BMW’s Attempt to Charge for Already Installed Heated Seats Shows There’s a Balance to be Struck
One of the more unpopular moves in the automotive industry in recent times was BMW’s attempt to charge customers to ‘activate’ hardware options that were already fitted in their cars, such as heated seats. This move sparked outrage among customers who felt that they were being charged twice for features that should have been included in the initial purchase price.
“People feel that they paid double – which was actually not true, but perception is reality, I always say,” BMW sales and marketing chief Pieter Nota told Autocar last month. “So that was the reason we stopped that.” BMW quickly realized the negative impact this decision had on their brand reputation and decided to reverse their policy.
Instead of charging for hardware options, BMW will now focus on charging for software upgrades. This includes features like driving assistance and parking assistance, which Nota believes customers are more accustomed to paying for. The idea is to offer customers the option to upgrade their cars even after they have left the dealership, potentially generating additional revenue for the automaker.
Other car manufacturers, like Volkswagen, are also considering this approach. Volkswagen boss Thomas Schäfer acknowledged the revenue potential in offering software upgrades but emphasized the importance of finding the right balance between additional value and cost. He cautioned against trying to sell customers access to unrelated services like Spotify and instead suggested focusing on features that customers would genuinely find valuable.
However, the current landscape of software upgrades in the automotive industry is still a bit chaotic. Different manufacturers offer different options, at varying prices, and with different names. For example, Range Rover Sport offers over-the-air software updates that improve the car’s performance and functionality. On the other hand, BMW and Polestar offer features on demand, allowing customers to unlock additional performance or features through software patches.
This raises several questions about pricing, value, and ownership transfer. Should customers have to pay for extra performance but not for a better infotainment system? Who determines the price of these upgrades, and does ownership of the software transfer when the car is sold? These uncertainties make it difficult for customers to assess the true value of these software upgrades and can impact the resale value of the vehicle.
Software is an intangible asset that is challenging to price on its own. When combined with a physical product like a car, the task becomes even more complex. Car manufacturers must ensure that their software is flawless and reliable if they expect customers to pay for upgrades after the initial purchase.
Instead of charging for constant upgrades and new features, some argue that car manufacturers could differentiate themselves by offering all software upgrades for free. By doing so, they could create a competitive advantage and win over customers who appreciate the added value without additional costs. However, convincing the public and the industry of this approach will require significant effort.
Schäfer’s committee, along with others in the industry, face the challenge of convincing customers that paying for software upgrades is worth it. Transparency and clear communication about the benefits and costs of these upgrades will be crucial in gaining public trust.
In conclusion, BMW’s attempt to charge for already installed heated seats highlights the delicate balance that car manufacturers must strike when offering software upgrades. While there is potential for additional revenue, automakers must carefully consider customer expectations, pricing strategies, and the overall value proposition. Ultimately, the success of this approach will depend on how well car manufacturers can navigate these challenges and meet customer demands.