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Highlights
- Function on Demand (FoD) is reshaping the automotive industry by creating continuous, post-sale revenue streams through dynamic feature delivery and flexible monetization models.
- A successful FoD platform requires seamless integration of feature catalog management, dynamic billing, license management, subscription handling, and real-time vehicle connectivity.
- Effective monetization strategies and emerging technologies will transform FoD platforms into intelligent digital marketplaces, deepening customer relationships and unlocking new revenue opportunities.
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Rise of FoD models
Function on demand transforms how automakers deliver value and monetize vehicles post-sale.
The automotive industry is witnessing a fundamental shift as digitalization redefines value delivery models. At the center of this transformation is FoD— a model that empowers customers to unlock or subscribe to additional vehicle features after purchase, offering enhanced flexibility and personalization.
For OEMs, FoD creates new opportunities for continuous customer engagement and recurring revenue streams beyond the point of sale. However, to capitalize these opportunities, businesses need more than just offering new features. It demands a strong, scalable monetization platform capable of:
- Managing dynamic pricing and enabling feature trials
- Overseeing subscriptions and validating feature dependencies
- Integrating smoothly with core enterprise systems such as enterprise resource planning (ERP), product lifecycle management (PLM), and customer relationship management (CRM).
To fully realize the potential of FoD, OEMs must adopt a strategic framework for building an advanced FoD monetization platform, focusing on strategy, architecture, and system integration.
Core components
FoD monetization is only as strong as its foundational architecture.
Building a strong FoD monetization platform requires an integrated architecture with several critical components working seamlessly.
Key components:
- Feature Catalog Management
A centralized repository that stores metadata on all available features, including model availability, regional compliance, pricing, version history, and trial eligibility. It underpins dynamic pricing and personalized offers.
- Pricing and Billing Engine
Supports multiple revenue models like one-time purchases, subscriptions, or usage-based billing. Handles flexible billing cycles, currency conversions, discounts, and dynamic pricing based on customer profiles or regions.
- Revenue Recognition Module
Ensures accounting integrity and compliance with IFRS 15 and ASC 606 by mapping FoD sales to financial reporting, offering real-time insights into deferred and realized revenue.
- Subscription Management
Covers plan creation, onboarding, activation/deactivation, renewals, cancellations, and upgrade/downgrade paths, while ensuring a smooth user experience.
- License management
Secures intellectual property and controls access to premium features by automating license key generation, renewal, and revocation in a scalable, user-friendly way.
- User portal and interface
A unified, intuitive platform for browsing features, initiating purchases, activating trials, managing subscriptions, and viewing usage stats.
Additional capabilities
- Automated trial expiration: Ensures timely deactivation unless converted to paid users, while including smart reminders and upgrading prompts to boost conversions.
- Real-time monitoring: Uses edge computing for instant usage tracking (e.g., mileage/session-based billing). Further, these usage data is fed to AI/ML models for upselling, feature recommendations, and customer journey optimization.
- Dependency management system: Validates hardware/software prerequisites before activation, while enabling cross-feature recommendations to support upselling.
Together, these components form a scalable, modular platform architecture that empowers automakers to deliver FoD at scale while maintaining high operational efficiency and customer satisfaction.
System integration
FoD success hinges on cross-functional system orchestration.
For FoD to function reliably at scale, deep integration is essential across key systems:
- A FoD ecosystem must be tightly integrated with the automaker's digital landscape to support remote activation, updates, and real-time feature monitoring. This includes seamless connectivity with vehicle/user twins, OTA systems, mobile apps, connected vehicle platforms, and IoT frameworks.
- Given the sensitivity of customer data, strong integration with security, privacy, and compliance systems is essential to meet standards like GDPR and CCPA.
- Integration with payment service providers (PSPs) ensures secure, real-time transactions, renewals, and microtransactions across currencies and methods.
- Subscription management platforms simplify backend tasks such as invoicing, trial handling, discounts, and analytics, enabling accurate, timely revenue capture.
- ERP integration aligns sales and subscriptions with financial reporting, cash flow, and cross-unit revenue, while PLM systems map feature compatibility and configuration updates across the product lifecycle. This helps in updating feature catalogs as new models and variants are introduced and their configuration evolves.
- CRM integration powers personalized marketing, dynamic pricing, targeted offers, and tailored customer journeys, boosting conversions and retention.
Function on demand (FoD) service delivery framework
Advanced use-cases
FoD’s future lies in intelligent, personalized, and flexible feature delivery, driven by emerging technologies, to transform vehicles into dynamic digital marketplaces.
As FoD matures, advanced and intelligent use cases are transforming vehicles into dynamic digital marketplaces. These cases are powered by emerging technologies like AI, OTA, blockchain, and subscription portability, enabling highly personalized, flexible, and situational feature activations.
On-demand feature activation with intelligent triggers
Dynamic feature delivery enables post-sale activation of software features via secure OTA updates. This includes predictive maintenance-driven prompts like offering advanced battery management upon detecting battery issues and temporary access for shared vehicle users, such as unlocking autonomous parking for rentals. These features can be time-bound, usage-based, and deactivated after the session, creating flexible, user-centric engagement.
Usage-based monetization with risk-aligned services
Pay-per-use models make high-value features like ADAS (adaptive cruise control, lane assist) more accessible by charging per kilometer or session. Integrated with vehicle usage data, this model extends to insurance and roadside assistance, offering personalized pricing or discounts to safe drivers, thereby aligning feature cost with driving behavior and risk profile.
Context-aware and seasonal feature bundling
Geo-based billing activates region-specific services like toll passes or navigation based on vehicle location, enabling real-time, location-triggered monetization. This logic extends to seasonal subscriptions, such as activating heated seats in winter, providing climate-aware features that adapt to user context and enhance convenience while unlocking new revenue streams
Below are key emerging technology enablers for FoD platforms:
AI and predictive analytics optimizes monetization strategies by analyzing customer data and predicting feature purchases. Predictive analytics helps manufacturers forecast demand for new functionalities.
Blockchain ensures transparent, secure ownership, simplifies license transfers and subscription sharing across multiple vehicles or users.
Mobility-as-a-service (MaaS) integration ecosystems enable subscription portability across vehicles and users, enhancing flexibility and customer retention.
In this interconnected future, the FoD platform will evolve into a dynamic digital marketplace, unlocking not just new revenue but also deeper customer relationships.
Monetizing strategy
Adopting innovative monetization models drives customer engagement and maximizes lifetime value. Revenue doesn't just scale with features—it scales with flexibility.
Having the right platform is only half the battle; developing a compelling monetization strategy is equally critical for maximizing returns. There are nine strategies that can drive FoD’s success.
One popular approach is subscription models, where automakers offer tiered plans like basic, premium, or bespoke that are tailored to different user segments. These subscriptions can be dynamically priced based on factors like user behavior or patterns.
Upselling and cross-selling strategies become powerful when backed by customer data. For instance, a customer who subscribes to a premium navigation service could be presented with an exclusive offer for an advanced ADAS (Advanced Driver-Assistance Systems) package at a discounted price.
To lower adoption barriers, manufacturers can leverage trial periods and feature trials. Allowing customers to experience features like self-parking for free or at a reduced rate for a limited time helps them understand the benefits.
A growing trend in monetization is usage-based pricing, where customers are charged based on how often they use a specific feature. This approach works well for features like navigation based on distance, making premium options accessible without large upfront commitments.
The freemium model also has strong potential in automotive. Here, basic functionalities are provided for free, encouraging customers to engage with the platform while upselling advanced capabilities. For instance, free navigation with paid upgrades like real-time traffic updates encourages users to upgrade after trying the free version.
Manufacturers can create greater perceived value by offering bundled packages. Combining multiple features such as safety upgrades, and navigation into a discounted bundle simplifies decision-making for customers.
Flexible billing options, like pay-per-use microtransactions, further personalize the experience without long-term commitment. Customers might, for instance, pay a small fee to activate automatic parking for a single use or a weekend trip.
To sustain engagement and organic growth, OEMs can roll out loyalty and referral programs, rewarding long-term customers and those who refer to new buyers with discounts or feature unlocks.
Innovative offerings like feature gifting also broaden the reach, allowing customers to purchase premium features as gifts for friends and family, thus tapping into emotional buying motivations.
Adopting these strategies enables OEMs to transform the customer relationship into a long-term, value-driven partnership, unlocking revenue across the full vehicle lifecycle.
Driving future value
FoD empowers OEMs to unlock new revenue streams and future-proof their business through continuous, customer-centric innovation.
FoD is not merely a new business model. It represents a broader shift towards continuous, seamless customer-centric value delivery in automotive. Success depends on building robust, integrated monetization platforms that combine technical excellence with strategic innovation. These platforms should not only enable flexible pricing and billing but also integrate with key systems like ERP, PLM, and CRM to provide holistic customer experience.
OEMs that embrace this opportunity by investing in flexible architecture, dynamic pricing models, and real-time data-driven engagement will not only unlock sustainable new revenue streams but also future-proof themselves in a rapidly evolving industry.
