A Business Case for Software Differentiation

[Zoidz]

While not a direct comparison, this concept of paying more to unlock additional capacity on the same hardware and software is very common in the manufacturing automation software market. Virtually all vendors price the exact same software by something called tag count. In simple terms, if I need to monitor 100 tags (real world device data values), I pay $X. For 500 I pay $2X, for 2500 I pay 3X. It is the exact same software and hardware with a different license key.

This what Rivian is doing with the Dual performance model. I expect to see more of this as time goes on. Software trim levels.

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[DuoRivians]

Tangentially, I still like my idea of Rivian’s selling naming rights at their RAN locations. Like an adopt a highway approach.

Charge $10-100Ks to claim naming rights. Could allow big marketing opportunities at RAN locations haha.

“This RAN is supported by REI”

 

[Donald Stanfield]

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.

No it's not just you. Arbitrarily locking features that your truck already has annoys me too. Like Tesla shut off their fog lights.

 

[Donald Stanfield]

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

About the level of brilliance I expected. It's much easier to shit talk than actually come up with a good idea. If I'm the idiot for having a bad idea what does that make you for not having one at all?

 

[Donald Stanfield]

Tangentially, I still like my idea of Rivian’s selling naming rights at their RAN locations. Like an adopt a highway approach.

Charge $10-100Ks to claim naming rights. Could allow big marketing opportunities at RAN locations haha.

“This RAN is supported by REI”

hmmm. I like this, but realistically the sponsorship will be less profitable and more paying for maintenance costs. Still a good idea, every little bit helps.

 

[DuoRivians]

hmmm. I like this, but realistically the sponsorship will be less profitable and more paying for maintenance costs. Still a good idea, every little bit helps.

It’s free money at the margin. 1000 RAN sites times $10K to 100K is $10-100M of free cash.

 

[Electrified Outdoors]

If you mean additional functionality based on trim i think its a good idea. They already do some of this with drive modes. I also think allowing upgrades after delivery (like Tesla does with acceleration boost for example) would be good. Im not a big fan of subscriptions unless there is some real value there. Was it BMW that was charging a subscription fee for heated seats?

The first big thing Rivian could do is offer a performance upgrade for those that purchase DM. It would slso be a good way to qualify folks for the tax incentives too as some configs would come in just under the limit.

Rivian will eventually charge for connectivity too i suspect (much like Tesla).

 

[MrMusAddict]

In terms of whether or not customers will be charged for features, RJ himself has said that they do not intend to if it requires barely any R&D. Other things like, say, Rivian's equivalent of """Full"" Self Driving", will be charged.

So basic features will be made available for free. That extends to all cost tiers of their vehicles. In other words, if a feature is capable of parity, it will have parity.

If a feature is not capable of parity (say for example something tuned specifically to Rock Crawl mode), then the feature will not have parity.


THAT BEING SAID, if Rivian decides to pick & choose features that can't have parity, they should absolutely do so. Legitimate disparity due to the capabilities of the vehicles hardware are absolutely things that Rivian should pursue to incentivize people spending more money.


But to reiterate, all Rivians in existence (both R1T and R1T) currently have the same trim level; Adventure. So the base software feature set will have parity between all vehicles. And there's actually a business reason for this; simplicity. Both simplicity for the customer (and less confusion & frustration), and simplicity for Rivian (for maintaining a software stack).

Any features beyond the base software will depend on which options the customer chooses to spend more money on to augment their Adventure trim.

 

[Christopher]

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?

Based on your own perspective, why do you assume buying behavior applies the same across the board to everyone else? Why do you think Rivian needs to differentiate even more between Max Pack and Large Pack? If I had to make assumptions, I'd go the other way. I'd say when it comes to Max vs Large or Dual vs Quad, consumers would see it as just that and not expect software differentiation.

You said the price difference between the two is too extreme so maybe that's your reason why you think there needs to be more, and I understand that's your opinion and you don't perceive the value for the difference between the two, but there's still others that do appreciate the value for having an option for a Max Pack. When you look a consumer behavior there's a category of people that will purchase a product to have the best option available, even if they won't take advantage of all the features. That may be some of us that have the quad motor, or maybe we have the quad motor because it was the only option available, to get the vehicle as soon as possible, or because we had early pricing, or like the off road capabilities of quad.

With that being said, I think you're on the right track with the idea of different packages that can appeal to a wider range of buyers, from those more price sensitive to those that aren't, and those that have different purchasing behaviors that perceive value in different ways. (If done strategically.) For example, if a "Quad Motor" is marketed as the performance version with the ultimate off-road capabilities, then maybe the software differentiation consumers such as yourself would appreciate and help move them into the higher price point is trail maps with offline support, satellite radio when on the trails, additional off-road recovery services, location sharing with friends, safety check-ins, etc. And for those focused on getting Quad Motor for the performance could benefit from a drag/race mode with lap timers, lap recording playback with a data log, launch control, etc. I could see that helping move consumers into higher price points if right now just a HP increase isn't enough as in your example, but only if there's a clear distinction between these "trims". Right now it's all the same with Rivian and slicing apart the software will be confusing to the consumer (just look at all the commotion with the dual motor users not seeing the gauges).

Also, keep in mind that just because legacy automakers have required leather seats to get your premium speakers doesn't mean Rivian has to do the same. Tesla has changed the way we buy cars, and has simplified the options and have been proven quite successful at doing so. In my opinion, I think all the trim levels, packages, options, etc. legacy manufacturers offer can be quite overwhelming for the consumer and don't provide the best buying experience. I like the simplicity that Rivian offers. I hate that an F150 has XL, XLT, Lariat, King Ranch, Platinum, Limited, etc. plus a million different equipment groups and a la carte options, but that's my personal preference and I recognize others may appreciate the complexity of having more options. I think Rivian will be able to streamline production and reach profitable faster by keeping it simple.

 

[Donald Stanfield]

Also, keep in mind that just because legacy automakers have required leather seats to get your premium speakers doesn't mean Rivian has to do the same. Tesla has changed the way we buy cars, and has simplified the options and have been proven quite successful at doing so. In my opinion, I think all the trim levels, packages, options, etc. legacy manufacturers offer can be quite overwhelming for the consumer and don't provide the best buying experience. I like the simplicity that Rivian offers. I hate that an F150 has XL, XLT, Lariat, King Ranch, Platinum, Limited, etc. plus a million different equipment groups and a la carte options, but that's my personal preference and I recognize others may appreciate the complexity of having more options. I think Rivian will be able to streamline production and reach profitable faster by keeping it simple.

That's a fair point and it is nicer to have a somewhat more simplified purchase process. It's a double edged sword though because being able to customize is also nice.

 

[Christopher]

That's a fair point and it is nicer to have a somewhat more simplified purchase process. It's a double edged sword though because being able to customize is also nice.

I agree. It's definitely a balancing act. Unfortunately you can't please everyone and it may take some experimentation before Rivian gets it right, but we're all counting on them!

 

[ads75]

It’s free money at the margin. 1000 RAN sites times $10K to 100K is $10-100M of free cash.

But realistically, professional sports teams use this approach with their stadiums. How many of us know who is the current sponsor for their local sports stadiums anymore? Or the sponsor of most sport stadiums. They change every few years. It's easy to type numbers projecting revenue, its harder to sell in the real world. I don't want to know what name brand I need to type into the navigation to get to a charging station. They want to throw some advertising up at the site, while a common practice, people get tired of it. And whoever is advertising on a Rivian site, better reflect Rivian values, whatever those are.

 

[goldburger]

the it's just software crowd is weird to me. like because it's not a physical difference you can see and touch value get away? more software requires more labor aka more costs... pay for software... how is this a question in 2023.

 

[DuoRivians]

But realistically, professional sports teams use this approach with their stadiums. How many of us know who is the current sponsor for their local sports stadiums anymore? Or the sponsor of most sport stadiums. They change every few years. It's easy to type numbers projecting revenue, its harder to sell in the real world. I don't want to know what name brand I need to type into the navigation to get to a charging station. They want to throw some advertising up at the site, while a common practice, people get tired of it. And whoever is advertising on a Rivian site, better reflect Rivian values, whatever those are.

There’s a market for advertising like this. Stadium ads you mention proves the point, regardless of how many people accurately remember it. There’s a saying that 7 exposures to one’s brand, even if cursory, is enough to create remembrance and recollection in the future.

The sponsoring name could even appear in the car’s navigation when you tap on the RAN.

Agree about brand alignment with Rivian. In all, it’s nearly all software and brings in very high margin money.

 

[ads75]

There’s a market for advertising like this. Stadium ads you mention proves the point, regardless of how many people accurately remember it. There’s a saying that 7 exposures to one’s brand, even if cursory, is enough to create remembrance and recollection in the future.

The sponsoring name could even appear in the car’s navigation when you tap on the RAN.

Agree about brand alignment with Rivian. In all, it’s nearly all software and brings in very high margin money.

Strong disagree. I used stadium ads because of how ridiculous they are. The stadium in Pittsburgh used to be called Heinz Field, now it’s something else, I couldn’t tell you if it’s a bank or insurance company or a fake university. Are executives at those companies going to get preferred charging, similar to box seats? I am going to remember the shops/stores around the charger I am using, not who is sponsoring it. If it’s the same, sure, it could work. At the same point, if every time I use something I feel like I am the product, I will use it less. Not everyone wants to be advertised to all the time. Sometimes we just want to get where we are going.

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