Documente Academic
Documente Profesional
Documente Cultură
Ha-Phong Nguyen Hamza Sehaqui Ilias Nafa Khalfa Anyss Yann Rambeau-Bysath
Index
Brief description of the company ............................................................................................................ 3
How did the company identify the opportunities to develop the model S............................................... 3
The target customers ............................................................................................................................... 5
The success secrets of the model S.......................................................................................................... 6
The competitive cars ........................................................................................................................... 6
The market place conditions ................................................................................................................ 8
Tesla Market strategies ........................................................................................................................ 8
The success of the Model S ................................................................................................................... 10
What marketing lessons does this case offer in terms of successful commercialization of an
opportunity?........................................................................................................................................... 12
Appendix ............................................................................................................................................... 14
Endnotes ................................................................................................................................................ 20
How did the company identify the opportunities to develop the model S
Tesla Motors identify the opportunity to develop the model S by profiting from 5 main key points:
1. The current energy context
2. Technological progress in vehicle elements
3. The use of open innovation
4. The development of charging stations of electric cars in the advanced countries.
5. Profiting from the success of the first developed car.
Today, many natural resources are decreasing rapidly. According to the estimations of the World
Energy Council, the oil reserves in the world have a potential of 56 years. In front of this situation,
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environmental concerns are at the forefront of our daily lives. Tesla Motors benefits from this current
energy context to develop fully electric vehicles that do not produce greenhouse emissions.
Besides the fact that people are more concerned to protect the environment which push them to
acquire an electric cars. There are strong government incentives for electric vehicle development,
production and sale that have been established by several national and local governments around the
world. Actually, the primary incentives to encourage people to buy electric cars are tax reductions and
exemptions, as well as bonus payments.
In Europe, 15 of the 27 European Union member states including all Western European countries,
Romania and Czech Republic provide tax incentives. In Austria for example, electric vehicles are
exempt from the fuel consumption tax, levied upon the first registration and from the monthly vehicles
tax.
Concerning the electric vehicle producers, the most challenging point relies in the development of the
battery. Tesla has then develop the idea that the same lithium-ion technology used in laptops would be
used to create a fully electric vehicle that is not only eco-friendly but also attractive and pleasant to
drive.
In order to save time, Tesla took the opportunity of making a partnership with Panasonic that already
developed this type of battery; this process is called Open Innovation (Exhibit 2). This agreement
allows Tesla to develop the model S which competes with the largest gasoline car brands and which
comes with great change in terms of results for safety, range and durability.
Finally, Tesla Motors smartly profits from the success and the benefits generated from the Model S
predecessor to continue developing luxury electric vehicles and attract more consumers.
However, the identification of the opportunities to develop a product is not the only step to achieve
success. There are important marketing processes to build a strong brand. Let us discover how Tesla
used these processes to achieve success.
of EVs. However, Model S is such a high-tech and classy car that it can attract all ages. According to
the VALS framework (Exhibit 3) for a psychographic segmentation, the lifestyle appeals and
personality of the target market for Model S is innovators trendy people. Indeed, people buying
Model S should be interested in high innovation and have an upper social class.
will be possible to go from 0 to 100km/h in 7.6 second with a top speed at 222km/h and a total
autonomy to 940km. Its price will be approximately $55000. Compare to the basic Model S which is
capable of 0-100km/h in 6.2 seconds, a top speed of 190km/h, an autonomy of 400km for a starting
price of $62500. Audi A3 E-tron will probably be a serious competitive product to the Model S, but at
the time Model S was commercialize, Audi was in stand-by concerning its EVs.
Concerning BMW, they are very committed in the electric and hybrid systems. From 2011, BMW hire
nearly 2600 new employees to develop the future electric vehicles. Their efforts leads to BMW i.
BMW is planning to launch two EVs, the i3 for the end of 2013 and the i8 for 2014. Lets start our
analysis with the BMW i3. With a starting price of $40000, an autonomy of 160km with the full
electric motor, a 0 to 100km/h in 8 seconds and a maximum speed of 150km/h, the BMW i3 is not a
direct competitor to the Tesla Model S. It will definitely compete against Tesla Gen III for the small
premium vehicle market. Concerning the BMW i8, it will be commercialize in 2014 for a price of
$130000. Like the electric hybrid supercar Porsche 918 Spyder ($845000), the BMW i8 is very
different from Model S. Indeed, Porsche 918 and BMW i8 are sports car body with only 2+2 seats and
autonomy of 30km on power electric alone. These cars will not be able to substitute the sport or family
sedan spot represent by Model S
What about Toyota? With its Prius, it was the first mass produced hybrid car. In 2012, Toyota
launched its first plug-in hybrid Prius for $30000. The main difference with the classic Prius is that it
can be plugged to recharge the battery. Compared to the model S, the plug-in Prius has poor
performance and autonomy. It is not comparable to Model S which gives a delightful driving
experience in addition to a maximum fuel efficiency.
Concerning 100% electric vehicles like the Nissan Leaf, Mitsubishi i-MiEV, the Ford Focus electric,
etc., they cannot compete against Model S. Indeed, these cars are not luxury vehicles and target very
different customers.
At that time when Model S was launched until now, we noted that no car manufacturer has a clear
direct competitive product to the Model S. As the Toyota Prius in the hybrid market, Tesla has a clear
advantage in the electric car market. Tesla should profit from this position to solidify its presence by
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improving their technological advantage and build a prevalent brand in the all-electric vehicles market
before others enter the niche market.
Model S is benefiting from all the classical electronic driving and safety features, plus some special
items, as customizable steering, suspension and brakes. The Model S is also the most secure car ever
made: it achieved 5 stars on all tests of National Highway Traffic Safety Administration (NHTSA) [6].
The ownership of a Model S is also giving access to Tesla Product Line membership that gives access
to many advantages, advices, and also events. You can keep statistics about your car, connect with
other users, and also manage maintenance. As we can see, Tesla is not fighting on the same ground as
its competitors. The model S, as the Roadster, is a premium car with no compromise on beauty,
efficiency and driving pleasure. According to Tesla, driving an electric car must not be a sacrifice, it
has to be an enjoyable experience!
Pricing
Electric cars in general have an advantage against thermal engine cars: they are now benefiting from
the state support. For example, electric cars buyer can have a Federal Tax Credit up to $7,500.
The basic Model S is available for $49,900. Tesla is at first following a sale oriented one-price
strategy, to achieve a rapid growth and discourage competitors to enter this market segment. On the
long run, Tesla wants to follow a profit oriented strategy: it is counting on the fact that production
costs will decrease to get more profit that will be used to fund the R&D, and for the development of
next Tesla car, the Model X. We can also add that similarly to many of high-tech goods, Model S
follows a skimming price strategy. It means that the model S is available in a high price performance
version, targeted to the customers willing to spend a premium to get the best possible car. This added
price will decrease over time, theoretically ensuring that all customers will pay their maximum
willingness price.
Distribution/Channel
As we said before, Tesla has a direct sale system, a first in the car industry. Instead of selling their cars
through automotive dealership franchise like other manufacturer do in the USA, they decide to sell it
directly to consumers. With their own modern showrooms, customer can test drive the product and can
buy it through a customizer on site. It is a whole new and disruptive customer experience. Like other
high-tech companies such as Apple, the stores are in high foot traffic, high visibility retail venues.
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According to Elon Musk, CEO & Chief Product Architect of Tesla Motors, Our technology is
different, our car is different, and, as a result, our stores are intentionally different. Tesla wants to
control the whole customer experience by educating people and not just selling their EVs.
Promotion
Tesla innovates also in the promotion field. Automotive industry is known to spend more on
advertising. Tesla takes the other way around. It will count on the first place on the quality of the
product: the disruptiveness of the Roadster and the Model S is an attraction by itself. The automotive
press for example was fighting to test the car, giving a huge visibility to their car. Also, the Teslas
store makes a high standard communication with possible customer possible; the explanation of the
product is easier. Tesla has also a strong community and base of enthusiasm that by word of mouth is
spreading Tesla vision and way of living.
The role of Tesla CEO Elon Musk must not be understated. He is the face of Tesla and its best
ambassador. He is representing the core values of Tesla: the Silicon Valley heritage, the high-tech and
no compromise on quality attitude, and a sense of hype and coolness.
What marketing lessons does this case offer in terms of successful commercialization of
an opportunity?
Tesla is currently a very successful company, which has passed all its crucial stages with ease. So it is
a very instructive case, which enables us to isolate some good marketing practises.
A perfect marketing plan is nothing if the world is not ready for the product. For electric vehicle,
success was not possible before social and technical settings were in place. Tesla would have died
30 years ago, because the concept of eco-friendliness did not even exist. Furthermore, the
technology of battery was not mature enough.
Think about the product with the help of the Total Product Experience. As we can see in Exhibit
7, there are four levels in any product. The core product, the functional product, the augmented
product, and the potential product. If the core product is what the company is actually producing,
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what the customer is buying is the potential product, leading to a misunderstanding of customer
needs. In Tesla case, we can see that the company is trying as hard as possible to match customer
desire, by putting emphasis for example on the design, beauty, and quality of the car rather than
just advertise and sell the core product, an electric vehicle.
Think in term of customer needs and not only in term of business innovation. What does the
customer want? He wants an eco-friendly electric car, but only if it is comparable or even better
than a normal car. The brand loyalty, or more precisely the technology loyalty here, is preventing
him to change before the proof has been made to him that Tesla is indeed much better than
everything he has experienced before. Try to sell electric car that are less beautiful, have less
driving performance and are less practical than the average car is meant to be a failure, even for
electric cars.
Have a clear marketing plan and identity. Crystal clear is the word: the easier a brand identity is
to understand, the better will customers identify to it. Senior management and more precisely
Elon Musk are making a very good job of being very involved in the company innovation and
vision, adding a lot of visibility to it. Also, this clarity and involvement is making Tesla goals and
objectives real to the employee, which are then implementing the marketing strategy much more
efficiently.
Follow the steps to build a strong brand. Exhibit 8 presents the development of this point.
To choose which customer segment to target, find the most profitable customer segment. High
volume is not always the best strategy, it is a very common mistake to take big sales as a target in
itself. It is the final profit margin and gain that must decide of which customer to serve. Tesla
could not achieve enough profit with high volume of sells. It therefore tailor fitted the Roadster,
and then the Model S to the people that could afford such a car.
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Appendix
Open Innovation
Chesbrough defines the Open Innovation as a paradigm that assumes that firms can and should use
external ideas as well as internal ideas, and internal and external paths to market, as the firms look to
advance their technology.
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15
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Design, eco-friendly
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As we can see in Exhibit 8, Tesla followed the theoretical steps to build a strong brand with great
success.
Step 1
Ask What business am I in?
Step 1
They are on the business of EV
Step 2
Create brand identity
Step 2
Fun, eco-friendly and attractive
Step 3
Implement brand identity
Step 3
Product, pricing, promotions, place
Step 4
Measure brand equity
Step 4
Quantitative reseatch
Step 5
Refresh the brand
Step 5
Extending the brand to target a
lower social class
First, it stated with clarity in which business it is in: the electric vehicle industry. It is not trying to do
two things at once, as it will only confuse the customer.
Then, it associated itself to powerful emotions, the most efficient tool of the marketer, by using the
potential product and asking itself what wanted the customer. Tesla is fun, eco-friendly and attractive.
To implement this, Tesla used all the elements of the marketing mix, including Pricing and Place,
which are too often neglected in the thinking of the marketing strategy. For Pricing, Tesla is using
skimming strategy for example, and is also using a mix of sale or profit oriented strategies, in order to
adapt over time, because the market is forever changing. For Place, Tesla is differentiating itself from
competitors with company-owned store and direct sale system, whereas the car industry is relying on
dealership to interact with the customers. To get the company message to the customer without the
common huge advertising means of car industry, Tesla is using a low budget promotion strategy, or in
other word it is building its brand without mass media. It is relying on a strong community of
passionate that by word of mouth are building the brand equity. Also, Tesla CEO, Elon Musk, is using
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at a maximum his charisma, popularity and media coverage to advertise the Tesla philosophy. As we
are talking about media coverage, it is interesting to see that much of car passionate have heard of
Tesla by the specialized press, who was fighting to test Teslas cars. Of course, this strategy can work
only if the quality of the product is worth it. Here, the disruptiveness of Model S has attracted the
attention, and the quality of the product has produced incredible reviews, including several Car of the
year 2013 nominations.
To measure brand equity, brand image (brand identity in the mind of the customer) and brand identity
(implemented by the company) are compared. Three dimension are used: brand awareness, brand
association, and brand loyalty.
Lastly, using the measure made just before and with the help of the marketing plan, the company must
Refresh the Brand. For Tesla, it means extend the brand to new market by making more and more
affordable cars, in order to capture more and more customers.
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Endnotes
Marketing a roadmap to success AJAY K. SIRSI, 2010
Brief description of the company:
http://fr.wikipedia.org/wiki/Tesla_Motors
The target customers:
[1] http://fr.slideshare.net/Partha_Doc/partha-mitra-marketingplanteslamodels
The success of the model S:
[2]
[3]
[4]
[5]
http://marketingtowin.wordpress.com/2012/04/09/teslas-innovationandmarketing-for-success/
http://marketingtowin.wordpress.com/2012/04/09/teslas-innovationandmarketing-for-success/
http://marketingtowin.wordpress.com/2012/04/09/teslas-innovationandmarketing-for-success/
http://fr.slideshare.net/esfandiarkhaleghi/stanford-university-technology-entrepreneurshipsuccessful-startup-tesla-motor
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