Newsletter | Dealership University™

Profit Ability™ Series
by Tory Hornsby

This article is from PowerSports Business Magazine on January 22, 2007.

Do you measure your Tire Penetration? Tire Penetration is the ratio of the number of tires a dealership sells compared to the number of major units it sales. For instance, if a dealership sold 75 tires one month and 100 units, their Tire Penetration would be 75%. This percentage can be a key indicator of your fixed operations (Parts & Service departments) performance.

Consider that tires are to a motorcycle dealership as milk is to a grocery store. Grocery stores often advertise special prices on milk, which is placed strategically in the back of the store, because they realize that if they can capture your milk business they will gain your grocery business and your loyalty as well.

I am normally not one that encourages discounting, however, tires are the exception. There are many websites and mail order catalogs that use tires as ‘loss leaders’ and offer tremendous discounts in order to gain add-on sales. Over the years this has created a very competitive tire market. The good news is that you can be competitive by offering a 25% discount and still yield a strong margin if you’re buying your tires right. Get in the habit of looking for tire specials and calling around for the best deal. You could also call and talk with each of your distributor’s reps. Buying in bulk (20 or more tires) will usually yield the best prices.

Moreover, many new opportunities will come to pass if you become ‘The Place to Go When You Need Tires’. Your dealership’s image will be enhanced, and the extra sales that come from building loyal customers and the Service department selling related add-ons, such as brake jobs, oil changes, and other services will be well worth it. Also, while tire customers are at your dealership they will look at accessories, see the new models on the showroom floor and frequently they will have friends with them. All of these lead to more sales.

According to a recent RPM Group composite report, the national average tire penetration was 104%, meaning a little more than one tire was sold for every unit that was sold. After all, tires are the number one wear item on a motorcycle, and everyone that rides will need them at some point. So, the question is, ‘How do I increase my tire sales?’ Here are a few points to help you begin.

Start tracking your tire sales. Set up a category in your DCS (Dealership Computer System) and track your tire sales on a separate line. You cannot improve something unless you’re tracking it.

Think of a catchy phrase. I was recently in a dealership whose staff had ‘Got Rubber?’ on their name tags. It’s catchy. I still remember it.

Educate your staff on becoming ‘The Place to Go When You Need Tires.’ Explain why you’re discounting tires, and make sure everyone is on the same page.

Run a tire promotion and be sure to include it in all of your marketing and advertising along with your catchy phrase.
- Trader
- Direct Mailer
- On Hold Message
- Newsletter
- Website
Have internal signage printed, not hand written, that displays your tire specials, and of course your catchy phrase, and place them throughout the dealership.
- Front door & other entrances
- Parts counter
- Service counter
- Bathroom walls

As you gain more tire business the image of your dealership will improve. You will also begin to see a greater loyalty from your customers as they get in the habit of coming to your dealership more often. Your floor traffic will increase leading to additional sales in each department. Then, you will notice your ability to make profit increase.

Feel free to contact me via e-mail (thornsby@dealershipuniversity.com). I respond to all my e-mail messages.

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