‘Range inflation’ is a sign Tesla has lost sight of its customers
Mark reviews the recent controversy over the driving range of Teslas and revises his assessment of the company’s market orientation.
A Tesla Model S has a range of 373 miles. Except it doesn’t. According to a recent expose from Reuters, the brochure might say that but it’s not usually what the car itself actually achieves.
The company’s chief executive, Elon Musk – you may have heard of him – previously instructed his team to show optimistic range projections in all Tesla’s marketing. “Elon wanted to show good range numbers when fully charged,” a source told Reuters. “When you buy a car off the lot seeing 350-mile, 400-mile range, it makes you feel good.”
But when put to any kind of objective test or driven in more typical conditions, Tesla’s vehicles keep coming up short. US authorities asked Tesla to reduce its stated range by 3%. South Korean authorities found the disparity to be 26% less than promised and fined the company accordingly. Independent testing company SAE found similar shortfalls.
Thousands of drivers buy new Teslas every week, partly on the basis of the stated range of their new vehicle.
According to the Reuters article, the issue originates with Tesla and a two-stage approach to range estimation. After a full charge, its cars usually overstate the mileage that can be achieved on their dashboard meters by underestimating power drains that occur because of cold external temperatures or vagaries in how a car is driven. But once a battery reaches less than 50% of its remaining charge these projections suddenly become more realistic to ensure drivers are not left stranded by inaccurate range projections and a suddenly exhausted battery.
It’s important to note that Tesla is not doing anything illegal with this flexible approach to range estimation. Indeed, it is not even the point of this column. It’s what happens next that will boggle your marketing mind and form the basis for the next twelve hundred words.
The moment of truth
Thousands of drivers buy new Teslas every week, partly on the basis of the stated range of their new vehicle. Sure enough, when they first turn it on that projected distance shows up on their shiny new dashboard. But mid-way through their drive, owners are confronted with an inexplicable and unexpected decline in their remaining range. Unaware of Tesla’s dual approach to distance estimation or the recent Reuters article, many drivers begin to assume something is wrong with their vehicle.
Lots of them think that.
In the last four years, Tesla has sold more than 3 million cars. Multiply the understandable concern of car owners by these gigantic numbers and then add in a four-year warranty period and you end up with the mother of all customer service challenges. Tens of thousands of Tesla owners have been calling their dealers to report a problem with their batteries and booking in their cars for an urgent check-up.
This is the moment. The ‘moment of truth’, as some service aficionados often call it. A situation in which a well-run company will meet customer concerns head on. Ideally, it will listen to the issue. Learn about the problem. Diagnose its causes. Consult the company’s brand values and product position. And then save the day with such efficiency and elan that the customer is left even more impressed with the company – not despite, but because of the problem and the way that it was resolved.
Such situations do occur. Ironically, Musk and Tesla offer up a perfect example of how to pull off this kind of redemptive resolution. In 2016, Loic Le Meur grew so frustrated waiting for fellow Tesla owners to drive their already fully charged cars away from their supercharger slot that he sent Musk a direct tweet. Within a few hours, Musk had responded and, apparently, altered his charging algorithm to penalise owners who left their fully charged car connected to a charger after a certain point.
It was fast. It was responsive. It was high tech. It was very Tesla. And it was about making life better for the company’s customer base. And if you owned a Ford or, God help you, a Jeep, you followed the saga with a potent mix of awe, inspiration and jealousy.
But that was seven years and many millions of cars ago. We are dealing with a different Tesla and a very different Elon Musk these days. Tesla’s approach to customers who query their car’s range wasn’t quite at the same level.
According to Reuters, the company set up a “diversion team”. The team was charged with intercepting up to two thousand users a week who wanted to have their cars checked out for range issues, and ensuring as many as possible were diverted away from a service and towards inaction.
At first, Tesla trained its diversion team to run a remote check on a user’s car and then call them to advise that all was well and no service was required. Or to contact them and confirm that range estimates were just a prediction, not an actual performance capability and that there was nothing to worry about. Or to explain that Tesla batteries degrade over time and, with them, accurate range estimates too.
The diversion team then stepped things up. A source close to the company claims that even when a remote check did uncover issues with a car, nothing was done about it. Their goal was diversion, not maintenance, after all. Then the diversion team stopped running remote tests altogether.
“Thousands of customers were told there is nothing wrong with their car by advisors who had never run diagnostics,” a person familiar with the situation told Reuters. Finally, Tesla allegedly altered its app so that customers who complained about range were rendered unable to book in for a service appointment.
A culture of market orientation
For much of the first hundred years of marketing knowledge generation, the discipline was a largely theoretical pursuit obsessed with its own scientific status. It was only in late 1980s that the marketing concept was operationalised by a small group of American academics. During this fertile period of study, two competing, if not entirely opposing, definitions of market orientation emerged.
Professors Ajay Kohli and Bernard Jaworski developed an operational perspective. They defined market orientation as a tripartite combination of “market intelligence, dissemination of the intelligence across departments and organisation-wide responsiveness to it”. Theirs was a compartmentalised view in which different tasks delivered market orientation within the firm.
Meanwhile, Professors Stanley Slater and John Narver took a cultural perspective. One that would ultimately see their definition become the dominant point of view within the discipline. For Narver and Slater, market orientation was more about the cultural foundations of the company. Why was it in business? Was it capable of learning from customers? Could it improve and adapt?
Market orientation demands a certain level of respect for the people that pay for everything.
Rather than starting with a requisite list of corporate behaviours, the professors saw market orientation first as a function of the way the company saw itself and the business it was in. From this perspective, customers were not an ancillary step in the path to making good products or the origin for the ultimately more important objective of corporate revenues. They were the reason a company existed and the source for its future growth and success. Market-oriented companies knew this and built a culture that reflected that knowledge.
And it’s from this more cultural perspective that these revelations about Tesla should best be interpreted. If proven true, a company that bends the truth of its product’s performance and then sets up a large team of executives to obfuscate the subsequent issues that arise signals genuine transparency and ethics issues. But it also suggests something deeper and more concerning about the nature of Tesla and its market orientation or lack thereof.
Any company that works this hard and this explicitly to deceive customers has something deeply fucked up at the very heart of its culture. Market orientation demands a certain level of respect for the people that pay for everything. And when a company, and in particular its leadership, demonstrate such abject disrespect and dishonesty, there are surely problems ahead.
Market orientation is not essential to corporate success. You can get away with a great product or low prices or even fantastic advertising and become strategically successful. But over the long haul, companies that are more market-oriented, more culturally attuned to the customers that they serve, end up being more successful. They launch better products. Deliver better service. And ultimately grow, on average, much faster than companies that don’t develop a culture of customer obsession, as the great Jeff Bezos once put it.
Who is Elon Musk?
And the unanswered question in all of this is what happened to the Elon Musk of 2016? The one who listened to customers on social media and who learned and actively worked to make things better? Where did he go? There were several examples where the Musk of this era stepped in and improved the way Tesla operated. He was a bit of marketing idol for a while. Why the change to a man so cynical and devoid of customer respect that he apparently set up a large group of executives with the express purpose of preventing customers from being served properly?
And what does it mean for Tesla? The cliché says the fish rots from the head down. And I’ve seen it too many times to discount the observation when it comes to marketing. A company hires a leader that gets market orientation and who walks the talk of customer focus. The culture gradually changes and corporate behaviours follow. When that same company is then led by someone driven by just the bottom line or product deadlines, customers become an afterthought or even an annoyance.
Tesla is selling more cars to more customers in more markets than ever. But that does not mean more market orientation. It means that the approach to customers that Musk and his team now adopt will be expanded exponentially across the next few years and next few million customers.
Now would be a good time for them to review that approach.