Sustainable Marketing Approaches by Tesla

About Tesla

Tesla Motor, head office located at Palo Alto, in the Silicon Valley, was founded in 2003 by Martin Eberhard and Marc Tarpenning to solve a real problem i.e. dependence on oil. The company led the first round of investments in 2004 where 3 investors joined in namely Ian Wright, JB Straubel and Elon Musk (who is the CEO and principal investor in the company).

The company was named in honor of Nikola Tesla, the Serbian inventor and engineer who developed the first alternating current (AC) motor. It is the main anchor of the electric car industry and not only builds all electric vehicles but also focuses on infinitely scalable and clean energy generation and storage products.

The company has its manufacturing and assembling operations at facility located at Fermont, California; Lathrop, California; and Tilburg, Netherlands. The company has also built a cell and battery manufacturing facility, Gigafactory 1, outside of Reno, Nevada. As per the present plans of the company it continues to expand its product line along with production plan at a rate of 500,000 vehicles a year by 2018.

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Marketing

Local marketing strategies of Tesla

As one of its strategies to attract customers in the foreign market, Tesla customizes its cars to meet local needs and to satisfy the tastes and preferences of its customers. For example, in response to customer feedback, Tesla made some modifications to its Tesla Model S in China, including an ‘executive rear seat’ option, which costs $2000 over the standard model and aims to make the rear seat experience more comfortable (O’Hara 2015).

Excerpts from Tesla 10K:

“Historically, we have been able to generate significant media coverage of our company and our vehicles, and we believe we will continue to do so. To date, for vehicle sales, media coverage and word of mouth have been the primary drivers of our sales leads and have helped us achieve sales without traditional advertising and at relatively low marketing costs.”

International marketing strategies of Tesla:

Direct Selling:

Tesla sells its cars directly to its consumers through an international network of company-owned stores & galleries. This benefits the company to better control costs of inventory, manage warranty servicing and pricing, maintain and strengthen the Tesla brand through obtaining customer feedback.

Used cars sales program:

The company used car business supports new car sales by integrating the sale of a new Tesla vehicle with a customer’s trade-in needs for their existing Tesla and non-Tesla vehicles. These acquired vehicles are remarketed primarily to general public and also in auction.

Strategic positioning of stores & galleries:

Another strategy employed by Tesla in the foreign market is deliberately positioning its stores and galleries in high foot traffic, high visibility retail venues, like malls and shopping streets that people regularly visit in a relatively open-minded buying mood (Musk 2012). This approach is to, as Musk (2012) states, “reach people before they make a decision on a new car.”

Super Charging stations:

The company has built their super charging network throughout North America, Europe, Asia and other markets to enable convenient & long distance travel. The supercharger network is a strategic corporate initiative designed to provide fast charging to enable long-distance travel and remove a barrier to the broader adoption of electric vehicles caused by the perception of limited vehicle range. The Tesla Supercharger is an industrial grade, high speed charger designed to recharge a Tesla vehicle significantly more quickly than other charging options. To satisfy growing demand, Supercharger stations typically have between six and twenty Superchargers and are strategically placed along well-travelled routes to allow Tesla vehicle owners the ability to enjoy long distance travel with convenient, minimal stops. Additionally, they are also building Superchargers in an increasing number of city centers to enable urban use. Use of the Supercharger network is either free or requires a small fee.

Principles of sustainable marketing:

Sustainable marketing also referred to as green marketing is socially and environmentally responsible marketing that meets the present needs of consumers and business while also preserving or enhancing the ability of future generations to meet their needs.

There are five sustainable marketing principles:

Consumer oriented marketing: a principle of sustainable marketing that holds a company should view & organize its marketing activities from the consumer’s point of view.

The marketing process strikingly points out the importance to orient one’s business to the customer needs and to create appropriate values. Thus, satisfaction of customers needs by meeting their expectations on performance and quality fortifies a profitable long-term relationship to the customer.

Below figure represents the profit chain of customer orientation: –

A lot of research focuses on the validation of customer orientation, the links between the relative concepts (i.a. Anderson, Fornell and Lehmann 1994; Appiah-Adu and Singh 1998; Brady and Cronin 2001a; Brockman, Jones and Becherer 2012) and the drivers of customer orientation (i.a. Strong and Harris 2004). Johnson (1997) translates the underlying core concepts of marketing into three sequential goals of customer orientation.

First, one needs to acquire information on the customer needs and establish the extent to which they are currently served.

Next, these gathered insights must be spread throughout the organization and transformed into actions, which are subsequently implemented in a third step in order to satisfy the customer’s needs.

In sum, understanding customers’ needs is the first and essential step to long-term economic success.

Customer value marketing: a principle of sustainable marketing that holds a company should put most of its resources into consumer value building marketing investments.

The customer value refers to current value of complete profit obtained from these customers through the maintainable business relation of these customers. The study of this theory is completed as enterprises continually seek competitive advantage and the related theory formed and developed on the basis of reference summary. Since 1990s, the customer value (Customer Value, CV) has become the focal point which the western marketing scholars and entrepreneurs pay attention to together, and is regarded as the new origin of competitive advantages.

As the economic globalization becomes the mainstream in nowadays, it is extremely important that the marketing strategies must be getting stronger when faced with the increasingly intense market competition. In the process of marketing, customer is the source of enterprises profits and the key to business success, especially in the era of the buyer’s market, who owns customers, is equal to having profit. Customer segmentation enables organizations to design different marketing strategies for different customers, and applies its superior resources to high value customers, mines customers’ potential value, and increases customers’ satisfaction, realizes customers’ loyalty.

Innovative marketing: a principle of sustainable marketing that requires a company to seek real product & marketing improvements.

Market competition accelerates technological progress and innovation in all areas to meet customer needs. It also includes product innovations aimed at increasing customer interest through innovative marketing tools. From a microeconomic perspective the customer satisfaction can be understood as a factor of product competitiveness valuation that can satisfy customer needs.

Economists became interested in the issue of customer satisfaction in the 1980s, under the influence of the economy internationalization, globalization and innovations generation. The possibilities to enhance the company competitiveness through the satisfaction of customers’ requirements began to be explored. Customer satisfaction with the product is neither objective nor absolute value. It is important to look for new opportunities and innovations to help the product to create customer needs that are considered as satisfactory by a customer

Business environment constantly faces new challenges that require companies to react promptly as fast as they can. Innovativeness is evident in all parts of marketing, as well as in marketing communication. Companies constantly search for tools that seem to be more effective in the relation with their customers. Appropriately chosen forms of marketing communication are effective in addressing more customers, getting their attention, their confidence to buy a product and keeping the customers´ loyalty.

Companies are using more or less traditional marketing communication tools that are also called “outbound marketing” and “inbound marketing”. New trends require companies to apply marketing communication tools which involve the customer in the communication that enables the instant feedback. Thus, the customer feels to be the inseparable part of the sales process. This is also the way how to reduce the communication costs and to achieve better communication and marketing objectives.

Sense-of-mission marketing: a principle of sustainable that holds a company should define its mission in broad social terms rather than narrow product terms.

This concept has led to a new generation of activist entrepreneurs who are essentially trained business managers with a sense of social responsibility and passion for a bigger cause.

The most popular example of this would be of the Dove Campaign.  After a research conducted by Unilever which revealed that only 2% of the 3300 women and girls surveyed across the world felt that they were beautiful, Unilever decided to redefine the concept of beauty.

The underlying mission of this campaign was to discover “Real beauty” and to help women be happy with the way they are. The advertisement contained confident and bold women of all types instead of regular models to echo the message of “normal is the new beautiful”.

Societal marketing: a principle of sustainable marketing that holds a company should make marketing decisions by considering consumers wants, the company’s requirements, consumers and society’s long-term interests.

“The well-being of individuals and society can be achieved by the enhancement of positive consequences associated with production and consumption of a product, as well as the limitation and/or reduction of negative consequences associated with production and consumption of a product. The reduction of negative consequences and enhancement of positive consequences should be complementary in the conceptualization of a societal orientation. To this respect, a societal orientation should be concerned with maximizing positive impact of and minimizing negative effects associated with the production and consumption of a product in order to increase the long-run well-being for consumers and society at large.”

Explanation of the case & synthesis with the theory:

Consumer oriented marketing: Tesla has consumer-oriented marketing

The company has a traditional marketing channel of direct selling and promotes primarily through media coverage & word of mouth. These drivers have helped them reduce their marketing cost along with spreading a word of trust to boost their sales in the EV market segment. The company through its owned stores interacts directly with customers keeping in view of their feedback and focuses on customer satisfaction.

Tesla also maintains low inventory and and offers customization in accordance with the customer’s needs & preferences via the internet.

Customer value marketing: Tesla lacks customer value marketing

Although Tesla focuses on customer satisfaction but there is an unclear vision through which it operates. The company is not driven by profitability but from a perspective to eradicate the usage of fossil fuels. The dependency of customers to charge their vehicles for long route is still a question of scalability from Tesla’s point of view. The competition offers hybrid vehicles which is a good alternative to lower the consumption of fuel and eradicates the dependency on charging vehicles.

Innovative Marketing: Tesla has innovative marketing

Tesla is continuously inventing and innovating its own bar of standards and has been driven by the green technology. As the consumer needs and preferences are changing they are drawn towards these products, which has resulted in increase in sales volume and expansion opportunities. Tesla however, is also focusing on on providing convenience to its customers along with infinite supply of better technology.

Sense-of-mission marketing: Tesla has sense-of-mission marketing

Tesla has a broad mission which is to accelerate the world transition to sustainable energy. Tesla is also making continuous efforts to make products more accessible and affordable to more and more people, ultimately accelerating the advent of clean transport and clean energy production.

Societal Marketing: Tesla has societal marketing approach

The company through its products and business offerings keeps society’s long term interest as its primary objective. The customer needs are changing and so is the evolving technology and it is of prime importance to increase our dependency on alternate fuels and reduce dependency on fossil fuels.

References

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