Michelin was having great difficulty making clients accept the products technical progress and therefore its selling price
1) Energy tyre = -6% fuel consumption
2) X-one = 1 tyre instead of two per axle => -5% fuel consumption due to weight reduction
« Energy Technology + X-one » = -11% fuel consumption, a very sensitive point for road hauliers. Roadhauliers refused to pay more even though they acknowledge the value of the Michelin technology
Michelin no longer sells tyres, but takes charge the tyres life cycle at the user customers*
- Adjusting tyre pressure which impacts fuel consumption
- Advising drivers on how to drive, and
Regrooving and retreading “at the right time”
The client no longer pays the tyre, but the amount of kilometres driven.
The life expectancy of a tyre is a lot longer.
Combining all factors, we stand at 20 tyre instead of 64 (/3.2)
Michelin very slightly increased their margin, in absolute value. However, the clients cost decreased by 3-ù (comparison of the cost of kilometers driven and buying new tyres), their internal administrative costs disappeared as Michelin took charge of them, and its fuel costs decreased by 11%!
Explanation: 44 tyres saved = energy and raw materials costs transformed into margin to be divided between the supplier and user customer.
The success of the bold gamble has been achieved, today more than 300.000 vehicles are handled throughout 24 countries.
Michelin encountered and overcame a resistance to price by replacing the sale of the good by the sale of its usage (km driven instead of a tyre). Michelin did this by adding a service: handling of the lifecycle, consulting and maintenance
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