Goodyear: The Aquatred Launch

HARVARD BUSINESS SCHOOL CASE STUDY

What is Aquatred ?It is a new tire providing improved driving traction under wet conditions

Major Tire Industries in U.S

Three major changes in US Tire Industry

Emergence of RADIAL tires to replace older “bias” and “bias-belted” tires.

Between 1971-91 radial’s share of unit sales increased from 32% to 95%.

Increased in foreign competition

Change in nature of demand from consumers and car makers.

FOUR major impacts of these changes

Demand for the passenger tires grew

sluggishly

New tires in the U.S market declined

Tires producing capacity outstripped demand

Tire making capacity rose 12% and capacity utilization fell from 87% to 76%

Industry difficult economic conditions, coupled with the tire manufacturer slow response resulted in a number of mergers and acquisitions

In, 1991 company operated 41 plants in U.S, 43 plants in other 25 countries and 6 rubber plantations

Known as “THE GORILLA” in world tire industry

Goodyear ranked third in worldwide sales of new tires

In 1977, company introduced the TIEMPO, first all season radial

their unit sales grew from 2% to 71%

In 1981, company successfully launched the EAGLE

Market for Passenger Tires could be segmented in three ways

Distinction between Performance and Broad-line tires

Performance Tires Broad-line Tires

Market can be also segmented on Replacement and OEM tires

Replacement tires sold directly to the individual consumers

OEM tires were sold to the car manufacturers

In 1986, Sir James Goldsmith attempt to takeover Goodyear greatly increased their debt. Their earnings were sluggish despite spending $1 million per day on investments.

Third segmentation was along brand classification

It includes major brands, minor brands and private labels

Most consumers viewed tires as a “grudge purchase”

An expensive necessity to keep vehicle in driving condition

Five important tire attributes1)Tread life2)Wet traction3)Handling4)Snow traction 5)Dry traction

Criteria for selecting Tire Retailer1)Price2)Offers fast service3)Can trust personnel4)Store is attractive5)Offers mileage

warranty6)Brand selection7)Maintains convenient

hours

CONSUMER SEGMENTS

Price constrained buyer

Value oriented buyer

Quality buyers

Commodity buyers

Wholesale distribution channels

Retail distribution channels

Goodyear Distribution Structure

4,400 independent dealers accounted for 50% of sales revenue, 1,047 manufactured owned outlets generated 27% and the 600 franchised dealers for 8% and remaining 15% were to government agencies

Just Tires was a new retail format under test by Goodyear

Goodyear supported core events with radio, television and print advertising, announcing special prices on specific tire lines.

Independent Dealers

Independent dealers were organized into 28 districts, each with a district manager and an average of three area saled managers

Most dealer complaints involved relatively minor billing problems and competition from the other channels or the location

Independent dealers typically offered more choice than the single-brand selection offered at most company owned stores and required less capital and attention from the manufacturer

Goodyear had protected its dealers by not selling their branded tires to the other outlets; in exchange dealers carry did not carry other brands

Auto Service

It includes jobs such as oil changes, tune ups and front end allignments, as well as repair to the parts such as brakes

COMPETITION

Goodyear regularly surveyed car owners to monitor their image of the major tire brands

Loyalty of the brand among consumers replacing passenger tires

The Aquatred

Survey from the test market compared purchase behavior of The Aquatred buyers with purchase behaviorfor buyers of Invicta GS

The launch of the AQUATRED

PROBLEMS

Did company have the right product for the dealers and the consumers ?

Should the company Expand their distribution channels ?

What should be the appropriate timing to launch the product in the market ?

Company has the right product for the dealers and the consumers

1) It has 60,000 mile warranty2) Tests shown that in wet conditions, car equipped with aquatred

travelling at 55 miles stopped in as much as two car lengths distance than car equipped with conventional all season tires.

3) When 50% worn, the Aquatred maintained the same wet traction as new tires.

4) Aquatred tires were more likely to replace competitor’s tires.5) Test markets results shows that Quality buyers were more inclined to

Aquatred (61%) who represents 51% of the sales of the major brands which includes Goodyear.

Company should expand their distribution channels because

1) The company’s three types of outlets produced 85% of their sales revenues with 50% from independent dealers, 27% from manufactured owned outlets and 8% from the franchised dealers.

2) From 1970-1983 company increased their manufacture owned outlets and converted some company owned outlets into franchised and independent dealers.

3) The company has protected their dealers by not selling their branded tires in the other outlets; in exchange dealers does not carry other brands thus, in 1989 70% of their independent dealers carried only Goodyear’s tires.

4) It also can prevent OEM tires from being replaced by other brands in the replacement market as OEM tires were making $695 millions by selling 16.3 units in 1991.

Company should launch the Aquatred in January itself beacuse

1) It was the time during winter olympics.2) 74% of the users of the Aquatred make the vehicle domestic.3) 33% of the Aquatred buyers got this information by

advertisment in newspaper, thus this is the appropriate time to market the Aquatred as their will be many readers during the time of the olympics to know about the events and other stuff regarding the winter olympics.

4) Other companies were also launching their tires same year so if we were launched after that we lose advantage of the marketing boom during the olympics.

THANK YOU

Jaannasheen SinghIIT(BHU) VARANASI

13155043Intern under

Prof. Sameer Mathur