Strategic marketing
Using your HBR coursepack, review the following articles in the coursepack:
- The Female Economy
- Customer Value Propositions in Business Markets
- Getting Brand Communities Right
- The One Number You Need to Grow
- Ending the War Between Sales and Marketing
Cite each source individually – do NOT cite as a coursepack!
Following your review, share a 750-words minimum review of the strategic marketing concepts discussed. Make sure to cite your sources individually – using their original published dates. This posting should be completed using APA formatting (in-text citations and references) attach in a formal word document. Not accepted if there is no word document attached.
This initial post should be completed by Saturday at 11:59 p.m. EST. After you submit the initial posting, return to the forum and review the findings of your classmates. Post a meaningful comment or question (150 words minimum) to the postings of one (1) classmate. Peer postings should be completed by Sunday at 11:00 p.m. EST.
Roger A. Kerin
Steven W. Hartley
MARKETING
THE CORE
Eighth Edition
MARKETING:
THE CORE
Eighth Edition
Roger A. Kerin
Southern Methodist University
Steven W. Hartley
University of Denver
MARKETING: THE CORE, EIGHTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2020 by McGraw-Hill
Education. All rights reserved. Printed in the United States of America. Previous editions © 2018, 2016, and
2013. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a
database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not
limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the
United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 LWI 21 20 19
ISBN 978-1-260-71145-5 (bound edition)
MHID 1-260-71145-5 (bound edition)
ISBN 978-1-260-08886-1 (loose-leaf edition)
MHID 1-260-08886-3 (loose-leaf edition)
Executive Brand Manager: Meredith Fossel
Senior Product Developer: Kelly I. Pekelder
Senior Marketing Manager: Nicole Young
Lead Content Project Manager: Christine Vaughan
Senior Content Project Manager: Danielle Clement
Senior Buyer: Susan K. Culbertson
Senior Designer: Matt Diamond
Lead Content Licensing Specialist: Carrie Burger
Cover Image: ©@by Feldman_1/Getty Images
Compositor: Aptara®, Inc.
All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.
Library of Congress Cataloging-in-Publication Data
Names: Kerin, Roger A., author. | Hartley, Steven William, author.
Title: Marketing : the core / Roger A. Kerin, Southern Methodist University, Steven W. Hartley,
University of Denver.
Description: Eighth edition. | New York, NY : McGraw-Hill Education, [2020] |
Audience: 18+
Identifiers: LCCN 2018048487| ISBN 9781260088861 (alk. paper) |
ISBN 1260088863 (alk. paper)
Subjects: LCSH: Marketing.
Classification: LCC HF5415 .K452 2020 | DDC 658.8—dc23 LC record available at
https://lccn.loc.gov/2018048487
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does
not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not
guarantee the accuracy of the information presented at these sites.
mheducation.com/highered
WELCOME FROM THE AUTHORS!
Is technology an integral part of yo
ur life? Are you innovative and entr
epreneurial? Do you consider
purpose-driven work important? Ha
ve you ever thought you could cha
nge the world? If the answer
to any of these questions is yes, yo
ur decision to study marketing is a
perfect match! In addition, if
you are curious about robots in the
marketplace, virtual reality and aug
mented reality in advertising,
wearable technology, YouTube cha
nnel brand advocates, shopping on
Pinterest, or the gamification
of almost everything, you will be exc
ited by the insights you will learn du
ring your studies. And we are
excited to have the opportunity to h
elp you along the way with our text
book about this exciting field!
We know from our experiences in
the classroom that students choo
se to study marketing for
many reasons. For marketing majo
rs this course is the first of many o
n the way to a marketing de-
gree. For students from other busi
ness majors this may be a required
course in a business “core.”
For many other students, marketin
g is an elective chosen because
of a personal interest in the
marketplace. Regardless of your r
easons for taking this course, it is
our pleasure to help you ex-
plore the many new trends, conc
epts, practices, challenges, and o
pportunities that are part of
marketing today. We encourage yo
u to use your own past experience
s and future interests to cre-
ate a personalized journey of expl
oration and study.
The dynamic nature of the marke
ting discipline necessitates equa
lly dynamic learning re-
sources. As a result, we have focus
ed our time and energy on ensurin
g that our textbook provides
the most current, insightful, and co
mprehensive coverage of the mar
ketplace today. The dramatic
changes in student learning styles
—from traditional observational sty
les to contemporary collab-
orative styles—are also reflected in
our efforts as we have included m
any features to match these
interests. Our approach to present
ing the complexities of marketing a
nd facilitating the changes in
learning is based on three importa
nt dimensions:
• Engagement. As professors we
have benefited from interactions
with many exceptional stu-
dents, managers, and instructors. T
heir insights have contributed to o
ur approach to teaching
and, subsequently, to our efforts as
textbook authors. One of the esse
ntial elements of our ap-
proach is a commitment to active l
earning through engaging, integra
ted, and timely materials.
In-class activities, an interactive bl
og, marketing plan exercises, and
in-text links to online ads
and web pages are just a few exam
ples of the components of our eng
agement model.
• Leadership. Our approach is als
o based on a commitment to takin
g a leadership role in the
development and presentation of
new ideas, principles, theories, an
d practices in marketing.
This is more important now than e
ver before, as the pace of change
in our discipline acceler-
ates and influences almost every a
spect of traditional marketing. We a
re certain that exposure
to leading-edge material related to
topics such as social media, data
analytics, and marketing
metrics can help students become
leaders in their jobs and careers.
• Innovation. New educational tec
hnologies and innovative teaching
tools have magnified the
engagement and leadership aspe
cts of our approach. Connect, Lea
rnSmart, and SmartBook,
for example, provide a digital and
interactive platform that embrace
s the “anytime and any-
where” style of today’s students. In
addition, we have provided new v
ideos and increased the
visual impact of the text and Pow
erPoint materials to facilitate mul
timedia approaches to
learning.
Through the previous 7 U.S. editio
ns—and 19 international editions in
11 languages—we have
been gratified by the enthusiastic
feedback we have received from
students and instructors. We
are very excited to have this oppo
rtunity to share our passion for thi
s exciting discipline with you
today. Welcome to the 8th edition
of Marketing: The Core! Roger A. Kerin
Steven W. Hartley
iii
iv
Marketing: The Core utilizes a unique, innovative, and effective pedagogical
approach developed by the authors through the integration of their combined
classroom, college, and university experiences. The elements of this approach
have been the foundation for each edition of Marketing: The Core and serve as the
core of the text and its supplements as they evolve and adapt to changes in student
learning styles, the growth of the marketing discipline, and the development of new
instructional technologies. The distinctive features of the approach are illustrated
below:
The goal of the 8th edition of Marketing: The Core is to create an exceptional
experience for today’s students and instructors of marketing. The development of
Marketing: The Core was based on a rigorous process of assessment, and the
outcome of the process is a text and package of learning tools that are based on
engagement, leadership, and innovation in marketing education.
PREFACE
Personalized Marketing
A vivid and accurate
description of businesses,
marketing professionals, and
entrepreneurs—through cases,
exercises, and testimonials—
that allows students to
personalize marketing and
identify possible career
interests.
Marketing:
The Core 8/e
Pedagogical
Approach
High-Engagement Style
Easy-to-read, high-
involvement, interactive
writing style that engages
students through active
learning techniques.
Rigorous Framework
A pedagogy based on the
use of learning objectives,
learning reviews, learning
objectives reviews, and
supportive student
supplements.
Traditional and
Contemporary Coverage
Comprehensive and
integrated coverage of
traditional and contemporary
marketing concepts.
Integrated Technology
The use of powerful
technical resources and
learning solutions, such as
Connect, LearnSmart,
SmartBook, the Kerin &
Hartley Blog
(www.kerinmarketing.com),
and in-text video links.
Marketing Decision
Making
The use of extended
examples, cases, and videos
involving people making
marketing decisions.
v
The members of this author team have benefited from extraordinary experiences
as instructors, researchers, and consultants, as well as the feedback of users of
previous editions of Marketing: The Core—now more than one million students! The
authors believe that success in marketing education in the future will require the
highest levels of engagement. They ensure engagement by facilitating interaction
between students and four learning partners—the instructor, other students, busi-
nesses, and the publisher. Some examples of the high-engagement elements of
Marketing: The Core include:
In-Class Activities and Digital In-Class Activities. The in-class activities,
located in the Instructor’s Manual, are designed to engage students in discussions
with the instructor and among themselves. They involve surveys, online resources,
out-of-class assignments, and personal observations. Each activity illustrates a con-
cept from the textbook and can be done individually or as a team. Examples
include: Designing a Candy Bar, Marketing Yourself, Pepsi vs. Coke Taste Test, and
What Makes a Memorable TV Commercial? In addition, digital in-class activities
have been added to selected chapters. These activities, located in the Instructor
Resources, focus on the use of web resources and the marketing data they can
provide students.
Interactive Web Page and Blog (www.kerinmarketing.com). Students can
access recent articles about marketing and post comments for other students. The
site also provides access to a Marketing: The Core Twitter feed!
Building Your Marketing Plan. The Building Your Marketing Plan guides at the
end of each chapter are based on the format of the Marketing Plan presented in
Appendix A. On the basis of self-study or as part of a course assignment, students
can use the activities to organize interactions with businesses to build a marketing
plan. Students and employers often suggest that a well-written plan in a student’s
portfolio is an asset in today’s competitive job market.
ENGAGEMENT
vi
The popularity of Marketing: The Core in the United States and around the globe is
the result, in part, of the leadership role of the authors in developing and presenting
new marketing content and pedagogies. For example, Marketing: The Core was
the first text to integrate ethics, technology, and interactive marketing. It was also
the first text to develop custom-made videos to help illustrate marketing principles
and practices and bring them to life for students as they read the text. The authors
have also been leaders in developing new learning tools, such as a three-step
learning process that includes learning objectives, learning reviews, and learning
objectives reviews and new testing materials that are based on Bloom’s learning
taxonomy. Other elements that show how Marketing: The Core is a leader in the
discipline include:
Chapter 17: Using Social Media and Mobile Marketing to Connect with
Consumers. Marketing: The Core features a dedicated chapter for social media
and mobile marketing. This new environment is rapidly changing and constantly
growing. The authors cover the building blocks of social media and mobile market-
ing and provide thorough, relevant content and examples. The authors discuss
major social media platforms like Twitter, Facebook, LinkedIn, and YouTube. They
explain how managers and companies can use those outlets for marketing
purposes. Chapter 17 also includes a section titled Social Media Marketing Programs
and Customer Engagement that addresses criteria for selecting social media,
how social media can produce sales, and methods of measuring a company’s suc-
cess with social media and mobile marketing. This chapter is one of many ways
Marketing: The Core is on the cutting edge of the field.
Applying Marketing Metrics. The Applying Marketing Metrics feature in the text
delivers two of the newest elements of the business and marketing environment
today—performance metrics and dashboards to visualize them. Some of the met-
rics included in the text are: category development index (CDI), brand development
index (BDI), load factor (a capacity management metric), price premium, sales per
square foot, same-store sales growth, promotion-to-sales ratio, and cost per thou-
sand (CPM) impressions. The feature is designed to allow readers to learn, practice,
and apply marketing metrics.
Color-Coded Graphs and Tables. The use of color in the graphs and tables
enhances their readability and adds a visual level of learning to the textbook for
readers. In addition, these color highlights increase student comprehension by link-
ing the text discussion to colored elements in the graphs and tables.
New Video Cases. Each chapter ends with a case that is supported by a video to
illustrate the issues in the chapter. New cases such as IBM, Toyota, Justin’s, and
Body Glove, and recent cases such as GoPro and Coppertone provide current and
relevant examples that are familiar to students.
LEADERSHIP
vii
In today’s fast-paced and demanding educational environment, innovation is es-
sential to effective learning. To maintain Marketing: The Core’s leadership position
in the marketplace, the author team consistently creates innovative pedagogical
tools that match contemporary students’ learning styles and interests. The authors
keep their fingers on the pulse of technology to bring real innovation to their text
and package. Innovations such as in-text links, a Twitter feed, hyperlinked Power-
Point slides, and an online blog augment the McGraw-Hill Education online innova-
tions such as Connect, LearnSmart, and SmartBook.
In-Text Links. You can see Internet links in magazine ads; on television program-
ming; as part of catalogs, in-store displays, and product packaging; and throughout
Marketing: The Core! These links bring the text to life with ads and videos about
products and companies that are discussed in the text. These videos also keep the
text even more current. While each link in the text has a caption, the links are up-
dated to reflect new campaigns and market changes. In addition, the links allow
readers to stream the video cases at the end of each chapter. You can simply click
on the links in the digital book or use your smartphone or computer to follow the
links.
Twitter Feed and Online Blog. Visit www.kerinmarketing.com to participate in
Marketing: The Core’s online blog discussion and to see Twitter feed updates. You
can also subscribe to the Twitter feed to receive the Marketing Question of the Day
and respond with the #QotD hashtag.
Connect, LearnSmart, and SmartBook Integration. These McGraw-Hill Educa-
tion products provide a comprehensive package of online resources to enable stu-
dents to learn faster, study more efficiently, and increase knowledge retention. The
products represent the gold standard in online, interactive, and adaptive learning
tools and have received accolades from industry experts for their Library and Study
Center elements, filtering and reporting functions, and immediate student feedback
capabilities. In addition, the authors have developed book-specific interactive
assignments, including (a) auto-graded applications based on the marketing plan
exercises, and (b) activities based on the Applying Marketing Metrics boxes and
marketing metrics presented in the text.
Innovative Test Bank. Containing more than 5,000 multiple-choice and essay
questions, the Marketing: The Core Test Bank reflects more than two decades of
innovations. The Test Bank also includes “visual test questions” in each chapter to
reward students who made an effort to understand key graphs, tables, and images
in the chapter.
INNOVATION
You’re in the driver’s seat.
Want to build your own course? No problem. Prefer to use our turnkey,
prebuilt course? Easy. Want to make changes throughout the semester?
Sure. And you’ll save time with Connect’s auto-grading too.
They’ll thank you for it.
Adaptive study resources like SmartBook® help your
students be better prepared in less time. You can
transform your class time from dull definitions to dynamic
debates. Hear from your peers about the benefits of
Connect at www.mheducation.com/highered/connect
Make it simple, make it affordable.
Connect makes it easy with seamless integration using any of the
major Learning Management Systems—Blackboard®, Canvas,
and D2L, among others—to let you organize your course in one
convenient location. Give your students access to digital materials
at a discount with our inclusive access program. Ask your
McGraw-Hill representative for more information.
Solutions for your challenges.
A product isn’t a solution. Real solutions are affordable,
reliable, and come with training and ongoing support
when you need it and how you want it. Our Customer
Experience Group can also help you troubleshoot
tech problems—although Connect’s 99% uptime
means you might not need to call them. See for
yourself at status.mheducation.com
Students—study more efficiently, retain more
and achieve better outcomes. Instructors—focus
on what you love—teaching.
SUCCESSFUL SEMESTERS INCLUDE CONNECT
65%
Less Time
Grading
©Hill Street Studios/Tobin Rogers/Blend Images LLC
For Instructors
Effective, efficient studying.
Connect helps you be more productive with your
study time and get better grades using tools like
SmartBook, which highlights key concepts and creates
a personalized study plan. Connect sets you up for
success, so you walk into class with confidence and
walk out with better grades.
Study anytime, anywhere.
Download the free ReadAnywhere app and access your
online eBook when it’s convenient, even if you’re offline.
And since the app automatically syncs with your eBook in
Connect, all of your notes are available every time you open
it. Find out more at www.mheducation.com/readanywhere
No surprises.
The Connect Calendar and Reports tools
keep you on track with the work you need
to get done and your assignment scores.
Life gets busy; Connect tools help you
keep learning through it all.
Learning for everyone.
McGraw-Hill works directly with Accessibility Services
Departments and faculty to meet the learning needs of all
students. Please contact your Accessibility Services office
and ask them to email accessibility@mheducation.com, or
visit www.mheducation.com/about/accessibility.html for
more information.
“I really liked this app—it
made it easy to study when
you don’t have your text-
book in front of you.”
— Jordan Cunningham,
Eastern Washington University
Chapter 12 Quiz Chapter 11 Quiz
Chapter 7 Quiz
Chapter 13 Evidence of Evolution Chapter 11 DNA Technology
Chapter 7 DNA Structure and Gene…
and 7 more…
13 14
©Shutterstock/wavebreakmedia
For Students
Create
SmartBook iSeeit! Videos Mini
Simulation
Marketing
Plan Prep
Marketing
Analytics
Video Cases/
Analytics
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Asset Alignment with Bloom’s Taxonomy
Evaluate
Analyze
Apply
Understand
Remember
We Take Students Higher
As a learning science company we create content that supports higher order thinking skills. Interactive
learning tools within McGraw-Hill Connect are tagged accordingly, so you can filter, search, assign, and receive
reports on your students’ level of learning. The result—increased pedagogical insights and learning process
efficiency that facilitate a stronger connection between the course material and the student.
The chart below shows a few of the key assignable marketing assets with McGraw-Hill Connect aligned with
Bloom’s Taxonomy. Take your students higher by assigning a variety of applications, moving them from simple
memorization to concept application.
Principles of Marketing
Asset Alignment with
Bloom’s Taxonomy
• Adaptively aids students to study more efficiently
by highlighting where in the chapter to focus,
asking review questions and pointing them to
resources until they understand.
• Short, contemporary videos provide engaging,
animated introductions to key course concepts.
Available at the chapter level. Perfect for
launching lectures and assigning pre- or
post-lecture.
• Mini-cases and scenarios of real-world firms
accompanied by questions that help students
analyze and apply marketing theory and other
core concepts.
SmartBook
iSeeit! Videos
Video Cases & Case Analyses
Mini Simulation
Marketing Plan Prep
Marketing Analytics
• These newest auto-graded, data analytics
activities challenge students to make decisions
using metrics commonly seen across Marketing
professions. The goal of this activity is to give
students practice analyzing and using marketing
data to make decisions.
• Marketing Mini Sims help students apply and
understand the interconnections of elements in
the marketing mix by having them take on the
role of Marketing Manager for a backpack
manufacturing company.
• Mini Sims can be assigned by topic or in its entirety.
• These exercises use guided activities and
examples to help students understand and
differentiate the various elements of a
marketing plan.
gre87719_fm_i-xlii.indd 17 14/11/18 9:48 AM
xii
Chapter 1: Update of Chobani’s Success Story, New
Showstopper Analysis, and New Material on Ritz-
Carlton and Patagonia. Chobani’s continued success
at creating customer value is discussed and updated.
The company’s guiding mission, “Better food for more
people,” new products such as Drink Chobani, Chobani
Flip, Smooth Yogurt, and Chobani Savor, and advertis-
ing campaigns such as “Love This Life” are presented.
Discussion of Elon Musk and his success with entrepre-
neurial endeavors such as Zip2, PayPal, SpaceX, and
Tesla has been added to the Marketing and Your Career
section. New-product examples such as smart glasses
and the YoYo car subscription service have been added
to the discussion of potential “showstoppers” for new-
product launches. Discussion of the Ritz-Carlton’s use
of relationship marketing concepts and Patagonia’s
Common Threads Initiative have also been added.
Chapter 2: New IBM Video Case, Updated Chapter
Opening Example, Addition of a New Example of
Social Entrepreneurship, and New Discussion of
Uber’s Changing Business Definition. The Chapter 2
opening example discusses Ben & Jerry’s mission to
make fantastic, sustainable, world-changing ice cream.
Free Cone Day has been added to the discussion of cre-
ative marketing strategies used by the company to help
accomplish its mission. The social entrepreneur venture
NexGenVest has been added to the 30 Under 30 Forbes
Social Entrepreneurs discussion in the Making Responsi-
ble Decisions box. In addition, the discussion of business
definitions and business models now describes how
Uber has changed its definition from a cab service, to a
ride-sharing service, to a delivery service. The applica-
tion of the Boston Consulting Group business portfolio
model to Apple’s product line has been updated to in-
clude changes related to the Apple Watch, the iPhone,
and the iPad/iPad mini tablet devices. The end-of-chap-
ter video case is completely new, and features the recent
IBM campaign and strategy: “Let’s Put Smart to Work.”
Chapter 3: New Toyota Video Case, Update of New
Trends in Marketing, New Discussion on Generation
Z, and New Discussion of Gender-Neutral Marketing
Actions. The discussion of new trends, such as the
growing popularity of brand advocates, the increasing
application of virtual reality and augmented reality,
and the surging scrutiny regarding the collection and
use of consumer data, has been updated. Generation
Z, the post-millennial generation, has been added to
the discussion of generational cohorts. The Making
Responsible Decisions box includes new examples
such as P&G’s recyclable shampoo bottles, Unilever’s
“brands with purpose,” and Apple’s “greenest building
on the planet.” New gender-neutral marketing actions
have been added to the Culture section. A discussion
of new trends in technology, such as the growth of au-
tomation (e.g., autonomous cars, drones, and robots),
digital assistants (e.g., Amazon’s Alexa), and wearable
technology, has also been added. In addition, the
chapter ends with a completely new video case about
Toyota, its transition to a “mobility” company, and its
marketing activities related to the hydrogen fuel-cell
vehicle, the Mirai.
Chapter 4: New Section on Consumer Touchpoints
and Consumer Journey Maps, and New Figure to Il-
lustrate a Consumer Journey Map. A new section de-
scribes consumer touchpoints, the product, service, or
brand points of contact with a consumer, and consumer
journey maps, the visual representation of all touch-
points where a consumer comes into contact with a
company’s products, services, or brands. The new
Figure 4–4 illustrates consumer touchpoints and a con-
sumer journey map for electronic devices sold by Apple
in stores. The Marketing Matters box has been updated
to reflect the latest procedures for BzzAgents.
Chapter 5: New Examples Including Lockheed Mar-
tin and BMW, and Updated Marketing Matters Box
Regarding eBay Business Supply. The description of
government markets has been updated to include the
Orion Multi-Purpose Crew Vehicle being developed
by Lockheed Martin. In addition, the Buyer–Seller
Relationship section now includes GT Advanced
NEW AND REVISED CONTENT
xiii
Technology’s $578 million contract with Apple to pro-
duce iPhone camera lenses and screens as an exam-
ple of a long-term agreement. BMW’s purchase of a
Cloud-based data management system from IBM has
been added as an example of a new buy. In addition,
the Marketing Matters box has been updated to re-
flect eBay’s trading platform, eBay Business Supply,
which generates $4 billion in sales annually.
Chapter 6: Updated Chapter Opening Example
Regarding Amazon in India, and Addition of UK
Withdrawal from the EU. The chapter opening ex-
ample is completely updated to describe the opportu-
nities and challenges Amazon faces as it invests
billions of dollars in India. The Economic Integration
among Countries section has been revised to reflect
increasing economic protectionism, including the
withdrawal of the United Kingdom from the European
Union, and discussions regarding possible changes in
the North American Free Trade Agreement. In addi-
tion, Listerine has been added as a new example of
product adaptation in the Product and Promotion
Strategies section.
Chapter 7: Updated Chapter Opening Example,
New Primary and Secondary Data Coverage, and
New Discussion of Artificial Intelligence. The chap-
ter opening example has been updated to reflect the
use of marketing research in movies such as Atomic
Blonde, Edge of Tomorrow, and War Dogs. An update
of the Secondary Data section reflects the upcoming
2020 Census. The Primary Data section has been up-
dated to include new Nielsen program ranking data,
an example of Gillette’s use of observational data, a
discussion of the growing use of neuromarketing
technologies, and a description of McDonald’s use of
test markets in developing its delivery service. In ad-
dition, artificial intelligence is discussed as part of the
Intelligent Marketing Enterprise Platform presented
in Figure 7–5.
Chapter 8: Update of Zappos’s Use of Behavioral
Segmentation, New Segmentation Examples, and
New Patronage Example Data. The chapter opening
example has been updated to describe how Zappos
uses behavioral segmentation to deliver “happiness”
to its customers. The Multiple Products and Multiple
Market Segments section includes a new discussion of
Ford’s shift in strategy to reduce its product line and
provide higher quality at lower prices. In addition, in
the Patronage of Fast-Food Restaurants section, the
patronage and user/nonuser data have been updated;
also, the Future Strategies for Your Wendy’s Restau-
rant section has been updated.
Chapter 9: New Discussion of the Apple-Enabled
iCar and New Marketing Matters Box Coverage of
Feature Fatigue. The chapter opening example has
been updated to include a discussion of Apple’s next
innovation—the Apple-enabled iCar. The concept of
feature bloat and fatigue is now introduced and illus-
trated in the Marketing Matters box. Keurig Kold and
the HP Tablet are introduced as examples in the
Marketing Reasons for New-Product Failures section.
An example of the success of Aaron Krause’s Scrub
Daddy, originally pitched on Shark Tank, has been
added to the section on inventors as a source of
innovation.
Chapter 10: New Justin’s Video Case, New Material
on Gatorade’s “Smart Cap,” New Co-Branding and
Brand Dilution Coverage, and New Examples. The
Chapter 10 discussion of Gatorade in the chapter
opener now includes material on the microchip-fitted
“smart cap” and the digital sweat patch for athletes
and fitness buffs. In addition, new discussions of co-
branding and brand dilution have been added to the
Multiproduct Branding Strategy section. New examples
include Olay Skin Care Advisor, the NFL and NBA, and
P&G’s acquisition of Gillette. The chapter ends with a
new video case titled Justin’s: Managing a Successful
Product with Passion, which describes the inspiring
story of entrepreneur Justin Gold, and the application
of product management concepts to the Justin’s brand
of organic nut butters.
Chapter 11: Updated Chapter Opening Example
about VIZIO, and Discussion of Apple iPhone X, 8,
xiv
and 8-Plus Pricing. The updated chapter opening ex-
ample describes VIZIO’s approach to pricing the 50 mil-
lion HDTVs it has sold since its founding. Microsoft’s
approach to pricing its Xbox One X videogame console
is now included in the Skimming Pricing section. In ad-
dition, examples of penetration pricing, odd-even pric-
ing, standard markup pricing, and cost-plus pricing
have been updated to reflect the current marketplace.
Chapter 12: New Chapter Opening Example about
Multichannel Marketing at Eddie Bauer, Updated
Marketing Matters Box about IBM’s Watson, and
Updated Making Responsible Decisions Box. A new
chapter opening example describes Eddie Bauer’s
“brick, click, and flip” multichannel marketing strategy.
The Marketing Matters box has been updated to
reflect IBM’s use of artificial intelligence to manage its
supply chain. In addition, the discussion of recycling
e-waste in the Making Responsible Decisions box has
been updated.
Chapter 13: Updated Chapter Opening Example
about Smart Stores, Updated Making Responsible
Decisions Box, and New Discussion about YouTube
Programming, Robocalls, and EDLP 2.0. Chapter 13
opens with a description of the potential impact of
smart stores on the customer journey. The Internet of
Things, biometric scanners, virtual reality, 3D modeling
tools, and wearable technology are discussed. The
Making Responsible Decisions box now includes infor-
mation about California’s “zero-waste” laws. New infor-
mation, such as banks’ attempts to change ATMs into
smart self-service devices, has been added to the Self-
Service section. In addition, YouTube’s live program-
ming, the FTC’s discussion regarding robocalls, and
Walmart’s development of EDLP 2.0 are discussed.
Chapter 14: Expanded Discussion about Personaliza-
tion; New Section Titled How Consumers Shop and
Buy Online, including Coverage of Social Commerce;
Broadened Implementing Multichannel Marketing
Section; and New Figure Illustrating a Multichannel
Consumer Journey Map. The Interactivity, Individuality,
and Customer Relationships in Marketspace section has
an expanded discussion about the differences between
collaborative filtering and personalization and includes
Sunglass Hut as an example of a company using person-
alization techniques. The use of chatbots has been added
to the Communication section. A new section titled How
Consumers Shop and Buy Online has been added and
covers social commerce—the use of social networks for
browsing and buying. In addition, the Implementing
Multichannel Marketing section has been rewritten with
new coverage of cross-channel consumer behavior,
mutually reinforcing channels, and monitoring and mea-
suring channel performance. New Figure 14–5 illustrates
a multichannel marketing consumer journey map. This
chapter was previously located later in the sequence of
chapters and has been moved to follow coverage of mar-
keting channels and supply chains (now Chapter 12) and
retailing and wholesaling (now Chapter 13).
Chapter 15: Updated Chapter Opening Example,
New Advertisements, New Example of an IMC
Program for a Movie, and New Discussion of the
Media Agency of the Year. The chapter opening ex-
ample has been completely updated to reflect Taco
Bell’s recent IMC activities. The company’s Love &
Tacos Contest; new restaurant in Las Vegas; Happily
Ever After sweepstakes; superbowl ads; collabora-
tions with Sony, the NBA, and Airbnb; and social media
tactics such as Taco Tales and Clip Show posts are all
discussed. New advertisements include examples
from The North Face, Sony, and Humira. The IMC pro-
gram used to promote the movie Star Wars: The Last
Jedi has been added to the Scheduling the Promotion
section. In addition, the work of Advertising Age’s
Media Agency of the Year, PHD Media, is discussed.
Chapter 16: Updated Chapter Opening Example
about Virtual Reality and Augmented Reality in Ad-
vertising, New Advertisements and Sales Promo-
tion Examples, and New Discussion of the
Advertising Agency of the Year. The growing impact
of virtual reality (VR) and augmented reality (AR) on
advertising is discussed in the chapter opening exam-
ple. New examples of VR and AR campaigns include
McDonald’s Happy Goggles and Lowe’s Holoroom.
Coverage includes new advertising examples from
xv
Mercedes-Benz, Progressive, Duracell, Milk Life, Ama-
zon, AG, and Sonos and new sales promotion exam-
ples from Nabisco and Ben & Jerry’s. The Identifying
the Target Audience section now includes Mountain
Dew and Lululemon campaigns as examples, and the
Message Content section includes a discussion of
the increasing use of gender—neutral advertising. The
chapter also includes new discussion of Advertising
Age’s Agency of the Year—Anomaly. In addition, the
results of a recent Association of National Advertisers
survey about the most common forms of compensa-
tion for ad agencies are discussed.
Chapter 17: New Body Glove Video Case, New Dis-
cussion on Internet-Connected Cars, New Section
on Influencer Marketing, New Material on Live
Streaming at Facebook, and Updated Marketing
Matters Box on Vloggers. Chapter 17 opens with a
discussion of the new level of mobile marketing en-
abled by Internet-connected cars. The discussion ad-
dresses three channels that can reach cars—social
media, e-mail, and messaging apps. In addition, a new
section titled Emergence of Influencer Marketing ad-
dresses the growth of social media influencers such as
Kendall Jenner who has close to 100 million Instagram
followers. New discussions about Facebook’s privacy
protection, its new dating feature, and Facebook Live
have been added to the section on Mobile Marketing
at Facebook. The overview of Twitter now includes an
example of teenager Carter Wilkerson obtaining
enough retweets to win free chicken nuggets for a
year. The Marketing Matters box has been updated to
describe how vloggers are becoming the online ver-
sion of traditional celebrities and the Pepsi MAX
“Friend Finder” YouTube video is included as an ex-
ample of Pepsi’s use of social media. The revised sec-
tion titled Social Media Marketing Programs and
Customer Engagement introduces new key terms
and definitions for social media marketing programs
and customer engagement. The chapter ends with a
new video case about Body Glove and the role social
media play in the company’s marketing plan.
Chapter 18: New Material on Upselling and Cross-
Selling, Updated Marketing Matters Box, and New
Discussion of Customer Relationship Marketing
Systems and Technology, including Sales Force Au-
tomation, Marketing Automation, and Customer
Service and Support Automation. The Consultative
Selling section now includes discussion of upselling
and cross-selling. The Marketing Matters box has been
updated to include the most recent emotional intelli-
gence test and the current link. In addition, the discus-
sion of CRM systems and technology includes new
material on the consolidation of customer and sales
information, how marketing automation emphasizes
sophisticated analytical techniques to track the behav-
ior of anyone showing an interest in a product or
service, and how customer service and support auto-
mation provides services such as “live chat.”
xvi
INSTRUCTOR RESOURCES
Practice Marketing
Practice Marketing is a 3D, online, single or multiplayer game that helps students
apply the four Ps by taking on the role of marketing manager for a backpack com-
pany. By playing the game individually and/or in teams, students come to understand
how their decisions and elements of the marketing mix affect one another. Practice
Marketing is easy to use, fully mobile, and provides an interactive alternative to
marketing plan projects. Log in to mhpractice.com with your Connect credentials to
access a demo, or contact your local McGraw-Hill representative for more details.
Marketing Mini Sims—Now Assignable within Connect!
Marketing Mini Sims are building-block sims based on our full Practice Marketing
simulation that require students to take on the role of a marketing decision maker
for a backpack manufacturing company. Each of the 9 Mini Sims focuses on one
aspect of the marketing mix and serves to both reinforce the understanding of key
concepts as well as allow students to make business decisions.
To view a demonstration video and/or see a list of available simulations, please
visit the McGraw-Hill Marketing Discipline Landing page at http://bit.ly/
MHEmarketing
Video Cases
A unique series of 18 marketing
video cases includes new
videos featuring IBM, Toyota,
Justin’s, and Body Glove.
Marketing:
The Core 8/e
Instructor
Resources
Instructor’s Manual
The IM includes lecture
notes, video case teaching
notes, and In-Class Activities.
Test Bank
We offer almost 5,000 test
questions categorized by
topic, learning objectives,
and level of learning.
Blog
www.kerinmarketing.com
A blog written specifically for
use in the classroom!
Throughout each term we
post new examples of
marketing campaigns, along
with a classroom discussion
and participation guide.
Practice Marketing
(Simulation)
Practice Marketing is a 3D,
online, multiplayer game that
enables students to gain
practical experiences in an
interactive environment.
Connect, LearnSmart,
and SmartBook
The unique content platform
delivering powerful technical
resources and adaptive
learning solutions. Includes
new Marketing Analytics
Exercises.
In-Class Activities
Chapter-specific in-class
activities for today’s students
who learn from active,
participative experiences.
PowerPoint Slides
Media-enhanced and
hyperlinked slides enable
engaging and interesting
classroom discussions.
Digital In-Class Activities
Digital In-Class Activities
focus on the use of web
resources and the marketing
data they can provide
students.
xvii
Acknowledgments
To ensure continuous improvement of our textbook and supplements we have utilized an
extensive review and development process for each of our past editions. Building on that
history, the Marketing: The Core, 8th edition development process included several phases
of evaluation and a variety of stakeholder audiences (e.g., students, instructors, etc.).
Reviewers who were vital in the changes that were made to the 8th and previous editions
and its supplements include:
A. Diane Barlar
Abe Qastin
Abhay Shah
Abhi Biswas
Abhik Roy
Adrienne Hinds
Ahmed Maamoun
Al Holden
Alan Bush
Alexander Edsel
Alicia Revely
Allan Palmer
Allen Smith
Amy Frank
Anand Kumar
Andrei Strijnev
Andrew Dartt
Andrew Thacker
Andy Aylesworth
Angela Stanton
Anil Pandya
Ann Kuzma
Ann Little
Ann Lucht
Ann Veeck
Annette George
Anthony Koh
Anthony R. Fruzzetti
Aysen Bakir
Barbara Evans
Barbara Ribbens
Barnett Greenberg
Barry Bunn
Bashar Gammoh
Beibei Dong
Ben Oumlil
Beth Deinert
Bill Curtis
Bill Murphy
Bill Peterson
Blaise Waguespack Jr.
Bob Dahlstrom
Bob Dwyer
Bob E. Smiley
Bob McMillen
Bob Newberry
Brent Cunningham
Brian Kinard
Brian Murray
Bronis J. Verhage
Bruce Brown
Bruce Chadbourne
Bruce Ramsey
Bruce Robertson
Bryan Hayes
Carl Obermiller
Carmen Powers
Carmina Cavazos
Carol Bienstock
Carol M. Motley
Carolyn Massiah
Casey Donoho
Catherine Campbell
Cathie Rich-Duval
Cathleen H. Behan
Cathleen Hohner
Cecil Leonard
Cesar Maloles
Charla Mathwick
Charles Bodkin
Charles Ford
Charles Schewe
Cheryl Stansfield
Chiranjeev Kohli
Chris Anicich
Chris Ratcliffe
Christie Amato
Christine Lai
Christopher Blocker
Christopher Kondo
Christopher Ziemnowicz
Chuck Pickett
Cindy Leverenz
Clare Comm
Clark Compton
Clay Rasmussen
Clint Tankersley
Clyde Rupert
Connie Bateman
Corinne Asher
Craig Stacey
Cristanna Cook
Cydney Johnson
Dan Darrow
Dan Goebel
Dan Sherrel
Dan Toy
Daniel Butler
Daniel Rajaratnam
Darrell Goudge
Dave Olson
David Erickson
David Gerth
David J. Burns
David Jamison
David Kuhlmeier
David Smith
David Terry Paul
Deana Ray
Deb Jansky
Debbie Coleman
Debra Laverie
Deepa Pillai
Dennis Pappas
Dennis Rosen
Diana Joy Colarusso
Diane Dowdell
Diane T. McCrohan
Don Weinrauch
Donald Chang
xviii
Donald F. Mulvihill
Donald Fuller
Donald G. Norris
Donald Hoffer
Donald Larson
Donald R. Jackson
Donald V. Harper
Donna Wertalik
Doris M. Shaw
Dotty Harpool
Douglas Kornemann
Duncan G. LaBay
Eberhard Scheuling
Ed Gonsalves
Ed Laube
Ed McLaughlin
Eddie V. Easley
Edna Ragins
Edwin Nelson
Elaine Notarantonio
Eldon L. Little
Elena Martinez
Elizabeth R. Flynn
Ellen Benowitz
Eric Ecklund
Eric Newman
Eric Shaw
Erin Baca Blaugrund
Erin Cavusgil
Erin Wilkinson
Ernan Haruvy
Eugene Flynn
Farrokh Moshiri
Fekri Meziou
Frances Depaul
Francis DeFea
Francisco Coronel
Frank A. Chiaverini
Fred Honerkamp
Fred Hurvitz
Fred Morgan
Fred Trawick
Frederick J. Beier
Gail M. Zank
Gary Carson
Gary F. McKinnon
Gary Law
Gary Poorman
Gary Tucker
George Kelley
George Miaoulis
George Young
Gerald O. Cavallo
Gerard Athaide
Gerald Waddle
Glen Brodowsky
Glen Gelderloos
Godwin Ariguzo
Gonca Soysal
Gordon Mosley
Greg Kitzmiller
Guy Lochiatto
Harlan Wallingford
Harold Lucius
Harold S. Sekiguchi
Havva Jale Meric
Heidi Rottier
Heikki Rinne
Helen Koons
Herbert A. Miller
Herbert Katzenstein
Howard Combs
Hsin-Min Tong
Hugh Daubek
Imran Khan
Irene Dickey
Irene Lange
Ismet Anitsal
J. Ford Laumer
Jacqueline Karen
Jacqueline Williams
James A. Henley Jr.
James A. Muncy
James C. Johnson
James Cross
James Garry Smith
James Gaubert
James Ginther
James Gould
James H. Barnes
James H. Donnelly
James L. Grimm
James Lollar
James Marco
James McAlexander
James Meszaros
James Munch
James Olver
James P. Rakowski
James V. Spiers
James Wilkins
James Zemanek
Jane Cromartie
Jane Lang
Jane McKay-Nesbitt
Janet Ciccarelli
Janet Murray
Janice Karlen
Janice Taylor
Janice Williams
Jarrett Hudnal
Jason Little
Jay Lambe
Jean Murray
Jean Romeo
Jeanne Munger
Jeff Blodgett
Jeff Finley
Jeffrey W. von Freymann
Jefrey R. Woodall
Jennie Mitchell
Jennifer Nelson
Jerry Peerbolte
Jerry W. Wilson
Jianfeng Jiang
Jim McHugh
Jo Ann McManamy
Joan Williams
Joanne Orabone
Jobie Devinney-Walsh
Joe Cronin
Joe Kim
Joe M. Garza
Joe Puzi
Joe Ricks
Joe Stasio
John Benavidez
John Brandon
John C. Keyt
John Coppett
John Cox
John Finlayson
John Fitzpatrick
John Gaskins
John H. Cunningham
John Kuzma
John Penrose
John Striebich
Jonathan Hibbard
Joseph Belonax
Joseph Defilippe
Joseph Myslivec
Joseph Wisenblit
xix
Juan (Gloria) Meng
Judy Bulin
Judy Foxman
Judy Wagner
Julie Haworth
Julie Sneath
Jun Ma
June E. Parr
Karen Becker-Olsen
Karen Berger
Karen Flaherty
Karen Gore
Karen LeMasters
Kasia Firlej
Katalin Eibel-Spanyi
Kathleen Krentler
Kathleen Stuenkel
Kathleen Williamson
Kathryn Schifferle
Kathy Meyer
Katie Kemp
Kay Chomic
Kaylene Williams
Keith B. Murray
Keith Jones
Keith Murray
Kellie Emrich
Ken Crocker
Ken Fairweather
Ken Herbst
Ken Murdock
Ken Shaw
Kenneth Goodenday
Kenneth Jameson
Kenneth Maricle
Kerri Acheson
Kevin Feldt
Kevin W. Bittle
Kim Montney
Kim Richmond
Kim Sebastiano
Kim Wong
Kimberly D. Smith
Kimberly Grantham
Kin Thompson
Kirti Celly
Koren Borges
Kristen Regine
Kristine Hovsepian
Kristy McManus
Kumar Sarangee
Kunal Sethi
Lan Wu
Larry Borgen
Larry Carter
Larry Feick
Larry Goldstein
Larry Marks
Larry Rottmeyer
Laura Dwyer
Lauren Wright
Lawrence Duke
Lawrence Marks
Lee Meadow
Leon Zurawicki
Leonard Lindenmuth
Leslie A. Goldgehn
Leta Beard
Linda Anglin
Linda M. Delene
Linda Morable
Linda Munilla
Linda N. LaMarca
Linda Rochford
Lindell Phillip Chew
Lisa M. Sciulli
Lisa Siegal
Lisa Simon
Lisa Troy
Lisa Zingaro
Lori Feldman
Lowell E. Crow
Lynn Harris
Lynn Loudenback
Marc Goldberg
Maria McConnell
Maria Randazzo-Nardin
Maria Sanella
Marilyn Lavin
Mark Collins
Mark Weber
Mark Young
Martin Bressler
Martin Decatur
Martin St. John
Marton L. Macchiete
Martyn Kingston
Marva Hunt
Mary Ann McGrath
Mary Beth DeConinck
Mary Conran
Mary Joyce
Mary Schramm
Mary Tripp
Matt Meuter
Max White
Mayukh Dass
Melissa Clark
Melissa Moore
Michael Callow
Michael Drafke
Michael Fowler
Michael Mayo
Michael Peters
Michael Pontikos
Michael R. Luthy
Michael Swenson
Michelle Kunz
Michelle Wetherbee
Mike Hagan
Mike Hyman
Mike Luckett
Milton Pressley
Miriam B. Stamps
Nadia J. Abgrab
Nancy Bloom
Nancy Boykin
Nancy Grassilli
Nanda Kumar
Nathan Himelstein
Neel Das
Nikolai Ostapenko
Norman Smothers
Notis Pagiavlas
Ottilia Voegtli
Pamela Grimm
Pamela Hulen
Parimal Bhagat
Pat Spirou
Patricia Baconride
Patricia Bernson
Patricia Manninen
Paul Dion
Paul Dowling
Paul Jackson
Paul Londrigan
Paul Myer
Peter J. McClure
Philip Kearney
Philip Parron
Philip Shum
Phyllis Fein
Phyllis McGinnis
xx
Poh-Lin Yeoh
Pola B. Gupta
Priscilla G. Aaltonen
Priscilla LaBarbera
Priyali Rajagopal
Rae Caloura
Rajesh Iyer
Rajiv Kashyap
Ram Kesaran
Randall E. Wade
Randy Stuart
Ravi Shanmugam
Raymond Marzilli
Reid Claxton
Renee Foster
Renee Pfeifer-Luckett
Rex Moody
Rhonda Mack
Rhonda Taylor
Richard C. Leventhal
Richard D. Parker
Richard Hansen
Richard Hargrove
Richard J. Lutz
Richard Lapidus
Richard M. Hill
Richard Penn
Rick Sweeney
Rita Dynan
Robert C. Harris
Robert Jones
Robert Lawson
Robert Luke
Robert Morris
Robert S. Welsh
Robert Swerdlow
Robert W. Ruekert
Robert Williams
Robert Witherspoon
Roberta Schultz
Roger McIntyre
Roger W. Egerton
Ron Dougherty
Ron Hasty
Ron Larson
Ron Weston
Ronald A. Feinberg
Ronald Michaels
Rosemary Ramsey
Roy Adler
Roy Klages
Ruth Ann Smith
Ruth Rosales
Ruth Taylor
S. Choi Chan
S. Tamer Cavusgil
Sally Sledge
Samuel E. McNeely
Sanal Mazvancheryl
Sandipan Sen
Sandra Robertson
Sandra Smith
Sandra Young
Sang Choe
Sanjay S. Mehta
Santhi Harvey
Scott Cragin
Scott Swan
Scott Thorne
Shabnam Zanjani
Sheila Wexler
Sherry Cook
Siva Balasubramanian
Soon Hong Min
Srdan Zdravkovic
Stacia Gray
Stan Garfunkel
Stan Scott
Starr F. Schlobohm
Stephen Calcich
Stephen Garrott
Stephen Pirog
Stephen W. Miller
Steve Hertzenberg
Steve Taylor
Steven Engel
Steven Moff
Sudhir Karunakaran
Sue Lewis
Sue McGorry
Sue Umashankar
Suman Basuroy
Sundaram Dorai
Sunder Narayanan
Susan Godar
Susan Peterson
Susan Sieloff
Susan Stanix
Susie Pryor
Suzanne Murray
Sylvia Keyes
Tamara Masters
Teri Root
Terrance Kevin McNamara
Terry Kroeten
Theodore Mitchell
Theresa Flaherty
Thom J. Belich
Thomas Brashear
Thomas L. Trittipo
Thomas M. Bertsch
Thomas Passero
Tim Aurand
Tim Landry
Timothy Donahue
Timothy Reisenwitz
Tina L. Williams
Tino DeMarco
Tom Castle
Tom Deckelman
Tom Marshall
Tom Rossi
Tom Stevenson
Tom Thompson
Tracy Fulce
Vahwere Kavota
Van R. Wood
Vicki Rostedt
Victoria Miller
Vincent P. Taiani
Vladimir Pashkevich
Vonda Powell
Walter Kendall
Wendy Achey
Wendy Wood
Wesley Johnston
William B. Dodds
William Brown
William D. Ash
William Foxx
William G. Browne
William G. Mitchell
William J. Carner
William Motz
William Pertula
William R. Wynd
William Rodgers
William S. Piper
Wilton Lelund
Yi He
Yue Pan
Yunchuan Liu
xxi
Thanks are due to many people, including current and past students, marketing educa-
tors around the globe, university staff, business journal and periodical authors, company
representatives, and marketing professionals of every kind. Their assistance has been
essential in our efforts to continue to provide the most comprehensive, up-to-date, and
integrated teaching and learning package available. We have been fortunate to have so
many people be part of our team! In particular, however, we continue to benefit from the
insights and guidance of our long-time friend, colleague, and coauthor, William Rudelius.
His contributions to the textbook are truly timeless.
Nancy Harrower of Concordia University, St. Paul, led our efforts on the Instructor’s Man-
ual, the PowerPoint slides, the In-Class Activities, and the new Digital In-Class Activities.
In addition, she provides the content for our blog (kerinmarketing.com). Tia Quinlan-
Wilder of the University of Denver was responsible for the Test Bank and Quizzes and the
LearnSmart component of our interactive learning package. Erin Steffes of Towson
University was responsible for the Connect application exercises and the new Marketing
Analytics exercises. All of these professors are exceptional educators and we are very
fortunate that they are part of our team. Michael Vessey, our long-time collaborator who
recently passed away, also provided assistance in the preparation of materials that are
still in use.
Thanks are also due to many other colleagues who contributed to the text, cases, and
supplements. They include: Richard Lutz of the University of Florida; Linda Rochford of
the University of Minnesota–Duluth; Kevin Upton of the University of Minnesota–Twin
Cities; Nancy Nentl of Metropolitan State University; Leslie Kendrick of Johns Hopkins
University; Lau Geok Theng of the National University of Singapore; and Leigh McAlister
of the University of Texas at Austin. Rick Armstrong of Armstrong Photography, Dan
Hundley and George Heck of Token Media, Nick Kaufman and Michelle Morgan of NKP
Media, Bruce McLean of World Class Communication Technologies, Paul Fagan of Fagan
Productions, Martin Walter of White Room Digital, Scott Bolin of Bolin Marketing, and
Andrew Schones of Pure Imagination produced the videos.
Many businesspeople also provided substantial assistance by making available informa-
tion that appears in the text, videos, and supplements—much of it for the first time in col-
lege materials. Thanks are due to Ann Rubin, Teresa Yoo, and Kathleen Cremmins of IBM;
Jana Hartline, Rommel Momen, Joanie Swearingen, and Amy Ulloa of Toyota; Justin Gold
and Mike Guanella of Justin’s; Lisa Selk of CytoSport; Jeff Ettinger of Hormel; Russ Lesser,
Billy Meistrell, Nick Meistrell, and Jenna Meistrell of Body Glove; Peter Maule of Marquee
Brands; Daniel Jasper, Jill Renslow, and Sarah Schmidt of Mall of America; Mike Pohl of
ACES Flight Simulation; Chris Klein, Jaime Cardenas, Casey Leppanen, Heather Peace,
and Lori Nevares of LA Galaxy; Ian Wolfman and Jana Boone of meplusyou; David Ford
and Don Rylander of Ford Consulting Group; Mark Rehborg of Tony’s Pizza; Vivian
Callaway, Sandy Proctor, and Anna Stoesz of General Mills; David Windorski, Tom Barnidge,
and Erica Schiebel of 3M; Nicholas Skally, Jeremy Stonier, and Joe Olivas of Prince Sports;
Brian Niccol of Pizza Hut; Tom Cassady of JCPenney, Inc.; Charles Besio of the Sewell
Automotive Group, Inc.; Lindsey Smith of GE Healthcare; Beverly Roberts of the U.S.
Census Bureau; Sheryl Adkins-Green of Mary Kay, Inc.; Mattison Crowe of Seven Cycles,
Inc.; Alisa Allen, Kirk Hodgdon, Patrick Hodgdon, and Nick Naumann of Altus Marketing
and Business Development; and Nelson Ng from Dundas Data Visualization, Inc.
Those who provided the resources for use in the Marketing: The Core, 8th edition text-
book, Instructor’s Manual, and/or PowerPoint presentations include: Todd Walker and
Jean Golden of Million Dollar Idea; Karen Cohick of Susan G. Komen for the Cure; Liz
Stewart of Ben & Jerry’s; John Formella and Patricia Lipari of Kodak; Erica Schiebel of
3M; Joe Diliberti of Consumer Reports; Patricia Breman of Strategic Business Insights
(VALS); Brian Nielsen of the Nielsen Company; David Walonick of StatPac; Mark Reh-
borg of Schwan’s Consumer Brands (Tony’s Pizza); Jennifer Olson of Experian Simmons;
xxii
Kitty Munger and Mary Wykoff of Wendy’s; Mark Heller of RetailSails; Nicky Hutcheon of
ZenithOptimedia; Amy Thompson and Jennifer Allison of Dell, Inc.; Adriana Carlton of
Walmart and Rick Hill of Bernstein-Rein Advertising (Walmart); Janine Bolin of Saks, Inc.;
Dr. Yory Wurmser of the Data and Marketing Association; and Elizabeth Clendenin of
Unilever (Caress).
We also want to thank the following people who generously provided assistance with our
Marketing: The Core, 8th edition In-Class Activities (ICAs) and associated PowerPoint
presentations: Mitch Forster and Carla Silveira of Ghirardelli Chocolate Company; Karolyn
Warfel and Betsy Boyer of Woodstream Corp. (Victor Pest); Leonard Fuld of Fuld & Co.;
Maggie Jantzen of Starbucks Coffee Company; Michelle Green and Victoria Glazier of
the U.S. Census Bureau; Lisa Castaldo of Pepsi; Muffie Taggert of General Mills; Robert M.
McMath, formerly of NewProductWorks; Greg Rodriguez; Jeremy Tucker, Julia Wells, and
Lisa Cone of Frito-Lay (Doritos); Susan Carroll and Bob Robinson of Apple, Inc.; Willard
Oberton of Fastenal Company; Scott Wosniak and Jennifer Arnold of Toro; Kim Eskro of
Fallon Worldwide (Gold’n Plump); Robin Grayson of TBWA/Chiat/Day (Apple); Katie Kramer
of Valassis Communications, Inc. (Nutella/Advil); Triestina Greco of Nutella/Ferrero; Tim
Stauber of Wyeth Consumer Healthcare (Advil); and Yvonne Pendleton and Lucille Storms
of Mary Kay.
Staff support from the Southern Methodist University and the University of Denver was
essential. We gratefully acknowledge the help of Jeanne Milazzo and Gabriela Barcenas
for their many contributions.
Checking countless details related to layout, graphics, and photos, and managing last-
minute text changes is essential for a sound and accurate textbook. This also involves
coordinating activities of authors, designers, editors, compositors, and production spe-
cialists. Christine Vaughan, our lead content project manager, of McGraw-Hill Education’s
production staff provided the necessary oversight and attention to detail while retaining
an extraordinary level of professionalism, often under tight deadlines. We are very fortu-
nate that Christine was part of our team. Thank you again!
Finally, we acknowledge the professional efforts of the McGraw-Hill Education staff. Com-
pletion of our book and its many supplements required the attention and commitment of
many editorial, production, marketing, and research personnel. Our McGraw-Hill team
included Susan Gouijnstook, Meredith Fossel, Nicole Young, Kelly Pekelder, Danielle
Clement, Susan Culbertson, Matt Diamond, Carrie Burger, and many others. In addition,
we relied on David Tietz for constant attention regarding the photo elements of the text,
and Claire Hunter for management of the details of the online authoring system. Handling
the countless details of our text, supplement, and support technologies has become an
incredibly complex challenge. We thank all these people for their efforts!
Roger A. Kerin
Steven W. Hartley
xxiii
BRIEF CONTENTS
Part 1 Initiating the Marketing Process
1 Creating Customer Relationships and Value through Marketing 2
2 Developing Successful Organizational and Marketing Strategies 26
Appendix A Building an Effective Marketing Plan 56
3 Understanding the Marketing Environment, Ethical Behavior,
and Social Responsibility 72
Part 2 Understanding Buyers and Markets
4 Understanding Consumer Behavior 98
5 Understanding Organizations as Customers 128
6 Understanding and Reaching Global Consumers and Markets 148
Part 3 Targeting Marketing Opportunities
7 Marketing Research: From Customer Insights to Actions 178
8 Market Segmentation, Targeting, and Positioning 210
Part 4 Satisfying Marketing Opportunities
9 Developing New Products and Services 236
10 Managing Successful Products, Services, and Brands 266
11 Pricing Products and Services 298
12 Managing Marketing Channels and Supply Chains 324
13 Retailing and Wholesaling 350
14 Implementing Interactive and Multichannel Marketing 378
15 Integrated Marketing Communications and Direct Marketing 402
16 Advertising, Sales Promotion, and Public Relations 428
17 Using Social Media and Mobile Marketing to Connect
with Consumers 460
18 Personal Selling and Sales Management 488
Appendix B Planning a Career in Marketing 516
Glossary 531
Name Index 539
Company/Product Index 549
Subject Index 558
xxiv
DETAILED CONTENTS
Part 1 Initiating the Marketing Process
1 CREATING CUSTOMER RELATIONSHIPS AND
VALUE THROUGH MARKETING 2
Creating Customer Value: The Chobani Way! 2
Creating an Exceptional Product 2
Connecting with Customers 2
Chobani Today 3
Chobani, Marketing, and You 4
What Is Marketing? 4
Marketing and Your Career 4
Marketing: Delivering Value to Customers 5
The Diverse Elements Influencing Marketing Actions 5
What Is Needed for Marketing to Occur 6
How Marketing Discovers and Satisfies Consumer Needs 7
Discovering Consumer Needs 7
The Challenge: Meeting Consumer Needs with New
Products 8
Satisfying Consumer Needs 10
The Marketing Program: How Customer Relationships Are Built 11
Relationship Marketing: Easy to Understand, Hard to Do 11
The Marketing Program and Market Segments 12
3M’s Strategy and Marketing Program to Help Students
Study 13
How Marketing Became So Important 15
Evolution of the Market Orientation 15
Focusing on Customer Relationship Management 15
Ethics and Social Responsibility in Marketing: Balancing the
Interests of Different Groups 16
The Breadth and Depth of Marketing 17
Learning Objectives Review 18
Learning Review Answers 19
Focusing on Key Terms 19
Applying Marketing Knowledge 20
Building Your Marketing Plan 20
Video Case 1: Chobani®: Making Greek
Yogurt a Household Name 20
Chapter Notes 24
2 DEVELOPING SUCCESSFUL ORGANIZATIONAL AND
MARKETING STRATEGIES 26
Ben and Jerry Are on a Mission: To Make Fantastic, Sustainable,
World-Changing Ice Cream 26
Today’s Organizations 28
Kinds of Organizations 28
©Diane Bond
areff/Invision
for
Chobani/AP
Images
©McGraw-Hi
ll Education/E
velyn
Nicole Kirkse
y, Photograp
her
xxv
Making Responsible Decisions: New Types of
Organizations Help Entrepreneurs Focus on
Passion and Purpose 29
What Is Strategy? 30
The Structure of Today’s Organizations 30
Strategy in Visionary Organizations 31
Organizational Foundation: Why Does It Exist? 31
Organizational Direction: What Will It Do? 32
Organizational Strategies: How Will It Do It? 34
Tracking Strategic Performance with Marketing
Analytics 34
Setting Strategic Directions 36
A Look Around: Where Are We Now? 36
Applying Marketing Metrics: How Well Is
Ben & Jerry’s Doing? 36
Growth Strategies: Where Do We Want to Go? 37
The Strategic Marketing Process 41
Principles Underlying the Strategic Marketing Process 41
The Planning Phase of the Strategic Marketing Process 42
The Implementation Phase of the Strategic Marketing
Process 44
The Evaluation Phase of the Strategic Marketing Process 46
Learning Objectives Review 48
Learning Review Answers 49
Focusing on Key Terms 50
Applying Marketing Knowledge 50
Building Your Marketing Plan 50
Video Case 2: IBM: Putting Smart Strategy to Work 50
Chapter Notes 53
Appendix A Building an Effective Marketing Plan 56
3 UNDERSTANDING THE MARKETING ENVIRONMENT,
ETHICAL BEHAVIOR, AND SOCIAL
RESPONSIBILITY 72
Fortune’s Businessperson of the Year: “I’m in This to Build
Something Cool!” 72
Facebook in the Future 73
Environmental Scanning 74
An Environmental Scan of Today’s Marketplace 74
Social Forces 74
Demographics 74
Culture 76
Making Responsible Decisions: Balancing Profits and
Purpose—Millennial Style 76
©David Paul
Morris/Bloom
berg
via Getty Ima
ges
xxvi
Economic Forces 77
Macroeconomic Conditions 77
Consumer Income 78
Technological Forces 79
Technology of Tomorrow 79
Technology’s Impact on Customer Value 80
Technology Enables Data Analytics 80
Competitive Forces 81
Alternative Forms of Competition 81
Small Businesses as Competitors 81
Regulatory Forces 82
Protecting Competition 82
Protecting Producers and Consumers 82
Control through Self-Regulation 83
Understanding Ethical Marketing Behavior 84
Societal Culture and Norms 84
Business Culture and Industry Practices 85
Corporate Culture and Expectations 85
Your Personal Moral Philosophy and Ethical Behavior 86
Making Responsible Decisions: Corporate Conscience
in the Cola War 86
Understanding Social Responsibility for Sustainable Marketing 87
Three Concepts of Social Responsibility 87
Sustainable Development: Doing Well by Doing Good 89
Marketing Matters: Will Consumers Switch Brands
for a Cause? Yes, If . . . 89
Learning Objectives Review 90
Learning Review Answers 90
Focusing on Key Terms 91
Applying Marketing Knowledge 91
Building Your Marketing Plan 92
Video Case 3: Toyota: Where the Future Is
Available Today 92
Chapter Notes 95
Part 2 Understanding Buyers and Markets
4 UNDERSTANDING CONSUMER BEHAVIOR 98
Enlightened Carmakers Know What Custom(h)ers
and Influenc(h)ers Value 98
Consumer Purchase Decision Process and Experience 100
Problem Recognition: Perceiving a Need 100
Information Search: Seeking Value 100
Alternative Evaluation: Assessing Value 101
Purchase Decision: Buying Value 102©Whisson/Jordan
/Corbis/Getty
Images
xxvii
Postpurchase Behavior: Realizing Value 102
Consumer Involvement Affects Problem Solving 103
Marketing Matters: How Much Is a Satisfied Customer
Worth? 103
Situational Influences That Affect Purchase Decisions 105
Putting the Purchase Decision Process into Practice: Consumer
Touchpoints and Consumer Journey Maps 105
Psychological Influences on Consumer Behavior 107
Consumer Motivation and Personality 107
Consumer Perception 109
Consumer Learning 110
Making Responsible Decisions: The Ethics
of Subliminal Messages 110
Consumer Values, Beliefs, and Attitudes 111
Consumer Lifestyle 112
Sociocultural Influences on Consumer Behavior 113
Personal Influence 113
Marketing Matters: BzzAgent—The Buzz Experience 115
Reference Group Influence 116
Family Influence 116
Culture and Subculture Influences 118
Learning Objectives Review 121
Learning Review Answers 121
Focusing on Key Terms 122
Applying Marketing Knowledge 122
Building Your Marketing Plan 122
Video Case 4: Coppertone: Creating the Leading
Sun Care Brand by Understanding Consumers 123
Chapter Notes 125
5 UNDERSTANDING ORGANIZATIONS AS CUSTOMERS 128
Organizational Buying Is Marketing, Too! Purchasing Publication
Paper for JCPenney 128
Business-to-Business Marketing and Organizational Buyers 130
Organizational Buyers 130
Organizational Markets 130
Measuring Organizational Markets 131
Characteristics of Organizational Buying 132
Demand Characteristics 132
Size of the Order or Purchase 132
Number of Potential Buyers 133
Organizational Buying Objectives 133
Organizational Buying Criteria 133
Buyer–Seller Relationships and Supply Partnerships 134Cou
rtesy of JCPe
nney
xxviii
Marketing Matters: At Milsco Manufacturing, “Our Marketing
Philosophy Is Designed to Develop Partnerships” and Deliver a
Great Ride for Customers’ Seats 135
The Organizational Buying Function and Process
and the Buying Center 136
The Buying Function in Organizations 136
Making Responsible Decisions: Sustainable Procurement for
Sustainable Growth at Starbucks 136
Stages in the Organizational Buying Process 137
The Buying Center: A Cross-Functional Group 137
Online Buying in Business-to-Business Marketing 140
Prominence of Online Buying in Organizational Markets 140
E-Marketplaces: Virtual Organizational Markets 140
Online Auctions in Organizational Markets 141
Marketing Matters: eBay Means Business for Business-to-
Business Marketing Entrepreneurs, Too! 141
Learning Objectives Review 142
Learning Review Answers 143
Focusing on Key Terms 143
Applying Marketing Knowledge 143
Building Your Marketing Plan 144
Video Case 5: Trek: Building Better Bikes through
Organizational Buying 144
Chapter Notes 147
6 UNDERSTANDING AND REACHING GLOBAL CONSUMERS
AND MARKETS 148
Transforming the Way India Sells and Transforming the Way India
Buys: Amazon India Builds a Multibillion-Dollar Operation from
the Ground up to the Cloud 148
Amazon’s Awesome Opportunity in India 148
Amazon’s Awesome Challenges in India 148
Failure Is Not an Option 149
Dynamics of World Trade 150
Global Perspective on World Trade 150
United States’ Perspective on World Trade 151
Marketing in a Dynamic Global Economy 152
Economic Protectionism by Individual Countries 152
Making Responsible Decisions: Global Ethics and Global
Economics—The Case of Protectionism 153
Economic Integration among Countries 154
Global Competition among Global Companies
for Global Consumers 155
The Presence of a Networked Global Marketspace 158
Photo: ©And
rey Arkusha/
Shutterstock
, Logo: ©Edit
orial/
Alamy Stock
Photo
xxix
Marketing Matters: The Global Teenager—A Market of
Voracious Consumers 158
Prevalence of Economic Espionage 159
A Global Environmental Scan 160
Cultural Diversity 160
Economic Considerations 163
Political-Regulatory Climate 165
Comparing Global Market-Entry Strategies 166
Exporting 166
Licensing 167
Marketing Matters: Creative Cosmetics and Creative Export
Marketing in Japan 167
Joint Venture 168
Direct Investment 168
Crafting a Worldwide Marketing Program 169
Product and Promotion Strategies 169
Distribution Strategy 171
Pricing Strategy 171
Learning Objectives Review 172
Learning Review Answers 173
Focusing on Key Terms 173
Applying Marketing Knowledge 173
Building Your Marketing Plan 173
Video Case 6: Mary Kay, Inc.: Building a Brand in India 174
Chapter Notes 176
Part 3 Targeting Marketing Opportunities
7 MARKETING RESEARCH: FROM CUSTOMER INSIGHTS
TO ACTIONS 178
Hollywood Loves Marketing Research! 178
A Film Industry Secret 178
The Role of Marketing Research 180
What Is Marketing Research? 180
The Challenges in Doing Good Marketing Research 181
Five-Step Marketing Research Approach 181
Step 1: Define the Problem 181
Set the Research Objectives 182
Identify Possible Marketing Actions 182
Step 2: Develop the Research Plan 182
Specify Constraints 182
Identify Data Needed for Marketing Actions 183
Determine How to Collect Data 183
Step 3: Collect Relevant Information 184
Secondary Data: Internal 184
©Moviestore
Collection Lt
d./Alamy
Stock Photo
xxx
Secondary Data: External 185
Advantages and Disadvantages of Secondary Data 185
Primary Data: Watching People 186
Marketing Matters: Online Databases and Internet Resources
Useful to Marketers 186
Primary Data: Asking People 188
Primary Data: Other Sources 192
Applying Marketing Metrics: Are the Carmex Social Media
Programs Working Well? 194
Advantages and Disadvantages of Primary Data 195
Step 4: Develop Findings 195
Making Responsible Decisions: No More Personal
Secrets: The Downside of Data Mining
and Predictive Modeling 197
Present the Findings 198
Step 5: Take Marketing Actions 199
Make Action Recommendations 199
Implement the Action Recommendations 200
Evaluate the Results 200
Sales Forecasting Techniques 200
Judgments of the Decision Maker 201
Surveys of Knowledgeable Groups 201
Statistical Methods 201
Learning Objectives Review 202
Learning Review Answers 203
Focusing on Key Terms 204
Applying Marketing Knowledge 204
Building Your Marketing Plan 204
Video Case 7: Carmex® (A): Leveraging Facebook
for Marketing Research 205
Chapter Notes 208
8 MARKET SEGMENTATION, TARGETING, AND
POSITIONING 210
Segmentation Rules in the Kingdom of Happiness! 210
Zappos’s Secret to Success 210
Delivering WOW Customer Service 210
Why Segment Markets? 212
What Market Segmentation Means 212
When and How to Segment Markets 213
Steps in Segmenting and Targeting Markets 216
Step 1: Group Potential Buyers into Segments 216
Step 2: Group Products to Be Sold into Categories 220
Step 3: Develop a Market-Product Grid and Estimate
the Size of Markets 222©Brad Swonetz/R
edux
xxxi
Step 4: Select Target Markets 223
Step 5: Take Marketing Actions to Reach Target Markets 224
Market-Product Synergies: A Balancing Act 226
Marketing Matters: Apple’s Segmentation Strategy—Camp
Runamok No Longer 227
Positioning the Product 228
Two Approaches to Product Positioning 228
Writing a Positioning Statement 228
Product Positioning Using Perceptual Maps 228
A Perceptual Map to Reposition Chocolate Milk for
Adults 229
Learning Objectives Review 230
Learning Review Answers 230
Focusing on Key Terms 231
Applying Marketing Knowledge 231
Building Your Marketing Plan 231
Video Case 8: Prince Sports, Inc.: Tennis Racquets
for Every Segment 232
Chapter Notes 234
Part 4 Satisfying Marketing Opportunities
9 DEVELOPING NEW PRODUCTS AND SERVICES 236
Apple: The World-Class New-Product Machine 236
Apple’s New-Product Development Successes 236
Apple’s New-Product Development Stumbles 237
The Next Chapter in Apple’s Story:
An Apple-Enabled iCar? 238
What Are Products and Services? 238
A Look at Goods, Services, and Ideas 238
Classifying Products 239
Classifying Services 239
The Uniqueness of Services 241
Assessing and Improving Service Quality 242
Product Classes, Forms, Items, Lines, and Mixes 242
New Products and Why They Succeed or Fail 244
What Is a New Product? 244
Marketing Matters: Too Much of a Good Thing:
Feature Bloat and Feature Fatigue in New-Product
Development 245
Why Products and Services Succeed or Fail 246
How Applying Marketing Metrics Can Monitor
New-Product Performance 249
©John Ziome
k/Courier- Po
st via
USA TODAY
NETWORK
xxxii
Applying Marketing Metrics: Which States Are
Underperforming? 249
The New-Product Development Process 250
Stage 1: New-Product Strategy Development 250
Stage 2: Idea Generation 251
Stage 3: Screening and Evaluation 253
Marketing Matters: Was the Google Glass Half Full
or Half Empty? 254
Stage 4: Business Analysis 255
Stage 5: Development 255
Stage 6: Market Testing 256
Stage 7: Commercialization 257
Learning Objectives Review 258
Learning Review Answers 259
Focusing on Key Terms 260
Applying Marketing Knowledge 260
Building Your Marketing Plan 260
Video Case 9: GoPro: Making All of Us Heroes
with Exciting New Products 261
Chapter Notes 264
10 MANAGING SUCCESSFUL PRODUCTS,
SERVICES, AND BRANDS 266
Gatorade: Bringing Science to Sweat
for More Than 50 Years 266
Creating the Gatorade Brand 266
Building the Gatorade Brand 267
Charting the Product Life Cycle 268
Introduction Stage 268
Growth Stage 270
Maturity Stage 271
Decline Stage 271
Three Aspects of the Product Life Cycle 272
Marketing Matters: Will E-mail Spell Extinction
for Fax Machines? 272
Managing the Product Life Cycle 276
Role of a Product Manager 276
Modifying the Product 276
Modifying the Market 277
Applying Marketing Metrics: Knowing
Your CDI and BDI 277
Repositioning the Product 278
©J. Meric/Ge
tty Images
xxxiii
Making Responsible Decisions: Consumer Economics of
Downsizing—Get Less, Pay More 279
Branding and Brand Management 280
Brand Personality and Brand Equity 280
Picking a Good Brand Name 282
Branding Strategies 283
Packaging and Labeling Products 286
Creating Customer Value and Competitive Advantage through
Packaging and Labeling 286
Marketing Matters: Creating Customer Value through
Packaging—Pez Heads Dispense More Than Candy 287
Packaging and Labeling Challenges and Responses 288
The Marketing of Services 289
Product (Service) 289
Price 289
Place (Distribution) 290
Promotion 290
People 290
Physical Environment 290
Process 291
Learning Objectives Review 291
Learning Review Answers 292
Focusing on Key Terms 293
Applying Marketing Knowledge 293
Building Your Marketing Plan 293
Video Case 10: Justin’s: Managing a Successful Product
with Passion 293
Chapter Notes 296
11 PRICING PRODUCTS AND SERVICES 298
Vizio, Inc.—Building a Smart TV Brand
at a Great Value 298
Nature and Importance of Price 300
What Is a Price? 300
Price as an Indicator of Value 301
Price in the Marketing Mix 302
Marketing Matters: Does Spirit Airlines Engage in Value
Pricing? For Some Yes, for Others No 302
Common Pricing Approaches 303
Demand-Oriented Pricing Approaches 303
Cost-Oriented Pricing Approaches 304
Marketing Matters: Energizer’s Lesson in Price
Perception—Value Lies in the Eye of the Beholder 305
Profit-Oriented Pricing Approaches 306
©CTK/Alamy
Stock Photo
xxxiv
Competition-Oriented Pricing Approaches 307
Applying Marketing Metrics: Are Red Bull Prices
Above, At, or Below the Market? 308
Estimating Demand and Revenue 309
Estimating Demand 309
Price Elasticity of Demand 311
Fundamentals of Estimating Revenue 311
Determining Cost, Volume, and Profit Relationships 312
The Importance of Controlling Costs 312
Break-Even Analysis 312
Pricing Objectives and Constraints 314
Identifying Pricing Objectives 314
Identifying Pricing Constraints 315
Setting a Final Price 316
Step 1: Select an Approximate Price Level 316
Step 2: Set the List or Quoted Price 317
Step 3: Make Special Adjustments to the List or
Quoted Price 317
Making Responsible Decisions: The Ethics and Economics
of Surge Pricing 318
Learning Objectives Review 319
Learning Review Answers 320
Focusing on Key Terms 320
Applying Marketing Knowledge 320
Building Your Marketing Plan 321
Video Case 11: Carmex (B): Setting the Price of the
Number One Lip Balm 321
Chapter Notes 323
12 MANAGING MARKETING CHANNELS AND SUPPLY
CHAINS 324
Eddie Bauer: The “Brick, Click, and Flip”
Pick for the Active Outdoor Enthusiast 324
Eddie Bauer’s Multichannel Marketing Strategy 324
Supply Chain Dynamics at Eddie Bauer 325
Nature and Importance of Marketing Channels 326
What Is a Marketing Channel of Distribution? 326
How Customer Value Is Created by Intermediaries 326
Marketing Channel Structure and Organization 328
Marketing Channels for Consumer Products and Services 328
Marketing Channels for Business Products and Services 329
Internet Marketing Channels 330
Direct and Multichannel Marketing 330
Dual Distribution and Strategic Channel Alliances 331
Vertical Marketing Systems 332
©Bonnie Kam
in/PhotoEdit,
Inc.
xxxv
Marketing Matters: Nestlé and General Mills—Cereal
Partners Worldwide 332
Marketing Channel Choice and Management 334
Factors Affecting Channel Choice and Management 334
Applying Marketing Metrics: Channel Sales and Profit
at Charlesburg Furniture 336
Managing Channel Relationships: Conflict and
Cooperation 337
Logistics and Supply Chain Management 338
Supply Chains versus Marketing Channels 339
Sourcing, Assembling, and Delivering a New Car:
The Automotive Supply Chain 339
Supply Chain Management and Marketing Strategy 340
Marketing Matters: IBM’s Watson Supply Chain—Delivering
a Total Solution for Its Customers 341
Two Concepts of Logistics Management in a Supply Chain 342
Total Logistics Cost Concept 342
Customer Service Concept 342
Closing the Loop: Reverse Logistics 343
Making Responsible Decisions: Reverse Logistics
and Green Marketing Go Together at Hewlett-Packard:
Recycling e-Waste 344
Learning Objectives Review 345
Learning Review Answers 345
Focusing on Key Terms 346
Applying Marketing Knowledge 346
Building Your Marketing Plan 346
Video Case 12: Amazon: Delivering the Earth’s Biggest
Selection! 347
Chapter Notes 349
13 RETAILING AND WHOLESALING 350
Smart Stores Are Changing the Customer Journey! 350
The Value of Retailing 352
Consumer Utilities Offered by Retailing 352
The Global Economic Impact of Retailing 353
Classifying Retail Outlets 353
Form of Ownership 354
Making Responsible Decisions: How Green Is Your Retailer?
The Rankings Are Out! 354
Level of Service 356
Type of Merchandise Line 356
Nonstore Retailing 357
©Jiraroj Prad
itcharoenkul/
Alamy
Stock Photo
xxxvi
Automatic Vending 358
Direct Mail and Catalogs 358
Television Home Shopping 359
Online Retailing 359
Telemarketing 360
Direct Selling 361
Retailing Strategy 361
Applying Marketing Metrics: Why Apple Stores May Be
the Best in the United States! 365
The Changing Nature of Retailing 366
The Wheel of Retailing 366
The Retail Life Cycle 367
Data Analytics 368
Wholesaling 368
Merchant Wholesalers 369
Agents and Brokers 369
Manufacturers’ Branches and Offices 370
Learning Objectives Review 370
Learning Review Answers 371
Focusing on Key Terms 371
Applying Marketing Knowledge 372
Building Your Marketing Plan 372
Video Case 13: Mall of America®: America’s Biggest Mall
Knows the Secret to Successful Retailing! 372
Chapter Notes 375
14 IMPLEMENTING INTERACTIVE AND MULTICHANNEL
MARKETING 378
Seven Cycles Delivers Just One Bike. Yours. 378
Creating Customer Value, Relationships,
and Experiences in Marketspace 380
Marketing Challenges in Two Environments 380
Creating Customer Value in Marketspace 380
Interactivity, Individuality, and Customer Relationships in
Marketspace 382
Creating a Compelling Online Customer Experience 383
Online Consumer Behavior and Marketing
Opportunities and Practices 386
Who Is the Online Consumer? 386
Applying Marketing Metrics: Sizing Up Site Stickiness
at Sewell Automotive Companies 386
What Consumers Buy Online 387
Why Consumers Shop and Buy Online 387
When and Where Consumers Shop and Buy Online 391
How Consumers Shop and Buy Online 392
Courtesy of S
even Cycles,
Inc.
xxxvii
Making Responsible Decisions: Who Is Responsible
for Internet Privacy and Security? 392
Cross-Channel Consumers and Multichannel Marketing 393
Who Is the Cross-Channel Consumer? 393
Implementing Multichannel Marketing 393
Learning Objectives Review 395
Learning Review Answers 396
Focusing on Key Terms 396
Applying Marketing Knowledge 397
Building Your Marketing Plan 397
Video Case 14: Pizza Hut and imc2: Becoming
a Multichannel Marketer 397
Chapter Notes 401
15 INTEGRATED MARKETING COMMUNICATIONS AND
DIRECT MARKETING 402
Sometimes Taco Bell Leads to Wedding Bells! 402
The Communication Process 404
Encoding and Decoding Messages 405
Feedback 405
Noise 406
The Promotional Elements 406
Advertising 406
Personal Selling 407
Public Relations 408
Sales Promotion 409
Direct Marketing 409
Integrated Marketing Communications—Developing
the Promotional Mix 410
The Target Audience 410
The Product Life Cycle 410
Marketing Matters: Hey Marketers, College Students Are
Digital and Mobile! 411
Channel Strategies 412
Developing an Integrated Marketing Communications Program 413
Identifying the Target Audience 413
Specifying Promotion Objectives 414
Setting the Promotion Budget 414
Selecting the Right Promotional Tools 415
Applying Marketing Metrics: How Much Should You
Spend on IMC? 415
Designing the Promotion 416
Scheduling the Promotion 416
Executing and Assessing the Promotion Program 417
©Walt Disne
y Studios Mo
tion
Pictures/Pho
tofest
xxxviii
Direct Marketing 418
The Growth of Direct Marketing 418
The Value of Direct Marketing 419
Technological, Global, and Ethical Issues in Direct
Marketing 419
Making Responsible Decisions: What Is the Future of Your
Privacy? 420
Learning Objectives Review 421
Learning Review Answers 421
Focusing on Key Terms 422
Applying Marketing Knowledge 422
Building Your Marketing Plan 423
Video Case 15: Taco Bell: Using IMC to Help Customers
Live Más! 423
Chapter Notes 425
16 ADVERTISING, SALES PROMOTION, AND PUBLIC
RELATIONS 428
Fantasy Is Becoming Reality for Advertisers! 428
Types of Advertisements 430
Product Advertisements 430
Institutional Advertisements 431
Developing the Advertising Program 432
Identifying the Target Audience 432
Specifying Advertising Objectives 432
Setting the Advertising Budget 432
Designing the Advertisement 433
Selecting the Right Media 435
Applying Marketing Metrics: What Is the Best Way
to Reach 1,000 Customers? 436
Different Media Alternatives 437
Scheduling the Advertising 441
Making Responsible Decisions: Who Is Responsible for
Preventing Click Fraud? 441
Executing the Advertising Program 442
Pretesting the Advertising 442
Carrying Out the Advertising Program 443
Assessing the Advertising Program 443
Posttesting the Advertising 443
Making Needed Changes 444
Sales Promotion 444
Consumer-Oriented Sales Promotions 444
Trade-Oriented Sales Promotions 448
Public Relations 449
©Ray Tang/R
EX/Shuttersto
ck
xxxix
Learning Objectives Review 450
Learning review Answers 451
Focusing on Key Terms 452
Applying Marketing Knowledge 452
Building Your Marketing Plan 452
Video Case 16: Google, Inc.: The Right Ads
at the Right Time 453
Chapter Notes 455
17 USING SOCIAL MEDIA AND MOBILE MARKETING
TO CONNECT WITH CONSUMERS 460
Mobile Moments Will Soon Include a Nice Ride! 460
Understanding Social Media 462
What Are Social Media? 462
Why and How Social Media Transformed
Marketing Communications 463
A Look at Four Important Social Media 465
Comparing Four Social Media 465
Facebook 465
Twitter 467
LinkedIn 468
YouTube 469
Social Media Marketing Programs and Customer Engagement 471
Selecting Social Media 471
Marketing Matters: Vloggers Are the New Power Players,
Worldwide! 471
Selecting Social Media Content 472
Measuring the Results of Social Media Marketing
Programs 473
Carmex Goes Viral with Luck and a LeBron James Bear
Hug 475
The Future: Convergence and Mobility 477
The Convergence of Real and Digital Worlds 477
Mobile Marketing: Tightening Links to Marketing
Actions 478
Learning Objectives Review 480
Learning Review Answers 480
Focusing on Key Terms 481
Applying Marketing Knowledge 481
Building Your Marketing Plan 482
Video Case 17: Body Glove: Helping Consumers
Do What They Love! 482
Chapter Notes 485
Background:
©Pozdeyev
Vitaly/
Shutterstock
; Icons: ©Hilc
h/
Shutterstock
xl
18 PERSONAL SELLING AND SALES MANAGEMENT 488
Meet Today’s Sales Professional 488
Scope and Significance of Personal Selling
and Sales Management 490
Nature of Personal Selling and Sales Management 490
Selling Happens Almost Everywhere 490
Personal Selling in Marketing and Entrepreneurship 491
Creating Customer Solutions and Value through Salespeople:
Relationship and Partnership Selling 491
The Many Forms of Personal Selling 492
Order-Taking Salespeople 492
Marketing Matters: Science and Selling: Is Customer Value
Creation in Your Genes? 492
Order-Getting Salespeople 493
Customer Sales Support Personnel 493
The Personal Selling Process: Building Customer Relationships 495
Marketing Matters: Creating and Sustaining Customer
Value through Cross-Functional Team Selling 495
Prospecting: Identifying and Qualifying Prospective
Customers 496
Preapproach: Preparing for the Sales Call 497
Approach: Making the First Impression 498
Presentation: Tailoring a Solution for a Customer’s Needs 498
Marketing Matters: Imagine This . . . Putting the Customer
into Customer Solutions! 500
Close: Asking for the Customer’s Order
or Business 501
Follow-up: Solidifying the Customer Relationship 501
The Sales Management Process 502
Sales Plan Formulation: Setting Direction 502
Making Responsible Decisions: The Ethics of Asking
Customers about Competitors 503
Sales Plan Implementation: Putting the Plan into Action 504
Marketing Matters: What Is Your Emotional Intelligence? You
Might Be Surprised. 505
Salesforce Evaluation: Measuring Results 506
Customer Relationship Management Systems
and Technology 507
Applying Marketing Metrics: Tracking Salesperson
Performance at Moore Chemical & Sanitation
Supply, Inc. 508
©Hillsman St
uart Jackson
xli
Learning Objectives Review 510
Learning Review Answers 510
Focusing on Key Terms 511
Applying Marketing Knowledge 511
Building Your Marketing Plan 512
Video Case 18: Xerox: Building Customer Relationships
through Personal Selling 512
Chapter Notes 514
Appendix B Planning a Career in Marketing 516
Glossary 531
Name Index 539
Company/Product Index 549
Subject Index 558
MARKETING:
THE CORE
Creating Customer
Relationships and
Value through
Marketing
Le a r n i ng
Ob j e c t i v e s
After reading this chapter
you should be able to:
Define marketing and
identify the diverse
factors that influence
marketing actions.
Explain how marketing
discovers and satisfies
consumer needs.
Distinguish between
marketing mix factors
and environmental
forces.
Explain how
organizations build
strong customer
relationships and
customer value
through marketing.
Describe the
characteristics of a
market orientation.
LO 1-1
LO 1-2
LO 1-3
LO 1-4
LO 1-5
1
Creating Customer Value: The Chobani Way!
Are you a health-conscious consumer? Are you determined to find food products
that are a good value for you? Then you may have noticed Chobani yogurt while
you were shopping!
If you purchased Chobani and enjoyed the product, it was the result of an ex-
traordinary marketing success story. Just a few years ago the U.S. yogurt market
was dominated by Dannon and Yoplait. Then Hamdi Ulukaya created Chobani
with less sugar and more protein to better match the changing tastes of American
consumers. Today Chobani has more than $1.5 billion in annual sales and was
recently recognized as one of the most innovative companies in the world “for
stirring it up in the grocery store.”1
What is the secret to Chobani’s success? Read on to hear the rest of the story!
Creating an Exceptional Product
The Chobani website proclaims that its guiding mission is “better food for more
people.” The process starts with milk from local sources and then uses a strain-
ing procedure that makes the yogurt extra thick and gives it twice as much
protein. Finally, only real fruit and natural sweeteners are added. The recipe is
the result of a commitment to a high-quality product. “I was very picky. It took
us 18 months to get the recipe right. I knew I had only one shot, and it had to be
perfect,” says Ulukaya. To produce the yogurt, Ulukaya purchased a closed dairy
in a small town in New York using a Small Business Administration loan. He
remodeled the facility using sustainability as a theme to reflect a focus on envi-
ronment and community.2
Connecting with Customers
Chobani had little money for traditional advertising, so it relied on positive
word of mouth, with one happy customer telling another about the new style
of yogurt. In addition, Chobani used social media such as Twitter and
Facebook to connect with consumers and a mobile yogurt food truck
3
Creating Customer
Relationships and
Value through
Marketing
called the CHOmobile to hand out free samples to encourage consumers to try
Chobani’s Greek Yogurt for the first time. One of Chobani’s biggest breakthroughs
in gaining public awareness was its sponsorship of the U.S. Olympic and Paralym-
pic Teams.
Chobani also pushed for distribution in major grocery chains, rather than smaller
niche stores, and encouraged placement of the product in the main dairy cases of the
stores, not the specialty or health food sections. Ulukaya was convinced that Americans
would really like Greek yogurt if they tried it and that they would try it if they heard
about it and could find it easily in their grocery store.3
Chobani Today
Chobani continues to monitor changing consumer tastes and offers new products to
accommodate them. For example, the company recently introduced a yogurt drink
called Drink Chobani, a package with a second compartment of crunchy toppings to
add to the yogurt called Chobani Flip, a less tart product called Smooth Yogurt, and
a squeezable package called Chobani Savor. The products are designed for new and
existing consumers and for new eating occasions.
Video 1-1
Chobani Fruit
Symphony Ad
kerin.tv/cr8e/v1-1
Source: Chobani, LLC
Source: Chobani, LLC Source: Chobani, LLC
4
One way Chobani stays in touch with consumer interests is
through its yogurt cafés in New York’s SoHo and Tribeca neigh-
borhoods. New ideas are continually tested on the menu and the
feedback has been so useful that Chobani plans to open similar
outlets in Los Angeles, San Francisco, Chicago, and other U.S.
cities. Chobani also recently announced a plan to open the
Chobani Food Incubator, which is designed to invest in and culti-
vate ideas from emerging food entrepreneurs.
Today, Chobani boasts a 40 percent market share of the
Greek yogurt segment, which makes up almost half of the
$8 billion yogurt market. Chobani advertising, such as
the “Believe in Food,” “No Bad Stuff,” and “Love This Life”
campaigns, are featured on the Chobani YouTube channel. The
company’s success has even led to a Super Bowl ad featuring a 1,400-pound bear in
search of a healthy snack!4
Chobani, Marketing, and You
Will Hamdi Ulukaya and his Chobani Greek Yogurt continue this fantastic success story—
especially with the recent appearance of competing Greek yogurts from Yoplait, Dannon,
Annie’s, Noosa, and Fage? For Ulukaya, one key factor will be how well Chobani under-
stands and uses marketing—the subject of this book.
Are you a marketing expert?
If so, what would you pay for
this cutting-edge TV?
©Kobby Dagan/VWPics via AP
Images
Located in New York City,
Chobani SoHo is the brand’s
first-of-its-kind retail concept,
serving yogurt creations with
innovative toppings.
©Diane Bondareff/Invision for
Chobani/AP Images
WHAT IS MARKETING?
The good news is that you are already a marketing expert! You perform many market-
ing activities and make marketing-related decisions every day. For example, would
you sell more LG Signature 77-inch 4K OLED TVs at $24,999 or $7,999? You an-
swered $7,999, right? So your experience in shopping gives you some expertise in
marketing. As a consumer, you’ve been involved in thousands of marketing decisions,
mostly on the buying and not the selling side.
The bad news is that good marketing isn’t always easy. That’s why
every year thousands of new products fail in the marketplace and then
quietly slide into oblivion.
Marketing and Your Career
Marketing affects all individuals, all organizations, all industries, and
all countries. This book seeks to teach you marketing concepts, often
by having you actually “do marketing”—by putting you in the shoes
of a marketing manager facing actual marketing decisions. The book
also shows marketing’s many applications and how it affects our lives.
This knowledge should make you a better consumer and enable you to
be a more informed citizen, and it may even help you in your career
planning.
Perhaps your future will involve doing sales and marketing for a large
organization. Working for a well-known company—Apple, Ford, Facebook,
or General Mills—can be personally satisfying and financially rewarding,
and you may gain special respect from your friends.
Start-ups and small businesses also offer marketing careers. Small
businesses are the source of the majority of new U.S. jobs. So you
might become your own boss by being an entrepreneur and starting
your own business.
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Shortly after leaving Stanford, Elon Musk, for example,
started and sold a web software company called Zip2. With
the proceeds from that business he started another business
which merged with another and became PayPal. When PayPal
was purchased by eBay, Musk founded another venture called
SpaceX, which develops and manufactures space launch
vehicles and currently launches satellites and delivers cargo to
the International Space Station. Since those initial business
start-ups, Musk has also started the electric car company
Tesla and a solar power company called SolarCity. In addi-
tion, he has started a design competition for a high-speed
transportation system called Hyperloop, a not-for-profit arti-
ficial intelligence company called OpenAI, and a neurotech-
nology company called Neuralink. Perhaps your interest in
marketing will lead to new business successes like Musk’s!5
Marketing: Delivering Value to Customers
The American Marketing Association represents individuals and organizations in-
volved in the development and practice of marketing worldwide. It defines marketing
as the activity, set of institutions, and processes for creating, communicating, deliver-
ing, and exchanging offerings that have value for customers, clients, partners, and so-
ciety at large.6 This definition shows that marketing is far more than simply advertising
or personal selling. It stresses the need to deliver genuine value in the offerings of
goods, services, and ideas marketed to customers. Also, notice that an organization’s
marketing activities should also create value for its partners and for society.
To serve both buyers and sellers, marketing seeks (1) to discover the needs and
wants of prospective customers and (2) to satisfy them. These prospective customers
include both individuals, buying for themselves and their households, and organiza-
tions, buying for their own use (such as manufacturers) or for resale (such as wholesal-
ers and retailers). The key to achieving these two objectives is the idea of exchange,
which is the trade of things of value between a buyer and a seller so that each is better
off after the trade.7
The Diverse Elements Influencing Marketing Actions
Although an organization’s marketing activity focuses on assessing and satisfying con-
sumer needs, countless other people, groups, and forces interact to shape the nature of
its actions (see Figure 1–1). Foremost is the organization itself, whose mission and
objectives determine what business it is in and what goals it seeks. Within the organi-
zation, management is responsible for establishing these goals. The marketing depart-
ment works closely with a network of other departments and employees to help provide
the customer-satisfying products required for the organization to survive and prosper.
Figure 1–1 also shows the key people, groups, and forces outside the organization
that influence its marketing activities. The marketing department is responsible for
facilitating relationships, partnerships, and alliances with the organization’s custom-
ers, its shareholders (or often representatives of nonprofit organizations), its suppliers,
and other organizations. Environmental forces involving social, economic, technologi-
cal, competitive, and regulatory considerations also shape an organization’s marketing
actions. Finally, an organization’s marketing decisions are affected by and, in turn,
often have an important impact on society as a whole.
The organization must strike a balance among the sometimes differing interests of
these groups. For example, it is not possible to simultaneously provide the lowest-
priced and highest-quality products to customers and pay the highest prices to suppli-
ers, the highest wages to employees, and the maximum dividends to shareholders.
LO 1-1
Define marketing
and identify the
diverse factors that
influence marketing
actions.
The chief executive officer of
Tesla and SpaceX began
building businesses shortly
after graduating from college.
©Reuters/Alamy Stock Photo
marketing
The activity, set of
institutions, and processes
for creating, communicating,
delivering, and exchanging
offerings that have value for
customers, clients, partners,
and society at large.
exchange
The trade of things of value
between buyer and seller so
that each is better off after
the trade.
6
The Organization and Its Departments
SocietySociety
Other
organizations
Suppliers
Partnerships
Alliances
Relationships
Ownership
Customers
Shareholders
(owners)
Competitive RegulatorySocial Economic Technological
Environmental forces
Marketing
department
Information
technology
department
Human
resources
department
Research
and
development
department
Finance
department
Senior
management
Manufacturing
department
What Is Needed for Marketing to Occur
For marketing to occur, at least four factors are required: (1) two or more parties (indi-
viduals or organizations) with unsatisfied needs, (2) a desire and ability on their part to
have their needs satisfied, (3) a way for the parties to communicate, and (4) something
to exchange.
Two or More Parties with Unsatisfied Needs Suppose you’ve developed an
unmet need—a desire for a late-night meal after studying for an exam—but you don’t yet
know that Domino’s has a location in your
area. Also unknown to you is that Domino’s
has a special “mix & match” offer for any two
or more of its menu items, just waiting to be
ordered and picked up or delivered. This is an
example of two parties with unmet needs:
you, desiring a meal, and your local Domino’s
owner, needing someone to place an order.
Desire and Ability to Satisfy These
Needs Both you and the Domino’s owner
want to satisfy these unmet needs. Further-
more, you have the money to pay for a pur-
chase and the time to place an order online,
over the telephone, or at a Domino’s loca-
tion. The Domino’s owner has the desire to
sell its products but also the ability to do so
since the items are easily made and delivered
to (or picked up by) you.
A Way for the Parties to Communicate
The marketing transaction of purchasing a
FIGURE 1–1
A marketing department
relates to many people,
organizations, and forces.
Note that the marketing
department both shapes and
is shaped by its relation ship
with these internal and
external groups.
Marketing doesn’t happen in a
vacuum. The text describes
the four factors needed to buy
a product from Domino’s Mix &
Match menu.
Source: Domino’s Pizza
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Domino’s pizza or one of its other products will never occur unless you are aware the prod-
uct exists and you know how to make a purchase (at a street address, through a URL, or via
a phone number). Similarly, Domino’s won’t be able to sell its products unless there’s a
market of potential buyers nearby. When you receive a coupon on your phone or drive by
and see the Domino’s store location, this communication barrier between you (the buyer)
and the Domino’s owner (the seller) is overcome.
Something to Exchange Marketing occurs when the transaction takes place
and both the buyer and seller exchange something of value. In this case, you exchange
your money ($5.99) for each item ordered from Domino’s Mix & Match menu. Both
you and the Domino’s owner have gained and also given up something, but you are
both better off because each of you has satisfied the other’s unmet needs. You have
the opportunity to eat Domino’s food items to satisfy your hunger, but you gave up
some money to do so; the Domino’s owner gave up the pizza, salad, and other items
but received money, which will help the owner remain in business. The ethical and
regulatory foundations of this exchange process are central to marketing and are dis-
cussed in Chapter 3.
1-1. What is marketing?
1-2. Marketing focuses on and consumer needs.
1-3. What four factors are needed for marketing to occur?
learning review
HOW MARKETING DISCOVERS AND SATISFIES CONSUMER NEEDS
The importance of discovering and satisfying consumer needs in order to develop and
offer successful products is so critical to understanding marketing that we look at
each of these two steps in detail next. Let’s start by asking you to analyze the three
products below.
Discovering Consumer Needs
The first objective in marketing is discovering the needs of prospective customers.
Marketers often use customer surveys, concept tests, and other forms of marketing re-
search (discussed in detail in Chapter 7) to better understand customer ideas. Many
LO 1-2
Explain how
marketing
discovers and
satisfies consumer
needs.
For these three products,
identify (1) what benefits the
product provides buyers
and (2) what factors or
“showstoppers” might doom
the product in the marketplace.
Answers are discussed in
the text.
(Left): ©Victor Virgile/Gamma-
Rapho via Getty Images; (Middle):
Source: The Coca-Cola Company;
(Right): Source: YOYO
A wearable computer. A no sugar soda. A subscription service for automobiles.
8
firms also use “crowdsourcing” websites to solicit and evaluate ideas from customers.
At LEGO Group, for example, ideas that receive 10,000 votes from site visitors are
considered for possible addition to the product line. LEGO Group products that were
discovered through the website include its Ghostbusters Ectomobile ambulance, its
Mars Curiosity Rover, and a set based on the Minecraft video game! Sometimes, how-
ever, customers may not know or be able to describe what they need and want. Smart-
phones, connected homes, and electric cars are all examples of this, in which case an
accurate long-term prediction of consumer needs is essential.8
The Challenge: Meeting Consumer Needs with New Products
While marketers are improving the ways they can generate new product ideas, experts
estimate that it takes 3,000 raw ideas to generate one commercial success. Market intel-
ligence agency Mintel estimates that 33,000 new products are introduced worldwide
each month. In addition, studies of new-product launches indicate that about 40 percent
of the products fail. Robert M. McMath, who has studied more than 110,000 new-
product launches, has two key suggestions: (1) focus on what the customer benefit is,
and (2) learn from past mistakes.9
The solution to preventing product failures seems embarrassingly obvious. First,
find out what consumers need and want. Second, produce what they need and want,
and don’t produce what they don’t need and want. The three products shown previ-
ously illustrate just how difficult it is to achieve new-product success, a topic covered
in more detail in Chapter 9.
Without reading further, think about the potential benefits to customers and possi-
ble “showstoppers”—factors that might doom the product—for each of the three prod-
ucts pictured. Some of the products may come out of your past, and others may be on
your horizon. Here’s a quick analysis of the three products:
∙ Google Glass. In 2014 Google launched a wearable computer called Google
Glass. The new product was head-mounted and similar in appearance to a pair of
glasses. In addition, though, the glasses had Internet capabilities, a camera, phone,
speaker, microphone, touch pad, and a heads-up display. Less than a year later
Google announced that it would stop producing Google Glass. While the product
was popular among technology enthusiasts it did not attract a mass market. Show-
stoppers included its $1,500 price tag, a general perception that it looked “nerdy,”
and concerns that wearing the device might violate privacy rights. Google is re-
portedly working on a redesigned model, however, so watch for a new Glass!10
∙ Coca-Cola Stevia No Sugar. As consumer preferences have shifted, beverage com-
panies have expanded their offerings to include drinks with less sugar. Soda pro-
ducers, for example, have offered new products such as Pepsi True and Coca-Cola
Life which are sweetened with sugar and stevia leaf extract. New products are also
being developed in anticipation of the U.S. Food & Drug Administration’s new
Nutrition Facts label requirements, taking effect in 2020, which will provide more
information about added sugars. Coca-Cola, for example, is testing Coca-Cola
Stevia which will be sweetened only with stevia. A potential showstopper: In the past
consumers reported that products with stevia sweetener had a bitter aftertaste. Will
Coca-Cola Stevia be different? As always, as a consumer you will be the judge!11
∙ YoYo. This pay-per-mile car subscription service hopes to disrupt the traditional
car purchase and ownership experience by offering consumers access to any type
of vehicle at any time at a cost lower than the $9,500 consumers spend on per-
sonal transportation each year. Selection takes place on a smartphone and the
vehicle can cost as little as $0.50 per mile, which also compares favorably with
car-sharing costs such as $0.96 per mile for an Uber vehicle, or $1.50 per mile
for a Zipcar. What are potential showstoppers? Consumers might not value ac-
cess to different types of vehicles, always driving a new vehicle, or avoiding the
responsibilities of ownership.12
Video 1-2
Google Glass
kerin.tv/cr8e/v1-2
Video 1-3
Coca-Cola
Stevia Ad
kerin.tv/cr8e/v1-3
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Firms spend billions of dollars annually on marketing and technical research that
significantly reduces, but doesn’t eliminate, new-product failure. So meeting the
changing needs of consumers is a continuing challenge for firms around the world.
Consumer Needs and Consumer Wants Should marketing try to satisfy
consumer needs or consumer wants? Marketing tries to do both. Heated debates rage
over this question, fueled by the definitions of needs and wants and the amount of
freedom given to prospective customers to make their own buying decisions.
A need occurs when a person feels deprived of basic necessities such as food, cloth-
ing, and shelter. A want is a need that is shaped by a person’s knowledge, culture, and
personality. So if you feel hungry, you have developed a basic need and desire to eat
something. Let’s say you then want to eat a Cool Mint Chocolate Clif Bar because,
based on your past experience, you know it will satisfy your hunger need. Effective
marketing, in the form of creating an awareness of good products at fair prices and
convenient locations, can clearly shape a person’s wants.
Certainly, marketing tries to influence what we buy. A question then arises: At what
point do we want government and society to step in to protect consumers? Most con-
sumers would say they want government to protect them from harmful drugs and un-
safe cars but not from candy bars and soft drinks. To protect college students, should
government restrict their use of credit cards?13 Such questions have no clear-cut an-
swers, which is why legal and ethical issues are central to marketing. Because even
psychologists and economists still debate the exact meanings of need and want, we
shall use the terms interchangeably throughout the book.
As shown on the left side of Figure 1–2, discovering needs involves looking
carefully at prospective customers, whether they are children buying M&M’s
candy, college students buying Chobani Greek Yogurt, or firms buying Xerox color
copiers. A principal activity of a firm’s marketing department is to scrutinize its
consumers to understand what they need and want and the forces that shape those
needs and wants.
What a Market Is Potential consumers make up a market, which is people with
both the desire and the ability to buy a specific offering. All markets ultimately are
people. Even when we say a firm bought a Xerox copier, we mean one or several
people in the firm decided to buy it. People who are aware of their unmet needs may
have the desire to buy the product, but that alone isn’t sufficient. People must also have
market
People with both the desire
and the ability to buy a
specific offering.
Studying late at night for an
exam and being hungry, you
decide to eat a Cool Mint
Chocolate Clif Bar. Is this a
need or a want? The text
discusses the role of
marketing in influencing
decisions like this one.
©McGraw-Hill Education/Evelyn
Nicole Kirksey, photographer
Satisfy consumer needs
by designing a marketing
program having the right
combination of:
• Product
• Price
• Promotion
• Place
Discover
consumer needs
by researching what
consumers’ needs are
Information about needs Products, services, ideas
Organization’s marketing department
Concepts for
products
Potential consumers: The market
FIGURE 1–2
Marketing seeks first
to discover consumer
needs through extensive
research. It then seeks to
satisfy those needs by
successfully implementing
a marketing program
possessing the right
combination of the
marketing mix—the four Ps.
10
the ability to buy, such as the authority, time, and money. People may even “buy” an
idea that results in an action, such as having their blood pressure checked annually or
switching to a reusable water bottle.
Satisfying Consumer Needs
Marketing doesn’t stop with the discovery of consumer needs. Because the organiza-
tion obviously can’t satisfy all consumer needs, it must concentrate its efforts on cer-
tain needs of a specific group of potential consumers. This is the target market—one
or more specific groups of potential consumers toward which an organization directs
its marketing program.
The Four Ps: Controllable Marketing Mix Factors Having selected its
target market consumers, the firm must take steps to satisfy their needs, as shown
on the right side of Figure 1–2. Someone in the organization’s marketing depart-
ment, often the marketing manager, must develop a complete marketing program
to reach consumers by using a combination of four elements, often called “the four
Ps”—a useful shorthand reference to them first published by Professor E. Jerome
McCarthy:14
∙ Product. A good, service, or idea to satisfy the consumer’s needs.
∙ Price. What is exchanged for the product.
∙ Promotion. A means of communication between the seller and buyer.
∙ Place. A means of getting the product to the consumer.
We’ll define each of the four Ps more carefully later in the book, but for now it’s
important to remember that they are the elements of the marketing mix. These four
elements are the controllable factors—product, price, promotion, and place—that can
be used by the marketing manager to solve a marketing problem. For example, when a
company puts a product on sale, it is changing one element of the marketing mix—
namely, the price. The marketing mix elements are called con-
trollable factors because they are under the control of the
marketing department in an organization.
Designing an effective marketing mix also conveys to
potential buyers a clear customer value proposition, which
is a cluster of benefits that an organization promises custom-
ers to satisfy their needs. For example, Walmart’s customer
value proposition can be described as “help people save money
so they can live better—anytime and anywhere.” Michelin’s
customer value proposition can be summed up as “providing
safety-conscious parents greater security in tires at a premium
price.”15
The Uncontrollable, Environmental Forces While
marketers can control their marketing mix factors, there are
forces that are mostly beyond their control (see Figure 1–1).
These are the environmental forces that affect a marketing
decision, which consist of social, economic, technological,
competitive, and regulatory forces. Examples are what consum-
ers themselves want and need, changing technology, the state of
the economy in terms of whether it is expanding or contracting,
actions that competitors take, and government restrictions.
Covered in detail in Chapter 3, these five forces may serve as
accelerators or brakes on marketing, sometimes expanding an
organization’s marketing opportunities and at other times
restricting them.
target market
One or more specific groups
of potential consumers
toward which an organization
directs its marketing program.
LO 1-3
Distinguish
between marketing
mix factors and
environmental
forces.
Firms can affect some
environmental forces with
breakthrough products such
as the Amazon Echo.
©Luke MacGregor/Bloomberg via
Getty Images
marketing mix
The controllable factors—
product, price, promotion,
and place—that can be used
by the marketing manager to
solve a marketing problem.
customer value proposition
The cluster of benefits that
an organization promises
customers to satisfy their
needs.
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Traditionally, many marketing executives have treated these environmental
forces as rigid, absolute constraints that are entirely outside their influence.
However, recent studies and marketing successes have shown that a forward-
looking, action-oriented firm can often affect some environmental forces by
achieving technological or competitive breakthroughs, such as Amazon’s virtual
assistant, the Echo.
THE MARKETING PROGRAM: HOW CUSTOMER RELATIONSHIPS ARE BUILT
An organization’s marketing program connects it with its customers. To clarify this
link, we will first discuss the critically important concepts of customer value, customer
relationships, and relationship marketing. Then we will illustrate these concepts using
3M’s marketing program for its Post-it® Flag Highlighter products.
Relationship Marketing: Easy to Understand, Hard to Do
Intense competition in today’s fast-paced global markets has prompted many success-
ful U.S. firms to focus on “customer value.” Gaining loyal customers by providing
unique value is the essence of successful marketing. What is new is a more careful at-
tempt at understanding how a firm’s customers perceive value and then actually creat-
ing and delivering that value to them.16 Customer value is the unique combination of
benefits received by targeted buyers that includes quality, convenience, on-time deliv-
ery, and both before-sale and after-sale service at a specific price. In addition, firms
now actually try to place a dollar value on the purchases of loyal, satisfied customers
during their lifetimes. For example, loyal Kleenex customers average 6.7 boxes a year,
about $994 over 60 years in today’s dollars.17
Research suggests that firms cannot succeed by being all things to all people.
Instead, firms seek to build long-term relationships with customers by providing
unique value to them. Many successful firms deliver outstanding customer value with
one of three value strategies: best price, best product, or best service.18
With the intense competition among U.S. businesses, being seen as “best” is admit-
tedly difficult. Still, successful firms such as Target (whose ad is shown), Starbucks,
and Nordstrom have achieved great success as reflected in the mission, vision, and
values statements they stress and live by:19
∙ Best price: Target. Target uses the brand promise of “Expect More, Pay Less®”
to “make Target the preferred shopping destination for our guests by delivering
outstanding value.”
∙ Best product: Starbucks. Starbucks seeks “to inspire and nurture the human
spirit—one person, one cup and one neighborhood at a time.” Its ads remind
customers that Starbucks is the “#1 Best Coffee.”
∙ Best service: Nordstrom. As a leading fashion specialty retailer, Nordstrom
works to “deliver the best possible shopping experience, helping our cus-
tomers express their style—not just buy fashion.” Nordstrom is “committed to
providing our customers with the best possible service—and to improving it
every day.”
Remaining among the “best” is a continuing challenge for today’s businesses.
A firm achieves meaningful customer relationships by creating connections
with its customers through careful coordination of the product, its price, the way it
is promoted, and how it is placed.
The hallmark of developing and maintaining effective customer relationships is
today called relationship marketing, which links the organization to its individual
customers, employees, suppliers, and other partners for their mutual long-term
LO 1-4
Explain how
organizations build
strong customer
relationships and
customer value
through marketing.
customer value
The unique combination of
benefits received by targeted
buyers that includes quality,
convenience, on-time
delivery, and both before-sale
and after-sale service at a
specific price.
relationship marketing
Links the organization to
its individual customers,
employees, suppliers, and
other partners for their
mutual long-term benefit.
environmental forces
The uncontrollable forces
that affect a marketing
decision and consist
of social, economic,
technological, competitive,
and regulatory forces.
Target provides customer
value using a very specific
approach. For its strategy,
see the text.
Source: Target Brands, Inc.
12
benefit. Relationship marketing involves a personal, ongoing relationship between the
organization and its individual customers that begins before the sale and may evolve
through different types of relationships after the sale.20
Information technology, along with cutting-edge manufacturing and marketing pro-
cesses, better enable companies to form relationships with customers today. Smart,
connected products, now elements of “the Internet of Everything,” help create detailed
databases about product usage. Then, using data analytics, or the examination of data
to discover relevant patterns, companies can gain insights into how products create
value for customers. For example, BMW receives data transmitted by each new vehi-
cle it sells and General Electric collects information sent in by the jet engines it builds
to help understand how customers use their products and when service may be needed.
The Ritz-Carlton Hotel Company trains each of its employees to observe guest prefer-
ences and record them in the guest recognition system. In addition, the hotel’s state-
ment of values, called Gold Standards, guides employees to “build strong relationships
and create Ritz-Carlton guests for life” and the website includes a variety of ways for
customers to become part of its online community, including a Twitter-based con-
cierge service.21
The Marketing Program and Market Segments
Effective relationship marketing strategies help marketing managers discover what
prospective customers need and convert these ideas into marketable products (see
Figure 1–2). These concepts must then be converted into a tangible marketing
program—a plan that integrates the marketing mix to provide a good, service, or
idea to prospective buyers. Ideally, they can be formed into market segments,
which are relatively homogeneous groups of prospective buyers that (1) have com-
mon needs and (2) will respond similarly to a marketing action. This action might
be a product feature, a promotion, or a price. As shown in Figure 1–2, in an effec-
tive organization this process is continuous: Consumer needs trigger product con-
cepts that are translated into actual products that stimulate further discovery of
consumer needs.
Ritz-Carlton hotels use
relationship marketing
concepts—tailoring the
purchase experience to
each individual—to create
lifelong customers.
©Paul Hilton/Bloomberg/
Getty Images
marketing program
A plan that integrates the
marketing mix to provide a
good, service, or idea to
prospective buyers.
market segments
The relatively homogeneous
groups of prospective
buyers that (1) have common
needs and (2) will respond
similarly to a marketing
action.
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3M’s Strategy and Marketing Program to Help Students Study
“How do college students really study?” asked David Windorski, a 3M inventor
of Post-it® brand products, when thinking about adding a new item to the Post-it®
line.22
To answer this question, Windorski worked with a team of four college stu-
dents. Their task was to observe and question dozens of students about their study
behavior, such as how they used their textbooks, took notes, wrote term papers,
and reviewed for exams. Often, they watched students highlight a passage and then
mark the page with a Post-it® Note or the smaller Post-it® Flag. Windorski realized
there was an opportunity to merge the functions of two products into one to help
students study!
Moving from Ideas to a Marketable Highlighter Product After working
on 15 or 20 models, Windorski concluded he had to build a highlighter product that
would dispense Post-it® Flags because the Post-it® Notes were simply too large to put
inside the barrel of a highlighter.
Hundreds of the initial highlighter prototypes with Post-it® Flags inside were pro-
duced and given to students—and also office workers—to get their reactions. This re-
search showed users wanted a convenient, reliable cover to protect the Post-it® Flags in
the highlighter. So the Post-it® Flag Highlighter with a rotating cover was born.
Adding the Post-it® Flag Pen Most of David Windorski’s initial design
energies had gone into his Post-it® Flag Highlighter research and development. But
Windorski also considered other related products. Many people in offices need im-
mediate access to Post-it® Flags while writing with pens. Students are a potential
market for this product, too, but probably a smaller market segment than office
workers.
A Marketing Program for the Post-it® Flag Highlighter and Pen After
several years of research, development, and production engineering, 3M introduced
its new products. Figure 1–3 outlines the strategies for each of the four marketing
mix elements in 3M’s program to market its Post-it® Flag Highlighters and Post-it®
Flag Pens. Although similar, we can compare the marketing program for each of the
two products:
∙ Post-it® Flag Highlighter. The target market shown in the orange column in
Figure 1–3 is mainly college students, so 3M’s initial challenge was to build
student awareness of a product that they didn’t know existed. The company used
a mix of print ads in college newspapers and a TV ad and then relied on word-of-
mouth advertising—students telling their friends about how great the product is.
Gaining distribution in college bookstores was also critical. Plus, 3M charged a
price to distributors that it hoped would give a reasonable bookstore price to
students and an acceptable profit to distributors and 3M.
3M’s initial product line of
Post-it® Flag Highlighters and
Post-it® Flag Pens included
variations in color.
©McGraw-Hill Education/Mike
Hruby, photographer
Video 1-4
3M Post-it® Flag
Highlighters Ad
kerin.tv/cr8e/v1-4
1-4. An organization can’t satisfy the needs of all consumers, so it must focus
on one or more subgroups, which are its .
1-5. What are the four marketing mix elements that make up the organiza-
tion’s marketing program?
1-6. What are environmental forces?
learning review
14
∙ Post-it® Flag Pen. The primary target market shown in the green column in
Figure 1–3 is people working in offices. The Post-it® Flag Pens are mainly busi-
ness products—bought by the purchasing department in an organization and
stocked as office supplies for employees to use. So the marketing program for
Post-it® Flag Pens emphasizes gaining distribution in outlets used by an organi-
zation’s purchasing department.
How well did these new 3M products do in the marketplace? They have done so
well that 3M bestowed a prestigious award on David Windorski and his team. And
in what must be considered any inventor’s dream come true, Oprah Winfrey flew
Windorski to Chicago to appear on her TV show and thank him in person. She told
Windorski and her audience that the Post-it® Flag Highlighter is changing the way
she does things at home and at work—especially in going through potential books
she might recommend for her book club. “David, I know you never thought this
would happen when you were in your 3M lab . . . but I want you to take a bow
before America for the invention of this . . . (highlighter). It’s the most incredible
invention,” she said.23
Extending the Product Line The success of the Post-it® Flag Highlighters
encouraged Windorski to continue to conduct research about how students study. He
asked students, “Is it too much trouble when you’re studying to grab for a 3M Post-it®
Flag, then a highlighter, and then your pen?”24 Feedback suggested there was another
opportunity in the market: A 3-in-1 combination that has a highlighter on one end, a
pen on the other, and 3M Post-it® Flags in the removable cap. The latest in the family
of 3M product innovations is shown in the photo!
MARKETING
MIX ELEMENT
MARKETING PROGRAM ACTION TO REACH:
COLLEGE STUDENT
MARKET SEGMENT
OFFICE WORKER
MARKET SEGMENT
RATIONALE FOR MARKETING
PROGRAM ACTION
O�er Post-it® Flag
Highlighter to help college
students in their studying
Seek retail price of about
$3.99 to $4.99 for a single
Post-it® Flag Highlighter
or $5.99 to $7.99 for a
three-pack
Run limited promotion
with a TV ad and some
ads in college newspapers
and then rely on student
word-of-mouth messages
Distribute Post-it® Flag
Highlighters through
college bookstores, o„ce
supply stores, and mass
merchandisers
Listen carefully to the needs
and wants of potential
customer segments to use
3M technology to introduce
a useful, innovative product
Set prices that provide
genuine value to the
customer segment being
targeted
Increase awareness among
potential users who have
never heard of this new,
innovative 3M product
Make it easy for prospective
buyers to buy at convenient
retail outlets (both products)
or to get at work (Post-it®
Flag Pens only)
Price
strategy
Place
strategy
Product
strategy
Promotion
strategy
Run limited promotion
among distributors to get
them to stock the product
Seek retail price of about
$3.99 to $4.99 for a single
Post-it® Flag Pen;
wholesale prices are lower
Distribute Post-it® Flag
Pens through o„ce
wholesalers and retailers
as well as mass
merchandisers
O�er Post-it® Flag
Pen to help o„ce workers
in their day-to-day work
activities
FIGURE 1–3
Marketing programs for
the launch of two Post-it®
brand products targeted
at two target market
segments.
Welcome to the most recent
generation of Post-it® Flag
Highlighters: the Post-it® Flag +
Highlighter & Pen. The cap
contains the Post-it® flags.
©McGraw-Hill Education
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HOW MARKETING BECAME SO IMPORTANT
To understand why marketing is a driving force in the modern global economy, let us
look at (1) the evolution of the market orientation, (2) ethics and social responsibility
in marketing, and (3) the breadth and depth of marketing activities.
Evolution of the Market Orientation
Marketing became the motivating force among many American firms in the 1950s,
which led to the marketing concept—the idea that an organization should (1) strive
to satisfy the needs of consumers while also (2) trying to achieve the organization’s
goals. General Electric probably launched the marketing concept and its focus on
consumers when its 1952 annual report stated: “The concept introduces . . .
marketing . . . at the beginning rather than the end of the production cycle and inte-
grates marketing into each phase of the business.”25
Firms such as Southwest Airlines, Marriott, and Facebook have achieved great suc-
cess by putting huge effort into implementing the marketing concept, giving their
firms what has been called a market orientation. An organization that has a market
orientation focuses its efforts on (1) continuously collecting information about
customers’ needs, (2) sharing this information across departments, and (3) using it to
create customer value.26
Focusing on Customer Relationship Management
A recent focus in the customer relationship era has been the advent of digital market-
ing, in which organizations and their customers develop relationships through applica-
tions (apps) and social media websites such as Facebook, Twitter, and YouTube,
among others. This focus has allowed organizations to understand and market to cur-
rent and prospective customers in ways that are still evolving.
An important outgrowth of this focus on the customer is the recent attention placed
on customer relationship management (CRM), the process of identifying prospective
LO 1-5
Describe the
characteristics of a
market orientation.
marketing concept
The idea that an organization
should (1) strive to satisfy the
needs of consumers while
also (2) trying to achieve the
organization’s goals.
market orientation
An organization with a
market orientation focuses
its efforts on (1) continuously
collecting information about
customers’ needs, (2) sharing
this information across
departments, and (3) using
it to create customer value.
customer relationship
management (CRM)
The process of identifying
prospective buyers,
understanding them
intimately, and developing
favorable long-term
perceptions of the
organization and its
offerings so that buyers
will choose them in the
marketplace and become
advocates after their
purchase.
Trader Joe’s is consistently
ranked as one of America’s
favorite supermarket chains.
This reflects the company’s
focus on providing a great
customer experience, as
described in the text.
©Lannis Waters/ZUMA Press/
Newscom
16
buyers, understanding them intimately, and developing favorable long-term percep-
tions of the organization and its offerings so that buyers will choose them in the
marketplace and become advocates after their purchase.27 This process requires the
involvement and commitment of managers and employees throughout the organiza-
tion28 and a growing application of information, communication, and Internet technology,
as will be described throughout this book.
The foundation of customer relationship management is really customer experience,
which is the internal response that customers have to all aspects of an organization and its
offering. This internal response includes both the direct and indirect contacts of the cus-
tomer with the company. Direct contacts include the customer’s contacts with the seller
through buying, using, and obtaining service. Indirect contacts most often involve un-
planned “touches” with the company through word-of-mouth comments from other cus-
tomers, reviewers, and news reports. In terms of outstanding customer experience, Trader
Joe’s is high on the list. It is ranked as one of America’s favorite supermarket chains by
Market Force Information and called “America’s hottest retailer” by Fortune magazine.
What makes the customer experience and loyalty of shoppers at Trader Joe’s
unique? The reasons include:
∙ Setting low prices, made possible by offering its own brands rather than well-
known national ones.
∙ Offering unusual, affordable products, like Thai lime-and-chili cashews, not
available from other retailers.
∙ Providing employee “engagement” to help customers, like actually walking them
to where the roasted chestnuts are—rather than saying “aisle five.”
This commitment to providing an exceptional customer experience is what gives
Trader Joe’s its high rankings. Recent studies support this approach, suggesting that
companies must watch for differences between the experience they offer and what
consumers expect at each interaction and excel at managing the complete experience
from start to finish.29
Ethics and Social Responsibility in Marketing: Balancing the
Interests of Different Groups
Today, the standards of marketing practice have shifted from an emphasis on
producers’ interests to consumers’ interests. Guidelines for ethical and so-
cially responsible behavior can help managers balance consumer, organiza-
tional, and societal interests.
Ethics Many marketing issues are not specifically addressed by existing
laws and regulations. Should information about a firm’s customers be sold to
other organizations? Should online advertising that reaches young children be
restricted? Should consumers be on their own to assess the safety of a prod-
uct? These questions raise difficult ethical issues. Many companies, indus-
tries, and professional associations have developed codes of ethics to assist
managers.
Social Responsibility While many ethical issues involve only the buyer
and seller, others involve society as a whole. How a manufacturer disposes of
toxic waste, for example, has potential to impact the environment and society.
This situation illustrates the issue of social responsibility, the idea that orga-
nizations are accountable to a larger society. The well-being of society at
large should also be recognized in an organization’s marketing decisions. In
fact, some marketing experts stress the societal marketing concept, the
view that organizations should satisfy the needs of consumers in a way that
provides for society’s well-being.30 For example, Patagonia manufactures
customer experience
The internal response that
customers have to all aspects
of an organization and its
offering.
societal marketing concept
The view that organizations
should satisfy the needs of
consumers in a way that
provides for society’s
well-being.
Patagonia’s use of recycled
plastic bottles and its
commitment to extending the
life of its products reflect the
increasing concern among
today’s organizations for
society’s well-being.
Source: Patagonia
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many of its products with polyester made from recycled plastic bottles. In addition,
Patagonia’s Common Threads Initiative encourages its customers to repair, trade, and
eventually recycle all of its products. Patagonia says, “One of the most responsible
things we can do as a company is to make high-quality stuff that lasts for years and can
be repaired, so you don’t have to buy more of it.”
The Breadth and Depth of Marketing
Marketing today affects every person and organization. To understand this, let’s ana-
lyze (1) who markets, (2) what is marketed, (3) who buys and uses what is marketed,
(4) who benefits from these marketing activities, and (5) how consumers benefit.
Who Markets? Every organization markets. It’s obvious that business firms in-
volved in manufacturing (Patagonia), retailing (Trader Joe’s), and providing services
(Marriott) market their offerings. And nonprofit organizations such as museums, your
local hospital or college, places (cities, states, countries), and even special causes
(Race for the Cure) also engage in marketing. Finally, indi-
viduals such as political candidates often use marketing to
gain voter attention and preference.
What Is Marketed? Goods, services, and ideas are
marketed. Goods are physical objects, such as toothpaste,
smartphones, or automobiles, that satisfy consumer needs.
Services are intangible items such as airline trips, financial
advice, or art museums. Ideas are thoughts about concepts,
actions, or causes.
In this book, goods, services, and ideas are all considered
“products” that are marketed. So a product is a good, ser-
vice, or idea consisting of a bundle of tangible and intangi-
ble attributes that satisfies consumers’ needs and is received
in exchange for money or something else of value.
Services like those offered by art museums, hospitals, and sports teams are relying
more heavily on effective marketing. For example, financial pressures have caused art
museums to innovate to market their unique services—the viewing of works of art by
visitors—to increase revenues. This often involves levels of creativity unthinkable sev-
eral decades ago.
This creativity ranges from establishing a global brand identity by launching over-
seas museums to offering sit-at-home video tours. France’s Louvre, home to the
Mona Lisa painting, is developing a new satellite museum in Abu Dhabi, housed in
a striking domed building.31 Russia’s world-class, 1,000-room State Hermitage
Museum wanted to find a way to market itself to potential first-time visitors. So it
partnered with IBM to let patrons take a “virtual tour” of its exhibits while watching
on their iPads and relaxing.
Ideas are most often marketed by nonprofit organizations or the government. So
The Nature Conservancy markets the cause of protecting the environment. Charities
market the idea that it’s worthwhile for you to donate your time or money. The Peace
Corps markets to recruit qualified volunteers. And state governments in Arizona and
Florida market taking a warm, sunny winter vacation in their states.
Who Buys and Uses What Is Marketed? Both individuals and organizations
buy and use products that are marketed. Ultimate consumers are the people—whether
80 years or eight months old—who use the products and services purchased for a
household. In contrast, organizational buyers are those manufacturers, wholesalers,
retailers, service companies, not-for-profit organizations, and government agencies
that buy products and services for their own use or for resale. Although the terms
product
A good, service, or idea
consisting of a bundle of
tangible and intangible
attributes that satisfies
consumers’ needs and is
received in exchange for
money or something else
of value.
Video 1-5
Hermitage Tour
kerin.tv/cr8e/v1-5
Strategies in marketing art
museums include taking a
“virtual tour” of Russia’s State
Hermitage Museum—courtesy
of IBM.
©Izzet Keribar/Getty Images
ultimate consumers
The people who use the
products and services
purchased for a household.
Also called consumers,
buyers, or customers.
organizational buyers
Those manufacturers,
wholesalers, retailers,
service companies, not-for-
profit organizations, and
government agencies that
buy products and services for
their own use or for resale.
18
consumers, buyers, and customers are sometimes used for both ultimate
consumers and organizations, there is no consistency on this. In this book
you will be able to tell from the example whether the buyers are ultimate
consumers, organizations, or both.
Who Benefits? In our free-enterprise society, there are three spe-
cific groups that benefit from effective marketing: consumers who buy,
organizations that sell, and society as a whole. True competition between
products and services in the marketplace ensures that consumers can find
value from the best products, the lowest prices, or exceptional service.
Providing choices leads to the consumer satisfaction and quality of life
that we expect from our economic system.
Organizations that provide need-satisfying products with effective
marketing programs—for example, Amazon, Apple, and L’Oréal—have
blossomed. But competition creates problems for ineffective competitors,
including the many retailers such as Toys R Us, RadioShack, and the
Limited that recently filed for bankruptcy.
Finally, effective marketing benefits society.32 It enhances competi-
tion, which both improves the quality of products and services and lowers
their prices. This makes countries more competitive in world markets and
provides jobs and a higher standard of living for their citizens.
How Do Consumers Benefit? Marketing creates utility, the benefits or cus-
tomer value received by users of the product. This utility is the result of the marketing
exchange process and the way society benefits from marketing. There are four different
utilities: form, place, time, and possession. The production of the product or service
constitutes form utility. Place utility means having the offering available where
consumers need it, whereas time utility means having it available when needed.
Possession utility is the value of making an item easy to purchase through the provi-
sion of credit cards or financial arrangements. Marketing creates its utilities by bridg-
ing space (place utility) and hours (time utility) to provide products (form utility) for
consumers to own and use (possession utility).
utility
The benefits or customer
value received by users of
the product.
Marketing the idea of
volunteering for the Peace
Corps can benefit society.
Source: Peace Corps
1-7. What are the two key characteristics of the marketing concept?
1-8. What is the difference between ultimate consumers and organizational
buyers?
learning review
LEARNING OBJECTIVES REVIEW
LO 1-1 Define marketing and identify the diverse factors
that influence marketing actions.
Marketing is an organizational function and a set of pro-
cesses for creating, communicating, and delivering value
to customers and for managing customer relationships in
ways that benefit the organization and its stakeholders.
This definition relates to two primary goals of marketing:
(a) discovering the needs of prospective customers and
(b) satisfying them. Achieving these two goals also involves
the four marketing mix factors largely controlled by the
organization and the five environmental forces that are
generally outside its control.
LO 1-2 Explain how marketing discovers and satisfies
consumer needs.
The first objective in marketing is discovering the needs and
wants of consumers who are prospective buyers and cus-
tomers. This is not easy because consumers may not always
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know or be able to describe what they need and want. A need
occurs when a person feels deprived of basic necessities such
as food, clothing, and shelter. A want is a need that is shaped
by a person’s knowledge, culture, and personality. Effective
marketing can clearly shape a person’s wants and tries to in-
fluence what he or she buys. The second objective in mar-
keting is satisfying the needs of targeted consumers. Because
an organization obviously can’t satisfy all consumer needs, it
must concentrate its efforts on certain needs of a specific
group of potential consumers or target market—one or more
specific groups of potential consumers toward which an
organization directs its marketing program. It then selects its
target market segment(s), which is a relatively homogeneous
group of prospective buyers that (1) have common needs and
(2) will respond similarly to a marketing action. Finally, the
organization develops a set of marketing actions in the form of
a unique marketing program to reach them.
LO 1-3 Distinguish between marketing mix factors and
environmental forces.
Four elements in a marketing program designed to satisfy
customer needs are product, price, promotion, and place.
These elements are called the marketing mix, the four Ps, or
the marketer’s controllable variables. The marketing mix
also provides a clear customer value proposition—a cluster
of benefits that an offering satisfies. Environmental forces,
also called uncontrollable variables, are largely beyond the
organization’s control. These include social, economic,
technological, competitive, and regulatory forces.
LO 1-4 Explain how organizations build strong customer
relationships and customer value through marketing.
The essence of successful marketing is to provide sufficient
value to gain loyal, long-term customers. Customer value is
the unique combination of benefits received by targeted
buyers that usually includes quality, price, convenience, on-
time delivery, and both before-sale and after-sale service.
Marketers do this by using one of three value strategies:
best price, best product, or best service.
LO 1-5 Describe the characteristics of a market
orientation.
Many firms have achieved great success by putting huge
effort into implementing the marketing concept—the idea
that an organization should (1) strive to satisfy the needs of
consumers while also (2) trying to achieve the organiza-
tion’s goals. Implementing the marketing concept creates a
market orientation. An organization that has a market ori-
entation focuses its efforts on (1) continuously collecting
information about customers’ needs, (2) sharing this infor-
mation across departments, and (3) using it to create cus-
tomer value.
LEARNING REVIEW ANSWERS
1-1 What is marketing?
Answer: Marketing is the activity for creating, communicating,
delivering, and exchanging offerings that benefit customers, the
organization, its stakeholders, and society at large.
1-2 Marketing focuses on and
consumer needs.
Answer: discovering; satisfying
1-3 What four factors are needed for marketing to occur?
Answer: The four factors are: (1) two or more parties (indi-
viduals or organizations) with unsatisfied needs; (2) a desire and
ability on their part to have their needs satisfied; (3) a way for
the parties to communicate; and (4) something to exchange.
1-4 An organization can’t satisfy the needs of all consumers,
so it must focus on one or more subgroups, which are its
.
Answer: target market(s)
1-5 What are the four marketing mix elements that make up the
organization’s marketing program?
Answer: product, price, promotion, place
1-6 What are environmental forces?
Answer: Environmental forces are the uncontrollable forces that
affect a marketing decision. They consist of social, economic,
technological, competitive, and regulatory forces.
1-7 What are the two key characteristics of the marketing
concept?
Answer: An organization should (1) strive to satisfy the needs
of consumers while also (2) trying to achieve the organization’s
goals.
1-8 What is the difference between ultimate consumers and
organizational buyers?
Answer: Ultimate consumers are the people who use the prod-
ucts and services purchased for a household. Organizational
buyers are those manufacturers, wholesalers, retailers, and gov-
ernment agencies that buy products and services for their own
use or for resale.
customer experience p. 16
customer relationship management
(CRM) p. 15
customer value p. 11
customer value proposition p. 10
environmental forces p. 10
exchange p. 5
market p. 9
market orientation p. 15
market segments p. 12
marketing p. 5
marketing concept p. 15
marketing mix p. 10
marketing program p. 12
organizational buyers p. 17
product p. 17
relationship marketing p. 11
societal marketing concept p. 16
target market p. 10
ultimate consumers p. 17
utility p. 18
FOCUSING ON KEY TERMS
20
APPLYING MARKETING KNOWLEDGE
1 What consumer wants (or benefits) are met by the
following products or services? (a) 3M Post-it®
Flag Highlighter, (b) Nike running shoes, (c) Hertz
Rent-A-Car, and (d) Amazon online shopping.
2 Each of the four products, services, or programs in
question 1 has substitutes. Respective examples
are (a) a BicTM highlighter, (b) regular tennis
shoes, (c) an Uber or Lyft ride, and (d) a depart-
ment store. What consumer benefits might these
substitutes have in each case that some consumers
might value more highly than those mentioned in
question 1?
3 What are the characteristics (e.g., age, income,
education) of the target market customers for the
following products or services? (a) National
Geographic magazine, (b) Chobani Greek Yogurt,
(c) New York Giants football team, and (d) Facebook.
4 A college in a metropolitan area wishes to increase
its evening offerings of business-related courses
such as marketing, accounting, finance, and man-
agement. Who are the target market customers
(students) for these courses?
5 What actions involving the four marketing mix
elements might be used to reach the target market
in question 4?
6 What environmental forces (uncontrollable vari-
ables) must the college in question 4 consider in
designing its marketing program?
7 Does a firm have the right to “create” wants and try
to persuade consumers to buy goods and services
they didn’t know about earlier? What are examples
of “good” and “bad” want creation? Who should
decide what is good and what is bad?
BUILDING YOUR MARKETING PLAN
If your instructor assigns a marketing plan for
your class, we hope you will be excited—for two
reasons. First, you will get insights into trying to ac-
tually “do marketing” that often go beyond what
you can get by simply reading the textbook. Second,
thousands of graduating students every year get
their first job by showing prospective employers a
“portfolio” of samples of their written work from
college—often a marketing plan if they have one.
This can work for you.
This “Building Your Marketing Plan” section at
the end of each chapter suggests ways to improve and
focus your marketing plan. You will use the sample
marketing plan in Appendix A (following Chapter 2)
as a guide, and this section after each chapter will
help you apply those Appendix A ideas to your own
marketing plan.
The first step in writing a good marketing plan is to
have a business or product that enthuses you and for
which you can get detailed information, so you can
avoid glittering generalities. We offer these additional
bits of advice in selecting a topic:
∙ Do pick a topic that has personal interest for
you—a family business; a business, product, or
service you or a friend might want to launch; or
a student organization that needs marketing help.
∙ Do not pick a topic that is so large it can’t be cov-
ered adequately or so abstract it will lack specifics.
1 Now to get you started on your marketing plan, list
four or five possible topics and compare these
with the criteria your instructor suggests and those
shown above. Think hard, because your decision
will be with you all term and may influence the
quality of the resulting marketing plan you show
to a prospective employer.
2 When you have selected your marketing plan
topic, whether the plan is for an actual business, a
possible business, or a student organization, write
the “company description” in your plan, as shown
in Appendix A (following Chapter 2).
“Everybody should be able to
enjoy a pure, simple cup of yo-
gurt. And that’s what Chobani
is,” says Hamdi Ulukaya,
founder and chief executive
officer of Chobani, LLC, in summarizing his vision
for the company.
As the winner of an Ernst & Young World Entre-
preneur of the Year award, his words and success
story carry great credibility.
VIDEO CASE 1 Chobani®: Making Greek Yogurt a Household Name
Video 1-6
Chobani Video
Case
kerin.tv/cr8e/v1-6
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21
THE IDEA
Hamdi Ulukaya came to the United States in 1994 to
learn English and study business. He started a feta
cheese company, Euphrates, when his visiting father
complained about the quality of American feta
cheese. In 2005, Kraft Foods closed its New Berlin,
New York, yogurt plant. While tidying up his office,
Ulukaya stumbled upon a postcard about the sale of
the shuttered Kraft plant and threw it out. After sleep-
ing on the decision, he fished it out of the wastebas-
ket, visited the plant, and purchased it with the help of
a U.S. Small Business Administration loan.
Ulukaya (center in photo) had no real experience in the
yogurt business. He grew up milking sheep at his family’s
dairy in eastern Turkey and eating the thick, tangy yogurt
of his homeland. Describing the regular yogurt he found
on shelves in America, he has one comment: “Terrible!”
In his view, it is too thin, too sweet, and too fake. So he
decided to produce what is known as “Greek yogurt”—
an authentic strained version that produces a thick tex-
ture, with high protein content and little or no fat. With
the help of four former Kraft employees and yogurt
master Mustafa Dogan, Ulukaya worked 18 months to
perfect the recipe for Chobani Greek Yogurt.
The very first cup for sale of Ulukaya’s Greek yo-
gurt appeared on the shelves of a small grocer in Long
Island, New York. The new-product launch focused
on the classic “4Ps” elements of marketing mix ac-
tions: product, price, place, and promotion.
PRODUCT STRATEGY
From the start Ulukaya’s Greek yogurt carried the
brand name “Chobani.” There was no room for error,
and the product strategy for the Chobani brand focused
on the separate elements of (1) the product itself and
(2) its packaging.
The Chobani product strategy stresses its authentic
straining process that removes excess liquid whey. This
results in a thicker, creamier yogurt that yields 13 to 18
grams of protein per single-serve cup, depending on the
flavor. Chobani is free of ingredients like milk protein
concentrate and animal-based thickeners, which some
manufacturers add to make “Greek-style” yogurts.
Chobani uses three pounds of milk to make one
pound of Chobani Greek Yogurt. Some other features
that make Chobani Greek Yogurt “nothing but good,”
to quote one of its advertising taglines:
∙ Higher in protein than regular yogurt.
∙ Made with real fruit and only natural ingredients.
∙ Preservative-free.
∙ No artificial flavors or artificial sweeteners.
∙ Contains five live and active cultures, including
three probiotics.
Then, and still today, Ulukaya obsessed about
Chobani’s packaging of the original cups. While de-
signing the cup, Ulukaya concluded that not any cup
would do. He insisted on a European-style cup with a
circular opening exactly 95 millimeters across. This
made for a shorter, wider cup that was more visible on
retailer’s shelves. Also, instead of painted-on labels,
Ulukaya chose shrink-on plastic sleeves that adhere to
the cup and offer eye-popping colors.
“With our packaging people would say, ‘You’re
making it all look different and why are you doing
that?’” says Kyle O’Brien, executive vice president of
sales. “If people pay attention to our cups—bright
colors and all—we know we have won them, because
what’s inside the cup is different from anything else
on the shelf.”
PRICE STRATEGY
To keep control of their product, Ulukaya and O’Brien
approached retailers directly rather than going through
distributors. Prices were set high enough to recover
Chobani’s costs and give reasonable margins to retail-
ers but not so high that future rivals could undercut its
price. Today, prices remain at about $1.29 for a single-
serve cup.
©Diane Bondareff/Invision for Chobani/AP Images
Source: Chobani, LLC
22
PLACE STRATEGY
The decision of Ulukaya and O’Brien to get Chobani
Greek Yogurt into the conventional yogurt aisle of
traditional supermarkets—not on specialty shelves
or in health food stores—proved to be sheer genius.
Today Chobani sees its Greek yogurt widely distrib-
uted in both conventional and mass supermarkets,
club stores, and natural food stores. On the horizon:
growing distribution in convenience and drugstores,
as well as schools. Chobani is also focused on edu-
cating food service directors at schools across the
United States about Greek yogurt’s health benefits for
schoolkids.
The Chobani growth staggers imagination. From
the company’s first order of 200 cases, its sales have
grown to over 2 million cases per week. To increase
capacity and bring new products to market faster, in
2012 Chobani opened a nearly one million square foot
plant in Idaho. Built in just 326 days, it is the largest
yogurt manufacturing facility in the world.
Along the way Chobani faced a strange glitch:
Demand for Chobani Greek Yogurt far surpassed sup-
ply, leading to unhappy retailers with no Chobani
cups to sell. Kyle O’Brien launched Operation Bear
Hug. “Instead of hiding behind letters to retailers, we
decided to get on a plane and to communicate with
them within 24 hours about the problem and what we
proposed to do about it,” says O’Brien. “So we found
it critical to be very transparent and open with our
communication at times like that.”
PROMOTION STRATEGY
In its early years Chobani had no money for tradi-
tional advertising, so it relied on word-of-mouth rec-
ommendation from enthusiastic customers. The
brand harnessed consumer passion on social media
channels early on and found that people loved the
taste of Chobani once they tried it. So Chobani
kicked off its CHOmobile tour: a mobile vehicle
sampling Chobani at events across the country,
encouraging consumers to taste Greek yogurt for the
first time. As Chobani grew, it began to launch new
promotional activities tied to (1) traditional advertis-
ing, (2) social media, and (3) direct communication
with customers.
In 2011, Chobani launched its first national ad-
vertising campaign, “Real Love Stories.” The only
problem: apparently it was too successful! The re-
sulting additional consumer demand for Chobani
Greek Yogurt exceeded its production capacity, leav-
ing retailers unhappy because of complaining con-
sumers. What did Chobani do then? It stopped the
advertising campaign and sent in another Operation
Bear Hug team to communicate with retailers. Since
then it has run other successful national advertising
campaigns, including sponsorship of the U.S. Olym-
pic Teams.
“Social media has been important to Chobani,
which has embraced a high-touch model that empha-
sizes positive communication with its customers,”
says Sujean Lee, head of corporate affairs. Today,
Chobani’s Customer Loyalty Team receives about
7,000 inbound customer e-mails and phone calls a
month and is able to make return phone calls to many
of them. Consumers also sometimes get a handwritten
note. Chobani launched its “Go Real Chobani” cam-
paign to highlight that it is a real company making
real products and engaging consumers through real
conversations.
In addition to Facebook (www.Facebook.com/
Chobani), the company interacts with its consumers
through Twitter, Pinterest, Instagram, Foursquare, and
other social media platforms. Chobani Kitchen (www.
chobanikitchen.com) is an online resource with reci-
pes, videos, and tips on how to use its Greek yogurt in
favorite recipes.
AGGRESSIVE INNOVATION AND
POSITIVE SOCIAL CHANGE
Dannon, Yoplait, and PepsiCo were shocked by the
success of Chobani Greek Yogurt. Each now offers its
own competing Greek yogurt. With giant competitors
like these, what can Chobani do? Innovate and develop
creative, new Greek yogurt products!
“Today we offer our Chobani Greek Yogurt in single-
serve and multi-serve sizes, while expanding our au-
thentic strained Greek yogurt to new occasions and
forms,” says Joshua Dean, vice president of brand ad-
vertising. Its recent new-product offerings include:
∙ Chobani SavorTM—a 14-ounce squeezable package
designed to position Greek yogurt as a condiment
that you could use to top foods such as chili or
baked potatoes.
∙ Chobani KidsTM tubes and pouches—made with
25 percent less sugar than other kids’ yogurt prod-
ucts, and natural non-GMO ingredients. Sample
flavor: Vanilla Chocolate Twist.
∙ Chobani FlipTM—a 5.3-ounce, two-compartment
package that lets consumers bend or “flip” mix-
ins like granola or hazelnuts into the Chobani
Greek Yogurt compartment. Sample flavor: Al-
mond Coco Loco, a coconut low-fat yogurt
paired with dark chocolate and honey-roasted
salted almonds.
∙ Drink ChobaniTM—a smooth, drinkable yogurt
with 10 grams of protein in 10 flavors.
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Chobani gives 10 percent of all profits to its
Shepherd’s Gift Foundation to support people and or-
ganizations working for positive, long-lasting change.
The name comes from the “spirit of a shepherd,” an
expression in Turkey used to describe people who
give without expecting anything in return. To date
the foundation has supported over 50 projects—from
local ones to international famine relief efforts.
WHERE TO NOW?
International operations and a unique test-market
boutique in New York City give a peek at Chobani’s
future.
International markets provide a growth opportunity.
Other countries have far greater annual per capita con-
sumption of yogurt than the United States. For example,
some Europeans eat five or six times as much on aver-
age. So while entrenched competitors exist in many for-
eign countries, the markets are often huge, too.
How do you test ideas for new Greek yogurt fla-
vors? In Chobani’s case, it opened what it calls a
“first-of-its-kind Mediterranean yogurt bar”—called
Chobani SoHo—in a trendy New York City neighbor-
hood. Here, customers can try new yogurt creations—
from Strawberry + Granola to Toasted Coconut +
Pineapple. The Chobani marketing team obtains con-
sumer feedback at Chobani SoHo, leading to potential
new flavors or products in the future.
Hmmm! Ready to schedule a visit to New York
City and Chobani SoHo? And then sample a
creation made with Pistachio + Chocolate (plain
Chobani topped with pistachios, dark chocolate,
honey, oranges, and fresh mint leaves), and perhaps
influence what Chobani customers will be buying in
the future?33
Questions
1 From the information about Chobani in the case
and at the start of the chapter, (a) who did Hamdi
Ulukaya identify as the target for his first cups of
Greek yogurt and (b) what was his initial “4Ps”
marketing strategy?
2 (a) What marketing actions would you expect the
companies selling Yoplait, Dannon, and PepsiCo
yogurts to take in response to Chobani’s appear-
ance and (b) how might Chobani respond?
3 What are (a) the advantages and (b) the disadvan-
tages of Chobani’s Customer Loyalty Team that
handles communication with customers—from
phone calls and e-mails to Facebook and Twitter
messages?
4 As part of building its brand, Chobani opened a
unique retail store in New York City: Chobani
SoHo. Why did Chobani do this?
5 (a) What criteria might Chobani use when it seeks
markets in new countries and (b) what three or four
countries meet these criteria?
©John Minchillo/AP Images
24
Chapter Notes
1. David Gelles, “Chobani, The Greek Yogurt Maker, Reclaims
Control of Its Finances,” The New York Times, June 28, 2018;
and “Why Chobani Is One of the Most Innovative Companies
of 2017,” Fast Company, March 2017, p. 44.
2. John Tamny, “The Story of Chobani Is about Much More Than
Yogurt,” Forbes, July 4, 2016, p. 1; and “How We Make Our
Product Matters,” Chobani.com, http://www.chobani.com/our-craft,
February 12, 2017.
3. “How Chobani Dominated the Yogurt Marketing in Just 8
Years,” Referral Candy, http://www.referralcandy.com/blog/
chobani-marketing-strategy/; and Mark Boshnack, “Chobani
Executive Touts Company’s Olympic Ties,” The Daily Star,
August 12, 2016.
4. “Chobani Café Adds Flavor,” MMR, November 28, 2016,
p. 8; “Chobani Ventures beyond the Yogurt Aisle,” Drug Store
News, August, 2016, p. 102; “Chobani Launches New Greek
Yogurt Product Platforms,” Plus Media Solutions, February 11,
2015; Lauren Coleman-Lochner, “Chobani’s Boutique Test
Kitchen,” Bloomberg Businessweek, October 6, 2014, p. 30;
“Chobani’s New York Café Doubles as Test Kitchen,” Plus
Media Solutions, October 7, 2014; and Emily Steel, “New-
comers Buy Ad Time at Big Game,” The New York Times,
January 31, 2015, p. B1.
5. Richard Robinsion, “It’s Time for Marketers to Start a Bonfire
of the Legacies,” Marketing Week, January 26, 2017, p. 13;
David Z. Morris, “Elon Musk Is the Most Admired Leader in
Technology,” Fortune, September 8, 2016, p. 1; and “Microsoft
Joins Forces with Musk on Artificial-Intelligence Deal,”
Investors Business Daily, November 15, 2016, p. 1.
6. See http://www.marketing-dictionary.org/ama (definition
approved by the American Marketing Association Board of
Directors, July 2013).
7. Richard P. Bagozzi, “Marketing as Exchange,” Journal of
Marketing, October 1975, pp. 32–39; and Gregory T. Gundlach
and Patrick E. Murphy, “Ethical and Legal Foundations of
Relational Marketing Exchanges,” Journal of Marketing,
October 1993, pp. 35–46.
8. Gordon Wyner, “Looking for Innovation in All the Right
Places,” Marketing News, January 2015, pp. 20–21; Jens
Hansegard, “Lego’s Plan to Find the Next Big Hit: Crowdsource
It,” The Wall Street Journal, February 25, 2015; and J. J.
McCorvey, “The Crowd Can Be Harnessed—Up to a Point,”
Fast Company, October, 2014, p. 72.
9. Mintel Global New Products Database, http://www.mintel.com/
global-new-products-database, accessed February 21, 2017;
George Castellion and Stephen K. Markham, “Perspective: New
Product Failure Rates: Influence of Argumentum ad Populum
and Self-Interest,” Journal of Product Innovation Management 30,
no. 5 (2013), pp. 976–79; and Robert M. McMath and Thom
Forbes, What Were They Thinking? (New York: Times Business,
1998), pp. 3–22.
10. Michele Chandler, “Google Glass Shatters as Social Media
Accounts for Consumer Close,” Investors Business Daily,”
January 27, 2016, p. 1; Sam Frizell, “Google Glass Is Going
into Hiding ‘Until It Is Perfect,’” Time.com, February 6, 2015;
and Ben Geier, “This Is Where Google Says Glass Went All
Wrong,” Fortune.com, March 23, 2015.
11. Mary Ellen Shoup, “Coca-Cola to Launch Soda Sweetened
Solely by Stevia,” www.beveragedaily.com, November 20, 2017;
Christopher Doering, “Coca-Cola to Launch Stevia-Sweetened
Soda in 2018,” www.fooddive.com, November 20, 2017; and
Megan Poinski, “FDA Proposes 2020 Compliance Deadline
for Nutrition Facts Label,” www.fooddive.com, September 29,
2017.
12. Clark Schultz, “Netflix-Type Service for Car Sharing to
Launch,” Seeking Alpha, June 7, 2016; “Former COO of
Elio Motors Launches Car Subscription Service YoYo,”
PR Newswire, June 7, 2016; and Seth Parks, “Can YoYo,
a Pay- per-Mile Car Subscription, Shake Up the Mobility
Landscape?” www.thetruthaboutcars.com, September 19,
2016.
13. Louis DeNicola, “Credit Card Use in College after the CARD
Act,” The Clearpoint Blog, www.clearpoint.org, May 1, 2017;
and “Washington: Marketing to College Student Appears to
Have Declined,” Plus Media Solutions, February 27, 2014.
14. E. Jerome McCarthy, Basic Marketing: A Managerial Approach
(Homewood, IL: Richard D. Irwin, 1960); and Walter van Water-
school and Christophe Van den Bulte, “The 4P Classification of
the Marketing Mix Revisited,” Journal of Marketing, October
1992, pp. 83–93.
15. “Walmart CEO Outlines Growth Strategy at Annual Meeting
for the Investment Community,” Walmart News Archive,
October 15, 2014, Walmart.com; David J. Collis and Michael
G. Rukstad, “Can You Say What Your Strategy Is?” Harvard
Business Review, April 2008, pp. 82–90; and Roger A. Kerin
and Robert A. Peterson, Strategic Marketing Problems: Cases
and Comments, 13th ed. (Upper Saddle River, NJ: Prentice
Hall, 2013), p. 12.
16. Ashish Kothari and Joseph Lackner, “A Value-Based Approach
to Management,” Journal of Business and Industrial Market-
ing 21, no. 4, pp. 243–49; and James C. Anderson, James A.
Narius, and Wouter van Rossum, “Customer Value Propositions
in Business Markets,” Harvard Business Review, March 2006,
pp. 91–99.
17. V. Kumar and Werner Reinartz, “Creating Enduring Customer
Value,” Journal of Marketing 80 (November 2016), pp. 36–68;
V. Kumar, Managing Customers for Profit (Upper Saddle River,
NJ: Pearson Education, 2008); and “What’s a Loyal Customer
Worth?” Fortune, December 11, 1995, p. 182.
18. Nicolas A. Zacharias, Edwin J. Nijssen, and Ruth Maria Stock,
“Effective Configurations of Value Creation and Capture
Capabilities: Extending Treacy and Wiersema’s Value
Disciplines,” Journal of Business Research, October 2016,
pp. 4121–31; Michael Treacy and Fred D. Wiersema, The Disci-
pline of Market Leaders (Reading, MA: Addison-Wesley, 1995);
Michael Treacy and Fred Wiersema, “How Market Leaders
Keep Their Edge,” Fortune, February 6, 1995, pp. 88–89; and
Michael Treacy, “You Need a Value Discipline—But Which
One?” Fortune, April 17, 1995, p. 195.
19. Target, Starbucks, and Nordstrom corporate websites.
20. Johathan Z. Zhang, George F. Watson IV, Robert W. Palmatier,
and Rajiv P. Dant, “Dynamic Relationship Marketing,”
Journal of Marketing, September 2016, pp. 53–75; Robert W.
Palmatier, Rajiv P. Dant, Dhruv Grewal, and Kenneth R.
Evans, “Factors Influencing the Effectiveness of Relationship
Marketing: A Meta-Analysis,” Journal of Relationship Market-
ing, October 2006, pp. 136–53; and William Boulding,
Richard Staelin, Michael Ehret, and Wesley J. Johnson, “A
Customer Relationship Management Roadmap: What Is
Known, Potential Pitfalls, and Where to Go,” Journal of
Marketing, October 2005, pp. 155–66.
21. Jagdish Sheth, “Revitalizing Relationship Marketing,” Journal
of Services Marketing, no. 1 (2017), pp. 6–10; Michael E.
Porter and James E. Hepplemann, “How Smart, Connected
Products Are Transforming Competition,” Harvard Business
Review, November 2014, pp. 65–88; Ritz-Carlton website,
http://www.ritzcarlton.com/en/about/gold-standards; and
Susan Foumier, Susan Dobscha, and David Glen Mick,
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25
“Preventing the Premature Death of Relationship Market-
ing,” Harvard Business Review, January–February 1998,
pp. 42–51.
22. The 3M Post-it® Flag Highlighter and 3M Post-it® Flag Pen
examples are based on a series of interviews and meetings with
3M inventor and researcher David Windorski from 2004 to 2011.
23. See www.oprah.com for January 15, 2008; and “Post-it®
Flags Co-Sponsors Oprah’s Live Web Event,” 3M Stemwinder,
March 4–17, 2008, p. 3.
24. Jane, Spencer, “Lenovo Puts Style in New Laptop,” The Wall
Street Journal, January 3, 2008, p. B5.
25. Annual Report (New York: General Electric Company,
1952), p. 21.
26. John C. Narver, Stanley F. Slater, and Brian Tietje, “Creating a
Market Orientation,” Journal of Market Focused Management,
no. 2 (1998), pp. 241–55; Stanley F. Slater and John C. Narver,
“Market Orientation and the Learning Organization,” Journal
of Marketing, July 1995, pp. 63–74; and George S. Day, “The
Capabilities of Market-Driven Organizations,” Journal of
Marketing, October 1994, pp. 37–52.
27. The definition of customer relationship management is adapted
from Philip Kotler, Hermawan Kartajaya, and Iwan Setiawan,
Marketing 4.0 (Hoboken, NJ: Wiley, 2017); Rajendra K. Srivastava,
Tasadduq A. Shervani, and Liam Fahey, “Marketing, Business
Processes, and Shareholder Value: An Embedded View of
Marketing Activities and the Discipline of Marketing,” Journal
of Marketing, special issue (1999), pp. 168–79; Gary F. Gebhardt,
Gregory S. Carpenter, and John F. Sherry Jr., “Creating a Market
Orientation: A Longitudinal, Multifirm, Grounded Analysis of
Cultural Transformation,” Journal of Marketing, October 2006,
pp. 37–55; and Christopher Meyer and Andre Schwager,
“ Understanding Customer Experience,” Harvard Business
Review, February 2007, pp. 117–26.
28. Gebhardt et al., “Creating a Market Orientation.
29. Phil Wahba, “Is Trader Joe’s Starting a Price War with
Whole Foods?” Fortune.com, July 11, 2016; Alex Rawson,
Ewan Duncan, and Conor Jones, “The Truth about Customer
Experience,” Harvard Business Review, September 2013,
pp. 90–98; and Meyer and Schwager, “Understanding
Customer Experience,” Havard Business Review,
February 2007, pp. 117–26.
30. Philip Kotler and Sidney J. Levy, “Broadening the Concept of
Marketing,” Journal of Marketing, January 1969, pp. 10–15;
and Jim Rendon, “When Nations Need a Little Marketing,”
The New York Times, November 23, 2003, p. BU6.
31. Peter Gumbel, “Louvre, Inc.” Time, August 11, 2008, pp. 51–52;
and Stella Wai-Art Law, A Branding Context: The Guggenheim
and the Louvre, M.A. Thesis, Columbus: The Ohio State
University, 2008.
32. William L. Wilkie and Elizabeth S. Moore, “Marketing’s
Relationship to Society,” in Handbook of Marketing, ed. Barton
Weitz and Robin Wensley (London: Sage Publications, 2006),
pp. 9–38.
33. Chobani, LLC: This case was written by William Rudelius,
based on personal interviews with Chobani executives Joshua
Dean, Sujean Lee, and Kyle O’Brien. Other sources include:
Kate Bernot, “Chobani Hopes New Squeeze Bottles Turn Greek
Yogurt into a Condiment,” thetakeout.com, August 8, 2018;
“The Chobani Story,” MEDIA@CHOBANI.COM, 2013;
Megan Durisin, “Chobani CEO: Our Success Has Nothing to
Do with Yogurt,” Business Retail Insider, May 3, 2013, p. 1;
and Sarah E. Needleman, “Old Factory, Snap Decision Spawn
Greek Yogurt Craze,” The Wall Street Journal, June 21, 2012,
pp. B1, B2.
Developing Successful
Organizational and
Marketing StrategiesLe a r n i ng Ob j e c t i v e s
After reading this chapter
you should be able to:
Describe three kinds of
organizations and the
three levels of strategy
in them.
Describe core values,
mission, organizational
culture, business, and
goals.
Explain why managers
use marketing
dashboards and
marketing metrics.
Discuss how an
organization assesses
where it is now and
where it seeks to be.
Explain the three steps
of the planning phase
of the strategic
marketing process.
Describe the four
components of the
implementation phase
of the strategic
marketing process.
Discuss how managers
identify and act on
deviations from plans.
LO 2-1
LO 2-2
LO 2-3
LO 2-4
LO 2-5
LO 2-6
LO 2-7
2
Ben and Jerry Are on a Mission: To Make Fantastic,
Sustainable, World-Changing Ice Cream
Does that sound ambitious? Not if you are longtime friends Ben Cohen and Jerry
Greenfield, the founders of Ben & Jerry’s ice cream shops. In fact, it was the basic
idea they used when they started their business!
Ben & Jerry’s started in 1978 when the two men moved to Vermont to open an
ice cream parlor in a renovated gas station. The venture was buoyed with enthusi-
asm, $12,000 in borrowed and saved money, and ideas from a $5 correspondence
course in ice cream making. Their first flavor? Vanilla—because it’s a universal
best seller. Other flavors such as Chunky Monkey, Cherry Garcia, Peanut Butter
Cup, and many others soon followed.
The ice cream flavors weren’t the only extraordinary thing about the company
though. Ben and Jerry embraced a concept they called “linked prosperity” which
encouraged the success of all their constituents, including employees, suppliers,
customers, and neighbors. They set out to achieve linked prosperity with a three-
part mission statement:
∙ Product Mission: To make, distribute, and sell the finest quality all-natural
ice cream.
∙ Economic Mission: To operate the company for sustainable financial growth.
∙ Social Mission: To operate the company in ways that make the world a better
place.
The mission statement guided the entrepreneurs’ decisions related to many
aspects of the business, including purchasing practices, ingredient sourcing, man-
ufacturing, and involvement in the community.1
Ben and Jerry’s mission-driven approach led them to successfully implement many
highly creative organizational and marketing strategies. Some examples include:
∙ Free Cone Day. One day each year Ben & Jerry’s gives away free servings of
ice cream to more than a million fans around the world. It’s one way the com-
pany can give back to the communities it serves.
27
Developing Successful
Organizational and
Marketing Strategies
∙ Fairtrade. Ben & Jerry’s believes that farmers who grow ingredients for their ice
cream products (such as cocoa, coffee, and vanilla) should receive a fair price for
their harvest. In return Fairtrade farmers agree to use sustainable farming practices,
implement fair working standards, and invest in local communities.
∙ B-Corp Certification. Ben & Jerry’s was one of the first companies involved in the
Benefit Corporation movement, which has developed a rigorous set of principles
and standards on which to evaluate companies in terms of social and environmen-
tal performance, accountability, and transparency.
Source: Ben & Jerry’s Homemade, Inc.
28
∙ PartnerShop Program. PartnerShops are Ben & Jerry’s scoop shops that are indepen-
dently owned and operated by community-based nonprofit organizations. The shops
employ youth and young adults who may face barriers to employment to help them
build better lives.
As you can see, Ben & Jerry’s has a strong link between its mission and its strategies.
CEO Jostein Solheim explains that their purpose at Ben & Jerry’s is “to be part of a global
movement that makes changing the world seem fun and achievable.”2
Today, Ben & Jerry’s is owned by Unilever, which is the market leader in the global ice
cream industry—one that is expected to reach $89.5 billion by 2023. Ben & Jerry’s re-
cently added a vegan line of products in four flavors, and it announced a partnership with
New Belgium Brewing to produce a Chocolate Chip Cookie Dough Ale. In addition, the
company supports a foundation that helps employees engage in philanthropy and supports
activism. While customers love Ben & Jerry’s rich premium ice cream, many buy its prod-
ucts to support its social mission. As a testament to its success, Ben & Jerry’s has over
8.7 million fans on Facebook!3
Chapter 2 describes how organizations set goals to provide an overall direction to their
organizational and marketing strategies. The marketing department of an organization con-
verts these strategies into plans that must be implemented and then evaluated so deviations
can be exploited or corrected based on the marketing environment.
Video 2-1
Ben & Jerry’s
kerin.tv/cr8e/v2-1
TODAY’S ORGANIZATIONS
In studying today’s organizations, it is important to
recognize (1) the kinds of organizations that exist, (2)
what strategy is, and (3) how this strategy relates to the
three levels of structure found in many large
organizations.
Kinds of Organizations
An organization is a legal entity that consists of people
who share a common mission. This motivates them to
develop offerings (goods, services, or ideas) that cre-
ate value for both the organization and its customers
by satisfying their needs and wants.4 Today’s organi-
zations are of three types: (1) for-profit organizations,
(2) nonprofit organizations, and (3) government
agencies.
A for-profit organization, often called a business
firm, is a privately owned organization such as Target,
Nike, or Brita that serves its customers to earn a profit
so that it can survive. Profit is the money left after a
for-profit organization subtracts its total expenses from
its total revenues—and the reward for the risk it under-
takes in marketing its offerings.
In contrast, a nonprofit organization is a
nongovernmental organization that serves its custom-
ers but does not have profit as an organizational goal.
Instead, its goals may be operational efficiency or
client satisfaction. Regardless, it also must receive
sufficient funds above its expenses to continue
operations. Organizations like Teach For America,
LO 2-1
Describe three kinds
of organizations and
the three levels of
strategy in them.
Brita is an example of a for-
profit organization. Its Brita
Hard-Sided Bottle is BPA-free
and filters tap water. Each filter
works for 300 bottles of water.
©McGraw-Hill Education
profit
The money left after a
for-profit organization
subtracts its total expenses
from its total revenues—and
the reward for the risk it
undertakes in marketing its
offerings.
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described in the Making Responsible Decisions box, seek to solve the practical needs
of society and are often structured as nonprofit organizations.5 For simplicity in the
rest of the book, the terms firm, company, and organization are used interchangeably
to cover both for-profit and nonprofit organizations.
Last, a government agency is a federal, state, county, or city unit that provides a
specific service to its constituents. For example, the Census Bureau, a unit of the U.S.
Department of Commerce, is a federal government agency that provides population
and economic data.
Organizations that develop similar offerings create an industry, such as the com-
puter industry or the automobile industry.6 As a result, organizations make strategic
decisions that reflect the dynamics of the industry to create a compelling and sustain-
able advantage for their offerings relative to those of competitors and achieve a
Filmmaker Pete Williams recently spent two years creating
a documentary called The New Breed to describe the
growing movement of people who are committed to using
business concepts to change the world for good. These
“social entrepreneurs” are using a variety of organiza-
tional models to address social needs about which they
are passionate. The enterprises are sometimes organized
as traditional for-profit companies with a for-purpose
orientation. They can also be benefit corporations, which
are for-profit organizations with legal requirements for
social and environmental impact assessment. Finally,
social entrepreneurs often create enterprises that are
organized as nonprofit ventures. The issues they are
focusing on range from health care delivery, to the cost of
higher education, to agricultural efficiency.
Each year Forbes magazine recognizes some of the
most innovative social ventures in its annual list of 30 Un-
der 30: Social Entrepreneurs. For example, Kelly Peeler
left a Wall Street job to found NexGenVest, an organiza-
tion created to help the 70 million Generation Z students
navigate the financial aid and student loan market.
NexGenVest customers, who are typically high school
seniors and college students, contact advisors 24/7 via
text message to receive personalized information and
advice. Why is Peeler so passionate about this issue?
Because Americans currently owe more than $1.4 trillion
in student debt. In addition, Peeler believes “the next
financial crisis [will be] rooted in the student loan market.”
Teach For America is another example of a creative
social venture. Launched by college senior Wendy Kopp,
Teach For America is the national corps of outstanding
recent college graduates who commit to teach for two
years in urban and rural public schools and become
lifelong leaders in expanding educational opportunity.
Each year more than 10,000 corps members teach
750,000 students.
These examples illustrate how organizations are
changing to create value for a broad range of constituents
by addressing the needs and challenges of society.
Making Responsible Decisions
New Types of Organizations Help Entrepreneurs
Focus on Passion and Purpose
Social
Responsibility
Courtesy of STAY GOLD Studios
30
superior level of performance.7 Much of an organization’s marketing strategy
is having a clear understanding of the industry within which it competes.
What Is Strategy?
An organization has limited human, financial, technological, and other re-
sources available to produce and market its offerings—it can’t be all things to
all people! Every organization must develop strategies to help focus and di-
rect its efforts to accomplish its goals. However, the definition of strategy has
been the subject of debate among management and marketing theorists. For
our purpose, strategy is an organization’s long-term course of action de-
signed to deliver a unique customer experience while achieving its goals.8 All
organizations set a strategic direction. And marketing helps to both set this
direction and move the organization there.
The Structure of Today’s Organizations
Large organizations are extremely complex. They usually consist of three organi-
zational levels whose strategies are linked to marketing, as shown in Figure 2–1.
Corporate Level The corporate level is where top management directs overall
strategy for the entire organization. “Top management” usually means the board of
directors and senior management officers with a variety of skills and experiences that
are invaluable in establishing the organization’s overall strategy.
The president or chief executive officer (CEO) is the highest-ranking officer in the
organization and is usually a member of its board of directors. This person must
possess leadership skills ranging from overseeing the organization’s daily operations
to spearheading strategy planning efforts that may determine its very survival.
In recent years, many large firms have changed the title of the head of marketing
from vice president of marketing to chief marketing officer (CMO). These CMOs have
an increasingly important role in top management and typically offer multi-industry
backgrounds, cross-functional management expertise, and insightful marketing intu-
ition as qualifications. In addition, they are increasingly called upon to bring “a strate-
gic viewpoint, exceptional measurement and analytical capabilities, financial
management rigor, and operational savviness to their role.”9
Functional level
Departments
Finance Marketing Manufacturingoperations
Information
technology
Research and
development
Human
resources
Strategic business unit level
Corporate level
Board of directorsFIGURE 2–1
The board of directors
oversees the three
levels of strategy in
organizations: corporate,
strategic business unit,
and functional.
Prada manages a portfolio or
group of businesses—including
clothing, perfume, leather
goods, and footwear—each of
which may be viewed as a
strategic business unit (SBU).
©Imaginechina via AP Images
strategy
An organization’s long-term
course of action designed to
deliver a unique customer
experience while achieving
its goals.
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Strategic Business Unit Level Some multimarket, multiproduct firms, such as
Prada and Johnson & Johnson, manage a portfolio or group of businesses. Each group
is a strategic business unit (SBU ), which is a subsidiary, division, or unit of an organi-
zation that markets a set of related offerings to a clearly defined target market. At the
strategic business unit level, managers set a more specific strategic direction for their
businesses to exploit value-creating opportunities. For less complex firms with a single
business focus, such as Ben & Jerry’s, the corporate and business unit levels may merge.
Functional Level Each strategic business unit has a functional level, where
groups of specialists actually create value for the organization. The term department
generally refers to these specialized functions such as marketing and finance (see
Figure 2–1). At the functional level, the organization’s strategic direction becomes its
most specific and focused. Just as there is a hierarchy of levels within an organization,
there is a hierarchy of strategic directions set by managers at each level.
A key role of the marketing department is to look outward by listening to custom-
ers, developing offerings, implementing marketing program actions, and then evaluat-
ing whether those actions are achieving the organization’s goals. When developing
marketing programs for new or improved offerings, an organization’s senior manage-
ment may form cross-functional teams. These consist of a small number of people
from different departments who are mutually accountable to accomplish a task or a
common set of performance goals. Sometimes these teams will have representatives
from outside the organization, such as suppliers or customers, to assist them.
2-1. What is the difference between a for-profit and a nonprofit organization?
2-2. What are examples of a functional level in an organization?
learning review
STRATEGY IN VISIONARY ORGANIZATIONS
To be successful, today’s organizations must be forward-looking. They must anticipate
future events and then respond quickly and effectively to those events. In addition, they
must thrive in today’s uncertain, chaotic, rapidly changing environment. A visionary
organization must specify its foundation (why does it exist?), set a direction (what will
it do?), and formulate strategies (how will it do it?), as shown in Figure 2–2.10
Organizational Foundation: Why Does It Exist?
An organization’s foundation is its philosophical reason for being—why it exists. At
their most basic level organizations exist to accomplish something for someone. Suc-
cessful visionary organizations use this foundation to guide and inspire their employ-
ees through three elements: core values, mission, and organizational culture.
Core Values An organization’s core values are the fundamental, passionate, and
enduring principles that guide its conduct over time. A firm’s founders or senior man-
agement develop these core values, which are consistent with their essential beliefs and
character. They capture the firm’s heart and soul and serve to inspire and motivate its
stakeholders—employees, shareholders, board of directors, suppliers, distributors, credi-
tors, unions, government, local communities, and customers. Core values also are time-
less and guide the organization’s conduct. The five core values at Facebook, for example,
are (1) focus on impact, (2) move fast, (3) be bold, (4) be open, and (5) build social value.
To be effective, an organization’s core values must be communicated to and supported
by its top management and employees; if not, they are just hollow words.11
LO 2-2
Describe core
values, mission,
organizational
culture, business,
and goals.
core values
The fundamental,
passionate, and enduring
principles of an organization
that guide its conduct over
time.
32
Mission By understanding its core values, an organization can take steps to define
its mission, a statement of the organization’s function in society that often identifies
its customers, markets, products, and technologies. Often used interchangeably with
vision, a mission statement should be clear, concise, meaningful, inspirational, and
long-term.12
Inspiration and focus appear in the mission statements of for-profit organizations, as
well as nonprofit organizations and government agencies. For example:
∙ Southwest Airlines: “Dedication to the highest quality of Customer Service de-
livered with a sense of warmth, friendliness, individual pride, and Company
Spirit.”13
∙ American Red Cross: “To prevent and alleviate human suffering in the face of emer-
gencies by mobilizing the power of volunteers and the generosity of donors.”14
∙ Federal Trade Commission: “To prevent business practices that are anticompeti-
tive or deceptive or unfair to consumers; to enhance informed consumer choice
and public understanding of the competitive process; and to accomplish this
without unduly burdening legitimate business activity.”15
Each statement exhibits the qualities of a good mission and provides a compelling
picture of an envisioned future.
Recently, many organizations have added a social element to their mission state-
ments to reflect an ideal that is morally right and worthwhile. This is what Ben &
Jerry’s social mission statement shows in the chapter opener. Stakeholders, particu-
larly customers, employees, and now society, are asking organizations to be excep-
tional citizens by providing long-term value while solving society’s problems.
Organizational Culture An organization must connect with all of its stake-
holders. Thus, an important corporate-level marketing function is communicating
its core values and mission to them. These activities send clear messages to em-
ployees and other stakeholders about organizational
culture—the set of values, ideas, attitudes, and norms
of behavior that is learned and shared among the mem-
bers of an organization.
Organizational Direction: What Will It Do?
As shown in Figure 2–2, the organization’s foundation
enables it to set a direction in terms of (1) the “business”
it is in and (2) its specific goals.
Business A business describes the clear, broad, underlying industry or market
sector of an organization’s offering. To help define its business, an organization looks
at the set of organizations that sell similar offerings—those that are in direct competi-
tion with each other—such as “the ice cream business.” The organization can then
begin to answer the questions “What do we do?” or “What business are we in?”
Video 2-2
Southwest
Airlines
kerin.tv/cr8e/v2-2
FIGURE 2–2
Today’s visionary
organizations use key
elements to (1) establish a
foundation and (2) set a
direction using (3)
strategies that enable
them to develop and
market their products
successfully.
“Luv Goes A Long Way” ads
emphasize how providing a
warm, friendly experience is
part of Southwest Airlines’s
organizational strategy.
Source: Southwest Airlines Co.
mission
A statement of the
organization’s function in
society that often identifies
its customers, markets,
products, and technologies.
Often used interchangeably
with vision.
organizational culture
The set of values, ideas,
attitudes, and norms of
behavior that is learned and
shared among the members
of an organization.
+ =
Organizational
direction (what)
• Business
• Goals (objectives)
Long-term
Short-term
Organizational
foundation (why)
• Core values
• Mission (vision)
• Organizational culture
Organizational
strategies (how)
• By level
Corporate
SBU
Functional
• By product
Good
Service
Idea
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Professor Theodore Levitt saw that 20th-century
American railroads defined their business too narrowly,
proclaiming, “We are in the railroad business!” This myo-
pic focus caused them to lose sight of who their customers
were and what they needed. So railroads failed to develop
strategies to compete with airlines, barges, pipelines, and
trucks. As a result, many railroads merged or went bank-
rupt. Railroads should have realized they were in “the
transportation business.” Similarly, the publishing indus-
try defined its business as being the printer of newspapers
and magazines. The dramatic decline in demand for print
publications, however, suggests that it should view itself
as being in the information and entertainment business.16
With today’s increased global competition, many or-
ganizations are rethinking their business model, the strat-
egies an organization develops to provide value to the
customers it serves. Technological innovation is often the
trigger for this business model change, particularly when
it is linked to consumer needs. Netflix, for example,
changed its business model several times, shifting its
original DVD rental model to a video streaming model,
and then to an original content production model.17
Bookstore retailer Barnes & Noble, too, is rethinking its
business model as e-book readers like Amazon’s Kindle
and Apple’s iPad have gained widespread popularity.18
Uber, the recent start-up known for its car transporta-
tion services, is continually redefining its business. The
company started as a limousine service called UberCab.
Soon the business was redefined as a ride-sharing service
when it added UberX and UberPool apps which allowed
drivers to use their own cars. The definition expanded
further, to transportation, when UberRush was added to
provide package delivery and UberEats was added to pro-
vide food delivery from restaurants. Today, taking a les-
son from Theodore Levitt, Uber sees itself as much more
than a cab service or ride-sharing service or delivery service. In fact, Forbes magazine
simply describes Uber’s business model as a “frictionless middleman.”19
Goals Goals or objectives (terms used interchangeably in this book) are state-
ments of an accomplishment of a task to be achieved, often by a specific time. Goals
convert an organization’s mission and business into long- and short-term performance
targets. Business firms can pursue several different types of goals:
∙ Profit. Most firms seek to maximize profits—to get as high a financial return on
investment (ROI) as possible.
∙ Sales. If profits are acceptable, a firm may elect to maintain or increase its sales
(dollars or units) even though profits may not be maximized.
∙ Market share. Market share is the ratio of sales revenue of the firm to the total
sales revenue of all firms in the industry, including the firm itself.
∙ Quality. A firm may seek to offer a level of quality that meets or exceeds the cost
and performance expectations of its customers.
∙ Customer satisfaction. Customers are the reason the organization exists, so their
perceptions and actions are of vital importance. Satisfaction can be measured
with surveys or by the number of customer complaints.
∙ Employee welfare. A firm may recognize the critical importance of its employ-
ees by stating its goal of providing them with good employment opportunities
and working conditions.
In the first half of the 20th century, what “business” did railroad
executives believe they were in? The text reveals their
disastrous error.
©Digital Vision/Getty Images
Why is the definition of Uber’s business changing? See the
text for the answer.
Source: Uber Technologies Inc.
business
The clear, broad, underlying
industry or market sector of
an organization’s offering.
goals
Statements of an
accomplishment of a
task to be achieved, often
by a specific time. Also
called objectives.
objectives
Statements of an accom-
plishment of a task to be
achieved, often by a specific
time. Also called goals.
market share
The ratio of sales revenue
of the firm to the total sales
revenue of all firms in the
industry, including the firm
itself.
34
∙ Social responsibility. Firms may seek to balance the conflicting goals of stake-
holders to promote their overall welfare, even at the expense of profits.
Nonprofit organizations (such as museums and hospitals) also have goals, such as to
serve consumers as efficiently as possible. Similarly, government agencies set goals
that seek to serve the public good.
Organizational Strategies: How Will It Do It?
As shown in Figure 2–2, the organizational foundation sets the “why” of organizations
and the organizational direction sets the “what.” To convert these into actual results,
the organizational strategies are concerned with the “how.” These organizational strat-
egies vary in at least two ways, depending on (1) a strategy’s level in the organization
and (2) the offerings an organization provides to its customers.
Variation by Level Moving down the levels in an organization involves creating
increasingly specific, detailed strategies and plans. So, at the corporate level, top man-
agers may struggle with writing a meaningful mission statement; while at the func-
tional level, the issue is who makes tomorrow’s sales call.
Variation by Product Organizational strategies also vary by the organization’s
products. The strategy will be far different when marketing a very tangible physical
good (Ben & Jerry’s ice cream), a service (a Southwest Airlines flight), or an idea (a
donation to the American Red Cross).
Most organizations develop a marketing plan as a part of their strategic marketing
planning efforts. A marketing plan is a road map for the marketing actions of an orga-
nization for a specified future time period, such as one year or five years. The planning
phase of the strategic marketing process (discussed later) usually results in a marketing
plan that directs the marketing actions of an organization. Appendix A at the end of
this chapter provides guidelines for writing a marketing plan.
Video 2-3
Uber Video
kerin.tv/cr8e/v2-3
2-3. What is the meaning of an organization’s mission?
2-4. What is the difference between an organization’s business and its goals?
learning review
Tracking Strategic Performance with Marketing Analytics
Although marketing managers can set the strategic direction for their organizations,
how do they know if they are making progress in getting there? As several industry
experts have observed, “You can’t manage what you don’t measure.”20 One answer to
this problem is the growing field of data analytics, or big data, which enables data-
driven decisions by collecting data and presenting them in a visual format such as a
marketing dashboard.
Car Dashboards and Marketing Dashboards A marketing dashboard is
the visual display of the essential information related to achieving a marketing objec-
tive.21 Today’s business intelligence tools often provide real-time data to allow market-
ing mix changes, personalization, and evaluation of customer satisfaction. An example
is when a chief marketing officer (CMO) wants to see daily what the effect of a new
social media campaign is on a product’s sales.22
The idea of a marketing dashboard really comes from the display of information
found on a car’s dashboard. On a car’s dashboard, we glance at the fuel gauge and take
action when our gas is getting low. With a marketing dashboard, a marketing manager
glances at a graph or table to monitor key metrics and makes a decision to take action
or analyze the problem further.23
LO 2-3
Explain why
managers use
marketing
dashboards and
marketing metrics.
marketing plan
A road map for the
marketing actions of an
organization for a specified
future time period, such as
one year or five years.
marketing dashboard
The visual display of the
essential information related
to achieving a marketing
objective.
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Dashboards, Metrics, and Plans The marketing dashboard of Sonatica, a hy-
pothetical hardware and software firm, appears in Figure 2–3. It shows graphic displays
of key performance indicators linked to Sonatica’s product lines.24 Each display in a
marketing dashboard shows a marketing metric, which is a measure of the quantitative
value or trend of a marketing action or result.25 Choosing which marketing metrics to
display is critical for a busy manager, who can be overwhelmed with irrelevant data.26
Today’s marketers use data visualization, which presents information about an or-
ganization’s marketing metrics graphically so marketers can quickly (1) spot devia-
tions from plans during the evaluation phase and (2) take corrective actions.27 This
book uses data visualization in many figures to highlight in color key points described
in the text. The Sonatica marketing dashboard in Figure 2–3 uses data visualization
tools like a pie chart, a line or bar chart, and a map to show how parts of its business
are performing as of December 2018:
∙ Website Traffic Sources. The color-coded perimeter of the pie chart shows the
three main sources of website traffic (referral sites at 47 percent, search engines
at 37 percent, and direct traffic at 16 percent). These three colors link to those of
the circles in the column of website traffic sources. Of the 47 percent of traffic
coming from referral sites, the horizontal bullet graphs to the right show that
Sonatica’s Facebook visits comprise 15 percent of total website traffic, up from
a month ago (as shown by the vertical line).
∙ Sales Performance by SBU. The spark lines (the wavy lines in the far left col-
umn) show the 13-month trends of Sonatica’s strategic business units (SBUs).
For example, the trends in electronics and peripherals are generally up, causing
their sales to exceed their YTD (year to date) targets. Conversely, both software
and hardware sales failed to meet YTD targets, a problem quickly noted by a
marketing manager seeing the red “warning” circles in their rows at the far right.
This suggests that immediate corrective actions are needed for the software and
hardware SBUs.
8
FIGURE 2–3
An effective marketing
dashboard, like this
one from Sonatica, a
hypothetical hardware
and software firm, helps
managers assess a
business situation at a
glance.
Source: Dundas Data
Visualization, Inc.
marketing metric
A measure of the
quantitative value or trend
of a marketing action or
result.
36
∙ Website Visits by State. The U.S. map shows that the darker the state, the greater
the number of website visits for the current month. For example, Texas has close
to 20,000 visits per month, while Illinois has none.
The Ben & Jerry’s dashboard in the Applying Marketing Metrics box shows how
the two widely used marketing metrics of dollar sales and dollar market share can help
the company assess its growth performance from 2017 to 2018. The Applying Market-
ing Metrics boxes in later chapters highlight other key marketing metrics and how they
can lead to marketing actions.
SETTING STRATEGIC DIRECTIONS
To set a strategic direction, an organization needs to answer two difficult questions:
(1) Where are we now? and (2) Where do we want to go?
A Look Around: Where Are We Now?
Asking an organization where it is at the present time involves identifying its compe-
tencies, customers, and competitors.
LO 2-4
Discuss how an
organization
assesses where it
is now and where it
seeks to be.
Ben & Jerry’s Dollar Sales
and Market Share
S
al
es
($
m
ill
io
ns
)
M
ar
ke
t s
ha
re
(%
)
2017
$240
18.4
0
200
220
240
$280
260
17
18
19
20
22
21
2018
20.0
$250
As the marketing manager for Ben & Jerry’s, you need
to assess how it is doing within the United States in the
super-premium ice cream market in which it competes.
For this, you choose two marketing metrics: dollar sales
and dollar market share.
Your Challenge
Scanner data from checkout counters in supermarkets
and other retailers show the total industry sales of super-
premium ice cream were $1.25 billion in 2018. Internal
company data show you that Ben & Jerry’s sold 50 million
units at an average price of $5.00 per unit in 2018. A
“unit” in super-premium ice cream is one pint.
Your Findings
Dollar sales and dollar market share for 2018 can be cal-
culated using simple formulas and displayed on the Ben &
Jerry’s marketing dashboard as follows:
Dollar sales ($) = Average price × Quantity sold
= $5.00 × 50 million units
= $250 million
Dollar market share (%) =
Ben & Jerry’s sales ($)
Total industry sales ($)
=
$250 million
$1.25 billion
= 0.20 or 20%
Your dashboard displays show that from 2017 to
2018 dollar sales increased from $240 million to
$250 million and that dollar market share grew from
18.4 to 20.0 percent.
Your Action
The results need to be compared with the goals estab-
lished for these metrics. In addition, they should be com-
pared with previous years’ results to see if the trends are
increasing, flat, or decreasing. This will lead to marketing
actions.
Applying Marketing Metrics
How Well Is Ben & Jerry’s Doing?
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Competencies Senior managers must ask the ques-
tion: What do we do best? The answer involves an assess-
ment of the organization’s core competencies, which are
its special capabilities—the skills, technologies, and re-
sources—that distinguish it from other organizations and
provide customer value. Exploiting these competencies
can lead to success.28 Competencies should be distinctive
enough to provide a competitive advantage, a unique
strength relative to competitors that provides superior re-
turns, often based on quality, time, cost, or innovation.29
Customers Ben & Jerry’s customers are ice cream
and frozen yogurt eaters who have different preferences
(form, flavor, health, and convenience). Boeing’s jet air-
liner customers include passenger airlines such as American, United, and Southwest who
serve travelers that need this type of service. Lands’ End communicates a remarkable
commitment to its customers and its product quality with these unconditional words:
Guaranteed. Period.®
The Lands’ End website points out that this guarantee has always been an uncondi-
tional one. It reads: “If you’re not satisfied with any item, simply return it to us at any
time for an exchange or refund of its purchase price.” But to get the message across
more clearly to its customers, it created the two-word guarantee. The point is that
Lands’ End’s strategy must provide genuine value to customers to ensure that they
have a satisfying experience.30
Competitors In today’s global marketplace, the distinctions among competitors
are increasingly blurred. Lands’ End started as a catalog retailer. But today, Lands’
End competes with not only other clothing catalog retailers such as L.L.Bean but also
traditional department stores, mass merchandisers, and specialty shops. In addition,
well-known clothing brands such as Eddie Bauer now have their own chain stores.
Although only some of the clothing in any of these stores may directly compete with
Lands’ End offerings, all of these retailers have websites to sell their offerings online.
This means there’s a lot of competition out there.
Growth Strategies: Where Do We Want to Go?
Knowing where the organization is at the present time enables managers to set a direc-
tion for the firm and allocate resources to move in that direction. Two techniques to aid
managers with these decisions are (1) business portfolio analysis and (2) diversifica-
tion analysis.
Business Portfolio Analysis Successful organizations have a portfolio or range
of offerings (products and services) that possess different growth rates and market
shares within the industry in which they operate. The Boston Consulting Group
(BCG), an internationally known management consulting firm, has developed
business portfolio analysis. It is a technique that managers use to quantify perfor-
mance measures and growth targets to analyze their firms’ SBUs as though they were
a collection of separate investments.31 The purpose of this tool is to determine which
SBU or offering generates cash and which one requires cash to fund the organization’s
growth opportunities.
Let’s assume you are filling the shoes of Apple CEO Tim Cook. Based on your
knowledge of Apple products, you are currently conducting a quick analysis of four
major Apple SBUs through 2020. Try to rank them from highest to lowest in terms of
percentage growth in expected unit sales. We will introduce you to business portfolio
analysis as we look at the possible future of the four Apple SBUs.
business portfolio analysis
A technique that managers
use to quantify performance
measures and growth
targets to analyze their
firms’ strategic business
units (SBUs) as though they
were a collection of
separate investments.
Lands’ End’s unconditional guarantee for its products
highlights its focus on customers.
Source: Lands’ End
38
10×
High
1×
Low
0.1×
M
ar
ke
t g
ro
w
th
r
at
e
(%
p
er
y
ea
r)
Stars
iPhone
iPad/iPad mini iPod
Apple Watch
Dogs
Question
Marks
Relative unit market share
(share relative to largest competitor)
40
30
High
Low
20
10
0
Cash
Cows
–10
–20
–30
–40
43
12
M
FIGURE 2–4
Boston Consulting Group
(BCG) business portfolio
analysis for four of Apple’s
consumer-related SBUs.
The red arrow indicates
typical movement of a
product through the
matrix.
All product photos: Source:
Apple Inc.
The BCG business portfolio analysis requires an organization to locate the position
of each of its SBUs on a growth-share matrix (see Figure 2–4). The vertical axis is the
market growth rate, which is the annual rate of growth of the SBU’s industry. The
horizontal axis is the relative market share, defined as the sales of the SBU divided by
the sales of the largest firm in the industry. A relative market share of 10× (at the left
end of the scale) means that the SBU has 10 times the share of its largest competitor,
whereas a share of 0.1× (at the right end of the scale) means it has only 10 percent of
the share of its largest competitor.
The BCG has given specific names and descriptions to the four resulting quadrants
in its growth-share matrix based on the amount of cash they generate for or require
from the organization:
1. Question marks are SBUs with a low share of high-growth markets. They re-
quire large injections of cash just to maintain their market share, much less in-
crease it. The name implies management’s dilemma for these SBUs: choosing
the right ones to invest in and phasing out the rest.
2. Stars are SBUs with a high share of high-growth markets that may need extra
cash to finance their own rapid future growth. When their growth slows, they
are likely to become cash cows.
3. Cash cows are SBUs that generate large amounts of cash, far more than they
can use. They have dominant shares of slow-growth markets and provide cash
to cover the organization’s overhead and to invest in other SBUs.
4. Dogs are SBUs with low shares of slow-growth markets. Although they may
generate enough cash to sustain themselves, they may no longer be or may not
become real winners for the organization. Dropping SBUs that are dogs may be
required if they consume more cash than they generate, except when relation-
ships with other SBUs, competitive considerations, or potential strategic alli-
ances exist.32
An organization’s SBUs often start as question marks and go counterclockwise
around Figure 2–4 to become stars, then cash cows, and finally dogs. Because an
organization has limited influence on the market growth rate, its main objective is to
try to change its relative dollar or unit market share. To do this, management decides
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what strategic role each SBU should have in the future and either injects cash into or
removes cash from it.
According to Interbrand, a leading brand management consulting firm, Apple
has been consistently cited as one of the top global brands over the past decade in
its annual Best Global Brands survey. What has made Apple so iconic is not only its
revolutionary products but also its commitment to infusing the “human touch” with
its technology such that its customers connect with the brand on both a cognitive
and an emotional level. The late Steve Jobs was instrumental in creating Apple’s
organizational culture and core values that will continue to guide its future.33
Using the BCG business portfolio analysis framework, Figure 2–4 shows that the
Apple picture might look this way from 2018 to 2020 for four of its SBUs:34
1. Apple Watch (wearable technology). Apple recently entered the wearable tech-
nology market with its version of a smartwatch, the Apple Watch. The watch
competes with Samsung, Pebble, LG, and Motorola watches and a wide range
of other wearable technologies such as Fitbit and Garmin fitness trackers. In-
dustry analysts estimate that Apple’s annual unit sales reached 18 million in
2017 and will reach 45 million watches in 2019, suggesting a 58 percent growth
rate. The Apple Watch enters the market as a question mark and appears to be
growing into a star.35
2. iPhone (smartphones). Apple launched its revolutionary iPhone smartphone in
2007. iPhone unit sales skyrocketed and Apple’s U.S. market share is now
greater than 44 percent, exceeding the market share of its largest competitor,
Samsung. The smartphone market is expected to grow at an annual rate of
7 percent due to growth in India, Indonesia, and Africa. High market share and
high growth suggest that Apple’s iPhone is a star.36
3. iPad/iPad mini (tablets). Launched in 2010, iPad unit sales reached 40 percent
market share by 2013—leading both Samsung’s Galaxy (18 percent) and
Amazon’s Kindle (4 percent). Tablet sales are now declining as consumers are
substituting big-screen smartphones and ultra-thin computers for tablets.
For Apple, its iPad SBU is a cash cow (high market share in a low-growth
market).37
4. iPod (music players). Apple entered the music player market with its iPod de-
vice in 2001. The product became a cultural icon, selling more that 50 million
units annually until 2010 when the iPhone integrated a music player. Since
2010, sales have been declining dramatically. In 2014 Apple announced that it
was discontinuing the iPod classic, and in 2017 it announced that it was discon-
tinuing the iPod shuffle and nano. Today Apple still sells the iPod touch—
although declining sales and discontinued products suggest that this SBU is
entering the dog category.38
So, how did you—as Tim Cook—rank the growth opportunity for each of the four
SBUs? The Apple Watch represents the highest unit growth rate at 58 percent. The
iPhone SBU is likely to continue growing at 7 percent, while the iPad SBU is experi-
encing a decline in sales. Despite the difference in growth rates, the iPhone and iPad
product lines together accounted for 76 percent of Apple’s revenues in early 2018.
These revenues are used to pursue growth opportunities such as the Apple HomePod,
the Apple AirPods, a next-generation phone, and possibly an Apple car. Finally, long-
term decline and the discontinuation of the iPod classic, shuffle, and nano may signal
the beginning of the end for Apple’s iPod.39
The primary strength of business portfolio analysis lies in forcing a firm to place
each of its SBUs in the growth-share matrix, which in turn suggests which SBUs will
be cash producers and cash users in the future. Weaknesses of this analysis arise from
the difficulty in (1) getting the needed information and (2) incorporating competitive
data into business portfolio analysis.40
What can Apple expect in
future growth of sales
revenues from its iPhone
products . . .
Source: Apple Inc.
. . . or its iPod devices?
Source: Apple Inc.
40
Diversification Analysis Diversification analysis is a technique that helps a
firm search for growth opportunities from among current and new markets as well as
current and new products.41 For any market, there is both a current product (what the
firm now sells) and a new product (what the firm might sell in the future). And for any
product there is both a current market (the firm’s existing customers) and a new market
(the firm’s potential customers). As Ben & Jerry’s seeks to increase sales revenues, it
considers all four market-product strategies shown in Figure 2–5:
∙ Market penetration is a marketing strategy to increase sales of current products
in current markets, such as selling more Ben & Jerry’s Chocolate Chip Cookie
Dough ice cream to U.S. consumers. There is no change in either the basic prod-
uct line or the markets served. Increased sales are generated by selling either
more ice cream (through better promotion or distribution) or the same amount of
ice cream at a higher price to its current customers.
∙ Market development is a marketing strategy to sell current products to new mar-
kets. For Ben & Jerry’s, Brazil is an attractive new market. There is good news
and bad news for this strategy: As household incomes of Brazilians increase,
consumers can buy more ice cream; however, the Ben & Jerry’s brand may be
unknown to Brazilian consumers.
∙ Product development is a marketing strategy of selling new products to current
markets. Ben & Jerry’s could leverage its brand by selling children’s clothing in
the United States. This strategy is risky because Americans may not see the com-
pany’s expertise in ice cream as extending to children’s clothing.
∙ Diversification is a marketing strategy of developing new products and selling
them in new markets. This is a potentially high-risk strategy for Ben & Jerry’s if
it decides to try to sell Ben & Jerry’s branded clothing in Brazil. Why? Because
the firm has neither previous production nor marketing experience from which to
draw in marketing clothing to Brazilian consumers.
diversification analysis
A technique that helps a
firm search for growth
opportunities from among
current and new markets as
well as current and new
products.
Video 2-4
B&J’s Chocolate
Chip Cookie
Dough Video
kerin.tv/cr8e/v2-4
Diversification
Selling a new product such as
children’s clothing under the Ben
& Jerry’s brand to Brazilians
for the first time
Product development
Selling a new product such as
children’s clothing under the Ben
& Jerry’s brand to Americans
Market development
Selling Ben & Jerry’s super-
premium ice cream to Brazilians
for the first time
Market penetration
Selling more Ben & Jerry’s super-
premium ice cream to Americans
New
Current
PRODUCTS
New
MARKETS
Current
FIGURE 2–5
Four market-product
strategies: alternative
ways to expand sales
revenues for Ben & Jerry’s
using diversification
analysis.
2-5. What is the difference between a marketing dashboard and a marketing
metric?
2-6. What is business portfolio analysis?
2-7. Explain the four market-product strategies in diversification analysis.
learning review
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THE STRATEGIC MARKETING PROCESS
After an organization assesses where it is and where it wants to go, management atten-
tion is focused on the strategic marketing process. The strategic marketing process
involves the allocation of an organization’s marketing mix resources to reach its target
markets and achieve a competitive advantage. The process is guided by underlying
principles and is divided into three phases: planning, implementation, and evaluation
as shown in Figure 2–6.
Principles Underlying the Strategic Marketing Process
Four principles underlie the strategic marketing process.42 Each principle represents a
fundamental assumption about customers, competitors, and organizational resources.
They are:
1. Customers are different. Customers are not alike. Rather, important differences
exist and these differences affect how customers respond to different marketing
mix elements.
2. Customers change. Customer preferences, needs, and behavior are not static.
Customer preferences, needs, and behavior change over time and circumstances
and are affected by competitor actions.
3. Competitors change and react. The sustainability of an organization’s competi-
tive advantage is affected by the conduct of present and future competitors and
how they react to an organization’s actions.
4. Organizational resources are limited. No organization has unlimited human,
technological, and financial resources. Trade-offs have to be made when
capitalizing on organizational opportunities and overcoming threats to their
performance.
These principles are central to the concepts, techniques, and tools applied in each
phase of the strategic marketing process.
LO 2-5
Explain the three
steps of the
planning phase
of the strategic
marketing process.
strategic marketing process
The process whereby an
organization allocates its
marketing mix resources to
reach its target markets and
achieve a competitive
advantage.
FIGURE 2–6
The strategic marketing
process has three vital
phases: planning,
implementation, and
evaluation. The figure also
indicates the chapters in
which these phases are
discussed in the text.
Marketing plan
Results
Step 1 Step 2 Step 3
Situation (SWOT)
analysis
Chapters 2–7
Market-product focus
and goal setting
Chapters 8 and 9
Marketing program
Chapters 9–18
Evaluation phase
Chapter 2
C
orrective A
ctions
Planning phase
Implementation phase
Chapter 2
42
The Planning Phase of the Strategic Marketing Process
Figure 2–6 shows the three steps in the planning phase of the strategic marketing
process: (1) situation (SWOT) analysis, (2) market-product focus and goal setting, and
(3) the marketing program.
Step 1: Situation (SWOT) Analysis The essence of situation analysis is tak-
ing stock of where the firm or product has been recently, where it is now, and where it
is headed in terms of the organization’s marketing plans and the external forces and
trends affecting it. An effective summary of a situation analysis is a SWOT
analysis, an acronym describing an organization’s appraisal of its internal
Strengths and Weaknesses and its external Opportunities and Threats.
The SWOT analysis is based on an exhaustive study of four areas that form
the foundation upon which the firm builds its marketing program:
∙ Identify changes and trends in the organization’s industry.
∙ Analyze the organization’s current and potential competitors.
∙ Assess the organization itself, including available resources.
∙ Research the organization’s present and prospective customers.
Assume you are responsible for doing the SWOT analysis for Ben & Jerry’s
shown in Figure 2–7. Note that the SWOT table has four cells formed by the
combination of internal versus external factors (the rows) and favorable versus
unfavorable factors (the columns) that identify Ben & Jerry’s strengths, weak-
nesses, opportunities, and threats.
The task is to translate the results of the SWOT analysis into specific mar-
keting actions that will help the firm grow. The ultimate goal is to identify the
critical strategy-related factors that impact the firm and then build on vital
strengths, correct glaring weaknesses, exploit significant opportunities, and
avoid disaster-laden threats.
The Ben & Jerry’s SWOT analysis in Figure 2–7 can be the basis for these
kinds of specific marketing actions. An action in each of the four cells might be:
∙ Build on a strength. Find specific efficiencies in distribution with parent-
company Unilever’s existing ice cream brands.
FIGURE 2–7
Ben & Jerry’s: A SWOT
analysis to keep it
growing. The picture
painted in this SWOT
analysis is the basis for
management actions.
Threats
• B&J customers read nutritional
labels and are concerned with
sugary and fatty desserts
• Competes with General Mills
and Nestlé brands
• Increasing competition in
international markets
Weaknesses
• B&J’s social responsibility
actions could reduce focus
• Experienced managers
needed to help growth
• Modest sales growth and
profits in recent years
External
Internal
LOCATION
OF
FACTOR Favorable
TYPE OF FACTOR
Unfavorable
Strengths
• Prestigious, well-known brand
name among U.S. consumers
• Complements Unilever’s other
ice cream brands
• Recognized for its social
mission, values, and actions
Opportunities
• Growing demand for quality
ice cream in overseas markets
• Increasing U.S. demand for
Greek-style yogurt
• Many U.S. firms successfully use
product and brand extensions
How can Ben & Jerry’s develop
new products and social
responsibility programs that
contribute to its mission?
The text describes how the
strategic marketing process
and its SWOT analysis can help.
©McGraw-Hill Education/Evelyn
Nicole Kirksey, photographer
situation analysis
Taking stock of where the
firm or product has been
recently, where it is now,
and where it is headed in
terms of the organization’s
marketing plans and the
external forces and trends
affecting it.
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∙ Correct a weakness. Recruit experienced managers from other consumer product
firms to help stimulate growth.
∙ Exploit an opportunity. Develop new product lines of low-fat, low-carb frozen
Greek-style yogurt flavors to respond to changes in consumer tastes.
∙ Avoid a disaster-laden threat. Focus on less risky international markets, such as
Brazil and Argentina.
Step 2: Market-Product Focus and Goal Setting Determining which
products will be directed toward which customers (step 2 of the planning phase in
Figure 2–6) is essential for developing an effective marketing program (step 3). This
decision is often based on market segmentation, which involves aggregating pro-
spective buyers into groups, or segments, that (1) have common needs and (2) will
respond similarly to a marketing action. This enables an organization to focus specific
marketing programs on its target market segments. The match between products and
segments is often related to points of difference, or those characteristics of a product
that make it superior to competitive substitutes. Goal setting involves specifying mea-
surable marketing objectives to be achieved.
So step 2 in the planning phase of the strategic marketing process—deciding which
products will be directed toward which customers—is the foundation for step 3, devel-
oping the marketing program.
Step 3: Marketing Program Activities in step 2 tell the marketing manager
which customers to target and which customer needs the firm’s product offerings can
satisfy—the who and what aspects of the strategic marketing process. The how
aspect—step 3 in the planning phase—involves developing the program’s marketing
mix (the four Ps) and its budget. Figure 2–8 shows that each marketing mix element is
combined to provide a cohesive marketing program.
Putting a marketing program into effect requires that the firm commit time and
money to it in the form of a sales forecast (see Chapter 7) and budget that must be ap-
proved by top management.
SWOT analysis
An acronym describing an
organization’s appraisal of
its internal Strengths and
Weaknesses and its external
Opportunities and Threats.
market segmentation
Involves aggregating
prospective buyers into
groups, or segments, that
(1) have common needs and
(2) will respond similarly to
a marketing action.
points of difference
Those characteristics of
a product that make it
superior to competitive
substitutes.
FIGURE 2–8
The four Ps elements of
the marketing mix must be
blended to produce a
cohesive marketing
program.
Cohesive marketing program
Promotion
Price
PlaceProduct
Product
• Features
• Brand name
• Packaging
• Service
• Warranty
Price
• List price
• Discounts
• Allowances
• Credit terms
• Payment period
Place
• Outlets
• Channels
• Coverage
• Transportation
• Stock level
Promotion
• Advertising
• Personal selling
• Public relations
• Sales promotion
• Direct marketing
Marketing manager
44
The Implementation Phase of the Strategic Marketing Process
As shown in Figure 2–6, the result of the hours spent in the planning phase of the stra-
tegic marketing process is the firm’s marketing plan. Implementation, the second
phase of the strategic marketing process, involves carrying out the marketing plan that
emerges from the planning phase. If the firm cannot execute the marketing plan— in
the implementation phase—the planning phase has been a waste of time and
resources.
There are four components of the implementation phase: (1) obtaining resources;
(2) designing the marketing organization; (3) defining precise tasks, responsibilities,
and deadlines; and (4) actually executing the marketing program designed in the plan-
ning phase.
Obtaining Resources A key task in the implementation phase of the strategic
marketing process is obtaining adequate human and financial resources to execute the
marketing program successfully. Small business owners often obtain funds from sav-
ings, family, friends, and bank loans. Marketing managers in existing organizations
obtain these resources by getting top management to assign managerial talent and di-
vert profits from BCG stars or cash cows.
Designing the Marketing Organization A marketing program needs a mar-
keting organization to implement it. Figure 2–9 shows the organization chart of a typi-
cal manufacturing firm, giving some details of the marketing department’s structure.
Four managers of marketing activities are shown to report to the chief marketing
LO 2-6
Describe the four
components of the
implementation
phase of the
strategic marketing
process.
2-8. What are the three steps of the planning phase of the strategic marketing
process?
2-9. What are points of difference and why are they important?
learning review
Chief Executive O�cer
Advertising,
Promotion, and
Social Media
Manager
Sales
Manager
Marketing
Research and
Analytics
Manager
Marketing
Assistants
Associate
Product
Managers
Product or
Brand
Manager
Sales
Representatives
Chief
Human
Resources
O�cer
Chief
Financial
O�cer
Chief
Marketing
O�cer
Chief
Manufacturing
O�cer
Chief
Research and
Development
O�cer
Chief
Technology
O�cer
FIGURE 2–9
Organization of a typical
manufacturing firm,
showing a breakdown of
the marketing department.
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officer or CMO. Sales representatives report to the manager of sales, possibly through
several regional sales managers and an international sales manager based on the size of
the salesforce. The product or brand managers and their subordinates help plan, imple-
ment, and evaluate the marketing plans for their offerings. However, the entire market-
ing organization is responsible for converting these marketing plans into realistic
marketing actions.
Defining Precise Tasks, Responsibilities, and Deadlines Successful im-
plementation requires that team members know the tasks for which they are responsi-
ble and the deadlines for completing them. To implement the thousands of tasks on a
new aircraft design, Lockheed Martin typically holds weekly program meetings. The
outcome of each of these meetings is an action item list, an aid to implementing a mar-
keting plan consisting of four columns: (1) the task, (2) the person responsible for
completing that task, (3) the date to finish the task, and (4) what is to be delivered.
Within hours of completing a program meeting, the action item list is circulated to
those attending. This then serves as the starting agenda for the next meeting. Meeting
minutes are viewed as secondary and backward-looking. Action item lists are forward-
looking, clarify the targets, and put strong pressure on people to achieve their desig-
nated tasks by the deadline.
Suppose, for example, that you and two friends undertake a term project on the
problem, “How can the college increase attendance at its performing arts concerts?”
The instructor says the term project must involve a survey of a sample of students, and
the written report with the survey results must be submitted by the end of the 11th
week of the term. To begin, you identify all the project tasks and then estimate the
time required to complete each one. To complete it in 11 weeks, your team must plan
which activities can be done concurrently (at the same time) to save time.
Scheduling activities can be done efficiently with a Gantt chart, which is a graph
of a program schedule. Figure 2–10 shows a Gantt chart—invented by Henry L.
Gantt—used to schedule the class project, demonstrating how the concurrent work
on several tasks enables the students to finish the project on time. Software applica-
tions such as Microsoft Project simplify the task of developing a program schedule
or Gantt chart.
The key to all scheduling techniques is to distinguish tasks that must be done se-
quentially from those that can be done concurrently. For example, Tasks 1 and 2 that
FIGURE 2–10
This Gantt chart shows
how three students (A, B,
and C) can schedule tasks
to complete a term project
on time.
1. Develop report outline and identify key
objectives
2. Conduct online and library research
relevant to the objectives
5. Monitor completed questionnaires
6. Analyze data from completed questionnaires
7. Prepare report sections, tables, graphics
8. Complete and submit final report
Planned completion dateKEY:
Task description
Week of quarterStudents
involved
in task
Actual completion date
Planned period of work Current date
Actual period of work
3. Construct a draft of a questionnaire, pretest,
make needed changes
4. Create list of survey recipients, send question-
naire with survey software (e.g., Qualtrics)
A
1 2 3 4 5 6 7 8 9 10 11
A
A, B, C
C
C
C
B
B
46
are shaded yellow in Figure 2–10 must be done sequentially. This is because the team
must agree on the outline of the project and its key objectives (Task 1) before it can
begin online and library research related to the objectives (Task 2). In contrast, Tasks
6 and 7 that are shaded blue can be done concurrently. So writing the final report
(Task 7) can be started before tabulating the answers to the questions (Task 6) is com-
pleted. This overlap speeds up project completion.
Executing the Marketing Program Marketing plans are meaningless without
effective execution of those plans. This requires attention to detail for both marketing
strategies and marketing tactics. A marketing strategy is the means by which a mar-
keting goal is to be achieved, usually characterized by a specified target market and a
marketing program to reach it. The term implies both the end sought (target market)
and the means or actions to achieve it (marketing program).
To implement a marketing program successfully, hundreds of detailed decisions are
often required to develop the actions that comprise a marketing program for an offer-
ing. These actions, called marketing tactics, are detailed day-to-day operational mar-
keting actions for each element of the marketing mix that contribute to the overall
success of marketing strategies. Writing ads and setting prices for new product lines
are examples of marketing tactics.
The Evaluation Phase of the Strategic Marketing Process
The evaluation phase of the strategic marketing process seeks to keep the marketing
program moving in the direction set for it (see Figure 2–6). Accomplishing this re-
quires the marketing manager to (1) compare the results of the marketing program
with the goals in the written plans to identify the presence and causes of deviations
and (2) act on these deviations—exploiting positive deviations and correcting nega-
tive ones.
Comparing Results with Plans to Identify Deviations At the end of its
fiscal year, which is September 30, Apple begins the evaluation phase of its strategic
marketing process. Suppose you are on an Apple task force in 2009 that is responsible
for making plans through 2017. You observe that extending the 2004–2009 trend of
Apple’s recent sales revenues (line AB in Figure 2–11) to 2017 along line BC shows
an annual growth in sales revenue unacceptable to Apple’s management.
Looking at potential new products in the Apple pipeline, your task force sets an
aggressive annual sales growth target of 25 percent per year—the line BD in
Figure 2–11. This would give sales revenues of $104 billion in 2013 and $255 bil-
lion in 2017.
This reveals a white wedge-shaped gap DBC in the figure. Planners call this the
planning gap, the difference between the projection of the path to reach a new sales
revenue goal (line BD) and the projection of the path of a plan already in place (line
BC). The ultimate purpose of the firm’s marketing program is to “fill in” this planning
gap—in the case of your Apple task force, to move its future sales revenue line from
the slow-growth line BC up to the more challenging target of line BD.
This is the essence of evaluation: comparing actual results with goals set. To reach
aggressive growth targets in sales revenues, firms like Apple must continuously look
for a new BCG SBU or product cash cow or star.
Acting on Deviations When evaluation shows that actual performance differs
from expectations, managers need to take immediate marketing actions—exploiting
positive deviations and correcting negative ones. Comparing the explosion in Apple’s
actual sales revenues from 2009 to 2017 (line BE in Figure 2–11) to its target sales rev-
enues (line BD) shows Apple’s rare, world-class ability to both generate and anticipate
marketing strategy
The means by which a
marketing goal is to
be achieved, usually
characterized by a specified
target market and a
marketing program to
reach it.
marketing tactics
The detailed day-to-day
operational marketing
actions for each element of
the marketing mix that
contribute to the overall
success of marketing
strategies.
LO 2-7
Discuss how
managers identify
and act on
deviations from
plans.
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FIGURE 2–11
The evaluation phase of
the strategic marketing
process requires that the
organization compare
actual results with goals
to identify and act on
deviations to fill in its
“planning gap.” The text
describes how Apple is
working to fill in its
planning gap
Computer: ©Joby Sessions/
MacFormat Magazine via
Getty Images
Actual sales revenues
from 2004 to 2009
Actual sales revenues
from 2009 to 2017
Past Future
2004
0
20
40
60
80
100
120
140
160
180
220
240
260
200
2006 2008 20102009 2012 2014 2016
A
nn
ua
l s
al
es
r
ev
en
ue
s
($
b
ill
io
ns
)
Planning
Gap
E
B
A
D
C
consumer demand and commercialize new technologies for its revolutionary offerings.
Let’s consider some of its marketing actions:
∙ Exploiting a positive deviation. Favorable customer reactions to Apple’s iPhone
(2007) and its iPad (2010) enable it to sell the products globally and to introduce
improved versions and models, such as the iPad Pro (2015) and the iPhone X
(2017). Success of new versions and models also enables the introduction of new
products such as the Apple Watch (2015), the Apple AirPods (2016), and the
HomePod (2018).
∙ Correcting a negative deviation. As Apple’s desktop PCs became dated, it moved
aggressively to replace them with new iMacs and MacBooks. Also, Apple re-
freshed its MacBook Air (2015, 2017) and MacBook Pro (2016, 2017) lines of
laptops.
As we saw earlier in the BCG business portfolio analysis of the four Apple product
lines, the firm has several stars and cash cows to fill in its planning gap. We shall ex-
plore Apple’s market-product strategies in more detail later in Chapters 8 and 9.
2-10. What is the implementation phase of the strategic marketing process?
2-11. How do the goals set for a marketing program in the planning phase
relate to the evaluation phase of the strategic marketing process?
learning review
48
LEARNING OBJECTIVES REVIEW
LO 2-1 Describe three kinds of organizations and the
three levels of strategy in them.
An organization is a legal entity that consists of people who
share a common mission. It develops offerings (goods, ser-
vices, or ideas) that create value for both the organization
and its customers by satisfying their needs and wants. To-
day’s organizations are of three types: for-profit organiza-
tions, nonprofit organizations, and government agencies. A
for-profit organization serves its customers to earn a profit
so that it can survive. Profit is the money left after a for-
profit organization subtracts its expenses from its total
revenues and is the reward for the risk it undertakes in mar-
keting its offerings. A nonprofit organization is a nongov-
ernmental organization that serves its customers but does
not have profit as an organizational goal. Instead, its goals
may be operational efficiency or client satisfaction. A gov-
ernment agency is a federal, state, county, or city unit that
provides a specific service to its constituents. Most large
for-profit and nonprofit organizations are divided into three
levels of strategy: (a) the corporate level, where top man-
agement directs overall strategy for the entire organization;
(b) the strategic business unit level, where managers set a
more specific strategic direction for their businesses to ex-
ploit value-creating opportunities; and (c) the functional
level, where groups of specialists actually create value for
the organization.
LO 2-2 Describe core values, mission, organizational
culture, business, and goals.
Organizations exist to accomplish something for someone.
To give organizations direction and focus, they continu-
ously assess their core values, mission, organizational cul-
ture, business, and goals. Today’s organizations specify
their foundation, set a direction, and formulate strategies—
the “why,” “what,” and “how” factors, respectively. Core
values are the organization’s fundamental, passionate, and
enduring principles that guide its conduct over time. The
organization’s mission is a statement of its function in soci-
ety, often identifying its customers, markets, products, and
technologies. Organizational culture is a set of values,
ideas, attitudes, and norms of behavior that is learned and
shared among the members of an organization. To answer
the question, “What business are we in?” an organization
defines its “business”—the clear, broad, underlying indus-
try category or market sector of its offering. The orga-
nization’s goals (or objectives) are statements of an
accomplishment of a task to be achieved, often by a specific
time. Finally, organizational strategies vary by level in the
organization and by product. The strategies are often de-
scribed in a marketing plan.
LO 2-3 Explain why managers use marketing dashboards
and marketing metrics.
Marketing managers use marketing dashboards to visu-
ally display the essential information related to achieving
a marketing objective. This information consists of key
performance measures of a product category, such as
sales or market share, known as marketing metrics, which
are a measure of the quantitative value or trend of market-
ing actions or results. Today’s marketers use data visual-
ization to present marketing metrics graphically so they
can spot deviations from plans and take corrective
actions.
LO 2-4 Discuss how an organization assesses where it is
now and where it seeks to be.
Managers of an organization ask two key questions to set a
strategic direction. The first question, “Where are we now?”
requires an organization to (a) assess its core competencies
to understand how its special capabilities provide a com-
petitive advantage; (b) identify its customers and how they
receive genuine value and have a satisfying experience; and
(c) analyze its competitors from a global perspective to de-
termine the distinctions among them.
The second question, “Where do we want to go?” re-
quires an organization to set a specific direction and allocate
resources to move it in that direction. Business portfolio
analysis and diversification analysis help an organization do
this. Managers use business portfolio analysis to assess the
organization’s strategic business units (SBUs), product
lines, or individual products as though they were a collec-
tion of separate investments (cash cows, stars, question
marks, and dogs) to determine the amount of cash each
should receive. Diversification analysis is a technique that
helps a firm search for growth opportunities from among
four strategies: market penetration (selling more of current
products to current markets); market development (selling
current products to new markets); product development
(selling new products to current markets); and diversifica-
tion (selling new products to new markets).
LO 2-5 Explain the three steps of the planning phase of
the strategic marketing process.
An organization uses the strategic marketing process to al-
locate its marketing mix resources to reach its target mar-
kets and achieve a competitive advantage. This process is
divided into three phases: planning, implementation, and
evaluation. The planning phase consists of (a) a situation
(SWOT) analysis, which involves taking stock of where the
firm or product has been recently, where it is now, and
where it is headed and focuses on the organization’s inter-
nal factors (strengths and weaknesses) and the external
forces and trends affecting it (opportunities and threats);
(b) a market-product focus through market segmentation
(grouping buyers into segments with common needs and
similar responses to marketing programs) and goal setting,
which in part requires creating points of difference (those
characteristics of a product that make it superior to com-
petitive substitutes); and (c) a marketing program that spec-
ifies the budget and actions (marketing strategies and
tactics) for each marketing mix element.
LO 2-6 Describe the four components of the
implementation phase of the strategic marketing process.
The implementation phase of the strategic marketing pro-
cess carries out the marketing plan that emerges from the
planning phase. It has four key components: (a) obtaining
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resources; (b) designing the marketing organization to
perform product management, marketing research, sales,
and advertising and promotion activities; (c) developing
schedules to identify the tasks that need to be done, the
time that is allocated to each one, the people responsible
for each task, and the deadlines for each task—often with
an action item list and Gantt chart; and (d) executing the
marketing strategies, which are the means by which mar-
keting goals are to be achieved, and their associated
marketing tactics, which are the detailed day-to-day
marketing actions for each element of the marketing mix
that contribute to the overall success of a firm’s market-
ing strategies. These are the marketing program actions a
firm takes to achieve the goals set forth in its marketing
plan.
LO 2-7 Discuss how managers identify and act on
deviations from plans.
The evaluation phase of the strategic marketing process
seeks to keep the marketing program moving in the direc-
tion that was established in the marketing plan. This re-
quires the marketing manager to compare the results from
the marketing program with the marketing plan’s goals to
(a) identify deviations or “planning gaps” and (b) take cor-
rective actions to exploit positive deviations or correct neg-
ative ones.
LEARNING REVIEW ANSWERS
2-1 What is the difference between a for-profit and a nonprofit
organization?
Answer: A for-profit organization is a privately owned organiza-
tion that serves its customers to earn a profit so that it can
survive. A nonprofit organization is a nongovernmental organi-
zation that serves its customers but does not have profit as an
organizational goal. Instead, its goals may be operational
efficiency or client satisfaction.
2-2 What are examples of a functional level in an organization?
Answer: The functional level in an organization is where groups
of specialists from the marketing, finance, manufacturing/
operations, accounting, information systems, research and de-
velopment, and/or human resources departments focus on a
specific strategic direction to create value for the organization.
2-3 What is the meaning of an organization’s mission?
Answer: A mission is a clear, concise, meaningful, inspirational,
and long-term statement of the organization’s function in soci-
ety, often identifying its customers, markets, products, and tech-
nologies. It is often used interchangeably with vision.
2-4 What is the difference between an organization’s business
and its goals?
Answer: An organization’s business describes the clear, broad, un-
derlying industry or market sector of an organization’s offering. An
organization’s goals (or objectives) are statements of an accom-
plishment of a task to be achieved, often by a specific time. Goals
convert an organization’s mission and business into long- and
short-term performance targets to measure how well it is doing.
2-5 What is the difference between a marketing dashboard and
a marketing metric?
Answer: A marketing dashboard is the visual display of the es-
sential information related to achieving a marketing objective.
Each variable displayed in a marketing dashboard is a marketing
metric, which is a measure of the quantitative value or trend of a
marketing action or result.
2-6 What is business portfolio analysis?
Answer: Business portfolio analysis is a technique that manag-
ers use to quantify performance measures and growth targets to
analyze their firms’ SBUs as though they were a collection of
separate investments. The purpose of this tool is to determine
which SBU or offering generates cash and which one requires
cash to fund the organization’s growth opportunities.
2-7 Explain the four market-product strategies in diversification
analysis.
Answer: The four market-product strategies in diversification
analysis are: (1) Market penetration, which is a marketing strat-
egy to increase sales of current products in current markets.
There is no change in either the basic product line or the markets
served. Rather, selling more of the product or selling the product
at a higher price generates increased sales. (2) Market develop-
ment, which is a marketing strategy to sell current products to
new markets. (3) Product development, which is a marketing
strategy of selling new products to current markets. (4) Diversi-
fication, which is a marketing strategy of developing new prod-
ucts and selling them in new markets. This is a potentially
high-risk strategy because the firm has neither previous produc-
tion nor marketing experience on which to draw in marketing a
new product to a new market.
2-8 What are the three steps of the planning phase of the strate-
gic marketing process?
Answer: The three steps of the planning phase of the strategic
marketing process are: (1) Situation analysis, which involves
taking stock of where the firm or product has been recently,
where it is now, and where it is headed in terms of the organiza-
tion’s marketing plans and the external forces and trends affect-
ing it. To do this, an organization uses a SWOT analysis, an
acronym that describes an organization’s appraisal of its internal
Strengths and Weaknesses and its external Opportunities and
Threats. (2) Market-product focus and goal setting, which deter-
mine what products an organization will offer to which custom-
ers. This is often based on market segmentation—aggregating
prospective buyers into groups or segments that have common
needs and will respond similarly to a marketing action. (3) Mar-
keting program, which is where an organization develops the
marketing mix elements and budget for each offering.
2-9 What are points of difference and why are they important?
Answer: Points of difference are those characteristics of a prod-
uct that make it superior to competitive substitutes—offerings
the organization faces in the marketplace. They are important
factors in the success or failure of a new product.
2-10 What is the implementation phase of the strategic marketing
process?
Answer: The implementation phase carries out the marketing plan
that emerges from the planning phase and consists of (1) obtain-
ing resources; (2) designing the marketing organization; (3) defin-
ing precise tasks, responsibilities, and deadlines; and (4) executing
the marketing program designed in the planning phase.
2-11 How do the goals set for a marketing program in the plan-
ning phase relate to the evaluation phase of the strategic
marketing process?
Answer: The planning phase goals or objectives are used as the
benchmarks with which the actual performance results are
compared in the evaluation phase to identify deviations from
the written marketing plans and to act on those deviations—
exploiting positive ones and correcting negative ones.
50
business p. 32
business portfolio analysis p. 37
core values p. 31
diversification analysis p. 40
goals (objectives) p. 33
market segmentation p. 43
market share p. 33
marketing dashboard p. 34
marketing metric p. 35
marketing plan p. 34
marketing strategy p. 46
marketing tactics p. 46
mission p. 32
objectives (goals) p. 33
organizational culture p. 32
points of difference p. 43
profit p. 28
situation analysis p. 42
strategic marketing process p. 41
strategy p. 30
SWOT analysis p. 42
FOCUSING ON KEY TERMS
APPLYING MARKETING KNOWLEDGE
1 (a) Using Netflix as an example, explain how a
mission statement gives it a strategic direction.
(b) Create a mission statement for your own career.
2 What competencies best describe (a) your college
or university and (b) your favorite restaurant?
3 Compare the advantages and disadvantages of Ben
& Jerry’s attempting to expand sales revenues by
using (a) a product development strategy or (b) a
market development strategy.
4 Select one strength, one weakness, one opportu-
nity, and one threat from the Ben & Jerry’s SWOT
analysis shown in Figure 2–7. Suggest an action
that a B&J marketing manager might take to ad-
dress each factor.
5 What is the main result of each of the three phases
of the strategic marketing process? (a) planning,
(b) implementation, and (c) evaluation.
6 Parts of Tasks 5 and 6 in Figure 2–10 are done
both concurrently and sequentially. (a) How can
this be? (b) How does it help the students meet the
term paper deadline? (c) What is the main advan-
tage of scheduling tasks concurrently rather than
sequentially?
7 The goal-setting step in the planning phase of the
strategic marketing process sets quantified objec-
tives for use in the evaluation phase. What does a
manager do if measured results fail to meet objec-
tives? Exceed objectives?
BUILDING YOUR MARKETING PLAN
1 Read Appendix A, “Building an Effective Market-
ing Plan.” Then write a 600-word executive
summary for the Paradise Kitchens marketing plan
using the numbered headings shown in the plan.
When you have completed the draft of your own
marketing plan, write a 600-word executive
summary to go in the front of your own market-
ing plan.
2 Using Chapter 2 and Appendix A as guides, focus
your marketing plan by (a) writing your mission
statement in 25 words or less, (b) listing three non-
financial goals and three financial goals, (c) writ-
ing your competitive advantage in 35 words or
less, and (d) creating a SWOT analysis table.
3 Draw a simple organization chart for your organi-
zation.
Businesses of the world are
changing the way they work
and IBM has a strategy to help
them. Ann Rubin, vice presi-
dent of corporate marketing at
IBM, explains: “IBM is in a constant state of innova-
tion, preparing for a world that is infused with digital
intelligence and a world where humans and machines
work side-by-side to do things that humans simply
cannot do alone.” “‘Let’s Put Smart To Work’ is our
new brand platform,” she continues, but “it’s not just
advertising, it’s bigger than that. ‘Let’s Put Smart To
Work’ is an invitation. We’re asking clients and part-
ners to work with us to put smart to work to use in-
novative technologies to change businesses and
industries and organizations.”
VIDEO CASE 2 IBM: Putting Smart Strategy to Work
Video 2-5
IBM Video Case
kerin.tv/cr8e/v2-5
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51
THE NEW IBM
IBM has a hundred-plus-year history of
innovation. Since its early days as the
Tabulating Machine Company, IBM
has gone through many dramatic trans-
formations. The company shifted from
tabulation machines, to typewriters, to computers, to
business services and consulting, to artificial intelli-
gence in response to changes in technology, the global
economy, and business practices. Along the way IBM
developed several well-known products such as the
automated teller machine (ATM), the hard disk drive,
the magnetic stripe card, and the Universal Product
Code (UPC). In addition, researchers at the company
won four Nobel prizes and six Turing awards for con-
tributions of lasting and major technical importance
to the computer field. IBM is in the top 20 of the
world’s most valuable brands and in the top 50 of the
world’s most admired companies. Today IBM has
$79 billion in sales and 380,000 employees, is ranked
34th on the Fortune 500, and is viewed as a cognitive
solutions and cloud platform company. According to
CEO Virginia Rometty, “IBM now possesses capa-
bilities that are unmatched in our industry to address
our clients’ most pressing needs.”
STRATEGY BASED ON VALUES
The forward-looking, visionary strategy at IBM is
built on core values that are the fundamental, passion-
ate, and enduring principles guiding its conduct. To
articulate those values IBM held a global discussion
event, called ValuesJam, among more than 50,000
employees. The results were three underlying values
of IBM’s business practices. Teresa Yoo, vice presi-
dent of brand strategy and experience design, explains
the outcome: “We weren’t founded on or defined by a
particular product or even a particular leader. It was
what we believed and valued in the world, and what
drove the decisions about everything that we do. So,
those values have evolved over time and remain at the
core of what we do. They are (1) a dedication to every
client’s success, (2) innovation that matters for our
company and for the world, and (3) trust and personal
responsibility in all our relationships.”
The values influence IBM’s use of strategic tools,
such as portfolio analysis and SWOT analysis, in its
assessment of marketplace opportunities around the
globe. According to Rubin, “Using methodologies
like business portfolio analysis is really important be-
cause you need to understand the opportunities in ev-
ery country that you are going to and what is going to
drive business in a certain area.” The analysis “helps
figure out what the revenue opportunity is and the
growth opportunity for every one of our products in
every one of our countries,” she contin-
ues. Similarly, Teresa Yoo explains that
“we use SWOT analysis when we’re
putting together a strategy for a partic-
ular brand we’re building or a particu-
lar portfolio or product set. It makes a
difference when you’re trying to figure
out what your value proposition is and you need to
look at where you really stand in order to create a
great strategy.”
The analysis indicates fundamental changes in the
business environment. IBM believes that in the near
future businesses will need enterprise-strength cloud
capabilities, artificial intelligence that is capable of
analyzing all company and consumer data, industry-
specific consulting services, and advanced cyber se-
curity. “Our brand strategy is to help IBM be easier to
understand, consume, and navigate,” says Yoo. “We
have hundreds of products that span the whole gamut
of what we do, from services to AI to cloud to re-
search to security. So we have really focused around a
few core brands that we want to be known for. They
are IBM Watson for AI, IBM Cloud, IBM Security,
IBM Services, and IBM Research.” Overall, IBM sees
these brands as the key to helping businesses become
smarter businesses.
In her letter to IBM shareholders, Rometty de-
scribed the trend toward smarter businesses as an “in-
flection point.” She observed that (1) businesses are
becoming smarter by leveraging intelligent digital
platforms, (2) businesses are becoming smarter by
making their systems and processes intelligent, and
(3) businesses are becoming smarter by embedding
AI and data to change how work is done, equipping
themselves for an era of man + machine. The insights
about the changes in businesses have led to IBM’s
strategy called “Let’s Put Smart To Work.”
THE “LET’S PUT SMART TO WORK”
STRATEGY
The “Let’s Put Smart To Work” initiative was
launched at IBM’s annual conference, called IBM
Think, at which partners, clients, industry representa-
tives, and technology leaders meet to share informa-
tion about the changing business environment and
business needs. IBM seeks to be an “incumbent dis-
ruptor” as it continues its transformation to the new
world of enterprise technology. “The evolution of
‘Let’s Put Smart To Work’ is the result of technolo-
gies that are fundamentally different today. They are
amazing. And we are directing them more specifically
to business applications,” explains Yoo. We can tell
clients “so let’s really put it to work in your business
to accomplish whatever it is that you need to get
done,” she adds.
©Peter Probst/Alamy Stock Photo
52
The strategy touches every aspect of IBM. “‘Let’s
Put Smart To Work’” is our rallying cry or call to ac-
tion to partner with clients and to make the world a
better place and to make businesses smarter,” says
Rubin. “IBM and our clients are putting smart to work
across every industry,” she adds. Industries where
IBM is assisting businesses include agriculture, auto-
motive, aviation, banking, health care, insurance, oil
and gas, retail, and utilities. For example, in agricul-
ture IBM’s Watson analyzes temperature, soil pH, and
other environmental factors to help farmers improve
their harvest yields. In the automotive industry IBM
technologies are helping combine data from IoT sen-
sors to create better experiences for drivers in intelli-
gent vehicles. Health care scientists are using IBM
artificial intelligence to help accelerate research and
find new uses for existing drugs. And in South Africa,
IoT sensors are being used to monitor animal move-
ments to help reduce rhinoceros poaching.
MARKETING “LET’S PUT SMART
TO WORK”
The IBM marketing organization includes thousands
of marketing professionals located in hundreds of
countries. They are all adopting an approach they call
“agile marketing,” which is based on improvisation,
testing and data, and collaboration, and which results
in speed, adaptability, and creativity. “At IBM we use
agile practices, agile methodologies,” says Rubin.
“It’s the way that you best collaborate and the way
that you best iterate and the way that you best create
programs and products to move forward,” she adds.
The general strategy and the specific elements of the
agile marketing approach all come together in a mar-
keting plan. Rubin explains, “Everything is grounded
in the marketing plan, in fact, everything is grounded
in our overall corporate strategy and our values, and
our strategic priorities.”
The marketing plan includes a variety of marketing
tools. “Our marketing plan leverages all kinds of
elements from traditional to emerging technologies
and emerging platforms. We use traditional advertis-
ing like TV and radio and print but we have to really
understand how our clients consume media,” says Ru-
bin. For example, IBM customers tend to travel a lot so
IBM places a lot of out-of-home advertising in air-
ports. Digital advertising and social media are also
part of the marketing plan. “The important thing about
social is understanding that every platform is different.
You can’t just take your TV spot and run it on Face-
book and LinkedIn and Twitter and Instagram and
think it’s going to work. The more you look at the met-
rics and the data and the analytics, the more you learn
those things. Then you uncover the insights and you
can create the right content for the right platform,”
Rubin explains.
Events are also a very important part of the market-
ing plan. The reason, as Rubin explains, is that “it’s hard
to touch and feel our products so it’s really important for
our audience to engage with IBMers.” The events give
IBM managers an opportunity to engage one-on-one
with their clients. Similarly, IBM sponsors events such
as the Masters golf tournament, the US Open, many
tennis tournaments around the world, and the Grammys,
the Oscars, and the Tony awards. The reason, explains
Yoo, is “the clients we are targeting tend to watch and
go to those events” and the events are “an opportunity to
make the technology we provide easier to understand.”
THE “SMART” FUTURE
The combination of innovative technologies and
changing businesses has created an exciting combina-
tion for IBM’s latest transformation. Ann Rubin de-
scribes the excitement in this way: “I feel like I have
the best job in IBM and frankly one of the best jobs in
the marketing industry overall. The marketing indus-
try is changing every day, so you need to keep up, but
it’s so exiting, there’s just nothing boring about it!” So
what will the future bring? Teresa Yoo’s advice is,
“Keep your eyes on IBM, we’re working on some in-
credible things that are going to change the world!”43
Questions
1 What is IBM’s “Let’s Put Smart To Work” strategy?
2 How does this strategy relate to IBM’s values?
3 Conduct a SWOT analysis for IBM’s “Let’s Put
Smart To Work” initiative. What are the relevant
trends to consider?
4 What marketing tools described in Chapter 2 are
prominent in IBM’s strategic marketing process?
5 What is “agile” marketing at IBM? Why does IBM
use the agile approach?
Source: IBM Corporation
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Chapter Notes
1. “Our Values,” from Ben & Jerry’s website, http://www.benjerry
.com/values, February 28, 2017; and “Ice Cream History
Revealed! What Was Ben & Jerry’s First Ice Cream Flavor?”
BusinessWire, November 15, 2011, http://www.businesswire
.com/news/home/20111115007275/en/Ice-Cream-History-
Revealed!-Ben-Jerry%E2%80%99s-Ice#.VR8B7J50yM8.
2. Michal Addady, “Here’s How to Get Free Ben & Jerry’s Ice
Cream Today,” Fortune.com, April 12, 2016; Nick Craig and
Scott Snook, “From Purpose to Impact,” Harvard Business
Review, May 2014, pp. 105–11; Joe Van Brussel, “Ben & Jerry’s
Become B-Corp Certified, Adds Credibility to Impact Investing
Movement,” Huffington Post: Business, October 23, 2012,
http://www.huffingtonpost.com/2012/10/23/ben-and-jerrys-
b-corp-impactinvesting_n_2005315.html; and “What Are
B-Corps?” B-Corporation website, see http://www.bcorporation
.net/what-are-b-corps.
3. “Global Ice Cream Market—Growth, Trends, and Forecasts
(2018–2023),” Mordor Intelligence, February 2018; Michal
Addady, “Ben & Jerry’s Is Going Vegan,” Fortune.com,
February 3, 2016; and Megan Lasher, “Ben & Jerry’s Is Making
Chocolate Chip Cookie Dough Beer,” Time.com, June 22, 2016.
4. Roger A. Kerin and Robert A. Peterson, Strategic Marketing
Problems: Cases and Comments, 13th ed. (Upper Saddle River,
NJ: Prentice Hall, 2013), p. 140.
5. Caroline Howard and Natalie Sportelli, “30 Under 30 Social
Entrepreneurs,” Forbes, December 12, 2017, p. 126; Tori Utley,
“Can Business Change the World? This Filmmaker Says Yes—
Through Social Entrepreneurship,” www.forbes.com, February
28, 2018; Richard Murphy and Denielle Sachs, “The Rise of
Social Entrepreneurship Suggests a Possible Future for Global
Capitalism,” www.forbes.com, May 2, 2013; and http://www
.teachforamerica.org.
6. For a discussion of how industries are defined and offerings are
classified, see the Census Bureau’s Economic Classification
Policy Committee Issues Paper #1 (http://www.census.gov/eos/
www/naics/history/docs/issue_paper_1 ), which aggregates
industries in the NAICS from a “production-oriented” view;
see also the American Marketing Association definition at
https://www.ama.org/resources/Pages/Dictionary.aspx?dLetter=I.
7. W. Chan Kim and Reneé Mauborgne, “Blue Ocean Strategy:
From Theory to Practice,” California Management Review 47,
no. 3 (Spring 2005), p. 105; and Michael E. Porter, “What Is
Strategy?” Harvard Business Review, November–December
1996, p. 2.
8. The definition of strategy reflects thoughts appearing in
Porter, “What Is Strategy?” pp. 4, 8; a condensed definition
of strategy is found on the American Marketing Association
website, https://www.ama.org/resources/Pages/Dictionary
.aspx?dLetter=S; Gerry Johnson, Kevan Scholes, and
Richard Wittington, Exploring Corporate Strategy (Upper
Saddle River, NJ: Prentice Hall, 2005), p. 10; and Costas
Markides, “What Is Strategy and How Do You Know
If You Have One?” Business Strategy Review 15, no. 2
(Summer 2004), p. 5.
9. Hal Conick, “The Evolution and Awaking of the Modern
CMO,” Marketing News, March 2017, pp. 28–37; Frank Holland,
“Tomorrow’s CMO Will Be Plugged into the Entire Marketing
Cycle,” Adweek, January 9, 2015, p. 1; George S. Day and
Robert Malcolm, “The CMO and the Future of Marketing,”
Marketing Management, Spring 2012, pp. 34–43; Christine
Moorman, “Ten Trends from the CMO SurveyTM,” Marketing
Management, Fall 2012, pp. 15–17; John Kador, “The View
from Marketing: How to Get the Most from Your CMO,” Chief
Executive, July–August 2011, pp. 60–61; Roger A. Kerin, “Stra-
tegic Marketing and the CMO,” Journal of Marketing, October
2005, pp. 12–13; and The CMO Council: Biographies of Se-
lected Advisory Board Members, www.cmocouncil.org/
advisoryboard.php.
10. Taken in part from Jim Collins and Morten T. Hansen, Great
by Choice (New York: HarperCollins Publishers, 2011); Jim
Collins and Jerry I. Porras, Built to Last: Successful Habits of
Visionary Companies (New York: HarperCollins Publishers,
2002), p. 54; and Steve Hemsley, “How to Build a Visionary
Company,” Marketing Week, July 23, 2015, p. 1.
11. Richard Feloni, “The 5 Values Facebook Looks for in Every
Employee,” Business Insider, February 9, 2016; Collins
and Porras, Built to Last, p. 73; Patrick M. Lencioni, “Make
Your Values Mean Something,” Harvard Business Review, July
2002, p. 6; Aubrey Malphurs, Values-Driven Leadership: Dis-
covering and Developing Your Core Values for Ministry, 2nd ed.
(Grand Rapids, MI: BakerBooks, 2004), p. 31; and Catherine
M. Dalton, “When Organizational Values Are Mere Rhetoric,”
Business Horizons 49 (September–October 2006), p. 345.
12. Collins and Porras, Built to Last, pp. 94–95; and Tom Kratten-
maker, “Write a Mission Statement That Your Company Is
Willing to Live,” Harvard Management Communication Letter,
March 2002, pp. 3–4.
13. See https://www.southwest.com/html/about-southwest.
14. See http://www.redcross.org/about-us/mission.
15. See https://www.ftc.gov/about-ftc.
16. Amy Gallo, “A Refresher on Marketing Myopia,” Harvard
Business Review, August 22, 2016, pp. 2–5; and Theodore
Levitt, “Marketing Myopia,” Harvard Business Review,
July–August 1960, pp. 45–56.
17. Stelios Kavadias, Kostas Ladas, and Christoph Loch, “The
Transformative Business Model,” Harvard Business Review,
October 2016, pp. 90-98; Dan Radak, “Breaking Down the
Netflix Business Model: The History and the Future of the VOD
Giant,” Business 2 Community, July 1, 2016; and Miriam
Gottfried, “Eyeballs Are No Longer Enough for Netflix,” The
Wall Street Journal, January 17, 2017.
18. Jim Milliot, “What’s Next for Barnes & Noble?” Publishers
Weekly, August 22, 2016, p. 4; Jim Milliot, “E-books Gained,
Online Retailers Slipped in 2014,” Publishers Weekly, March 30,
2015, pp. 4–5; and Jeffrey A. Trachtenberg, “What’s Barnes &
Noble’s Survival Plan?” The Wall Street Journal, April 18,
2014, p. B1.
19. Alan Ohnsman and Brian Solomon, “Uber’s Bold Move,”
Forbes, December 30, 2016, pp. 58–74; and Adam Lashinsky,
“Classifying Uber’s Business Model Is a Complicated Affair,”
Fortune.com, December 5, 2016, p. 73.
20. Andrew McAfee and Erik Brynjolfsson, “Big Data: The Man-
agement Revolution,” Harvard Business Review, October 2012,
pp. 61–68.
21. The definition is adapted from Stephen Few, Information Dash-
board Design: The Effective Visual Communication of Data
(Sebastopol, CA: O’Reilly Media, Inc., 2006), pp. 2–46.
22. Pedro Hernandez, “Microsoft Enables Real-Time IoT Dash-
boards in Power BI,” eWeek, February 1, 2017, p. 3; Michel
Wedel and P. K. Kannan, “Marketing Analytics for Data-Rich
Environments,” Journal of Marketing, November 2016,
pp. 97-121; and Koen Pauwels et al., Dashboards & Marketing:
Why, What, How and What Research Is Needed? (Hanover, NH:
Tuck School, Dartmouth, May 2008).
54
23. Vikal Mittal, “The Downside of Marketing Dashboards,”
Marketing News, January 2017, pp. 22–23; Few, Information
Dashboard Design: Michael T. Krush, Raj Agnihotri, Kevin J.
Trainor, and Edward L. Nowlin, “Enhancing Organizational
Sensemaking: An Examination of the Interactive Effects of
Sales Capabilities and Marketing Dashboards,” Industrial
Marketing Management, July 2013, pp. 824–35; Bruce H. Clark,
Andrew V. Abela, and Tim Ambler, “Behind the Wheel,” Mar-
keting Management, May–June 2006, pp. 19–23; and Spencer E.
Ante, “Giving the Boss the Big Picture,” BusinessWeek,
February 13, 2006, pp. 48–49.
24. Few, Information Dashboard Design, p. 13.
25. Mark Jeffery, Data-Driven Marketing: The 15 Metrics Everyone
in Marketing Should Know (Hoboken, NJ: Wiley 2010), chapter
1; Michael Krauss, “Balance Attention to Metrics with Intu-
ition,” Marketing News, June 1, 2007, pp. 6–8; John Davis,
Measuring Marketing: 103 Key Metrics Every Marketer Needs
(Singapore: Wiley [Asia], 2007); and Paul W. Farris, Neil T.
Bendle, Phillip E. Pfeifer, and David J. Reibstein, Marketing
Metrics, 2nd ed. (Upper Saddle River, NJ: Wharton School
Publishing, 2010).
26. David Burrows, “Too Many Metrics: The Perils of Training
Marketers to Calculate ROI,” Marketing Week, September 11,
2014, p. 42; Art Weinstein and Shane Smith, “Game Plan,”
Marketing Management, Fall 2012, pp. 24–31; Alexander
Chiang, “Special Interview with Stephen Few, Dashboard
and Data Visualization Expert,” Dundas Dashboard, July 14,
2011; Stephen Few, Now You See It (Oakland, CA: Analytics
Press, 2009), chapters 1–3; and Jacques Bughin, Amy
Guggenheim Shenkan, and Mark Singer, “How Poor Metrics
Undermine Digital Marketing,” The McKinsey Quarterly,
October 2008.
27. The now-classic reference on effective graphic presentation is
Edward R. Tufte, The Visual Display of Quantitative Infor-
mation, 2nd ed. (Cheshire, CT: Graphics Press, 2001);
see also Few, Information Dashboard Design, chapters 3–5.
28. George Stalk, Phillip Evans, and Lawrence E. Shulman,
“ Competing on Capabilities: The New Rules of Corporate
Strategy,” Harvard Business Review, March–April 1992,
pp. 57–69; and Darrell K. Rigby, Management Tools 2007:
An Executive’s Guide (Boston: Bain & Company, 2007), p. 22.
29. Roger Kerin and Robert Peterson, Strategic Marketing
Problems: Cases and Comments, 13th ed. (Upper Saddle
River, NJ: Prentice Hall, 2013), pp. 2–3; and Derek F. Abell,
Defining the Business (Englewood Cliffs, NJ: Prentice Hall,
1980), p. 18.
30. Robert D. Hof, “How to Hit a Moving Target,” BusinessWeek,
August 21, 2006, p. 3; and Peter Kim, Reinventing the Marketing
Organization (Cambridge, MA: Forrester, July 13, 2006), pp. 7,
9, and 17.
31. Adapted from The Experience Curve Reviewed, IV: The Growth
Share Matrix of the Product Portfolio (Boston: The Boston
Consulting Group, 1973). See also https://www.bcgperspectives
.com/content/classics/strategy_the_product_portfolio (registra-
tion and login required for access).
32. Roger A. Kerin, Vijay Mahajan, and P. Rajan Varadarajan,
Contemporary Perspectives on Strategic Marketing Planning
(Boston: Allyn & Bacon, 1990), p. 52.
33. “The Best Global Brands 2016 Rankings,” Interbrand,
http://interbrand.com/best-brands/best-global-brands/2016/
ranking/.
34. See the Apple press release library at http://www.apple.com/pr/
library/.
35. Grace Donnelly, “Apple Is Officially Taking Over the Watch
Business,” fortune.com, February 20, 2018; Ben Lovejoy,
“IDC Predicts Apple Watch Sales Will Hit 45M/Year by
2019, Still Lead Smartwatch Market,” 9to5mac.com,
December 2015; and Joseph Palenchar, “Apple Watch the One
to Watch,” The Week in Consumer Electronics, March 16, 2015,
www.twice.com.
36. “comScore Reports June 2017 U.S. Smartphone Subscriber
Market Share,” PR Newswire, August 3, 2017; Daniel Sparks,
“Apple’s iPhone Has Rapidly Increased Market Share in the
US,” Business Insider, December 10, 2016; and Elad Natanson,
“2016: A Pivotal Year for the Smartphone Industry,” Forbes.com,
September 12, 2016.
37. Matt Weinberger, “The World of Technology Is Changing and
the iPad Is Getting Caught in the Middle,” Business Insider,
February 1, 2017; Jack Linshi, “5 Charts That Show Why the
iPad’s Fifth Birthday Is Bittersweet,” www.time.com, April 6,
2015; “The State of the Tablet Market,” TabTimes Weekly, April
10, 2015, http://tabtimes.com/resources/the-state-of-the-tablet-
market/; and Larry Magid, “Apple’s Tablets Selling Well but
Market Share Slips While Samsung Grows,” Forbes, May 1,
2013, http://www.forbes.com/sites/larrymagid/2013/05/01/
apples-tablet-market-share-slips-and-samsunggrows.
38. Anita Balakrishnan, “Apple Is Discontinuing the iPod Shuffle
and Nano,” CNBC, www.cnbc.com, July 27, 2017; Jason
Cipriani, “The Real Reason Apple Decided to Release a New
iPod Touch,” Fortune.com, July 15, 2015; Don Reisinger,
“iPod History: 10 Milestones in This Wearable Music Player’s
Evolution,” eWeek, October 31, 2014; James Hall, “MP3 Players
Are Dead,” Business Insider, December 26, 2012, http://www
.businessinsider.com/mp3-players-are-dead-2012-12; and Zak
Islam, “Smartphones Heavily Decrease Sales of iPod, MP3
Players,” Tom’s Hardware, December 31, 2012, http://www
.tomshardware.com/news/SmartphonesiPod-MP3-Players-Sales
,20062.html.
39. “Share of Apple’s Revenue by Product Category from
the First Quarter of 2012 to the First Quarter of 2018,”
Statista, 2018, https://www.statista.com/statistics/382260/
segments-share- revenue-of-apple/; and Martyn Casserly,
“Apple Rumours & Predictions 2017,” MacWorld,
February 20, 2017.
40. Strengths and weaknesses of the BCG technique are based on
Derek F. Abell and John S. Hammond, Strategic Market Plan-
ning: Problem and Analytic Approaches (Englewood Cliffs, NJ:
Prentice Hall, 1979); Yoram Wind, Vijay Mahajan, and Donald
Swire, “An Empirical Comparison of Standardized Portfolio
Models,” Journal of Marketing, Spring 1983, pp. 89–99; and
J. Scott Armstrong and Roderick J. Brodie, “Effects of Portfolio
Planning Methods on Decision Making: Experimental Results,”
International Journal of Research in Marketing, Winter 1994,
pp. 73–84.
41. H. Igor Ansoff, “Strategies for Diversification,” Harvard
Business Review, September–October 1957, pp. 113–24.
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42. Robert W. Palmatier and Shrihari Shridhar, Marketing Strategy,
New York: Macmillan International Higher Education, 2017.
43. This case was written by Steven Hartley and Roger Kerin.
Sources: Interviews with IBM executives Ann Rubin and Teresa
Yoo; Thomas Haigh, “Defining American Greatness: IBM from
Watson to Trump,” Communication of the ACM, January 2018,
pp. 32–37; Yagmur Simsek, “IBM Has Introduced a New Brand
Platform along with a New Campaign—‘Let’s Put Smart To
Work,’” Digital Agency Network, April 2018; Jason Bloomberg,
“IBM Bet Company on Exponential Innovation in AI,
Blockchain, and Quantum Computing,” Forbes, March 22,
2018; “Our Values at Work,” https://www.ibm.com/ibm/values/
us/; Adi Ignatius, “Don’t Try to Protect the Past: A Conversation
with IBM CEO Ginni Rometty,” Harvard Business Review,
July– August, 2017, pp. 126–32; Avi Dan, “How Michele Peluso
Is Redefining Marketing at IBM,” Forbes, January 18, 2018;
IBM 2017 Annual Report; IBM website, www.ibm.com; “The
Fortune 500,” Fortune, June 2018; “The World’s Most Admired
Companies,” Fortune, January 19, 2018; and “The World’s Most
Valuable Brands,” Forbes, May 23, 2018.
56
A Building an Effective Marketing PlanAppendix
“If you have a real product with a distinctive point of dif-
ference that satisfies the needs of customers, you may
have a winner,” says Arthur R. Kydd, who has helped
launch more than 60 start-up firms. “And you get a real
feel for this in a well-written marketing or business plan,”
he explains.1
This appendix (1) describes what marketing and busi-
ness plans are, including the purposes and guidelines in
writing effective plans, and (2) provides a sample market-
ing plan.
MARKETING PLANS AND
BUSINESS PLANS
After explaining the meanings, purposes, and audiences
of marketing plans and business plans, this section
describes some writing guidelines for them and what
external funders often look for in successful plans.
Meanings, Purposes, and Audiences
A marketing plan is a road map for the marketing ac-
tions of an organization for a specified future time period,
such as one year or five years.2 No single “generic” mar-
keting plan applies to all organizations and all situations.
Rather, the specific format for a marketing plan for an
organization depends on the following:
∙ The target audience and purpose. Elements
included in a particular marketing plan depend
heavily on (1) who the audience is and (2) what its
purpose is. A marketing plan for an internal audi-
ence seeks to point the direction for future market-
ing activities and is sent to all individuals in the
organization who must implement the plan or who
will be affected by it. If the plan is directed to an
external audience, such as friends, banks, venture
capitalists, or crowdfunding sources like Kickstarter
for the purpose of raising capital, it has the addi-
tional function of being an important sales docu-
ment. So it contains elements such as the strategic
focus, organizational structure, and biographies of
key personnel that would rarely appear in an inter-
nal marketing plan. The elements of a marketing
plan for each of these two audiences are compared
in the two left-hand columns in Figure A–1.
∙ The kind and complexity of the organization. A
neighborhood restaurant has a less detailed market-
ing plan than Apple, which serves international
markets. The restaurant’s plan would be relatively
simple and directed at serving customers in a local
market. In Apple’s case, because there is a hierar-
chy of marketing plans, various levels of detail
would be used—such as the entire organization, the
strategic business unit, or the product/product line.
∙ The industry. Both the restaurant serving a local
market and Apple, selling electronic devices glob-
ally, analyze elements of their industry. However,
their geographic scopes are far different, as are the
complexities of their offerings and, hence, the time
periods likely to be covered by their plans. A one-
year marketing plan may be adequate for the restau-
rant, but Apple may need a five-year planning
horizon because product development cycles for
complex, new electronic devices may be many
years.
In contrast to a marketing plan, a business plan is a
road map for the entire organization for a specified future
period of time, such as one year or five years.3 A key dif-
ference between a marketing plan and a business plan is
that the business plan contains details on the research and
development (R&D)/operations/manufacturing activities
of the organization. Even for a manufacturing business,
the marketing plan is probably 60 or 70 percent of the
entire business plan. For firms like a small restaurant or
an auto repair shop, their marketing and business plans
are virtually identical. The elements of a business plan
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FIGURE A–1
Elements in typical
marketing and business
plans targeted at different
audiences.
1. Executive summary
2. Description of company
3. Strategic plan/focus
4. Situation analysis
5. Market-product focus
6. Marketing program strategy and tactics
7. R&D and operations program
8. Financial projections
9. Organizational structure
10. Implementation plan
11. Evaluation
Appendix A: Biographies of key personnel
Appendix B, etc.: Details on other topics
Marketing plan
Element of the plan
Business plan
For internal
audience
(to direct
the firm)
For external
audience
(to raise
capital)
For internal
audience
(to direct
the firm)
For external
audience
(to raise
capital)
typically targeted at internal and external audiences appear in the two right-hand
columns in Figure A–1.
The Most-Asked Questions by Outside Audiences
Lenders and prospective investors reading a business plan or a marketing plan that is
used to seek new capital are probably the toughest audiences to satisfy. Their most-
asked questions include the following:
1. Is the business or marketing idea valid?
2. Is there something unique or distinctive about the product or service that
separates it from substitutes and competitors?
3. Is there a clear market for the product or service?
4. Are the financial projections realistic and healthy?
5. Are the key management and technical personnel capable, and do they have a
track record in the industry within which they must compete?
6. Does the plan clearly describe how those providing capital will get their money
back and make a profit?
Rhonda Abrams, author of books on writing business plans, observes, “Although
you may spend five months preparing your plan, the cold, hard fact is that an investor
or lender can dismiss it in less than five minutes. If you don’t make a positive impres-
sion in those critical first five minutes, your plan will be rejected.”4 While her com-
ments apply to plans seeking to raise capital, the first five questions listed above apply
equally well to plans prepared for internal audiences.
Writing and Style Suggestions
There are no magic one-size-fits-all guidelines for writing successful marketing and
business plans. Still, the following writing and style guidelines generally apply:5
∙ Use a direct, professional writing style. Use appropriate business terms without
jargon. Present and future tenses with active voice (“I will write an effective
marketing plan”) are generally better than past tense and passive voice (“An
effective marketing plan was written by me”).
marketing plan
A road map for the
marketing actions of an
organization for a specified
future time period, such as
one year or five years.
business plan
A road map for the entire
organization for a specified
future period of time, such
as one year or five years.
58
∙ Be positive and specific to convey potential success. At the same time, avoid su-
perlatives (“terrific,” “wonderful”). Specifics are better than glittering generalities.
∙ Use numbers for impact, justifying projections with reasonable quantitative
assumptions, where possible.
∙ Use bullet points for succinctness and emphasis. As with the list you are reading,
bullets enable key points to be highlighted effectively.
∙ Use A-level (the first level) and B-level (the second level) headings under the
numbered section headings to help readers make easy transitions from one topic
to another. This also forces the writer to organize the plan more carefully.
∙ Use visuals where appropriate. Photos, illustrations, graphs, and charts enable
massive amounts of information to be presented succinctly.
∙ Shoot for a plan 15 to 35 pages in length, not including financial projections and
appendices. An uncomplicated small business may require only 15 pages, while
a high-technology start-up may require more than 35 pages.
∙ Use care in layout, design, and presentation. Use 11- or 12-point type (you are
now reading 10-point type) in the text. Use a serif type (with “feet,” like that you
are reading now) in the text because it is easier to read, and sans serif (without
“feet”) in graphs and charts like Figure A–1. A bound report with a nice cover
and a clear title page adds professionalism.
These guidelines are used, where possible, in the sample marketing plan that follows.
SAMPLE FIVE-YEAR MARKETING PLAN
FOR PARADISE KITCHENS, INC.
To help interpret the marketing plan for Paradise Kitchens, Inc. that follows, we will
describe the company and suggest some guidelines for interpreting the plan.6
Background on Paradise Kitchens, Inc.
Randall and Leah Peters have over 40 years of food industry experience with General
Foods and Pillsbury, with a number of diverse responsibilities. With these backgrounds
and their savings, they co-founded Paradise Kitchens, Inc. to produce and market a
new line of high-quality frozen chili products.
Interpreting the Marketing Plan
The marketing plan that follows, based on an actual Paradise Kitchens plan, is directed
at an external audience (see Figure A–1). For simplicity, let us assume it is early 2019,
the Peters have company data through 2018, and they are developing a five-year mar-
keting plan through 2023. Some details and dates have been altered, but the basic logic
of the plan has been kept.
Notes in the margins next to the Paradise Kitchens plan fall into two categories:
1. Substantive notes are in blue boxes. These notes explain the significance of an
element in the marketing plan and are keyed to chapter references in this
textbook.
2. Writing style, format, and layout notes are in red boxes and explain the editorial
or visual rationale for the element.
A word of encouragement: Writing an effective marketing plan is hard but also
challenging and satisfying work. Dozens of the authors’ students have used effective
marketing plans they wrote for class in their interviewing portfolio to show prospec-
tive employers what they could do and to help them get their first job.
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59Color-Coding Legend
Blue boxes explain significance
of marketing plan elements.
Red boxes give writing style,
format, and layout guidelines.
Five-Year Marketing Plan
Paradise Kitchens,® Inc.
Table of Contents
1. Executive Summary
2. Company Description
Paradise Kitchens,® Inc. was started by co-founders Randall F. Peters and Leah E.
Peters to develop and market Howlin’ Coyote® Chili, a unique line of single serve and
microwavable Southwestern/Mexican style frozen chili products. The Howlin’ Coyote
line of chili was first introduced into the Minneapolis–St. Paul market and expanded
to Denver two years later and Phoenix two years after that.
To the Company’s knowledge, Howlin’ Coyote is the only premium-quality,
authentic Southwestern/Mexican style frozen chili sold in U.S. grocery stores. Its high
quality has gained fast, widespread acceptance in its targeted markets. In fact, same-
store sales doubled in the last year for which data are available. The Company believes
the Howlin’ Coyote brand can be extended to other categories of Southwestern/Mexican
food products, such as tacos, enchiladas, and burritos.
Paradise Kitchens believes its high-quality, high-price strategy has proven success-
ful. This marketing plan outlines how the Company will extend its geographic cover-
age from 3 markets to 20 markets by the year 2023.
3. Strategic Focus and Plan
This section covers three aspects of corporate strategy that influence the market-
ing plan: (1) the mission, (2) goals, and (3) core competency/sustainable competitive
advantage of Paradise Kitchens.
Mission
The mission of Paradise Kitchens is to market lines of high-quality Southwestern/
Mexican food products at premium prices that satisfy consumers in this fast-growing
food segment while providing challenging career opportunities for employees and
above-average returns to stockholders.
The Table of Contents
provides quick access
to the topics in the plan,
usually organized by
section and subsection
headings.
Seen by many experts as
the single most important
element in the plan, the
two-page Executive
Summary “sells” the plan
to readers through its
clarity and brevity. For
space reasons, it is not
shown here, but the
Building Your Marketing
Plan exercise at the end of
Chapter 2 asks the reader
to write an Executive
Summary for this plan.
The Strategic Focus and
Plan sets the strategic
direction for the entire
organization, a direction
with which proposed
actions of the marketing
plan must be consistent.
This section is not
included in all marketing
plans. See Chapter 2.
The Company Description
highlights the recent his-
tory and recent successes
of the organization.
The qualitative Mission
statement focuses the
activities of Paradise
Kitchens for the stake-
holder groups to be
served. See Chapter 2.
60
Goals
For the coming five years Paradise Kitchens seeks to achieve the following
goals:
∙ Nonfinancial goals
1. To retain its present image as the highest-quality line of Southwestern/Mexican
products in the food categories in which it competes.
2. To enter 17 new metropolitan markets.
3. To achieve national distribution in two convenience store or supermarket
chains by 2019 and five by 2020.
4. To add a new product line every third year.
5. To be among the top five chili lines—regardless of packaging (frozen or
canned—in one-third of the metro markets in which it competes by 2020
and two-thirds by 2022.
∙ Financial goals
1. To obtain a real (inflation-adjusted) growth in earnings per share of 8 percent
per year over time.
2. To obtain a return on equity of at least 20 percent.
3. To have a public stock offering by the year 2020.
Core Competency and Sustainable Competitive Advantage
In terms of core competency, Paradise Kitchens
seeks to achieve a unique ability to (1) provide dis-
tinctive, high-quality chilies and related products
using Southwestern/Mexican recipes that appeal to
and excite contemporary tastes for these products
and (2) deliver these products to the customer’s
table using effective manufacturing and distribution
systems that maintain the Company’s quality
standards.
To translate these core competencies into a sustain-
able competitive advantage, the Company will work
closely with key suppliers and distributors to build
the relationships and alliances necessary to satisfy the
high taste standards of our customers.
To help achieve national
distribution through chains,
Paradise Kitchens introduced
this point-of-purchase ad that
adheres statically to the glass
door of the freezer case.
Lists use parallel con-
struction to improve
readability—in this case
a series of infinitives
starting with “To . . .”
Photos or sample ads
can illustrate key points
effectively, even if they are
not in color as they appear
here.
A brief caption on photos
and sample ads ties them
to the text and highlights
their reason for being
included.
The Goals section sets
both the nonfinancial and
financial targets—where
possible in quantitative
terms—against which the
company’s performance
will be measured. See
Chapter 2.
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4. Situation Analysis
This situation analysis starts with a snapshot of the current environment in which
Paradise Kitchens finds itself by providing a brief SWOT (strengths, weaknesses,
opportunities, threats) analysis. After this overview, the analysis probes ever-finer
levels of detail: industry, competitors, company, and consumers.
SWOT Analysis
Figure 1 shows the internal and external factors affecting the market opportuni-
ties for Paradise Kitchens. Stated briefly, this SWOT analysis highlights the great
strides taken by the company since its products first appeared on grocers’ shelves.
Figure 1. SWOT Analysis for Paradise Kitchens
Management Experienced and entrepreneurial Small size can restrict options
management and board
Offerings Unique, high-quality, high-price Many lower-quality, lower-price
products competitors
Marketing Distribution in three markets with No national awareness or
excellent consumer acceptance distribution; restricted shelf space
in the freezer section
Personnel Good workforce, though small; Big gap if key employee leaves
little turnover
Finance Excellent growth in sales revenues Limited resources may restrict
growth opportunities when
compared to giant competitors
Manufacturing Sole supplier ensures high quality Lack economies of scale of huge
competitors
R&D Continuing efforts to ensure quality Lack of canning and microwavable
in delivered products food processing expertise
Consumer/Social Upscale market, likely to be stable; Premium price may limit access
Southwestern/Mexican food to mass markets; consumers
category is fast-growing segment due value a strong brand name
to growth in Hispanic American
population and desire for spicier foods
Competitive Distinctive name and packaging in Not patentable; competitors can
its markets attempt to duplicate product; others
better able to pay slotting fees
Technological Technical breakthroughs enable Competitors have gained
smaller food producers to achieve economies in canning and
many economies available to large microwavable food processing
competitors
Economic Consumer income is high; More households “eating out,”
convenience important to U.S. and bringing prepared take-out
households into home
Legal/Regulatory High U.S. Food & Drug Administration Mergers among large competitors
standards eliminate fly-by-night being approved by government
competitors
Internal Factors Strengths Weaknesses
External Factors Opportunities Threats
To improve readability,
each numbered section
usually starts on a new
page. (This is not done in
this plan to save space.)
The Situation Analysis is
a snapshot to answer the
question “Where are we
now?” See Chapter 2.
The SWOT analysis iden-
tifies strengths, weak-
nesses, opportunities,
and threats to provide a
solid foundation,
which is the springboard
to identify subsequent
actions in the marketing
plan. See Chapter 2.
Each long table, graph,
or photo is given a figure
number and title. It then
appears as soon as possi-
ble after the first reference
in the text, accommodat-
ing necessary page breaks.
This avoids breaking long
tables like this one in the
middle. Short tables or
graphs are often inserted
in the text without figure
numbers because they
don’t cause serious prob-
lems with page breaks.
Effective tables seek
to summarize a large
amount of information in
a short amount of space.
62
In the Company’s favor internally are its strengths: an experienced management
team and board of directors, excellent acceptance of its product line in the three
metropolitan markets within which it competes, and a strong manufacturing and
distribution system to serve these limited markets. Favorable external factors
include the increasing appeal of Southwestern/Mexican foods, the strength of the
upscale market for the Company’s products, and food-processing technological break-
throughs that make it easier for smaller food producers to compete.
Among unfavorable factors, the main weakness is the limited size of Paradise
Kitchens relative to its competitors in terms of the depth of the management team,
the available financial resources, and the national awareness and distribution of product
lines. Threats include the danger that the Company’s premium prices may limit
access to mass markets and competition from the “eating-out” and “take-out”
markets.
Industry Analysis: Trends in Frozen and Mexican Foods
Frozen Foods. According to recent frozen food industry reports consumers are
eating out less and buying more frozen food. The reasons: as more Americans return
to work they have less time to prepare meals, and there are many new, convenient, and
nutritious frozen food products available in grocery stores.7 In 2018, total sales of frozen
food in supermarkets, drugstores, and mass merchandisers reached $35 billion. Prepared
frozen meals, which are defined as meals or entrees that are frozen and require minimal
preparation, accounted for about 39 percent of the total frozen food market.8
Sales of Mexican entrees now exceed $600 million. Heavy consumers of frozen
meals, those who eat five or more meals every two weeks, tend to be kids, teens, and
adults 35–44 years old.9
Mexican Foods. Currently, Mexican foods such as burritos, enchiladas, and
tacos are used in two-thirds of American households. These levels of demand
reflect a general trend toward spicy foods that include red chili peppers. The
growing Hispanic population in the United States, over 57 million people with
about $1.4 trillion in purchasing power, partly explains the increasing demand for
Mexican food. Hispanic purchasing power is projected to be more than $1.7 trillion
in 2020.10
Competitor Analysis: The Chili Market
The chili market represents over $500 million in annual sales. On average, consumers
buy five to six servings annually, according to the NPD Group. The products fall
primarily into two groups: canned chili (75 percent of sales) and dry chili (25 percent
of sales).
The text discussion of Fig-
ure 1 (the SWOT Analysis
table) elaborates on its
more important elements.
This “walks” the reader
through the information
from the vantage point of
the plan’s writer.
Even though relatively
brief, this in-depth treat-
ment of sales of Mexican
foods in the U.S. demon-
strates to the plan’s read-
ers the company’s
understanding of the
industry within which it
competes.
The Industry Analysis sec-
tion provides the backdrop
for the subsequent, more
detailed analysis of com-
petition, the company, and
the company’s customers.
Without an in-depth under-
standing of the industry,
the remaining analysis
may be misdirected. See
Chapter 2.
The Competitor Analysis
section demonstrates that
the company has a realistic
understanding of its major
chili competitors and their
marketing strategies.
Again, a realistic assess-
ment gives confidence
that subsequent marketing
actions in the plan rest on
a solid foundation. See
Chapters 2, 3, 7, and 8.
Sales of Mexican entrees
are significant and pro-
vide a variety of future
opportunities for Paradise
Kitchens.
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Bluntly put, the major disadvantage of the segment’s dominant product, canned chili,
is that it does not taste very good. A taste test described in an issue of Consumer
Reports magazine ranked 26 canned chili products “poor” to “fair” in overall sensory
quality. The study concluded, “Chili doesn’t have to be hot to be good. But really good
chili, hot or mild, doesn’t come out of a can.”11
Company Analysis
The husband-and-wife team that co-founded Paradise Kitchens, Inc. has
44 years of experience between them in the food-processing business. Both have
played key roles in the management of the Pillsbury Company. They are being
advised by a highly seasoned group of business professionals, who have extensive
understanding of the requirements for new-product development.
The Company now uses a single outside producer with which it works closely to
maintain the consistently high quality required in its products. The greater volume has
increased production efficiencies, resulting in a steady decrease in the cost of goods sold.
Customer Analysis
In terms of customer analysis, this section describes (1) the characteristics of
customers expected to buy Howlin’ Coyote products and (2) health and nutrition
concerns of Americans today.
Customer Characteristics. Demographically, chili products in general are purchased
by consumers representing a broad range of socioeconomic backgrounds. Howlin’
Coyote chili is purchased chiefly by consumers who have achieved higher levels of
education and whose income is $50,000 and higher. These consumers represent 50 per-
cent of canned and dry mix chili users.
The household buying Howlin’ Coyote has one to three people in it. Among married
couples, Howlin’ Coyote is predominantly bought
by households in which both spouses work. While
women are a majority of the buyers, single men
represent a significant segment.
Because the chili offers a quick way to make a tasty
meal, the product’s biggest users tend to be those
most pressed for time. Howlin’ Coyote’s premium
pricing also means that its purchasers are skewed
toward the higher end of the income range. Buyers
range in age from 25 to 54 years old and often live
in the western United States where spicy foods are
more readily eaten.
The five Howlin’ Coyote entrees offer
a quick, tasty meal with high-quality
ingredients.
This page uses a “block”
style and does not indent
each paragraph, although
an extra space separates
each paragraph. Compare
this page with the opposite
page, which has indented
paragraphs. Most readers
find that indented para-
graphs in marketing plans
and long reports are easier
to follow.
The Company Analysis
provides details of the
company’s strengths and
marketing strategies that
will enable it to achieve
the mission and goals
identified earlier. See
Chapters 2 and 7.
The “A heading” for this
section (“4. Situation Anal-
ysis”) identifies the major
section of the plan. The “B
heading” of Customer
Analysis has a more
dominant typeface and
position than the lower-level
“C heading” of Customer
Characteristics. These
headings introduce the
reader to the sequence
and level of topics covered
within each major “A level”
section. The organization
of this textbook uses this
kind of structure and
headings.
Satisfying customers and
providing genuine value to
them is why organizations
exist in a market economy.
This section addresses the
question “Who are the
customers for Paradise
Kitchens’s products?”
See Chapters 4, 5, 6, 7,
and 8.
64
Health and Nutrition Concerns. Coverage of food issues in the U.S. media is
often erratic and occasionally alarmist. Because Americans are concerned about their
diets, studies from organizations of widely varying credibility frequently receive
sig nificant attention from the major news organizations. For instance, a study of fat
levels of movie popcorn was reported in all the major media. Similarly, studies on the
healthfulness of Mexican food have received prominent play in print and broadcast
reports. The high caloric levels of much Mexican and Southwestern-style food have
been widely reported and often exaggerated. Some Mexican frozen-food competitors,
such as Don Miguel, Mission Foods, Ruiz Foods, and José Olé, plan to offer or have
recently offered more “carb-friendly” and “fat-friendly” products in response to
this concern.
Howlin’ Coyote is already lower in calories, fat, and sodium than its competitors,
and those qualities are not currently being stressed in its promotions. Instead, in the
space and time available for promotions, Howlin’ Coyote’s taste, convenience, and
flexibility are stressed.
5. Market-Product Focus
This section describes the five-year marketing and product objectives for Paradise
Kitchens and the target markets, points of difference, and positioning of its lines of
Howlin’ Coyote chilies.
Marketing and Product Objectives
Howlin’ Coyote’s marketing intent is to take full advantage of its brand
potential while building a base from which other revenue sources can be mined—
both in and out of the retail grocery business. These are detailed in four areas
below:
∙ Current markets. Current markets will be grown by expanding brand and fla-
vor distribution at the retail level. In addition, same-store sales will be grown
by increasing consumer awareness and repeat purchases, thereby leading to the
more efficient broker/warehouse distribution channel.
∙ New markets. By the end of Year 5, the chili, salsa, burrito, and enchilada
business will be expanded to a total of 20 metropolitan areas, which represent
53 percent of the 38 major U.S. metropolitan markets. This will represent
70 percent of U.S. food store sales.
∙ Food service. Food service sales will include chili products and smothering
sauces. Sales are expected to reach $693,000 by the end of Year 3 and $1.5 million
by the end of Year 5.
∙ New products. Howlin’ Coyote’s brand presence will be expanded at the retail
This section demonstrates
the company’s insights
into a major trend that has
a potentially large impact.
As noted in Chapters 2,
8, and 9, the chances of
success for a new product
significantly increase if
objectives are set for the
product itself and if target
market segments are
identified for it. Diversifi-
cation analysis, discussed
in Chapter 2, helps iden-
tify the market segments
to target. This section
makes these explicit for
Paradise Kitchens. The
objectives also serve
as the planned targets
against which marketing
activities are measured in
program implementation
and evaluation.
The size of headings
should give a professional
look to the report and not
overwhelm the reader.
These two headings are
too large.
64
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level through the addition of new products in the frozen-foods section. This will
be accomplished through new-product concept screening in Year 1 to identify
new potential products. These products will be brought to market in Years 2
and 3.
Target Markets
The primary target market for Howlin’ Coyote
products is households with one to three people,
where often both adults work, and with individual
income typically above $50,000 per year. These
households contain more experienced, adventur-
ous consumers of Southwestern/Mexican food
and want premium quality products.
Points of Difference
The “points of difference”— characteristics that make Howlin’ Coyote chilies
unique relative to competitors—fall into three important areas:
∙ Unique taste and convenience. No known competitor offers a high-quality,
“authentic” frozen chili in a range of flavors. And no existing chili has the same
combination of quick preparation and home-style taste that Howlin’ Coyote
does.
∙ Taste trends. The American palate is increasingly intrigued by hot spices. In
response to this trend, Howlin’ Coyote brands offer more “kick” than most
other prepared chilies.
∙ Premium packaging. Howlin’ Coyote’s packaging graphics convey the unique,
high-quality product contained inside and the product’s nontraditional
positioning.
Positioning
In the past, chili products have been either convenient or tasty, but not both.
Howlin’ Coyote pairs these two desirable characteristics to obtain a positioning in
consumers’ minds as very high-quality “authentic Southwestern/Mexican tasting”
chilies that can be prepared easily and quickly.
To help buyers see the many
different uses for Howlin’ Coyote
chili, recipes are even printed on the
inside of the packages.
An organization cannot
grow by offering only “me-
too products.” The greatest
single factor in a new prod-
uct’s failure is the lack of
significant “points of differ-
ence” that set it apart from
competitors’ substitutes.
This section makes these
points of difference explicit.
See Chapter 9.
A positioning strategy
helps communicate the
unique points of difference
of a company’s products
to prospective customers
in a simple, clear way.
This section describes
this positioning. See
Chapters 8.
This section identifies the
specific niches or target
markets toward which the
company’s products are
directed. When appro-
priate and when space
permits, this section often
includes a market-product
grid. See Chapter 8.
A heading should be
spaced closer to the text
that follows (and that it
describes) than the preced-
ing section to avoid confu-
sion for the reader. This
rule is not followed for the
Target Markets heading,
which now unfortunately
appears to “float” between
the preceding and following
paragraphs.
66
6. Marketing Program
The four marketing mix elements of the Howlin’ Coyote chili marketing program
are detailed below. Note that “chile” is the vegetable and “chili” is the dish.
Product Strategy
After first summarizing the product line, this section describes Howlin’ Coyote’s
approach to product quality and packaging.
Product Line. Howlin’ Coyote chili, retailing for $3.99 for an 11-ounce serving, is
available in five flavors: Green Chile Chili, Red Chile Chili, Beef and Black Bean Chili,
Chicken Chunk Chili, and Mean Bean Chili.
Unique Product Quality. The flavoring systems of the Howlin’ Coyote chi lies are
proprietary. The products’ tastiness is due to extra care lavished upon the ingredients
during production. The ingredients used are of unusually high quality. Meats are low-
fat cuts and are fresh, not frozen, to preserve cell structure and moistness. Chilies are fire-
roasted for fresher taste. Tomatoes and vegetables are of select quality. No preservatives
or artificial flavors are used.
Packaging. Reflecting the “cutting edge” marketing strategy of its producers,
Howlin’ Coyote bucks conventional wisdom in its packaging. It specifically avoids
placing predictable photographs of the product on
its containers. Instead, Howlin’ Coyote’s package
shows a southwestern motif that communicates
the product’s out-of-the- ordinary positioning. As
noted earlier, both women and men represent sig-
nificant segments of actual purchasers of Howlin’
Coyote Chili. The southwestern motif on the
packaging is deliberately designed to appeal to
both women and men.
Price Strategy
At a $3.99 retail price for an 11-ounce
package. Howlin’ Coyote chili is priced com-
parably to the other frozen offerings but higher than the canned and dried chili
varieties. However, the significant taste advantages it has over canned chilies
and the convenience advantages over dried chilies justify this pricing strategy.
This retail price also provides adequate margins for wholesalers and retailers in
Howlin’ Coyote’s channel of distribution.
Promotion Strategy
Key promotion programs feature in-store demonstrations, recipes, and cents-off
coupons.
The southwestern motif makes
Howlin’ Coyote’s packages stand out
in a supermarket’s freezer case.
This section describes in
detail three key elements
of the company’s product
strategy: the product line,
its quality and how this is
achieved, and its “cutting
edge” packaging. See
Chapters 9 and 10.
This Price Strategy sec-
tion makes the company’s
price point very clear,
along with its price posi-
tion relative to potential
substitutes. When appro-
priate and when space
permits, this section might
contain a break-even anal-
ysis. See Chapter 11.
This “introductory over-
view” sentence tells the
reader the topics covered
in the section—in this
case in-store demon-
strations, recipes, and
cents-off coupons. While
this sentence may be
omitted in short memos or
plans, it helps readers see
where the text is leading.
These sentences are used
throughout this plan. This
textbook also generally
uses these introductory
overview sentences to aid
your comprehension.
Everything that has gone
before in the marketing plan
sets the stage for the mar-
keting mix actions—the four
Ps—covered in the market-
ing program. See Chapters
9 through 18.
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In-Store Demonstrations. In-store demonstrations enable consumers to try
Howlin’ Coyote products and discover their unique qualities. Demos will be
conducted regularly in all markets to increase awareness and trial purchases.
Recipes. Because the products’ flexibility of use is a key selling point, recipes are
offered to consumers to stimulate use. The recipes are given at all in-store demonstra-
tions, on the back of packages, through a mail-in recipe book offer, and in coupons
sent by direct-mail or freestanding inserts.
Cents-Off Coupons. To generate trial and repeat purchase of Howlin’ Coyote prod-
ucts, coupons are distributed in four ways:
∙ In Sunday newspaper inserts. These inserts are widely read and help generate
awareness.
∙ In-pack coupons. Each box of Howlin’ Coyote
chili will contain coupons for $1 off two more
packages of the chili. These coupons will be
included for the first three months the product is
shipped to a new market. Doing so encourages
repeat purchases by new users.
∙ Direct-mail chili coupons. Those households that
fit the Howlin’ Coyote demographics described
previously will be mailed coupons.
∙ In-store demonstrations. Coupons will be passed
out at in-store demonstrations to give an addi-
tional incentive to purchase.
Place (Distribution) Strategy
Howlin’ Coyote is distributed in its present
markets through a food distributor. The distributor
buys the product, warehouses it, and then resells
and delivers it to grocery retailers on a store-by-
store basis. As sales grow, we will shift to a more
efficient system using a broker who sells the prod-
ucts to retail chains and grocery wholesalers.
7. Financial Data and Projections
Past Sales Revenues
Historically, Howlin’ Coyote has had a steady increase in sales revenues since its
introduction in 2010. In 2014, sales jumped spectacularly, due largely to new
Sunday newspaper inserts encourage
consumer trial and provide recipes to
show how Howlin’ Coyote chili can be
used in summer meals.
Note that this section con-
tains no introductory over-
view sentence. While the
sentence is not essential,
many readers prefer to
see it to avoid the abrupt
start with Past Sales
Revenues.
Another bulleted list adds
many details for the reader,
including methods of gain-
ing customer awareness,
trial, and repeat purchases
as Howlin’ Coyote enters
new metropolitan areas.
The Place Strategy is
described here in terms
of both (1) the present
method and (2) the new
one to be used when the
increased sales volume
makes it feasible. See
Chapters 12 and 13.
Elements of the Promotion
Strategy are highlighted
in terms of the three key
promotional activities the
company is emphasizing:
in-store demonstrations,
recipes, and cents-off cou-
pons. For space reasons,
the company’s online strat-
egies are not shown in the
plan. See Chapters 15, 16,
and 17.
All the marketing mix
decisions covered in the
just-described marketing
program have both rev-
enue and expense effects.
These are summarized in
this section of the market-
ing plan.
68
promotion strategies. Sales
have continued to rise, but
at a less dramatic rate. Sales
revenues appear in Figure 2.
Five-Year Projections
Five-year financial projec-
tions for Paradise Kitchens
appear below. These projec-
tions reflect the continuing
growth in the number of cases
sold (with eight packages
of Howlin’ Coyote chili
per case).
Projections (000s)
Actual Year 1 Year 2 Year 3 Year 4 Year 5
Financial Element 2018 2019 2020 2021 2022 2023
Cases sold (000s) 353 684 889 1,249 1,499 1,799
Net sales ($000s) $5,123 $9,913 $12,884 $18,111 $21,733 $26,080
Gross profit ($000s) $2,545 $4,820 $6,527 $8,831 $10,597 $12,717
Operating profit ($000s) $339 $985 $2,906 $2,805 $3,366 $4,039
8. Organization
Paradise Kitchens’s present organization appears in Figure 3. It shows the four
people reporting to the President. Below this level are both the full-time and part-time
employees of the Company.
Figure 3. The Paradise Kitchens Organization
Chief Marketing
O�cer
Director
Operations
Director
Sales
Director Finance
& Admin.
Board of Directors
President & CEO
Figure 2. Sales Revenues for Paradise
Kitchens, Inc.
Sa
le
s
re
ve
nu
es
($
00
0s
)
4,000
5,000
$6,000
3,000
2,000
1,000
0
2018
$5,123
4,067
2016
3,174
2014
1,650
2,428
Year
600
2012
380210
2010
60
The Organization of
Paradise Kitchens
appears here. It
reflects the bare-bones
organizational structure
of successful small busi-
nesses. Often a more
elaborate marketing
plan will show the new
positions expected to be
added as the firm grows.
Because this table is very
short, it is woven into the
text, rather than given a
figure number and a title.
Because the plan proposes
to enter 17 new metropoli-
tan markets in the coming
five years (for a total of 20),
it is not possible to simply
extrapolate the trend in
Figure 2. Instead, manage-
ment’s judgment must be
used. Methods of making
sales forecasts— including
the “lost horse” technique
used here—are discussed
in Chapter 7.
The Five-Year Projections
section starts with the
judgment forecast of cases
sold and the resulting net
sales. Gross profit and
then operating profit—
critical for the company’s
survival—are projected. An
actual plan often contains
many pages of computer-
generated spreadsheet
projections, usually shown
in an appendix to the plan.
The graph shows more
clearly the dramatic growth
of sales revenue than data
in a table would do.
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At present, Paradise Kitchens operates with full-time employees in only essential
positions. It now augments its full-time staff with key advisors, consultants, and
subcontractors. As the firm grows, people with special expertise will be added to
the staff.
9. Implementation Plan
Introducing Howlin’ Coyote chilies to 17 new metropolitan markets is a complex
task and requires that creative promotional activities gain consumer awareness and
initial trial. Counting the three existing metropolitan markets in which Paradise Kitch-
ens competes, by 2023 it will be in 20 metropolitan markets or 53 percent of the top
38 U.S. metropolitan markets. The anticipated rollout schedule to enter these metro-
politan markets appears in Figure 4.
The diverse regional tastes in chili will be monitored carefully to assess whether
minor modifications may be required in the chili recipes. As the rollout to new met-
ropolitan areas continues, Paradise Kitchens will assess manufacturing and distribu-
tion trade-offs. This is important in determining whether to start new production with
selected high-quality regional contract packers.
10. Evaluation
Monthly sales targets in cases have been set for Howlin’ Coyote chili for each
metropolitan area. Actual case sales will be compared with these targets and
tactical marketing programs modified to reflect the unique sets of factors in each
metropolitan area.
Appendix a. Biographical Sketches of Key Personnel
Appendix B. Detailed Financial Projections
Figure 4. Rollout Schedule to Enter New U.S. Markets
Last (2018) 2 5 16
Year 1 (2019) 3 8 21
Year 2 (2020) 4 12 29
Year 3 (2021) 2 14 37
Year 4 (2022) 3 17 45
Year 5 (2023) 3 20 53
New Markets Cumulative Cumulative Percentage of
Year Added Each Year Markets 38 Major U.S. Markets
The Implementation Plan
shows how the company
will turn its plan into
results. Charts are often
used to set deadlines and
assign responsibilities for
the many tactical market-
ing decisions needed to
enter a new market.
The essence of Evaluation
is comparing actual sales
with the targeted values
set in the plan and taking
appropriate actions. Note
that the section briefly
describes a contingency
plan for alternative
actions, depending on
how successful the entry
into a new market turns
out to be.
Various appendices may
appear at the end of the
plan, depending on the
plan’s purpose and audi-
ence. For example, résu-
més of key personnel or
detailed financial spread-
sheets often appear in
appendices. For space
reasons these are not
shown here.
Source: ©1996 Paradise Kitchens, Inc. All photos & ads reprinted with permission.
70
Appendix Notes
1. Personal interview with Arthur R. Kydd, St. Croix Management
Group.
2. Examples of guides to writing marketing plans include William
A. Cohen, The Marketing Plan, 5th ed. (New York: Wiley,
2006); and Roman G. Hiebing Jr. and Scott W. Cooper, The Suc-
cessful Business Plan: A Disciplined and Comprehensive Ap-
proach (New York: McGraw-Hill, 2008).
3. Examples of guides to writing business plans include Rhonda
Abrams, Business Plan in a Day, 2nd ed. (Palo Alto, CA: The
Planning Shop, a Division of Rhonda, Inc., 2009); Rhonda
Abrams, The Successful Business Plan, 5th ed. (Palo Alto, CA:
The Planning Shop, a Division of Rhonda, Inc., 2010); Joseph
A. Covello and Brian J. Hazelgren, The Complete Book of
Business Plans, 2nd ed. (Naperville, IL: Sourcebooks, 2006);
Joseph A. Covello and Brian J. Hazelgren, Your First Business
Plan, 5th ed. (Naperville, IL: Sourcebooks, 2005); and Mike
McKeever, How to Write a Business Plan, 8th ed. (Berkeley,
CA: Nolo, 2007).
4. Abrams, The Successful Business Plan, p. 41.
5. Some of these points are adapted from ibid., pp. 41–49; others
were adapted from William Rudelius, Guidelines for Technical
Report Writing (Minneapolis: University of Minnesota, un-
dated). See also William Strunk Jr. and E. B. White, The
Elements of Style, 4th ed. (Needham Heights, MA: Allyn &
Bacon, 2000).
6. Personal interviews with Randall F. and Leah E. Peters, Paradise
Kitchens, Inc.
7. “Frozen Food Production: US Market Research Report,” IBIS-
World, June 2018; and Demitri Diakantonis, “Buyers Chew on
Frozen Food Makers as Consumers Eat More Meals at Home,”
Mergers & Acquisitions Report, March 1, 2017, p. 4.
8. Frozen Food Manufacturing Industry, Barnes Reports: 2017
U.S. Industry & Market Outlook, NAICS 31141, p. 17; and
“Frozen Food Production in the U.S.: Market Research Report,”
IBISWorld, September 2016.
9. “Frozen/Refrigerated Prepared Foods,” Progressive Grocer,
April 2015, p. 20; and Chuck Van Hyning, NPD’s National
Eating Trends, www.npdfoodworld.com.
10. Matt Weeks and Jeff Humphreys, “UGA Report: Minority
Groups Driving U.S. Economy,” Multicultural Economy Report
press release, March 2, 2017; Jens Manuel Krogstad, “Key Facts
about How the U.S. Hispanic Population Is Changing,” Pew
Research Center, www.pewresearch.org, September 8, 2016;
and “Hispanic Influence Reaches New Heights in the U.S.,” The
Nielsen Company, www.nielsen.com, August 23, 2016.
11. “The Best Canned Chili: Our Taste Test Reveals There’s Only
One Worth Trying,” The Huffington Post, February 7, 2014; and
“This Is Chili?!” Consumer Reports, October 1990, p. 688.
Understanding the
Marketing Environment,
Ethical Behavior, and
Social Responsibility
Le a r n i ng
Ob j e c t i v e s
After reading this chapter
you should be able to:
Explain the purpose
of environmental
scanning.
Describe social forces
such as demographics
and culture.
Discuss how economic
forces affect marketing.
Describe how
technological changes
can affect marketing.
Discuss the forms of
competition that exist
in a market.
Explain how regulatory
forces ensure
competition and
protect producers and
consumers.
Identify factors that
influence ethical and
unethical marketing
decisions.
Describe the different
concepts of social
responsibility.
LO 3-1
LO 3-2
LO 3-3
LO 3-4
LO 3-5
LO 3-6
LO 3-7
LO 3-8
3
Fortune’s Businessperson of the Year: “I’m in This to
Build Something Cool!”
Fortune magazine recently named Facebook CEO Mark Zuckerberg the recipi-
ent of its Businessperson of the Year award. One of the keys to Zuckerberg’s
success, explains Fortune, is his unique ability to look into the future. He sees
the world as a system and works to understand how the pieces interact and are
likely to change.
Zuckerberg started Facebook in his Harvard dorm room. His vision was not
just to be a company, but to connect everyone in the world. Today, with 2.2 billion
users, or nearly one-quarter of the world’s population, Facebook is well on its way
to accomplishing that vision!
Facebook’s incredible success is the result of many things, including its ability
to observe and adapt to a rapidly changing marketing environment. Let’s take a
look at the environmental forces that influence Facebook:
∙ Social forces are changing as people look for new ways to communicate,
obtain information, and offer opinions. Simple online interactions that began
on desktops have migrated to mobile devices and now include communica-
tion with photos, group and video chats, and instant messaging.
∙ Economic forces also influence the demand for Facebook as the cost of
smartphones and wireless connectivity declines and Internet access expands
throughout the globe, making social networking increasingly affordable to
more and more people.
∙ Technological advances in software integration, server speed, and data
storage are making Facebook increasingly fast and convenient. New
enhancements such as photo editing, 3D posts, and an app development kit
also increase use of Facebook.
∙ Competitive forces such as the rivalry with Google, Twitter, and Snapchat, the
ability of users to easily switch platforms, and the constant threat of new social
networks targeted at specific interest groups encourage rapid expansion.
73
∙ Legal and regulatory forces also influence the growth of Facebook. The company
has obtained trademark and patent rights to its name and many of its features, and
it provides guidelines for and responds to inquiries about a variety of topics such as
privacy, data protection, protection of minors, and taxation.
Zuckerberg’s rapid responses to changes in the environment and his willingness to try
new things have resulted in the world’s largest social network—one that is quickly con-
necting the world.
Facebook in the Future
Facebook’s challenge now is to keep growing by continuing to respond to changes in
the marketing environment. As Zuckerberg explains, Facebook needs to “think about
the next big things that we want to do.” For example, Zuckerberg wants Facebook to
become more intuitive and to help users answer questions and solve problems. Another
change will be the development of procedures for removing “inauthentic activity” (fake
accounts) and enforcing custom audience targeting requirements. In the future, when
users click on “why am I seeing this ad” they’ll be shown exactly how advertisers got
their information. Facebook also purchased virtual reality headset company Oculus VR
for $2 billion in anticipation of consumer interest in VR-based communication. Face-
book is currently testing augmented reality ads in Messenger with select brands. Fi-
nally, Facebook recently announced new partnerships with Major League Football and
Warner Music Group and launched Community Finder, a tool to connect female entre-
preneurs with their peers around the globe.1 Chapter 17 provides additional discussion
on social networks and social media.
Many businesses operate in environments where important forces change. Antici-
pating and responding to changes often means the difference between marketing suc-
cess and failure. This chapter describes how the marketing environment has changed in
the past and how it is likely to change in the future.
©David Paul Morris/Bloomberg via Getty Images
74
ENVIRONMENTAL SCANNING
Changes in the marketing environment are a source of opportunities and threats to be
managed. The process of continually acquiring information on events occurring outside
the organization to identify and interpret potential trends is called environmental scanning.
Environmental trends typically arise from five sources: social, economic, technological,
competitive, and regulatory forces. As shown in Figure 3–1 and described later in this
chapter, these forces affect the marketing activities of a firm in numerous ways.
An Environmental Scan of Today’s Marketplace
What trends might affect marketing in the future? A firm conducting an environmental
scan of the marketplace might uncover a number of key trends—from the growing
popularity of brand advocates, to the increasing application of virtual reality and aug-
mented reality, to the surging scrutiny regarding the collection and use of consumer
data.2 These trends affect consumers and the organizations that serve them. Trends such
as these are described in the following discussion of the five environmental forces.
SOCIAL FORCES
The social forces of the environment include the demographic characteristics of the
population and its culture. Changes in these forces can have a dramatic impact on mar-
keting strategy.
Demographics
Describing a population according to selected characteristics such as age, gender, eth-
nicity, income, and occupation is referred to as demographics. Three key demographic
characteristics include a population profile, a description of generational cohorts, and
a description of racial and ethnic diversity.
The Population at a Glance The most recent estimates indicate there are
7.4 billion people in the world today, and the population is likely to grow to 9.8 billion
by 2050. While this growth has led to the term population explosion, the increases have
LO 3-1
Explain the
purpose of
environmental
scanning.
LO 3-2
Describe social
forces such as
demographics and
culture.
FIGURE 3–1
Environmental forces
affect the organization, as
well as its suppliers and
customers.
Environmental forces
Suppliers Customers
• Demographic
shifts
• Cultural
changes
• Marketing department
• Other departments
• Employees
Organization
Social
• Macroeconomic
conditions
• Consumer
income
Economic
• Changing
technology
• Technology’s
impact on
customer value
• Technology
enabled data
analytics
Technological
• Alternative forms
of competition
• Small businesses
Competitive
• Laws protecting
competition
• Laws a�ecting
marketing mix
actions
• Self-regulation
Regulatory
environmental scanning
The process of continually
acquiring information on
events occurring outside the
organization to identify and
interpret potential trends.
social forces
The demographic
characteristics of the
population and its culture.
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not occurred worldwide; they are primarily in the developing countries of Africa and
Asia. In fact, India is predicted to have the world’s largest population in 2050 with
1.7 billion people, replacing the current largest country, China, which will have a popula-
tion of 1.3 billion people. World population projections show that the populations of
42 countries, including China, Japan, Ukraine, Russia, Romania, Poland, Spain, and
Taiwan, will be declining.3
Studies of the demographic characteristics of the U.S. population suggest several
important trends. Generally, the population is becoming larger, older, and more di-
verse. The U.S. Census Bureau estimates that the current population of the United
States is approximately 328 million people. If current trends in life expectancy, birth-
rates, and immigration continue, by 2030 and 2050 the U.S. population will exceed
359 and 398 million people, respectively.
Generational Cohorts A major reason for the graying of America is that the
73 million baby boomers—the generation of children born between 1946 and 1964—
are growing older. Baby boomers are retiring at a rate of 10,000 every 24 hours, and
they will all be 65 or older by 2030.4
The baby boom cohort is followed by Generation X, which includes the 50 million
people born between 1965 and 1976. This period is also known as the baby bust, be-
cause during this time the number of children born each year was declining. This is a
generation of consumers who are self-reliant, supportive of racial and ethnic diversity,
and better educated than any previous generation. They are not prone to extravagance
and are likely to pursue lifestyles that are a blend of caution, pragmatism, and tradi-
tionalism. This generation is on the Internet more than any other generation, and they
also have become the largest segment of business travelers.5
The generational cohort labeled Generation Y includes the Americans born between
1977 and 1994. This was a period of increasing births, which resulted from baby boom-
ers having children, and it is often referred to as the echo-boom. Generation Y exerts
influence on music, sports, computers, video games, and all forms of communication
and networking. Generation Y members are interested in distinctive, memorable, and
personal experiences and are very adept at managing their lives to create a work–life
balance. They are strong-willed, passionate about the environment, and optimistic. This
is also a group that is attracted to purposeful work where they have control. The term
millennials is often used, with inconsistent definitions, to refer to younger members of
Generation Y. The Making Responsible Decisions box describes how millennials’ inter-
est in sustainability is influencing product offerings, colleges, and employers. According
Which generational cohorts
are these three advertisers
trying to reach?
(Left) Source: Merrill Lynch;
(Center) Source: IHG; (Right)
Source: Athleta
demographics
Describing a population
according to selected
characteristics such as age,
gender, ethnicity, income,
and occupation.
baby boomers
Includes the generation of
73 million children born
between 1946 and 1964.
Generation X
Includes the 50 million
people born between 1965
and 1976. Also called the
baby bust.
Generation Y
Includes the 75 million
Americans born between
1977 and 1994. Also called
the echo-boom.
76
to population estimates, millennials have recently surpassed baby boomers as the largest
living generation, with 75 million people. The post-millennial generation is referred to
as Generation Z, which includes consumers born between 1995 and 2010. They em-
brace the broadest definitions of diversity and inclusivity to include race, ethnicity, the
LGBT community, different body types, and those with physical challenges. They lead
healthy, active lifestyles, prefer a “natural” look, discover and learn online, and expect a
seamless use of digital and physical aspects of the marketplace.6
Racial and Ethnic Diversity A notable trend is the changing racial and ethnic
composition of the U.S. population. Approximately one in three U.S. residents belongs
to the following racial or ethnic groups: African American, Native American or Alaska
Native, Asian American, or Native Hawaiian or Pacific Islander. While the growing
size of these groups has been identified through new Census data, their economic im-
pact on the marketplace is also very noticeable. Hispanics, African Americans, and
Asian Americans spend more than $1.4 trillion, $1.2 trillion, and $891 billion each
year, respectively. To adapt to this new marketplace, many companies are developing
multicultural marketing programs, which are combinations of the marketing mix that
reflect the unique attitudes, ancestry, communication preferences, and lifestyles of dif-
ferent races and ethnic groups.7
Culture
A second social force, culture, incorporates the set of values, ideas, and attitudes that
are learned and shared among the members of a group. Because many of the elements
Millennials are technologically savvy, innovative, and am-
bitious. In addition, they are a generation that is determined
to make the world a better place. They expect brands and
companies to embrace social change, corporate social
responsibility, and environmental stewardship, as well as
profits. This focus on a higher purpose influences their
choices as consumers, as students, and as early career
employees.
Some companies are taking note of millennials’ interests.
Procter & Gamble, for example, recently introduced fully
recyclable Head & Shoulders shampoo bottles made with
25 percent recycled plastic. Similarly,
Unilever has launched its Sustainable
Living Plan to create “brands with pur-
pose,” Apple’s new headquarters is
described as “the greenest building on
the planet,” and Whole Foods Market
makes decisions only after considering
the needs of all stakeholders.
There are approximately 17 million undergraduate mil-
lennials who expect sustainable campus communities that
include LEED (Leadership in Energy and Environmental
Design)–certified housing, campus transit systems, and
recycling programs. Graduate students are looking for
programs with sustainability electives, case studies, and
potential for involvement with organizations such as Net
Impact (www.netimpact.org), a nonprofit for students who
want to “use business to improve the world.” Sara Hoch-
man is a typical example. She was interested in environ-
mental issues in college, and her first job was as an
environmental consultant. To make a bigger impact on her
clients, she enrolled in graduate school at the University of
Chicago, where she could take an elective on renewable
energy and join the Energy Club.
Early career employees want “green” jobs such as so-
cial responsibility officer, corporate philanthropy manager,
and sustainability database specialist. In addition they
want to work at companies that
advocate good corporate citizenship,
responsible capitalism, and “B-Corp”
status. They view themselves as part
of a “positive business” movement
that balances the interests of share-
holders, employees, and society.
Charlotte Moran, a mid-20s group
marketing manager for Siemens Home Appliances, ex-
plains: “I’d find it very hard to work for a company that
didn’t understand its impact on the environment and
didn’t make an effort to change for the better.”
How will your interests in being a force for good
influence your education and career decisions?
The world will know soon!
SustainabilityMaking Responsible Decisions
Balancing Profits and Purpose—Millennial Style
Source: Net Impact
Video 3-1
Colgate Super
Bowl Ad
kerin.tv/cr8e/v3-1
Generation Z
The post-millennial
generation, which includes
consumers born between
1995 and 2010.
multicultural marketing
Combinations of the
marketing mix that reflect
the unique attitudes,
ancestry, communication
preferences, and lifestyles
of different races and ethnic
groups.
culture
The set of values, ideas, and
attitudes that are learned
and shared among the
members of a group.
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of culture influence consumer buying patterns, monitoring national and
global cultural trends is important for marketing. Cross-cultural analy-
sis needed for global marketing is discussed in Chapter 6.
One of the most notable cultural changes has been in the attitudes
and roles of men and women in the marketplace. Some companies
are moving away from traditional gender norms to avoid gender ste-
reotypes. Target, for example, recently removed gender-based sig-
nage from its toy, entertainment, and home departments, and Disney
has removed gender labels from its Halloween costumes. Fashion
leader Zara introduced a line of ungendered clothing which includes
sweatshirts, T-shirts, trousers, and shoes, and Calvin Klein introduced
fragrance CK2 for women and men. Gender-neutral advertising is
also becoming more common. Jaden Smith recently modeled Louis
Vuitton’s new women’s line with three female models, and one of
Diesel’s advertising campaigns uses the tagline, “This ad is gender
neutral.”8
Another increasingly important value for consumers in the United
States and around the globe is sustainability and preserving the environ-
ment. In fact, 82 percent of today’s shoppers consider themselves envi-
ronmentally friendly. Recent research also indicates that consumers are
committed to brands with a strong link to social action. For example,
Colgate’s “Every Drop Counts” water conservation campaign, which
included a Super Bowl ad, asks consumers to pledge to save water by turning off the
faucet while brushing their teeth.9
Diesel is making changes to
appeal to women as well as men.
Source: Diesel
3-1. Describe four generational cohorts.
3-2. Why are many companies developing multicultural marketing programs?
3-3. How are important values such as sustainability reflected in the market-
place today?
learning review
ECONOMIC FORCES
The second component of the environmental scan, the economy, pertains to the in-
come, expenditures, and resources that affect the cost of running a business and house-
hold. We’ll consider two aspects of these economic forces: a macroeconomic view of
the marketplace and a microeconomic perspective of consumer income.
Macroeconomic Conditions
Of particular concern at the macroeconomic level is the performance of the economy
based on indicators such as GDP (gross domestic product), unemployment, and price
changes (inflation or deflation). In an inflationary economy, the cost to produce and
buy products and services escalates as prices increase. From a marketing standpoint, if
prices rise faster than consumer incomes, the number of items consumers can buy de-
creases. This relationship is evident in the cost of a college education. The College
Board reports that since 2000 college tuition and fees have increased 160 percent
(from $3,508 to $9,650) while family incomes have declined by 2 percent. The share
of family income required to pay for tuition at public four-year colleges has risen from
5 percent in 2000 to 17 percent today.10
LO 3-3
Discuss how
economic forces
affect marketing.
economy
Pertains to the income,
expenditures, and resources
that affect the cost of
running a business and
household.
78
Periods of declining economic activity are referred to as recessions. During reces-
sions, businesses decrease production, unemployment rises, and many consumers have
less money to spend. The U.S. economy experienced recessions from 1973 to 1975, 1981
to 1982, 1990 to 1991, and in 2001. Most recently, a recessionary period began in 2007
and ended in 2009, becoming the longest in recent history.11
Consumer Income
The microeconomic trends in terms of consumer income are also important issues for
marketers. Having a product that meets the needs of consumers may be of little value
if they are unable to purchase it. A consumer’s ability to buy is related to income,
which consists of gross, disposable, and discretionary components.
Gross Income The total amount of money made in one year by a person, house-
hold, or family unit is referred to as gross income (or “money income” at the Census
Bureau). While the typical U.S. household earned only about $8,700 of income in
1970, it earned about $59,039 in 2016. When adjusted for inflation, however, the in-
come of that typical U.S. household was relatively stable. In fact, inflation-adjusted
income has only increased approximately $10,400 since 1970. Approximately 51 per-
cent of U.S. households have an annual income between $25,000 and $99,999.12 Are
you from a typical household?
Disposable Income The second income component, disposable income, is the
money a consumer has left after paying taxes to use for necessities such as food, housing,
clothing, and transportation. Thus, if taxes rise or fall faster than income, consumers are
likely to have more or less disposable income. Similarly, dramatic changes in the prices
of products can lead to spending adjustments. A decline in the price of gasoline, for ex-
ample, often leads to increases in consumer spending in other categories. In addition,
changes in home prices have a psychological impact on consumers, who tend to spend
more when they feel their net worth is rising and postpone purchases when it declines.
During a recessionary period, spending, debt, and the use of credit all decline.13
Discretionary Income The third component of income is discretionary income,
the money that remains after paying for taxes and necessities. Discretionary income is
used for luxury items such as a Cunard cruise. An obvious problem in defining discre-
tionary versus disposable income is determining what is a luxury and what is a necessity.
As consumers’ discretionary
income increases, so does the
opportunity to indulge in the
luxurious leisure travel
marketed by Cunard.
Courtesy of Cunard Line
gross income
The total amount of money
made in one year by a
person, household, or family
unit. Also known as money
income at the Census
Bureau.
disposable income
The money a consumer has
left after paying taxes to use
for necessities such as food,
housing, clothing, and
transportation.
discretionary income
The money that remains
after paying for taxes and
necessities.
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The Department of Labor monitors consumer expenditures through its annual Con-
sumer Expenditure Survey. The most recent report indicates that consumers spend
about 13 percent of their income on food, 33 percent on housing, and 3 percent on
clothes. While an additional 25 percent is often spent on transportation and health
care, the remainder is generally viewed as discretionary. The percentage of income
spent on food and housing typically declines as income increases, which can provide
an increase in discretionary income. Discretionary expenditures also can be increased
by reducing savings. The Bureau of Labor Statistics observed that during the 1990s
and early 2000s the savings rate declined from a long-term average of 8 percent to ap-
proximately 2 percent. That trend was reversed in 2008 when the government issued
stimulus checks designed to improve the economy and, instead of spending the money,
consumers saved it. Recent data on consumer expenditures indicate that the savings
rate is now approximately 5.5 percent.14
TECHNOLOGICAL FORCES
Our society is in a period of dramatic technological change. Technology, the third en-
vironmental force in Figure 3–1, refers to inventions or innovations from applied sci-
ence or engineering research. Each new wave of technological innovation can replace
existing products and companies. Maybe you’ve had a favorite product such as a phone
or a computer replaced by an improved version. In some cases, an entire product cate-
gory (think of DVDs and books) can be replaced by a completely new technology.
Technology of Tomorrow
Technological change is the result of research, so it is difficult to predict. Some of the
most dramatic technological changes occurring now, however, include the following:
∙ Artificial intelligence capabilities will impact many marketing functions, includ-
ing sales, retailing, and customer service.
∙ Automation will become prevalent in products ranging from autonomous cars, to
delivery drones, to robots in the home and office.
∙ The Internet of Things (IoT) will become a reality as digital assistants such as
Amazon’s Alexa allow easy connectivity to all electronic devices.
∙ Wearable technology will take many new forms, from biometric monitors related
to fitness and well-being, to visual displays for information and training, to
exoskeletons to enhance personal mobility.
LO 3-4
Describe how
technological
changes can affect
marketing.
Technological change leads to
new products. What products
or services might be replaced
by these innovations?
(Left) ©dpa picture alliance
archive/Alamy Stock Photo;
(Center) Source: Slack; (Right)
©Bryan Thomas/Getty Images
technology
Inventions or innovations
from applied science or
engineering research.
80
Some of these trends in technology are already being realized in today’s market-
place. IBM, for example, has partnered with Salesforce.com to use artificial intelli-
gence to enhance Salesforce’s customer service software. Amazon recently began
delivery by automated drone in the United Kingdom. LG recently introduced a “con-
nected” refrigerator that can track food expiration dates and respond to voice com-
mands. Other technologies, such as IBM’s Watson, Slack’s new software, and Apple
Pay, are likely to replace or become substitutes for existing products and services such
as customer service representatives, e-mail, and plastic credit cards and money.15
Technology’s Impact on Customer Value
Advances in technology have important effects on marketing. First, the cost of technol-
ogy is plummeting, causing the customer value assessment of technology-based prod-
ucts to focus on other dimensions such as quality, service, and relationships. PC
Magazine (www.pcmag.com) publishes an article titled “The Best Free Software”
each year to tell readers about companies that give their software away, with the expec-
tation that advertising or upgrade purchases will generate revenue. A similar approach
is used by some cell phone service providers, who offer free or subsidized telephones
if the consumer changes providers.16
Technology also provides value through the development of new products. More
than 3,800 companies recently unveiled 20,000 new products at the Consumer Elec-
tronics Show held in Las Vegas. New products included wireless earbuds that translate
37 languages in real time, “wallpaper” televisions that are as thin as a credit card, and
smart rings that measure the same metrics as wrist-based fitness trackers! Better
Homes and Gardens magazine recently announced its Innovation Awards, which in-
clude anti-hacking software from Virtru, a washer and dryer combined into one unit by
LG, and a 360-degree camera by Samsung. Other new products likely to be available
soon include injectable health monitors that will send biometric information to a mo-
bile monitor, such as a watch or a phone, and wireless charging systems that will send
power to devices within five feet of the system.17
Technology Enables Data Analytics
Technology has also had a dramatic impact on the operations of marketing organiza-
tions. First, the development of online capabilities created the marketspace, an
information- and communication-based electronic exchange environment occupied by
sophisticated computer and telecommunication technologies and digital offerings.
Second, these capabilities led to electronic commerce
(e-commerce), or the activities that use electronic communica-
tion in the inventory, promotion, distribution, purchase, and
exchange of products and services. Internet-based technology
also allows companies to create intranets to communicate
within the organization and extranets to communicate with
suppliers, distributors, and other partners such as advertising
agencies.
Today, technologies have advanced to allow computer
chips to be placed in almost anything and to be connected to
a network almost anywhere. This network of products embed-
ded with connectivity-enabled electronics has come to be
known as the Internet of Things (IoT). The information gen-
erated by the Internet of Things has led to an explosion in
interest in advanced analytics that can predict consumer pref-
erences and behavior. A recent study by Forrester Research
indicates that 74 percent of firms want to be “data-driven,”
while Wikibon Research estimates that expenditures on big
data capabilities will reach $92 billion by 2026. Some experts
The Internet of Things has
contributed to the growth in
data analytics.
©Askold Romanov/Getty Images
marketspace
An information- and
communication-based
electronic exchange
environment mostly
occupied by sophisticated
computer and
telecommunication
technologies and digital
offerings.
electronic commerce
The activities that use
electronic communication in
the inventory, promotion,
distribution, purchase, and
exchange of products and
services. Also called
e-commerce.
Internet of Things (IoT)
The network of products
embedded with
connectivity-enabled
electronics.
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suggest that the use of analytics is associated with success in the marketplace. Firms
that have grown their revenues through analytical insights include Netflix, Google,
Amazon, Dell, and eBay.18
COMPETITIVE FORCES
The fourth component of the environmental scan, competition, refers to the alterna-
tive firms that could provide a product to satisfy a specific market’s needs. There are
various forms of competition, and each company must consider its present and poten-
tial competitors in designing its marketing strategy.
Alternative Forms of Competition
Four basic forms of competition create a continuum from pure competition to mo-
nopolistic competition to oligopoly to pure monopoly.
At one end of the continuum is pure competition, in which there are many sellers
and each has a similar product. Companies that deal in commodities common to agri-
business (for example, wheat, rice, and grain) often are in a pure competition position
in which distribution (in the sense of shipping products) is important but other ele-
ments of marketing have little impact.
In the second point on the continuum, monopolistic competition, many sellers com-
pete with substitutable products within a price range. For example, if the price of cof-
fee rises too much, consumers may switch to tea. Coupons or sales are frequently used
marketing tactics.
Oligopoly, a common industry structure, occurs when a few companies control the
majority of industry sales. The wireless telephone industry, for example, is dominated
by four carriers that serve more than 95 percent of the U.S. market. Verizon, AT&T,
Sprint, and T-Mobile have 152, 147, 75, and 53 million subscribers, respectively. Sim-
ilarly, the entertainment industry in the United States is dominated by Viacom, Disney,
and Time Warner, and the major firms in the U.S. defense contractor industry are Boe-
ing, Northrop Grumman, and Lockheed Martin. Critics of oligopolies suggest that
because there are few sellers, price competition among firms is not desirable because
it leads to reduced profits for all producers.19
The final point on the continuum, pure monopoly, occurs when only one firm sells
the product. Monopolies are common for producers of products and services consid-
ered essential to a community: water, electricity, and cable service. Typically, market-
ing plays a small role in a monopolistic setting because it is regulated by the state or
federal government. Government control usually seeks to ensure price protection for
the buyer, although deregulation in recent years has encouraged price competition in
the electricity market. Concern that Microsoft’s 91 percent share of the PC operating
system market was a monopoly that limited consumer access to competitors’ Internet
browsers led to lawsuits and consent decrees from the U.S. Justice Department and
investigations and fines from the European Union. A recent Federal Trade Commis-
sion investigation of Google found that although the company’s market share of the
online search market exceeds 70 percent, it had not harmed competition in the market-
place. An investigation by the European Union, however, is still in progress.20
Small Businesses as Competitors
While large companies provide familiar examples of the forms and components of com-
petition, small businesses make up the majority of the competitive landscape for most
businesses. Consider that there are approximately 28.8 million small businesses in the
United States, which employ 48 percent of all private sector employees. In addition,
small businesses generate 63 percent of all new jobs and 46 percent of the gross domes-
tic product (GDP). Research has shown a strong correlation between national economic
growth and the level of new small business activity in previous years.21
LO 3-5
Discuss the forms
of competition that
exist in a market.
competition
The alternative firms that
could provide a product to
satisfy a specific market’s
needs.
82
REGULATORY FORCES
For any organization, the marketing and broader business decisions are constrained,
directed, and influenced by regulatory forces. Regulation consists of restrictions state
and federal laws place on a business with regard to the conduct of its activities. Regu-
lation exists to protect companies as well as consumers. Much of the regulation from
the federal and state levels is the result of an active political process and has been
passed to ensure competition and fair business practices. For consumers, the focus of
legislation is to protect them from unfair trade practices and ensure their safety.
Protecting Competition
Major federal legislation has been passed to encourage competition, which is deemed
desirable because it permits the consumer to determine which competitor will suc-
ceed and which will fail. The first such law was the Sherman Antitrust Act (1890).
Lobbying by farmers in the Midwest against fixed railroad shipping prices led to the
passage of this act, which forbids (1) contracts, combinations, or conspiracies in
restraint of trade and (2) actual monopolies or attempts to monopolize any part of
trade or commerce. Because of vague wording and government inactivity, however,
there was only one successful case against a company in the nine years after the act
became law, and the Sherman Act was supplemented with the Clayton Act (1914).
This act forbids certain actions that are likely to lessen competition, although no
actual harm has yet occurred.
In the 1930s, the federal government had to act again to ensure fair competition.
During that time, large chain stores appeared, such as the Great Atlantic & Pacific Tea
Company (A&P). Small businesses were threatened, and they lobbied for the
Robinson-Patman Act (1936). This act makes it unlawful to discriminate in prices
charged to different purchasers of the same product, where the effect may substantially
lessen competition or help to create a monopoly.
Protecting Producers and Consumers
Various federal laws are intended to protect the company while others are intended to
protect the consumer. In some cases the laws are designed to protect both.
A company can protect its competitive position in new and novel products under the
patent law, which gives inventors the right to exclude others from making, using, or
selling products that infringe the patented invention. The federal copyright law is an-
other way for a company to protect its competitive position in a product. The copyright
law gives the author of a literary, dramatic, musical, or artistic work the exclusive right
to print, perform, or otherwise copy that work. Copyright is secured automatically
when the work is created. Digital technology has necessitated additional copyright
legislation, called the Digital Millennium Copyright Act (1998), to improve protection
of copyrighted digital products.22
Federal laws also protect consumers. Various laws address each of the four elements
of the marketing mix. Product requirements, for example, are specified in laws such as
LO 3-6
Explain how
regulatory forces
ensure competition
and protect
producers and
consumers.
3-4. What is the difference between a consumer’s disposable and discretion-
ary income?
3-5. How does technology impact customer value?
3-6. In pure competition there are a ______________ number of sellers.
learning review
regulation
Restrictions state and federal
laws place on a business
with regard to the conduct of
its activities.
consumerism
A grassroots movement
started in the 1960s to
increase the influence,
power, and rights of
consumers in dealing
with institutions.
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the Fair Packaging and Labeling Act (1966), the Child Protection Act (1966), the Con-
sumer Product Safety Act (1972), which established the Consumer Product Safety
Commission to monitor product safety and establish uniform product safety standards,
the Infant Formula Act (1980), and the Nutritional Labeling and Education Act (1990).
Many of these laws came about because of consumerism, a grassroots movement
started in the 1960s to increase the influence, power, and rights of consumers in deal-
ing with institutions.
Laws also address pricing, distribution, and promotion. The FTC Act of 1914, for
example, established the Federal Trade Commission (FTC) to monitor unfair business
practices. The FTC has the power to (1) issue cease and desist orders and (2) order
corrective advertising. In issuing a cease and desist order, the FTC orders a company
to stop practices the commission considers unfair. With corrective advertising, the
FTC can require a company to spend money on advertising to correct previous mis-
leading promotion. Other laws, such as the Deceptive Mail Prevention and Enforce-
ment Act (1999), the Telephone Consumer Protection Act (1991), and the Controlling
the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act (2004), are
designed to guide the use of direct mail, telemarketing, e-mail solicitations, and other
forms of promotion.23
An example of a law that protects producers and consumers is the Lanham Act
(1946), which provides for the registration of trademarks. Registration under the Lan-
ham Act provides important advantages to a trademark owner but it does not confer
ownership. A company can lose its trademark if it becomes generic, which means that
it has come to be a common, descriptive word for the product. Coca-Cola, Whopper,
and Xerox are registered trademarks, and competitors cannot use these names. Aspirin
and escalator, however, are former trademarks that are now generic terms in the United
States and can be used by anyone. Consumers benefit from the use of trademarks be-
cause it allows them to correctly identify products they want to purchase.24
Control through Self-Regulation
An alternative to government control is self-regulation, where an industry attempts to
police itself. The major television networks, for example, have used self-regulation to
set their own guidelines for TV ads for children’s toys. These guidelines have generally
worked well. There are two problems with self-regulation, however: noncompliance by
members and enforcement. In addition, if attempts at self-regulation are too strong,
they may violate the Robinson-Patman Act. The best-known self-regulatory group is
the Better Business Bureau (BBB). This agency is a voluntary alliance of companies
whose goal is to help maintain fair practices. The BBB is a nonprofit corporation that
uses a Partner Code of Conduct to encourage its members to comply with its
standards.25
Video 3-2
Federal Trade
Commission
(FTC)
kerin.tv/cr8e/v3-2
These products are
identified by protected
trademarks. Are any of
these trademarks in
danger of becoming
generic?
©McGraw-Hill Education
Source: Federal Trade
Commission
Companies must meet certain
requirements before they can
display this logo on their
websites.
Better Business Bureau. Used with
permission.
84
There is a distinction between laws, which are society’s values that are enforce-
able in courts, and ethics, which deal with personal and moral principles and values.
The following sections discuss ethical behavior and social responsibility in
marketing.
self-regulation
An alternative to
government control
whereby an industry
attempts to police itself.
3-7. The ____________ Act forbids actual monopolies, whereas the
___________ Act forbids actions that are likely to lessen competition.
3-8. The Federal Trade Commission (FTC) monitors _________.
3-9. How does the Better Business Bureau encourage companies to follow
its standards for commerce?
learning review
UNDERSTANDING ETHICAL MARKETING BEHAVIOR
Ethics are the moral principles and values that govern the actions and decisions of an
individual or group.26 They serve as guidelines on how to act rightly and justly when
faced with moral dilemmas. Researchers have identified four factors that influence
ethical marketing behavior.27 Figure 3–2 presents a framework that shows these factors
and their relationships.
Societal Culture and Norms
As described previously, culture refers to the set of values, ideas, and attitudes that are
learned and shared among the members of a group. Culture also serves as a socializing
force that dictates what is morally right and just. This means that moral standards are
relative to particular societies.28 These standards often reflect the laws and regulations
that affect social and economic behavior, which can create ethical dilemmas. Compa-
nies that compete in the global marketplace recognize this fact. Consider UPS, the
world’s largest package delivery company operating in more than 220 countries and
territories worldwide.29 According to the company’s global compliance and ethics co-
ordinator, “Although languages and cultures around the world may be different, we do
not change our ethical standards at UPS. Our ethics program is global in nature.” Not
surprisingly, UPS is consistently ranked among the world’s most ethical companies.
ethics
The moral principles and
values that govern the
actions and decisions of an
individual or group.
LO 3-7
Identify factors that
influence ethical
and unethical
marketing
decisions.
Corporate culture
and expectations
Personal moral
philosophy and
ethical behavior
Business culture and
industry practices
Societal culture
and norms
FIGURE 3–2
A framework for
understanding ethical
behavior. Each of these
influences has an effect
on ethical marketing
behavior, as described in
the text.
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Business Culture and Industry Practices
Societal culture provides a foundation for understanding moral behavior in business
activities. Business cultures “comprise the effective rules of the game, the boundaries
between competitive and unethical behavior, [and] the codes of conduct in business
dealings.”30 Consumers have witnessed instances where business cultures in the finan-
cial (insider trading), insurance and banking (deceptive sales practices), and defense
(bribery) industries went awry. Business culture affects ethical conduct both in the
exchange relationship between sellers and buyers and in the competitive behavior
among sellers.
Ethics of Exchange The exchange process is central to the marketing concept.
Ethical exchanges between sellers and buyers should result in both parties being better
off after a transaction.
Before the 1960s, the legal concept of caveat emptor—let the buyer beware—was
pervasive in the American business culture. In 1962, President John F. Kennedy out-
lined a Consumer Bill of Rights that codified the ethics of exchange between buyers
and sellers. These were the right (1) to safety, (2) to be informed, (3) to choose, and (4)
to be heard. Consumers expect and often demand that these rights be protected, as
have American businesses.
Ethics of Competition Business culture also affects ethical behavior in competi-
tion. Two kinds of unethical behavior are most common: (1) economic espionage and
(2) corruption.
Economic espionage is the clandestine collection of trade secrets or proprietary
information about a company’s competitors. This practice is illegal and unethical
and carries serious criminal penalties for the offending individual or business. Es-
pionage activities include illegal trespassing, theft, fraud, misrepresentation, elec-
tronic hacking, the search of a competitor’s trash, and violations of written and
implicit employment agreements with noncompete clauses. More than half of the
largest firms in the world have uncovered espionage in some form, costing them
$445 billion annually in lost sales.31 Read the Making Responsible Decisions box to
learn how Pepsi-Cola responded to an offer to obtain confidential information about
its archrival’s marketing plans.32
Corruption is a second form of unethical behavior. Corruption involves unethical
conduct by a person entrusted with a position of authority, often to acquire a personal
benefit. The giving and receiving of bribes, kickbacks, and gifts are the most common
forms of corruption. These practices are more common in business-to-business and
government marketing than in consumer marketing. In general, bribery is most evident
in industries experiencing intense competition and in countries in the earlier stages of
economic development or facing economic and political turmoil. According to a
United Nations study, 15 percent of all companies in industrialized countries have
to pay bribes to win or retain business. In Asia, this figure is 40 percent. In Eastern
Europe, 60 percent of all companies must pay bribes to do business. Analysts at the
World Bank estimate that the equivalent of $1 trillion is offered in bribes and kick-
backs every year in the global arena.33
Corporate Culture and Expectations
A third influence on ethical practices is corporate culture. Corporate culture is the set
of values, ideas, and attitudes that is learned and shared among the members of an or-
ganization. The culture of a company demonstrates itself in the dress (“We don’t wear
ties”), sayings (“The IBM Way”), and manner of work (team efforts) of employees.
Culture is also apparent in the expectations for ethical behavior present in formal codes
of ethics and the ethical actions of top management and co-workers.
Consumer Bill of Rights
An outline presented by
President John F. Kennedy
in 1962 that codified the
ethics of exchange between
buyers and sellers, including
the rights to safety, to be
informed, to choose, and to
be heard.
86
Codes of Ethics A code of ethics is a formal statement of ethical principles and
rules of conduct. It is estimated that 85 to 90 percent of U.S. companies have some sort
of ethics code and one of every four large companies has corporate ethics officers.
Ethics codes typically address contributions to government officials and political par-
ties, customer and supplier relations, conflicts of interest, and accurate recordkeeping.
Ethical Behavior of Top Management and Co-workers One reason for
violating ethics codes rests in the perceived behavior of top management and co-
workers.34 Observing peers and top management and gauging responses to unethical
behavior play an important role in individual actions. A study of business executives
reported that 63 percent had witnessed ethically troubling behavior. About 21 per-
cent of those who reported unethical behavior were penalized, through either out-
right punishment or a diminished status in the company.35 Clearly, ethical dilemmas
can bring personal and professional conflict. For this reason, states have enacted
laws designed to protect whistle-blowers, employees who report unethical or illegal
actions of their employers.
Your Personal Moral Philosophy and Ethical Behavior
Ultimately, ethical choices are based on the personal moral philosophy of the decision
maker. Moral philosophy is learned through the process of socialization with friends
and family and by formal education. It is also influenced by the societal, business, and
corporate culture in which a person finds him- or herself. Two prominent personal
moral philosophies have direct bearing on marketing practice: (1) moral idealism and
(2) utilitarianism.
Moral Idealism Moral idealism is a personal moral philosophy that considers
certain individual rights or duties as universal, regardless of the outcome. This phi-
losophy exists in the Consumer Bill of Rights and is favored by moral philosophers
Suppose you are a senior executive at
Pepsi-Cola and a Coca-Cola employee
offers to sell you the marketing plan and
sample for a new Coke product at a
modest price. Would you buy it knowing
Pepsi-Cola could gain a significant com-
petitive edge in the cola war?
When this question was posed in an
online survey of marketing and advertis-
ing executives, 67 percent said they
would buy the plan and product sample
if there were no repercussions. What did
Pepsi-Cola do when this offer actually
occurred? The company immediately
contacted Coca-Cola, which contacted
the FBI. An undercover FBI agent paid
the employee $30,000 in cash stuffed in a Girl Scout
cookie box as a down payment and later arrested the em-
ployee and accomplices. When asked about the incident,
a Pepsi-Cola spokesperson said: “We
only did what any responsible company
would do. Competition must be tough,
but must always be fair and legal.”
Why did the 33 percent of respon-
dents in the online survey say they would
decline the offer? Most said they would
prefer competing ethically so they could
sleep at night. According to a senior ad-
vertising agency executive who would
decline the offer: “Repercussions go be-
yond potential espionage charges. As
long as we have a conscience, there are
repercussions.”
So what happened to the Coca-Cola
employee and her accomplices? She
was sentenced to eight years in prison and ordered to
pay $40,000 in restitution. Her accomplices were each
sentenced to five years in prison.
EthicsMaking Responsible Decisions
Corporate Conscience in the Cola War
What does 3M’s Scotchgard
have to do with ethics, social
responsibility, and a $200
million loss in annual sales?
Read the text to find out.
©McGraw-Hill Education/Mike
Hruby, photographer
©Cliff Tew
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and consumer interest groups. For example, the right to know applies to probable de-
fects in an automobile that relate to safety.
This philosophy also applies to ethical duties. A fundamental ethical duty is to do
no harm. Adherence to this duty prompted the recent decision by 3M executives to
phase out production of a chemical 3M had manufactured for nearly 40 years. The
substance, used in far-ranging products from pet food bags, candy wrappers, carpeting,
and 3M’s popular Scotchgard fabric protector, had no known harmful health or envi-
ronmental effect. However, the company discovered that the chemical appeared in mi-
nuscule amounts in humans and animals around the world and accumulated in tissue.
Believing that the substance could be possibly harmful in large doses, 3M voluntarily
stopped its production, resulting in a $200 million loss in annual sales.36
Utilitarianism An alternative perspective on moral philosophy is utilitarianism,
which is a personal moral philosophy that focuses on “the greatest good for the great-
est number” by assessing the costs and benefits of the consequences of ethical behav-
ior. If the benefits exceed the costs, then the behavior is ethical. If not, then the
behavior is unethical. This philosophy underlies the economic tenets of capitalism and,
not surprisingly, is embraced by many business executives and students.37
code of ethics
A formal statement of
ethical principles and rules
of conduct.
moral idealism
A personal moral philosophy
that considers certain
individual rights or duties as
universal, regardless of the
outcome.
utilitarianism
A personal moral philosophy
that focuses on “the greatest
good for the greatest
number” by assessing the
costs and benefits of the
consequences of ethical
behavior.
3-10. What rights are included in the Consumer Bill of Rights?
3-11. Economic espionage includes what kinds of activities?
3-12. What is meant by moral idealism?
learning review
UNDERSTANDING SOCIAL RESPONSIBILITY FOR SUSTAINABLE MARKETING
As we saw in Chapter 1, the societal marketing concept stresses marketing’s social
responsibility by not only satisfying the needs of consumers but also providing for
society’s welfare. Social responsibility means that organizations are part of a larger
society and are accountable to that society for their actions. Like ethics, agreement on
the nature and scope of social responsibility is often difficult to come by, given the
diversity of values present in different societal, business, and corporate cultures.
Three Concepts of Social Responsibility
There are three concepts of social responsibility: (1) profit responsibility, (2) stake-
holder responsibility, and (3) societal responsibility.
Profit Responsibility Profit responsibility holds that companies have a simple
duty: to maximize profits for their owners or stockholders. This view is expressed by
Nobel Laureate Milton Friedman, who said, “There is one and only one social respon-
sibility of business—to use its resources and engage in activities designed to increase
its profits so long as it stays within the rules of the game, which is to say, engages in
open and free competition without deception or fraud.”38
Stakeholder Responsibility Criticism of the profit view has led to a broader
concept of social responsibility. Stakeholder responsibility focuses on the obligations
an organization has to those who can affect achievement of its objectives. These con-
stituencies include consumers, employees, suppliers, and distributors. Failure to
consider a company’s broader constituencies when making decisions can have dire
LO 3-8
Describe the
different concepts
of social
responsibility.
social responsibility
The idea that organizations
are part of a larger society
and are accountable to that
society for their actions.
88
consequences. For example, Volkswagen AG was widely criticized for employing so-
phisticated software on selected Volkswagen, Audi, and Porsche models that impaired
its diesel emission devices required by the U.S. Environmental Protection Agency.39
Volkswagen AG executives admitted that the company engaged in emissions decep-
tion practices and agreed to pay up to $25 billion in settlement fees.40
Societal Responsibility An even broader concept of social responsibility has
emerged in recent years. Societal responsibility refers to obligations that organizations
have (1) to the preservation of the ecological environment and (2) to the general pub-
lic. Emphasis is placed on the triple bottom line—recognition of the need for organiza-
tions to improve the state of people, the planet, and profit simultaneously if they are to
achieve sustainable, long-term growth.41 Marketers have embraced societal responsi-
bility through sustainable marketing, which seeks to meet today’s (global) economic,
environmental, and social needs without compromising the opportunity for future gen-
erations to meet theirs. Green marketing, cause marketing, social audits, and sustain-
able development reflect this recognition.
Green marketing—marketing efforts to produce, promote, and reclaim environ-
mentally sensitive products—takes many forms.42 At 3M, product development op-
portunities emanate both from consumer research and its “Pollution Prevention Pays”
(3P) program. This program solicits employee suggestions on how to reduce pollution
and recycle materials. Since 1975, this program has generated over 11,000 3P projects
that have eliminated more than two billion tons of air, water, and solid-waste pollutants
from the environment. Levi Strauss & Co. uses eight recycled plastic bottles in each
pair of Waste