Published on July 2nd, 2019 |
by Loren McDonald
July 2nd, 2019 by Loren McDonald
Fellow CleanTechnica writer Barry A.F. recently penned two impassioned articles explaining his arguments why Tesla should start advertising (see: Tesla Should Advertise and Tesla Should Advertise, Part Deux). I completely disagree, as I think traditional advertising is the last thing on which Tesla should spend its limited marketing budget.
To be clear, I’m not saying that Tesla should never advertise, just that it should not use traditional national TV, radio, and print advertising — and it should not advertise at all right now.
One of the things that Elon Musk likes to tout about Tesla is that the company does not advertise. He apparently has a strong disdain for advertising, which according to Wikipedia can be traced to ancient civilizations. But despite Musk’s personal dislike, there are actual strategic reasons for not spending Tesla’s precious marketing budget on advertising.
It is important to clarify, however, that while Tesla currently does not spend money on traditional national/countrywide or local/regional advertising, the company’s success to date in most markets is driven by a variety of marketing and customer experience-oriented activities. These include test drive events and meetups, website content, public relations, social media, showrooms and galleries, presence of charging stations, referral incentives, and email marketing.
The Case Against Traditional Mass Advertising For Electric Vehicles
“Many manufacturers secretly question whether advertising really sells their product, but are vaguely afraid that their competitors might steal a march on them if they stopped.”
— David Ogilvy (Source: Brainy Quote)
Automotive advertising is a big business, with automotive companies spending an estimated $33.8 billion across 10 key countries, including $18 billion in the US in 2018, according to Zenith. Other key statistics:
- More than 50% of all automotive advertising expenditure goes to television – 54.5% in 2018 (Zenith)
- Zenith forecasts the internet’s share of automotive ad spend will rise to 25.6% by 2020
- The average cost for an automotive lead is $205 (Lion Tree Group)
- Advertising as a percentage of gross sales = 8.2% in 2018 at US auto dealers (NADA)
- Advertising expense per new vehicle retailed = $624 in 2018 at US auto dealers (NADA)
- 95% of vehicle buyers use digital as a source of information, and twice as many people start their research online versus at a dealer. (Google study)
What is important to understand about advertising is that what the channel is good at is influencing a consumer to buy a specific product or service that they already have an interest in purchasing. It is also good at creating brand awareness and preference.
I recently spoke at a Chief Marketing Officer (CMO) event at the Kellogg School at Northwestern University and one of the professors shared analysis he conducted on online advertising effectiveness for autos. What he uncovered through buyer research was that almost all of the consumers who click on an advertisement for a car and who then go on to purchase that car were in fact already planning to purchase a vehicle.
The implication is that most digital ads for automobiles drive a tiny percentage of incremental automobile purchases. Automotive ads do not motivate consumers to buy a car, but rather increase the likelihood that they will buy a car they were already planning to purchase or considering.
“Advertising says to people, ‘Here’s what we’ve got. Here’s what it will do for you. Here’s how to get it.’”
— Leo Burnett (Source: Brainy Quote)
Advertising generally does not excel at nor is cost effective in educating consumers on new product categories. Advertising is generally a passive activity and unless consumers have an existing interest in a product or product category, they are much less likely to engage with the ad.
George Levy of Car and Driver recently penned the article “Why Few TV Commercials Promote Electric Cars” and rightly explained that:
“The other knock against ‘selling the category’ is that if you need to convince people to consider a particular kind of vehicle, it will probably take a long time to convince them to make an actual purchase.”
Using advertising to convince someone they should buy an electric vehicle instead of a gas-powered car is not going to be money well spent. Electrify America and Audi are pursuing an “educate the masses” advertising approach, but they have deep pockets and can wait for sales to follow years later — Tesla needs buyers sooner. For educating car buyers on the benefits of electric cars, there are simply more cost-effective marketing approaches than advertising.
On the other hand, targeting someone who is considering an EV and who is researching the Jaguar I-PACE with an ad for the Audi e-tron or Tesla Model X is going to be much more successful. They are in the consideration phase and would be very interested and attentive in understanding the differences between those models.
Jaguar I-PACE Google search results page. | Screenshot by Loren McDonald.
Why Now Is Not the Time for Traditional Advertising
This brings us back to Tesla and 6 reasons now is not the time for traditional advertising:
Traditional advertising is expensive: TV, radio, and print advertising are very effective at what is called reach. Want to reach 10 million American consumers all at once? Then a national TV ad can make great sense and return an effective ROI because that may be the only way and most cost-effective method of reaching such a huge audience.
For several years, GoDaddy spent a lot of money with in-your-face, politically incorrect ads during the Super Bowl for its domain and hosting services. Derided by ad critics, and offensive to many, the ads basically put GoDaddy on the map for what is in essence fairly commoditized services. (I admit to using GoDaddy for my own sites and domain services despite also having disdain for their past ads. But despite my dislike for those ads, GoDaddy was top of mind when a few years later I began buying domains and needed a web hosting provider.)
But that is an example of where advertising works — increasing brand awareness and buyer preference — not education of a new category or creating demand. I knew what I wanted, but did not previously have a high brand preference for any provider — GoDaddy was top of mind.
Not the right stage of the market: Electric vehicles are still a new product category and in most markets are only being purchased by innovators and early adopters. (The few exceptions are markets such as Norway and the San Francisco Bay Area, where EVs have basically already gone mainstream.)
Rogers Diffusion of Innovation. | Source: Loren McDonald/EVAdoption
In 2018, only 1.97% of new vehicle buyers in the US purchased an EV. But that percentage is actually inflated due to California having an EV purchase share of 7.87% and accounting for 46.8% of all US EV purchases. Elsewhere, 27 states in the US had an EV purchase share in 2018 of less than 1%, and 43 states were less than 2%.
2018 California EV sales reached 7.8% & 46.8% of US EV sales. | Source: Loren McDonald/EVAdoption
Trying to reach less than 2% of the market means that most of your advertising dollars are wasted on consumers with little interest in electric vehicles.
2018 EV sales share by state. | Source: Loren McDonald/EVAdoption
EV buyers have already decided to go EV: Most buyers of EVs have already decided for a variety of reasons that they are going to purchase an EV over a gas vehicle. People rarely walk into a Chevrolet or Nissan dealer planning to buy a gas car and drive away a few hours later in a Bolt or LEAF.
As I wrote in “EVs Require Consumers to Consider New Factors During Their Vehicle-Purchase Process,” consumers have to know where they are going to charge, be comfortable with potential range limitations or concerns, perhaps install a home charger, accept potential charge times longer than gas/diesel refueling times, be okay with generally spending more money upfront, and other factors. EV buyers have a multiple-step thinking and decision process they have to go through when considering an EV.
Consumers must be marketed to very differently in various US markets: What will motivate someone in West Virginia to purchase an EV might be very different from someone in the state of Washington. While there are probably many commonalities among early adopters located in these very different markets, the messaging to these potential buyers may in fact need to highlight different features and benefits of electric vehicles.
This can only be done through very targeted forms of marketing, such as search engine marketing, direct mail, email marketing, look-alike ads on Facebook, and online targeted display and retargeting ads.
US state EV sales share by various factors. | Source: Loren McDonald/EVAdoption
Not enough supply: As many people have pointed out in the comments in Barry A.F.’s two articles, at least for the Model 3, producing enough units at scale remains Tesla’s biggest challenge. The Model S and X, on the other hand could, could benefit from some additional marketing to boost sales, especially with numerous luxury EVs coming to market. But Tesla’s biggest competitor for the S in particular is the Model 3.
Other, more effective marketing approaches: For the above and other reasons, there are simply more cost-effective marketing approaches for Tesla to sell more Model 3s, Ss, and Xs. These include search engine optimization, content marketing, test-drive events, social media, email marketing, and PR. Educating the market on EVs is also best done through other non-advertising forms of marketing.
Marketing and Customer Experience Activities Tesla Should Focus On and Consider
The following is a look at what Tesla should continue doing, even expand, and some ideas on potential new activities:
Events: The top two ways to sell Tesla models are to have a potential buyer take one for a test drive and to have prospects talk to current Tesla owners. The company has in the past organized Tesla meetups and drive events and should expand these events.
I’ve personally been to a Tesla-sponsored meetup event at the Half Moon Bay Ritz Carlton and Model 3 drive event at Tesla’s Palo Alto headquarters. We went on a Sunday last year for the latter event and our test-drive rep told me that on the Saturday before 1 out of 10 people who took a test drive purchased a Model 3 that same day. A 10% conversion rate is amazing!
Tesla Model 3 test drive confirmation email. | Screenshot by Loren McDonald
Social Media/Twitter: With more than 27 million followers on Twitter, Elon Musk’s mix of tweets on Tesla, SpaceX, The Boring Company, and other topics repel his haters and Tesla shorts, but keep Tesla talked about not just on Twitter, but on Facebook, LinkedIn, and other channels. And then the press writes about many of his tweets, meaning that a single tweet from Elon Musk could ultimately reach 100s of millions of people worldwide through multiple channels.
Screenshot by Loren McDonald
The @Tesla account currently has a not-too-shabby 3.9 million followers and a strong social media person has been apparently been hired to manage the account. The difference in humor and engagement since this person’s hiring has been noticeable and should lead to greater visibility for the company.
Email Marketing: Tesla needs to continue to leverage email marketing to nurture prospects who have shown an interest. The company currently makes decent use of the channel, but doesn’t appear to be leveraging offline and online behaviors to deploy real-time and highly targeted emails.
Tesla Model 3 leasing email. | Screenshot by Loren McDonald
But a second area would be to create more of an educational email marketing program to attract and educate people who are potentially interested in EVs but are still in a learning phase and are not yet ready to buy an EV or a Tesla yet (and perhaps don’t read CleanTechnica).
Galleries and Showrooms: Stealing from the Apple playbook, Tesla has opened an estimated 200 showrooms and galleries throughout the world. Tesla announced plans earlier this year to cut back on these showrooms, which I believe is a huge mistake. Often located in upscale shopping malls, these showrooms are an ideal fit with the buyer demographic at these mall locations and they keep the Tesla brand and image front and center with upscale shoppers.
These are often the first opportunity for consumers to sit in a Tesla and ask questions about the cars, charging, etc. As opposed to a traditional dealer location and model, Tesla showrooms reach and attract consumers who aren’t necessarily in the market for an EV. Tesla showrooms are about building Tesla as an aspirational brand, which is foundational to the company’s success.
Orange County Tesla showroom circa ~2012 — my first time in a Tesla. | Source: Loren McDonald
Rather than cutting back on showrooms and galleries, Tesla should instead make greater use and hence improve the ROI of these locations and leases. The company could hold seminar series at showrooms, providing tips and education on various EV topics. They could also invite in speakers from utilities, charging installers, local EV organizations and clubs, and turn the showrooms into educational centers that get consumers more comfortable with making the leap to an electric vehicle.
Targeted Search Engine and Social Media Ads: While I am not in favor of Tesla spending budget on mass advertising techniques, there are some targeted approaches that probably make sense — especially in markets with high EV purchase rates. These include search engine ads targeting searches for competitive electric vehicle models and social media look-a-like ads. These latter ads target consumers who have the same demographic and psychographic attributes as current Tesla owners. These ads target consumers highly likely to consider an EV and can be based on offline and online behavior that already shows interest in Tesla.
Continue to Build out the Tesla Supercharger and Destination Charger Networks: While Tesla’s two charging networks exist primarily to provide easy access to charging for current owners, they also serve as very effective “billboards” for the company. Their existence at wineries, upscale hotels and resorts, along major highways, and in shopping mall and retailer parking lots reminds potential and current buyers that owning a Tesla means you rarely have to worry about access to charging while out and about.
They also simply keep Tesla’s brand in front of non-owners. And to that extent, Tesla should consider, where possible, increasing the branding at Supercharger locations. This could include digital signage that displays real-time charging statistics and ads for Tesla. They might include an interactive digital kiosk where consumers could get information about Tesla products and schedule test drives.
Tesla Kettleman City Supercharger — view of lounge from charger stall. | Source: Loren McDonald
In the last year, I’ve taken two road trips from Northern California to Southern California and back — trips of nearly 900 miles — in our Tesla Model S 60. The 60 only has about 205 miles of range, which has meant at least 3 stops along Interstate 5 to reach our destination. I simply would not have considered these trips in any other EV except for a Tesla.
Electrify America, EVgo, Tesla Superchargers — DCFC locations & stations as of May 24, 2019. | Source: Loren McDonald/EVAdoption
For the next few years, these charging networks will continue to be one of Tesla’s biggest competitive advantages and one of the reasons why EV buyers choose a Tesla over other brands. But Electrify America and EVgo (in the US) and Ionity (in Europe) are rapidly building out their fast-charging networks.
Tesla must continue to build out the Supercharger network to keep a very real and visual lead on the other networks. One key is to continue to expand the number of connections at key locations. Tesla already has a sizable lead with an average of more than 9 connections per fast charger location, compared to 4.5 for Electrify America and 2.7 for EVgo. These large “charging centers” are very visible and provide huge branding and awareness for Tesla.
Ratio of DC fast chargers to # of locations (USA) March 31, 2019 | Source: Loren McDonald/EVAdoption
Secondly, I believe Tesla should build out more super centers such as the Kettleman City location that has 40 fast chargers and a lounge with restrooms and a coffee bar. They should locate these in much more visible and high-traffic locations and partner with a food service management operator to run them, potentially at a profit.
Family eating at Tesla Supercharger Kettleman City lounge. | Image Source: Loren McDonald
These locations could also have separate parking for non-Tesla customers who could refuel with food and beverages, while also viewing Tesla cars, battery storage systems, and solar panel systems. These Supercharger super centers can serve as visible showrooms and increase awareness and brand preference. These locations might even include opportunities to test drive Teslas, or at minimum schedule them.
Public Relations: Tesla is a PR machine. Most companies have PR teams and agencies that spend hours and hours crafting story ideas and pitches, byline articles, infographics, studies, and other content that they hope the media and bloggers write about and cover. Tesla does not have this challenge.
There are several reporters at outlets such as CNBC, Bloomberg, and others that cover Tesla either full or nearly full-time. Then you have sites such as CleanTechnica, InsideEVs, Electrek, Green Car Reports, and dozens of others that cover Tesla exhaustively.
But most of the coverage around Tesla is focused on the company itself, its products, or Elon Musk. Tesla is not much of a source for broader EV trends, market developments, incentives, and EV and charging tips.
Tesla should invest in a content marketing team that produces content that the PR team can use to proactively drive overall awareness of EVs. Since about 40% of EVs sold in the US are Tesla models, that broader awareness and education would benefit Tesla more than any other automaker.
Solar/Battery Storage: There is a variety of research that points to the connection between consumers who install solar panels and then also purchase or lease an electric vehicle. My own recent regression analysis project that looked at 29 factors that might affect EV sales in the 50 US states and Washington, DC, found that the ratio of solar installations to EV households had the second highest correlation. Solar in essence is the gateway drug to consumers buying EVs.
While Tesla’s solar business has declined recently, the company should aggressively target this market of existing SolarCity/Tesla Energy customers and those who have installed solar solutions. These customers understand the benefits of going green both to society and their personal pocket book, so will take little convincing to buy an EV.
Tesla Solar panels and Powerwall | Screenshot from Tesla.com by Loren McDonald
Website Resource Center: In business-to-business (B2B) and high-consideration product/service markets, building out content-based website resource centers is a very successful method of driving traffic from search engines and converting site visitors to email subscribers where you can continue to educate and nurture prospects into customers.
Tesla currently has very little of this type of content on its website, and what content it does have is generally embedded within the buying or consideration phase rather than awareness and discovery. Rather than having consumers end up on competitor or general EV and automotive sites for answers around EVs, as the market leader, Tesla should own this topic area and use the inbound traffic to grow its email database and nurture these prospects into customers. (Editor’s note: I oppose this idea on personal, selfish grounds — I think those people should be funneled to CleanTechnica, not Tesla.com. 😉 )
Webinars, Podcasts, and Videos: There are dozens of YouTube channels and podcasts devoted to Tesla or Tesla and EVs in general. Tesla should consider developing its own webinar and video series. These webinars could educate both current and prospective customers on topics such as charging best practices, how to use navigation to optimize for minimal charging time on trips, home charging installation tips, interviews with hosts and users of destination charging locations, factory tours, owner interviews, Tesla executive interviews, feature explorations, and more.
They could also explain how to take advantage of state and utility incentives, and could feature interviews with utility and energy executives to dispel myths about the grid. This series could explore issues around mining and minerals or the benefits of marrying solar, storage, and EVs. While the industry is already doing much of the above, the online traffic isn’t driving people directly to the Tesla website or gallery locations — which is a huge missed opportunity.
Product Features: While features such as Ludicrous Mode, Autopilot, the vehicles’ longer range and efficiency, overall performance, and other features are not actual marketing activities, they are constantly talked about on social media and written up in the press. In other words, Tesla’s product features are its best marketing tactic.
It is clear that Elon Musk and Tesla executives are keenly aware of this. Fun features such as the holiday lights and doors feature on the Model X, Santa and sleigh on the Autopilot display, and recent video games featured on the center screen keep Tesla in the news and, most importantly, talked about and shared on social media.
But there are a number of more serious and innovative product-centric areas Tesla is focusing on and could add, including:
- Launch the first 400-mile range BEV, which will be a significant industry milestone (expected by the end of 2019).
- Wide rollout of V3 of Superchargers, which offer the quickest real-world charging speeds.
- Charging partnerships with retailers and hotels as well as food service operators.
- Tesla app features such as the ability to order food and have it delivered to your car while being charged. A bathroom finder. A smart feature that sends you a push notification or SMS message alerting you that you didn’t plug in your Tesla.
- An AI-based navigation feature that more accurately predicts necessary range needed to reach your destination, but also predicts when, where, and how long other drivers will charge and that routes you to the optimum Supercharger to avoid wait times and/or maximize charging speeds.
- Improved voice interaction and integration with smart speakers such as Amazon Alexa and Google Home.
The features and performance of Tesla models combined with the charging advantages of the Supercharger and Destination Charger networks remain the company’s most effective forms of marketing. Tesla needs to not just continue, but step up its innovation and market-leading features to ensure maximum awareness and demand generation. Forget fart apps, focus on real innovation.
Beyond the above marketing and customer experience activities, Tesla needs to step up its game in the following areas:
- Rebuilding trust with customers and employees.
- Improving quality and customer service.
- Making customer retention a top priority.
There are a lot of things Tesla can do to increase awareness of electric vehicles and drive demand for its own vehicles, but mass advertising should not be one of them — at least until EVs become mainstream.
About the Author
Loren McDonald writes about the factors driving adoption of electric vehicles and the opportunities and challenges the transition to EVs presents companies and entrepreneurs in the auto, utility, energy, retail and other industries. His research and content are published on CleanTechnica, his own blog/site, www.EVAdoption.com, and in his upcoming book “Gas Station Zero” about the huge shifts and changes in multiple industries driven by the transition to battery electric, autonomous and shared vehicles.