Goodyear : The Aquatred Launch

Vaibhav Wadhwa 80303190146

Akshita Sikand 80303190121
Nikhil Rohra 80303190109
Kavi Suneja 80303190135
Damini Baijal 80303190012
 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 Tires
2. Increased foreign competition
3. Nature of demand

• These changes had four major impacts :

1. Demand for passenger tires
2. New tire prices
3. Tire-producing capacity outstripped demand
4. 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
18
16
14
12
Goodyear
10 Michelin
8 Firestone
Goodrich
6
Bridgestone
4
2
0
1975 1980 1985 1991
 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 OEM Replacement OEM
(in mn. dollars) (in mn. units)
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.

Major brands Minor brands Private labels

40% 36%

24%
 Consumer Behavior
• Price
• Offers fast service
• Can trust personnel
• Store is attractive
• Offers mileage warranty
• Brand selection
• Maintains convenient hours
Consumer Segmentation
Price-constrained buyers Value-oriented buyers
Quality buyers Commodity buyers

22%
37%

18%

23%
Consumer Marketing Channels
0-level 1-level 2-level
Manufacturer Manufacturer Manufacturer

Wholesaler

Retailer Retailer

Consumer Consumer Consumer

Wholesale Distribution Channels
80

70

60
Oil Companies
50
Large retailers
40
Manufacturer-owned
30 outlets
Independent dealers
20

10

0
1976 1981 1986 1991
Retail Distribution
Channels

Garages / Service stations

Warehouse clubs
Mass Merchandisers

Manufacturer-owned outlets

Small Independent tire dealers

Large Independent tire chains

Other
Goodyear’s distribution structure
Independent dealers Government Agencies
Franchised dealers Manufacturer-Owned Outlets

27%

50%
8%

15%
Goodyear Distribution Channel
Small Independent Dealers :
• Accounted for 40% of retail sales
• Brand Loyalty is high
• Creates value through post sales service
Manufacturer 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 Price
Label
Garage/ Service Small outlets 6% 57% 110%
Stations Gasoline
Auto Services
Small Small outlets auto 40% 36% 100%
Independent services
Dealers
Manufacturer One brand auto services 9% 16% 107%
Outlet
Warehouse Large stores 6% 8% 80%
Limited offer according
to deals
Minimum Service
LOW PRICE
Mass Retail Chain 12% 34% 97%
Merchandiser Large Brand Selection
Auto Services
Large tire chains Multi brand discounters 23% 54% 90%
LOW PRICED, HIGH
VOLUME
 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
GoodYear : Problems Faced
• Managers at Good Year were concerned if
Aquatred is the right product for the dealers and
consumers.
• Should Good Year expand the distribution
channel to get increased sales from Aquatred
launch? Launching in lower service outlets may
lead to brand dilution and expanding
distribution might cannibalize sales.
 Alternatives
• Launching the new product only through its
traditional channels

• Expand the distribution channel

• Expanding distribution of Aquatred to low

priced outlets

• Integrating its dealership network

1) Traditional channels – Independent
dealers & Franchises

• Surveys show that buyers in 1992 are tending to be

more price oriented (45%) and outlet oriented
(26%). Good Year does not have any price control
when it sells through its independent dealers and
almost 50% of its total sales are through this
channel.
 2) Expand the distribution channel –
Increase manufacture owned outlets
• Approximately 33% of Aquatred buyers want Good Year
brand whereas 25% are specifically looking Aquatred.

• By launching a retail store they will able to serve this

segment of customers at a lower price and also provide
good service quality.
• 61% of buyers are quality oriented buyers who generally
are loyal to the outlet and brand, and tend to be upscale.
Thus opening new retail stores like Just Tires seems to
be a good option
3) Expanding distribution of Aquatred
to low priced outlets - warehouse
clubs, mass merchandisers

• Expanding into low priced outlets may lead to

brand dilution, cannibalization of sales from
existing channels

• Would result in the existing dealers taking on

additional lines because of the decreased sales
from Good Year.
4) Integrating its dealership network –
Buying out independent dealers
• This option though will lead to lesser channel conflicts,
greater control over the distribution channel.

• This will lead to higher capital costs because of

acquisitions and lost sales from customers.

• Customers will not be able to compare different brands

(53% of customers are not sure of the brand they want)
and thus may not prefer single brand outlets.
 Action Plan
– Independent dealers might be unhappy with the expansion
plans of Manufacturer •
 Almost 53% of the customers don’t know which brand/product
they want, these customers would continue to go through the
independent dealers who sell different brands.

 Only 25% of the customers who are sure of the brand they want
to buy would go to Manufacturer owned stores.

 Independent dealers need to be taken into confidence so that

they don’t feel threatened by manufacturer’s expansion.

 Manufacturer’s expansion should not overlap with

Independent dealers territories
▫ Manufacturers should try to get the help of the
dealers association to prevent leakage of sales
through unwarranted channels. (Like sales to
mass merchandisers etc.)

▫ Launching AquaTred during the Winter Olympics

 Greater exposure within budgeted advertising
expenses

 Scarcity would signify uniqueness and justify

premium pricing
 Contingency Plan
• Launching the new product only through its traditional
channels – Independent dealers manufacture owned
outlets and franchisees. This will reduce the potential
channel conflicts that may arise due to “Just Tires”.

• In such a scenario Good Year should expand its sales

through Independent Dealers.

• An alliance can be reached with the dealer network

through the State Association to increase the sales of
Goodyear Aquatred through these outlets.
Thank
You