4 hidden ways to get more profits from mounting and balancing
Selling more mounting and balancing services is a proven way to add to a dealership’s bottom line, but it’s not the only one. Strategies for increasing the profit potential of the services at the heart of a tire dealership fall into four areas, according to several dealers, business coaches and manufacturers. Their suggestions range from rethinking the value of free services to offering dealer-specific tire warranties, tracking tire labor and getting more out of balancing and mounting equipment.
- Embrace free
Free rotations for the life of the tire have become the norm. But Jim Murphy, business coach for Top Flight, the peer group for members of the Tire Factory Inc. cooperative, says dealers often view the free rotation as a necessity only because competitors offer it.
He encourages dealers to turn that mind set around. A free tire rotation can bring a customer into a shop as often as every 5,000 miles versus oil change intervals that span up to 7,000 miles.
“As tire margins continue to get squeezed, it would make sense for a dealer to offer a free rotation because there’s the opportunity to review that vehicle on a more regular basis than a 5,000- or 7,000-mile oil change interval.” He notes that getting the customer in the door to have their tires rotated for free is easier than the process of sending reminder cards or placing phone calls asking customers to schedule a service they have to pay for.
“You’ve sold the tire and made a few bucks on the tire sale. But now you’ve locked that customer into a service they feel you owe them,” says Murphy, who is president of Automotive Business Solutions Inc., a training and consulting firm based in Spokane Valley, Wash. “Now you’ve got a customer who’s contacting you or you’re reminding them that every 5,000 miles they need to have those tires rotated. You ‘owe’ them that service now and are more likely to get that customer back.”
Once the customer returns, perform some type of inspection. Along with building trust and rapport with a customer, a dealer can review the vehicle and potentially sell other services, according to Murphy. “They certainly can be talking to the customer about charging for a balance.”
- Create your own tire warranty
All Tire Factory stores offer a Good as Gold warranty at no charge that provides free air pressure checks, tire inspections, tire rotations, free flat repair and free tire replacement for tires damaged and not repairable due to a road hazard with every purchase. But Alignment Pros Inc. which does business as Alignment Pros Tire Factory in Gillette, Wyo., takes the warranty a step further, according to Kalina Petersen, co-owner. She has enhanced the Good as Gold warranty to also include free TPMS reset and free rebalancing every 6,000 miles for the life of the tires.
Those free services drive business to other areas of the six-bay shop. “The warranty keeps customers coming in because they like the full service,” says Petersen. “For example, we measure their brake pads and let them know where they are at in millimeters, not percentages. It gives us a chance to check suspension parts to see if they’ve got any tire wear starting to where we’d need to recommend an alignment check.”
Petersen employs seven people and plans to add two more technicians soon. The shop provides complete automotive repair services as well as sales and service for passenger, light truck, agricultural, ATV, trailer and other specialty tires. The popularity of muscle cars among local vehicle owners helps to boost sales and service of high performance tires.
Gillette’s strong economy is driven by coal, oil, gas and even geothermal energy production. A large portion of Petersen’s business is devoted to servicing vehicles driven by energy workers who recognize the value of the Good as Gold warranty and appreciate the full service. “We offer that warranty to our corporate accounts out there on the shale. They do chew up a few more tires, but I sell a lot more tires, too, because I stand behind them.”
All Tire Factory stores have an option to sell an expanded protection plan called “Platinum Warranty,” which provides road hazard coverage. Petersen also has taken Tire Factory’s Platinum Warranty a step further. She will replace all four tires if the replacement tire’s tread depth varies from the original tires’ tread depth by more than 3/32nds. Petersen adds 15% of the price of a tire to the ticket for the Platinum Warranty, and she gives customers a 30-day window to decide if they want to purchase it.
Petersen says the road hazard coverage makes the platinum level especially popular with drivers of AWDs. “The platinum plan is also a marketing tool because the average consumer does not know that if they ruin a tire they may have to have four new ones,” says Petersen. “So it’s a great educational moment. You can explain it to them and they can digest it and several of them do come back and buy it. I don’t believe in high pressure. I’d rather somebody embrace the idea than feel pressured into it. But it’s been great. It’s a bonus for both the consumer and us.”
In addition to the road hazard coverage, the platinum program covers a free TPMS reset, free rebalancing and a free alignment check every 15,000 miles. Petersen began selling the platinum plan in the fall of 2013 and so far has had to adjust tires for two customers. She presents the warranty to customers as a way to protect their tire investment. For her operation, the Tire Factory Platinum Warranty is a way to create repetition and generate revenue.
“The Tire Factory platinum program is where I’m going to make my money. You have to get past the fact you’re not the least expensive, but you’re offering awesome service. You’re offering more than just the price, you have to sell the service that comes with it. You can be a little bit higher than your competition if you’re offering better service.”
John Roemer also offers the Tire Factory’s Platinum Warranty to new customers and has even offered the program to customers he had previously sold tires to. He is the owner of Roemer’s Car Clinic Inc. doing business as Roemer’s Tire Factory in Missoula, Mont. He employs 13 people in full- and part-time positions. Roemer has two aligners in his seven-bay shop, which performs everything up to transmission and engine replacement or rebuild.
The dealership celebrated 60 years in business in 2013. Sales and profitability have been up the past two years. “We had a record sales year with our 60th anniversary; we are comfortably on path to finish 15% ahead of that number for this year, so the momentum of our anniversary promotion has had a lasting benefit,” he says.
The number of all-wheel-drive vehicle owners in Missoula prompted Roemer to try the Tire Factory Platinum Warranty. “If a tire is damaged due to a road hazard injury and requires a replacement, we have to share the news with the customer that he or she will need to buy four new tires. Not fun. If the tread depth of the remaining tires is lower than allowed for mating up with a replacement tire we won’t install just the one tire. This creates a lot of heartburn not only for our customers, but also for my sales team.”
Roemer’s solution is to offer the Platinum Warranty at the time of purchase. “I’m finding that less than 25% of our new tire sales opt for the Platinum Warranty. But those AWD owners who have, or have had need of exercising the coverage, are thrilled with their decision.”
Roemer says he’s trying to get his sales team to quote the price of the Platinum Warranty added in with the total cost of the tires. “The big fear with my sales force, and I think this is true with all sales forces, is that we’re all afraid the customer is going to walk, and we won’t get another chance to get in front of them.
“You really have to differentiate what is being provided. Because we’re really saying we’ll give you a new tire for free for the first four years or down to the last 3/32nds in the event you have a tire ruined.” Roemer has tweaked the Tire Factory Platinum Warranty by promising his tire purchasers that he will replace all four tires if existing tires are worn such that it’s not appropriate to put on just one new tire and have it operate properly on an all-wheel-drive vehicle.
Roemer says the complicated process of balancing low profile tires that require more expensive tape weights is causing some dealers to no longer offer free balancing. “We’re seeing more and more of these with the new cars. They are almost exclusively an alloy type of a wheel with no lip. You’ve got to balance them using tape weights, and that’s very expensive and much more time consuming.”
Automotive repair and maintenance make up 50% of Roemer’s annual sales. His employees inspect every vehicle before performing the services the customer requested. Roemer says this gives his service advisors time to discuss other service needs while the customer is in the store.
“There’s always been the argument you can afford to offer free services if you’re minding business and doing the inspections. I think we are fast approaching the day when I can actually say no, we are really not covering all of the cost. I’m thinking of the additional time to reset tire pressure monitors, the additional time to balance tires; those things have added time that I’m not sure we’re collecting for.
“Fortunately for us, and for any tire center that does automotive repair services, it is still a benefit because we’re feeding our mechanical technicians with work found in our tire service bays.”
- Track tire labor separately
Another way to build profitability into mounting and balancing services is to track tire-related labor separately from mechanical labor, according to Murphy. Tire technicians are treated as the cost of goods sold on the profit/loss statement. Tracking them separately gives dealers the ability to control the cost of sale.
“A lot of times dealers will have tire technicians who are not always productive. So I don’t have them always break out rotations, for example, but they are reported as revenue or lack of revenue related to tire types of services,” says Murphy.
Roemer says tracking tire labor separately from mechanical labor provides a way to measure the efficiency and profitability of sales in both areas.
“If you have people who do just tires, which we do, there’s a nice wall of separation and you’re able to measure the productivity and profitability of that department.” Payroll costs for tire labor and mechanical labor are shown as cost of goods sold on Roemer’s profit and loss statements.
There’s another reason for tracking tire labor separately, according to Dennis McCarron, a facilitator for Dealer Strategic Planning Inc. (DSP), a tire-focused 20 Group that helps members improve profitability.
“It’s a different part of the business. Most shops will separate their tire sales from their mechanical sales because the gross profit is so different. But they usually lump tire labor in with mechanical labor.” The cost of the equipment is the reason a dealer needs to be looking at tire labor. “You need to know you’re getting a return on that purchase,” says McCarron.
- Get the most from your equipment
Mounting services can result in higher costs if not done correctly, according to Kevin Rohlwing, senior vice president of training for the Tire Industry Association (TIA). “Anything from a scratched rim to a torn bead to a non-concentrically seated tire is going to raise the costs.”
On the other hand, balancing does offer some potential for increased profit. “Modern suspension systems are far more sophisticated than they were years ago, which means even the slightest imbalance in a rotating tire assembly may be felt by the driver. Dealers with advanced balancing equipment can more easily identify the assembly or assemblies that are causing the problem and correct them.”
But it takes a skilled technician with more advanced training to utilize all of the features and benefits of the higher-end balancers, according to Rohlwing. “Retailers who have the top-of-the-line equipment with technicians who know how to use it can definitely make more money because they have a service that is not readily available.”
MTD asked equipment manufacturers what dealers can do to get the most efficiency, productivity and profitability out of mounting and balancing machines. Their answers will be in the October issue of MTD. ■