A Preface
to Marketing
Management
This page intentionally left blank
A Preface
to Marketing
Management
Fourteenth Edition
J. Paul Peter
University of Wisconsin–Madison
James H. Donnelly Jr.
Gatton College of Business and
Economics University of Kentucky
A PREFACE TO MARKETING MANAGEMENT, FOURTEENTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2015 by McGraw-Hill
Education. All rights reserved. Printed in the United States of America. Previous editions © 2013, 2011, and
2008. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a
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Library of Congress Cataloging-in-Publication Data
Peter, J. Paul.
A preface to marketing management / J. Paul Peter, University of Wisconsin-Madison, James H. Donnelly,
Jr., Gatton College of Business and Economics, University of Kentucky.–Fourteenth edition.
pages cm
ISBN 978-0-07-786106-3 (alk. paper)
1. Marketing–Management. I. Donnelly, James H. II. Title.
HF5415.13.P388 2013
658.8–dc23
2013046644
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does
not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not
guarantee the accuracy of the information presented at these sites.
www.mhhe.com
To Rose and Angie
J. Paul Peter
To Gayla
Jim Donnelly
About the Authors
J. Paul Peter
has been a faculty member at the University of Wisconsin since 1981. He was a member
of the faculty at Indiana State, Ohio State, and Washington University before joining the
Wisconsin faculty. While at Ohio State, he was named Outstanding Marketing Professor
by the students and has won the John R. Larson Teaching Award at Wisconsin. He has
taught a variety of courses including Marketing Management, Marketing Strategy, Consumer Behavior, Marketing Research, and Marketing Theory, among others.
Professor Peter’s research has appeared in the Journal of Marketing, the Journal of
Marketing Research, the Journal of Consumer Research, the Journal of Retailing, and the
Academy of Management Journal, among others. His article on construct validity won the
prestigious William O’Dell Award from the Journal of Marketing Research, and he was a
finalist for this award on two other occasions. Recently, he was the recipient of the Churchill
Award for Lifetime Achievement in Marketing Research, given by the American Marketing
Association and the Gaumnitz Distinguished Faculty Award from the School of Business,
University of Wisconsin–Madison. He is an author or editor of over 30 books, including A
Preface to Marketing Management, Fourteenth edition; Marketing Management: Knowledge
and Skills, ninth edition; Consumer Behavior and Marketing Strategy, ninth edition; Strategic
Management: Concepts and Applications, third edition; and Marketing: Creating Value for
Customers, second edition. He is one of the most cited authors in the marketing literature.
Professor Peter has served on the review boards of the Journal of Marketing, Journal of Marketing Research, Journal of Consumer Research, and Journal of Business
Research and was measurement editor for JMR and professional publications editor for the
American Marketing Association. He has taught in a variety of executive programs and
consulted for several corporations as well as the Federal Trade Commission.
James H. Donnelly Jr.
has spent his academic career in the Gatton College of Business and Economics at the
University of Kentucky. In 1990 he received the first Chancellor’s Award for Outstanding
Teaching given at the university. Previously, he had twice received the UK Alumni Association’s Great Teacher Award, an award one can only be eligible to receive every 10 years. He
has also received two Outstanding Teacher awards from Beta Gamma Sigma, national business honorary. In 1992 he received an Acorn Award recognizing “those who shape the future”
from the Kentucky Advocates for Higher Education. In 2001 and 2002 he was selected as
“Best University of Kentucky Professor.” In 1995 he became one of six charter members
elected to the American Bankers Association’s Bank Marketing Hall of Fame. He has also
received a “Distinguished Doctoral Graduate Award” from the University of Maryland.
During his career he has published in the Journal of Marketing Research, Journal of
Marketing, Journal of Retailing, Administrative Science Quarterly, Academy of Management Journal, Journal of Applied Psychology, Personnel Psychology, Journal of
Business Research, and Operations Research among others. He has served on the editorial review board of the Journal of Marketing. He is the author of more than a dozen
books, which include widely adopted academic texts as well as professional books.
Professor Donnelly is very active in the banking industry where he has served on the board
of directors of the Institute of Certified Bankers and the ABA’s Marketing Network. He has
also served as academic dean of the ABA’s School of Bank Marketing and Management.
vi
Preface
We are proud to introduce the fourteenth edition of A Preface to Marketing Management.
Our plan has always been to deliver a clear and concise presentation of the basic principles of marketing in such a way that the core concepts and ideas are covered in sufficient
depth to ensure in-depth understanding. By offering an engaging, clear, and conceptually sound text, our book has been able to maintain its position as a leading marketing
management text.
Throughout the history of the book, feedback from both students and instructors has
suggested that our plan is a good one. Our book has been used in a wide variety of settings and is the best-selling book of its kind. We introduce the fourteenth edition knowing
that our book and its eight foreign translations have been used around the world whenever
courses require an overview of the critical aspects of marketing management.
With this edition, we seek to more effectively implement our plan by building on a
strong foundation, maintaining the attributes and elements of the book that make it a very
teachable text, updating existing content, adding new content, and focusing the presentation. We seek to emphasize quality content and examples and avoid excess verbiage, pictures, and description.
As usual, each time we revise the book there is an emphasis on responding to feedback
from students and instructors. These two constituencies plus our own intuitions drive each
revision. Marketing is an exciting and dynamic field of study. We want to capture the
sense of excitement and at the same time respect its history.
Our book has become known simply as the Preface. We want to believe a major reason
it has endured is that because marketing is figuring out how to do a superior job of satisfying customers, we simply try to practice what we preach. Welcome to the Preface.
THE PRESENT EDITION
Every element of content in our book is designed with one thought in mind: to assist students in analyzing marketing problems and cases and developing and writing marketing
plans. Section I of the book consists of 13 concise chapters that cover the essentials of marketing management. We think of it as the “must know” content of the field. It is divided
into four parts that focus on strategic planning and marketing planning, understanding target markets, the marketing mix, and marketing in special fields. These 13 chapters should
provide students a clear understanding of the terminology, techniques, tools, and strategies
for effective marketing management and marketing strategy development.
In addition to revising and updating the text chapters, this edition contains new content as
well. There are discussions of internal and external secondary data sources, the use of social
media monitoring, alternative search in consumer behavior, key characteristics of organizational buyers, e-procurement, global virtual teams, brand equity, using distinctive competencies in new product development, consumer databases, business-to-business databases,
mobile marketing, online retailing and multichannel marketing, franchising, the effects of
the Internet on pricing, global account managers, and learning about different cultures.
In the twelfth edition, we altered two of the text elements. The changes have been well
received by instructors and students. First, “Marketing Insights” are included to assist students
as they solve marketing problems, analyze marketing cases, and develop marketing plans.
Second, we know that our book is often used with case problems, writing assignments,
and constructing marketing plans. Accordingly, there is an “Additional Resources” section
vii
viii
Preface
at the end of each chapter. Our purpose is to highlight current resources that students can
use in writing assignments and oral presentations. The resources have been selected with
students in mind. They include resources accessible to students at various stages of marketing education given the wide spectrum of courses in which the book is utilized.
NEW FEATURES AND CONTENT CHANGES
Chapter 1: Strategic Planning and The Marketing Management
Process
• Revised basic questions that must be asked when developing a mission statement.
• Marketing Insight 1-3 now contains five actual mission statements for firms of varying
sizes and industries. It provides students with a better mix of alternatives when completing the exercise in Marketing Insight 1-4.
• Updated additional resources.
Chapter 2: Marketing Research: Process and Systems for Decision
Making
• Revised section on secondary data to include both internal and external sources
• Added new figure “Common Types of Information Available in a Secondary Data
Search”
• Added a new Marketing Insight, “Social Media Monitoring for Marketing Insights”
• Updated additional resources
Chapter 3: Consumer Behavior
• Updated discussion of consumer and marketer reactions to recession
• Revised and updated discussion of Alternative Search
• Updated additional resources
Chapter 4: Business, Government, and Institutional Buying
•
•
•
•
Revised Marketing Insight on “Key Characteristics of Organizational Buying Behavior”
New Marketing Insight, “Organizational Buying on the Internet: E-Procurement”
Revised Discussion of “Organizational Needs”
Updated additional resources
Chapter 5: Market Segmentation
• New Marketing Insight, “Segmenting the Mobile Phone Market”
• Revised and updated discussion of VALS
Chapter 6: Product and Brand Strategy
• Marketing Insight 6-3 now contains the latest information on the value of the top twenty
brands in the world
• Contains a new section on branding and brand equity
• Revised and updated Marketing Insight 6-6
• Added a new section on global virtual teams
• New key terms and concepts
• Updated additional resources
Preface ix
Chapter 7: New Product Planning and Development
• New Marketing Insight 7-4 which focuses on utilizing corporate strengths in the new
product development process. It includes eight firms with strengths in either technology or markets
• Updated additional resources
Chapter 8: Integrated Marketing Communications
• Revised Marketing Insight 8-1 which presents up-to-date information on the top ten
websites in Brazil, Portugal and South Korea
• Revised section on direct marketing as part of the promotion mix
• Revised Marketing Insight 8-6
• New section on direct marketing
• New Marketing Insight 8-7 on the contents of a comprehensive database included are
both consumer and business-to-business databases
• Added new Key Terms and Concepts
• Updated additional resources
Chapter 9: Personal Selling, Relationship Building, and Sales
Management
• New Marketing Insight 9-1 which focuses on what a salesperson actually does
• A new discussion of an increasingly important customer organization structure, the
global account manager
• Added new Key Terms and Concepts
• Updated additional resources
Chapter 10: Distribution Strategy
•
•
•
•
Added New Marketing Insight, “Advantages and Disadvantages of Franchising”
New section on “Online and Mobile Retailing”
Updated additional resources
New “Key Terms and Concepts”: online retailing, mobile retailing, multichannel marketing
Chapter 11: Pricing Strategy
• Added a new discussion of the Internet as an external influence on pricing decisions
• A new Marketing Insight, “Ten Tips for Managing Pricing Strategy”
Chapter 12: The Marketing of Services
• The chapter has been significantly revised and has been shortened for this edition
• A new section on the importance of all the elements of the marketing mix in the marketing of services has been added
• Updated additional resources
Chapter 13: Global Marketing
• Marketing Insight 13-1 has been updated with the latest data on selected U.S. companies
and their international sales
• The section on cultural misunderstanding as a problem in foreign markets has been
replaced with an entirely new section
x Preface
• Marketing Insight 13-3 has been replaced with a new Marketing Insight which focuses
on ways to learn about new cultures
• Updated additional resources
Section II: Analyzing Marketing Problems and Cases
• New Marketing Insight, “Objectives of Case Analysis”
• Revised and updated discussion of SWOT analysis
• Updated additional resources
Section III: Financial Analysis for Marketing Decisions
• Updated dates and additional resources
Section IV: Developing Marketing Plans
• Updated dates and additional resources
STUDENT SUPPORT
Knowing that our book is used for a variety of course levels, programs, and students, we
have assembled several elements that we believe will support students for whatever purpose they use our book.
Key Terms and Concepts
New to the previous edition, we decided to add a section of key terms and concepts at the
conclusion of each chapter. There was much debate as to where they should be placed in
the book. We decided to place them at the end of the chapter in which they appear. In this
way, they are more visible to students than as an appendix at the end of the book. More
than a glossary, it also presents key concepts covered in the chapter.
Analyzing Marketing Problems and Cases
Section II presents a very practical and comprehensive framework for analyzing, preparing, and presenting case analyses. It includes discussions of what a case is, preparing for
the class discussion and written analysis, pitfalls to avoid in case analysis, and preparing
to do an oral presentation. It has been praised by both instructors and students.
For courses utilizing marketing problems and cases, we encourage students to read this
guide before discussing a problem or case. Thus, it could have been placed at the beginning of the book, but because it is often referred to throughout the semester, we have
placed it after the text chapters. And for those courses that do not utilize cases, the book
may be used without reference to this section.
Financial Analysis for Marketing Decisions
It is absolutely critical for marketing students to understand and appreciate the fact that
the ultimate objectives of marketing are usually expressed in financial terms. Section III
enables students to assess a company’s financial position. It presents important financial
calculations that are useful in evaluating the financial position of a firm and the financial
impact of various decisions and strategies. Included are discussions of breakeven analysis,
net present value, and ratio analysis.
Developing Marketing Plans
Given the purpose of this book and the needs of users, Section IV enables students to
develop practical planning skills so they are able to construct a quality marketing plan for
Preface xi
any product or service. It provides a complete format for structuring and presenting one,
including specific questions to ask in competitive analysis, the development of well-stated
objectives, analyzing customers, and implementation and control. As with Section II, we
know that this section has become a valuable take-away resource for many students long
after their course has been completed.
A Value-Added Website
We encourage students to view the student section of the Online Learning Center (OLC)
at website www.mhhe.com/peterdonnelly14e, which contains a number of useful aids for
facilitating learning and supporting student achievement. We believe you will find it a
useful resource.
INSTRUCTOR SUPPORT
The Preface has been used as a resource in college courses and professional development
programs that require an overview of the critical “need-to-know” aspects of marketing
management and marketing strategy development. It has been used:
• As the primary introductory text at the undergraduate level.
• At both the undergraduate and MBA level, where several AACSB core curriculum
courses are team-taught as one multidisciplinary 9- to 12-hour course.
• At the advanced undergraduate and MBA level where it is used as the content foundation in courses that utilize marketing cases.
• In short courses and executive development programs.
The instructor section of www.mhhe.com/peterdonnelly14e includes an instructor’s
manual and other support material. It includes two expanded supplements. They were
developed in response to instructors’ requests. We offer a test bank of nearly 1,300
multiple-choice, true-false, and brief essay questions. It is available in both print and
EZ Test Online. We also offer Power Point slides that highlight key text material. Your
McGraw-Hill representative can also assist in the delivery of any additional instructor
support material.
Acknowledgments
Our book is based on the works of many academic researchers and marketing practitioners.
We want to thank those individuals who contributed their ideas to develop the field of marketing throughout the years. Indeed, our book would not be possible without their contributions. We would also like to thank our teachers, colleagues, and students for their many
contributions to our education. We would also like to publicly acknowledge those individuals who served as reviewers of this and previous editions. We appreciate their advice and
counsel and have done our best to reflect their insightful comments.
xii
Roger D. Absmire
Sam Houston State University
Anna Andriasova
University of Maryland University College
Catherine Axinn
Syracuse University
Mike Ballif
University of Utah
Andrew Bergstein
Pennsylvania State University
Edward Bond
Bradley University
Donald Brady
Millersville University
Tim Carlson
Judson University
Glenn Chappell
Meridith College
Newell Chiesl
Indiana State University
Reid P. Claxton
East Carolina University
Larry Crowson
University of Central Florida
Mike Dailey
University of Texas, Arlington
Linda M. Delene
Western Michigan University
Gerard DiBartolo
Salisbury University
Casey Donoho
Northern Arizona University
James A. Eckert
Western Michigan University
Matthew Elbeck
Troy University Dothan
Karen A. Evans
Herkimer County Community College
R. E. Evans
University of Oklahoma
Lawrence Feick
University of Pittsburgh
Robert Finney
California State University, Hayward
Stephen Goldberg
Fordham University
David Good
Grand Valley State University
David Griffith
University of Oklahoma
Perry Haan
Tiffin University
Lawrence Hamer
DePaul University
Harry Harmon
Central Missouri
Jack Healey
Golden State University
Betty Jean Hebel
Madonna University
Catherine Holderness
University of North Carolina–Greensboro
JoAnne S. Hooper
Western Carolina University
David Horne
Wayne State University
Nasim Z. Hosein
Northwood University
Nicole Howatt
UCF
Fred Hughes
Faulkner University
Anupam Jaju
GMU
Chris Joiner
George Mason University
Benoy Joseph
Cleveland State University
Sol Klein
Northeastern University
Robert Brock Lawes
Chaminade University of Honolulu
Eunkyu Lee
Syracuse University
Tina Lowrey
University of Texas at San Antonio
Franklyn Manu
Morgan State University
Edward J. Mayo
Western Michigan University
Edward M. Mazze
University of Rhode Island
Donald J. Messmer
College of William & Mary
Albert Milhomme
Texas State University
Chip Miller
Drake University
David L. Moore
LeMoyne College
Johannah Jones Nolan
University of Alabama, Birmingham
R. Stephen Parker
Southwest Missouri State University
Joan Phillips
University of Notre Dame
Thomas Powers
University of Alabama at Birmingham
Debu Purohit
Duke University
John Rayburn
University of Tennessee
Martha Reeves
Duke
Gary K. Rhoads
Brigham Young University
Lee Richardson
University of Baltimore
Henry Rodkin
DePaul University
Ritesh Saini
George Mason University
Matthew H. Sauber
Eastern Michigan University
Alan Sawyer
University of Florida
Ronald L. Schill
Brigham Young University
Mark Spriggs
University of St. Thomas
Vernon R. Stauble
California State Polytechnic University
David X. Swenson
College of St. Scholastica
Ann Marie Thompson
Northern Illinois University
John R. Thompson
Memphis State University
Gordon Urquhart
Cornell College
Sean Valentine
University of Wyoming
Ana Valenzuela
Baruch College, CUNY
Stacy Vollmers
University of St. Thomas
Jacquelyn Warwick
Andrews University
Kevin Webb
Drexel University
Kathleen R. Whitney
Central Michigan University
J. B. Wilkinson
University of Akron
Dale Wilson
Michigan State University
It is always easy to work with professionals. That is why working with the professionals at McGraw-Hill is always enjoyable for us. Sankha Basu, publisher, and Jane Mohr,
project manager, support what we do and we are very grateful. Thank you Heather Darr,
development editor, and welcome to our team. We also wish to acknowledge Francois
Ortalo-Magne, dean of the School of Business at the University of Wisconsin, and David
Blackwell, dean of the Gatton College of Business and Economics at the University of
Kentucky, who support what we do.
J. Paul Peter
James H. Donnelly, Jr.
Contents
SECTION I
Preparation of the Research Report 40
Limitations of the Research Process 40
ESSENTIALS OF MARKETING
MANAGEMENT 1
Marketing Information Systems
Summary 43
PART A
INTRODUCTION
Chapter 3
Consumer Behavior
3
Chapter 1
Strategic Planning and the Marketing Management Process 4
The Marketing Concept 4
What Is Marketing? 5
What Is Strategic Planning?
6
Social Influences on Consumer Decision
Making 46
Culture and Subculture 46
Social Class 47
Reference Groups and Families
16
20
The Strategic Plan, the Marketing Plan, and
Other Functional Area Plans 21
Marketing’s Role in Cross-Functional Strategic
Planning 21
Summary 22
Appendix
Portfolio Models 27
Situational Influences on Consumer Decision
Making 51
Psychological Influences on Consumer Decision
Making 51
Product Knowledge 51
Product Involvement 52
Consumer Decision Making
PART B
MARKETING INFORMATION,
RESEARCH, AND UNDERSTANDING
THE TARGET MARKET 31
Chapter 2
Marketing Research: Process and Systems
for Decision Making 32
xiv
52
Need Recognition 53
Alternative Search 54
Alternative Evaluation 55
Purchase Decision 55
Postpurchase Evaluation 56
Summary
Purpose of the Research 33
Plan of the Research 34
Performance of the Research 37
Processing of Research Data 39
48
Product Influences 48
Price Influences 48
Promotion Influences 49
Place Influences 49
6
Situation Analysis 16
Marketing Planning 19
Implementation and Control of the Marketing Plan
Marketing Information Systems and Marketing
Research 21
The Role of Marketing Research 32
The Marketing Research Process 33
45
Marketing Influences on Consumer Decision
Making 48
Strategic Planning and Marketing Management
The Strategic Planning Process 7
The Complete Strategic Plan 16
The Marketing Management Process
42
58
Chapter 4
Business, Government, and Institutional
Buying 60
Categories of Organizational Buyers
60
Producers 60
Intermediaries 61
Government Agencies 61
Other Institutions 61
The Organizational Buying Process 61
Purchase-Type Influences on Organizational
Buying 62
Straight Rebuy 62
Modified Rebuy 62
New Task Purchase 62
Contents
Structural Influences on Organizational Buying
63
Purchasing Roles 63
Organization-Specific Factors 64
Purchasing Policies and Procedures 65
Behavioral Influences on Organizational Buying
Personal Motivations 65
Role Perceptions 66
Chapter 7
New Product Planning and
Development 105
New Product Strategy 106
New Product Planning and Development
Process 108
Idea Generation 108
Idea Screening 110
Project Planning 111
Product Development 112
Test Marketing 112
Commercialization 113
The Importance of Time 113
Stages in the Organizational Buying
Process 68
Organizational Need 68
Vendor Analysis 68
Purchase Activities 69
Postpurchase Evaluation 70
Summary
65
xv
70
Some Important New Product Decisions 114
Chapter 5
Market Segmentation
72
Delineate the Firm’s Current
Situation 72
Determine Consumer Needs
and Wants 73
Divide Markets on Relevant Dimensions
A Priori versus Post Hoc Segmentation 74
Relevance of Segmentation Dimensions 75
Bases for Segmentation 75
Develop Product Positioning 81
Decide Segmentation Strategy 82
Design Marketing Mix Strategy 84
Summary 84
THE MARKETING MIX
Basic Issues in Product Management
86
86
Product Definition 86
Product Classification 87
Product Quality and Value 88
Product Mix and Product Line 89
Branding and Brand Equity 90
Packaging 96
The Product Audit
Chapter 8
Integrated Marketing Communications 120
121
The Promotion Mix 121
Integrated Marketing Communications 122
Advertising: Planning and Strategy 124
Objectives of Advertising
Advertising Decisions
124
126
132
Push versus Pull Marketing 132
Trade Sales Promotions 133
Consumer Promotions 133
What Sales Promotion Can and Can’t Do 134
99
101
Organizing for Product Management
Summary 103
73
Sales Promotion
100
Deletions 100
Product Improvement
117
The Expenditure Question 126
The Allocation Question 127
97
Product Adoption and Diffusion
Need for Research
118
Summary
Create Awareness 120
Build Positive Images 120
Identify Prospects 120
Build Channel Relationships
Retain Customers 121
85
Chapter 6
Product and Brand Strategy
Causes of New Product Failure 116
Strategic Goals of Marketing
Communication 120
PART C
Product Life Cycle
Quality Level 114
Product Features 115
Product Design 116
Product Safety 116
101
Public Relations 135
Direct Marketing 136
Summary 137
Appendix
Major Federal Agencies Involved in Control
of Advertising 139
xvi
Contents
Chapter 9
Personal Selling, Relationship Building,
and Sales Management 140
Importance of Personal Selling
The Sales Process 141
140
Objectives of the Sales Force 141
The Sales Relationship-Building Process 142
People Who Support the Sales Force 146
Managing the Sales and Relationship-Building
Process 147
The Sales Management Task 148
Controlling the Sales Force 149
Motivating and Compensating Performance
152
156
The Need for Marketing Intermediaries 156
Classification of Marketing Intermediaries and
Functions 156
Channels of Distribution 158
Selecting Channels of Distribution 159
181
PART D
Chapter 12
The Marketing of Services
184
Relationship Marketing in Channels
Vertical Marketing Systems 162
Wholesaling 164
Store and Nonstore Retailing
162
190
Limited View of Marketing 194
Limited Competition 194
Noncreative Management 195
No Obsolescence 195
165
Store Retailing 166
Nonstore Retailing 167
Implications for Service Marketers
Summary 197
Summary 170
Chapter 13
Global Marketing
172
172
Demographic Factors 172
Psychological Factors 172
Price Elasticity 174
Supply Influences on Pricing Decisions
Pricing Objectives 174
Cost Considerations in Pricing 174
Product Considerations in Pricing 176
Environmental Influences on Pricing
Decisions 177
178
188
Overcoming the Obstacles in Service Marketing 194
162
Demand Influences on Pricing Decisions
186
Intangibility 186
Inseparability 187
Perishability and Fluctuating Demand
Client Relationship 188
Customer Effort 189
Uniformity 190
Providing Quality Services
183
Customer Satisfaction Measurement 192
The Importance of Internal Marketing 192
159
Managing a Channel of Distribution
The Internet 177
Competition 177
Government Regulations
Summary
Important Characteristics of Services
Chapter 10
Distribution Strategy
Chapter 11
Pricing Strategy
178
Set Pricing Objectives 179
Evaluate Product–Price Relationships 179
Estimate Costs and Other Price Limitations 180
Analyze Profit Potential 181
Set Initial Price Structure 181
Change Price as Needed 181
MARKETING IN SPECIAL FIELDS
Summary 154
Specific Considerations
A General Pricing Model
196
199
The Competitive Advantage of Nations 200
Organizing for Global Marketing 201
Problems with Entering Foreign Markets 201
Organizing the Multinational Company 204
174
Programming for Global Marketing
206
Global Marketing Research 206
Global Product Strategy 209
Global Distribution Strategy 209
Global Pricing Strategy 210
Global Advertising and Sales Promotion
Strategy 210
Entry and Growth Strategies for Global Marketing 211
Summary 214
Contents
xvii
SECTION II
SECTION IV
ANALYZING MARKETING PROBLEMS
AND CASES 215
DEVELOPING MARKETING PLANS 239
A Case Analysis Framework
216
1. Analyze and Record the Current Situation 217
2. Analyze and Record Problems and Their Core
Elements 221
3. Formulate, Evaluate, and Record Alternative Courses
of Action 222
4. Select and Record the Chosen Alternative and Implementation Details 223
Pitfalls to Avoid in Case Analysis 223
Communicating Case Analyses 226
228
Index
FINANCIAL ANALYSIS FOR MARKETING DECISIONS 229
Financial Analysis
230
Breakeven Analysis 230
Net Present Value Analysis
Ratio Analysis 234
Summary
238
249
Chapter Notes
SECTION III
232
240
Title Page 241
Executive Summary 241
Table of Contents 242
Introduction 242
Situational Analysis 242
Marketing Planning 242
Implementation and Control of the Marketing Plan 244
Summary 246
Appendix—Financial Analysis 246
References 249
Summary
The Written Report 226
The Oral Presentation 228
Summary
A Marketing Plan Framework
256
251
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Essentials of Marketing
Management
Essentials
of Marketing
Management
Section I
Section
I
This page intentionally left blank
A
Part
Introduction
Essentials of Marketing
Management
Strategic Planning and the Marketing Management Process
Section I
1
Chapter
1
Strategic Planning
and the Marketing
Management Process
The purpose of this introductory chapter is to present the marketing management process
and outline what marketing managers must manage if they are to be effective. In doing so,
it will also present a framework around which the remaining chapters are organized. Our
first task is to review the organizational philosophy known as the marketing concept, since
it underlies much of the thinking presented in this book. The remainder of this chapter will
focus on the process of strategic planning and its relationship to the process of marketing
planning.
THE MARKETING CONCEPT
Part A
Simply stated, the marketing concept means that an organization should seek to make a
profit by serving the needs of customer groups. The concept is very straightforward and
has a great deal of commonsense validity. Perhaps this is why it is often misunderstood,
forgotten, or overlooked.
The purpose of the marketing concept is to rivet the attention of marketing managers on
serving broad classes of customer needs (customer orientation), rather than on the firm’s
current products (production orientation) or on devising methods to attract customers to
current products (selling orientation). Thus, effective marketing starts with the recognition of customer needs and then works backward to devise products and services to satisfy
these needs. In this way, marketing managers can satisfy customers more efficiently in
the present and anticipate changes in customer needs more accurately in the future. This
means that organizations should focus on building long-term customer relationships in
which the initial sale is viewed as a beginning step in the process, not as an end goal. As a
result, the customer will be more satisfied and the firm will be more profitable.
The principal task of the marketing function operating under the marketing concept is
not to manipulate customers to do .what suits the interests of the firm, but rather to find
effective and efficient means of making the business do what suits the interests of customers. This is not to say that all firms practice marketing in this way. Clearly, many firms still
emphasize only production and sales. However, effective marketing, as defined in this text,
requires that consumer needs come first in organizational decision making.
Introduction
4
MARKETING INSIGHT Some Guidelines for Implementing the
Marketing Concept
1–1
1. Create customer focus throughout the business.
2. Listen to the customer.
3. Define and nurture your distinctive competence, that is, what your organization does
well, better than competitors.
4. Define marketing as market intelligence.
5. Target customers precisely.
6. Manage for profitability, not sales volume.
7. Make customer value the guiding star.
8. Let customers define quality.
9. Measure and manage customer expectations.
10. Build customer relationships and loyalty.
11. Define the business as a service business.
12. Commit to continuous improvement and innovation.
13. Manage the culture of your organization along with strategy and structure.
14. Grow with strategic partners and alliances.
15. Destroy marketing bureaucracy.
Source: For a very early discussion of the marketing concept, see Robert L. King, “The Marketing Concept:
Fact or Intelligent Platitude,” The Marketing Concept in Action, Proceedings of the 47th National Conference
(Chicago: American Marketing Association, 1964), p. 657. Also see Frederick E. Webster Jr., “Defining the
New Marketing Concept,” Marketing Management 2, no. 4 (1994) pp. 22–31; William O. Bearden,
Thomas N. Ingram, and Raymond W. LaForge, Marketing: Principles and Perspectives, 5th ed. (Burr Ridge,
IL: McGraw-Hill/Irwin, 2007), p. 9; and William D. Perreault Jr., Joseph P. Cannon, and E. Jerome McCarthey,
Basic Marketing: A Managerial Approach, 19th ed. (Burr Ridge, IL: McGraw-Hill Education, 2014), pp. 19–26.
One qualification to this statement deals with the question of a conflict between consumer wants and societal needs and wants. For example, if society deems clean air and
water as necessary for survival, this need may well take precedence over a consumer’s
want for goods and services that pollute the environment.
WHAT IS MARKETING?
Everyone reading this book has been a customer for most of his or her life. Last evening you
stopped at a local supermarket to graze at the salad bar, pick up some bottled water and a bag
of Fritos corn chips. While you were there, you snapped a $1.00 coupon for a new flavor salad
dressing out of a dispenser and tasted some new breakfast potatoes being cooked in the back
of the store. As you sat down at home to eat your salad, you answered the phone and someone
suggested that you need to have your carpets cleaned. Later on in the evening you saw TV
commercials for tires, soft drinks, athletic shoes, and the dangers of smoking and drinking
during pregnancy. Today when you enrolled in a marketing course, you found that the instructor has decided that you must purchase this book. A friend has already purchased the book on
the Internet. All of these activities involve marketing. And each of us knows something about
marketing because it has been a part of our life since we had our first dollar to spend.
Since we are all involved in marketing, it may seem strange that one of the persistent
problems in the field has been its definition. The American Marketing Association defines
marketing as “the activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and
society at large.”1 This definition takes into account all parties involved in the marketing
effort: members of the producing organization, resellers of goods and services, and customers or clients. While the broadness of the definition allows the inclusion of nonbusiness
5
6
Part A Introduction
FIGURE 1.1
Major Types of
Marketing
Type
Description
Example
Product
Marketing designed to create exchange
for tangible products.
Marketing designed to create exchanges
for intangible products.
Marketing designed to create favorable
actions toward persons.
Marketing designed to attract people to
places.
Strategies to sell
Gateway computers.
Strategies by Allstate
to sell insurance.
Strategies to elect
a political candidate.
Strategies to get
people to vacation
in national or state
parks.
Strategies to get
pregnant women not
to drink alcohol.
Service
Person
Place
Cause
Organization
Marketing designed to create support
for ideas, causes, or issues or to get
people to change undesirable
behaviors.
Marketing designed to attract donors,
members, participants, or
volunteers.
Strategies designed to
attract blood donors.
exchange processes, the primary emphasis in this text is on marketing in the business environment. However, this emphasis is not meant to imply that marketing concepts, principles, and
techniques cannot be fruitfully employed in other areas of exchange as is clearly illustrated in
Figure 1.1.
WHAT IS STRATEGIC PLANNING?
Before a production manager, marketing manager, and personnel manager can develop plans
for their individual departments, some larger plan or blueprint for the entire organization
should exist. Otherwise, on what would the individual departmental plans be based?
In other words, there is a larger context for planning activities. Let us assume that we are
dealing with a large business organization that has several business divisions and several
product lines within each division (e.g., General Electric, Altria). Before individual divisions or departments can implement any marketing planning, a plan has to be developed for
the entire organization.2 This means that senior managers must look toward the future and
evaluate their ability to shape their organization’s destiny in the years and decades to come.
The output of this process is objectives and strategies designed to give the organization a
chance to compete effectively in the future. The objectives and strategies established at the
top level provide the context for planning in each of the divisions and departments by divisional and departmental managers.
Strategic Planning and Marketing Management
Some of the most successful business organizations are here today because many years
ago they offered the right product at the right time to a rapidly growing market. The
same can also be said for nonprofit and governmental organizations. Many of the critical decisions of the past were made without the benefit of strategic thinking or planning.
Whether these decisions were based on wisdom or were just luck is not important; they
worked for these organizations. However, a worse fate befell countless other organizations. More than three-quarters of the 100 largest U.S. corporations of 70 years ago have
fallen from the list. These corporations at one time dominated their markets, controlled
vast resources, and had the best-trained workers. In the end, they all made the same critical mistake. Their managements failed to recognize that business strategies need to reflect
MARKETING INSIGHT
1.
2.
3.
4.
5.
6.
The Long-Term Value
of Loyal Customers
1–2
It costs a great deal more to acquire a new customer than to keep an old one.
Loyal customers buy more from your firm over time.
The longer you keep a customer, the more profitable they become over time.
It costs less to service loyal customers than new customers.
Loyal customers are often excellent referrals for new business.
Loyal customers are often willing to pay more for the quality and value they desire.
Source: One of the earliest works on the value of the loyal customer was Frederick F. Reichheld, The Loyalty
Effect, BOSTON: HBS Press, 1996. Also see Roland T. Rust, Katherine N. Lemon, and Valerie A. Zeithaml,
“Return on Marketing: Using Customer Equity to Focus Marketing Strategies,“ Journal of Marketing, January
2004, pp. 76–89; William O. Bearden, Thomas N. Ingram, and Raymond W. LaForge, Marketing: Principles
and Perspectives, 5th ed. (Burr Ridge, IL: McGraw-Hill/Irwin, 2007), p. 8; and W. D. Perreault Jr., J. P. Cannon,
and E. Jerome McCarthy, Basic Marketing: A Marketing Strategy Planning Approach, 19th ed. (Burr Ridge, IL:
McGraw-Hill/Irwin, 2013), pp. 42–43.
changing environments and emphasis must be placed on developing business systems that
allow for continuous improvement. Instead, they attempted to carry on business as usual.
Present-day managers are increasingly recognizing that wisdom and innovation alone
are no longer sufficient to guide the destinies of organizations, both large and small. These
same managers also realize that the true mission of the organization is to provide value
for three key constituencies: customers, employees, and investors. Without this type of
outlook, no one, including shareholders, will profit in the long run.
Strategic planning includes all the activities that lead to the development of a clear
organizational mission, organizational objectives, and appropriate strategies to achieve
the objectives for the entire organization. The form of the process itself has come under
criticism in some quarters for being too structured; however, strategic planning, if performed successfully, plays a key role in achieving an equilibrium between the short and
the long term by balancing acceptable financial performance with preparation for inevitable changes in markets, technology, and competition, as well as in economic and political arenas. Managing principally for current cash flows, market share gains, and earnings
trends can mortgage the firm’s future. An intense focus on the near term can produce an
aversion to risk that dooms a business to stagnation. Conversely, an overemphasis on the
long run is just as inappropriate. Companies that overextend themselves betting on the
future may penalize short-term profitability and other operating results to such an extent
that the company is vulnerable to takeover and other threatening actions.
The strategic planning process is depicted in Figure 1.2. In the strategic planning process,
the organization gathers information about the changing elements of its environment.
Managers from all functional areas in the organization assist in this information-gathering
process. This information is useful in aiding the organization to adapt better to these changes
through the process of strategic planning. The strategic plan(s)3 and supporting plan are
then implemented in the environment. The end results of this implementation are fed back
as new information so that continuous adaptation and improvement can take place.
The Strategic Planning Process
The output of the strategic planning process is the development of a strategic plan. Figure 1.2
indicates four components of a strategic plan: mission, objectives, strategies, and portfolio
plan. Let us carefully examine each one.
Organizational Mission
The organization’s environment provides the resources that sustain the organization,
whether it is a business, a college or university, or a government agency. In exchange
7
8
Part A Introduction
FIGURE 1.2 The Strategic Planning Process
The environment
Cooperative
Competitive
Economic
Social
Political
Legal
The organization's strategic plan
Information
Organizational
mission
Organizational
objectives
Organizational
strategies
Organizational
portfolio plan
Implementation
for these resources, the organization must supply the environment with quality goods
and services at an acceptable price. In other words, every organization exists to accomplish something in the larger environment and that purpose, vision, or mission usually is
clear at the organization’s inception. As time passes, however, the organization expands,
and the environment and managerial personnel change. As a result, one or more things
are likely to occur. First, the organization’s original purpose may become irrelevant as
the organization expands into new products, new markets, and even new industries. For
example, Levi Strauss began as a manufacturer of work clothes. Second, the original
mission may remain relevant, but managers begin to lose interest in it. Finally, changes
in the environment may make the original mission inappropriate, as occurred with the
March of Dimes when a cure was found for polio. The result of any or all three of these
conditions is a “drifting” organization, without a clear mission, vision, or purpose to guide
critical decisions. When this occurs, management must search for a purpose or emphatically restate and reinforce the original purpose.
The mission statement, or purpose, of an organization is the description of its reason
for existence. It is the long-run vision of what the organization strives to be, the unique
aim that differentiates the organization from similar ones and the means by which this
differentiation will take place. In essence, the mission statement defines the direction in
which the organization is heading and how it will succeed in reaching its desired goal.
While some argue that vision and mission statements differ in their purpose, the perspective we will take is that both reflect the organization’s attempt to guide behavior,
create a culture, and inspire commitment. However, it is more important that the mission statement comes from the heart and is practical, easy to identify with, and easy to
remember so that it will provide direction and significance to all members of the organization regardless of their organizational level.
The basic questions that must be answered when an organization decides to examine and
restate its mission are, What is our business? Who are our customers? What do customers
value? and What is our business? The answers are, in a sense, the assumptions on which the
MARKETING INSIGHT
Some Actual Mission
Statements
Organization
Large pharmaceutical firm
Community bank
Skin care products
Hotel chain
Mid-size bank
1–3
Mission
We will become the world’s most valued company to patients, customers, colleagues, investors, business partners, and the communities
where we work and live.
To help citizens successfully achieve and celebrate important life events
with education, information, products, and services.
We will provide luxury skin-care products with therapeutic qualities that
make them worth their premium price.
Grow a worldwide lodging business using total-quality-management
(TQM) principles to continuously improve preference and profitability.
Our commitment is that every guest leaves satisfied.
We will become the best bank in the state for medium-size businesses
by 2017.
organization is being run and from which future decisions will evolve. While such questions may seem simplistic, they are such difficult and critical ones that the major responsibility for answering them must lie with top management. In fact, the mission statement
remains the most widely used management tool in business today. In developing a statement of mission, management must take into account three key elements: the organization’s history, its distinctive competencies, and its environment.4
1. The organization’s history. Every organization—large or small, profit or nonprofit—
has a history of objectives, accomplishments, mistakes, and policies. In formulating a
mission, the critical characteristics and events of the past must be considered.
2. The organization’s distinctive competencies. While there are many things an
organization may be able to do, it should seek to do what it can do best. Distinctive
competencies are things that an organization does well—so well in fact that they give it an
advantage over similar organizations. For Honeywell, it’s their ability to design, manufacture, and distribute a superior line of thermostats. Similarly, Procter & Gamble’s distinctive
competency is its knowledge of the market for low-priced, repetitively purchased consumer
products. No matter how appealing an opportunity may be, to gain advantage over competitors, the organization must formulate strategy based on distinctive competencies.
3. The organization’s environment. The organization’s environment dictates the opportunities, constraints, and threats that must be identified before a mission statement is
developed. For example, managers in any industry that is affected by Internet technology
breakthroughs should continually be asking, How will the changes in technology affect my
customers’ behavior and the means by which we need to conduct our business?
However, it is extremely difficult to write a useful and effective mission statement. It is
not uncommon for an organization to spend one or two years developing a useful mission
statement. When completed, an effective mission statement will be focused on markets
rather than products, achievable, motivating, and specific.5
Focused on Markets Rather Than Products The customers or clients of an organization are critical in determining its mission. Traditionally, many organizations defined their
business in terms of what they made (“our business is glass”), and in many cases they
named the organization for the product or service (e.g., American Tobacco, Hormel Meats,
National Cash Register, Harbor View Savings and Loan Association). Many of these
organizations have found that, when products and technologies become obsolete, their
mission is no longer relevant and the name of the organization may no longer describe
what it does. Thus, a more enduring way of defining the mission is needed. In recent years,
9
MARKETING INSIGHT
Common Shortcomings
in Mission Statements
1–4
1. Incomplete—not specific as to where the company is headed and what kind of company management is trying to create.
2. Vague—does not provide direction to decision makers when faced with product/market
choices.
3. Not motivational—does not provide a sense of purpose or commitment to something
bigger than the numbers.
4. Not distinctive—not specific to our company.
5. Too reliant on superlatives—too many superlatives such as #1, recognized leader, most
successful.
6. Too generic—does not specify the business or industry to which it applies.
7. Too broad—does not rule out any opportunity management might wish to pursue.
Source: Adapted from Arthur A. Thompson Jr. Margaret A. Peteraf, John E. Gamble, and A. J. Strickland III,
Crafting and Executing Strategy, 19th ed. (Burr Ridge, IL: McGraw-Hill/Irwin, 2014), p. 22.
Examine the mission statements in Marketing Insight 1–3. Do any of these shortcomings apply
to them?
therefore, a key feature of mission statements has been an external rather than internal
focus. In other words, the mission statement should focus on the broad class of needs
that the organization is seeking to satisfy (external focus), not on the physical product or
service that the organization is offering at present (internal focus). These market-driven
firms stand out in their ability to continuously anticipate market opportunities and respond
before their competitors. Peter Drucker has clearly stated this principle:
A business is not defined by the company’s name, statutes, or articles of incorporation. It is
defined by the want the customer satisfies when he buys a product or service. To satisfy the
customer is the mission and purpose of every business. The question “What is our business?”
can, therefore, be answered only by looking at the business from the outside, from the point
of view of customer and market.6
While Drucker was referring to business organizations, the same necessity exists for
both nonprofit and governmental organizations. That necessity is to state the mission in
terms of serving a particular group of clients or customers and meeting a particular class
of need.
Achievable While the mission statement should stretch the organization toward more
effective performance, it should, at the same time, be realistic and achievable. In other
words, it should open a vision of new opportunities but should not lead the organization
into unrealistic ventures far beyond its competencies.
Motivational One of the side (but very important) benefits of a well-defined mission is
the guidance it provides employees and managers working in geographically dispersed
units and on independent tasks. It provides a shared sense of purpose outside the various
activities taking place within the organization. Therefore, such end results as sales, patients
cared for, students graduated, and reduction in violent crimes can then be viewed as the
result of careful pursuit and accomplishment of the mission and not as the mission itself.
Specific As we mentioned earlier, public relations should not be the primary purpose of
a statement of mission. It must be specific to provide direction and guidelines to management when they are choosing between alternative courses of action. In other words, “to
produce the highest-quality products at the lowest possible cost” sounds very good, but it
does not provide direction for management.
10
MARKETING INSIGHT Potential Sources of Cross-Functional
1–5
Conflict for Marketers
Functions
Research and development
Production/operations
Finance
Accounting
Human resources
What They May
Want to Deliver
What Marketers May
Want Them to Deliver
Basic research projects
Product features
Few projects
Long production runs
Standardized products
No model changes
Long lead times
Standard orders
No new products
Rigid budgets
Budgets based on return
on investment
Low sales commissions
Standardized billing
Strict payment terms
Strict credit standards
Trainable employees
Low salaries
Products that deliver customer value
Customer benefits
Many new products
Short production runs
Customized products
Frequent model changes
Short lead times
Customer orders
Many new products
Flexible budgets
Budgets based on need to
increase sales
High sales commissions
Custom billing
Flexible payment terms
Flexible credit standards
Skilled employees
High salaries
Organizational Objectives
Organizational objectives are the end points of an organization’s mission and are what it
seeks through the ongoing, long-run operations of the organization. The organizational
mission is distilled into a finer set of specific and achievable organizational objectives.
These objectives must be specific, measurable, action commitments by which the mission
of the organization is to be achieved.
As with the statement of mission, organizational objectives are more than good intentions. In fact, if formulated properly, they can accomplish the following:
1. They can be converted into specific action.
2. They will provide direction. That is, they can serve as a starting point for more specific and detailed objectives at lower levels in the organization. Each manager will then
know how his or her objectives relate to those at higher levels.
3. They can establish long-run priorities for the organization.
4. They can facilitate management control because they serve as standards against which
overall organizational performance can be evaluated.
Organizational objectives are necessary in all areas that may influence the performance
and long-run survival of the organization. As shown in Figure 1.3, objectives can be established in and across many areas of the organization. The list provided in Figure 1.3 is by no
means exhaustive. For example, some organizations are specifying the primary objective
as the attainment of a specific level of quality, either in the marketing of a product or the
providing of a service. These organizations believe that objectives should reflect an organization’s commitment to the customer rather than its own finances. Obviously, during the
strategic planning process conflicts are likely to occur between various functional departments in the organization. The important point is that management must translate the
11
12
Part A Introduction
FIGURE 1.3
Sample
Organizational
Objectives
(manufacturing firm)
Area of Performance
Possible Objective
1. Market standing
2. Innovations
3. Productivity
4. Physical and financial resources
5. Profitability
6. Manager performance
and responsibility
7. Worker performance and attitude
8. Social responsibility
To make our brands number one in their field in terms of
market share.
To be a leader in introducing new products by spending no
less than 7 percent of sales for research and development.
To manufacture all products efficiently as measured by
the productivity of the workforce.
To protect and maintain all resources—equipment, buildings, inventory, and funds.
To achieve an annual rate of return on investment of at
least 15 percent.
To identify critical areas of management depth and
succession.
To maintain levels of employee satisfaction consistent with
our own and similar industries.
To respond appropriately whenever possible to societal
expectations and environmental needs.
organizational mission into specific objectives that support the realization of the mission.
The objectives may flow directly from the mission or be considered subordinate necessities for carrying out the mission. As discussed earlier, the objectives are specific, measurable, action commitments on the part of the organization.
Organizational Strategies
Hopefully, when an organization has formulated its mission and developed its objectives, it knows where it wants to go. The next managerial task is to develop a “grand
design” to get there. This grand design constitutes the organizational strategies. Strategy
involves the choice of major directions the organization will take in pursuing its objectives. Toward this end, it is critical that strategies are consistent with goals and objectives and that top management ensures strategies are implemented effectively. As many
as 70 percent of strategic plans fail because the strategies in them are not well defined
and, thus, cannot be implemented effectively. What follows is a discussion of various
strategies organizations can pursue. We discuss three approaches: (1) strategies based on
products and markets, (2) strategies based on competitive advantage, and (3) strategies
based on value.
Organizational Strategies Based on Products and Markets One means to developing
organizational strategies is to focus on the directions the organization can take in order
to grow. Figure 1.4, which presents the available strategic choices, is a product–market
matrix.7 It indicates that an organization can grow by better managing what it is
FIGURE 1.4
Organizational
Growth Strategies
Products
Present Products
New Products
Present customers
Market penetration
Product development
New customers
Market development
Diversification
Markets
MARKETING INSIGHT
Three Tests for Organizational
Strategies
1–6
1. The Fit Test: How well does the strategy fit the company’s situation? A strategy must have
good external fit, which means it will be well matched to industry and competitive conditions, the company’s best market opportunities, and other relevant aspects of its business
environment. It also must have a good internal fit, which means it is tailored to the company’s resources and distinctive competencies and be supported by a complementary set
of functional capabilities (sales and marketing, production, etc.).
2. The Competitive Advantage Test: Can the strategy help the company achieve a sustainable
competitive advantage? Strategies that fail this test are unlikely to produce superior
performance for more than a brief period of time. A good strategy should enable the
organization to achieve a long-term competitive advantage.
3. The Performance Test: Is the strategy producing good company performance? Critical
performance indicators are (a) profitability and financial strength and (b) competitive
strength and market standing. Above average performance in these two areas is an indicator of a winning strategy.
Source: Adapted from Arthur A. Thompson Jr. Margaret A. Peteraf, John E. Gamble, and A. J. Strickland III,
Crafting and Executing Strategy, 19th ed. (Burr Ridge, IL: McGraw-Hill/Irwin, 2014), p. 12.
presently doing or by finding new things to do. In choosing one or both of these paths,
it must also decide whether to concentrate on present customers or to seek new ones.
Thus, according to Figure 1.4, there are only four paths an organization can take in
order to grow.
Market Penetration Strategies These strategies focus primarily on increasing the sale of
present products to present customers. For example:
• Encouraging present customers to use more of the product: “Orange Juice Isn’t Just for
Breakfast Anymore.”
• Encouraging present customers to purchase more of the product: multiple packages of
Pringles, instant winner sweepstakes at a fast-food restaurant.
• Directing programs at current participants: A university directs a fund-raising program
at those graduates who already give the most money.
Tactics used to implement a market penetration strategy might include price reductions,
advertising that stresses the many benefits of the product (e.g., “Milk Is a Natural”), packaging the product in different-sized packages, or making it available at more locations. Other
functional areas of the business could also be involved in implementing the strategy in addition to marketing. A production plan might be developed to produce the product more efficiently. This plan might include increased production runs, the substitution of preassembled
components for individual product parts, or the automation of a process that previously was
performed manually.
Market Development Strategies Pursuing growth through market development, an
organization would seek to find new customers for its present products. For example:
• Arm & Hammer continues to seek new uses for its baking soda.
• McDonald’s continually seeks expansion into overseas markets.
• As the consumption of salt declined, the book 101 Things You Can Do with Salt Besides
Eat It appeared.
13
14
Part A Introduction
Market development strategies involve much, much more than simply getting the product to a new market. Before deciding on marketing techniques such as advertising and
packaging, companies often find they must establish a clear position in the market, sometimes spending large sums of money simply to educate consumers as to why they should
consider buying the product.
Product Development Strategies Selecting one of the remaining two strategies means
the organization will seek new things to do. With this particular strategy, the new products
developed would be directed primarily to present customers. For example:
• Offering a different version of an existing product: mini-Oreos, Ritz with cheese.
• Offering a new and improved version of their product: Gillette’s latest improvement in
shaving technology.
• Offering a new way to use an existing product: Vaseline’s Lip Therapy.
Diversification This strategy can lead the organization into entirely new and even unrelated businesses. It involves seeking new products (often through acquisitions) for customers not currently being served. For example:
• Altria, originally a manufacturer of cigarettes, is widely diversified in financial services, Post cereals, Sealtest dairy, and Kraft cheese, among others.
• Brown Foreman Distillers acquired Hartmann Luggage, and Sara Lee acquired Coach
Leather Products.
• Some universities are establishing corporations to find commercial uses for faculty research.
Organizational Strategies Based on Competitive Advantage Michael Porter developed a model for formulating organizational strategy that is applicable across a wide
variety of industries.8 The focus of the model is on devising means to gain competitive
advantage. Competitive advantage is an ability to outperform competitors in providing
something that the market values. Porter suggests that firms should first analyze their
industry and then develop either a cost leadership strategy or a strategy based on differentiation. These general strategies can be used on marketwide bases or in a niche
(segment) within the total market.
Using a cost leadership strategy, a firm would focus on being the low-cost company
in its industry. They would stress efficiency and offer a standard, no-frills product. They
could achieve this through efficiencies in production, product design, manufacturing,
distribution, technology, or some other means. The important point is that to succeed, the
organization must continually strive to be the cost leader in the industry or market segment
it competes in. It must also offer products or services that are acceptable to customers
when compared to the competition. Walmart, Southwest Airlines, and Timex Group Ltd.
are companies that have succeeded in using a cost leadership strategy.
Using a strategy based on differentiation, a firm seeks to be unique in its industry or
market segment along particular dimensions that the customers value. These dimensions
might pertain to design, quality, service, variety of offerings, brand name, or some other
factor. The important point is that because of uniqueness of the product or service along one
or more of these dimensions, the firm can charge a premium price. L.L.Bean, Rolex, CocaCola, and Microsoft are companies that have succeeded using a differentiation strategy.
Organizational Strategies Based on Value As competition increases, the concept of
“customer value” has become critical for marketers as well as customers. It can be thought
of as an extension of the marketing concept philosophy that focuses on developing and
delivering superior value to customers as a way to achieve organizational objectives. Thus,
it focuses not only on customer needs, but also on the question, How can we create value
for them and still achieve our objectives?
Chapter One
Strategic Planning and the Marketing Management Process 15
It has become pretty clear that in today’s competitive environment it is unlikely
that a firm will succeed by trying to be all things to all people.9 Thus, to succeed firms
must seek to build long-term relationships with their customers by offering a unique
value that only they can offer. It seems that many firms have succeeded by choosing
to deliver superior customer value using one of three value strategies—best price, best
product, or best service.
Dell Inc., Costco, and Southwest Airlines are among the success stories in offering customers the best price. Rubbermaid, Nike, Starbucks, and Microsoft believe they offer the
best products on the market. Airborne Express, Roadway, Cott Corporation, and Lands’
End provide superior customer value by providing outstanding service.
Choosing an Appropriate Strategy
On what basis does an organization choose one (or all) of its strategies? Of extreme
importance are the directions set by the mission statement. Management should select those
strategies consistent with its mission and capitalize on the organization’s distinctive competencies that will lead to a sustainable competitive advantage. A sustainable competitive
advantage can be based on either the assets or skills of the organization. Technical superiority, low-cost production, customer service/product support, location, financial resources,
continuing product innovation, and overall marketing skills are all examples of distinctive
competencies that can lead to a sustainable competitive advantage. For example, Honda is
known for providing quality automobiles at a reasonable price. Each succeeding generation of Honda automobiles has shown marked quality improvements over previous generations. Likewise, VF Corporation, manufacturer of Wrangler and Lee jeans, has formed
“quick response” partnerships with both discounters and department stores to ensure the
efficiency of product flow. The key to sustaining a competitive advantage is to continually focus and build on the assets and skills that will lead to long-term performance gains.
Organizational Portfolio Plan
The final phase of the strategic planning process is the formulation of the organizational
portfolio plan. In reality, most organizations at a particular time are a portfolio of businesses, that is, product lines, divisions, and schools. To illustrate, an appliance manufacturer may have several product lines (e.g., televisions, washers and dryers, refrigerators,
stereos) as well as two divisions, consumer appliances and industrial appliances. A college
or university will have numerous schools (e.g., education, business, law, architecture) and
several programs within each school. Some widely diversified organizations such as Altria
are in numerous unrelated businesses, such as cigarettes, food products, land development,
and industrial paper products.
Managing such groups of businesses is made a little easier if resources are plentiful,
cash is plentiful, and each is experiencing growth and profits. Unfortunately, providing
larger and larger budgets each year to all businesses is seldom feasible. Many are not
experiencing growth, and profits and resources (financial and nonfinancial) are becoming more and more scarce. In such a situation, choices must be made, and some method is
necessary to help management make the choices. Management must decide which businesses to build, maintain, or eliminate, or which new businesses to add. Indeed, much of
the recent activity in corporate restructuring has centered on decisions relating to which
groups of businesses management should focus on.
Obviously, the first step in this approach is to identify the various divisions, product
lines, and so on that can be considered a “business.” When identified, these are referred to
as strategic business units (SBUs) and have the following characteristics:
• They have a distinct mission.
• They have their own competitors.
16
Part A Introduction
• They are a single business or collection of related businesses.
• They can be planned independently of the other businesses of the total organization.
Thus, depending on the type of organization, an SBU could be a single product, product
line, or division; a college of business administration; or a state mental health agency.
Once the organization has identified and classified all of its SBUs, some method must
be established to determine how resources should be allocated among the various SBUs.
These methods are known as portfolio models. For those readers interested, the appendix
of this chapter presents two of the most popular portfolio models, the Boston Consulting
Group model and the General Electric model.
The Complete Strategic Plan
Figure 1.2 indicates that at this point the strategic planning process is complete, and the
organization has a time-phased blueprint that outlines its mission, objectives, and strategies. Completion of the strategic plan facilitates the development of marketing plans for
each product, product line, or division of the organization. The marketing plan serves as
a subset of the strategic plan in that it allows for detailed planning at a target market
level. This important relationship between strategic planning and marketing planning is
the subject of the final section of this chapter.
THE MARKETING MANAGEMENT PROCESS
Marketing management can be defined as “the process of planning and executing the
conception, pricing, promotion, and distribution of goods, services, and ideas to create exchanges with target groups that satisfy customer and organizational objectives.”10
It should be noted that this definition is entirely consistent with the marketing concept,
since it emphasizes serving target market needs as the key to achieving organizational
objectives. The remainder of this section will be devoted to a discussion of the marketing
management process according to the model in Figure 1.5.
Situation Analysis
With a clear understanding of organizational objectives and mission, the marketing
manager must then analyze and monitor the position of the firm and, specifically, the
marketing department, in terms of its past, present, and future situation. Of course, the
future situation is of primary concern. However, analyses of past trends and the current
situation are most useful for predicting the future situation.
The situation analysis can be divided into six major areas of concern: (1) the cooperative environment, (2) the competitive environment, (3) the economic environment, (4) the
social environment, (5) the political environment, and (6) the legal environment. In analyzing each of these environments, the marketing executive must search both for opportunities and for constraints or threats to achieving objectives. Opportunities for profitable
marketing often arise from changes in these environments that bring about new sets of
needs to be satisfied. Constraints on marketing activities, such as limited supplies of scarce
resources, also arise from these environments.
The Cooperative Environment The cooperative environment includes all firms and individuals who have a vested interest in the firm’s accomplishing its objectives. Parties of primary interest to the marketing executive in this environment are (1) suppliers, (2) resellers,
(3) other departments in the firm, and (4) subdepartments and employees of the marketing
department. Opportunities in this environment are primarily related to methods of increasing efficiency. For example, a company might decide to switch from a competitive bid
process of obtaining materials to a single source that is located near the company’s plant.
Chapter One
FIGURE 1.5
Strategic
Planning and
Marketing Planning
The strategic plan
Organizational
Organizational
Organizational
Organizational
Strategic Planning and the Marketing Management Process 17
mission
objectives
strategies
portfolio plan
Marketing information
system and marketing
research
The marketing plan
Situation analysis
Marketing objectives
Target market selection
Marketing mix
Product strategy
Promotion strategy
Pricing strategy
Distribution strategy
Implementation and control
Likewise, members of the marketing, engineering, and manufacturing functions may use a
teamwork approach to developing new products versus a sequential approach. Constraints
consist of such things as unresolved conflicts and shortages of materials. For example, a
company manager may believe that a distributor is doing an insufficient job of promoting
and selling the product, or a marketing manager may feel that manufacturing is not taking
the steps needed to produce a quality product.
The Competitive Environment The competitive environment includes primarily other
firms in the industry that rival the organization for both resources and sales. Opportunities in this environment include such things as (1) acquiring competing firms; (2) offering
demonstrably better value to consumers and attracting them away from competitors; and
(3) in some cases, driving competitors out of the industry. For example, one airline purchases another airline, a bank offers depositors a free checking account with no minimum
balance requirements, or a grocery chain engages in an everyday low-price strategy that
competitors can’t meet. The primary constraints in these environments are the demand
stimulation activities of competing firms and the number of consumers who cannot be
lured away from competition.
The Economic Environment The state of the macroeconomy and changes in it also
bring about marketing opportunities and constraints. For example, such factors as high
inflation and unemployment levels can limit the size of the market that can afford to
purchase a firm’s top-of-the-line product. At the same time, these factors may offer a
profitable opportunity to develop rental services for such products or to develop lessexpensive models of the product. In addition, changes in technology can provide significant threats and opportunities. For example, in the communications industry, when
technology was developed to a level where it was possible to provide cable television
using phone lines, such a system posed a severe threat to the cable industry.
MARKETING INSIGHT Key Issues in the Marketing Planning
Process That Need to Be Addressed 1–7
Speed of the Process. There is the problem of either being so slow that the process seems
to go on forever or so fast that there is an extreme burst of activity to rush out a plan.
Amount of Data Collected. Sufficient data are needed to properly estimate customer
needs and competitive trends. However, the law of diminishing returns quickly sets in
on the data-collection process.
Responsibility for Developing the Plan. If planning is delegated to professional planners,
valuable line management input may be ignored. If the process is left to line managers, planning may be relegated to secondary status.
Structure. Many executives believe the most important part of planning is not the plan
itself but the structure of thought about the strategic issues facing the business. However,
the structure should not take precedence over the content so that planning becomes
merely filling out forms or crunching numbers.
Length of the Plan. The length of a marketing plan must be balanced between being
so long that both staff and line managers ignore it and so brief that it ignores key details.
Frequency of Planning. Too frequent reevaluation of strategies can lead to erratic firm
behavior. However, when plans are not revised frequently enough, the business may
not adapt quickly enough to environmental changes and thus suffer a deterioration in
its competitive position.
Number of Alternative Strategies Considered. Discussing too few alternatives raises the
likelihood of failure, whereas discussing too many increases the time and cost of the
planning effort.
Cross-Functional Acceptance. A common mistake is to view the plan as the proprietary
possession of marketing. Successful implementation requires a broad consensus,
including other functional areas.
Using the Plan as a Sales Document. A major but often overlooked purpose of a plan
and its presentation is to generate funds from either internal or external sources.
Therefore, the better the plan, the better the chance of gaining desired funding.
Senior Management Leadership. Commitment from senior management is essential to
the success of a marketing planning effort.
Tying Compensation to Successful Planning Efforts. Management compensation should
be oriented toward the achievement of objectives stated in the plan.
Source: From Donald R. Lehmann and Russell S. Winer, Analysis for Marketing Planning 7E, McGraw-Hill/
Irwin, 2008, Chapter 1. Reprinted with permission of McGraw-Hill Education.
The Social Environment This environment includes general cultural and social traditions, norms, and attitudes. While these values change slowly, such changes often bring
about the need for new products and services. For example, a change in values concerning the desirability of large families brought about an opportunity to market better methods of birth control. On the other hand, cultural and social values also place constraints
on marketing activities. As a rule, business practices that are contrary to social values
become political issues, which are often resolved by legal constraints. For example, public
demand for a cleaner environment has caused the government to require that automobile
manufacturers’ products meet certain average gas mileage and emission standards.
The Political Environment The political environment includes the attitudes and reactions of the general public, social and business critics, and other organizations, such as
the Better Business Bureau. Dissatisfaction with such business and marketing practices as
unsafe products, products that waste resources, and unethical sales procedures can have
adverse effects on corporation image and customer loyalty. However, adapting business
18
Chapter One
Strategic Planning and the Marketing Management Process 19
and marketing practices to these attitudes can be an opportunity. For example, these attitudes have brought about markets for such products as unbreakable children’s toys, highefficiency air conditioners, and more economical automobiles.
The Legal Environment This environment includes a host of federal, state, and local
legislation directed at protecting both business competition and consumer rights. In past
years, legislation reflected social and political attitudes and has been primarily directed at
constraining business practices. Such legislation usually acts as a constraint on business
behavior, but again can be viewed as providing opportunities for marketing safer and more
efficient products. In recent years, there has been less emphasis on creating new laws
for constraining business practices. As an example, deregulation has become more common, as evidenced by events in the airlines, financial services, and telecommunications
industries.
Marketing Planning
The previous sections emphasized that (1) marketing activities must be aligned with
organizational objectives and (2) marketing opportunities are often found by systematically
analyzing situational environments. Once an opportunity is recognized, the marketing executive must then plan an appropriate strategy for taking advantage of the opportunity. This
process can be viewed in terms of three interrelated tasks: (1) establishing marketing objectives, (2) selecting the target market, and (3) developing the marketing mix.
Establishing Objectives Marketing objectives usually are derived from organizational
objectives; in some cases where the firm is totally marketing oriented, the two are identical. In either case, objectives must be specified and performance in achieving them should
be measurable. Marketing objectives are usually stated as standards of performance (e.g.,
a certain percentage of market share or sales volume) or as tasks to be achieved by given
dates. While such objectives are useful, the marketing concept emphasizes that profits
rather than sales should be the overriding objective of the firm and marketing department.
In any case, these objectives provide the framework for the marketing plan.
Selecting the Target Market The success of any marketing plan hinges on how well it
can identify customer needs and organize its resources to satisfy them profitably. Thus,
a crucial element of the marketing plan is selecting the groups or segments of potential
customers the firm is going to serve with each of its products. Four important questions
must be answered:
1.
2.
3.
4.
What do customers want or need?
What must be done to satisfy these wants or needs?
What is the size of the market?
What is its growth profile?
Present target markets and potential target markets are then ranked according to (1)
profitability; (2) present and future sales volume; and (3) the match between what it takes
to appeal successfully to the segment and the organization’s capabilities. Those that appear
to offer the greatest potential are selected. One cautionary note on this process involves the
importance of not neglecting present customers when developing market share and sales
strategies. Chapters 3, 4, and 5 are devoted to discussing consumer behavior, industrial
buyers, and market segmentation.
Developing the Marketing Mix The marketing mix is the set of controllable variables
that must be managed to satisfy the target market and achieve organizational objectives.
These controllable variables are usually classified according to four major decision areas:
product, price, promotion, and place (or channels of distribution). The importance of
MARKETING INSIGHT
Examples of Marketing Objectives
1–8
Poorly Stated Objectives
Our objective is to be a leader in the
industry in terms of new product
development.
Our objective is to maximize profits.
Our objective is to better serve
customers.
Our objective is to be the best that we
can be.
Well-Stated Objectives
Our objective is to spend 12 percent of sales
revenue between 2013 and 2015 on research and
development in an effort to introduce at least five
new products in 2016.
Our objective is to achieve a 10 percent return on
investment during 2013, with a payback on new
investments of no longer than four years.
Our objective is to obtain customer satisfaction
ratings of at least 90 percent on the 2013 annual
customer satisfaction survey, and to retain at
least 85 percent of our 2013 customers as repeat
purchasers in 2014.
Our objective is to increase market share from
30 percent to 40 percent in 2013 by increasing
promotional expenditures by 14 percent.
Source: From Donald R. Lehmann and Russell S. Winer, Analysis for Marketing Planning 7E, McGraw-Hill/
Irwin, 2008, Chapter 1. Reprinted with permission of McGraw-Hill Education.
these decision areas cannot be overstated, and in fact, the major portion of this text is
devoted to analyzing them. Chapters 6 and 7 are devoted to product and new product
strategies, Chapters 8 and 9 to promotion strategies in terms of both nonpersonal and
personal selling, Chapter 10 to distribution strategies, and Chapter 11 to pricing strategies. In addition, marketing mix variables are the focus of analysis in two chapters on
marketing in special fields, that is, the marketing of services (Chapter 12) and global
marketing (Chapter 13). Thus, it should be clear that the marketing mix is the core of the
marketing management process.
The output of the foregoing process is the marketing plan. It is a formal statement of
decisions that have been made on marketing activities; it is a blueprint of the objectives,
strategies, and tasks to be performed.
Implementation and Control of the Marketing Plan
Implementing the marketing plan involves putting the plan into action and performing
marketing tasks according to the predefined schedule. Even the most carefully developed plans often cannot be executed with perfect timing. Thus, the marketing executive
must closely monitor and coordinate implementation of the plan. In some cases, adjustments may have to be made in the basic plan because of changes in any of the situational
environments. For example, competitors may introduce a new product. In this event, it
may be desirable to speed up or delay implementation of the plan. In almost all cases,
some minor adjustments or fine tuning will be necessary in implementation.
Controlling the marketing plan involves three basic steps. First, the results of the
implemented marketing plan are measured. Second, these results are compared with
objectives. Third, decisions are made on whether the plan is achieving objectives. If
serious deviations exist between actual and planned results, adjustments may have to be
made to redirect the plan toward achieving objectives.
20
Chapter One
Strategic Planning and the Marketing Management Process 21
Marketing Information Systems and Marketing Research
Throughout the marketing management process, current, reliable, and valid information is
needed to make effective marketing decisions. Providing this information is the task of the
marketing information system and marketing research. These topics are discussed in detail
in Chapter 2.
THE STRATEGIC PLAN, THE MARKETING PLAN,
AND OTHER FUNCTIONAL AREA PLANS
Strategic planning is clearly a top-management responsibility. In recent years, however,
there has been an increasing shift toward more active participation by marketing managers
in strategic analysis and planning. This is because, in reality, nearly all strategic planning
questions have marketing implications. In fact, the two major strategic planning questions—
What products should we make? and What markets should we serve?—are clearly marketing questions. Thus, marketing executives are involved in the strategic planning process in
at least two important ways: (1) They influence the process by providing important inputs
in the form of information and suggestions relating to customers, products, and middlemen;
and (2) they must always be aware of what the process of stategic planning involves as well
as the results because everything they do—the marketing objectives and strategies they
develop—must be derived from the strategic plan. In fact, the planning done in all functional areas of the organization should be derived from the strategic plan.
Marketing’s Role in Cross-Functional Strategic Planning
More and more organizations are rethinking the traditional role of marketing. Rather
than dividing work according to function (e.g., production, finance, technology, human
resources), they are bringing managers and employees together to participate in crossfunctional teams. These teams might have responsibility for a particular product, line of
products, or group of customers.
Because team members are responsible for all activities involving their products and/or
customers, they are responsible for strategic planning. This means that all personnel working in a cross-functional team will participate in creating a strategic plan to serve customers.
Rather than making decisions independently, marketing managers work closely with
team members from production, finance, human resources, and other areas to devise plans
that address all concerns. Thus, if a team member from production says, “That product will
be too difficult to produce,” or if a team member from finance says, “We’ll never make a
profit at that price,” the team members from marketing must help resolve the problems.
This approach requires a high degree of skill at problem solving and gaining cooperation.
Clearly the greatest advantage of strategic planning with a cross-functional team is
the ability of team members to consider a situation from a number of viewpoints. The
resulting insights can help the team avoid costly mistakes and poor solutions. Japanese
manufacturers are noted for using cross-functional teams to figure out ways to make desirable products at given target costs. In contrast, U.S. manufacturers traditionally have developed products by having one group decide what to make, another calculate production
costs, and yet another predict whether enough of the product will sell at a high enough price.
Thus, in well-managed organizations, a direct relationship exists between strategic
planning and the planning done by managers at all levels. The focus and time perspectives
will, of course, differ. Figure 1.6 illustrates the cross-functional perspective of strategic
planning. It indicates very clearly that all functional area plans should be derived from the
strategic plan while at the same time contributing to the achievement of it.
22
Part A Introduction
FIGURE 1.6 The Cross-Functional Perspective in Planning
The strategic plan
Mission
Objectives
Strategies
Portfolio plan
Functional area plans derived from strategic plan
Production plan
Marketing plan
Human resource
plan
Finance plan
Technology plan
Objectives
Forecast
Budgets
Strategies
and programs
Policies
Objectives
Forecast
Budgets
Strategies
and programs
Policies
Objectives
Forecast
Budgets
Strategies
and programs
Policies
Objectives
Forecast
Budgets
Strategies
and programs
Policies
Objectives
Forecast
Budgets
Strategies
and programs
Policies
If done properly, strategic planning results in a clearly defined blueprint for management action in all functional areas of the organization. Figure 1.7 clearly illustrates this
blueprint using only one organizational objective and two strategies from the strategic
plan (above the dotted line) and illustrating how these are translated into elements of the
marketing department plan and the production department plan (below the dotted line).
Note that in Figure 1.7, all objectives and strategies are related to other objectives and
strategies at higher and lower levels in the organization: That is, a hierarchy of objectives
and strategies exists. We have illustrated only two possible marketing objectives and two
possible production objectives. Obviously, many others could be developed, but our purpose is to illustrate the cross-functional nature of strategic planning and how objectives
and strategies from the strategic plan must be translated into objectives and strategies for
all functional areas including marketing.
SUMMARY
This chapter has described the marketing management process in the context of the
organization’s overall strategic plan. Clearly, marketers must understand their crossfunctional role in joining the marketing vision for the organization with the financial goals
and manufacturing capabilities of the organization. The greater this ability, the better the
likelihood is that the organization will be able to achieve and sustain a competitive advantage, the ultimate purpose of the strategic planning process.
At this point it would be useful to review Figures 1.5, 1.6, and 1.7 as well as the book’s
table of contents. This review will enable you to better relate the content and progression
of the material to follow to the marketing management process.
Chapter One
Strategic Planning and the Marketing Management Process 23
FIGURE 1.7 A Blueprint for Management Action: Relating the Marketing Plan to the Strategic
Plan and the Production Plan
One organizational
objective (the profitability
objective) from Figure 1.3
Two possible
organizational
strategies from
the product-market
matrix, Figure 1.4
Two
possible
marketing
objectives
and two
possible
production
objectives
derived
from the
strategic
plan
Achieve an annual rate of return
on investment of at least 15 percent
1. Market penetration
Improve position of present
products with present customers
2. Market development
Find new customers for present
products
1. Marketing
department
objective
2. Production
department
objective
3. Marketing
department
objective
4. Production
department
objective
Increase rate of
purchase by existing
customers by 10
percent by
year-end
Design additional
features into
product that will
induce new uses
by existing
buyers
Increase market
share by 5 percent
by attracting new
market segments for
existing use by
year-end
Design additional
features into product
that will open
additional markets
with new uses
Marketing
strategies and
programs
Production
strategies and
programs
Specific
course of
action of the
marketing and
production
departments
designed to
achieve the
objective
Additional
Resources
Marketing
strategies and
programs
Production
strategies and
programs
Austin, Robert D., Richard L. Nolan, and Shannon O’Donnell. Harder Than I Thought, Boston:
Harvard Business Review Press, 2013.
Charan, Ram. Leadership in the Era of Economic Uncertainty. New York: McGraw-Hill, 2009.
Christensen, Clayton, M., Scott Cook, and Tandy Hall. “Marketing Malpractice: The Cause and the
Cure.” Harvard Business Review, December 2005, pp. 74–75.
Dixit, Avinash, K., and Barry J. Noblebuff. The Art of Strategy. New York: W.W. Norton and Co., 2009.
Friedman, George. The Next Decade. New York: Doubleday, 2011.
Kaplan, Robert S., and David Norton. “How to Implement a New Strategy Without Disrupting
Your Organization.” Harvard Business Review, March 2006, pp. 100–109.
Levitt, Ted. On Marketing. Boston: HBS Press, 2006.
Markower, Jack. Strategies for the Green Economy. New York: McGraw-Hill, 2009.
O’Sullivan, Don, and Andrew W. Abdela. “Marketing Performance Measurement Ability and
Performance.” Journal of Marketing, April 2007, pp. 79–93.
Silverstein, Michael J., Abheek Singhi, Carol Liao, and David Michael. The $10 Trillion Prize:
Captivating the Newly Affluent in China and India. Boston: Harvard Business Review Press, 2012.
24
Part A Introduction
Key Terms
and Concepts
Distinctive competencies: Distinctive competencies are things that an organization does so well
that they give it an advantage over similar organizations. No matter how appealing an opportunity
may be, to gain advantage over competitors, the organization must formulate strategy based on
distinctive competencies.
Diversification: An organizational strategy that seeks growth through new products (often through
acquisitions) for customers not currently being served.
Market development: An organizational strategy that seeks growth through seeking new customers for present products.
Market penetration: An organizational strategy that seeks growth through increasing the sale of
present products to present customers.
Marketing: The activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.
Marketing concept: The marketing concept means that an organization should seek to make a
profit by serving the needs of customer groups. Its purpose is to rivet the attention of marketing
managers on serving broad classes of customer needs (customer orientation), rather than on the
firm’s products (production orientation) or on devising methods to attract customers to current
products (selling orientation).
Marketing information system: Throughout the marketing management process, current,
reliable, and valid information is needed to make effective marketing decisions. Providing this
information is the task of the marketing information system and marketing research.
Marketing management: Marketing management is the process of planning and executing the
conception, pricing, promotion, and distribution of goods, services, and ideas to create exchanges
with target groups that satisfy customer and organizational objectives.
Marketing mix: The marketing mix is the set of controllable variables that must be managed to
satisfy the target market and achieve organizational objectives. The controllable variables are
usually classified according to four major decision areas: product, price, promotion, and place
(or channels of distribution).
Marketing planning: The marketing planning process produces three outputs: (1) establishing
marketing objectives, (2) selecting the target market, and...
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