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Marketing is a guiding
philosophy for the firm
as a whole.
KEY IDEA
Marketing is a set of six
imperatives the must
dosof marketing.
Four marketing princi-
ples guide execution of
the six imperatives.
KEY IDEA
The firms major task is
to attract, retain, and
grow customers by
developing and deliver-
ing valued offers.
The firm enhances
shareholder value by
successfully attracting,
retaining, and growing
customers.
KEY IDEA
The firm has two basic
functions marketing
and innovation.
KEY IDEA
Marketing is critical for
a firms success in
todays increasingly
complex and fast-
changing environment.
KEY IDEA
The shareholder-value
perspective is increas-
ingly widespread
around the world.
KEY IDEA
Customers are the sole
source of firm rev-
enues, and all firm
activities are costs.
Customers are the firms
core assets, yet they donot appear on the
balance sheet.
Some balance-sheet
assets act as strategic
liabilities.
KEY IDEA
Customers are the
critical source of
cash inflows.
KEY IDEA
There are two sides to
value. When the firm
delivers high customer
value, it attracts,
retains, and grows
customers. When thefirm attracts, retains,
and grows customers,
it earns high value for
shareholders.
KEY IDEA
CHAPTER 1: INTRODUCTION TO MANAGING MARKETING
WHAT DOES MARKETING ME AN TODAY ?
page 5_______________________ page 6_______________________
WHAT IS MARKETING?
page 8 __________________________________________________________________________________________________
MARKETING AND SHAREHOLDER VALUE
page 9_______________________ page 10 _________________________________________________________________________________________________
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C H A P T E R 1 I I N T R O D U C T I O N T O M A N A G I N G M A R K E T I N G
Marketing must identify
market segments
groups of customers
with similar needs that
value similar benefits,
with similar priority
levels.
KEY IDEA
The firm should target
those market segments
that best use its strengths
and exploit competitors
weaknesses.
KEY IDEA
Decisions about the
firms strategic direction
set the stage for
designing the marketing
offer.
KEY IDEA
The Marketing Mixcomprises:
Product
Promotion
Distribution (or Place)
Service
Price
KEY IDEA
Marketing must keepthe firm focused on
customers needs,
regardless of current
feasibility.
KEY IDEA
MARKETING AS A PHILOSOPHY: EXTERNAL AND INTERNAL ORIENTATIONS
page 11______________________
External and internal
orientations are coreconcepts for examining
the firms basic
philosophy.
KEY IDEA
The firm should view
marketing expendituresas an investment, not as
an expense.
KEY IDEA
An externally oriented
firm goes beyond acustomer focus. It
works hard to under-
stand competitors,
markets, and environ-
mental forces in
general.
KEY IDEA
Long-run success is
difficult for internallyoriented firms.
Internal orientations
often focus on opera-
tions, sales, finance,
and/or technology.
KEY IDEA
Marketing should
identify market oppor-
tunities and advise
top management on
potential strategic
actions.
KEY IDEA
page 12______________________ page 13______________________ page 14______________________
THE SIX MARKETING IMPERATIVES
page 16______________________ page 17 ___________________________________________________________ page 18______________________
page 19______________________ page 20 _________________________________________________________________________________________________
Marketing mustexercise leadership
to encourage coop-
eration across multiple
functions.
KEY IDEA
Marketing must monitorand control the firms
actions and perform-
ance to keep it on track.
KEY IDEA
THE FOUR PRINCIPLES OF MARKETING
page 21______________________ page 22______________________ page 23______________________ page 24______________________
Selectivity focuses on
the choice of market or
market segment target.
Concentration refers
to concentrating
resources so as to
deliver value to that
target.
KEY IDEA
The firm earns
marketplace success
by providing value to
customers.
The firm develops,
produces, and delivers
products and services,
but customers perceive
value only in the bene-
fits these products and
services provide.
KEY IDEA
To secure a differential
advantage, customers
must perceive greater
value in the firms offer
than in competitors
offers.
KEY IDEA
The firm achieves
integration by agreeing
on priorities those
involved in designing
and implementing the
offer must develop
close and cooperative
working relationships.
KEY IDEA
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CHAPTER 2: THE VALUE OF CUSTOMERS: OPTIMIZING SHAREHOLDER VALUE
OPENING CASE: ROYAL BANK OF CANADA
page 31 ___________________________________________________________
When the firm creates
value for customers, it
successfully attracts,
retains, and grows
those customers.
By being attracted,
retained, and grown,
customers create value
for the firm and its
shareholders.
KEY IDEA
Customer lifetime
value (LTV) is the link
between delivering
value to customers
and creating value
for shareholders.
KEY IDEA
CUSTOMER LIFETIME VALUE (LTV)
page 32______________________
Customer lifetime
value depends on just
three factors margin,
retention rate, and
discount rate.
KEY IDEA
The margin multiple is a
handy way to calculate
customer lifetime value.
Increasing customer
retention rate has
greater leverage on
customer lifetime valuethan reducing the
discount rate.
KEY IDEA
page 34______________________
page 36______________________ page 38______________________
The margin the firm
earns from a customer
tends to increase over
time.
KEY IDEA
INCREASING CUSTOMER LIFETIME VALUE
Small increases in
customer retention
can dramatically
improve profitability
and customer lifetime
value.
KEY IDEA
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C H A P T E R 2 I T H E V A L U E O F C U S T O M E R S : O P T I M I Z I N G S H A R E H O L D E R V A L U E
page 44______________________ page 45______________________
ENHANCING CUSTOMER LIFETIME VALUE
There are three ways
to improve customer
LTV with current
customers improve
customer retention,
grow customer margins,
and delete customers.
KEY IDEA
There are three
approaches to
improving customer
LTV with potential
customers retrieve,
acquire, and ignore
customers.
KEY IDEA
page 45______________________ page 47______________________ page 48______________________ page 49______________________
BEING SELECTIVE ABOUT CUSTOMERS
The firm should develop
systems for measuring
customer profitability.
KEY IDEA
At many firms, 20%
of customers provide
80% of revenues and
120% of profits.
At these same firms,
80% of customers pro-
vide 20% of revenues
and are responsible for
20% of firm losses.
KEY IDEA
In general, customers
are critical firm assets,
but some customers
may be liabilities and
should be fired.
The firm may have to
reject some potential
customers on the basis
of a detailed profitability
analysis.
KEY IDEA
Poor profitability is
not the only reason to
reject or fire customers.
KEY IDEA
page 42______________________
ACQUIRING NEW CUSTOMERS
The firm should try to
acquire customers if
the expected customer
lifetime value is greater
than the acquisition
cost.
KEY IDEA
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CHAPTER 3: MARKET INSIGHT
page 58______________________
The firm must secure
insight in three broad
areas: the market,
customers, and com-
petitors, the company,
and complementers
the M4Cs.
KEY IDEA
page 61 ___________________________________________________________
OPENING CASE: NETFLIX
When firms secure
good market insight,
they do a better job of
identifying opportunities
and gaining competitive
advantage.
KEY IDEA
Market insight com-
prises four separate
aspects market
structure, market and
product evolution,
industry forces, and
environmental forces.
KEY IDEA
page 62______________________ page 63______________________ page 64______________________
MARKET STRUCTURE
Markets consist of
people and organiza-
tions that require goods
and services to satisfy
their needs and are
able and willing to pay.
KEY IDEA
We can view any
market as being made
up of several different
areas.
The firm avoids market-
ing myopia by using a
broad market definition.
KEY IDEA
A useful way of catego-
rizing products in a
market is product class,
product form, product
line, and product item.
KEY IDEA
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C H A P T E R 3 I M A R K E T I N S I G H T
The firms current direct
competitors can change
via acquisition, merger,
and LBOs.
KEY IDEA
The firm faces many
forces current direct
competitors, new direct
entrants, indirect com-
petitors, suppliers, and
buyers that can frus-
trate its ability to make
profits and seize new
opportunities.
KEY IDEA
The firm may face new
direct competitors from
geographic expansion,
start-up entry, new
sales and distribution
channels, strategic
alliances, networks,
and the firms own
employees.
KEY IDEA
The firm faces a broad
set of environmental
forces political,
economic, sociocultu-
ral, technological,
legal/regulatory,
and environmental
(physical) PESTLE.
KEY IDEA
Technological
innovation can be
sustaining (improving
performance of
established products)
or disruptive
(offering new
value propositions).
KEY IDEA
Environmental forces
are constantly in flux;
they also interact with
each other.
KEY IDEA
The managerial process
environment comprises
the intellectual capital
for leading and
managing a business.
KEY IDEA
page 72 ___________________________________________________________ page 73______________________
INDUSTRY FORCES
page 75______________________ page 79______________________ page 82______________________ page 83______________________
ENVIRONMENTAL FORCES
page 67______________________ page 70 ___________________________________________________________
MARKET AND PRODUCT EVOLUTION
Critical variables affect-
ing market size include
population size, popula-
tion mix, geographic
population shifts,
income and income
distribution, and age
distribution.
KEY IDEA
Product-form life-cycle
stages have consistent
characteristics across
products and services.
KEY IDEA
Markets and products
generally evolve in a
consistent manner over
time.
The life-cycle frame-
work is useful for
describing market and
product evolution.
KEY IDEA
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CHAPTER 4: CUSTOMER INSIGHT
OPENING CASE: IKEA
page 89______________________
Customer insight
requires a deep and
unique understanding of
customers.
Good customer insight
requires answers to
three questions: Who
are the customers?
What do they need
and want? How do
they buy?
KEY IDEA
page 90______________________ page 91______________________ page 92______________________
page 93______________________
IDENTIFYING CUSTOMERS
To secure customer
insight, the firm must
correctly identify
customers.
KEY IDEA
Macro-level customers
are organizations;
micro-level customers
are individuals.
KEY IDEA
Purchase decisions
involve many customer
roles: decision-maker,
influencer, spoiler,
champion, specifier,
gatekeeper, buyer,
information provider,
and user.
KEY IDEA
The firm must pay
attention to both its
current and potential
customers.
KEY IDEA
Indirect customers may
be more important than
direct customers
they are often final
users and ultimatelydrive product demand.
KEY IDEA
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C H A P T E R 4 I C U S T O M E R I N S I G H T
page 94 ___________________________________________________________ page 96______________________ page 97______________________
CUSTOMER NEEDS, BENEFITS, AND VALUES
To attract, retain, and
grow customers, the
firm must:
Develop offers of
value to satisfy
customers needs
Communicate the
value of those offers
to customers.
KEY IDEA
Customers have
recognized needs
and latent needs.
Recognized needs
may be expressedor
non-expressed.
KEY IDEA
Maslows approach
places a persons needs
in an ordered hierarchy.
KEY IDEA
The feature/benefit/
value ladder ensures
that the firm focuses
on providing value to
customers, provides
options for communica-
tion, and broadens the
view of competition.
KEY IDEA
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page 102 __________________________________________________________ page 103_____________________ page 104_____________________
EVC is the maximum
price customers will
pay.
The firm delivers
economic value by
reducing customers
costs and/or increasing
their revenues.
KEY IDEA
To gain greater
customer insight, the
firm must ask: What
motivates people in
customer roles to
behave the way
they do?
KEY IDEA
The firm must deliver
the rightcombination
of functional, psycho-
logical, and economic
benefits and values to
those customers it
wants to attract, retain,
and grow.
KEY IDEA
Customers receive
value from their
experiences.
KEY IDEA
The firm must learn the
customers decision-
making process (DMP).
KEY IDEA
Membership in the
customers considera-
tion set is crucial for
the firm.
KEY IDEA
The firm should try to
understand customers
evaluation processes.
The linear-compensa-
tory approach to
evaluation and choice
balances the firms
performance on the
relevant attributes.
KEY IDEA
page 105_____________________ page 106_____________________
Customers often
deviate from rationality
in making purchase
decisions.
KEY IDEA
There are three
categories of purchase
decision: routinized-
response behavior,
limited problem-solving,
and extended problem-
solving.
KEY IDEA
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C U S T O M E R I N S I G H T I C H A P T E R 4
By identifying sources
of influence in the
consumer decision-
making process,
firms formulate better
market strategies.
KEY IDEA
page 106_____________________ page 108_____________________ page 109_____________________
INFLUENCES ON CONSUMER PURCHASE PROCESSES
A variety of environ-
mental factors affect
consumers purchasing
decisions culture,
social class, other
people, family, and the
situation.
KEY IDEA
Individual factors
that affect purchase
decisions include
economic resources,
time availability,
cognitive resources,
comfort with tech-
nology, life-cycle stage,
and lifestyle.
The VALS2 Lifestyle
framework is a usefulapproach to under-
standing lifestyles.
KEY IDEA
page 112_____________________
INFLUENCES ON ORGANIZATIONAL PURCHASE PROCESSES
Important consid-
erations for the
organizational
purchase-decisionprocess are increased
corporate attention to
procurement, changes
in the procurement
process, reducing the
number of suppliers,
and evolution in buyer-
seller relationships.
KEY IDEA
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CHAPTER 5: INSIGHT ABOUT COMPETITORS, COMPANY, AND COMPLEMENTERS
Competitors
IDENTIFYING COMPETITORS
page 124_____________________ page 125_____________________ page 127_____________________
Competitive insight is
securing a deep enough
understanding of com-
petitors to provide a
unique perspective.
Competitive insight is
crucial for attracting,retaining, and growing
customers.
The firm must act on
competitive insight in its
own decision-making.
KEY IDEA
The firms most serious
competitive threats may
be the least obvious.
KEY IDEA
Be aware of potential
competition from within
your own firm.
Be prepared to offer
multiple products as
customer needs evolve.
KEY IDEA
page 129_____________________ page 130_____________________ page 131_____________________
DESCRIBING COMPETITORS
When focusing on com-
petitive data-gathering,
the firm should be clear
about the level and type
of data it requires.
KEY IDEA
The firm can secure
timely competitive
information from many
internal and external
sources.
KEY IDEA
The firm should develop
formal processes to
secure timely and
relevant competitive
information.
KEY IDEA
The firm should not use
unethical or illegal
processes to collect
competitor data.
Leaky organizations
help the firm secure
competitive data.
Good counter-
intelligence procedures
prevent proprietary
data from leaking.
KEY IDEA
page 132 __________________________________________________________ page 133_____________________
The firm should use a
rigorous framework
to organize its data-
gathering.
KEY IDEA
Organizations do not
make decisions
people in organizations
make decisions.
KEY IDEA
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I N S I G H T A B O U T C O M P E T I T O R S , C O M P A N Y , A N D C O M P L E M E N T E R S I C H A P T E R 5
page 135_____________________ page 136_____________________
EVALUATING COMPETITORS
Competitive assessment
analysis is a powerful
tool for marketers.
It maps customer
requirements needs,
benefits, and values
into corporatecapabilities/resources.
KEY IDEA
Game theory is a
structured way of
identifying options
and evaluating their
consequences.
KEY IDEA
page 137_____________________ page 138_____________________
PROJECTING THE ACTIONS OF COMPETITORS
A good approach to
projecting the com-
petitors future actions
is to develop a set of
robust scenarios that
examine the competi-
tors strategic options.
KEY IDEA
The firm projects the
competitors future
actions by identifying
the most likely scenario
from the set of alterna-
tive scenarios.
KEY IDEA
page 139_____________________
MANAGING COMPETITORS
The firm may be able to
manageits competitors
by sending signals.
The major signals
available to the firmare pre-emptive,
warning, and tit-for-tat.
The firm may also send
competitors misleading
information.
KEY IDEA
Complementers
page 141_____________________ page 142 __________________________________________________________
Independent organiza-
tions, including cus-
tomers and suppliers,
can be the firms
complementers.
KEY IDEA
Competitors can com-
plement the firm in the
marketplace or in the
back office. Competitors
can also offer weak
complementarity.
KEY IDEA
A firms complementary
product activities may
be unwelcome by its
competitors.
KEY IDEA
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CHAPTER 6: MARKETING RESEARCH
THE MARKETING RESEARCH PROCESS
page 153_____________________
The marketing research
process contains
several well-defined
steps that the manager
and the researcher
should follow.
KEY IDEA
CRITICAL DISTINCTIONS IN MARKETING RESEARCH
page 154_____________________ page 155_____________________
Secondary marketing
research uses data
relevant to your
research needs that
have already been
collected for some
other purpose. Primary
market research
requires you to
collect new data.
KEY IDEA
Qualitative marketing
research is not con-
cerned with numbers.
Quantitative market
research focuses on
quantitative analysis.
KEY IDEA
SECURING Q UALITATIVE RESEAR CH DATA
page 158_____________________
SECURING QUANTITATIVE RESEA RCH DATA
page 160_____________________
Focus groups, one-on-
ones, and blogs and
wikis are alternative
means for collecting
qualitative data directly
from respondents.
Projective techniques,
observation, and ethno-
graphic research are
indirect qualitative
data-gathering
approaches.
KEY IDEA
When designing a
process to collect
survey data, the firm
must make several
important trade-offs,
primarily between cost,
time, and flexibility.
KEY IDEA
MARKET AND SALES POTENTIALS, MARKET AND SALES FORECASTS
page 163_____________________ page 165_____________________ page 166_____________________
Market potential is the
maximum sales that
the firm expects in the
market in a given time
period. Sales potential
is the maximum sales
the firm might achieve
in a corresponding
time period.
KEY IDEA
There are several
approaches to making
market forecasts.
One of the most
popular uses multiple
regression analysis.
KEY IDEA
Many firms develop
synthetic sales
forecasts, using a
combination of top-
down and bottom-up
approaches.
KEY IDEA
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M A R K E T I N G R E S E A R C H I C H A P T E R 6
APPENDIX 6.1: ANALYZING QUANTITATIVE RESEARCH DATA
page 171_____________________ page 175 __________________________________________________________
Cross tabs are a tried
and true method for
analyzing simple
quantitative marketing
research data.
KEY IDEA
Conjoint analysis is a
versatile marketing
research technique
that can provide
significant insight
into many marketing
questions.
KEY IDEA
Multidimensional
scaling is a valuable
technique for develop-
ing market maps,
aka perceptual maps.
KEY IDEA
Factor analysis helps
the researcher reduce
an unwieldy number
of variables into a
manageable set.
Cluster analysis helps
the researcher to place
many respondents into
meaningful groups.
KEY IDEA
page 176_____________________
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A strategy for growth
has four components:
vision, mission, growth
path, and timing of
entry.
KEY IDEA
Vision is the description
of an ideal future state
for a firm or business
unit. Vision sets a broad
direction for the firm.
When developed with
employee participation,
it can inspire the entire
organization for the
long run.
KEY IDEA
The firms mission
should guide its search
for opportunity.
The five approaches to
developing mission are:
core ingredient or
natural resource,
technology, product
or service, market or
market segment, or
customer needs. The firms mission can
use a single approach
or combine approaches.
The firm should pro-
actively revise its
mission.
KEY IDEA
The four fundamentalpaths to growth are
market penetration,
product growth, market
growth, and product
and market diversifica-
tion. These four paths
give rise to nine individ-
ual growth paths.
KEY IDEA
The four timing-of-entryoptions pioneer,
follow-the-leader,
segmenter, and
me-too correspond,
respectively, to entry in
the introduction, early
growth, late growth,
and maturity stages of
the product life cycle.
The firm must match
its capabilities to its
timing-of-entry strategy.
These capabilities must
evolve as its markets
evolve.
KEY IDEA
CHAPTER 7: DETERMINE AND RECOMMEND WHICH MARKETS TO ADDRESS
A STRATEGY FOR GROWTH
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page 191_____________________ page 193_____________________
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D E T E R M I N E A N D R E C O M M E N D W H I C H M A R K E T S T O A D D R E S S I C H A P T E R 7
A venture portfolio
is the set of growth
opportunities the firm
addresses.
The strategy for growth
helps the firm develop
its venture portfolio.
The defining character-
istics of the venture
portfolio are expected
financial return, timingof contribution to
profits, and risk.
KEY IDEA
The firm should exam-
ine each opportunity
using four screening
criteria: objectives,
compatibility (or fit),
core competence, and
synergy.
KEY IDEA
In setting objectives,
the firm should strike
a balance between
revenue and profit
growth, risk, stability,
and flexibility.
KEY IDEA
The three important
dimensions of com-
patibility (or fit) are:
product-market fit,
product-company fit,
and company-market fit.
KEY IDEA
The firm should con-
sider four perspectives
when evaluating oppor-
tunities: objectives,
compatibility, core
competence, and
synergy.
KEY IDEA
Options for implement-
ing a growth strategy
include internal devel-
opment, insourcing,
outsourcing, acquisi-
tion, strategic alliance,
licensing and technol-
ogy purchase, and
equity investment.
KEY IDEA
THE VENTURE PORTFOLIO
page 195_____________________
SCREENING CRITERIA: EVALUATING OPPORTUNITIES
page 196_____________________ page 197_____________________ page 198_____________________ page 199_____________________
IMPLEMENTING GROWTH STRATEGIES
page 204_____________________
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CHAPTER 8: MARKET SEGMENTATION AND TARGETING
THE MARKET SEGMENTATION PROCESS
page 213_____________________ page 216_____________________ page 218_____________________
Market segmentation
is a conceptual and
analytic process it is
critical for developing
and implementing
an effective market
strategy.
KEY IDEA
Four categories of can-
didate descriptor vari-
ables or segmentation
variables can define
market segments:
geographic, demo-
graphic, behavioral, and
socio-psychological.
KEY IDEA
In any market,
customers have
different need profiles.
The market segmenta-
tion process identifies
groups of customers.
When segmentation is
done well, customers
within a segment have
similar need profiles.
Customers in differentsegments have different
need profiles.
KEY IDEA
MARKET SEGMENTS
page 219_____________________ page 220_____________________ page 223 __________________________________________________________
The best approach
for forming market
segments is to group
customers based ontheir need profiles. The
firm should then use
descriptor or segmenta-
tion variables to identify
the different segments.
KEY IDEA
The market segmen-
tation process can
combine creativity
and sophisticateddata analysis.
KEY IDEA
B2B firms often treat
major customers as
individual market seg-
ments. In B2C markets,many firms are practic-
ing mass customization.
KEY IDEA
The firm must continu-
ally evolve its segmen-
tation, as customers
need profiles evolve.
KEY IDEA
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M A R K E T S E G M E N T A T I O N A N D T A R G E T I N G I C H A P T E R 8
For each segment it
targets, the firm should
develop a unique offer
precisely tailored to
the need profile of cus-
tomers in that segment.
KEY IDEA
In deciding which
segments to target,
the firm should ask
two questions:
How attractive is this
segment?
Does the firm have
the business
strengths to win
in this segment?
KEY IDEA
A firm can improve
its market segment
position by investing
in those business
strengths that
determine success.
A firm may identify
more attractive market
segments by refining its
segmentation approach.
KEY IDEA
Perceptual maps show
how various products
serve customers or
segment needs. They
show market segment
sizes and customer
ideal points in each
segment. These data
help the firm make
targeting decisions.
KEY IDEA
Large firms and small
firms each have
advantages in targeting
market segments.
Mis-steps can cause
each to lose a strong
position.
KEY IDEA
TARGETING MARKET SEGMENTS
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page 231 __________________________________________________________
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The goal of market and
market-segment strate-
gies is very simple
to attract, retain, and
grow customers in the
face of competitors
trying to do the same
thing.
The market strategy is
the firms game plan for
addressing the market.It states what the firm is
trying to achieve, what
it will do and will not do.
Notably, it identifies
those segments the firm
targets for effort.
KEY IDEA
The market strategy
requires decisions
about results, re-
sources, and actions.
Well-developed market
and market-segment
strategies fulfill four
purposes for the firm
provide strategic
direction in the market,
state how to secure
differential advantage,guide the effective
allocation of scarce
resources, and achieve
cross-functional
coordination.
KEY IDEA
Effective market and
market-segment strate-
gies show how the firm
will secure a differential
advantage.
KEY IDEA
An effective market
strategy helps the firm
allocate its resources.
Externally, the firm
allocates resources to
target market segments,
and selects specific
resources to secure
differential advantage.
Internally, the firm
allocates resources
across internal
activities.
KEY IDEA
CHAPTER 9: MARKET STRATEGY THE INTEGRATOR
OPENING CASE: MAYO CLINIC
page 237_____________________
THE PURPOSE OF MARKET AND MARKET-SEGMENT STRATEGIES
page 238_____________________ page 239_____________________ page 240_____________________
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M A R K E T S T R A T E G Y T H E I N T E G R A T O R I C H A P T E R 9
Inter-functional conflict
is endemic. Formulating
the market strategy
should resolve this
conflict and achieve
cross-functional
coordination.
KEY IDEA
The firm must make
trade-offs among the
three categories of
strategic objectives:
growth and market
share, profitability, and
cash flow.
KEY IDEA
Priorities for strategic
objectives evolve during
product life-cycle
stages.
KEY IDEA
Operational objectives
provide the numbers to
attach to the strategic
objectives; they specify
how much is needed
and by when.
KEY IDEA
Managers should
explicitly discuss
the trade-offs and
expectations among
strategic objectives
before setting opera-
tional objectives.
KEY IDEA
The firm competes for
customer targets
decision-makers or
influencers.
KEY IDEA
The firms competitive
target can be current
or potential, direct or
indirect, or in the supply
chain. Sometimes the
targeted competitor
is not immediately
obvious.
KEY IDEA
The value proposition
is the firms major
competitive weapon
for gaining its target
customers; it also
defines the firms
implementation focus.
The firm must developa value proposition for
each target customer
type.
KEY IDEA
Positioning is not what
you do to a product:
Positioning is what you
do to the mind of the
prospect.
KEY IDEA
ELEMENTS OF THE MARKET-SEGMENT STRATEGY
page 240_____________________
PERFORMANCE OBJECTIVES
page 242_____________________ page 243 ________________________________________________________________________________________________
POSITIONINGpage 251 __________________________________________________________ page 252_____________________ page 253_____________________
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C H A P T E R 9 I M A R K E T S T R A T E G Y T H E I N T E G R A T O R
Together, individual
market segment
strategies must form
a coherent market
strategy. The segment
strategies must be
distinct, yet the firm
should seek out
positive synergies
in implementation
programs.
KEY IDEA
The marketing mix
and other functional
programs implement
the market strategy.
KEY IDEA
Marketing mix pro-
grams should support
the value proposition,
and all elements should
support one another.
KEY IDEA
The firms functional
areas must support the
market strategy.
KEY IDEA
IMPLEMENTATION PROGRAMS
page 254_____________________ page 255 ________________________________________________________________________________________________
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CHAPTER 10: MANAGING THROUGH THE LIFE CYCLE
OPENING CASE: RYANAIR
page 263_____________________
Firms failing to act
pre-emptively may
face significant
opportunity costs.
KEY IDEA
DEVELOPING COMPETITIVE STRATEGIC OPTIONS
page 266_____________________
Scenarios help the firm
generate competitive
strategic options.
The main building block
for these scenarios is
product life-cycle stage.
Successful strategies
should have a strong
creative element.
Life cycles are shorten-
ing for many products.
KEY IDEA
BUILDING PRODUCT LIFE-CYCLE SCENARIOS
page 267 __________________________________________________________ page 269 __________________________________________________________
Pioneers must be pre-
pared to tap multiple
sources to fund losses
early in the life cycle.
KEY IDEA
The most common
government-imposed
barriers are patents.
Firms sometimes lobby
governments to imposeregulations on their
competitors.
KEY IDEA
When the firm executes
a low-price penetration
strategy, it must accept
low profit margins for a
substantial time period.Continual cost reduc-
tions are essential to
sustain low prices.
KEY IDEA
A pioneer can sustain
first-mover advantages
by producing high-
quality products. The
firm earns a leadingreputation and sets the
stage for creating a
strong brand.
KEY IDEA
page 270_____________________
By the early-growth
stage, customers
accept the product,
and the market leader
should be profitable.
KEY IDEA
page 272 __________________________________________________________
Generally, followers in
growth markets are
unprofitable and have
negative cash flows.
The followers goal is
to learn from others and
minimize cost and risk.
KEY IDEA
Imitationmeans
copying the leader
but being more effec-
tive in execution.
Leapfrogginggoes
one better than the
leader by developing
innovative and superior
products and/or target-
ing emerging market
segments.
KEY IDEA
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C H A P T E R 1 0 I M A N A G I N G T H R O U G H T H E L I F E C Y C L E
By late growth, basic
customer benefits and
values are still impor-
tant but may not enter
into customers choice
decisions. Customers
are more likely to base
their purchase deci-
sions on additional
benefits and values.
KEY IDEA
In late growth, the firm
must decide whether to
target many segments
or just a few.
KEY IDEA
Creative Ways to Drive
Growth in the Maturity
Stage
Increase customers
use of the product
Improve the product
or service
Improve physical
distribution
Reduce price
Reposition the brand
Enter new markets
KEY IDEA
Markets that seem
mature may have
growth potential waiting
to be unlocked via
creative approaches.
KEY IDEA
Market leaders in
mature, concentrated
markets should have
low costs, decent
profits, and positive
cash flows.
KEY IDEA
Market leaders in
concentrated markets
have two major
alternatives
long-run leadership
or harvesting.
KEY IDEA
Followers in mature
concentrated markets
typically have higher
costs and lower profits
and are financially
weaker than market
leaders. But they mayrejuvenate to become a
major threat.
KEY IDEA
Firms can make
considerable profits
in declining markets.
KEY IDEA
In a declining market,
the firms options
depend on market
hospitality and its
business strengths.
KEY IDEA
BUILDING PRODUCT LIFE-CYCLE SCENARIOS CONTINUED
page 274 __________________________________________________________ page 276_____________________ page 277_____________________
page 278_____________________ page 279_____________________ page 280_____________________ page 282_____________________
In mature fragmented
markets, no firm has a
large market share.
KEY IDEA
page 283 __________________________________________________________
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CHAPTER 11: MANAGING BRANDS
WHAT IS A BRAND?
page 295_____________________
The brand is a symbol
around which the firm
and its customers can
construct a relationship.
KEY IDEA
BRAND EQUITY AND THE VALUE OF BRANDS
page 298_____________________ page 299_____________________
Brand equity reflects
the trust established
between the brand
owner and its
customers.
KEY IDEA
Brand equity generally
builds up slowly over
time.
A brand can quickly
lose value if not
managed properly.
KEY IDEA
MONETIZING BRAND EQUITY
page 300_____________________ page 302_____________________
BUILDING AND SUSTAINING A STRONG BRAND
page 304_____________________ page 305_____________________
Replacement cost
and cash flow
methods are two
internal approaches
for calculating firm
brand equity.
KEY IDEA
The firm earns a
contribution to firm
brand equity only when
a customer purchases
the brand.
KEY IDEA
Carefully chosen
brand identity and
consistent execution
are critical to develop-
ing brand loyalty.
KEY IDEA
Firm brand equity
represents the brands
balance sheet
Brand health checks
compare a brands
strengths against
historic trends and
benchmark competing
brands.
KEY IDEA
MANAGING BRAND ARCHITECTURE
page 305_____________________ page 306_____________________ page 309_____________________ page 310_____________________
The firm should careful-
ly manage the evolution
of its brand portfolio.
Firms adjust their brand
portfolios in response
to shifting consumer
trends, competitiveresponses, and mergers
and acquisitions.
KEY IDEA
There are pros and
cons for both multi-
branding and umbrella
branding.
KEY IDEA
Increasingly, global
firms make branding
decisions at head-
quarters, rather than
in individual countries.
Think global, act local!
guides many firms.
Multinational firms
should consider a brand
portfolio that includes
global, regional, and
national brands. Over-
time, the geographic
scope of some brands
may narrow, and other
brands may broaden.
KEY IDEA
Firms that leverage
brands secure auto-
matic brand awareness
for the new product.
They avoid new brand
introduction costs and
may increase profitsfor little additional
investment.
For an extension to be
viable, the brand must
have strong positive
associations. The
difference between
these brand associa-
tions and the product
extension should not be
incongruous.
KEY IDEA
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C H A P T E R 1 1 I M A N A G I N G B R A N D S
The firm can conserve
brand equity by effec-
tive brand migration.
KEY IDEA
The firm can enhance
brand equity by effec-
tive strategic alliances.
KEY IDEA
Three ways to reposi-
tion a brand are:
address new market
segments, change
brand associations,
and alter the brands
competitive target.
Continuous innovation
pre-empts the need to
revitalize a brand.
KEY IDEA
MANAGING BRAND ARCHITECTURE CONTINUED
page 311_____________________ page 312 __________________________________________________________
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CHAPTER 12: MANAGING THE PRODUCT LINE
THE PRODUCT PORTFOLIO CONCEPT
page 322_____________________ page 323_____________________ page 324 __________________________________________________________
The firms products
have important
resource-related
interrelationships.
The firm does not
optimize its overall
profits by maximizing
profits from individual
products. It must
consider the entire
product line. Firms with imbalanced
portfolios are vulnera-
ble to acquisition.
KEY IDEA
Financial analysis
methods rely on fore-
casts these can
be highly uncertain.
Financial analysis
does not consider
strategic issues.
Too much reliance on
financial analysis can
lead to misallocation
of resources acrossproducts.
Financial analysis
methods ignore
marketing
considerations.
KEY IDEA
Portfolio analysis is a
systematic, organized,
and easily communi-
cated way of assem-
bling, assessing, and
integrating important
information about
product opportunities.
KEY IDEA
Portfolio analysis
addresses many
problems with
financial analysis.
KEY IDEA
page 325_____________________ page 327_____________________ page 328_____________________
Portfolio analysis is
best viewed as anadditional tool for
setting investment
priorities not as an
alternative to financial
analysis.
KEY IDEA
Long-run market growth
and RMS define thegrowth-share matrix.
The growth-share
matrix can be overused
and misinterpreted.
KEY IDEA
The firm can use the
multifactor matrix(Chapter 8) for resource
allocations among
products.
The growth-share and
multifactor matrices
have advantages and
disadvantages that
impact the viability
of strategic
recommendations
that they generate.
KEY IDEA
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C H A P T E R 1 2 I M A N A G I N G T H E P R O D U C T L I N E
Sometimes one product
helps another (positive
complementarity);
sometimes it hurts
another (negative
complementarity).
KEY IDEA
When making product
decisions, the firm
should carefully consid-
er current and potential
interactions with the
firms other products.
KEY IDEA
Firms face conflicting
pressures for broad
versus narrow product
lines.
ROS and ROI measure
very different things.
KEY IDEA
Firms often differentiate
individual products by
time availability, prod-
uct performance, and
package quantities.
Implementing a firewall
strategy can lead to
product proliferation.
KEY IDEA
Product proliferation
refers to product
variety. Market seg-
mentation explores
differences in customer
needs.
The firm can develop
multiple offers based
on a single product,
targeted to several
segments.
KEY IDEA
A simplified product
line can make the firm
more competitive. But
the firm should use
appropriate criteria for
its deletion decisions.
KEY IDEA
Sometimes the firm can
successfully resurrect
deleted products.
KEY IDEA
Beware deleting prod-
ucts without consider-
ing all relevant issues.
KEY IDEA
OTHER IMPORTANT PRODUCT INTERRELATIONSHIPS
page 331 __________________________________________________________
PRODUCT LINE BREADTH: PROLIFERATION VERSUS SIMPLIFICATION
page 332_____________________ page 333_____________________ page 334_____________________
page 336 __________________________________________________________
OTHER PRODUCT LINE ISSUES
page 336_____________________
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CHAPTER 13: DEVELOPING NEW PRODUCTS
OPENING CASE: THOMSON FINANCIAL BOARDLINK
page 347_____________________
Successful new
products enhance
shareholder value.
KEY IDEA
WHERE AND HOW INNOVATION OCCURS
page 348 __________________________________________________________
NEW PRODUCT DEVELOPMENT
page 352_____________________
Innovation embracesnew products, but also
processes and tech-
nologies.
Sustaining innovations
improve products and
processes on existing
performance dimen-
sions. Disruptive inno-
vations offer different
value propositions.
Leading firms often
invest in sustainingversus disruptive
innovations.
KEY IDEA
The firm should servecurrent, especially
loyal, customers it
must also createnew
customers.
KEY IDEA
page 349_____________________ page 351_____________________
The customer-innovation relationship
involves a two-way
communication flow.
KEY IDEA
Firms can be Isolates,Followers, Shapers, or
Interactors, based on
their innovation focus
and customer focus.
KEY IDEA
Product development
trade-offs include t ime,
risk, and financial
return. Four develop-ment approaches
are basic technology
research, applied
technology research,
market-focused
development, and
market tinkering.
KEY IDEA
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C H A P T E R 1 3 I D E V E L O P I N G N E W P R O D U C T S
The firm should
develop clear criteria
for a project to pass
through each gate.
KEY IDEA
The stage-gate process
is a systematic method
for new product devel-
opment. The stages
are idea generation,
preliminary screening,
concept development,
business-case analysis,
development, product
testing, market-factor
testing, test marketing,
and commercialization.
The firm must manage
Type I and Type II
errors.
The cost of failure in-
creases at each stage.
KEY IDEA
The firm should tap
multiple sources for
new ideas.
The best way to get
a good idea is to get
a lotof ideas.42
KEY IDEA
Preliminary screening
aims to form a balanced
portfolio of new product
ideas.
Different types of new
product idea require
different screening
criteria.
KEY IDEA
The product conceptshould appeal to
customers and guide
development.
KEY IDEA
Business-case analysisassesses the financial
viability of a product
concept.
Forecasting sales
revenues is the most
difficult step in busi-
ness-case analysis.
KEY IDEA
Many firms make verylarge investments in
product development.
Multi-functional
teams and customer
involvement aid the
development process.
Design is an increasing-
ly important part of the
development process.
KEY IDEA
The House of Qualitymaps customer needs
into product design.
KEY IDEA
THE STAGE-GATE PROCESS FOR NEW PRODUCT DEVELOPMENT
page 354_____________________
page 361_____________________ page 362_____________________ page 365_____________________ page 366_____________________
page 355_____________________ page 359_____________________ page 360_____________________
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In the communications
process, senders send
information, and
receivers receive infor-
mation.
Miscommunication
arises from problems in
encoding, distortion,
and decoding.
KEY IDEA
Personal communica-
tion is face-to-facewith
individuals or groups.
KEY IDEA
Non-personal communi-
cation occurs without
interpersonal contact
between sender and
receiver.
KEY IDEA
Quasi-personal
communications
embrace interaction
and feedback without
human involvement.
KEY IDEA
Word-of-mouth
communication occurs
among customers and
potential customers.
KEY IDEA
The firm has two major
types of communica-
tions targets: those
directly relatedto the
firms products and
others not directly
related.
KEY IDEA
Most firms use either
push or pull strategies
large firms
often use combination
push/pull strategies.
KEY IDEA
Firms have many com-
munications targets
other than customers.
KEY IDEA
Communications
objectives and timelines
drive the choice of
communication tools.
KEY IDEA
Integration ensures
maximum communica-
tions impact to achieve
firm goals.
KEY IDEA
CHAPTER 14: INTEGRATED MARKETING COMMUNICATIONS
COMMUNICATIONS: PROCESS AND TOOLS
page 380 ________________________________________________________________________________________________
page 381_____________________ page 382_____________________
DEVELOPING THE COMMUNICATIONS STRATEGY
page 383_____________________
INTEGRATING COMMUNICATIONS EFFORTS
page 389_____________________
page 384_____________________ page 385_____________________ page 387_____________________
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Advertising is critical
for both market and
communications
strategies.
KEY IDEA
Hierarchy-of-effects
models for high
involvement and
low involvement
products are central
to understanding how
advertising works.
KEY IDEA
There are two types
of advertising objec-
tives output and
intermediate.
Output objectives are
what the firm ultimately
wants to achieve.
Intermediate objectives
relate to hierarchy-of-
effects models and
include awareness,knowledge, liking or
preference, and trial.
KEY IDEA
Creating advertising is
an enigma, more art
than science, mysteri-
ous and unexplainable.
KEY IDEA
Rational-style adver-
tising includes demon-
stration, comparative,
one- and two-sided
appeals, refutational,
and primacy or recency.
Emotional-style adver-
tising includes humor,
fear, celebrity endorse-
ment, and storytelling.
KEY IDEA
In setting media objec-
tives, the firm must con-
sider reach, frequency,
and gross rating points.
The advertisingmessage must appear
in the right place at
the right time.
Major timing options
are continuous,
flighting, and pulsing.
KEY IDEA
The objective and task
method, based on
marginal analysis,
should underpin the
budgeting process.
Rule-of-thumb
methods can lead to
unsatisfactory results.
KEY IDEA
Evaluating advertising
effectiveness is a
complex task. The firm
must choose among
various types of tests
and measures.
KEY IDEA
Direct marketing offers
advantages over mass
advertising: flexibility,
action-oriented cus-
tomer response, better
measurement, pre-
dictability, better
customer knowledge,
ability to tailor the offer,
and ability to identify
prospects.
KEY IDEA
Publicity and Public
Relations relies on an
intermediary, typically
the press, to transmit
a message to a target
audience.
KEY IDEA Sales promotion is a
potpourri of techniques,
mostly for short-term
objectives.
Poorly designed sales
promotion programs
hurt profits and brand
image.
KEY IDEA
Only quasi-personal
communication taps the
webs true potential.
KEY IDEA
CHAPTER 15: NON-PERSONAL COMMUNICATION
ADVERTISING
page 396_____________________
page 402_____________________ page 407_____________________ page 408_____________________ page 410_____________________
page 397_____________________ page 398_____________________ page 400_____________________
DIRECT MARKETING
page 412_____________________
SALES PROMOTION
page 415 ____________________
THE INTERNET
page 417_____________________
PUBLICITY ANDPUBLIC RELATIONS
page 414_____________________
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CHAPTER 16: DIRECTING AND MANAGING THE FIELD SALES EFFORT
MARKETINGS ROLE IN THE FIELD SALES EFFORT
page 427_____________________ page 428_____________________ page 429 __________________________________________________________
Effectively managing
the sales/marketing
interface is critical
for achieving sales
excellence.
KEY IDEA
Firms often group
customers into separate
tiers like Tier I
(platinum), Tier II (gold),
and Tier III (bronze)
and address each
differently.
KEY IDEA
Some customers
purchase small volumes
but disproportionately
consume the firms
resources.
KEY IDEA
Tier I customers provide
the highest levels of
sales and profits.
Strategic account man-
agers are responsible
for individual accounts.
Global account man-
agers are responsible
for multinational cus-
tomers that want to
make global purchases.
KEY IDEA
THE TASKS OF SALES FORCE MANAGEMENT
page 430 __________________________________________________________ page 431 __________________________________________________________
Sales objectives are
the firms desired
results. Achieving
sales objectives is the
sales forces central
task. Sales objectives
turned into specific
performance require-
ments are called
quotas.
KEY IDEA
page 432_____________________ page 435 __________________________________________________________
Gross sales revenues
are the traditional basis
for sales objectives.
Sometimes firms base
objectives on profit or
profit contribution.
KEY IDEA
Sales objectives
integrate the firms
market strategy and
sales strategy.
KEY IDEA
The firm should break
down sales objectives
by control unit sales
regions, sales districts,
and individual sales
territories. It should
also calendarize sales
objectives quarterly,
monthly, and possibly
weekly.
KEY IDEA
The firm can set sales
objectives related tocustomer retention,
market share, price
realization, close
rates, and customer
satisfaction.
KEY IDEA
Salespeople conduct
several activities. Inmany firms, they spend
less than 20 percent of
time face-to-face with
customers trying to
make sales.
KEY IDEA
Guidelines should
specify how sales-people must allocate
their time.
KEY IDEA
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D I R E C T I N G A N D M A N A G I N G T H E F I E L D S A L E S E F F O R T I C H A P T E R 1 6
page 437 ________________________________________________________________________________________________
page 439 __________________________________________________________ page 440_____________________ page 442_____________________
Selling effort guidelines
must mirror the struc-
ture of sales objectives.
Typically, selling effort
is not proportional to
sales objectives.
The firm must break
down selling effort
allocations by individual
control units like sales
regions, sales districts,and sales territories.
The firm should allocate
selling effort by account
category.
KEY IDEA
The value proposition
anchors the sales
approach the central
message the sales-
person delivers to
customers.
KEY IDEA
The firm should tailor
the sales message to
different customer
targets and design a
process to explain the
firms benefits.
KEY IDEA
Selling is a system to
facilitate customer
buying. Coaching, counseling,
and training can
improve the selling
process.
KEY IDEA
The employee-based or
outsourced sales force
decision involves con-trol, cost, and flexibility
trade-offs.
KEY IDEA
Key sales organization
design variables are
degree of centralizationor decentralization,
number of management
levels, and span of
control.
Specialization may lead
to higher sales but also
higher costs. It may
also cause problems
when several firm
salespeople sell to the
same customer.
KEY IDEA
The firm should
implement sales force
reorganizations verycarefully.
KEY IDEA
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C H A P T E R 1 6 I D I R E C T I N G A N D M A N A G I N G T H E F I E L D S A L E S E F F O R T
Sales territories should
have roughly equal
sales potential and
workloads.
KEY IDEA
The firm should actively
engage salespeople
in the sales planning
process.
KEY IDEA
A pipeline system con-
tinually tracks success
at different stages in
the selling process.
Rigorous pipeline
analysis leads to better
forecasts.
KEY IDEA
The firms reward
system should motivate
salesperson behavior.
Primary components
are financial incentives,
recognition, and
promotions.
The primary ways to
pay salespeople are
salary, commission,
and bonus.
KEY IDEA
The firm should develop
rigorous systems for
recruiting, selecting,
training, retaining, and
replacing salespeople.
KEY IDEA
To simplify translating
product and segment
objectives into sales
objectives, the firm
can focus on existing
versus new productsand existing versus
new customers.
KEY IDEA
THE TASKS OF SALES FORCE MANAGEMENT CONTINUED
page 443 __________________________________________________________
APPENDIX 16.1: ILLUSTRATION OF SETTING OBJECTIVE BY PRODUCT AND CUSTOMER
page 452
page 444_____________________
page 446_____________________ page 447_____________________
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CHAPTER 17: DISTRIBUTION DECISIONS
DISTRIBUTION SYSTEMS AND THEIR EVOLUTION
page 458_____________________
A distribution channel
comprises many enter-
prises, their interrela-
tionships, and the
functions they perform.
A distribution systems
effectiveness changes
over time.
Distribution arrange-
ments are more difficult
to change than othermarketing implementa-
tion elements.
KEY IDEA
Distribution closes gaps
in physical locationand
timebetween finishedproducts at the factory
and consumers and
end-user customers.
KEY IDEA
DEVELOPING A DISTRIBUTION STRATEGY
page 458_____________________ page 460 __________________________________________________________ page 461_____________________
Direct distribution
methods, combined
with database market-ing, are powerful alter-
natives to indirect
distribution.
KEY IDEA
Advantages for wholly
owned retail distribution
are greater operationalcontrol and earning the
entire retail margin; dis-
advantages are capital
required for growth,
and operating risk.
KEY IDEA
Direct channels:
Supplier firms manage
the contact with con-sumers and end users.
Indirect channels:
intermediaries like dis-
tributors, wholesalers,
and retailers play a
major role in transfer-
ring products from
suppliers to consumers
and end users.
Intermediaries offer
value-added benefits
that suppliers cannot.
They provide productassortments, shopping
experience, market
access, and often
reduce the costs of
conducting various
distribution functions.
KEY IDEA
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C H A P T E R 1 7 I D I S T R I B U T I O N D E C I S I O N S
For B2B suppliers,
conditions typically
favor either direct or
indirect distribution.
In each case, there
are several options.
KEY IDEA
Suppliers should select
distribution channel(s)
that are appropriate for
their target segment(s)
and perform the
required functions.
Providing customer
benefits and values,
rather than traditional
industry practice,
should guide thesuppliers distribution
choices.
KEY IDEA
Critical distribution
strategy decisions
include identifying the
functions to be per-
formed, deciding on
direct versus indirect
channels and distribu-
tion channel breadth,
and setting criteria for
intermediaries.
KEY IDEA
A well-designed com-
pensation system can
help the supplier direct
its distributors efforts.
KEY IDEA
Intermediaries add
value by reducing the
number of relationships
a supplier and end-usercustomer must have.
Intermediaries occupy
the nexus between
suppliers and end-user
customers.
KEY IDEA
Distribution channel
members have high
conflict potential.
KEY IDEA
When suppliers attempt
to improve their powerpositions, they should
try to anticipate the
actions of other
distribution channel
members.
KEY IDEA
The partnership model
is an increasinglypopular alternative to
the power/strategic
conflict approach.
Channel members
jointly set goals and
work together for
greater efficiency
and effectiveness.
KEY IDEA
Distribution laws vary
by industry and geogra-
phy. What is illegal in
the U.S. may be normal
business practice in
other countries.
In the U.S., many
antitrust lawsuits
involve distribution
issues.
KEY IDEA
DEVELOPING A DISTRIBUTION STRATEGY CONTINUED
page 462_____________________
MANAGING DISTRIBUTION CHANNELS
page 466_____________________
page 471_____________________ page 472_____________________
page 468_____________________
LEGAL ISSUES IN DISTRIBUTION
page 473_____________________
page 469_____________________
page 463_____________________ page 464_____________________
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CHAPTER 18: MANAGING SERVICES, CUSTOMER SERVICE,AND CUSTOMER RELATIONSHIP MANAGEMENT
PRODUCTS, SERVICES, AND CUSTOMER SERVICE
page 480_____________________ page 481_____________________
Customers buy offersor
promises of benefits
and values; the key
element may be a
product or a service.
KEY IDEA
A service is: any act or
performance that one
party can offer another
that is essentially
intangible and does
not result in the
ownership of anything.
Customer service
enhances value
inherent in the core
product or service.
KEY IDEA
CHARACTERISTICS OF SERVICES
page 482_____________________ page 483 __________________________________________________________
Services are over 70
percent of employment
and GDP in developed
countries.
Factors driving services
growth are rising
incomes, age-related
demographic shifts,
outsourcing, leveraging
core competence,
franchising, customer
behavior changes,
deregulation, technol-
ogy, and globalization.
KEY IDEA
Moments of truthare
opportunities for
customer satisfaction
or dissatisfaction.
KEY IDEA
Customers often focus
on tangible aspects of
intangible services
service facilities, serv-
ice equipment, service
personnel, and serviceguarantees.
Service guarantees
should be uncondi-
tional, painless to
invoke, and easy and
quick to collect. They
should also be simple
to understand and
communicate and
meaningfully related
to the service being
guaranteed.
KEY IDEA
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C H A P T E R 1 8 I M A N A G I N G S E R V I C E S , C U S T O M E R S E R V I C E , A N D C U S T O M E R R E L AT I O N S H I P M A N A G E M E N T
For services, production
and consumption are
inseparable.
Since the firm cannot
inventory services, it
must either increase or
decrease supply and/or
demand.
KEY IDEA
Reducing variability
is more difficult for
services than for
products.
KEY IDEA
Service variability can
be positive when
human service
providers tailor their
behavior for individual
customers.
The firm can reduce
human variability
through automation.
KEY IDEA
Because they cannot
be inventoried, services
are perishable.
KEY IDEA
Services are divisible
the service blueprint
is the sequence of
activities that make
up the service.
KEY IDEA
People do not acquire
services in a physical
sense.
KEY IDEA
Fellow customers can
influence the service
experience the
customer is NOT
always right.
KEY IDEA
Expectations
disconfirmation is
perceived quality
less expected quality.
SERVQUAL identifies
five gaps for diagnosing
service quality.
KEY IDEA
Variables influencing
perceived service
quality include
responsiveness,
reliability, assurance,
empathy, and tangibles.
SERVQUALs related
subscale scores pro-
vide actionable items
for improving serviceperformance.
KEY IDEA
High satisfaction no
longer guarantees high
customer retention.
Firms must delight their
customers.
KEY IDEA
All firms experience
service failures;
how they address
them is key.
KEY IDEA
CHARACTERISTICS OF SERVICES CONTINUED
page 484 __________________________________________________________
SERVICE QUALITY
page 487_____________________ page 488_____________________ page 490 __________________________________________________________
page 486 ________________________________________________________________________________________________
page 485 __________________________________________________________
page 491_____________________ page 492_____________________
A drive for service
efficiency can lead
to inflexible systems
they cannot deal with
idiosyncratic customer
behavior.
KEY IDEA
Few aggrieved
customers complain
they just defect.
Firms should make
complaining easier,
then follow up swift ly
and aggressively.
KEY IDEA
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M A N A G I N G S E R V I C E S , C U S T O M E R S E R V I C E , A N D C U S T O M E R R E L A T I O N S H I P M A N A G E M E N T I C H A P T E R 1 8
CUSTOMER SERVICE
page 493 __________________________________________________________
page 495 __________________________________________________________ page 497_____________________
page 494_____________________
CUSTOMER RELATIONSHIP MANAGEMENT
page 497_____________________ page 498_____________________ page 499_____________________ page 502_____________________
Customer service can
be more central than
the core product or
service.
KEY IDEA
Customer service has
eight flower-of-service
dimensions.
KEY IDEA
Customer service is
different before, during,
and after the purchase.
KEY IDEA
Customers requiring
similar products andservices may have
differing needs for
customer service, and
vice versa.
KEY IDEA
Human capital planning
requires specialattention to recruitment,
selection, training
and development,
appraisal, recognition,
reward, and retention
of customer service
employees.
KEY IDEA
Customer service
infrastructure combinesthe technological
and human resources
necessary to deliver
high-level customer
service.
KEY IDEA
Customer defection
rate is a more valuable
performance measure
than customer satisfac-
tion. The firm should
identify and measure
critical elements driving
customer satisfaction.
KEY IDEA
CRM is a synthesis
of marketing, quality
management, and
customer service to
form mutually benefi-
cial relationshipswith
customers.
Technology has an
important role in CRM,
but CRM is not about
technology.
KEY IDEA
Superior customer
databases are relevant,
structured, current,
consistent, accurate,
accessible, complete,
and secure.
The customer database
should distinguish
among customers
on loyalty and value to
the firm. Customer databases
are more valuable when
they also contain data
about relationships with
competitors.
KEY IDEA
The firm should exam-
ine its privacy policy for
the impact on customer
relationships.
Customer loyalty
programs have many
design parameters.
KEY IDEA
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Price has a larger
impact on profits than
any other lever. Price
changes affect margins,
unit volumes, costs, and
customer perceptions.
KEY IDEA
In setting prices, the
firm should consider
perceived customer
value, costs, com-
petition, and strategic
objectives. Excessive
focus on a single
element leads to
suboptimal pricing
decisions.
KEY IDEA
What seems to be a
pricing problem may
be a perceived value
problem.
KEY IDEA
The firm creates value
for customers primarily
via non-price elements
in its offer the
marketing mix.
Many factors affect the
value that customers
perceive in the firms
offer.
KEY IDEA
Price apportions value
some to the firm,
some to customers.
KEY IDEA
Pricing at what the
market will bearis
not useful advice;
the market will bear
many prices.
KEY IDEA
PED helps estimate
market demand when
price changes.
KEY IDEA
CHAPTER 19: MANAGING PRICE AND VALUE
OPENING CASE: SOUTHWEST AIRLINES
page 509_____________________
page 516_____________________
Part 1: Developing Pricing Stategy
page 510_____________________
PERCEIVED CUSTOMER VALUE
page 511 __________________________________________________________ page 515 __________________________________________________________
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M A N A G I N G P R I C E A N D V A L U E I C H A P T E R 1 9
Critical topics in per-
ceived customer value
are creating, measur-
ing, and capturing
value. Customers price
sensitivity is closely
related to value.
KEY IDEA
In cost-plus pricing,
the firm identifies its
costs and adds a
profit margin.
Cost-plus pricing
does not consider
customer value.
KEY IDEA
Disadvantages of cost-
plus pricing are profit
limitations, arbitrary
cost measurement, and
mismatch with market
realities.
Firms often determine
fixed costs per unit
arbitrarily by assuming
some level of sales
or production.
KEY IDEA
Costs have an important
price-setting role for
birth control, death
control, and profit
planning.
KEY IDEA
Customers do not care
about the firms costs;
they care only about
the value they receive.
The real purpose of
price is notto recover
costs but to capturevalue in the customers
mind.
KEY IDEA
The firm should seek
offer superiority, not
price superiority.
KEY IDEA
In high fixed cost/
low variable cost
oligopolies, firms often
cut prices to gain extravolume. Prices can
spiral downward and
profits vanish.
KEY IDEA
Rampant price-cutting
is disastrous for all but
the low-cost producer.
KEY IDEA
The firm has various
price and non-price
actions for responding
to price competition.
KEY IDEA
page 517_____________________
page 519_____________________ page 520_____________________
page 518 __________________________________________________________
COSTS
page 520_____________________ page 521_____________________ page 522_____________________ page 523_____________________
COMPETITION
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C H A P T E R 1 9 I M A N A G I N G P R I C E A N D V A L U E
CMU and CMR are
critical concepts in
price-setting. They
allow the firm to
calculate breakeven
sales volumes for
various pricing options.
KEY IDEA
Many firms make a
fixed offer, then vary
the price when under
pressure. Firms with
a price menu have
variable offers with
fixed prices.
KEY IDEA
Single product prices
are rare in the real
world.
Pricing actions vary
between highly visible
and opaque.
KEY IDEA
The firm needs good
systems to track ele-
ments in the pricing
toolkit.
The pricing toolkit pro-
duces the pocket pricevia the price waterfall.
Pricing toolkit elements
are differentially impor-
tant to customers.
KEY IDEA
The firm should develop
pricing policies at high
levels in the firm.
Price-setting can be a
strategic capability.
KEY IDEA
Many governments
scrutinize prices for
illegal activity.
KEY IDEA
The firm should link
pricing strategy to its
strategic objectives.
KEY IDEA
The firms major options
for strategic objectives
are: maximize growth in
volume and/or market
share, maximize profits,
or maximize cash flow.
KEY IDEA
STRATEGIC OBJECTIVES
page 524 __________________________________________________________
Part 2: Sett ing Prices
USING PERCEIVED CUSTOMER VALUE, COSTS, COMPETITION, AND STRATEGIC OBJECTIVES
page 530_____________________
TACTICAL PRICING
page 532_____________________
PRICING MANAGEMENT
page 538_____________________
LEGAL AND ETHICAL ISSUES IN PRICING
page 539_____________________
page 533_____________________
page 531_____________________
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C H A P T E R 2 0 I E N S U R I N G T H E F I R M I M P L E M E N T S T H E M A R K E T I N G O F F E R A S P L A N N E D
Soft systems can also
help make firms more
externally oriented.
KEY IDEA
HRM gives the firm
many opportunities to
focus on the customer.
If the firm hires the
rightpeople and
develops and manages
them appropriately, an
external orientation
should follow.
KEY IDEA
Hiring experienced
marketers, including
those at the highest
levels, can play a major
role in developing an
external orientation.
Marketing education
can help marketers
learn new behaviors
that help instill an
external perspective.
KEY IDEA
Many firms training
courses include
customer input and/or
participation.
KEY IDEA
Managers at all
functions and levels
should have consistent
and regular contact
with customers.
KEY IDEA
Customer-focused
measures put teeth
into the external
orientation effort.
KEY IDEA
Todays success sows
the seeds of tomorrows
defeat.
KEY IDEA
page 562_____________________ page 563_____________________ page 564 __________________________________________________________
page 565 __________________________________________________________
TRANSFORMING THE ORGANIZATION TO BECOME EXTERNALLY ORIENTED CONTINUED
page 567_____________________
SUSTAINING AN EXTERNAL ORIENTATION
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CHAPTER 21: MONITORING AND CONTROLLINGFIRM PERFORMANCE AND FUNCTIONING
KEY PRINCIPLES OF MONITOR-AND-CONTROL PROCESSES
page 574_____________________
page 576 __________________________________________________________
page 575 __________________________________________________________
Monitor-and-control
processes are the most
powerful means of
changing individual
behavior in firms.
Monitor-and-control
processes focus on the
firms results: Is the firm
achieving its planned
results? And on firm
functioning: Is the firmfunctioning well?
KEY IDEA
Post-action control
means waiting for a pre-
set time before compar-
ing actual results against
performance standards.
KEY IDEA
Steering control con-
tinually compares the
firms actual results to
performance standards
and allows it to be more
market responsive.
Feedback cycles the
time between the firms
actions and the results
it measures should
not be too short.
KEY IDEA
The firm should use
objective measures for
monitor-and-control
purposes; if scales are
appropriate, these
should be validated.
KEY IDEA
The firm should meas-
ure performance at
multiple organizational
levels.
Good performance in a
unit or sub-unit canhide poor performance
elsewhere. The firm
must isolate the
problem areas.
KEY IDEA
The firm should
measure both unitsales volume and
sales revenues.
The firm must ensure
its volume measures
are accurate and
consistently derived.
KEY IDEA
Marketers generally
prefer profit contribu-tion and direct product
profit measures to
bottom-lineprofit.
KEY IDEA
Most firms measure
product profitability;fewer firms measure
customer profitability.
KEY IDEA
page 581_____________________ page 583_____________________ page 584 __________________________________________________________
MONITORING AND CONTROLLING FIRM PERFORMANCE
Sales volume and
profitability measureshave serious short-
comings; they dont
show the firms
performance relative
to its competitors.
KEY IDEA
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APPENDIX: FINANCIAL ANALYSIS FOR MARKETING DECISIONS
SECTION 1: PARTITIONING COSTS FOR MARKETING DECISION-MAKING
page A2 _____________________
page A7 _____________________
page A13 ____________________
page A8 _____________________ page A10 __________________________________________________________
page A5 _____________________ page A6 ___________________________________________________________
Variable costs increase
and decrease as
volumes increase
and decrease.
Fixed costs do not vary
with volume over a
reasonable range.
KEY IDEA
For marketing decision-
making, the firm should
reclassify its costs as
variable and fixed.
A contribution magin
approach makes it easy
to calculate the profit
impact of volume
changes.
KEY IDEA
Contribution margin per
unit is contribution on a
per unit basis.
KEY IDEA
At the breakeven point
contribution margin
covers fixed costs and
profits are zero.
Profit is a residual. Its
what is left over after
contribution margin
covers fixed costs.
KEY IDEA
Managers can change
programmed fixed costs
in the short/medium
run. Standby fixed
costs only change in
the long run.
KEY IDEA
The firm can use the
breakeven approach to
calculate the profit
impact of changing
programmed fixed
costs.
KEY IDEA
The difference between
a direct cost and an
indirect cost is simple
to figure out. I f the
product, sales territory,
or function were to go
away and the cost
would also go away,
it i