Reprint: R0511J
There has been a lot of research on marketing as an offensive tactic—how it can help companies successfully launch new products, enter new markets, or gain share with existing products in their current markets. But for nearly every new product launch, market entrant, or industry upstart grabbing market share, there is an incumbent that must defend its position. And there has been little research on how these defenders can use marketing to preemptively respond to new or anticipated threats.
John H. Roberts outlines four basic types of defensive marketing strategies: positive, inertial, parity, and retarding. With the first two, you establish and communicate your points of superiority relative to the new entrant; with the second two, you establish and communicate strategic points of comparability with your rival. Before choosing a strategy, you need to assess the weapons you have available to protect your market position—your brand identity, the products and services that support that identity, and your means of communicating it. Then assess your customers’ value to you and their vulnerability to being poached by rivals.
The author explains how Australian telecommunications company Telstra, facing deregulation, used a combination of the four strategies (plus the author’s customer response model) to fend off market newcomer Optus. Telstra was prepared, for instance, to reach deep into its pockets and engage in a price war. But the customer response model indicated that a parity strategy—in which Telstra would offer lower rates on some routes and at certain times of day, even though its prices, on average, were higher than its rival’s—was more likely to prevent consumers from switching. Ultimately, Telstra was able to retain several points of market share it otherwise would have lost.
The strategies described here, though specific to Telstra’s situation, offer lessons for any company facing new and potentially damaging competition.
