Offensive and Defensive Competitive Marketing Strategy

7/30/2019 Offensive and Defensive Competitive Marketing Strategy

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ff n iv D f n iv

MarketingStrategyA

contradiction

or

complimentary?

Dr.PantriHeriyati

PT.HOLCIMBINUSBUSINESSSCHOOL

KNOWLEDGESHARINGSESSION 20OCTOBER2010


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Background

Flexibleand

innovative

players

enter

the

market

rapidlyerodingtheadvantagesofestablishedplayers(DAveni,1994)

ExploratoryStudy (Heriyati, 2007):

Marketshares

are

more

difficult

to

gain,

Firminsufficientlyequippedwithknowledge

strategyjustdoesnotmatchwiththemarketchallenge

Itispredicted:

firmsarenotchoosing therightmarketing

3

environmentandmarketchallenge


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Twoapproachesincompetitivemarketingstrategy:

Firmmustapplyamorerelationshipmarketing (Hunt,1983;Gronroos,1994;Gummesson,2002;Johnson&Selnes,2004)=defensive

Firmmust aggressivelyseektofillmarketopportunity (Keegan&Davidson,2003;Roberson,Eliashberg &Rymon,1995)=offensive

4


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ac groun A

good

strategist

seeks

not

only

to

win

the

hill,

butholdontoit. Subash Jain


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SunTzes OffensiveStrategies

Toknock

out

abusiness

rival

so

astotakeoverhiscompany:Indofoodsupermie

Toknockoutacompeting

productso

as

to

take

over

its

marketshare: Indomiemie sedaap

Covertoffensivestrategy

Keepas

low

aprofile

as

possiblewhilemakingoffensive

e.g. eps use anattac strategyaga nst o e

inChinabylocatingitsbottlingplantsinthe

interiorprovinces


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StrategiesforMarketLeaders

MarketLeadersobjectives:

Expandthetotalmarketby

Findingnewusers

Creating

new

uses,

and

Protectitscurrentmarketshareby

Increaseitsmarketshare

profitability


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Whichstrategytouse?

epen sonyouranswer

tothefollowing:

Isitworthfighting?

Are

oustron

enou h

tofight?

defense?BUSINESS

butto

fight?


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OffensiveMarketingStrategy Activities aimedatattractin and ainin newcustomer Johnson&

Selnes,2004)

builtoncapabilitiestoacquirenewcustomer,obtainadditionalcus omers,encourage ran sw c ng oown ran an ncreasepurchasefrequency(Fornell &Wenerfelt,1987;Boyd,1996)

Mainob ective=salesandmarketshare includeex ansionoforganizationsoffering(Rust&Zahorik,1993)

mostlysuitableforgrowthmarket (Boyd,1996)withfrequentchanging,

,

,

Eliashberg &Rymon,

1995;

Vorhies &

Harker,

2000;

Hooley

et

al.,

2004;

Bradley,2003)

marketingattacksarecarriedoutwithpricepromotionsoradvertising,warranty&launchingnewproducts (Hooleyetal.,2004;Stenkaamp etal.,

2005;

Camamero,

Martin

&

Gutierres,

2005

).


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moreprofitable forfirm(Rust,Zeithmal &Lemon,2000;Venkatesan &Kumar,

2004;Day,2000;Fornell &Wernerfelt,1988).

Usescustomerasashield intheirbattledwithrival(Fornell & Westbrook,1984;Fornell,1992;Fornell &Wernerfelt,1998;Johnson&Selnes,2004).

Focus:managingcurrentorexistingcustomer (Bolton,Lemon&Verhoef,2004;Gummesson,

2002)

&

building

relationship

and

retaining

customer

(Boyd,

1996),

re uc ngsw c ng ymanag ngcus omercomp a n o ncreasecus omer

retention(Fornel &Wernerfelt,1987;Smith,Bolton&Wagner,1999;Boyd,1996)

, .

Therelationshipbuiltthroughcommunication,cultivatingtrust,empathy,, , ,

1995;Callaghan,1995)

Bythis

definition,

relationship

marketing

can

be

regarded

as

defensive

strategy

(Sinetal.,2002;Tse etal.,2004).


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ConceptualModelFirmTypology Generic Performance

MarketPerformance

Firmsresourceand

capacity(highvs.

ar e ng ra egy

MarketShare

CustomerRetention

Financial

Performance:

ROI,Netincome

Growth

Defensivevolatility&

complexity

(Highvs.low)

11Source:Heriyati,

2009


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ens ve:

mens onsDimensions Items

Firms Product development effort (Vorhies &

Harker , 2000, Davidson & Keegan, 2003): firmseffort in product/service development involving

organizational formal structure, financing and level

1. Our product development efforts are more oriented to

customer needs than those average competition2. We invest more in R&D compare to average

competitor

.

4. R&D is an important function in our organizations

structure

5. Our product development is an ongoing process

New/modified product launched (Bradley, 2003;

Roberson, Eliashberg & Rymon, 1995; Slater &

Narver,1994): defined as new product launched

relative to other competitors in principal served

market over the ast ear

1. We frequently launch new/modified product launch

each year compare to average competitor.

2. The rate of product success each year is higher than

average competitor

3. We alwa s develo new roduct accordin to trend in

the market4. It is important to launch new product each on every

year.

5. Our new product always receive good response from

t e customer


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Offensive:Dimensions(contd)Dimensions Items

Customerattract onprogram Forne Wernelfelt,

1987,

1988;

Camamero,

Martin

&

Gutierrez,2005):definedasactivitiesprimary

focusedonattractingandwiningnewcustomer.

1. Weo ersgoo servicewarrantyo itpro ucts

andservice

2. Ourproductofferedhigherqualitythanaverage

competitor

, .

customer

4. We spend more on advertising than average

competitor.5. We do a ressive romotions to attract customer.

Competitororientation

6. We spend more on promotion than average

competitor

7. Our pricing approach is more competitive than

competitors

(Narver &Slater,

1990):

seller

understand

the

shorttermstrengthandweaknessandlong

termcapabilitiesandstrategiesofbothkey

currentandpotentialcompetitors

1. We respond rapidly to competitors action

2. Our salespeople share competitors information

3. Our top managers discuss competitors strategies

. we are a e o an c pa e an ac on u ure ren

quickly

5. Target opportunity for competitive advantage


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e ens ve:

mens onsDimensions Items (measurement)

,Sinetal.,2002,Morgan&Hunt,1994): formaland

informalsharing

of

meaningful

and

timely

informationbetweensellerandbuyer.

Communicationalsoactsasgluethatholdthem

. .

2. Wecanshowourdiscontenttoeachotherthrough

communication

3. Wecancommunicateopenly/honestly

4. Weallocatetimetocommunicatewithour

together customer

5. Wehavededicatedlinetocommunicatewith

customer

, ,

Morgan&Hunt1994)definedasawillingnessto

relyonanexchangepartnerinwhomonehas

confident.

.

2. Our customer give reliable inputs

3. According to our past relationship, my company

think our customers are trustworthy

Bonding:defined

as

the

dimension

of

a

businessrelationshipthatresultintwo

parties;thebuyerandselleractinginunified

mannertowardadesiredgoal(Cross&Smith,

1. We rely on each other to reach ourobjectives

2. We both try to establish a longterm

relationship

1995;Callaghan,1995;Tse etal.,2004) 3. We work in close cooperation


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Defensive:Dimensions(contd)Dimensions Items (measurement)

asfirmsspecificfunction tomanagethe

dissatisfiedcustomer

in

such

manner

that

its

negativeandharmfuleffectsonfirmare

.

2. Firmaddcustomercomplaintfunctioninthe

formalorganizations

structure

3. Firmtrainemployeetodealwithcustomer

4. Firmprovidecompensationforcustomer

whoseclaimedareconstructive

SwitchingBarriers:(Bruhn,2003;Sorce &Edwards,2004) definedasfirmcreate

barrierstoensurecustomerdependenceon

thefirmandthattherelated rofitsare

1. Customerarecontractuallyboundtothe

firm

2. Firmprovidemorediscountforrepeat

urchase

securedover

the

time

period

involved.

3. Firm

rewards

repeat

buyers

4. Ownproduct/brandhas auniquebenefit

whichcompetitordonthave


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Strategyvs.Environment:Managerialimplicationfor VigilantFirms

Typology Characteristic Strategy Recommendation

Vigilant Vigilant has prime capability in

finding and exploiting new product

and market opportunities

Important for manager to maintain reputation as innovator in

product and market, even more important rather than achieving high

profitability (Mc. Daniel & Kohari, 1987).

g an s mar e now e ge s

distinctive competence.

anager nee o emp as ze s organ za ona resource on e

continuation of the research and development activity (Hauser &

Shugan, 1983; Roberson, Eliashberg & Rymon, 1995; Vorhies &

Harker, 2000, Hooley et al., 2004)

Firms are in growth stage Manager more emphasize on price, and the length of the product line

should be relatively short to reduce production cost and to hold down

inventory.

Heavy advertising in order to generate awareness among new

customer and the use of broad mass media.

New product with price considerably high may recommended to

launch the lower-price version to anticipate competitor entering the

same market with lower price strategy.

16

Vigilant has broad market

opportunity

-Intensive distribution through independent outlet or retail store

(Kotler, 2003)

-Offering free trial or extended warranty policies


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PROFILE 2025

Vigilant: PLC Stage

Vigilant: Industry Type

5

2419

9

0

5

10

15

Introduction Growth Maturity Decline

Automotive, 8,

14%Other , 2,4%

Pharmacy, 5,

9%

Home

Appliances, 3,

5%

, ,

9%

Electronic , 2,

4%

Automotive

Food and

Beverage , 32,

55%

CosmeticElectronicFood and BeverageHome AppliancesOtherPharmacy

Source:Heriyati,

2009


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Strategyvs.Environment:ManagerialImplicationfor NeuroticFirms


Neurotic Firm with too much market

scanning activity

Product market is in maturity stage

1. adjustment especially on the cost or investment over the market scanning

activity.2. Improved its scoping activity by identifying not too broad area of

investigation.

3. Identify a specific homogeneous target market that will be served and

protected. The market should be profitable for firm to maintain.

If market opportunity are wide

enough and resource is abundant

Move the organization to Vigilant position and take aggressive action

enough but resource is limited:

.

2. Product strategy emphasizing on eliminating unprofitable or weaker items.

Enjoy a relatively stable share in the

industry, but also seeking new

To sustain its share through differentiation of its products offering on the basis of

superior quality or by service attach to the product or by maintaining low-cost

segment.

, .

1. Strengthen the relationship with its channel to ensure they are still

motivated to sell the product and thus maintaining its current market share.

2. Contractual distribution with the authority limited to distribution of the

18

.


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Neurotic: PLC Stage

PROFILE

15

euro c: n us ry ype

Other , 3,

14%Automotive,

1, 5% Cosmetic, 2,

811

2

0

5

Growth Maturity Decline

Food and

Appliances,

1, 5%

10%

Automotive

Cosmetic

Beverage ,14, 66%

Food and Beverage

Home Appliances

Other

Source:Heriyati,2009


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Strategyvs.Environment:ManagerialImplicationforFocused Firms

vision capability to operate in stable

market environmentIn the mature to decline market.

.

2. Depend on firms ability to sustain at lower cost

delivery or heighten product quality and additionalservice to product

3. Manager not too focus on supporting declining market

too long, it hurt current profitability (defensive)

4. Product rejuvenation is mostly designed to promoting

new uses or by encouraging customer to use more often

(In-dept interview)n t s sta e-mature mar et, ex t

barrier is low

manager to e very su c ent an e c ent n mar et ng

program to increase market share via lower cost policy or

more promotional effort (offensive) in order to driving out

weaker competitor.

In this stable-mature market, if exitbarrier is high

Focus in maintaining and protecting their existing or currentmarket with lower price and organization efficiency



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30

Focused: PLC Stage

PROFILE

Focused: Industry Type

1 4

2517

0

10

20


Pharmacy, 9,

19%

Cosmetic, 4,

9%

Automotive, 6,

13%

Electronic , 1,

2%Other , 6, 13%

Automotive

Cosmetic

Home

Appliances, 4,

9%Food and

Beverage , 17,

35%

ElectronicFood and Beverage

Home Appliances

Pharmacy



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T olo Strate Recommendation

Strategyvs.Environment:ManagerialImplicationforVulnerable Firms

Vulnerable Vulnerable: lacking of

market knowledge

Urgent to develop its market knowledge capability:

1. Assign the responsibility to an existingfunctional group

2. Mobilize ad hoc issue group

3. Create a market-hypotheses testing initiative

4. Invest in start-up ventures

Firm in mature to decline Focus on strategy & avoids prolonged direct

market confrontation with larger and stronger competitor

(Cravens & Piercy, 2003; Kotler, 2003; Kotler &

Singh, 1981)

pro uc cos per-un s

low :

pp y ower pr ce or eav er persona approac

effort when necessary to retain customer,

If product cost per-unit is Or firm has limited resources relative to competitor,

product (market niche) (Mullin et. al 2008)

Source:Heriyati,

2009


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Vulnerable: PLC StagePROFILE

Vulnerable: Industry Type

10

15

Pharmac 3

Apparel , 1,

4%Automotive ,

1, 4%Cosmetic, 1,

4%

3

119

2

0

5


12%

Other , 2,

8%

, ,

8%

Home

Appliances, 1,

4%

Food and

Beverage , 14,

56%



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Conclusion

Strategyinfluenced

by

the

external

and

OffensiveandDefensivestrategy:compliment

strate

Maydependonproductmarketcharacteristic

OrganizationneedtostayalertandbuilditsVi ilant ca abilit


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Thank You

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Offensive and Defensive Competitive Marketing Strategy

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