Revealing Your Potential: The Complete Business Makeover - Tire Review Magazine

Revealing Your Potential: The Complete Business Makeover

When was the last time you looked at your tire dealership – not as a business manager but as an objective observer?

If it’s been a while, take a step back and really study your business. What do you see? Sagging sales? Unbalanced balance sheets? Peeling paint?

If you’re suffering from any of those, it might be time for a business makeover.

You work hard on your business. You wouldn’t be where you are today if you didn’t. But human beings, for the most part, don’t like change. The daily routine is comfortable, predictable and stable. If you don’t stir things up now and then, though, you’re likely to get stuck. And, as they say, a stationary target is easy to hit.

“Many smaller businesses build up a lot of inertia and don’t really change much until something pretty drastic occurs,” says Richard P. Morgan, certified management consultant and president and founder of consulting firm Morgan Marketing Solutions Inc. That “drastic something” can take many forms.

A tire dealer may experience a steep drop in sales, or, on the positive side, rapid sales growth and increased vehicle traffic.

But sales – sagging or skyrocketing – aren’t the only factors that can shake up a tire dealership. A tire chain or mass merchant sets up shop nearby. A son or daughter takes over the family business. A tire dealer buys an existing location. A natural disaster strikes. All of these drastic events, according to Morgan, may call for drastic measures, which can include a business makeover.

Even if none of these events occurs, independent tire dealers still have plenty of reason to makeover their businesses, according to Chris Frederick, president of Automotive Training Institute (ATI). Frederick says that all independent tire dealers are experiencing an industry-wide paradigm shift. “Cars today are more reliable,” he says. More reliable cars are reducing the repair business for dealers and forcing them to pitch intangibles like preventive maintenance, according to Frederick. “It takes selling skills to do that,” he says.

“Plus, car dealers have already taken 25% of service business away from tire dealers in the last five years. And, everybody is selling tires these days.” That’s not all. With women making up about 65% to 75% of the typical tire dealer’s customer base, they are essential to the business of selling tires.

Tire dealers need to adapt to these changes to survive, Frederick says, and a makeover might be in order.

The Makeover Mission

So, what exactly is a business makeover? From a physical standpoint, it’s relatively easy to understand. A fresh coat of paint, new chairs in the waiting area, better lighting and flooring, a new balancer or an extra service bay can each be elements of a physical transformation. The other kind of makeover – internal and operational – is much more complex. Internal changes can include staffing changes, altered pricing and payroll structures, reorganized inventory and even mentality shifts.

A business mentality shift – a cultural makeover – can be like cosmetic surgery. Results are extreme; risks are many. But a facelift will do more to alter appearance than a new outfit, and a change in mindset will do more for a business than a coat of paint. And, in most cases, doing both gives the best results.

Each tire dealer interviewed for this article had different reasons for taking on a business makeover. Some acquired new stores. Others had cash-flow problems. Still others had to make changes to keep up with a shifting marketplace.

Regardless of their reasons, though, they all learned that making over a business is no easy task. Money has to be spent; cuts have to be made. Sometimes, a long healing process follows. But, once all the bandages are removed and the final result is revealed, tire dealers find themselves operating a more attractive, more resilient, more profitable business.

Proud of their transformations, they are anxious to tell their stories.

Four-Day Fixup

On Thursday, Apr. 14, D.W. Hennelly, chairman and CEO of The Tire Choice & Total Car Care, received the keys to the former C&C Tire shop in Fort Myers, Fla. It was the final step in a long acquisition process.

The conversion of the store into a Tire Choice location, though, was anything but long. On Monday morning, Apr. 18, Hennelly opened the doors of the newly remodeled Fort Myers Tire Choice & Total Car Care.

How did he do it? For starters, he had connections that helped him do the physical makeover. As former president of Morgan Tire and longtime entrepreneur, Hennelly had developed what he calls “strategic, long-term relationships” with painters, plumbers, electricians, inspectors and other contractors. During his career, Hennelly treated all of the contractors he hired with respect. That meant not only paying them on time but also developing friendships with them.

So, when he asked those contractors to work double shifts – labor starting on Friday with a completion deadline of Sunday – they were willing. “Painters worked all night, from 5 p.m. to 8 a.m.,” Hennelly says. “Then, another crew came in to do the exterior. They worked 12 hours straight. At the same time, carpenters came in to do their work.”

Hennelly says he was willing to pay extra for this round-the-clock labor to get the new store up and running. “My goal was to make the transition as quickly as possible to minimize the expense of a closed store,” he says.

Hennelly’s intent with the physical makeover was quite simple. He wanted to attract “the high-end, high-income demographic market of Fort Myers.” In Hennelly’s opinion, the existing building wasn’t going to help him do that. “From the street, the signage didn’t call out the name of the company,” he notes. “The building had a two-tone gray exterior and a battleship-gray interior. The customer waiting area was painted a two-tone gray.”

And within that “high-end demographic” lived Hennelly’s number-one target audience – professional females. “We’ll get the men,” he says. “But professional women make up the target market we are really going after. Women are almost 70% of our customer base.” To that end, Hennelly spent $18,000 on exterior lighting alone to ensure that women would feel safe and comfortable pulling into the dealership at night.

Investment didn’t stop there. Hennelly put up $20,000 worth of signage, which boldly reflected his “no-surprises” branding philosophy. “Like McDonald’s, we focus on having the same look, so that when customers come into The Tire Choice, they will expect the same quality service and the same image, no matter which store they visit.”

Hennelly also bought new balancers and high-performance mounting equipment. He installed track lighting in the waiting room and made sure the showroom had a clean, fresh, inviting look. Television sets, fresh magazines (some for women) and even kiosks adorned the new showroom. Tire displays, previously on the floor, were hung on the walls at the customer’s line of sight.

That was just the physical part. Hennelly made internal changes, too. “The store we purchased was closed on Sunday and open only for a short time on Saturday,” Hennelly notes. “We’re open 362 days a year, seven days a week.” He also implemented a database marketing system to send out service reminders. And, he directed employees to call each customer to thank them for coming in. “We don’t try to get feedback,” he says. “We just call to say ‘thank you.’ If there is a problem, they will let us know. It’s just an open-handed, olive-branch, sincere gesture of appreciation.”

As for employees, Hennelly used a 50/50 strategy. Fifty percent of the new store’s staff was made up of current employees promoted from an existing Tire Choice location just south of Fort Myers; the other 50% were new hires. “I wanted to staff the new store with employees who were already trained and would mentor the new people. That would lead to a good atmosphere and culture.”

All of these internal changes reflected Hennelly’s perception of the people who walk into the shop. To him, they’re not just customers; they’re guests. “We focus culturally on customers as guests in our business, guests in our home. We want them to feel comfortable. And that creates an easier environment to sell,” he says. When all was said and done, Hennelly had done a mentality makeover, as well.

“Yes, we’re in the tire business,” Hennelly says about himself and fellow retail tire dealers. “But, sometimes, we have a tendency to look at the business from a tire standpoint. At the end of the day, we’re retail. We have to focus on presenting a good retail – not tire – image.”

The Fort Myers store made money on its opening day, Hennelly reports. “We had a huge weekend the first weekend we were in business,” he adds. “We’ve completed our first full month in business, and the store is making money.”

Waking Up

Sid Spencer, franchisee of two of the 44 locations owned by Toronto-based Active Green + Ross tire and automotive repair center, found himself in a situation like Hennelly’s. When Sears Canada exited the Canadian tire business in March 2004, Active Green + Ross purchased 14 Sears tire stores in Ontario. Spencer became franchisee for one in Pickering.

Spencer saw the former Sears store as an underachiever – a “sleeping giant,” he says – based on vehicles processed compared to overall sales volume. “Traffic through the doors was about 200 vehicles a week,” he explains. “That’s good traffic, yet the store was only doing about 25% of the business it should be based on that. I couldn’t believe the lack of sales.”

The problem, as Spencer saw it, was a “corporate mentality” ingrained in the employees. “Nobody was an independent thinker,” he says. “Ideas and promotions came from the Sears corporate office. With them came many layers of corporate bureaucracy. And, by the time ideas got down to the counter staff, nobody had any idea about the original concept.”

Of course, construction crews hired by Active Green + Ross did a physical transformation to reflect the Active Green + Ross name instead of Sears. And, Sears-brand private label tires, which made up about 97% of the inventory, were sold at clearance prices and replaced by flag brands. The new signage, exterior paint and revamped showroom were in place within two weeks.

Spencer knew, though, that if he really wanted to “wake up” the store and move sales levels to where they should be based on traffic, he had to take on the most difficult type of business makeover – a cultural shift. That would take time.

He tapped lessons he had learned previously from working with ATI’s Frederick on his other tire store in Ajax, Ont. One of those lessons was the value of employee empowerment.

It took time for the employees to trust him. “I was the big new boss taking over,” Spencer reflects. “I wanted to instill in the staff a sense of self-worth and pride in the knowledge of the technicians. I wanted them to see beyond the gloom and doom of the lack of sales.”

It was no easy task. Spencer had a one-on-one meeting with each employee shortly after he purchased the store. He told the employees, technically terminated from Sears, that they had jobs if they wanted them. He also told them he was interested in their ideas. “You’re going to make more money because we’re going to turn this place alive,” he told them.

Employees seemed to embrace his philosophy. Spencer provided more training opportunities, which they seemed to appreciate. He listened to them. Most importantly, he implemented their ideas. There were plenty of obstacles during the transition to in-house management from corporate dictation, Spencer says.

For example, employees were taught to smooth over customer objections with gift certificates. But that was only a band-aid solution. “They were not addressing the issue,” he explains. “Why did this objection happen in the first place?” Another way counter staff handled customer complaints was by simply grabbing the store manager.

Spencer thought he figured out the root cause of many customer complaints. It wasn’t inferior parts or staff; it was lack of accountability. Employees didn’t have the ability to handle problems, Spencer explains. They wouldn’t try to come up with resolutions to customer complaints because they saw that as beyond their authority.

During the process of retraining employees, Spencer found that he had to reeducate customers, as well. “Three or four months after the takeover, a customer came in with a slow leak in a tire,” Spencer remembers. “The counter staff told the customer that, depending on the cause, the fix could cost nothing or up to $30. Nobody had looked at the tire,” he says. The customer left the store and returned shortly thereafter with a store manager, Spencer recalls. “Turns out the problem was a valve core that needed tightening,” he says.

Spencer was bothered by the fact that the customer felt he had to go to the management level to make sure his interests were served. There was no trust in the employee at the counter. “A precedent of bypassing everyone and going right to management was set,” says Spencer. “We had to break the precedent and reeducate the customer.”

It didn’t happen overnight. But, through employee training and empowerment, Spencer was eventually able to show customers that the staff could be trusted. “Give employees some authority,” Spencer advises other dealers. “Tell them just to get it solved. Teach them that what we lose in the apples of today, we’ll make up for in the oranges of tomorrow.”

It’s been nearly a year since Spencer took over the old Sears store, and he’s seeing results from the mentality makeover, which is still ongoing. “Over the past 11 months, the minimum monthly sales increase was 24%. The maximum was 214%.”

The giant is waking up.

The Power of People

Founded in 1923, Ganin Tire Co. in Brooklyn, N.Y., is a family-run business with a long history. After World War II, Saul Ganin, along with brothers Jack and Jerry, took on the business founded by their father, Morris Ganin.

Today, Ganin Tire is being run by the fourth generation of Ganins. Michael Zegans, grandson of Saul Ganin, now serves as junior vice president, while his father, Jeff Zegans, and his business partner, Stephen Ganin, own the business. Ganin Tire operates two stores in Brooklyn, two in Long Island, two in Orange County, N.Y., and one in the Bronx.

Last year, with help from the T3 marketing program run by Tire Centers Inc. (TCI), a subsidiary of Michelin North America, Ganin Tire took on a major transformation project to modernize its stores. When the company became a T3 certified dealer, Michael Zegans knew it was time for a change.

“The goal was to modernize the stores,” says Zegans. “Our company has always been a mom-and-pop organization, and we really reflected that.” Old peg boards adorned the walls, while outdated wheel displays and lock kits took up space in the showroom. Counters were plain and uninviting.

“More than 50% of our customers are women,” Zegans emphasizes. “It was time to spruce up the stores.” Zegan committed $400,000 to redecorate six of the seven Ganin Tire locations. “We did total facelifts on our stores – both interior and exterior,” says Zegans.

Walls, windows and floors were ripped apart and reconstructed, new displays were put up, and customer waiting areas were stocked with more amenities like cable television and leather chairs. Every bathroom was doubled in size and remodeled. Old tire servicing equipment was replaced with new, state-of-the-art mounting and balancing machines. Nitrogen generators were purchased. “We wanted to be able to handle 24- to 26-inch tires and run-flats and offer nitrogen fills as an option,” Zegans explains. It was all part of the modernization goal.

At the final stages, TCI employees came to Ganin Tire stores to help decorate the exterior with new T3 certified tire store signage. Each store took about a month to remodel, according to Zegans, and that quick timeline required substantial investment. But saving money wasn’t an immediate concern. “We didn’t want to cut corners to save costs,” says Zegans. “Getting it done in a timely fashion and getting it done right were more important.”

Once the stores were revamped physically, Zegans started to look inside the business. “When you physically redo the stores, you also have to bring your people up to speed,” he says.

Ganin Tire sent its employees to TCI training seminars and required all sales personnel to hold a minimum of five certifications. And, diplomas and certificates were hung on the walls.

“We have about 40 to 60 certifications hanging in each store,” says Mark Eagleston, director of sales and new-store development. He found that displaying the certificates had two major payoffs: The store gained more credibility in the eyes of customers, and technicians and sales people became more confident.

There were speed bumps along the way. For example, each employee was evaluated in a one-on-one meeting, and not every employee was thrilled with the changes. “We had to reevaluate our people to make sure they would accept the new training,” says Zegans. “We raised our standards and set new goals for our people.” Some employees left the company, while others were promoted into management positions. “People were replaced if they couldn’t get with the program,” notes Zegans.

The personnel makeover was a critical part of Ganin Tire’s transformation. “If you’re just making over your store, you’re wasting your money,” says Zegans. “If you’re going to do a miracle makeover on your physical plant, you also have to do a miracle makeover on your people. We’re only as good as the people working in our stores.”

Retail sales for the last six months have been up double digits on a monthly basis, according to Zegans. “On average, the retail business is up 20% over last year, and the wholesale business is up 10%,” he says. Once the retail business took off, the wholesale division followed. “It’s a better place for customers to visit. It’s comfortable and clean, and the people are professional,” says Zegans.

Ganin Tire’s transformation continues. “Every Ganin employee, within the next few months, will be TIA certified,” says Zegans. His advice to other independent tire dealers is straightforward: “Fully invest, prepare and plan and have a passion and love for the business. Never forget your core business – what you do best. And, always remember that people are your most important asset.”

Financial Facelift

At Star Tire Co. in Dallas, owner Ned Edwards found himself in a situation common to many independent tire dealers. The company was experiencing cash-flow problems. It was on COD with suppliers and losing cash discounts. Payables were running behind, and sales were stagnant. Expenses were rising. Slow-moving stock and past-due accounts receivable were soaking up working capital.

Edwards looked to management consultant Morgan for help. Edwards remembers the beginning of the transformation: “Dick asked me for my business plan, and I replied, ‘What business plan?’ At that point, we sat down and came up with a Mission Plan.”

Morgan classifies Star Tire’s transformation as a complete financial makeover. According to Morgan, “the company had ample physical facilities, enough personnel and a long-standing reputation for quality products and service. Missing was a formal plan of action to correct some of the financial obstacles that were poised to sink the firm.”

The management consultant says the first step was to perform a detailed analysis of Star Tire’s operating statements to identify variable and fixed expenses. “We then added calculations to determine the company’s margin on goods and true margin after all variable costs,” says Morgan. “Knowing the true marginal income, we calculated the break-even point.”

Then, together, Morgan and Edwards looked at factors affecting profits and losses. They examined sales results by salesperson and compared commercial and retail sales figures. “We could increase short-term sales results by five percent or more by revitalizing retail sales efforts, dressing up the showroom with wheels and accessories, keeping the coffee pot full and implementing more selective pricing formulas,” says Morgan.

Edwards began making larger purchases from fewer suppliers, which resulted in a gain of nearly three percent in marginal income, according to Morgan. Bloated inventory was trimmed, and slow-moving products were eliminated. In addition, more small-demand tire sizes and brands were purchased from wholesalers that offered pick-up or quick delivery services. “Their premium for carrying stock and delivery was still a better deal than tying up precious working capital in special sizes and slow movers,” Morgan recalls.

Next, Star Tire examined fixed expenses and attempted to reduce them, and Morgan helped the dealership refinance its mortgage loan at a lower rate. Those strategies reduced some overhead and freed up working capital.

As for accounts receivable, Edwards began to monitor them closely after about 60 days. “If we don’t get some action in that third month, they’re cut off until they make restitution,” he says. And, he physically counts and analyzes his inventory every month.

Eventually, the dealer was able to get off COD status with suppliers and gain back some cash discounts.

Edwards says his dealership is still in its “Renaissance Period.” Morgan assists him in analyzing operating statements every month. “We look at the business on a monthly basis,” says Edwards. “When a red flag shows up, we analyze things.”

As Edwards sees it, the root cause of many of his financial problems was that he was at the counter, selling tires. Nobody was overseeing and analyzing financials on a regular basis. As a result, the business became stagnant. “It’s like when you’re making soup,” says Edwards. “You’ve got to stir it a little bit to get all the flavors just right.”

Edwards’ financial makeover allowed him eventually to ask suppliers to provide an annual volume bonus, in the 1% to 2% range, each time his purchases exceeded $500,000 a year.

Today, Star Tire is “doing more than double the business at enviable margins and creating very respectable profitability for the owner,” Morgan says.

A Service Shake-Up

About three years ago, Steve Crawford purchased Hepner Tire & Automotive in Woodstock, Va., and became owner. Right away, he knew changes were in order. First of all, the store didn’t have a showroom, so he built one. He created a comfortable waiting room, complete with carpeting for kids to play on and a gas fireplace. Bathrooms were remodeled and kept spotless. New tire display stands were put in the showroom, and a brand-new counter was installed. Next year, Crawford plans to replace the vinyl-sided exterior with a stucco finish.

More important than the physical transformation, though, were the changes Crawford made to the internal workings of the business. One of the first, most simple, but effective changes he made was charging for shop supplies. “I applied a certain part of the ticket to cover miscellaneous shop supplies. The previous owner didn’t do that.” That charge, unnoticed by most customers, added about five percent to Crawford’s bottom line. “Only one customer questioned it in the past three years,” he says.

Next, Crawford told the shop technicians they would be paid a flat rate instead of hourly. He also implemented free, 30-point courtesy checks. The techs resisted. They didn’t want to do courtesy checks at no charge, nor did they want to give up their hourly rate. But Crawford stood his ground. “I told them to be patient. I asked them to trust me and said that, long term, it would pay off.”

Crawford was right. Within just a few months, the techs discovered that the free courtesy checks resulted in them getting more work than they had before. By doing the checks, the techs uncovered service opportunities they wouldn’t have had before and, therefore, made more money. “The average ticket increased by close to $50,” says Crawford. “The lead tech got a $14,000 pay increase over the previous year.”

Crawford made other changes, too. He hired a master technician who was charged with doling out service work to the other techs. The past owner had assigned the work himself, and that took time away from running the business. He also hired a direct-mail marketing firm to send out mailers and thank-you cards to customers, and started offering free shuttle services. “If customers have to wait for their vehicles, we’ll shuttle them to the mall to go shopping and pick them up later at no charge,” says Crawford.

His financial and time investments paid off. “My shop went from struggling to gross $80,000 a month to averaging $225,000 a month,” says Crawford. “My bottom-line profit increased by 15%.”

Common Threads

So, what can a tire dealer really learn from each of these stories? Perhaps the lesson is the value of standing back and looking objectively at the business. Perhaps it’s the importance of change. A business that stands still while the rest of the world is racing past will eventually get trampled.

The tire dealers we interviewed for this story transformed their businesses in different ways and for different reasons. But they all agreed that makeover success is more than skin deep. To attract the most profitable customers and win sales, tire dealerships must be more than good-looking exteriors.

Extreme business makeovers require financial investment, hard work, serious planning and employee support. As shown in this article, some tire dealers work with consultants or affinity groups that act as business surgeons, giving the business a nip here and a tuck there.

Even with the right help, though, making over a tire business is much more than a nip-tuck proposition. Be sure you’re up to the task.

Steve LaFerre, senior editor, helped research this article.


Quality Vs. Quantity

“The reason many tire dealers don’t make changes is because they’re at the front counter selling tires,” says Chris Frederick, president of Automotive Training Institute (ATI). “Developing relationship-based selling skills is a necessity today, and dealers don’t have the time to do that if they are working in the business.”

Tony Klis, owner of Klis Brothers Automotive & Tire in East North Point, N.Y., learned that lesson. “We used to be in the reactive automotive service business,” Klis says. “We now focus on being a proactive marketer of maintenance.”

It was a business mindset makeover. Frederick helped Klis become more aware of his cost-of-goods numbers and pricing and purchasing strategies. “We are operating our business today based on management statistics,” Klis says. “I now know that my payroll is supposed to be at 20% of my operating costs. When I see my payroll at 25%, I know something is wrong. I have to make my people more productive or trim staff.”

Klis eventually gained enough confidence to start charging $90 an hour for labor. “We offer great service and perform top-quality work and charge for it,” he says. He also exited the cheap, fast oil-change business, which focused on quantity and not quality. “Today, we are working on fewer cars but making more money on each car,” Klis explains.

When all was said and done, Klis added $300,000 in annual gross sales and $100,000 net dollars to his bottom line. Klis Brothers’ sales figures rose from $25,000 to $35,000 per week.

Larry Griffin, co-owner of Griffin Brothers Tire Sales in Charlotte, N.C., also hired Frederick to help with a similar mindset makeover. Griffin is currently remodeling his six retail outlets. In the customer waiting areas, he’s installing Internet workstations, flat-screen TV sets, comfortable chairs and free beverage service. He has also started offering free loaner cars to customers.

Most importantly, Griffin says he began focusing more on quality than quantity. “In the past, we had too much car count. “We were herding them in like cattle. But, now, instead of taking 15 minutes with a car, we take 30 minutes. We do a 32-point courtesy check, which includes pulling the wheels and looking for potential problems.”

That’s part of Griffin’s new focus on preventive maintenance. “My people are finding more work by offering more thorough service. We had to slow down, and that meant getting rid of customers who probably weren’t a good fit.

“People expect more today,” he continues. “They expect that you will go over their cars thoroughly and let them know everything that is wrong or is going to go wrong so that they can plan for a future expense.”

Results have been exceptional. “We’re having, by far, the best year we’ve ever had,” says Griffin. “Two years ago, we were in single-digit net profit margins,” he says. “We’re in double digits now.”

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