PHILIP KOTLERNorthwestern University

KEVIN LANE KELLERDartmouth College

PEARSON

PrenticeHall

Pearson Education International

Preface 29

PART 1 Understanding Marketing Management 42

Chapter 1 Defining Marketing for the 21st Century 42

The Importance of Marketing 44The Scope of Marketing 45

What Is Marketing? 45What Is Marketed? 46Who Markets? 47Marketing in Practice 50

Core Marketing Concepts 52Needs, Wants, and Demands 52Target Markets, Positioning, and Segmentation 53Offerings and Brands 53Value and Satisfaction 53Marketing Channels 54Supply Chain 54Competition 54Marketing Environment 54

The New Marketing Realities 55Major Societal Forces 55New Consumer Capabilities 56New Company Capabilities 57

Company Orientation toward the Marketplace 58The Production Concept 58The Product Concept 58The Selling Concept 59The Marketing Concept 59

The Holistic Marketing Concept 59

MARKETING MEMO Marketing Right and Wrong 60

Relationship Marketing 60

BREAKTHROUGH MARKETING Nike 61Integrated Marketing 62Internal Marketing 64Performance Marketing 66

Marketing Management Tasks 68Developing Marketing Strategies and Plans 68Capturing Marketing Insights 68

MARKETING MEMO Marketers'Frequently AskedQuestions 69

Connecting with Customers 69Building Strong Brands 69

CONTENTS

Shaping the Market Offerings 69Delivering Value 69Communicating Value 70Creating Long-Term Growth 70

Summary 70Applications 71

Chapter 2 Developing Marketing Strategies and Plans 72

Marketing and Customer Value 74The Value Delivery Process 74The Value Chain 75Core Competencies 76A Holistic Marketing Orientation and Customer Value 78The Central Role of Strategic Planning 79

BREAKTHROUGH MARKETING Intel 80

Corporate and Division Strategic Planning 81Defining the Corporate Mission 81Establishing Strategic Business Units 83Assigning Resources to Each SBU25 84Assessing Growth Opportunities 84Organization and Organizational Culture 87Marketing Innovation 87

Business Unit Strategic Planning 88The Business Mission 88SWOT Analysis 89

MARKETING INSIGHT Creating Innovative Marketing 89

Goal Formulation 92

MARKETING MEMO Checklist for PerformingStrengths/Weaknesses Analysis 93

Strategic Formulation 93Program Formulation and Implementation 95

MARKETING INSIGHT Marketing's Contribution toShareholder Value 96

Feedback and Control 96Product Planning: The Nature and Contents of a MarketingPlan 96

MARKETING MEMO Marketing Plan Criteria 97

Summary 103Applications 103

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MARKETING INSIGHT Conducting Informative Focus

Groups 135

MARKETING MEMO Questionnaire Dos and Don'ts 136

MARKETING INSIGHT Getting into Consumers' Heads withQualitative Research 138

MARKETING INSIGHT Understanding Brain Science 139

Step 3: Collect the Information 141

MARKETING MEMO Pros and Cons of Online Research 142

Step 4: Analyze the Information 142

Step 5: Present the Findings 143Step 6: Make the Decision 143Overcoming Barriers to the Use of Marketing Research 143

BREAKTHROUGH MARKETING IDEO 145

Measuring Marketing Productivity 146Marketing Metrics 146Marketing-Mix Modeling 146Marketing Dashboards 147

MARKETING INSIGHT Marketing Dashboards to ImproveEffectiveness and Efficiency 148

Forecasting and Demand Measurement 149The Measures of Market Demand 150A Vocabulary for Demand Measurement 151Estimating Current Demand 153Estimating Future Demand 155

Summary 157Applications 157

PART 3 Connecting with Customers 158

Chapter 5 Creating Customer Value, Satisfaction, and Loyalty 158

Building Customer Value, Satisfaction, and Loyalty 160Customer Perceived Value 161Total Customer Satisfaction 164Monitoring Satisfaction 165

MARKETING INSIGHT Net Promoter and CustomerSatisfaction 167

Product and Service Quality 169

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Maximizing Customer Lifetime Value 170Customer Profitability 170Measuring Customer Lifetime Value 172

MARKETING MEMO Calculating Customer Lifetime Value 172

Cultivating Customer Relationships 173Customer Relationship Management 173

MARKiTIWO INSIGHT Company Response to CustomerEmpowerment 174

Attracting and Retaining Customers 176Building Loyalty 178

MARKETING MEMO Creating Customer Evangelists 179

Win-Backs 182Customer Databases and Database Marketing 182

Customer Databases 183Data Warehouses and Datamining 183

BREAKTHROUGH MARKETING Tesco 184

The Downside of Database Marketing and CRM 185Summary 187Applications 187

Chapter 6 Analyzing Consumer Markets 188

What Influences Consumer Behavior? 190Cultural Factors 190

MARKETING 1NSI6HT The Future of AmericanHyperconsumption 192

MARKETING SWSIGHT Marketing to Cultural MarketSegments 193

Social Factors 194Personal Factors 196

MARKETING MEMO The Average U.S. Consumer Quiz 197

Key Psychological Processes 200

BREAKTHROUGH MARKETING Ikea 201

Motivation: Freud, Maslow, Herzberg 201Perception 203Learning 204Memory 205

The Buying Decision Process: The Five-Stage Model 207Problem Recognition 208Information Search 208

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CONTENTS

Evaluation of Alternatives 209Purchase Decision 212Postpurchase Behavior 213

Other Theories of Consumer Decision MakingLevel of Consumer Involvement 214Decision Heuristics and Biases 215

214

MARKETING INSIGHT How Consumers Really MakeDecisions 216

MARKETING MEMO Decision Traps 217

Mental Accounting 217Profiling the Customer Buying-Decision Process 218

Summary 218Applications 219

Chapter 7 Analyzing Business Markets 220

What Is Organizational Buying? 222

The Business Market versus the Consumer Market 222

MARKETING INSIGHT Big Sales to Small Business 224

Buying Situations 225Systems Buying and Selling 226

MARKETING MEMO Maximizing Customer References 227

Participants in the Business Buying Process 228The Buying Center 228Buying Center Influences 228Buying Center Targeting 230

The Purchasing/Procurement Process 231Purchasing Department Perceptions 231Purchasing Organization and Administration 232

Stages in the Buying Process 232Problem Recognition 233General Need Description and Product Specification 233Supplier Search 233Proposal Solicitation 234Supplier Selection 234

MARKETING MEMO Developing Compelling Customer ValuePropositions 236

Order-Routine Specification 237Performance Review 238

Managing Business-to-Business Customer Relationships 238The Benefits of Vertical Coordination 238

BREAKTHROUGH MARKETING General Electric 239

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MARKETING iWSIGHT Establishing Corporate Trust andCredibility 240

Business Relationships: Risks and Opportunism 241Institutional and Government Markets 242

MARKETING MEMO Selling Tech to the U.S. Government 244

Summary 245Applications 245

Chapter 8 Identifying Market Segments and Targets

248

246

Levels of Market SegmentationSegment Marketing 248Niche Marketing 249Local Marketing 250Individual Marketing 250

Chasing the Long Tail

252

253

251

BREAKTHROUGH MARKETING HSBC

Bases for Segmenting Consumer MarketsGeographic Segmentation 253Demographic Segmentation 255

MARKETING INSIGHT Trading Up (and Down): The New U.S.

Consumer 259

MARKETING INSIGHT Marketing to Generation Y 260

MARKETING MEMO Cheat Sheet for U.S. 20-Somethings 261Psychographic Segmentation 261Behavioral Segmentation 263

Bases for Segmenting Business Markets 266Market Targeting 267

Effective Segmentation Criteria 267Evaluating and Selecting the Market Segments 268Additional Considerations 270

Summary 272Applications 273

PART 4 Building Strong Brands 274

Chapter 9 Creating Brand Equity 274

What Is Brand Equity? 276The Role of Brands 277The Scope of Branding 278Defining Brand Equity 278

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BREAKTHROUGH MARKETING Procter & Gamble 279

MARKETING INSIGHT Brand Cooking with Jamie Oliver 280

Brand Equity as a Bridge 282Brand Equity Models 283

Building Brand Equity 285Choosing Brand Elements 286Designing Holistic Marketing Activities 287Leveraging Secondary Associations 290

Measuring Brand Equity 291

MARKETING INSIGHT The Brand Value Chain 292

Brand Valuation 293Managing Brand Equity 293

Brand Reinforcement 293

MARKETING INSIGHT What Is a Brand Worth? 294

Brand Revitalization 295Devising a Branding Strategy 296

Branding Decisions 297Brand Extensions 298Brand Portfolios 301

Customer Equity 303

MARKETING MEMO Twenty-First-Century Branding 303

Summary 304Applications 305

Chapter 10 Crafting the Brand Positioning 306

Developing and Communicating a Positioning Strategy 308Competitive Frame of Reference 309Points-of-Difference and Points-of-Parity 309

BREAKTHROUGH MARKETING UPS 310

Establishing Category Membership 311Choosing POPs and PODs 314Creating POPs and PODs 314

i MARKETING MEMO Writing a Positioning Statement 315

Differentiation Strategies 316

MARKETING MEMO How to Derive Fresh Consumer

Insights to Differentiate Productsand Services 317

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CONTENTS

Product Life-Cycle Marketing Strategies 318Product Life Cycles 318Style, Fashion, and Fad Life Cycles 319Marketing Strategies: Introduction Stage and the PioneerAdvantage 320Marketing Strategies: Growth Stage 322Marketing Strategies: Maturity Stage 323

MARKETING INSIGHT Competitive Category Dynamics 324

Marketing Strategies: Decline Stage 326Evidence on the Product Life-Cycle Concept 327Critique of the Product Life-Cycle Concept 327Market Evolution 328

MARKETING MEMO How to Build a Breakaway Brand 329

Summary 330Applications 331

Chapter 11 Dealing with Competition 332

Competitive Forces 334Identifying Competitors 335Analyzing Competitors 336

Strategies 336

MARKETING INSIGHT High Growth Through ValueInnovation 337

Objectives 337Strengths and Weaknesses 339Selecting Competitors 339

MARKETING MEMO Benchmarking to Improve CompetitivePerformance 340

Selecting Customers 340Competitive Strategies for Market Leaders 341

BREAKTHROUGH MARKETING Accenture 342

MARKETING INSIGHT When your Competitor Delivers Morefor Less 343

Expanding the Total Market 343Defending Market Share 345Expanding Market Share 347

Other Competitive Strategies 348Market-Challenger Strategies 348Market-Follower Strategies 350

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MARKETING MEMO Making Smaller Better 351

Market-Nicher Strategies 352

MARKETING MEMO Niche Specialist Roles 353

Balancing Customer and Competitor Orientations 354Competitor-Centered Companies 354Customer-Centered Companies 354

Summary 355Applications 355

PART 5 Shaping the Market Offerings 356

Chapter 12 Setting Product Strategy 356

Product Characteristics and Classifications 358Product Levels: The Customer-Value Hierarchy 358

WSSGHT Metamarkets and Metamediaries 359

Product Classifications 359Differentiation 361

Product Differentiation 361

BREAKTHROUGH MARKETING Toyota

Design 365Services Differentiation 366

Product and Brand Relationships 368The Product Hierarchy 368Product Systems and Mixes 368Product-Line Analysis 369Product-Line Length 371

When Less Is More

364

372

Product-Mix Pricing 375Co-Branding and Ingredient Branding 377

MARKETING MEMO Making Ingredient Branding Work 379

Packaging, Labeling, Warranties, and Guarantees 379Packaging 379Labeling 380Warranties and Guarantees 381

Summary 382Applications 383

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CONTENTS

Chapter 13 Designing and Managing Services 384

The Nature of Services 386Service Industries Are Everywhere 386Categories of Service Mix 387Distinctive Characteristics of Services 389

Marketing Strategies for Service Firms 392A Shifting Customer Relationship 392

MARKETING MEMO Recommendations for Improving ServiceQuality 393

BREAKTHROUGH MARKETING Southwest Airlines 395

Holistic Marketing for Services 396Managing Service Quality 399

Customer Expectations 399

MARKETING INSIGHT The Role of Expectations in Service-Quality Perceptions 401

MARKETING MEMO Assessing E-Service Quality 402

Best Practices of Service-Quality Management 402

MARKETING INSIGHT Developing Customer InterfaceSystems 404

Managing Service Brands 407Differentiating Services 407Developing Brand Strategies for Services 408

Managing Product-Support Services 410Identifying and Satisfying Customer Needs 410Postsale Service Strategy 411

Summary 413Applications 413

Chapter 14 Developing Pricing Strategies and Programs 414

Understanding Pricing 416A Changing Pricing Environment 416How Companies Price 417

MARKETING INSIGHT Giving It All Away 418

Consumer Psychology and Pricing 419Setting the Price 423

Step 1: Selecting the Pricing Objective 423Step 2: Determining Demand 425

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CONTENTS

Step 3: Estimating Costs 428Step 4: Analyzing Competitors' Costs, Prices, and Offers 429

Step 5: Selecting a Pricing Method 430

BREAKTHROUGH MARKETING Ebay 434

Step 6: Selecting the Final Price 435

MARKETING INSIGHT Stealth Price Increases 436

Adapting the Price 437Geographical Pricing (Cash, Countertrade, Barter) 437Price Discounts and Allowances 438Promotional Pricing 439Differentiated Pricing 440

Initiating and Responding to Price Changes 442Initiating Price Cuts 442Initiating Price Increases 443Responding to Competitors' Price Changes 444

MARKETING MEMO How to Fight Low-Cost Rivals 445

Summary 446Applications 447

PART 6 Delivering Value 448

Chapter 15 Designing and Managing Integrated Marketing Channels 448

Marketing Channels and Value Networks 450The Importance of Channels 450Channel Development 451Hybrid Channels 452Understanding Customer Needs 453Value Networks 454

The Role of Marketing Channels 454Channel Functions and Flows 455Channel Levels 456Service Sector Channels 457

Channel-Design Decisions 457Analyzing Customers' Desired Service Output Levels 457Establishing Objectives and Constraints 458Identifying and Evaluating Major Channel Alternatives 458

MARKETING INSIGHT How CarMax Is Transforming theAuto Business 460

Evaluating the Major Alternatives 461

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CONTENTS

Channel-Management Decisions 463Selecting Channel Members 463Training and Motivating Channel Members 463Evaluating Channel Members 464Modifying Channel Design and Arrangements 465

Channel Integration and Systems 466Vertical Marketing Systems 466

MARKETING INSIGHT The Importance of ChannelStewards 467

Horizontal Marketing Systems 468Integrating Multichannel Marketing Systems 468

MARKETING MEMO Multichannel Shopping Checklist 469

Conflict, Cooperation, and Competition 470Types of Conflict and Competition 471Causes of Channel Conflict 471Managing Channel Conflict 471Dilution and Cannibalization 473Legal and Ethical Issues in Channel Relations 473

E-Commerce Marketing Practices 474Pure-Click Companies 474

BREAKTHROUGH MARKETING Amazon.com 475

Brick-and-Click Companies 477M-Commerce 477

Summary 478Applications 479

Chapter 16 Managing Retailing, Wholesaling, and Logistics 480

Retailing 482Types of Retailers 482The New Retail Environment 486Marketing Decisions 488

MARKETING INSIGHT Making Labels Smarter 491

BREAKTHROUGH MARKETING Target 493

MARKETING MEMO Helping Stores to Sell 494

Private Labels 496Role of Private Labels 496The Private-Label Threat 497

MARKETING MEMO How to Compete Against StoreBrands 498

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CONTENTS

Wholesaling 498Trends in Wholesaling 499

Market Logistics 501Integrated Logistics Systems 502Market-Logistics Objectives 502Market-Logistics Decisions 504Organizational Lessons 506

Summary 507Applications 507

PART 7 Communicating Value 508

Chapter 17 Designing and Managing Integrated MarketingCommunications 508

The Role of Marketing Communications 510The Changing Marketing Communication Environment 510Marketing Communications, Brand Equity, and Sales 511The Communications Process Models 514

Developing Effective Communications 516Identify the Target Audience 516Determine the Communications Objectives 517Design the Communications 517

MARKETING INSIGHT Celebrity Endorsements asa Strategy 520

Select the Communications Channels 521Establish the Total Marketing Communications Budget 524

Deciding on the Marketing Communications Mix 526Characteristics of the Marketing Communications Mix 526

BREAKTHROUGH MARKETING Ocean Spray 526

Factors in Setting the Marketing Communications Mix 529Measuring Communication Results 531

Managing the Integrated Marketing CommunicationsProcess 531

Coordinating Media 532Implementing IMC 533

MARKETING MEMO How Integrated Is Your IMCProgram? 534

Summary 534Applications 535

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Chapter 18 Managing Mass Communications: Advertising, SalesPromotions, Events and Experiences, and PublicRelations 536

Developing and Managing an Advertising Program 538Setting the Objectives 539Deciding on the Advertising Budget 539Developing the Advertising Campaign 540

MARKETING MEMO Print Ad Evaluation Criteria 544

Deciding on Media and Measuring Effectiveness 545Deciding on Reach, Frequency, and Impact 545Choosing among Major Media Types 546Alternative Advertising Options 548Selecting Specific Media Vehicles 550

MAKSCiTING INSIGHT Playing Games with Brands 551

Deciding on Media Timing and Allocation 552Evaluating Advertising Effectiveness 553

Sales Promotion 554Objectives 554Advertising versus Promotion 555Major Decisions 556

Events and Experiences 560Events Objectives 561Major Sponsorship Decisions 561Creating Experiences 563

Public Relations 563

INSIGHT Experiential Marketing 564

ETING INSIGHT Managing a Brand Crisis 565

Marketing Public Relations 565

BREAKTHROUGH MARKETING Virgin Group 566

Major Decisions in Marketing PR 567Summary 569Applications 569

Chapter 19 Managing Personal Communications: Direct and InteractiveMarketing, Word of Mouth, and Personal Selling 570

Direct Marketing 572The Benefits of Direct Marketing 572Direct Mail 574Catalog Marketing 576

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Telemarketing 577Other Media for Direct-Response Marketing 578Public and Ethical Issues in Direct Marketing 578

Interactive Marketing 578Advantages and Disadvantages of Interactive Marketing 578

BREAKTHROUGH MARKETING Yahoo! 579

Placing Ads and Promotions Online 580

MARKETING MEMO Segmenting Tech Users 582

Word of Mouth 585Buzz and Viral Marketing 586Opinion Leaders 588

MARKETING MEMO How to Start a Buzz Fire 588

Blogs 590Measuring the Effects of Word of Mouth 591

Designing the Sales Force 591Sales-Force Objectives and Strategy 592Sales-Force Structure 593Sales-Force Size 594

MARKETING INSIGHT Major Account Management 595

Sales-Force Compensation 595Managing the Sales Force 596

Recruiting and Selecting Representatives 596Training and Supervising Sales Representatives 597Sales Rep Productivity 597Motivating Sales Representatives 598Evaluating Sales Representatives 599

Principles of Personal Selling 601The Six Steps 601Relationship Marketing 602

Summary 603Applications 603

PART 8 Creating Successful Long-Term Growth 604

Chapter 20 Introducing New Market Offerings 604

New-Product Options 606Make or Buy 606Types of New Products 606

Challenges in New-Product Development 607The Innovation Imperative 607New-Product Success 609New-Product Failure 610

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Organizational Arrangements 611Budgeting for New-Product Development 612Organizing New-Product Development 613

Managing the Development Process: Ideas 614Idea Generation 614

MARKETING MEMO Ten Ways to Find Great New-ProductIdeas 615

MARKETING INSIGHT P&G'S New Connect-and-DevelopApproach to Innovation 616

MARKETING MEMO Seven Ways to Draw New Ideas fromYour Customers 617

MARKETING MEMO How to Run a Successful BrainstormingSession 618

Idea Screening 619Managing the Development Process: Concept to Strategy 621

Concept Development and Testing 621Marketing Strategy Development 624Business Analysis 624

Managing the Development Process: Development toCommercialization 626

Product Development 626Market Testing 627Commercialization 630

BREAKTHROUGH MARKETING Apple iPod 631

The Consumer-Adoption Process 632Stages in the Adoption Process 632Factors Influencing the Adoption Process 633

Summary 635Applications 635

Chapter 21 Tapping into Global Markets 636

Competing on a Global Basis 638

BREAKTHROUGH MARKETING Samsung 639

Deciding Whether to Go Abroad 640Deciding Which Markets to Enter 640

How Many Markets to Enter 640Developed versus Developing Markets 641

MARKETING INSIGHT Spotlight on Key DevelopingMarkets 644

Evaluating Potential Markets 645

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CONTENTS

Deciding How to Enter the Market 646Indirect and Direct Export 646Using a Global Web Strategy 647Licensing 647Joint Ventures 648Direct Investment 649

Deciding on the Marketing Program 649Product 651

MARKETING MEMO The Ten Commandments of GlobalBranding 652

Communications 653Price 655

MARKETING INSIGHT Unauthorized Sales—Dealing withthe Gray Market and CounterfeitProducts 657

Distribution Channels 658Country-of-Origin Effects 659

Building Country Images 659Consumer Perceptions of Country of Origin 660

MARKETING INSIGHT The Ups and Downs of BrandAmerica 661

Deciding on the Marketing Organization 661Export Department 662International Division 662Global Organization 662

Summary 663Applications 663

Chapter 22 Managing a Holistic Marketing Organizationfor the Long Run 664

Trends in Marketing Practices 666Internal Marketing 667

Organizing the Marketing Department 667

MARKETING MEMO Characteristics of Company DepartmentsThat Are Truly Customer Driven 668

Relations with Other Departments 672Building a Creative Marketing Organization 673

MARKETING INSIGHT The Marketing CEO 673

MARKETING MEMO Fueling Strategic Innovation 674

Socially Responsible Marketing 674

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CONTENTS

BREAKTHROUGH MARKETING Starbucks 677

Corporate Social Responsibility 678Socially Responsible Business Models 680Cause-Related Marketing 680

MARKETING INSIGHT New Views on Corporate Social

Responsibility 681

Social Marketing 684

MARKETING MEMO Making a Difference 685Marketing Implementation 688Evaluation and Control 689

Annual-Plan Control 689Profitability Control 692Efficiency Control 696Strategic Control 696

The Future of Marketing 697

MARKETING MEMO Major Marketing Weaknesses 700

Summary 701Applications 702

Appendix 703Endnotes 717Glossary 783Image Credits 791Name Index 793Company, Brand, and Organization Index 795Subject Index 802

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