TESLAMOTORS
The Tesla Model TRX
Tanja Kuehni, Elisa Lokmagozian, Andrew Mirto, Erik Sharp
Bus 306-02
December 8, 2013
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Contents
Executive Summary ........................................................................................................................ 4
Situation Analysis ........................................................................................................................... 6
Market Summary ............................................................................................................................ 6
Market Analysis .............................................................................................................................. 7
Demographics.............................................................................................................................. 7
Geographics ................................................................................................................................. 7
Psychographics ............................................................................................................................ 7
The Market ...................................................................................................................................... 8
Market Needs ........................................................................................................................... 8
Market Trends.......................................................................................................................... 9
Market Growth ...................................................................................................................... 10
SWOT Analysis ............................................................................................................................ 10
Strengths ................................................................................................................................ 10
Weaknesses ............................................................................................................................ 11
Opportunities ......................................................................................................................... 11
Threats ................................................................................................................................... 12
Competition................................................................................................................................... 13
Product Offering ........................................................................................................................... 14
Keys to Success............................................................................................................................. 15
Critical Issue ................................................................................................................................. 16
Marketing Strategy........................................................................................................................ 16
Value Proposition ...................................................................................................................... 16
Mission ...................................................................................................................................... 17
Marketing Objectives .................................................................................................................... 17
Financial Objectives...................................................................................................................... 17
Target Markets .............................................................................................................................. 17
Demographics............................................................................................................................ 18
Household Income ................................................................................................................. 18
Gender ................................................................................................................................... 18
Family Orientation ................................................................................................................. 18
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Geographics ............................................................................................................................... 19
Outdoor Oriented Regions ..................................................................................................... 19
Psychographics .......................................................................................................................... 19
Use of the Truck .................................................................................................................... 19
Upper-Middle Class ............................................................................................................... 20
Positioning .................................................................................................................................... 20
Strategies ....................................................................................................................................... 21
Marketing Mix .............................................................................................................................. 21
Pricing ....................................................................................................................................... 21
Distribution................................................................................................................................ 21
Marketing Communications ...................................................................................................... 22
Marketing Research ...................................................................................................................... 22
Financials ...................................................................................................................................... 23
Break-even Analysis ................................................................................................................. 23
Sales Forecast ............................................................................................................................ 26
Expense Forecast ....................................................................................................................... 27
Controls ......................................................................................................................................... 28
Implementation ............................................................................................................................. 28
Marketing Organization ................................................................................................................ 29
Contingency Plan .......................................................................................................................... 30
References ................................................................................................................................. 32
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List of Tables and Figures
Figure 1: Survey…………………………………………………………………………...………9
Figure 2: Cost Breakdown 1…………………………………………..........................................24
Figure 3: Cost Breakdown 2…………………………………………..........................................25
Figure 4: Break-Even Analysis………………………………………..........................................26
Figure 5: Sales Forecast………………………………………………………………………….27
Figure 6: Fixed Expense Forecast……………………………………..........................................27
Figure 7: Variable Expense Forecast…………………………………………………………….28
Figure 8: Marketing Organization……………………………………………………………….29
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Executive Summary
Responding to the increasing demand for environmentally friendly and innovative
solutions in the car industry (Kuehni, et al., survey, October, 2013), TeslaMotors will introduce a
fully electric pickup truck, the Model TRX. By doing so, Tesla not only addresses the
environmental issues that pickup trucks contribute to, but also relieves customers of the
dependence on gasoline, a major portion of an individual’s expenses. The Model TRX will have
the same motor as the Model S P85, which is currently on the market, with a mileage range of
265, 416 horsepower and speed up to 130 MPH (Musk, n.d.).
The main target market consists of males with an annual household income of at least
$135,000. According to a market survey, people in this income range perceive themselves as part
of the upper-middle class (Kuehni, et al., survey, October, 2013). Taking this into consideration,
the Model TRX will have a clean look and will be subtly luxurious, but it will not cost a lifetime
savings. The focus is rather on functionality and power, which speaks to the outdoor oriented
target market.
The growing market for electric vehicles provides an ideal opportunity to introduce the
Model TRX. The main competitors are electric vehicle companies, luxury car companies and
pickup truck manufacturers. However, Tesla will benefit from the first mover advantage, by
being the first company to offer a fully electric pickup truck. As an established and reputable
company, Tesla can draw from experience. Therefore, Tesla will apply product line pricing.
Without the addition of special luxury features, the base price for the Model TRX is $75,000.
Tesla’s Model TRX will be distributed in the highly promising U.S. market, due to the
popularity of pickup trucks in the U.S (Paukert, 2013). It will be sold to customers directly
through Tesla, at Tesla’s stores and galleries. The integrated marketing communication will
consist of advertising and public relations. Advertisements will be placed in television, web, and
selected magazines. Hosting the car at events and car shows will encourage positive press and
help spread the word about the product. The business-to-customer marketing will also strongly
rely on word of mouth referrals.
Our marketing department includes the sales team, phone support, technicians, and PR
representatives. The sales force team will promote the Tesla brand and the new Model TRX,
while the phone support team will be available to help place orders, set dates for regular
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maintenance, and assist with general problems. Most importantly, the technicians will maintain
close customer relationships to ensure customer satisfaction and consumer value.
Based on the sales forecast of the Model S, the projected unit sales of the Model TRX can
be estimated at 2,700 in the first year. High customer satisfaction and referrals will result in an
exponential increase in sales, with 5,000 units in the second and 15,000 units in the third year.
With the average selling price of $80,000, Tesla will break-even by the end of the second quarter
of the second year.
A strong focus on customer relationships will be a vital aspect in convincing customers of
the quality of the product, as well as, reacting to possible malfunctions or mishaps in the
production. An honest dialogue with the customers and superior customer services will maintain
a high level of trust and result in customer retention.
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Situation Analysis
The car industry is criticized daily for the environmental damages produced by its
products. Furthermore, the cost to operate these products (gasoline and maintenance) is a rising
issue for consumers. TeslaMotors wishes to enter a specific part of the car industry: the pickup
truck market. The truck industry has attempted to provide solutions for the arising issues
mentioned, such as hybrid trucks and more fuel-efficient models. However, combustion, diesel,
and even hybrid pickup trucks increase greenhouse gas emissions every day (Fortenbaugh, n.d.).
Furthermore, it would be beneficial to provide a pickup truck that does not run on fossil fuel. For
the reasons listed above, TeslaMotors will introduce a fully electric pickup truck named the
Model TRX. Since it will not run on fossil fuel, it will be more environmentally friendly than all
of the current pickup trucks on the market. With careful analysis of the market, the Model TRX
will be available to consumers by 2015.
Market Summary
With the increasing number of vehicles sold each year, there is a greater need for an ecofriendly line of vehicles (EDTA, n.d.). All pickup trucks on the market, hybrid, combustion, or
diesel, use a source of fossil fuel. Therefore, there is a need for a consistent source of renewable
fuel. Finally, with a fully electric line of vehicles on the road, there would be less emissions and
a boost in the economy with the money saved from gas expenses.
The market for a fully electric truck falls into the personal transportation vehicle market.
In 2010, the global financial crisis caused a decline in the production of vehicles by 9 percent;
however, the car industry responded the year after with a 22 percent increase in production.
Since then, there has been a steady three percent yearly growth (EDTA, n.d.). The demand for a
new fuel source is responsible for an increased popularity of electric vehicles. Hybrids offer a
decreased reliance on fossil fuels; however, an electric automobile eliminates the reliance of
fossil fuels altogether, which is one of the many reasons for the expansion of the electric vehicle
market. In 2012, the total number of vehicles sold was over 14 million, of which electric drive
models made up 3.38 percent (EDTA, n.d.). In 2013, year-to-date, approximately 11 million
vehicles have been sold, and there was a 3.90 percent increase for all electric drive models
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(EDTA, n.d.). This illustrates a growing need and desire for electric vehicles. With new designs
and recent advances in technology, Tesla’s Model TRX has the ability to gain a significant
market share. This information gathered on the automobile market provides insight for the
execution of Tesla’s Model TRX, taking into consideration the business-to-consumer and
business-to-business strategies.
Market Analysis
Demographics
After careful analysis of the distribution of the 2011 annual household income in the
United States and a first party survey, the best suited demographic for the Model TRX are males
with an annual household income of at least $135,000. Males are a part of the target market
because the first-hand survey displayed that 79 percent of males expressed interest in the truck,
whereas a much lower portion of females expressed interest (Kuehni, Lokmagozian, Mirto, &
Sharp, survey, October, 2013). As for the targeted household income, the Tesla Model TRX will
not be within the budget of any individual that makes less than $135,000. Although an annual
household income of $135,000 is in the top 10 percent of the U.S. population (‘2011 annual
social’, 2011), the demographic listed above will be the most profitable target market for the
Model TRX.
Geographics
The Model TRX targets outdoor-oriented regions. Such regions are targeted because
nearly two thirds of the population would use the truck for outdoor recreation (Kuehni, et al.,
survey, October, 2013). Outdoor recreation may be noted as but not limited to: camping, hiking,
traditional sports, and action sports. To distinguish outdoor-oriented regions from others, Forbes
Magazine produced a list of the 40 best domestic cities to spend time outdoors. It is safe to
assume that the 40 cities and its surrounding areas will contain the outdoor-oriented individual.
This list and further market research will be utilized to target the specific geographic locations.
Psychographics
There are two important target topics related to psychographics for the Tesla truck: the
use of the truck and perceived social class. Based on these two topics, the targeted psychographic
type believes that they would use the truck for outdoor recreation and believes that they are
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upper-middle class. The targeted psychographic will be pursued because the first hand survey
established that the targeted demographic perceives themselves as upper-middle rather than
upper (Kuehni, et al., survey, October, 2013), and because 70 percent of all individuals plan to use
the truck for outdoor recreation (Kuehni, et al., survey, October, 2013).
The Market
Market Needs
Recently, the car industry offers solutions that support “green thinking”, such as hybrid
and electric cars. However, what the market is lacking is a zero-emissions solution for the pickup
truck market—a market that provides a highly criticized car, said to be one of the most damaging
to the environment. An electric pickup truck by TeslaMotors would draw significant interest due
to brand recognition. Also, current pickup truck drivers may be intrigued by the idea. It will be
the perfect solution for those who would like the convenience of a pickup truck, but have not
purchased one due to the impact on the environment.
A survey has been conducted in order to verify these assumptions and to enquire if an
electric pickup truck by TeslaMotors would gain substantial market share. Fifty-five percent of
all respondents stated that they would be interested in the Model TRX, regardless of the vehicle
they currently drive. Seventy-one percent of current pickup truck drivers voiced an interest in
this solution by TeslaMotors. Tesla’s name recognition has increased in popularity, which is
reflected by the high number of people who have already heard of the company (85 percent).
When asked what they would want to change about their current car, 82 percent of respondents
mentioned that they would like it to be more fuel efficient, and 30 percent wished it be more
environmentally friendly (refer to Figure 1). The electric Model TRX will satisfy these wishes
(Kuehni, et al., survey, October, 2013).
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Figure 1: If you could change or add any characteristics to
your vehicle, what would it be?
Off road or towing capabilities
9%
Better for the environment
30%
Interior luxury
15%
more room
18%
Better mpg
82%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Figure 1: Survey
(Kuehni, et al., survey, October, 2013).
Market Trends
People’s increasing concern for the environment is a major trend that provides
opportunity for the Model TRX. TeslaMotors has proven to be a leading company in tackling
environmental concerns through its environmentally friendly automobiles. Furthermore,
TeslaMotors will appeal to even more customers by offering the Model TRX to the market.
Since a vehicle is a source of self-expression, the message conveyed by the Model TRX will
portray a “green” lifestyle. Nonetheless, average consumers are not the only customers that may
take an interest in this product. Many businesses use pickup trucks as company vehicles, which
creates a vast opportunity for the Model TRX. This product can be marketed towards companies
that are engaged in environmental protection and want to create a positive image.
Furthermore, gasoline prices are likely to remain high, which will result in many people
reconsidering their gasoline consumption. The U.S. Energy Information Administration (EIA)
projects an average price of $3.37 per gallon nationwide for the year 2014 (EIA, 2013). In a
short-term perspective, these high prices might seem insignificant compared to the high price of
an electric vehicle. Therefore, it is imperative that potential customers be educated about the
long-term benefits of electric vehicles in order to increase their willingness to pay a premium
(Martschenko & Gabriel, 2013).
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Market Growth
Compared to last year, electric car sales increased by more than 50 percent in the first
half of the year 2013. This growth can be explained by a better overall understanding of how
electric vehicles work, and how they are beneficial for both the customer and the environment.
Also, advancements in technology have led to lower car battery prices, which is a trend that is
expected to continue over the coming years. Due to lower production costs and increasing
awareness of electric car benefits, growth in the electric car market will be expected (Bigelow,
2013). For TeslaMotors, earnings are expected to grow 108.81 percent in 2013 and projections
display substantial growth over the next five years (Nasdaq, 2013).
According to Shanbhag (2013), the reason why Tesla has such great potential for the
future is the fact that Tesla provides solutions for problems that will gain a greater importance in
the coming years. The depletion of the environment and the scarcity of energy resources ask for
continuous innovation and for the use of renewable energy sources—the one thing Tesla
specializes in.
SWOT Analysis
Strengths
Producing an electric pickup truck fits into a market niche that possesses quite a few
strengths. A fully electric truck is not available in the market for consumers yet. We have a
strong marketing strategy that recognizes the consumer need for a more sustainable, yet stylish,
pickup truck.
TeslaMotors was founded recently, in 2003, by a group of engineers in Silicon Valley.
One aspect that makes Tesla such a strong company is its talented team of founders. Tesla’s goal
is “to accelerate the world’s transition to electric mobility with a full range of increasingly
affordable electric cars. We're catalyzing change in the industry. Tesla vehicles and electric
vehicles (EV’s) powered by Tesla are fun to drive and environmentally responsible” (About
Tesla, 2013). It currently produces (or is producing) all-electric, high performance vehicles such
as the Roadster, Model S, and Model X.
Tesla is a very innovative company and its ability to create these vehicles proves its
effective research and development process. Tesla has built a small, but loyal, customer base that
isn’t like any other car company. Its customers tend to be financially comfortable, interested in
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sports cars and car performance, and concerned about the environment. Most importantly, Tesla
“will help lessen global dependence on petroleum-based transportation and drive down the cost
of electric vehicles” (About Tesla, 2013). By producing the Model TRX, we can utilize and build
upon Tesla’s reputation, skills, and unique technology, which will open up an array of
opportunities.
Weaknesses
While Tesla is a strong company with an excellent reputation, it has its weaknesses. One
weakness is its popularity. Tesla does not have much brand recognition yet, which is most likely
due to the fact that its cars are expensive and that the company is still fairly new and trying to
expand. Tesla’s high-priced cars can turn away potential customers and pose as a weakness.
Many consumers cannot justify spending so much money on a car, even if it may save them
money in the long run.
Another weakness is the battery life of a Tesla, or any electric car for that matter. A Tesla
does not have unlimited driving mileage. This poses problems to those who want to take longer
road trips into more remote areas (Noland, 2013). The batteries must be recharged every few
hundred miles (Lampton, 2008). This is a weakness because many people either do not want to
hassle with charging their car when on the road, or they simply cannot charge given their
location. If a Tesla’s batteries are depleted, the owner is stuck on the road and must be towed.
Charging also takes hours at a time for a complete, full charge at any regular plug-in outlet
(Tesla, 2013).
Tesla car batteries possess another weakness besides their mileage range. As with any
battery, the Tesla batteries can only be charged so many times before they cannot hold charge
any longer. For example, the lithium-ion battery pack in the Roadster has an average lifespan of
five years, or 100,000 miles (Lampton, 2008). Once dead, the battery will need to be replaced at
the expense of the consumer. Additionally, the “dead” battery needs to be disposed of which
there isn’t an environmentally friendly way to do this.
Opportunities
One of the biggest market trends today is the idea of more fuel-efficient vehicles. The
prices of oil and gasoline are unpredictable; however, they are expected to remain high (EIA,
2013). Consumers are concerned with these prices and are searching for better alternatives
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(Kuehni, et al., survey, October, 2013). As automotive technology continues to improve and
more cars are produced that have a better gas mileage, what is better than a car that does not
operate using gasoline? The Model TRX will be fully electric and targeted towards consumers
who need the convenience of a pickup truck, while also needing a superior alternative to
gasoline. All of the trucks on the market today are gasoline-powered and do not have efficient
gas mileage. For example, the 2013 Ford F150 has an EPA estimated MPG of 17/23
(city/highway), which is low when compared to smaller cars, yet it is among the most fuel
efficient pickup trucks today (Ford, 2013). The Model TRX has a great opportunity here because
owners will no longer have to pull into a gas station to fill the tank.
Another big opportunity addresses the recent market trend for consumers and businesses
to be environmentally friendly. The care and protection for the environment is a concern that is
somewhat overlooked by gasoline-powered vehicles. However, Tesla vehicles have zero
emissions, making it an appealing alternative to ordinary vehicles (About Tesla, 2013).
Battery producing companies for all kinds of products are an emerging market as well.
Research on longer lasting lithium-ion batteries is improving battery life for many consumer
products (Fisher, 2013). A breakthrough in battery technology will improve the life of a Tesla,
which will turn the company’s weakness into a strength.
Threats
A potential threat to the Model TRX could occur if the price of gasoline were to drop,
and stay relatively low. Current pickup truck owners would most likely keep their pickup trucks
and the price of filling the tank wouldn’t hurt as many people financially. Also, people who are
in the market for a new pickup truck would most likely purchase a less expensive one, such as
the Ford F150, rather than a luxurious electric truck.
Furthermore, if there were to be a downturn in the economy, people would be less
inclined to purchase vehicles, especially luxurious ones. When money gets tight, people tend to
be cautious and save their money. In this case, it is unlikely that an average consumer would
purchase a Model TRX.
Suppliers for Tesla batteries are limited (Motavalli, 2013). By adding a new line to
Tesla’s vehicles, Tesla will have an even more increased demand for batteries. However, there
aren’t enough batteries in production currently. This poses as a threat for the Model TRX. For
example, each Tesla Model S battery pack uses more than 7,000 cylindrical 18,650 cells in its
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battery pack. These cells are unique and different from the ones used in other electric car
batteries (Motavalli, 2013). Production of batteries solely for the Model S might contribute to 40
percent of global cylindrical battery production (Fisher, 2013). Also, Elon Musk, CEO of
TeslaMotors, explained that even if the company used other existing sources of battery cells, it
would still limit Tesla to only a few hundred thousand cars a year (Motavalli, 2013). Without
enough batteries, Tesla’s rate of expansion will be hindered. If Tesla cannot produce enough
vehicles because of this, sales will be affected.
Finally, an obvious threat to Tesla is its competition.
Competition
Tesla has the first mover advantage, because it will be the first company to offer a fully
electric, luxury pickup truck to consumers, which will put it ahead of its competition. Tesla’s
Model TRX competes with luxury car companies such as Mercedes, Audi, Lexus, Porsche, and
BMW because of similar interior and exterior style and performance. It competes with
companies that offer hybrid vehicles, as well. Hybrids are suitable alternatives for those who
want to get significantly higher MPG than an average vehicle. However, Tesla still comes out on
top of this competition due to its electric engine. For example, Tesla competes for market share
with Toyota because it offers the Prius hybrid that is already quite reliable and reputable.
However, the Prius still requires the use of gasoline (Toyota, 2013). In addition to these
competitors, other truck manufacturers pose as definite competitors to Tesla, solely because there
are other trucks on the market. Tesla is not the only company offering a truck; therefore, it is
competing for market share with companies such as Ford, Dodge, Toyota, GMC, and more
(Addison, 2013).
Finally, Tesla’s main competitors are those that currently offer fully electric vehicles.
Some electric vehicles currently on, or nearing, the market include the Nissan Leaf, Chevy Volt,
Mitsubishi i, Ford Focus Electric, Fisker Karma, and the Porsche Panamera E-hybrid (Addison,
2013). These companies, especially Porsche and Fisker, are major competitors to Tesla (Okulski,
2013). Once Tesla releases the Model TRX, the technology is out for the world, and other
competitors will want to compete for market share. All in all, while there are no other companies
that currently offer a fully electric, luxury pickup truck to consumers, Tesla still competes for
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market share with every other automobile-producing company around the globe.
Product Offering
The product offered is a fully electric Model TRX that is environmentally friendly, but it can
still be utilized similar to any of the current combustion, diesel, and hybrid trucks on the market.
The main focus with this new truck design is to provide a solution regarding the negative
environmental impacts of trucks and to relieve consumers of the reliance of gasoline. This is
done by creating a 100 percent electric truck, while maintaining the versatility, power, and style.
The Model TRX would have the same motor as the Model S P85. It gets up to 265 miles range,
has 416 horsepower, and reaches speeds up to 130 MPH (Musk, n.d.). This makes the
introduction of the product to the assembly lines very simple, and it gives the truck the
performance package at the stock model base. Therefore, the masses would flourish at the idea of
a sleek truck design with the power of the Model S P85 that has become so popular.
The ordering process is simple for a new buyer, as well as the experienced Tesla customer. It
all begins at a store near you or simply on the Tesla webpage. Once the order is placed and
processed, the customer is given an estimate, and the product is ready to drive after two to three
months. There are multiple personalization options available for the Model TRX. These include,
but are not limited to:

Ride height

Wheel size

Rim selection

Color

Interior design/color

Tire selection

Interior audio

Light packages
There are multiple ways of charging the Model TRX as well. As long as there is an outlet
present, the ability to charge the truck is endless. The charging time of the battery is dependent
on the type of outlet available, based on voltage emitted. When the vehicle is delivered, a Tesla
specialist will explain how to use the mobile connector (Musk, n.d.). There are many adaptors
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available for charging. The main adaptor is the standard household outlet adaptor, which has
plenty of power to fully charge the Model TRX overnight. For those long road trips with shorter
periods of time to charge, there are supercharge stations that are soon to be placed along all
major interstates in the country and have the ability to charge about half of the battery in twenty
minutes (Musk, n.d.). Everything that is ordered from Tesla is thoroughly tested before delivery
to the customer.
With any purchase of the Model TRX, there is a four year or 50,000 mile warranty. For
the electric motors, there is an eight year, unlimited mile warranty that protects all of the
consumers after purchase. With the warranties comes a maintenance plan provided by the local
Tesla dealer. This will take care of the customers need to plan regular scheduled maintenance on
the vehicle, ensuring total customer satisfaction and maximum life of the Model TRX.
Keys to Success
In order to gain market share in the truck industry, there are key factors that will aid the
Model TRX’s success. The most obvious factor is the 100 percent electric power of the truck.
The electric power of the Model TRX will eliminate the reliance of fossil fuel for customers,
which will lead to savings. Furthermore, the projected sales growth of Tesla displays that the
niche market for fully electric vehicles is rapidly growing (Nasdaq, 2013), as well as the increase
of sales in the truck industry (Stoddard, 2013). Due to this information, it would be wise to
increase the width of Tesla’s product mix, leading towards a beneficial release of the Model
TRX.
Given the recent gas prices, and the need for renewable energy, the demand for fully
electric vehicles will rise, resulting in two more keys to success for the Model TRX. Another
factor that will help the Model TRX in the automobile market is the convenience of a 90 second
fully charged battery swap. At a recent demo of the new battery swap stations, Musk gave a great
show that was documented by Rogowsky in a Forbes article:
With the driver remaining in the car, an automated machine disconnected the battery,
removed it, and replaced it with a fully charged one. Simultaneously — on video — a
Tesla employee was filling a gas tank at what Musk claimed was the fastest gas station in
L.A. At the 1:33 mark, the Tesla pulled away, while the gas-powered car continued
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filling. Musk apologized for making folks wait and then the crowd roared as a second
Tesla drove out from behind a curtain and also had its battery swapped (this time it took
about 96 seconds). That car also drove off before the gas fill-up was completed, which
occurred after about 4 minutes. (Rogowsky, 2013)
Finally, Model TRX offers individuals and corporations the ability to show case
corporate social responsibility and the convenience of recharging a vehicle on site or simply
switch out batteries at a local supercharge station. As of late, Americans have shown a deep
desire to save the environment and use renewable resources.
Critical Issue
Unfortunately, there are always factors that may cause issues and obstruct the Model
TRX from performing well in the new market. The major issue we may encounter is the slow
manner in which the economy is recovering. Unlike major competitors that have already
established economies of scale, the Model TRX is at a higher price, leaving it only available to a
small market that would not be able to support the production. This would leave the major target
market of the blue collar workers and the day-to-day truck user out of the market and may cause
the Model TRX to be dropped from future production. All of these issues leave Tesla and the
Model TRX vulnerable.
Marketing Strategy
Value Proposition
The Model TRX is specifically tailored to the target market briefly mentioned in the latter
sections: Demographics, Geographics, and Psychographics and elaborately discussed in the
following section labeled as Target Market. For a relatively high price, the Tesla consumer
receives everything that they would want in a pickup truck and more. The Model TRX’s fully
electric capabilities relieve consumers of gasoline costs and a guilty conscience. With the Model
TRX, no sacrifices will have to be made.
The high quality of the product, which consists of unmatched crash ratings, sleek design,
sports performance, and luxury, leaves the customer satisfied. Lastly, the price of the Model
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TRX produces a sense of exclusivity that nearly all individuals wish to be a part of. Put simply,
the Model TRX is an automobile that most truck owners wish to drive, but only a select few will
get the chance.
Mission
Tesla’s goal is to “accelerate the world’s transition to electric mobility with a full range of
increasingly affordable electric cars” (Teslamotors, 2013). By introducing the TRX, TeslaMotors
will revolutionize the truck market.
Marketing Objectives
Based on the data from a survey conducted by Tesla Motors, 82 percent of all individuals
want to improve their MPG rate and 30 percent want their vehicles to be better for the
environment. Furthermore, 15 percent of the people surveyed want a more luxurious interior and
18 percent want more room (Kuehni, et al., survey, October, 2013). It is the goal of the Model
TRX to add customer value through the information provided by the survey. With the aid of the
marketing communication strategy and word of mouth, Tesla’s high quality product is expected
to be successful.
Financial Objectives
Tesla’s goal is to sell 2,700 units in the first year, 5,000 units in the second, and 15,000
units in the third. Each Model TRX will be sold for an average of $80,000. Tesla’s goal is to
break even by the end of the second quarter of the second year.
Target Markets
In the section listed as Market Analysis (p.3-5), the target markets were guided by three
main criterions: demographics, geographics, and psychographics. Each criterion has subtopics
that are related to the characteristics of an individual, such as household income, gender, and
personal pastimes. Based on these subtopics, first party and third party research was conducted to
find the best fitted target markets for the Model TRX.
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Demographics
The Model TRX will target a specific type of demographic. For starters, it will be on the
expensive end of a vehicle. Therefore, the target market will be tailored towards individuals who
earn a relatively high income. Although household income will be a main concern for targeting a
specific market, the gender and family orientation will be of concern as well.
Household Income
A 2013 Nissan Versa S can be sold at $12,780, which would make it one of the cheapest
new cars on the U.S. market (Healey, 2013). On the other hand, there are cars on the market that
cost over a million dollars. The Model TRX will not be on either end of the spectrum. Based on a
rough estimate and the base price of $62,400 for Tesla’s Model S ("Facts," 2013), the Model
TRX may range from $70,000 to $120,000. That being said, the targeted consumer will have an
annual household income of at least $150,000 and up. This will narrow the market down greatly.
According to the U.S. Census Bureau, in 2010, the top 10 percent of U.S. households reported an
annual household income of $135,000 or more (‘2011 annual social’, 2011). Thus, based simply
on annual household income, the pickup truck will target less than 10 percent of U.S.
households.
Gender
The marketing for Tesla’s Model TRX will be geared towards men. Based on a market
survey about the Model TRX, men showed a higher interest than women (Kuehni, et al., survey,
October, 2013). Only 21 percent of the females surveyed displayed interest in the truck, whereas
79 percent of all male respondents expressed their interest. Therefore, gender plays a significant
role in the marketing of our product.
Family Orientation
According to the same market survey, more individuals that are married with children
expressed interest in the Model TRX than those that do not have children. Therefore, the
marketing will target individuals married with children. However, singles will not be
unaccounted for because a significant portion of the singles expressed interest, as well.
Nonetheless, more single individuals would need to be surveyed before a solid conclusion can be
made about that specific demographic.
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Geographics
According to data gathered for a Model TRX market survey, the density of regions (rural,
city, or suburban) did not affect the interest for a Model TRX (Kuehni, et al., survey, October,
2013). However, regions that are more outdoor oriented are favorable places to market to, as well
as regions with a higher average income distribution compared to the total income distribution in
the U.S.
Outdoor Oriented Regions
Nearly two thirds of the people surveyed mentioned that they would use the truck for
outdoor recreation. Therefore, it would be wise to market the truck to regions where people
spend more time outdoors. Furthermore, high density regions that are known for their outdoor
qualities are a perfect place to market the Model TRX. An article provided by Forbes Magazine
lists 40 of the best domestic cities to spend time outdoors. At the top of the list are cities such as:
San Francisco, San Diego, San Jose, and Jacksonville (Ruiz, 2008). Although these cities are
outdoor oriented, only the regions of a higher than average income distribution will be the most
successful to market to. The product will be marketed to these areas and the areas surrounding.
Psychographics
The behavioral factors of individuals affect how the Model TRX will be marketed. For
example, the Model TRX market survey unveiled that there is a trend relating to the activities
that the truck will be used for. Additionally, the perceived economic status of our targeted
demographic is similar throughout the group.
Use of the Truck
According to the market survey, 70 percent of the respondents reported that they would
use a Model TRX for outdoor recreation (Kuehni, et al., survey, October, 2013). Although, only
17 percent of the individuals that own a truck mentioned that they use their truck for recreation.
Nonetheless, when people envision themselves driving a truck, the majority expects to use it for
outdoor recreation. Therefore, the Model TRX will be marketed towards the outdoor oriented
individual. This will send a message aimed towards the type of individuals that envision an
outdoor use of a truck, which will generate a larger response.
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Upper-Middle Class
The targeted demographic that makes over $100,000 of annual household income view
themselves as upper-middle class, with the exception of a few individuals that would categorize
themselves as part of the middle class (Kuehni, et al., survey, October, 2013). Based on an
estimate from the U.S. Census Bureau, the individuals that make over $100,000 are well over the
25th percentile of average household income in the U.S., which would put these individuals in the
upper-class range (2011 annual social, 2011). However, that is not the way that the targeted
demographic perceives itself. Therefore, the Model TRX will target individuals who consider
themselves as part of the upper-middle class. Thus, the Model TRX will not be ridiculously
lavish or super-powered like the cars on the market that are worth millions, but rather, it will
have a clean look and be subtly luxurious. The truck will make a statement, but it won’t cost a
lifetime savings.
Positioning
Before one can understand the positioning of the Model TRX, the individual must
understand the major product attributes of the truck. For starters, the Model TRX will be known
for its safety ratings. Much like the unmatched safety ratings of Tesla’s Model S (‘The model
s’,2013), the Model TRX is planned to have similar crash ratings. Furthermore, the Model TRX
will be fully electric, unlike any truck currently on the market. The truck will be free of gasoline
consumption. Lastly, the Model TRX will have a relatively high base price of $75,000.
Each of the attributes mentioned above are responsible for a perceived position in the
consumer’s mind, and as for the Model TRX, the attributes create a more-for-more position. For
example, the Model TRX’s high safety ratings will produce a perceived sense of quality. This
high sense of quality is positive image that will be used to Tesla’s advantage. Unlike a car of
lesser quality, the Model TRX’s quality will lead to consumer trust. Next, the fully electric
capability of the Tesla truck will differentiate the product from all of the other trucks on the
market. Therefore, consumers will perceive the Model TRX to be innovative and unlike the
mundane automobiles that are offered to them. Finally, the Model TRX’s high price will lead to
the consumer perception of exclusivity. Unfortunately, exclusivity can be perceived as positive
or negative. On the positive side, consumers will want the car simply because it is difficult to
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attain. On the negative side, the price’s exclusive nature may drive individuals away from the
Model TRX because of its lavish manner.
Strategies
The strategy of the Model TRX focuses on the trucks value proposition. The first step is
to reach the targeted market (simply put, outdoor-oriented males with higher incomes) through
carefully placed advertising and public relation events. Once the target market becomes
purchasers, not only will the superior value proposition have drawn them in, but the superior
value proposition will be the cause of repeat customers and referred customers. Tesla will rely on
the satisfaction and promotion of the product.
Marketing Mix
Pricing
Before an estimated price is made for the Model TRX, it is understood that the truck will
have a base price with an optional product pricing format. Therefore, the base price of the Model
TRX is the absolute minimum, and additional features may be added to the Model TRX at an
additional cost. Additional features may be a larger battery capacity, a navigation system, leather
interior, etc.
To estimate the pricing of the Model TRX two factors were taken into consideration. The
first factor is the relative pricing of the Tesla models. This factor takes the approach of product
line pricing. At the moment, Tesla’s only model offered to consumers is the Model S (the
Roadster is no longer available, and the Model X will be available in 2014). Thus, the base price
of the Model S, which is $62,400 ("Facts," 2013), is used as a relative price range for the Model
TRX. The second factor is “the average transaction price of a full-size pickup [,which] is now
$39,915” (Paukert, 2013). This factor emphasizes the relative pricing of competitors; however,
the value added to the Model TRX, in the form of electric capabilities and luxury, increases the
pricing. Taking these two factors into consideration, the Model TRX base price is $75,000.
Distribution
The Model TRX will be distributed in the same fashion as all other Tesla automobiles.
Unlike the normal franchise structure of the automobile industry, the Model TRX will be sold to
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consumers directly through Tesla. The consumer contact point will be at one of Tesla’s own
stores or galleries. At the moment, Tesla has over 60 stores and galleries, of which there is a
significant international presence (Musk, 2013). However, the Model TRX will only be
distributed in the United States.
There are numerous reasons why the Model TRX will be distributed in the manner
described above. The Model TRX will not be sold in the traditional franchise manner because of
the conflict of gasoline vs. electric vehicles. For example, it would be difficult for a car salesman
to “explain the advantages of going electric without simultaneously undermining their traditional
business” (Musk, 2013). Furthermore, most consumers choose the car that they would like to buy
before they go to the dealership, which provides little opportunity for Tesla sales. Lastly, the
Model TRX will only be distributed in the U.S. because the pickup truck market is thriving there
(Paukert, 2013), which makes a beneficial region to launch the new truck.
Marketing Communications
Advertising and public relations will be the two main tools of the integrated marketing
communications for the Model TRX. Carefully communicated advertisements will take place on
specific television programs, websites (social media and other targeted websites), and in
business, tech, and automobile magazines. Next, public relations (PR) will be utilized in order to
host the car at numerous events ranging from car shows to golf events. Furthermore, PR will gain
press relations with certain publications to publish reviews of the automobile. The specific
communications mix will be used to spread the word and establish a reputation for Tesla.
TeslaMotors is a relatively new company, and it is necessary to build its reputation through the
following methods.
Marketing Research
Primary research for our target market consisted of generating an original survey that
addressed the public and centralized our focus on who we wanted to target and what they were
looking for in a new vehicle. It is important for “research to gather and analyze information
about the moving of a good or service from the producer to the consumer” (Marketing Research,
n.d.). This survey addressed the age and general demographics of Monterey County while
supplying valuable information about a fully electric Tesla truck. It was given online as well as
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in person to everyone willing and available. Secondary analytical research was done online as
well. Information about the current market conditions and TeslaMotors was found online, as
well as, general information about the demographics and the technology planned for the Model
TRX.
As the Model TRX matures in its product life cycle, ongoing research will need to be
conducted. Research will consist of updating the demographic data, addressing accessory
options, updating technology, and staying up to date with the disposal of byproducts. There will
need to be constant research on technology and waste due to the ever increasing technology and
the high volume of battery waste used in the process of production. Demographics are
constantly changing and will always need to be addressed and updated if there is to be a long
product life cycle for the Model TRX.
Financials
Break-even Analysis
The following table is the estimated break-even point for the cost of production of the
Model TRX.
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Figure 2: Cost Breakdown 1
Tesla will have to sell 4,243 units in the first year to break-even. Tesla will not make a
profit in the first year because the break-even volume is much greater than the expected first year
sales volume.
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The following table is the estimated break-even point for the cost of marketing of the
Model TRX.
Figure 3: Cost Breakdown 2
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Tesla will have to sell 26 units in the first year to break even, or generate sales of
$2,108,264.70. Tesla will be able to break even in the first quarter of the first year according the
sales forecast below.
Figure 4: Break-Even Analysis
Sales Forecast
In the year 2012, the opening year of the Model S, the sales forecast of the Model S was
at 5,000 units (King, 2012). However towards the end of 2012, the prediction of the units sold
dropped to nearly 3,200 units (Voelker, 2013). The previous introduction of the Model S has
helped gauge an accurate forecast for the Model TRX. It is projected that 2,700 units of the
Model TRX will be sold in the first year at an average cost of $80,000. The average cost is at
$80,000 because not all Model TRX customers will purchase the base model of $75,000. For the
following two years, the sales will exponentially increase due to quality of the product and
consumer satisfaction.
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Figure 5: Sales Forecast
Expense Forecast
Figure 6: Fixed Selling Costs
Tesla will employ four people for the Model TRX marketing department and each will
make a $150,000 salary.
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Figure 7: Variable Selling Costs
Tesla plans to advertise on prime time television 24 times in the first year. The average
cost of a 30-second advertisement on prime time is $108,956 (Crupi, 2011). Tesla estimates
spending $110,000 each on 24, 30-second advertisements.
Controls
For each quarter, we will track all of the units ordered and make sure to have five models
on each show room floor with all of the different options available for the Model TRX. The
Model TRX will have to be custom ordered just like all of the other Tesla vehicles offered. This
allows more data to be collected and makes it easy to keep track of the total units sold. Analysis
of the data will be done by a team of specialists making sure to capture all of the options chosen
and to address all of the major problems with orders. To meet our sales goal of 2,700 units in the
first year, we will rely on general marketing and referrals from word of mouth. This will be done
with general advertising and PR.
Implementation
The implementation process of TeslaMotors and the Model TRX begins with first
contacting current suppliers and manufactures of products needed for producing the
vehicle. After suppliers are contacted and test vehicles are completed, there will be a multitude
of tests ensuring the Model TRX meets the set standards of power, durability, luxury, and battery
life before sales begin. These steps are important to ensure consumer value. Since TeslaMotors
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has its own stores for distribution, there will only need to be models on the showroom flow of
select locations, making it easy for consumers to see an actual Model TRX.
After all of this is complete, consumers can begin placing orders with
TeslaMotors. Using this method of ordering, overhead costs will be almost non-existent and the
issue of over production will be avoided. Upon completion of the Model TRX, a certified
technician will be available to deliver the vehicle and review all of the specifications with the
customer, or the customer may pick up the Model TRX at the store. Testimonials will then
follow the order to further help the promotion of the model.
Marketing Organization
For TeslaMotors, business-to-consumer marketing will take place. This will need general
marketing tactics such as advertising, PR, and word of mouth referrals. One of the most
effective tactics we plan on using is marketing at car events in all locations and sponsoring
events. At these events sales representatives will be walking around promoting the Model TRX
and handing out information brochures for consumers to look at. Our marketing department
includes the sales team, phone support, technicians, and PR representatives. The sales force
team will travel with show models to various events nationwide, and eventually globally, to help
promote the Tesla brand and the new Model TRX. The phone support team will be available to
help place orders, set dates for regular maintenance, and assist with any problems customers
have with the vehicle. Most importantly, the technicians will have a great opportunity to talk to
the consumers when they review the specifications of the vehicle making sure everything is up to
the consumers’ expectations. They will have the last word with the customer making this contact
point the most important because it will be the last impression of TeslaMotors.
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Below is a structured diagram of the marketing
organization.
Figure 8: Marketing Organization
Contingency Plan
Difficulties that arise when entering the sensitive truck market consist of meeting
consumer needs, having an appealing style, making sure to address the wanted versatility and
power, ensuring the economy can handle the price, and maintaining the unified Tesla image.
In the future, increasing demands regarding the battery life and power may become a
pressing issue. Such an issue has the potential to decrease the life cycle of the Model TRX and
create a problem with customer satisfaction. This may be a huge difficulty for the Model TRX
due to the fact that it will be the first of its kind in the market. Being a leader in any market is
difficult because consumers hold leaders to high standards. To handle this issue, Tesla will rely
on improvement in technologies and superior engineering.
The worst case scenario for the Model TRX is a lack power in certain situations and
negative consumer buzz. Another situation could be operation malfunctions like some of the
recent Toyota mishaps causing trust issues with the new model and Tesla. Either of these
scenarios would be addressed right off the bat and fixed, or publicly spoken about reassuring the
public that the truck is a top brand and top quality with kinks that are being worked out. Early
models that are still under warranty would also be addressed with no cost to the consumer. The
“activity undertaken to ensure that proper and immediate follow-up steps will be taken by
management and employees in an emergency. Its major objectives are to ensure containment of
damage or injury to, or loss of, personnel and property, and continuity of the key operations of
P a g e | 31
the organization” (Contingency Planning, n.d.). Consumer satisfaction is the number one
objective, which is the reason a high quality contingency plan is vital.
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