How The Model 3 is Destroying Tesla

Tesla Model 3

If the story of Tesla was somehow a metaphor for stories from the Bible, then the Model 3 is Judas making sure everyone at Tesla is on their way to the last supper, assuring their shepherd is approaching his final resting place (that cross is for you Elon). Maybe it was always Tesla’s destiny to be a sacrificial lamb of sorts, ending up in the same situation as many other pioneering companies, often not lasting long enough to see the technology they introduce make it to mainstream profitability. Ultimately, the Model 3 will bring forth a real test of faith in electric car kingdom that Tesla built.

You see, the Model 3 betrays everything consumers love about Tesla, and at the same time reveals those in charge of the company don’t understand their clientele at all. As it turns out, car companies in America only operate in two models, high volume or high margin, and with each comes a specific set of expectations that have to be met if you want to continue in that space. Tesla was the latter, high margin, but the Model 3 changed everything.

Exclusivity

The first expectation of running a high margin, or premium brand, is exclusivity, which when speaking plainly, means these brands produce a low volume of products. Premium brands often justify their product scarcity by including extravagant materials or assembly methods as a part of their production process, enabling product owners to reference things like hand-stitched leather, individually assembled, or first of its kind, when talking to others about their new toys.

Model X with Falcon Doors Open
Photo courtesy of Mashable.com

In Tesla’s case, it’s Falcon Wing doors on the Model X, Ludicrous mode on the Model S, and street legal lithium batteries on the Roadster, that check all the appropriate branding boxes for a premium brand. These features, combined with lower product availability, meant consumers looked forward to random encounters with the vehicles in real life, hoping to catch a glimpse of how a Tesla embodies the concept of cool. Then came the Model 3.

The Model 3 is a contradiction in how premium brands operate, and when Tesla announced it at a $35K price point with the specific goal of being a mass-market vehicle, I could almost hear the other Tesla owners cringing. In the minds of premium brand owners, the proliferation of the Tesla badge to everybody and their mother would seemingly make the symbol on their vehicle less valuable, as if they were mathematically averaging the prices of the cars together. American’s don’t tolerate this kind of behavior. You can’t use the same branding for bargain vehicles as you do for premium ones.

Tesla’s could have easily avoided this mistake by using the same branding strategy as every other car manufacturer in America. In “Merica,” car companies use different brands to divide their consumer base between their operating models, one brand for volume, and another one for margin. That’s why there’s a GM and Cadillac, Infinite and Nissan, Ford and Lincoln, etc.

This two prong approach has enabled U.S. car manufacturers to maintain a certain amount of exclusivity on some brands, while simultaneously achieving the cost efficiencies of scale with another. More importantly, the dual branding strategy protects another expectation of premium brands – cost.

The Cost Correlation

Time to Cost Correlation

When there’s a limited supply of anything, most of the time, the cost of that product naturally increases, delivering a price point that inherently leads to more margin. Premium brands use this natural correlation of exclusivity and cost to perpetuate their brands further, promoting an emotional response that evokes admiration and envy. The combination of these two emotions is what brand experts like to refer to as aspirational, and Ferrari is a perfect example of an aspirational brand.

Do you know why I don’t drive a Ferrari? I can’t afford one, and for the people that can, that is part of the allure of owning one. For everyone with the same budgetary constraints as myself, the astronomical price tag associated with a Ferrari isn’t off-putting, it provides an immediate understanding that a person driving one must be doing pretty well for themselves and makes us wonder how we can achieve the same thing.

Tesla’s vehicles used to inspire the same type of awe as a Ferrari when they pulled into a parking lot, but the release of a reasonably priced version calls everything we know about the brand into question. A Tesla never had the practicality of a Nissan Leaf or the design of a Toyota Prius, and surely didn’t carry a similar price tag. A Tesla was always expensive, exclusive, and impractical, just like an aspirational car brand should be. All of that went out of the window with the Model 3.

Before the Model 3, when people asked me about owning a Tesla, my answer was the same as it is concerning a Ferrari, “I can’t afford one.” Since the release of the Model 3, it’s different, when people ask me why I don’t drive a Tesla, I have to consider if I really want one. Being able to afford one has forced me to consider the features of a Tesla, like reliability, charging time, and driving distance. I had to ask myself, is this the best car for me at 35K? For a lot of consumers, the answer to that question is no, which proposes some harsh realities for Tesla, and the future of electric cars.

Tesla’s Red Pill

Red Pill and Blue Pill

The reason the Model 3 ruined everything about Tesla is that it snapped everyone back to reality, not just consumers, but Tesla was well. Besides exposing previously oblivious consumers to serious considerations about owning an electric vehicle, it also presented questions about Tesla as a car company. The effort to reach critical mass has surfaced several issues about various aspects of Tesla, making everyone consider if they have the production capacity, infrastructure, and sales tools of a high volume brand.

In the end, the production Model 3 broke the rules of a premium brand and made us all lose faith in the dream that made Tesla great. All we’re left with is the harsh reality of having taken the red pill rather than the blue one. I should have heeded the advice of Cypher in the Matrix and realized “ignorance is bliss.”

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Think Twice Before Buying Digital Content

Digital Content Locked Down

I wish there were a more natural way to say this, but buying digital content sucks, and for the last couple of months I’ve been getting regular email reminders as to just how bad the situation has gotten. For me, I started realizing the dream of a digital content library was nothing more than the fantasy of overly optimistic movie enthusiast when I lost access to three, Seven Samurai episodes that I purchased on Xbox Live. Then, over a year later, I could no longer access SimCity Deluxe and GoNinja HD because of a lack of iOS 10 support from their developers. And now, I get email reminders that Ultraviolet is shutting down, leaving me scrambling to retain the content that I “bought.” I hate digital content.

The Promise of Digital Lockers

I didn’t ever consider buying digital content until I began witnessing major corporations deploy digital lockers. For those of you aren’t familiar with the concept of a digital locker, it is something mainstream video distributors stumbled upon during their many efforts to stop online piracy. In the world of torrents and peer-to-peer sharing, digital lockers pose a unique threat to enforcing copyright laws by placing the shared files behind a landing page that requires a username and password. This login page approach is in contrast to the usual tactic of search-based, sharing sites that only need users to set up a profile before they start downloading files.

HackerEnforcement on search-based sites is pretty easy to execute. Officers enter bogus profile information, then begin uploading bait files that are tracked throughout the website, flagging those that download the tainted content. The addition of a credentials page made this tactic harder to deploy, as it became challenging for enforcers to acquire usernames and passwords without identifying themselves, locking them out of some of the largest media sharing libraries. While digital lockers largely remain a copyright enforcement nightmare, operating in the gray area where file sharing exists, the idea was co-opted by digital content distributors as their own content management tactic and deployed by services like Ultraviolet.

Ultraviolet is was the video industry’s major attempt at creating a digital locker, and also the first time I put my trust in a digital media management system that I thought would be around forever. From the outset, Ultraviolet had all the pedigree of a prize racehorse, major studio and retailer backing, high rate of consumer adoption, and for a brief moment, it looked as if the digital locker was moving to the forefront of legal ways to manage a content library. Everything was great.

The Perfect Management Solution

In an ideal world, these digital media companies would have merely fortified and scaled the digital locker concept they found in the depths of copyright oblivion, adding features like enterprise level encryption and single sign-on, and based on the marketing material, it seemed like that was the plan. Instead, companies produced a final product that was vastly different than its original concept, focusing on Digital Rights Management (DRM) and not content sharing. By concentrating on DRM, these systems became viewed as a way to restrict the movement of multimedia, and not a way to promote the secure, legal sharing of our favorite content.

For example, when Microsoft announced Xbox One, they dedicated a whole segment to how the system would only use digital media and immediately drew the ire of gamers who didn’t understand how they would let friends borrow games if there were no discs. Sony jokingly responded to Microsofts poorly presented value proposition with a video (see video) to capitalize on the backlash, which is super ironic considering they are the defacto kings of overly strict DRM systems and proprietary formats (I’m looking at you MiniDisc, Memory Stick, Betamax, and Universal Media Disc).

Regardless, it doesn’t seem to matter what messaging an organization deploys related to DRM systems, the value proposition never translates to consumer benefits, but instead reignites the fear of corporations adding one more aspect of segmentation to our already fractured digital existence.  Maybe that’s the part of purchasing digital content we get, that they don’t.

Segmentation

The over-application of DRM seems to be the icing on the crap cake that we call owning digital media. It’s sitting on top of layers of operating system and hardware variations, processor incompatibilities, screen size variances, and proprietary connections. All-in-all, the reason the digital experience is so horrible for the average consumer can be boiled down to one word – segmentation.

By dividing up the content and features we need among a variety of services, organizations are causing the demise of a system that could have easily benefited everyone, leaving customers to have to choose where to spend the limited about of disposable income they possess. And with customers so thinly spread between a variety of services, none of the services can reach a profitability level that can cover the cost of developing all these exclusive features and content.

The reason I chose to purchase the aforementioned digital content from Microsoft, Apple, and Ultraviolet, respectively, was because it seemed like I would be able to avoid the problems haunting the digital media purchase process by going with well-established players. I was wrong. Developers and companies still give up on platforms, licensing for content expires, and companies go under. If I can’t make digital content purchases work with companies of this size, I’m afraid the whole industry has no hope.

Feel free to let us know how you feel about the situation, or better yet, tell us your own horror story about purchasing digital media.

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