MarketingTh

e Roger A. KerinSouthern Methodist University

University of Denver

University of Minnesota

McGraw-HillIrwin

Boston Burr Ridge, IL Dubuque, IA Madison, Wl New York San Francisco St. LouisBangkok Bogota Caracas Kuala Lumpur Lisbon London Madrid Mexico CityMilan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto

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Parti Initiating the Marketing Process

1 CREATING CUSTOMER RELATIONSHIPS AND VALUETHROUGH MARKETING 2

How Do College Students Study? 3M's Response to aNew-Product Challenge! 3What Is Marketing? 4

Marketing and Your Career 4

Marketing Matters: Payoff for the Joys (!) andSleepless Nights (?) of Starting Your Own SmallBusiness: YouTubeW! 5

Marketing: Delivering Benefits to the Organization, ItsStakeholders, and Society 6The Diverse Factors Influencing Marketing Activities 6

How Marketing Discovers and Satisfies Consumer Needs 7Discovering Consumer Needs 7Satisfying Consumer Needs 10

The Marketing Program: How Customer RelationshipsAre Built 11

Customer Value and Customer Relationships 11Relationship Marketing and the Marketing Program 113M's Strategy and Marketing Program to Help StudentsStudy 12

How Marketing Became So Important 14Evolution of the Market Orientation 14Ethics and Social Responsibility: Balancing Interests 14The Breadth and Depth of Marketing 15

Learning Objectives Review 16Focusing on Key Terms 17Applying Marketing Knowledge 17Building Your Marketing Plan 18

Video Case 1: 3M's Post-it® Flag Highlighter: Extending the• Concept! 18

2 DEVELOPING SUCCESSFUL MARKETING ANDCORPORATE STRATEGIES 20

Can an "A" in an Ice Cream Making Course ReallyBecome a Business? 21Today's Organizations 22

Strategy and Visionary Organizations 22Organizational Foundation 22Organizational Direction 24Tracking Strategic Directions with Marketing Dashboards 25Organizational Structures and Strategies 27

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Setting Strategic Directions 28A Look Around: Where Are We Now? 28Growth Strategies: Where Do We Want to Go? 29

The Strategic Marketing Process 32The Planning Phase of the Strategic Marketing Process 32The Implementation Phase of the Strategic MarketingProcess 36The Evaluation Phase of the Strategic Marketing Process 37

Learning Objectives Review 39Focusing on Key Terms 40Applying Marketing Knowledge 40Building Your Marketing Plan 40

Video -Case 2: BP: Transforming Its Strategy "BeyondPetroleum" 41

Appendix A Building an Effective Marketing Plan 44

3 SCANNING THE MARKETING ENVIRONMENT 58

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Web 2.0 Is All About You! 59 j

Environmental Scanning 60

An Environmental Scan of Today's MarketplaceSocial Forces 60

Demographics 60

Marketing Matters: Generation Y Is Becominga Generation of Entrepreneurs! 63

Culture 65Economic Forces 65

Macroeconomic Conditions 65Consumer Income 66

Technological Forces 67Technology of Tomorrow 67Technology's Impact on Customer Value 68Electronic Business Technologies 68

Competitive Forces 69Alternative Forms of Competition 69Small Businesses as Competitors 69

Regulatory Forces 70Protecting Competition 70Product-Related Legislation 70

Making Responsible Decisions: Are Doppelgangers a FirstAmendment Right? 72

Pricing-Related Legislation 72Distribution-Related Legislation 73Advertising- and Promotion-Related LegislationControl through Self-Regulation 73

Learning Objectives Review 74

Focusing on Key Terms 75

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Applying Marketing Knowledge 75Building Your Marketing Plan 75

Video Case 3: Geek Squad: A New Business for a NewEnvironment 75

ETHICAL AND SOCIAL RESPONSIBILITY INMARKETING 78

There Is More to Anheuser-Busch Than Meets the Palate 79Nature and Significance of Marketing Ethics 80

Ethical/Legal Framework in Marketing 80Current Perceptions of Ethical Behavior 80

Understanding Ethical Marketing Behavior 81Societal Culture and Norms 81Business Culture and Industry Practices 82

Making Responsible Decisions: Corporate Conscience inthe Cola War 84

Corporate Culture and Expectations 84Your Personal Moral Philosophy and Ethical Behavior 85

Understanding Social Responsibility in Marketing 86Three Concepts of Social Responsibility 86The Social Audit: Doing Well by Doing Good 88

Marketing Matters: Will Consumers Switch Brands fora Cause? Yes, If... 90

Turning the Table: Consumer Ethics and SocialResponsibility 90

Learning Objectives Review 91Focusing on Key Terms 92Applying Marketing Knowledge 92Building Your Marketing Plan 92

Video Case 4: Starbucks Corporation: Serving More ThanCoffee 93

Part 2 Understanding Buyers and Markets5 UNDERSTANDING CONSUMER BEHAVIOR 96

Who's Really Buying That New Car? Just Ask Her! 97Consumer Purchase Decision Process and Experience 98

Problem Recognition: Perceiving a Need 98Information Search: Seeking Value 98Alternative Evaluation: Assessing Value 99Purchase Decision: Buying Value 100Postpurchase Behavior: Value in Consumption or Use 100Consumer Involvement Affects the Purchase Process 100Situational Influences 102

Psychological Influences on Consumer Behavior 103Motivation and Personality 103Perception 104

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Making Responsible Decisions: The Ethics of SubliminalMessages 105

Learning 106Values, Beliefs, and Attitudes 107Consumer Lifestyle 108

Sociocultural Influences on Consumer BehaviorPersonal Influence 109Reference Groups 110

Marketing Matters: BzzAgent—The BuzzExperience 111

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Family Influence 111Culture and Subculture 114

Learning Objectives Review 116Focusing on Key Terms 117Applying Marketing Knowledge 117Building Your Marketing Plan 117

Video Case 5: Best Buy: Using Customer Centricity to Connectwith Customers 118

UNDERSTANDING ORGANIZATIONS ASCUSTOMERS 120

Buying Paper Is a Global Business Decision at JCPenney 121The Nature and Size of Organizational Markets 122

Industrial Markets 122Reseller Markets 122Government Markets 122

Measuring Domestic and Global Industrial, Reseller, andGovernment Markets 123Characteristics of Organizational Buying 124

Demand Characteristics 124Size of the Order or Purchase 125Number of Potential Buyers 125Organizational Buying Objectives 126Organizational Buying Criteria 126

Marketing Matters: Harley-Davidson's SupplierCollaboration Creates Customer Value . .. and a GreatRide 127

Buyer-Seller Relationships and Supply Partnerships 127

Making Responsible Decisions: Scratching Each Other'sBack—The Ethics of Reciprocity in OrganizationalBuying 128

The Organizational Buying Process and the \Buying Center 128

Stages in the Organizational Buying Process 129The Buying Center: A Cross-Functional Group 129

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Online Buying in Organizational Markets 131Prominence of Online Buying in Organizational Markets 132E-Marketplaces: Virtual Organizational Markets 132

Marketing Matters: eBay Means Business forEntrepreneurs 133

Online Auctions in Organizational Markets 133

Learning Objectives Review 134Focusing on Key Terms 135Applying Marketing Knowledge 135Building Your Marketing Plan 135

Video Case 6: Lands' End: Where Buyers Rule 136

7 UNDERSTANDING AND REACHING GLOBALCONSUMERS AND MARKETS 138

Procter & Gamble Is Changing the Face of China 139Dynamics of World Trade 140

Decline of Economic Protectionism 140Rise of Economic Integration 140A New Reality: Global Competition among Global Companiesfor Global Consumers 142 r

Marketing Matters: The Global Teenager—A Market of500 Million Voracious Consumers with $100 Billion toSpend 144

Emergence of a Networked Global Marketspace 145A Global Environmental Scan 146

Cultural Diversity 146Economic Considerations 148Political-Regulatory Climate 150

Comparing Global Market-Entry Strategies 151Exporting 151

Marketing Matters: Creative Cosmetics and CreativeExport Marketing in Japan 152

Licensing 152Joint Venture 153Direct Investment 153

Crafting a Worldwide Marketing Program 154Product and Promotion Strategies 154Distribution Strategy 156Pricing Strategy 157

Learning Objectives Review 158Focusing on Key Terms 158Applying Marketing Knowledge 158 ,Building Your Marketing Plan 159

Video Case 7: CNS Breathe Right Strips:Going Global 159

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Part 3 Targeting Marketing Opportunities

MARKETING RESEARCH: FROM CUSTOMERINSIGHTS TO ACTIONS 162

Test Screenings: How Listening to Consumers ReducesMovie Risks 163

The Role of Marketing Research 164What Is Marketing Research? 164Why Good Marketing Research Is Difficult 164Five-Step Marketing Research Approach 165

Step 1: Define the Problem 166Set the Research Objectives 166Identify Possible Marketing Actions 166

Step 2: Develop the Research Plan 167Specify Constraints 167Identify Data Needed for Marketing Actions 167Determine How to Collect Data 167

Step 3: Collect Relevant Information 168Secondary Data: Internal 168Secondary Data: External 168Advantages and Disadvantages of Secondary Data 169

Marketing Matters: Online Databases and InternetResources Useful to Marketers 170

Primary Data: Observing Behavior 170Primary Data: Questioning Consumers 173

Marketing Matters: When Less Is More—Deleting Featuresto Open Up Huge Markets 175

Primary Data: Panels and Experiments 176Advantages and Disadvantages of Primary Data 177Syndicated Panel Data and Information Technology 178Using Information Technology to Trigger Marketing Actions 178

Step 4: Develop Findings 180Analyze the Data 180Present the Findings 180

Step 5: Take Marketing Actions 182Make Action Recommendations 182Implement the Action Recommendations 182

Sales Forecasting Techniques 182Judgments of the Decision Maker 183Surveys of Knowledgeable Groups 183Statistical Methods 183

Learning Objectives Review 184Focusing on Key Terms 185Applying Marketing Knowledge 185Building Your Marketing Plan 186

Video Case 8: Ford Consulting Group Inc.: From Data toActions 186 ^

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SEGMENTING MARKETS AND POSITIONINGOFFERINGS 188

Zappos.com: Powered by Service™ 189Why Segment Markets? 190

What Market Segmentation Means 190When and How to Segment Markets 191

Steps in Segmenting and Targeting Markets 194Step 1: Group Potential Buyers into Segments 194Step 2: Group Products Sold into Categories 197Step 3: Develop a Market-Product Grid and Estimate the Size ofMarkets 198Step 4: Select Target Markets 199Step 5: Take Marketing Actions to Reach Target Markets 200

Marketing Matters: Apple's Segmentation Strategy—CampRunamok No Longer 202

Market-Product Synergies: A Balancing Act 202Positioning the Product 203

Two Approaches to Product Positioning 203Writing a Positioning Statement 203

Learning Objectives Review 205Focusing on Key Terms 206Applying Marketing Knowledge 206Building Your Marketing Plan 206

Video Case 9: Rollerblade: Skates to Go Where YouWant to Go 206

Part 4 Satisfying Marketing Opportunities

10 DEVELOPING NEW PRODUCTS AND SERVICES 210

Apple's New-Product Revolutions 211What Are Products and Services? 212

A Look at Goods, Services, and Ideas 212Classifying Products 213

Product Items, Product Lines, and Product Mixes 214Classifying Services 214The Uniqueness of Services 215The Goods-Services Continuum 216

New Products and Why They Succeed or Fail 217What Is a New Product? 217

Marketing Matters: You Bought a Combination Computer,Lawn Mower, and Dishwasher? Better Call the GeekSquad! 219

Why Products Succeed or Fail 220

Using Marketing Dashboards: Which States AreUnderperforming? 223

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How Marketing Dashboards Can ReduceNew-Product Failures 223

The New-Product Process 224Stage 1: New-Product Strategy Development 224Stage 2: Idea Generation 224Stage 3: Screening and Evaluation 226Stage 4: Business Analysis 227Stage 5: Development 227Stage 6: Market Testing 228Stage 7: Commercialization 229

Learning Objectives Review 230Focusing on Key Terms 231Applying Marketing Knowledge 231Building Your Marketing Plan 231

Video Case 10: General Mills Warm Delights™: Indulgent,Delicious, and Gooey! 232

11 MANAGING PRODUCTS, SERVICES, ANDBRANDS 234

Gatorade: Satisfying the Unquenchable Thirst 235The Product Life Cycle 236

Introduction Stage 236Growth Stage 238Maturity Stage 239 ;

Marketing Matters: Will E-mail Spell Extinction for FaxMachines? 240

Decline Stage 240Some Dimensions of the Product Life Cycle 241

Managing the Product Life Cycle 243Role of a Product Manager 243Modifying the Product 243

Using Marketing Dashboards: Knowing Your CD! andBDI 244

Modifying the Market 244Repositioning the Product 245

Making Responsible Decisions: Consumer Economics ofDownsizing—Get Less, Pay More 246

Branding and Brand Management 247Brand Personality and Brand Equity 247Picking a Good Brand Name 249Branding Strategies 250

Marketing Matters: Creating Customer Value throughPackaging—Pez Heads Dispense More Than Candy 253

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Packaging and Labeling Products 253Creating Customer Value and Competitive Advantage throughPackaging and Labeling 253Contemporary Packaging and Labeling Challenges 255

Managing the Marketing of Services 256Product (Service) 256Price 256Place (Distribution) 257Promotion 257

Learning Objectives Review 258Focusing on Key Terms 258Applying Marketing Knowledge 258Building Your Marketing Plan 259

Video Case 11: Philadelphia Phillies Inc.: SportsMarketing 101 259

12 PRICING PRODUCTS AND SERVICES 262

Standing Tall in Starbury Signature Sneakers 263Nature and Importance of Price 264

What Is a Price? 264Price as an Indicator of Value 265Price in the Marketing Mix 266

General Pricing Approaches 266Demand-Oriented Pricing Approaches 266

Marketing Matters: Energizer's Lesson in PricePerception—Value Lies in the Eye of the Beholder 268

Cost-Oriented Pricing Approaches 268Profit-Oriented Pricing Approaches 269Competition-Oriented Pricing Approaches 270

Using Marketing Dashboards: Are Cracker Jack PricesAbove, At, or Below the Market? 271

Estimating Demand and Revenue 272Fundamentals of Estimating Demand 272Fundamentals of Estimating Revenue 274

Determining Cost, Volume, and Profit Relationships 274The Importance of Controlling Costs 275Break-Even Analysis 275

Pricing Objectives and Constraints 277Identifying Pricing Objectives 277Identifying Pricing Constraints 278

Setting a Final Price 280Step 1: Select an Approximate Price Level 280Step 2: Set the List or Quoted Price 281Step 3: Make Special Adjustments to the List or QuotedPrice 281

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Making Responsible Decisions: Flexible Pricing—Is ThereRace and Gender Discrimination in Bargaining for a NewCar? 282

Learning Objectives Review 284Focusing on Key Terms 284Applying Marketing Knowledge 284Building Your Marketing Plan 285

Video Case 12: The Starbury Collection: Setting a Price.Making a Difference. 285

13 MANAGING MARKETING CHANNELS AND SUPPLYCHAINS 288

Apple Stores: Creating a High-Touch Customer Experience in aHigh-Tech Marketing Channel 289Nature and Importance of Marketing Channels 290

What Is a Marketing Channel of Distribution? 290Value Is Created by Intermediaries 290

Marketing Channel Structure and Organization 292Marketing Channels for Consumer Goods and Services 292Marketing Channels for Business Goods and Services 293Electronic Marketing Channels 294Direct and Multichannel Marketing 295Dual Distribution and Strategic Channel Alliances 295Vertical Marketing Systems and Channel Partnerships 295

Marketing Matters: Nestle and General Mills—CerealPartners Worldwide 296

Marketing Channel Choice and Management 298Factors Affecting Channel Choice and Management 298Managing Channel Relationships: Conflict and Cooperation 300

Using Marketing Dashboards: Channel Sales and Profit atCharlesburg Furniture 301

Logistics and Supply Chain Management 302Supply Chains versus Marketing Channels 303Sourcing, Assembling, and Delivering a New Car: TheAutomotive Supply Chain 303Supply Chain Management and Marketing Strategy 304

Marketing Matters: IBM's Integrated Supply Chain—Delivering a Total Solution for Its Customers 305

Two Concepts of Logistics Management in a SupplyChain 306

Total Logistics Cost Concept 306Customer Service Concept 307

Learning Objectives Review 308Focusing on Key Terms 309Applying Marketing Knowledge 309

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Building Your Marketing Plan 309

Video Case 13: Golden Valley Microwave Foods: TheSurprising Channel 309

14 RETAILING AND WHOLESALING 312

Retailers Are Reinventing Their Stores to Match the Way YouWant to Shop! 313The Value of Retailing 314

Consumer Utilities Offered by Retailing 314The Global Economic Impact of Retailing 315

Classifying Retail Outlets 315Form of Ownership 316

Marketing Matters: Are You a Future RetailingEntrepreneur? 317

Level of Service 317Type of Merchandise Line 318

Nonstore Retailing 319Automatic Vending 319Direct Mail and Catalogs 320Television Home Shopping 321Online Retailing 321Telemarketing 322Direct Selling 322

Retailing Strategy 323Retail Pricing 323Store Location 324Retail CommunicationMerchandise 325

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Using Marketing Dashboards: Why Apple Stores May Bethe Best in the United States! 326

The Changing Nature of Retailing 327The Wheel of Retailing 327The Retail Life Cycle 328

Wholesaling 329Merchant Wholesalers 329Agents and Brokers 330Manufacturer's Branches and Offices 330

Learning Objectives Review 331Focusing on Key Terms 331Applying Marketing Knowledge 331Building Your Marketing Plan 332

Video Case 14: Mall of America: Shopping and a Whole LotMore 332

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15 INTEGRATED MARKETING COMMUNICATIONS ANDDIRECT MARKETING 334

How Do Marketers Fight the Game Console Wars? WithIntegrated Marketing Communications! 335The Communication Process 336

Encoding and Decoding 336Feedback 338Noise 338

The Promotional Elements 338Advertising 338Personal Selling 339Public Relations 340Sales Promotion 341Direct Marketing 341

Integrated Marketing Communications—Developing thePromotional Mix 342

The Target Audience 342The Product Life Cycle 342

Marketing Matters: Mobile Marketing ReachesGeneration Y, 32/7! 343

Channel Strategies 344Developing an IMC Program 345

Identifying the Target Audience 345Specifying Promotion Objectives 346Setting the Promotion Budget 346

Using Marketing Dashboards: How Much Should YouSpend on IMC? 347

Selecting the Right Promotional Tools 347Designing the Promotion 348Scheduling the-Promotion 348

Executing and Evaluating the Promotion Program 348Direct Marketing 350

The Growth of Direct Marketing 350The Value of Direct Marketing 350Technological, Global, and Ethical Issues in DirectMarketing 351

Making Responsible Decisions: Is Spam Out ofControl? 352

Learning Objectives Review 352Focusing on Key Terms 353Applying Marketing Knowledge 353Building Your Marketing Plan 354

Video Case 15: Las Vegas: Creating a Brand with IMC 354

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16 ADVERTISING, SALES PROMOTION, AND PUBLICRELATIONS 358

Advertisers Have Another Life on Second Life! 359Types of Advertisements 360

Product Advertisements 360Institutional Advertisements 361

Developing the Advertising Program 361Identifying the Target Audience 361Specifying Advertising Objectives 362Setting the Advertising Budget 362Designing the Advertisement 362Selecting the Right Media 364

Using Marketing Dashboards: What Is the Best Way toReach 1,000 Customers? 365

Different Media Alternatives 366

Making Responsible Decisions: Who Is Responsible forClick Fraud? 369

Scheduling the Advertising 370Executing the Advertising Program 371

Pretesting the Advertising 371Carrying Out the Advertising Program 371

Assessing the Advertising Program 372Posttesting the Advertising 372

Sales Promotion 373Consumer-Oriented Sales Promotions 373Trade-Oriented Sales Promotions 376

Public Relations 377

Learning Objectives Review 377Focusing on Key Terms 378Applying Marketing Knowledge 378Building Your Marketing Plan 379

Video Case 16: Fallon Worldwide: In the CreativityBusiness 379

17 PERSONAL SELLING AND SALESMANAGEMENT 382

Xerox Delivers an Exceptional Customer Experience by Sellingthe Way Customers Want to Buy 383Scope and Significance of Personal Selling and SalesManagement 384

Nature of Personal Selling and Sales Management 384Selling Happens Almost Everywhere 384Personal Selling in Marketing 385Creating Customer Solutions and Value through Salespeople:Relationship Selling 385

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The Many Forms of Personal Selling 385Order Taking 386

Order Getting 386The Personal Selling Process: Building Relationships 388

Prospecting 388

Preapproach 389

Approach 390

Presentation 390

Marketing Matters: Imagine This . . . ? Putting theCustomer into Customer Solutions! 392

Close 393Follow-Up 393

The Sales Management Process 393 -

Sales Plan Formulation: Setting Direction 393

Marketing Matters: Creating and Sustaining CustomerValue through Cross-Functional Team Selling 395

Sales Plan Implementation: Putting the Plan into Action 396

Salesforce Evaluation: Measuring Results 398

Salesforce Automation and Customer Relationship

Management 398

Using Marketing Dashboards: Tracking SalespersonPerformance at Moore Chemical & Sanitation SupplyInc. 399

Learning Objectives Review 400Focusing on Key Terms 401Applying Marketing Knowledge 401Building Your Marketing Plan 401

Video Case 17: Xerox: Building Customer Relationshipsthrough Personal Selling 402

18 IMPLEMENTING INTERACTIVE AND MULTICHANNELMARKETING 404

Seven Cycles. One Bike. Yours 405Creating Customer Value, Relationships, and Experiences inMarketspace 406

Customer Value Creation in Marketspace 406

Interactivity, Individuality, and Customer Relationships in

Marketspace 407

Creating an Online Customer Experience 409

Using Marketing Dashboards: Sizing Up Site Stickiness atSewell Automotive Companies 411

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Online Consumer Behavior and Marketing Practice inMarketspace 412

Who Is the Online Consumer? 412

Marketing Matters: Meet Today's Internet Mom—All 31Million! 413

What Online Consumers Buy 413

Why Consumers Shop and Buy Online 414

When and Where Online Consumers Shop and Buy 417

Making Responsible Decisions: Let the E-BuyerBeware 418

Cross-Channel Shoppers and Multichannel Marketing 418

Who Is the Cross-Channel Shopper? 418

Implementing Multichannel Marketing 419

Learning Objectives Review 420Focusing on Key Terms 421Applying Marketing Knowledge 421Building Your Marketing Plan 421

Video Case 18: McFarlane Toys: The Best of InteractiveMarketing 422

Appendix B Planning a Career in Marketing 424

Glossary 434Learning Review Answers 440Chapter Notes 447

Credits 468Name Index 470Company/Product Index 475

Subject Index 480