The great nitrogen experiment: It took some tinkering to get there, but Ron Lautzenheiser's nitrogen sales are booming
Fort Collins, Colo.-based tire dealer Ron Lautzenheiser isn't the type who jumps into something sight unseen. He likes to do his homework.
So when he first heard about nitrogen inflation he didn't immediately run out and invest in equipment.
"We began exploring the idea of nitrogen late last summer," says Lautzenheiser, who is a Big O Tires Inc. franchisee. (He has two Big O stores: one in Fort Collins and one in Estes Park, Colo.)
"At first, we were skeptical. We didn't understand nitrogen. I didn't know that nitrogen made up 78% of the air we breathe."
Lautzenheiser and his staff began educating themselves with the ultimate goal of determining whether or not the service would sell.
"Our first concern was, 'Why invest $6,000 or $7,000 in something that would become an unused asset, sitting in the corner?'
"The bottom line was, 'Is it a feature that would benefit the customer?'"
Was it for him?
While he was studying nitrogen, Lautzenheiser also was immersing himself in another technology: tire pressure monitoring systems (TPMS).
He purchased the Tire Industry Association's TPMS training module to share with his employees.
"I also jumped in the car and went to various and sundry automobile dealers and found out that some of them were as ignorant about TPMS as I was."
He was concerned that the time it takes to re-calibrate the systems would pose a problem for his stores' speed lanes. "We literally pull vehicles in the back and out the front and usually have three people on each vehicle."
Lautzenheiser was proven wrong.
As his techs became more comfortable with TPMS, he realized that the systems' impact on his speed lanes would be minimal.
He then began thinking about how nitrogen would react with TPMS.
"For example, if you have valves that are sticking and causing air to leak due to moisture in the line, nitrogen -- being a very inert gas -- would sometimes help that."
The next step was looking at his own market. Was anyone else offering nitrogen?
"We are blessed that we don't have a Costco in our marketplace," says Lautzenheiser. (Coscto offers nitrogen inflation for free.)
"We saw no competitor within our trade area that was offering nitrogen. It was an opportunity to differentiate ourselves.
"Go back a number of years; you went to the Goodyear store to buy Goodyears, you went to Firestone to buy Firestones. Today most of your large retailers offer a myriad of brands. And most offer products at a competitive price.
"To me, the ultimate differentiation is the experience that the consumer has when he makes the retail purchase."
Lautzenheiser also wanted to get a head start on the service in case other retailers in his area started offering it at a later date.
The next step was procuring equipment.
He decided to use nitrogen tanks due to their low cost "and if we aborted (the service), we could return the tanks. We leased them."
Tanks in place, it was time to figure out a price. "We began working with $2.50 to $7 per unit. We were trying to find a price line."
At the same time, Lautzenheiser decided to test nitrogen inflation at a lube center owned by one of his sons, Ron.
"When you pass through a lube center and buy a full service oil change, they top off the tires to bring them back to manufacturers' recommendations."
The test yielded less-than-ideal results.
"What we learned in California is that we had little success selling nitrogen to the oil change customer... due to the cost of nitrogen relative to the price of an oil change."
Lack of point-of-purchase materials didn't help either, he says.
Setting a price
Undaunted, Lautzenheiser continued to see potential in selling nitrogen at his Fort Collins shop. (His store in Estes Park does not yet offer nitrogen.)
Initially, only 20% to 30% of the tires he sold were filled with nitrogen.
"We began playing with advertising. The consumer was very ignorant about nitrogen. We began working it into our ads. At the same time, we went to in-store point-of-purchase materials. We used easels, banners, etc.
"Because it was home-made stuff, it wasn't as good as it ultimately would be. Part of the problem I had was getting valid research."
Another son, Jim, who has ownership in the store, helped Lautzenheiser gather data.
The Fort Collins store is near Colorado State University, "and a lot of our customers are professors, so you better have some reasonable proof. We needed credible material.
"That helped make me more comfortable because there's the inevitable question of, "Is nitrogen a rip-off?' We had to do the research."
Pinning down a price point became the next goal.
"We moved off $2.50. We then tried to sell it at $3.50 for a passenger tire and $5.50 for a light truck tire. We went as high as $5.50 (for a car tire) and $7.50 (for a light truck tire.) Each month we'd vary our pitch a little bit."
He finally settled on including nitrogen in his out-the-door price. Broken down on an invoice, the retail cost came to $5 per tire.
"When you quote the customer for four tires with mounting, balancing, installation, sales tax, etc., nitrogen, at $5 a tire -- relative to the cost of the tire -- is small.
"We also abandoned trying to differentiate between passenger and light truck. Yes, there are more cubic feet of nitrogen in a light truck tire than a passenger tire, but it's unimportant to the customer."
Lautzenheiser also decided that his shops would re-inflate tires with nitrogen at $5 a tire, even if they were bought somewhere else.
"It's definitely improved customer loyalty."
And he stepped up the quality of his store's point-of-purchase materials. "Ingersoll Rand has helped us with what we are presently using."
'Charge for it'
Since then, Lautzenheiser's nitrogen sales have skyrocketed to between $2,000 and $4,000 a month.
Eighty to 85% of the tires he sells now leave the shop with nitrogen in them.
"We're to the point where customers even have a choice on the green valve caps."
(Caps are used to denote whether a tire has been filled with nitrogen or not.)
"We have a standard cap and a cap that's more appropriate for high performance wheels. They're no longer debating whether they want nitrogen or not; it's do they want a standard cap or a fancy cap?"
The service has become so popular that Lautzenheiser sometimes doesn't believe his ears.
"I happened to arrive at the store one day and was doing some work, looking for sales numbers.
"A customer was unhappy with one of our salespersons. I said, 'Excuse me, sir. Is there something I can do to help? You're obviously upset.'"
The customer replied that he was mad because he had brought his car in for tire balancing and rotation, and only three green valve caps were put back on his tires instead of four!
"Of course we raced out and put that fourth green cap on," says Lautzenheiser with a laugh. "But I couldn't believe it."
On a more serious note, Lautzenheiser is prepared for the possibility of competitors offering the service for free.
However, his equipment is paid for, and because of that he says he'll have an easier time coping than a retailer who's getting into the game late.
Right now he's more than happy to charge for it.
"I would recommend any independent tire dealer to charge a fair price for the service. It will provide a good stream of income.
"Our customers like the idea of nitrogen. They perceive it as high-tech. You have to air up tires anyway. It's just another good benefit for the customer."