Tesla Motors Marketing Success Formula

Table of Contents
1. PREAMBLE.......................................................................................................................2
2. INTRODUCTION ..............................................................................................................2
3. SUCCESS OF TESLA MOTORS.......................................................................................3
3.1. UNDERSTANDING MARKET ENVIRONMENTS................................................................ 4
3.2. COMPETITORS ANALYSIS & MARKET POSITION.......................................................... 5
4. TESLA’S MARKETING SUCCESS FORMULA...............................................................5
4.1. SEGMENTATION & TARGETING ................................................................................... 6
4.2. MARKETING MIX ........................................................................................................6
 Products ...................................................................................................................... 6
 Promotion.................................................................................................................... 9
 Place ........................................................................................................................... 9
 Price.......................................................................................................................... 10
5. CONCLUSION................................................................................................................. 12
6. FUTURE RECOMMENDATIONS.................................................................................. 13
APPENDIX 1: DETAILS ON PEEST ANALYSIS................................................................... 14
APPENDIX 2: TESLA MODEL S VERSUS COMPETITOR.................................................. 16
REFERENCES......................................................................................................................... 17
BIBLIOGRAPHY..................................................................................................................... 20

Ahmed Elsayed Elrayes – 15024408
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Tesla Motors from a 19th century Design to 21st century and Innovators and
Electrical Vehicle Leaders
1. Preamble
Thinking about Electrical Vehicles (‘EV’) is like imagining the future, however, in reality
EV were developed and produced in 1800s, EV dominated the steam and gasoline vehicles
in 1909 reaching 30,000 registered EV in U.S. alone (Høyer, 2007). With the technology
advancement in Internal Combustion Engines (ICE) and Oil revolution, it started to be more
feasible and economical to shift to ICE vehicles (Høyer, 2007). The resurrection of EV
production was supported by UN World Commission for sustaining the environment for
better future, and the UN Green Economy initiative that aims for economics growth,
resource sustainability, and preserving the environment (UNDP, 2010 and WCED (1987,
cited in Høyer, 2007) this led for hidden race between automakers to deliver an
environment friendly vehicle and meets the consumer needs, which was first met by Toyota
Prius in 1997 (Høyer, 2007).
Tesla Motors is the 21st century market success story in EV automaker industry, this report
aims to analyze the marketing success factors contributed to Tesla’s success, Tesla’s
utilizations of marketing mix, and highlights key recommendation for Tesla’s future.
2. Introduction
Tesla Motors (‘Tesla’) was founded in 2003 by Silicon Valley inventors with an aim of
producing pure electrical vehicles, based on original 1888 Nikola Tesla electrical motor,
Tesla’s mission is “To accelerate the world’s transition to sustainable transport and bring
mass market electrical cars to market as soon as possible” that makes Tesla not only a car
manufacturing company, but also a technology and energy innovation company. (Tesla
Motors, 2016).
Maneuvering in a very competitive market with high barriers of entry that requires strong
financial and infrastructure support (The Economist Intelligence Unit, 2012), just after 16
years, Tesla managed to re-define the automaker industry with successful launch of its main
stream model 3, achieving the biggest marketing and financial success in the history of any
industry, recording $ 7.5 Billion U.S. dollars worth of pre-orders in just 24 hours (The
Economist, 2016 and Randall, 2016). Tesla is the anomaly that survived the market high

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entry barriers compared to its peers/startups with successful strategies, business model and
marketing approach lead by Tesla’s CEO (Muller, 2013).
3. Success of Tesla Motors
“For Marketing strategy to be developed successfully, it is necessary to understand an
organization’s strategic context and then to fit the marketing strategy...” (Baines & Fill,
2014). Tesla gained its success of being the zero emission automaker that successfully
delivered workable production vehicles that address consumer needs (Mangram, 2012).
Additionally, Tesla has gained market attention in the automaker industry similar to Apple
and being ranked #1 world’s most innovative company in 2015 by Forbes (Forbes, 2015),
and ranked #3 in 2013 after big players like BMW and Mercedes in selling electrical cars
and #1 in electric automakers (Reynolds, 2013 and Hartung, 2013). Financially, Tesla
created a success with steady increase of revenue since 2012 second quarter when Model
S delivery started shown in Figure 1.

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3.1. Understanding Market Environments
A quick PEEST analysis for EV automaker can be summarized by the following:
Tesla is operating in a positive environment, which enables success of environmental
friendly vehicles, Tesla’s products have the political and legislative support to achieve
environmental sustainability. Consumers are looking for a suitable alternative to ICE
vehicles in support of environmental issues, and to unlock the economical benefits of
saving from fuel and running costs. Also, governments realized the economical benefits of
adopting green vehicles as means of transportation based on the economical value to
nations’ GDP and environmental sustainability. Finally, with technology advancements in
long lasting batteries, and recharging networks that made governments establish platform
for Tesla’s success. Refer to Appendix 1 for additional details of PEEST analysis.

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3.2. Competitors Analysis & Market Position
Tesla is taking advantage of big companies’ slower movement to capture new profit
opportunities, and focus on what they do best and trying to shift to make EV (Flowers,
2008). Tesla has chosen a niche market segment of providing luxury, stylish, long
range EV on a single charge and more horsepower with no direct competitors (Tesla
Motors, 2016 and Gould and Muioi, 2015). In addition, when Tesla launched the
Model 3 for mass-market, it gained the competitive edge over other automakers with
supercharged stations across U.S. and Europe and functions that meets consumers’
needs, making Tesla the lead competitor for giant automakers to be aware of, adding
the past success of Tesla being ranked #1 in EV sales in 2013 operating with almost
no direct competition (McGee, 2016 and Hartung, 2013 and The Economist, 2016).
4. Tesla’s Marketing Success Formula
A strong marketing strategy will ensure success, which is the fault of many start ups
tend to forget and focus on operational aspect of the organization (Flowers, 2008).
Tesla didn’t focus on lavish marketing approaches to succeed, but focused on
understanding consumers’ needs, and establishing loyal consumers by focusing on the
Tesla EV ride experience and functionalities. Moreover, Tesla way of selling is by
itself a differentiator from other competitors, by reinvented the sales channels and
cutting the car dealership methods, reducing the overhead costs (Trefis Team, 2016
and Reynolds, 2013 and Gould and Muioi, 2015).

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4.1. Segmentation & Targeting
Tesla aims to contribute to cleaner environment and by changing the transportation
means to be cleaner and efficient use for every consumer (Tesla, 2016). Realizing this
mission requires Tesla to adopt multi-level approach in marketing their products
(Mangram, 2012):
a. B2B Market: Tesla encourages the partnerships with other automakers by
having its technology patents open for use, by this enables Tesla achieve its
mission of sustainable transportation (Tesla, 2016). Tesla partners with big
automakers and sells the drivetrain and battery technologies to automakers
to produce their models, such as, the Toyota 2012 RAV4 EV (Fleming,
2013) and German automaker giant Mercedes-Benzes (Yared, 2014).
b. B2C Market: Tesla targets the consumer by three main models, the luxury
sedan Model S, the family SUV Model X, and the mass market Model 3. In
addition to the complimentary products (Tesla Motors, 2016)
4.2. Marketing Mix
A successful implementation of organizational strategy requires efficient and effective
utilization of the marketing mix, enabling the organization to communicate
successfully with consumers (Proctor, 2002). Tesla is not only considered a technology
innovator or electrical automaker, Tesla redefined the industry business model and the
utilization of the marketing mix to achieve its strategic goals. Tesla re-invented the
automakers approach in selling its products and distributed the market (Reynolds, 2013
and QMAC, 2016). Examine Tesla’s Marketing Mix components as follows:
 Products
 Targeting automakers, Tesla sells its drive-train technologies and
lithium-ion batteries to automakers, because of reduced cost and long
lasting duration of batteries (Fleming, 2013 and Yared, 2014). With
increasing demand of EV batteries, Tesla partnered with Panasonic to
build “GigaFactory” to be ready by 2017 to meet Tesla’s own demand
for its EV and their clients (Economist, 2014).

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 Targeting consumers, Tesla focus in making the suitable car for
consumers considering all aspects of their needs, such as, environmental
friendly, long distance travel on a single charge, horsepower, loaded
with useful latest technologies and gadgets, high level of road safety,
and the key element is the modern stylish design of Tesla’s models, in
contrast with regular automakers and EV startups tend to design and
build either futuristic cars or small compact cars to resolve some of the
issues related to electricity consumption, which don’t appeal to
consumer making (The Economist, 2014 and QMAC, 2016).
“A Tesla is a more stylish way of displaying environmentalist
credentials than a lumpen Toyota Prius and more practical than a
Ferrari—putting two child seats in the back boosts the capacity to seven
passengers” (The Print Edition-the Economist, 2014).
Appendix (2) compares EV models and clearly shows Tesla Model S is
taking the spot lights (Davies and Nudelman, 2013)

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 Complimentary products, Tesla builds Supercharger stations across the
world, enabling Tesla’s vehicles and other electrical vehicles to utilize
those supercharger stations. Tesla’s Supercharger stations more efficient
and effective in battery charging, and in less time that regular charging
technologies which gives them a competitive edge over the market.
(Girotra and Netessine, 2013 and Trefis Team, 2016 and Tesla Motors,
2016). Tesla provides “Powerwall” a home battery to utilize with solar
power for storing energy, providing efficient use of home electricity
even at night, with more than 1,000 consumers utilizing Tesla’s
Powerwall alongside Solar Panels to store electricity (Economist, 2014).

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 Promotion
In just 24 hours from launching Model 3 prototype, Tesla recorded a 198,000
reservation orders of a vehicle that would start production in late 2017, this
shows how Tesla’s promotion strategy is effective in reaching its consumers
(Randall, 2016). Tesla succeeded without spending on mainstream promotions
and no plans of hiring an advertisement agency, Tesla focuses on
communications through its website, stores and social-network capturing
client’s experience driving a Tesla (AdvertisingAge, 2013). In addition, Having
Tesla’s CEO as the face of the company with over 2 million followers in social
media updating the world of Tesla’s mission, products and stories (QMAC,
2016).
 Place
Tesla is all about the consumer experience, exclusivity and modernization from
establishing interest of buying a Tesla model to even aftersales services. Tesla

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reinvented the purchasing experience of a vehicle, Tesla removed the
“middleman” traditional dealership approach by directly selling to end
consumer. It didn’t stop at channel selection but also carefully opening Tesla
stores at shopping malls with no stock of cars, consumers go to Tesla’s shops
for the experience and learning more about Tesla’s technologies, mission and
exclusivity of being each purchased car customized for its owner (QMAC, 2016
and The Economist, 2015).
Another sales channel is Tesla’s interactive website ordering applications that
provides full control to the consumers to make the purchase, while
understanding all aspects of the products and number of varieties of
customization (QMAC, 2016 and The Economist, 2015). Even aftersales
support is completely managed by Tesla ensuring quality of service and
enhanced customer experience, as most of the vehicle services are software
update, Tesla provides over the internet update to its models without the need
of visiting a service center (QMAC, 2016)
 Price
Currently, Tesla is classified against luxury automakers segment as Tesla’s
current models are compared to Mercedes S Class, Porsha, BMW…etc. So far.
Tesla Model S starts at 70,000$ which is highest of EV cars, but still Tesla sold

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more cars in Q1 of 2013 than Mercedes or BMW similar models (Valdes-
Dapena, 2013).
Tesla strategy to produce mass market EV (Model 3) at a range of 35,000$ and
lower, this can be achieved by completing of “Gigafactory” and advances in
battery technologies, giving Tesla the competitive edge over the EV market
(The Economist, 2015 and Davies and Nudelman, 2013).

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5. Conclusion
Tesla achieved its mission of successful delivery of environmental friendly cars to
consumers, whither through Tesla’s top of the range vehicles or through Tesla’s innovative
technologies that are open for other firms to build on.
It’s true the market macroeconomic environment provided the required infrastructure and
demand enabling Tesla to successes, but Tesla’s success came from its strategic business
model, which is built around Tesla delivering what is the consumers need. Tesla succeeded
in building loyal consumers base by actively communicating with consumers to understand
their needs, experience and delivering the right products. Tesla’s adopted business model
outcomes were tangible during the launch of Model 3 recording over 800 individuals in
single Tesla store to place their advanced reservation amount (@elonmusk, 2016).

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6. Future Recommendations
Moving ahead Tesla will definitely have a continuing demand for its products and
technologies, and playing a major role as innovators for sustainable transportation with
several speakers and articles predicting that the near future transportations won’t be based
on ICE vehicles (Urquhart, 2013). It is important to sustain Tesla’s position in the market
for future the success established by Tesla’s market, key recommendation raised from
conducted research are:

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Appendix 1: Details on PEEST Analysis
 Political/Legal:
Governments are supporting the UN’s green initiative and working to reduce
carbon footprint, with setting target to achieve a certain CO2 emissions levels,
which creates a need for environmental friendly means of transportation, Figure 2
shows targets set by leading countries to reduce carbon footprint. (McKinsey &
Company, Amsterdam Roundtable Foundation, 2014).
Inline with governments’ initiative different laws/legislations were in place to
support citizens shift to EV, such as tax reduction/exemptions, free parking or
other means. This political/legal aspect established a demand for greener cars, for
example, Toyota is planning to double its production of green flagship model
Prius (The Economist Intelligence Unit, 2012).
 Economic:
Shifting to EV contributes positively to the economic growth, both at consumer
and nation levels. Saving fuel costs and ability to spend the saved money in
different items, leads to better circulation of money in economy at whole (Ozaki
and Sevastyanova, 2009 and Gallagher and Muehlegger, 2008). In Addition,
adopting new technologies resolves national economical issues such as,
unemployment by increasing demand for different skill sets and opens doors for
supporting businesses to service EV, which contributes to national GDP
(McKinsey & Company, Amsterdam Roundtable Foundation, 2014 and Hecker,
2005).

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 Ecological:
The political aspect is highly linked with ecological aspect of this analysis, as
mentioned in point 3.1.1, there is strong push started in 1986 by WCED and UN
to reduce carbon footprint and preserve the environment WCED (1987, cited in
Høyer, 2007). In support of environment preservation, California State placed
zero emission regulation in 1990s, which started the race again for research and
development of EV and home of Tesla Motors (Høyer, 2007).
 Social/Culture:
Consumers’ buying behavior are strongly linked with economical benefits of long-
term saving, and contribution of preserving the environment (The Economist
Intelligence Unit, 2004), Figure 3, shows top motivation for customers to purchase
EV (Ozaki and Sevastyanova, 2009)
 Technological:
The EV history started with advances in battery technologies, and passing the 60
mile range limitation (Høyer, 2007), Governments are supporting EV automaker
by investing in new technologies that motivate the consumers to buy alternative
vehicles than ICE, such as the smart roads in UK that aims to recharge the vehicles
while it moves. (Highways England Company Knowledge Compendium, 2015).

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Appendix 2: Tesla Model S versus Competitor
Tesla models are packed with major horsepower over competitive that allows Tesla’s vehicle
compete with traditional cars in driving experience and acceleration. Most importantly, Tesla
cars travels double the range of existing electric car on single charge. Finally, Tesla cars looks
modern, pragmatic and loaded with functionalities that meets consumers’ needs.
Source: http://www.techinsider.io/tesla-versus-other-electric-cars-2015-9

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