GOODYEAR

THE AQUATRED LAUNCH

Submitted by:

Pallavi Wasnik 10020541026

Piyush Gupta 10020541027

Puja Sarkar 10020541028

Rangoli Singhal 10020541029

Goodyear: The Aquatred Launch

Rohit Mittal 10020541031

INTRODUCTION TO THE CASEGoodyear is engaged in the development, manufacture, distribution and sale of tires and

related products and services worldwide. The company primarily operates in the US. It is headquartered in Akron, Ohio and employs about 1,05,000 people. Although Goodyear was the leader in U.S. passenger tire market with 15% market share, the company still had to be very careful because the competition was intense. There were so many players in the industry, both branded and private label. Although, each of them had less than 10% of market share, the second in rank, Michelin, was growing very fast in both replacement and OEM market. Also, the private label had become the biggest threat for all branded tires since many branded tire owners intended to replace their tires with private label.

Move Towards Value-Based Pricing

Under Gault‘s direction, Goodyear began the process of transforming itself from a manufacturing-based company to a customer value-based company. One of Goodyear‘s earliest successes with executing customer value-based pricing came with the Introduction of the Aquatred tire.

The first step was to conduct consumer research to identify and prioritize the attributes that would motivate consumers to purchase a new type of replacement tire. The research revealed that consumers wanted a tire that was all-season, had a good ride characteristic, a low noise level, and provided good mileage. But, Goodyear‘s marketing team discovered that consumers were also willing to pay more for a tire that looked like it provided wet traction. Armed with this information, Goodyear launched the Aquatred, a tire with a distinctive-looking groove placed down the center for wet traction.

The tire consumers can be broken in the three categories:

A. Quality Conscious -18%

Factors driving purchasing decisions are performance attributes including long life time of the product – thickness of the rubber, reliability - groves, tread and superior high touch service at the point of sale.

Price sensitivity is low. They believe tires are needed to carry the car, provide lateral control, and provide handling and durability.

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High brand awareness at 15%.

B. Value Conscious – 23%

Factors driving purchasing decisions are getting extra value for money paid as compared to a competitive product.

High brand awareness at 17%.

C. Price Conscious – 59%

Looks at the tire as a commodity- necessity. Tires are needed to carry weight of the car. Extreme switch between brands if it saves money.

ANALYSIS: IS IT THE RIGHT TIRE FOR RIGHT TIMETo start the analysis of adding a premium sub-brand (Aquatred) to Goodyear’s portfolio,

we need to analyze the market, the position of the company, its competitive advantages and challenges, as well as review the competitive environment.

Challenges:

80% of the total tire (OEM and Replacement) market is mature and stagnant with slow growth factors and extreme competition.

Goodyear has been experiencing a management crisis with no clear strategy and focus on their competitive advantage of producing tires.

They diversified into other industries. By defocusing on innovations in tire markets, they are facing a price war as their differentiators from private label and other competitor are very small, as perceived by the consumer.

Their current distribution structure is hybrid with lack of control over distribution of the tires to low price outlets.

Goodyear had too many private labels and needed to refocus its product mix from purely price driven to providing value.

Competitive Review:

Michelin and Bridgestone were planning to introduce improved warranty of 80,000 miles.

Michelin was able to position its brand among quality and value conscious consumers.

Michelin was selling at discounted venues: mass merchandisers and warehouse clubs.



Rare innovations in industry – Uniroyal was introducing new tires and Continental was planning to come up with a similar design in 2 years.

Competitive Advantages:

Looking at the competitive environment, Goodyear has the bigger market share per sales unit (15%), Michelin comes in second place (8.5%).

Despite all that, Goodyear is known as an innovator with a strong track record of launching new and exciting products.

Overall, the Goodyear needed Aquatred to improve its financial position and build up brand equity and establish itself as an innovation leader along competitors with a premium product lines in a stagnant tire replacement market. To do so, Goodyear needed to revolutionize the market by breaking price driven behavior of consumers and changing their perception of tire characteristics – moving away a commodity perception. Aquatred is an important product for this time in the industry, and should be introduced soon.

DISTRIBUTION CHANNELSGoodyear has a hybrid go to market strategy combining both direct and indirect

channels. Tire replacement industry used 6 main channels for distribution from which Goodyear focused on 3.

Most sales revenue was derived from: 1. Small Independent Dealers 2. Manufacturer Owned Outlets 3. Large Chains.

Overall, Goodyear had a major conflict between its independent dealer distribution channels, company owned outlets and large wholesalers due to the differences in the independent goal of each channel. When each member of the channel is an independent business, they will not set the same goal or behave according to manufacturer expectations, which is a conflict.

Managing three core channels and their conflict requires a specialized sales force that conducts planning sessions with goal setting, communicate incentive programs. It also requires a careful planning for each product in the product development lifecycle which type of distribution system to select – from exclusive to intensive. Traditionally mass products go well through intensive, while premium requires exclusive distribution with focus on education and training of the channel carrying the brand to perform value add functions including convincing the target customer.

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



Expanding distribution could boost sales and prevent Goodyear OEM tires from being replaced by other brands in the replacement market.

However, selling tires in lower-service outlets could erode the value of the Goodyear brand, cannibalize sales of existing outlets, and might cause dealers to take on additional lines of tires.

GOODYEAR: LAUNCHING OF AQUATRED

The main objective of Goodyear is now to handle the following:1. Select a target market 2. Segmentation 3. Product position

Segmentation: 1. Quality 2. Value- Oriented buyers 3. Price Conscious Consumers- Constrained buyers

Target Market:1. The target audience (Quality Conscious) seek additional value provided with the tire

through reliability, durability or handling2. With the introduction of a new premium tire, Goodyear would need to introduce program

to increase perceived value of tires in the market.

Product Positioning:It should include the following traits:

Characteristics as design, name and brand, warranty and level of customer service Premium brand: Aquatred should be positioned in the Higher Margin Replacement

markets to the Quality Conscious consumers focused on quality and performance Focus on the psychological benefit that is safety and present it as the USP

1. Point of Parity Quality radials Precision handling Large dealership network

2. Point of Difference Safety (lowest stopping distance) Durability (60,000 miles>> Industry average) Best Wet Traction Appearance: New, innovative & contemporary design

3. Frame of reference Simplification of the message to consumers Avoid poisoning mistakes Avoid positioning too many features Avoid targeting too broad of an audience



Pricing strategy

Analysis of company goals, fixed and variable costs, customer buying behaviour, competitive differentiation and product value context.

Deploying high pricing Goodyear will communicate image of a superior product. Perceived Value Pricing should focus on safety image, high traction performance,

warranty and other service deliverables through channel, savings on insurance, brand reputation and trustworthiness.

Promotion Program

The launch should be nationwide to give a strong brand impact at a large. Promote aggressively during the Olympics and create difference awareness among the

customers. Aggressively promote in high-precipitation areas.

Communication program for the launch should include the following:

Advertise the tire as a prestigious and stylish item with safety as the key message Training the dealers to brief them about

Benefits against competitor brand Explaining technical characteristics of the product Sales incentive plans

Test and drive demonstrations in all major dealerships across country. Customer Relationship Management

To increase brand loyalty To increase direct communication To create a database for trends and consumer preferences

Distribution: Aquatred should be distributed using exclusive distribution channel design. To design the channel network, Goodyear should understand the need of the Quality Conscious consumer segment is and where they purchase their tires from. Based on the analysis, this segment is interested in performance and quality; thus the channel must understand technical characteristics of tires and be able to provide presales and post sales support. Small independent dealers and manufacturer outlets are most consistent with the high value premium image that Aquatred is going to portray.

Channels should contribute to the value chain of the product through the following characteristics:

Price Image Post sales - warranty, check up, tire rotations Presale- convincing target consumers of purchasing Financing-Payments

Manufacturer needs to provide: Promotion Information On time efficient manufacturing



ERP or online system for ordering

If small independent dealers are not perceptive to the idea of a higher priced product, Goodyear needs to educate them through seminars describing points of differentiation. Goodyear is about to revolutionalize the market, and their dealers should be able to convince and educate the customers on the perceived value of the breakthrough.

Aquatred should be only provided under a limited distribution contract to the manufacturer owned outlets and dealers who are loyal to the brand and generate the most revenue – this way it will protect dealers’ profit margins and sales volumes. This way Goodyear has a full control over its distribution channel and can control price. Goodyear should avoid selling Aquatred to other distribution channel and car manufacturers – OEM to keep the product in the premium channel, at least until competition enters the market in 1993.


GOODYEAR

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