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Case: Goodyear - The Aquatred Launch

Dr. Prafulla AGNIHOTRI Professor Marketing Group, IIM Calcutta

Case: The Aquatread Launch 1

Main Issues Involved

Goodyears position in the industry How do consumers buy tires? How can the market be segmented? Goodyears distribution channels in the US replacement tire market Aquatreds strategic role and the marketing programme Should Goodyear broaden its distribution to mass merchandisers? Should they be offered the Aquatred?
Case: The Aquatread Launch 2

The U.S. Tire Industry

A dramatic shift in consumer preferences- for longer lasting radial tires. The globalisation of industry following the globalisation of automobile industry Foreign competition Excess manufacturing capacity. Growth in sale of private label tires Improved quality of private labels
40% of unit sales of replacement tires in 1991
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Increase from 32% to +95% from 1975 to 1991

What was Goodyears Position in the US Tire Market in 1990s?

The company was burdened with debt and deteriorating net income (Table C). Ranked third in worldwide sales of new tires (Table B, p.403). Ranked first in the US OEM market (38%) and also in the replacement market (15%). Michelin - principal competitor in the branded market (29% OEM; 15.5% Replacement market).
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Intent to Buy for Major Consumer Segments Figures in % Exhibit 7

p. 415

All PriceValueQuality Commo Buyers Constrained Oriented Buyers Buyers

Goodyear Michelin Other Uncommit ted

13 13 19 55

16 9 18 57

17 24 20 39

18 22 25 35

10 6 16 68

Case: The Aquatread Launch

What do these figures tell you?

Case: The Aquatread Launch

Goodyears consumer franchise appears weaker than its share leadership would suggest
The same % of consumers (13%) intent to buy Goodyear as they intent to buy Michelin. The difference between Goodyears intent to buy (13%) and market share (15%) =Actual purchase (2%). Goodyear has higher intent to buy among quality and value buyers (18% & 17%); but in both segments, beaten by Michelin (225 and 24%). Needs to reassess its quality leadership.
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Difference between Goodyears share of OEM tires (38%) and replacement tires (15%).. What does it indicate?

Significant absence of brand loyalty!!!!

Case: The Aquatread Launch

Brand Switching
Exhibit 8

39% of Goodyear owners repeat buy Goodyear but 44% of Michelin owners repeat buy Michelin. Goodyear, like other brands, looses out primarily to private label when OEM Goodyear tires are replaced.

Case: The Aquatread Launch

How do consumers buy tires?

Important attributes (such as tread life) Infrequent purchase (every 2.5 years) Significant dollar purchase (around $ 75 per
tire plus installation costs) High perceived risk (safety and security on long journeys)
1. In 1992, 53% of consumers did not know what tire they planned to buy next (against 36% in 1982) 2. 75% of all Goodyear tires are sold on promotion at an average discount of 25%, and 40% of replacement tires are private labels.
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What are the possible bases of segmentation?

OEM tires (35% of Goodyear $ sales) versus replacement tires (65%). Performance tires (30% $ sales) versus broad line tires (70%). Major brand tires (36% of industry units), minor brands tires(24%) and private label tires (40%).
This is nothing but product-classification scheme.
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Can we segment the market on some other bases? Such as

Price co nstrained buyers How will you describe Value oriented buyers these bases of Quality buyers prestige segmentation? conservative Commodity buyers bargain hunters trusting patrons
Relative importance of different benefits, shopping behaviour, and brand vs outlet loyalty
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Consumer Segments in the Replacements Passenger Tire Industry

Consumer Segment
Price constrained

Key Decision Criteria

Price, then brand

Shopping Loyalty to Process specific brand

Extensive Extensive Moderate ( s/to price) High

Loyalty to Specific Outlets

Very low Very low

Value oriented Brand, then price Quality buyers Prestige Brand, Conservative Outlet, Commodity B. Hunters Trst. Patrons Price Outlet

outlet Brief brand Brief Extensive Brief

Very high Mod. to low Low Low

Mod. to high Very high Low 13 Very high

Case: The Aquatread Launch

Can there be any other basis of segmentation?

Emergency purchases Planned purchases
What are the implications of this simple two segment analysis?

Case: The Aquatread Launch


Goodyears Distribution in Replacement Market

Industry Goodyear
Garages / service stations Warehouse clubs Mass merchandisers Manufacturer-owned outlets Independent tire dealers

6 6 12 9 63

0 0 0 27 58 (incl. franchised
dealers) 15 (gov.t agencies)

Case: The Aquatread Launch

Strategic Role of Aquatred in Turning Around Goodyear

Reestablish Goodyears industry leadership and reputation for product innovation, especially vis a vis Michelin. Refocus the dealers on product and away from the daily tactical problems of manufacturer-dealer relations Motivate Goodyears sales staff and dealers
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The Aquatred is likely to appeal to..

Quality and value buyers especially those who are brand sensitive and more likely to engage in pre-purchase information search.

Case: The Aquatread Launch


What should be Aquatreds positioning?

Providing superior wet traction. The Aquatred groove should be the visible point of differentiation.

Case: The Aquatread Launch


How should it be positioned?

As a performance tire or At the top of the broad line segment? What should be the price?

Case: The Aquatread Launch


Should Goodyear broaden its distribution to mass merchandisers? Should they be offered the Aquatred?

Case: The Aquatread Launch


Thank You

Case: The Aquatread Launch