m arket-based management, 4 th edition
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Defensive Strategies
Chapter Chapter ThirteenThirteen
MMarket-Basedarket-Based Management, 4Management, 4thth editionedition
13-2
Defensive StrategiesDefensive Strategies
Chapter Thirteen
– Defensive Strategic Market Plans
– Core Defensive Strategies
– Sub Defensive Strategies
13-3
Defensive Strategic Market Defensive Strategic Market PlansPlans
What are the main objectives of defensive strategies?– Protect profitability
and manage profitability
When are Defensive Market Plans employed?
13-4
Core Defensive StrategiesCore Defensive Strategies
Core Strategy 1 Core Strategy 2 Core Strategy 3
Protect Position Optimize Position Monetize, Harvest, or
Divest
Maintain Sales
Maximize Profits
Cash Flow
13-5
1. Protect position in growth markets
2. Protect a high-share position
3. Protect a follower share position
4. Protect a niche share position
Defensive Core Strategy 1: Defensive Core Strategy 1: Invest to Protect PositionInvest to Protect Position
Sub Strategy A Sub Strategy B
Protect Market Share
Build Customer Retention
13-6
Defensive Core Strategy 2: Defensive Core Strategy 2: Optimize PositionOptimize Position
Sub Strategy A
Sub Strategy B
Maximize Net Marketing
Contribution
Selective Market Focus
13-7
1. Harvest Price Strategy
2. Harvest Marketing Resource Strategy
3. Divest Market Strategy
Defensive Core Strategy 3: Defensive Core Strategy 3: Monetize, Harvest, Or DivestMonetize, Harvest, Or Divest
Sub Strategy A Sub Strategy B
Manage for Cash Flow
Harvest-Divest for Cash Flow
13-8
TakeawaysTakeaways//ReviewReview
• Strategic Market Plans
• Profit Protection
• Portfolio Analysis and Strategy Selection
• Defensive Strategies
• Defensive Tactics
13-9
Marketing Performance ToolsMarketing Performance Tools
Defensive Strategy to Protect Share
Strategic Market Plan (customers) Current Plan Plan Plan
Invest to Protect Share Year Year 1 Year 2 Year 3
Market Demand (000) 1,000 1,050 1,100 1,150
Market Share 10.0% 10.0% 10.0% 10.0%
Customer Volume (000) 100 105 110 115
Customer Retention 0.90 0.90 0.90 0.90
Retained Customers (000) 85.5 90 94.5 99
New Customers (000) 14.5 15.0 15.5 16.0
Revenue per Customer
Retained Customers $500 $500 $500 $500
New Customers $300 $300 $300 $300
Average Revenue per Customer $471 $471 $472 $472
Sales Revenues (millions) $47.10 $49.50 $51.90 $54.30
Percent Margin per Customer
Retained Customers 50.0% 50.0% 50.0% 50.0%
New Customers 33.3% 33.3% 33.3% 33.3%
Average Percent Margin 48.5% 48.5% 48.5% 48.5%
Gross Profit (millions) $22.82 $24.00 $25.17 $26.35
Marketing Expenses
Retention Cost per Customer $25 $25 $25 $25
Acquistion Cost per Customer $150 $150 $150 $150
Average Marketing Expense (% sales) 9.2% 9.1% 9.0% 9.0%
Marketing Expenses (millions) $4.31 $4.50 $4.69 $4.88
Net Marketing Contribution (millions) $18.51 $19.50 $20.49 $21.47
Marketing ROS 39.3% 39% 39% 40%
Marketing ROI 429% 433% 437% 441%
13-10
Marketing Performance ToolsMarketing Performance Tools
Evaluating Defensive Strategies
Strategic Market Plan (customers) Current Plan Plan Plan
Defensive Strategy Year Year 1 Year 2 Year 3
Market Demand (000) 1,000 1,050 1,100 1,150
Market Share 10.0% 10.0% 10.0% 10.0%
Customer Volume (000) 100 105 110 115
Customer Retention 0.90 0.90 0.90 0.90
Retained Customers (000) 85.5 90 94.5 99
New Customers (000) 14.5 15.0 15.5 16.0
Revenue per Customer
Retained Customers $500 $500 $500 $500
New Customers $300 $300 $300 $300
Average Revenue per Customer $471 $471 $472 $472
Sales Revenues (millions) $47.10 $49.50 $51.90 $54.30
Percent Margin per Customer
Retained Customers 50.0% 50.0% 50.0% 50.0%
New Customers 33.3% 33.3% 33.3% 33.3%
Average Percent Margin 48.5% 48.5% 48.5% 48.5%
Gross Profit (millions) $22.82 $24.00 $25.17 $26.35
Marketing Expenses
Retention Cost per Customer $25 $25 $25 $25
Acquistion Cost per Customer $150 $150 $150 $150
Average Marketing Expense (% sales) 9.2% 9.1% 9.0% 9.0%
Marketing Expenses (millions) $4.31 $4.50 $4.69 $4.88
Net Marketing Contribution (millions) $18.51 $19.50 $20.49 $21.47
Marketing ROS 39.3% 39% 39% 40%
Marketing ROI 429% 433% 437% 441%
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