Johnson & Johnson Successful Competitive Intelligence Campaign


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Case Overview
Johnson & Johnson’s well-executed competitive intelligence (CI) strategy and following marketing defensive block against Bristol-Myers during Tylenol – Datril confrontation on the market is considered as a classic example of the CI effective use.

Ever since Johnson & Johnson acquired McNeil Laboratories, maker of Tylenol, the drug has been marketed as a high-priced product (Hoover’s, 2008). The drug was able to keep exclusive position on the analgesic market, since consumers perceived it to have fewer side effects, as probability for upset stomach, than the aspirin-based products, such as Bayer, Anacin, and Excedrin. Marketing position of the drug on the map (prior introduction of the ibuprofen products) in terms of the perceived effectiveness and possible side effects is presented in Attachment A. At the time, Tylenol was not a commonly accepted brand, while market was strongly dominated by cheaper aspirin-based products. Recognizing the market opportunity, in 1975, Bristol-Myers introduced acetaminophen-based alternative drug Datril. The introduction included heavy emphasis on national advertising with claim that Datril is “just good as Tylenol, only cheaper”. By way of placing the new competitive product on the same map, the strong marketing position of Datril becomes obvious (see attachment B). Such positioning of Datril had the strong potential to decrease Tylenol’s market share (Hauser, 2005). Indeed, Datril successfully entered the pain reliever market and initially captured about half of Tylenol’s sales on the test markets (Shay & Rothaermel, 1999).

Use of Competitive Intelligence
The early warning signal on the threat of a new entrant on the market was received from one of the McNeil’s marketing managers, who recorded a critical piece of competitive intelligence, visiting a printer near the Tylenol manufacturing plant. He noticed a new advertising booklet for Datril, a competing product, which highlighted significantly lower prices in comparison with the Tylenol. Being able to recognize the importance of this information, he reported his finding at once to Tylenol product management (ACI).

In order to get more information for the Datril price-penetration strategy against Tylenol, Johnson & Johnson executed proactive and efficient competitive intelligence move. It was well-known that Bristol-Myers has had traditionally tested all new products on the two United State markets – in Peoria, Illinois and in Albany, New York (Nolan, 2007). Based on this information, Johnson & Johnson insinuated multiple observers into the test marketing populations in those two cities and, based on their reports and observations, identified exact Bristol-Myers market penetration strategy, approaches, and timing (Nolan, 1999).

Bristol-Myers obviously has not executed any sort of counterintelligence strategy, so the company failed to detect the Johnson & Johnson’s competitive intelligence activities at the time. Simply changing the test markets locations would make the surveillance task much more difficult (Nolan, 1999).

Marketing Strategy Execution
Equipped with competitive intelligence result, James Burke, a President of Johnson & Johnson Domestic Operations, met with Chairman Richard Sellars and convinced him that emergency defense block marketing strategy should be executed. It was decided to slash Tylenol’s price immediately to match Datril’s offerings (Hoover’s, 2008). Two weeks before Datril’s introduction, Johnson & Johnson announced reducing the retail price of Tylenol by 30%. The same day, Johnson & Johnson informed Bristol-Myers on the immediate price cuts in an effort to prevent them from advertising Datril as a lower-priced alternative to Tylenol. However, Bristol-Myers ignored the rival’s warning and responded by accelerating the launch of the television advertising campaign (QuickMBA, 2007). 

Bristol-Myers failure to consider Johnson & Johnson’s prices-slashing marketing step as valid reason for its own strategy adjustment, turned out to be a big mistake. Over a single weekend, Johnson & Johnson mobilized its entire sales force, matched Datril’s price, persuaded the television networks that announced Datril’s price advantage could be considered as false advertising, and executed other defensive measures (Hauser, 2005). At first, Johnson & Johnson, due to the wide company publicity, forced advertising networks to change the price advantage related wording in the Datril’s advertising. And later the major advertising networks, like CBS and NBC, shut down completely the Datril advertising campaign due to the substantial controversies and public pressure. As the result of this operation, Datril ended up with less than 1 percent of the analgesics market share. And Tylenol’s sales soared on the wide publicity and lower prices (QuickMBA, 2007).     

Analysis
Johnson & Johnson marketing success in its blocking the competitive Bristol-Myers product Datril’s penetration on the analgesics market and extending its own brand marketing presence can be attributed to the following factors:
§  Johnson & Johnson organized well-positioned competitive intelligence program and was able to learn its rival’s plans to launch a new product in time to develop effective defense strategy.
§  Johnson & Johnson management decision to decrease the Tylenol’s prices was not easy to make, since in the process of the warfare the company lost millions in profits. However, on long run, this move allowed to capture significant market share and to become a biggest player on the market.
§  One of the reasons Bristol-Myers dismissed the Johnson & Johnson’s warning was due to the fact that the company could not anticipate so fast and heavy response and did not believe that the Johnson & Johnson’s countermeasures could reach the potential customers immediately. Obviously, the marketing inflexibility appeared to be a big mistake.
§  Awakened to the marketing potential of the Tylenol brand, Johnson & Johnson became a national advertiser and increased its advertising budget to promote Tylenol from $2 million in 1974 to $8 million in 1975 (Karla, Rajiv, & Srinivasan, 1998).
§  To capture consumers’ interests in drug “effectiveness”, Johnson & Johnson introduced Extra Strength Tylenol and executed a number of additional effective marketing tactics. By the time of ibuprofen entries, Tylenol has already about 37 percents of the market share, and no competitive product – Datril, Panadol, or generic acetaminophen – was able to affect it (Hauser, 2005).  


References

Academy of Competitive Intelligence (n.d.). Intelligence sources and collection techniques. Retrieved February 26, 2009, from http://www.academyci.com/Seminars/ps-intelligence_sources.html

Hauser, J.R. (2005, Spring). Note on defensive marketing strategy. Retrieved February 25, 2009, from http://ocw.mit.edu/NR/rdonlyres/Sloan-School-of-Management/15-810Spring-2005/BD3B5287-1FF5-49D9-B29A-A779CFF2E2E4/0/1note2.pdf

Hoover’s, Inc. (1998). Hoover’s profile: Johnson & Jonson. Retrieved February 25, 2009, from http://www.answers.com/topic/johnson-johnson

Karla, A., Rajiv, S., Srinivasan, K. (1998). Response to competitive entry: A rationale for delayed defensive reaction. Marketing Science, 17(4), pp. 380-405.

Nolan, J.A. (2007). Getting to know your competition – without them getting to know all about you. Retrieved February 26, 2009, from http://www.intellpros.com/arch_one_four.html

Nolan, J.A. (1999). It’s the third millennium: Do you know where your competitor is? The Journal of Business Strategy, 20(6), pp. 11-16.

QuickMBA (2007). Marketing warfare. Retrieved February 26, 2009, from http://www.quickmba.com/marketing/ries-trout/marketing-warfare/

Shay, J.P., & Rothaermel, F.T. (1999). Dynamic competitive strategy: Towards a multi-perspective conceptual framework. Long Range Planning, 32(6), pp. 559-572.

Wheelen, T., & Hunger, J. (2002). Strategic Management and Business Policy, Upper Saddle River, NJ:  Prentice Hall, pp. 70-72.  


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