Principles of Marketing (Philip T. Kotler, Gary Armstrong) PDF Textbook

Principles of Marketing This page intentionally left blank  Principles of Marketing 17e gLOBaL eDitiOn...

Principles of Marketing This page intentionally left blank  Principles of Marketing 17e gLOBaL eDitiOn Philip Kotler Northwestern University Gary Armstrong University of North Carolina with Marc Oliver Opresnik St. Gallen Management Institute Harlow, England London New York Boston San Francisco Toronto Sydney Dubai Singapore Hong Kong Tokyo Seoul Taipei New Delhi Cape Town Sao Paulo Mexico City Madrid Amsterdam Munich Paris Milan Vice President, Business Publishing: Donna Battista Product Marketing Assistant: Jessica Quazza Director of Portfolio Management: Stephanie Wall Vice President, Production and Digital Studio, Arts and Business: Portfolio Manager: Daniel Tylman Etain O’Dea Editorial Coordinator: Linda Albelli Director of Production, Business: Jeff Holcomb Managing Editor, Global Edition: Steven Jackson Managing Producer, Business: Ashley Santora Associate Acquisitions Editor, Global Edition: Ishita Sinha Operations Specialist: Carol Melville Senior Project Editor, Global Edition: Daniel Luiz Creative Director: Blair Brown Project Manager, Global Edition: Nikhil Rakshit Manager, Learning Tools: Brian Surette Manager, Media Production, Global Edition: M. Vikram Kumar Content Developer, Learning Tools: Sarah Peterson Senior Manufacturing Controller, Production, Global Edition: Managing Producer, Digital Studio, Arts and Business: Trudy Kimber Diane Lombardo Vice President, Product Marketing: Roxanne McCarley Digital Studio Producer: Darren Cormier Director of Strategic Marketing: Brad Parkins Digital Studio Producer: Alana Coles Strategic Marketing Manager: Deborah Strickland Full-Service Project Management, Design, and Composition: Integra Product Marketer: Becky Brown Software Services Field Marketing Manager: Lenny Ann Kucenski Cover Art: MSSA/Shutterstock.com Pearson Education Limited KAO Two KAO Park Harlow CM17 9NA United Kingdom and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsonglobaleditions.com © Pearson Education Limited 2018 The rights of Philip Kotler and Gary Armstrong to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. Authorized adaptation from the United States edition, entitled Principles of Marketing, 17th edition, ISBN 978-0-13-449251-3, by Philip Kotler and Gary Armstrong, published by Pearson Education © 2018. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permis- sion of the publisher or a license permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. ISBN 10: 1-292-22017-1 ISBN 13: 978-1-292-22017-8 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. 10 9 8 7 6 5 4 3 2 1 14 13 12 11 10 Typeset in Times LT Pro-Roman by Integra Software Services. Printed and bound by Lego, Italy. Dedication To Kathy, Betty, Mandy, Matt, KC, Keri, Delaney, Molly, Macy, and Ben; and Nancy, Amy, Melissa, and Jessica This page intentionally left blank about the authors As a team, Philip Kotler and Gary Armstrong provide a blend of skills uniquely suited to writing an introductory marketing text. Professor Kotler is one of the world’s leading authorities on marketing. Professor Armstrong is an award-winning teacher of under- graduate business students. Together, they make the complex world of marketing prac- tical, approachable, and enjoyable. Philip Kotler is S.C. Johnson & Son Distinguished Professor worked with many companies on marketing research, sales of International Marketing at the Kellogg School of Manage- management, and marketing strategy. ment, Northwestern University. He received his master’s But Professor Armstrong’s first love has always been teach- degree at the University of Chicago and his Ph.D. at M.I.T., both ing. His long-held Blackwell Distinguished Professorship is in economics. Dr. Kotler is the author of Marketing Management the only permanent endowed professorship for distinguished (Pearson), now in its fifteenth edition and the most widely used undergraduate teaching at the University of North Carolina at marketing textbook in graduate schools of business worldwide. Chapel Hill. He has been very active in the teaching and ad- He has authored more than 50 other successful books and has ministration of Kenan-Flagler’s undergraduate program. His published more than 150 articles in leading journals. He is the administrative posts have included Chair of Marketing, Associ- only three-time winner of the coveted Alpha Kappa Psi award ate Director of the Undergraduate Business Program, Director for the best annual article in the Journal of Marketing. of the Business Honors Program, and many others. Through the Professor Kotler was named the first recipient of four years, he has worked closely with business student groups and major awards: the Distinguished Marketing Educator of the Year has received several UNC campuswide and Business School Award and the William L. Wilkie “Marketing for a Better World” teaching awards. He is the only repeat recipient of the school’s Award, both given by the American Marketing Association; highly regarded Award for Excellence in Undergraduate Teach- the Philip Kotler Award for Excellence in Health Care Marketing ing, which he received three times. Most recently, Professor presented by the Academy for Health Care Services Market- Armstrong received the UNC Board of Governors Award for ing; and the Sheth Foundation Medal for Exceptional Contribution Excellence in Teaching, the highest teaching honor bestowed by to Marketing Scholarship and Practice. He is a charter member the sixteen-campus University of North Carolina system. of the Marketing Hall of Fame, was voted the first Leader in Marc Oliver Opresnik is Professor of Marketing and Man- Marketing Thought by the American Marketing Association, agement and Member of the Board of Directors at SGMI St. and was named the Founder of Modern Marketing Manage- Gallen Management Institute, a leading international business ment in the Handbook of Management Thinking. His numerous school. In addition, he is Professor of Business Administration other major honors include the Sales and Marketing Executives at Luebeck University of Applied Sciences as well as a visiting International Marketing Educator of the Year Award; the European professor to international universities such as the European Association of Marketing Consultants and Trainers Marketing Business School in London and East China University of Sci- Excellence Award; the Charles Coolidge Parlin Marketing Research ence and Technology in Shanghai. He has 10 years of experi- Award; and the Paul D. Converse Award, given by the American ence working in senior management and marketing positions Marketing Association to honor “outstanding contributions to for Shell International Petroleum Co. Ltd. and is the author of science in marketing.” A recent Forbes survey ranks Professor numerous articles and books. Along with Kevin Keller and Phil Kotler in the top 10 of the world’s most influential business Kotler, he is co-author of the German edition of Marketing Man- thinkers. And in a recent Financial Times poll of 1,000 senior ex- agement. In addition, he is a co-editor and member of the edito- ecutives across the world, Professor Kotler was ranked as the rial board of several international journals such as Transnational fourth “most influential business writer/guru” of the twenty- Marketing, Journal of World Marketing Summit Group, and Interna- first century. tional Journal of New Technologies in Science and Engineering. He Dr. Kotler has served as chairman of the College on Mar- was also appointed Chief Research Officer at Kotler Impact Inc., keting of the Institute of Management Sciences, a director of the Philip Kotler’s international company. His responsibilities in- American Marketing Association, and a trustee of the Marketing clude the global development, planning, implementation, and Science Institute. He has consulted with many major U.S. and management of university courses and executive training as international companies in the areas of marketing strategy and well as global research initiatives and cooperations. planning, marketing organization, and international marketing. As president of his consulting firm Opresnik Management He has traveled and lectured extensively throughout Consulting, Professor Opresnik works as a coach, keynote Europe, Asia, and South America, advising companies and gov- speaker, and consultant for numerous institutions, govern- ernments about global marketing practices and opportunities. ments, and international corporations, including Google, Gary Armstrong is Crist W. Blackwell Distinguished Coca-Cola, McDonald’s, Dräger, RWE, SAP, Porsche, Audi, Professor Emeritus of Undergraduate Education in the Kenan- Volkswagen, Shell International Petroleum Co. Ltd., Procter Flagler Business School at the University of North Carolina at & Gamble, Unilever, L’Oréal, Bayer, BASF, and Adidas. More Chapel Hill. He holds undergraduate and master’s degrees in than 100,000 people have benefited professionally and person- business from Wayne State University in Detroit, and he re- ally from his work as a coach in seminars on marketing, sales, ceived his Ph.D. in marketing from Northwestern University. and negotiation and as a speaker at conferences all over the Dr. Armstrong has contributed numerous articles to lead- world, including locations like St. Gallen, Davos, St. Moritz, ing business journals. As a consultant and researcher, he has Berlin, Houston, Moscow, London, Paris, Dubai, and Tokyo. 7 This page intentionally left blank Brief Contents Preface 17 Acknowledgments 23 Part 1 Defining Marketing and the Marketing Process 26 1 Marketing: Creating Customer Value and Engagement 26 2 Company and Marketing Strategy: Partnering to Build Customer Engagement, Value, and Relationships 62 Part 2 Understanding the Marketplace and Consumer Value 90 3 Analyzing the Marketing Environment 90 4 Managing Marketing Information to Gain Customer Insights 122 5 Consumer Markets and Buyer Behavior 156 6 Business Markets and Business Buyer Behavior 186 Part 3 Designing a Customer Value–Driven Strategy and Mix 210 7 Customer Value–Driven Marketing Strategy: Creating Value for Target Customers 210 8 Products, Services, and Brands: Building Customer Value 242 9 Developing New Products and Managing the Product Life Cycle 278 10 Pricing: Understanding and Capturing Customer Value 306 11 Pricing Strategies: Additional Considerations 330 12 Marketing Channels: Delivering Customer Value 356 13 Retailing and Wholesaling 390 14 Engaging Consumers and Communicating Customer Value: Integrated Marketing Communication Strategy 422 15 Advertising and Public Relations 450 16 Personal Selling and Sales Promotion 478 17 Direct, Online, Social Media, and Mobile Marketing 510 Part 4 Extending Marketing 540 18 Creating Competitive Advantage 540 19 The Global Marketplace 566 20 Sustainable Marketing: Social Responsibility and Ethics 596 Appendix 1 Marketing Plan 627 Appendix 2 Marketing by the Numbers 637 Appendix 3 Careers in Marketing 655 Glossary 667 References 675 Index 705 9 This page intentionally left blank Contents Preface 17 Acknowledgments 23 Chapter 2 Company and Marketing Strategy: partnering to Build Customer engagement, Value, Part 1: Defining Marketing and the Marketing and relationships 62 Process 26 Company-Wide Strategic Planning: Defining Marketing’s Role 64 Defining a Market-Oriented Mission 64 | Setting Company Chapter 1 Marketing: Creating Customer Value and Objectives and Goals 66 Designing the Business Portfolio 66 engagement 26 Analyzing the Current Business Portfolio 67 | The Boston Consulting Group Approach 67 | Developing Strategies for What Is Marketing? 28 Growth and Downsizing 70 Marketing Defined 29 | The Marketing Process 29 Planning Marketing: Partnering to Build Customer Understanding the Marketplace and Customer Relationships 72 Needs 30 Partnering with Other Company Departments 72 | Partnering Customer Needs, Wants, and Demands 30 | Market with Others in the Marketing System 73 Offerings—Products, Services, and Experiences 31 | Marketing Strategy and the Marketing Mix 74 Customer Value and Satisfaction 31 | Exchanges and Customer Value–Driven Marketing Strategy 74 | Developing an Relationships 33 | Markets 33 Integrated Marketing Mix 77 Designing a Customer Value–Driven Marketing Strategy Managing the Marketing Effort and Marketing Return on and Plan 34 Investment 79 Customer Value–Driven Marketing Strategy 34 | Preparing an Managing the Marketing Effort 79 | Measuring and Managing Integrated Marketing Plan and Program 38 Marketing Return on Investment 83 Managing Customer Relationships and Capturing Customer REVIEWING AND ExTENDING THE CONCEPTS 84 | OBjECTIVES Value 38 REVIEW AND KEY TERMS 84 | Objectives Review 84 | Key Engaging Customers and Managing Customer Terms 85 | DISCuSSION AND CRITICAL THINKING 86 | Discussion Relationships 38 | Capturing Value from Customers 44 Questions 86 | Critical Thinking Exercises 86 | APPLICATIONS AND The Changing Marketing Landscape 46 CASES 86 | Online, Mobile, and Social Media Marketing: Google’s The Digital Age: Online, Mobile, and Social Media (Alphabet’s) Mission 86 | Marketing Ethics: Predicting the Marketing 46 | The Changing Economic Environment 50 | Future 87 | Marketing by the Numbers: Apple vs. Microsoft 87 | The Growth of Not-for-Profit Marketing 51 | Rapid Video Case: Konica 87 | Company Case: Facebook: Making the Globalization 52 | Sustainable Marketing—The Call for More World More Open and Connected 88 Environmental and Social Responsibility 53 | So, What Is Marketing? Pulling It All Together 53 Part 2: Understanding the Marketplace and Consumer REVIEWING AND ExTENDING THE CONCEPTS 55 | Value 90 OBjECTIVES REVIEW AND KEY TERMS 55 | Objectives 3 Review 55 | Key Terms 56 | DISCuSSION AND CRITICAL THINKING 57 | Discussion Questions 57 | Critical Thinking Chapter analyzing the Marketing environment 90 Exercises 57 | APPLICATIONS AND CASES 57 | Online, Mobile, and Social Media Marketing: The ALS Ice The Microenvironment and Macroenvironment 92 Bucket Challenge 57 | Marketing Ethics: Exaggeration and High The Microenvironment 92 | The Macroenvironment 96 Pressure 58 | Marketing by the Numbers: Be on the The Demographic and Economic Environments 96 First Page 58 | Video Case: Eskimo joe’s 58 | Company Case: The Demographic Environment 96 | The Economic Environment 103 Argos: Creating Customer Value amid Change and The Natural and Technological Environments 104 Turbulence 59 The Natural Environment 104 | The Technological Environment 106 11 12 Contents The Political–Social and Cultural Environments 108 Buying Decision Behavior and the Buyer Decision The Political and Social Environment 108 | The Cultural Process 174 Environment 111 Types of Buying Decision Behavior 174 | The Buyer Decision Responding to the Marketing Environment 114 Process 175 REVIEWING AND ExTENDING THE CONCEPTS 117 | OBjECTIVES The Buyer Decision Process for New Products 178 REVIEW AND KEY TERMS 117 | Objectives Review 117 | Key Stages in the Adoption Process 178 | Individual Differences in Terms 117 | DISCuSSION AND CRITICAL THINKING 118 | Innovativeness 179 | Influence of Product Characteristics on Discussion Questions 118 | Critical Thinking Exercises 118 | Rate of Adoption 179 APPLICATIONS AND CASES 118 | Online, Mobile, and Social REVIEWING AND ExTENDING THE CONCEPTS 180 | Media Marketing: Sharing Economy 118 | Marketing Ethics: Your OBjECTIVES REVIEW AND KEY TERMS 180 | Objectives Insurance Renewal Notice Could Be a Trap 118 | Marketing by the Review 180 | Key Terms 181 | DISCuSSION AND CRITICAL Numbers: Demographic Trends 119 | Video Case: Burger King 119 | THINKING 182 | Discussion Questions 182 | Critical Company Case: Fitbit: Riding the Fitness Wave to Glory 119 Thinking Exercises 182 | APPLICATIONS AND CASES 182 | Online, Mobile, and Social Media Marketing: Blogvertorials 182 | Chapter 4 Managing Marketing Information to Gain Marketing Ethics: Make Yourself Feel Good 183 | Marketing by the Numbers: Evaluating Alternatives 183 | Video Case: Customer Insights 122 IMG Worldwide 183 | Company Case: GoldieBlox: Swimming upstream against Consumer Perceptions 184 Marketing Information and Customer Insights 124 Marketing Information and Today’s “Big Data” 125 | Managing Marketing Information 125 Assessing Information Needs and Developing Data 126 Assessing Marketing Information Needs 126 | Developing Chapter 6 Business Markets and Business Buyer Behavior 186 Marketing Information 126 Marketing Research 130 Business Markets 188 Defining the Problem and Research Objectives 130 | Developing Market Structure and Demand 189 | Nature of the Buying the Research Plan 131 | Gathering Secondary Data 132 | unit 189 | Types of Decisions and the Decision Primary Data Collection 133 | Implementing the Research Process 189 Plan 140 | Interpreting and Reporting the Findings 140 Business Buyer Behavior 190 Analyzing and Using Marketing Information 140 Major Types of Buying Situations 191 | Participants in the Customer Relationship Management (CRM) 141 | Big Business Buying Process 192 | Major Influences on Business Data and Marketing Analytics 141 | Distributing and using Buyers 192 Marketing Information 144 The Business Buyer Decision Process 195 Other Marketing Information Considerations 144 Problem Recognition 195 | General Need Description 196 | Marketing Research in Small Businesses and Nonprofit Product Specification 196 | Supplier Search 196 | Proposal Organizations 144 | International Marketing Research 145 | Solicitation 196 | Supplier Selection 197 | Order-Routine Public Policy and Ethics in Marketing Research 147 Specification 197 | Performance Review 197 REVIEWING AND ExTENDING THE CONCEPTS 149 | Engaging Business Buyers with Digital and Social OBjECTIVES REVIEW AND KEY TERMS 149 | Objectives Marketing 197 Review 149 | Key Terms 150 | DISCuSSION AND CRITICAL E-procurement and Online Purchasing 197 | Business- THINKING 150 | Discussion Questions 150 | Critical Thinking to-Business Digital and Social Media Marketing 198 Exercises 151 | APPLICATIONS AND CASES 151 | Online, Mobile, Institutional and Government Markets 199 and Social Media Marketing: Online Snooping 151 | Marketing Institutional Markets 199 | Government Markets 201 Ethics: Metadata 151 | Marketing by the Numbers: What’s REVIEWING AND ExTENDING THE CONCEPTS 203 | Your Sample? 151 | Video Case: Nielsen 152 | Company Case: OBjECTIVES REVIEW AND KEY TERMS 203 | Objectives Campbell Soup Company: Watching What You Eat 152 Review 203 | Key Terms 204 | DISCuSSION AND CRITICAL Chapter 5 Consumer Markets and Buyer THINKING 204 | Discussion Questions 204 | Critical Thinking Exercises 205 | APPLICATIONS AND CASES 205 | Online, Behavior 156 Mobile, and Social Media Marketing: E-procurement and Mobile Procurement 205 | Marketing Ethics: Innocent: Proven Model of Consumer Behavior 158 Guilty? 205 | Marketing by the Numbers: NAICS 206 | Video Characteristics Affecting Consumer Behavior 159 Case: Eaton 206 | Company Case: Procter & Gamble: Treating Cultural Factors 159 | Social Factors 162 | Personal Business Customers as Strategic Partners 206 Factors 167 | Psychological Factors 169  Contents 13 Part 3: Designing a Customer Value–Driven Strategy Video Case: Plymouth Rock Assurance 275 | Company Case: Airbnb: Making Hospitality Authentic 275 and Mix 210 Chapter 7 Customer Value–Driven Marketing Chapter 9 Developing New products and Managing the Strategy: Creating Value for target Customers 210 product Life Cycle 278 Marketing Strategy 212 Market Segmentation 213 New Product Development Strategy 280 Segmenting Consumer Markets 213 | Segmenting Business The New Product Development Process 281 Markets 219 | Segmenting International Markets 220 | Idea Generation 281 | Idea Screening 283 | Concept Requirements for Effective Segmentation 221 Development and Testing 283 | Marketing Strategy Market Targeting 221 Development 284 | Business Analysis 285 | Evaluating Market Segments 221 | Selecting Target Market Product Development 286 | Test Marketing 286 | Segments 222 Commercialization 287 | Managing New Product Differentiation and Positioning 228 Development 287 Positioning Maps 229 | Choosing a Differentiation and Product Life-Cycle Strategies 289 Positioning Strategy 230 | Communicating and Delivering the Introduction Stage 294 | Growth Stage 294 | Maturity Chosen Position 235 Stage 295 | Decline Stage 296 Additional Product and Service Considerations 297 REVIEWING AND ExTENDING THE CONCEPTS 236 | Product Decisions and Social Responsibility 297 | OBjECTIVES REVIEW AND KEY TERMS 236 | Objectives International Product and Services Marketing 298 Review 236 | Key Terms 237 | DISCuSSION AND CRITICAL THINKING 237 | Discussion Questions 237 | Critical Thinking REVIEWING AND ExTENDING THE CONCEPTS 299 | Exercises 238 | APPLICATIONS AND CASES 238 | Online, OBjECTIVES REVIEW AND KEY TERMS 299 | Objectives Mobile, and Social Media Marketing: Get Your Groupon 238 | Review 299 | Key Terms 300 | DISCuSSION AND CRITICAL Marketing Ethics: Targeting Teens 238 | Marketing by the THINKING 300 | Discussion Questions 300 | Critical Thinking Numbers: uSAA 238 | Video Case: Sprout 239 | Company Case: Exercises 301 | APPLICATIONS AND CASES 301 | Online, Virgin America: Flight Service for the Tech Savvy 239 Mobile, and Social Media Marketing: Telemedicine 301 | Marketing Ethics: The Sustainable Tourist? 301 | Marketing by the Numbers: Dental House Calls 302 | Video Case: Day2Night Chapter 8 products, Services, and Brands: Building Convertible Heels 302 | Company Case: Bose: Better Products through Research 302 Customer Value 242 What Is a Product? 244 Products, Services, and Experiences 244 | Levels of Product Chapter 10 pricing: Understanding and Capturing and Services 245 | Product and Service Classifications 246 Customer Value 306 Product and Service Decisions 249 Individual Product and Service Decisions 249 | Product Line What Is a Price? 308 Decisions 256 | Product Mix Decisions 256 Major Pricing Strategies 309 Services Marketing 258 Customer Value–Based Pricing 309 | Cost-Based The Nature and Characteristics of a Service 258 | Marketing Pricing 313 | Competition-Based Pricing 317 Strategies for Service Firms 259 | The Service Profit Chain 259 Other Internal and External Considerations Affecting Price Branding Strategy: Building Strong Brands 264 Decisions 317 Brand Equity and Brand Value 264 | Building Strong Overall Marketing Strategy, Objectives, and Mix 318 | Brands 265 | Managing Brands 272 Organizational Considerations 321 | The Market and REVIEWING AND ExTENDING THE CONCEPTS 272 | Demand 321 | The Economy 323 | Other External OBjECTIVES REVIEW AND KEY TERMS 272 | Objectives Factors 323 Review 272 | Key Terms 273 | DISCuSSION AND CRITICAL REVIEWING AND ExTENDING THE CONCEPTS 324 | THINKING 274 | Discussion Questions 274 | Critical Thinking OBjECTIVES REVIEW AND KEY TERMS 324 | Objectives Exercises 274 | APPLICATIONS AND CASES 274 | Online, Review 324 | Key Terms 325 | DISCuSSION AND CRITICAL Mobile, and Social Media Marketing: Feeding Pets from Your THINKING 325 | Discussion Questions 325 | Critical Thinking Smartphone 274 | Marketing Ethics: Cutthroat Prices 274 | Exercises 325 | APPLICATIONS AND CASES 325 | Online, Marketing by the Numbers: Pop-Tarts Gone Nutty! 275 | Mobile, and Social Media Marketing: Sold Out 325 | 14 Contents Marketing Ethics: The Cost of a Life 326 | Marketing Channel Management Decisions 372 by the Numbers: Pricey Sheets 326 | Video Case: Selecting Channel Members 372 | Managing and Fast-Food Discount Wars 327 | Company Case: MSC Motivating Channel Members 373 | Evaluating Channel Cruises: From One Second-Hand Ship to a Major World Members 375 | Public Policy and Distribution Player 327 Decisions 375 Marketing Logistics and Supply Chain Management 376 Chapter 11 pricing Strategies: additional Nature and Importance of Marketing Logistics 376 | Sustainable Supply Chains 377 | Goals of the Logistics Considerations 330 System 378 | Major Logistics Functions 378 | Integrated Logistics Management 381 New Product Pricing Strategies 332 REVIEWING AND ExTENDING THE CONCEPTS 383 | Market-Skimming Pricing 332 | Market-Penetration OBjECTIVES REVIEW AND KEY TERMS 383 | Objectives Pricing 333 Review 383 | Key Terms 384 | DISCuSSION AND Product Mix Pricing Strategies 333 CRITICAL THINKING 385 | Discussion Questions 385 | Product Line Pricing 334 | Optional-Product Pricing 334 | Critical Thinking Exercises 385 | APPLICATIONS AND Captive-Product Pricing 334 | By-Product Pricing 335 | CASES 385 | Online, Mobile, and Social Media Marketing: Product Bundle Pricing 335 Fabletics Changing Channels 385 | Marketing Ethics: Ethical Price Adjustment Strategies 335 Sourcing 386 | Marketing by the Numbers: Tyson Discount and Allowance Pricing 335 | Segmented Pricing 336 | Expanding Distribution 386 | Video Case: Progressive 386 | Psychological Pricing 337 | Promotional Pricing 338 | Company Case: Apple Pay: Taking Mobile Payments Geographical Pricing 339 | Dynamic and Online Pricing 340 | Mainstream 387 International Pricing 342 Price Changes 344 Initiating Price Changes 344 | Responding to Price Changes 345 Chapter 13 retailing and Wholesaling 390 Public Policy and Pricing 346 Pricing within Channel Levels 349 | Pricing across Channel Retailing 392 Levels 349 Retailing: Connecting Brands with Consumers 392 | Types of Retailers 393 REVIEWING AND ExTENDING THE CONCEPTS 350 | OBjECTIVES REVIEW AND KEY TERMS 350 | Objectives Retailer Marketing Decisions 400 Segmentation, Targeting, Differentiation, and Positioning Review 350 | Key Terms 351 | DISCuSSION AND CRITICAL Decisions 400 | Product Assortment and Services THINKING 351 | Discussion Questions 351 | Critical Thinking Decision 401 | Price Decision 403 | Promotion Decision 403 | Exercises 352 | APPLICATIONS AND CASES 352 | Online, Place Decision 404 Mobile, and Social Media Marketing: Krazy Coupon Lady 352 | Marketing Ethics: Less Bang for Your Buck 352 | Marketing by Retailing Trends and Developments 405 Tighter Consumer Spending 405 | New Retail Forms, the Numbers: Louis Vuitton Price Increase 352 | Video Case: Shortening Retail Life Cycles, and Retail Convergence 406 | Hammerpress 353 | Company Case: Lululemon: Indulging The Rise of Megaretailers 406 | Growth of Direct, Online, Customers at a Premium Price 353 Mobile, and Social Media Retailing 407 | The Need for 12 Omni-Channel Retailing 407 | Growing Importance of Retail Chapter Marketing Channels: Delivering Customer Technology 409 | Green Retailing 410 | Global Expansion of Value 356 Major Retailers 411 Wholesaling 411 Supply Chains and the Value Delivery Network 358 Types of Wholesalers 412 | Trends in Wholesaling 416 The Nature and Importance of Marketing Channels 359 REVIEWING AND ExTENDING THE CONCEPTS 417 | Channel Behavior and Organization 362 OBjECTIVES REVIEW AND KEY TERMS 417 | Objectives Channel Behavior 362 | Vertical Marketing Systems 363 | Review 417 | Key Terms 418 | DISCuSSION AND CRITICAL Horizontal Marketing Systems 365 | Multichannel Distribution THINKING 418 | Discussion Questions 418 | Critical Thinking Systems 365 | Changing Channel Organization 366 Exercises 418 | APPLICATIONS AND CASES 418 | Online, Channel Design Decisions 368 Mobile, and Social Media Marketing: Skipping the Checkout Analyzing Consumer Needs 369 | Setting Channel Line 418 | Marketing Ethics: Footloose and Tax-Free 419 | Objectives 369 | Identifying Major Alternatives 370 | Marketing by the Numbers: Inventory Management 419 | Video Evaluating the Major Alternatives 371 | Designing International Case: Kmart 419 | Company Case: Bass Pro Shops: Creating Distribution Channels 371 Nature’s Theme Park for People Who Hate to Shop 420  Contents 15 Chapter 14 engaging Consumers and Communicating Managing the Sales Force 482 Designing the Sales Force Strategy and Structure 482 | Customer Value: Integrated Marketing Recruiting and Selecting Salespeople 485 | Training Communication Strategy 422 Salespeople 486 | Compensating Salespeople 487 | Supervising and Motivating Salespeople 488 | Evaluating The Promotion Mix 424 Salespeople and Sales Force Performance 489 | Social Integrated Marketing Communications 425 Selling: Online, Mobile, and Social Media Tools 490 The New Marketing Communications Model 425 | The Need The Personal Selling Process 493 for Integrated Marketing Communications 427 Steps in the Selling Process 493 | Personal Selling and Developing Effective Marketing Communication 430 Managing Customer Relationships 495 A View of the Communication Process 430 | Steps in Sales Promotion 496 Developing Effective Marketing Communication 432 The Rapid Growth of Sales Promotion 496 | Sales Promotion Setting the Total Promotion Budget and Mix 437 Objectives 497 | Major Sales Promotion Tools 498 | Setting the Total Promotion Budget 437 | Shaping the Overall Developing the Sales Promotion Program 502 Promotion Mix 439 | Integrating the Promotion Mix 441 | REVIEWING AND ExTENDING THE CONCEPTS 503 | Socially Responsible Marketing Communication 441 OBjECTIVES REVIEW AND KEY TERMS 503 | Objectives REVIEWING AND ExTENDING THE CONCEPTS 444 | Review 503 | Key Terms 504 | DISCuSSION AND CRITICAL OBjECTIVES REVIEW AND KEY TERMS 444 | Objectives THINKING 505 | Discussion Questions 505 | Critical Thinking Review 444 | Key Terms 445 | DISCuSSION AND CRITICAL Exercises 505 | APPLICATIONS AND CASES 505 | Online, THINKING 446 | Discussion Questions 446 | Critical Thinking Mobile, and Social Media Marketing: Snap It and Redeem It! 505 | Exercises 446 | APPLICATIONS AND CASES 446 | Online, Marketing Ethics: Walking the Customer 506 | Marketing by Mobile, and Social Media Marketing: Spot the Difference 446 | the Numbers: Sales Force Analysis 506 | Video Case: First Marketing Ethics: Western Stereotypes 447 | Marketing by Flavor 506 | Company Case: SunGard: Building Sustained the Numbers: Advertising-to-Sales Ratios 447 | Video Case: Growth by Selling the SunGard Way 506 OxO 447 | Company Case: Volvo Trucks: Integrated Marketing Communications of Epic Proportions 447 Chapter 17 Direct, Online, Social Media, and Mobile Chapter 15 advertising and public relations 450 Marketing 510 Advertising 452 Direct and Digital Marketing 512 Major Advertising Decisions 453 The New Direct Marketing Model 512 | Rapid Growth of Direct Setting Advertising Objectives 453 | Setting the Advertising and Digital Marketing 513 | Benefits of Direct and Digital Budget 456 | Evaluating Advertising Effectiveness and the Marketing to Buyers and Sellers 514 Return on Advertising Investment 468 | Other Advertising Forms of Direct and Digital Marketing 514 Considerations 468 Marketing, the Internet, and the Digital Age 515 Public Relations 470 Online Marketing 516 The Role and Impact of PR 471 Social Media and Mobile Marketing 521 Major Public Relations Tools 472 Social Media Marketing 521 | Mobile Marketing 525 REVIEWING AND ExTENDING THE CONCEPTS 473 | OBjECTIVES Traditional Direct Marketing Forms 528 REVIEW AND KEY TERMS 473 | Objectives Review 473 | Key Direct-Mail Marketing 528 | Catalog Marketing 529 | Terms 473 | DISCuSSION AND CRITICAL THINKING 474 | Telemarketing 529 | Direct-Response Television Discussion Questions 474 | Critical Thinking Exercises 474 | Marketing 530 | Kiosk Marketing 531 | Public Policy Issues in APPLICATIONS AND CASES 474 | Online, Mobile, and Social Media Direct and Digital Marketing 531 Marketing: Facebook Audience Network 474 | Marketing Ethics: REVIEWING AND ExTENDING THE CONCEPTS 534 | Lie to Me 474 | Marketing by the Numbers: Dubai City Guide 475 | OBjECTIVES REVIEW AND KEY TERMS 534 | Objectives Video Case: Kmart 475 | Company Case: Allstate: Bringing Mayhem Review 534 | Key Terms 536 | DISCuSSION AND CRITICAL to the Auto Insurance Advertising Wars 475 THINKING 536 | Discussion Questions 536 | Critical Thinking 16 Exercises 536 | APPLICATIONS AND CASES 536 | Online, Chapter personal Selling and Sales promotion 478 Mobile, and Social Media Marketing: On the Move 536 | Marketing Ethics: #Fail 537 | Marketing by the Numbers: Field Personal Selling 480 Sales versus Telemarketing 537 | Video Case: Nutrisystem 537 | The Nature of Personal Selling 480 | The Role of the Sales Company Case: Alibaba: The World’s Largest E-tailer Is Not Force 481 Amazon 538 16 Contents Part 4: Extending Marketing 540 Key Terms 591 | DISCuSSION AND CRITICAL THINKING 592 | Discussion Questions 592 | Critical Thinking Exercises 592 | Chapter 18 Creating Competitive advantage 540 APPLICATIONS AND CASES 592 | Online, Mobile, and Social Media Marketing: China’s Great Firewall 592 | Marketing Ethics: Cleaning up the Chinese Pharmaceutical Market 593 | Marketing by the Numbers: Competitor Analysis 542 Attracting Alternative Markets 593 | Video Case: Monster 593 | Identifying Competitors 542 | Assessing Competitors 545 | Company Case: L’Oréal: The united Nations of Beauty 593 Selecting Competitors to Attack and Avoid 547 | Designing a Competitive Intelligence System 549 Competitive Strategies 549 Chapter 20Sustainable Marketing: Social Approaches to Marketing Strategy 549 | Basic Competitive responsibility and ethics 596 Strategies 550 | Competitive Positions 553 | Market Leader Strategies 554 | Market Challenger Strategies 557 | Market Sustainable Marketing 598 Follower Strategies 558 | Market Nicher Strategies 558 Social Criticisms of Marketing 600 Balancing Customer and Competitor Orientations 559 Marketing’s Impact on Individual Consumers 600 | REVIEWING AND ExTENDING THE CONCEPTS 560 | Marketing’s Impact on Society as a Whole 604 | Marketing’s OBjECTIVES REVIEW AND KEY TERMS 560 | Objectives Impact on Other Businesses 606 Review 560 | Key Terms 561 | DISCuSSION AND CRITICAL Consumer Actions to Promote Sustainable Marketing 607 THINKING 561 | Discussion Questions 561 | Critical Thinking Consumerism 607 | Environmentalism 608 | Public Actions to Exercises 562 | APPLICATIONS AND CASES 562 | Online, Regulate Marketing 612 Mobile, and Social Media Marketing: I’ll Eat My Hat 562 | Business Actions Toward Sustainable Marketing 613 Marketing Ethics: Creating Competitive Advantage…to What Sustainable Marketing Principles 613 End? 562 | Marketing by the Numbers: Market Share 562 | Video Marketing Ethics and the Sustainable Company 617 Case: umpqua Bank 563 | Company Case: YouTube: Google’s Marketing Ethics 617 | The Sustainable Company 620 Quest for Video Dominance 563 REVIEWING AND ExTENDING THE CONCEPTS 620 | OBjECTIVES REVIEW AND KEY TERMS 620 | Objectives Review 620 | Key Terms 621 | DISCuSSION AND CRITICAL Chapter 19 the Global Marketplace 566 THINKING 621 | Discussion Questions 621 | Critical Thinking Exercises 622 | APPLICATIONS AND CASES 622 | Online, Mobile, and Social Media Marketing: Teens and Global Marketing Today 568 Social Media 622 | Marketing Ethics: Milking the International Elements of the Global Marketing Environment 570 | Deciding Market 622 | Marketing by the Numbers: The Cost of Whether to Go Global 578 | Deciding Which Markets to Sustainability 622 | Video Case: Honest Tea 623 | Company Enter 578 Case: adidas: Athletic Apparel with Purpose 623 Deciding How to Enter the Market 580 Exporting 580 | joint Venturing 581 | Direct Investment 582 Appendix 1: Marketing Plan 627 Deciding on the Global Marketing Program 583 Appendix 2: Marketing by the Numbers 637 Product 585 | Promotion 586 | Price 588 | Distribution Appendix 3: Careers in Marketing 655 Channels 589 Deciding on the Global Marketing Organization 590 Glossary 667 REVIEWING AND ExTENDING THE CONCEPTS 591 | OBjECTIVES References 675 REVIEW AND KEY TERMS 591 | Objectives Review 591 | Index 705 Preface The Seventeenth Edition of Kotler/Armstrong’s Principles of Marketing! Setting the World Standard in Marketing Education 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 mo- bile media, connected digital devices, and the new consumer empowerment to “big data” and new marketing analytics—have profoundly affected both marketers and the consum- ers they serve. All around the world—across five continents, more than 40 countries, and 24 languages—students, professors, and business professionals have long relied on Kotler/ Armstrong’s Principles of Marketing as the most-trusted source for teaching and learning about the latest developments in basic marketing concepts and practices. More than ever, the seventeenth edition introduces new marketing students to the fascinating world of modern marketing in a complete and authoritative yet fresh, practical, and engaging way. Once again, we’ve added substantial new content and poured over every page, table, figure, fact, and example in order to make this the best text from which to learn about and teach marketing. Enhanced by MyMarketingLab, our online homework and personalized study tool, the seventeenth edition of Principles of Marketing remains the world standard in introductory marketing education. 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. To- day’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 proposi- tion by which the organization can attract and grow valued consumers. 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’ conversations and lives. In this digital age, to go along with their tried-and-true 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 commu- nity. If marketers do these things well, they will reap the rewards in terms of market share, profits, and customer equity. In the seventeenth edition of Principles of Marketing, you’ll learn how customer value and customer engagement drive every good marketing strategy. What’s New in the Seventeenth Edition? We’ve thoroughly revised the seventeenth edition of Principles of Marketing to reflect the major trends and forces that affect marketing in this digital age of customer value, engage- ment, and relationships. Here are just some of the major and continuing changes you’ll find in this edition. 17 18 Preface The seventeenth 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, the Internet of Things, 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, monetizing social media, tiered and dynamic pricing, consumer privacy, sustainability, 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 through- out the text address the latest customer engagement tools, practices, and develop- ments. 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 influ- ence and customer community through digital and social media marketing); Chapter 9 (customer co-creation and customer-driven new-product development); Chapter 13 (omni-channel retailing); Chapters 14 and 15 (marketing content curation and native advertising); Chapter 16 (sales force social selling); and Chapter 17 (direct digital, on- line, 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 seventeenth edition of Principles of Marketing provides thoroughly refreshed, up-to- date coverage of these explosive developments in every chapter—from online, mobile, and social media engagement technologies discussed in Chapters 1, 5, 14, 15, and 17 to “real-time listening” and “big data” research tools in Chapter 4, real-time dynamic pricing in Chapter 11, omni-channel retailing in Chapter 13, and social selling in Chapter 16. 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 17 section on Direct, Online, Social Media, and Mobile Marketing 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 con- sumers anywhere, anytime via their computers, smartphones, tablets, internet-ready TVs, and other digital devices. The seventeenth edition continues to track fast-changing developments in marketing communications and the creation of marketing content. Marketers are no longer sim- ply creating 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 seventeenth edition of Principles of Marketing continues to improve on its innova- tive learning design. The text’s active and integrative presentation includes learning enhancements such as annotated chapter-opening stories, a chapter-opening objective outline, explanatory author comments on major chapter sections and figures, and Real Marketing highlights that provide in-depth examples of marketing concepts and prac- tices at work. The chapter-opening layout helps to preview and position the chapter and its key concepts. Figures annotated with author comments help students to sim- plify and organize chapter material. New and substantially revised end-of-chapter fea- tures help to summarize important chapter concepts and highlight important themes, such as marketing ethics, financial marketing analysis, and online, mobile, and social media marketing. This innovative learning design facilitates student understanding and eases learning. The seventeenth edition provides 18 new end-of-chapter company cases by which stu- dents can apply what they learn to actual company situations. It also features 16 new video cases, with brief end-of-chapter summaries and discussion questions. Finally, all of the chapter-opening stories, Real Marketing highlights, and end-of-chapter features in the seventeenth edition are either new or revised. New material throughout the seventeenth edition highlights the increasing importance of sustainable marketing. The discussion begins in Chapter 1 and ends in Chapter 20,  Preface 19 which pulls marketing together under a sustainable marketing framework. In be- tween, frequent discussions and examples show how sustainable marketing calls for socially and environmentally responsible actions that meet both the immediate and the future needs of customers, companies, and society as a whole. The seventeenth edition provides new discussions and examples of the growth in global marketing. As the world becomes a smaller, more competitive place, marketers face new global marketing challenges and opportunities, especially in fast-growing emerging markets such as China, India, Brazil, Africa, and others. You’ll find much new coverage of global marketing throughout the text, starting in Chapter 1 and dis- cussed fully in Chapter 19. Five Major Customer Value and Engagement Themes The seventeenth edition of Principles of Marketing 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 manag- ing 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 satisfaction, and build strong customer relationships and brand community. In return, they capture 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 mar- keting creates customer value and captures value in return. The framework is care- fully 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 so- cial media have taken today’s marketing by storm, dramatically changing how com- panies and brands engage consumers and how consumers connect and influence each other’s brand behaviors. The seventeenth edition introduces and thoroughly explores the contemporary concept of customer engagement marketing and the excit- ing new digital and social media technologies 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. A refreshed Chapter 17 on Direct, Online, Social Media, and Mobile Marketing summarizes the latest developments in digital engagement and relation- ship-building tools. Everywhere in between, you’ll find revised and expanded cov- erage 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 seventeenth edition provides a deep focus on brands, anchored by a Chapter 8 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 pro- grams, often without thinking carefully about the financial returns on their spend- ing. But all that has changed rapidly. “Marketing accountability”—measuring and managing marketing return on investment—has now become an important part of strategic marketing decision making. This emphasis on marketing accountability is addressed in Chapter 2, in Appendix 2 (Marketing by the Numbers), and throughout the seventeenth 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 mar- keting their brands globally and in sustainable ways. New material throughout the 20 Preface seventeenth edition emphasizes the concepts of global marketing and sustainable marketing—meeting the present needs of consumers and businesses while also preserv- ing or enhancing the ability of future generations to meet their needs. The seventeenth edition integrates global marketing and sustainability topics throughout the text. It then provides focused coverage on each topic in Chapters 19 and 20, respectively. An Emphasis on Real Marketing and Bringing Marketing to Life Principles of Marketing, seventeenth edition, takes a practical marketing-management ap- proach, providing countless in-depth, real-life examples and stories that engage students with marketing concepts and bring modern marketing to life. In the seventeenth edition, every chapter has an engaging opening story plus Real Marketing highlights that provide fresh insights into real marketing practices. Learn how: Samsung’s passion for creating superb online customer experiences has made it a poster child for direct and digital marketing. Nestlé has set up a customer-driven new product development process for finding and growing new market offerings while living up to its vision to make its products tastier and healthier. Apple’s outstanding success has never been about prices; it’s always been about creat- ing “life-feels-good” user experiences that make its products fly off the shelves despite their premium prices. Emirates became a lifestyle brand by changing the way it reached out to customers. It framed itself as connecting peoples and cultures, creating meaningful experiences. Lenovo’s global success is rooted in its deep and sound understanding of customers and its ability to build profitable relationships. Its business model is thus built on cus- tomer satisfaction, innovation, and operational efficiency. Philips has realized that assessing multiple factors for change is vital to the under- standing of current and probable future shifts in a marketing environment that is continuously shifting. Ferrero successfully analyzes and uses marketing information and customer insights to better tailor its offerings to the local market. Zara’s control of the entire distribution chain, from design and production to its own worldwide distribution network, has turned the brand into the world’s fastest- growing retailer. App-based car sharing service Uber is radically reshaping urban transportation chan- nels in cities around the globe, but it is now facing stiff competition from local rivals like Careem. Industrial giant GE has unleashed a remarkable array of digital and social me- dia content that connects the brand with its business customers and positions the 130-year-old company as a youthful, contemporary technology leader in the new digital industrial era. High-flying Mountain Dew is “Doin’ the Dew” with brand superfans to build a pas- sionately loyal and engaged brand community. It doesn’t just market to customers; it makes them partners in building the brand. Beyond such features, each chapter is packed with countless real, engaging, and timely ex- amples that reinforce key concepts. No other text brings marketing to life like the seventeenth edition of Principles of Marketing.  Preface 21 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 preview sections. The active and integrative chapter-opening spread in each chapter starts with a Chapter Preview, which briefly previews chapter concepts, links them with previous chapter concepts, and introduces the chapter- opening story. This leads to a chapter-opening vignette—an engaging, deeply devel- oped, illustrated, and annotated marketing story that introduces the chapter material and sparks student interest. Finally, an Objective Outline provides a helpful preview of chapter contents and learning objectives, complete with page numbers. Real Marketing highlights. Each chapter contains two carefully developed highlight features that provide an in-depth look at real marketing practices of large and small companies. Author comments and figure annotations. Each figure contains author comments that ease student understanding and help organize major text sections. Reviewing and Extending the Concepts. Sections at the end of each chapter summarize key chapter concepts and provide questions and exercises by which students can review and apply what they’ve learned. The Objectives Review and Key Terms section reviews major chapter concepts and links them to chapter objectives. It also provides a helpful listing of chapter key terms by order of appearance with page numbers that facilitate easy reference. A Discussion and Critical Thinking section provides discussion questions and critical thinking exercises that help students to keep track of and apply what they’ve learned in the chapter. Applications and Cases. Brief Online, Mobile, and Social Media Marketing; Marketing Ethics; and Marketing by the Numbers sections at the end of each chapter provide short ap- plications cases that facilitate discussion of current issues and company situations in areas such as mobile and social marketing, ethics, and financial marketing analysis. A Video Case section contains short vignettes with discussion questions to be used with a set four- to seven-minute videos that accompanied the seventeenth edition. End-of- chapter Company Case sections provide all-new or revised company cases that help students to apply major marketing concepts to real company and brand situations. Marketing Plan appendix. Appendix 1 contains a sample marketing plan that helps stu- dents to apply important marketing planning concepts. Marketing by the Numbers appendix. An innovative Appendix 2 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. More than ever before, the seventeenth edition of Principles of Marketing 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 sys- tem. 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 support Principles of Marketing, seventeenth edition. 22 Preface Instructor resources At the Instructor Resource Center, www.pearsonglobaleditions.com/kotler, instructors can easily register to gain access to a variety of instructor resources available with this text in downloadable format. If assistance is needed, a dedicated technical support team is ready to help with the media supplements that accompany the text. Visit http://support.pearson.com/getsupport 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 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, PowerPoint presen- tations, and the marketing plan appendix. This and many previous editions have benefited greatly from Andy’s assistance. We also thank Colette Wolfson of the Ivy Tech Community College School of Business for her dedicated efforts in preparing end-of-chapter materials. Additional thanks go to Carol Davis at California State University Monterey Bay for her work in updating the Instructor’s Manual and Test Item File. Finally, we’d like to thank the professors who assisted with our work on MyMarketingLab: Arlene Green, Indian River State College; Mahmood Khan, Virginia Tech; Todd Korol, Monroe Community College; Susan Schanne, Eastern Michigan University; and Sarah Shepler, Ivy Tech Community Col- lege. All of these contributors are greatly appreciated in making the seventeenth edition of Principles of Marketing a robust teaching and learning system. 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 input: reviewers Charles Lee, Chestnut Hill College Sucheta Ahlawat, Kean University Yun Jung Lee, Adelphi University Darrell E. Bartholomew, Rider University Carolyn A. Massiah, University of Central Florida Leta Beard, University of Washington Samuel McNeely, Murray State University Greg Black, Metropolitan State University of Denver Chip Miller, Drake University Christopher P. Blocker, Colorado State University Linda Morable, Richland College Kathryn Boys, Virginia Tech Randy Moser, Elon University Rod Carveth, Naugatuck Valley Community College David Murphy, Madisonville Community College Anindja Chatterjee, Slippery Rock University of Pennsylvania Esther Page-Wood, Western Michigan University Christina Chung, Ramapo College of New Jersey Ed Petkus Jr., Ramapo College of New Jersey Ed Chung, Elizabethtown College Tim Reisenwitz, Valdosta State University Marianne Collins, Winona State University Mary Ellen Rosetti, Hudson Valley Community College Mary Conran, Temple University William Ryan, University of Connecticut Eloise Coupey, Virginia Tech James Sawhill, Washington University–Missouri Deborah L. Cowles, Virginia Commonwealth University Mid Semple, SUNY Broome Alan Dick, University of Buffalo Roberta Schultz, Western Michigan University Patti Diggin, West Chester University of Pennsylvania Shweta Singh, Kean University Frank Franzak, Virginia Commonwealth University Michaeline Skiba, Monmouth University George J. Gannage Jr., Embry Riddle Aeronautical University Joseph G. Slifko Jr., Pennsylvania Highlands Community David A. Gilliam, University of Arkansas at Little Rock College Karen Gore, Ivy Tech Community College, Evansville Campus J. Alexander Smith, Oklahoma City University Deborah M. Gray, Central Michigan University Deb Utter, Boston University Amy Handlin, Monmouth University Donna Waldron, Manchester Community College James Heyman, University of St. Thomas Wendel Weaver, Oklahoma Wesleyan University Ken Knox, Eastern Gateway Community College Susan D. Williams, New Jersey City University Ann T. Kuzma, Minnesota State University, Mankato Douglas Witt, Brigham Young University Geoffrey P. Lantos, Stonehill College Poh-Lin Yeoh, Bentley University 23 24 Acknowledgments We also owe a great deal to the people at Pearson Education who helped develop this book. Portfolio Manager Dan Tylman provided resources and support during the revision. Edi- torial Coordinator Linda Albelli and Project Manager Karin Williams provided valuable assistance and advice in guiding this complex revision project through development, de- sign, and production. We’d also like to thank Director of Portfolio Management Stephanie Wall for her strong guidance and support along the way as well as the expertise of Manag- ing Producer Ashley Santora, Director of Production Jeff Holcomb, and Product Marketer Becky Brown. We are proud to be associated with the fine professionals at Pearson. We also owe a mighty debt of gratitude to Senior Project Manager Charles Fisher, Associate Managing Editor Allison Campbell, Design Manager Emily Friel, and the rest of the team at Integra for their fine work on this edition. Finally, we owe many thanks to our families for all of their support and encourage- ment—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 Global Edition Acknowledgements Pearson would like to thank the following people for their work on the Global Edition: Contributors Jan Charbonneau, University of Tasmania Diane Sutherland Geoff Fripp, The University of Sydney Jon Sutherland Ayantunji Gbadamosi, University of East Nguyen Hai Anh Tran, University London, United Kingdom of East Anglia Alice Cheah Wai Kuan, Taylor’s University, Nina von Arx-Steiner, University of Malaysia Applied Sciences and Arts, Marc Opresnik, SGMI St. Gallen Northwestern Switzerland FHNW Management Institute Sophie Hsiao-Pei Yang, Coventry Abdul Rauf, Wittenborg University University Muneeza Shoaib, Middlesex University Dubai reviewers Lailani Alcantara, Ritsumeikan Asia Pacific Jie Liu, Manchester Metropolitan University University Maggie Au, Temasek Polytechnic Christina Neylan, Lucerne University Adele Berndt, Jönköping University of Applied Sciences and Arts Michael Grund, HWZ University Milena S. Nikolova, American University of Applied Sciences in Business in Bulgaria Administration Zurich Stephen Tustain, Glion Institute of Higher Michael Korchia, Kedge Business School Education Ronan de Kervenoael, ESC Rennes, Jimmy Wong Shiang Yang, Singapore France University of Social Sciences Principles of Marketing  Part 1: Defining Marketing and the Marketing Process (Chapters 1–2) Part 2: Understanding the Marketplace and Consumer Value (Chapters 3–6) Part 3: Designing a Customer Value–Driven Strategy and Mix (Chapters 7–17) Part 4: Extending Marketing (Chapters 18–20) 1 Marketing Creating Customer Value and Engagement Chapter preview This first chapter introduces you to the basic concepts digital, mobile, and social media. Understanding these basic con- of marketing. We start with the question: What is mar- cepts and forming your own ideas about what they really mean to keting? Simply put, marketing is engaging customers you will provide a solid foundation for all that follows. and managing profitable customer relationships. The Let’s start with a good story about marketing in action at aim of marketing is to create value for customers in Emirates, the largest international airline in the world and one of order to capture value from customers in return. Next we discuss the best-known brands on the planet. Emirate’s success results the five steps in the marketing process—from understanding cus- from much more than just offering a way to connect people from tomer needs, to designing customer value–driven marketing strat- point A to point B. It’s based on a customer-focused marketing egies and integrated marketing programs, to building customer strategy by which Emirates creates customer value through deep relationships and capturing value for the firm. Finally, we discuss brand–customer engagement and close brand community with the major trends and forces affecting marketing in this new age of and among its customers. EmiratEs’ CUstOmEr VaLUE—DriVEN markEtiNg: Engaging Customers and Building a Brand Community T he Emirates Group operates across six continents customer needs of surfing the Internet, emailing, or simply and 150 cities with a 95,000-strong team comprised calling a land line while in the airplane, as well as exclusive of over 160 nationalities. The Emirates airline, head- lounges for its clientele. These offerings have allowed Emirates quartered in Dubai, UAE, was founded in 1985. The to deliver its value proposition to its customers and support its financial year ending March 31, 2016, saw the Group achieve mission statement of committing to high standards. its 28th consecutive year of profit in a financial year. The The Skywards Program, the airlines’ frequent traveler loy- company successfully capitalized on its location—a small city- alty program, also plays a key role in helping Emirates build state strategically located to reach three-fourths of the world strong customer relationships. In an industry-leading innovation, population in a flight of less than eight hours—to build a fast- members now earn miles by zone instead of actual miles flown. A growing and profitable hub-based business model, making it “miles accelerator feature” offers bonus miles on specific flights the largest international airline in the world. and is designed to boost turnover on flights with less full flights. Emirates set out to be an in- Facing increased and fierce novative, modern, and customer- competition, Emirates has launched oriented provider of high-quality Emirates is not just offering a way to a range of customer service initia- air travel services. Through the connect people from point A to point B tives that support differentiation, years, Emirates has successfully but is the catalyst to connect people’s including Dubai Connect, an incen- and continuously created a cus- dreams, hopes, and aspirations. tive for premium-class passengers tomer-focused value proposition offering free luxury hotel accom- by offering a combination of prod- modation, including meals, ground ucts, services, information, and experiences customized for transportation, and visa costs in Dubai. Another differentiating el- its market demographics for each of its destinations. This ap- ement of its customer service is Chauffeur-drive, a service offered proach had led to an array of product offerings such as its on- to customers flying first-class or business-class. Emirates chauf- board Information, Communication, and Entertainment (ICE) feurs collect customers from their doorstep or will be present to system, an all-in-one communications device accommodating take them to their final destination when they land. This could  ChAptEr 1 | Marketing: Creating Customer Value and Engagement 27 be straight to the customer’s hotel, their next meeting, their favorite restaurant, or even to the course for a round of golf. This service is available in over 70 cities worldwide. As competitors continued to discount air fares close to loss levels, Emirates maintained fares while manag- ing healthy yields supported by excellent load factors. The company was capable of doing this because of its customer value–driven marketing approach and its ser- vice proposition, for which customers continue to be willing to pay a premium. Whereas competitors empha- sized low prices or well-maintained aircraft, Emirates built customer engagement and relationships. Beyond the functional benefit of air travel, Emirates marketed its services as “The Emirates Experience,” a genuine passion Emirates’ success is due in part to its diverse product offerings. for comfort and attention to detail. Customers didn’t just Antony Nettle/Alamy Stock Photo fly Emirates; they experienced it. Connecting with customers once required simply out- company is connecting people and cultures, creating relevant spending competitors on big media ads and celebrity endorsers and meaningful experiences that are shaping the world. that talk at customers. In these digital times, however, Emirates The campaign launch featured print, TV, and digital adver- is forging a new kind of customer relationship, a deeper, more tising, including some iconic billboards in New York’s Times personal, more engaging one. Emirates still invests in tradi- Square and Milan’s central train station. Launched in over tional advertising, but the brand now spends an increasing 80 markets across the world, the new brand platform pre- amount of its marketing budget on cutting-edge digital and sented Emirates’ new mindset through communication and social media marketing that interacts with customers to build engagement that celebrates global travel, conveying Emirates’ brand engagement and community. commitment to connect with people and help them realize Emirates uses online, mobile, and social media marketing their potential through travel. Reflecting an effort to target a to connect with their customers. Emirates also creates brand younger audience, the “Hello Tomorrow” campaign debuted “tribes”—large groups of highly engaged users—with the help with vignettes of the TV spots on Emirates’ Facebook channel. of social media platforms such as Facebook, Twitter, Instagram, Moreover, Emirates collaborated with the BBC to develop a YouTube, and Pinterest. For example, the main Emirates Facebook new series called “Collaboration Culture,” which followed 14 page has more than 6.5 million likes. The Emirates Twitter page leading personalities who collaborated across their respective adds another 822,000; the Emirates Instagram page has 1.9 million fields in music, food, fashion, and art. With CNN, Emirates subscribers, making it the largest in the industry; and the compa- created “Fusion Journeys,” a concept that took artists to join ny’s LinkedIn page has 667,000 followers, also no. 1 in the airline fellow artists across the world to learn, teach, and even perform business. Emirates’ social media presence engages customers at with them in their own country. Finally, Emirates’ created the a high level, gets them talking with each other about the brand, “Inspired Culture” channel on Yahoo! Globally, where globalis- and weaves the brand into their daily lives through cross-media tas can access recommendations, videos, and content, engaging campaigns that integrate digital media with traditional tools to with other people and being inspired by their creations. connect with customers. A compelling example is the company’s The new global culture reached 43 million viewers across “Hello Tomorrow” campaign, which was launched in 2012 and 85 countries through the BBC, CNN, and Yahoo! Emirates’ positioned the global airline as the enabler of global connectivity consideration jumped from 38 percent to 69 percent among and meaningful experiences. Emirates wanted to be perceived as viewers and an impressive 84 percent of viewers exposed to the a lifestyle choice and to ensure that more people than ever will content reportedly believe Emirates was a brand that sought to fly Emirates. The target audience was “globalistas”—people who connect the world and create a “brighter future.” live to experience new cultures. Emirates was looking for a big Emirates has become the world’s most valuable airline idea that would build virtual bridges between globalistas and dif- brand, with an estimated value of $7.7 billion, according to the ferent cultures worldwide; inspire conversations on food, fashion, 2016 Brand Finance Global 500 report. It came out 47 places art, and music; and break the mold for a travel brand to engage above the next closest airline brand. As a result of its customer- with its audience and inspire discussions like never before. centric approach and integrated marketing campaigns (such Sir Maurice Flanagan, the founding CEO of Emirates and as the Hello Tomorrow initiative), Emirates has demonstrated the former executive vice-chairman of The Emirates Group, commitment, authenticity, relevance, and differentiation outside emphasized that Emirates is not just offering a way to connect the travel industry. Emirates has successfully changed the way people from point A to point B but is the catalyst to connect it reaches out to its customers by moving away from the prod- people’s dreams, hopes, and aspirations. He also stated that the uct and creating a discourse of global customer engagement.1 28 | pArt 1 Defining Marketing and the Marketing Process Objectives Outline Objective 1-1 Define marketing and outline the steps in the marketing process. What Is Marketing? (pp 28–30) 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 (pp 30–34) 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 Value–Driven Marketing Strategy and Plan (pp 34–38) Objective 1-4 Discuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return. Managing Customer Relationships and Capturing Customer Value (pp 38–46) Objective 1-5 Describe the major trends and forces that are changing the marketing landscape in this age of relationships. The Changing Marketing Landscape (pp 46–55) Today’s successful companies have one thing in common: Like Emirates, they are strongly customer focused and heavily committed to marketing. These companies share a passion for satisfying customer needs in well-defined target markets. They mo- tivate 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 reassessing how they engage with brands. New digital, mobile, and social media developments have revolutionized how consumers shop and interact, in turn call- ing for new marketing strategies and tactics. It’s now more important than ever to build strong customer engagement, relationships, and advocacy 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. Author Pause here and think about Comment how you’d answer this What Is Marketing? question before studying marketing. Marketing, more than any other business function, deals with customers. Although we will Then see how your answer changes as you read the chapter. soon explore more-detailed definitions of marketing, perhaps the simplest definition is this one: Marketing is engaging customers and managing profitable customer relationships. The two- fold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering value and satisfaction. For example, Nike leaves its competitors in the dust by delivering on its promise to inspire and help everyday athletes to “Just do it.” Amazon dominants the online market- place by creating a world-class online buying experience that helps customers to “find and discover anything they might want to buy online.” Facebook has attracted more than 1.5 billion active web and mobile users worldwide by helping them to “connect and share with the people in their lives.” And Coca-Cola has earned an impressive 49 percent global share of the carbonated beverage market—more than twice Pepsi’s share—by fulfilling its  ChAptEr 1 | Marketing: Creating Customer Value and Engagement 29 “Taste the Feeling” motto with products that provide “a simple pleasure that makes every- day moments more special.”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 marketing. But so do not-for-profit organizations, such as colleges, hospitals, museums, symphony orches- tras, 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 prod- ucts at your nearby 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, ev- erything from imaginative websites and smartphone apps to blogs, online videos, and social 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. They want to help you live their brands. At home, at school, where you work, and where