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17.1: The Use and Value of Marketing Channels

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Learning Objectives

By the end of this section, you will be able to:

• Describe the use of marketing channels.
• Identify the different types of marketing channels.
• Discuss how marketing intermediaries add value to products.

What Are Marketing Channels?

In addition to identifying ways to create value for consumers, marketers must also decide how to distribute market offerings. In this section, you’ll explore the important role that marketing channels play in delivering value to targeted customers.

A marketing channel is a system of people, organizations, and activities that work together to make goods and services available to consumers to purchase. Along the marketing channel, ownership of these goods and services is transferred from one channel member to the next. The goal is to create and deliver value to the final consumer by distributing these goods and services. The final consumer is the end user of a good or service. It includes grocery store shoppers, movie stream viewers, app users, vacation-takers, and many more.

Link to Learning: Distribution

To learn more about how the distribution of products works and the decisions marketers must consider when choosing the right marketing channel, watch the Channels of Distribution in Marketing: 8 Distribution Channels to Consider video.

Marketing Channels (Distribution Channels) Defined

It’s not enough for companies to create, price, and promote products and services that deliver value. A company must also decide where and how consumers can access and purchase the company’s market offering. Market offerings can include tangible goods, services, experiences, digital products, ideas, and information. All market offerings require a marketing or distribution channel to reach consumers.

Think of a channel like a stream or a river that carries a market offering to the consumer. Distribution describes how a company makes its market offering accessible for purchase. Local companies that sell to a smaller, more geographically concentrated set of consumers have a more simplified marketing or distribution channel compared to global companies.

The film industry provides a great example of the distribution decisions that marketers must make. Before a production company releases a new movie, it must decide which channels are best for distributing the movie to consumers. In today’s market, movie producers have a slew of distribution options, including Netflix , HBOMax , and YouTube , to name a few. They also have the option of distributing through traditional movie theaters, such as AMC or Regal . Regardless of the marketing channel they pursue, their goal is to distribute their movie to the right customers at the right place and at the right time. Production companies will choose the marketing channel that is most efficient at helping them achieve this goal.

Marketing Channels for Consumer Products

Companies that use intermediaries to deliver value to consumers have a variety of marketing channel options. There are four major types of intermediaries: agents or brokers, distributors, wholesalers, and retailers (see Figure 17.2).

An agent or broker is someone who acts as an extension to the manufacturer. While they never take possession of the product or service they represent, they earn a commission or collect a fee for facilitating the transaction between the customer and the manufacturer. Auto insurance agents, for example, may sell Geico or Allstate auto insurance policies to consumers. The agent serves as a representative who answers questions, gathers information, and provides a quote on behalf of the insurance company.

A distributor takes ownership of the product and tends to align itself closely with a manufacturer. For example, Coca-Cola uses distributors who contract to distribute only Coca-Cola products, not PepsiCo products.

Wholesalers are similar to distributors in that they take ownership of products; however, they buy a variety of products in large quantities and bulk-break for the purpose of distributing an assortment of products to retailers in a quantity aimed at meeting the needs of end users or consumers. Let’s examine how the different types of intermediaries depend on one another. AstraZeneca manufactures prescription medications that are made available to consumers by way of pharmacies such as CVS and Walgreens . Pharmacies are retailers in the marketing channel because they sell a wide variety of consumer products, from toothpaste to milk to medications.

Before AstraZeneca’s medications reach retail pharmacies, they are purchased in bulk by wholesalers who partner directly with AstraZeneca. Wholesalers are an integral part of the marketing channel because they package and handle medications and manage the logistics of delivery to retail pharmacies. This creates value for the customer in that the right quantity of medications arrives at retail pharmacies safely and in good condition.

The fourth type of intermediary is the retailer . Retailers also take ownership of the product, and their sole focus is on reaching the end user or customer directly. They purchase a wide variety of products in smaller amounts that meet the wants and needs of consumers. Retailers include companies like Rite Aid , Walmart , Target , and Hallmark .

Intermediary Functions

The intermediaries’ role is critical, and they perform a variety of functions (as shown in Table 17.1) that create value for other members in the marketing channel.

Let’s examine the three functions: transactional, logistical, and facilitating.

Transactional Functions

Intermediaries perform a variety of transactional functions that improve the efficiency of the channel. Transactional functions involve the buying, selling, and risk-bearing that accompany the movement of products along the marketing channel. Companies share the risk of ownership by temporarily possessing products before selling them to another channel member.

Imagine if a small bakery made the best oatmeal raisin cookies and decided to distribute them to consumers using local restaurants in the city. The bakery sells to the restaurant, who then sells to the customer. Temporary risk-sharing, in this scenario, means that at first the bakery assumes the risk in the making, storing, and transporting of the cookies, but that risk transfers to the restaurant once the restaurant buys the cookies. The restaurant then assumes ownership and responsibility for selling the cookies, which may involve placing them someplace customers can see them.

The transactional functions of buying, selling, and risk-bearing help add value in the marketing channel because the system allows for channel members to work together to move a product offering to consumers in an efficient and effective way.

Logistical Functions

In addition to transactional functions, intermediaries also perform logistical functions , which involve handling, packing, inventorying, transporting, warehousing, and ensuring the security of products as they make their way to the customer. In the earlier bakery example, the bakery must ensure the cookies are fresh and tasty in order to continue supplying restaurants with a product that consumers desire. In order to ensure that cookies meet the wants and needs of customers, both the bakery and the restaurant must ensure the product is handled safely in the marketing channel. That might mean selecting a trucking company that secures the cookies during transport to restaurants as well as packaging them so that freshness is sealed and quality is maintained.

Facilitating Functions

In addition to transactional and logistical functions, intermediaries also help in the facilitation of the purchase of products and services. Facilitating functions involve activities such as financing and sharing information with members of the marketing channel. Intermediaries may provide financing to one another and to the end user to help move the product along the channel. Financing involves one channel member allowing another channel member to pay over time.

In the bakery example, pretend that the restaurant purchases $12,000 in cookies each year. Instead of the bakery requiring the restaurant to pay for the order in full at the beginning of each year, it allows the restaurant to pay $1,000 a month over a 12-month period. This benefits the restaurant in that a large amount of capital isn’t tied up in its cookie order payment but instead is spread out over time. While some companies require payment in full, others permit payment installments over time. The terms of payment are explicitly stated at the start of the buying and selling relationship between companies.

Intermediaries also share information that can be used to improve marketing decisions. Intermediaries often share key data such as consumer feedback on a product or service, the shopping behavior surrounding that product or service, and historical purchase trends. The facilitating functions that intermediaries perform ultimately help marketing channel members make better distribution decisions and, in some cases, financially support the movement of these products and services in the name of delivering value to customers.

How Intermediaries Add Value to Customers

Intermediaries play a critical role in adding value to customers. They specialize in aspects of distribution that manufacturers don’t wish to specialize in. They create efficiencies in the marketing channel by reducing transactions, sharing important information among partners, and matching the right quantity of the right product to customer demand. While manufacturers focus on creating value for customers, intermediaries focus on delivering that value.

Dove manufactures millions of units of body wash, bar soap, dry spray antiperspirant, and hair products. In turn, it sells large quantities of these products to wholesalers, who after buying in bulk, break these large quantities down into smaller assortments that are then sold to retailers. This allows consumers to buy a variety of products in smaller amounts. They can visit a Target, a CVS, or the Amazon website and purchase three bars of soap, one bottle of shampoo, and one bottle of conditioner.

Without intermediaries, customers would need to buy directly from every manufacturer producing the desired product. Imagine grocery shopping without intermediaries. Instead of shopping at one or two grocery retailers for bread, milk, cereal, fruit, and ice cream, shoppers would need to buy from individual manufacturers, making shopping extremely time consuming and difficult.

Intermediaries add value by reducing the number of transactions between companies and customers. As illustrated in Figure 17.3, there are nine transactions without intermediaries and five transactions with the use of intermediaries. Consider the inefficiencies if companies had to directly transact with individual consumers.

Providing Needed Information about Products and Services

Intermediaries share pertinent information about the products and services that move through the distribution channel. More specifically, intermediaries gather, analyze, and communicate information to other distribution partners to improve the effectiveness and efficiency of the channel. This flow ultimately helps marketers plan and optimize the distribution channel so that consumers get the right products and services at the right place and at the right time.

Adjusting for Discrepancy of Quantity

As intermediaries move products and services from manufacturers to consumers, they offer the valuable service of accumulating and bulk-breaking. Bulk-breaking is when an intermediary takes a large quantity of a manufacturer’s product and breaks it down into smaller units to be distributed to retailers based on the consumer demand. Consumers desire to purchase in smaller quantities from retailers. Wholesalers buy in bulk from producers and break the bulk into the right size quantity for retailers, who ultimately meet the needs of consumers who want an assortment of products in small quantities.

Accumulating relates to intermediaries buying in bulk from different manufacturers. When buying in bulk, it is beneficial to the manufacturers because the risk is passed from manufacturers to intermediaries. The United States produces hundreds of millions of bushels of apples, oranges, and peaches each year. 2 These types of produce require different types of climates and care and are therefore grown in different states across the country. Wholesalers play a critical role in buying an assortment of this product in bulk from these producers and ensure that they are sold to retailers in the right quantity to meet the needs of consumers.

Together these activities allow intermediaries to offer retailers the right number of products to offer consumers, based on demand.

Adjusting for Discrepancy of Assortment

Intermediaries also add value by adjusting for the discrepancies of assortment between the manufacturer and the consumer. Discrepancy of assortment is the difference between the variety of products that a manufacturer produces and the variety that consumers want to purchase. Adjusting for discrepancy of assortment occurs when an intermediary buys from manufacturers, then regroups products into different assortments based on what consumers are demanding from retailers.

While manufacturers generally produce large quantities of one or a few types of products, consumers demand small quantities of an assortment of products. For example, when visiting the grocery store, consumers demand an array of different products in small quantities. Depending on the size of their household, consumers are generally shopping to meet the needs of one or a few people; therefore, they value the ability to buy a variety of products in smaller quantities. Intermediaries mitigate these differences by matching supply assortment to demand assortment.

Providing Credit to Customers

Intermediaries also provide credit to customers. Consumers can hardly check out at a cash register without being asked if they would like to sign up for a credit card. By extending credit to customers, retailers from Dick’s Sporting Goods to furniture retailer Wayfair give customers the chance to spend now and pay over a period of time with interest.

While providing credit to customers is often accompanied by special email offers and direct mail coupon codes, the corresponding interest rates are often high. Nevertheless, providing credit to customers can create brand loyalty and provide retailers with insight into consumer purchases. 3

Careers In Marketing: Distribution Management

Distribution managers determine when, where, and how much of a product is distributed. Learn more about the job role and what it entails in this video.

Michigan State University provides insightful information on this career, including a sample job description, roles and responsibilities, salary, education, and training. When looking at your skill development and what you may need in order to obtain a job, check out ZipRecruiter’s website. It indicates that while there are several skills needed in this job role, compliance and customer service are the most common. Read more about the needed skills on the Zip Recruiter website.

Knowledge Check

It’s time to check your knowledge on the concepts presented in this section. Refer to the Answer Key at the end of the book for feedback.

A(n) ________ is a group of people, organizations, processes, and activities that work together to deliver products and services to the consumer.

• manufacturer
• intermediary
• marketing channel

A(n) ________ is someone who acts as an extension of the manufacturer. While they never take possession of the product or service they represent, they earn a commission or collect a fee for facilitating the transaction between the customer and the manufacturer.

• distributor

Without intermediaries, the number of transactions between the total number of manufacturers and the total number of consumers would ________.

• stay the same
• decrease temporarily

What do intermediaries do to add value in the marketing channel?

• They perform important activities that manufacturers are not experts at performing.
• They increase the price of products and services for customers.
• They increase the amount of time it takes for products and services to reach consumers.
• They make improvements to the product so that it functions better.

As intermediaries move products and services from manufacturers to consumers, what key services do they offer?

• Pricing and promoting across geographical areas
• Surveying customers to ensure they are satisfied with their product or service experience
• Competing with one another to reduce prices for consumers
• Accumulating, bulk-breaking, adjusting for assortment discrepancies, and providing financing

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What Are Marketing Channels?

A marketing channel is the type of medium used to advertise your company. Learn how to choose the right marketing channel for your business here.

Digital marketing channels have been around since the earliest days of the Internet, but the marketing channel definition has changed with the times.

Back in October of 1994, if someone were to ask "What are marketing channels?" there would have been only one answer: Display ads.

AT&T sponsored a banner reading "Have you ever clicked your mouse right HERE? YOU WILL”. And, there being very few other sponsors of banner advertising, over 44% of people who had the Internet at the time clicked on that one ad.

Fast forward to 2022, and Smart Insights tells us that only 0.1% of Americans and 0.09% of Canadians will click on any given Internet display banner. Clearly, if you were to pose the question "What are marketing channels?" In 2022, the answer would not be "Oh, they are display ads."

But the variety and complexity of Internet marketing channels have tremendously increased in recent years. Digital marketing has evolved beyond paid advertising and other paid marketing channels. There are a variety of effective marketing channels that deliver content and promotion.

Types of marketing channels

In 2022, the answer to the question "What are marketing channels?" includes digital advertising, events, influencer marketing , search engine optimization (SEO), content marketing, word-of-mouth, and traditional marketing through mass media and print.

No matter what your marketing channel's definition, your marketing goals probably include raising awareness of your brand, generating leads, improving your conversion, and boosting repeat business.

As you will see in our examples to answer the question of "What are channels in marketing?" there is a digital marketing channel for every online business.

Digital advertisements

Digital advertisements enable you to use images, audio, and video marketing to communicate your message, market products , and reinforce your brand presence online. Display ads appear on websites, email platforms, social media posts, and many other digital channels, usually in the form of a banner, like the digital advertisement for AT&T we mentioned earlier.

Digital display advertising doesn't target keywords. It isn't limited to search engine results. There are many more pages for digital advertising on websites than there are for search ads on search engine results.

For those reasons, the cost per click for digital advertising is usually a lot lower than the cost per click you would have to pay for Google ads. However, you have to do some research to make sure that you place your ads on pages that have content that attracts site visitors who are interested in what you have to sell.

One of the advantages of display advertising is its capacity for tracking. If someone clicks on your display ad to go to your website and then doesn't convert, you can track them with a cookie. You can use this information to target your market with a more effective ad later. When you achieve contextual relevance with your ads, digital advertising becomes extremely cost-effective.

Email marketing isn't exactly the most modern technology available to digital marketers, but it is familiar, measurable, and well-understood.

Email marketing also allows you to take advantage of some of the latest tools of content marketing, such as automation and personalization while staying within your marketing budget. And even in 2022, 63% of digital marketers say that email is their top tool for generating leads and 73% say email is their cost-effective driver of new revenues .

Here is a simple fact that can make the difference between failure and success for your email marketing campaign:

In 2022, SuperOffice tells us, 62 percent of emails are read on a phone. Another 28 percent are read on a pad. Only 10 percent of emails are read on a desktop or laptop computer.

If you want to attract potential customers with email marketing , your messages must be framed for reading on a phone. And if your site must be fast-loading and responsive, or potential customers will simply swipe to the next message.

If you want to set your brand apart , you can't spend all your time building a digital presence . You occasionally need to meet your target audience face-to-face. Product reveals, brand reveals, client conventions, trade shows, and expos are all opportunities to exercise your sales skills in person.

Event marketing is a strategy for promotion that involves in-person contact between the people behind the brands, their influencers, and their customers. Every event is a little different. It is always necessary to provide at least slightly different content for different audiences, taking into consideration local culture.

Why is Event Marketing Important?

Most digital marketing professionals are finding that as the tools of online marketing become increasingly sophisticated, maintaining a good return on investment on marketing dollars requires constant innovation. If you are frustrated with open rates and click-through rates, consider hosting an event.

A survey sponsored by Aventri reported that 31% of marketers believe that event marketing is their single most effective tool for increasing revenues. Perhaps more importantly, 87% of executives believe in the power of events, and 84% of customers attending events stated that they had a more positive view of the product, service, brand, or company being promoted after they attended an event.

Influencer marketing

Influencer marketing has emerged as an alternative way of reaching consumers who have grown tired of other forms of advertising.

Backlink reports that 45 percent of consumers have ad blockers on their computers and 24 percent have ad blockers on their phones. But nearly everyone is on social media.

Social influencers blog about their lives and their experiences with the brands that sponsor them. The job of a social influencer is to establish online relationships. A byproduct of those social media relationships is interest in sponsored products.

Influencer marketing is relational, not transactional. You are building relationships with your brand, not sales of your products. But over time, you will get new customers who want to try out your products that social influencers mention online.

Search engine optimization (SEO)

SEO is a fundamental tool of multichannel marketing . SEO is all about making sure that your content is recognized by the search engines, namely, Google.

Google insists that the most important element of good SEO is useful content. If you are providing the content searchers are looking for, Google will reward you with high rankings, at least in theory. There are no magic algorithms that guarantee that your pages will rank in the top of the search results. but Mailchimp offers online instruction in SEO that will show you how to use headers, meta descriptions, and other tools of on-page SEO to boost your rankings in Google search.

Content marketing

Digital marketers around the world rank content marketing as their most useful tool in the day to day marketing efforts. The research service Statista reports that marketers are four times to list content marketing as their most effective marketing tool as social media, and three times more likely to prefer content marketing to improved U/X.

Content marketing can keep customers coming back to your site to learn more. They will not necessarily make a purchase every time they visit your site, but every visit reinforces your brand and makes your products the first choice for consumer needs.

Social media

TikTok has become a tour de force of the digital marketing world in 2022. It has overtaken Google as the most popular site worldwide, largely because its algorithms give everyone an equal chance to go viral. With one billion subscribers, TikTok still doesn't have the reach of Facebook. Every social media marketing strategy must include Facebook , too. But for huge promotional potential, be sure that TikTok is part of your social media plan.

Word-of-mouth

Word-of-mouth advertising is the natural outgrowth of great value and exceptional service. If you delight your customers, they will tell their friends. Word-of-mouth is free, and the benefit to your brand can be priceless.

Traditional marketing

Traditional marketing channels include direct marketing like television, radio, billboards, signs, and print. Traditional marketing still works for reaching enormous numbers of people at the same time. But you need to consider the cost of traditional marketing versus its potential benefits to avoid overspending.

Benefits of using marketing channels

What are the benefits of using these marketing channels?

Having a clear plan for how you will use each marketing channel available to your business helps you achieve a higher rate of return on your promotional dollars. Finding the right pros to manage your marketing channels costs money, but gives you a greater return than doing all the work yourself.

Marketing channels save time. You don't have to do all the work of distributing your product by yourself. And pursuing several marketing channels helps you find far more customers than you ever could on your own.

The right marketing channel for your business is the channel that brings you the greatest number of customers who spend the most money. Determining which marketing channels work best for your business isn't something you should leave to guesswork. The best way to choose the right marketing channels is to be SMART , targeting specific goals with agreed-on metrics of success, keeping your goals achievable, relevant, and time-bound.

Chances are you will test some marketing channels that you will later choose to drop. That's just part of the cost of business. Do A/B testing to find the marketing methods that work best for you, and use Mailchimp to keep up with the analytics that tell you that your marketing campaigns are still working.

Mailchimp has all the channels you will need to connect to your customers every day. You can create emails, ads, and landing pages all in one place, and test the tools Mailchimp makes available to you to find which marketing channels deserve the most of your time and your budget.

Mailchimp has discovered that marketing campaigns that involve different channels outperform single-channel campaigns by an average of 300%. Mailchimp can empower you to follow up on your digital campaign with a postcard campaign, automating the analytics so you can focus your attention on the things you do best.

Ready to get started? Set up your account with Mailchimp . Or call our sales department at (800) 315-5939. Mailchimp has all the tools you need for marketing success. You'll be in good company.

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Best Marketing Essay Examples

Marketing channels.

512 words | 2 page(s)

1) A distribution channel is a set of interdependent organizations that make available for use products or services. My contention would be that the most important marketing channel for a new product would be the product availability. As a new product or business, the product availability will vary with the product’s characteristic and the target’s customers. Some products may demand immediate availability (perishable products) while immediate availability is lLess critical for unique and important products as consumer specialty goods or major industrial equipment and installations.” “Distribution Channels.” Home. Ed. Paul Ducham. McGraw-Hill, 2013. Web. 21 May 2013.

2) The problem with global marketing is that a business is dealing with multiple languages and customs. Therefore, even the language on a product will have to be translated multiple times. If what is offered is service, a company will have to have employees that speak multiple languages and are also familiar with a certain culture’s social norms and conventions. The “Four P’s” of marketing–product, price, placement, and promotion-will all need to be adjusted in different markets. “The Global Economy.” – Importance of Marketing. Boundless, n.d. Web. 21 May 2013. “Sephora”

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3) Sephora could improve its supply channel management by the following: reducing inventory; improved transportation so that customers can ultimately receive their products in a more timely fashion; and better communication will enable the product to reach the customers more easily. Kedrowski, Thomas J. “Improving Supply Chain Management Drives a Turnaround in Tumultuous times.” Recently Filed RSS. N.p., 22 Sept. 2013. Web. 21 May 2013.

4) I am choosing Apple, which has been rated the number one retail store by USA Today. The tasks Apple would have had to face would be multiple considering their product is on the high-end of computer technology for consumers. Apple would have had to develop a “retail marketing strategy involving market research, product and promotional mix planning, budgeting and evaluation.” The very first move, however, would have been the identification of a target market, which is the most important step for a retail outlet. Apple would have had to recognize both its customer base and what exactly they were looking for in their product. I imagine that for Apple, their customers would have been willing to pay more for ease of use of the computers and would have looked for quality applications that are easy to use, which is the difference with any PC. One can really sit down with any Apple product and figure out how to use its software. That’s why most Apple products don’t even have instructions–something that baffled me when I bought my first Apple computer. Apple would also have picked its locations wisely and I think most stores are in the right location. For example, many Best Buys now contain an Apple portion of the store. Apple stores are most commonly found in shopping malls. I have not seen too many stand-alone Apple stores, which is smart because Apple wants customers to come in and play with their products. Akers, Helen, and Jessica Seminara. “How Do I Develop a Retain Marketing Strategy?” WiseGeek. Conjecture, n.d. Web. 21 May 2013.

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• Marketing Channels: NIKE

Marketing Channels: NIKE - Essay Example

• Subject: Marketing
• Type: Essay
• Level: Undergraduate
• Pages: 12 (3000 words)
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Extract of sample "Marketing Channels: NIKE"

Check these samples of marketing channels: nike, effective marketing strategies, managing conflicts in channel management, companies and marketing channels, the success of information media, the nature and importance of marketing channels, successful channel in marketing, digital marketing communication channels of nike, the fashion channel - swot analysis, consumer and market data.

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Marketing Channels in Business and Economics Essay

Marketing channels, development of the customer-producer gap, socioeconomic factors of the consumer-manufacture gap, gaps in marketing channels, need for marketing and the intermediaries, universal functions of marketing.

In recent times, marketing is increasingly becoming complex. The industrial revolution has been considered to be the primary catalyst for increasing market complexities. With improved transport systems, local goods have reached international markets. Characterized by different cultural demands and consumer preferences, among other factors, manufacturers are faced with the challenge of reaching these markets (Reddy & Pellegrini, 2012). Marketing channels have been developed to bridge the gap between the consumer and the producer to address this issue, to address this issue. In line with the importance of marketing channels, this paper will discuss the gap that separated the production from the consumer, the role of intermediaries in bridging the difference, and the purposes of marketing.

In the early times, the business was characterized by a primary mode of transport. This primary mode of transport ensured that the consumer got their products at the appropriate time. The cost of moving products from one place to another was a significant determinant of not only production but also distributing approaches. Therefore, products were placed closer to the raw materials (Boone & Kurtz, 2013).

Through such methods, products found their way to the customer by way of linear chain distribution. Production and consumption were done at the local levels. Local production of products meant that manufacturers and consumers could effectively communicate with each other. It was easy for the customers to specify the features they needed in these products and services. While a village blacksmith and potter characterized the ancient markets, consumer needs were quickly addressed.

The industrial revolution led to the improvement of sea transport in the18th century. Shipping technology in the 18th century led to increasing the scale of international shipping. The success of introducing ram in the global markets led to the shipment of slaves and sugar cane into the world markets. By 1840, locally produced goods such as drinks had entered into the international markets (Boone & Kurtz, 2013). At the climax of the industrial revolution, India had started exporting Cotton to all parts of the globe. Altogether, the improvements in the ancient markets led to the development of steamships by the mid of the 19th century (Coughlan, 2010). Although characterized by excellent transport networks, inferior modes of communication have greatly influenced the supply systems of the 21st century.

Since its inception, marketing channels have gone through a series of transformation phases. These phases include the Production Era that existed in the 19th and early 20th century, the production era in the 1920s, and the marketing era in the 1950s (Reddy & Pellegrini, 2012).

Foremost, the production era began in the 19th century and ended in the early 20th century. In this phase, a higher concentration was placed on not only plant efficiency, but also the capacity and volume expansions. Salespeople played a critical role in linking the manufacturer and the consumer. At this time, salesmanship was more of an art than skills. The next phase of marketing channels was the sales area. This era existed began in the 1920s. During the Sales Era, both economic prosperity and the industrial revolution were at its pick. Marketers began to realize that sales required skills. The last phase of marketing channels was the marketing era. The marketing era started in the 1950s. During the marketing era, sales representatives were required to link the manufacturer and consumer. The roles of marketers included goal setting, developing markets, and forecasting the market.

The gap between the consumer and the manufacturer associated with a wide range of factors. Foremost, globalization has led to increased growth in the fashion industry. As a result, the market attractions have significantly affected the consumer cultural attributes across the customer segment (Hopkinson & Blois, 2014). For this reason, the shift in cultural values became a significant issue for marketers. The different cultural values across the globe have forced marketers to adopt marketing channels that will meet the needs of different cultures. Another socioeconomic factor that has led to the increasing gap between the manufacturer and the consumer is consumer preference. New products in the marketplace exist because of the industrial revolution. With a wide range of products in the market, consumers have developed unique preferences (Reddy & Pellegrini, 2012).

Consumer preferences have made it difficult for manufacturers to meet the increased consumer needs. The Last socioeconomic factor that has led to the gap between the consumer and the producer is the purchase intentions. In the recent past, consumers have developed the unique needs of purchasers.

The industrial revolution came with many holes in the marketplace. Many consumer demands characterize contemporary consumers. Today’s consumers do want not only high-quality goods but also quality customer services (Hopkinson & Blois, 2014). For this reason, manufacturers will not gain a competitive edge by meeting the physical needs alone. The many gaps present in marketing include customer gap, knowledge gap, policy gap, delivery gap, and the communication gap.

To begin with, the knowledge gap the manufacture’s opinion and customer’s expectations. The policy gap focuses on the separation amid the service quality requirement and the management attitude (Hopkinson & Blois, 2014). The customer gap is the difference that exists between consumer attitudes and consumer expectations. Lastly, the communication gap exists amid external communications and the delivery of service.

Customer knowledge and communication gaps are increasingly making the delivery of products and services to the consumers have become complicated. Over time, the effects associated with this separation has forced business people to come up with approaches that will help in bridging this gap. As a result of the challenges related to the difference between the consumer and the manufacturers, marketing approaches have been invented to address these issues (Reddy & Pellegrini, 2012). These marketing activities are not only meant to overcome, but also neutralize these increasing gaps and inconsistencies in the channels of marketing. Intermediaries should be involved in the chains of distributions to address these challenges.

Marketing has comprehensive functions. The primary purpose is to bridge the gap between the consumer and the producer. They achieve this through the transportation of products to the market, the formation of markets, purchasing of products, trading of commodities, offering storage services, standardization, and sorting, funding, and risk-taking (Reddy & Pellegrini, 2012). Through its intermediary role, marketing is responsible for the breaking bulk process. Marketers meet the needs of customers since they want these products in small quantities. Marketing channels comprise of set independent roles that ensure products reach the consumer.

Boone, L., & Kurtz, D. (2013). Contemporary marketing . Fort Worth, TX: Dryden Press. Web.

Coughlan, A. (2010). Marketing Channel Strategy . Wiley International Encyclopedia of Marketing . Web.

Hopkinson, G., & Blois, K. (2014). Power-base Research in Marketing Channels: A Narrative Review. International Journal of Management Reviews , 16 (2), 131-149. Web.

Reddy, S. K., & Pellegrini, L. (2012). Retail and Marketing Channels: RLE Retailing and Distribution. New York Routledge. Web.

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Tesla Cars Company: Marketing Strategies and Channels

Introduction.

The proposed study will focus on investigating marketing methods for Tesla to help it survive in the market for its new technology products. While automobiles have been marketed for more than a century, Tesla offers a radical disruptive, plug-in electric vehicle that matches the performance of conventional fuel vehicles, such as diesel and petrol vehicles. The marketing channels, the marketing mix, and integrated marketing communication methods will be analysed to indicate the best methods that Tesla can use to sell its electric vehicles. This research will use a mixed-method approach with primary and secondary research.

Tesla Inc. is a manufacturer of electric cars, energy storage products, and solar panel manufacturer based in Palo Alto, California, in the US. The main promoter of this firm is Elon Musk who is also the CEO of Space X and the chairman of SolarCity Corporation. Tesla became famous after the launch of the Model S, a plug-in electric car that had the performance in speed and acceleration of petrol-fuelled cars. Subsequently, Tesla introduced the Model X, and Model 3 cars (Tesla 2017). The latest Model S achieves an acceleration of 0-60 miles per hour in 2.9 seconds and can run for 335 miles on a full charge, with seven passengers. Achieving a full charge takes about nine hours, and the electricity cost for a full charge is about $12/ hour. With the awareness of pollution caused by diesel and petrol cars, electric vehicles are increasingly in demand (Models 2017).

Over the years, several automobile manufacturers, such as General Motors, Ford and others, have offered fully electric vehicles. Sales were low, however, since these models had low performance. The market changed with the introduction of Tesla cars in 2012, which were very well received (Bartlett 2017). The Model S saw sales of 150,000 units by November 2016, and the Model X, which was released in July 2017, saw sales of 250,000 units. The basic version of the Model X starts at $80,700, while a fully loaded version costs more than $100,000. The basic version of Model 3 is $36,000 while the Model S costs $69,000 (Car & Driver 2017). There are plans to introduce lower-end models and customer satisfaction stands at 91%, which is a high score (Kane 2017).

These indicators mean that Tesla has a secure future. The problem is in the high debt of $6.8 billion that Tesla has accumulated. In addition, development costs for Tesla cars are high and marketing costs are presently about $2 billion, turning the firm into a negative cash flow entity. To break even by 2020, Tesla has to sell more than 2 million units per year, and customers must buy several add-in features worth at least $10,000 per car (Jones 2017). Unless Tesla achieves these sales, it is likely that the firm will close down and declare bankruptcy. The target segment for Tesla cars includes affluent people who are environmentally-conscious, and who are willing to pay the premium price (Lambert 2017). Aggressive marketing and promotion methods are needed with the optimum segmenting, targeting and positioning techniques in the appropriate marketing channels. With this background, this paper presents a proposal to examine marketing techniques to increase the adoption rate of Tesla cars.

Justification of the Research

The US car market is very competitive with a number of leading automotive manufacturers such as Ford, Toyota, Honda, BMW, Chrysler, GM, and others, manufacturing and selling cars. In 2017, more than 7.1 million units were sold, and the total revenue was $715.85 billion. Electric plug-in cars saw encouraging growth and in 2016, US sales grew to 570,187 units. However, these vehicles represent less than 1% of the total sales. Hybrid vehicles have also experienced strong growth. A hybrid car runs on diesel or petrol fuel and has an additional electric motor drive, which runs the vehicle on highways, reducing carbon emissions. These hybrid vehicles compete with plug-in electric vehicles (Statista 2017).

A number of well-established car manufacturers offer electric vehicles. Some popular models are the Chevrolet Volt, a plug-in hybrid, the Nissan Leaf, BMW’s 330e and 740e iPerformance vehicles, the Toyota Prius Prime, the Chevrolet Bolt EV, the Mercedes-Benz C 350e Plug-in Hybrid, the Kia Optima PHEV, Hyundai’sIoniq Electric, the Audi Q7 e-tron Quattro, the Jaguar I-Pace, Porsche’s Mission E, and several others. These models fall in the range of affordable cars that compete with the Tesla Model S and premium luxury cars, which compete with the Tesla Model X. Almost every global automotive company offers plug-in or hybrid vehicles. These cars have good sales rates and sell more than 50,000 units (Cazzola 2017). The Tesla Model X outperformed its rival Audi SQ7 and Range Rover Sport in road tests. However, the latter two models are in the $85,000 range, while the Model X costs more than $100,000 (Barry 2017). Many cities and offices have installed direct current fast charging (DCFC) units where these vehicles can be charged. Availability of these charging units and the capability for fast charging is important to drivers.

Another aspect is that large automotive manufacturers sell a large number of conventional fuel vehicles, which provide them with sufficient revenue and economies of scale. As a result, these firms can absorb the cost of research and development without financial breakdown. This is not the case with Tesla, which must obtain minimum sales of a limited line to remain viable. Another issue is that the major firms can outsource the motor, electric drive, battery, and other components, thus reducing their overhead. Tesla, on the other hand, manufactures all its components in-house, considerably adding to costs. Therefore, Tesla operates in a market dominated by major automakers who want to have a presence in electric plug-in and hybrid vehicles since they are a future growth area. It appears that Tesla does not have a competitive advantage over its rivals (Wood 2017).

The justification for this paper is as follows. The previous paragraphs show that the market for electric plug-in and hybrid vehicles is rapidly growing. A number of leading automotive manufacturers have entered the market and offer high-performance cars. It is essential to develop innovative marketing strategies to help Tesla succeed in this competitive market.

Literature Review

The literature review will bring out important topics, such as the marketing forces, diffusion of technology and user adoption, and marketing of hi-tech, innovative products as they relate to electric plug-in and hybrid vehicles and Tesla.

SWOT Analysis of Tesla

A SWOT analysis helps to identify the impact of internal or micro forces on a firm and its product. The analysis helps to formulate a firm’smarketing plan (Hollensen 2015). The four forces that make up the SWOT analysis are strengths, weaknesses, opportunities and threats. As for Tesla, a SWOT analysis reveals the following:

• Strengths: Strong products – Tesla cars are valued for their performance, brand identity, and charisma. The firm has managed to gain quick popularity in a few years.
• Weaknesses: Tesla cars are more expensive than equivalent rival models. Tesla faces a huge debt burden, and future development, marketing expenses, and viability are under threat.
• Opportunities: Tesla needs to enter new markets in China and Japan, where electric vehicles are in demand. It needs to focus on upper-class business people, executives, and celebrities who are environmentally conscious.
• Threats: Tesla faces threats from established, global automotive firms that have introduced similar types of electric plug-in and hybrid vehicles. The firm needs to undertake segmentation, targeting and positioning study, and develop a unique value proposition that will attract the target segments.

PESTLE Analysis of Plug-in Cars

A PESTLE analysis is used to understand the macro or external forces that act on an industry and a firm (Barney 2014). The six forces (political, economic, social, technological, legal and environmental) are analysed for Tesla as follows (Tesla 2017).

• Political: Political support is strong for plug-in electric cars since they are green and have zero emissions. Governments provide subsidies and charge lower taxes for these cars.
• Economic: Global markets have yet to recover from the economic recession and spending is subdued. However, luxury and premium high product sales have increased. Therefore, affluent people have funds to buy expensive plug-in electric and hybrid cars. Operating costs are lower, which is an attractive feature.
• Social: With increased awareness of limiting pollution, reducing carbon footprints, and saving the environment, electric vehicles are gaining in popularity. Tesla and other car models are attractive, show good performance, and are popular. Driving one of these environmentally-sound vehicles makes a person socially acceptable and admired.
• Technological: Tesla cars use high levels of technology in the engine, transmission, and accessories. New models are introduced regularly and innovation levels are high.
• Legal: Patent protection is poor in the industry and innovators often see their ideas used by other auto manufacturers.
• Environmental: With increased concerns to save the planet from carbon emissions and excessive fossil fuel consumption, electric vehicles have gained in popularity.

Porter’s Five-Forces Analysis

Porter’s Five-Force analysis helps to understand the severity of competition and the strength of entry barriers in a market (Porter & Heppelmann 2015). The five forces are threat of new entrants, the threat of substitutes, the bargaining power of customers, the bargaining power of suppliers, and industry rivalry. These factors for Tesla’s electric plug-in vehicle are discussed below (Tesla 2017).

The threat of new entrants: if the returns and growth prospects are high, then the industry will attract new entrants. Electric plug-in vehicles are considered the future of transportation. With depleting reserves of fossil fuels and increased concerns about carbon emissions, many automobile manufacturers have entered the market for electric vehicles. Success depends on cost advantage, economies of scale, cost of production and sales, quality, product appeal, brand identity, and price. Large automotive manufacturers find it easier to enter and consolidate the market since they have extensive supply chains of vendors and dealer networks. Therefore, the threat of new entrants for Tesla is high.

The threat of substitutes: Electric plug-in cars face the threat of substitute products such as conventional and petrol cars, solar-powered cars, natural gas-powered cars, and hybrid vehicles. Electric vehicles face threat from these products when the issue of green and zero-emission is considered. The threat of substitute products is medium.

Bargaining power of customers: Customers have a choice in the range of models, features, and price. Customer loyalty for electric vehicles is not clear and data is not available to determine if owners of fossil fuel car will switch brands when they consider an electric vehicle. The bargaining power of customers is high.

Bargaining power of suppliers: These entities supply parts to manufacturers. Suppliers are selected as per their quality standards and ability to scale operations. Replacing a supplier is cumbersome, but possible since firms have multiple suppliers for each part. Therefore, the bargaining power of suppliers is low.

Industry rivalry: As indicated in the previous sections, the automobile market is very competitive. A large number of global brands compete in product features and price. The same pattern is seen in electric vehicles and Tesla faces great competition. Therefore, industry rivalry is severe.

Summary of the Analyses of the Marketing Forces Models

The SWOT, PESTLE and Five-Forces analyses have brought out some important points, and these are explained as follows. The SWOT analysis indicates that Tesla has a strong product line, the cars are popular, trendy, and have good performance. Pricing may be a deterrent and opportunities exist among the upper class of environmentally conscious consumers. Tesla faces competition from global car manufacturers who have lower overhead costs and well-developed networks. The PESTLE analysis shows strong political support and sustained consumer interest since electric vehicles are environmentally friendly with zero emissions. The Five-Forces analysis indicates that the intensity of competition is severe, that it is a buyer’s market, and substitute products are available. The marketing strategy will need to consider these issues.

Consumer Behavior and Buying Intentions

The purchase of electric vehicles is subject to customer preferences and buying behaviour patterns. Monitoring buying behaviour and consumer behaviour helps to understand the manner in which customers react to a product, the stimulus they perceive from advertisements, and their behavioural intentions. Purchase intentions and decision can be modified from initial deference to a positive trigger, where a customer decides to buy a product. As seen in the earlier sections, the penetration of electric vehicles in the market is low and stands at less than 1% of the total vehicles sold. Customers are somewhat confused by the types of electric vehicles. Different types include hybrid electric vehicles (HEVs), plug-in hybrids (PHEVs), and full battery electric vehicles (BEVs). Tesla is a BEV, meaning that the vehicle is charged by plugging into a suitable electric power outlet (Singer 2016).

Two main types of theories help to understand customer selection among various alternatives: economic and psychological. Economic theories use parameters that specify weights in decision making, while psychological studies consider motivation, external influences, attitudes, emotions, and perceptions. Some direct and indirect relations are formed between these factors. Car manufacturers usually focus on economic factors, such as cost savings, availability of charging points, costs per charge, maintenance and operating costs, and other such factors. Advantages like zero pollution, zero carbon emissions, etc. are stated, but these messages are not the focus. Factors considered during the purchase decision process is utility, individual-related variables, and attributes (Petschnig, Heidenreich & Spieth 2014). Figure 1 illustrates these factors.

Customer preferences can be grouped into various attributes such as financial, technical and infrastructure, policy, dynamic, socio-economic and demographic characteristics, and psychological theories. Consideration of these attribute is needed when designing the marketing strategy. These attributes are briefly discussed as follows.

Financial, technical and infrastructure attribute: These attributes refer to the direct and indirect costs of owning a Tesla car, the technical specifications, and infrastructure availability. Fig. 2 lists some variables of these attributes.

Figure 2 lists some of these attributes and variables. Each customer may give a different weight to the variables. This means that for one customer, the price is very important, while for another, the acceleration time and maximum speed are important. Generally, the price, driving range, top speed, charging points, and charging times are considered most important. One very important aspect is the driving range of a full charge. Users who plan long trips need an assurance that the car would not discharge in the middle of a journey. Tesla specifies that its car can travel about 300 miles on a full charge. In its promotion material, factors like the number of passengers and load carried, uphill and downhill conditions, air conditioning use, etc. are omitted. As a result, a customer may well run out of charge after travelling just 200 miles, becoming stranded and helpless. Tesla must consider these aspects in its marketing strategy (Mabit & Fosgerau 2011).

Brand is very important and automakers such as Audi, Mercedes, BMW, that have decades’ old reputations as reliable brands. Customer awareness of these brands is high, leading to the acceptability of new electric vehicles from these brands. Similarly, brand diversity, or the number of brands and models available, is important. When the market is open and competitive, then brand diversity is high. Tesla faces these barriers in its drive to sell more cars (Hoen & Koetse 2014).

Policy attributes: These refer to different policies, schemes, and concessions that the auto manufacturers and the government announced to promote sales of electric vehicles (Mabit & Fosgerau 2011). Fig. 3 lists some of these policies.

As seen in Figure 3, government policies to promote electric vehicle use include the reduction of purchase taxes or on-road taxes, removing tolls, allowing free parking where available, and allowing single-occupant cars to use high occupancy and priority lanes. Such benefits and policies are a constant reminder of the benefits of electric vehicle use.

Socio-economic, demographic, and psychological attributes and variables: Some of these attributes and variables are explicit and have a significant impact on the buying decisions (Beck, Fifer & Rose 2016). Figure 4 lists some of these variables.

As seen in Figure 4, a large number of factors influence the purchase decision. The number of cars on the road and parking space availability is an important factor. Customers in the suburbs have larger homes and ample spaces to park cars, while those in large cities have limited parking spaces. If a family has a conventional fuel vehicle, then may hesitate before buying another vehicle due to parking restrictions. The size of the existing car is also important and a family-owned a small car would reconsider buying a larger car due to perceived problems in driving (Rasouli & Timmermans 2013).

Bessenbach and Wallrapp (2013) have researched the barriers to purchasing electric vehicles. These include customers’ car involvement, ecological consciousness, EV exposure, bad publicity and adverse media reports, buying incentives, monetary benefits, functional benefits, indirect benefits, and consumer preferences. Therefore, the marketing strategy needs to convey a message that overcomes these barriers.

Theory of Diffusion of Innovation

Tesla vehicles and other electric cars are radical innovations that have the potential to disrupt existing conventional fuel cars. The rate of acceptance or rate of diffusion of these innovations into society must be large enough to ensure the success and sustainability of the brands. The theory of diffusion of innovations, proposed in 1962 by Everett Rogers, explains the process taken to spread innovation in society (Rogers 2003). According to this theory, the following elements can help or hinder diffusion: compatibility, relative advantage, risk, complexity, and trialability. In addition, four elements are important in communicating new ideas: the innovative idea or product, the communication systems and channels, the social system or communities, and time. Product manufacturers want their innovations to spread in society at a rapid rate until a critical mass is reached. In addition, users adopt new innovations at different rates, forming five groups: innovators, early adopters, early majority, late majority, and laggards (Cho, Hwang & Lee 2012). Fig.5 illustrates the model.

Figure 5 illustrates the division of market share percentage among different users. Adopters are communities, individuals, and businesses, clusters of industries, social networks, and countries that adopt or use a product. The five categories of adopters are briefly described below as they reference Tesla.

Innovators: These are the first users who buy a product as it is introduced in the market. They are risk-takers with financial stability who derive their motivation from being the first users of a product in their social circle; they are driven by the thrill of owning a new product and the associated ‘bragging rights’. Innovators make up 2.5% of the market. In the case of Tesla, innovators were the first group of people who purchased the Model S, launched in 2012. Some innovators sell off their early purchases and buy newer models when available. Tesla must keep in touch with innovators (Higgins et al. 2012).

Early Adopters: These are the next group of users who are opinion leaders. They make up 13.5% of users. They prefer to wait for some time after a product launch before their purchase. These people are more discreet, they judge the options available, have sound financial stability and are ready to take calculated risks. The important characteristic of this category is that it is elastic and community members can influence others to buy a product. Hence, they are social influencers. For Tesla, this group makes up customers for the Model X and the Model 3. Tesla needs to increase the number of members in this category since it is easier to sell to this group (Karakaya, Hidalgo & Nur 2014).

Early Majority: This group of people make up 34% of the market. They have medium risk aversion with restricted financial stability and wait until their acquaintances and members from their social community adopt a product. The length of time waiting before buying a product is longer and they follow opinion leaders. Some percentage of this group can be induced to buy a product if offered the appropriate value proposition. Tesla needs to look at this group to drive sales with appropriate value propositions (Walker, Avellaneda & Berry 2011).

Late Majority and Laggards: These groups make up 34% and 16% of the market, respectively. Members are sceptical of market reports, have less than average social status, lower liquidity, and are prone to view new products with suspicion. A point of importance is that well-off elderly and middle-aged people with sufficient funds fall in this group. They may be unwilling to give up old cars that they drive for many years. Other members may wait until the innovation peaks its lifecycle, watch for price reductions, and then purchase a product when it becomes more affordable. Tesla needs to cover these two groups with occasional communication and keep them ready when lower-priced models are launched in the future (Zhang, Gensler & Garcia 2011).

The assessment from this discussion of diffusion is that Tesla needs to focus on three groups: innovators, early adopters, and the early majority. A maximum number of users would be drawn from these groups, although higher volumes could come from the late majority and laggard groups. It is important to carry out segmentation, positioning, and targeting (STP) studies for these groups.

Marketing Techniques and Methods

As indicated in the previous sections, Tesla cars are innovative and hi-tech products. The cars are premium priced and appeal to specific segments of customers who have a different set of requirements. Some methods of marketing are discussed below.

STP studies: While Tesla has sold more than 450,000 cars, it is important to use its previous sales information to develop segmentation, positioning, and targeting strategies. It appears that Tesla has tapped the innovators and early adopters and it next needs to bring in more people from these groups as well as from the early majority group. Tesla needs to know who these members are, along with their professions, lifestyles, attitudes towards the environment, disposable incomes, etc. The profile of a typical buyer should be created and the marketing strategy should focus on members of this segment (Schlegelmilch 2016).

Marketing mix: The marketing mix extends beyond the standard 4Ps to 7Ps. Today, elements of the marketing mix include product, price, place, promotion, physical evidence, people, and process. The extended marketing mix is needed since the environment where Tesla cars are sold and serviced, the sales and service personnel, and the process of registrations, trial drives, sales, after-sale service, charging points, and the experience of owning a Tesla car are all important. Where possible, Tesla should set up separate charging centres with power supply from solar and wind power (Keller & Kotler 2016).

Marketing channels: These represent channels used for communicating with existing and potential customers. Tesla customers are educated and use social media, the Internet, mobile apps, online publications, TV and other conventional channels. Tesla can increase the use of online media, create separate social media campaigns, and promote memberships. It can also create virtual communities in important cities where Tesla car owners may meet, have drinks, listen to music and entertainment. The focus should be on positioning Tesla as a lifestyle product that is environmentally friendly and helps users to make a fashion statement (Kotler & Armstrong 2013).

IMC methods: Integrated marketing communications are recommended for marketing methods. Consistent messages need to be transmitted through all the marketing channels. The marketing campaign should be monitored to identify channels that bring the maximum returns. Future communications can then focus on these channels (Belch et al. 2014).

This section reviewed the literature on electric vehicles, presented an analysis of the macro forces, micro forces, and the strength of entry barriers. The market for Tesla vehicles has shown strong growth, and while the competition is high, Tesla can build on its product and brand strengths to increase sales. The theory of diffusion applied to Tesla makes it clear that the firm needs to focus on innovators, early adopters, and the early majority. Some potential marketing methods that would help Tesla are STP studies, developing an appropriate marketing mix and implementing marketing messages using online and traditional channels using IMC.

Methodology

The intention of the research is to find methods and processes for effective advertising strategies for Tesla. As mentioned in the initial chapters, Tesla faces an immediate urgency to bring in focused advertising to increase sales. Answers or solutions to this problem will be derived by using a mixed-methods approach. In this method, a literature review will help to find out past methods used by technology firms in delivering innovative products. Several attributes that affect electric vehicle purchase decision and their variables will also be identified. While examples of Apple’s iPad and other technology devices come to the mind, these are not suitable comparisons, since an Apple X phone costs about $1000, while a Tesla Model S costs more than $100,000.

Therefore, customers’ level of commitment and decision-making regarding Tesla products are more intensive due to the high cost of the product. This proposal is for a multi-method approach. First is secondary research to analyse and assess marketing methods and processes, and to identify important attributes and variables. Then, these findings will be used to design two survey instruments to conduct primary research. Respondents for the first instrument will include existing owners of Tesla and potential customers. The second instrument will be a semi-structured survey instrument and respondents will be managers of large car dealerships. Findings from these three methods will be triangulated to obtain a concise set of findings. These findings will form the basis for recommendations of the marketing strategy for Tesla (Smith 2015). Figure 3 illustrates the research model.

Research questions

The following research questions are proposed.

What marketing strategies and methods are suitable for Tesla to increase sales rapidly?

What factors act as motivators, drivers, and inhibitors in Tesla achieving high growth?

Aims and Objectives

The aim of the research is to determine the marketing strategies and channels that are most suitable to sell Tesla cars and help the firm to survive.

The objectives of the research are as follows:

• Carry out STP studies to identify the appropriate segments, target these segments, and develop a positioning strategy with a USP.
• Research and suggest integrated marketing strategies for the selected segments.
• Evaluate and select marketing channels and modes to deliver advertising content and promotion strategies.
• Develop a time-bound plan with indicative costs to implement these strategies.

Research Philosophy

The research philosophy requires adopting a structured path to gain knowledge and define the reason for the research. It helps to answer questions on the research subject, the methods used in the research and the reasons for the research. The research philosophy specifies the set of values, beliefs, and assumptions considered for the research (Saunders 2011). Important philosophies available are pragmatism, realism, positivism, and objectivism. Among these, the positivist method is used in this research to study the various issues in the research. The positivist philosophy uses logical deduction and observations of an event and assesses them to understand relations between different entities. Data gathering tools, such as surveys, are used in the research. This research will use a positivist philosophy since the objective is to find a suitable marketing strategy for Tesla (Bryman & Bell 2015).

Research Approach

The research approach is the formal and structured method used to develop knowledge for the research through a set of assumptions. Two types of approaches are available namely, deductive and inductive. The deductive approach, also called the ‘top-down’ approach, makes observations of a phenomenon through observation or surveys. Using findings from these observations, important points and issues are drawn that reveals the nature of the event, and appropriate recommendations are made. The inductive approach, or ‘bottom-up’ approach, develops a set of hypotheses about an event. These hypotheses are tested through a survey instrument or through secondary research and data is analysed with statistical analysis tools, such as SPSS. A review of both approaches indicates that the deductive method is suited for this research since we do not know already about the marketing methods of Tesla. The survey instrument will elicit responses from the respondents and develop conclusions and recommendations (Sekaran & Bougie 2016).

Two other important approaches relevant to academic research are qualitative and quantitative methods. The qualitative method is not complex and it uses responses through contextual analysis and with simple Excel calculations. Data gathered is simple and variablesand their relations are not examined. The qualitative method uses simplistic surveys with basic Likert score questions, and close-ended questions, with multiple options. Respondents select one or more options and create a spectrum of responses. These responses are analysed with keyword associations or simple data analysis and conclusions are drawn to answer the research question. The qualitative approach is used along with the positivist approach. Quantitative research is more complex and is carried out by drawing hypotheses, identifying variables and using surveys to obtain responses. This research uses simple survey instruments, where respondents generate simplistic data through responses. Hence, the qualitative method is used in this research (Zikmund et al. 2013).

Research Strategy

Research strategy defines the methods used in collating research data. The strategy includes methods of selecting respondents and data analysis methods. Different methods available for data gathering include surveys, semi-structured interviews, grounded theory, action research, archival research and case studies, among others. For this research, surveys and semi-structured methods are proposed.They help to obtain views of respondents to a set of similar questions. The survey instrument will have a set of research questions with multiple option selections and single option selections, and a few questions based on theLikert score. Respondents will select the options according to their perspective. The semi-structured instrument has a set of open-ended questions, to which respondents give their options and views (Fowler 2013).

Research Design

For this study, two survey instruments are proposed. The first instrument is for potential customers of Tesla cars and the second is for managers of automobile dealerships. These instruments will be designed when the full research is undertaken. Sample instruments are given below. The number of questions will be expanded and modified when the full research is undertaken.

Table 1. Sample survey questions for potential Tesla customers.

Given below are sample questions for the semi-structured interviews.

Table 2. Sample semi-structured interview questions.

Population and Sampling

Two sets of survey instruments are proposed. Details of the population and sampling are given as follows.

Instrument 1: Considering that Tesla will have thousands of customers, according to Saunders (2011), the research sample must cover 318 individuals to obtain a meaningful representation. Since the author of this research has limited resources, a sample population of 100 is considered. Respondents will be affluent business owners, entrepreneurs and executives, who are interested in protecting the environment and who have sufficient funds (Patten & Newhart 2017).

Instrument 2: These respondents will include store managers of car dealerships of brands such as Audi, Mercedes, BMW, Ford, etc. The proposal is to approach 10 dealers and ask managers to respond (Saunders 2011).

Data Collection

The survey instruments will be mailed to the two sets of respondents with a request to complete and mail them back. Emails and contact details will be obtained. Another possibility is to host Instrument 1 on Survey Monkey and send a link to respondents (Taylor, Bogdan & DeVault 2015).

Data Analysis

Data analysis of Instrument 1 will be done by calculating the number of responses that each option for each question receives. The percentage of responses will be calculated to decide the majority perspective. For Instrument 2, keywords for each question will be extracted and analysed contextually (Ritchie et al. 2013).

The following Gantt chart gives the project timelines for each major activity.

Resource Plan

A survey monkey subscription requires afee payment, which will be less than 100 USD for the duration of the 10-week project. Other resources include time, reading materials and books. These can be accessed from the academic library, the Internet and past readings on marketing at college, university and from current academic pursuits.

Conclusions

The assessment is that Tesla can survive and grow in the market by using aggressive marketing strategies. While the market sees many auto firms offering electric cars, Tesla can use its strong brand identity and high-performance cars to dominate the market. Certain research questions and objectives have been framed in this proposal. These will be answered by using two survey instruments. The recommendation is that a full research study can be conducted to develop marketing methods for Tesla.

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BusinessEssay. (2023, August 5). Tesla Cars Company: Marketing Strategies and Channels. https://business-essay.com/tesla-cars-company-marketing-strategies-and-channels/

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BusinessEssay . "Tesla Cars Company: Marketing Strategies and Channels." August 5, 2023. https://business-essay.com/tesla-cars-company-marketing-strategies-and-channels/.

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