Third Edition Dhruv Grewal, Ph.D. · Chapter Case Study: Coca-Cola 255 9 Marketing Research 259 The...

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Marketing Me Graw Hill ^Connect Learn I Succeed" Third Edition Dhruv Grewal, Ph.D. Babson College Michael Levy, Ph.D. Babson College

Transcript of Third Edition Dhruv Grewal, Ph.D. · Chapter Case Study: Coca-Cola 255 9 Marketing Research 259 The...

Page 1: Third Edition Dhruv Grewal, Ph.D. · Chapter Case Study: Coca-Cola 255 9 Marketing Research 259 The Marketing Research Process 260 Marketing Research Process Step i: Defining the

Marketing

MeGrawHill

^ConnectLearn

I Succeed"

Third Edition

Dhruv Grewal, Ph.D.Babson College

Michael Levy, Ph.D.Babson College

Page 2: Third Edition Dhruv Grewal, Ph.D. · Chapter Case Study: Coca-Cola 255 9 Marketing Research 259 The Marketing Research Process 260 Marketing Research Process Step i: Defining the

SECTION i Assessing the Marketplace 3

i Overview of Marketing 5

What Is Marketing? 6

Marketing Is about Satisfying Customer Needs and Wants 6

Marketing Entails an Exchange 7

Marketing Requires Product, Price, Place, and Promotion Decisions 8

Superior Service 1.1: Ritz Cariton Hotel Makes Customer Service an Art 10

Marketing Can Be Performed by Both Individuals and Organizations 12

Marketing Impacts Various Stakeholders 12

Power of the Internet 1.1: Facebook Networks the Web 13

Marketing Helps Create Value 14

Adding Value 1.1: Jeans—From Bronco to Boardroom 16

What Is Value-Based Marketing? 17

How Firms Compete on the Basis of Value 18

How Do Firms Become Value Driven? 18

Why Is Marketing Important? 21

Marketing Expands Firms'Global Presence 21

Marketing Is Pervasive across the Supply Chain 22

Marketing Enriches Society 23

Ethical and Societal Dilemma 1.1: Firms Swing the Ethical Pendulum Both Ways 25

Marketing Can Be Entrepreneurial 26

Summing Up 27

Key Terms 28

Marketing Applications 28

Quiz Yourself 2g

Net Savvy 2g

Chapter Case Study: iPad Launch 29

2 Developing Marketing Strategies and a Marketing Plan 33

What Is a Marketing Strategy? 35

Building a Sustainable Competitive Advantage 35

Customer Excellence 36

Superior Service 2.1: Singapore Airline Leads in Customer Satisfaction 37

Operational Excellence 38

Product Excellence 39

Locational Excellence 39

Multiple Sources of Advantage 40

The Marketing Plan 40

Step i: Define the Business Mission 41

Step 2: Conduct a Situation Analysis 41

Step 3: Identifying and Evaluating Opportunities Using STP (Segmentation,Targeting,

and Positioning) 44

Power of the Internet 2.1: Spreading Positive Self-Esteem Online 46

Step 4: Implement Marketing Mix and Allocate Resources 47

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Adding Value 2.1: Innovation at 3M 47

Step 5: Evaluate Performance Using Marketing Metrics 49

Ethical and Societal Dilemma 2.1: Starbucks Working to Make the Earth a Better

Place 51

Strategic Planning Is Not Sequential 54

Growth Strategies 54

Market Penetration 55

Market Development 55

Product Development 56

Diversification 56

Summing Up 57

Key Terms 58

Marketing Applications 59

Quiz Yourself S9

Toolkit 59

Net Savvy 59

Chapter Case Study: Netflix versus Blockbuster and the Video Rental Industry 60 •

Appendix 2A Wiiting a Marketing Plan 62'

3 Marketing Ethics 83

The Scope of Marketing Ethics 84

Ethical Issues Associated with Marketing Decisions 85

Creating an Ethical Climate in the Workplace 85

The Influence of Personal Ethics 88

Ethics and Corporate Social Responsibility 90

Adding Value 3.1: The Barefoot Entrepreneur 92

A Framework for Ethical Decision Making 92

Ethical and Societal Dilemma 3.1: A Questionable Promotion 95

Integrating Ethics into Marketing Strategy 97

Planning Phase 97

Implementation Phase 98

Adding Value 3.2: Newman's Own Making a Difference 99

Power of the Internet 3.1: For Heavyweight Championship of the World: Google

versus China 100

Control Phase 100

Adding Value 3.3: It Isn't Easy to Sell to Walmart 101

Understanding Ethics Using Scenarios 101

Scenario 1: RJ. Reynolds: Promotions to the Youth Market 102

Scenario 2: Car Manufacturer Gives Bribes for Contracts 103

Scenario 3: Retailers Lack Ethical Guidelines 103

Scenario 4: Who Is on the Line? 103

Scenario 5: West Virginia T-Shirts 104

Scenario 6: Giving Credit Where Credit Isn't Due 104

Scenario 7: The Jeweler's Tarnished Image 104

Scenario 8: No Wonder It's So Good 105

Scenario 9: Bright Baby's Bright Idea 105

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Scenario io: Money from Mailing Lists 106

Scenario 11: The Blogging CEO 106

Corporate Social Responsibility 107

Inputs 108

Developing a CSR Program 108

Outputs 109

Summing Up 109

Key Terms no

Marketing Applications no

Quiz Yourself m

Net Savvy m

Chapter Case Study: Whose Side Are You On? 112

4 Analyzing the Marketing Environment 115

A Marketing Environment Analysis Framework 116

The Immediate Environment 117

Company Capabilities 117

Competitors 117

Corporate Partners 118 , ' '

Macroenvirohmental Factors 119

Culture 119 , }

Demographics 120

Ethical and Societal Dilemma 4.1: Predatory Lenders Target VulnerableConsumers 122

Social Trends 126

Adding Value 4.1: Puma Sacks the Box 128

Superior Service 4.1: Grocery Retailers Help Time-Poor Consumers 129

Technological Advances 130

Economic Situation 130

Power of the Internet 4.1: Brands, Calling at Your Service, Sir 131

Political/Regulatory Environment 132

Summing Up 134

Key Terms 134

Marketing Applications 135

Quiz Yourself 735

Net Savvy 735

Chapter Case Study: Nike: Delivering Innovation and Inspiration 136

SECTION 2 Understanding the Marketplace 139

5 Consumer Behavior 141

The Consumer Decision Process 142

Need Recognition 143

Adding Value 5.1: Enhancing the Customer Experience 144

Search for Information 145

Evaluation of Alternatives 147

Purchase and Consumption 149

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Power of the Internet 5.1: Friends Make Shopping Easier 150

Postpurchase 151

Factors Influencing the Consumer Decision Process 153

Psychological Factors 153

Social Factors 158

Situational Factors 159

Superior Service 5.1: Educating Salespeople to Educate Consumers 160

Ethical and Societal Dilemma 5.1: Is a "Free Gift" Really Free? 161

Involvement and Consumer Buying Decisions 162

Extended Problem Solving 163

Limited Problem Solving 164

Summing Up 765

Key Terms 765

Marketing Applications 166

. Quiz Yourself 166

Toolkit 167

Net Savvy 167

Chapter Case Study: Weight Watchers vs. Jenny Craig 167

, _ . . _ » » i i . • ' Introducing a coiporate stimulus6 BusmeSS-tO-BuSineSS Marketing 171 package that eliminates the package

B2B Markets 173

Manufacturers or Producers 174

Resellers 174

Institutions 174

Adding Value 6.1: Buying for Value 175

Government 176

The Business-to-Business Buying Process 176

Stage 1: Need Recognition 176

Stage 2: Product Specification 177

Stage 3: RFP Process 177

Stage 4: Proposal Analysis, Vendor Negotiation, and Selection 177

Stage 5: Order Specification 178

Stage 6: Vendor Performance Assessment Using Metrics 178

The Buying Center 179

Ethical and Societal Dilemma 6.1: But How Does the Doctor Come to Know

Best? 180

Organization Culture 181

Building B2B Relationships 182

Power of the Internet 6.1: Staples Businesses Stick to It! 183

The Buying Situation 183

Summing Up: 186

Key Terms 187

Marketing Applications 187

Quiz Yourself 188

Toolkit 188

Net Savvy 188

Chapter Case Study: UPS: From Shipping to Supply Chain 189

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7 Global Marketing 193Growth of the Global Economy: Globalization of Marketing and Production 195

Ethical and Societal Dilemma 7.1: Pity the Poor Behemoth 197

Assessing Global Markets 198

Economic Analysis Using Metrics 199

Ethical and Societal Dilemma 7.2: Retail Concerns for India 203

Analyzing Infrastructure and Technological Capabilities 204

Analyzing Government Actions 205

Analyzing Sociocultural Factors 208

Choosing a Global Entry Strategy 210

Exporting 210

Franchising 211

Strategic Alliance 212

Joint Venture 212

Direct Investment 213

Choosing a Global Marketing Strategy 213

Target Market: Segmentation, Targeting, and Positioning 214

The Global Marketing Mix 214

Adding Value 7.11 Is One World Car Enough for All of Us? 217

Superior Service 7.1: Hey Neighbor, Can You Spare a Battery Pack? 219

Adding Value 7.2: Cover Art as Cover Ads 220

Summing Up 220

Key Terms 221

Marketing Applications 221

Quiz Yourself 222

Net Savvy 222

Chapter Case Study: P&G Takes on the World, One Smile, One Diaper Change at a

Time 223

SECTION 3 Targeting the Marketplace 227

8 Segmentation, Targeting, and Positioning 229

The Segmentation,Targeting, and Positioning Process 230

Step i: Establish Overall Strategy or Objectives 230

Step 2: Segmentation Methods 231

Adding Value 8.1: Competing for Chinese Drivers 232

Power of the Internet 8.1: How to Attract Women 237

Adding Value 8.2: China Mobile Grows through Segmentation 239

Step 3: Evaluate Segment Attractiveness 241

Step 4: Select Target Market 243

Step 5: Develop Positioning Strategy 246

Superior Service 8.1: Let's See, for This Trip, I'll Take Soft Jazz, a Firm Pillow, and

Jasmine in My Hotel Room, Please 247

Ethical and Societal Dilemma 8.1: Design Labels Target Teens 248

Summing Up 252

Key Terms 253

Marketing Applications 253

Quiz Yourself 254

Toolkit 254

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Net Savvy 254

Chapter Case Study: Coca-Cola 255

9 Marketing Research 259

The Marketing Research Process 260

Marketing Research Process Step i: Defining the Objectives and Research Needs 261 NEW SAUCE.NEW CRUST NEW CHEESE.

Marketing Research Process Step 2: Designing the Research 262 i STILL ROUND.

Marketing Research Process Step 3: Data Collection Process 263

Secondary Data 263

Adding Value 9.1: SymphonylRI and the Value of Information 266

Data Mining 267

Data Collection Techniques 269

Ethical and Societal Dilemma 9.1: Watching Consumers 270

Adding Value 9.2: Marketing Research on a Shoestring Budget 278

Marketing Research Process Step 4: Analyzing Data and Developing Insights 278

Superior Service 9.1: Harrah's Analyzes Its Customers 280

Marketing Research Process Step 5: Action Plan and Implementation 280

The Ethics of Using Customer Information 282

Summing Up 28$

Key Terms 283

Marketing Applications 284 r.

Quiz Yourself 285

Net Savvy 285

Chapter Case Study: Hollywood: Researching a Blockbuster 285

Appendix 9A: Using Secondary Data to Assess Customer Lifetime Value (CLV) 289

SECTION 4 Value Creation 293

10 Product, Branding, and Packaging Decisions 295

Complexity of Products and Types of Products 297

Complexity of Products 297

Types of Products 298

Product Mix and Product Line Decisions 299

Change Product Mix Breadth 301

Change a Product Line's Depth 301

Product Line Decisions for Services 302

Branding 303

Value of Branding for the Customer and the Marketer 304

Power of the Internet 10.1: How Much Is an Amazon.com CustomerWorth? 305

Brand Equity 306

Adding Value 10.1: The Brand Singles Choose to Find Them a Friend 309

Branding Strategies 310

Brand Ownership 310

Naming Brands"and Product Lines 312

Brand and Line Extensions 313

Co-branding 315

Brand Licensing 315

Brand Repositioning 317

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Packaging 318

Product Labeling 319

Ethical and Societal Dilemma 10.1: Calories: o, Vitamins: o. How Much

Information Can Water Labels Provide? 320

Summing Up 320

Key Terms 321

Marketing Applications 322

Quiz Yourself 322

Net Savvy 323

Chapter Case Study: Coca-Cola: A History and a Future 323

11 Developing New Products 327

Why Do Firms Create New Products? 329

Changing Customer Needs 329

Adding Value 11.1: Want Beef? 330

Market Saturation 330

Managing Risk through Diversity 331

Fashion Cycles 331

Improving Business Relationships 332 , f'

Diffusion of Innovation 332

' Innovators 334

Early Adopters 335

Early Majority 335

Late Majority 335

Laggards 335

Using the Diffusion of Innovation Theory 335

How Firms Develop New Products 337

Idea Generation 337

Concept Testing 340

Product Development 341

Superior Service 11.1: Airlines Can Improve Luggage Efficiency through RFID 341

Ethical and Societal Dilemma 11.1: Should Firms Test on Animals? 342

Market Testing 343

Product Launch 344

Adding Value 11.2: Marilyn Monroe Would Love It: Diamonds for Hair Care 346

Evaluation of Results 347

The Product Life Cycle 348

Introduction Stage 348

Growth Stage 349

Maturity Stage 349

Decline Stage 350

The Shape of the Product Life Cycle Curve 351

Strategies Based on Product Life Cycle: Some Caveats 352

Summing Up 352 1

Key Terms 353

Marketing Applications 353

Quiz Yourself 354

Net Savvy 354

Chapter Case Study: The Smart(est) Phone 354

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12 Services: The Intangible Product 359

Services Marketing Differs from Product Marketing 361

Intangible 361

Inseparable Production and Consumption 362

Variable 362

Ethical and Societal Dilemma 12.1: Who Are You Going to Call? 363

Perishable 364

Providing Great Service:The Gaps Model 364

The Knowledge Gap: Understanding Customer Expectations 366

Adding Value 12.1: The Broadmoor Manages Service Quality for Five-StarRating 368

The Standards Gap: Setting Service Standards 370

The Delivery Gap: Delivering Service Quality 371

Superior Service 12.1: Zappos Pays $2000 to Quit 372

The Communications Gap: Communicating the Service Promise 375

Service Recovery 376

Power of the Internet 12.1: David versus Goliath: Service Providers Beware 376

Listening to the Customer 377

Finding a Fair Solution 377

Resolving Problems Quickly 378

Summing Up 379 '"

Key Terms 379

Marketing Applications 380

Quiz Yourself 380

Toolkit 381

Net Savvy 381

Chapter Case Study: Puttin'on the Ritz 381

SECTIONS Value Capture 385

13 Pricing Concepts foi Establishing Value 387

The Five Cs of Pricing 390

Company Objectives 390

Customers 392

Adding Value 13.1: How Much Do You Really Value It? Pay What You WantPricing 393

Costs 398

Superior Service 13.1: Great Service Lowers Price Elasticity 398

Break-Even Analysis and Decision Making 400

Competition 402

Ethical and Societal Dilemma 13.1: The Battle of the Books 403

Channel Members 405

Macro Influences on Pricing 405

The Internet 40,6

Economic Factors 406

Power of the Internet 13.1: Pricing on eBay 407

Summing Up 408

Key Terms 409

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Marketing Applications 409

Quiz Yourself 410

Toolkit 410

Net Savvy 410

Chapter Case Study: Paying for All Those Pinstripes 4 "

14 Strategic Pricing Methods 413

Considerations for Setting Price Strategies 414

Cost-Based Methods 414

Competitor-Based Methods 415

Value-Based Methods 415

Pricing Strategies 417

Everyday Low Pricing (EDLP) 417

Ethical and Societal Dilemma 14.1: Do We Have to Pay Twice as Much to See

The Boss? 418

Power of the Internet 14.1: Price Check on Aisle... Anywhere 419

High/Low Pricing 419

EDLP and High/Low Strategies Are Influenced by

Price-Quality Relationships 420 j '

Ethical and Societal Dilemma 14.2: Is It Really 45 Percent Off? 421

New Product Pricing Strategies 422 ,..

Market Penetration Pricing 422

Price Skimming 422

Adding Value 14.1: Cellular All Around: The Market Penetration of Phones 424

Pricing Tactics 424

Pricing Tactics Aimed at Consumers 425

Superior Service 14.1: Oh, This Old Porsche? I'm Just Leasing It This Month 427

Business Pricing Tactics and Discounts 428

Legal and Ethical Aspects of Pricing 429

Deceptive or Illegal Price Advertising 430

Predatory Pricing 431

Price Discrimination 431

Price Fixing 432

Summing Up 432

Key Terms 433

Marketing Applications 434

Quiz Yourself 43s

Net Savvy 435

Chapter Case Study: Price Wars in the Wireless Market 435

SECTION 6 Value Delivery: Designing the Channeland Supply Chain 439

15 Supply Chain and Channel Management 441

Supply Chain, Marketing Channels, and Logistics Are Related 443

Supply Chains Add Value 444

Supply Chain Management Streamlines Distribution 445

Supply Chain Management Affects Marketing 446

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Making Information Flow 446

Power of the Internet 15.1: Neiman Marcus Expedites Shipments through

Customs 448

Data Warehouse 449

Electronic Data Interchange 450

Vendor-Managed Inventory 451

Collaborative Planning, Forecasting, and Replenishment 452

Pull and Push Supply Chains 452

Making Merchandise Flow 452

Distribution Centers versus Direct Store Delivery 453

The Distribution Center 454

Superior Service 15.1: Home Depot Transitions to Distribution Centers 455

Adding Value 15.1: American Apparel: Now with RFID Chips 456

Inventory Management through Just-in-Time Systems 458

Managing the Marketing Channel and Supply Chain 460

Managing the Marketing Channel and Supply Chain throughVertical Marketing Systems 461

Managing Marketing Channels and Supply Chains throughStrategic Relationships 464

Ethical and Societal Dilemma 15.1: Gap Inc. Recognized as One of World's Most

Ethical Companies 465

Summing Up 467

Key Terms 467

Marketing Applications 468

Quiz Yourself 469

Net Savvy 469

Chapter Case Study: Walmart: Pioneer in Supply Chain Management 469

16 Retailing and Multichannel Marketing 473

Choosing Retailing Partners 475

Channel Structure 476

Customer Expectations 476

Channel Member Characteristics 477

Distribution Intensity 477

Identify Types of Retailers 478

Food Retailers 479

Adding Value 16.1: Trader Joe's Offers the Unexpeced 480

General Merchandise Retailers 482

Services Retailers 486

Developing a Retail Strategy Using the Four Ps 487

Product 488

Price 489

Promotion 489

Place 491

Benefits of Stores for Consumers 491

Benefits of the Internet and Multichannel Retailing 492

Deeper and Broader Selection 492

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Personalization 492

Power of the Internet 16.1: Renting Luxury 493

Superior Service 16.1: Amazon Sells Merchandise, but Excels Because of its

Service 494

Gain Insights into Consumer Shopping Behavior 495

Increase Customer Satisfaction and Loyalty 495

Expand Market Presence 495

Ethical and Societal Dilemma 16.1: Protecting Customer Privacy 496

Effective Multichannel Retailing 496

Integrated CRM 497

Brand Image 497

Pricing 497

Supply Chain 498

Summing Up 498

Key Terms 499

Marketing Applications 499

Quiz Yourself 500

Net Savvy 500

Chapter Case Study: Staples, Inc. 500

SECTION 7 Value Communication 5°5

17 Integrated Marketing Communications 507

Communicating with Consumers 509

The Communication Process 509

How Consumers Perceive Communication 510

The AlDA Model 511

Elements of an Integrated Marketing Communication Strategy 513

Advertising 514

Public Relations (PR) 516

Ethical and Societal Dilemma 17.1: Who Decides What Is Healthy? 515

Sales Promotions 516

Personal Selling 516

Direct Marketing 516

Ethical and Societal Dilemma 17.2: Identifying Web Users 517

Online Marketing 519

Power of the Internet 17.1: YouTube and HSN 523

Planning for and Measuring IMC Success 524

Goals 524

Setting and Allocating the IMC Budget 524

Measuring Success Using Marketing Metrics 525

Planning, Implementing, and Evaluating IMC Programs—

An Illustration of Google Advertising 526

Summing Up 528

Key Terms 529

Marketing Applications 529

Quiz Yourself 530

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Chapter Case Study: Red Bull Gives You Wings 531

18 Advertising, Public Relations, and Sales Promotions 535

Stepi. Identify Target Audience 537

Step 2. Set Advertising Objectives 537 | ©Harmony*

Adding Value 18.1: Going Nuts over Men 538

Informative Advertising 539

Persuasive Advertising 539

Reminder Advertising 539

Focus of Advertisements 540

Step 3. Determine the Advertising Budget 541

Step 4. Convey the Message 541

Ethical and Societal Dilemma 18.1: Getting to the Truth 542

The Message 542

The Appeal 543

Step 5. Evaluate and Select Media 544

Mass and Niche Media 545 , "*

Choosing the Right Medium 546

Determining the Advertising Schedule 546

Step 6. Create Advertisements 547

Step 7. Assess Impact Using Marketing Metrics 548

Regulatory and Ethical Issues in Advertising 549

Public Relations 551

Sales Promotion 553

Types of Sales Promotion 553

Using Sales Promotion Tools 556

Evaluating Sales Promotions Using Marketing Metrics 557

Summing Up 558

Key Terms 559

Marketing Applications 559

Quiz Yourself 560

Toolkit 560

Net Savvy 560

Chapter Case Study: What Is Popularity Anyway? 560

19 Personal Selling and Sales Management 565

The Scope and Nature of Personal Selling 567

Personal Selling as a Career 567

The Value Added by Personal Selling 568

Power of the Internet 19.1: Personal Selling Goes Virtual 569

The Personal Selling Process 570

Stepi:Generate and Qualify Leads 571

Step 2: Preapproach and the Use of CRM Systems 572

Adding Value 19.1: Retail Salespeople Cannot Judge a Book by Its Cover 573

Step 3: Sales Presentation and Overcoming Reservations 574

Step 4: Closing the Sale 575

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Step 5: Follow-Up 576

Superior Service 19.1: Soft-Selling Works 577

Managing the Sales Force 578

Sales Force Structure 578

Recruiting and Selecting Salespeople 579

Sales Training 580

Motivating and Compensating Salespeople 580

Ethical and Legal Issues in Personal Selling 582

The Sales Manager and the Sales Force 583

The Sales Force and Corporate Policy 583

The Salesperson and the Customer 583

Ethical and Societal Dilemma 19.1: Pharmaceutical Sales Ethics 584

Summing Up 584

Key Terms 585

Marketing Applications 585

Quiz Yourself 586

Net Savvy 586

Chapter Case Study: Alta Delta Solutions: Making the Sale 587

Glossary 591

Quiz Yourself Answer Key 607 ri.

Endnotes 609

Credits 647

Name Index 651

Company Index 659

Subject Index 665