Replacement Tire Market

Other Distribution Channels 1) Mass Merchandisers were one stop convenience outlets like Sears that sell tires and performed auto services. They maintain a large brand selection at a slightly discounted 97% price index but their marketshare declined from 28% to 12%. Value conscious consumers were primary buyers in this channel. The loyalty to the manufacturer products were quite high as they only sell 34% of the private label tires. 2) Warehouse Clubs are heavy discounters of the pricing at 80% price index but their share has grown from 0 in 1976 to 6% in 1991 and the trend is a continuous growth. Since large % of the consumers and price and value driven, this channel would see an increase over the years. 3) Garage/Service station derived value from offering services on gasoline, tires and auto. Share declined from 18% to 6% as consumers are becoming more price conscious. These outlets charges highest price as the consumer purchasing would be connected to the emergency purchase. Garage stations heavily promote private labels as they bring higher margins and cheaper in general. Distribution Channels: Price Index/Market Share and % Private Label Revenues RETAIL OBS SHARE % PRIVATE PRICE LABEL Garage / Small outlets 6% 57% 110% Service Gasoline Stations Auto services Small Small outlets auto services 40% 36% 100% independent dealers Manufacturer One brand auto services 9% 16% 107% outlet Warehouse Large stores 6% 8% 80% Limited offer according to deals Minimum service LOW PRICE Mass Retail chains 12% 34% 97% merchandiser Large brand selection Auto services Large tire Multi brand discounters 23% 54% 90% chains LOW PRICED, HIGH VOLUME OverallGoodyear faces multiple issues regarding the launch of the Aquatred. I feel that pursuing the following strategies would make this a successful launch: Strategy for the Aquatred launch Target Market Strategy: Goodyear should target value-oriented and quality buyers (Multi market strategy) for the Aquatred tire. Exhibit 7 shows that in these two segments Michelin is stronger than Goodyear and we can also see from Exhibit 8 that 44% of Michelin customers are loyal to their brand, which is the highest. So, it would be hard for Goodyear to attract their customers but now they have a very good product, which suits these two segments perfectly. Market entry time: Goodyear should launch the Aquatred in January 1992 during the winter Olympics.

As Michelin and Bridgestone are introducing new products in 1992 with a higher warranty and heavy advertising, Goodyear must advertise in a big stage to attract the customers. Product positioning strategy: Goodyear should position the Aquatred in such a way through advertising that the

customers perceive it as a different kind of tire. The advertising should appeal to the informed buyer. Goodyear should start with heavy advertising ensuring that customers know the name Aquatred' Pricing strategy: As Goodyear is positioning the Aquatred at the top of the broad-line tires, they should convey

this message through the price. So, Goodyear should train and monitor the sales people so that they highlight wet traction and hydroplaning feature more. Goodyear Aquatred Case Study - Marketing - Document Transcript 1. Goodyear: The Aquatred Launch Maria Medvedeva, DLEMBA2010 Behavior of consumers in the replacement tire market. Factors driving the purchasers, where they buy and how frequently. To analyze consumer buying process, it is important to examine the situation in which a purchase occurs. Consumer buys tires in cases of emergency when the tire is torn on the road; and as a preventative measure before the crisis (including tear in the tread; nail; at car registration inspection) occurred. It is given in the case that 50% of the purchases are done in the same day as a grudge purchase. Average time between purchases in the preventive/safety category were 2.5 years. 60% of all units sold were purchased in sets of four tires. The behavior of consumers for tires in the replacement market are either habitual or dissonance seeking. Habitual buyers rely on the same brand and channel of purchasing; while dissonance seeking consumers explore product variety in terms of performance, resilience and durability and make a purchase in their favorite distribution channel. Replacement tire market of 1991 shows that consumers across all segments are becoming more tire brand aware and price conscious. In fact, the tire has

become almost a commodity and consumers do not see it as a premium product. The tire consumers can be broken in the three category with definitions as per the table below: Quality Conscious -18% Value Conscious 23% Price Conscious 59% Factors driving purchasing Factors driving purchasing Looks at tire as at a decisions are performance decisions are getting extra commodity- necessity. Tires attributes including long life value for money paid as are needed to carry weight of the car. Extreme switch time of the product compared to a competitive between brands if it saves thickness of the rubber, product. Performance money. Price conscious reliability - groves, tread and benefits are important in consumers are drawn to the superior high touch service at terms of lifetime for tire and low cost, one stop shopping the point of sale. These reliability connected to a experience and broad selection consumers are looking at psychological safety factor. of brands, sizes and styles in variety of durability, Tires are needed to carry warehouse clubs. reliability, style and high weight but also provide touch service from sales durability. representatives. Price High brand awareness at sensitivity is low. They 17%. 2. believe tires are needed to carry the car, provide lateral control, provide handling and durability. Driving foreign cars. Consumers are demanding improved quality product with key characteristics as defined in survey. High brand awareness at 15%. Buying process includes Buying process includes Buying process is primarily information gathering, information gathering, purchasing at lowest cost at evaluation of alternatives, but evaluation of alternatives, warehouse clubs - 20% price difference with independent purchase in their own channel but always buying at the dealers and 27% with company manufacturer owned outlets lowest price. Purchases are outlets. or small independent dealers made at small independent focused on the preferred dealers or mass warehouses brand. Price index of these that provide bundle services channels is 100 to107% but it and give a bit lower prices does not stop a quality buyer (3% from the small as he is looking at perceived independent dealers and 10% performance and quality from the company owned value. outlets based on price index exhibit 2) The key attributes that consumers were seeking for in a tire includes the following: 1 Tread life 2 Wet traction 3 Handling 4 Snow traction 5 Dry traction 3. 4. What is the strategic role of Aquatred in Goodyears product line? Is this the right product for the right time? Aquatred tire is a premium product line with a unique value proposition of providing high traction in snow, ice, dry and wet weather for improved safety. 55% of cars stopped under wet condition faster. Being worn 50% the tire maintained the same wet traction. Additionally, these benefits were placed into a tangible, look and feel package with Aquachannel design that changed tire appearance. The product is seen to be priced at 10% premium over the current premium offering Invicta due to increased functional benefits. Safety, durability and appeal Tire replacement market, 80% of the total tire (OEM and Replacement) market is mature and stagnant with slow growth factors and extreme competition By defocusing on innovations in tire markets, they are facing an price wars as their differentiators from private label and other competitor are very small, as perceived by the consumer. As per exhibit 5, brand loyalty is slowly degrading as compared to Michelin with 44% of loyal customers. Their current distribution structure is hybrid with lack of control over distribution of the tires to low price outlets. The brand is not doing well due to this heavy discounting and arrival of discount chains. Their financial position is also challenging with net income less than 1% of total revenues. Revenues $10.91 Billion Net income < 1% Despite all that, Goodyear is known as an innovator with a strong track record of launching new and exciting products. The main goal for Goodyears new innovative product should be to improve brand equity and financial positions of the company through the improved customer perception of premium tires and higher margins on the product. Looking at the competitive environment, Goodyear has the bigger market share per sales unit (15%), Michelin comes in second place (8.5%). This is the largest competitor for Goodyear with highest perceived value among customers as a premium product. 5. Another important trend is the increase in the marketshare of private labels due to the high amount of price and value conscious buyers. Many large and small manufacturers specialized in private label due to excess capacity; however, they have created a problem as the market is oversaturated with tires leading to price competition. Price of a private label is 18% lower than the comparable brand label but with lower functional characteristics of lifetime. While all competitors are summarized below, the key points are: 1) Michelin and Bridgestone were planning to introduce improved warranty 80,000 mile 2) Michelin was able to position its brand among quality and value conscious consumers 3) Michelin was selling at discounted venues: mass merchandisers and warehouse clubs 4) Goodyear had too many private labels and needed to refocus

its product mix from purely price driven to value providing. 5) Rare innovations in industry Uniroyal was introducing new tires and Continental was planning to come up with a similar design in 2 years. Overall, the Goodyear needed Aquatred to improve its financial position and build up brand equity and establish itself as an innovation leader along competitors with a premium product lines in a stagnant tire replacement market. To do so, Goodyear needed revolutionize the market by breaking price driven behavior of consumers and changing their perception of tire characteristics moving away a commodity perception. Aquatred is an important product for this time in the industry, and should be introduced. Evaluate the evolution of Goodyear distribution channels and discuss the management challenges these changes have brought? How well the Goodyear addressed these changes. Goodyear has a hybrid go to market strategy combining both direct and indirect channels.

How should Aquatred be positioned, priced, promoted and distributed. Explain and justify. After the careful analysis of the consumer behavior, distribution channels, tire replacement market environment, company position and competition, the next step is to select a target market among described segments and create a product differentiation strategy for proper position. As defined above, the market is divided among Quality, Value and Price conscious consumers. The company weak financial position and need to increase brand equity would make us to focus on Quality Conscious consumers- being only 18% of the market, but with high expectations in terms of performance, style and durability. The findings are in the following table: 1) Quality, Value and Price Conscious Consumers SEGMENTATION 1) Goodyear has management crisis, low brand loyalty and financial issues. The company knows how to produce innovative product and has an opportunity to build brand equity through introduction to the segment demanding a higher performance/quality product. TARGET MARKET 2) The target audience Quality Conscious (18%) seek additional value provided with the tire through reliability, durability or handling. 3) By introducing a new premium tire, Goodyear would need to introduce program to increase perceived value of tires in the market. 1) Establish a frame of reference Goodyear is in the tire market. Simplification of the message to consumers. Goodyear needs to review their other investments and select its core focus as a company. The name should be associated with tires, and not with other products. 2) Point of Parity Buyers top requested attribute - Tread Life and Handling should be in the product as in other competitors; however, a differentiator needs to be PRODUCT POSITIONING added. 3) Point of Difference - Get better traction lead to psychological appeal of safety. 50% stop time leads to psychological appeal of innovation by this brand. Make benefits tangible by changing tire appearance. 4) Goodyear should avoid poisoning mistakes including positioning too many features, or targeting too broad of an audience. 6. Product Position includes such characteristics as design, name and brand, warranty and level of customer service. As a premium brand Aquatred should be positioned in the Higher Margin Replacement Markets to the Quality Conscious consumers focused on quality and performance that can be translated to treat life and wet traction. Consequently, the benefit of these two attributes is a consumer perceived value which is the willingness to pay more. The psychological benefit is safety. To make these attributes tangible, Goodyear should introduces a new tire style with Aquachannel design. Aquachannel design has a grove, a brand element that creates an impression of channeling water. Aquatred would appeal to consumers through a psychological need for safety by providing a functional attribute of improved traction in wet condition; through a social need for difference by providing style change and through economic benefit of getting more value than a competitive tire. Goodyear should position Aquatred as a top of the broad-line segment, referring to improvement of performance and safety in wet conditions. Unique value proposition is to provide high traction in snow, ice, dry and wet weather for improved safety. Safety, durability and appeal! 60K mile warranty is being reviewed by the company, but a potential improvement could be to increase to 80K mile to beat the competition. It is also imperative to initialize campaigns to switch value driven consumers to see high value in safety and purchase the product at premium pricing. These Value buyers are followers and would switch after Quality consumers if they value is worth the investment. Pricing strategy starts from setting a pricing objective based on integrated analysis of company goals, fixed and variable costs, customer buying behavior, competitive differentiation and product value context. Pricing in the case of Aquatred would lead to product image, channel image and enhancement of Goodyear reputation. After the review of all aspects, Goodyear should enter the

market with a Market Skimming objective to establish market leadership through a superior product with initial premium pricing that can be later reduced when competitors enter with similar products. The price should be just high enough for customers to match it with perceived high level of quality. The high price will communicate the image of a superior product to the market. No discounting should be allowed not to erode its value. The pricing method Perceived Value Pricing should focus on safety image, high traction performance, warranty and other service deliverables through channel, savings on insurance, brand reputation and trustworthiness. By deploying high pricing Goodyear will communicate image of a superior product. Price for Consumers 7. +Price plus 2.5 X Better Traction (Reduced the chance of the accident by 2.5 times, reduced probability of getting into an accident in the rainy condition) +Price plus Safety - (Insurance premium increases after incident, so it can be quantified) +Price plus Resilience (50% used gives same stopping power) +Stylish Exterior (Aquachannel) Total Price with Improved Value 5 out 6 stores showed that price sensitivity is from 79.95 to 88. This means 5-10% improvement from the base value of 75 (average). However, their described perceived value of the product could be calculated based on the average market price and differences in improvement perceptions described by the dealers. 75 USD at 15% improved value=86 USD 75 USD at 20% improved value = 95 USD 75 USD at 35% improved value = 101.2 USD Thus, the perceived value for this tire is in the range from 86 to 101 USD as described by the dealers. Suggested retail pricing is 10% above Invicta from 89.95 to 93.95 USD. While we can assume that the price range should be within the perceived value category, it is imperative to run more studies using models of Van Westendorp and Conjoint analysis to measure distribution of perceptions about the acceptable price of the product. The analysis should tell us at average expected price, and at what price the intent to buy falls sharply and at what point the price is too inexpensive and hurts the image. The promotion program should be launched nationwide to have a stronger impact on the market. $21 mill was allocated. Communication program for the launch should include: 1) Training plan for dealers sales associates/Establish education centers to include: a. Benefits and positioning against competition b. Objectives handling for pricing c. Brochures explaining technical characteristics of the product against competitors. 2) Test and drive demonstrations in all major dealerships across country 3) Advertising to make tire a prestigious and stylish item with safety as the key message. This should build brand equity and increase sales revenues. Participate in car magazines reviews, industry specific events. Invite a NASCAR car drivers to test drive Additional benefits could be announced in press releases considering that this tire is associated with high quality, long life and safety. 4) Sales incentive plans a. Aquatred commission accelerator should be placed for internal sales. 8. b. Travel incentives or special offers for individual sales people of dealers. 5) Additional Service could be introduced: a. 80K Mile Tread Life Limited Warranty b. Roadside Assistance Distribution: Aquatred should be distributed using exclusive distribution channel design. To design the channel network, Goodyear should understand what the need of the Quality Conscious consumer segment is and where they purchase their tires. Based on the analysis, this segment is interested in performance and quality; thus the channel must understand technical characteristics of tires and be able to provide presales and post sales support. Small independent dealers and manufacturer outlets are most consistent with the high value premium image that Aquatred is going to portray. Channels should contribute to the value chain of the product through the following characteristics: Price Image Post sales - warranty, check up, tire rotations Presale- convincing target consumers of purchasing Financing payments Manufacturer needs to provide: Promotion Information On time efficient manufacturing ERP or online system for ordering If small independent dealers are not perceptive to the idea of a higher priced product, Goodyear needs to educate them through seminars describing points of differentiation. Goodyear is about to revolutionalize the market, and their dealers should be able to convince and educate the customers on the perceived value of the breakthrough. Aquatred should be only provided under a limited distribution contract to the manufacturer owned outlets and dealers who are loyal to the brand and generate the most revenue this way it will protect dealers profit margins and sales volumes. This way Goodyear has a full control over its distribution channel and can control price. Goodyear should avoid selling Aquatred to other distribution channel and car manufacturers OEM to keep the product in the premium channel, at least until competition enters the market in 1993. In the next two years, Goodyear should introduce an Aquatred light version under a different sub-brand and enter mass merchandising market to capture the remainder of the consumers (59% PC +23% VC). Competitors are already selling at this channel without scarifying its image. Mass 9. merchandisers do not discount heavily only 3% from small dealers, and keep high brand loyalty. At the same time from the company standpoint, expanding channels means adding intermediaries to create an inventory buffer. This is a hedge against

fluctuations of demand. Since existing dealers should have already collected high profits on Aquatred, they would probably see entering additional channels as less threatening.

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Single channel captain( a manger who directs activities of whole channel and avoid channel conflict) channel relations) Goodyear brand was sold almost exclusively thru its own stores by its independent 2500 tire dealers.bt sales were falling.mAny reasons france Michelin nd japan bridgestone had aggressively Xpanded distribution network in NORTH AMERICA.many wer shopping wer at discount stores Aquatrd is dealers range market.2 reach discount stores converting many of its own autocenters 2 nofrills zone under just tires nnames to reduce changes conflict caused with dealers launched aquatred incresad advertising nd Gemini brand name help 2 promote service by goodyear dealers Bcz of channel leadership, its sales nd dealers sales increased producers tale lead in channel distribution

Tire replacement industry used 6 main channels for distribution, from which Goodyear focused on 3. Most sales revenue was derived from Small Independent Dealers, Manufacturer Owned Outlets and Large Chains. Goodyear Distribution Channels 1) Small Independent Dealers has conflicts with Goodyear about proximity of manufacturer owned outlet, billing, pricing and need for special programs. This is a high maintenance category as evident by the Bill of Rights asking to be treated better by manufacturers. a) Accounted for 40% of the retail sales share in US with price index being at 100% of the recommended manufacturer value. b) Only 2500 independent dealers generated a consistent level of sales, maintained major Goodyear retail displays and offered the full line of Goodyear tires. 50% sold only Goodyears tires ; the remaining 50% stocked at least one other brand. Goodyears products generated 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 up, oil changes and other auto services. The average number of tires installed per day decreased 13% at a typical independent dealer. Average service dollars per outlet grew 92% d) Needed high attention and support from manufacturer. 2) Manufacturer Owned Outlets allow Goodyear a full control of the distribution, but creates a competition with the other channels. Outlets set the quality and value standard for performance seeking consumer as they have better training and educated personnel to evaluate the problem and provide solution. a) High cost to maintain and high touch management oversight. This is not a core business for Goodyear but is used for educational and awareness building of customers. Necessary

for education of the consumers, maintains of the product pricing and experiencing brand benchmarks. 1300 outlets carefully placed away from small dealers. b) The market share of this channel has decreased over number of year but they still represent 9% marketshare with the price index of 107% over other retail channels due to higher perceived value from the loyal customers to the brand. 3) Large Chains and Large Chain/Wholesales is the channel of distribution over which Goodyear has no control in terms of product resale and pricing structure.a) Large Chains/Wholesalers resell to care dealers, services stations, and small independent dealers. Large Chains are resellers for independent dealers, secondary outlets and its own retail outlets. b) Large chains represented 23% of the retail market, but they practice discounting and promotion so price index is at 90%. This reduced customer perceived product value, but targeted price conscious consumers. The channel is not loyal as they sell 54% of the private labels. c) Diversion problems from wholesalers to discount outlets created a problem with independent outlets. Discount outlets use the product to conduct switch and bait technique by attracting brand loyal customer using the product advertising and offering an alternative solution. d) Diversion was difficult to avoid due to legal restrictions that prohibited manufacturers from dictating to whom their tires should be resold. Goodyear had a major conflict between its independent dealer distribution channels, company owned outlets and large wholesalers due to the differences in the independent goal of each channel.The goal of small independent dealers was to obtain higher margin on their bundled product/service offering and attract loyal customers to the brand. They needed a lot of help in promotion, pricing and management oversight. The goal of manufacturer owned outlets were to make public aware and educated about the line of Goodyear products. This was not a core business, but was important from the awareness standpoint. Manufactured owned outlets personnel were more educated to address consumer concerns with a Goodyear product line. The goal of large warehouse and chains was to push the largest volume of product at smaller margins. This is a true distribution business where margins are accepted at a lower base point, if volume is high. They are not interested in brand equity or label loyalty; they dispatch an order as requested by the next channel or retail. Managing three core channels and their conflict requires a specialized sales force that conducts planning sessions with goal setting, communicate incentive programs. Traditionally mass products go well through intensive, while premium requires exclusive distribution with focus on education and training of the channel carrying the brand to perform value add functions including convincing the target customer 4) 1. Aquatred tire is a premium product line with a unique value proposition of providing high traction in snow, ice, dry and wet weather for improved safety. 55% of cars stopped under wet condition faster. Being worn 50% the tire maintained the same wet traction. Additionally, these benefits were placed into a tangible, look and feel package with Aquachannel design that changed tire appearance. The product is seen to be priced at 10% premium over the current premium offering Invicta due to increased functional benefits. Safety, durability and appeal Tire replacement market, 80% of the total tire (OEM and Replacement) market is mature and stagnant with slow growth factors and extreme competition By defocusing on innovations in tire markets, they are facing an price wars as their differentiators from private label and other competitor are very small, as perceived by the consumer. As per exhibit 5, brand loyalty is slowly

degrading as compared to Michelin with 44% of loyal customers. Their current distribution structure is hybrid with lack of control over distribution of the tires to low price outlets. The brand is not doing well due to this heavy discounting and arrival of discount chains. Their financial position is also challenging with net income less than 1% of total revenues. Revenues $10.91 Billion Net income < 1% Despite all that, Goodyear is known as an innovator with a strong track record of launching new and exciting products. The main goal for Goodyears new innovative product should be to improve brand equity and financial positions of the company through the improved customer perception of premium tires and higher margins on the product. Looking at the competitive environment, Goodyear has the bigger market share per sales unit (15%), Michelin comes in second place (8.5%). This is the largest competitor for Goodyear with highest perceived value among customers as a premium product. 2. Another important trend is the increase in the marketshare of private labels due to the high amount of price and value conscious buyers. Many large and small manufacturers specialized in private label due to excess capacity; however, they have created a problem as the market is oversaturated with tires leading to price competition. Price of a private label is 18% lower than the comparable brand label but with lower functional characteristics of lifetime. While all competitors are summarized below, the key points are: 1) Michelin and Bridgestone were planning to introduce improved warranty 80,000 mile 2) Michelin was able to position its brand among quality and value conscious consumers 3) Michelin was selling at discounted venues: mass merchandisers and warehouse clubs 4) Goodyear had too many private labels and needed to refocus its product mix from purely price driven to value providing. 5) Rare innovations in industry Uniroyal was introducing new tires and Continental was planning to come up with a similar design in 2 years. Overall, the Goodyear needed Aquatred to improve its financial position and build up brand equity and establish itself as an innovation leader along competitors with a premium product lines in a stagnant tire replacement market. To do so, Goodyear needed revolutionize the market by breaking price driven behavior of consumers and changing their perception of tire characteristics moving away a commodity perception. Aquatred is an important product for this time in the industry, and should be introduced.

5) After the careful analysis of the consumer behaviour, distribution channels, tyre replacement market environment, company position and competition, one can create a product differentiation strategy for proper position. Product Position includes characteristics such as design, pricing,name and brand, warranty and level of customer service. As a premium brand Aquatred should be positioned in the Higher Margin Replacement Markets to the Quality Conscious consumers focused on quality and performance and safety in wet conditions.Consequently, the benefit of these attributes is a consumer perceived value which is the willingness to pay more. The psychological benefit is safety. Unique value proposition is to provide high traction in snow, ice, dry and wet weather for improved safety. It is also imperative to initialize campaigns to switch value driven consumers to see high value in safety and purchase the

product at premium pricing. These Value buyers are followers and would switch after Quality consumers if they value is worth the investment.

Pricing strategy starts from setting a pricing objective based on integrated analysis of company goals, fixed and variable costs, competitive differentiation and product value.After the review of all aspects, Goodyear should enter the market with a objective to establish market leadership through a superior product with initial premium pricing, just high enough for customers to match it with perceived high level of quality.The pricing method Perceived Value Pricing should focus on safety image, high traction performance, warranty and other service deliverables through channel, savings on insurance, brand reputation and trustworthiness. By deploying this pricing stratergy, Goodyear will communicate image of a superior product. Price for Consumers 11. Suggested retail pricing is 10% above Invicta from 89.95 to 93.95 USD. Total Price with Improved Value 5 out 6 stores showed that price sensitivity is from 79.95 to 88. This means 5-10% improvement from the base value of 75 (average). However, their described perceived value of the product could be calculated based on the average market price and differences in improvement perceptions described by the dealers. 75 USD at 15% improved value=86 USD 75 USD at 20% improved value = 95 USD 75 USD at 35% improved value = 101.2 USD Thus, the perceived value for this tire is in the range from 86 to 101 USD as described by the dealers.It is also imperative to run more studies using Conjoint analysis to measure distribution of perceptions about the acceptable price of the product. The analysis should tell us at average expected price, and at what price the intent to buy falls sharply and at what point the price is too inexpensive and hurts the image.

The promotion program should be launched nationwide to have a stronger impact on the market. $21 mill was allocated. Communication program for the launch should include: 1) Training plan for dealers sales associates. 2) Establish education centers to include: a. Benefits and positioning against competition b. Objectives handling for pricing c. Brochures explaining technical characteristics of the product against competitors. 3)Test and drive demonstrations in all major dealerships across country 4) Advertising to make tire a prestigious and stylish item with safety as the key message. This should build brand equity and increase sales revenues. 5)Participate in car magazines reviews, industry specific events. Aquatred should be distributed using exclusive distribution channel design. Based on the analysis, Quality consumer segment is interested in performance and quality; thus the channel must understand technical characteristics of tires and be able to provide post sales support. Small independent dealers and manufacturer outlets are most consistent with the high value premium image that Aquatred is going to portray.

If small independent dealers are not perceptive to the idea of a higher priced product, Goodyear needs to educate them through seminars describing points of differentiation. Goodyear is about to revolutionalize the market, and their dealers should be able to convince and educate the customers on the perceived value of the breakthrough. Aquatred should be only provided under a limited distribution contract to the manufacturer owned outlets and dealers who are loyal to the brand and generate the most revenue this way it will protect dealers profit margins and sales volumes. This way Goodyear has a full control over its distribution channel and can control price. Goodyear should avoid selling Aquatred to other distribution channel and car manufacturers OEM to keep the product in the premium channel, at least until competition enters the market in 1993. In the next two years, Goodyear should introduce an Aquatred into mass merchandising market to capture the remainder of the consumers (59% PC +23% VC).Massmerchandisers do not discount heavily only 3% from small dealers, and keep high brand loyalty. Since existing dealers than should have already collected high profits on Aquatred, they would probably see entering additional channels as less threatening.