How did Tesla increase sales with a 0$ digital marketing budget?

Article : https://www.extole.com/blog/tesla-referral-program-how-to-grow-with-0-marketing-budget/

A closer look into Tesla's Marketing Program : 

Tesla has a really different relation with digital marketing from its competitors. Unlike most of the companies in the car industry, Elon Musk’s firm does not spend a huge amount of money neither on their communication nor marketing. Instead, Tesla built a 0$ referral program as its main digital marketing campaign.

According to ‘marketers’, Referral Marketing can be defined as « spreading the word about a product or service through a business' existing customers, rather than traditional advertising.”

Extending a company customer base and get new customer is costly: Tesla evaluated that the cost of a new customer was around 2000$. As the company’s marketing strategic presence is almost exclusive to online channels (both in their selling processes and communication) they understood that to be leader in a very competitive market, a special relationship with its customers was important. Therefore, since 2015 Tesla has decided to launch 5 different referral programs. All these programs reward  - on a different level -Tesla customers who advocate the acquisition of a Tesla car.

• ·       The first Referral Program: reward both the newly referred customer and the advocate with a 1000$ in Tesla Credit (with an online voucher code.)
• ·       The second Referral Program: reward the biggest advocates of each region by offering them a new Tesla, a home charger and a trip to the opening of the Tesla factory in Nevada. Again, the new customer received 1,000$ in Tesla Credit.
• ·       The third Referral Program: reward the advocate with a raffle to win a tour of SpaceX HQ (company managed by Elon Musk, CEO of Tesla). Also, the new customer received 1,200$ in Tesla Credit.
• ·       The fourth and fifth Programs: reward the advocate with exclusive Tesla items, based on how many referrals you are responsible for. Again, the new customer received 1,000$ in Tesla credit.

Referral Programs : A Risky Digital Bet ? 

As business students, we do think that this type of marketing can be both really effective and risky. Indeed, the specific case of Tesla or companies like Dropbox that have used Referral as main Digital Marketing campaign are the proof that it can work very well. It makes the customers feel like they have the power to be part of the company’s successtory. However, in order to be effective this referral programs have to rely on a highly qualitative product. Meaning, if your customers appreciate your product, they will likely advocate it and recommend it to their relatives. Yet, if your product or service lacks of quality, this strategy can then be dangerous as people are more easily tempted to write negative reviews that would spread online really fast. According to a lot of studies, a satisfied customer will tell 3 people about his/her experience with the company or the product. A unhappy customer will tell around 10 people about the poor experience he/she had with the company or the product. Online, this example is decupled.

Still, making Tesla’s users its best salespersons (for instance, one of the user is responsible for 16 millions in sales) is one of the smartest way to use digital channels today.  Social networks are a great catalyst for this kind of programs. Thanks to this tool, people can share their story and develop the brand awareness. According to Forbes, “92% of consumers believe recommendations from friends and family over all forms of advertising”. Giving people the incentive to expand the brand awareness is a great way to get new customers while fidelizing already acquired users.

What's in it for us ? 

Word of mouth marketing is complementing the Marketing 4Ps by the principle of the 3Es: Engage, Equip, Empower. With the rise of growth hacking and operational cleverness, digital tactics like this referral project are more and more important to interact with users. Understanding how to use traditional marketing levers in the digital area is, for us, a must have, in order to engage growth in either a small start up or a big company as Tesla.

Maxime K.

Mehdi S.

Other Sources : 
1- http://www.marketing-schools.org/types-of-marketing/referral-marketing.html
2-http://www.forbes.com/sites/kimberlywhitler/2014/07/17/why-word-of-mouth-marketing-is-the-most-important-social-media/#261737087a77