Defensive Strategies Mktg 485 June 2, 2004

Defensive Strategies – Ch. 13 Protect Market Position –Protect Market Share –Build Customer Retention –Reduced Focus Exit Market Position –Harvest Price Strategy –Harvest Resource Strategy –Divest Market Position

Problems at Campbell Soup No so “Hmm, hmm Good” Canned soup sales are down 8% Losing share to General Mills Progresso – whose ad campaign equates Campbell’s soups to kids food Gotten nowhere in the dry soup category competing against Lipton

Hope for Campbell Pepperidge Farms is #3 in cookie/cracker category Nabisco (Kraft Foods) Keebler (Kelloggs) But sales are up 8% (counting Godiva chocolates)

Focus for Growth & Profitability Campbell’s Pepperidge Farms saw declining sales for its Goldfish crackers Decided to refocus from adults to children –In 1997, revised the product & advertising –Stamped a smiling face on every cracker –“the healthy snack that smiles back” Sales doubled to $250 milllion

Portfolio Analysis Defense Very Weak Very Strong Very Attractive Very Unattractive Competitive Advantage Market Attractiveness

Portfolio Analysis Protect Protect or Harvest Protect Defense Protect or Focus Harvest or Divest Protect or Harvest Very Weak Very Strong Very Attractive Very Unattractive Competitive Advantage Market Attractiveness

Protect Market Position Protect Market Share Importance? Depends on growth How? Depends on share Build Customer Retention Reduced Focus

Ford’s Drive for Profitability Improved quality Dropped slow sellers ( e.g., Mercury Cougar ) Reduced sales to rental companies Results –  Market Share 22% to 20.2% –  Margins 5.6% to 8.4% –$2 billion profit in 1 st quarter

Fast versus Slow Growth ( text, p. 310 ) Fast Growth Markets –.4% share loss for every 1% annual market increase every year. –Loss = 40% x Growth x Share –If Growth = 5% –Loss = 40% x 5% x Share –Loss = 2% x Share –If Share = 20%, share loss =.4%

Market Share Erosion ( for industry with 5% share ) YearShareIndustryFirm 020%

Market Share Erosion ( for industry with 5% share ) YearShareIndustryFirm 020% % % % % %

Market Share Erosion ( for business with 20% share ) Year5%10%15% 119.6%19.2%18.8% 219.2%18.4%17.7% 318.8%17.7%16.6% 418.4%17.0%15.6% 518.1%16.3%14.7% Erosion =.4% of growth rate

Effect of Market Growth on Share when Not Protected

Protect Market Share Protect High Share Maintain new product development Improve product & service quality Support marketing budgets Protect Follower Share Match leader Defend against growth-oriented nichers Protect Niche Share Focus to keep expenses low Customize products

Protect Market Share - Leader Maintain new product development Intel Microsoft Improve product & service quality Amazon, eBay Support marketing budgets Coca Cola

Protect Market Share - Challenger Match leaderBarnes & Noble – free shipping FedEx – open retail sites Defend against growth-oriented nichers Miller beer - microbrews

Protect Market Share - Flanker Focus to keep expenses low Customize products

Build Customer Retention Loyalty Programs Know Customers

Reduced Market Focus Cutter & Buck Sears Amazon

Exit Market Strategies Harvest Pricing Harvest Resources Divest

Yahoo’s Failure to Defend Once, the leading internet site First place that individuals went to for information. AOL & MSN dominate as portals Google dominates for searches Amazon dominates for shopping eBay dominates for auctions News, Sports, Finance & Communities

Web Traffic – February 2004 SiteVisitorsTime / Visit MSN94.01:29 Time Warner81.13:48 Yahoo!81.01:53 Google49.60:18 eBay37.51:29 US Gov33.30:17 Interactive23.80:18 Amazon23.80:13 Real Networks22.70:36