Dealership Workaround with Paypal Roots, Tesla Referral Program is a Gamechanger

Tesla Motors (TSLA) just announced an innovative approach for igniting word-of-mouth buzz, it's a new Referral Program that gives $1,000 to new car buyers who use a referral link from a previous buyer. The current Model S owner would also get $1,000 off a new car, services, or accessories. There are more details that we'll get to in a moment. But, the question on everyone's mind is... why would Tesla CEO Elon Musk choose to launch a referral program?

Paypal Roots

As an owner, I received an email from Tesla CEO Elon Musk about this new referral program last night. One particular line in that email jumped out at me, Musk stated that "... this is similar to the customer growth program that I worked on at PayPal/ back in ’99." So, I did some digging to figure out what he was referring to, and, according to Peter Thiel, Elon's partner at Paypal at the time, "New customers got $10 for signing up, and existing ones got $10 for referrals. Growth went exponential, and PayPal wound up paying $20 for each new customer... [this resulted in] 7 to 10% daily growth and 100 million users." I also uncovered this intriguing 2003 video with Elon Musk elaborating on Paypal's referral-based viral nature and why it was so successful (see below).

Yes, Tesla Motors is vastly different from Paypal. But, it turns out that Tesla has used a referral program before during the early stages of the company with the Tesla Roadster. In addition, Elon Musk is also Chairman of SolarCity and they've been running a successful referral program as well. My son, Mike is also part of this SolarCity "Ambassador" program and he's been quite impressed with the results. So, although the new Tesla Referral Program has its original roots in Paypal, it's clear that Elon Musk has employed this strategy to great advantage since that time, and, he plans to try it out again at this time.

Dealership Workaround

Futhermore, Tesla is fighting the dealership lobby in many U.S states. Allowing owners to sell for them through this referral program completely bypasses the (unfair and anti-competitive, IMO) laws that are suppressing sales in those states. It's a brilliant move and an excellent dealership workaround. Tesla owners are not bound by the "on the books" dealership protectionist laws that have limited Tesla stores from opening in all 50 states. Musk mentioned this on his call with the press, "This is a way for us to sort of have a guerrilla battle with the car dealer association, Tesla representatives are not allowed to sell in certain states so customers who are not salespeople can refer their friends there.” Check out Musk on CNBC...

In addition, this is also an effective workaround against "footing the bill" for more of Tesla's own dealership equivalents, their Tesla Stores. Elon Musk noted during his conference call that it costs Tesla about $2,000 to sell a car through its Tesla Stores and if the company can "amplify word of mouth, then we don't need to open as many new stores in the future," Tesla added in a statement. “We’re trying to figure out if we can reduce the cost of selling the car and pass it on to customers,” Musk said during the conference call. “It’s an experiment with a finite time. It’s worth trying out. If it’s a fundamental improvement in cost of sales that we can pass on to customers, that’s a good thing.” Think about all the costs avoided... rent, benefits, insurance, salary, etc. for all the employees that might not be needed as a result of this program and the additional "lift" they may see in states where Tesla sales are outlawed.

Tesla Referral Program

So... the new Referral Program is set up to give $1,000 to new car buyers who use a referral link from a previous buyer. The current Model S owner would get $1,000 off a new car, services, or accessories. What else should you know about it? Elon Musk has described the referral program as “experimental.” It’s only offered for Model S cars purchased by October 31. But Musk said if the program is successful, the company could offer it in a more permanent way. Some cool perks mentioned by Musk in his email, "If five of your friends order a Model S, you and a guest will receive an invitation to tour the [Tesla] Gigafactory in Nevada – the world’s biggest factory by footprint – and attend the grand opening party. This will be awesome. At ten orders, you get the right to purchase a Founder Series Model X, which is not available to the public, with all options free (value of about $25,000). The first person to reach ten will get the entire car for free." More details can be found here.

Let's Try It

Tesla's customers that have purchased its cars have, in many ways, already become the company’s best salesforce. Customer satisfaction (and loyalty) has been proven in survey after survey. Why not try this new, albeit temporary program to try to boost word-of-mouth sales by incentivizing all of us Tesla owners to spread the good word? We've all sold cars to others interested in Tesla, it might be nice to get some perks as a result. And, this can exponentially grow Tesla's salesforce to include its 60,000+ owners.

At EVannex, we intend to build a series of unique aftermarket accessories for the Model X, just as we've done for the Model S. We have some ideas on the drawing board, but we really, really need an early Model X so we can provide Model X owners with accessories options as soon as possible. You can help and get a $1,000 purchase discount, if you're considering the purchase of a Model S. Use the link below -- you get $1,000 off your purchase and we get an early Model X. Everyone wins!

So, here goes... to our loyal EVannex® friends who've yet to purchase a Model S, start to configure your Tesla now... just select the button below!

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