The Right Way To Deal With Public Disaster: A Case Study About Tesla Motors
by Joe Polish
If something publicly affected your company or customers life in a negative way, how would you handle it?
If disaster struck your company, and it was public, what is your PR plan?
Recently, this happened (Warning: there’s some vulgar language in this video):
Now, imagine your product or service was figuratively, or literally, being shown ‘up in flames’ for all the world to see…
Well, that’s what happened to Tesla around 8 a.m. on October 1st 2013. The driver of the Tesla vehicle hit some metal debris on the freeway, and soon after the vehicle caught fire.
And Tesla’s stock? The incident caused Tesla to have its’ biggest one-day decline since July 16th, sinking more than 6%. Shares of Tesla have risen more than 400 percent since the beginning of 2013, but investors feared the fire, and accident, might have shown a flaw in the company’s battery pack despite being called “the safest car in America.”
So, how did Tesla deal with this?
I’m already impressed with all the things his company does, including how this fire mishap was handled.
I want you to read Tesla’s response below carefully. It’s instructive for your business, and life.
What you’re about to read is incredibly savvy marketing when it comes to dealing with disaster, mishaps, and accidents.
I want you to notice 3 things as you read Tesla’s response:
1. DETAILS. The first half of the letter is incredibly detailed. Complete and thorough. This not only instills credibility, but gives you a clear picture of what accurately happened. They don’t avoid the issue. They face the facts head on in a way that makes sense of the incident.
2. TRANSFORM ACCIDENT INTO ADVANTAGE. In the second half of the letter, Elon transforms the accident into a positive advantage, and actually differentiates the Tesla from normal conventional gasoline cars. He turns disaster into an advantage for Tesla by pointing out the weakness in the competition, and proving the Tesla is superior to the competition.
3. BEHIND THE SCENES. In the last part of the letter, the communications between the Tesla owner who was in the accident and the VP of sales and service for Tesla are reproduced. This gives you a behind the scenes look at how the issue was handled with the customer experiencing the issue. Total transparency. This breeds trust.
It’s actually incredibly masterful when you consider Tesla transformed a PR disaster into an advantage.
Tesla’s marketing is good. Real good. And you can learn from it and apply it to your own business and life.
Oh, and Teslas stock? It’s back up.
Here’s the letter…
|October 4, 2013About the Model S fireBy Elon Musk, Chairman, Product Architect & CEO|
|Earlier this week, a Model S traveling at highway speed struck a large metal object, causing significant damage to the vehicle. A curved section that fell off a semi-trailer was recovered from the roadway near where the accident occurred and, according to the road crew that was on the scene, appears to be the culprit. The geometry of the object caused a powerful lever action as it went under the car, punching upward and impaling the Model S with a peak force on the order of 25 tons. Only a force of this magnitude would be strong enough to punch a 3 inch diameter hole through the quarter inch armor plate protecting the base of the vehicle.The Model S owner was nonetheless able to exit the highway as instructed by the onboard alert system, bring the car to a stop and depart the vehicle without injury. A fire caused by the impact began in the front battery module – the battery pack has a total of 16 modules – but was contained to the front section of the car by internal firewalls within the pack. Vents built into the battery pack directed the flames down towards the road and away from the vehicle.When the fire department arrived, they observed standard procedure, which was to gain access to the source of the fire by puncturing holes in the top of the battery’s protective metal plate and applying water. For the Model S lithium-ion battery, it was correct to apply water (vs. dry chemical extinguisher), but not to puncture the metal firewall, as the newly created holes allowed the flames to then vent upwards into the front trunk section of the Model S. Nonetheless, a combination of water followed by dry chemical extinguisher quickly brought the fire to an end.It is important to note that the fire in the battery was contained to a small section near the front by the internal firewalls built into the pack structure. At no point did fire enter the passenger compartment.Had a conventional gasoline car encountered the same object on the highway, the result could have been far worse. A typical gasoline car only has a thin metal sheet protecting the underbody, leaving it vulnerable to destruction of the fuel supply lines or fuel tank, which causes a pool of gasoline to form and often burn the entire car to the ground. In contrast, the combustion energy of our battery pack is only about 10% of the energy contained in a gasoline tank and is divided into 16 modules with firewalls in between. As a consequence, the effective combustion potential is only about 1% that of the fuel in a comparable gasoline sedan.The nationwide driving statistics make this very clear: there are 150,000 car fires per year according to the National Fire Protection Association, and Americans drive about 3 trillion miles per year according to the Department of Transportation. That equates to 1 vehicle fire for every 20 million miles driven, compared to 1 fire in over 100 million miles for Tesla. This means you are 5 times more likely to experience a fire in a conventional gasoline car than a Tesla!For consumers concerned about fire risk, there should be absolutely zero doubt that it is safer to power a car with a battery than a large tank of highly flammable liquid.— Elon|
|Below is our email correspondence with the Model S owner that experienced the fire, reprinted with his permission:From: robert CarlsonSent: Thursday, October 03, 2013 12:53 PMTo: Jerome Guillen
Subject: carlson 0389Mr. Guillen,Thanks for the support. I completely agree with the assessment to date. I guess you can test for everything, but some other celestial bullet comes along and challenges your design. I agree that the car performed very well under such an extreme test. The batteries went through a controlled burn which the internet images really exaggerates. Anyway, I am still a big fan of your car and look forward to getting back into one. Justin offered a white loaner–thanks. I am also an investor and have to say that the response I am observing is really supportive of the future for electric vehicles. I was thinking this was bound to happen, just not to me. But now it is out there and probably gets a sigh of relief as a test and risk issue-this “doomsday” event has now been tested, and the design and engineering works.rob carlson
|On Oct 3, 2013, at 12:29 PM, Jerome Guillen wrote:Dear Mr. Carlson:I am the VP of sales and service for Tesla, reporting directly to Elon Musk, Tesla’s CEO.I am sorry to hear that you experienced a collision in your Model S 2 days ago. We are happy that the Model S performed in such a way that you were not injured in the accident and that nobody else was hurt.I believe you have been in contact with Justin Samson, our service manager, since the accident. We are following this case extremely closely and we have sent a team of experts to review your vehicle. All indications are that your Model S drove over large, oddly-shaped metal object which impacted the leading edge of the vehicle’s undercarriage and rotated into the underside of the vehicle (“pole vault” effect). This is a highly uncommon occurrence.Based on our review thus far, we believe that the Model S performed as designed by limiting the resulting fire to the affected zones only. Given the significant intensity of the impact, which managed to pierce the 1/4 inch bottom plate (something that is extremely hard to do), the Model S energy containment functions operated correctly. In particular, the top cover of the battery provided a strong barrier and there was no apparent propagation of the fire into the cabin. This ensured cabin integrity and occupant safety, which remains our most important goal.We very much appreciate your support, patience and understanding while we proceed with the investigation. Justin keeps me closely informed. Please feel free to contact me directly, if you have any question or concern.Best regards,Jerome Guillen I VP, WW sales and service|
Just to grasp the importance and impact of Elon’s letter, I’ll add one more thing.
By Thursday, Tesla had lost around $2.5 billion in market capitalization, and Elon personally lost $594 million in Tesla with his 23% ownership. So, that fact that the stock is back up to roughly $180 from $173 as of Friday October 4th…or back up roughly to a market cap of 21.7 billion from roughly a market cap of 20.9 billion… because of a letter…that letter is really a billion dollar letter from a PR perspective, marketing perspective, market perspective, and a real monetary perspective.
That’s how marketing can make you a billion dollars (or save you from losing a billion dollars).
Here is a graph of the stock movement: