Analysis

By Yanai Levy, Nov 4th, 2023

Picture this: a sleazy used car salesman is talking to a subordinate of his about this great new idea he has is to change their business model for the better. They will now acquire inventory and immediately take it to their in-house mechanic, who will proceed to strategically remove built-in parts of the cars. When a customer comes to the lot interested in buying said cars, the salesman will now sell those removed parts back to the customer to “enhance” their driving experience. A car that was worth $10,000 is now worth $12,000 due to $2000 worth of “added” features. Genius! This strategy sounds impossible to succeed with, right? Only a fool would buy the same kind of car that they could buy at a different dealership for significantly less money and the same features. However, these kinds of practices are present in the strategies of a large number of technology product companies, and is painted in just the right marketing veneer to make sure people eat it up without complaint.

Sticking with the automotive theme for now, we can turn our attention to Tesla. Elon Musk’s electric car company that enjoys between 60-70 percent market share of the electric vehicles in the US. For those unfamiliar, Tesla makes four models of car, the Model S, 3, X, Y. Besides sharing the punny naming scheme, all those models have similar features, just tailored to their respective sizes and price categories. All are fully electric, able to access Tesla’s Supercharger charging network, and have the capability to drive themselves to some degree. That last point is where we find the feature reselling strategy in this case: the self-driving capabilities. Tesla employs a tiered system for this part of their strategy. their basic version that is included on every car is “autopilot”. “Autopilot” is little more than the standard safety awareness features that are included on many other brand’s offerings, providing automatic emergency braking and distance-based cruise control, stuff like that. The middling level, “Enhanced Autopilot”, adds automatic highway overtaking, on to and off of highway driving, and somewhat minimized driver actions. Lastly, we have the “Full Self Driving” tier, which includes driving on city and rural roads besides highways, as well as following traffic signals with no input from the driver.

The tiered system and its various capabilities are normal in the car world. Many cars come in different trim levels with different luxuries and features. The part of this that speaks to the used car salesman analogy is that every single car Tesla has made since 2016 includes all the necessary sensors, cameras, and processing power to achieve the highest tier of their autonomous operation. This has been said by Tesla themselves as if it is something to be proud of, but in reality, it just shows that from an economic perspective their basic package has the capability to be more feature-rich than it is, but they intentionally lock users out of functionality to make more money. It’s all there! You just haven’t paid Tesla enough to be granted access to it. Companies subsidizing lower end products by charging higher margins on top end models is nothing new, but they are shooting the basic model in the legs to convince you to pay up for the higher end ones. They can activate that capability at the touch of a button and more concerningly, they can remove it later just as easily.

Used Teslas that the original owner paid to “unlock” advanced functionality in have been audited by Tesla after subsequent resale to disable those features again in the hopes of forcing the second owner to pay their fees again. This consumer-hostile move is fully legal due to all kinds of disclosures and agreements you must sign to buy the car of course, but indicate a certain mindset when it comes to their view of how car sales work. Historically this was not possible. If you spent extra for heated seats in your car, there were electric coils in the padding and a button on the dash to toggle them on or off. There was nothing further Mercedes could do to change that without a drill and some cutters. With more recent development trends in the car world making internet-connected cars, it calls into question how much of your car you really buy at the dealership. If the ability to turn features of your car on and off is not yours to control, can you say your really own it entirely? Tesla seems to think they retain partial ownership at least.

They are not alone in this. BMW came under fire in July of 2022 for rolling out “functions on demand”, a system that charged owners monthly fees to use features such as heated seats in their cars. More morbidly, a company called Klim was involved in controversy surrounding its motorcycle rider airbag system “In&Motion” which used an internet connected processing unit to determine if you were about to have a crash and inflate the system. That sounds great, until you figure into the equation that there is a monthly subscription fee associated which disables the life-saving tech you already paid $400 for if your subscription is not up to date. This policy was called dystopian by Jalopnik.com in justifiable fashion.

So far, products that have their own functionality hamstrung in some way have been discussed, but there is another type of product strategy which needs to be addressed as well. Products that create issues for another (usually in-house) product to solve. Let’s take the Samsung Galaxy Note 10 as an example. This smartphone was released in 2019 to significant criticism for not including a 3.5mm audio jack in its design. Apple was famously the first to make this change with their iPhone 7 in 2016, but in the tech world, whatever Apple does is usually followed. The Note 10 was the most criticized Android phone to follow this move, mainly due to its marketing as a no-compromises phone with all the features you could dream of. Under this messaging, it is understandable that people were disappointed when it lacked a basic feature such as wired headphone support. Samsung are not in the habit of employing idiots, so why did they make this move? Surely they could have predicted the backlash. The reason they made that call was to create friction for their customers that used wired headphones. They made it require unsightly and inconvenient adapters to work with their existing headphones, and conveniently made another option available that solved this manufactured problem.

Bluetooth earbuds have become commonplace in the years since 2016, quickly becoming one of the largest revenue sources for companies like Apple and Samsung. The Apple Airpods made them more than 23 billion dollars in 2021, almost more money than Netflix’s whole business made in the same period. Samsung’s equivalent, the Galaxy Buds did not command the same kind of adoption as the Airpods but are a huge revenue generator for Samsung as well. Remember, this product category did not exist in any meaningful way before smartphone companies decided that people should pay them more for the privilege of convenient, portable audio. This was not a visionary coming into a segment and solving a problem people did not know they had, this was premediated production of a problem by companies in a position to profit more. What a world.

In situations like these, awareness is the number one way to combat undesirable practices. Too many consumers take the marketing strategies companies produce as gospel and dutifully buy what they are told. Being aware of the source of a movement into buying previously working technology again or differently can be the difference between such a campaign working out and encouraging follow-ups, or not. Is there a convenience advantage to not having a cable dangling down your body from your ear to your phone? Absolutely. Does the knowledge that this is a problem Samsung designed into their phone change your opinion on how to solve it? It should.

Thanks for reading!