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Task one: Tesla marketing strategy
Tesla marketing strategy focusses on three aspects: engagement with customer experience, media attention, and marketing sustainability. In the appendix to this report, the portfolio depicts examples of these aspects of Tesla strategy. This part of the report discusses the Tesla marketing strategy with examples in the portfolio and also discussion on the strategy by reference to literature on marketing strategy. Tesla Inc is an American automotive and energy storage company. Its core areas are electric cars and batteries. After Tesla Roadster launch, Tesla has created and launched more electric cars. In this report, the Tesla strategy for marketing is discussed with reference to customer experience, media attention, and marketing sustainability. In this respect, this report finds that the Tesla experience is somewhat unique in that it does not rely on traditional marketing methods and instead chooses to adopt a different strategy to marketing.
Tesla employs a strategy of turning customers into marketers. Instead of investing in commercials or traditional advertising campaigns, Tesla invests in social media interaction and customer centric ways for reaching out to new consumers. Tesla employs the following from the 9 promotional diagram mix predominantly: word of mouth marketing and public relations and publicity.
Tesla focuses on two methods of marketing that are based on word of mouth advertising, and referrals. This means that instead of investing in a marketing campaign that is directed at customers, Tesla indulges in what can be termed as indirect marketing method where it encourages customers to reach out to potential customers for buying Tesla cars. This is done through both word of mouth and referrals in which customers are involved. Customer word of mouth publicity is based on whether Tesla has a great product the customer experience around purchasing and owning Tesla.
Word of mouth marketing has now gone digital because of the use of social media which is the digital version of word of mouth publicity as “social media represents the materialization, storage, and retrieval of word-of mouth content online” (Pan & Crotts, 2012, p. 2). Literature suggests that there are some distinct advantages offered by social media in the context of marketing, which include facilitation of a two-way communication between customers and organisations leading to increase in customer loyalty and generation of word of mouth publicity from consumer to consumer (Kaplan & Haenlein, 2010).
The referral program offered by Tesla encourages customers to reach out to potential customers by talking about their own experience with the Tesla cars and in exchange of this, they can get something they want or need from the company. The Tesla Referral Program is simply advertised on its website. Figure 1 below is the example from the 2019 Tesla Referral program in the UK.
The customer referral program allows customers to receive free cars if they refer adequate number of new customers who purchase cars from Tesla. This is a program that is used by many businesses to generate business by using existing customers to get new customers to be attracted to their products or services (Berman, 2016). Although referral program as one of the few strategies that a business may employ is rare because major businesses also invest significant amounts of capital in traditional marketing, literature suggests that using referral programmes can be useful in turning the social capital earned by the business into more economic capital (Van den Bulte, Bayer, Skiera, & Schmitt, 2018). In this regard, it has been stated that when a business acquires customers through a referral program, there is a likelihood of higher margins and lower churn than customers acquired through other means (Van den Bulte, Bayer, Skiera, & Schmitt, 2018). The likely mechanisms that may lead to this phenomenon are noted as better matching between referred customers and the firm, and social enrichment by the referrer (Van den Bulte, Bayer, Skiera, & Schmitt, 2018).
Referrals allows the business to optimise the customer to customer connections. The four reasons noted by Van den Bulte, Bayer, Skiera, and Schmitt (2018) as being useful for acquiring customers are that the programmes do not require any prior data on connections among customers, are very low cost, simple to administer, and despite least intervention from the business, still allow for a certain degree of targeting. In Tesla’s case, the targeting through referral program is obviously of those potential consumers who are interested in electric cars and have the same perspective towards sustainability. This aligns with the understanding in literature on referral strategy which provides that passive matching of new and existing customers is useful because there are shared unobservables related to the existing and new customers which are common to the referrer and the referral because of the aspect of homophily due to which referrers are likely to be similar to the person they refer (Van den Bulte, Bayer, Skiera, & Schmitt, 2018).
Tesla’s referral policy in particular has been recently the subject of a research on referral strategy which found that the program encourages customers to complete referrals through video and has seen such success that it has been restored even after many cars were given free as referral rewards to consumers (Gao, Zhao, & Qin, 2020).
Tesla does not spend on conventional marketing methods but chooses to use media attention to its products and social media engagement with consumers to create a buzz about its products.
For media attention, Tesla has provided a vehicle for testing to the reviewer who wrote a piece on the car on MSN and in another case, Fox News got a customer to provide a vehicle for testing to the channel (Gastelu, 2019 ). As a marketing move, this was not a major investment and cost very little to Tesla but it was useful in helping with word of mouth publicity for Tesla and for reaching out to a variety of potential customers. The fact that a Tesla customer was happy to lend a car to the channel for testing for the afternoon also shows that the Tesla customers are invested in the brand and are willing to help with word of mouth publicity. The news article carried pictures of Tesla car to show how much space there was in the car and other features as well as shown in figures 1 and 2.
Elon Musk although the CEO of Tesla is also known for his activity on Twitter and is usually involved in direct engagement with his audience. He uses Twitter to post live-tweets like the SpaceX rocket launches, share business and technology ideas, and even respond directly to customer suggestions (Folschette, 2020). Although Tesla does not spend on advertising, Elon Musk is very active on social media including on You tube apart from Twitter (Folschette, 2020). Musk is even known to respond directly to detractors on Twitter. Musk’s strategy appears to be in tandem with the cultural shift that has marked the way businesses do marketing for their products and services with the new internet technology and social media becoming ubiquitous (Harvey, 2014).
Tesla is using both the traditional and social media to generate awareness of its cars and core issues like sustainability. Social media is particularly useful because it allows the formulation of social media networks that have large number of visitors which makes it convenient for businesses to market products or services to these visitors (Slyke, Lou, Belanger, & Sridhar, 2010). Due to the benefits of social media in reducing marketing costs while also reaching out to a great number of customers, businesses are increasingly using social network sites to communicate with customers.
In particular, Musk’s tendency to directly engage with the customers can be seen in the context of the literature that shows that the unprecedented amount of customer feedback available about the service providers on social media generated by customers sharing their experiences with other customers can be very effective in the way businesses use this to improve their own services (Kaplan & Haenlein, 2010). In this context, Musk is turning more to social media than to traditional media or even advertisements in traditional formats, which also aligns with the growing perception in literature that businesses need to engage more with the information available in the social media in order to be effective. For instance, it is stated:
“Historically, companies were able to control the information available about them through strategically placed press announcements and good public relations managers. Today, however, firms have been increasingly relegated to the side-lines as mere observers, having neither the knowledge nor the chance- or, sometimes, even the right – to alter publicly posted comments provided by their customers” (Kaplan & Haenlein, 2010, p. 60).
Literature on use of Social Media marketing suggests that the creation of online social networks such as, on Facebook, allow likeminded individuals to form groups that interact on shared interests and also share information with each other (Obar & Wildman, 2015). Moreover, content posted in social media is very influential and is becoming impactful in terms of how consumers place trust in this content before making their decisions to purchase some product or service (Baka, 2016).
Tesla has leveraged its sustainability revolution for car manufacturers, to make itself an attractive brand for an environmentally conscious base. Tesla uses social media to make its innovations and technological know how related to sustainability known to the consumers. In the Figure 2 below, the marketing technique is simple and is based on the marketing of sustainability. Next to the sleek Tesla is the charging port which sends an effective marketing message to the consumers that Tesla is targeting with its electric cars.
The photograph in figure 2 above seeks to make sustainability appealing to customers. In figure 3 below, another example of sustainability marketing can be seen where the patent of the Tesla for one of its cars is made public. This also seeks to showcase its sustainability expertise. The patent also shows that Tesla has intellectual ownership over technological know how that is related to sustainability.
Tesla puts out content related to sustainable energy on its website. Tesla also publishes its sustainability report, with the second report being published in 2019 (Tesla, 2020). The report us used by Tesla to be transparent and to document Tesla’s carbon emissions, water usage, and energy expenditure (Tesla, 2020). The report mentions that they have “generated positive Free Cash Flow (operating cash flow less capex) of more than $1 billion for the first time in 2019” (p. 3). The report can be seen as an extension of Tesla’s marketing sustainability strategy. There are photos within the report which may appeal to consumers’ sense of aspirations.
Finally, based on the Ansoff matrix, Tesla strategy can be explained (Loredana, 2017 ). The matrix is presented in fig 7 below. With regard to market penetration, Tesla is selling its different models of cars we well as solar panels, inverters and other products. With regard to the product development, which sees new products to sell to existing markets, Tesla is not frequently involved in new product development. It is more focussed on developing the products that it now has. With regard to market development that involves finding new markets for existing products, Tesla is thinking about venturing more into Asian markets while also having had a foothold in the UK market. With regard to diversification, which involves developing new products for new markets, Tesla has used diversification strategy such as entering into alternative fuel vehicles and then energy storage sector.
Tesla’s marketing strategy is not conventional. It has avoided having an extensive and expensive marketing programme and has instead used social media for direct engagement with clients, word of mouth publicity, referral system, use of media in innovative ways and marketing of its sustainability to generate a buzz about its cars. Although unconventional, this strategy aligns with the growing literature on similar methods and how these can be used by companies to enhance their appeal to new and potential customers.
There are two theories that can be used to explain the effectiveness of the Tesla strategy for marketing. These theories are AIDA and the push and pull strategy. This part of the report discusses the Tesla strategy and assesses the effectiveness of the strategy.
The first theory being analysed here with respect to Tesla is AIDA, which stands for Awareness, Interest, Desire, Action and is based on the work done by Strong (1925) and is also related to the Hierarchy-of-effects models, which sequences the way in which a consumer moves along in a linear continuum of internal states where they go from the unawareness of the brand to awareness of the brand, to interest and then a desire for the brand and finally ending with the consumer purchasing the product (Hackley, 2005). There is a hierarchy-of-effect in this process because the consumer goes from an internal condition in which they are unaware of the brand to the point where they purchase the product that the brand has to offer. As the model is hierarchical in nature, it represents a process where each step is a necessary condition for the subsequent step (Hackley, 2005). A criticism of the AIDA model is that it represents only high-involvement purchases while most purchases are spontaneous and are not representative of an engagement of consumers with the kind of rational processing that is seen in the AIDA model. However, Tesla cars being high value purchases, it can be argued that this model may be appropriate to the kind of rational processing that consumers may be involved in prior to the making of purchase of a Tesla car. Therefore, this model is used in this part of the report to assess whether the strategy used by Tesla for marketing is effective in achieving its goals of acquiring customers through the word of mouth publicity and referral system.
The specific methods chosen by Tesla to reach across to their customers both new and potential can be related to the AIDA model because the messaging from Tesla is seen to be moving from the awareness phase to the final action stage. In the awareness phase, messages from the company are focused building familiarity, establishing performance, process and building trust by being transparent about the purpose of the company (Wind, Vries, & Constantinides, 2019). The interest phase involves messaging formulated on the perceived usefulness of the product (Wind, Vries, & Constantinides, 2019). The desire phase involves campaigns formulated to appeal to the three basic desires of consumers and in the action phase, the purpose is to move consumers to buy the product and this includes messaging that shows how have access to the product and know where to buy it (Wind, Vries, & Constantinides, 2019).
Awareness of the Tesla cars is created through word of mouth and media publicity as the part one discussed where some examples of media reports were given. Once widespread awareness is created, consumers move to interest, which can be satisfied by seeking out news articles about the car, or the Tesla website, or even Youtube videos. Consumers can move from interest to desire when they have sufficient information to make an informed decision about purchasing a Tesla. Those who purchase Tesla can also promote the brand as has been encouraged through the referral system which allows existing customers to pool in prospective customers.
The impact of the AIDA model in the effective strategy making by the company can be discussed next. The next graph represents the followers of Tesla as compared with other brands on Twitter and Subreddit. This graph shows that Tesla has a much higher engagement on social media. This refers to the awareness or attention aspect of AIDA model and shows that Tesla is making its brand known and is able to use its own peculiar strategies to gain attention of the consumers.
The question (for assessing effectiveness of the technique) is related to the final action of buying the cars made by Tesla out of the people whose attention the company managed to get through its marketing techniques. Data suggests that in February 2019 after the announcement by Tesla that they would be offering the Model 3, the traffic to Tesla.com was at 941K, while the other digital car selling platforms had an engagement below 799K (Marks, 2019). In the UK, 2020 saw Tesla sell more cars online than through brick and mortar stores. In May 2020, U.K. drivers bought 20,247 cars of which 852 were Tesla Model 3s (Mitchell, 2020 ). It was the highest selling car in the UK in May 2020 (Mitchell, 2020 ). Tesla remained the top selling car in the UK in the first half of 2020 as seen in the graph below.
The second theory that can be considered here with respect to the Tesla marketing strategy is push and pull strategies. Push strategy involves the pushing of the product towards the customer, while pull strategy involves customers pulling the product through the retail chain towards them (Brocato, 2010). A push strategy would lead to tactics that make third parties stock the product while the pull strategy would lead to the customers demanding the product from the retailer (Hackley, 2005)
The push strategy includes selling directly to the customers in showrooms. Push strategy would also include advertising. Tesla does not invest in advertising in a significant way and instead relies on word of mouth marketing and mall showrooms and capitalising on its brand loyalty.
Another push strategy that is employed by Tesla is the referral system. The referrals allow existing customers to get rewards from the company in exchange for referrals to new customers who buy Tesla products. The figures mentioned above showing Tesla emerging as the most bought car in the first half of 2020 in the UK suggests that Tesla strategy in pushing the cars to the customers is working to add more customers.
To conclude, the Tesla strategy in not investing in traditional advertising and instead relying on word of mouth publicity and referral system and social media engagement has led to the effective message giving by the company to its intended audience. The 2020 statistics from the UK for the first half of 2020 shows that despite not relying on the traditional methods of advertising, the company sold more cars than any other brand in this period. The company also has continued with the referral system and its website showed this system was in effect in 2020. Although the data related to referrals is not available, the fact that the company continued the system suggests that the system has been found to be useful for acquiring new customers for the company.
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