Boston
Columbus Indiana
Amsterdam
Cape Town Dubai Lo
Delhi Mexico City Sao Paulo
chosen as the L a
1975 survey. H
original contribut
(SMEI) named hi
Educator Award
doctoral degrees
Economics and
Economics, Grou
Administration, a
Professor Kot
cluding IBM, Ge
Michelin, and ot
tion, and interna
He has been
Sciences, a Dire
Science Institute
Board, and a me
of Governors of
Board of the Dr
and South Amer
opportunities.
iv
most successful brands, including Accenture, A
Strauss, Procter & Gamble, and Samsung. Additi
with other top companies such as Allstate, B
Campbell’s, Colgate, Eli Lilly, ExxonMobil, Gener
Johnson, Kodak, L.L.Bean, Mayo Clinic, Nordst
Shell Oil, Starbucks, Unilever, and Young & Rubi
trustee for the Marketing Science Institute.
A popular and highly sought-after speaker,
marketing seminars to top executives in a variet
ment and marketing training clients have include
Cisco, Coca-Cola, Deutsche Telekom, GE, G
Novartis, and Wyeth. He has lectured all over t
from Sydney to Stockholm, and from Sao Paul
speaker at conferences with hundreds to thous
An avid sports, music, and film enthusiast, in
manage and market, as well as serve as executive
and roll treasures, The Church, as well as Americ
Tommy Keene. Additionally, he is the Principal In
Motion Records. He is also on the Board of Direct
Autism and the Montshire Museum of Science. wife,
Punam (also a Tuck marketing professor), a
PART 7
Chapter 17
Chapter 18
Chapter 19
PART 8
Chapter 20
Chapter 21
Chapter 22
Appendix: So
Endnotes
E
Glossary
G1
Image Credit
Name Index
Company, Br
Subject Index
vi
Company Orientation toward the
Marketplace
17
The Production Concept
18
The Product Concept
18
The Selling Concept
18
The Marketing Concept
18
The Holistic Marketing Concept 1
MARKETING MEMO Marketing Rig
and Wrong
19
Relationship Marketing
20
Integrated Marketing
20
Internal Marketing 21
Performance Marketing
22
The New Four Ps
25
Marketing Management Tasks
26
Developing Marketing Strategies an
Plans 26
Capturing Marketing Insights
26
MARKETING MEMO Marketers’ Fre
Asked Questions
26
Connecting with Customers
27
The Natural Environment 80
The Technological Environment
81
MARKETING INSIGHT The Green Ma
Revolution
82
The Political-Legal Environment
84
Forecasting and Demand
Measurement
85
The Measures of Market Demand 85
A Vocabulary for Demand
Measurement
86
Estimating Current Demand
88
Estimating Future Demand
90
Summary
92
Applications
92
CHAPTER 4Conducting Marketing
Research
96
The Marketing Research System
97
The Marketing Research Process
99
viii
Markets
150
What Influences Consumer Behavior
Cultural Factors 151
Social Factors 153
MARKETING MEMO The Average U
Consumer Quiz 155
Personal Factors 155
Key Psychological Processes 160
Motivation: Freud, Maslow, Herzber
Perception
161
Learning
163
Emotions
163
Memory
163
MARKETING INSIGHT Made
to Stick 165
The Buying Decision Process:
The Five-Stage Model
166
Problem Recognition
167
Evaluation of Alternatives 168
PART 4
Building Strong
Brands 240
CHAPTER 9
Creating Brand Equity 240
What Is Brand Equity? 241
The Role of Brands 242
The Scope of Branding 243
Defining Brand Equity
243
Brand Equity Models
245
MARKETING INSIGHT Brand Bubble
Trouble 248
Building Brand Equity
249
Choosing Brand Elements 250
Designing Holistic Marketing Activities
Leveraging Secondary Associations
Internal Branding 253
Brand Communities 253
Measuring Brand Equity 255
x
Get Closer to Customers 318
Review Budget Allocations 319
Put Forth the Most Compelling Valu
Proposition
319
Fine-tune Brand and Product
Offerings
320
Summary
320
Applications
321
PART 5
Shaping the Market
Offerings 324
CHAPTER 12 Setting Product Strategy
Product Characteristics and
Classifications 325
Product Levels: The Customer-Valu
Hierarchy
326
Product Classifications 327
and Offers 395
Step 5: Selecting a Pricing
Method 395
Step 6: Selecting the Final Price 402
MARKETING INSIGHT Stealth Price
Increases
403
Adapting the Price 403
Geographical Pricing (Cash, Countertr
Barter) 404
Price Discounts and Allowances 404
Promotional Pricing 405
Differentiated Pricing 406
Initiating and Responding to Price
Changes
407
Initiating Price Cuts 407
Initiating Price Increases 408
Responding to Competitors’ Price
Changes
409
Summary
410
Applications
410
xii
CHAPTER 17 Designing and Managing In
Marketing Communication
The Role of Marketing Communicatio
The Changing Marketing Communic
Environment
476
MARKETING INSIGHT Don’t Touch
Remote 476
Marketing Communications, Brand
and Sales
478
The Communications Process Mod
Developing Effective Communication
Identify the Target Audience
482
Determine the Communications
Objectives
482
Design the Communications
484
MARKETING INSIGHT Celebrity
Endorsements as a Strategy
486
Select the Communications Channe
Interactive Marketing Communication
Options 541
MARKETING MEMO How to Maximize
Marketing Value of E-mails
543
MARKETING MEMO Segmenting Tech
Users 545
Word of Mouth
546
Social Media
546
Buzz and Viral Marketing
549
Opinion Leaders 551
MARKETING MEMO How to Start a B
Fire 552
Measuring the Effects of Word of
Mouth 552
Designing the Sales Force 553
Sales Force Objectives and Strategy
Sales Force Structure 555
MARKETING INSIGHT Major Account
Management
555
xiv
Licensing
604
Joint Ventures 605 Direct Investment
605
Deciding on the Marketing Program
Global Similarities and Differences
Marketing Adaptation 607
MARKETING MEMO The Ten
Commandments of Global Branding
Global Product Strategies
608
Global Communication Strategies
Global Pricing Strategies
611
Global Distribution Strategies 613
Country-of-Origin Effects 614
Building Country Images 614
Consumer Perceptions of Country o
Origin 614
Deciding on the Marketing Organizati
Export Department 616
International Division 616
Global Organization 616
Summary 617 Applications 617
holistic in wha
Chapter 19, o
material to ref
Forecasting ha
ing environme
Chapter 5 was
stronger area o
Chapters 10 a as
“Competitiv an
economic d
What Is
Marketing Mana
consistently refl
Marketing Manag
customer-and-m
mental topics su
equity, customer
channels, supply
xvi
ing principles, especially senior management.
Integrated marketing—ensuring that multiple
nicating value are employed and combined in t
Relationship marketing—having rich, multifac
members, and other marketing partners.
Performance marketing—understanding
retur and programs, as well as addressing
broader con vironmental effects.
These four dimensions are woven throughout
t The text specifically addresses the following
tasks t ment in the 21st century:
Developing marketing strategies and plans
Capturing marketing insights and performance
Connecting with customers
Building strong brands
Shaping the market offerings
Delivering and communicating value
Creating successful long-term growth
Universal App
marketing: pro
business mark
small and larg
industries.
Comprehensiv
informed mar
istrative mark
Student
mymarketin
Mymarketinglab
your progress thr
you achieve succe
Features inclu
Personalized S
you understan
xviii
plan to fit your marketing needs by following easylined steps from strategy to implementation. Clic
charts come together to create a powerful mark
Handbook, by Marian Burk Wood, supplements t indepth guide to what student marketers really n leads
to a complete and actionable marketing plan. ples
that illustrate key points, sample marketing pl
John Bowen, Rob
Donald Haider,
Kotler, Nancy Lee
Rath, Irving Rein
Shields, Francois
and David Young
My overriding
time, support, an
From Kevin La at
Tuck—Punam
Golder, Ellie Kyu
Dean Paul Danos
tions from my fac
of gratitude to D
career started and
I have learned fro
insights and expe
sistance from two
rate, thorough, d
provided superb
Carolyn and Allis
xx
Sunil Bhatla, Case Western Reserve University
Michael Bruce, Anderson University
Frederic Brunel, Boston University
John Burnett, University of Denver
Lisa Cain, University of California at Berkeley
and Mills College
Surjit Chhabra, DePaul University
Yun Chu, Frostburg State University
Dennis Clayson, University of Northern
Iowa Bob Cline, University of Iowa
Brent Cunningham, Jacksonville State Univer
Hugh Daubek, Purdue University
John Deighton, University of Chicago
Kathleen Dominick, Rider University
Tad Duffy, Golden Gate University
Mohan Dutta, Purdue University
Barbara Dyer, University of North Carolina
at Greensboro
The talented staff at Prentice Hall deserves pra
want to thank our editor, Melissa Sabella, for h
thank our project manager, Kierra Bloom, for
falling into place in such a personable way, bot
benefited greatly from the superb editorial hel
ents as a development editor to this edition. W
work of Ann Pulido, the creative design work
Elizabeth Scarpa. We thank Denise Vaughn for
our marketing manager, Anne Fahlgren.
S. C. Johnson
xxii
In This Chapter, We Will Addre
the Following Questions
Why is marketing important?
What is the scope of marketing?
What are some core marketing concepts?
How has marketing management changed in rece
What are the tasks necessary for successful
mark management?
Twitter were crucial, perhaps Obama’s most powerful
massive 13.5 million–name e-mail list. What were the
online efforts? About $500 million (most in sums of was
raised online from 3 million donors; 35,000 gr through
the Web site, My.BarackObama.com; 1,800 YouTube;
the creation of Facebook’s most popula course, the
election of the next President of the United
The Importance of
The first decade of the 21st century challenged firms
face of an unforgiving economic environment. Mark
challenges. Finance, operations, accounting, and o
without sufficient demand for products and services
there must be a top line for there to be a bottom li
marketing ability.
After a
distasteful
video was
posted online
by two
employees,
Domino’s Pizza
learned a
valuable lesson
about the power
of social media.
eBay promot
1970s TV ga
people outsid
Johnson & Jo
have contribu
Skillful market
Good marketers
a
OfficeMax pr videos and i
organizing sy
product or service available.
When Nintendo designed its Wii game system,
w era line, and when Toyota introduced its
Prius were swamped with orders because they
had design marketing homework.
What Is Marketed?
Marketers market 10 main types of entities: goods,
properties, organizations, information, and ideas. Let
GOODS Physical goods constitute the bulk of most
Each year, U.S. companies market billions of fresh, c
millions of cars, refrigerators, televisions, machines, a
SERVICES As economies advance, a growing
pr production of services. The U.S. economy
today Services include the work of airlines, hotels,
c maintenance and repair people, and
accountants, b programmers, and management
consultants. Man such as a fast-food meal.
EVENTS Marketers promote time-based even
performances, and company anniversaries. Global s
World Cup are promoted aggressively to both compa
PLACES Cities, st
company headquar
commercial banks,
Vegas Convention
Here, Stays Here,”
convention attend
Authority took out
Unfortunately, the
likely did not help
PROPERTIES Pr
financial property
marketing. Real es
commercial real e
and individual inv
ORGANIZATI
minds of their ta
program reflects th
the community
supermarket chain
and nonprofits all
INFORMATIO
13
industries. Infor
distribute at a pri
kets, labor market
Figure 1.2 are connected by f
direct mail to the and sales data. Th shows an exchang
|Fig. 1.1|
Structure of Flows
in a Modern Exchange
Economy
Manufac
marke
G
MARKETPLACES, MARKETSPACES, AND M
such as a store you shop in; the marketspace is di
Northwestern University’s Mohan Sawhney has propo
cluster of complementary products and services clo
spread across a diverse set of industries.
Metamarkets are the result of marketers packagin
related product/service activities. The automobile meta
new and used car dealers, financing companies, insura
service shops, auto magazines, classified auto ads in ne
A car buyer will engage many parts of this metamar to
assist him or her in moving seamlessly through the
buyer find the stated features and prices of different
search for the lowest-price dealer for financing, access
other metamarkets, such as home ownership, parentin
Core Marketing Co
To understand the marketing function, we need to u
Needs, Wants, and Demands
Needs are the basic human requirements such as for a
also have strong needs for recreation, education, an
which are its target
of the target buyer
safety is a major co
Offerings
Companies addres
isfy those needs. T
combination of pr A
brand is an o
associations in peo
teous service, and
favorable, and uni
Value and
The buyer choose
tangible and intan
combination of q
increase with qual
We can think
monitoring of cus
performance in rel
tomer is disappoi
customer is deligh
for certain parts from Alcoa to reduce the car’s wei
Industries Corporation (SABIC) instead of steel. Clea
about its competition if it thought only of other inte
Steel is more likely to be hurt by substitute products t
Marketing Environment
The marketing environment consists of the task envir
environment includes the actors engaged in produci
These are the company, suppliers, distributors, dealer
are material suppliers and service suppliers, such as m
cies, banking and insurance companies, transportatio
panies. Distributors and dealers include agents, brok
who facilitate finding and selling to customers.
The broad environment consists of six component
ronment, social-cultural environment, natural envir liticallegal environment. Marketers must pay close these and
adjust their marketing strategies as needed that await
the right marketing savvy and ingenuity. H
TerraCycle
TerraCycle After finding that so with a
fertilizer made by feeding table scra TerraCycle
founder Tom Szaky came up with a cycling,”
finding new ways to use nonrecycla
more relevan
Globalization
made it easier the
world. Int
countries.
Deregulation and
growth
telecommun
competition.
Privatization
management in
Chile and t
Heightened c
marketing co erful
retailer
megabrands
nificant comp
Industry con
opportunitie
electronics in
stream of ent
technology fu
Retail transf mail
firms; n and ecomm
Consumer buying power. In part, due to disint
substantially increased their buying power. From
compare product prices and features and orde 24
hours a day, 7 days a week, bypassing limited
savings. Even business buyers can run a reverse
their business. They can readily join others to a
volume discounts.
Consumer information. Consumers can col
depth as they want about practically anything.
tionaries, medical information, movie ratings
information sources in many languages from a
and user-generated content thrive on social
Del.icio.us (links), Digg (news stories), Wikip
23
(video). Social networking sites—such as Do
travelers, and Moterus for bikers—bring toget
CarSpace.com auto enthusiasts talk about chro
to find a great local mechanic.
24
Consumer participation. Consumers have f
and public opinion. In recognition, companies
and even marketing offerings to heighten t
Consumers see their favorite companies as wo
offerings they want.
Consumer resistance. Many customers today so
they show less brand loyalty and become search for
value, and less tolerant about u
on the compa
•
Marketers ca can also creat
Sammy Stephen’s viral video helped his flea market receive
unprecedented attention.
General Motors, and McDonald’s in embracing c cate
with the public and employees. Patagonia’s T mental
news, reports the results of its sponsored descriptions of
employees’ favorite outdoor locat
Companies can facilitate and speed up inte their
employees by using the Internet as a pri query
one another, seek advice, and download from and to
the company’s main computer. See portal that
transcended business units, Genera called
mySocrates in 2006 consisting of anno
historical information. GM credits the port
savings to date.
34
Companies can improve their cost efficie
Internet. Corporate buyers can achieve sub
Internet to compare sellers’ prices and purcha
posting their own terms in reverse auctions. Co
and operations to reap substantial cost savings
service quality.
Marketing in Practice
Not surprisingly, these new marketing forces and
changed marketing management. In theory, the mark
of analyzing marketing opportunities, selecting targe
strategies, developing marketing programs, and m
see many new challenges in the foreseeable future, and
unlik cessions, there may be no assurance that a return to
past man practices would ever be successful again.
According to Kotler and Caslione, marketers should a ready
to activate automatic responses when turbulence whip chaos
reigns in. They recommend marketers keep these eight mind
as they create “chaotics marketing strategies.”
Secure your market share from core customer segme is not a
time to get greedy, so get your core customer firmly secured,
and be prepared to ward off attacks from tors seeking your
most profitable and loyal customers.
Push aggressively for greater market share from compe
companies fight for market share, and in turbulent and cha many
have been weakened. Slashing marketing budgets travel
expenses is a sure sign a competitor is buckling un sure. Push
aggressively to add to your core customer segme expense of
your weakened competitors.
Research customers more now, because their ne wants are
in flux. Everyone is under pressure during tim bulence and
chaos, and all customers—even those in segments whom
you know so well—are changing. Stay
increasingly marketing is not done only by the mar
affect every aspect of the customer experience,
marke points—store layouts, package designs,
product fun logistics methods. Marketing must also
be influential product innovation and new-business
development marketers must think like executives in
other depar must think more like marketers.
39
As the late David Packard of Hewlett-Packard obse to
the marketing department.” Companies now kno
customer and must see the customer as the source o
ning to emphasize interdepartmental teamwork to m
smooth management of core business processes, such
sition and retention, and order fulfillment.
Company Orientat
the Marketplace
Given these new marketing realities, what philosophy
Increasingly, marketers operate consistent with the
ho evolution of earlier marketing ideas.
vides product
pla computer.
The marketing
tive than competit
target markets. H
marketing concep
Selling focuse
preoccupied idea
of satisfy ter of
things a
Several scholar
superior performa
The Holis
Without question
are leading busin
Right and Wrong
their marketing.
The holistic m
marketing progra
Holistic marketin
grated perspective
The Ten Deadly Sins of Marketing
The company is not sufficiently market
focused and customer driven.
The company does not fully
understand its target customers.
The company needs to better define
and monitor its competitors.
The company has not properly
managed its relationships with its
stakeholders.
The company is not good at
finding new opportunities.
The company’s marketing
plans and planning process
are deficient.
The company’s product and
service policies need
tightening.
The company’s brand-building and
communications skills are weak.
The company is not well organized
to carry on effective and efficient
marketing.
The company has not made
maximum use of technology.
Source: Adapted from Philip Kotler, Ten
Deadly Marketing Sins (Ho
proces of “wea
spent a
number of
credit as well as mi
accent and fluency
Florida.
46
Because attract
relationship mark
offering a larger va
selling. Marketing
partner relations
arrangements with
nal customers so e
Integrated
Integrated market
ing programs to c
greater than the su
can create, comm
one marketing act
Electric’s Medical
training services t
Snowshoe Mountain
Virginia, embarked on a marketing progra
of an “authentic, rustic and engaging wil
initiative to define their goals and articula
Performance mar
ness and society f
beyond sales reve
market share, cust
are also considerin
programs.
FINANCIAL A
investments in fin
growing the custo
the direct and ind
firms’ market valu
distributor and s
quantify and com
research and stat
marketing activiti
the value from ana
SOCIAL RESPO
the company and
environmental, leg
The organizati
satisfy them more
sumers’ and socie
They make only promises that they can keep.
They feed back customers’ needs and ideas to thos
They serve the same customers for a long period of
Logistics
They set a high standard for service delivery time a
They operate a knowledgeable and friendly custome tions,
handle complaints, and resolve problems in a
Accounting
They prepare periodic “profitability” reports by prod
(regions, sales territories), order sizes, channels, an
They prepare invoices tailored to customer
needs a and quickly.
Finance
They understand and support marketing expenditur longterm customer preference and loyalty.
They tailor the financial package to the customer’s f
They make quick decisions on customer creditworth
Public Relations
They send out favorable news about the company a
They act as an internal customer and public advoca
Source: ©Philip Kotler, Kotler on Marketing (New York: Free Press, 1999), pp.
Simon & Schuster Adult Publishing Group. Copyright © 1999 by Philip Kotler. A
Ben & Jerry’s “triple bottom
line” business philosophy is
based on
monitoring the
environmental
and social
effects of its
actions in addition to the
profits from the
sale of its
products.
eschew
hormon
Sto
StonyfieldFarm
Farm—
plant, S
as refo
about a million
pou perils of
hormones,
cultures or
dietary
Stonyfield
adopted brand in
the United
Product
Product variety
Quality
Design
Features
Brand name
Packaging
Sizes
Price
Services
Warranties
List price
Returns
Discounts
Allowances
Payment period
Credit terms
Marketing
Mix
Four Ps
Product
Place
Promotion
Price
M
e
m
o
mar
ket
ing
it can
continu
ally the
players
who af
custom
ers, and
co
nologic
al,
political
Atlas
also
need
marketi
ng
mana
g
Ma
rk
How can we spot and choose the
right market segment(s)?
How can we differentiate
our offerings?
How should we respond to
customers who buy on price?
How can we compete against
lower-cost, lower-price competit
How far can we go in customizing
our offering for each custom
How can we grow our
business?
How can we build
stronger brands?
How can we reduce the cost
of customer acquisition?
and retail prices, discounts, allowances, and credit te
fer’s perceived value; otherwise, buyers will turn to co
Delivering Value
Atlas must also determine how to properly deliver to
products and services. Channel activities include thos
uct accessible and available to target customers (see
link various marketing facilitators to supply its prod ket. It
must understand the various types of retailers and how
they make their decisions (see Chapter 16).
Communicating Value
Atlas must also adequately communicate to the targe
and services. It will need an integrated marketing com
vidual and collective contribution of all communicat set
up mass communication programs consisting of a
relations (see Chapter 18). It also needs to plan more
rect and interactive marketing, as well as hire, train, an
Creating Successful Long-Ter
Based on its product positioning, Atlas must initi
launching as part of its long-term view (see Chapte
changing global opportunities and challenges (see Ch
Today’s marketplace is fundamentally different sult
of major societal forces that have resulted new
consumer and company capabilities forces have
created new opportunities and ch
Applications
Marketing Debate
Does Marketing Create or
Satisfy Needs?
Marketing has often been defined in terms of satisfy
tomers’ needs and wants. Critics, however, main
marketing goes beyond that and creates needs an
that did not exist before. They feel marketers en
consumers to spend more money than they sh
goods and services they do not really need.
Take a position: Marketing shapes consume
and wants versus Marketing merely reflects th
and wants of consumers.
In 1985, Nike signed up then-rookie gu
Jordan as a spokesperson. Jordan was still
comer, but he personified superior perform
bet paid off—the Air Jordan line of basketba
off the shelves and revenues hit over $100
first year alone. As one reporter stated, “Fe
have so reliably been able to identify and s
who transcend their sports to such great effe
In 1988, Nike aired the first ads in its $20 m It”
ad campaign. The campaign, which ultimatel TV
spots in all, subtly challenged a generation
thusiasts to chase their goals. It was a natural
of Nike’s attitude of self-empowerment through
As Nike began expanding overseas t found
that its U.S.-style ads were seen as to Nike
realized it had to “authenticate” its bran so it
focused on soccer (known as football United
States) and became active as a spon
leagues, local clubs, and national teams.
Nike to build authenticity among the socc
consumers had to see professional athlet
product, especially athletes who won. Nike
came in 1994 when the Brazilian team (the
team for which Nike had any real sponsors
World Cup. That victory transformed Nik
>>Google
In 1998, two University PhD students, Larry Page
and
Brin, founded a search engine company and n
Google. The name plays on the number googol—1
by 100 zeroes—and refers to the massive quantit
available online that the company helps users find.
corporate mission is “To organize the world’s inf and
make it universally accessible and useful.” F
beginning, Google has strived to be one of the “go in
the corporate world, supporting a touchy-fe
products include all Google products availab
devices. Web products are broken down into
subsets—advertising (e.g., AdWorks, Double
to-Call), communications and publishing
( Docs, Google Calendar, Google Gadgets,
Wa ment (e.g., Android, Google Code),
mapping Sky, Google Maps), Search (e.g.,
Google Google Alerts, Google Scholar), and
statistics Trends, Google Analytics).
Google’s stage of development starts w Labs,
which lists new products available for te moves
to beta status, where invited users tes types.
Once the product is fully tested and re leased to
the general public, it moves into th as a core
Google product. Google Voice, for in the beta
stage. It provides consumers with phone
number, which then connects to the office, and
cell numbers. The user decides w ring, based
on who calls. Due to Google Voic ity and
popularity, users can sign up only by i
Google has not spent a lot of money o
advertising. Recent efforts have targeted Mi
sumers with appeals to use Google’s “cloud
applications instead of Microsoft Office or
What does a marketing plan
include?
Yahoo! faces many strategic challenges
as it attempts to fend off competition from
Google and others.
in cash. Discussions with Microsoft about a possible merg
10-year deal in June 2009 that gave Microsoft full acce
search engine, to be used in future Microsoft projects fo
engine, Bing. CEO Carol Bartz faced many questions,
ho Yahoo! should best move forward.
1
Marketing and Cus
Value
The task of any business is to deliver customer valu
with increasingly informed buyers faced with abund
tuning the value delivery process and choosing, pro
The Value Delivery Process
The traditional view of marketing is that the firm mak
taking place in the selling process. Companies that s
sulting customers
see whom they ra
industries if neces
innovative, GE ha
The firm’s succ on
how well the c
These processes in
The marketabout the ma
The new-off
launching ne
The customer for
new custo
The custome
understandin
The fulfillme
shipping the
Strong compan
responsible for eac
tion, service, and b
at managing core
Whitney have reor
in nonprofit and g
To be successfu
tions, into the val
Core Competencies
Traditionally, companies owned and controlled most o
labor power, materials, machines, information, and e
resources if they can obtain better quality or lower cost
The key, then, is to own and nurture the resources the
business. Many textile, chemical, and computer/ their
own products because offshore manufacturers a focus
on product design and development and marke tency
has three characteristics: (1) It is a source of co
contribution to perceived customer benefits. (2) It h
8
(3) It is difficult for competitors to imitate.
Competitive advantage also accrues to companie
lence in broader business processes. Wharton’s Geo
excelling in three distinctive capabilities: market sens
In terms of market sensing, he believes tremendous
10
o signals” from the “periphery” of a business. He
offe eral vision, and practical tools and strategies for
changes in the environment, by asking three questi
evaluating the present, and envisioning the future.
Competitive advantage ultimately derives from how cies
and distinctive capabilities into tightly interlocking imitate
Southwest Airlines, Walmart, and IKEA because
where, and how they
want.
Value deliver
value offering
Value creatio
The
Centr
Successful marketi ing,
and sustainin master
marketers respond
effectively and their other
de
To ensure they planning
in three
(2) assessing
each position
and fit in plan for
achieving Most
large com ness
unit, and (4
strategic plan to
g cate to each
divisi a plan
covering th
develops a
strateg level
(product line The
marketin effort.
It operates
target markets and the firm’s value proposition, base
nities. The tactical marketing plan specifies the m
promotion, merchandising, pricing, sales channels,
mentation, and control cycle of strategic planning is
planning at each of these four levels of the organizat
Corporate and Div
Planning
Some corporations give their business units freed
and strategies. Others set goals for their business un
Still others set the goals and participate in developing
All corporate headquarters undertake four planni
Defining the corporate mission
Establishing strategic business units
Assigning resources to each strategic business un
Assessing growth opportunities
We’ll briefly look at each process.
Kawasaki adv
statements, li
Compare the rath
losophy on the rig
To build total bran
customer value an
better, and more c
We build brands a
happier by bringin
operate defines its geographical sphere.
Some companies operate in a specific city or st Post DHL
and Royal Dutch/Shell, which each op
Establishing Strategic Busine
Companies often define themselves in terms of pro
“clothing business.” Market definitions of a business,
satisfying process. Products are transient; basic n
Transportation is a need: the horse and carriage, aut
products that meet that need.
Viewing businesses in terms of customer needs c
Table 2.3 lists companies that have moved from a ness.
It highlights the difference between a target mark A
target market definition tends to focus on selli Pepsi
could define its target market as everyone who tors
would therefore be other carbonated soft dri
however, also focuses on the potential market. If Pepsi
thing to quench their thirst, its competition would water,
fruit juices, tea, and coffee. To better compete, P
with promising growth rates.
A business can define itself in terms of three dime
17
technology.
Consider a small company that defines i
systems for televis
ing; the technolog
for homes, factori
heating, ventilatio
TABLE 2.3
Product-Oriented versus M
Company
Product Defini
Union Pacific Railroad
We run a railroa
Xerox
We make copyin
Hess Corporation
We sell gasoline
Paramount Pictures
We make movie
Encyclopaedia Britannica
We sell encyclo
Carrier
We make air co
News Corp.
The purpose of identifying the company’s strategi gies
and assign appropriate funding. Senior managem
includes a number of “yesterday’s has-beens” as well a
has put more emphasis on some of its younger bus
Jeans, Mexx, and Kate Spade while selling businesse
Olsen, and Laundry). Campbell Soup has out-pace
developing or keeping only products that ranked nu
simple meals, baked snacks, and veggie-based drink
nutrition, and convenience.
19
News Corp. Media conglomera ally all aspects
of print and broadcast media 2008–2009 had
different effects on each.
Even though the Fox network retained popu advertising
sales took their toll. The cable n
due to lower ad rates and monthly provider fees, was
slump in the newspaper and magazine business led the
Web sites. News Corp.’s $650 million investment in My
network site struggled to attract advertisers. At the same
its stride, and News Corp. remained committed to a stro
shows and movies that would drive DVD sales and lead
t ally to products downloadable to mobile phones.
20
|Fig. 2.2|
The StrategicPlanning
Gap
Assessing
growth older
businesses.
management
will
Figure
2.2 disks called
Music five years
from th period.
Evidently, How
can it fill the The
first optio
opportunities). T
Sales ($ millions)
0
provider in 2007 and partnered with Verizon Wireless to la
Company, ESPN earns $5 billion a year in revenue, but
brand came from one male focus group respondent: “If E
So how might Musicale use these three major inte
could try to encourage its current customers to buy
compact disks for data storage in addition to music st
tomers if it noticed major weaknesses in their produ
could try to convince nonusers of compact disks to st
How can Musicale use a market-development str
user groups in the current sales areas. If it has been
kets, it might go after office and factory markets. S
channels by adding mass merchandising or online ch
locations in its home country or abroad.
Management should also consider new-produc
features, such as additional data storage capabilities
two or more quality levels, or it could research an alte
These intensive growth strategies offer several w
enough, and management must also look for integrat
INTEGRATIVE GROWTH A business can incr
ward, or horizontal integration within its industr
selling prescription pharmaceuticals. It formed join
Disney Channel a
erties, and offerin
Research In Motion, is a scientist in his own right
achievement in film. He has hosted a weekly, inno
headquarters that focuses on new research and
com culture of innovation here, and [engineers]
have ab promote innovation.”
26
Marketing Innovation
Innovation in marketing is critical. Imaginative ide
27
company. Senior management should identify
and sented groups: employees with youthful or
diverse company headquarters, and employees
new to the i orthodoxy and stimulate new ideas.
German-based Reckitt Benckiser has been an inn
ucts industry by generating 40 percent of sales
multinational staff is encouraged to dig deep into
co lent performance. “Marketing Insight: Creating
Innov companies approach innovation.
Firms develop strategy by identifying and selecti
Royal Dutch/Shell Group has pioneered scenario an
tions of a firm’s possible future using assumptions a
uncertainties. Managers think through each scenario
pens?” adopt one scenario as the most probable, an
disconfirm it.
28
Consider the challenges faced by the
TABLE 2.5
The 12 Dimensions of Busin
Dimension
Definition
Offerings (WHAT)
Develop innovative new pr
Platform
Use common components
create derivative offerings.
Solutions
Create integrated and cus
solve end-to-end custome
Customers (WHO)
Discover unmet customer
underserved customer seg
Customer Experience
Redesign customer interac
points and all moments of
6.
of
T
offer something t
obvious. The seco
problem detection
an ideal version o
their steps in acqu
new product or se
Marketers need
A company m
services that digital
photo
A company m
Internet to fin
A company ca uals
with loca
A company ca for
different s stitching
and
A company c with
the iMac with
friends a
A company
deliver mail a
A company m
created generi
Will the financial rate of return meet or exceed o
In the opportunity matrix in
Figure 2.4 ( the
TV-lighting-equipment company appear in th
the lower-right cell (#4) are too minor to
consider. T and the lower-left cell (#3) are worth
monitorin tiveness and potential.
An environmental threat is a challenge posed by
the absence of defensive marketing action, would lea
trates the threat matrix facing the TV-lighting-equipm
are major, because they have a high probability of oc
To deal with them, the company needs contingency
minor and can be ignored. The firm will want to car
lower-left cells in the event they grow more serious.
INTERNAL ENVIRONMENT (STRENGTHS
thing to find attractive opportunities, and another to ness
needs to evaluate its internal strengths and weakn
Loan Bright At the Web site potential homebuyers
can get a personalized Bright made its money by selling the
homebu Wells Fargo Home Mortgage, Bank of Ameri firms
turned the data into leads for their sale
share improveme
objectives and the
tives must meet fo
They must be
objective for
increase profi by
increasing
Objectives sh on
investmen
Goals should ties
and stren
Objectives m
Other importa tion
of existing m and
high growth v
Many believe a
short-term profits
margins are seven
Microsoft, and Sa
Strategic
Goals indicate wh
Every business mu
a compatible techn
STRATEGIC ALLIANCES Even giant companie
achieve leadership, either nationally or globally, with
national companies that complement or leverage thei
Just doing business in another country may req joint
venture with a local firm, or buy from local su
ments. Many firms have developed global
strategic build the better global network. The
Star Allia Lufthansa, United Airlines, Singapore
Airlines, Air huge global partnership that allows
travelers to mak destinations.
Many strategic alliances take the form of marketing
Product or service alliances—One company lic
companies jointly market their complementary industry
is a complicated combination of cards America, credit
card companies such as Visa, an
Promotional alliances—One company agrees t
product or service. McDonald’s teamed up with to
current Disney films as part of its meals for ch
Logistics alliances—One company offers logist
Warner Music Group and Sub Pop Records c
(ADA) in 1993 as a joint venture to distribute a ent
labels. ADA is the leading “indie” distribut physical
and digital product.
Pricing collaborations—One or more companie and
rental car companies often offer mutual pric
20.
Ability to produce on time
_____
__
21.
Technical manufacturing skill
_____
__
Organization
_____
__
22.
Visionary, capable leadership
23.
Dedicated employees
_____
__
24.
Entrepreneurial orientation
_____
__
25.
Flexible or responsive
_____
__
Companies
ne
their strengths an greater sales impac to develop organi form and
manage Both pharmace It’s estimated that through acquisitio
operator, Vodafone
Vod
source ers. Wi create
leads to higher growth and profits, which leads to
more investment, and so on. This virtuous circle spel
According to McKinsey & Company, strategy is o
with the letter s—in successful business practice.
systems—are considered the “hardware” of
success. values—are the “software.”
The first “soft” element, style, means company e
and behaving. The second, skills, means employe
company’s strategy. Staffing means the company
and assigned them to the right jobs. The fourth
elem same guiding values. When these elements
are prese strategy implementation.
42
Feedback and Control
A company’s strategic fit with the environment will ine
changes faster than the company’s seven Ss. Thus, a co
ness. Peter Drucker pointed out that it is more importan “to
do things right”—to be efficient. The most successf Once an
organization fails to respond to a change to recapture its lost
position. Consider KB Toys. Fou
pany successfully reinvented itself many times, first
by by anticipating the growth of shopping malls. The
fi the world but ultimately crumbled due to competitio
tion of eToys. The company declared bankruptcy in 1
again file bankruptcy and liquidate its assets in late 2
Although the ex one
year in anywhe
plans, whereas cor
effectively, every pa
post its marketing
on changes. A mar
Executive su
contents and
Situation an
competitors, how
big is it, will use
all th
Marketing st cial
objective
positioning. sales,
finance,
Financial pro
break-even a
category, and
categories. Th how
many ye
A more co
(optimistic, p under
an assu
threats, and opportunities. As the plan is put into effe
toward objectives and identify areas for improvement.
Finally, marketing research helps marketers learn
expectations, perceptions, satisfaction, and loyalty. T
marketing research will be conducted and when, as w
The Role of Relationships
Although the marketing plan shows how the compa
tomer relationships, it also affects both internal and
marketing personnel work with each other and with
customers. Second, it affects how the company work
achieve the plan’s objectives. Third, it influences the
including government regulators, the media, and the all
these relationships when developing a marketing p
From Marketing Plan to Mark
Most companies create yearly marketing plans. Mar
implementation date to allow time for marketing rese
dination between departments. As each action pro
investigate any deviation from plans, and take corre
gency plans; marketers must be ready to update and a
The marketing plan should define how progress t
typically use budgets, schedules, and marketing me
and selecting and managing business partners
collaborative networks; and maximizes value de
becoming proficient at customer relationship
ment, internal resource management, and
partnership management.
Applications
Marketing Debate
What Good Is a Mission Statemen
Mission statements are often the product of much
tion and discussion. At the same time, critics cl
sometimes lack “teeth” and specificity, or do not va
from firm to firm and make the same empty promis
Take a position: Mission statements are criti
successful marketing organization versus Missio
ments rarely provide useful marketing value.
ests with the new president and CEO. O
decade, the company grew exponentially,
product launches such as patented router
platforms, and modems—which
significantly to the backbone of the
Internet. Cisco op international offices in
London and France has opened a number
of new international then. During the
1990s, Cisco acquired a fully integrated 49
companies into its core a result, the
company’s market capitali faster than for
any company in history—fro to $300 billion
between 1991 and 1999. In Cisco became
the most valuable company with market
capitalization peaking at $582 per share.
By the end of the 20th century, although t
was extremely successful, brand awarenes
Cisco was known to many for its stock pric
for what it actually did. Cisco developed part
Sony, Matsushita, and US West to co-brand
with the Cisco logo in hopes of building its na
tion and brand value. In addition, the compa
its first television spots as part of a campaign
Intel makes the micro sors found in 80 percent of
the world’s computers. Today, it is one of the most
valuable in the world, with revenues exceeding
$37 billio early days, however, Intel
microprocessors wer simply by their engineering
numbers, such as “8 “80486.” Since numbers
can’t be trademarked, c tors came out with their
own “486” chips and Inte way to distinguish itself.
Nor could consumers s products, buried deep
inside their PCs. Thus, Int hard time convincing
consumers to pay more for performance
products.
As a result, Intel created the quintessential ing
branding marketing campaign and made hi
chose a name for its latest microprocessor intr
that could be trademarked, Pentium, and launc
“Intel Inside” campaign to build brand awarene
whole family of microprocessors. This campaig
achieve higher margins and maintain a close relationship
customers, which is essential for producing products tha
true market demand. By the end of the year, Pegasus
also developed relationships with different skate shops
begin to sell some of its products through retailers.
TABLE 2.1
Target Market Forecast
T
Potential Customers
Growth
2011
Recreational
10%
19,142,500
Fitness
15%
6,820,000
Speed
10%
387,500
Hockey
6%
2,480,000
Extreme
4%
2,170,000
Total
10.48%
31,000,000
*Compound Annual Growth Rate
Source: Adapted from a sample plan provided by and copyrighted by Palo Alto Software,
dedication to the sport will provide it with the nee tion
to produce insightfully designed products.
Customer service. Exemplary service is requ a
sustainable business that has a loyal customer
2.1.3 Market Trends
Pegasus will distinguish itself by marketing produc
ously available to skaters. The emphasis in the
pas sell skates and very few replacement parts.
Th skaters is not restricted to any one single
country, age group, so there is a world market.
Pegasus for virtually every group of skaters. The
fastest-g ment of this sport is the fitness skater.
Therefore, t is being directed toward this group.
BladeBoot users to enter establishments without
having to skates. BladeBoots will be aimed at the
recreation largest segment. SkateAids, on the
other hand, everyone.
The sport of skating will also grow through Skat sport
is primarily for the medium-to-advanced sk growth
potential is tremendous. The sails that Pegas
factured have been sold in Europe, following a patt
windsurfing. Windsailing originated in Santa Monic
take off until it had already grown big in Europe.
2.6 Critical Issues
As a start-up business, Pegasus is still in the early sta
critical issues are for Pegasus to:
Establish itself as the premier skating accessory comp
Pursue controlled growth that dictates that payroll exp
will never exceed the revenue base. This will help prot
against recessions.
Constantly monitor customer satisfaction, ensuring tha
the growth strategy will never compromise service and
faction levels.
3.0 Marketing Strategy
The key to the marketing strategy is focusing on the spee
and fitness, and recreational skaters. Pegasus can cov
80% of the skating market because it produces product
toward each segment. Pegasus is able to address all of t
ent segments within the market because, although each is
distinct in terms of its users and equipment, its prod useful
to all of the different segments.
Advertising and promotion. Several differen will
be used for the advertising effort.
Customer service. Pegasus will strive to ach
marked levels of customer care.
3.8 Marketing Research
Pegasus is blessed with the good fortune of being l
center of the skating world: Venice, California. It w
leverage this opportune location by working with ma
ferent skaters that live in the area. Pegasus was abl
its products not only with its principals, who are a
skaters, but also with the many other dedicated users
located in Venice. The extensive product testi variety
of users provided Pegasus with valuable prod and
has led to several design improvements.
4.0 Financials
This section will offer the financial overview of
Pega marketing activities. Pegasus will address
break-e sales forecasts, expense forecast, and
indicate how ties link to the marketing strategy.
Contribution Margin
$398,725
$544,652
$6
Contribution Margin/Sales
75.42%
78.40%
5.0 Controls
The purpose of Pegasus’ marketing plan is to serve as
a the organization. The following areas will be
monitored t performance:
Revenue: monthly and annual
Expenses: monthly and annual
In This Chapter, We Will Addre
the Following Questions
What are the components of a modern
marketing system?
What are useful internal records for such a system
What makes up a marketing intelligence system?
What are some influential macroenvironment deve
How can companies accurately measure and fore
response.
Components of a M
Marketing Informa
The major responsibility for identifying significant
marketers. Marketers have two advantages for the
task tion, and time spent interacting with
customers an groups. Some firms have marketing
information s wants, preferences, and behavior.
Largest refugee population
Highest divorce rate
Highest color TV ownership per 100 households
Mobile telephone subscribers per capita
Highest cinema attendance
Biggest beer drinkers per capita
Biggest wine drinkers per capita
Highest number of smokers per capita
Highest GDP per person
Largest aid donors as % of GDP
Most economically dependent on agriculture
Highest population in workforce
Highest percent of women in workforce
Most crowded road networks
Most deaths in road accidents
Most tourist arrivals
Highest life expectancy
Highest diabetes rate
Source: CIA World Fact Book,
https://www.cia.gov/library/publications/the-world-factbo
The company’s marketing information system sho
need, what they really need, and what is economicall
terview a cross-section of marketing managers to dis
displays some useful questions to ask them.
TABLE 3.2
What decisions do you regularly make?
What information do you need to make these decis
What information do you regularly get?
What special studies do you periodically request?
What information would you want that you are not
What information would you want daily? Weekly? M
What online or offline newsletters, briefings,
blogs, on a regular basis?
What topics would you like to be kept informed of?
What data analysis and reporting programs would
What are the four most helpful improvements
that information system?
consu vendor-tion,
an averag
Panasonic’s new vendormanaged inventory system
met with marketplace
success, including from
retailers.
illustration: “If yo
a red one, the
sal the yellow
Musta yellow
Mustangs.”
ship. Knowing so much about consumers allows
Best precision marketing and customer-triggered
incentive positive response rates.
8
Marketing Intellige
The Marketing Intelligence S
A marketing intelligence system is a set of procedu
everyday information about developments in the m
system supplies results data, but the marketing int
Marketing managers collect marketing intelligence i
ing books, newspapers, and trade publications; talki
monitoring social media on the Internet; and meetin
Before the Internet, sometimes you just had to
competition. This is what oil and gas entrepreneu
learned about a rival’s drilling activity, Pickens recalls
[the rival’s] drilling floor from a half mile away with
there wasn’t anything they could do about it. Our sp
They would count them; each [drill] joint was 30 fee
be able to tally the depth of the well.” Pickens knew
would be for his rival to get the oil or gas up to the
sur an immediate competitive advantage.
9
Set up a cust
largest, most
GlaxoSmithK far
more than loss pill
to wh
Take advant an indepth l changing
fam July 1, 2008)
sumer surve BMW,
and S address
infor specific clust
Purchase info
include firms
information media.
They their own. Biz
analysis of ne social
media s
Collecting
Thanks to the exp
cussion forums, c
and disseminates a news bulletin to marketing man
works best when it is closely coordinated with the dec
ravioli the “w
A megatrend form,
and onc
To help mark firms
offer s nationally
ea “anti-bigness A
new market nically
feasibl
Identifyin
The end of the fi
decline of the stoc
unemployment; c
deterioration in t
events were acco
foundly influence
Firms must mo
cultural, natural, t
that their interacti
growth (demogra
consumers to call
products (technol
behavior (social-c
If the world were a village of 100 people:
61 villagers would be Asian (of that, 20 would be Ch
African, 11 would be European, 8 would be Latin or and
only one of the villagers would be from Australia
At least 18 villagers would be unable to read or
writ 16 would be online on the Internet.
18 villagers would be under 10 years of age and 11
an equal number of males and females.
There would be 18 cars in the village.
63 villagers would have inadequate sanitation.
32 villagers would be Christians, 20 would be Musli 16
would be non-religious, and the remaining 12 w
30 villagers would be unemployed or underemploye
work in agriculture (primary sector), 14 would work ing
28 would work in the service sector (tertiary sec
53 villagers would live on less than two U.S. dollars a
would smoke, and 14 villagers would be obese.
By the end of a year, one villager would die
and two would climb to 101.
Source: David J. Smith and Shelagh Armstrong, If the World
Were a Village: A Press, 2002).
having to pay the full price the PC would normally
command. payment runs out, the PC stops
operating and the user prepay restart it.
Other firms find “reverse innovation” advantages by d
products in countries like China and India and then distribut
globally. After GE successfully introduced a $1,000 handhel
cardiogram device for rural India and a portable, PC-based u
older. Some mark who travel throug become adults (ro values,
preferences
ETHNIC AND extreme is Japan, 25 million people 2000 census,
the U Hispanic. The Hisp the population by and Cuban (0.4 p
Chinese are the larg
The growth of Hispanics made u
HOUSEHOLD PATTERNS The traditional h
children (and sometimes grandparents). Yet by 2010,
of a married couple with children under 18. Other h
single-parent families (8 percent), childless married c
with nonrelatives only (5 percent), and other family s
More people are divorcing or separating, choosin
without intending to have children. Each group h single,
separated, widowed, and divorced may n smaller
appliances, furniture, and furnishings; and Nontraditional
households are growing more rap and marketing experts
estimate that the gay and lesb 8 percent of the total U.S.
population, higher in urb holds have experienced
change. Boomer dads marry shop more, and are much
more active in raising the high-concept Bugaboo stroller
designed a model with the high-end vacuum company, is
appealing to dads’ i lutionary technology. Before Dyson
entered the U.S. m uum cleaner sales. Now they make
up 40 percent of D
The Economic Environment
The available purchasing power in an economy depe
and credit availability. As the recent economic dow
purchasing power can have a strong impact on busin
are geared to high-income and price-sensitive consu