No, Tesla doesn’t need an advertising budget
What’s the biggest difference between Tesla and other automakers? That is, aside from the fact that its vehicles lack gas tanks, engines and transmissions? To the bewilderment of some, and the delight of others, the company spends no money on traditional advertising.
Above: Front of a Tesla Model X (Flickr: davidgsteadman)
As we all know, the legacy auto brands are the ad industry’s bread and butter, spending billions each year on TV and radio spots, billboards, spreads in newspapers and magazines, and all kinds of online campaigns—to say nothing of the huge sums invested in racing teams, trade shows and (my favorite) all-expenses-paid events for the press.
In fact, advertising is such an integral part of the auto industry that we EV journalists often cite the majors’ failure to advertise their electric models as proof that they aren’t serious about selling them.
What gives? Why should Tesla be an exception? That’s what shareholder James Danforth wants to know. He believes ads would “help mitigate and dilute…misinformation campaigns sponsored by competitors and detractors, and steer the narrative more favorably.” At Tesla’s upcoming annual shareholder meeting, he plans to propose that the company start spending at least $50 per vehicle on advertising.
That doesn’t seem likely to happen. Non-advertising has been part of Tesla’s mystique since the beginning, and Elon Musk has said that he seldom thinks about marketing. “If you produce a truly revolutionary product, the marketing will take care of itself.” That’s one of his most famous aphorisms, and so far, it has proven a hard one to argue with.
Of course, just because Tesla isn’t patronizing the Mad Men doesn’t mean there’s no advertising going on. Matthew DeBord, writing in Business Insider, points out that the company benefits from a lot of “earned” media—positive messaging created by satisfied customers. In fact, there’s a huge amount of this out there, from homegrown rave reviews on YouTube to some very slick 30-second commercials created by fans on a volunteer basis. (In 2017, Tesla held a competition to choose the best of these.)
Above: An example of a fan-made commercial from the community, 16 years of Tesla (Youtube: Billy Crammer)
DeBord also points out that, whereas other automakers pay others for their exposure, Tesla owns it. Starman’s red Roadster, currently en route to Mars, and Bob and Doug’s excellent adventure aboard SpaceX’s Crew Dragon spaceship, to which they arrived in a Model X—these events will be recounted in history books, and that’s worth infinitely more than any momentary buzz generated by a Superbowl spot.
DeBord lists no less than 10 great marketing coups (or publicity stunts, depending on your viewpoint) that generated huge publicity for Tesla, including: the ventilators Tesla designed to help fight the COVID-19 pandemic; the Boring Company, which sold over a million dollars’ worth of hats and flamethrowers; Musk’s Clinton-style puff off a joint on a podcast, which stoned the media for days; and not least the incredible levitating act of TSLA stock, which has made the erstwhile startup the world’s most valuable automaker.
Larry Light, writing in Forbes, offers more reasons why paid advertising may not be worth the cost. “Traditional advertising has already given way to many alternative ways of brand communication, most of which Mr. Musk deftly employs,” he writes, and cites several examples.
For better or for worse, Musk is a star on social media platforms. Does GM CEO Mary Barra have 35 million Twitter followers? Light asks (in fact, she has about 51,000). Every Supercharger, many of which are in highly visible and trendy locations, serves as a dynamic billboard, demonstrating how cool it is to own a Tesla. Elon Musk’s appearances at TED and other forums often generate in-depth articles in the media.
Mr. Light also points out that several other well-known companies, including Starbucks and Chipotle, developed powerful brands without the benefit of traditional advertising. Others, such as Uber, have spent big money on ad campaigns that generated little goodwill. According to market research firm Kantar, only 25% of the 2019 Cannes Lion award-winning ads generated substantial brand impact. The bottom line: spending money on advertising is by no means guaranteed to generate sales (as several deep-pocketed former presidential candidates could tell you).
Above: Comparing automakers back in 2016, Tesla's the only one that shows $0 of ad spending (Source: Advertising Age via Kantar Media)
Carolyn Fortuna, writing in CleanTechnica, seconds the assertion that “metaphoric advertising,” of which Elon Musk is a master, is more effective than traditional ad spots. “Musk seems to spend part of every single day making sure we are exposed to the Tesla brand,” she writes. Musk directs and stars in a “theater of Tesla” that keeps the brand in the public eye constantly (usually in a positive way).
All these writers make good points, and they all boil down to this question: what could an advertising budget give Tesla that it doesn’t have already? It’s hard to imagine how awareness of the Tesla brand could be much greater. Even people who are only vaguely aware that electric cars exist know about Tesla, and those who do follow the automotive market can’t fail to be well-informed about the company, as it is regularly featured in car mags, techie mags, greenie mags, the financial press…
This leads us to another point. The reason for advertising is to increase sales, and by all accounts, Tesla is currently selling its vehicles just about as fast as it can build them (as Musk has said several times, it is “production-constrained”). A company that just opened one new factory in China, is building another in Germany, and is planning a third in Texas, somehow doesn’t sound like a company that needs to find new ways to increase sales.