How Tesla Managed to Alienate Their Most Loyal Customers

[hobbes]

Oh what I wouldn't give for a GeorgeB at Tesla right now.

GeorgeB isn't gone because Tesla is running lean though. There's no reason that I can see to not have someone like him publicly advocating for customers.

+1! He was the kind of guy showing the empathy Dave was talking about towards customers that Elon is completely lacking (while he is a great person in other regards). I think that a company needs employees with different skills on all levels to even out everyone´s specific talents and flaws. I think while Tesla couldn´t do without Elon, it would be better if it wasn´t such a one man show.

 

[schonelucht]

When Tesla gets in that territory, we can talk about their investment priorities, but they are currently a $4B company.

I work with a $4M company with younger employees, but still, if we were running one hour late on a product presentation to our customers the first thing we'd start with it, is a honest apology. And I use 'were' on purpose because we make damn sure that doesn't happen. It really does not take money or expensive managers to get these things right, but it takes dedication to your customers starting from the top dog who must lead by example...

 

[DaveT]

I've learned in life that the good stuff takes care of itself and that it is the bad (or potentially bad) stuff that needs attention. In that light, I can understand why Dave wants to discuss what could be done to make Tesla more bullet proof and not how great the company is. Of course it is great; just look at its success to date.

The real question for me is why?
Why publish unrealistic/untrue specs when the car does not require them to sell (thinking HP, 0-60, 1/4 mile for P85D, DL and P90DL)?
Why not have a simple communication structure in place that keeps reservation holders up to speed without compromising the company's internal machinations?
The list can go on but you get the point.

Sure, you can continue with self inflicted wounds because there is no competition and your customers have nowhere else to go but why?

For the record, I've have been and continue to be a huge Tesla fan. At the same time, I posted very early on (early 2013?) about the lack of good business sense within the company and the Valley mentality when it comes to dealing with customers. I see Dave's observations as more manifestations of a fundamental flaw. Given the flaw goes all the way to the top, I doubt you will see much if anything change anytime soon.

lolachampcar, I know you've been a huge fan and advocate as Tesla. Your post rings true to me. I know Tesla is a great company (that's why I still believe in it and am an investor and owner). And I know that they will recover from the shortcomings of the X rollout. I just cringe though when I think about Tesla repeating this for Model 3 and the many people who can/will be disappointed/frustrated/confused. And people will be asking in a few years, "Model 3 is awesome but why is the stock price so low?" and it'll be because of execution flaws of Tesla. And the low stock price will/might hamper their future plans/expansions. I'm not expecting Tesla to nail it with communication but I do expect at least a passing grade.

I also agree with it being frustrating to see Tesla embellish specs. It's something they really don't need to do and it just makes them look really bad.

These are my requests to Tesla:
1. Create some kind of simple communication structure to keep Model 3 reservations holders involved. It doesn't have to be something that costs a fortune. For example, Tesla could create a weekly blog post or newsletter called "The Model 3 Weekly". And in that newsletter or blog post they can have a weekly video or something that shows some cool stuff or exec interviews. They don't need to divulge any secrets, but they can raise awareness and keep reservation holders engaged, interested and informed. It really doesn't have to cost more than $1m per year. Just put a small team of 3-5 people on it and tell them to create an awesome weekly video newsletter for Model 3 reservation holders that will make their experience great. Problem solved.

2. Stop embellishing specs and over-promising on dates. If you plan on delivering a handful of Founders cars by end of 2017, then say so. And if you know you'll only deliver like 10-20k cars in first half of 2018, then they really ought to say so to manage expectations of reservation holders. And they ought tell let Model 3 reservation holders know that Tesla will prioritize higher optioned cars and that base model orders will ship later.

- - - Updated - - -

While we are on the subject of alienating their most loyal customers, how about they stop putting out specifications that nearly always need at least two asterisks? It started right from the very first sentence of the model S reveal which was supposedly a "300 mile car under $50k" Turned out that it was, but never both at the same time, and then of course only after the incentives. It continued with messaging the price in ever more convoluted ways (after incentives, after fuel savings,...), the protocols under which 0-60 times being reported changing from one model to the other to make the gap between both seemingly larger than it was. Same of course with the famous horsepower stuff and finally we are learning that even the main badging numbers (60-85) were not indicative of relative battery capacity between both models.

Those kind of statements where I, as a customer, can't take the company at face value without examining every little possible interpretation nuance? That sounds to me like an old fashioned second hand car sales guy who's giving me a hard sell on his financing deals.

Tesla should just stop that altogether. The product is amazing enough that even if they reported every single spec as an understatement with the least favorable measurement protocol it would still be the best car money can buy.

Unfortunately I suspect that the Model 3 reveal will start with Elon saying it's going to be "a $35k car with the best autopilot money can buy". And then it will turn out that yes the Model 3 will be that, but not both at the same time. And what will happen is that many of the loyal fans who laid down their $1k because they can stretch their budget to $35k for an amazing car are going to look at what they actually get at that price and then cancel. It won't be a problem because the $45k model will still sell like hotcakes, the $35k model will be scrapped after 6 months because 'no one is buying' (sounds familiar?) and another notch up the list of Tesla statements we can squarely put in the camp of : "technically true but that's about it".

Couldn't have said it better. What's frustrating is I'm not sure if Tesla even knows how much their embellishments are hurting their credibility. It's already an awesome product, and by over-embellishing on specs it just invites people to criticize it and customers who were relying on those embellished specs to be disappointed.

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Seriously pointless rant given you prove the point by your actions. You own a model S have ordered an X and you aren't cancelling anytime soon. Why would Tesla change a thing? They can do whatever they want and you, Dave, will still buy. Why would they change? I wouldn't. Do what you like, start late, treat customers whatever way you want and they still line up to buy whatever you produce. I'd almost be tempted to play a game and keep going to see how bad you could be and still people will buy anything at almost any cost. I half joke. Save your breath, Tesla doesn't have to change anything and if a customer walks 20 more will take their place.

Why exactly? They're selling as many cars as they can make, have pre-orders for thousand more, will sell tens of thousands of model 3s years before they even make them.....
Why should they change again?

The reason Tesla ought to fix mistakes is because big mistakes can hurt credibility with customers and weaken their position. It can make them vulnerable to competitors in the future. It can damage their current credibility, thus disillusioning investors who then give a lower P/E multiple on the stock which in turns hurts their ability to raise funds which then in turn hurts their ability to expand as quickly as they could. Case in point, it's best not to piss off your customers even if you're an early mover cause it can/will bite you later.

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I take a different view of your comments. As a frequent poster, supporter you felt you were due more respect as an insider. You felt brushed off by a high level tesla exec. Did that person give equal access to everyone else there or did you expect something extra because of who you are? I remember your moving to start a newsletter with your insights on the company. Is that still going? Are you out of sorts because of the money lost by your followers? I can see why you feel down on the company. The higher the pedestal,the harder the fall. I am blunt as usual but do you believe that because of your prior support or newsletter that you deserve your car earlier or inside information, I do not

Again, I'm still bullish on the company and a believer in what Tesla can accomplish. I just think their mistakes can seriously hurt/hamper their goal. Also, I'm not upset Tesla isn't treating me special for a small newsletter I write. I do think they could have and should have treated Model X reservation holders, in general, better by giving them more frequent and transparent communication. That's just basic respect for your customers.

 

[omarsultan]

I work with a $4M company with younger employees, but still, if we were running one hour late on a product presentation to our customers the first thing we'd start with it, is a honest apology. And I use 'were' on purpose because we make damn sure that doesn't happen. It really does not take money or expensive managers to get these things right, but it takes dedication to your customers starting from the top dog who must lead by example...

Don't disagree with what you say here and I think an apology for running late by Elon would have calmed a lot of ruffled feathers, but he didn't and so here we are. Hopefully, some lessons were learned along the way. To me, the fact they burned headcount to bring an events team in-house is a tangible action to improve things for next time.

 

[DaveT]

DaveT, your frustrations are warranted.

There are 2 separate issues here: One, delays in manufacturing with could only have been prevented by designing a vehicle that's easier to produce. Two, lack of communications with reservation holders concerning the delays in production.

My hope is that TM has learned from the X and make the 3 much easier to manufacture, which will make their communication flaw moot. They've said that the 3 will be easier to manufacture, but the proof will be in the pudding.

Regarding communications, it's a tricky thing to get right. What they should have done is communicate with the customers the same way they've communicated with the analysts. Send out an e-mail stating, 'we are hopeful to have your Signature X delivered by December. There are potential issues with suppliers and processes in manufacturing that could delay that delivery by a few months. As we get more clarity, we will keep you informed'.

I totally agree. The delays with the X made things especially challenging. Delays typically lead to frustration, angst, unhappiness with customers and thus Tesla needed to counteract that with increased communication and increased transparency. However, instead they kept silence and let the frustration/angst/unhappiness grow. If they would have delivered on time, then they wouldn't have had as big of a problem.

But I agree that they could have and should have sent out even simple emails (like the one you mentioned) to let reservation holders know what's going on. Lots of people are trying to defend Tesla on this saying their a company with limited resources but I don't think that's the issue. It's simply they screwed up. I just hope they recognize it and avoid it in the future.

 

[Auzie]

Actually I see this as a positive. The company communication policy up to now seems to have been "if you don't know - just make something up".

So if you are truly starting to get "I don't know"'s out of Tesla SC's and Stores, at least they're not doing something better than they used to.


Of course, an even better approach would be to inform your staff better so that they can give a real answer. But if you're not going to do that, then getting them to admit: "I don't know" is the next best thing to do.

My guess is that most often there is no one with the better (or any) answer that can inform staff of the better answer. Questions are often about some future expectations or present delays.

In the case of future expectations, no one can answer for sure with the details that people demand and feel entitled to.

In the case of present delays, they are often due to unexpected developments. When unexpected happens, people jump to figure out how to best resolve the issue and no one has the scripted answer up their sleeve ready to deliver on a push of a button of thousands of eager customers.

My bet is that as time goes by, Tesla will come up with scripts for their staff, how to respond to curious customers questions in various scenarios. It is my experience that a ready list of scripts perhaps does not perfectly and precisely describe causes of delays but it does calm the inquirers/scrutineers from above and most importantly, the script gives the ones working on the problem some space to find out what the true answer is or how to fix the problem.

 

[DaveT]

DaveT - Great post and it feels balanced, well thought out and sincere. Consistent with your other posts and is appreciated.

My 2 cents is that Tesla is experiencing something unprecedented. Leading the transition to sustainable transportation from the ground up. It starts and ends there as the top priority. Underneath that, actually, directly underneath that is one thing; innovation. Tesla does nothing else. Let's be clear on that point and I'm happy to discuss it. Below innovation is one thing that stands out as the next priority; engineering. A somewhat close 2nd priority is managing finances. Engineering always takes priority over finances.

You may ask, "ok, but where do customers fall in that priority?" Answer: Depends and you have to pose the question in terms of the other three priorities.

Your examples - Explanation based on priorities

Big deposits - You do this to show enough 'real' demand to inform your supply chain ramp versus a low deposit wouldn't show 'real' demand as much. It is a supply chain balance and financial.

Delays - Nature of the beast and is inherent in the way that innovative engineering complex products comes to market. There are ways to make this better, but it flys in the face of innovation. It is balance of innovative passion and time to market. Other Program Managers and Product Managers can add more color here, but it really boils down to what you want to optimize for and compensate for.

Communication issues - These are real problems that are NOT getting enough attention; that is not a discussion IMO. However, it is not a priority unless it impacts one of the three priorities. I believe changes are in flight and the folks working these issues are professionals. It is just a function of priority. While the issues have been pretty bad they are simply not impacting the three priorities. I hope Tesla will innovate here prior to Model 3. They must do it as it will truly impact the transition to sustainable transportation.

Big event for Founders - This is purely for financial reasons as opposed to a big event when sigs go out or production goes out. Wall Street cares about the first shipped cars as a 'big splash media event'. This is the major milestone that Tesla communicates for financial reasons

Handling customers - Let's be clear here; Tesla, overall, treats their customers better, I'd say leaps better, than any other car company, possibly better than any tech company or any company on the planet for that matter. Why do I say that with such confidence? I follow this forum and have had a great experience as well as my friends. Yes, there is a bell curve associated with everyone's experience, but this is fundamental constant. With special regards to the order cancelled, that is simply setting a precedent that is largely a function a product that is in such high demand.

Thanks for the thoughtful post, Discoducky.

Sometimes it's confusing to me that Tesla can make such an amazing car that oozes with empathy in so many ways, yet be so unempathetic with communication. I'm tempted to think that the empathy to communicate is there somewhere at Tesla; it just needs to be tapped. But then again, I could be wrong and maybe it's a more complex issue.

I personally think that they just made a poor strategic decision to "keep quiet" regarding the Model X so they wouldn't cannibalize Model S sales. I think with the X delays, that decision bit them in the foot more than they expected.

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Omar is right. When you're running lean, you have to make choices like he says. Apple has cash reserves. Mercedes & Amazon, same. If you've worked for a lean org, still in startup mode, you know the tradeoffs being made.

It doesn't make it right. But it IS reality. Another option is to hire more experienced older customer service folks, rather than fresh-out-of-college. At a higher salary. Again, tradeoffs. Elon cares about innovation. When he cares about communication, it will be a higher priority. And it will be at the expense of something else we care about. Sadly.

I understand Tesla is always trying to have a "startup" mentality. But the reality is they are a 13-year old company with 10k+ employees (is it over 15k employees now?). I'm kind of tired of hearing the excuse that Tesla is "growing fast" or "running lean" or "is like a startup". At some point, they need to own up to their mistakes and correct them. I think for Model S, I could buy the excuse that they're a youngish company. But for Model X, the standard is higher. They've got money in bank, thousands of employees, locations around the world. They need to start acting like a more mature company in matter that are of crucial importance like customer service and communication. I personally think that maybe Tesla is so "Elon-centric" that they rely on Elon so much to give them priorities, and Elon just hasn't given them a priority for communication w/reservation holders. So without direction with Elon, the default becomes lack of communication w/reservation holders. I don't think it's a money/resource issue. I think it's mostly a "Elon hasn't given direction" issue.

 

[TheTalkingMule]

You'll get your toy when you get it. The guy is trying to go to Mars for god's sake.

 

[DaveT]

I understand Tesla is always trying to have a "startup" mentality. But the reality is they are a 13-year old company with 10k+ employees (is it over 15k employees now?). I'm kind of tired of hearing the excuse that Tesla is "growing fast" or "running lean" or "is like a startup". At some point, they need to own up to their mistakes and correct them. I think for Model S, I could buy the excuse that they're a youngish company. But for Model X, the standard is higher. They've got money in bank, thousands of employees, locations around the world. They need to start acting like a more mature company in matter that are of crucial importance like customer service and communication. I personally think that maybe Tesla is so "Elon-centric" that they rely on Elon so much to give them priorities, and Elon just hasn't given them a priority for communication w/reservation holders. So without direction with Elon, the default becomes lack of communication w/reservation holders. I don't think it's a money/resource issue. I think it's mostly a "Elon hasn't given direction" issue.

(I hate naming names and won't do so for lower/mid-level employees, but for top execs they are the public face and have more/most accountability...)

So, after writing that I'm thinking maybe Tesla's head of communications holds the most responsibility here. Here's Ricardo Reyes LinkedIn profile (https://www.linkedin.com/in/ricardo-reyes-aa5061a):

"reporting directly to Elon Musk to lead communications strategy, including public positioning, product announcements, customer, policy and crisis comms."

"Manage Tesla’s communication strategy across all channels including website, email marketing, social media, auto shows, press, customer and media events"

So what is Mr Reyes doing if he's ignoring the most important area of communication over the past year (communication w/X reservation holders)? Maybe he ought to come on this post and explain what's going on.

 

[Zaxxon]

Without rehashing my whole Tesla experience, I just want to say that I largely agree with DaveT on this topic.

I've been an X reservation holder for 2 years as of last week, but will likely be canceling that reservation shortly. I don't fault Tesla for the delays (when I reserved, deliveries were to begin 'in 2014'). Making this vehicle was, as Elon has said, extremely difficult. I do wish communication had been handled better (on this and many other fronts). For nearly three years now I've said that their poor communication would bite them if not corrected by the Model 3 timeframe, and we're about to open those floodgates.

From the lack of visible service center expansion to keep up with sales, to changes in Ranger policy, to the ESA 'mistake' debacle in recent weeks, to continued drive train replacements at low mileage #s, I just don't have the level of confidence required to buy an X at this moment. I love Tesla's goals, I think Musk is brilliant and is trying on three fronts to do very important things for the future of the planet. I think Tesla will get there and become a high-volume EV manufacturer who leads the way for quite a long time to come. I'll be reserving a Model 3 as soon as I can.

But the company has its issues, and I hope that they address them before the competition really gets going. The frustrating part to me is that the communication piece could be made so much better with a relatively small amount of extra effort/spending.

 

[30seconds]

Personally I think many of the issues with the X ramp has to do with trying to ramp a custom build product to high volumes. This is not an excuse, but maybe an explanation of where they got to where they are and maybe how to do things differently.

Think about the reworked door seals for example. They are trying to ramp up a line, basically complete 50, maybe 100 cars, and figure out a part needs to be reworked. OK, stop new builds, redesign part and get going again. It is probably more important for the overall ramp to test the first batch of new parts back on the line for the next 50 to 100 cars and see if they work. If they don't work, redesign part and get going again. If they do work, now you can ramp up volume on the part and get the line going again. And then you go back and fix the cars already built.

If these weren't custom configurations no one outside the company would ever know. The company would go back and forth until the line is at reasonable speed for production. Then the batch of cars that were made and eventually fixed would go out to the dealers for sale.

Of course since every one is a custom build, with website tracking, everyone sees the fits and starts. Makes sense for a company just getting off the ground, but hopefully they will be in a better position next time.

For the Model 3 maybe they could use this model for the ramp. Build the first 500 to 1000 cars in some common configurations and use them for sales/ service centers, demos, loaners, etc. Or even offer them to the reservations to see if anyone wants to ditch their configuration and buy one of these instead of waiting.

Food for thought.

 

[omarsultan]

I understand Tesla is always trying to have a "startup" mentality. But the reality is they are a 13-year old company with 10k+ employees (is it over 15k employees now?). I'm kind of tired of hearing the excuse that Tesla is "growing fast" or "running lean" or "is like a startup". At some point, they need to own up to their mistakes and correct them. I think for Model S, I could buy the excuse that they're a youngish company. But for Model X, the standard is higher. They've got money in bank, thousands of employees, locations around the world. They need to start acting like a more mature company in matter that are of crucial importance like customer service and communication. I personally think that maybe Tesla is so "Elon-centric" that they rely on Elon so much to give them priorities, and Elon just hasn't given them a priority for communication w/reservation holders. So without direction with Elon, the default becomes lack of communication w/reservation holders. I don't think it's a money/resource issue. I think it's mostly a "Elon hasn't given direction" issue.

This has nothing to do with being a "startup" but it has everything to do with making efficient use of your capital. I keep hearing you say you want this or you want that, but I have not heard you say what you will stop doing to do what you want--that's what you do when you own an P&L or run a company. Like it or not, Tesla has made the decision to prioritize allocation to hiring engineers and building out manufacturing (GF, S/X production line, M3 production line). Everything is going to take a back seat to that. Is that ideal? Probably not, but those things are critical to the company's success while the company will survive with 3 DS instead of 4. Nobody is happy about that but its better than the alternative--all the newly hired DSes will be telling reservation holders that the Me is delayed because the the drivetrain is not ready yet or they GF buildout is not complete or the M3 ramp is constrained by working capital.

They actually are being a "mature" and grown up company by making hard choices instead of knee jerk spending on the hope they will be able to cove costs somewhere down the road.

I don't think it's a money/resource issue.

Its absolutely about money and resources. The company has a fixed amount of money at its disposal and a finite number of sources to they can bring to bear. They cannot just go hire a bunch more DSes without paying for them somehow.

And just for context, I have handled marketing and communications for my day job and off the top of my head I can tell you a dozen things I wish they were handling better, but I also understand the business side of things and understand why they might be making these choices.

 

[PaulusdB]

I don't follow your reasoning, O.
Just for argument's sake: How many DS's are you willing to ditch to re-instate Mr. GB or Mr. JG? Couldn't cost more than a dozen, could it?

 

[Ocelot]

It is a small thing to create a mass email list, and update reservation holders every 3 months (4 emails per year). cost/resources would be a pittance to do that.
I get more updates on 50 dollar projects I back on kickstarter than for my X reservation. Gotta say it does not bother me too much, but then I read these boards to get all the information, and for those not here, are more in the dark than we are.

No one has mentioned Elon's lack of apology for that blazer he was wearing! Now that deserves an apology. however i probably wear too much tie dye to be casting stones...

 

[omarsultan]

I don't follow your reasoning, O.
Just for argument's sake: How many DS's are you willing to ditch to re-instate Mr. GB or Mr. JG? Couldn't cost more than a dozen, could it?

We are not talking about George or Jerome--presumably they left for reasons not having to do with compensation (must be nice).

We are talking about trading delivery specialists for engineers. To support a owner base of 100,000 owners, one or two new DS are not going to make a difference, so say you add 20. Glassdoor says that the average salary for a DS is $53K or about $80K loaded cost or $1.6M in total payroll. The same site says average salary for an engineer is $111K or $166K loaded cost per engineer. So, as an owner of the business, where do you make your investment: 20 new DSes or 10 new software engineers--which one is more critical path for the success of the company?

 

[aesculus]

In regard to figuring it all out in advance, I'd like to get my Toto toilets to flush properly without holding the handle down.

I am pretty sure that's by design. Simple loads get flushed with the normal handle movement. BIG loads require you to hold the handle down until all is clear. You can blame the EPA and water gods for that one. :smile:

BTW my 10 year old American Standard has this same issue and has a special flapper/valve assembly. I am constantly reminding my wife of this feature.

 

[Gwgan]

I'm not talking about more DS's. My DS has been great, and just as in the dark as me. If headquarters can't keep a thousand customers appeased what will M3 launch look like? People ask me every day at work if I have my car yet and then when I mention the 4/1 reservation date they just laugh and say they can't think that far ahead (for when the car might actually be ready). If there wasn't a story of missed advisories with no explanations these negative conversations wouldn't be happening.

 

[GLDYLX]

I've come to this thread late (busy working), and pretty much everything that came to mind as I caught up got posted, so thanks to all...

Dave, I believe that you are advocating for people like me; an investor and future Bluestar owner. For that I thank you. You have put in a great deal of time and effort here and with your newsletter, and while I don't like to clutter up threads or e-mailboxes with "Thank You" notes, I want you to know that your efforts are greatly appreciated.

I do believe that SOMEONE at that massivelyexpandedatthelastminute event should have taken the initiative when the press event ran long to jump up on the stage to explain and apologize for the delay. It needn't have been Elon, and he may well have assumed that someone (like the Event Coordinator or better yet, Ricardo Reyes) had done so. Where WAS Ricardo?

Anyhoo, I have nothing else (that hasn't been said) to contribute to this thread, so I'm going to sink back into lurkdom now...

Happy Friday!

 

[anticitizen13.7]

Glassdoor says that the average salary for a DS is $53K or about $80K loaded cost or $1.6M in total payroll. The same site says average salary for an engineer is $111K or $166K loaded cost per engineer. So, as an owner of the business, where do you make your investment: 20 new DSes or 10 new software engineers--which one is more critical path for the success of the company?

Adding more engineers to a project is often counterproductive (the concept of the man hour myth), so it would depend on the situation.

I'd guess that the communications issue is more a systems problem than a personnel problem.

 

[omarsultan]

Adding more engineers to a project is often counterproductive (the concept of the man hour myth), so it would depend on the situation.

I'd guess that the communications issue is more a systems problem than a personnel problem.

Yes and no, depending on project structure. If we are talking about a a waterfall model and a monolithic development effort, then yes, it can get counterproductive (see "The Mythical Man-Month"). However, with an agile-ish model, additional devs will allow you to spin up more scrum teams and and allow you to work through backlog faster.