Discount Tire Company Marketing Activities
Abstract
The purpose of this paper is to explain and evaluate the marketing activities of Discount Tire Company. The name Discount Tire Company and the abbreviation DTC may be used interchangeably within this paper. It is my intent to expound upon the marketing activities that have made this company so successful. I contend that, in a down economy, these marketing activities have allowed the company to remain ahead of its competition. Discount Tire Company was founded in Ann Arbor, Michigan in 1960 by Bruce T. Halle. Mr. Halle had already owned several other businesses before starting this one. His store, which was located in an old gas station, did not have the space for inventory, nor did it have much equipment to speak of. He …show more content…
stocked a set of new tires and a set of used tires, and since he did not have an air compressor, he would inflate the tires at a station across the street. He was a one man show with little to no overhead. Fast forward fifty plus years; the company now has over eight hundred locations, and is the largest independent tire and wheel retailer in the world.
Throughout the years, Mr. Halle always said that the best advertising available was word of mouth. It is the cheapest and most effective way to influence your customers. The philosophy is "they are in the people business, and selling tires is a byproduct". Essentially, if you treat customers with respect, and do what is right, people will share their experience with others. This is not to say that he never advertised in any other medium. He ran advertisements in the local newspapers, and up until recently, still ran weekly ads in the sports section of the newspaper. Why in the sports section, you ask. For many years the primary purchaser of tires was men, and it was widely thought that men read the sports section of the paper. This type of thinking has since gone away. Armed with the knowledge that in today’s environment, women make up a much larger percentage of customers, and with newspaper readership on a huge decline, the newspaper ads have become obsolete. DTC is also in the Guinness Book of World Records for having the longest running commercial on television. The commercial, which came out in 1975, shows an old lady throwing a tire through the window of the store. The tag line was, “If ever you’re dissatisfied with one of our tires, feel free to bring it back”. Now, the commercial itself is a little kooky, but the message was a powerful statement, at the time. It didn’t say, if there is something wrong with the product to bring it back, but rather if you are unhappy with it, for any reason, to bring it back. In the automotive industry, where somebody is always out to get you, this was a big deal. That ad still runs today, but the difference is that DTC has been able to get tire manufacturers to pay for part of the ad by stating at the end of the commercial that you can buy their tires at DTC. This has been a big shift in the advertising philosophy of DTC over the years. It’s really smart, if you think about it, getting tire manufacturers to share the expense of the advertising budget simply by putting their name in the advertisement. This has been used in television commercials, as mentioned above, in newspaper ads, in radio ads, and other forms of print ads. This type of support from vendors results in a massive reduction of the annual advertising budget. As with any company, however, you must try to focus your attention on the most productive forms of advertising. So, you try to calculate the ROI (return on investment) of various types of advertising efforts. This can be very difficult to quantify, and sometimes very costly to compile the data needed to make the correct strategic decision. Over the years, DTC has tried many different types of advertisements. There have been direct mailers, email blasts, and automated surveys triggered from the point of sales system. In 2003, DTC decided to get involved with NASCAR. They became a primary sponsor of a car in the Busch series, now known as the Nationwide series. It seemed like a logical step for a tire company to get involved in racing, even though the associated costs may not have an effect comparable to other types of advertising. It is very expensive to be a sponsor in NASCAR, even in the Nationwide series, but justification comes in the form of exposure to a very large number of people. In order to expand on their motorsports involvement, DTC became one of the founding sponsors of Formula D Drifting in 2005. As drifting reached the height of popularity in Japan, the movement to the US was the next logical evolution, and DTC got in on the ground floor of the sport’s development here in the states. They teamed up with Falken Tire, the largest tire supplier of the sport, and together have the largest stable of cars in the sport today. DTC has a high level of visibility in the sport and increased it with the creation of the Tires.com Triple Crown (tires.com is the primary DTC website), a series of three regular season races with a large cash purse to the winner.
Being a retailer, that does not manufacture anything, it is critical to determine what products, and in what volume to carry. Discount Tire Company has a wide variety of products available, and in fairly large quantities. They carry name brand products from many different manufacturers. This alone does not create separation from competition, so they also carry private branded product as well. This product is developed in coordination with tire vendors to help differentiate DTC from their competition. Often times product availability is an issue, especially considering the volume they deal in, and the product offerings are then determined by what is available. This happens quite frequently with the low cost radial (lcr). This product is usually a lost leader anyway, so consistently maintaining these skus is not a prime concern. It is more important to have a low cost option available rather than consistency of the product line. An example of this would be when the government placed a tariff on Chinese made tires a few years ago. It was very difficult to obtain these entry level products, and if you could get them, it was not cost effective within the marketing line up. Also, like clockwork every year, usually in the summer, all of the vendors start experiencing shortages in their supply. Whether from labor negotiations in union states, or overseas logistical problems, the backorders start piling up. This too creates problems in maintaining consistency in existing product lines, sometimes dictating that new lines be added just to have product available. Extensive research on what product to stock is conducted constantly to ensure that a good product mix is available at all times. Looking at emerging markets for vehicles that are new is key to knowing what tires are going to be needed. Also, researching what vehicles are sold in a particular geographical area is helpful to know what products to stock. Lastly, tracking previous sales of in stock product, and special order product will help to tailor a particular store's inventory with respect to product mix and product depth. Both of these are important to maintaining inventory levels and forecasting inventory needs.
Establishing retail prices for product is relatively easy in comparison to other operational functions. Pricing is most often dictated by competition, but with so many different competitors, it is a constant battle to keep up. In the industry, competition is classified into several categories; dealerships, major retailers, small retailers (mom-and-pop dealers), clubs (Costco, Sam's, etc.), and internet. Although product offerings and service inclusions are different with each type, it is important to be competitive on base price (in case that's all a customer checks). The internet has created a dimension to the industry that really changed the way that a tire company must view pricing. Research is conducted daily to keep up with the competition. Once comparisons are made, a decision must be made to determine a price point. It is not always the decision to be lower than every competitor. Sometimes it is determined that it is acceptable to have the same price. Being a leader in the industry, it is decided to set prices a little higher so that other competitors will follow their pricing. DTC has a computer program that can automatically change the retail price on a tire based on multiple competitor's prices using a preset scale. This involves researching the competition on multiple brands and market segments. Once the information is obtained, it is input into the system, and prices are updated. This only works for product lines with skus currently in the system, and then is only as good as the information being keyed in. For new products that will be added to the existing inventory, usually a desired profit margin (represented by a percentage) is used to set the retail price. As the sku becomes an established part of the total product mix, and as competitors begin to carry the product, the price may change.
As an industry leader with over 800 stores, retail site location is very important.
Locations are not picked at random, and a great deal of research goes into the selection process. One of the first things to look at is whether or not a particular area can support the addition of a store. Sales figures from existing stores are considered to ensure that adding a store will not have a parasitic effect. If there are no existing stores in a given area, the issue is whether or not the area can support building a new store. In choosing a site location, certain criteria must be considered; population density, median household income, traffic count, competitor proximity, lot size, ease of access, and visibility of the site. DTC rarely leases property, but rather builds most of their locations from the ground up. This means that lot size, visibility, and accessibility are very important considerations in the selection process. One of the most dramatic changes to the way that DTC conducts business is the proliferation of the internet, and web-based sales. In the late 90's, DTC started its website "tires.com" to serve as an informational tool to help customers research product and find stores in their area. In the early days of this new system, customers could pick out their product, reserve it, and have it installed at a nearby retail store. Soon after, it was evident that if customers were able to purchase online, then DTC would be able to compete with Tire Rack, their largest online competitor. So, "discounttiredirect.com" was born, which propelled sales to a new level. This new e-commerce venture exposed them to many people in areas where a retail location was not present (they were only in 20 states at the time). They were a late comer to online tire sales, but have parlayed it into a very successful piece of the total sales model. Market share varies in different parts of the country, but with so many stores open, and with internet sales holding strong,
DTC is the largest player in the game today.
Summary
Discount Tire Company was founded in 1960 by Bruce Halle. He opened the first store in Ann Arbor Michigan. Today the company has just over 800 stores in 23 states and is the largest independent tire and wheel retailer in the world. Regardless if the economy is up or down, or if the tire industry is up, down, or flat, they have continued to grow their business every year since 1960. This type of success does not happen without a solid infrastructure that focuses on core marketing principles.
Careful research is conducted on every potential retail site location to ensure an increase in market share without any parasitic effect to existing stores, and also to ensure that the new store will add to the company's overall profit potential. They have developed a rigorous training program to maintain a sales staff that is well versed in the art of the sale. Sales people utilize interpersonal communication skills for telephone sales and for personal selling in the store environment, which allows them to sell features and benefits, as well as overcome customer objections. They have a website that support the stores, which is tires.com. From this site, a customer can perform research, read or write reviews, obtain fitment information, and reserve product for installation at the store of their choosing. In addition to that website, they also have an e-commerce site, which is discounttiredirect.com. This site has all of the same functions as the store site, but allows the customer to make a purchase and have the product shipped directly to them. This is especially beneficial in areas of the country where the company does not have retail locations.
DTC advertises in a variety of mediums, including various types of print ads that appear in major market newspapers as well as local or neighborhood papers, automotive magazines, and direct mailers. In addition to print ads, they also run television commercials and drive-time radio spots. Another popular type of advertising, which is very cost-effective, is using email blasts to precede a sale. DTC also uses motorsports sponsorship as a form of advertising. They are the primary sponsor of a car in the NASCAR Nationwide Series, and one of the founding sponsors of the Formula D Drifting Series. Although this type of advertising is very expensive, and it is difficult to quantify its effectiveness, it has the potential to reach a very large number of people. DTC has drastically cut their advertising budget by getting vendors to subsidize the various forms of ads that are used.
Store location and demographical differences will cause each store's inventory to vary slightly, but the width and depth of their product lines are the most comprehensive in the industry. Access to a vast number of local and national vendors and distributors allows them maintain an inventory of core product lines. DTC carries name brand products as well as private and co-branded products, which helps differentiate them from competitors.
As a leader in the tire industry, DTC has the ability, in some cases to set the market price on tires. The majority of the time, however, it is the market that dictates the price. They are price competitive with nearly everyone in the industry. This includes major retailers, small local retailers, wholesale clubs, and even online mail-order companies. In many cases, their product and service offerings are better than the competitor, but they would rather lose profit than customers.
The purpose of this paper is to explain and evaluate the marketing activities of Discount Tire Company. The name Discount Tire Company and the abbreviation DTC may be used interchangeably within this paper. It is my intent to expound upon the marketing activities that have made this company so successful. I contend that, in a down economy, these marketing activities have allowed the company to remain ahead of its competition. Discount Tire Company was founded in Ann Arbor, Michigan in 1960 by Bruce T. Halle. Mr. Halle had already owned several other businesses before starting this one. His store, which was located in an old gas station, did not have the space for inventory, nor did it have much equipment to speak of. He …show more content…
stocked a set of new tires and a set of used tires, and since he did not have an air compressor, he would inflate the tires at a station across the street. He was a one man show with little to no overhead. Fast forward fifty plus years; the company now has over eight hundred locations, and is the largest independent tire and wheel retailer in the world.
Throughout the years, Mr. Halle always said that the best advertising available was word of mouth. It is the cheapest and most effective way to influence your customers. The philosophy is "they are in the people business, and selling tires is a byproduct". Essentially, if you treat customers with respect, and do what is right, people will share their experience with others. This is not to say that he never advertised in any other medium. He ran advertisements in the local newspapers, and up until recently, still ran weekly ads in the sports section of the newspaper. Why in the sports section, you ask. For many years the primary purchaser of tires was men, and it was widely thought that men read the sports section of the paper. This type of thinking has since gone away. Armed with the knowledge that in today’s environment, women make up a much larger percentage of customers, and with newspaper readership on a huge decline, the newspaper ads have become obsolete. DTC is also in the Guinness Book of World Records for having the longest running commercial on television. The commercial, which came out in 1975, shows an old lady throwing a tire through the window of the store. The tag line was, “If ever you’re dissatisfied with one of our tires, feel free to bring it back”. Now, the commercial itself is a little kooky, but the message was a powerful statement, at the time. It didn’t say, if there is something wrong with the product to bring it back, but rather if you are unhappy with it, for any reason, to bring it back. In the automotive industry, where somebody is always out to get you, this was a big deal. That ad still runs today, but the difference is that DTC has been able to get tire manufacturers to pay for part of the ad by stating at the end of the commercial that you can buy their tires at DTC. This has been a big shift in the advertising philosophy of DTC over the years. It’s really smart, if you think about it, getting tire manufacturers to share the expense of the advertising budget simply by putting their name in the advertisement. This has been used in television commercials, as mentioned above, in newspaper ads, in radio ads, and other forms of print ads. This type of support from vendors results in a massive reduction of the annual advertising budget. As with any company, however, you must try to focus your attention on the most productive forms of advertising. So, you try to calculate the ROI (return on investment) of various types of advertising efforts. This can be very difficult to quantify, and sometimes very costly to compile the data needed to make the correct strategic decision. Over the years, DTC has tried many different types of advertisements. There have been direct mailers, email blasts, and automated surveys triggered from the point of sales system. In 2003, DTC decided to get involved with NASCAR. They became a primary sponsor of a car in the Busch series, now known as the Nationwide series. It seemed like a logical step for a tire company to get involved in racing, even though the associated costs may not have an effect comparable to other types of advertising. It is very expensive to be a sponsor in NASCAR, even in the Nationwide series, but justification comes in the form of exposure to a very large number of people. In order to expand on their motorsports involvement, DTC became one of the founding sponsors of Formula D Drifting in 2005. As drifting reached the height of popularity in Japan, the movement to the US was the next logical evolution, and DTC got in on the ground floor of the sport’s development here in the states. They teamed up with Falken Tire, the largest tire supplier of the sport, and together have the largest stable of cars in the sport today. DTC has a high level of visibility in the sport and increased it with the creation of the Tires.com Triple Crown (tires.com is the primary DTC website), a series of three regular season races with a large cash purse to the winner.
Being a retailer, that does not manufacture anything, it is critical to determine what products, and in what volume to carry. Discount Tire Company has a wide variety of products available, and in fairly large quantities. They carry name brand products from many different manufacturers. This alone does not create separation from competition, so they also carry private branded product as well. This product is developed in coordination with tire vendors to help differentiate DTC from their competition. Often times product availability is an issue, especially considering the volume they deal in, and the product offerings are then determined by what is available. This happens quite frequently with the low cost radial (lcr). This product is usually a lost leader anyway, so consistently maintaining these skus is not a prime concern. It is more important to have a low cost option available rather than consistency of the product line. An example of this would be when the government placed a tariff on Chinese made tires a few years ago. It was very difficult to obtain these entry level products, and if you could get them, it was not cost effective within the marketing line up. Also, like clockwork every year, usually in the summer, all of the vendors start experiencing shortages in their supply. Whether from labor negotiations in union states, or overseas logistical problems, the backorders start piling up. This too creates problems in maintaining consistency in existing product lines, sometimes dictating that new lines be added just to have product available. Extensive research on what product to stock is conducted constantly to ensure that a good product mix is available at all times. Looking at emerging markets for vehicles that are new is key to knowing what tires are going to be needed. Also, researching what vehicles are sold in a particular geographical area is helpful to know what products to stock. Lastly, tracking previous sales of in stock product, and special order product will help to tailor a particular store's inventory with respect to product mix and product depth. Both of these are important to maintaining inventory levels and forecasting inventory needs.
Establishing retail prices for product is relatively easy in comparison to other operational functions. Pricing is most often dictated by competition, but with so many different competitors, it is a constant battle to keep up. In the industry, competition is classified into several categories; dealerships, major retailers, small retailers (mom-and-pop dealers), clubs (Costco, Sam's, etc.), and internet. Although product offerings and service inclusions are different with each type, it is important to be competitive on base price (in case that's all a customer checks). The internet has created a dimension to the industry that really changed the way that a tire company must view pricing. Research is conducted daily to keep up with the competition. Once comparisons are made, a decision must be made to determine a price point. It is not always the decision to be lower than every competitor. Sometimes it is determined that it is acceptable to have the same price. Being a leader in the industry, it is decided to set prices a little higher so that other competitors will follow their pricing. DTC has a computer program that can automatically change the retail price on a tire based on multiple competitor's prices using a preset scale. This involves researching the competition on multiple brands and market segments. Once the information is obtained, it is input into the system, and prices are updated. This only works for product lines with skus currently in the system, and then is only as good as the information being keyed in. For new products that will be added to the existing inventory, usually a desired profit margin (represented by a percentage) is used to set the retail price. As the sku becomes an established part of the total product mix, and as competitors begin to carry the product, the price may change.
As an industry leader with over 800 stores, retail site location is very important.
Locations are not picked at random, and a great deal of research goes into the selection process. One of the first things to look at is whether or not a particular area can support the addition of a store. Sales figures from existing stores are considered to ensure that adding a store will not have a parasitic effect. If there are no existing stores in a given area, the issue is whether or not the area can support building a new store. In choosing a site location, certain criteria must be considered; population density, median household income, traffic count, competitor proximity, lot size, ease of access, and visibility of the site. DTC rarely leases property, but rather builds most of their locations from the ground up. This means that lot size, visibility, and accessibility are very important considerations in the selection process. One of the most dramatic changes to the way that DTC conducts business is the proliferation of the internet, and web-based sales. In the late 90's, DTC started its website "tires.com" to serve as an informational tool to help customers research product and find stores in their area. In the early days of this new system, customers could pick out their product, reserve it, and have it installed at a nearby retail store. Soon after, it was evident that if customers were able to purchase online, then DTC would be able to compete with Tire Rack, their largest online competitor. So, "discounttiredirect.com" was born, which propelled sales to a new level. This new e-commerce venture exposed them to many people in areas where a retail location was not present (they were only in 20 states at the time). They were a late comer to online tire sales, but have parlayed it into a very successful piece of the total sales model. Market share varies in different parts of the country, but with so many stores open, and with internet sales holding strong,
DTC is the largest player in the game today.
Summary
Discount Tire Company was founded in 1960 by Bruce Halle. He opened the first store in Ann Arbor Michigan. Today the company has just over 800 stores in 23 states and is the largest independent tire and wheel retailer in the world. Regardless if the economy is up or down, or if the tire industry is up, down, or flat, they have continued to grow their business every year since 1960. This type of success does not happen without a solid infrastructure that focuses on core marketing principles.
Careful research is conducted on every potential retail site location to ensure an increase in market share without any parasitic effect to existing stores, and also to ensure that the new store will add to the company's overall profit potential. They have developed a rigorous training program to maintain a sales staff that is well versed in the art of the sale. Sales people utilize interpersonal communication skills for telephone sales and for personal selling in the store environment, which allows them to sell features and benefits, as well as overcome customer objections. They have a website that support the stores, which is tires.com. From this site, a customer can perform research, read or write reviews, obtain fitment information, and reserve product for installation at the store of their choosing. In addition to that website, they also have an e-commerce site, which is discounttiredirect.com. This site has all of the same functions as the store site, but allows the customer to make a purchase and have the product shipped directly to them. This is especially beneficial in areas of the country where the company does not have retail locations.
DTC advertises in a variety of mediums, including various types of print ads that appear in major market newspapers as well as local or neighborhood papers, automotive magazines, and direct mailers. In addition to print ads, they also run television commercials and drive-time radio spots. Another popular type of advertising, which is very cost-effective, is using email blasts to precede a sale. DTC also uses motorsports sponsorship as a form of advertising. They are the primary sponsor of a car in the NASCAR Nationwide Series, and one of the founding sponsors of the Formula D Drifting Series. Although this type of advertising is very expensive, and it is difficult to quantify its effectiveness, it has the potential to reach a very large number of people. DTC has drastically cut their advertising budget by getting vendors to subsidize the various forms of ads that are used.
Store location and demographical differences will cause each store's inventory to vary slightly, but the width and depth of their product lines are the most comprehensive in the industry. Access to a vast number of local and national vendors and distributors allows them maintain an inventory of core product lines. DTC carries name brand products as well as private and co-branded products, which helps differentiate them from competitors.
As a leader in the tire industry, DTC has the ability, in some cases to set the market price on tires. The majority of the time, however, it is the market that dictates the price. They are price competitive with nearly everyone in the industry. This includes major retailers, small local retailers, wholesale clubs, and even online mail-order companies. In many cases, their product and service offerings are better than the competitor, but they would rather lose profit than customers.