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Executive Summary
Tesla Motors was developed in the year 2003 and has been the pioneer of producing the environment friendly vehicles ever since. The company has been widely known for its high performance sports cars that are equipped with the latest technology features and hinder the carbon emission, which eventually makes its vehicles environment friendly. The company is aimed towards reducing its inventory, production and distribution cost and provide high-end vehicles at low cost. The company is focused on enhancing the customer experience by means of providing them with the innovative features and design while keeping the cost low and product is made highly accessible to the technology savvy customers. The company’s vision incorporates the dynamic change in the automobile industry and encompasses a shift from traditional automobiles to the electric automobiles. The company tends to achieve its mission and vision by ensuring that the customers are provided with the luxurious product that is innovative in accordance with the technology, design and experience. Moreover, the company has reduced its promotion and distribution cost in order to reinvent in the research and development mechanism so that the company can offer innovative vehicles in an effective manner.
Introduction
Tesla Motors was founded by Marc Tarpenning Martin Eberhard in the year 2003 and ever since, the company’s business has been observing the positive bottom-line. The company went public in the year 2010 and the company’s gross profit is found to be $456.26 million total with the total revenue of $2.44 billion. The company has been named after Nikola Tesler who designed the induction motor and developed the alternating power transmission. The company’s vision towards producing the eco-friendly products has made the company most innovative, whereas its mission towards making its products accessible and affordable to its customer indicates the company’s high inclination towards its vision. The company has been offering the electric cars to its customers at an affordable price, which provides the company with a pricing advantage against its competitors and increases the company’s potential to grow by capturing the market share (Tesla Motors, 2016a).
The company is objectified towards producing its electric cars under the cost of $40,000 per unit by the end of 2017, which eventually indicates the company’s inclination towards making electric cars prominent among its customers. The company has achieved several awards for its lean production and outstanding performance over the period of years. The company is known towards adapting its products towards being environment friendly since 2012 with the release of Roadster and ever since, the company has produced Model S Sedan and Model X SUV with the enhanced features that have won the titles for being the World’s Green Car. The company focuses on optimizing its pricing strategy while producing the vehicles that provide customers with safety and comfort throughout their driving experience (Tesla Motors, 2016a).
The company is observed to be positively effected by its external environment because the customer and legislative focus towards environment friendly products has been increased. The government has been offering subsidy to the companies that are aimed towards the production of environment friendly vehicles with alternative energy, which eventually has increased the profitability of the company (Tesla Motors, 2016a). The company has been facing direct competition from Mercedes, Audi and BMW, which are considered as one of the pioneers in the automobile industry and hence, these competitors have enjoyed increased market share and possess loyal customers. In this manner, the Tesla has to strive towards attracting and retaining its customers considering the strong brand image of its competitors that eventually attracts the high-end customers.
The automobile industry for alternative energy cars is new, which eventually indicates the long-term profitability of the company and provides the company with the opportunity to acquire market share. The global sales for the passenger cars was observed to be 72.37 million units since 2014 to 2015, whereas 73.9 million units are projected to be sold in the year 2016. In this manner, Tesla Motors has the opportunity to enhance its market share as the sales in the automobile industry are projected to increase (Statista, 2016).
Customer Analysis
The customers of the Tesla Motors are segmented on the basis of geographic, demographic, behavioral and psychographic segmentation. In accordance with the geographic segmentation, the company has been operating worldwide by means of its online purchasing mechanism. However, the company has developed its distribution centers and supercharging stations in the United States in order to target the customers on the geographical basis. This is basically due to the fact that the U.S market is considered as the largest automobile market in the world in accordance with the number of sales. It has been inferred that 7.7 million units of cars were sold in U.S in the year 2014, which eventually indicates the high market potential for the automobile companies (Statista, 2016).
The demographic segmentation of the customers incorporates the customers on the basis of age and occupation. In this instance, Tesla Motors targets the individuals aged between 22 to 40 years, because the individuals from this age group are considered technology savvy and are able to adapt to the new features introduced by the company. Similarly, the geographic segmentation based on the occupation incorporates the customers who belong from the upper-middle class and upper class, and possess the adequate level of income to spend on purchasing a luxurious vehicle offered by the company (Lowry, 2014).
The behavioral segmentation accounts for the customers who are highly inclined towards purchasing the environment friendly products and reduce the carbon emission by using the product. In this manner, these customers are highly prone towards incorporating a positive buying behavior due to their preference of purchasing environment friendly product than the traditional automobiles. Similarly, the psychographic segmentation incorporates the high-end customers who are inclined towards purchasing the most innovative products in order to enlighten their luxurious lifestyle and becoming the early technology adaptors (Lowry, 2014).
The overall segmentation of the customers indicates that the customers are highly influenced by the innovation and ease of use offered by the product, as it reduces the forthcoming expenses related to the gasoline prices of the company. Similarly, the customers who possess adequate funds to purchase the product and prefer the environment friendly products are highly inclined towards the purchase. Moreover, the customers are technology savvy and hence, they are approached by the social media marketing of the company and due to the intriguing features of the product, the customers visit the company’s website to acquire adequate knowledge about the vehicle. Afterwards, the customers engage in the buying behavior via placing their order online, however, the customers who are intrigued by the display of the vehicle also engage in the buying process by visiting the distribution center of the company.
Targeting and Positioning
The company has been targeting the customers on the basis of the behavioral segmentation, in which the high-end customers who want to maintain their life style by purchasing the innovative products with a high inclination towards buying the environment friendly product. This segment has been targeting because the company is attracting the niche customers who want innovative but environment friendly vehicle. These customers perceive the product as a means towards reducing the negative environmental impact and hence, their attitude towards using such products is attractive for the company to target such customers (Forbes, 2015).
The positioning strategy of Tesla Motors incorporates the high value by means of providing the customers with the luxurious and innovative product at low cost. The company offers high-end product at the cost that is comparatively lower than its competitors, which eventually develops high value for the company. In this manner, the company has been offering the high value product for the lower price, due to which the customers are highly attracted towards incorporating the positive buying decision (Musk, 2013; O’Brien, 2016).
Marketing Strategy
Product Strategy
The most prominent featured offered by the Tesla Motors incorporates its inclination towards producing the environment friendly vehicles that are also considered as a green alternative to the normal fuel consuming cars. The company’s products, specifically Model S is designed to reduce the carbon footprint from the environment and also offers the exterior made up of lightweight aluminum and boron steel, which makes the exterior of the company durable with enhanced strength. The vehicle is designed to move the cargo volume that makes up about thirty-one cubic feet, which eventually indicates the vehicle’s usability. Moreover, the customers are provided with a single and a dual charger which can provide fifty-eight miles after being charged for eight hours. The product is considered simple and easy to use in accordance with the charging mechanism because the customers can charge the vehicle with the simple electric outlets existing in their homes (Tesla Motors, 2016b).
The product is also equipped with the entertainment features and hence, it comes with a 200 Watt stereo system that supports the MP3, MP4 and AAC formats while providing HD radio features. The 17-inch touchscreen is also installed which provides the customers with the ability to communicate and control the driving mechanism while providing Bluetooth connectivity to support the online streaming and hands-free calling mechanism. The company has also developed Supercharging stations in the United States that are objectified on providing free charging services to its customers. The company has located the Supercharging stations at 119 locations in Canada and United States in such manner that the cross country travel has been made possible and charging station is within the reach of 244 miles (Tesla Motors, 2016b).
Pricing Decision
The company incorporates the low cost pricing strategy by means reducing the cost of inventory, marketing and distribution. The company also utilizes the tax exemptions and federal tax credit that is offered by the government, which eventually reduces the overall cost. The prevalence of tax exemptions and federal tax credit is incorporated due to the lack of negative effects on the environment. The pricing incentives are also provided by some States that help the company to increase its profitability. The prevalence of incentives and low cost for the customers due to no usage of gasoline intrigues the target customers who are highly focused towards purchasing the environment friendly products. The company incorporates the value based pricing and hence, it offers innovative product at low cost as compared to the similar products offered by its competitors at high cost (Lowry, 2014).
Distribution Decision
The company does not comprehend the traditional distribution tactics of incorporating car dealers in order to contemplate the sales for the company. The company believes that the hiring of dealers can result in the conflict of interest as they prefer selling the cars that offer more commission, which will increase the cost of the company. Moreover, the company also believes that the franchise dealers may hinder their inclination towards the sales of electric cars due to the traditional prevalence of gasoline cars. The company owns 17 stores in order to provide physical and visual interaction to the customers, however, on-demand test drives are provided to the customers who are willing to pay for it (O’Hara, 2015a).
In this manner, the inventory at the company’s retail stores is minimized, whereas the customers’ exposure to the vehicle is increased by displaying the vehicle at the shopping malls. The company incorporates the pull strategy and hence, reduces its inventory and engages in the efficient distribution mechanism that initiates from the online order required of the customer to the delivery of the product. The company is focused at the notion that the vehicle as innovative as Tesla requires the innovative means of distribution, however, the company does not engage in integrating with dealer franchises. In this manner, the company reduces the distribution cost in an effective manner by eradicating the prevalence of intermediaries (O’Hara, 2015a).
Promotional Strategy
The marketing objective of the company incorporates the provision of adequate knowledge to the customers about its products and intrigue them towards comprehending a positive buying behavior. The company incorporates the innovative, yet risky approaches in advertising its products because the company takes a pride in not conducting any advertising campaigns. The company is not comprehended with any advertising agency and hence, it does not possess any dealer network. The company is focused on pull strategy in order to advertise its products by means of using the social media platforms, word of mouth and electronic blogs in order to promote its products. The CEO of the company actively engages in communicating the company’s products, future technologies and forecasted products via blogs that are published at the company’s website (O’Hara, 2015b).
The company incorporates the monthly updates in its social media posts in order to provide its target customers with the adequate information about its products. However, the company only uses this strategy only if it intends to target a large customer base and hence, only prominent products are promoted via on-going social media posts. The company has developed a creative web page where the target customers can enlighten themselves with the company’s products, features and relevant product upgrades. The company does not engage in advertising its products via the traditional method, however, it focuses creating buzz among the customers by means of enlightening the innovative features of its products (O’Hara, 2015b).
The company is highly focused on minimizing the cost incurring from the traditional 4P of marketing mix but it tries its best to provide customers with the adequate customer experience. In this manner, the company promotes its vehicles by incorporate displays at the showrooms and malls rather than engaging in promoting via dealers. The company does not incorporate the traditional manner of retail and hence, sales personnel are not hired in order to generate sales for the company and hence, sales promotion strategies are not comprehended by the organization. the company offers a nonnegotiable price to its customers and incorporates its purchase mechanism online. Similarly, the company encompasses the make-to-order strategy in order to reduce its inventory cost (Lowry, 2014). In this manner, the company has not only evolved the dimensions of the automobile industry, but it also has changed the dimensions of marketing. Therefore, the company intrigues its customers towards developing a positive buying behavior because its products are highly innovative rather than widely promoted.
Conclusion
Tesla Motors has been targeting the high-end customers who are inclined towards purchasing the environment friendly and innovative vehicle. The company has been offering the luxury vehicle at a comparatively low cost, which eventually results in targeting a large number of potential customers. The company does not incorporate the standard marketing mix and incorporates the innovative means of promotion, in which the social media and blogs are used to intrigue the customers. The company does not possess the any retail franchises and promotes its product by displaying it at exclusive malls. The company incorporates the online purchasing mechanism to incorporate its sales and uses a pull strategy in which the product is made after the customer has placed the order, due to which the company’s inventory cost also decreases. The company offers the innovative product which provides the customers with the advanced featured, ease of use and environment friendliness and hence, the company has revitalized the overall mechanism of marketing mix by adopting the innovative marketing strategies.
References
Baer, D. (2014). The Making of Tesla: Invention, Betrayal, And The Birth Of The Roadster. Business Insider. Available from: http://www.businessinsider.com/tesla-the-origin-story-2014-10
Forbes. (2015). Tesla's Unique Position In The Car Market Is One Of Its Biggest Strengths. Forbes. Available from: http://www.forbes.com/sites/greatspeculations/2015/07/02/teslas-unique-position-in-the-car-market-is-one-of-its-biggest-strengths/#6ba3616022ec
Lowry, W. (2014). Making sense of Tesla: An investor's guide to a unique company. Market Realist. Available from: http://marketrealist.com/2014/06/teslas-production-plans-tesla-ramping-production/
Musk, E. (2013). The Mission of Tesla. Tesla Motors. Available from: https://www.tesla.com/blog/mission-tesla
O’Brien, K. (2016). Five Marketing Lessons from Tesla. DMN News. Available from: http://www.dmnews.com/marketing-strategy/five-marketing-lessons-from-tesla/article/510913/
O’Hara, M. (2015a). Is Tesla Pursuing the Correct Sales and Distribution Strategy?. Business Insider. Available from: http://marketrealist.com/2015/09/tesla-pursuing-correct-sales-distribution-strategy/
O’Hara, M. (2015b). Understanding Tesla Motors’ Marketing Strategy. Business Insider. Available from: http://marketrealist.com/2015/09/understanding-tesla-motors-marketing-strategy/
Statista. (2016). Statistics and Facts about the Global Automotive Industry. Statista. Available from: http://www.statista.com/topics/1487/automotive-industry/
Tesla Motors. (2016a). About us. Tesla Motors. Available from: https://www.tesla.com/about
Tesla Motors. (2016b). Model S. Tesla Motors. Available from: https://www.tesla.com/ModelS
