Aquatred case
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Transcript of Aquatred case
In June 1991, Stanley G
Gault took over as the
chairman with Barry Robbins
serving as Vice President of
marketing.
In the 1980s, radial tires were quickly replacing the conventional bias-belted tires.
Foreign competition increased. Michelin of France used its expertise in radial tires to gain market share.
Difficult economic conditions led to many
mergers and acquisitions
Only major US tire
manufacturer that
had not been acquired
was Goodyear
The market for passenger tires can be segmented
along brand classifications.
Average price of private label tire was 18%
lower than that of a branded tire.
36%
24%
40%
% of unit sales
Major brands
Minor brands
Private Labels
50%
27%
8%
15%
% of sales revenue
independent dealers
maufacture ownedoutlets
franchised dealers
government agencies
Goodyear plans to launch its latest technological innovation,
60,000 miles warranty
Unique design channels
water out from under
the tire
Superior wet traction
Does not hydroplane
Premium price product
For consumers:
A survey conducted by Goodyear among car owners revealed the top two performance attributes consumers consider for buying tires :
Aquatred :
Tread life – 60,000 miles (much above market average)
Wet traction – same as a new all-season tire after
being 50% worn !
A comprehensive survey comparing purchase behavior of Aquatred and Invicta GS buyers yielded the following numbers : The first segment did, on an average 50 % more product research than the second and ended up buying Aquatreds. Thus, Aquatred does indeed meet customer needs.
Checked newspaper ads 33% 23%
Telephoned outlets 21% 14%
Shopped other dealers 20% 12%
Total : 74% 49%
For dealers: The following table showcases the major consumer segments for Replacement Passenger Tires (Exhibit 4) :
Percentage sales of Major brands due to Price constrained and Commodity buyers = (22%)(30%) + (37%)(18%) = 13.26 % Percentage sales of Major brands due to Quality and Value oriented buyers = (18%)(54%) + (23%)(51%) = 21.45%
Price-constrained
buyers 22% 30%
Value-oriented
buyers 18% 54%
Quality buyers 23% 51%
Commodity buyers 37% 18%
The table below enlists the purchase decision segments of Aquatred buyers : As is clearly evident, bulk of Aquatred buyers are the Quality and Value oriented buyers, who form the greater 21.45 % segment (as calculated previously).
Price-constrained Buyers 6%
Value-oriented Buyers 23%
Quality Buyers 61%
Commodity Buyers 10%
“In 1991, Goodyear and Michelin were virtually even, but Michelin’s image was stronger among value-oriented and quality buyers, while Goodyear had a stronger image among price-constrained buyers and commodity buyers.”
Thus the introduction of Aquatreds, increases Goodyear’s market reach to include quality and value buyers and can greatly boost the selling potential of dealers.
Considering present situation of overcapacity,
expansion of distribution is futile and would only
increase competition between dealers.
Instead, a structural modification aimed at
maximizing sales can prove useful.
Goodyear’s 4400 independent dealers, who
contribute 50% toward its sale are its biggest
assets and proper measures must be taken to avoid
further straining of relationship with them.
50%
27%
8%
15%
% of sales revenue
independent dealers
maufacture ownedoutlets
franchised dealers
government agencies
Business with wholesalers found supplying in low-priced outlets must be reduced and replaced by alternate distribution channels. This would provide following benefits:
• Retail dealers would be encouraged as Goodyear
products won’t find their way into low priced
outlets.
• Aquatred will be available only at its designated
value in market thereby maintaining its premium
image.
Independent dealers 50/4400 = 0.0114 %
Manufacture owned outlets 27/1047= 0.0258%
Franchised dealers 8/600= 0.0133%
As shown above, the manufacturer owned outlets
are the most profitable in terms of sales volume.
But they are accompanied by additional costs of
capital and management.
Thus, efforts can be concentrated on improving
numbers of franchised dealers for replacing select
wholesalers.
The core target market for the Aquatred brand
are the quality and value oriented consumers.
Thus, its brand image should be that of a
premium brand and should be viewed as the
highest value offering.
Pricings of 6 dealers were found as follows by a mystery shopper: Calculating the average price, we get $85.32 for Aquatred with Black sidewall $85.82 for Aquatred with White sidewall
Studies reveal that customers expect broad-line tires from Goodyear brand to be priced within a $6 range
With Invictus GS priced at $80, dealer pricings averaging at $85.32 and customer expectations in mind, an appropriate pricing scheme would be :
$86.5 Aquatred with Black sidewall
$88.5 for Aquatred with White sidewall
Promotional policies
Facing difficult economic conditions, cutting back on the advertising budget can be detrimental to the brand. The need of the hour is aggressive marketing and advertising using radio, television and print media to secure loyal customer base.
The commercial time opportunity at the Olympics must be utilized to the fullest for introducing the Aquatreds to the world
Requests for Aquatreds for imported cars must be seen as an opportunity to market the comparable wet traction of the Invictus GS The comparable pricing and characteristics of Invictus GS can rebuild its popularity and boost its sales too
Conclusion
Aquatred must be launched as a premium product for catering to the quality and value conscious consumers.
Such positioning will not only reduce cannibalization but will also attract rival market share.
Current distribution channels must be utilized to the maximum and products must be aggressively marketed and advertised.
Dealers must be encouraged to maintain recommended price to earn future promotional offers.
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