Marketing Issues of Tesla

Marketing Issues of Tesla

Introduction

According to Hofacker and Belanche (2016), the marketing manager of an organization must be responsive and adaptive to the ever-changing business environment. Challenges in marketing stem from the growing global competition, changes in market communication, and the influence of social media on marketing to influence the buying behavior of customers in the digital age. The increased competition of business organizations in the market requires the marketing department to design ways of solving marketing challenges. Tesla is one of the companies that is facing several marketing issues. Founded in 2003, Tesla is one of the best electric car manufacturers in the world. Tesla released its first electric car in 2008, and ever since, the company’s marketing share has been growing. The aim of manufacturing electric vehicles was to prove that they are superior that fuel cars in terms of comfort levels, efficiency, and speed (Hofacker & Belanche, 2016). Several marketing challenges are facing Tesla in Australia. First, Tesla relies on the use of social media platforms to market their products. However, rival firms like BMW secure huge budgets for marketing initiatives in Australia. With zero spendings on marketing, Tesla fails to compete effectively in terms of customer acquisition in the market. Lack of strategic marketing strategies is one of the issues that many organizations face (Resnick et al., 2016). Tesla lacks strategic marketing. Competitors like Hyundai, which have the highest market share in Australia, pay for their marketing, manufacture quality cars, and distribute them at low prices to acquire more customers. Poor market positioning is another challenge facing Tesla. Mobile connection and driver assistance is no longer a unique competitive strategy for Tesla. Competitors like Mercedes-Benz have adopted the technology, and they have even added a hybrid system. This positions them better than Tesla in the Australian market.

Marketing Objectives

Primarily, marketing objectives set out what a business is trying to achieve in the market. Specific, measurable, attainable, relevant, and timely (SMART) objectives define the marketing project of an organization (Chaudhry & Sharma, 2018). Specific objectives must specify and describe the intended results after a business adopts new marketing strategies. Measurable objectives are the objectives that can be reached by an organization, and their success is evident from increased customers in the market. According to Knutson (2017), achievable objectives require a reasonable amount of effort the stretches to the capabilities of the company. Realistic objectives take into account the skills or funding an organization can involve enhancing marketing. Every marketing objective must have a deadline in order to measure and evaluate its success.

In response to the three marketing challenging issues, which include a lack of marketing budget, poor market positioning, and poor strategic market, Tesla decided to make three SMART objectives. The first objective to respond to the underlying marketing challenges was to invest about $1,000,000 on intensified marketing within seven months. As mentioned earlier, Tesla did not budget any money for intensive marketing. Instead, the company relied solely on its social media platforms to market their products in Australia. As such, Tesla faced high competition from competitors like BMW, which spent massive amounts of money in intensive marketing to promote brand recognition. The amount could be used to pay for brand promotions, contract influencers, and pay for sponsorship in order to increase the awareness of the company’s products.

This objective was SMART for various reasons. The objective was specific in terms of stating the amount of money to be budgeted for marketing. The company set the time frame that they were to implement the objective and after which they could measure its success. Specific objectives are important as they help an organization to understand what exactly they have to do. When a time frame is set, the organization’s management and employees are aware of the time limit. They have to accomplish the set objective (Resnick et al., 2016).

Another SMART objective made by Tesla was to raise brand awareness of the company, especially on the Model S. Model S sedan is a vehicle with high body strength, a strong battery, and its chassis provide adequate collision protection for the passengers and drivers. In the effort to improve its marketing, Tesla focused on creating awareness of its brand and convincing customers why their car models, especially the ModelModel S, was a suitable product. The company had to create awareness of its models to make sure that customers understood why their products stood out from the competitors.

In brand awareness, as noted by Knutson (2017), companies must prove to the customers that their products are worthy. Customers must be convinced why they should purchase a specific product from one organization and leave a substitute from another organization. Another critical marketing objective that was made by Tesla was to attract a client base of about 200 new clients every month. With the significant investment and brand awareness, Tesla aimed at increasing its customers every month. It can be argued that this objective was attainable and relevant. By investing $1,000,000 on intensive marketing, Tesla would receive an increase in the number of customers since more people would be aware of the company and the car models they offer.

Segments, Target Market and Positioning

A market segmentation strategy helps an organization limits its scope to the set of people that it is most likely to serve. This means that the marketing focus of the business should be centered on the identified customers in order to promote growth (Chaudhry & Sharma, 2018). Market segmentation is one of the strategies that organizations use to communicate vision, mission, and the products they offer to the selected scope of customers. There are many ways in which a company can segment its customers. Customers can be segmented based on psychological, geographic, demographic, or behavioral aspects.

Tesla is a luxury vehicle manufacturing vehicle meaning that its focus is on people who earn a significant amount of income in order to maintain a luxurious life. In addition, Australia is a developed country. This means that customers of electric cars are people with high economic capabilities. To increase its sales in the market, Tesla should segment their focus on middle-income customers who are capable of purchasing their vehicles. Australia is a geographical area that is habited by a higher population of middle-income earners (Katsikeas, 2019). Middle-income earners are people who can afford to purchase luxury cars. Unlike focusing their scope of low income and high-income earners who may not afford and may not be interested in electric cars respectively, segmenting their focus on middle-income earners is a strategic way to acquiring more customers in the Australian market.

In addition to segmenting its focus on the middle-income earners, Tesla should establish its target market. According to Katsikeas (2019), establishing a target market is crucial because it enables an organization to direct its resources to the customers with high potential for increased growth, interest on the product, and enhanced loyalty to the brand. Tesla targets people who have a high annual income and people aged between 20 years to 40 years old. Establishing a target market within this specified demographic is important since their probability of being interested in the products that the company is offering is high. Moreover, people between 20 to 40 years old are tech-savvy, meaning that these are people who are well informed about the new technology. They are people who understand that the motor industry under a revolution from fuel cars to more efficient electric cars (Chaudhry & Sharma, 2018).

In marketing, a positioning map helps marketers to compare their products and services with those of the competitors (Resnick et al., 2016). For the case of Tesla, the company is better placed in comparison to other vehicle production companies since it produces cars that are ecofriendly. Electric cars do not produce exhaust emissions. This protects the environment. Since there are minimal emissions of carbon dioxide to the environment, electric cars are considered ecofriendly. Some of the models produced by Tesla are quality products because they provide adequate collision protection for both passengers and drivers. In addition, Tesla cars are sold at prices that are affordable to the customers. All factors combined, Tesla is better postponed in the market, and it is likely to receive more clients in the future.

Marketing Mix

According to Massingham and Pomering (2017), a marketing mix refers to a set of factors that an organization uses to grow its products in the market. When implemented effectively, the 4Ps of the marketing mix can be effective in succeeding in the business in a competitive environment.

Product

Before starting a business, an organization must know what it intends to sell. In product development, a company must design and produce quality products that satisfy the desires of the customers. In production, quality is key (Wu & Li, 2018). Producing and supplying quality products to the market helps in building brand reputation and enhances customer loyalty. Organizations must produce or manufacture various products in order to allow customers freedom of choice. Tesla has three car models. Model X is a fascinating product since it can accommodate seven people at a time, and it has air filtration systems to allow fresh air in the car.

Model 3 can accommodate five people at a time. It only takes 6 seconds for Model 3 to accelerate from 0 to 60 miles/hr. The ModelModel has an automatic driving function, and it can drive at least 215 miles per charge. On the other hand, the ModelModel S sedan has a strong body structure as it provides adequate collision protection for passengers and drivers. It is evident that Tesla provides its customers with a wide variety of products to choose from. Diversity in the production of products plays a great role in improving the satisfaction of customers leading to enhanced market performance.

Promotion

Promotion, as defined by Massingham and Pomering (2017), refers to the process of communicating the values and beliefs of a company’s products and services to the customers. Promotion is done using various methods. Businesses can promote their products and services through advisements, face to face, sales promotion, and social media platforms. By promoting its products, Tesla will create awareness of its products in the market. As mentioned earlier, Tesla will invest about $1,000,000 in intensive marketing of their products. When customers budget for marketing, they are better placed because advertising creates awareness of the products to the customers.

For instance, Tesla could promote the ModelModel S sedan to the market. Model S sedan has been identified as an electric car that offers protection of drivers and passengers whenever the car is in a collision. Promoting this ModelModel will create awareness of the safety and convenience of the car. According to Massingham and Pomering (2017), customers are inclined to quality products. The promotion will help in enhancing the performance of Tesla in the market since more customers will purchase their car models. Also, the promotion will help in developing acceptance of Tesla’s car models in the market.

Place

Wu and Li (2018) note that place focuses on the location, distributions, and ways of delivering products to the customers. The place of operation is one of the factors that determine the success of a business. If a business is placed in a wrong geographical area, it is likely to incur losses or even the risk of closure due to the lack of customers. If a business is located in a prime location where many customers can access it, the probability of success of the business is high (Wu & Li, 2018). The geographical location of Tesla in Australia is an added advantage to its success.

Even though the physical location of the company may not be accessible to all customers in the country, it would be imperative for Tesla to establish an online shop. Operating online is a strategy of ensuring that customers are not left out in learning about the various models sold by the company and even purchasing them. Tesla should develop a delivery program to ensure that customers who purchase cars online receive these models at the right time and with the right quality. Operating in Australia exposes the company to diverse customers. Moreover, delivering cars purchased online to the customers is a strategy of creating customer satisfaction and promote the overall growth and performance of the company.

Price

Simply, price is the amount of money that customers pay to purchase a product. In Tesla, the company observes the factor of price. In production, the company manufacture three models of cars at different prices. This is to impact the buying behavior of the entire population. Tesla produces a small number of high priced vehicles, a slightly higher number of mid-priced cars, and a sustainable number of low-priced cars. Price is a factor that all businesses should consider as setting high prices of products reduces the number of customers. In 2017, Elon Musk, the CEO of Tesla announced that the starting price of Model 3 cars was $35,000 which was much lower than the starting price of $80,000 for Model S and X. Setting different prices for their products is a strategy that Tesla uses to compete in the market as the company has cars for bot low-income and high-income earning customers.

Conclusion

There are several marketing challenges facing Tesla in Australia. Tesla relies on the use of social media platforms to market their products. However, rival firms like BMW secure huge budgets for marketing initiatives in Australia. With zero spendings on marketing, Tesla fails to compete effectively in terms of customer acquisition in the market. Lack of strategic marketing strategies is one of the issues that many organizations face. Tesla lacks strategic marketing. Competitors like Hyundai, which have the highest market share in Australia, pay for their marketing, manufacture quality cars, and distribute them at low prices to acquire more customers. Poor market positioning is another challenge facing Tesla. Mobile connection and driver assistance is no longer a unique competitive strategy for Tesla. Competitors like Mercedes-Benz have adopted the technology, and they have even added a hybrid system.

In response to the above challenges, Tesla should develop a marketing plan. A marketing plan will benefit Tesla in the following ways. First, Tesla will meet the demands of the target customers in Australia. The current and potential customers in Australia need to be updated about the company and the changes they make in production. Relying on social media alone cannot serve the entire customer base in the country. Hence, investing in a marketing plan will be an important strategy towards meeting the needs of the customers.

Second, developing a marketing plan will help in building the brand of Tesla. A marketing plan involves a well-researched and comprehension of the market. In this effort, the organization will understand where to focus its attention. Marketing the company to the customers will help in building the brand of the company, and it will also enhance brand recognition. Branding and brand recognition are aspects that Tesla needs in order to succeed in a competitive business environment in Australia.

Developing a business plan will ease access to new opportunities. A market plan is essential in developing new grounds of operation. When a company expands its marketing initiatives, it discovers new potentials, or it acquires a new market share. Therefore, by developing a marketing plan, Tesla will benefit from unutilized customers in Australia, which means that the market share of the company will increase. Lastly, developing a marketing plan will help in boosting Tesla’s competitiveness. Tesla will segment and establish a target market, after which they will focus their attention. Focusing on a specific segment of customers will help Tesla in building its competitive advantage since the company will be aware of the needs of its customers, and they will work towards satisfying those needs.

References

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Hofacker, C. F., & Belanche, D. (2016). Eight social media challenges for marketing managers. Spanish Journal of Marketing-ESIC, 20(2), 73-80.

Katsikeas, C. S. (2019). Publishing in international marketing: challenges, opportunities, and guideposts. In How to Get Published in the Best Marketing Journals. Edward Elgar Publishing.

Knutson, B. J. (2017). The foundation of the twenty-first-century hospitality marketing strategy. In Routledge Handbook of Hospitality Marketing (pp. 93-102). Routledge.

Massingham, P. R., & Pomering, A. A. (2017). Introducing Knowledge Management to the Marketing Mix.

Resnick, S. M., Cheng, R., Simpson, M., & Lourenço, F. (2016). Marketing in SMEs: a “4Ps” self-branding model. International Journal of Entrepreneurial Behavior & Research.

Wu, Y. L. & Li, E. Y. (2018). The marketing mix, customer value, and customer loyalty in social commerce. Internet Research.