Goodyear: The Aquatred Launch

Case Title:

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