goodyear - the aquatred launch
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THE AQUATRED LAUNCH
A HARVARD CASE STUDY ANALYSIS
ABOUTTHECASE
the players (1/2)• BARRY ROBINS– Vice President of Marketing
• STANLEY G. GAULT– Chairman of Goodyear
GOODYEAR’s BACKGROUND (2/2)
• In 1991 – 41 Plants in USA, 43 Plants other nations
• 3rd Rank in Worldwide Sales• Income < 1% of $10.91 Billion Revenue• $1 Million per day on Interest Spending in
1991• History of Successful Product Innovation
AIMOF THISCASE
OBJECTIVE 1• MAKING SURE GOODYEAR HAS
THE RIGHT PRODUCT & TIMING TO GENERATE SUPPORT FROM THE COMPANY’S TRADITIONAL BASE OF INDEPENDENT DEALERS
– We’ll talk about market segments & consumer’s and dealer’s preferences over tire attributes
OBJECTIVE 2• WEIGHING THE RISKS &
BENEFITS OF EXPANDING DISTRIBUTION CHANNELS. ANALYZING WHETHER THE NEW CHANNELS WOULD SELL THE AQUATRED
– We’ll study the company’s distribution structure & analyze the market research done on this
TIREINDUSTRYIN USA
OVERVIEW from 1970 to 1990
• 3 Major Events – CAUSEa. Radial tires introduced, required heavy investmentsb. Increase in foreign competitionc. Change in Demand due to Increase in Oil Prices
• Impact – EFFECTa. Slow Demand Growthb. Price reductionc. Production Capacity >
Demandd. Mergers & Acquisitions
MARKET FORPASSENGERTIRES
MARKET SEGMENTATION (1/3)
• Market divided on basis of :-a. PERFORMANCE vs BROAD-LINE TIRESb. REPLACEMENT vs OEM TIRESc. BRAND CLASSIFICATION
i. Major Brand (36%)ii. Minor Brand (24%)iii. Private Label (40%)
• TIRE ATTRIBUTESa. Tread Lifeb. Wet Tractionc. Handlingd. Snow Tractione. Dry Traction
• RETAILER CRITERIAa. Priceb. Offers Fast Servicec. Trustable Personneld. Attractive Storee. Mileage Warrantyf. Brand Selectiong. Convenient Hours
CONSUMER PREFERENCES (2/3)
CONSUMER SEGMENTATION (3/3)• On the basis of preference of brand or outlet
a. Price-Constrained Buyers – 22%b. Value-Oriented Buyers – 18%c. Quality Buyers – 23%d. Commodity Buyers – 37%
• In 1992a. 45% Price Orientedb. 22% Brand Orientedc. 33% Outlet Oriented
MARKET FORREPLACEMENTTIRES
Retail channel (1/3)
DISTRIBUTION CHANNELS
Garage/ Service Stations
(6%)
Warehouse Clubs (6%)
Mass Merchandis
ers (12%)
Manufacturer owned
Stores (9%)
Small Independent Dealers
(40%)
Large Independent dealers
(23%)
Goodyear's distribution structure (2/3)
DISTRIBUTION CHANNELS
4400 INDEPENDENT
DEALERS50%
1047 MANUFACTURER
OWNED27%
600FRANCHISED
DEALERS8%
GOVERNMENT AGENCIES 15%
Number of stores Sales Revenue
Goodyear ‘S independent dealers (3/3)
• Dealers Organized into :-– 28 Districts – 1 District Manager – 3 Area Sales Managers
• Goodyear Offered Services like :-– Expertise & Training– Certified Auto Service– Goodyear Business Management System– National & Regional Advertising– Research on Market Trends
THEAQUATREDTIRE
AQUATRED features (1/2)• INNOVATIVE – Design Improved Traction in
Wet Conditions• SAFE – Reduced Braking Time & Distance• SUPERIOR – Top of Broad Line Segment• STRENGTH – 60,000 Mile Warranty• APPEARANCE – New & Striking Design
AQUATRED’s LAUNCH (2/2)• Sale only through Replacement Market• Priced at a premium of 10% over Invicta GS• Launch Budget of $21 million• Launch during Winter Olympics in January
1992
LAUNCHCONCERNS
PRODUCT (1/5)• Is it the Right Product for the
market ?– Michelin & Bridgestone planned to launch new
tires with 80,000 mile warranties and huge advertisement budgets
• What would the consumer prefer ?
Distribution channel (2/5)• Should they expand distribution ?– Would prevent being replaced
by other brands
• If yes then through which channels ?– Selling through lower service
outlets could erode Brand Value
Timing (3/5)• When should it be Launched ?– Plan to launch during Winter Olympics– Might spark Sales– Initial Inventory unavailable for Imported cars
EDUCATING DEALERS (4/5)• Which customer would be likely to
switch to Aquatreds ?– Dealers tried selling to
affluent looking customers
• Should the new channelsreceive the Aquatred?
Pricing & Promotion (5/5)• What should the price be ?– Kept at a premium of 10% over Invicta GS
• Should they allow price promotions on Aquatred ?– Problem of tires being diverted to Unauthorized
dealers
SOME SUGGESTIONS
Suggestions (1/3)• Sales force and dealers must be
properly trained so that they convey the correct message to the customer– EXHIBIT 10
• Avoid discounts on Aquatred instead Decrease Prices– Success of Tiempo due to low retail price– In competition with high mile warranty tires– Reduces Brand Image
SUGGESTIONS (2/3)• Optimize promotion during Winter
Olympics– Launch the product before the competition does– Increase awareness of a new product among
customers by creating curiosity– Change mindset by highlighting the importance &
need of safe tires in all conditions• Unavailability of product for imported
cars would not be a big concern– Only 26% buyers of Imported cars
SUGGESTIONS (3/3)• Market Extensively & Aggressively in
Rain-prone areas
• Expand Distribution Network into Garage/Service Stations– Reduce effects of whole sellers– Maximizes geographic reach– Increases Sales & Market Share
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