The computer system also allows Direct Tire to take full advantage of its large inventory of uncommon tires. "See this," Steinberg says, pointing to the screen, "that's the code for a rear tire on a Porsche 928S. Call around. You'll find nobody has them in stock. I have 12. That one's for a Mercedes 560 SEC. I have 60 in six different brands -- nobody has that many." Steinberg says he could get by with $200,000 worth of inventory, but that would mean occasionally disappointing a customer. By increasing his inventory 20%, he almost always has what customers want. At 11% interest, the annual cost on the extra inventory is $4,400.
That, too, represents an investment in customer service. Like the software system, the testing equipment, the headhunter commissions, and the pay scale, it's part of Steinberg's effort to keep the service promise by making sure customers get what they come for. In Direct Tire's case, the service promise goes beyond tires and beyond brake and alignment work. For Steinberg has also promised customers an extraordinary level of convenience and comfort, and he is determined to keep that promise, too.
It's a little before 8:00 a.m. at Direct Tire and the customer, who works in nearby Waltham, is getting angry. He called ahead of time to make sure there would be no problem getting a ride to work while the store checked his car's alignment. But now, while the car sits on the lift, there is a problem. Bobby Binnall, who ferries passengers to and from work, has just called to say his car won't start -- he'll be there as soon as he can. Steinberg would be happy to give the customer one of his loaners, but all are spoken for. The customer begins to tap his foot.
"I called the local taxi company, and in five minutes they were here and took the guy over to his office. The cab fare was $17, but can you imagine how many people he's going to tell this story to? It was the best $17 I ever spent."
That, in a nutshell, describes Steinberg's approach to the other part of customer service -- the willingness to do whatever it takes to make the customer happy. If the customer had been forced to wait for Binnall, who showed up an hour later, Steinberg still could have said, "Hey, I provide better service than my competition. I offer people rides to work." And he would have been right. But instead of heralding Steinberg's service, the customer would have cursed it. He would have been promised the ride and then forced to wait an hour to get it. By calling the cab, Steinberg kept his promise. Moreover, he did it in a way that the customer will remember and talk about for a long time.
Such opportunities don't arise every day, but -- whether they do or not -- Steinberg goes out of his way to make Direct Tire a pleasant and convenient place to shop, and it costs him a lot more than $17. For example, he wants all his people to look professional, so he buys the clothes they wear at work, to the tune of $21,000 per year. He also spends $900 per year on magazines for the waiting room, and another $2,500 per year on fresh coffee and half-and-half.
Then there are the loaner cars. Direct Tire has seven Chevy compacts. By the time Steinberg adds up the monthly payments, maintenance, insurance, and the like, he figures each car costs him about $400 per month, for a total of $28,800 per year. And that's in addition to the $8 per hour he spends having Binnall drive customers around while their cars are in the shop.
It's a lot of money, but the effort does not go unappreciated. Direct Tire has been recognized by Boston magazine, for example, as one of the best auto repair shops in the area. Steinberg, for his part, does all he can to make sure customers notice. By having windows in his waiting room, for example, he lets customers see how his highly qualified technicians go about their jobs. Similarly, he does more than leave postage-paid customer comment cards in each car on which work has been completed; he personally calls every single person who complains. Nor is he content to have salespeople apologize to a customer who has been kept waiting for a repair that has taken longer than promised. Each of them is also empowered to knock a few bucks off the bill, which makes the apology seem more sincere.
But giving away money is the last thing Steinberg wants to do. This is, after all, a business he's running. The real secret of his success is to make customers pay for the service they receive, and he makes no bones about doing it. Sure, he'll keep that uncommon Porsche tire around, the one no other dealer has in stock, but you'll pay more to get it. On average, Steinberg makes a gross profit of 37.9%. The harder the tire is to find, the greater his profit. So while his gross margin on an everyday tire is 33.3%, it's 47.4% on the one for that high-performance Porsche.
This approach to pricing is consistent. There are few bargains at Direct Tire, but customers don't seem to mind. On the contrary, Steinberg has found that -- if you keep your promises -- customers are more than willing to pay for value, service, and convenience, and he's constantly looking for new ways to let them do just that.
For example, one of the problems common to people who live in apartments is that they have no place to store their snow tires in summer or their regular tires in winter. It was a problem that many customers kept mentioning. "We finally figured out that letting them keep the tires here was a good idea," Steinberg says.
