ORLANDO, Fla.Stop selling tires and start selling tire packages.
That advice may not quite have elicited an audible gasp from his audience, but Matt Winslow, director of speakers and content for Automotive Training Institute (ATI), certainly piqued the interest of dealers with his keynote address opening the International Tire Exhibition & Conference for Tire Dealers/Auto Service professionals (ITEC) Aug. 20 in Orlando.
Mr. Winslow said tire dealers can't survive just selling a set of tiresthey need to sell a package of related services, such as tire pressure monitoring system (TPMS) rebuilds, nitrogen inflation and tire protection plans.
Those tire protection plans, in particular, help dealers turn customers into clients who will come back for adjustments when they get a flat tire or need rotations and balances.
Dealers should offer three choices of tire packagesgood, better and bestbased on the tire with all options offering the same add-ons.
With declining tire margins, the waning influence of word-of-mouth advertising among the younger generation and extended intervals between tire purchases, Mr. Winslow offered his six strategies for surviving and thriving in today's tire industry:
He noted that some tire dealers have given up on selling tires due to competition from discount-ers and online retailers.
Auto repair is profitable and it's something some of you guys want to consider. But I want you to consider this: Even in today's market and tire margins shrinking, what gives you more money? he asked.
When calculating the parts and labor expenses between an hour of auto service and an hour of tire installation, the tire service actually produces higher gross profit, he said.
Sales mean nothing, he said. Businesses pay their bills with gross profits.
He compared one hour of auto repair with one hour of tire installation with an $85/hour labor rate.
Based on $170 for parts and laborminus $34 for the technician pay rate and $39.95 cost of partsthe shop will make $51 on labor and $45.05 on parts for a net gross profit of $96.05 per hour for auto service, he said. (See chart above.)
If a shop sells tires with a 20-percent margin, along with a tire package that includes balancing, TPMS rebuild, tire disposal and a tire protection plan, it would generate a gross profit of $47.34 per tire. With the sale of four tires and a tire package, the shop would generate $252.48 per hour per bay, Mr. Winslow said.
Here's the beauty of the tire business. It takes about 45 minutes to install a tire, or two tires or three tires or four. Most of the time is spent in the stacking and racking and so forth. If we install four tires in 45 minutes at $47.34 per unit, that generates $189 for that 45 minutes, after paying costs of goods. And if we can maintain that bay at 100-percent efficiency,...the money is in the package, Mr. Winslow said.
Even if we just sold two tires in that 45 minutes, we can still generate more real dollars to pay your bills.... This is still more profitable just doing two tires than doing auto service in a perfect scenario.
Even if a dealer sells four tires at cost plus the tire package, the shop can still generate $119 gross profit per hour in the bay, he said.
Are you willing to lose that business to your competitor?
We need to go to where the car is when we talk to the customer initially, he urged the audience. The first step is to get out from behind the computer and always measure the tread.
Mr. Winslow offered five key steps for a service writer to increase tire sales:
c Get out from behind the computer and walk out to the customer's vehicle.
c Always measure the customer's tire tread.
c Recommend tire replacement when the tread is worn to 4/32-inch rather than the industry's generally accepted 2/32-inch because of performance and safety issues, such as increased braking distance, he said.
c Assume the customer wants to replace all four tires when writing up an estimate.
c If the customer only wants two tires replaced, offer trade-ins and other benefits to sell four tires instead.
Mr. Winslow encouraged tire dealers to make more money by providing rotations, TPMS service, flat repairs, balancing, nitrogen fills and custom wheels.
He noted that TPMS is going to be huge for us.
Sensor battery life is about five to six years. The TREAD Act of 2008 required manufacturers to start putting this (TPMS) in cars in 2008guess what that means? How many years have occurred since 2008? he asked rhetorically.
He said certain TPMS tools can identify batteries that will be failing soon, even if the vehicle TPMS indicator light hasn't been activated.
Mr. Winslow said that tire dealers should focus on offering tire protection plans with required tire rotation intervals rather than oil change services due to the expanded intervals between recommended oil changes.
All-season tires need to be rotated every 6,000 to 7,000 miles,...which means regardless what happens on the oil change side, if I own the tire rotation business, I own all the other services to the car because guess what happens if I'm the person taking the wheel off the car and moving them? Who gets all the undercar business?
In the future, if you own the rotations, you own the market.
Protection plans are incredibly profitable, and it converts the customer or one-time visitor into a service client you can count to come in every five to six months, he said.
Selling tires opens up the doors to selling other undercar services, such as steering, suspension and drive axle repairs and wheel alignments.
Mr. Winslow suggested dealers implement four different versions of a courtesy check. Dealers should charge a fee for state inspections and pre-purchase vehicle inspections and offer free 30-point and quicker 10-point inspections.
A 30-point inspection is conducted when a car is on the lift and a technician has the time to pull off the wheelsthe purpose is to generate additional services, he said.
A 10-point inspection is useful when the shop doesn't have the time for a thorough wheel-off inspection.
In either situation, every car should receive one of these two inspections, he told the ITEC audience.
I believe every single car that comes into your facility should have some form of courtesy check. No exceptions.
A dealership should have a form for a 30-point inspection and a form for a 10-point quick check and require its techs to complete a form for every vehicle.
This form is not designed to impress your customer, he said. You impress your customer with customer service and a well-written estimate and sales skills.
The purpose of this document is to hold your people accountable to a specific recipe so, as the service desk, I know the information they give me on this form is accurate and I can tell the customer with a straight face they need it.
This is to make sure every single tech follows a process.
In addition to being presentable in appearance and attitude, Mr. Win-slow said the front desk salesperson should follow these steps to complete a tire sale:
c Answer the phone effectively and with enthusiasmconvert a phone query into a sale.
c Provide a friendly greeting and smile.
c Walk out to the customer's car to check the tires.
c Explain the features and benefits of the tire package.
c Make a recommendation.
c Ask for the sale.
He said the salespeople also should be trained to handle price objections by explaining why the dealership is different from the competitionsuch as offering a better service warranty.
If a customer complains about the price of the package, the salesperson should smile, agree with the customer and shut up, Mr. Winslow said. He noted that with the silence from the salesperson, customers often just acquiesce and make the purchase.
If there is a second objection, the salesperson should offer ways to make the purchase affordable, such as provide a payment plan.
To sell the tire package, you need to make it simple for the customer.... You want to give your customer three options, three choices, but every choice includes everything...good, better, best based on the tire, he said.
I've seen this strategy take shops that struggled with a 15-percent close rate on a tire protection plan to an 85-percent close rate on a tire protection plan without even giving their service advisers a spiff.
Tire buying frequency is decreasing. It is possible for consumers to now buy tires every eight to nine years.... All the advertising in the world is not going to enable you to stay in front of your customer enough to build a relationship if they are only seeing you every eight years, Mr. Winslow said.
So my suggestion is to convert tire customers into service clients.
To reach this reporter: [email protected]; 330-865-6127.