Goodyear - The Aquatred Launch
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Transcript of Goodyear - The Aquatred Launch
ABOUT THE CASE
the players (1/2)
• BARRY ROBINS
– Vice President of Marketing
• STANLEY G. GAULT
– Chairman of Goodyear
GOODYEAR’s BACKGROUND (2/2)
• In 1991 – 41 Plants in USA, 43 Plants other nations
• 3rd Rank in Worldwide Sales
• Income < 1% of $10.91 Billion Revenue
• $1 Million per day on Interest Spending in 1991
• History of Successful Product Innovation
AIM OF THIS CASE
OBJECTIVE 1
• MAKING SURE GOODYEAR HAS THE RIGHT PRODUCT & TIMING TO GENERATE SUPPORT FROM THE COMPANY’S TRADITIONAL BASE OF INDEPENDENT DEALERS
– We’ll talk about market segments & consumer’s and dealer’s preferences over tire attributes
OBJECTIVE 2
• WEIGHING THE RISKS & BENEFITS OF EXPANDING DISTRIBUTION CHANNELS. ANALYZING WHETHER THE NEW CHANNELS WOULD SELL THE AQUATRED
– We’ll study the company’s distribution structure & analyze the market research done on this
TIRE INDUSTRY IN USA
OVERVIEW from 1970 to 1990
• 3 Major Events – CAUSE a. Radial tires introduced, required heavy
investments
b. Increase in foreign competition
c. Change in Demand due to Increase in Oil Prices
• Impact – EFFECT a. Slow Demand Growth
b. Price reduction
c. Production Capacity > Demand
d. Mergers & Acquisitions
MARKET FOR PASSENGER TIRES
MARKET SEGMENTATION (1/3)
• Market divided on basis of :- a. PERFORMANCE vs BROAD-LINE TIRES
b. REPLACEMENT vs OEM TIRES
c. BRAND CLASSIFICATION
i. Major Brand (36%)
ii. Minor Brand (24%)
iii. Private Label (40%)
• TIRE ATTRIBUTES a. Tread Life
b. Wet Traction
c. Handling
d. Snow Traction
e. Dry Traction
• RETAILER CRITERIA a. Price
b. Offers Fast Service
c. Trustable Personnel
d. Attractive Store
e. Mileage Warranty
f. Brand Selection
g. Convenient Hours
CONSUMER PREFERENCES (2/3)
CONSUMER SEGMENTATION (3/3)
• On the basis of preference of brand or outlet a. Price-Constrained Buyers – 22% b. Value-Oriented Buyers – 18% c. Quality Buyers – 23% d. Commodity Buyers – 37%
• In 1992 a. 45% Price Oriented b. 22% Brand Oriented c. 33% Outlet Oriented
MARKET FOR REPLACEMENT TIRES
Retail channel (1/3)
DISTRIBUTION CHANNELS
Garage/ Service Stations
(6%)
Warehouse Clubs (6%)
Mass Merchandis
ers (12%)
Manufacturer owned
Stores (9%)
Small Independent Dealers
(40%)
Large Independent dealers
(23%)
Goodyear's distribution structure (2/3)
DISTRIBUTION CHANNELS
4400 INDEPENDENT
DEALERS 50%
1047 MANUFACTURER
OWNED 27%
600 FRANCHISED
DEALERS 8%
GOVERNMENT AGENCIES
15%
Number of stores Sales Revenue
Goodyear ‘S independent dealers (3/3)
• Dealers Organized into :- – 28 Districts
– 1 District Manager
– 3 Area Sales Managers
• Goodyear Offered Services like :- – Expertise & Training
– Certified Auto Service
– Goodyear Business Management System
– National & Regional Advertising
– Research on Market Trends
THE AQUATRED TIRE
AQUATRED features (1/2)
• INNOVATIVE – Design Improved Traction in Wet Conditions
• SAFE – Reduced Braking Time & Distance
• SUPERIOR – Top of Broad Line Segment
• STRENGTH – 60,000 Mile Warranty
• APPEARANCE – New & Striking Design
AQUATRED’s LAUNCH (2/2)
• Sale only through Replacement Market
• Priced at a premium of 10% over Invicta GS
• Launch Budget of $21 million
• Launch during Winter Olympics in January 1992
LAUNCH CONCERNS
PRODUCT (1/5)
• Is it the Right Product for the market ? – Michelin & Bridgestone planned to launch new
tires with 80,000 mile warranties and huge advertisement budgets
• What would the consumer prefer ?
Distribution channel (2/5)
• Should they expand distribution ?
– Would prevent being replaced by other brands
• If yes then through which channels ?
– Selling through lower service outlets could erode Brand Value
Timing (3/5)
• When should it be Launched ? – Plan to launch during Winter Olympics
– Might spark Sales
– Initial Inventory unavailable for Imported cars
EDUCATING DEALERS (4/5)
• Which customer would be likely to switch to Aquatreds ? – Dealers tried selling to
affluent looking customers
• Should the new channels receive the Aquatred?
Pricing & Promotion (5/5)
• What should the price be ? – Kept at a premium of 10% over Invicta GS
• Should they allow price promotions on Aquatred ? – Problem of tires being diverted to Unauthorized
dealers
SOME
SUGGESTIONS
Suggestions (1/3)
• Sales force and dealers must be properly trained so that they convey the correct message to the customer – EXHIBIT 10
• Avoid discounts on Aquatred instead Decrease Prices – Success of Tiempo due to low retail price
– In competition with high mile warranty tires
– Reduces Brand Image
SUGGESTIONS (2/3)
• Optimize promotion during Winter Olympics – Launch the product before the competition does
– Increase awareness of a new product among customers by creating curiosity
– Change mindset by highlighting the importance & need of safe tires in all conditions
• Unavailability of product for imported cars would not be a big concern – Only 26% buyers of Imported cars
SUGGESTIONS (3/3)
• Market Extensively & Aggressively in Rain-prone areas
• Expand Distribution Network into Garage/Service Stations – Reduce effects of whole sellers
– Maximizes geographic reach
– Increases Sales & Market Share
DISCLAIMER
• Created by Bhavnoor Singh, IITR,
during a marketing internship by Prof.
Sameer Mathur, IIM Lucknow. (See www.IIMInternship.com )