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CASE: GOODYEAR, THE AQUATRED LAUNCH
GROUP 6
BACKGROUND (sharmista)
• 1900s – U.S. tyre industry dominated by 5 companies.
• It was characterized by consistent growth in revenues
& profits and absence of foreign competition.
• 1970 -1980s: three important changes
– Bias tyres replaced by radial ones.
– Foreign competition
– Change in demand from consumers and car manufacturers.
BACKGROUND
• Major impacts of these changes:
– Sluggish demand due to increased average life of
tyres with less usage of cars.
– Declined tyre prices by 25%
– 12% increased tyre making capacity but capacity
utilization reduced to 76%.
– Mergers and acquisition due to economic slow
down.
BACKGROUND• Goodyear – known as “Gorilla” for its dominance in the
tyre industry.
• Highest market share -15% (replacement) & 38% (OEM
market) in 1991
• Made investment over $1.5bn to convert its factories to
produce radials.
• Had strong track record in launching innovative
products.
• Stanley Gault, Chairman , increased priority on new
product development.
BACKGROUND
• GY Earned net income of less than 1% on total
revenues.
• GY testing a new retail format “just tyres”
• Price conscious consumers, making purchases
only on sale.
• Increasing dependence of industry on independent
dealers to increase availability & market share.
BACKGROUND
• 50% of GY’s independent dealers sold only GY tyres
and other 50% stocked at least one other brand.
• These dealers aggressively merchandised other
brands but still GY generated 90% of its revenue.
• 1991 – Dealers were not pleased with their reliance
on auto service which earned 48% of their revenues.
BACKGROUND
• Michelin owners were most loyal followed by GY.
• GY’s competitors planning a wide range of campaigns
for 1992.
• Aquatred – new tyre, with improved driving traction
under wet condition.
• Robbins concerned over the Aquatred launch program.
• Aquatred – product to revitalize GY.
QUESTIONS
• Aquatred, a the right product consumers?
• Whether distribution be expanded and if so which
channels to be added?
• Whether new channels would sell Aquatred?
• Launching Aquatred during Winter Olympics, was
the right option.
• Finalizing on the pricing and promotional policies.
AQUATRED, A RIGHT PRODUCT FOR CONSUMERS? (latif)
• Yes.
• Provided improved wet driving traction and as
per survey wet traction is the 2nd most important
performance attribute considered while
purchasing.
• Tread life was given 1st priority while purchasing
tyre and Aquatred offered 60,000 miles warranty.
PRICING
• Price conscious consumers, making purchase only on
sale.
• New tyre prices in U.S. passenger market had declined
& averaged at $75.
• Aquatred - priced at 10% premium over the Invicta GS.
• Current pricing was appropriate:
– Aquatred, only product in the market offering wet traction.
– Wet traction 1st priority while making purchase.
CONT…
• Pricing also depends on the
marketing channel to be used.
• Use of exclusive distribution for
Aquatred to signify uniqueness and
premium pricing.
PUSH STRATEGY FOR GY PRODUCTS
• GY induced its intermediaries to carry, promote & sell
only its tyre lines to consumers by:
– Offering 28% retail margin on GY tyres as compared to 25%
on other major brands.
– Offering its mechanize at a discounts.
– Extending financing on tyre orders.
– Offering other such services, not popular with every dealer.
– GY tyres to be available only in few dealership provided
they carry only GY brand.
PULL STRATEGY FOR AQUATRED (anuja)
• GY used pull strategy for Aquatred i.e. persuading
the consumers to demand products from sellers.
• Strategy is useful incase of
– Brand loyalty: Aquatred test market data revealed
61% of Aquatred buyers were quality buyers (i.e. loyal
to brand and outlet)
– Michelin had most loyal customers followed by GY.
CONT….
– Perceived difference: survey also
revealed that buyers were more likely to
replace competitors’ tire with Aquatred.
– Choose brand before they go to store:
according to the survey majority buyers
considered brand as the primary
shopping orientation followed by store.
ADVERTISING & PROMOTIONAL POLICIES
• GY usually spends 9-11% of sales on advertising and
promotions.
• 60% spent on promotions.
• 2/3rd of all GY tyres were sold on promotion i.e. an
average 25% discount.
• Michelin and Bridgestone to launch new tyres (80,000
miles warranty) backed by heavy advertising.
CONT…
• Firm’s advertising decisions depend on how
much motivation dealers need.
• Need to advertise more for Aquatred as:
– Miles warranty was just 60,000 when competitors
were coming up with 80,000 miles warranty
– Priced higher when consumers where getting price
conscious.
– Targeted at maturing replacement market.
CONT….
• Increase advertising to induce sales
and thus increase capacity utilization
which is currently lower.
GY’S DISTRIBUTIONAL CHANNEL (anesh)
• For consumer marketing, channels
used
– One and two level channel:
• For industrial marketing, channels
used
– One level channel.
One and two level consumer channels
GY(MANUFACTUERE)
Manufacturer owned outlets
Consumers
Independent dealers
(Wholesalers)
Car dealers, service stn, independent
dealers(Retailer)
Consumers
Independent dealers
(Wholesalers)
Consumers
Own retail outlets
One level industrial distribution channel
GY(MANUFACTUER
E)
OEM
Consumers
CONT….
• Retail channels:
– Independent dealers accounting for 50%
of sales
–Manufacturer owned outlet – 27% of sales
– Franchised dealers – 8% of sales
– Government agencies – 8% of sales
WHETHER TO EXPAND DISTRIBUTION AND IF SO WHICH CHANNELS TO BE
ADDED? (ruju)
• To modify distribution channel when consumers
buying pattern changes, new competition arises
and as the product moves into later stages.
• Should opt for selective distribution: relying on
more than few but less than all intermediaries.
• Include large independent tire chains and mass
merchandisers.
CONT…
• Use only for selected tyre lines which have
entered the maturity or decline stage.
• With this it can gain adequate market coverage.
• Would avoid brand dilution.
• Avoid channel conflicts by reserving selling
rights of certain goods only to individual
dealers.
WHETHER NEW CHANNEL SHOULD SELL AQUATRED?
• Use exclusive distribution: limiting number of
intermediaries
– Selling Aquatred only through Independent dealers &
manufacture owned outlets.
• Introduced to revitalize GY brand.
• Premium pricing under depressed economic situation.
• Try & bring down its levels of channel to one to avoid
adding much to price.
CONT…
• Protect its image by avoiding over exposure and
availability in discount stores, as its positioned in
the top broadline segment.
• Avoid price wars due to limited availability and thus
higher margins.
• Early buyers are willing to pay for high value added
channels, but later switch to lower cost channels.
LAUNCHING AQUATRED DURING WINTER OLYMPICS (salil)
• Yes. • Greater exposure within budgeted
advertising expense.• Scarcity would signify unique and
justify premium pricing.
Suggestion
• To periodically review channel design of
Aquatred and modify it if not working as
planned.
• Use of e-commerce marketing practices.
• Lowering price at later stages to drive
competition out.