Goodyear is preparing to launch a cutting-edge new tire with a unique tread design and outstanding performance features for wet and snowy roads that would give it conspicuous brand differentiation in the market. The product category is highly price sensitive and very competitive. This case involves marketing channel issues as well as the difficult management decisions involved in competitive positioning with mature product categories such as tires.
The new line of tires is known as Aquatred, which features a an innovative aquachannel groove that purportedly provides better handling on wet roads, one of the features most consistently asked for by consumers, according to market research. The key question is whether to take the expensive and risky gamble of launching the line of tires at all. This decision depends on a careful analysis of channels of distribution, as well price positioning, and the timing of the launch.
After having been the industry giant for years Goodyear has recently come upon hard times, with narrowing profit margins of less than 1% of total revenues in a market that is saturated and offers few avenues of expansion. This is due in part to the emergence of radial tires in the 1970Æs, increased competition from tire manufacturers in Europe, Japan, and South Korea, technological innovations leading to longer tire life, and complications in tire marketing demand due to a dramatic increase in the number of smaller cars.
Goodyear needs something to make a big splash in order to regain lost market share from competitors, especially among those consumers with a marked preference for product value and quality. It also needs a product with higher profit margins than standard tires. Therefore the Aquatred is planned as a top-of-the-line major brand all-weather replacement tire with markedly improved handling under wet conditions.
Goodyear plans a two year payback on its initial $21MM investment by gaining a minim...