When the word "advertising" is used, the first thoughts to pop into most of our heads are all those annoying, interrupting TV and radio commercials (with a handful of positively entertaining ones) that give us a chance to use the bathroom during a show, and maybe a few billboards. If you're having a hard time remembering what a Tesla commercial looks like, that's probably because they don't have any. That's right- this 10 year old car company who's stock grew five times its values since January of this year, and who's net worth is in the $20 billion range, doesn't advertise. Yet.
Tesla does utilize social media very well, however this is still not in the realm of paid advertising. Tesla does not have an ad agency nor and internal advertising campaign at this point, as many believe it's too soon to worry about such things ,especially with such positive growth coming along on its own. This may very well be because one thing Tesla has a lot of (as anyone with a penchant for building their own version of a boat and then rocking other peoples old fashioned wooden rafts) is Buzz. Anyone who is even slightly interested in cars, and almost anybody with a hobby of gadgetry knows what Tesla is, despite never having taken a bathroom break on their expense. It's hard to say exactly how this comes about, but information does tend to have a life of it's own once it reaches the infinitely long arms of the internet and social media- and if people are naturally curious enough about what you have brewing it seems advertising is not much needed.
Between company posted tweets, news about the latest scuffle with whining auto dealers, and never ending innovation in technological coolness (Tesla invests most of its revenue back into R&D), there is enough to attract curious people seeking all sort of interesting stories to read with their morning coffee.
Now, I did say "yet" earlier in regards to the no-advertising-necessary mentality, and intentionally so. Thus far, Tesla was targeting a very niche target market that seemed to be drawn in all by themselves. However, CEO Elon Musk has already been openly discussing the 2017 estimated release of a $30,000, 200 mile range affordable sedan, to be released to a wider target market than the current luxury models, shortly after the completion of the major Supercharger project. At that point, the market being targeted is no longer niche, and the market development will require more fishing than before in order to sustain sales in the scale they expect.
Sunday, October 27, 2013
Monday, October 21, 2013
Ch. 14 - Marketing Channels and Retailing
The fundamental concepts behind utilizing expansive or specialized marketing channels and retailers was always to get your product out to the most amount of potential buyers possible. In the pre-2000's world, this usually meant having product presence or retail in as many physical locations as possible. Since most commerce up until then was done in-store, this was always the best practice for mass produced products of pretty much any kind. In order to get these products out there, marketing channels were utilized so that manufactures didn't have to worry about the product once it was off the assembly line. In today's world, however, where anything and everything can be ordered online (and quite often with not shipping charges), physical product presence doesn't necessarily need to be as extensive, so much is a social awareness for it. All people need to know is that your product is out there. That is, if enough people know about a specific product and its reputation is well founded, people don't need to find it in a store to purchase it- they just go online.
Another concept that is of great importance to both sales and service is mark-up. Every intermediary in the marketing channel between the producer and final consumer will mark up the price at their level in order to make their profits. A producer will sell their product to a wholesaler at $X, the wholesaler then charges the retailer $X+10%, and the retailers charges the consumer $(X+10%)+10% (10% being a very modest markup in the world of retail).The more links in the chain the greater the markup. The consumer at the bottom of this chain ends up paying an addition of 21% (again, being modest) that essentially pays the way for the entire distribution line.
So once again the recurring question- in this world of online shopping, where a direct link can be established between customers and producers, where anyone can buy anything online, is the entire chain of distribution even necessary? Could we not, at the very least, remove a few links in the chain?
Tesla Motor does exactly that. Based on the Dell Sales Model (1994), Tesla customers can order their cars, online with the specifications they desire, and have their cars shipped to their houses, all while saving on all the marking up done along the chain. While there are many Tesla owned store-fronts, these are more of the informative institutions (product research, test driving, etc.), sales being conducted mainly online. Tesla doesn't need the power of quantified retail real estate to reach customers, since their product can be bought anytime and anyplace.
Another concept that is of great importance to both sales and service is mark-up. Every intermediary in the marketing channel between the producer and final consumer will mark up the price at their level in order to make their profits. A producer will sell their product to a wholesaler at $X, the wholesaler then charges the retailer $X+10%, and the retailers charges the consumer $(X+10%)+10% (10% being a very modest markup in the world of retail).The more links in the chain the greater the markup. The consumer at the bottom of this chain ends up paying an addition of 21% (again, being modest) that essentially pays the way for the entire distribution line.
So once again the recurring question- in this world of online shopping, where a direct link can be established between customers and producers, where anyone can buy anything online, is the entire chain of distribution even necessary? Could we not, at the very least, remove a few links in the chain?
Tesla Motor does exactly that. Based on the Dell Sales Model (1994), Tesla customers can order their cars, online with the specifications they desire, and have their cars shipped to their houses, all while saving on all the marking up done along the chain. While there are many Tesla owned store-fronts, these are more of the informative institutions (product research, test driving, etc.), sales being conducted mainly online. Tesla doesn't need the power of quantified retail real estate to reach customers, since their product can be bought anytime and anyplace.
Sunday, October 13, 2013
Ch. 6 - Consumer Decision Making
Need Recognition
"I need to get from A to B. I should buy a car"
Information Search
Let's face it, very few people decide to buy a car because they happened to see one in the window on their way to Starbucks, and they just had to have it. For the most part, the vast majority of car shoppers engage in more research and effort than they did on their college final papers. This is most likely because they usually end up paying more than they have in their bank account at any given time to have the car they want, and will spend the next few years paying it off.
With the exception of well-to-do idealists who would buy a Tesla because they can afford to make the statement they believe in without compromising luxury, and people rich enough to get anything for the iconic trendy value, for most people the immediate benefits of electric cars are not yet significant enough to strongly tip the scale in their direction. For the majority of people, in fact, the consideration of overall cost and convenience consideration takes place well before the fuel consideration- when you start up looking for a car, the first question usually is "how much can I pay?", followed (by reasonable consumers) with "what is practical?", and then somewhere down the line, providing the first two don't eliminate the option- "gas or electric?"
Evaluation of Alternatives
Tesla is not in the competitive market of Electric Vehicles. That highly specific market is still too insignificant to be considered competitive on an international scale. Tesla is in the competitive market of Vehicles. Period. And until people start caring about the source of a cars power more than the price or comfort, it will be in the same pool as all the other liquid hyped kids.
So lets talk about price- since that's the first question usually asked. At $69,000 base price, and a wide assortment of impressive technology, Tesla is still very clearly marketed to luxury oriented consumers, which prices it out of reason for the bulk of auto market consumers, much like Lexus. But even with the promise of no gas costs, the initial price and long term maintenance still make it a questionable investment on most people salaries. Now many people who are specifically in the market for luxury cars, who could afford the price tag, would also consider a key topic in that investment- convenience. Why is Telsa better than Lexus?
Now, assuming you are a common luxury car buyer, not necessarily too worried about the environment enough to consider it in balance with your own troubles- why would buying electric make sense compared to the gas fueled competitor? Well, some of the many answers to that are raw responsive power, quiet driving, and not having to worry about rising gas prices. But at this point it's still fair to say that put so simply it is still too good to be true. Well no, you don't have to worry about gas prices- but you do have to consider other factors such as driving range, presence of charging stations (that are still not nearly as ubiquitous as gas stations), charging time- and really many other not yet fully addressed EV issues. With all these things to consider on a daily basis, gas powered vehicles seem easier to deal with since gas stations can be found everywhere, and the average driver doesn't need to be bothered with how far he's driving or plan ahead to know when and where he'll need to refuel.
Purchase
"You had me at 17" touchscreen! I'll take it!"
Post Purchase Behavior
Now what most of us never even consider, is that the majority of cash flow in the auto industry runs in the river called "maintenance and parts". While this is an unavoidable fact, since driving a thousand miles is bound to cause some wear and tear on some thing-a-ma-jigger, it becomes a secondary nuisance if you can't find someone nearby to pop open the hood for you. While many people feel comfortable going to their dealer, many others enjoy shopping for cheaper parts and service at local mechanics. But seeing as only one out of every 100 motors is powered by a battery, and Tesla has less service stations per state than the average person has fingers on a single hand, finding someone to fix it when it starts making that noise you don't like hearing can be an issue.
The bottom line is that there is not yet enough on Tesla scale to tip the balance in their favor on a larger scale at this point in time. The majority of cost conscience and easy minded consumers would still not feel comfortable investing in a Tesla rather than a Lexus (if they could afford it). But as was mentioned in earlier posts- there is a plan to address all such concerns- price, convenience, service- it's all being implemented as I write this, and it is only a matter of time before the pile on the Tesla side of the scale gets larger than the other.
"I need to get from A to B. I should buy a car"
Information Search
Let's face it, very few people decide to buy a car because they happened to see one in the window on their way to Starbucks, and they just had to have it. For the most part, the vast majority of car shoppers engage in more research and effort than they did on their college final papers. This is most likely because they usually end up paying more than they have in their bank account at any given time to have the car they want, and will spend the next few years paying it off.
With the exception of well-to-do idealists who would buy a Tesla because they can afford to make the statement they believe in without compromising luxury, and people rich enough to get anything for the iconic trendy value, for most people the immediate benefits of electric cars are not yet significant enough to strongly tip the scale in their direction. For the majority of people, in fact, the consideration of overall cost and convenience consideration takes place well before the fuel consideration- when you start up looking for a car, the first question usually is "how much can I pay?", followed (by reasonable consumers) with "what is practical?", and then somewhere down the line, providing the first two don't eliminate the option- "gas or electric?"
Evaluation of Alternatives
Tesla is not in the competitive market of Electric Vehicles. That highly specific market is still too insignificant to be considered competitive on an international scale. Tesla is in the competitive market of Vehicles. Period. And until people start caring about the source of a cars power more than the price or comfort, it will be in the same pool as all the other liquid hyped kids.
So lets talk about price- since that's the first question usually asked. At $69,000 base price, and a wide assortment of impressive technology, Tesla is still very clearly marketed to luxury oriented consumers, which prices it out of reason for the bulk of auto market consumers, much like Lexus. But even with the promise of no gas costs, the initial price and long term maintenance still make it a questionable investment on most people salaries. Now many people who are specifically in the market for luxury cars, who could afford the price tag, would also consider a key topic in that investment- convenience. Why is Telsa better than Lexus?
Now, assuming you are a common luxury car buyer, not necessarily too worried about the environment enough to consider it in balance with your own troubles- why would buying electric make sense compared to the gas fueled competitor? Well, some of the many answers to that are raw responsive power, quiet driving, and not having to worry about rising gas prices. But at this point it's still fair to say that put so simply it is still too good to be true. Well no, you don't have to worry about gas prices- but you do have to consider other factors such as driving range, presence of charging stations (that are still not nearly as ubiquitous as gas stations), charging time- and really many other not yet fully addressed EV issues. With all these things to consider on a daily basis, gas powered vehicles seem easier to deal with since gas stations can be found everywhere, and the average driver doesn't need to be bothered with how far he's driving or plan ahead to know when and where he'll need to refuel.
Purchase
"You had me at 17" touchscreen! I'll take it!"
Post Purchase Behavior
Now what most of us never even consider, is that the majority of cash flow in the auto industry runs in the river called "maintenance and parts". While this is an unavoidable fact, since driving a thousand miles is bound to cause some wear and tear on some thing-a-ma-jigger, it becomes a secondary nuisance if you can't find someone nearby to pop open the hood for you. While many people feel comfortable going to their dealer, many others enjoy shopping for cheaper parts and service at local mechanics. But seeing as only one out of every 100 motors is powered by a battery, and Tesla has less service stations per state than the average person has fingers on a single hand, finding someone to fix it when it starts making that noise you don't like hearing can be an issue.
The bottom line is that there is not yet enough on Tesla scale to tip the balance in their favor on a larger scale at this point in time. The majority of cost conscience and easy minded consumers would still not feel comfortable investing in a Tesla rather than a Lexus (if they could afford it). But as was mentioned in earlier posts- there is a plan to address all such concerns- price, convenience, service- it's all being implemented as I write this, and it is only a matter of time before the pile on the Tesla side of the scale gets larger than the other.
Saturday, October 5, 2013
Ch. 5 - Developing a Global Vision
Practically since the invention of the combustion engine the market of motor vehicles was grossly dominated by fossil fuel derived energy. The growth potential and economic success of a company producing nothing but electric cars could be perceived as marginal at best when up against the ubiquity of oil fuel based infrastructure, consumer habit, and the overwhelming insistence on putting our faith in the devil we know.
But before analyzing Teslas' global market initiative in steps and measures, it may be worth while to consider what exactly it is they are getting at. In the 1950's a geo-scientist named M. King Hubbert, published a theory known as Hubberts Peak Theory, that asserted that at some point oil production in the world will reach a peak, and perpetually decline there after. The consequences of such perpetual decline and depletion of crude oil resource would include exponential increases in oil prices, and shutdowns of many industrialized, oil-reliant economies. This worrisome idea caused the U.S. Department of Energy to request a report published as the "Hirsch Report on Peak Oil". Robert L. Hirsch draws on many sources to estimate when peaking will occur, and what mitigation efforts should be in progress to prevent economic collapse, as the report states, the year peak is reached, worldwide economic recession is expected to ensue. The real frighting part of it all is that most projections in this report point to the 2010-2020 decade as the peak reaching time frame.
Now, beyond good intentions and idealistic hopes of saving our planet and our society- this is a market driven world nevertheless. Despite being a young American company, Telsa Motors has been reaching overseas almost with its conception. To date, the company has stores and service stations across Europe, a market share development project as significant as it's local one.
Alongside it's sales and service centers, the Supercharger program projects the infrastructure plans seen in the picture above to be completed by the winter of 2014. Stores, service centers and charging stations are also being implemented in east Asia and Australia, albeit in a slower pace. The bottom line is that the impending effects of the projected peak oil issue apply to all industrialized nations, greatest of which markets are the EU and North America, and a day will come where gasoline prices exceed those of champagne. Despite the ideology involved in being "green" in the current not-yet-imminent-but-mildly-worried world of commerce, the tables are soon to be turned, and those who have already established the alternative will prevail.
While Teslas plans to expand markets into India, Singapore, and further Asian presence, they are met with the general economic issue of out times. Infrastructure for both production and product use, corruption, and poverty in the existing market, burgeoning though it may be, still do not support good FDI returns. Despite being one of the largest economies for luxury, China's population is primarily poor, a problem afflicting a majority of Asian nations. The integration of their electric vehicles require the preparation of infrastructure alongside sales- an unviable endeavor where the sections of the population that can afford to invest in such cars are so small. It is in my opinion that once proper infrastructure is achieved in Europe and the U.S., affordable models are introduced, and Asian markets have further time to stabilize, only then will Tesla have a reasonable capacity to enter into the Asian market and tap into the masses therein.
Whether ideology driven or a market advantage plan is the primary motivation, there is no doubt that in the case of Tesla, good for one will be good for the other.
But before analyzing Teslas' global market initiative in steps and measures, it may be worth while to consider what exactly it is they are getting at. In the 1950's a geo-scientist named M. King Hubbert, published a theory known as Hubberts Peak Theory, that asserted that at some point oil production in the world will reach a peak, and perpetually decline there after. The consequences of such perpetual decline and depletion of crude oil resource would include exponential increases in oil prices, and shutdowns of many industrialized, oil-reliant economies. This worrisome idea caused the U.S. Department of Energy to request a report published as the "Hirsch Report on Peak Oil". Robert L. Hirsch draws on many sources to estimate when peaking will occur, and what mitigation efforts should be in progress to prevent economic collapse, as the report states, the year peak is reached, worldwide economic recession is expected to ensue. The real frighting part of it all is that most projections in this report point to the 2010-2020 decade as the peak reaching time frame.
Now, beyond good intentions and idealistic hopes of saving our planet and our society- this is a market driven world nevertheless. Despite being a young American company, Telsa Motors has been reaching overseas almost with its conception. To date, the company has stores and service stations across Europe, a market share development project as significant as it's local one.
 |
| Supercharger Plans |
Alongside it's sales and service centers, the Supercharger program projects the infrastructure plans seen in the picture above to be completed by the winter of 2014. Stores, service centers and charging stations are also being implemented in east Asia and Australia, albeit in a slower pace. The bottom line is that the impending effects of the projected peak oil issue apply to all industrialized nations, greatest of which markets are the EU and North America, and a day will come where gasoline prices exceed those of champagne. Despite the ideology involved in being "green" in the current not-yet-imminent-but-mildly-worried world of commerce, the tables are soon to be turned, and those who have already established the alternative will prevail.
While Teslas plans to expand markets into India, Singapore, and further Asian presence, they are met with the general economic issue of out times. Infrastructure for both production and product use, corruption, and poverty in the existing market, burgeoning though it may be, still do not support good FDI returns. Despite being one of the largest economies for luxury, China's population is primarily poor, a problem afflicting a majority of Asian nations. The integration of their electric vehicles require the preparation of infrastructure alongside sales- an unviable endeavor where the sections of the population that can afford to invest in such cars are so small. It is in my opinion that once proper infrastructure is achieved in Europe and the U.S., affordable models are introduced, and Asian markets have further time to stabilize, only then will Tesla have a reasonable capacity to enter into the Asian market and tap into the masses therein.
Whether ideology driven or a market advantage plan is the primary motivation, there is no doubt that in the case of Tesla, good for one will be good for the other.
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