Isbn 978 0 07 786106 3

•

This page intentionally left blank

■

Fourteenth Edition

J. Paul Peter University of Wisconsin-Madison

James H. Donnelly Jr. Gatton College of Business and

Economics University of Kentucky

A PREFACE TO MARKETING MANAGEMENT, FOURTEENTH EDmON

Published by McGraw-Hill Education. 2 Penn Plaza, New York, NY 10121. Copyright© 2015 by McGraw-Hill

Education. All rights reserved. Printed in the United States of An1erica. Previous editions © 2013, 2011, and

2008. No part of this publication may be reproduced or distributed in any forrn or by any means, or stored in a

database or retrieval systen1, without the prior written consent of McGraw-Hill Education, including, but not

limited to, in any network or other electronic storage or transrnission, or broadcast for distance learning.

Sorne ancillaries, including electronic and print components, may not be available to customers outside the

United States.

This book is printed on acid-free paper.

I 2 3 4 5 6 7 8 9 0 DOW/DOW l O 9 8 7 6 5 4

ISBN 978-0-07-786106-3

MHLD 0-07-786106-X

Senior Vice President, Products & Markets: Kurr L. Strand Vice President, General Manager, Products & Markets: Michael Ryan

Vice President, Content Production & Technology Services: Kin1berly Merhvether David Brand Manager: Sankha Basu Editorial Coordinator: Heather Darr

Marketing Manager: Donielle Xu Director, Content Production: Terri Schiesl

Lead Content Project Manager: Jane Mohr Buyer: Laura Fuller Cover Designer: Studio Montage, St. Louis, MO.

Cover Image: © John Sha�v/Getty linages Media Project Manager: Shawn Coenen

Compositor: Laserwords Private Limited Typeface: 10/12 Ti,nes LT Std. Printer: R. R. Donnelley

All credits appearing on page or at the end of the book are considered to be an extension of the copy1ight page.

Library of Congress Cataloging-in-Publication Data

Peter, J. Paul.

A preface to marketing management/ J. Paul Peter, University of Wisconsin-Madison, James H. Donnelly, Jr., Gatton College of Business and Economics, University of Kentucky.-Fourteenth edition.

pages cm

ISBN 978-0-07-786106-3 (alk. paper)

1. Marketing-Management. I. Donnelly, Ja,nes H. II. Title.

HF5415.13.P388 2013

658.8-dc23

2013046644

The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does

not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not

guarantee the accuracy of the infor1nation presented at these sites.

ww,v .mhhe.com

To Rose and Angie

J. Paul Peter

To Gayla

Jim Donnelly

vi

ors

J. Paul Peter has been a faculty member at the University of Wisconsin since 1981. He was a member

of the faculty at Indiana State, Ohio State, and Washington University before joining the

Wisconsin faculty. While at Ohio State, l1e was named Outstanding Marketing Professor

by the students and has won the John R. Larson Teaching Award at Wisconsin. He has

taught a variety of courses including Marketing Management, Marketing Strategy, Con­

sumer Behavior, Marketing Research, and Marketing Theory, among others. Professor Peter's research has appeared in t11e Journal of Marketing, the Journal of

Marketing Research, the Journal of Consumer Research., the Journal of Retailing, and the

Academy o,f Management Journ.ctl, among others. His article on construct validity won the

prestigious William O'Dell Award from the Journal of Marketing Research, and he was a

finalist for this award on two other occasions. Recently, he was the recipient of the ChurchilJ Award for Lifeti1ne Achievement in Marketing Research, given by the American Marketing

Association and the Gaumnitz Distinguished Faculty Award from the School of Business,

University of Wisconsin-Madison. He is an author or editor of over 30 books, including A

Preface to Marketing Management, Fourteenth edition; Marketing Management: Krtowledge and Skills, ninth edition; Consumer Behavior and Marketing Strategy, ninth edition; Strategic

Management: Concepts and Applications, third edition; and Marketirig: Creating Value .for

Custom.ers, second edition. He is one of the most cited authors in the marketing literature.

Professor Peter has served on the review boards of the Journal of· Marketing, Jour­

nal of Marketi11g Research, Journal of Corisumer Research, and Journal of Business Research and was measurement editor for JMR and professional publicatio11s editor for tl1e

American Marketing Association. He has taught in a variety of executive programs and

consulted for several corporations as well as the Federal Trade Commission.

James H. Donnelly Jr. has spent his academic career in the Gatton College of Business a11d Econo1nics at the

University of Kentucky. In 1990 he received the first Chancellor's Award for Outstanding

Teaching given at the university. Previously, he had twice received the UK Alumni Associa­

tion's Great Teacher Award, an award one can only be eligible to receive every 10 years. He

has also received two Outstanding Teacher awards from Beta Gamma Sigma, national busi­

ness honorary. In 1992 he received an Acorn Award recognizing "those who shape the future"

from the Kentucky Advocates for Higher Education. In 2001 and 2002 he was selected as

"Best University of Kentucky Professor." In 1995 he became one of six charter members

elected to the American Bankers Association's Bank Marketing Hall of Fame. He has also

received a "Distinguished Doctoral Graduate Award" from the University of Maryland.

During his career he has published in the Journal of Marketing Research,, Journ.al o,f

Marketing, Journal of· Retailing, Administrative Science QiJ-arterly, Academy of Man­

agemerit Jourrtal, Journal of Applied Psychology, Personnel Psychology, Jourrial of

Business Researcli, and Operatio,is Research a1nong others. He has served on the edito­

rial review boa.rd of the Journal o,f Marketing. He is the author of more than a dozen

books, which include widely adopted academic texts as well as professional books.

Professor Donnelly is very active in the banking industry where l1e l1as served on the board of directors of tl1e Institute of Certified Bankers and tl1e ABA's Marketing Network. He has

also served as academic dean of the ABA' s School of Bank Marketing and Management.

re ace

We are proud to introdt1ce the fourteenth edition of A Pre.face to Marketin.g Man,agement.

Our plan has always been to deliver a clear and concise presentation of the basic princi­

ples of marketing in such a way that the core concepts and ideas are covered in sufficient

depth to ensure in-depth understanding, By offering an engaging, clear, and conceptu­

ally sound text, our book has been able to maintain its position as a leading marketing

management text.

Througl1ot1t the history of the book, feedback from botl1 students and instructors has

suggested that our plan is a good one. Our book has been used in a wide variety of set­

tings and is the best-selling book of its kind. We introduce the fourteenth edition knowing

that our book and its eight foreign translations have been used around the world vvhenever

courses require an overview of the critical aspects of marketing manage1nent.

With this edition, we seek to n1ore effectively implement our plan by building on a

strong foundation, maintaining the attributes and elements of the book tl1at make i t a very

teachable text, updating existir1g content, adding new content, and focusing the presenta­

tion. We seek to emphasize qttality content and examples and avoid excess verbiage, pic­

tures, and description.

As usual, each time we revise the book there is a11 e1nphasis on responding to feedback

from students and instructors. These two constituencies plus our own intuitions drive each

revision, Marketing is an exciting and dynamic field of study, We want to capture the

sense of excitement and at the same time respect its history.

Our book has become known simply as tl1e Preface. We want to believe a major reason

it has endured is that because marketing is figuring out how to do a superior job of satisfy­

ing customers, we simply try to practice what we preach. Welcorne to the Pre.face.

THE PRESENT EDITION

Every elem.ent of content in our book is designed with one thought in mind: to assist stu­

dents in analyzing marketing problems and cases and developing and writing marketing

plans. Section I of the book consists of 13 concise chapters that cover the essentials of mar­

keting management. We think of it as the "must know" content of the field. It is divided

into four parts that foct1s on strategic planning and marketing planning, ttnderstanding tar­

get markets, tl1e marketing mix, and marketing in special fields. These 13 chapters should

provide students a clear understanding of the tenninology, techniques, tools, and strategies

for effective 1narketing management and marketing strategy development.

In addition to revising and updating the text chapters, this edition contains new content as

well. There are discussions of internal and external secondary data sources, the use of social

media monitoring, a]ten1ative searcl1 in consumer behavior, key characteristics of organiza ­

tional buyers, e-procurement, global virtual teams, brand equity, using distinctive compe­

tencies in new product development, consumer databases, business-to-business databases,

mobile marketing, online retailing and multichannel marketing, franchising, the effects of t11e Internet on pricing, global account 1nanagers, and ]earning about different cultures.

In the twelfth edition, we altered two of the text elements. The changes have been well

received by instructors and stt1dents. First, "Marketing Insights" are included to assist students

as they solve marketing problems, analyze marketing cases, and develop marketing plans.

Second, we know that our book is often used with case problems, writing assignments,

and constructing marketing plans. Accordingly, there is an "Additional Resources" section

vii

viii Preface

at the end of each chapter. Our purpose is to highlight current resoLLrces that students can

use in writing assign111ents and oral presentations. The resources have been selected with

students in mind. Tl1ey include resources accessible to students at various stages of 111ar­

keting education given the wide spectrum of courses in which the book is utilized.

NEW FEATURES AND CONTENT CHANGES

Chapter 1: Strategic Planning and The Marketing Management

Process • Revised basic questions that 1nust be asked when developing a 1nission state1nent. • Marketing Insight 1-3 now contains five actual mission statements for firms of varying

sizes and industries. It provides students with a better mix of alternatives when com­

pleting the exercise in Marketing h1sight 1-4. • Updated additional resources.

Chapter 2: Marketing Research: Process and Systems for Decision

Making • Revised section on secondary data to include both internal and external sources

• Added new figure "Common Types of Information Available in a Secondary Data

Search" • Added a new Marketing Insight, "Social Media Monitoring for Marketing Insights" • Updated additional resources

Chapter 3: Consumer Behavior

Updated discussion of consumer and marketer reactions to recession • Revised and updated discussion of Alternative Search • Updated additional resources

Chapter 4: Business, Government, and Institutional Buying • Revised Marketing Insight on "Key Characteristics of Organizational Buying Behavior" • New Marketing Insight, "Organizational Buying on the Internet: E-Procurement" • Revised Discussion of "Organizational Needs" • Updated additional resources

Chapter 5: Market Segmentation • New Marketing Insight, "Segmenting the Mobile Phone Market"

Revised and updated discussion of VALS

Chapter 6: Product and Brand Strategy • Marketing Insight 6-3 now contains the latest information on the value of the top twenty

brands in the world • Contains a new section on branding and brand equity • Revised and updated Marketing Insight 6-6 • Added a new section on global virtual teams • New key terms and concepts • Updated additional resources

Preface Ix

Chapter 7: New Product Planning and Development • New Marketing Insight 7-4 which focuses on utilizing corporate strengths in the new

product development process. It includes eight firms with strengths in either technol­ ogy or markets

• Updated additional resources

Chapter 8: Integrated Marketing Communications • Revised Marketing Insight 8-1 which presents up-to-date information on the top ten

websites in Brazil, Portugal and South Korea Revised section on direct marketing as part of the pro1notion mix

• Revised Marketing Insight 8-6 • New section on direct marketing • New Marketing Insight 8-7 on the contents of a comprehensive database included are

both consumer and business-to-business databases • Added new Key Tem1s and Concepts • Updated additional resources

Chapter 9: Personal Selling, Relationship Building, and Sales

Management

New Marketing Insight 9-1 wl1ich focuses on what a salesperson actually does A new discussion of an increasingly important customer organization structure, the

global account manager

Added new Key Terms and Concepts • Updated additional resources

Chapter 10: Distribution Strategy • Added New Marketing Insight, "Advantages and Disadvantages of Franchising" • New section on "Online and Mobile Retailing" • Updated additional resources • New "Key Terms and Concepts": online retailing, mobile retailing, multichannel marketing

Chapter 11: Pricing Strategy

Added a new discussion of the Internet as an external influence on pricing decisions • A new Marketing Insight, "Ten Tips for Managing Pricing Strategy"

Chapter 12: The Marketing of Services • The chapter has been significantly revised and has been shortened for this edition • A new section on the importance of all the elernents of the marketing mix in the market­

ing of services has been added • Updated additional resources

Chapter 13: Global Marketing • Marketing Insight 13-1 has been updated with the latest data on selected U.S. companies

and their international sales • The section on cultural misunderstanding as a problem in foreign rnarkets has been

replaced with an entirely new section

x Preface

• Marketing Insight 13-3 has been replaced with a new Marketing Insight which focuses

on ways to lea111 about new cultures

• Updated additional resources

Section 11: Analyzing Marketing Problems and Cases • New Marketing Insight, "Objectives of Case Analysis" • Revised and updated discussion of SWOT analysis • Updated additional resources

Section Ill: Financial Analysis for Marketing Decisions

• Updated dates and additional resources

Section IV: Developing Marketing Plans • Updated dates and additional resources

STUDENT SUPPORT

Knowing tl1at our book is used for a variety of course levels, programs, and students, we

have assembled several elements that we believe will support students for whatever pur­

pose they use our book.

Key Terms and Concepts

New to the previous edition, we decided to add a section of key terms and concepts at the conclusion of each chapter. There was mucl1 debate as to wl1ere they sl1ould be placed in

the book. We decided to place them at the end of the chapter in which they appear. In this

way, they are more visible to students than as an appendix at the end of the book. More

than a glossary, it also presents key concepts covered in the chapter.

Analyzing Marketing Problems and Cases

Section TI presents a very practical and comprehensive framework for analyzing, prepar­

ing, a.nd presenting case analyses. It includes discussions of what a case is, preparing for

the class discussion and written analysis, pitfalls to avoid in case analysis, and preparing

to do an oral presentation. It has been praised by both instructors and students.

For courses utilizing marketing problems and cases, we encourage students to read this

guide before discussing a problem or case. Tl1us, it could l1ave been placed at the begin­

ning of the book, but because it is often referred to throughout the semester, we have

placed it after the text chapters. And for those courses that do not utilize cases, the book

1nay be used without reference to tl1is section.

Financial Analysis for Marketing Decisions

It is absolutely critical for marketing students to understand. and appreciate the fact that

the ultimate objectives of marketing are usually expressed in financial terms. Section ill

enables students to assess a company's financial position. It presents important financial

calculations that are useful in evaluating the financial position of a finn and the financial

impact of various decisions and strategies. Included are discussions of breakeven analysis,

net present value, and ratio analysis.

Developing Marketing Plans

Given the purpose of this book and the needs of users, Section IV enables students to develop practical planning skills so they are able to construct a quality marketing plan for

Preface xi

any product or service. It provides a complete format for structuring and presenting one,

including specific questions to ask in competitive analysis, the development of well-stated

objectives, analyzing custo1ners, and implementation and control. As with Section II, we

know that this section has become a valuable take-away resource for many students long

after their course has been completed.

A Value-Added Website

We encourage students to view the student section of tl1e Online Leaming Center (OLC)

at website www.mhhe.com/peterdonnelly14e, which contains a number of useful aids for

facilitating learning and supporting student achievement. We believe you will find it a

useful resource.

INSTRUCTOR SUPPORT

The Preface has been used as a resotrrce in college courses and professional development

programs that require an overview of the critical "need-to-know" aspects of marketing

management and marketing strategy development. It has been used:

As the primary introductory text at the undergraduate level.

• At both the undergraduate and MBA level, where several AACSB core curriculum

courses are team-taught as one multidisciplinary 9- to 12-hour course.

• At the advanced undergraduate and MBA level where it is used as the content founda­

tion in courses that utilize marketing cases.

• In short courses and executive development programs.

The instructor section of www.mhl1e.com/peterdonne1Jy14e inc]udes an instructor's

manual and other support material. It includes two expanded suppletnents. They were

developed in response to instructors' requests. We offer a test bank of nearly 1,300

multiple-choice, true-false, and brief essay questions. It is available in both print and

EZ Test Online. We also offer Power Point slides that highlight key text material. Your McGraw-Hill representative can also assist in the delivery of any additiona1 instructor