I’ve been writing a lot about product companies adding subscriptions to their business model for features that were previously provided for free. I want you to know why this has become so popular.
The subscription model is highly profitable and recurring revenue often sees a much higher multiple if and when a company decides to sell. As such, every company is pushing subscriptions which is a trend we’re likely to see continue.
The latest wave is expected to come from automotive manufacturers. Car companies want those attractive software company margins and since cars are adding more tech, opportunities are popping up for them to get into the game.
For a while now, you’ve been able to purchase subscriptions for things like satellite radio or remotely locking, unlocking or starting your car through a companion app.
However, car companies are starting to think more aggressively by expecting you to possibly pay a subscription fee for apple car play or the heated seats that were previously included in the price – I’m looking at you BMW.
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So stay tuned to see how this all shakes out. Remember car companies aren’t software companies (yet) so they need to hear from you if you think what they’re doing is unethical. They are in testing mode now trying to find the lines.
What you can learn from their evolution (and mistakes) is to leverage the right model at the right time. For example, I think it makes a lot more sense to pay a subscription fee for extra features that are nice to have, but aren’t already built into the car. The moment when you start taking away functionality people already had and expecting them to pay more, that’s when I think you’ve probably gone too far.
The moral of the story is listen to your customers, they will tell you where the line is.