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Goodyear - The Aquatred Launch

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This is an Analysis Presentation report made on a Harvard Case Study

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Goodyear - The Aquatred Launch

  1. 1. ABOUT THE CASE
  2. 2. the players (1/2) • BARRY ROBINS – Vice President of Marketing • STANLEY G. GAULT – Chairman of Goodyear
  3. 3. 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
  4. 4. AIM OF THIS CASE
  5. 5. 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
  6. 6. 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
  7. 7. TIRE INDUSTRY IN USA
  8. 8. 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
  9. 9. MARKET FOR PASSENGER TIRES
  10. 10. 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%)
  11. 11. • 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)
  12. 12. 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
  13. 13. MARKET FOR REPLACEMENT TIRES
  14. 14. Retail channel (1/3) DISTRIBUTION CHANNELS Garage/ Service Stations (6%) Warehouse Clubs (6%) Mass Merchandis ers (12%) Manufactur er owned Stores (9%) Small Independe nt Dealers (40%) Large Independe nt dealers (23%)
  15. 15. 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
  16. 16. 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
  17. 17. THE AQUATRED TIRE
  18. 18. 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
  19. 19. 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
  20. 20. LAUNCH CONCERNS
  21. 21. 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 ?
  22. 22. 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
  23. 23. Timing (3/5) • When should it be Launched ? – Plan to launch during Winter Olympics – Might spark Sales – Initial Inventory unavailable for Imported cars
  24. 24. 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?
  25. 25. 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
  26. 26. SOME SUGGESTIONS
  27. 27. 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
  28. 28. 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
  29. 29. 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
  30. 30. DISCLAIMER • Created by Bhavnoor Singh, IITR, during a marketing internship by Prof. Sameer Mathur, IIM Lucknow. (See www.IIMInternship.com )

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