Over the past few years, subscription services of all types have become increasingly popular with today’s consumers. Big names like Netflix and Amazon leverage them to offer optimized, often instantaneous access to their goods. Now, it’s the auto industry’s turn, with the rising popularity of vehicle subscriptions. These programs charge customers a monthly fee to access an exclusive selection of vehicles on demand—but where do individual dealers fit into this? While vehicle subscription programs are primarily run by manufacturers, there’s plenty of opportunity for dealers to adopt their own.

Although the data behind these programs is still limited overall, 34% of consumers surveyed in a recent AutoLoop study said they would either be at least somewhat likely or extremely likely to sign up for a subscription when the time comes to replace their current vehicle. That means dealers have an opportunity right now to spearhead the creation of similar programs at their stores in order to differentiate themselves from competitors––and keep up with ongoing industry changes and customer expectations.

Our survey found a direct––and significant––correlation between age and interest: the younger the respondent, the higher the interest. Over half of both Millennials and Generation Z consumers would consider a vehicle subscription, compared to 37% of Generation X-ers and just 16% of Baby Boomers. This isn’t surprising, since Millennials have grown up in a subscription-based world and are therefore naturally more comfortable utilizing this method for their transportation.

Across all consumer groups, flexibility topped the list of reasons they’d enroll. People like the idea of regularly switching vehicles to accommodate personal and family needs. Younger generations in particular would consider subscriptions due to the peace of mind they believe comes with less commitment when compared to buying or leasing. With that said, not even the prospect of less commitment guarantees Millennials would be willing to pay the high prices currently associated with most subscriptions. In fact, 42% of Millennials said they would only go for a vehicle subscription service if it were less than $500 a month. Since currently available OEM programs are significantly higher––Access by BMW starts at $998/month, Audi Select at $995/month, and Care by Volvo at $750/month––not many existing services accommodate that preference. However, a few programs do provide services for less than $500 per month––Canvas starts at $349/month with a 12-month agreement––but they are currently limited to specific areas of the country. Other programs such as Fair offer low monthly payments based on the selected vehicle, but insurance and additional wear and tear protection aren’t included.

Again, the growth of OEM-created subscriptions paves the way for dealers to provide similar programs at their stores and pick up a share of the profits. However, retailers interested in starting their own subscription plans face a double-sided challenge. First, they need to determine if their region’s demographics would justify creating this type of service. In places with predominantly older clientele, for example, it’s likely to be a niche program with limited participation. Based on our survey, areas with a thriving Millennial demographic would be much more likely to generate interest and attract a critical mass of consumers.

Secondly, dealer-generated subscription solutions will have to accommodate the average consumer’s budget without sacrificing profit. Among other issues, retailers must consider usable inventory, allocation of service resources, insurance partnerships, and program staffing (e.g., concierge services).

But dealerships have a key advantage. While manufacturers focus almost exclusively on using subscription programs aimed at getting consumers to drive newer model year vehicles, dealers have the unique opportunity to complement those programs with their own branded offerings that can include both new and certified pre-owned vehicles. This allows them to deliver a lower price-point subscription plan. And with the creation of such sustainable programs, retailers will very likely capture a sizable portion of the profit potential in this emerging business and become leaders of an important industry trend.

Tesla has been dominating the electric vehicle market, but it’s now positioning itself as a top contender in the premium vehicle sector as well. In a recent press release, Tesla touted its Model 3 as the best-selling passenger car in the U.S. (in terms of revenue for the latter half of 2018) and the best-selling premium vehicle in the U.S. for all of last year. So, as the brand continues to expand and produce, what advantages can you offer to help ensure continued loyalty from your current customers—and a competitive edge with first-time buyers?

To better understand why shoppers are choosing Tesla, and how other premium brands can effectively compete, AutoLoop recently surveyed 1,000 auto consumers. Given Tesla’s reported performance and technology, 53% of those with a household income of at least $75,000 said they would consider purchasing a model. To no one’s surprise, the most powerful factors influencing those decisions were fuel savings and the positive environmental impact. More specifically, Millennials and Generation-X consumers comprised the majority of those who make finding eco-friendly vehicle options a priority. 

Saving the planet vs. saving money
With Tesla, the environmental concern is curbed by concern over cost, though. Even for those with a household income of at least $75,000, the high sticker price is a major deterrent—and many consumers automatically associate the Tesla brand with extravagance already. It’s a valid perception, as the Model S starts at around $85,000. However, the Model 3 price continues to decrease (now starting at roughly $42,000), and consumers are noticing: 77% of those surveyed considered the Model 3 to be affordable.

More eco-friendly options to power sales
All this said, with electric vehicles on the rise and with climate concern becoming more of a mainstream issue, manufacturers and dealerships alike would do well to take cues from Tesla’s success to fuel their own. From a manufacturing standpoint, expanding the electric vehicle offerings can help drive competition with the Tesla brand: Audi just recently aired a commercial during the 2019 Super Bowl promising that one-third of all its new models would be electric by 2025. Several other brands, such as Mercedes-Benz and Porsche, have also released concepts of electric models with estimated production beginning as early as this year. Meanwhile, companies already offering EVs can focus on improvements.  For example, the comparably priced BMW i3 is available now but falls short in terms of driving range on a single charge.

Showcase specific advantages to capture buyer interest
From an individual retailer standpoint, stores can help offset the Tesla appeal by bringing their customer’s attention back to the advantages of their own models—along with the less-expensive price tag (if applicable). Particularly with Millennials and Generation X buyers, focusing on the many environmental benefits of hybrid vehicles, for instance, is smart. And offering gas perks as part of the vehicle purchase works to proactively address the need for fuel savings to help win over those prospective buyers.

As for the higher end, luxury dealers can emphasize the numerous advanced technology features of their latest vehicles, such as infotainment, semi-autonomous driving features, collision-avoidance systems, and much more. Today’s models provide virtually limitless options for consumers. And the truth is, if competing premium brands can offer more affordable, environmentally sound options complete with the latest intelligence and maximum driving range – all without sacrificing the eye-catching designs that attract buyers in the first place – Tesla may find itself in need of a recharge. 

In today’s digital world, if you want your audience to hear your message, it’s crucial to stand out among the flood of marketing communications hitting them at every turn. But all too often, marketers use a “one size fits all” mentality, sending messages on a standard interval without taking into account each customer’s unique purchase patterns. The result? After enough irrelevant messages, not only are those marketers tuned out, their intended audience begins to unsubscribe. That’s why it’s crucial to reach out to your customers at just the right moment, such as when they’re ready to make a purchasing decision. That’s where Artificial Intelligence (AI) can help.

Through machine learning, AI studies your customers’ behavior. Then, using what it finds, it categorizes those customers’ probability of returning to your business for specific services. This allows for strategic, more relevant marketing that increases response rates and reduces opt-outs.

So, to gain crucial insights into how AI impacts digital marketing, we studied two groups of stores. The first group of stores sent marketing communications based on the “one size fits all” technique. The second group used predictive machine learning. Incorporating hundreds of data points unique to each customer, the AI targeted individuals most likely to need specific repairs such as brakes, tires, or batteries. Highly relevant digital communications were then sent to these customers, inviting them in for those services.

When analyzing the results, we looked at a variety of engagement and purchase metrics. And as expected, the predictive AI audience had a lower opt-out rate and significantly higher ROI than the standard “one size fits all” audience. In fact, the predictive model resulted in a 7% response rate increase over the standard audience.

The key takeaway here is that as the digital marketing landscape gets more and more saturated, it’s important for dealers to take a more strategic approach with their marketing. Our study reinforces machine learning’s proven ability to bring customers a highly personalized, intelligent experience that consistently grows and learns with each new lifecycle. Therefore, by sending your audience communications powered by AI, you can minimize opt-outs and maximize profit.