case study on goodyear: the aquatred launch
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- 1. Goodyear: The Aquatred launch Prateek Rout NIT Rourkela HARVARD BUSINESS SCHOOL CASE
- 2. The STALWARTS
- 3. BARRY ROBBINS, Goodyears vice president of marketing for North American Tires. STANLEY G. GAULT, Chairman of Goodyear.
- 4. PRESENT SITUATION
- 5. Some of the unanswered questions regarding the launch of Aquatred Tire: - Is this the right product? - Is it the right timing for the launch? - Should the distribution channels be expanded? - Will Aquatred be sold through the new markets?
- 6. TIRE INDUSTRY AQUATRED TIRE AUTO SERVIC ES CUSTOME R SEGMENT S INSIGHTS ON
- 7. TIRE INDUSTRY 1900 1970s Five companies dominated the US market
- 8. TIRE INDUSTRY CHALLENGES (1/3) Radial Tire construction > Bias & bias-belted tire constructio Advantages: Superior tread-wear, handling and gas mileage. Radial tires lasted for 40,000 miles whereas bias-belted tires lasted for 20,000 miles.
- 9. TIRE INDUSTRY CHALLENGES (2/3) Increased foreign competition Import passenger tires unit sales BOOMED: 1972 8% 1982 12% 1990 22%
- 10. TIRE INDUSTRY CHALLENGES (3/3) Nature of demand from consumers and car makers Rise in the price of oil. Rise in cost of manufacturing tires. Shift of sales towards smaller cars which place less wear on tires.
- 11. TIRE INDUSTRY Demand for passenger tires grew sluggishly New tire prices in the U.S. market declined. Tire-producing capacity outstripped demand. Rise in the number of mergers and
- 12. COMPANY BACKGROUND STATS (1991) 41 plants in United States. 43 plants in 25 other countries. 6 rubber plantations. 2000 distribution outlets worldwide. Total revenue - $10.91 billion. 105,000 employees. Ranked third in worldwide sales of new tires.
- 13. COMPANY BACKGROUND INNOVATIVE PRODUCTS 1977 Introduced the TIEMPO, the first all- season radical. 1981 Launched the EAGLE, the first radial tire offering high-speed traction for sports cars.
- 14. COMPANY BACKGROUND In 1991 Goodyear was still spending $1 million per day on interest payments and earnings were sluggish.
- 15. COMPANY BACKGROUND STANLEY G. GAULT Chairman of Goodyear and retired chairman of Rubbermaid. Installed his own management team. Sold off assets. Increased priority on new product development.
- 16. MARKET FOR PASSENGER TIRES SEGMENTATION BASED ON PERFORMANCE AND BROAD-LINE TIRES Performance tires were wider than broad- line tires, were more expensive, and provided better traction. In the U.S. passenger tire market, performance tires represented 25% of Goodyears unit sales, 30% of dollar sales, and an even higher percentage of profits.
- 17. MARKET FOR PASSENGER TIRES SEGMENTATION BASED ON REPLACEMENT AND OEM TIRES Replacement tires were sold to individual consumers, while OEM tires to car manufacturers. In 1991, U.S. replacement tire sales - $8.6 billion. In the United States, Goodyears passenger tire division derived 65% of its revenues from replacement tires and 35% from OEM tires.
- 18. MARKET FOR PASSENGER TIRES SEGMENTATION BASED ON BRAND CLASSIFICATION
- 19. CONSUMER BEHAVIOR CONSUMER PURCHASES 2 tire purchases 42%. 4 tire purchases 40%. 1 tire purchase 16%. 3 tire purchases 2%. Purchases of sets of four tires accounted for 60% of all units sold.
- 20. CONSUMER BEHAVIOR TIRE ATTRIBUTES Tread life. Wet traction. Handling. Snow traction. Dry traction. IMPORTANCE
- 21. CONSUMER BEHAVIOR CONSUMER CRITERIAS Price. Offers fast service. Can trust personnel. Store is attractive. offers mileage warranty. Brand selection. Maintains convenient hours. IMPORTANCE
- 22. CONSUMER SEGMENTS Price-constrained buyers Value-oriented buyers Quality buyers Commodity buyers
- 23. DISTRIBUTION CHANNELS
- 24. DISTRIBUTION CHANNELS WHOLESALE DISTRIBUTION CHANNELS LARGE RETAILERS INDEPENDENT DEALERS Strictly wholesalers (10%) Strictly Retailers (50%) Wholesalers + Retailers (40%)
- 25. DISTRIBUTION CHANNELS RETAIL DISTRIBUTION CHANNELS GARAGES/SERVIC E STATIONS WAREHOUSE CLUBS MASS MERCHANDISERS MANUFACTURER -OWNED OUTLETS SMALL INDEPENDENT TIRE DEALERS LARGE INDEPENDENT TIRE CHAINS OTHER (Ex- FULL SERVICE STORES)
- 26. GOODYEARS DISTRIBUTION STRUCTURE
- 27. GOODYEARS INDEPENDENT DEALERS Sales organization for independent dealers was organized into 28 districts, each with a district manager and three sales managers Area sales manager made sure: Dealer orders were placed properly. Information provided about market trends. Advices offered on operations. Complaints are handled. In 1989, 70% of Goodyears independent dealers carried only Goodyear tires, while 30% stocked other brands. In 1991, the estimates were 50-50. Allowances: Wholesale allowance. Merchandising allowance (1.5%). Advertising accruals (4%).
- 28. PROMOTIONS Spring Dating Core Events Unique product offerings
- 29. AUTO SERVICES Services sales $38,000 per month per outlet Margins 50% service labor & 20 to 25% parts installed. Revenues 70% service labor & 30% parts.
- 30. COMPETITION VS Better brand image among a group of buyers. Wise spending on advertising and promotion. Loyal customers.
- 31. AQUATRED TIRE
- 32. POP Quality radials. Precision handling. Large dealership network.
- 33. POD Safety (lowest stopping distance) Durability (60,000 miles >> Industry average) Best wet traction. Appearance: New innovative and contemporary design.
- 34. BCG MATRIX
- 35. OBJECTIVE OF CASE STUDY
- 36. Should we launch Aquatred?
- 37. LAUNCH ISSUES Is this the right PRODUCT?
- 38. TREAD LIFE OF 60,000 MILES SURVEY REVEALS: CONSUMERS WERE MORE LIKELY TO REPLACE COMPETITIOR TIRES ONLY PRODUCT OFFERING WET TRACTION
- 39. LAUNCH ISSUES PRICING & PROMOTION?
- 40. Average selling price of a tire by Goodyears independent dealer - $75 ConclusionReduce the price of the tire to add some specific buyer groups. Aquatred was priced at 10% premium over Invicta Gs. Good years suggested price higher than that suggested by independent dealers. 50% of the sales revenue from Independent dealers
- 41. LAUNCH ISSUES PRICING & PROMOTION?
- 42. Is the decision taken by Goodyear to launch Aquatred during winter Olympics is right? Yes Goodyears ads should sell SAFETY and not just the tires. Aquatred should be promoted in heavy rainfall regions of the country. Should give Early bird discounts to attract customers and give service incentives.
- 43. LAUNCH ISSUES REFORMATION OF MARKETING CHANNELS?
- 44. How to Expand independent dealers? TRAINING AND SUPPORT ACTIVITIES FINANCIAL ASSISTANCE FOR NEW ENTRANTS FRANCHISE-TO-INDEPENDENT CERTIFICATION PROCESS
- 45. How to Expand Wholesale channels? Only limited stock to be supplied Limited discounts No Incentives Only to few wholesalers
- 46. LAUNCH ISSUES TIMING OF LAUNCH?
- 47. Launched during the Olympics. Early bird Advantage. Heavy promotions with ads. Organize contests between the games. Opportunity to connect with huge consumer base.
- 48. Michelin and Bridgestone launch products earlier than expected. Then: Reevaluate Prices. Incentives to dealers for targeted sales. Sales are lower than anticipated. Then: Reevaluate the value conveyed. Make use of wholesale channel. Use in OEMs.
- 49. TIRE INDUSTRY AQUATRED TIRE AUTO SERVIC ES CUSTOME R SEGMENT S INSIGHTS ON
- 50. AQUATRED TIRE
- 51. Should we launch Aquatred?
- 52. These slides were created by Prateek Rout, as part of an internship done under the guidance of Prof. Sameer Mathur (www.IIMInternship.com)
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