How does Tesla do marketing with zero advertising investment?

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During the National Day holiday, Tesla Model 3 prices were reduced again. In the past year and a half, the price of Model 3 has dropped by 100,000 yuan, and old car owners feel that they have been ripped off. However, as long as we look at Tesla's financial report, we can find that compared with traditional car companies, Tesla still has huge room for price reduction: Tesla sold 367,500 vehicles in 2019, but the total marketing expenses incurred were only 186 million yuan, which means that the marketing cost of each car is only 500 yuan, much lower than Volkswagen's 16,000 yuan/unit and Mercedes-Benz's 30,000 yuan/unit.

More importantly, these marketing expenses are mainly concentrated in press conferences and public relations communications. On the contrary, Tesla's expenses are 0 for advertising, which traditional car companies are keen on.

Many people believe that this is because Tesla created disruptive products that exceeded expectations and spread spontaneously, thus being able to acquire users at a very low cost. But if things were that simple, the car manufacturers who were creating disruptive products in the early 20th century wouldn't have racked their brains to design themselves to look like horse-drawn carriages.

1. The Paradox of Disruptive Products

Most people are not so friendly to unfamiliar things. People will instinctively resist unfamiliar things and choose things they are more familiar with.

When cars were first invented in the 19th century, people did not accept this revolutionary invention. In order to make it easier for people to understand the purpose of cars, many car manufacturers had to design cars in the style of horse-drawn carriages. As late as 1910, the Borgata Model 13 car even had a statue of a coachman on the front of the car to reduce the user's cognitive cost. It can be said that the more subversive a thing is, the greater the sense of unfamiliarity it often brings, which will cause a higher cognitive cost, which means it is difficult to become popular.

So how do disruptive products like the iPhone become popular? The answer is to find a group of people who understand you.

As we all know, in addition to the functions of making calls and sending text messages, the iPhone is completely different from previous mobile phones in terms of style and user experience. However, when the iPhone was launched, Apple and Steve Jobs already had world-class influence, and the launch of the first generation iPhone also attracted the attention of technology enthusiasts all over the world. With the recommendation of these technology enthusiasts, the iPhone quickly became popular.

In fact, it's not just the iPhone. I have summarized Internet products such as LinkedIn, Slack, Uber, Dropbox, etc. They also first became popular among technology enthusiasts and then gradually grew into companies with a market value of tens of billions of dollars. This is not difficult to understand. The technology elites represented by Silicon Valley are curious about new things with a strong sense of technology, dare to take risks, and have high purchasing power. They are the most suitable group of people who "understand Tesla".

2. Silicon Valley Celebrities: Tesla Super Users

"Equality for all" has always been the concept we advocate, but in fact, individuals in any organization or group of people are unequal.

There are bloggers with tens of millions of fans on Weibo and Tik Tok, and one of their words or one of their videos can influence tens of millions of ordinary users; on Xiaohongshu and Taobao Live, a recommendation by Li Jiaqi can make tens of thousands of people place orders; in companies, an order from the boss can drive the entire company's employees; similarly, among technology enthusiasts, successful people such as Steve Jobs, Bill Gates, Mark Zuckerberg, and Larry Page have the ability to influence the entire group, and influencing these people can, in a sense, influence the entire group of technology enthusiasts.

Musk also confirmed this strategy in his article "Tesla's Secret Plan": first build expensive cars and sell them to rich people, then use the money earned to develop cheaper cars and sell them to the public.

Tesla CEO Musk is a celebrity in Silicon Valley. He has founded the online content publishing software zip2 and the world-renowned payment tool PayPal. In June 2002, he founded Space Exploration Technologies Corporation (Space X). Tesla has attracted the attention of Silicon Valley very early. In 2006, after launching its first black version of the two-seater convertible concept car Roadster, Tesla completed a financing of 40 million US dollars, including well-known investment institutions such as Draper Fisher Jurvetson, Advantage Capital, JP Morgan, Google founders Larry Page, Sergey Brin and Musk himself.

In July 2006, Tesla officially announced its electric car plan. The event attracted famous movie star Arnold Schwarzenegger, former Disney CEO Michael Eisner, as well as celebrities and Silicon Valley elites such as Larry Page and Sergey Brin. In addition to showing off the cool product design at the event and emphasizing that it only takes 4 seconds to accelerate from a standstill to 60 miles per hour, far exceeding the performance of all electric vehicles at the time, Musk also worked hard to sell Tesla's concept to those present. Tesla is not a simple car company that manufactures and sells cars, but a technology company that uses various technologies to dream of changing travel.

Compared to owning a cool electric car, the great dream of changing the world with technology can motivate these Silicon Valley elites who are passionate about technology, love adventure and hope to change the world. Especially after they test-drove the Roadster on the spot, although the price was as high as $90,000 and they could only test drive it for 5 minutes at a time to avoid overheating of the car, 30 people still promised to buy Tesla's concept car Roadster on the spot. The press conference also attracted media attention, and the New York Times published a report about Tesla.

The founder of PayPal started a new business, the recognition of Silicon Valley elites and media reports made the topic of Tesla begin to ferment.

3. Product innovation and brand concept complete the reputation closed loop

I once used a formula to explain the principle of word-of-mouth: marketing, especially the dissemination of content, is to establish an expectation in the minds of target consumers. When users actually use the product, they will compare it with their expectations. If it is consistent with expectations, they will continue to use the product. If it is below expectations, they will abandon the product and give negative reviews. If it exceeds expectations, they will continue to use the product and recommend it to people around them, which is to generate word-of-mouth communication .

The basis of Tesla's early reputation was to package owning a Roadster as a unique thing. This uniqueness included not only Tesla's product-level innovations as an electric car, such as faster acceleration, longer battery life, and OTA updates, but also the recognition of top Silicon Valley leaders such as Larry Page and Sergey Brin, as well as major media. Musk would search for news about Tesla on Google every day. If he saw negative news, even if Tesla's public relations staff could not get the reporter to change his point of view, he would designate someone to "correct him."

After Jon McNeill became Tesla's president of global sales and services, he portrayed Tesla as a company that provides a lifestyle and a company that exists for the sustainable development of the earth. He asked Tesla's sales staff not to sell vehicles to users, but to sell them Tesla's philosophy and a technological lifestyle. This requirement remains to this day.

Musk's extreme demands on the product itself have also achieved a closed loop of user word-of-mouth: users think it is cool to own a Roadster, and that the Roadster is indeed cool to drive, so they are willing to continue showing off the Roadster and recommend it to others with a certain sense of showing off.

Therefore, venture capitalists, Silicon Valley elites, and celebrities are all proud to order a Roadster. Some Silicon Valley elites even went directly to Tesla headquarters and paid for an order on the spot. People who already knew Musk racked their brains and used various means to hope to buy a Roadster through Musk.

However, due to performance issues and difficulties in mass production, the scarcity of Roadsters has indirectly created a hunger effect. Owning a Roadster has gradually become a symbol of status. They are willing to show off their Roadsters on various occasions. As a result, people around them have become interested in Roadster and other Tesla products, and have become Tesla owners at some point.

As a result, Musk satisfied the preferences of the most influential elite in the United States through product innovation and brand concepts, and formed a word-of-mouth marketing model. Tesla's letter to shareholders also confirmed the effectiveness of this model:

We observed that the order volume in a given area was positively correlated with the local car delivery volume – meaning that our customers were actively selling their cars to others.

As more people see our car on the road, take a test drive, or talk to another Model S owner, more demand for the car is created. Despite the absence of any promotional campaigns, advertising budgets, paid endorsements, etc., demand far outstrips supply.

Through word-of-mouth communication, Tesla not only increased sales but also gained a group of loyal fans. However, word-of-mouth requires a certain amount of time to ferment and often lacks the motivation to spread actively, which also results in low communication efficiency. Therefore, Tesla is preparing to add a booster to the rocket of word-of-mouth.

4. Referral Reward Program: Adding a booster to the rocket of word-of-mouth

User fission has always been called the best marketing method by marketers.

Stimulated by merchant incentives, existing users bring new users to merchants, existing users gain benefits, and merchants gain new users. However, in actual operations, this seemingly perfect marketing method often encounters problems such as the wool-pulling party taking advantage of the wool and the inability to activate new users. This is because the premise of all marketing activities is that the product can effectively solve the real problems of the target users, and this is especially true for user fission.

We can regard user fission as a booster. If the product itself is valuable, user fission will speed up the efficiency of word-of-mouth communication and further expand the product's reputation. If the product itself is poor, user fission will only accelerate the product's death.

In 2014, after the Model S was launched on the market and word-of-mouth spread among users’ spontaneous recommendations, Tesla launched a referral reward program. This incentive program adopts a bilateral reward method. If you invite a friend to order a Tesla, both of you will receive a $1,000 coupon, which can be used to purchase Tesla cars, accessories and surrounding services. After the new user places an order through the invitation link, the coupons for both people will be credited to their account.

Tesla then launched a list-top reward. The person with the most invitations in each region (North America, Asia Pacific, and Europe) will receive huge rewards, including: a P90D Model S (US$130,000); a home charging station (US$3,000); and attendance at the opening ceremony of the Nevada Super Factory.

(Today, Tesla’s referral bonus is that both parties will receive 1,500 kilometers of free Supercharging credits.)

In other words, Tesla packages its products as prizes and rewards them to users , which not only benefits users and speeds up word-of-mouth communication, but also further deepens users' recognition of the Tesla brand and provides more opportunities for brand display. Of course, the premise of all this is that users have a huge recognition of Tesla's products and brand concepts.

In addition, due to rapid fission, the demand for products continued to increase, and people had to queue up to order, which indirectly maintained the hunger effect and was more conducive to Tesla's word-of-mouth spread.

Let’s summarize at this point. The secret of Tesla’s zero advertising is…

Knock on the blackboard and highlight the key points

1. First, find a small group of super users among technology enthusiasts who can influence the entire group . Through Tesla's product innovation and Musk's own influence, these people will identify with the brand , and through their endorsement and media exposure , the brand potential will be instantly established ;

2. Secondly, based on the endorsement of super users, a closed loop of word-of-mouth is formed through product innovation and the dissemination of brand concepts , and a hunger effect is formed by using production capacity issues to further intensify the fermentation of word-of-mouth;

3. Finally, based on strong word of mouth, sales can be quickly increased through fission . At this point, Tesla has formed a closed loop of word-of-mouth marketing. As long as it continues to innovate its products and constantly create topics , Tesla can maintain its dominant position in the electric vehicle field, just like the iPhone in the smartphone field.

When I was analyzing Tesla's customer acquisition with zero advertising investment with a friend, he thought that Tesla's success was almost impossible to replicate because of Musk's past experience and fame in Silicon Valley. I listed a few examples:

Another disruptive innovation product is Bitcoin. Whether Satoshi Nakamoto really exists is a mystery. However, when Bitcoin was first created, it attracted the attention of Cypherpunks, a group of top geeks who are keen on cryptography, including Hal Finney, a core participant in PGP encryption and inventor of RPoW, the predecessor of PoW; Jed McCaleb, co-founder of eDonkey, Stella, and Ripple; Julian Assange, founder of WIKI decryption; and Sir Tim-Berners Lee, inventor of the World Wide Web...

With the help of these super users, Bitcoin has gone from obscurity to universal knowledge at absolutely zero cost.

Santonban, a boutique coffee brand, adopts an internal testing approach, sending product samples to experts and heavy users on the Xiachufang platform to solicit their suggestions and continuously optimize and improve the product. By continuously optimizing its products and interacting with influencers, Santonban has not only produced better products, but also gained a group of loyal fans from different industries including design, finance, media, doctors, photography, illustration, desserts, etc. They have also become the cornerstone users after Santonban opened its Taobao store.

Top fashion brand Supreme, sports brand lululemon, domestic beauty brand Huaxizi...all found super users who can influence a certain group, created high-quality products, and then used this group of super users to influence the entire circle at a very low cost, and gradually went out of the circle to become the brands we know now.

Author: TopMarketing

Source: TopMarketing (TMarketing)