2. THE EVENT
Launch of Aquatred, a new
tire providing improved
driving traction under wet
conditions.
3. THE ISSUES
• Right Product
• Right timing
• Risks and Benefits of expanding the company’s distribution
channels
• Should new channel sell the Aquatred?
5. The Tire Industry in the United States
Big 5 of 1900-1970
• Goodyear
• Firestone
• Uniroyal
• BF Goodrich
• and General Tire
6. Three important changes of 1970-80s
• Emergence of the radial tire to replace the older “bias” and
“bias-belted” tire constructions
• Increased foreign competition
• Change in the nature of demand from consumers and car
makers
8. • Demand for passenger tires grew sluggishly during the 1980s
• New tire prices in the U.S. market declined
• Tyre producing capacity outstripped demand
• Number of mergers and acquisitions
9. The Company
• Operated 41 plants in the United States, 43 plants in 25 other
countries, six rubber plantations, and more than 2,000
distribution outlets worldwide
• Net income of less than one percent
• Ranked third in worldwide sales of new tires
10.
11.
12. The Market for Passenger Tires
• Performance and broad-line tires
• Replacement and OEM tires
• Major brands, minor brands, and private label
13. Consumers in the Replacement
Passenger Tire Market
Buying Decision Criteria Ranked:
• 1. Price
• 2. Offers fast service
• 3. Can trust personnel
• 4. Store is attractive
• 5. Offers mileage warranty
• 6. Brand selection
• 7. Maintains convenient hours
15. Wholesale and Retail Channels for
Replacement Tires
Wholesale Distribution Channels
16. Retail Distribution Channels
• Garages/service stations:
• Warehouse clubs:
• Mass merchandisers:
• Manufacturer-owned outlets:
• Small independent tire dealers:
• Others
17. Goodyear’s Distribution Structure
• 4,400 independent dealers accounted for 50% of sales revenues
• 1,047 manufacturer-owned outlets generated 27% of sales
• 600 franchised dealers accounted for another 8% of sales
18. Goodyear’s Promotion Strategy
• Three-fourths of all Goodyear tires sold in independent or company-
owned outlets were sold on promotion, at an average discount of
25%
• Spring dating
20. Design
• Developed after comparing 10 different designs on performance
and consumer preference.
• The deep groove down the center of the tire dubbed the “Aqua
channel.”
• Tread design channeled water out from under the tire, reducing
hydroplaning and improving traction in wet conditions.
• In wet conditions, cars equipped with Aquatred traveling at 55
miles per hour stopped in as much as two-car lengths- less
distance than similar cars equipped with conventional all-season
radials.
• When 50% worn, the Aquatred maintained the same wet traction
as a new all-season tire.
35. Right Product
Aquatred doesn’t fit as the correct product for the company reasons
being:
• Within the company, it has heavy overlap with Invicta GS, both are
all season and robust - hence cater to the same category. In fact -
in a survey it was found that Invicta GS has better satisfaction level
than Aquatred. So its less likely that customers would be shelling
out a premium of 10% for some ornamental change.
• Michelin and Bridgestone both planned to launch new tires with
80,000-mile warranties in 1992 backed by heavy advertising. Its
likely that Goodyear’s dealers will be receptive to a high-priced tire
when the industry seemed to be turning toward long-life
warranties and low-cost private labels.
36. Right Timing
The launch timing of winter Olympics didn’t really suit
Aquatred reasons being:
• It might spark sales of the Aquatred, but the initial inventory
of Aquatred had been made to fit domestic cars, as opposed
to the smaller sizes for imported cars. This can create supply
bottlenecks which could lead to customer uproar and negative
publicity.
• Molds to produce other sizes would not be available until
several months after the Olympics creating further uncertainty
about supply.
37. Risks and Benefits of expanding the
company’s distribution channels
• Selling tires in lower-service outlets could erode the value of
the Goodyear brand, cannibalize sales of existing outlets.
• Might cause dealers to take on additional lines of tires.
• Fear of losing brand exclusivity by selling in every other shop.
38. Should new channel sell the Aquatred?
The decision to add Aquatred to the new channels is highly
doubtful reasons being:
• When the product itself was not promising and differentiable,
it was likely to add confusion in the huge range for the
customer.
• It could burden up the inventory adding to unnecessary cost.
39. Disclaimer:
These slides were created by Deepak Madan, BITS Pilani, during
a Marketing internship by Prof. Sameer Mathur, IIM Lucknow
(See www.IIMInternship.com)
