Philip Kotler° Kevin Lane Keller ° Taihong Lu

Prentice Hallis an imprint of

Singapore London New York Toronto Sydney Tokyo MadridMexico City Munich Paris Capetown Hong Kong. Montreal

CONTENTS

List of Cases by Industry xxxvii

Preface xli

About the Book xlvii

Acknowledgment Iv

PART I Recognizing the Bases for Marketing Management

Chapter 1 Understanding Marketing for the 21st Century 2

The Importance and Scope of Marketing 4

The Importance of Marketing 4

MARKETING INSIGHT: Improve CMO Success 5

The Scope of Marketing 6

MARKETING IN CHINA: Hong Kong's Independent CommissionAgainst Corruption (ICAC) 8

The Marketing Philosophy 10

The Production-Oriented 10 ,

The Product-Oriented 10

The Selling-Oriented 11

The Marketing-Oriented 11

The Holistic Marketing-Oriented 11

The Core Concepts of Marketing 15

Needs, Wants and Demands 15

Exchange and Transactions 16

Target Markets, Positioning, and Segmentation 16

Offerings and Brands 17

Value and Satisfaction 17

Marketing Channels 17

Supply Chain 18

Competition 18

Marketing Environment 18

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Dynamic Marketing Management 18

Transformation Marketing 18

MARKETING IN CHINA: The Transformation of Amway in China 22

Marketing Management Tasks 25

CHAPTER CASE: Coca-Cola 27

Chapter Summary 28

Marketing Discussion 29

Chapter 2 Examining the Infrastructure for Marketing Management 32

Marketing Management Systems 34

Marketing Strategic System 35

Marketing Integrated Tactical System 35

Developing Marketing Strategy 36

Core Competencies 36

MARKETING INSIGHT: Becoming a Vigilant Organization 39

Corporate Division and Strategic Planning 39

Business Unit Strategic Planning 43

The Nature and Contents of a Marketing Plan 46

Marketing Information System 47

Internal Records 47 '

MARKETING IN CHINA: Taobao (Alibaba) 48

Marketing Intelligence System 51

MARKETING INSIGHT: Challenges of Market Research in China 52

Marketing Research System 52

CHAPTER CASE: Budweiser 59

Chapter Summary 60

Marketing Discussion 61

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PART II Assessing Market Orientation and Customer Value 64

Chapter 3 Scanning the Marketing Environment and Capturing Markets 66

Analyzing Macroenvironment 68

7 Natural Environment 68

Demographic Environment 69

Economic Environment 74

INNOVATIVE MARKETING: Hong Kong's "Free Travel" Seizes MarketOpportunity 76

Socio-Cultural Environment 78

Technological Environment 79

Political-Legal Environment 80

Forecasting and Demand Measurement 80

MARKETING IN CHINA: Characteristics of China's Transforming Market 81

Which Market to Measure? 82

Demand Measurement 83

Company Demand and Sales Forecast 84

Estimating Current Demand 84

Estimating Future Demand 86

MARKETING IN CHINA: China's Emergent Middle Class 87

Market Evolution 88

Growth 89

Maturity 89

CHAPTER CASE: Vanke Group Ltd. 90

Chapter Summary 92

Marketing Discussion 92

Chapter 4 Creating Customer Value and Customer Relationship 94

Marketing and Customer Value 96

The Value Delivery Process 96

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A Holistic Marketing Orientation and Customer Value 97

MARKETING INSIGHT: The Value Chain 98

INNOVATIVE MARKETING: Hewlett Packard Co. vs Dell Inc. 99

Defining Customer Value and Satisfaction 101

MARKETING IN CHINA: How Warner Coped with China's PirateDVD Market 106 -

Cultivating Customer Relationships 109

Five Levels of Relationship Marketing 109

Customer Relationship Management 109

Attracting, Retaining, and Growing Customers 111

Forming Strong Customer Bonds 113

Building Customer Equity 115

Customer Profit Ability 116

Maximizing Customer Lifetime Value '117

Brand Equity and Customer Equity 118

MARKETING INSIGHT: Winning Back Lost Customers 119

Customer Databases and Database Marketing 120

Data Warehouses and Data Mining 120

The Downside of Database Marketing and CRM 121

CHAPTER CASE: Yum! China 122

Chapter Summary 124

Marketing Discussion 124

Chapter 5 Analyzing Consumer Markets 128

What Influences Consumer Behavior? 130

INNOVATIVE MARKETING: IKEA 130

Cultural Factors 131

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Social Factors 132

Personal Factors 134

MARKETING IN CHINA: The One-Child Generation 135

Key Psychological Processes 138

Motivation 138

MARKETING IN CHINA: Transition of the Female Social Role in China 139

Perception 141

Learning 142

Memory 142

MARKETING INSIGHT: Numerology on Chinese Behavior 144

The Buying Decision Process: The Five-Stage Model 146

Problem Recognition 146

Information Search 146•i

Evaluation of Alternatives 147

Purchase Decisions 148

Postpurchase Behavior 149

Other Theories of Consumer Decision Making 150

Level of Consumer Involvement 150

Decision Heuristics and Biases 151

Mental Accounting 151

Profiling the Customer Buying Decision Process 151

The Consumer Adoption Process 151

MARKETING INSIGHT: How Consumers Really Make Decisions 152

Stages in the Adoption Process 152

Factors Influencing the Adoption Process 153

CHAPTER CASE: Tide in China (P&G)—Diao's challenge 155

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Chapter Summary 158

Marketing Discussion 158

Chapter 6 Analyzing Business Markets 162

What is Organizational Buying? 164

The Business Market Versus the Consumer Market 164

MARKETING INSIGHT: Big Sales to Small Business 166

Institutional and Organizational Markets 166

Buying Situations 168

Systems Buying and Selling 169

Participants in the Business Buying Process 169

The Buying Center 170

Buying Center Influences 171

Buying Center Targeting 171 i

Stages in the Business Buying Process 172

Problem Recognition 172

MARKETING IN CHINA: Tetra Pak in China 173

General Need Description and Product Specification 176

Supplier Search 176

Proposal Solicitation 176

Supplier Selection 177

Order-Routine Specification 177

INNOVATIVE MARKETING: General Electric 178

Performance Review 179

Business Relationships 179

Overcoming Price Pressures 180

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Risks and Opportunism 181

CHAPTER CASE: How Wal-Mart Does Purchasing in China 182

Chapter Summary 185

Marketing Discussion 185

PART III Choosing Value 188

Chapter 7 Identifying Market Segments and Targets 190

MARKETING INSIGHT: Chasing the Long Tail 192

Levels of Market Segmentation 192

Segment Marketing 192

Niche Marketing 193

Local Marketing 194

Customerization 195

Patterns of Market Segmentation 195

MARKETING IN CHINA: China Mobile's Market Segmentation Strategy 196

Segmenting Consumer and Business Markets 197

Bases for Segmenting Consumer Markets 197

MARKETING INSIGHT: The Cohorts in China 200

Bases for Segmenting Business Markets 203

MARKETING INSIGHT: Trading Up and Trading Down: The New Consumer 204

Market Targeting 205

Effective Segmentation Criteria 206

Evaluating and Selecting Market Segments 207

Additional Considerations 209

MARKETING INSIGHT: Regional Consumption Difference in China 210

CHAPTER CASE: Future Cola 211

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Chapter Summary 213

Marketing Discussion 213

Chapter 8 Creating Positioning and Dealing with Competition 216

Developing and Communicating a Positioning Strategy 218

Competitive Frame of Reference 219

Points-of-Parity and Points-of-Difference 219

Establishing Category Membership 220

Communicating Category Membership 220

Choosing and Creating POPs/PODs 221

Creating POPs and PODs 221

Differentiation Strategies 222

MARKETING IN CHINA: Repositioning of Wong Lo Kat 223

Product Differentiation 225 '

Services Differentiation 226

Channel Differentiation 226

Personnel Differentiation 227

Brand Image Differentiation 227

Competitive Forces and Competitors 227

Identifying and Analyzing Competitors 229

Analyzing Competition 230

INNOVATIVE MARKETING: Accenture 232

Balancing Customer and Competitor Orientations 232

Competitive Strategies 233

Market-Leader Strategies 233

Market-Challenger Strategies 237

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MARKETING INSIGHT: Guerrilla Marketing 238

Market-Follower and Market-Nicher Strategies 238

MARKETING INSIGHT: Different Approaches to Innovative Marketing 240

Innovative Marketing 241

MARKETING INSIGHT: Blue Ocean Strategy — High Growth throughValue Innovation 243 ~

CHAPTER CASE: Baidu's Challenge for Google 244

Chapter Summary 246

Marketing Discussion 246

Chapter 9 Building Brand Equity 250

What is .Brand Equity? 252

The Role of Brands 252

The Scope of Branding 252

Defining Brand Equity 253

Brand Equity as a Bridge 254

Brand Equity Models 254

MARKETING INSIGHT: Fundamental Flaws in China's Branding 256

MARKETING IN CHINA: Revitalizing China's Time-Honored Brands 258

Creating Brand Equity 259

Choosing Brand Elements 260

Designing Holistic Marketing Activities 261

Internalization 262

Leveraging Secondary Associations 262

Developing a Brand Strategy 263

The Branding Decision: To Brand or Not to Brand? 263

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MARKETING IN CHINA: Huawei's Brand Rebuilding: Transformation from

"Aardwolf" to "Elephant" 264

Brand Portfolio 266

Co-Branding and Ingredient Branding 267

Brand Extensions 269

Managing and Measuring Brand Equity 271

Brand Reinforcement 271

Brand Revitalization 271

INNOVATIVE MARKETING: L'Oreal in China 272

Measuring Brand Equity 274 •

MARKETING INSIGHT: What is a Brand Worth? 276

CHAPTER CASE: Procter & Gamble 277

Chapter Summary 278

Marketing Discussion 279 '

PART IV Offering Value 282

Chapter 10 Setting Product Strategy 284

Product Characteristics and Classifications 286

Product Levels: The Customer-Value Hierarchy 286

Product Classifications 287

Product Relationships 288

Product-Line Analysis 288

Product-Line Length 289

Line Modernization, Featuring, and Pruning 289

Packaging, Labeling, Warranties and Guarantees 289

INNOVATIVE MARKETING: Disney 290

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Packaging 290

Labeling 292

Warranties and Guarantees 292

MARKETING IN CHINA: VIMICRO 293

Managing New Products 294

Why New Products Fail—and Succeed 294

New Product Development 295

INNOVATIVE MARKETING: Sony 295

MARKETING INSIGHT: P&G's New Connect and Develop Approach toInnovation 296

MARKETING IN CHINA: Develop Products Suitable for China's Market 302

Marketing Through the Product Life Cycle 305

Product Life Cycles 305

Marketing Strategies: Introduction Stage and the Pioneer Advantage 306

Marketing Strategies: Growth Stage 306

Marketing Strategies: Maturity Stage 307

Marketing Strategies: Decline Stage 308

Critique of the Product Life-Cycle Concept 308

CHAPTER CASE: Toyota 310

Chapter Summary 312

Marketing Discussion 312

Chapter 11 Designing and Managing Services 316

The Nature of Services 318

Categories of Service Mix 318

Distinctive Characteristics of Services 318

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Marketing Strategies for Service Firms 321

A Shifting Customer Relationship 321

Holistic Marketing for Services 323

Managing Service Brands 323

INNOVATIVE MARKETING: Southwest Airlines, JetBlue, and SingaporeAirlines (SIA) 324

Differentiating Services 325

Developing Brand Strategies for Services 326

Managing Service Quality 327

MARKETING IN CHINA: Haier's Five-star Consumer Service 328

Customer Expectations 329

MARKETING IN CHINA: The Customer Service in Vanke 330

Best Practices of Service-Quality Management 332

Managing Product Support Services 336•i

Identifying and Satisfying Customer Needs 336

Post-Sale Service Strategy 337

CHAPTER CASE: HSBC 338

Chapter Summary 339

Marketing Discussion 340

Chapter 12 Developing Pricing Strategies and Programs 342

Understanding Pricing 344

A Changing Pricing Environment 344

INNOVATIVE MARKETING: eBay 344

Consumer Psychology and Pricing 345

Setting the Price 346

Step 1: Selecting the Pricing Objective 346

Step 2: Determining Demand 347

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Step 3: Estimating Costs 349

Step 4: Analyzing Competitors' Costs, Prices, and Offers 351

Step 5: Selecting a Pricing Method 351

Step 6: Selecting the Final Price 356

INNOVATIVE MARKETING: Home Inn 357,

Adapting the Price 359

Geographical Pricing 359

Price Discounts and Allowances 360

Promotional Pricing 360

Differentiated Pricing 361

Product-Mix Pricing 362

Initiating and Responding to Price Changes 363

Initiating Price Cuts 363 .,

INNOVATIVE MARKETING: Ryanair Jet 364

Initiating Price Increases 365

Responding to Competitors' Price Changes 365

MARKETING INSIGHT: How to Fight Low-cost Rivals 367

CHAPTER CASE: Galanz's Strategy of Low-Priced Competition 368

Chapter Summary 370

Marketing Discussion 370

PART V Delivering Value 372

Chapter 13 Designing and Managing Integrated Marketing Channels 374

Marketing Channels and Value Networks 376

The Importance of Channels 376

Value Networks 377

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Channel Functions and Flows 377

Channel Levels 378

Service Sector Channels 379

MARKETING IN CHINA: The Rural Distribution Channel in China 380

Channel-Design Decisions 383

Analyzing Customers' Desired Service Output Levels 383

Establishing Objectives and Constraints 383

Identifying Major Channel Alternatives 384

Evaluating the Major Alternatives 385

Channel-Management Decisions 386

Selecting Channel Members 386

INNOVATIVE MARKETING: Dell 386

Training Channel Members 387

Motivating Channel Members 387

Evaluating Channel Members 387

Modifying Channel Arrangements 388

Channel Integration and Systems 389

Vertical Marketing Systems 389

MARKETING IN CHINA: MNC's Reformed Channels in China 390

Horizontal Marketing Systems 393

Multichannel Marketing Systems 393

Conflict, Cooperation, and Competition 393

Legal and Ethical Issues in Channel Relations 395

CHAPTER CASE: Amazon 396

Chapter Summary 397

Marketing Discussion 397

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Chapter 14 Managing Retailing, Wholesaling, and Logistics 400

Retailing 402

Types of Retailers 402

INNOVATIVE MARKETING: Target 404

The New Retail Environment 405

Retailer Marketing Decisions 407

INNOVATIVE MARKETING: 7-Eleven in Taiwan 408

INNOVATIVE MARKETING: Tesco 412

Retailing Private Label Brands 413

Wholesaling 415

Types of Wholesalers 415

Trends in Wholesaling 417

MARKETING IN CHINA: The Evolution of Wal-Mart and Carrefour in China 418i

Market Logistics 420

Integrated Logistics Systems 420

Market-Logistics Objectives 421

Market-Logistics Decisions 422

CHAPTER CASE: Gome 425

Chapter Summary 427

Marketing Discussion 428

PART VI Communicating Value 430

Chapter 15 Designing and Managing Integrated Marketing Communications 432

The Role of Marketing Communications 434

The Changing Marketing Communication Environment and Brand Equity 434

Communications Process Models 436

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Developing Effective Communications 438

Identify the Target Audience 438

MARKETING IN CHINA: The Integrated Marketing Communications ofBeijing 2008 Olympic Games 439

Determine the Communications Objectives 441

Design the Communications 441

MARKETING INSIGHT: Celebrity Endorsements as a Strategy 443

Global Adaptations 444

Select the Communications Channels 444

Establish the Total Marketing .Communications Budget 444

MARKETING IN CHINA: The Mistakes of MNC's Advertising in China (Toyota;Nike; Nippon Paint) 445

INNOVATIVE MARKETING: Intel 448

Deciding on the Marketing Communications Mix 450

Characteristics of the Marketing Communications Mix 450

Factors in Setting the Marketing Communications Mix 451

Measuring Communication Results 452

Managing the Integrated Marketing Communications Process 452

Coordinating Media 452

MARKETING IN CHINA: Hong Kong City's Brand Image 453

Implementing IMC 455

CHAPTER CASE: Nike 456

Chapter Summary 457

Marketing Discussion 458

Chapter 16 Managing Mass Communications: Advertising, Sales Promotions, Events andExperiences, and Public Relations 460

Developing and Managing an Advertising Program 462

Setting the Objectives 463

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Deciding on the Advertising Budget 463

Developing the Advertising Campaign 463

Deciding on Media and Measuring Effectiveness 464

INNOVATIVE MARKETING: Mini-BMW 465

MARKETING IN CHINA: Focus Media 468

MARKETING INSIGHT: Playing Games with*Brands 469

MARKETING IN CHINA: Bidding for Commercials in CCTV's Prime Time 471

Managing Sales Promotion 473

Purpose of Sales Promotion 473

Major Decisions 474

Managing Events and Experiences 477

Events Objectives 477

Major Decisions 479i

INNOVATIVE MARKETING: Virgin Group 480

Managing Public Relations 481

Marketing Public Relations 482

Major Decisions in Marketing PR 482

CHAPTER CASE: Phoenix Satellite TV 484

Chapter Summary 486

Marketing Discussion 487

Chapter 17 Managing Personal Communications: Direct and Interactive Marketing,Word of Mouth, and Personal Selling 490

Direct Marketing 492

The Benefits and Ethical Issues of Direct Marketing 492

Direct Mail 493

Catalog Marketing 494

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Telemarketing 494

Other Media for Direct-Response Marketing 495

Interactive Marketing 495

MARKETING IN CHINA: Tencent QQ 496

The Advantages and Disadvantages of Interactive Marketing 498

Placing Ads and Promotion Online 498

INNOVATIVE MARKETING: Yahoo! 498

Word of Mouth Marketing 502

Buzz and Viral Marketing 502

Opinion Leaders 503

Blogs 504

Measuring the Effects of Word of Mouth 505

Designing the Sales Force 505•t

Sales Force Objectives and Strategy 506

Sales Force Structure 506

Sales Force Size 507

Sales Force Compensation 507

MARKETING INSIGHT: Major Account Management 508

Managing the Sales Force 509

Recruiting and Selecting Sales Representatives 509

Training and Supervising Sales Representatives 510

Sales Rep Productivity 510

Motivating Sales Representatives 511

Evaluating Sales Representatives 512

Principles of Personal Selling 513

Negotiation 513

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Relationship Marketing 513

CHAPTER CASE: Dell in China 514

Chapter Summary 517

Marketing Discussion 517

PART VII Creating Lasting Growth and Value 522

Chapter 18 Managing Transformation Marketing 524

Improving Marketing Patterns for Performance Marketing 526

MARKETING IN CHINA: Microsoft in China 527

MARKETING IN CHINA: Starbucks in China — To Please Customers or EducateThem? 527

Evaluation of Marketing Patterns 529

INNOVATIVE MARKETING: Samsung 530

Improving Marketing Profitability 532

Improving Company Organization to Become Customer-Oriented and Creative 533

Measuring and Improving Marketing Management Effectiveness 534

The Marketing Audit 534

MARKETING INSIGHT: Marketing's Contribution to Shareholder Value 535

MARKETING INSIGHT: The Marketing CEO 535

Measuring Marketing productivity 536

MARKETING IN CHINA: Alibaba 537

MARKETING IN CHINA: Huawei's Internationalization of Management 542

Measuring and Improving Marketing Management Efficiency 544

Measuring Marketing Plan Performance 545

Improving Marketing Management Efficiency Through Control 546

MARKETING INSIGHT: Marketing Dashboards to Improve Effectiveness andEfficiency 547

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CHAPTER CASE: Lenovo 549

Chapter Summary 551

Marketing Discussion 552

Chapter 19 Managing Marketing in the New World 554

Managing Global Marketing 556

MARKETING IN CHINA: Chery Automobile 557

INNOVATIVE MARKETING: Nokia 558

Deciding Whether to Go Abroad 558

Deciding Which Markets to Enter 559

MARKETING INSIGHT: Spotlight on Key Developing Markets 560

Deciding How to Enter the Market 563

MARKETING INSIGHT: The Four Types and Three Approaches for the Globalizationof Chinese Enterprises 564

i

MARKETING IN CHINA: The Footprints of the Globalization of ChineseEnterprises 565

Deciding on the Marketing Program 570

Managing Hl-Technologies Marketing 572

Managing Internet Marketing 572

E-Commerce Marketing 574

M-Marketing 576

Managing Holistic Marketing Organization 577

Internal Marketing 577

Organizing the Marketing Department 578

Socially Responsible Marketing 581

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MARKETING INSIGHT: New Views on Corporate Social Responsibility 582

INNOVATIVE MARKETING: Starbucks 583

Cause-Related Marketing 584

MARKETING INSIGHT: Business Ethics in Traditional Chinese Culture 585

CHAPTER CASE: Microsoft 586

Chapter Summary 587

Marketing Discussion 588

Appendix The Evolution of Marketing Management 591Glossary 601Credits 609Index 611

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