Twheel Marketing Plan

Juan Carlos Vargas

March 30, 2011

Keller Graduate School of Management

MM522

Marketing Management

Zach Yabs

1.0 Executive Summary

The Twheel is an innovation on the pneumatic tire that uses an internal structure of spokes instead of air pressure to hold a tire together. The Twheel will provide value to customers via increases in performance, safety, and durability, as well as decreasing maintenance times, and environmental and personal costs. There are issues to contend with such excessive vibration and safety concerns that must be corrected. The Twheel will be introduced to the U.S. market in a three phase roll-out. The Twheel will gain acceptance in the market through an initial deployment into auto-racing, which will showcase the effectiveness of technology to the masses. Coinciding with the auto-racing deployment will be heavy advertising and promotions budgets, as well as celebrity endorsements that will establish the brand image. The roll-out will then proceed to the luxury car segment at premium pricing, and then conclude with mass retailers and most car manufacturers at reduced prices. The time frame of the initial roll-out will be approximately 5 years. Future targets will include military, construction, and specialty personal transportation vehicles.

2.0 Situational Analysis

2.1 Market Summary

The tire industry is well developed, yet the emerging Twheel will have its own industry characteristics. This industry analysis will describe the threat of substitute products and new entrants, the competitive rivalry, and the bargaining power of customers and suppliers. The Twheel is being positioned as a substitute to regular tires, thus making this threat the most relevant to marketing efforts of the Twheel. New entrants are not uncommon to the tire industry, as perfections and enhancements have been developed periodically for the traditional air-pressure tire. New technologies can be seen as a substitute to the Twheel and tires, especially to consumers looking for cutting-edge technology who could choose another new technology in tires as more beneficial than the Twheel’s features. Competition in the industry is intense and market share is divided by few major players. According the U.S. Census Bureau, there are only 21 establishments in tire cord and tire fabric mills (NAICS code 314992), with $1.2 billion in shipments and 5,192 employees. This dense concentration of manufacturers gives the firms substantial bargaining power over suppliers and customers, since the abundance of suppliers and customers do not have many choices of companies to do business with.

2.2 SWOT Analysis

Strengths

The Twheel essentially puts together the wheel and tire together in one. It is airless and resilient, factors which make the Twheel more durable in comparison to traditional pneumatic tires. Additionally, since the Twheels are airless, no time will be wasted maintaining proper tire pressure. Proper tire pressure will not only extend the gas mileage of a vehicle, but minimize the likeliness of a blowout as well. This makes the Twheel a more time and cost effective alternative to current pneumatic offerings. The Twheel can be tuned in relation to vertical and lateral stiffness. Vertical stiffness affects how smooth the ride is, while lateral stiffness affects handling and cornering. Adjusting these two can optimize how the car runs and give the driver not only a safer feel, but a more enjoyable ride as well. An additional strength of the Twheel is numerous application platforms it can be applied to. The Twheel can be made for military use, commercial use, or industrial use. The different products could range from construction machines to wheelchairs to RVs. A third advantage of the Twheel is that it would be the first product commercially introduced in the newly created “airless” market. Consumers would associate the Twheel with cutting-edge technology, making the marketability of the Twheel much easier than those of “copy-cat” companies that follow.

Weaknesses

There are two significant issues with the Twheel that must be addressed. The first issue is at high speeds the Twheel generates vibrations and a loud hissing noise. There have been adjustments made to prototypes which have proved successful, and with more testing and R&D, this problem will be eliminated. Another issue with the Twheel is its ability to handle hard braking. The same property which allows the Twheel to absorb shock so effectively might also make it lousy during hard braking, causing the tires to fold or transform shape which would prove fatal on the road. Engineers are working on a different type of spokes that would not compress or fold when breaks are applied suddenly. These spokes would work in such a way that when sudden braking pressures are applied, the spoke structure holds its shape and does not bend in any way; however, during normal driving they will retain their flexibility.

Opportunities

The Twheel is entering into the newly created “airless” market, which contains many opportunities. The Twheel’s entry into the market will be selective and deliberate, initially targeting only select road going vehicles; long term possibilities for this new product could range from military use, public transit, Segways, and ATVs. The military uses rugged-terrain vehicles routinely for training and operational purposes. These vehicles must be supported by the best wear-and-tear material and structure possible, which begins with the vehicle’s contact with ground, wheels. The Twheel would satisfy the military’s needs for tough and enduring performance. Public transit vehicles utilize wheels extensively, and their tires are constantly in need for repair and replacement. Employing the Twheel would benefit public transit by limiting the need for repair and replacement, as well as provide a superior product which improves overall performance. Specialty personal transport vehicles such as Segways and ATVs provide an additional market for the Twheel. The advanced handling and shock-absorbing characteristics of the Twheel can be readily marketed to ATV customers, while the advanced cutting-edge technology of the Twheel would be just as marketable to tech-savvy Segway owners.

Threats

The main threat to the Twheel is reverse engineering from competitors. Competitors will try to make a version of the Twheel by copying its design. By copying the design competitors will enjoy cheaper R&D costs and thus higher profit margins and faster times to market. The government could also become a threat. The Twheel has been tested for military applications, and from the results of tests the government may want to start using the Twheel for its military transportation needs. If that does happen, the government may pass regulations that limit the use of the Twheel by the public. If laws are passed by the government regarding the Twheel, it would slow down the initial growth.

2.3 Competitor Analysis

When the Twheel makes its debut into the tire/wheel market, it will have two types of competitors. The first type is the well known tire companies that specialize in pneumatic radial tires. These companies include Firestone, Goodyear, and Michelin, who actually designed the now popular radial tire that is in use today. Not only do they have the advantage of being the first to enter the market nearly sixty years before the Twheel, but they also posses a proven, widely used technology that has been the only real competitor in this market. The second type of competitors is those companies that have started developing their own version of the airless tire. One company in particular, Resilient Technologies, has already begun the development of the NPT, non-pneumatic tire, which they’ve decided to market towards the U.S. military.

2.4 Product Offering

The attributes that set the Twheel apart from the current pneumatic tires are the new airless tire-wheel integrated technology that makes up the Twheel. The flexible spokes and hub of the Twheel bend and adjust according to the road surface, and takes on all of the inflated tire’s responsibilities. The Twheel also allows for the adjustment of both the vertical and lateral tire stiffness, and thus both the comfort and the handling of the car. This is not currently possible with today’s pneumatic tires.
2.5 Keys to success Important keys to the success of the Twheel include fine tuning its design, securing endorsements from reputable celebrities in the auto industry, and achieving efficiencies in manufacturing and distribution to speed along breaking even. The noise caused by the internal structure and the spokes’ instability during hard braking must be addressed before taking the product to market, and a solution must take the Twheel’s commercialization and future manufacturing practices into account. Tying the image of the Twheel to a well known celebrity in the auto industry from early in its marketing will have endurance power that will result in a solid brand image as the product’s roll out progresses. In order for the Twheel to be a commercial success economies of scale must be achieved to spread costs and raise margins. The marketing team has several milestones to meet and can gauge its success by monitoring progress of these keys to success.

2.6 Critical issues

The Twheel has 5 different attributes that will produce increased value for the customer over current pneumatic tire offerings. These are low maintenance, safety, enhanced performance, durability and strength, and cost savings. These are explained in greater detail in Exhibit 2. There are three attributes of the Twheel that might detract value from the customer, when compared to current pneumatic tire offerings. The areas that are of concern include the following: safety, excessive vibration, and the structure of the Twheel. These are explained in greater detail in Exhibit 3. The two possible threats that the marketing team must mitigate are reverse engineering and government legislation. These are explained in further detail in Exhibit 4.

3.0 Marketing Strategy

3.1 Mission

The vision for the Twheel is to be the recognized leader of the U.S. “nontraditional” tire market. Through this vision, the product will build shareholder value by delivering innovative tire solutions in novel and cost effective ways.

3.2 Marketing Objectives

The Twheel will be marketed in a three phase roll out campaign. The campaign will be initially targeting motorsports in the United States, both professional and amateur alike, advancing to the luxury car segment, and concluding with mass distribution via car manufacturers and national tire retailers.

3.3 Financial Objectives

The first financial objective will be to breakeven by year three of major operations. The initial loses in Phase 1 will be attributable to heavy marketing and sponsorships. In Phase 2 Twheels will be introduced as a premium product to select car brands such as Lexus, Mercedes Benz, and BMW. This will allow the operation to become profitable for the first time, as a result of high contribution margins and expanded customer base. Later phases will incur even higher marketing and sales costs, but total revenues and profits will be significantly higher because of a national customer base. Growth from Phase 3 and beyond will be contingent on additional contracts with car manufacturers and national tire retailers.

3.4 Target Markets

In the first phase, the main focus will be professional and amateur motor sports. People who like a particular driver will eagerly patronize the companies that put their logos on the uniform and race car. Auto racing is an excellent advertising media; television crews cover all major league races live. In the second stage, the Twheel will be introduced to luxury and performance car drivers. This segment of automobile drivers enjoys the newest technologies, options for the dashboard and underneath the hood, and personal attention from sales and technical support. In the third and final stage, the marketing team will concentrate in the mass distribution via car manufacturers and national tire retailers. This segment of consumers is price sensitive and seeks the best value for their dollar.

3.5 Positioning

The Twheel is being positioned as a cutting-edge new technology. Consumers who want the latest technology available will be targeted in the initial introduction of the Twheel, beginning with a focus on high-profile motorsports. The Twheel offers anyone who uses tires an upgrade which is more reliable. Once the product is brought to market and customer awareness is increasing, it will be economically offered to consumers who are interested in upgrades, but can not usually afford the latest new technologies.

3.6 Strategies

Marketing for the Twheel will proceed in three phases, each designed to gain particular market exposure. Phase 1 will focus on specialty production, particularly the racing tire industry. This allows for a “sneak peak” of an up-and-coming product, where it will receive a wide-spectrum informational marketing approach. Phase 2 will introduce the Twheel to luxury and performance car tires, where it will maintain a premium status. Consumers will already have exposure to the technology, and premium product seekers will wish to upgrade their wheels to a superior technology with little consideration for price. Car manufacturers will be targeted in the distribution channel exclusively, so only new cars will be able to have the Twheel. This phase will be carried out for as long a time as is strategically permitted by the market. In Phase 3 the Twheel will be introduced to the masses, giving any car owner the opportunity to upgrade their wheels. Pricing, promotion, and distribution will need to be modified for this segment, with the refinement of a product that is cost- and production-friendly.

3.7 Marketing Mix

Product Strategy

The main focus in product strategy is to obtain and maintain awareness. People should be able to remember the Twheel when they are shopping for tires. This is a challenging task due to the fact that the Twheel is a brand new product. Brand recognition is a crucial aspect to the marketing plan. The three-stage marketing plan will make the company national with future hopes of becoming international. Once customer awareness is at a high level, the products will sell themselves. The Twheel is a revolutionary product that will change the future.

Pricing Strategy

The pricing strategy will be based off the three stages of the marketing plan. The first stage is to distribute Twheels to professional track and race cars. This is the initial stage where not much awareness is out and not many people will know about the product. The main goal of this stage is to penetrate the market, and let product awareness grow. Motor racing events will be sponsored and drivers will use the product for the first time. Extensive initial spending must occur, requiring debt raising or investor introduction. There is substantial risk involved, but future returns have potential for extreme wealth creation. Letting big names use the Twheel for free in sponsored events will earn trust with potential customers in later phases. The second stage is to enter the high profile manufacturers. This includes but does not limit to names such as BMW, Acura, Lexus, and Mercedes. By this stage most car retailers will have heard about the Twheel, as well as some of the general public. Since this stage will be dealing with mass wholesale, wholesale prices would need to be negotiated. The third and final stage of the marketing plan is to allow access of Twheels virtually everywhere. This means all other car manufacturers not included in phase two, as well as retailers such as NTB, Discount Tires, and Wal-Mart. The focus in this stage of products is to provide a cost-friendly version that is in the price range of an average consumer.

Promotional Strategy

The first stage promotional activity will include efforts to raise public awareness of the product. Jeff Gordon will be hired as a spokesman to promote the Twheel for the professional and amateur race circuits. Also, the Twheel will be featured in “Fast and the Furious 4,” whose audience includes motor vehicle racing fanatics. Also in this phase, the marketing team will be hosting and sponsoring many different race events throughout the country. In Phase 2, national television commercial ads, billboards, and magazine ads will reach the target segment of performance and luxury car drivers. As price is a concern in Phase 3 a discount will be offered for a limited time, such as a free fourth Twheel with the purchase of the first three. This discount will be recurrent every 18 months.

Place (distribution) Strategy

During the first phase Twheels will only be purchased directly from the marketing team and its direct distribution channel. This allows for direct customer interaction, and customized selling. In Phase 2 Twheels will be purchased by luxury automobile manufactures for new vehicles only. The third stage will introduce national retailers as a distribution channel, and consumers will be able to replace their existing traditional tires with Twheels.

4.0 Controls

4.1 Implementation

The Twheel will be brought to market using the meticulous marketing plan previously described. As distribution to the first target market commences, substantial deficits will be undertaken. This first stage is not meant to actually make money, but to solidify a presence in the automobile industry. By the second year the Twheel would receive premium consumers’ acceptance in new car purchases. The last stage is marked by lowering of prices to help defend market share from other companies promoting their own version of the Twheel. The third stage is also where the wide spread distribution of Twheels occurs with the introduction of retailers as a distribution channel. With the Twheel on every store’s inventory list and new lower priced models sales should climb into the millions with time.
4.2 Marketing Organization The Twheel will be managed and marketed by a marketing team consisting of a Chief Marketing Officer and several managers running the marketing operation. A senior level director, the CMO, will manage the strategic direction of the introduction of the Twheel and report to senior leadership of the overall firm. Reporting to the director will be Vice Presidents for various marketing functions including Research & Development, PR & Communications, and Advertising. The marketing organization is depicted in Exhibit 5.

4.3 Performance Evaluation

The marketing plan will be monitored by running monthly reports, which will show the market share growth and the progress of each phase. All of the marketing vice presidents will report to the CMO. From there, the VP will review the reports and make whatever adjustments that are needed, and will sit down with company leadership and discuss findings. The vice presidents make everyday marketing decisions, however, the CMO over looks any major program changes.
Exhibit 1: Market-Product Grid

|Market-Product Grid |Specialty |Manufacturers |Retailers |
|Racing |Phase 1 |- |- |
|Luxury/Performance |- |Phase 2 |Phase 3 |
|Regular |- |Phase 3 |Phase 3 |

Exhibit 2: Value Adding Qualities of the Twheel

|Value Added |Benefits |
|Low Maintenance |No longer will customers have to monitor tire pressures to ensure that all four tires are of the same |
| |pressure |
|Safety |No Chance of a Blowout |
| |Twheel design maximizes tread contact with road improving traction |
|Enhanced Performance |Handling and comfort can be adjusted to the specific target market because the Twheel can be tuned in |
| |relation to vertical and lateral stiffness |
|Durability and Strength |No Single Point of Failure. It cannot be harmed by objects in the road. In fact, in testing, it has |
| |remained serviceable after being damaged by an exploding landmine. |
| |Flexible polyurethane spokes are extremely compliant, bending easily and allowing the structure to absorb |
| |shock, carry heavy loads, and envelope road hazards similar to a pneumatic tire |
|Cost Savings |Personal and Environmental cost savings. Only the tread from the Twheel has to be replaced, rather than |
| |the entire unit; which lowers the cost of replacement for the individual. |
| |Environmental: Since the entire unit does not have to be replaced, there would be a sharp reduction in the|
| |amount of waste rubber generated by discarded automobile tires |

Exhibit 3: Value Detracting Qualities of the Twheel
|Value Detractor |Reason For Loss of Value |Contingency Plan |
|Safety |The same property which allows the Twheel to |R&D Funding |
| |absorb shock so effectively might also make it |Target markets where speed and heavy breaking |
| |unstable during hard braking, causing the |are not required (Military, Construction, |
| |tire's leading edge to flatten and deform in |Segways) |
| |undesirable ways | |
|Excessive Vibration |The level of comfort is lessened because above |R&D Funding |
| |50 mph, the Twheel vibrates considerably, |Target markets where speed and precision |
| |generating noise and heat. |handling are not required (Military, |
| |Above 50mph the vibrations might also make the |Construction, Segways) |
| |car harder to control | |
|Twheels Structure | The Twheel's structure may cause slightly more|R&D Funding |
| |drag during normal driving, reducing fuel |Marketing plan to emphasize other attributes. |
| |efficiency and tread life. | |

Exhibit 4: Threats and Solutions
|Threat |Concerns |Mitigation of Concern |
|Reverse Engineering |Reverse engineering of the Twheel’s design |Acquire all patents and copyrights to make it |
| |could lead to a smaller window of time in which|more difficult for companies to mimic the |
| |to capture the market. |Twheel. |
| |The brunt of R&D costs are borne by the |Continued improvements in performance will |
| |marketing team, allowing competitors to make |render imitations inferior. |
| |their products cheaper. | |
|Government Regulation |Laws passed that restrict use to only military |The marketing team will work closely with the |
| |vehicles due to the strength and durability of |government and military, with lobbyists in |
| |the Twheel. |Washington D.C stating its case. |
| |Laws passed restricting or delaying the release| |
| |of the Twheel for the benefit of other tire | |
| |companies. | |

Exhibit 5: Company Organization

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Works Cited

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Chief Marketing Officer

VP of Communication & PR

VP Advertising

VP Research & Development