Ch. 4 - The Marketing Environment

It comes as no surprise to anyone that the rate of change of the market and its products and services as a function of the changing of its environment has grown exponentially over the last two decades. It used to be that a company's successes and follies took their time to be known as words traveled slowly from ear to ear, almost at Darwinian pace, and reputation slowly formed. Nowadays however, with the entwining of technology and social media into everyday life it only takes one disgruntled customer to inform thousands of people of the terrible service he just received within 60 seconds of having experienced it. The world is ever changing- economy, legislation, social trends, and even international politics all affect the conduct of business, and those who can't adapt will be eaten by the bear, while those who are paying attention get to survive another day.

Just like most companies do, the smart ones in any case, Tesla uses the same platforms that most people choose to use as mediums of complaining to keep customers, potential employees and society at large up to speed with everything they are doing to make them not want to complain. One of the most common sources of streamlined bits of information fed to the masses is Twitter. Telsa uses twitter to inform of upcoming sales promotion events, publish achievements and benchmarks, and even invite people to apply for various positions:

#WattsUp: More than 3.2 million miles have been charged at Tesla Superchargers, offsetting about 130,500 gallons of gas. #GoElectric
— Tesla Motors (@TeslaMotors) September 23, 2013

Engineers interested in working on autonomous driving, pls email autopilot@teslamotors.com. Team will report directly to me.
— Elon Musk (@elonmusk) September 18, 2013

That second tweet is evidence of Tesla's future plans to keep up with the advancement of technological factors in the external market environment. In this particular instance, it seems they are trying to out do Google's own driver-less car- an up-and-coming technology that may one day eliminate human error and slow reaction time on the road. While Tesla is a world leader in their category of vehicles, they understand that there is more to a car than just it's source of power, and invest in developing and innovating every aspect of what makes a car do what it does, and do it better.

Google's Driverless Prototype

In their efforts to conquer external factors that may hinder their progress, Tesla has had, and still has, many battles (some successful others not) against archaic legislation protecting franchised auto dealers from being overpowered by they manufacturers they do business with. It all started in the turn of the previous century when mass production of automobiles was perfected by Ford, it seemed easier for car producers to let someone else worry about the distribution. Franchised dealers began popping up, protected by contract clauses preventing their respective producers from selling within their territory. After decades of lobbying these clauses began taking form in the word of law, and have not been challenged in ages, until Tesla began rocking the boat insisting that there is no reason for them to use dealers, when they could distribute their product themselves and pass the savings onto their clients. Despite the uphill efforts on this front, Tesla is committed to innovating not just the cars we buy, but how we buy them.

Ch. 3 - Ethics & Social Responsibility

There is much debate in recent years over the impact of our consumption needs on the environment. Everything from waste disposal, pollution, and use of natural resources is on the plate in such discussions, where is becomes exceedingly clear that there is no one solution, and not one side responsible for damages or answers- but that an effort must be made on all accounts if we are to bring balance to our world again. One thing is certain- many people look at corporations as the culprits since environmental pollution is widely product based in one way or another, and finger pointing is as part of humanity as driving a car.

In examination of Tesla Motors Corporate Social Responsibility (CSR) we may look fist at the definition of sustainability as it relates to their business model and practices. Sustainability is "the idea that the socially responsible companies will outperform their peers by focusing on the worlds social and environmental problems and viewing them as opportunities to build profits and help the world at the same time."

To begin with, urban pollution in many of the worlds large cities due to exhaust fumes emitted by cars is one of the top on the list of environmental and health concerns. Electric car companies have come and gone over the last few years (Fisker, A Better Place, etc.) trying to give an alternative to the fossil fuel domination of the auto industry, all of which have collapsed due to financial or other factors. Companies producing electric cars face opposition from the natural habit and distrust of the consumer, and the heavy lobbying of oil companies and other auto producers, making it an exceedingly risky endeavor to pursue. Although large car manufacturers produce single models of electric cars, they have no whole-hearted transition in that direction as of yet.

Despite all risks involved Tesla is committed to this long term battle over market share and environment resolution. As mentioned earlier, Tesla is investing millions in the nation wide infrastructure development of the free-to-use Supercharger stations, an expensive move in a risky, virtually non existent market of electric cars (<1% of auto market share 2012). So why invest so much in such an uncertain future? The business side of that argument would say that Tesla is building the foundations for a market to emerge into, allowing them to create the market they would eventually lead in. This of course goes hand in hand with the green ideology that the more people use zero emission vehicles the better- should Teslas market share pick up, the boon to the environment would rise alongside their stock value, and everybody wins.

Ch. 2 - Strategic Planning for Competitive Advantage

There are many car manufacturers all over the world, competing in one of the broadest markets on the planet with countless comparable products. Of these companies, few operate in quite the same fashion as Tesla motors. To put aside the argument of political lobbying in support of fossil fuels, and legal protection of the standing of franchised auto dealers in the United States, it can be generally accepted that a company producing nothing but electric cars sold online with a wholesale price tag is a new species on planet earth.  

In examination of the four P's of Teslas' marketing mix we can see exactly how they stand out from general population of automobile producers, and how exactly they are attempting to change the market as a whole. 

Product Strategies

If you consider the companies long term development plan, it's easy to see that they aim for a greater share of the market than the average luxury car producer. But before we examine that plan we aught to look into unique way in which Tesla entered the market.

Tesla Roadster

Teslas' first production car was the Tesla Roadster, a super charged electric sports car with a starting price tag of $109,000. This luxury sports car that out did many of it's gasoline powered competitors, was produced in limited capacities and purchased by the few who could afford it, and quickly became an image of the exotic.

Model S

A few years later the Model S was announced with award winning features and safety, and a price stating at $69,000, about $40,000 less than the previous model. Although still a luxury level car, Tesla has expressed intention of eventually selling low-cost, high-production cars affordable to the common american, and feeding off of the exotic luxury brand reputation it has earned while entering the car market from the top down. 

Supercharger

Now, remember that development plan mentioned earlier? This was referring to Teslas Supercharger project- an international infrastructure project that aims to cover 98% of main highways and interstates in the US (and parts of Europe and Canada) with high-power 20 minute charger stations that enable long range and worry free travel in electric vehicles, and free of charge. The significance of investment in such a project in conjunction with it's product development ensures giving answers to concerns before they are even asked. Investment in such projects even before the effective production of an affordable Tesla model ensures that by the time they hit the market, peoples concerns over battery range will be void and irrelevant. 

Place (Distribution) Strategies

To the general public in the united states it seems fairly unchangeable that cars are bought at the local car dealers lot. Despite the legal battles that they knew they would face, Tesla embraced Dells' model of sales, where after a visit at a Tesla "gallery" for information and test drive, a perspective consumer may then go online in the comfort of his own home, choose the details he wants in his car, click "order", and 5-11 business days later the his new purchase is delivered to his door. Until now production cars were never built to order, never sold online, and whats more- never sold directly from the manufacturer to the consumer (within the US). Despite numerous legal battles and political lobbying put forth by worried and defensive auto dealer associations nation wide, Tesla is committed to the concept of dealing with the consumer directly and provide their specialized service. The general question in distribution strategies is usually "where?", and much like many other industries in the .com era, Teslas answer is "wherever!"

Promotion strategies  

Tesla's promotion so far is mostly based on word of mouth and general unprompted media. There are no commercials, ads, or billboards. Since the release of the Roadster the name "Tesla" was spoken with a reputation of high-end and exotic luxury, a reputation that yields great spread of word of mouth through car lovers and media alike. There almost seems no need to advertise the brand at this point in time, a fact that may change when the affordable models are expected to reach mass-markets. In addition, Teslas legal battles with local and national auto dealers, and other such publicity, are prompting media coverage in many outlets, spreading the brands recognition and "Robin Hood" like activities. 

Price Strategies

Much about pricing can be inferred from the above- starting from the expensive and working down the price as the reputation is seeded, is one aspect of these strategies. But the other very significant one was not yet addressed directly- wholesale prices. It may seem a little obvious to some, but still begs discussion, that the fact that consumers are able to buy the cars directly from the manufacturer means that there is no markup (~9%) that usually results from buying cars via dealerships. Tesla does not lose money from conducting business this way since they are selling cars to consumer for the same price they would have to a dealer, yet the consumers benefit directly.   

A second aspect that is unique to any car that uses "green" forms of energy, and is independent of Teslas marketing, yet relevant, is government subsidies. Many state governments shell out benefits when consumers purchase electric cars (California will give a buyer $10,000 back from the price tag) as further motivation. This benefits not only the consumer who enjoys the discount, but also Tesla- who enjoys a more attractive market price appeal without sacrificing any profit margins.