Tesla Motors: Pricing, Distribution and Integrated Communication Strategies - Implementation Plan
The strategic focus of Tesla Motors Inc. marketing plan is on acquiring and increasing its market share in the mass automobile market. In order to achieve this objective, the proposed pricing strategies include penetration pricing (targeting entry into the mass market) and premium pricing (retaining the market share for its current high-end cars). The proposed distribution strategy for Tesla is exclusive distribution, which entails using a single outlet to distribute the product/service in a given geographical area. The distribution strategy is effective for highly priced products and poses the need for the intermediary to emphasize the details during the sale of the products, which is consistent with the product portfolio of Tesla. The integrated communications strategy will comprise of advertising, sales and customer service, trade shows, public relations, and the use of corporate social responsibility.
Development of Pricing Strategies Aligned with Specific Strategic Focus
For Tesla Motors, the strategic focus of the marketing plan is on acquiring and increasing its market share in the mass automobile market across the globe. Currently, the strategic focus is on producing high-end and expensive automobiles targeting affluent customers. As a result, currently, Tesla Motors is targeting customers who favor high-end cars that are eco-friendly. Owing to the high price of these high-end cars produced by Tesla, it is relatively challenging for Tesla to target the mass market. One of the ways through which Tesla can effectively reach the mass automobile market is through its pricing strategies. Armstrong and Cunningham (2012) consider pricing as the most important component of the marketing mix since it is the only component that generates revenue, whereas the remaining components comprise variable costs. Depending on the goals of the marketing plan, an organization can make use of various pricing strategies for their product/service offering. For instance, the pricing strategy can be used for maximizing profitability, used to defend an existing market share from competitors and new entrants, increasing the market share, or gaining entry into a market (Kotler & Keller, 2012). In line with the strategic focus of Tesla, the pricing strategy adopted ought to gain entry into a new market (mass automobile market). In order to target the mass market while still retaining its market for high-end cars, Tesla Motors should use both low cost and differentiation in its generic strategies in an attempt to achieve a competitive advantage in the global automobile market. In line with the strategic focus, Tesla should use a broad market scope that targets almost every consumer in the market that intends to buy an environment-friendly automobile.
Talking about the strategic focus of Tesla, the suitable pricing strategies are penetration pricing (targeting entry into the mass market) and premium pricing (retaining the market share for its current high-end cars). Penetration pricing involves setting initially the price of a product/service at a lower level when compared to the eventual price with the main objective of attracting new customers. According to Cleveland, Papadopoulos, and Laroche (2011), penetration pricing strategy is based on the assumption that the lower price will play a significant role in influencing customers to switch to the brand being offered. In addition, this pricing strategy is normally linked with a marketing goal of growing the market share rather than increasing profitability in the short term, which is consistent with Tesla's strategic focus. After the market share has been gained, the price can be increased. The rationale for the choice of the penetration pricing for targeting the mass automobile market is that high market penetration is possible; thus, it results in cost control and reduces pressures associated with cost reduction leading to increased efficiency; and that prices can utilize the principle of marginal cost pricing leading to economic efficiency (Kerin, Hartley, & Rudelius, 2012). The only challenge for the case of Tesla using penetration pricing strategy is that it creates long-term price expectations among customers as well as customers' perception of the company and the brand. Consequently, this increases the difficulty of raising prices in the long term. It has also been argued that penetration pricing strategy can only attract customers looking for bargains, who are most likely to switch brands when the prices are raised. Nevertheless, there are a number of approaches that Tesla can use to counter these challenges. With regard to the price expectations and perceived brand image associated with low prices, Tesla can opt to use an initial market price that equals its long-term price; however, it can make sure of sales promotions. As a result, the apparent price points may be high despite the fact that the actual price for the product is low. With regard to the issue of penetration pricing attracting only those who favor bargains, Tesla can opt to gradually increase the price of its automobiles in a manner that customers will hardly notice the upward changes in prices. Apparently, this can be used to combat the switching effects associated with a large increase in price.
The premium pricing strategy will be used by Tesla to retain its market share in the high-end automobile market for customers who favor luxury and environment-friendly cars. Premium pricing involves keeping prices high with the main objective of insuring that customers have favorable perceptions regarding the product and the company (Kerin, Hartley, & Rudelius, 2012). For Tesla, the prices for its high-end eco-friendly cars are high. The company has attributed these high prices to the high costs of production associated with electric cars. In addition, the luxury aspect of cars produced by Tesla has attributed to the high prices. In this regard, this pricing strategy ought to be retained in order to insure that the perceived favorable perception of high-end buyers is not eroded by the low prices because of penetration pricing targeting the mass automobile market. Therefore, a combination of both penetration and premium pricing strategies will facilitate the achievement of Tesla's marketing goals.
Development of Distribution Strategies Aligned with Strategic Focus
Distribution involves insuring the availability of the product/service being offered to end consumers for consumption or use. Distribution can be done using indirect means (involving intermediaries) or direct means. Product distribution usually involves using channels, which refer to groups of interdependent organizations or intermediaries that take part in insuring that end-users can access and use the product. Intermediaries can be merchants who purchase and resell the product or brokers (agents) who act on the company's behalf. In this regard, Tesla Motors will use agents. Another attribute of distribution is the number of channels that are needed between the end consumer and the producer, which starts from zero (no intermediaries) and is usually used in direct marketing. There are three types of distribution strategies that any organization can use, which can be determined by the type of product/service being offered. They include intensive distribution, exclusive distribution, and selective distribution strategies (Cleveland, Papadopoulos, & Laroche, 2011). Intensive distribution entails stocking the product in most outlets; this distribution strategy is suitable for basic supplies such as beverages and food, among others. Intensive distribution has the main goal of insuring saturation coverage through making use of all outlets that are available. In such strategy, the sales volume is directly proportional to the number of outlets. Selective distribution involves relying on a small number of intermediaries in distributing the product. The distribution strategy has the primary advantage of the company selecting the best-performing outlets and training them. According to Weinstein (2013), selective distribution is optimally effective when customers are more likely to &"shop around" in the sense that they prefer a specific brand so that they are likely to search for that brand in the supplying outlets. Exclusive distribution entails using a single outlet to distribute the product/service in a given geographical area. The distribution strategy is effective for highly priced products and poses the need for the intermediary to emphasize the details during the sale of the products. Weinstein (2013) considers exclusive distribution to be similar to selective distribution, albeit in an extreme form. When a company uses exclusive distribution, outlets only stock products from that particular company. An exclusive distribution strategy is the most appropriate form of distribution for Tesla since the company intends to exercise control over aspects such as the price set by intermediaries, service policies, credit inventory, and promotion efforts. In addition, Tesla intends to gain from aggressive selling adopted by these exclusive outlets. In addition, exclusive distribution will provide Tesla with an opportunity to control its brand image.
Development of Integrated Communication Strategies
Integrated marketing communications involves applying consistent brand messaging using a mix of both conventional marketing channels and various promotional methods in order to complement one another. According to Cleveland, Papadopoulos, and Laroche (2011), integrated marketing communications involves using well-coordinated promotional methods to achieve the marketing campaign objectives. In fact, this entails acknowledging the strategic roles of communication disciplines such as sales promotions, public relations and advertising plays in guaranteeing clarity as well as enhanced impact. Through the integration of various tools, marketers can reach their target audience in an effective manner. According to Armstrong and Cunningham (2012), integrated marketing communication is based on the power of public relations and advertising and the utilization of novel online tools for communication such as social media. In the case of Tesla, the integrated marketing communications strategy will comprise advertising, sales and customer service, trade shows, public relations, and the use of corporate social responsibility. Advertising as a component of the integrated marketing communication will have the main objective of encouraging and persuading the target audience to purchase the offerings by Tesla. The advertising efforts that Tesla will use include broadcasting/mass advertising using television, print and radio advertising; outdoor advertising using billboards; and online advertising using blogs and newsletters. Sales and customer service will entail offering service to consumers prior to, during and after buying in order to enhance customer satisfaction. Moreover, some of the initiatives under customer and sales service will include offering sales materials such as product presentations and brochures, customer support, and after-sales service. Public relations entails the management of information dissemination between members of the public and organization. The public relations initiatives that Tesla will incorporate in its marketing plan will comprise news releases and involvement in events and charities. Corporate social responsibility will also form a crucial component of Tesla's integrated marketing communications and comprise monitoring and reporting Tesla's performance with regard to its compliance with regulations and ethical business practice (Cleveland, Papadopoulos, & Laroche, 2011). Some of the corporate social responsibilities that Tesla will engage in include the focus on environmental protection, corporate philanthropy to charities, and the use of ethical business practices. Another aspect of integrated marketing communications will entail the use of social media, which offers opportunities that Tesla can use to increase the awareness of products and directly communicate to the masses at reduced costs.
Development of Implementation Plan
After developing a marketing plan, steps can be taken to implement the initiatives outlined in the marketing plan. The first step in the implementation plan will entail communicating the marketing plan to employees. When communicating the marketing plan to employees, it is imperative to insure that they have an understanding of how the marketing plan will aid in the achievement of the company's business goals and objectives. It is also crucial to ascertain whether employees have the skills needed for the implementation of the marketing plan (Cleveland, Papadopoulos, & Laroche, 2011).
The timeline for the implementation of the marketing plan is one year. Nevertheless, it is imperative to note that this market plan is a living document; as a result, it will be continually reviewed and revised quarterly to track aspects such as the appropriateness of the marketing tactics and the response of the target market, among others. It is also imperative to devise contingency plans, refine the marketing goals and objectives, and incorporate new initiatives in the marketing plan (Weinstein, 2013).