Vertical Innovation. Customer Experience. Tesla is making a splash in the automotive industry through bringing their production process in-house and it's their customers who are reaping the benefits to this bold decision.

Why are people loyal to one company over another? Is it because of brand awareness or a cool logo? It’s actually precisely the opposite. People don’t fall in love with a brand because it’s a household name or they like its color palette or logo; people fall in love with storytelling, experience and emotion.

Consider Tesla. Tesla is taking off for a whole host of reasons. Many attribute the brand’s success to the style and genius of superstar CEO Elon Musk.

However, beneath the flair, Tesla is a company investing in itself and the consumer experience it offers. In addition to manufacturing incredible cars, Tesla has built an incredible brand story. How have they harnessed the power of a great brand experience? What are they doing differently?

The Answer is Vertical Innovation

Car dealerships aren’t known for exceptional service. The tedious, confusing procedures and mountains of paperwork leave consumers feeling pressured and trapped in the dealership. In the modern era of customization and immediacy, consumers now realize they deserve better.

Tesla has responded to the call by putting a premium on customer and retail experiences because now, customer happiness is the name of the game. Tesla overhauled its supply chain to complement consumer demand and brought many aspects of the production process in house. This is known as vertical innovation, and it’s catching on.

For Tesla, distribution has become a competitive advantage. Aside from developing an innovative product, Tesla built its own retail infrastructure, leaving traditional third-party dealerships in the rearview mirror. However, Tesla is not the first to try this.

Tesla built its own retail infrastructure, leaving traditional third-party dealerships in the rearview mirror.

Apple was a key pioneer for large companies looking to skip the middle man to sell not only a product, but an idea, brand and experience directly to the customer. Though not initially unique, Apple’s entrance into the retail world marked a turning point for the way customers experienced a brand in a brick-and-mortar space. Apple is an example of the success a company can have when it avoids being compartmentalized and does things differently. They set the standard for consumer retail experience through devotion to customers and understanding the importance of telling a great story, and telling it from the customers’ point of view. You get this the moment you enter an Apple store.

Vertical innovation is now trending. It’s a catalyst for many companies to flex their creative muscles. Companies that can afford to take on the extra expenses of vertical innovation are beginning to see results. Nike and New Balance are two great examples of companies getting in on the action, opening state-of-the-art stores throughout the country, and doing so in their own name rather than solely through third-party retailers. Luckily for Tesla, vertical innovation has been slow to penetrate the automotive industry, giving them a head start at developing an original brand experience.

Early Vertical Innovators

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It’s no coincidence Apple and Tesla are finding success with vertical innovation. George Blankenship, former Apple and Tesla Customer Experience Executive, has been on the cutting edge of vertical and retail innovation for almost two decades. Both Tesla and Apple stores have a showroom feel rather than retail, as if to say: We know your gonna buy one, it’s just a matter of which one.

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Both stores have immense curbside appeal, drawing you into the store with beautiful, glossy facades and a clean, sharp logo overhead. Upon entering the space, your eyes feast on the modern, clean and simple design of the room, intensely lit and easily navigable. In Apple, its row-upon-row of fine-sanded tables, topped with the newest technology. For Tesla, a sleek, new-aged vehicle owns the room. In the background, walls mounted with different color pallets and sample pieces give customers context and additional information. Both stores allow you to browse the room uninterrupted by salespeople. It’s just the customer, the brand and the products.

Though Blankenship has since moved on from Apple and Tesla, he has followed the trends he helped set in motion as they blossom and develop, saying “Traditionally a car company designs, engineers and builds a car they think the public will want. But even though that company has invested all this time and energy in the process, when they hand it off to the dealer the customer experience is out of their hands and the dealer’s motivations are driven by the desire to sell as many cars as possible every day, which doesn’t lend itself to happy customers.”  

So, what does lend itself to a happier customer?

Vertical Innovation for Customers

Tesla’s streamlined store allows for a more efficient, intuitive customer journey. This is accomplished through balanced architecture along with elegant, sensible design. New digital technologies also assist in this process. Large screens and monitors placed throughout the stores act as a guide to help walk customers through brand information, company procedures, and car buying processes. These techniques limit customer confusion while at the same time, leave a lasting image in their minds.

Because of its distribution strategy, Tesla can quickly adapt to online retailing. People want accessibility and convenience now more than ever and they want it from the comfort of their homes. With Tesla’s online interface, customers can tailor a car to their exact specifications, as well as decide when, where and how they want to purchase.

Though you can’t actually leave a Tesla store in a Tesla, the customer experience is instead geared toward education, encouraging customers to ask questions and to test drive cars. Also, no lot means low inventory and maintenance costs. As customer expectations shift toward customization and convenience, they are set to offer just that.

Most importantly, vertical innovation has allowed Tesla to offer superior service and thus, a better relationship with its customers. Exceptional brands create connections with people. They understand this and have trained their employees not to sell, but simply educate.

Vertical innovation has allowed Tesla to offer superior service, thus a better relationship with its customers.

Tesla employees are taught to teach people about the benefits of electric cars and create a comfortable and relaxed atmosphere.

Tesla doesn’t pay employees on commission, which means customers can flow in and out of a store without being harassed. Because they use stores to showcase the brand rather than as a main source of income, employees are able to work naturally without forcing sales.

The undeniable success of Apple and Tesla stores show preferences shifting toward vertical innovation. People would rather give money to a brand they trust and like.

Through adapting to a vertical innovation strategy, Tesla has become a model for new approaches to the customer experience. By breaking free from conventional assumptions about the automotive industry, Tesla is reframing the way companies operate from a new perspective: the customer perspective.

What do you think about this new way of doing business? Use #verticalinnovation and let us know your thoughts.

Co-authored by Ryan Barrick, Marketing & Strategy Intern.