Late last year, BMW announced it was building its own data warehouse in Iceland to handle the estimated one terabyte of data per day it expects to be generated by users of its ConnectedDrive system by 2018. It was an early indicator of the bright future in store for the relatively new industry of telematics, where so-called ‘black boxes’ are used to track where consumers go, how they behave and how they use products, using the internet and the global positioning system (GPS).
Numerous brands and product categories could eventually be affected, but the most common applications of telematics are currently in vehicles, and cars look set to become the new Clubcard of the insight world this year. Logistics-driven businesses can use the technology to track their vehicle fleets, while motor insurance providers use it to give an accurate assessment of the mileage and risk levels of a customer’s journeys. Half a million insurance policies are expected to be using telematics in the UK by next year, according to the British Insurance Broker Association.
While telematics is still in its infancy, figures from a report by research and networking company Telematics Update, entitled Telematics Connectivity Strategies 2013, suggest that some consumers are prepared to accept it taking a more prominent role in their lives – but only
if the trade-off is right. More than 20 per cent of consumers would require at least a 47 per cent discount if they were to have a telematics device in their car for insurance purposes, while fewer than 10 per cent would be happy with around a 10 per cent reduction in premiums.
Andy Price, European practice leader for motor fleets at Zurich Insurance, insists: “As more equipment is fitted, there will be a greater acceptance of telematics in the marketplace. Data transmission costs are coming down and a lot of the technological advances that are currently being made available in the business-to-business space will be driven down to consumers.”
Gearing up for infotainment
While insurance is the sector with the greatest consumer awareness of telematics functionality, there is also rapidly growing availability of ‘infotainment’ systems in new car models. Major manufacturers including Toyota, BMW, Ford, Nissan, Citroën and Fiat are all incorporating telematics as standard into many post-2012 models in markets including Europe, the US and Asia.
For vehicle manufacturers, the most obvious potential is in managing customer relationships. Already, telematics are able to deliver data on driving style, routes and individual driving preferences – the most listened-to radio stations and unused dashboard functions, for example – but they can also perform diagnostics on problems with the vehicle that can automatically be transmitted back to dealerships for timely intervention. One result could be cost savings to customers.
Fiat Group vice president of marketing innovation Candido Peterlini says: “Drivers can download applications into the telematics system that monitor driving style and behaviour to improve consumption and driving quality. Car maintenance is also a very high-value app, as well as related car mode setups that can be selected and personalised.”
This forms the basis of Fiat’s ecoDrive app, which is designed to improve the individual’s driving experience through constant feedback on personal driving style. It also delivers information back to the manufacturer, enabling it to make adjustments to future products.
“When I aggregate the data of all the drivers using the same engine, I might find insights that can be used to improve engine efficiency,” Peterlini reveals.
Internet in cars
According to the Telematics Update report, 53 per cent of infotainment-focused executives believe all new vehicles will offer internet connectivity by 2020 and a third believe it will happen as soon as 2018. In-car telematics is expected to be further boosted by the introduction of mandatory safety systems such as eCall and bCall in Europe from 2014, involving direct communication between the car and emergency or recovery services, in the event of an accident or breakdown.
Those already operating in the telematics space agree that the most fruitful use of the data generated by these applications will remain within automotive-related areas for the time being. Mobile phones have the ability to be used in similar ways, but the relatively slow adoption by brands of location-based marketing could indicate a lingering reticence towards the idea of using this data to target messages.
Mobile operator EE could be seen as an exception, to some extent: it is currently exploring the potential for using people’s mobile phones as telematics devices of a kind. In partnership with research company TNS, EE’s mData division is providing aggregated insights on consumers’ movements and habits to brands, using anonymised location and internet usage data from handsets.
Effectively, merging aggregated data with a specific consumer’s telematic data might give a picture of a consumer at a given point in time. However, if that person is on any non-habitual journey, it could be virtually impossible to build a consumer profile to accurately predict what marketing messages might be effective and desirable. There is also little data as yet to prove the return on investment for marketers and service providers wishing to reach consumers using telematics technology although this could be about to change.
Holger Weiss, chief executive of Aupeo Radio – a personalised radio streaming app – warns: “The CRM and marketing teams need to be on this. In the next year, we will see the first case studies where you can set opportunity costs against real-time data from the dashboard.”
For the benefit of apps such as Aupeo Radio, telematics can collect data on listening habits and aggregate journey information in order to deliver personalised content and advertising messages, but Facebook partner engineer David Pio suggests that instead of trying to do this, marketers need to look to new forms of aggregated data, such as Facebook’s social graph, to deliver a more reliable picture of individual marketing opportunities (see Viewpoint, right).
“It shouldn’t be about location-based services,” he said, speaking at a Telematics Update event in Detroit in 2012. “Of the people I know, around a third actually ‘check-in’ to their location [on Facebook]. What is close to you emotionally is a lot more interesting than what is close to you geographically. A restaurant will pop up in your [social graph] because you have already ‘liked’ this restaurant, not because you are nearby it.”
According to Toyota US national manager Brian Inouye, the temptation is to believe that detailed real-time information from telematics has the ability to yield numerous personalised marketing opportunities. The reality is that one-to-one marketing through telematics is neither particularly accurate nor to be welcomed, he says, referring again particularly to cars. For one thing, there remains a disconnect between location and relevancy – the consumer may be driving past a McDonald’s at lunchtime but this information is useless if they are also a committed ‘slow food’ activist.
Inouye adds: “Content providers are seeking information not to connect directly with individual consumers but more to understand them on a demographic level. To use telematics data you have to define personalisation. Marketers have been trying to predict what the consumer might want, but on an individual data level, your experiences change.”
Hakan Kostepen, executive director of product strategy and innovation at Panasonic Automotive Systems America, which manufacturers car stereos, keeps an open mind, but says that telematic data only presents marketing opportunities under certain conditions.
“The key is to connect time-, space- and place-relevant telematics information with the car and the consumer’s lifestyle,” he argues. “From Panasonic’s perspective, with driver-consensus, telematics data could range from vehicle maintenance or driving patterns to vehicle location or contextual information around the driver’s lifestyle, including the potential to use the car as a wallet in connection with smartphones.”
The consumer need to be ‘always-on’ is ensuring that more smartphone applications are integrated into vehicles’ telematics technology, and smartphones are also becoming like remote controls for the in-car environment. Moving beyond vehicle diagnostics and insurance requirements, smartphones are likely to be behind greater telematics adoption.
Marketers may lick their lips at the sheer volume of real-time, accurate information pouring forth from dashboards, but the only effective generation of insight will come from its selective use. Consumers understand the ‘value exchange’ and expect improved services in return for their data. They are also increasingly likely to insist that data sharing be on an opt-in basis, and that the resulting messages be not just relevant to their physical location but also sensitive to their overall lifestyle choices.
Case study: Zurich Fleet Intelligence
Conceived as a business-to-business solution for medium-to-large fleets, Zurich Fleet Intelligence is a risk management service from Zurich Insurance that uses data from in-vehicle telematics to build driver risk profiles.
Unlike in business-to-consumer telematics, where the inclusion of a telematics ‘black box’ is pre-emptive and used to motivate the insured party to ensure that their car is driven safely, business-to-business telematics uses the data to assess existing fleet driver behaviour to give its corporate client an idea of how well its employees are using their vehicles.
“For the private user, the installation of an insurer ‘black box’ gives them a vested financial interest but the fleet driver doesn’t see that,” claims Andy Price, Zurich Insurance’s practice leader for motor fleets in Europe. “Instead we focus on the organisation’s needs, looking at
data such as harsh braking, speeding and fatigue management, combined with other ‘data universes’ such driver risk assessments and collision data. This helps build a strong risk profile of employees.”
Price points out that data from the embedded telematics system can provide Zurich’s clients not only with data about driver behaviour but a cost/benefit analysis based on optimal fuel consumption and reducing wear and tear. If enough drivers fit a reduced risk profile, the company is then able to offer clients reduced insurance premiums.
The ability to offer a service based on hard data derived from actual employee behaviour supports Zurich’s brand in two distinct ways, Price says: “We do a lot of risk management as thought leadership, so as to be perceived in the market as a specialist. Most of the benefits lie with the customer in terms of fuel benefits and reduced collision rates.
Of course, this improves our loss ratio but it also reduces premiums as well as uninsured losses. Where customers see these benefits, they’re less likely to change insurers.”
Price notes that despite using data to drive brand consideration and loyalty, it is also a chargeable service. “We provide an important risk management tool to the client. If we give a service away such as this, it is taken less seriously.”
The analysis of data from fleet telematics is well established, and Price believes that the consumer automotive insurance sector will soon see the trickle-down effect achieve critical mass: “Soon all vehicles will have some form of telematics solution built in and any interested party will be able to access data. Data transmission technologies are coming down in cost and there are imminent advances that will make them available to all sorts of organisations. As more equipment is fitted, there will be a general acceptance of it in the marketplace. This is a really fast moving area.”
There are a lot of ideas about how you can integrate social networks into the vehicle. Facebook on your computer and on your phone is an inherently different experience than in a vehicle where it’s not an application, it’s an identity service. It’s about augmenting the experience you have already, rather than trying to create new ones.
What is the proper way to think about social networks in the vehicle? The way we think about data in Facebook is we have the concept called the social graph. It’s a map of people whose relationships interconnect them.
They’re not only connected to people but places and things that they like. We then move from the social graph to the open graph where you can take the data and usage patterns of your customers and connect it to the social graph. This is really powerful and especially useful in automotive, where people have a lot of interactions with their cars but it’s in isolation. If something awesome happens, nobody knows about it.
Facebook is great for modelling what you care about and this can be surfaced and integrated into an in-car experience. All of the music I’m listening to in-car is happening in isolation – no-one knows what I am listening to but integrate social media in-car and they could. It’s about modelling this information about user behaviour and superimposing it onto the social graph. And how you then harness that data?
Equally, one area that is not currently well explored but that could be exploited is vehicle data exported out into the social arena. Rather than unstructured data that states simply ‘I drove 20 miles today’, it is structured data that can be connected to people, places and things. This delivers information to the consumer that is both meaningful and helpful and creates stories that people are emotionally attached to.
David Pio was presenting at Telematics Update Detroit 2012