Goodyear: The Aquatred Launch

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

Standardize