Model S Sourced from Tesla.com
I work at an energy company, so I have a great interest in Tesla as it is at the cutting edge of commercialising new energy technology.
Tesla makes rechargeable energy storage systems, but it is their electric vehicles that catch my imagination. The Tesla Roadster, a high-end sports car, was their first in 2006. They currently sell two car models, a luxury sedan called the Model S, and the Model X which is a high-end crossover SUV.
On 31 March 2016, Tesla announced that its latest model, the Model 3, would be available from late 2017. So how will Tesla move from the concept of the Model 3 through to a successful launch? Marketing describes this through the New Product Development Process (NPDP), with a number of NPDP models presenting variants of this process, including, the Fuzzy Front End as described by Koen et al.
Iacobucci advocates four stages of NPDP:
- Idea Generation & Market Potential
- Concept Testing and Design and Development
- Beta Testing
Follow The Model 3 through this NPDP.
Tesla Roadster Sourced from Tesla.com
Idea Generation & Market Potential
Tesla has built its business model around the consumer trend towards greater environmental sustainability. Both of its core product offerings – electric vehicles and rechargeable energy storage systems are seen to pioneer greater environmental sustainability.
Tesla has been at the forefront of the electric car market since 2006, enabling it to gather significant market insight of what different segments of the car market think of electric cars.
The idea for the Model 3 would have started with the possibility of producing an affordable electric car. Tesla’s market knowledge would have shown that there was market potential. Fleshing out the idea would have involved bottom up input from the market and staff, but Elon Musk’s dominant personality would have ensured that the Model 3 idea would have been largely driven from the top down.
Tesla’s current two car models target the luxury sedan and SUV markets. The Model 3 will target the mid-priced car market. This broadens Tesla’s electric vehicle offering, fitting in well with Tesla’s current product range.
The Model 3 is not targeted at a price that will cannibalise Tesla’s existing models. The Model 3 will literally create and significantly grow a new mid-priced electric car market.
In Figure 1, the Model 3 shows Tesla pursuing a Market Development growth strategy, by down into the market development quadrant. The Model 3 is not a new product, (it is still a Tesla Electric Vehicle), but rather the same product, albeit modified, that is targeted at a new market.
Figure 1: Growth Strategies
Concept Testing and Design and Development
Tesla has developed and refined the concept of the Model 3 through the development cycles of the Model S, Model X and the Tesla Roadster. Tesla saw that there was interest in the market for an electric car at an affordable price.
Tesla’s focus and energies are currently in the Design and Development parts of this stage. Following are the key outcomes needed before Tesla can move to the next stage of the process:
- Design a desirable Tesla Electric car that targets the affordable car market.
- Choose processes and materials that facilitate the lower production costs required for the model to be affordable.
- Organise the production facilities, processes and logistics, ensuring they are scalable to the desired production volumes.
- Ensure that suppliers production is also scalable in desired timeframes.
These are the key outcomes that will determine if Tesla will proceed further with the Model 3 concept.
Model X Sourced from Tesla.com
If the Model 3 makes it to this point, Tesla will engage in some form of Beta testing. This may involve the release of a few initial limited batches of production as Tesla did with the Tesla Roadster. Beta testing will allow Tesla to iron-out design flaws before full production begins.
If the Model 3 makes it to this stage, it means it will be ready for Launch.
This will be the point where all the design, logistics planning and marketing plans will be outworked. This is the point where Tesla will start delivering Model 3s on mass to those who have pre-ordered them, and the point where Tesla will be able to hopefully pay down its development costs.
Model 3 Sourced from Tesla.com
Model 3 Progress
On 31 March 2016 Tesla unveiled the Model 3 with a price starting from 35,000 USD, with first deliveries starting late 2017. This Model 3’s market potential has been proved true so far with 325,000 customers pre-ordering in the first week after the unveiling.
It will be fascinating to see if Tesla can surmount the challenges entailed in the Model 3 development process and drive the company to greater successes.
Iacobucci, D. (2014), Marketing Management (MM), 4th Edition, South-Western, Cenage Learning, Mason.
Koen, P, et al. (2001), Providing Clarity and a Common language to the “Fuzzy Front End.’’, Research Technology Management, 44, 2, p 46-55 MasterFILE Premier, EBSCOhost, viewed 29 August 2016.
Kahn, Kenneth B.. PDMA Handbook of New Product Development (3). Somerset, US: Wiley, 2012. ProQuest ebrary. Web. 29 August 2016.
By: John McMurtry