Marketing Performance Tools and Application Exercises
13.1Defensive Strategies: Core Strategy I: Protect Position
Using the data provided, evaluate the two strategies for protecting profits..
A. Protect Market Share: Set the market growth rate at 25 percent and hold market share at 10 percent.
B. Build Customer Retention: Improve retention to 75 percent by increasing retention expense to $250.
Teaching Notes
A. A defensive strategy to protect share position in a market growing at 25 percent
requires a larger marketingbudget. As shown, the marketingbudget is increased
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B. A defensive strategy to build customer retention produces a signi,cant gains of
$5.5million in sales and$4.25 million in marketing pro,ts. The gains illustrate the
importance of customer retention in mature markets and the value of investing in
13.2Defensive Strategies: Core Strategy II: Optimize Position
Using the data provided, evaluate the two strategies for maximizing profits without exiting markets.
A. Maximize Net Marketing Contribution: Hold market share while reducing marketing administration
expenses to 1 percent and customer retention expense from $150 to $100.
B.Reduce Market Focus: Raise prices 10 percent and reduce market share from 10 to 8 percent.
Teaching Notes
A. Maximizing the NMC results in no change in sales but reduces the marketing budget by $952,000,
allowing the NMC to increase by the same amount. The strategy would be feasible only in a market with
B. The reduce-focus defensive strategy results in a decline in sales from $39 million to $34.32 million. The
tricky part that students may miss is the change in margins. The costper customer does not change with
Market-Based Management Copyright © 2012
Sixth Edition –40– Pearson Education, Inc.
Instructor’s Manual– Chapter 4 Publishing as Prentice Hall
marketing profits (from $9.6 million to $10.7 million).
13.3Defensive Strategies: Core Strategy III: Monetize, Harvest, or Divest
Using the data provided, evaluate the two strategies for maximizing short-run cash flow.
A. Manage for Cash Flow: Reduce the customer retention expense to $100, the customer acquisition
expense to $500, and the marketing administration expense to 0.5 percent.
B. Harvest/Divest for Cash Flow: Reduce share to 5 percent with a 10 percent price increase, no
customer acquisition expense, and the marketing administration expense equal 0.1 percent of sales.
Market-Based Management Copyright © 2012
Sixth Edition –41– Pearson Education, Inc.
Instructor’s Manual– Chapter 4 Publishing as Prentice Hall
Teaching Notes
A. This defensive strategy drastically cuts marketing expenses. As shown, the marketing
budget drops from $5.84 million to $3.2 million, allowing marketing pro,ts to increase
B. This harvest-and-divest strategy will result in share erosion and a decline in sales from
$39 million to $21.45 million. However, the marketing budget is reduced from $5.84
Market-Based Management Copyright © 2012
Sixth Edition –42– Pearson Education, Inc.
Instructor’s Manual– Chapter 4 Publishing as Prentice Hall