Distribution Channels
What are traditional distribution channels within the automotive industry? (3)
(1) Franchised Dealer Model: strong manufacturer control but expensive.
(2) Manufacturer-owned dealership
(3) Independent Sales organisation: Widespread customer reach but weak manufacturer control
How does Tesla use the physical distribution channel format? (4)
1. Direct through stores.
2. New Car Sales Focus
3. Store-front environment
4. Custom-built products
Why does Tesla focus on Direct Sales? (2)
1. Franchise dealers don’t always work in the best interests of the rest of the firm (agent-principle theory)
2. Stores promote brand and the EV concept
What are three advantages and three disadvantages of Tesla’s approach to physical distribution channels?
1. Cost-advantage
2. Control of Stores
3. Low inventory
1. Need for manufacturing and selling expertise.
2. High capital requirement.
3. Cash-flow variability
What is Tesla’s approach to virtual distribution channels?
1. Dedicated e-commerce.
2. Cost: effective, easy-to-create.
3. Strong manufacturer control over price, no negotiations.
What is Tesla’s focus on e-commerce?
1. Visible Calls to Action
2. Conversion-oriented
3. Product focus
4. Well-structured
5. Major distribution channels
What are three advantages to Tesla’s focus on e-commerce?
1. Reduction in selling costs through online sales.
2. Simple ordering experience with a higher degree of customisation.
3. Better customer service
What are three distribution problems that Tesla is facing?
1. High-cost: Cost of supply chain until 2018 is $10 billion.
2. Legal: Legal complications and restrictions in some US states of Tesla’s distribution model.
3. Long lead times: Long delivery time manifests itself in a 2 month waiting period.
What are three solutions to the distribution problems that Tesla is facing?
1. Mixed distribution system
2. If time is vital, sacrifice costs and quality.
3. Outsource manufacturing to improve efficiency.
What are two characteristics of Tesla’s supply chain?
1. Degree of control: Flexibility and control at the expense of higher costs.
2. Economies of scale: e.g. Gigafactory resulting in production costs being lower because of scale.
Customer Relationships
What are characteristics of the market segment that Tesla targets? (3)
1. Tech-savvy
2. Entry-level luxury car customers
3. Eco-friendly customers
What are characteristics of the typical potential customer profile? (5)
Middle-aged male.
Large, expensive purchases.
Buy in-store and offline.
Aesthetics, luxury and electric cars matter.
Influenced by the economy, the environment, politics and latest trends.
What is Tesla’s marketing strategy?
1. Very low marketing budget
2. Own + manage their own relationships
3. Community is strongly attached to the product/brand.
What are the three facets of Tesla’s customer strategy
1. Getting Customers
2. Keeping Customers
3. Growing Customers
What are elements of ‘Getting Customers’? (3)
1. Eco-friendly company
2. Use of mobile/web relation strategies
3. New tech from a new company.
What are elements of ‘Keeping Customers’? (3)
1. Open Communication
2. Transparency
3. Constantly innovating
What are elements of ‘Growing Customers’? (3)
1. Referrals
2. Up-selling
3. Cross-selling
What is Tesla’s balance between Customer Acquisition Costs (CAC) and monetisation?
Implement effective strategies while keeping customer acquisition costs very low – e.g. free servicing and software updates w/new features.
No CMO or marketing budget.
How has Tesla created such strong customer loyalty?
Has strong values and culture, it follows the pattern of:
1. Creating an enemy (combustion engines)
2. Establishing an emotional connection w/customers (by solving earth’s energy problems)
3. Being transparent (strong social media presence
What are three customer benefits?
1. Speed
2. Safety
3. Technology
What is Tesla’s wider ecosystem and how does Tesla use it to reinforce customer demand?
Other products include PowerWall and Panel which create energy and are compatible with the Tesla vehicles.
What are three future threats that Tesla must address?
1. Driverless cars
2. Competition
3. Price
What are future strategies Tesla might be able to implement? (3)
1. Reduce time lag between order + delivery.
2. Cost-reduction initiatives.
3. Global sales expansion