Discuss about the Marketing Analysis of Tesla.
Tesla Motors was founded in 2003 as a California Startup by a group of Silicon Valley engineers who wanted to promote sustainable electric cars. The electric cars would be better than the gasoline powered cars as they will have instant torque, high power and contribute to minimal environmental pollution. Although at present the cost of the electric cars is high, the next generations of the electric cars will become more and more affordable. The ultimate goal of the company is to provide sustainable medium of transportation without compromising on the product quality and consumer experience. As a result, Tesla has conducted several experiments in terms of design and style of the manufactured cars. These electric cars are excellent transportation medium without any negative impact on the environment. Initially, the company designed a powertrain which was built around an AC induction motor (Hardman, Shiu and Steinberger-Wilckens, 2015). The name of the company is based on the inventor Nikola Tesla, who patented this technology in 1888.
In 2008, Tesla Roadster was launched which can accelerate at a very speed in few seconds and travel to a range of 245 miles per charge of the battery. In 2012, the Tesla launched a four wheeler based on the same technology. The Model S sedan was the first electric sedan car completely driven by electric power. The electric car consumers can easily charge their cars at home without the need of visiting a gas station every time their vehicle runs out of gasoline. In long distance routes, the company has established a network of superchargers which cover half of the main routes in the USA, Europe and Asia Pacific. It has manufacturing plants in the USA and Netherlands (Tesla, 2017). It is an innovative organization focused on energy conservation. Tesla has attracted a large number of customers who are environmentally-conscious. In this regard, in this report, the marketing strategy of the company, its main customers and suppliers and the competitors have been examined.
Tesla is a sustainable auto maker and electric car company. It comes under the automobile industry and its major competitors are the leading automakers such as General Motors and Toyota. The ultimate mission of the company is to increase the popularity of electric vehicles. Precisely, it strives to offer the customers sustainable transportation mediums without sacrificing the associated comfort of the cars. It targets the market of the affluent customers who are willing to pay large down payment. It includes the upper class business executives who are willing to experiment with new products and pay premium price for them. The Tesla Roadster was focused on the customers who were looking for luxury sports car. This customer segment is also predominated by the male population. It mainly focuses on the customers who are conscious about the emission patterns of their vehicle. It allows zero environmental emission without sacrificing the quality and the performance of the traditional vehicles (Karamitsios, 2013).
In the recent years, Tesla has come under the leading luxury automobile manufacturers across the globe due to its unique marketing strategy and product offering. It is a vertical manufacturer which means that it directly manufactures and sells the products to its customers. The company has several showrooms at popular shopping malls; however, the customers can only enrich their information regarding the electric cars, they have to make the purchase directly online. It helps in keeping the expenditure of the company low and creating unnecessary risk by increasing inventory (Birk, 2015).
It is a catalyst in personal transportation and developing disruptive and breakthrough technology in the automobile sector. Tesla has increased the market demand for luxury zero-emission vehicles and also joined hands with other automobile manufacturers to increase the number of production lines. The cars manufactured by the company are solely driven by the electric batteries. As it is innovative technology, the company has to work with several suppliers who do not traditionally work with the automobile manufacturers. Therefore, Tesla has collaborated with large automobile companies to keep the economy of sales low (Supply Chain 247).
The first car of the company Tesla Roadster was launched in 2008, and since then the company has sold a large number of electric cars all across the globe. It is an electric sports car which runs on the lithium-ion batteries. In 2010, the company launched its vehicle in the UK and Ireland. The United States is the leading market for the electric cars. It is the second largest electric car manufacturer after Renault-Nissan Alliance. Recently, the Model S of the company has become the most popular vehicle driven by electric power. It is highly widespread and became the first ever car to top the sales list of any country. It has adopted a unique sales model wherein the customers are provided after sales services to all the customers. As it is a small company, it suffers from budget constraints. In order to keep the economy of scale minimal, it has reduced the inventory requirements (Tansel, 2016.). The company manufactures the cars after receiving the orders from the customers. It controls the expenditure of the company; however, the customers have to wait for a long time before delivery takes place.
In its sales model, the company has developed a large number of stores and galleries at the busiest markets and shopping malls. These stores work as showroom for the company where the customers learn about the company and its vehicles. The interactive display at the company’s stores is focused on four major themes, namely, safety, electric motor, charging network and autopilot feature. The sales model of the company is very different from the standard model adopted by the automobile companies. It is the only car manufacturing companies that sells the cars through online mediums without any middle man or dealer. The company targets the affluent customers as the cost of these cars in high (Carlson, 2013). Recently, Tesla is conducting experiments with the technology to decrease the model cost, increase the customer outreach and penetrate the target markets. In Australia, the first showroom of the company was opened in 2010 in Sydney. Subsequently, stores and service centers were opened in Melbourne and Richmond.
Although Tesla is a small car manufacturer, it has adopted several unique marketing approaches to establish its presence in market. In the following section, the marketing mix of the company in terms of pricing, promotion and distribution are discussed.
Pricing Strategy: Tesla has entered the markets as a mass producer of the electric vehicles which has given it a competitive advantage in terms of pricing. It has adopted the premium pricing strategy according to the target customers. As it is a disruptive technology, and the wealthy customers are more willing to experiment with new products, it has selected the affluent customers as its target base. In regard to the prices, the models of the company rival the companies such as Mercedes-Benz, BMW and Audi. It focuses on adopting the value based price model. Accordingly, the company provides all the luxuries of a traditional car and is environmental-friendly (Ferrell & Hartline, 2013). Moreover, although the initial price of the cars is high, the customers save on the gasoline prices. Recently, the company has adopted a pricing strategy to lower the cost of its existing car models and launching new models to increase the customer base. It is focusing on tapping the mass market and producing cars at large volume to increase its revenue (WN, 2016).
Promotion Strategy: Tesla Motors has implemented several promotional strategies to engage the potential owners. It uses the combination of events, online promotion and broadcast media for advertising. In its promotional strategy, the company focuses on different target customers irrespective of their age or income. Their advertisement focuses on the efficiency and the benefit of the electric car (Fifield, 2012). The events are also effective in promoting the company’s products. It also organizes events in art galleries, hotels and restaurants to enhance the knowledge of the people regarding the electric cars and creating a stress-free environment which leads to the customer decision. Today, online mediums are also critical in the promotion of the products. The website of the company contains large number of incentives and plans to attract the prospective customers. Other than that, the company also uses the YouTube videos, blogs and social media in its promotional strategy (Pride & Ferrell, 2016).
Distribution Strategy: Tesla motors are growing at a phenomenal pace and over the years, expanded its operations in several places in Europe, North America, Asia and Australia. It is also focusing on expanding the product range and reducing the cost of the automobile to become more available for the mainstream customers. Since it is a small automobile company, it controls its expenditure by manufacturing cars only upon orders (Fifield, 2008). It has several stores and service centers at the busiest locations; however, the customers can only gain knowledge regarding the company and its models from there. This strategy has increased the sales of the company as the customers having no-to-little knowledge of electric cars learn the benefits of owning an electric car. Tesla has also adopted the strategy of opening their stores at shopping malls so that the customers coming to buy clothes or watching movies also learn about the new cars. Tesla has also observed that these people become the potential customers of the company (Hoffmann & Coste-Manière, 2012).
Since the market for the mass-produced electric vehicles is new and emerging, the company has very few competitors in this domain. However, the luxury car-makers such as BMW, Audi and Toyota are the major competitors of the company. Renault-Nissan Alliance is also a major competitor of the company as they are investing heavily in battery-powered cars. BYD e6, a Chinese manufacturer is likely to become the largest selling electric car in future. BMW is also focusing on battery development for the electric vehicles. The motto of the company is not to sell the best electric car in the industry but the best car in the industry. Therefore, it focuses on developing best electric cars with all the features. As the company targets the premium and rich customers, the luxury brands are the major competitors of the company (Great Speculation, 2016).
The major luxury car brands provide hybrid models rather than complete electric car models. Therefore, Tesla remains in competitive advantage to attract those customers who are environmentally conscious. Moreover, these companies distribute the cars with the traditional distribution model. Accordingly, the customers enter the distribution centers when they are in the need of buying cars. However, Tesla has created service centers and shops in shopping malls so that the people came to buy clothes can also learn about their product. These individuals can convert into potential leads (Viardot, 2004).
While comparing the marketing mix of the company with other electric cars manufacturing companies, Tesla has several competitive advantages. For instance, it provides the supercharging facilities which are far superior to the charging facilities offered by other companies. The customers are also attracted towards the models of the company due to their clear pricing system and no pressure sales system. The customers can easily navigate the showrooms; learn about the system and the new cars, without any pressure of buying the models. Moreover, the company has adopted a non-negotiable, transparent and clear pricing system which makes the customers comfortable.
Recommendations and Conclusion
Due to the image of the electric cars, their low performance and high prices, the customers avoid buying these cars. However, Tesla has made several efforts to change the image of the electric cars and promote its sales. The company not only strives to create the best electric car but the best cars in the industry. It has focused its research on the development of low-cost batteries to reduce the prices of the cars. It has developed an innovative technology and competing with large auto makers such as Toyota, Ford and Mercedes with their electric cars. As the company is new and suffers from budget constraints, it has adopted several strategies to control their expenditure and increase outreach to the maximum customers. It involves opening up of outlets at shopping malls and busy locations. It offers direct connect to the customers and they can learn about new the company and the profits of purchasing the electric cars. Initially, the company also focused on adopting the premium pricing strategy wherein the affluent and the rich customers are targeted. These customers are more willing to experiment with the products and have the budget to buy high cost cars. In its promotional strategy, the company used the combination of online medium and broadcast media. The company did not focus on a single target customer base and in its broadcast message elaborate the qualities and the benefits of the electric cars. Moreover, the company has also adopted an innovative distribution model wherein it only manufactures the product after getting orders from the customers. It reduces the cost of the company.
In the following section, several recommendations are made so that the company can extend their marketing mix to large customer base.
Product: Tesla offers exclusive cars which are driven only by the electric power. The core competency of the company is its environmental-friendly product. Moreover, the consumers can also reduce the cost of fuel after buying these cars. However, it can extend the product range by offering electric two wheelers and low cost product range. In its low cost series, the company can reduce the features of the cars.
Pricing strategy: Currently, Tesla has limited customers due to the high cost of the electric cars. In order to increase the customer base, the company can reduce the cost of the cars. The low cost range should be capable of driving solely with electric energy; however, the features of these cars should be limited.
Distribution: It can be deduced that several customers might avoid buying the electric cars due to the long waiting period after booking the cars. In this regard, the companies should keep few cars in inventory so that the customers with urgent needs can be addressed easily. Since the cars are manufactured after the order of the customers, the company should also offer the option of customizing the cars according to the needs or preferences of the customers.
In its promotional strategy, Tesla should also focus on connecting the customers through social media. It can examine the reaction of the customers towards the new product launch with social media websites and customize the products accordingly. Moreover, as the electric cars are brought by the business executives and managers of the business organizations, it can also strike deals with the business organizations and government agencies to increase its services (Doole and Lowe 2008).
References
Birk, D. 2015. Evaluation of the Marketing Strategy of Tesla Motors Inc. GRIN Verlag.
Carlson, W.B. 2013. Tesla: Inventor of the Electrical Age. Princeton University Press.
Doole, I., and Lowe R. (2008). International Marketing Strategy: Analysis, Development and Implementation. Cengage Learning EMEA.
Ferrell, O.C., and Hartline, M. 2013. Marketing Strategy, Text and Cases. Cengage Learning.
Fifield, P. (2008). Marketing Strategy Masterclass: The 100 Questions You Need to Answer to Create Your Own Winning Marketing Strategy : Including the New ‘scorpio’ Model of Market Strategy. Routledge.
Fifield, P. (2012). Marketing Strategy. Routledge.
Great Speculations. (2016). Should Tesla Be Worried About Competition? Forbes. [Online]. Available at: https://www.forbes.com/sites/greatspeculations/2016/01/04/should-tesla-be-worried-of-competition/#417f73fd3415 [Accessed on: 1 February 2017].
Hardman, S., Shiu, E. and Steinberger-Wilckens, R., 2015. Changing the fate of Fuel Cell Vehicles: Can lessons be learnt from Tesla Motors?. international journal of hydrogen energy, 40(4), pp.1625-1638.
Hoffmann, J., and Coste-Manière, I. 2012. Global Luxury Trends: Innovative Strategies for Emerging Markets. Springer
Karamitsios, A., 2013. Open innovation in EVs: A case study of Tesla Motors.
Pride, W.M., and Ferrell, O.C. 2016. Foundations of Marketing. Cengage Learning.
Supply Chain 247. Tesla’s Revolutionary Supply Chain. [Online]. Available at: https://www.supplychain247.com/article/teslas_revolutionary_supply_chain [Accessed on: 1 February 2017].
Tansel, A.K. 2016. Analysis of Tesla Motors’ Marketing Communications Strategy: Marketing Report. GRIN Verlag.
Tesla. (2017). About Tesla. [Online]. Available at: https://www.tesla.com/en_AU/about [Accessed on: 1 February 2017].
Viardot, E. (2004). Successful Marketing Strategy for High-tech Firms. Artech House.
(2016). That new Tesla probably won’t be as cheap as you think. [Online]. Available at: https://article.wn.com/view/2016/02/11/That_new_Tesla_probably_wont_be_as_cheap_as_you_think/ [Accessed on: 1 February 2017].
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