Tesla Model S: The Disruptive Marketing of an Electric Car

20 Jan

The most interesting thing about Tesla — the niche luxury electric car maker — is the role of marketing in selling electric cars that cost $100,000 or more. Many people have tried to change the auto industry over the last 40 years and none have succeeded. The process of buying a car is essentially the same as it was a generation ago. And the process has remained unpopular for decades: the typical car dealer receives just 2 or 3 stars on Yelp.

Tesla Model S and Tesla Roadster: Tesla has figured out how to market an electric car

Tesla is creatively using marketing to upend the auto industry business model:

  • There are no Tesla dealers
  • There are no commissioned sales people
  • Tesla cars are marketed and not aggressively sold
  • Tesla transactions are conducted online
  • The price is the price: no negotiation
  • There is no inventory: the Tesla Model S is built to order
  • You can’t test drive a Tesla unless you put down a $5,000 deposit
  • In many parts of the country, you can’t see or drive the car before you buy even if you place a deposit
  • You have to wait in line for months or years to get a car

And the marketing challenges are incredibly difficult:

  • They are building a new luxury brand from scratch
  • They are evangelizing a new type of vehicle: an electric car
  • They are selling a $60,000 – $100,000+ car that can’t go on a road trip
  • They must sell an entirely new model of buying and owning a car

While Tesla is starting with expensive vehicles, they clearly have mainstream ambitions. They are investing to build a big car company.  How hard is it to build and sell cars in the USA? Look at it this way: Tesla is the second oldest publicly traded  auto company in the United States behind Ford. GM went bankrupt and went public four months after Tesla. Chrysler remains private following its own reorganization.

While Tesla has a long way to go to be profitable, producing cars in volume, and moving towards the mainstream, their first home-built product — the Model S — is a success. They have 10,000 – 20,000 orders and have swept the auto industry awards, winning the most recent round of Motor Trend, Automobile, and Yahoo Autos awards for car of the year. Tesla is the first startup car company, and the Model S is the first electric car, to win these awards.

So what can we learn from Tesla marketing?

(1) Start with a great product – Tesla would be dead today if they didn’t build the best car available today. There are too many obstacles — range, lack of road trips, and buyer confusion to name a few. Tesla used electric technology to build a car that can’t be reproduced with a combustion engine. It’s as fast as a Porsche and gets the equivalent of 100 miles per gallon. It has very few moving parts. It is the most aerodynamic car made and has the most cargo space of any car in its class. It’s a sports car that seats seven.

(2) Start high and work your way down — It’s a lot easier to build a lust-inducing $100,000 car than a cheaper model. Tesla started with the $100K plus roadster built on a modified Lotus platform. With the Model S, they started with production of $100K vehicles and are working their way towards the $60K entry-luxury models. By starting high, Tesla is letting early adopters fund technology development. As volume increases, prices are coming down. The early super cars are media darlings endlessly discussed in waves of free Tesla publicity.

(3) Turn auto industry strengths into weaknesses — Historically, luxury cars have been sold and justified based on the quality of their engineering. Most luxury automobile companies tout “performance through engineering” as the one thing that makes them special and desirable. Tesla marketing focuses on performance through technology while touting the simplicity of the platform. The Tesla Model S pitch reframes the auto industry strength as a weakness. Through the highly-effective Tesla marketing lens, traditional gas cars are dirty, complex, unreliable, and difficult to maintain. In a bold marketing move, Tesla service centers are designed with white floors to reinforce that electric cars don’t have oil and other dirty fluids that leak on the floor.

The Tesla powertrain is marketed as simple, reliable, and effective

The Tesla powertrain is marketed as simple, reliable, and effective

Traditional luxury auto makers focus on "engineering" -- Through the Tesla marketing lens, educated viewers see complexity, maintenance, and antiquated technology

Traditional luxury auto makers focus on “engineering” — Through the Tesla marketing lens, educated viewers see complexity, maintenance, and antiquated technology

Tesla Service centers have impractical white floors to highlight that the cars run clean without messy oil and fluids

Tesla Service centers have impractical white floors to highlight that the cars run clean without messy oil and fluids

(4) Create a new multi-channel model: Tesla decided not to build a traditional car dealer network. Nobody likes car dealers: even buying and servicing a high-end car like a Porsche is a dreadful experience. Tesla looked at the car buying process and optimized its sales model to fit the way people buy cars today. Since people start online, Tesla designed their process around online information, commerce, and community. Their site is unusually clear, clean, and effective. For people who want to see the car, they are building kiosk stores in malls with Tesla experts who can’t sell cars and who aren’t commissioned. When a buyer is ready, they place a refundable deposit online. If they want to drive a car, they can arrange a test drive after they’ve placed a deposit. Essentially, Tesla is selling cars the same way Apple sells the iPhone.

(5) Build the community & focus on the experience: From the beginning, Tesla has made user forums and user community a key part of the online experience. Tesla marketing highlights the unique Tesla buying and ownership experience and encourages owners to interact with the company and each other in full public view on the Tesla site. This provides a rich base of content — and owner passion — on view for prospective buyers.

(6) Leverage the media and traditional press: While much is new about the Tesla Model S and the accompanying sales and marketing model, one thing is not: the dependence on traditional media. Tesla has been a master at driving press coverage, reviews, and awards for its cars. It’s clear that the company has worked hard to position the brand with the media and to make sure the right messages come through. The company’s #1 message is that they are trying to build the best car ever made and not just the best electric car. This message is frequently repeated by the press.

Tesla Marketing: Likely more lessons to come

While it’s early and many many risks remain, Tesla is the first company to have the potential to become the Apple computer of the car industry. Like Apple, they are selling a product that is very different than what has come before. Both companies focus on great products and innovation. They are both building their own ecosystem (Tesla’s super charger network is akin to Apple’s build-out of iTunes and the Apple Store) and both are challenging traditional sales models with their own direct distribution system. In fact, Tesla hired Apple’s previous retail chief to build out the new distribution model.

Whatever does happen with Tesla, the marketing lessons to come are certain to fascinate.

10 Responses to “Tesla Model S: The Disruptive Marketing of an Electric Car”

  1. Brian Russell January 21, 2013 at 8:56 am #

    If only there were profits.

    • Robert.Boston January 24, 2013 at 12:21 pm #

      Tesla Motors is cash-flow positive and is on track to become profitable this year.

  2. CapitalistOppressor January 21, 2013 at 12:51 pm #

    Outstanding article. Really, really excellent.

  3. Lawrence Chanin January 21, 2013 at 10:58 pm #

    Nicely written article. However, the Tesla Supercharger network with FREE FUEL for roadtrips for the life of the car is a real game-changer and a very unique marketing technique that warranted a bit more discussion.

    • pjda January 21, 2013 at 11:17 pm #

      Thank you Lawrence (and Capitalist Oppressor as well — sincerely!) — I think the super charger network is a big deal at scale but if I want to drive to LA or Chicago from my home in Austin, TX today, it would be a lot easier to take a gasoline-powered vehicle than a Tesla. I look forward to watching the network coverage expand — if it was everywhere, it would be a different story! True?

  4. Lawrence Chanin January 22, 2013 at 10:46 am #

    Thanks Paul for the response. The network doesn’t have to be fully deployed to be of legitimate marketing value. The fact is that most people are not taking cross country trips by car even if it is gasoline-powered, they are flying. Realistically most people are merely interested in occasionally taking a road trip across their state. Tesla demonstrated that it could build a basic statewide network in California “overnight” even before their factory reached full production. Facilitating travel across California for free is noteworthy from a marketing perspective, because it demonstrates real progress, not just marketing vaporware. The electrical grid is already ubiquitous making the expansion of the Supercharger network orders of magnitude easier and cheaper than it took to build a network of gasoline stations. Within a year many states will have basic Supercharger coverage. When was the last time you drove into a gasoline station and received a free fill-up? 😉

  5. Lori Witzel (@loriaustex) January 22, 2013 at 4:20 pm #

    Paul, very interesting parsing of where Tesla is upending traditional marketing and where it works traditional marketing, particularly re: press coverage.

    “Tesla has been a master at driving press coverage, reviews, and awards for its cars. It’s clear that the company has worked hard to position the brand with the media and to make sure the right messages come through.”

    My question for you – is this really traditional marketing, or is this “new” marketing – specifically content/SEO marketing – in stealth mode? Perhaps it’s less about positioning the brand, and more about mindshare and momentum that aligns with their target audience (affluent, technophiliac, internet-centric)?

  6. Lee kovel January 23, 2013 at 9:59 am #

    Great article.

    However. You can easily get a test drive.
    Free
    The roadsters were available on the showroom for sale a couple months ago
    (Of course they weren’t making more)
    And once you show interest, the sales folks
    Take over. It’s gentle. But they certainly
    Follow up and attempt to sell cars just like the
    Old model
    The cars are on the streets in Los Angeles now. Gorgeous. See about one per week

  7. Paul Scott January 23, 2013 at 2:46 pm #

    I work for a Nissan dealer in downtown Los Angeles and I only sell the LEAF EV. I borrowed a friend’s Model S and drove it to work. with his permission, I gave test drives to many of the managers and sales staff. To a person, they believed the Model S to be the best car they’ve ever seen. They are all long time car guys who have driven the Nissan GTR, our “supercar”, but all of them said they’d take the Tesla over the GTR any day.

    The Model S is not only the best car in the world this year, it’s the best car in history! Oh, and it’ll be improved every year going forward.

    • Robert.Boston January 24, 2013 at 12:19 pm #

      Better yet, the Model S is being improved every _month_ through software enhancements. This is another break from traditional automotive practice: even after a car is in the customer’s hands, it is still being improved through frequent (and free) software updates. Again, a nod to the Internet age, but also built on Tesla’s design decision to use a huge touchscreen console (which can be reprogrammed to do anything) instead of ranks of purpose-built buttons and knobs.

      Great article, Paul. It probably should give a nod to George Blankenship, the head of Tesla’ marketing and ownership experience. It’s easy to see the common thread in his work first at Apple and now at Tesla.

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