Will Tesla’s Referral Program Turn Model S Buyers Into Sellers?

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Tesla Motors cannot sell its Model S sedan and future vehicles in over 20 U.S. states. Considering the automaker’s marketing strategy does not include television or radio ads, you have to wonder how the company spreads the word about its award-winning electric vehicles (other than through journalists). For a company like Tesla, word-of-mouth recommendations are a significant part of the company’s strength, and a new program introduced by the electric car maker will test the power of financial incentives for direct referrals for a trial period.

According to a company statement, Model S buyers who use a referral link from a current Tesla owner will receive a discount of $1,000 off the purchase price of the car. Likewise, the referring Tesla owner will receive $1,000 in credit that can used for another Tesla, a visit to the company’s service centers, or accessories for a Model S.

The incentives do not end there. Those who manage five referrals will get an invite for two to the grand opening of the Gigafactory in April 2016. Those who make 10 referrals earn the right to purchase a “fully loaded” Founder Series Model X (not for sale to the public) for the price of a base model, which amount to about $25,000 of goodies. Finally, the first to make referrals in each of the three continents where Tesla does business will get a free Model X.

While $1,000 (or even $25,000 in credits) may not seem like much to buyers of vehicles costing six figures, Tesla is acknowledging the power of its brand advocates and hopes to spur more recommendations with these incentives. Tesla CEO Elon Musk said the automaker is also experimenting with marketing tactics by spending about as much as it takes to sell a Model S in one of the company’s showrooms ($1,500).

Sean Gallup Getty Images
Sean Gallup/Getty Images

Musk told the Wall Street Journal the automaker is trying to gauge how the referral program stacks up against in-store sales as a way to decide when and where to open more brick-and-mortar locations. He also described it “a way to have a guerrilla battle with the car-dealer associations in certain states.” Since there are Tesla owners in every state but consumers cannot shop for a Model S in about 40% of the U.S., the company is in effect paying its owners to do a little work.

Judging by the feedback from its owners, Tesla brand advocates abound. While $1,000 does not seem like a difference-maker for this class of car enthusiasts, a trip to the Gigafactory launch and a shot at a special-edition Model X seem like they would be right up the alley of Tesla’s biggest fans.

As Musk noted, the referral program is an experiment with a finite end date. Discounts to referring owners are available beginning August 15 of this year. Referrals must be made by October 31, 2015. The opportunity to redeem deals will expire at the end of 2016. But Tesla should know by Halloween whether it has a new way to overcome limitations in marketing and sales. Trusting current owners sounds like a good call.

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