Power of smart marketing – the Tesla Model S Sedan – Tesla Motors part 3

This is my third and final blog on the brilliant marketing strategy of Tesla Motors. In this blog, i will focus on their Model S sedan specifically.

Tesla Motor’s self-stated key goals in the company’s marketing effort are to

  • “Generate demand for our vehicles and drive leads to our sales teams;
  • build long-term brand awareness and manage corporate reputation;
  • manage our existing customer base to create loyalty and customer referrals; and
  • enable customer input into the product development process”

From a pricing perspective, Tesla Motors does not have a truly affordable “middle-class” car yet. However considering the company’s branding focus is as a maker of premium electric vehicles, the marketing effort is not seriously focused on the main stream car buying public yet. The company has focused its marketing efforts to attract the environment conscious/ class conscious buyer and has not been averse to bask in adulation for being a successful American car maker. At the same time under Mr. Elon Musk’s astute leadership , the company has good financing options to encourage price conscious customers to purchase the car.

From a premium shopping experience perspective, Tesla Motors has been strongly focused on ensuring a distinctive approach. A lot of this focus can be attributed to Mr. Blankenship who pioneered the hugely successful Apple Retail store concept . Mr. Blankenship has been attempting to replicate this success in the car industry by designing elegant stores with substantial investment at highly visible venues. Tesla Motors uses these venues as a means to evangelize the electric car in general and Tesla Motors in particular. The staff follows a model of soft selling with the caveat that due to regulatory restrictions in many states the staff cannot sell the car directly . However this approach appears to have generated significant footfalls for Tesla Motors helping them capture popular imagination despite actually having only a tiny number of cars in the market.

Tesla London Store

A stylish Tesla Store

Tesla Motors in a number of ways has the mindset of a software company.  In addition, Tesla Motors openly flaunts a preference to update the company’s proprietary software over the internet so Tesla Motors customers can benefit from regular software upgrades. This is especially relevant for a company like Tesla whose cars rely on an exceptionally high amount of software most strongly illustrated by the unique 17 inch touch screen console, as an example, the “slow creep” ability to Tesla cars was added based on user feedback. This is important because this is a subtle way of marketing to customers that the user experience and features of Tesla Motors cars are likely to be regularly upgraded even after customers purchase the car when compared to similar high value branded competitors .

Tesla Motors has been talking about ushering the Electric Vehicle revolution in the US . I surmise that even the title of the Model S Sedan is probably a subtle marketing way of bringing reference to the original blockbuster car, the famous Ford Model T that is largely acknowledged to have ushered in the automobile revolution in the US in the early 19th century.

in addition to all the smart marketing approaches I’ve detailed above, The Model S is a technologically superior vehicle. It has the highest EPA rating among all electric cars.  The car has exceptional ratings. It was rated the best car of the year 2013 by multiple prestigious publications,

1) MOTORTREND car of the year 2013
2) 2013 automobile of the year from Automobile magazine
3) had an unbelievable rating of 99 out a possible 100 by Consumer Reports.

As I stated in an earlier blog, the combination of peerless marketing and an excellent product is the key reason for their success. Of course I must add, the incredibly talented Mr. Elon Musk is at the helm of this exciting car company. This ends my analysis of Tesla Motors. Thank you for reading.

Advertisements

Power of smart marketing along with a great product – early days of Tesla Motors – Part 2

This is second of my series of blogs on the Tesla Motors marketing strategy.  In this blog I will examine why the product (in this case, their first car) played a key role in their early success. One of the things Tesla Motors (http://www.teslamotors.com/)  got right early on was targeting their product for the right customer segment. Tesla Motors branded their car as a world class sports car instead of being sold as just a premium electric vehicle. The Tesla Roadster could go for 0 to 60 in ~4 seconds and compared very well with the premium sports cars of its times ~2007-2008.

The key strength was their superior battery pack technology (of densely packing the same Lithium Ion cells that form batteries of our standard laptops in a highly efficient array) and an excellent power train. They were an early adopter of smart outsourcing. To save funds and manufacturing costs as a start-up, while the power train was manufactured in-house, the actual car manufacture was outsourced to Lotus Cars Limited.  These partly complete cars called “Tesla Roadster Gliders” were then integrated with the power train. Though they sold only ~2450 roadsters across five years 2008-2012, The company gained such a niche reputation that this helped them earn several hundreds of advance bookings when their Model S Sedan was formally launched and bookings were commenced years in advance.

Having said this, did Tesla Motors have a fairytale run? Hardly! For starters they suffered two fairly embarrassing product recalls in May 2009 and Oct 2010.  They had fairly well publicized transmission related issues that delayed manufacturing timelines for their Roadster. The global financial crisis from 2008 onwards hurt the luxury car market and lack of funds (as announced in a section of the media) hurt them as well.

Two key turning points financially for the struggling Tesla Motors were a 50 million dollar investment by Diamler AG and more importantly the selection of Tesla Motors along with other firms like Ford, Nissan and now defunct Fisker for the US department of Energy’s Advanced Technology Vehicle Manufacturing Loan Program (ATVM).  Tesla Motors received 465 million $ (the smallest loan among these firms) and invested it brilliantly to acquire and develop the then shut down NUMMI facility from Toyota and speed up manufacturing of their flagship product, the Model S Sedan.

Model S Sedan

The amazing Tesla Model S

The success of the Model S Sedan has made Tesla Motors the first successful new car company in the US in over 90 years! What are the reasons behind this? well that will the topic for my next blog! Thanks for reading.

Power of Smart Marketing – An examination of early days of Tesla Motors

Firstly, in the interest of transparency,  I’d like to declare that I do not own stocks of Tesla Motors (http://www.teslamotors.com) or any of the firms run by Mr. Elon Musk. This is the first part of a series of posts on the marketing and strategic thought process behind the success of Tesla Motors.

Let us take a look at what most of us consider the typical characteristics of a marketing campaign. Typical marketing campaigns involve,

1) A premium Ad agency and associated costs.
2) Large marketing budgets , for instance big budget Hollywood movies spend almost 25-50% of their total budget towards marketing.
3) A carpet bombing approach involving the movie stars attending a slew of interviews, teaser ads in multiple media formats like Print ads, television campaigns, Online interest building via  twitter, Tumblr,  Facebook, A custom built website etc. to name a few.

Now let’s look at Tesla Motors, this is of course before Tesla became a stock market darling in the US and achieved its stellar share growth over the last year or so.

1) Tesla Motors does not have a Chief Marketing Officer
2) They do not have a contract with a large marketing or Ad agency
3) They have a pretty small marketing department.

So how exactly did Tesla Motors build up so much interest on their product?

The first Tesla Roadster (Their first high performance electric car) was produced and marketed from early 2006.  The approach followed was as follows,

1) A very internet centric marketing campaign from very early days. The founders Mr. Martin Eberhard, Mr. Elon Musk published very detailed and smart blogs from the early days (A classic one from Mr. Musk can be found at http://www.teslamotors.com/blog/secret-tesla-motors-master-plan-just-between-you-and-me )
2) Niche appearances at Conferences, effective use of the charisma and connections of Mr. Musk.
3) For example, Mr. Musk appeared on the then world famous late show with David Letterman after selling a car to Mr. Letterman.
4)  Smart product placement of the roadster by providing it free for the first Iron Man movie starring Robert Downey Jr and even for some BlackBerry ads (of course this was before the IPhone era!)
5)  Sale of the Roadster to Mr. Arnold Schwarzenegger the then California Governor,  top movie stars and executives etc.

Mr. Elon Musk with the Tesla Roadster

Mr. Elon Musk with the Tesla Roadster

These marketing strategies ensured Tesla Motors got much higher media and online visibility than the few 100 Roadsters they sold through the first few years.

However it must be noted, marketing alone could not have Tesla Motors to their current position. They obviously had a pretty good product. My next post will examine the product specific reasons and strategy the firm adopted that helped the company along the way. Hope you enjoyed reading this post.

Marketing – Why is it so important?

These days we read a lot about consultants helping firms devise marketing strategies based on many varied factors including but not limited to the demographic of the targeted customer base, classification of the customer base into various segments, use of new technologies like Big Data , Analytics etc.

Despite all the technological wizardry in display these days, if we try and simplify this to its bare minimum… What is marketing? Marketing is nothing but a philosophy or a raw set of techniques to make a particular product or a service highly desirable to the customer. Marketing need not necessarily be part of selling a ready made product or service. Often a failed marketing approach can reveal deep insights on exactly what gap or niche demand of the customer the existing product / service fails to fulfill and can in turn help devise a best fit product or service.

Also is marketing relevant only to a big firm? In reality.. definitely not. The rise of social media, the 24/7 media frenzy, the short attention spans have made marketing a key necessity for every professional. This is nowhere more apparent that in the entertainment industry where stars big and small jostle for space in the newsprint and ensure their comments or activities or social interactions regularly appear in the mass media and help them further build their personal brand.

as an example, top Indian movie stars like Aamir Khan have perfected the art of manipulating the news cycle to their benefit by having

1) Self imposed periods of exile
2) Followed by intense media curiosity build up by teaser posts in social media
3) select interviews ensuring tight control and management of the message and careful build up of attention.

The case of the average but brilliantly successful movie “PK” is a good example. An almost nude, buffed up , photo-shopped picture posted on social media by the star himself, This ensured some resultant excitement and attention in news media. Subsequent teaser posts like “In the next photo even the radio is not there” and comments by the star himself and others etc ensured continued attention helping the build up.

In my next post, i will try to provide my take on some of the brilliant marketing campaigns that I’ve noticed.

A short history of management theories

This blog is focused on listing out three of the top management theories that became almost the predominant way of doing business in the post Industrial revolution period to almost 40 years after the second world war.

Management Theory 1 – Conglomeration – In very simple terms this is a still prevalent model where a firm expands by entering diverse areas of business that are not traditionally its areas of business. This model provides the obvious benefit of providing diverse revenue streams to a firm enabling greater competitive benefit of market spread and the ability to surmount periods of slowdown or recessionary trends in any particular area of business. Classic examples of this model are Samsung , Hyundai. These firms are also known as “Chaebols” in South Korea as power over all subsidiaries is consolidated with a single chairman.

Management Theory 2 – Horizontal Integration – This is a model where a firm acquires its competitors thereby gaining market share in its core areas of business simply by gobbling up its competition as much as possible.  In the internet Age a strong trend towards horizontal integration is visible especially in the media space with individuals like Mr. Rupert Murdoch gaining a large share of media mind share via his diverse investments in media properties (newspapers, cable etc.) The main benefits here being the firm has the potential to acquire greater economy of scale and scope of business due to higher market share.

Management Theory 3 –  Vertical Integration This is almost a corollary of the earlier theory, here the firm acquires companies that would normally be suppliers (downstream) or vendors (upstream) with the aim to have greater control of the end to end delivery of their specific products and services. The great industrialist Henry Ford acquired ships, railroads and even rubber plantations to ensure he had end to end control on all raw materials for manufacture of his cars like the arguably greatest car that triggered  the personal car revolution- the iconic Ford Model T.  In modern times, Oracle Corporation has acquired a very large number of firms with the same philosophy in mind.

A new year resolution for 2015

Dear Reader,

Firstly, let me wish you and your families a fun filled, professionally satisfying and most importantly healthy 2015. For me personally, 2014 was a year of great camaraderie professionally,  an almost shocking relevation in terms of what is possible when one is under tremendous work pressure.

A lot of us make new year resolutions…In that tradition, my humble suggestion to you is to focus during this new year 2015 to pursue one passion or build one skill that you’ve always wanted to learn. It doesn’t really matter if it’s professionally relevant or not.  To paraphrase the words of one of the greatest Industry disruptor and innovator of our times, the late Steve Jobs … “You can’t plan your life and career too much, It is  not possible to  connect all the dots that make a great career and a great life. It’s only when we look back that it all makes sense.” So have trust in your instincts , your destiny for life (if you believe in the concept) and follow it to the end.

Have a great new year 2015!

Regards,
Arun

P.S -> If you haven’t read this before, you can read the full Stanford commencement speech from Mr. Jobs at http://news.stanford.edu/news/2005/june15/jobs-061505.html