The Tesla Model TRX



TeslaMotorsThe Tesla Model TRXTanja Kuehni, Elisa Lokmagozian, Andrew Mirto, Erik SharpBus 306-02December 8, 2013Contents TOC \o "1-3" \h \z \u Executive Summary PAGEREF _Toc374191694 \h 3Situation Analysis PAGEREF _Toc374191695 \h 4Market Summary PAGEREF _Toc374191696 \h 4Market Analysis PAGEREF _Toc374191697 \h 5Demographics PAGEREF _Toc374191698 \h 5Geographics PAGEREF _Toc374191699 \h 5Psychographics PAGEREF _Toc374191700 \h 5The Market PAGEREF _Toc374191701 \h 6Market Needs PAGEREF _Toc374191702 \h 6Market Trends PAGEREF _Toc374191703 \h 7Market Growth PAGEREF _Toc374191704 \h 8SWOT Analysis PAGEREF _Toc374191705 \h 8Strengths PAGEREF _Toc374191706 \h 8Weaknesses PAGEREF _Toc374191707 \h 9Opportunities PAGEREF _Toc374191708 \h 9Threats PAGEREF _Toc374191709 \h 10Competition PAGEREF _Toc374191710 \h 11Product Offering PAGEREF _Toc374191711 \h 12Keys to Success PAGEREF _Toc374191712 \h 13Critical Issue PAGEREF _Toc374191713 \h 14Marketing Strategy PAGEREF _Toc374191714 \h 14Value Proposition PAGEREF _Toc374191715 \h 14Mission PAGEREF _Toc374191716 \h 15Marketing Objectives PAGEREF _Toc374191717 \h 15Financial Objectives PAGEREF _Toc374191718 \h 15Target Markets PAGEREF _Toc374191719 \h 15Demographics PAGEREF _Toc374191720 \h 16Household Income PAGEREF _Toc374191721 \h 16Gender PAGEREF _Toc374191722 \h 16Family Orientation PAGEREF _Toc374191723 \h 16Geographics PAGEREF _Toc374191724 \h 17Outdoor Oriented Regions PAGEREF _Toc374191725 \h 17Psychographics PAGEREF _Toc374191726 \h 17Use of the Truck PAGEREF _Toc374191727 \h 17Upper-Middle Class PAGEREF _Toc374191728 \h 18Positioning PAGEREF _Toc374191729 \h 18Strategies PAGEREF _Toc374191730 \h 19Marketing Mix PAGEREF _Toc374191731 \h 19Pricing PAGEREF _Toc374191732 \h 19Distribution PAGEREF _Toc374191733 \h 19Marketing Communications PAGEREF _Toc374191734 \h 20Marketing Research PAGEREF _Toc374191735 \h 20Financials PAGEREF _Toc374191736 \h 21Break-even Analysis PAGEREF _Toc374191737 \h 21Sales Forecast PAGEREF _Toc374191738 \h 24Expense Forecast PAGEREF _Toc374191739 \h 25Controls PAGEREF _Toc374191740 \h 26Implementation PAGEREF _Toc374191741 \h 26Marketing Organization PAGEREF _Toc374191742 \h 27Contingency Plan PAGEREF _Toc374191743 \h 28References PAGEREF _Toc374191744 \h 29Figure 1: Survey…………………………………………………………………………...………9 Figure 2: Cost Breakdown 1…………………………………………..........................................24Figure 3: Cost Breakdown 2…………………………………………..........................................25Figure 4: Break-Even Analysis………………………………………..........................................26Figure 5: Sales Forecast………………………………………………………………………….27Figure 6: Fixed Expense Forecast……………………………………..........................................27Figure 7: Variable Expense Forecast…………………………………………………………….28Figure 8: Marketing Organization……………………………………………………………….29List of Tables and FiguresExecutive SummaryResponding 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 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.Situation AnalysisThe 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 SummaryWith the increasing number of vehicles sold each year, there is a greater need for an eco-friendly 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 (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 ?DemographicsAfter 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.GeographicsThe 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.PsychographicsThere 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 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 MarketMarket NeedsRecently, 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).Figure 1: Survey(Kuehni, et al., survey, October, 2013).Market TrendsPeople’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 CITATION Mar13 \l 1031 (Martschenko & Gabriel, 2013).Market GrowthCompared 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 CITATION Big13 \l 1031 (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 AnalysisStrengthsProducing 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” CITATION Abo131 \l 1033 (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 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” CITATION Abo131 \l 1033 (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. WeaknessesWhile 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 CITATION Nol13 \l 1033 (Noland, 2013). The batteries must be recharged every few hundred miles CITATION Lam08 \l 1033 (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 CITATION Tes13 \l 1033 (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 CITATION Lam08 \l 1033 (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. OpportunitiesOne 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 (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 CITATION For13 \l 1033 (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 CITATION Abo131 \l 1033 (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 CITATION Fis13 \l 1033 (Fisher, 2013). A breakthrough in battery technology will improve the life of a Tesla, which will turn the company’s weakness into a strength.ThreatsA 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 CITATION Mot13 \l 1033 (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 battery pack. These cells are unique and different from the ones used in other electric car batteries CITATION Mot13 \l 1033 (Motavalli, 2013). Production of batteries solely for the Model S might contribute to 40 percent of global cylindrical battery production CITATION Fis13 \l 1033 (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 CITATION Mot13 \l 1033 (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 petitionTesla 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 CITATION Toy13 \l 1033 (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 CITATION Add13 \l 1033 (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 CITATION Add13 \l 1033 (Addison, 2013). These companies, especially Porsche and Fisker, are major competitors to Tesla CITATION Oku13 \l 1033 (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 market share with every other automobile-producing company around the globe. Product OfferingThe 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 heightWheel sizeRim selectionColorInterior design/colorTire selectionInterior audioLight packagesThere 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 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 SuccessIn 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 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 IssueUnfortunately, 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 StrategyValue 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 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. ??MissionTesla’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 ObjectivesTesla’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.DemographicsThe 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 IncomeA 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. GenderThe 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 OrientationAccording 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.GeographicsAccording 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 RegionsNearly 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. PsychographicsThe 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 TruckAccording 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.Upper-Middle ClassThe 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 attain. On the negative side, the price’s exclusive nature may drive individuals away from the Model TRX because of its lavish manner.StrategiesThe 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 MixPricing???????????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 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 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.FinancialsBreak-even AnalysisThe following table is the estimated break-even point for the cost of production of the Model TRX.Figure 2: Cost Breakdown 1Tesla 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. The following table is the estimated break-even point for the cost of marketing of the Model TRX. Figure 3: Cost Breakdown 2Tesla 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 AnalysisSales ForecastIn 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.Figure 5: Sales ForecastExpense ForecastFigure 6: Fixed Selling CostsTesla will employ four people for the Model TRX marketing department and each will make a $150,000 salary.Figure 7: Variable Selling CostsTesla 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. ControlsFor 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. ?ImplementationThe 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 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 OrganizationFor 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. ?Below is a structured diagram of the marketing organization. ?Figure 8: Marketing OrganizationContingency 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 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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