Cover Story : Marketing Overdrive

Michelin North America’s dealer program gains traction with an eStatement

So in 2006, Michelin N.A.'s wholesale division began its program transformation with the relaunch of its paper-based sales agreement as an online contract. "By putting this contract online, we're then able to take that input to the contract, or the numbers, and evolve them into [our] online reporting tool, the eStatement," Schaffner explains. The next part of the process, the development of the eStatement, would take all of 2007—plus a great deal of manpower—to execute. "We had as many as 150 people internally working on this project," says Schaffner, in addition to database marketing expertise from DATACORE Marketing, a marketing services company located in Westwood, Kan., and feedback from the distributors and dealers.

Building the Data Engine
The linchpin of the dealer program for the dealers, distributors and Michelin N.A. is reporting. Essentially, that's what the eStatement is: an online report that shows Alliance Associate dealers:

• their progress toward their contracted purchase commitment;
• how much money they've earned in the program; and
• details on their transactions.

"Every element of the AAD program is articulated through the eStatement," Schaffner states.

The data underpinnings consist of a daily electronic data interchange of dealer transactions from the distributors to Michelin N.A. The tire manufacturer then consolidates dealers' purchases from multiple distributors and sends this data stream on to DATACORE, where it's incorporated into the program database, bounced off Michelin N.A.'s business rules and published via the eStatement that dealers access through the interface DATACORE hosts for Michelin N.A.

According to DATACORE President and CEO Jeff Yowell, his firm receives 4 million transactions annually that feed daily updates of more than 4,000 eStatements. To make this possible, DATACORE first needed to develop 16 different file transfers between itself, Michelin N.A. and the distributors. For data to be collected and compiled efficiently, Yowell notes, Michelin N.A. had to compel numerous parties to adapt their operations to new and different processes and policies, a massive undertaking that undoubtedly required a certain amount grace under pressure.

On a monthly basis, DATACORE sends Michelin N.A. "a payment file based on the dealers who hit their objectives. We send cash payment to these dealers directly in their bank accounts," Schaffner explains. He adds that the majority of distributors report transactions nightly and the eStatement is updated daily, giving dealers the most current information on which to base their business decisions—a critical need for independent tire retailers who have to manage risk while remaining competitive. The other key component of the online reporting tool is the direct cash payments, reducing the time a dealer is waiting on program incentives.

Yowell explains that all of the data elements being tracked in the AAD program impact dollar amounts and payouts. So, despite the automated nature of the eStatement, this information requires continual monitoring.

Running on All Cylinders
The retooled AAD program has been running for a little more than two years; enough time for Michelin N.A. to see several benefits to its new approach.

Prior to the eStatement, the company's area sales managers operated with less precision when it came to communicating with dealers in their territories. They didn't always have current data on where a dealer stood relative to its sales goals and how much money it was making, so the managers were "very limited in what they could actually talk about with the customer," Schaffner explains. "They could talk about product launches, promotions, training and things like that, but they couldn't really talk about the business facts." Now, the sales managers can pull up their dealers' eStatements and reach out to them with ideas for how to better leverage the AAD program. "It allows for a more consultative relationship between Michelin and the customer—the dealers really appreciate that," Schaffner says. "We can take action before the end of the month, not go back and ask a dealer why he missed his goal by 10 tires."

The online tool also helps Michelin N.A. more easily carry out relevant sales promotions. For example, Schaffner points out, before the eStatement, the company would create promotions that it hoped also would be appealing to the distributors who oversaw the dealers' efforts. With the transactional insight available to all stakeholders, Michelin N.A. is able to "execute sales programs for the dealer that draws tires out of the distributor's inventory, which is exactly what we want," he explains.

From the distributor side of the program, the eStatement offers other complementary advantages. Michelin N.A. talked to these constituents before the data project got off the ground to learn how to better address their needs. A key discovery was the importance of customer loyalty to distributors' profitability. In response, Michelin N.A. built into the AAD program a requirement for dealers to purchase a minimum percentage of tires from their primary servicing distributor, which is the co-signer of the dealer's purchasing contract. This feature "ensures the distributor gets the maximum value of the program and that the funds going back to the dealer don't contribute to a price war," says Schaffner.

Other key benefits of the online reporting tool include reduced program administration costs—due to the distributor no longer bearing this responsibility—and greater visibility into the dealers' progress toward sales goals, which also is of importance to the distributor. As Schaffner puts it, "At the end of the month, when [a distributor] looks at their sales to AADs, they can say, 'I need to go talk to Joe, because he's only four tires away from hitting his goal. We need to sell him those four tires,' which might turn into eight or 12 or 20 tires."

And certainly, the eStatement has made a big difference to tire dealers in the AAD program. With 24/7 access to their account details, they're able to fully leverage the ability to sell new Michelin products and expand sales of existing products. "The end result is we want our dealers to be advocates for our brands," says Schaffner. "And advocacy means it must be a good business decision to sell our tires, not just a good purchase decision for the consumer."

More Miles to the Gallon
So far, the AAD program is meeting, if not exceeding, Michelin N.A.'s performance expectations. More than 3,000 dealers have signed on, accounting for more than 4,000 points of sale for the company's Michelin, Goodrich and Uniroyal tire brands. And the number of customers has grown in excess of 50 percent. What's more, Schaffner reports, in last year's tough economy, Michelin increased its market share, with its AAD program outperforming the overall U.S tire market.

But again, it's the end result for the independent tire dealer that means the most to Michelin. "I've had small dealers who've had a very difficult time competing against the big box stores, the national retailers, call me to thank me for this program because they can now be competitive—not matching price, but they're close enough that the customers who want to shop there will not leave. So the profitability is greatly improved, their price competitiveness has improved and we've seen our sales improve, as well," says Schaffner.

Going the Distance
While getting this program revamp on the ground and going was a worthy challenge, the work is not over yet. With so many stakeholders and so many moving parts involved, opportunities abound to make adjustments that can further improve performance.

For example, as Michelin N.A. has increased its understanding of the volume of data available and its value to dealers and distributors, it's developing new product screens for dealers, applying the information to forecasting models, and supplying the area sales managers with more detailed insights for planning and management purposes.

Further, the success of the program has "attracted a lot of attention," from other business lines at Michelin, says Schaffner, such as the agricultural segment and even overseas operations. "Down the road," he notes, "we could be implementing this program for these business lines."

DATACORE's Yowell points out that Michelin N.A.'s AAD program has two sides to it—one operations-related and one marketing-related. Operations-side innovations connect to aspects like price book updates and audits, personally identifiable information, and reporting functionality. The marketing-side innovations lean more toward customized communication opportunities, such as e-mails personalized with dealer data at the individual level—progress status, advantages to meeting program goals, dollars available to hit goals, etc. And such messaging could be set up to deploy on a trigger basis.

"This started as a sales program for Michelin," Yowell says. "But with the data being generated, so many opportunities exist to drive a wide variety of communication objectives."

Given Michelin N.A.'s emphasis on the independent dealer's success, any future initiative will need to meet the core criterion of making the tire business easier for the dealer. "In our work, we count tires and we count money," Schaffner says. "We want our dealers to be more focused on selling tires than on buying tires."

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