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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Executive summary

The following report aims to present a marketing plan for the launch of Tesla's brand-new product the “Powerange”. Powerange is a portable device which charges an EV in motion. UK government's “Road to Zero Strategy” supports Powerange in providing a solution for EV's limited driving range in urban areas, especially Central London, where home-charging is restricted by limited off-street parking. With Tesla's strong brand and advanced technology, slow skimming strategy will be adopted to attract existing high disposable income EV owners. Pull-positioning strategy will also be implemented to engage green consumers and technology enthusiasts. Using objective-and-task method, Tesla will implement zero-marketing budget strategy that does not advertise sales but promotes through public relations and word-of-mouth. Nevertheless, this cannot be a long-term strategy as cultural and societal trends are constantly changing. Besides, high cost of manufacturing EV has yet to be resolved by Gigafactory which is still under construction. Problem with undeniably high costs of producing Powerange intensifies. Therefore, corrective action should be taken to counter unforeseen circumstances based on the control system.

Introduction

Tesla is a global company established in 2003 in the US (Tesla, 2018). From 2015 to 2017, Tesla's revenues were £3176.88, £5496.40 and £9232.79 respectively (Statista, 2018). Recently, the UK market obtained Tesla's second highest sales value (Statista, 2018). In addition to UK gaining importance to Tesla, the government's initiatives to encourage Electric Vehicles (EV) has made the UK market increasingly attractive to Tesla. (Gov, 2018). According to a note written by the Parliamentary Office of Science and Technology (PN 365, 2010: 1), an EV operates on electrical engines and relies primarily on massive restorable power units. As the mission of Tesla states to “accelerate the world's transition to sustainable energy”, the current two main product lines include EV, as well as Energy Generation and Storage Systems (MarketLine, 2018, p.21). This report introduces a new technology, Powerange, to enhance the benefits of EV, increasing public awareness and hence EV usage. Within the organisation, this report is aimed at the UK regional manager to extend Tesla's portfolio for future development. However, there are uncertainties to introducing Powerange, which will be analysed in detail further in the report.

Environmental analysis

With the aid of SWOT and PEST analysis, the current situation of Tesla will be analysed by combining the macro-environment of the whole industry as well as the evaluation of the micro-environment, with the specific stakeholders.

With recent technology developments, the reform of "a new energy economy” is driven by the government as well as individual businesses due to both economic and environmental concerns. The UK government recently announced the ‘Road to Zero Strategy', claiming the ambition to realise 50% of new selling cars with renewable energy in 2030 (Gov, 2018). This provides a great opportunity for the EV industry as citizens are heartened to make purchase with supporting policies. Since Powerange provides a backup electric power for Tesla users, this suggests a solid connection with the sales of Tesla's EV, predicting a rapidly growing market.

However, Tesla may suffer from the threat of limited market size and the currency risk owing to Brexit. According to Lilly (2018), although the market share of EV has improved due to the currently incentive policy, they are still well below targeted levels, with only around 2% of UK market share. This illustrates the presently weak market share in the EV market. Powerange has no assurance that the expected sales in the niche market will be achieved. Moreover, from the economics perspective, due to the unpredictable outlook and unclear policies, Brexit shriveled European investors' confidence of UK's financial environment. This is presented by the decline of general investment and the decrease in the government budget, which has adverse effect on the EV market, hence influencing EV and Powerange sales.

Believing that the product will attract the market, Tesla focuses on the innovation, especially in battery manufacturing, which is a notable strength among EV industry. The investment in R&D is over £800 million in 2017 and the company continues spending over 10% of its annual revenue on it year by year (MarketLine, 2018). This provides a powerful foundation for the development of Powerange. In terms of supplier, Tesla cooperates with Panasonic. Panasonic owns the best technology for its cylindrical lithium-ion and has built several factories in order to supply battery raw materials for Tesla (Funabashi, 2018). The use of cylindrical lithium-ion not only increases the potential of Tesla's battery, but also important for Powerange to attract the market.Therefore, from both technical and financial perspectives, Tesla has the strength to innovate Powerange and ensure the sustainability of the product development. As a product-oriented company famous for its zero-budget marketing, Tesla paying little attention to marketing will be explained in the marketing mix part of the report. Without distributors, Tesla sells all its products online, eliminating additional pressure on profit margin.

While Tesla places an emphasis on its production and innovation, the weakness in product quality and safety have caused serious damage to the public's confidence. Statistics have shown in 2017 and 2018, a total of 176,000 of Tesla's Model X and Model S were recalled to “rectify power steering bolts” and “malfunctioning parking brakes and faulty locking mechanism” (Statista, 2018). These scandals were a heavy blow to the company's image, more seriously causing a rapid fall in stock value. Moreover, as a power storage unit placed in the EV, Powerange's safety quality will directly influence the safety of the EV and hence, affect the reputation of Tesla as a company.

Marketing objectives

Marketing objectives matters as they provide direction for what the business wants to accomplish (Tutor2u, n.d.). Firstly, a marketing objective of Tesla is for 15% of Tesla's total EV sales be bought together with Powerange as a complementary accessory by the end of 2019. According to Statista (2018, p.64), 73% of people in question in the UK displayed supportive responses towards shifting to low emission vehicles. Despite favourable results, multiple concerns still exist involving 61% majority worrying about the driving range, lack of charging infrastructure and time required to charge an EV (Statista, 2018). Powerange can offer a solution for the majority. As a complementary product of EV, improved views on EV serves as a measurement for the success of Powerange. This then leads to Tesla's second objective, which is to lessen 10% of the majority's inconvenience. Tesla is also branded as the most innovative brand for “alternative drive types”, but only 33% in the UK agrees as compared to 43% in the US (Statista, 2018, p.84). Hence, Tesla's last objective is to improve its brand image as the leading innovative brand by 10% in the UK.

Marketing strategy

Segmentation

Demographic Segmentation:

Tesla will target affluent young professionals (upper middle to upper class) who currently own a Tesla vehicle as Powerange is a complementary product to the automobile. The response of EV users will reflect a high usage rate on a daily basis, as they continually seek for advanced products which corresponds to the eco-friendly concept (Kmbangera, 2016).

Eco-friendly consumers have influenced major changes in the market. Rapid changes of technological development within the automotive industry has led to a surge in demand for EVs in the UK (Lilly, 2018). Firms are continuously incorporating new features and technology to their vehicles in order gain a competitive advantage over its competitors and increase market share.

Tech savvy consumers expect Tesla to develop advanced products with innovative technology. These individuals have an early adoption attitude and are proficient in modern technology. Being the first of its kind, Powerange will undoubtedly rely on tech savvy consumers to promote the product as they are significant influencers.

Geographic Segmentation:

Tesla will focus on selling Powerange to consumers in Europe, particularly the UK. High oil prices (approximately £45 per barrel) (Statista, 2018) and the UK's environmental-friendly government policies will make marketing plausible (PaperAp, 2017). Tesla will primarily target consumers based in urban areas. In London, the majority of people live in flats with restricted parking spaces, hence charging EVs can be very difficult. According to pwc (2018, p.6), “only 48% of off-street vehicle drivers have access to parking” in London, thus making it evident that Powerange will be crucial in cities.

Psychographic Segmentation:

Social class and Lifestyle segmentation will help identify consumers that own a Tesla vehicle, as well as new potential owners who are keen on being eco-friendly and fancy the latest technology trend. Powerange will improve Tesla mobility whilst remaining green which corroborates Tesla's mission as mentioned above.

Targeting

Having analysed the various segmentations, Tesla will target to sell Powerange to Tesla car owners whom are generally consumers with high disposable income. The use of EVs for road transport is quickly increasing in the UK, therefore Powerange is able to provide added value to Tesla cars to meet the consumers' expectations by acting as a backup battery to ensure a quick and efficient journey. Powerange offers convenience to consumers by enabling the car to be charged while in motion as opposed to having the traditional method of charging in which the vehicles will have to be at a complete stop.

With the number of pure electric cars increasing in the UK, Tesla have the opportunity to further expand and grow by targeting a variety of consumers. Recent data has shown that plug-in car registrations have gone from 3500 units in 2013 to over 180,000 in 2018 (Lilly, 2018). The escalation of EVs proves the attractiveness of the environmental friendly market. Targeting eco-friendly will help achieve the UK government's “Road to zero strategy”, particularly carbon emissions savings and reducing the dependence on oil (PN 365, 2010). By targeting this segment, can contribute significantly to achieving the marketing objective of increasing Powerange sales.  

Positioning

Tesla faces many competitions in the automotive industry, particularly from BMW and Nissan. However, Tesla's market position is unique as we are not only selling vehicles but also advanced technology. Tesla positions itself as a high-end manufacturer of innovative and conservative EV, hence appealing to the niche market of those interested in luxury or eco-friendly vehicles “without alienating consumers in either segment” (Kmbangera, 2016, p.1).  Additionally, Powerange has a differential advantage as it is the first of its kind with unique functions such as portable charging. These advantages will help Tesla expand in the automotive market.

Marketing mix

Product

Alongside the sharp growth of EV market, both range anxiety and perceived inconvenience of charging become two greatest consumers' concerns regarding all battery powered electric vehicles. More than 60% of residents who would like to buy EV or plan to purchase one in the next year considered the lack of charging station as the top disadvantage of EV (Statista, 2018). In order to eliminate and minimize the shortage of the battery power, Powerange is designed to meet a range of different requirement of EV users. Powerange is a device that can directly charge EV and has its own power storage unit. It provides EV owners with an additional choice of charging without the constraint of location and time. At the introduction stage, Powerange would put more emphasis on its reliability and functionality which will leave a huge room for further growth.

In terms of branding, Tesla currently has two product lines with two combination brand names. One is its EV with luxury, long-range cars' position —— Model S, Model X and Model 3. Another is the extension of the business into energy storage systems which include SolaRoof, PowerWall and PowerPack. Thus, providing an entire product mix from battery range to autonomous driving. In line with a future vision, Powerange would be developed as a complementary product of EV as a link to the Tesla Models and its energy storage systems. Differing from the PowerWall home battery, Powerange could provide customers who bought the Tesla Models with flexibility and a sense of security, to boost the sales of its core products. In addition, Powerange will adopt the large white surface design, a simple modern style with the classic Tesla logo, to represent Tesla's technology and maintain consistency of the signature design of its entire product line.

Price

According to Statista (2018), The Model S is currently the only luxury EV which succeeded in providing both long range and full battery vehicles among its competitors such as NISSAN, Chevrolet and BMW. The unique brand personality and technological superiority enabled Tesla to place high value on all its products in comparison with the industry. Powerange, as a brand-new product with no other alternatives, slow skimming price strategy would be adopted. As an example, Tesla Powerwall, a home battery, currently sells for £6200 per unit. It also practises a price skimming strategy in the market. Due to the centralization of the supply chain, there will not be any mark-up from retailers or wholesalers. Tesla's zero-marketing budget strategy Tesla will also lower the amount of promotional expenditure on Powerange. More on this will be discussed in the place and promotion section.

Nevertheless, in the introductory stage, Powerange will be set in a relative low price-position within its product mix and have promotional pricing strategy against other Tesla energy storage products. As a complementary product to encourage the sales of EV, Powerange will approach Tesla EV with more flexibility and adaptability, benefitting the overall product portfolio. Thus, Powerange will be set up cross-sell associations with the Tesla Model, where customers who buys EV will be suggested by “more recommendations” or “buy one and get one with £100 off”. Once the EV market is saturated, Powerange will more likely to be sell as a standalone product and add more features and functions so that to charge with a full price.

Place

By using B2C and direct distribution approach, Tesla will reduce cost on distribution channel through disintermediation. Although raw materials will be provided by suppliers such as Panasonic (Investopedia, 2018), Powerange will be manufactured by Tesla's Gigafactory. Powerange will then be sold directly to the customers via Tesla official website. Tesla official website is well-designed, user-friendly and easy to navigate. Information regarding product features, price and other associated services such as warranty will be present on the webpage. Direct marketing allows Tesla to interact directly with customers, gaining a better understanding of them to serve them better. Direct distribution channel also provides more control throughout the whole operation.

Like most luxury automobile manufacturers, Tesla is the sole retailer of Powerange and  implements exclusive distribution strategy. Without the risk of losing distributors, more effort and money can be spent on technology investments and improvements.

Similar to Tesla EV, transactions for Powerange can only be completed via Tesla official website and delivery services will be provided. Customers can visit Tesla's brick-and-mortar stores and galleries, which provide a platform for customers to learn about Powerange and other products and technology. Tesla's showrooms also exclusively serve as an education centre instead of a trading place. On top of that, repair and maintenance services are provided at Tesla's service centres.

Promotion

Zero-marketing budget (Rawal, 2018) is Tesla's unique strategy where there will be no spending on advertising. To ensure integrated marketing communication, there will be no commercial and billboards advertising for Powerange as correspondence to Tesla's distinct zero-marketing budget strategy. At the first phase of marketing, the main objective is to create awareness as suggested by AIDA model (Strong, 1925). Pull-positioning strategy will be applied to stimulate public's interest and excitement. Social media and press releases will be an effective way to reach out to the technology enthusiasts and innovators. With the influence and charisma of Elon Musk, the “face” and CEO of Tesla, his introduction and demonstration of Powerange in live announcements and interviews will create controversial news. Target market's awareness will be further raised with the help of press coverage, and hence lead to the second phase to maintain interest.

Viral marketing will be implemented to maintain interest. Besides being low cost, viral marketing also have a potential of great reach. Buzzworthy topic can be further put forth by releasing spectacular videos on YouTube, Facebook and Twitter. Since Tesla does not rely on advertising, public relation is crucial. It is important to create buzzworthy content as press coverage and word-of-mouth is the key to promote Powerange.

The third phase of creating desire is vital and it can be build up through holding events including Powerange demonstration, discount code distributed during showroom events and electric car test drive to attract customers to Tesla's stores and galleries. At the last stage, actual action on buying Powerange will be urged through sales promotion, such as discount referral program, on the online store . This is the key stage that extends the possibility of reaching out to the early adopters and early majority.

Marketing Budget

Tesla uses objective-and-task method to implement zero-marketing budget. Since Tesla''s mission is to “accelerate the world's transition to sustainable energy” (Tesla, 2018), Tesla does not advertise sales, but instead promotes technology for a better future of working towards zero-emission and overall customer experience.

Zero-marketing budget will not eliminate marketing. Marketing is still necessary to ensure the continuous exposure of Tesla and Powerange to the public. In place of spending money on advertising, more effort will be put into social media platforms and public relations. For instance, spokesperson of Tesla, Elon Musk had been active on social medias, interviews and cameo appearances in Iron Man 2, The Big Bang Theory and The Simpsons (IMDb, n.d.). Elon Musk's proactive media presence helps to raise brand awareness.

Conclusion

Powerange is a new innovation associated with several risks due to its uncertainties. As identified in environmental analysis, safety issue will affect Tesla's image badly. The increasing competitors will also reduce Tesla's bargaining power and lower customer's switching costs. A countermeasure could be reducing price through production costs. The most expensive component of EV, the battery, would be manufactured in Tesla's own Gigafactory. Nevertheless, the ongoing construction of Gigafactory (Tesla, 2018) and possible currency fluctuations due to Brexit (News, 2016) leave Tesla in an unpredictable situation. Tesla should make use of control system to ensure corrective action will be taken accordingly.

Elon Musk has brought success to Tesla alongside his popularity. However, over-reliance on his intelligence and fame leads to a codependent relationship which could be Tesla's biggest weakness. Viral marketing might not be tenable since it mainly depend on Elon Musk and buzzworthy topics heavily rely on culture and society trends which changes constantly. Tesla should evolve from zero-marketing budget to a more sustainable strategy.

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