Kotler & Keller -Marketing Management (14th Edition).pdf

 Marketing Management 14 PHILIP KOTLER Northwestern University KEVIN LANE KELLER...

 Marketing Management 14 PHILIP KOTLER Northwestern University KEVIN LANE KELLER Dartmouth College Prentice Hall Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editorial Director: Sally Yagan Creative Director: John Christiano Editor in Chief: Eric Svendsen Senior Art Director: Blair Brown Executive Editor: Melissa Sabella Text and Cover Designer: Blair Brown Development Editor: Elisa Adams Lead Media Project Manager: Lisa Rinaldi Director of Editorial Services: Ashley Santora Editorial Media Project Manager: Denise Vaughn Editorial Project Manager: Kierra Bloom Full-Service Project Management: Sharon Editorial Assistant: Elizabeth Scarpa Anderson/BookMasters, Inc. Director of Marketing: Patrice Lumuba Jones Composition: Integra Senior Marketing Manager: Anne Fahlgren Printer/Binder: Courier/Kendallville Senior Managing Editor: Judy Leale Cover Printer: Lehigh-Phoenix Color/Hagerstown Production Project Manager: Ann Pulido Text Font: 9.5/11.5, Minion Senior Operations Supervisor: Arnold Vila Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on appropriate page within text. Copyright © 2012, 2009, 2006, 2003, 2000 Pearson Education, Inc., publishing as Prentice Hall, One Lake Street, Upper Saddle River, New Jersey 07458. All rights reserved. Manufactured in the United States of America. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458. Many of the designations by manufacturers and seller to distinguish their products are claimed as trademarks. Where those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been printed in initial caps or all caps. Library of Congress Cataloging-in-Publication Data Kotler, Philip. Marketing management/Philip Kotler, Kevin Lane Keller. — 14th ed. p. cm. Includes bibliographical references and index. ISBN 978-0-13-210292-6 1. Marketing—Management. I. Keller, Kevin Lane, 1956- II. Title. HF5415.13.K64 2012 658.8—dc22 2010046655 10 9 8 7 6 5 4 3 2 1 ISBN 13: 978-0-13-210292-6 ISBN 10: 0-13-210292-7 This book is dedicated to my wife and best friend, Nancy, with love. – PK This book is dedicated to my wife, Punam, and my two daughters, Carolyn and Allison, with much love and thanks. – KLK  About the Authors Philip Kotler is one of the world’s leading authorities on market- ing. He is the S. C. Johnson & Son Distinguished Professor of International Marketing at the Kellogg School of Management, Northwestern University. Philip Kotler He received his master’s degree at the University of Chicago and his Ph.D. at MIT, both in economics. He did postdoctoral work in mathematics at Harvard University and in behavioral science at the University of Chicago. Dr. Kotler is the coauthor of Principles of Marketing and Marketing: An Introduction. His Strategic Marketing for Nonprofit Organizations, now in its seventh edition, is the best seller in that specialized area. Dr. Kotler’s other books include Marketing Models; The New Competi- tion; Marketing Professional Services; Strategic Marketing for Educational Institutions; Marketing for Health Care Organizations; Marketing Congregations; High Visibility; Social Marketing; Marketing Places; The Marketing of Nations; Marketing for Hospitality and Tourism; Standing Room Only—Strategies for Marketing the Performing Arts; Museum Strategy and Marketing; Marketing Moves; Kotler on Marketing; Lateral Marketing: Ten Deadly Marketing Sins; and Corporate Social Responsibility. In addition, he has published more than one hundred articles in leading journals, in- cluding the Harvard Business Review, Sloan Management Review, Business Horizons, California Management Review, the Journal of Marketing, the Journal of Marketing Research, Management Science, the Journal of Business Strategy, and Futurist. He is the only three-time winner of the coveted Alpha Kappa Psi award for the best annual article published in the Journal of Marketing. Professor Kotler was the first recipient of the American Marketing Association’s (AMA) Distinguished Marketing Educator Award (1985). The European Association of Marketing Consultants and Sales Trainers awarded him their Prize for Marketing Excellence. He was chosen as the Leader in Marketing Thought by the Academic Members of the AMA in a 1975 survey. He also received the 1978 Paul Converse Award of the AMA, honoring his original contribution to marketing. In 1995, the Sales and Marketing Executives International (SMEI) named him Marketer of the Year. In 2002, Professor Kotler received the Distinguished Educator Award from the Academy of Marketing Science. He has received honorary doctoral degrees from Stockholm University, the University of Zurich, Athens University of Economics and Business, DePaul University, the Cracow School of Business and Economics, Groupe H.E.C. in Paris, the Budapest School of Economic Science and Public Administration, and the University of Economics and Business Administration in Vienna. Professor Kotler has been a consultant to many major U.S. and foreign companies, in- cluding IBM, General Electric, AT&T, Honeywell, Bank of America, Merck, SAS Airlines, Michelin, and others in the areas of marketing strategy and planning, marketing organiza- tion, and international marketing. He has been Chairman of the College of Marketing of the Institute of Management Sciences, a Director of the American Marketing Association, a Trustee of the Marketing Science Institute, a Director of the MAC Group, a member of the Yankelovich Advisory Board, and a member of the Copernicus Advisory Board. He was a member of the Board of Governors of the School of the Art Institute of Chicago and a member of the Advisory Board of the Drucker Foundation. He has traveled extensively throughout Europe, Asia, and South America, advising and lecturing to many companies about global marketing opportunities. iv  Kevin Lane Keller Kevin Lane Keller is widely recognized as one of the top mar- keting academics of the last 25 years. He is the E. B. Osborn Professor of Marketing at the Tuck School of Business at Dartmouth College. Professor Keller has degrees from Cornell, Carnegie-Mellon, and Duke universities. At Dartmouth, he teaches MBA courses on marketing management and strate- gic brand management and lectures in executive programs on those topics. Previously, Professor Keller was on the faculty of the Graduate School of Business at Stanford University, where he also served as the head of the marketing group. Additionally, he has been on the marketing faculty at the University of California at Berkeley and the University of North Carolina at Chapel Hill, been a visiting professor at Duke University and the Australian Graduate School of Management, and has two years of industry experience as Marketing Consultant for Bank of America. Professor Keller’s general area of expertise lies in marketing strategy and planning, and branding. His specific research interest is in how understanding theories and con- cepts related to consumer behavior can improve marketing strategies. His research has been published in three of the major marketing journals—the Journal of Marketing, the Journal of Marketing Research, and the Journal of Consumer Research. He also has served on the Editorial Review Boards of those journals. With over ninety published pa- pers, his research has been extensively cited and has received numerous awards. Professor Keller is acknowledged as one of the international leaders in the study of brands and branding. His textbook on those subjects, Strategic Brand Management, has been adopted at top business schools and leading firms around the world and has been heralded as the “bible of branding.” Actively involved with industry, he has worked on a host of different types of marketing projects. He has served as a consultant and advisor to marketers for some of the world’s most successful brands, including Accenture, American Express, Disney, Ford, Intel, Levi Strauss, Procter & Gamble, and Samsung. Additional brand consulting activities have been with other top companies such as Allstate, Beiersdorf (Nivea), BlueCross BlueShield, Campbell’s, Colgate, Eli Lilly, ExxonMobil, General Mills, GfK, Goodyear, Intuit, Johnson & Johnson, Kodak, L.L.Bean, Mayo Clinic, Nordstrom, Ocean Spray, Red Hat, SAB Miller, Shell Oil, Starbucks, Unilever, and Young & Rubicam. He has also served as an academic trustee for the Marketing Science Institute. A popular and highly sought-after speaker, he has made speeches and conducted marketing seminars to top executives in a variety of forums. Some of his senior manage- ment and marketing training clients have included such diverse business organizations as Cisco, Coca-Cola, Deutsche Telekom, GE, Google, IBM, Macy’s, Microsoft, Nestle, Novartis, and Wyeth. He has lectured all over the world, from Seoul to Johannesburg, from Sydney to Stockholm, and from Sao Paulo to Mumbai. He has served as keynote speaker at conferences with hundreds to thousands of participants. An avid sports, music, and film enthusiast, in his so-called spare time, he has helped to manage and market, as well as serve as executive producer for, one of Australia’s great rock and roll treasures, The Church, as well as American power-pop legends Dwight Twilley and Tommy Keene. Additionally, he is the Principal Investor and Marketing Advisor for Second Motion Records. He is also on the Board of Directors for The Doug Flutie, Jr. Foundation for Autism and the Montshire Museum of Science. Professor Keller lives in Etna, NH, with his wife, Punam (also a Tuck marketing professor), and his two daughters, Carolyn and Allison. v  Brief Contents Preface xvi PART 1 Understanding Marketing Management 2 Chapter 1 Defining Marketing for the 21st Century 2 Chapter 2 Developing Marketing Strategies and Plans 32 PART 2 Capturing Marketing Insights 66 Chapter 3 Collecting Information and Forecasting Demand 66 Chapter 4 Conducting Marketing Research 96 PART 3 Connecting with Customers 122 Chapter 5 Creating Long-term Loyalty Relationships 122 Chapter 6 Analyzing Consumer Markets 150 Chapter 7 Analyzing Business Markets 182 Chapter 8 Identifying Market Segments and Targets 212 PART 4 Building Strong Brands 240 Chapter 9 Creating Brand Equity 240 Chapter 10 Crafting the Brand Positioning 274 Chapter 11 Competitive Dynamics 298 PART 5 Shaping the Market Offerings 324 Chapter 12 Setting Product Strategy 324 Chapter 13 Designing and Managing Services 354 Chapter 14 Developing Pricing Strategies and Programs 382 PART 6 Delivering Value 414 Chapter 15 Designing and Managing Integrated Marketing Channels 414 Chapter 16 Managing Retailing, Wholesaling, and Logistics 446 PART 7 Communicating Value 474 Chapter 17 Designing and Managing Integrated Marketing Communications 474 Chapter 18 Managing Mass Communications: Advertising, Sales Promotions, Events and Experiences, and Public Relations 502 Chapter 19 Managing Personal Communications: Direct and Interactive Marketing, Word of Mouth, and Personal Selling 534 PART 8 Creating Successful Long-term Growth 566 Chapter 20 Introducing New Market Offerings 566 Chapter 21 Tapping into Global Markets 594 Chapter 22 Managing a Holistic Marketing Organization for the Long Run 620 Appendix: Sonic Marketing Plan A1 Endnotes E1 Glossary G1 Image Credits C1 Name Index I1 Company, Brand, and Organization Index I4 Subject Index I14 vi Contents Preface xvi Building Strong Brands 27 Shaping the Market Offerings 27 PART 1 Understanding Marketing Delivering Value 27 Communicating Value 27 Management 2 Creating Successful Long-Term Growth 27 Summary 28 CHAPTER 1 Defining Marketing for the 21st Applications 28 Century 2 CHAPTER 2 Developing Marketing Strategies The Importance of Marketing 3 and Plans 32 The Scope of Marketing 5 What Is Marketing? 5 Marketing and Customer Value 33 What Is Marketed? 5 The Value Delivery Process 33 Who Markets? 7 The Value Chain 34 Core Marketing Concepts 9 Core Competencies 35 Needs, Wants, and Demands 9 A Holistic Marketing Orientation and Target Markets, Positioning, and Customer Value 36 Segmentation 10 The Central Role of Strategic Planning 36 Offerings and Brands 10 Corporate and Division Strategic Value and Satisfaction 10 Planning 37 Marketing Channels 11 Defining the Corporate Mission 38 Supply Chain 11 Establishing Strategic Business Units 39 Competition 11 Assigning Resources to Each SBU 42 Marketing Environment 11 Assessing Growth Opportunities 42 The New Marketing Realities 12 Organization and Organizational Culture 45 Major Societal Forces 12 Marketing Innovation 45 New Company Capabilities 14 Marketing in Practice 15 MARKETING INSIGHT Creating Innovative Marketing 46 MARKETING INSIGHT Marketing in an Age of Turbulence 16 Business Unit Strategic Planning 47 The Business Mission 48 Company Orientation toward the SWOT Analysis 48 Marketplace 17 Goal Formulation 50 The Production Concept 18 Strategic Formulation 50 The Product Concept 18 MARKETING MEMO Checklist for Performing The Selling Concept 18 Strengths/Weaknesses Analysis 52 The Marketing Concept 18 The Holistic Marketing Concept 18 Program Formulation and Implementation 53 MARKETING MEMO Marketing Right Feedback and Control 53 and Wrong 19 Product Planning: The Nature and Contents Relationship Marketing 20 of a Marketing Plan 54 Integrated Marketing 20 Internal Marketing 21 MARKETING MEMO Marketing Plan Performance Marketing 22 Criteria 55 The New Four Ps 25 The Role of Research 55 Marketing Management Tasks 26 The Role of Relationships 55 Developing Marketing Strategies and From Marketing Plan to Marketing Plans 26 Action 55 Capturing Marketing Insights 26 Summary 56 MARKETING MEMO Marketers’ Frequently Applications 56 Asked Questions 26 Sample Marketing Plan: Pegasus Sports Connecting with Customers 27 International 60 vii  Step 1: Define the Problem, the Decision PART 2 Capturing Marketing Alternatives, and the Research Insights 66 Objectives 99 Step 2: Develop the Research Plan 100 MARKETING MEMO Conducting Informative CHAPTER 3 Collecting Information and Focus Groups 102 Forecasting Demand 66 MARKETING MEMO Questionnaire Dos and Components of a Modern Marketing Don’ts 104 Information System 67 Internal Records 70 MARKETING INSIGHT Getting into the The Order-to-Payment Cycle 70 Heads of Consumers 106 Sales Information Systems 70 Databases, Data Warehousing, and Data MARKETING INSIGHT Understanding Brain Mining 71 Science 108 Marketing Intelligence 71 Step 3: Collect the Information 110 The Marketing Intelligence Step 4: Analyze the Information 111 System 71 Step 5: Present the Findings 111 Collecting Marketing Intelligence on the Step 6: Make the Decision 111 Internet 72 MARKETING INSIGHT Bringing Marketing Communicating and Acting on Marketing Research to Life with Personas 112 Intelligence 73 Analyzing the Macroenvironment 74 Overcoming Barriers to the Use of Marketing Needs and Trends 74 Research 112 Identifying the Major Forces 74 Measuring Marketing Productivity 114 The Demographic Environment 75 Marketing Metrics 114 Marketing-Mix Modeling 116 MARKETING INSIGHT Finding Gold at the Marketing Dashboards 116 Bottom of the Pyramid 76 MARKETING INSIGHT Marketing The Economic Environment 77 Dashboards to Improve Effectiveness and The Sociocultural Environment 78 Efficiency 117 The Natural Environment 80 The Technological Environment 81 Summary 118 MARKETING INSIGHT The Green Marketing Applications 119 Revolution 82 The Political-Legal Environment 84 Forecasting and Demand PART 3 Connecting with Measurement 85 Customers 122 The Measures of Market Demand 85 A Vocabulary for Demand Measurement 86 CHAPTER 5 Creating Long-term Loyalty Estimating Current Demand 88 Estimating Future Demand 90 Relationships 122 Summary 92 Building Customer Value, Satisfaction, and Applications 92 Loyalty 123 Customer Perceived Value 124 Total Customer Satisfaction 128 CHAPTER 4 Conducting Marketing Monitoring Satisfaction 128 Research 96 MARKETING INSIGHT Net Promoter and The Marketing Research System 97 Customer Satisfaction 129 The Marketing Research Process 99 Product and Service Quality 131 viii  Maximizing Customer Lifetime Value 132 Purchase Decision 170 Postpurchase Behavior 172 MARKETING MEMO Marketing and Total Moderating Effects on Consumer Decision Quality 132 Making 173 Customer Profitability 133 Behavioral Decision Theory and Behavioral Measuring Customer Lifetime Value 134 Economics 174 Cultivating Customer Relationships 134 Decision Heuristics 174 MARKETING MEMO Calculating Customer MARKETING INSIGHT Predictably Lifetime Value 134 Irrational 176 Customer Relationship Framing 177 Management 135 Summary 177 Attracting and Retaining Applications 178 Customers 139 Building Loyalty 141 Win-Backs 143 CHAPTER 7 Analyzing Business Markets 182 Customer Databases and Database Marketing 143 What Is Organizational Buying? 183 Customer Databases 143 The Business Market versus the Consumer Data Warehouses and Data Mining 143 Market 183 The Downside of Database Marketing and Buying Situations 185 CRM 145 Systems Buying and Selling 187 Participants in the Business Buying MARKETING INSIGHT The Behavioral Process 188 Targeting Controversy 146 The Buying Center 188 Summary 147 Buying Center Influences 189 Applications 147 Targeting Firms and Buying Centers 190 MARKETING INSIGHT Big Sales to Small Businesses 191 CHAPTER 6 Analyzing Consumer The Purchasing/Procurement Markets 150 Process 193 Stages in the Buying Process 195 What Influences Consumer Behavior? 151 Problem Recognition 196 Cultural Factors 151 General Need Description and Product Social Factors 153 Specification 196 MARKETING MEMO The Average U.S. Supplier Search 196 Consumer Quiz 155 Proposal Solicitation 198 Supplier Selection 198 Personal Factors 155 Key Psychological Processes 160 MARKETING MEMO Developing Compelling Customer Value Propositions 199 Motivation: Freud, Maslow, Herzberg 160 Perception 161 Order-Routine Specification 201 Learning 163 Performance Review 201 Emotions 163 Managing Business-to-Business Customer Memory 163 Relationships 201 MARKETING INSIGHT Made The Benefits of Vertical Coordination 202 to Stick 165 MARKETING INSIGHT Establishing The Buying Decision Process: Corporate Trust, Credibility, and Reputation 203 The Five-Stage Model 166 Problem Recognition 167 Business Relationships: Risks and Evaluation of Alternatives 168 Opportunism 203 ix  New Technology and Business MARKETING INSIGHT The Brand Value Customers 204 Chain 255 Institutional and Government Markets 205 MARKETING INSIGHT What Is a Brand Summary 207 Worth? 257 Applications 208 Managing Brand Equity 258 Brand Reinforcement 258 CHAPTER 8 Identifying Market Segments and Brand Revitalization 259 Targets 212 Devising a Branding Strategy 260 Branding Decisions 261 Bases for Segmenting Consumer Brand Portfolios 262 Markets 214 Brand Extensions 263 Geographic Segmentation 214 Customer Equity 267 Demographic Segmentation 216 MARKETING MEMO Twenty-First-Century MARKETING INSIGHT Trading Up, Down, Branding 267 and Over 218 Summary 268 Psychographic Segmentation 225 Behavioral Segmentation 227 Applications 269 Bases for Segmenting Business Markets 230 Market Targeting 231 CHAPTER 10 Crafting the Brand Positioning 274 Effective Segmentation Criteria 231 Evaluating and Selecting the Market Developing and Establishing a Brand Segments 232 Positioning 275 MARKETING INSIGHT Chasing the Long Determining a Competitive Frame of Tail 235 Reference 276 Summary 236 MARKETING INSIGHT High Growth Through Applications 237 Value Innovation 278 Identifying Optimal Points-of-Difference and Points-of-Parity 280 PART 4 Building Strong Choosing POPs and PODs 283 Brands 240 Brand Mantras 284 Establishing Brand Positioning 286 MARKETING MEMO Constructing a Brand CHAPTER 9 Creating Brand Equity 240 Positioning Bull’s-eye 287 What Is Brand Equity? 241 Differentiation Strategies 289 The Role of Brands 242 Alternative Approaches to Positioning 291 The Scope of Branding 243 Positioning and Branding a Small Defining Brand Equity 243 Business 293 Brand Equity Models 245 Summary 294 MARKETING INSIGHT Brand Bubble Applications 294 Trouble 248 Building Brand Equity 249 Choosing Brand Elements 250 CHAPTER 11 Competitive Dynamics 298 Designing Holistic Marketing Activities 251 Competitive Strategies for Market Leveraging Secondary Associations 252 Leaders 299 Internal Branding 253 Brand Communities 253 MARKETING INSIGHT When Your Measuring Brand Equity 255 Competitor Delivers More for Less 300 x  Expanding Total Market Demand 301 Product and Services Differentiation 328 Protecting Market Share 302 Product Differentiation 329 Increasing Market Share 304 Services Differentiation 330 Other Competitive Strategies 305 Design 332 Market-Challenger Strategies 305 Product and Brand Relationships 333 Market-Follower Strategies 307 MARKETING INSIGHT Marketing Luxury Market-Nicher Strategies 308 Brands 334 MARKETING MEMO Niche Specialist The Product Hierarchy 336 Roles 309 Product Systems and Mixes 336 Product Life-Cycle Marketing Product Line Analysis 337 Strategies 310 Product Line Length 337 Product Life Cycles 310 MARKETING INSIGHT When Less Is Style, Fashion, and Fad Life Cycles 311 More 339 Marketing Strategies: Introduction Stage and Product Mix Pricing 342 the Pioneer Advantage 312 Co-Branding and Ingredient Marketing Strategies: Growth Stage 313 Branding 344 Marketing Strategies: Maturity Stage 313 Marketing Strategies: Decline Stage 315 MARKETING MEMO Product-Bundle Pricing Considerations 344 MARKETING INSIGHT Managing a Brand Crisis 316 Packaging, Labeling, Warranties, and Evidence for the Product Life-Cycle Guarantees 346 Concept 316 Packaging 346 Critique of the Product Life-Cycle Labeling 348 Concept 317 Warranties and Guarantees 349 Market Evolution 317 Summary 349 Marketing in an Economic Applications 350 Downturn 318 Explore the Upside of Increasing Investment 318 CHAPTER 13 Designing and Managing Get Closer to Customers 318 Review Budget Allocations 319 Services 354 Put Forth the Most Compelling Value The Nature of Services 355 Proposition 319 Service Industries Are Everywhere 356 Fine-tune Brand and Product Categories of Service Mix 356 Offerings 320 Distinctive Characteristics of Services 358 Summary 320 The New Services Realities 361 Applications 321 A Shifting Customer Relationship 362 Achieving Excellence in Services Marketing 365 PART 5 Shaping the Market Marketing Excellence 365 Offerings 324 Best Practices of Top Service Companies 366 Differentiating Services 368 CHAPTER 12 Setting Product Strategy 324 MARKETING INSIGHT Improving Company Product Characteristics and Call Centers 369 Classifications 325 Managing Service Quality 370 Product Levels: The Customer-Value Hierarchy 326 MARKETING MEMO Recommendations for Product Classifications 327 Improving Service Quality 372 xi  Managing Customer Expectations 373 Incorporating Self-Service Technologies PART 6 Delivering Value 414 (SSTs) 375 Managing Product-Support Services 375 Identifying and Satisfying Customer CHAPTER 15 Designing and Managing Integrated Needs 376 Marketing Channels 414 MARKETING MEMO Assessing E-Service Marketing Channels and Value Networks 415 Quality 376 The Importance of Channels 416 Hybrid Channels and Multichannel Postsale Service Strategy 377 Marketing 416 Summary 378 Value Networks 417 Applications 378 The Role of Marketing Channels 418 Channel Functions and Flows 418 Channel Levels 420 CHAPTER 14 Developing Pricing Strategies and Service Sector Channels 421 Programs 382 Channel-Design Decisions 422 Analyzing Customer Needs and Wants 422 Understanding Pricing 383 Establishing Objectives and A Changing Pricing Environment 384 Constraints 423 MARKETING INSIGHT Giving It All Identifying Major Channel Alternatives 424 Away 384 Evaluating Major Channel Alternatives 426 How Companies Price 386 Channel-Management Decisions 427 Consumer Psychology and Selecting Channel Members 427 Pricing 386 Training and Motivating Channel Setting the Price 389 Members 428 Step 1: Selecting the Pricing Evaluating Channel Members 429 Objective 389 Modifying Channel Design and Step 2: Determining Demand 390 Arrangements 429 Step 3: Estimating Costs 392 Channel Modification Decisions 429 Step 4: Analyzing Competitors’ Costs, Prices, Global Channel Considerations 430 and Offers 395 Channel Integration and Systems 431 Step 5: Selecting a Pricing Vertical Marketing Systems 431 Method 395 MARKETING INSIGHT Channel Stewards Step 6: Selecting the Final Price 402 Take Charge 432 MARKETING INSIGHT Stealth Price Horizontal Marketing Systems 433 Increases 403 Integrating Multichannel Marketing Adapting the Price 403 Systems 433 Geographical Pricing (Cash, Countertrade, Conflict, Cooperation, and Competition 435 Barter) 404 Types of Conflict and Competition 435 Price Discounts and Allowances 404 Causes of Channel Conflict 436 Promotional Pricing 405 Managing Channel Conflict 436 Differentiated Pricing 406 Dilution and Cannibalization 438 Initiating and Responding to Price Legal and Ethical Issues in Channel Changes 407 Relations 438 Initiating Price Cuts 407 E-Commerce Marketing Practices 438 Initiating Price Increases 408 Pure-Click Companies 439 Responding to Competitors’ Price Brick-and-Click Companies 440 Changes 409 M-Commerce Marketing Practices 441 Summary 410 Summary 442 Applications 410 Applications 442 xii  Establish the Total Marketing CHAPTER 16 Managing Retailing, Wholesaling, Communications Budget 488 and Logistics 446 Deciding on the Marketing Retailing 447 Communications Mix 490 Types of Retailers 448 Characteristics of the Marketing The New Retail Environment 451 Communications Mix 490 Marketing Decisions 453 Factors in Setting the Marketing Channels 454 Communications Mix 492 Measuring Communication Results 494 MARKETING MEMO Helping Stores to Managing the Integrated Marketing Sell 458 Communications Process 494 Private Labels 459 Coordinating Media 495 Role of Private Labels 460 Implementing IMC 496 Private-Label Success Factors 460 MARKETING MEMO How Integrated Is Your MARKETING INSIGHT Manufacturer’s IMC Program? 496 Response to the Private Label Threat 461 Summary 497 Wholesaling 461 Applications 497 Trends in Wholesaling 463 Market Logistics 464 Integrated Logistics Systems 464 CHAPTER 18 Managing Mass Communications: Market-Logistics Objectives 465 Market-Logistics Decisions 466 Advertising, Sales Promotions, Organizational Lessons 469 Events and Experiences, and Public Summary 469 Relations 502 Applications 470 Developing and Managing an Advertising Program 504 Setting the Objectives 504 PART 7 Communicating Value 474 Deciding on the Advertising Budget 505 Developing the Advertising Campaign 506 CHAPTER 17 Designing and Managing Integrated MARKETING MEMO Print Ad Evaluation Criteria 509 Marketing Communications 474 Deciding on Media and Measuring The Role of Marketing Communications 476 The Changing Marketing Communications Effectiveness 510 Environment 476 Deciding on Reach, Frequency, and Impact 511 MARKETING INSIGHT Don’t Touch That Choosing among Major Media Types 512 Remote 476 Alternate Advertising Options 512 Marketing Communications, Brand Equity, MARKETING INSIGHT Playing Games with and Sales 478 Brands 516 The Communications Process Models 480 Selecting Specific Media Vehicles 516 Developing Effective Communications 482 Deciding on Media Timing and Identify the Target Audience 482 Allocation 517 Determine the Communications Evaluating Advertising Effectiveness 518 Objectives 482 Design the Communications 484 Sales Promotion 519 Objectives 519 MARKETING INSIGHT Celebrity Advertising versus Promotion 519 Endorsements as a Strategy 486 Major Decisions 520 Select the Communications Channels 486 Events and Experiences 524 xiii  Events Objectives 524 Sales Force Size 556 Major Sponsorship Decisions 525 Sales Force Compensation 556 Creating Experiences 526 Managing the Sales Force 556 MARKETING MEMO Measuring High Recruiting and Selecting Performance Sponsorship Programs 526 Representatives 556 Training and Supervising Sales Public Relations 527 Representatives 557 Marketing Public Relations 527 Sales Rep Productivity 557 Major Decisions in Marketing PR 528 Motivating Sales Representatives 558 Summary 530 Evaluating Sales Representatives 559 Applications 530 Principles of Personal Selling 560 The Six Steps 561 Relationship Marketing 562 CHAPTER 19 Managing Personal Summary 562 Communications: Direct and Applications 563 Interactive Marketing, Word of Mouth, and Personal Selling 534 PART 8 Creating Successful Long- term Growth 566 Direct Marketing 535 The Benefits of Direct Marketing 536 Direct Mail 538 CHAPTER 20 Introducing New Market Catalog Marketing 539 Offerings 566 Telemarketing 539 Other Media for Direct-Response New-Product Options 567 Marketing 539 Make or Buy 567 Public and Ethical Issues in Direct Types of New Products 568 Marketing 540 Challenges in New-Product Interactive Marketing 540 Development 568 Advantages and Disadvantages of Interactive The Innovation Imperative 568 Marketing 540 New-Product Success 569 Interactive Marketing Communication New-Product Failure 570 Options 541 Organizational Arrangements 570 MARKETING MEMO How to Maximize the Budgeting for New-Product Marketing Value of E-mails 543 Development 571 Organizing New-Product MARKETING MEMO Segmenting Tech Development 572 Users 545 Managing the Development Process: Word of Mouth 546 Ideas 573 Social Media 546 Generating Ideas 573 Buzz and Viral Marketing 549 MARKETING MEMO Ten Ways to Find Great Opinion Leaders 551 New-Product Ideas 574 MARKETING MEMO How to Start a Buzz Fire 552 MARKETING INSIGHT P&G’s New Connect ⫹ Develop Approach to Innovation 574 Measuring the Effects of Word of Mouth 552 MARKETING MEMO Seven Ways to Draw Designing the Sales Force 553 New Ideas from Your Customers 576 Sales Force Objectives and Strategy 554 Sales Force Structure 555 MARKETING MEMO How to Run a Successful Brainstorming Session 577 MARKETING INSIGHT Major Account Management 555 Using Idea Screening 578 xiv  Managing the Development Process: Concept CHAPTER 22 Managing a Holistic Marketing to Strategy 579 Concept Development and Testing 579 Organization for the Long Marketing Strategy Development 582 Run 620 Business Analysis 583 Trends in Marketing Practices 621 Managing the Development Process: Internal Marketing 623 Development to Commercialization 585 Organizing the Marketing Department 623 Product Development 585 Market Testing 585 MARKETING MEMO Characteristics of Commercialization 588 Company Departments That Are Truly The Consumer-Adoption Process 589 Customer Driven 624 Stages in the Adoption Process 589 Relationships with Other Departments 627 Factors Influencing the Adoption Building a Creative Marketing Process 589 Organization 628 Summary 590 MARKETING INSIGHT The Marketing Applications 591 CEO 628 Socially Responsible Marketing 629 CHAPTER 21 Tapping into Global Markets 594 Corporate Social Responsibility 630 Competing on a Global Basis 595 MARKETING INSIGHT The Rise of Deciding Whether to Go Abroad 597 Organic 633 Deciding Which Markets to Enter 597 Socially Responsible Business Models 634 How Many Markets to Enter 598 Cause-Related Marketing 634 Developed versus Developing Markets 598 MARKETING MEMO Making a Difference: MARKETING INSIGHT Spotlight on Key Top 10 Tips for Cause Branding 637 Developing Markets 600 Social Marketing 638 Evaluating Potential Markets 602 Marketing Implementation and Control 640 Deciding How to Enter the Market 603 Marketing Implementation 640 Indirect and Direct Export 603 Marketing Control 641 Licensing 604 Annual-Plan Control 641 Joint Ventures 605 Profitability Control 642 Direct Investment 605 Efficiency Control 642 Deciding on the Marketing Program 606 Strategic Control 643 Global Similarities and Differences 606 The Future of Marketing 643 Marketing Adaptation 607 MARKETING MEMO Major Marketing MARKETING MEMO The Ten Weaknesses 647 Commandments of Global Branding 608 Summary 648 Global Product Strategies 608 Global Communication Strategies 610 Applications 648 Global Pricing Strategies 611 Appendix Tools for Marketing Global Distribution Strategies 613 Control 650 Country-of-Origin Effects 614 Building Country Images 614 Appendix Sonic Marketing Plan A1 Consumer Perceptions of Country of Endnotes E1 Origin 614 Glossary G1 Deciding on the Marketing Organization 616 Image Credits C1 Export Department 616 International Division 616 Name Index I1 Global Organization 616 Company, Brand, and Organization Index I4 Summary 617 Subject Index I14 Applications 617 xv  Preface What’s New in the 14th Edition The overriding goal of the revision for the 14th edition of Marketing Management was to create as comprehensive, current, and engaging MBA marketing textbook as possible. Where appropriate, new material was added, old material was updated, and no longer relevant or necessary material was deleted. Marketing Management, 14th edition, allows those instructors who have used the 13th edition to build on what they have learned and done while at the same time offering a text that is unsurpassed in breadth, depth, and relevance for students experi- encing Marketing Management for the first time. The successful across-chapter reorganization into eight parts that began with the 12th edi- tion of Marketing Management has been preserved, as well as many of the favorably received within-chapter features that have been introduced through the years, such as topical chapter openers, in-text boxes highlighting noteworthy companies or issues, and the Marketing Insight and Marketing Memo boxes that provide in-depth conceptual and practical commentary. Significant changes to the 14th edition include: Brand new opening vignettes for each chapter set the stage for the chapter material to fol- low. By covering topical brands or companies, the vignettes are great classroom discussion starters. Almost half of the in-text boxes are new. These boxes provide vivid illustrations of chapter concepts using actual companies and situations. The boxes cover a variety of products, services, and markets, and many have accompanying illustrations in the form of ads or product shots. The end-of-chapter section now includes two Marketing in Action mini-cases highlighting innovative, insightful marketing accomplishments by leading organizations. Each case in- cludes questions that promote classroom discussion and analysis. Dramatic changes in the marketing environment have occurred in recent years—in particular, the economic, natural, and technological environments. Throughout the new edition, these three areas are addressed, sometimes via new subsections in chapters, with emphasis on marketing during economic downturns and recessions, the rise of sustainability and “green” marketing, and the increased development of computing power, the Internet, and mobile phones. These new marketing realities make it more important than ever for marketers to be holistic in what they do, the overriding theme of this text. Chapter 19, on personal communications, received a significant update with much new material to reflect the changing social media landscape and communications environment. Forecasting has been moved to Chapter 3 where it fits well with the material on the market- ing environment. Chapter 5 was re-titled as “Creating Long-Term Loyalty Relationships” to better reflect its stronger area of emphasis. Chapters 10 and 11 were reorganized and material swapped. Chapter 11 was also re-titled as “Competitive Dynamics” to acknowledge the significant material added on marketing in an economic downturn. What Is Marketing Management All About? Marketing Management is the leading marketing text because its content and organization consistently reflect changes in marketing theory and practice. The very first edition of Marketing Management, published in 1967, introduced the concept that companies must be customer-and-market driven. But there was little mention of what have now become funda- mental topics such as segmentation, targeting, and positioning. Concepts such as brand equity, customer value analysis, database marketing, e-commerce, value networks, hybrid channels, supply chain management, and integrated marketing communications were not xvi even part of the marketing vocabulary then. Marketing Management continues to reflect the changes in the marketing discipline over the past 40 years. Firms now sell goods and services through a variety of direct and indirect channels. Mass ad- vertising is not nearly as effective as it was, so marketers are exploring new forms of communica- tion, such as experiential, entertainment, and viral marketing. Customers are telling companies what types of product or services they want and when, where, and how they want to buy them. They are increasingly reporting to other consumers what they think of specific companies and products—using e-mail, blogs, podcasts, and other digital media to do so. Company messages are becoming a smaller fraction of the total “conversation” about products and services. In response, companies have shifted gears from managing product portfolios to managing customer portfolios, compiling databases on individual customers so they can understand them better and construct individualized offerings and messages. They are doing less product and service standardization and more niching and customization. They are replacing monologues with customer dialogues. They are improving their methods of measuring customer profitabil- ity and customer lifetime value. They are intent on measuring the return on their marketing investment and its impact on shareholder value. They are also concerned with the ethical and social implications of their marketing decisions. As companies change, so does their marketing organization. Marketing is no longer a company department charged with a limited number of tasks—it is a company-wide undertaking. It drives the company’s vision, mission, and strategic planning. Marketing includes decisions like who the company wants as its customers, which of their needs to satisfy, what products and services to of- fer, what prices to set, what communications to send and receive, what channels of distribution to use, and what partnerships to develop. Marketing succeeds only when all departments work together to achieve goals: when engineering designs the right products; finance furnishes the required funds; purchasing buys high-quality materials; production makes high-quality products on time; and accounting measures the profitability of different customers, products, and areas. To address all these different shifts, good marketers are practicing holistic marketing. Holistic marketing is the development, design, and implementation of marketing programs, processes, and activities that recognize the breadth and interdependencies of today’s market- ing environment. Four key dimensions of holistic marketing are: 1. Internal marketing—ensuring everyone in the organization embraces appropriate market- ing principles, especially senior management. 2. Integrated marketing—ensuring that multiple means of creating, delivering, and commu- nicating value are employed and combined in the best way. 3. Relationship marketing—having rich, multifaceted relationships with customers, channel members, and other marketing partners. 4. Performance marketing—understanding returns to the business from marketing activities and programs, as well as addressing broader concerns and their legal, ethical, social, and en- vironmental effects. These four dimensions are woven throughout the book and at times spelled out explicitly. The text specifically addresses the following tasks that constitute modern marketing manage- ment in the 21st century: 1. Developing marketing strategies and plans 2. Capturing marketing insights and performance 3. Connecting with customers 4. Building strong brands 5. Shaping the market offerings 6. Delivering and communicating value 7. Creating successful long-term growth xvii  What Makes Marketing Management the Marketing Leader? Marketing is of interest to everyone, whether they are marketing goods, services, properties, persons, places, events, information, ideas, or organizations. As it has maintained its respected position among students, educators, and businesspeople, Marketing Management has kept up- to-date and contemporary. Students (and instructors) feel that the book is talking directly to them in terms of both content and delivery. Marketing Management owes its marketplace success to its ability to maximize three dimen- sions that characterize the best marketing texts—depth, breadth, and relevance—as measured by the following criteria: Depth. Does the book have solid academic grounding? Does it contain important theo- retical concepts, models, and frameworks? Does it provide conceptual guidance to solve practical problems? Breadth. Does the book cover all the right topics? Does it provide the proper amount of emphasis on those topics? Relevance. Does the book engage the reader? Is it interesting to read? Does it have lots of compelling examples? The 14th edition builds on the fundamental strengths of past editions that collectively dis- tinguish it from all other marketing management texts: Managerial Orientation. The book focuses on the major decisions that marketing man- agers and top management face in their efforts to harmonize the organization’s objectives, capabilities, and resources with marketplace needs and opportunities. Analytical Approach. Marketing Management presents conceptual tools and frameworks for analyzing recurring problems in marketing management. Cases and examples illustrate effective marketing principles, strategies, and practices. Multidisciplinary Perspective. The book draws on the rich findings of various scientific disciplines—economics, behavioral science, management theory, and mathematics—for fundamental concepts and tools directly applicable to marketing challenges. Universal Applications. The book applies strategic thinking to the complete spectrum of marketing: products, services, persons, places, information, ideas and causes; consumer and business markets; profit and nonprofit organizations; domestic and foreign companies; small and large firms; manufacturing and intermediary businesses; and low- and high-tech industries. Comprehensive and Balanced Coverage. Marketing Management covers all the topics an informed marketing manager needs to understand to execute strategic, tactical, and admin- istrative marketing. Student Supplements mymarketinglab Mymarketinglab gives you the opportunity to test yourself on key concepts and skills, track your progress through the course and use the personalized study plan activities—all to help you achieve success in the classroom. Features include: Personalized Study Plans—Pre- and post-tests with remediation activities directed to help you understand and apply the concepts where you need the most help. xviii  Interactive Elements—A wealth of hands-on activities and exercises let you experience and learn actively. Current Events Articles—Concise, highly relevant articles about the latest marketing re- lated news with thought provoking short essay questions. Critical Thinking Challenge Question—These questions measure core critical-thinking skills through the context of marketing applications. To answer these questions, you will need to recognize assumptions, evaluate arguments, identify relevant issues, draw infer- ences, spot logical flaws, and recognize similarities between arguments. Knowledge of mar- keting content picked up through the text and the class will help you zero in on the correct issues, but you will still need to exercise critical judgment in order to get the correct answer. Marketing Management Cases Prentice Hall Custom Business Resources can provide instructors and students with all the cases and articles needed to enhance and maximize learning in a marketing course. Instructors can create Custom CoursePacks or Custom CaseBooks. Resources include top-tier cases from Darden, Harvard, Ivey, NACRA, and Thunderbird, plus full access to a database of articles. For details on how to order these value-priced packages, contact your local representative or visit the Prentice Hall Custom Business Resources Web site at www.prenhall.com/custombusiness. Marketing Management Video Gallery Make your classroom “newsworthy.” PH has updated the Marketing Management video li- brary for the 14th edition. A full library of video segments accompany this edition featuring issue-focused footage such as interviews with top executives, objective reporting by real news anchors, industry research analysts, and marketing and advertising campaign experts. A full video guide, including synopses, discussion questions, and teaching suggestions, is available on the IRC (online and on CD-ROM) to accompany the video library. The Marketing Plan Handbook, 4th edition, with Marketing Plan Pro Marketing Plan Pro is a highly rated commercial software program that guides you through the entire marketing plan process. The software is totally interactive and features 10 sample marketing plans, step-by-step guides, and customizable charts. Customize your marketing plan to fit your marketing needs by following easy-to-use plan wizards. Follow the clearly out- lined steps from strategy to implementation. Click to print, and your text, spreadsheet, and charts come together to create a powerful marketing plan. The new The Marketing Plan Handbook, by Marian Burk Wood, supplements the in-text marketing plan material with an in-depth guide to what student marketers really need to know. A structured learning process leads to a complete and actionable marketing plan. Also included are timely, real-world exam- ples that illustrate key points, sample marketing plans, and Internet resources. xix  Acknowledgments he 14th edition bears the imprint of many people. From Phil Kotler: My colleagues and T associates at the Kellogg School of Management at Northwestern University continue to have an important impact on my thinking: Nidhi Agrawal, Eric T. Anderson, James C. Anderson, Robert C. Blattberg, Miguel C. Brendl, Bobby J. Calder, Gregory S. Carpenter, Alex Chernev, Anne T. Coughlan, David Gal, Kent Grayson, Karsten Hansen, Dipak C. Jain, Lakshman Krishnamurti, Angela Lee, Vincent Nijs, Yi Qian, Mohanbir S. Sawhney, Louis W. Stern, Brian Sternthal, Alice M. Tybout, and Andris A. Zoltners. I also want to thank the S. C. Johnson Family for the generous support of my chair at the Kellogg School. Completing the Northwestern team is my former Dean, Donald P. Jacobs, and my current Dean, Dipak Jain, both of whom have provided generous support for my research and writing. Several former faculty members of the marketing department had a great influence on my thinking when I first joined the Kellogg marketing faculty, specifically Richard M. Clewett, Ralph Westfall, Harper W. Boyd, and Sidney J. Levy. I also want to acknowledge Gary Armstrong for our work on Principles of Marketing. I am indebted to the following coauthors of international editions of Marketing Manage- ment and Principles of Marketing who have taught me a great deal as we worked together to adapt marketing management thinking to the problems of different nations: Swee-Hoon Ang and Siew-Meng Leong, National University of Singapore Chin-Tiong Tan, Singapore Management University Friedhelm W. Bliemel, Universitat Kaiserslautern (Germany) Linden Brown; Stewart Adam, Deakin University; Suzan Burton, Macquarie Graduate School of Management; and Sara Denize, University of Western Sydney (Australia) Bernard Dubois, Groupe HEC School of Management (France); and Delphine Manceau, ESCP-EAP European School of Management John Saunders, Loughborough University and Veronica Wong, Warwick University (United Kingdom) Jacob Hornick, Tel Aviv University (Israel) Walter Giorgio Scott, Universita Cattolica del Sacro Cuore (Italy) Peggy Cunningham, Queen’s University (Canada) I also want to acknowledge how much I have learned from working with coauthors on more specialized marketing subjects: Alan Andreasen, Christer Asplund, Paul N. Bloom, John Bowen, Roberta C. Clarke, Karen Fox, David Gertner, Michael Hamlin, Thomas Hayes, Donald Haider, Hooi Den Hua, Dipak Jain, Somkid Jatusripitak, Hermawan Kartajaya, Neil Kotler, Nancy Lee, Sandra Liu, Suvit Maesincee, James Maken, Waldemar Pfoertsch, Gustave Rath, Irving Rein, Eduardo Roberto, Joanne Scheff, Norman Shawchuck, Joel Shalowitz, Ben Shields, Francois Simon, Robert Stevens, Martin Stoller, Fernando Trias de Bes, Bruce Wrenn, and David Young. My overriding debt continues to be to my lovely wife, Nancy, who provided me with the time, support, and inspiration needed to prepare this edition. It is truly our book. From Kevin Lane Keller: I continually benefit from the wisdom of my marketing colleagues at Tuck—Punam Keller, Scott Neslin, Kusum Ailawadi, Praveen Kopalle, Jackie Luan, Peter Golder, Ellie Kyung, Fred Webster, Gert Assmus, and John Farley—as well as the leadership of Dean Paul Danos. I also gratefully acknowledge the invaluable research and teaching contribu- tions from my faculty colleagues and collaborators through the years. I owe a considerable debt of gratitude to Duke University’s Jim Bettman and Rick Staelin for helping to get my academic career started and serving as positive role models to this day. I am also appreciative of all that I have learned from working with many industry executives who have generously shared their insights and experiences. With this 14th edition, I received some extremely helpful research as- sistance from two former Tuck MBAs—Jeff Davidson and Lowey Sichol—who were as accu- rate, thorough, dependable, and cheerful as you could possibly imagine. Alison Pearson provided superb administrative support. Finally, I give special thanks to Punam, my wife, and Carolyn and Allison, my daughters, who make it all happen and make it all worthwhile. xx We are indebted to the following colleagues at other universities Jackkie Eastman, Valdosta State University who reviewed this new edition: Steve Edison, University of Arkansas–Little Rock Jennifer Barr, Richard Stockton College Alton Erdem, University of Houston at Clear Lake Lawrence Kenneth Duke, Drexel University LeBow Elizabeth Evans, Concordia University College of Business Barb Finer, Suffolk University Barbara S. Faries, Mission College, Santa Clara, CA Chic Fojtik, Pepperdine University William E. Fillner, Hiram College Renee Foster, Delta State University Frank J. Franzak, Virginia Commonwealth University Ralph Gaedeke, California State University, Sacramento Robert Galka, De Paul University Robert Galka, De Paul University Albert N. Greco, Fordham University Betsy Gelb, University of Houston at Clear Lake John A. Hobbs, University of Oklahoma Dennis Gensch, University of Wisconsin, Milwaukee Brian Larson, Widener University David Georgoff, Florida Atlantic University Anthony Racka, Oakland Community College, Auburn Rashi Glazer, University of California, Berkeley Hills, MI Bill Gray, Keller Graduate School of Management Jamie Ressler, Palm Beach Atlantic University Barbara Gross, California State University at Northridge James E. Shapiro, University of New Haven Lewis Hershey, Fayetteville State University George David Shows, Louisiana Tech University Thomas Hewett, Kaplan University We would also like to thank colleagues who have reviewed Mary Higby, University of Detroit–Mercy previous editions of Marketing Management: Arun Jain, State University of New York, Buffalo Michelle Kunz, Morehead State University Homero Aguirre, TAMIU Eric Langer, Johns Hopkins University Alan Au, University of Hong Kong Even Lanseng, Norwegian School of Management Hiram Barksdale, University of Georgia Ron Lennon, Barry University Boris Becker, Oregon State University Michael Lodato, California Lutheran University Sandy Becker, Rutgers University Henry Loehr, Pfeiffer University–Charlotte Parimal Bhagat, Indiana University of Pennsylvania Bart Macchiette, Plymouth University Sunil Bhatla, Case Western Reserve University Susan Mann, Bluefield State College Michael Bruce, Anderson University Charles Martin, Wichita State University Frederic Brunel, Boston University H. Lee Matthews, Ohio State University John Burnett, University of Denver Paul McDevitt, University of Illinois at Springfield Lisa Cain, University of California at Berkeley and Mills College Mary Ann McGrath, Loyola University, Chicago Surjit Chhabra, DePaul University John McKeever, University of Houston Yun Chu, Frostburg State University Kenneth P. Mead, Central Connecticut State University Dennis Clayson, University of Northern Iowa Henry Metzner, University of Missouri, Rolla Bob Cline, University of Iowa Robert Mika, Monmouth University Brent Cunningham, Jacksonville State University Mark Mitchell, Coastal Carolina University Hugh Daubek, Purdue University Francis Mulhern, Northwestern University John Deighton, University of Chicago Pat Murphy, University of Notre Dame Kathleen Dominick, Rider University Jim Murrow, Drury College Tad Duffy, Golden Gate University Zhou Nan, University of Hong Kong Mohan Dutta, Purdue University Nicholas Nugent, Boston College Barbara Dyer, University of North Carolina Nnamdi Osakwe, Bryant & Stratton College at Greensboro Donald Outland, University of Texas, Austin xxi  Albert Page, University of Illinois, Chicago Michael Swenso, Brigham Young University, Young-Hoon Park, Cornell University Marriott School Koen Pauwels, Dartmouth College Thomas Tellefsen, The College of Staten Island–CUNY Lisa Klein Pearo, Cornell University Daniel Turner, University of Washington Keith Penney, Webster University Sean Valentine, University of Wyoming Patricia Perry, University of Alabama Ann Veeck, West Michigan University Mike Powell, North Georgia College and State University R. Venkatesh, University of Pittsburgh Hank Pruden, Golden Gate University Edward Volchok, Stevens Institute of Management Christopher Puto, Arizona State University D. J. Wasmer, St. Mary-of-the-Woods College Abe Qstin, Lakeland University Zac Williams, Mississippi State University Lopo Rego, University of Iowa Greg Wood, Canisius College Richard Rexeisen, University of St. Thomas Kevin Zeng Zhou, University of Hong Kong William Rice, California State University–Fresno A warm welcome and many thanks to the following people Scott D. Roberts, Northern Arizona University who contributed to the global case studies developed for Bill Robinson, Purdue University the 14th edition: Robert Roe, University of Wyoming Mairead Brady, Trinity College Jan Napoleon Saykiewicz, Duquesne University John R. Brooks, Jr., Houston Baptist University Larry Schramm, Oakland University Sylvain Charlebois, University of Regina Alex Sharland, Hofstra University Geoffrey da Silva, Temasek Business School Dean Siewers, Rochester Institute of Technology Malcolm Goodman, Durham University Anusorn Singhapakdi, Old Dominion University Torben Hansen, Copenhagen Business School Jim Skertich, Upper Iowa University Abraham Koshy, Sanjeev Tripathi, and Abhishek, Indian Allen Smith, Florida Atlantic University Institute of Management Ahmedabad Joe Spencer, Anderson University Peter Ling, Edith Cowan University Mark Spriggs, University of St. Thomas Marianne Marando, Seneca College Nancy Stephens, Arizona State University Lu Taihong, Sun Yat-Sen University The talented staff at Prentice Hall deserves praise for their role in shaping the 14th edition. We want to thank our editor, Melissa Sabella, for her contribution to this revision. We also want to thank our project manager, Kierra Bloom, for making sure everything was moving along and falling into place in such a personable way, both with regard to the book and supplements. We benefited greatly from the superb editorial help of Elisa Adams, who lent her considerable tal- ents as a development editor to this edition. We also want to acknowledge the fine production work of Ann Pulido, the creative design work of Blair Brown, and the editorial assistance of Elizabeth Scarpa. We thank Denise Vaughn for her work on the media package. We also thank our marketing manager, Anne Fahlgren. Philip Kotler S. C. Johnson Distinguished Professor of International Marketing Kellogg School of Management Northwestern University Evanston, Illinois Kevin Lane Keller E. B. Osborn Professor of Marketing Tuck School of Business Dartmouth College Hanover, New Hampshire xxii  Marketing Management PART 1 Understanding Marketing Management Chapter 1 | Defining Marketing for the 21st Century Chapter 2 | Developing Marketing Strategies and Plans 1 ter hap C In This Chapter, We Will Address One of the key factors in Barack Obama’s victory in the 2008 U.S. the Following Questions presidential election was a well-designed and well-executed marketing program. 1. Why is marketing important? 2. What is the scope of marketing? 3. What are some core marketing concepts? 4. How has marketing management changed in recent years? 5. What are the tasks necessary for successful marketing management?  Defining Marketing for the 21st Century Formally or informally, people and organizations engage in a vast number of activities we could call marketing. Good marketing has become increasingly vital for success. But what constitutes good marketing is constantly evolving and changing. The election of Barack Obama as the 44th President of the United States was attributed, in part, to the adoption of new marketing practices. The “Obama for America” presidential campaign combined a charismatic politician, a powerful message of hope, and a thoroughly integrated modern marketing program. The marketing plan needed to accomplish two very different goals: expand the elec- torate via broader messages while targeting very specific audiences. Multimedia tactics combined offline and online media, as well as free and paid media. When research showed that the more voters learned about Obama, the more they identified with him, the campaign added long-form videos to traditional print, broadcast, and outdoor ads. The Obama team—aided by its agency GMMB—also put the Internet at the heart of the campaign, letting it serve as the “central nervous system” for PR, advertising, advance work, fund-raising, and organizing in all 50 states. Their guiding philosophy was to “build online tools to help people self- organize and then get out of their way.” Technology was a means to Good marketing is no accident, but a result of careful “empower people to do what they were interested in doing in the first planning and execution using state-of-the-art tools and place.” Although social media like Facebook, Meetup, YouTube, and techniques. It becomes both an art and a science as marketers Twitter were crucial, perhaps Obama’s most powerful digital tool was a strive to find creative new solutions to often-complex massive 13.5 million–name e-mail list. What were the results of these challenges amid profound changes in the 21st century online efforts? About $500 million (most in sums of less than $100) marketing environment. In this book, we describe how top was raised online from 3 million donors; 35,000 groups organized marketers balance discipline and imagination to address these through the Web site, My.BarackObama.com; 1,800 videos posted to new marketing realities. In the first chapter, we lay the YouTube; the creation of Facebook’s most popular page; and, of foundation by reviewing important marketing concepts, tools, course, the election of the next President of the United States.1 frameworks, and issues. The Importance of Marketing The first decade of the 21st century challenged firms to prosper financially and even survive in the face of an unforgiving economic environment. Marketing is playing a key role in addressing those challenges. Finance, operations, accounting, and other business functions won’t really matter without sufficient demand for products and services so the firm can make a profit. In other words, there must be a top line for there to be a bottom line. Thus financial success often depends on marketing ability. 3 4 PART 1 UNDERSTANDING MARKETING MANAGEMENT Marketing’s broader importance extends to society as a whole. Marketing has helped introduce and gain acceptance of new products that have eased or enriched people’s lives. It can inspire en- hancements in existing products as marketers innovate to improve their position in the market- place. Successful marketing builds demand for products and services, which, in turn, creates jobs. By contributing to the bottom line, successful marketing also allows firms to more fully engage in socially responsible activities.2 CEOs recognize the role of marketing in building strong brands and a loyal customer base, in- tangible assets that contribute heavily to the value of a firm. Consumer goods makers, health care insurers, nonprofit organizations, and industrial product manufacturers all trumpet their latest marketing achievements. Many now have a chief marketing officer (CMO) to put marketing on a more equal footing with other C-level executives such as the chief financial officer (CFO) or chief information officer (CIO).3 Making the right marketing decisions isn’t always easy. One survey of more than a thousand senior marketing and sales executives revealed that although 83 percent felt that marketing and sales capabilities were a top priority for their organization’s success, in rating their actual marketing effectiveness, only 6 percent felt that they were doing an “extremely good” job.4 Marketers must decide what features to design into a new product or service, what prices to set, where to sell products or offer services, and how much to spend on advertising, sales, the Internet, or mobile marketing. They must make those decisions in an Internet-fueled environment where consumers, competition, technology, and economic forces change rapidly, and the consequences of the marketer’s words and actions can quickly multiply. Domino’s When two employees in Conover, North Carolina, posted a YouTube video showing themselves preparing sandwiches while putting cheese up their noses and vio- lating other health-code standards, Domino’s learned an important lesson about PR and brand communications in a modern era. Once it found the employees—who claimed the video was just a gag and the sandwiches were never delivered—the company fired them. In just a few days, however, there had been more than a million downloads of the video and a wave of negative publicity. When research showed that perception of quality for the brand had turned from positive to negative in that short time, the firm aggressively took action through social media such as Twitter, YouTube, and others.5 As Domino’s learned, in an era of connectivity, it is important to respond swiftly and decisively. While marketers were coming to grips with this increasingly wired world, the economic recession of 2008–2009 brought budget cuts and intense pressure from sen- ior management to make every marketing dollar count. More than ever, marketers need to understand and adapt to the latest market- place developments. At greatest risk are firms that fail to carefully monitor their customers and competitors, continuously improve their value offerings and marketing strategies, or satisfy their employees, stockholders, suppliers, and channel partners in the process. After a distasteful video was Skillful marketing is a never-ending pursuit. Consider how some top firms drive business: posted online by two employees, Domino’s Pizza learned a valuable OfficeMax promoted a new line of products by professional organizer Peter Walsh with Web lesson about the power of social videos and in-store events featuring local experts demonstrating his OfficeMax-branded media. organizing system. eBay promoted its “Let’s Make a Daily Deal” holiday promotion by recreating the famous 1970s TV game show Let’s Make a Deal in Times Square, adding an online component so people outside New York City could play. Johnson & Johnson launched BabyCenter.com to help new parents. Its success is thought to have contributed to subscription slumps experienced by parenting magazines. Good marketers are always seeking new ways to satisfy customers and beat competition.6  DEFINING MARKETING FOR THE 21ST CENTURY | CHAPTER 1 5 The Scope of Marketing To prepare to be a marketer, you need to understand what marketing is, how it works, who does it, and what is marketed. What Is Marketing? Marketing is about identifying and meeting human and social needs. One of the shortest good definitions of marketing is “meeting needs profitably.” When eBay recognized that people were unable to locate some of the items they desired most, it created an online auction clearinghouse. When IKEA noticed that people wanted good furnishings at substantially lower prices, it created knockdown furniture. These two firms demonstrated marketing savvy and turned a private or social need into a profitable business opportunity. The American Marketing Association offers the following formal definition: Marketing is the activ- ity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.7 Coping with these exchange processes calls for a considerable amount of work and skill. Marketing management takes place when at least one party to a potential exchange thinks about the means of achieving desired responses from other parties. Thus we see marketing management as the art and science of choosing target markets and getting, keep- ing, and growing customers through creating, delivering, and communicating superior customer value. We can distinguish between a social and a managerial definition of marketing. A social defini- tion shows the role marketing plays in society; for example, one marketer has said that marketing’s role is to “deliver a higher standard of living.” Here is a social definition that serves our purpose: Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others. Managers sometimes think of marketing as “the art of selling products,” but many people are surprised when they hear that selling is not the most important part of marketing! Selling is only the tip of the marketing iceberg. Peter Drucker, a leading management theorist, puts it this way: There will always, one can assume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the cus- tomer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available.8 When Nintendo designed its Wii game system, when Canon launched its ELPH digital cam- era line, and when Toyota introduced its Prius hybrid automobile, these manufacturers were swamped with orders because they had designed the right product, based on doing careful marketing homework. What Is Marketed? Marketers market 10 main types of entities: goods, services, events, experiences, persons, places, properties, organizations, information, and ideas. Let’s take a quick look at these categories. GOODS Physical goods constitute the bulk of most countries’ production and marketing efforts. Each year, U.S. companies market billions of fresh, canned, bagged, and frozen food products and millions of cars, refrigerators, televisions, machines, and other mainstays of a modern economy. SERVICES As economies advance, a growing proportion of their activities focuses on the production of services. The U.S. economy today produces a 70–30 services-to-goods mix. Services include the work of airlines, hotels, car rental firms, barbers and beauticians, maintenance and repair people, and accountants, bankers, lawyers, engineers, doctors, software programmers, and management consultants. Many market offerings mix goods and services, such as a fast-food meal. EVENTS Marketers promote time-based events, such as major trade shows, artistic performances, and company anniversaries. Global sporting events such as the Olympics and the World Cup are promoted aggressively to both companies and fans. 6 PART 1 UNDERSTANDING MARKETING MANAGEMENT The Rolling Stones have done a masterful job of marketing their rebellious form of rock and roll to audiences of all ages. EXPERIENCES By orchestrating several services and goods, a firm can create, stage, and market experiences. Walt Disney World’s Magic Kingdom allows customers to visit a fairy kingdom, a pirate ship, or a haunted house. There is also a market for customized experiences, such as a week at a baseball camp with retired baseball greats, a four-day rock and roll fantasy camp, or a climb up Mount Everest.9 PERSONS Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other professionals all get help from celebri