Goodyear: The Aquatred Launch

มาตรฐาน

Sarinda Wongksolsuk

Case Title: “Goodyear: The Aquatred Launch”

Authors: John A. Quelch and Bruce Isaacson

Publication: McGraw-Hill

Key Issues:

• How can Goodyear be more competitive and maintain its leader position?

• How to launch Aquatred effectively?

Factors that should be taken into consideration:

Intense competition

Although Goodyear was the leader in U.S. passenger tire market with 15% market share, the company still had to be very careful in all things done because the competition was so intense. There were so many players in the industry, both branded and private label. Although, each of them had less than 10% of market share, the second in rank, Michelin, was growing very fast in both replacement and OEM market. Also, the private label had become the biggest threat for all branded tires since many branded tire owners intended to replace their tires with private label.

Changes in consumer preferences

From Goodyear’s research, 45% of tire buyers thought that price was the most important factor when shopping for tires, followed by 33% for the outlets and 22% for the brand. Also, Goodyear segmented consumers into four categories: price-constrained buyers (22%), commodity buyers (37%), value-oriented buyers (18%), and quality buyers (23%). Recently, more and more buyers became commodity buyers. When Goodyear launched a survey asked what brand of tires the owners intended to buy the next time, Goodyear had the highest percentage among price-constrained buyers (16%) and commodity buyers (10%), while 24% of value-oriented buyers and 22% of quality buyers intended to buy Michelin tires. This meant that Michelin’s consumers had high loyalty to the brand more than Goodyear’s.

Goodyear distribution channels

There were three main distribution channels of Goodyear: 4,400 independent dealers accounted for 50% of sales revenues, 1,047 manufacturer-owned outlets generated 27% of sales, and the 600 franchised dealers accounted for another 8% of sales. Comparing to the industry’s statistics that had six main channels of retail sales: garages/service stations (6%), warehouse clubs (6%), mass merchandisers (12%), manufacturer-owned outlets (9%), small independent tire dealers (40%), and large independent tire chains (23%), Goodyear might have too few channels of distribution. The company could lose lots of tire customers who their preferred outlets had no Goodyear tires. Although Goodyear claimed not to want its tires sold in low-priced outlets, they sporadically obtained Goodyear tires. Therefore, Goodyear should answer itself first why it didn’t want its tires sold in low-priced outlets? Bad image? Then why Michelin, which had its tires sold in low-priced outlets, still got higher percentage from value-oriented buyers and quality buyers in the survey of ‘what brand of tires the owners intended to buy the next time’?

New product launched: Aquatred

Aquatred was a new tire providing improved driving traction under wet conditions. The question was ‘was it the right product for the dealers and for the consumer, as the industry seemed to be turning toward long-life warranties and low-cost private label?’

It was also planned to launch during the Winter Olympics in January of 1992. However, the initial inventory of Aquatreds had been made to fit only domestic cars and molds to produce other sizes would not be available until several months after the Olympics.

In addition, Goodyear hoped to price the Aquatred at a 10% premium over the existing most-expensive tire. However, as the company research stated that more customers were price-sensitive, the company doubted whether the customers would be interested in Aquatred.

Possible Solutions:

• To be competitive in the intense competition, the company needed to figure its core competencies out and differentiate itself from the competitors. As tire was the commodity product, the product itself was difficult to differentiate. Therefore, the company should emphasize on other aspects, for example, strong brand image, and outstanding customer services.

• One solution that can be used to make customers loyal to the brand was implementing customer relationship management or CRM. It was the system used to establish and retain long-term relationship with the customers.

The pros of CRM

o Standardize – All departments that had to deal with customers would have real-time and same format of database to serve all customers.

o Quicker – As the information was real-time, the company could provide faster cross-function services to the customers.

o Know what they want – The customers’ database would show previous purchasing data and the preferences of all customers, which the company could use to forecast the trends and serve what customers really want.

The cons of CRM

o Costly – CRM software was in high price, and there were also some hidden costs, for example, training session.

o Resistance – Most people didn’t like change, some people might even resist. The company had to give time for employees to adapt themselves with new things.

• As it seemed that Goodyear had too few channels of distribution, the company should find more and new ones. From the fact that Michelin sold its tires in low-priced outlets and wasn’t perceived as low-price tires, Goodyear might also be able to do it if the company had right pricing strategy. The distribution channels that Goodyear never used were garages/service stations, warehouse clubs, mass merchandisers, and large independent tire chains. Firstly, Goodyear should evaluate which channel would be suitable for the company, and then test with one outlet from each channel that the company selected for three months. Then, redo the evaluation to make the final decision about which channel should Goodyear expand into.

• Aquatred was the right product for Goodyear. Most people perceived tire as commodity product for long because no player came out with very innovative product. Aquatred could gain first mover advantage as it was very innovative one. Also, from Goodyear’s survey, the second most important tire attributes was wet traction. Therefore, Aquatred would get attention from many customers who concern about tire’s quality.

Aquatred should be launched as soon as possible. It’s innovative product, which could gain highest profitability only when being the first mover. For the problem of unavailable sizes of Aquatred for imported cars if it launched during the Winter Olympics, the company could solve this problem by let those customers make a reservation for unavailable sizes of Aquatred and give them special promotion for that.

Although price was an important factor to be considered when customers wanted to purchase tire, there were still customers who concerned about quality more than price. Aquatred should focus more on quality buyers and value-oriented buyers. In addition, Goodyear could acknowledge the customers that Aquatred was only $8.2 – 8.5 more expensive than the existing most-expensive tire.

Recommendations:

• As Goodyear was the market leader, being innovative and doing lots of researches to observe the trends and changing in consumer preferences were the right things.

• As it was estimated that 75% of all Goodyear tires sold in independent or company-owned outlets were sold on an average discount of 25%, it implied that the company might have too many promotions. Finally, the consumers wouldn’t come to buy Goodyear tires at full price and it could affect company’s image, too.

• Goodyear needed loyalty program to establish and retain relationship with consumers as soon as possible before they switched to other branded tires, like Michelin, or private label tires that had lower price than Goodyear.

• The company should find a way to compromise with independent dealers about competition in the areas, while expand more distribution channels and find more new retail formats, like Just Tires.

• In order to launch Aquatred effectively, Goodyear needed cooperation from every department, especially marketing department. Integrated marketing communication was very important to create awareness of the customers. It should focus on the word “innovation” and “safety under wet conditions”.

5 responses »

  1. hi sandy i have just done a blog about aquatreds in the Uk but not in ass much depth as your excellent blog. the trend of Goodyear was echoed across from the USA to the UK so we both have pretty much the same story thanks eric roberts

  2. Pingback: GOODYEAR AQUATRED Wet Weather tyres

  3. hi Sandy i find it interesting to go back and analyse the products and succes or failure of these products created by the big tyre companies such as Goodyear i am going to dig deep and come up with some other similar tyre products over the years perhaps you may have some ideas for me ?? eric robetrs

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