Tesla’s Integration of Marketing Communications Essay
Tesla’s Integration of Marketing Communications
Tesla Motors Inc. gained widespread attention by producing the Tesla Roadster in 2008, the first federally-compliant electric vehicle. The roadster is also impressive because of its sports car design. Tesla then followed in summer of 2012 with the release of the Model S in the United States, which is a fully electric luxury sedan. Tesla Motors was founded in 2003 by a group of intrepid Silicon Valley engineers who set out to prove that electric vehicles could be awesome (Tesla. com, 2013). They currently have 31 stores across the United States and in European and Asian countries and are working to expand to other locations.
Tesla designs, develops, manufactures and sells electric vehicles and advanced electric vehicle powertrain components. Tesla owns its sales and service network. In addition to developing its Model S and future vehicle manufacturing capabilities at the Tesla Factory, the company is designing, developing and manufacturing lithium-ion battery packs, electric motors, gearboxes and components both for its vehicles and for its original equipment manufacturer customers (NYTimes. com, 2013). After 10 years, the company posted profits for the first time during the first quarter of 2013.
Even Tesla’s business model is, in stark contrast to its competitors, wholly of the 21st century. Instead of sprawling dealerships eating up entire neighborhoods, it employs “galleries” in downtowns and malls to show off its product. Knowledgeable representatives are on hand to teach and demonstrate the unique features and requirements of a luxury long-range electric car; these salespersons bear little resemblance to the commission hounding “vultures” that embody the traditional auto dealer to many.
Instead, once they have given you all the information you want to know, you leave. You customize and order your car online, which Tesla will deliver to your door, unless you prefer factory pickup. No middleman, no inefficiency. A straight-forward exchange between consumer and producer (Coppage, 2013). Tesla’s operations present an interesting cost structure with this model. While they do have fixed costs to operate their stores and service centers, they do not have high overhead for production since the cars are manufactured on-demand with customized features based on the orders, so there is not a large surplus of inventory at any one time. Automobile manufacturing is an industry that values economies of scale and requires the production of hundreds of thousand cars to cover the fixed costs of research and development, engineering, manufacturing, marketing, and distribution. According to Tesla’s 2012 10K report, they market and sell cars directly to the consumers through an international network of their company-owned stores and galleries. The Tesla stores are highly visible, in premium outlets in major metropolitan markets.
Tesla’s believes that by owning their own sales and service network they can offer a compelling experience while achieving operating efficiencies and capturing sales and service revenues incumbent automobile manufacturers do not enjoy in the traditional franchise distribution and service model. Their customers deal directly with Tesla employed sales and service staff, creating what they believe is a differentiated buying experience from the buying experience consumers have with franchised automobile dealers and service centers.
Tesla also believes they are able to control costs of inventory, manage warranty service and pricing, will strengthen the Tesla brand, and obtain rapid customer feedback. Further, by owning their sales network they can avoid the conflict of interest in the traditional dealership structure inherent to most incumbent automobile manufacturers where the sale of warranty parts and repairs by a dealer are a key source of revenue and profit for the dealer but often are an expense for the vehicle manufacturer (Tesla, 2013). Tesla has adopted principal marketing goals:
Generate demand for our vehicles and drive leads to our sales team Build long-term brand awareness and manage corporate reputation Manager or existing customer base to create loyalty and customer referrals; and Enable customer input into the product and development process As the first company to commercially produce a federally-compliant, fully electric vehicle that achieves market-leading range on a single charge, Tesla has been able to generate significant media coverage for the company and their vehicles, and believe they will continue to do so.
To date, media coverage and word of mouth have been the primary drivers of their sales leads and have helped to achieve sales without traditional advertising and at relatively low marketing costs. They use traditional means of advertising including product placement in a variety of media outlets and pay-per-click advertisements on websites and applications relevant to their target demographics (Tesla, 2013). Tesla set a major milestone this month; they became the third biggest luxury car seller, behind only the Mercedes E Class and BMW 5 series.
That’s an extraordinary achievement for a brand that didn’t even exist a few years ago. So how did they do it? Well certainly the car has gotten highly positive reviews, but few have really took notice of their radical marketing technique at the center of Tesla’s sales strategy. According to Forbes, it is the strangest car showrooms of any car maker in the world. They are not located along main roads like every other car dealer; they are in shopping malls – right alongside brands like Bloomingdale’s, and See’s Candy.
Secondly, the showrooms are only the size of a small shop, often only squeezing in a single vehicle into the space. This radical departure from car marketing norms completely changes the traditional customer math. Most car dealerships would be lucky to get a hundred potential customers perusing the cars on their lot each day. But because of their location, Tesla gets tens of thousands of people walking right past their car, every single day (Reynolds, 2013).
Incredibly, many sales have come from people who had zero interest in buying a car until they saw Tesla’s showroom. Impressed by the car’s design they could walk right and immediately talk to a sales person- rather than have to specifically drive out to a dealership. It’s been a brilliant move for Tesla, as the sales figures are demonstrating, but is it not possible that you could use the same concept to grow other types of business?
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 27 May 2018
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