Offensive versus Defensive Marketing: What is the Optimal Spending Allocation?

International Journal of Research in Marketing, Forthcoming

41 Pages Posted: 20 Oct 2011

See all articles by Guiomar Martin-Herran

Guiomar Martin-Herran

University of Valladolid - Faculty of Economic Science and Business Studies

Shaun McQuitty

Athabasca University - School of Business

Simon Sigue

Athabasca University - School of Business

Date Written: October 18, 2011

Abstract

This article investigates the optimal allocation between offensive and defensive marketing in a dynamic mature market where two firms compete for market share. A modified Lanchester model is used to determine Nash stationary feedback strategies that allow the competitors to adjust their marketing expenditures as their market shares evolve over time. An important component of the model is the interaction between offensive and defensive marketing activities, which was not considered previously. Our findings suggest that a cost differential between offensive and defensive marketing cannot fully explain resource allocation in a competitive market. Rather, the optimal allocation critically depends on the firms’ relative positions in the market, their competitive advantages in offensive and defensive marketing, and the costs and effectiveness of these two classes of marketing activities. The theoretical and managerial implications are discussed.

Keywords: Customer Acquisition, Customer Retention, Defensive Marketing, Offensive Marketing, Lanchester Model

Suggested Citation

Martin-Herran, Guiomar and McQuitty, Shaun and Sigue, Simon, Offensive versus Defensive Marketing: What is the Optimal Spending Allocation? (October 18, 2011). International Journal of Research in Marketing, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1945980

Guiomar Martin-Herran

University of Valladolid - Faculty of Economic Science and Business Studies ( email )

Avenida Valle Esgueva, 6
Valladolid
Spain

Shaun McQuitty

Athabasca University - School of Business ( email )

11207 - 70 Avenue
Edmonton, Alberta T6H 2H2
Canada

Simon Sigue (Contact Author)

Athabasca University - School of Business ( email )

11207 - 70 Avenue
Edmonton, Alberta T6H 2H2
Canada

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