Subject: [NEXTEL-1] End-User Emphasis On Safety And Competitive Pricing Persists In Telematics

From: Marcel <[email-masked]>
Date: Tue, 14 Jan 2003 17:13:57 -0500

End-User Emphasis On Safety And Competitive Pricing Persists In Telematics
Community
Published: Tuesday, 14 January 2003

Despite automakers' ambitions and huge financial outlay to add electronic gadgets
and services to their vehicles, telematics - the umbrella name for in-car information
and entertainment services - has found itself on a rocky road to mass consumer
acceptance.

Automotive manufacturers across the globe anticipate that they would own and operate
telematics services, creating a large profit stream in the process. Against a backdrop
of sluggish vehicle sales, it is no surprise that carmakers have leapt at this nascent
but enticing market.

Recent initiatives and partnerships to accelerate the development of telematics
solutions have suffered a succession of setbacks as a result of prevailing uncertainty
over the type of content end-users envision telematics systems and services packages
to offer.

Without the support of real business case examples, the plug has been pulled on a
number of telematics projects and joint ventures. The demise of Wingcast, a joint
venture between Ford and software company Qualcomm, which was supposed to turn
cars into four-wheeled communications devices that would generate steady revenue
streams from various telecom services, is just one of the recent well-publicised
examples.

European drivers are willing to pay between EUR 1,800 and EUR 1,900, constituting 50
per cent of the current average recommended retail price, for the perfect telematics
system. Consumers expect this system to boast the most advanced navigation
system, full safety and security system, remote vehicle access and infotainment
system with voice activation and ability to plug in mobile phone/PDA.

This claim follows Frost & Sullivan's analysis of European customer attitudes and
perceptions towards telematics in passenger vehicles, conducted amongst 1,500
vehicle owners using a phone-post-phone approach, and furnishing 400 select
participants of the sample base with an information pack containing all the necessary
technical background information.

The analysis also included a form of conjoint analysis (Stated Preference) using
games and exercise enabling the respondents to make a realistic decision over the
features he/she most preferred in relation to features and a price variable.

"Consumers expect to pay an average relative price of EUR 219 for a navigation
system, the survey shows, and demonstrated willingness to pay an additional EUR 132
if a navigation system would direct them around traffic congestion. They were also
happy to pay an additional EUR 36 to be able to receive directions to points of interest
such as petrol stations and car parks," notes Frank Leveque, Project Manager at Frost
& Sullivan.

"These costs are all based on readiness to pay one-off charges without any further
subscription or system use fees. As can be expected, we could monitor distinct
differences in price acceptability across driver groups. Drivers in UK are willing to pay
EUR 313 more than those in France and owners of high value cars are willing to pay up
to EUR 717 more than those at the lower end of the scale," he explains.

The study underlines that over 40 per cent of European customers prefer a dual
payment structure integrating both a one-off payment with a level of subscription,
preferably linked to the mobile phone bills.

Vehicle manufacturers feel encouraged by the strategic advantages associated with
telematics, such as utilising the technology as a critical customer relationship
management (CRM) tool with long-term benefits. During Frost & Sullivan's survey, it
emerged that consumers were surprisingly open to receiving information related to
their vehicle from the vehicle manufactures. Drivers want a more intimate relationship
with the manufacturers, offering carmakers a golden opportunity to develop and
implement their CRM strategy.

Within the telematics services sector, German car manufacturers (Mercedes-Benz,
BMW, Audi and Volkswagen) enjoy the strongest level of brand awareness across
Europe, with the exception of a few local players, such as TrafficMaster in the UK and
Renault in France.

Frost & Sullivan's survey uncovers poor brand awareness rates for systems
manufacturers and specialist service providers (such as Onstar, Tegaron or Intellicast)
amongst consumers.

According to Frost & Sullivan, visibility and awareness of the term telematics scores
surprisingly low amongst European vehicle owners, with only about 36 per cent of
respondents demonstrating knowledge of the services.

Although recognition of the term telematics is limited across Europe, understanding of
certain telematics features (such as navigation systems) without immediate
association with the term telematics is more widespread. Italy shows the highest level
of awareness of the term telematics (79 per cent), while the UK recorded the lowest
awareness level (4 per cent).

No doubt the hype of telematics has exceeded what has actually been delivered,
however, Frost & Sullivan is confident that the technology's success will be a reality
soon. The findings indicate that 88 per cent of parties surveyed were receptive to the
idea of adding telematics features to their future vehicles.

Airbag deployment notification and colour map navigation (with congestion avoidance
and points of interest) rank as the most desirable feature amongst customers.
Interestingly, a vast majority of the Europeans prefer steering wheel button activation
to voice recognition systems for operating a telematics system.

The advent of next-generation wireless is set to transform the entire vehicle into a
mobile entertainment centre. However, entertainment features, including TV, games,
MP3 and DVD, were not considered important and their cost/performance ratio turns
these systems into "nice-to-have" rather than "must-have" items.

A large majority of respondents expected to find telematics systems at car
dealerships. This can mainly be attributed to the fact that telematics is still
predominantly a niche market technology and consumers have more faith in
specialists. This is likely to change as the product life cycle evolves.

Frost & Sullivan recommends that suppliers offer both basic as well as premium price
packages to achieve a core competitive differentiator. "The market share winners will
be those companies who reduce prices while simultaneously communicating the
benefits of telematics and subsidising its launch in order to increase exposure and
thus enhance the perceived value of the technology," Mr Leveque concludes.

Voice Of The Customer- Frost & Sullivan's Survey Of Customer Attitudes And
Perceptions Towards Telematics In Cars

Publication Date: January 2003
Report Code: B140

http://www.frost.com/prod/corpnews.nsf/0/353F1F6F84B17E2180256CAE004FCCEF

Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/