Tesla’s great year came without paid advertising, but plenty of buzz

The inclusion of Tesla on a list honoring excellent marketing is not without irony. After all, the electric vehicle brand eschews most forms of paid advertising. But Tesla’s 2021 rise—which includes supplanting Mercedes as the third-ranked luxury auto brand by sales in the U.S.—speaks to the forces shaping modern marketing, which often have nothing to do with big-budget TV campaigns. In the case of Tesla, it means creating a product so differentiated that it in many ways sells itself, fueled by word-of-mouth marketing spread by Tesla zealots. See all of Ad Age's 2021 Marketers of the Year here. “I don’t think there are any more enthusiastic buyers than Tesla owners—and they are active and promoting the brand, which certainly helps Tesla avoid buying advertising,” said Michelle Krebs, an executive analyst at Kelley Blue Book owner Cox Automotive. Tesla spent just 11 cents on measured media per vehicle sold in 2020, according to the latest full-year figures from the Ad Age Datacenter. Compare that to its luxury competitors and the divide is stark: Hyundai-owned Genesis shelled out $1,955 per vehicle sold, while Ford’s Lincoln spent $1,553 and Jaguar spent $1,235. Of course, the EV category Tesla plays in remains niche, accounting for just 2.5% of the new vehicle market in the U.S., according to Edmunds. But Tesla dominates the segment with 65% market share. It has kept its electric vehicle stronghold even as traditional automakers such as Volkswagen, General Motors and Ford plow more money into EVs, including pricey marketing such as Super Bowl ads. The true test for Tesla might come in the next few years as its larger competitors get more EVs into the market. But there is no denying that Tesla more than held its own in 2021. It set company records for profit and global sales in the third quarter, earning $1.62 billion and delivering 241,300 vehicles worldwide. The soaring sales volume mostly comes from its Model 3 sedan and Model Y crossover. The success of the models—introduced in 2017 and 2019, respectively—prove that Tesla’s entry into the mainstream market is working. (Model 3 has a starting price tag in the mid-$40,000 range, while Model Y is in the $50,000 to $60,000 range, compared with the six-figure Model S.) Top 10 EV Models By U.S. registration, Jan.-Sept. Rank/Model Registrations 1 Tesla Model Y 120,387 2 Tesla Model 3 98,989 3 Chevrolet Bolt EV 22,960 4 Ford Mustang Mach-E 17,716 5 Volkswagen ID4 11,894 6 Nissan Leaf 10,941 7 Tesla Model S 9,651 8 Hyundai Kona 8,139 9 Porsche Taycan 7,368 10 Kia Niro 6,085 Experian Tesla got more positive press in October when the 18-year-old company’s market capitalization surged past $1 trillion, joining an elite club that includes Amazon, Apple, Microsoft and Google parent Alphabet. That same month, Interbrand deemed Tesla the fastest-growing brand of 2021, with an unprecedented 184% increase in brand value to $36 billion, which the Omnicom-owned consultancy bases on financial performance, loyalty and competitive strength. And based on vehicle registration data reported by Experian, which acts as a proxy to sales, Tesla trailed only BMW and Lexus among luxury brands in the year’s first nine months. Top 10 Luxury Brands Vehicle registrations, Jan.-Sept. Brand Registrations % Change/year ago 1 BMW 259,237 36% 2 Lexus 245,864 33 3 Tesla 230,855 76 4 Mercedes 213,708 13 5 Audi 170,092 35 6 Acura 130,703 38 7 Cadillac 104,146 21 8 Volvo 94,272 26 9 Lincoln 71,001 –3.9 10 Land Rover 64,511 20 Experian “Tesla’s meteoric rise was achieved with a ubiquitous social media presence that enhanced its brand values, consolidating its position as the world-leading electric vehicle manufacturer,” according to Interbrand. “Its core purpose, ‘to accelerate the world’s transition to sustainable energy,’ clearly resonates with a growing, loyal consumer base and demonstrates how successful brands woo consumers with a clear, coherent vision.” Of course, much of that social media presence can be tied to one person: Elon Musk, the mercurial Tesla CEO whose frequent and filterless tweeting brings hoards of attention to the automaker, both good and bad. His stint as guest host of “Saturday Night Live” in May brought the kind of attention to Tesla that money can’t buy. In a telling sign of Musk’s draw, rivals such as VW and Ford spent money on ads during the show. On Dec. 13, Time named Musk its Person of the Year, noting that "thanks in large part to Musk’s pace-setting, auto companies from VW to Nissan are jostling to invest billions in electric vehicles. Their about-face is driven less by altruism than by a dawning realization that Musk is eating their lunch." When your CEO can command that kind of attention, you don’t need much fabricated PR. And indeed, Tesla dissolved its PR department last year. True to form, the automaker did not respond to an interview request for this story. Musk’s distaste for traditional forms of marketing is best summed up in a 2010 interview with the Silicon Valley Business Journal. When asked if people buy brands, he replied, “No, you buy the product. The brand is just a perception, and perception will match reality over time. Sometimes it will be ahead, other times it will be behind. But brand is simply a collective impression some have about a product.” Kimberly Whitler, a marketing expert and professor at University of Virginia’s Darden School of Business, in an email interview said: “Marketing is about value creation, and one of the best ways to create value is the way Tesla is doing it—through superior, awe-inspiring, imagination-capturing, pride-inducing products.” She added: “While other companies are advertising their virtue or something other than the product they sell, Tesla has focused on, in a way, old-fashioned marketing. They simply built a spectacular widget, something that is completely different and captures the imagination of consumers. The result? The media talks about it (i.e., earned media) and consumers talk about it (word-of-mouth). ... How many companies are focusing all their energy and resources into building noticeably better, superior products that are worthy of earned, positive buzz?” Amid all that positive buzz, Tesla had its share of negative headlines in 2021, the latest stemming from a lawsuit filed in November by a plant worker alleging that female workers face “rampant sexual harassment” at a Fremont, California factory. The automaker also frequently deals with questions about the safety of its self-driving features. But Tesla, more often than not, maintains a Teflon-like quality. “Elon Musk has definitely made some missteps, but he is really unapologetic about all of it,” said Jessica Caldwell, executive director of insights for Edmunds. “I don’t know if that is good or bad, but that certainly is his strategy, to really not get us to focus on any Tesla scandals.” This year, Musk was even combative when responding to what was seemingly positive news: reports in late October that Hertz ordered 100,000 Teslas for its rental car fleet. Musk downplayed the deal on Twitter, suggesting the contract was not signed, while stressing that Tesla “has far more demand than production, therefore we will only sell cars to Hertz for the same margin as to consumers.” The fact that Tesla’s demand outstrips supply is another factor that lessens the need for traditional advertising. But that could change as traditional automakers begin flooding the market with EVs. The Hertz deal—signed contract or not—signals at least a baby step toward more mainstream marketing. Tesla vehicles take a prominent role in Hertz’s new ads that star Tom Brady and are backed with a media buy that includes Hulu, YouTube, national cable, social media and digital. It exposes Tesla to a potentially new audience of business and leisure travelers—attention the automaker might need in the coming years, despite what Musk says. “Tesla will never be able to hold onto that cool niche forever—no company can,” Caldwell said. “It just seems impossible because somebody will come along that is cooler and hipper. It just so happens they put out a product where there is not a lot of competition right now, and that is not going to be the case in five years.” See all of Ad Age's 2021 Marketers of the Year here.

Tesla’s great year came without paid advertising, but plenty of buzz

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