ABOUT THE CASE

the players (1/2)

• BARRY ROBINS

– Vice President of Marketing

• STANLEY G. GAULT

– Chairman of Goodyear

GOODYEAR’s BACKGROUND (2/2)

• In 1991 – 41 Plants in USA, 43 Plants other nations

• 3rd Rank in Worldwide Sales

• Income < 1% of $10.91 Billion Revenue

• $1 Million per day on Interest Spending in 1991

• History of Successful Product Innovation

AIM OF THIS CASE

OBJECTIVE 1

• MAKING SURE GOODYEAR HAS THE RIGHT PRODUCT & TIMING TO GENERATE SUPPORT FROM THE COMPANY’S TRADITIONAL BASE OF INDEPENDENT DEALERS

– We’ll talk about market segments & consumer’s and dealer’s preferences over tire attributes

OBJECTIVE 2

• WEIGHING THE RISKS & BENEFITS OF EXPANDING DISTRIBUTION CHANNELS. ANALYZING WHETHER THE NEW CHANNELS WOULD SELL THE AQUATRED

– We’ll study the company’s distribution structure & analyze the market research done on this

TIRE INDUSTRY IN USA

OVERVIEW from 1970 to 1990

• 3 Major Events – CAUSE a. Radial tires introduced, required heavy

investments

b. Increase in foreign competition

c. Change in Demand due to Increase in Oil Prices

• Impact – EFFECT a. Slow Demand Growth

b. Price reduction

c. Production Capacity > Demand

d. Mergers & Acquisitions

MARKET FOR PASSENGER TIRES

MARKET SEGMENTATION (1/3)

• Market divided on basis of :- a. PERFORMANCE vs BROAD-LINE TIRES

b. REPLACEMENT vs OEM TIRES

c. BRAND CLASSIFICATION

i. Major Brand (36%)

ii. Minor Brand (24%)

iii. Private Label (40%)

• TIRE ATTRIBUTES a. Tread Life

b. Wet Traction

c. Handling

d. Snow Traction

e. Dry Traction

• RETAILER CRITERIA a. Price

b. Offers Fast Service

c. Trustable Personnel

d. Attractive Store

e. Mileage Warranty

f. Brand Selection

g. Convenient Hours

CONSUMER PREFERENCES (2/3)

CONSUMER SEGMENTATION (3/3)

• On the basis of preference of brand or outlet a. Price-Constrained Buyers – 22% b. Value-Oriented Buyers – 18% c. Quality Buyers – 23% d. Commodity Buyers – 37%

• In 1992 a. 45% Price Oriented b. 22% Brand Oriented c. 33% Outlet Oriented

MARKET FOR REPLACEMENT TIRES

Retail channel (1/3)

DISTRIBUTION CHANNELS

Garage/ Service Stations

(6%)

Warehouse Clubs (6%)

Mass Merchandis

ers (12%)

Manufacturer owned

Stores (9%)

Small Independent Dealers

(40%)

Large Independent dealers

(23%)

Goodyear's distribution structure (2/3)

DISTRIBUTION CHANNELS

4400 INDEPENDENT

DEALERS 50%

1047 MANUFACTURER

OWNED 27%

600 FRANCHISED

DEALERS 8%

GOVERNMENT AGENCIES

15%

Number of stores Sales Revenue

Goodyear ‘S independent dealers (3/3)

• Dealers Organized into :- – 28 Districts

– 1 District Manager

– 3 Area Sales Managers

• Goodyear Offered Services like :- – Expertise & Training

– Certified Auto Service

– Goodyear Business Management System

– National & Regional Advertising

– Research on Market Trends

THE AQUATRED TIRE

AQUATRED features (1/2)

• INNOVATIVE – Design Improved Traction in Wet Conditions

• SAFE – Reduced Braking Time & Distance

• SUPERIOR – Top of Broad Line Segment

• STRENGTH – 60,000 Mile Warranty

• APPEARANCE – New & Striking Design

AQUATRED’s LAUNCH (2/2)

• Sale only through Replacement Market

• Priced at a premium of 10% over Invicta GS

• Launch Budget of $21 million

• Launch during Winter Olympics in January 1992

LAUNCH CONCERNS

PRODUCT (1/5)

• Is it the Right Product for the market ? – Michelin & Bridgestone planned to launch new

tires with 80,000 mile warranties and huge advertisement budgets

• What would the consumer prefer ?

Distribution channel (2/5)

• Should they expand distribution ?

– Would prevent being replaced by other brands

• If yes then through which channels ?

– Selling through lower service outlets could erode Brand Value

Timing (3/5)

• When should it be Launched ? – Plan to launch during Winter Olympics

– Might spark Sales

– Initial Inventory unavailable for Imported cars

EDUCATING DEALERS (4/5)

• Which customer would be likely to switch to Aquatreds ? – Dealers tried selling to

affluent looking customers

• Should the new channels receive the Aquatred?

Pricing & Promotion (5/5)

• What should the price be ? – Kept at a premium of 10% over Invicta GS

• Should they allow price promotions on Aquatred ? – Problem of tires being diverted to Unauthorized

dealers

SOME

SUGGESTIONS

Suggestions (1/3)

• Sales force and dealers must be properly trained so that they convey the correct message to the customer – EXHIBIT 10

• Avoid discounts on Aquatred instead Decrease Prices – Success of Tiempo due to low retail price

– In competition with high mile warranty tires

– Reduces Brand Image

SUGGESTIONS (2/3)

• Optimize promotion during Winter Olympics – Launch the product before the competition does

– Increase awareness of a new product among customers by creating curiosity

– Change mindset by highlighting the importance & need of safe tires in all conditions

• Unavailability of product for imported cars would not be a big concern – Only 26% buyers of Imported cars

SUGGESTIONS (3/3)

• Market Extensively & Aggressively in Rain-prone areas

• Expand Distribution Network into Garage/Service Stations – Reduce effects of whole sellers

– Maximizes geographic reach

– Increases Sales & Market Share

DISCLAIMER

• Created by Bhavnoor Singh, IITR,

during a marketing internship by Prof.

Sameer Mathur, IIM Lucknow. (See www.IIMInternship.com )