Goodyear the aquatred launch

Harvard Case Study Good year : The Aquatred Launch

Presented by-Tanushree Shukla B.Tech( Chemical Engineering ) MNNIT- Allahabad

Who are you ?

Hey , I am Barry RobbinsGoodyear’s vice President of Marketing for North American tires

Goodyear ?

“The Goodyear Rubberand Tire Company!”

“Known as “The gorilla” for its dominance in world tire industry”

Known as “The gorilla” for its dominance in world tire industry

41 plants in United States

Known as “The gorilla” for its dominance in world tire industry

43 plants in 25 other

countries 41 plants in

United States

Known as “The gorilla” for its dominance in world tire industry

43 plants in 25 other

countries

6 rubber plantations

41 plants in United States

Known as “The gorilla” for its dominance in world tire industry More than

2,000 distribution

outlets worldwide

43 plants in 25 other

countries

6 rubber plantations

41 plants in United States

Known as “The gorilla” for its dominance in world tire industry

Ranked 3rd in worldwide

sales of new tires in 1991

More than 2,000

distribution outlets

worldwide

43 plants in 25 other

countries

6 rubber plantations

41 plants in United States

So , What’s new with Goodyear , Mr.Robbins?

“The Upcoming launch of Aquatred, a new tire providing improved driving traction under wet conditions”

Passenger Tires

1

Performance

Broad-Line Tires

2

Major

Brand

Minor

Brand

Private

Label

3

Replacement

OEM

Examples:GoodyearMichelinFirestone

Examples:Kelly(Goodyear subsidiary)DunlopUniroyal

Examples:Kelly-Springfield(Goodyear owned subsidiary)

Market Segmentation

Goodyear’s Broad-Line Tires

And I need to address some Key Issues .......

•Is Aquatred the right product ? Is it what the consumers need?

•What is the appropriate timing for the launch of Aquatred so as to generate support from the company’s traditional base of independent dealers ?

•Should we expand the company’s distribution channels , and determine if they would sell Aquatred ?

•What should be the Pricing and Promotional policies for Aquatred ?

Is Aquatred the right product ? Is it what the consumers need?

Why is that an issue ?

The industry in turning towards long-life warranties and low-cost private labels . Would Goodyear’s dealers be receptive to a high-priced tire like Aquatred ?

Their competitors (Michelin and BridgeStone) plan to launch new tires with 80,000 miles warrantiesin 1992 backed with heavy advertising .

Lets Analyze the situation ......

152 million units of replacement tires were sold in the year 1991

Goodyear surveyed car owners

Performance attributes considered when purchasing tires (in order of higher to lower importance)

Tread life

Wet Traction

Handling

Snow traction

Dry

traction

Wet Traction is second most considered attribute after tred life

Rating on tire’s traction on wet roads (Goodyear consumer survey)

60% people found the wet traction excellent for Aquatred but a similar response for Invicta GS

What is the appropriate timing for the launch of Aquatred so as to generate support from the company’s traditional

base of independent dealers ?

Why is that an issue ? •Goodyear could use the time of winter Olympics January 1992 to introduce Aquatred . •It might spark the sales of Aquatred but the initial inventory of Aquatred was made to fit domestic cars as opposed to smaller size ofimported cars.•Mould to produceother sizes would notbe ready until several months after the Olympics .

According to the Survey of Aquatred test Market

Goodyear could work on moulds and reap the benefits of imported cars that is 26 % of the consumer section .

Should we expand the company’s distribution channels, and determine if they would sell Aquatred ?

Why is that an issue ?

Expanding distribution could boost sales , but selling tires in lower service outlets could erode the value of the Goodyear brand , cannibalize sales of existing outlets , and might cause dealers to take on additional line of tires .

Wide range of tires are sold by Goodyear , dealers would need advice regarding which customers would be likely to switch to Aquatreds.

Goodyear’s Distribution Structure Goodyear Outlets

Independent Dealers

Strictly wholesalers(No retail operations)

Sold tires at retail and resold tires

Sold tires at retail only

Manufacturer-owned outlets Franchised dealers Government agencies 4400 6001047

50% revenue

27%revenue

8% 15%

10%

40%

50%

Car dealers Service stations Small independent dealers Other secondary outlets

2500 are active

What should be the Pricing and Promotional policies for Aquatred ?

Goodyear hoped to price Aquatred at a 10% premium over Invicta GS, but successful launches were attributed to low retail prices ( Tiempo 1977)

Independent Dealers in test markets ask forprice promotions on Aquatred and it wasunclear that for how long could theykeep Aquatred out of channels that were prone to discountingand promotions .

Why is that an issue ?

¾ th of all Goodyear tires sold in independent or company-owned outlets were sold on promotion , at an average discount of 25%.

Core events – 6 in a year They are 3 week periods spread throughout the year during which Goodyear dealers could buy merchandise at a discount .

Situation Analysis......

Only

Percentage of consumers No. Of tires

42% 2

40% 4

16% 1

2% 3

152 million replacement tires are sold in 1991 .Total number of consumers : X0.42*X*2+0.40*X*4+0.16*X*1+0.02*3*X=152 million

X=57.14 million consumers

Major consumer Segment

Percentage of consumers

Consumers in each segment (million)

% Consumers that prefer major brands in the given segment

Consumers that prefer major brands in the given segment(million)

%Consumers preferring Goodyear over 4 other major brands

Consumers of Goodyear in each Segment(million)

Price 22% 12.57 30% 3.77 16% 0.60

Value 18% 10.28 54% 5.55 17% 0.94

Quality 23% 13.14 51% 6.70 18% 1.20

Commodity 37% 21.14 18% 3.80 10% 0.38

Total 100% 57.13 3.12

Total consumers -57.13 million Goodyear Company records

3.12 million consumers for Goodyear

25% consumers on Goodyears want Aquatred .Potential consumers of Aquatred – 0.78 million consumers

91% bought four tires =2.83 million tires Total Aquatreds demand-2.90 million tires (considering 9% to buy one tire)

90$ per tire retail price as suggested by the company . ¾ of the dealers buy the tire at 25% discount ( $67.5 ) from Goodyear manufacturers .

Total revenue generated –> $67.5*(3/4)*2.90 + $90*(1/4)*2.90 million

= $212.56 million

Conclusions The full scale Launch of Aquatred is

estimated to cost Goodyear $21 million .Aquatred is to be launched with 60,000 miles warranty with 90$ per tire , at the top of the broad-Line Segment .

Conclusions

Most of the Consumers are in the Quality buyers section and are Brand oriented , thus retailing channels used should be Manufactured-owned outlets and Independent dealers . The existing dealers have conveyed the necessary information to only 44% buyers. Training them and establishing a stronger market with existing distribution channel would be better .

Conclusions

The consumers do require wet-traction as an attribute in their tires and thus Aquatred will attract consumers , but most quality buyers and not many price-constraint customers .

Conclusions

Aquatred can launch during Olympics but will not be able to cater to imported cars . They must advertise to be at par with the competitors . Highlighting the qualities while the competitors play in low-price and tred-life strategies

That’s all .... Thank you !

Disclaimer Created by :Tanushree Shukla MNNIT-Allahabad during an internship under the guidance ofProf. Sameer Mathur, IIM Lucknow.www.IIMInternship.com