Fosina Marketing Group
Maybe the Beatles were on to something back in 1965 when they released this single. If you look around the market these days; marketers have their heads down trying to figure out how to transform their business models to include some sort of subscription type offer and bring it to market.
It’s really very interesting to experience such a dramatic shift in the focus of the marketing community regarding the best way to bring new products to market. Just a year ago much of the marketing speak in our industry was focused on leveraging ecommerce and the remnants of brick and mortar retailing.
With the monopoly-like dominance that Amazon has developed in recent months thru organic growth and strategic acquisitions; it appears that many merchants have literally thrown in the towel believing that there is no way to compete with this juggernaut. At best, most believe that they are really competing for a much smaller piece of the overall consumer market that is reserved for the No. 2 position in their respective market segments.
Product marketers are feeling the impact of this brick and mortar retail channel consolidation and centralization as they vie for the love of Amazon, Walmart and other big players who are grabbing huge swaths of consumer purchasing. The Big guys are using their distribution “prowess” to crush margins and profits resulting in a product marketing arena that is desperate to find new ways to work “around the channel” and make their appeal directly to the consumer. With the dubious future of Toys R Us, toy manufacturers are looking at a holiday season that is fraught with peril from a unit sale and “are we going to get paid” perspective.
What has become most interesting about the new found awareness and recognition of the direct to consumer and subscription model is how universal the appeal is with all demographic segments and product categories in the consumer marketplace. The incredible rise overnight of more than a dozen automakers and auto aggregators marketing subscription services around the consumer’s ability to drive the car of their dreams and/or their necessity is incredible. Before you jump to conclusions and believe these opportunities are the 2018 version of rent a wreck, consider the big brands that are already playing in this space: Ford, Volvo, Hyundai, Cadillac, Porsche & Chevrolet are all players. There are a host of other aggregators that are offering cross car brand subscription opportunities.
The model is fairly simple. Each company asks the subscriber to pay an upfront fee (as a qualifier) and then provides a number of different subscription options to select from. The options are pivoting on the subscriber’s monthly budget, style of car, number of miles to be driven etc. The subscriber pays their fee and the car is either ready for pick up or can be delivered to the subscriber’s home or business. There is no insurance or registration fee to be paid. You get to drive the car you want at the level you want for a monthly subscription fee.
The strategy is ingenious in its simplicity and the potential to deliver several different revenue streams. Clearly, the subscription fee is nice upfront cash along with a commitment to pay a monthly subscription over time brings a recurring revenue stream. Automakers and dealers have plenty of inventory on their lots these days and this is a neat way to generate revenue to the dealer prior to a sale of a car. Dealers are always looking for new buyers to “test drive” their cars; knowing that if they can get a “butt in a seat” - 90 percent of the time the driver will buy the car. In the subscription model offering, they lure customers in and have them pay for the right to “test drive” the car over time. No doubt…during that period…dealers and automakers will have a range of incentives to turn a subscriber into a buyer of the vehicle. In a sense, they are “seeding” their prospect pool and potentially getting paid twice!
The overarching lesson for all marketers in the evolution of this new business model for automakers and dealers is that holding on to the past and/or lamenting the current state of the distribution model dynamics is wasted energy. If marketers aren’t thinking both in and out of the box for new direct to consumer strategies….what are they waiting for?
Time to get moving and drive down a new road to profitability … in 2018 and beyond.
Jim Fosina is Fosina Marketing Group’s chief executive officer.