Continental Sells to Tire Salesmen in the U.S.
It’s just past 9 a.m. on a soon-to-be-scorching June Thursday on the southern edge of Texas hill country, and Chris Kunz is making a Ford Mustang squeal. Kunz, a 28-year-old assistant store manager for Discount Tire in Houston, is comparing a set of General Tire G-Max tires with four Goodyear Eagle GTs. It’s looking bad for the Goodyears, which is exactly what Continental, the company that owns the General brand, hoped. “God, these Goodyears are horrible,” says Kunz, who says they gave a rougher and noisier ride when he hit 60 mph on the twisty, 1.1-mile asphalt course. (Goodyear spokesman Jim Davis says, “The Eagle GT is an excellent product.”)
Kunz, who works for the second-largest independent U.S. tire retailer, is one of about 950 tire salesmen Continental brings to its Uvalde proving grounds for 10 hours each year, as the world’s fourth-largest tire maker tries to maximize its marketing budget by influencing some of the most influential men in the business. Tire stores are a bit of a holdout in the world of big-ticket retail, where Internet research is supplanting salesmanship. The word of the guy working the tire-store counter still matters in as many as 80 percent of retail tire purchases, tire sellers say. That’s not small change: Americans will spend $13 billion at tire retailers this year, up 6.6 percent from 2010, according to researcher IBISWorld.
The Uvalde events have helped Hanover (Germany)-based Continental’s U.S. business gain market share over the past five years, boost profits, and increase average selling price by 20 percent. “We’re a huge company that basically is lacking brand awareness in the U.S.,” says Travis Roffler, Continental’s marketing director for North America. “We have the technology and the capability. We just need the recognition of these products and to grow this brand to the point where people on both sides of the counter will give us a shot.”
Continental, which sponsors soccer and racing but doesn’t do tire advertising on TV networks, spends about $1 million annually mounting 4 weeks of daily Uvalde events. That’s about 15 percent of its marketing budget for its biggest dealers. Included are dinner and drinks at a ranch, transportation, and two nights of room, board, and open bar at the Quality Inn. That comes to about $1,000 per tire guy—a guy who typically makes about $40,000 a year. “This is a huge investment we do for our dealers to get them to experience the product,” Roffler says. “We track sales before and after, and we know it pays off.” Continental says its top dealers, the ones whose salesmen are invited to Uvalde, have increased unit sales by 30 percent each year since 2007. It attributes most of that increase to the Uvalde program.
Tire makers have hosted dealers at events for years. Michelin brings about 1,000 dealer reps to events at its test track in Laurens, S.C., as well as facilities in Vermont and Nevada. Goodyear Tire & Rubber hosts dealers at its San Angelo (Tex.) proving grounds and other locales. But such events are more crucial to Continental, which doesn’t own blimps or advertise on network TV, as a way to talk directly to the guys who tell many customers which tire to buy. “In the end, the counter person is the person who’s going to recommend the tire for the consumer, independent of all the advertising money you spend,” says Matthias Schoenberg, who until a July 1 promotion ran Continental’s tire unit for the Americas.
With 5.5 percent of the market, Continental is behind Bridgestone, Michelin, and Goodyear, which together sell half the replacement tires for U.S. passenger cars. Since 2005, Continental, including its General brand, has gained one percentage point of share, the largest gain among the top five makers of replacement car tires in the U.S., according to Modern Tire Dealer. Continental has boosted prices about 20 percent since 2005, relative to tires from price leader Michelin, Schoenberg says.
Last year, Continental broke even on its 24-year-old, new-car tire business in the Americas for the first time, driving a 50 percent boost in pretax profit margin for its car and light-truck tire unit. Continental is spending $224 million to expand its Mt. Vernon (Ill.) tire factory and plans to build a plant in the southern U.S. by 2014. The U.S. accounts for 13 percent of Continental’s tire sales.
Unlike automakers, who are more concerned with a tire’s impact on fuel efficiency, individual consumers want tires that grip and last a long time, says Gene Petersen, who oversees tire testing for Consumer Reports. It makes sense for Continental to focus on these replacement tires, since they account for three-fourths of its U.S. sales. Continental’s ProContact EcoPlus tire, which sells for about $95, was the second-best-performing all-season tire, scoring an 82 out of 100, in Consumer Reports’ latest rankings. Michelin’s $132 HydroEdge scored 84. Continental’s tire ranked the same or better than pricier versions from Michelin, Hankook Tire, and Pirelli.
During their 10 hours at the south Texas track, Kunz and his fellow influencers compared Continental and General tires with models from Michelin, Goodyear, and Hankook in tests of wet and dry braking, traction, and handling. They saw what happens when you put new tires on the front instead of the rear (the car tends to drift on curves, something Kunz says he can now talk about firsthand with customers). Attendees also maneuvered Jeeps equipped with General Tire’s knobby Grabbers over rock piles.
Next came a Texas-style happy hour and dinner at the La Paloma ranch. Waitresses in short shorts served margaritas, Cokes, and ice-cold beer, while the tire guys—and they were all guys—were free to fish in a stocked catfish pond or take shotguns for skeet shooting. Kunz says the head-to-head comparisons at the event made him more willing to recommend Continental tires. “But not just because they let me shoot guns and stuff,” he says. “Now I’ve got a better idea of Continental’s products. I can relay that to my customers and try to educate them.”