Tesla’s $ 0 ad spend attracts consumers and investors everywhere
Tesla Motor’s commitment to a $ 0 advertising budget is no secret to consumers or investors. The aspiring car company has no advertising team, no CMO or advertising agency.
Nevertheless, Tesla is one of the hippest and most sought after automobile brands in the automotive industry and is building a reputation that competes with its traditional competitors without the help of advertising.
Let’s take a look at Tesla’s advertising and marketing strategy (or lack thereof) to better understand brand recognition in the automotive industry.
1.Reference Program 1: Fair Double Face Award
Tesla started with the simplest possible reward structure:
New customers received $ 1,000 Tesla credits
Defenders got $ 1,000 Tesla credit
Tesla went into the benchmark with a simple, proven and genuine reward structure for his first foray into the benchmark.
If you are trying to market by recommendation for the first time, it makes no sense to try to reinvent the wheel. It’s best to start the program and see how customers respond.
On the Extole platform, we found that rewarding lawyers and new customers is the best way for most companies to generate more sales with referrals.
It gives followers an incentive to share, but does not feel selfish or transactional, as their friends also receive a prize.
With Tesla’s average retail sales of around $ 85,000, Tesla has achieved a 40x return on each benchmark sale.
2.Reference Program 2: Rewarding the Greatest Lawyers
After a successful first referral program, Tesla adapted the reward structure of the second iteration to his fanatical fans:
$ 1,000 loan for newly sponsored clients
The most successful advocates in each region (North America, Europe and Asia) received:
A new Tesla P90D Model S (priced at around $ 130,000)
A wall charger for the home (with a price of about 3,000 USD)
A trip to the inauguration of Tesla’s Gigafactory in Nevada
The main defender, known by his handler Wei70644, convinced the unbelievable number of 188 people to buy a Tesla.
Wei alone brought Tesla $ 16 million for a price of about $ 135,000. There is a return of 119x generated for each sale.
Not only that, but its remarkable references have further enhanced the Tesla brand by highlighting the passion of its customers.
3.Reference program 3: The draw
Tesla’s third reference program focused on the experience as a reward for the defender:
New customers received $ 1,200 in Tesla credits
Defenders participated in a raffle to win a visit to the SpaceX headquarters in Los Angeles
The SpaceX tour perfectly highlights Tesla’s unique brand identity. Remember, Elon Musk does not just sell cars.
It’s about selling a vision of the future where everyone can circulate without emissions in vehicles and travel to other planets at will.
A visit to SpaceX is an opportunity to take a look and make it a tempting reward for Tesla customers.
The random element of the raffle also prompted more customers to refer to the new program.
As prices were based on the number of referrals, the program was dominated by superfans who treated it as a full-time job. This program was Tesla’s way of giving his customers more informal, but still very dedicated, a reason to recommend.
4.Reference Programs 4 and 5: Reward Levels
The last two Tesla reference programs offer proponents different rewards based on the number of people they refer to. The two programs are very similar, so let’s analyze the benefits of the current program:
New customers will receive $ 1,000 in Tesla credits
Automatic entry into a raffle to win a Ludicrous P90D Model X.
After ten references: invitation to the next Tesla presentation (similar to the opening of the Gigafactory)
After five references: Tesla tires are generally not for sale
After three references: A Tesla Owners Jacket is not available for general purchase
After two references: A Tesla Canvas bag is not available for general shopping
There is a clear topic here. Besides the car that goes to the winner of the raffle, all these prizes are unique.
They are only available to lawyers, including other Tesla customers. Send a clear message that Tesla values his advocates for the maximum of everyone in their very active community.
Everyone can win with respect
Too many marketers see the reference as a simple and cheap way to spread word of mouth. But Tesla has already destroyed it by word of mouth before building a reference program.
In this way, Tesla has promoted the existing impact and made it an integral part of the brand and growth strategy.
That’s the crucial lesson:
If you have passionate customers who really care about your product and your brand, you have everything you need to gain a reference. You just have to experiment with different stimuli and see what the best word of the mouth is.
Tesla production numbers
Although Tesla is a household name and a global brand, its production capacity is still limited. Tesla produced only 84,000 vehicles in 2016, compared to Volkswagen’s 10.5 million vehicles and more than 6.5 million vehicles.
Tesla’s low production is probably due to the introduction of a brand new high price product.
That said, as Tesla completes its new plants and uses its newest and most affordable car, it is expected to increase the total number of annual Model 3 vehicles.
Tesla ad spend of $ 0
The differences between Tesla and other car manufacturers are even more pronounced when comparing advertising strategies. Since its inception, Tesla has spent $ 0 on traditional advertising.
On the other hand, its competitors spend billions on commercials, billboards, digital banners and more.
The US brands Ford and GM spend 4.3 billion US dollars and 5 billion US dollars, respectively. The German luxury brand BMW has spent more than 3 billion US dollars.
Tesla market capitalization
However, the feeling that Tesla has an extraordinary presence in the automotive industry does not stop at its advertising budget. It also shows stellar (and worrying) numbers in market capitalization.
At the end of the first quarter of 2017, Tesla’s market value reached $ 51.6 billion, surpassing its US competitor Ford by $ 44.9 billion, despite losses and limited production.
Over the two-year period between the first quarter of 2015 and the first quarter of 2017, all car brands except Tesla recorded a negative change in market capitalization. As Ford’s market capitalization fell by more than 20%, Tesla’s market capitalization increased by about 45%.
What does this mean for the automotive industry?
Despite the small number of productions, bad sales and constant losses Tesla remains a hit with investors. Where does the trust of investors come from?
While some of them may be the unique position and product of Tesla in the automotive industry, some of them could also be attributed to the organic conversations and enthusiasm for the Tesla brand.
Tesla is not just another car company, but a brand that represents innovation and an absolute sense of innovation in an industry that requires disruption.
Customers and car enthusiasts are excited about Tesla products, which means Tesla has little to do with brand awareness.
It is not yet known if Tesla can keep his ad spending at $ 0, but right now consumers are keeping Tesla talking and making sure it’s never far from thought or headlines.