Marketing Strategy Apr 3, 2013

To Defend or Not to Defend?

What to do when a com­peti­tor enters your industry

Based on the research of

Timothy Calkins

When­ev­er a new com­peti­tor enters an indus­try or indus­tri­al seg­ment, the industry’s dom­i­nant play­ers face a crit­i­cal deci­sion: Should they defend their posi­tion or rely on mar­ket real­i­ties to take care of the new­com­er? The deci­sion is a com­pli­cat­ed one. You can’t defend every­thing,” says Kel­logg School mar­ket­ing pro­fes­sor Tim Calkins. But in his view com­pa­nies defend far too infre­quent­ly. You can get into trou­ble when you don’t defend,” he says. You can trace a lot of busi­ness prob­lems back to inef­fec­tive defen­sive efforts.”

In a chap­ter of his new book Defend­ing Your Brand, Calkins focus­es on this very ques­tion — one that, to date, has had min­i­mal aca­d­e­m­ic expo­sure. The book, informed by 11 years of expe­ri­ence at Kraft Foods, as well as his own and oth­ers’ aca­d­e­m­ic research, aims to reverse that situation.

Why Defend?

Calkins high­lights sev­er­al rea­sons for mount­ing a defense against a com­peti­tor. The most obvi­ous is a company’s need to pro­tect its mar­ket share and prof­it. A defense plan can min­i­mize a new entrant’s gains and, as one of Calkins’s sources points out, push the pain onto oth­er play­ers in the cat­e­go­ry.” Defen­sive think­ing works over the long term as well as the short because, by reduc­ing the chances that com­peti­tors’ new prod­ucts will suc­ceed, a good defense reduces the like­li­hood that the prod­uct will pro­vide a seri­ous threat in the future.

Defend­ing a company’s turf also sends a sig­nal to the entire indus­try seg­ment. If your com­peti­tors know that you will defend aggres­sive­ly, they will take that into account when think­ing about enter­ing your cat­e­go­ry by launch­ing a new prod­uct,” Calkins writes. And the deci­sion to defend plays the per­cent­ages. Defense pro­grams gen­er­al­ly work,” Calkins explains. A new busi­ness has to change cus­tomer behav­ior to be suc­cess­ful; this is a chal­lenge because peo­ple resist change. A defend­er sim­ply has to main­tain the cur­rent sit­u­a­tion. The sta­tus quo works in the defender’s favor,” Calkins adds.

When Not to Defend

Calkins takes care to point out that mount­ing a defense does not always rep­re­sent the best action for a firm whose brand comes under attack. He cites a num­ber of very valid rea­sons why defend­ing might not be the best approach.”

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Two of those rea­sons, odd­ly enough, occu­py oppo­site ends of the spec­trum: a threat may be too small, or it may be too over­whelm­ing. In the for­mer case, a com­pet­i­tive new prod­uct may present very lit­tle risk to a company’s bot­tom line. It might, for exam­ple, tar­get a dif­fer­ent cus­tomer seg­ment or a dif­fer­ent region from those where the com­pa­ny has its strength. Or the com­peti­tor may sim­ply be too small to cause con­cern. A per­son mak­ing a sal­ad dress­ing in her garage will not be a huge prob­lem for Clorox, a com­pa­ny that pro­duces mil­lions of bot­tles of Hid­den Val­ley Ranch sal­ad dress­ing every year,” Calkins writes. And in the case of a strong com­peti­tor aim­ing at a vul­ner­a­ble seg­ment of an estab­lished company’s mar­ket, the best strat­e­gy may be to retreat — by mov­ing to a new loca­tion, for example.

Oth­er rea­sons to shy away from defend­ing include cor­po­rate con­cerns about pub­lic per­cep­tion. Fear that the com­pa­ny may fall foul of anti-trust reg­u­la­tions may over­turn an oth­er­wise com­pelling case for defense. The sim­ple issue of pub­lic rela­tions can play a sim­i­lar role. A giant food com­pa­ny such as Nabis­co would risk a PR dis­as­ter if it spent mil­lions of dol­lars attack­ing Girl Scout cook­ies, Calkins notes wryly.

Cor­po­rate plan­ning can also influ­ence a deci­sion to stand pat against a com­peti­tor. A com­pa­ny that plans to leave the busi­ness seg­ment under attack, or that can piv­ot toward more prof­itable oppor­tu­ni­ties, should prob­a­bly avoid the expen­di­ture of mon­ey and time on defense. And in some cas­es a firm might take the same inac­tion because, para­dox­i­cal­ly, it wel­comes a com­peti­tor. Com­pa­nies open­ing up a new busi­ness cat­e­go­ry, for exam­ple, or intro­duc­ing new tech­nol­o­gy into an estab­lished cat­e­go­ry can ben­e­fit from com­peti­tors who can add momen­tum to the launch­es — and coin­ci­den­tal­ly help to counter anti-trust issues.

Wrong Rea­sons to Avoid Defense

Calkins also cites the reverse of that think­ing — that a defense will val­i­date the attacker’s idea and hence give it cred­i­bil­i­ty — as one of sev­er­al wrong rea­sons” to avoid defend­ing against a new com­peti­tor. Val­i­dat­ing a new prod­uct idea is a con­cern, but there are many ways to defend that are essen­tial­ly invis­i­ble to cus­tomers. The issue can be addressed by care­ful­ly con­struct­ing the defense plan.

Small com­pa­nies can also fall into the trap of expect­ing larg­er, estab­lished firms in their mar­ket to bear the brunt of defense against new­com­ers. But in fact, Calkins says, the larg­er firms’ defense may result in the new entrants tak­ing mar­ket share from the small orga­ni­za­tions that do not defend. In this case, a defense plan can lim­it the newcomer’s share of the mar­ket and help to ensure that any of its gains come at the expense of oth­er firms in the category.

Peo­ple get excit­ed about growth ini­tia­tives; as a result, they don’t defend. There’s a per­cep­tion that if you’re defend­ing, that’s a bad sign somehow.”

Anoth­er big mis­take is think­ing the new entrant has a bad idea and will fail any­way. If the com­peti­tor has a clunk­er of an idea, why both­er to defend against it?” Calkins asks. But the per­cep­tion may be wrong; the competitor’s bad idea may actu­al­ly be a good one. When Hon­da entered the Amer­i­can motor­cy­cle mar­ket in 1959 with a 50 cc machine aimed at stu­dents, exec­u­tives at indus­try leader Harley David­son regard­ed the com­pa­ny as too mar­gin­al and its prod­uct as too quirky to defend against. But Hon­da used its machine as the entry card to the mar­ket. By 1982 Hon­da led the indus­try with 37 per­cent of sales; Harley had just 4 per­cent, although it has since recovered.

The Appeal of Growth

Final­ly, one of the strongest rea­sons exec­u­tives refrain from defend­ing is a bias toward growth. After all, to afford an effec­tive defense, exec­u­tives must cut back on oth­er activ­i­ties, most notably those involv­ing cor­po­rate growth. Peo­ple get excit­ed about growth ini­tia­tives; as a result, they don’t defend,” Calkins says. There’s a per­cep­tion that if you’re defend­ing, that’s a bad sign somehow.”

That same prej­u­dice often emerges in exec­u­tives’ mis­judg­ment of both the risk that com­peti­tors present and the val­ue of their com­pa­nies’ own prod­ucts. Man­agers get so con­fi­dent about their own efforts that they miss what the oth­ers are doing,” Calkins asserts. That thought yields the chapter’s take-away mes­sage: Don’t under­es­ti­mate com­pet­i­tive threats,” he says. Don’t under­es­ti­mate the val­ue of a good defense.”

(Editor’s note: Defend­ing Your Brand was named Mar­ket­ing Book of the Year for 2013 by Expert Mar­keter Mag­a­zine.)

About the Writer

Peter Gwynne is a freelance writer based in Sandwich, Mass.

About the Research

Calkins, Tim. 2012. Defending Your Brand: How Smart Companies Use Defensive Strategy to Deal with Competitive Attacks. Palgrave Macmillan.

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