January 22, 2007: How to increase your store’s tire penetration
January 22, 2007
Filed under Columns
Do you measure your tire penetration? Tire penetration is the ratio of the number of tires a dealership sells compared to the number of major units it sells.
For instance, if a dealership sold 75 tires one month and 100 major units, its tire penetration would be 75 percent. This percentage can be a key indicator of your fixed operations (parts and service departments) performance.
Consider that tires are to a motorcycle dealership as milk is to a grocery store. Grocery stores often advertise special prices on milk, which is placed strategically in the back of the store because they realize that if they can capture your milk business, they will gain your business and loyalty as well.
I am normally not one that encourages discounting. However, tires are the exception. There are many Web sites and mail-order catalogs that use tires as “loss leaders” and offer tremendous discounts to gain add-on sales. Over the years, this has created a very competitive tire market. The good news is that you can be competitive by offering a 25-percent discount and still yield a strong margin if you’re buying your tires right. Get in the habit of looking for tire specials and calling around for the best deal. You also could call and talk with each of your distributor’s reps. Buying in bulk (20 or more tires) will usually yield the best prices.
Many new opportunities will come to pass if you become “The Place to Go When You Need Tires.” Your dealership’s image will be enhanced, and the extra sales that come from building loyal customers and the service department selling related add-ons, such as brake jobs, oil changes and other services, will be well worth it. Also, while tire customers are at your dealership, they will look at accessories, see the new models on the showroom floor, and frequently they will have friends with them. All of these lead to more sales.
According to a recent RPM Group composite report, the national average for tire penetration was 104 percent, meaning a little more than one tire was sold for every unit that was sold. After all, tires are the No. 1 wear item on a motorcycle, and everyone that rides will need them at some point.
So the question is, “How do I increase my tire sales?”
Here are a few points to help you begin:
As you gain more tire business, the image of your dealership will improve. You also will begin to see greater loyalty from your customers as they get in the habit of coming to your dealership more often. Your floor traffic will increase, leading to additional sales in each department. Then, you will notice your ability to make profit increase.
About this column
Series goal: Each Profit Ability column will focus on one key measurable found in most dealer 20 Group’s composite reports and offer tips on improving those measurables.
This edition: Tire penetration
National average for this measurable: 104 percent
Tory Hornsby, general manager of Dealership University, was drawn to the powersports industry more than 10 years ago when he turned his passion for motorcycles into a career. Hornsby worked in nearly every position in the dealership before becoming a general manager. He welcomes your e-mail: email@example.com.