Marketing Case Study Tesla

Contents

List of figures

1. Introduction

2. Part I: Global Marketing Management
2.1 Evaluation of the underlining growth drivers
2.2 Complexities that underpin Tesla’s business model strategy
2.2.1 PESTLE analysis
2.2.2 Porter’s Five Forces
2.2.3 SWOT analysis

3. Part II: Customer Relationship Marketing
3.1 The Tesla brand as prominent iconic luxury brand
3.2 Proposal for a “blue print” model to build tighter bonds with loyal customers and deliver added value

4. Bibliography

List of figures

Figure 1: Accelerated growth by Ernst & Young

Figure 2: PESTLE analysis

Figure 3: Porter’s Five Forces

Figure 4: SWOT analysis

Figure 5: Touch point analysis

Figure 6: Detailed table of pain and desire

Figure 7: Where do the diverse customer types get their information from?

1. Introduction

As the number of publications referring to Tesla increased formidable during the last years, it is a highly discussed automotive brand, which is becoming more and more im­portant. In August 2017, the Bernstein Research Institute1 published a study dealing with brand enjoyment and service experiences of 286 Tesla owners, which resulted in a fanat¡- cal brand loyalty autonomous of the region the participants lived in (of. Krok 2017).

This paper deals with aspects of Global Marketing Management and Customer Relation­ship Management, which on the one hand include growth drivers and complexities that underpin the strategy of Tesla in its quest to exercise market power in a very competitive automotive market place, and on the other hand examine how Tesla was able to connect its customers as prominent iconic luxury brand. In the end of this paper a “blue print” model on how Tesla might build and embrace a customer driven marketing strategy aimed at building tighter bonds with its loyal customers and delivering added value will be pro­posed.

2. Part I: Global Marketing Management

2.1 Evaluation of the underlining growth drivers

Tesla’s growth strategic footprint epitomizes a rising champion reconfiguring the automo­tive competitive landscape, because it is both an electric car manufacturer and an energy management service provider, in form of energy storage and solar cells.

As Tesla was founded in 2003 and launched their first electric vehicle, the “Roadster”, in 2008 it is a young company compared to the competitors in the automotive market, which results in reduced production outputs and therefore missing customer requirements. But having said that, Tesla is a pioneer in terms of producing an appropriate “sustainable en­ergy ecosystem” out of solar roofs, powerpacks and powerwalls, which none of the other companies in the automotive sector does (of. Tesla, 2018).

After looking at several definitions of the term “growth drivers” the one by Ernst & Young (EY) was decided to be the most adequate for this case. According to EY there are seven drivers of growth (of. Figure 1), which have to be focused on, to successfully execute the growth strategy of a company over a long-term period: Customer; Operations; Funding and Finance; Digital, technology and analytics; Transactions and alliances; People, be­haviors and culture; and Risk (of. Ernst & Young, 2018).

Founded in 1967 in the u.s. and widely recognized as Wall Street's premier sell-side research and brokerage firm, with a global equity trading platform that spans the U.S., Europe, and Asia (cf. Bernsteinresearch, 2017).

In the following this paper will focus on every of the mentioned growth drivers by first de­fining and later on applying those to the Tesla case.

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Figure 1 : Accelerated growth by Ernst & Young; Source: Ernst & Young (2017)

First of all, the driver “Customer” contains the understanding of the needs and desires of all the customers that stand in relation with the business. The company needs to know “who they are, what they want and when they want it ” (of. Ernst & Young, 2018), since this is the meaning of customer loyalty, which enables sustainable growth. Besides “Op­erations” is defined by considering the macro and micro level of operations and analyzing them constantly at all times to ensure a rapid way of changes, if required. “Funding and finance” includes the way the CFO and decision-makers of an enterprise determine the financial solution or even a mix of solutions. The most fundamental driver is “Digital, technology and analytics”. Digital technologies have an essential impact on the way of interaction between the businesses and their customers. Therefore, it is important to uti­lize the power of IT to create a competitive and strategic benefit. Moreover “Transactions and alliances” means that companies infrequently develop to market-leaders without ere- ating strategic partnerships. But those partnerships also generate risks, like the disclosure of know-how, strategies and operations. “People, behaviors and culture” is one of the most important growth drivers, because every business is dependent on the people work­ing for it. If the employees are promoted to think diversified, be motivated and innovative it might lead the organization to success. At last “Risk” comprises all substantial challenges of a company. It has to be analyzed, valued and minimized through risk management in order to be effective.

All of the named growth drivers have propelled the business model of Tesla on the global market place in some way, but everyone significantly.

As mentioned in the introduction of this paper the Bernstein Research Institute published a study dealing with brand enjoyment and service experiences of 286 Tesla owners, which resulted in a fanatical brand loyalty autonomous of the region they live in. This study is a proof that the growth driver “Customer” has been taken serious at Tesla, since 83 percent of the respondents are more likely to rebuy a Tesla instead of another car brand they owned before. In contrast, the interviewees were not satisfied with the service experiences due to the fact they did not get an appointment in less than ten days (of. Krok 2017). This also influences the driver “Operations” since a long waiting time for a service appointment might result out of lack in operation management. Additional, 30 percent of the reservation holders for the Tesla Model 3 indicated that they are unsure, unlikely or very unlikely to execute the option of a delivery because of the delayed due dates, what again indicates inefficient methods of operation. “Funding and Finance” of Tesla is not solely driven by shareholders but also by credits of rival car manufacturers. The mandato­ry purchase of those credits from competitors becomes due, if the fixed amount, given by the government of California, of electric and other non-polluting vehicles sold was not ful­filled (of. Lippert and Beene 2017). In Tesla’s case “Digital, technology and analytics” is the most important growth driver, as people are not buying a Tesla only because of the technology, the unique experience and the sustainable mindset, but because of the whole package behind this extraordinary car. The software of any Tesla is updated automatically “over-the-air (of. DeBord 2017) so the owner does not have to take it to a garage for up­dates. An advantage of this system is the impossibility for the driver to have outdated software, but the opponents might refer to privacy violations since the cars are connected 24 hours a day and transfer sensitive data. With Panasonic as the only supplier for lithi­um-ion batteries and SolarCity as a merger for the expansion of sustainable energy man­agement in forms of solar technologies, Tesla has proven its will to become a market leader by the help of “Transactions and alliances”. By looking at the driver “People, be­haviors and culture” the difference between the early years of Tesla and the last year is enormous. From the beginning of the rise until last year the employees of Tesla have been seldom criticized, due to no customer complaints. In October 2017, the firing of ap­proximately 700 people working for Tesla’s motor vehicle division and one week later about 500 employees responsible for the solar power division begun. Elon Musk, CEO of Tesla, related these decisions to unsatisfied client needs in terms of producing far to less cars and solar panels to serve the demand, resulting in unachieved customer satisfaction. “Risk” in the sense of protecting their customers is valued high at Tesla, as seen in the prior part “Digital, technology and analytics”. By delivering software updates via Internet to the cars in all countries of the world the responsible employees can be sure that the prod­ucts are always up to date.

In summary, it can be said that the growth drivers Customers, Digital, Technology and analytics, and transactions and alliances propelled the business model of Tesla in a posi­tive direction. On the contrary Operations influenced it in a negative way, which resulted in a bad effect for People, behaviors and culture.

2.2 Complexities that underpin Tesla’s business model strategy

To outline in full the complexities that underpin the business model strategy in its quest to exercise market power in a very competitive automotive market place, the tools PESTLE analysis, Porter’s Five Forces and SWOT analysis are used in the following. The PESTLE analysis’ focus lies on the macro-environmental aspects, whereas Porter’s Five Forces are used for the micro-environmental issues and competitive rivalry amongst similar firms. Finally, the SWOT analysis determines the positioning and strategy of the business or product.

2.2.1 PESTLE analysis

PESTLE is an acronym for Political, Ecological, Social, Technological, Legal and Econom­ic factors that might influence a business in its macro environment. Nicolas and Sandes (2016, p. 7) elaborated a strategic analysis of Tesla Motors, Inc. including a PESTLE analysis, which suits perfectly to this paper (of. Figure 2).

Figure 2: PESTLE analysis; Source: Nicolas and Sandes (2016: 7)

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In the “Political” part of their analysis they focused on French politics, as they are French. Since it is complicated to apply this part to the whole world, because there are unlimited politics all around the globe, this paper focuses on American and European politics only. Since Donald Trump wants to build a wall at the border to Mexico and started to draft reg­ulations against non-American citizens, traditional US car producers, like General Motors, Ford and Fiat Chrysler Automobiles will be affected tremendous in terms of trade (NAFTA2), what results in an opportunity but also a threat for Tesla. An essential support for Tesla might be the Paris Climate Agreement of the European Commission concluded in 2015 as a framework for global climate resilience. A study published by the European Economic Area (EEA) illustrated, that 73% of Greenhouse Gas Emissions were caused by road transportation, whereas only 1% was by railways. Norway is leading the way towards zero emissions by providing advantages for owners of electric cars, like the use of most bus lanes, reduced highway ferry rates and free public parking. Additional the governing parties are meditating to ban the sale of diesel and petrol cars from 2025 onwards (of. European Political strategy Centre 2016). “Ecological” aspects are also in line with the Paris Climate Agreement of 2015 and will support companies like Tesla, but differ from the political ones in the way that there is a defined objective, which has to be reached: the governments of all participating states agreed to keep the increase in global average tern- perature to well below 2°Celsius above pre-industrial levels (of. European Commission 2015). Therefore, car producers concentrating on less pollution will meet the mandatory requirements and as a result of that generate higher market shares compared to tradition­al engines. Moreover, the volatility in oil and gas prices will be fundamental for the “Eco­nomie” development of Tesla. If the fees for oil and gas will increase, the customers have to pay more for transportation, regardless of which means of transport. This will result in looking for alternative impulsions, like fully electric vehicles. Another opportunity for elec- trie car manufacturers is the sustainable life style of people becoming more and more im­portant referring to “Social” aspects or social responsibility. The way people care about their health in terms of food, beverages, sports and also clean environment changed for­midable during the last decade and will be considered even stronger in the future. “Tech­nological” issues form the most complicated part for Tesla, as on the one hand the Nth¡- um-ion battery cells will get cheaper, so the fix costs decrease and the selling price per unit will drop but on the other hand self-driving cars collide with an ethical way of thinking. The essential questions in this case would be, when the society will be ready to accept autonomous driving. Additional there is a threat referring to required charging stations in participating countries or states since the governments have to allow the construction of power stations on the highways. In a final step the “Legal” aspects are built up of intellec- tuai property, like patent risks but then also of safety norms concerning artificial intelli­gence in terms of accountability for arising accidents.

NAFTA = North American Free Trade Agreement. One of the world's largest free trade zone, that regulates the trade between Canada, USA and Mexico (cf. Naftanow 2012)

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