Introduction
The following paper is an elaborate presentation of the marketing strategy over the next three years (2013-2016) for Tesla Motors, which is an electric carmaker company whose portfolio includes only two car brands, namely The Model S and The Roadster.
Marketing strategy involves the analysis of Tesla as a company without focusing on any of the two brands of cars that are currently at its disposal. In this paper, the approach will be a brief introduction of the company as a player in the larger auto industry, with a presentation of the situational analysis being made thereafter.
This section will then be followed by an informed investigation of the strategic considerations together with a statement of some of the recommendations in the strategic route while capturing both the primary and selective demands.
The paper will also use these recommendations to construct a marketing strategy that is both achievable and reasonable. A conclusion will be made based on the findings of the marketing strategy.
Organizations can choose between primary and selective demand marketing strategies. In the primary demand strategy, organizations aim to increase the number of sales within their respective industry by boosting the number of customers either by making themselves attractive to clients who are non-users of the product or by growing the number of sales in the already-established pool of users.
This essentially means that organizations increase the overall demand for the product, not just the brand, but also the class of the product or its form in the industry. Contrary to the primary demand marketing strategy, selective demand marketing strategy requires that organizations increase the demand for a particular brand of the product rather than the product or class in the industry.
The two marketing strategies interact in most organizations. They cannot be described as being mutually exclusive.
Before a detailed marketing strategy for the company can be presented, it is important to understand Tesla Motors in the context of the industry in which it operates. In the age of global warming and environmental pollution, a number of engineers got together to provide an answer the problem through the provision of a cleaner way of transport.
Tesla Motors was born out of this dream, with the engineers developing an electric car to replace the ones that are an environmental menace. The company that is currently making only two brands of cars as stated earlier (Tesla Motors, 2013, Para. 1) has managed to capture a significantly large part of the automotive industry.
It has presently sold more luxury cars relative to some of the other renowned companies such as BMW and Lexus (Loveday, 2013). Tesla has also managed to create electric cars to provide more power in relation to what was previously possible in this form of propulsion, with this contributing more to the evident respect in the industry.
Situational Analysis Summary
The 20th century was marked by an outcry that the environment was being polluted beyond repair. If no interventions were made, the human race would have ceased to exist. One of the victims of the environmental pollution established was the ever-growing number of vehicles on roads, with the fuel they burn causing the bulk of pollution (Leitman, 2013).
On the background of these concerns, Tesla Motors positioned itself to produce not just environmentally friendly electric cars, but also vehicles that could match the demands of the client base. Electric cars, mainly running on solar power, were also more efficient compared to those running on petroleum (Blakeslee, 2013).
The company managed to establish itself as a leader in this new industry, with only a few other organizations following suit.
Factors Affecting Willingness/ Ability to Buy
Companies face many challenges in the process of coming up with strategies that will help them stand firm in this competitive market. Tesla Motors is not an exception. One of the major challenges that the company faced was the development of batteries that could hold enough energy to power the electric cars.
Through its adequate financing in the industry, Tesla was, however, able to develop and use new batteries that were efficient based on their ability to hold more energy (Rodriguez, 2013). Considerable growth in the automobile industry has been recorded over the last few years, both in the US and globally.
Individuals are now spending a large percentage of their income and loans to finance vehicles (Baumgartner, & Gross, 2000) (Figure 2). The auto market is still recording growth, with sales hitting their highest levels after the global economic crisis (Figure 1).
In the industry, Tesla competes with other automakers although these are mainly the traditional automakers. In the specific market for its products, the company has managed crush any competition, thus enjoying relative monopoly. In the electric car industry, the company competes with the likes of the hybrid and plug-in hybrid vehicles.
Some of the companies that Tesla is in competition with include Mercedes, BMW, Lexus, Honda, Nissan, Toyota, and Ford Motors. However, in the category of pure electric cars that Tesla has capitalized on, it remains the undoubted market leader.
Relevant Market Definition
Relevant market is the client base that a company has for a specific product. In the case of Tesla Motors, the relevant market is set at the product level. The product that is used in this case is the alternative fueled vehicles that are manufactured by Tesla Motors.
In this paper, an inclusion is also made in the relevant market for environmentally friendly products by the company, with a particular focus on the market for premium and sports vehicles. In the primary demand, Tesla has seen a recorded increase in the demand for electric cars, with the growth being steered by the desire to stop pollution and/or invest in efficient vehicles.
The number of units sold has increased with the steadily improving economy, with more people being able to purchase vehicles in general. Based on this fact, the demand for Tesla’s products is likely to increase in the coming years with competition also growing significantly.
There has been an observed increase in the demand for electric vehicles, with the demand being projected to increase over the coming years. In Figure 3, there is a consistent rise in demand for all types of vehicles over the last few years. In the last three years, for example, passenger cars rose to 7 million in 2012, as opposed to the 6 million cars sold in 2010.
The sales for light truck models also rose in the same period to stand at 7.2 million units in 2012 from less than 6 million in 2010. The sale for light vehicles also rose from 10 million in 2010 to reach slightly below the 15 million mark in 2012. The increase will boost the sales for Tesla, thus ensuring profitability.
Target Market Identification
There has also been increased acceptance of electric cars across the US, with more people receiving them positively, with the authorities being supportive of the move. The charging areas for these vehicles are also expected to increase in all states, with some of the states having the existing charging areas (Tesla Motors, 2013, Para. 1).
Figure 4 shows the three stages that the lithium-ion batteries have undergone in terms of cost. The last stage is a projection of the expected decrease in price, with 2014 having 400 $/kWh while 2015 has values lower than this figure. 2016 is also projected to have a cost of slightly below 400 $/kWh. This period will be followed by a decline in price.
The company has also been recognized as one of the safest automakers in the US as established by NHTSA, with the report coming as an added advantage to the company. The target market is likely to remain in the US, with the growth in demand also being observed in the non-traditional markets such as Asia.
The target market could also be divided into age groups. The youths have demonstrated an increased desire to own a vehicle. For this market, Tesla Motors Company should produce cheap and easy-to-operate vehicles while still maintaining its luxurious characteristics.
Selective Demand
In the selective demand, Tesla Motors has managed to establish itself quickly as the preferred automaker in the category of Luxury Sedans, with sales for the same being high (Tesla Motors, 2013, Para. 2) (See Figure 5). The sales have also showed an increased probability of stabilizing over the next few years, with the number of units sold increasing constantly.
Tesla as a brand has also established and cultivated client confidence in the company. Despite the faults that have previously been found in some of the vehicles that the company produced, the automaker continues to be unbeaten in the field. Despite the market dominance, Tesla is likely to see an increase over the next years in the number of competitors in the field.
Some of the specific attributes in the company’s products that are likely to influence its performance include fuel efficiency, duration of charging, and the driving range. These attributes are, however, yet to be applicable. The company remains the sole competitor.
Tesla Motors should target to introduce other brands in the market. This strategy will improve the company’s evaluated performance. The specific demand for all new products will increase the overall profitability of the company, thus ensuring a continued performance.
Segmentation
In the segmentation strategy, the next three years are likely to have a change in the company’s economic trends in the market. This change is however going to be very insignificant and dependent on some of the factors of change such as the change in the American GDP, the market demand for electric cars, and the emergence of competitors.
The foreseeable change is an increase in the demand for Tesla’s products, with the products being influenced by the above factors. The different segments mentioned in the paper will be affected by different trends.
Segmental effects are the effects in the particular specific market in which the company will see changes. Tesla Motors will have increased sales in a number of models of its vehicles. These are mainly in the luxury cars as stated above.
The electric car segment is also likely to undergo a series of positive and negative changes, with these changes having different effects on the company. The best example of the segmental effect is the policy that will be developed to curb global warming. The company will play a special role here.
Over the next three years, the company might see a change in the outlook on electric cars, with this situation affecting the sales and marketing strategy in place. Although a negative change in the social environment is likely for the company, the more probable change is a positive one as indicated by the change in attitude towards electric cars (Gilbert, 2002).
Tesla is likely to benefit in the event of such a change. Some of the changes observed in the past in the auto industry were, however, unpredicted. These may be duplicated in the next three years. The determining factor will however be the marketing strategy that the company is able to put in place.
Competition
Competition for the company is likely to increase over the next three years, with the main drivers for the competition being the emergence of smaller companies producing electric cars. The traditional automakers that mainly produce vehicles fueled by petroleum together with other fuels are also likely to venture into the electric car field, thus offering competition to the company.
There are, however, a number of ways that the company can ensure that is stays competitive with the entry of these players. Some of them include marketing itself as the original maker of the electric cars and/or using the brand that it creates to be competitive in the industry.
The other way in which the company can increase its dominance in the industry is through collaboration with other related companies such as those that are involved in the development of parts such as solar power systems. The company also needs to invest in new technology to ensure that it stays ahead of the ever-rising competition.
The next source of competition for Tesla Motors over the next years is also likely to come from the bio-fuel industry, with large firms that are dedicated to bio-fuels emerging over the last decade. Bio-fuel can be favored due to its relative safe and environmentally friendly nature coupled with the cheap production process.
Strategic Considerations for Determining the Strategic Route
The marketing strategy to be applied by Tesla Motors is dependent on several strategic considerations. These are important in determining whether selective or primary demand will be applied in the strategy. These considerations will be discussed in this section.
Market Measurement Workings
Tesla Motors is located in an industry where competition for its specific products is limited as stated earlier. It is important that the sales that the company has had in the last few years be analyzed along with sales in the respective industry.
An important source of sales for the company is the Electric Drive Transportation Association’s website, which provides vital statistics for the recorded sales in the past year (Electric Drive Transportation Association, 2013, Para. 3). T
he sales made by Tesla during this period were approximately 13,850. These figures represented the sales in the specific brand. The industry’s sales for plug-in electric cars during the same period were 78079, with those for Hybrid Electric ones amounting to 423290 vehicles.
Since plug-in electric cars and their hybrid counterparts are only competing in the overall automobile industry, it is only reliable to use the market potential for the whole industry. With an estimated absolute potential of 12,979,521, the industry is likely to spiral with companies fighting for this potential, such as Tesla Motors.
While considering the specific brands sold by the company, Model S featured as a dominant one in the luxury car segment. In the US alone, the model sold 4,900 vehicles, with the sale of its closest competitors in the same segment being 9787 vehicles, with an absolute market potential being estimated at 29,692 (Cain, 2013).
The market is however likely to experience more growth upward, with the potential being higher than calculated based on the binding policies that several administrations have made to invest in efficient propulsion systems and/or prevent pollution.
Market Share Position
Tesla Motors has a significant market share as shown in the above statistics. The company has a market share of approximately 10% (Figure 5), with the specific brands having a larger share in their respective market segments. Model S in particular managed to have over 70% market share in the luxury vehicles segment, with this being the largest share in the market.
Pioneering Advantage
Tesla Motors and engineers who came up with the company were the pioneers in the electric car. The company thus enjoys this advantage as a very useful determinant of the marketing strategy as the legacy built can work to the benefit of the organization during marketing.
This fact is also likely to affect the choice of marketing strategy. The company has also pioneered in the use of longer lasting batteries, the increase in the range for the electric cars, and the types of batteries that these vehicles use. The pioneering capability and achievements are likely to place the company ahead of its competition as the fight for the market intensifies.
Likelihood of Competitor Reaction
Using the results of an environmental scan, there is a high possibility of an increase in competition in the industry. Over the next three years, this competition is likely to increase as stated above, with the companies positioning themselves for the market potential being established.
The industry is also likely to receive more companies, with the established players venturing into the manufacture of electric cars as their returns and demands improve.
The analysis shows that the competitor reaction is likely to increase over the next three years in the automobile industry. Some of the measures that are likely to define the competition increase the vehicle ranges and the efficiency that each company is able to achieve with its batteries.
Nature of Market Opportunity
This factor is not an important one in the determination of primary or selective demand market strategy for Tesla Motors because the company presents no factor that is likely to be used as a defining one in the measure of competition. The main determinants of the competition drive are the clients, with these being influenced little by the marketing strategy but more by the demand that they have.
Resources and Capabilities
One of the most important resources that the company has is the successful Brand that it has created over the years. With years of pioneering in the industry, Tesla Motors has managed to dominate the industry through the introduction of more advanced methods of utilizing solar energy and the reduction of charging time for its vehicles.
Another important resource that may be considered is the confidence that government administrations globally are expressing toward electric cars with the attempt of taming global warming. Tesla Motors also possesses the capability of manufacturing large volumes of vehicles, with this endeavor being possible because of the efficient manufacturing process utilized.
Life Cycle Analysis
The life cycle of the products offered by Tesla Motors including the luxury models of vehicles represented by Model S is predictable. Unlike the gadget industry such as the Smartphone industry where an annual course of the products is expected, the auto industry has a rather longer life cycle, with the products lasting longer.
This situation is a major influence on the marketing strategy to be utilized, as it favors primary demand rather than the selective demand marketing strategy.
Recommended Strategic Route
As stated earlier, organizations have a choice between primary and selective demand marketing strategies. The two strategies can be applied together if required. Some of the major factors influencing the decision to apply either of the two include the market, the microenvironment, and the microenvironment of the company. The main factors that influence the choice of marketing strategy have been discussed above.
These factors are crucial in the recommendations made below for both marketing strategies. The market measurement for industry revealed a big potential for growth, with the performance of the US economy and the global economies being projected to continue improving after the economic crises experienced in the last decade.
The automobile sales were also reported to be increasing, with the same trend being maintained over the next three years.
The market share for the company stood at 10%, with the luxury car segment performing better. The other section that the company performed well is in the pioneering advantage, with several landmark achievements being highlighted. In the competitor’s reaction, the industry was projected to receive more players, with the traditional competitors diversifying in the manufacture of electric cars.
This situation is, however, not likely to occur in the next three years, but will take more than a decade to be achieved. The company’s main resource is in the products that it manufactures, thus managing to maintain reduced competition in the industry.
The lifecycle analysis works against the company, with the vehicles lasting longer than any other industrial products. The two marketing strategies will be discussed below as a factor of the discussed determinants.
Recommended Primary Demand Strategies
The strategic considerations made above may be applied in the justification to the use of any of the two marketing strategies. It is, therefore, difficult in real life to use any of the marketing strategies in exclusion despite the likely application of a combination of both strategies in marketing Tesla Motors Company’s products.
As stated earlier, the application of primary marketing strategy is for users and non-users of the products. These elements will be considered separately under independent subheadings.
Non-Users
The non-users of Tesla Motors Company’s vehicles present the largest market that can be influenced to grow the sales for the company. In fact, due to the life cycle analysis, most of the users will not have a pressing need for the product since they will already be using it. However, they are also important.
Therefore, they will be discussed below. One way for Tesla Motors to increase sales among non-users is to capitalize on increasing their willingness to buy its products.
There are a number of ways that the company can increase consumers’ willingness to buy its products. The first of these ways is increasing, thus making them aware of the benefits that the products have over others in the market and/or showing them the benefits that these products have already offered to other users.
Tesla Motors will have to remind the potential users of the effects of global warming, the environmental pollution by other brands of cars, and the likely health effects that this situation will have on their health and that of their relatives in the future.
The company will then need to present itself as the solution to the problem. It will have to convince non-users that the use of electric cars will contribute significantly to lowering pollution and global warming.
Another benefit that the company should use to lobby its non-users to use its products is the efficiency of the vehicles that it manufactures. Over the years, the company has managed to manufacture fuel-efficient and safe cars, with the range for these products increasing exponentially.
Tesla Motors will also have to present itself as the market leader in the industry, with electric cars being its specialization. The other benefit that the company will have to sell to non-users is the financial efficiency of the cars. The company will have to compare the use of electric cars and other fueled cars to show that its products are cost-effective to the users.
Some of the other achievements that the company will have to sell to the non-users include the maintenance record that the products carry and durability relative to its competitors’ products. The company will have to present itself as a classic carmaker in the same level as some of the other luxury carmakers such as Lexus and Mercedes.
These benefits along with others that the company can attribute to its products will form a considerable part of its primary demand marketing strategy to its clients who are non-users of their products.
The second strategy that Tesla Motors can use to market itself to non-users is the development of certain products that will be more useful to a certain group of its targeted consumers. One strategic group is organization and government.
The company can ensure that it creates larger sized vehicles for the transfer of more people with larger capacities. With authorities looking for ways to reduce pollution in their cities, the company can capitalize on this to develop larger vehicles such as buses to establish itself in these markets.
There are also other groups of people that view electric cars as not being luxurious enough and thus not in their preferred class of vehicles. Tesla Motors can develop other luxurious models of vehicles for these high-end consumers, thus enabling them to acquire their desired class of the same.
Tesla could also target the untapped market in terms of electric cars for the middle class that only requires movement to and from work. This market constitutes the largest market for the company, with the bulk of its customers requiring their vehicles cheap.
The company can invest in production methods that make the vehicles cheap for its customers, thus targeting these clients. The easiest way to make the clients attracted to these classes of vehicles is to make them cheap for the ready market, thus ensuring a steady supply of the same in their respective market segments.
The third way in which the company can capture non-users of the products is through the development of new benefits with the use of the products that are already in the market. One such way of doing this task by the company is by marketing the new products through rebranding and adding of new capabilities to their functioning.
The company may also add the advantage of not having to visit the gas stations, the ability of using other electronic devices together with the car, and the ability to use interchangeable batteries for vehicles. The above strategies can increase the willingness of non-users of Tesla’s Vehicles to buy them.
However, other non-users may be willing to buy the vehicles although having no means of doing so. Some strategies can therefore be used to increase this ability of the potential customers.
The first major step that has the effect of increasing the ability of most clients to buy the company’s vehicles is the reduction in the prices for each of the vehicles. As stated above, the company can explore ways of reducing the costs incurred through the production process until the vehicles reach the end user.
One such a move is the reduction of the non-essential staff and/or investment in cheaper energy sources and cheaper states for labor. Tesla Motors currently has a wide range of prices for the various models. The two models that are purely electrical cars are fairly priced in its line of vehicles.
Since this sector of the company has the least competitors, the company should explore ways of reducing pricing to ensure that more people are able to acquire them.
The second way of increasing the ability of non-users to acquire Tesla’s models of cars is to ensure that there is availability of the products throughout the US and around the globe. The company has dominance in the US, with many markets outside the country not being sufficiently covered.
To ensure that the company benefits from the global trade, there is the need to invest in other regions of the world, especially in Europe and the developing nations. The company should also open branches all over the world to ensure that it markets its brand as the globally accepted pioneers in electric car manufacture.
Existing Users
For the existing users of Tesla’s products, varieties of methods are in place that the company can employ to ensure that the sales are increased to them. For these clients, the company should ensure that they are able to buy the vehicles more often, or buy more of the vehicles.
The company can increase usage of its vehicles among the traditional customers to ensure that the company is able to broaden the vehicle usage. In doing this, the company can make a variety of vehicles for different uses, thus enabling customers to acquire more than one for different uses.
Some manufacturers have the advantage of increasing the sale to its loyal customers by increasing the consumption levels. For Tesla Motors, the concept is scarcely applicable since the vehicles, unlike some other products, are not perishable.
Another way of increasing the consumption of the products is the encouragement of users to replace the vehicles when they are no longer useful to them. Unlike the Smartphone industry where customers are able to change their phone often, the motor vehicle industry is slow to change in the generations of vehicles.
Tesla Motors can, however, introduce new models regularly and/or rebrand the older models with new capabilities to ensure that the current customers have a choice of upgrading their vehicles.
Recommended Selective Demand Strategies
There are several ways that Tesla Motors Company may increase the sales of its products using selective demand marketing strategies. These methods can be categorized into ways to expand the market already being served. They include acquiring the company competitors’ clients and increasing demand within the current customer base.
Expanding the Existing Market
The company has the option of increasing the market size for the already existing products. One of the ways that Tesla Motors can accomplish this role is by broadening the distribution of its products. The number of outlets that the products are available can be increased through partnership with other like-minded organizations to ensure that the brand has many outlets.
Tesla can also apply e-commerce where the vehicles are sold online, with distributors being readily available. The company stands to gain a lot from the growth in information technology. The most successful marketing strategies include the use of IT. The company, therefore, needs to invest in information technology to ensure that there is a ready market online.
Another way in which the company can increase sales through the expansion of the existing market is the development of other models as stated earlier. The company should invest in vehicles that are tailor-made for specific groups of people. This strategy will be instrumental in increasing demand of the new models within the market that has already acquired the older models.
Consumers of various products have developed a liking for diversification. With the growth observed in the economies of various regions as documented earlier, it is likely that more people can afford the latest newer brands that the company can roll out.
Acquisition of Competitors’ Clients
There are two ways that Tesla Motors can achieve this goal: Head-to-head positioning and differentiated positioning. In head-to-head positioning, Tesla can offer vehicles with the same features as the competitors’ products by only improving them and/or ensuring that they are better known relative to competitors.
In the motor vehicle industry, some of the features that are crucial to customers include the off-road performance. Tesla Motors Company can ensure that the vehicles are able to outdo its competitors in this feature that is offered by many of its competitors.
Another feature is air conditioning that is present in almost all of its competitor’s vehicles. In an industry where motor vehicle clines are concerned about the charge retention of the batteries that the vehicle use, other electric and hybrid vehicle manufacturers have managed to reduce the charging time to less than two hours (Marchetti, 2013; Hill, 2013).
With Tesla being able to achieve the same and actually being the pioneer in this case, the company should ensure that it achieves the best charging time of all the other manufacturers to retain the position. This will however need constant innovation to ensure that the company stays on top.
Aside from capitalizing on the features that are already offered by competitors and ensuring it is the best, Tesla Motors can also develop newer features for its products. This measure is called differentiated positioning.
Based on the environmental scan performed in an earlier work, Tesla Motors has the capability of engaging in the production of newer features in the latest models that are currently under development. These will position the company among the top performers in the industry.
Retaining Demand or Expanding it Within Existing Customer Base
Tesla Motors can achieve this goal through the establishment of a working quality-assurance department. One of the major policies that the company needs to invest in is ensuring that customers are satisfied when dealing with the company or its products. This step is crucial in maintaining the existing customers and/or retaining them within the organization’s reach.
The principle will make marketing to the customers easy besides increasing sales within the three years. The company can also set up a department to ensure that relationships with its customers are well handled. To motivate the existing customers, the company can set up a loyalty program where customers who are loyal to the company are rewarded with special services or products.
An example is free repair for customers within the branches of the company. The other thing that the company needs to do to increase sales is to develop a line of products that are complementary to the electric vehicles that it makes. They include car batteries and engines for the repair of the vehicles when they break down. The other way is to ensure that customers have an easy access to these accessory products.
Conclusion
The paper is a detailed outline of the marketing strategy that Tesla Motors Company needs to adopt over the next three years. The paper is informed by the environmental scan carried out on the company, the situational analysis that is specific to the company, and a number of useful articles on the same.
Tesla Motors is one of the pioneers in the manufacture of electric cars, with years of experience in the same field. With the US and world economy being documented to be growing at a very fast rate after the recent global economic crisis, sales in the motor vehicle industry have also been reported to be on the rise.
The above strategy constitutes of a combination of both selective and primary marketing strategies. Both the existing customers and potential ones feature prominently in the strategy. The major strategies addressed in the primary demand strategies include the improvement of the abilities of customers to buy the vehicles and the willingness that they have in doing so.
The paper also proposes the introduction of new models by the company to ensure that it is able to compete more efficiently. More details on other primary demand marketing strategies were also provided.
An elaborate presentation of the combination of the two marketing strategies is presented with the suggestion of a loyalty program to ensure that customers are rewarded. The company should also invest in advertisement and/or expanding to other regions of the world that are previously not covered as a way of tapping the potential in the regions.
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