Harvard Case Study

Good year : The Aquatred

Launch

Presented by-Tanushree Shukla

B.Tech( Chemical Engineering )
MNNIT- Allahabad
Who are
you ?
Hey , I am Barry
Robbins
Goodyear’s vice
President of
Marketing for
North American
tires
Goodyear ?
“The
Goodyear
Rubber
and Tire
Company!”
“Known as
“The gorilla”
for its
dominance in
world tire
industry”
 Known as
“The gorilla”
41 plants in
for its
United States
dominance in
world tire
industry
 Known as
“The gorilla”
43 plants in 25
41 plants in
for its
other countries
United States
dominance in
world tire
industry
 Known as
“The gorilla”
43 plants in 25
41 plants in
for its
other countries
United States
dominance in
world tire
6 rubber
industry
plantations
 Known as
“The gorilla”
43 plants in 25
41 plants in
for its
other countries
United States
dominance in
world tire
6 rubber
industry
plantations

More than
2,000
distribution
outlets
worldwide
 Known as
“The gorilla”
43 plants in 25
41 plants in
for its
other countries
United States
dominance in
world tire
6 rubber
Ranked 3rd in
worldwide
industry
plantations sales of new
tires in 1991

More than
2,000
distribution
outlets
worldwide
So , What’s new
with Goodyear ,
Mr.Robbins?
“The Upcoming
launch of
Aquatred, a new
tire providing
improved driving
traction under
wet conditions”
Market Segmentation
Passenger Tires

1 2 3

Examples: Examples: Examples:

Goodyear Kelly Kelly-Springfield
Michelin (Goodyear (Goodyear owned subsidiary)
Firestone subsidiary)
Dunlop
Uniroyal
Goodyear’s
Broad-Line
Tires
And I need to address some
Key Issues .......
•Is Aquatred the right product ? Is it what the
consumers need?

•What is the appropriate timing for the launch of

Aquatred so as to generate support from the
company’s traditional base of independent dealers ?

•Should we expand the company’s distribution

channels , and determine if they would sell
Aquatred ?

•What should be the Pricing and Promotional

policies for Aquatred ?
 Is Aquatred the right product ? Is it what the
consumers need?
Why is that an issue ?
The industry in turning towards long-life
warranties and low-cost private labels .
Would Goodyear’s dealers be receptive
to a high-priced tire like Aquatred ?

Their competitors (Michelin and

BridgeStone) plan to launch new
tires with 80,000 miles warranties
in 1992 backed with heavy
advertising .
Lets Analyze the situation ......

152 million units of replacement tires were sold in

the year 1991
Goodyear surveyed car owners

Tread life
Performance attributes
considered when purchasing
Wet Traction tires (in order of higher to
lower importance)
Handling
Wet Traction is
Snow traction second most
considered attribute
Dry traction after tred life
Rating on tire’s traction on wet roads (Goodyear
consumer survey)

60% people found the wet traction excellent

for Aquatred but a similar response for
Invicta GS
 What is the appropriate timing for the launch of Aquatred so as to
generate support from the company’s traditional base of independent
dealers ?

Why is that an issue ?

•Goodyear could use the time of winter Olympics
January 1992 to introduce Aquatred .
•It might spark the sales of Aquatred but the initial
inventory of Aquatred was made to fit domestic cars
as opposed to smaller size of
imported cars.
•Mould to produce
other sizes would not
be ready until several
months after the
Olympics .
 According to the Survey of Aquatred test Market

Goodyear could work on moulds and

reap the benefits of imported cars
that is 26 % of the consumer section .
 Should we expand the company’s distribution
channels, and determine if they would sell Aquatred ?
Why is that an issue ?
Expanding distribution could boost sales , but 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 line of tires .

Wide range of tires are sold by Goodyear , dealers would need

advice regarding which customers would be likely to switch to
Aquatreds.
Goodyear’s Distribution Structure
2500 are
active
Goodyear Outlets
4400 1047 600

50%
revenue

Manufacturer-owned
27% 8% 15%
Government
Independent Dealers Franchised dealers
outlets revenue agencies
10%

Car dealers
40% Service stations
Small independent dealers
Other secondary outlets

50%
 What should be the Pricing and Promotional
policies for Aquatred ?
Why is that an issue ?
Goodyear hoped to price Aquatred at a 10% premium over Invicta GS,
but successful launches were attributed to low retail prices ( Tiempo
1977)

Independent Dealers in test markets ask for

price promotions on Aquatred and it was
unclear that for how long could they
keep Aquatred out of channels
that were prone to discounting
and promotions .
 Situation Analysis......

¾ th of all Goodyear tires sold in

independent or company-owned
outlets were sold on promotion , at
an average discount of 25%.

Core events – 6 in a year

They are 3 week periods spread
throughout the year during which
Goodyear dealers could buy
merchandise at a discount .
Only
 Percentage of consumers No. Of tires

42% 2
40% 4
16% 1
2% 3

152 million replacement tires are sold in 1991 .

Total number of consumers : X
0.42*X*2+0.40*X*4+0.16*X*1+0.02*3*X=152 million
X=57.14 million consumers
 Total consumers -57.13 million
Goodyear Company records

Major Percentage of Consumers in % Consumers Consumers %Consumers Consumers of

consumer consumers each segment that prefer that prefer preferring Goodyear in
Segment (million) major brands major brands Goodyear each Segment
in the given in the given over 4 other (million)
segment segment(milli major brands
on)

Price 22% 12.57 30% 3.77 16% 0.60

Value 18% 10.28 54% 5.55 17% 0.94

Quality 23% 13.14 51% 6.70 18% 1.20

Commodity 37% 21.14 18% 3.80 10% 0.38

Total 100% 57.13 3.12

3.12 million consumers for

Goodyear
25% consumers on Goodyears want Aquatred .
Potential consumers of Aquatred – 0.78 million
consumers

91% bought four tires =2.83 million tires

Total Aquatreds demand-2.90 million tires
(considering 9% to buy one tire)

90$ per tire retail price as suggested

by the company . ¾ of the
dealers buy the tire at 25%
discount ( $67.5 ) from
Goodyear manufacturers .
Total revenue generated –> $67.5*(3/4)*2.90 +
$90*(1/4)*2.90 million

= $212.56 million
Conclusions
The full scale Launch of Aquatred is estimated to cost
Goodyear $21 million .
Aquatred is to be launched with 60,000 miles warranty
with 90$ per tire , at the top of the broad-Line Segment .
Conclusions
Most of the Consumers are in the Quality buyers section
and are Brand oriented , thus retailing channels used
should be Manufactured-owned outlets and Independent
dealers . The existing dealers have conveyed the
necessary information to only 44% buyers. Training them
and establishing a stronger market with existing
distribution channel would be better .
Conclusions
The consumers do require wet-traction as an attribute in
their tires and thus Aquatred will attract consumers , but
most quality buyers and not many price-constraint
customers .
Conclusions

Aquatred can launch during Olympics but will not be able

to cater to imported cars . They must advertise to be at par
with the competitors . Highlighting the qualities while the
competitors play in low-price and tred-life strategies
That’s
all ....
Thank you !
Disclaimer
Created by :Tanushree
Shukla MNNIT-Allahabad
during an internship
under the guidance of
Prof. Sameer Mathur, IIM
Lucknow.
www.IIMInternship.com