The Aquatred Launch

Case Study..

What isGOODYEAR

?

The Goodyear Tire & Rubber Company is a global manufacturing company founded in 1898 by Frank Seiberling and based in Akron, Ohio. It manufactures tires for automobiles, commercial trucks , light trucks, SUVs, race cars, airplanes, farm equipment and heavy earth-mover machinery. Since the early days of the tire industry, The Goodyear Rubber and Tire Company had been known as “The Gorilla” for its dominance of the world tire industry.

The Tire Industry in the..

United States

Goodyear

Firestone

Uniroyal

BF Goodrich

General Tire

5 Leading brands !!

In the 1970s and 1980s,the US Tire industry experienced

Important changes

1.Emergence of ‘radial’ tires to replace older ‘bias’ tires.

Radial lasted 40,000 miles in comparison to 20,000 miles of bias.

Radial share unit sales in US passenger tire market increased from 32% to over 95%.

2.Increased foreign competition

Imported passenger tires represented 8% in 1972, 12%

in 1982 and 22% in 1990 in the US passenger tire market.

3.Nature of demands from consumers and car makers

In 1970, the rise in price of oil, caused consumers to drive less.

Seven gallons or oil and derivatives required for making tire led to increased cost of manufacturing

What was the

IMPACT ?

1.Demand for passenger tires grew sluggishly.

2. New tire prices in the U.S. market declined.

3. Tire producing capacity outstripped demand.

4. A large number of mergers and acquisitions between various brands

What was the scenario of market for

passenger tires?

The Market was segmented in ways:3

1. Segmentation based on distinction between performance and broad-line tires.

2. It was based on replacement and OEM tires.

3. It was also based on brand classification, which included major and minor brands and private labels.

What is Consumer behaviour

towards tires?

According to consumers-“Tires are ‘grudge

purchases’- an expensive necessity to keep the

vehicle in driving condition.”

Survey results by customers highlighted the following things while

purchase:1.Price2.Offers fast service3.Can trust personnel4.Store is attractive5.Offers mileage warranty6.Brand selection7.Maintains convenient hours

Consumer SegmentsPrice constrained buyers

Buy best brand they could afford

Value oriented buyersPreferred brand at best

priceQuality buyers

Loyal to outlet and brandCommodity buyers

Value price and outlet

What are retail distribution channels?

6 major retail channels competed in US for market share-

1.Garages/service stations2.Warehouse clubs3.Mass merchandisers4.Manufacturer-owned outlets5.Small independent tire dealers6.Large independent tire dealers

Goodyear did not sell tires in garages/service stations,

warehouse clubs or mass merchandisers; instead, the

company relied on three types of outlets. Goodyear’s 4,400 independent dealers accounted for 50% sales of revenues, while the 1,047

manufacturer-owned outlets generated 27% of sales, and the 600 franchised dealers

accounted for another 8% of sales.

It was estimated that the 3/4th of all Goodyear tire sold in independent or company

owned outlets were sold on promotion, at and average

discount of 25%.

Independent dealers in tire industries

Independent dealers also set their own inventory policies. For many years Goodyear hadprotected its dealers by not selling Goodyear-branded tires in other outlets; in exchange, Goodyeardealers did not carry other brands. In 1989, 70% of Goodyear’s independent dealers carried onlyGoodyear tires, while 30% stocked other brands. Typically, the other brands were not aggressivelymerchandised but used only as lower-priced alternatives to Goodyear. By 1991, estimates suggested that50% of Goodyear’s independent dealers sold only Goodyear tires, while the other 50% stocked at least oneother brand. Among the latter, some aggressively merchandised other brands but Goodyear tires stillgenerated 90% of the revenues for most independent dealers

Way of working-

Auto ServicesAuto services included jobs such as oil changes,tune-ups, and front-end alignments, as well as repairs to parts such as brakes or transmissions

Monthly auto service sales for independent tire dealers averaged

$38,100 per outlet

CompetitionIn 1991, Goodyear and Michelin were virtually even, but Michelin’s image was strongeramong value-oriented and quality buyers, while Goodyear had a stronger image among price-constrained buyers and commodity buyers. The percentage of consumers who did not know what brandof tire they planned to buy next rose to 53% in 1992 from 36% in 1982.

The Aquatred:The Aquatred was developed after comparing 10 different designs on performance andconsumer preference. The deep groove down the center of the tire was dubbed the “Aquachannel.”

Goodyear planned to sell the Aquatred with a 60,000-mile warranty and to position the tire at thetop of the broad-line segment

Managers at Goodyear still had two concerns about the launch. First, did Goodyear have theright product for the dealers and for the consumer? In addition, Goodyear had to finalize pricing and promotional policies for the Aquatred.Goodyear hoped to price the Aquatred at a 10% premium over the Invicta GS

Aayush NayakUIT-RGPV, Bhopal, during

an internship by

Created By-

Prof. Sameer Mathur, IIM Lucknow.

www.IIMInternship.com