Download Characteristics of competing marketing strategies when defending

JOURNAL OF STRATEGIC MARKETING 5 23–49 (1997)
Characteristics of competing marketing
strategies when defending market
leadership
STANLEY F. STASCH AND JOHN WARD
Loyola University of Chicago, Water Tower Campus, 820 North Michigan Avenue,
Chicago, Illinois 60611, USA
Forty-one case histories of attacks on market leaders were studied for the purpose of
identifying the characteristics of com peting marketing strategies when such attacks
occur. Based on this research, a four-part classification m odel of such com petitive
behaviour is proposed. (1) When are m arket leaders m ost likely to be attacked? (2)
What should a m arket leader identify about an attack? (3) How should a m arket
leader defend against an attack? (4) How should the market leader respond to the
attacker’s counter-attack? Sum mary findings are also presented.
KEYWORDS: Competing marketing strategies; market leadership; competitive behaviour
INTRODUCTION
Even though the market leader holds the largest share of the market, it knows that
competitors would like to increase their market shares. In mature markets, since the market
leader has the biggest share, it is likely to be attacked whenever a competitor wants a bigger
slice of the market. This is a common occurrence. Each year the business press reports
situations where one or more competitors have made serious attempts to increase their market
shares at the expense of the market leader’s share.
This paper enquires into the characteristics of marketing strategies used by established
market leaders in mature markets when they try to defend their leadership positions against
attack. It also investigates the characteristics of the strategies used by challenger firms who try
to take a significant market share away from the leader. The overall purpose of the paper is to
identify and describe the characteristics of competing marketing strategies when market leaders
are attacked.
The competitive behaviour described in this paper was documented by the authors in 41
marketing strategy case histories of actual attacks on market leaders. The case histories used
were ones involving recognized leaders in mostly consumer product markets in the US. These
attacks occurred during the time period extending from the late 1960s into the early 1990s.
The literature
This paper focuses on the marketing strategies used by specific firms when they attack their
industry’s market leaders and the marketing strategies used by the market leaders when
0965–254X # 1997 Chapman & Hall
STASCH AND WARD
24
defending against the attacks. The literature most directly related to this paper’s focus can be
classified into two groups: research based on the study of one or more actual marketing
strategy case histories and empirical research based on quantitative and statistical data such as is
available from the Profit Impact of Market Strategies (PIMS) programme.
Case-based research
Bloom and Kotler (1975) addressed the general topic of ‘Strategies for High Market-Share
Companies’. The article used several examples to illustrate some strategies which high market
share companies might consider using. Porter (1985) authored ‘How to Attack the Industry
Leader’, which suggested four conditions an attacker must meet in order to have a chance of
being successful. However, he also stated that the leader must be in a vulnerable state in order
for the attacker to have a chance of succeeding. Ward and Stasch (1986) analysed 21
marketing strategy case histories to answer the question of ‘When Are Market Leaders Most
Likely To Be Attacked?’ They reported 12 situations in which market leaders seem most
susceptible to being attacked. More recently, Stasch and Ward (1992) presented a framework
which outlined the type of competitive behaviour characteristics they observed when market
leaders were attacked.
Although all of these articles address the market leader’s behaviour to some extent, none of
them go into the details of competitive behaviour, as attempted in this paper. In addition,
these articles do not give evidence of using as broad an information base as used in this paper.
The first two articles listed above do refer to a few specific examples as illustrations, but
neither article claims to be based on numerous examples or case histories. The third and forth
articles noted above used approximately two dozen marketing strategy case histories in their
research.
PIMS-based research
Space permits comments on only a few of the many PIMS-based research publications. Buzzell
et al.’s (1975) Harvard Business Review article entitled ‘Market Share–Key to Profitability’, was
probably the most noteworthy lead article in this category of research. However, Buzzell and
Weirsema’s (1981) Harvard Business Review article, ‘Successful Share-building Strategies’, is the
most applicable relative to this paper’s focus. If a marketing strategy is successful in building a
firm’s market share, there may be a good chance that some or all of the market share gained
came at the expense of the market leader. For this reason, the Buzzell and Weirsema (1981)
article is reviewed in depth below. Other researchers used the same PIMS database to raise
questions about the desirability of a firm trying to increase its market share and even the
desirability of becoming the market leader (see Woo, 1984; Jacobson and Aaker, 1985).
The Buzzell and Wiersema (1981) article is useful for illustrating the character of PIMSbased research as it might apply to a market leader being attacked by one of its competitors.
Those authors developed statistical models which simultaneously incorporated the effects of
changes in new product activity, quality levels and marketing budgets on changes in market
shares. They reported the following.
These models explain about 40% of all the variations in market share changes for consumer product
markets and about 30% of the variation for both raw materials and industrial products manufacturers.
While it has provided some clear-cut results concerning factors that affect market share, our analyses
failed to isolate certain other forces. Some specific ways of competing are distinctive to particular
CHARACTERISTICS OF COMPETING MARKETING STRATEGIES
25
industries or products and cannot readily be measured and analyzed in a multi-industry program such
as PIMS. No doubt, much of the shifting in market positions not attributable to changes in quality,
new products, or marketing budgets was due to the use of these industry-specific competitive tools.
In addition, enormous differences must exist in the quality of execution of competitive strategies
(Buzzell and Wiersema, 1981, p. 143).
Buzzell and Wiersema (1981) went on to observe that market share gains can be due to the
quality of execution of competing strategies, targeting one or a few segments of the market
and the complex marketing mixes firms employ.
While situations probably exist in which a single competitive weapon, such as advertising, can be
employed to build market share without changing anything else, we think they are uncommon.
Typically, better results can be obtained by using a balanced, consistent marketing program or a mix
of strategic factors.
In fact, among the businesses in the PIMS database that achieved significant gains in market share,
only 17% changed just one (of the factors of new product, product quality, and marketing budgets).
Most employed two or three factors in combination. For example, quality improvements and new
product introductions were almost always accompanied by increases in at least one of the three
categories of promotional spending. This pattern is consistent with the notion of the marketing mix,
which assumes that all elements of a marketing program are mutually consistent. If any one of these
factors changes, it is reasonable that others would need to be changed accordingly (Buzzell and
Wiersema, 1981, p. 143)
In the above statement the authors imply that more than 80% of the share-gaining businesses
(100 2 17 ˆ 83%) used complex marketing mix strategies involving two or more factors.
PIMS-based research versus case-based research
In order to clarify the nature of the differences between PIMS-based research and that being
reported in this paper, it is helpful to comment briefly on the nature of the data available in
the PIMS database. The PIMS data are for ‘businesses’ or strategic business units (SBUs),
while the findings being presented in this paper are for specific brands of products. PIMS data
represent businesses which may or may not be in competition with one another, while the
findings in this paper are for specific brands competing against each other in the same market.
PIMS businesses report ‘relative product quality’ and ‘relative new products’, but these
measures are not likely to reflect direct competition between a specific market leader and a
specific attacker. The research reported here is based on two or more different brands of
products in direct competition with one another. PIMS measures on marketing expenditures
do not reflect the qualitative character of the promotional methods used, nor do they
compare expenditures between two direct competitors. Most of the marketing strategy case
histories involved in this research include both advertising expenditures and messages used by
the competitors. In the above Buzzell and Wiersema (1981) quotes, they note the limitations
of PIMS-based research and suggest that the character of the PIMS data makes it most
applicable for cross-sectional multi-industry statistical studies of strategic business units in order
to uncover relationships between market shares, ROI, profitability, costs and so on.
In concluding this literature review, we wish to bring to the reader’s attention the main
One of the authors of this paper, John Ward, was a practising PIMS consultant for four years.
STASCH AND WARD
26
reasons for researching attacks on market leaders through case history research rather than
through PIMS-based research. Marketing strategy case histories allow researchers to observe
over time (competitive event by competitive event, rather than annually) the changes two
specific competitors made in their products, prices, promotions, distribution, product
positionings and even target markets when an attack occurred. These case histories allow
researchers to incorporate into their analyses such qualitative factors as target markets,
marketing mixes, advertising messages, product differentiation and other factors. This type of
research and its advantages and disadvantages are described in more detail below.
Description of the research
For over 15 years we have been compiling case histories of the marketing strategies actually
used by firms to market a branded product. Our purpose has been to gain insights into why
they are successful or unsuccessful. Our research approach is based on case histories of
marketing strategies which are both visible to an interested observer and well-documented in
business publications. Over the last 7–10 years this type of research has been greatly facilitated
by the continuous improvement in computerized library databases (such as Lexis=Nexis,
ABI=Inform and others) which are now available in the US. No doubt, the Internet and the
World Wide Web will increasingly contribute to this type of research in the future.
Occasionally, a case history might be based on other sources. In addition to business
publications, other sources can be published case studies, personal experiences or consulting
situations, contacts with officials of the companies involved and contacts with knowledgeable
individuals such as market specialists and security analysts.
In each case history we classify the market and competitive situation faced by the branded
product which is the subject of the study and we do so according to 23 different categories of
situational factors. (See Ward and Stasch (1980) for a detailed description of these factors.) We
also identify the specific details of the marketing strategy employed by the branded product
and these details are broken down into 12 marketing strategy elements. Finally, we normally
use changes in the market share to record the results of the strategy, but we also use other
measures, such as profitability, when such information is available. The end result of this
research activity is typically an extensive document describing the case history in much depth
of detail.
To date, 97 completed case histories involving both large and small firms have been
compiled; several case histories are currently in various stages of development and over 100
situations are listed as possible case histories which might be developed in the future.
Compared with PIMS-based research, we believe marketing strategy case history research
offers the following advantages.
(1) Case histories are a chronological record of marketing strategy events put into place by
the competitors involved. This allows researchers to carry out longitudinal studies of
the specific marketing strategies used by the competing firms on behalf of the specific
products and brands they are marketing.
(2) Case histories contain qualitative aspects of marketing strategies such as descriptions of
market segmentation, product differentiation, product positioning, advertising messages
and distribution channels.
(3) Because of their more complete qualitative descriptions, as well as the time record of
strategic events, case histories are richer in detail than either PIMS data or ‘examples’
CHARACTERISTICS OF COMPETING MARKETING STRATEGIES
27
and, therefore, are more likely to provide researchers with critical insights regarding the
effectiveness of different strategies.
(4) Because marketing strategy case histories identify the specific combatants involved (i.e.
products and brands) in a given situation, researchers can study the actions, reactions
and interactions between the competitors over a time span consisting of a pre-strategy
period, a strategy period and a post-strategy period.
Marketing strategy case history research displays three characteristics which can be criticized
as weaknesses. First, it is not possible to draw a probability sample of marketing strategy cases.
The selection is based upon observed availability and this tends to result predominantly in
consumer products cases. Second, because of the qualitative aspects of marketing strategies, it
is possible for researcher bias to enter into the analysis. Third, because case histories are
developed primarily from published sources, there exists the possibility that some details of the
strategies involved may not be reported in the publications or that some of the details
reported may be incomplete or inaccurate in some way.
P urpose of the paper
The purpose of this paper is to propose a four-part classification model of the marketing
strategy characteristics present when market leaders are attacked by competitors. Of the cases
completed to date, more than three dozen involve an aggressive attack upon a recognized
market leader by a competitor who had not recently demonstrated above-normal
aggressiveness towards the market leader. Table 1 lists the 41 cases of attacks on market
leaders which constitute the main sources of information used in the research reported in this
paper.
We considered a competitor’s attack to be ‘above-normal’ in aggressiveness if it was
noticeably stronger than the marketing activities engaged in by that competitor during the
previous year or two. Examples of such above-normal aggressiveness include the following:
(1) Moving into new geographic markets where the competitor previously had not had
distribution, but which the leader traditionally had dominated.
(2) Introducing a new product into direct head-to-head competition with the market
leader’s brand and then using comparative advertising to encourage trial of the new
product.
(3) Dramatically increasing advertising expenditures far above the market leader’s and the
industry’s norm, thus forcing an increase in the industry’s expenditures on advertising.
(4) Entering for the first time into the market with a new product that is very competitive
with the leader’s product and is supported by large marketing programmes.
While analysing these case histories, we observed that many of them displayed similar
characteristics. There were minor variations here and there, but even those variations fit very
logically with the characteristics displayed by the majority of cases. Using these numerous case
histories, we organized the observed marketing strategy characteristics into the classification or
‘model’ shown in Table 2. We believe the model describes the full range of marketing
strategy characteristics which can be exhibited by both the market leaders which are attacked
and the firms which aggressively attack them. We are not aware of any other such
classification in the literature.
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TABLE 1.
Forty-One documented cases of attacks on market leaders
Years
Market leader
Attacker
Evaluated
attack
Strength of
defence
Defence was
successful?
Pickles
Chocolate
Tampons
Chewing gum
Chocolate
Mouthwash
Spaghetti sauce
Deodorant soap
Dog food
Root beer
Skin lotion
Coffee
Roll-on deodorant
Baked goods
Toothpaste
Low-tar cigarettes
Disposable nappies
Bleach
Colas
Frozen entree
1965–1970
1970–1975
1974–1976
1975–1980
1975–1980
1976–1977
1976–1978
1977–1980
1977–1979
1977–1988
1977–1981
1978–1980
1978–1980
1979–1981
1979–1980
1980–1981
1980–1984
1981–1984
1981–1984
1981–1983
Heinz, Borden
Hershey
Tampax
Wrigley
Hershey
Listerine
Ragu
Dial
Ralston Purina
A&W
Vaseline Intensive Care
Maxwell House
P&G’s Sure, Secret
Sara Lee
Crest
RJR’s Merit
Pampers
Clorox
Coca-Cola
Heinz’s Weight Watchers
Vlasic
M&M Mars
Several attackers
American Chicle
M&M Mars
P&G’s Extend
Hunt’s Prima Salsa
P&G’s Coast
QO’s Tender Chunks
Barq’s
P&G’s Wandra, others
P&G’s Folgers
Gillette’s Dry Idea
Entenmann’s
Aqua Fresh
B&W’s Barclay
K-C’s Huggies
P&G’s Vibrant
Pepsi-Cola
Lean Cuisine
‡2
‡2
‡2
‡2
‡3
‡1
2 1
‡2
‡5
‡2
0
‡1
‡4
‡3
‡2
‡3
‡3
‡1
0
‡3
2 4
2 1
2 2
‡1
‡1
‡2
‡3
2 2
2 1
‡3
‡4
‡3
2 2
2 4
‡2
2 3
2 1
‡2
2 1
2 4
No
?
No
?
?
Yes
Yes
No
No
Yes
Yes
Yes
No
No
Yes
No
?
Yes
Yes
No
STASCH AND WARD
Market
1981–1985
1982–1985
1982–1990
1982–1985
1982–1985
1982–1985
1982–1985
1983–1986
1983–1986
1984–1987
1984–1986
1984–1986
1985–1986
1985 –1990
1986–1989
1987–1988
1988 –1990
1988 –1990
1988 –1990
1990 –1993
1990 –1991
Heinekin
Tylenol
Nike
Kellogg’s
P&G’s Downy
Minute Maid
Federal Express
Gerber’s
Everest & Jennings
Thompson’s Slim Fast
Coca-Cola, Pepsi Cola
Crest
All Bran
UPS
Eveready, Duracell
Quaker Oats
Bausch & Lomb
Procter & Gamble
Crest
Makita
Gillette
Corona Extra
Datril, others
Reebok
General Foods, others
Lever’s Snuggle
P&G’s Citrus Hill
UPS, others
Beechnut, Heinz
Invacare
Carnation
QO’s Gaterade
Colgate’s pump
GM’s Fiber One
RPS
Kodak
General Mills’ Total
J&J’s Vistakon
Lever’s L2000
Arm & Hammer
B&D’s DeWalt
Schick, others
‡3
0
‡5
2 3
‡2
2 3
2 1
‡1
‡2
2 2
‡3
0
2 2
‡3
2 3
‡2
‡2
‡3
‡4
‡1
2 5
2 2
‡1
0
‡2
‡2
‡2
‡3
0
2 3
‡4
2 4
‡1
‡4
0
‡3
‡3
2 4
2 2
2 2
‡2
‡4
Yes
Yes
No
Yes
?
Yes
Yes
Yes
No
Yes
No
Yes
Yes
No
Yes
Yes
No
No
No
No
Yes
CHARACTERISTICS OF COMPETING MARKETING STRATEGIES
Imported beer
Analgesics
Athletic shoes
Cereals
Fabric softener
Orange juice
Package delivery
Baby foods
Wheelchairs
Diet supplements
Soft drinks
Toothpaste
Bran cereal
Package delivery
Batteries
Oatmeal
Contact lenses
Toilet soap
Toothpaste
Power tools
Razors
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STASCH AND WARD
TABLE 2. Four-part classification of marketing strategy characteristics when
defending market leadership
(A) When are market leaders most likely to be attacked?
(1) Are external forces encouraging an attack?
(a)
Leader is fending off a government challenge
(b)
New technologies emerging or leader’s patents expiring
(c)
A `new personality’ is entering the industry
(d)
Leader is facing a random catastrophe
(2) Does industry structure or market position suggest potential opportunities for competitors?
(a)
No strong `number two’ firm in the market
(b)
The leader is expensive
(c)
A new positioning or product differentiation or market segmentation opportunity is
emerging
(d)
The leader is relatively small
(e)
The number two brand can expand geographically
(3) Does the leader’s behaviour encourage competitive attacks?
(a)
The leader is not an aggressive marketer
(b)
The leader displays a significant strategic weakness
(c)
The leader has offended key distribution channels
(B) What should the market leader identify about the attack?
(1) Does the market leader see the attack coming?
(a)
Well signalled
(b)
Evolutionary emergence
(c)
Surprise, but from logical rival
(d)
Surprise, from unexpected rival
(2) How innovative or strong is the attack?
(a)
Copy the leader: help fill market void
(b)
Power-oriented: compete on price or marketing dollars
(c)
Emphasize current strengths
(d)
Innovate: do something better=different
(3) What is the attacker’s market definition strategy?
(a)
Same as the market leader’s definition
(b)
New form of segmentation
(c)
Simultaneously serve two or more segments
(d)
Use reputation and resources from a related business (e.g. brand extension)
(e)
Change product-market coverage definition
(4) How differentiated is the attacker’s market offering?
(a)
`Me-too’ product
(b)
Improved features
(c)
New features
(d)
Completely new product
(5) What is the attacker’s marketing mix strategy?
(a)
Same marketing mix, same spending level
(b)
Increased spending
(c)
New mix variable(s) emphasized
(d)
Completely new marketing mix
(C) How should the market leader defend against the attack?
(1) Is the leader well-prepared to fend off the attack?
(a)
Anticipated and pre-empted the attack
(b)
Anticipated the attack and counter-attacked almost immediately
CHARACTERISTICS OF COMPETING MARKETING STRATEGIES
TABLE 2.
31
(continued)
(c)
Did not anticipate attack, was not prepared, took a short period of time to respond (e.g.
3– 6 months)
(d)
Was not prepared, did not respond
(2) What is the form of the leader’s defence?
(a)
Pre-emptive (i.e. beat them to the market)
(b)
Aggressive (i.e. one-up them to punish them)
(c)
Increase the level of competition
(d)
Match the attack
(e)
Evolutionary response
(f)
No response or defence at all
(3) How differentiated is the leader’s defence?
(a)
No differentiation
(b)
Improved features or service
(c)
New features or service
(d)
New product or service
(4) Is the leader using a different marketing mix strategy?
(a)
Change advertising, promotion, price and=or distribution
(b)
New mix variables emphasized
(c)
Modify or expand product line
(d)
New marketing mix
(D) How should the market leader respond to a counter-attack?
(1) What should the leader identify about the counter-attack?
(2) How should the leader defend against the counter-attack?
There are four parts to the proposed classification, each of which can be identified as a
question, as follows.
(1) When are market leaders most likely to be attacked?
(2) What should a market leader identify about an attack? What are the main characteristics
of the attack?
(3) How should a market leader defend against an attack?
(4) After their initial defence, how should a market leader defend against a second, followup attack if it occurs?
Each of the four parts consists of three to five major elements which can be used to describe
the strategies of the two competitors. Each major element is composed of a number of
subelements which further describe the details of the competitors’ marketing strategies. Table
2 is a complete outline of the four-part classification model with all its major elements and
subelements.
Usefulness of the classification
We believe this classification can be useful to both marketing academics and practitioners for
the following reasons.
(1) It represents necessary input information if we are to begin building theories associated
with what strategies market leaders should use when they are attacked and what
strategies firms can use to attack market leaders.
STASCH AND WARD
32
(2) It helps marketers understand the competitive interaction and dynamics of an attack on
a market leader and the market leader’s response, i.e. it helps us understand the nature
of the competitive behaviour used by the two combatants.
(3) It provides a framework that marketers can use when studying which strategies can be
used by market leaders to defend their leadership positions successfully, as well as which
strategies are not likely to be successful.
(4) Conversely, it can help marketers study the strategies used by attacking firms in order
to identify why some strategies are successful while others are not.
We consider the entire classification model as a hypothesis based on in-depth but
exploratory research. More than likely, this hypothesis cannot be accepted or rejected in any
statistical sense. However, there is much evidence to suggest that it or something like it is
valid and does exist in the competitive market-place.
The remainder of this paper explains and reviews the four-part classification outlined in
Table 2 by using numerous marketing strategy case history ‘stories’ as illustrations. Also
presented at appropriate points throughout the paper are numerical summaries of the findings
resulting from our analyses of the 41 case histories.
What the paper does not cover
It should be noted that this paper does not cover a certain aspect of maintaining competitive
superiority, namely, that of a market leader using periodic market-oriented technological
improvements to keep potential competitors at bay. For example, Gillette has maintained its
market leadership in razors by periodically introducing a technologically advanced product
(e.g. its Sensor razor in 1990 and its Sensor For Women razor in 1992). Boeing was
essentially doing the same thing when it recently announced its intention to defend its
leadership in the small-jetliner market by offering faster-flying, farther-ranging and more fuelefficient versions of its popular 737 model (Cole, 1992). Hewlett-Packard reportedly pursues
the policy of developing improved new products to replace their current products before any
competitor does so (Deutschman, 1994). While using periodic market-oriented technological
improvements in this manner is certainly one way some market leaders can maintain
competitive superiority, that topic is not covered in this paper.
WHEN ARE MARKET LEADERS MOST LIKELY TO BE ATTACKED?
Our research indicated that there are 12 circumstances under which a market leader might
appear to be vulnerable in the eyes of a competitor. When these circumstances occur, there
seems to be an increased possibility that the market leader will be strongly attacked by one or
more competitors. These 12 circumstances can be categorized under three headings, as
follows.
(1) Changing external forces, which are outside of the leader’s control, may create
situations which cause competitors to feel that the leader’s position is vulnerable. Such
forces include a governmental challenge, technological changes, the arrival of a new
management ‘personality’ in the industry or a random catastrophe.
(2) Industry structure or market position characteristics may encourage competitors to
challenge the leader. Our research indicated that leaders are vigorously attacked when
there is no strong number two competitor, when the leader’s strategy is based on a
CHARACTERISTICS OF COMPETING MARKETING STRATEGIES
33
high quality–high price position, when a new ‘positioning’ opportunity emerges, when
the leader is a relatively small firm and when an important competitor does not yet
have full geographic coverage.
(3) The leader’s strategic behaviour, which may encourage competitors to attack. The types
of behaviour practiced by leaders may encourage attack include not being aggressive
marketers, having a significant strategic weakness in their marketing strategy or
alienating a key distribution channel.
Part (A) in Table 2 lists the 12 circumstances under which market leaders might experience
increased competition and shows how they are organized under the above three headings.
The remainder of this section explains and illustrates the 12 circumstances using case history
examples.
Are external forces encouraging an attack?
Is the leader fending off a government challenge?
A market leader should expect that an alert competitor will increase the level of competition
when the leader is busy defending itself against a government or environmental agency. When
Warner-Lambert’s market leader Listerine was being sued by the Federal Trade Commission
(FTC) in the mid-1970s for its ‘cold fighting’ claim and was being asked to make an apology
of sorts to the public, Proctor & Gamble chose that timing to introduce Extend, a new
mouthwash which was amber in colour and spicy rather than ‘mediciny’ in taste, a direct
reference to Listerine’s taste.{ Similarly, when the Food and Drug Administration (FDA)
banned the use of fluorocarbon propellants in aerosol containers in the mid-1970s, Gillette’s
Right Guard lost a significant market share as consumers began using more roll-on
deodorants. As the public became aware of the potential dangers of fluorocarbons, BristolMyer’s aggressive marketing of its roll-on deodorant products helped boost its Ban brand into
the number one position in the market (Ulman, 1978).
Are new technologies emerging or are the leader’s patents expiring?
A market leader can be challenged when a new or substitute technology emerges, as was the
case when Bausch & Lomb lost its contact lens leadership to Johnson & Johnson when they
introduced disposable contact lenses in the late 1980s. When the leader’s patents expire and
the technology becomes available to competitors, the leader should expect an increase in
competition. Kodak’s challenge to Polaroid’s monopoly in instant photography was illustrative
of the leader experiencing increased competition when its patents ran out (Haugh, 1976).
Is a `new personality’ entering the industry?
The beer industry has often been cited as an illustration of increased competition due to the
arrival in the early 1970s of Phillip Morris as the new owner of the Miller Brewing
Company. This example of new, outside-of-the-industry experienced ownership certainly
brought intensified competition to Budweiser in the form of new beer products and much
increased advertising expenditures for the Miller beer brands (Business Week, 1976).
{
Because of the numerous sources associated with each case history identified in Table 1, it is not
practical to list the references for these cases when they are discussed in the text of the paper.
References can be supplied on request.
34
STASCH AND WARD
Is the leader facing a random catastrophe?
A market leader may face its toughest challenge when it has been affected by a random
catastrophe which demands all of its managerial attention. Tylenol was the leader in the
analgesic market in 1982 when seven people died due to criminal tampering with the
product. Shortly thereafter, Bristol-Myers undertook its first major advertising campaign in
over 4 years on behalf of its Datril brand – to urge consumers to ask their doctors about
Datril (Kneale, 1982).
Does industry structure or m arket position suggest potential
opportunities to com petitors?
Is the market without a strong number two firm?
Many students of marketing strategies (e.g. Boston Consulting Group) believe that mature
markets ‘naturally’ have a dominant leader and a strong number two competitor whose
market share may fall in the 15–25% range. When an industry consists of a dominant leader
and many small competitors – but no strong number two firm – the market leader can
expect someone to try to fill such a ‘vacuum of opportunity’. Ragu, with nearly 70% of the
spaghetti sauce market in the mid-1970s, had no competitor with more than an 11% share
(Chef Boy-R-Dee). First Hunt’s, with its Prima Salsa brand, tried unsuccessfully to gain a
strong number two position in the market. Later Campbell’s, with its Prego brand, greatly
intensified competition in the spaghetti market and was able to gain a solid number two
position.
Is the leader expensive?
Leaders who have been successful using excellent quality, high service and coincidental higher
cost and price may well expect ‘cheap’ competition to become very active in the marketplace. The expensiveness could be due to the leader intentionally pursuing a ‘skimming price
strategy’ or be due to the cost of creating a quality or elite image. During the decade of the
1980s generic cigarettes and low-priced brands grew from essentially 0% of the market to
more than 30% of the market, much of the gain coming at the expense of the leading
premium brands of cigarettes (Chakravarty and Feldman, 1993).
Is a new positioning or product differentiation or market segmentation opportunity
emerging in the market-place?
Even if the market is mature, the leader should keep alert for opportunities based on new
positionings, product differentiation and=or market segmentation. Crest toothpaste encountered a new competitive threat when Beacham introduced Aqua-Fresh in the late 1970s, the
first toothpaste to offer both cavity prevention and breath-freshening characteristics. AquaFresh’s success indicated that there existed a sizeable market segment that wanted a toothpaste
with both characteristics – a segment that apparently had been overlooked by Procter &
Gamble. R alston-Purina’s established stronghold in dry dog food was challenged in the late
1970s when Quaker Oats introduced Tender Chunks, an inexpensive food which was also
soft and moist as well as more nutritious than the dry dog foods then on the market. In
1988–1990, Lever introduced its L2000 combined deodorant-moisturizer toilet soap, which
helped Lever take over as the number one toilet soap marketer in the US.
CHARACTERISTICS OF COMPETING MARKETING STRATEGIES
35
Is the leader relatively small?
A market dominated by a company small in size and resources may be vulnerable to attack.
In the mid-1970s Tampex was a small firm dominating the large tampon market. This
situation caught the attention of Procter & Gamble, Playtex and Johnson & Johnson, none of
which had been competitors in the tampon market. All three of these large consumer product
companies introduced new brands of tampon products, thus creating an entirely new and
more difficult competitive situation for Tampax.
Can the number two brand expand geographically?
If a strong number two competitor does not have complete distribution relative to the leader
(e.g. the leader may have national distribution while the number two brand may only have
regional distribution), the market leader should recognize that the number two firm might be
tempted to go after more complete (e.g. national) geographic coverage. Perhaps this
temptation helps explain Folger’s dramatic entry in the late 1970s into eastern US markets
against market leader Maxwell House.
Does the leader’s behaviour encourag e com petitive attacks?
Is the leader not an aggressive marketer?
Some of the most dramatic changes in industry leadership are associated with a lack of
continued marketing aggressiveness on the part of a dominant market leader. This is true even
for market leaders with strong consumer franchises. Hershey’s in chocolate candy bars in
1960–1975 and Wrigley’s in chewing gum in the early 1970s were unaggressive marketers
who had not introduced a new product for decades. M&M Mars and American Chicle used
new product introductions and aggressive promotion to gain considerable shares of these
respective markets. In the 1960s, pickle industry leaders Heinz and Borden’s did very little
while Vlasic used aggressive marketing and distribution strategies to become the leader in that
market. Johnson & Johnson’s Vistakon Division was the first to introduce disposable contact
lenses in 1988 and thereby was able to take the market leadership position away from Bausch
and Lomb, which was busy occupying itself in other markets.
Does the leader display a significant strategic weakness?
A leader may encourage increased competition if it displays a significant tactical weakness in
its marketing strategy. Hershey lost its candy leadership to Mars in the late 1960s partly
because of Mars’ new product introductions. However, Mars also aggressively used media
advertising to its own advantage while Hershey continued its long-standing policy against
national media advertising. In the early 1980s Reebok noted that Nike did not include
national media advertising in its marketing mix and therefore decided to use such advertising
aggressively, along with new product introductions, to gain the market leadership position
away from Nike.
Has the leader offended key distribution channels?
Established leaders may encourage new competition if they offend an important distribution
channel. When this occurs, the channel itself can become the new competition or
competitors can use the offended channel to make inroads into the market leader’s share. In
the late 1980s wheelchair market leader Everest and Jennings had so offended both wheelchair
STASCH AND WARD
36
retailers and users that the door was open for Invacare to make a successful run at the
leadership spot in the US. Much of the success of Lee’s jeans in the 1980s was due to Levi
Strauss’s alienating jean stores when they began distributing through mass merchandisers
(Stroud, 1984). In the late 1980s Reebok was able to gain market share at Nike’s expense
because the latter, by its perceived arrogance, had alienated many retail shoe store chains.
Analysis of the presence of circum stances when leaders are
attacked
How many of the above 12 circumstances were present when the 41 market leaders were
attacked and how often was each circumstance present when those attacks occurred?
All of the 12 circumstances described above were present at least once in the 41 attacks
observed. A total of 89 circumstances were observed in the 41 cases overall. On average, 2.2
of the above 12 circumstances were present when a market leader was attacked.
Only two of the 41 attacks seem to have occurred without any of the 12 circumstances
present. Twelve of the attacks occurred with only one circumstance present, while 16
occurred when two were present. Eleven attacks on market leaders occurred with three or
more circumstances present. In one of the attacks, eight of the circumstances were observed
to be present. Table 3 shows this data for all 41 cases.
We also determined the number of attacks that occurred when circumstance one was
present, the number of attacks that occurred when circumstance two was present and so on.
Table 4 shows that three of the industry structure and market position circumstances (5– 7)
were present quite often when leaders were attacked (17, 11 and 20 times, respectively). The
fourth most frequently present circumstance was that of ‘a new personality entering the
industry’ (3). Ten of the attacks occurred when that circumstance was present. Circumstances
associated with the leader’s behaviour (10–12) were present fairly often (six, seven and five
times, respectively). The other five circumstances (1, 2, 4, 8 and 9) were present three or fewer
times.
WHAT SHOULD A MARKET LEADER IDENTIFY ABOUT AN ATTACK?
To improve their overall defensive situation, market leaders should be aware of the
TABLE 3. The number of circumstances present at the time of attacks on
market leaders and the frequency of occurrence for each number
Number of circumstances present
Frequency of occurrence
0
1
2
3
4
5
6
7
8
Total
2
12
16
6
2
1
1
0
1
41
CHARACTERISTICS OF COMPETING MARKETING STRATEGIES
37
TABLE 4. Frequency of the presence of each of the 12 circumstances when
market leaders were attacked
Number of attacks when the
circumstance was present
Changing external forces
(1) Facing a government challenge
(2) Substitute technologies emerge
(3) `New personality’ enters market
(4) Subjected to a random catastrophe
Industry structure and market position
(5) No strong number two firm
(6) Leader has high costs and prices
(7) New position, etc. opportunity
(8) Leader is relatively small
(9) Competitor has incomplete distribution
Leader’s behaviour
(10) Leader not an aggressive marketer
(11) Leader has strategic weakness
(12) Leader has offended channels
Total number of circumstances present
3
3
10
1
17
11
20
3
3
6
7
5
89
circumstances under which they are most likely to be attacked. The findings reported above
suggest that the probability of an attack on a market leader increases with the presence of one
or more of the above circumstances. Leaders should attempt to avoid such circumstances
and=or increase their alertness and preparedness when such circumstances arise. However, it
seems unlikely that their actions will prevent a determined competitor from attacking.
Therefore, market leaders should know what to look for when an attack does occur in order
to prepare the best possible defence against the attack.
Our collection of actual case histories indicates that if a market leader can quickly recognize
five aspects of an attack, they will have identified the basic information they need when
planning an effective defence against the attack. Part (B) of Table 2 lists these major aspects of
attack characteristics along with their various subelements. In the following discussion each of
these five aspects of an attack is presented as a question. The discussion then addresses some
of the ‘different ways’ the question can be answered. The answers to these questions identify
the critical marketing strategy characteristics of the attack. This knowledge can help the
market leader plan the type of response needed in order to maintain its leadership position.
Is the m arket leader able to see the attack com ing?
There is a range of possibilities associated with this question and each can have a differing
effect on the nature of an attack and=or the leader’s response. The attack can be a complete
surprise and it can come either from a logical rival or from an unexpected one. Our research
suggests that an attack from an unexpected rival is likely to be viewed differently by the
leader, compared with an attack from a logical rival. For example, when Quaker Oats began
expanding their newly acquired Gatorade drink in the mid-1980s, it seems quite possible that
38
STASCH AND WARD
the two cola giants did not expect to be attacked by Gatorade, nor did they consider that
brand to be a competitor against their two megabrands. But clearly, the type of marketing
programme Gatorade brought to the ‘refreshing drink’ market-place was different than that
which the two cola giants were used to.
Rather than being a surprise, some attacks are well-signalled. In the late 1980s when US
Surgical petitioned the FDA for permission to begin testing their new sutures, industry leader
Johnson & Johnson was alerted to expect a new competitor in the sutures market (Winslow,
1991). Sometimes the market leader can see that an attack is evolving and likely to emerge at
some future time. When Bic expanded its disposable razor out of the European market into
Canada in the mid-1970s, Gillette was signalled that it was highly probable that Bic would be
entering the US in the future (O’Conner, 1976). Similarly, Polaroid was signalled of Kodak’s
intentions when the latter entered the instant photography market in Canada in the early 1970s.
The characteristics of competitive behaviour are clearly influenced by whether or not the
market leader sees the attack coming and by whether the attacker is a logical or an
unexpected rival. An attack by a logical rival may very well be the easiest to fend off if the
market leader sees it coming. More troublesome situations for the leader would be a surprise
attack by a logical rival or a non-traditional rival’s attack which the leader is able to
anticipate. An attack by an unexpected rival may be the most difficult to defend against,
particularly if it completely surprises the leader.
How innovative and=or strong is the attack?
The case histories suggest that an attack can be characterized in four different ways:
innovative, power oriented, based on one or more of the attacker’s strengths or ‘copy the
leader’. Each represents a different type of competitive behaviour and so each requires a
different response from the leader. Therefore, it is imperative that the leader recognize this
aspect of the attack at the earliest possible moment.
By definition, an innovative attack will introduce new behaviour into the market-place.
With its strong use of sporting events and professional team sponsorships, the Gatorade
example noted above represented an innovative marketing programme different from ones
traditionally used in the refreshing drink market-place. Power-oriented attacks are likely to
involve the use of lower prices (e.g. generic and low-priced cigarette brands during the
1980s) to compete and=or heavy expenditures on advertising and promotion (e.g. the
introduction of Miller Lite beer in 1972). Not surprisingly, some attacks are based on the
attacker’s strengths, as when Procter & Gamble used its strong distribution capabilities in
1983–1985 to achieve a good distribution for its Citrus Hill orange juice. The fourth type of
attack, ‘copy the leader’, occurs when the attacker merely tries to duplicate the marketing
programme used by the leader. This is perhaps the most commonly used attack, an illustration
of which is Kodak’s entry into the small battery market in the late 1980s.
Each of the above represents a different type of competitive behaviour and so each may
require a different response from the leader. It is probably easiest for the leader to defend
against a ‘copy the leader’ attack and relatively easy to defend against a power-oriented attack.
It may be more difficult for the leader to defend against an attack based on the attacker’s
strengths, if the leader cannot easily counter those strengths. Because of its new and different
characteristics, the leader may find an innovative attack to be the most difficult type of attack
to defend against.
CHARACTERISTICS OF COMPETING MARKETING STRATEGIES
39
What is the attacker’s m arket definition strategy?
It is important for the leader to identify how the attacker defines the market it is pursuing, as
this definition may be different from the leader’s. When Hanes introduced the L’eggs product
in 1970, they chose not to define their target market in the traditional manner used by the
leading marketers of women’s hosiery. Rather, they defined the market differently: working
women who wanted to purchase good hosiery as a convenience product where they shopped
for food and cosmetics (Singer and Debruicker, 1977). Sometimes an attack may be based on
attempting to serve simultaneously two traditional but different segments with a single
offering. In 1977 when Quaker Oats introduced its soft-moist dog food, Tender Chunks, this
one product served as a substitute for both traditional canned dog food and dry dog food. A
company may use their reputation or brand name as the basis for defining their market. From
about 1977 to 1983 Anheuser-Busch was unable to make significant inroads into Miller Lite’s
share of the market with either Anheuser-Busch Natural Light or Michelob Light. It was only
when they used their most well-known brand name as a brand extension (Bud Light) that
they were able to take a noticeable market share from Miller Lite (Garino, 1982).
The character of the competition during an attack on a leader can vary greatly depending
upon the attacker’s market definition strategy. If they are to respond effectively to an attack,
the leader must know how the attacker is defining its target market. If the attacker’s market
definition is the same as the leader’s, this aspect of the attack should not cause problems for
the leader when preparing its defence. However, by using a market definition which is
different from the leader’s traditional definition, the attacker may gain an advantage,
particularly if the attack enjoys some initial success. In such cases, it is possible that the
leader’s response to the attack will not be effective if that response is based on the leader’s
traditional market definition rather than upon the attacker’s new market definition.
How differentiated is the attacker’s m arket offering?
An attack on the market leader may be based on a ‘me-too’ product, on a product with some
or much differentiation or on a completely new product. The severity of the attack on the
market leader varies greatly over this range of possibilities.
Procter & Gamble essentially introduced a me-too product when it introduced Citrus Hill
orange juice against Minute Maid and Tropicana and General Mill did likewise in the late
1980s when it introduced Total Oatmeal against Quaker Oat’s Oatmeal. The lack of
differentiation in these attacks undoubtedly made it easier for the marker leaders to defend
their positions. Reebok used a differentiated product (a fashionable aerobics shoe designed for
women) to take market share away from Nike in the athletic shoe market in the mid-1980s.
Kimberly Clark used shape and fit in the early 1980s to differentiate its disposable nappy
(Huggies) from those offered by leader Procter & Gamble. Because both R eebok and
Kimberly Clark used differentiated products, their attacks on the leaders were much more
severe and, consequently, more difficult for the leaders to defend against.
The presence or absence of a differentiated attack affects the character of the competition.
In order to mount an effective defence, the leader must identify whether the attacker’s
offering is a me-too one, one which is based on only slight differentiation, one based on
significant differentiation or one based on a completely new product. If it is the first of these
possibilities, the leader should find it relatively easy to come up with an effective response
which can fend off the attack. If it is the last possibility, the leader may be hard pressed
40
STASCH AND WARD
to come up with a response which will offset the ‘newness’ inherent in the attacker’s
offering.
What is the attacker’s m arketing m ix strategy?
It seem that an attacker can choose from four different options when deciding on a marketing
mix strategy. One is to use the same marketing mix and the same spending levels traditionally
used by the market leader. A second option is to use the same marketing mix at an increased
spending level, thus intensifying the attack on the leader. A third option is to emphasize a new
marketing mix variable, one which has not been used by the market leader. Depending upon the
new variable which is used, this option may represent a more severe attack than the second
option. When they attempted to improve their market position in the late 1960s, Vlassic made
heavy use of trade promotions and in-store promotions, two marketing mix elements little used
by market leaders Heinz and Borden. A fourth option is to use a completely new marketing mix,
one that essentially ‘changes the rules’ of marketing. Hanes moved from third to first place in the
women’s hosiery market when it introduced L’eggs and used a completely new marketing mix
when doing so (e.g. television advertising, direct distribution to grocery stores and consignment
pricing). Clearly, an attacker can significantly increase the severity of the attack on the leader by
moving away from the first option noted above to any of the other options.
The complexity of the competition between the two combatants will increase if the
attacker uses a non-traditional marketing mix or marketing mix variable. If the attack is based
on the same marketing mix used by the leader, the leader is likely to have little difficulty in
arriving at a defence. If the attack is based on a new marketing mix variable or a completely
new marketing mix, a successful defence by the leader is likely to require the use of one or
more new marketing variables and=or the use of a new or modified marketing mix.
Analysis of the strength of the observed attacks
Because the strength or weakness of an attack should have some affect on a market strategy’s
success or failure, it is appropriate to ask how strong or weak were the 41 attacks on market
leaders which constitute our information base?
Using the five topics discussed above, an analysis of the details of each attack was made in
order to reveal the intensity of its strength or weakness. The strongest possible attacks were
judged to be those which resulted in a good advantage to the attacker on each of the above
five factors. That is, the strongest attack was judged to be one which (1) surprised the leader
when it was launched, (2) was innovative, (3) used a market definition different from that
used by the leader, (4) used a differentiated market offering and (5) used a non-traditional
marketing mix. Such an attack was given a rating of ‡1 point for each of the five factors, for
a total rating of ‡5 points.
Conversly, attacks which displayed only disadvantages relative to the market leader were
given a rating of 2 1 point for each of the five factors. Thus, if an attack was well-signalled in
advance to the market leader and was a ‘copy the leader’ attack with the traditional market
definition, a ‘me-too’ product and traditional marketing mix and spending, such an attack was
given a total rating of 2 5 points because it was considered to be at a disadvantage to the
market leader on all five factors.
The effect of such a rating system is that an attack could be given a score ranging
anywhere from ‡5 points down to 2 5 points. The evaluated strength of each attack is shown
CHARACTERISTICS OF COMPETING MARKETING STRATEGIES
41
in the fifth column of Table 1. Table 5 summarizes the ratings given to the 41 attacks. The
ratings range from ‡5 (given to two attacks) to 2 5 (given to one attack), with the median
and mode both being ‡2. At least 17 of the attacks would have to be considered weak (or at
least not strong), with ratings ranging from ‡1 down to 2 5. Eleven of the attacks were rated
‡2, which we considered to be moderately strong. Only 13 of the attacks were rated ‡3 to
‡5, which we interpreted as strong or very strong.
Table 5 illustrates that the five attack factors can be used to measure the strength of the
attackers’ attacks and that the strength of the attacks varies greatly from very strong to very
weak. However, the success of an attack depends not only on the strength of an attack, but
also on the strength of the leader’s defence. It is to the latter topic that we now turn.
HOW SHOULD A MARKET LEADER DEFEND AGAINST AN ATTACK?
If a market leader has been particularly alert when it finds itself in one of the 12, somewhat
foreseeable circumstances described earlier, there is a very good chance that the leader will not be
surprised if a competitor chooses to take advantage of its apparently ‘weakened’ position by
launching an attack. If an attacked leader quickly analyses an attack when it does occur and identifies
the five characteristics described in the above section, the leader will have a very clear picture of the
attack and be able to judge whether the attack is weak, moderately strong or very strong.
An analysis of the 41 case histories suggests that a market leader is more likely to be successful in
fending off an attack if the leader’s defence is a quick response to the attack and if it is essentially as
strong or stronger than the attack, preferably the latter. Our analysis also suggests that a strong
defence should be based on the four characteristics which are listed in part (C) of Table 2. The
following discussions describe those four characteristics and their various subelements.
Is the m arket leader well- prepared to fend off the attack?
Our case histories indicate that market leaders demonstrate varying degrees of alertness to and
preparation for fending off an aggressive attack. In general, higher levels of preparation and
quickness of response seem to be associated with successful defence.
TABLE 5. Frequency distribution of the strength and weakness ratings
given to the 41 attacks
Strong
Weak
Total
Strength and weakness ratings
Frequency
‡5
‡4
‡3
‡2
‡1
0
2 1
2 2
2 3
2 4
2 5
2
2
9
11
5
4
2
2
3
0
1
41
42
STASCH AND WARD
In the mid-1970s the Gillette Company anticipated that Bic would soon be introducing its
disposable razor into the US. However, rather than wait for Bic to act, Gillette pre-empted
Bic’s introduction by introducing its own disposable razor (Good News). When Procter &
Gamble used a new mouthwash (Extend) to attack Warner-Lambert’s market leader Listerine
directly in 1976, Warner-Lambert immediately counter-attacked with its own new brand
(Depend), which was used as a fighting brand to destroy the effectiveness of P & G’s
introduction of its new mouthwash. In 1986– 1987 both Eveready and Duracell introduced
heavy trade and consumer promotions as soon as Kodak entered the replacement battery
market.
Some of our cases involve market leaders who did not exhibit alertness and preparation when
attacked. Within a relatively short period of time in the late 1970s, Beacham introduced AquaFresh toothpaste and Lever introduced Aim and CloseUp toothpastes, all three of which took
market share from market leader Crest. Procter & Gamble did not or could not come up with
an effective response to these attacks for almost two years, by which time all three of the new
brands had become quite well established (Miller, 1975; Giges, 1976).
One aspect of competitive behaviour is how quickly and how strongly the market leader
defends against an attack. This research suggests that it is most important for market leaders to
be alert for possible attack at all times, to anticipate potential attacks by the most likely
competitors, to have prepared contingent marketing defences for those possible attacks and to
respond very quickly when an attack does occur.
What is the form of the m arket leader’s defence?
A leader’s defence can take on one of several forms. It can be pre-emptive, as Gillette was
when it introduced its Good News razor before Bic could introduce its disposable razor. It
can be very aggressive, as when Warner-Lambert used a fighting brand to counter Procter &
Gamble’s introduction of its new mouthwash (Extend). A market leader may also do
something to increase the level of competition above that brought about by the attacker. For
example, in 1985 General Mills’ Fiber One directly attacked Kelloggs All Bran by claiming its
brand had a higher fiber content than the Kellogg brand. Within one month, Kellogg’s All
Bran was reformulated to have a greater fiber content than that claimed by Fiber One, thus
eliminating Fiber One’s main advertising claim. However, it is not uncommon for a market
leader to offer a lukewarm or tepid response by only slightly increasing one of its promotional
tools. In some cases, the market leader may do nothing.
A market leader’s competitive behaviour will be reflected in the form of the defence it
uses. It appears from the cases studied that the leaders’ defences seem most effective when
their responses quickly and clearly send a message to the attacker that they will be entering a
very bitter and hard-fought battle if they persist.
How differentiated is the m arket leader’s defence?
Just as an attacker can use differentiation to gain an advantage, so too can the market leader
use differentiation in its defence. When Gillette used its Good News razor to defend against
Bic’s disposable razor, they had the advantage of a ‘twin blade’ offer comparared with Bic’s
‘single blade’ offer. The fighting brand Warner-Lambert used (Depend) to fend off Procter &
Gamble’s attack on Listerine mouthwash was very different from Listerine but very similar to
CHARACTERISTICS OF COMPETING MARKETING STRATEGIES
43
the new brand Procter & Gamble was introducing (Extend). In the late 1980s, after R eebok
began making strong gains in the athletic shoe market, one of the factors strongly
contributing to Nike’s successful counter-attack was its very popular Air Jordan basketball
shoe. In the example described in the preceeding paragraphs, when General Mills attacked
Kellogg’s All Bran, Kellogg responded by differentiating their product even more than the
attacker had differentiated Fiber One. These examples confirm that market leaders can use
differentiation to their advantage when defending against attack.
A market leader’s use of differentiation to defend against an attack reflects very forceful
behaviour. It can have the effect of negating one or more of the attacker’s advantages and=or
require the attacker to modify its product offering. If either of these effects are strong enough,
they may cause the attacker to tone down the intensity of the attack or even to withdraw.
Is the m arket leader using a different m arketing m ix strategy?
An option that may be available to a leader under attack is that of altering its marketing mix
in a way that will be advantageous to its defence. Expansion or modification of its product
line is one way a leader may enhance its defence. In the attack on Listerine, Warner-Lambert
used an addition to its product line to defend against the attack. When American Chicle
began making inroads into Wrigley’s share of the chewing gum market in the 1970s, Wrigley
responded with a series of successful new product introductions over a 3–4 year period. To
fend off encroaching competitors in the mid-1980s, Federal Express guaranteed that overnight
packages would be delivered by 10:30 a.m. the next morning and started using computers to
be able to inform customers of the exact locations of their packages at any time.
Leaders might also use advertising, promotion, price and distribution in various
combinations to alter their marketing mix. After Reebok made inroads into Nike’s market
share in the mid-1980s, Nike realized it could no longer ignore the use of mass media in its
marketing efforts and, accordingly, began using media advertising strongly. At the same time,
Nike also introduced more efficient ordering procedures, shortened delivery cycles and greatly
improved relationships with their dealers. When Maxwell House coffee was attacked by
Folgers, when Eveready batteries was attacked by Kodak and when Quaker Oats Oatmeal was
attacked by Total Oatmeal, all of the leaders put increased emphasis on media advertising
and=or consumer promotions in order to offset the effect of the attacker’s marketing efforts.
The character of the market leader’s competitive behaviour can be little or strongly affected
by the degree of change it makes to its marketing mix when defending its position. Making
no change to its marketing mix means that the leader has foregone using this tool to enhance
its defence. The easiest change that can be made is to lower price, but such a change can
make a contribution to an effective defence. A somewhat more difficult change is to increase
advertising and promotion in a way which counters or neutralizes the attack. Probably the
most difficult change to make has to do with product, yet such changes can be very effective
defensive acts if they signal to the attacker that the leader is raising the level of competition
and that the attacker is going to have to do likewise in order to stay in the battle.
Analysis of the strength of the observed defences
Just as it is useful to inquire into the strength of individual attacks, so also is it appropriate to
ask how strong or weak were the defences put up by the 41 markets leaders?
We used the four topics discussed above to analyse the strength of each defence. We
STASCH AND WARD
44
considered the strongest possible defence to be one where the leader (1) was well-prepared
for the attack, (2) used a more aggressive form of defence, (3) used differentiation as part of
the defence and (4) used an altered or different marketing mix when defending itself. Such a
defence was given a rating of ‡1 point for each of the four factors, for a total rating of ‡4
points. On the other hand, if the leader’s defence displayed only weaknesses on these four
factors, such a defence was given a rating of 2 1 point on each factor, for a total of 2 4
points.
Using this rating system, each defence was given a score ranging from ‡4 points to 2 4
points. This score is shown in the sixth column of Table 1. Table 6 summarizes our
evaluations of the 41 defences. Just as there was much variation in the strength of the 41
attacks, so also was there much variation in the strength of the 41 defences. Twenty of the
defences were rated between 0 and 2 4 points, all of which we interpreted as weak to very
weak defences. Eleven of the defences were rated ‡1 or ‡2 points, which might be
considered as moderate defences. The remaining ten were judged to be strong defences based
on their ratings of ‡3 or ‡4 points.
Analysis of the strength of each defence relative to the strength of the attack against it
In the above two analyses we rated the strength of each attack and the strength of each
defence. Each attack was given a rating somewhere between ‡5 points and 2 5 points, while
each defence was rated from ‡4 to 2 4 points. Consequently, we had 41 such pairs of ratings,
one for each case history (see columns 5 and 6 in Table 1).
In order to enquire into the relationship, if any, between the strength of an attack and the
strength of the corresponding defence, we created a scatter diagram of the 41 attacks and
defences. For each case history, we plotted the rating assigned to the attack on the horizontal
axis and the rating assigned to the defence on the vertical axis. Fig. 1 shows the resulting
scatter diagram.
The upper left quadrant of Fig. 1 represents case histories of weak attacks being opposed by
strong defences. The lower right quadrant represents strong attacks which are opposed by
weak defences. The quadrant in the upper right represents cases of strong attacks
encountering strong defences.
During the development of each case history we attempted to judge whether the market
leader’s defence was successful or unsuccessful, typically using retention of the market share as
TABLE 6. Frequency distribution of the strength and weakness ratings
given to the 41 defences
Strong
Weak
Total
Strength and weakness ratings
Frequency
‡4
‡3
‡2
‡1
0
2 1
2 2
2 3
2 4
4
6
7
4
3
4
6
2
5
41
CHARACTERISTICS OF COMPETING MARKETING STRATEGIES
45
STRONG 1 4
DEFENSE
1 3
1 2
?
1 1
?
?
?
?
1 2
1 3
0
2 1
2 2
2 3
WEAK
DEFENSE 2 4
2 5
2 4
2 3
2 2
2 1
0
1 1
WEAK
ATTACK
1 4
1 5
STRONG
ATTACK
5
5
? 5
Key
Successful defense
Unsuccessful defense
Indeterminate defense
FIGURE 1. Scatter diagram of the strength of each defence relative to the strength
of the attack against it.
the criterion. This information is shown in the seventh column of Table 1. In our opinion,
20 of the defences were successful, while 16 were not. In the remaining five cases it was not
possible to conclude that the defence was successful, nor was it possible to conclude that the
defence was unsuccessful.
In Fig. 1, small circles are used to identify the attack and defence ratings associated with
cases representing successful defences. A small cross is used to identify the ratings of cases
where the defence was not successful. Case histories where the outcome of the defence could
not be determined are identified by small question marks.
As indicated above, cases found in the upper left quadrant represent weak attacks opposed
by strong defences. A persual of Fig. 1 shows that all 11 of the cases in this quadrant are
associated with defences judged to be successful. Regarding the lower right quadrant, which
represents strong attacks opposed by weak defences, the figure shows that 15 of the 20 cases
found there were judged to be associated with unsuccessful defences. Three of the 20 cases
are associated with successful defences, while the remaining two are cases where the success
or failure of the defence could not be determined.
46
STASCH AND WARD
The upper right quadrant of Fig. 1 represents cases of strong defences opposing strong
attacks. This quadrant can be evenly divided by drawing a dashed line out of the zero–zero
rating location at an angle of 458 . The area above the dashed line represents defences which
are rated stronger than the attacks faced, while the area below the dashed line represents
attacks rated stronger than the defences they faced.
Of the six cases located above the dashed line in Fig. 1, five were judged to have successful
defences, while one was judged to be unsuccessful. Of the two cases which fall on the dashed
line, one was judged to represent a successful defence while in the other success or failure was
indeterminate. In both of the cases falling below the dashed line, the outcome of the leader’s
defence was indeterminate.
In our view, the findings in Fig. 1 appear to support the proposition that the five attack
and four defence characteristics described above are relevant to understanding the nature of
the marketing strategies used when attacking and defending market leadership. These findings
also suggest that the five attack and four defence characteristics might be useful tools when
studying the causes of success or failure of the leader’s defence or the attacker’s attack.
HOW SHOULD A MARKET LEADER RESPOND TO AN ATTACKER’S
COUNTER-ATTACK?
If the market leader is quick to respond to an attack and if the aggressiveness of the leader’s
defensive response exceeds the aggressiveness of the attack, the leader in essence is sending the
signal that it is ‘raising the stakes’ in this marketing battle. If the attacker then wishes to
continue trying to take share away from the leader, the attacker knows that it is going to
have to put more effort and resources into its attack. Because of the leader’s defensive
response to the original attack, however, the attacker has already been put on notice that the
leader may well raise the stakes again if the attacker once again intensifies the competition
against the leader. Thus, the attacker might be spending more and more time and resources to
intensify the competition against the leader, but not be gaining much market share due to the
leader’s aggressive action. Because continuing the attack on the market leader would appear to
be a ‘no win’ situation under these circumstances, the attacker may very well cut back on the
intensity of the attack or even allow it to ‘slowly die on the vine’.
Our analyses of the marketing strategy case histories suggest that when a market leader is
attacked, a quick, strong response is likely to have the effect suggested in the above
paragraph. If the leader’s response is not a strong one, the attacker may continue or perhaps
increase the intensity of the attack. Even when the market leader’s response is a quick and
strong one, however, occasionally the attacker will counter-attack against the leader’s defence.
In the case histories we studied, approximately one-quarter of the attackers raised some kind
of counter-attack against the leader’s defence.
Only a few of these counter-attacks could be characterized as being very aggressive or fairly
aggressive. If there is such a thing as a more typical counter-attack, it would appear to be one
where the attacker tries to do what is necessary to ‘match’ or ‘almost match’ the leader’s
defence. The relatively low frequency of attackers counter-attacking leader’s defences suggests
that often the attackers were poorly prepared for the leaders’ defences or had little stomach
for a long and drawn out competition.
R egarding the timing of the counter-attacks, only one or two occurred shortly after the
leader’s defence was established. It seems more common for a counter-attack to be developed
over time, as the attacker sees and understands the nature of the leader’s defence and figures
CHARACTERISTICS OF COMPETING MARKETING STRATEGIES
47
out how to respond to it. When the length of time delay associated with attacker’s counterattacks is taken into consideration along with the relative infrequency of counter-attacks, one
can probably conclude that attackers tend not to expect or be well-prepared for the leaders’
defences.
When a counter-attack does occur, the leader should again address and answer the
questions posed in the two sections immediately preceeding this one.
What should the market leader identify about the counter-attack?
How should the market leader defend against the counter-attack?
Our research suggests that a quick, strong response seems to be the best course of action a
leader can take to turn back the counter-attack and – quite likely – convince the aggressor
that there is little to be gained by continuing such intensive competitive behaviour.
As reported above, the occasions of an attacker counter-attacking a leader’s defence
represent a small proportion of the cases studied. Based only on a handful of such cases, we
conclude this section on attacker’s counter-attacks by hypothesizing the likely presence of the
following pattern of competitive behaviour when such counter-attacks occur: the leader is
attacked, the leader defends, the attacker counter-attacks, the leader defends against the
counter-attack. Perhaps the best example of such behaviour is in 1985 when General Mills
introduced Fiber One against Kellogg’s All Bran by promoting Fiber One as having more
fibre per serving than All Bran. Kellogg quickly defended by reformulating All Bran to have
more fibre per serving than Fiber One. In a short period of time General Mills counterattacked by reformulating Fiber One to increase its fibre content level to match that of the
reformulated Kellogg’s All Bran. Shortly thereafter, Kellogg defended against the counterattack by reformulating its All Bran once again to have a higher fibre content than the
reformulated Fiber One. Apparently General Mills understood the message Kellogg was
sending, namely that its All Bran brand was not going to give up the competitive advantage
of offering the highest fibre content and the competition did not escalate to a higher level
thereafter.
CLOSING COMMENTS
Since its conception, this research has been exploratory in nature and is likely to continue as
such into the future. In the introductory section of the paper we noted both the advantages
and weaknesses inherent in case history research. However, compared with PIMS-based
research, we believe the advantages of case research are a richness of detail and a
chronological ordering of the marketing strategy characteristics associated with a specific
market leader under attack by a specific competitor. Thus, even though the research is
exploratory in nature, we believe it has much to offer in improving our understanding of
marketing strategies and competitive behaviour.
Our analyses of the collected case histories suggest that a four-part classification can help
researchers when studying the marketing strategies used to defend a market leadership
position: (1) circumstances when leaders are likely to be attacked, (2) the characteristics of the
attack, (3) the characteristics of the defence and (4) defending against a second, follow-up
attack if it occurs.
We described 12 circumstances which we found to be present when market leaders are
48
STASCH AND WARD
attacked, as well as the frequency of occurrence of those circumstances. We identified five
characteristics of attacks and four characteristics of defence which we then used to estimate
the level of the strength or weakness of each attack and its associated defence. We plotted the
resulting 41 pairs of such estimates on a scatter diagram which also identified both the
successful and unsuccessful defences. Based on the findings in the scatter diagram, we believe
the five attack characteristics and four defence characteristics can be useful tools when
studying successful and unsuccessful marketing strategies used when attacking and defending
market leadership.
Although we consider the proposed classification as basically a hypothesis, we believe we
encountered enough evidence to suggest that it or something like it represents a good
descriptive framework for understanding this type of competitive behaviour. With respect to
the 12 circumstances when market leaders are likely to be attacked, the five characteristics of
attacks and the four characteristics of defence, we concluded that our case histories gave no
evidence that other circumstances or other characteristics should be included in the proposed
framework. Quite likely, future research may suggest still other circumstances when market
leaders are likely to be attacked. In addition, it is possible that future research will add to or
modify the five attack and four defence characteristics presented here. When such new
findings emerge, we hope that this paper may have in some way contributed to the
encouragement of that research.
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