A Christmas Gift From Elon Musk

 

December 25th is generally a day that companies and brands avoid making big announcements… for fear they will be lost in either the noise of the holiday or missed entirely as people “tune out” to be with family and loved ones.

But Elon Musk doesn’t do anything by anyone else’s playbook.

On December 25th, Elon tweeted the following:

elon-musk-roadster-3.0-tweet

This tweet did several things to strengthen both the Tesla and Elon Musk brands:

  1. It started a viral swell, setting the Twitterverse of Tesla enthusiasts on fire with speculation of what was to come
  2. It ensured Tesla’s formal press release would be rabidly consumed and analyzed word-by-word for additional clues
  3. It created even more loyalty with his already passionate customer and fan bases

Let’s be honest, announcing an upgrade to a car isn’t really news in itself, so it’s important to understand the larger context. The Tesla Roadster is a vehicle that hasn’t been in production since 2012, making it clear that Elon’s tweet was just a sheep costume around the wolf.

On Christmas day, Musk was really firing a warning shot across the bow of every automobile manufacturer, indicating that the days of producing a vehicle and supporting it merely through a warranty (and recalls) are over. To be seen is whether he also initiated a change in the mindset of consumers toward a model where existing vehicles will be upgraded incrementally with new technology, prolonging the new car purchase cycle for many consumers.

While this may seem counter-intuitive from an automobile manufacturer’s perspective, it actually stands to benefit manufacturers and consumers alike:

Manufacturers

  • New technology innovation, which is expensive, can be partially subsidized and even turned into a high-margin revenue stream, by offering upgrade packages to vehicle owners
  • The support window for older (or multiple) platforms can be shortened as newer technology is adopted
  • A deeper relationship (brand loyalty) with consumers can be better fostered through a long-term product view
  • Relationships with dealer networks who do the upgrades are strengthened by the new CRM and revenue opportunities this creates

Consumers

  • Technology upgrade packages can improve the safety, range, MPG, eco-footprint, and other aspects of existing vehicles without the full expense of replacement
  • Upgrades may slow down (or change) the way in which automobiles depreciate in value
  • Upgrades demonstrate manufacturers are committed to relationships with their customers for the long haul

Although it’s not a 100% parallel, this is evocative of Apple’s model of selling hardware and continually offering a better experience over its life through software upgrades (e.g. iOS 8 keeps an iPhone 5s relevant in a world of iPhone 6’s). Operationally, it also allows them to be more streamlined by limiting the number of legacy iOS versions they have to actively support.

In case there’s any remaining doubt about Elon’s intention to further disrupt the automobile industry, the closing line in Tesla’s December 26th press release makes his intentions very clear:

We are confident that this will not be the last update the Roadster will receive in the many years to come.

Perhaps “A Call to Arms for the Automobile Industry” would have been a better title. Either way, I expect this will prove to make a happier new year for some, not others.

Is Customer Experience Cable’s Biggest Advantage?

 

2015 is looking like it will be the beginning of a tipping point in which US consumers will be able to subscribe a la carte to television networks over-the-top (jargon free, that’s HBO, etc. without a cable subscription).

Tabling individual feelings about this inevitable shift, cable companies have certain significant advantages over the networks that are about to go direct. This is independent of the apparent consumer desire to “cut the cord,” and it’s the networks that need to be careful in how they transition to include a new, direct-to-consumer, model.

First, it’s important to simply summarize the business model of each based on the customer (who’s paying) and the product (what’s being sold):

mso-network-business-model.001
These business model differences are the core of where the advantages lie for cable companies:

  1. Customer Service: Because the cable company customer is the consumer, they already have robust systems ranging from automated and live phone support systems to online chat in place for resolving a wide variety consumer service issues quickly (While consumers often complain about cable company customer service, it’s important to distinguish the difference between resolving service related issues and dissatisfaction between the pricing of subscription packages).
  2. Quality of Service (QoS): Cable companies generally own and maintain their own physical networks, meaning they provide television services end-to-end from the facility where they receive network satellite feeds all the way through the last mile to the consumer’s television. As a result, they have very consistent uptime and can troubleshoot, and resolve, service related issues anywhere down the line, from their facilities to the individual consumer’s home.
  3. Program Guide: It may sound antiquated in a world rapidly transitioning from live to time-shifting to on-demand, but one of the things that’s lost on all over-the-top devices is the discovery of programs by way of a cross-channel guide (and queueing by way of recording) . This is especially important for networks’ fall lineups, which have precious little time to build an audience, and to older demographics resistant to any change in how they find or watch programs.

So, what are the networks’ primary challenges?

  1. Brand Awareness: Networks have two levels of branding, corporate and program franchises. Networks deeply care about their corporate brands, but consumers primarily care about programs. From a viewership perspective, removing the layer of a guide by going direct forces a change to a “network first” mentality in order to find programs that consumers may not embrace (Consider how well record label websites did in the late 1990’s when they tried to circumvent Tower Records and HMV).
  2. Customer Service: Networks have always fielded calls from consumers in the form of complaints about programs, but they’ve never had to directly support a consumer customer base. Going direct means they have to be staffed and equipped to resolve a world of issues including account authorization / verification, payment processing, connectivity, crashes and more for the first time. This isn’t trivial, and can have a direct impact on customer perception of the corporate brand.
  3. Pricing: The cost of a top-tier network subscription isn’t likely to be less than the ~$8.00 / month a Netflix or Hulu Plus account currently charges. In addition to a live feed and on-demand current programming, networks will need to have substantial and desirable back catalogs to both draw consumers and minimize churn. Additionally, if a lower overall bill proves to be a primary driver for the consumer, networks may end up having to compete for consumer dollars like CPG companies before they even have the opportunity to compete for eyeballs.

While networks definitely have the opportunity to be successful in a direct distribution model if they scale accordingly, it’s hardly a “doom and gloom” scenario for cable companies if they leverage their significant strengths in Customer Experience.