One of our clients developed a specialty component for tires that improves the tire’s durability and/or increases fuel efficiency, depending on the formulation (BREAKTHROUGH VALUE CREATION). However tire manufacturers were unwilling to pay more than a few cents to add these benefits to their tires. This describes customer behavior and shows that the value from increased fuel efficiency can be captured (DIFFERENT VALUE CAPTURE OPPORTUNITY; see the demand curve).

1. COPYRIGHT 2015 QDI STRATEGIES, INC.
QDI: Market Assessments
Project Example

2. COPYRIGHT 2015 QDI STRATEGIES, INC.
Market Assessments:
One of our clients developed a specialty component for tires that improves the tire’s
durability and/or increases fuel efficiency, depending on the formulation (BREAKTHROUGH
VALUE CREATION). However tire manufacturers were unwilling to pay more than a few
cents to add these benefits to their tires.
In previous work, QDI established that large trucking fleets in the U.S. could measure the
improved tire longevity and fuel savings (VALUE CAPTURE is possible). We developed the
demand curve which shows that one segment of fleet managers is willing to pay a
significant premium for tires with these benefits. (VALUE CAPTURE strategy is to work with
a tire manufacturer to wants to grow share through the launch of a new line of tires.)
This presentation was used as part of work session on European opportunities. It describes
customer behavior and shows that the value from increased fuel efficiency can be captured
(DIFFERENT VALUE CAPTURE OPPORTUNITY; see the demand curve). However, the
durability savings and the tire brand specification are made by separate organizations (fleet
owners vs. tire service providers). For durability, the savings isn’t sufficient to overcome the
market structure.
Capturing the Value of a Product Innovation

3. COPYRIGHT 2015 QDI STRATEGIES, INC.
European Truck Tire Market Opportunity
Strategy Work Session
• Tire Component Supplier
• Demand Curve and Strategy to
realize the value of their
innovation

4. COPYRIGHT 2015 QDI STRATEGIES, INC.
Objectives
• Estimate the demand curve for fuel-efficient, HVG tires by
fleets
– Identify lead market
• Understand how firms will purchase fuel-efficient and
increased durability tires
– Adoption challenges
– Implications for tire manufacturers
• Identify key issues for Client’s strategy
– Credibility
– Country differences
– Lead time
Methodology:
Project
Objectives

5. COPYRIGHT 2015 QDI STRATEGIES, INC.
Methodology
• Debriefs & secondary data
– Review of the literature, industry contacts
• Interview companies with truck fleets
– Tire Manager, Purchasing, Fuel Manager, Maintenance
– Segment by large vs. small, “for-hire" vs. captive...
– UK, German, & French firms
• Verify issues in Spanish and Italian fleets
– Same segments
– Durability issues in smaller trucks
• Reviews & internal analysis
– Model demand
– Adoption challenges
Methodology:
Understand
Customer
Behavior

6. COPYRIGHT 2015 QDI STRATEGIES, INC.
Fuel Management
• Most firms did not have a dedicated Fuel Manager
– Fleet Manager and/or Purchasing were responsible
• Purchasing as much as 90% of their fuel needs in bulk for
distribution at their terminals and facilities
• Negotiating programs and pricing for on-the-road
– Discount cards
As in the U.S., fuel
management does not
directly influence tire
purchasing.
Methodology:
Understand
Customer
Behavior

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Monitoring Fuel Efficiency
• Metric
– The most common metric is MPG or kml
• Measurement
– On-board computers – EMC
– Tracking software
– Manual tracking
• No legislation, but significant fuel costs
• Tracking
– Overall fuel consumption
– Fuel use / efficiency by tractor
– Fuel use / efficiency by driver (15% of
the time)
Monitor
Fuel
Efficiency
99%
Don't
Monitor
1%

8. COPYRIGHT 2015 QDI STRATEGIES, INC.
Tire Management
• Must manage a number of types of tires
– Most firms have multiple types of trucks
• Vans (smaller trucks)
• Articulated (larger trucks) -Different configurations (2x3, 3x3, 4x2, 4x3)
– Many firms use different types of tires in different positions
• Steer and drive vs. trailer
• Must manage tires at different stages
– Identify when to regroove
– Identify when to retread (remix, recap)
• Inspected at terminals / depot
– Every 1-3 weeks -- visual & mechanical
• Check tire pressure
– Measurement in mm
• Minimum is 1.6mm (U.K. adopting European standard)
– Replaced -- based on tread depth, cuts, cracks
Methodology:
Understand
Customer
Behavior

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Purchase Criteria
0
1
2
3
4
5
Price Durability Fuel
Efficiency
Availability Retread
Value
Tread
Design
U.K.
German
France
Basic tire purchase criteria
do not vary significantly by
country.
Methodology:
Understand
Customer
Behavior

10. COPYRIGHT 2015 QDI STRATEGIES, INC.
Tire Dealership’s Role
• Most fleet owners could not quantify tire life
– Steer, drive, trailers are different
– Articulated vehicles are different than lorries
– Route / road conditions differ
– Mileage to regroove, mileage to retread, total mileage
• The complex management is turned over to the tire dealership
through a management contract
– Dealership frequently performs the service on-site
– Fleet owner than manage the total cost, specifically
• Monthly cost of tires
• Monthly cost of total tire management
Methodology:
Understand
Customer
Behavior
The greater tire management complexity in European fleets leads
fleet managers to contract out the management to the tire dealer.
This means the benefits and costs (tire price, record keeping, lost
service work) are split between two organizations.

11. COPYRIGHT 2015 QDI STRATEGIES, INC.
Role of Leading Firms as
Technology Leaders
Fuel-
Efficient
27%
Durability
58%
Segments Size of Fleet
Two segments, representing over 75% of the large
for-hire tractors, are interested.
Most firms look for usage by the large, fuel-efficient
firms before they take any action.
Methodology:
Understand
Customer
Behavior

12. COPYRIGHT 2015 QDI STRATEGIES, INC.
Adoption Process
Fuel-Efficient Tires
• While interested in the concept, they are skeptical
– They are regularly approached with money and fuel-saving
pitches that don’t materialize
• Most firms (in all three segments) wish to test the fuel savings for
themselves
– Unlike the U.S., usage by larger firms was not a prerequisite
– If the tires don’t deliver the fuel savings, they will NOT
purchase them
Methodology:
Understand
Customer
Behavior

13. COPYRIGHT 2015 QDI STRATEGIES, INC.
Behavior by Segment
U.K., Germany & France
10%
30%
50%
70%
90%
Fuel-Mgt
System
Fuel-Eff
Rank
Michelin (%) Use of
Super
Singles
Credibility of
Fuel Saving
Use of
Regrooving
Credibility of
Durability
Fuel Sav.
SW
Fuel
Storage
Fuel-Efficiency
Durability
Price
Fleet operators can be divided into 3
segments, based on their behavior.
Segments
Behaviors

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Three Behavioral Segments
Fuel-Efficient
23%
Durability
63%
Durability
Price
14%
Top 100 Firms
The key segmentation is the firms’ behavior
regarding durability & fuel-efficiency
Methodology:
Sizing
Segments

15. COPYRIGHT 2015 QDI STRATEGIES, INC.
Behavior by Segment
Fuel-Efficient
The fuel-efficient segment behaves slightly
differently by country (i.e. Germany doesn’t
use super singles).
0%
20%
40%
60%
80%
100%
120%
Fuel-Mgt System Fuel-Efficient
Rank
Michelin (%) Use of Super
Singles
Credibility of
Concept
UK
Germany
France
Methodology:
Sizing
Segments

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Credibility of the Concepts
-
10
20
30
40
50
60
70
15% Improved Durability 2% Fuel Savings
Score
Credibility of 10
Credibility of 8-10
The increased durability has
significantly less credibility than
the fuel efficiency.
Methodology:
Measurement
of Concept
Value

17. COPYRIGHT 2015 QDI STRATEGIES, INC.
Likelihood of Purchasing
Fuel-Efficient Tires
0
20
40
60
80
100
70 40 30 17.5 10
%ofTiresPurchased
Denominations Removed
Likelihood 10
Likelihood 8-10
Likelihood 5-10
Likelihood 2-10
Respondents’ likelihood for purchasing
at various price points all indicated their
answers are contingent on the test
results.
Methodology:
Measurement
of Concept
Value

18. COPYRIGHT 2015 QDI STRATEGIES, INC.
Demand Curve for Fuel-Efficient Tires
Top 100 Fleets
- 10 20 30 40 50 60 70
UnitsRemoved
Premium per Tire
Tires
Combined demand from the UK, Germany, France, Italy and Spain.
Methodology:
Measurement
of Concept
Value

19. COPYRIGHT 2015 QDI STRATEGIES, INC.
Demand Curve for Fuel-Efficient Tires
Vehicles Over 37t
- 10 20 30 40 50 60 70
UnitsRemoved
Premium per Tire
Tires
Combined demand from the UK, Germany, France, Italy and Spain.
In smaller fleets, the demand falls
rapidly as the price rises above 10
(Denomination removed)

20. COPYRIGHT 2015 QDI STRATEGIES, INC.
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• Customized research
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- Have us design a project to address your strategic issues
Contact Information
QDI Strategies, Inc.
1580 S. Milwaukee Avenue, Suite 620
Libertyville, IL 60606
847-566-2020
www.qdistrategies.com
Steve Bassill
President
sbassill@qdistrategies.com