PHOENIX—Michelin Americas Small Tires is on a roll, and the company's management expects to keep the momentum by helping its customers rediscover brand value and grow profitably.
After picking up several points of market share in the U.S. the past two years, MAST intends to take advantage of heightened consumer interest in tires to strengthen the already high market awareness positions of its Michelin, BFGoodrich and Uniroyal brands.
"Our objective is clear: position Michelin as the `only best' tire in a quality class of its own," said Alison Heiser, Michelin brand manager, referring to company research that dealers rate Michelin considerably higher than the competition in terms of quality, but consumers rate the brand only marginally higher.
"We at Michelin have probably taken consumer knowledge of our quality for granted," Ms. Heiser. "Make no mistake—we are serious about getting credit for the things we do.|.|.|."
Ms. Heiser was one of eight MAST executives speaking at MAST's 2001 national sales conference, "Survive or Thrive," in Phoenix Jan. 9-11. In a break with industry tradition, it was attended by representatives of the company's 50 largest customers—independent dealers, mass merchandisers, wholesale clubs, wholesalers etc.—which collectively account for 85-90 percent of MAST's business.
To raise consumer awareness of the quality issue, MAST intends to pursue several courses of action related to what it calls "relationship marketing."
"Our vision is to evolve our business from mass marketing to one-to-one relationships," Ms. Heiser said, "because Michelin is not for a mass audience."
MAST encourages its dealers to get involved in getting to know customers and their needs better, "because relationships are deep, while purchases are situational," Ms. Heiser said.
"We are absolutely convinced that relationship marketing is the key to driving traffic in one and only one very important direction—to the doors of our retailers."
To support retailer efforts to know their customers better, Michelin will survey consumers on an ongoing basis. The company also has budgeted several million dollars to stage marketing events aimed at young discerning buyers, she said.
MAST gains, but...
MAST exceeded its lofty double-digit sales growth goals last year, but at a price.
The company's efforts to supply as many P235/75R15 P-metric light truck tires as possible to fill demand created by the Firestone ATX/Wilderness recall left MAST with the lowest return on assets within Group Michelin's major operating units, MAST COO Pete Selleck said.
"Our financial performance.|.|.was far below expectations," he said, blaming high interest rates, sharply increased fuel, energy and raw materials costs, higher labor costs and operational inefficiences brought on by the recall-induced shift in manufacturing priorities.
"Therefore we cannot justify further growth in the North American passenger tire business until our return on assets improves to more competitive levels within our company."
Mr. Selleck said MAST would focus this year on streamlining its cost structure and reducing the asset base, but did not elaborate on either.
"Improving our return on assets is important to you," Mr. Selleck told the dealers in attendance, "as it is critical to sustain our ability to invest in the initiatives that add value to your businesses—like the equity of our brands, TIMS and BibNet technology, and other added-value services."
Overall, Michelin executives expect MAST to grow about 8 percent this year, following double-digit growth in 2000. MAST officials declined to specify the company's sales volume, but did say MAST brands accounted for 55 percent of overall U.S. passenger tire aftermarket growth of 10 million units last year.
If MAST achieves its growth objectives this year, it would pick up another point of market share, since the overall passenger tire replacement market is forecast to be essentially unchanged from 2000.
On the downside, the company's efforts to satisfy demand for the recalled P235/75R15 sizes disrupted the positive fill rate situation MAST had worked so hard to attain during 1999-2000, according to Jean-Michelin Guillon, vice president of sales.
As a result, deliveries of other products fell in some cases below 70 percent, several dealers said.
MAST pledged to get fill rates on Uniroyal, BFGoodrich and associate brands back into the 90-percent range by the end of January, Mr. Guillon said, and that of the Michelin brand by the end of the first quarter.
Each of the MAST executives who spoke honed in on the "Survive or Thrive" conference theme.
To help its customers thrive, MAST is focusing on three goals this year, Mr. Guillon said: define more precisely each distribution channel's role in the overall sales scheme; improve the consumer purchasing experience; and increase profitability.
The heightened consumer awareness of tires—a byproduct of the Firestone recall—has led to a measurable shift in demand for flag brands, Mr. Guillon said, "playing right into MAST strengths." MAST research shows flag brands accounted for 58 percent of replacement passenger and light truck tire sales last year, up from 55-56 percent a year earlier and heading for 60 percent or more this year.
Mr. Selleck said dealers are not reacting fast enough to changing consumer atttitudes and are missing out on opportunities to enhance the value of the products and services they sell.
"We have an obligation and an opportunity to educate consumers" about proper tire selection, use and care, he said. By emphasizing education, retailers can reinforce their role as consumer advisers, and lay the ground work for increasing prices and improving profitability.