CUSTOMER ATTITUDES TOWARDS AND PERCEPTIONS OF TELEMATICS IN CARS

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1 CUSTOMER ATTITUDES TOWARDS AND PERCEPTIONS OF TELEMATICS IN CARS by Rob Sheldon, Managing Director Mark Kidd, Senior Research Executive Accent Marketing & Research INTRODUCTION Telematics is an emerging technology within the automotive industry and may be broadly defined as, "the interactive exchange of information, via voice or data, over a wireless communications network". The technology will allow wireless transmission of data between a receiver unit and a remote point. It will use a combination of data from Global Positioning Satellites (GPS) and mobile data transfer networks. Data transfer between the receiver unit (which could be installed in your car) and a remote central server would make use of new high-speed networks such as third generation (3G), which would be quicker than most existing internet connections. The new technology will allow a number of different interactive systems to be provided for new vehicles. Telematics systems could offer drivers emergency and roadside assistance, air bag deployment notification, navigation, remote door unlock, vehicle security notification and stolen vehicle tracking services. More advanced systems will be available which provide customised services such as travel information (traffic updates, parking availability, airline status), messaging (voice mail and retrieval), information (sports, weather, stock market updates and Internet access) and entertainment (audio games, books, magazines and newspapers). These are only a few of the applications, which will evolve with telematics to keep drivers and their passengers in touch. AIM AND OBJECTIVES The main objective of the research was to establish customers willingness to pay for telematics features in four European countries: France, Germany, Italy and the United Kingdom. Other objectives included: to establish customers knowledge and use of telematics systems to gauge customers awareness and opinions on the quality of the different service providers systems to find customers preferences in billing, position and display options. This paper sets out some outline findings on respondents willingness to pay and awareness of telematics. Only a selection of results are shown for Europe

2 as a whole the study included sub-analysis for each of the four countries included in the survey. The study also provided details on preferred displays and ergonomics of any telematics systems, as well as payment options, and customer relationship management. Further analysis was conducted by age, gender, working status, whether or not respondents had children and likely journey purposes. The detailed report is available for purchase. METHODOLOGY The research was undertaken through a programme of phone-post-phone surveys involving three stated preference exercises. Four hundred interviews were undertaken between 14 October and 10 November All respondents were people who had purchased a new car within the previous 2 years and whose vehicles were worth at least 9,000 or 12,000 Euros at the time of purchase. Respondents were initially contacted by telephone from a list of new car purchasers and asked a small series of questions to confirm the car purchase value using a recruitment questionnaire The recruitment questionnaire also included a few questions about awareness of the term telematics and what respondents thought it to mean. Once contacted, respondents were invited to participate in a longer telephone interview at a time which was convenient to them. Recruits were each sent an information pack which detailed several key features of telematics systems which they were to refer to during the main interview. This pack gave detailed descriptions of each attribute and level used in the stated preference. For example, different levels on navigations systems were shown as follows: Satellite Navigation Systems will allow you to receive directions to your destinations as you travel. These will include: a basic navigation system which will given you directions to your destination based on the shortest distance. Once you have entered the address details of where you want to go, you will receive visual instructions on your dashboard as you drive or automated voice instructions will prompt you how to get there (for example, turn left in 500 metres turn left in 100 metres turn left here ) dynamic navigation systems will give you directions based upon the quickest route. Information will be passed to a central computer system which will send you directions as you travel so that you avoid congestion. This will greatly reduce the likelihood that you get stuck in traffic jams

3 advanced dynamic systems will allow you to receive directions which avoid traffic congestion, but also allow you to request information on how to get to places when you don t know the specific address. For example, by entering details of a particular movie you want to see, the advanced system will give you directions as to how to get to a cinema showing the film. Other directions could be provided to certain shops which stock a particular item you wanted. Information could also be provided as to how to get to the nearest petrol station, hotels, museums, fast food outlets or public car parks with available spaces. In addition, respondents were each sent one of four sets of fixed design stated preference exercises which they referred to during the main telephone interview. Computer Aided Telephone Interviewing (CATI) was used for the main interview. The questionnaire, which was drafted in consultation with the client, elicited information on: frequency of driving on different types of roads awareness and use of different telematics features priorities of different telematics features through three stated preference exercises awareness and opinion of different service providers telematics services billing and payment preferences of telematics services desirability of different telematics services usefulness of being able to source navigation directions to different types of points of interest respondent characteristics. Interviews were conducted in each respondent s native language. Each took approximately 25 to 30 minutes to complete. Throughout the survey, payment options were quoted in Pounds Sterling for UK respondents and in Euros for German, French and Italian respondents. A conversion rate of 1.5 Euros for each Pound was used between questionnaires, approximate to the exchange rate at the time of fieldwork. STATED PREFERENCE Each respondent was presented with three different stated preference exercises. The first of these was designed to measure the relative worth of different features involving vehicle tracking, remote diagnostics, navigations systems and automatic speed warnings. The levels for each of these attributes is shown in Table 1.

4 Table 1: Levels and attributes for first stated preference exercise Attribute Levels Vehicle tracking No external vehicle tracking Vehicle tracking allowing location of vehicle to be found in case of theft Vehicle tracking plus an SOS button Vehicle tracking plus automatic notification of emergency services if the airbag is deployed Remote Diagnostics No remote diagnostics Remote diagnostics giving you software updates plus advising you when to have the car serviced Remote diagnostics with maintenance updates plus automatic notification of roadside assistance in case of breakdown Navigation system No navigation system Navigation system giving you turn by turn directions to your destination with colour map display Dynamic navigation system giving you directions on your route and avoiding congestion with colour map display Advanced dynamic navigation system giving you route directions, congestion avoidance plus ability to access directions to points of interest with colour map display Speed limit notification No speed limit notification Optional audio warning when you exceed the local speed limit Respondents were each asked to refer to one of the four sets of stated preference exercises they were sent which showed a series of 8 different packages and to state which package they preferred (even though they might not like either). An example of a pairwise choice drawn from these levels and attributes is shown in Figure 1. Figure 1: Example pair of first stated preference game OPTION A or OPTION B Vehicle tracking plus an SOS button Remote diagnostics giving you software updates plus advising you when to have the car serviced Advanced dynamic navigation system giving you route directions, congestion avoidance plus ability to access directions to points of interest with colour map display No speed limit notification Vehicle tracking allowing location of vehicle to be found in case of theft Remote diagnostics giving you software updates plus advising you when to have the car serviced No navigation system Optional audio warning when you exceed the local speed limit Abbreviated features of each sample pair were also read out by the interviewer which dealt with the key differences between each package shown in the pairwise choice. Figure 2 shows the same sample pair as Figure 2 as it would have been read out to the respondent during the interview using the CATI questionnaire.

5 Figure 2: Example of first exercise pair wise choice Second Exercise For the second stated preference exercise, pair-wise choices were given for different features which might be included in an information and entertainment system. Table 2 shows the levels and attributes used in the second stated preference exercise. Table 2: Levels and attributes for second stated preference exercise Attribute Levels Information No information systems traffic updates on local major roads all updates with traffic, news, weather, sports and stocks access as well as all updates Entertainment system No video displays DVD player can be used by passengers and, when stationary, by driver DVD player plus games console (eg PS2 or X-box) DVD player, games console, plus ability to download and store films and games on demand Portability Navigation system works only when in the vehicle Navigation and any information, DVD or games features are fully portable and can be used anywhere Figure 3 shows an example of one of the pairwise choices derived from the attributes and levels included in Table 2. As with the first exercise, respondents were each asked to refer to one of four sets of pairwise choices and state which package they preferred.

6 Figure 3: Example of pairwise choice in second stated preference exercise OPTION A or OPTION B access as well as all updates traffic updates on local major roads DVD player can be used by DVD player, games console, plus ability passengers and, when stationary, by driver to download and store films and games on Navigation system works only when in the vehicle Third Exercise demand Navigation system works only when in the vehicle For the third stated preference exercise, respondents were presented with pairs of packages which were made up of the best features from the previous exercises (where airbag deployment notification was considered the best of those three features), along with some additional features plus a cost amount. The different attributes and levels included in the third stated preference exercise are shown in Table 3. Table 3: Levels and attributes for third stated preference exercise Attribute Levels Tracking, diagnostics, navigation and speed notification systems No external vehicle tracking, no remote diagnostics, no navigation system, and no speed warning Advanced dynamic navigation system with full colour map display, emergency services called on deployment of airbag, notification of roadside assistance on breakdown & optional warning when you exceed speed limit Infotainment systems No information or video system, navigation system (if any) only works when installed in the car access, information updates, DVD and games console, ability to download films and games on demand, system (including any navigation) works anywhere Other features No additional features Remote door unlock, ability to purchase additional features as they become available, digital satellite radio, ability to plug in mobile phone or PDA, voice control for hands free use and ability to download MP3s Costs Costs between 0 (0 Euros) and 2000 (3000 Euros) An example of a pairwise choice derived from these attributes and levels is shown in Figure 4. As with the previous exercises, each respondent was presented with eight different pairwise choices between packages featuring variations of the levels of each attribute.

7 Figure 4: Example pairwise choice from third stated preference exercise OPTION A or OPTION B No external vehicle tracking, no remote diagnostics, no navigation system, and no speed warning access, information updates, DVD and games console, ability to download films and games on demand, system (including any navigation) works anywhere Remote door unlock, ability to purchase additional features as they become available, digital satellite radio, ability to plug in mobile phone or PDA, voice control for hands free use and ability to download MP3s Advanced dynamic navigation system with full colour map display, emergency services called on deployment of airbag, notification of roadside assistance on breakdown & optional warning when you exceed speed limit access, information updates, DVD and games console, ability to download films and games on demand, system (including any navigation) works anywhere No additional features Package value limits were checked using transfer pricing questions. These determined what was the most each individual was prepared to pay for a telematics package which included all features. MAIN FINDINGS Table 4 shows the valuations for individual items in a telematics package derived through the stated preference exercises on a Europe-wide level. Further analysis was also conducted for each country (UK, France, Germany and Italy) and also for car purchases above or below 15,000. The table shows valuations derived only for a selection of the items tested. Table 4: Cost Values derived from stated preference for all respondents Feature Willingness to pay ( ) Navigation basic navigation system (showing route directions from origin to destination) 219 Safety and Security airbag deployment notification (where emergency services are alerted to your location if the airbag is deployed) 356 Remote Access speed limit warning (where the driver receives a warning when the car exceeds the speed limit for the road on which it is being driven) 105 Infotainment DVD player (for use for passengers and, when stationary, the driver) 111 Additional features Portable system (where the system can be taken and used as a hand-held device, such as for navigation) 0* * - coefficients were not significant, indicating that respondents were not willing to pay discernibly any more for additional features.

8 Linkages with Desirability Ratings Because of limited interview time and requirements to establish costs for a larger set of telematics features, linkages were set according to the values derived from the stated preference exercise and Likerd scale ratings on how desirable was each feature. Figure 5 shows the linkage graph between the Likerd scale valuation and the value of each telematics feature derived through stated preference. A quadratic relationship was established as being the best in terms of correlation between the Likerd and SP valuations. Figure 5: Linkage between desirability values and stated preference scores 700 stated preference valuation (Euros) y = x x R 2 = desirability score minus one Likerd scale desirability ratings were established for those features which could not be tested via stated preference. These Likerd values were then inputted into the quadratic equation established in the linkage exercise and scaled down in order to account for the package effect. The valuations of all features derived this way are set out in Table 5. Again, these values are an agglomeration of all interviews in Europe further analysis was conducted for each country and purchase value of vehicle. Only a selection of items are shown. Table 5: Final Willingness to Pay Valuations Willingness to Feature pay ( ) Remote door unlock 152 Terrestrial TV 17 Voice Control 102 Ability to plug in existing mobile phone or PDA 112

9 One of the key points that came out of the research was that entertainment features (such as TV, games, MP3s and DVDs) were not considered important and mean valuations were generally lower than the costs of introducing these systems. It is likely that this is because the people who purchased the vehicles would also be the primary car drivers and would therefore not benefit from these systems. Those with children were keener to have DVD systems on board but still did not value these items as highly as other benefits. Another key finding was that respondents had high valuations for safety systems, such as for airbag deployment notification. This is where vehicle tracking systems and on-board diagnostics would be combined, so that the emergency services would be automatically notified of the vehicle s location should the airbag be deployed and the driver requested help or was unable to respond to a call. Sub-analysis was conducted for each country, value of car purchase, household composition and driving patterns. The following key findings were established: Awareness of Telematics Thirty seven per cent of all respondents were aware of the term telematics when they were initially recruited (ie before any show material had been sent to them). However there was a great disparity between different countries, with 78% of those from Italy being aware of the term whereas only 4% were aware in the UK. Thirty six per cent of German and 28% of French respondents were aware of the term. Of the 87 respondents who had heard of telematics before, 59% would consider having telematics installed in their next vehicle purchase. Only 18% said that they would definitely not have telematics installed. The feature most likely to be thought as appealing in telematics, mentioned by 88% of the sample, was a navigation system. Figure 6 shows that 91% of respondents were aware of the existence of onboard navigation systems.

10 Figure 6: Awareness of existence of in-vehicle telematics features a) basic navigation system 25 b) vehicle tracking for theft recovery 7 67 c) traffic information updates d) speed limit warning e) remote diagnostics f) SOS button g) access h) automatic roadside assistance i) traffic, weather, sports, stocks & news updates j) film, game and MP3 downloads k) navigation with congestion avoidance l) navigation with points of interest m) remote door unlock n) airbag deployment notification know it's available in respondent's car model know it's available but not in respondent's car model % respondents Base: All respondents (401) Conclusions The single most valued feature for a telematics system was having automatic airbag notification, whereby the emergency services are automatically notified of your location should you be involved in an accident for which your airbag was deployed. As a combined feature, respondents were also likely to value highly having an on-board navigation system which allows one to key in requests for certain types of locations (such as where is the nearest public car park, cinema or hospital). Entertainments systems, such as DVDs or games consoles, were given very low values. This is likely to be due also to their potential distraction effects even though it was specified that drivers would not be able to use the features when the vehicle was in motion.

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