The Real Madness
I don’t know how I did it, but I had the house to myself. The kids, the wife, everyone was gone that Sunday morning. It was just the newspaper and me, and for the first time in months, I was going to enjoy every single page of that paper.
As I finished up the business section, there it was ®“ what I had been waiting for all morning ®“ the Sports Section. Page after page of information that would let me re-enter the water cooler conversations around the office. And it was all mine, baaabbbyyy!
March Madness. Spring training. Free agents. LeBron. All in glorious color. Utopia!
After devouring every glorious line on the front page, I turned to page two. And there it was: A blaring 90-point headline screaming "HOOPS MADNESS!" across the top of an ad. A major tire retailer’s ad.
Curses! My own beloved tire industry couldn’t leave me alone for this one weekend.
The pointed NCAA tournament connection drew me in, like it was supposed to. Below the overly large headline were seven or eight tires, the centers of each touting "premium" 40,000- to 65,000-mile tires, all priced below $50, all with the same familiar loss- leader sizes.
Then I felt the blood drain from my cheeks. A P155/80R13 for just $10!
How can anyone produce a tire, sell it for $10 and still earn even a penny profit? If you can create a modern radial tire so inexpensively, all this cost-cutting talk is a bunch of hooey.
That same ad offered a "premium" 65,000-mile tire in that same microscopic size for $27.
While you would be hard-pressed to find a wheelbarrow, let alone a functioning car, that takes a tire that small ®“ the last Yugo was laid to rest in 2001, I believe ®“ what do those prices say about what we really think of our own products?
All I wanted was to get back to the real March Madness and not think about this tire pricing madness.
I’m not pointing the finger at just this one retailer. Many other retailers of all types use the same lure-‘em-in-the-door sales pitch that’s been used by commodity product retailers for decades. Did I say "commodity?" Well, if you price it like a commodity and sell it like a commodity, you can’t claim a tire isn’t anything but a commodity.
When did we decide that Americans (or Canadians or Mexicans) only wanted to pay $10 for a tire? Or $27? Or $57? I know you have better odds of being struck by lightning than actually selling a set of P155/80R13s. But consumers don’t know that.
This is what consumers perceive: "Geez, those tires can’t be very good if they’re so cheap." And then they connect the dots from the price to the brand to the retailer. Now, not only is that one tire cheap, but so is the "major brand" and the store. The water has been poisoned for everyone.
I once had a tire exec tell me his company knew exactly how much consumers would pay for tires. Really?
So, what if tomorrow all P235/75R15s cost exactly $350 each? What if we all woke up, and those sugar glazed P155/80R13 donuts were on sale for $110 a piece? What if the retail price of all SKUs magically multiplied by 500% or even 1,000%?
Here’s what would happen: Nothing. People would still have to buy them. Either that or they’d have to buy a bike.
Despite everything we say to the contrary, we’re still deluded into thinking that price is the most important attribute. How many price concessions have you made because you didn’t want to lose the sale? How many of you whine every time manufacturers try to raise prices? And how many times do tire companies undermine their own price increases with special deals and month-end budget-makers?
In all these instances, we miss the simple truth: Consumers have to buy tires. They don’t have a choice.
How much does it cost to produce a water heater ®“ raw materials and labor? Every home, apartment and business has one. But you never see "HEATER MADNESS!" blasted across an ad. Same with refrigerators, furnaces and other non-discretionary purchases.
So, while we are all concerned about raw material cost increases and shifting production to low cost countries and enhancing stock prices and lowering operating costs and all the rest, maybe we need to pay more attention to the real issue.
Have some respect for the products we make and sell. Only when we gain that respect will we start to price them accordingly.
Aagghh! The family returned, and they’re walking in the door. So much for the rest of the Sunday paper.