26 november | Written by Kim Buitenhuis
Tesla has grown into one of the world's biggest brands without TV advertising. It has disrupted the car industry by tapping into the shift towards eco-cars, cutting out car dealerships, word-of-mouth marketing, and having a charismatic CEO who has acted as the brand's mouthpiece. But as the competition hots up, Tesla is facing questions whether it might shift its marketing strategy.
By John Reynolds
Tesla's ascendancy in the automotive world continued in September when one of its flagship electric cars topped the car sales charts in the UK. The Tesla Model 3 made by the world's most valuable car brand sold nearly 7,000 cars in September, dwarfing sales of Volkswagen and Toyota rival petrol cars.
The accolades Tesla has received are far and wide and, remarkably, its hegemony has come despite it largely eschewing traditional advertising, according to its charismatic and ego-driven founder Elon Musk. ,,I hate advertising," Musk tweeted in 2018, sending Madison Avenue into a tailspin. ,,Tesla does not advertise or pay for endorsements. Instead, we use that money to make the product great," Musk said later. But was Musk being genuine in his hatred of advertising or is he, as some suggest, the world's best advertising man?
Musk is the advertising
,,Musk is the advertising in my view," says Will Arnold-Baker, founding partner of creative agency Come the Glorious Day. ,,He is a massive, massive self-publicist. Part of me goes he is a guy who anything goes to publicise his company." Musk is clearly no shrinking violet, and over the years he's effectively used his Twitter feed to make company public announcements (and take pot shots at rivals). These posts have generated infinite news coverage reaching way beyond the 60million-plus who follow him on Twitter. While rivals spend millions on big budget shiny TV ad spots, Musk could argue that the zero he spent on his Twitter pronouncements is a more effective communications channel.
An example of the influence of his tweets is Musk posting that Tesla's share price was too high, wiping $14bn off the carmaker's value. Musk's social media outpourings, says Ben Thrasher, strategist at Superunion, the branding agency, co-exist alongside Tesla's overarching brand story. ,,To understand why Musk, and Tesla, have avoided traditional advertising, we need to make a clear distinction between advertising and marketing," he says. ,,Advertising is the act of selling a product to a specific audience, whilst marketing is the broad concept of selling your story. ,,Elon Musk can say he hates advertising because his brand's story sells his products."
Tesla shuns traditional marketing
While the "I hate advertising" line resonated with the public and the media, it should be treated with caution. True, Tesla has hitherto ignored big budget TV campaigns but it does spend on marketing. In its latest financial results for the three months to December 31 2020, marketing is included as a cost in a group spending figure of $973m in the quarter.
Product is the Tesla brand
But there is no doubt that traditional advertising has largely been shunned at the expense of investing in the core car products. Specifically, Tesla has thrown money into research and development so as to create eye-catching "sexy "and "sustainable" cars, which observers say appeal to two distinct audiences: car enthusiasts and green advocates.
Tesla is acutely aware that aesthetics are important to car buyers and that is why its products look great, they say. Jim Hawker, co-founder, Threepipe Reply, the brand performance agency, says Tesla's cars are "head and shoulders" above its rivals, which propels "brand recognition'" that its rivals can't match. Hawker adds: There is a real shift at the moment in companies that focus on creating a product to be the best it can be. ,,Put it in the hands of consumers and they will do the rest by driving word of mouth."
Word of mouth advertising
Word of month marketing has been a mainstay for Tesla and, essentially, allows its customers, some of who see Tesla as a cult-like brand, to do the selling for the brand. While many brands run referral programmes, Tesla's programmes have, in keeping with many things the brand does, become news stories.
Take the example of Norwegian YouTuber Bjorn Nyland, who won four Tesla cars through the programme, which captured media coverage. At the peak of its referral programmes, Tesla was giving away Tesla Roadster cars to those who accumulated enough referrals. Tesla further benefits as those who win out in the referral programmes tend to be locked-in customers in for the long haul, as well as wanting to become brand advocates. Yet Tesla's referrals programmes are currently in flux, after Musk said it was ending them, as was costing the business too much.
Selling direct to consumers
Typifying its disruptor credentials, Tesla chose to sell its cars direct to consumers, cutting out the middleman, providing a massive point of difference to other brands, observers point out. Musk had the foresight to realise Tesla could make hay as cutting independent dealers out of the sales equation was not an option for legacy brands. Wanting to gain a further advantage, Tesla is now shifting sales to online only, as it looks to improve customer service with a handful of stores acting as show rooms.
Marketing stunts pay dividends
Musk knows how to drum up publicity and is not averse to marketing stunts. And over the years, the PR stunts by SpaceX, the aerospace company he founded, and Tesla, have built evangelical followings. In 2018, the billionaire made history when he successfully launched a Tesla Roadster into space, on board the Falcon Heavy Rocket.
Will Tesla ever do TV advertising?
But as Tesla has now switched from challenger brand to market leader, then there is debate as what next for the brand? As competition hots up in the electric car industry, could, for example, Tesla begin to use TV adverts? As Neil Henderson, CEO, St Luke's, the advertising agency, points out, behemoth brands like Google and Dyson shied away from TV spot advertising in their early days before changing their tune.
He argues Tesla will likely do TV ads, as the competition hots up in the eco-car sector. Henderson says: ,,When you are a real innovator, when you are a real pioneer, when you really set the agenda, then advertising is less important. But there will be a point when these other brands are just as electric as Tesla. Once it's hard to differentiate the product and service then advertising starts to play a really important role."
But Thrasher is not convinced Tesla will ever advertise on TV. Thasher said: ,,If Tesla keeps doing what it's doing (creating radical new products to solve real world problems)- then it won't really need to. ,,Traditional marketing and advertising channels, such as TV are used to stake your ground in a busy market place where product development alone won't keep you at the front of the race; Tesla is in a race of one."
Musk to appear in ads would be a mistake
If Tesla goes down the route of TV advertising, then could we see the self-publicist Musk fronting them? Arnold-Baker is not convinced this would be a wise move. He points out that Musk's mercurial character might be at odds with the heavily regulated mainstream advertising environment. Henderson agrees, saying it would be a "big mistake" for Musk to appear in Tesla TV ads.
Instead, Tesla ads, like Apple's TV spots, should be product focused, Henderson says. ,,They would capture some very high emotional thing about the fact that Tesla hasreally changed the world," he said.
Tesla is now the world's most valuable car company and the eigth most valued company in the world. Achieving this status by largely eschewing traditional advertising has set it apart as a true disruptor. But whether it can continue to disrupt and play the role of challenger when it is now the market leader remains to be seen.