Executive Summary
Tesla is an energy firm whose main objective is to be the catalyst for clean and renewable energy items in the contemporary marketplace. Tesla’s cars, such as model S, have been praised for their zero-emission abilities as the organization challenges other industry players to adopt zero-emission strategies (Tesla). Additionally, the firm produces roof tiles that use the sun rays and heat to produce energy that can power a two-bedroom house for more than 20 hours.
Tesla’s profit margins have increased from $ 3.70 billion in 2015 to $ 25.71 billion in 2020. The firm can attribute its profit margins to the aggressive expansion strategy as Tesla aims to maximize the production of clean energy products and supply them to international markets. Furthermore, the firm managed to increase profit margins, although the automotive and total revenue reduced. The trend can be attributed to the company’s sale of more Model 3 vehicles, which made it benefit from the increased volumes and fixed cost base. Besides, the firm benefited from the self-driving features, which attracted more customers.
The organization has expanded production capabilities by building large factories that will manufacture lithium batteries and solar panels. The organization has recorded increased efficiencies in the solar business since it can install residential houses with solar panels in a single visit rather than three visits as experienced before. In turn, Tesla has reduced costs associated with solar panel installation. However, the firm’s acquisition of a $ 2.6 billion solar city project shook the investor’s confidence, which affected Tesla’s stocks, but it did not adversely influence Tesla’s revenues.
Tesla Company’s success is based on its mission “to speed the global transition to sustainable transport”. As such, the firm offers electric cars to the consumers as they share the vision of adopting clean energy use (Tesla). Consequently, Tesla is providing consumers with safe luxury vehicles with enhanced performance and energy-efficient.
The essential aspects that drive demand for electric vehicles entail gasoline prices, availability of battery charging centers, the durability of the batteries, car features, and the green movement. Tesla did not innovate electric vehicles, but it has transformed the sector by introducing components such as luxury that have attracted some market segments. The firm needs a strategy to penetrate local and international markets and lower the operating costs of electric vehicles. The firm also needs to expand its product line to target low-income earners who value clean energy emissions. Furthermore, Tesla needs to incorporate advertising as part of its marketing strategy to steer a clear narrative about its products and eliminate any doubt, fear, and uncertainty arising from promotion campaigns sponsored by industrial competitors.
1. Company Background
Tesla Inc., formerly known as Tesla Motors, is an American electric automobile manufacturer. The organization was founded in 2003 by Eberhard and Marc Tarpenning. The corporation sourced its funding from Elon Musk, who contributed over $30 million and became the firm’s chairperson at the start of 2004. Tesla Company designs, creates, produces, and sells electric cars and stationary energy storage products. The firm operates primarily in the US and Norway, China, England, and internationally (“Tesla’s Mission”). In 2008, Tesla released an electric car named the Roadster. The release of the Roadster illustrated Tesla’s advanced battery and electric powertrain technology. All subsequent models in Tesla’s production were all-electric, combining efficiency, safety, and performance. Today, the company manufactures both electric vehicles and scalable clean energy storage items. Tesla challenges the world to stop using fossil fuels and adopt clean energy to protect the environment.
2. Automotive and Energy Industry Analysis
a. Industry Overview
Over the years, the automotive industry has transformed. However, recently, governments worldwide have agreed to limit the use of fossil fuels as the world transition to clean energy sources (Dudovskiy). The environmental restrictions will shake the automotive markets as vehicle manufacturers such as General Motors and Toyota struggle to meet the new measures.
b. Tesla’s Competitive Analysis
The automobile industry is continually evolving, with the vehicle manufacturers adopting new technologies to remain competitive. For example, with the discovery of electric vehicles and optional fuels like shell gas and CNG, vehicle manufacturers are investing in research and development to attract customers and drive growth via the utilization of renewable energy sources such as solar. Tesla’s vehicles are electric and compliant with the US laws concerning emissions and the use of renewable energy sources.
Regardless of increased vehicle sales growth, the automobile industry has experienced car recalls due to different technical dysfunctionalities and non-compliance to government policies (Dudovskiy). Also, increasing customer bargaining power has shifted the automobile market from demand to supply. Increased competition and alternatives for the customer to choose provides clients with bargaining power.
The clean energy industry has evolved as the world transitions to clean and renewable energy sources. The sector provides market opportunities for firms investing in energy as countries start eliminating fossil fuels. In this context, Tesla is ahead of its competitors since all the products use clean energy (Topliff). Thus, the firm has a competitive advantage over firms such as General Motors, increasing market share in countries that have fully transitioned to clean energy sources like Norway. The firm is set to produce lithium batteries that could go one million miles before needing replacement, making electric cars cheap to operate than conventional ones.
c. Tesla’s Brand Positioning
Tesla’s brand positioning depends on market segmentation. The firm uses mono-segment positioning, whereby each of its products and marketing program focuses on one market (Odhiambo and Wanjira 85). Tesla positions itself among target vehicle owners concerned about fossil fuels’ adverse environmental influence (Dudovskiy). As such, Tesla’s items are perceived to be expensive for average customers, and thus, the organization’s target consumer segment is wealthy households and individuals. Besides, Tesla utilizes anticipatory brand positioning for the market segment with low turnover but anticipates the increase in turnover in the future.
In the past few years, Tesla has also been developing a third electric car for a different market. Initially, consumers perceived the majority of the company’s products as expensive, lucrative, and mainly suited to high-end vehicle owners. However, Tesla Model 3 is positioned as a starter luxury electric car that targets middle-and upper-middle-class individuals (Dans; Waters). Tesla Model 3 is priced relatively lower than the previous models, explaining the increased demand for the product among consumers.
d. Tesla’s Brand Personality
Tesla Company’s brand personality is connected to Elon Musk. Elon Musk has transformative ideas to change the globe and prides himself in challenging the status quo. Elon’s transformative personality is mirrored in the company’s products that aim to transform the world into zero-emission by adopting sustainable transportation.
Elon’s personality of challenging the status quo, which is also viewed as a ruler archetype, is also reflected in the company’s products. Dvornechuck notes that Tesla shares the ruler archetype because it aims at crushing the competition. Undeniably, Tesla has been striving to remain competitive and a market leader in electric vehicle (EV) production by adopting and incorporating new technologies in each of its new models. For example, the company recently launched new battery cells for its electric cars, which are expected to provide five times the energy, six times the power, and 16 percent more range than the old battery cell (Dobuski and Schneider). While this move by Tesla aims to make its products more durable and cost-effective, it is also likely that the innovation targets to crush other electric vehicle manufacturers that are yet to attain this level of advancement. In essence, Tesla’s brand personality can be described as a ruler archetype and transformative.
3.Tesla Buyer Behavior Analysis
a. Target Market Segments
Tesla’s Model 3 electric car is popular among consumers. When it was released in 2016, Tesla received over 300,000 reservations for the model. The exceptional features of Tesla’s products attract customers. For instance, Model 3 is an eco-friendly vehicle that motivates individuals to buy since it does not pollute the environment, enhanced performance and safety (Topliff).
Tesla targets eco-friendly clients who prefer electric or hybrid vehicles. This market segment is less elastic, which implies that it does not change with fuel prices. Thus, the customer’s purchase behavior is impacted by the need to reduce carbon emissions.
Tesla’s products, such as model 3, have become affordable to many people. The car is cheaper compared to gasoline vehicles in its category. The firm targets business executives who reside in the city, eco-friendly, and tech-savvy with its products. Most of the clients are wealthy and desire to own luxury cars. Additionally, Tesla strives to expand its market segment to reach a broader consumer base by focusing on individuals aged 20 to 40 (Dudovskiy). Thus, the firm challenges its target customer base to adopt Tesla products that guarantee safety, luxury, durability, and cost-effectiveness.
b. Customer Journey Analysis
Customer journey analysis in Tesla involves mapping the customer’s journey and analyzing their experience with the company and the products. This analysis can be conducted by assessing the consumer’s touchpoints, which are the points of interaction between the firm and consumers. As noted by Aichner and Gruber, the quality of the customer-company interactions affects the manner in which a brand is perceived, the customer’s willingness to purchase, and customer satisfaction (131). So far, Tesla has significant touchpoints with its customers, suggesting that its customers have a remarkable experience with the brand.
Tesla customer’s journey analysis can be categorized into five primary touchpoints: engagement, buying, use, sharing, and completion. At the engagement stage, Tesla sets the bar high and deviates from other companies’ traditional engagement strategies. Most notably, Tesla interacts with its customers through in-store showrooms where the firm’s employees communicate to potential buyers about the car models’ features and energy efficiency, regardless of whether a purchase is made. Surprisingly, Tesla does not indulge in other forms of advertisements. However, the close interaction between the company’s salespersons and buyers enhances the latter’s satisfaction at the engagement phase because the consumer receives prompt responses to questions they may have regarding the car models.
Tesla also has a unique consumer touchpoint at the buying stage, enhancing customers’ experiences and satisfaction with the brand. Most notably, unlike other vehicle manufacturers who sell through a third-party franchise, Tesla adopts a direct-to-consumer selling model. The products are sold either at the in-store digital design center or through the company’s website, where consumers can place orders in the comfort of their homes. This selling model improves customer experiences by enabling them to directly interact with the manufacturer and avoid the hassle of dealing and negotiating with car dealers.
After purchase, the customer journey proceeds to the use, share, and completion phase. Tesla enhances its consumer touchpoint at the use stage by enabling consumers to receive free services on some vehicle repairs. Recent data shows that 80 percent of the firm’s repairs are done outside a service center (“Advancing Automotive Service”). This aspect improves customers’ experience at the use stage as they can seek technical services from the manufacturer when and where it is required. Furthermore, recent surveys show that 90 percent of the car owners are satisfied with the brand as it lives up to the owners’ expectations at the time of purchase (Hanley (b). This information cements the fact that Tesla understands its customers’ needs and optimizes their experiences by manufacturing and selling products that meet their expectations.
As a result of the consistent and highly exceptional experiences that Tesla consumers receive throughout the journey, many are fascinated to share their experiences with the brand with others through social media sites. This aspect is evident from the several positive reviews that customers share on social media and the company’s website. As a result of the satisfaction received from prior purchases, some also exhibit the intent of upgrading their cars to the firm’s latest car models. Fundamentally, Tesla appears to have an adequate understanding of its customer expectations, explaining why the company has several improved consumer touchpoints.
4. IMC Planning Process (PP).
a. IMC PP in Tesla
Tesla follows a unique IMC PP process that resembles the AIDA model. This communication model adapted in advertising involves creating awareness, interest, desire, and ultimately an action (Egede 140). Tesla uses the AIDA model to communicate its message through the four primary steps.
At the first step, Tesla creates awareness about its brand through the media, the Internet, blogs, and interviews posted on YouTube. The second IMC planning process involves comprehension, whereby the company educates its consumers about its environmentally sustainable products. This step is mainly conducted through channels such as blogs and interviews. The third step of the IMC planning process is conviction, where the firm, through its sales representatives, convinces potential consumers to make a purchase. The process ends at the action step, where the consumer eventually purchases the vehicle.
b. How Well the Brand Implements the IMC Planning Process
Undeniably, Tesla adequately implements the IMC planning process, which is validated by the high sale of EVs that the company has experienced over the years relative to its competitors. For example, in 2019, Tesla sold more than 300,000 units of Tesla Model 3, which was approximately three times the sale of BAIC EU-Series (Wagner). This statistic suggests that Tesla creates awareness about its brand and adapts effective strategies to trigger a purchase.
c. Incorporation of IMC PP Tools
Besides implementing an effective IMC planning process that drives up sales, Tesla also incorporates cost-effective IMC PP tools. The tools are cost-effective because they impose minimum costs, yet, they generate a consistent message that attracts a broad audience for the company’s products. For example, it is estimated that Tesla spends about $6 per car on advertising, which is significantly lower than what other vehicle brands spend on adverts (Hanley (a)). Some of the IMC tools used by Tesla include in-store advertising, direct marketing through social media sites, and personal selling. Although Tesla strives to incorporate cost-effective IMC PP tools, they are seemingly inadequate because they do not target all the potential target markets, such as consumers who rely on traditional media for information.
5. IMC Tool (Components) Design
a. Tools Available to the brand
Unlike other EV manufacturers, Tesla utilizes a unique set of marketing communication tools that differ from traditional promotional tools. The primary tools available to the company are blogs, interviews, the Internet, and media. Over the years, Elon Musk has mastered using YouTube videos to promote the company’s products. Tesla also relies on blogs posted on the company’s sites to communicate specific messages to its consumers. Furthermore, the Internet and Media are among Tesla’s number one strategies for generating buzz about its products. Often, Tesla’s product launches are covered by content sites such as Medium and the Internet on sites such as Twitter and Facebook.
b. The Use of the IMC Tools
i. Sales promotion
Tesla relies on media, the Internet, blogs, and interviews to initiate sales among its consumers. Most notably, the buzz generated through these tools stimulates the demand for the product among consumers. Nonetheless, the exclusive reliance on online marketing channels limits sales promotion to social media users only.
ii. Advertising
Media, the Internet, and interviews are also used in advertising in Tesla. For example, when the company is about to launch a new car model, it hints about it on social media sites such as Twitter. These tools help create awareness and build hype about the product among consumers.
iii. Personal Selling
Personal selling in Tesla is mainly conducted in the company’s stores or through social media sites such as Facebook. As a personal selling tool, Facebook is primarily used by sales agents who have adequate knowledge about the company’s environmentally friendly products. In essence, social media is an ideal tool for personal selling as it enables the firm to reach, inform, and encourage distant consumers to purchase the products.
iv. Direct Marketing
Blogs and hashtags are the primary IMC tools used in direct marketing in Tesla. Hashtags are mainly used to direct consumers to the company’s website, where the products are displayed. This technique is useful because it helps drive traffic to the company’s website and increase consumer engagement with a target product like newly launched car models such as Tesla Model 3.
6. Recommendations
a. Spend on advertising
Tesla survives on a ZERO advertising policy. Despite spending nothing on paid ads, the firm generates approximately 300,000 units of sale each year. However, as noted in the analysis, competition in the industry has become more fierce, and the firm needs to remain competitive and maintain a favorable perception among consumers. As such, Tesla should indulge in paid advertisements to help increase the brand’s awareness among consumers. As noted by one of the company’s shareholders, advertising the Tesla brand could also help mitigate and dilute substantial fear, uncertainty, doubt, misinformation from campaigns sponsored by competitors and detractors worldwide and steer its narrative more favorably (Light). Advertising could also help target consumer segments that rely on traditional media channels and drive up EV sales.
b. Penetrate International Markets
As noted in the analysis, the world is gradually transitioning to clean energy, and countries are beginning to eliminate fossil fuels. This transition creates an opportunity for Tesla to expand its presence in other countries besides the United States and generate multiple revenue streams. Some of the market penetration strategies that the company could use include foreign direct investment (FDI) and forming joint ventures with domestic firms that focus on the production of clean energy in host countries. The proposed change targets global markets, which may be interested in purchasing Tesla’s EV due to the move towards clean energy.
C. Expand the Company’s Product Line
The analysis reveals that a majority of Tesla’s products are priced for high-end consumers. Not until recently did the company manufacture a starter-luxury car, which is still relatively expensive for low-income consumers. The analysis also reveals that consumers have high bargaining power and multiple alternative brands to choose from in the industry. Therefore, for Tesla to attract and retain its consumer base, it should expand its product line to include vehicle models that are affordable to other consumer segments other than high-income earners. The proposed change would mainly target low-income earners that value clean energy emissions.
Works Cited
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“Tesla’s Mission is to Accelerate the World’s Transition to Sustainable Energy.” Tesla. www.tesla.com/about. Accessed 26 Nov. 2020.
Aichner, Thomas, and Gruber, Benjamin. “Managing Customer Touchpoints and Customer Satisfaction in B2B Mass Customization: A Case Study.” International Journal of Industrial Engineering and Management, vol. 8, no. 3, 2017, pp.131-140.
Dans, Enrique. “Tesla, The Model 3 and the Market.” Forbes, 4 Aug. 2018, www.forbes.com/sites/enriquedans/2018/08/04/tesla-the-model-3-and-the-market/?sh=61ecd56c77ed. Accessed 26 Nov. 2020.
Dobuski, Michael, and Schneider, Leighton. “Tesla’s New Battery Technology Could Drive Down Cost of Electric Cars, Company Says.” ABC News, 26 Sept. 2020, abcnews.go.com/US/teslas-battery-technology-drive-cost-electric-cars-company/story?id=73222745. Accessed 26 Nov. 2020.
Dudovskiy, John. “Tesla Segmentation, Targeting, and Positioning: Overview.” Business Research Methodology, 13 Oct. 2018. research-methodology.net/tesla-segmentation-targeting- and-positioning-overview/. Accessed 26 Nov. 2020.
Dvornechuck, Arek. “Brand Personality: Traits of Top Brands.” Medium, 10 Oct. 2019, ebaqdesign.medium.com/brand-personality-traits-of-top-brands-19c58890770f. Accessed 26 Nov. 2020.
Egede, Ehikwe Andrew. “Strategic Evaluation of How Advertising Works on Product Promotions.” Developing Country Studies, vol. 3, no. 10, 2013, pp. 138-148.
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Hanley, Steve (b). “Consumer Reports Owner Satisfaction Survey Puts Tesla #1 Yet Again.” Clean Technica, 21 Dec. 2017, cleantechnica.com/2017/12/21/consumer-reports-owner-satisfaction-survey-puts-tesla-top-second-straight-year/. Accessed 26 Nov. 2020.
Light, Larry. “The Natural: Elon Musk’s Non-Traditional Approach to Tesla Advertising.” Forbes, 1 Jun. 2020, www.forbes.com/sites/larrylight/2020/06/01/the-natural-elon-musks-non-traditional-approach-to-tesla-advertising/?sh=252f4788512a. Accessed 26 Nov. 2020.
Odhiambo, Edwin, and Wanjira, Jane. “Strategic Positioning and Competitive Advantage of Commercial Banks in Uasin Gishu County, Kenya.” International Journal of Current Aspects, vol. 3, no. 2, 2019, pp.83-97.
Topliff, Justin. “How Tesla is Changing Consumer Behavior, the world, and the Way We Buy Cars.” www.linkedin.com/pulse/how-tesla-changing-consumer-behavior-world-way-we- buy-justin-topliff. Accessed 26 Nov. 2020.
Wagner, I. “Best-Selling Plug-in-Electric Vehicle Models Worldwide in 2019.” Statista, 12 Feb. 2020, www.statista.com/statistics/960121/sales-of-all-electric-vehicles-worldwide-by-model/. Accessed 26 Nov. 2020.
Waters, Richard. “Tesla Targets Mass Market with New Model 3.” Financial Times, 1 April 2016, www.ft.com/content/8913fdc2-f7c3-11e5-803c-d27c7117d132. Accessed 26 Nov. 2020.
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