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Instant Analysis: Tesla Motors Unveils Third Referral Program

By Evan Niu, CFA - Feb 17, 2016 at 2:00PM

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The electric-car maker has had so much success with its customer referral programs that it's doing another one.

What happened?
Tesla Motors (TSLA -0.35%) has just announced details for its third referral program. Tesla owners can refer up to 3 friends to purchase a new Model S, and the purchasers will receive a $1,200 credit that can be applied toward the cost of home-charging installation. The program concludes on April 15.

Image source: Tesla.

Referrers will be entered into a drawing to win a fully loaded P90D Model X with Ludicrous mode, in addition to a tour for two of the SpaceX headquarters in Los Angeles. Tesla will even cover travel and accommodations. Five additional referrers will win the same tour for two of the SpaceX headquarters. Unlike the Tesla factory, which conducts tours that are open to the public, the SpaceX headquarters is not open to the public.

Does it matter?
Historically, Tesla has never relied on traditional marketing or advertising. The company garners plenty of media attention already due to its technological accomplishments, and enjoys free word-of-mouth recommendations from its loyal customer base. Tesla ran two referral programs in 2015 that similarly offered prizes and giveaways, and the programs have been widely considered a success. Tesla has said that it is essentially passing on the customer acquisition costs to its customer base.

Some Tesla watchers estimate that the second referral program contributed to 5,000 new Model S sales last quarter. As Tesla's customer base continues to grow, implementing these referral programs becomes more powerful as well.

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