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CONTENTS

Preface xxix

PART 1 U n d e r s t a n d i n g M a r k e t i n g M a n a g e m e n t 2

Chapter 1 Defining Marketing for the 21st Century 3

The Impor tance of Marke t ing 4

The Scope of Marke t ing 5

What Is Marketing? 5

MARKETING MEMO Marketers' Frequently Asked Questions 6

Exchange and Transactions 6

What Is Marketed? 8

Who Markets? 10

MARKETING INSIGHT New Consumer Capabil i t ies 11

How Business and Marketing Are Changing 13

MARKETING M E M O The Ten Rules of Radical Market ing 13

Company Or ien ta t ions Toward the Marketp lace 15

The Production Concept 15

The Product Concept 15

The Selling Concept 15

The Marketing Concept 16

The Holistic Marketing Concept 16

MARKETING INSIGHT The Internet Advantage 17

Fundamental Marke t ing Concepts, Trends, and Tasks 24

Core Concepts 24

Shifts in Marketing Management 27

Marketing Management Tasks 29

Summary 31

Applications 31

Notes 32

Chapter 2 Developing Marketing Strategies and Plans 35

Market ing and Customer Value 36

The Value Delivery Process 36

The Value Chain 38

Core Competencies 39

A Holistic Marketing Orientat ion and Customer Value 40

The Central Role of Strategic Planning 41

MARKETING INSIGHT Views on Market ing f rom Chief

Executive Officers 42

MARKETING INSIGHT Keys to Long-Term Market

Leadership 43

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Corpora te and Division Strategic Planning 44

Defining the Corporate Mission 44

Defining the Business 45

Assessing Growth Opportuni t ies 47

Organization and Organizational Culture 50

Business Unit Strategic Planning 51

The Business Mission 51

SWOT Analysis 52

Goal Formulation 54

MARKETING M E M O Checklist for Performing

Strengths/Weaknesses Analysis 55

Strategic Formulation 56

Program Formulation and Implementation 58

MARKETING INSIGHT Marketing's Contr ibut ion to

Shareholder Value 58

Feedback and Control 59

Product Planning: The Nature and Contents of a Marke t ing

Plan 60

Contents of the Marketing Plan 60

TING M E M O Market ing Plan Criteria 61

Summary 67

Applications 67

Notes 68

PART 2 C a p t u r i n g M a r k e t i n g Ins ights 70

Chapter 3 Gathering Information and Scanning the Environment 71

Components of a Modern Marke t ing In format ion System 72

Internal Records and Marke t ing Intel l igence 73

The Order-to-Payment Cycle 73

Sales Information Systems 73

Databases, Data Warehousing, and Data Mining 74

The Marketing Intelligence System 74

MARKETING INSIGHT Putt ing Data t o Work wi th Business

Integrat ion Software 75

Analyz ing the Macroenv i ronment 77

MARKETING M E M O Clicking on the Compet i t ion 77

Needs and Trends 77

MARKETING INSIGHT Ten Megatrends Shaping the Consumer Landscape 78

Identifying the Major Forces 78

The Demograph ic Envi ronment 79

Worldwide Population Growth 79

Population Age Mix 80

Ethnic and Other Markets 81

Educational Groups 83

Household Patterns 83

Geographical Shifts in Population 84

Other Major Macroenv i ronments 85

Economic Environment 85

Social-Cultural Environment 87

Natural Environment 89

MARKETING INSIGHT Green Market ing 91

Technological Environment 92

Political-Legal Environment 93

Summary 95

Applications 96

Notes 97

Chapter 4 Conducting Marketing Research and Forecasting Demand 101

The Marke t ing Research System 102

The Marke t ing Research Process 103

Step 1: Define the Problem, the Decision Alternatives, and the

Research Objectives 104

Step 2: Develop the Research Plan 104

MARKETING INSIGHT Conduct ing Informative Focus

Groups 106

MARKETING M E M O Questionnaire Dos and Don'ts 107

MARKETING INSIGHT Get t ing into Consumers' Heads with Quali tat ive Research 109

Step 3: Collect the Information 112

MARKETING M E M O Pros and Cons of Onl ine Research 113

MARKETING INSIGHT Global Online Market Research

Challenges 114

Step 4: Analyze the Information 114

Step 5: Present the Findings 114

Step 6: Make the Decision 115

Overcoming Barriers to the Use of Marketing Research 116

Measur ing Marke t ing Product iv i ty 116

Marketing Metrics 117

MARKETING INSIGHT Seeing the Big Picture and Getting

to the Bottom Line in Marketing 117

Measuring Marketing Plan Performance 119

Profitability Analysis 122

Marketinq-Mix Model ing 125 3 3 XIII

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Forecast ing and Demand Measurement 125

The Measures of Market Demand 126

A Vocabulary for Demand Measurement 127

Estimating Current Demand 130

Estimating Future Demand 132

Summary 134

Applications 135

Notes 136

PART 3 C o n n e c t i n g w i t h C u s t o m e r s 138

Chapter 5 Creating Customer Value, Satisfaction, and Loyalty 139

Bui ld ing Customer Value, Sat isfact ion, and Loyalty 140

Customer Perceived Value 141

Total Customer Satisfaction 144

Measuring Satisfaction 145

Product and Service Quality 146

Total Quality Management 147

Maximiz ing Customer Li fet ime Value 148

Customer Profitability 149

Measuring Customer Lifetime Value 150

Customer Equity 151

Cu l t i va t ing Customer Relationships 152

Customer Relationship Management (CRM) 152

MARKETING INSIGHT Progress and Priorities in Customer

Equity Management 153

At t ract ing, Retaining, and Growing Customers 154

MARKETING M E M O How to Handle Customer Complaints 156

Building Loyalty 157 Reducing Customer Defection 158

Forming Strong Customer Bonds 159

M E M O Asking Questions when Customers

Leave 159

MARKETING M E M O Forming Strong Customer Bonds 160

Customer Databases and Database Marke t ing 162

Customer Databases 162

Data Warehouses and Datamining 163

The Downside of Database Marketing and CRM 165

MARKETING INSIGHT Succeeding at CRM 167

Summary 167

Applications 168

Notes 169

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Chapter 6 Analyz ing Consumer Marke ts 173

What Influences Consumer Behavior? 174

Cultural Factors 174

MARKETING INSIGHT Consumer Trends for the Future 176

Social Factors 176

MARKETING INSIGHT Market ing to Cultural Market

Segments 178

Personal Factors 180

MARKETING M E M O The Average American Consumer Quiz 181

Key Psychological Processes 184

Motivat ion: Freud, Maslow, Herzberg 184

Perception 185

Learning 187

Memory 187

The Buying Decision Process: The Five-Stage Mode l 191

Problem Recognition 191

Information Search 191

Evaluation of Alternatives 193

MARKETING M E M O App ly ing Customer Value Analysis 196

Purchase Decisions 196

Postpurchase Behavior 198

Other Theories of Consumer Decision Making 199

Level of Consumer Involvement 200

Decision Heuristics and Biases 201

MARKETING M E M O Decision Traps 202

Mental Accounting 202

Profiling the Customer Buying Decision Process 203

Summary 203

Appl ica t ions 203

Notes 205

Chapter 7 Analyz ing Business Marke ts 209

What Is Organizat ional Buying? 210

The Business Market Versus the Consumer Market 210

MARKETING INSIGHT Big Sales to Small Business 210

Buying Situations 212

MARKETING M E M O Guidelines for Selling to Small Business 212

Systems Buying and Selling 213

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Part ic ipants in the Business Buying Process 214

The Buying Center 214

Buying Center Influences 215

Buying Center Targeting 215

The Purchasing/Procurement Process 217

Purchasing Orientations 218

Types of Purchasing Processes 218

Purchasing Organization and Administrat ion 219

Stages in the Buying Process 219

Problem Recognition 220

General Need Description and Product Specification 221

Supplier Search 222

E-Procurement 222

MARKETING INSIGHT The Business-to-Business (B2B)

Cyberbuying Bazaar 223

Proposal Solicitation 225

Supplier Selection 225

MARKETING M E M O Methods of Assessing Customer Value 226

Order-Routine Specification 227

Performance Review 227

MARKETING INSIGHT Establishing Corporate Trust

and Credibi l i ty 228

Manag ing Business-to-Business Customer Relationships 228

The Benefits of Vertical Coordination 228

Business Relationships: Risks and Opportunism 230

Inst i tu t iona l and Government Markets 230

MARKETING M E M O Selling Tech to the Government 233

Summary 234

Applications 234

Notes 235

Chapter 8 Identifying Marke t Segments and Targets 239

Levels of Marke t Segmentat ion 240

Segment Marketing 240

Niche Marketing 242

Local Marketing 244

MARKETING INSIGHT Experiential Market ing 245

Customerization 246

Segment ing Consumer Markets 247

Geographic Segmentation 247

Demographic Segmentation 249

Psychographic Segmentation 252

MARKETING INSIGHT Market ing t o Generat ion Y 253

MARKETING M E M O Cheat Sheet for 21-Year-Olds 253

Behavioral Segmentation 254

Bases fo r Segment ing Business Markets 258

Marketing to Small Businesses 258

Sequential Segmentation 260

Market Target ing 261

Effective Segmentation Criteria 262

Evaluating and Selecting the Market Segments 262

Addi t ional Considerations 264

Summary 268

Applications 268

Notes 269

PART 4 Bu i l d ing S t r o n g Brands 272

Chapter 9 Creating Brand Equity 273

What Is Brand Equity? 274

The Role of Brands 274

MARKETING M E M O The Brand Report Card 275

The Scope of Branding 275

Defining Brand Equity 276

Brand Equity as a Bridge 278

Brand Equity Models 278

Bui ld ing Brand Equity 281

Choosing Brand Elements 281

Designing Holistic Marketing Activit ies 284

MARKETING INSIGHT App ly ing Permission

Market ing 285

Leveraging Secondary Associations 287

Measuring Brand Equity 288

MARKETING INSIGHT The Brand Value Chain 288

Brand Audits 289

Brand Tracking 290

Brand Valuation 290

Managing Brand Equity 291

Brand Reinforcement 291

MARKETING INSIGHT What Is a Brand Worth? 292

MARKETING M E M O Twenty-First-Century

Branding 294

Brand Revitalization 294

Brand Crisis 295 xvii

Devising a Branding St rategy 296

Branding Decision: To Brand or Not to Brand? 297

Brand Extensions 297

Brand Portfolios 301

MARKETING M E M O Research Insights on Brand

Extensions 301

Summary 303

Applications 303

Notes 304

Chapter 10 Crafting the Brand Positioning 309

Deve lop ing and Communicat ing a Posit ioning Strategy 310

Compet i t ive Frame of Reference 311

MARKETING INSIGHT Value Disciplines Positioning 311

Points-of-Parity and Points-of-Difference 312

Establishing Category Membership 314

Choosing POPs and PODs 315

Creating POPs and PODs 316

i M E M O Wri t ing a Positioning Statement 316

Di f ferent ia t ion Strategies 318

MARI ETING M E M O How to Derive Fresh Consumer Insights to

Differentiate Products and Services 318

Product Differentiation 319

Personnel Differentiation 319

Channel Differentiation 320

Image Differentiation 320

Product Life-Cycle Marke t ing Strategies 321

MARKETING M E M O Exceeding Customer Expectations 322

Product Life Cycles 322

Style, Fashion, and Fad Life Cycles 323

Marketing Strategies: Introduction Stage and the Pioneer

Advantage 324

Marketing Strategies: Growth Stage 325

Marketing Strategies: Maturity Stage 326

Marketing Strategies: Decline Stage 329

The Product Life-Cycle Concept: Crit ique 331

Marke t Evolut ion 331

MARKETING INSIGHT Dynamics of Attribute Competition 334

Summary 335

Applications 335

Notes 337 xviii

Chapter 11 Dealing with Competition 341

Compet i t i ve Forces 342

Ident i fy ing Compet i to rs 343

Industry Concept of Compet i t ion 344

Market Concept of Compet i t ion 346

Analyzing Compet i to rs 347

Strategies 347

Objectives 347

Strengths and Weaknesses 347

Selecting Competi tors 348

Compet i t i ve Strategies fo r Marke t Leaders 349

MARKETING M E M O Benchmarking to Improve Compet i t ive

Performance 349

Expanding the Total Market 350

MARKETING INSIGHT When Your Compet i to r Delivers More for Less 351

Defending Market Share 352

Expanding Market Share 355

Other Compet i t i ve Strategies 355

Market-Challenger Strategies 355

Market-Follower Strategies 359

MARKETING M E M O Making Smaller Better 360

Market-Nicher Strategies 362

MARKETING M E M O Niche Specialist Roles 364

MARKETING M E M O Strategies for Entering Markets Held

by Incumbent Firms 364

Balancing Customer and Compet i t o r Or ien ta t ions 365

Competi tor-Centered Companies 365

Customer-Centered Companies 365

Summary 366

Applications 366

Notes 367

PART 5 Shap ing t h e M a r k e t O f f e r i n g s 370

Chapter 12 Setting Product Strategy 371

Product Characterist ics and Classif ications 372

Product Levels: The Customer Value Hierarchy 372

Product Classifications 373

Di f ferent ia t ion 376

Product Differentiation 376

Design: The Integrative Force 377

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Services Differentiation 378

MARKETING INSIGHT Design as a Powerful Market ing

Tool 379

Product and Brand Relationships 380

The Product Hierarchy 380

Product Systems and Mixes 381

Product-Line Analysis 382

Product-Line Length 384

MARKETING INSIGHT Rationalizing Brand Portfol ios

for Growth 387

Product-Mix Pricing 387

Co-Branding and Ingredient Branding 390

Packaging, Label ing, Warrant ies, and Guarantees 392

MARKETING M E M O Making Ingredient Branding Work 392

Packaging 393

Labeling 394

Warranties and Guarantees 395

Summary 396

Applications 397

Notes 398

Chapter 13 Designing and Managing Services 401

The Nature of Services 402

Service Industries Are Everywhere 402

Categories of Service Mix 403

Distinctive Characteristics of Services 405

Marke t ing Strategies for Service Firms 408

A Shifting Customer Relationship 408

MARKETING M E M O A Service Market ing Checklist 409

Holistic Marketing for Services 410

MARKETING INSIGHT Voice Mail Hell 410

Managing Service Qual i ty 412

Customer Expectations 412

Best Practices of Service-Quality Management 414

MARKETING INSIGHT The Role of Expectations in Service-

Quali ty Perceptions 415

M A R K E T I N G M E M O Assessing E-Service Quali ty 416

MARKETING M E M O Recommendations for Improving

Service Quality 417

MARKETING M E M O Get t ing Self-Service Kiosks Off the

Ground 418