CASE-STUDYLAUNCH OF AQUATRED TIRES BY GOODYEAR

WHAT IS THIS CASE STUDY ABOUT?

THIS CASE-STUDY IS ABOUT THE DILEMMAS OF MAJOR TIRE MANUFACTURER GOODYEAR’S NEW PRODUCT LAUNCH

WHAT IS THE NEW PRODUCT ?

AQUATRED (High-Traction tire series)

Situation Analysis

Questions

Hypothesis

Proof and Action

Alternatives

WORK-FLOW FOR OUR CASE STUDY ANALYSIS

SITUATION

GOODYEAR IS ONE OF THE MAJOR TIRE MANUFACTURERS IN THE U.S. AND THE COMPANY NOW WANTS TO LAUNCH A NEW TIRE SERIES AIMED AT PROVIDING HIGH-TRACTION TIRES TO THE CONSUMERS AND ESTABLISH ITSELF AS AN INNOVATIVE TIRE MANUFACTURER.

SOME POINTS TO PONDER…

• INDUSTRY GROWTH HASN’T BEEN TOO GOOD IN THE PAST FEW YEARS DUE TO LOW DEMAND. THE MAIN REASONS OF LOW DEMAND INCLUDE INCREASED OIL PRICES AND INCREASED AVERAGE LIFE OF NEW TIRES

• A SHARP DECLINE OF TIRE PRICES – 25%, HAS BEEN OBSERVED IN THE PAST DECADE DUE TO INCREASED COMPETITION

• LOW CAPACITY UTILIZATION AND HIGH TIRE-MAKING CAPACITY

• GOODYEAR’S CONTEMPLATION OF UPCOMING LAUNCH OF AQUATRED TIRES.

• RISK AND BENEFIT ANALYSIS OF EXPANDING COMPANY’S DISTRIBUTION CHANNEL

QUESTIONS

• WHO ARE THE MAIN PROTAGONISTS?

• WHAT IS THE CURRENT SITUATION IN TIRE INDUSTRY?

• HOW IMPORTANT IS THE ROLE PLAYED BY VARIOUS DISTRIBUTION CHANNELS?

• WHO ARE THE MAIN COMPETITORS ?

• HOW IS THE NEW PRODUCT DIFFERENT FROM OTHER PRODUCTS OF THE COMPANY?

• WILL THE LAUNCH OF THE NEW PRODUCT BE HELPFUL TO REVITALIZE GOODYEAR?

MAIN PROTAGONISTS ARE

BARRY ROBBINS(VICE PRESIDENT, MARKETING, NORTH-AMERICA, GOODYEAR)

STANLEY GAULT(CHAIRMAN, GOODYEAR)

MAIN COMPETITORSOF GOODYEAR

WHAT ARE THE MAIN DISTRIBUTION CHANNELS?

Wholesalers

Oil Companies

Large-retailers

Manufacture-owned outlets

Independent dealers

Retailers

Garages/ Service stations

Warehouse clubs

Mass-merchandisers

Manufacturer-owned outlets

Small Independent tire dealers

Large independent tire chains

HYPOTHESIS with PROOFS AND ACTION

GOODYEAR SHOULD TAKE A CHANCE WITH AQUATRED WITH SOME CHANGES IN ITS LAUNCH STRATEGY

BECAUSE…

BRAND-SPECIFIC REASONS

GOODYEAR HAS A STRONG TRACK RECORD IN DEVELOPING INNOVATIVE PRODUCTS

LAUNCH OF GOODYEAR’S FIRST ALL SEASON TIRE, TIEMPO IN 1977 WAS SUCCESSFUL

SUCCESSFUL LAUNCH OF EAGLE (HIGH-SPEED TRACTION) TIRES IN 1981

GOODYEAR HAS BEEN “THE GORILLA” (MAJOR PLAYER) IN TERMS

OF MARKET SHARE OF REPLACEMENT TIRE MARKET AND AQUATRED WILL BE A PART OF THE REPLACEMENT SERIES

GOOD YEAR HAS A LARGE LOYAL CUTOMER BASE, SECOND ONLY TO MICHELIN

HERE IS THE PROOF…

Major threat to this loyalty is brand switching to Private Labels but if we look at the numbers carefully, the stats aren’t as disturbing for Goodyear and Michelin as it is for other major players.

CAN SWITCHING TO PRIVATE LABELS BE CONTROLLED ?

IT MIGHT NOT BE IMPOSSIBLE, BUT IT IS SURELY VERY DIFFICULT BECAUSE THE AVERAGE RETAIL PRICE OF A PRIVATE LABEL TIRE IS 18% LESS THAN THE BRANDED TIRES.

GOODYEAR HAS A STRONGER IMAGE ,COMAPRED TO MICHELIN, AMONG PRICE- CONSTRAINED BUYERS AND COMMODITY BUYERS

WHO ARE THESE PRICE-CONSTRAINED AND COMMODITY BUYERS?

BOTH THESE BUYERS ARE PRICE CONSCIOUS AND PREFER LOWER PRICE

BOTH THESE BUYERS SHOP AROUND MORE THAN QUALITY BUYERS AND VALUE ORIENTED BUYERS

THEY POSSESS LOW BRAND LOYALTY

PROOF OF THE FACT THAT GOODYEAR HAS A STRONGER IMAGE AMONG COMMODITY BUYERS AND VALUE-ORIENTED BUYERS

CHANGES IN THE MINDSET OF CONSUMERS

• IN THE PAST FEW YEARS, THERE HAS BEEN A 4% INCREASE IN THE NUMBER OF COMMODITY BUYERS AND ONLY A SLIGHT DECREASE IN THE PRICE-ORIENTED BUYERS (CONSIDERING THE INITIAL SHARE OF SUCH BUYERS-48%)

• ON THE OTHER HAND, THERE HAS BEEN A 4% DECREASE IN THE QUALITY BUYERS

PRODUCT-SPECIFIC REASONS

60,000-MILES WARRANTY

LESS NUMBER OF COMPETITORS IN THE HIGH WET-TRACTION, BROAD-LINE TIRES SEGMENT

WITH NEW PERFORMANCE AND DESIGN CHANGES BASED ON CONSUMER PREFERANCES, AQUATRED IS EXPECTED TO HAVE TANGIBLE AND PERCEPTIBLE ADVANTAGES OVER OTHER EXISTING MODELS.

BUT…

WILL THE PEOPLE BE READY TO PAY A HIGH AMMOUNT FOR A HIGH WET-TRACTION SERIES WHEN THEY HAVE THE OPTION OF BUYING TIRES WHICH PROMISE HIGHER DISTANCE WARRANTY AT A LOW PRICES?

YES, IF TEST-MARKET SURVEY IS TO BE BELIEVED

UNLIKE OTHER GOODYEAR PRODUCTS, THE CUSTOMER BASE OF AQUATRED TIRES IS DOMINATED BY QUALITY BUYERS AND VALUE-ORIENTED BUYERS

AQUATRED CUSTOMERS ARE MORE LIKELY TO REPLACE COMPETITOR’S TIRES

AQUATRED BUYERS SEARCHED MORE EXTENSIVELY FOR INFORMATION PRIOR TO PURCHASE AND ARE EXPECTED TO VALUE THE ADVANTAGES OF HIGH WET-TRACTION

IS THE COMPANY PRICING THE

PRODUCT RIGHTLY?

RESULTS OF “MYSTERY SHOPPING” IN AQUATRED TEST MARKET

Above shown are the prices quoted by six different outlets during a mystery shopping exercise 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.

THE PRODUCT IS CERTAINLY

OVERPRICED AND HENCE, PRICE

PROMOTIONS ON AQUATRED IS A GOOD

OPTION

WHAT SHOULD BE THE IDEAL DISTRIBUTION CHANNEL?

“THERE IS NOTHING CALLED IDEAL AND ONE HAS TO CONSTANTLY JUGGLE BETWEEN THE OPTIONS TO REACH AN OPTIMUM LEVEL OF SATISFACTION”

THE COMPANY CAN EITHER…

EXPANDING INDEPENDENT DEALERS (MAIN REVENUE

GENERATOR)

EXPANDING NEW FORMATS LIKE MASS-MERCHANDISER,

WAREHOUSE CLUB & SERVICE STATIONS FOR

MORE REACH AND VISIBILITY OF THE PRODUCT

• FINANCIAL ASSISTANCE TO NEW ENTRANTS

• TRAINING AND SUPPORT REQUIRED

• LIMITED DISCOUNT NEEDS TO BE PROVIDED

• LIMITED STOCK SHOULD BE PROVIDED (ELSE IT WILL START BOTHERING INDEPENDENT DEALERS)

WHAT SHOULD BE THE IDEAL TIMING FOR THE LAUNCH ?

WHAT COULD BE A BETTER TIME THAN WINTER OLYMPICS ?

GOOD CHANCE TO REACH LARGE CUSTOMER BASE

NEEDS TO SPEND HEAVILY ON ADVERTISEMENT AND PROMOTIONS (GOOD YEAR NEEDS TO RELATE ITSELF TO THE OLYMPICS THROUGH ITS ADVERTISEMENTS)

HEAVY PROMOTIONS THROUGHOUT THE OLYMPICS EVENT CAN BE A BIG BOOSTER TO SALES

IT NEEDS TO PROMOTE SAFETY AND COMFORT

IT SHOULD MAKE PEOPLE UNDERSTAND THE VALUE OF HIGH WET-TRACTION

ALTERNATIVES

ALTERNATIVES COULD BE THOUGHT OF DEPENDING ON THE FAILURE OR SUCCESS OF THE LAUNCH

IN CASE OF A FAILURE, THE COMPANY NEEDS TO THINK ABOUT ITS EXPANSION MEDIUM (BETTER USE OF WHOLESALE CHANNELS)

THE COMPANY SHOULD LOOK TO FORRAY INTO OEM MARKETS TOO

PRICING WILL ALSO A PLAY A MAJOR PART DEPENDING ON WHETHER OR NOT THE COMPETITORS COME UP WITH A SIMILAR PRODUCT AT A LOWER PRICE

THE COMPANY WILL NEED TO RETHINK ABOUT THE VALUE THAT IS CONVEYED TO THE CUSTOMERS THROUGH ADVERSTISMENTS AND OTHER FORMS OF MARKETING

Created by Akash Yadav, IIT Kharagpur, during an internship by Prof. Sameer Mathur, IIM Lucknow.

www.IIMInternship.com