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Zuora Inc.

09/20/2019 | News release | Distributed by Public on 09/20/2019 16:40

When Is A Car Not A Car?

ByTien Tzuo September 20, 2019

Last summer several Japanese car-sharing services (think the 'Uber of Japan') shared the same interesting problem. After checking mileage records, they noticed that almost one out of every eight subscribers 'traveled no distance.'

That's right. They didn't go anywhere. These people were definitely accessing the cars, they just weren't using them to actually engage in transportation. To move from Point A to Point B. So what were they doing?

Well, what weren't they doing?

The ride-sharing services ran some surveys, and found out that their subscribers were napping, eating lunch, making business calls, making family calls, charging their phones, practicing singing, practicing English, storing bags when nearby coin lockers were full (!), and 'doing facial exercises in order to reduce the size of their face.'

Look, we can all see that the way we use cars is shifting dramatically these days, and I'm not just talking about Uber and Lyft. Actual car sales are down. For the first time in six years, first quarter 2019 American car sales fell below 3 million units, with an overall slump of 2.5% YoY. For rideshares and manufacturers and auto startups alike, the new priority is about generating usage (or miles driven), as opposed to units sold.

Look no further than the explosion of vehicle subscription services on the market - Lexus, BMW, Audi, Land Rover, Mercedes-Benz, Porsche, the list goes on. Volvo plans to have half of its automobiles sold on a subscription basis by 2025, a remarkable statistic. There are all sorts of ancillary effects happening as well: the Indigo Group, which manages thousands of parking lots around the world, offers car washes, maintenance services, and package delivery while people are busy at work.

And as a result of this explosion in new auto subscription services, some unexpected things are happening! In Japan, it costs around $4 to access a ride-share car for 30 minutes. Space and time are at a premium, so people are turning ride-share cars into all sorts of surprising venues: libraries, restaurants, nap pods, cell phone chargers, storage containers, movie theaters.

That's the beauty of subscription models: when products start turning into services, all sorts of unexpected new value and innovation is unleashed.

What happens when you move from hard drives to a cloud storage service like Box? Collaboration. You start creating all sorts of new network effects: you're sharing old photos with high school friends, you're helping your niece out with her college essay, you're collaborating on a pdf with work colleagues.

What happens when you ditch CDs for a music streaming service like Spotify? Discovery. Suddenly you're seeing what your friends are listening to in real time, you're improving the music suggestion algorithms with positive and negative feedback, you're discovering music that your favorite musicians like on their own curated playlists, etc.

What happens when you sign up with a monthly travel subscription service like Inspirato Pass? Inspiration. Now you have access to all sorts of trips and experiences that you may not have even considered before: three nights in a private home in Malibu, two days in an upscale hotel in Seattle, etc. All with no price tags attached - the costs are included in your subscription fees.

Successful subscription services are constantly surfacing new ways of learning, collaborating, discovering, and inspiring.

And napping. Let's not forget napping.

For more insights from Zuora CEO Tien Tzuo, sign up to receive the Subscribed Weekly here. The opinions expressed in the Subscribed Weekly are his own, not those of the company. The companies mentioned in this newsletter are not necessarily Zuora customers.

And check out his book SUBSCRIBED: Why the Subscription Model Will be Your Company's Future - and What to Do About It.