62085647 caseanalysis goodyear

Case: The Aquatread Launch 1

Case: Goodyear - The Aquatred Launch

Dr. Prafulla AGNIHOTRI

Professor – Marketing Group,

IIM Calcutta


Main Issues Involved

• Goodyear’s position in the industry• How do consumers buy tires?• How can the market be segmented?• Goodyear’s distribution channels in the US

replacement tire market• Aquatred’s strategic role and the marketing

programme• Should Goodyear broaden its distribution to mass

merchandisers? Should they be offered the Aquatred?


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

• Excess manufacturing capacity.

• Growth in sale of private label tires

• Improved quality of private labels

Foreign competition

Increase from32% to +95%

from 1975 to 1991

40% of unit sales of replacement tiresin 1991


What was Goodyear’s 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).


Intent to Buy for Major Consumer Segments Figures in %

All

Buyers

Price- Constrained

Value-Oriented

Quality Buyers

Commo Buyers

Goodyear 13 16 17 18 10

Michelin 13 9 24 22 6

Other 19 18 20 25 16

Uncommitted

55 57 39 35 68

Exhibit 7 p. 415


What do these figures tell you?


Goodyear’s 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 Goodyear’s 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.


• Difference between Goodyear’s share of OEM tires (38%) and replacement tires (15%)…..

What does it indicate?

Significant absence of brand loyalty!!!!


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.


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.


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.


Can we segment the market on some other bases? Such as

• Price co nstrained buyers

• Value oriented buyers

• Quality buyers – prestige

– conservative

• Commodity buyers – bargain hunters

– trusting patrons

Relative importance of different benefits, shopping behaviour, and brand vs outlet loyalty

How will you describe these bases of segmentation?


Consumer Segments in the Replacements Passenger Tire Industry

Consumer Segment

Key Decision

Criteria

Shopping Process

Loyalty to specific brand

Loyalty to Specific Outlets

Price constrained

Price, then brand

Extensive Moderate

( s/to price)

Very low

Value oriented Brand, then price

Extensive High Very low

Quality buyers•Prestige•Conservative

Brand, outlet

Outlet, brand

Brief

Brief

Very high

Mod. to low

Mod. to high

Very high

Commodity•B. Hunters•Trst. Patrons

Price

Outlet

Extensive

Brief

Low

Low

Low

Very high


Can there be any other basis of segmentation?

• Emergency purchases

• Planned purchases

What are the implications of this simple two segment analysis?


Goodyear’s Distribution in Replacement Market

Industry Goodyear

Garages / service stations 6 0

Warehouse clubs 6 0

Mass merchandisers 12 0

Manufacturer-owned outlets 9 27

Independent tire dealers 63 58 (incl. franchised dealers)

Others 4 15 (gov.t agencies)?


Strategic Role of Aquatred in Turning Around Goodyear

• Reestablish Goodyear’s 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 Goodyear’s sales staff and dealers


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.


What should be Aquatred’s positioning?

• “Providing superior wet traction”.

• The Aquatred groove should be the visible point of differentiation.


How should it be positioned?

• As a performance tire or

• At the top of the broad line segment?

• What should be the price?


Should Goodyear broaden its distribution to mass

merchandisers? Should they be offered the

Aquatred?


Thank You

62085647 caseanalysis goodyear

Documents

consumers buy tires

replacement tires

oem tires

aquatread launch

mass merchandisers

goodyear broaden

consumers

goodyear