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.