Case 9: Promotion Case Larry’s Conundrum Larry Bates is a recent graduate of UNA and has decided to start out with his own business. His parents have worked in real estate and he would like to work is the same area. However, he wants to start his own office. He has worked for a few years and has saved enough to lease and office and has just received his license. Larry’s major concern is how he is going to get his business promoted so that people have heard about him for listings and potential sales. He has decided to do some advertising, sales promotion and try to get publicity and of course personal selling but he is unsure how money to spend and in which areas. Questions: 1. What is the best analysis to use to help Larry make his Promotion decision? Explain. The best analysis to use would be the AIDA curve. The AIDA curve compares promotion effectiveness against buyer readiness stage. 2. Given Larry's position on the PLC curve what promotion methods should he use at this point? Explain. One could overlay the PLC curve with the AIDA curve to show what promotion methods would be best at different stages of business development. It shows that at early business stages, you should use more advertising and publicity. Promotion 1 Promotion • Promotion is communicating information between the seller and the potential buyer -to influence attitudes and behaviour. 2 Promotion • Methods of Promotion : • 1. Personal Selling - involves direct face-to-face communication between seller and potential customers – one of the most expensive forms of promotion 3 Promotion • Methods of Promotion : • 1. Personal Selling - one of the most expensive forms of promotion • Mass Selling - a variation of personal selling communicating with large numbers of potential customers at the same time 4 Promotion • Methods of Promotion : • 2. Advertising - any paid form of non-personal presentation of ideas, goods, or services by an identified sponsor 5 Promotion • Methods of Promotion : • 3. Publicity - any unpaid from of non-personal presentation of ideas, goods, or services. – e.g., Press releases, Newspaper articles, et 6 Promotion • Methods of Promotion : • Publicity is usually more effective than advertising • Consumers view publicity sources as having more source creditability 7 Promotion • Methods of Promotion : • 4. Sales Promotion - refers to promotion activities other than advertising, publicity and personal selling 8 Promotion • Methods of Promotion : • Sales Promotion – e.g., Lotteries associated with buying a product, coupons, free prizes 9 Promotion • Methods of Promotion • 4. Sales Promotion – Can be aimed at channel members, sales staff, other employees 10 Promotion • Which Methods to use depends on Promotion Objectives. • The different promotion methods can be viewed as different forms of communication. 11 The Elements of the Communication Process Sender 絏 Encoding Message Media Receiver Decoding Noise Response Feedback Promotion • However, the overall objective of promotion is to affect behaviour. • Prior to affecting behaviour, attitudes must be changed. 12 Promotion • Therefore, promotion seeks to: • 1. Reinforce present attitudes that lead to favorable Behaviour • 2. Actually changing the attitudes and Behaviour of the firm‘s target market 13 Promotion • In terms of demand, promotion seeks to make demand more inelastic and shift the curve to the right or both. 14 Promotion Objective : Demand 10 5 ________________________ Price Product before Promotion Product after Promotion ____________________________________ 100 200 220 Quantity Demanded 15 Promotion • Basically, the three basis promotion objectives are: – 1. Informing (Educating) – 2. Persuading – 3. Reminding 16 Promotion • More specifically, a firm should determine who they want to inform and why. 17 Promotion • Informing is the most important objective. This is usually all that is necessary with a new product with advanced features. 18 Promotion • Promotion requires effective communication. • The same message may be interpreted differently by different persons. • e.g., Pinto, Nova 19 Promotion • Feedback improves the communication process. • Marketers often test the effectiveness of ads using research techniques. e.g., coupons 21 Promotion Effectiveness ______________________________ AIDA Model AIDA Personal Selling Sales Promotion Publicity Advertising _________________________________________ Desire Action Interest Awareness 22 AIDA Curve • The AIDA curves allow marketers to determine what form of promotion to use at a particular time during the buyer readiness process and during the PLC. The Adoption Curve %Adoption ________________________ 90% ________________________________________ _____________________________________________ Innovators Early Adopters Early Majority Late Majority Laggards Non-Adopt 23 The Adoption Curve: A marketing research tool • Marketers can use the adoption curve characteristics to determine when to sample to predict the success or failure of a new product. • Marketers test the Early adopters as bell weather sample for prediction. Adoption Curve Prediction Process • 1. Calculate potential market demand for a new product (Market Targeting Lecture) • 2. Start surveying customers after the first 5 to 7% have purchased the product (i.e., innovators) • 3. Survey these customers (Early Adopters) to determine their perception of the value of the product. • These survey results will predict success or failure of the new product. Promotion • Adoption Curve – 1. Innovators - the first to adopt – eager to try a new idea - willing to take risks 25 The Adoption Curve %Adoption ________________________ 90% ________________________________________ _____________________________________________ Innovators Early Adopters Early Majority Late Majority Laggards Non-Adopt 23 Promotion • Adoption Curve – 1. Innovators – tend to be young and well educated – 3 to 5% of the potential market – tend to have many contacts outside social group 26 Promotion • Adoption Curve – – – – 2. Early Adopters (10-15%) opinion leaders tend to be younger and more mobile fewer contacts outside social group 27 Promotion • Adoption Curve – 3. Early Majority (34%) – avoid risk and wait to consider a new idea after many early adopters have tried it 28 Promotion • Adoption Curve – 3. Early Majority (34%) – corresponds to growth stage in PLC – members are usually not opinion leaders 29 Promotion • Adoption Curve – – – – – 4. Late Majority (34%) cautious about new ideas older than early majority more set in their ways mistrust early adopters 30 Promotion • Adoption Curve – – – – 5. Laggards or Non-adopters (5-16%) prefer things the way they have been older and less well educated usually low in social status and income 31 Promotion • Adoption Curve – Curve emphasizes the importance of opinion leaders in the adoption process – Opinion leaders are those who influence other people抯 attitudes and behaviour 32 Promotion • Factors Affecting the Selection of a Promotion Blend – 1. The promotion budget affects promotion efficiency – 2. Stage of the Product Life Cycle – 3. Nature of the competition 33 Promotion • Factors Affecting the Selection of a Promotion Blend – – – – – – 4. Target of Promotion a. to final customers b. to industrial customers c. to retailers d. to wholesalers e. to employees 34 Marketing Strategy Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Marketing Strategy Text and Cases SIXTH EDITION O.C. FERRELL The University of New Mexico MICHAEL D. HARTLINE The Florida State University Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. This is an electronic version of the print textbook. Due to electronic rights restrictions, some third party content may be suppressed. Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. The publisher reserves the right to remove content from this title at any time if subsequent rights restrictions require it. For valuable information on pricing, previous editions, changes to current editions, and alternate formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for materials in your areas of interest. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Marketing Strategy: Text and Cases, Sixth Edition O.C. Ferrell and Michael D. 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For your course and learning solutions, visit www.cengage.com Purchase any of our products at your local college store or at our preferred online store www.cengagebrain.com Printed in the United States of America 1 2 3 4 5 6 7 16 15 14 13 12 Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. To my wife, Linda O.C. Ferrell To Huck and ReRe Michael D. Hartline Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Brief Contents PART 1 Setting the Stage for Marketing Strategy CHAPTER 1 Marketing in Today’s Economy CHAPTER 2 Strategic Marketing Planning PART 2 1 27 Discovering Market Opportunities CHAPTER 3 Collecting and Analyzing Marketing Information CHAPTER 4 Developing Competitive Advantage and Strategic Focus 85 PART 3 Developing Marketing Strategy CHAPTER 5 Customers, Segmentation, and Target Marketing CHAPTER 6 The Marketing Program CHAPTER 7 Branding and Positioning PART 4 53 115 149 199 Putting Strategy into Action CHAPTER 8 Ethics and Social Responsibility in Marketing Strategy CHAPTER 9 Marketing Implementation and Control CHAPTER 10 PART 5 227 255 Developing and Maintaining Long-Term Customer Relationships 283 Cases CASE 1 USA Today: Innovation in an Evolving Industry CASE 2 Apple’s Winning Marketing Strategy CASE 3 Monsanto Balances the Interests of Multiple Stakeholders CASE 4 New Belgium Brewing (A): Gaining Competitive Advantage Through Socially Responsible Marketing 351 CASE 5 New Belgium Brewing (B): Developing a Brand Personality CASE 6 Mattel Confronts Its Marketing Challenges CASE 7 Mistine: Direct Selling in the Thai Cosmetics Market CASE 8 BP Struggles to Repair Its Tarnished Reputation CASE 9 Chevrolet: 100 Years of Product Innovation 313 327 339 361 371 381 393 405 vii Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. viii Brief Contents CASE 10 Wyndham Worldwide Adopts a Stakeholder Orientation Marketing Strategy 419 CASE 11 NASCAR: Can’t Keep a Good Brand Down CASE 12 IndyCar: Seeking a Return to Motorsports’ Fast Lane CASE 13 Zappos: Delivering Happiness CASE 14 Sigma Marketing: Strategic Marketing Adaptation CASE 15 Netflix Fights to Stay Ahead of a Rapidly Changing Market CASE 16 Gillette: Why Innovation May Not Be Enough CASE 17 IKEA Slowly Expands Its U.S. Market Presence 493 CASE 18 Sushilicious: Standing Out In A Crowded Field 501 CASE 19 Trouble Brews at Starbucks CASE 20 Groupon Appendix 429 441 451 461 471 481 517 533 Marketing Plan Worksheets 547 Brands and Companies Index 557 Name Index 571 Subject Index 575 Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Contents PART 1 Setting the Stage for Marketing Strategy CHAPTER 1 1 Marketing in Today’s Economy Introduction 1 Beyond the Pages 1.1 Thriving in Commodity Hell 2 The Challenges and Opportunities of Marketing in Today’s Economy 3 7 Basic Marketing Concepts What Is a Market? 8 What Is Exchange? 9 What Is a Product? 11 Major Marketing Activities and Decisions Strategic Planning 14 14 Beyond the Pages 1.2 Innovative Marketing Strategies for a Tough Economy Research and Analysis 16 Developing Competitive Advantage 16 Marketing Strategy Decisions 17 Beyond the Pages 1.3 Targeting Consumers via Online Social Networking Social Responsibility and Ethics 20 Implementation and Control 20 Developing and Maintaining Customer Relationships 21 24 Questions for Discussion Exercises 18 22 Taking On the Challenges of Marketing Strategy Lessons from Chapter 1 15 25 25 CHAPTER 2 Strategic Marketing Planning Introduction 27 27 Beyond the Pages 2.1 Redbox’s Success Story 28 The Strategic Planning Process 29 Organizational Mission versus Organizational Vision Corporate or Business-Unit Strategy 34 Functional Goals and Objectives 35 Functional Strategy 35 Implementation 36 Evaluation and Control 36 The Marketing Plan 36 Marketing Plan Structure 30 37 Beyond the Pages 2.2 Sell Below Cost, They Will Come Using the Marketing Plan Structure 41 42 ix Copyright 2013 Cengage Learning. 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Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. x Contents Purposes and Significance of the Marketing Plan 44 Organizational Aspects of the Marketing Plan 44 Maintaining Customer Focus and Balance in Strategic Planning Customer-Focused Planning 46 Beyond the Pages 2.3 Amazon Is on Fire Balanced Strategic Planning Lessons from Chapter 2 Questions for Discussion Exercises 45 47 48 50 51 51 PART 2 Discovering Market Opportunities CHAPTER 3 Collecting and Analyzing Marketing Information Introduction 53 53 Beyond the Pages 3.1 Baby Boomers Deserve Careful Analysis Conducting a Situation Analysis 55 Analysis Alone Is Not a Solution 55 Data Is Not the Same as Information 56 The Benefits of Analysis Must Outweigh the Costs 56 Conducting a Situation Analysis Is a Challenging Exercise The Internal Environment 58 Review of Current Objectives, Strategy, and Performance Availability of Resources 59 Organizational Culture and Structure 60 54 56 59 The Customer Environment 60 Who Are Our Current and Potential Customers? 62 What Do Customers Do with Our Products? 62 Where Do Customers Purchase Our Products? 63 When Do Customers Purchase Our Products? 63 Beyond the Pages 3.2 The Ongoing Challenge of E-Waste Why (and How) Do Customers Select Our Products? 65 Why Do Potential Customers Not Purchase Our Products? 64 65 The External Environment 66 Competition 66 Economic Growth and Stability 70 Political Trends 71 Legal and Regulatory Issues 71 Technological Advancements 72 Sociocultural Trends 73 Collecting Marketing Data and Information Secondary Information Sources 76 76 Beyond the Pages 3.3 A Corporate Affairs Primer Primary Data Collection 80 Overcoming Problems in Data Collection Lessons from Chapter 3 Questions for Discussion Exercises 77 81 82 82 83 Copyright 2013 Cengage Learning. 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Contents CHAPTER 4 85 Developing Competitive Advantage and Strategic Focus Introduction 85 Beyond the Pages 4.1 Innovation: A Major Key to Success 86 Making SWOT Analysis Productive 87 Stay Focused 88 Search Extensively for Competitors 89 Collaborate with Other Functional Areas 89 Examine Issues from the Customers’ Perspective 90 Look for Causes, Not Characteristics 92 Separate Internal Issues from External Issues 92 SWOT-Driven Strategic Planning Strengths and Weaknesses 93 Opportunities and Threats 95 The SWOT Matrix 96 93 98 Developing and Leveraging Competitive Advantages Establishing a Strategic Focus 100 Beyond the Pages 4.2 Successful Product Leadership at 3M Developing Marketing Goals and Objectives 101 105 Beyond the Pages 4.3 A Closer Look at Blue Ocean Strategy 106 Developing Marketing Goals 107 Developing Marketing Objectives 108 Moving Beyond Goals and Objectives 111 Lessons from Chapter 4 Questions for Discussion Exercises 111 112 112 PART 3 Developing Marketing Strategy CHAPTER 5 Customers, Segmentation, and Target Marketing Introduction 115 115 Beyond the Pages 5.1 Data Mining Allows Companies to Know Our Secrets Buyer Behavior in Consumer Markets 117 The Consumer Buying Process 117 Factors That Affect the Consumer Buying Process Buyer Behavior in Business Markets 125 Unique Characteristics of Business Markets The Business Buying Process 128 Market Segmentation 129 Traditional Market Segmentation Approaches 116 123 126 129 Beyond the Pages 5.2 The Challenges and Opportunities of Population Diversity Individualized Segmentation Approaches 132 Criteria for Successful Segmentation 134 Beyond the Pages 5.3 Shifting Strategies in the Cereal Market 130 135 Identifying Market Segments 135 Segmenting Consumer Markets 136 Segmenting Business Markets 141 Copyright 2013 Cengage Learning. 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Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xi xii Contents 142 Target Marketing Strategies Lessons from Chapter 5 143 146 Questions for Discussion Exercises 146 CHAPTER 6 149 The Marketing Program Introduction 149 Beyond the Pages 6.1 Can Good Marketing Save Barnes & Noble? 150 Product Strategy 151 Strategic Issues in the Product Portfolio 151 The Challenges of Service Products 154 Developing New Products 156 Pricing Strategy 158 Key Issues in Pricing Strategy 159 Beyond the Pages 6.2 Pricing Around the World 160 Pricing Service Products 165 Base Pricing Strategies 166 Adjusting the Base Price 167 Supply Chain Strategy 169 Strategic Supply Chain Issues 170 Trends in Supply Chain Strategy 175 Beyond the Pages 6.3 Walmart’s Supply Chain Advantages Integrated Marketing Communications 176 179 Beyond the Pages 6.4 Fragmentation Forever Changes Media Advertising Strategic Issues in Integrated Marketing Communications Advertising 182 Public Relations 184 Personal Selling and Sales Management 186 Sales Promotion 188 Lessons from Chapter 6 Questions for Discussion Exercises 180 181 192 195 195 CHAPTER 7 Branding and Positioning Introduction 199 199 Beyond the Pages 7.1 Steinway: More Than a Piano 200 Strategic Issues in Branding 202 Basic Branding Decisions 204 Strategic Brand Alliances 206 Brand Value 206 Packaging and Labeling 209 Beyond the Pages 7.2 Tropicana’s Packaging Debacle 210 Differentiation and Positioning 210 Bases for Differentiation 212 Positioning Strategies 214 Copyright 2013 Cengage Learning. 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Contents Mananging Brands over Time Development Stage 217 Introduction Stage 218 Growth Stage 219 Maturity Stage 220 215 Beyond the Pages 7.3 Nintendo’s Rebranding Strategy Decline Stage 222 223 Lessons from Chapter 7 Questions for Discussion Exercises xiii 224 225 225 PART 4 Putting Strategy into Action CHAPTER 8 227 Ethics and Social Responsibility in Marketing Strategy Introduction 227 Beyond the Pages 8.1 Salesforce.com Adopts a Stakeholder Orientation Ethics and Social Responsibility in Marketing Strategy Dimensions of Social Responsibility 229 Sustainability 232 Marketing Ethics and Strategy 233 228 229 Beyond the Pages 8.2 Finding the Real Green Products 234 The Challenges of Being Ethical and Socially Responsible 236 Ethical Issues in the Marketing Program 237 Product-Related Ethical Issues 238 Pricing-Related Ethical Issues 239 Supply Chain-Related Ethical Issues 240 Promotion-Related Ethical Issues 241 Managing and Controlling Ethical Issues Regulating Marketing Ethics 242 Codes of Conduct 243 242 Beyond the Pages 8.3 The Consumer Financial Protection Bureau Aims to Build Trust in the Banking System Ethical Leadership 244 245 Relationship to Marketing and Financial Performance Stakeholder Orientation 247 Marketing Financial Performance 247 246 Incorporating Ethics and Social Responsibility into Strategic Planning Lessons from Chapter 8 Questions for Discussion Exercises 249 250 251 251 CHAPTER 9 Marketing Implementation and Control Introduction 255 255 Beyond the Pages 9.1 Green Mountain Coffee Gets It Done 256 Strategic Issues in Marketing Implementation 257 The Link Between Planning and Implementation 257 The Elements of Marketing Implementation 259 Copyright 2013 Cengage Learning. 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Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xiv Contents Approaches to Marketing Implementation Implementation by Command 263 Implementation Through Change 263 263 Beyond the Pages 9.2 The New Rules of CEO Leadership 264 Implementation Through Consensus 265 Implementation as Organizational Culture 266 268 Internal Marketing and Marketing Implementation The Internal Marketing Approach 268 The Internal Marketing Process 269 Evaluating and Controlling Marketing Activities Formal Marketing Controls 271 Informal Marketing Controls 275 Scheduling Marketing Activities 276 270 Beyond the Pages 9.3 Managing Risk Through Culture Lessons from Chapter 9 Questions for Discussion Exercises 277 279 280 280 CHAPTER 10 283 Developing and Maintaining Long-Term Customer Relationships Introduction 283 Beyond the Pages 10.1 1-800-Flowers.com Focuses on Customers 284 Managing Customer Relationships 284 Developing Relationships in Consumer Markets 286 Developing Relationships in Business Markets 288 Quality and Value: The Keys to Developing Customer Relationships Understanding the Role of Quality 290 Delivering Superior Quality 293 Beyond the Pages 10.2 Customer Service versus Efficiency Understanding the Role of Value Competing on Value 298 Beyond the Pages 10.3 Satisfied, But Not Loyal 302 Satisfaction versus Quality versus Value 303 Customer Satisfaction and Customer Retention Customer Satisfaction Measurement 306 304 308 Questions for Discussion 310 Exercises 294 295 Customer Satisfaction: The Key to Customer Retention Understanding Customer Expectations 299 Lessons from Chapter 10 290 299 310 PART 5 Cases CASE 1 USA Today: Innovation in an Evolving Industry CASE 2 Apple’s Winning Marketing Strategy CASE 3 Monsanto Balances the Interests of Multiple Stakeholders 313 327 339 Copyright 2013 Cengage Learning. 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Contents xv CASE 4 New Belgium Brewing (A): Gaining Competitive Advantage Through Socially Responsible Marketing 351 CASE 5 New Belgium Brewing (B): Developing a Brand Personality CASE 6 Mattel Confronts Its Marketing Challenges CASE 7 Mistine: Direct Selling in the Thai Cosmetics Market CASE 8 BP Struggles to Repair Its Tarnished Reputation CASE 9 Chevrolet: 100 Years of Product Innovation CASE 10 Wyndham Worldwide Adopts a Stakeholder Orientation Marketing Strategy 419 CASE 11 NASCAR: Can’t Keep a Good Brand Down CASE 12 IndyCar: Seeking a Return to Motorsports’ Fast Lane CASE 13 Zappos: Delivering Happiness CASE 14 Sigma Marketing: Strategic Marketing Adaptation CASE 15 Netflix Fights to Stay Ahead of a Rapidly Changing Market CASE 16 Gillette: Why Innovation May Not Be Enough CASE 17 IKEA Slowly Expands Its U.S. Market Presence 493 CASE 18 Sushilicious: Standing Out In A Crowded Field 501 CASE 19 Trouble Brews at Starbucks CASE 20 Groupon Appendix 361 371 381 393 405 429 441 451 461 471 481 517 533 Marketing Plan Worksheets Brands and Companies Index Name Index 571 Subject Index 575 547 557 Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Preface Welcome to one of the most interesting, challenging, and important topics in your business education. What makes marketing strategy so interesting, challenging, and important you ask? To begin, marketing strategy is interesting because (1) it is inherently people-driven and (2) it is never stagnant. A distinct blend of both art and science, marketing strategy is about people (inside an organization) finding ways to deliver exceptional value by fulfilling the needs and wants of other people (customers, shareholders, business partners, society at large), as well as the needs of the organization itself. Marketing strategy draws from psychology, sociology, and economics to better understand the basic needs and motivations of these people—whether they are the organization’s customers (typically considered the most critical), its employees, or its stakeholders. In short, marketing strategy is about people serving people. For this reason, marketing strategy is interesting because it is never stagnant. The simple fact is that people change. A strategy that works today might not work tomorrow. Products that are popular today are forgotten next week. These truisms are important because truly understanding marketing strategy means accepting the fact that there are few concrete rules for developing and implementing marketing activities. Given the constant state of change in the marketing environment, it is virtually impossible to say that given “this customer need” and “these competitors” and “this level of government regulation” that Product A, Price B, Promotion C, and Distribution D will produce the best results. Marketing simply doesn’t work that way. The lack of concrete rules and the ever changing economic, sociocultural, competitive, technological, and political/legal landscapes make marketing strategy a terribly fascinating subject. Now that you know why marketing strategy is so interesting, it should be easy to see why it is also challenging. A perfect marketing strategy that is executed flawlessly can still fail. Sometimes, organizations are lucky and have success despite having a terrible strategy and/or execution. The nature of marketing can make marketing planning quite frustrating. Finally, the importance of marketing strategy is undeniable. No other business function focuses on developing relationships with customers—the lifeblood of all organizations (even non-profits). This statement does not diminish the importance of other business functions, as they all are necessary for an organization to be successful. In fact, coordination with other functions is critical to marketing success. However, without customers, and marketing programs in place to cultivate customer relationships, no organization can survive. Our Focus Given this marketing landscape, Marketing Strategy: Text and Cases, 6th Edition provides a practical, straightforward approach to analyzing, planning, and implementing marketing strategies. Our focus is based on the creative process involved in applying the knowledge and concepts of marketing to the development and implementation of marketing strategy. Our goal is to encourage students of marketing to think and act like a marketer. By discussing the key concepts and tools of marketing strategy, our emphasis on critical thinking, both analytical and creative, allows students to understand the essence of how marketing decisions fit together to create a coherent strategy. xvii Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xviii Preface Our approach in Marketing Strategy: Text and Cases, 6th Edition is also grounded in the development and execution of the marketing plan. Throughout the text, we provide a comprehensive planning framework based on conducting sound background research, developing market capabilities and competitive advantages, designing integrated marketing programs, and managing customer relationships for the long term. We also emphasize the need for integrity in the strategic planning process, as well as the design of marketing programs that are both ethical and socially responsible. We also stress the integration and coordination of marketing decisions with other functional business decisions as the key to achieving an organization’s overall mission and vision. Throughout the text, we offer examples of successful planning and implementation to illustrate how firms face the challenges of marketing strategy in today’s economy. Purpose We view strategic marketing planning not only as a process for achieving organizational goals, but also as a means of building long-term relationships with customers. Creating a customer orientation takes imagination, vision, and courage, especially in today’s rapidly changing economic and technological environments. To help meet these challenges, our text approaches marketing strategy from both “traditional” and “cutting-edge” practices. We cover topics such as segmentation, creating a competitive advantage, marketing program development, and the implementation process with a solid grounding in traditional marketing, but also with an eye toward emerging practices. Lessons learned from the rise, fall, and reemergence of the dotcom sector, recent corporate scandals, and the most recent economic recession illustrate the importance of balancing the traditional and emerging practices of marketing strategy. Our text never loses sight of this balance. Although our approach allows for the use of sophisticated research and decisionmaking processes, we have employed a practical perspective that permits marketing managers in any size organization to develop and implement a marketing plan. We have avoided esoteric, abstract, and highly academic material that does not relate to typical marketing strategy decisions in most organizations. The marketing plan framework that we utilize throughout the text has been used by a number of organizations to successfully plan their marketing strategies. Many companies report great success in using our approach partially due to the ease of communicating the plan to all functional areas of the business. Target Audience Our text is relevant for a number of educational environments, including undergraduate, graduate, and corporate training courses. At the undergraduate level, our text is appropriate for the capstone course or any upper-level integrating course such as “Marketing Management,” “Marketing Strategy,” or “Marketing Policy.” At this level, the text provides an excellent framework to use with our included text-based cases, live-client cases, or a computer simulation. At the graduate level, our text is appropriate for courses addressing strategic marketing planning, competitive marketing strategies, or as a supplement for any simulation-based course. A growing segment of the market, corporate training, can utilize our text when educating business professionals interested in developing marketing plans of their own, or interpreting and implementing the plans of others. Each of the twenty cases included in our text describes the strategic situations of real-world, identifiable organizations. Because these cases feature real situations, instructors have the option of using the case material as published, or they may give students the opportunity to update the cases by conducting research to find the latest information. Many additional resources for students and instructors can be found at our text’s companion website, www.cengagebrain.com. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Preface xix Key Features of the 6th Edition The key features of Marketing Strategy: Text and Cases, 6th Edition include: • • • • Revised and expanded coverage throughout the text of recent events in marketing practice by well-known global companies. A focus on the integration of the traditional marketing mix elements (product, price, distribution, and promotion) into a consistent marketing program. Consequently, the four separate marketing mix chapters have been condensed into a single chapter. A new chapter on Branding and Positioning (Chapter 7) that adds increased emphasis on using every element of the marketing program to achieve branding and positioning success. Five new cases written specifically for our text: • • • • • • Case 2, “Apple’s Winning Marketing Strategy,” focuses on Apple’s phenomenal rise to prominence through the use of masterful marketing, an entrepreneurial spirit, and “cool” branding. Case 9, “Chevrolet: 100 Years of Product Innovation,” looks at Chevrolet’s use of product innovation and branding to create practical, sporty, and affordable automotive products that compete with strong domestic and foreign manufacturers. Case 10, “Wyndham Worldwide Adopts a Stakeholder Orientation Marketing Strategy,” examines how Wyndham’s focus on stakeholder orientation has positioned the company as a global brand that is synonymous with quality, ethical leadership, customer satisfaction, and sustainability. Case 13, “Zappos: Delivering Happiness,” explores the company’s unique business model and corporate culture, and how they influence its relationships with customers, employees, the environment, and its communities. Case 15, “Netflix Fights to Stay Ahead of a Rapidly Changing Market,” looks at how the dominant rent-by-mail and video streaming company bested its chief rival, Blockbuster, and how the company must prepare for an uncertain future as the DVD rental sector approaches the end of its life cycle. A complete revision of the twelve cases that have been carried over from the 5th edition of our text: • • • • • Case 1, “USA Today: Innovation in an Evolving Industry,” explores how the nation’s largest daily newspaper has used continuous innovation to stay ahead of the technological and sociocultural shifts that threaten the very existence of the newspaper industry. Case 3, “Monsanto Balances the Interests of Multiple Stakeholders,” focuses on Monsanto’s shift from a chemical company to one focused on biotechnology, and the resulting stakeholder concerns about safety and the environment that come with such a change. Case 4, “New Belgium Brewing (A): Gaining Competitive Advantage Through Socially Responsible Marketing,” shows how a firm can use social responsibility and customer intimacy as key competitive advantages in the highly competitive craft beer market. Case 5, “New Belgium Brewing (B): Developing a Brand Personality,” explains how New Belgium expanded its branding and communication strategy after the development of its “Brand Manifesto.” Case 6, “Mattel Confronts Its Marketing Challenges,” looks at the threats that Mattel faces in its ongoing global operations, including changing customer preferences, competition, product liability, and declining sales. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xx Preface • • • • • • • • The inclusion of three new outside cases from the Ivey School of Business at the University of Western Ontario: • • • • • • Case 7, “Mistine: Direct Selling in the Thai Cosmetics Market,” explores how Mistine’s value-based positioning moved the company to the top of the direct selling cosmetics market in Thailand. Case 8, “BP Struggles to Repair Its Tarnished Reputation” considers how BP’s growing reputation for sustainability was tarnished by the Gulf oil spill disaster. Case 11, “NASCAR: Can’t Keep a Good Brand Down,” looks at NASCAR’s marketing and branding successes and its newfound struggles to remain on top of the motorsports market and the #1 spectator sport in the U.S. Case 12, “IndyCar: Seeking a Return to Motorsports’ Fast Lane,” is an excellent companion to the NASCAR case. The case examines the reunification of U.S. open wheel racing and how the new IRL must reconnect with fans to improve its standing in the U.S. motorsports market. Case 14, “Sigma Marketing: Strategic Marketing Adaptation,” explores the innovation and market adaptation of this small, family-owned business as it grew from a regional printing company to a global specialty advertising firm. Case 16, “Gillette: Why Innovation May Not Be Enough,” examines Gillette’s history of product and marketing innovation, and how past success may not be enough to maintain supremacy in the global razor market. Case 17, “IKEA Slowly Expands Its U.S. Market Presence,” discusses how IKEA’s strategy of operational excellence may stand in the way of further expansion into the U.S. furniture and home furnishings market. Case 18, “Sushilicious: Standing Out in a Crowded Field,” examines the use of social media in the marketing campaign for a California sushi restaurant. Case 19, “Trouble Brews at Starbucks,” looks at how the company’s rapid expansion actually worked against its long-term brand positioning and equity. Case 20, “Groupon,” explores the rapid growth of the online coupon company, its business model, and whether its future growth could depend on finding a business partner to bring needed resources and capabilities to the table. Our complete case package provides up-to-date coverage of topics that are important and relevant to marketing practice in the 21st century. These topics include innovation, social responsibility, sustainability, global sourcing, technology, corporate affairs, and entrepreneurship. An updated set of Marketing Plan Worksheets, provided in the Appendix. The worksheets reflect a concise approach to marketing plan development. However, the worksheets are comprehensive in scope to help ensure that students and/or managers do not omit important issues in developing strategic marketing plans. A continued user-friendly writing style that covers essential points without heavy use of jargon. The text has also been reduced from 12 chapters to 10 chapters without a loss in coverage. Instructor Resources The Instructor Resource materials for the 6th edition have been updated to match the new organization of the text. These materials are available via an Instructor’s Resource CD-ROM or online at the password-protected instructor’s resource website. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Preface xxi These materials include: • • A revised PowerPoint® package, which incorporates lecture outlines and summary of key points, as well as select figures and tables from the text. An updated Instructor’s Manual, which includes the following: • • • Chapter lecture outlines—These outlines for each chapter may be used to quickly review chapter content before class or to gain an overview of the entire text. The outlines can also be used by instructors to add their own personal notes and examples before class. Case teaching notes—Our teaching notes use a consistent format to help instructors evaluate cases before use, or to assist instructors in leading case analysis and class discussion. Although there are many different approaches to using cases, our notes will help instructors identify key issues and alternatives as they relate to the content of the case and corresponding text chapters. An updated Test Bank. These examination materials include a variety of multiple choice, true/false, and discussion questions. The Test Bank questions vary in levels of difficulty, and meet a full range of tagging requirements, so that instructors can tailor their testing to meet their specific needs. The updated instructor’s resource website supports the text and cases. In addition to the instructor resources already mentioned, instructors will find lecture outlines, case teaching notes, and sample syllabi for use in their classes. Student Resources Our primary student resource is contained within the text. The Appendix includes a detailed set of marketing plan worksheets that assist students in developing marketing plans. The remaining student resources can be found online at our website: • • • • • • A downloadable Microsoft Word version of the Marketing Plan Worksheets found in the Appendix. The worksheets are designed so students can fill-in material and edit the worksheets outside of class. Example marketing plans to help illustrate the format and writing style used in creating an actual marketing plan document. A downloadable Microsoft Word version of the Lessons from each chapter. This document provides a complete outline of each chapter so that students may add to and edit the lessons outside of class. Alternatively, the file can be used during class as a way to organize note taking. Online exercises for each chapter. These exercises allow students to practice the concepts learned in class. Online quizzes for each chapter. These quizzes help students prepare for course exams. A tutorial on how to perform a case analysis. The tutorial provides a suggested way to conduct cases analyses. Instructors may use this tutorial or provide one of their own. Acknowledgements Throughout the development of this text, several extraordinary individuals provided their talent and expertise to make important contributions. A number of individuals have made many useful comments and recommendations as reviewers of this text. We appreciate the generous help of these reviewers: Lynn Allendorf, University of Iowa Dr. Fazal Ahmed, University of Pennsylvania Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xxii Preface Julia Cronin-Gilmore, Bellevue University A. Cemal Ekin, Providence College Steven McClung, Mercer University Joseph Ouellette, Bryant University Jeffry Overby, Belmont University Norman Alan Ross, Northern Arizona University Kim Saxton, Indiana University Herbert Sherman, Long Island University—Brooklyn Campus George David Shows, Louisiana Tech University Ziad Swaidan, University of Houston—Victoria Uday Tate, Marshall University Linda Wright, Longwood University We also deeply appreciate the assistance of several individuals who played a major role in developing cases or other materials. Specifically, we thank the following individuals: Timothy W. Aurand, Northern Illinois University Harper Baird, University of New Mexico Chandani Bhasin, University of New Mexico Christin Copeland, Florida State University Linda Ferrell, University of New Mexico John Fraedrich, Southern Illinois University - Carbondale Bernadette Gallegos, University of New Mexico Jennifer Jackson, University of New Mexico Kimberly Judson, Illinois State University Cassondra Lopez, University of New Mexico Kevin Mihaly, Florida State University Kelsey Reddick, Florida State University Don Roy, Middle Tennessee State University Mike Sapit, Sigma Marketing Jennifer Sawayda, University of New Mexico Beau Shelton, University of New Mexico Bryan Simpson, New Belgium Brewing Company Debbie Thorne, Texas State University Jacqueline Trent, University of New Mexico Robyn Watson, Florida State University Celeste Wood, Florida State University Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Preface xxiii We greatly appreciate the efforts of Jennifer Sawayda, University of New Mexico, for coordinating much of the new case development in this edition. The editorial, production, and marketing staff at Cengage cannot be thanked enough. With a deep since of appreciation, we thank Mike Roche and Sarah Blasco. Finally, we express appreciation for the support and encouragement of our families, friends, and our colleagues at The University of New Mexico and The Florida State University. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. About the Authors O.C. Ferrell, Ph.D. The University of New Mexico O.C. Ferrell (Ph.D., Louisiana State University) is University Distinguished Professor of Marketing and Bill Daniels Professor of Business Ethics at the Anderson School of Management at the University of New Mexico. He served as the Bill Daniels Distinguished Professor of Business Ethics at the University of Wyoming and was Chair of the Marketing Department at Colorado State University. Prior to his arrival at CSU, Dr. Ferrell was the Distinguished Professor of Marketing and Business Ethics at the University of Memphis. He has also served as a professor at the University of Tampa, Texas A&M University, Illinois State University, and Southern Illinois University. His MBA and BA degrees are from Florida State University. Dr. Ferrell is past president of the Academic Council of the American Marketing Association and former chair of the American Marketing Association Ethics Committee. Under his leadership, the committee developed the AMA Code of Ethics and the AMA Code of Ethics for Marketing on the Internet. He is a Society for Marketing Advances Fellow and the Vice President of Publications for the Academy of Marketing Science. He is a former member of the Board of Governors as a Distinguished Fellow for the Academy of Marketing Science. In addition, he received the first Innovative Educator award from the Marketing Management Association. Dr. Ferrell has taught a wide variety of courses, including marketing strategy, principles of marketing, marketing ethics, international marketing, as well as most undergraduate courses in marketing. Annually, Dr. Ferrell teaches a graduate course in competitive marketing strategies at Thammasat University in Bangkok, Thailand. Dr. Ferrell is the co-author of 20 books and more than 100 articles. His research is published in the Journal of Marketing Research, the Journal of Marketing, the Journal of Business Ethics, the Journal of Business Research, the Journal of the Academy of Marketing Science, as well as other journals. His Marketing: Concepts and Strategies text, co-authored with Bill Pride, is one of the most widely adopted principles of marketing texts in the world. Furthermore, his Business Ethics: Decision Making and Cases text is the leading business ethics text. Dr. Ferrell has served as an expert witness in many high-profile civil litigation cases related to marketing ethics. More recently he has assisted international corporations and worked with state regulatory agencies in modifying marketing programs to maintain compliance with both ethical and legal requirements. Currently, he is working with the National Association of State Boards of Accountancy to develop an ethical leadership certification for students. He has appeared on the NBC Today show and he has been quoted in national papers such as USA Today. Dr. Ferrell and his wife Linda (also a faculty member at the University of New Mexico) live in Albuquerque. He enjoys golf, skiing, reading, and travel. xxv Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xxvi About the Authors Michael D. Hartline, Ph.D. The Florida State University Michael D. Hartline (Ph.D., The University of Memphis) is Associate Dean for Strategic Initiatives and Charles A. Bruning Professor of Business Administration in the College of Business at Florida State University, where he is responsible for external relations, executive education, and strategic programs. Prior to joining the FSU faculty in 2001, Dr. Hartline was on faculty at the University of Arkansas at Little Rock, Louisiana State University, and Samford University. His MBA and B.S. degrees are from Jacksonville State University in Alabama. Dr. Hartline primarily teaches graduate courses in Marketing Strategy and Corporate Affairs Management, as well as undergraduate courses in Services Marketing. He has won many teaching and research awards and made many presentations to industry and academic audiences. Dr. Hartline has also served as a consultant to several for-profit and non-profit organizations in the areas of marketing plan development, market feasibility analysis, customer satisfaction measurement, customer service training, and pricing policy. He has also served on the executive committee of the Academy of Marketing Science, co-chaired two international conferences for the American Marketing Association, and has served on the editorial review boards of a number of leading marketing journals. Dr. Hartline’s research addresses marketing implementation issues in service firms. Specifically, his work examines the role of customer-contact employees and workgroups in the effective delivery of quality service to customers. Dr. Hartline’s research appears in the Journal of Marketing, the Journal of Service Research, the Journal of Business Research, the Journal of Relationship Marketing, the Journal of Services Marketing, the Cornell Quarterly, the Journal of Strategic Marketing, the Journal of Business Ethics, and the Marketing Science Institute Working Paper Series. Dr. Hartline and his wife Marsha live in Tallahassee with their daughters, Meghan, Madison, and Mallory. They have two dogs, Bella and Chief (both Japanese Chins), and a cat, Snickers. Dr. Hartline is a self-professed electronics and gadget enthusiast who enjoys music, reading, computers, travel, college football (Go Seminoles!), and being a dad. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Marketing Strategy Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. CHAPTER 1 Marketing in Today’s Economy Introduction As noted in the opening Beyond the Pages 1.1 story, competing in today’s economy means finding ways to break out of commodity status to meet customers’ needs better than competing firms. All organizations—both for-profit and nonprofit—require effective planning and a sound marketing strategy to do this effectively. Without these efforts, organizations would not be able to satisfy customers or meet the needs of other stakeholders. For example, having an effective marketing strategy allows Apple to develop popular products, such as the iPhone, iPad, and its MacBook line of notebook computers. Further, effective planning and strategy allows Cola-Cola to continue its leadership in soft drinks, make a key acquisition in its purchase of the Vitamin Water brand, all the while continuing its expansion into the lucrative Chinese market. These and other organizations use sound marketing strategy to leverage their strengths and capitalize on opportunities that exist in the market. Every organization—from your favorite local restaurant to giant multinational corporations; from city, state, and federal governments, to charities such as Habitat for Humanity and the American Red Cross—develops and implements marketing strategies. How organizations plan, develop, and implement marketing strategies is the focus of this book. To achieve this focus, we provide a systematic process for developing customer-oriented marketing strategies and marketing plans that match an organization to its internal and external environments. Our approach focuses on real-world applications and practical methods of marketing planning, including the process of developing a marketing plan. The chapters of this book focus on the steps of this process. Our goal is to give the reader a deeper understanding of marketing planning, the ability to organize the vast amount of information needed to complete the planning process, and an actual feel for the development of marketing plans. In this first chapter, we review some of the major challenges and opportunities that exist in planning marketing strategy in today’s economy. We also review the nature and scope of major marketing activities and decisions that occur throughout the planning process. Finally, we look at some of the major challenges involved in developing marketing strategy. 1 Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 2 Part 1: Setting the Stage for Marketing Strategy Beyond the Pages 1.1 Thriving in Commodity Hell Have you noticed that regardless of the industry, most goods and services offered by competing companies are eerily the same? Most household appliances, such as refrigerators, washing machines, and stoves, offer the same basic features and come in white, beige, black, or stainless steel. Virtually all Android-based smartphones offer the same features at similar prices. Even airline flights from New York to Los Angeles are essentially the same. Everywhere you look, most companies offer the same basic products to the same customer groups at roughly the same prices. This situation is referred to as “commodity hell” and it’s a tough situation for most companies. Commoditization is everywhere and is the result of mature markets where goods and services lack any real means of differentiation. Unfortunately for companies, when customers begin to see all competing products as offering roughly the same benefits, price is the only thing that matters. Commoditization is a consequence of mature industries where slowing innovation, extensive product assortment, excess supply, and frugal consumers force margins to the floor. Since firms have few competitive differences, they are unable to increase margins. They must also spend a great deal on promotion to attract new customers. This situation makes firms more vulnerable to the entry of new competitors. Consider the airline industry. Notwithstanding a few minor differences, most air travelers see all airlines as being roughly the same. They all get passengers from Point A to Point B while offering the same basic customer services. This makes price the driving force in consumer decision-making and allows discount airlines such as Southwest and Jet Blue to steal customers away from traditional full-service carriers. This same precarious situation exists in a broad range of industries including telephone service, hotels, packaged goods, automobiles, household appliances, and retailing. As you might expect, low price leaders can do quite well in commoditized markets. Southwest, for example, was profitable for over 33 years until the economic recession hit the industry hard in 2008. 1 Today, Southwest is expanding routes by acquiring rival companies (such as AirTran). The company also stands apart from others with its innovative “No Bag Fees” promotional campaign. Other firms, however, avoid commodity status through the most basic of marketing tactics: brand building. Here, firms break free from commodity status by developing a distinctive brand position that separates them and their products from the competition. Firms that come to mind are Apple, Coca-Cola, and Chick-fil-A. By offering compelling reasons for consumers to buy products, brand building allows firms to increase margins. Apple, in particular, enjoys the highest profit margins of any firm in the technology sector. Starbucks is another case in point. Starbucks clearly sells one of the most commoditized, ubiquitous products of all time: coffee. Starbucks Chairman Howard Schultz, however, does not accept that his firm is in the coffee business. Instead, Schultz sees Starbucks as a “third place” to hang out (with home and work being number 1 and number 2, respectively). Through this mentality, Starbucks offers its customers much more than coffee, including wireless Internet access, music, food, and relaxation. Starbucks has continued its brandbuilding activities by introducing breakfast combos, an instant coffee (Via), and the continued push of its Seattle’s Best brand into restaurants, offices, hospitals, and vending machines. Getting out of commodity hell is not an easy feat. To do so, firms must give consumers a compelling reason to buy their products over competing products. Ultimately, winning the commodity game is all about innovation. Consider the firms that top BusinessWeek’s list of the World’s Most Innovative Companies for 2011 (in order): Apple, Twitter, Facebook, Nissan, Groupon, and Google. Each of these companies offers innovative products, processes, or experiences that stand apart from the competition; yet each competes in mature industries known for commoditization. These companies prove that innovation and good marketing strategy are the antidotes for commodity hell. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 1: Marketing in Today’s Economy 3 The Challenges and Opportunities of Marketing in Today’s Economy Traditional ideas about marketing strategy began to change forever during the mid 1990s. Advances in computer, communication, and information technology forever changed the world and the ways that marketers reach potential customers. The collapse of the dot-com bubble in the late 1990s was followed by a historic collapse of the worldwide economy in 2008. The powerhouse companies of the past have weakened and lost relevance in an economy marked by constant change and consumer skepticism. Consider these fundamental changes to marketing and business practice, as well as our own personal buying behavior: © OmniTerra Images • Power Shift to Customers. Perhaps the single most important change during the last two decades is the shift in power from marketers to consumers. Rather than businesses having the ability to manipulate customers via technology, customers often manipulate businesses because of their access to information, the ability to comparison shop, and the control they have over spending. Individual consumers and business customers can compare prices and product specifications in a matter of minutes. Using a smartphone and the Amazon app, customers can walk Target’s aisles, scan bar codes to check prices on Amazon, and order items for two-day delivery while in the store. In other cases, customers are able to set their own prices, such as purchasing airline tickets at Priceline.com. Customers can now interact with one another, as merchants such as Amazon and eBay allow customers to share opinions on product quality and supplier reliability. As power continues to shift to customers, marketers have little choice but to ensure that their products are unique and of high quality, thereby giving customers a reason to purchase their products and remain loyal to them. • Massive Increase in Product Selection. The variety and assortment of goods and services offered for sale on the Internet and in traditional stores is staggering. In grocery stores alone, customers are faced with countless options in the cereal and soft drink aisles. The growth in online retailing now allows customers to purchase a car from CarsDirect, handmade, exotic gifts from Mojo Tree (www.mojotree.co.uk), or a Consumers can instantly find competitors’ prices while in the store. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 4 Part 1: Setting the Stage for Marketing Strategy case of their favorite wine from Wine.com. Increased transaction efficiency (e.g., 24/7 access, delivery to home or office) allows customers to fulfill their needs more easily and conveniently than ever before. Furthermore, the vast amounts of information available online has changed the way we communicate, read the news, and entertain ourselves. Customers can now have the news delivered to them automatically via smartphone apps, such as Flipboard, that pull from hundreds of sources. This radical increase in product selection and availability has exposed marketers to inroads by competitors from every corner of the globe. • Audience and Media Fragmentation. Changes in media usage and the availability of new media outlets have forced marketers to rethink the way they communicate with potential customers. Since the advent of cable television in the 1970s, mass media audiences have become increasingly fragmented. Television audiences, for example, shifted from the big three networks (ABC, CBS, NBC) and began watching programming on ESPN, HGTV, Nickelodeon, and the Discovery Channel. When the growth of the Internet, satellite radio, and mobile communication is added to this mix, it becomes increasingly difficult for marketers to reach a true mass audience. Media audiences have become fragmented due to (1) the sheer number of media choices we have available today, and (2) the limited time we have to devote to any one medium. Today, customers increasingly get information and news from Facebook and Twitter rather than the New York Times or CBS. They spend a growing amount of time online or interacting with handheld devices than they do reading magazines or watching television. As shown in Exhibit 1.1, consumer usage of traditional media is declining, while the usage of Internet and mobile media is on the rise. However, despite the challenge of reaching mass audiences today, media fragmentation does have a big advantage: It is easier to reach small, highly targeted audiences who are more receptive to specific marketing messages. • Changing Value Propositions. Even before “The Great Recession” began in 2008, consumers and business buyers were already facing increasing costs associated with energy, gasoline, food, and other essentials. Then, as the economy weakened, buyers were forced to tighten their belts and look for other ways to lower expenses. This trend actually began after the dot-com collapse as consumers saw for the first time that they could bypass some types of firms and do things for themselves. For example, travel agents and real estate agents have been hit hard by e-commerce. Many customers now turn to Travelocity and Expedia, rather than travel agents, for EXHIBIT 1.1 Change in Daily Media Usage by U.S. Adults, 2008–2011 Percent Change (%) Television and Video Internet 7.9 21.9 Radio -7.8 Mobile 103.1 Newspapers -31.8 Magazines -28.0 Other 0.0 Source: Media Literacy Clearinghouse, “Media Use Statistics,” http://www.frankwbaker.com/mediause.htm, accessed July 18, 2012. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 1: Marketing in Today’s Economy 5 assistance in booking airline tickets, cruises, or hotel stays. A similar change has taken place in the real estate industry as buyers are moving their house hunting online, while sellers are increasingly taking the “for sale by owner” route. Consequently, many marketers learned a tough lesson: In situations where customers see goods and services as commodities, they will turn to the most convenient, least-expensive alternative. Today, many of these same consumers face pay cuts or losing their jobs in addition to increased expenses. These and other economic hardships have forced consumer and business buyers to rethink value propositions and focus on the importance of frugality. The effects on business have been dramatic. For example, Kodak filed for Chapter 11 bankruptcy in early 2012 in the face of a highly commoditized market and stiff competition from other camera makers and smartphones with much improved camera technology. As consumers realized that the best camera was the one they had with them (i.e., their smartphones), they began to shy away from traditional camera makers like Kodak.2 A similar shakeout is happening in the book retailing segment. Borders, for instance, closed its doors after fierce competition from Barnes & Noble, Amazon, Walmart, and Target lured its shoppers away. Likewise, we are just beginning to see the effects of e-book readers, like Amazon’s Kindle, and personal publishing solutions, such as Apple’s iBooks, on the book publishing industry. Because books have become highly commoditized, consumers typically search for the lowest prices rather than the fringe benefits offered by traditional bookstores. E-book readers add to that by being more ecologically advantageous. This is the essence of being frugal, as customers look for ways to cut spending on unnecessary parts of their lives. • Shifting Demand Patterns. In some cases, changes in technology have shifted customer demand for certain product categories. News is one well-known example, where traditional newspapers are slowing disappearing while online and mobile news continues to grow. Now, many newspaper companies have folded, some are on the brink of folding, while others have cut publication to only a few days per week. Another example is the explosive growth in the digital distribution of music and video. The success of Apple’s iPod and iTunes, YouTube, and Netflix, along with the continuing integration of television and computers, has dramatically shifted demand for the recording and movie industries. Hollywood film studios are grappling with soft demand in theatres and the declining popularity of DVDs as customers increasingly look for online movie options, or for other forms of entertainment such as video games. This trend ultimately led to the demise of Blockbuster video in 2011. • Privacy, Security, and Ethical Concerns. Changes in technology have made our society much more open than in the past. As a result, these changes have forced marketers to address real concerns about security and privacy, both online and offline. Businesses have always collected routine information about their customers. Now, customers are much more attuned to these efforts and the purposes for which the information will be used. Though customers appreciate the convenience of e-commerce and mobile access to information, they want assurances that their information is safe and confidential. Concerns over privacy and security are especially acute with respect to online businesses such as Facebook, Google, and mobile devices that can potentially track every move we make, literally. These same concerns are also keen with respect to children. For example, many well-known and respected companies, including Mrs. Fields Cookies, Sony BMG, and Hershey Foods, have been fined for violating the standards of the Children’s Online Privacy Protection Act (COPPA). For example, Playdom, Inc., an online gaming company owned by Disney, Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 6 Part 1: Setting the Stage for Marketing Strategy EXHIBIT 1.2 The Children’s Online Privacy Protection Act (COPPA) The Children’s Online Privacy Protection Act applies to operators of commercial websites and online services that attempt to collect personal information from children under the age of 13. The law explains what must be included in the firm’s privacy policy, when and how to seek verifiable consent from a parent or guardian, and the firm’s responsibilities to protect children’s privacy and safety. Firms cannot evade the law’s provisions by claiming that children under 13 cannot visit their sites; nor can they make information optional or ask the visitor’s age. In implementing the provisions of COPPA, the FTC issued the Children’s Online Privacy Protection Rule, which is designed to give parents control over the information that is collected from their children. The rule requires website operators to: • Post a description of its privacy policy on the site’s homepage and any other area where personal information is collected. • Provide notice to parents about the site’s information collection practices. This full disclosure must • • • • describe (1) the type of information collected, (2) why the information is being collected, (3) how the information will be used and stored, (4) whether the information will be disclosed to third parties, and (5) parental rights with regard to information content and usage. Obtain verifiable parental consent to the collection and use of a child’s personal information for internal use. The operator must also give parents the opportunity to choose not to have this information disclosed to third parties. Give parents access to their child’s information, give them the right and means to review and/or delete this information, and give parents the choice to opt out of the future collection or use of the information. Not require that children provide more information than is reasonably necessary to participate in an activity. Children cannot be required to provide information as a condition of participation. Maintain the security, confidentiality, and integrity of all personal information collected from children. Source: United States Federal Trade Commission, Bureau of Consumer Protection, http://business.ftc.gov/privacy-and-security/ children’s-privacy. paid a $3 million fine to the Federal Trade Commission for collecting, using, and disclosing personal information from children under the age of 13 without their parents’ permission. This was the largest civil penalty ever levied for a violation of COPPA, which is overviewed in Exhibit 1.2.3 • Unclear Legal Jurisdiction. When a company does business in more than one country (as many Internet-based firms do), that company often faces a dilemma with respect to differing legal systems. Today, this difference is especially keen for firms that do business in both the U.S. and China. Google, for example, faces a difficult situation in dealing with the Chinese government’s censorship demands. Though Google is a U.S. firm, it must comply with the Chinese request by operating a completely separate search service that censors information considered sensitive by the Chinese government.4 Doing business in China is also an issue with respect to protection of intellectual property rights, where Chinese laws do not offer the same protections found in the U.S. For example, the U.S. International Trade Commission estimates that Chinese piracy costs the U.S. economy in excess of $48 billion each year. Most of this is in the information sector, with high-tech and manufacturing also showing sizable losses due to infringements of intellectual property rights by Chinese firms.5 Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 1: Marketing in Today’s Economy 7 Another important legal issue involves the collection of sales tax for online transactions. In the early days of e-commerce, most online merchants did not collect sales taxes for online transactions—giving them a big advantage against store-based merchants. In fact, a 1992 U.S. Supreme Court decision exempted out-of-state retailers from collecting sales taxes in states where they had no physical presence. States countered that they were losing millions in yearly tax revenue, but were poorly organized to mount a collection effort. In 2003, major retailers—including Walmart, Target, and Toys “R” Us—in an agreement with a consortium of 38 states and the District of Columbia, agreed to collect online sales taxes. Amazon plans to collect sales tax from consumers in an additional eight states over the next four years. However, many online merchants still did not charge sales taxes. Today, states—much more organized than before—estimate that they lose a collective $23 billion per year in lost tax revenue. More than a dozen states have passed laws to force the collection of online sales taxes, and similar legislation is pending in ten other states.6 Although the full effect of these challenges will not be recognized for some time, circumstances have forced businesses to move ahead by adjusting their marketing activities at both the strategic and tactical levels. As we review the major marketing concepts and activities in this chapter, we will look at how today’s challenges have affected strategic planning in these areas. Basic Marketing Concepts Marketing is many different things. Many people, especially those not employed in marketing, see marketing as a function of business. From this perspective, marketing parallels other business functions such as production/operations, research, management, human resources, and accounting. As a business function, the goal of marketing is to connect the organization to its customers. Other individuals, particularly those working in marketing jobs, tend to see marketing as a process of managing the flow of products from the point of conception to the point of consumption. The field’s major trade organization, the American Marketing Association, has changed the definition of marketing over time to reflect changes in the economic and business environments. From 1985 until 2005, the AMA defined marketing this way: “Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.” 7 Note how this definition focuses on the four Ps, or the marketing mix. In 2005, the AMA changed the definition to better reflect the realities of competing in the marketplace: “Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.” 8 This definition shifts the focus away from the marketing mix and toward value creation for customers. In 2007, the AMA changed the definition of marketing again: “Marketing is 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.” 9 Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 8 Part 1: Setting the Stage for Marketing Strategy Notice that the changes in the definition are not merely cosmetic in nature. The older definitions focused on the process of marketing to deliver value and manage customer relationships. The most recent definition shifts from “value” to “offerings that have value.” Also, the notion of stakeholders is made more explicit. Why would the AMA make these changes? One reason has to do with commoditization as discussed in Beyond the Pages 1.1. Breaking free from commodity status means finding ways to differentiate the offering. The new definition recognizes that differentiation can come from any part of the offering, whereas older conceptualizations of marketing placed the onus of differentiation on the product itself. The second reason has to do with marketing’s broader role in today’s corporation. Firms don’t just sell products; they sell the firm as a whole. Corporate relationships with partners, media, government, investors, employees, and society are every bit as important as relationships with customers. These types of relationships—which grow and thrive on exceptional value—are an absolute necessity in the commodity-driven status of many product markets. While the older definitions of marketing had a decidedly transactional focus, the new definition emphasizes long-term relationships that provide value for both the firm and its stakeholders. A final way to think about marketing relates to meeting human and social needs. This broad view links marketing with our standard of living, not only in terms of enhanced consumption and prosperity, but also in terms of society’s well being. Through marketing activities, consumers can buy cars from South Korea and wines from South Africa; and organizations can earn a viable profit, making both employees and shareholders happy. However, marketing must also bear responsibility for any negative effects it may generate. This view demands that marketers consider the social and ethical implications of their actions, and whether they practice good citizenship by giving back to their communities. As exemplified in the New Belgium Brewing case at the end of the text, firms can successfully meet human and social needs through socially responsible marketing and business practices. Let’s take a closer look at several basic marketing concepts. As we will see, ongoing changes in today’s economy have forever altered our way of thinking about these foundational aspects of marketing. What Is a Market? At its most basic level, a market is a collection of buyers and sellers. We tend to think of a market as a group of individuals or institutions that have similar needs that can be met by a particular product. For example, the housing market is a collection of buyers and sellers of residential real estate, while the automobile market includes buyers and sellers of automotive transportation. Marketers or sellers tend to use the word “market” to describe only the buyers. This basic understanding of a market has not changed in a very long time. What has changed, however, is not so much the “what” but the “where” of a market; that is, the location of the buyers and sellers. In both consumer markets (like housing and automobiles) and business markets (like replacement parts and raw materials), the answer to the “where” question is quickly becoming “anywhere” as markets become less defined by geography. Until recently, marketers have considered a market to be a physical location where buyers and sellers meet to conduct transactions. Although those venues (e.g., grocery stores, malls, flea markets) still exist, technology mediates some of the fastest growing markets. The term marketspace has been coined to describe these electronic marketplaces unbound by time or space.10 In a marketspace, physical goods, services, and information are exchanged through computer networks. Some of the largest marketspaces, such as Amazon, eBay, and Monster, are now household names. In fact, Amazon has become Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 1: Marketing in Today’s Economy 9 the marketspace equivalent of a shopping mall as the company now sells shoes, apparel, jewelry, beauty aids, and sporting goods in addition to its traditional offerings of books and electronics. Marketspaces also exist in the business-to-business realm. The shift from marketplaces to marketspaces has significant ramifications for marketers. The fact that customers can shop, place orders, and exchange information 24/7 means that these businesses must be capable of operating in that same time frame. In effect, marketspace operators never take a break at closing time—they never close. It also means that firms lose some control over the information that is disseminated about their company or products. Through blogs, discussion forums, or even Twitter, customers can exchange information about a marketspace outside the marketspace itself. Furthermore, the substitution of technology for human interaction can be both a blessing and a curse. Some marketspaces, like CarsDirect, are successful because they eliminate the hassle of dealing with another human in the buying process. Many customers, however, have been slow to embrace marketspaces because they lack the human element. In these cases, the design and implementation of the online experience is a serious challenge for marketspace operators. Finally, the wealth of information available through today’s marketspaces not only makes customers more educated than ever before, it also gives customers increased power through comparison shopping and price negotiation. Another interesting shift related to markets is the advent of metamarkets and metamediaries. A metamarket is a cluster of closely related goods and services that center around a specific consumption activity. A metamediary provides a single access point where buyers can locate and contact many different sellers in the metamarket.11 Assume for example that you are engaged to be married. How many different buying decisions will you and your fiancé have to make in the coming months? How many newspaper ads, websites, and magazines will you explore? Although the businesses and decisions are diverse, they all converge on the single theme of wedding planning. This is the driving principle behind a metamarket. Exhibit 1.3 shows examples of common metamarkets and metamediaries. Although customers don’t use these terms, they fully understand the concept of finding information and solutions in one place. For example, iVillage (www.ivillage.com) has become the Internet’s preeminent metamediary with respect to women’s issues. One of its most popular sections deals with pregnancy and parenting, which has become the first stop for many anxious parents in need of advice. Metamediaries like iVillage fulfill a vital need by offering quick access and one-stop shopping to a wide variety of information, goods, and services. What Is Exchange? Closely related to the concept of a market, our ideas about exchange have changed in recent years. Exchange is traditionally defined as the process of obtaining something of value from someone by offering something in return; this usually entails obtaining products for money. For exchange to occur, five conditions must be met: 1. There must be at least two parties to the exchange. Although this has always been the case, the exchange process today can potentially include an unlimited number of participants. Online auctions provide a good example. Customers who bid on an item at eBay may be one of many participants to the exchange process. Each participant changes the process for the others, as well as the ultimate outcome for the winning bidder. Some auctions include multiple quantities of an item, so the potential exists for multiple transactions within a single auction process. 2. Each party has something of value to the other party. Exchange would be possible, but not very likely, without this basic requirement. The Internet has exposed us to a vast array of goods and services that we did not know existed previously. Today, not Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 10 Part 1: Setting the Stage for Marketing Strategy EXHIBIT 1.3 Common Metamarkets and Participants Metamarkets Metamediaries Metamarket Participants Automotive Home Ownership Parenting www.edmunds.com http://autos.msn.com www.carsdirect.com www.kbb.com www.realtor.com http://realestate.msn. com www.bhg.com www.ivillage.com/ pregnancyparenting www.parenting. com Buyers Manufacturers Car dealerships Banks Credit unions Credit reporting services Insurance firms Rating services Magazines Television programs Aftermarket parts/accessories Repair services Car rental firms Auction houses Homeowners Builders Real estate agents Mortgage companies Insurance companies Home inspectors and appraisers Pest control services Magazines Television programs Retailers Parents Doctors Retailers Baby supply manufacturers Insurance firms Financial planners Educational providers Toy manufacturers Television programs Movies © Cengage Learning 2013 only can we buy a television or stereo receiver from a local merchant; we also have access to hundreds of online merchants. Furthermore, the ability to comparison shop products and their prices allows customers to seek out the best value. 3. Each party must be capable of communication and delivery. The advantages of today’s communication and distribution infrastructure are amazing. We can find and communicate with potential exchange partners anywhere and anytime via telephone, computers, interactive television, and smartphones. We can also conduct arm’s-length transactions in real time, with delivery of exchanged items occurring in a matter of hours if necessary. For example, you can text message an order to Pizza Hut on your way home from work. 4. Each party must be free to accept or reject the exchange. In the online world, this condition of exchange becomes a bit ...
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