Basic MarketingA Marketing Strategy Planning Approach

William D. Perreault, Jr., Ph.D.UNIVERSITY OF NORTH CAROLINA

Joseph P. Cannon, Ph.D.COLORADO STATE UNIVERSITY

E. Jerome McCarthy, Ph.D.MICHIGAN STATE UNIVERSITY

McGraw-HillIrwin

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

CHAPTER ONE

Marketing's Value to Consumers,Firms, and Society 2MarketingWhat's It All About? 4Marketing Is Important to You 5 . *How Should We Define Marketing? 6 'Macro-Marketing 8The Role of Marketing in Economic Systems 11Marketing's Role Has Changed a Lot over the Years 15What Does the Marketing Concept Mean? 16Adoption of the Marketing Concept Has Not Been Easy or

Universal 17The Marketing Concept and Customer Value 19The Marketing Concept Applies in Nonprofit Organizations 11The Marketing Concept, Social Responsibility, and Marketing

Ethics 13

Conclusion 27Key Terms 27Questions and Problems 28Suggested Cases 28Computer-Aided Problem 28

CHAPTER TWO

Marketing Strategy Planning 30The Management Job in Marketing 31What Is a Marketing Strategy? 33Selecting a Market-Oriented Strategy Is Target

Marketing 34Developing Marketing Mixes for Target Markets 35The Marketing Plan Is a Guide to Implementation and

Control 41The Marketing Program Should Build Customer

Equity 43The Importance of Marketing Strategy Planning 45Creative Strategy Planning Needed for Survival 46What Are Attractive Opportunities? 47Marketing Strategy Planning Process Highlights

Opportunities 48Types of Opportunities to Pursue 51International Opportunities Should Be

Considered 53

Conclusion 54Key Terms 55Questions and Problems 55Creating Marketing Plans 56Suggested Cases 56Computer-Aided Problem 56

CHAPTER THREE

Evaluating Opportunities in theChanging Marketing Environment 58The Marketing Environment 60Objectives Should Set Firm's Course 61Company Resources May Limit Search for

Opportunities 64Analyzing Competitors and the Competitive

Environment 65The Economic Environment 69The Technological Environment 71The Political Environment 71The Legal Environment 74The Cultural and Social Environment 77Using Screening Criteria to Narrow Down to

Strategies 78Planning Grids Help Evaluate a Portfolio of

Opportunities 82Multiproduct Firms Have a Difficult

Strategy-Planning Job 83Evaluating Opportunities in International

Markets 84

Conclusion 85Key Terms 86Questions and Problems 86Creating Marketing Plans 87Suggested Cases 87Computer-Aided Problem 87

CHAPTER FOUR

Focusing Marketing Strategy withSegmentation and Positioning 88Search for Opportunities Can Begin by Understanding

Markets 90Naming Product-Markets and Generic Markets 93Market Segmentation Defines Possible Tarket

Markets 95What Dimensions Are Used to Segment Markets? 100A Best Practice Approach to Segmenting Products-

Markets 105More Sophisticated Techniques May Help in

Segmenting 109Differentiation and Positioning Take the Customer

Point of View HI

Conclusion 115Key Terms 115Questions and Problem 115Creating Marketing Plans 116Suggested Cases 116Computer-Aided Problem 116

CHAPTER FIVE

Demographic Dimensions ofGlobal Consumer Markets 118Target Marketers Focus on the Customer 120People with Money Make Markets 121

Population Trends in the U.S. Consumer Market 119Income Dimensions of the U.S. Market 135Spending Varies with Income and Other Demographic

Dimensions 138Ethnic Dimensions of the U.S. Market 141

Conclusion 144Key Terms 144Questions and Problems 144Creating Marketing Plans 145Suggested Cases 145Computer-Aided Problem 145

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CHAPTER SIX

Final Consumers andTheir Buying Behavior 146Consumer Behavior: Why Do They Buy What

They Buy? 148Economic Needs Affect Most Buying Decisions 149Psychological Influences within an Individual 150Social Influences Affect Consumer Behavior 160Individuals Are Affected by the Purchase

Situation 163The Consumer Decision Process 164Consumer Behavior in International Markets 167

Conclusion 169Key Terms 169Questions and Problems 169Creating Marketing Plans 170Suggested Cases 170Computer-Aided Problem 170

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CHAPTER SEVEN

Business and Organizational Customersand Their Buying Behavior 172Business and Organizational CustomersA Big

Opportunity 174Organizational Customers Are Different 175Many Different People May Influence a Decision 177Organizational Buyers Are Problem Solvers 181Buyer-Seller Relationships in Business Markets 186Manufacturers Are Important Customers 190Producers of ServicesSmaller and More Spread

Out 193Retailers and Wholesalers Buy for Their

Customers 194The Government Market 195

Conclusion 197Key Terms 197Questions and Problems 197Creating Marketing Plans 198Suggested Cases 198Computer-Aided Problem 198

CHAPTER EIGHT

Improving Decisions with MarketingInformation 200

Effective Marketing Requires Good Information 101Changes Are Under Way in Marketing Information

Systems 203The Scientific Method and Marketing Research 107Five-Step Approach to Marketing Research 208Defining the ProblemStep 1 108Analyzing the SituationStep 2 209Getting Problem-Specific DataStep 3 111Interpreting the DataStep 4 110Solving the ProblemStep 5 223International Marketing Research 224

Conclusion 225Key Terms 226Questions and Problems 226Creating Marketing Plans 227Suggested Cases 227Computer-Aided Problem 227

CHAPTER NINE

Elements of Product Planningfor Goods and Services 228The Product Area Involves Many Strategy

Decisions 130

What Is a Product? 231Differences in Goods and Services 133Whole Product Lines Must Be Developed Too 235Branding Is a Strategy Decision 235Conditions Favorable to Branding 236Achieving Brand Familiarity Is Not Easy 137Protecting Brand Names and Trademarks 240What Kind of Brand to Use? 140Who Should Do the Branding? 141The Strategic Importance of Packaging 141What Is Socially Responsible Packaging? 144Warranty Policies Are a Part of Strategy Planning 246Product Classes Help Plan Marketing Strategies 247Consumer Product Classes 147Business Products Are Different 250Business Product ClassesHow They Are

Defined 251

Conclusion 254Key Terms 254Questions and Problems 254Creating Marketing Plans 256Suggested Cases 256Computer-Aided Problem 256

CHAPTER TEN

Product Management and New-Product Development 258Innovation and Market Changes Create

Opportunities 260Managing Products Over Their Life Cycles 261Product Life Cycles Should Be Related to Specific

Markets 263Product Life Cycles Vary in Length 264Planning for Different Stages of the Product Life

Cycle 267

New-Product Planning 171An Organized New-Product Development Process Is

Critical 171New-Product Development: A Total Company

Effort 178Need for Product Managers 280Managing Product Quality 181

Conclusion 285Key Terms 285Questions and Problems 286Creating Marketing Plans 286Suggested Cases 286Computer-Aided Problem 286

CHAPTER ELEVEN

Place and Development of ChannelSystems 288Marketing Strategy Planning Decisions for Place 291Place Decisions Are Guided by "Ideal" Place

Objectives 292Channel System May Be Direct or Indirect 293Channel Specialists May Reduce Discrepancies and

Separations 297Channel Relationship Must Be Managed 298Vertical Marketing Systems Focus on Final

Customers 301The Best Channel System Should Achieve Ideal

Market Exposure 304Channel Systems Can Be Complex 307Entering International Markets 309Conclusion 312Key Terms 312Questions and Problems 312Creating Marketing Plans 313Suggested Cases 313Computer-Aided Problem 313

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CHAPTER TWELVE

Distribution Customer Serviceand Logistics 314PhysicakDistribution Gets It to Customers 316Physical Distribution Customer Service 317Physical Distribution Concept Focuses on the Whole

Distribution System 319Coordinating Logistics Activities among Firms 322The Transporting Function Adds Value to a Marketing

Strategy 316Which Transporting Alternative Is Best? 327The Storing Function and Marketing Strategy 331Specialized Storing Facilities May Be Required 333The Distribution CenterA Different Kind of

Warehouse 335

Conclusion 335Key Terms 336Questions and Problems 336Creating Marketing Plans 337Suggested Cases 337Computer-Aided Problem 337

CHAPTERTHIRTEEN

Retailers, Wholesalers, and TheirStrategy Planning 338Retailers and Wholesalers Plan Their Own

Strategies 340The Nature of Retailing 341Planning a Retailer's Strategy 342Conventional RetailersTry to Avoid Price

Competition 344Expand Assortment and ServiceTo Compete at a

High Price 345Evolution of Mass-Merchandising Retailers 345Some Retailers Focus on Added Convenience 348Retailing on the Internet 349Why Retailers Evolve and Change 352Retailer Size and Profits 354Differences in Retailing in Different Nations 355What Is a Wholesaler? 356Wholesaling Is Changing with the Times 356Wholesalers Add Value in Different Ways 358Merchant Wholesalers Are the Most Numerous 359Agents Are Strong on Selling 361What Will Happen to Retailers and Wholesalers

in the Future? 363

Conclusion 363Key Terms 364Questions and Problems 364Creating Marketing Plans 365Suggested Cases 365Computer-Aided Problem 365

CHAPTER FOURTEEN

PromotionIntroduction to IntegratedMarketing Communications 366Promotion Communicates to Target Markets 368Several Promotion Methods Are Available 369Someone Must Plan, Integrate, and Manage the

Promotion Blend 371Which Methods to Use Depends on Promotion

Objectives 374Promotion Requires Effective Communication 376Integrated Direct-Response Promotion Is Very

Targeted 378The Customer May Initiate the Communication

Process 379How Typical Promotion Plans Are Blended and

Integrated 382Adoption Processes Can Guide Promotion

Planning 385Promotion Blends Vary Over the Life Cycle 388Setting the Promotion Budget 390

CHAPTER FIFTEEN

Personal Selling andCustomer Service 394The Importance and Role of Personal Selling 396What Kinds of Personal Selling Are Needed? 399Order Getters Develop New Business

Relationships 399Order Takers Nurture Relationships to Keep the

Business Coming 400Supporting Sales Force Informs and Promotes in the

Channel 401Customer Service Promotes the Next Purchase 403The Right Structure Helps Assign Responsibility 404Information Technology Provides Tools to Do

the Job 409Sound Selection and Training to Build a Sales

Force 410Compensating and Motivating Salespeople 412Personal Selling TechniquesProspecting and

Presenting 415

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Conclusion 391Key Terms 392Questions and Problems 392Creating Marketing Plans 393Suggested Cases 393Computer-Aided Problem 393

Conclusion 419Key Terms 420Questions and Problems 420Creating Marketing Plans 421Suggested Cases 421Computer-Aided Problem 421

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CHAPTER SIXTEEN CHAPTER SEVENTEEN

Advertising and Sales Promotion 422 Pricing Objectives and Policies 454Advertising, Sales Promotion, and Marketing Strategy

Planning 424Advertising Is Big Business 426Advertising Objectives Are a Strategy Decision 418Objectives Determine the Kinds of Advertising

Needed 429Coordinated Advertising Efforts with Cooperative

Relationships 431Choosing the "Best" MediumHow to Deliver the

Message 431Advertising on the InternetNew Opportunities and

New Challenges 435Planning the "Best" MessageWhat to

Communicate 438Advertising Agencies Often Do the Work 441Measuring Advertising Effectiveness Is Not Easy 444How to Avoid Unfair Advertising 445Sales PromotionDo Something Different to

Stimulate Change 446Problems in Managing Sales Promotion 448Different Types of Sales Promotion for Different

Targets 449Conclusion 450Key Terms 451Questions and Problems 451Creating Marketing Plans 452Suggested Cases 452Computer-Aided Problem 452

Price Has Many Strategy Dimensions 456Objectives Should Guide Strategy Planning

for Price 458Profit-Oriented Objectives 459Sales-Oriented Objectives 460Status Quo Pricing Objectives 461Most Firms Set Specific Pricing PoliciesTo Reach

Objectives 461Price Flexibility Policies 462Price-Level PoliciesOver the Product

Life Cycle 464Most Price Structures Are Built Around List Prices 469Discount PoliciesReductions from List Prices 469Allowance PoliciesOff List Prices 471Some Customers Get Something Extra 472List Price May Depend on Geographic Pricing

Policies 473Pricing Policies Combine to Impact Customer

Value 474Legality of Pricing Policies 478Conclusion 481Key Terms 482Questions and Problems 482Creating Marketing Plans 483Suggested Cases 483Computer-Aided Problem 483

CHAPTER EIGHTEEN

Price Setting in theBusiness World 484

Price Setting Is a Key Strategy Decision 487Some Firms Just Use Markups 487Average-Cost Pricing Is Common and Can Be

Dangerous 491Marketing Managers Must Consider Various Kinds

of Costs 492Some Firms Add a Target Return to Cost 496Break-Even Analysis Can Evaluate Possible Prices 496Marginal Analysis Considers Both Costs and

Demand 498Demand-Oriented Approaches for Setting Prices 502Pricing a Full Line 509Bid Pricing and Negotiated Pricing Depend Heavily

onCosts 510

Conclusion 512Key Terms 512Questions and Problems 512Creating Marketing Plans 513Suggested Cases 513Computer-Aided Problem 513

CHAPTER NINETEEN

Implementing and ControllingMarketing Plans: Evolutionand Revolution 514Good Plans Set the Framework for Implementation

and Control 516Speed Up Information for Better Implementation and

Control 518Effective Implementation Means That Plans Work

as Intended 519Control Provides Feedback to Improve Plans and

Implementation 522Sales Analysis Shows What's Happening 523Performance Analysis Looks for Differences 524Performance Indexes Simplify Human Analysis 526A Series of Performance Analyses May Find the

Real Problem 527Marketing Cost AnalysisControlling Costs Too 530Planning and Control Combined 535The Marketing Audit 536Conclusion 537Key Terms 537Questions and Problems 537Creating Marketing Plans 538Suggested Cases 538Computer-Aided Problem 539

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CHAPTER TWENTY

Managing Marketing's Link withOther Functional Areas 540Marketing in the Broader Context 542The Finance Function: Money to Implement

Marketing Plans 543Production Must Be Coordinated with the Marketing

Plan 549Accounting Data Can Help in Understanding Costs

and Profit 555People Put Plans into Action 559

Conclusion 561Key Terms 562Questions and Problems 562Creating Marketing Plans 563 /Suggested Cases 563

CHAPTER TWENTY-ONE

Ethical Marketing in a Consumer-Oriented World: Appraisal andChallenges 564How Should Marketing Be Evaluated? 566Can Consumer Satisfaction Be Measured? 568Micro-Marketing Often Does Cost Too Much 569

Macro-Marketing Does Not Cost Too Much 571Marketing Strategy Planning Process Requires Logic

and Creativity 573The Marketing Plan Brings All the Details

Together 576Challenges Facing Marketers 577How Far Should the Marketing Concept Go? 586

Conclusion 586Questions and Problems 587Creating Marketing Planss 587Suggested Cases 587

Appendix A EconomicsFundamentals 588

Appendix B Marketing Arithmetic 601

Appendix C Career Planning inMarketing 618

VIDEO CASES 6321. Chick-fil-A: "Eat Mor Chickin" (Except

on Sunday) 6332. Bass Pro Shops (Outdoor World) 6343. Toyota Prius: The Power of Excellence in Product

Innovation and Marketing 6354. Potbelly Sandwich Works Grows through

"Quirky" Marketing 6375. Suburban Regional Shopping Malls: Can the

Magic Be Restored? 6386. Girl Scouts 6417. The GM HUMMER: Brand Equity, Positioning, and

Development 6438. Segway Finds Niche Markets for Its Human

Transporter Technology 644

CASES 6471. McDonald's "Seniors" Restaurant 6482. Harvest Farm Foods, Inc. 6483. MANU Soccer Academy 6494. Trusty Technology Services 6505. PolyTech Products 651

6. Global Steel Company 6527. Waituiwa Lodge 6538. Lombardi's Italian Grill 6549. Sweetest Dreams Inn 655

10. Taffe's Ice Land 65611. The Next Step 65712. DrRay.comCustom Vitamins and

Supplements 65813. File-It Supplies, Inc. 65914. Express Multimedia 66015. The Trujillo Group 66116. Bunyan Lumber 66217. Oh So Pure Water, Inc. 66418. Whisper Valley Volunteer Fire Department 66519. OurPerfectWedding.com 66620. Recreation Supplies Unlimited 66821. Advanced Materials, Inc. 66922. Bright Light Innovations: The Starlight Stove 67023. West Side Furniture 67124. Lone Star Wire, Inc, 67125. United Plastics Mfg., Inc. 67326. Best Way Canning, Inc. 67427. Superior Molding, Inc. 67528. Precision Cutting Tools, Inc. 676

29. Specialized Castings, Inc. 67730. Eden Prairie Mills, Ltd . 67831. At-Home Health Services, Inc. 67932. Lever, Ltd. 68133. Mulligan & Starling 68334. Innovative Aluminum Products, Inc. 68435. Mama Rossi's Pizza 68636. Sorenson Builders 688

Computer-Aided Problems 690

Notes 695

Illustration Credits 755

Name Index l-i

Company Index l-io

Subject Index 1-14

Glossary G-i

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