Goodyear Aquatred launch – Strategic Recommendations

Table of Content

Summary of Recommendations:

The timing, targeted segments and distribution channels are critical to the successful launch of the Aquatred tire and to the reposition of Goodyear as No 1 in all its segments consideration sets. Thus;

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* The Aquatred should be launched during the Olympics and be positioned as a top of the line, broad-line, major brand replacement tire.

* The Aquatred can and should be priced at $90.

* Distribution of the Aquatred should be restricted to existing channels (Independent Dealers).

* Immediate attention should be placed on overcoming issues associated with availability of stock and import moulds for the Aquatred.

* Goodyear should view the Mass Merchandiser and Discount Club channels as an area for extensive future growth. Immediate expansion into this channel is recommended for low to medium price/product segments.

Notations relating to the Aquatred launch:

* Aquatreds differentiating characteristics of superior performance, wear and consequently higher price will most likely hold highest appeal in the upper tiers of the Broadline segments of ‘Quality’ and ‘Commodity’ type tire consumers. This segment has a propensity to buy tires bearing superior attributes across each category (Appendix III)and is less likely to make trade offs of one attribute over another. These consumers also demonstrate a relatively low price sensitivity( Appendix V) making the Aquatred most suited to their purchasing habits.

* Given that the tire is most suited to the Quality and Commodity segments, it highly likely that lost market share can be regained in this area that has more recently been dominated by Michelin.

* The Aquatred should be priced at $90. Research indicates consumers expect only a $6 increase in price when new tires enter the market, however, the Aquatred will be the only tire of its kind in the market which will justify the $10 increase. Plus, Aquatreds characteristics will appeal to the quality consumer who are relatively price inelastic in choice. (Appendix V).

* In addition, discounting the Aquatred should be discouraged amongst dealers where possible. The Aquatreds differentiating characteristics render it a ‘premium tire’ that will support a higher price described above. Maintaining price integrity on this ‘revolutionary’ tire will provide greater margins to Goodyear and its dealers who should be made aware of the benefits of such integrity.

* The Aquatred will however, only be a success if independent dealers support the product. Thus in order to retain the veracity of its premium position, the Aquatred should be limited to existing distribution channels (Independent Dealers) since they are better equipped to provide the service, product presentation and expertise demanded by the targeted segments.

In addition, 33% of consumers indicated outlet is most important (Appendix VI) and broadening channels for this particular product will risk compromising its perception as an ‘exclusive tire’ available only in ‘selected outlets’. Thus, the Aquatred should not be launched or made available via MM since its premium position in the market will be eroded and price and margins will be compromised. The Independent committee should endorse this move at least in the short term due to the increase margins and exclusivity offered on the tire.

* Launching the Aquatred during the Olympics will be essential to creating optimum product awareness. Whilst a typical launch cost is $21M, it is essential a strong campaign be used to introduce the product. The Olympics should be seen as a great time to gain maximum consumer exposure in a season that is appropriate for the wet weather tire and where wet traction is seen as one of the most important attributes in tire (Appendix III). Launching during the Olympics will make the most of an important time to utilize relationships with the media, perhaps even the athletes and ensure unified and motivated sales force.

* Whilst there are concerns about the availability of stock and the delay in import mould production, it is essential these be overcome immediately to ensure “first – mover advantage” is attained. These segments are “most likely to drive imported cars”, complemented by encouraging growth on the import car tire market (Appendix I)thus an immediate push is required for development of the moulds for imported cars to match the timing of the launch.

* Finally, it is not essential that the Aquatred incorporates an 80,000 km warranty immediately as its distinctive handling and safety attributes are its differentiating point. However given tread life is the most important attribute of a tire (Appendix III), incorporating an extended warranty if possible, will ensure that the product is capable of matching rumored competitors specifications maintaining ‘first mover advantage’.

Longer term recommendations:

* Price and discounting in the Broad line market has lead to a lack of price consistency (and decreasing margins) fostering a “shop around” mentality for a growing proportion of consumers. In fact, price is the No1 purchase selection criteria (Appendix IV) and the mature nature of this market will make it difficult to improve existing margins at readily discounted prices. Growth will only be attained through share capture in existing segments via expansion of distribution channels.

* The company has been losing money through limiting its distribution channels and drastic measures are needed to remedy the issue. By not expanding channels, Goodyear risks being replaced by other brands already sold through these outlets or even Michelin surpassing Goodyear in sales of every product category based on availability alone. Put simply, Goodyear has not been placing its tires where consumers buy them though selling exclusively via independent dealer networks.

* In addition, shopping habits of consumers have changed markedly in the last few years. Tires are becoming more of an impulse item and value-minded buyers are purchasing from cheaper multi branded discount outlets and warehouses more frequently. Market share of these outlets has grown (Appendix VII) 30% in the previous 5 years while the share of tire dealers has fallen 4%. Expanding distribution channels gives Goodyear exposure to 24% more of the market.

* It is not necessary for these new channels to have access to the entire Goodyear range for two reasons. 1). Consumers are also segmented by shopping habit and not all consumers are likely to shop for premium end tires at MM or Discount outlets. 2.) It would create major problems for the independent retailers and franchisees that would be forces to compete on price.

* It is recommended that only those products aimed at the price constrained and commodity buyers me made available to this channel. (See Appendix IX for distribution segmentation) It is not expected that the expansion of channels will dilute the strength of Goodyear’s brand equity in the market if it remains select and strategic about product placement issues.

* These are short term suggestions for existing product lines however it is strongly recommended that research be undertaken to more clearly define segments in the market. Clearly some of the existing ‘lifestyle’ based segments have overlapping characteristics (see Appendix V) which creates confusion for development, marketing and consumers. In addition, too many premium lines are being distributed through dealers and none of the lower priced lines that customers are demanding are being developed appropriately. Thus redefining the characteristics of the segments will allow a greater degree of targeting and more than likely extensively broaden the range of tires (new generation products) available to the market.

* It is equally important to clearly identify product placement issues based on consumer’s propensity to spend at through each channel (even gas service stations play a part in Michelin’s No1 status) as this will ultimately determine which new generation products to make available to each channel. Regardless, it is relatively clear given competitor success through expanded channels, that market share will be gained and not cannibalised.

* Given developing new channels risks eroding loyalty and effectiveness of independent channels you must find a way to work together in harmony for mutual benefit. You should look at providing dealers with a line of lower prices tires that satisfy demand and prevent dealer anarchy regarding dual availability of like tires.

* Overall, this will inevitably mean most existing tires will have to be withdrawn and several new products to be produced. This is not of concern and Goodyear has invested heavily in the infrastructure over the previous years giving it the capability to define, develop, produce and sell new products in quick succession. This capability will be critical to the reposition of Goodyear as the market leader across all categories and move it to number one position.

* Finally, a clear opportunity exists in the private label product lines. In conjunction with expanding distribution, development resources should be placed behind the Kelly-Springfield Private label collections since a growing proportion of consumers are replacing their tires with private label brands as a result of the lower price.

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Goodyear Aquatred launch – Strategic Recommendations. (2017, Dec 24). Retrieved from

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