A Business Case for Software Differentiation

[Donald Stanfield]

There's been a lot of discussion lately about different software for different trim levels of truck. People arguing for Rivian to provide special features for certain models, and others arguing for giving all trucks the same truck. I'm going to take this opportunity to explain why Rivian should provide different software based on the pricing tiers of the various trucks. It makes business sense.

First off, we can all agree that there is a wide range of appeals here when it comes to the R1 series vehicles. People want different things out of these vehicles, and as such Rivian needs to figure out a way to motivate people to move up into more expensive vehicles. Spending time on this forum I have seen plenty of people with quad motor trucks that aren't at all motivated by the extra horsepower. That's evident in the tire discussion threads how some people have melted off their tires and others are getting over double or triple the miles out of the same tires with the same vehicle. Obviously that comes from people who aren't using all 835HP.

If you were RJ how would you get people like that to buy your more expensive trucks? Surely some of these people who do not need the power could and would still purchase the more expensive vehicle if there were another reason to do so. There are two ways. The first is to make the price not that much more between the different trims. People might move up simply because an extra 1500 dollars is worth the nicer badges and the thought of having extra power even if they won't use it. At an 8K dollar price delta between a plain dual and a quad that gulf is too great for this to reliably work. The other way is to offer different features that are package exclusive. Most manufacturers do this. If you want the premium stereo you need the leather seats or the premium 2 package with a bunch of other features. Rivian can do this with software like gauges.

They really need to do this if they plan on selling any of the underwhelming max packs. The price difference of those is pretty extreme and the dual performance max is currently the most expensive configuration. So if Rivian wants to sell those, presumably they make a good profit on a max pack, they are going to need to offer some extra software modes or something. I wouldn't spend the money on a max pack because the range isn't enough for my use. If they want to entice buyers to their more profitable packages Rivian will need to provide that value to the end user.

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[Donald Stanfield]

@R.I.P. Just a mighty fine rebuttal there.

 

[R.I.P.]

@R.I.P. Just a mighty fine rebuttal there.

Thank you sir for providing such fine entertainment for us on this balmy Friday evening.

 

[DuoRivians]

Software differences because of fundamental hardware differences are fine. (Or, upfront differentiation, eg perf dual motor is more expensive even though the engine is the same.)

Otherwise, I’d prefer to see differentiation via software subscription services. More revenue opportunities

 

[Donald Stanfield]

Thank you sir for providing such fine entertainment for us on this balmy Friday evening.

Since you clearly think I'm wrong go ahead and lay out how you would get a customer to buy a quad for extra profit when that person doesn't care enough about the horsepower WITHOUT extra software modes. We will all wait with bated breath at your brilliant business acumen. Let me guess, your reply will be another meme and a laugh react.

 

[COdogman]

I agree, but also because I support there being lower points of entry for those who want a Rivian but can’t afford the fully loaded version. I hope someday there are multiple options so more people can join the club.

 

[Donald Stanfield]

Software differences because of fundamental hardware differences are fine. (Or, upfront differentiation, eg perf dual motor is more expensive even though the engine is the same.)

Otherwise, I’d prefer to see differentiation via software subscription services.

So how would you motivate someone to buy a more expensive package if everyone can get the subscription?

 

[DuoRivians]

So how would you motivate someone to buy a more expensive package if everyone can get the subscription?

Better vehicle hardware and physical capabilities.

 

[Donald Stanfield]

I agree, but also because I support there being lower points of entry for those who want a Rivian but can’t afford the fully loaded version. I hope someday there are multiple options so more people can join the club.

Totally. Rivian enticing people to buy more profitable vehicles allows them to produce lower margin vehicles at lower price points too. Getting your name out there and market share is important for sure. You cannot sell more affordable vehicles at a lower profit without also selling higher margin vehicles or enough premium packages.

 

[Donald Stanfield]

Better vehicle hardware and physical capabilities.

So you would differentiate purely on a performance basis? Like you'd buy a max pack only if you need more range or a quad only if you wanted the extra HP?

 

[DuoRivians]

So you would differentiate purely on a performance basis? Like you'd buy a max pack only if you need more range or a quad only if you wanted the extra HP?

Yeah.

Or charge more for software upgrades if it’s clear on day one what those will be. For example, dual motor performance and standard have the same motors, but it’s clear upfront what the extra hp software costs.

With software subscription available for all trims, however, I think the population for more upselling is greater. Examples:

- I’m sure some will throw a fit, but if Rivian came out with a L3 full self driving solution (ie the Tesla approach), I could see that deserving more money beyond basic Driver+

- Data streaming packages beyond basic purposes, eg $10/mo for in-car wifi hotspot

- $x/mo for more analytics from car

- $x/mo for trail map data integration with in car nav

 

[Donald Stanfield]

Yeah.

Or charge more for software upgrades if it’s clear on day one what those will be. For example, dual motor performance and standard have the same motors, but it’s clear upfront what the extra hp software costs.

With software subscription available for all trims, however, I think the population for more upselling is greater. Examples:

- I’m sure some will throw a fit, but if Rivian came out with a L3 full self driving solution (ie the Tesla approach), I could see that deserving more money beyond basic Driver+

- Data streaming packages beyond basic purposes, eg $10/mo for in-car wifi hotspot

- $x/mo for more analytics from car

- $x/mo for trail map data integration with in car nav

I agree Rivian should do all that too. I don't think it would help move upper level trims though. Stuff like the max pack is something I personally feel is extremely expensive for what you get relative to the large pack. It's twice the price but no where near twice the range. It looks like Rivian is using max pack as a high margin money maker. I doubt they are going to sell many of them on range alone, as it really isn't enough to make a huge difference towing. If Rivian wants to sell these high margin options I don't think them as they are is enough.

 

[R.I.P.]

Since you clearly think I'm wrong go ahead and lay out how you would get a customer to buy a quad for extra profit when that person doesn't care enough about the horsepower WITHOUT extra software modes. We will all wait with bated breath at your brilliant business acumen. Let me guess, your reply will be another meme and a laugh react.

Oh, hell.. you were serious? My bad! ?

 

[SoCal Rob]

There's been a lot of discussion lately about different software for different trim levels of truck. People arguing for Rivian to provide special features for certain models, and others arguing for giving all trucks the same truck. I'm going to take this opportunity to explain why Rivian should provide different software based on the pricing tiers of the various trucks. It makes business sense.

First off, we can all agree that there is a wide range of appeals here when it comes to the R1 series vehicles. People want different things out of these vehicles, and as such Rivian needs to figure out a way to motivate people to move up into more expensive vehicles. Spending time on this forum I have seen plenty of people with quad motor trucks that aren't at all motivated by the extra horsepower. That's evident in the tire discussion threads how some people have melted off their tires and others are getting over double or triple the miles out of the same tires with the same vehicle. Obviously that comes from people who aren't using all 835HP.

If you were RJ how would you get people like that to buy your more expensive trucks? Surely some of these people who do not need the power could and would still purchase the more expensive vehicle if there were another reason to do so. There are two ways. The first is to make the price not that much more between the different trims. People might move up simply because an extra 1500 dollars is worth the nicer badges and the thought of having extra power even if they won't use it. At an 8K dollar price delta between a plain dual and a quad that gulf is too great for this to reliably work. The other way is to offer different features that are package exclusive. Most manufacturers do this. If you want the premium stereo you need the leather seats or the premium 2 package with a bunch of other features. Rivian can do this with software like gauges.

They really need to do this if they plan on selling any of the underwhelming max packs. The price difference of those is pretty extreme and the dual performance max is currently the most expensive configuration. So if Rivian wants to sell those, presumably they make a good profit on a max pack, they are going to need to offer some extra software modes or something. I wouldn't spend the money on a max pack because the range isn't enough for my use. If they want to entice buyers to their more profitable packages Rivian will need to provide that value to the end user.

I agree with this and it is in keeping with the feature packages sold by legacy manufacturers. However, I think that as with the legacy manufacturers, there needs to be a way for people to add some options from higher trim levels, generally at a higher price than if you did some kind of breakdown of the various components of the option packages. I think the manufacturers do this because it allows the customer to get the vehicle they want while paying for the privilege of something off-standard.

If they go that route, I hope extra software features are available as a one-time fee in addition to recurring. For people who buy with a one-time fee I hope the option(s) purchased stay with the vehicle when it is sold.

I don’t know if other people feel this way, but I feel much better about paying for software features than the ability to unlock hardware features which are already physically present. As an example, if Rivian reintroduced an Explore trim and it lacked the ventilated seat capability even though the hardware was there, it would feel very petty to me to make people pay for something which the manufacturer already built into the car when it was assembled. On the other hand, if you could buy a ventilated seat accessory kit which the service center could physically install and activate in the vehicle’s profile, then that doesn’t feel as petty to me.

I think that this desire to buy something and have ownership of it is a generational thing. I think younger folks grew up with the recurring fee model for cell phones, renting places to live, and leasing cars so this doesn’t bother them as much. Or it’s just me.

 

[DuoRivians]

I agree Rivian should do all that too. I don't think it would help move upper level trims though. Stuff like the max pack is something I personally feel is extremely expensive for what you get relative to the large pack. It's twice the price but no where near twice the range. It looks like Rivian is using max pack as a high margin money maker. I doubt they are going to sell many of them on range alone, as it really isn't enough to make a huge difference towing. If Rivian wants to sell these high margin options I don't think them as they are is enough.

There shouldn’t be pressure by Rivian to sell the max pack. Presuming pricing is appropriate, their profit margins by the type of vehicle should be fairly consistent.

As for me, we’re getting the R1S max pack because of more confidence camping further away from a DCFC, and what I think will be noticeably faster charging times to get 100 miles when at 20% battery. (Because 100 miles / 400 miles is a smaller percentage than 100 / 350)

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