Tesla, Cybertruck, Market Research, and Sizzle
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You can add another new product to the list — CYBERTRUCK.
In case you’ve only seen a headline or two, check out the 30-second commercial to fully appreciate the audaciousness of Cybertruck.
Tesla’s announcement of Cybertruck perfectly illustrates three concepts at the heart of the Marketing BS newsletter:
Bad PR can be good for business
Sizzle is sometimes more valuable than steak
Market research is BS
Bad PR is Good PR
Tesla unveiled the Cybertruck on November 21. Most media outlets skewered both the product and the launch. An article from The Guardian provides a representative example of the criticism hurled at Elon Musk’s latest plaything:
On Thursday, Elon Musk’s net worth plunged by $768m (£588m) after Tesla unveiled its ugly new Cybertruck. “It is literally bulletproof to a 9mm handgun,” Musk proudly announced of the futuristic take on a pickup truck. The company’s design chief then attempted to figuratively demonstrate this by throwing a ball at the car’s “shatterproof” windows. The windows literally shattered and Tesla stock dropped more than 6%.
Within hours, many websites — spanning mainstream media, comedy platforms, and everything in between — posted video replays of Tesla designer Franz von Holzhausen smashing the “unbreakable” glass of the Cybertruck windows. Not once, but twice.
How many people watched Tesla’s embarrassing moment?
Tesla livestreamed the hourlong launch event for Cybertruck. The company never released information about the number of people who watched online; moreover, they immediately took down all videos of the event, presumably to avoid further humiliation about the shattered windows.
Several media outlets posted highlights of the launch on YouTube:
The Verge: 5-minute version, 12.7 million views
CNET: 14-minute version, 7.3 million views
Business Insider: 6-minute version, 5.4 million views
From just three videos, that’s over 25 million views — a figure that pales in comparison to the total number of people who watched or read about Cybertruck via television reports, news articles, and social media buzz.
Despite media descriptions of “failure,” Tesla’s launch became one of the biggest stories in business — in pop culture, really — for an entire week.
As regular Marketing BS readers know, I believe that bad news regularly yields good results for companies. Last week, I wrote about the impact of negative news stories on company awareness (which is the first step towards customer consideration):
Morning Consult published their annual “definitive measure of brand growth” list for 2019 [including a top 10 list for brands that showed the largest increase in “awareness” and another list for the greatest growth in “consideration.”]
Seven of the ten brands are shared between both lists — and in exactly the same order. Essentially, growing awareness follows a similar trajectory as growing consideration.
The takeaway message here? The window fiasco significantly boosted awareness for Tesla’s new product. Instead of driving car buyers AWAY from the not-so-bulletproof vehicle, the coverage actually sent consumers on the fast track TOWARD Cybertruck’s preorder webpage.
From the Guardian article:
The Cybertruck launch debacle doesn’t appear to have done lasting damage to the vehicle’s image. On Saturday, Musk jubilantly tweeted to his 29.6 million followers that there had been “146k Cybertruck orders so far … with no advertising”. On Sunday, he tweeted: “200K.” And on Monday, Tesla stock rose 4% and Musk’s net worth significantly recovered.
Someday (maybe?) media analysts will realize a fundamental idea about selling products: in most cases, bad news is better than no news. Busting through the clutter is the hardest part of marketing. With Cybertruck, Elon Musk managed to, quite literally, smash expectations for media coverage.
Sizzle versus Steak
In a recent Bloomberg piece, Austin Carr highlighted Tesla’s ability to manufacture something more valuable than vehicles — publicity. Here is Carr’s take on cars:
The overnight popularity of an unreleased product that’s still at least two years away from being manufactured hasn’t detracted from the hoopla surrounding what it could mean for Tesla’s future. One analyst even suggested Thursday that Cybertruck could contribute to a 50% jump in the company’s stock. The hype, whether earned or not, has been core to Musk’s marketing magic for years. While most automakers and tech companies have to rely on retailing products they can actually ship today — how old-school! — the Tesla CEO has a supernatural ability to get away with selling a vision of tomorrow that often proves better than the real thing. [Emphasis mine]
Back in 2010, I developed a concept for a new startup. A venture capitalist friend of mine recommended that I pursue one of two strategies:
Build the product, get traction, establish the viability of the unit economics, and then raise money to scale.
Build a presentation that demonstrates why the idea should work in theory, and then raise money (before you actually try to make the idea work).
My friend argued that either approach could prove successful, and he also outlined a situation doomed for failure: building a product that could not achieve immediate traction. In other words, you need to specialize in serving steak or selling sizzle. If you serve any steak to potential investors, they will take a very close look; even minor imperfections might scare away their interest. In contrast, if there is no attempt at serving steak, then investors will evaluate the sizzle.
Throughout his career, Elon Musk has shown an impressive knack for selling the sizzle.
Let’s consider Cybertruck’s sizzle: Tesla boasted 250,000 preorders. Closer investigation reveals the very modest commitment required for a preorder — a $100 deposit, fully refundable at any time. By setting the bar so low, Tesla sparked interest among an astonishing number of customers. The frenzied consumer response emboldened Musk to trumpet the unprecedented demand for the vehicle — which, in turn, commanded another news cycle, which drove even more preorders. As an added bonus, Cybertruck’s sizzle steered some extra money to Tesla’s coffers. In the same way that Starbucks’ loyalty program delivers free financing to the coffee retailer, Tesla just scored $25 million in free cash flow (250,000 preorders x $100 deposits).
Of course, Musk still needs to prove that Tesla can mass produce the Cybertruck (presumably with stronger windows!), but he has until 2022 — that’s a lot of sizzling before he needs to serve any actual steak.
And if the company struggles to attain their targets, the low price of the deposit should provide more roadway. In 2016, Musk tried a similar preorder strategy (with a $1000 deposit) for the Tesla Model 3, but ended up hitting a wall. From Bloomberg in 2018:
Musk initially promised as many as 200,000 Model 3s by the end of 2017. To get there he planned an unprecedented investment in factory robots, calling the production line “the machine that builds the machine.” He’d said it would look like “alien dreadnought” — a manufacturing process so futuristic, unstoppable, and cost-effective that it would seem extraterrestrial. It hasn’t worked out that way. Tesla ended 2017 having made not quite 2,700 Model 3s. As of the end of June it had turned out about 41,000.
Musk appears to have learned his lesson from the Tesla 3, as evidenced by language in the Cybertruck order agreement: “The estimated delivery date of your Vehicle, if provided, is only an estimate as we do not guarantee when your Vehicle will actually be delivered.”
The uncertainty about a shipping date has not dented the Cybertruck’s hype. For example, Dubai’s police force recently announced plans to purchase the vehicle. Some context: the police fleet also features more than 15 exotic cars, including a Lamborghini, Bugatti, and Rolls-Royce. As such, I suspect their announcement has less to do with the truck’s suitability for police activity, and more to do with basking in some of Elon Musk’s sizzle.
Let’s be clear: Cybertruck was not designed for police departments — or maybe even for any practical purposes. Tesla created a vehicle that would stand out for the sake of standing out. Benedict Evans, a partner at Andreessen Horowitz, shared his “half-formed” thoughts on Twitter:
In the late 90s and early 2000s, Apple used design to break into consciousness when the underlying product was a commodity and the company was on the wrong side of economies of scale. The form here doesn’t flow from function: it flows from marketing.
Conversely the first iPhone design flowed inevitably from the function — it’s all screen (which is why all the phones that followed it had to look essentially the same).
And now, which is Tesla? Is this form-led design or marketing-led design?
I think the answer is obvious: the Cybertruck design was not driven by “function.” Every element of the vehicle — the angular shape, the illumination strip, the unbreakable windows — is a marketing statement about looking, feeling, and being “different.” In short, with just weeks left before the end of the 2010s, Tesla launched the most sizzle-powered product of the decade.
Do People WANT a Bulletproof Truck?
In general practice, before a company develops a new product, it conducts market research to gauge potential consumer interest. But that’s not the strategy roadmap followed by Tesla. As reported by Sam Walker in the Wall Street Journal:
The most audacious thing about this vehicle isn’t the styling — it’s the way it was conceived, designed and launched. This isn’t the kind of calculated strategic move you’d expect from a $60 billion public company. It’s basically a gut hunch — a wild bet.
On Nov. 5, two weeks before the Cybertruck’s debut, Mr. Musk … described Tesla’s approach to market research.
“I do zero market research whatsoever,” he said. [Emphasis mine]
After expressing astonishment at Musk’s admission, Walker continued his argument:
Ignoring market research would be a tough strategy to defend in any industrial era, but it seems especially reckless in the age of Big Data.
In the case of Cybertruck, I believe Musk is right and the WSJ is wrong.
From 2013 to 2016, I served as CMO for A Place for Mom, a company that helps families find senior housing for their aging parents. In 2014, the team developed a new product idea to address a recurrent concern: many families worried their parents would encounter issues after they moved into a senior community. What if we could provide a “care check” to ensure that everything was okay? Essentially, someone would visit to ensure proper medical care and facility maintenance, as well as some regular, in-person social contact.
Our market research indicated off-the-charts levels of enthusiasm. People loved the idea so much that (1) they wanted a weekly service (we imagined monthly visits), and (2) they expressed a willingness to pay far more than our price estimates. Based on the positive feedback, we anticipated a successful program launch.
While we prepared the widespread introduction of CareCheck, we decided to run a small pilot program to fine-tune its features. We offered the service, free of charge, to 20 families. Of that group, 19(!) families passed on the opportunity.
According to our market research, 90% of families communicated a willingness to pay a fee for the CareCheck program. And yet, when presented with the opportunity to participate — FOR FREE — only 5% of families committed.
The moral of the story? There is a massive difference between “what people say they want” and “what people actually buy.” In most cases, these are two entirely different things.
Many market researchers understand the gap between expressed intent and actual behavior. Lots of us have conducted market research knowing that we will not discover how people might respond in the real world. Instead, we go through the motions to “cover our ass”; if things don’t work out with a new product launch, we can point to the market research, absolving ourselves of responsibility. Here’s a passage from my upcoming Marketing BS book:
A.G. Lafley was CEO of P&G from 2000 to 2010, and again from 2013 to 2015. As CEO, Lafley was called, “one of the most lauded CEOs in history, and is credited with revitalizing P&G under the mantra that ‘consumer is boss.’” In Playing to Win, a book Lafley co-wrote with Roger Martin, he discussed considering the cancellation of all market research at P&G because he believed the predictive power of research was practically nil… Lafley said, “People just lie through their teeth on market surveys, especially when answering truthfully would make them feel bad about themselves. All market research does is measure how much desirability bias your product happens to have.”
During our market research at A Place for Mom, responses about the CareCheck program were skewed by desirability bias. Imagine being asked, “would you be willing to spend $200 to ensure that someone takes care of your mom?” How could you possibly answer “no” to that question — even during an anonymous survey? When A Place for Mom launched the pilot program, psychology reversed itself. In that case, a family would need to confront the reality that whatever support they were currently providing for their mom was NOT good enough. You can understand why 19 of 20 families passed on the offer of a free service.
Most people are not comfortable admitting their flaws. As such, people prefer thinking about ideas that make them feel good about themselves. Market research is very helpful for learning how to boost people’s self-worth, but far less useful at determining if people want to buy your product.
What’s a better method of measuring consumer interest? Show people a model of your truck and see if they will place a $100 deposit.
So why don’t more companies skip the market research and follow the Cybertruck approach? The short answer: most companies are not led by an all-powerful CEO/Founder who can “will” radical ideas into fruition.
The more complete version: the companies large enough to consider developing major products — like a new truck — are usually organized in a hierarchical structure, with checks and balances at every level. More importantly, each of those checks and balances would be mediated by multiple individuals, with varying motivations and fears. Deciding to launch a new product without any market research would require a LOT of people to agree — people potentially risking their careers. If a single person in the reporting structure sounds the alarm, the company will likely insist on conducting market research to rationalize their decisions. And once that happens, any new product will resemble every existing product on the market.
Is the Cybertruck a good product? I have no idea. But I think it’s a smartly marketed product. And it’s unique — not just for its sci-fi design — but because something this bold was even released by a major company.
Happy holidays. See you next year!
Keep it simple,
If you enjoyed this article, I invite you to subscribe to Marketing BS — the weekly newsletters feature bonus content, including follow-ups from the previous week, commentary on topical marketing news, and information about unlisted career opportunities.
Edward Nevraumont is a Senior Advisor with Warburg Pincus. The former CMO of General Assembly and A Place for Mom, Edward previously worked at Expedia and McKinsey & Company. For more information, including details about his latest book, check out Marketing BS.