Inspiring in store conversion

US Tire Market:Inspiring brand conversion in-store

David NemiahUlterior GroupMay 27, 2014

© 2014 Ulterior Group

2

Agenda

• The assignment

•What we did

• Key learnings

• Roadmap for brand conversion


3

• Drive conversion in-the-store

• Leverage dealer training and point-of-sale tools (in-store & web-based)

• Provide two scenarios:• “the right way” • “the fast way”

The assignment

Ulterior Group was asked to provide illustrative brand conversion strategy for tire category-leader…Michelin.

The Ask Key Challenges

New competitors

Pricing pressures

Benefitpressures

Low consumer involvement

High dealerinfluence

Conversion in-store


4

What we did

• Secondary review:• Michelin on-line tools, training and marketing materials• Competitor web-sites• Local/national tire dealer sites• Business & trade press (Ad Age, Tire Review, Shopper Mktg, etc.)• On-line ratings (Yelp, Consumer Reports, Facebook, etc.)• On-line image search: in-store tire dealer displays/promotions

• Store checks & dealer interviews:• Frame: Michelin authorized dealers (20 mile radius from Fairfield CT)• Sample:

Discovery phase included the following:


5

Learnings:Tire Market Structure

6

Passenger/LT market= $29.9 B Michelin portfolio

= 13.6%

Market Structure

Michelin, followed by Goodyear, are leaders in the $30B US passenger/light truck “replacement” market.

Source: Modern Tire Dealer (1/2014) © 2014 Ulterior Group

7

Market Structure

Tire dealerships come in six “flavors” – some national chains – but they are intrinsically local operations.

Source: Secondary literature review

Independent Dealers• Local to market• Family owned and/or operated• Service vs. price-orientation

Mass Merchants (e.g., Sears, Walmart)

Auto Dealerships (e.g., BMW, Lexus)

Tire Company Owned(e.g., Goodyear, Firestone)

Muffler Shops (e.g., Midas, Monroe)

Warehouse Clubs(e.g., Costco, Sam’s)


8

Independent Dealers = 60%+ of retail volume

Tire Services= 56% of total jobs

Market Structure

Independent dealers handle the lion’s share of tire sales…and tires are their key focus.

Source: Modern Tire Dealer (1/14); Tire Review (9/13) © 2014 Ulterior Group

9

Market Structure

Tire product lines are organized into a devilishly complex hierarchy of specifications, features and benefits.

Source: Secondary literature review; store checks (5/14)

• Tire size• Tire life• Tire performance• Tire fuel efficiency• Tire price• Tire appearance• Tire brand

• Vehicle type• Seasonality• Noise• Comfort• Rebate • Warrantee• OEM status


10

Learnings:The Consumer Experience

11

Consumer Experience

When consumers need tires, they often feel ill-informed and seek expert guidance.

Source: Google: Digital Helps Tire Brands Gain Traction(11/13); Tire Review (4/13), store checks (5/14)

• Consumer choices can be overwhelming• 68 “authorized dealer” outlets (20 mile radius)• 60+ tire brands available in-store & online• 40+ sizes often offered per tire• Up to 36 brand/model options (per vehicle)• Options for season, performance, traction, etc.

• Common strategies to get clarity & guidance:• 73% visited dealer websites• Over 40% used smartphones to check prices,

discounts and special offers• In the end:

• 84% buy their tires from a dealer• 78% listened to dealer recommendations• 45% said salespeople are key influencers

(rivaling family members)


12

Consumer Experience

The consumer journey is somewhat predictable, but ultimately presents a difficult choice.

Source: Secondary review; store checks (5/14) **Judgment-based…hierarchical segmentation is recommended to validate

The Consumer Decision Process**

Which brand = best

Price/Value?• Vehicle type• Tire size

• Seasonality• Speed rating• Performance

vs. Touring

• Price hierarchy:• Low•Med• High

• Prioritization:• Braking• Wear life• Comfort/noise• Fuel Efficiency• Warranty

Time


13

Consumer Experience

The example below underscores the difficulty of brand choice – and unique challenges faced by Michelin.

Source: Google: Store checks (5/14)

Brand

Michelin Latitude Tour

GoodyearFortera

Hankook Roadhandler

GuardsmanLT

Price MileageWarranty

SalespersonComments

$217.99

$180.99

$172.99

$124.00

65K miles

60K miles

70K miles

NA

“Pretty good tire, but Michelin’s always overpriced.”

“Excellent tire for the money.”

“Best tire for a smooth/comfortable ride.”

“I call it the oval tire…can vibrate.”

Example – Sears Auto Center


14

Consumer Experience

Michelin’s tremendous heritage of innovation and quality seems to hit a “headwind” at the moment of truth…

Source: Michelin.com; store checks : Sears, Monroe, Town Fair Tire, Pep Boys, Curtis Ryan Honda (5/14)

Michelin Price/Value In-Store

Michelin Selling Strategy

The Michelin brand is associated with:• Safety• Reliability• Durability

This stimulates the buy decision and customer loyalty…in every geography.

• Innovation• Service• Expertise

Michelin “Headwind” In-Store

“Michelin’s always overpriced.”

“You don’t want to know their price.”

“Michelin is hugely expensive.”

“Michelin’s not worth the extra $.”

“Continental’s probably your best value.”

“If you’re within $10-$15, Michelin’s best.”


15

Learnings:Dealer Perspective

16

Dealer Perspective

Tire dealers have a two track mind – (1) making money and (2) keeping customers coming back.

Source: Google: Tire Review (4/13), store checks (5/14) © 2014 Ulterior Group

17

Dealer Perspective

Here’s a summary of their toolkit to keep customers happy and earn their repeat business.

Source: Google: Tire Review (4/13), store checks (5/14)

• Good selection of tires/brands• Advice on the “right” tire• Low/reasonable prices• Road hazard warranty• Tires in stock• Rapid mounting/balancing• Friendly atmosphere & service


18

Dealer Perspective

Here’s a summary of their toolkit to keep customers happy and earn their repeat business.

Source: Google: Tire Review (4/13), store checks (5/14)

• Good selection of tires/brands• Advice on the “right” tire• Low/reasonable prices• Road hazard warranty• Tires in stock• Rapid mounting/balancing• Friendly atmosphere & service

Michelin/Dealer interests closely align


19

Dealer Perspective

Key challenge for Michelin…

How do you get these guys… To recommend this guy?


20

Roadmap for Brand Conversion

(using training and in-store tools)


21

Roadmap for Conversion

• Marketing tools:• Deep investment in Michelin Brand• Coherent “total performance” platform• Cutting-edge innovation pipeline• Business Development Fund – ads & merchandising• Alliance Associate Dealer Program• MichelinDealerConnect.com – online marketing tools

• Training tools:• Michelin Data Book• Michelin Learning Institute• Laurens Test Track (guided visits for senior mngt.)• Michelinman.com – tire selector/”how to buy” guides/tire

selector/pricing/product ratings/consumer reviews

Michelin, in its wisdom, is flush with marketing & training tools to build trust/engagement with dealers/staff.


22

Roadmap to Conversion

And although real estate is often scarce in-store, Michelin has shown success with POS tools.


23


The question remains:

How do you get these guys… To recommend this guy?

To inspire these guys?© 2014 Ulterior Group

24


The answer…

• Be disruptive

• Find a new way

• Ground idea/execution in Michelin strengths

• Leverage interactive/social media

• Appeal to interests of both customer & sales team

• Ultimate goal – change the conversation:• From – “Michelin is expensive”• To – “Michelin is worth a look…and worth the money”


25

• Tap into passion for online ratings** - gets Michelin on menu in “good” way• Leverage Michelin expertise in “ratings”• Elevate current ratings/review platform (Michelinman.com)• Become THE STANDARD for online rating of tires:

• Expand/deepen content/tools• Include competitor ratings (track testing)• Include consumer reviews (dynamic, 3rd party)• Provide full tips/tricks appendix• Access in-store, on-the-go, or at home

• Common reference point…brings Michelin into conversation• Dealers/staff can see it as “value-add” and possible new POS tool


The big idea… “Wisdom of the Crowd!”

** Assumes: (1) Michelin willing to host “real” ratings platform, and (2) that Michelin product superiority will drive high ratings

Complementary idea… Romance the sales team• Explore budget to expand Laurens Track visits to broader sales team• Psychology of reciprocation + better grasp of “total performance” should improve

Michelin recommendations in-store


26


The fast way:• Leverage existing tire search/review engine in the Michelin Tire Selector• Expand to include new content:

• Existing Michelin models and a short list of competitive tires (per vehicle)• Performance ratings across brands by independent track• Preliminary “open” consumer ratings platform (really a beta)• Rename “Premium Tire Selector”…sub-brand by Michelin

• Build (and place) in-store tool to allow access to the Premium Tire Selector• Explore budget to expand Laurens Track visits to broader sales team• Test/beta innovations above in selected markets…followed by broader roll-out

“Premium Tire Selector” Laurens Test Track Visits© 2014 Ulterior Group

27


The right way:• Start with the “fast way” beta approach• Expand both programs (as feasible) to be most effective• Specific guidance for the “Premium Tire Selector”:

• Invest in robust competitor listings/ratings …optimizes credibility/value• Invest in robust consumer ratings platform – think Zagat’s guide for tires, but with the

knowledge/infrastructure allowed by Michelin Guides• Build in continuous feedback/improvement to drive utility• Invest in consumer promotions and dealer sell-in to drive adoption• Aspire to 3rd party integrity and goal of brand & sales gains for Michelin

“Premium Tire Guide” Laurens Test Track Visits

MichelinPremium Tire Guide 2014


28

• Reports are too long• Reports are too frequent• Running out of ideasThank You!