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Full-Circle Learning MyLab™: Learning Full Circle for Marketing,

Management, Business Communication, and Intro to Business

BEFORE CLASS

AFTER CLASS DURING

CLASS

Decision Sims, Videos, and Learning

Catalytics

DSMs, pre-lecture homework,

eText

Writing Space, Video

Cases, Quizzes/ Tests

MyLab

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MyMarketingLab: Improves Student Engagement Before, During, and After Class

• NEW! VIDEO LIBRARY – Robust video library with over 100 new book-specific videos that include easy-to-assign assessments, the ability for instructors to add YouTube or other sources, the ability for students to upload video submissions, and the ability for polling and teamwork.

• Decision-making simulations – NEW and improved feedback for students. Place your students in the role of a key decision-maker! Simulations branch based on the decisions students make, providing a variation of scenario paths. Upon completion students receive a grade, as well as a detailed report of the choices and the associated consequences of those decisions.

• Video exercises – UPDATED with new 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) – UPDATED with additional questions. 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.

• Writing Space – UPDATED with new commenting tabs, new prompts, and a new tool for students called Pearson Writer. 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, Reporting Dashboard, comprehensive online course content, and easily scalable and shareable content.

http://www.pearsonmylabandmastering.com

BREAKTHROUGH

Prep and Engagement

BREAK THRO

UGH

To better resultsTo better results

Critical Thinking

Decision Making

http://www.pearsonmylabandmastering.com
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Marketing An Introduction Thirteenth Edition

GAry ArmstronG University of North Carolina

PhIlIP Kotler Northwestern University

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vii

About the Authors As a team, Gary Armstrong and Philip Kotler provide a blend of skills uniquely suited to writing an introductory marketing text. Professor Armstrong is an award-winning teacher of undergraduate business students. Professor Kotler is one of the world’s leading authorities on marketing. Together they make the complex world of marketing practical, approachable, and enjoyable.

GAry ArmstronG is Crist W. Blackwell Distinguished Professor Emeritus of Undergraduate Education in the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill. He holds undergraduate and master’s degrees in business from Wayne State University in Detroit, and he received his Ph.D. in marketing from North- western University. Dr. Armstrong has contributed numerous articles to leading business journals. As a consultant and researcher, he has worked with many companies on market- ing research, sales management, and marketing strategy.

But Professor Armstrong’s first love has always been teaching. His long-held Black- well Distinguished Professorship is the only permanent endowed professorship for distinguished undergraduate teaching at the University of North Carolina at Chapel Hill. He has been very active in the teaching and administration of Kenan-Flagler’s undergraduate 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 campuswide 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 teaching honor bestowed by the 16-campus University of North Carolina system.

PhIlIP Kotler is S. C. Johnson & Son Distinguished Professor of International Mar- keting at the Kellogg School of Management, Northwestern University. He received his master’s degree at the University of Chicago and his Ph.D. at M.I.T., both in economics. Dr. Kotler is author of Marketing Management (Pearson), now in its 15th edition and the most widely used marketing textbook in graduate schools of business worldwide. He has authored dozens of other successful books and has written more than 50 books and 150 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 four major awards: the Distinguished Marketing Educator of the Year Award and the William L. Wilkie “Marketing for a Bet- ter World” Award, both given by the American Marketing Association; the Philip Kotler Award for Excellence in Health Care Marketing presented by the Academy for Health Care Services Marketing; and the Sheth Foundation Medal for Exceptional Contribution to Mar- keting Scholarship and Practice. He is a charter member of the Marketing Hall of Fame, was voted the first Leader in Marketing Thought by the American Marketing Associa- tion, and was named the Founder of Modern Marketing Management in the Handbook of Management Thinking. 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 Marketing Research Award; and the Paul D. Converse Award, given by the Ameri- can 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 influential business thinkers. And in a recent Financial Times poll of 1,000 senior executives across

viii About the Authors

the world, Professor Kotler was ranked as the fourth “most influential business writer/ guru” of the twenty-first century.

Dr. Kotler has served as chairman of the College of Marketing of the Institute of Man- agement 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.

ix

Brief Contents PArt 1 DefInInG mArKetInG AnD the mArKetInG ProCess 2

1 Marketing: Creating Customer Value and Engagement 2 2 Company and Marketing Strategy: Partnering to Build Customer Engagement, Value,

and Relationships 38

PArt 2 UnDerstAnDInG the mArKetPlACe AnD CUstomer VAlUe 66

3 Analyzing the Marketing Environment 66 4 Managing Marketing Information to Gain Customer Insights 98 5 Understanding Consumer and Business Buyer Behavior 132

PArt 3 DesIGnInG A CUstomer VAlUe-DrIVen strAteGy AnD mIx 168

6 Customer Value-Driven Marketing Strategy: Creating Value for Target Customers 168 7 Products, Services, and Brands: Building Customer Value 200 8 Developing New Products and Managing the Product Life Cycle 236 9 Pricing: Understanding and Capturing Customer Value 262 10 Marketing Channels: Delivering Customer Value 298 11 Retailing and Wholesaling 332 12 Engaging Customers and Communicating Customer Value: Advertising and Public Relations 364 13 Personal Selling and Sales Promotion 398 14 Direct, Online, Social Media, and Mobile Marketing 428

PArt 4 extenDInG mArKetInG 458

15 The Global Marketplace 458 16 Sustainable Marketing: Social Responsibility and Ethics 488

APPenDIx 1 Company Cases 519 APPenDIx 2 Marketing Plan 551 APPenDIx 3 Marketing by the Numbers 561 APPenDIx 4 Careers in Marketing 579

Glossary 591 References 601 Index 623

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xi

Contents Preface xxi Acknowledgments xxvii

PArt 1 DefInInG mArKetInG AnD the mArKetInG ProCess 2

1 marketing: Creating Customer Value and Engagement 2 ChAPter roAD mAP 2

Objective Outline 2 • Previewing the Concepts 2 • First Stop: Nike’s Customer Value-Driven Marketing 3

What Is marketing? 4 Marketing Defined 5 • The Marketing Process 5

Understanding the marketplace and Customer needs 6 Customer Needs, Wants, and Demands 6 • Market Offerings—Products, Services, and Experiences 6 • Customer Value and Satisfaction 7 • Exchanges and Relationships 7 • Markets 8

Designing a Customer Value-Driven marketing strategy 9 Selecting Customers to Serve 9 • Choosing a Value Proposition 9 • Marketing Management Orientations 9

Preparing an Integrated marketing Plan and Program 12

engaging Customers and managing Customer relationships 13 Customer Relationship Management 13

marketing at Work 1.1: JetBlue: Delighting Customers and Bringing Humanity Back to Air Travel 15 Engaging Customers 18 • Customer Engagement and Today’s Digital and Social Media 18 • Consumer-Generated Marketing 19 • Partner Relationship Management 20

Capturing Value from Customers 20 Creating Customer Loyalty and Retention 21 • Growing Share of Customer 21 • Building Customer Equity 22

the Changing marketing landscape 24 The Digital Age: Online, Mobile, and Social Media Marketing 24

marketing at Work 1.2: Real-Time Marketing: Engaging Consumers in the Moment 26 The Changing Economic Environment 28 • The Growth of Not-for-Profit Marketing 28 • Rapid Globalization 29 • Sustainable Marketing—The Call for More Environmental and Social Responsibility 30

so, What Is marketing? Pulling It All together 31

reVIeWInG AnD extenDInG the ConCePts 33 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 33 • Key Terms 34 • Discussion Questions 34 • Critical Thinking Exercises 35 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 35 • Marketing Ethics 35 • Marketing by the Numbers 36 • Video Case 36 • Company Cases 37

xii Contents

2 Company and marketing strategy: Partnering to Build Customer Engagement, Value, and Relationships 38

ChAPter roAD mAP 38

Objective Outline 38 • Previewing the Concepts 38 • First Stop: Starbucks’s Customer Value-Driven Marketing Strategy 39

Company-Wide strategic Planning: Defining marketing’s role 40 Defining a Market-Oriented Mission 41 • Setting Company Objectives and Goals 42 • Designing the Business Portfolio 43

marketing at Work 2.1: ESPN: Skillfully Managing a Complex Brand Portfolio 44

Planning marketing: Partnering to Build Customer relationships 48 Partnering with Other Company Departments 49 • Partnering with Others in the Marketing System 50

marketing strategy and the marketing mix 50 Customer Value-Driven Marketing Strategy 51 • Developing an Integrated Marketing Mix 53

marketing at Work 2.2: DuckDuckGo: Google’s Tiniest, Fiercest Competitor 54

managing the marketing effort 56 Marketing Analysis 56 • Marketing Planning 57 • Marketing Implementation 57 • Marketing Department Organization 59 • Marketing Control 60

measuring and managing marketing return on Investment 60

reVIeWInG AnD extenDInG the ConCePts 62 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 62 • Key Terms 63 • Discussion Questions 63 • Critical Thinking Exercises 63 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 64 • Marketing Ethics 64 • Marketing by the Numbers 64 • Video Case 65 • Company Cases 65

PArt 2 UnDerstAnDInG the mArKetPlACe AnD CUstomer VAlUe 66

3 Analyzing the marketing environment 66 ChAPter roAD mAP 66

Objective Outline 66 • Previewing the Concepts 66 • First Stop: Kellogg 67

the microenvironment 68 The Company 68 • Suppliers 69 • Marketing Intermediaries 70 • Competitors 70 • Publics 71 • Customers 72

the macroenvironment 72 The Demographic Environment 72 • The Economic Environment 80 • The Natural Environment 81 • The Technological Environment 82

marketing at Work 3.1: Chipotle’s Environmental Sustainability Mission: Food With Integrity 83 The Political and Social Environment 85 • The Cultural Environment 88

responding to the marketing environment 91 marketing at Work 3.2: In the Social Media Age: When the Dialogue Gets Nasty 92

Contents xiii

reVIeWInG AnD extenDInG the ConCePts 94 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 94 • Key Terms 95 • Discussion Questions 95 • Critical Thinking Exercises 95 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 95 • Marketing Ethics 96 • Marketing by the Numbers 96 • Video Case 96 • Company Cases 97

4 managing marketing Information to Gain Customer Insights 98 ChAPter roAD mAP 98

Objective Outline 98 • Previewing the Concepts 98 • First Stop: The LEGO Group 99

marketing Information and Customer Insights 100 Marketing Information and Today’s “Big Data” 101 • Managing Marketing Information 101

Assessing marketing Information needs 102

Developing marketing Information 102 Internal Data 102 • Competitive Marketing Intelligence 103

marketing at Work 4.1: Social Media Command Centers: Listening to and Engaging Customers in Social Space 104

marketing research 106 Defining the Problem and Research Objectives 107 • Developing the Research Plan 107 • Gathering Secondary Data 108 • Primary Data Collection 109 • Implementing the Research Plan 117 • Interpreting and Reporting the Findings 117

Analyzing and Using marketing Information 118 Customer Relationship Management (CRM) 118 • Big Data and Marketing Analytics 119

marketing at Work 4.2: Netflix Streams Success with Big Data and Marketing Analytics 120 Distributing and Using Marketing Information 122

other marketing Information Considerations 123 Marketing Research in Small Businesses and Nonprofit Organizations 123 • International Marketing Research 124 • Public Policy and Ethics in Marketing Research 125

reVIeWInG AnD extenDInG the ConCePts 128 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 128 • Key Terms 129 • Discussion Questions 129 • Critical Thinking Exercises 129 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 130 • Marketing Ethics 130 • Marketing by the Numbers 130 • Video Case 131 • Company Cases 131

5 Understanding Consumer and Business Buyer Behavior 132 ChAPter roAD mAP 132

Objective Outline 132 • Previewing the Concepts 132 • First Stop: Harley-Davidson 133

Consumer markets and Consumer Buyer Behavior 134 Model of Consumer Behavior 134 • Characteristics Affecting Consumer Behavior 135

marketing at Work 5.1: Word-of-Mouth Marketing: Sparking Brand Conversations and Helping Them Catch Fire 140

marketing at Work 5.2: Taco Bell: More than Just Tacos, a “Live Más” Lifestyle 144

the Buyer Decision Process 149 Need Recognition 149 • Information Search 149 • Evaluation of Alternatives 150 • Purchase Decision 150 • Postpurchase Behavior 151

the Buyer Decision Process for new Products 151 Stages in the Adoption Process 152 • Individual Differences in Innovativeness 152 • Influence of Product Characteristics on Rate of Adoption 153

Business markets and Business Buyer Behavior 154 Business Markets 154 • Business Buyer Behavior 156 • Engaging Business Buyers with Digital and Social Marketing 161

reVIeWInG AnD extenDInG the ConCePts 164 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 164 • Key Terms 165 • Discussion Questions 165 • Critical Thinking Exercises 165 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 166 • Marketing Ethics 166 • Marketing by the Numbers 166 • Video Case 167 • Company Cases 167

PArt 3 DesIGnInG A CUstomer VAlUe-DrIVen strAteGy AnD mIx 168

6 Customer Value-Driven marketing strategy: Creating Value for Target Customers 168 ChAPter roAD mAP 168

Objective Outline 168 • Previewing the Concepts 168 • First Stop: Dunkin’ Donuts 169

market segmentation 170 Segmenting Consumer Markets 171 • Segmenting Business Markets 176 • Segmenting International Markets 177 • Requirements for Effective Segmentation 178

market targeting 179 Evaluating Market Segments 179 • Selecting Target Market Segments 179

marketing at Work 6.1: Hypertargeting: Walking a Fine Line between Serving Customers and Stalking Them 186

Differentiation and Positioning 187 Positioning Maps 188 • Choosing a Differentiation and Positioning Strategy 189

marketing at Work 6.2: Spirit Airlines: Getting Less but Paying Much Less for It 194 Communicating and Delivering the Chosen Position 195

reVIeWInG AnD extenDInG the ConCePts 196 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 196 • Key Terms 197 • Discussion Questions 197 • Critical Thinking Exercises 198 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 198 • Marketing Ethics 198 • Marketing by the Numbers 199 • Video Case 199 • Company Cases 199

7 Products, services, and Brands: Building Customer Value 200 ChAPter roAD mAP 200

Objective Outline 200 • Previewing the Concepts 200 • First Stop: GoPro 201

What Is a Product? 202 Products, Services, and Experiences 202 • Levels of Product and Services 203 • Product and Service Classifications 204

xiv Contents

Product and service Decisions 207 Individual Product and Service Decisions 207 • Product Line Decisions 213 • Product Mix Decisions 214

services marketing 215 The Nature and Characteristics of a Service 215 • Marketing Strategies for Service Firms 216 • The Service Profit Chain 217

marketing at Work 7.1: Zappos.com: Taking Care of Those Who Take Care of Customers 218

Branding strategy: Building strong Brands 221 Brand Equity and Brand Value 222 • Building Strong Brands 223 • Managing Brands 229

marketing at Work 7.2: Brand Extensions: Consumers Say “Yeah!” or “Huh?” 230

reVIeWInG AnD extenDInG the ConCePts 232 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 232 • Key Terms 233 • Discussion Questions 233 • Critical Thinking Exercises 233 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 234 • Marketing Ethics 234 • Marketing by the Numbers 234 • Video Case 235 • Company Cases 235

8 Developing new Products and Managing the Product Life Cycle 236

ChAPter roAD mAP 236 Objective Outline 236 • Previewing the Concepts 236 • First Stop: Google 237

new Product Development strategy 238

the new Product Development Process 239 Idea Generation 239

marketing at Work 8.1: Crowdsourcing: Throwing the Innovation Doors Wide Open 241 Idea Screening 243 • Concept Development and Testing 243 • Marketing Strategy Development 244 • Business Analysis 245 • Product Development 245 • Test Marketing 246 • Commercialization 247

managing new Product Development 247 Customer-Centered New Product Development 247 • Team-Based New Product Development 248 • Systematic New Product Development 248

Product life-Cycle strategies 249 Introduction Stage 251

marketing at Work 8.2: Managing Mattel’s Product Life Cycle: More Than Just Fun and Games 252 Growth Stage 253 • Maturity Stage 254 • Decline Stage 255

Additional Product and service Considerations 256 Product Decisions and Social Responsibility 256 • International Product and Services Marketing 257

reVIeWInG AnD extenDInG the ConCePts 258 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 258 • Key Terms 259 • Discussion Questions 260 • Critical Thinking Exercises 260 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 260 • Marketing Ethics 260 • Marketing by the Numbers 261 • Video Case 261 • Company Cases 261

Contents xv

9 Pricing: Understanding and Capturing Customer Value 262 ChAPter roAD mAP 262

Objective Outline 262 • Previewing the Concepts 262 • First Stop: Amazon versus Walmart 263

What Is a Price? 264

major Pricing strategies 265 Customer Value-Based Pricing 265

marketing at Work 9.1: ALDI: Impressively High Quality at Impossibly Low Prices, Every Day 268 Cost-Based Pricing 269 • Competition-Based Pricing 271

other Internal and external Considerations Affecting Price Decisions 272 Overall Marketing Strategy, Objectives, and Mix 272 • Organizational Considerations 273 • The Market and Demand 274 • The Economy 275 • Other External Factors 276

new Product Pricing strategies 277 Market-Skimming Pricing 277 • Market-Penetration Pricing 277

Product mix Pricing strategies 278 Product Line Pricing 278 • Optional-Product Pricing 279 • Captive-Product Pricing 279 • By-Product Pricing 279 • Product Bundle Pricing 280

Price Adjustment strategies 280 Discount and Allowance Pricing 280 • Segmented Pricing 281 • Psychological Pricing 282 • Promotional Pricing 282 • Geographical Pricing 283 • Dynamic and Online Pricing 284

marketing at Work 9.2: Dynamic Pricing: The Wonders and Woes of Real-Time Price Adjustments 285 International Pricing 287

Price Changes 288 Initiating Price Changes 288 • Responding to Price Changes 290

Public Policy and Pricing 291 Pricing within Channel Levels 292 • Pricing across Channel Levels 293

reVIeWInG AnD extenDInG the ConCePts 294 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 294 • Key Terms 295 • Discussion Questions 295 • Critical Thinking Exercises 296 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 296 • Marketing Ethics 296 • Marketing by the Numbers 297 • Video Case 297 • Company Cases 297

10 marketing Channels: Delivering Customer Value 298 ChAPter roAD mAP 298

Objective Outline 298 • Previewing the Concepts 298 • First Stop: Uber 299

supply Chains and the Value Delivery network 300

the nature and Importance of marketing Channels 301 How Channel Members Add Value 301 • Number of Channel Levels 303

Channel Behavior and organization 304 Channel Behavior 304 • Vertical Marketing Systems 305 • Horizontal Marketing Systems 307 • Multichannel Distribution Systems 308 • Changing Channel Organization 308

xvi Contents

marketing at Work 10.1: Netflix: Disintermediate or Be Disintermediated 310

Channel Design Decisions 311 Analyzing Consumer Needs 311 • Setting Channel Objectives 312 • Identifying Major Alternatives 313 • Evaluating the Major Alternatives 314 • Designing International Distribution Channels 314

Channel management Decisions 315 Selecting Channel Members 315 • Managing and Motivating Channel Members 316

marketing at Work 10.2: Amazon and P&G: Taking Channel Partnering to a New Level 317 Evaluating Channel Members 318

Public Policy and Distribution Decisions 319

marketing logistics and supply Chain management 319 Nature and Importance of Marketing Logistics 319 • Sustainable Supply Chains 321 • Goals of the Logistics System 321 • Major Logistics Functions 322 • Integrated Logistics Management 325

reVIeWInG AnD extenDInG the ConCePts 327 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 327 • Key Terms 328 • Discussion Questions 329 • Critical Thinking Exercises 329 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 329 • Marketing Ethics 330 • Marketing by the Numbers 330 • Video Case 330 • Company Cases 331

11 retailing and Wholesaling 332 ChAPter roAD mAP 332

Objective Outline 332 • Previewing the Concepts 332 • First Stop: Walmart 333

retailing 334 Retailing: Connecting Brands with Consumers 334 • Types of Retailers 335 • Retailer Marketing Decisions 341

marketing at Work 11.1: Digitizing the In-Store Retail Experience 344 Retailing Trends and Developments 348

marketing at Work 11.2: Omni-Channel Retailing: Creating a Seamless Shopping Experience 351

Wholesaling 355 Types of Wholesalers 356 • Wholesaler Marketing Decisions 357 • Trends in Wholesaling 359

reVIeWInG AnD extenDInG the ConCePts 360 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 360 • Key Terms 361 • Discussion Questions 361 • Critical Thinking Exercises 361 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 362 • Marketing Ethics 362 • Marketing by the Numbers 362 • Video Case 363 • Company Cases 363

12 engaging Consumers and Communicating Customer Value: Advertising and Public Relations 364

ChAPter roAD mAP 364 Objective Outline 364 • Previewing the Concepts 364 • First Stop: GEICO 365

the Promotion mix 366

Contents xvii

Integrated marketing Communications 367 The New Marketing Communications Model 367

marketing at Work 12.1: Just Don’t Call It Advertising: It’s Content Marketing 369 The Need for Integrated Marketing Communications 370 • Shaping the Overall Promotion Mix 372

Advertising 375 Setting Advertising Objectives 375 • Setting the Advertising Budget 377 • Developing Advertising Strategy 379 • Evaluating Advertising Effectiveness and the Return on Advertising Investment 388

marketing at Work 12.2: The Super Bowl: The Mother of All Advertising Events—But Is It Worth the Price? 389

Other Advertising Considerations 390

Public relations 392 The Role and Impact of PR 393 • Major Public Relations Tools 393

reVIeWInG AnD extenDInG the ConCePts 394 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 394 • Key Terms 395 • Discussion Questions 395 • Critical Thinking Exercises 395 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 396 • Marketing Ethics 396 • Marketing by the Numbers 397 • Video Case 397 • Company Cases 397

13 Personal selling and sales Promotion 398 ChAPter roAD mAP 398

Objective Outline 398 • Previewing the Concepts 398 • First Stop: Salesforce 399

Personal selling 400 The Nature of Personal Selling 400 • The Role of the Sales Force 401

managing the sales force 402 Designing the Sales Force Strategy and Structure 402 • Recruiting and Selecting Salespeople 406 • Training Salespeople 407 • Compensating Salespeople 408 • Supervising and Motivating Salespeople 409 • Evaluating Salespeople and Sales Force Performance 410

social selling: online, mobile, and social media tools 410 marketing at Work 13.1: B-to-B Salespeople: In This Digital and Social Media Age, Who Needs Them Anymore? 411

the Personal selling Process 414 Steps in the Selling Process 414 • Personal Selling and Managing Customer Relationships 416

sales Promotion 417 The Rapid Growth of Sales Promotion 417 • Sales Promotion Objectives 418 • Major Sales Promotion Tools 419

marketing at Work 13.2: P&G’s “Everyday Effect” Event: A Great Marriage between Old-School Promotions and New-School Social Sharing 421

Developing the Sales Promotion Program 423

reVIeWInG AnD extenDInG the ConCePts 424 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 424 • Key Terms 425 • Discussion Questions 425 • Critical Thinking Exercises 426 • MINICASES AND APPLICATIONS • Online, Social Media, and Mobile Marketing 426 • Marketing Ethics 426 • Marketing by the Numbers 427 • Video Case 427 • Company Cases 427

xviii Contents

14 Direct, online, social media, and mobile marketing 428 ChAPter roAD mAP 428

Objective Outline 428 • Previewing the Concepts 428 • First Stop: Amazon.com 429

Direct and Digital marketing 430 The New Direct Marketing Model 430 • Rapid Growth of Direct and Digital Marketing 431 • Benefits of Direct and Digital Marketing to Buyers and Sellers 431

forms of Direct and Digital marketing 432

Digital and social media marketing 433 Marketing, the Internet, and the Digital Age 433 • Online Marketing 434 • Social Media Marketing 439

marketing at Work 14.1: Social Media Monetization: Making Money without Driving Fans Away 440 Mobile Marketing 443

marketing at Work 14.2: Mobile Marketing: Smartphones Are Changing How People Live—and How They Buy 445

traditional Direct marketing forms 447 Direct-Mail Marketing 447 • Catalog Marketing 448 • Telemarketing 449 • Direct-Response Television Marketing 449 • Kiosk Marketing 450

Public Policy Issues in Direct and Digital marketing 451 Irritation, Unfairness, Deception, and Fraud 451 • Consumer Privacy 452 • A Need for Action 452

reVIeWInG AnD extenDInG the ConCePts 454 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 454 • Key Terms 455 • Discussion Questions 455 • Critical Thinking Exercises 456 • MINICASES AND APPLICATIONS • Online, Social Media, and Mobile Marketing 456 • Marketing Ethics 456 • Marketing by the Numbers 457 • Video Case 457 • Company Cases 457

PArt 4 extenDInG mArKetInG 458

15 the Global marketplace 458 ChAPter roAD mAP 458

Objective Outline 458 • Previewing the Concepts 458 • First Stop: L’Oréal 459

Global marketing today 460

looking at the Global marketing environment 462 The International Trade System 462 • Economic Environment 464 • Political-Legal Environment 465

marketing at Work 15.1: International Marketing: Targeting the Bottom of the Economic Pyramid 466 Cultural Environment 467

Deciding Whether to go Global 470

Deciding Which markets to enter 471

Deciding how to enter the market 472 Exporting 472 • Joint Venturing 473 • Direct Investment 474

Deciding on the Global marketing Program 475

Contents xix

Product 476 • Promotion 477

marketing at Work 15.2: Localizing Chinese Brand Names: Very Important but Notoriously Tricky 479 Price 480 • Distribution Channels 481

Deciding on the Global marketing organization 483

reVIeWInG AnD extenDInG the ConCePts 484 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 484 • Key Terms 484 • Discussion Questions 485 • Critical Thinking Exercises 485 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 485 • Marketing Ethics 486 • Marketing by the Numbers 486 • Video Case 486 • Company Cases 487

16 sustainable marketing: Social Responsibility and Ethics 488 ChAPter roAD mAP 488

Objective Outline 488 • Previewing the Concepts 488 • First Stop: Patagonia 489

sustainable marketing 490

social Criticisms of marketing 492 Marketing’s Impact on Individual Consumers 492 • Marketing’s Impact on Society as a Whole 496 • Marketing’s Impact on Other Businesses 498

Consumer Actions to Promote sustainable marketing 499 Consumerism 500 • Environmentalism 501

marketing at Work 16.1: Sustainability at Unilever: Creating a Better Future Every Day 502 Public Actions to Regulate Marketing 505

Business Actions toward sustainable marketing 506 Sustainable Marketing Principles 506

marketing at Work 16.2: TOMS: “Be the Change You Want to See in the World” 508 Societal Marketing 509 • Marketing Ethics 510 • The Sustainable Company 513

reVIeWInG AnD extenDInG the ConCePts 514 CHAPTER REVIEW AND CRITICAL THINKING • Objectives Review 514 • Key Terms 515 • Discussion Questions 515 • Critical Thinking Exercises 515 • MINICASES AND APPLICATIONS • Online, Mobile, and Social Media Marketing 515 • Marketing Ethics 516 • Marketing by the Numbers 516 • Video Case 516 • Company Cases 517

APPenDIx 1 Company Cases 519 APPenDIx 2 Marketing Plan 551 APPenDIx 3 Marketing by the Numbers 561 APPenDIx 4 Careers in Marketing 579

Glossary 591 References 601 Index 623

xx Contents

xxi

The Thirteenth Edition of Marketing: An Introduction! fresh. Proven. Practical. engaging. These are exciting times in marketing. Recent surges in digital technologies have created a new, more engaging, more connected marketing world. Beyond traditional tried-and-true marketing concepts and practices, today’s marketers have added a host of new-age tools for engaging consumers, building brands, and creating customer value and relationships. In these digital times, sweeping advances in “the Internet of Things”—from social and mobile media, connected digital devices, and the new consumer empowerment to “big data” and new mar- keting analytics—have profoundly affected both marketers and the consumers they serve.

More than ever, the 13th edition of Marketing: An Introduction introduces the exciting and fast-changing world of marketing in a fresh yet proven, practical, and engaging way.

marketing: Creating Customer Value and engagement in the Digital and social Age Top marketers share a common goal: putting the consumer at the heart of marketing. Today’s marketing is all about creating customer value and engagement in a fast-changing, increasingly digital and social marketplace.

Marketing starts with understanding consumer needs and wants, determining which target markets the organization can serve best, and developing a compelling value prop- osition by which the organization can attract and grow valued customers. Then, more than just making a sale, today’s marketers want to engage customers and build deep customer relationships that make their brands a meaningful part of consumers’ conver- sations and lives.

In this digital age, to go along with proven traditional marketing methods, marketers have a dazzling set of new online, mobile, and social media tools for engaging customers anytime, anyplace to jointly shape brand conversations, experiences, and community. If marketers do these things well, they will reap the rewards in terms of market share, profits, and customer equity. In the 13th edition of Marketing: An Introduction, you’ll learn how customer value and customer engagement drive every good marketing strategy.

Marketing: An Introduction makes learning and teaching marketing more productive and enjoyable than ever. The 13th edition’s streamlined approach strikes an effective bal- ance between depth of coverage and ease of learning. The 13th edition builds on proven content developed over 12 previous editions, yet it has been thoroughly revised to provide the freshest insights into current marketing concepts and practices.

The 13th edition remains highly approachable, with an organization, writing style, and design well suited to beginning marketing students. Its learning design—with integrative features at the start and end of each chapter plus insightful author comments throughout— helps students to learn, link, and apply important concepts. The text presents the practical side of marketing, with engaging examples and illustrations throughout that help to bring marketing to life. And when combined with MyMarketingLab, our online homework and

Preface

personalized study tool, Marketing: An Introduction ensures that students will come to class well prepared and leave class with a richer understanding of basic marketing concepts, strategies, and practices.

What’s new in the 13th edition? Once again, we’ve thoroughly revised Marketing: An Introduction to provide the freshest coverage of the latest trends and forces that affect marketing. We’ve poured over every page, table, figure, fact, and example in order to keep this the best text from which to learn about and teach marketing. The new edition provides substantial new content, expanded coverage, and fresh examples throughout each chapter.

●● The 13th edition adds fresh coverage in both traditional marketing areas and on fast- changing and trending topics such as customer engagement marketing, mobile and social media, big data and the new marketing analytics, omni-channel marketing and retailing, customer co-creation and empowerment, real-time customer listening and marketing, building brand community, marketing content creation and native advertising, B-to-B social media and social selling, tiered and dynamic pricing, consumer privacy, sustain- ability, global marketing, and much more.

●● This new edition continues to build on its customer engagement framework—creating direct and continuous customer involvement in shaping brands, brand conversations, brand experiences, and brand community. New coverage and fresh examples throughout the text address the latest customer engagement tools, practices, and developments. See especially Chapter 1 (refreshed sections on Customer Engagement and Today’s Digital and Social Media and Consumer-Generated Marketing); Chapter 4 (big data and real- time research to gain deeper customer insights); Chapter 5 (creating social influence and customer community through digital and social media marketing); Chapter 8 (customer co-creation and customer-driven new-product development); Chapter 11 (omni- channel retailing); Chapter 12 (marketing content curation and native advertising); Chapter 13 (salesforce social selling); and Chapter 14 (direct digital, online, social media, and mobile marketing).

●● No area of marketing is changing faster than online, mobile, social media, and other digital marketing technologies. Keeping up with digital concepts, technologies, and practices has become a top priority and major challenge for today’s marketers. The 13th edition of Marketing: An Introduction provides thoroughly refreshed, up-to-date cover- age of these explosive developments in every chapter—from online, mobile, and social media engagement technologies discussed in Chapters 1, 5, 12, and 14 to “real-time lis- tening” and “big data” research tools in Chapter 4, real-time dynamic pricing in Chapter 9, digitizing the in-store retail shopping experience in Chapter 11, and social selling in Chapter 13. A Chapter 1 section on The Digital Age: Online, Mobile, and Social Media Marketing introduces the exciting new developments in digital and social media mar- keting. Then a Chapter 14 section on Direct, Online, Social Media, and Mobile Mar- keting digs more deeply into digital marketing tools such as online sites, social media, mobile ads and apps, online video, email, blogs, and other digital platforms that engage consumers anywhere, anytime via their computers, smartphones, tablets, Internet-ready TVs, and other digital devices.

●● The 13th edition continues to track fast-changing developments in marketing commu- nications and the creation of marketing content. Marketers are no longer simply creat- ing integrated marketing communications programs; they are joining with customers and media to curate customer-driven marketing content in paid, owned, earned, and shared media. You won’t find fresher coverage of these important topics in any other marketing text.

●● The 13th edition of Marketing: An Introduction continues to improve on its innovative learning design. The text’s active and integrative presentation includes learning enhance- ments such as annotated chapter-opening stories, a chapter-opening objective outline, explanatory author comments on major chapter sections and figures, and Marketing at Work highlights that provide in-depth examples of marketing concepts and practices at

xxii Preface

work. The chapter-opening layout helps to preview and position the chapter and its key concepts. Figures annotated with author comments help students to simplify and organize chapter material. New and substantially revised end-of-chapter features help to summa- rize important chapter concepts and highlight important themes, such as marketing eth- ics, financial marketing analysis, and online, mobile, and social media marketing. This innovative learning design facilitates student understanding and eases learning.

●● The 13th edition provides 16 new end-of-chapter company cases by which students can apply what they learn to actual company situations. It also features 16 brand-new video cases, with brief end-of-chapter summaries and discussion questions. Finally, all of the chapter-opening stories, Marketing at Work highlights, and end-of-chapter features in the 13th edition are either new or substantially revised.

five major Customer Value and engagement themes The 13th edition of Marketing: An Introduction builds on five major customer value and engagement themes:

1. Creating value for customers in order to capture value from customers in return. Today’s marketers must be good at creating customer value, engaging customers, and managing customer relationships. Outstanding marketing companies understand the marketplace and customer needs, design value-creating marketing strategies, develop integrated marketing programs that engage customers and deliver value and satisfac- tion, and build strong customer relationships and brand community. In return, they cap- ture value from customers in the form of sales, profits, and customer equity.

This innovative customer value and engagement framework is introduced at the start of Chapter 1 in a five-step marketing process model, which details how market- ing creates customer value and captures value in return. The framework is carefully developed in the first two chapters and then fully integrated throughout the remainder of the text.

2. Customer engagement and today’s digital and social media. New digital and social media have taken today’s marketing by storm, dramatically changing how companies and brands engage consumers and how consumers connect and influence each other’s brand behaviors. The 13th edition thoroughly explores the contemporary concept of customer engagement marketing and the exciting new digital and social media technol- ogies that help brands to engage customers more deeply and interactively. It starts with two major Chapter 1 sections: Customer Engagement and Today’s Digital and Social Media and The Digital Age: Online, Mobile, and Social Media Marketing. A refreshed Chapter 14 on Direct, Online, Social Media, and Mobile Marketing summarizes the lat- est developments in digital engagement and relationship-building tools. Everywhere in between, you’ll find revised and expanded coverage of the exploding use of digital and social tools to create customer engagement and build brand community.

3. Building and managing strong, value-creating brands. Well-positioned brands with strong brand equity provide the basis upon which to build customer value and profit- able customer relationships. Today’s marketers must position their brands powerfully and manage them well to create valued brand experiences. The 13th edition provides a deep focus on brands, anchored by a Chapter 7 section on Branding Strategy: Building Strong Brands.

4. Measuring and managing return on marketing. Especially in uneven economic times, marketing managers must ensure that their marketing dollars are being well spent. In the past, many marketers spent freely on big, expensive marketing programs, often without thinking carefully about the financial returns on their spending. But all that has changed rapidly. “Marketing accountability”—measuring and managing market- ing return on investment—has now become an important part of strategic marketing decision making. This emphasis on marketing accountability is addressed in Chapter 2,

Preface xxiii

Appendix 3: Marketing by the Numbers, and end-of-chapter Marketing by the Numbers features and throughout the 13th edition.

5. Sustainable marketing around the globe. As technological developments make the world an increasingly smaller and more fragile place, marketers must be good at marketing their brands globally and in sustainable ways. New material throughout the 13th edition emphasizes the concepts of global marketing and sustainable marketing— meeting the present needs of consumers and businesses while also preserving or enhancing the ability of future generations to meet their needs. The 13th edition inte- grates global marketing and sustainability topics throughout the text. It then provides focused coverage on each topic in Chapters 15 and 16, respectively.

An emphasis on real marketing and Bringing marketing to life Marketing: An Introduction, 13th edition, takes a practical marketing management approach, providing countless in-depth, real-life examples and stories that engage students with marketing concepts and bring modern marketing to life. In the 13th edition, every chapter has an engaging First Stop opening story plus Marketing at Work highlights that provide fresh insights into real marketing practices. Learn how:

●● Netflix uses “big data” to personalize each customer’s viewing experience. While Netflix subscribers are busy watching videos, Netflix is busy watching them—very, very closely.

●● Wildly innovative Google has become an incredibly successful new product “moonshot factory,” unleashing a seemingly unending flurry of diverse products, most of which are market leaders in their categories.

●● Nike—by far the world’s largest sports apparel company—does much more than just make and sell sports gear. The iconic brand creates customer value by building deep engagement and a sense of community with and between the Nike brand and its customers.

●● Toy market leader LEGO uses innovative marketing research—lots and lots of it—to dig out fresh customer insights, then uses the insights to create irresistible play experi- ences for children around the world.

●● Mighty Kellogg, the world’s largest cereal maker, may be losing its snap, crackle, and pop as shifts in the marketing environment change how people today eat breakfast.

●● Harley-Davidson’s market dominance comes from a deep understanding of the emotions and motivations that underlie consumer behavior. Harley doesn’t just sell motorcycles; it sells freedom, independence, power, and authenticity.

●● Ultra low-price Spirit Airlines is thriving despite industry-low customer experience rat- ings. You don’t get much when you fly Spirit. Then again, you don’t pay for what you don’t get.

●● Marketers are now using real-time online, mobile, and social media marketing to engage customers in the moment, linking brands to trending topics, events, causes, personal oc- casions, or other happenings in their lives.

●● Amazon has become the poster child for direct and digital marketing. Its passion for cre- ating superb online customer experiences has made it one of the most powerful names on the Internet.

●● Direct marketing insurance giant GEICO has gone from bit player to behemoth thanks to a big-budget advertising campaign featuring a smooth-talking gecko and an enduring “15 minutes could save you 15 percent” tagline.

●● Outdoor apparel and gear maker Patagonia’s “Conscious Consumption” mission takes sustainability to new extremes by telling consumers to buy less of its products.

●● Cosmetics maker L’Oréal has become the “United Nations of Beauty” by achieving a global-local balance that adapts and differentiates brands in local markets while opti- mizing their impact across global markets.

xxiv Preface

Beyond such features, each chapter is packed with countless real, engaging, and timely examples that reinforce key concepts. No other text brings marketing to life like the 13th edition of Marketing: An Introduction.

learning Aids that Create Value and engagement A wealth of chapter-opening, within-chapter, and end-of-chapter learning devices help stu- dents to learn, link, and apply major concepts:

●● Integrated Chapter-Opening Road Maps. The active and integrative chapter-opening spread in each chapter features an Objective Outline that outlines chapter contents and learning objectives, a brief Previewing the Concepts section that introduces chapter con- cepts, and a First Stop opening vignette—an engaging, deeply developed, illustrated, and annotated marketing story that introduces the chapter material and sparks student interest.

●● Marketing at Work highlights. Each chapter contains two carefully developed high- light features that provide an in-depth look at real marketing practices of large and small companies.

●● Author comments and figure annotations. Throughout each chapter, author comments ease and enhance student learning by introducing and explaining major chapter sections and figures.

●● Reviewing and Extending the Concepts. Sections at the end of each chapter summa- rize key chapter concepts and provide questions, exercises, and cases by which students can review and apply what they’ve learned. The Chapter Review and Critical Thinking section reviews major chapter concepts and links them to chapter objectives. It provides a helpful listing of chapter key terms by order of appearance with page numbers that fa- cilitate easy reference. Finally, it provides discussion questions and critical thinking ex- ercises that help students to keep track of and apply what they’ve learned in the chapter.

The Minicases and Applications section at the end of each chapter provides brief Marketing Ethics; Online, Mobile, and Social Media Marketing; and Marketing by the Numbers applications cases that facilitate discussion of current issues and company situations in areas such as mobile and social marketing, ethics, and financial marketing analysis. It also includes a Video Case section that contains short vignettes with discus- sion questions to be used with a set of short videos that accompany the 13th edition. An end-of-chapter Company Cases section identifies which of the company cases found in Appendix 1 are best for use with each chapter.

●● Company Cases. Appendix 1 contains 16 all-new company cases that help students to apply major marketing concepts to real company and brand situations.

●● Marketing Plan appendix. Appendix 2 contains a sample marketing plan that helps students to apply important marketing planning concepts.

●● Marketing by the Numbers appendix. An innovative Appendix 3 provides students with a comprehensive introduction to the marketing financial analysis that helps to guide, assess, and support marketing decisions. An exercise at the end of each chapter lets students apply analytical and financial thinking to relevant chapter concepts and links the chapter to the Marketing by the Numbers appendix.

●● Careers in Marketing. Appendix 4 helps students to explore marketing career paths open to them and lays out a process for landing a marketing job that best matches their special skills and interests.

More than ever before, the 13th edition of Marketing: An Introduction creates value and engagement for you—it gives you all you need to know about marketing in an effective and enjoyable total learning package!

A total teaching and learning Package A successful marketing course requires more than a well-written book. Today’s classroom requires a dedicated teacher, well-prepared students, and a fully integrated teaching system.

Preface xxv

A total package of teaching and learning supplements extends this edition’s emphasis on creating value and engagement for both the student and instructor. The following aids sup- port Marketing: An Introduction, 13th edition.

Instructor resources At the Instructor Resource Center, www.pearsonhighered.com/irc, instructors can eas- ily register to gain access to a variety of instructor resources available with this text in downloadable format. If assistance is needed, our dedicated technical support team is ready to help with the media supplements that accompany this text. Visit http://247.pearsoned .com for answers to frequently asked questions and toll-free user support phone numbers.

The following supplements are available with this text:

●● Instructor’s Resource Manual ●● Test Bank ●● TestGen® Computerized Test Bank ●● PowerPoint Presentation

xxvi Preface

www.pearsonhighered.com/irc
xxvii

Acknowledgments No book is the work only of its authors. We greatly appreciate the valuable contributions of several people who helped make this new edition possible. As always, we owe extra-special thanks to Keri Jean Miksza for her dedicated and valuable contributions to all phases of the project and to her husband Pete and daughters Lucy and Mary for all the support they provide Keri during this very absorbing project.

We owe substantial thanks to Andy Norman of Drake University for his skillful help in developing chapter vignettes and highlights, company and video cases, and the Marketing Plan appendix. This and many previous editions have benefited greatly from Andy’s assistance. We also thank Laurie Babin of the University of Louisiana at Monroe for her dedicated continued efforts in preparing end-of-chapter materials and for keeping our Marketing by the Numbers ap- pendix fresh. Additional thanks also go to Jennifer Barr, Tony Henthorne, and Douglas Martin.

Many reviewers at other colleges and universities provided valuable comments and suggestions for this and previous editions. We are indebted to the following colleagues for their thoughtful inputs:

We also owe a great deal to the people at Pearson Education who helped develop this book. Senior Acquisitions Editor Mark Gaffney provided resources and support during the revision. Senior Project Manager Jacqueline Martin and Program Manager Jennifer Collins provided valuable assistance and advice in guiding this complex revision project through development, design, and production. We’d also like to thank Stephanie Wall, Lenny Ann Kucenski, Judy Leale, Jeff Holcomb, and Eric Santucci for their able assistance along the way. We are proud to be associated with the fine professionals at Pearson. We also owe a mighty debt of gratitude to Charles Fisher and the team at Integra.

reVIeWers

George Bercovitz, York College Pari S. Bhagat, Ph.D., Indiana University of

Pennsylvania Sylvia Clark, St. John’s University Linda Jane Coleman, Salem State University Mary Conran, Temple University Datha Damron-Martinez, Truman State University Lawrence K. Duke, Drexel University Barbara S. Faries, MBA, Mission College Ivan Filby, Greenville College John Gaskins, Longwood University Karen Halpern, South Puget Sound Community College Jan Hardesty, University of Arizona Hella-Ilona Johnson, Olympic College David Koehler, University of Illinois at Chicago Michelle Kunz, Morehead State University Susan Mann, University of Northwestern Ohio Thomas E. Marshall, M.B.E., Owens Community College

Nora Martin, University of South Carolina Erika Matulich, University of Tampa Marc Newman, Hocking College John T. Nolan, SUNY, Buffalo State Nikolai Ostapenko, University of the District of Columbia Vic Piscatello, University of Arizona Bill Rice, California State University David Robinson, University of California, Berkeley William M. Ryan, University of Connecticut Elliot Schreiber, Drexel University Lisa Simon, Cal Poly, San Luis Obispo Robert Simon, University of Nebraska, Lincoln Keith Starcher, Indiana Wesleyan University John Talbott, Indiana University Rhonda Tenenbaum, Queens College Deborah Utter, Boston University Tom Voigt, Judson University Terry Wilson, East Stroudsburg University

Finally, we owe many thanks to our families for all of their support and encouragement — Kathy, Betty, Mandy, Matt, KC, Keri, Delaney, Molly, Macy, and Ben from the Armstrong clan and Nancy, Amy, Melissa, and Jessica from the Kotler family. To them, we dedicate this book.

Gary Armstrong Philip Kotler

xxviii Acknowledgments

Marketing An Introduction Thirteenth Edition

Part 1: Defining Marketing anD the Marketing Process (chaPters 1–2) Part 2: UnDerstanDing the MarketPlace anD cUstoMer ValUe (chaPters 3–5) Part 3: Designing a cUstoMer ValUe-DriVen strategy anD Mix (chaPters 6–14) Part 4: extenDing Marketing (chaPters 15–16)

1 objectiVe 1-1 Define marketing and outline the steps in the marketing process. What Is Marketing? (4–5)

objectiVe 1-2 explain the importance of understanding the marketplace and customers and identify the five core marketplace concepts. Understanding the Marketplace and Customer Needs (6–8)

objectiVe 1-3 identify the key elements of a customer- value driven marketing strategy and discuss the marketing management orientations that guide marketing strategy. Designing a Customer-Driven Marketing Strategy (9–12) Preparing an Integrated Marketing Plan and Program (12–13)

Marketing creating customer Value and engagement

objectiVe 1-4 Discuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return. Engaging Customers and Managing Customer Relationships (13–20); Capturing Value from Customers (20–23)

objectiVe 1-5 Describe the major trends and forces that are changing the marketing landscape in this age of relationships. The Changing Marketing Landscape (24–31)

Previewing the concepts this chapter introduces you to the basic concepts of marketing. We start with the question: What is marketing? simply put, marketing is engaging customers and managing profitable customer relationships. the aim of marketing is to create value for customers in order to capture value from customers in return. next we discuss the five steps in the marketing process—from understanding customer needs, to designing customer value-driven market- ing strategies and integrated marketing programs, to building customer relationships and capturing value for the firm. finally, we discuss the major trends and forces affecting market- ing in this new age of digital, mobile, and social media. Understanding these basic concepts and forming your own ideas about what they really mean to you will provide a solid founda- tion for all that follows.

let’s start with a good story about marketing in action at nike, the world’s leading sports apparel company and one of the best-known brands on the planet. nike’s outstand- ing success results from much more than just making and selling good sports gear. it’s based on a customer-focused marketing strategy by which nike creates customer value through deep brand–customer engagement and close brand community with and among its customers.

chaPter roaD MaP objective outline

3

first stop nike’s customer Value-Driven Marketing: Engaging Customers and Building Brand Community The Nike “swoosh”—it’s everywhere! Just for fun, try counting the swooshes whenever you pick up the sports pages or watch a basketball game or tune into a televised soccer match. Over the past 50 years, through innovative marketing, Nike has built the ever-present swoosh into one of the world’s best-known brand symbols.

Product innovation has always been a cornerstone of Nike’s success. Nike makes outstanding shoes, clothing, and gear, whether for basketball, football, and baseball or golf, skate- boarding, wall climbing, bicycling, and hiking. But from the start, a brash, young Nike revolutionized sports marketing. To build image and market share, the brand lavishly outspent competi- tors on big-name endorsements, splashy promotional events, and big-budget, in-your-face “Just Do It” ads. Whereas competi- tors stressed technical performance, Nike built customer engagement and relationships.

Beyond shoes, Nike marketed a way of life, a genuine passion for sports, a “just-do-it” attitude. Customers didn’t just wear their Nikes, they experienced them. As the company once stated on its Web page, “Nike has always known the truth—it’s not so much the shoes but where they take you.” Nike’s mission isn’t to “make better gear,” it’s to “connect with and inspire athletes around the world.” Few brands have become more ever-present and valued than Nike in their customers’ lives and conversations.

Whether customers connect with Nike through ads, in-person events at Niketown stores, a local Nike running club, or one of the company’s profusion of community Web and social media sites, more and more people are bonding closely with the Nike brand. Connecting once required simply outspending competitors on big media ads and celebrity endorsers that talk at customers. But in these digital times, Nike is forging a new kind of brand–customer connection—a deeper, more personal, more engaging one. Nike still invests heavily in traditional advertising. But the brand now spends a lion’s share of its marketing budget on cutting-edge digital and social media marketing that interacts with customers to build brand engagement and community.

Nike’s innovative use of online, mobile, and social media recently earned the brand the title of “top genius” in “digital IQ” among 42 sportswear companies in one digital consultancy’s rankings. Nike also placed first in creating brand “tribes”—large groups of highly engaged users—with the help of social media platforms such as Facebook, Twitter, Instagram, YouTube, and Pinterest. For example, the main Nike Facebook page has more than 42 million Likes. The Nike Soccer page adds another 35 mil- lion, the Nike Basketball page 7 million more, and Nike Running another 3 million. More than just numbers, Nike’s social media presence engages customers at a high level, gets them talking with each other about the brand, and weaves the brand into their daily lives.

Nike excels at cross-media campaigns that integrate digi- tal media with traditional tools to connect with customers. An

the nike swoosh—it’s everywhere. nike has mastered social networking, both online and off, creating deep engagement and community with and among customers. © Steve Hellerstein/Alamy

nike’s outstanding success results from much more than just making good sports gear. the iconic brand

delivers customer value by building deep engagement and a

sense of community with and between the nike brand

and its customers.

example is Nike’s recent “Risk Everything” World Cup soccer campaign. The Risk Everything campaign began with captivating four- to five-minute videos embedded in Nike social media sites and its own Risk Everything Web site. The campaign—featuring Nike- sponsored soccer superstars such as Portugal’s Cristiano Ronaldo, England’s Wayne Rooney, Brazil’s Neymar, and a dozen others—was built around an intense, provocative World Cup story line of taking risks to gain the glory of succeeding against rival teams and nations.

In one Risk Everything video—“Winner Stays”—two teams of young men faced off on a local soccer field for a pickup game, pretending to be (then turning into) the superstars. The scene trans- formed into a legendary bout on a global stage. As the video ended, a young boy stepped in for Ronaldo and under immense pres- sure scored the winning goal. According to one analyst, the Risk Every- thing videos were “the perfect blend of product placement, provocative storytelling, and real-time marketing.” Although the videos were filled with Nike swooshes, products, and stars, highly engaged viewers hardly realized that they were con- suming ad content.

By the end of the final World Cup match, the Risk Everything videos had produced 372 million views, 22 million engagements (Likes, comments, shares), and 650,000 uses of #riskeverything. Nike reigned as the “most-viewed brand” of the World Cup in terms of online video, trouncing rival adidas. In fact, Nike’s online views accounted for an incredible one-half of all the views attributed to the event’s 97 World Cup marketing campaigns—and Nike wasn’t even an official sponsor. Along with the Risk Everything videos, Nike ran a full array of traditional television, print, radio, cinema, and gaming

4

advertising. Taken as a whole, across all media, the Risk Everything campaign generated more than 6 billion impressions in 35 countries. Now that’s customer engagement.

Nike has also created customer value and brand commu- nity through groundbreaking mobile apps and technologies. For example, its Nike+ apps have helped Nike become a part of the daily fitness routines of millions of customers around the world. The Nike+ FuelBand device, for instance, converts just about every imaginable physical movement into NikeFuel, Nike’s own universal activity metric. So whether your activity is running, jump- ing, baseball, skating, dancing, stacking sports cups, or chasing chickens, it counts for NikeFuel points. Everyday athletes can use NikeFuel to track their personal performance, then share and com- pare it across sports and locations with others in the global Nike community. The Nike+ mobile app lets users watch their progress, get extra motivation on the go, and stay connected with friends. Nike+ has engaged a huge global brand community. To date, more than 5 million Nike+ users worldwide have logged 1,118,434,247

miles. That’s 44,914 trips around the world or 4,682 journeys to the moon and back.

Thus, Nike delivers customer value well beyond the products it makes. It has built a deep kinship and sense of community with and between the Nike brand and its customers. Whether it’s through local running clubs, a performance-tracking app, primetime TV ads, videos, and other content in any of its dozens of brand Web sites and social media pages, the Nike brand has become a valued part of customers’ lives and times.

As a result, Nike remains the world’s largest sports apparel com- pany, an impressive 44 percent larger than closest rival adidas. Dur- ing the past decade, even as a sometimes-shaky economy left many sports footwear and apparel rivals gasping for breath, Nike’s global sales and income have sprinted ahead by more than double. “Connect- ing used to be, ‘Here’s some product, and here’s some advertising. We hope you like it,’” notes Nike’s CEO. “Connecting today is a dialogue.” Says Nike’s chief marketing officer, “The engagement levels we have received . . . drive huge momentum for our brand. This is just the begin- ning of how we will connect with and inspire athletes around the world.”1

oday’s successful companies have one thing in common: Like Nike, they are strongly customer focused and heavily committed to marketing. These companies share a passion for understanding and satisfying customer needs in well-defined

target markets. They motivate everyone in the organization to help build lasting customer relationships based on creating value.

Customer relationships and value are especially important today. Facing dramatic technological advances and deep economic, social, and environmental challenges, today’s customers are relating digitally with companies and each other, spending more carefully, and reassessing how they engage with brands. New digital, mobile, and social media developments have revolutionized how consumers shop and interact, in turn calling for new marketing strategies and tactics. In these fast-changing times, it’s now more important than ever to build strong customer relationships based on real and enduring customer value.

We’ll discuss the exciting new challenges facing both customers and marketers later in the chapter. But first, let’s introduce the basics of marketing.

What is Marketing? Marketing, more than any other business function, deals with customers. Although we will soon explore more-detailed definitions of marketing, perhaps the simplest definition is this one: Marketing is engaging customers and managing profitable customer relationships. The twofold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering satisfaction.

For example, Walmart has become the world’s largest retailer—and the world’s largest company—by delivering on its promise “Save Money. Live Better.” Coca-Cola has earn a 49 percent global share of the carbonated beverage market—more than twice Pepsi’s share—by fulfilling its “open happiness” motto with products that “spread smiles and open happiness every day all across the world.” Facebook has attracted more than 1.4 billion active Web and mobile users worldwide by helping them to “connect and share with the people in their lives.”2

Sound marketing is critical to the success of every organization. Large for-profit firms, such as Google, Target, Procter & Gamble, Coca-Cola, and Microsoft, use mar- keting. But so do not-for-profit organizations, such as colleges, hospitals, museums, symphony orchestras, and even churches.

You already know a lot about marketing—it’s all around you. Marketing comes to you in the good old traditional forms: You see it in the abundance of products at your nearby

author comment Pause here and think about how you’d answer this question before studying marketing. Then

see how your answer changes as you read the chapter.

t

chapter 1: Marketing: creating customer Value and engagement 5

shopping mall and the ads that fill your TV screen, spice up your magazines, or stuff your mailbox. But in recent years, marketers have assembled a host of new marketing approaches, everything from imaginative Web sites and smartphone apps to blogs, online videos, and so- cial media. These new approaches do more than just blast out messages to the masses. They reach you directly, personally, and interactively. Today’s marketers want to become a part of your life and enrich your experiences with their brands—to help you live their brands.

At home, at school, where you work, and where you play, you see marketing in almost everything you do. Yet there is much more to marketing than meets the consumer’s casual eye. Behind it all is a massive network of people, technologies, and activities competing for your attention and purchases. This book will give you a complete introduction to the basic concepts and practices of today’s marketing. In this chapter, we begin by defining marketing and the marketing process.

Marketing Defined What is marketing? Many people think of marketing as only selling and advertising. We are bombarded every day with TV commercials, catalogs, spiels from salespeople, and online pitches. However, selling and advertising are only the tip of the marketing iceberg.

Today, marketing must be understood not in the old sense of making a sale—“telling and selling”—but in the new sense of satisfying customer needs. If the marketer engages consumers effectively, understands their needs, develops products that provide superior customer value, and prices, distributes, and promotes them well, these products will sell easily. In fact, according to management guru Peter Drucker, “The aim of marketing is to make selling unnecessary.”3 Selling and advertising are only part of a larger marketing mix—a set of marketing tools that work together to engage customers, satisfy customer needs, and build customer relationships.

Broadly defined, marketing is a social and managerial process by which individuals and organizations obtain what they need and want through creating and exchanging value with others. In a narrower business context, marketing involves building profitable, value-laden exchange relationships with customers. Hence, we define marketing as the process by which companies engage customers, build strong customer relationships, and create customer value in order to capture value from customers in return.4

the Marketing Process figure 1.1 presents a simple, five-step model of the marketing process for creating and

capturing customer value. In the first four steps, companies work to understand consum- ers, create customer value, and build strong customer relationships. In the final step, companies reap the rewards of creating superior customer value. By creating value for consumers, they in turn capture value from consumers in the form of sales, profits, and long-term customer equity.

In this chapter and the next, we will examine the steps of this simple model of mar- keting. In this chapter, we review each step but focus more on the customer relationship steps—understanding customers, engaging and building relationships with customers, and capturing value from customers. In Chapter 2, we look more deeply into the second and third steps—designing value-creating marketing strategies and constructing marketing programs.

Marketing The process by which companies engage customers, build strong customer relationships, and create customer value in order to capture value from customers in return.

Create value for customers and build customer relationships

Capture value from customers in return

Capture value from customers to create profits and customer equity

Engage customers, build profitable

relationships, and create customer

delight

Construct an integrated

marketing program that delivers

superior value

Understand the marketplace and customer needs

and wants

Design a customer value- driven marketing

strategy

This important figure shows marketing in a nutshell. By creating value for customers, marketers capture value from customers in return. This five-step process forms the marketing framework for the rest of the chapter and the remainder of the text.

figure 1.1 the Marketing Process: creating and capturing customer Value

6 Part 1: Defining Marketing and the Marketing Process

Understanding the Marketplace and customer needs As a first step, marketers need to understand customer needs and wants and the market- place in which they operate. We examine five core customer and marketplace concepts: (1) needs, wants, and demands; (2) market offerings (products, services, and experiences); (3) value and satisfaction; (4) exchanges and relationships; and (5) markets.

customer needs, Wants, and Demands The most basic concept underlying marketing is that of human needs. Human needs are states of felt deprivation. They include basic physical needs for food, clothing, warmth, and safety; social needs for belonging and affection; and individual needs for knowledge and self-expression. Marketers did not create these needs; they are a basic part of the human makeup.

Wants are the form human needs take as they are shaped by culture and individual personality. An American needs food but wants a Big Mac, french fries, and a soft drink. A person in Papua, New Guinea, needs food but wants taro, rice, yams, and pork. Wants are shaped by one’s society and are described in terms of objects that will satisfy

those needs. When backed by buying power, wants become demands. Given their wants and resources, people demand products and services with benefits that add up to the most value and satisfaction.

Outstanding marketing companies go to great lengths to learn about and understand their customers’ needs, wants, and demands. They conduct consumer research, analyze moun- tains of customer data, and observe customers as they shop and interact, offline and online. People at all levels of the com- pany—including top management—stay close to customers:5

Target’s energetic new CEO, Brian Cornell, makes regular un- announced visits to Target stores, accompanied by local moms and loyal Target shoppers. Cornell likes nosing around stores and getting a real feel for what’s going on. It gives him “great, genuine feedback.” Similarly, Boston Market CEO George Mi- chel makes frequent visits to company restaurants, working in the dining room and engaging customers to learn about “the good, the bad, and the ugly.” He also stays connected by reading customer messages on the Boston Market Web site and has even cold-called customers for insights. “Being close to the customer is critically important,” says Michel. “I get to learn what they value, what they appreciate.”

Market offerings—Products, services, and experiences Consumers’ needs and wants are fulfilled through market offerings—some combination of products, services, information, or experiences offered to a market to satisfy a need or a want. Market offerings are not limited to physical products. They also include services— activities or benefits offered for sale that are essentially intangible and do not result in the ownership of anything. Examples include banking, airline, hotel, retailing, and home repair services.

More broadly, market offerings also include other entities, such as persons, places, organizations, information, and ideas. For example, San Diego recently launched a $9 million “Happiness Is Calling” advertising campaign that invites visi- tors to come and enjoy the city’s great weather and good times—everything from its bays and beaches to its downtown nightlife and urban scenes. And the Ad Council and

author comment Marketing is all about creating value for customers. So, as the first step in the

marketing process, the company must fully understand consumers and the marketplace

in which it operates.

needs States of felt deprivation.

Wants The form human needs take as they are shaped by culture and individual personality.

Demands Human wants that are backed by buying power.

Market offerings Some combination of products, servic- es, information, or experiences offered to a market to satisfy a need or want.

staying close to customers: energetic new target ceo brian collins makes regular unannounced visits to target stores, accompanied by local moms and loyal target shoppers. Ackerman + Gruber

chapter 1: Marketing: creating customer Value and engagement 7

the National Highway Traffic Safety Administration created a “Stop the Texts. Stop the Wrecks.” campaign that markets the idea of eliminating texting while driving. The campaign points out that a texting driver is 23 times more likely to get into a crash than a non-texting driver.6

Many sellers make the mistake of paying more attention to the specific products they offer than to the benefits and experiences produced by these products. These sell- ers suffer from marketing myopia. They are so taken with their products that they focus only on existing wants and lose sight of underlying customer needs.7 They forget that a product is only a tool to solve a consumer problem. A manufacturer of quarter-inch drill bits may think that the customer needs a drill bit. But what the customer really needs is a quarter-inch hole. These sellers will have trouble if a new product comes along that serves the customer’s need better or less expensively. The customer will have the same need but will want the new product.

Smart marketers look beyond the attributes of the products and services they sell. By orchestrating several services and products, they create brand experiences for consumers. For example, you don’t just visit Walt Disney World Resort; you immerse yourself and your family in a world of wonder, a world where dreams come true and things still work the way they should. “Let the magic begin!” says Disney. Similarly, Mattel’s American Girl does much more than just make and sell high-end dolls. It creates special experiences between the dolls and the girls who adore them.8

To put more smiles on the faces of the girls who love their American Girl dolls, the com- pany operates huge American Girl experiential stores in 20 major cities around the country. Each store carries an amazing selection of dolls plus every imaginable outfit and accessory. But more than just shopping spots, American Girl stores are exciting destinations unto themselves, offering wonderfully engaging experiences for girls, mothers, grandmoth- ers, and even dads or grandpas. There’s an in-store restaurant where girls, their dolls, and grown-ups can sit down together for brunch, lunch, afternoon tea, or dinner. There’s even a doll hair salon where a stylist can give a doll a new hairdo. American Girl also offers “perfect parties” to celebrate a birthday or any day, as well as a full slate of special events, from crafts and activities to excursions. Much more than a store that sells dolls, says the company, “it’s the place where imaginations can soar.” A visit to American Girl creates “Fun today. Memories forever.”

customer Value and satisfaction Consumers usually face a broad array of products and services that might satisfy a given need. How do they choose among these many market offerings? Customers form expectations about the value and satisfaction that various market offerings will deliver and buy accordingly. Satisfied customers buy again and tell others about their good experiences. Dissatisfied customers often switch to competitors and disparage the product to others.

Marketers must be careful to set the right level of expectations. If they set expecta- tions too low, they may satisfy those who buy but fail to attract enough buyers. If they set expectations too high, buyers will be disappointed. Customer value and customer satisfac- tion are key building blocks for developing and managing customer relationships. We will revisit these core concepts later in the chapter.

exchanges and relationships Marketing occurs when people decide to satisfy their needs and wants through ex- change relationships. Exchange is the act of obtaining a desired object from someone by offering something in return. In the broadest sense, the marketer tries to bring about a response to some market offering. The response may be more than simply buying or trading products and services. A political candidate, for instance, wants votes; a church wants membership; an orchestra wants an audience; and a social action group wants idea acceptance.

Marketing myopia The mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these products.

exchange The act of obtaining a desired object from someone by offering something in return.

Marketing experiences: american girl does more than just make and sell high-end dolls. it creates special experiences between the dolls and the girls who adore them. Image courtesy of American Girl, Inc. All rights reserved.

8 Part 1: Defining Marketing and the Marketing Process

Marketing consists of actions taken to create, maintain, and grow desirable exchange relationships with target audiences involving a product, service, idea, or other object. Companies want to build strong relationships by consistently delivering superior customer value. We will expand on the important concept of managing customer relationships later in the chapter.

Markets The concepts of exchange and relationships lead to the concept of a market. A market is the set of actual and potential buyers of a product or service. These buyers share a particu- lar need or want that can be satisfied through exchange relationships.

Marketing means managing markets to bring about profitable customer relation- ships. However, creating these relationships takes work. Sellers must search for and engage buyers, identify their needs, design good market offerings, set prices for them, promote them, and store and deliver them. Activities such as consumer research, prod- uct development, communication, distribution, pricing, and service are core marketing activities.

Although we normally think of marketing as being carried out by sellers, buyers also carry out marketing. Consumers market when they search for products, interact with companies to obtain information, and make their purchases. In fact, today’s digital tech- nologies, from online sites and smartphone apps to the explosion of social media, have empowered consumers and made marketing a truly two-way affair. Thus, in addition to customer relationship management, today’s marketers must also deal effectively with customer-managed relationships. Marketers are no longer asking only “How can we influ- ence our customers?” but also “How can our customers influence us?” and even “How can our customers influence each other?”

figure 1.2 shows the main elements in a marketing system. Marketing involves serving a market of final consumers in the face of competitors. The company and competi- tors research the market and interact with consumers to understand their needs. Then they create and exchange market offerings, messages, and other marketing content with con- sumers, either directly or through marketing intermediaries. Each party in the system is affected by major environmental forces (demographic, economic, natural, technological, political, and social/cultural).

Each party in the system adds value for the next level. The arrows represent rela- tionships that must be developed and managed. Thus, a company’s success at engaging customers and building profitable relationships depends not only on its own actions but also on how well the entire system serves the needs of final consumers. Walmart can- not fulfill its promise of low prices unless its suppliers provide merchandise at low costs. And Ford cannot deliver a high-quality car-ownership experience unless its dealers provide outstanding sales and service.