Brand is not a product, the Tesla example

Telsla Model S

Few days ago Tesla published a blog post explaining to their customers that their Model 3 is not an upgrade from Model S, and that they should not buy the Model 3, but the superior Model S. The blog post explains this quite bluntly. We can conclude that this Tesla blog post is a reaction to how customers communicated to Tesla sales recently, and that some Tesla customers are so loyal to the Tesla brand that they do not really research their only three models before buying.

The Tesla blog post is a great example of a difference between a brand and a product. The brand is customer’s perception and is owned by a customer. The product is manufactured and owned by the company. The main differences are:

1) Brand has much less information than a product. Meaning customers know much less about the product then the manufacturer and in most cases this is substantially less information.

2) Brand information, being owned by the customer and being customer’s perception, is highly subjective soft information. Product information is engineering and design oriented, and includes mostly objective hard information.

3) Brand requires a lot of motivation and incentives for growth because customers are inert towards accepting new brands. Product does not include motivation and incentives, but simply provides a solution.

Tesla sells with their Brand, not with their Products. Same as Ferrari. This is why Tesla has passed Ford in market capitalization, and Ferrari almost has the same market capitalization as Fiat Chrysler Automobiles (Ferrari 13.58 B USD vs FCA 19.27 B USD).

Both sales tactics – Brand and Product – work, but in specific situations, but selling with a Brand is more competitive in a mature market.

Written by: Nikola Tosic
Publishing date: 9 Apr 2017