Case: Goodyear - The

Aquatred Launch
Dr. Prafulla AGNIHOTRI
Professor Marketing Group,
IIM Calcutta
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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?
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The U.S. Tire Industry

Increase from
32% to +95%
from 1975 to 1991

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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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
Buyers Constrained Oriented Buyers

Commo
Buyers

Goodyear

13

16

17

18

10

Michelin

13

24

22

Other

19

18

20

25

16

Uncommit
ted

55

57

39

35

68

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What do these figures tell you?

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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!!!!

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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.

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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
segmentation?
Quality buyers prestige
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

Key Decision Shopping Loyalty to

Process specific
Criteria
brand

Loyalty to
Specific
Outlets

Price
constrained

Price, then
brand

Value oriented Brand, then

price
Quality buyers
Prestige
Brand,
Conservative Outlet,
Commodity
B. Hunters
Trst. Patrons

Price
Outlet

Extensive

Moderate
( s/to price)

Very low

Extensive

High

Very low

Very high
Mod. to low

Mod. to high
Very high

outlet Brief
brand Brief

Extensive
Low
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Brief
Low
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Low
13
Very high

Can there be any other basis of

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

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Goodyears Distribution in
Replacement Market
Industry Goodyear
Garages / service stations

Warehouse clubs

Mass merchandisers

12

Manufacturer-owned outlets

27

Independent tire dealers

63

58 (incl. franchised
dealers)

Others

4
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15 (gov.t agencies)
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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.

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What should be Aquatreds

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

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How should it be positioned?

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

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Should Goodyear broaden its

distribution to mass
merchandisers?
Should they be offered the
Aquatred?

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Thank You

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