Explore the Strategy of Defensive Marketing
In many industries, one particular company stands out as the leader, having the highest sales and the largest customer base. But whether they’re selling hamburgers, dish soap, or personal computers, their position as market leader can always be under threat.
Defensive Marketing Guide
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New businesses and products constantly arise to challenge the reigning king, offering some alternative—better quality, lower price, some unique feature —to the product(s) currently dominating the market. How should the established leader respond?
What is defensive marketing?
Defensive marketing strategies refer to the actions of a market leader to protect its market share, profitability, product positioning, and mind share against an emerging competitor. If not undertaken, some amount of customers will leave the established business in favor of the competitor—who can even displace the market leader and rise to the top. (See also Offensive Marketing)
Who employs defensive marketing?
Employed by market leaders, defensive marketing strategies are implemented any time a new threat to market share appears. The type of industry doesn’t matter. For example:
- market share—the percentage of customers who buy a business’s product instead of the competitors’ products
- mind share—the awareness of a business among consumers (e.g. there may be 10+ businesses in a given market, but only 2 of them might be immediately identified by consumers)
- product positioning—the consumer perception of a product’s virtues in relation to other products on the market
- Google is the market leader in “cloud” technology services. To stay ahead of new competitors, the company actually attacks itself by producing new products that force their old ones into obsolescence. It thus presents a moving target for new competitors, who end up competing primarily against the old Google products. (See also Cloud Marketing)
- Tesco was the market leader in general merchandising when Wal-Mart began to move in, threatening to attract their customers with lower prices. Tesco responded with lowering the price on many items, while simultaneously improving the personalization of coupons and promotions. In so doing, and despite Wal-Mart’s ongoing success, Tesco kept hold of its customer base in many cities.
- Tylenol was the market leader for non-aspirin pain relievers when Datril tried to challenge them. Tylenol’s response was so massive and effective that it actually awoke a “sleepy” market for aspirin alternatives. As a result, Tylenol is now the market leader for all OTC pain relievers, including aspirin.
- Starbucks was not the first coffee shop or restaurant to offer free Wi-Fi, and to promote that fact to customers; but it started doing so in order to protect its market share from other businesses that were doing just that.
- Facebook, the market leader for social media, updated their options for friends’ lists as a direct response to the “circles” offered on Google+. This allowed users to establish different levels of involvement in their social media contacts.
In a free-market economy, industry leadership can quickly change, and even long-established companies can be displaced. So any company with a dominant market share must constantly be on its guard for new competition, and be quick to respond with the right strategy.
For what kinds of customers is defensive marketing effective?
Defensive marketing strategies apply most directly to existing customers. For products that are purchased continually (such as food items), this includes a large group of loyal customers. Loyal customers of a retail store or fast-food restaurant may represent a majority of sales, even when they’re only a minority of the total customer base (See also Loyalty Marketing). For products that are purchased less frequently, such as a new computer, defensive strategies must be applied both to existing and potential customers, so that the business retains its mindshare among all those considering a purchase.
Different defensive strategies must be used, and will vary depending upon the nature of the competitor’s attack. If the competitor’s product costs less, strategies will be focused on the price-sensitive customer. If the new product has a specific feature that attracts customers, a repositioning strategy might be used. The key is to identify the competitor’s strengths first, which customers those strengths are resonating with, and respond to that challenge.
How is a defensive marketing campaign developed?
Defensive Marketing Options
- change product pricing
- if possible, block competitor’s distribution channels
- improve the threatened product
- reposition the product through advertising
In most cases, even the best defensive marketing strategy will not prevent a company from having lower profits than it had before the new competitor showed up. An exception to this is a “sleepy” market, where a market leader has not yet realized how much more demand exists for its product (such as Tylenol in the early ‘80s).
If a market for a particular product is growing, the leader can maintain its profit level as long as it gains new customers faster than its challengers. However, if that particular market has been “fully mined,” any new competition is going to reduce profits for the established business(es). Defensive responses hope to keep these losses to a minimum by promoting a number of strategies, including:
- Pricing. The market leader may have to reduce its own prices (and profits) in order to prevent customers from defecting to the competition. This is particularly important when the threat comes from a lower-priced product. However, this strategy can also be used against a similarly priced product advertising some other feature, as long as the savings in price are perceived by customers to be of more value than that feature or quality.
In some cases the market leader may actually increase prices. For example, if a product sells well based upon its quality, features, and/or reputation, many consumers who buy it may not be attracted to a competitor’s lower-priced alternative. In this case, the market leader does not try to keep its most price-sensitive customers from defecting to the competition, but instead raises the price for the ones who were willing to pay more anyway. When this strategy is used, it must be accompanied by advertising that focuses on the product’s increased value for the money.
- Distribution. Sometimes it is possible to block the distribution of a competitor’s product by creating incentives for distributors who refuse to carry it. However, this is only possible when the market leader is well-off enough to provide these incentives—and when doing so, will not be perceived as an illegal monopoly action. In most cases, companies can do more to retain profits by investing less in distribution, focusing on keeping the most defensible markets rather than trying to defend everywhere.
- Product improvement. Most products have more than one interesting quality for customers. Dish soap, for example, has a combined quality of strong cleaning effectiveness while staying gentle on hands. A competing product might be particularly strong against some, but not all, of these qualities. Thus a defending company can choose to improve their product either along their competitor’s strength, or along their own strength. Continuing the dish soap example: If a competitor’s product advertises itself as particularly effective on dishes, then the defending company can either try to make their product more, or it can choose to improve its mildness (and then advertise that). A company’s choice of strategy will depend upon market demand (i.e., do more customers buy their dish soap for its mildness, or for its effectiveness?).
Defending companies must be careful when attempting to attack a robust competitor’s strength, and should never change/abandon the product qualities that have driven their success. For example, when Pepsi challenged Coca-Cola’s market dominance in the 1980s, Coca-Cola tried to improve their product along their competitor’s strength by producing the sweeter-tasting New Coke. The plan backfired, as it undermined its own brand and upset its core customer base. Coca-Cola was forced to switch back to its former recipe, failing to recapture Pepsi’s customers. (See also Marketing Soft Drinks)
- Advertising. Defensive companies will invariably respond to new competitors in their ad campaigns. But the content of these campaigns is important. For example, promoting their brand at this point is generally a bad investment. Product and brand awareness campaigns yield a diminishing return on investment, and never address why the competitor’s product is attracting customers. A better advertising strategy is to reposition the product, stressing the features that the competitor is weak on (or doesn’t have). Such advertising can work without changing the product. However, in other cases, the marketing strategy will also involve some kind of product improvement.
- Defend profits without defending market share. In some cases, a company with multiple products may choose to protect profits by divesting itself of a losing product. It then takes the money it had previously invested in this product and moves it to other products that are like to offer greater returns.
What career titles work with defensive marketing strategies?
Marketing Managers direct multiple teams and campaigns, both offensive and defensive.
What do they do?
What type of salary should I expect?
- Marketing Manager
Median annual pay: $116,010
Top earners: $187,199+
- Market Research Analyst
Median annual pay: $60,570
Top earners: $111,440+
- Public Relations Manager
Median annual pay: $52,090
Top earners: $95,200+
Source: U.S. Bureau of Labor Statistics, 2012
- identify when a company needs to employ a defensive strategy
- review the relative strengths, weaknesses, and market positions of both their company and that of the competitor(s), and then select appropriate defensive responses
- oversee the daily operations of the marketing staff, and the various separate teams
- ensure that all repositioning and product-improvement campaigns are consistent with the overall company message
Education and experience
Most marketing managers have at least a bachelor’s degree (often in marketing, advertising, or business management) and substantial experience in their industry—in marketing, advertising, special promotions, public relations, and/or sales. Education preparing them for this career includes classes in marketing, market research, statistics, and consumer behavior. Additionally, future marketing managers often pursue and complete an internship while in school.
Market Research Analysts
Market Research Analysts gather data about their company’s products and strengths, as well as comparable data about their direct competitors.
What do they do?
- use a variety of methods (including interviews, questionnaires, focus groups, and literature reviews) to gather data on customers’ perceptions of their products and competitive products
- analyze data, employing statistical methods and software
- identify where a company’s profits are most likely to be threatened by a competitor, and make recommendations toward an appropriate defensive response
- distill and communicate findings about defensive marketing campaigns to their organization, using charts, graphs, and other means
Education and experience
Market research analysts need at least a bachelor’s degree in market research (or related field, such as statistics or computer science); many jobs also require a master’s degree, particularly for leadership positions or for positions that engage in more technical research. Many marketing students complete an internship while in school, and may gain additional experience in other jobs that require collecting and analyzing data and writing reports.
Public Relations Managers
Public Relations Managers improve customer perception of quality and promote mindshare (customer awareness of their products).
What do they do?
- write press releases regarding product improvements, and monitor media coverage of both their company and the competition
- draft speeches for executives, which are consistent with both product repositioning and the overall company mission
- identify customers’ information channels, and focus advertising in those areas
- reinforce company brand from competitors’ attacks
Education and experience
Public relations managers need at least a bachelor’s degree, usually in public relations or communications, and often with a minor in advertising, business management, or marketing. About one-fourth of all public relations managers also have master’s degrees. Their work experience often begins with an internship, then moves on to supporting more experienced staff members, before getting work on their own account(s). Necessary skills include excellent writing ability, and understanding both public and organizational communications—all of which will be provided by a good marketing education program.
How can a marketing school help you in this field?
Effective defensive marketing requires a number of different skill sets, particularly in analysis and communication. Marketing programs equip you with both of these skill sets, and more.
A marketing program will teach you how to acquire and analyze meaningful data, using a variety of research methods and analysis (See also Research Analyst). Such a program will include classes in business, accounting, sales, statistics, and computer science. These courses will equip you to understand a company’s customer base and its position/strength in the market. You will also learn about different methods attacking a business’ weaknesses—foundational knowledge for developing a proper defensive marketing strategy.
Additionally, a good marketing program emphasizes skill development in communication, requiring students to practice presentations and business proposals to build upon these skills. The practice and feedback you get in an effective marketing program will prepare you to connect with a wide variety of audiences, and teach you how to adapt your message according to their responses. You’ll learn how to defend a product or company without appearing defensive.
To learn more about what a marketing school can do for you, request information from schools with degrees in marketing, and get on the path to becoming a market leader in your own field.