DEFENSE STRATEGIES OF A MARKET LEADER-Article Excerpts
DEFENSE STRATEGIES OF A MARKET LEADER-Article Excerpts
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:
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.
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)(I have covered this aspect in ABM
class of unit 2)
product positioning—the consumer perception of a product’s virtues in
relation to other products on the market
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?).