Transcript:
On the surface test this product reveal events appear pretty straightforward the company rolls out a brand new product onto stage enthusiasts gather all around it share their initial reactions and then a week later it’s old news I mean Apple has been doing product reveals for ages Google and Samsung do them it’s quite common in the tech industry but nobody does it quite like Tesla because Tesla doesn’t just use product reviews to create hype they use them to fundraise they using to crowdsource new ideas and they use them to create a viral sales loop with a few clever psychological tricks these events also save Tesla hundreds and millions of dollars they make Tesla billions of dollars so any entrepreneur marketer investor whatever would be wise to learn the fundamentals from Tesla learn about how they maximize the impact of these products unveilings because I think we’re gonna start to see as we approach 2020 a lot more companies start to copy this formula in fact Ford actually copied Tesla’s reveal event formula just a couple months ago with their Maki Mustang reveal so let’s walk through some of the ways that Tesla designs their product reveal experience for maximum impact Tesla’s very first reveal event is always for a prototype vehicle it typically is about two years before the expected launch date of that vehicle when it will actually go on sale and this is really intentional because it’s close enough for buyers to pay attention to it people in the market for a new car but it’s also far enough away that Tesla doesn’t have to start spending any money on manufacturing and this is different from a lot of tech companies I mean Apple with their iPhone events they’re revealing these devices the moment they go on sale but Tesla does the opposite because there’s a lot of extra benefits that come from Tesla’s cycle of reveal wait a couple years and launch the most obvious benefit of Tesla’s reveal events is that they generate a lot of extra cash for the company most of Tesla’s history they have needed all the cash they could get they seem to be turning a corner right now but still cash is the key ingredient that accelerates production timelines and allows the company to scale up faster and faster but of course this cash comes at a cost typically and that cost is the interest that you have to pay on debt one of Tesla’s favorite ways to get extra cash and although interest rates differ on every single loan that Tesla gets we can probably look back in time and safely say that somewhere around 5% is roughly the cost of capital if Tesla uses debt financing a lot of lenders have viewed Tesla as a risky bet especially 5 or 10 years ago and some still do today so to avoid these extra interest costs Tesla has figured out that they can instead ask their customers for money they get free money from customers instead of paying 5% to a bank and when we look at Tesla’s customer deposits over the last seven years Tesla has made an absolute killing here the overall balance of customer deposits has been steadily increasing over time and for the last four years it’s always remained over six hundred million dollars so with an average interest rate of about 5% if we look back at all the cash Tesla’s generated from customer deposits Tesla has saved about a hundred and eighty three million dollars in just interest expenses by funding with customer deposits instead of debt but that’s just the beginning Tesla also uses these reveal events to crowdsource new product ideas millions of people around the world tune into these events they flood the internet with a firehose of reactions and Tesla uses all this feedback to make better products people share what they like what they hate and even share all the additional features that they’d like to see in a final product it may not seem like a big deal but it is because the companies that reveal their products once they’re ready take Apple and the iPhone as an example have to be damn sure that they’ve got a winner on their hands sometimes to avoid the risk of a flop the strategy may be to water down the product or make it resemble last year’s product not taking any serious risks because all the manufacturing has already been done all the expenses have already been paid for it has to work but Tesla on the other hand has a chance to do a heat check on some new product ideas they can test out products they can try new ideas they can bring out bold designs like the cyber truck and there’s basically no risk of failure because they’re getting the money and the ideas upfront before they even start the manufacturing so far the cyber trucks been the most polarizing of all Tesla vehicles and Elon has already come out publicly and thanked people on Twitter for all the ideas they’ve submitted I imagine the trucks gonna retain most of its original design but I don’t think Elon skidding when he says that the truck is going to better because of all the feedback of millions of people all around the world because nobody on the Tesla team can exactly replicate the experiences of lifetime pickup truck owners from all over the world there is immense value in having all those people come together and give their feedback so while less savvy companies may pay third-party agencies to conduct focus groups Tesla just runs a live stream has everyone come together all at once submit their ideas through Twitter and online and then they build from there and while it is true that other auto companies do host events for their product unveilings none of them really take themselves seriously there’s no excitement there’s no pre-orders there’s no customer deposits everything that makes Tesla’s reveal events great is missing from other companies Viviane and Ford’s seem to be exceptions they seem to be learning from Tesla’s playbook but other than that nobody comes close traditional automakers either show off concept cars at auto shows things that will never get to market or they show off next year’s model of the same cars that they’ve been producing for twenty years in a row and neither of these things ever get much traction I search BMW reveal on YouTube and the first video I saw was one with three thousand views and ten likes a searching Mercedes revealed didn’t give me anything much better but when I searched Tesla reveal the first five videos that showed up had over two million views Tesla has mastered the art of getting the world to pay attention to their events they take them seriously and it shows I mean the cyber truck unveiling was like the Super Bowl for tech nerds nobody could stop talking about but after Tesla’s livestream shuts down and after all the first reaction videos slowed down across the Internet that’s when Tesla’s marketing machine really kicks into high gear there are a few clever psychological tricks that Tesla uses in their pre-order system to keep customers hooked let’s see how to do it just like clockwork after every single test the reveal event people flood the internet and share order confirmations or pictures of the new car that they’re going to receive leaving everyone else with a sense of FOMO now that’s not unique to Tesla this happens with a lot of tech product unveilings but then Tesla follows that up and they announce customer deposits this is a second a third a fourth a fifth wave of FOMO that pushes all the on the fence customers over the edge any lawns got a really good for how to use this to his advantage and he knows that humans all have this natural scarcity bias which makes us want things that weren’t actually available so he shows off this ever-expanding list of customer deposits for the truck that won’t actually be ready for another two years and this signals to everyone that this thing must be worth buying because everyone wants it and no one can get it and the main idea behind the scarcity bias is that it causes people to act before they think if you spend too much time thinking you’re gonna be pushed further and further back in that Tesla pre-order liner and Elon Musk is gonna rub that in your face he tweeted four separate times within the first week of the cyber truck unveil updated customer numbers he’s letting you know that if you haven’t bought yet you’re pushing yourself further and further back in line and even though there’s no real scarcity going on here Tesla will build as many cyber trucks as customers by Tesla’s production ramp can only go so fast so for a lot of people thinking before acting means potentially losing out on an early purchase date so they act on impulse and that leads us to our next psychological bias that keeps these pre-order customers hooked people do not buy Tesla vehicles quietly as soon as their orders complete they share this news with friends family anyone they can tell just look online Tesla forums are flooded with excited new customer stories from folks who can’t bottle up their excitement and I don’t blame him I mean I didn’t pre-order a Model 3 myself but when I did get my Model 3 my excitement was well known by all my friends and family and there’s a hidden side effect that comes from this as soon as we start telling our friends and family that were committing to a decision that we’re gonna go ahead and buy this car or shackling ourselves one of the strongest cognitive biases that affects humans is called the commitment or consistency bias it’s ingrained in all of us and it’s our deep desire to appear consistent to others we do what we say and we say what we do because humans instinctively think that inconsistency represents either a lack of conviction or a lack of knowledge or an inability to make a decision so as everyone who pre-orders Tesla shouts out this news for everyone to hear they’re personally committing to all their friends and family that they’re going to go through with this purchase even though the commitment is entirely in their heads I mean Tesla deposits are a hundred percent refundable but to go back on that purchase would show all your friends and family that you either can’t make decisions or your not consistent with your actions and nobody wants to look like a fool in front of friends and family now I’ll admit this is tough to quantify the effect that it has on pre-orders but it’s a well-known bias that marketers have been using for ever because it works but even if a Tesla pre-order customer manages to navigate and avoid the commitment or consistency bias they’ve got another one to deal with and his sunk cost fallacy is the idea that once we’ve spent either time or money doing something we have a tendency to continue in that direction even if it’s not the right direction because to go back would be to cancel out all the time and money spent again it was showing consistency interactions but it would also be perceived as costly in either time or money to go back to square one so we continue down the path we started on even if it doesn’t look appealing it’s not logical at all but humans continue to fall for it even though Tesla pre-orders are fully refundable and pulling out would mean a customer doesn’t lose any money they would have lost all that time that they spent into research in the vehicle and they would have lost their place in line and as they know eelain’s been reminding them there are now thousands and thousands of people behind them in line and then you got to go back to square one if they want to pull out of their order – a lot of people that two-year wait can be perceived as a really large cost especially if they’re one of the early orders so it makes it a lot more difficult for someone to back out of an order when it comes time for delivery and so there’s all these layers of hidden benefits that accrue to Tesla that all begin from the reveal event it’s by far the most important piece of Tesla’s marketing machine today and it’s a strategy that I expect a lot of other automakers are soon going to be copying Tesla gets free ideas up front they get free cash up front and they get customers that are a lot more likely to follow through with their purchase because they made an initial deposit two years earlier what’s not to love about that you
Leave a Reply