MARKETING MANAGEMENT
PREPARED BY
VRISHANK SINGH(MBA152063)
AKSHAY TYAGI(MBA152064)
RISHABA JAIN(MBA152046)
KUNAL GARG(MBA152028)
ROHTASHVA GUPTA(MBA152047)
INTRODUCTION TO CASE
The US tire industry was denominated by 5 companies in the early 1970s where all the
players were from US Goodyear, Firestone, Uniroyal, BF Goodrich, General Tire.
Goodyear operated 41 Plants in US, 43 Plants in 25 other Countries, six rubber plantations,
2000 Distribution outlets worldwide, 4400 Independent dealers, 1047 manufacturer owned
outlets and 600 franchise dealers.
The company also had a strong track record in launching innovative new products. Goodyear
had made large investment (over $1.5 billion) during the late 1970s to produce radials.
Goodyear had EAGLE, AQUATRED, INVICTA, ARRIVA, TIEMPO, CORSA in its brand
portfolio.
Goodyear had produced two lines of private label tires: All American and The Concorde,
which were replaced by Goodyear branded tires in 1991.
CHANGES AND IMPACT
MARKET SEGMENTATION-PASSENGER TIRE (3 WAY)
1. PERFORMANCE VS BROADLINE TIRES
MORE EXPENSIVE LESS EXPENSIVE
BETTER TRACTION POOR HANDLING
HIGHER PROFIT %(25% TOTAL LOWER PROFIT PERCENTAGE
SALES)
2. REPLACEMENT VS OEM TIRES
SOLD TO INDIVIDUAL SOLD TO
CUSTOMERS MANUFACTURERS
65% REVENUE 35% REVENUE
CUT THROUGH COMPETITION MARKET LEADER(RANK-
1,38%)
BRAND
3. MAJOR CLASSIFICATION
BRANDS MINOR BRANDS PRIVATE LABELS
36% UNIT SALES 24% UNIT SALES 40% UNIT SALES
HIGHEST MINOR BUT WELL EXCESS CAPACITY
RECOGNITION RECOGNIZED USED TO SERVICE
E.G. DUNLOP,YOKOHAMA, PRIVATE LABELS
GOODYEAR,MICHELIN COOPER,KELLY CARRIED NAMES TO
,PIRELLI,BRIDGESONE RETAILERS(CONCORD
E)
CONSUMER BEHAVIOR(REPLACEMENT TIRES)
CONSUMER SEGMENTS
TYPE OF BUYER LOYALTY TO LOYALTY TO SHOP AROUND MAIN FEATURE
OUTLET BRAND
PRICE LESS LESS MORE WANT BEST IN
CONSTRAINED THEIR BUDGET
VALUE ORIENTED LESS MAJOR BRANDS EXTENSIVELY SEARCH FOR
BEST PRICES
QUALITY- MORE MORE LESS BEST TIRES(65%
PRESTIGE MAJOR BRAND
QUALITY-CC MORE LESS LESS 38% MAJOR
BRANDS
COOMODITY- LESS LESS EXTENSIVELY YOUNG,PRICE
BARGAIN
HUNTER
COMMODITY- MORE LESS LESS LOWER PRICE
TRUSTING
PATRONS
WHOLESALE CHANNELS FOR REPLACEMENT TIRES
Distribution channels (percent of U.S. passenger tire
replacement sales in units)
type of outlet 1976 1981 1986 1991
Oil companies 9 5 3 2
Large retailers 24 20 16 19
Manufacturer- 11 10 13 12
owned outlets
Independent 56 65 68 67
dealers
The majority of the tires wholesaled to oil companies were resold through franchised or
company-owned gas stations or service stations.
Wholesaling by oil companies had declined reflecting increased competition at the retail level.
Like other tire makers, good year sold passenger tire to three kinds of independent dealers :-
INDEPENDENT DEALERS
strictly whole-sellers Retail dealers Retail owners
10% 40% 50%
Car dealers, service Other dealers, Own retail outlets
stations, small secondary outlets
independent dealers
RETAIL CHANNELS
GOODYEARS DISTRIBUTION STRUCTURE
Goodyear did not sell tires in garages/service stations, warehouse clubs or mass merchandise.
The company relied on three types of outlets :-
1. Independent dealers : accounted for 50% of sales revenues through 4,400 outlets (2500 active selling full
line of good year tires ).
2. Manufacturer-owned outlets : generated 27% of sales through 1,407 outlets
3. Franchise dealers: 600 in total accounted for another 8% of sales.
PROMOTIONS
Estimated 75% of all Goodyear tires sold in independent or company owned outlets were sold on promotion,
at an average discount of 25%
This was offered to consumers by schemes like one free tire with the purchase of three tires, one tire for half
price with purchase of another tire at full price, or 25% off the price of selected tires.
Promotions organized around core events-six 3-week periods spread throughout the year to buy merchandise
at a discount, which was supported by radio, television, and print advertising announcing special prices on
specific tire lines.
SPRING DATING organized every spring, provided extended financing on tire orders to Goodyear dealers.
2) MANUFACTURER OWNED OUTLET
a) Allow Goodyear a full control of the distribution, but creates a competition with
the other channels.
b) Outlets set the quality and value standard for performance seeking consumer as
they have better training education to evaluate the problem and provide
solution.
c) This was not a core business for goodyear but it was used for awareness and
loyalty building of customers.
3) FRANCHISE DEALERS
d) New owner was converted into independent dealer after three years.
e) During these years, owner was provided with the training in operations, finance,
and other aspects of the business.
f) They were kept 600 by adding new outlets as older franchise became
independent.
SALES OPERATIONS
COMPANY OWNED OUTLET
42 Districts(1 District manager per district)
20-23 Stores (1 Store manager per district)
INDEPENDENT DEALERS
28 Districts(1District manager per district)
Services
Expertise training on issues like Financing , architecture, Operations.
Certified auto services: Allowed dealers to attend training classes and became sertified in auto services
GY business management system : computer based system help with inventory and accounting
National & Regional Adv. : Support dealer sales
Research on market trends: like information regarding popularity of each tire by size in th market.
INDEPENDENT DEALERS
They dont provide service for free.
Allowance
1. Wholesale allowance
2. Merchandising allowances 1.5%
3. Advertisement accruals 4%
GOODYEAR & INDEPENDENT DEALERS
1989
-70% only good year & 30% other brand also
1991
-Aggressively merchandised other brands but Good year generated 90% of the
revenue
Independent dealers network better option
-Grow sales expand brand availability & increase market share.
INDEPENDENT DEALERS AUTO SERVICES
Services sales $38100 per month per outlet
-26%(1980) to 48% (1991)
-20% comes from tire related work
Margins
-50% on service labor
-20%-25% on parts installed
Revenues
-70% Services labor
-30% parts
THE AQUATRED TIRE
WHY AQUATRED?
DIFFERENT
Company started new project
Looking for product which appearance wise is different from current models
DESIGN
Consumer & performance preference(compared 10 different designs)
Designed to improve traction in wet condition(Aquachannel)
Channelled water out from under tire, reduce hydroplaning
60,000 mile warranty
top in broad line segment
Stopped in as much as two-car-lengths-less distance(55mile/hour)
MARKETING FACTS ABOUT AQUATRED
COMPARISON
Goodyear compared purchase behaviour for Aquatred & Invictus GS buyers
Aquatred buyers were more likely to replace competitors tires
Buyers searched for more information prior to purchase
Customers more likely to drive imported cars
Often visited Goodyears outlets specifically for Aquatred
LAUNCH OF AQUATRED
Launch will revitalize the companies brand image in the market
Planned to have strong impact on market
Budget estimated was $21 million
Launch during Winter Olympics of 1992
Advantage for mass advertisement & promotion
First mover advantage.
LAUNCH ISSUES
PRODUCT
Only product offering wet traction
Tread life of 60000 miles
Consumer likely to replace competitors tire
PRICE & PROMOTION
Average selling price of a tire by Goodyear was $75
Aquatred was priced at 10% premium over Invictus GS
Reduce price of tire to add some specific buyer groups
EXPAND MARKET CHANNELS
Expand Independent dealers, more revenues
Expanding wholesale channel
Limited discounts, limited stock to be supplied
Less revenue but widespread reach of product
[Link] Goodyears position in the tire industry
Known as THE GORILLA since the early days due to its dominance in the tire industry.
Goodyear operated 41 Plants in US, 43 Plants in 25 other Countries, six rubber plantations, 2000 Distribution
outlets worldwide, 4400 Independent dealers, 1047 manufacturer owned outlets, 600 franchise dealers and
employed 105000 people.
IN 1991,
1. 3rd largest seller of new tires at $8.5 billion behind Michelin and Bridgestone.
2. Earned net income of less than 1% over total revenue of $10.91 billion.
3. Paying $1 million per day as interest. Also earnings were sluggish.
4. Had highest brand share in unit sales in both replacement tires market(15%) and OEM market(38%).
5. Discontinued its private labels-All American and Concorde.
[Link] do consumers buy tires? How can the market be segmented?
Ans-slides 5 and 6
Q3. ASSESS THE EVOLUTION OF GOODYEARS DISTRIBUTION CHANNELS IN THE U.S. REPLACEMENT TIRE MARKET.
Goodyear had a hybrid market strategy combining both direct and indirect dealers.
Tire replacement industry used 6 main channels for distribution, from which Goodyear focused on three.
Most sales revenue was derived from small independent dealers, manufacturer owned outlets and franchised
dealers.
Goodyears distribution channel
[Link] DEALERS
a) Small independent dealers had conflicts with Goodyears owned outlets nearby.
b) Only 2500 independent dealers generated a consistent level of sales, maintained major Goodyear retail display.
Goodyear products generate 90% of revenues. Therefore, we can say that brand loyalty is high in this channel.
c) Independent dealers create value through post sales service by providing warranty check, oil check and other auto
services.
d) The average number of tires installed per day decreased by 13%.
e) Needed high attention and support from manufacturer.
Q 4)ASSESS AQUATREDS STRATEGIC ROLE AND THE MARKETING PROGRAM.
STRATEGIC ROLES
SLEEK APPEARANCE IS USED TO ATTRACT THE CUSTOMER
PREVENT GOOD YEAR OEM TIRES TO BE REPLACED BY OTHER
BRANDS IN THE REPLACEMENT MARKET
HIGH DURABILITY
PREVENT VALUE DEGRADATION
PRICING IS VALUE BASED
MARKETING PROGRAM
They plan to position the tire at the top of the broad line segment with 60000 miles warranty
Aquatred was tested in large metropolitan area.
They have to Keep in mind the positioning the product in the market.
When aquatred launch consumer paid for replacement tire was in $50 range. Goodyears
customer research indicated that consumers would be wiling to pay much more for tire
possessing the Aquatred features. So to the dismay of most industry observes. Goodyear
introduced the Aquatred at a price of $95/tire
Q5) SHOULD GOODYEAR BROADEN ITS DISTRIBUTION TO MASS MERCHANDISERS? SHOULD THEY BE OFFERED THE AQUATRED ?
Goodyear's distribution structure:
Independent dealers: 50% Sales revenue(4400 small independent dealers)
Manufacturer owner outlet: 27% SR(1047 outlets)
Franchised dealers: 8% SR
Government agencies: 15% SR
If Goodyear wants to increase market share, they have to sell tires to mass merchandisers
or warehouse clubs
It will increase market share
Goodyear have to cut the prices or give discounts
Less revenue but widespread reach of products
Selling tires to low-service outlets will erode the value of the brand
THE END
