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please return it to Pearson Education
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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
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process that harnesses the talent and expertise of Pearson authors, editors, and production
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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
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
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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
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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.
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