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Basic MarketingA MarketingStrategy PlanningApproach

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UNIVERSITY OF NORTH CAROLINA

COLORADO STATE UNIVERSITY

MICHIGAN STATE UNIVERSITY

cJ1M. McGraw-Hill

Irwin

Basic MarketingA MarketingStrategy PlanningApproach

li li <CU ii II U I L ^ n ,

UNIVERSITY OF NORTH CAROLINA

COLORADO STATE UNIVERSITY

E, Jerome McCarthy, Ph.MICHIGAN STATE UNIVERSITY

I McGraw-HillI Irwin

Contents

CHAPTER ONE

Marketing's Value to Consumers, Firms, and Society 2

Marketing—What's It All About? 4

Marketing Is Important to You 6

How Should We Define Marketing? 7

Macro-Marketing 8

The Role of Marketing in Economic Systems 12

Marketing's Role Has Changed a Lot over the Years 16

What Does the Marketing Concept Mean? 17

The Marketing Concept and Customer Value 19

The Marketing Concept Applies in Nonprofit Organizations 22

The Marketing Concept, Social Responsibility, and

Marketing Ethics 23

Conclusion 27Key Terms 28Questions and Problems 28Suggested Cases 29Computer-Aided Problem 29

CHAPTER TWO

Marketing Strategy Planning 30

., The Management Job in Marketing 32

|. What Is a Marketing Strategy? 33

I Selecting a Market-Oriented Strategy Is Target

| Marketing 34

i Developing Marketing Mixes for Target Markets 35

j The Marketing Plan Is a Guide to Implementationv and Control 40li Recognizing Customer Lifetime Value and.[>,;•• Customer Equity 42

|The Importance of Marketing StrategyI Planning 43

$ What Are Attractive Opportunities? 45 .

; Marketing Strategy Planning Process HighlightsOpportunities 47

Types of Opportunities to Pursue 49• International Opportunities Should Be; Considered 51

Conclusion 53

Key Terms 53

Questions and Problems 54

Creating Marketing Plans 54

Suggested Cases 54

Computer-Aided Problem 55

'— XXXI

CHAPTER THREEEvaluating Opportunities in theChanging Market Environment 56

The Market Environment 58

Objectives Should Set Firm's Course 59

Company Resources May Limit Search for

Opportunities 61

Analyzing Competitors and the Competitive

Environment 62 <•

The Economic Environment 66

The Technological Environment 67

The Political Environment 69

The Legal Environment 70

The Cultural and Social Environment 72

Using Screening Criteria to Narrow Down

to Strategies 78

Planning Grids Help Evaluate a Portfolio

of Opportunities 80

Evaluating Opportunities in InternationalMarkets 82

Conclusion 83Key Terms 84Questions and Problems 84Creating Marketing Plans 85Suggested Cases 85 ~Computer-Aided Problem 85

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CHAPTER FOUR

Focusing Marketing Strategy withSegmentation and Positioning 86

Search for Opportunities Can Begin byUnderstanding Markets 88

Naming Product-Markets and Generic

Markets 91

Market Segmentation Defines Possible Target

Markets 92

What Dimensions Are Used to Segment

Markets? 98

A Best Practice Approach to Segmenting

Product-Markets 702

More Sophisticated Techniques May Help

in Segmenting 708

Differentiation and Positioning Take the CustomerPoint of View 709

Conclusion 113Key Terms 113

Questions and Problems 113

Creating Marketing Plans 114

Suggested Cases 714

Computer-Aided Problem 114

CHAPTER FIVE

Final Consumers and Their BuyingBehavior 117

Consumer Behavior: Why Do They Buy WhatThey Buy? 7 78

Economic Needs Affect Most BuyingDecisions 7 78

Psychological Influences within an

Individual 727

Social Influences Affect Consumer Behavior 729

Individuals Are Affected by the Purchase

Situation 134

The Consumer Decision Process 735

Consumer Behavior in InternationalMarkets 138

Conclusion 139

Key Terms 140

Questions and Problems 140

Creating Marketing Plans 141

Suggested Cases 141

Computer-Aided Problem 141

XXXII

CHAPTER SIX

Business and Organizational Customersand Their Buying Behavior 142

Business and Organizational Customers—A BigOpportunity 144

Organizational Customers Are Different 745

Many Different People May Influence a Decision 747

Organizational Buyers Are Problem Solvers 752

Buyer-Seller Relationships in Business Markets 754

Manufacturers Are Important Customers 759

Producers of Services—Smaller and More Spread

Out 767

Retailers and Wholesalers Buy for Their

Customers 762

The Government Market 163

Conclusion 165

Key Terms 165

Questions and Problems 165

Creating Marketing Plans 166

Suggested Cases 166

Computer-Aided Problem 166

XXXIII

CHAPTER SEVENImproving Decisions with MarketingInformation 168

Effective Marketing Requires Good Information 770

Changes Are Under Way in Marketing Information

Systems 777

The Scientific Method and Marketing Research 776

Five-Step Approach to Marketing Research 776

Defining the Problem—Step 1 777

Analyzing the Situation—Step 2 777

Getting Problem-Specific Data—Step 3 787

Interpreting the Data—Step 4 789

Solving the Problem—Step 5 797

International Marketing Research 792

Conclusion 193Key Terms 193Questions and Problems 193Creating Marketing Plans 194Suggested Cases 194Computer-Aided Problem 194

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CHAPTER EIGHT

Elements of Product Planningfor Goods and Services 196

The Product Area Involves Many StrategyDecisions 798

What Is a Product? 798

Differences between Goods and

Services 202

Whole Product Lines Must Be

Developed Too 203

Branding Is a Strategy Decision 204

Achieving Brand Familiarity Is Not Easy 206

Protecting Brand Names and Trademarks 208

What Kind of Brand to Use? 209

Who Should Do the Branding? 270 /

Packaging Promotes, Protects, and Enhances 27 7

Warranty Policies Are a Part of Strategy

Planning 213

Product Classes Help Plan Marketing

Strategies 274

Consumer Product Classes 275

Business Products Are Different 277

Business Product Classes—How They AreDefined 278

CHAPTER NINE

Product Management andNew-Product Development 234

Innovation and Market Changes CreateOpportunities 226

Managing Products over Their Life Cycles 227

Product Life Cycles Vary in Length 230

Planning for Different Stages of the Product Life

Cycle 232New-Product Planning 236

An Organized New-Product Development Process

Is Critical 238

New-Product Development: A Total Company

Effort 244

Need for Product Managers 245

Managing Product Quality 246

Conclusion 249Key Terms 249Questions and Problems 250Creating Marketing Plans 250Suggested Cases 250 'Computer-Aided Problem 250

Conclusion 221Key Terms 221Questions and Problems 222Creating Marketing Plans 223Suggested Cases 223Computer-Aided Problem 223

XXXIV

CHAPTER TEN

Place and Development of ChannelSystems 253

Marketing Strategy Planning Decisionsfor Place 254

Place Decisions Are Guided by "Ideal" Place

Objectives 255

Channel System May Be Direct or Indirect 256

Channel Specialists May Reduce Discrepancies and

Separations 260

Channel Relationship Must Be Managed 262

Vertical Marketing Systems Focus on FinalCustomers 266

The Best Channel System Should Achieve IdealMarket Exposure 268

Multichannel Distribution and Reverse

Channels 270

Entering International Markets 273

Conclusion 275

Key Terms 275

Questions and Problems 275

Creating Marketing Plans 276

Suggested Cases 276

Computer-Aided Problem 277

XXXV

CHAPTER ELEVEN

Distribution Customer Serviceand Logistics 278

Physical Distribution Gets It to Customers 280

Physical Distribution Customer Service 287

Physical Distribution Concept Focuses on the Whole

Distribution System 283

Coordinating Logistics Activities among Firms 285

The Transporting Function Adds Value to a

Marketing Strategy 288

Which Transporting Alternative Is Best? 290c

The Storing Function and Marketing

Strategy 293

Specialized Storing Facilities May Be

Required 295

The Distribution Center—A Different Kindof Warehouse 296

Conclusion 298Key Terms 298Questions and Problems 298Creating Marketing Plans 299Suggested Cases 299Computer-Aided Problem 299

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CHAPTER TWELVE

Retailers, Wholesalers, and TheirStrategy Planning 300

Retailers and Wholesalers Plan TheirOwn Strategies 302

The Nature of Retailing 303

Planning a Retailer's Strategy 304

Conventional Retailers—Try to Avoid Price

Competition 306

Expand Assortment and Service—To Compete

at a High Price 307

Evolution of Mass-Merchandising Retailers 307

Some Retailers Focus on Added Convenience 370

Retailing on the Internet 37 7

Why Retailers Evolve and Change 314

Retailer Size and Profits 376

Differences in Retailing in Different Nations 377

What Is a Wholesaler? 379

Wholesaling Is Changing with the Times 379

Wholesalers Add Value in Different Ways 320

Merchant Wholesalers Are the Most

Numerous 322

Agents Are Strong on Selling 324

Conclusion 325Key Terms 326Questions and Problems 326Creating Marketing Plans 327Suggested Cases 327Computer-Aided Problem 327

CHAPTER THIRTEEN

Promotion—Introduction toIntegrated MarketingCommunications 328

Promotion Communicates to TargetMarkets 330

Several Promotion Methods Are Available 337

Someone Must Plan, Integrate, and Manage the

Promotion Blend 333

Which Methods to Use Depends on Promotion

Objectives 335

Promotion Requires Effective Communication 337

When Customers Initiate the Communication

Process 340

How Typical Promotion Plans Are Blended

and Integrated 343

Adoption Processes Can Guide Promotion

Planning 347

Promotion Blends Vary over the Life

Cycle 350

Setting the Promotion Budget 357

Conclusion 353Key Terms 353Questions and Problems 354Creating Marketing Plans 354Suggested Cases 355Computer-Aided Problem 355

XXXVI

CHAPTER FOURTEEN

Personal Selling and CustomerService 356

The Importance and Role of PersonalSelling 358

What Kinds of Personal Selling Are

Needed? 367

Order Getters Develop New Business

Relationships 367

Order Takers Nurture Relationships to Keep the

Business Coming 362

Supporting Sales Force Informs and Promotes in

the Channel 363

Customer Service Promotes the Next

Purchase 365

The Right Structure Helps Assign

Responsibility 366

Information Technology Provides Tools to Do

the Job 377

Sound Selection and Training to Build a

Sales Force 373

Compensating and Motivating Salespeople 374

Personal Selling Techniques—Prospecting andPresenting 376

Conclusion 381Key Terms 381Questions and Problems 381Creating Marketing Plans 382Suggested Cases 382Computer-Aided Problem 382

XXXVII

CHAPTER FIFTEEN

Advertising, Publicity, and SalesPromotion 384

Advertising, Publicity, Sales Promotion, andMarketing Strategy Planning 386

Advertising Is Big Business 388

Advertising Objectives Are a Strategy Decision 389

Objectives Determine the Kinds of Advertising

Needed 397

Choosing the "Best" Medium—How to Deliver

the Message 393

Digital Advertising 396

Planning the "Best" Message—What to

Communicate 399

Advertising Agencies Often Do the Work 400

Measuring Advertising Effectiveness Is Not Easy 402

How to Avoid Unfair Advertising 403

Customer Communication and Types

of Publicity 404

Sales Promotion—Do Something Different to

Stimulate Change 47 7

Challenges in Managing Sales Promotion 472

Different Types of Sales Promotion for DifferentTargets 473

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Conclusion 415Key Terms 416Questions and Problems 416Creating Marketing Plans 417Suggested Cases 417Computer-Aided Problem 417

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CHAPTER SIXTEEN

Pricing Objectives and Policies 418

Price Has Many Strategy Dimensions 420

Objectives Should Guide Strategy Planning

for Price 422

Profit-Oriented Objectives 423

Sales-Oriented Objectives 424

Status Quo Pricing Objectives 425

Most Firms Set Specific Pricing Policies—To Reach

Objectives 425

Price Flexibility Policies 426

Price-Level Policies—Over the Product

Life Cycle 428

Discount Policies—Reductions from List Prices 432

Allowance Policies—Off List Prices 434

Some Customers Get Something Extra 435

List Price May Depend on Geographic Pricing

Policies 436

Pricing Policies Combine to Impact Customer

Value 438

Legality of Pricing Policies 440

Conclusion 443Key Terms 444Questions and Problems 444Creating Marketing Plans 445Suggested Cases 445Computer-Aided Problem 445

CHAPTER SEVENTEEN

Price Setting in theBusiness World 446

Price Setting Is a Key Strategy Decision 448

Some Firms Just Use Markups 449

Average-Cost Pricing Is Common and Can

Be Dangerous 452

Marketing Managers Must Consider Various Kinds

of Costs 453

Break-Even Analysis Can Evaluate Possible

Prices 456

Marginal Analysis Considers Both Costs and

Demand 458

Additional Demand-Oriented Approaches for

Setting Prices 467

Pricing a Full Line 468

Bid Pricing and Negotiated Pricing Depend Heavilyon Costs 470

Conclusion 471Key Terms 471Questions and Problems 472Creating Marketing Plans 472Suggested Cases 472Computer-Aided Problem 473

XXXVIII

CHAPTER EIGHTEENImplementing and ControllingMarketing Plans: Evolution andRevolution 474

Good Plans Set the Framework for Implementationand Control 476

Speed Up Information for Better Implementation

and Control 477

Effective Implementation Means That Plans Work

as Intended 479

Control Provides Feedback to Improve Plans andImplementation 482

Sales Analysis Shows What's Happening 484

Performance Analysis Looks for Differences 485

Performance Indexes Simplify Human

Analysis 486

A Series of Performance Analyses May Find the

Real Problem 488

Marketing Cost Analysis—Controlling

Costs Too 497

Planning and Control Combined 495

The Marketing Audit 496

Conclusion 497Key Terms 497Questions and Problems 497Creating Marketing Plans 498Suggested Cases 498Computer-Aided Problem 498

XXXIX

CHAPTER NINETEEN

Managing Marketing's Link withOther Functional Areas 500

Marketing in the Broader Context 502

The Finance Function: Money to ImplementMarketing Plans 503

Production Must Be Coordinated with the

Marketing Plan 509

Accounting Data Can Help in Understanding

Costs and Profit 574 -

Enabling Marketing Strategy with

Information Technology 579

People Put Plans into Action 520

Conclusion 522Key Terms 522Questions and Problems 523Creating Marketing Plans 523Suggested Cases 523

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CHAPTER TWENTY

Ethical Marketing in a Consumer-Oriented World: Appraisal andChallenges 524

How Should Marketing Be Evaluated? 526

Can Consumer Satisfaction Be Measured? 528

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Micro-Marketing Often Does Cost Too Much 529

Macro-Marketing Does Not Cost Too Much 537

Marketing Strategy Planning Process Requires

Logic and Creativity 533

The Marketing Plan Brings All the Details Together 535

Challenges Facing Marketers 538

How Far Should the Marketing Concept Go? 545

Conclusion 546Questions and Problems 547Creating Marketing Plans 547Suggested Cases 547

APPENDIX A

Economics Fundamentals 548

APPENDIX B

Marketing Arithmetic 561

APPENDIX C

Career Planning in Marketing 577

VIDEO CASES 5901. Chick-fil-A: "Eat Mor Chickin" (Except on

Sunday) 597

2. Bass Pro Shops (Outdoor World) 592

3. Toyota Prius: The Power of Excellence in ProductInnovation and Marketing 593

4. Potbelly Sandwich Works Grows through"Quirky" Marketing 595

5. Suburban Regional Shopping Malls: Can theMagic Be Restored? 596

6. Strategic Marketing Planning in Big BrothersBig Sisters of America 598

7. Invacare Says, "Yes, You Can!" to CustomersWorldwide 607

8. Segway Finds Niche Markets for Its HumanTransporter Technology 603

CASES 6061. McDonald's "Seniors" Restaurant 607

2. Golden Valley Foods, Inc. 607

3. NOCO United Soccer Academy 608

4. Hometown Tech 609

5. Polystyrene Solutions 670

6. Applied Steel 67 7

7. Omarama Mountain Lodge 672

8. Besitti's Restaurant 672

9. Peaceful Rest Motor Lodge 673

10. Cooper's Ice Center 675

11. Running Room 676

12. DrJane.com—Custom Vitamins 677

13. AAA Office World (AAA) 678

14. Showtime Media 679

15. The Buckeye Group 620

16. J&J Lumber Supply 620

17. Simply Pure H2O4U, Inc. 622

18. Whistler Township Volunteer Fire Department(WTVFD) 624

19. MyPerfectWedding.com 625

20. Blue Lagoon Marine & Camp 626

21. Global Chemical, Inc. (GCI) 627

22. Bright Light Innovations: The StarlightStove 629

23. Carson Furniture 629

24. Wireway 637

25. Long Beach Plastics 637

26. Abundant Harvest 632

27. Advanced Molding, Inc. 633

28. KCA Precision Tools (KCA) 634

29. Quality Iron Castings, Inc. 635

30. Walker-Winkle Mills, Ltd. 636

31. Amato Home Health (AHH) 637

32. Lever, Ltd. 639

33. Kennedy & Gaffney (K&G) 647 ~ -

34. Chess Aluminum Worldwide (CAW) 642

35. Rizzuto's Pizzeria 643

36. Skyline Homebuilders 646

Computer-Aided Problems 647Notes 652Illustration Credits 693Name Index 697Company Index 708Subject Index 713Glossary G-1

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