When Elon Musk and Tesla Motors decided to forego traditional car dealerships and instead sell cars directly to consumers, the move was widely applauded. Since car dealers rank right down with ambulance-chasers and politicians in overall public esteem, it wasn’t difficult to figure out why the maverick tycoon’s retail gambit met with general agreement. But in retrospect, the move might have created yet another pothole for the embattled car company to navigate around. According to the recently released 2019 Trusted Automotive Brand Study (TABS) from AMCI, Tesla has fallen off its previously lofty perch in the study to land at third from the bottom, besting only Acura and BMW among luxury marques. Alfa Romeo was the top-ranking luxury brand in this year’s study, followed by Porsche, Genesis, Audi and Land Rover in the top five.
Since the AMCI study again affirmed that trust accounts for more than 50% of a consumer’s decision to repurchase or recommend an automotive brand or its dealers, Tesla’s precipitous drop has to be considered yet more evidence that the brand is in trouble. How did Tesla find itself in this position when the move to go “dealerless” was so broadly hailed?
“The urban myth is that taking control of your entire retail process will lead to superior customer experience and many people subscribe to that,” Ian Beavis, AMCI Global’s chief strategy officer told forbes.com in an exclusive interview. “Certainly the first two years of the study Tesla was near the top of the heap in luxury but they have tumbled to third from the bottom in the luxury category, and that’s largely due to the fact that they have been pushing volume.”
Over the past 18 months, Tesla Motors has significantly stepped up its sales volume without markedly increasing its number of retail outlets. Beavis believes that likely caused Tesla sales representatives to move from a relational approach to a much more transactional stance…with an accompanying loss of trust from potential buyers.
“One of the most telling things,” Beavis said, “is that all the luxury brands that are ahead of Tesla in the study use franchised dealers. Franchised dealers can do an excellent job of building trust if they use the right standards and practices.”
While many observers were impressed by the additional volume the Model 3 represented for Tesla Motors, they missed the fact that many Model 3 buyers are fundamentally different from those who purchased the Model S and Model X. As Beavis said, “They aren’t early adopters.” Tesla appeared as unready for the change as were industry pundits.
“Once they got into the Model 3 at a lower price point and started to attract people who were stretching to buy a car in many cases and then with the volume that they were pushing with their retail footprint, things started to fall apart,” Beavis said. “With the Model 3, many buyers were buying the most expensive car ever in their lives.”
One factor that has served to torpedo consumer trust in Tesla is in its pricing. The company has repeatedly publicized what appear to be very attractive prices for upcoming products in the pre-launch phase only to offer much higher-priced versions of the vehicles in its showrooms after production begins.
“You know they’ve had all those people that signed up for its $35,000 car, and it never happens,” he said. “So that hasn’t helped.”
But not delivering on a price promise is not all that is plaguing Tesla Motors now, the AMCI Global executive said.
“Tesla has clearly overstepped their resources, and they’re feeling all the strain of production quality problems. You’ve got myriad problems,” Beavis said. “And the investment that’s been required to have this retail footprint now is a drain on the company as well. You’d rather be spending that on product development and better product quality than what they’re doing.”
One has to look at the buying public’s failing trust in Tesla Motors as very problematic for the brand, especially since it was founded as the antidote for the global car manufacturers. The public has clearly been captivated by Musk’s efforts to transform transportation fundamentally. But taking on competitors with such power and reach is taxing its resources.
“I think that their organization is really just overwhelmed,” Beavis said. “And you know that the drop in rankings is the most precipitous drop of any brand in our study.”
How important is the “trust” measure to automakers going forward? AMCI feels it is the next step beyond “customer satisfaction,” which has become a standard industry measurement.
“If we look at the industry here, we’ve been measuring satisfaction for a long long time, and it has improved, but we’re still paying enormous incentives and all sorts of trickery to get people to buy the cars,” Beavis said. “You know the definition of insanity is doing the same thing and expecting a different result, so that was the genesis of us looking at something other than satisfaction.”
Beavis sees trust as being of a “higher order” than satisfaction, a metric that includes satisfaction but goes far beyond it. Because customer satisfaction has been scrutinized for decades now, most brands are fairly good at executing on it, but the AMCI strategist now believes satisfaction is a cost of entry. Satisfying people is just not enough. Based on the hypothesis that emotions beyond satisfaction are the real drivers of customer loyalty and brand enthusiasm, AMCI identified trust as a facet of the buyer-seller relationship worthy of study. And the study revealed that developing and maintaining customer trust is a very, very powerful thing.
“The analogy I use about satisfaction versus trust is is the absence of illness doesn’t mean a person is fit or healthy,” he said. “Another analogy I’d use is you don’t get a serious relationship because you’re satisfied with dating someone. It takes love and trust to build longterm relationships.”
In its early years, Tesla certainly created an aura of trust, and its brand, products, and go-to-market process were not just respected but venerated. Now, engaged in life-or-death struggles with heavily entrenched traditional manufacturers with much larger footprints, Tesla has obviously entered a new phase in its evolution.