Question:
Describe the marketing plan for Tesla Motors Company.
Tesla Motors main goal was to be able to provide the best and most affordable electric vehicles that would be preferred to gasoline vehicles by consumers. Apart from designing, manufacturing and selling the models of these vehicles, Tesla also offers super-chargers for their customers in the United States at certain places like restaurants, shopping centers and malls. Generally, there are 498 free charging stations with a total of 2804 superchargers. An advantage to them is that they are able to gain loyal customers for their vehicles and the customers can freely easily access the chargers (a promise by the CEO Elon Musk). Tesla uses the most friendly technology to produce their cars which are co-friendly, comfy, luxurious and cheap e.g. Model S and Model X. They also provide electric vehicle powertrain in advance for their competitors like Toyota and Daimler AG. Tesla tries to beat its competitors by opening up as many subsidiary outlets as possible which makes them more accessible by their customers. To increases its popularity among its customers, the company uses techniques like promotions, advertisements on social media (free) and word-of-mouth which they consider to be reliable and best techniques. The company has also opened many retail centers for their sales in order to back up these techniques of accessibility to customers. Tesla markets its products via twitter, blogs and you tube which helps them to update their customers on new important information that they may require currently and gives them hope for future expectations. By providing their customers with affordable vehicles which are environmentally friendly and free charging station which are easily accessible, Tesla’s market mix seems to be efficient and effective because their sales and profits increase with time.
Tesla Motors (named after the electrical engineer and physicist called Nikola Tesla, Tesla Motors, 2007) was started by Marc Tarpenning and Martin Eberhard in July the year 2003. It is one of the largest public companies in America that deals with energy storage and automotive electrical gadgets. Electric cars, components and battery products are designed, manufactured and sold here too. The company’s first car production was Tesla Roadster (first fully electric car) which gained them a lot of fame and popularity in the automotive industry (Tesla Company, 2010). The second car that the company made was the Model S which was among the best electric plug-in sedan cars selling in the year 2015 (Tesla Motors, 2007). Model X and 3 were the vehicles that followed in 3rd and 4th positions respectively. Apart from offering some of the best battery charging components to their customers, the company also operates with stations like restaurants, malls, galleries and shops whereby they sell their best products to their potential and existing customers. The company’s mission is to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to the market as soon as possible for the safety of their customers and the families they entrust to their cars and to accelerate the world’s transition to electric mobility with a full range of increasingly affordable electric cars for all consumer (Tesla Motors). The company believes in coming up with the most affordable and safe vehicles which can be purchased by most consumers with an aim of offering the best and most comfortable transport facilities for them. Its vision is to create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles (Tesla Motors). It aims at becoming the best company in the world that can offer the best electric vehicles and stimulating the world into becoming a better one technologically. The company increased its sales with time but later reduced the production of Roadster to focus more on the production of Model S and X. In 2010 the company announced its public contribution on NASDAQ whereby the public was offered 13300000 shares to buy and has continued with this strategy to date.
3.1. Demography
Tesla Motors main targets are the upper-middle class persons with the ability to afford their vehicles (Tesla motors, 2009). Also considering the fact that there is an increase in gas prices and environmental awareness, there is increased popularity and demand for affordable and environmentally friendly electric cars in the United States. Tesla Motors was one of the first companies to produce a pure electric car and market it (Model S). Basically, it is normal to see the hybrids of these models on the roads but these does not affect the market of the originals for the loyal customers of the companies producing them. With the incomes of the average income earner in the United States increasing (according to the U. S Census Bureau), the sales of Tesla increased with increase in demand for electric vehicles. In addition to this, the US government has increased the subsidy provision to electric car producing companies (US News, 2014) which has made Tesla’s sales to increase with time. Tesla also faces some challenges from certain states like Texas (Texas Lobby, 1015) and Michigan (Martinez et al., 2014) where automobile manufactures who act as dealers are not allowed (Vance A, 2014). However, Tesla has an advantage of being able to sell their cars online to the customers in these countries and has built galleries in Texas to help them educate their potential customers about the cars. However, the laws in Michigan go as far as forbidding manufactures from opening centers in the state and this certainly bans Tesla even from opening galleries there (Shepardson D, 2015).
Tesla also faces competition from other companies producing and selling electric cars e.g. Model S of Tesla with Mercedes Benz S Class which is also a luxury sedan car, Model 3 of Tesla which is to be launched soon is expected to face competition from Chevrolet Bolt from the General Motors a plug-in hybrid sedan (Bob L, 2009). Currently, Tesla has no stiff competition in its market because no other car company that has been able to produce a pure electric car so far.
3.2. Demand Analysis
The demand for electric cars has increased with time and thus increasing Tesla’s sales. This is because it’s the only company that is currently in a position to produce pure electric cars accompanied with superchargers and some of the best battery components compared to other automobile companies. As of 31st of March 2016, Tesla has sold an average of 125000 electric cars 2008 since 2008 when it delivered its first Roadster. The most demanded car from Tesla is Model S (Cobb J, 2016) followed by Model X and lastly comes the Roadster. Model 3, the fourth model for Tesla is to be launched by mid-2017 which is expected to attain a mass market and retail deliveries for the company.
3.3. Marketing Environment/Swot Analysis
The SWOT Analysis is the study, analysis and understanding of both the external and internal environments of a company i.e. the strengths, weaknesses, opportunities and threats faced by a company in its marketing and selling responsibilities.
3.3.1. External Environment
Legal/Political Issues-Most of the governments in the developed countries like the US are more interested in helping the electric car producing companies with an aim of encouraging the public to purchase those cars and also for environmental improvement (Mangram, 2012). Policies like provision of subsidy to electric car producing companies have been set up. These policies reduce the production price of these companies and therefore the car price too and this makes the cars cheap and affordable to the public. Also the cars are made in a way that they appear very attractive compared to the gasoline using cars and this encourages the public to purchase them (Mangram, 2012). This acts as an opportunity for Tesla Motors because it’s an electric car producing company.
Economic Issues-According to the Us Census Bureau, the income of an average earner has increased and therefore more money in supply to purchase luxury stuff. When the incomes increase, Tesla is able to increase its sales but when it decreases its sales decreases too. When the economy of a country is low, production becomes expensive thus increasing car prices and making purchase impossible for consumers and sales reduction for Tesla Motors. This acts as an opportunity as well as a threat for Tesla Motors.
Technological Support-Tesla Motors provides free supercharging network stations for their customers at certain stations i.e. 498 in the US, 259 in North America, 222 in Europe and 119 in Asia (309). Tesla’s Model S was designed to in a way that it’s able to allow battery swapping and this made it possible for Tesla to give the same property to their upcoming car models (Sebastian, 2009).In the year 2013, Tesla’s main goal was putting up a battery swapping station in every supercharging station available to be able to give its customers full support and service. This two scenarios indicate the strengths of Tesla to its environment.
Competition-Tesla faces competition from other car companies like the General Motors, Ford and Honda Motors Company even though they are specialized in hybrid or gasoline cars. Currently, the General Motor’s aim is to produce the Chevrolet Bolt which has almost the same features like that of the upcoming model of Tesla (Model 3). This characteristics of Chevrolet Bolt may make it look like a substitute car model for Tesla’s Model 3 (Mangram, 2012). The competition that is yet to come seems to be a threat facing Tesla.
3.3.2. Internal Environment
Resources-They are divided into either tangible or intangible resources. For the tangible resources, Tesla has got very good financial access. In the year 2012, it was able to make profits averaging to $400million from selling shares and giving long-term debts to customers. Tesla also has got so many outlet markets in different countries like US (where its headquarters are situated i.e. California) Asia, Australia, Canada and Europe. It also has many factories where the manufacturing takes place like Tesla factory and Gigag factory. The intangible resources that Tesla own are: have a very efficient and effective top management team currently led by the CEO Elon Musk, a unique technology and ownership of patents of batteries and drivetrain which enable it to b way ahead of its competitors and the wide popularity of their products because of their advertising and marketing techniques. These two factors are its strengths.
Battery Supply Guarantee-Tesla manufactures its batteries from lithium-ion cells which are currently in short supply. This may therefore hinder Tesla from expanding its market as it may want (Mangram, 2012).
3.4. Current Competition
There is a lot of competition from other car producing companies either electronic, gasoline or hybrid. Besides working with other companies as partners in producing other products, Tesla competes with them in the products they commonly produce. Companies like Toyota, Daimler AG, Panasonic and Airbnb have one time or another formed partnerships with Tesla to produce certain products. However, they are also competitors especially in the car and battery production. Tesla faces competition also from other automotive companies like the General Motors and Ford.
3.5. Product
Tesla being an automotive company, its products are definitely electronics. It designs, manufacture and sells electronic cars, battery, electronic vehicle powertrain components and other electronic components. The car models are: Tesla Roadster which was the first electric sports car, Model S, a sedan was the second Tesla’s car and was announced in 2008 (Michael, 2008), Model X came up being the third car model of Tesla and was first delivered in 2014 (Young A, 2013) and last is the Model which is to be delivered in the early 2017. Tesla also has future car models whereby it is planning on developing autonomous driving characteristics. It has plans for starting electric minivans and fleet vans and crossover SUVs, Model X crossover which will share features with Model S. There are also ideas on debuting a Roadster’s successor in 2019 (Ballan, 2015) and a Model Y, a combination of Model 3 and X features which will be much cheaper and more affordable than the others (Warren T, 2015). The battery products include a 7 and 10kWh wall mounted unit which were unveiled in 2015. Supercharger networks which are accompanied by a battery swapping station are situated in every country where Tesla has an outlet.
3.6. Competitors Marketing Promotional Budget and Sales Analysis
In the business world, the sellers or producers may choose to play with their products price or its quality i.e. either to sell a good/bad quality product at low/high price. But in the automobile industry, there are players who chose to offer both to their customers. E.g. the General Motors and the Ford’s main aim is to take care of the mass market segment offering best luxurious cars like land Rover and Jaguar in the industry which makes them the largest competitors of Tesla. For electric vehicle selling, Nissan’s Leaf was the best-selling brand in 2014 whereby it sold more than 60000 units which more than twice the units sold by Tesla for Model S. This shows that Tesla’s competitors may have better ways of marketing and selling and that why their sales are more than those of Tesla. When it comes to budgeting, other automotive companies allocate a lot of funds to advertising e.g. the Nissan Motors which spent $25million for the Leaf in 2012.
3.7. Target Market and Target Positioning Analysis
Tesla Motors mainly targets the average income earning people but who have enough cash to spare for luxurious things or wants i.e. the upper middle class of people (Tesla Motor Company, 2009). Some of the company’s goals being to: to be able to sell its vehicles online and in its own showrooms, to sell their powertrain and other electric components to other automotive companies and to become a motivation and an example to other companies (Rogowsky, 2013), it is able to position itself as one of the best car company in the market. It can therefore can market and sell its products effectively and efficiently and compete with other companies. Tesla also owns more than 200 galleries (120 outside US) which it uses to sell in retail to its customers directly or even online as well as in wholesale. This means that it has a large market share and segment too compared to other companies therefore positioning it as one of the best.
Promotional Objectives:
Promotional Strategies
According to Elon Musk, Tesla Motors has and will never have any advertisement to promote its products. The company does not allocate any money for advertisement (UC Berkeley, 2014). It also does not have any dealer networks or agents or sale persons to help in its promotion. Instead Tesla uses a pool advertising strategy whereby it chooses to use the media (you tube, twitter and blogs) to make its products known to the public. The word of mouth is also used especially in the galleries where customers need to be given more information about the products. The company’s CEO, Elon Musk is one of the frequent writers in the company’s blog where he updates their customers on expected products, technology, improvements of the existing products and all other changes that have taken place in the company’s products. However, the company can chose to promote a product especially when it’s new to the market otherwise no advertising promotions in any way.
The company’s CEO, Elon Musk swore that he is never going to allocate any funds for advertisement of the company’s products so no money that has been allocated for advertisement for 2016-2017. In March 2016, the CEO Elon Musk, announced that there will be a new Model 3 car (pocket friendly and features more like those of sedan and hatchback design) whose production will begin mid- 2017 and will be at an average price of $35000. The production of this vehicle will lead to 500000 vehicles total Tesla car production. This means the company will have to increase its production expenses but will expect more profits after selling the cars because the demand for the new Model 3 is relatively high.
6. Conclusion
In conclusion, Tesla’s most sold product is the Model S car which is being demanded by most of the upper-middle class people. Tesla concentrates its selling towards the places where it’s sure that it has a large market share and segment. Tesla also has an advantage over other electric car selling companies with the fact that Model S car has very unique characteristics and features compared to others. It is the only fully electric luxury sedan car produced by any company and therefore this places it on the top of its competitors. In addition to this, Tesla’s low prices and differentiation strategies accompanied by perfect and effective product placement, the company is able to utilize its market strategies which gives it the top positions in the automotive industry.
Tesla’s mission and vision are aimed at providing the best quality, affordable and luxurious cars for their customers. In addition to this advantage, the cars usually go hand–in-hand with things like MP4 and MP3 Players, HD stations among others. Tesla gives the best value to its customers but it also have some problems which it has to improve, they include: Improving their channels of product purchase and delivery for it to take shorter time, reduce the test-driving charges for their customers, increase promotions through other means apart from media.
References
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Ashlee, V. (2014, October 10). The Cult of Elon Musk:A night with “D” and thousands of Tesla fanatics. Bloomberg Week.
Blanco, S. (2013). Tesla Model S was Designed with Battery Swaps in Mind. Autoblog Green.
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Cobb, J. (2015, November 3). Tesla Q3 Earnings Induce After Hours Stock Market Spike. Hybrid Cars.
David, S. (2015, May 12). FTC Urges Michiban to Drop Tesla Sales Ban. Detroit News.
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Mangram M E. (2012). The Globalisation of Tesla Motors. A strategic Market Plan Analysis, pp. 289-312.
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Michael, M., & Michael, W. (2014, October 16). New Jersey Bans Direct Auto Sales. The Detroit News:Business.
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