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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
Campbells, 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

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 Dont 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 marketingensuring that multiple


nicating value are employed and combined in t

Relationship marketinghaving rich, multifac


members, and other marketing partners.

Performance marketingunderstanding
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
TuckPunam
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 Obamas most powerful


massive 13.5 millionname 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 Facebooks 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,
Dominos 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

MARKETPLACES, MARKETSPACES, AND M


such as a store you shop in; the marketspace is di
Northwestern Universitys 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 cars 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 sitessuch as Do


travelers, and Moterus for bikersbring 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 Stephens viral video helped his flea market receive


unprecedented attention.

General Motors, and McDonalds in embracing c cate


with the public and employees. Patagonias 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 companys 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 customerseven those in segments whom
you know so wellare changing. Stay

increasingly marketing is not done only by the mar


affect every aspect of the customer experience,
marke pointsstore 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 companys marketing


plans and planning process
are deficient.

The companys product and


service policies need
tightening.

The companys 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
Electrics 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 customers 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 & Jerrys 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


fers 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

Todays 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 offthe 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 Nikes 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 googol1
by 100 zeroesand refers to the massive quantit
available online that the company helps users find.
corporate mission is To organize the worlds 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
subsetsadvertising (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).

Googles 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 Googles 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.

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 firms 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

(3) It is difficult for competitors to imitate.


Competitive advantage also accrues to companie

lence in broader business processes. Whartons 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 firms 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

Well 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 companys strategi gies


and assign appropriate funding. Senior managem
includes a number of yesterdays 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 20082009 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)

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 firms 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

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 alliancesOne company lic


companies jointly market their complementary industry
is a complicated combination of cards America, credit
card companies such as Visa, an

Promotional alliancesOne company agrees t


product or service. McDonalds teamed up with to
current Disney films as part of its meals for ch

Logistics alliancesOne 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 collaborationsOne 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 Its 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 sin successful business practice.
systemsare considered the hardware of
success. valuesare the software.

The first soft element, style, means company e


and behaving. The second, skills, means employe
companys 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 companys strategic fit with the environment will ine


changes faster than the companys seven Ss. Thus, a co
ness. Peter Drucker pointed out that it is more importan to
do things rightto 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 plans 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 modemswhich
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
companys market capitali faster than for
any company in historyfro 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 worlds 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
cant 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

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 companys 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

Panasonics 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.

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 rivals drilling activity, Pickens recalls
[the rivals] drilling floor from a half mile away with
there wasnt 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.

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