GM Looks to Customer Retention Rather Than Subscriptions or Fees to Support 4G Effort

GM is “moving fast” in the connected car space to build on the long-term financial commitment the company made to the OnStar program 17 years ago, Mark Reuss, president, GM North America, told journalists at the GM booth Wednesday at the New York International Auto Show. The equipment GM put into vehicles to enable OnStar service in the past “we generally did not price for,” Reuss said. “That’s a long-term financial commitment,” he said, saying the company’s recently announced deal with AT&T for embedded 4G service beginning with model year 2015 vehicles is an “expansion of that pipe.”

Reuss cited changing demographics of new customers coming into the car buying market, who are accustomed to the “ultimate customization available” on mobile devices, as target customers for the 4G technology. He compared consumers’ ability to customize their smartphones through apps and content to the aftermarket car market of previous generations. “It’s almost like hotrodding used to be,” he said. The creativity consumers have with their smartphones combined with the upcoming 4G capability will enable GM to “harvest that investment in OnStar,” he said.

The online world is causing changes throughout the automotive market, from buying a car through driving, Reuss said. GM is just beginning to use the OnStar pipeline to deliver data that could be useful to vehicle-based apps including readings on tire pressure, fuel economy and preventive maintenance schedules. The readings are useful to the GM infrastructure, too, he said. “The car is now bringing that information to the dealer, our engineers and to us as an OEM,” he said, which helps with car safety and reminding consumers of revenue-producing service schedule events they might not otherwise remember.

The OnStar app runs across all GM segments but the company is maintaining separate branding for different target demographics, Reuss said. The $12,000 Spark for first-time buyers is positioned as an alternative to a used car, he said, and its “bring your own content” technology package doesn’t have all the options available to high-end Cadillac customers who have access to the Cue system that was launched last summer, he said. A Spark tech package “replicates the user’s phone experience” while Cue customers have access to more content options along with safety features including crash avoidance and radar-detected cruise control. MyLink and IntelliLink systems fall between on the tech spectrum, he said.

Reuss referred to GM’s need for flexibility as it learns from customer feedback what technology works and what doesn’t and to keep pace with technology changes. “We'll be able to adapt platform-wise within General Motors to just about anything anybody wants,” he said. The company isn’t focused on a “silver bullet” for any of its tech packages “because it changes so fast,” he said.

Keeping consumers’ financial stake minimal is key to GM’s infotainment strategy, Reuss said. He referred to customers being able to have automatic streaming once a phone has been paired with a system for the first time. “When you don’t have to pay for storage … and have lightning fast flexibility with what you carry around to run your life, that’s a really good formula,” he said. Reuss said customers won’t pay “to store things they know will be out of date the next time they come into the car with a phone,” he said.

GM is “playing around” with a few apps to see if customers want certain apps to be embedded in the Spark system, Reuss said, and it’s looking for help in writing apps from companies with expertise in certain areas. “We don’t know all that,” he said. “We're a car company and a telematics company, not an app company.” GM is in the early stages of the connected car environment, and 4G integration is going to “redefine what a car is and does,” but the ability to be agile and respond to customer demands is critical, he said. The company’s goal “isn’t to obtain the perfect solution in the Malibu next year."

GM is concentrating on customer loyalty rather than potential income from apps or subscriptions to pay for infotainment features enabled by the 4G pipeline, Reuss said. “I know that customers won’t be willing to pay very much for that,” Reuss said. GM made the 4G investment in OnStar to “take it to a different level,” but “I'm not sure we're going to pass a lot of that on to the customer because we don’t think people will pay for that in every case,” he said. The company can achieve savings through scale by having embedded 4G on every car, he said, a strategy that mirrors what it did when it embedded OnStar in every car early on. “At the end of the day, when we get customers buying our cars over and over again, that is the ultimate measure of whether we do this right or not,” he said. GM spends “hundreds of millions” of dollars to retain customers, he said. “It’s very expensive to lose someone and bring them back,” he said. Reuss wouldn’t put a value on the 4G pipeline that’s coming but “that’s going to give GM agility that no one else has,” he said, predicting software updates will roll out every six months to a year.

Although GM maintains different technology brands within its segments, the company wants to maintain a certain level of commonality based on the same operating system and feel, Reuss said. He cited the hurdles smartphone companies face in trying to lure customers from one platform to another as an example of why GM won’t try to make technology statements with its individual platforms. Even when BlackBerry had problems, he said from first-hand experience, subscribers resisted switching phones because they were familiar with the tactile feel of the keyboard. “I was a late adopter of the iPhone, because I was scared to go to a non-haptic feedback keyboard to do my email with one hand,” Reuss said. Those are the kinds of considerations automakers have to think about for customer retention, he said. “If you have a really good experience in a Chevrolet with MyLink or in a Cadillac with Cue or a simple BYOM [bring your own media] on a Spark, the first place you're going to come look for another car is going to be within that brand, even though the executions within those brands may be different by segment,” he said. GM wants a Spark customer to evolve into a Malibu customer and then to a Buick or Cadillac buyer later on, so “I'm not going to over-brand any one of these technologies so people only get what they know,” he said. The key basics GM wants consumers to take away is that GM infotainment systems are “simple, they're not going to pay a lot of money for it and it’s going to make their lives easier,” he said.

While technology was front and center on the GM stage at the International Auto Show this week, one GM car was decidedly low tech. GM’s new muscle car, the 500-horsepower Camaro Z/28, was “set up for track perfection,” Reuss said. That involved “taking a lot of weight out of the car,” he said. To lighten the load, engineers designed out trunk carpeting and insulation, used lighter rear-window glass, made air conditioning optional and removed all the car’s loudspeakers but one. “I wanted to take all of them out,” Reuss said, “but you have to have one of them so you can hear the seat belt chime.”