Conjoint Analysis Assignment

Bhagath Gottipaty, MBA

Rishabh Mutha, MBA

Tesla Motors, Inc. is an American automotive and energy storage company that designs,
manufactures, and sells electric cars, electric vehicle power train components, and battery
products. Tesla designs and manufactures premium electric vehicles. Tesla currently produces
the Model S sedan, Model 3 sedan and the Model X SUV crossover. Currently Tesla is targeting
towards high and premium customer in US, Europe, Canada, Asia and Australian markets.

As part of the assignment, we have chosen Tesla Model S as our product and Luxembourg
market as our target market to implement conjoint analysis. Firstly, we had defined the
attributes/factors and different levels under each factor. This helps us understand the market’s
preference, i.e. Luxembourg and help us analyze and design the product based on the
competitive positioning, pricing and segmentation thereby inferring the needs of the customer in
terms of the factors/attributes.

Factors Model 1 Model 2 Model 3 Model 4

Price 81000USD 89500USD 130000USD 76500USD
Battery 70kwh 90kwh 90kwh 70kwh
Torque 387lb-ft 485lb-ft 713lb-ft 325lb-ft
Motor Type Dual- Dual- Dual- 382HP
259HP(front & 259HP(front & 503HP(front);259HP(rear) Single
rear) rear) motor(rear)
Table.1 Factors and levels considered in Tesla Model S for Conjoint analysis

We had chosen price, battery, torque and motor type as four factors and four variants under
Model S as different levels under each of these factors to implement the conjoint analysis. Based
on our analysis we decided that these factors are the key aspects for the premium customers
across all the markets considered when buying a high end car.

Factors & Levels.

As per the information in table 1, we can find there are four factors & fours levels under each of
those factors which will be more relevant after the surveys from the target customers.

1.   Battery – As Tesla cars run on the concept of green energy i.e., electric power. The
higher the power of the battery, the better mileage of the car.
a.   Since battery is the source of the fuel and the major product differentiator in the
market, we suggest that the battery should be 90kwh across all the models.

2.   Torque – The performance of any car is closely related to acceleration. The customers
consider torque as a necessity for any high end car. Tesla’s cars offer high torque across
all the variant based on the models.
 a.   Currently Tesla offers 387lb-ft, 485lb-ft, 713lb-ft and 382lb-ft. We consider that a
lower premium model should have 485lb-ft as torque and a higher model should have
713lb-ft in order to make the product attractive to the segment.

3.   Motor – Its is another important attribute which decides the cars drive model whether its
all-wheel drive or only a rear wheel drive. It provides additional comfort and acceleration
to the drive. Since Tesla models are aimed at the premium segment, we believe that the
type of the motor. plays an important role.
a.   Levels under the motor are 259 HP (all-wheel), 382 HP (rear wheel), 503 HP (all-
wheel). The premium customers tend more towards all-wheel drive based on the
existing markets. Two products have similar motors and the high end edition has very
powerful motors as it goes with the price tag and also provides greater pick up and
speed for the driver to enjoy his drive. Also the company provides a rear wheel drive
edition in the same segment which has a single motor and the car being low priced
gives the least performance compared to the rest of its counterparts.
Based on our analysis, we believe that 259 HP (all-wheel) and 503 HP(all-wheel)
should be considered for the premium markets.

4.   Price – The prices are based on the above performance factors of each of the models and
the payment mode the customer considers for example when the costumer chooses to
make the payment in one go, the cheaper the price compared to the price when he opts to
make the payment through a loan or lease.

a.   Currently the prices that Tesla offers its products are USD 81000, USD 89500, USD
130000 and USD 76500 as lower segment. Based on the survey responses and how
often each of the levels above were included in the customer’s preference according
to their survey report, we have to fix the price accordingly. From our analysis, we
consider that a model with price USD 89500 and USD 130000 should be taken
forward for release in the Luxembourg market.

We choose to keep the price as constant initially and considered other factors and levels to
decide what the customer value for the most and this will lead us to predict the model better and
helps us to build the right product for the right market.

Recommendation

Based on the study of various factors and levels, we recommend that tesla should concentrate on
Model 2, a base level premium model, which has a price of USD 89500 and Model 3 as super
end product with a price of USD 130000 for the Luxembourg market.

The company can take an advantage of the pricing in terms of the delivery time. For example,
the company could price these models on the basis of the delivery time (customers wait time).
The more waiting time the lesser the price tag.