On Jan. 1, independent retailers who buy Michelin, BFGoodrich and Uniroyal consumer tires from MAST (Michelin Americas Small Tires) will begin purchasing the tires under MAST’s new Alliance Associate Dealer (AAD) program. Michelin calls the new program a “fundamental shift” in the way it will do business with its dealers.
If AAD performs as advertised, MAST officials say dealers will see increased profit margins on MAST products, and wholesale distributors will gain the loyalty of its MAST dealers -- and the added sales that come with it.
Michelin scheduled 40 meetings in 15 days in major markets throughout the United States to introduce the program to more than 3,000 of its dealers. Modern Tire Dealer attended the meeting in Nashville to hear about the changes first-hand -- and dealers’ reactions to them.
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Multiple distributors allowed
Earlier this year, Michelin surveyed its dealers to find out what they needed from the new AAD program. According to new MAST COO Scott Clark, the needs haven’t changed in the six years he has been with Groupe Michelin abroad (Clark was vice president of marketing for MAST in 2001). Retailers want:
* better profit margins.
* an enhanced, more flexible delivery system.
The new program will allow Alliance dealers to receive program benefits for purchases from multiple Alliance “servicing distributors” instead of just the primary distributor.
“If your main supplier is out of the tires you are looking for, you have an alternate person or dealer you can buy from and it still counts toward your numbers,” said Shae South, vice president of Kentucky Tire Exchange Inc. in Bowling Green, Ky. “If a person needed tires in the past, I would go ahead and order them from a secondary supplier, but it wouldn’t count toward my numbers.”
In order to promote loyalty to the dealer’s primary distributor, dealers must purchase at least 85% of their MAST products from the primary distributor to receive their Retail Commitment Bonuses (between 3.5% and 8.5%) and Service Loyalty Bonuses (2%).
That includes Michelin’s private and associate brands.
There are 19 distributors in the Alliance program, among them Tire Centers LLC (TCI) and American Tire Distributors Inc. They do business with 3,500 independent retailers.
MAST takes over
To help both the retailer and the distributor -- and to make sure the program is run more uniformly -- MAST is taking over administration of the program. Performance bonuses were paid by the Alliance distributor in 2007; in 2008, Michelin will pay dealers through direct deposit, according to Bob Schaffner, sales program development manager for Michelin North America Inc.
“In the past, when a new part of the program was ‘bolted’ on, we gave it to the distributors to administer. This is ultimately not fair. We wanted to absorb the administration of that program, and relieve that burden from the distributor.”
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“Michelin itself is hooked into the computer systems of these distributors and is monitoring the units,” said Steve Walker, owner of Tennessee Tire & Auto Clinic in Gallatin, Tenn. “It’s not left up to the primary or secondary distributors to furnish these numbers to Michelin.
“Michelin handles it and they keep track of the numbers and the rebates on a timely basis… and the rebate goes right to me.”
Michelin will annually audit the distributor to make sure the program is being administered properly.
“It’s going to make your distributor more conscientious of what he is doing,” said Bruce Wrather, owner of Tire World Inc. in Smyrna, Tenn. “I believe in being loyal to our distributor, but I also expect him to be loyal to me.”
Controlling your own destiny
Michelin retailers also want “more control over the resources of the program,” said Schaffner. Under the new AAD Program, dealers will be able to manage their own advertising and marketing fund accruals.
A running total of what AAD dealers have earned year-to-date and what it’s worth to them per tire will be accessible 24/7 through the Michelin B2B portal.
“Basically, we are empowering the independent dealer,” said Schaffner. “We are enabling them to make more informed decisions. They now have a better basis to make decisions to buy from others.”
For the first time, dealers were significantly involved in developing the program, he said. “We created the concept from a blank sheet.”
