IDEAS home Printed from https://ideas.repec.org/a/inm/ormksc/v2y1983i4p319-360.html
   My bibliography  Save this article

Defensive Marketing Strategies

Author

Listed:
  • John R. Hauser

    (Sloan School of Management, Massachusetts Institute of Technology, 50 Memorial Drive, Cambridge, Massachusetts 02139)

  • Steven M. Shugan

    (Graduate School of Business, University of Chicago, Chicago, Illinois 60637)

Abstract

This paper analyzes how a firm should adjust its marketing expenditures and its price to defend its position in an existing market from attack by a competitive new product. Our focus is to provide usable managerial recommendations on the strategy of response. In particular we show that if products can be represented by their position in a multiattribute space, consumers are heterogeneous and maximize utility, and awareness advertising and distribution can be summarized by response functions, then for the profit maximizing firm: it is optimal to decrease awareness advertising; it is optimal to decrease the distribution budget unless the new product can be kept out of the market; a price increase may be optimal; and, even under the optimal strategy, profits decrease as a result of the competitive new product. Furthermore, if the consumer tastes are uniformly distributed across the spectrum: a price decrease increases defensive profits, it is optimal (at the margin) to improve product quality in the direction of the defending product's strength, and, it is optimal (at the margin) to reposition by advertising in the same direction. In addition we provide practical procedures to estimate (1) the distribution of consumer tastes and (2) the position of the new product in perceptual space from sales data and knowledge of the percent of consumers who are aware of the new product and find it available. Competitive diagnostics, such as the angle of attack, are introduced to help the defending manager.

Suggested Citation

  • John R. Hauser & Steven M. Shugan, 1983. "Defensive Marketing Strategies," Marketing Science, INFORMS, vol. 2(4), pages 319-360.
    • Handle: RePEc:inm:ormksc:v:2:y:1983:i:4:p:319-360
    DOI: 10.1287/mksc.2.4.319
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mksc.2.4.319
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mksc.2.4.319?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. John R. Hauser & Patricia Simmie, 1981. "Profit Maximizing Perceptual Positions: An Integrated Theory for the Selection of Product Features and Price," Management Science, INFORMS, vol. 27(1), pages 33-56, January.
    2. Schmalensee, Richard, 1981. "Economies of Scale and Barriers to Entry," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1228-1238, December.
    3. Charles Blackorby & Daniel Primont & R. Robert Russell, 1975. "Budgeting, Decentralization, and Aggregation," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 4, number 1, pages 23-48, National Bureau of Economic Research, Inc.
    4. Hauser, John R. & Urban, Glen L., 1982. "Prelaunch forecasting of new consumer durables : ideas on a consumer value - priority model," Working papers 1270-82., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    5. Ratchford, Brian T, 1975. "The New Economic Theory of Consumer Behavior: An Interpretive Essay," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 2(2), pages 65-75, Se.
    6. John D. C. Little, 1966. "A Model of Adaptive Control of Promotional Spending," Operations Research, INFORMS, vol. 14(6), pages 1075-1097, December.
    7. Yoram Wind & Lawrence K. Spitz, 1976. "Analytical Approach to Marketing Decisions in Health-Care Organizations," Operations Research, INFORMS, vol. 24(5), pages 973-990, October.
    8. John W. Keon, 1980. "The Bargain Value Model and a Comparison of Managerial Implications with the Linear Learning Model," Management Science, INFORMS, vol. 26(11), pages 1117-1130, November.
    9. Ratchford, Brian T, 1979. "Operationalizing Economic Models of Demand for Product Characteristics," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 6(1), pages 76-84, June.
    10. W.J. Lane, 1980. "Product Differentiation in a Market with Endogenous Sequential Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 237-260, Spring.
    11. Shugan, Steven M, 1980. "The Cost of Thinking," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 7(2), pages 99-111, Se.
    12. Green, Paul E & Srinivasan, V, 1978. "Conjoint Analysis in Consumer Research: Issues and Outlook," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 5(2), pages 103-123, Se.
    13. Glen L. Urban, 1975. "Perceptor: A Model for Product Positioning," Management Science, INFORMS, vol. 21(8), pages 858-871, April.
    14. Hise, Richard T. & McGinnis, Michael A., 1975. "Product elimination: Practices, policies, and ethics," Business Horizons, Elsevier, vol. 18(3), pages 25-32, June.
    15. Lancaster, Kelvin, 1980. "Competition and Product Variety," The Journal of Business, University of Chicago Press, vol. 53(3), pages 79-103, July.
    16. Moshe Givon & Dan Horsky, 1978. "Market Share Models as Approximators of Aggregated Heterogeneous Brand Choice Behavior," Management Science, INFORMS, vol. 24(13), pages 1404-1416, September.
    17. Jean-Marie Blin & Joe A. Dodson, 1980. "The Relationship between Attributes, Brand Preference, and Choice: A Stochastic View," Management Science, INFORMS, vol. 26(6), pages 606-619, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hauser, John R., 1983. "Price theory and the role of marketing science," Working papers 1403-83., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    2. Wayne DeSarbo & Kamel Jedidi & Joel Steckel, 1991. "A stochastic multidimensional scaling procedure for the empirical determination of convex indifference curves for preference/choice analysis," Psychometrika, Springer;The Psychometric Society, vol. 56(2), pages 279-307, June.
    3. Wilhelm, Wilbert E. & Xu, Kaihong, 2002. "Prescribing product upgrades, prices and production levels over time in a stochastic environment," European Journal of Operational Research, Elsevier, vol. 138(3), pages 601-621, May.
    4. Hauser, John R., 1985. "Theory and application of defensive strategy," Working papers 1642-85., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    5. Manalo, Alberto B., 1989. "Benefits Sought by Apple Consumers," Working Papers 115908, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
    6. Hauser, John R. & Urban, Glen L., 1982. "Prelaunch forecasting of new consumer durables : ideas on a consumer value - priority model," Working papers 1270-82., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    7. de Bont, Cees J. P. M. & Schoormans, Jan P. L., 1995. "The effects of product expertise on consumer evaluations of new-product concepts," Journal of Economic Psychology, Elsevier, vol. 16(4), pages 599-615, December.
    8. Hauser, John R. & Urban, Glen L., 1975. "A normative methodology for modeling consumer response to innovation," Working papers 785-75., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    9. John R. Hauser & Steven M. Shugan, 2008. "Commentary—Defensive Marketing Strategies," Marketing Science, INFORMS, vol. 27(1), pages 85-87, 01-02.
    10. Sibel Sozuer & Gregory S. Carpenter & Praveen K. Kopalle & Leigh M. McAlister & Donald R. Lehmann, 2020. "The past, present, and future of marketing strategy," Marketing Letters, Springer, vol. 31(2), pages 163-174, September.
    11. Nicholas Economides & Joel Steckel, "undated". "The Max-Min Principle of Product Differentiation," Networks, Compatibility 94-16, Economics of Networks.
    12. Manalo, Alberto B., 1990. "Assessing The Importance Of Apple Attributes: An Agricultural Application Of Conjoint Analysis," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 19(2), pages 1-7, October.
    13. Paul Frijters & Benno Torgler & Brendan Markey-Towler, 2016. "On the Problem of Constructing Rational Preferences," The Economic Record, The Economic Society of Australia, vol. 92, pages 68-82, June.
    14. Albritton, M. David & McMullen, Patrick R., 2007. "Optimal product design using a colony of virtual ants," European Journal of Operational Research, Elsevier, vol. 176(1), pages 498-520, January.
    15. Winfried Steiner & Harald Hruschka, 2002. "A Probabilistic One-Step Approach to the Optimal Product Line Design Problem Using Conjoint and Cost Data," Review of Marketing Science Working Papers 1-4-1003, Berkeley Electronic Press.
    16. Ohlwein, Martin, 2022. "Same but different - The effect of the unit of measure on the valuation of a unit price," Journal of Retailing and Consumer Services, Elsevier, vol. 66(C).
    17. Venkatesh Shankar & Pablo Azar & Matthew Fuller, 2008. "—: A Multicategory Brand Equity Model and Its Application at Allstate," Marketing Science, INFORMS, vol. 27(4), pages 567-584, 07-08.
    18. Merja Halme & Kari Linden & Kimmo Kääriä, 2009. "Patients’ Preferences for Generic and Branded Over-the-Counter Medicines," The Patient: Patient-Centered Outcomes Research, Springer;International Academy of Health Preference Research, vol. 2(4), pages 243-255, December.
    19. Jinsung Kim & Minseok Kim & Sehyeuk Im & Donghyun Choi, 2021. "Competitiveness of E Commerce Firms through ESG Logistics," Sustainability, MDPI, vol. 13(20), pages 1-15, October.
    20. Nagler Matthew G., 2007. "Understanding the Internet's Relevance to Media Ownership Policy: A Model of Too Many Choices," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-28, June.

    More about this item

    Keywords

    competition; pricing; product entry; defensive marketing;
    All these keywords.

    JEL classification:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:2:y:1983:i:4:p:319-360. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.