Climbing up the satisfaction index in the Indian tire industry
The tire customer – then and now
The automotive industry has witnessed a significant increase in the level of tire awareness among car buyers within the short span of five years. In 2011, only one in two car owners could correctly recall the brand of tires that came fitted with their new car. When J.D. Power asked the same question in our most recent 2015 tire study, two-thirds of car owners correctly recalled their tire brand. Moreover, a quarter of new-car buyers are also pro-actively selecting the tire brand to go with their new car.
With higher awareness is a parallel rise in consumer expectations and demands. In 2011, tire customers expected a lifespan of 47,000km from their tires. Today, lifespan requirements have risen just under 10%, with tire customers demanding that their tires last 51,500km on the road. Customers are also factoring fuel expenditure into their overall cost of operation, with an upswing in demand for tires that provide better gas mileage occurring simultaneously when oil pump prices peaked in 2012.
The increase in demand for better performing tires, however, has not translated into downward pressure on the price of tires. In 2011, around 9% of the respondents surveyed had cited high cost as a deterrent from choosing the same tire brand for repurchase. Today, this figure has now shrunk to only 2%. Car owners are reporting that factors like a quiet ride, brand image and durability rank high in their consideration mindsets rather than cost.
We can now catch a glimpse of today’s modern car owner – highly knowledgeable, savvy, and sensitive to macroeconomic changes – yet willing to pay premium prices for a set of wheels that will meet their needs.
How the Tire Manufacturers have performed
Even as customers become more perceptive and demanding, tire manufacturers too have stepped up their efforts in understanding what these expectations are and have made significant strides to bridge these gaps. Our yearly assessment has shown that overall satisfaction levels with original tires have been steadily increasing reaching a record high of 868 points on a 1,000 point index this year. One of the major findings of J.D. Power Asia Pacific’s 2015 India Original Equipment Tire Customer Satisfaction (OE TCSI) study is that there is a notable reduction in the percentage of frequent punctures reported by customers – dropping significantly to 9 percent from 18 percent in 2010.
In taking a step to appreciate what has contributed to this improvement in the level of customer satisfaction, we have to understand the focus from the auto manufacturers as well as the lure of the massive replacement tire market that underscores the importance of climbing the satisfaction index in the tire industry.
The push from auto manufacturers
In our 2015 tire study, the appearance of tire is the strongest driver of customer satisfaction contributing nearly 40% to the overall index. Why is this so? When shopping for a new car at the dealership, the average customer is not able to ascertain the build quality of the tires or its long term durability just by looking at them. They, on the other hand, can easily see the appearance of the side wall, tread design and the tire rims the moment they visit the showroom.
What this means is that tires have a direct influence in the overall perception of vehicle appeal and performance which automakers cannot afford to overlook and are therefore, directing OE tires manufacturers to help them achieve their aim. Each car manufacturer makes the decision to prioritize certain tire attributes that they know will help to yield the greatest satisfaction from their customers. For example, a car manufacturer that is banking on vehicle design may opt for tires with bigger and sporty rims whereas vehicles that are marketed on the parameters of fuel efficiency would demand tires that perform better on lowering rolling resistance.
In addition, the perception of a vehicle’s overall ride and handling is directly influenced by the quality and durability of tires. When a car owner begins to drive his new vehicle, the tires’ ability to absorb bumps on the road as well as resist punctures clearly influences not only his perception of the tire performance but also his overall satisfaction with his new car. Therefore, this element of consumer behavior further necessitates added focus from automakers to partner with tire manufacturers to improve these characteristics to create positive perceptions of their vehicles.
The lure of the replacement market
Nearly three quarter of car owners who are delighted with their OE tire experience are likely to repurchase the same brand versus less than 40% saying so for customers who are relatively dissatisfied. Assuming that a car owner is likely to replace their tires at least 4-5 times in their entire car lifetime, the revenue that tire manufacturers earn from replacement is much more than from OE fitments (from auto manufacturers). However, tire manufacturers must provide customers with a positive experience on the first original set to even have a chance of customers returning to fit the same brand for replacement.
What this underscores once again is the importance of OE tire customer satisfaction on how it should not be simply understood and studied in isolation.
The way forward for increasing tire customer satisfaction
Our data indicates that there is an increasing demand from customers who are requesting for more advanced technology from their tires such as self-sealing and run-flat functions. In 2011, 58% of customers reported that run-flat tires are very important. Today, this percentage has risen to 75%. In light of Indian road and climate conditions where 22% of car owners reported tire punctures and blow-out, this tire technology may well be the savior in a case of a life-and-death scenario! Additionally, with the government’s emphasis on national road safety, the awareness of these advanced tire technologies looks set to increase.
However, the price premium of these tires – around 20% higher than conventional tires, deters many car owners from making this purchase. Tire manufacturers must look to innovate and provide the right technology of tires but market them at an affordable price point. Clearly, India is an emerging market so the kind of price points that one can command in developed markets are not possible in a market like India. For tire manufacturers who can find the sweet spot of manufacturing advanced tires at a reasonable price point will be able to differentiate themselves and continue to be successful.
As published in AutoCarProfessional (May 2015 issue)
Tire manufacturers who can find the sweet spot of manufacturing advanced tires at a reasonable price point will be able to differentiate themselves and continue to be successful.