220. How to Run A Business: Offensive and Defensive Strategies To Manage Competitive Attacks

Defending Your Brand by Tim CalkinsPublished in 2012 by Palgrave Macmillan, Tim Calkins‘ book Defending Your Brand  outlines 15 defensive strategies smart companies use to deal with competitive attacks, and warns that while these strategies can be carried out ‘legally,’ you should first consult legal counsel.

Economic reasons for defense

You’re the CEO of the leading brand with a 40%  market share (400,000,000€) of a 1 billion € industry. You operate in a mature industry that isn’t growing very quickly.

industry growth stages

As the market leader, a 1% market share loss (10,000,000€) to a competitor may not seem like much, and you could just as easily justify the loss as an ‘unlucky’ business year. That is, until you take into account several critical factors:

  1. Competitor(s) which successfully take 1% (10,000,000€) out of your pocket this year will likely not stop there, and will aggressively continue growing their market share – at your expense – into the next coming years through brand activation and marketing and advertising, meaning that your sales will continue to suffer in the years to come.
  2. The fact that your mature industry isn’t growing means that the any sales competitors make come directly at the expense of another brand in the industry – a zero/sum distribution in negotiations
  3. Meanwhile, your fixed and variable operating costs (rent, utilities, machine equipment repair and maintenance, salaries and wages, distribution, packaging, travel, taxes, bank charges, marketing and advertising, R&D to create new and improved products…) will remain relatively the same over the long term all the while yearly cost of living increase, meaning your net income will be reduced in the years to come.

Left unchallenged, those aggressive competitors could very well capture up to 10% of the market share (100,000,000€) over the next ten years, and your once powerful position as leader will dwindle to the point where you become nothing more than a generic ‘has been’ on the bottom of the grocery shelf.

[EDITOR’S NOTE: Recall in the Ycombinator lecture series at Stanford University that a startups’ best strategy for entering a market is to identify and meet the needs of a highly-targeted consumer niche that the other brands aren’t able to cater to, and then grow from there as quickly as possible so that by the time a more financially backed competitors see you as a threat and can attack or acquire you, you have enough market share and finances to properly defend yourself.]

Under these circumstances, what’s a brand to do?!

1. Promote the industry, not the brand

As pointed out in the book The 22 Immutable Laws of Branding, in a market where growth is still possible, a leading brand should promote the category and not the brand itself because more competitors can actually lead to a market growth where all competing brands benefit.

2. The best defense is a good offense

Using your advertising and marketing dollars to saturate the consumer’s mind is an effective way of raising the barriers to entry so smaller brands on a budget are unable to get the word out about products and services.

Patenting everything you possibly can and then threating competitors with legal action for infringements is an effective way of tying up the competitor’s money and time in court costs for years to come, making it easier for them to just give up and walk away than to stay and fight.

[EDITOR’S NOTE: To learn more about how this lowbrowed but effective technique stifles business and progress, watch the videos:

Stopping a competitor’s product launch by offering “Buy 1 get 1 free” coupons a few days before their launch effectively stocks the consumer up on the very product your competitors are trying to sell.

3. The best offense is a good defense

(In a perfect world) If at the end of the day…

…then competitors will do their best to stay away from you.