European Customer Desirability and Willingness to Pay for Infotainment Features

Low Awareness Levels and High Perceived Prices of Infotainment Systems Restrict Market Penetration

System Manufacturers Need to Increase Marketing Efforts and Revise Prices to Suit Consumers’ Expectations

London, UK – 24 November, 2005 - Although the European infotainment market is projected to earn revenues of €6.20 billion by 2010, awareness levels of the very term ’infotainment’ are surprisingly low. A recent Frost & Sullivan (http://transportation.frost.com) study on this market using the conjoint analysis methodology revealed that a substantial 61 per cent of the sampled people had not even heard of the term.

“Clearly, the biggest challenge facing original equipment manufacturers (OEMs) is to urgently ramp up awareness levels through increased marketing and sales efforts,” say Frost & Sullivan Industry Analysts Franck Leveque, Soikot Sengupta and Praveen Chandrasekar. “OEMs need to communicate the many benefits of infotainment systems to consumers through a variety of channels and the Internet could play an important role in achieving this.”

Enhanced marketing efforts are particularly critical in the mass market A&B vehicle segments. While these segments hold the real revenue potential, its consumers are paradoxically the least likely to consider infotainment systems when making a vehicle purchasing decision.

In contrast, infotainment features were found to have a much bigger influence on consumers in the D&E and multi-purpose vehicle (MPV) segments when buying a new vehicle. The exception to this seems to be in Italy where infotainment systems are a strong purchasing decision factor even in the A&B segment level. Consumers in France also demonstrated a clear influence of these systems on the buying decision in both the A&B and D&E segments.

From a country-wise perspective, Italian consumers overall gave the most importance to infotainment features in the car purchasing decision. They were followed by customers in Germany, the United Kingdom, France and Spain in that order.

Among the various infotainment attributes, the basic audio system with AM/FM, digital radio and a 6 CD changer emerged as the most desirable. In fact, the study revealed that customers now perceive basic audio systems as more or less a standard feature in new cars.

Navigation systems were second on customers’ lists of top infotainment attributes, perhaps due to growing awareness and the enhanced driving experience they offer. Once again, it was the D&E segment that displayed the greatest interest in such features. Control devices such as touch screens were at third place.

“Over 50 per cent of consumers in France, Germany, Spain and the United Kingdom are expected to equip their next vehicle with navigation systems,” say Frost & Sullivan Industry Analysts Franck Leveque, Soikot Sengupta and Praveen Chandrasekar. “These results indicate that the penetration of navigation in vehicles could rise dramatically over the next few years as these consumers change their cars.”

Phone systems and multimedia remained low priorities and it was found that most respondents preferred using their own mobile phones while travelling. Multimedia was the least desired attribute. These systems were referred to as niche and only seemed to be popular in the higher and MPV segments.

“Interestingly, while respondents clearly understood that navigation, audio and rear seat entertainment systems formed ‘infotainment features’, they considered phone systems and SOS buttons as additional features,” remark Frost & Sullivan Industry Analysts Franck Leveque, Soikot Sengupta and Praveen Chandrasekar. “Since only half of the respondents considered phone systems as a part of infotainment, manufacturers might consider marketing these features separately.”

With regard to portability, 68 per cent of respondents across quota, age, and gender preferred fixed navigation, audio, and multimedia systems. This suggests that integrated solutions incorporating all these systems are highly desirable for consumers, paving the way for an ‘all-in-one’ system to be fixed in cars. However, this could drastically change with the introduction of portable navigation solutions on mobiles and personal digital assistants (PDAs).

Using conjoint analysis to estimate consumers’ perceived pricing for individual infotainment solutions as well as infotainment packages, the study found that the average perceived price for a complete infotainment system was €1540. However, consumers were willing to pay only up to €1240. This gap between perceived price and customers’ willingness to pay is preventing OEMs from penetrating the mass market segments, which hold the most potential for revenue growth.

“With customers unwilling to pay for features that they do not use or value, system manufacturers need to rework the price of the system and the relevance of their offerings in line with consumer expectations,” state Frost & Sullivan Industry Analysts Franck Leveque, Soikot Sengupta and Praveen Chandrasekar. “OEMs and suppliers have already made huge investments in infotainment systems in Europe and run the risk of incurring losses if the pricing and product planning strategies are not modified in the short term.”

If you are interested in a virtual brochure, which provides manufacturers, end users, and other industry participants with an overview of the latest analysis of the European Customer Desirability and Willingness to Pay for Infotainment Features, then send an e-mail to Magdalena Oberland - Corporate Communications at magdalena.oberland@frost.com with the following information: your full name, company name, title, telephone number, e-mail address, city, country and source of information. We will send you the information via email upon receipt of the above information.

Title: European Customer Desirability and Willingness to Pay for Infotainment Features

Code: B479-18 Background Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community, by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics. List of Keywords in this Press Release: European, infotainment systems, original equipment manufacturers, OEMs, mass market vehicle segment, A&B segment, D&E segments, multi-purpose vehicles, MPV segments, basic audio system, navigation systems, control devices, touch screens, phone systems, multimedia systems, rear seat entertainment systems, SOS buttons, fixed systems, integrated solutions, portability, personal digital assistants, PDAs