Kotler Keller - Marketing Management 14th Edition

December 9, 2017 | Author: Sunil Shaw | Category: Google, Marketing, Brand, Strategic Management, Marketing Communications
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Kotler Keller - Marketing Management 14th Edition...



Columbus Indiana


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



most successful brands, including Accenture, A Strauss, Procter & Gamble, and Samsung. Additi with other top companies such as Allstate, B Campbell’s, Colgate, Eli Lilly, ExxonMobil, Gener Johnson, Kodak, L.L.Bean, Mayo Clinic, Nordst Shell Oil, Starbucks, Unilever, and Young & Rubi trustee for the Marketing Science Institute.

A popular and highly sought-after speaker, marketing seminars to top executives in a variet ment and marketing training clients have include Cisco, Coca-Cola, Deutsche Telekom, GE, G Novartis, and Wyeth. He has lectured all over t from Sydney to Stockholm, and from Sao Paul speaker at conferences with hundreds to thous

An avid sports, music, and film enthusiast, in manage and market, as well as serve as executive and roll treasures, The Church, as well as Americ Tommy Keene. Additionally, he is the Principal In Motion Records. He is also on the Board of Direct

Autism and the Montshire Museum of Science. wife, Punam (also a Tuck marketing professor), a


Chapter 17

Chapter 18

Chapter 19


Chapter 20

Chapter 21

Chapter 22

Appendix: So

Endnotes E

Glossary G1

Image Credit

Name Index

Company, Br

Subject Index


Company Orientation toward the

Marketplace 17

The Production Concept 18

The Product Concept


The Selling Concept 18

The Marketing Concept 18

The Holistic Marketing Concept 1 MARKETING MEMO Marketing Rig and Wrong


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




What Influences Consumer Behavior

Cultural Factors 151

Social Factors 153


Consumer Quiz 155

Personal Factors 155

Key Psychological Processes 160

Motivation: Freud, Maslow, Herzber










to Stick 165

The Buying Decision Process:

The Five-Stage Model 166 Problem Recognition 167

Evaluation of Alternatives 168


Building Strong

Brands 240


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



Fine-tune Brand and Product








Shaping the Market

Offerings 324

CHAPTER 12 Setting Product Strategy

Product Characteristics and

Classifications 325

Product Levels: The Customer-Valu



Product Classifications 327

and Offers 395

Step 5: Selecting a Pricing

Method 395

Step 6: Selecting the Final Price 402




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



Initiating Price Cuts 407

Initiating Price Increases 408

Responding to Competitors’ Price








CHAPTER 17 Designing and Managing In

Marketing Communication

The Role of Marketing Communicatio

The Changing Marketing Communic




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


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







Joint Ventures 605 Direct Investment 605

Deciding on the Marketing Program

Global Similarities and Differences Marketing Adaptation 607


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


ing principles, especially senior management.

Integrated marketing—ensuring that multiple nicating value are employed and combined in t

Relationship marketing—having rich, multifac members, and other marketing partners.

Performance marketing—understanding retur and programs, as well as addressing broader con vironmental effects.

These four dimensions are woven throughout t The text specifically addresses the following tasks t ment in the 21st century:

Developing marketing strategies and plans

Capturing marketing insights and performance

Connecting with customers

Building strong brands

Shaping the market offerings

Delivering and communicating value

Creating successful long-term growth

Universal App marketing: pro business mark small and larg industries.

Comprehensiv informed mar istrative mark

Student mymarketin

Mymarketinglab your progress thr

you achieve succe Features inclu

Personalized S you understan


plan to fit your marketing needs by following easylined steps from strategy to implementation. Clic charts come together to create a powerful mark Handbook, by Marian Burk Wood, supplements t indepth guide to what student marketers really n leads to a complete and actionable marketing plan. ples that illustrate key points, sample marketing pl

John Bowen, Rob Donald Haider, Kotler, Nancy Lee Rath, Irving Rein Shields, Francois and David Young

My overriding time, support, an From Kevin La at Tuck—Punam Golder, Ellie Kyu Dean Paul Danos tions from my fac of gratitude to D career started and I have learned fro insights and expe sistance from two rate, thorough, d provided superb Carolyn and Allis


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


In This Chapter, We Will Addre

the Following Questions

Why is marketing important?

What is the scope of marketing?

What are some core marketing concepts?

How has marketing management changed in rece

What are the tasks necessary for successful mark management?

Twitter were crucial, perhaps Obama’s most powerful massive 13.5 million–name e-mail list. What were the online efforts? About $500 million (most in sums of was raised online from 3 million donors; 35,000 gr through the Web site, My.BarackObama.com; 1,800 YouTube; the creation of Facebook’s most popula course, the election of the next President of the United

The Importance of

The first decade of the 21st century challenged firms face of an unforgiving economic environment. Mark challenges. Finance, operations, accounting, and o without sufficient demand for products and services there must be a top line for there to be a bottom li marketing ability.

After a distasteful video was posted online by two employees, Domino’s Pizza learned a valuable lesson about the power of social media.

eBay promot 1970s TV ga people outsid

Johnson & Jo have contribu

Skillful market Good marketers a OfficeMax pr videos and i organizing sy

product or service available.

When Nintendo designed its Wii game system, w era line, and when Toyota introduced its Prius were swamped with orders because they had design marketing homework.

What Is Marketed?

Marketers market 10 main types of entities: goods, properties, organizations, information, and ideas. Let

GOODS Physical goods constitute the bulk of most Each year, U.S. companies market billions of fresh, c millions of cars, refrigerators, televisions, machines, a

SERVICES As economies advance, a growing pr production of services. The U.S. economy today Services include the work of airlines, hotels, c maintenance and repair people, and accountants, b programmers, and management consultants. Man such as a fast-food meal.

EVENTS Marketers promote time-based even performances, and company anniversaries. Global s World Cup are promoted aggressively to both compa

PLACES Cities, st company headquar commercial banks, Vegas Convention Here, Stays Here,” convention attend Authority took out Unfortunately, the likely did not help

PROPERTIES Pr financial property marketing. Real es commercial real e and individual inv

ORGANIZATI minds of their ta program reflects th the community supermarket chain and nonprofits all


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





MARKETPLACES, MARKETSPACES, AND M such as a store you shop in; the marketspace is di Northwestern University’s Mohan Sawhney has propo cluster of complementary products and services clo spread across a diverse set of industries.

Metamarkets are the result of marketers packagin related product/service activities. The automobile meta new and used car dealers, financing companies, insura service shops, auto magazines, classified auto ads in ne A car buyer will engage many parts of this metamar to assist him or her in moving seamlessly through the buyer find the stated features and prices of different search for the lowest-price dealer for financing, access other metamarkets, such as home ownership, parentin

Core Marketing Co

To understand the marketing function, we need to u

Needs, Wants, and Demands Needs are the basic human requirements such as for a also have strong needs for recreation, education, an

which are its target of the target buyer safety is a major co

Offerings Companies addres isfy those needs. T combination of pr A brand is an o associations in peo teous service, and favorable, and uni

Value and

The buyer choose tangible and intan combination of q increase with qual We can think monitoring of cus performance in rel tomer is disappoi customer is deligh

for certain parts from Alcoa to reduce the car’s wei

Industries Corporation (SABIC) instead of steel. Clea about its competition if it thought only of other inte Steel is more likely to be hurt by substitute products t

Marketing Environment The marketing environment consists of the task envir environment includes the actors engaged in produci These are the company, suppliers, distributors, dealer are material suppliers and service suppliers, such as m cies, banking and insurance companies, transportatio panies. Distributors and dealers include agents, brok who facilitate finding and selling to customers. The broad environment consists of six component ronment, social-cultural environment, natural envir liticallegal environment. Marketers must pay close these and adjust their marketing strategies as needed that await the right marketing savvy and ingenuity. H


TerraCycle After finding that so with a fertilizer made by feeding table scra TerraCycle founder Tom Szaky came up with a cycling,” finding new ways to use nonrecycla

more relevan

Globalization made it easier the world. Int countries.

Deregulation and growth telecommun competition.

Privatization management in Chile and t

Heightened c marketing co erful retailer

megabrands nificant comp

Industry con opportunitie electronics in stream of ent technology fu

Retail transf mail firms; n and ecomm

Consumer buying power. In part, due to disint substantially increased their buying power. From compare product prices and features and orde 24 hours a day, 7 days a week, bypassing limited savings. Even business buyers can run a reverse their business. They can readily join others to a volume discounts.

Consumer information. Consumers can col depth as they want about practically anything. tionaries, medical information, movie ratings information sources in many languages from a and user-generated content thrive on social

Del.icio.us (links), Digg (news stories), Wikip 23

(video). Social networking sites—such as Do travelers, and Moterus for bikers—bring toget

CarSpace.com auto enthusiasts talk about chro to find a great local mechanic.


Consumer participation. Consumers have f and public opinion. In recognition, companies and even marketing offerings to heighten t Consumers see their favorite companies as wo offerings they want.

Consumer resistance. Many customers today so they show less brand loyalty and become search for value, and less tolerant about u

on the compa

Marketers ca can also creat

Sammy Stephen’s viral video helped his flea market receive unprecedented attention.

General Motors, and McDonald’s in embracing c cate with the public and employees. Patagonia’s T mental news, reports the results of its sponsored descriptions of employees’ favorite outdoor locat

Companies can facilitate and speed up inte their employees by using the Internet as a pri query one another, seek advice, and download from and to the company’s main computer. See portal that transcended business units, Genera called mySocrates in 2006 consisting of anno

historical information. GM credits the port savings to date.


Companies can improve their cost efficie Internet. Corporate buyers can achieve sub Internet to compare sellers’ prices and purcha posting their own terms in reverse auctions. Co and operations to reap substantial cost savings service quality.

Marketing in Practice

Not surprisingly, these new marketing forces and changed marketing management. In theory, the mark of analyzing marketing opportunities, selecting targe strategies, developing marketing programs, and m

see many new challenges in the foreseeable future, and unlik cessions, there may be no assurance that a return to past man practices would ever be successful again.

According to Kotler and Caslione, marketers should a ready to activate automatic responses when turbulence whip chaos reigns in. They recommend marketers keep these eight mind as they create “chaotics marketing strategies.”

Secure your market share from core customer segme is not a time to get greedy, so get your core customer firmly secured, and be prepared to ward off attacks from tors seeking your most profitable and loyal customers.

Push aggressively for greater market share from compe companies fight for market share, and in turbulent and cha many have been weakened. Slashing marketing budgets travel expenses is a sure sign a competitor is buckling un sure. Push

aggressively to add to your core customer segme expense of your weakened competitors.

Research customers more now, because their ne wants are in flux. Everyone is under pressure during tim bulence and chaos, and all customers—even those in segments whom you know so well—are changing. Stay

increasingly marketing is not done only by the mar affect every aspect of the customer experience, marke points—store layouts, package designs, product fun logistics methods. Marketing must also be influential product innovation and new-business development marketers must think like executives in other depar must think more like marketers.


As the late David Packard of Hewlett-Packard obse to the marketing department.” Companies now kno customer and must see the customer as the source o ning to emphasize interdepartmental teamwork to m smooth management of core business processes, such sition and retention, and order fulfillment.

Company Orientat

the Marketplace Given these new marketing realities, what philosophy Increasingly, marketers operate consistent with the ho evolution of earlier marketing ideas.

vides product pla computer.

The marketing tive than competit target markets. H marketing concep

Selling focuse preoccupied idea of satisfy ter of things a

Several scholar superior performa

The Holis

Without question are leading busin Right and Wrong their marketing.

The holistic m marketing progra Holistic marketin grated perspective

The Ten Deadly Sins of Marketing

The company is not sufficiently market focused and customer driven.

The company does not fully understand its target customers.

The company needs to better define and monitor its competitors.

The company has not properly managed its relationships with its stakeholders.

The company is not good at finding new opportunities.

The company’s marketing plans and planning process are deficient.

The company’s product and service policies need tightening.

The company’s brand-building and communications skills are weak.

The company is not well organized to carry on effective and efficient marketing.

The company has not made maximum use of technology.

Source: Adapted from Philip Kotler, Ten Deadly Marketing Sins (Ho

proces of “wea spent a number of

credit as well as mi accent and fluency Florida.


Because attract relationship mark offering a larger va selling. Marketing partner relations arrangements with nal customers so e


Integrated market ing programs to c greater than the su can create, comm one marketing act Electric’s Medical training services t

Snowshoe Mountain Virginia, embarked on a marketing progra of an “authentic, rustic and engaging wil initiative to define their goals and articula

Performance mar

ness and society f beyond sales reve market share, cust are also considerin programs.

FINANCIAL A investments in fin growing the custo the direct and ind firms’ market valu distributor and s quantify and com research and stat marketing activiti the value from ana

SOCIAL RESPO the company and

environmental, leg The organizati satisfy them more sumers’ and socie

They make only promises that they can keep.

They feed back customers’ needs and ideas to thos

They serve the same customers for a long period of


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


They prepare periodic “profitability” reports by prod (regions, sales territories), order sizes, channels, an

They prepare invoices tailored to customer needs a and quickly.


They understand and support marketing expenditur longterm customer preference and loyalty. They tailor the financial package to the customer’s f

They make quick decisions on customer creditworth

Public Relations

They send out favorable news about the company a

They act as an internal customer and public advoca

Source: ©Philip Kotler, Kotler on Marketing (New York: Free Press, 1999), pp. Simon & Schuster Adult Publishing Group. Copyright © 1999 by Philip Kotler. A

Ben & Jerry’s “triple bottom line” business philosophy is

based on monitoring the environmental and social effects of its actions in addition to the profits from the sale of its products.



Sto StonyfieldFarm


plant, S

as refo

about a million pou perils of hormones, cultures or dietary Stonyfield adopted brand in the United


Product variety




Brand name


Sizes Price


Warranties List price

Returns Discounts


Payment period

Credit terms



Four Ps





M e m o

mar ket ing

it can continu ally the players who af custom ers, and co nologic al, political Atlas also need marketi ng

mana g

Ma rk

How can we spot and choose the right market segment(s)?

How can we differentiate our offerings?

How should we respond to customers who buy on price?

How can we compete against lower-cost, lower-price competit

How far can we go in customizing our offering for each custom

How can we grow our business?

How can we build stronger brands?

How can we reduce the cost of customer acquisition?

and retail prices, discounts, allowances, and credit te fer’s perceived value; otherwise, buyers will turn to co

Delivering Value Atlas must also determine how to properly deliver to products and services. Channel activities include thos uct accessible and available to target customers (see link various marketing facilitators to supply its prod ket. It must understand the various types of retailers and how they make their decisions (see Chapter 16).

Communicating Value Atlas must also adequately communicate to the targe and services. It will need an integrated marketing com vidual and collective contribution of all communicat set up mass communication programs consisting of a

relations (see Chapter 18). It also needs to plan more rect and interactive marketing, as well as hire, train, an

Creating Successful Long-Ter Based on its product positioning, Atlas must initi launching as part of its long-term view (see Chapte changing global opportunities and challenges (see Ch

Today’s marketplace is fundamentally different sult of major societal forces that have resulted new consumer and company capabilities forces have created new opportunities and ch

Applications Marketing Debate

Does Marketing Create or Satisfy Needs?

Marketing has often been defined in terms of satisfy tomers’ needs and wants. Critics, however, main marketing goes beyond that and creates needs an that did not exist before. They feel marketers en consumers to spend more money than they sh goods and services they do not really need.

Take a position: Marketing shapes consume and wants versus Marketing merely reflects th and wants of consumers.

In 1985, Nike signed up then-rookie gu

Jordan as a spokesperson. Jordan was still comer, but he personified superior perform bet paid off—the Air Jordan line of basketba off the shelves and revenues hit over $100 first year alone. As one reporter stated, “Fe have so reliably been able to identify and s who transcend their sports to such great effe

In 1988, Nike aired the first ads in its $20 m It” ad campaign. The campaign, which ultimatel TV spots in all, subtly challenged a generation thusiasts to chase their goals. It was a natural of Nike’s attitude of self-empowerment through

As Nike began expanding overseas t found that its U.S.-style ads were seen as to Nike realized it had to “authenticate” its bran so it

focused on soccer (known as football United States) and became active as a spon leagues, local clubs, and national teams.

Nike to build authenticity among the socc consumers had to see professional athlet product, especially athletes who won. Nike came in 1994 when the Brazilian team (the team for which Nike had any real sponsors World Cup. That victory transformed Nik


In 1998, two University PhD students, Larry Page and

Brin, founded a search engine company and n Google. The name plays on the number googol—1 by 100 zeroes—and refers to the massive quantit available online that the company helps users find. corporate mission is “To organize the world’s inf and make it universally accessible and useful.” F beginning, Google has strived to be one of the “go in the corporate world, supporting a touchy-fe

products include all Google products availab devices. Web products are broken down into subsets—advertising (e.g., AdWorks, Double to-Call), communications and publishing ( Docs, Google Calendar, Google Gadgets, Wa ment (e.g., Android, Google Code), mapping Sky, Google Maps), Search (e.g., Google Google Alerts, Google Scholar), and statistics Trends, Google Analytics).

Google’s stage of development starts w Labs, which lists new products available for te moves to beta status, where invited users tes types. Once the product is fully tested and re leased to the general public, it moves into th as a core Google product. Google Voice, for in the beta stage. It provides consumers with phone number, which then connects to the office, and cell numbers. The user decides w ring, based on who calls. Due to Google Voic ity and popularity, users can sign up only by i

Google has not spent a lot of money o advertising. Recent efforts have targeted Mi sumers with appeals to use Google’s “cloud applications instead of Microsoft Office or

What does a marketing plan include?

Yahoo! faces many strategic challenges

as it attempts to fend off competition from

Google and others.

in cash. Discussions with Microsoft about a possible merg

10-year deal in June 2009 that gave Microsoft full acce search engine, to be used in future Microsoft projects fo engine, Bing. CEO Carol Bartz faced many questions, ho Yahoo! should best move forward.


Marketing and Cus

Value The task of any business is to deliver customer valu with increasingly informed buyers faced with abund tuning the value delivery process and choosing, pro

The Value Delivery Process

The traditional view of marketing is that the firm mak taking place in the selling process. Companies that s

sulting customers see whom they ra industries if neces innovative, GE ha The firm’s succ on how well the c These processes in

The marketabout the ma

The new-off launching ne

The customer for new custo

The custome understandin

The fulfillme shipping the

Strong compan responsible for eac tion, service, and b at managing core Whitney have reor in nonprofit and g To be successfu tions, into the val

Core Competencies Traditionally, companies owned and controlled most o labor power, materials, machines, information, and e resources if they can obtain better quality or lower cost The key, then, is to own and nurture the resources the business. Many textile, chemical, and computer/ their own products because offshore manufacturers a focus on product design and development and marke tency has three characteristics: (1) It is a source of co contribution to perceived customer benefits. (2) It h


(3) It is difficult for competitors to imitate. Competitive advantage also accrues to companie

lence in broader business processes. Wharton’s Geo excelling in three distinctive capabilities: market sens

In terms of market sensing, he believes tremendous 10

o signals” from the “periphery” of a business. He offe eral vision, and practical tools and strategies for changes in the environment, by asking three questi evaluating the present, and envisioning the future.

Competitive advantage ultimately derives from how cies and distinctive capabilities into tightly interlocking imitate Southwest Airlines, Walmart, and IKEA because

where, and how they want.

Value deliver value offering

Value creatio

The Centr

Successful marketi ing, and sustainin master marketers respond effectively and their other de

To ensure they planning in three

(2) assessing each position and fit in plan for achieving Most large com ness unit, and (4 strategic plan to g cate to each divisi a plan covering th develops a strateg level (product line The marketin effort. It operates

target markets and the firm’s value proposition, base nities. The tactical marketing plan specifies the m promotion, merchandising, pricing, sales channels, mentation, and control cycle of strategic planning is planning at each of these four levels of the organizat

Corporate and Div Planning Some corporations give their business units freed and strategies. Others set goals for their business un

Still others set the goals and participate in developing All corporate headquarters undertake four planni

Defining the corporate mission

Establishing strategic business units

Assigning resources to each strategic business un

Assessing growth opportunities

We’ll briefly look at each process.

Kawasaki adv statements, li

Compare the rath losophy on the rig

To build total bran customer value an better, and more c

We build brands a happier by bringin

operate defines its geographical sphere.

Some companies operate in a specific city or st Post DHL and Royal Dutch/Shell, which each op

Establishing Strategic Busine

Companies often define themselves in terms of pro “clothing business.” Market definitions of a business, satisfying process. Products are transient; basic n Transportation is a need: the horse and carriage, aut products that meet that need.

Viewing businesses in terms of customer needs c Table 2.3 lists companies that have moved from a ness.

It highlights the difference between a target mark A target market definition tends to focus on selli Pepsi could define its target market as everyone who tors would therefore be other carbonated soft dri however, also focuses on the potential market. If Pepsi thing to quench their thirst, its competition would water, fruit juices, tea, and coffee. To better compete, P

with promising growth rates.

A business can define itself in terms of three dime 17


Consider a small company that defines i

systems for televis

ing; the technolog

for homes, factori

heating, ventilatio


Product-Oriented versus M


Product Defini Union Pacific Railroad We run a railroa Xerox

We make copyin

Hess Corporation

We sell gasoline Paramount Pictures

We make movie Encyclopaedia Britannica We sell encyclo Carrier

We make air co

News Corp.

The purpose of identifying the company’s strategi gies and assign appropriate funding. Senior managem includes a number of “yesterday’s has-beens” as well a has put more emphasis on some of its younger bus Jeans, Mexx, and Kate Spade while selling businesse Olsen, and Laundry). Campbell Soup has out-pace developing or keeping only products that ranked nu simple meals, baked snacks, and veggie-based drink nutrition, and convenience.


News Corp. Media conglomera ally all aspects of print and broadcast media 2008–2009 had different effects on each.

Even though the Fox network retained popu advertising sales took their toll. The cable n

due to lower ad rates and monthly provider fees, was slump in the newspaper and magazine business led the Web sites. News Corp.’s $650 million investment in My network site struggled to attract advertisers. At the same its stride, and News Corp. remained committed to a stro shows and movies that would drive DVD sales and lead t ally to products downloadable to mobile phones.


|Fig. 2.2|

The StrategicPlanning


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.”


Marketing Innovation Innovation in marketing is critical. Imaginative ide 27

company. Senior management should identify and sented groups: employees with youthful or diverse company headquarters, and employees new to the i orthodoxy and stimulate new ideas.

German-based Reckitt Benckiser has been an inn ucts industry by generating 40 percent of sales multinational staff is encouraged to dig deep into

co lent performance. “Marketing Insight: Creating Innov companies approach innovation.

Firms develop strategy by identifying and selecti Royal Dutch/Shell Group has pioneered scenario an tions of a firm’s possible future using assumptions a uncertainties. Managers think through each scenario pens?” adopt one scenario as the most probable, an disconfirm it.


Consider the challenges faced by the


The 12 Dimensions of Busin


Definition Offerings (WHAT)

Develop innovative new pr


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

Promotional alliances—One company agrees t product or service. McDonald’s teamed up with to current Disney films as part of its meals for ch

Logistics alliances—One company offers logist Warner Music Group and Sub Pop Records c (ADA) in 1993 as a joint venture to distribute a ent labels. ADA is the leading “indie” distribut physical and digital product.

Pricing collaborations—One or more companie and rental car companies often offer mutual pric

20. Ability to produce on time



21. Technical manufacturing skill






22. Visionary, capable leadership

23. Dedicated employees



24. Entrepreneurial orientation



25. Flexible or responsive



Companies ne

their strengths an greater sales impac to develop organi form and manage Both pharmace It’s estimated that through acquisitio operator, Vodafone

Vod source ers. Wi create

leads to higher growth and profits, which leads to more investment, and so on. This virtuous circle spel

According to McKinsey & Company, strategy is o with the letter s—in successful business practice. systems—are considered the “hardware” of success. values—are the “software.”

The first “soft” element, style, means company e and behaving. The second, skills, means employe company’s strategy. Staffing means the company and assigned them to the right jobs. The fourth elem same guiding values. When these elements are prese strategy implementation.


Feedback and Control

A company’s strategic fit with the environment will ine changes faster than the company’s seven Ss. Thus, a co ness. Peter Drucker pointed out that it is more importan “to do things right”—to be efficient. The most successf Once an organization fails to respond to a change to recapture its lost position. Consider KB Toys. Fou

pany successfully reinvented itself many times, first by by anticipating the growth of shopping malls. The fi the world but ultimately crumbled due to competitio tion of eToys. The company declared bankruptcy in 1 again file bankruptcy and liquidate its assets in late 2

Although the ex one year in anywhe plans, whereas cor effectively, every pa post its marketing on changes. A mar

Executive su contents and

Situation an competitors, how big is it, will use all th

Marketing st cial objective positioning. sales, finance,

Financial pro break-even a category, and categories. Th how many ye

A more co (optimistic, p under an assu

threats, and opportunities. As the plan is put into effe toward objectives and identify areas for improvement. Finally, marketing research helps marketers learn expectations, perceptions, satisfaction, and loyalty. T marketing research will be conducted and when, as w

The Role of Relationships Although the marketing plan shows how the compa tomer relationships, it also affects both internal and marketing personnel work with each other and with customers. Second, it affects how the company work achieve the plan’s objectives. Third, it influences the including government regulators, the media, and the all these relationships when developing a marketing p

From Marketing Plan to Mark

Most companies create yearly marketing plans. Mar implementation date to allow time for marketing rese dination between departments. As each action pro investigate any deviation from plans, and take corre gency plans; marketers must be ready to update and a

The marketing plan should define how progress t typically use budgets, schedules, and marketing me

and selecting and managing business partners collaborative networks; and maximizes value de becoming proficient at customer relationship ment, internal resource management, and partnership management.

Applications Marketing Debate

What Good Is a Mission Statemen

Mission statements are often the product of much tion and discussion. At the same time, critics cl sometimes lack “teeth” and specificity, or do not va from firm to firm and make the same empty promis

Take a position: Mission statements are criti successful marketing organization versus Missio ments rarely provide useful marketing value.

ests with the new president and CEO. O decade, the company grew exponentially, product launches such as patented router platforms, and modems—which significantly to the backbone of the Internet. Cisco op international offices in London and France has opened a number of new international then. During the 1990s, Cisco acquired a fully integrated 49 companies into its core a result, the company’s market capitali faster than for any company in history—fro to $300 billion between 1991 and 1999. In Cisco became the most valuable company with market capitalization peaking at $582 per share.

By the end of the 20th century, although t was extremely successful, brand awarenes Cisco was known to many for its stock pric for what it actually did. Cisco developed part

Sony, Matsushita, and US West to co-brand with the Cisco logo in hopes of building its na tion and brand value. In addition, the compa its first television spots as part of a campaign

Intel makes the micro sors found in 80 percent of the world’s computers. Today, it is one of the most valuable in the world, with revenues exceeding $37 billio early days, however, Intel microprocessors wer simply by their engineering numbers, such as “8 “80486.” Since numbers can’t be trademarked, c tors came out with their own “486” chips and Inte way to distinguish itself. Nor could consumers s products, buried deep inside their PCs. Thus, Int hard time convincing consumers to pay more for performance products.

As a result, Intel created the quintessential ing branding marketing campaign and made hi chose a name for its latest microprocessor intr

that could be trademarked, Pentium, and launc “Intel Inside” campaign to build brand awarene whole family of microprocessors. This campaig

achieve higher margins and maintain a close relationship customers, which is essential for producing products tha true market demand. By the end of the year, Pegasus also developed relationships with different skate shops begin to sell some of its products through retailers.


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


Components of a M

Marketing Informa The major responsibility for identifying significant marketers. Marketers have two advantages for the task tion, and time spent interacting with customers an groups. Some firms have marketing information s wants, preferences, and behavior.

Largest refugee population

Highest divorce rate

Highest color TV ownership per 100 households

Mobile telephone subscribers per capita

Highest cinema attendance

Biggest beer drinkers per capita

Biggest wine drinkers per capita

Highest number of smokers per capita

Highest GDP per person

Largest aid donors as % of GDP

Most economically dependent on agriculture

Highest population in workforce

Highest percent of women in workforce

Most crowded road networks

Most deaths in road accidents

Most tourist arrivals

Highest life expectancy

Highest diabetes rate

Source: CIA World Fact Book, https://www.cia.gov/library/publications/the-world-factbo

The company’s marketing information system sho need, what they really need, and what is economicall terview a cross-section of marketing managers to dis displays some useful questions to ask them.


What decisions do you regularly make?

What information do you need to make these decis

What information do you regularly get?

What special studies do you periodically request?

What information would you want that you are not

What information would you want daily? Weekly? M

What online or offline newsletters, briefings, blogs, on a regular basis?

What topics would you like to be kept informed of?

What data analysis and reporting programs would

What are the four most helpful improvements that information system?

consu vendor-tion, an averag

Panasonic’s new vendormanaged inventory system met with marketplace success, including from retailers.

illustration: “If yo a red one, the sal the yellow Musta yellow Mustangs.”

ship. Knowing so much about consumers allows Best precision marketing and customer-triggered incentive positive response rates.


Marketing Intellige The Marketing Intelligence S

A marketing intelligence system is a set of procedu everyday information about developments in the m system supplies results data, but the marketing int Marketing managers collect marketing intelligence i ing books, newspapers, and trade publications; talki monitoring social media on the Internet; and meetin

Before the Internet, sometimes you just had to competition. This is what oil and gas entrepreneu learned about a rival’s drilling activity, Pickens recalls [the rival’s] drilling floor from a half mile away with there wasn’t anything they could do about it. Our sp They would count them; each [drill] joint was 30 fee be able to tally the depth of the well.” Pickens knew would be for his rival to get the oil or gas up to the sur an immediate competitive advantage.


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


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

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