Tesla

Tesla Model S: The Disruptive Marketing of an Car 20Jan Electric  The most interesting thing about Tesla — the niche luxury electric car maker — is the role of marketing in selling electric cars that cost $100,000 or more. Many people have tried to change the auto industry over the last 40 years and none have succeeded. The process of buying a car is essentially the same as it was a generation ago. And the process has remained unpopular for decades: the typical car dealer receives just 2 or 3 stars on Yelp. Tesla Model S and Tesla Roadster: Tesla has figured out how to market an electric car Tesla is creatively using marketing to upend the auto industry business model: There are no Tesla dealers There are no commissioned sales people Tesla cars are marketed and not aggressively sold Tesla transactions are conducted online The price is the price: no negotiation There is no inventory: the Tesla Model S is built to order You can’t test drive a Tesla unless you put down a $5,000 deposit In many parts of the country, you can’t see or drive the car before you buy even if you place a deposit You have to wait in line for months or years to get a car And the marketing challenges are incredibly difficult: They are building a new luxury brand from scratch They are evangelizing a new type of vehicle: an electric car They are selling a $60,000 – $100,000+ car that can’t go on a road trip They must sell an entirely new model of buying and owning a car While Tesla is starting with expensive vehicles, they clearly have mainstream ambitions. They are investing to build a big car company.  How hard is it to build and sell cars in the USA? Look at it this way: Tesla is the second oldest publicly traded  auto company in the United States behind Ford. GM went bankrupt and went public four months after Tesla. Chrysler remains private following its own reorganization. While Tesla has a long way to go to be profitable, producing cars in volume, and moving towards the mainstream, their first home-built product — the Model S — is a success. They have 10,000 – 20,000 orders and have swept the auto industry awards, winning the most recent round of Motor Trend, Automobile, and Yahoo Autos awards for car of the year. Tesla is the first startup car company, and the Model S is the first electric car, to win these awards. So what can we learn from Tesla marketing? (1) Start with a great product – Tesla would be dead today if they didn’t build the best car available today. There are too many obstacles — range, lack of road trips, and buyer confusion to name a few. Tesla used electric technology to build a car that can’t be reproduced with a combustion engine. It’s as fast as a Porsche and gets the equivalent of 100 miles per gallon. It has very few moving parts. It is the most aerodynamic car made and has the most cargo space of any car in its class. It’s a sports car that seats seven. (2) Start high and work your way down — It’s a lot easier to build a lust-inducing $100,000 car than a cheaper model. Tesla started with the $100K plus roadster built on a modified Lotus platform. With the Model S, they started with production of $100K vehicles and are working their way towards the $60K entry-luxury models. By starting high, Tesla is letting early adopters fund technology development. As volume increases, prices are coming down. The early super cars are media darlings endlessly discussed in waves of free Tesla publicity. (3) Turn auto industry strengths into weaknesses — Historically, luxury cars have been sold and justified based on the quality of their engineering. Most luxury automobile companies tout “performance through engineering” as the one thing that makes them special and desirable. Tesla marketing focuses on performance through technology while touting the simplicity of the platform. The Tesla Model S pitch reframes the auto industry strength as a weakness. Through the highly-effective Tesla marketing lens, traditional gas cars are dirty, complex, unreliable, and difficult to maintain. In a bold marketing move, Tesla service centers are designed with white floors to reinforce that electric cars don’t have oil and other dirty fluids that leak on the floor. The Tesla powertrain is marketed as simple, reliable, and effective Traditional luxury auto makers focus on “engineering” — Through the Tesla marketing lens, educated viewers see complexity, maintenance, and antiquated technology Tesla Service centers have impractical white floors to highlight that the cars run clean without messy oil and fluids (4) Create a new multi-channel model: Tesla decided not to build a traditional car dealer network. Nobody likes car dealers: even buying and servicing a high-end car like a Porsche is a dreadful experience. Tesla looked at the car buying process and optimized its sales model to fit the way people buy cars today. Since people start online, Tesla designed their process around online information, commerce, and community. Their site is unusually clear, clean, and effective. For people who want to see the car, they are building kiosk stores in malls with Tesla experts who can’t sell cars and who aren’t commissioned. When a buyer is ready, they place a refundable deposit online. If they want to drive a car, they can arrange a test drive after they’ve placed a deposit. Essentially, Tesla is selling cars the same way Apple sells the iPhone. (5) Build the community & focus on the experience: From the beginning, Tesla has made user forums and user community a key part of the online experience. Tesla marketing highlights the unique Tesla buying and ownership experience and encourages owners to interact with the company and each other in full public view on the Tesla site. This provides a rich base of content — and owner passion — on view for prospective buyers. (6) Leverage the media and traditional press: While much is new about the Tesla Model S and the accompanying sales and marketing model, one thing is not: the dependence on traditional media. Tesla has been a master at driving press coverage, reviews, and awards for its cars. It’s clear that the company has worked hard to position the brand with the media and to make sure the right messages come through. The company’s #1 message is that they are trying to build the best car ever made and not just the best electric car. This message is frequently repeated by the press. Tesla Marketing: Likely more lessons to come While it’s early and many many risks remain, Tesla is the first company to have the potential to become the Apple computer of the car industry. Like Apple, they are selling a product that is very different than what has come before. Both companies focus on great products and innovation. They are both building their own ecosystem (Tesla’s super charger network is akin to Apple’s build-out of iTunes and the Apple Store) and both are challenging traditional sales models with their own direct distribution system. In fact, Tesla hired Apple’s previous retail chief to build out the new distribution model. Whatever does happen with Tesla, the marketing lessons to come are certain to fascinate. Tesla’s Unique Position In The Car Market Is One Of Its Biggest Strengths July 1st, 2015 by Trefis Team Tesla Motors (NYSE:TSLA) is unique because it is not merely selling cars but also selling new technologies. Essentially, betting on Tesla Motors involves betting on a new technology. Simply put, Tesla has created, and now dominates, the market for luxury, long-range electric automobiles, a market that is distinct from both the market for less expensive electric vehicles and the market for luxury gas-powered vehicles.  And as the sole player, the company has to not only sell cars but also build out the infrastructure necessary to support the operation of those cars. In Tesla’s case, this involves building out a network of superchargers, battery swap stations, and service stations. On the face of it, this should make growing the business tougher, but Tesla’s unique position in the auto car market can help it achieve that target. Essentially, there is one unique thing about Tesla:  Its cars operate in a Long Range EV car market, which consists of just one car currently — the Tesla Model S. Given its pricing, the car falls into the price range of luxury cars which form nearly half of the auto industry’s profits, despite making up just 10% of its unit sales. This makes it harder for other car companies to compete as they cannot afford to risk losing out on their most profitable segment by developing a luxury car that siphons off sales of its most  profitable products. Let us explore this dynamic in greater detail below. We have a price estimate of $170 for Tesla, which is about 30% below the current market price. See Our Complete Analysis For Tesla Motors Here Lack of Competition A widely misunderstood thing about Tesla is the markets it deals in. Every time an established automotive company announces the launch of an electric vehicle, the business press is quick to announce it as a threat to Tesla Motors. This is a fundamental misunderstanding of two key aspects of Tesla’s business model. Firstly, Tesla is the only company selling production volumes of a high-end, high-range electric vehicle. Every other car company merely experiments with its EVs. The reason behind this is simple: almost all car companies get their cash profits from their high-end ICE (Internal Combustion Engine) cars. If they started releasing production volumes of cars about which customers are still circumspect, they could end up cannibalizing the sales of their high-end ICE cars.  It also poses a threat to their market position and their reputation, as well as the prospect of losing a lot of money in the process. So far, car companies have erred on the side of safety and let Tesla lead the push for enlarging the share of alternative vehicles in the overall car market. Secondly, Tesla’s competition is not other EVs (at least not yet), but high-end ICE cars. So when Tesla releases its Gen III, its competition will be neither Nissan Leaf, Chevy Bolt, nor Chevrolet Malibu and Toyota Camry, but rather the Audi A4, A5, and A6, BMW’s X1, X3, and X4, and Buick’s Enclave, La Crosse, and Regal. So, no, Chevrolet Bolt is not Tesla’s competitor. Tesla’s modus operandi is to sell high-end cars in different car segments, and use the profits to realize greater efficiencies in the production and distribution process in order to bring down the unit price and expand its market share. The Green Car Market Is Segmented It is easy to make the mistake of treating all alternative fuel cars as belonging to the same car segment. Therefore, hybrid vehicles, plug-in hybrids, short range electric vehicles and long-range electric vehicles are all treated identically. There are two problems with this kind of categorization:  1) these cars are very different in how they use electric batteries; and, 2) these segments are growing at different rates, so projecting the growth of the EV market by lumping them in together gives a false picture of the market Tesla is trying to capture. Tesla operates in the long range EV segment of the market comprised by electric vehicles. Essentially, these are vehicles that can run more than 200 miles on a battery alone. The only car in the market that offers this value is the Tesla Model S. When Tesla releases its Model X SUV later this year, there will be two cars on this market. Even though, Tesla missed its target of 35,000 deliveries last year by just under 10%, Model S sales still grew by over 30%. In 2015, Tesla is targeting a sales growth rate of over 66%. That is a tough target but sales of the new Model X can help. According to the company management, the Model X has managed to generate as many as 20,000 deposit-backed orders already and all this without any advertising or even the display of a production version of the car. Commercial: Strategy & Structure The strategy and structure of the Tesla Model S commercial is going to be discussed in this blog. The product of the ad, the Tesla Model S electrical car is very relevant for the user. Users have to feel comfortable and safe in their car which they usually own for several years. The advertised car is therefore a high involvement product.  People have to learn about and accept this high-end electrical car. They have to know what its specifications are to be able to accept this electrical car as a general car. The ad has to create confidence in the brand and the Tesla Model S regarding its appearance and its capacity. This will be easier if people would know its characteristics and see its appearance, it would make the emotional response stronger since they would not expect an electrical car to have all these possibilities. We want people to accept this product on a brand attitude level. The ad will try to convince people of the benefits of the car by offering ‘evidence’ that the car is fast and both family- and business appropriate. By doing so, people might overcome their prejudice about electrical cars being ‘lame’, slow, low driving range and for tree-huggers mainly. This way the acceptance of people to purchase an electrical car will increase.  The strategy used in this case will be high involvement / transformational. Since this car is yet to be introduced and Tesla has only launched one other car into the market, there will be little prior attitude within the market towards Tesla. This means that the message of the ad has to be neutral in this case. Because there is little use of electrical cars currently, we have to take into account that the increase in acceptance and attitude has its limits. People might be impressed by the specifications of the Tesla Model S, but still be reluctant to purchase it themselves because it has a relatively high risk. The product is unknown to most people and not very common in society. Next to the product and monetary risks, this also involves risks on the social and status aspects. Electrical cars are not common in current society and this might influence the acceptance and attitude level negatively.  The informational aspects used in the ad are (1) a demonstration of the product, (2) list of benefits and (3) a slight side-by-side comparison. The demonstration of the product is shown in the way the car accelerates and its spaciousness is shown with a shot of the back seat. The benefits are mentioned with text accompanying the relevant slides and the side-by-side comparison is shown when two cars are standing in front of the traffic light and they both pull up in which case the Tesla Model S accelerates much faster.  The transformational side of the ad shows the busy lifestyle of the driver who has private as well as professional responsibilities to fulfill. He has to take care of his children and go to work, so he wants a car suitable for all situations: safe, spacious, silent, professional, streamlined and of course speed to go wherever he wants or needs to go fast, safe and in style. The above mentioned strategy results in the following criteria, characteristics and propositions:   –        Benefits product (transformational/informational) There are three main things we want to communicate to the viewers. Emphasis is put on the acceleration (speed), spaciousness and business appropriate aspects of the car. The ad will be developed following a transformational structure to convince viewers of the benefits of the Tesla Model S. –        Core of the message The core message is that the Tesla Model S is suitable for a variety of activities the driver engages in throughout the day. This could be from dropping off the children to school, to going to a business meeting. Whatever responsibilities the driver has, this car is taking care of it and makes sure you will look circumstance appropriate. –        Uniqueness The uniqueness of the Tesla Model S is the combination of characteristics rather than the separate specifications. It is the whole package that makes this car outstanding and special. This is what we want to emphasize in the ad. It looks like this car is ready for anything the driver has planned which makes the lives of the drivers more enjoyable. The car is electric, silent, fast, accelerates fast, spacious, business appropriate and has a streamlined design. –        Consistency The consistency of the ad will be that this specific car is multi functional and helps the driver to get where they want fast, safe and in style. The driver of this car is a business man with a family and now he has a car that is suitable for both business and home. Meanwhile these drivers are contributing to the environment by the decrease of noise and gasoline emissions.   Movie characteristics: -         Actors: The actors consist of the driver, his children and his business partners/colleagues/clients. The driver of the car will be a smart looking business man and his children are young, cute and happy-looking. The actors for the driver’s work environment are, just like the driver, smart looking business people. -         Colors: the colors used are clean, slick and transparent which has to convey the image of openness, transparency, trust and business-like. This means that the colors used in the ad will be blue-ish which is important since the car is mainly targeted at business people who happen to have a family as well. -         Music: Apart from the natural sounds of the elements of the different shots, there will also be a background music clip by Sven Hammond Soul - "Fatcakes". -         Images: Images of business environment, children/school and a shot of a driving car will be used to send the message. -    Pay off: The pay off of this ad should mainly be that people get familiarized with the capacities and specifications of the car. By showing them the capabilities of the car, we want to increase the acceptance towards electrical cars in general but more specifically the Tesla Model S. People need to be amazed by the combination of specs and become more open towards electrical cars. The Tesla Model S shows that 'real driving'  is possible with an electrical car.    -         Trade off time/information: The trade off made in this ad is of the electrical aspect of the car. It will be mentioned briefly, but since we do not want to focus on this characteristic because electrical cars have a negative image, this will not be a big problem. We want to advertise this as a superb car without mentioning the electrical aspect too much to avoid prejudices and a tree-hugging image. To be able for people to see the underlying capacities and specifications we want people to think this car is very ‘cool’ and business appropriate and an electrical car currently does not have this image. However, the car being electrical in combination with its specifications is what makes the car special. Compared to other electrical cars, the Tesla Model S has a high (acceleration) speed, large driving range, streamlined design, low price tag, etc. When leaving or minimize the electrical aspect of the car for the sake of the product-image, the specifications and capacity of the car seems less unique. Will Tesla’s New Model X Crack the Middle Eastern Market? has received both critical acclaim and financial gain for its successful Model S sedan, and has followed this up with the development of the Model X SUV. At the same time, Tesla has planned to rapidly grow their supercharger network throughout North America and Europe and expand into the Asian market. Where does this leave Tesla in the Middle East? The Tesla Roadster has already been spotted in the region, particularly in cities like Dubai. Could the new Model X be the Tesla car that breaks into the mainstream market? Tesla’s Global Expansion Tesla Motors has been busy over the past year, producing over 500 Model S (pictured above) units per week and opening new stores worldwide. Tesla’s stores provide a unique car buying experience, using touch screen technology modelled on Apple’s retail design. At the same time that it has boosted production of the Model S to meet high demand, Tesla has also been working on launching new Supercharger network locations, not only in North America but throughout Europe. And Tesla’s founder, Elon Musk, has suggested that the company is considering opening new factories in Europe and Asia in the future. While at the moment there has been no mention of expanding into the Middle Eastern market, it seems natural that as global expansion grows it would travel into the region if there is customer demand. Features of the New Model X The Model S has earned rave reviews and launched to strong preliminary sales, but Tesla has been working hard on the new Model X SUV. One interesting feature that will set this model apart is a set of rear doors that open vertically, providing easy access to the car’s interior. These wing-like doors are just one of the unique features of the Model X, however. Teaser images show that the Model X will look quite like a taller, boxier Model S, with similar interior touch screens and exterior contours. Yet in addition to the falcon-wing doors, the Model X will also feature a third row of front-facing seats, to accommodate families more easily. It will also potentially be outfitted with all-wheel drive, which could be attractive to Middle Eastern buyers looking to dune bash. There will also be a sporty Performance-oriented model, as with the Model S. This will allow the Model X to hit 60 mph in under five seconds. Challenges to Overcome in the Middle East Historically, there have been slower sales of electric vehicles in the Middle East in comparison to other markets. With lower fuel costs, there is simply less economic demand for Tesla cars or other electric vehicles. However, as the cost of electric cars falls, it could make more economic sense to purchase them. This has already been seen in other markets. The low-cost Nissan Leaf has been a best-seller in Europe, and Citroen offers at Carsales make the new C-Zero a more affordable option in the Australian market. Tesla’s founder has stated that it’s a priority to lower the starting cost of new Tesla vehicles. Although the Tesla Roadster debuted at a starting price of $100,000, the Model S costs half that. When the new Model X comes out in a couple of years, it could be even lower in price which may entice budget-minded Middle Eastern buyers. There has also been a wider interest in environmental issues throughout the region which may trump cost-savings on fuel – which in some Middle East countries is practically free. As Tesla continues to expand its brand, it seems only a matter of time before this Californian automaker crosses over into the Middle East. – IMPORTANT LINKS http://www.slideshare.net/taposhdr/tesla-in-uae-financial-strategy http://www.slideshare.net/nkhattab/tesla-strategic-management-final-30084939?related=1 http://marketrealist.com/2015/08/chevrolet-bolt-formidable-competitor-tesla-model-3/ http://www.slideshare.net/lmaioli/strategic-marketing-for-tesla-motors-uc-berkeley-extension?related=1 http://www.slideshare.net/dpayne05/tesla-marketing-plan?related=2 http://www.slideshare.net/VishnuMohan3/vishnu-mohan-xeri-final?related=3 http://marketrealist.com/2015/08/investors-guide-tesla-motors/ http://goevgo.com/2015/04/22/saudi-arabia-oil-policy-confronts-the-future/ http://www.naba.com.tr/NabaMimarlik/Iletisim http://www.naksan.com/en/index.html http://www.forbes.com/sites/siimonreynolds/2013/09/01/why-you-should-copy-teslas-way-of-marketing/