TESLA'S UNIQUE BUSINESS MODEL
How has Tesla challenged the traditional business model?
On paper, Tesla’s business model makes no sense. First of all, unlike other large car companies and corporations, they have very little advertising. In fact, Tesla has no advertising department and no Chief Marketing Officer. In 2014 Alexis Georgeson, a Tesla spokeswoman, their equivalent of a PR agent said:
“Right now, the stores are our advertising. We’re very confident we can sell 20,000-plus cars a year—without paid advertising. It may be something we’ll do years down the road. But it’s certainly not something we feel is crucial for sales right now.”
These “stores” that Georgeson refers to have also been integral to Tesla’s success. Instead of selling at traditional dealerships like most automobile companies, Tesla’s cars are displayed in showrooms at malls around America, then ordered online through the Tesla website.
A Tesla showroom in a Dallas mall
This unique business model would not work for any other company. Tesla is only able to rely on word-of-mouth marketing and showrooms because they have built up a fierce brand loyalty among their cult-like consumer base.
So how does Tesla create this brand loyalty?
Psychology!
Tesla’s rise to power is based on two different psychological factors
The Creation of an Enemy
Henri Tajfel, renowned cognitive psychologist, discovered that by establishing minor distinctions between two groups of people he could artificially create loyalty within the groups. Tesla’s “enemy” is not one brand, but a group of them. Acting as the antithesis to all large auto corporations and fuel burning vehicles, Tesla offers its consumers an escape from the conventional.
Emotional Connection
Tesla has established a false emotional connection with its consumers by frequently communicating with its buyers through social media. This makes people feel like Tesla is acknowledging them directly, thereby fostering a seemingly “personal” connection.
Check out this video with George Blankenship, Tesla's VP of Sales and Ownership Experience, to learn more about Tesla's marketing strategy and business model!