M a n a g i n g Service Brands 421 Differentiating Services 422 Developing Brand Strategies for Services M a n a g i n g P r o d u c t S u p p o r t Services 423 424 Identifying and Satisfying Customer Needs Postsale Service Strategy Summary 425 426 Applications Notes 425 426 427 Chapter 14 Developing Pricing Strategies and Programs U n d e r s t a n d i n g Pricing 431 432 MARKETING INSIGHT The Internet and Pricing Effects on Sellers and Buyers 433 How Companies Price 433 Consumer Psychology and Pricing S e t t i n g t h e Price 434 436 Step 1: Selecting the Pricing Objective 437 M A R K E T I N G M E M O When t o Use Price Cues 437 Step 2: Determining Demand Step 3: Estimating Costs 439 441 M A R K E T I N G M E M O Three Myths about Pricing Strategy 441 Step 4: Analyzing C o m p e t i t o r s ' Costs, Prices, and Offers Step 5: Selecting a Pricing M e t h o d Step 6: Selecting the Final Price MARKETING INSIGHT A d a p t i n g t h e Price 444 448 Stealth Price Increases 449 450 Geographical Pricing (Cash, Countertrade, Barter) Price Discounts and Allowances Promotional Pricing Differentiated Pricing 450 451 452 453 I n i t i a t i n g and R e s p o n d i n g t o Price Changes Initiating Price Cuts 443 455 455 Initiating Price Increases 455 MARKETING INSIGHT Smart Pricing Takes Off 456 M A R K E T I N G M E M O M a r k e t i n g Strategies t o A v o i d Raising Prices 458 Reactions to Price Changes 458 Responding to Competitors' Price Changes Summary 461 Applications Notes 463 461 460 PART 6 D e l i v e r i n g Value 466 C h a p t e r 15 D e s i g n i n g and M a n a g i n g Value N e t w o r k s and Channels M a r k e t i n g Channels and Value N e t w o r k s The Importance of Channels Channel Development 467 468 468 469 M A R K E T I N G M E M O Multichannel Shopping Checklist 470 Value Networks 470 The Role o f M a r k e t i n g Channels Channel Functions and Flows Channel Levels 472 472 474 MARKETING INSIGHT M-Commerce Opens Up New O p p o r t u n i t i e s for Marketers Service Sector Channels 476 Channel-Design Decisions 476 Analyzing Customers' Desired Service O u t p u t Levels Establishing Objectives and Constraints Identifying Major Channel Alternatives M A R K E T I N G INSIGHT 475 476 477 477 How Carmax is Transforming the A u t o Business 479 Evaluating the Major Alternatives C h a n n e l - M a n a g e m e n t Decisions Selecting Channel Members Training Channel Members 481 483 483 483 Motivating Channel Members 483 Evaluating Channel Members 485 Modifying Channel Arrangements Channel I n t e g r a t i o n and Systems Vertical Marketing Systems 485 486 486 M A R K E T I N G M E M O Designing a Customer-Driven Distribution System 487 Horizontal Marketing Systems 488 Multichannel Marketing Systems 489 C o n f l i c t , C o o p e r a t i o n , and C o m p e t i t i o n Types of Conflict and Competition Causes of Channel Conflict 491 Managing Channel Conflict 492 491 491 Legal and Ethical Issues in Channel Relations E-Commerce M a r k e t i n g Practices Pure-Click Companies MARKETING INSIGHT 494 Burst of the Dot-Com Bubble 495 Brick-and-Click Companies xxii 493 493 495 Summary 497 Applications Notes 498 499 Chapter 16 Managing Retailing, Wholesaling, and Logistics Retailing 503 504 Types of Retailers 504 New Models for Success 506 MARKETING INSIGHT Franchise Fever 508 M A R K E T I N G M E M O Helping Stores t o Sell 509 Marketing Decisions 509 MARKETING INSIGHT Making Labels Smarter 513 M A R K E T I N G M E M O W h a t W o m e n Want f r o m Customer Service Trends in Retailing Private Labels 517 518 House Brands 518 The Private Label Threat Wholesaling 514 519 520 The Growth and Types of Wholesaling Wholesaler Marketing Decisions Trends in Wholesaling M a r k e t Logistics 521 521 522 523 M A R K E T I N G M E M O Strategies for High-Performance Wholesaler-Distributors Integrated Logistics Systems Market-Logistics Objectives Market-Logistics Decisions Organizational Lessons Summary PART 7 524 525 526 529 530 Applications Notes 524 530 532 C o m m u n i c a t i n g Value 534 Chapter 17 Designing and Managing Integrated Marketing Communications 535 The Role of M a r k e t i n g C o m m u n i c a t i o n s 536 Marketing Communications and Brand Equity The Communications Process Models 539 D e v e l o p i n g Effective C o m m u n i c a t i o n s 541 Identify the Target Audience 541 Determine the Communications Objectives Design the Communications 536 544 542 MARKETING INSIGHT Celebrity Endorsements as a Strategy 547 Select the Communications Channels MARKETING INSIGHT 548 Buzz Marketing 549 Establish t h e Total Marketing Communications Budget MARKETING INSIGHT 552 H i t t i n g the Bull's Eye in a PostMass-Market World 553 D e c i d i n g on t h e M a r k e t i n g C o m m u n i c a t i o n s Mix 554 Characteristics of the Marketing Communications Mix 555 Factors in Setting the Marketing Communications Mix 556 Measuring Communication Results 557 Managing the Integrated Marketing Communications Process 558 Coordinating Media Implementing IMC 558 560 MARKETING INSIGHT Coordinating Media t o Build Brand Equity 560 M A R K E T I N G M E M O How Integrated Is Your IMC Program? 562 Summary 562 Applications Notes 563 564 Chapter 18 Managing Mass Communications: Advertising, Sales Promotions, Events, and Public Relations 567 D e v e l o p i n g and M a n a g i n g an A d v e r t i s i n g P r o g r a m Setting the Objectives 568 568 Deciding on the Advertising Budget Developing the Advertising Campaign 569 570 M A R K E T I N G M E M O Print AD Evaluation Criteria D e c i d i n g on M e d i a and M e a s u r i n g Effectiveness Deciding on Reach, Frequency, and Impact Choosing A m o n g Major Media Types Alternative Advertising Options Selecting Specific Vehicles MARKETING INSIGHT 573 574 574 575 576 579 Playing Games w i t h Brands 581 Deciding on Media Timing and Allocation Evaluating Advertising Effectiveness 581 583 How t o Sell in Hard Times 584 MARKETING INSIGHT Understanding the Effects of Advertising and Promotion xxiv 585 Sales P r o m o t i o n Objectives 585 585 Advertising versus Promotion Major Decisions 586 587 Events and Experiences Events Objectives Major Decisions 591 591 592 Public Relations 593 Marketing Public Relations 594 Major Decisions in Marketing PR Summary Applications Notes 595 596 597 598 Chapter 19 Managing Personal Communications: Direct M a r k e t i n g and Personal Selling Direct M a r k e t i n g 603 604 The Benefits of Direct Marketing Direct Mail 604 606 M A R K E T I N G M E M O The Public and Ethical Issues in Direct Marketing 606 M A R K E T I N G M E M O When Your Customer Is a Committee 608 Catalog Marketing Telemarketing 609 611 Other Media for Direct-Response Marketing Interactive Marketing 612 The Benefits of Interactive Marketing Designing an Attractive W e b Site 613 613 M A R K E T I N G M E M O Just Your Type Placing Ads and Promotion Online E-Marketing Guidelines 614 616 Sales Force Objectives and Strategy Sales Force Size 614 615 D e s i g n i n g t h e Sales Force Sales Force Structure 611 617 618 618 MARKETING INSIGHT Major A c c o u n t M a n a g e m e n t Sales Force Compensation M a n a g i n g t h e Sales Force 619 620 Recruiting and Selecting Representatives 620 Training and Supervising Sales Representatives Sales Rep Productivity 621 Motivating Sales Representatives 623 Evaluating Sales Representatives 624 620 619 Principles of Personal Selling The Six Steps 625 626 MARKETING INSIGHT Principles of Customer-Oriented Selling 627 Negotiation 627 Relationship Marketing Summary 628 Applications Notes PART 8 628 629 630 C r e a t i n g Successful Long-Term G r o w t h Chapter 20 Introducing N e w M a r k e t Offerings 632 633 Challenges in N e w - P r o d u c t D e v e l o p m e n t MARKETING INSIGHT 634 Iridium Disconnects with Global Customers Organizational Arrangements 637 637 M A R K E T I N G M E M O Lessons for New-Product Success 638 Budgeting for New-Product Development Organizing New-Product Development 639 M a n a g i n g t h e D e v e l o p m e n t Process: Ideas Idea Generation 638 640 640 M A R K E T I N G M E M O Ten Ways t o Great New-Product Ideas 642 Idea Screening 643 MARKETING INSIGHT Developing Successful High-Tech Products 644 M a n a g i n g t h e D e v e l o p m e n t Process: Concept t o Strategy Concept Development and Testing Marketing Strategy Business Analysis 645 648 649 M a n a g i n g t h e D e v e l o p m e n t Process: D e v e l o p m e n t t o Commercialization 651 Product Development Market Testing 651 653 Commercialization 655 The C o n s u m e r - A d o p t i o n Process 658 Stages in the A d o p t i o n Process 659 Factors Influencing the A d o p t i o n Process Summary 661 Applications Notes vi 663 661 659 645 Chapter 21 Tapping into Global Markets 667 C o m p e t i n g on a G l o b a l Basis 668 D e c i d i n g W h e t h e r t o Go A b r o a d 669 D e c i d i n g Which M a r k e t s t o Enter How Many Markets t o Enter 670 670 Developed versus Developing Markets Regional Free Trade Zones 673 Evaluating Potential Markets 673 D e c i d i n g H o w t o Enter t h e M a r k e t Indirect and Direct Export 674 674 Using a Global W e b Strategy Licensing 671 675 676 Joint Ventures 676 Direct Investment 677 D e c i d i n g on t h e M a r k e t i n g P r o g r a m Product 677 678 MARKETING INSIGHT Global Standardization or Adaptation? 679 M A R K E T I N G M E M O The Ten C o m m a n d m e n t s of Global Branding MARKETING INSIGHT Communications Price 680 Establishing Global Service Brands 681 682 684 Distribution Channels 685 C o u n t r y - o f - O r i g i n Effects 686 Building Country Images 686 Consumer Perceptions of Country of Origin MARKETING INSIGHT The Ups and Downs of Brand America 688 D e c i d i n g on t h e M a r k e t i n g O r g a n i z a t i o n Export Department International Division 689 689 690 Applications Notes 688 689 Global Organization Summary 686 690 691 Chapter 22 Managing a Holistic Marketing Organization Trends in M a r k e t i n g Practices Internal M a r k e t i n g 695 696 697 Organizing the Marketing Department 697 xxvii M A R K E T I N G M E M O Characteristics of Company Departments That Are Truly Customer-Driven Relations with Other Departments 698 703 Building a Creative Marketing Organization MARKETING INSIGHT The Marketing CEO 705 Socially Responsible M a r k e t i n g MARKETING INSIGHT 706 Fueling Strategic Innovation Corporate Social Responsibility Cause-Related Marketing 706 707 Socially Responsible Business Models Social Marketing 704 709 709 712 M A R K E T I N G M E M O Making a Difference Marketing Implementation Evaluation and C o n t r o l Efficiency Control 717 Strategic Control 719 713 715 716 M A R K E T I N G M E M O Marketing Effectiveness Review Instrument The F u t u r e o f M a r k e t i n g 720 721 M A R K E T I N G M E M O Major M a r k e t i n g Weaknesses Summary 726 Applications Notes Appendix Glossary 726 727 A1 G1 Image Credits Name Index C1 11 Company, Brand, and Organization index Subject Index 112 14 725 M arketing 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 fundamental 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. Firms now sell goods and services through a variety of direct and indirect channels. Mass advertising is not nearly as effective as it was. Companies are exploring new forms of communication, such as experiential, entertainment, and viral marketing. Customers are increasingly telling companies what types of product or services they want and when, where, and how they want to buy them. In response, companies have shifted gears from managing product portfolios to managing customer portfolios, compiling databases on individual customers so they can understand them better, and construct individualized offerings and messages. They are doing less product and service standardization and more niching and customization. They are replacing 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 undertaking. It drives the company's vision, mission, and strategic planning. Marketing includes decisions like who the company wants as its customers; which 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 quality materials, production makes quality products on time, and accounting measures the profitability of different customers, products, and areas. And as marketing techniques and organization have changed, so has this text. The biggest change is the addition of a co-author. Kevin Lane Keller is one of the top marketing academics of his generation. He has conducted ground-breaking research and written a highly successful text, Strategic Brand Management. He has also worked with marketing executives from companies around the globe to help them become better marketers. He brings fresh thinking and new perspectives to Marketing Management. The twelfth edition reflects a collaborative effort between the two authors with a goal of creating the best edition of Marketing Management ever. Extensive focus groups were conducted to fully understand the course and classroom needs of the instructor. Based on this input, the twelfth edition is designed to preserve the strengths of previous editions while introducing new material and organization to further enhance learning. It is dedicated to helping companies, groups, and individuals adapt their marketing strategies and management to the marketplace realities of the twenty-first century. Ill Revision Strategy for the Twelfth Edition Marketing is of interest to everyone, whether they are marketing goods, services, properties, persons, places, events, information, ideas, or organizations. As the "ultimate authority" for students and educators, Marketing Management must be kept up-to-date and contemporary. Students (and instructors) should feel that the book is talking directly to them in terms of both content and delivery. XXIX The success of Marketing Management can be attributed to its ability to maximize three dimensions that characterize the best marketing texts—depth, breadth, and relevance—as reflected by the following questions. n Depth. Does the book have solid academic grounding? Does it contain important theoretical 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? i" Relevance. Does the book engage the reader? Is the book interesting to read? Does it have lots of compelling examples? The twelfth edition builds on the fundamental strengths of past editions: n Managerial Orientation. The book focuses on the major decisions that marketing managers and top management face in their efforts to harmonize the organization's objectives, capabilities, and resources with marketplace needs and opportunities. I Analytical Approach. This book presents conceptual tools and frameworks for analyzing recurrent problems in marketing management. Cases and examples illustrate effective marketing principles, strategies, and practices. n Multidisciplinary Perspective. This book draws on the rich findings of various scientific disciplines—economics, behavioral science, management theory, and mathematics—for fundamental concepts and tools. n Universal Applications. This book applies strategic thinking to the complete spectrum of marketing: products and services, consumer 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. I Comprehensive and Balanced Coverage. This book covers all the topics an informed marketing manager needs to understand to execute strategic, tactical, and administrative marketing. N e w Themes: Holistic Marketing One major new theme in this edition is holistic marketing. Holistic marketing can be seen as the development, design, and implementation of marketing programs, processes, and activities that recognize the breadth and interdependencies involved today's marketing environment. Holistic marketing recognizes that "everything matters" with marketing and that a broad, integrated perspective is often necessary. Holistic marketing has four key dimensions: 1. Internal marketing-ensuring everyone in the organization embraces appropriate marketing principles, especially senior management. 2. Integrated marketing-ensuring that multiple means of creating, delivering and communicating value are employed and combined in the optimal manner. 3. Relationship marketing-having rich, multi-faceted relationships with customers, channel members and other marketing partners. 4. Socially responsible marketing-understanding the ethical, environmental, legal, and social effects of marketing. These four dimensions are woven throughout the book and at times spelled out explicitly. Two additional themes of this text are marketing personalization and marketing accountability. The former reflects all the attempts to make marketing more individually relevant; the latter reflects the need to understand and justify the return on marketing investments within organizations.