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March 20, 1995 01:00 AM

COUNTERING LOW-PRICE ADVERTISING

Bob Barnes
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    Point: Editor's note: The following two articles feature different views on dealing with low-price advertising-a problem many independent tire dealers are facing everyday in their markets.

    First, tire supplier Bob Barnes advises dealers on overcoming competitors' low-price ads without having to sacrifice profitability.

    The second article, written by dealer Henry Gelbman, was penned as a letter in response to Mr. Barnes' comments, which originally appeared in the November 1994 issue of the Old Dominion Tire Digest, published by the Virginia Tire & Automotive Service Dealers Association.

    Both articles are reprinted here with permission.

    Each day you, as an independent tire dealer, must attempt to survive in an increasingly competitive market. You must meet head-on the wholesale clubs, national chains, tire-manufacturer-owned outlets and dominant regional tire stores.

    How can a small local store survive under such circumstances?

    The first thing that comes to mind regarding the small independent dealer is that he doesn't buy right and he sometimes gives in.

    I will agree that you (the owner or manager of a small independent dealership) probably don't buy tires as cheaply as some do. But the difference between your cost and their cost will not cause you to lose the sale.

    What will cost you the sale is not being able to get the customer into your store. The battle is in your favor once the customer comes to your store.

    You are, more often than not, wiser, sharper and more knowledgeable than the wholesale club or chain store personnel. You are a local person who knows the customer, his friends, associates and family.

    ``How then can I get the customer to my store?'' you might ask. ``I can't afford radio or TV advertising and I can't sell a 235/75R15 low-cost radial for only $34.95 and also charge it for the customer.''

    Let's take these questions one at a time.

    First, let's address advertising: You can advertise effectively in local shopper newspapers at a low cost or you could try AdvoMarriage Mail or local inserts. These are low cost and can be directed to zip codes or areas around your store from which it draws customers. You are then targeting a specific geographic area that favors your store.

    Second, let's talk price. Do you really think most of the big boys sell 235/75R15s for $34.95? You bet they do-plenty of them and at no profit.

    But what they also do is sell wheel balancing and valves and tire protection policies.

    Suddenly, a no-profit $34.95 sale can become a $47.95 sale with $13.00 or 27-percent gross profit-which can grow to more with a ``sell-up'' on the tire.

    Do you really think that most customers who phoned in for the price on a tire ``heard'' you say your $47.95 price, which includes everything, is as good as the discounter's price of $34.95, plus all of his add-ons?

    I think not.

    By the way, when was the last time you bought a car or refrigerator without an extended warranty? It's a way of life today. And, surprisingly, customers expect it.

    Lastly, let's discuss credit. I don't recommend that you issue credit on your own. In fact, I caution you against it.

    Many tire dealers, for whatever reasons, don't encourage credit card sales. They all will accept credit cards, but don't encourage their use because they have to pay a discount for the privilege.

    But believe me, such costs are small compared to the rewards.

    You will find credit card sales generate a larger ticket than ``cash.'' There are several good programs available, including those of the rubber companies and tire dealer associations.

    Remember, you are in a dog fight and must constantly change with the business. You must grow your business or die. You can't stand still.

    Be innovative and try new ideas.

    Mr. Barnes is vice president of American Tire Distributors, the wholesale division of Merchant's Inc. in Manassas, Va.

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    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

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