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Telematics Is Not M-Commerce
Telematics Is Not M-Commerce

Paul Eisenstein, publisher of THECarConnection.com, reports from the June 15-16 EyeForAuto Conference in Detroit that the repeat purchase rate on telematics service is low. That is, once current telematics customers finish their free first year of service, they refuse to pay the annual fee for a second year. Their reason: the content is too similar to that on PCs, laptops, and cell phones. Telematics is not a land rush similar to e-commerce, the Internet, or, most recently, m-commerce.

No re-upping for a second year means, in marketing terms, the failure of post-first purchase decisions. Fewer repeat sales say telematics is not selling itself to customers. They're confused. They don't know which technology to buy so they don't buy any. Customers hate it when they can't compare prices, quality, and service among telematics service providers. They hate telematics even more when they find the same content somewhere else. Customers ask themselves: What do I get? Their answer: not enough to pay extra annual fees.

Steve Millstein, president and CEO of Texas-based ATX Technologies, puts the blame on the applications people by saying that telematics is now a marketing game. Unfortunately, senior executives at the June 7-8, 2001 Nordic Smart Vehicles Conference in Sweden think telematics marketing is the same as m-commerce marketing. They're mistaken because the target market groups for sales are different for telematics and m-commerce. Hence, the lack of success in getting repeat sales.

Our studies find that conquering the telematics world is not the same as conquering the wireless world, the e-commerce world, or anything that has come before. We find that telematics marketing is a new concept. We must learn a new business, and then teach our customers how to gain value and add to their lifestyles from telematics services in their cars, homes, and offices.

Mapping the Race
Any good marketer can also be a good telematics marketer. Voice-recognition wireless portable telephones in automobiles and trucks change the skills required from the marketing manager, but not so fundamentally that good telematics marketers are not also good marketing managers. Here are some qualities that are important for telematics marketers:

  • Products: Telematics marketers must introduce wireless telephone equipment in dashboards, and pop-up screens in the windshields of cars, with unique interactive location, business, and personal content for telematics customers.
  • Promotion: Telematics marketing managers need to provide auto and truck drivers with value-added intangible product attributes (such as safety, security, and assistance) that are included as part of their handsfree, portable wireless telephones.
  • Price: Telematics marketers have to offer built-in wireless packages as part of the total price of the car, and one-year or more free service, as telematics customers prefer to get acquainted with new dashboard products.
  • Place: Telematics marketing managers must encourage wide-area coverage that connects satellite communications to one or two wireless protocols (such as WAP or CDMA) in the handsfree, portable telephones within cars, homes, and offices.
Given that telematics customers have decided they're not getting a great deal from their telematics services, new and different product content is by far the most important of the four in terms of creating value for telematics. Thus free is the best pricing strategy. A very low price in subsequent years is a second-best pricing strategy, but not as good as free. Until customers believe they're getting something of high value from their telematics services, they will not pay more than a few dollars, if anything at all, for telematics services.

Therefore, telematics is not m-commerce, and telematics marketers must come up with new and different content before they can expect to reap the same returns as wireless m-commerce providers. Today all the telematics service providers offer competing products, promote the devil out of them, and try to price them to cover costs. They give them away free for the first year. Try as they might, the second and subsequent years are disasters - few repeat sales, little in the way of revenues and, hence, expenses greater than income. Their marketing strategy, which assumes telematics is another form of m-commerce, is not working. Telematics marketers need a new strategy.

Running the Race
We telematics marketers must go back to the drawing board. We need one technology to sell, not OnStar, Wingcast, or something else. Also, we need a killer application to sell as the star in the field of telematics, similar to Formula 1, which has Michael Schumacher, NASCAR's Winston Cup, which has Jeff Gordon, and Homestead IRL, which has Sarah Fisher. Moreover, forget the complex value chains, sophisticated portfolio analysis, and Maslow's hierarchy of needs that Freda Benlamlih of the ARC Group told us were the significant market drivers at the Nordic Smart Vehicles Conference.

Instead, jump ship as Toyota did by leaving the Championship Auto Racing Teams (CART) and getting into the big race in the U.S. - the Indy 500. Then we must benchmark ourselves against the best and the brightest NASCAR teams who change tires and fix problems so fast that Jeff Gordon's DuPont team, as an example, loses the checkered flag a brief 1.179 seconds behind winner Bobby Hamilton's Square D team at April's Winston Cup Diehard 500 at Talladega, Alabama.

Here's how telematics marketers must run their race:

  • Segmentation: Telematics marketers must divide like groups of people into those who have the income, are the correct age, work in the right jobs, and belong to the modernizing values and lifestyles groups as candidates for the purchase of voice-activated wireless telephone equipment in cars.
  • Targeting: Telematics marketing managers need to assemble smaller groups of people who are bound together by their preference for expensive toys, such as Formula 1 fans, or by their talents and skills, such as NASCAR drivers, or by their personal tastes, habits, and values, such as medical doctors or stockbrokers who want to sponsor something new, such as CART races.
  • Positioning: Telematics marketers must match telematics products with probable customers; the former offer the latter enhanced customer relationships to try out handsfree, portable voice-recognition content during and after the first purchase.
Targeting specific like-minded groups with the right combination of price-quality-service is by far the most important of the three in creating and delivering value to present and potential customers of telematics.

For example, some 30 years ago NASCAR ran its races at Belmont, North Carolina, about six miles from Charlotte, the site of the first Winston Cup race. Today, NASCAR dominates stock car racing in the U.S. because its cars are bigger and easier to follow around the track. Americans like big things, and 100,000 people show up at Indy to see the teams work together to win the race. Within NASCAR in the U.S., or Formula 1 in Europe, lies the secret of how to make telematics a success on both sides of the North Atlantic. Give telematics customers something new in content and service.

Rules of the Road
Here's what marketers must do to triumph in the telematics race:

  • Design (or buy) new and different interactive content for handsfree, voice recognition equipment in cars. Don't be gulled into believing that content from existing Web sites, or what is available on the hard decks of handheld wireless phones, is sufficiently compelling for telematics.
  • Form alliances between OEM assemblers and auto suppliers, suppliers of control devices, and handheld manufacturers. Don't be lulled into believing that existing equipment, which was designed for other purposes, offers enough in design and functionality to be successful in the telematics market.
  • Turn one or two wireless protocols (such as WAP or CDMA) into the only standards worthy of universal acceptance. Don't drift in and out of nonstandard protocols.
  • Sell fun and lifestyle content to twenty-somethings (Gen-Y), travel and location content to thirty-somethings (Gen-X), bond and stock portfolio content to boomers, and safety and security content to seniors. Don't think all customers want the same content from telematics.
  • Market voice-recognition equipment that offers voice, data, and transaction capabilities that support the values and lifestyles of new, mid-career, and senior managers and executives. Don't believe all professionals want the same support service from telematics.
  • Build brand communities as product-based experiences for owners of Mercedes, Lexus, GM, and Ford cars. Don't practice the "one size fits all" or mass-market approach to marketing telematics.
Winning the Race
Different generations have different needs. It won't take long for senior executives (boomers) to translate their need for instantaneous information about stocks and bonds, market and sales data, and financial performance into a demand for new and better telematics content.

Mid-career executives (Gen-X) have just as pressing a desire to translate their need for online information about travel and location into a demand for new and better telematics content.

Junior managers (Gen-Y), however, may not have the same urgency to convert their need for quick information about fun and lifestyles into new and better telematics content. They may rely more on m-commerce sources for now.

Diffusion
In our study comparing m-commerce marketing to telematics marketing, we found that the diffusion of handheld information appliances is different than the rollout of handsfree, portable wireless telephones in automobiles. Here's the real difference. M-commerce requires two types of customers to be successful: teenagers who want short messaging services (SMS) and twenty-somethings who want voice, data, and transaction capabilities.

On the other hand, telematics needs two different types of customers to be successful: boomers with money and professional skills who demand good quality voice communications, and thirty-somethings, again with higher incomes, who might do some work in their cars and demand good quality data communications. In doing our sensitivity analysis, we've found that m-commerce customers are not good target market groups for telematics services. Therefore, telematics is not m-commerce.

Voice Recognition and Portability
Thus boomers must find voice recognition equipment in cars easy to use. Thirty-somethings must have acccess to wireless phones that are portable between their cars, homes, and offices. These are the real customers for telematics in the foreseeable future.

Post-First Purchase Decision
Right now telematics marketers are giving away the first year of service. They've been using all their pricing, promotion, and product skills to try to turn what has been a free gift into a paid service for the second year. These marketers continue to be unsuccessful in promoting their new strategy. Therefore, telematics marketing managers must target boomers and thirty-somethings with the right price-quality-service offering. If telematics marketers do this correctly, they will create and deliver value sooner rather than later. This is the promise of winning the telematics race just as NASCAR won the auto racing circuit in the U.S.

Telematics will not take off as long as marketers continue to think of it as an offshoot of m-commerce.

About Douglas Lamont
Doug Lamont is Telematics Editor of Wireless Business & Technology and visiting professor of marketing at DePaul University in Chicago, Illinois.

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