Critical Thinking
MyMarketingLab™: Improves Student Engagement Before, During, and After ClassFull-Circle Learning
Decision Making
Prep and Engagement
• Video exercises – engaging videos that bring business concepts to life and explore business topics related to the theory students are learning in class. Quizzes then assess students’ comprehension of the concepts covered in each video.
• Learning Catalytics – a “bring your own device” student engagement, assessment, and classroom intelligence system helps instructors analyze students’ critical-thinking skills during lecture.
• Dynamic Study Modules (DSMs) – through adaptive learning, students get personalized guidance where and when they need it most, creating greater engagement, improving knowledge retention, and supporting subject-matter mastery. Also available on mobile devices.
• Business Today – bring current events alive in your classroom with videos, discussion questions, and author blogs. Be sure to check back often, this section changes daily.
• Decision-making simulations – place your students in the role of a key decision-maker. The simulation will change and branch based on the decisions students make, providing a variation of scenario paths. Upon completion of each simulation, students receive a grade, as well as a detailed report of the choices they made during the simulation and the associated consequences of those decisions.
• Writing Space – better writers make great learners—who perform better in their courses. Providing a single location to develop and assess concept mastery and critical thinking, the Writing Space offers automatic graded, assisted graded, and create your own writing assignments, allowing you to exchange personalized feedback with students quickly and easily.
Writing Space can also check students’ work for improper citation or plagiarism by comparing it against the world’s most accurate text comparison database available from Turnitin.
• Additional Features – included with the MyLab are a powerful homework and test manager, robust gradebook tracking, comprehensive online course content, and easily scalable and shareable content.
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MyLab™: Learning Full Circle for Marketing, Management, Business Communication,
Intro to Business, and MIS
BEFORE CLASS
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15
PhiliP Kotler Northwestern University
Kevin lane Keller Dartmouth College
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Marketing Management
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Library of Congress Cataloging-in-Publication Data Kotler, Philip. Marketing management/Philip Kotler, Kevin Lane Keller.—15e [edition]. pages cm ISBN 978-0-13-385646-0 (student edition) 1. Marketing—Management. I. Keller, Kevin Lane, 1956- II. Title. HF5415.13.K64 2016 658.8—dc23 2014023870
10 9 8 7 6 5 4 3 2 1
ISBN 10: 0-13-385646-1 ISBN 13: 978-0-13-385646-0
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This book is dedicated to my wife and best friend, Nancy, with love.
—PK
This book is dedicated to my wife, Punam, and my two daughters,
Carolyn and Allison, with much love and thanks.
—KLK
iv
Philip Kotler is one of the world’s leading authorities on marketing. He is the S. C. Johnson & Son Distinguished Professor of International Marketing at the Kellogg School of Management, Northwestern University. He received his master’s degree at the University of Chicago and his Ph.D. at MIT, both in economics. He did postdoctoral work in mathematics at Harvard University and in behav- ioral science at the University of Chicago.
Dr. Kotler is the coauthor of Principles of Marketing and Marketing: An Introduction. His Strategic Marketing for Nonprofit Organizations, now in its seventh edition, is the best seller in that specialized area.
Dr. Kotler’s other books include Marketing Models; The New Competition; Marketing Professional Services; Strategic Marketing for Educational Institutions; Marketing for Health Care Organizations; Marketing Congregations; High Visibility; Social Marketing; Marketing Places; The Marketing of Nations; Marketing for Hospitality and Tourism; Standing Room Only—Strategies for Marketing the Performing Arts; Museum Strategy and Marketing; Marketing Moves; Kotler on Marketing; Lateral Marketing; Winning at Innovation; Ten Deadly Marketing Sins; Chaotics; Marketing Your Way to Growth; Winning Global Markets; and Corporate Social Responsibility.
In addition, he has published more than 150 articles in leading journals, including the Harvard Business Review, Sloan Management Review, Business Horizons, California Management Review, the Journal of Marketing, the Journal of Marketing Research, Management Science, the Journal of Business Strategy, and Futurist. He is the only three-time winner of the coveted Alpha Kappa Psi award for the best annual article published in the Journal of Marketing.
Professor Kotler was the first recipient of the American Marketing Association’s (AMA) Distinguished Marketing Educator Award (1985). The European Association of Marketing Consultants and Sales Trainers awarded him their Prize for Marketing Excellence. He was chosen as the Leader in Marketing Thought by the Academic Members of the AMA in a 1975 survey. He also received the 1978 Paul Converse Award of the AMA, honoring his original contribution to marketing. In 1995, the Sales and Marketing Executives International (SMEI) named him Marketer of the Year. In 2002, Professor Kotler received the Distinguished Educator Award from the Academy of Marketing Science. In 2013, he received the William L. Wilkie “Marketing for a Better World” Award and subsequently received the Sheth Foundation Medal for Exceptional Contribution to Marketing Scholarship and Practice. In 2014, he was inducted in the Marketing Hall of Fame.
He has received honorary doctoral degrees from Stockholm University, the University of Zurich, Athens University of Economics and Business, DePaul University, the Cracow School of Business and Economics, Groupe H.E.C. in Paris, the Budapest School of Economic Science and Public Administration, the University of Economics and Business Administration in Vienna, and Plekhanov Russian Academy of Economics. Professor Kotler has been a consultant to many major U.S. and foreign companies, including IBM, General Electric, AT&T, Honeywell, Bank of America, Merck, SAS Airlines, Michelin, and others in the areas of marketing strategy and planning, marketing organization, and international marketing.
He has been Chairman of the College of Marketing of the Institute of Management Sciences, a Director of the American Marketing Association, a Trustee of the Marketing Science Institute, a Director of the MAC Group, a member of the Yankelovich Advisory Board, and a member of the Copernicus Advisory Board. He was a member of the Board of Governors of the School of the Art Institute of Chicago and a member of the Advisory Board of the Drucker Foundation. He has traveled extensively throughout Europe, Asia, and South America, advising and lecturing to many companies about global marketing opportunities.
about the authors
P hi
lip K
ot le
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Kevin Lane Keller is the E. B. Osborn Professor of Marketing at the Tuck School of Business at Dartmouth College. Professor Keller has degrees from Cornell, Carnegie-Mellon, and Duke universities. At Dartmouth, he teaches MBA courses on mar- keting management and strategic brand management and lectures in executive programs on those topics.
Previously, Professor Keller was on the faculty at Stanford University, where he also served as the head of the marketing group. Additionally, he has been on the faculty at the University of California at Berkeley and the University of North Carolina at Chapel Hill, has been a visiting professor at Duke University and the Australian
Graduate School of Management, and has two years of industry experience as Marketing Consultant for Bank of America.
Professor Keller’s general area of expertise lies in marketing strategy and planning and branding. His specific research interest is in how understanding theories and concepts related to consumer behavior can improve marketing strategies. His research has been published in three of the major marketing journals: the Journal of Marketing, the Journal of Marketing Research, and the Journal of Consumer Research. He also has served on the Editorial Review Boards of those journals. With more than 90 pub- lished papers, his research has been widely cited and has received numerous awards.
Actively involved with industry, he has worked on a host of different types of marketing projects. He has served as a long-term consultant and advisor to marketers for some of the world’s most successful brands, including Accenture, American Express, Disney, Ford, Intel, Levi Strauss, Procter & Gamble, and Samsung. Additional brand consulting activities have been with other top companies such as Allstate, Beiersdorf (Nivea), BlueCross BlueShield, Campbell, Colgate, Eli Lilly, ExxonMobil, General Mills, GfK, Goodyear, Hasbro, Intuit, Johnson & Johnson, Kodak, L.L.Bean, Mayo Clinic, MTV, Nordstrom, Ocean Spray, Red Hat, SAB Miller, Shell Oil, Starbucks, Unilever, and Young & Rubicam. He has also served as an academic trustee for the Marketing Science Institute and served as their Executive Director from July 1, 2013, to July 1, 2015.
A popular and highly sought-after speaker, he has made speeches and conducted marketing semi- nars to top executives in a variety of forums. Some of his senior management and marketing training clients have included include such diverse business organizations as Cisco, Coca-Cola, Deutsche Telekom, ExxonMobil, GE, Google, IBM, Macy’s, Microsoft, Nestle, Novartis, Pepsico, SC Johnson and Wyeth. He has lectured all over the world, from Seoul to Johannesburg, from Sydney to Stockholm, and from Sao Paulo to Mumbai. He has served as keynote speaker at conferences with hundreds to thousands of participants.
Professor Keller is currently conducting a variety of studies that address strategies to build, mea- sure, and manage brand equity. His textbook on those subjects, Strategic Brand Management, in its fourth edition, has been adopted at top business schools and leading firms around the world and has been heralded as the “bible of branding.”
An avid sports, music, and film enthusiast, in his so-called spare time, he has helped to manage and market, as well as serve as executive producer for, one of Australia’s great rock-and-roll treasures, The Church, as well as American power-pop legends Tommy Keene and Dwight Twilley. He also serves on the Board of Directors for The Doug Flutie, Jr. Foundation for Autism, the Lebanon Opera House, and the Montshire Museum of Science. Professor Keller lives in Etna, NH, with his wife, Punam (also a Tuck marketing professor), and his two daughters, Carolyn and Allison.
K ev
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an e
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Brief Contents Preface xvii
Part 1 Understanding Marketing Management 2 Chapter 1 Defining Marketing for the New Realities 3 Chapter 2 Developing Marketing Strategies and Plans 35
Part 2 Capturing Marketing Insights 66 Chapter 3 Collecting Information and Forecasting Demand 67 Chapter 4 Conducting Marketing Research 99
Part 3 Connecting with Customers 126 Chapter 5 Creating Long-Term Loyalty Relationships 127 Chapter 6 Analyzing Consumer Markets 157 Chapter 7 Analyzing Business Markets 189 Chapter 8 Tapping into Global Markets 217
Part 4 Building Strong Brands 244 Chapter 9 Identifying Market Segments and Targets 245 Chapter 10 Crafting the Brand Positioning 275 Chapter 11 Creating Brand Equity 299 Chapter 12 Addressing Competition and Driving Growth 335
Part 5 Creating Value 366 Chapter 13 Setting Product Strategy 367 Chapter 14 Designing and Managing Services 399 Chapter 15 Introducing New Market Offerings 429 Chapter 16 Developing Pricing Strategies and Programs 461
Part 6 Delivering Value 492 Chapter 17 Designing and Managing Integrated Marketing Channels 493 Chapter 18 Managing Retailing, Wholesaling, and Logistics 527
Part 7 Communicating Value 556 Chapter 19 Designing and Managing Integrated Marketing Communications 557 Chapter 20 Managing Mass Communications: Advertising, Sales Promotions, Events
and Experiences, and Public Relations 585 Chapter 21 Managing Digital Communications: Online, Social Media, and Mobile 615 Chapter 22 Managing Personal Communications: Direct and Database Marketing and
Personal Selling 635
Part 8 Conducting Marketing Responsibly for Long-Term Success 656
Chapter 23 Managing a Holistic Marketing Organization for the Long Run 657
appendix: Sonic Marketing Plan and Exercises a1 Endnotes E1 Glossary G1 Name Index I1 Company, Brand, and Organization Index I5 Subject Index I18
vii
Contents Preface xvii
Part 1 Understanding Marketing Management 2
Chapter 1 Defining Marketing for the New Realities 3
The Value of Marketing 3 Marketing Decision Making 3 Winning Marketing 4
The Scope of Marketing 5 What Is Marketing? 5 What Is Marketed? 5 Who Markets? 7
Core Marketing Concepts 9 Needs, Wants, and Demands 9 Target Markets, Positioning, and
Segmentation 9 Offerings and Brands 10 Marketing Channels 10 Paid, Owned, and Earned Media 10 Impressions and Engagement 10 Value and Satisfaction 11 Supply Chain 11 Competition 12 Marketing Environment 12
The New Marketing Realities 13 Technology 13 Globalization 14 Social Responsibility 14
MarkEtING INSIGht Getting to Marketing 3.0 15
A Dramatically Changed Marketplace 16 New Consumer Capabilities 16 New Company Capabilities 17 Changing Channels 19 Heightened Competition 19
Marketing in Practice 19 Marketing Balance 19
MarkEtING MEMO Reinventing Marketing at Coca-Cola 20
Marketing Accountability 20 Marketing in the Organization 20
Company Orientation toward the Marketplace 20
The Production Concept 20 The Product Concept 21
The Selling Concept 21 The Marketing Concept 21 The Holistic Marketing Concept 21
Updating the Four Ps 25
MarkEtING INSIGht Understanding the 4 As of Marketing 26
Marketing Management Tasks 27 Developing Marketing Strategies and
Plans 27 Capturing Marketing Insights 28 Connecting with Customers 28 Building Strong Brands 28
MarkEtING MEMO Marketers’ Frequently Asked Questions 28
Creating Value 29 Delivering Value 29 Communicating Value 29 Conducting Marketing Responsibly for
Long-Term Success 29 Summary 29 applications 30
MarkEtING ExCEllENCE Nike 30
MarkEtING ExCEllENCE Google 32
Chapter 2 Developing Marketing Strategies and Plans 35
Marketing and Customer Value 35 The Value Delivery Process 35 The Value Chain 36 Core Competencies 36 The Central Role of Strategic Planning 37
Corporate and Division Strategic Planning 38
MarkEtING MEMO What Does It Take to Be a Successful CMO? 39
Defining the Corporate Mission 39 Establishing Strategic Business Units 42 Assigning Resources to Each SBU 42 Assessing Growth Opportunities 42 Organization and Organizational Culture 46 Marketing Innovation 47
MarkEtING INSIGht Creating Innovative Marketing 47
Business Unit Strategic Planning 48 The Business Mission 49 SWOT Analysis 49
viii
MarkEtING MEMO Checklist for Evaluating Strengths/Weaknesses Analysis 51
Goal Formulation 52 Strategic Formulation 52 Program Formulation and
Implementation 53
MarkEtING INSIGht Businesses Charting a New Direction 54
Feedback and Control 55 The Nature and Contents of a Marketing
Plan 55
MarkEtING MEMO Marketing Plan Criteria 55
The Role of Research 56 The Role of Relationships 56 From Marketing Plan to Marketing
Action 57 Summary 57 applications 58 Sample Marketing Plan: Pegasus Sports
International 61
MarkEtING ExCEllENCE Cisco 58
MarkEtING ExCEllENCE Intel 59
Part 2 Capturing Marketing Insights 66
Chapter 3 Collecting Information and Forecasting Demand 67
Components of a Modern Marketing Information System 67
Internal Records 69 The Order-to-Payment Cycle 69 Sales Information Systems 69 Databases, Data Warehousing, and Data
Mining 69
MarkEtING INSIGht Digging into Big Data 70
Marketing Intelligence 70 The Marketing Intelligence System 70 Collecting Marketing Intelligence on the
Internet 72 Communicating and Acting on Marketing
Intelligence 72 Analyzing the Macroenvironment 72
Needs and Trends 73 Identifying the Major Forces 73 The Demographic Environment 74
MarkEtING MEMO Finding Gold at the Bottom of the Pyramid 75
The Economic Environment 77 The Sociocultural Environment 78 The Natural Environment 79
MarkEtING INSIGht The Green Marketing Revolution 81
The Technological Environment 82 The Political-Legal Environment 83
MarkEtING INSIGht Watching Out for Big Brother 85
Forecasting and Demand Measurement 85 The Measures of Market Demand 86 A Vocabulary for Demand Measurement 87 Estimating Current Demand 89 Estimating Future Demand 91
Summary 93 applications 94
MarkEtING ExCEllENCE Microsoft 94
MarkEtING ExCEllENCE Walmart 95
Chapter 4 Conducting Marketing Research 99
The Scope of Marketing Research 99 Importance of Marketing Insights 99 Who Does Marketing Research? 100 Overcoming Barriers to the Use of Marketing
Research 101 The Marketing Research Process 102
Step 1: Define the Problem, the Decision Alternatives, and the Research Objectives 102
Step 2: Develop the Research Plan 103
MarkEtING MEMO Conducting Informative Focus Groups 105
MarkEtING MEMO Marketing Questionnaire Dos And Don’ts 108
MarkEtING INSIGht Getting into the Heads of Consumers 109
MarkEtING INSIGht Understanding Brain Science 111
Step 3: Collect the Information 113 Step 4: Analyze the Information 113 Step 5: Present the Findings 113
MarkEtING INSIGht Bringing Marketing Research to Life with Personas 114
ix
Step 6: Make the Decision 114 Measuring Marketing Productivity 115
Marketing Metrics 115
MarkEtING MEMO Measuring Social Media ROI 117
Marketing-Mix Modeling 118 Marketing Dashboards 118
MarkEtING MEMO Designing Effective Marketing Dashboards 119
Summary 121 applications 121
MarkEtING ExCEllENCE IDEO 122
MarkEtING ExCEllENCE Intuit 124
Part 3 Connecting with Customers 126
Chapter 5 Creating Long-Term Loyalty Relationships 127
Building Customer Value, Satisfaction, and Loyalty 127
Customer-Perceived Value 128 Total Customer Satisfaction 131 Monitoring Satisfaction 133 Product and Service Quality 134
MarkEtING INSIGht Net Promoter and Customer Satisfaction 135
Maximizing Customer Lifetime Value 136 Customer Profitability 137 Measuring Customer Lifetime
Value 138 Attracting and Retaining Customers 138
MarkEtING MEMO Calculating Customer Lifetime Value 139
Building Loyalty 142 Brand Communities 143 Win-Backs 146
Cultivating Customer Relationships 146 Customer Relationship Management 146
MarkEtING INSIGht The Behavioral Targeting Controversy 147
Summary 152 applications 152
MarkEtING ExCEllENCE Nordstrom 153
MarkEtING ExCEllENCE Tesco 154
Chapter 6 Analyzing Consumer Markets 157
What Influences Consumer Behavior? 157 Cultural Factors 157 Social Factors 159 Personal Factors 161
MarkEtING MEMO The Average U.S. Consumer Quiz 162
Key Psychological Processes 165 Motivation 165 Perception 167
MarkEtING MEMO The Power of Sensory Marketing 167
Learning 169 Emotions 170 Memory 171
The Buying Decision Process: The Five-Stage Model 172
Problem Recognition 173 Information Search 174 Evaluation of Alternatives 175 Purchase Decision 176 Postpurchase Behavior 178 Moderating Effects on Consumer Decision
Making 180 Behavioral Decision Theory and Behavioral
Economics 180 Decision Heuristics 181 Framing 182
Summary 183 applications 183
MarkEtING ExCEllENCE Disney 184
MarkEtING ExCEllENCE IKEA 185
Chapter 7 Analyzing Business Markets 189
What Is Organizational Buying? 189 The Business Market versus the Consumer
Market 189 Buying Situations 192
Participants in the Business Buying Process 193
The Buying Center 194 Buying Center Influences 194 Targeting Firms and Buying Centers 195
MarkEtING INSIGht Big Sales to Small Businesses 196
The Purchasing/Procurement Process 197 Stages in the Buying Process 198
Problem Recognition 198
x
General Need Description and Product Specification 199
Supplier Search 199 Proposal Solicitation 201 Supplier Selection 201
MarkEtING MEMO Developing Compelling Customer Value Propositions 202
Order-Routine Specification 204 Performance Review 204
Developing Effective Business-to-Business Marketing Programs 204
Communication and Branding Activities 204 Systems Buying and Selling 206
MarkEtING MEMO Spreading the Word with Customer Reference Programs 207
Role of Services 207 Managing Business-to-Business Customer
Relationships 208 The Benefits of Vertical Coordination 208
MarkEtING INSIGht Establishing Corporate Trust, Credibility, and Reputation 209
Risks and Opportunism in Business Relationships 209
Institutional and Government Markets 211 Summary 212 applications 213
MarkEtING ExCEllENCE Accenture 213
MarkEtING ExCEllENCE GE 214
Chapter 8 Tapping into Global Markets 217
Competing on a Global Basis 217 Deciding Whether to Go Abroad 219 Deciding Which Markets to Enter 220
How Many Markets to Enter 220 Evaluating Potential Markets 221 Succeeding in Developing
Markets 221 Deciding How to Enter the Market 226
Indirect and Direct Export 227 Licensing 227 Joint Ventures 228 Direct Investment 228 Acquisition 228
Deciding on the Marketing Program 229 Global Similarities and Differences 230 Marketing Adaptation 231 Global Product Strategies 232
Global Communication Strategies 235 Global Pricing Strategies 235 Global Distribution Strategies 237
Country-of-Origin Effects 238 Building Country Images 238 Consumer Perceptions of Country of
Origin 239 Summary 240 applications 241
MarkEtING ExCEllENCE Twitter 241
MarkEtING ExCEllENCE L’Oréal 242
Part 4 Building Strong Brands 244
Chapter 9 Identifying Market Segments and Targets 245
Bases for Segmenting Consumer Markets 246
Geographic Segmentation 246 Demographic Segmentation 249 Psychographic Segmentation 258 Behavioral Segmentation 259
How Should Business Markets Be Segmented? 261
Market Targeting 262 Effective Segmentation Criteria 263
Evaluating and Selecting the Market Segments 264
MarkEtING INSIGht Chasing the Long Tail 267
MarkEtING MEMO Protecting Kids Online 269
Summary 269 applications 270
MarkEtING ExCEllENCE HSBC 270
MarkEtING ExCEllENCE BMW 272
Chapter 10 Crafting the Brand Positioning 275
Developing a Brand Positioning 275 Understanding Positioning and Value
Propositions 275 Choosing a Competitive Frame of
Reference 276 Identifying Potential Points-of-Difference
and Points-of-Parity 278
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Choosing Specific POPs and PODs 282 Brand Mantras 285
Establishing a Brand Positioning 287
MarkEtING MEMO Constructing a Brand Positioning Bull’s eye 287
Alternative Approaches to Positioning 291 Brand Narratives and Storytelling 291 Cultural Branding 292
Positioning and Branding for A Small Business 292
Summary 295 applications 295
MarkEtING ExCEllENCE Louis Vuitton 296
MarkEtING ExCEllENCE American Express 296
Chapter 11 Creating Brand Equity 299
How Does Branding Work? 299 The Role of Brands 300 The Scope of Branding 301
Defining Brand Equity 302 Brand Equity Models 304
MarkEtING INSIGht Brand Bubble Trouble 306
Building Brand Equity 309
MarkEtING MEMO The Marketing Magic of Characters 310
Designing Holistic Marketing Activities 310 Leveraging Secondary Associations 312 Internal Branding 314
Measuring Brand Equity 315
MarkEtING INSIGht The Brand Value Chain 315
MarkEtING INSIGht What Is a Brand Worth? 317
Managing Brand Equity 318 Brand Reinforcement 318 Brand Revitalization 319
Devising a Branding Strategy 321 Branding Decisions 322 Brand Portfolios 323 Brand Extensions 325
Customer Equity 328
MarkEtING MEMO Twenty-First-Century Branding 329
Summary 330 applications 330
MarkEtING ExCEllENCE McDonald’s 331
MarkEtING ExCEllENCE Procter & Gamble 332
Chapter 12 Addressing Competition and Driving Growth 335
Growth 335 Growth Strategies 335 Growing the Core 336
Competitive Strategies for Market Leaders 337
Expanding Total Market Demand 338 Protecting Market Share 339 Increasing Market Share 341
Other Competitive Strategies 342 Market-Challenger Strategies 342 Market-Follower Strategies 344
MarkEtING INSIGht The Costs and Benefits of Fast Fashion 345
Market-Nicher Strategies 346
MarkEtING MEMO Niche Specialist Roles 348
Product Life-Cycle Marketing Strategies 348 Product Life Cycles 348 Style, Fashion, and Fad Life Cycles 349 Marketing Strategies: Introduction Stage and
the Pioneer Advantage 351
MarkEtING INSIGht Understanding Double Jeopardy 352
Marketing Strategies: Growth Stage 353 Marketing Strategies: Maturity Stage 354 Marketing Strategies: Decline Stage 355
MarkEtING MEMO Managing a Marketing Crisis 356
Evidence for the Product Life-Cycle Concept 358
Critique of the Product Life-Cycle Concept 359
Market Evolution 359 Marketing in a Slow-Growth Economy 359
Explore the Upside of Increasing Investment 359
Get Closer to Customers 360 Review Budget Allocations 360 Put Forth the Most Compelling Value
Proposition 360 Fine-Tune Brand and Product Offerings 361
xii
Summary 362 applications 362
MarkEtING ExCEllENCE Samsung 363
MarkEtING ExCEllENCE IBM 364
Part 5 Creating Value 366
Chapter 13 Setting Product Strategy 367
Product Characteristics and Classifications 367
Product Levels: The Customer-Value Hierarchy 367
Product Classifications 369 Differentiation 370
Product Differentiation 371 Services Differentiation 372
Design 374 Design Leaders 374 Power of Design 375 Approaches to Design 375
Luxury Products 376 Characterizing Luxury Brands 376 Growing Luxury Brands 376 Marketing Luxury Brands 377
Environmental Issues 378
MarkEtING MEMO A Sip or A Gulp: Environmental Concerns in the Water Industry 379
Product and Brand Relationships 379 The Product Hierarchy 380 Product Systems and Mixes 380 Product Line Analysis 381 Product Line Length 382
MarkEtING INSIGht When Less Is More 383
Product Mix Pricing 386 Co-Branding and Ingredient
Branding 387
MarkEtING MEMO Product-Bundle Pricing Considerations 388
Packaging, Labeling, Warranties, and Guarantees 390
Packaging 390 Labeling 392 Warranties and Guarantees 393
Summary 393 applications 394
MarkEtING ExCEllENCE Caterpillar 394
MarkEtING ExCEllENCE Toyota 396
Chapter 14 Designing and Managing Services 399
The Nature of Services 399 Service Industries Are Everywhere 399 Categories of Service Mix 400 Distinctive Characteristics of Services 402
The New Services Realities 406 A Shifting Customer Relationship 406
MarkEtING MEMO Lights! Cameras! Customer Service Disasters! 408
Achieving Excellence In Services Marketing 409
Marketing Excellence 409 Technology and Service
Delivery 410 Best Practices of Top Service
Companies 411 Differentiating Services 413
MarkEtING INSIGht Improving Company Call Centers 414
Managing Service Quality 417 Managing Customer Expectations 418
MarkEtING MEMO Recommendations for Improving Service Quality 419
Incorporating Self-Service Technologies (SSTS) 421
Managing Product-Support Services 422 Identifying and Satisfying Customer
Needs 422 Postsale Service Strategy 423
Summary 423 applications 424
MarkEtING ExCEllENCE The Ritz-Carlton 424
MarkEtING ExCEllENCE Mayo Clinic 426
Chapter 15 Introducing New Market Offerings 429
New-Product Options 429 Make or Buy 429 Types of New Products 430
xiii
Challenges in New-Product Development 431
The Innovation Imperative 432 New-Product Success 432 New-Product Failure 433
Organizational Arrangements 434 Budgeting for New-Product Development 434 Organizing New-Product Development 435
Managing the Development Process: Ideas 438 Generating Ideas 438
MarkEtING MEMO Ten Ways to Find Great New-Product Ideas 438
MarkEtING INSIGht P&G’S Connect + Develop Approach to Innovation 439
MarkEtING MEMO Seven Ways to Draw New Ideas from Your Customers 440
MarkEtING MEMO How to Run a Successful Brainstorming Session 442
Using Idea Screening 443 Managing the Development Process: Concept
to Strategy 445 Concept Development and Testing 445 Marketing Strategy Development 448 Business Analysis 448
Managing the Development Process: Development to Commercialization 450
Product Development 450 Market Testing 451 Commercialization 453
The Consumer-Adoption Process 454 Stages in the Adoption Process 454 Factors Influencing the Adoption
Process 454 Summary 456 applications 457
MarkEtING ExCEllENCE Apple 457
MarkEtING ExCEllENCE Salesforce.com 459
Chapter 16 Developing Pricing Strategies and Programs 461
Understanding Pricing 461 Pricing in a Digital World 462 A Changing Pricing Environment 462
MarkEtING INSIGht Giving It All Away 463
How Companies Price 464 Consumer Psychology and Pricing 465
Setting the Price 467 Step 1: Selecting the Pricing Objective 467
MarkEtING INSIGht Trading Up, Down, and Over 468
Step 2: Determining Demand 470 Step 3: Estimating Costs 472
MarkEtING MEMO How to Cut Costs 474
Step 4: Analyzing Competitors’ Costs, Prices, and Offers 474
Step 5: Selecting a Pricing Method 475 Step 6: Selecting the Final Price 480
MarkEtING INSIGht Stealth Price Increases 481
Adapting the Price 482 Geographical Pricing (Cash, Countertrade,
Barter) 482 Price Discounts and Allowances 482 Promotional Pricing 483 Differentiated Pricing 484
Initiating and Responding to Price Changes 485
Initiating Price Cuts 485 Initiating Price Increases 486 Anticipating Competitive Responses 486 Responding to Competitors’ Price
Changes 487 Summary 488 applications 488
MarkEtING ExCEllENCE eBay 489
MarkEtING ExCEllENCE Southwest Airlines 490
Part 6 Delivering Value 492
Chapter 17 Designing and Managing Integrated Marketing Channels 493
Marketing Channels and Value Networks 494
The Importance of Channels 494 Multichannel Marketing 494 Integrating Multichannel Marketing
Systems 495 Value Networks 497 The Digital Channels Revolution 498
The Role of Marketing Channels 499 Channel Functions and Flows 500 Channel Levels 501 Service Sector Channels 502
xiv
Channel-Design Decisions 503 Analyzing Customer Needs and Wants 503
MarkEtING INSIGht Understanding the Showrooming Phenomena 503
Establishing Objectives and Constraints 504 Identifying Major Channel Alternatives 505 Evaluating Major Channel
Alternatives 507 Channel-Management Decisions 508
Selecting Channel Members 508 Training and Motivating Channel
Members 508 Evaluating Channel Members 509 Modifying Channel Design and
Arrangements 510 Channel Modification Decisions 510 Global Channel Considerations 510
Channel Integration and Systems 512 Vertical Marketing Systems 512 Horizontal Marketing Systems 514
E-Commerce Marketing Practices 514 Pure-Click Companies 514 Brick-and-Click Companies 515
M-Commerce Marketing Practices 516 Changes in Customer and Company
Behavior 517 M-Commerce Marketing Practices 517 Privacy 518
Conflict, Cooperation, and Competition 518 Types of Conflict and Competition 519 Causes of Channel Conflict 519 Managing Channel Conflict 519 Dilution and Cannibalization 521 Legal and Ethical Issues in Channel
Relations 521 Summary 521 applications 522
MarkEtING ExCEllENCE Amazon.com 522
MarkEtING ExCEllENCE Costco 524
Chapter 18 Managing Retailing,Wholesaling, and Logistics 527
Retailing 527 Types of Retailers 528
MarkEtING MEMO Innovative Retail Organizations 529
The Modern Retail Marketing Environment 532
MarkEtING INSIGht The Growth of Shopper Marketing 534
Marketing Decisions 535
MarkEtING MEMO Helping Stores to Sell 540
Private Labels 541 Role of Private Labels 542 Private-Label Success Factors 542
MarkEtING INSIGht Manufacturer’s Response to the Private-Label Threat 543
Wholesaling 543 Trends in Wholesaling 545
Market Logistics 545 Integrated Logistics Systems 546 Market-Logistics Objectives 547 Market-Logistics Decisions 548
Summary 551 applications 552
MarkEtING ExCEllENCE Zara 552
MarkEtING ExCEllENCE Best Buy 554
Part 7 Communicating Value 556
Chapter 19 Designing and Managing Integrated Marketing Communications 557
The Role of Marketing Communications 558 The Changing Marketing Communications
Environment 558
MarkEtING INSIGht Don’t Touch That Remote 558
Marketing Communications Mix 559 How Do Marketing Communications
Work? 561 The Communications Process Models 562
Developing Effective Communications 564 Identify the Target Audience 564 Set the Communications Objectives 565 Design the Communications 565 Select the Communications
Channels 568
MarkEtING MEMO Celebrity Endorsements as a Message Strategy 569
MarkEtING INSIGht Playing Tricks to Build a Brand 571
xv
Establish the Total Marketing Communications Budget 572
Selecting the Marketing Communications Mix 573
Characteristics of the Marketing Communications Mix 574
Factors in Setting the Marketing Communications Mix 575
Measuring Communication Results 577 Managing the Integrated Marketing
Communications Process 577 Coordinating Media 579 Implementing IMC 579
MarkEtING MEMO How Integrated Is Your IMC Program? 579
Summary 580 applications 581
MarkEtING ExCEllENCE Red Bull 581
MarkEtING ExCEllENCE Target 582
Chapter 20 Managing Mass Communications: Advertising, Sales Promotions, Events and Experiences, and Public Relations 585
Developing and Managing an Advertising Program 586
Setting the Advertising Objectives 587 Deciding on the Advertising Budget 587 Developing the Advertising
Campaign 588
MarkEtING MEMO Print Ad Evaluation Criteria 590
MarkEtING INSIGht Off-Air Ad Battles 592
Choosing Media 593
MarkEtING INSIGht Playing Games with Brands 596
MarkEtING MEMO Winning The Super Bowl of Advertising 597
Evaluating Advertising Effectiveness 599 Sales Promotion 600
Advertising Versus Promotion 600 Major Decisions 601
Events and Experiences 604 Events Objectives 604 Major Sponsorship Decisions 605
MarkEtING MEMO Measuring High- Performance Sponsorship Programs 606
Creating Experiences 606 Public Relations 607
Marketing Public Relations 607 Major Decisions in Marketing PR 608
Summary 609 applications 610
MarkEtING ExCEllENCE Coca-Cola 610
MarkEtING ExCEllENCE Gillette 612
Chapter 21 Managing Digital Communications: Online, Social Media, and Mobile 615
Online Marketing 615 Advantages and Disadvantages of Online
Marketing Communications 616 Online Marketing Communication
Options 617
MarkEtING MEMO How to Maximize the Marketing Value of E-mails 620
Social Media 620 Social Media Platforms 621 Using Social Media 622
Word of Mouth 623 Forms of Word of Mouth 624 Creating Word-of-Mouth Buzz 624
MarkEtING MEMO How to Start a Buzz Fire 626
MarkEtING INSIGht Tracking Online Buzz 627
Measuring the Effects of Word of Mouth 628
Mobile Marketing 628 The Scope of Mobile Marketing 628 Developing Effective Mobile Marketing
Programs 629 Mobile Marketing across Markets 629
Summary 630 applications 631
MarkEtING ExCEllENCE Facebook 631
MarkEtING ExCEllENCE Unilever (Axe and Dove) 632
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Chapter 22 Managing Personal Communications: Direct and Database Marketing and Personal Selling 635
Direct Marketing 635 The Benefits of Direct Marketing 636 Direct Mail 637 Catalog Marketing 638 Telemarketing 638 Other Media for Direct-Response
Marketing 639 Public and Ethical Issues in Direct
Marketing 639 Customer Databases and Database
Marketing 640 Customer Databases 640 Data Warehouses and Data Mining 640 The Downside of Database Marketing 642
Designing the Sales Force 642 Sales Force Objectives and Strategy 644 Sales Force Structure 645
MarkEtING INSIGht Major Account Management 646
Sales Force Size 646 Sales Force Compensation 646
Managing the Sales Force 647 Recruiting and Selecting
Representatives 647 Training and Supervising Sales
Representatives 647 Sales Rep Productivity 648 Motivating Sales Representatives 648 Evaluating Sales Representatives 649
Principles of Personal Selling 651 The Six Steps 651 Relationship Marketing 652
Summary 653 applications 653
MarkEtING ExCEllENCE Progressive 654
MarkEtING ExCEllENCE Victoria’s Secret 655
Part 8 Conducting Marketing Responsibly for Long-Term Success 656
Chapter 23 Managing a Holistic Marketing Organization for the Long Run 657
Trends in Marketing Practices 657 Internal Marketing 658
MarkEtING MEMO Characteristics of Company Departments That Are Truly Customer Driven 659
Organizing the Marketing Department 660 Relationships with Other Departments 662 Building a Creative Marketing
Organization 662
MarkEtING INSIGht The Marketing CEO 663
Socially Responsible Marketing 663 Corporate Social Responsibility 664
MarkEtING INSIGht The Rise of Organic 667
Socially Responsible Business Models 668
Cause-Related Marketing 668
MarkEtING MEMO Making a Difference: Top 10 Tips for Cause Branding 671
Social Marketing 672 Marketing Implementation and Control 675
Marketing Implementation 675 Marketing Control 675
The Future of Marketing 680
MarkEtING MEMO Major Marketing Weaknesses 681
Summary 683 applications 683
MarkEtING ExCEllENCE Starbucks 684
MarkEtING ExCEllENCE Virgin Group 685
appendix Tools for Marketing Control 687
appendix: Sonic Marketing Plan and Exercises a1 Endnotes E1 Glossary G1 Name Index I1 Company, Brand, and Organization Index I5 Subject Index I18
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Preface What’s New in the 15th Edition The 15th edition of Marketing Management is a landmark entry in the long successful history of the market leader. With the 15th edition, great care was taken to provide an introductory guide to marketing management that truly reflects the modern realities of marketing. In doing so, classic concepts, guidelines, and examples were retained while new ones were added as appropriate. Three broad forces—globalization, technology, and social responsibility—were identified as critical to the success of modern marketing programs. These three topics are evident all through the text.
As has been the case for a number of editions now, the overriding goal of the revision for the 15th edition of Marketing Management was to create as comprehensive, current, and engaging a MBA marketing textbook as possible. Where appropriate, new material was added, old material was updated, and no longer relevant or necessary material was deleted.
Even though marketing is changing in many significant ways these days, many core elements remain, and we feel strongly that a balanced approach of classic and contemporary approaches and perspectives is the way to go. Marketing Management, 15th edition, allows those instructors who have used the 14th edition to build on what they have learned and done while at the same time offering a text that is unsurpassed in breadth, depth, and relevance for students experiencing Marketing Management for the first time.
The successful across-chapter reorganization into eight parts that began with the 12th edition of Marketing Management has largely been preserved, although several adjustments have been made to improve student understanding, as described below. Many of the favorably received within-chapter features that have been introduced through the years, such as topical chapter openers, in-text boxes highlighting noteworthy compa- nies or issues, and the Marketing Insight and Marketing Memo boxes that provide in-depth conceptual and practical commentary, have been retained.