Why Tesla Motors is Implementing a Referral Program

Last week I came across an article outlining a new referral strategy Tesla Motors is implementing for their Model S sedan. As might be expected, I try to stay atop developing trends in referral marketing. So staying “up to speed” with what Elon Musk is cooking up here only made sense.

This program appears to be consistent with other retail-oriented referral strategies we have seen in the past. It operates on the tell-a-friend-and-you-both-get-something credo.

Current Model S owners share a referral link with their friends and, if they buy, both are rewarded with a thousand bucks in Tesla credit. There are other rewards for referring 5 or 10 friends, such as an invitation to an premier party and the exclusive right to purchase a souped up version of their Model X (their SUV variant).

When asked the reasoning behind this referral program Elon Musk indicated that Tesla is exploring ways to lower their cost of client acquisition. More specifically, ways in which they can cut down on marketing costs by driving prospects directly to their website to order their vehicle. He indicated that they could save $2,000 for every prospect that skipped visiting their physical stores and instead just took their friend’s word for it.

The thing is, Tesla’s marketing budget is already next to nothing. They perform zero traditional advertising like the big car manufacturers do.

Okay so no Super Bowl commercials, but you have almost certainly heard of them. This is due to 1) word-of-mouth 2) leveraging the press 3) no-pressure show rooms

Tesla has been very successful at creating a buzz around their product. They are new, they are exciting, and they are green. I mean, since when have we had fast and attractive looking electric cars? Since 2008 to be exact, when Tesla released its first model, the Roadster. Even the name sounds crisp. They have developed a product known for breaking the mold and innovating on green energy. People talk about this kind of thing. And when they do, those with money consider taking out their pocketbook and placing an order. According to Tesla, this referral program is an effort at incentivizing existing clients to tell their friends, and to reward those that already do. The result would be a lower cost of acquisition.

That’s fine, but I think there is a much larger objective behind this referral program: to further the exclusivity of owning a Tesla.

Let’s be honest, $1,000 seems like little more than a pat on the back when compared to a price tag upwards of six digits. Let’s just say that the demographic that purchases a Model S sedan is probably not jumping through hoops to get a relatively small kickback. And thus is the real genius behind the referral program.

A small incentive is Elon Musk’s way of showing his appreciation to his customers that are actively referring their friends, while also promoting the establishment of an exclusive group of Tesla owners.

Exclusivity is felt throughout the Tesla brand. There’s no negotiating on price. There’s no network of franchised dealers. There’s a backlog of car orders lasting for months, or even years. Those that refer many friends get an invitation to an exclusive party, or the right to purchase an exclusive Tesla model.

This referral program is just another way that Tesla is creating a network of owners from a chosen demographic.
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