Goodyer Tyer Analysis
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Problem Statement:
With the development of Aquatread (AT), a premium differentiated tire intended for the broadline, replacement market; Goodyear (GY) must reassess its competitive position and distribution systems in the North American tire market. The GY is currently a market leader in the replacement market with 15% market share (Sales of 22.8MM units). GYЎЇs marketing strategy, in particular, the launch of AT, must be examined in the context of evolving consumer buying patterns and distribution channels, as well as alignment with their business strategy of differentiating GY through their brand. The key marketing decisions to be made are should GY launch AT, should GY expanded its distribution and whether or not AT is to be included in this expansion.
The Market for Replacement Tires.
The US replacement tire industry (152MM units) had seen; stagnant growth (5 yr CAGR 1.1%), declining prices (25% over 10 years), foreign imports, excess capacity, brand consolidation and longer tire life. These factors have contributed to a shift in the market place towards a competitive, commodity- like market. The major brands account for 36% of the market with Private Label (PL) having the largest share (40%). The distribution channels in the market have moved towards independent dealers (67%) and large retail distribution (19%). Exhibit 1 details the market share and price levels within channels as well as the level of service consumers receive.
Consumers and Segmentation Analysis:
50% of consumer purchases are made the same day consumers are aware of the need to replace tires. Purchases are likely to be made at convenient locations with little research and only 1-2 tires replaced. For planned purchases, the primary performance attributes consumers consider (Exhibit 2) are tread life and wet weather traction. Both of which are key selling point for AT. However, consumers also indicated that price, service and trust, were the primary components in retailer selection. Exhibit 3 shows further segmentation by decision criteria. Brand is the primary choice for quality and value-oriented buyers who are willing to accept higher price points for quality.
Competition Analysis.
GYЎЇs main rival is Michelin, both owning 43% of the major brand market. However, Michelin has greater brand equity in the quality and value segments which are likely to be key to the success of AT and GYЎЇs brand. However, the greatest threat to all brands is the emerging popularity of Private Label (PL). Exhibit 4 shows the switching amongst brands showing PL as the dominant segment consumers are switching into. Private labels sold at an 18% discount to comparable brands with no appreciable difference in tire life. Both Michelin and Bridgestone are planning to launch new major brand tires with 80,000 mile warranties. This compares to a 60,000 mile warranty for AT. In addition, Continental Tire will launch (within 18 months) Aqua Contact, a direct rival to AT. Michelin distributes its tires through a far more intensive network than GY. However, these outlets are multibrand outlets, warehouse clubs and mass merchandisers giving Michelin less influence and product information with their retailers than GY.
Company and AT Analysis.
In the past, GY has had a reputation for developing innovative products. Recent years have seen deterioration in GY financial performance and brand perception in the quality segments. GaultЎЇs (CEO) vision is to create a market driven organization and a differentiated product, offering safety and reliability. GY product range consists of performance radials ($100-$280) broadline all season radials ($40-80$) and truck tires. Within the broad-line segment, GY tires offer similar features to other brands and PL. GY has a good relationship with OEM car manufacturers where it derives 35% of its revenues. However, due to the long purchasing cycles and specialty nature of AT it was only being considered in the replacement market. GY Distributes using independent and franchised dealers (58%) as well as GY owned outlets (27%). Many of these outlets distribute for GY. Exhibit 5 highlights the value GY is able to create for its retailers. By foregoing the mass merchandisers and warehouse clubs, GY had elected not to pursue intensive distribution. This trade-off is believed to protect the GY brand from being perceived as a commodity product, and prevent conflict with independent retailers. However, as demonstrated in the AT test market, many inconsistencies arise due to insufficient training or outlets simply not conveying a consistent, effective message to consumers. GY is utilizing a push strategy with the greater part of its budget towards promotions rather than advertising. With