THE AQUATRED LAUNCH

PanaceaAnkit – 092104Bhavin – 0821

Jayesh – 092120Biju – 0821

Nigam – 082142

The Goodyear Rubber and Tire Company

• 41 plants in U.S. 43 plants Overseas• 2,000 distribution word wide.• Also known as “The Gorilla”.• Around 1,05,000 employees• Ranked Third in worldwide sales of new tires.• Innovative in terms of technology ($1.5 b.)• Marketing (Eagle Tires, Tiempo)

Performance Vs. Broad-line TiresMore expensive Better traction.

Less expensive Poor handling

25% of Goodyear’s unit Sales 30% of Dollar salesHigher percentages of profits.

Less percentage of profits.

Replacement Vs. OEMSold to Individual Consumers . Sold to Car manufacturers.

65% of Revenue 35% of Revenue

Cut-through CompetitionLarge Scope

Market Leader (Rank 1; Mkt Share 38%)

The Market For Passenger Tire

Brand ClassificationMajor Brands Minor Brands Private Label

36% of unit sales. 24% of unit sales. 40% of unit sales.

Highest recognition among consumers.

Minor but well-recognized among consumers.

Larger manufacturer used excess capacity to service private labels.

Goodyear, Firestone, Michelin, Bridgestone, Pirelli and Goodrich.

Dunlop, General, Kelly , Uniroyal, Cooper, Yokohama and Toyo.

They carried names to particular retailers.

The Market For Passenger Tire

Independent DealersStrictly whole-sellers Retail Dealers Retail Owners

10 % 40 % 50 %Car dealers, service stations, small independent dealers

Other dealers, secondary outlets

Own retail outlets

WholesaleDistribution Channels (percent of U.S. passenger tire replacement sales in units)

Type of Outlet 1976 1981 1986 1991

Oil companies 9 5 3 2

Large retailers 24 20 16 19

Manufacturer-owned outlets 11 10 13 12

Independent dealers 56 65 68 67

Channels

ChannelsRetail Distribution – passenger tires

Garage / service station

Warehouse clubs

Mass Merchandisers

Manufacturer-owned outlets

Small independent tire dealers

Large independent

tire chains

Set-up Small Outlets Large Stores Large Retail space / chain

Large Outlets One or two outlets

Concentrated within geographic

regions

Outlets Neighborhood outlets

less than 100 outlets

Some hundreds less than 100 outlets

Various 30-100 outlets

Product / service offered

Tires, gasoline, auto services

Food ,clothing electronics ,tires

,hardwareOnly installation

of tires

Carried various types of

merchandise. Performed auto

services

Tires Tires Tires

Tires sold Private lab. / Branded

Branded Various Branded / own

brand

One brand Start with a brand and add on

later / private labels

Private labels / Branded

Players Many Sam’s, Pace, Price club,

Costco

Kmart / Sears /Wal-Mart

Manufacturers : Goodyear / Michelin / Firestone

Many Tire America, National Tire Warehouse,

and Discount Tire.

Strategy Low volume / Stiff competition

from high volume players

Deal based/ Low prices

High Volume/ Low prices

High Volume/ Low prices

Low volume/ Stiff competition from

high volume players

High Volume/ Low prices

Goodyear’s Distribution Structure4 channels of distribution : • Independent dealers : Accounted for 50% of sales revenues through

4,400 outlets (2500 active selling full line of Goodyear tires) • Manufacturer-owned outlets : Generated 27% of sales through 1,047

outlets• Franchised dealers : 600 in total accounted for another 8% of sales• Government agencies : 15% of sales

Goodyear did not sell tires in garages/service stations, warehouse clubs, or mass merchandisers. However another private label of Goodyear “Kelly Springfield was sold by mass merchandisers”

“Just tires” a proposed new retail format of Goodyear planned to offer tires & fast oil change without appointment and guaranteed speed & quality of installation

Manufacturer-owned outlets : •Greater control for opening / closing an outlet•High associated demands for capital and management attention•Some competition perceived by Independent dealer•Converted some outlets into franchised dealerships.

•Independent Dealer•Required owner to invest $100,000 and generate revenues of $1,000,000 pa.•Sold an average of 15.5 tires/day, including both Goodyear and other brands of tires•Most Goodyear dealers had majority of their sales from Goodyear tires - average selling price of $75 per tire. •Margins :

– 28% averaged for independent dealers on Goodyear tires– 25% for dealers carrying other major brands– 20% for private label tires

•Average wholesale margins were 18% for private label tires and 14% for Goodyear tires

Goodyear’s Distribution Structure

Sales Operation

Company Owned Outlet• 42 Districts (1 DM)• 20 to 23 Stores each (1SM)

Independent Dealers• 28 Districts (1DM)• Avg. 3 SM• Services

– Expertise & Training– GY Business Mgt. System– National & Regional Adv.– Research on Market Trend– Certified Auto Service

Independent DealersAuto Services

• Services sales $38,100 per month per outlet– 26% (1980) to 48% (1991)– 20% tries related work

• Margins – 50% Services Labor– 20% to 25% Parts installed

• Revenues– 70% services Labor– 30% parts

Independent Dealers

• Services provided were not free.• Paid upon receipt, ordered in full trailer loads

or purchased under occasional promotional programs.

• Allowance– Wholesale Allowance– Merchandising Allowance 1.5%– Advertising Accruals 4%

Goodyear & Independent Dealers

• 1989– 70% only GY & 30% other brand also

• 1991– 50% – 50%– Aggressively merchandised other brands but GY

generated 90% of the revenues. • Independent dealers network better option– Grow sales, expand brand availability & increase

market share

Consumer Behavior

Consumer Behavior

Tire Attributes• Tread Life• Wet Traction• Handling• Snow Traction• Dry Traction

Tire Criteria• Price • Offers Fast Service• Can Trust Personnel• Store is Attractive• Offers Mileage Warranty• Brand Selection• Maintains Convenient

Hours

Consumer SegmentsType of Buyers Loyalty to

OutletLoyalty to Brand

Shop Around Other

Price Constrained

LESS LESS MORE Best in their Budget

Value Oriented LESS MAJOR BRANDS

EXTENSIVELY Search for best prices

Quality- Prestige

MORE MORE LESS Best Tires. 65% Major Brand

Quality - CC MORE LESS LESS 38% Major Brands

Commodity- Bargain Hunter

LESS LESS EXTENSIVELY YOUNG,PRICE

Commodity- Trusting Patrons

MORE LESS LESS Lower Price

CompetitionIntent to buy Major Brand Segments

? 36% (1982) TO 53% (1992)

Switching Among Brand

• 9%-11% of sales on adv. & promotion• 60% on promotion

• 60% share of voice in TV & Magazines

Promotions1. Estimated 75% of all Goodyear tires sold in independent or

company-owned outlets were sold on promotion, at an average discount of 25%. Offered to the consumer by schemes like one free tire with the purchase of three tires, one tire for half price with purchase of another tire at full price, or 25% off the price of selected tires.

2. Promotions organized around “core events”—six 3-week periods spread throughout the year to buy merchandise at a discount. This was supported by radio, television, and print advertising announcing special prices on specific tire lines.

3. “Spring dating,” organized every spring , provided extended financing on tire orders to Goodyear dealers

Aquatred

• Different• Design– Performance & Consumer Preference– Aquachannel– Hydroplanning & Wet Traction– 60,000 mile warranty– Top in Broad Line

Test Market - Result

• Aquatred buyer were likely to replace competitors tires.

• Less Cannibalizing (GY 38-51) (M17-15)• Information Search is extensive• Braking the orientation (Brand 56-47)– Uplifting Brand Equity

• Target Segments– Value Oriented & Quality Buyer

Test Market - Result

• Detailing by Salesperson

Details Aquatred Invicta GS

60 K mile Warranty 41% 10%

Great Wet Traction 33% 38%

Don’t tell any thing 13% 42%

Won’t Hydroplane 16% 9%

Other 29% 18%

• Absences of Integrated communication at Touch Point

The Launch of Aquatred

• A high profile nationwide launch of Aquatred was planned to have a strong impact on the market as it was a product which would revitalize the image of Goodyear in the market.

• An budget of $21 million

•Launch during the Winter Olympics in January 1992 was proposed to get an advantage of the mass promotion and mileage.

Launch Issues

• Right Product or not• Timing• Distribution Channel• Initial Inventory• Communication at Touch Point• Pricing & Promotion

Team RecommendationsGo-to Market Strategy1. Customers : Value-oriented & Quality buyers segment2. Communication Plan :

a) Message : Highlight core value of safety , trust & reliability at all weather conditions.

b) Place : Upcoming Olympics events on Jan-1992 through a video ad with above message.This needs to be backed up with :

» Radio Ads» Teaser Ads to create inquisitiveness & awareness » Billboards» Press releases» “On Snow” Demo

Team Recommendations

• Initial Inventory– Test Market Result have shown– 74% buyers of Domestic– 26% buyer of Imported

Team RecommendationsChannel Strategy1. Use existing Independent Chain & manufacturing outlets2. Geographic spread of all contact points for maximum reach3. Design promotional incentive schemes for dealers .4. Motivate / train / facilitate other Independent dealers to

promote Goodyear products (total 1900 dealers)5. Contact point integration to have same message (Training )at

all touch-points.

DISCUSSIONS …

Regards,Panacea