- - • " E S . ' - " • " • " " * * . • " " - . ; * ' !

F o u r t h E d i t i o

N o r t h w e s t e r n U n i v e r s i t y

Kevin Laine KellerD a r t m o u t h C o l l e g e

Pearson Education International

Preface 16

Part I UNDERSTANDING MARKETING MANAGEMENT 231. Defining Marketing for the Twenty-First Century 23

The Importance of Marketing 24The Scope of Marketing 24

fPZwrt Jj Marketing? 24What Is Marketed? 25What Is a Market? 26Who Markets? 21How Is Marketing Done? 21

Core Marketing Concepts 28Needs, Wants, and Demands 28Target Markets, Positioning, and Segmentation 29Offerings and Brands 29Value and Satisfaction 30Marketing Channels 30Supply Chain 30Competition 30Marketing Environment 31

The New Marketing Realities 31Major Societal Forces 31New Consumer Capabilities 32New Company Capabilities 32

Company Orientation Toward the Marketplace 32The Production Concept 32The Product Concept 33The Selling Concept 33The Marketing Concept 33The Holistic Marketing Concept 34

Marketing Management Tasks 3 8Executive Summary 39Notes 40

Contents

2. Developing and Implementing Marketing Strategiesand Plans 42Marketing and Customer Value 43

The Value Delivery Process 43The Value Chain 44Core Competencies 45A Holistic Marketing Orientation

and Customer Value 45The Central Role of Strategic Planning 41

Corporate and Division Strategic Planning 48Defining the Corporate Mission 48Defining the Business 49Assigning Resources to SBUs 50Assessing Growth Opportunities 50Organization, Organizational Culture,

and Innovation 51Business Unit Strategic Planning 51

Business Mission 51SWOT Analysis 52Goal Formulation 53Strategy Formulation 53Program Formulation and Implementation 54Feedback and Control 54

The Marketing Plan and Marketing Performance 55Contents of a Marketing Plan 55Measuring Marketing Performance 55

Executive Summary 57Notes 58

3. Understanding Markets, Market Demand, and theMarketing Environment 60Marketing Information, Intelligence, and Research 61

Internal Records 61Marketing Intelligence System 62Marketing Research System 62

Forecasting and Demand Measurement 68Which Market to Measure? 68Demand Measurement 69Company Demand and Sales Forecast 10Estimating Current Demand 10Estimating Future Demand 12

6 ••) Contents

Macroenvironmental Trends and Forces 72Demographic Environment 13Economic Environment 15Social-Cultural Environment 15Natural Environment 16Technological Environment 11Political-Legal Environment 18

Executive Summary 78Notes 79

Part II CONNECTING WITH CUSTOMERS 814. Creating Customer Value, Satisfaction,

and Loyalty 81Building Customer Value and Satisfaction 82

Customer Perceived Value 82Total Customer Satisfaction 84Monitoring Satisfaction 84Product and Service Quality 86

Maximizing Customer Lifetime Value 86Customer Profitability 86Measuring Customer Lifetime Value 88

Cultivating Customer Relationships 89Attracting and Retaining Customers 89Building Loyalty 90

Customer Databases and Database Marketing 92Data Warehouses and Datamining 93The Downside of Database Marketing

and CRM 94Executive Summary 94Notes 95

5. Analyzing Consumer Markets 98What Influences Consumer Behavior? 99

Cultural Factors 99Social Factors 99Personal Factors 101

Key Psychological Processes 103Motivation: Freud, Maslow, Herzberg 103Perception 104Learning 105Memory 105

Contents

The Buying Decision Process: The Five-Stage Model 107Problem Recognition 101Information Search 101Evaluation of Alternatives 109Purchase Decisions 110Postpurchase Behavior 110

Executive Summary 112Notes 112

6. Analyzing Business Markets 116What Is Organizational Buying? 117

The Business Market versus the Consumer Market 111Institutional and Organizational Markets 111Buying Situations 119Systems Buying and Selling 120Participants in the Business Buying Process 120The Buying Center 120Buying Center Influences 121Buying Center Targeting 122

Stages in the Buying Process 123Problem Recognition 123General Need Description and Product

Specification 123Supplier Search 124Proposal Solicitation 125Supplier Selection 125Order-Routine Specification 126Performance Review 126Building Business Relationships 126

Executive Summary 128Notes 129

7. Identifying Market Segments and Targets 132Levels of Market Segmentation 133

Segment Marketing 133Niche Marketing 133Local Marketing 134Individual Marketing 134

Segmenting Consumer and Business Markets 135Bases for Segmenting Consumer Markets 136Bases for Segmenting Business Markets 141

Contents

Market Targeting 142Effective Segmentation Criteria 143Evaluating and Selecting Market

Segments 144Additional Considerations 146

Executive Summary 147Notes 147

Part III BUILDING STRONG BRANDS 1508. Creating Brand Equity 150

What is Brand Equity? 151The Role of Brands 151The Scope of Branding 151Defining Brand Equity 152 'Brand Equity as a Bridge 153

Building Brand Equity 153Choosing Brand Elements 154Designing Holistic Marketing Activities 155Leveraging Secondary Associations 156

Measuring and Managing Brand Equity 157Brand Audits and Brand Tracking 151Brand Valuation 158Managing Brand Equity 158

Brand Strategy and Customer Equity 159Branding Decisions 160Brand Extensions 161Brand Portfolios 162Customer Equity 163

Executive Summary 164Notes 164

9. Crafting the Brand Positioning and Dealingwith Competition 169

Developing and Communicating a Positioning Strategy 170Competitive Frame of Reference 111Points-of-Parity and Points-of-

Difference 111Establishing Category Membership 112Choosing POPs and PODs 113Creating POPs and PODs 113

Contents

Differentiation Strategies 174Product Differentiation 114Services Differentiation 115Other Dimensions of Differentiation 116

Competitive Forces and Competitors 176Identifying Competitors 111Industry and Market Views of Competition 111

Analyzing Competitors 179Strategies 119Objectives 180Strengths and Weaknesses 180Selecting Competitors 180

Competitive Strategies 181Market-Leader Strategies 181Other Competitive Strategies 183Balancing Customer and Competitor

Orientations 185Executive Summary 186Notes 187

Part IV SHAPING THE MARKET OFFERINGS 19010. Setting Product Strategy and Marketing through

the Life Cycle 190Product Characteristics and Classifications 191

Product Levels 191Product Classifications 192

Product and Brand Relationships 193Product-Line Analysis 194Product-Line Length 194Line Modernization, Featuring,

and Pruning 194Co-Branding and Ingredient Branding 195

Packaging, Labeling, Warranties, and Guarantees 195Packaging 195Labeling 196Warranties and Guarantees 196

Managing New Products 197Why New Products Fail—and Succeed 191New Product Development 191

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The Consumer Adoption Process 203Stages in the Adoption Process 204Factors Influencing Adoption 204

Marketing Through the Product Life Cycle 205Product Life Cycles 205Marketing Strategies: Introduction Stage

and the Pioneer Advantage 206Marketing Strategies: Growth Stage 206Marketing Strategies: Maturity Stage 201Marketing Strategies: Decline Stage 201Critique of the Product Life-Cycle Concept 208

Executive Summary 209Notes 209

11. Designing and Managing Services 213The Nature of Services 214

Categories of Service Mix 214Distinctive Characteristics of Services 215

Marketing Strategies for Service Firms 216A Shifting Customer Relationship 211Holistic Marketing for Services 218

Managing Service Quality 220Customer Expectations 220Best Practices of Service-Quality Management 222

Managing Service Brands 224Differentiating Services 224Developing Brand Strategies for Services 224

Managing Product Support Services 225Identifying and Satisfying Customer Needs 225Post-Sale Service Strategy 226

Executive Summary 226Notes 227

12. Developing Pricing Strategies and Programs 231Understanding Pricing 232

A Changing Pricing Environment 232How Companies Price 232Consumer Psychology and Pricing 233

Setting The Price 234Step 1: Selecting the Pricing Objective 234

Contents 11

Step 2: Determining Demand 235Step 3: Estimating Costs 236Step 4: Analyzing Competitors' Costs, Prices,

and Offers 238Step 5: Selecting a Pricing Method 238Step 6: Selecting the Final Price 243

Adapting the Price 243Geographical Pricing 244Price Discounts and Allowances 244Promotional Pricing 244Differentiated Pricing 245Product-Mix Pricing 246

Initiating and Responding to Price Changes 247Initiating Price Cuts 241Initiating Price Increases 241Responding to Competitors' Price

Changes 248Executive Summary 249Notes 249

PartV DELIVERING VALUE 25213. Designing and Managing Integrated Marketing

Channels 252Marketing Channels and Value Networks 253

The Importance of Channels 253Value Networks 254

The Role of Marketing Channels 254Channel Functions and Flows 254Channel Levels 256Service Sector Channels 251

Channel-Design Decisions 257Analyzing Customers' Desired Service Output

Levels 251Establishing Objectives and Constraints 251Identifying Major Channel Alternatives 258Evaluating the Major Alternatives 259

Channel-Management Decisions 260Selecting Channel Members 260Training and Motivating Channel Members 260Evaluating Channel Members 260Modifying Channel Arrangements 261

12 Contents

Channel Integration and Systems 262Vertical Marketing Systems 262The New Competition in Retailing 263Conflict, Cooperation, and Competition 263Legal and Ethical Issues in Channel

' Relations 265E-Commerce Marketing Practices 266

Pure-Click Companies 266Brick-and-Click Companies 261M-Commerce 261

Executive Summary 267Notes 268

14. Managing Retailing, Wholesaling, and Logistics 270Retailing 271

Types of Retailers 211The New Retail Environment 212Retailer Marketing Decisions 213

Private Labels 276House Brands 216The Private Label Threat 211

Wholesaling 277Trends in Wholesaling 219Strengthening Channel Relationships 219

Market Logistics 279Integrated Logistics Systems 280Market-Logistics Objectives 281Market-Logistics Decisions 282Market Logistics Lessons 284

Executive Summary 284Notes 285

Part VI COMMUNICATING VALUE 28715. Designing and Managing Integrated Marketing

Communications 287The Role of Marketing Communications 288

The Changing Marketing CommunicationsEnvironment 288

Marketing Communications, Brand Equity,and Sales 289

Communications Process Models 289

Contents 13

Developing Effective Communications 290Identify the Target Audience 292Determine the Communications Objectives 292Design the Communications 293Select the Communications Channels 294Establish the Total Marketing Communications

Budget 296Deciding on the Marketing Communications Mix 297

Characteristics of the MarketingCommunications Mix 291

Factors in Setting the MarketingCommunications Mix 298

Measuring Communication Results 299Managing the Integrated Marketing CommunicationsProcess 299

Coordinating Media 300Implementing IMC 300

Executive Summary 301Notes 301

16. Managing Mass Communications 304

Developing and Managing an Advertising Program 305Setting the Objectives 305Deciding on the Advertising Budget 306Developing the Advertising Campaign 306Deciding on Media and Measuring

Effectiveness 301Sales Promotion 311

Sales Promotion Objectives 311Advertising versus Promotion 312Major Decisions 312

. Events and Experiences 315Events Objectives 315Major Sponsorship Decisions 316Creating Experiences 316

Public Relations 317Marketing Public Relations 311Major Decisions in Marketing PR 318

Executive Summary 319Notes 319

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17. Managing Personal Communications 324

Direct Marketing 325The Benefits of Direct Marketing 325Direct Mail 325Catalog Marketing 326Telemarketing 326Other Media for Direct-Response Marketing 321Public and Ethical Issues in Direct Marketing 321

Interactive Marketing 327Word-of-Mouth 330

Buzz and Viral Marketing 330Opinion Leaders 330Blogs 332Measuring the Effects of Word-of-Mouth 333

Personal Selling and the Sales Force 333Personal Selling and Relationship Marketing 333Designing the Sales Force 334Sales Force Objectives and Strategy 335Sales Force Structure 335Sales Force Size 336Sales Force Compensation 336

Managing the Sales Force 336Recruiting and Selecting Sales Representatives 331Training and Supervising Sales Representatives 331Sales Rep Productivity 338Motivating Sales Representatives 338Evaluating Sales Representatives 339

Executive Summary 339Notes 340

Part VII CREATING SUCCESSFUL LONG-TERM GROWTH 34518. Managing Marketing in the Global

Economy 345Competing on a Global Basis 346

Deciding Whether to Go Abroad 341Deciding Which Markets to Enter 341Deciding How to Enter the Market 348Deciding on the Marketing Program 349Country-of-Origin Effects 350

Contents 15

Glossary 363Index 369

Internal Marketing 351

Organizing the Marketing Department 351Relations with Other Departments 353

Managing the Marketing Process 353Evaluation and Control 353The Marketing Audit 355

Socially Responsible Marketing 356

Ethical, Legal, and Social Responsibility Behavior 356Cause-Related Marketing 356Sustainability 351

Executive Summary 357Notes 358