Four key services
TomTom has chosen to concentrate its offer on four key services that seem very relevant to European customers. The first one is HD Traffic, its real-time traffic service using GSM probe data which was already available in the Netherlands and is now extended to UK, Germany, Switzerland and France. The latter was unexpected since TomTom previously said it should be only available in the first half of 2009 for French customers.
The second service is called TomTom safety alert. Under this politically correct name TomTom will offer real-time speed camera reporting and sharing, meaning you can also report mobile speed cameras operated by the police on the fly. This service is likely to be unavailable in Switzerland where speed cam databases have been outlawed in the recent years.
The third service will offer customers the cheapest gas stations around their location. The latest service is local search with Google, meaning drivers will have at their fingertips millions of Points of Interests directly fed to their device from the web.
TomTom “LIVE” unique selling proposition is pretty clear: to save time and money. Save time in getting around traffic congestions and save money in avoiding speed tickets and finding the cheapest fuel. Local search with Google is fine too, but it is not where TomTom want to put the emphasis. It is wise because it is probably not the reason why European customers would like to pay €9.95 per month in the first place.
Let’s take an example: if you drive in France these days it is not surprising to see fuel prices differences of €0.25 per liter, which is €15 savings for a full tank of 60 liters, not bad. Same thing for speedcams: if you get caught over the speed limit the lowest you pay is €45 and it gets up to €750, not mentioning the fact you might lose your driving license if you are caught several times. Coyote, which operates a real-time speedcam sharing service in France - with a €199 dedicated device and a €12 monthly subscription - has already 40,000 subscribers.
Driving margins up
From a financial standpoint these four services will drive high margins for TomTom and generate recurring revenue in an industry where driving two digits operating margin from hardware is becoming a risky business. “Through the introduction of TomTom LIVE Services we are also evolving from a pure PND manufacturer to a provider of state-of-the-art routing information,” said TomTom’s CEO Harold Goddijn. “We believe that through those innovations we can enhance the lives of millions”… and TomTom’s bottom line at the same time.
Nevertheless, even if there is a nascent replacement market in Europe with consumers looking for more advanced services, the big share of the PND market will remain in the un-connected, €79 to €149 price segment with razor thin margin.