My chosen product in this case is for a Tesla Model S. This product is an electric car, but one that features luxury styling and features. The target market can be defined in a number of ways. First is income, as one needs to have a certain amount of money to buy this car. The Model S. competes as a luxury vehicle, and therefore it has a target market that fits into a certain income characteristic. The target market is also likely to be highly educated, as this is correlated not only with the market for luxury cars but the market for electric cars as well. Moreover, the Model S. can be segmented by geography. Tesla only sells in certain places, and does not have a large dealer footprint. Most of its sales are in areas where it has a concentration of dealerships, and also where it has the infrastructure of Superchargers that can assist with longer-distance highway driving. Tesla’s market is also fairly young, especially for the luxury car market (LeBeau, 2013)
The competition is generally defined as other luxury vehicles, rather than other electric vehicles. Tesla will have models released at a later date that target the mainstream electric vehicle market, but with the Model S. they are seeking to target the luxury car buyer, usually someone who is a thought leader and influencer among their peer group. BMW is among the competitors who is working to be a player in the luxury electric market, which at this point is very much a niche market. The perceptual map for luxury vehicles can be drawn around the stylishness and innovation, as these are the attributes that buyers of luxury vehicles seek — price is not necessarily among their biggest concerns. Almost by definition, all cars in this segment occupy the upper right quadrant, combining elements of innovation and stylishness. The most stylish examples might be things like the Rolls-Royce Ghost or the Ferrari FF, but they are not necessarily innovative. The Tesla has both style and is the most innovative in the category (Davis, 2014), so against many it has competitive advantage and represents great value. What it offers in addition is that it is electric. What is does not offer, necessarily, is exclusivity — some other vehicles in this class have even lower production runs, and Tesla Model S. is almost too trendy from some luxury car buyers.
This graph indicates that Tesla does indeed want to position itself as the superior option within the market, and certain it wants to position itself as having a unique value proposition, relative to other cars in the segment.
Week 5 Assignment
The offering of the Tesla Model S. is as a means of luxury transport, powered by electricity. As features go, it is hard to describe those without sounding like the company website, but here goes. The main feature is personal transportation. This is the primary business of all automakers. Personal transportation takes many forms, including luxurious, and so luxury is something else that is a product attribute. It is interesting to determine where the electric aspect fits in. For customers in Europe, electric allows them to save money over their gas, which is much more expensive than in America. For Americans, there is prestige in owning such a vehicle, there is the sense of self-satisfaction one gets from stepping away from the carbon economy, and there is the fact that one is being a thought leader among their peers.
This offering is a shopping offering. While the Model does occupy a fairly narrow product niche at the moment, there are two reasons why this a shopping offering. First, it is a car, and cars are generally shopping offerings unless they are highly unique, customized products. The Model S. competes against a wide range of gas-powered vehicles — often competing directly in the company’s promotions — so it can be said to be a shopping good in that sense. Further, the long-run vision for Tesla is that their vehicles will be more mainstream in nature, so the Model S. might not move a lot of units right now, but it is not viewed by the company as strictly a niche offering. It is something that people will choose based on the research that would typically go into a vehicle purchase.
There are many extensions, not necessarily of the Model S. But for Tesla in general. As direct extensions go, the Model X crossover SUV that is planned is one such extension, building on the existing Model S. platform so it is a directly-related product. There are different features that can be added onto the Model S. As well, to create variants of this vehicle. Further, the Model S. is one of what will likely be many vehicles in a family, so it is the first of a line that will feature a number of different product extensions. There is also some brand extensions into things like signature underlying technologies (the battery business, so horizontal extension) and roadside chargers (vertical extension). The chargers service a similar market — they allow other businesses such as hotels to target Tesla owners. The batteries leverage the technology and company brand, but appeal to a different user set. The brand extensions within automobiles may appeal to different target markets, but ones with similar psychographics to the company’s existing buyers.
The product lifecycle is too early to determine. The Model S. has been around since 2012. Its predecessor is already out of production, but extensions based on the Model S. platform are just being introduced later this year. There is a high cost associated with developing new platforms in vehicles, so the Model S. lifecycle is probably only in the growth stage right now, and this stage may continue for another several years until the product reaches maturity. Even where growth is stable in the U.S. now, the company is at production capacity and still has a number of growth markets internationally.
Week 6 Assignment
Tesla’s marketing channel is actually quite simple, because the company has famously decided to vertically integrate its retail and distribution functions. The company self-distributes, and has set up its own network of showrooms in order to facilitate this. The basic process is that a customer goes to a showroom. The showroom is company-owned and staffed entirely by Tesla employees. The showroom does not, in contrast to industry norms, have any inventory, just one or two showcase models. When an order is finalized, it is placed with the factory, usually online, which then produces the vehicle. Tesla ships the vehicles itself to the showroom where the customer would pick up the vehicle when it arrives (D’Arcy, 2014). So this is direct: manufacturer customer. This is the only channel that Tesla uses, by design, so that it can retain the entire marketing function for its vehicles, and avoid conflicts of interest with car dealers who would also be selling competitor’s products.
Distribution intensity can either be intensive, selective or exclusive. Tesla’s Model S. has exclusive distribution density. There are several components that support this. By avoiding direct competition with other products in the category (e.g. not selling through conventional dealerships), by having customers order a car sometimes even before they have test-driven one, and by making the showrooms to be exclusive in nature — you cannot test drive without a deposit — Tesla has successful created an exclusivity around its product (Frazier & Lassar, 1996). Many people have never seen one, and those who have likely have not driven one, which makes this product have a high level of exclusivity, in an industry where most vehicles are either selective or exclusive in their distribution intensity. But in a given city, there might only be a single showroom, and in some cities there are none.
Tesla is the value chain — it makes the cars, it distributes the cars (outbound), and it handle the sales and service. Tesla is not the only supplier in its supply chain, though it does develop the most important technological aspects of the vehicle, so there is some value generator by the firms with which Tesla contracts to provide some of the parts and materials that go into the car, but almost the entire value chain is kept in-house, and again this is quite specifically be design, as Tesla intends to be a disruptive player in the automobile market (Boyadijs, Rassweiler & Brinley, 2014).
Skimming is the pricing strategy that Tesla currently uses. The company seeks to price high for a couple of reasons. First, its current customer base is still mainly comprised of early adopters, who are as interested is the design and technology elements as they are in the luxury aspect. This creates a relatively inelastic price demand. If there is elasticity, the surplus demand in excess of production capacity renders that elasticity moot. Further, the company has to use this strategy in order to generate the cash flow needed to cover its operations. Whether the product itself is profitable is not apparent, but Tesla has many other costly projects on the go, resulting in a significant burn rate (Lysaght & Hull, 2015). It simply does not have the high production capacity available to entertain any sort of low pricing model. So skim pricing, roughly in line with what other luxury vehicles utilize, allows them to get the market that they seek, and generate the necessary cash flow (NetMBA, 2010).
Week 7 Assignment
An integrated marketing platform is necessary, but it can only truly be integrated when the different elements come together in a cohesive way. It is important for the messages coming from each channel to be complementary in nature (Olenski, 2013), as this will enhance the brand and allow for the recipient to better understand the brand message. The value of Tesla’s offering is definitely enhanced by having a clear and compelling message. There are many who believe in the company, mainly because of the messages that they are receiving about Tesla. People who are not in the company’s target market have an understanding of what the company is about, and perhaps more importantly they are starting to buy into the brand narrative. The value in this is that when Tesla launches more mainstream cars, there will be a significant level of pent-up demand.
The AIDA framework is “attention, interest, desire and action.” With this in mind, the framework can be used to create objectives for Tesla’s integrated marketing communications (Hill, 2015). So for Tesla, being a relatively young company, the first is going to relate to attention. Not only does Tesla wish to cultivate brand awareness, but association as well. This is something that can be measured with surveys, to see what percentage of people has heard of Tesla, and what they know about the company. From there, an assessment can be made with respect to the perceptions that people have about the company and its products.
The second objective within the AIDA framework can be desire. The company wants to create a pent-up desire for its products so that when new production comes on stream, Tesla is selling to capacity immediately. This is the most efficient return on new infrastructure investment. A specific desire objective can be measured in the number of downpayments that people have made on the company’s vehicles. These downpayments represent an intention to purchase — not always followed-through on — but an intention strong enough to leave some money with the company.
As for how to meet these objectives, the entire point of an integrated marketing campaign is that multiple different media and approaches work together to achieve the objectives. There is not one single tool that will be used to achieve any of the above — the entire strategy taken as a whole does this. It should be noted, however, that Tesla spends almost nothing on advertising, instead relying almost entirely on public relations. Its Internet site is about the only real advertising that it does. But yes, in an integrated marketing strategy, all tools work towards all objectives in a carefully coordinated manner.
Since we are not advocating Tesla waste its money on advertising, the message and media strategy will be strictly public relations. Why spend on advertising when you sell everything you make, have a backlog, and receive the amount of publicity that Tesla does? The messaging and media strategy will continue to promote the company’s ideals, as well as its products through press releases, social media, and through media availability of Elon Musk. Tesla will also use its website as a marketing arm, and will continue with major announcements following the existing model of splashy, showy product launches. This strategy reaches the company’s market because of the high level of saturation that Tesla is able to achieve by these means. Furthermore, so many people seek out information about the company, such is the buzz, so that it can simply “build it and they will come” with respect to media strategy. It is understood that this is very much a luxury, but that as long as the company has this luxurious position it should take advantage of it.
There are two potential B2B targets, though arguably only one of them makes any sense at the present moment. The best B2B target is taxi companies, which have a distinct interest in reducing fuel expenditure. Taxis in Europe sometimes use Teslas already. The benefit of the Tesla as a taxi is that the company can also sell the company the superchargers it would need to power the vehicles in 15-20 minutes. Moreover, the taxis make an excellent advertisement as every person who rides in a Tesla taxi will have the ability to experience the car.
The second market, which maybe is not the best one, is rental car companies. Many larger rental car sites will have luxury cars available, and a significant premium would be paid to rent a Tesla. This strategy reduces the exclusivity of the car, but the upside is that more exposure would be gained. There are not the same fuel savings benefits as taxi companies would have, so there is less upside for the rental car company, and arguably more downside as the car could be stolen or insurance costs will be higher.
B2B markets are segmented by type. In looking specifically at the more viable of the two, the taxi market, it would be segmented by geography first. Europe or anywhere that the fuel savings on a Tesla would offset the higher product cost will be the ideal place to launch such a program. The second element of segmentation would be to focus on companies that have standardized fleets that the drivers lease from the company. Taxi companies with non-standardized fleets are less likely candidates because the drivers would have to make the purchase decision themselves.
There are several different types of information that Tesla will need for decision-making. The first is the population of the target market in a given area. This is something that will help the company to assist with distribution decisions in particular. The second component of information is the after-purchase feedback. The Model S. is three years old, and the company needs to know how well it performs against its peers. Moreover, learning about customers’ post-purchase impressions will help the company in new product development by identifying the things that drivers prefer the most, and the components of the vehicle that might be in need of improvement.
The financial metric has to be sales, because Tesla’s main objective right now is to grow revenues. Performance metrics can include things like market share, new product orders, and the number of media impressions (or reach) that the company receives. It is important for Tesla to keep track of how well its publicity campaigns are working, and beyond that the company also needs to understand the tenor of that publicity. But it is also important to look at the non-financial side of the business, things like customer satisfaction, anticipation of new products and how well the vehicles are performing in line with their market peers — if sales are down, that might be related to an overall shrinking of the market, and market share might actually be growing. Thus, it is important to have a mix of financial and performance metrics to evaluate the overall performance of the company, and the specific performance of the different elements of marketing.
Lysaght, B. & Hull, D. (2015). Tesla falls after analyst calls its cash burn eye watering. Bloomberg Retrieved June 13, 2015 from http://www.bloomberg.com/news/articles/2015-05-07/tesla-falls-after-morgan-stanley-calls-cash-burn-eye-watering-
NetMBA (2010). Pricing strategy. NetMBA. Retrieved June 13, 2015 from http://www.netmba.com/marketing/pricing/
Olenski, S. (2013). Why integrated marketing communications is more important than ever. Forbes. Retrieved June 13, 2015 from http://www.forbes.com/sites/steveolenski/2013/09/16/why-integrated-marketing-communications-is-more-important-than-ever/
LeBeau, P. (2013). The young and rich snapping up Tesla’s Model S. CNBC. Retrieved June 13, 2015 from http://www.cnbc.com/id/100970641
Hill, R. (2015). AIDA: Attention Interest Action Desire. MindTools.com. Retrieved June 13, 2015 from http://www.mindtools.com/pages/article/AIDA.htm
D’Arcy, P. (2014). Tesla Model S: The disruptive marketing of an electric car. Science of Revenue. Retrieved June 13, 2015 from http://scienceofrevenue.com/tag/tesla-marketing-strategy/
Davis, S. (2014). Tesla, Tesla, Tesla: Building a power brand from scratch. Forbes. Retrieved June 13, 2015 from http://www.forbes.com/sites/scottdavis/2014/02/24/tesla-tesla-tesla-building-a-power-brand-from-scratch/
Frazier, G. & Lassar, W. (1996). Determinants of distribution intensity. Journal of Marketing. Vol. 60 (4) 39-51.
Boyadijs, M., Rassweiler, A. & Brinley, S. (2014). Tesla Motors: A case study in disruptive innovation. IHS Quarterly. Retrieved June 13, 2015 from http://blog.ihs.com/q14-tesla-motors-a-case-study-in-disruptive-innovation
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