Social, Ethical, and Legal implications

Price, place and Distribution of Tesla cars

In recent years, Tesla Motors has incorporated numerous changes in its marketing efforts aimed at aligning its marketing activities with the ever-changing customer needs and the market environment. It uses a holistic marketing mix that ensures it stands out in the automotive industry by using control mechanisms to ensure the company is effectively reaching out to its target market and optimizing on their revenues. As the major producer of electric automobile in the United States and a distributor of the electric automobiles to different countries, Tesla uses its marketing mix to support their market penetration and market expansion strategies to expand their operations overseas (Goi, 2009).

Distribution strategy

Tesla uses a selective distribution strategy where it uses only its internal marketing and sales team to reach out to customers, in addition, they also sell the products through their website. Any attempt to purchase Tesla products from external sources such as the auctioneers and secondhand traders will render the customer's goods as reject since Tesla cannot service our activate them for the customer. For instance, in 2014, a customer in San Diego bought a Tesla 2012 Model S car at an auction for the half the price that Tesla sells at their showroom, on taking the car for servicing at Tesla the company did not accept to service the car or sell any spare parts to the customer. Thus complete control of their distribution gives Tesla company control over other marketed products, this has helped in minimizing cases of product and spare part counterfeit and cloning (Staahl, 2014). In addition, absolute control of the distribution channels has necessitated the expansion of the distribution and sales channels in a bid to increase sales, as at 2016 Tesla has opened over 300 Tesla stores worldwide, this stores support Tesla's distribution strategies that aim at meeting the current product demand and increasing the sales revenues (Tesla, 2016).

Distribution channels

Tesla uses only company-owned distribution networks hence there are no distribution channels. For a zero- level distribution channel the sales are accomplished by the company by selling directly to the consumers, as a result the firm has to increase its marketing efforts to ensure that the consumers are aware of the new products released to the market, they also have to organize trade shows where consumers can be given highlights of new spares parts and product use. Other than the 300 physical delivery and service stores, Tesla also uses online platforms where consumers can purchase the products from their website, the use of online platforms enables them to reach out to a wider market hence increasing their sales volume (Kotler and Keller, 2012).

Positioning with channels

By using zero-level distribution channel, the company uses demand-chain planning as its positioning strategy in the distribution of the products and services. Demand-chain planning deals with forecasting the product demand based on the target market coverage then doing backward supply chain that begins with demand forecast then to production other than production then increasing marketing efforts to increase sales. For the company, demand forecast is usually more effective since customers are required to pay a deposit for the product during the ordering stage, therefore the production is usually done for the ordered commodities. Knowing the product demand enables Tesla to use its resources effectively while leveraging their delivery services through their 300 delivery centers.

Pricing strategies

Tesla operates in the automobile industry where it focuses more on the electric automobile, considering many automobile firms have not ventured into high-end luxurious electric cars the level of competition is usually low. This enables Tesla to use static pricing since it knows its target market and its market has remained unchanged for a long period of time. For instance, for all their car models S and X they have a base price of $74,000 and $89,000 respectively, in addition to each add-on and modification on the model static charges are applied regardless of the model, however, among the factors that may result in static prices variations are changes in the supply chain. Currently, dynamic pricing is not used, since most customers order and pay a deposit for the goods during the ordering stage, thus, this eliminates the variations in prices. However, in the long run, Tesla may adopt dynamic pricing strategy to ensure their Model S sells, this is because other competitors are offering model S at $30000 yet Tesla is selling at $74000.

For their daily pricing, Tesla uses premium pricing strategy where it offers relatively high prices, for their luxurious high-end cars. This strategy is used to attract the smaller market share who comprise of the people in the upper social class who are not price sensitive, in addition, using this strategy the firm gains in high level of profitability since they are able to appeal to a target market who like high priced products that are unique and differentiated. Lastly, Tesla often offers promotional pricing when introducing new products in the market.

Conclusion

It is clear that Tesla has adopted good pricing strategies based on their target market, in addition, their distribution channels enable them to eliminate cases of product counterfeit and cloning hence they have been able to build on brand loyalty by offering products at prices that reflect the intrinsic value of the products.

References

Kotler, P.T. & Keller, K.L. (2012). Marketing management (14th Ed). Upper Saddle River, NJ: Pearson/Prentice Hall.

Goi, C. L. (2009). A review of marketing mix: International Journal of Marketing Studies, 1(1)

Tesla (2016) 10-K form. Retrieved 23rd March from http://ir.tesla.com/secfilingfilingID=1564590-16-13195&CIK=1318605