Mercedes vs Tesla: A Case Study In Value Proposition

By Kelly Lawrence, Founder & CEO, Lawrence Innovation

In January, I shared that my commitment in 2022 is to have more fun - both personally and professionally. How does fun tie into value proposition? Given the debate on the future of electric vehicles, here’s a personal case study: Mercedes vs Tesla.

Let’s pretend you have an innovation team that wants to work on the next generation automobile. Your team is setting up voice of customer sessions to understand customer unmet needs. I am a customer your team is interviewing.

Your team read my January article so they know that, “fun” is my desired outcome - a state of being for myself and hopefully those around me. So, if you want to sell me something and increase your profitability, you need to help me have more fun. To solve this problem, your innovation team asks me an excellent question: “Kelly, how do you define fun?”

To me, fun is about experiences that make me smile as opposed to collecting more stuff. Ideally, those experiences hit on the things I care about most: spending quality time with family, learning new things, embracing nature, making the world a better place and making an impact by helping others.

Great. Your team now understands my definition of fun and my core values. They know if they deliver me an experience that delivers these desired outcomes, they are likely to make a sale. You have a smart team and they recognize that if they want my car business, the automobile must be more than a car, it must deliver a fun experience.

Your team asks me another great question, “Kelly, what are your problems with your current vehicle?” Here’s what they learn:

• My warranty expires in March of 2022 - I’m concerned the maintenance costs will be very high (ie Kelly is in the market for a replacement vehicle)

• I typically buy on value and hate the amount of depreciation a vehicle loses as soon as it is driven off the lot (ie Kelly is usually an ideal candidate for a certified pre-owned vehicle program)

• However, I don’t see the value in spending 30% more for a used vehicle in the current market (ie Kelly’s buying behavior has changed due to market dynamics - she now sees greater value in a new car vs a certified pre-owned car. We should be able to sell Kelly a new car.).

• I love my Mercedes-Benz. It is comfortable, fun to drive and gets great gas mileage. However, it is too small for my family. I like the bigger models, they drive really well and match the comfort and perfection I’m used to, but the new features don’t justify the upgrade. (Kelly loves her current vehicle but wants to change due to concerns over future maintenance costs. She’s questioning the value of new products from a brand she loves - these new products are not delivering enough differentiation for Kelly to justify the switching cost.)

Your very observant team asks, “Kelly, are you open to new brands?”

• I’ve test driven models from a number of brands. Mercedes-Benz is my preferred if I stay with a combustion engine. (Kelly still shows brand preference for the current technology, but she’s expressing a potential openness to new technology adoption.)

Your team asks, “Kelly, what other kind of engine are you considering?”

• I really like the potential of the electric vehicle. I know the market is in its early stages with <2% of cars being electric, but I’m seeing a lot of evidence that gives me confidence in Tesla. It’s the only car I drove that made me say, “Wow!” One pedal driving is an incredible experience and I’m fascinated by regenerative braking. I learned the overall cost of ownership will be less for me despite the higher initial sticker price, insurance and state registration. My daughters love the all glass roof and are excited to try the Tesla-fan trend of glamping in the Tesla versus pitching a tent. I wish the fit and finish matched the perfection of Mercedes, but I’m excited to play a role in protecting the environment and to provide the data that may truly enable autonomous driving.

Your very observant team realizes I have enough proof points to change my former buying behavior and that while Tesla is not perfect (higher upfront costs and lacks the fit and finish), I’m willing to trade off these features in favor of the vehicle that best meets my needs today.

I bought the Tesla.

How have your customers’ buying preferences changed? Most have changed since 2020. How will you adjust your value proposition to win? Not sure? Contact me, I'd love to hear from you.