Aquatred is considered a broad-line tire and not a performance tire. The trend is toward broad-line tires with higher mileage warranties. The Aquatred tire only has a 60,000-mile warranty so this presents a possible challenge to us since there are tires with 80,000-mile warranties on the market and consumers are tending to purchase those products more often. Market research has told us that wet traction is the second most important feature to customers (See figure 1) and there is not really a tire on the market today that is hitting this segment squarely. And so? Need to complete your arguments so it helps to answer the problems you raised at the outset.
Company Strengths and Weaknesses (SWOT)
Strengths:
- Goodyear is a major brand with a large market share.
- We have a loyal dealer network because we have chosen to honor the dealers in the past.
- Fairly large advertising budget with $21 million to spend on the promotion of the Aquatred.
Weakness:
- We have a lot of debt with inflated interest payments because of past issues with the company.
- We don’t have commanding market share of replacement tires with only 15 percent of the 152 million units being Goodyear products (See figure 2)
- In the past several years there has been a lot of price discounting which has cut into our margins.
- We are not number one with regard to the Value-Oriented Buyers or the Quality Buyers.
Opportunities:
- We would be the first company to market with the wet traction tire. This would give us the advantage of market leadership early on. Also this tire is revolutionary and the key benefit can actually be “seen”
- From the market survey conducted, we noted that Aquatred buyers were more likely to replace our competitors’ tires with ours, which gives us potential to take market share from our competitors.
- Opportunity to introduce our Aquatred product during the Olympics, since we have already purchased time slots during this programming.
Threats:
- Consumers may value the higher mileage warranty tire over the wet traction tire that we are offering.
- If we advertise our Aquatred tire during the Olympics, we have determined that we will not have the Aquatred tire available for import automobiles at that time. This could tarnish our reputation and dissuade consumers from purchasing our tire.
- Continental is about to launch their wet traction tire in direct competition to our tire. This would give consumers options in the wet traction segment shortly after we launch our product. OK
Distribution and transaction costs
Distribution is a concern for us here at Goodyear. We have worked hard to maintain good relationships with our dealers, yet it would appear that we are possibly losing some market share to the brands that sell their products in the mass merchandisers and discount warehouse clubs. Up until now, Goodyear has relied on 3 primary types of distribution channels. While independent dealers, manufacturer-owned outlets and franchised dealers make up the nearly all of the sales for Goodyear, the independent dealers count for nearly 50% of our sales revenue. The cost of the manufacturer-owned outlets is significant, as Goodyear has to maintain a management team for each store, as well as the capital expenses associated with that store. In addition to the expenses, Goodyear has come under fire in recent years by the independent dealers who were claiming that the manufacturer-owned outlets were cutting into their sales. It also costs money to do feasibility studies to ensure that when we open a manufacturer-owned outlet, that we are not opening too close to an independent dealer so as to not cause strife.
Independent dealers cost Goodyear money as well. Goodyear does support some advertising with the independent dealer if certain requirements of the advertisement are met. Additionally, Goodyear assists with training on inventory and accounting systems as well as training in auto services. Goodyear also provides the independent dealers with market trends from the research studies that we have done. All of these services cost Goodyear money yet we do it to keep a good reputation with the independent dealer to hopefully get them to be more efficient sales people and promote our brand more in their stores. This represents more a summary of case facts (good) and less an analysis (not so good)
Competitor analysis and strategies
Michelin has been moving steadily toward independent dealers and away from company-owned outlets. Most of their independent dealers have Michelin as their signature brand, but do sell other brands as well in their stores. Additionally, Michelin has been selling tires to warehouse clubs as well as mass merchandisers. This seems to be the trend with the other big tire brands as well. They are getting their product out in front of as many people, in as many places as possible, and are moving away from the more expensive company-owned outlets.
Michelin and Goodyear have been close in sales for the past few years. Surveys showed that Michelin had a stronger image among value-oriented and quality buyers, and we had a stronger image among price constrained and commodity buyers. Our main competitors are planning on introducing new 80,000 mile tires in the upcoming months, which is right in line with the latest market trends.
Recommendations
Aquatred’s strategic role in Goodyear is to revitalize the company and to provide a visible difference in tires to the consumer. good In order to maximize this strategic role, we need to get the tires in front of as many consumers as possible. My recommendation is to keep the independent dealers. They play an important and strategic role in the future of Goodyear. We need to keep the relationship with these dealers as strong as we can so as to ensure our future growth in this distribution channel. An important issue is the role of the salesperson in the consumers’ brand choice, and so has implications for the kind of distribution we choose.
I also believe that we need to start selling Goodyear products in warehouse clubs. In order to be competitive in all of the consumer segments we need to get the right tires in front of the consumers that feel that they have to buy at a discounted price. See my previous comment There would be little advertising and training expense in this area, as the warehouse club either don’t offer many perks to the consumers, or they take care of training their own employees. We should not distribute our Aquatred tires at these places however. As determined by market studies, the consumer that is going to be purchasing our Aquatred tire will not necessarily be very concerned about the price that he or she is paying. This purchaser is concerned with the quality of tire, so they will be more apt to purchase at the independent dealer where they will get more information and attention.
We should not distribute our tires to mass merchandisers. There will be a cost associated to opening up this new distribution channel, and over the past 10 years this channel has steadily declined. We want to concentrate our efforts on the distribution channels that show the most promise moving forward.
Plan of Action
After doing a market study with a mystery shopper we determined that the independent dealerships did not give consistent information, so we need to get training to the sales people at these places. We need to have accurate information in the hands of the sales people so they can promote Aquatred aggressively. We need to get brochures printed up and distributed to all of the independent dealers that sell our Aquatred tires. This will assist the sales people in remembering the statistics, as well as give the consumer something to take home if they are not purchasing their product today. This also gives us some consistency in our message to potential consumers. We need to capitalize on the fact that the second most important feature in a tire to consumers is wet traction. Our wet traction statistics needs to be communicated to the sales people as well as headlined in our brochure. In addition to this we need to increase print advertising so as to gain more visibility in the market.
For the first month that Aquatred goes on the market, we need to offer a 10% discount on the tires to the independent dealers. This will help us in getting them to promote these tires aggressively. In addition to this, if 15% of a given stores sales come from the Aquatred tire, we will provide them with more free advertising.
We will purchase a Chevy Corvette and have it repainted to display the Aquatred and Goodyear logo, customize the interior of the car with the latest in automotive extras and put the Aquatred tires on the car. We will shoot a video that shows that very car on a wet track with regular tires, and show it handling and stopping poorly, and contrast that with the same scenario but with Aquatred tires on it. This will allow us to show how much more effective the tire is at handling and stopping. We will have this video running in all of our independent dealers and the car will tour the country spending a few days at each dealership. Our motto would be “If the Aquatred can improve the handling and stopping distance of the Corvette, imagine what it can do for your automobile.” The Corvette display would be advertised in local papers so auto enthusiasts could come to see the car, but also generate hype about the improvement in the handing with the Aquatred tire.
One of the things that make our tires stand out is the unique tread design. We need to create a display that can be prominently displayed at the independent dealerships that is eye catching and exciting. Very good The Goodyear name needs to be displayed boldly so even if a consumer isn’t considering an Aquatred tire, they will notice the display in the store, and the Goodyear name will be fresh on their mind when they reach the counter to purchase their tire. We are looking to perpetuate our image of quality and safety in these displays and get that conveyed to the consumer.
We provide a few auto magazines with samples of our tires free of charge so they can test them in their environment. We are confident that the results will be in our favor so the magazines, when writing up their stories, will essentially be advertising for us and hitting this niche market for us as well. We will contact Consumer Reports to see if they would be interested in testing our tires for their magazine, as we have noted the potential consumers of the Aquatred will be educated and not as concerned about price as he or she is about quality. To these consumers, we just really need to get our information in front of them so they can make an informed decision.
By April we need to have expanded our distribution of all of our other tires to the warehouse clubs. We need to get into this distribution channel as tires at warehouse clubs have sales that have been on the rise for the past 10 years. We will not sell our higher end tires in these environments as the type of consumer that would purchase these tires would not generally shop at the warehouse club for them.
We should advertise our Aquatred tire in the Olympic advertisement time that we have already purchased. In addition to just advertising the Aquatred tire, we should promote that fact that Goodyear is always looking out for the consumer’s safety. This will hit a huge market, and even those consumers that are not interested in the Aquatred tire, would realize that effort and concern was put forth by the company to try to make tires as safe as possible. This is a positive spin on the company as a whole, which should translate to higher sales for our other tire products.
In conclusion, we have a unique opportunity to take advantage of a niche market that is as of yet untapped. We have already purchased advertising time at the Olympics for which we are going introduce our new Aquatred tire, as well as promote Goodyear’s continuing quest for safety and quality. We are going to open up new distribution channels for our lower end tires so as to increase market share in these areas, while ensuring that our independent dealers sales are respected and promoted as much as possible. This is a very exciting time for Goodyear and the Aquatred tire. A little long, but I like your plan of action.
Figure 1.
Most important attributes for consumers when purchasing a new tire:
- Tread Life
- Wet Traction
- Handling
- Snow traction
- Dry traction
Figure 2.
US market for Passenger Tires Replacement OEM Total
Industry 152.0 43 195
Goodyear 22.8 16.3 39.1
Goodyear’s percent 15% 38% 20%
