PHILIP KOTLERNorthwestern University
KEVIN LANE KELLERDartmouth College
PEARSON
PrenticeHall
Pearson Education International
Preface 29
PART 1 Understanding Marketing Management 42
Chapter 1 Defining Marketing for the 21st Century 42
The Importance of Marketing 44The Scope of Marketing 45
What Is Marketing? 45What Is Marketed? 46Who Markets? 47Marketing in Practice 50
Core Marketing Concepts 52Needs, Wants, and Demands 52Target Markets, Positioning, and Segmentation 53Offerings and Brands 53Value and Satisfaction 53Marketing Channels 54Supply Chain 54Competition 54Marketing Environment 54
The New Marketing Realities 55Major Societal Forces 55New Consumer Capabilities 56New Company Capabilities 57
Company Orientation toward the Marketplace 58The Production Concept 58The Product Concept 58The Selling Concept 59The Marketing Concept 59
The Holistic Marketing Concept 59
MARKETING MEMO Marketing Right and Wrong 60
Relationship Marketing 60
BREAKTHROUGH MARKETING Nike 61Integrated Marketing 62Internal Marketing 64Performance Marketing 66
Marketing Management Tasks 68Developing Marketing Strategies and Plans 68Capturing Marketing Insights 68
MARKETING MEMO Marketers'Frequently AskedQuestions 69
Connecting with Customers 69Building Strong Brands 69
CONTENTS
Shaping the Market Offerings 69Delivering Value 69Communicating Value 70Creating Long-Term Growth 70
Summary 70Applications 71
Chapter 2 Developing Marketing Strategies and Plans 72
Marketing and Customer Value 74The Value Delivery Process 74The Value Chain 75Core Competencies 76A Holistic Marketing Orientation and Customer Value 78The Central Role of Strategic Planning 79
BREAKTHROUGH MARKETING Intel 80
Corporate and Division Strategic Planning 81Defining the Corporate Mission 81Establishing Strategic Business Units 83Assigning Resources to Each SBU25 84Assessing Growth Opportunities 84Organization and Organizational Culture 87Marketing Innovation 87
Business Unit Strategic Planning 88The Business Mission 88SWOT Analysis 89
MARKETING INSIGHT Creating Innovative Marketing 89
Goal Formulation 92
MARKETING MEMO Checklist for PerformingStrengths/Weaknesses Analysis 93
Strategic Formulation 93Program Formulation and Implementation 95
MARKETING INSIGHT Marketing's Contribution toShareholder Value 96
Feedback and Control 96Product Planning: The Nature and Contents of a MarketingPlan 96
MARKETING MEMO Marketing Plan Criteria 97
Summary 103Applications 103
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MARKETING INSIGHT Conducting Informative Focus
Groups 135
MARKETING MEMO Questionnaire Dos and Don'ts 136
MARKETING INSIGHT Getting into Consumers' Heads withQualitative Research 138
MARKETING INSIGHT Understanding Brain Science 139
Step 3: Collect the Information 141
MARKETING MEMO Pros and Cons of Online Research 142
Step 4: Analyze the Information 142
Step 5: Present the Findings 143Step 6: Make the Decision 143Overcoming Barriers to the Use of Marketing Research 143
BREAKTHROUGH MARKETING IDEO 145
Measuring Marketing Productivity 146Marketing Metrics 146Marketing-Mix Modeling 146Marketing Dashboards 147
MARKETING INSIGHT Marketing Dashboards to ImproveEffectiveness and Efficiency 148
Forecasting and Demand Measurement 149The Measures of Market Demand 150A Vocabulary for Demand Measurement 151Estimating Current Demand 153Estimating Future Demand 155
Summary 157Applications 157
PART 3 Connecting with Customers 158
Chapter 5 Creating Customer Value, Satisfaction, and Loyalty 158
Building Customer Value, Satisfaction, and Loyalty 160Customer Perceived Value 161Total Customer Satisfaction 164Monitoring Satisfaction 165
MARKETING INSIGHT Net Promoter and CustomerSatisfaction 167
Product and Service Quality 169
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Maximizing Customer Lifetime Value 170Customer Profitability 170Measuring Customer Lifetime Value 172
MARKETING MEMO Calculating Customer Lifetime Value 172
Cultivating Customer Relationships 173Customer Relationship Management 173
MARKiTIWO INSIGHT Company Response to CustomerEmpowerment 174
Attracting and Retaining Customers 176Building Loyalty 178
MARKETING MEMO Creating Customer Evangelists 179
Win-Backs 182Customer Databases and Database Marketing 182
Customer Databases 183Data Warehouses and Datamining 183
BREAKTHROUGH MARKETING Tesco 184
The Downside of Database Marketing and CRM 185Summary 187Applications 187
Chapter 6 Analyzing Consumer Markets 188
What Influences Consumer Behavior? 190Cultural Factors 190
MARKETING 1NSI6HT The Future of AmericanHyperconsumption 192
MARKETING SWSIGHT Marketing to Cultural MarketSegments 193
Social Factors 194Personal Factors 196
MARKETING MEMO The Average U.S. Consumer Quiz 197
Key Psychological Processes 200
BREAKTHROUGH MARKETING Ikea 201
Motivation: Freud, Maslow, Herzberg 201Perception 203Learning 204Memory 205
The Buying Decision Process: The Five-Stage Model 207Problem Recognition 208Information Search 208
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CONTENTS
Evaluation of Alternatives 209Purchase Decision 212Postpurchase Behavior 213
Other Theories of Consumer Decision MakingLevel of Consumer Involvement 214Decision Heuristics and Biases 215
214
MARKETING INSIGHT How Consumers Really MakeDecisions 216
MARKETING MEMO Decision Traps 217
Mental Accounting 217Profiling the Customer Buying-Decision Process 218
Summary 218Applications 219
Chapter 7 Analyzing Business Markets 220
What Is Organizational Buying? 222
The Business Market versus the Consumer Market 222
MARKETING INSIGHT Big Sales to Small Business 224
Buying Situations 225Systems Buying and Selling 226
MARKETING MEMO Maximizing Customer References 227
Participants in the Business Buying Process 228The Buying Center 228Buying Center Influences 228Buying Center Targeting 230
The Purchasing/Procurement Process 231Purchasing Department Perceptions 231Purchasing Organization and Administration 232
Stages in the Buying Process 232Problem Recognition 233General Need Description and Product Specification 233Supplier Search 233Proposal Solicitation 234Supplier Selection 234
MARKETING MEMO Developing Compelling Customer ValuePropositions 236
Order-Routine Specification 237Performance Review 238
Managing Business-to-Business Customer Relationships 238The Benefits of Vertical Coordination 238
BREAKTHROUGH MARKETING General Electric 239
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MARKETING iWSIGHT Establishing Corporate Trust andCredibility 240
Business Relationships: Risks and Opportunism 241Institutional and Government Markets 242
MARKETING MEMO Selling Tech to the U.S. Government 244
Summary 245Applications 245
Chapter 8 Identifying Market Segments and Targets
248
246
Levels of Market SegmentationSegment Marketing 248Niche Marketing 249Local Marketing 250Individual Marketing 250
Chasing the Long Tail
252
253
251
BREAKTHROUGH MARKETING HSBC
Bases for Segmenting Consumer MarketsGeographic Segmentation 253Demographic Segmentation 255
MARKETING INSIGHT Trading Up (and Down): The New U.S.
Consumer 259
MARKETING INSIGHT Marketing to Generation Y 260
MARKETING MEMO Cheat Sheet for U.S. 20-Somethings 261Psychographic Segmentation 261Behavioral Segmentation 263
Bases for Segmenting Business Markets 266Market Targeting 267
Effective Segmentation Criteria 267Evaluating and Selecting the Market Segments 268Additional Considerations 270
Summary 272Applications 273
PART 4 Building Strong Brands 274
Chapter 9 Creating Brand Equity 274
What Is Brand Equity? 276The Role of Brands 277The Scope of Branding 278Defining Brand Equity 278
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BREAKTHROUGH MARKETING Procter & Gamble 279
MARKETING INSIGHT Brand Cooking with Jamie Oliver 280
Brand Equity as a Bridge 282Brand Equity Models 283
Building Brand Equity 285Choosing Brand Elements 286Designing Holistic Marketing Activities 287Leveraging Secondary Associations 290
Measuring Brand Equity 291
MARKETING INSIGHT The Brand Value Chain 292
Brand Valuation 293Managing Brand Equity 293
Brand Reinforcement 293
MARKETING INSIGHT What Is a Brand Worth? 294
Brand Revitalization 295Devising a Branding Strategy 296
Branding Decisions 297Brand Extensions 298Brand Portfolios 301
Customer Equity 303
MARKETING MEMO Twenty-First-Century Branding 303
Summary 304Applications 305
Chapter 10 Crafting the Brand Positioning 306
Developing and Communicating a Positioning Strategy 308Competitive Frame of Reference 309Points-of-Difference and Points-of-Parity 309
BREAKTHROUGH MARKETING UPS 310
Establishing Category Membership 311Choosing POPs and PODs 314Creating POPs and PODs 314
i MARKETING MEMO Writing a Positioning Statement 315
Differentiation Strategies 316
MARKETING MEMO How to Derive Fresh Consumer
Insights to Differentiate Productsand Services 317
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CONTENTS
Product Life-Cycle Marketing Strategies 318Product Life Cycles 318Style, Fashion, and Fad Life Cycles 319Marketing Strategies: Introduction Stage and the PioneerAdvantage 320Marketing Strategies: Growth Stage 322Marketing Strategies: Maturity Stage 323
MARKETING INSIGHT Competitive Category Dynamics 324
Marketing Strategies: Decline Stage 326Evidence on the Product Life-Cycle Concept 327Critique of the Product Life-Cycle Concept 327Market Evolution 328
MARKETING MEMO How to Build a Breakaway Brand 329
Summary 330Applications 331
Chapter 11 Dealing with Competition 332
Competitive Forces 334Identifying Competitors 335Analyzing Competitors 336
Strategies 336
MARKETING INSIGHT High Growth Through ValueInnovation 337
Objectives 337Strengths and Weaknesses 339Selecting Competitors 339
MARKETING MEMO Benchmarking to Improve CompetitivePerformance 340
Selecting Customers 340Competitive Strategies for Market Leaders 341
BREAKTHROUGH MARKETING Accenture 342
MARKETING INSIGHT When your Competitor Delivers Morefor Less 343
Expanding the Total Market 343Defending Market Share 345Expanding Market Share 347
Other Competitive Strategies 348Market-Challenger Strategies 348Market-Follower Strategies 350
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MARKETING MEMO Making Smaller Better 351
Market-Nicher Strategies 352
MARKETING MEMO Niche Specialist Roles 353
Balancing Customer and Competitor Orientations 354Competitor-Centered Companies 354Customer-Centered Companies 354
Summary 355Applications 355
PART 5 Shaping the Market Offerings 356
Chapter 12 Setting Product Strategy 356
Product Characteristics and Classifications 358Product Levels: The Customer-Value Hierarchy 358
WSSGHT Metamarkets and Metamediaries 359
Product Classifications 359Differentiation 361
Product Differentiation 361
BREAKTHROUGH MARKETING Toyota
Design 365Services Differentiation 366
Product and Brand Relationships 368The Product Hierarchy 368Product Systems and Mixes 368Product-Line Analysis 369Product-Line Length 371
When Less Is More
364
372
Product-Mix Pricing 375Co-Branding and Ingredient Branding 377
MARKETING MEMO Making Ingredient Branding Work 379
Packaging, Labeling, Warranties, and Guarantees 379Packaging 379Labeling 380Warranties and Guarantees 381
Summary 382Applications 383
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CONTENTS
Chapter 13 Designing and Managing Services 384
The Nature of Services 386Service Industries Are Everywhere 386Categories of Service Mix 387Distinctive Characteristics of Services 389
Marketing Strategies for Service Firms 392A Shifting Customer Relationship 392
MARKETING MEMO Recommendations for Improving ServiceQuality 393
BREAKTHROUGH MARKETING Southwest Airlines 395
Holistic Marketing for Services 396Managing Service Quality 399
Customer Expectations 399
MARKETING INSIGHT The Role of Expectations in Service-Quality Perceptions 401
MARKETING MEMO Assessing E-Service Quality 402
Best Practices of Service-Quality Management 402
MARKETING INSIGHT Developing Customer InterfaceSystems 404
Managing Service Brands 407Differentiating Services 407Developing Brand Strategies for Services 408
Managing Product-Support Services 410Identifying and Satisfying Customer Needs 410Postsale Service Strategy 411
Summary 413Applications 413
Chapter 14 Developing Pricing Strategies and Programs 414
Understanding Pricing 416A Changing Pricing Environment 416How Companies Price 417
MARKETING INSIGHT Giving It All Away 418
Consumer Psychology and Pricing 419Setting the Price 423
Step 1: Selecting the Pricing Objective 423Step 2: Determining Demand 425
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CONTENTS
Step 3: Estimating Costs 428Step 4: Analyzing Competitors' Costs, Prices, and Offers 429
Step 5: Selecting a Pricing Method 430
BREAKTHROUGH MARKETING Ebay 434
Step 6: Selecting the Final Price 435
MARKETING INSIGHT Stealth Price Increases 436
Adapting the Price 437Geographical Pricing (Cash, Countertrade, Barter) 437Price Discounts and Allowances 438Promotional Pricing 439Differentiated Pricing 440
Initiating and Responding to Price Changes 442Initiating Price Cuts 442Initiating Price Increases 443Responding to Competitors' Price Changes 444
MARKETING MEMO How to Fight Low-Cost Rivals 445
Summary 446Applications 447
PART 6 Delivering Value 448
Chapter 15 Designing and Managing Integrated Marketing Channels 448
Marketing Channels and Value Networks 450The Importance of Channels 450Channel Development 451Hybrid Channels 452Understanding Customer Needs 453Value Networks 454
The Role of Marketing Channels 454Channel Functions and Flows 455Channel Levels 456Service Sector Channels 457
Channel-Design Decisions 457Analyzing Customers' Desired Service Output Levels 457Establishing Objectives and Constraints 458Identifying and Evaluating Major Channel Alternatives 458
MARKETING INSIGHT How CarMax Is Transforming theAuto Business 460
Evaluating the Major Alternatives 461
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CONTENTS
Channel-Management Decisions 463Selecting Channel Members 463Training and Motivating Channel Members 463Evaluating Channel Members 464Modifying Channel Design and Arrangements 465
Channel Integration and Systems 466Vertical Marketing Systems 466
MARKETING INSIGHT The Importance of ChannelStewards 467
Horizontal Marketing Systems 468Integrating Multichannel Marketing Systems 468
MARKETING MEMO Multichannel Shopping Checklist 469
Conflict, Cooperation, and Competition 470Types of Conflict and Competition 471Causes of Channel Conflict 471Managing Channel Conflict 471Dilution and Cannibalization 473Legal and Ethical Issues in Channel Relations 473
E-Commerce Marketing Practices 474Pure-Click Companies 474
BREAKTHROUGH MARKETING Amazon.com 475
Brick-and-Click Companies 477M-Commerce 477
Summary 478Applications 479
Chapter 16 Managing Retailing, Wholesaling, and Logistics 480
Retailing 482Types of Retailers 482The New Retail Environment 486Marketing Decisions 488
MARKETING INSIGHT Making Labels Smarter 491
BREAKTHROUGH MARKETING Target 493
MARKETING MEMO Helping Stores to Sell 494
Private Labels 496Role of Private Labels 496The Private-Label Threat 497
MARKETING MEMO How to Compete Against StoreBrands 498
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CONTENTS
Wholesaling 498Trends in Wholesaling 499
Market Logistics 501Integrated Logistics Systems 502Market-Logistics Objectives 502Market-Logistics Decisions 504Organizational Lessons 506
Summary 507Applications 507
PART 7 Communicating Value 508
Chapter 17 Designing and Managing Integrated MarketingCommunications 508
The Role of Marketing Communications 510The Changing Marketing Communication Environment 510Marketing Communications, Brand Equity, and Sales 511The Communications Process Models 514
Developing Effective Communications 516Identify the Target Audience 516Determine the Communications Objectives 517Design the Communications 517
MARKETING INSIGHT Celebrity Endorsements asa Strategy 520
Select the Communications Channels 521Establish the Total Marketing Communications Budget 524
Deciding on the Marketing Communications Mix 526Characteristics of the Marketing Communications Mix 526
BREAKTHROUGH MARKETING Ocean Spray 526
Factors in Setting the Marketing Communications Mix 529Measuring Communication Results 531
Managing the Integrated Marketing CommunicationsProcess 531
Coordinating Media 532Implementing IMC 533
MARKETING MEMO How Integrated Is Your IMCProgram? 534
Summary 534Applications 535
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Chapter 18 Managing Mass Communications: Advertising, SalesPromotions, Events and Experiences, and PublicRelations 536
Developing and Managing an Advertising Program 538Setting the Objectives 539Deciding on the Advertising Budget 539Developing the Advertising Campaign 540
MARKETING MEMO Print Ad Evaluation Criteria 544
Deciding on Media and Measuring Effectiveness 545Deciding on Reach, Frequency, and Impact 545Choosing among Major Media Types 546Alternative Advertising Options 548Selecting Specific Media Vehicles 550
MAKSCiTING INSIGHT Playing Games with Brands 551
Deciding on Media Timing and Allocation 552Evaluating Advertising Effectiveness 553
Sales Promotion 554Objectives 554Advertising versus Promotion 555Major Decisions 556
Events and Experiences 560Events Objectives 561Major Sponsorship Decisions 561Creating Experiences 563
Public Relations 563
INSIGHT Experiential Marketing 564
ETING INSIGHT Managing a Brand Crisis 565
Marketing Public Relations 565
BREAKTHROUGH MARKETING Virgin Group 566
Major Decisions in Marketing PR 567Summary 569Applications 569
Chapter 19 Managing Personal Communications: Direct and InteractiveMarketing, Word of Mouth, and Personal Selling 570
Direct Marketing 572The Benefits of Direct Marketing 572Direct Mail 574Catalog Marketing 576
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Telemarketing 577Other Media for Direct-Response Marketing 578Public and Ethical Issues in Direct Marketing 578
Interactive Marketing 578Advantages and Disadvantages of Interactive Marketing 578
BREAKTHROUGH MARKETING Yahoo! 579
Placing Ads and Promotions Online 580
MARKETING MEMO Segmenting Tech Users 582
Word of Mouth 585Buzz and Viral Marketing 586Opinion Leaders 588
MARKETING MEMO How to Start a Buzz Fire 588
Blogs 590Measuring the Effects of Word of Mouth 591
Designing the Sales Force 591Sales-Force Objectives and Strategy 592Sales-Force Structure 593Sales-Force Size 594
MARKETING INSIGHT Major Account Management 595
Sales-Force Compensation 595Managing the Sales Force 596
Recruiting and Selecting Representatives 596Training and Supervising Sales Representatives 597Sales Rep Productivity 597Motivating Sales Representatives 598Evaluating Sales Representatives 599
Principles of Personal Selling 601The Six Steps 601Relationship Marketing 602
Summary 603Applications 603
PART 8 Creating Successful Long-Term Growth 604
Chapter 20 Introducing New Market Offerings 604
New-Product Options 606Make or Buy 606Types of New Products 606
Challenges in New-Product Development 607The Innovation Imperative 607New-Product Success 609New-Product Failure 610
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Organizational Arrangements 611Budgeting for New-Product Development 612Organizing New-Product Development 613
Managing the Development Process: Ideas 614Idea Generation 614
MARKETING MEMO Ten Ways to Find Great New-ProductIdeas 615
MARKETING INSIGHT P&G'S New Connect-and-DevelopApproach to Innovation 616
MARKETING MEMO Seven Ways to Draw New Ideas fromYour Customers 617
MARKETING MEMO How to Run a Successful BrainstormingSession 618
Idea Screening 619Managing the Development Process: Concept to Strategy 621
Concept Development and Testing 621Marketing Strategy Development 624Business Analysis 624
Managing the Development Process: Development toCommercialization 626
Product Development 626Market Testing 627Commercialization 630
BREAKTHROUGH MARKETING Apple iPod 631
The Consumer-Adoption Process 632Stages in the Adoption Process 632Factors Influencing the Adoption Process 633
Summary 635Applications 635
Chapter 21 Tapping into Global Markets 636
Competing on a Global Basis 638
BREAKTHROUGH MARKETING Samsung 639
Deciding Whether to Go Abroad 640Deciding Which Markets to Enter 640
How Many Markets to Enter 640Developed versus Developing Markets 641
MARKETING INSIGHT Spotlight on Key DevelopingMarkets 644
Evaluating Potential Markets 645
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CONTENTS
Deciding How to Enter the Market 646Indirect and Direct Export 646Using a Global Web Strategy 647Licensing 647Joint Ventures 648Direct Investment 649
Deciding on the Marketing Program 649Product 651
MARKETING MEMO The Ten Commandments of GlobalBranding 652
Communications 653Price 655
MARKETING INSIGHT Unauthorized Sales—Dealing withthe Gray Market and CounterfeitProducts 657
Distribution Channels 658Country-of-Origin Effects 659
Building Country Images 659Consumer Perceptions of Country of Origin 660
MARKETING INSIGHT The Ups and Downs of BrandAmerica 661
Deciding on the Marketing Organization 661Export Department 662International Division 662Global Organization 662
Summary 663Applications 663
Chapter 22 Managing a Holistic Marketing Organizationfor the Long Run 664
Trends in Marketing Practices 666Internal Marketing 667
Organizing the Marketing Department 667
MARKETING MEMO Characteristics of Company DepartmentsThat Are Truly Customer Driven 668
Relations with Other Departments 672Building a Creative Marketing Organization 673
MARKETING INSIGHT The Marketing CEO 673
MARKETING MEMO Fueling Strategic Innovation 674
Socially Responsible Marketing 674
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CONTENTS
BREAKTHROUGH MARKETING Starbucks 677
Corporate Social Responsibility 678Socially Responsible Business Models 680Cause-Related Marketing 680
MARKETING INSIGHT New Views on Corporate Social
Responsibility 681
Social Marketing 684
MARKETING MEMO Making a Difference 685Marketing Implementation 688Evaluation and Control 689
Annual-Plan Control 689Profitability Control 692Efficiency Control 696Strategic Control 696
The Future of Marketing 697
MARKETING MEMO Major Marketing Weaknesses 700
Summary 701Applications 702
Appendix 703Endnotes 717Glossary 783Image Credits 791Name Index 793Company, Brand, and Organization Index 795Subject Index 802
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