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August 8, 2014

Analytics Drives Tesla Customer Loyalty

As the auto industry is transformed by upstarts like Tesla Motors, analytics is being applied to bring customers and car makers closer together.

The Tesla S twin-engine electric sedan is a case in point, having been variously described by one observer of auto technology as an “iPad on wheels” and “highly modular,” a reference to the amount of computing power in the mid-range electric car.

As the technology pundit Rob Enderle notes, “Tesla often knows about a problem before the driver does.” That’s a good thing since the Tesla S’s repair record, in Enderle’s words, “isn’t pretty.”

Part of the problem, of course, is that Tesla founder Elon Musk is breaking new ground. That means the upstart carmaker is still working out the kinks in delivering a reliable mass-market electric vehicle. Musk has undoubtedly learned lessons from other auto startups like Fisker Automotive, another electric sedan maker that Tesla has left by the side of the road.

Enderle notes that the basis for the strong connection between Tesla and its customers is analytics, “and it is this connection that has helped prevent Tesla from following Fisker in the big car company graveyard in the sky.”

Tesla’s use of analytics and the customer information it brings allowed the carmaker to assess “the tradeoffs in customer loyalty and cost [to] make balanced decisions” about maintenance and customer complaints that in Tesla’s case “favor loyalty,” Enderle argues.

To a lesser extent, other carmakers that are loading up hybrids and electric cars with electronics are also trying to build customer loyalty. But Tesla appears to be a pioneer in designing applied analytics into an electric car.

Not only does analytics allow Tesla build customer loyalty, it also helped Musk defend his brand against an unfavorable review of the Tesla S published by the New York Times. The review included a photo of the Model S on a flat bed truck after the reviewer depleted the car’s battery charge on the last leg of his trip.

Musk used the car’s analytics to counter the public relations disaster, ultimately alleging the story was faked and that the reviewer intentionally caused the Tesla to fail.

The Times stood by the story, but Musk fired back on the Tesla blog with reams of detailed data about the car being test-driven by the Times reviewer.

The result was a stalemate, but Musk’s analytical approach won him backers and a lot of free publicity about the Tesla S. It was a classic illustration of how a company that captures data on customer loyalty can benefit in the long run.

In comparing the Tesla to a comparable high-end car, the Jaguar F-Type, the auto IT analyst Enderle concludes: “Jaguar doesn’t capture data on the loyalty impact and thus sees only the cost for the fix and decides against it because it doesn’t have access to the same level of customer information that Tesla enjoys.”

All things being equal, Enderle concludes, he would choose a Tesla over a Jaguar F-Type because Tesla leverages analytics to engage “the customer where the other firms can’t.”

Related items:

BMW Preempts Problems with Predictive Analytics

Report: Big Data Will Represent Billions in Automotive