At the same time, the company said it has cancelled its promotion on those tires for the third quarter.
“Pricing is, right now, more difficult than I've ever seen it,” Mr. Brennan told Tire Business. “You can get a price sheet and you can get a glimpse of what the tire price is, but there're a lot of other things that the dealer gets.
“He gets, not just the traditional volume bonus and things that are part of a program, but because the market's so difficult right now a lot of manufacturers are going and saying, ‘OK, if you buy this many more I'll give you this much more money.' It can be a lump sum, it can be for a specific reason, it can be for a specific tire—we call it back side pay.
“It's not in a written program document that you can maybe get your hands on,” he continued. “It's probably 10 different communications — some of them maybe even over email — so you don't see it. All you do is you have to track the wholesale and retail pricing, then all of a sudden you see a change then backtrack and say, ‘OK, what happened?'”
For manufacturers, these pricing practices can make it difficult to gauge the best competitive level for a new tire, so launch promotions typically are put in place to drive sales. When unit requirements are included in these promotions — as was the case with Falken's — dealers may not always use the promotional pricing.
“With all of the other things, part of that promotion had to be used to make us competitive,” Mr. Brennan said. “So all of that discount that we gave for the promotion wasn't just profit. The dealer actually had to reduce the price to sell it.
“Well, if you do a promotion that has some unit requirement the dealer may not know if he's going to hit it or not, so he doesn't use that money in the price.”
Mr. Brennan said the goal for the tires moving forward is to get a consistent position “instead of flattening out and having to do something to make it move,” but that requires a “consumer velocity change.”
“That trend has to be a price change or a promotion or better communication, whatever it is,” he said. “So you have to take some action. That's what we want is, ‘Okay, we're going to get ourselves a little more competitive, but we want you to put us more competitive in the marketplace instead of keeping us at high margin/lower volume.'”
Nearly a year has past since SRNA's Falken brand became the official tire of Major League Baseball, an agreement that has given the brand multiple promotional opportunities, ranging from virtual signage behind home place to global marketing rights for post-season games.
The company also added team sponsorships with the San Diego Padres, Cleveland Indians and Detroit Tigers in 2016.
“We had to spend a lot more money, but we've had to because now we aren't just performance (tires),” Mr. Brennan said. “We sell a lot of other things.”
He said the increased advertising spend has been successful.
In 2014, the number of impressions for the Falken brand — generated primarily through signage, racing, project car activity and TV sponsorships — reached about 9.5 million. That number plummeted to 3.5 million last year, largely as a result of changes to its motorsports program.
Within the first six months of 2016, Falken has had about 498 million impressions.
Expectations are for MLB partnership to generate more than 2 billion impressions by the end of the post-season.
Since partnering with the MLB, Falken's website traffic has increased 41 percent, Mr. Brennan added. However, that hasn't necessarily translated into increased tire sales so far for the company.
“If the consumer isn't aware of you, then he never engages your brand,” Mr. Brennan said. “So you have to get that awareness up, get his familiarity up to a certain level before he will even engage with your brand.
“So have we seen a lift of sales just because of that? Impossible to know at this point, because the activity with MLB is a long-term process.”
What the company has seen is a different attitude from its dealers, with a larger number of them now purchasing the company's product offerings.
Mr. Brennan said the MLB partnership likely made the decision easier for those dealers.
“It is risky,” he said. “(The dealer's) got tires and inventory, and if he buys us and puts them in (his product screen), the market's not growing. He's got to take share from somebody, so he's got to get rid of that stuff he's got there.
“If he buys it, all of a sudden his inventory went up,” he added. “If he doesn't sell these, we've got a problem because he's not going to buy another one. That's why we're tracking sell-out.”
Additional advertising and marketing activities for the brand will include continued motorsports involvement; print, TV and online advertising; and engagement with fans through social media.
To reach this reporter: [email protected]; 330-865-6148; Twitter: @Will_Schertz