Should tyre dealers price tyres online?

By Patrick Sandone [Special to Tire Business]

To price or not to price tyres online is indeed the question we hear most often at our company, Net Driven, when discussing website strategy with current and prospective clients.

As with all great questions, the answer is not simple. With some understanding of online pricing dynamics, however, determining the best strategy for your business is possible.

Before we dive into the details, let's start with the basics.

The word “tyre” is searched for between 13 million and 16 million times a month online. There are lots of people looking for tyres online and various sources report that 50 to 65 percent of consumers begin their purchase process for tyres on the Internet. Very few tyres, however, are actually “sold” online.

Tires are expensive, require installation and are products consumers know little about; all of these factors contribute to low online conversions.

Seeking info

What consumers are looking for online is information. Online tyre customers shop using a method known as ROBO (Research Online, Buy Offline)-meaning that while they start their purchase process online, they complete that purchase at a local tyre dealership approximately 96 percent of the time.

Pricing is just one type of information they look for, but there are many other types of data important to consumers, and that includes features and benefits, warranty data, consumer reviews, side-by-side comparisons and sale/rebate information.

Before your dealership even considers offering pricing online, step one is to make sure you have the basics covered, such as a website with a tyre fitment guide that is easy to find on search engines. Without these basics, you might as well not even have a website and, indeed, you do need a website.

Clearly, this is an important decision; the majority of consumers looking to buy tyres are influenced by online sources (your website or your competition's). Without the right website and Internet marketing plan, you are missing out on lots of opportunities.

Once you have a website that delivers basic research capabilities and is getting lots of visits, the next thing to consider is how you convert more of these visitors into customers. Increasing conversion is about delivering usability and information. Remember, online tyre shoppers are ROBO shoppers and the “R” in ROBO stands for “research”-consumers want information that is easy to find, and they want lots of it.

The more easy to find, good information you provide online, the longer they will stay on your website, and the longer they stay on your website the more often they will buy from you. Beyond the basics, consumers state that these are the top four types of information they want when shopping for tyres online:

a.) Prices;

b.) Consumer reviews;

c.) Side-by-side comparisons; and

d.) Sale or rebate information on the tyre record in your online catalog.

While price is important, so are the other types of information listed above. Indeed, having price without review, comparisons and rebate information would not be as powerful as having review, comparisons and rebate information without price.

Pricing is among the top four types of information consumers want online. But should you give it to them?

Before we answer this question, it is important to understand that just because consumers want tyre pricing online does not mean you should give it to them. Indeed, I am sure if we asked consumers if they want to know your buying price, 100 percent would say YES! That fact, however, does not mean you should tell consumers what you pay for tyres.

Your website can be your best form of marketing. The bottom line is that the information you list on it should help you gain sales. Listing your buying price would not likely be in your best interest, and that's why you don't give that information to consumers. Similarly, you should not list pricing online unless it will help you. Just because consumers want something, does not mean you should give it to them. You need to determine what is going to help your business the most.

One more factor to consider before we dive into the details of whether or not to list pricing on your website is the key influencers of tyre buying. The top three influencers are people, sales/promotions and websites.

In the people category, retail salespeople are a key influencer. Indeed, many consumers want to get a recommendation from someone on tyres, and even if you have pricing online, the consumer may still want to talk to someone about his or her purchase. View your website as a lead generation tool. You should not have pricing online unless it improves your chances of someone calling, emailing or walking into your store.

Online-or not?

OK, so should you put pricing online-or not?

Again, that depends on your business, particularly these factors:

• Your market;
• Your competition;
• Your buying price; and
• Your selling price.

Let's look at each of these factors to understand how they influence your decision.

Market-Your market, as defined by the consumer base you serve, is an important factor to consider when thinking about pricing tyres online. For example, time-starved consumers who live in densely populated urban areas with significant traffic congestion problems are prime targets for pricing and online shopping.

Thus, pricing and online ordering may be more important in high-income Zip codes where time and convenience are important factors driving consumer behavior. On the other hand, consumers in suburban and rural areas are more content to call or email for a price.

Even if you are in the wealthiest, most densely populated area in the country, it does not mean you should list pricing online. It just suggests that if you can put the right price online it would help.

So the bottom line is, if you are in an urban market, consider pricing more seriously. Otherwise, your market should not influence your decision.

Competition-What your competition is doing should also influence this decision. Competition, in this case, is defined by retailers with stores in your area, not online-only retailers. Most consumers want to deal with a retail store-although they may use online sites as a reference point-so only compare with competitors that can install tyres.

The best way to think about competition is the “tipping point theory”-when more than half of your competition puts pricing online, it becomes a factor in favor of you having pricing online as well. If less than half of your competition lists prices online, it may actually play in your favor not to put pricing online.

Consumers, on average, consult two to three sources before making a tyre purchase. So just because “Competitor A” has pricing online does not mean that the consumer will not also contact you if you don't have pricing.

In fact, in this case, I think it is an advantage not to have pricing on your website. Consider this scenario: A consumer is looking for tyre prices and visits the website of “Competitor A” and obtains an online price. Then the potential customer looks at your website-which may include much more information about reviews, promotions, features and benefits, just not the price-and emails or calls you.

This gives you a big advantage because you get to talk to the customer and build a relationship, especially since people, ultimately, are the biggest influencer of tyre purchases. “Competitor A,” which listed an online price, did not get to interact with the customer at all. In this scenario, “Competitor A” just provided a price, while you provided much more and, if your sales team is good, you will win this sale.

Let's apply this logic to two of the largest metro markets in the US. When looking at website offerings from the top seven dealers as listed by Google for each area, there are a few things to consider. In neither case do more than 50 percent list pricing. In fact, in neither scenario do 50 percent even have a tyre fitment guide and tyre catalog. Only two of the 14 dealers surveyed have side-by-side comparisons; only one dealer has consumer reviews; and none has promotion data in the tyre catalog.

There is no need to have pricing in either case and there are many opportunities to differentiate your business without adding pricing by creating an information-rich online shopping experience.

Buying price-Your buying price is also a factor when considering online pricing.

Typically, online prices are more competitive than normal retail pricing. Therefore, to have an effective online pricing strategy and still make a profit, you'll need to have a competitive buying price. A quick check to see where you stand is to compare the online prices of your competitors who list prices online and analyse what mark-up that represents to your buying price.

Again, don't use online retailers, just look at competitors with local tyre stores.

If you can make a decent margin when meeting or beating online prices, you may want to consider listing prices online. If not, pursue other strategies such as giving consumers other important forms of online information such as an interactive tyre catalog packed with consumer reviews, side-by-side comparisons and promotion data. As I've mentioned, this may actually confer more of an advantage than having pricing listed.

Consider listing pricing online if you can meet the market price and make a profit. If not, consider enhancing your online shopping experience with other types of information consumers want to promote phone calls and emails to your dealership.

Selling price-Your selling price strategy is another crucial aspect to consider. Online pricing emphasises a low tyre price, but does not always translate into a low all-in buying price for the consumer.

Indeed, we often find that independent tyre dealers offer a lower all-in price than even the largest online retailers. In several examples we looked at, fees associated with buying a tyre online-related to installation, shipping and stocking fees-amounted to between 30 and 40 percent of the total cost of the purchase. In cases analysed, the price of the tyre was $70 but other costs related to $30, $40 and more per tyre.

If you are pricing your tyre assuming $10 for installation, you may be selling yourself short online since the consumer will often make a decision on the price of the tyre alone. If you do choose to list tyre prices online, it is important to develop a relevant strategy that will help you compete with the strategies used by your competition.

Also, whether or not you decide to list prices online, train your sales staff on how to compare all-in pricing when someone calls or walks in with an online price quote. When you compare the all-in buying price, you'll often find that those online retailers are pretty easy to beat.

So do you put prices online or not? The answer depends on you and your research. Hopefully you now have a better understanding of all the factors that it depends on.

In the end, proceed with caution and focus on building a great overall website experience for your customers, not just adding price.

Ultimately, consumers want information. The more you offer the better, as long as that information puts your best foot forward. Having the wrong online price can be damaging; providing review data, side-by-side comparisons, promotion data and other information may just win the sale.

This article is part of a special series-“The Business Side of a Tire Dealership”-in the April 9 print edition of Tire Business.

Patrick Sandone is the president and founder of Net Driven. He previously worked as director of business development for Sandone Tire, his family's tyre and auto service business in Scranton, Pa., as well as with the venture capital firm Monitor Clipper Partners in Boston and with the investment banking firm Donaldson, Lufkin & Jenrette in New York. Scranton-based Net Driven, founded in 2007 to provide effective and affordable Web solutions to tyre dealers and repair shops, works with more than 1,500 retail automotive businesses. The company's website is www.netdriven.com. Mr. Sandone can be reached via email at psandone@getnetdriven.com or by calling 877-860-2005 x223.

From Tire Business (A Crain publication)