That didn’t take long. Only a year and a half after launching, General Motors is “hitting the pause button” on their luxury car subscription service, Book by Cadillac. Originally available in three metro areas; New York, New York, Dallas, Texas, and Los Angeles, California, Book by Cadillac will cease operations on December 1st, 2018.
This shouldn’t come as too much of a surprise. If you’ve ever brought a new product to market, or attempted to resegment an existing market, you know it’s incredibly challenging to gain adoption. Why should consumers change their habits for your new offering? Answering that question is undoubtedly tough.
If you’re unfamiliar with Book by Cadillac you’re not alone (that may be part of the reason it’s shutting down). We recently provided an overview review of the $1,800/mo luxury car subscription service here. The service offered its members access to a fleet of Cadillac vehicles for a monthly fee. However, after a yearlong pilot General Motors decided to end the program.
As originally reported by the Wall Street Journal, a General Motors spokesperson was quoted as saying, “we are hitting the pause button for a brief time to make some tweaks to Book [by Cadillac] based on our learnings,” suggesting that Book by Cadillac will be back in the near future.
Here at Car Subscription Reviews we see three key takeaways from General Motors pilot of Book by Cadillac:
- No pain, no gain;
- Unclear target market;
- Managing a subscription service is hard.
This is what can be learned from General Motors pilot of Book by Cadillac.
No pain, no gain
What problem does Book by Cadillac solve? Movement. Just like your car, your bike, or your Lyft account, Book by Cadillac set out to help move individuals from point a to point b. The issue Book by Cadillac faced was that it wasn’t much better than the existing options.
95% of Americans own a car. That means 95% of Book’s target market have a solution to their movement problem. There are of course benefits that come from movement alternatives. Ride-share provides the convenience of not having to drive (you’re the passenger), scooters and bikes allow you to avoid traffic jams, and walking is a tried and tested way to navigate short distances in a way that immerses you in your surroundings.
What added benefit did Book (especially at it’s price point) bring to the table?
With nearly a third of all cars being leased in the United States, Cadillac was up against stiff competition. What incentive does a consumer who has leased a car have to transition to Book by Cadillac? It certainly isn’t saving money. Leasing a Cadillac Escalade for three years would cost around $49,000, Edmunds estimates. The cost of subscribing to Cadillac’s Book service over that period would top $64,000.
If movement is the problem Cadillac is trying to solve, they did a poor job differentiating their service from existing solutions.
Unclear target market
Who was supposed to get excited about Book by Cadillac? At $1,800/mo the subscription service was out of reach for most all consumers.
The average monthly car payment for a new car is $515. Add in insurance and you’re looking at a sub $600 monthly payment. Book by Cadillac offered you access to a fleet of vehicles for 3 times that price. Sure, you didn’t have to maintain the car or pay insurance, but a 3 times increase made the service unreasonable for the majority of Americans.
That was done on purpose though, Book by Cadillac was intended for the affluent and wealthy. However, think back to the statistic that 95% of Americans own a car. Who actually was Book by Cadillac trying to convert to their subscription service? That answer seems more and more nebulous the deeper you dig in.
Managing a subscription service is hard
In addition to the gaps Book by Cadillac faced on the consumer facing side of the business, General Motors faced the challenge of running a subscription service. General Motors and Cadillac are great at doing a few things, mainly making cars. The transition from car manufacturer to subscription service operator can’t happen overnight no matter how great of a team you put together.
Book by Cadillac offered 18 “swaps” annually. The logistics of managing their fleet proved more challenging and expensive then originally forecast. When Book by Cadillac inevitably comes back to market don’t be surprised if they partner with a standalone company like Clutch or Flexdrive to assist with operating the service.
What it means for the industry
Ramifications from General Motors decision to suspend Book by Cadillac have yet to be felt. Will other manufacturers do the same? What does the future of car ownership and car subscription look like? It’s too soon to know.
However, what General Motors is doing makes sense. Pilot, learn, iterate, and test again. That seems to be their approach when it comes to car subscription services, and that gives us hope that their next iteration of Book will be a better, more valuable offer to consumers.