Marketing management Chapter 1 potx

Kotler's other books include Marketing Models; The New Competition; Marketing Professional Services; Strategic Marketing f o r Educational Institutions; Marketing f o r Health Care Orga

Upper Saddle River, New Jersey 07458

PHILIP KOTLER Northwestern University

Dartmouth College

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This book is dedicated to my wife and best friend, Nancy, with love

This book is dedicated to my wife, Punam, and my two daughters, Carolyn and Allison, with much love and thanks

DEDICATION

ABOUT THE AUTHORS

Philip Kotler is one of the world's leading authorities on marketing He is the 5 C

Johnson & Son Distinguished Professor of International Marketing at the Kellogg School of Management, Northwestern University He received his master's degree

at the University of Chicago and his Ph.D at MIT, both in economics He did doctoral work in mathematics at Harvard University and in behavioral science at the University of Chicago

post-Dr Kotler is the co-author of Principles of Marketing and Marketing: A n Introduction His Strategic Marketing for Nonprofit Organizations, now in its sixth edition, is the best seller in that specialized area Dr Kotler's other books include

Marketing Models; The New Competition; Marketing Professional Services; Strategic Marketing f o r Educational Institutions; Marketing f o r Health Care Organizations; Marketing Congregations; High Visibility; Social M a r k e t i n g ; 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 nals, including the Harvard Business Review, Sloan Management Review, Business Horizons, California Management Review, the Journal of Marketing, the Journal

jour-of Marketing Research, Management Science, the Journal jour-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 AM A in a 1975 survey He also received the 1978 Paul Converse Award of the AM A, honoring his original con- tribution 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 panies, including IBM, General Electric, AT&T, Honeywell, Bank of America, Merck, SAS Airlines, Michelin, and others in the areas of marketing strategy and planning, marketing organization, and international marketing

com-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 lec- turing to many companies about global marketing opportunities

Kevin Lane Keller 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 an MBA

elec-tive on strategic brand management and lectures in execuelec-tive programs on that

topic 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

market-ing group Additionally, he has been on the marketmarket-ing 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 is in consumer marketing His

spe-cific research interest is in how understanding theories and concepts related to

consumer behavior can improve marketing strategies The research has been

published in over fifty papers 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 His research has been widely cited and has received numerous awards

Professor Keller is acknowledged as one of the international leaders in the

study of brands, branding, and strategic brand management Actively involved

with industry, he has worked on a host of different types of marketing projects

He has served as brand confidant to marketers for some of the world's most

suc-cessful brands, including Accenture, American Express, Disney, Ford, Intel, Levi

Strauss, Miller Brewing, Procter & Gamble, and Starbucks He has done

addition-al brand consulting with other top companies such as Allstate, Beiersdorf (Nivea),

Blue Cross Blue Shield, Campbell Soup, General Mills, Goodyear, Kodak, The

Mayo Clinic, Nordstrom, Shell Oil, Unilever, and Young & Rubicam He is also an

academic trustee for the Marketing Science Institute A popular speaker, he has

conducted marketing seminars and workshops with top executives in a variety of

forums

Professor Keller is currently conducting studies that address marketing

strate-gies and tactics to build, measure, and manage brand equity His textbook on

those subjects, Strategic Brand Management, the second edition of which was

published September 2002 by Prentice-Hall, has been heralded as the "bible of

branding."

An avid sports, music, and film enthusiast, in his spare time, he helps to

man-age and market one of Australia's great rock and roll treasures, The Church

Professor Keller lives in New Hampshire with his wife, Punam (also a Tuck

mar-keting professor), and his two daughters, Carolyn and Allison

PART 5 S h a p i n g t h e M a r k e t O f f e r i n g s 3 7 0

Chapter 12 Setting Product Strategy 371 Chapter 13 Designing and Managing Services 401 Chapter 14 Developing Pricing Strategies and Programs 431

Appendix A1

Glossary G1 Image Credits C1

N a m e Index 11 Company, Brand, and Organization Index 14 Subject Index 112

MARKETING M E M O Marketers' Frequently Asked Questions 6

Exchange and Transactions 6 What Is Marketed? 8

W h o Markets? 10

M A R K E T I N G I N S I G H T N e w Consumer Capabilities 11 How Business and Marketing Are Changing 13

M A R K E T I N G M E M O The Ten Rules of Radical M a r k e t i n g 13

C o m p a n y O r i e n t a t i o n s T o w a r d t h e M a r k e t p l a c e 15 The Production Concept 15

The Product C o n c e p t 15 The Selling Concept 15 The Marketing Concept 16 The Holistic Marketing Concept 16

M A R K E T I N G I N S I G H T The Internet A d v a n t a g e 17

F u n d a m e n t a l M a r k e t i n g C o n c e p t s , Trends, a n d Tasks 24 Core Concepts 24

Shifts in Marketing Management 27 Marketing Management Tasks 29

The Business Mission 51 SWOT Analysis 52 Goal Formulation 54

M A R K E T I N G M E M O Checklist for Performing

Strengths/Weaknesses Analysis 55 Strategic Formulation 56

Program Formulation and Implementation 58

M A R K E T I N G I N S I G H T Marketing's C o n t r i b u t i o n t o

Shareholder Value 58 Feedback and Control 59

P r o d u c t Planning: The N a t u r e and C o n t e n t s of a M a r k e t i n g

M A R K E T I N G I N S I G H T P u t t i n g Data t o Work w i t h Business

Integration Software 75

A n a l y z i n g t h e M a c r o e n v i r o n m e n t 77

M A R K E T I N G M E M O Clicking on t h e C o m p e t i t i o n 77 Needs and Trends 77

M A R K E T I N G I N S I G H T Ten M e g a t r e n d s Shaping t h e

Consumer Landscape 78 Identifying the Major Forces 78

The D e m o g r a p h i c E n v i r o n m e n t 79

W o r l d w i d e Population Growth 79

Population A g e Mix 80 Ethnic and Other Markets 81 Educational Groups 83 Household Patterns 83 Geographical Shifts in Population 84

O t h e r M a j o r M a c r o e n v i r o n m e n t s 85

Economic Environment 85 Social-Cultural Environment 87 Natural Environment 89

M A R K E T I N G I N S I G H T Green M a r k e t i n g 91 Technological Environment 92

Political-Legal Environment 93

Summary 95

Applications 96

N o t e s 9 7

Chapter 4 Conducting Marketing Research and Forecasting Demand 101

The M a r k e t i n g Research System 102

The M a r k e t i n g Research Process 103

Step 1: Define the Problem, t h e Decision Alternatives, and the Research Objectives 104

Step 2: Develop the Research Plan 104

M A R K E T I N G I N S I G H T C o n d u c t i n g Informative Focus

Groups 106

M A R K E T I N G M E M O Questionnaire Dos and Don'ts 107

M A R K E T I N G I N S I G H T G e t t i n g i n t o Consumers' Heads with

Qualitative Research 109 Step 3: Collect the Information 112

M A R K E T I N G M E M O Pros and Cons of Online Research 113

M A R K E T I N G I N S I G H T Global Online Market Research

Challenges 114 Step 4: Analyze the Information 114 Step 5: Present t h e Findings 114 Step 6: Make the Decision 115

O v e r c o m i n g Barriers t o the Use of Marketing Research 116

M e a s u r i n g M a r k e t i n g P r o d u c t i v i t y 116

Marketing Metrics 117

M A R K E T I N G I N S I G H T Seeing the Big Picture and Getting

t o the Bottom Line in Marketing 117 Measuring Marketing Plan Performance 119

Profitability Analysis 122 Marketinq-Mix M o d e l i n g 125

3 3 XIII

[CONTENTS

F o r e c a s t i n g and D e m a n d M e a s u r e m e n t 125

The Measures of Market Demand 126

A Vocabulary for Demand Measurement 127 Estimating Current Demand 130

Chapter 5 Creating Customer Value, Satisfaction, and Loyalty 139

B u i l d i n g C u s t o m e r Value, S a t i s f a c t i o n , and Loyalty 140 Customer Perceived Value 141

Total Customer Satisfaction 144 Measuring Satisfaction 145 Product and Service Quality 146 Total Quality Management 147

M a x i m i z i n g Customer L i f e t i m e Value 148

Customer Profitability 149 Measuring Customer Lifetime Value 150 Customer Equity 151

C u l t i v a t i n g C u s t o m e r Relationships 152

Customer Relationship Management (CRM) 152

Equity Management 153

A t t r a c t i n g , Retaining, and Growing Customers 154

M A R K E T I N G M E M O How t o Handle Customer Complaints 156 Building Loyalty 157

Reducing Customer Defection 158 Forming Strong Customer Bonds 159

M E M O Asking Questions when Customers

Leave 159

M A R K E T I N G M E M O Forming Strong Customer Bonds 160

C u s t o m e r Databases and Database M a r k e t i n g 162

Customer Databases 162 Data Warehouses and Datamining 163 The Downside of Database Marketing and CRM 165

Summary 167

Applications 168

N o t e s 1 6 9

M A R K E T I N G M E M O The A v e r a g e A m e r i c a n Consumer

Quiz 181 Key Psychological Processes 184

M o t i v a t i o n : Freud, Maslow, Herzberg 184 Perception 185

Learning 187 Memory 187 The Buying Decision Process: The Five-Stage M o d e l 191 Problem Recognition 191

Information Search 191 Evaluation of Alternatives 193

M A R K E T I N G M E M O A p p l y i n g C u s t o m e r Value Analysis 196

Purchase Decisions 196 Postpurchase Behavior 198

O t h e r T h e o r i e s of C o n s u m e r Decision M a k i n g 199 Level of Consumer Involvement 200

Decision Heuristics and Biases 201

M A R K E T I N G M E M O Decision Traps 202

Mental Accounting 202 Profiling the Customer Buying Decision Process 203

M A R K E T I N G I N S I G H T Big Sales t o Small Business 210

Buying Situations 212

M A R K E T I N G M E M O Guidelines for Selling t o Small

Business 212 Systems Buying and Selling 213

P a r t i c i p a n t s in t h e Business Buying Process 214

The Buying Center 214 Buying Center Influences 215 Buying Center Targeting 215 The P u r c h a s i n g / P r o c u r e m e n t Process 217

Purchasing Orientations 218 Types of Purchasing Processes 218 Purchasing Organization and Administration 219 Stages in t h e Buying Process 219

Problem Recognition 220 General Need Description and Product Specification 221 Supplier Search 222

E-Procurement 222

M A R K E T I N G I N S I G H T The Business-to-Business (B2B)

Cyberbuying Bazaar 223 Proposal Solicitation 225

Business Relationships: Risks and O p p o r t u n i s m 230

M A R K E T I N G I N S I G H T Experiential M a r k e t i n g 245 Customerization 246

S e g m e n t i n g C o n s u m e r M a r k e t s 247

Geographic Segmentation 247

D e m o g r a p h i c Segmentation 249 Psychographic Segmentation 252

The Role of Brands 274

M A R K E T I N G M E M O The Brand Report Card 275 The Scope of Branding 275

Defining Brand Equity 276 Brand Equity as a Bridge 278 Brand Equity Models 278

M e a s u r i n g Brand Equity 288

M A R K E T I N G I N S I G H T The Brand Value Chain 288 Brand Audits 289

Brand Tracking 290 Brand Valuation 290

Brand Crisis 295

xvii

D e v i s i n g a B r a n d i n g S t r a t e g y 296 Branding Decision: To Brand or N o t t o Brand? 297 Brand Extensions 297

Brand Portfolios 301

M A R K E T I N G M E M O Research Insights on Brand

Extensions 301

Summary 3 0 3 Applications 3 0 3

M A R I E T I N G M E M O How t o Derive Fresh Consumer Insights t o

Differentiate Products and Services 318 Product Differentiation 319

Personnel Differentiation 319 Channel Differentiation 320 Image Differentiation 320

M a r k e t E v o l u t i o n 331

M A R K E T I N G I N S I G H T Dynamics of Attribute Competition 334

Summary 3 3 5 Applications 3 3 5

N o t e s 3 3 7

xviii

Chapter 11 Dealing w i t h Competition 341

C o m p e t i t i v e Forces 342

I d e n t i f y i n g C o m p e t i t o r s 343

Industry Concept of C o m p e t i t i o n 344 Market Concept of C o m p e t i t i o n 346

A n a l y z i n g C o m p e t i t o r s 347

Strategies 347 Objectives 347 Strengths and Weaknesses 347 Selecting C o m p e t i t o r s 348

C o m p e t i t i v e S t r a t e g i e s f o r M a r k e t Leaders 349

M A R K E T I N G M E M O Benchmarking t o Improve C o m p e t i t i v e

Performance 349 Expanding the Total Market 350

M A R K E T I N G I N S I G H T W h e n Your C o m p e t i t o r Delivers

M o r e f o r Less 351 Defending Market Share 352

Expanding Market Share 355

O t h e r C o m p e t i t i v e S t r a t e g i e s 355

Market-Challenger Strategies 355 Market-Follower Strategies 359

M A R K E T I N G M E M O M a k i n g Smaller Better 360 Market-Nicher Strategies 362

M A R K E T I N G M E M O Niche Specialist Roles 364

M A R K E T I N G M E M O Strategies f o r Entering Markets Held

by Incumbent Firms 364 Balancing C u s t o m e r and C o m p e t i t o r O r i e n t a t i o n s 365

C o m p e t i t o r - C e n t e r e d Companies 365 Customer-Centered Companies 365

xix

Services Differentiation 378

M A R K E T I N G I N S I G H T Design as a Powerful M a r k e t i n g

Tool 379

P r o d u c t and Brand Relationships 380

The Product Hierarchy 380 Product Systems and Mixes 381 Product-Line Analysis 382 Product-Line Length 384

M A R K E T I N G I N S I G H T Rationalizing Brand Portfolios

f o r G r o w t h 387 Product-Mix Pricing 387

Co-Branding and Ingredient Branding 390

P a c k a g i n g , L a b e l i n g , W a r r a n t i e s , and Guarantees 392

M A R K E T I N G M E M O Making Ingredient Branding W o r k 392 Packaging 393

Labeling 394 Warranties and Guarantees 395

M A R K E T I N G I N S I G H T Voice Mail Hell 410

M a n a g i n g Service Q u a l i t y 412

Customer Expectations 412 Best Practices of Service-Quality Management 414

M A R K E T I N G I N S I G H T The Role of Expectations in

Service-Quality Perceptions 415

M A R K E T I N G M E M O Assessing E-Service Quality 416

M A R K E T I N G M E M O Recommendations for Improving

Service Quality 417

M A R K E T I N G M E M O G e t t i n g Self-Service Kiosks Off t h e

G r o u n d 418

M a n a g i n g Service Brands 421

Differentiating Services 422 Developing Brand Strategies for Services 423

M A R K E T I N G I N S I G H T The Internet and Pricing Effects

on Sellers and Buyers 433 How Companies Price 433

Consumer Psychology and Pricing 434

S e t t i n g t h e Price 436

Step 1: Selecting t h e Pricing O b j e c t i v e 437

M A R K E T I N G M E M O W h e n t o Use Price Cues 437 Step 2: Determining D e m a n d 439

Step 3: Estimating Costs 441

M A R K E T I N G M E M O Three Myths about Pricing Strategy 441 Step 4: Analyzing C o m p e t i t o r s ' Costs, Prices, and Offers 443 Step 5: Selecting a Pricing M e t h o d 444

Step 6: Selecting the Final Price 448

M A R K E T I N G I N S I G H T Stealth Price Increases 449

A d a p t i n g t h e Price 450

Geographical Pricing (Cash, C o u n t e r t r a d e , Barter) 450 Price Discounts and Allowances 451

Promotional Pricing 452 Differentiated Pricing 453

I n i t i a t i n g and R e s p o n d i n g t o Price Changes 455

Initiating Price Cuts 455 Initiating Price Increases 455

M A R K E T I N G I N S I G H T Smart Pricing Takes Off 456

M A R K E T I N G M E M O M a r k e t i n g Strategies t o A v o i d Raising

Prices 458 Reactions to Price Changes 458 Responding to C o m p e t i t o r s ' Price Changes 460

Summary 4 6 1

Applications 4 6 1

N o t e s 4 6 3

PART 6 D e l i v e r i n g V a l u e 4 6 6

C h a p t e r 15 D e s i g n i n g a n d M a n a g i n g Value N e t w o r k s and Channels 467

M a r k e t i n g Channels a n d Value N e t w o r k s 468 The Importance of Channels 468

M A R K E T I N G I N S I G H T M-Commerce Opens Up N e w

O p p o r t u n i t i e s for Marketers 475 Service Sector Channels 476

C h a n n e l - D e s i g n Decisions 476 Analyzing Customers' Desired Service O u t p u t Levels 476 Establishing Objectives and Constraints 477

Identifying Major Channel Alternatives 477

M A R K E T I N G I N S I G H T How Carmax is Transforming

t h e A u t o Business 479 Evaluating the Major Alternatives 481

C h a n n e l - M a n a g e m e n t Decisions 483 Selecting Channel Members 483 Training Channel Members 483

M o t i v a t i n g Channel Members 483 Evaluating Channel Members 485

M o d i f y i n g Channel Arrangements 485 Channel I n t e g r a t i o n and Systems 486 Vertical Marketing Systems 486

M A R K E T I N G M E M O Designing a Customer-Driven

D i s t r i b u t i o n System 487 Horizontal Marketing Systems 488

Multichannel Marketing Systems 489

C o n f l i c t , C o o p e r a t i o n , and C o m p e t i t i o n 491 Types of Conflict and C o m p e t i t i o n 491 Causes of Channel Conflict 491

M a n a g i n g Channel Conflict 492 Legal and Ethical Issues in Channel Relations 493 E-Commerce M a r k e t i n g Practices 493

Pure-Click Companies 494

M A R K E T I N G I N S I G H T Burst of t h e D o t - C o m Bubble 495 Brick-and-Click Companies 495

xxii

M A R K E T I N G I N S I G H T Franchise Fever 508

M A R K E T I N G M E M O H e l p i n g Stores t o Sell 509 Marketing Decisions 509

M A R K E T I N G I N S I G H T M a k i n g Labels Smarter 513

M A R K E T I N G M E M O W h a t W o m e n Want f r o m Customer

Service 514 Trends in Retailing 517

Private Labels 518

House Brands 518 The Private Label Threat 519

W h o l e s a l i n g 520

The Growth and Types of Wholesaling 521 Wholesaler Marketing Decisions 521 Trends in Wholesaling 522

M a r k e t Logistics 523

M A R K E T I N G M E M O Strategies f o r High-Performance

W h o l e s a l e r - D i s t r i b u t o r s 524 Integrated Logistics Systems 524

Market-Logistics Objectives 525 Market-Logistics Decisions 526 Organizational Lessons 529

M A R K E T I N G I N S I G H T Celebrity Endorsements as a

Strategy 547 Select the Communications Channels 548

M A R K E T I N G I N S I G H T Buzz M a r k e t i n g 549 Establish t h e Total Marketing Communications Budget 552

M A R K E T I N G I N S I G H T H i t t i n g t h e Bull's Eye in a

Post-Mass-Market W o r l d 553

D e c i d i n g on t h e M a r k e t i n g C o m m u n i c a t i o n s M i x 554 Characteristics of the Marketing Communications Mix 555 Factors in Setting the Marketing Communications Mix 556 Measuring Communication Results 557

M a n a g i n g t h e I n t e g r a t e d M a r k e t i n g C o m m u n i c a t i o n s Process 558

N o t e s 5 6 4 Chapter 18 Managing Mass Communications: Advertising, Sales

Promotions, Events, and Public Relations 567

D e v e l o p i n g and M a n a g i n g an A d v e r t i s i n g P r o g r a m 568 Setting t h e Objectives 568

D e c i d i n g on the Advertising Budget 569

D e v e l o p i n g the Advertising Campaign 570

M A R K E T I N G M E M O Print AD Evaluation Criteria 573

D e c i d i n g on M e d i a and M e a s u r i n g Effectiveness 574 Deciding on Reach, Frequency, and Impact 574 Choosing A m o n g Major Media Types 575 Alternative Advertising O p t i o n s 576 Selecting Specific Vehicles 579

M A R K E T I N G I N S I G H T Playing Games w i t h Brands 581 Deciding on Media Timing and Allocation 581

Evaluating Advertising Effectiveness 583

How t o Sell in Hard Times 584

M A R K E T I N G I N S I G H T Understanding t h e Effects of

A d v e r t i s i n g and Promotion 585 xxiv

Sales P r o m o t i o n 585

Objectives 585 Advertising versus Promotion 586 Major Decisions 587

Events and Experiences 591

Events Objectives 591 Major Decisions 592 Public Relations 593

Marketing Public Relations 594 Major Decisions in Marketing PR 595

Summary 5 9 6

Applications 5 9 7

N o t e s 5 9 8

Chapter 19 Managing Personal Communications: Direct M a r k e t i n g

and Personal Selling 603

M a n a g i n g t h e Sales Force 6 2 0

Recruiting and Selecting Representatives 620 Training and Supervising Sales Representatives 620 Sales Rep Productivity 621

Motivating Sales Representatives 623 Evaluating Sales Representatives 624

Principles of Personal Selling 625 The Six Steps 626

M A R K E T I N G I N S I G H T Principles of C u s t o m e r - O r i e n t e d

Selling 627

N e g o t i a t i o n 627 Relationship Marketing 628

Summary 6 2 8 Applications 6 2 9

M a n a g i n g t h e D e v e l o p m e n t Process: Ideas 640 Idea Generation 640

M A R K E T I N G M E M O Ten Ways t o Great New-Product

Ideas 642 Idea Screening 643

M A R K E T I N G I N S I G H T D e v e l o p i n g Successful High-Tech

Products 644

M a n a g i n g t h e D e v e l o p m e n t Process: C o n c e p t t o S t r a t e g y 645

C o n c e p t D e v e l o p m e n t a n d Testing 645 Marketing Strategy 648

Business Analysis 649

M a n a g i n g t h e D e v e l o p m e n t Process: D e v e l o p m e n t

t o C o m m e r c i a l i z a t i o n 651 Product D e v e l o p m e n t 651 Market Testing 653

Commercialization 655 The C o n s u m e r - A d o p t i o n Process 658 Stages in the A d o p t i o n Process 659 Factors Influencing the A d o p t i o n Process 659

Summary 6 6 1 Applications 6 6 1

N o t e s 6 6 3

vi

Chapter 21 Tapping into Global Markets 667

Evaluating Potential Markets 673

D e c i d i n g H o w t o Enter t h e M a r k e t 674

Indirect and Direct Export 674 Using a Global W e b Strategy 675 Licensing 676

Joint Ventures 676 Direct Investment 677

M A R K E T I N G M E M O Characteristics of Company

D e p a r t m e n t s That Are Truly Customer-Driven 698 Relations with O t h e r Departments 703 Building a Creative Marketing Organization 704

M A R K E T I N G I N S I G H T The M a r k e t i n g CEO 705 Socially Responsible M a r k e t i n g 706

M A R K E T I N G I N S I G H T Fueling Strategic Innovation 706 Corporate Social Responsibility 707

Socially Responsible Business Models 709 Cause-Related Marketing 709

M arketing Management is the leading marketing text because its content and

organ-ization 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 fundamental 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 even part of the marketing vocabulary then Firms now sell goods and services through a variety of direct and indirect channels Mass advertising is not nearly as effective as it was Companies are exploring new forms of communication, such

as experiential, entertainment, and viral marketing Customers are increasingly telling companies what types of product or services they want and when, where, and how they want to buy them

In response, companies have shifted gears from managing product portfolios to ing customer portfolios, compiling databases on individual customers so they can under-stand them better, and construct individualized offerings and messages They are doing less product and service standardization and more niching and customization They are replac-ing monologues with customer dialogues They are improving their methods of measuring customer profitability and customer lifetime value They are intent on measuring the return

manag-on their marketing investment and its impact manag-on shareholder value They are also cmanag-oncerned 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 under-taking It drives the company's vision, mission, and strategic planning Marketing includes decisions like who the company wants as its customers; which needs to satisfy; what prod-ucts and services to offer; 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 quality materials, pro-duction makes quality products on time, and accounting measures the profitability of dif-ferent customers, products, and areas

And as marketing techniques and organization have changed, so has this text The biggest change is the addition of a co-author Kevin Lane Keller is one of the top marketing aca-demics of his generation He has conducted ground-breaking research and written a highly

successful text, Strategic Brand Management He has also worked with marketing executives

from companies around the globe to help them become better marketers He brings fresh

thinking and new perspectives to Marketing Management

The twelfth edition reflects a collaborative effort between the two authors with a goal of

creating the best edition of Marketing Management ever Extensive focus groups were

con-ducted to fully understand the course and classroom needs of the instructor Based on this input, the twelfth edition is designed to preserve the strengths of previous editions while introducing new material and organization to further enhance learning It is dedicated to helping companies, groups, and individuals adapt their marketing strategies and manage-ment to the marketplace realities of the twenty-first century

Ill Revision Strategy for the Twelfth Edition

Marketing is of interest to everyone, whether they are marketing goods, services, properties, persons, places, events, information, ideas, or organizations As the "ultimate authority" for

students and educators, Marketing Management must be kept up-to-date and

contempo-rary Students (and instructors) should feel that the book is talking directly to them in terms

of both content and delivery

The success of Marketing Management can be attributed to its ability to maximize three

dimensions that characterize the best marketing texts—depth, breadth, and relevance—as reflected by the following questions

n Depth Does the book have solid academic grounding? Does it contain important retical concepts, models, and frameworks? Does it provide conceptual guidance to solve practical problems?

theo-! Breadth Does the book cover all the right topics? Does it provide the proper amount of emphasis on those topics?

i" Relevance Does the book engage the reader? Is the book interesting to read? Does it have lots of compelling examples?

The twelfth edition builds on the fundamental strengths of past editions:

n Managerial Orientation The book focuses on the major decisions that marketing agers and top management face in their efforts to harmonize the organization's objec-tives, capabilities, and resources with marketplace needs and opportunities

man-I Analytical Approach This book presents conceptual tools and frameworks for analyzing recurrent problems in marketing management Cases and examples illustrate effective marketing principles, strategies, and practices

n Multidisciplinary Perspective This book draws on the rich findings of various scientific disciplines—economics, behavioral science, management theory, and mathematics—for fundamental concepts and tools

n Universal Applications This book applies strategic thinking to the complete spectrum of marketing: products and services, 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

I Comprehensive and Balanced Coverage This book covers all the topics an informed marketing manager needs to understand to execute strategic, tactical, and administrative marketing

N e w Themes: Holistic M a r k e t i n g

One major new theme in this edition is holistic marketing Holistic marketing can be seen

as the development, design, and implementation of marketing programs, processes, and activities that recognize the breadth and interdependencies involved today's marketing environment Holistic marketing recognizes that "everything matters" with marketing and that a broad, integrated perspective is often necessary Holistic marketing has four key dimensions:

1 Internal marketing-ensuring everyone in the organization embraces appropriate keting principles, especially senior management

mar-2 Integrated marketing-ensuring that multiple means of creating, delivering and municating value are employed and combined in the optimal manner

com-3 Relationship marketing-having rich, multi-faceted relationships with customers, nel members and other marketing partners

chan-4 Socially responsible marketing-understanding the ethical, environmental, legal, and social effects of marketing

These four dimensions are woven throughout the book and at times spelled out explicitly

Two additional themes of this text are marketing personalization and marketing ity The former reflects all the attempts to make marketing more individually relevant; the lat-

accountabil-ter reflects the need to understand and justify the return on marketing investments within organizations

Organization

The twelfth edition preserves the major topics of the eleventh edition, but reorganizes them into a new modular structure There are now eight parts as compared to five to allow for greater flexibility in the classroom

Part 1 Understanding Marketing Management

Part 2 Capturing Marketing Insights

Part 3 Connecting with Customers

Part 4 Building Strong Brands

Part 5 Shaping the Market Offerings

Part6 Delivering Value

Part 7 Communicating Value

Part 8 Creating Successful Long-Term Growth

The most significant organizational changes are:

i A new part on capturing marketing insights that includes the two research-oriented ters, placed even earlier in the book (Chapters 3 and 4)

chap-a A new section on creating long-term growth that brings together chapters on new ucts and new markets (global) as well as a revised concluding chapter, placed at the end

prod-of the book (Chapters 20-22)

• Chapters 16 and 17 are now aligned more definitely in terms of mass and personal munications

com-• The marketing plan material has been upgraded and moved into Chapter 2 to help dents gain concrete marketing skills We have also created an appendix to Chapter 2 with

stu-an illustrative example of stu-an actual compstu-any marketing plstu-an stu-and stu-another appendix to the book itself with a series of marketing plan exercises

• The new Marketing Plan appendix, at the end of the book, provides detailed information

on how to develop a marketing plan and includes a series of exercises to help students develop a formal marketing plan using the hypothetical example of Sonic PDA

• A Glossary containing all the key terms and definitions has been added at the end of the book Chapter by Chapter Changes

This edition has been both streamlined and expanded to bring essentials and classic ples into sharper focus, while covering new concepts and ideas in depth Some chapters received more extensive revisions than others Here is an overview of the chapter changes:

exam-Chapter 1, Defining Marketing for the 21st Century, now consolidates the "big picture"

material from the first two chapters of the eleventh edition to introduce key marketing topics, how they have changed and are likely to change in the future

Chapter 2, Developing Marketing Strategies and Plans, provides more discussion on

holis-tic marketing and more detail on marketing plans, including a sample marketing plan

Chapter 3, Gathering Information and Scanning the Environment, is now couched in

terms of macro approaches to marketing research

Chapter 4, Conducting Marketing Research and Forecasting Demand, is framed in terms

of micro approaches and includes a new section on Marketing Productivity

Chapter 5, Creating Customer Value, Satisfaction, and Loyalty, consolidates material from

several chapters related to customers and introduces new material on Customer Equity

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Chapter 6, Analyzing Consumer Markets, introduces a new section on Other Theories of

Consumer Decision-Making

Chapter 7, Analyzing Business Markets, contains a section on Managing

Business-to-Business Customer Relationships

Chapter 8, Identifying Market Segments and Targets, adds new material on local

market-ing, conversion marketmarket-ing, experiential marketing and marketing to Generation Y

Chapter 9, Creating Brand Equity, has been completely reworked and expanded to

cap-ture more of the important concepts in building, measuring, and managing brand equity

Chapter 10, Crafting the Brand Positioning, introduces a contemporary approach to

posi-tioning based on the concepts of points-of-parity and points-of-difference

Chapter 11, Dealing with Competition, includes fresh material on how to increase

Chapter 14, Developing Pricing Strategies and Programs, contains a new section on

understanding pricing with material on consumer psychology and pricing

Chapter 15, Designing and Managing Value Networks and Channels, includes material on

e-commerce marketing practices and new material on channel power, conflict and cooperation

Chapter 16, Managing Retailing, Wholesaling, and Logistics, includes relevant material on

store activities and experiences and has been reorganized to include private labels

Chapter 17, Designing and Managing Integrated Marketing Communications, introduces

a section on the Role of Marketing Communications and information on coordinating media

Chapter 18, Managing Mass Communications: Advertising, Sales Promotions, Events, and Public Relations, includes a new section on Events and Experiences Marketing

Chapter 19, Managing Personal Communications: Direct Marketing and Personal Selling,

introduces new material on interactive marketing

Chapter 20, Introducing New Market Offerings, includes new material on idea generation Chapter 21, Tapping into Global Markets, covers new material on country-of-origin

effects

Chapter 22, Managing a Holistic Marketing Organization, contains new sections on

social marketing and the future of marketing

Additional concepts that have been added or explored in greater detail include: brand management principles, cause-related marketing, consumer decision heuristics, consumer involvement, consumer memory models, events and experiences, innovation and creativity, qualitative research techniques, marketing metrics, mental accounting, reference prices, and sponsorships

Each chapter includes:

Chapter Introduction, which includes brief commentary and a short vignette that set

the stage for the chapter material to follow By covering topical brands or companies, the vignettes serve as great discussion starters

Marketing Insight boxes that delve into important marketing topics, often highlighting current research findings New and updated Marketing Insight boxes include such top-ics as "Views on Marketing from Chief Executive Officers," "Progress and Priorities in Customer Equity Management," "Consumer Trends for the Future," and "Small Business, Big Sales: The Burgeoning Small-Midsize Business Market."

Marketing Memo boxes that offer practical advice and directions in dealing with various decisions at all stages of the marketing management process New and updated Marketing Memo boxes include "Managing Customer Knowledge," "Decision Traps,"

"Average American Consumer Quiz," and "Guidelines for Selling to Small Businesses." Text Examples Each chapter also includes 10-15 in-text examples that provide vivid illus-trations of chapter concepts using actual companies and situations Virtually all these examples of good and bad company marketing practices are new to the twelfth edition and cover a variety of products, services, and markets Many have accompanying illus-trations in the form of ads or product shots

End-of-Chapter Exercises These include Marketing Applications and the Marketing Spotlight

n The Marketing Applications section has two practical exercises to challenge students: Marketing Debate suggests opposing points-of-view on an important marketing topic from the chapter and asks student to take a side Marketing Discussion identifies provoca-

tive marketing issues and allows for a personal point-of-view

Q The Marketing Spotlight, an in-depth examination of one of the world's most successful

marketing companies, includes questions for class discussion or student assignments The Teaching a n d Learning P a c k a g e

Marketing Management is an entire package of materials available to students and

instruc-tors This edition includes a number of ancillaries designed to make the marketing ment course an exciting, dynamic, interactive experience

manage-M a r k e t i n g manage-Management Cases

Prentice Hall Custom Business Resources can provide instructors and students with all of 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 rep or visit the Prentice Hall Custom Business Resources Web site at www.prenhall.com/custombusiness Instructor's Resource Manual

Prepared by Ronald N Borrieci, the Instructor's Resource Manual includes

chapter/summa-ry overviews, key teaching objectives, answers to end-of-chapter materials, Harvard Business School case suggestions, exercises, projects, and detailed lecture outlines A new feature, "Professors on the Go!", was created with the busy professor in mind It brings key material upfront, where an instructor who is short on time can find key points and assign-ments that can be incorporated into the lecture, without having to page through all the material provided for each chapter

Instructor's Resource Center (IRC)

H IRC—CD-ROM: One source for all of your supplement needs New interface and able database makes sorting through and locating specific resources easier than ever before Includes all the same supplements hosted at our IRC Online; however, the PowerPoint Media Rich set is provided only on this CD-ROM due to its larger file size and

search-embedded video clips The CD-ROM also contains many images from the textbook, which you may incorporate into your lectures

i IRC—ONLINE: One destination for all of your supplement needs The Prentice 1 lall log at www.prenhall.com/marketing is where instructors can access our complete array

cata-of teaching materials Simply go to the catalog page for this text and click on the Instructor link to download the Instructor's Manual, Video Guide, Test Item File, TestGen

EQ, PowerPoint slides (Basic only), and more

NOTE: Prentice Hall manually checks every password request and verifies each individual's

instruc-tor status before issuing a password

Test Item File

Prepared by John R Brooks, Jr of Houston Baptist University, the Test Item File contains more than 3,000 multiple-choice, true-false, short-answer, and essay questions, with page refer-

ence and difficulty level provided for each question A new feature is an entire section cated to application questions These real-life situations take students beyond basic chapter

dedi-concepts and vocabulary and ask them to apply marketing skills Prentice Hall's TestGen EQ test-generating software is new for this edition This supplement is available in two places:

Download from the IRC Online (www.prenhall.com/kotler) or from the IRC on CD-ROM

i PC/Mac compatible and preloaded with all of the Test Item File questions

I Manually or randomly view test bank questions and drag-and-drop to create a test

• Add or modify test bank questions using the built-in Question Editor

• Print up to 25 variations of a single test and deliver the test on a local area network using the built-in QuizMaster feature

• Free customer support is available at media.supportOO am and 5:00 pin CST

PowerPoints

When it comes to PowerPoints, Prentice Hall knows one size does not fit all That's why

Marketing Management 12e offers instructors more than one option

i PowerPoint BASIC: This simple presentation includes only basic outlines and key points from each chapter No animation or forms of rich media are integrated, which makes the total file size manageable and easier to share online or via email BASIC was also designed for instructors who prefer to customize PowerPoints or want to avoid having to strip out animation, embedded files, or other media rich features

i PowerPoint MEDIA RICH: This media rich alternative includes basic outlines and key points from each chapter, plus advertisements and art from the text, images from outside the text, discussion questions, Web links, and embedded video snippets from the accom-panying video library The best option if you want a complete presentation solution Instructors can further customize this presentation using the image library featured on the IRC on CD-ROM Both the BASIC and MEDIA RICH version of slides were authored by Mark E Collins

Aside from these three PowerPoint options, a select number of slides, based on the MEDIA RICH version, are also available as overhead transparencies

M a r k e t i n g Management Video Gallery 2006

Make your classroom "newsworthy." PH has updated the Marketing Management video library for the 12th Edition Using today's popular newsmagazine format, students are taken

on location and behind closed doors Each news story profiles a well-known or

up-and-coming company leading the way in its industry More than twenty new video clips

accom-pany this edition, covering key topics using leading companies such as American Express,

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Song Airlines, the NFL, Eaton, and Wild Planet Issue-focused footage includes 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, discus-sion questions, and teaching suggestions, is available to accompany the video library Companion Web Site

at www.prenhall.com/kotler This FREE site offers students valuable resources Two quizzes are offered per chapter The Concept Check Quiz is to be administered prior to reviewing the chapter, in order to assess students' initial understanding The Concept Challenge Quiz is to

be administered after reviewing the chapter Also featured is the text glossary, plus a link to the new Instructor's Resource Center

M a r k e t i n g Plan: A Handbook, 2nd e d i t i o n w i t h MarketingPlan Pro 6.0

Marketing PlanPro is a highly rated commercial software program that guides students through the entire marketing plan process The software is totally interactive and features ten 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 outlined steps from strategy to implementation Click to print, and your text, spread-

sheet, and charts come together to create a powerful marketing plan The new Marketing Plan: A 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 examples that illustrate key points, sample marketing plans, and Internet resources The Handbook and Marketing PlanPro software are available as value-pack items at a dis-counted price Contact your local Prentice Mall representative for more information