AKRON (March 14, 2005) — Every tire manufacturer wants to build its brand presence in the marketplace, and every tire dealer needs to communicate to the public his or her brand lineup in order to be successful.
That's the simple formula upon which the tire industry has been based.
For years, manufacturers and dealers have used co-op advertising as the means to fulfill these mutual interests. Manufacturers that offer a co-op program told Tire Business there's no better way to promote their brands to consumers than to give dealers co-op money and then trust them with the marketing details.
“I think it's an investment in your brand,” said Dave Craig, director of North American advertising for Cooper Tire & Rubber Co.
“(Co-op) is a very effective tool for both the manufacturer and the dealer if it's used in the proper way to build your brand and allow for localized marketing. The dealer knows in his community or region the best way to reach his potential customer, whether that's direct mail, radio or cable TV.”
Bill Bainbridge, marketing director for Hankook Tire America Corp., echoed that sentiment and noted that with advertising, tire manufacturers make significant investments in generating national brand awareness and creating personality for their brands. Co-op has been an effective incentive to get dealers on board with local advertising to complement those efforts, he said.
“Co-op is really intended for a dealer to say, ‘Hey I want to dovetail (brand ads), and I want to extend the brand message and direct the consumer to my place of business when they have an interest in that brand,'” Mr. Bainbridge said.
For most of the tire makers, nationwide advertising is a priority. But that alone can't bring the local benefits created by co-op programs, according to Earl Knoper, retired senior vice president of marketing and now consultant for Toyo Tire (U.S.A.) Corp.
“With national advertising, we can't refer a reader or viewer to a particular store or location or give them a phone number to call,” Mr. Knoper said, adding that co-op ads fill that void.
Tire Business spoke with six tire manufacturers regarding their co-op programs: Bridgestone/Firestone, Cooper, Goodyear, Hankook, Michelin North America Inc. and Toyo. Two manufacturers—Continental Tire North America Inc. and Pirelli Tire North America Inc.—did not respond to queries regarding their programs.
Two other tire companies—Yokohama Tire Corp. and Kumho Tire USA Inc.—do not offer co-op programs but have alternative ways of bringing advertising support to dealers.
Generally, dealers accrue co-op dollars as a percentage of tire purchases and can either use those funds during a calendar year or lose them. Whether a manufacturer pays 100 percent for a promotion depends on whether its brand is the sole one advertised; otherwise it's a marginal reimbursement. Michelin and Hankook both said they reimburse dealers at 100 percent for ads that feature only their brands. Cooper and BFS said they reimburse such ads at 80 percent, Toyo at 70 percent and Goodyear at 50 percent.
The manufacturers all said they try to give dealers as much flexibility as possible with their co-op funds to use even non-traditional means of advertising. Hankook's Mr. Bainbridge said he tries to offer as much flexibility and versatility to dealers' co-op funds as possible.
“I try to be as liberal as I can as long as we're getting fair representation for our brand,” he said. “If a dealer wants to do something where I might say, ‘Boy I don't know if advertising in a local penny-saver or shopper direct mail is really good.' But if the dealer really believes in it and the dealer's had some success and he's dedicated to using Hankook as the primary focus, I tend to want to look at those things very liberally.”
Kurt Ring, BFS' manager of channel marketing for consumer tire, said that if dealers want to do a non-typical promotion, they generally need to first get prior approval, but the Nashville, Tenn.-based tire maker usually approves it.
“We'll reimburse on some things, depending on what it is,” he explained. “For instance, we'll co-op Indy car user fees, like when they have to pay for an Indy car. But (the co-op program) excludes transportation, and if they get a driver it excludes his expense.”
The tire makers place no caps on how much dealers can earn, and all said they do not cut or withhold co-op funds during non-profitable years. A Michelin spokesman did not say if the company ever cuts or withholds co-op funds but said Michelin reviews its program to consider dealers' needs and whether they're still competitive and compatible with corporate objectives.
BFS said it had changed its co-op program for 2005 by dropping a percentage on the accrual of new tires and “high technology” products to 4 percent, according to Mr. Ring. Accruals on all other products not considered new or high technology also dropped a point to 3 percent.
The other tire manufacturers reported the following percentages their dealers can accrue toward co-op funds: Goodyear, 5 percent; Toyo, 4 percent; Michelin and Hankook, 3 percent; and Cooper 2.5 percent.
“We decided to change because we found we were a little more lucrative than our competition, so we're trying to get in line with everybody else,” Mr. Ring said. “Frankly, the changes aren't as impactful for (dealers).
“We have some bonus periods this year. We have three different promotions that they're going to enjoy some additional accruals.”
Mr. Ring noted that up until this year, BFS hadn't changed its co-op program at all in the past 10 years, and the other tire makers also said their programs have changed little, if at all, over time. Toyo's Mr. Knoper said the tire maker has had the same program in place for 15 years, largely because it hasn't seen a reason to adjust it.
“We're happy with it, and I think our dealers are happy with it,” Mr. Knoper said. “I know I see the results because when they claim the advertising, we look it over. It's working very well.”