The Tesla trial: Can brands thrive without a traditional marketing team?

Last month, Tesla laid off its entire 40-person growth-marketing team in charge of creating the electric vehicle (EV) company’s first ads. The cuts came a year following CEO Elon Musk's reluctant declaration that he would "try a little advertising and see how it goes”.

Well, by all accounts, it did not go particularly well. After scrapping his marketing team, Musk tweeted: “The ads were far too generic—could’ve been any car.” 

The layoffs come amid falling sales for the EV giant and fierce competition from Chinese automakers. Tesla said it delivered 387,000 cars worldwide in the first quarter of 2024, down 8.5% from 423,000 in the same period last year. Reduced sales have impacted the company's profits and revenues. Since the beginning of the year, the company's share price has decreased by more than a quarter. 

But was scrapping an entire marketing team just four months after launching it a little premature?

"Imagining you can hire and fire whole teams, and that decision alone will make a difference is naive," says Jarther Taylor, senior advisor and CMO at 24HR Business Plan. "A new corporate capability takes time to grow."

Indeed, Alexander Christenson, a former Tesla senior editor, revealed on LinkedIn that his tenure ended just two months after initiation, a duration too brief for developing impactful creative work.

"Tesla's global growth content team, consisting of 40 members, faced challenges from the outset due to insufficient time allocated for testing and refining ad campaigns," says Kaitlin Zhang CEO, OvalBranding. "The broader objectives of ad campaigns, like enhancing brand awareness and loyalty, necessitate a longer timeline to take effect and are more complex to measure. This underscores the need for strategic patience and support in marketing endeavours."

 

But it's clear that 'strategic patience' is not something that Musk specialises in. Never much a fan of marketing to begin with, Musk has mentioned in the past that Tesla had no marketing team or CMO and that their advertising budget was zero. Until recently, they relied on word of mouth and media coverage only.

"Elon Musk is an unconventional leader, so the move to ditch the marketing team that offered him a ‘generic’ solution that also failed to meet growth targets was not surprising," says Jacqueline Alexis Thng, partner at Prophet. "I fully expect him to leverage AI and data to be more predictive."

Can brands survive and thrive without a traditional marketing team?

While a big personality CEO like Musk with a cult following might be able to ditch an entire marketing team overnight and seemingly get away with it, would other brands be able to survive for long without a traditional marketing team or advertising budget? What, if any, alternatives are there?

"If you have done your work and understand the market dynamics, and your audience’s needs and develop a product that addresses those needs, at a price that works for the audience, and the distribution strategy that works for them, then you can go a long way without promotion," says Taylor. "But at some point, a brand needs to integrate its efforts from PR and word of mouth and the rest of its random acts of marketing into a deliberate and intentional plan."

Iona Macgregor, chief strategy officer at WhiteGREY points out that just because it doesn’t look like traditional advertising doesn’t mean marketing or advertising isn’t happening.

"For example, Elon Musk, is a living and breathing distinctive brand asset, for better or for worse,” she says.

After all, marketing is multifaceted, and it extends beyond mere advertising. And Tesla's significant investment in managing its brand and reputation is a testament to this, with Musk's tweets and interviews serving as key marketing activities.

"Claims of Tesla lacking a marketing team are exaggerated," says Zhang. "In reality, market research is vital for consumer brands like Tesla to grasp evolving customer needs and perceptions. Solid brand positioning and clear messaging are fundamental, providing a foundation for exploring various marketing channels and strategies, including advertising, influencer partnerships, social media engagement, PR and more. This holistic approach is essential for any brand's growth and resilience."

Perhaps Tesla is more the exception than the norm in this case as for years, Tesla’s brand reputation has been centred around Musk's personal brand.

 

"The most successful brands in the world often have a brand champion or key influencer that promoted the brand using his or her personal platform. Think Apple, Virgin, Softbank or Alibaba," says Thng. "Tesla literally created the EV category. So an unconventional company like Tesla would not and should not approach marketing the conventional way."

Of course, Tesla is not the first brand to eschew advertising. Other well-known car makers such as Rolls Royce and Lamborghini seldom, if ever, advertise. Rather than using ads, Lamborghini prefers to extend invitations to fancy events and provide test drives in certain locations to its rich clientele. They claim, "We don't do commercials because our target audience isn't sitting around watching TV”.

Meanwhile, retail brand Zara only spends about 0.3% of sales on advertising. Perhaps this is owed to its fast-fashion approach where some 450 million items and 12,000 new styles are launched annually. Furthermore, the brand does not post itself on every billboard and instead takes a fairly anti-marketing stance on social media.

As these brands and others show, there are alternatives to following the traditional marketing route.

"If we define a ‘traditional’ marketing team as the promotional or advertising team, then there are products that absolutely can thrive without massive budgets," says Taylor. "However, a marketing strategy for most companies cannot be based on statistical outliers alone. You need solid marketers and a strategic marketing plan which you can execute with intention and focus."

Will Tesla ultimately lose out?

It does look like the wheels are starting to come off for Tesla. It has reduced prices in significant markets and is currently letting go of 14,000 workers, or 10% of its total staff worldwide. 

There was a time when Tesla could do no wrong, it literally created the EV category. And the world's largest EV market, China, is a market that Tesla helped establish for EVs. But the company is currently trailing many of the domestic automakers in China and recently revealed dramatic price reductions. And for a little while, China's own car maker BYD, which offers a wide range of EVs, many of which are less expensive than Tesla's, overthrew the firm as the leader in the worldwide EV market.

Could a marketing team help to reverse Tesla's fortunes? 

"Marketing or advertising isn’t the solution for Tesla’s future," says Thng. "Rather, new products or innovation will be key. I am excited about Elon’s emphasis that Tesla's future lies in AI and robotaxis, and not conventional auto manufacturing."

Strategically, Musk's recent trip to China and the tentative approval to collaborate with major local firms, including Baidu, may signal a promising move.

"Tesla's success in China's complex market hinges on effective localisation, which requires a robust branding and marketing team, regardless of Tesla's aversion to advertising," says Zhang. "This approach is crucial for any Western brand aiming to make inroads in the Chinese market."

Tesla has been discounting heavily and as many wise owls have pointed out, that’ll swiftly deplete brand equity. Tesla cut the starting price of its revamped Model 3 in China by 14,000 yuan ($1,930) to 231,900 yuan ($32,000), last month. There were also price cuts in the US, Germany, many other countries in Europe, the Middle East and Africa.

"As a premium brand, Tesla should stay focused on its premium positioning because the category will invariably expand with low-cost competition overtime," says Thng. 

But as for giving advertising another shot to stem declining sales, it seems unlikely given Musk's aversion to it. 

 

 

 

"I hate advertising," Musk wrote on Twitter, now X, in 2019. The Wall Street Journal revealed that Tesla spent over $6.4 million on ads in the US in 2023, compared to a pitiful $175,000 in 2022, despite Musk's distaste for them. But having ditched his marketing team, there's slim chance advertising will save the day for Tesla going forward. 

 

"If Tesla had invested in communicating its value and its brand from the start, they are likely to have had stronger salience in the mind of buyers and a much better chance in competing with the very strong Chinese and traditional car manufacturer markets," says Taylor.

 

"Making a concerted effort starting now to build the brand would pay off within 6-12 months," adds Taylor. "Of course, you’d need to build a marketing team to help manage that programme. Oh wait…"