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Goodyear: The Aquatred Launch : Harvard Case Analysis
- Five tire companies once dominated the US tire market but faced decline due to foreign competition and rising costs. Radial tires with increased mileage replaced bias tires in the 1970s and 1980s. - The document discusses the US tire market in the 1990s, noting increased average mileage per tire, lower prices due to overcapacity, and consumers' lack of brand loyalty. It profiles Goodyear as the only remaining US company and discusses its new Aquatred tire. - Goodyear launched the Aquatred, positioned as an innovative radial tire with best-in-class wet traction and a 60,000 mile warranty. It was priced competitively at $89.95-$93.95 and marketed toward safety
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Goodyear: The Aquatred Launch : Harvard Case Analysis
- 3. • Five majorcompanies based out of Akron, Ohio Dominated the market from 1900s to 1970s • Bias & Bias-belted tires were phased out by radial tires • They lasted under 20,000 miles, by the early 1980s radials lasted over 40,000 miles leading to decrease in frequency of tire change. • Foreign competition reduced market share per company • Rising oil prices led to increase in production-cost • A number of mergers/acquisitions modified the industry
- 4. • Average lifeof a new tire rose from 28,600 miles in 1980 to 37,300 miles in 1991 • Annual miles travelled per passenger rising slowly 9,100 miles in 1980 to 10,600 miles in 1990 • The median retail price dropped by1991,the average retail price was $75.00 • Tire-producing capacity outstripped demand U.S. tire-making capacity rose 12% between 1987 and 1990; capacity utilization fell from 87% to 76% during the same period. • Led to a number of mergers/acquisitions modified the industry
- 5. • Important attributes( tread life ,traction) • Infrequent purchase (every 2.5 years) • Significant dollar purchase (around $ 75 per tire plus installation costs) • High perceived risk (safety and security on long journeys) 1. In 1992, 53% of consumers did not know what tire they planned to buy next (against 36% in 1982) 2. 75% of all Goodyear tires are sold on promotion at an average discount of 25%, and 40% of replacement tires are private labels. 5
- 6. Distribution Channels Small independent dealers (40%) Garages / Service Stations (6%) LargeTire Chains (23%) Mass Merchandisers (12%) Manufacturer owned stores (9%) Warehouse Clubs (6%)
- 7. Independent dealers dominatedthe market
- 8. • Value priceand outlet Trusting Patrons and Bargain Hunters • Loyal to outlet and brand • Search for preferred brand at the best price • Buy the best within the budget • Little loyalty to brand
- 9. Performance vs broad-line Major brands, Minor brands, Privatelabel Replacement & OEM tire
- 10. Consumers in theReplacement Passenger Tire Market Goodyear also regularly surveyed car owners concerning the criteria they used to select a tire retailer. 1. Price 2. Offers fast service 3. Can trust personnel 4. Store is attractive 5. Offers mileage warranty 6. Brand selection 7. Maintains convenient hours
- 12. • 1 ofthe 5 to dominate the industry, only remaining US company • Quick to convert to radial production • Profits hurt by international competition & oil prices • Strong track record of innovation • Diversified in 1980’s but earnings were sluggish • Goodyear ranked third in worldwide sales of new tires • 1991 Stanley G Gault Sold indirect investments Prioritized on new development.
- 14. Distribution Channels 4400 Small independent dealers (50% salesrevenue) Franchised Dealers and Govt. Agencies (20%) Just Tires (under testing phase) 1047 Manufacturer owned stores (30% sales)
- 16. • Reestablish Goodyear’sindustry leadership and reputation for product innovation, especially vis a vis Michelin. • less number of competitors in the high wet-traction, broad-line tires segment, being the first to enter the market with such products • Refocus the dealers on product and away from the daily tactical problems of manufacturer-dealer relations • Motivate Goodyear’s sales staff and dealers
- 17. BARRY ROBBINS (VICE PRESIDENT,MARKETING, NORTH-AMERICA, GOODYEAR) STANLEY GAULT (CHAIRMAN, GOODYEAR)
- 18. Long buying cyclesof auto manufacturers Goodyear has major share in US Replacement Tire Market (15%) Aquatred would come through the replacement market not as Original Equipment
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- 27. • The Aquatredwas developed after comparing 10 different designs on performance and consumer preference . • Aquatreds traveling at 55 miles per hour stopped in two-car lengths-less distance • Aquatred came with a 60,000-mile warranty and positioned tire at the top of the broad-line segment. • Compared with buyers of the Invicta GS, Aquatred buyers were more likely to replace competitors’ tires. • Consumers searched more extensively for information prior to purchase of Aquatreds.
- 28. Majority of driversbelieved Aquatred has a good wet traction.
- 30. • Quality Radials& durability • Precision Handling • Large Dealership • Network • Safety (lowest stopping distance) • Durability (60,000 miles > Industry average) • Best Wet Traction • Appearance: New, Innovative, & Contemporary Design
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- 33. Distribution Channels 4400 Small independent dealers (50% salesrevenue) Franchised Dealers and Govt. Agencies (20%) Just Tires (under testing phase) 1047 Manufacturer owned stores (30% sales)
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- 35. Small and LargeIndependent dealers have the majority share in retail sales replacement passenger tires.
- 36. Independent dealers havealways had the majority share in wholesale replacement tire market
- 37. • 50% ofGoodyear’s independent dealers sold only Goodyear tires, while the other 50% stocked at least one other brand. • Among the latter, some merchandised other brands but Goodyear tires still generated 90% of the revenues • Three-fourths of all Goodyear tires sold in independent or company- owned outlets were sold on promotion, at an average discount of 25%.
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- 41. Price, then brandExtensive Moderate ( s/to price) Very low Brand, then price Extensive High Very low Brand, outlet Outlet, brand Brief Brief Very high Mod. to low Mod. to high Very high Price Outlet Extensive Brief Low Low Low Very high
- 42. 18+23=41% of totalcustomers (value-oriented +quality customers) prefer major brands over Minor or private labels
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- 48. Proposed Aquatred Advertisement TVAD focuses on advanced design and emphasizes on wet traction to appeal to the quality ,safety and value-oriented customers
- 50. Consumers showed moreinterest in Aquatred Invicta GSAquatred
- 51. Suggested retail pricein Aquatred test market $90 Goodyear’s suggested retail prices for the Aquatred were $89.95 with a black sidewall, and $93.95 with a white sidewall.
- 52. Suggested retail pricein Aquatred test market $90