Tesla Model S. Market and Sales Strategy

Term Paper, 2016

15 Pages, Grade: 1,3


Table of contents

List of figures

1 Introduction

2 Marketing Mix Tesla
2.1 Product / Customer Value
2.2 Price / Cost
2.3 Place / Convenience
2.4 Promotion / Communication

3 Conclusions

List of references

illustration not visible in this excerpt

List of figures

Fig 1.: Automobile brands owned by Tesla buyers

Fig. 2: Audience Visualization of People who mentioned the Tesla Model 3

Fig. 3: Competitive Analysis of the twitter followers of @TeslaMotors and @ChevyVolt

1 Introduction

After ten years of waiting, Tesla's CEO Elon Musk has presented Tesla Model 3 to the public for the first time in an evening show at the end of march 2016. Unveiled at the company's design studio in Hawthorne, California in front of a crowd of whooping and cheering customers and journalists, Model 3 is the most affordable Tesla so far, hoped to bring electric cars to the mass market. Musk stated that the car will deliver at least 215 miles of range beginning at just 35.000 dollar. Musk is "fairly confident" that deliveries will begin by the end of 2017, and "you will not be able to buy a better car for 35.000 dollar, even with no options." Also it will be one of the safest cars in the world, according to Musk (Golson, 2016). Even before Tesla unveiled its new middle-class model, there were more than 115,000 people who had paid already 1.000 dollar to reserve one of the highly-anticipated electric cars. These early buyers didn't know what the car would look like or that it would have a starting price of exactly 35.000 dollar. They also didn't know how long the production and delivery would take. (Valdes-Dapena, 2016).

Even though the delivery aspect is still not clear, the number of preorders increased to almost 400.000 until mid-may 2016 (Reuters, 2016). Both, the type of presentation as well as the tremendous hype of the announcement are absolutely untypical for a middle-class automobile. This resembles to Steve Jobs successful staging of a new Apple product. Even more surprising is the fact that people are willing to reserve a car of more than 30.000 dollar without knowing the exact design and especially without information of the delivery date. Even if the forecasted start of delivery at the end of 2017 can be hold, there will probably pass off some years until the entire pre orders are produced.

For this reason the purpose of this assignment is to analyze the obviously very successful market and sales strategy of Tesla as well as to identify its Model 3 customers who are camping out in lines in order to be among the first ones to order a car they have never seen und that won't be delivered within the next 1,5 years. Research was rather difficult due to the fact that there are no customer studies about this very recent theme yet. In a consequence different media and social media sources had to be used for the analysis.

2 Marketing Mix

Marketers use numerous tools to elicit the desired responses from their target markets. These tools constitute a marketing mix. The Marketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market (Kotler & Keller, 2009, p. 9 ff). McCarthy classified these tools into four broad groups that he called the four Ps of marketing: product, price, place, and promotion. A typical marketing mix includes some product, offered at a price, with some promotion to tell potential customers about the product, and a way to reach the customer’s place (Perreault & McCarthy, 2002, p. 46).

In order to focus on the customer’s point of view, Kotler converted this model of 4 Ps into 4Cs: Customer Value (instead of product), Cost (instead of price), Conveniences (instead of Place) and Communication (instead of promotion).

2.1 Product / Customer Value

Tesla Motors (Tesla) is a global enterprise that designs, produces and markets electric powered vehicles and components such as lithium-ion battery packs, and electric vehicle powertrains. After establishing in 2003 Tesla started the mass production of the first model Tesla Roadster, a solely electric operated sports car, on March 17th in 2008. Tesla then used its technological advantage and expanded to the luxury sedan market leading to the introduction of their second electric vehicle in 2012: Model S, a zero emission, sustainable luxury sedan (Liu et al, 2014). the same year the SUV Model X was announced and rolled out at the end of 2015. In 2016 Tesla announced the production of the middle-class car Model 3. The first delivery is expected at the end of 2017.

Tesla has got two very important advantages: First of all, it was the very first company entering the market with cars that operate exclusively with batteries and secondly it is the technology leader both in powertrain and battery technology. In addition Tesla combines these innovations with high quality, an attractive design and sportiness. As a result Tesla succeeds in avoiding the typical „eco-image“. Tesla released with its Model S an absolute new and unique product.

Additionally Tesla provides a product line membership. This includes the usage of user forums and a user community for interacting with the company and with each other in private or full public view. Throughout this platform it is possible for Tesla owners to inform themselves about news, events and all kinds of product information in a wiki (Mitra 2012).

There are no studies about the consumer group of Tesla, particularly Model 3, available yet. Considering new vehicle registration data, Tom Libby from IHS Automotive described the buyer of the Tesla Model S (2014) as the following: About 25 % of the Model S buyers owned a Toyota-brand or a vehicle of Toyotas luxury division Lexus at the time of the purchase (fig 1). It is not clear from the numbers whether they were trading their car for the new vehicle or whether they were adding the electric sports sedan to their car pool. Most of these buyers had a Toyota Prius before buying a Model S. The electrical car Leaf ranks number seven on the model list. “The fact that the Prius and Leaf both rank so high on the Model S conquest list suggests that the S now gives hybrid-/EV-inclined purchasers an opportunity to move up to a vehicle that is clearly a hybrid or electric like their current model but more luxurious and upscale than their current car and more stylish as well,” Libby said. It is not surprising that behind the Toyota drivers there are owners of the upper class brands Mercedes and BWM vehicles among the tesla buyers with 10 % respectively.

illustration not visible in this excerpt

Fig 1.: Automobile brands owned by Tesla buyers (Source: Libby, 2014)

It is even more interesting to look at the statistics by considering the total number of company sales and relating them to the Tesla Model S acquires: It can be seen that McLaren super car owners are most likely to buy a Tesla when they buy a new or an additional car. In this ranking Lotus is followed by Maybach, Lotus, Ferrari, Aston Martin, Maserati, Bentley and Lamborghini.

These statistics suggest that there are two kinds of typical Tesla Model S buyers: People with high-income who are interested in a sustainable way of living and those who are interested in luxury und sports cars.

With the new Model 3, Tesla addresses a much wider audience. Positioned in the middle-class market sector, the vehicles will be affordable for people with average incomes as well. As already stated in the introduction there is no such recent data yet. India White from Affinio, Inc. conducted a customer analysis (2016) of the Tesla Model 3. Affinio’s software analyzes billions of social network connections that exist within a specific audience and then groups individuals into tribes of people with similar interests (Affinio, Inc., n.d.). White wanted to know what people are having an interest in the Model 3 and are willing to buy a car before even having seen it. In addition her purpose was to find out whether Tesla's fan community differs from the constituencies of the Chevrolet Bolt EV. Their new electric vehicle was announced only a few months earlier and will own very similar price and range properties.

As shown in fig. 2 there are several very different customer groups interested in Elon Musk's most recent product. One group can be classified as a group who is interested in renewable energy and consequently interested in sustainability not wanting fossil fuel-based vehicles anymore. The second customer group contains conservative people who are interested to support an American-made product and do not want their petro-dollars enriching unpopular countries like OPEC and Russia. Another large group are people who are interested in marketing, new technologies, space & science as well as innovative brands such as apple. This aspect illustrates that a lot of Tesla fans are rather similar to fans of high-tech products than to typical automobile fans. An additional interesting group consists of business people and financial investors. This emphasizes Tesla's success of creating its product image as being modern, sophisticated and status-representing in contrast to a product for ecologists and do-gooder.

illustration not visible in this excerpt

Fig 2.: Audience Visualization of People who mentioned the Tesla Model 3 (Source: White, 2016)

Another analysis is illustrated in fig 3: White compared the followers of the official twitter accounts of Tesla Motors and Chevrolet Volt and segmented them based on different interests into a cluster. Very interesting are the results within the area of "Sustainability", dominated by Chevrolet with more than 80 percent. It is surprising as well that most of Tesla’s followers do not seem to be very interested in the general automobile industry. In this segment Chevy attains about 95 percent. On the contrary Tesla dominates the fields of "Tech founders" and "Space & Science".

In summary it can be said, that Tesla does not attract the typical automobile fan or supporter of sustainability. People who are interested in new technologies, design and science, however, are interested even more in Tesla’s products.


Excerpt out of 15 pages


Tesla Model S. Market and Sales Strategy
University of applied sciences, Cologne
Catalog Number
ISBN (eBook)
ISBN (Book)
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Tesla, Tesla Motors, Model S, Marketing, Marketing Mix, Elektroautos, Automobilindustrie, Automotive, Model 3
Quote paper
Erik Somssich (Author), 2016, Tesla Model S. Market and Sales Strategy, Munich, GRIN Verlag, https://www.grin.com/document/356696


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