Goodyear: The Aquatred Launch

Harvard Business School Case

The Goodyear rubber and tire company

•41 plants in United States•43 plants overseas•Also known as “The Gorilla”•Ranked third in world wide sales of new tires• Innovative in terms of technology

Market Analysis

PerformanceTires

Broad lineTires

ReplacementTires

OEM

Major Brand (36%)

Minor Brand(24%)

Private labels(40%)

Consumer Segmentation

37%

23%

22%

18%

Sales

Commodity buyers Quality buyers price constrained buyers Value Oriented buyers

For replacement passenger tires

Switching Brands analysisBrand Replaced

Bridgestone Firestone Goodyear Michelin Minor Brands Private Labels

Bridgestone 29

4 8 8 7 43

Firestone 2 27 11 6 7 45

Goodyear 2 5 39 5 9 38

Mitchelin 3 3 7 44 6 36

Minor Brands 2 4 10 7 32 42

Private label 2 5 8 5 7 70

Retail channel for Replacement Tires

Distribution Channels

Small independent dealers (40%)

Garages / Service

Stations (6%)

Large Tire Chains (23%)

Mass Merchandisers

(12%)

Manufacturer owned stores

(9%)

Warehouse Clubs (6%)

Goodyear’s Distribution structure

Distribution Channels

4400 Small independent dealers (50%

sales revenue)

Franchised Dealers and

Govt. Agencies

(20%)

Just Tires(under testing

phase)

1047 Manufacturer owned stores

(30% sales)

Goodyear’s IndependentDealersIn 1981

70% GY & 30% other brands

In 1991

• 50%-50%

• Aggressively merchandised other brands but GY generated 90% revenue

The Aquatred Tire

Aquatred – a new tire providing improved driving traction under Wet conditions

• The Aquatred was developed after comparing 10 different designs on performance and consumer preference.• Goodyear planned to sell the Aquatred with a 60,000-mile warranty

and to position the 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.• It was estimated that a fullscale launch would cost Goodyear about

$21 million.

Some key points

SWOT Analysis

Strength:• Dedicated Independent dealers• Brand recognition• Strong track record in launching new products• Largest market share in replacement segment• Strong brand image with price oriented buyers

Weakness:• Michelin has stronger value oriented and loyal buyers• Limited marketing channels• Availability of GY products at unauthorized dealers at low prices• Knowledge of dealers

Opportunity:• New technological breakthrough• Absence of high durability/distance tyres• Wet condition tires launch• Promotions at winter olympics• As 90% of reveue for independent dealer is generated through goodyear, this would be a chance to deal with them

Threat:• Possibility of Competitors launching similar products• Non selling in warehouse clubs and mass merchandisers• Further erosion of market share.

Good year’s strategy for Aquatred

Product • Wet traction• Appearance• 60,000 miles warranty

Pricing• Premium pricing• 10% more than Invicta GS

Place• Independent Dealers• Manufacturer owining outlets

Some major problems company was facing are

• High price product in market driven towards low price

Launch issues

• Right product or not• Timing• Distribution channel• Initial inventory• Communication at touch point• Pricing and promotion

• Is Aquatred a right product to the dealers and customers?

• Goodyear management debated whether distribution should be expanded, and if so, what specific channels or retailers should be added?

• Aquatred can only be launched in replacement market

• selling through lower service channels could increase the sales but it could also erode the value of brand

• Selling at high price as a replacement tire might become a wrong decision

Share of Retail Sales of Replacement Passenger Tires by Channel

Two other tire companies Michelin and Bridgestone were planningTo launch new tires in 1992• 80,000 mile warranties• Huge advertisement budgets

Points to strengthen the decision of Aquatred launch• This would be a right chance to tap quality conscious market• Cannibalization concerns mitigated, supported by market test data• New product proves the company’s strong innovative background• The new product distribution strategy is aligned with Bill of Rights

These slides were Created by V.Sushmitha Reddy, IIITD&M Kancheepuram, during an internship by prof. Sameer Mathur, IIM Lucknow.www.IIMInternship.com