Goodyear : The Aquatred Launch

Gaurav SharmaPauline BusnelNaima KassanalyGaspard Padet

Hardeep PathakGaurav Arora

Paritosh SinghAshish Varkey

Tire Industry in the US• Industry was dominated by five companies in the early

years ; Goodyear, Firestone, Uniroyal, BF Goodrich, and General Tire.

• In the 1970s & 1980s, the U.S. tire industry experienced three major changes :

1. Radial Tires2. Increased foreign competition3. Nature of demand

• These changes had four major impacts :1. Demand for passenger tires2. New tire prices 3. Tire-producing capacity outstripped demand4. Mergers & Acquisitions

Company Background• The Goodyear Rubber & Tire company had been known as

“The Gorilla” for its dominance• In 1991, Goodyear operated 41 plants in U.S., 43 in 25 other

countries and more than 2,000 distribution outlets worldwide

• In 1991, Goodyear had approximately 1.05 lac employees and a revenue of $10.91 billion

• Goodyear ranked third in worldwide sales of new tires after Michelin & Bridgestone

• In 1977, Goodyear introduced Tiempo , the first all-season radial

• In 1981, Goodyear launched the Eagle, the first radial tire offering high speed traction for sports cars.

• In 1991, Stanley G. Gault became the chairman of Goodyear and

laid more emphasis on new product development

Brand Shares

1975 1980 1985 19910

2

4

6

8

10

12

14

16

18

GoodyearMichelinFirestoneGoodrichBridgestone

Market Segmentation • Performance & Broad-line : Performance tires were wider

, expensive (approx. 3 times) & provided better traction compared to broad-line tires

• Replacement & OEM : Replacement tires were sold to individual customers while OEM were sold to car manufacturers

Replacement(in mn. dollars)

OEM Replacement(in mn. units)

OEM

Industry $8,600 N/A 152.0 43

Goodyear

$1,290 $695 22.8 16.3

Market Segmentation Major, Minor & Private Labels :• Major brands had the highest recognition among customers.• Minor brands included tires made by small manufacturers as

well as major manufacturers but sold under different name.• Private labels had flexibility in pricing.

36%

24%

40%

Major brands Minor brands Private labels

Consumer Behavior• Price• Offers fast service• Can trust personnel• Store is attractive • Offers mileage warranty• Brand selection• Maintains convenient hours

Consumer Segmentation

22%

18%

23%

37%

Price-constrained buyers Value-oriented buyersQuality buyers Commodity buyers

Consumer Marketing Channels 0-level 1-level 2-levelManufacturer ManufacturerManufacturer

Wholesaler

Retailer Retailer

ConsumerConsumer Consumer

Wholesale Distribution Channels

1976 1981 1986 19910

10

20

30

40

50

60

70

80

Oil CompaniesLarge retailersManufacturer-owned outletsIndependent dealers

Other

Garages / Service stations

Warehouse clubs

Mass MerchandisersManufacturer-owned

outletsSmall Independent tire

dealersLarge Independent tire

chains

Retail Distribution Channels

Goodyear’s distribution structure

50%

15%

8%

27%

Independent dealers Government AgenciesFranchised dealers Manufacturer-Owned Outlets

Goodyear Distribution ChannelSmall Independent Dealers : • Accounted for 40% of retail sales• Brand Loyalty is high • Creates value through post sales serviceManufacturer owned outlets• High cost to maintain, awareness building among customers• Decreases in market share to 9%Large Chains• Resellers for independent dealers, secondary outlets• Diversion problems from wholesalers to discount outlets

created a problem with independent dealers• Diversion was difficult to avoid due to legal restrictions. .

Retail OBS Share % Private Label

Price

Garage/ Service Stations

Small outletsGasolineAuto Services

6% 57% 110%

Small Independent Dealers

Small outlets auto services

40% 36% 100%

Manufacturer Outlet

One brand auto services

9% 16% 107%

Warehouse Large storesLimited offer according to dealsMinimum ServiceLOW PRICE

6% 8% 80%

Mass Merchandiser

Retail ChainLarge Brand SelectionAuto Services

12% 34% 97%

Large tire chains

Multi brand discountersLOW PRICED, HIGH VOLUME

23% 54% 90%

Conflict• Conflict between various channels due to differences in

the independent goal of each channel• Goal: ->Small independent dealers : Obtain higher margin &

attract loyal customers ->Manufacturer owned : To make public aware & educate

about Goodyear’s product line ->Large chains : To push the largest volume of product at

smaller margins

Aquatred Tire• Goodyear started the NEWEX project to develop

a new & exciting product.• The Aquatred was developed after comparing 10

different designs on performance and consumer preference

• The deep groove down the center of the tire was called “the aquachannel”

• It channeled water out from under the tire reducing hydroplaning & improving traction in wet conditions

(cont’d)• In wet conditions , cars travelling at 55mph

stopped in as much as 2 car lengths less distance than similar cars equipped with conventional tires.

• When 50% worn it maintained the same traction as a new all season tire

• Positioned at the top of the broad line segment with a 60,000 mile warranty

Concerns about launch• Competitors launch: Michelin & Bridgestone planned to

launch new tires with 80,000 mile warranty at relatively lesser prices

• Dilemma about good years Distribution channelAdvantages:1. Boosts sales 2. Prevents Goodyear OEM tires from being replaced by

other brandsDisadvantages:3. Sales in lower service outlets could erode the brand

value4. Can lead to cannibalization of sales of existing outlets

Recommendations• Loyalty Programs• Compromise with independent dealers about competition

in the areas• Expand more distribution channels and find new retail

formats like Just Tires• Integrated marketing communication to create awareness• Researches to observe trends and changes in consumer

preferences • Emphasize on strong brand image and outstanding

customer services

RecommendationsConflict : • Specialized sales force that conducts planning sessions

with goal setting and communicate incentive programs• Planning for each product in the PLC which type of

distribution system to select – from extensive to intensive• Design internal structure with specialized programs

Thank You