Why the Tesla Model 3 is the new iPhone
Last week I did something I never could have predicted — I waited in line and made a reservation on a car without having seen it. I’m not one to spend money easily as I consider myself both frugal and someone who enjoys the research into buying something almost as much actually having it. This article is a rationalization of that decision and the observations of someone who has worked alongside the automotive industry for over fifteen years.
Simply put, Elon Musk and Tesla Motors just completely disrupted the automotive industry with the Model 3 announcement and its subsequent 250,000+ reservations. By adopting consumer engagement strategies that were pioneered by Apple and other tech companies, Tesla is well positioned to go from a niche high end car company to exploding their market share in the mid-range segment.
How did this happen? How did Tesla convince so many people to make a bet on a car that is perhaps 1–2 years away from delivery?
Charismatic and open leadership creates consumer trust
Can you name the CEO of any other car company right now? Honestly, I can name only one off the top of my head — Sergio Marchionne, CEO of Fiat/Chrysler. The reason I can is because Marchionne has been very visible and outspoken in the media. This was especially true during the years of the financial meltdown and the auto industry bailouts. Long gone are the days of Lee Iococca starring in television commercials pitching Chryslers to the American public. Auto CEOs are no longer household names.
Contrast that to tech companies. The best example would be Steve Jobs and his successor, Tim Cook. But that’s not all — you have very visible tech leaders like Mark Zuckerberg, Larry Page, Sergey Brin, Jeff Bezos, Jack Dorsey, and Meg Whitman. In many cases, these are household names that are almost universally recognized. These are people who are also completely accessible to the public via social media and frequent publicity. Other tech CEOs are on the rise too, like Satya Nadella (Microsoft), Gabe Newell (game industry giant Valve Software), and Palmer Luckey (Oculus Rift).
The auto industry comes nowhere close to this.
Along comes Elon Musk. He’s not overly polished like Steve Jobs or Tim Cook. His presentations aren’t amazing performances worthy of an Academy Award. He makes mistakes and stumbles over some of his words and is self-deprecating. But he has this incredible way of connecting with his audience and consumers. It isn’t just about how well he can present himself on stage. He’s constantly being interviewed about his business ventures or innovative ideas like the Hyperloop. He’s everywhere. If you have a question for him about the fabric in your Model X, he’s there and will answer on Twitter. This customer focus and sincerity is what endears him to the public and creates a feeling of trust with consumers. Compare this behavior to the manufacturer of my current car — they completely outsource their social media presence to a third party.
Looking at Google Trends, even before the Model 3 launch, Elon Musk’s popularity on Google completely overshadowed other automotive CEOs — and has just exploded.
Buying a car like you would an iPhone
When I heard that Tesla would have an online (and in-store) reservation system I had no problem accepting the idea. I have been preordering iPhones, iPads, and other tech gadgets for years. I recently preordered VR kits from HTC and Oculus. It came as a natural extension of a consumer behavior that I was very familiar with. The reality is that preordering a $800 phone is not the same as putting in a reservation for a $35,000 car, but it didn’t feel that way.
Based on my understanding of Tesla’s ordering process, the next step will be for me to figure out how I’m going to pay for the car and when the time comes to configure the exact car I want to build via an online builder tool. This is done 100% online. There is no need to go to a dealership. There is no pressure to accept a car that doesn’t quite fit what you envisioned. Can you imagine wanting a silver 64gb iPhone only to show up at an Apple store to be told that only 128gb rose gold is available? Then spending a few hours working out all the details and paperwork? On top of that having to perhaps come back another day to actually pick up your phone? Oftentimes this is the consumer experience for car shoppers and it flies in the face of how modern tech companies sell their products.
Tesla has adopted the iPhone way to buy their products. This is based on low friction and giving the customer exactly what they want.
The “earliest” of adopters and the sense of scarcity
When I told people about pre-ordering the Model 3 ahead of actually seeing it, I was called the “earliest of adopters” by an astute friend. Never in my right mind would I have considered doing this. But everything came together to make this happen:
· I was very impressed with Tesla based on their track record of innovation and customer satisfaction
· Elon Musk captured my imagination with his long term goal of making electric cars commonplace and his other ventures like SpaceX
· I had a strong feeling that this would be successful given the pent up demand for an affordable electric car with decent specifications
· The barrier for entry ($1,000) was low enough
This created a sense of trust and excitement which lead me to believe that I needed to get in early in order to actually receive a car in a reasonable time frame. That lead me to take a day off work and head down to the local Tesla store to sign up — all before actually seeing the vehicle.
Was I 100% convinced? No. Did I feel it was worth the risk? Yes. That was confirmed further with the great experience at the store which was quick and professional. Meanwhile, I’ve told everyone about the great experience I’ve had and maybe even helped push some people over the edge to reserve their own Model 3’s.
What’s next?
First of all, the auto industry needs to quickly open up and adopt the approaches Tesla has pioneered. The mistake right now would be to attack Tesla or try to diminish their accomplishment. Yes, there are big questions on how Tesla will actually handle this huge quantity of reservations. Not just on the manufacturing side but also on things like battery pack creation, and service center capacity. But they are in a good position to do this and to raise new funds to achieve those goals.
The first step needs to be consumer engagement and building up trust. Trust is earned and it’s earned one customer at a time. Going negative would only work against that goal.
Meanwhile, I’ll be waiting for new details to trickle out from Tesla and figuring out how I’m going to add a charger to my garage.
