maintaining a successful subscription marketplace. For a dealer to be profitable on a vehicle, they have to charge enough to offset things such as finance charges, depreciation, insurance, fleet management fees, maintenance, cleaning, and any operational overhead. And, let’s be honest, these costs have pushed monthly pricing above what most well-qualified consumers would consider a “good deal.”

Experience creates value
A subscription program provides an opportunity to build a customer base that visits the dealership often. This puts focus on customer experience while they are on-site. Deliver a great vehicle onboarding experience and your customers will see the dealership as a partner, helping them with their mobility needs. By extending that experience to a mobile app, the subscriber’s affinity for both the platform and the dealer partner is strengthened. The opportunity for a dealer to distinguish themselves with excellent customer service will create more value for both parties. In return, the dealer receives recurring monthly revenue which is stable and more predictable. For subscribers, it means gaining access to a vehicle with very little upfront cost and no long-term commitment. Bundled insurance, maintenance and roadside service can make a vehicle subscription ideal for many consumers.

“The time invested to go from decision to driving requires less than 30 minutes of customer’s time.”

Convenience creates value
Often overlooked when discussing vehicle subscription is speed and convenience of the application and transaction. On most subscription platforms the application process is not only quicker than a traditional loan, it requires fewer steps and less personal information. At flexdrive, a customer spends about 2 minutes applying via the mobile app. Approvals typically happen in as little as 10 minutes. Onboarding at the dealership takes another 5-10 minutes. 

For dealers, the cost and effort required to run a successful and profitable subscription program varies by platform. At flexdrive, vehicles are cleaned and prepped before the subscriber arrives. Upon arrival, the subscriber’s credit card and driver’s license are verified. The dealer will perform a quick walk-around with the subscriber to inspect the car, before sending them on their way. The flexdrive platform manages subscribers, subscription billing, fleet management, telematics, insurance and roadside services. Most dealerships can train a single employee to run the program in a few days. Convenience helps both justify the price to a subscriber, and expand the profit potential for the dealer partner.

Finding the balance
The balance between dealer profitability and subscriber value can best be achieved by building trust with subscribers and establishing a personal relationship with the dealer partner. Balance can often be elusive for dealers as they discover that subscribers have ongoing needs, whether they are requesting a vehicle swap, or have a problem with the vehicle. Dealers must be responsive to the subscriber’s needs and provide the best possible experience for the right price. Our two cents…subscription programs that understand this balance will succeed in this space and will outlast most other competitors.

by
Patrick Boggs & Eric Bates
flexdrive Product Managers

 

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