The marketing program’s objective is to determine if expanding to a multi-channel distribution policy will stop the decline in market share. Goodyear has not sold the Goodyear tire brand through a mass merchandiser since the 1920’s and because of recent top management change and loss in market share, the option is up for debate again. The growing loyalty to warehouse membership, mass merchandiser, and discount tire stores have contributed to the loss in market share for Goodyear. Constraints The marketing program has some constraints to consider when deciding what is the best option for Goodyear Tire.
Goodyear Tire has to be concerned with the reaction and result expanding to a multi-channel distribution will have on their Goodyear Tire dealerships. Right now Goodyear distributes its tire products through almost 8,000 retail points of sale in the United States and some 25,000 retail outlets worldwide. The company operates about 1,000 company-owned Goodyear Auto Service Centers and sells through 2,500 franchised Goodyear Tire Dealers in the United States, many of which are multisite operators. These retail outlets account for a major portion of Goodyear brand annual tire sales.
One Goodyear franchiser states, “We went with them through thick and thin, and now they’re going to drown us. ” This is not the reaction that you want from one of your main contributors (franchises) to your annual income. The reaction doesn’t matter as much as the outcome. Goodyear needs to be careful about cannibalization and creating extra competition for their company-owned/franchise stores. Strengths The marketing program has strengths to help them achieve their objective of stopping the decline of market share.
Goodyear tire is one of the most recognized brands worldwide. This is important because when/if they expand into different channels, the consumer will be well aware of the Goodyear brand and quality. They have a large television advertising budget of 10-30 million for own brand commercials and 20-100 million for cooperative dealer commercials. This is a strength for Goodyear because it allows them the ability to advertise for their company-owned service centers more if a mutli-channel distribution policy occurs. Weaknesses
There are weaknesses that arise with Goodyear Tire’s marketing program. Goodyear Franchisees and company-owned stores could lose sales with the addition of more channels of distribution. This is possible because of the increase in competition of stores selling Goodyear tires. Another weakness is that the new channels carry manufactures brand tires (like Goodyear & Michelin) but markets their own brand. This is because they receive higher margins for their own private label brand. Target Markets Goodyear has two target markets; replacement tires and original equipment.
The replacement tire market is 70-75% tires sold annually, price sensitive, not the original tire, and considered a “flat” industry. The consumers have a lack of knowledge towards different tire specifications, which results in picking the cheaper tire. This also means that consumers aren’t very brand loyal. The industry is considered “flat” because of newer technology allowing for longer tread life and not needing as many replacement tires. The original equipment tire market is 25-30% of unit production, 38% of Goodyear’s segment, and is price elastic.
Original equipment tires are price elastic because the manufactures can easily switch to a competitor and this creates somewhat of a bidding war between competition and car companies. Considerations Goodyear Tire Company has different channel, price, and product considerations to consider with this marketing program. Goodyear currently has 12 brands of passenger and light-truck tires sold under the Goodyear name that range from lower-priced tires to very expensive high end tires. This allows for a variety of options for how Goodyear can widen their distribution channels.
Goodyear can provide different stores with exclusive brands (high and low end) while allowing their own dealers with certain brands. They could only allow one or two brands (high end or low end) to other channels and have Goodyear dealers have more. Also, they could provide a niche type of tire for these channels like off-roading or import tires. A variety of promotions are available for Goodyear to use with this marketing program. Cooperating with different channels in creating specials and bundles for different Goodyear tires can help create awareness of Goodyear tires being sold in more places.
Putting a Goodyear salesman in some channels to help promote the Goodyear brand over other competitors will strengthen the ability to sell more tires. Large point of purchase displays and eye popping signs about the arrival of Goodyear brand tires in these new channels will increase brand awareness as well. There are a variety of different promotions available and we will talk about some of the ones we are going to focus on in our alternatives. Statement of Problems Primary Problem
The Primary problem/opportunity for the Goodyear Tire Company at this juncture of their business cycle is whether or not to widen their distribution. More specifically, Goodyear has the opportunity to expand their distribution through Sears Auto Centers. Secondary Problems If in fact Goodyear were to distribute to Sears auto centers in order to expand their market presence, how would a change affect the company’s image as they would have to change their long standing distribution policy that attracted many franchisees to the business in the first place?
In consideration of this the company would need to do also realize franchisees may need to sell/push other brands as Sears may be a serious contender for owners located near a competing Sears Auto Center. On the other hand Sears customers are very loyal, so Goodyear may be tapping into a market they haven’t entered yet anyway, which would maximize profits and spread an already superior brand image. Secondly, if Goodyear were to go ahead and change the distribution policy and sell in Sears Auto Center stores, how many branded products as well as which type should Goodyear launch in the joint effort with Sears Auto Centers.