Goodyear aquatred launch
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Goodyear is planning to launch the Aquatred tire, which has an innovative tread design that channels water out to reduce hydroplaning and improve wet traction. Some concerns have been raised about the Aquatred launch, including whether it is the right product, the right time to launch, and how distribution should be handled. The document discusses the tire market in the 1970-80s, Goodyear's past successful product launches, consumer preferences, competition, and distribution channels. It recommends that Goodyear control dealers' pricing before launch and use upcoming events like the Winter Olympics to introduce the Aquatred, as test data shows the innovative tread design could attract buyers and gain traction over competitors.
Goodyear aquatred launch
- 3. WHO IS GOODYEAR? Goodyear Rubber and Tire Company is a dominant player in the world tire industry. Barry Robbins is Goodyear’s vice president of marketing for North American Tires
- 4. IN THE 1970S AND 1980S, THE U.S. TIRE INDUSTRY EXPERIENCED THREE IMPORTANT CHANGES.
- 5. 1ST The emergence of the radial tire to replace the older “bias” and “bias- belted” tire constructions. Radials offered superior treadwear, handling, and gas mileage, but had a stiffer ride. Bias and bias-belted tires lasted under 20,000 miles whereas by the early 1980s radials lasted over 40,000 miles. Many U.S. tire manufacturers had hesitated, hoping that consumers would continue to prefer the softer ride of bias- belted tires.
- 6. 2ND Increasing foreign competition. Michelin of France, used expertise in radial production as a lever into the U.S. market. Some tire manufacturers gained access by equipping new cars exported from their home country. Imported passenger tires represented 8% of unit sales in the U.S. passenger tire market in 1972, 12% in 1982, and 22% in 1990.
- 7. 3RD Change in the nature of demand from consumers and car makers were observed. Price of oil increased. Producing one tire required seven gallons of oil or derivative products, so the cost of manufacturing tires also increased. Automobile sales shifted towards cars that were smaller, lighter, and had front wheel drive; these cars placed less wear on tires.
- 8. THESE CHANGES HAD FOUR MAJOR IMPACTS. Demand for passenger tires grew sluggishly. New tire prices in the U.S. market declined. Tire-producing capacity outstripped demand. A number of mergers and acquisitions. Took place.
- 9. Goodyear is going to launch the Aquatred as a tire that would have a tangible, perceptible difference over its existing models. PRESENTLY
- 11. Concerns Have Risen Regarding The Launch Of The Aquatred.
- 12. Do Goodyear have the right product for the dealers and for the consumer? Whether distribution should be expanded, and if so, what specific channels or retailers should be added? Is it the right time to launch the Aquatred?
- 13. Do Goodyear have the right product for the dealers and for the consumer?
- 14. In 1977, Goodyear introduced the Tiempo, the first all-season radial. All season radials did not have to be replaced with snow tires during winter months; their unit sales grew from 2% of U.S. replacement passenger tires in 1978 to 71% in 1991.
- 15. In 1981, Goodyear successfully launched the Eagle, the first radial tire offering high-speed traction for sports cars. On a typical radial, the cost of goods sold was 60% of the manufacturer’s selling price, but the Eagle provided Goodyear and its dealers with higher percentage profit margins than standard radials.
- 16. Thus we can see that keeping its brand value as its base, whenever Goodyear launched an INNOVATIVE PRODUCT it succeeded.
- 17. The Market Segment for passenger tires could be done in 3 ways.
- 18. Based on the distinction between performance and broad-line tires. Performance tires were wider than broad-line tires, were more expensive, and provided better traction. Although performance tires could be replaced with broad-line tires, consumers rarely made this substitution because of the resulting decrease in handling and performance. Goodyear Tire Lines With Typical Suggested Per-Tire Retail Prices
- 19. In the U.S. passenger tire market, performance tires represented 25% of Goodyear’s unit sales, 30% of dollar sales, and an even higher percentage of profits.
- 20. Based on replacement and OEM tires. Car makers used volume purchases to negotiate substantial discounts on tires. The U.S. Market for Passenger Tires, 1991
- 21. Based on brand classifications Included major brands, minor brands, and private label. Major brands, which carried the name of a major tire manufacturer, accounted for 36% of unit sales in the replacement passenger tire market. Major brands had the highest recognition among consumers and included Goodyear also.
- 22. Now let us have a look at the Consumer Behaviour
- 23. Most consumers viewed tires as an expensive necessity to keep a vehicle in driving condition. Goodyear regularly surveyed car owners, asking about performance attributes considered when purchasing tires.
- 24. THE FIVE MOST IMPORTANT TIRE ATTRIBUTES, IN ORDER FROM HIGHER TO LESSER IMPORTANCE, WERE Tread life Wet traction Handling Snow traction Dry traction.
- 25. Aquatred’s tread design channeled water out from under the tire, reducing hydroplaning and improving traction in wet conditions. When 50% worn, the Aquatred maintained the same wet traction as a new all-season tire. Goodyear planned to sell the Aquatred with a 60,000-mile warranty. Tests showed that in wet conditions, cars equipped with Aquatreds traveling at 55 miles per hour stopped in as much as two-carlengths- less distance than similar cars equipped with conventional all- season radials.
- 26. GOODYEAR ALSO REGULARLY SURVEYED CAR. THE SEVEN MOST IMPORTANT CRITERIA, IN ORDER FROM HIGHER TO LESSER IMPORTANCE, WERE: Price Offers fast service Can trust personnel Store is attractive Offers mileage warranty Brand selection Maintains convenient hours
- 27. Goodyear used research about consumers’ Shopping Behaviour to segment tire buyers into four categories
- 28. In 1992, 45% of tire buyers were price oriented when shopping for tires; 22% were brand oriented, and 33% believed the outlet was most important.
- 29. THUS WE CAN SEE THAT AT PRESENT: There is a demand for Innovative Products. Performance Tire have high demands. Replacement Market is highly demanding. Major brand like Goodyear has highest recognition among consumers. Consumers viewed tires as an expensive necessity. The properties of Aquatred are very impressive.
- 30. Should the distribution be expanded, and if so, what specific channels or retailers should be added?
- 31. GOODYEAR SOLD PASSENGER TIRES TO THREE KINDS OF INDEPENDENT DEALERS. Strictly Wholesalers, with no retail operations, accounted for 10% of Goodyear’s factory. 40% went to Dealers who both sold tires at retail and resold tires to other dealers or to secondary outlets. 50% went to Dealers who bought tires to resell in their own retail outlets and did not resell to other outlets.
- 32. GOODYEAR’S DISTRIBUTION STRUCTURE Goodyear’s 4,400 independent dealers accounted for 50% of sales revenues. 1,047 manufacturer-owned outlets generated 27% of sales. 600 franchised dealers accounted for another 8% of sales. The remaining 15% of sales were primarily to government agencies. Goodyear did not sell tires in garages/service stations, warehouse clubs, or mass merchandisers; instead, the company relied on three types of outlets.
- 33. The average selling price of all tires sold by Goodyear’s independent dealers was $75 per tire. Retail margins for independent dealers averaged 28% on Goodyear tires, 25% for dealers carrying other major brands, and 20% for private label tires. Average wholesale margins were 18% for private label tires and 14% for Goodyear tires.
- 34. PRIVATE LABEL TIRES Sales of private label tires constituted 40% of the market. Many small manufacturers specialized in private label tires, while some larger manufacturers used excess capacity to service the private label market. In 1991, private label tires constituted 80% of the sales of Goodyear’s Kelly-Springfield subsidiary; 20% were sold under the Kelly brand. The average retail selling price of a private label tire was 18% lower than the price of a comparable branded tire.
- 35. Although sales of private label tires had grown, their average life remained lower than the life of a branded tire. Average Tire Life (miles)
- 36. How to deal with Private Label Suppliers? As sales of Private Label Tires have increased, Goodyear may provide service to them by providing its excess quantities. As a bad reputation has risen about the life of the Private Label Tires, Goodyear may provide its excess reputed tires. It will boost both the sales of Private Labels and Goodyear simultaneously.
- 37. PROMOTIONS One free tire with the purchase of three tires. One tire for half price with the purchase of another tire at full price. 25% off the price of selected tires. It was estimated that three-fourths of all Goodyear tires sold in independent or company-owned outlets were sold on promotion, at an average discount of 25%. DISCOUNT WAS OFFERED TO THE CONSUMER IN A NUMBER OF WAYS:
- 38. Promotions were organized around “core events”—six 3-week periods spread throughout the year during which Goodyear dealers could buy merchandise at a discount. Supported core events with Radio, Television, and Print advertising announcing special prices on specific tire lines. Every spring, Goodyear offered dealers “Spring Dating,” which provided extended financing on tire orders.
- 39. But!
- 40. Experiments with everyday low pricing in the tire industry had been unsuccessful because price competition among dealers undermined attempts to set consistently low but fair prices. The services Goodyear provided its dealers were not free. The cost of these services was built into Goodyear’s prices. Some of Goodyear’s largest dealers would have preferred to buy their tires at the lowest possible “net” price and develop their own advertising and promotion programs.
- 41. Goodyear had protected its dealers by not selling Goodyear-branded tires in other outlets Goodyear dealers did not carry other brands. In 1989, 70% of Goodyear’s independent dealers carried only Goodyear tires, while 30% stocked other brands. Other brands were not aggressively merchandised but used only as lower- priced alternatives to Goodyear.
- 42. Thus beside promotions, Goodyear must also look into the: Demand of the Independent Dealers and follow Tire Dealers’ Bill of Rights in order to gain influence. Provide Independent Dealers some initial free service in order to secure its potential buyers. Do proper survey and locate those dealers who are both geographically and economically profitable to Goodyear and have secured their market. Goodyear may offer them to develop their own ad and promotion program.
- 43. INDEPENDENT DEALERS IN THE TIRE INDUSTRY By 1991, tire manufacturers owned fewer of their distribution outlets, as independent dealers typically offered more choice than the single-brand selection offered at most company-owned stores and required less capital and attention from the manufacturer. Some tire companies believed that expanding independent dealer networks would grow sales faster than company-owned outlets.
- 44. Michelin, Uniroyal, and Goodrich had recently combined their sales forces to allow their salespeople to sell all three brands.
- 45. Thus Goodyear need to explore the potential Independent Dealers and combine their sales forces as much as they can as it will help it to boost its sale force.
- 46. FIRESTONE was an exception to the trend toward independent distribution. During the mid-1980s, many of Firestone’s independent dealers switched to other manufacturers. Some felt that the company had stopped supporting its dealers and its products in order to maximize short-term financial results.
- 47. Is it the right time to launch the Aquatred?
- 48. Competition Goodyear regularly surveyed car owners to monitor their image of the major tire brands. In 1991, Michelin’s image was stronger among 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 brand of tire they planned to buy next rose to 53% in 1992 from 36% in 1982.
- 49. Replacing Among Tire Brands, 1991 Four percent of car owners with Bridgestone tires bought Firestone tires to replace the Bridgestone. Significant proportions of consumers who owned major brands replaced their tires with private label brands.
- 50. Goodyear typically spent 9%-11% of sales on advertising and promotion, with 60% being spent on promotion. Among U.S. tire marketers, Goodyear’s share of voice in television and magazine advertising was about 60%. Goodyear’s competitors were planning a wide range of campaigns for 1992. Both Bridgestone and Michelin were planning to introduce new tires with 80,000-mile warranties, while Uniroyal was introducing a new tire for light trucks.
- 51. The Aquatred Tire “We were looking for something that appearance wise was different—something that a customer would walk into a showroom and tell from a distance that it was different.”
- 52. Whats Good for Aquatred? The Aquatred was developed after comparing 10 different designs on performance and consumer preference. According to Goodyear, the Aquatred’s tread design channeled water out from under the tire, reducing hydroplaning and improving traction in wet conditions. Performance tests showed that in wet conditions, cars equipped with Aquatreds travelling at 55 miles per hour stopped in as much as two- carlengths-less distance than similar cars equipped with conventional all-season radials. When 50% worn, the Aquatred maintained the same wet traction as a new all-season tire.
- 53. Comparison
- 54. So what next? Goodyear has good image among value oriented and quality buyers. It has a good percentage in tire replacement than its competitors. Its competitors are planning to launch a wide campaign. With surveyed consumer demand on its side, it is good time for Goodyear to launch Aquatred. The attractive and economic properties of Aquatred is bound to bring good sales. Survey also suggests that Aquatred buyers were more likely to replace competitor’s tires. Goodyear could use Winter Olympics in January of 1992 to introduce the Aquatred.
- 55. Before launching of The Aquatred, Goodyear need to look into an important matter.
- 56. Few data was gathered by a “MYSTERY SHOPPER,” a Goodyear employee who shopped for tires at independent dealers without identifying his or her affiliation with Goodyear. Despite the uniformity of the company’s literature and policies, there was variation in the presentation and pricing of the Aquatred by dealers in the test market. Goodyear’s suggested retail prices for the Aquatred were $89.95 with a black sidewall, and $93.95 with a white sidewall. Goodyear must take economic steps regarding this matter and control its dealers.
- 57. These slides were created by- Biswajit Biswas as part of an internship done under the guidance of Prof. Sameer Mathur (www.IIMInternship.com)