Inspiring in store conversion

US Tire Market:
Inspiring brand conversion in-store
David Nemiah
Ulterior Group
May 27, 2014
© 2014 Ulterior Group

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Agenda
• The assignment
• What we did
• Key learnings
• Roadmap for brand conversion

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• Drive conversion in-the-store
• Leverage dealer training and point-of-
sale tools (in-store & web-based)
• Provide two scenarios:
• “the right way”
• “the fast way”
The assignment
Ulterior Group was asked to provide illustrative brand
conversion strategy for tire category-leader…Michelin.
The Ask Key Challenges
New
competitors
Pricing
pressures
Benefit
pressures
Low consumer
involvement
High dealer
influence
Conversion
in-store

4
What we did
• Secondary review:
• Michelin on-line tools, training and marketing materials
• Competitor web-sites
• Local/national tire dealer sites
• Business & trade press (Ad Age, Tire Review, Shopper Mktg, etc.)
• On-line ratings (Yelp, Consumer Reports, Facebook, etc.)
• On-line image search: in-store tire dealer displays/promotions
• Store checks & dealer interviews:
• Frame: Michelin authorized dealers (20 mile radius from Fairfield CT)
• Sample:
Discovery phase included the following:

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Learnings:
Tire Market Structure

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Passenger/LT market
= $29.9 B Michelin portfolio
= 13.6%
Market Structure
Michelin, followed by Goodyear, are leaders in the $30B
US passenger/light truck “replacement” market.
Source: Modern Tire Dealer (1/2014) © 2014 Ulterior Group

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Market Structure
Tire dealerships come in six “flavors” – some national
chains – but they are intrinsically local operations.
Source: Secondary literature review
Independent Dealers
• Local to market
• Family owned and/or operated
• Service vs. price-orientation
Mass Merchants
(e.g., Sears, Walmart)
Auto Dealerships
(e.g., BMW, Lexus)
Tire Company Owned
(e.g., Goodyear, Firestone)
Muffler Shops
(e.g., Midas, Monroe)
Warehouse Clubs
(e.g., Costco, Sam’s)

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Independent Dealers
= 60%+ of retail volume
Tire Services
= 56% of total jobs
Market Structure
Independent dealers handle the lion’s share of tire
sales…and tires are their key focus.
Source: Modern Tire Dealer (1/14); Tire Review (9/13) © 2014 Ulterior Group

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Market Structure
Tire product lines are organized into a devilishly complex
hierarchy of specifications, features and benefits.
Source: Secondary literature review; store checks (5/14)
• Tire size
• Tire life
• Tire performance
• Tire fuel efficiency
• Tire price
• Tire appearance
• Tire brand
• Vehicle type
• Seasonality
• Noise
• Comfort
• Rebate
• Warrantee
• OEM status

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Learnings:
The Consumer Experience

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Consumer Experience
When consumers need tires, they often feel ill-informed
and seek expert guidance.
Source: Google: Digital Helps Tire Brands Gain Traction(11/13); Tire Review (4/13), store checks (5/14)
• Consumer choices can be overwhelming
• 68 “authorized dealer” outlets (20 mile radius)
• 60+ tire brands available in-store & online
• 40+ sizes often offered per tire
• Up to 36 brand/model options (per vehicle)
• Options for season, performance, traction, etc.
• Common strategies to get clarity & guidance:
• 73% visited dealer websites
• Over 40% used smartphones to check prices,
discounts and special offers
• In the end:
• 84% buy their tires from a dealer
• 78% listened to dealer recommendations
• 45% said salespeople are key influencers
(rivaling family members)

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Consumer Experience
The consumer journey is somewhat predictable, but
ultimately presents a difficult choice.
Source: Secondary review; store checks (5/14) **Judgment-based…hierarchical segmentation is recommended to validate
The Consumer Decision Process**
Which brand =
best
Price/Value?
• Vehicle type
• Tire size
• Seasonality
• Speed rating
• Performance
vs. Touring
• Price hierarchy:
• Low
• Med
• High
• Prioritization:
• Braking
• Wear life
• Comfort/noise
• Fuel Efficiency
• Warranty
Time

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Consumer Experience
The example below underscores the difficulty of brand
choice – and unique challenges faced by Michelin.
Source: Google: Store checks (5/14)
Brand
Michelin
Latitude Tour
Goodyear
Fortera
Hankook
Roadhandler
Guardsman
LT
Price Mileage
Warranty
Salesperson
Comments
$217.99
$180.99
$172.99
$124.00
65K miles
60K miles
70K miles
NA
“Pretty good tire, but Michelin’s always
overpriced.”
“Excellent tire for the money.”
“Best tire for a smooth/comfortable ride.”
“I call it the oval tire…can vibrate.”
Example – Sears Auto Center

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Consumer Experience
Michelin’s tremendous heritage of innovation and quality
seems to hit a “headwind” at the moment of truth…
Source: Michelin.com; store checks : Sears, Monroe, Town Fair Tire, Pep Boys, Curtis Ryan Honda (5/14)
Michelin Price/Value In-Store
Michelin Selling Strategy
The Michelin brand is associated with:
• Safety
• Reliability
• Durability
This stimulates the buy decision and
customer loyalty…in every geography.
• Innovation
• Service
• Expertise
Michelin “Headwind” In-Store
“Michelin’s always overpriced.”
“You don’t want to know their price.”
“Michelin is hugely expensive.”
“Michelin’s not worth the extra $.”
“Continental’s probably your best value.”
“If you’re within $10-$15, Michelin’s best.”

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Learnings:
Dealer Perspective

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Dealer Perspective
Tire dealers have a two track mind – (1) making money
and (2) keeping customers coming back.
Source: Google: Tire Review (4/13), store checks (5/14) © 2014 Ulterior Group

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Dealer Perspective
Here’s a summary of their toolkit to keep customers
happy and earn their repeat business.
Source: Google: Tire Review (4/13), store checks (5/14)
• Good selection of tires/brands
• Advice on the “right” tire
• Low/reasonable prices
• Road hazard warranty
• Tires in stock
• Rapid mounting/balancing
• Friendly atmosphere & service

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Dealer Perspective
Here’s a summary of their toolkit to keep customers
happy and earn their repeat business.
Source: Google: Tire Review (4/13), store checks (5/14)
• Good selection of tires/brands
• Advice on the “right” tire
• Low/reasonable prices
• Road hazard warranty
• Tires in stock
• Rapid mounting/balancing
• Friendly atmosphere & service
Michelin/Dealer
interests closely align

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Dealer Perspective
Key challenge for Michelin…
How do you get these guys… To recommend this guy?

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Roadmap for
Brand Conversion
(using training and in-store tools)

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Roadmap for Conversion
• Marketing tools:
• Deep investment in Michelin Brand
• Coherent “total performance” platform
• Cutting-edge innovation pipeline
• Business Development Fund – ads & merchandising
• Alliance Associate Dealer Program
• MichelinDealerConnect.com – online marketing tools
• Training tools:
• Michelin Data Book
• Michelin Learning Institute
• Laurens Test Track (guided visits for senior mngt.)
• Michelinman.com – tire selector/”how to buy” guides/tire
selector/pricing/product ratings/consumer reviews
Michelin, in its wisdom, is flush with marketing & training
tools to build trust/engagement with dealers/staff.

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Roadmap to Conversion
And although real estate is often scarce in-store,
Michelin has shown success with POS tools.

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The question remains:
How do you get these guys… To recommend this guy?
To inspire these guys?

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The answer…
• Be disruptive
• Find a new way
• Ground idea/execution in Michelin strengths
• Leverage interactive/social media
• Appeal to interests of both customer & sales team
• Ultimate goal – change the conversation:
• From – “Michelin is expensive”
• To – “Michelin is worth a look…and worth the money”

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• Tap into passion for online ratings** - gets Michelin on menu in “good” way
• Leverage Michelin expertise in “ratings”
• Elevate current ratings/review platform (Michelinman.com)
• Become THE STANDARD for online rating of tires:
• Expand/deepen content/tools
• Include competitor ratings (track testing)
• Include consumer reviews (dynamic, 3rd party)
• Provide full tips/tricks appendix
• Access in-store, on-the-go, or at home
• Common reference point…brings Michelin into conversation
• Dealers/staff can see it as “value-add” and possible new POS tool
The big idea… “Wisdom of the Crowd!”
** Assumes: (1) Michelin willing to host “real” ratings platform, and (2) that Michelin product superiority will drive high ratings
Complementary idea… Romance the sales team
• Explore budget to expand Laurens Track visits to broader sales team
• Psychology of reciprocation + better grasp of “total performance” should
improve Michelin recommendations in-store

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The fast way:
• Leverage existing tire search/review engine in the Michelin Tire Selector
• Expand to include new content:
• Existing Michelin models and a short list of competitive tires (per vehicle)
• Performance ratings across brands by independent track
• Preliminary “open” consumer ratings platform (really a beta)
• Rename “Premium Tire Selector”…sub-brand by Michelin
• Build (and place) in-store tool to allow access to the Premium Tire Selector
• Explore budget to expand Laurens Track visits to broader sales team
• Test/beta innovations above in selected markets…followed by broader roll-out
“Premium Tire Selector” Laurens Test Track Visits

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The right way:
• Start with the “fast way” beta approach
• Expand both programs (as feasible) to be most effective
• Specific guidance for the “Premium Tire Selector”:
• Invest in robust competitor listings/ratings …optimizes credibility/value
• Invest in robust consumer ratings platform – think Zagat’s guide for tires, but with the
knowledge/infrastructure allowed by Michelin Guides
• Build in continuous feedback/improvement to drive utility
• Invest in consumer promotions and dealer sell-in to drive adoption
• Aspire to 3rd party integrity and goal of brand & sales gains for Michelin
“Premium Tire Guide” Laurens Test Track Visits
Michelin
Premium Tire
Guide 2014

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• Reports are too long
• Reports are too frequent
• Running out of ideasThank You!

Inspiring in store conversion

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