Introduction
Value is the ratio of the bundle of benefits received from a product compared to what the
cost to receive the benefits of that product (Marshall & Johnston, 2023). Most customers tend to
base their options of value on what they paid for the item while not usually adding in the other
costs like time to research or find the product. There is an old saying, “Is the juice worth the
squeeze,” this is another comparative analysis of is the benefit worth the cost. In this installment
of our Tesla marketing research, we will focus on the pricing and value of the offering or
product. We will review the Tesla pricing strategies and discuss the perceived value that
customers may or may not recognize through their partnership with Tesla.
Q1. Explain the selected pricing strategy (penetration, skimming, competitor-based, etc.).
(Ch.11)
Tesla has chosen to leverage a version of price skimming as their pricing strategy. Price
skimming allows Tesla to enter the market at a relatively high price point, while creating a high-
quality expectation (Marshall & Johnston, 2023). Tesla version is known as a floating price
strategy where they fluctuate pricing quickly and regularly (Wood, 2023). Tesla has leveraged
this strategy to drive demand and maintain premium levels of quality. They also used this
strategy to introduce the no-haggle pricing concept to the auto industry (Wood, 2023).
Q2. Discuss various pricing tactics (product line pricing, captive pricing, price bundling,
etc.) that have or would prove effective in stimulating sales. (Ch.11)
Tesla uses the product line pricing tactic as they have several different models of Tesla
vehicles in their portfolio. Product line pricing allows for the marketing manager to develop a
rational marketing plan across the complete product line (Marshall & Johnston, 2023). In Tesla’s
case this tactic works because consumers can see the distinct differences that each of the
different models contain thus justifying the price point for any given model. Another tactic
leveraged by Tesla is price bundling where they will bundle extended services within the overall
cost of the vehicle itself. Price bundling is when products that would usually be purchased by
themselves are put together in a single priced package that usually tends to offer a lower overall
cost for the bundle versus individually buying each item separately (Marshall & Johnston, 2023).
Q3. Explain the channels of distribution (manufacturer to retailer to consumer, etc.) used
to distribute the product/service. (Ch.12)
The distribution channel is the entities that are aligned for the purpose of transferring the
possession of a product to the consumer (Marshall & Johnston, 2023). Tesla has chosen to
deliver their end products directly to their consumer. Tesla leverages their website to drive
customers to their company-owned showrooms to complete the transfer of the Tesla to the
customer. Tesla also leverages their online store to capture customers and transfer goods
(Pereira, 2024). Tesla has chosen the direct-to-consumer distribution model to maintain control
over the end-to-end customer experience and to capture vital and valuable customer data
(Pereira, 2024).
Q4. Discuss the distribution strategy (intensive, selective, exclusive) relevant to the
product/service. (Ch. 12)
Exclusive distribution is part of an overall positioning strategy built on prestige, scarcity,
and premium pricing (Marshall & Johnston, 2023). Tesla leverage this strategy by the exclusive
nature of keeping everything in-house and maintaining the direct-to-consumer relationship. Tesla
customers feel exclusive by not seeing the other automotive company brands sitting next to the
one they are looking at. The Tesla showroom only features Tesla products, and the online store is
also exclusive. Tesla not only offers the exclusive distribution, but also offers very
individualized customer buying experiences where the car is configured exclusively for the
purchaser.
Q5. Explain the firm’s use of e-channels, e-retailing, or other non-traditional methods of
distribution. (Ch.12)
Tesla is a master of leveraging e-channels to distribute and market their products. The
Tesla website is a customer experience wonderland where exclusive, personalized experiences
abound. Tesla is capturing extremely valuable information through the website, and they drive
that data right into their customer relationship management software. They then personally target
customers through individualized offerings (Pereira, 2024). Tesla’s expert use of e-channels and
marketing have caused the CMO of Cadillac to completely shift their marketing spend. The
CMO is shifting spend from sports and other mediums to experiential marketing to try and get
Tesla customers to drive a Cadillac not just see a cool brand spot (McCarthy, 2014). Tesla, like
Apple has developed a deep customer loyalty through their e-channel distribution strategy and
maximizing customer value offerings.
References:
McCarthy, M. (2014). No apologies from Cadillac CMO: With his polarizing 'Poolside' spot and
hard line on pricing, practical-minded Uwe Ellinghaus is taking on Tesla. Tree huggers
need not apply.Advertising Age,85(15), 34-35.
https://go.openathens.net/redirector/liberty.edu?url=https://www.proquest.com/trade-
journals/no-apologies-cadillac-cmo/docview/1540519960/se-2
Marshall, G., & Johnston, M. (2023). Marketing Communications. In Marketing Management
(4th ed., pp. 42–42). essay, McGraw Hill Education LLC.
Pereira, D. (2024, July 11). Tesla Marketing Strategy (2024). Business Model Analyst.
https://businessmodelanalyst.com/tesla-marketing-strategy/#:~:text=Tesla’s%20distributi
on%20strategy%20is%20primarily,further%20engaging%20with%20potential%20custo
mers.
Wood, R. (2023, January 30). How the tesla pricing strategy disrupted the auto industry. Pricing
University.
https://pricinguniversity.com.au/tesla-pricing-strategy/#:~:text=The%20idea%20behind%
20floating%20pricing,its%20price%20decreases%20as%20well.
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