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 2

Marketing—What's It All About? 4

Marketing Is Important to You 5 . *•

How Should We Define Marketing? 6 '

Macro-Marketing 8

The Role of Marketing in Economic Systems 11

Marketing's Role Has Changed a Lot over the Years 15

What Does the Marketing Concept Mean? 16

Adoption of the Marketing Concept Has Not Been Easy or

Universal 17

The Marketing Concept and Customer Value 19

The Marketing Concept Applies in Nonprofit Organizations 11

The Marketing Concept, Social Responsibility, and MarketingEthics 13

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

CHAPTER TWO

Marketing Strategy Planning 30

The Management Job in Marketing 31

What Is a Marketing Strategy? 33

Selecting a Market-Oriented Strategy Is Target

Marketing 34

Developing Marketing Mixes for Target Markets 35

The Marketing Plan Is a Guide to Implementation and

Control 41

The Marketing Program Should Build Customer

Equity 43

The Importance of Marketing Strategy Planning 45

Creative Strategy Planning Needed for Survival 46

What Are Attractive Opportunities? 47

Marketing 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 58

The Marketing Environment 60

Objectives Should Set Firm's Course 61

Company Resources May Limit Search for

Opportunities 64

Analyzing Competitors and the Competitive

Environment 65

The Economic Environment 69

The Technological Environment 71

The Political Environment 71

The Legal Environment 74

The Cultural and Social Environment 77

Using Screening Criteria to Narrow Down to

Strategies 78

Planning Grids Help Evaluate a Portfolio of

Opportunities 82

Multiproduct Firms Have a Difficult

Strategy-Planning Job 83

Evaluating Opportunities in InternationalMarkets 84

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

CHAPTER FOUR

Focusing Marketing Strategy withSegmentation and Positioning 88

Search for Opportunities Can Begin by UnderstandingMarkets 90

Naming Product-Markets and Generic Markets 93

Market Segmentation Defines Possible TarketMarkets 95

What Dimensions Are Used to Segment Markets? 100

A Best Practice Approach to Segmenting Products-Markets 105

More Sophisticated Techniques May Help inSegmenting 109

Differentiation and Positioning Take the CustomerPoint of View HI

Conclusion 115Key Terms 115

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

CHAPTER FIVE

Demographic Dimensions ofGlobal Consumer Markets 118

Target Marketers Focus on the Customer 120

People with Money Make Markets 121

Population Trends in the U.S. Consumer Market 119

Income Dimensions of the U.S. Market 135

Spending Varies with Income and Other Demographic

Dimensions 138

Ethnic 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 146

Consumer Behavior: Why Do They Buy WhatThey Buy? 148

Economic Needs Affect Most Buying Decisions 149

Psychological Influences within an Individual 150

Social Influences Affect Consumer Behavior 160

Individuals Are Affected by the Purchase

Situation 163

The Consumer Decision Process 164

Consumer 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 172

Business and Organizational Customers—A BigOpportunity 174

Organizational Customers Are Different 175

Many Different People May Influence a Decision 177

Organizational Buyers Are Problem Solvers 181

Buyer-Seller Relationships in Business Markets 186

Manufacturers Are Important Customers 190

Producers of Services—Smaller and More Spread

Out 193

Retailers and Wholesalers Buy for TheirCustomers 194

The 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 101

Changes Are Under Way in Marketing Information

Systems 203

The Scientific Method and Marketing Research 107

Five-Step Approach to Marketing Research 208

Defining the Problem—Step 1 108

Analyzing the Situation—Step 2 209

Getting Problem-Specific Data—Step 3 111

Interpreting the Data—Step 4 110

Solving the Problem—Step 5 223

International 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 228

The Product Area Involves Many StrategyDecisions 130

What Is a Product? 231

Differences in Goods and Services 133

Whole Product Lines Must Be Developed Too 235

Branding Is a Strategy Decision 235

Conditions Favorable to Branding 236

Achieving Brand Familiarity Is Not Easy 137

Protecting Brand Names and Trademarks 240

What Kind of Brand to Use? 140

Who Should Do the Branding? 141

The Strategic Importance of Packaging 141

What Is Socially Responsible Packaging? 144

Warranty Policies Are a Part of Strategy Planning 246

Product Classes Help Plan Marketing Strategies 247

Consumer Product Classes 147

Business Products Are Different 250

Business Product Classes—How 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 258

Innovation and Market Changes CreateOpportunities 260

Managing Products Over Their Life Cycles 261

Product Life Cycles Should Be Related to Specific

Markets 263

Product Life Cycles Vary in Length 264

Planning for Different Stages of the Product LifeCycle 267

New-Product Planning 171

An Organized New-Product Development Process IsCritical 171

New-Product Development: A Total Company

Effort 178

Need for Product Managers 280

Managing 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 288

Marketing Strategy Planning Decisions for Place 291

Place Decisions Are Guided by "Ideal" Place

Objectives 292

Channel System May Be Direct or Indirect 293

Channel Specialists May Reduce Discrepancies and

Separations 297

Channel Relationship Must Be Managed 298

Vertical Marketing Systems Focus on Final

Customers 301

The Best Channel System Should Achieve Ideal

Market Exposure 304

Channel Systems Can Be Complex 307

Entering International Markets 309

Conclusion 312Key Terms 312Questions and Problems 312Creating Marketing Plans 313Suggested Cases 313Computer-Aided Problem 313

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CHAPTER TWELVE

Distribution Customer Serviceand Logistics 314

PhysicakDistribution Gets It to Customers 316

Physical Distribution Customer Service 317

Physical Distribution Concept Focuses on the Whole

Distribution System 319

Coordinating Logistics Activities among Firms 322

The Transporting Function Adds Value to a Marketing

Strategy 316

Which Transporting Alternative Is Best? 327

The Storing Function and Marketing Strategy 331

Specialized Storing Facilities May Be Required 333

The Distribution Center—A Different Kind ofWarehouse 335

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

CHAPTERTHIRTEEN

Retailers, Wholesalers, and TheirStrategy Planning 338

Retailers and Wholesalers Plan Their OwnStrategies 340

The Nature of Retailing 341

Planning a Retailer's Strategy 342

Conventional Retailers—Try to Avoid PriceCompetition 344

Expand Assortment and Service—To Compete at aHigh Price 345

Evolution of Mass-Merchandising Retailers 345

Some Retailers Focus on Added Convenience 348

Retailing on the Internet 349

Why Retailers Evolve and Change 352

Retailer Size and Profits 354

Differences in Retailing in Different Nations 355

What Is a Wholesaler? 356

Wholesaling Is Changing with the Times 356

Wholesalers Add Value in Different Ways 358

Merchant Wholesalers Are the Most Numerous 359

Agents Are Strong on Selling 361

What Will Happen to Retailers and Wholesalersin the Future? 363

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

CHAPTER FOURTEEN

Promotion—Introduction to IntegratedMarketing Communications 366

Promotion Communicates to Target Markets 368

Several Promotion Methods Are Available 369

Someone Must Plan, Integrate, and Manage the

Promotion Blend 371

Which Methods to Use Depends on PromotionObjectives 374

Promotion Requires Effective Communication 376

Integrated Direct-Response Promotion Is Very

Targeted 378

The Customer May Initiate the Communication

Process 379

How Typical Promotion Plans Are Blended and

Integrated 382

Adoption Processes Can Guide Promotion

Planning 385

Promotion Blends Vary Over the Life Cycle 388

Setting the Promotion Budget 390

CHAPTER FIFTEEN

Personal Selling andCustomer Service 394

The Importance and Role of Personal Selling 396

What Kinds of Personal Selling Are Needed? 399

Order Getters Develop New Business

Relationships 399

Order Takers Nurture Relationships to Keep theBusiness Coming 400

Supporting Sales Force Informs and Promotes in theChannel 401

Customer Service Promotes the Next Purchase 403

The Right Structure Helps Assign Responsibility 404

Information Technology Provides Tools to Do

the Job 409

Sound Selection and Training to Build a Sales

Force 410

Compensating and Motivating Salespeople 412

Personal Selling Techniques—Prospecting andPresenting 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 454

Advertising, Sales Promotion, and Marketing StrategyPlanning 424

Advertising Is Big Business 426

Advertising Objectives Are a Strategy Decision 418

Objectives Determine the Kinds of Advertising

Needed 429

Coordinated Advertising Efforts with Cooperative

Relationships 431

Choosing the "Best" Medium—How to Deliver the

Message 431

Advertising on the Internet—New Opportunities and

New Challenges 435

Planning the "Best" Message—What to

Communicate 438Advertising Agencies Often Do the Work 441

Measuring Advertising Effectiveness Is Not Easy 444

How to Avoid Unfair Advertising 445

Sales Promotion—Do Something Different to

Stimulate Change 446

Problems in Managing Sales Promotion 448

Different Types of Sales Promotion for DifferentTargets 449

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

Price Has Many Strategy Dimensions 456

Objectives Should Guide Strategy Planning

for Price 458

Profit-Oriented Objectives 459

Sales-Oriented Objectives 460

Status Quo Pricing Objectives 461

Most Firms Set Specific Pricing Policies—To Reach

Objectives 461

Price Flexibility Policies 462

Price-Level Policies—Over the Product

Life Cycle 464

Most Price Structures Are Built Around List Prices 469

Discount Policies—Reductions from List Prices 469

Allowance Policies—Off List Prices 471

Some Customers Get Something Extra 472

List Price May Depend on Geographic Pricing

Policies 473

Pricing Policies Combine to Impact Customer

Value 474

Legality of Pricing Policies 478

Conclusion 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 487

Some Firms Just Use Markups 487

Average-Cost Pricing Is Common and Can Be

Dangerous 491

Marketing Managers Must Consider Various Kinds

of Costs 492

Some Firms Add a Target Return to Cost 496

Break-Even Analysis Can Evaluate Possible Prices 496

Marginal Analysis Considers Both Costs and

Demand 498

Demand-Oriented Approaches for Setting Prices 502

Pricing a Full Line 509

Bid Pricing and Negotiated Pricing Depend HeavilyonCosts 510

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

CHAPTER NINETEEN

Implementing and ControllingMarketing Plans: Evolutionand Revolution 514

Good Plans Set the Framework for Implementationand Control 516

Speed Up Information for Better Implementation and

Control 518

Effective Implementation Means That Plans Work

as Intended 519Control Provides Feedback to Improve Plans and

Implementation 522

Sales Analysis Shows What's Happening 523

Performance Analysis Looks for Differences 524

Performance Indexes Simplify Human Analysis 526

A Series of Performance Analyses May Find the

Real Problem 527

Marketing Cost Analysis—Controlling Costs Too 530

Planning and Control Combined 535

The Marketing Audit 536

Conclusion 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 540

Marketing in the Broader Context 542

The Finance Function: Money to Implement

Marketing Plans 543

Production Must Be Coordinated with the MarketingPlan 549

Accounting Data Can Help in Understanding Costsand Profit 555

People 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 564

How Should Marketing Be Evaluated? 566

Can Consumer Satisfaction Be Measured? 568

Micro-Marketing Often Does Cost Too Much 569

Macro-Marketing Does Not Cost Too Much 571

Marketing Strategy Planning Process Requires Logic

and Creativity 573

The Marketing Plan Brings All the Details

Together 576Challenges Facing Marketers 577

How 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 632

1. Chick-fil-A: "Eat Mor Chickin" (Excepton Sunday) 633

2. Bass Pro Shops (Outdoor World) 634

3. Toyota Prius: The Power of Excellence in ProductInnovation and Marketing 635

4. Potbelly Sandwich Works Grows through"Quirky" Marketing 637

5. Suburban Regional Shopping Malls: Can theMagic Be Restored? 638

6. Girl Scouts 641

7. The GM HUMMER: Brand Equity, Positioning, andDevelopment 643

8. Segway Finds Niche Markets for Its HumanTransporter Technology 644

CASES 647

1. McDonald's "Seniors" Restaurant 648

2. Harvest Farm Foods, Inc. 648

3. MANU Soccer Academy 649

4. Trusty Technology Services 650

5. PolyTech Products 651

6. Global Steel Company 652

7. Waituiwa Lodge 653

8. Lombardi's Italian Grill 654

9. Sweetest Dreams Inn 655

10. Taffe's Ice Land 656

11. The Next Step 657

12. DrRay.com—Custom Vitamins andSupplements 658

13. File-It Supplies, Inc. 659

14. Express Multimedia 660

15. The Trujillo Group 661

16. Bunyan Lumber 662

17. Oh So Pure Water, Inc. 664

18. Whisper Valley Volunteer Fire Department 665

19. OurPerfectWedding.com 666

20. Recreation Supplies Unlimited 668

21. Advanced Materials, Inc. 669

22. Bright Light Innovations: The Starlight Stove 670

23. West Side Furniture 671

24. Lone Star Wire, Inc, 671

25. United Plastics Mfg., Inc. 673

26. Best Way Canning, Inc. 674

27. Superior Molding, Inc. 675

28. Precision Cutting Tools, Inc. 676

29. Specialized Castings, Inc. 677

30. Eden Prairie Mills, Ltd . 678

31. At-Home Health Services, Inc. 679

32. Lever, Ltd. 681

33. Mulligan & Starling 683

34. Innovative Aluminum Products, Inc. 684

35. Mama Rossi's Pizza 686

36. 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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