THE AQUATRED LAUNCH

A HARVARD CASE STUDY ANALYSIS

ABOUTTHECASE

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

AIMOF THISCASE

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

TIREINDUSTRYIN USA

OVERVIEW from 1970 to 1990

• 3 Major Events – CAUSEa. Radial tires introduced, required heavy investmentsb. Increase in foreign competitionc. Change in Demand due to Increase in Oil Prices

• Impact – EFFECTa. Slow Demand Growthb. Price reductionc. Production Capacity >

Demandd. Mergers & Acquisitions

MARKET FORPASSENGERTIRES

MARKET SEGMENTATION (1/3)

• Market divided on basis of :-a. PERFORMANCE vs BROAD-LINE TIRESb. REPLACEMENT vs OEM TIRESc. BRAND CLASSIFICATION

i. Major Brand (36%)ii. Minor Brand (24%)iii. Private Label (40%)

• TIRE ATTRIBUTESa. Tread Lifeb. Wet Tractionc. Handlingd. Snow Tractione. Dry Traction

• RETAILER CRITERIAa. Priceb. Offers Fast Servicec. Trustable Personneld. Attractive Storee. Mileage Warrantyf. Brand Selectiong. 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 1992a. 45% Price Orientedb. 22% Brand Orientedc. 33% Outlet Oriented

MARKET FORREPLACEMENTTIRES

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

DEALERS50%

1047 MANUFACTURER

OWNED27%

600FRANCHISED

DEALERS8%

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

THEAQUATREDTIRE

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

LAUNCHCONCERNS

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 channelsreceive 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