Tesla has steeply discounted their vehicles which has created a PR backlash nightmare.
Let’s talk about how they created this mess so you can avoid it. Plus we’ll get into how you should manage it instead to avoid this situation altogether.
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Hey, Folks. Sean Here.
And today, what I want to talk about is
how NOT to manage price discounts for your product,
with an example provided by Tesla and the recent
discounts that they’ve provided and the PR nightmare that
that’s caused, especially in China.
So if you’re unfamiliar with this story,
Tesla has more recently been steeply discounting.
Several of the models that they offer all over
the world to the tune of thousands of dollars
in some markets, and in particular, customers that have
paid need for the tesla vehicles before these price
discounts went into place are very upset. Why?
Well, because the discounts are not applying to them
in any form of refund or anything like that.
So, as you can imagine, if you were one
of these people that purchased a tesla at its
previously higher price, in some markets, considerably higher price,
you probably wouldn’t be very happy to learn that
all of a sudden, they produced that price by
thousands of dollars, and it doesn’t apply to you.
Now, in certain areas of the world, in particular
in China, this has become a total PR.
Nightmare where their customers that have
paid that higher price have been
storming their stores and vandalizing them.
Because how Tesla has treated this situation and
the fact that they’re not offering them anything,
in fact, it all feels pretty poorly planned.
And the execution does as well.
So this is among some of the risk
that you can experience if you’re going to
start offering discounts for your product.
And that’s why I say it really
is important with how you manage it.
Because if you don’t, it can turn into a PR.
Nightmare like this one.
This is the last thing that you want to see. Right?
I understand that they’re trying to incentivize
selling more vehicles, but they didn’t execute
that plan well, especially in China.
Now I want to talk a little bit about
the difference in the markets as well, too, because
the Chinese market is different than the American market.
And what I mean by that is,
in China, they leverage a different model. In China.
They Have A Direct Sales model, which We
Don’t yet have here in The United States.
But it seems like things are
kind of pushing in that direction.
Although it’s undetermined when something like that
might apply in the United States.
But in China they have a direct sales
model, meaning that price transparency is very high.
So everyone could see where your
price is and where it’s been.
That means that you need to treat how you manage
your price differently in the Chinese market than you do
in the American market, where there’s a dealership network.
The dealership network is kind of like the
wholesale retail model, where the dealer, the manufacturers
provide the vehicles for a price to the
dealership, and then the dealership has some price
flexibility in terms of what they want to
charge from there based on market conditions.
And they can manage incentives and
all that type of stuff.
So American consumers are accustomed to there
being some of these incentives that come
and go, incentivizing them to purchase at
different times and things like that.
So the way you manage the process in
the American market should not be the same
as how you manage in the Chinese market.
And that appears to be what Tesla essentially has
done here, where they kind of just rolled out
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the same strategy in both markets and no previous
customers are happy anywhere but in China.
They’re particularly upset because
it’s very, very uncommon.
So you really need to be careful how
you manage price discounts for your product.
In fact, I would really never would like to see
you offer price discounts, but if you are going to
do it, you really shouldn’t have to do it if
the value is high and the value is strong.
I think that’s really some of the underlying fundamental
issues that are going on here at Tesla.
But if you are going to manage it, you
need to make sure that you manage it well.
Otherwise you could create one of
these PR nightmares for yourself.
So I want to talk to you about how
you can manage this process much better than Tesla
has to avoid this PR nightmare that you might
experience yourself as well, too, if you want to
get creative with your pricing for your products.
And in particular, this applies when you’re talking about
discounting your product and how it applies with managing
relationships with your previous customers, who you should be
taken care of as well too, because they should
be brand ambassadors for you not going around telling
everybody about how they got shafted by you, which
is probably what these Tesla customers are going to
be doing. And it’s going to cause
untold brand and reputation damage.
So that is not worth it at any price.
But if you do want to get creative with
how you’re managing your pricing, in particular, you want
to offer discounts, but you want to do them
in a creative way, in a way that works
for everybody, you’ve got to get more creative with
how you manage your relationship with your previous customers.
Now, I’ve seen other product companies try to do this as
well, too, and it always creates a form of backlash.
So you have to expect that because people have
paid a higher price, then you’re all of a
sudden charging for the product right now.
So you need a story to be able to share
with them or something to provide for them that’s going
to make them feel okay with the situation, like grandfathering
them in for whatever they had paid previously.
Like, for example, if you wanted to offer
additional services or you wanted to switch to
a subscription model or whatever it is, however
you’re changing your pricing model, right?
If you want to do that, then you need to
manage the process with your existing customers in a different
way than you’re managing it for everybody else.
That’s completely new to your product.
That’s where you can make a clean break.
So whatever they’ve paid before, if that was
expected to include whatever features and upgrades you
were going to add to your product moving
forward, you should manage it that way.
So you have to bifurcate how you’re managing this basically
subset of customers in order to minimize the backlash that
you’re going to get from making these changes.
Now, everybody understands and expects there to be changes
to products and product companies along the way.
That’s something customers, for the most part, are
relatively familiar with, but they’re not looking for
you to take advantage of them.
That’s going to create all kinds of problems for
you and your company potentially for the foreseeable future
if you don’t manage this the right way.
So figure out how you can make essentially
both groups of customers as happy as possible.
You’re not going to make everyone happy,
but you need to offer them something.
You can’t just tell them that, no, you bought
then, and as such, you’re being penalized for it.
That’s really not how this should work.
And if you do that, I promise you, you’re
going to create a mess just like Tesla has.