Consumers still important as Dutch satnav pioneer maps B2B future

TomTom is focusing on the business-to-business sector, but its consumer base is an important part of its strategy

TomTom was once the undisputed king of the road. But ever since free and increasingly better navigation systems hit smartphones, the once massive Dutch company has had to set its sights on other areas while not losing track of its vast customer base.

Mike Schoofs has been with TomTom since 2005, and is now managing director of consumer. It is a notable development for the company that “consumer” is now a separate division, along with automotive and enterprise (the company sold its Telematics division earlier this year). “I am involved with everything that ends in the hands of the consumer,” he told Computer Weekly.

In the early years after TomTom was founded in 1991, consumer technology was the one thing that made the company almost unbeatable in the global navigation market. But now the firm, which is headquartered in Amsterdam, faces an uncertain future with the rise of free competitor systems.

The company’s consumer division is still very strong, said Schoofs, but he admitted the market is declining with little prospect for growth. “But we have a very large and very strong user base,” he added. “We still sell 5,000 portable navigation devices [PNDs] a day.”

According to Schoofs, the customers who are buying TomTom’s products are upgrading. “These are the users that really love our products and want the latest technology,” he said. “That is why we still innovate by developing connected products with SIM or Wi-Fi.”

But a declining market does not promise much of a future, even when the company’s consumer base is so loyal. That is why TomTom is moving into the brave new world of automotive development, partnering with large companies rather than selling directly to consumers.

TomTom’s automotive and enterprise divisions have grown exponentially in recent years. The company partnered with Apple and Uber to produce integrated maps, and works with large car manufacturers under original equipment manufacturer (OEM) deals.

But it is not the only player in this field. TomTom suffered a setback when Renault-Nissan signed a partnership with Google in September 2018 and Google became a competitor in more than just the mobile space. Now TomTom competes with Google on an OEM level, and sold its Telematics division earlier this year to free up resources and release capital to help it compete.

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For Schoofs, the company’s different divisions are not that different at the end of the day. “As a company, we might move more towards a B2B [business to business] approach, but in the end, our users remain the same,” he said. “It doesn’t matter whether they buy a BMW or Peugeot in which TomTom maps are integrated, or use Apple Maps – we just have to keep the connection with them.”

And that is the pivotal point for TomTom. Physical navigation devices are no longer the company’s big money-maker, but the users are still there – and there is a lot of knowledge to be gained about what they want in a journey.

“We are coming up to 100 million devices sold,” said Schoofs – and that milestone is more than just symbolic. Combined with TomTom’s heavy push into software – which now produces about two-thirds of its revenue, said Schoofs – the company has a lot of data it can use to make a user’s journey easier.

“Users still go from A to B, but their journey is different,” he said. “For a commuter, it is important to know traffic information, or where the speed cameras are, whereas someone going on holiday would rather know where the cultural areas are, where the good restaurants are. That information becomes more important.”

It is here that TomTom wants to differentiate itself. It is not an entirely new idea – the company was once famous for integrating points of interest into its maps. Schoofs sees parallels, but also differences.

“People want information, but they want it before and after their journey as well,” he said. “Whether it is a commuter who finds out at the breakfast table what his fastest route is, or a traveller who wants to be inspired before his holiday, we want to answer that question: what do you, as a customer, want?”

Social experience

The “after” part of a journey is also becoming more important for TomTom, said Schoofs. “People want experiences. They want to be inspired and then they can inspire others through the trips they have had.”

Schoofs hinted at new products coming from TomTom, such as a platform built by and for the community, but details are yet unclear. “Social recommendations to other users will become a larger part of the TomTom experience,” he said. “We have to kick it off and then let the community take it from there. Those 100 million users mean that we can have really relevant insights.”

This approach also means a change in the company’s business model, said Schoofs. An advertising model, especially one based on personal data, is not something TomTom wants, but partnerships are a possibility, he said.

“It’s not about bombarding people with ads, but about relevance,” said Schoofs. “If we can find out how long it takes before a driver needs to refuel, we could show them things like dynamic fuel pricing and offer a free coffee and sandwich in partnership with a petrol station.”

New competitors

But it is hard to add relevance to maps when Google is a competitor. This is the elephant in the room for TomTom. Free navigation systems make TomTom’s expensive software packages a hard sell to customers. That is why the company has become increasingly interested in lucrative OEM contracts, which it now has with car manufacturers such as Toyota and Volkswagen.

It also has enterprise partnerships with Apple, Uber and Baidu, and revenue from these automotive and enterprise contracts has been growing exponentially, with 23% growth in the last quarter of 2018 alone.

High-definition (HD) maps might be the key to a sustainable future for TomTom, and are one of the most important developments for the future adoption of autonomous cars. However, developing such maps might be difficult for TomTom when Google moves into this space as well.

In fact, TomTom is not often seen as a tech company, according to InsingerGilissen analyst Jos Versteeg. “It has never been one,” he said. “It is a great retailer that can sell its signature product really well, but it can’t compete with a tech company like Google.”

But Schoofs rejected this assessment. “For instance, we applied artificial intelligence [AI] long before other companies started using it as a marketing ploy,” he said. “We had products like IQ Routes before 2010. Everything we do is technological. Our live traffic feed is often seen as the best around. And we are in an advanced stage of HD mapping as well.”

And those HD maps have become an important part of TomTom’s identity. Its revenue from autonomous driving has grown steadily in recent years and continues to increase. But despite the fact that the company has branched out from consumer products, that consumer base is still important for TomTom. It is also difficult to say what the future of autonomous driving will hold, and how the company should respond to that.

“Developing for an autonomous [driving] future is long term,” said Schoofs. “There are too many factors to take into account – legislation, technological developments, consumer acceptance. We develop for the future, but it is hard to say whether that will be for three, five or 10 years from now.”

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