Crowdsourcing the dealer network with owner sales consultants
As a shareholder, one of the pleasures of following Tesla as a company is the innovation in all aspects of the corporation. From load-bearing battery pack pancakes to over the air software upgrades, from marketing presence in upscale shopping malls to hybrid leases, this is a transportation product and company reimagined. And to an ex-physicist (Ph.D., Stanford, ‘89), Elon and team’s penchant for rethinking each issue from first principles scratches an itch for me that is both deeply satisfying and yet rarely seen, even in the VC startup space. Clearly Tesla represents more than a battery-powered car.
Which leads me to thinking about the situation with the sales channel, and the opposition of the National Automobile Dealers Association.
Clearly, kudos are due to George Blankenship, who has done a terrific job rethinking the sales and marketing channels. The shopping mall presence, the non-comissioned representatives, the company-owned network, the build-to-order, no-inventory ordering process, as exciting and financially efficient as they are, are simply the logical outward expression of a deeper and even more exciting process. That is, he and his team have grokked the fundamental challenges, assets, and opportunities for Tesla and the electric vehicle industry, and produced an end to end system that is a work of art.
And yet there are challenges. Clever as the “no sales, just a showroom” idea is, it is not ideal. This is understandable. After all, this is not buying a book at Amazon. When one is talking about putting down $100,000 for a car, it helps to have someone there to close the sale.
At the same time, Tesla has one asset to bring to bear that simply cannot be matched by its competition, a true sustainable competitive advantage. Elon has noted “Importantly, we are seeing orders in a particular region increase proportionate to the number of deliveries, which means that customers are selling other customers on the car.” Many TMC members have noted the same effect, albeit anecdotally. Apparently, Tesla owners appear to be among the most highly satisfied customers of any car make, and there is reason to believe that will continue to be the case for the foreseeable future. As such, they are uniquely positioned to be the best sales advocates for Tesla.
Some have even suggested sales commissions for the owners. I don’t know. That doesn’t feel quite right to me. For one thing, I don’t want my friends thinking I am pressuring them into buying a car so I can earn a few hundred dollars. Besides, the greater need is to connect a local owner to the person who doesn’t have a friend that owns a Tesla.
So why not do just that? Namely, use existing owners to crowdsource the dealer network.
It would work like this. Either at a showroom or on the web, the prospective buyer types in their zip code to look for a list of nearby owners who are participating in the Tesla Sales Consultants program. They review the options, including ratings from past participants of the different consultants, and contact the one that seems like the best fit (here’s a sample page (any resemblance to actual TMC members is purely coincidental)) . You, the consultant, arrange to swap cars for a day. You meet in the evening, give some simple instructions about driving the Model S, and then they drive off in your car and you in theirs (perhaps after both signing a standardized insurance waiver). They experience what it would be like to use the car in their daily routine. At the end of the day you meet, buy them dinner, talk about the experience, answer any questions, and talk about your own experience living with the car. All in a very relaxed and no pressure atmosphere.
But if there is no sales commission, what would be the incentive for Model S owners to participate? After all, we’re talking about lending out your car for a day, and the hassle and time spent for both an initial meeting and a dinner. And what’s this about paying for dinner?
I think the answer is that the potential purchaser pays $500 for the chance to meet with an owner consultant and use their car for a day. Now you may think “this sounded reasonable up to this point, but now this guy has lost it. After all, since when does a customer pay to meet with a salesman, just to try out a car?”
Well, picture the potential purchaser sitting on the fence. What are they thinking? “The car is attractive, even beguiling. But it’s an awful lot of money. What would it really do for me on a daily basis? What difference would it make in my life?” All I know is, if I were seriously contemplating spending $70K - $110K on a completely new type of car, I would consider $500 money well spent to help make that decision. And notice that because no commission is involved, all of the incentives, both social and economic, work to create as pleasant and non-pressure a consultative experience as possible. The owner has already been paid for his troubles. He or she doesn’t need to sell the car. Just give the prospective buyer all the benefit of their experience. And if they want to get a good rating at the web site, they’ll make the experience as enjoyable as possible, whether the person is leaning towards buying or not.
I think owners in this setting would be more persuasive than any Tesla employee could ever be. For one, they have more experience with the product. More importantly, remember what Geoffrey Moore’s Crossing the Chasm teaches us about the real definition of a market segment. It is a group of peers who trust and respect the opinions of fellow peer group members. Well, a prospective buyer is far more likely to perceive an owner as a true peer than any Tesla employee.
As a further (and probably necessary) incentive Tesla could credit buyers the cost of the sales consultant. (Frankly, it would probably pay Tesla, in terms of increasing the numbers of prospective customers to bite on the idea, to offer them a $1,000 credit for their $500 investment. In terms of conversion rates from fence-sitters to buyers, this could be money well spent.)
So what about NADA? With owner consultants, one can reduce the ability of NADA to restrict sales and otherwise interfere with Tesla, regardless of legislation particulars. I don't claim to have thought through the best way to position owner consultants from a legal perspective (and would be very appreciative of someone more knowledgeable than I to think that through), but it certainly would give Tesla more room to maneuver.
Well, I've had my say. Hopefully others could help to improve these ideas into something fully viable. One final thought, though. In the long run, think of the dilemma it could pose for traditional dealers. There is no way they could match this superior selling experience, because of the conflicts it would create with their existing channels and salespeople, and the superior customer loyalty that Tesla evokes. That is the very essence of a sustainable competitive advantage: the competitor is simply unable to respond.
Game over, NADA. Perhaps, as Tim Draper suggested, it really is time for other car companies to move into a different line of business.
* with apologies (well, not really) to BMW.
As a shareholder, one of the pleasures of following Tesla as a company is the innovation in all aspects of the corporation. From load-bearing battery pack pancakes to over the air software upgrades, from marketing presence in upscale shopping malls to hybrid leases, this is a transportation product and company reimagined. And to an ex-physicist (Ph.D., Stanford, ‘89), Elon and team’s penchant for rethinking each issue from first principles scratches an itch for me that is both deeply satisfying and yet rarely seen, even in the VC startup space. Clearly Tesla represents more than a battery-powered car.
Which leads me to thinking about the situation with the sales channel, and the opposition of the National Automobile Dealers Association.
Clearly, kudos are due to George Blankenship, who has done a terrific job rethinking the sales and marketing channels. The shopping mall presence, the non-comissioned representatives, the company-owned network, the build-to-order, no-inventory ordering process, as exciting and financially efficient as they are, are simply the logical outward expression of a deeper and even more exciting process. That is, he and his team have grokked the fundamental challenges, assets, and opportunities for Tesla and the electric vehicle industry, and produced an end to end system that is a work of art.
And yet there are challenges. Clever as the “no sales, just a showroom” idea is, it is not ideal. This is understandable. After all, this is not buying a book at Amazon. When one is talking about putting down $100,000 for a car, it helps to have someone there to close the sale.
At the same time, Tesla has one asset to bring to bear that simply cannot be matched by its competition, a true sustainable competitive advantage. Elon has noted “Importantly, we are seeing orders in a particular region increase proportionate to the number of deliveries, which means that customers are selling other customers on the car.” Many TMC members have noted the same effect, albeit anecdotally. Apparently, Tesla owners appear to be among the most highly satisfied customers of any car make, and there is reason to believe that will continue to be the case for the foreseeable future. As such, they are uniquely positioned to be the best sales advocates for Tesla.
Some have even suggested sales commissions for the owners. I don’t know. That doesn’t feel quite right to me. For one thing, I don’t want my friends thinking I am pressuring them into buying a car so I can earn a few hundred dollars. Besides, the greater need is to connect a local owner to the person who doesn’t have a friend that owns a Tesla.
So why not do just that? Namely, use existing owners to crowdsource the dealer network.
It would work like this. Either at a showroom or on the web, the prospective buyer types in their zip code to look for a list of nearby owners who are participating in the Tesla Sales Consultants program. They review the options, including ratings from past participants of the different consultants, and contact the one that seems like the best fit (here’s a sample page (any resemblance to actual TMC members is purely coincidental)) . You, the consultant, arrange to swap cars for a day. You meet in the evening, give some simple instructions about driving the Model S, and then they drive off in your car and you in theirs (perhaps after both signing a standardized insurance waiver). They experience what it would be like to use the car in their daily routine. At the end of the day you meet, buy them dinner, talk about the experience, answer any questions, and talk about your own experience living with the car. All in a very relaxed and no pressure atmosphere.
But if there is no sales commission, what would be the incentive for Model S owners to participate? After all, we’re talking about lending out your car for a day, and the hassle and time spent for both an initial meeting and a dinner. And what’s this about paying for dinner?
I think the answer is that the potential purchaser pays $500 for the chance to meet with an owner consultant and use their car for a day. Now you may think “this sounded reasonable up to this point, but now this guy has lost it. After all, since when does a customer pay to meet with a salesman, just to try out a car?”
Well, picture the potential purchaser sitting on the fence. What are they thinking? “The car is attractive, even beguiling. But it’s an awful lot of money. What would it really do for me on a daily basis? What difference would it make in my life?” All I know is, if I were seriously contemplating spending $70K - $110K on a completely new type of car, I would consider $500 money well spent to help make that decision. And notice that because no commission is involved, all of the incentives, both social and economic, work to create as pleasant and non-pressure a consultative experience as possible. The owner has already been paid for his troubles. He or she doesn’t need to sell the car. Just give the prospective buyer all the benefit of their experience. And if they want to get a good rating at the web site, they’ll make the experience as enjoyable as possible, whether the person is leaning towards buying or not.
I think owners in this setting would be more persuasive than any Tesla employee could ever be. For one, they have more experience with the product. More importantly, remember what Geoffrey Moore’s Crossing the Chasm teaches us about the real definition of a market segment. It is a group of peers who trust and respect the opinions of fellow peer group members. Well, a prospective buyer is far more likely to perceive an owner as a true peer than any Tesla employee.
As a further (and probably necessary) incentive Tesla could credit buyers the cost of the sales consultant. (Frankly, it would probably pay Tesla, in terms of increasing the numbers of prospective customers to bite on the idea, to offer them a $1,000 credit for their $500 investment. In terms of conversion rates from fence-sitters to buyers, this could be money well spent.)
So what about NADA? With owner consultants, one can reduce the ability of NADA to restrict sales and otherwise interfere with Tesla, regardless of legislation particulars. I don't claim to have thought through the best way to position owner consultants from a legal perspective (and would be very appreciative of someone more knowledgeable than I to think that through), but it certainly would give Tesla more room to maneuver.
Well, I've had my say. Hopefully others could help to improve these ideas into something fully viable. One final thought, though. In the long run, think of the dilemma it could pose for traditional dealers. There is no way they could match this superior selling experience, because of the conflicts it would create with their existing channels and salespeople, and the superior customer loyalty that Tesla evokes. That is the very essence of a sustainable competitive advantage: the competitor is simply unable to respond.
Game over, NADA. Perhaps, as Tim Draper suggested, it really is time for other car companies to move into a different line of business.
* with apologies (well, not really) to BMW.
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