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Principles of Marketing

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Principles of Marketing

Global Edition

Philip Kotler Northwestern University

Gary Armstrong University of North Carolina

Boston Columbus Indianapolis New York San Francisco Upper Saddle River

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15e

Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this

textbook appear on the appropriate page within the text.

Pearson Education Limited Edinburgh Gate

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England

and Associated Companies throughout the world

Visit us on the World Wide Web at: www.pearson.com/uk

© Pearson Education Limited 2014, 2012

The rights of Philip Kotler and Gary Armstrong to be identified as authors of this work has been asserted by

them in accordance with the Copyright, Designs and Patents Act 1988.

Authorised adaptation from the United States edition, entitled Principles of Marketing, 15th Edition, ISBN 978-0-13-325541-6 by Philip Kotler and Gary Armstrong, published by Pearson Education © 2014.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted

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prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom

issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS.

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does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use

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ISBN-13: 978-0-273-78699-3

ISBN-10: 0-273-78699-7

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Editor in Chief: Stephanie Wall Senior Acquisitions Editor, Global Edition: Steven Jackson

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Dedication

To Kathy, Betty, Mandy, Matt, KC, Keri, Delaney, Molly, Macy, and Ben;

Nancy, Amy, Melissa, and Jessica

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About The Authors

Philip Kotler is S. C. Johnson & Son Distinguished Professor

of International Marketing at

the Kellogg School of Manage-

ment, Northwestern Univer-

sity. He received his master’s

degree from the University

of Chicago and his PhD from

M.I.T., both in economics. Dr.

Kotler is author of Marketing Management (Pearson Prentice Hall), now in its fourteenth

edition and the most widely

used marketing textbook in

graduate schools of business worldwide. He has authored doz-

ens of other successful books and has written more than 100

articles in leading journals. He is the only three-time winner of

the coveted Alpha Kappa Psi award for the best annual article

in the Journal of Marketing. Professor Kotler was named the first recipient of two ma-

jor awards: the Distinguished Marketing Educator of the Year

Award given by the American Marketing Association and the

Philip Kotler Award for Excellence in Health Care Marketing pre-

sented by the Academy for Health Care Services Marketing. His

numerous other major honors include the Sales and Marketing

Executives International Marketing Educator of the Year Award;

the European Association of Marketing Consultants and Trainers

Marketing Excellence Award; the Charles Coolidge Parlin Mar- keting Research Award; and the Paul D. Converse Award, given by the American Marketing Association to honor “outstanding

contributions to science in marketing.” A recent Forbes survey

ranks Professor Kotler in the top 10 of the world’s most influen-

tial business thinkers. In a recent Financial Times poll of 1,000 se- nior executives across the world, Professor Kotler was ranked

as the fourth “most influential business writer/guru” of the

twenty-first century. And he recently topped BusinessEducators

.com’s “Management A-List of Academics,” based on outstand-

ing achievements as well as Google global Web search interest.

Dr. Kotler has served as chairman of the College on Mar-

keting of the Institute of Management Sciences, a director of the

American Marketing Association, and a trustee of the Marketing

Science Institute. He has consulted with many major U.S. and

international companies in the areas of marketing strategy and

planning, marketing organization, and international marketing.

He has traveled and lectured extensively throughout Europe,

Asia, and South America, advising companies and governments

about global marketing practices and opportunities.

Gary Armstrong is Crist W. Blackwell Distinguished Profes-

sor Emeritus of Undergraduate

Education in the Kenan-Flagler

Business School at the Uni-

versity of North Carolina at

Chapel Hill. He holds under-

graduate and master’s degrees

in business from Wayne State

University in Detroit, and he

received his PhD in marketing

from Northwestern Univer-

sity. Dr. Armstrong has con-

tributed numerous articles to

leading business journals. As a consultant and researcher, he

has worked with many companies on marketing research, sales

management, and marketing strategy.

But Professor Armstrong’s first love has always been

teaching. His long-held Blackwell Distinguished Professor-

ship is the only permanently endowed professorship for dis-

tinguished undergraduate teaching at the University of North

Carolina (UNC) at Chapel Hill. He has been very active in the

teaching and administration of Kenan-Flagler’s undergradu-

ate program. His administrative posts have included Chair of

Marketing, Associate Director of the Undergraduate Business

Program, Director of the Business Honors Program, and many

others. Through the years, he has worked closely with business

student groups and has received several UNC campus-wide

and Business School teaching awards. He is the only repeat

recipient of the school’s highly regarded Award for Excellence

in Undergraduate Teaching, which he received three times.

Most recently, Professor Armstrong received the UNC Board of

Governors Award for Excellence in Teaching, the highest teach-

ing honor bestowed by the 16-campus University of North

Carolina system.

7

As a team, Philip Kotler and Gary Armstrong provide a blend of skills uniquely suited to writing

an introductory marketing text. Professor Kotler is

one of the world’s leading authorities on marketing.

Professor Armstrong is an award-winning teacher

of undergraduate business students. Together they

make the complex world of marketing practical,

approachable, and enjoyable.

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9

Preface 16

Part 1 Defining Marketing and the Marketing Process 24 1 Marketing: Creating and Capturing Customer Value 24

2 Company and Marketing Strategy: Partnering to Build Customer Relationships 60

Part 2 Understanding the Marketplace and Consumers 90 3 Analyzing the Marketing Environment 90

4 Managing Marketing Information to Gain Customer Insights 122

5 Consumer Markets and Consumer Buyer Behavior 156

6 Business Markets and Business Buyer Behavior 188

Part 3 Designing a Customer-Driven Strategy and Mix 212 7 Customer-Driven Marketing Strategy: Creating Value for Target Customers 212

8 Products, Services, and Brands: Building Customer Value 246

9 New-Product Development and Product Life-Cycle Strategies 282

10 Pricing: Understanding and Capturing Customer Value 310

11 Pricing Strategies: Additional Considerations 334

12 Marketing Channels: Delivering Customer Value 360

13 Retailing and Wholesaling 394

14 Communicating Customer Value: Integrated Marketing Communications Strategy 426

15 Advertising and Public Relations 454

16 Personal Selling and Sales Promotion 482

17 Direct and Online Marketing: Building Direct Customer Relationships 514

Part 4 Extending Marketing 546 18 Creating Competitive Advantage 546

19 The Global Marketplace 572

20 Sustainable Marketing: Social Responsibility and Ethics 602

Appendix 1 Marketing Plan 633

Appendix 2 Marketing by the Numbers 643

Appendix 3 Marketing Careers 661

Glossary 673

Index 683

Brief Contents

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Preface 16

Part 1: Defining Marketing and the Marketing Process 24

Marketing: Creating and Capturing Customer Value 24

What Is Marketing? 26

Marketing Defined 27 | The Marketing Process 27

Understanding the Marketplace and Customer Needs 28

Customer Needs, Wants, and Demands 28 | Market

Offerings—Products, Services, and Experiences 28 |

Customer Value and Satisfaction 29 | Exchanges and

Relationships 29 | Markets 29

Designing a Customer-Driven Marketing Strategy 30

Selecting Customers to Serve 31 | Choosing a Value

Proposition 31 | Marketing Management Orientations 31

Preparing an Integrated Marketing Plan and Program 34

Building Customer Relationships 34

Customer Relationship Management 34 | The Changing

Nature of Customer Relationships 38 | Partner Relationship

Management 41

Capturing Value from Customers 41

Creating Customer Loyalty and Retention 42 | Growing Share

of Customer 42 | Building Customer Equity 43

The Changing Marketing Landscape 44

The Changing Economic Environment 44 | The Digital

Age 45 | The Growth of Not-for-Profit Marketing 48 | Rapid

Globalization 48 | Sustainable Marketing—The Call for More

Social Responsibility 49

So, What Is Marketing? Pulling It All Together 50

Reviewing Objectives and Key Terms 51 | Objectives Review 51 |

Key Terms 53 | Discussion and Critical Thinking 53 |

Discussion Questions 53 | Critical Thinking Exercises 53 |

Applications and Cases 54 | Marketing Technology 54 |

Marketing Ethics 54 | Marketing by the Numbers 54 | Video Case:

Zappos 55 | Company Case: Abou Shakra Restaurant 55

1

Contents

Company and Marketing Strategy: Partnering to Build Customer Relationships 60

Company-Wide Strategic Planning: Defining Marketing’s

Role 63

Defining a Market-Oriented Mission 63 | Setting Company

Objectives and Goals 64 | Designing the Business Portfolio 65

Planning Marketing: Partnering to Build Customer

Relationships 70

Partnering with Other Company Departments 71 | Partnering

with Others in the Marketing System 72

Marketing Strategy and the Marketing Mix 72

Customer-Driven Marketing Strategy 73 | Developing an

Integrated Marketing Mix 76

Managing the Marketing Effort 77

Marketing Analysis 77 | Marketing Planning 78 | Marketing

Implementation 79 | Marketing Department Organization 80 |

Marketing Control 81

Measuring and Managing Return on Marketing Investment 81

Reviewing Objectives and Key Terms 61 | Objectives Review

83 | Key Terms 62 | Discussion and Critical Thinking 62 |

Discussion Questions 84 | Critical Thinking Exercises 63 |

Applications and Cases 63 | Marketing Technology 85 |

Marketing Ethics 63 | Marketing by the Numbers 85 |

Video Case: OXO 64 | Company Case: Trap-Ease America 86

Part 2: Understanding the Marketplace and Consumers 90

Analyzing the Marketing Environment 90

The Microenvironment 93

The Company 93 | Suppliers 93 | Marketing Intermediaries 94 |

Competitors 94 | Publics 95 | Customers 95

The Macroenvironment 96

The Demographic Environment 96 | The Economic

Environment 103 | The Natural Environment 104 |

2

3

Part 1: Defining Marketing and the Marketing Process (Chapters 1–2)

Part 2: Understanding the Marketplace and Consumers (Chapters 3–6)

Part 3: Designing a Customer-Driven Strategy and Mix (Chapters 7–17)

Part 4: Extending Marketing (Chapters 18–20)

11

2

12 Contents

The Technological Environment 106 | The Political and Social

Environment 107 | The Cultural Environment 110

Responding to the Marketing Environment 113

Reviewing Objectives and Key Terms 93 | Objectives Review

115 | Key Terms 94 | Discussion and Critical Thinking 94 |

Discussion Questions 116 | Critical Thinking Exercises 95 |

Applications and Cases 95 | Marketing Technology 117 |

Marketing Ethics 95 | Marketing by the Numbers 96 |

Video Case: Ecoist 96 | Company Case: Xerox 118

Managing Marketing Information to Gain Customer Insights 122

Marketing Information and Customer Insights 124

Assessing Marketing Information Needs 125

Developing Marketing Information 126

Internal Data 126 | Competitive Marketing Intelligence 127

Marketing Research 128

Defining the Problem and Research Objectives 129 |

Developing the Research Plan 129 | Gathering Secondary

Data 130 | Primary Data Collection 131 | Implementing the

Research Plan 140 | Interpreting and Reporting the Findings 141

Analyzing and Using Marketing Information 141

Customer Relationship Management 141 | Distributing and

Using Marketing Information 142

Other Marketing Information Considerations 144

Marketing Research in Small Businesses and Nonprofit

Organizations 145 | International Marketing Research 146 |

Public Policy and Ethics in Marketing Research 147

Reviewing Objectives and Key Terms 126 | Objectives Review

148 | Key Terms 149 | Discussion and Critical Thinking 128 |

Discussion Questions 128 | Critical Thinking Exercises 128 |

Applications and Cases 128 | Marketing Technology 150 |

Marketing Ethics 129 | Marketing by the Numbers 129 | Video

Case: Domino’s 151 | Company Case: Meredith 152

Consumer Markets and Consumer Buyer Behavior 156

Model of Consumer Behavior 158

Characteristics Affecting Consumer Behavior 159

Cultural Factors 159 | Social Factors 162 | Personal

Factors 167 | Psychological Factors 171

Types of Buying Decision Behavior 174

Complex Buying Behavior 174 | Dissonance-Reducing Buying

Behavior 175 | Habitual Buying Behavior 175 | Variety-Seeking

Buying Behavior 175

The Buyer Decision Process 176

Need Recognition 176 | Information Search 176 | Evaluation

of Alternatives 177 | Purchase Decision 177 | Postpurchase

Behavior 178

4

5

The Buyer Decision Process for New Products 178

Stages in the Adoption Process 179 | Individual Differences in

Innovativeness 179 | Influence of Product Characteristics on

Rate of Adoption 180

Reviewing Objectives and Key Terms 159 | Objectives Review

181 | Key Terms 160 | Discussion and Critical Thinking 160 |

Discussion Questions 160 | Critical Thinking Exercises 182 |

Applications and Cases 161 | Marketing Technology 161 |

Marketing Ethics 161 | Marketing by the Numbers 183 | Video

Case: Goodwill Industries 162 | Company Case: Porsche 184

Business Markets and Business Buyer Behavior 188

Business Markets 190

Market Structure and Demand 191 | Nature of the Buying Unit 191

Business Buyer Behavior 193

Major Types of Buying Situations 193 | Participants in

the Business Buying Process 194 | Major Influences on

Business Buyers 194 | The Business Buying Process 197 |

E-Procurement: Buying on the Internet 199

Institutional and Government Markets 200

Institutional Markets 202 | Government Markets 203

Reviewing Objectives and Key Terms 183 | Objectives

Review 205 | Key Terms 184 | Discussion and Critical Thinking

184 | Discussion Questions 206 | Critical Thinking Exercises

185 | Applications and Cases 185 | Marketing Technology 185 |

Marketing Ethics 207 | Marketing by the Numbers 186 | Video

Case: Eaton 186 | Company Case: Cisco Systems 208

Part 3: Designing a Customer-Driven Strategy and Mix 212

Customer-Driven Marketing Strategy: Creating Value for Target Customers 212

Market Segmentation 215

Segmenting Consumer Markets 215 | Segmenting Business

Markets 222 | Segmenting International Markets 223 |

Requirements for Effective Segmentation 224

Market Targeting 224

Evaluating Market Segments 224 | Selecting Target Market

Segments 225

Differentiation and Positioning 232

Positioning Maps 232 | Choosing a Differentiation and

Positioning Strategy 233 | Communicating and Delivering the

Chosen Position 238

Reviewing Objectives and Key Terms 217 | Objectives Review

217 | Key Terms 240 | Discussion and Critical Thinking 218 |

Discussion Questions 218 | Critical Thinking Exercises 240 |

Applications and Cases 219 | Marketing Technology 219 |

Marketing Ethics 241 | Marketing by the Numbers 219 | Video

Case: Boston Harbor Cruises 241 | Company Case: Bentley

Motors 242

6

7

Contents 13

Products, Services, and Brands: Building Customer Value 246

What Is a Product? 248

Products, Services, and Experiences 249 | Levels of

Product and Services 249 | Product and Service

Classifications 250

Product and Service Decisions 253

Individual Product and Service Decisions 253 | Product Line

Decisions 258 | Product Mix Decisions 258

Services Marketing 259

The Nature and Characteristics of a Service 260 | Marketing

Strategies for Service Firms 261

Branding Strategy: Building Strong Brands 266

Brand Equity 266

Building Strong Brands 267 | Managing Brands 274

Reviewing Objectives and Key Terms 253 | Objectives Review

275 | Key Terms 254 | Discussion and Critical Thinking 254 |

Discussion Questions 254 | Critical Thinking Exercise 276 |

Applications and Cases 255 | Marketing Technology 255 |

Marketing Ethics 255 | Marketing by the Numbers 255 | Video

Case: Life Is Good 277 | Company Case: Mavi Jeans 278

New-Product Development and Product Life-Cycle Strategies 282

New-Product Development Strategy 284

The New-Product Development Process 285

Idea Generation 285 | Idea Screening 287 | Concept

Development and Testing 289 | Marketing Strategy

Development 290 | Business Analysis 291 | Product

Development 291 | Test Marketing 292 |

Commercialization 293

Managing New-Product Development 293

Customer-Centered New-Product Development 293 | Team-

Based New-Product Development 294 | Systematic New-

Product Development 294 | New-Product Development in

Turbulent Times 295

Product Life-Cycle Strategies 295

Introduction Stage 297 | Growth Stage 298 | Maturity Stage

298 | Decline Stage 299

Additional Product and Service Considerations 301

Product Decisions and Social Responsibility 301 |

International Product and Services Marketing 303

Reviewing Objectives and Key Terms 282 | Objectives Review

282 | Key Terms 283 | Discussion and Critical Thinking 283 |

Discussion Questions 283 | Critical Thinking Exercises 305 |

Applications and Cases 284 | Marketing Technology 284 |

Marketing Ethics 284 | Marketing by the Numbers 306 | Video

Case: Subaru 285 | Company Case: Google 307

8

9

Pricing: Understanding and Capturing Customer Value 310

What Is a Price? 312

Major Pricing Strategies 313

Customer Value-Based Pricing 313 | Cost-Based Pricing 317 |

Competition-Based Pricing 321

Other Internal and External Considerations Affecting Price

Decisions 321

Overall Marketing Strategy, Objectives, and Mix 321 |

Organizational Considerations 324 | The Market and

Demand 324 | The Economy 327 | Other External Factors 327

Reviewing Objectives and Key Terms 306 | Objectives

Review 328 | Key Terms 307 | Discussion and Critical

Thinking 307 | Discussion Questions 307 | Critical Thinking

Exercises 329 | Applications and Cases 308 | Marketing

Technology 308 | Marketing Ethics 308 | Marketing by the

Numbers 330 | Video Case: Smashburger 309 | Company Case:

Cath Kidston 331

Pricing Strategies: Additional Considerations 334

New-Product Pricing Strategies 336

Market-Skimming Pricing 336 | Market-Penetration

Pricing 337

Product Mix Pricing Strategies 337

Product Line Pricing 338 | Optional Product Pricing 338 |

Captive Product Pricing 338 | By-Product Pricing 339 |

Product Bundle Pricing 339

Price Adjustment Strategies 339

Discount and Allowance Pricing 340 | Segmented Pricing 340 |

Psychological Pricing 341 | Promotional Pricing 343 |

Geographical Pricing 344 | Dynamic and Internet Pricing 345 |

International Pricing 346

Price Changes 347

Initiating Price Changes 347 | Responding to Price

Changes 350

Public Policy and Pricing 351

Pricing within Channel Levels 352 | Pricing across Channel

Levels 352

Reviewing Objectives and Key Terms 331 | Objectives

Review 353 | Key Terms 332 | Discussion and Critical

Thinking 333 | Discussion Questions 333 | Critical Thinking

Exercises 333 | Applications and Cases 333 | Marketing

Technology 355 | Marketing Ethics 334 | Marketing by the

Numbers 334 | Video Case: Hammerpress 356 | Company Case:

Amazon vs. Walmart 357

10

11

14 Contents

Marketing Channels: Delivering Customer Value 360

Supply Chains and the Value Delivery Network 362

The Nature and Importance of Marketing Channels 363

How Channel Members Add Value 364 | Number of Channel

Levels 365

Channel Behavior and Organization 366

Channel Behavior 366 | Vertical Marketing Systems 367 |

Horizontal Marketing Systems 369 | Multichannel Distribution

Systems 370 | Changing Channel Organization 370

Channel Design Decisions 371

Analyzing Consumer Needs 372 | Setting Channel Objectives 372

Identifying Major Alternatives 373 | Evaluating the Major

Alternatives 374 | Designing International Distribution Channels 374

Channel Management Decisions 375

Selecting Channel Members 375 | Managing and Motivating

Channel Members 376 | Evaluating Channel Members 376

Public Policy and Distribution Decisions 376

Marketing Logistics and Supply Chain Management 379

Nature and Importance of Marketing Logistics 379 | Goals of

the Logistics System 380 | Major Logistics Functions 381 |

Integrated Logistics Management 383

Reviewing Objectives and Key Terms 365 | Objectives Review

387 | Key Terms 366 | Discussion and Critical Thinking 367 |

Discussion Questions 367 | Critical Thinking Exercises 367 |

Applications and Cases 367 | Marketing Technology 389 |

Marketing Ethics 368 | Marketing by the Numbers 368 | Video

Case: Gaviña Gourmet Coffee 368 | Company Case: Pandora 390

Retailing and Wholesaling 394

Retailing 374

Types of Retailers 397 | Retailer Marketing Decisions 402 |