With the Federal Communications Commission’s Phase II enhanced 911 compliance deadline quickly approaching, U.S. cellular and personal communications services carriers actively are evaluating systems for locating 911 callers. Because they also need to increase customer loyalty and revenue per subscriber, carriers are assessing whether implementing caller-location technology will provide an opportunity to offer value-added services that would differentiate them from competitors and increase their average monthly billing.
Cellular and PCS carriers are not the only ones trying to pin down consumer interest and willingness to pay for location-based services. Automotive manufacturers and automotive electronics suppliers are conscious of the slow rate at which the market for in-vehicle cellular/global positioning system systems has developed and wonder at what price point large numbers of new car buyers will opt for these systems.
In August 1999, Driscoll-Wolfe Marketing & Research Consulting completed a multiclient marketing research study designed to answer these types of issues being faced by both the wireless and automotive industries. This study was funded partially by major cellular carriers, telematics equipment and services suppliers, software developers for wireless platforms, and other technology companies.
The study included both qualitative and quantitative research. The qualitative portion consisted of a series of 10 focus groups (two in each of five cities), which were designed to provide in-depth information on consumer opinions and preferences. The quantitative portion of the study consisted of a nationwide survey of 12,700 households that yielded projectable data on consumer awareness of location-based services, interest in these services, and willingness to pay for both equipment and services.
The research study covered a wide range of location-based services, many of which could be delivered to in-vehicle units, wireless phones or other portable devices. Services included security-related offerings, such as emergency notification and automatic crash notification, as well as convenience services such as routing assistance and information services-like location-based traffic alerts, weather reports and news headlines. The study also assessed consumer interest in location-monitoring services for children, handicapped individuals, pets and valuable possessions.
Response to potential services
The study determined U.S. consumers have considerable interest in location-based services. Seventy percent of the consumers who participated in the nationwide survey expressed interest in one or more services. The chart on this page shows the interest expressed in five of the 10 services covered in the survey. Note that this chart shows interest in the individual services without considering the cost associated with the service.
Fifty-eight percent of the participants in the nationwide survey expressed interest in E911 location. Nearly all participants in the focus group portion of the study also believed it is important to have their location automatically sent to the response center when they dial 911 from their cellular phone.
More than half of these participants said they would pay a surcharge of between $1 and $2 on their monthly cellular bill to have their location automatically transmitted to the 911 response agency. The following was a typical comment: “My wife and son travel on the freeways. Their protection is worth more than $2 a month.”
Some participants objected to the idea of paying any additional fees on a monthly basis.
Fifty-four percent of respondents were interested in location-based roadside assistance service. Most focus group participants acknowledged they have experienced car problems on the highway and have not known their location. Some would be willing to pay an additional fee for automatic caller location.
“The locating feature would be worth at least $10 to $20 per year on top of my regular AAA service,” one respondent said.
A stolen-vehicle tracking service interested 42 percent of the nationwide sample. Most focus group participants favored this service, particularly if they owned expensive cars. Many recognized a need for a system to recover stolen cars quickly. “I’d like this service if they can find my car fast enough, before it gets stripped or damaged,” said one respondent.
Interestingly, some consumers do not want their cars back once they have been stolen since they most likely will be damaged. Some said they would expect to receive a discount on their auto insurance premiums if they subscribe to a stolen-vehicle tracking service.
The highest rated of the “convenience” services covered in the nationwide survey was real-time traffic alerts. Twenty-nine percent of the nearly 13,000 respondents indicated they would be interested in this service.
Many complained the traffic information they obtain over the radio is not very helpful. “I’m sitting in a line of traffic as far as I can see, but I never hear them mention it on the radio,” said one person.
Consumers who would like to have access to this service are particularly interested in knowing when a traffic accident or other incident occurs that could bring traffic to a stop. They would also like this service to provide them with alternative routes to their destinations.
Twenty-five percent of the survey respondents expressed interest in a routing-assistance service providing them with directions to their destinations. Most focus-group participants would like to have access to this service when they are driving in unfamiliar areas.
For example, one respondent said, “I don’t think I’d use this service much around town, but it might be good to use when I’m out of town.”
Some consumers believe this service is unnecessary since directions can be obtained easily from a number of Internet Web sites or from paper maps.
The study also covered consumer interest in a number of other services, including personal security services. Focus group participants were shown a prototype of a small personal security device that had two buttons for transmitting a request for assistance, along with the caller’s location, to a private response center. Respondents indicated a high level of interest in this type of device, particularly for women, elderly individuals and those with medical problems.
Discussion on the group covered the pros and cons of two-way voice or data communications in such a device and whether it is preferable to have a separate device or to incorporate these features into a cellular phone.
Cellular subscribers vs. nonsubscribers
The research findings showed a substantially greater interest in location-based services among consumers who currently subscribe to cellular service than among nonsubscribers.
For the various location-based services (E911, roadside assistance, stolen-vehicle tracking, collision notification, routing assistance and traffic alerts), the percentage of cellular subscribers who expressed interest in each service was approximately two to three times as great as the interest expressed by nonsubscribers.
For example, 63 percent of respondents who were cellular subscribers were interested in roadside assistance with location, compared with 31 percent of nonsubscribers. Thirty-seven percent of cellular subscribers expressed interest in traffic alerts, compared with 11 percent of nonsubscribers.
Willingness to pay
A critical issue covered in the study was consumer willingness to pay for location-based services.
In the nationwide survey, respondents who were cellular subscribers were asked if they would pay a monthly fee for each of 10 location-based services. Half of the sample indicated a willingness to pay $5 per month for one or more of the services.
These findings indicate that while interest in t
he services declines when consumers are told they must pay a fee for the service, many cellular subscribers would be willi
ng to pay a “reasonable” monthly fee, in addition to their current cellular bill, for access to location-based services. The data also shows consumers are interested in bundled services offered at a reasonable monthly rate.
The research study also assessed whether consumers would prefer to pay for convenience services on a monthly or per-transaction basis. Most focus group participants would prefer to pay on a per-transaction basis for services such as routing assistance, mobile Yellow Pages, traffic alerts and information services.
The survey confirmed consumers would pay a “reasonable” per-transaction fee for these services.
Industry projections
Based on the research data and industry trends, Driscoll-Wolfe projects that by 2003 there will be more than 3 million U.S. subscribers to location-based services. Today, approximately 150,000 consumers have access to these services, mostly through in-vehicle systems supplied by General Motors (OnStar) and Mercedes Benz (TeleAid). The number of telematics subscribers will continue to grow as other auto manufacturers introduce cellular/GPS systems as standard or optional equipment on new car models.
As location systems are implemented in wireless handsets and networks to support E911 service, some carriers also will introduce other location-based services. Some are likely to begin by adding caller location to the 411 services that are already in place, such as routing assistance and mobile Yellow Pages.
The study projects that by 2003, the number of consumers with access to location-based services through portable devices will exceed the number using in-vehicle cellular/GPS devices. However, the rate at which cellular and PCS subscribers adopt these services will depend heavily on the extent to which carriers promote awareness of the benefits of these services as well as service bundling and pricing.
Future updates to this multiclient research study will monitor changes in consumer awareness and willingness to pay for these services, as well as market-penetration levels.
Clement Driscoll is a senior partner in Driscoll-Wolfe Marketing & Research Consulting, which has offices in Los Angeles and Palos Verdes Estates, Calif. Driscoll-Wolfe conducts private and multiclient marketing-research studies in wireless communications. He also is president of C.J. Driscoll & Associates, based in Palos Verdes Estates, which provides marketing-consulting services in telematics and other location-based products and services.
