Evaluation of the Marketing Strategy of Tesla Motors Inc

Research Paper (undergraduate) 2015 24 Pages

Business economics - Marketing, Corporate Communication, CRM, Market Research, Social Media


Table of Contents


I. Table of Contents.

II. List of Abbreviations.

III. List of Figures.

1.1 Problem Definition and Objective.
1.2 Structure.

2.Current Market Position.

3.Marketing Mix.
3.1 Customer Value.
3.1.1 Product Portfolio.
3.1.2 Portfolio Analysis.
3.1.3 Product Life Cycle.
3.2 Customer Cost
3.2.1 Pricing Strategy of Tesla Motors.
3.2.2 Pricing Strategy Competitors.
3.3 Convenience.
3.3.1 Distribution Levels.
3.3.2 Channel Strategy.
3.4 Communication.

4. Conclusion and Outlook.

IV. List of References.

V. ITM-Checklist

II. List of Abbreviations

BCG Boston Consulting Group
e.g. exempli gratia
EV Electronic Vehicle
ICE Internal Combustion Engine
Tesla Tesla Motors, Inc
U.S. United States
USP Unique Selling Proposition
GE-Matrix General-Electric Matrix

III. List of Figures

Figure 1 - The “Four Ps” of the Marketing Mix

Figure 2 - Development of the “Four Ps” to the “Four Cs”

Figure 3 - Chronological product portfolio development with respective price ranges

Figure 4 - The Boston Consulting Group Matrix

Figure 5 - BCG-Matrix for Tesla Motors current Model S

Figure 6 - The product life cycle

Figure 7 - Example of a Tesla showroom

Figure 8 - Examples of Tesla's interaction and communication on social media

Figure 9 – Advertising made voluntarily by private persons or graphic designers

1. Introduction

1.1 Problem Definition and Objective

Tesla Motors, Inc. is a car manufacturer, which polarizes like no other company in this industry. It is often said that with its business model and its special strategic moves, Tesla confuses competitors, utilities and marketing agencies (Zart 2014b).

Therefore, this assignment will focus on the analysis of the key aspects of Tesla’s business model in order to find out why it is considered to be different. Moreover, the objective of this assessment is to find out, whether this strategy is useful, or if it should be changed.

The market definition and analysis of the first assignment is hereby the basis for this evaluation of Tesla Motor’s current marketing strategy. Therefore, the focus will be again on the company’s domestic market: the United States of America. Furthermore, only Tesla’s automotive products will be taken into consideration – its recently launched home battery will not be object of this work.

1.2 Structure

The structure of this assignment is based on the analysis technique of the `Four Cs`, which takes the key aspects of a marketing mix into consideration.

Therefore, after giving a short overview of Tesla’s current market situation, the assignment will evaluate Tesla’s:

- Customer Value
- Customer Cost
- Customer Convenience
- Communication

As the concept of the marketing mix includes numerous factors in each category, this assignment will focus on those aspects which are considered to be most relevant to understand the company’s strategy.

Afterwards, the results of the assessment of Tesla’s marketing mix will be summarized in the conclusion. Furthermore, an outlook on Tesla’s future will be given, followed by a recommendation whether Tesla should keep or change its current marketing approach.

2. Current Market Position

Within the first assignment “Tesla Motors, Inc. – Market Analysis and Definition”, the market position and the USP of Tesla Motors have been investigated. Market analysis tools, like SWOT and STEEP, were applied in order to become aware of external influencing factors and to set the company in relation to its customers and competitors.

It became clear, that the market for all-electric cars is influenced by more positive than negative external factors and it is growing continuously. Nevertheless, the mentioned market is still relatively small compared to the market for traditional fuel-powered cars.

Eventually, Tesla’s unique selling proposition within this market has been defined: It is the combination of a high-quality and high-performance premium car manufacturer with the eco-friendly and innovative technology of an all-electric engine which makes Tesla Motors, Inc. unique on the automobile market.

3. Marketing Mix

The marketing mix is one of the major concepts in modern marketing. It is a set of controllable, tactical marketing tools that a company uses to produce the response it wants to get in the target market. Hence, it comprises everything a firm can do to influence the demand for its product (Kotler and Armstrong 2010, p. 76). Those possibilities were originally clustered into the “Four Ps”: Product, Price, Promotion and Place (Dogra 2008, p. 80).

illustration not visible in this excerpt

Figure 1 - The “Four Ps” of the Marketing Mix.

Source: Own creation, based on P. Kotler and K. Keller, “Marketing Management”, 14th ed. (2012), p. 47.

As we are in the age of customer value and relationships, this shown model is being criticized for taking only the seller’s point of view. In order to put the focus on the buyer’s viewpoint, the traditional four aspects have been modified to the “Four Cs” (Kotler and Armstrong 2010, p. 77).

illustration not visible in this excerpt

Figure 2 - Development of the “Four Ps” to the “Four Cs”.

Source: Own creation, based on P. Kotler and G. Armstrong, “Principles of Marketing”, 13th ed. (2010), p.77).

Although the development of the Four Cs is valuable for some marketers, it does not represent a paradigm shift or a new marketing definition, as it still sticks to the conventional toolbox view of marketing as positioning (Hougaard and Bjerre 2009, p. 28).

3.1 Customer Value

Customer value describes more than the conventional marketing expression ‘Product’. It covers the physical unit itself, as well as for instance its package, warranty, after-sale service or the company image (Lamb et al. 2009, p. 46).

3.1.1 Product Portfolio

Tesla designs and manufactures premium all-electric vehicles. Due to their eco-friendly innovative technology and their high quality standards, they won the “2013 automobile of the year” award and reached the highest safety rating in the U.S. (Tesla 2015b).

The production of the first model, the Tesla Roadster, was stopped in 2012 after four years when Tesla shifted production to the Model S (LaMonica, 2011). Since then, Tesla Motors offers currently only this type of vehicle. This will change by the end of 2015 when the new SUV, the Model X, will be launched (Donath 2015). Moreover, CEO Elon Musk announced the planning of a smaller and more affordable version of the popular Model S, the so-called Model 3 (Morris 2015).

illustration not visible in this excerpt

Figure 3 - Chronological product portfolio development with respective price ranges.

Source: Own creation, based on Tesla Motors, “Tesla Model S”, http://my.teslamotors.com/models/design and A. Oagana, “2015 Tesla Roadster 3.0”, http://www.topspeed.com/cars/tesla/2015-tesla-roadster-30-ar166846.html and Recargo, “Tesla Model X Review”, http://www.plugincars.com/tesla-model-x and C. Morris, “Tesla Model 3 announced, Model X delayed”, http://www.valuewalk.com/2015/05/tesla-model-3-model-x-release-date/, all accessed June 2015.

Some may argue that Tesla’s recent product announcements indicate a shift in their strategy (Morris 2015). Yet, the opposite is the case. As already outlined in the first assignment, Tesla is sticking exactly to the strategy it already planned almost ten years ago: Entering at the high end of the market where customers are prepared to pay a premium, and then drive down market as fast as possible in order to higher unit volume and lower prices with each successive model (Musk 2006).

3.1.2 Portfolio Analysis

The two most popular methods to analyze a company’s portfolio are the Boston-Consulting-Group Matrix and the General-Electric Matrix (GE-Matrix). Although the GE-Matrix is considered to be more sophisticated, it is criticized for its methodology and the lack of clear guidelines for implementing strategies afterwards (Fyall and Garrod 2005, p. 77f.). Therefore, the BCG-Matrix will be applied to analyze Tesla’s product portfolio.

The Boston Consulting Group designed a matrix that allows examining an entire company portfolio, in order to determine products and services that should be continued, as well as those that should be modified or even eliminated (Hillestad and Berkowitz 2004, p. 124). It thereby measures the two dimensions business growth rate and market share. The first dimension pertains to how rapidly the entire industry is growing, while the second one defines whether a product has a larger or a smaller share than the products of the competitors. The combination of those dimensions leads to the following four categories of a corporate portfolio (Daft 2008, p. 249):

illustration not visible in this excerpt

Figure 4 - The Boston Consulting Group Matrix.

Source: Ygraph, “The BCG Matrix”, http://ygraph.com/chart/1524, accessed June 2015.

As mentioned in the previous chapter, the product portfolio of Tesla Motors consists currently only of the Model S. As seen in Figure 5 of the first assignment, the total amount of electric cars worldwide has doubled successively since 2012. The growth rate of the entire industry can therefore be considered as high. Figure 14 of the previous assignment shows the ten best-selling electric vehicles in the United States in 2014. Focusing on those ten models, Tesla’s Model S is placed third with a market share of almost 16%. It is only topped by the Chevrolet Volt (16,8%) and the Nissan Leaf (26,9%). As the Model S is currently Tesla’s only product, the other best-selling electric vehicles are also added to the following figure, to see Tesla’s product in relation to the competition. By applying the data of those two figures to the BCG-Matrix, it becomes obvious that Tesla’s Model S belongs to the category of “Stars”.



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University of applied sciences, Cologne
marketing tesla motors inc tesla marketing strategy strategy market position marketing mix customer value product portfolio portfolio analysis customer cost pricing strategy convenience distribution levels channel strategy communication strategy electric vehicles EV product life cycle




Title: Evaluation of the Marketing Strategy of Tesla Motors Inc