Product Managers Investigate Car Subscriptions

by drjim on August 27, 2018

Do consumers want to subscribe to cars or own them?

Do consumers want to subscribe to cars or own them?
Image Credit: Marit & Toomas Hinnosaar Follow

So I want you to think back to the last time that you bought a car. Just exactly how did you go about doing this fairly major task? If you are like most of us, you at least spent some time thinking about what you wanted. You thought about how much stuff you generally haul around, how many people you give rides to, and just exactly how far you tend to travel on a daily basis. You used all of this information in order to pick out the perfect car for you. However, what if you didn’t have to do this anymore?

GM’s “Book By Cadillac” Program

Over at General Motors, their product managers have been hard at work trying to come up with ways to change their product development definition and get more people to select Cadillacs when it comes time to buy or lease their next car. Cadillacs occupy a crowed part of the car market because they are expensive and they are designed to appeal to customers who may also be tempted to select BMWs and Porsches. Getting their target customers to pay attention to GM’s high-end brand has always been a bit of a challenge. However, now they think that they’ve come up with a plan that just might work.

GM is preparing to roll out their Book By Cadillac program. The concept is simple. Almost like a Netflix subscription, people who participate in the program won’t actually be buying a car. It will be more like leasing a car with a few special differences. The most significant difference is that a customer participating in this program will have the opportunity to trade in the Cadillac that they are currently driving for a different Cadillac up to 18 times per year. What this means for the average customer is if they normally drive a Cadillac sedan during the week and if they want to go to the beach or transport a group of friends somewhere, they can request one of Cadillac’s Escalade SUVs to accomplish this task. Once they are done using the Escalade, they can once again trade it back in and start to drive a Cadillac sedan once again. If this works, it’s going to look good on somebody’s product manager resume.

The GM product managers are taking a bit of a chance with this program. They are basically conducting a big experiment in order to determine if their customers are willing to change how they view car ownership. The question is if consumers are going to be willing to treat personal transportation more like a subscription service than ownership. The benefit of the Cadillac program is that it provides temporary on-demand access to using a car. The big question is if this type of service is going to prove more popular than outright ownership of a car?

How This Changes Everything

The big question that is facing the GM product managers is just how popular a program like this would be? The company has gone ahead and launched it in the New York metro area. They have plans to roll it out in other markets later on. People who subscribe to the service will pay month-to-month without having to make a long-term commitment. The cost of the program is US$1,500 per month. Initially 5,000 people used the company’s website to sign up for the program.

One of the challenges that the GM product managers are going to be facing is that this type of service is being offered by other firms. There are a number of startup firms that are currently testing this model. Clutch Technologies, which is based in Atlanta, started operations in 2014. Their service offers customers access to multiple brands and models. This company only charges its customers between $950 and $1,400 per month for access to its cars.

The GM product managers feel that it’s necessary to explore the viability of programs like this. Studies of the auto market are predicting that U.S. vehicle sales could decline by as much as 40% over 25 years. The reason for this decline would be the arrival of car-sharing services and self-driving vehicles. Another major issues that the GM product managers are facing is that the business model that they are playing with cuts local dealers out of the equation. These are all issues that are going to have to be dealt with if the GM product managers want this new program to be a success.

What All Of This Means For You

One of the things that most of us have always prepared ourselves to do is to eventually go out and buy our next car. It’s generally not all that pleasant to do, but it is a necessary evil. However, over at GM their product managers have taken a look at their product manager job description and are working on rolling out a new program that just might change everything.

The new GM program is called the Book By Cadillac program. Customers who sign up for this program will have the option of trading in the Cadillac that they are currently driving for a different Cadillac up to 18 times per year. The big question that the GM product managers are trying to answer is if customers are going to be willing to change how they view car ownership to a more of a subscription model. An important thing for the GM product managers to test will be the popularity of this type of program. GM is going to be facing some completion from other startup firms that offer multiple models and multiple price points for the service. GM needs to take steps now to change their business model because auto sales are forecasted to start to decline over the next few years. At the same time, GM’s relationship with their dealers needs to be managed very carefully.

The new program that the GM product managers are exploring sounds very exciting. However, care is going to have to be taken when rolling this program out. It’s going to be new to customers and so it will need to be carefully managed. GM’s relationship with their dealers is also very important and so the product managers will have to find a way for the dealers to benefit from this program also.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: Do you think allowing car trade-in 18 times a year is the right number? Should it really be a higher or lower number?

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What We’ll Be Talking About Next Time

Think about it for just a moment: just exactly what goes into making a good hamburger? We’re basically talking about three sets of ingredients: a burger (of course), a bun, and a collection of toppings. Just exactly how much should any of that cost? One upon a time you could go out to a restaurant and get a burger fairly cheaply. However, in the past few years a number of restaurants who all claim to be serving a “better burger” have popped up. Their burger is pretty much what any of us have expected, but they use artisan buns and a collection of nontraditional toppings. Along with making the plain burger fancier, have they also made a burger cost too much?

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