Essay: Marketing strategies – Tesla Motors

Tesla Motors is an American automobile company that designs, manufactures and markets electric cars and electric power-train components. The company was founded in 2003 by a group of intrepid Silicon Valley engineers who set out to prove that electric vehicles is the way of the future in this era of high energy costs.
Assignment:
1. Research and write a brief history of the company, it mission and vision statements.
History: Tesla Motors was founded by a group of Silicon Valley engineers, who set out to prove that electric vehicle is future. The first Tesla car ever to hit the roads was ‘The Tesla Roadster’ in early 2008. This car had a range of going from 0 to 60mph in 3.7 seconds and it travelled 245 miles per charge. ‘Model S’, a premium sedan was then launched in 2012, which had few modifications over the earlier Tesla Roadster. Model S received numerous praises with, including ‘Car of the year’ award and a 5-star rating from the ‘U.S. National Highway Safety Administration.’ Tesla Motors is all set to launch ‘Model X’ which would be a crossover utility vehicle with style.
Tesla’s aim is to work with other car manufacturers and bring more electric cars on road. Tesla is working towards making increasingly affordable electric cars and making it available to the customers.
Vision: Tesla’s vision is to ‘Create to create the most compelling car company of the 21st century by driving the world’s transition to electric cars’.
Mission: Tesla’s mission statement is to “Move from a mine-and-burn hydrocarbon economy towards a sustainable, solar electronic economy”.
2. Identify the key elements of Tesla’s marketing strategy with reference to the 4 Ps and discuss the marketing management orientation(s) that guide the company y’s marketing strategy.
Tesla is a very expensive car which costs about $100,000 or more. Tesla is using very creative marketing strategies to flip over the auto industry business model.
Following are the key elements for Tesla’s marketing strategy:
a. Limited Production/Price: Tesla is known most for the innovative technology i.e. ‘Green Tech Business’ and manufacturing excellence. Tesla Motors make very limited quantity of cars, and the major cause for that is hidden in Tesla’s Mission Statement. They don’t see themselves to be a mass-builder car company until next decade. For now, Tesla’s production plan is not to reach household of every single family, which is also their ultimate goal. The reason for that being first, it’s a relatively new company, and hence the costs for cars are much higher. Tesla is planning to launch Model X, that would be somewhere between $55,000 and $70,000, but the average would be higher, as there would be other competitions available in the market. Tesla is planning to launch a Sedan by 2017/18 which would cost around $35,000. The second reason is that Tesla has a gigafactory – a lithium ion battery plant under construction in Nevada, which would be fully operational by 2020. The current production scale of Tesla is 200,000 cars a year even if they push, but with the gigafactory in place, they would be able to produce 500,000 cars a year.
b. Promotional Strategies: Tesla’s promotional strategies involve the following elements:
Gasoline v/s Electric: The first and foremost tool for their promotion cannot be anything other than their innovation, which is generating an Electric car. It is impossible for the manufacturers to stop explaining the advantages of electric cars, over the traditional cars. And it doesn’t compromise the luxury, the speed, or the safety. In fact, it is one of the best cars.
Direct-to-Customers Sales: Tesla’s one of the major marketing strategies include selling the cars directly to the customers in stores owned and operated by them. Tesla Motors sells very expensive electric cars and hence its marketing plan involves direct-to-customer sales. But this strategy of Tesla has not been completely successful. Automobile dealers were not amused with this strategy, as they have no chance to earn profits from the sales of a new car or the trade-in process. Tesla is battling in separate states legally to get a direct-to-customer sales access. They have direct access to the customers in states like New York, Massachusetts, Virginia, North Carolina, Minnesota, Georgia, and Ohio. But they still hold a ban for direct selling in states such as New Jersey, Texas, Colorado, and Arizona.
Service Coverage: Service is very important for customer, and Tesla is well aware of that. That’s why they have opened more Tesla Service Centers in United States then Stores and Galleries combined. Tesla has Service Centers even at the places where they don’t own a store, to ensure that their customers have access to Tesla certified technicians.vi
c. Place: Customers buy cars in a very traditional way. They already decide what car they want to buy. The only thing that matters is negotiating the price with the dealer. Tesla, which is a new car maker company, thought that they would have a very rare opportunity on educating their potential customers about their car model if they placed their car in a traditional auto dealer gallery.
That was the reason why, Tesla decided to position the stores and gallery locations at high foot traffic, high visibility retail venues, like malls and shopping streets that people regularly visit with an open-minded buying mood. The product specialist at these places is skilled to answer about the electric cars in general.
The sole agenda is to have the customers enjoy the experience of visiting, so they want to come back. Their stores are designed to be informative and interactive.vi
3. Discuss customer relationship management and identify strategies that Tesla uses to create value for customers in order to capture value back from them.
4. Describe the major trends and forces that are changing the automobile marketing landscape and how Tesla is taking advantage and/or trendsetting in the automobile industry.
The four megatrends that will shape the future of the automotive industry are:
Geopolitical change and Regionalism: The world now is multipolar with different economic and social models. In terms of GDP, it has been estimated that by 2025, China will be the 2nd largest in terms of economy and purchasing power, with a current growth rate of 8% annually. US will still be the strongest economy will almost double the GDP of China. And, India will hold the 3rd place with the current GDP of 7% annually. Also, there is a group of heterogeneous countries known as ‘Next eleven’, which in future will join the group of biggest economies, as per their current growth rate.
The car sale by 2025 in N11 countries is expected to show a rise of 70% compared to just 42% in the triad countries. However, the increase of car sales in BRIC countries would remarkably be at 111% compared to N11 and triad countries.
Regionalism is another important aspect which is on rise, and bilateral trade relations are expected to become more important. Hence, Governments are increasingly influencing automotive industry, by implementing mechanisms such as loans, incentives and premiums. After the economic crisis of 2008/09, countries have introduced protectionist measures, which are disguised as environmental tariffs. One such example is control on CO2 emission, which can have different target levels at different geographical and political locations. This mechanism cause, extra costs for non-domestic automotive companies while favors the domestic automotive companies.
Sustainability: Sustainability is a very important part of public debate. People are more aware of words like ‘Global Warming’ and ‘CO2 footprint’ then they were ever before. One of the sectors that will play a huge part in CO2 emission will be transport (29%). Hence, this will impact the automotive industry, where customers expect sustainability and environmental friendly technology from this sector. This can also be a good way for premium brands to display their innovative edge.
Evolution of mobility: With the population growth and increase in economy, the overall levels of car ownership will rise by 2025, as the time spent on mobility has almost remained constant over past decade and is expected to remain same in near future. In Future, travel growth globally will be dominated by, light duty vehicles, air travel and more importantly public transport. Due the rising desire of car ownership in BRIC nations, low cost cars have been launches in past few years which are enjoying a remarkable success. One such example is Tata Nano, which was launched in India in 2009. It is the cheapest car on the Earth. It already got its market share of 2.2% by 2010.
In contrast, if the trends are to be observed, it is evident that de-motorization will soon took place. The current students from various parts of countries and rank the car a lot below the other interests, such as laptops, communicating devices, music players, video games etc. Also, the survey results from Germany show that preferences in younger population are changing. Person owning a Premium car is perceived to be a self ‘centered and materialistic. Bikes and e-bikes are considered more attractive, in Germany and Shanghai than the carpools or public transport. Hence, there is an overall shift in the buying pattern in the consumers toward smaller cars in terms of body and engine. Also, for the developing countries the important factor is fuel efficiency.
Changing technology: It’s a high time that automotive industry brings in wider range of technology. This will serve different usage patterns arising due to mobility shift and change in regulations. Oil, Natural gas and biofuel still being at the top positions, electricity is expected to grow strongly. The major growth for EVs will be in China with the current share of 10%.
One of the most important technological trends in recent years has been Internet. It has helped in globalizing the world. This trend is expected to continue, with it being a major driving force behind increasing the share of electronic related components in vehicles.
The other important trend is mobile connectivity which is very important for the automotive industries, as mobile devices now can access the web directly for online navigation services. As the consumer demand is changing, they want mobile devices to be unified seamlessly into information backbone for their vehicles.
Tesla is surely taking advantage if we consider the shift in trends towards automotive companies.
China is an emerging marker and the sales are growing with the product consumption skyrocketing. Tesla is expecting the same rise in the sales of their car in China. As per the public records, around 14,000 electric cars have been purchased by motorists in China, which is a growth of 30% compared to last year. China plans to populate their highways with electric cars in near future, and Tesla is seeking to be a part of this growth. Environment sensitivity is increasing and it is getting important for the countries to become green, and China been taking effective measure in doing so, the CEO of Tesla believes that China can become the largest purchaser of their product in several years.
Also Tesla is taking advantage of Technology in their cars; they signed a contract with AT&T Inc. to provide high speed wireless services to its vehicles. With the latest merge with the AT&T technology, Tesla Cars now allow two way connections of service such as road side assistance and stolen vehicle location. These cars also provide internet services, in-built navigation and entertainment services on a touchscreen installed in a car.
Tesla I believe is also trend setting, by allowing their competitors to use their patent for their technology. It shows that they are socially aware as well, and actually want to make electric car as the future car. Some companies produce no zero emission cars at all. Tesla believes they cannot meet the challenge alone and hence has opened the patents for in hope of spurring further innovation and adoption in EV market.
5. Where would you place Tesla within the competition? Market leader? Challenger? Follower? Explain.
Tesla has positioned itself as a challenger brand. Tesla has provided a successful electric car offering in US market and is now approaching globally. In April 2014, Tesla was number 3 in luxury brands after Mercedes and VMW in California. Tesla conquered this position by making a few powerful enemies. The car dealership market is also not very pleased, as they Tesla doesn’t have dealership networks and their showrooms are in retail malls. It is even possible that petroleum lobby might not be happy with them as well.
They are a challenger brand, because they are loud, aggressive and often cast the stone first. They always ensure that they are in headlines. They will spin and attack their competitors, because they know that these market leaders won’t retaliate back because of their status and being accused of bullying. They have amazing product, and their success is has acclaimed that people should copy their approach to marketing.
Tesla is heading fast towards being a market leader. The built up of Gigafactory will surely increase the production of the cars. Also the new innovations in battery with high efficiency will produce higher volume of electric cars. Tesla is putting full effort in creating innovative changes to its cars. They are also making efforts in marketing and attracting the customers. That is the reason Tesla is future if car industry.