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Marketing Leadership Via Brand Equity Building - Tenneco/Monroe Auto Parts

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This case study describes how a major automotive aftermarket supplier looking to offset declines in their core business found success in an adjacent product categories

Rick Steinbrenner - The Global Brand Guy

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Marketing Leadership Via Brand Equity Building - Tenneco/Monroe Auto Parts

  1. 1. 1 Marketing Leadership Via Brand Equity Building
  2. 2. 2 Tenneco NAAM Business Situation 1. Exhaust systems & shocks/struts have relatively low service interval rates: #3/#6 rank Source: AAIA 1) Engine tune-ups – 33.5% 2) Brake jobs – 21.7% 3) Exhaust system job – 6.6% 4) Radiator/Cooling Flush – 5.1% 5) Ignition Wire – 4.6% 6) Shocks & Struts – 3.6% 7) Fuel Injection – 2.2% 2. Shock/Strut market stagnant/declining due to better quality original equipment driving lower service replacement rates for aftermarket shocks. Source: IMR 3. Exhaust market declining due to better quality original equipment – i.e. aluminum to stainless steel exhaust systems. Source: IMR North American Aftermarket Business Profile: • Sales: ~$500MM • Core businesses: Ride Control & Emission Control - #1 brands • Brands: Monroe Shocks & Struts, Walker Exhaust • 15% of total corporate revenue, balance – original equipment parts 3.3% 2.8% 2.9% 2.5% 2.6% 2.4% 2.6% 2.4% 2.2% 2.1% 2.0% 1.8% 1.7% 1.6% 1.4% 1.3% 1.2% 1.0% 1.0% 0.9% 1.2% 1.2% 1.2% 1.3% 1.4% 1.6% 1.8% 2.1% 0.0% 1.0% 2.0% 3.0% 4.0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Shock Absorbers (actual) Struts (actual) 6.06.6 7.4 8.0 9.2 10.7 11.8 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 2000 2001 2002 2003 2004 2005 2006 UnitsinMillions
  3. 3. 3 Tenneco NAAM Business Actions #1 Dirt and Mud have a hard time sticking – for a clean/shine that really last Black waxes highly rated by Consumer Reports Black Waxes were “best sellers” at key customers Ion Car Polish – next generation polish – repels dirt/mud Non-greasy shine Unique 2-sided wipe Tire Shine – No sling vs. competition Wheel Cleaner – Spray On, Hose Off “Best Sellers” at key customers Protect and coats critical engine parts for better gas mileage Fuel Cleaners help improve fuel flow efficiency Engine Treatment help protect critical engine parts Spray on, wipe off Formula similar to wheel clr. Carpet Clr. was best seller Spot Free Shine Helps keep car cleaner longer “Best Sellers” at key customers Licensed Product Opportunity with DuPont & Motorsports DuPont wanted a new licensee to help re-enter Car Care market adjacent to their paint line. NASCAR “Free” access to Jeff Gordon & 24 Car as an endorser in marketing communications Tenneco had independently developed new “best in class” formulations in a water-based format Identified/developed new “wear shield” friction modifier for performance chemical products
  4. 4. 4 Tenneco NAAM Business Actions #2 Brakes Parts – attractive category #2 service item behind engine tune-ups Very large/growing market – Friction: $1.1B++ All brake components (i.e. rotors, calipers) - $2.2B Source: IMR/Frost & Sullivan Market not heavily concentrated – top 3 brands only account for 60% of sales Top 3 brands at the time were weak: - Wagner: owned by Federal Mogul: No innovation - Raybestos: Sold by Dana to Affinia – restructuring - Bendix: Owned by Honeywell – tried to sell business to Wagner. No investment. Monroe equity extension beyond Shocks - logical and easy to understand 1. 2. 3. Brakes Pads/Shoes 64 62 57 61 62 65 63 62 63 $938 $939 $865 $950 $969 $1,029 $1,130$1,123$1,126 0 10 20 30 40 50 60 70 80 2000 2001 2002 2003 2004 2005 2006P 2007P 2008P MMUnits $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $MM's New Category Opportunity: Brakes
  5. 5. 5 Tenneco NAAM Business Actions #2 PREMIUM PRICE POINT Part Numbers: 642 Applications: Mid 60’s - 2010; Pass Car, Lt. Truck SUV, Med-Duty, some heavy duty Formulation Type: Semi Metallic Attributes: Hardware in box (e.g. Wire Wear Sensors, Noise Reduction Kits, Rubber coated shims, Lube) Part Numbers: 391 Applications: Mid 60’s - 2010; Pass Car, Lt. Truck, SUV Formulation Type: Ceramic/Non Asbestos Organic blends Attributes: Hardware in box (e.g. Wire Wear Sensors, Noise Reduction Kits, Rubber coated shims, Lube) Monroe premium brake pads were first OE replacement application - engineered product – including all the hardware in box to do job right
  6. 6. Post Launch - Brake Packaging Structure & Line Graphic Change Before: After: 1) Original Packaging Design: 1000+ SKU’s spread among two friction types – Semi Metallic (DX) & Ceramics (CX) Product packed in very expensive and non-customer friendly vacuum form “skin tight” configuration 2) Packout & Design Changes: Shifted to easy to remove and simpler shrink wrap design Consolidated dual friction type design into one product line look – similar to competitive packaging designs Savings: ~$300M/yr. Tenneco NAAM Business Actions #2
  7. 7. 7 Tenneco NAAM Business Results DuPont Car Care: Introduced 17 new products that generated over $5MM+ in annualized sales. Obtained distribution in 15,000+ retail outlets: Mass Merchants/Home Centers & Automotive retailers. Sold Tenneco/DuPont into brand new customers: Wal-Mart, Wal-Mart-Mexico, Lowe’s, Target and Auto-Zone. Spray Wax, Tire Shine & Wheel Cleaner – top 10 best selling SKU’s in NPD; Wax received #5 rating out of 28 total waxes tested in 6/’06 Consumer Reports test. Monroe Brakes: Achieved $20MM in sales with 100+ new customers against entrenched competitors. Developed “best practice” new product development process resulting in $500M in new brake pad SKU’s including a new brake shoe line in just two years. Grew margins and supply chain effectiveness – in house manufacturing program vs. third party suppliers. Reduced product cost by 25% and increased margin % by +8.3 ppts.

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