By Jim Smith
Editor, Tire Review magazine
Received a question from a reader regarding whether consumer rebate promotions really work. Our dealer friend wondered if the offer of a straight rebate or a debit card actually helped drivers choose one brand of tire over another or to even buy new tires in the first place.
So we posed the question to the Tire Review Dealer Advisory Board and received the following responses:
“At the moment we have rebates from Hankook, Conti/General, Goodyear/Dunlop and I think Michelin is coming out again with another one. Our customers want the cash up-front and the rebates are a big pain with filling the form out, etc. especially when the customer is spending $1,000 and gets a $50 to $70 rebate. Everyone is offering rebates and in some cases, like America’s Tire/Discount Tire or Costco, they offer them year-round. I would like to see us get a lower price so that if we want to be competitive we can offer a lower price. If we want to keep the lower price or want to mark it up more, then that’s the chance we take to see if we can make the sales.”
Redwood General Tire Service
Redwood City, Calif.
“In our part of the country, rebates work well. It is a good selling tool. If the manufacturer lowers the price to the wholesaler then all that would happen is one of us will lower ours and we will all make less money. I’m not sure what percentage of consumers send in the mail-in rebates, I can only assume not many. Goodyear is offering up to $160 on a set if you use a Goodyear credit card, and we can already see an increase in movement on those tires.”
“My impression is that the public gives all of these rebates a very big yawn. I agree with those who feel that most of our clients want the money up-front. They know they will lose the rebate or cash card, forget they have it or just not take the time to fill these out. We had one rebate with one of the oil companies where we filled out the forms for our clients and mailed all of them in at one time and the oil company refused to accept them in that form. They wanted each one sent in individually for obvious reasons. We fought it and won but it took a long time to convince them to honor the program. People are smart and they want the price at the time of purchase.”
Direct Tire and Auto Service
“Barry, I will have to agree. I have found that the person who is inquiring about rebates is also price shopping. In this day and age it is all about the bottom line, out-the-door price. A rebate is a bonus. If you are more expensive you must educate your customer as to why and back it up. Second, I have found it is impossible to keep up with all these rebates and, as you said, some find loopholes not to pay. I usually find out about these rebates from customers or inquiries and find they are available on the Internet and are available to any end-purchaser regardless of where they where purchased. The exception is company stores that promote ‘buy three get one free.’ Since we are brainstorming ideas and have communications, I would like to take a moment to see if any one feels the same way about tire pricing. It is my feeling that in these high economic times I have been paying close attention to pricing in all areas of retail sales. With the exception of fuel alone, I feel that tire price increases are way above the norm. From warehouse to warehouse I figured 38% increase in two years. I believe the average cost of goods increase over the past two years is only 15%. Does anyone else feel the same way or have a real explanation?”
Pit Crew Tire
Palm Harbor, Fla.
“Prices are out of control. Here is a good one: I am sure we have all had margins that we have tried to maintain over the years when tires cost $50 to $100. What do you do with the tires that cost $200 to $300 each? What can you possibly charge for this kind of product when the Tire Rack and the rest of the Internet companies are giving them away? Is the tire sale no longer a profit center and it is just away of creating traffic to keep our repair side of the business going? It is certainly what the car dealers are doing to keep their bays full with OUR customers’ cars. Around the Wheel what a wonderful program that we have allowed the manufacturers to force down our throats. Do you think Goodyear, Michelin, Conti and Bridgestone could deliver two tires at a time and make their program work? I doubt it. Any thoughts?”
“I would tend to agree with most of the comments so far. Goodyear often has a rebate for $25 on a set and the customer will say, ‘Per tire?’ And our associates inform them that it is $25 total, and that turns them off. Now Goodyear is running a rebate of $160 on various popular products combined with the Goodyear credit card. Under this scenario it seems to be working. I like rebates if they are big enough to get the customers attention and we don’t have to cut our margin to be competitive.”
“Great question, and my immediate answer is yes but not for the reason you may think. Rebates bring the dealer’s attention to the product and, in some cases, the customer also. However, I think it is us that the rebate is for. First we hang up all the POS, then we make sure we have all the forms, next we have a meeting with our people to get them focused so they don’t embarrass us when the customer asks and they are not aware. Guess what…that brand promo is embedded in our head. Next, the cost of the coupon depends on how many follow through. If most dealers leave it up to the customer to send in and request then you will most likely have a 50% reduction in redemption. Now it only costs the manufacturer half of what it could have or they got twice the bang for their buck. In our case, we do not believe in breakage and do all the paperwork for our clients to eliminate any failure of redemption. If all the manufactures lowered their price then there would be no incentive for us to focus on a certain brand that’s not a win for them. However, I’m all for the lower prices and if Michelin or one of the others decided to give us an instant rebate for us to use however we choose that brand would have my attention. Instant rebates will always out perform mail-ins, but the manufacturer feels they lose control.”