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Repositioning Project

Jordan Bauer, Isaac Dallas, Joey Dones, Nate Cummings

May 1st, 2017


Executive Summary 2
Company and Product Background 3
State of the Market 6
Repositioning Statement 8
Rationale for Repositioning 9

Survey Techniques/Strategies 10
Marketing Mix Recommendations 11
Product 11
Price 14
Promotion 16
Distribution (Place) 18

Conclusion 19
Appendix 21
Bibliography 31

Executive Summary

Tesla is a high end sports electric car company run by billionaire Elon Musk. The

company started in 2003 with an initial goal of making electric cars attractive. In 2012 the

company introduced the model S, a sleek 4 door sedan; this launch solidified the fact that electric

cars can be revolutionary and appealing. Since then the company has been focused on finding a

way to speed up the adoption of electric cars.


This repositioning is focused on taking Tesla's high class, high quality cars and

repositioning these high end sports cars to the middle class. The benefits of retargeting to the

middle class are simple. One, Tesla would be tapping into an untapped market. As of right now

no car manufacturer has figgered out how to produce sleek electric cars for under 20,000, and

Tesla is the closest to being able to pull of such a stunt. As first entrant into the market space,

Telsa would benefit from increased sales and would also be leading the charge of adoption of

electric cars in the world.

To do so the company would need to increase advertising towards middle class

Americans. Increase their number of showrooms, showing the benefits of owning an electric car,

like tax reimbursement. In the following pages we cover the background of Tesla, frame the

current electric car markets and our reposting statement. This is followed by Product, Price,

Promotion and Place. Finally we sum up the findings in the conclusion.

Company and Product Background

Tesla, Inc. is an American auto manufacturer founded in 2003, then known as Tesla

Motors. Tesla is a pioneer of electric vehicles, energy storage, as well as exploring consumer

solar power production through its subsidiary SolarCity. For the purposes of this report, we will

examine Teslas motor vehicle brand.

Tesla vehicles seek to reimagine the all-electric vehicle by producing sleek, high-end,

luxury sports cars that challenge consumers current perception of all-electric vehicles,

considered to be less powerful or as practical compared to their gas-powered counterparts.

Teslas first vehicle offered to consumers was the Tesla Roadster, introduced in 2008 and

discontinued in 2012. At this time, Tesla currently offers the Model S, a 4 door sedan introduced
in 2012, and the Model X, a crossover that began shipping in 2015. Tesla will begin production

of the Model 3, a more competitively priced hatchback sedan, later this year. Tesla vehicles

generally offer a fully-charged range between 200-350 miles highway, depending on model

being driven and other driving conditions, including outside temperature, or whether the cabin

heater is in use. Tesla vehicles also feature self-driving technology, dubbed Autopilot. All

Tesla vehicles, including the Model 3, ship with the hardware necessary to support Autopilot

functionality, and Autopilot is an available feature for purchase on all Tesla cars. Autopilot is

capable of driver assist, in which it will assume automatic control of the vehicle on the road.

Also available is full-fledged self-driving capability, in which a driver just has to tell the car

where to go and the car will do the rest. Autopilot, like other self-driving technologies, are still

subject to regulatory restrictions, which may be pending introduction or vary by jurisdiction.

To facilitate vehicle charging, Tesla buyers are given the option of chargers for their cars;

more powerful chargers with faster charging times come at a premium price. Whats more, Tesla

is in the process of building upon the network of superchargers at stations across North

America. At this time, according to the Tesla website, there are currently 842 supercharger

stations with 5,431 superchargers across the US and Canada, Western Europe, and China.

All Tesla vehicles are priced at the very high end of the market: according to Tesla.com,

the Model S starts at $68,000 up to $134,500, and the Model X starts at $85,000 up to $135,000.

The Model 3, however, will be priced at $35,000 dollars, much more reasonable for the common

car buyer, but still carrying that luxury price. As electric vehicles, a driver who purchases a Tesla

will be eligible for certain tax incentives (depending on the state of registry), including a state

income tax credit up to $7,500 for the purchase and discounted charging rates from power

providers like ComEd. Tesla offers all vehicles with full customization packages, each car being
made to order at the specifications requested by the buyer. Tesla ships newly-purchased vehicles

directly to buyers via flatbed truck.

As it stands now, Tesla is the only major automobile manufacturer that produces only all-

electric vehicles.

State of the Market

Electric automobiles used to be considered a pipe dream, and a product that consumers

would only be able to purchase in the future. Now, thanks to Tesla and other automobile

manufacturers following suit, the future is now. In the late 1990s and early 2000s some of the

major global players in the automobile manufacturing industry such as Ford, Honda, GM, and

Chrysler began to work with the idea and production of electric vehicles. The first vehicles

produced had very small amounts of popularity and were quickly discontinued as the global

market continued to show it was not ready for all electric vehicles. Eight years later, under the

leadership of Elon Musk, Tesla announced and began shipping the Tesla Roadster. The Roadster

was an electric, sleek, luxury coupe which sold at $109,000. Tesla has since moved on from the

Roadster, and introduced the Tesla Model S in 2012 and the Model X in 2015. Since 2012 the all

electric car market has expanded to include the Chevy Volt, Ford Focus Electric, Nissan Leaf,

Volkswagen e-Golf, and the Kia Soul EV. The BMW i8 is currently the only vehicle which is in

direct competition with the Tesla brand as far as luxury electric cars are concerned. This proves

that the electric automobile industry is still in the early stages but certainly growing. The largest

problem facing the industry is the inability to produce and sell cheap electric vehicles in a way
that is cost-effective for the companies.

For these companies to be able to make all electric vehicles compete in the global market,

the companies will need to be able to sell the cars around $20,000. Once the electric vehicles

reach a low enough price benchmark, the middle class will be able to afford to buy the vehicles,

while the companies will be able to continue producing luxury style electric vehicles at the same

time. Currently, the plan for most major automobile manufacturers is to go the same route as

Tesla and BMW; produce an all electric, luxury car and continuously work down from that point

to produce a more affordable and economic model for the general public. Trends show that

manufacturers plan to be producing high-end electric vehicles within the next five years.

For now, electric cars, specifically Tesla remain as more of a social and status statement

than a practical automobile purchase. Tesla perfectly brands themselves as an enigmatic

company with extremely high quality products. Due to the rather large price tag on the Tesla

vehicles, the Tesla cars are primarily seen as a way to display wealth while also owning a car
that is high quality, beautifully designed, and as a way to show advancement of the electric

vehicle. While there is no guarantee that the consumers who already own a Tesla vehicle will

continue to be loyal to the brand in years to come, the company is certainly setting the pace, and

starting miles ahead of all other car manufacturers looking to break into the electric car market.

Repositioning Statement

After looking over Teslas current positioning, we are suggesting Tesla market to

reposition itself towards a wider, consumer-level market: the target market we intend to direct

our focus on consists of middle-class carbuyers who would typically purchase/drive consumer

level brands such as Chevy, Ford, Honda, etc. To achieve this, we plan on making few changes

on the current Tesla product line and existing industry-leading technology, which have set the

standard for the all-electric vehicle market; instead, we intend to make drastic changes to Teslas

marketing and promotional approach, which currently consists of marketing itself; adjust

pricing accordingly to fit the needs and desires of a range of wider income groups; and

reevaluate their present visibility on the road by implementing more dealerships and promotions

across the country.

Rationale for Repositioning

Tesla has a high-tech, sporty product line, but at this time, we believe that Tesla does not

well fit the current image that the typical carbuyer has of an all-electric car. Currently, Tesla is a

high-end luxury car for the upper class, and the common carbuyer has very little interaction with

Tesla vehicles: according to our survey data, 33.9% of respondents claim they only see Tesla

cars infrequently, and 16.9% of respondents claim they never see Tesla cars on the road at all.
However, we believe there is a great deal of interest in the general population in owning a Tesla

car: when asked if it was within your budget, would you consider buying a Tesla vehicle,

69.5% of our survey respondents said yes. This leads us to believe that if Tesla vehicles were

not so prohibitively expensive, there would be a great deal of demand for them. There is also a

great deal of room to grow when bringing Tesla into the mainstream market. The long term goal

of our campaign is to see a Tesla as common as Volkswagen or Toyota. Currently, we believe

there is a prevailing stigma attached to many electric vehicles: vehicles such as the Nissan Leaf

or the Toyota Prius are designed with unique and futuristic looks, and because of this, we believe

many electric/hybrid cars, such as the previously mentioned examples, are viewed as gentle and

inert purveyors of green energy. Pushing Tesla towards the current electric market will start to

eliminate the stigma that electric cars are small and underpowered compared to their

traditionally-powered counterparts. Tesla, on the other hand, produces eye-catching, streamlined,

sporty vehicles. Tesla has one of the best products on the market with their options of electric

vehicles. The more attention brought to the Tesla vehicles, the more public opinion will grow in

favor of all electric vehicles. They are only targeting a select market; with a lower price it can

attract middle class consumers. Tesla, with its proven technology, attractive aesthetic, and

promotional mystique has the opportunity to redefine the all-electric vehicle in the minds of

typical car buyers and capitalize on that untapped potential.

Survey Techniques/Strategies

In order to develop a greater understanding of the position that Tesla currently holds in

the minds of consumers, we developed a survey that was distributed between April 18th and

April 27th. Our research objectives were these:


Develop an understanding of consumer opinion towards Tesla vehicles in terms of

price, quality, aesthetic, etc.

Determine which factors are important to consumers when choosing to buy a car.

Gain insight into consumer beliefs and values regarding fuel efficiency/economy

and carbon footprint with regards to their vehicle.

Gain insight into consumer willingness to buy electric/hybrid vehicles.

Given available time and resources, we chose to utilize a convenient straw poll sample, in

which the survey was distributed via Facebook to willing participants and to friends and family.

Our overall purpose with the questions selected for the survey questionnaire were to fulfill our

above research objectives and assist in making assumptions to adjust the Tesla marketing mix to

achieve our overarching repositioning goal.

We surveyed 59 respondents: 52.5% were male, 45.8% were female, and 1.7% reported

other. 76.3% of respondents were in the 18-24 age range, 8.5% were in the 25-31 range, 5.1%

were in the 32-37 range, 1.7% were in the 38-44 range, 5.1% were in the 45-51 range, 5.1% were

in the 52-58 range.

Marketing Mix Recommendations

The following are our chosen recommendations for changes to Teslas current marketing

mix in order to achieve our repositioning goal, as supported by our survey data.

Product

According to our survey data, many characteristics of Tesla vehicles already draw favor

from consumers. According to our survey data, 67.8% of respondents are willing to buy a
hybrid/all-electric vehicle, and 69.5% of respondents would consider buying a Tesla vehicle.

This bodes well for Tesla in appealing to a wider market. Whats more, Tesla has an easy card to

play on fuel efficiency: when asked to give their opinion on the statement fuel efficiency is

important to me, on a scale of 1 to 5, with 1 indicating strongly disagree and 5 indicating

strongly agree, the mean importance of fuel efficiency to respondents was 4.237. The all-

electric fuel efficiency of Tesla vehicles is the obvious primary inherent advantage that Tesla

vehicles have over the rest of the market. And Tesla cars are some of the most advanced electric-

vehicles that can be bought: the Tesla Model S 100D is the longest-ranged all-electric vehicle

currently in the all-electric/hybrid market, offering a range of 355 highway miles on a full

charge. With regard to range, other comparable vehicles in the all-electric and hybrid class

include the Chevy Bolt, with a highway range of 238 miles, the Ford Focus Electric, with a

highway range of 115 miles, and the Nissan Leaf, with a highway range of 107 miles. Tesla can

easily exploit the ready and willing market who would likely take advantage of a Tesla vehicle

and its obvious fuel economy, as well as the savings associated with it.

Tesla cars are also known for their sleek, sport aesthetics. This is another defining feature

that Tesla cars have. When survey respondents were asked to give their opinion to the statement

I prefer sleek, sporty cars respondents reported a mean interest of 3.389 (on the same scale as

the previous question). The majority of respondents, 32.2%, responded with agree and 16.9%

responded with strongly agree. This indicates that there is at least above-average interest in the

bold sporty aesthetic that Tesla vehicles possess. Other features, however, did not generate the

same enthusiasm.

The Autopilot feature is another feature we considered when making decisions on

changes to the marketing mix. Our survey data reported a generally lukewarm response to self-
driving technology: when asked to give their opinion on the statement I am interested in self-

driving technology, on a scale of 1 to 5, with 1 indicating strongly disagree and 5 indicating

strongly agree, the mean interest for all respondents was 2.729, indicating less than neutral

favor towards self-driving technology and, therefore, Teslas Autopilot. A majority of

respondents, 39%, responded that they disagree with the statement. Only 18.6% responded

with agree, and just 8.5% responded with strongly agree. Since the self-driving feature does

little to garner interest when a car buyer is looking at new cars, we recommend promoting the

Autopilot feature less when marketing towards a wider market, in particular with the Model 3.

This would allow Tesla to appeal to a larger market while not sacrificing critical features that

create excitement. We also recommend offering a variant of the Model S, Model X, and Model 3

not equipped with Autopilot-supporting hardware, in order to offer them as a more consumer-

friendly option in the already highly-developed Tesla product line.

The ideal existing product to appeal to the sentiments expressed in our survey is the

Model 3, which will be offered starting at $35,000 later this year. Though the specs of this new

car are largely speculative at this point, it can be assumed that it will offer lower-end features

such as fabric/pleather upholstery and plastic interior. The Model 3 will be equipped to support

Autopilot functionality, but as previously mentioned, there is not much interest in the Autopilot.

We recommend offering a variant of the Model 3 which does not support the Autopilot feature,

in order to reduce costs and better appeal to carbuyers in our target market.

One final recommendation for price: Tesla offers all vehicles made to order at this time.

This significantly increases the overhead costs of developing even a single car. If vehicles were

mass produced with standardized variations, cost can be driven down and marketing more

affordably to consumers.
Price

Tesla has continuously been at the top of the game as far as the new wave of innovation

in the auto industry goes. Teslas push for constant improvement and state of the art technology

makes the vehicles in the Tesla fleet extremely sought after. The Model S and Model X

combined to total around 76,000 vehicles produced and delivered in 2016, while the companys

newest vehicle, the Model 3, is set to begin production and delivery in 2017. Each of the vehicles

produced come with options to add special features, and customize the vehicles to the customers

liking. Tesla is still a new company in the automobile industry, yet the company has begun to

offer sales of pre-owned vehicles from the Model S and Model X lines. All of the incredible

hardware built into each vehicle, the possible special features which could be added in, and the

made-to-order production style, add up to one significant downside to many consumers: price.

The two current vehicles in production, the Model S and the Model X, start at $69,000 and

$87,000. The Model 3, while not on the market yet, is the most affordable option that the

company has announced, and this vehicle will hit the market with a starting price of $35,000.

Only eight total respondents signified that they would purchase a vehicle in the price range of the

Teslas currently on the market. Also, over seventy-four percent of respondents said that they

believe Tesla vehicles to be either, expensive or too expensive. For Tesla to improve as a

company both of those statistics must change. To do this Tesla would need to lower the price of

the Model 3 or a future model to a price point of $15,000 - $35,000. According to our survey

data, 52.5%t of respondents said they would pay up to $15,000 for a car, 54.2% would spend

$25,000, and 54.2% would spend up to $35,000. As Tesla continues to bring prices down, the

opportunity is massive for overall expansion into the entire automobile industry. Seventy percent

of respondents agreed that if Tesla vehicles were within their budget, they would purchase a
Tesla vehicle. Finally, with the majority of respondents signifying that they may be interested in

made-to-order purchasing of vehicles, Tesla will be able to capitalize as soon as more affordable

options become available. Consumers who may want some of the more extravagant customizable

options in the luxury Tesla vehicles will be able to apply those upgrades to a more affordable

option to find the perfect middle ground between price and luxury for most middle class families.

Promotion

One thing Tesla is lacking heavily in is promotion. They believe being very low

involvement in the media. From our survey, over fifty four percent said they think Tesla is doing

a decent job promoting themselves. Right now, their strategy is being a mysterious luxury car.

This strategy can only go so far, until people forget about them. They know Tesla is a car

company but know nothing about their products. For our survey over half responded saying they

have not seen a Tesla advertisement. Currently, Tesla does not feel it necessary to rely on

marketing for sales. They think having an excellent product is good enough. How do people find

out about your great idea, if no one tells them about it? If the goal to mass market they need to

spread brand awareness with advertisements.

The main outlets we would like to target are sporting events/award shows, social media,

and product placement. Either one of these outlets are fantastic way spread awareness. This is the

quickest way to get to the people then air it during the most watched events nationally. The target

market ages from 25-60 years old are usually technology savvy always on their phones. With a

futuristics style car, social media is a great outlet to target.


Product placement will also be a great outlet. People will connect the Tesla with there

favorite movie or character such as Audi with Tony Stark in the Iron Man movies. This can lead

to toy deals and other ways to get recognition and get our name out.

For our slant we would do two type of commercial campaigns. First one would be a more

serious tone. It should star a celebrity spokesperson showing the advantages of a electric car.

With the style and features of the car you can market to people who are buying it for the look, or

the electric engine. Similar to Melissa McCarthys Kia commercial, but again a more serious

tone. The goal is trying to recreate the Dear Brother advertisement or like Audis daughter

commercial. Something that hits the heart and gives a message. Talking about the environment

and the damage cars are doing yearly is a way to get the message across. Saying there is an

affordable stylish way to help out. The perfect spokesperson for these advertisements would be

Leonardo DiCaprio. He is a huge advocate against global warming and overall environmental

safety. He would be able to give the serious message to the public.

Another advertisement we would put out is more would showcase the style of the car.

This would focus more on the features of the car and be more casual. This will go heavily on the

person with the customizing (if it was a model offering customization), showing each one fits

your personality. It will have upbeat music and lively colors entertaining the viewer. This will

also show the new affordable price.

The advertising objectives are brand awareness, and increase in sales. At the end of our

campaign, we want to see sales go through the roof. According to our survey, about seven

percent only see Tesla vehicles frequently. The goal is to see that number increase, and

eventually see a Tesla every day on the road like you see a Volkswagen. Right now with the low

enrolment in the electric market, the market is up for grabs.


We are not going to focus heavily on personal selling since a lot of orders are online. We

will have dealerships and more areas you are able to test drive and gets a hands on feel. They are

also available to purchase there, so that will rely more on personal selling.

The general substance of our message is that Tesla is the most elite electric car on the

market today. We have to let the general market know about the finest product available.

Distribution (Place)

For most Americans, the car dealership is a familiar sight. This is how the majority of

Americans acquire their cars in the past and today. The dealership model has a few pros and

cons. The major pluses are the customer can test drive the car close to their home and buy it

same day. The buying process allows a sales rep to walk you through the process and help you

decide what car fits your personality best. The drawbacks of a dealership model is the increased

cost and many of the cars in the lot sit outside for months and some time years which wears on

the cars.

Tesla currently operates mostly off of a online ordering system. This system allows

customers to order their car exactly the way they want and have it shipped to their house. This

whole process is done on line allowing for consumers to make the purchase without ever having

to leave the house. This streamlined process helps save the consumer money by not having a

percentage mark up from a dealership. The biggest drawback of the online model is the

consumer does not have easy access to test driving. Right now for a consumer to test drive a

Tesla they have to travel several hours to find a test driving location, and many people have not

even see a tesla showroom: according to our survey, 76.3% of respondents have never seen a

Tesla showroom. The point of distribution boils down to would you buy a $35,000 car online
without test driving a model?. This question is a major barrier for many middle class americans

from considering a Tesla.

Our suggestion is that Tesla places more showrooms around the United States in visible

areas of town. This will help to increase visibility and will help consumers become familiar with

the product before purchase.

Conclusion

The overall goal of our campaign is expand the brand of Tesla to the masses and make be

seen on the road more often. Tesla vehicles are the now with all their futuristic features. Before

we created this plan, Tesla did barely any marketing at all. They relied on their mysterious

image to sell their brand. They are a different electric car that is both stylish and energy efficient.

To make increase sales one way to do this is lower prices. Around 37% said it was too

expensive, so this is our first step. Price is obviously the most immediate change we must make

to market such a high end car to a much wider market.

We also want to have a more aggressive approach for marketing. We want to channel

social media and television outlets to spread awareness: it is important that common carbuyers

know that Tesla isnt just for the rich anymore, it is for everybody interested in driving an

electric car. Having the advertisements show the environmental benefits and also be personable

will add a human element to the company and their brands, and endear them to consumers the

way Toyota and Honda attempt to do. Another thing we are doing is something Tesla does not

currently have are show rooms: it is very hard to get a hands on feel for these cars and it can help

persuade someone into buying it. Going from a quiet laid back luxury car company, we have

decided to go to low cost, aggressive marketing strategy.


Tesla is the industry and world standard for electric cars, but in order to stay on the top of

that hill, Tesla must reenvision what it is. It cannot change the electric car market by selling cars

averaging $80,000. We believe that our plan will bring Tesla to the masses and catapult Tesla to

an electric powerhouse in the automobile market.

Appendix
Presentation
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Fortune. (Jan 22, 2017). Tesla Quietly Introduces Longest-Range Electric Car on the

Market. Retrieved April 27th, from

http://fortune.com/2017/01/22/tesla-long-range-electric-car

Science of Revenue. (Jan 20, 2016). Tesla Model S: The Disruptive Marketing of an Electric

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https://scienceofrevenue.com/2013/01/20/tesla-model-s-the-disruptive-marketing-of-an-

electric-car/

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