Theory and application of defensive strategy

For every new product launched, there are many major existing firms who wish to defend their product's profitability from the new product attack. This essay summarizes research on defensive marketing strategy, that is, the adjustment of price, advertising, image, ingredients, distribution and other marketing mix elements in order to maintain maximum profitability and strategic position. First, a marketing science model of consumer behavior is presented and interpreted relative to an applied economics perspective. This model implies qualitative results which suggest directional changes in price, advertising, product ingredients, and distribution. Next, measurement and estimation of the consumer model are discussed and an empirical application presented. Included are vignettes on seven world-wide applications. The focus throughout this essay is on the strengths and weaknesses of the research and applications to date and on the opportunities for further research by both applied economists and marketing scientists.