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Khurshan Irani
Khurshan Irani
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---l---r_ __ _J,-__ T Preface xxix PART 1 Understanding Marketing Management 2 Chapter 1 Chapter 2 Defining Marketing for the 21 st Century 3 Developing Marketing Strategies and Plans 33 AR 2 Capturing Marketing Insights Chapter 3 Chapter 4 ART Chapter Chapter Chapter Chapter Connecting with Customers 5 6 7 8 64 Gathering Information and Scanning the Environment 65 Conducting Marketing Research and Forecasting Demand 89 118 Creating Customer Value, Satisfaction, and Loyalty Analyzing Consumer Markets 149 Analyzing Business Markets 181 Identifying Market Segments and Targets 207 119 PART 4 Building Strong Brands Chapter 9 Chapter 10 Chapter 11 Creating Brand Equity 235 Crafting the Brand Positioning 267 Dealing with Competition 293 PART 5 Shaping the Market Offerings Chapter 12 Chapter 13 Chapter 14 Setting Product Strategy 317 Designing and Managing Services 345 Developing Pricing Strategies and Programs PART 6 Delivering Value Chapter 15 Chapter 16 Designing and Managing Integrated Marketing Managing Retailing, Wholesaling, and Logistics PA T7 Communicating Value Chapter 17 Chapter 18 Designing and Managing Integrated Marketing Communications 469 Managing Mass Communications: Advertising, Sales Promotions, Events and Experiences, and Public Relations 497 Managing Personal Communications: Direct and Interactive Marketing, Word of Mouth, and Personal Selling 531 Chapter 19 234 316 375 408 409 441' 468 PARTS Creating Successful Long-Term Growth Chapter 20 Chapter 21 Chapter 22 Introducing New Market Offerings 565 Tapping into Global Markets 597 Managing a Holistic Marketing Organization Appendix A1 Endnotes E1 Glossary G1 Image Credits C1 Name Index 11 Company, Brand, and Organization Index Subject Index 110 564 625 13 vii
Preface xxix PART 1 Understanding Marketing Management Chapter 1 Defining Marketing for the 21st Century The Importance of Marketing The Scope of Marketing 5 2 3 4 What Is Marketing? 5 What Is Marketed? 6 Who Markets? 7 Marketing in Practice 10 Core Marketing Concepts 12 Needs, Wants, and Demands 12 Target Markets, Positioning, and Segmentation Offerings and Brands 13 13 Value and Satisfaction 13 Marketing Channels 14 Supply Chain 14 Competition 14 Marketing Environment 14 The New Marketing Realities 15 Major Societal Forces 15 New Consumer Capabilities 16 New Company Capabilities 17 Company Orientation toward the Marketplace 18 The Production Concept 18 The Product Concept 18 The Selling Concept 19 The Marketing Concept 19 The Holistic Marketing Concept 19 MARKETING MEMO Marketing Right and Wrong Relationship Marketing 20 20 BREAKTHROUGH MARKETING Nike Integrated Marketing 22 Internal Marketing 24 Performance Marketing 26 Marketing Management Tasks 21 28 Developing Marketing Strategies and Plans Capturing Marketing Insights 28 28 MARKETING MEMO Marketers' Frequently Asked Questions 29 Connecting with Customers 29 Building Strong Brands 29 ix
E Shaping the Market Offerings Delivering Value 29 29 Communicating Value 30 Creating Long-Term Growth 30 Summary 30 Applications 31 Chapter 2 33 Developing Marketing Strategies and Plans Marketing and Customer Value 34 The Value Delivery Process 34 The Value Chain 35 Core Competencies 36 A Holistic Marketing Orientation and Customer Value The Central Role of Strategic Planning BREAKTHROUGH MARKETING Intel 40 Corporate and Division Strategic Planning Defining the Corporate Mission 38 39 41 41 Establishing Strategic Business Units 43 Assigning Resources to Each SBU25 44 Assessing Growth Opportunities 44 Organization and Organizational Culture Marketing Innovation Business Unit Strategic Planning The Business Mission 48 SWOT Analysis 47 47 48 48 MARKETING INSIGHT Creating Innovative Marketing Goal Formulation MARKETI 49 52 MEMO Checklist for Performing StrengthslWeaknesses Analysis 53 Strategic Formulation 53 Program Formulation and tmplementation 55 MARKETING INSIGHT Marketing's Contribution to Shareholder Value Feedback and Control 56 56 Product Planning: The Nature and Contents of a Marketing Plan 56 MARKETING MEMO Marketing Plan Criteria Summary 63 Applications ;. 63 57
PART 2 Capturing Marketing Insights 64 Chapter 3 Gathering Information and Scanning the Environment 65 Components of a Modern Marketing Information System Internal Records and Marketing Intelligence 67 The Order-to-Payment Cycle 67 Sales Information Systems 68 Databases, Data Warehousing, and Data Mining 68 The Markehng Intelligence System 69 MARKETING INSIGHT The Big Dig 66 70 MARKETING MEMO Clicking on the Competition 72 72 Analyzing the Macroenvironment Needs and Trends 72 MARKET NG MEMO Trends Shaping the Business Landscape 73 74 Identifying the Major Forces BREAKTHROUGH MARKETING Google The Demographic Environment Worldwide Population Growth Population Age Mix 76 MARKETING INSIGHT 75 75 75 Friends for Life 76 Ethnic and Other Markets 77 Educational Groups 78 Household Patterns 78 Geographical Shifts in Population 78 Other Major Macroenvironments 79 Economic Environment 79 Social-Cultural Environment 80 Natural Environment 82 MARKETING INSIGHT Green Marketing Technological Environment Political-Legal Environment Summary 87 Applications 87 Chapter 4 83 84 86 Conducting Marketing Research and Forecasting Demand 89 The Marketing Research System 90 The Marketing Research Process 9~ Step 1: Define the Problem, the Decision Alternatives, and the Research Objectives 91 Step 2: Develop the Research Plan 92 xi
MARKETING INSIGHT Conducting Informative Focus Groups 95 MARKETING MEMO Questionnaire Dos and Don'ts 96 MARKETING INSIGHT Getting into Consumers' Heads with Qualitative Research 98 MARKETING INSIGHT Understanding Brain Science Step 3: Collect the Information 99 101 MARKETING MEMO Pros and Cons of Online Research Step 4: Analyze the Information 102 Step 5: Present the Findings 103 Step 6: Make the Decision 103 Overcoming Barriers to the Use of Marketing Research BREAKTHROUGH MARKETING IDEO Measuring Marketing Productivity Marketing Metrics 106 Marketing-Mix Modeling 106 Marketing Dashboards 107 MARKETING INSIGHT 102 103 105 106 Marketing Dashboards to Improve Effectiveness and Efficiency 108 Forecasting and Demand Measurement 109 The Measures of Market Demand 110 A Vocabulary for Demand Measurement 111 Estimating Current Demand 113 Estimating Future Demand 115 Summary 117 Applications 117 PART 3 Connecting with Customers Chapter 5 Creating Customer Value, Satisfaction, and Loyalty 118 Building Customer Value, Satisfaction, and loyalty Customer Perceived Value 121 Total Customer Satisfaction 124 Monitoring Satisfaction 125 MARKETING INSIGHT 120 Net Promoter and Customer Satisfaction 127 Product and Service Quality xli 119 129
Maximizing Customer Lifetime Value 130 130 Customer Profitability 132 Measuring Customer Lifetime Value ARKETI G MEMO Calculating Customer Lifetime Value Cultivating Customer Relationships 132 133 133 Customer Relationship Management MARKETING INSIGHT Company Response to Customer Empowerment 134 136 Attracting and Retaining Customers Building Loyalty 138 MA KETI G MEMO Creating Customer Evangelists 142 Win-Backs Customer Databases and Database Marketing 142 143 Customer Databases Data Warehouses and Datamining 143 BREAKTHROUGH MARKETING Tesco 144 The Downside of Database Marketing and CRM Summary 139 145 147 147 Applications Chapter 6 Analyzing Consumer Markets 149 What Influences Consumer Behavior? Cultura! Factors 150 150 MARKETING INSIGHT The Future of American Hyperconsumption 152 MARKETING INSIGHT Marketing to Cultural Market Segments 153 154 Personal Factors 156 Social Factors MARKETING MEMO The Average U.s. Consumer Quiz Key Psychological Processes 160 BREAKTHROUGH MARKETING Ikea Motivation: Freud, Maslow, Herzberg Perception 157 161 161 163 Learning 164 Memory 165 The Buying Decision Process: The Five-Stage Model Problem Reco9nition Information Search 167 168 168 xlii
Evaluation of Alternatives 169 Purchase Decision 172 Postpurchase Behavior 173 Other Theories of Consumer Decision Making 174 Level of Consumer Involvement 174 Decision Heuristics and Biases 175 MARKETING INSIGHT How Consumers Really Make Decisions 176 MARKETING MEMO Decision Traps Mental Accounting 177 177 Profiling the Customer Buying-Decision Process Summary 178 Applications 179 Chapter 7 Analyzing Business Markets 178 181 What Is Organizational Buying? 182 The Business Market versus the Consumer Market 182 MARKETING INSIGHT Big Sales to Small Business Buying Situations 185 Systems Buying and Selling 184 186 MARKETING MEMO Maximizing Customer References Participants in the Business Buying Process The Buying Center 188 Buying Center Influences 188 Buying Center Targeting 190 The Purchasing/Procurement Process 188 191 Purchasing Department Perceptions 191 Purchasing Organization and Administration Stages in the Buying 'Process 192 Problem Recognition 187 192 193 General Need Description and Product Specification Supplier Search 193 193 Proposal Solicitation 194 Supplier Selection 194 MARKETING MEMO Developing Compelling Customer Value Propositions 196 Order-Routine Specification 197 Performance Review 198 Managing Business-to-Business Customer Relationships The Benefits of Vertical Coordination 198 BREAKTHROUGH MARKETING General Electric 199 198
MARKETING INSIGHT Establishing Corporate Trust and Credibility 200 Business Relationships: Risks and Opportunism Institutional and Government Markets 202 201 A KETt G MEMO Selling Tech to the Government 204 Summary 205 Applications 205 Chapter 8 Identifying Market Segments and Targets Levels of Market Segmentation Segment Marketing 208 lIiche Marketing 209 Local Marketing 210 Individual Marketing 210 207 208 MARKETING INSIGHT Chasing the Long Tall BREAKTHROUGH MARKETING HSBC 212 Bases for Segmenting Consumer Markets Geographic Segmentation 213 Demographic Segmentation 215 211 213 MARKETING INSIGHT Trading Up (and Down): The New Consumer 219 MARKETING INSIGHT Marketing to Generation Y 220 MARKETING M MO Cheat Sheet for 20-Somethin'gs Psychographic Segmentation 221 Behavioral Segmentation 223 Bases for Segmenting Business Markets 226 Market Targeting 227 Effective Segmentation Criteria 227 Evaluating and Selecting the Market Segments Additional Considerations 230 Summary 232 Applications 233 PART 4 Building Strong Brands Chapter 9 Creating Brand Equity 221 228 234 235 What Is Brand Equity? 236 The Role of Brands 237 The Scope of Branding 238 Defining Brand Equity 238 xv
r " T BREAKTHROUGH MARKETING Procter & Gamble MARKETING INSIGHT 239 Brand Cooking with Jamie Oliver 240 Brand Equity as a Bridge 242 Brand Equity Models 243 Building Brand Equity 245 Choosing Brand Elements 246 Designing Holistic Marketing Activities 247 Leveraging Secondary Associations 250 Measuring Brand Equity 251 MARKETING INSIGHT The Brand Value Chain 252 Brand Valuation 253 Managing Brand Equity 253 Brand Reinforcement 253 MARKETING INSIGHT What Is a Brand Worth? Brand Revitalization 255 Devising a Branding Strategy Branding Decisions 2'57 Brand Extensions 258 Brand Portfolios 261 Customer Equity 263 254 256 MARKETING MEMO Twenty-First-Century Branding 263 Summary 264 Applications 265 Chapter 10 Crafting the Brand Positioning 267 Developing and Communicating a Positioning Strategy Competitive Frame of Reference 269 Points-of-Difference and Points-of-Parity 269 BREAKTHROUGH MARKETING UPS Establishing Category Membership Choosing POPs and PODs 274 Creating POPs and PODs 274 270 271 MARKET1NG MEMO Writing a Positioning Statement Differentiation Strategies 276 MARKETING MEMO How to Derive Fresh Consumer Insights to Differentiate Products and Services 277 xvi 268 275
" I Product Life-Cycle Marketing Strategies Product Life Cycles 278 Style, Fashion, and Fad Life Cycles 278 279 Marketing Strategies: Introduction Stage and the Pioneer Advantage 280 Marketing Strategies: Growth Stage 282 Marketing Strategies: Maturity Stage 283 MARKETING INSIGHT Competitive Category Dynamics Marketing Strategies: Decline Stage 286 Evidence on the Product Life-Cycle Concept Critique of the Product Life-Cycle Concept Market Evolution 288 284 287 287 MARKETI G MEMO How to Build a Breakaway Brand 289 Summary 290 Applications 291 Chapter 11 Dealing with Competition Competitive Forces 293 294 Identifying Competitors 295 Analyzing Competitors 296 Strategies 296 MARKETING INSIGHT High Growth Through Value Innovation Objectives 297 297 Strengths and Weaknesses 299 Selecting Competitors 299 MARKETING MEM Benchmarking to Improve Competitive Performance 300 Selecting Customers 300 Competitive Strategies for Market Leaders BREAKTHROUGH MARKETING Accenture 301 302 MARKETING INSIGHT When your Competitor Delivers More for Less 303 Expanding the Total Market 303 Defending Market Share 305 Expanding Market Share 307 Other Competitive Strategies 308 Market-Challenger Strategies 308 Market-Follower Strategies 310 xvii
MARKETING MEMO Making Smailer Better Market-Nicher Strategies 311 312 MARKETING MEMO Niche Specialist Roles 313 Balancing Customer and Competitor Orientations 314 Competitor-Centered Companies 314 Customer-Centered Companies 314 Summary 315 Applications PARTS 315 Shaping the Market Offerings Chapter 12 Setting Product Strategy 316 317 Product Characteristics and Classifications 318 Product Levels: The Customer-Value Hierarchy MARKETING INSIGHT Product Classifications Differentiation 321 Product Differentiation Metamarkets and Metamediaries 321 324 326 Product and Brand Relationships The Product Hierarchy 328 Product Systems and Mixes Product-Line Analysis 329 Product-Line Length 331 328 328 MARKETING INSIGHT When Less Is More Product-Mix Pricing 332 335 Co-Branding and Ingredient Branding 337 MARKETING MEMO Making Ingredient Branding Work Packaging, Labeling, Warranties, and Guarantees Packaging 339 Labeling 340 Warranties and Guarantees Summary 342 Applications xviii 343 319 319 BREAKTHROUGH MARKETING Toyota Design 325 Services Differentiation 318 341 339 339
Chapter 13 Designing and Managing Services The Nature of Services 346 Service Industries Are Everywhere 345 346 Categories of Service Mix 347 Distinctive Characteristics of Services 349 Marketing Strategies for Service Firms 352 A Shifting Customer Relationship 352 MARKETING MEMO Recommendations for Improving Service Quality 353 BREAKTHROUGH MARKETING Southwest Airlines Holistic Marketing for Services 355 356 Managing Service Quality 359 Customer Expectations 359 MARKETING INSIGHT The Role of Expectations in Service­ Quality Perceptions 361 MARKETING MEMO Assessing E-Service Quality 362 362 Best Practices of Service-Quality Management MARKETING INSIGHT Developing Customer Interface Systems 364 Managing Service Brands 367 Differentiating Services 367 Developing Brand Strategies for Services 368 Managing Product-Support Servkes 370 Identifying and Satisfying Customer Needs Postsale Service Strategy 371 370 Summary 373 Applications 373 Chapter 14 Developing Pricing Strategies and Programs Understanding Pricing 375 376 A Changing Pricing Environment How Companies Price 377 MARKETING INSIGHT 376 Giving It All Away Consumer Psychology and Pricing Setting the Price 383 378 379 Step 1: Selecting the Pricing Objective Step 2: Determining Demand 385 383 xix
r Step 3: Estimating Costs 388 Step 4: Analyzing Competitors' Costs, Prices, and Offers Step 5: Selecting a Pricing Method 390 BREAKTHROUGH MARKETING Ebay Step 6: Selecting the Final Price 394 395 MARKETING INSIGHT Stealth Price Increases Adapting the Price 389 396 397 Geographical Pricing (Cash, Countertrade, Barter) Price Discounts and Allowances 398 Promotional Pricing 399 Differentiated Pricing 400 Initiating and Responding to Price Changes 397 402 Initiating Price Cuts 402 Initiating Price Increases 403 Responding to Competitors' Price Changes 404 MARKETING ME:MO How to Fight Low-Cost Rivals 405 Summary 406 Applications 407 PART 6 Delivering Value 408 Chapter 15 Designing and Managing Integrated Marketing Channels Marketing Channels and Value Networks The Importance of Channels 410 Channel Development 411 Hybrid Channels 412 Understanding Customer Needs 409 410 413 Value Networks 414 The Role of Marketing Channels 414 Channel Functions and Flows 415 Channel Levels 416 Service Sector Channels Channel-Design Decisions 417 417 Analyzing Customers' Desired Service Output Leve~s Establishing Objectives and Constraints 418 Identifying and Evaluating Major Channel Alternatives 417 418 MARKETING INSIGHT How CarMax Is Transforming the Auto Business 420 Evaluating the Major Alternatives xx 421
Channel-Management Decisions 423 Selecting Channel Members 423 Training and Motivating Channel Members 423 Evaluating Channel Members 424 Modifying Channel Design and Arrangements Channel Integration and Systems 426 Vertical Marketing Systems 425 426 MARKETING INSIGHT The Importance of Channel Stewards 427 Horizontal Marketing Systems 428 Integrating Multichannel Marketing Systems TI MEM 428 Multichannel Shopping Checklist Conflict, Cooperation, and Competition Types of Conflict and Competition Causes of Channel Conflict 431 Managing Channel Conflict 431 430 431 Dilution and Cannibalization 433 Legal and Ethical Issues in Channel Relations E-Commerce Marketing Practices 434 Pure-Click Companies 433 434 BREAKTHROUGH: MARKETING Amazon.com Brick-and-Click Companies M-Commerce 437 Summary 435 437 438 Applications 439 Chapter 16 Managing Retailing, Wholesaling, and Logistics Retailing 429 441 442 Types of Retailers 442 The New Retail Environment Marketing Decisions 446 448 MARKETING INSIGHT Making Labels Smarter 451 BREAKTHROUGH MARKETING Target M RKETING ME Private Labels 453 0 Helping Stores to Sell 454 456 Role of Private Labels 456 The Private-Label Threat 457 MARKETING MEMO How to Compete Against Store Brands 458 xxi
• Wholesaling 458 Trends in Wholesaling Market Logistics 459 461 Integrated Logistics Systems Market-Logistics Objectives Market-Logistics Decisions Organizational Lessons Summary 462 462 464 466 467 467 Applications PART 7 Communicating Value 468 Chapter 17 Designing and Managing Integrated Marketing Communications 469 The Role of Marketing Communications 470 The Changing Marketing Communication Environment Marketing Communications, Brand Equity, and Sales the Communications Process Models 474 Developing Effective Communications 470 471 476 Identify the Target Audience 476 Determi,ne the Communications Objectives Design the Communications 477 477 MARKETING INSIGHT Celebrity Endorsements as a Strategy 480 481 Establish the Total Marketing Communications Budget 484 Deciding on the Marketing Communications Mix 486 Characteristics of the Marketing Communications Mix 486 Select the Communications Channels BREAKTHROUGH MARKETING Ocean Spray 486 Factors in Setting the Marketing Communications Mix 491 Managing the Integrated Marketing Communications Process 491 Coordinating Media 492 Implementing IMC 493 Measuring Communication Results MARKETING MEMO How Integrated Is Your IMC Program? Summary 494 Applications 495 494 489
_[ 1.-'---_ _ Chapter 18 Managing Mass Communications: Advertising, Sales Promotions, Events and Experiences, and Public Relations 497 498 Developing and Managing an Advertising Program Setting the Objectives 499 Deciding on the Advertising Budget 499 Developing the Advertising Campaign 500 MARKETI G M MO Print Ad Evaluation Criteria Deciding on Media and Measuring Effectiveness Deciding on Reach, Frequency, and Impact Choosing among Major Media Types 506 504 505 505 Alternative Advertising Options 508 Selecting Specific Media Vehicles 510 MARKETING INSIGHT Playing Games with Brands Deciding on Media Timing and Allocation Evaluating Advertising Effectiveness 513 Sales Promotion 514 Objectives 514 Advertising versus Promotion Major Decisions 516 Events and Experiences 520 Events Objectives 521 Major Sponsorship Decisions Creating Experiences Public Relations 523 512 515 521 523 MARKETING INSIGHT Experiential Marketing MARKETING INSIGHT Managing a Brand Crisis Marketing Public Relations 524 525 525 BREAKTHROUGH MARKETING Virgin Group Major Decisions in Marketing PR Summary 511 526 527 529 Applications 529 Chapter 19 Managing Personal Communications: D,i,rect and Interactive Marketing, Word of Mouth, and Personal Selling Direct Marketing 532 The Benefits of Direct Marketing Direct Mail 531 532 534 Catalog Marketing 536 ywiii
Telemarketing 537 Other Media for Direct-Response Marketing 538 Public and Ethical Issues in Direct Marketing 538 Interactive Marketing 538 Advantages and Disadvantages of Interactive Marketing BREAKTHROUGH MARKETING Yahoo! Placing Ads and Promotions Online MARKfTI Word of Mouth 538 539 540 MEMO Segmenting Tech Users 542 545 Buzz and Viral Marketing Opinion Leaders 546 548 MARKETING MEMO How to Start a Buzz Fire 548 Blogs 550 Measuring the Effects of Word of Mouth Designing the Sales Force Sales-Force Objectives and Strategy Sales-Force Structure Sales-Force Size 551 551 552 553 554 MARKETING INSIGHT Major Account Management Sales-Force Compensation Managing the Sales Force 555 556 Recruiting and Selecting Representatives 556 Training and Supervising Sales Representatives Sales Rep Productivity 557 Motivating Sales Representatives 558 Evaluating Sales Representatives 559 Principles of Personal Selling The Six Steps 561 561 Relationship Marketing 562 Summary 563 Applicatij)ns 563 PARTS Creating Successful Long-Term Growth Chapter 20 Introducing New Market Offerings New-Product Options Make or Buy 565 566 566 Types of New Products 566 Challenges in New-Product Development The Innovation Imperative New-Product Success New-Product Failure xxiv 564 569 570 567 567 557 555
--, I/~-----------~'" Organizational Arrangements 571 Budgeting for New-Product Development 572 Organizing New-Product Development 573 Managing the Development Process: Ideas 574 Idea Generation 574 MARKET! G MEMO Ten Ways to Find Great New-Product Ideas 575 MARKETING INSIGHT MARKETING P&G'S New Connect-and-Develop Approach to Innovation 576 EMO Seven Ways to Draw New Ideas from Your Customers 577 MARKETI G MEMO How to Run a Successful Brainstorming Session 578 Idea Screening 579 Managing the Development Process: Concept to Strategy Concept Development and Testing 581 Marketing Strategy Development 584 Business Analysis 584 Managing the Development Process: Development to Commercialization 586 Product Development 586 Market Testing 587 Commercialization 590 BREAKTHROUGH MARKETING Apple Ipod The Consumer-Adoption Process 592 Stages in the Adoption Process 592 Factors Influencing the Adoption Process Summary 595 Applications 595 Chapter 21 Tapping into Global Markets 591 593 597 Competing on a Global Basis 581 598 BREAKTHROUGH MARKETING Samsung Deciding Whether to Go Abroad 600 Deciding Which Markets to Enter 600 How Many Markets to Enter 600 Developed versus Developing Markets 599 601 MARKETING INSIGHT Spotlight on Key Developing Markets 604 Evaluating Potential Markets 605 xxv
' Deciding How to Enter the Market 606 Indirect and Direct Export 606 Using a Global Web Strategy 607 Licensing 607 Joint Ventures 608 Direct Investment 609 Deciding on the Marketing Program 609 Product 611 MARKETING MEMO The Ten Commandments of Global Branding 612 Communications Price 615 613 MARKETING INSIGHT Unauthorized Sales-Dealing with the Gray Market and Counterfeit Products 617 Distribution Channels 618 Country-of-Origin Effects 619 Building Country Images 619 Consumer Perceptions of Country of Origin 620 MARKETING INSIGHT The Ups and Downs of Brand America 621 Deciding on the Marketing Organization Export Department 622 International Division 622 Global Organization 622 $u.mmary 623 Applications 623 621 Chapter 22 Managing a Holistic Marketing Organization for the Long Run 625 Trends in Marketing Practices 626 Internal Marketing 627 Organizing the Marketing Department 627 MARKET!NG MEMO Characteristics of Company Departments That Are Truly Customer Driven 628 Relations with Other Departments 632 Building a Creative Marketing Organization MARKETING INSIGHT The Marketing CEO 633 633 MARKETING MEMO Fueling Strategic Innovation Socially Responsible Marketing xxvi 634 634
BREAKTHROUGH MARKETING Starbucks Corporate Social Responsibility 638 Socially Responsible Business Models Cause-Related Marketing 640 637 640 MARKETING INSIGHT New Views on Corporate Social Responsibility 641 Social Marketing 644 MARK TING MEMO Making a Difference 645 Marketing Implementation 648 Evaluation and Control 649 Annual-Plan Control 649 Profitability Control 652 Efficiency Control 656 Strategic Control 656 The Future of Marketing 657 MARKETING MEMO Major Marketing Weaknesses 660 Summary 661 Applications 662 Appendix A1 Endnotes E1 Glossary G1 Image Credits C1 Name Index 11 Company, Brand, and Organization Index Subject Index 110 13 xxvii
Each title in the Pearson One series is part of a collaborative global editorial development process that harnesses the talent and expertise of Pearson authors, editors, and production people from all over the world. And we combine content from many cultures, giving stu­ dents greater insight into what they have in common with the world, and at the same time, we offer material that is locally relevant. : :: Our History Pearson imprints have a rich heritage of academic, business, and professional books. For more than 100 years, we have provided educational tools to more than 100 million people across the globe. Our diverse network of brands encompasses a comprehensive range of solutions in testing, ,assessment, and enterprise software; the very best in online consumer and professional learning; and textbooks written by the most notable authors for higher education around the world. We help teachers teach and students learn across the globe. : :: The First in the Pearson One Series Readers of the U.S. edition will benefit from these local perspectives and expertise through our international case studies, authored by our partners worldwide. These cases will be identified by a marginal note in each chapter linked to relevant content and available through links on our Companion Website. PEARSON rr-­ UItC
,r~---------~---------~ r 1 ::: What Is Marketing Management All About? Marketing Management is the leading marketing text because its content and organization consistently reflect changes in marketing theory and practice, The very first edition of Marketing Management, published in 1967, introduced the concept that companies must be customer-and-market driven, But there was little mention of what have now become funda­ mental topics such as segmentation, targeting, and positioning, Concepts such as brand equity, customer value analysis, database marketing, e-commerce, value networks, hybrid channels, supply chain management, and integrated marketing communications were not even part of the marketing vocabulary then, Marketing Management continues to reflect the changes in the marketing discipline over the past forty years, Firms now sell goods and services through a variety of direct and indirect channels. Mass advertising is not nearly as effective as it was, so marketers are exploring new forms of com­ munication, such as experiential, entertainment, and viral marketing. Customers are telling companies what types of product or services they want and when, where, and how they want to buy them, They are increasingly reporting to other consumers what they think of specific companies and products-using e-mail, blogs, podcasts, and other digital media to do so, Company messages are becoming a smaller fraction of the total "conversation" about prod­ ucts and services, In response, companies have shifted gears from managing product portfolios to manag­ ing customer portfolios, compiling databases on individual customers so they can under­ stand them better and construct individualized offerings and messages, They are doing less product and service standardization and more niching and customization, They are replac­ ing monologues with customer dialogues, They are improving their methods of measuring customer profitability and customer lifetime value. They are intent on measuring the return on their marketing investment and its impact on shareholder value, They are also concerned with the ethical and social implications of their marketing decisions, As companies change, so does their marketing organization. Marketing is no longer a company department charged with a limited number of tasks-it is a company-wide under­ taking, It drives the company's vision, mission, and strategic planning, Marketing indudes decisions like who the company wants as its customers; which of their needs to satisfy; what products and services to offer; what prices to set; what communications to send and receive; what channels of distribution to use; and what partnerships to develop, Marketing succeeds only when all departments work together to achieve goals: when engineering designs the right products, finance furnishes the required funds, purchasing buys high-quality materials, production makes high-quality products on time, and accounting measures the profitability of different customers, products, and areas, To address all these different shifts, good marketers are practicing holistic marketing. Holistic marketing is the development, design, and implementation of marketing programs, processes, and activities that recognize the breadth and interdependencies oftoday's market­ ing environment. Four key dimensions of holistic marketing are: 1. Internal marketing-ensuring everyone in the organization embraces appropriate mar­ keting principles, especially senior management, 2. Integrated marketing-ensuring that multiple means of creating, delivering, and com­ municating value are employed and combined in the best way, 3. Relationship marketing-having rich, multifaceted relationships with customers, chan­ nel members, and other marketing partners, 4. Performance marketing-understanding returns to the business from marketing activi­ ties and programs, as well as addressing broader concerns and their legal, ethical, social, and environmental effects, These four dimensions are woven throughout the book and at times spelled out explicitly, The text specifically addresses the following tasks that constitute modern marketing manage­ ment in the 21st century:
/' PREr-~~t::: I 1. Developing marketing strategies and plans 2. Capturing marketing insights and performance 3. 4. 5. 6. Connecting with customers Building strong brands Shaping the market offerings Delivering and communicating value 7. Creating successful long-term growth ••• ••• What Makes Marketing Management the Marketing Leader? Marketing is of interest to everyone, whether they are marketing goods, services, properties, persons, places, events, information, ideas, or organizations. As it has maintained its respected position among students, educators, and businesspeople, Marketing Management has kept up-to-date and contemporary. Students (and instructors) feel that the book is talk­ ing directly to them in terms of both content and delivery. Marketing Management owes its marketplace success to its ability to maximize three di­ mensions that characterize the best marketing texts-depth, breadth, and relevance-as measured by the following criteria: • Depth. Does the book have solid academic grounding? Does it contain important theo­ retical concepts, models, and frameworks? Does it provide conceptual guidance to solve practical problems? • Breadth. Does the book cover all the right topics? Does it provide the proper amount of emphasis on those topics? • Relevance. Does the book engage the reader? Is it interesting to read? Does it have lots of compelling examples? The thirteenth edition builds on the fundamental strengths of past editions that collec­ tively distinguish it from all other marketing management texts: • Managerial Orientation. The book focuses on the major decisions that marketing man­ agers and top management face in their efforts to harmonize the organization's objectives, capabilities, and resources with marketplace needs and opportunities. • Analytical Approach. Marketing Management presents conceptual tools and frame­ works for analyzing recurring problems in marketing management. Cases and examples illustrate effective marketing principles, strategies, and practices. • Multidisciplinary Perspective. The book draws on the rich findings of various scientific disciplines-economics, behavioral science, management theory, and mathematics-for fundamental concepts and tools directly applicable to marketing challenges. • Universal Applications. The book applies strategic thinking to the complete spectrum of marketing: products, services, persons, places, information, ideas and causes; con­ sumer and business markets; profit and nonprofit organizations; domestic and foreign companies; small and large firms; manufacturing and intermediary businesses; and low­ and high-tech industries. • Comprehensive and Balanced Coverage. Marketing Management covers all the topics an informed marketing manager needs to understand to execute strategic, tactical, and administrative marketing. Other features include new concepts, examples, gUidelines, and developments as detailed below. xxx
: :: Revision Strategy for the Thirteenth Edition As marketing techl'iques and organization have changed, so has this text. The thirteenth edition is designed not only to preserve the strengths of previous editions, but also to intro­ duce new material and organization to further enhance learning. We retained the key theme of holistic marketing, and the recognition that "everything matters" with marketing and that a broad, integrated perspective is often necessary. This theme is not developed so deeply, however, that it would restrict or inhibit an instructor's flexibility and teaching approach. To provide flexibility in the classroom, we also retained the new modular structure and eight parts corresponding to the eight key marketing management tasks. The thirteenth edition was changed to include the following: • All chapters have brief commentary and new introductory vignettes that set the stage for the chapter material to follow. By covering topical brands or companies, the vignettes serve as great discussion starters. • Breakthrough Marketing boxes replace the Marketing Spotlight boxes from the twelfth edition. Each chapter has one box appearing in an appropriate spot to highlight innova­ tive, insightful marketing accomplishments by leading organizations. • Approximately four Marketing Insight and Marketing Memo boxes are included in each chapter; at least half, on average, are new. Marketing Insight boxes delve into important marketing topics, often highlighting current research findings. Marketing Memo boxes of­ fer practical advice and direction in dealing with various decisions at all stages ofthe mar­ keting management process. • About ten in-text boxes are included in each chapter, with roughly two-thirds new. These in-text boxes provide vivid illustrations of chapter concepts using actual companies and situations. The boxes cover a variety of products, services, and markets, and many have ac­ companying illustrations in the form of ads or product shots. • Chapters are updated throughout, especiaJly in terms of academic references. • At the end of each chapter, the Marketing Applications section has two practical exercises to challenge students: Marketing Debate suggests opposing points of view on an impor­ tant marketing topic from the chapter and asks students to take a side. Marketing Discus­ sion identifies provocative marketing issues and allows for a personal point of view. ::: Chapter-by-Chapter Changes Once again. this edition has been both streamlined and expanded to bring essentials and classic examples into sharper focus, while covering new concepts and ideas in depth. Following is an overview of some of the new or expanded matelial in each chapter: Chapter 1 • Role of Chief Marketing Officer (CMO) • 1Vhat makes a great marketer • Internal marketing and effective marketing departments Chapter 2 • Market sensing and becoming more market-driven • Assigning resources to SBUs • Corporate culture and innovative marketing xxxi
l Chapter 3 • • • • Database marketing Important new marketplace trends Generations and cohorts Green marketing Chapter 4 • Ethnographic research • Brain science • Marketing dashboards • Marketing-mix modeling Chapter 5 • Measuring customer satisfaction • Methods to calculate customer lifetime value • The new customer empowerment Chapter 6 • New consumer trends • Consumer decision-making Chapter 7 • Customer references • Lead generation • Customer value proposition Chapter 8 • Niche marketing and the "long tail" • Consumers trading up and down • Brand funnel Chapter 9 Brand equity models • Internal branding • Brand valuation • Customer equity Chapter 10 • Creating new markets and categories • Building a breakaway brand Chapter 11 • Value innovation ("blue ocean thinking") • Selecting customers • Competing with value-based rivals J(J()(lj
Chapter 12 • Product returns • Product and product line simplification Chapter 13 Customer empowerment • Coproduction • Customer interface systems • Service strategies for product companies Chapter 14 • The changing pricing environment "Freemium" pricing strategies Price optimization • Strategies to fight low-cost rivals Chapter 15 • Channel stewardship • E-marketing • M-marketing Chapter 16 • The new retail environment • "Fast forward" retailers • RFIDs • Private-label competition Chapter 17 The changing marketing communication environment Interactive marketing Word-of-mouth marketing Chapter 18 • New developments in place advertising • Advergames and Second Life • New developments in marketing events and experiences Chapter 19 • Consumer-generated ads • Types of interactive marketing • Word of mouth, buzz and viral marketing, blogs, and podcasts Chapter 20 • Innovation imperative • "Connect and develop" innovation approaches xxxiii
E E • Generating ideas from customers Designing brainstorming sessions Chapter 21 • Emerging markets ("BlUeS") • Regionalization • Gray markets and counterfeit products Chapter 22 • New developments in social responsibility • Cause marketing guidelines • Marketing metrics • Marketing creativity and discipline ::: The Teaching and Learning Package Marketing Management is an entire package of materials available to students and instruc­ tors. This edition includes a number of ancillaries designed to make the marketing manage­ ment course an exciting, dynamic. mtewctive experience. CourseSmart CourseSmart is an exciting new chuice tor students looking to save money. As an alternative to purchasing the print textbook, studellts can purchase an electronic version of the same content and save up to 50 percent off the suggested list price of the print text. With a CourseSmart eTextbook, students can search the text, nlake notes online, print out reading assignments tbat incorporate lecture notes, and bookmark important passages for later review. For more infor­ mation, or to purchase access to the CourseSmart eTextbook, visit www.coursesmart.colll. VangoNotes Study on the go with VangoNotes--chapter reviews from your text in downloadable MP3 for­ mat. Now wherever you are--whatever you're doing--you can study by listening to the fol­ lowing for each chapter of your textbook: • Big Ideas: Your "need to know" for each chapter • Key Terms: Audio "flashcards" to help you review key concepts and terms • Rapid Review: A quick drill session--use it right before your test VangoNotes are flexible; download all the material directly to your player, or only the chap­ ters you need. And they're efficient. Use them in your car, at the gym, walking to class, or wherever. So get yours today. And get studying. Marketing Management Cases Prentice Hall Custom Business Resources can provide instructors and students with all the cases and articles needed to enhance and maximize learning in a marketing course. Instructors can create Custom Course Packs or Custom CaseBooks. Resources include top­ tier cases from Darden, Harvard, Ivey, NACRA. and Thunderbird, plus full access to a data­ base of articles. For details on how to order these value-priced packages, colltact your local representative or visit the Prentice Hall Custom Business Resources Web site at W/llw.prenhaJl.com/custornbusilIess. xxxiv
( J ------!....-.---~---, Instructor's Resource Manual The Instructor's Resource Manual· includes chapter/summary overviews, key teaching objectives, answers to end-of-chapter materials, Harvard Business School case suggestions, exercises, projects, and detailed lecture outlines. Also included is the feature, "Professors on the Go!" which was created with the busy professor in mind. It brings key material upfront, where an instructor who is short on time can find key points and assignments that can be incorporated into the lecture, without having to page through all the material provided for each chapter. Instructor's Resource Center (lRC) IRC-CD-ROM: New interface and searchable database makes sorting through and locat­ ing specific resources easier than ever before. Includes all the same supplements hosted at our IRC Online; however, the TestGen is only available online. The CD-ROM also con­ tains many images from the textbook, which you may incorporate into your lectures. • IRC-ONLINE: The Prentice Hall catalog at wNw.prenhall.com/kotler is where instructors can access our complete array of teaching materials. Simply go to the Instructor's Resource page for this text and click on the Instructor link to download the Instructor's Manual, Video Guide, Test Item File, TestGen, PowerPoint slides (Basic only), and more. Please note that the PowerPoint Media Rich set is provided only on the IRC on CD-ROM due to its larger file size and embedded video clips. NOTE: Prentice Hall manuaUy checks evelJlpassword request and verifies each individual's instructor status before issuing a password. Test Item File 1~IAACS[31 The Test Item File contains more than 3,000 multiple-choice, true-false, short-answer, and essay questions, with page reference and difficulty level provided for each question. Please note that an entire section is dedicated to application questions. These real-life situations take students beyond basic chapter concepts and vocabulary and ask them to apply market­ ing skills. The Test Item File supports Association to Advance Collegiate Schools of Business (AACSB) International Accreditation. Each chapter of the Test Item File was prepared with the AACSB curricula standards in mind. Where appropriate, the answer line of each question' indicates a category within which the question falls. This AACSB reference helps instructors identify those test questions that support that organization's learning goals. 'Please note that not all the questions will offer an AACSB reference. TestGen Prentice Hall's TestGen test-generating software is available for this edition as well. This sup­ plement is available from the IRe Online only (www.prenhall.com/kotler). Please note that the TestGen is NOT included on the Instructor's Resource Center on CD. • PC/Mac compatible and preloaded with all the Test Item file questions. • Manually or randomly view test bank questions and drag-and-drop to create a test. • Add or modify test bank questions using the built-in Question Editor. • Print up to 25 variations of a single test and deliver the test on a local area network using the built-in QuizMaster feature. • Free customer support is available at media.support@pearsoned.com or call 1-800-6­ PROFESSOR between 8:00 AM and 5:00 PM CST. xxxv
PowerPoints When it comes to PowerPoints, Prentice Hall knows one size does not fit all. That's why Marketing Management, thirteenth edition, offers instructors more than one option. PowerPoint BASIC: This simple presentation includes only basic outlines and key points from each chapter. No animation or forms of rich media are integrated, which makes the total file size manageable and easier to share online or via e- mail. BASIC was also designed for instructors who prefer to customize PowerPoints or want to avoid having to strip out animation, embedded files, or other media-rich features. • PowerPoint MEDIA RICH: This media-rich alternative-the best option if you want a complete presentation solution-includes basic outlines and key points from each chap­ ter, plus advertisements and art from the text, discussion questions, Web links, and em­ bedded video snippets from the accompanying video library. Instructors can further customize this presentation using the image library featured on the IRC on CD-ROM. Aside from these two PowerPoint options, a select number of slides, based on the MEDIA RICH version, are also available as overhead transparencies. Marketing Management Video Gallery 2009 Make your classroom "newsworthy." PH has updated the Marketing Management video library for the thirteenth edition. Using today's popular newsmagazine format, students are taken on location and behind closed doors. Each news story profiles a well-known or up­ and-coming company leading the way in its industry. A full library of video segments accom­ pany this edition, covering key topics using leading companies such as American Express, the NFL, Eaton, and Wild Planet. Issue-focused footage includes interviews with top execu­ tives, objective reporting by real news anchors, industry research analysts, and marketing and advertising campaign experts. A full video guide, including synopses, discussion ques­ tions, and teaching suggestions, is available on the IRC (online and on CD-ROM) to accom­ pany the video library. Companion Web Site Available at www.prenhall.com/kotler.This site offers students valuable resources at no cost. Two quizzes are offered per chapter. The Concept Check Quiz is to be administered prior to reviewing the chapter, in order to assess students' initial understanding. The Concept Challenge Quiz is to be administered after reviewing the chapter. The Marketing Plan Handbook 3rc1 edition with Marketing Plan Pro l l Marketing Plan Pro is a highly rated commercial software program that guides students through the entire marketing plan process. The software is totally interactive and features ten sample marketing plans, step-by-step guides, and customizable charts. Customize your marketing plan to fit your marketing needs by following easy-to-use plan wizards. Follow the clearly outlined steps from strategy to implementation. Click to print, and your text, spread­ sheet, and charts come together to create a powerful marketing plan. The new The Marketing Plan Handbook, by Marian Burk Wood, supplements the in-text marketing plan material with an in-depth guide to what student marketers really need to know. A structured learning process leads to a complete and actionable marketing plan. Also included are timely, real­ world examples that illustrate key points, sample marketing plans, and Internet resources. The Handbook and Marketing Plan Pro software are available as value-pack items at a dis­ counted price. Contact your ,local Prentice Hall representative for more information. xxxvi
..-----------~---------~-" .. he thirteenth edition bears the imprint of many people. From Phil Kotler: My colleagues and associates at the Kellogg School of Management at Northwestern University continue to have an important impact on my thinking: Nidhi Agrawal, Eric 1. Anderson, James c. Anderson, Robert C. Blattberg, Miguel C. Brend!, Bobby J. Calder, Gregory S. Carpenter, Alex Chernev, Anne T. Coughlan, David Gal, Kent Grayson, Karsten Hansen, Dipak C. Jain, Lakshman Krishnamurti, Angela Lee, Vincent Nijs, Yi Qian, Mohanbir S. Sawhney, Louis W. Stern, Brian Sternthal, Alice M. Tybout, and Andris A. Zoltners. I also want to thank the S. C. Johnson Family for the generous support of my chair at the Kellogg School. Com­ pleting the Northwestern team is my former Dean, Donald P. Jacobs, and my current Dean, Dipak Jain, both of whom have provided generous support for my research and writing. Several former faculty members of the marketing department had a great influence on my thinking when I first joined the Kellogg marketing faculty, specifically Richard M. Clewett, Ralph Westfall, Harper W. Boyd, and Sidney J. Levy. I also want to acknowledge Gary Armstrong for our work on Principles ofMarketing. I am indebted to the following coauthors of international editions of Marketing Manage­ mentand Principles ofMarketing who have taught me a great deal as we worked together to adapt marketing management thinking to the problems of different nations: T • • • • Swee- Hoon Ang and Siew-Meng Leong: National University of Singapore Chin-Tiong Tan: Singapore Management University FriedheIm W. Bliemel: Universitat Kaiserslautern (Germany) Linden Brown; Stewart Adam: Deakin University; Suzan Burton: Macquarie Graduate School of Management; and Sara Denize: University ofWestern Sydney (Australia) • Bernard Dubois: Groupe HEC School of Management (France); and Delphine Manceau: ESCP-EAP European School of Management • John Saunders (Loughborough University) and Veronica Wong (Warwick University, United Kingdom) • Jacob Hornick: Tel Aviv University (Israel) • Walter Giorgio Scott: Universita Cattolica del Sacro Cuore (Italy) • Peggy Cunningham: Queen's University (Canada) I also want to acknowledge how much I have learned from working with coauthors on more specialized marketing subjects: Alan Andreasen, Christer Asplund, Paul N. Bloom, John Bowen, Roberta C. Clarke, Karen Fox, David Gertner, Michael Hamlin, Thomas Hayes, Donald Haider, Hooi Den Hua, Dipak Jain, Somkid Jatusripitak, Hermawan Kartajaya, Neil Kotler, Nancy Lee, Sandra Liu, Suvit Maesincee, James Maken, Waldemar Pfoertsch, Gustave Rath, Irving Rein, Eduardo Roberto, Joanne Scheff, Norman Shawchuck, Joel Shalowitz, Ben Shields, Francois Simon, Robert Stevens, Martin Stoller, Fernando Trias de Bes, Bruce Wrenn, and David Young. My overriding debt continues to be to my lovely wife, Nancy, who provided me with the time, support, and inspiration needed to prepare this edition. It is truly our book. From Kevin Lane Keller: I continually benefit from the wisdom of my colleagues at Tuck­ Scott Neslin, Punam Keller, Kusum Ailawadi, Praveen Kopalle, Koen Pauwels, Petia Petrova, Jackie Luan, Fred Webster, Gert Assmus, and John Farley-as well as the leadership of Dean Paul Danos. I also gratefully acknowledge the invaluable research and teaching contributions from my faculty colleagues and collaborators through the years. lowe a considerable debt of gratitude to Duke University's Jim Bettman and Rick Staelin for helping to get my academic career started and serving as positive role models. I am also appreciative of all that I have learned from working with industry executives who have generously shared their insights and experiences. Finally, I give special thanks to Punam, my wife, and Carolyn and Allison, my daughters, who make it all happen and make it all worthwhile. )(Xxvii
,~ ]L---_ _ We are indebted to the following colleagues at other universities who reviewed this new edition: • Bomero Aguirre, TAMIU • Parimal Bhagat, Indiana University of Pennsylvania • Michael Bruce, Anderson University • Yun Chu, Frostburg State University • Bugh Daubek, Purdue University • Kathleen Dominick, Rider University • Tad Duffy, Golden Gate University • Mohan Dutra, Purdue University • Barbara Dyer, University of North Carolina at Greensboro • Jackie Eastman, Valdosta State University • Steve Edison. University of Arkansas-Little Rock • Barb Finer, Suffolk University • Renee Foster, Delta State University Chic Fojtik, Pepperdine University • Robert Galka, De Paul University • Rashi Glazer, University of California, Berkeley • Lewis Hershey, Fayetteville State University • • • • Thomas Hewett, Kaplan University Mary Higby, University of Detroit-Mercy Michelle Kunz, Morehead State University Even Lanseng, Norwegian School of Management • Michael Lodato, California Lutheran University • Henry Loehr, Pfeiffer University-Charlotte • Susan Mann, Bluefield State College • Charles Martin, Wichita State University • • • • John McKeever, University of Houston Robert Mika, Monmouth University Mark Mitchell, Coastal Carolina University Nnamdi Osakwe, Bryant & Stratton College • Young-Hoon Park, Cornell University • • • • • Koen Pauwels, Dartmouth College Keith Penney, Webster University Patricia Perry, University of Alabama Mike Powell, North Georgia College and State University William Rice, California State University-Fresno • Bill Robinson, Purdue University • Jan Napoleon Saykiewicz, Duquesne University • Larry Schramm, Oakland University • Jim Skertich, Upper Iowa University • Allen Smith, Florida Atlantic University • Joe Spencer, Anderson University • Nancy Stephens, Arizona State University I{xxviii
---=-0_··----~ _ _) __ • Thomas Tellefsen, The College of Staten Island-CUNY • • • • Daniel Turner, University ofWashington Edward Volchok, Stevens Institute of Management OJ. Wasmer, St. Mary-of-the-Woods College Zac Williams, Mississippi State University We would also like to thank colleagues who have reviewed previous editions of Marketing Management: Alan Au, University of Hong Kong Hiram Barksdale, University of Georgia Boris Becker, Oregon State University Sandy Becker, Rutgers University Sunil Bhatia, Case Western Reserve University Frederic BruneI, Boston University John Burnett, University of Denver Lisa Cain, University of California at Berkeley and Mills College Surjit Chhabra, DePaul University Dennis Clayson, University of Northern Iowa Bob Cline, University of Iowa Brent Cunningham, Ph.D., Jacksonville State University John Deighton, University of Chicago Alton Erdem, University of Houston at Clear Lake Elizabeth Evans, Concordia University Ralph Gaedeke, California State University, Sacramento Betsy Gelb, University of Houston at Clear Lake Dennis Gensch, University ofWisconsin, Milwaukee David Georgoff, Florida Atlantic University Bill Gray, Keller Graduate School of Management Barbara Gross, California State University at Northridge Arun Jain, State University of New York, Buffalo Eric Langer, Johns Hopkins University Ron Lennon, Barry University Bart Macchiette, Plymouth University H. Lee Matthews, Ohio State University Paul McDevitt, University of Winois at Springfield Mary Ann McGrath, Loyola University, Chicago Kenneth P. Mead, Central Connecticut State University Henry Metzner, University of Missouri, Rolla Francis Mulhern, Northwestern University Pat Murphy, University of Notre Dame Jim Murrow, Drury College Zhou Nan, University of Hong Kong Nicholas Nugent, Boston College Donald Outland, University of Texas, Austin Albert Page, University ofTJIinois, Chicago Lisa Klein Pearo, Cornell University Hank Pruden, Golden Gate University 'llUell(
K LE Christopher Puto, Arizona State University Abe Qstin, Lakeland University Lopo Rego, University of Iowa Richard Rexeisen, University of St. Thomas Scott D. Roberts, Northern Arizona University Robert Roe, University ofWyoming Alex Sharland, Hofstra University Dean Siewers, Rochester Institute of Technology Anusorn Singhapakdi, Old Dominion University Mark Spriggs, University of St. Thomas Michael Swenso, Brigham Young University, Marriott School Sean Valentine, University of Wyoming Ann Veeck, West Michigan University R. Venkatesh, University of Pittsburgh Greg Wood, Canisius College Kevin Zeng Zhou, University of Hong Kong A warm welcome and many thanks to the following people who contributed to the global case studies developed for the thirteenth edition: Mairead Brady, Trinity College John R. Brooks, Jr., Houston Baptist University Sylvain Charlebois, University of Regina Geoffrey da Silva, Temasek Business School Malcolm Goodman, Durham University Torben Hansen, Copenhagen Business School Abraham Koshy, Sanjeev Tripathi, and Abhishek, Indian Institute of Management Ahmedabad Peter Ling, Edith Cowan University Marianne Marando, Seneca College Lu Taihong, Sun Yat-Sen University The talented staff at Prentice Hall deserves praise for their role in shaping the thirteenth edi­ tion. We want to thank our Editor Melissa Sabella, for her contribution to this revision. We also want to thank our project manager, Melissa Pellerano, for making sure everything was moving along and falling into place in such a personable way, both vvith regard to the book and supplements. We benefited greatly from the superb editorial help of Elisa Adams, who lent her considerable talents as a development editor to this edition. We thank Nancy Brandwein, who again researched and updated the examples. We also want to acknowledge the fine production work of Judy Leale, the creative design work of Steve Frim, and the edi­ torial assistance of Christine letto. We thank Denise Vaughn for her work on the media pack­ age. We also thank our Marketing Manager, Anne Fahlgren. Philip Kotler s. C. Johnson Distinguished Professor ofInternational Marketing Kellogg School of Management Northwestern University Evanston, Illinois Kevin Lane Keller xl E. B. Osborn Professor of Marketing Tuck School of Business Dartmouth College Hanover, New Hampshire
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CHAPTER 1 ••• ••• DEFINING MARKETING FOR THE 21ST CENTURY Marketing is everywhere. Formally or informally, people and organi­ zations engage in a vast number of activities that we could call mar­ keting. Good marketing has become an increasingly vital ingredient for business success. And marketing profoundly affects our day-to­ day lives. It is embedded in everything we do-from the clothes we wear, to the Web sites we click on, to the ads we see: [flJ woteenage gir.ls.. walk into their local Starbucks, which happens to be in Shanghai. One goes to the crowded counter and waits to hand the barista cards for two free peppermint lattes. The other sits at a table and opens her Lenovo ThinkPad R60 notebook computer. Within a few seconds she connects to the Internet, courtesy of Starbucks' deal with China Mobile to provide its customers with wireless access to HotSpots on the China Mobile Network. Once on the Net, the girl uses Baidu.com-the Chinese search engine market leader-to search for infor­ mation about the latest online game release from China's Shanda Interactive. In addition to links to various reviews, news sites, and fan pages, Baidu's search results feature a link to a chat room where hundreds of other gamers are discussing the game. The girl enters the chat room to ask whether peo­ ple who have played the game recommend it. The response is overwhelm­ ingly positive, so she clicks on a sponsored link from the results page, which > > > Downtown Silanghai, a Iii e (1811 onslration of the many r res of ma keling today.
generatesasliver'of.paid7search revenue/or Baidu and takes her to Shanda's offi­ ,cial site! ~/.l~re sh.e'sets'yp,.an. EJ.cc(junt. Nqwh~r friencJ'has ff?tLJrneljwithl(;ltfesi[1,hand. She's eager to show off her parents~ Nev,/,Year;'s giftto Iier~ifhot pink Motorola RAZR cell,phane created bya .tearnof;young~bicago-based designers after;months of market ,research and con" sumertests: ihe~twogirls'are admiring the slender phone when it receives a text ~d anno_uncin.g the,a.vaU~bJlitYo.rShanda'sJates.i,garne·for rrlobi/~ doV(n/oad. The girls:turn to, the, laptop so; they can gauge theon/ilie buzzf6r,the mobile version of the game. Good marketin5;)is no accident, but a result of careful planning and execution. It is both, an art and',a science-there's a constant tension between its· f()rmu­ lated sideCind its c;~eative,~side; It's easi~r to leCll"n the formulated side, which will occupy most ofcour'attention in this book, but Newill also describe how real creativity and. passion operate in.many companies. In this c;hapter" we lay the foundation for· our- stud'yby. reviewin'g, a number of important marketing' ~oncepts, tools, frameworks, :and issues; • po. ""'I!!I : :: The Importance of Marketing Financial success often depends on marketing ability. Finance, operations, accounting, and other business functions 'Will not really matter if there isn't sufficient demand for products and services so the company can make a profit. There must be a top line for there to be a bottom line. Many companies have now created a Chief Marketing Officer, or CMO, position to put marketing on a more equal footing with other C-Ievel executives, such as the Chief Executive Officer (CEO) and Chief Financial Officer (CFO). Press releases from organizations of all kinds-from consumer goods makers to health care insurers and from nonprofit organizations to industrial product manufacturers-trumpet their latest marketing achieve­ ments on their Web sites. In the business press, countless articles are devoted to marketing strategies and tactics. In stating their business priorities, CEOs acknowledge the importance of marketing. One survey of the top 10 challenges CEOs face around the world in 2006 revealed that among the top 5 were both "sustained and steady top line growth" and "customer loyalty/retention," challenges whose achievement depends heavily on marketing. l CEOs also recognize the importance of marketing to building brands and a loyal customer base, intangible assets that make up a large percentage of the value of a firm. Marketing is tricky, however, and it has been the Achilles' heel of many formerly prosper­ ous companies. Sears, Levi's, General Motors, Kodak, Sony, and Xerox all have confronted newly empowered customers and new competitors and have had to rethink their business models. Even market leaders such as Intel, Microsoft, and Wal-Mart recognize that they cannot afford to relax as their leadership is challenged. Jack Welch, GE's former CEO, repeatedly warned his company: "Change or die."
DEFI ING MARKETING FOR THE 21ST CENTURY XEROX • Xerox has had to become more than just a copier company. Now the blue-chip icon with the name that became a verb sports the broadest array of imaging products in the world and dominates the market for high­ end printing systems. And it's making a huge product-line transition as it moves away from the old-line "light lens" technology to digital systems. Xerox is preparing for a world that is no longer black and white, and in which most pages are printed in color (which, not incidentally, generates five times the revenue of black and white). In addition to revamping its machines, Xerox is beefing up sales by providing annuity-like products and services that are ordered again and again: document management, ink, and toners. Having been slow at one time to respond to the emergence of Canon and the small copier market, Xerox is doing everything it can to stay ahead of the game. 2 Making the right decisions about change isn't always easy. Marketing managers must decide what features to design into a new product, what prices to offer customers, where to sell products, and how much to spend on advertising, sales, or the Internet. They must also decide on details such as the exact wording or color for new packaging. The companies at greatest risk are those that fail to carefully monitor their customers and competitors and to continuously improve their value offerings. They take a short-term, sales-driven view of their business and ultimately they fail to satisfy their stockholders, employees, suppliers, and channel partners. Skillful marketing is a never-ending pursuit. ::: The Scope of Marketing To prepare to be a marketer, you need to understand what marketing is, how it works, what is marketed, and who does the marketing. What 15 Marketing? Marketing is about identifying and meeting human and social needs. One of the shortest good definitions of marketing is "meeting needs profitably." When eBay recognized that peo­ ple were unable to locate some of the items they desired most, it created an online auction clearinghouse. When IKEA noticed that people wanted good furniture at a substantially lower price, it created knockdown furniture. These two firms demonstrated marketing savvy and turned a private or social need into a profitable business opportunity. The American Marketing Association offers the following formal definition: Marketing is an organizational function and a set ofprocesses for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organi­ zation and its stakeholders. 3 Coping with these exchange processes calls for a considerable amount of work and skill. Marketing management takes place when at least one party to a potential exchange thinks about the means of achieving desired responses from other par­ ties. Thus we see marketing management as the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicat­ ing superior customer value. We can distinguish between a social and a managerial definition of marketing. A social definition shows the role marketing plays in society; for example, one marketer has said that marketing's role is to "deliver a higher standard of living." Here is a social definition that serves our purpose: Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and ser­ vices ofvalue with others. Managers sometimes think of marketing as "the art of selling products," but many people are surprised when they hear that selling is not the most important part of marketing! Selling is only the tip of the marketing iceberg. Peter Drucker, a leading management theorist, puts it this way: There will always, one can assume, be need for some selling. But the aim of market­ ing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available. 4 CHAPTER 1 5
6 PART 1 UNDERSTANDING MARKE.TING MANAGEMENT t ! ~~ , I L. . When Sony designed its Play Station 3 game system, when Apple launched its iPod Nano digital music player. and when Toyota intro­ duced its Prius hybrid automobile, these manu­ facturers were swamped with orders because they had designed the "right" product. based on doing careful marketing homework. , What Is Marketed? ~ ) Marketing people market 10 types of enti­ ties: goods, services. events. experiences. persons. places. properties, organizations. information. and ideas. Let's take a quick look at these categories. GOODS Physical goods constitute the bulk of A successful new product is tile result of careful marketing Ilomework most countries' production and marketing ef­ forts. Each year, U.S. companies alone market billions of fresh. canned. bagged, and frozen food products and millions of cars, refrigera­ tors. television sets, machines, and various other mainstays of a modern economy. Not only do companies market their goods, but thanks in part to the Internet, even individuals can effectively market goods. RUBBER CHICKEN CARDS A struggling actor who made ends meet by waiting tables, landing bit parts in TV series, teaching high • school, and managing an office, Steve Rotblatt found a way to keep his acting dream alive by running a prof­ itable small business out of his home. Rubber Chicken Cards (rubberchickencards.com) is a Santa Monica company that's generating online buzz with electronic greeting cards that combine voice-over acting-by Rotblatt and partner Richard Zobel-with irreverent humor. It didn't hurt that Classmates.com selected the company to develop a lighthearted card to help its 40 million members reconnect with old friends, or that the social networking site Me.com chose Rubber Chicken over dozens of competing vendors to create an electronic birthday card for its members. Founded in 2000. the company expected annual sales to reach $300,000 in 2006, up 60% from the prior year. Rotblatt and Zobel's business strategy: use our talents and spend as little as possible. 5 SERVICES As economies advance, a growing proportion of their activities focuses on the production of services. The U.S. economy today consists of a 70-30 services-to-goods mix. Services include the work of airlines, hotels, car rental firms, barbers and beauticians. main­ tenance and repair people, and accountants, bankers, lawyers, engineers. doctors, software programmers, and management consultants. Many market offerings consist ofa variable mix of goods and services. At a fast-food restaurant, for example, the customer consumes both a product and a service. EVENTS Marketers promote time-based events, such as major trade shows, artistic perfor­ mances, and company anniversaries. Global sporting events such as the Olympics and the World Cup are promoted aggressively to both companies and fans. EXPERIENCES By orchestrating several services and goods, a firm can create, stage. and market experiences. Walt Disney World's Magic Kingdom represents this kind of experiential marketing. allowjng customers to visit a fairy kingdom, a pirate ship, or a haunted house. There is also a market for customized experiences. such as spending a week at a baseball camp playing wjth retired baseball greats, conducting the Chicago Symphony Orchestra for five minutes, or climbing Mount Everest. 6
DEFINING MJl.RKETIN 1 FOR THE 2'!ST CENTURY PERSONS Celebrity marketing is a major business. Artists, musicians, CEOs, physicians, high-profile lavvyers and financiers, and other professionals all get help from celebrity mar­ keters. 7 Some people have done a masterful job of marketing themselves-think of David Beckham, Oprah Winfrey, and the Rolling Stones. Management consultant Tom Peters, him­ self a master at self-branding, has advised each person to become a "brand." PLACES Cities, states, regions, and whole nations compete actively to attract tourists, facto­ ries, company headquarters, and new residents. G Place marketers include economic develop­ ment specialists, real estate agents, commercial banks, local business associations, and advertising and public relations agencies. The Las Vegas Convention & Tourism Authority spent about $80 million on a provocative ad campaign, "What Happens Here, Stays Here." Re­ turning to its roots as an "adult playground," Las Vegas hoped the campaign would lead to an increase from 37.4 million visitors in 2004 to 43 million visitors by 2009.~J PROPERTIES Properties are intangible rights of ownership of either real property (real es­ tate) or financial property (stocks and bonds). Properties are bought and sold, and these ex­ changes require marketing. Real estate agents work for property owners or sellers, or they buy and sell residential or commercial real estate. Investment companies and banks market se­ curities to both institutional and individual investors. ORGANIZATIONS Organizations actively work to build a strong, favorable, and unique im­ age in the minds of their target publics. In the United Kingdom, Tesco's "Every Little Helps" marketing program reflects the food marketer's attention to detail in everything it does, within as well as outside the store in the community and the environment. The campaign has vaulted Tesco to the top of the UK supermarket chain industry. Universities, museums, performing arts organizations, and nonprofits all use marketing to boost their public images and to com­ pete for audiences and funds. Corporate identity campaigns are the result of intensive market research programs. This is certainly the case with Philips "Sense and Simplicity" campaign. ROYAL PHILIPS Philips researchers asked 1,650 consumers and 180 customers in dozens of in-depth and quantitative interviews and focus groups what was most important to them in using technology. Respondents from the UK, United States, France, Germany, the Netherlands, Hong Kong, China, and Brazil agreed on one thing: they wanted the benefits of technology without the hassles. With its "Sense and Simplicity" advertising campaign and focus, Philips believes, • "our brand now reflects our belief that simplicity can be a goal of technology. It just makes sense." The campaign consists of print, online, and television advertising directed by five experts from the worlds of health care, lifestyle, and technology whose role is to provide "additional outside perspectives on the journey to simplicity. "10 INFORMATION Information is essentially what books, schools, and universities produce, mar­ ket, and distribute at a price to parents, students, and communities. Magazines such as Road and Track, PC World, and Vogue supply information about the car, computer, and fashion worlds, re­ spectively. The production, packaging, and distribution of information are some of our society's major industries. I I Even companies that sell physical products attempt to add value through the use of information. For example, the CEO of Siemens Medical Systems, Tom McCausland, says, "Iour product] is not necessarily an X-ray or an MRI, but information. Our business is really health care information technology, and our end product is really an electronic patient record: information on lab tests, pathology, and drugs as weB as voice dictation."12 IDEAS Every market offering includes a basic idea. Charles Revson of RevIon once Observed: "In the factory, we make cosmetics; in the store we sell hope." Products and services are plat­ forms for delivering some idea or benefit. Social marketers are busy promoting such ideas as "Friends Don't Let Friends Drive Drunk" and "A Mind Is a Terrible Thing to Waste." Who Markets? MARKETERS AND PROSPECTS A marketer is someone who seeks a response-attention, a purchase, a vote, a donation-from another party, called the prospect. If two parties are seeking to sell something to each other, we call them both marketers. CHAPTER 1
a PART 1 arl~eling can UNDERSTAriDING MARKETING MANAGEMENT !lelp to promote powen ul ideas I:tII ~, UNCF h~lps thousands of d~!,ming students. But we h~"Il to turn away thousands more. So ~~aS>l give 10 the Unlilld N~IOCOllege Fund. Your donation will make adIHer~f)l. ~lSrt un:;[crg (fcall 1·300-332·9623. ~ UNITE. D NEGRO Co - p- J un LLEGE liND '"'' """"" • ""b"· "tn, 'ow.... , Marketers are indeed skilled at stimulating demand for their company's products, but that's too limited a view of the tasks they perform. Just as production and logistics profes­ sionals are responsible for supply management, marketers are responsible for demand man­ agement. Marketing managers seek to influence the level, timing, and composition of demand to meet the organization's objectives. Eight demand states are possible: 1. Negative demand-Consumers dislike the product and may even pay a price to avoid it. 2. Nonexistent demand-Consumers may be unaware of or uninterested in the product. 3. Latent demand-Consumers may share a strong need that cannot be satisfied by an existing product. 4. Declining demand-Consumers begin to buy the product less frequently or not at all. 5. Irregular demand-Consumer purchases vary on a seasonal, monthly, weekly, daily, or even hourly basis. 6. Full demand-Consumers are adequately buying all products put into the marketplace. 7. Overfull demand-More consumers would like to buy the product than can be satisfied. 8. Unwholesome demand-Consumers may be attracted to products that have undesir­ able social consequences. In each case, marketers must identify the underlying causers) of the demand state and then determine a plan of action to shift the demand to a more desired state. MARKETS Traditionally, a "market" was a physical place where buyers and sellers gathered to buy and sell goods. Economists describe a market as a collection of buyers and sellers who transact over a particular product or product class (such as the housing market or the grain market). Modern economies abound in such markets.
DEFINING MARKETING FOR THE 21ST CENTURY Resources - - Money • Taxes, goods Taxes Consumer markets Services Services, money I Taxes, goods Money Goods and services S!IlIl'IIJlr. nf Rows in a Morlern bcl131lJ6 Economy money ~ G"""m,m • markets Manufacturer markets FIG. 1.1 Money S'"i"~ Taxes, goods Services, money Resources I~' Resource markets Money t CHAPTER 1 Intermediary markets Goods and services Five basic markets and their connecting flows are shown in Figure 1.1. Manufacturers go to resource markets (raw material markets, labor markets, money markets), buy resources and turn them into goods and services, and then sell finished products to intermediaries, who sell them to consumers. Consumers sell their labor and receive money with which they pay for goods and services. The government collects tax revenues to buy goods from resource, manufacturer, and intermediary markets and uses these goods and services to proVide public services. Each nation's economy, and the global economy, consists of com­ plex interacting sets of markets linked through exchange processes. Marketers often use the term market to cover various groupings of customers. They view sellers as constituting the industry and buyers as constituting the market. They talk about need markets (the diet-seeking market), product markets (the shoe market), demographic markets (the youth market), and geographic markets (the French market); or they extend the concept to cover other markets, such as voter markets, labor markets, and donor markets. Figure 1.2 shows the relationship betvreen the industry and the market. Sellers and buy­ ers are connected by four flows. The sellers send goods and services and communications such as ads and direct mail to the market; in return they receive money and information such as customer attitudes and sales data. The inner loop shows an exchange of money for goods and services; the outer loop shows an exchange of information. EY CUSTOMER ARKETS Consider the following key customer markets: consumer, busi­ ness, global, and nonprofit. Con sum e r Mar k e t s Companies selling mass consumer goods and services such as soft drinks, cosmetics, air travel, and athletic shoes and equipment spend a great deal of time trying to establish a superior brand image. Much of a brand's strength depends on developing a superior product and packaging, ensuring its availability, and backing it with engaging communications and reliable service. Bus i n e ssM r k e t s Companies selling business goods and services often face well-trained and well-informed professional buyers who are skilled at evaluating competitive offerings. Business buyers buy goods in order to make or resell a product to others at a profit. Business marketers must demonstrate how their products will help these buyers achieve Communication Goods/services J------, Market (a collection of buyers) Industry (a collection of sellers) Money Information FIG. 1.2 9
10 PART 1 UNDERSTANDING MARI<:ETiNG MANAGEMENT higher revenue or lower costs. Advertising can playa role, but the sales force, price, and the company's reputation for reliability and quality may playa stronger one. G lob a I Mar k e t s Companies selling goods and services in the global marketplace face additional decisions and challenges. They must decide which countries to enter; how to enter each (as an exporter, licenser, joint venture partner, contract manufacturer, or solo manufacturer); how to adapt their product and service features to each country; how to price their products in different countries; and how to adapt their communications to fit different cultures. They make these decisions in the face of different requirements for buying, negoti­ ating, owning, and disposing of property; different culture, language, and legal and political systems; and currencies that might fluctuate in value. Yet, the payoff for doing all this addi­ tionallegwork can be huge. ALASKA DEPARTMENT OF COMMERCE. WAL-MART In 2005 alone, China accounted for $337 million of Alaska's exports-from seafood and fish meal to minerals, fertilizers, and wood-and surpassed Canada to become Alaska's third-largest export partner. Noting the huge market potential of China, especially with the 2008 Olympics in Beijing and the 2010 World Expo slated for Shanghai, Wal-Mart purchased about $140,000 of Alaska seafood for its China stores. In order to compete with white fish and farmed salmon from Norway, five Wal-Mart stores hired Alaska officials to host cooking demon­ • strations of wild Alaska sockeye salmon and black cod during a 14-day span. Although they were labor inten­ sive, the demonstrations gave an immediate taste test to China's young, sophisticated urban residents, who can pay the high prices these fish command. 13 Non pro fit and G 0 v ern men t a I Mar k e t s Companies selling their goods to nonprofit organizations such as churches, universities, charitable organizations, and government agencies need to price carefully, because these buyers have limited purchas­ ing power. Lower selling prices affect the features and quality the seller can build into the of­ fering. Much government purchasing calls for bids, and buyers often favor the lowest bid in the absence of extenuating factors. ARKETPLACES, M",RKETSPACES, A ~D METAIVIARKETS The marketplace is physical, such as a store you shop in; marketspaceis digital, as when you shop on the Internet. J4 Northwestern University's Mohan Sawhney has proposed the concept of a metamarket to describe a cluster of complementary products and services that are closely related in the minds of consumers, but spread across a diverse set of industries. The automobile metamar­ ket consists of automobile manufacturers, new car and used car dealers, financing compa­ nies, insurance companies, mechanics, spare parts dealers, service shops, auto magazines, classified auto ads in newspapers, and auto sites on the Internet. In purchasing a car, a buyer will get involved in many parts of this metamarket, and this creates an opportunity for metamediaries to assist buyers in moving seamlessly through these groups, although they are disconnected in physical space. One example is Edmund's (www.edmunds.com). a Web site where a car buyer can find the stated features and prices of different automobiles and easily click to other sites to search for the lowest-price dealer for financing, for car accessories, and for used cars at bargain prices. Metamediaries also serve other metamarkets, such as the home ownership market, the parenting and baby care mar­ ket, and the wedding market. 15 Marketing in Practice How is marketing done? Increasingly, marketing is not done only by the marketing depart­ ment. Marketing needs to affect every aspect of the customer experience, meaning that mar­ keters must properly manage all possible touch points-store layouts, package designs, product functions, employee training, and shipping and logistics methods. Marketing must also be heavily involved in key general management activities, such as product innovation and new-business development. To create a strong marketing organization, marketers must think like executives in other departments, and executives in other departments must think more like mar­ keters. IG CMO and later CEO ofWaIMart.com, Carter Cast, noted that what surprised him
DEFINING MARKETING FOR THE 21ST CENTURY CHAPTER 1 11 Eclmunrj's Is ametamediary Web site Ilml helps pro, pectil e car ouvers navigate the The All-New 2008 Cadillac CTS Now tM19able v.iilh a 304 hp Direct Inj~ction 16. the most powerful V6 E'J1glOe ever to beat the- Cadillac Wreath and Crest. New Vehicle Spotlight automubile metamarkel onlini:i, Spon.(I,.db'l'~ r;;;;;nj Edmunds.com provides True Market Value;t!I pricing, unbiased car reviews, ratings, and ~ THE EDl'iUNDS CREEN CAR ADVISOR >ell.... N....,. ••d Comm.,nlaly on En·~',o"lm.nl"l expert advice to help you ger a talr desL Bqad OLf S!;9t9:1! StQ!W NEWCARSEJ 1- £..d..W Brvlo;n. InfoanJ1l!w r;- I~ liW!! --I!lI<l<-' - ­ - COMortlbig _ IolU<l!!:l ~ ~ ~ Aut6n:kltiV* r,..nch.1lad 1.dwlolcgi.s. ~~;R~!.~~n~~o~) AII-Whaal-Drlva Shootout 1 J~p Ctlerokeo SRTe VI. Audl R8. Find Used Car.. for Salo: (:.2lI.2.2 :j tiG!!~ Q.lml I OPRbO!'U'1!lMCtli ~EUNE Thlll;J.loslaulo·onlhuslulnl7W$ • 20QI TQkyo &1lO Show • Fyi To", 2QC8loxu'IS.f • BSooqir.gflomT9ho'llvoC9YS?'XifcomStlOwf!oor REVIEWS, AWARDS' AD Whip Now.w.ek of Oclober23 LATeST ROAD TfSTS FtATnr i99I bgallll~E enl pr~/r BMW 1J5; m -F ~I~I~I~ FH out '1'It1::1 YlIIl'ii:Jlll .... "1 C3me 0Il( Ol'. top: .. 1 COMPMIISON SPOHIGIH SR:~ CrQouover C,adil1",c c 8 CAR COMPARISONS l ~ • Auto lOCle; AS low AS 6 Q9% i • APR GQl pt'ob!Rm-Cfc<li! Of Qo=crQdlJ r.... prcl':o • CAleulIO yOII! AAYfIDW' !I , • GAl your FREE Crg" RoQO!'1 Il'Iluronco Conlo( most when he became CMO was "that I would interact so much with functions outside of marketing. I didn't realize it is a holistic assignment. Then I realized I really had to under­ stand things like product supply, cost break-evens, and accounting."17 Companies generally establish a marketing department to be responsible for creating and delivering customer value, but as the late David Packard of Hewlett-Packard observed, "Marketing is far too important to leave to the marketing department." Companies now know that every employee has an impact on the customer and must see the customer as the source of the company's prosperity. So they're beginning to emphasize interdepartmental teamwork to manage key processes. They're also placing more emphasis on the smooth management of core business processes, such as new-product realization, customer acqui­ sition and retention, and order fulfillment. In practice, marketing follows a logical process. The marketing planning process consists of analyzing marketing opportunities, selecting target markets, designing marketing strate­ gies, developing marketing programs, and managing the marketing effort. In highly compet­ itive marketplaces, however. marketing planning is more fluid and is continually refreshed. Companies must always be moving forward with marketing programs, innovating products and services, staying in touch with customer needs, and seeking new advantages rather than relying on past strengths. The changing new marketing environment is putting considerable demands on market­ ing executives. Marketers must have diverse quantitative and qualitative skills, an entrepre­ neurial attitude, and a keen understanding of how marketing can create value within their organization. 18 They must work in harmony with the sales function. There are five key functions for a CMO in leading marketing within the organization: 1. Strengthening the brands 2. 3. 4. 5. Measuring marketing effectiveness Driving new product development based on customer needs Gathering meaningful customer insights Utilizing new marketing technology Harvard's John Quelch and Gail McGovern note that there is tremendous variability in the responsibilities and job descriptions for CMOs.19 They offer eight ways to improve CMO suc­ cess (see Figure 1.3).
12 PART 1 UNDERSTANDING MARKETlrlG MANAGEMEN FIG. 1,3 Improvlll[1 CMO Success S,III/l:i"I~'lll MC;;C1,'el I "rod Jorrr A OliellJI 'Tim Tall ;j11' I [lis~ d !Ill_ CMO .. :;;i,llt!gv,ffil.','·I//I~.',' liy 1"1.; I r ,$~I(ln V,'nial 20ll-l. RelJIIPkd 1. Make the mission and responsibilities clear. Be certain that the case for having a CMO is strong and .the mission is well understood by leaders in the organization, particularly the CEO, the board, and line management Without a clear need (real or perceived), the role will be rejected by the organization, 2. Fit the role to the marketing culture and structure. Avoid having a CMO in a marketing-led company that has many individual brands rather than a single corporate umbrella-unless the person appointed to the position is a well-connected insider, 3. Choose a CMO who is compatible with the CEO. Beware of the CEO who wants to hire aCMO but doesn't want to relinquish any marketing control. Find a CEO who recognizes his or her responsibility to be the cheerleader for marketing and the brand, but realizes the need to be guided and coached by a marketing specialist. 4. Remember that showpeople don't succeed. The CMO should work hard to ensure the CEO is successful at being the principal cheerleader for the brand 5. Match the personality with the CMO type. Be certain that the chief marketer has the right skills and personality for whichever of the three CMO models he or she might fill (VP of Marketing Services, Classic CMO, or "Super" CMO) There is little tolerance for on-the-job training, 6. Make line managers marketing heroes. By stretching their marketing budgets, CMOs can improve a division's marketing productivity and help business unit leaders increase their top-line revenues, 7. Infiltrate the line organization. Have the CMO support the placement of marketing professionals from the corporate marketing department into divisional marketing roles, Provide input from the CMO into the annual reviews of line marketers. 8. Require right-brain and left-brain skills. The most successful CMO will have strong creative and technical marketing expertise, be politically savvy, and have the interpersonal skills to be a great leader and manager, : :: Core Marketing Concepts To understand the marketing function, we need to understand the following core set of concepts. Needs, Wants, and Demands Needs are the basic human requirements. People need air, food, water, clothing, and shelter to survive. People also have strong needs for recreation, education, and entertainment. These needs become wants when they are directed to specific objects that might satisfy the need. A consumer in the United States needs food but may want a hamburger, french fries, and a soft drink. A person in Mauritius needs food but may want a mango, rice, lentils, and beans. Wants are shaped by our society. Demands are wants for specific products backed by an ability to pay. Many people want a Mercedes; only a few are Willing and able to buy one. Companies must measure not only how many people want their product, but also how many would actually be willing and able to buy it. These distinctions shed light on the frequent criticism that "marketers create needs" or "marketers get people to buy things they don't want." Marketers do not create needs: Needs preexist marketers. Marketers, along with other societal factors, influence wants. Marketers might promote the idea that a Mercedes would satisfy a person's need for social status. They do not, however, create the need for social status. Understanding customer needs and wants is not always simple. Some customers have needs of which they are not fully conscious, or they cannot articulate these needs, or they use words that require some interpretation. What does it mean when the customer asks for a "powerful" lawnmower, a "fast" lathe, an "attractive" bathing suit, or a "restful" hotel? The marketer must probe furtheL We can distinguish among five types of needs: 1. Stated needs (The customer wants an inexpensive caL) 2. Real needs (The customer wants a car whose operating cost, not its initial price, is low.) 3. Unstated needs (The customer expects good service from the dealeL)
DEFINING MARKETING FOR THE 21 ST CENTURY CHAPTER 1 4. Delight needs (The customer would like the dealer to include an onboard navigation system.) 5. Secret needs (The customer wants friends to see him as a savvy consumer.) Responding only to the stated need may shortchange the customer. Many consumers do not know what they want in a product. Consumers did not know much about cellular phones when they were first introduced, and Nokia and Ericsson fought to shape consumer percep­ tions of them. Simply giving customers what they want isn't enough any more-to gain an edge companies must help customers learn what they want. Target Markets, Positioning, and Segmentation A marketer can rarely satisfy everyone in a market. Not everyone likes the same cereal, hotel room, restaurant, automobile, college, or movie. Therefore, marketers start by dividing the market into segments. They identify and profile distinct groups of buyers who might prefer or require varying product and service mixes by examining demographic, psychographic, and behavioral differences among buyers. WAL-MART • Wal-Mart uses segmentation to reach customers in different geographic markets, with its new Store of the Community concept. Now over two dozen Wal-Mart stores have been designed to reflect the communities in which they are located. For instance, there's a Wal-Mart with a Western flair in Ft. Collins, Colorado, and a two-level art-deco-inspired unit to draw in wealthy African Americans in Baldwin Hills, California. In an effort to cater to the country's fourth-largest Amish community, the Middlefield, Ohio, Wal-Mart offers hitching posts outside for horse and buggies, block ice for refrigerators, and a huge assortment of denim fabric for making work pants. After identifying market segments, the marketer then decides which present the greatest opportunity-which are its target markets. For each, the firm develops a market offering that it positions in the minds of the target buyers as delivering some central benefit(s). For exam­ ple, Volvo develops its cars for buyers to whom safety is a major concern. Volvo, therefore, positions its car as the safest a customer can buy. Companies do best when they choose their target market(s) carefully and prepare tailored marketing programs. Offerings and Brands Companies address needs by putting forth a value proposition, a set of benefits that they offer to customers to satisfy their needs. The intangible value proposition is made physi­ cal by an offering, which can be a combina­ tion of products, services, information, and experiences. A brand is an offering from a known source. A brand name such as McDonald's carries many associations in people's minds that make up the brand image: hamburgers, fun, children, fast food, convenience, and golden arches. All companies strive to build a strong, favorable, and unique brand image. Value and Satisfaction The offering wiU be successful if it delivers value and satisfaction to the target buyer. The buyer chooses between different offerings based on 1he art -deeo slylinO of II lis new Wal-Mart store is Oleanlto appeal 10 the wealthy sllolJPers in it CaliforniiJ neiglllJorllOO(1. 13
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Marketingmanagement13 kotler-120813131205-phpapp01

  • 1. If you no longer require this review copy, please return it to Pearson Education and we will donate $1 to Jumpstart for children who need our help.
  • 2. ---l---r_ __ _J,-__ T Preface xxix PART 1 Understanding Marketing Management 2 Chapter 1 Chapter 2 Defining Marketing for the 21 st Century 3 Developing Marketing Strategies and Plans 33 AR 2 Capturing Marketing Insights Chapter 3 Chapter 4 ART Chapter Chapter Chapter Chapter Connecting with Customers 5 6 7 8 64 Gathering Information and Scanning the Environment 65 Conducting Marketing Research and Forecasting Demand 89 118 Creating Customer Value, Satisfaction, and Loyalty Analyzing Consumer Markets 149 Analyzing Business Markets 181 Identifying Market Segments and Targets 207 119 PART 4 Building Strong Brands Chapter 9 Chapter 10 Chapter 11 Creating Brand Equity 235 Crafting the Brand Positioning 267 Dealing with Competition 293 PART 5 Shaping the Market Offerings Chapter 12 Chapter 13 Chapter 14 Setting Product Strategy 317 Designing and Managing Services 345 Developing Pricing Strategies and Programs PART 6 Delivering Value Chapter 15 Chapter 16 Designing and Managing Integrated Marketing Managing Retailing, Wholesaling, and Logistics PA T7 Communicating Value Chapter 17 Chapter 18 Designing and Managing Integrated Marketing Communications 469 Managing Mass Communications: Advertising, Sales Promotions, Events and Experiences, and Public Relations 497 Managing Personal Communications: Direct and Interactive Marketing, Word of Mouth, and Personal Selling 531 Chapter 19 234 316 375 408 409 441' 468 PARTS Creating Successful Long-Term Growth Chapter 20 Chapter 21 Chapter 22 Introducing New Market Offerings 565 Tapping into Global Markets 597 Managing a Holistic Marketing Organization Appendix A1 Endnotes E1 Glossary G1 Image Credits C1 Name Index 11 Company, Brand, and Organization Index Subject Index 110 564 625 13 vii
  • 3. Preface xxix PART 1 Understanding Marketing Management Chapter 1 Defining Marketing for the 21st Century The Importance of Marketing The Scope of Marketing 5 2 3 4 What Is Marketing? 5 What Is Marketed? 6 Who Markets? 7 Marketing in Practice 10 Core Marketing Concepts 12 Needs, Wants, and Demands 12 Target Markets, Positioning, and Segmentation Offerings and Brands 13 13 Value and Satisfaction 13 Marketing Channels 14 Supply Chain 14 Competition 14 Marketing Environment 14 The New Marketing Realities 15 Major Societal Forces 15 New Consumer Capabilities 16 New Company Capabilities 17 Company Orientation toward the Marketplace 18 The Production Concept 18 The Product Concept 18 The Selling Concept 19 The Marketing Concept 19 The Holistic Marketing Concept 19 MARKETING MEMO Marketing Right and Wrong Relationship Marketing 20 20 BREAKTHROUGH MARKETING Nike Integrated Marketing 22 Internal Marketing 24 Performance Marketing 26 Marketing Management Tasks 21 28 Developing Marketing Strategies and Plans Capturing Marketing Insights 28 28 MARKETING MEMO Marketers' Frequently Asked Questions 29 Connecting with Customers 29 Building Strong Brands 29 ix
  • 4. E Shaping the Market Offerings Delivering Value 29 29 Communicating Value 30 Creating Long-Term Growth 30 Summary 30 Applications 31 Chapter 2 33 Developing Marketing Strategies and Plans Marketing and Customer Value 34 The Value Delivery Process 34 The Value Chain 35 Core Competencies 36 A Holistic Marketing Orientation and Customer Value The Central Role of Strategic Planning BREAKTHROUGH MARKETING Intel 40 Corporate and Division Strategic Planning Defining the Corporate Mission 38 39 41 41 Establishing Strategic Business Units 43 Assigning Resources to Each SBU25 44 Assessing Growth Opportunities 44 Organization and Organizational Culture Marketing Innovation Business Unit Strategic Planning The Business Mission 48 SWOT Analysis 47 47 48 48 MARKETING INSIGHT Creating Innovative Marketing Goal Formulation MARKETI 49 52 MEMO Checklist for Performing StrengthslWeaknesses Analysis 53 Strategic Formulation 53 Program Formulation and tmplementation 55 MARKETING INSIGHT Marketing's Contribution to Shareholder Value Feedback and Control 56 56 Product Planning: The Nature and Contents of a Marketing Plan 56 MARKETING MEMO Marketing Plan Criteria Summary 63 Applications ;. 63 57
  • 5. PART 2 Capturing Marketing Insights 64 Chapter 3 Gathering Information and Scanning the Environment 65 Components of a Modern Marketing Information System Internal Records and Marketing Intelligence 67 The Order-to-Payment Cycle 67 Sales Information Systems 68 Databases, Data Warehousing, and Data Mining 68 The Markehng Intelligence System 69 MARKETING INSIGHT The Big Dig 66 70 MARKETING MEMO Clicking on the Competition 72 72 Analyzing the Macroenvironment Needs and Trends 72 MARKET NG MEMO Trends Shaping the Business Landscape 73 74 Identifying the Major Forces BREAKTHROUGH MARKETING Google The Demographic Environment Worldwide Population Growth Population Age Mix 76 MARKETING INSIGHT 75 75 75 Friends for Life 76 Ethnic and Other Markets 77 Educational Groups 78 Household Patterns 78 Geographical Shifts in Population 78 Other Major Macroenvironments 79 Economic Environment 79 Social-Cultural Environment 80 Natural Environment 82 MARKETING INSIGHT Green Marketing Technological Environment Political-Legal Environment Summary 87 Applications 87 Chapter 4 83 84 86 Conducting Marketing Research and Forecasting Demand 89 The Marketing Research System 90 The Marketing Research Process 9~ Step 1: Define the Problem, the Decision Alternatives, and the Research Objectives 91 Step 2: Develop the Research Plan 92 xi
  • 6. MARKETING INSIGHT Conducting Informative Focus Groups 95 MARKETING MEMO Questionnaire Dos and Don'ts 96 MARKETING INSIGHT Getting into Consumers' Heads with Qualitative Research 98 MARKETING INSIGHT Understanding Brain Science Step 3: Collect the Information 99 101 MARKETING MEMO Pros and Cons of Online Research Step 4: Analyze the Information 102 Step 5: Present the Findings 103 Step 6: Make the Decision 103 Overcoming Barriers to the Use of Marketing Research BREAKTHROUGH MARKETING IDEO Measuring Marketing Productivity Marketing Metrics 106 Marketing-Mix Modeling 106 Marketing Dashboards 107 MARKETING INSIGHT 102 103 105 106 Marketing Dashboards to Improve Effectiveness and Efficiency 108 Forecasting and Demand Measurement 109 The Measures of Market Demand 110 A Vocabulary for Demand Measurement 111 Estimating Current Demand 113 Estimating Future Demand 115 Summary 117 Applications 117 PART 3 Connecting with Customers Chapter 5 Creating Customer Value, Satisfaction, and Loyalty 118 Building Customer Value, Satisfaction, and loyalty Customer Perceived Value 121 Total Customer Satisfaction 124 Monitoring Satisfaction 125 MARKETING INSIGHT 120 Net Promoter and Customer Satisfaction 127 Product and Service Quality xli 119 129
  • 7. Maximizing Customer Lifetime Value 130 130 Customer Profitability 132 Measuring Customer Lifetime Value ARKETI G MEMO Calculating Customer Lifetime Value Cultivating Customer Relationships 132 133 133 Customer Relationship Management MARKETING INSIGHT Company Response to Customer Empowerment 134 136 Attracting and Retaining Customers Building Loyalty 138 MA KETI G MEMO Creating Customer Evangelists 142 Win-Backs Customer Databases and Database Marketing 142 143 Customer Databases Data Warehouses and Datamining 143 BREAKTHROUGH MARKETING Tesco 144 The Downside of Database Marketing and CRM Summary 139 145 147 147 Applications Chapter 6 Analyzing Consumer Markets 149 What Influences Consumer Behavior? Cultura! Factors 150 150 MARKETING INSIGHT The Future of American Hyperconsumption 152 MARKETING INSIGHT Marketing to Cultural Market Segments 153 154 Personal Factors 156 Social Factors MARKETING MEMO The Average U.s. Consumer Quiz Key Psychological Processes 160 BREAKTHROUGH MARKETING Ikea Motivation: Freud, Maslow, Herzberg Perception 157 161 161 163 Learning 164 Memory 165 The Buying Decision Process: The Five-Stage Model Problem Reco9nition Information Search 167 168 168 xlii
  • 8. Evaluation of Alternatives 169 Purchase Decision 172 Postpurchase Behavior 173 Other Theories of Consumer Decision Making 174 Level of Consumer Involvement 174 Decision Heuristics and Biases 175 MARKETING INSIGHT How Consumers Really Make Decisions 176 MARKETING MEMO Decision Traps Mental Accounting 177 177 Profiling the Customer Buying-Decision Process Summary 178 Applications 179 Chapter 7 Analyzing Business Markets 178 181 What Is Organizational Buying? 182 The Business Market versus the Consumer Market 182 MARKETING INSIGHT Big Sales to Small Business Buying Situations 185 Systems Buying and Selling 184 186 MARKETING MEMO Maximizing Customer References Participants in the Business Buying Process The Buying Center 188 Buying Center Influences 188 Buying Center Targeting 190 The Purchasing/Procurement Process 188 191 Purchasing Department Perceptions 191 Purchasing Organization and Administration Stages in the Buying 'Process 192 Problem Recognition 187 192 193 General Need Description and Product Specification Supplier Search 193 193 Proposal Solicitation 194 Supplier Selection 194 MARKETING MEMO Developing Compelling Customer Value Propositions 196 Order-Routine Specification 197 Performance Review 198 Managing Business-to-Business Customer Relationships The Benefits of Vertical Coordination 198 BREAKTHROUGH MARKETING General Electric 199 198
  • 9. MARKETING INSIGHT Establishing Corporate Trust and Credibility 200 Business Relationships: Risks and Opportunism Institutional and Government Markets 202 201 A KETt G MEMO Selling Tech to the Government 204 Summary 205 Applications 205 Chapter 8 Identifying Market Segments and Targets Levels of Market Segmentation Segment Marketing 208 lIiche Marketing 209 Local Marketing 210 Individual Marketing 210 207 208 MARKETING INSIGHT Chasing the Long Tall BREAKTHROUGH MARKETING HSBC 212 Bases for Segmenting Consumer Markets Geographic Segmentation 213 Demographic Segmentation 215 211 213 MARKETING INSIGHT Trading Up (and Down): The New Consumer 219 MARKETING INSIGHT Marketing to Generation Y 220 MARKETING M MO Cheat Sheet for 20-Somethin'gs Psychographic Segmentation 221 Behavioral Segmentation 223 Bases for Segmenting Business Markets 226 Market Targeting 227 Effective Segmentation Criteria 227 Evaluating and Selecting the Market Segments Additional Considerations 230 Summary 232 Applications 233 PART 4 Building Strong Brands Chapter 9 Creating Brand Equity 221 228 234 235 What Is Brand Equity? 236 The Role of Brands 237 The Scope of Branding 238 Defining Brand Equity 238 xv
  • 10. r " T BREAKTHROUGH MARKETING Procter & Gamble MARKETING INSIGHT 239 Brand Cooking with Jamie Oliver 240 Brand Equity as a Bridge 242 Brand Equity Models 243 Building Brand Equity 245 Choosing Brand Elements 246 Designing Holistic Marketing Activities 247 Leveraging Secondary Associations 250 Measuring Brand Equity 251 MARKETING INSIGHT The Brand Value Chain 252 Brand Valuation 253 Managing Brand Equity 253 Brand Reinforcement 253 MARKETING INSIGHT What Is a Brand Worth? Brand Revitalization 255 Devising a Branding Strategy Branding Decisions 2'57 Brand Extensions 258 Brand Portfolios 261 Customer Equity 263 254 256 MARKETING MEMO Twenty-First-Century Branding 263 Summary 264 Applications 265 Chapter 10 Crafting the Brand Positioning 267 Developing and Communicating a Positioning Strategy Competitive Frame of Reference 269 Points-of-Difference and Points-of-Parity 269 BREAKTHROUGH MARKETING UPS Establishing Category Membership Choosing POPs and PODs 274 Creating POPs and PODs 274 270 271 MARKET1NG MEMO Writing a Positioning Statement Differentiation Strategies 276 MARKETING MEMO How to Derive Fresh Consumer Insights to Differentiate Products and Services 277 xvi 268 275
  • 11. " I Product Life-Cycle Marketing Strategies Product Life Cycles 278 Style, Fashion, and Fad Life Cycles 278 279 Marketing Strategies: Introduction Stage and the Pioneer Advantage 280 Marketing Strategies: Growth Stage 282 Marketing Strategies: Maturity Stage 283 MARKETING INSIGHT Competitive Category Dynamics Marketing Strategies: Decline Stage 286 Evidence on the Product Life-Cycle Concept Critique of the Product Life-Cycle Concept Market Evolution 288 284 287 287 MARKETI G MEMO How to Build a Breakaway Brand 289 Summary 290 Applications 291 Chapter 11 Dealing with Competition Competitive Forces 293 294 Identifying Competitors 295 Analyzing Competitors 296 Strategies 296 MARKETING INSIGHT High Growth Through Value Innovation Objectives 297 297 Strengths and Weaknesses 299 Selecting Competitors 299 MARKETING MEM Benchmarking to Improve Competitive Performance 300 Selecting Customers 300 Competitive Strategies for Market Leaders BREAKTHROUGH MARKETING Accenture 301 302 MARKETING INSIGHT When your Competitor Delivers More for Less 303 Expanding the Total Market 303 Defending Market Share 305 Expanding Market Share 307 Other Competitive Strategies 308 Market-Challenger Strategies 308 Market-Follower Strategies 310 xvii
  • 12. MARKETING MEMO Making Smailer Better Market-Nicher Strategies 311 312 MARKETING MEMO Niche Specialist Roles 313 Balancing Customer and Competitor Orientations 314 Competitor-Centered Companies 314 Customer-Centered Companies 314 Summary 315 Applications PARTS 315 Shaping the Market Offerings Chapter 12 Setting Product Strategy 316 317 Product Characteristics and Classifications 318 Product Levels: The Customer-Value Hierarchy MARKETING INSIGHT Product Classifications Differentiation 321 Product Differentiation Metamarkets and Metamediaries 321 324 326 Product and Brand Relationships The Product Hierarchy 328 Product Systems and Mixes Product-Line Analysis 329 Product-Line Length 331 328 328 MARKETING INSIGHT When Less Is More Product-Mix Pricing 332 335 Co-Branding and Ingredient Branding 337 MARKETING MEMO Making Ingredient Branding Work Packaging, Labeling, Warranties, and Guarantees Packaging 339 Labeling 340 Warranties and Guarantees Summary 342 Applications xviii 343 319 319 BREAKTHROUGH MARKETING Toyota Design 325 Services Differentiation 318 341 339 339
  • 13. Chapter 13 Designing and Managing Services The Nature of Services 346 Service Industries Are Everywhere 345 346 Categories of Service Mix 347 Distinctive Characteristics of Services 349 Marketing Strategies for Service Firms 352 A Shifting Customer Relationship 352 MARKETING MEMO Recommendations for Improving Service Quality 353 BREAKTHROUGH MARKETING Southwest Airlines Holistic Marketing for Services 355 356 Managing Service Quality 359 Customer Expectations 359 MARKETING INSIGHT The Role of Expectations in Service­ Quality Perceptions 361 MARKETING MEMO Assessing E-Service Quality 362 362 Best Practices of Service-Quality Management MARKETING INSIGHT Developing Customer Interface Systems 364 Managing Service Brands 367 Differentiating Services 367 Developing Brand Strategies for Services 368 Managing Product-Support Servkes 370 Identifying and Satisfying Customer Needs Postsale Service Strategy 371 370 Summary 373 Applications 373 Chapter 14 Developing Pricing Strategies and Programs Understanding Pricing 375 376 A Changing Pricing Environment How Companies Price 377 MARKETING INSIGHT 376 Giving It All Away Consumer Psychology and Pricing Setting the Price 383 378 379 Step 1: Selecting the Pricing Objective Step 2: Determining Demand 385 383 xix
  • 14. r Step 3: Estimating Costs 388 Step 4: Analyzing Competitors' Costs, Prices, and Offers Step 5: Selecting a Pricing Method 390 BREAKTHROUGH MARKETING Ebay Step 6: Selecting the Final Price 394 395 MARKETING INSIGHT Stealth Price Increases Adapting the Price 389 396 397 Geographical Pricing (Cash, Countertrade, Barter) Price Discounts and Allowances 398 Promotional Pricing 399 Differentiated Pricing 400 Initiating and Responding to Price Changes 397 402 Initiating Price Cuts 402 Initiating Price Increases 403 Responding to Competitors' Price Changes 404 MARKETING ME:MO How to Fight Low-Cost Rivals 405 Summary 406 Applications 407 PART 6 Delivering Value 408 Chapter 15 Designing and Managing Integrated Marketing Channels Marketing Channels and Value Networks The Importance of Channels 410 Channel Development 411 Hybrid Channels 412 Understanding Customer Needs 409 410 413 Value Networks 414 The Role of Marketing Channels 414 Channel Functions and Flows 415 Channel Levels 416 Service Sector Channels Channel-Design Decisions 417 417 Analyzing Customers' Desired Service Output Leve~s Establishing Objectives and Constraints 418 Identifying and Evaluating Major Channel Alternatives 417 418 MARKETING INSIGHT How CarMax Is Transforming the Auto Business 420 Evaluating the Major Alternatives xx 421
  • 15. Channel-Management Decisions 423 Selecting Channel Members 423 Training and Motivating Channel Members 423 Evaluating Channel Members 424 Modifying Channel Design and Arrangements Channel Integration and Systems 426 Vertical Marketing Systems 425 426 MARKETING INSIGHT The Importance of Channel Stewards 427 Horizontal Marketing Systems 428 Integrating Multichannel Marketing Systems TI MEM 428 Multichannel Shopping Checklist Conflict, Cooperation, and Competition Types of Conflict and Competition Causes of Channel Conflict 431 Managing Channel Conflict 431 430 431 Dilution and Cannibalization 433 Legal and Ethical Issues in Channel Relations E-Commerce Marketing Practices 434 Pure-Click Companies 433 434 BREAKTHROUGH: MARKETING Amazon.com Brick-and-Click Companies M-Commerce 437 Summary 435 437 438 Applications 439 Chapter 16 Managing Retailing, Wholesaling, and Logistics Retailing 429 441 442 Types of Retailers 442 The New Retail Environment Marketing Decisions 446 448 MARKETING INSIGHT Making Labels Smarter 451 BREAKTHROUGH MARKETING Target M RKETING ME Private Labels 453 0 Helping Stores to Sell 454 456 Role of Private Labels 456 The Private-Label Threat 457 MARKETING MEMO How to Compete Against Store Brands 458 xxi
  • 16. • Wholesaling 458 Trends in Wholesaling Market Logistics 459 461 Integrated Logistics Systems Market-Logistics Objectives Market-Logistics Decisions Organizational Lessons Summary 462 462 464 466 467 467 Applications PART 7 Communicating Value 468 Chapter 17 Designing and Managing Integrated Marketing Communications 469 The Role of Marketing Communications 470 The Changing Marketing Communication Environment Marketing Communications, Brand Equity, and Sales the Communications Process Models 474 Developing Effective Communications 470 471 476 Identify the Target Audience 476 Determi,ne the Communications Objectives Design the Communications 477 477 MARKETING INSIGHT Celebrity Endorsements as a Strategy 480 481 Establish the Total Marketing Communications Budget 484 Deciding on the Marketing Communications Mix 486 Characteristics of the Marketing Communications Mix 486 Select the Communications Channels BREAKTHROUGH MARKETING Ocean Spray 486 Factors in Setting the Marketing Communications Mix 491 Managing the Integrated Marketing Communications Process 491 Coordinating Media 492 Implementing IMC 493 Measuring Communication Results MARKETING MEMO How Integrated Is Your IMC Program? Summary 494 Applications 495 494 489
  • 17. _[ 1.-'---_ _ Chapter 18 Managing Mass Communications: Advertising, Sales Promotions, Events and Experiences, and Public Relations 497 498 Developing and Managing an Advertising Program Setting the Objectives 499 Deciding on the Advertising Budget 499 Developing the Advertising Campaign 500 MARKETI G M MO Print Ad Evaluation Criteria Deciding on Media and Measuring Effectiveness Deciding on Reach, Frequency, and Impact Choosing among Major Media Types 506 504 505 505 Alternative Advertising Options 508 Selecting Specific Media Vehicles 510 MARKETING INSIGHT Playing Games with Brands Deciding on Media Timing and Allocation Evaluating Advertising Effectiveness 513 Sales Promotion 514 Objectives 514 Advertising versus Promotion Major Decisions 516 Events and Experiences 520 Events Objectives 521 Major Sponsorship Decisions Creating Experiences Public Relations 523 512 515 521 523 MARKETING INSIGHT Experiential Marketing MARKETING INSIGHT Managing a Brand Crisis Marketing Public Relations 524 525 525 BREAKTHROUGH MARKETING Virgin Group Major Decisions in Marketing PR Summary 511 526 527 529 Applications 529 Chapter 19 Managing Personal Communications: D,i,rect and Interactive Marketing, Word of Mouth, and Personal Selling Direct Marketing 532 The Benefits of Direct Marketing Direct Mail 531 532 534 Catalog Marketing 536 ywiii
  • 18. Telemarketing 537 Other Media for Direct-Response Marketing 538 Public and Ethical Issues in Direct Marketing 538 Interactive Marketing 538 Advantages and Disadvantages of Interactive Marketing BREAKTHROUGH MARKETING Yahoo! Placing Ads and Promotions Online MARKfTI Word of Mouth 538 539 540 MEMO Segmenting Tech Users 542 545 Buzz and Viral Marketing Opinion Leaders 546 548 MARKETING MEMO How to Start a Buzz Fire 548 Blogs 550 Measuring the Effects of Word of Mouth Designing the Sales Force Sales-Force Objectives and Strategy Sales-Force Structure Sales-Force Size 551 551 552 553 554 MARKETING INSIGHT Major Account Management Sales-Force Compensation Managing the Sales Force 555 556 Recruiting and Selecting Representatives 556 Training and Supervising Sales Representatives Sales Rep Productivity 557 Motivating Sales Representatives 558 Evaluating Sales Representatives 559 Principles of Personal Selling The Six Steps 561 561 Relationship Marketing 562 Summary 563 Applicatij)ns 563 PARTS Creating Successful Long-Term Growth Chapter 20 Introducing New Market Offerings New-Product Options Make or Buy 565 566 566 Types of New Products 566 Challenges in New-Product Development The Innovation Imperative New-Product Success New-Product Failure xxiv 564 569 570 567 567 557 555
  • 19. --, I/~-----------~'" Organizational Arrangements 571 Budgeting for New-Product Development 572 Organizing New-Product Development 573 Managing the Development Process: Ideas 574 Idea Generation 574 MARKET! G MEMO Ten Ways to Find Great New-Product Ideas 575 MARKETING INSIGHT MARKETING P&G'S New Connect-and-Develop Approach to Innovation 576 EMO Seven Ways to Draw New Ideas from Your Customers 577 MARKETI G MEMO How to Run a Successful Brainstorming Session 578 Idea Screening 579 Managing the Development Process: Concept to Strategy Concept Development and Testing 581 Marketing Strategy Development 584 Business Analysis 584 Managing the Development Process: Development to Commercialization 586 Product Development 586 Market Testing 587 Commercialization 590 BREAKTHROUGH MARKETING Apple Ipod The Consumer-Adoption Process 592 Stages in the Adoption Process 592 Factors Influencing the Adoption Process Summary 595 Applications 595 Chapter 21 Tapping into Global Markets 591 593 597 Competing on a Global Basis 581 598 BREAKTHROUGH MARKETING Samsung Deciding Whether to Go Abroad 600 Deciding Which Markets to Enter 600 How Many Markets to Enter 600 Developed versus Developing Markets 599 601 MARKETING INSIGHT Spotlight on Key Developing Markets 604 Evaluating Potential Markets 605 xxv
  • 20. ' Deciding How to Enter the Market 606 Indirect and Direct Export 606 Using a Global Web Strategy 607 Licensing 607 Joint Ventures 608 Direct Investment 609 Deciding on the Marketing Program 609 Product 611 MARKETING MEMO The Ten Commandments of Global Branding 612 Communications Price 615 613 MARKETING INSIGHT Unauthorized Sales-Dealing with the Gray Market and Counterfeit Products 617 Distribution Channels 618 Country-of-Origin Effects 619 Building Country Images 619 Consumer Perceptions of Country of Origin 620 MARKETING INSIGHT The Ups and Downs of Brand America 621 Deciding on the Marketing Organization Export Department 622 International Division 622 Global Organization 622 $u.mmary 623 Applications 623 621 Chapter 22 Managing a Holistic Marketing Organization for the Long Run 625 Trends in Marketing Practices 626 Internal Marketing 627 Organizing the Marketing Department 627 MARKET!NG MEMO Characteristics of Company Departments That Are Truly Customer Driven 628 Relations with Other Departments 632 Building a Creative Marketing Organization MARKETING INSIGHT The Marketing CEO 633 633 MARKETING MEMO Fueling Strategic Innovation Socially Responsible Marketing xxvi 634 634
  • 21. BREAKTHROUGH MARKETING Starbucks Corporate Social Responsibility 638 Socially Responsible Business Models Cause-Related Marketing 640 637 640 MARKETING INSIGHT New Views on Corporate Social Responsibility 641 Social Marketing 644 MARK TING MEMO Making a Difference 645 Marketing Implementation 648 Evaluation and Control 649 Annual-Plan Control 649 Profitability Control 652 Efficiency Control 656 Strategic Control 656 The Future of Marketing 657 MARKETING MEMO Major Marketing Weaknesses 660 Summary 661 Applications 662 Appendix A1 Endnotes E1 Glossary G1 Image Credits C1 Name Index 11 Company, Brand, and Organization Index Subject Index 110 13 xxvii
  • 22. Each title in the Pearson One series is part of a collaborative global editorial development process that harnesses the talent and expertise of Pearson authors, editors, and production people from all over the world. And we combine content from many cultures, giving stu­ dents greater insight into what they have in common with the world, and at the same time, we offer material that is locally relevant. : :: Our History Pearson imprints have a rich heritage of academic, business, and professional books. For more than 100 years, we have provided educational tools to more than 100 million people across the globe. Our diverse network of brands encompasses a comprehensive range of solutions in testing, ,assessment, and enterprise software; the very best in online consumer and professional learning; and textbooks written by the most notable authors for higher education around the world. We help teachers teach and students learn across the globe. : :: The First in the Pearson One Series Readers of the U.S. edition will benefit from these local perspectives and expertise through our international case studies, authored by our partners worldwide. These cases will be identified by a marginal note in each chapter linked to relevant content and available through links on our Companion Website. PEARSON rr-­ UItC
  • 23. ,r~---------~---------~ r 1 ::: What Is Marketing Management All About? Marketing Management is the leading marketing text because its content and organization consistently reflect changes in marketing theory and practice, The very first edition of Marketing Management, published in 1967, introduced the concept that companies must be customer-and-market driven, But there was little mention of what have now become funda­ mental topics such as segmentation, targeting, and positioning, Concepts such as brand equity, customer value analysis, database marketing, e-commerce, value networks, hybrid channels, supply chain management, and integrated marketing communications were not even part of the marketing vocabulary then, Marketing Management continues to reflect the changes in the marketing discipline over the past forty years, Firms now sell goods and services through a variety of direct and indirect channels. Mass advertising is not nearly as effective as it was, so marketers are exploring new forms of com­ munication, such as experiential, entertainment, and viral marketing. Customers are telling companies what types of product or services they want and when, where, and how they want to buy them, They are increasingly reporting to other consumers what they think of specific companies and products-using e-mail, blogs, podcasts, and other digital media to do so, Company messages are becoming a smaller fraction of the total "conversation" about prod­ ucts and services, In response, companies have shifted gears from managing product portfolios to manag­ ing customer portfolios, compiling databases on individual customers so they can under­ stand them better and construct individualized offerings and messages, They are doing less product and service standardization and more niching and customization, They are replac­ ing monologues with customer dialogues, They are improving their methods of measuring customer profitability and customer lifetime value. They are intent on measuring the return on their marketing investment and its impact on shareholder value, They are also concerned with the ethical and social implications of their marketing decisions, As companies change, so does their marketing organization. Marketing is no longer a company department charged with a limited number of tasks-it is a company-wide under­ taking, It drives the company's vision, mission, and strategic planning, Marketing indudes decisions like who the company wants as its customers; which of their needs to satisfy; what products and services to offer; what prices to set; what communications to send and receive; what channels of distribution to use; and what partnerships to develop, Marketing succeeds only when all departments work together to achieve goals: when engineering designs the right products, finance furnishes the required funds, purchasing buys high-quality materials, production makes high-quality products on time, and accounting measures the profitability of different customers, products, and areas, To address all these different shifts, good marketers are practicing holistic marketing. Holistic marketing is the development, design, and implementation of marketing programs, processes, and activities that recognize the breadth and interdependencies oftoday's market­ ing environment. Four key dimensions of holistic marketing are: 1. Internal marketing-ensuring everyone in the organization embraces appropriate mar­ keting principles, especially senior management, 2. Integrated marketing-ensuring that multiple means of creating, delivering, and com­ municating value are employed and combined in the best way, 3. Relationship marketing-having rich, multifaceted relationships with customers, chan­ nel members, and other marketing partners, 4. Performance marketing-understanding returns to the business from marketing activi­ ties and programs, as well as addressing broader concerns and their legal, ethical, social, and environmental effects, These four dimensions are woven throughout the book and at times spelled out explicitly, The text specifically addresses the following tasks that constitute modern marketing manage­ ment in the 21st century:
  • 24. /' PREr-~~t::: I 1. Developing marketing strategies and plans 2. Capturing marketing insights and performance 3. 4. 5. 6. Connecting with customers Building strong brands Shaping the market offerings Delivering and communicating value 7. Creating successful long-term growth ••• ••• What Makes Marketing Management the Marketing Leader? Marketing is of interest to everyone, whether they are marketing goods, services, properties, persons, places, events, information, ideas, or organizations. As it has maintained its respected position among students, educators, and businesspeople, Marketing Management has kept up-to-date and contemporary. Students (and instructors) feel that the book is talk­ ing directly to them in terms of both content and delivery. Marketing Management owes its marketplace success to its ability to maximize three di­ mensions that characterize the best marketing texts-depth, breadth, and relevance-as measured by the following criteria: • Depth. Does the book have solid academic grounding? Does it contain important theo­ retical concepts, models, and frameworks? Does it provide conceptual guidance to solve practical problems? • Breadth. Does the book cover all the right topics? Does it provide the proper amount of emphasis on those topics? • Relevance. Does the book engage the reader? Is it interesting to read? Does it have lots of compelling examples? The thirteenth edition builds on the fundamental strengths of past editions that collec­ tively distinguish it from all other marketing management texts: • Managerial Orientation. The book focuses on the major decisions that marketing man­ agers and top management face in their efforts to harmonize the organization's objectives, capabilities, and resources with marketplace needs and opportunities. • Analytical Approach. Marketing Management presents conceptual tools and frame­ works for analyzing recurring problems in marketing management. Cases and examples illustrate effective marketing principles, strategies, and practices. • Multidisciplinary Perspective. The book draws on the rich findings of various scientific disciplines-economics, behavioral science, management theory, and mathematics-for fundamental concepts and tools directly applicable to marketing challenges. • Universal Applications. The book applies strategic thinking to the complete spectrum of marketing: products, services, persons, places, information, ideas and causes; con­ sumer and business markets; profit and nonprofit organizations; domestic and foreign companies; small and large firms; manufacturing and intermediary businesses; and low­ and high-tech industries. • Comprehensive and Balanced Coverage. Marketing Management covers all the topics an informed marketing manager needs to understand to execute strategic, tactical, and administrative marketing. Other features include new concepts, examples, gUidelines, and developments as detailed below. xxx
  • 25. : :: Revision Strategy for the Thirteenth Edition As marketing techl'iques and organization have changed, so has this text. The thirteenth edition is designed not only to preserve the strengths of previous editions, but also to intro­ duce new material and organization to further enhance learning. We retained the key theme of holistic marketing, and the recognition that "everything matters" with marketing and that a broad, integrated perspective is often necessary. This theme is not developed so deeply, however, that it would restrict or inhibit an instructor's flexibility and teaching approach. To provide flexibility in the classroom, we also retained the new modular structure and eight parts corresponding to the eight key marketing management tasks. The thirteenth edition was changed to include the following: • All chapters have brief commentary and new introductory vignettes that set the stage for the chapter material to follow. By covering topical brands or companies, the vignettes serve as great discussion starters. • Breakthrough Marketing boxes replace the Marketing Spotlight boxes from the twelfth edition. Each chapter has one box appearing in an appropriate spot to highlight innova­ tive, insightful marketing accomplishments by leading organizations. • Approximately four Marketing Insight and Marketing Memo boxes are included in each chapter; at least half, on average, are new. Marketing Insight boxes delve into important marketing topics, often highlighting current research findings. Marketing Memo boxes of­ fer practical advice and direction in dealing with various decisions at all stages ofthe mar­ keting management process. • About ten in-text boxes are included in each chapter, with roughly two-thirds new. These in-text boxes provide vivid illustrations of chapter concepts using actual companies and situations. The boxes cover a variety of products, services, and markets, and many have ac­ companying illustrations in the form of ads or product shots. • Chapters are updated throughout, especiaJly in terms of academic references. • At the end of each chapter, the Marketing Applications section has two practical exercises to challenge students: Marketing Debate suggests opposing points of view on an impor­ tant marketing topic from the chapter and asks students to take a side. Marketing Discus­ sion identifies provocative marketing issues and allows for a personal point of view. ::: Chapter-by-Chapter Changes Once again. this edition has been both streamlined and expanded to bring essentials and classic examples into sharper focus, while covering new concepts and ideas in depth. Following is an overview of some of the new or expanded matelial in each chapter: Chapter 1 • Role of Chief Marketing Officer (CMO) • 1Vhat makes a great marketer • Internal marketing and effective marketing departments Chapter 2 • Market sensing and becoming more market-driven • Assigning resources to SBUs • Corporate culture and innovative marketing xxxi
  • 26. l Chapter 3 • • • • Database marketing Important new marketplace trends Generations and cohorts Green marketing Chapter 4 • Ethnographic research • Brain science • Marketing dashboards • Marketing-mix modeling Chapter 5 • Measuring customer satisfaction • Methods to calculate customer lifetime value • The new customer empowerment Chapter 6 • New consumer trends • Consumer decision-making Chapter 7 • Customer references • Lead generation • Customer value proposition Chapter 8 • Niche marketing and the "long tail" • Consumers trading up and down • Brand funnel Chapter 9 Brand equity models • Internal branding • Brand valuation • Customer equity Chapter 10 • Creating new markets and categories • Building a breakaway brand Chapter 11 • Value innovation ("blue ocean thinking") • Selecting customers • Competing with value-based rivals J(J()(lj
  • 27. Chapter 12 • Product returns • Product and product line simplification Chapter 13 Customer empowerment • Coproduction • Customer interface systems • Service strategies for product companies Chapter 14 • The changing pricing environment "Freemium" pricing strategies Price optimization • Strategies to fight low-cost rivals Chapter 15 • Channel stewardship • E-marketing • M-marketing Chapter 16 • The new retail environment • "Fast forward" retailers • RFIDs • Private-label competition Chapter 17 The changing marketing communication environment Interactive marketing Word-of-mouth marketing Chapter 18 • New developments in place advertising • Advergames and Second Life • New developments in marketing events and experiences Chapter 19 • Consumer-generated ads • Types of interactive marketing • Word of mouth, buzz and viral marketing, blogs, and podcasts Chapter 20 • Innovation imperative • "Connect and develop" innovation approaches xxxiii
  • 28. E E • Generating ideas from customers Designing brainstorming sessions Chapter 21 • Emerging markets ("BlUeS") • Regionalization • Gray markets and counterfeit products Chapter 22 • New developments in social responsibility • Cause marketing guidelines • Marketing metrics • Marketing creativity and discipline ::: The Teaching and Learning Package Marketing Management is an entire package of materials available to students and instruc­ tors. This edition includes a number of ancillaries designed to make the marketing manage­ ment course an exciting, dynamic. mtewctive experience. CourseSmart CourseSmart is an exciting new chuice tor students looking to save money. As an alternative to purchasing the print textbook, studellts can purchase an electronic version of the same content and save up to 50 percent off the suggested list price of the print text. With a CourseSmart eTextbook, students can search the text, nlake notes online, print out reading assignments tbat incorporate lecture notes, and bookmark important passages for later review. For more infor­ mation, or to purchase access to the CourseSmart eTextbook, visit www.coursesmart.colll. VangoNotes Study on the go with VangoNotes--chapter reviews from your text in downloadable MP3 for­ mat. Now wherever you are--whatever you're doing--you can study by listening to the fol­ lowing for each chapter of your textbook: • Big Ideas: Your "need to know" for each chapter • Key Terms: Audio "flashcards" to help you review key concepts and terms • Rapid Review: A quick drill session--use it right before your test VangoNotes are flexible; download all the material directly to your player, or only the chap­ ters you need. And they're efficient. Use them in your car, at the gym, walking to class, or wherever. So get yours today. And get studying. Marketing Management Cases Prentice Hall Custom Business Resources can provide instructors and students with all the cases and articles needed to enhance and maximize learning in a marketing course. Instructors can create Custom Course Packs or Custom CaseBooks. Resources include top­ tier cases from Darden, Harvard, Ivey, NACRA. and Thunderbird, plus full access to a data­ base of articles. For details on how to order these value-priced packages, colltact your local representative or visit the Prentice Hall Custom Business Resources Web site at W/llw.prenhaJl.com/custornbusilIess. xxxiv
  • 29. ( J ------!....-.---~---, Instructor's Resource Manual The Instructor's Resource Manual· includes chapter/summary overviews, key teaching objectives, answers to end-of-chapter materials, Harvard Business School case suggestions, exercises, projects, and detailed lecture outlines. Also included is the feature, "Professors on the Go!" which was created with the busy professor in mind. It brings key material upfront, where an instructor who is short on time can find key points and assignments that can be incorporated into the lecture, without having to page through all the material provided for each chapter. Instructor's Resource Center (lRC) IRC-CD-ROM: New interface and searchable database makes sorting through and locat­ ing specific resources easier than ever before. Includes all the same supplements hosted at our IRC Online; however, the TestGen is only available online. The CD-ROM also con­ tains many images from the textbook, which you may incorporate into your lectures. • IRC-ONLINE: The Prentice Hall catalog at wNw.prenhall.com/kotler is where instructors can access our complete array of teaching materials. Simply go to the Instructor's Resource page for this text and click on the Instructor link to download the Instructor's Manual, Video Guide, Test Item File, TestGen, PowerPoint slides (Basic only), and more. Please note that the PowerPoint Media Rich set is provided only on the IRC on CD-ROM due to its larger file size and embedded video clips. NOTE: Prentice Hall manuaUy checks evelJlpassword request and verifies each individual's instructor status before issuing a password. Test Item File 1~IAACS[31 The Test Item File contains more than 3,000 multiple-choice, true-false, short-answer, and essay questions, with page reference and difficulty level provided for each question. Please note that an entire section is dedicated to application questions. These real-life situations take students beyond basic chapter concepts and vocabulary and ask them to apply market­ ing skills. The Test Item File supports Association to Advance Collegiate Schools of Business (AACSB) International Accreditation. Each chapter of the Test Item File was prepared with the AACSB curricula standards in mind. Where appropriate, the answer line of each question' indicates a category within which the question falls. This AACSB reference helps instructors identify those test questions that support that organization's learning goals. 'Please note that not all the questions will offer an AACSB reference. TestGen Prentice Hall's TestGen test-generating software is available for this edition as well. This sup­ plement is available from the IRe Online only (www.prenhall.com/kotler). Please note that the TestGen is NOT included on the Instructor's Resource Center on CD. • PC/Mac compatible and preloaded with all the Test Item file questions. • Manually or randomly view test bank questions and drag-and-drop to create a test. • Add or modify test bank questions using the built-in Question Editor. • Print up to 25 variations of a single test and deliver the test on a local area network using the built-in QuizMaster feature. • Free customer support is available at media.support@pearsoned.com or call 1-800-6­ PROFESSOR between 8:00 AM and 5:00 PM CST. xxxv
  • 30. PowerPoints When it comes to PowerPoints, Prentice Hall knows one size does not fit all. That's why Marketing Management, thirteenth edition, offers instructors more than one option. PowerPoint BASIC: This simple presentation includes only basic outlines and key points from each chapter. No animation or forms of rich media are integrated, which makes the total file size manageable and easier to share online or via e- mail. BASIC was also designed for instructors who prefer to customize PowerPoints or want to avoid having to strip out animation, embedded files, or other media-rich features. • PowerPoint MEDIA RICH: This media-rich alternative-the best option if you want a complete presentation solution-includes basic outlines and key points from each chap­ ter, plus advertisements and art from the text, discussion questions, Web links, and em­ bedded video snippets from the accompanying video library. Instructors can further customize this presentation using the image library featured on the IRC on CD-ROM. Aside from these two PowerPoint options, a select number of slides, based on the MEDIA RICH version, are also available as overhead transparencies. Marketing Management Video Gallery 2009 Make your classroom "newsworthy." PH has updated the Marketing Management video library for the thirteenth edition. Using today's popular newsmagazine format, students are taken on location and behind closed doors. Each news story profiles a well-known or up­ and-coming company leading the way in its industry. A full library of video segments accom­ pany this edition, covering key topics using leading companies such as American Express, the NFL, Eaton, and Wild Planet. Issue-focused footage includes interviews with top execu­ tives, objective reporting by real news anchors, industry research analysts, and marketing and advertising campaign experts. A full video guide, including synopses, discussion ques­ tions, and teaching suggestions, is available on the IRC (online and on CD-ROM) to accom­ pany the video library. Companion Web Site Available at www.prenhall.com/kotler.This site offers students valuable resources at no cost. Two quizzes are offered per chapter. The Concept Check Quiz is to be administered prior to reviewing the chapter, in order to assess students' initial understanding. The Concept Challenge Quiz is to be administered after reviewing the chapter. The Marketing Plan Handbook 3rc1 edition with Marketing Plan Pro l l Marketing Plan Pro is a highly rated commercial software program that guides students through the entire marketing plan process. The software is totally interactive and features ten sample marketing plans, step-by-step guides, and customizable charts. Customize your marketing plan to fit your marketing needs by following easy-to-use plan wizards. Follow the clearly outlined steps from strategy to implementation. Click to print, and your text, spread­ sheet, and charts come together to create a powerful marketing plan. The new The Marketing Plan Handbook, by Marian Burk Wood, supplements the in-text marketing plan material with an in-depth guide to what student marketers really need to know. A structured learning process leads to a complete and actionable marketing plan. Also included are timely, real­ world examples that illustrate key points, sample marketing plans, and Internet resources. The Handbook and Marketing Plan Pro software are available as value-pack items at a dis­ counted price. Contact your ,local Prentice Hall representative for more information. xxxvi
  • 31. ..-----------~---------~-" .. he thirteenth edition bears the imprint of many people. From Phil Kotler: My colleagues and associates at the Kellogg School of Management at Northwestern University continue to have an important impact on my thinking: Nidhi Agrawal, Eric 1. Anderson, James c. Anderson, Robert C. Blattberg, Miguel C. Brend!, Bobby J. Calder, Gregory S. Carpenter, Alex Chernev, Anne T. Coughlan, David Gal, Kent Grayson, Karsten Hansen, Dipak C. Jain, Lakshman Krishnamurti, Angela Lee, Vincent Nijs, Yi Qian, Mohanbir S. Sawhney, Louis W. Stern, Brian Sternthal, Alice M. Tybout, and Andris A. Zoltners. I also want to thank the S. C. Johnson Family for the generous support of my chair at the Kellogg School. Com­ pleting the Northwestern team is my former Dean, Donald P. Jacobs, and my current Dean, Dipak Jain, both of whom have provided generous support for my research and writing. Several former faculty members of the marketing department had a great influence on my thinking when I first joined the Kellogg marketing faculty, specifically Richard M. Clewett, Ralph Westfall, Harper W. Boyd, and Sidney J. Levy. I also want to acknowledge Gary Armstrong for our work on Principles ofMarketing. I am indebted to the following coauthors of international editions of Marketing Manage­ mentand Principles ofMarketing who have taught me a great deal as we worked together to adapt marketing management thinking to the problems of different nations: T • • • • Swee- Hoon Ang and Siew-Meng Leong: National University of Singapore Chin-Tiong Tan: Singapore Management University FriedheIm W. Bliemel: Universitat Kaiserslautern (Germany) Linden Brown; Stewart Adam: Deakin University; Suzan Burton: Macquarie Graduate School of Management; and Sara Denize: University ofWestern Sydney (Australia) • Bernard Dubois: Groupe HEC School of Management (France); and Delphine Manceau: ESCP-EAP European School of Management • John Saunders (Loughborough University) and Veronica Wong (Warwick University, United Kingdom) • Jacob Hornick: Tel Aviv University (Israel) • Walter Giorgio Scott: Universita Cattolica del Sacro Cuore (Italy) • Peggy Cunningham: Queen's University (Canada) I also want to acknowledge how much I have learned from working with coauthors on more specialized marketing subjects: Alan Andreasen, Christer Asplund, Paul N. Bloom, John Bowen, Roberta C. Clarke, Karen Fox, David Gertner, Michael Hamlin, Thomas Hayes, Donald Haider, Hooi Den Hua, Dipak Jain, Somkid Jatusripitak, Hermawan Kartajaya, Neil Kotler, Nancy Lee, Sandra Liu, Suvit Maesincee, James Maken, Waldemar Pfoertsch, Gustave Rath, Irving Rein, Eduardo Roberto, Joanne Scheff, Norman Shawchuck, Joel Shalowitz, Ben Shields, Francois Simon, Robert Stevens, Martin Stoller, Fernando Trias de Bes, Bruce Wrenn, and David Young. My overriding debt continues to be to my lovely wife, Nancy, who provided me with the time, support, and inspiration needed to prepare this edition. It is truly our book. From Kevin Lane Keller: I continually benefit from the wisdom of my colleagues at Tuck­ Scott Neslin, Punam Keller, Kusum Ailawadi, Praveen Kopalle, Koen Pauwels, Petia Petrova, Jackie Luan, Fred Webster, Gert Assmus, and John Farley-as well as the leadership of Dean Paul Danos. I also gratefully acknowledge the invaluable research and teaching contributions from my faculty colleagues and collaborators through the years. lowe a considerable debt of gratitude to Duke University's Jim Bettman and Rick Staelin for helping to get my academic career started and serving as positive role models. I am also appreciative of all that I have learned from working with industry executives who have generously shared their insights and experiences. Finally, I give special thanks to Punam, my wife, and Carolyn and Allison, my daughters, who make it all happen and make it all worthwhile. )(Xxvii
  • 32. ,~ ]L---_ _ We are indebted to the following colleagues at other universities who reviewed this new edition: • Bomero Aguirre, TAMIU • Parimal Bhagat, Indiana University of Pennsylvania • Michael Bruce, Anderson University • Yun Chu, Frostburg State University • Bugh Daubek, Purdue University • Kathleen Dominick, Rider University • Tad Duffy, Golden Gate University • Mohan Dutra, Purdue University • Barbara Dyer, University of North Carolina at Greensboro • Jackie Eastman, Valdosta State University • Steve Edison. University of Arkansas-Little Rock • Barb Finer, Suffolk University • Renee Foster, Delta State University Chic Fojtik, Pepperdine University • Robert Galka, De Paul University • Rashi Glazer, University of California, Berkeley • Lewis Hershey, Fayetteville State University • • • • Thomas Hewett, Kaplan University Mary Higby, University of Detroit-Mercy Michelle Kunz, Morehead State University Even Lanseng, Norwegian School of Management • Michael Lodato, California Lutheran University • Henry Loehr, Pfeiffer University-Charlotte • Susan Mann, Bluefield State College • Charles Martin, Wichita State University • • • • John McKeever, University of Houston Robert Mika, Monmouth University Mark Mitchell, Coastal Carolina University Nnamdi Osakwe, Bryant & Stratton College • Young-Hoon Park, Cornell University • • • • • Koen Pauwels, Dartmouth College Keith Penney, Webster University Patricia Perry, University of Alabama Mike Powell, North Georgia College and State University William Rice, California State University-Fresno • Bill Robinson, Purdue University • Jan Napoleon Saykiewicz, Duquesne University • Larry Schramm, Oakland University • Jim Skertich, Upper Iowa University • Allen Smith, Florida Atlantic University • Joe Spencer, Anderson University • Nancy Stephens, Arizona State University I{xxviii
  • 33. ---=-0_··----~ _ _) __ • Thomas Tellefsen, The College of Staten Island-CUNY • • • • Daniel Turner, University ofWashington Edward Volchok, Stevens Institute of Management OJ. Wasmer, St. Mary-of-the-Woods College Zac Williams, Mississippi State University We would also like to thank colleagues who have reviewed previous editions of Marketing Management: Alan Au, University of Hong Kong Hiram Barksdale, University of Georgia Boris Becker, Oregon State University Sandy Becker, Rutgers University Sunil Bhatia, Case Western Reserve University Frederic BruneI, Boston University John Burnett, University of Denver Lisa Cain, University of California at Berkeley and Mills College Surjit Chhabra, DePaul University Dennis Clayson, University of Northern Iowa Bob Cline, University of Iowa Brent Cunningham, Ph.D., Jacksonville State University John Deighton, University of Chicago Alton Erdem, University of Houston at Clear Lake Elizabeth Evans, Concordia University Ralph Gaedeke, California State University, Sacramento Betsy Gelb, University of Houston at Clear Lake Dennis Gensch, University ofWisconsin, Milwaukee David Georgoff, Florida Atlantic University Bill Gray, Keller Graduate School of Management Barbara Gross, California State University at Northridge Arun Jain, State University of New York, Buffalo Eric Langer, Johns Hopkins University Ron Lennon, Barry University Bart Macchiette, Plymouth University H. Lee Matthews, Ohio State University Paul McDevitt, University of Winois at Springfield Mary Ann McGrath, Loyola University, Chicago Kenneth P. Mead, Central Connecticut State University Henry Metzner, University of Missouri, Rolla Francis Mulhern, Northwestern University Pat Murphy, University of Notre Dame Jim Murrow, Drury College Zhou Nan, University of Hong Kong Nicholas Nugent, Boston College Donald Outland, University of Texas, Austin Albert Page, University ofTJIinois, Chicago Lisa Klein Pearo, Cornell University Hank Pruden, Golden Gate University 'llUell(
  • 34. K LE Christopher Puto, Arizona State University Abe Qstin, Lakeland University Lopo Rego, University of Iowa Richard Rexeisen, University of St. Thomas Scott D. Roberts, Northern Arizona University Robert Roe, University ofWyoming Alex Sharland, Hofstra University Dean Siewers, Rochester Institute of Technology Anusorn Singhapakdi, Old Dominion University Mark Spriggs, University of St. Thomas Michael Swenso, Brigham Young University, Marriott School Sean Valentine, University of Wyoming Ann Veeck, West Michigan University R. Venkatesh, University of Pittsburgh Greg Wood, Canisius College Kevin Zeng Zhou, University of Hong Kong A warm welcome and many thanks to the following people who contributed to the global case studies developed for the thirteenth edition: Mairead Brady, Trinity College John R. Brooks, Jr., Houston Baptist University Sylvain Charlebois, University of Regina Geoffrey da Silva, Temasek Business School Malcolm Goodman, Durham University Torben Hansen, Copenhagen Business School Abraham Koshy, Sanjeev Tripathi, and Abhishek, Indian Institute of Management Ahmedabad Peter Ling, Edith Cowan University Marianne Marando, Seneca College Lu Taihong, Sun Yat-Sen University The talented staff at Prentice Hall deserves praise for their role in shaping the thirteenth edi­ tion. We want to thank our Editor Melissa Sabella, for her contribution to this revision. We also want to thank our project manager, Melissa Pellerano, for making sure everything was moving along and falling into place in such a personable way, both vvith regard to the book and supplements. We benefited greatly from the superb editorial help of Elisa Adams, who lent her considerable talents as a development editor to this edition. We thank Nancy Brandwein, who again researched and updated the examples. We also want to acknowledge the fine production work of Judy Leale, the creative design work of Steve Frim, and the edi­ torial assistance of Christine letto. We thank Denise Vaughn for her work on the media pack­ age. We also thank our Marketing Manager, Anne Fahlgren. Philip Kotler s. C. Johnson Distinguished Professor ofInternational Marketing Kellogg School of Management Northwestern University Evanston, Illinois Kevin Lane Keller xl E. B. Osborn Professor of Marketing Tuck School of Business Dartmouth College Hanover, New Hampshire
  • 35.
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  • 37. CHAPTER 1 ••• ••• DEFINING MARKETING FOR THE 21ST CENTURY Marketing is everywhere. Formally or informally, people and organi­ zations engage in a vast number of activities that we could call mar­ keting. Good marketing has become an increasingly vital ingredient for business success. And marketing profoundly affects our day-to­ day lives. It is embedded in everything we do-from the clothes we wear, to the Web sites we click on, to the ads we see: [flJ woteenage gir.ls.. walk into their local Starbucks, which happens to be in Shanghai. One goes to the crowded counter and waits to hand the barista cards for two free peppermint lattes. The other sits at a table and opens her Lenovo ThinkPad R60 notebook computer. Within a few seconds she connects to the Internet, courtesy of Starbucks' deal with China Mobile to provide its customers with wireless access to HotSpots on the China Mobile Network. Once on the Net, the girl uses Baidu.com-the Chinese search engine market leader-to search for infor­ mation about the latest online game release from China's Shanda Interactive. In addition to links to various reviews, news sites, and fan pages, Baidu's search results feature a link to a chat room where hundreds of other gamers are discussing the game. The girl enters the chat room to ask whether peo­ ple who have played the game recommend it. The response is overwhelm­ ingly positive, so she clicks on a sponsored link from the results page, which > > > Downtown Silanghai, a Iii e (1811 onslration of the many r res of ma keling today.
  • 38. generatesasliver'of.paid7search revenue/or Baidu and takes her to Shanda's offi­ ,cial site! ~/.l~re sh.e'sets'yp,.an. EJ.cc(junt. Nqwh~r friencJ'has ff?tLJrneljwithl(;ltfesi[1,hand. She's eager to show off her parents~ Nev,/,Year;'s giftto Iier~ifhot pink Motorola RAZR cell,phane created bya .tearnof;young~bicago-based designers after;months of market ,research and con" sumertests: ihe~twogirls'are admiring the slender phone when it receives a text ~d anno_uncin.g the,a.vaU~bJlitYo.rShanda'sJates.i,garne·for rrlobi/~ doV(n/oad. The girls:turn to, the, laptop so; they can gauge theon/ilie buzzf6r,the mobile version of the game. Good marketin5;)is no accident, but a result of careful planning and execution. It is both, an art and',a science-there's a constant tension between its· f()rmu­ lated sideCind its c;~eative,~side; It's easi~r to leCll"n the formulated side, which will occupy most ofcour'attention in this book, but Newill also describe how real creativity and. passion operate in.many companies. In this c;hapter" we lay the foundation for· our- stud'yby. reviewin'g, a number of important marketing' ~oncepts, tools, frameworks, :and issues; • po. ""'I!!I : :: The Importance of Marketing Financial success often depends on marketing ability. Finance, operations, accounting, and other business functions 'Will not really matter if there isn't sufficient demand for products and services so the company can make a profit. There must be a top line for there to be a bottom line. Many companies have now created a Chief Marketing Officer, or CMO, position to put marketing on a more equal footing with other C-Ievel executives, such as the Chief Executive Officer (CEO) and Chief Financial Officer (CFO). Press releases from organizations of all kinds-from consumer goods makers to health care insurers and from nonprofit organizations to industrial product manufacturers-trumpet their latest marketing achieve­ ments on their Web sites. In the business press, countless articles are devoted to marketing strategies and tactics. In stating their business priorities, CEOs acknowledge the importance of marketing. One survey of the top 10 challenges CEOs face around the world in 2006 revealed that among the top 5 were both "sustained and steady top line growth" and "customer loyalty/retention," challenges whose achievement depends heavily on marketing. l CEOs also recognize the importance of marketing to building brands and a loyal customer base, intangible assets that make up a large percentage of the value of a firm. Marketing is tricky, however, and it has been the Achilles' heel of many formerly prosper­ ous companies. Sears, Levi's, General Motors, Kodak, Sony, and Xerox all have confronted newly empowered customers and new competitors and have had to rethink their business models. Even market leaders such as Intel, Microsoft, and Wal-Mart recognize that they cannot afford to relax as their leadership is challenged. Jack Welch, GE's former CEO, repeatedly warned his company: "Change or die."
  • 39. DEFI ING MARKETING FOR THE 21ST CENTURY XEROX • Xerox has had to become more than just a copier company. Now the blue-chip icon with the name that became a verb sports the broadest array of imaging products in the world and dominates the market for high­ end printing systems. And it's making a huge product-line transition as it moves away from the old-line "light lens" technology to digital systems. Xerox is preparing for a world that is no longer black and white, and in which most pages are printed in color (which, not incidentally, generates five times the revenue of black and white). In addition to revamping its machines, Xerox is beefing up sales by providing annuity-like products and services that are ordered again and again: document management, ink, and toners. Having been slow at one time to respond to the emergence of Canon and the small copier market, Xerox is doing everything it can to stay ahead of the game. 2 Making the right decisions about change isn't always easy. Marketing managers must decide what features to design into a new product, what prices to offer customers, where to sell products, and how much to spend on advertising, sales, or the Internet. They must also decide on details such as the exact wording or color for new packaging. The companies at greatest risk are those that fail to carefully monitor their customers and competitors and to continuously improve their value offerings. They take a short-term, sales-driven view of their business and ultimately they fail to satisfy their stockholders, employees, suppliers, and channel partners. Skillful marketing is a never-ending pursuit. ::: The Scope of Marketing To prepare to be a marketer, you need to understand what marketing is, how it works, what is marketed, and who does the marketing. What 15 Marketing? Marketing is about identifying and meeting human and social needs. One of the shortest good definitions of marketing is "meeting needs profitably." When eBay recognized that peo­ ple were unable to locate some of the items they desired most, it created an online auction clearinghouse. When IKEA noticed that people wanted good furniture at a substantially lower price, it created knockdown furniture. These two firms demonstrated marketing savvy and turned a private or social need into a profitable business opportunity. The American Marketing Association offers the following formal definition: Marketing is an organizational function and a set ofprocesses for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organi­ zation and its stakeholders. 3 Coping with these exchange processes calls for a considerable amount of work and skill. Marketing management takes place when at least one party to a potential exchange thinks about the means of achieving desired responses from other par­ ties. Thus we see marketing management as the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicat­ ing superior customer value. We can distinguish between a social and a managerial definition of marketing. A social definition shows the role marketing plays in society; for example, one marketer has said that marketing's role is to "deliver a higher standard of living." Here is a social definition that serves our purpose: Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and ser­ vices ofvalue with others. Managers sometimes think of marketing as "the art of selling products," but many people are surprised when they hear that selling is not the most important part of marketing! Selling is only the tip of the marketing iceberg. Peter Drucker, a leading management theorist, puts it this way: There will always, one can assume, be need for some selling. But the aim of market­ ing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available. 4 CHAPTER 1 5
  • 40. 6 PART 1 UNDERSTANDING MARKE.TING MANAGEMENT t ! ~~ , I L. . When Sony designed its Play Station 3 game system, when Apple launched its iPod Nano digital music player. and when Toyota intro­ duced its Prius hybrid automobile, these manu­ facturers were swamped with orders because they had designed the "right" product. based on doing careful marketing homework. , What Is Marketed? ~ ) Marketing people market 10 types of enti­ ties: goods, services. events. experiences. persons. places. properties, organizations. information. and ideas. Let's take a quick look at these categories. GOODS Physical goods constitute the bulk of A successful new product is tile result of careful marketing Ilomework most countries' production and marketing ef­ forts. Each year, U.S. companies alone market billions of fresh. canned. bagged, and frozen food products and millions of cars, refrigera­ tors. television sets, machines, and various other mainstays of a modern economy. Not only do companies market their goods, but thanks in part to the Internet, even individuals can effectively market goods. RUBBER CHICKEN CARDS A struggling actor who made ends meet by waiting tables, landing bit parts in TV series, teaching high • school, and managing an office, Steve Rotblatt found a way to keep his acting dream alive by running a prof­ itable small business out of his home. Rubber Chicken Cards (rubberchickencards.com) is a Santa Monica company that's generating online buzz with electronic greeting cards that combine voice-over acting-by Rotblatt and partner Richard Zobel-with irreverent humor. It didn't hurt that Classmates.com selected the company to develop a lighthearted card to help its 40 million members reconnect with old friends, or that the social networking site Me.com chose Rubber Chicken over dozens of competing vendors to create an electronic birthday card for its members. Founded in 2000. the company expected annual sales to reach $300,000 in 2006, up 60% from the prior year. Rotblatt and Zobel's business strategy: use our talents and spend as little as possible. 5 SERVICES As economies advance, a growing proportion of their activities focuses on the production of services. The U.S. economy today consists of a 70-30 services-to-goods mix. Services include the work of airlines, hotels, car rental firms, barbers and beauticians. main­ tenance and repair people, and accountants, bankers, lawyers, engineers. doctors, software programmers, and management consultants. Many market offerings consist ofa variable mix of goods and services. At a fast-food restaurant, for example, the customer consumes both a product and a service. EVENTS Marketers promote time-based events, such as major trade shows, artistic perfor­ mances, and company anniversaries. Global sporting events such as the Olympics and the World Cup are promoted aggressively to both companies and fans. EXPERIENCES By orchestrating several services and goods, a firm can create, stage. and market experiences. Walt Disney World's Magic Kingdom represents this kind of experiential marketing. allowjng customers to visit a fairy kingdom, a pirate ship, or a haunted house. There is also a market for customized experiences. such as spending a week at a baseball camp playing wjth retired baseball greats, conducting the Chicago Symphony Orchestra for five minutes, or climbing Mount Everest. 6
  • 41. DEFINING MJl.RKETIN 1 FOR THE 2'!ST CENTURY PERSONS Celebrity marketing is a major business. Artists, musicians, CEOs, physicians, high-profile lavvyers and financiers, and other professionals all get help from celebrity mar­ keters. 7 Some people have done a masterful job of marketing themselves-think of David Beckham, Oprah Winfrey, and the Rolling Stones. Management consultant Tom Peters, him­ self a master at self-branding, has advised each person to become a "brand." PLACES Cities, states, regions, and whole nations compete actively to attract tourists, facto­ ries, company headquarters, and new residents. G Place marketers include economic develop­ ment specialists, real estate agents, commercial banks, local business associations, and advertising and public relations agencies. The Las Vegas Convention & Tourism Authority spent about $80 million on a provocative ad campaign, "What Happens Here, Stays Here." Re­ turning to its roots as an "adult playground," Las Vegas hoped the campaign would lead to an increase from 37.4 million visitors in 2004 to 43 million visitors by 2009.~J PROPERTIES Properties are intangible rights of ownership of either real property (real es­ tate) or financial property (stocks and bonds). Properties are bought and sold, and these ex­ changes require marketing. Real estate agents work for property owners or sellers, or they buy and sell residential or commercial real estate. Investment companies and banks market se­ curities to both institutional and individual investors. ORGANIZATIONS Organizations actively work to build a strong, favorable, and unique im­ age in the minds of their target publics. In the United Kingdom, Tesco's "Every Little Helps" marketing program reflects the food marketer's attention to detail in everything it does, within as well as outside the store in the community and the environment. The campaign has vaulted Tesco to the top of the UK supermarket chain industry. Universities, museums, performing arts organizations, and nonprofits all use marketing to boost their public images and to com­ pete for audiences and funds. Corporate identity campaigns are the result of intensive market research programs. This is certainly the case with Philips "Sense and Simplicity" campaign. ROYAL PHILIPS Philips researchers asked 1,650 consumers and 180 customers in dozens of in-depth and quantitative interviews and focus groups what was most important to them in using technology. Respondents from the UK, United States, France, Germany, the Netherlands, Hong Kong, China, and Brazil agreed on one thing: they wanted the benefits of technology without the hassles. With its "Sense and Simplicity" advertising campaign and focus, Philips believes, • "our brand now reflects our belief that simplicity can be a goal of technology. It just makes sense." The campaign consists of print, online, and television advertising directed by five experts from the worlds of health care, lifestyle, and technology whose role is to provide "additional outside perspectives on the journey to simplicity. "10 INFORMATION Information is essentially what books, schools, and universities produce, mar­ ket, and distribute at a price to parents, students, and communities. Magazines such as Road and Track, PC World, and Vogue supply information about the car, computer, and fashion worlds, re­ spectively. The production, packaging, and distribution of information are some of our society's major industries. I I Even companies that sell physical products attempt to add value through the use of information. For example, the CEO of Siemens Medical Systems, Tom McCausland, says, "Iour product] is not necessarily an X-ray or an MRI, but information. Our business is really health care information technology, and our end product is really an electronic patient record: information on lab tests, pathology, and drugs as weB as voice dictation."12 IDEAS Every market offering includes a basic idea. Charles Revson of RevIon once Observed: "In the factory, we make cosmetics; in the store we sell hope." Products and services are plat­ forms for delivering some idea or benefit. Social marketers are busy promoting such ideas as "Friends Don't Let Friends Drive Drunk" and "A Mind Is a Terrible Thing to Waste." Who Markets? MARKETERS AND PROSPECTS A marketer is someone who seeks a response-attention, a purchase, a vote, a donation-from another party, called the prospect. If two parties are seeking to sell something to each other, we call them both marketers. CHAPTER 1
  • 42. a PART 1 arl~eling can UNDERSTAriDING MARKETING MANAGEMENT !lelp to promote powen ul ideas I:tII ~, UNCF h~lps thousands of d~!,ming students. But we h~"Il to turn away thousands more. So ~~aS>l give 10 the Unlilld N~IOCOllege Fund. Your donation will make adIHer~f)l. ~lSrt un:;[crg (fcall 1·300-332·9623. ~ UNITE. D NEGRO Co - p- J un LLEGE liND '"'' """"" • ""b"· "tn, 'ow.... , Marketers are indeed skilled at stimulating demand for their company's products, but that's too limited a view of the tasks they perform. Just as production and logistics profes­ sionals are responsible for supply management, marketers are responsible for demand man­ agement. Marketing managers seek to influence the level, timing, and composition of demand to meet the organization's objectives. Eight demand states are possible: 1. Negative demand-Consumers dislike the product and may even pay a price to avoid it. 2. Nonexistent demand-Consumers may be unaware of or uninterested in the product. 3. Latent demand-Consumers may share a strong need that cannot be satisfied by an existing product. 4. Declining demand-Consumers begin to buy the product less frequently or not at all. 5. Irregular demand-Consumer purchases vary on a seasonal, monthly, weekly, daily, or even hourly basis. 6. Full demand-Consumers are adequately buying all products put into the marketplace. 7. Overfull demand-More consumers would like to buy the product than can be satisfied. 8. Unwholesome demand-Consumers may be attracted to products that have undesir­ able social consequences. In each case, marketers must identify the underlying causers) of the demand state and then determine a plan of action to shift the demand to a more desired state. MARKETS Traditionally, a "market" was a physical place where buyers and sellers gathered to buy and sell goods. Economists describe a market as a collection of buyers and sellers who transact over a particular product or product class (such as the housing market or the grain market). Modern economies abound in such markets.
  • 43. DEFINING MARKETING FOR THE 21ST CENTURY Resources - - Money • Taxes, goods Taxes Consumer markets Services Services, money I Taxes, goods Money Goods and services S!IlIl'IIJlr. nf Rows in a Morlern bcl131lJ6 Economy money ~ G"""m,m • markets Manufacturer markets FIG. 1.1 Money S'"i"~ Taxes, goods Services, money Resources I~' Resource markets Money t CHAPTER 1 Intermediary markets Goods and services Five basic markets and their connecting flows are shown in Figure 1.1. Manufacturers go to resource markets (raw material markets, labor markets, money markets), buy resources and turn them into goods and services, and then sell finished products to intermediaries, who sell them to consumers. Consumers sell their labor and receive money with which they pay for goods and services. The government collects tax revenues to buy goods from resource, manufacturer, and intermediary markets and uses these goods and services to proVide public services. Each nation's economy, and the global economy, consists of com­ plex interacting sets of markets linked through exchange processes. Marketers often use the term market to cover various groupings of customers. They view sellers as constituting the industry and buyers as constituting the market. They talk about need markets (the diet-seeking market), product markets (the shoe market), demographic markets (the youth market), and geographic markets (the French market); or they extend the concept to cover other markets, such as voter markets, labor markets, and donor markets. Figure 1.2 shows the relationship betvreen the industry and the market. Sellers and buy­ ers are connected by four flows. The sellers send goods and services and communications such as ads and direct mail to the market; in return they receive money and information such as customer attitudes and sales data. The inner loop shows an exchange of money for goods and services; the outer loop shows an exchange of information. EY CUSTOMER ARKETS Consider the following key customer markets: consumer, busi­ ness, global, and nonprofit. Con sum e r Mar k e t s Companies selling mass consumer goods and services such as soft drinks, cosmetics, air travel, and athletic shoes and equipment spend a great deal of time trying to establish a superior brand image. Much of a brand's strength depends on developing a superior product and packaging, ensuring its availability, and backing it with engaging communications and reliable service. Bus i n e ssM r k e t s Companies selling business goods and services often face well-trained and well-informed professional buyers who are skilled at evaluating competitive offerings. Business buyers buy goods in order to make or resell a product to others at a profit. Business marketers must demonstrate how their products will help these buyers achieve Communication Goods/services J------, Market (a collection of buyers) Industry (a collection of sellers) Money Information FIG. 1.2 9
  • 44. 10 PART 1 UNDERSTANDING MARI<:ETiNG MANAGEMENT higher revenue or lower costs. Advertising can playa role, but the sales force, price, and the company's reputation for reliability and quality may playa stronger one. G lob a I Mar k e t s Companies selling goods and services in the global marketplace face additional decisions and challenges. They must decide which countries to enter; how to enter each (as an exporter, licenser, joint venture partner, contract manufacturer, or solo manufacturer); how to adapt their product and service features to each country; how to price their products in different countries; and how to adapt their communications to fit different cultures. They make these decisions in the face of different requirements for buying, negoti­ ating, owning, and disposing of property; different culture, language, and legal and political systems; and currencies that might fluctuate in value. Yet, the payoff for doing all this addi­ tionallegwork can be huge. ALASKA DEPARTMENT OF COMMERCE. WAL-MART In 2005 alone, China accounted for $337 million of Alaska's exports-from seafood and fish meal to minerals, fertilizers, and wood-and surpassed Canada to become Alaska's third-largest export partner. Noting the huge market potential of China, especially with the 2008 Olympics in Beijing and the 2010 World Expo slated for Shanghai, Wal-Mart purchased about $140,000 of Alaska seafood for its China stores. In order to compete with white fish and farmed salmon from Norway, five Wal-Mart stores hired Alaska officials to host cooking demon­ • strations of wild Alaska sockeye salmon and black cod during a 14-day span. Although they were labor inten­ sive, the demonstrations gave an immediate taste test to China's young, sophisticated urban residents, who can pay the high prices these fish command. 13 Non pro fit and G 0 v ern men t a I Mar k e t s Companies selling their goods to nonprofit organizations such as churches, universities, charitable organizations, and government agencies need to price carefully, because these buyers have limited purchas­ ing power. Lower selling prices affect the features and quality the seller can build into the of­ fering. Much government purchasing calls for bids, and buyers often favor the lowest bid in the absence of extenuating factors. ARKETPLACES, M",RKETSPACES, A ~D METAIVIARKETS The marketplace is physical, such as a store you shop in; marketspaceis digital, as when you shop on the Internet. J4 Northwestern University's Mohan Sawhney has proposed the concept of a metamarket to describe a cluster of complementary products and services that are closely related in the minds of consumers, but spread across a diverse set of industries. The automobile metamar­ ket consists of automobile manufacturers, new car and used car dealers, financing compa­ nies, insurance companies, mechanics, spare parts dealers, service shops, auto magazines, classified auto ads in newspapers, and auto sites on the Internet. In purchasing a car, a buyer will get involved in many parts of this metamarket, and this creates an opportunity for metamediaries to assist buyers in moving seamlessly through these groups, although they are disconnected in physical space. One example is Edmund's (www.edmunds.com). a Web site where a car buyer can find the stated features and prices of different automobiles and easily click to other sites to search for the lowest-price dealer for financing, for car accessories, and for used cars at bargain prices. Metamediaries also serve other metamarkets, such as the home ownership market, the parenting and baby care mar­ ket, and the wedding market. 15 Marketing in Practice How is marketing done? Increasingly, marketing is not done only by the marketing depart­ ment. Marketing needs to affect every aspect of the customer experience, meaning that mar­ keters must properly manage all possible touch points-store layouts, package designs, product functions, employee training, and shipping and logistics methods. Marketing must also be heavily involved in key general management activities, such as product innovation and new-business development. To create a strong marketing organization, marketers must think like executives in other departments, and executives in other departments must think more like mar­ keters. IG CMO and later CEO ofWaIMart.com, Carter Cast, noted that what surprised him
  • 45. DEFINING MARKETING FOR THE 21ST CENTURY CHAPTER 1 11 Eclmunrj's Is ametamediary Web site Ilml helps pro, pectil e car ouvers navigate the The All-New 2008 Cadillac CTS Now tM19able v.iilh a 304 hp Direct Inj~ction 16. the most powerful V6 E'J1glOe ever to beat the- Cadillac Wreath and Crest. New Vehicle Spotlight automubile metamarkel onlini:i, Spon.(I,.db'l'~ r;;;;;nj Edmunds.com provides True Market Value;t!I pricing, unbiased car reviews, ratings, and ~ THE EDl'iUNDS CREEN CAR ADVISOR >ell.... N....,. ••d Comm.,nlaly on En·~',o"lm.nl"l expert advice to help you ger a talr desL Bqad OLf S!;9t9:1! StQ!W NEWCARSEJ 1- £..d..W Brvlo;n. InfoanJ1l!w r;- I~ liW!! --I!lI<l<-' - ­ - COMortlbig _ IolU<l!!:l ~ ~ ~ Aut6n:kltiV* r,..nch.1lad 1.dwlolcgi.s. ~~;R~!.~~n~~o~) AII-Whaal-Drlva Shootout 1 J~p Ctlerokeo SRTe VI. Audl R8. Find Used Car.. for Salo: (:.2lI.2.2 :j tiG!!~ Q.lml I OPRbO!'U'1!lMCtli ~EUNE Thlll;J.loslaulo·onlhuslulnl7W$ • 20QI TQkyo &1lO Show • Fyi To", 2QC8loxu'IS.f • BSooqir.gflomT9ho'llvoC9YS?'XifcomStlOwf!oor REVIEWS, AWARDS' AD Whip Now.w.ek of Oclober23 LATeST ROAD TfSTS FtATnr i99I bgallll~E enl pr~/r BMW 1J5; m -F ~I~I~I~ FH out '1'It1::1 YlIIl'ii:Jlll .... "1 C3me 0Il( Ol'. top: .. 1 COMPMIISON SPOHIGIH SR:~ CrQouover C,adil1",c c 8 CAR COMPARISONS l ~ • Auto lOCle; AS low AS 6 Q9% i • APR GQl pt'ob!Rm-Cfc<li! Of Qo=crQdlJ r.... prcl':o • CAleulIO yOII! AAYfIDW' !I , • GAl your FREE Crg" RoQO!'1 Il'Iluronco Conlo( most when he became CMO was "that I would interact so much with functions outside of marketing. I didn't realize it is a holistic assignment. Then I realized I really had to under­ stand things like product supply, cost break-evens, and accounting."17 Companies generally establish a marketing department to be responsible for creating and delivering customer value, but as the late David Packard of Hewlett-Packard observed, "Marketing is far too important to leave to the marketing department." Companies now know that every employee has an impact on the customer and must see the customer as the source of the company's prosperity. So they're beginning to emphasize interdepartmental teamwork to manage key processes. They're also placing more emphasis on the smooth management of core business processes, such as new-product realization, customer acqui­ sition and retention, and order fulfillment. In practice, marketing follows a logical process. The marketing planning process consists of analyzing marketing opportunities, selecting target markets, designing marketing strate­ gies, developing marketing programs, and managing the marketing effort. In highly compet­ itive marketplaces, however. marketing planning is more fluid and is continually refreshed. Companies must always be moving forward with marketing programs, innovating products and services, staying in touch with customer needs, and seeking new advantages rather than relying on past strengths. The changing new marketing environment is putting considerable demands on market­ ing executives. Marketers must have diverse quantitative and qualitative skills, an entrepre­ neurial attitude, and a keen understanding of how marketing can create value within their organization. 18 They must work in harmony with the sales function. There are five key functions for a CMO in leading marketing within the organization: 1. Strengthening the brands 2. 3. 4. 5. Measuring marketing effectiveness Driving new product development based on customer needs Gathering meaningful customer insights Utilizing new marketing technology Harvard's John Quelch and Gail McGovern note that there is tremendous variability in the responsibilities and job descriptions for CMOs.19 They offer eight ways to improve CMO suc­ cess (see Figure 1.3).
  • 46. 12 PART 1 UNDERSTANDING MARKETlrlG MANAGEMEN FIG. 1,3 Improvlll[1 CMO Success S,III/l:i"I~'lll MC;;C1,'el I "rod Jorrr A OliellJI 'Tim Tall ;j11' I [lis~ d !Ill_ CMO .. :;;i,llt!gv,ffil.','·I//I~.',' liy 1"1.; I r ,$~I(ln V,'nial 20ll-l. RelJIIPkd 1. Make the mission and responsibilities clear. Be certain that the case for having a CMO is strong and .the mission is well understood by leaders in the organization, particularly the CEO, the board, and line management Without a clear need (real or perceived), the role will be rejected by the organization, 2. Fit the role to the marketing culture and structure. Avoid having a CMO in a marketing-led company that has many individual brands rather than a single corporate umbrella-unless the person appointed to the position is a well-connected insider, 3. Choose a CMO who is compatible with the CEO. Beware of the CEO who wants to hire aCMO but doesn't want to relinquish any marketing control. Find a CEO who recognizes his or her responsibility to be the cheerleader for marketing and the brand, but realizes the need to be guided and coached by a marketing specialist. 4. Remember that showpeople don't succeed. The CMO should work hard to ensure the CEO is successful at being the principal cheerleader for the brand 5. Match the personality with the CMO type. Be certain that the chief marketer has the right skills and personality for whichever of the three CMO models he or she might fill (VP of Marketing Services, Classic CMO, or "Super" CMO) There is little tolerance for on-the-job training, 6. Make line managers marketing heroes. By stretching their marketing budgets, CMOs can improve a division's marketing productivity and help business unit leaders increase their top-line revenues, 7. Infiltrate the line organization. Have the CMO support the placement of marketing professionals from the corporate marketing department into divisional marketing roles, Provide input from the CMO into the annual reviews of line marketers. 8. Require right-brain and left-brain skills. The most successful CMO will have strong creative and technical marketing expertise, be politically savvy, and have the interpersonal skills to be a great leader and manager, : :: Core Marketing Concepts To understand the marketing function, we need to understand the following core set of concepts. Needs, Wants, and Demands Needs are the basic human requirements. People need air, food, water, clothing, and shelter to survive. People also have strong needs for recreation, education, and entertainment. These needs become wants when they are directed to specific objects that might satisfy the need. A consumer in the United States needs food but may want a hamburger, french fries, and a soft drink. A person in Mauritius needs food but may want a mango, rice, lentils, and beans. Wants are shaped by our society. Demands are wants for specific products backed by an ability to pay. Many people want a Mercedes; only a few are Willing and able to buy one. Companies must measure not only how many people want their product, but also how many would actually be willing and able to buy it. These distinctions shed light on the frequent criticism that "marketers create needs" or "marketers get people to buy things they don't want." Marketers do not create needs: Needs preexist marketers. Marketers, along with other societal factors, influence wants. Marketers might promote the idea that a Mercedes would satisfy a person's need for social status. They do not, however, create the need for social status. Understanding customer needs and wants is not always simple. Some customers have needs of which they are not fully conscious, or they cannot articulate these needs, or they use words that require some interpretation. What does it mean when the customer asks for a "powerful" lawnmower, a "fast" lathe, an "attractive" bathing suit, or a "restful" hotel? The marketer must probe furtheL We can distinguish among five types of needs: 1. Stated needs (The customer wants an inexpensive caL) 2. Real needs (The customer wants a car whose operating cost, not its initial price, is low.) 3. Unstated needs (The customer expects good service from the dealeL)
  • 47. DEFINING MARKETING FOR THE 21 ST CENTURY CHAPTER 1 4. Delight needs (The customer would like the dealer to include an onboard navigation system.) 5. Secret needs (The customer wants friends to see him as a savvy consumer.) Responding only to the stated need may shortchange the customer. Many consumers do not know what they want in a product. Consumers did not know much about cellular phones when they were first introduced, and Nokia and Ericsson fought to shape consumer percep­ tions of them. Simply giving customers what they want isn't enough any more-to gain an edge companies must help customers learn what they want. Target Markets, Positioning, and Segmentation A marketer can rarely satisfy everyone in a market. Not everyone likes the same cereal, hotel room, restaurant, automobile, college, or movie. Therefore, marketers start by dividing the market into segments. They identify and profile distinct groups of buyers who might prefer or require varying product and service mixes by examining demographic, psychographic, and behavioral differences among buyers. WAL-MART • Wal-Mart uses segmentation to reach customers in different geographic markets, with its new Store of the Community concept. Now over two dozen Wal-Mart stores have been designed to reflect the communities in which they are located. For instance, there's a Wal-Mart with a Western flair in Ft. Collins, Colorado, and a two-level art-deco-inspired unit to draw in wealthy African Americans in Baldwin Hills, California. In an effort to cater to the country's fourth-largest Amish community, the Middlefield, Ohio, Wal-Mart offers hitching posts outside for horse and buggies, block ice for refrigerators, and a huge assortment of denim fabric for making work pants. After identifying market segments, the marketer then decides which present the greatest opportunity-which are its target markets. For each, the firm develops a market offering that it positions in the minds of the target buyers as delivering some central benefit(s). For exam­ ple, Volvo develops its cars for buyers to whom safety is a major concern. Volvo, therefore, positions its car as the safest a customer can buy. Companies do best when they choose their target market(s) carefully and prepare tailored marketing programs. Offerings and Brands Companies address needs by putting forth a value proposition, a set of benefits that they offer to customers to satisfy their needs. The intangible value proposition is made physi­ cal by an offering, which can be a combina­ tion of products, services, information, and experiences. A brand is an offering from a known source. A brand name such as McDonald's carries many associations in people's minds that make up the brand image: hamburgers, fun, children, fast food, convenience, and golden arches. All companies strive to build a strong, favorable, and unique brand image. Value and Satisfaction The offering wiU be successful if it delivers value and satisfaction to the target buyer. The buyer chooses between different offerings based on 1he art -deeo slylinO of II lis new Wal-Mart store is Oleanlto appeal 10 the wealthy sllolJPers in it CaliforniiJ neiglllJorllOO(1. 13