How Subscriptions Could Affect Car Sales

BMW says that it will soon let us subscribe to some of our car options.

I wonder how our incentives will change.

BMW Subscriptions

BMW is offering options that can be turned on and off remotely. They might include a heated steering wheel cruise control, and a lane keeper. Owners of “preowned” vehicles could add the subscribed items that the previous owner had refused. She just would have to pay a monthly or annual charge.

As psychologist Daniel Kahneman points out, consumers respond more intensely to loss than to gain. Because U.S. buyers are used to getting heated seats in all luxury packages, the subscription could anger them. Still though, we might like the opportunity to enjoy a free try out period before paying to continue the package.

On its website, BMW presented the concept:

This is one of the pricier packages. For now it appears that the selection is more general than a heated steering wheel:

Our Bottom Line:  Incentives

As economists we can alway explain the items we demand by looking at the incentives that nudge us toward our decision. When we buy a car, the incentives shift every time the extras are combined differently. We could be offered everything separately. But one study indicated that we got decision fatigue when presented with “4 styles of gearshift knobs, 13 kinds of wheel rims, 25 configurations of the engine and gearbox and a palette of 56 colors for the interior.” Here, people got too worn out. The long list of possibilities created the incentive to buy the default option package.

When we have decision fatigue, there is much less of an incentive to make a purchase. So, we can ask if a subscription package minimizes or adds to a consumer’s decision fatigue.

My sources and more: Starting with Marginal Revolution, then CNN, arstechnica, and businessinsider, I learned more about the BMW offer. While all applied to BMW, a bundled subscription is about far more than a car.