1. Tesla Going Mass Market
Introduction
Tesla Motors designs and manufactures high-end, luxury, electric motor-vehicles. Prior
to this year their vehicles would cost the consumer anywhere from $57,000 all the way to into
the $100,000 range. As of recently, Tesla has created the Model 3. Tesla's Model 3 has a starting
price of approximately $35,000, which is comparable cheap to their other models. Tesla boasts
this as being its "most affordable car yet" (Tesla Motors). Tesla's Model 3 is the company's first
mass market car and these cars should be in consumers hands as early as 2017. Tesla received
325,000 orders for the Model 3 within the first week of announcing it. For Tesla this would
result in 14 billion dollars of future sales (Kiley, 2016). The release of this car marks a turning
point for the company by propelling the brand into a new market: a middle income market.
Along with the launch of the Model 3 there are plans in place to create an affordable crossover,
sports car and a pickup truck. The launch of these mass market cars will likely not go 100%
smoothly, which is to be expected when entering into a new market. There are many factors of
production that Tesla will need to consider and change in order for their mass market plan to
actually work. They will also face competition from other major companies like Chevrolet, who
are coming out with electric vehicles for their consumers with a much smaller price tag. Tesla's
goal of having an electric vehicle in everyone's hands is going to be a tall order for a company
who started their production in the luxury range. In order for Tesla to be successful in the mass
market they are going to need to identify what their consumers want and still be able to provide
them a Tesla, but with a smaller price tag.
Background
Tesla Motors was created in 2003 by engineers who strived to prove that electric cars
would be better than gasoline-powered vehicles. Tesla is not just an automaker, but a technology
and design company focused on energy innovation. The company wanted each generation of the
vehicles to be increasingly affordable to help reach their mission, which is to accelerate the
world’s transition to sustainable energy. The first vehicle was launched in 2008, the Tesla
Roadster, which can accelerate from 0 to 60 mph in 3.7 seconds and achieved a range of 245
miles per charge on its battery. The Roadster was priced at $98,000. The next model, the Tesla
Model S, was released in 2012 and was the world’s first premium electric sedan. Everything
about the vehicle was electric. It offered the comfort of a family vehicle, but had sports car like
features including 0 to 60 mph in five seconds. The battery life increased to 265 miles per charge.
After the first two models launched, there was approximately 50,000 Tesla vehicles on the road.
In 2015 they released their latest car, Model X. This crossover vehicle features falcon wing doors,
three rows of seating, and exhilarating acceleration. Tesla offers their Supercharger network of
charging stations throughout popular routes in North America, Europe, and Asia Pacific.
Spending 20 minutes at a station could replenish half of the battery. The company’s main factory
in Fremont, California brought thousands of jobs back to the United States. Manufacturing is
being spread out into other areas in the world as well as across the states. They began the
development process for their future car, Model 3, which is planned to be released before 2020.
The concern for Tesla lies within how to market this vehicle to the mass market without loosing
their brand image and reputation as a top of the line car manufacturer. (About Tesla)

2. 2003 Tesla was created
2008 Their first vehicle, the Tesla Roadster was released
2012 Tesla Model S was released; first premium electric sedan
2015 Model X released; a crossover with falcon wing doors
2017-2020 The release of the Model 3; targeted at the mass market
Problem
The growing concern for Tesla is how they will become a Mass Market car brand in less
than 4 years. The goal Tesla has is to be building nearly 500,000 Model 3 vehicles by the year
2020. Tesla wants to have an electric vehicle in everyone's hands. Model 3’s is a roadster that
will only cost the consumer $35,000. Their goal is to have the car last for 200 miles on a single
charge (Hull 2016). In order to accomplish their goals Tesla will likely double their retail outlets
to over 400 stores by 2017 worldwide (Kiley, 2016). Approximately 325,000 customers have put
down deposits down for the Model 3 when it was first revealed, but production of these vehicles
could take upwards of two years. The caution consumers have with this idea is the concern that
they will be cutting major Tesla trademarks in order to get to that price. Consumers are worried
that by creating such a cheap electric car (in comparison to the high priced Tesla Model S), the
Model 3 will lose the uniqueness that separates a Tesla from the competition. At which point,
there will be little difference between a Tesla Model 3 and a competitor's vehicle.
One issue Tesla is facing is how to get production to a point where they can produce that
many cars and remain a reliable, dependable car. Increasing production is going to be
challenging for Tesla as it will come with the need for additional capital (Niedermeyer, 2016).
Tesla seeks to enter the mass market by achieving a production of at least 500,000 automobiles
by Fall of 2017. Tesla has actually taken a loss in the first quarter of the year of over $280
million (Niedermeyer, 2016). In order to produce the Model 3 at the rate and price that Tesla
would like, they are going to have to cut costs to the bone. This means the features that originally
attracted Tesla customers to early models will be stripped for cost purposes. With the increased
production that will likely have to occur will the mass market cars hold up to the high standards
of Tesla? Consumers have already taken to Web forums to complain about the Model S and
defects.
With the heightened levels of production and consumer purchasing (with 325,000 people
already putting down payments on cars two years before production even begins) Tesla also has
to consider the amount of charging stations they will have to produce (Niedermeyer, 2016).There
are already long lines at the charging stations and they are not currently placed all over the
country. The crowded lines at charging stations will cause drivers to be stranded for longer
periods of time. With the Tesla now only hit roughly 200 miles per full charge(a normal gas
fueled car gets an estimated 450miles per full tank), the consumer is going to need more options
to ensure they can get where they need to be. Tesla will have to upgrade its infrastructure to

3. ensure there are enough charging stations to meet the demands of their mass market consumer
base.
Tesla also is going to be concerned with their brand image. Opening the door to an
entirely different target market with the Model 3 car is quite possibly going to change Tesla’s
brand image. It allows for a different social class to have access to consuming the product. Tesla
needs to find a way to ensure they can keep the allure and prestigious image of the brand. There
have already been reports that the new Model 3 is nothing like a Tesla except for its appearance
from the outside. In order for Tesla to keep the mass market customer, their car needs to still be a
Tesla, just at a cheaper cost. Tesla showrooms are also few and far between which could have an
effect on service level which will cause problems for consumers that may be new to the Tesla
brand. However, Tesla has been pragmatic in their locations of Tesla showrooms, focusing on
high income areas to match the level of prestige their name carries. If Tesla wants everyone to be
able to have access to their cars then they need to be able reach new consumers to appeal to the
new, lower income market for the Model 3, then the number showrooms are going to have to
increase to match their proposed market level. As such, Tesla will have to change their
advertising strategy to be able to appeal to the new consumer market, thus staying competitive in
the new mass market of electric cars.
With many major auto companies increasing their focus on electric vehicle production,
Tesla has to have a heightened level of concern for competition interference. A major competitor
for Tesla is General Motors. With its recent release of the Chevy Bolt, GM has taken a vital
portion of the market away from Tesla. The Chevy Bolt is not only affordable, it offers nearly
the same 200 mileage range per full charge, as Tesla does (Hull, 2016). Tesla must now find a
way to supercharge their brand image to out shine GM and many other upcoming competitors.
Ford Motors is another major competitor that has plans to take another chunk of the EV (electric
vehicle) market. Ford Motors announced in early December of 2015, that they were going to
increase their investment in the EV development department by nearly $4.5 billion. Tesla is
going to learn that Mass Market customers are pickier and harder to please than even customers
that purchase luxury vehicles. When a consumer is considering purchasing an electric car they
have the option of purchasing a brand such as a Chevrolet or a Nissan, and now a Tesla. A
consumer might think that they are getting a great deal on a Tesla that is priced at $35,000, but
Tesla needs to make sure this is the case. Tesla will not be able to get away with selling a
$35,000 car that looks luxurious, but feels less luxurious than a $20,000 car. Customers may
consider the car for the brand, but Tesla needs to make the vehicle simulates luxury so that they
choose the Tesla over the Chevrolet Bolt, which is comparable in price range to Tesla's Model 3.
After cash incentives from the government, Tesla's Model 3 is likely to cost around $27,000 and
the Chevrolet Bolt around $30,000. With the sleek design of the Tesla and its price point, Tesla
may have the edge of Chevrolet, but that is a matter of whether or not they can get enough
capital for production and how well the production process and supply chain work together. For
now, Tesla has remained strong on the supercharger station front. No other car brand has been

4. able to successfully network and implement the amount of lone standing charging stations that
Tesla has. Although it may not be enough, it is far more than any other competitor.
With consumers all over the world becoming more cautious of their auto purchases due to
environmental factors, the demand for electric vehicles is increasing. As a culture, Tesla stands
for sustainable transport. Making an electric vehicle for a small portion of the market is not
going to help the environment, which is why Tesla decided to enter into mass market production.
By also unveiling the Model 3 for the mass market Tesla has continued their legacy of
innovation that they stand for. In addition to building the Model 3, Tesla plans to open a
gigifactory in Nevada which will support the production of batteries needed for the vehicle as
well as production for other vehicles. The gigifactory will become the world's largest producer of
lithium-ion batteries. CEO, Elon Musk, says that the factory is necessary for production for the
vehicle and that it will allow Tesla to produce 500,000 cars annually. Tesla's main barrier to
entry into the mass market is going to be its production and supply chain. Tesla has a current
culture of being passionate about high end products. They succeed at building high end cars at
low-volumes, and with their desire to enter Ito mass market production they are going to have to
build high end cars, at low costs, and high volumes. Tesla needs to consider the consumer as well
for this to be successful. The purchaser of a Tesla is still going to want the luxurious feel, they
are not going to want to feel like they are in a mass marketed Toyota Prius. Tesla's goal of
entering into mass market by 2020 could prove difficult, but if it is done correctly they will boast
a high share price and will have accomplished their goal of sustainable transportation.

5. Teaching Note – CI Overview
The critical incident being investigated is how Tesla will enter into the mass market for
electric vehicles. The learning objectives which will be covered includes the types of innovation,
core values, subcultures, and demographics, brand image, and the external/internal factors. Tesla
has been a leading luxury electric car company. They are now trying to break into the mass
market with a $35,000 electric vehicle, the Model 3. There have been over 325,000 preorders
placed for the Model 3 within the first week of announcing its creation.
Learning Objectives
LO1 Chapter 7 discusses the types of innovation. Is Tesla’s mass market car best described as a
continuous, dynamically continuous, or discontinuous innovation? Will crossing the chasm be an
issue for Tesla?
LO2 Describe and analyze core values, subcultures and demographics that make up the target
consumer for a certain purchase.
LO3 Understanding how brand image influences the marketing strategy of a company entering a
new market.
LO4 Understanding how to take into consideration and apply External / Internal factors.
Recognizing how they play a key role in the consumer purchasing process.
Questions
1. LO1: Chapter Seven discusses types of innovation. Is Tesla’s mass market vehicle best
described as a continuous, dynamically continuous, or discontinuous innovation? Will
crossing the chasm be an issue for Tesla?
2. LO2: Segment and profile the target population for Tesla's mass market vehicle using
values, subcultures, and demographics (generation chart).
3. LO3: Chapter Nine discusses Brand Image and how it affects the marketing strategy of a
company. How could Tesla’s advertising strategy assist or hamper their ability to mass
market the new Model 3?
4. LO4: The most effective of marketing strategies are those that invoke specific thoughts
and reactions, containing internal and external influences, to lead the consumer to their
purchase. These influences are useful to marketers because they provide them with
information about the most ideal way to distribute, price, promote and evolve a product,
such as Tesla's Model 3. Explain what key internal and external factors Tesla has to take
into consideration.
Answers

6. 1. LO1 Chapter 7 discusses the types of innovation. Is Tesla’s mass market car best described as a
continuous, dynamically continuous, or discontinuous innovation? Will crossing the chasm be an
issue for Tesla?
a. Tesla’s mass market vehicle would be considered both continuous and
dynamically continuous, depending on the consumer. Continuous innovation
requires relatively minor changes in behavior or changes in behaviors that are
unimportant to the consumer. Tesla’s new mass market vehicle would be
continuous to consumers who have previously owned an electric car, because they
have already adapted to using charging stations and driving vehicle. Dynamically
continuous innovation requires a moderate change in an important behavior or a
major change in a behavior of low or moderate importance to the individual. For
the consumers who have never owned an electric car, Tesla’s Model 3 would be a
dynamically continuous innovation, because they are not used to having to find a
charging station when their battery gets low, but they know how to operate a
vehicle.
b. Crossing the chasm refers to chasm between the early adopters and early majority
of products. The chasm is created by disruptive innovations and a large behavior
change. Crossing the chasm will be an issue for Tesla concerning the consumers
which have never owed an electric vehicle, because it requires a major change in
their behavior. Tesla has to target consumers who have never had an electric
vehicle to be able to cross the chasm into the early majority.
2. LO2: Segment and profile the target population for Tesla's mass market vehicle using
values, subcultures, and demographics (generation chart).
a. Culture is the complex whole that includes knowledge, belief, law, art, morals
and any other capabilities and habits acquired by humans as members of society.
Culture influence an individual's thought processes and behaviors. Culture
influences our perspectives and how consumers make decisions. Cultural values
are widely held beliefs that affirm what is desirable. These values affect behaviors
through norms, which specify responses to specific situations. Cultural values
vary across cultures and affect consumption. The main cultural values are other-
oriented, environment-oriented, and self-oriented. Other-oriented values reflect a
society's view of the appropriate relationships between individuals and groups
within that society. These relationships have a strong influence on marketing
practice. Environment oriented values prescribe a society's relationship to its
economic and technical as well as its physical environment. Self-oriented values
reflect the objectives and approaches to life that the individual members of society
find desirable.
OTHER
ORIENTED
VALUES
ENVIRONMENT
ORIENTED
VALUES
SELF
ORIENTED
VALUES
Individual/Collective Performance/Status Material vs Non-
Material
Competitive/Cooperative Nature

7. b. Demographics describe a population in terms of its size, distribution, and
structure. Demographics influence consumption behaviors both directly and by
affecting other attributes of individuals, such as their personal vales and decision
styles. Occupation is the most widely applied single cue we use to initially
evaluate and define individuals we meet. We use people's occupations to make
inferences about their lifestyle . One's occupation provides status and income.
Consumption differs across occupational classes. Education also influences what
one can purchase by partially determining one's income and occupation. It also
influences how one thinks, makes decisions and relates to others. Income is
another factor. Income enables purchases but generally does not cause or explain
them.
c. Proper age positioning is also critical for many products. Age carries with it
culturally defined behavioral norms. It affects a persons self-concept and lifestyle.
Along with age comes generations and age cohorts.Of the six generations there
are certain generations that are more likely to purchase the mass market car than
the others. Generation X, and Y would be the likely purchases o this vehicle.
Generation X Generation Y
Born between 1965-1976: Moving
into 40's
1977-1994
Highly educated; more college
attendance and graduates than
previous generations
Dual income households; highly
educated
Major force in the marker for cars Do not appreciate marketing hype;
brand names are important
Open to diversity Finishing college/starting careers
Technologically immersed
d. Social rank is one's position relative to others on one or more dimensions valued
by society. There is a social class system that can be defined as a hierarchical
division of a society into relatively distinct and homogenous groups with respect
to attitudes, values and lifestyles. Pure social class does not exist in the United
States rather there is a status continua.
Upper-Middle Middle Class
$330,000 $61,000
Medical Degree College Degree
Highly Visible Population;
class to mass
Suburbs; concerned about
respectability
e. Life Stages:
Single I Young Couples Single II Empty Nest I
18-34 25-34 35-64 35-64
Unmarried Married/
Unmarried
Unmarried/
Divorced
Married

8. Tend to have
ample disposable
income
Dual incomes;
relatively
affluent
Higher
incomes;
indulge
themselves
Dual incomes,
money to spend
on themselves
3. LO3: Chapter Nine discusses Brand Image and how it affects the marketing strategy of a
company. How could Tesla’s advertising strategy assist or hamper their ability to mass
market the new Model 3?
a. On one hand, Tesla Motor’s strategy of not advertising normally helps to generate
word of mouth buzz between consumers. Consumers are forced to actively seek
out information on Tesla Motors by themselves, creating a genuine interest in the
automobile. On the other hand, the lack of definitive advertisement causes users
to have to first hear about Tesla Motors through some avenue of word of mouth to
have interest generated in the first place. Tesla does not spend money in its direct
advertising department. As such, the company is forced to rely upon their
customers being opinion leaders in the market.
b. Furthermore, the company is subject to what their users have to say about the
company’s qualities, rather than have the company outwardly advertise their own
product. In order to sell the supposed 500,000 units in Fall of 2017, there is going
to have to be a push somewhere to generate interest in the new Model 3. . While
325,000 people have already put a down payment on the new model, what about
after the initial wave of purchases? With a zero dollar advertising budget, the
Model 3 is going to have to generate a massive buzz to sell the remaining units by
Fall of 2017. Not to mention consequent years, the lofty goal of developing and
selling half a million units a year is going to take some serious marketing
campaign, one that is reliant upon the backs of consumers and their opinions of
their purchased Model 3.
4. LO4: The most effective of marketing strategies are those that invoke specific thoughts
and reactions, containing internal and external influences, to lead the consumer to their
purchase. These influences are useful to marketers because they provide them with
information about the most ideal way to distribute, price, promote and evolve a product,
such as Tesla's Model 3. Explain what key internal and external factors Tesla has to take
into consideration.
a. The consumer decision making process is one that plays a role in every purchase a
consumer makes. Purchasing a Tesla is no different. When trying to market to a
consumer, one needs to take into consideration the external and internal
influences that will affect the decision process. For Tesla, external factors are
going to play a role in forms such as the consumer’s social status, their reference
groups, culture, and lifestyle. Internally, consumers are influenced in a variety of
ways. The consumer’s memory, emotions, attitudes, and motives are all going to
be useful for Tesla to research. In order for Tesla has selected a target market
when deciding to design a car that was only going to cost the consumer
$35,000(Tesla Model 3). This opened the doors for an entirely different social
class to consume their product. With that being said, the idea of Tesla going Mass
Market needs to be considered. The desire to identify with a specific reference
group is one that drives many consumers to purchasing a Tesla. If the company
does in fact decide to Mass Market their product there are many different aspects

9. they have to consider in order to help guide the consumer in their information
search. Concerns that top the list in consumer cautions are charging stations,
dependability, loss of idolized Tesla feature due to cost cutting, and worry that
production may be too slow to meet demand. Internal factors are going to be a
growing concern for Tesla as well. Tesla needs to decide if they are going to in
fact remain a company that is mostly based on WOM marketing or if they want to
perhaps become a company that relies more on advertising. With a change in
advertisement they company can play more towards the emotional side and to the
attitudes of the consumers. Making it known to the consumer that the new Model
3 is not only more affordable, it is eco-friendly, family oriented, and reliable.
Pedagogical Details
This case has been classroom tested. This case can be enhanced through the use of
attached PowerPoint slides and a handout with relevant charts and images pertaining to the
questions. Breaking up the classroom into four small groups in order have a thorough discussion
about each question works well. After each group has discussed the questions individually,
reconvene as a whole class and go over all the answers and have a wrap-up discussion about the
case and its implications.

10. Bibliography
About Tesla. (n.d.). Retrieved May 17, 2016, from https://www.teslamotors.com/about
Hull, D. (2016, March 31). Musk Unveils Tesla's $35,000 Model 3 in Push for Mass Market.
Retrieved May 17, 2016,
Kiley, D. (2016, March 30). Tesla Model 3 Could Be Timed Perfectly For Mass Market Electric
Driving. Retrieved May 17, 2016,
Mothersbaugh, D. L., Hawkins, D. I., Mothersbaugh, L. L., & Tom, G. (2016). Consumer
behavior building marketing strategy. New York, NY: McGraw-Hill Education.
Niedermeyer, E. (2016, February 11). Tesla Will Get Trampled by the Mass Market. Retrieved
May 17, 2016