Strategy and Positioning: Tesla Motors
Summary
This strategy and positioning research will identify various marketing concepts involving Tesla Motors and its products. It will provide a description on how marketing efforts changes at various phases within the product’s life cycle, how packaging will add value to the product, and how the company will determine pricing strategies. Finally, this paper will identify various channels of distribution to sell its products and how each partner can add value to the brand.
Product Life Cycle
A product life cycle is a concept with various stages that a product goes through during its lifetime. Kerin, Hartley, & Rudelius (2015) informs, “The concept of the product life cycle describes the stages a new product goes through the marketplace: introduction, growth, maturity, and decline (p. 273). Furthermore, each stage has different characteristics in response to the different needs the product requires as it moves along each cycle. As a result, the marketing tactics used in each stage change as well. According to Lorette (2015), “Understanding the product life cycle can help business owners and marketing managers plan a marketing mix to address each stage fully” (para. 1).
Introduction stage. This stage refers to when Tesla Motors introduces its product to its intended market. Typically, the sales grow slowly and the profit is minimal due to the high production costs, investments, and all the initial outlays associated with developing the product. In this phase, the marketing strategy is to create consumer awareness and stimulate the initial purchase of a product (Kerin et al., 2015). As a result, companies typically allocate large budgets towards various advertising and marketing techniques to gain consumer awareness. Another concept that Tesla can take advantage of is the lack of competition at this stage. Since there is a lack of competitors with the same product, Tesla can establish a primary demand for the product class, rather than specific models.
Growth stage. A company has entered the growth stage once the customers become aware of the product and sales increase. In fact, this is partly due to new consumers trying the product, in addition to repeat purchasers. At this phase, more competitors are established and aggressive pricing strategies are involved, therefore, profit is at its peak for companies. For Tesla, the growth stage is vital for product differentiation and building a brand preference for its target market. Since there are many competitors, Tesla must set itself apart by diversifying its products and services since consumers compare product benefits among the available selection. As a response, the marketing strategy should be geared towards stimulating a selective demand for the purpose of gaining market share due to the increase in various competitive products and benefits.
Maturity stage. When a company gains over its competitors, the product transitions to the maturity stage. However, this phase is characterized by a slowing of total industry sales and revenue, profit decline, and the cost of gaining new customers increase (Kerin et al., 2015). In fact, most products out there are currently in the maturity stage; for example, televisions, cell phones, and soda brands. Once Tesla enters this stage, it must focus on a marketing mix that maintains its market share through either gaining new customers or further differentiating its products. Furthermore, it must aspire to build customer brand loyalty. This can be achieved by packaging products with incentives or creating promotions for new buyers who switch from other competitors.
Decline stage. Once sales drop and the product market becomes oversaturated, the product is in the decline stage of the life cycle. However, if Tesla successfully achieved brand loyalty from its customers, then it can retain its customers despite of being in the decline stage. Although it may not gain new customers. Lorette (2015) asserts, “For the marketing mix that remains during the decline stage, the focus is generally on reinforcing the brand image of the product to stay in a positive light in the eyes of the product’s loyal customers” (para. 6). Additionally, another strategy that Tesla must employ is a solution for sustainability. As a matter of fact, products enter the decline stage mainly due to environmental factors and not failing marketing strategies. For example, Walkman’s and CD players declined due to advanced technology such as MP3 players. Consequently, Tesla must find solutions to respond to environmental changes.
Product Packaging, Services, and Promotion Incentives
Tesla motors promotes its product by offering excellent services, such as delivering the car closer to a buyer and unmatched incentives. Additionally, Tesla offers annual inspection service plans beyond the original warranty. For example, the annual inspection fee for the Model S is only $600 every year. In addition, it offers software updates over –the-air that add new features and functionalities. Moreover, there are some incentives offered to support and promote electric cars. For instance, there is a $7,500 federal income tax credit for owning a Tesla Model S in serval states as rebate, which customers can claim after purchasing the car. Besides, some states such as California offer free carpool lane access and municipal parking. Chandra, Priyono & Hakim (2015) states, “The sales promotion comprising short-term incentives to encourage the purchase or sale of a product or service. They argue that sales promotions include a wide variety of promotions ranging from implementing and is designed to stimulate the market response in order to become stronger” (para. 3). Another convenient packaging strategy is that Tesla cars can be delivered to a dealership close to customers that lack available Tesla dealerships close by. Additionally, it can be delivered by truck to the customer once the payment is completed. Furthermore, Tesla has excellent 24/7 technical support as well as offering roadside assistance. Customers can call at any time, any day, or send an email. It is always ready to assess the issue, and troubleshoot it. If the issue was not solved through the phone, Tesla can help in transporting the vehicle by a trained network of tow providers. For Tesla Motors, ensuring that clients receive their vehicles in pristine condition is vital to the overall customer experience, there is only one chance to make a first impression. After a client designs his or her automobile an estimated date of delivery will be sent out, which may change pending on options chosen and availability of parts. Once the car is ready, a delivery date will be set. According to Tesla Motors (2016), “If you live more than 160 miles from the closest service center, your Model S can be shipped directly to your home or business.” Using a car transportation company such as Reliable Carriers Inc., which is one of the best in the car transportation industry, guaranteeing on time delivery.
Pricing Strategy
Pricing for Tesla products will depend on a number of factors which include: demographic of the target audience as well as costs and overhead to supply the product. Also, creating a sense of value that outweighs the price of the product will also determine the penetration rate with the target market. Kerin et al., (2015) explains, “The price must be “right”—in the sense that customers must be willing to pay it; it must generate enough sales dollars to pay for the cost of developing, producing, and marketing the product; and it must earn a profit for the company” (p.324). Having price transparency is also a major factor when targeting a market to sell to. When Tesla wants a vehicle to be promoted for a specific price, the customer will want to not only see what it is going to cost him or her in the long run over a specific term, but the value he or she gets from owning an electric sports car. Price, along with many other factors, plays a unique role within the market because it is where everyone makes their decisions on the needs and wants of the business. It is where business decisions are calculated and executed on. Kerin et al., (2015) says, “It is the place where all other business decisions come together” (p. 324). From a marketing point of view, price needs to be viewed by the target market as less than the perceived benefits in order to instill a good value for the consumer. Given the current market for Tesla, it has to set a price the not only creates enough value to target a specific market penetration goal, creates value for the consumer when he or she purchases it, but also generates enough revenue to meet sales goals, market share goals, and revenue goals the is laid out in Tesla’s pricing objectives.
Distribution Channels
Tesla will use the selective channel of distribution. Why? Because what Tesla really sells is an experience. Today there are many cars to choose from, and most people have gasoline powered vehicles. But what the Tesla consumer gets when they buy a car is quality and prestige of being a Tesla driver. No other electric car can do what Tesla does. According to Tesla Motors the “Tesla 85D can drive up to 270 miles before needing to be charged” (2016).
Using the selective distribution channel via a mixed marketing channel allows tesla to maintain its exclusivity and prestige above the other car makers. The purchaser of the vehicle is considered the consumer and they are what keeps Tesla moving forward. Without them Tesla wouldn’t exist. Tesla is considered the producer and they will use a direct internet based marketing channel to get their car out in the market. This adds to Tesla’s value because it isn’t just a car you can test drive on a Saturday afternoon and take home that night since there are no tesla auto dealers – customers have to go to a Tesla showroom and customize a vehicle for themselves.
References
Chandra, T., Priyono, C. & Hakim, L. (2015). The influence of location, products, promotions, services with respect to consumer behavior. Review of European Studies. Retrieved from ProQuest database. University of Phoenix online library.
Kerin, R., Hartley, S., & Rudelius, W. (2015). Marketing (12th Ed.). McGraw-Hill Irwin. Retrieved from University of Phoenix eBook Collection.
Lorette, K. (2015). How would the marketing mix change at different stages of the product life cycle? Small Business. The Chron. Demand Media. Retrieved from www.chron.com
Tesla Motors. (2016). How Ordering Works. Retrieved from www.teslamotors.com
Tesla Motors. (2016). Tesla Design Studio.