Lessons learned from Tesla’s approach to selling electric vehicles
Why is Tesla’s sales journey so effective?
Tesla’s simplified approach starts at the beginning of the sales journey. The brand spends no time on first-contact activities, relying on customers to self-register their interest and book their own test drives online.
Subsequently, Tesla’s direct-to-consumer model and zero-rebate strategy allows it to eliminate the time traditionally spent on price negotiations (given that other studies have shown that up to 81% of buyers cars don’t like price negotiations, Tesla’s approach seems to be a win/win).
The brand’s simplified vehicle set-up also means deals can be done in minutes with a salesperson, or even done by the customer online. And he takes a very different attitude to discounts, with customers picking up their vehicles at regional delivery centers, often in groups with other new owners.
To enable this streamlined sales journey, Tesla has created a series of extremely lean organizational processes. This includes centralizing logistics, distribution, and billing, as well as supporting activities such as financial management, human resources, customer relationship management, and inventory allocation.
Profitability… but at a price?
Unsurprisingly, the efficiency of Tesla’s sales journey has a big impact on its cost of sales.
The absolute cost incurred per vehicle sold through traditional dealerships is approximately 1.6 times higher than for Tesla showrooms.
However, it’s important to recognize that Tesla’s ability to streamline its sales journey to this degree may be partly due to its unique situation.
The explosive growth of the brand has been mainly driven by a young and/or very enthusiastic generation of BEV buyers. These people value speed and simplicity and are comfortable interacting and transacting entirely online.
Whether this drive to adopt self-service processes extends to other consumer demographics is an open question for the industry. And time will ultimately tell if that leads to higher levels of customer satisfaction and loyalty among Tesla drivers over the long term.
Five key steps
That said, there’s no doubt that there are aspects of Tesla’s approach that all automotive brands can emulate today, especially when it comes to BEV sales. Broadly speaking, there are five immediate actions to consider.
- Consider digitizing the point of sale. A good example would be introducing digital screens in showrooms to provide up-to-the-minute details on pricing, emissions, fuel efficiency, etc.
- Seek to simplify vehicle configurators and make them independent of sales channels. Ideally, a customer should be able to configure their favorite car in ten clicks or less, with minimal (or no) assistance from sales reps.
- Consider how to leverage the loyalty of new and existing customers. This could include creating an online platform to connect potential customers with enthusiastic existing owners who can increase conversions by acting as brand ambassadors. Likewise, seek to build customer loyalty and loyalty from the outset by allowing new customers to return their vehicle if they are not completely satisfied.
- Help customers help themselves when it comes to researching their new purchase. Provide rich digital channels, video content and tools that allow buyers to learn about their particular vehicle.
- Consider moving the retail network to a direct sales model (i.e. an agency model for established automakers), whereby dealerships facilitate sales on behalf of an automaker and remain the main point of physical contact with the customer. This can help streamline and integrate offline and online customer journeys, as well as unlock significant cost synergies.