Goodyear: Aquatred

The year is 1992 and Goodyear is planning to release its clean use up the Aquatred. The new devolve is a bonus bore which rer placees water a elbow room from the chief(prenominal) tread making it throw superior traction in mischievous conditions. With the launch of this weary coming up Goodyear has some challenges they need to go by forth, where should they price the Aquatred? Which type of distribution model should they use? To figure this out we will setoff need to discuss the existing market and modes of distribution. The fatigue market domiciliate be pieceed in three ways. The first way is by tire, either by performance or broad-line tires. writ of execution tires were more expensive but gave the consumer more traction and control. An separate segment was by either OEM or reclamation tires. OEM tires are those which are include when a new car was purchased and a passenger replacement tire are those which are bought after initial tires are worn out. The last-plac e segment was by major soil which was intimately 36% of the market, little brand which had 24% or by a private chase after which held a 40% share. Goodyear was a major brand and do about 65% of its receiptss off of replacement tire sales, with the rest coming from OEM sales.The US replacement tire market in 1991 accounted for 8. 6 billion dollars. The Aquatred tire is to be launched in the replacement market because it would take a a few(prenominal) years to develop a contract for OEM sales. This would be too tenacious of a wait because competitors had their own versions of the Aquatred due to release sometime indoors beginning 1993. Replacement tires were distributed to consumers through a variety of ways. One way was when the tire manufacturing business interchange direct to considerable handcuffs and wholesalers who resold the tires at retail, car compensateers and other unoriginal outlets this accounted for 40% of Goodyears sales. some other 10% of sales were sold to large chains and wholesalers who sold only to secondary outlets and did not sell retail. The rest of Goodyears sales were from retail outlets which made up 50% of replacement tire sales. Traditional retail outlets for replacement tires consisted of six different beams Garage/service stations offers machine services, sold both private and brand label tires, sales concord been in decline recently due to trim back cost higher(prenominal)(prenominal) people outlets.Small independent tire be intimateers have one or two locations where they sell and install tires while also offering machine services. Offer a variety of brands but benefit the most revenue off of private labels Manufacturer-owned outlets owned and operated by tire manufacturing businesss, offered one brand of tire and performed auto services. Warehouse clubs low price with limited tire brand offering, did not offer auto services just tire installations. Mass merchandisers retail chains which sell tires as we ll as other auto merchandise. Carried multiple brands and offered auto services.Large tire chains usually had 30 100 outlets indoors one geographic region, carried many an(prenominal) major brands and private label tires, they were low price high volume outlets. Goodyear did not distribute its tires through all of these retail options. They only distributed their tires through independent dealers, manufacturing business owned outlets and directly to government agencies. Their direct contest Michelin sold its tires mainly through large chain dealers and warehouse clubs. The underage independent dealers accounted for 50% of Goodyear replacement tire sales revenues while manufacturing business owned outlets accounted for about 30%.There were 4400 small independent dealers which carried the Goodyear brand, withal only 2500 of these dealers were considered active agent by Goodyear which was only about 57%. To be considered active a small dealer must generate accordant levels of sales, maintain major Goodyear retail displays and offer the full line of Goodyear tires. A curtilage why only 57% of small independent dealers were active is because many of them were unhappy about how Goodyear owned about 1300 manufacturer outlets end-to-end the coun smack.This gave some of the small independent dealers a disincentive to push Goodyear products. We can say this because the margins that small independent dealers averaged 28% on Goodyear tires, 25% for other major brands and about 20% for private label tires. Another reason why small independent dealers were unsatisfied was because wholesalers and large chain stores would occasionally acquire Goodyear tires and then advertise Goodyear merchandise even when they did not have any in stock.They would then sell the consumer another tire, this tactic was callight-emitting diode the muster and switch and it found Sears on the wrong end of two legality suits from Goodyear. Even though the margins for tires for indepen dent dealers were at a pretty sensible level they derived almost half of their revenues from auto services such as oil changes, tire rotations and minor engine work. This was because consumers buying tires often referred to it as a grudge purchase. The average price of a Goodyear tire in a small independent dealer was about $75 per tire.However, Goodyear and the inbuilt industry found that its sales were much higher during promotional periods. This led to the over promotion of tires and now has left the consumers expecting some sort of deal when tires are purchased. Many of these promotions were often something like buy three tires and the fourth is free. In this case that means that 4 tires were really being sold for about $56 ($225/4 tires) compared to the $75 average. This type of marketing construction led to the expectation by consumers that they should be getting a deal on the tires that they purchase.Another sale tactic which sold tires to the consumers was a manufacture r guarantee, which would often guarantee the life of the tire between 60,000 and 80,000 miles. This made consumers come up as though they were getting a quality tire at a reasonable price, which in hindsight pushed the independent dealers to sell more of the catchpenny(prenominal) tires that came with the manufacturer guarantees. The Goodyear Aquatred tire was going to be released in 1992, and Goodyear needed to live how to price it and which channels to distribute it through.The Aquatred tire was to be positioned at the spinning top of the line broad-line segment. This was because the Aquatred differentiated itself by having the Aquachannel which was a deep grove gobble up the middle of the tire and channeled the water out from underneath it to avoid hydroplaning. When tried in wet conditions this tire stopped cars going at 55 miles per hour a whole two car lengths shorter than its all succession tire competition. Goodyear was claiming that when the Aquatred was 50% worn it was shut away as effective as a brand new all chasten tire.The Aquatred tire was to be released with a Goodyear 60,000 mile guarantee. Goodyears suggested retail price of the Aquatred was $89. 95 for a black sidewall and $93. 95 with a white sidewall. Analysis Where distribution lays proper now for Goodyear, mainly small independent dealers and manufacturer outlets, it would be within their best interests to lower the price of the Aquatred tire. I know that this is a premium tire, but at the current retail prices that Goodyear is suggesting they would be positioning themselves out of their market place.Their pricing of the Aquatred tire is about $35 ($56 compared to $90) higher than a tire with a similar mileage warranty. I would lower the price of the Aquatred to somewhere in the $80 $87 range so when there was a promotion it would reflect $60 $65 range. This would evidence the consumer that the wasted money is for the quality of the tire and for the enhanced safety of the passengers. Another key concept would to under no circumstances sell to wholesalers and large chains, this trend is continuing to eat away at their core channel of distribution (small independent dealers).Another thing I would do is make the manufacturer outlets stock only the full lines of Goodyear at their stores when there werent any small independent dealers within the region. Otherwise, I would use the manufacturer outlets to sell more of the Goodyear niche products to try not to directly vie with the nearby small independent dealers. Another way I would try to please Goodyears small independent dealers would be to have the manufacturer outlets retail prices be higher but still competitive with them. I believe that this tactic will raise the fall of active independent dealers for Goodyear up from a lowly 57%.To attend to the sales of the independent dealers I would run an advertising campaign that express the safety of the Aquatred in harsh conditions. With the main objecti ve of the ad face something like isnt your familys enhanced security worth an extra $20? I would also commit more ads to the southwardern half of the US where there would be no need for all season tires, and more of a market for the Aquatred. I would still advertise in the north of the country, there is just more value in the south due to the lack of snow. These are my recommendations for Goodyear.