UNIT 6, ASSIGNMENT 1, Integrated Global Marketing Case Study

Kelly Monegan

MBA6012- Integrated Global Marketing

April 3, 2015

Email: kmonegan@capellauniversity.edu
Professor: Joseph Levesque
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Tesla Motors - Overview

In 2003 Jeffrey B, Straubel, Elon R, Musk and Marc Tarpenning founded Tesla Motors, a lavish,

environmentally friendly electric car company located in Palo Alto, CA. Tesla Motors also

manufactures electric powertrain components, batteries and charging systems for Daimler-Benz

(Mercedes) and Toyota Motor Co. “Tesla’s engineers first designed a powertrain for a sports car

built around an AC induction motor, patented in 1888 by Nikola Tesla, the inventor who inspired

the company’s name.” (TeslaMotors.com) Since then, Tesla has been recognized as being

experts in creating the highest energy density in their batteries making them the premiere

manufacturer of EV (Electric Vehicle) batteries in the world. They employ over 6,000 people

that are mostly engineers and they have stores that sell directly to owners (customers) cutting out

the middle man (dealerships).

Target Market

The target market is a higher income group that wants a custom built, luxurious vehicle that has

more value and presence than other electric vehicles on the market such as the Chevy Volt and

The Nissan Leaf. In my opinion, Tesla’s customers don’t mind paying a higher price because

owning a Tesla EV has become a status symbol. Tesla’s market has been educated about and

understands the impacts of pollution and oil consumption. I believe their customers want to leave

less of a footprint on our earth.

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Marketing Mix Analysis – 4 P’s of Marketing

The 4 P’s of Marketing are product, price, place and promotion. (Marshal, G.W., Johnston, M.

W., 2014) Below are examples of each part of the marketing mix analysis.

Product

Tesla makes the Model S and will be manufacturing the Model X sometime this year. The model

S has been ranked as having the highest safety rating in the U.S. It’s equipped with autopilot, has

all-wheel drive and can go from Zero to 60 mph in 3.2 seconds. It has a range of 270 miles.

(Tesla Motors.com) The Model X is a sport utility vehicle, seats seven, offered with multiple

battery and performance options, all-wheel drive and has Falcon Wing Doors that fold up.

Considering I work for an automotive manufacturer, I consider Tesla as “top shelf” compared to

other EV’s on the market. My reason is their product service, quality and features. Also because

they’ve had zero safety recalls and their EV’s traction control is superior because it has a much

higher latency and inertia than a standard gasoline powertrain.

Price

Since Tesla custom builds per customer specifications, the price will vary upon options and

battery selection. The base models start at around $70,000 and with premium options can go up

to $125,000. I applaud Tesla for using creative financing with extended amortization to help less

affluent people to afford their cars. Tesla has also worked, using lobbyists to have customers

earn Federal and State tax credits for purchasing their EV’s. Tesla also encourages trade-ins

because they meet the needs of customers that need a lower price point and it generates more

sales.

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Place

Tesla sells their vehicles directly to customers, in stores mostly located in California and from

the Tesla Website. The website enables customers to build and design their EV’s from their own

home. Tesla doesn’t sell their EV’s in existing dealerships. Instead, preferring to market and

educate their customers similar to Apple. The main reason for not using dealerships to sell and

promote the EV’s is the conflict of interest between selling gasoline cars and selling the new

technology of electric cars. “It would be impossible for dealerships to explain the advantages of

going electric without undermining their gasoline cars.” (Elon Musk)

Promotion

Tesla uses Social media such as LinkedIn, Facebook and Twitter to promote their company and

EV’s. They don’t use an advertising agency nor do they advertise in newspapers or magazines.

The other way they promote is thru company stores, press releases and news articles. In the Tesla

stores, salesmen are told to “sell like you're selling to a sibling because these are truly Family

Customers. They are joining your club.” (Teslamotors.com) This is an “out of the box” sales

approach. Personally, I dislike the whole salesman /dealership experience. I had the opportunity

to visit a Tesla store in Lyndhurst, Ohio, December of 2014, a month after it opened and I was

truly impressed with how they promote their vehicles compared to other domestic and

international automotive dealership showrooms.

Domestic and International Markets

Currently Tesla sells in 17 countries and operates a network of over 80 sales, service-plus and

gallery locations in North America, Europe and Asia. Including all sales and service facilities,

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they currently operate 116 locations worldwide. (Tesla, 2014) Most domestic business is located

in California. The second largest market is Canada.

Vision and Execution

Tesla’s principal marketing goal is to enable customer input into the product development

process. Generating a greater demand, referrals for vehicles and leads for the sales teams. Tesla

manages its corporate reputation and brand thru social media and rewards customers for

referrals. Tesla executes and promotes its vision thru Regional Brand Partnerships, Civic Leaders

and conferences promoting “Green” awareness such as “GoGreen Seattle 2014”.

Company’s Plan for Growing and Servicing its Customer Base

Tesla is in the process of promoting their electric propulsion system as the future of the

transportation industry. The aim is to mass produce the EV’s and develop vehicles that will be

marketed to more segments. Tesla estimates substantial growth in powertrain sales and

development services to other manufacturers. They anticipate further growth with the expansion

of service and charging stations across the U.S. Beginning in February, 2015 Tesla will begin

construction of two charging stations along the New Jersey Turnpike. This is an agreement to

install two charging stations on the Turnpike at no charge to the authority or toll-payers. “Tesla

will pay for the electricity and is making efforts to retrofit solar canopies over some of the

stations so they can produce and distribute electricity,"(Higgs, L., 2015) Tesla is also working

with Lobbyists and Policy makers to pass Bills and Legislation allowing them to sell cars

directly to customers in states that have laws that now prohibit them. Tesla plans to install

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charging stations along turnpikes and major highways. In my opinion, Tesla is doing the right

things. I think people will be willing to wait for their special order EV’s despite Tesla’s delays to

keep up with demand. Because the brand has become the premiere EV manufacturer of the

automotive world. Even if it cost more than the competition for similar specs people will choose

one over the other for the sake of brand recognition and saying they own a Tesla.

Opportunities

Unlike Tesla, GM and Ford don’t have the brand recognition they once had with the new

generation of car buyers. The oldest of the millennials are now in their 30’s and since their

buying power has increased this is a market that needs to be targeted. MTV did a focus group in

Fort Lee, N.J., Cleveland and San Francisco. The reason for the focus group was to gain a better

understanding of what millennials wanted in a vehicle, how many miles they drove and where

they drove. The focus group was in response to a survey that was done in 2014 about the

younger generation having a 75% decrease in driver’s licenses and that most would rather use

public transportation or ride a bike than own a vehicle. (Gardner, G., 2015)

The focus group concluded that “80% of people believe buying and leasing a car should take less

time. 71% think that ratings and comparisons among vehicles were unclear, 87% say the buying

process should be more transparent and 33% say they plan to buy or lease a new vehicle in the

next six months.” (Gardner, G., 2015)

This being said, Tesla has an opportunity to gain this segments market share because they

embrace social media, they’re transparent, they offer a green solution and they have the features

that will attract the millennials. The only drawback is price at the point of sale and trade in

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values. Tesla has recognized this and plans to produce a vehicle by 2017 that will be in the

$30,000 price range. With the $7,500 Federal EV tax incentive, this will be attractive to more

people and this will be a way for them to gain more market share.

A concern I would have would be the value of the vehicle in three years. According to the Tesla

sales representative I spoke to, Tesla guarantees 50% of the value up to three years and 47% of

the value after the 4th year. I think the reason for the low trade in value is the batteries. There’s

also a concern about the charge of a battery in cold weather. I was told that in fifteen degree

weather the battery charge goes from 270 miles down to about 160 miles. Information Resources

Tesla Motors’ Customer Relationship Management (CRM) is done through an Open Source

cloud service called Azure Storage Explorer, which is a Microsoft National Systems Integrator.

The CRM is contracted by a company called Neudesic, headquartered in Irvine, CA. Neudesic

provides Tesla with Business Intelligence Solutions that combines data from various sources and

applications into a “single source” of actionable information. The data helps Tesla to streamline

their business processes and continue their competitive advantage. Tesla uses a CRM contractor

to help support their efforts. I believe this is a good strategy because Neudesic is a state of the art

service/technology company and they can bring new technology as it becomes available. I think

it’s also a good idea to have the experts as part of their team.

Tesla’s CRM Goals

Marketing Automation – because it dramatically increases the ability to cost effectively close

new customers. Tesla uses “in-app” messaging that gives help in the use of the product, the offer

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for a direct “chat” with a company representative, an email giving recommendation for use of the

product or additional product information, or an invitation to a webinar or company event.

Customer Engagement Management – increases customer satisfaction, customer referenceability,

revenue per customer, and customer retention.

Customer Services together with Customer Engagement - drive Up-Sales, Cross-Sales, and

Customer Retention using related techniques. (Key, D., 2014)

How Tesla uses marketing information resources

Tesla uses cloud technology to collect Scalability, Adoption and Training marketing information

resources.

• Scalability are problems that can plague new products, campaigns and deplete

resources.

• Adoption is through cloud-based products such as Google and Google Earth. Tesla

has included in every Model S EV the ability to add functionality and make changes

to the vehicle via remote software updates.

• Training is mostly done using the cloud. The cloud technology reduces training costs

for service professionals, sales and customers.

Marketing

Tesla’s marketing strategies are as follows:

(1) Start with a great product

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(2) Start high and work your way down

(3) Turn auto industry strengths into weaknesses

(4) Create a new multi-channel model

(5) Build the community & focus on the experience

(6) Leverage the media and traditional press

Theories, models and practices of marketing

Tesla has built their own ecosystem that challenges traditional sales models by using a direct

distribution system. Their strategy for marketing vehicles and services is entirely different.

Because they promote the “value preposition”, giving them a competitive leverage. Currently,

Tesla is being touted as the new “Apple”. They’ve even hired Apple’s former retail chief to build

out their new distribution model. Tesla’s theory is to turn auto industry strengths into

weaknesses.

An example is that, historically automakers sell luxury cars justified by the quality of their

engineering. Therefore, most luxury automotive manufacturers tout, “performance thru

engineering” This statement is meant to wow customers and make their cars special and

desirable.

Tesla’s marketing focuses on performance through technology. “The Tesla Model S pitch

reframes the auto industry strength as a weakness. Through Tesla’s highly-effective marketing

lens, traditional gas cars are dirty, complex, unreliable, and difficult to maintain.” (Musk, E.,

2014)

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This is reinforced by the design of Tesla’s “white floor” service centers. I like to think Tesla used

Fiat’s “white floors” idea to reinforce that electric cars don’t have oil and other dirty fluids that

leak on the floor. The company I work for, Fiat Chrysler Automobiles, they use white floors to

show that the vehicles don’t leak and it conveys an image of quality.

Marketing Against Competition

On June 12, 2014, CEO Elon Musk did a daring marketing move. He decided to open up “his

secrets” by making Tesla’s patents public, paving the way for an open-source electric car. Elon

Musk stated, “Let innovators work without the specter of legal action and see what gets created.”

(Bonderud, D., Midsizeinsider.com)

His reason for open source is because he wants to invite competition. When Tesla first started

out they assumed major auto manufacturers would want to adopt their ideas. Instead they refused

to deviate from their gas platforms.

This move was unheard of in the automotive industry where new model launches are tightly held

secrets. I think this was a good marketing move because it challenges the likes of GM and

Toyota to become open. It also goes along with their Open Source CRM analytics that enables

Tesla to better predict customer's future needs.

Market Segments

Tesla has targeted three marketing segments, eco-friendly, tech savvy and entry level luxury car

consumers. The eco-friendly segment is reached by offering a fully electric vehicle that’s good

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for the environment, costs less to drive and is an investment into clean energy. The tech savvy

segment is reached because the features, Such as, the electronic vehicle driving range is more

than double the competition and the vehicle comes with many add-on options. The EV maps and

features automatically update so there isn’t an additional cost for upgrades. The entry level

luxury segment reaches professionals in the early stage of their careers looking to buy an entry

level luxury vehicle that is based on new technology and has superior performance. Tesla’s

marketing strategy incorporates Maslow's hierarchy of needs such as: self-actualization, esteem

and status, belongingness/love, safety, psychological as well as cognitive, aesthetic and

transcendence needs to motivate customers to purchase their electric vehicles. (McLeod, S A.,

2007) By focusing on needs, the EV’s have been well received and customers are on waiting lists

to own their own custom ordered vehicle.

How marketing fits into the internal and external environments of Tesla Motors

Tesla’s internal environment consists of their mission statement, “To offer a compelling

customer experience while gathering rapid customer feedback and achieving operating

efficiencies, better control of costs of inventory, warranty service, pricing and the development

of the Tesla brand” (www.tesla motors.com) Another factor is Tesla’s leadership style. Elon

Musk, stated that his philosophy is to reward people who come up with daring ideas that work,

and only ‘punish’ them lightly if they fail. This creates an environment where people aren’t

afraid to make, and share mistakes and learning experiences. I think that Tesla’s marketing

strategy works with their internal environment because it engages customers and invites a dialog

of shared ideas, implement ways to improve and create vehicles that they will want to buy.

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Tesla’s external environment understands social, demographic, economic, technological,

political, legal, and competitive variables and how they affect sales and marketing. Tesla keeps

current on market trends through social media and they understand the socio-economic patterns

of new technological buyers. Tesla’s external environment has created a transparency that invites

innovation, allowing customers, competitors and political entities to see and understand their

technology. Making it quite obvious that EV’s are a viable solution to reduce our dependence on

oil in politically unstable countries especially since it also reduces our carbon footprint and

greenhouse gas emissions.

Global Business Marketing Problems and Opportunities.

“Management churn” has plagued Tesla in 2014 with the resignation of Veronica Wu, former

Global Vice President of China and June Jin, Tesla China’s Vice President for Global Business

and Chief Marketing Officer for the Greater China region. Jin announced her resignation, after

only five months with Tesla. This has been a major blow to Tesla’s plan to grow their market in

China. As a result, underperforming company managers “will be asked to leave” or assume a

more junior role. The resignations, have challenged Tesla to seek better qualified leaders and

improve China’s marketing plan.

With the addition of new management and national policies subsidizing the production and sales

of NEVs (New-Energy Vehicles) in China through 2020, Tesla expects a substantial amount of

growth in 2015- 2020.

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Market Segment Analysis

Since Tesla has clearly defined their market segments and marketing strategy, I think this year

will be a success. As for growth in the global market, China has some new opportunities and

Tesla is working with government agencies about creating charging stations that will align with

China’s State Grid plans. China is planning to open a distributed power grid and electric vehicle

charging stations—which were previously state-run—to private investors like Tesla. Also,

China’s State Council is in the process of removing the 10 percent purchase tax on domestic-

made NEVs and Shanghai will begin to issue free license plates for new Tesla vehicles this year

—“a significant incentive, considering that Shanghai license plates cost ($11,959 U.S. dollars) a

piece on average.” (Marro, N., Hengrui, L., Yu, Y., 2015) I think that these incentives will

motivate customers to purchase NEV’s and Tesla will be on track to meet future goals.

Marketing Communications

Tesla Motors’ message is “competency and innovation”. Innovation is the core competency that

brought them through near bankruptcy and from making 400 cars annually to making over 400

cars weekly. Tesla Motors believes that their electric vehicles are the future to a greener planet,

renewable energy and oil independence.

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Analysis of how Tesla integrates its marketing communications tools and promotional

activities.

Tesla uses a unique form of marketing communication tools and they’ve broke the mold by not

using standard marketing communication programs or promotional activities. Tesla’s marketing

tools are the media, internet, blogs and interviews.

Tesla spends ZERO dollars on advertising. CEO Elon Musk’s strategy is this: “Advertising is

earned, not bought. Do something truly cool and the media will beat a path to your door. ”

Tesla’s philosophy is that you earn media attention by making something that is really

newsworthy. Tesla’s marketing communication programs consist of interviews and stores.

Musk’s interviews are all over YouTube. Elon Musk’s interview strategy is successful because

he’s an interesting billionaire that has brilliant ideas and he works on interesting projects.

At Tesla Motors, there isn’t an advertising department, ad team or Chief Marketing Officer

(CMO). Alexis Georgeson, who is a spokeswoman for Tesla, is the closest to a PR person in the

company. She says: “Right now, the stores are our advertising. We’re very confident we can sell

20,000-plus cars a year—without paid advertising. It may be something we’ll do years down the

road. But it’s certainly not something we feel is crucial for sales right now.” (Tesla, 2014)

Advertising, personal selling, public relations and direct marketing

Since Tesla’s primary form of advertising is their stores, they use location as an advantage.

Instead of having a store positioned next to car dealerships, they’ve put small stores in shopping

centers. They’ve identified their target audience and positioned stores near high end retailers,

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restaurants and businesses. The stores themselves dictate the decisions of where, when, what

and how the marketing message will be delivered and by whom.

Stores are not located along main roads like every other car dealer. Instead, right alongside

brands like Banana Republic, Coach, Nordstrom or Bloomingdales and the showrooms are only

the size of a small shop, often only squeezing in a single vehicle into the space. Many sales have

come from people who had zero interest in buying a car until they saw Tesla’s showroom (They

were probably in the mall to buy a gift or doing what I call “retail therapy”).

People impressed by the car’s design walk right in and immediately talk to a sales person –

rather than have to specifically drive out to a dealership. The salesmen have been trained to use

communication objectives that focus on buyer readiness stages such as: awareness, knowledge,

liking, purchase, conviction and preference.

Tesla’s public relations and direct marketing consist of using social media and they do this all

without spending any money on direct advertising campaigns. Because CEO, Elon Musk and the

creative minds behind the company know how to generate a social media buzz. They use blogs

and hashtags to direct people to their website and stores. Through social media they design a

message, creating awareness, interest, desire and action (AIDA).

The direct marketing is face to face, phone, e-mail, and internet sites like Facebook, LinkedIn or

Twitter. The non-personal marketing is done by the media and special events. Their marketing is

successful because they use credible sources and they collect customer feedback from

recognition and behavior measures.

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Tesla’s integrated marketing communications (IMC) process model

Tesla communication model closely resembles “DAGMAR” (acronym: Defining Advertising

Goals for Measured Advertising Results). The approach involves setting specific, measurable

objectives for a marketing strategy to determine if specific objectives were met. Specifically,

DAGMAR seeks to communicate a specific message through four steps:

Awareness - making the consumer aware of Tesla Motors

Comprehension - letting the consumer know by educating them about their electronic vehicles

and environmentally safe batteries.

Conviction - convincing the consumer to purchase the vehicle

Action - getting the consumer to actually make the purchase

Promotional Strategy

Tesla uses both a Push and Pull strategy. The Push being the personal selling at the stores. The

Pull strategy is using the media to do most of their advertising. The media is making potential

customers aware of Tesla and they spark interest by making people want to know more about the

benefits of owning an electronic vehicle.

Another pull strategy is gaining customer engagement in the “build your own vehicle process”.

Tesla’s pull strategy relies more on consumer demand than personal selling for the product to

travel from the manufacturer to the end user. The demand generated by the media, website and

stores "pull" the custom designed vehicles through the channels of distribution.

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Conclusion

Tesla has changed the automobile marketing and buying experience. Throwing away standard

marketing strategies and programs. I can see future case studies being done regarding this

marketing strategy.

I like Tesla’s stores, I like that the car is completely bought online. I think they’re the only auto

manufacturer that allows customers to track the manufacturing process with a smartphone. This

communication method allows customers to have the feeling of ownership all the way through

the manufacturing process and they can have vehicles delivered to anywhere they want. No price

haggling, no multiple visits to get your car, and most importantly, the experience is tailored to

one’s life schedule (kind of like on-line learning).

Tesla’s marketing communication is efficient and effective. The publicity and self-promotion

thru the internet appeals to young professionals, environmentalists and tech savvy customers. It’s

hard to believe a company like this doesn’t have a marketing department. Unless they quit

developing new vehicles, charging stations or batteries with a longer range, I can’t see this

communication method failing.

References:

Marshall, G. W., & Johnston, M. W. (2015). Marketing Management (2nd ed). New York, NY:

McGraw-Hill.

http://www.teslamotors.com/de_AT/blog/tesla-approach-distributing-and-servicing-cars

http://www.teslamotors.com/about

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http://www.slideshare.net/joseangeldf/darden-school-of-business-tesla-strategic-analysis

Higgs, L., (2015, Februar18) Tesla charging stations to be installed on N.J. Turnpike starting

next week. NJ.com Referenced from:

http://www.nj.com/traffic/index.ssf/2015/02/tesla_charging_stations_to_be_installed_on_nj_turn

pike_starting_next_week.html

Gardner, G., (2015, January 23) MTV study: Millennials want their cars Referenced from:

http://www.usatoday.com/story/money/cars/2015/01/23/mtv-study-millennials-want-their-

cars/22249193/

Key, D. (2014) Customer Success Best Practices. Referenced from:

http://www.gainsight.com/customer-success-best-practices/marketing-automation-customer-
engagement-management-drives-saas-revenue/
Musk, E. Referred from: http://www.teslamotors.com/about

Blankenship, G. (2013, February 5) Blog: Inside Tesla 02.05.13. Referenced from:

http://www.teslamotors.com/blog/inside-tesla-020513

Bonderud, D., (2015, January 23) Powering the Open-Source Cloud: What Tesla Motors Can
Teach IT. Referenced from: http://midsizeinsider.com/en-us/article/powering-the-open-source-
cloud-what-tes#.VPudMvnF8tE
Musk, E. Referred from: http://www.teslamotors.com/about

Matjeschk, M. (2014, August 21). Silent, Smart, Sustainable: Driving Innovation with Tesla.

Referenced from: https://nyintl.net/article/smart_mobility_driving_innovation_with_tesla

http://www.dow.com/news/press-releases/article/?id=6573

McLeod, S. A. (2007). Maslow's Hierarchy of Needs. Retrieved from

http://www.simplypsychology.org/maslow.html Boyko, B., (2015) Why Texas Banned Tesla

Motors (Spoiler: Because we don’t have campaign finance reform) Referenced from:

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http://www.boykotx.org/why-texas-banned-tesla-motors-spoiler-because-we-dont-have-

campaign-finance-reform/

http://www.referenceforbusiness.com/management/Log-Mar/Marketing-

Communication.html#ixzz3VXZSfUVA

http://www.teslarati.com/brilliant-tesla-advertising-strategy-lack-

thereof/#J6rRZZhYvrRs1ZIS.99

http://www.teslamotors.com/about

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