Aquafina vending machine hack 2017

PPT For The Presentation

O.C. Ferrell Belmont University

Michael D. Hartline Florida State University

Marketing Strategy TEXT AND CASES

SEVENTH EDITION

Australia • Brazil • Mexico • Singapore • United Kingdom • United States

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

Marketing Strategy: Text and Cases, Seventh Edition O.C. Ferrell and Michael D. Hartline

Senior Vice President, General Manager, Social Sciences, Humanities, and Business: Erin Joyner

Product Director: Jason Fremder

Senior Product Manager: Mike Roche

Product Assistant: Brian Pierce

Marketing Manager: Katie Jergens

Marketing Coordinator: Casey Binder

Content Project Manager: Darrell E. Frye

Manufacturing Planner: Ron Montgomery

Production Service: MPS Limited

Senior Art Director: Bethany Casey

Cover Image: Black_Diamond/Shutterstock.com; vs148/Shutterstock.com; scyther5/Shutterstock.com; Pulvas/Shutterstock.com

Intellectual Property Analyst: Diane Garrity Project Manager: Sarah Shainwald

© 2017, 2014 Cengage Learning

ALL RIGHTS RESERVED. No part of this work covered by the copyright herein may be reproduced or distributed in any form or by any means, except as permitted by U.S. copyright law, without the prior written permission of the copyright owner.

For product information and technology assistance, contact us at Cengage Learning Customer & Sales Support, 1-800-354-9706.

For permission to use material from this text or product, submit all requests online at www.cengage.com/permissions.

Further permissions questions can be emailed to permissionrequest@cengage.com.

Unless otherwise noted all items © Cengage Learning.

Library of Congress Control Number: 2016942345

ISBN: 978-1-337-29651-9

Cengage Learning 20 Channel Center Street Boston, MA 02210 USA

Cengage Learning is a leading provider of customized learning solutions with employees residing in nearly 40 different countries and sales in more than 125 countries around the world. Find your local representative at www.cengage.com.

Cengage Learning products are represented in Canada by Nelson Education, Ltd.

To learn more about Cengage Learning Solutions, visit www.cengage.com.

Purchase any of our products at your local college store or at our preferred online store www.cengagebrain.com.

Printed in the United States of America Print Number: 01 Print Year: 2016

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

To my wife, Linda

O.C. Ferrell

To my girls, Marsha, Meghan, Madison, and Mallory

Michael D. Hartline

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

Brief Contents Preface xiii

About the Authors xvii

1 MARKETING IN TODAY’S ECONOMY 1 2 STRATEGIC MARKETING PLANNING 27 3 COLLECTING AND ANALYZING MARKETING INFORMATION 56 4 DEVELOPING COMPETITIVE ADVANTAGE AND STRATEGIC FOCUS 89 5 CUSTOMERS, SEGMENTATION, AND TARGET MARKETING 119 6 THE MARKETING PROGRAM 153 7 BRANDING AND POSITIONING 203 8 ETHICS AND SOCIAL RESPONSIBILITY IN MARKETING STRATEGY 230 9 MARKETING IMPLEMENTATION AND CONTROL 260 10 DEVELOPING AND MAINTAINING LONG-TERM CUSTOMER RELATIONSHIPS 289

CASES CASE 1 USA TODAY : INNOVATION IN AN EVOLVING INDUSTRY 318

CASE 2 CONSUMERS TAKE A SHINE TO APPLE, INC. 331

CASE 3 MONSANTO BALANCES THE INTERESTS OF MULTIPLE STAKEHOLDERS 342

CASE 4 NEW BELGIUM BREWING (A): SOCIAL RESPONSIBILITY AS COMPETITIVE ADVANTAGE 355

CASE 5 NEW BELGIUM BREWING (B): DEVELOPING A BRAND PERSONALITY 364

CASE 6 MATTEL CONFRONTS ITS MARKETING CHALLENGES 373

CASE 7 MISTINE: DIRECT SELLING IN THE THAI COSMETICS MARKET 384

CASE 8 BP STRUGGLES TO REPAIR ITS TARNISHED REPUTATION 396

CASE 9 CHEVROLET: A CENTURY OF PRODUCT INNOVATION 407

CASE 10 WYNDHAM WORLDWIDE ADOPTS A STAKEHOLDER ORIENTATION MARKETING STRATEGY 422

CASE 11 NASCAR: CAN’T KEEP A GOOD BRAND DOWN 431

iv

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

CASE 12 INDYCAR: SEEKING A RETURN TO MOTORSPORTS’ FAST LANE 443

CASE 13 ZAPPOS: DELIVERING HAPPINESS 454

CASE 14 NETFLIX FIGHTS TO STAY AHEAD OF A RAPIDLY CHANGING MARKET 465

CASE 15 GILLETTE: WHY INNOVATION MAY NOT BE ENOUGH 475

CASE 16 IKEA SLOWLY EXPANDS ITS U.S. MARKET PRESENCE 487

CASE 17 UBER: THE OPPORTUNITIES AND CHALLENGES OF MARKET DISRUPTION 496

CASE 18 SCENTSY, INC.: A SUCCESSFUL DIRECT SELLING BUSINESS MODEL 507

CASE 19 SIGMA MARKETING: STRATEGIC MARKETING ADAPTATION 515

CASE 20 BELLE MEADE PLANTATION: A SOCIAL ENTREPRENEURSHIP MARKETING STRATEGY 525

CASE 21 COCA-COLA: INTEGRATED MARKETING COMMUNICATIONS 534

Index 544

Brief Contents v

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

Contents Preface xiii

About the Authors xvii

1 MARKETING IN TODAY’S ECONOMY 1 THE CHALLENGES AND OPPORTUNITIES OF MARKETING IN TODAY’S ECONOMY 2

Power Shift to Customers 3

Massive Increase in Product Selection 4

Audience and Media Fragmentation 4

Changing Value Propositions 4

Shifting Demand Patterns 5

Privacy, Security, and Ethical Concerns 5

Unclear Legal Jurisdiction 6

BASIC MARKETING CONCEPTS 7

What Is a Market? 8

What Is Exchange? 9

What Is a Product? 10

MAJOR MARKETING ACTIVITIES AND DECISIONS 13

Strategic Planning 15

Research and Analysis 15

Developing Competitive Advantage 16

Marketing Strategy Decisions 16

Social Responsibility and Ethics 19

Implementation and Control 20

Developing and Maintaining Customer Relationships 20

vi

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

TAKING ON THE CHALLENGES OF MARKETING STRATEGY 21

LESSONS FROM CHAPTER 1 23

NOTES 24

2 STRATEGIC MARKETING PLANNING 27 THE STRATEGIC PLANNING PROCESS 29

Organizational Mission versus Organizational Vision 30

Corporate or Business-Unit Strategy 34

Functional Goals and Objectives 35

Functional Strategy 36

Implementation 36

Evaluation and Control 36

THE MARKETING PLAN 37

Marketing Plan Structure 37

Using the Marketing Plan Structure 43

Purposes and Significance of the Marketing Plan 44

Organizational Aspects of the Marketing Plan 45

MAINTAINING CUSTOMER FOCUS AND BALANCE IN STRATEGIC PLANNING 46

Customer-Focused Planning 46

Balanced Strategic Planning 49

LESSONS FROM CHAPTER 2 51

NOTES 53

3 COLLECTING AND ANALYZING MARKETING INFORMATION 56 CONDUCTING A SITUATION ANALYSIS 58

Analysis Alone Is Not a Solution 58

Data Are Not the Same as Information 59

The Benefits of Analysis Must Outweigh the Costs 59

Conducting a Situation Analysis Is a Challenging Exercise 59

THE INTERNAL ENVIRONMENT 61

Review of Current Objectives, Strategy, and Performance 61

Availability of Resources 62

Organizational Culture and Structure 63

THE CUSTOMER ENVIRONMENT 63

Who Are Our Current and Potential Customers? 65

What Do Customers Do with Our Products? 65

Where Do Customers Purchase Our Products? 66

When Do Customers Purchase Our Products? 66

Contents vii

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

Why (and How) Do Customers Select Our Products? 68

Why Do Potential Customers Not Purchase Our Products? 68

THE EXTERNAL ENVIRONMENT 69

Competition 71

Economic Growth and Stability 73

Political Trends 74

Legal and Regulatory Issues 74

Technological Advancements 75

Sociocultural Trends 76

COLLECTING MARKETING DATA AND INFORMATION 79

Secondary Information Sources 79

Primary Data Collection 82

Overcoming Problems in Data Collection 83

LESSONS FROM CHAPTER 3 84

NOTES 85

4 DEVELOPING COMPETITIVE ADVANTAGE AND STRATEGIC FOCUS 89 MAKING SWOT ANALYSIS PRODUCTIVE 91

Stay Focused 91

Search Extensively for Competitors 93

Collaborate with Other Functional Areas 93

Examine Issues from the Customers’ Perspective 93

Look for Causes, Not Characteristics 95

Separate Internal Issues from External Issues 96

SWOT-DRIVEN STRATEGIC PLANNING 97

Strengths and Weaknesses 97

Opportunities and Threats 97

The SWOT Matrix 99

DEVELOPING AND LEVERAGING COMPETITIVE ADVANTAGES 102

ESTABLISHING A STRATEGIC FOCUS 104

DEVELOPING MARKETING GOALS AND OBJECTIVES 109

Developing Marketing Goals 111

Developing Marketing Objectives 112

Moving beyond Goals and Objectives 115

LESSONS FROM CHAPTER 4 115

NOTES 117

viii Contents

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

5 CUSTOMERS, SEGMENTATION, AND TARGET MARKETING 119 BUYER BEHAVIOR IN CONSUMER MARKETS 121

The Consumer Buying Process 121

Factors that Affect the Consumer Buying Process 127

BUYER BEHAVIOR IN BUSINESS MARKETS 129

Unique Characteristics of Business Markets 130

The Business Buying Process 132

MARKET SEGMENTATION 133

Traditional Market Segmentation Approaches 133

Individualized Segmentation Approaches 136

Criteria for Successful Segmentation 138

IDENTIFYING MARKET SEGMENTS 139

Segmenting Consumer Markets 139

Segmenting Business Markets 144

TARGET MARKETING STRATEGIES 145

LESSONS FROM CHAPTER 5 147

NOTES 151

6 THE MARKETING PROGRAM 153 PRODUCT STRATEGY 155

Strategic Issues in the Product Portfolio 155

The Challenges of Service Products 158

Developing New Products 160

PRICING STRATEGY 162

Key Issues in Pricing Strategy 162

Pricing Service Products 168

Base Pricing Strategies 170

Adjusting the Base Price 171

SUPPLY CHAIN STRATEGY 172

Strategic Supply Chain Issues 173

Trends in Supply Chain Strategy 178

INTEGRATED MARKETING COMMUNICATIONS 182

Strategic Issues in Integrated Marketing Communications 183

Advertising 185

Public Relations 187

Contents ix

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

Personal Selling and Sales Management 189

Sales Promotion 191

LESSONS FROM CHAPTER 6 195

NOTES 200

7 BRANDING AND POSITIONING 203 STRATEGIC ISSUES IN BRANDING 206

Basic Branding Decisions 206

Strategic Brand Alliances 209

Brand Value 209

Packaging and Labeling 212

DIFFERENTIATION AND POSITIONING 213

Bases for Differentiation 215

Positioning Strategies 217

MANANGING BRANDS OVER TIME 218

Development Stage 220

Introduction Stage 221

Growth Stage 221

Maturity Stage 223

Decline Stage 224

LESSONS FROM CHAPTER 7 226

NOTES 228

8 ETHICS AND SOCIAL RESPONSIBILITY IN MARKETING STRATEGY 230 ETHICS AND SOCIAL RESPONSIBILITY IN MARKETING STRATEGY 231

Dimensions of Social Responsibility 232

Sustainability 235

Marketing Ethics and Strategy 237

The Challenges of Being Ethical and Socially Responsible 239

ETHICAL ISSUES IN THE MARKETING PROGRAM 241

Product-Related Ethical Issues 241

Pricing-Related Ethical Issues 243

Supply Chain–Related Ethical Issues 244

Promotion-Related Ethical Issues 245

x Contents

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

MANAGING AND CONTROLLING ETHICAL ISSUES 246

Regulating Marketing Ethics 246

Codes of Conduct 248

Ethical Leadership 249

RELATIONSHIP TO MARKETING AND FINANCIAL PERFORMANCE 250

Stakeholder Orientation 250

Marketing Financial Performance 251

INCORPORATING ETHICS AND SOCIAL RESPONSIBILITY INTO STRATEGIC PLANNING 251

LESSONS FROM CHAPTER 8 252

NOTES 255

9 MARKETING IMPLEMENTATION AND CONTROL 260 STRATEGIC ISSUES IN MARKETING IMPLEMENTATION 262

The Link Between Planning and Implementation 262

The Elements of Marketing Implementation 264

APPROACHES TO MARKETING IMPLEMENTATION 268

Implementation by Command 268

Implementation through Change 270

Implementation through Consensus 271

Implementation as Organizational Culture 271

INTERNAL MARKETING AND MARKETING IMPLEMENTATION 272

The Internal Marketing Approach 272

The Internal Marketing Process 274

EVALUATING AND CONTROLLING MARKETING ACTIVITIES 275

Formal Marketing Controls 276

Informal Marketing Controls 279

Scheduling Marketing Activities 281

LESSONS FROM CHAPTER 9 283

NOTES 286

10 DEVELOPING AND MAINTAINING LONG-TERM CUSTOMER RELATIONSHIPS 289 MANAGING CUSTOMER RELATIONSHIPS 290

Developing Relationships in Consumer Markets 292

Developing Relationships in Business Markets 294

Contents xi

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

QUALITY AND VALUE: THE KEYS TO DEVELOPING CUSTOMER RELATIONSHIPS 296

Understanding the Role of Quality 296

Delivering Superior Quality 298

Understanding the Role of Value 299

Competing on Value 303

CUSTOMER SATISFACTION: THE KEY TO CUSTOMER RETENTION 304

Understanding Customer Expectations 304

Satisfaction versus Quality versus Value 307

Customer Satisfaction and Customer Retention 310

Customer Satisfaction Measurement 312

LESSONS FROM CHAPTER 10 313

NOTES 317

CASES CASE 1 USA TODAY : INNOVATION IN AN EVOLVING INDUSTRY 318

CASE 2 CONSUMERS TAKE A SHINE TO APPLE, INC. 331

CASE 3 MONSANTO BALANCES THE INTERESTS OF MULTIPLE STAKEHOLDERS 342

CASE 4 NEW BELGIUM BREWING (A): SOCIAL RESPONSIBILITY AS COMPETITIVE ADVANTAGE 355

CASE 5 NEW BELGIUM BREWING (B): DEVELOPING A BRAND PERSONALITY 364

CASE 6 MATTEL CONFRONTS ITS MARKETING CHALLENGES 373

CASE 7 MISTINE: DIRECT SELLING IN THE THAI COSMETICS MARKET 384

CASE 8 BP STRUGGLES TO REPAIR ITS TARNISHED REPUTATION 396

CASE 9 CHEVROLET: A CENTURY OF PRODUCT INNOVATION 407

CASE 10 WYNDHAM WORLDWIDE ADOPTS A STAKEHOLDER ORIENTATION MARKETING STRATEGY 422

CASE 11 NASCAR: CAN’T KEEP A GOOD BRAND DOWN 431

CASE 12 INDYCAR: SEEKING A RETURN TO MOTORSPORTS’ FAST LANE 443

CASE 13 ZAPPOS: DELIVERING HAPPINESS 454

CASE 14 NETFLIX FIGHTS TO STAY AHEAD OF A RAPIDLY CHANGING MARKET 465

CASE 15 GILLETTE: WHY INNOVATION MAY NOT BE ENOUGH 475

CASE 16 IKEA SLOWLY EXPANDS ITS U.S. MARKET PRESENCE 487

CASE 17 UBER: THE OPPORTUNITIES AND CHALLENGES OF MARKET DISRUPTION 496

CASE 18 SCENTSY, INC.: A SUCCESSFUL DIRECT SELLING BUSINESS MODEL 507

CASE 19 SIGMA MARKETING: STRATEGIC MARKETING ADAPTATION 515

CASE 20 BELLE MEADE PLANTATION: A SOCIAL ENTREPRENEURSHIP MARKETING STRATEGY 525

CASE 21 COCA-COLA: INTEGRATED MARKETING COMMUNICATIONS 534

Index 544

xii Contents

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

Preface Welcome to one of the most interesting, challenging, and important topics in your business education. What makes marketing strategy so interesting, challenging, and important you ask? To begin, marketing strategy is interesting because (1) it is inher- ently people-driven and (2) it is never stagnant. A distinct blend of both art and sci- ence, marketing strategy is about people (inside an organization) finding ways to deliver exceptional value by fulfilling the needs and wants of other people (custo- mers, shareholders, business partners, society at large), as well as the needs of the organization itself. Marketing strategy draws from psychology, sociology, and economics to better understand the basic needs and motivations of these people— whether they are the organization’s customers (typically considered the most critical), its employees, or its stakeholders. In short, marketing strategy is about peo- ple serving people.

For this reason, marketing strategy is interesting because it is never stagnant. The simple fact is that people change. A strategy that works today might not work tomorrow. Products that are popular today are forgotten next week. These truisms are important because truly understanding marketing strategy means accepting the fact that there are few concrete rules for developing and implementing marketing activities. Given the constant state of change in the marketing environment, it is vir- tually impossible to say that given “this customer need” and “these competitors” and “this level of government regulation” that Product A, Price B, Promotion C, and Distribution D will produce the best results. Marketing simply doesn’t work that way. The lack of concrete rules and the ever changing economic, sociocultural, competi- tive, technological, and political/legal landscapes make marketing strategy a terribly fascinating subject.

Now that you know why marketing strategy is so interesting, it should be easy to see why it is also challenging. A perfect marketing strategy that is executed flawlessly can still fail. Sometimes, organizations are lucky and have success despite having a terrible strategy and/or execution. The nature of marketing can make mar- keting planning quite frustrating.

Finally, the importance of marketing strategy is undeniable. No other business function focuses on developing relationships with customers—the lifeblood of all organizations (even non-profits). This statement does not diminish the importance of other business functions, as they all are necessary for an organization to be suc- cessful. In fact, coordination with other functions is critical to marketing success. However, without customers, and marketing programs in place to cultivate customer relationships, no organization can survive.

xiii

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

OUR FOCUS Given this marketing landscape, Marketing Strategy: Text and Cases, 7th Edition provides a practical, straightforward approach to analyzing, planning, and imple- menting marketing strategies. Our focus is based on the creative process involved in applying the knowledge and concepts of marketing to the development and imple- mentation of marketing strategy. Our goal is to encourage students of marketing to think and act like a marketer. By discussing the key concepts and tools of marketing strategy, our emphasis on critical thinking, both analytical and creative, allows stu- dents to understand the essence of how marketing decisions fit together to create a coherent strategy.

Our approach in Marketing Strategy: Text and Cases, 7th Edition is also grounded in the development and execution of the marketing plan. Throughout the text, we provide a comprehensive planning framework based on conducting sound background research, developing market capabilities and competitive advantages, designing integrated marketing programs, and managing customer relationships for the long term. We also emphasize the need for integrity in the strategic planning pro- cess as well as the design of marketing programs that are both ethical and socially responsible. We also stress the integration and coordination of marketing decisions with other functional business decisions as the key to achieving an organization’s overall mission and vision. Throughout the text, we offer examples of successful planning and implementation to illustrate how firms face the challenges of marketing strategy in today’s economy.

PURPOSE We view strategic marketing planning not only as a process for achieving organiza- tional goals, but also as a means of building long-term relationships with customers. Creating a customer orientation takes imagination, vision, and courage, especially in today’s rapidly changing economic and technological environments. To help meet these challenges, our text approaches marketing strategy from both “traditional” and “cutting-edge” practices. We cover topics such as segmentation, creating a competi- tive advantage, marketing program development, and the implementation process with a solid grounding in traditional marketing, but also with an eye toward emerging practices. Lessons learned from the rise, fall, and reemergence of the dotcom sector, recent corporate scandals, and the most recent economic recession illustrate the importance of balancing the traditional and emerging practices of marketing strat- egy. Our text never loses sight of this balance.

Although our approach allows for the use of sophisticated research and decision-making processes, we have employed a practical perspective that permits marketing managers in any sized organization to develop and implement a marketing plan. We have avoided esoteric, abstract, and highly academic material that does not relate to typical marketing strategy decisions in most organizations. The marketing plan framework that we utilize throughout the text has been used by a number of organizations to successfully plan their marketing strategies. Many companies report great success in using our approach partially due to the ease of communicating the plan to all functional areas of the business.

TARGET AUDIENCE Our text is relevant for a number of educational environments, including undergrad- uate, graduate, and corporate training courses. At the undergraduate level, our text is appropriate for the capstone course or any upper-level integrating course such as

xiv Preface

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

“Marketing Management,” “Marketing Strategy,” or “Marketing Policy.” At this level, the text provides an excellent framework to use with our included text-based cases, live-client cases, or a computer simulation. At the graduate level, our text is appropri- ate for courses addressing strategic marketing planning, competitive marketing strat- egies, or as a supplement for any simulation-based course. A growing segment of the market, corporate training, can utilize our text when educating business profes- sionals interested in developing marketing plans of their own, or interpreting and implementing the plans of others.

Each of the 21 cases included in our text describes the strategic situations of real-world, identifiable organizations. Because these cases feature real situations, instructors have the option of using the case material as published, or they may give students the opportunity to update the cases by conducting research to find the latest information. Many additional resources for students and instructors can be found at our text’s companion website, www.cengagebrain.com.

ACKNOWLEDGMENTS Throughout the development of this text, several extraordinary individuals pro- vided their talent and expertise to make important contributions. A number of indi- viduals have made many useful comments and recommendations as reviewers of this text.

We also deeply appreciate the assistance of several individuals who played a major role in developing cases or other materials. Specifically, we thank the follow- ing individuals:

Joe Alexander, Belmont University

Noushin Laila Ansari, University of New Mexico

Timothy W. Aurand, Northern Illinois University

Harper Baird, University of New Mexico

Chandani Bhasin, University of New Mexico

Christin Copeland, Florida State University

Linda Ferrell, Belmont University

John Fraedrich, Southern Illinois University – Carbondale

Bernadette Gallegos, University of New Mexico

Sederick Hood, University of New Mexico

Jennifer Jackson, University of New Mexico

Danielle Jolley, University of New Mexico

Kimberly Judson, Illinois State University

Robert P. Lambert, Belmont University

Cassondra Lopez, University of New Mexico

Julian Mathias, University of New Mexico

Kevin Mihaly, Florida State University

Christian Otto, University of New Mexico

Greg Owsley, New Belgium Brewing Company

Kelsey Reddick, Florida State University

Preface xv

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

Don Roy, Middle Tennessee State University

Mike Sapit, Sigma Marketing

Jennifer Sawayda, University of New Mexico

Beau Shelton, University of New Mexico

Bryan Simpson, New Belgium Brewing Company

Debbie Thorne, Texas State University

Jacqueline Trent, University of New Mexico

Robyn Watson, Florida State University

Lecia Weber, University of New Mexico

Celeste Wood, Florida State University

We greatly appreciate the efforts of Jennifer Sawayda, University of New Mexico, for coordinating much of the new case development in this edition. The editorial, production, and marketing staff at Cengage cannot be thanked enough. With a deep sense of appreciation, we thank Mike Roche and Zach Fleischer.

Finally, we express appreciation for the support and encouragement of our families and friends, and our colleagues at Belmont University, Florida State University, and the University of New Mexico.

xvi Preface

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

About the Authors O.C. FERRELL, PH.D. Belmont University

O.C. Ferrell (Ph.D., Louisiana State University) is University Distinguished Chair of Business Ethics at Belmont University. He recently served 9 years as University Dis- tinguished Professor of Marketing at the Anderson School of Management, Univer- sity of New Mexico. He also served at the University of Wyoming and was Chair of the Marketing Department at Colorado State University. Prior to his arrival at CSU, Dr. Ferrell was the Distinguished Professor of Marketing and Business Ethics at the University of Memphis. He has also served as a professor at the University of Tampa, Texas A&M University, Illinois State University, and Southern Illinois University. His MBA and BA degrees are from Florida State University.

Dr. Ferrell is past president of the Academic Council of the American Marketing Association and former chair of the American Marketing Association Ethics Commit- tee. Under his leadership, the committee developed the AMA Code of Ethics and the AMA Code of Ethics for Marketing on the Internet. He is a Society for Marketing Advances Fellow and the Vice President of Publications for the Academy of Market- ing Science. He is a former member of the Board of Governors as a Distinguished Fellow for the Academy of Marketing Science. He received the Cutco Vector Distin- guished Marketing Educator Award from the Academy of Marketing Science. In addi- tion, he received the first Innovative Educator award from the Marketing Management Association.

Dr. Ferrell has taught a wide variety of courses, including marketing strategy, principles of marketing, marketing ethics, international marketing, as well as most undergraduate courses in marketing. For 16 years he taught a graduate course in competitive marketing strategies at Thammasat University in Bangkok, Thailand. He has also been a visiting professor at University of Wisconsin, University of Michigan–Ann Arbor, and University of Hanover, Germany.

Dr. Ferrell is the co-author of over 20 books and more than 100 articles. His research is published in the Journal of Marketing Research, the Journal of Market- ing, the Journal of Business Ethics, the Journal of Business Research, the Journal of the Academy of Marketing Science, as well as other journals. His Marketing: Con- cepts and Strategies text, co-authored with Bill Pride, is one of the most widely adopted principles of marketing texts in the world. Furthermore, his Business Ethics: Decision Making and Cases is the leading business ethics text.

Dr. Ferrell has served as an expert witness in many high-profile civil litigation cases related to marketing ethics. More recently he has assisted international cor- porations and worked with state regulatory agencies in modifying marketing pro- grams to maintain compliance with both ethical and legal requirements. Currently,

xvii

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

he is working with the National Association of State Boards of Accountancy to develop an ethical leadership certification for students. He has appeared on the NBC Today show and he has been quoted in national papers such as USA Today.

Dr. Ferrell and his wife Linda (also a faculty member at Belmont University) live in Nashville, Tennessee. He continues to help coordinate the Daniels Fund Ethics Ini- tiative at the University of New Mexico. He enjoys golf, skiing, reading, and travel.

MICHAEL D. HARTLINE, PH.D. Florida State University

Michael D. Hartline (Ph.D., University of Memphis) is Interim Dean and Charles A. Bruning Professor of Business Administration in the College of Business at Florida State University. Previously, he served as Associate Dean for Strategic Initiatives and Chair of the Department of Marketing. Prior to joining the FSU faculty in 2001, Dr. Hartline served on faculty at the University of Arkansas at Little Rock, Louisiana State University, and Samford University. His MBA and B.S. degrees are from Jacksonville State University in Alabama.

Dr. Hartline primarily teaches graduate courses in Marketing Strategy and undergraduate courses in Services Marketing. He has won many teaching and research awards and made many presentations to industry and academic audiences. Dr. Hartline has also served as a consultant to several for-profit and nonprofit orga- nizations in the areas of marketing plan development, market feasibility analysis, customer satisfaction measurement, customer service training, and pricing policy. He currently serves on the Academic Advisory Council of the Direct Selling Educa- tion Foundation and on the board of the Knight Creative Communities Initiative in Tallahassee, Florida. He has previously served on the executive committee of the Academy of Marketing Science, co-chaired two international conferences for the American Marketing Association, and has served on the editorial review boards of a number of leading marketing journals.

Dr. Hartline’s research addresses marketing implementation issues in service firms. Specifically, his work examines the role of customer-contact employees and workgroups in the effective delivery of quality service to customers. Dr. Hartline’s research appears in the Journal of Marketing, the Journal of Service Research, the Journal of Business Research, the Journal of Relationship Marketing, the Journal of Services Marketing, the Cornell Quarterly, the Journal of Strategic Marketing, the Journal of Business Ethics, and the Marketing Science Institute Working Paper Series.

Dr. Hartline and his wife Marsha live in Tallahassee with their three daughters Meghan, Madison, and Mallory. They have two dogs, Bella and Chief (both Japanese Chins), and two cats, Snickers and Sammie. Dr. Hartline is a self-professed electron- ics and gadget enthusiast who enjoys music, reading, computers, travel, college football (Go Seminoles!), and being a dad.

xviii About the Authors

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

Marketing in Today’s Economy

INTRODUCTION As noted in the opening Beyond the Pages 1.1 story, competing in today’s economy means finding ways to break out of commodity status to meet customers’ needs bet- ter than competing firms. All organizations—both for-profit and nonprofit—require effective planning and a sound marketing strategy to do this effectively. Without these efforts, organizations would not be able to satisfy customers or meet the needs of other stakeholders. For example, having an effective marketing strategy allows Apple to develop popular products, such as the iPhone, iPad, iWatch, and its MacBook line of computers. Further, effective planning and strategy allows Cola- Cola to continue its leadership in soft drinks, make key acquisitions, and continue its expansion into the lucrative Chinese market. These and other organizations use sound marketing strategy to leverage their strengths and capitalize on opportunities that exist in the market. Every organization—from your favorite local restaurant to giant multinational corporations; from city, state, and federal governments, to chari- ties such as Habitat for Humanity and the American Red Cross—develops and imple- ments marketing strategies.

How organizations plan, develop, and implement marketing strategies is the focus of this book. To achieve this focus, we provide a systematic process for devel- oping customer-oriented marketing strategies and marketing plans that match an organization to its internal and external environments. Our approach focuses on real-world applications and practical methods of marketing planning, including the process of developing a marketing plan. The chapters of this book focus on the steps of this process. Our goal is to give the reader a deeper understanding of mar- keting planning, the ability to organize the vast amount of information needed to complete the planning process, and an actual feel for the development of marketing plans.

In this first chapter, we review some of the major challenges and opportunities that exist in planning marketing strategy in today’s economy. We also review the nature and scope of major marketing activities and decisions that occur throughout the planning process. Finally, we look at some of the major challenges involved in developing marketing strategy.

CHAPTER

1

1

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

THE CHALLENGES AND OPPORTUNITIES OF MARKETING IN TODAY’S ECONOMY Traditional ideas about marketing strategy began to change forever during the mid- 1990s. Advances in computer, communication, and information technology forever

BEYOND THE PAGES 1.1

Thriving in Commodity Hell1

Have you noticed that regardless of the industry, most goods and services offered by competing companies are eerily the same? Most household appliances, such as refrigerators, washing machines, and stoves, offer the same basic features and come in white, beige, black, or stain- less steel. Virtually all Android-based smartphones offer the same features at similar prices. Even air- line flights from New York to Los Angeles are essentially the same. Everywhere you look, most companies offer the same basic products to the same customer groups at roughly the same prices. This situation is referred to as “commodity hell” and it’s a tough situation for most companies. Commoditization is everywhere and is the result of mature markets where goods and services lack any real means of differentiation. Unfortunately for companies, when customers begin to see all competing products as offering roughly the same benefits, price is the only thing that matters.

Commoditization is a consequence of mature industries where slowing innovation, extensive product assortment, excess supply, and frugal consumers force margins to the floor. Since firms have few competitive differences, they are unable to increase margins. They must also spend a great deal on promotion to attract new custo- mers. This situation makes firms more vulnerable to the entry of new competitors. Consider the air- line industry. Notwithstanding a few minor differ- ences, most air travelers see all airlines as being roughly the same. They all get passengers from Point A to Point B while offering the same basic customer services. This makes price the driving force in consumer decision-making and allows discount airlines such as Southwest and Jet Blue to steal customers away from traditional full- service carriers. This same precarious situation exists in a broad range of industries including telephone service, hotels, packaged goods, auto- mobiles, household appliances, and retailing.

As you might expect, low price leaders can do quite well in commoditized markets. South- west, for example, was profitable for over 33 years until the economic recession hit the

industry hard in 2008. To counteract the down- turn, Southwest expanded routes by acquiring rival companies such as AirTran. The company also stands apart from others with its innovative “No Bag Fees” policy. Other firms, however, avoid commodity status through the most basic of marketing tactics: brand building. Here, firms break free from commodity status by developing a distinctive brand position that separates them and their products from the competition. Firms that come to mind are Apple, Coca-Cola, and Chick-fil-A. By offering compelling reasons for consumers to buy products, brand building allows firms to increase margins. Apple, in partic- ular, enjoys the highest profit margins of any firm in the technology sector.

Starbucks is another case in point. Starbucks clearly sells one of the most commoditized, ubiq- uitous products of all time: coffee. Starbucks Chairman Howard Schultz, however, does not accept that his firm is in the coffee business. Instead, Schultz sees Starbucks as a “third place” to hang out (with home and work being number 1 and number 2, respectively). Through this mental- ity, Starbucks offers its customers much more than coffee, including wireless Internet access, music, food, and relaxation. Starbucks has contin- ued its brand-building activities by introducing breakfast combos, Via instant coffee, and the con- tinued push of its Seattle’s Best brand into restau- rants, offices, hospitals, and vending machines.

Getting out of commodity hell is not an easy feat. To do so, firms must give consumers a com- pelling reason to buy their products over compet- ing products. Ultimately, winning the commodity game is all about innovation. Consider the firms that top Fast Company’s list of the World’s Most Innovative Companies for 2014 (in order): Goo- gle, Bloomberg Philanthropies, Xiaomi, Dropbox, Netflix, Airbnb, Nike, and ZipDial. Each of these companies offers innovative products, processes, or experiences that stand apart from the compe- tition; yet each competes in mature industries known for commoditization. These companies prove that innovation and good marketing strat- egy are the antidotes for commodity hell.

2 Chapter 1 • Marketing in Today’s Economy

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

changed the world and the ways that marketers reach potential customers. The col- lapse of the dot-com bubble in the late 1990s was followed by a historic collapse of the worldwide economy in 2008. The powerhouse companies of the past have weak- ened and lost relevance in an economy marked by constant change and consumer skepticism. Consider the following fundamental changes to marketing and business practice, as well as our own personal buying behavior.

Power Shift to Customers Perhaps the single most important change during the last two decades is the shift in power from marketers to consumers. Rather than businesses having the ability to manipulate customers via technology, customers often manipulate businesses because of their access to information, the ability to comparison shop, and the con- trol they have over spending. Individual consumers and business customers can compare prices and product specifications in a matter of minutes. Using a smart- phone and the Amazon app, customers can walk Target’s aisles, scan bar codes to check prices on Amazon, and order items for 2-day delivery while in the store. This fact is the reason that Target, and other retailers like Best Buy, now price matches Amazon and other online competitors. In other cases, customers are able to set their own prices, such as purchasing airline tickets at Priceline.com. Customers can now interact with one another, as merchants such as Amazon and eBay allow custo- mers to share opinions on product quality and supplier reliability. As power con- tinues to shift to customers, marketers have little choice but to ensure that their products are unique and of high quality, thereby giving customers a reason to pur- chase their products and remain loyal to them.

Da ni el

Ko eb e/ Fa nc y/ Co rb is

Consumers can instantly find competitors’ prices while in the store.

Chapter 1 • Marketing in Today’s Economy 3

Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203

Massive Increase in Product Selection The variety and assortment of goods and services offered for sale on the Internet and in traditional stores is staggering. In grocery stores alone, customers are faced with countless options in most aisles, such as in cereal and soft drinks. The growth in online retailing now allows customers to purchase a car from CarsDirect, handmade gifts from over 1.2 million shops on Etsy, or a case of their favorite wine from Wine.com. Increased transaction efficiency (e.g., 24/7 access, delivery to home or office even on weekends) allows customers to fulfill their needs more easily and con- veniently than ever before. Furthermore, the vast amounts of information available online has changed the way we communicate, read the news, and entertain our- selves. Customers can now have the news delivered to them automatically via smart- phone apps, such as Flipboard, that pull from hundreds of sources. This radical increase in product selection and availability has exposed marketers to inroads by competitors from every corner of the globe.

Audience andMedia Fragmentation Changes in media usage and the availability of new media outlets have forced mar- keters to rethink the way they communicate with potential customers. Since the advent of cable television in the 1970s, mass media audiences have become increas- ingly fragmented. Television audiences, for example, shifted from the big three net- works (ABC, CBS, NBC) and began watching programming on ESPN, HGTV, Nickelodeon, and the Discovery Channel. When the growth of the Internet, satellite radio, and mobile communication is added to this mix, it becomes increasingly diffi- cult for marketers to reach a true mass audience. Media audiences have become fragmented due to (1) the sheer number of media choices we have available today, and (2) the limited time we have to devote to any one medium. Today, customers increasingly get information and news from Facebook and Twitter rather than the New York Times or CBS. They spend a growing amount of time interacting with handheld devices than they do reading magazines, listening to the radio, or watching television. As shown in Exhibit 1.1, consumer usage of traditional media is declining, while the usage of mobile media is on the rise. However, despite the challenge of reaching mass audiences today, media fragmentation does have a big advantage: It is easier to reach small, highly targeted audiences who are more receptive to specific marketing messages.