Ebook Principles of marketing (16/E): Part 1

(BQ) Part 1 book “Principles of marketing” has contents: Marketing - Creating customer value and engagement, analyzing the marketing environment, managing marketing information to gain customer insights, business markets and business buyer behavior, consumer markets and buyer behavior ,… and other contents.

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Global edition

Principles of Marketing sixteenth edition

Philip Kotler • Gary Armstrong

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Principles of Marketing

Global Edition

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This page is intentionally left blank.

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Philip Kotler

Northwestern University

Gary Armstrong

University of North Carolina

Boston Columbus Indianapolis New York San Francisco Amsterdam Cape Town

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16e

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To Kathy, Betty, Mandy, Matt, KC, Keri, Delaney, Molly, Macy, and Ben; and Nancy, Amy, Melissa, and Jessica

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Philip Kotler is S.C Johnson &

Son Distinguished Professor

of International Marketing at the Kellogg School of Manage-ment, Northwestern Univer-sity He received his master’s degree at the University of Chicago and his PhD at M.I.T., both in economics Dr. Kotler

is the author of Marketing

Management (Pearson), now

in its fifteenth edition and the most widely used marketing textbook in graduate schools

of business worldwide He has authored dozens of other

suc-cessful books and has written more than 100 articles in

lead-ing journals He is the only three-time winner of the coveted

Alpha Kappa Psi award for the best annual article in the Journal

of Marketing

Professor Kotler was named the first recipient of four major

awards: the Distinguished Marketing Educator of the Year Award

and the William L Wilkie “Marketing for a Better World” Award,

both given by the American Marketing Association; the Philip

Kotler Award for Excellence in Health Care Marketing presented by

the Academy for Health Care Services Marketing; and the Sheth

Foundation Medal for Exceptional Contribution to Marketing

Schol-arship and Practice His numerous other major honors include

the Sales and Marketing Executives International Marketing

Educator of the Year Award; The European Association of

Mar-keting Consultants and Trainers MarMar-keting Excellence Award; the

Charles Coolidge Parlin Marketing Research Award ; and the Paul

D Converse Award, given by the American Marketing

Associ-ation to honor “outstanding contributions to science in

mar-keting.” A recent Forbes survey ranks Professor Kotler in the

top 10 of the world’s most influential business thinkers And in

a recent Financial Times poll of 1,000 senior executives across the

world, Professor Kotler was ranked as the fourth “most

influ-ential business writer/guru” of the twenty-first century

Dr Kotler has served as chairman of the College on

Mar-keting of the Institute of Management Sciences, a director of the

American Marketing Association, and a trustee of the

Market-ing Science Institute He has consulted with many major U.S

and international companies in the areas of marketing strategy

and planning, marketing organization, and international

mar-keting He has traveled and lectured extensively throughout

Europe, Asia, and South America, advising companies and

gov-ernments about global marketing practices and opportunities

Gary Armstrong is Crist W Blackwell Distinguished Pro-fessor Emeritus of Under-graduate Education in the Kenan-Flagler Business School

at the University of North Carolina at Chapel Hill He holds undergraduate and master’s degrees in business from Wayne State University

in Detroit, and he received his PhD in marketing from Northwestern University

Dr. Armstrong has contributed numerous articles to leading business journals As a consultant and researcher, he has worked with many companies on mar-keting research, sales management, and marketing strategy

But Professor Armstrong’s first love has always been ing His long-held Blackwell Distinguished Professorship is the only permanent endowed professorship for distinguished undergraduate teaching at the University of North Carolina at Chapel Hill He has been very active in the teaching and admin-istration of Kenan-Flagler’s undergraduate program His ad-ministrative posts have included Chair of Marketing, Associate Director of the Undergraduate Business Program, Director of the Business Honors Program, and many others Through the years, he has worked closely with business student groups and has received several UNC campuswide and Business School teaching awards He is the only repeat recipient of the school’s highly regarded Award for Excellence in Undergraduate Teach-ing, which he received three times Most recently, Professor Armstrong received the UNC Board of Governors Award for Excellence in Teaching, the highest teaching honor bestowed

teach-by the 16-campus University of North Carolina system

As a team, Philip Kotler and Gary Armstrong provide a blend of skills uniquely suited to writing an

introductory marketing text Professor Kotler is one of the world’s leading authorities on marketing

Professor Armstrong is an award-winning teacher of undergraduate business students Together,

they make the complex world of marketing practical, approachable, and enjoyable.

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Preface 17Acknowledgments 23

Part 1 Defining Marketing and the Marketing Process 26

1 Marketing: Creating Customer Value and Engagement 26

2 Company and Marketing Strategy: Partnering to Build Customer Engagement,

Value, and Relationships 62

Part 2 Understanding the Marketplace and Customer Value 92

3 Analyzing the Marketing Environment 92

4 Managing Marketing Information to Gain Customer Insights 128

5 Consumer Markets and Buyer Behavior 164

6 Business Markets and Business Buyer Behavior 196

Part 3 Designing a Customer Value-Driven Strategy and Mix 220

7 Customer-Driven Marketing Strategy: Creating Value for Target Customers 220

8 Products, Services, and Brands: Building Customer Value 254

9 New Product Development and Product Life-Cycle Strategies 292

10 Pricing: Understanding and Capturing Customer Value 322

11 Pricing Strategies: Additional Considerations 346

12 Marketing Channels: Delivering Customer Value 374

13 Retailing and Wholesaling 408

14 Engaging Customers and Communicating Customer Value 444

15 Advertising and Public Relations 472

16 Personal Selling and Sales Promotion 500

17 Direct, Online, Social Media, and Mobile Marketing 532

Part 4 Extending Marketing 566

18 Creating Competitive Advantage 566

19 The Global Marketplace 592

20 Social Responsibility and Ethics 624

Appendix 1 Marketing Plan 655

Appendix 2 Marketing by the Numbers 665

Appendix 3 Careers in Marketing 681

Glossary 691Index 699

BRIEF CONTENTS

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Company-Wide Strategic Planning: Defining Marketing’s Role 64

Defining a Market-Oriented Mission 64 | Setting Company Objectives and Goals 68 | Designing the Business Portfolio 68

Planning Marketing: Partnering to Build Customer Relationships 72

Partnering with Other Company Departments 72 | Partnering with Others in the Marketing System 73

Marketing Strategy and the Marketing Mix 74

Customer Value-Driven Marketing Strategy 74 | Developing

an Integrated Marketing Mix 78

Managing the Marketing Effort 79

Marketing Analysis 79 | Marketing Planning 80 | Marketing Implementation 80 | Marketing Department Organization 82 | Marketing Control 82

Measuring and Managing Marketing Return on Investment 83

Part 2: Understanding the Marketplace and Customer Value 92

1 Marketing: Creating Customer Value and Engagement 26

What Is Marketing? 29

Marketing Defined 29 | The Marketing Process 30

Understanding the Marketplace and Customer Needs 30

Customer Needs, Wants, and Demands 30 | Market

Offerings—Products, Services, and Experiences 30 |

Customer Value and Satisfaction 32 | Exchanges and

Relationships 32 | Markets 32

Designing a Customer Value-Driven Marketing Strategy 33

Selecting Customers to Serve 33 | Choosing a Value

Proposition 33 | Marketing Management Orientations 34

Preparing an Integrated Marketing Plan and Program 37

Building Customer Relationships 37

Customer Relationship Management 37 | Engaging

Customers 41 | Partner Relationship Management 45

Capturing Value from Customers 46

Creating Customer Loyalty and Retention 46 | Growing

Share of Customer 46 | Building Customer Equity 47

The Changing Marketing Landscape 48

The Digital Age: Online, Mobile, and Social Media

Marketing 48 | The Changing Economic Environment 50 |

The Growth of Not-for-Profit Marketing 51 | Rapid

Globalization 52 | Sustainable Marketing—The Call for More

Environmental and Social Responsibility 52

So, What Is Marketing? Pulling It All Together 53

OBJECTIVES REVIEW AND KEY TERMS 55 | Objectives Review 55 | Key Terms 56 |

DISCUSSION AND CRITICAL THINKING 56 | Discussion Questions 56 | Critical

Thinking Exercises 57 | MINICASES AND APPLICATIONS 57 | Online, Mobile, and

Social Media Marketing: Retro Console 57 | Marketing Ethics: Extreme Baby

Monitoring 57 | Marketing by the Numbers: Consumers Rule! 58 | Video Case:

Zappos 58 | Company Case: Abou Shakra Restaurant: Creating Customer Value

the Old-Fashioned Way 58

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The Macroenvironment 98

The Demographic Environment 99 | The Economic

Environment 106 | The Natural Environment 107 |

The Technological Environment 108 | The Political

and Social Environment 111 | The Cultural Environment 114

Responding to the Marketing Environment 117

OBJECTIVES REVIEW AND KEY TERMS 119 | Objectives Review 119 | Key

Terms 120 | DISCUSSION AND CRITICAL THINKING 120 | Discussion

Questions 120 | Critical Thinking Exercises 121 | MINICASES AND

APPLICATIONS 121 | Online, Mobile, and Social Media Marketing: Social

Data 121 | Marketing Ethics: Your Insurance Renewal Notice Could Be

a Trap 121 | Marketing by the Numbers: Tiny Markets 122 | Video Case:

Ecoist 122 | Company Case: Sony: Battling the Marketing Environment’s

“Perfect Storm” 122

Types of Buying Decision Behavior 182

Complex Buying Behavior 182 | Dissonance-Reducing Buying Behavior 182 | Habitual Buying Behavior 182 | Variety-Seeking Buying Behavior 183

The Buyer Decision Process 183

Need Recognition 184 | Information Search 184 | Evaluation

of Alternatives 184 | Purchase Decision 185 | Postpurchase Behavior 185

The Buyer Decision Process for New Products 186

Stages in the Adoption Process 186 | Individual Differences

in Innovativeness 187 | Influence of Product Characteristics

on Rate of Adoption 187

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4 Managing Marketing Information to Gain Customer Insights 128

Marketing Information and Customer Insights 130

Marketing Information and Today’s “Big Data” 131 | Managing

Marketing Information 131

Assessing Marketing Information Needs 132

Developing Marketing Information 133

Internal Data 133 | Competitive Marketing Intelligence 133

Marketing Research 135

Defining the Problem and Research Objectives 136 |

Developing the Research Plan 136 | Gathering Secondary

Data 137 | Primary Data Collection 138 | Implementing the

Research Plan 148 | Interpreting and Reporting the

Findings 148

Analyzing and Using Marketing Information 148

Customer Relationship Management and Mining

Big Data 148 | Distributing and Using Marketing

Information 149

Other Marketing Information Considerations 152

Marketing Research in Small Businesses and Nonprofit

Organizations 152 | International Marketing Research 153 |

Public Policy and Ethics in Marketing Research 154

OBJECTIVES REVIEW AND KEY TERMS 156 | Objectives Review 156 |

Key Terms 157 | DISCUSSION AND CRITICAL THINKING 157 | Discussion

APPLICATIONS 158 | Online, Mobile, and Social Media Marketing: Online

Snooping 158 | Marketing Ethics: Research Ethics 158 | Marketing by the

Numbers: What’s Your Sample? 159 | Video Case: Domino’s 159 | Company

Case: Oracle: Getting a Grip on Big Data 159

Consumer Markets and Buyer

Behavior 164

Model of Consumer Behavior 166

Characteristics Affecting Consumer Behavior 167

Cultural Factors 167 | Social Factors 171 | Personal

Factors 175 | Psychological Factors 177

Business Markets and Business Buyer Behavior 196

Business Markets 198

Market Structure and Demand 199 | Nature of the Buying Unit 200 | Types of Decisions and the Decision Process 200

Business Buyer Behavior 201

Major Types of Buying Situations 201 | Participants in the Business Buying Process 202 | Major Influences on Business Buyers 203 | The Business Buying Process 204 | E-Procurement and Online Purchasing 208

Institutional and Government Markets 210

Institutional Markets 210 | Government Markets 211

E-Procurement and Mobile Procurement 215 | Marketing Ethics: Pay To Stay 215 | Marketing by the Numbers: NAICS 216 | Video Case: Eaton 216

| Company Case: Cisco Systems: Solving Business Problems through Collaboration 216

Part 3: Designing a Customer Value-Driven Strategy and Mix 220

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Customer-Driven Marketing Strategy: Creating Value for Target Customers 220

Market Segmentation 223

Segmenting Consumer Markets 223 | Segmenting Business Markets 230 | Segmenting International Markets 231 | Requirements for Effective Segmentation 232

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Market Targeting 232

Evaluating Market Segments 232 | Selecting Target Market

Segments 233

Differentiation and Positioning 238

Positioning Maps 240 | Choosing a Differentiation and

Positioning Strategy 241 | Communicating and Delivering

the Chosen Position 246

OBJECTIVES REVIEW AND KEY TERMS 247 | Objectives Review 247 | Key Terms 248 |

DISCUSSION AND CRITICAL THINKING 248 | Discussion Questions 248 |

Critical Thinking Exercises 248 | MINICASES AND APPLICATIONS 249 | Online,

Mobile, and Social Media Marketing: SoLoMo (Social ∙ Local ∙ Mobile) 249 |

Marketing Ethics: Unrealistic Bodies 249 | Marketing by the Numbers: USAA 249 |

Video Case: Boston Harbor Cruises 250 | Company Case: Bentley Motors:

Differentiation and Positioning in International Markets 250

8 Products, Services, and Brands: Building Customer Value 254

What Is a Product? 256

Products, Services, and Experiences 257 | Levels of Product

and Services 257 | Product and Service Classifications 258

Product and Service Decisions 261

Individual Product and Service Decisions 261 | Product Line

Decisions 267 | Product Mix Decisions 267

Services Marketing 268

The Nature and Characteristics of a Service 268 | Marketing

Strategies for Service Firms 270

Branding Strategy: Building Strong Brands 274

Brand Equity and Brand Value 275 | Building Strong

Brands 276 | Managing Brands 283

APPLICATIONS 286 | Online, Mobile, and Social Media Marketing: Funeral

Plans 286 | Marketing Ethics: $450 Starbucks Gift Card 286 | Marketing

by the Numbers: Pop-Tarts Gone Nutty! 286 | Video Case: Life is good 287 |

Company Case: Mavi Jeans: Jeans That Fit 287

9 New Product Development and Product Life-Cycle Strategies 292

New Product Development Strategy 294

The New Product Development Process 295

Idea Generation 295 | Idea Screening 299 | Concept

Development and Testing 299 | Marketing Strategy

Development 300 | Business Analysis 301 | Product

Development 301 | Test Marketing 302 | Commercialization 303

Managing New Product Development 304

Customer-Centered New Product Development 304 |

Team-Based New Product Development 304 |

Systematic New Product Development 305 | New Product

Development in Turbulent Times 306

Product Life-Cycle Strategies 306

Introduction Stage 308 | Growth Stage 308 | Maturity Stage 309 | Decline Stage 310

Additional Product and Service Considerations 312

Product Decisions and Social Responsibility 312 | International Product and Services Marketing 314

Reading Rainbow App 317 | Marketing Ethics: There Is No Such Thing as A Miracle 317 | Marketing by the Numbers: Dental House Calls 317 | Video Case: Subaru 318 | Company Case 3M: Where Innovation Is a Way of Life 318

10 Pricing: Understanding and Capturing

Customer Value 322

What Is a Price? 324Major Pricing Strategies 325

Customer Value-Based Pricing 325 | Cost-Based Pricing 329 | Competition-Based Pricing 332

Other Internal and External Considerations Affecting Price Decisions 333

Overall Marketing Strategy, Objectives, and Mix 333 | Organizational Considerations 336 | The Market and Demand 336 | The Economy 338 | Other External Factors 339

Pricing Strategies: Additional Considerations 346

New Product Pricing Strategies 349

Market-Skimming Pricing 349 | Market-Penetration Pricing 349

Product Mix Pricing Strategies 350

Product Line Pricing 350 | Optional-Product Pricing 350 | Captive-Product Pricing 351 | By-Product Pricing 351 | Product Bundle Pricing 352

Price Adjustment Strategies 352

Price Changes 360

Initiating Price Changes 360 | Responding to Price Changes 363

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Public Policy and Pricing 365

Pricing within Channel Levels 365 | Pricing across

Channel Levels 366

Terms 368 | DISCUSSION AND CRITICAL THINKING 368 | Discussion Questions 368 |

Critical Thinking Exercises 368 | MINICASES AND APPLICATIONS 369 | Online,

Mobile, and Social Media Marketing: Online Price Glitches 369 | Marketing

Ethics: Breaking the Law or Cultural Norm? 369 | Marketing by the Numbers:

Louis Vuitton Price Increase 369 | Video Case: Hammerpress 370 | Company

Case: Coach: Riding the Wave of Premium Pricing 370

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by the Numbers: Inventory Management 438 | Video Case: Home Shopping Network 439 | Company Case: Leader Price: Good Quality, Low Price 439

Marketing Channels: Delivering

Customer Value 374

Supply Chains and the Value Delivery Network 376

The Nature and Importance of Marketing Channels 377

How Channel Members Add Value 378 | Number

of Channel Levels 379

Channel Behavior and Organization 380

Channel Behavior 380 | Vertical Marketing Systems 381 |

Horizontal Marketing Systems 383 | Multichannel Distribution

Systems 384 | Changing Channel Organization 384

Channel Design Decisions 385

Analyzing Consumer Needs 386 | Setting Channel

Objectives 386 | Identifying Major Alternatives 387 |

Evaluating the Major Alternatives 388 | Designing International

Distribution Channels 388

Channel Management Decisions 389

Selecting Channel Members 389 | Managing and Motivating

Channel Members 390 | Evaluating Channel Members 392

Public Policy and Distribution Decisions 392

Marketing Logistics and Supply Chain Management 393

Nature and Importance of Marketing Logistics 393 | Goals of

the Logistics System 394 | Major Logistics Functions 396 |

Integrated Logistics Management 399

Terms 402 | DISCUSSION AND CRITICAL THINKING 402 | Discussion Questions 402 |

Critical Thinking Exercises 403 | MINICASES AND APPLICATIONS 403 |

Online, Mobile, and Social Media Marketing: Self-Publishing 403 | Marketing

Ethics: Ethical Sourcing 403 | Marketing by the Numbers: Tyson Expanding

Distribution 404 | Video Case: Gaviña Gourmet Coffee 404 | Company Case:

Corning: Feeding Innovation through the Supply Chain 404

Retailing and Wholesaling 408

Retailing 410

Types of Retailers 411 | Retailer Marketing Decisions 417 |

Retailing Trends and Developments 424

Wholesaling 430

Types of Wholesalers 431 | Wholesaler Marketing

Decisions 433 | Trends in Wholesaling 435

The New Marketing Communications Model 447 |

The Need for Integrated Marketing Communications 449

A View of the Communication Process 452Steps in Developing Effective Marketing Communication 454

Setting the Total Promotion Budget and Mix 460

Setting the Total Promotion Budget 460 | Shaping the Overall Promotion Mix 462 | Integrating the Promotion Mix 464

Socially Responsible Marketing Communication 464

Advertising and Sales Promotion 465 | Personal Selling 465

by the Numbers: Advertising-to-Sales Ratios 468 | Video Case: OXO 468 | Company Case: Snickers: Achieving Promotional Integration with a Universal Appeal—Hunger 469

on Advertising Investment 486 | Other Advertising Considerations 488

Public Relations 490

The Role and Impact of PR 491 | Major Public Relations Tools 491

OBJECTIVES REVIEW AND KEY TERMS 493 | Objectives Review 493|

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Numbers: Dubai City Guide 496 | Video Case: E*TRADE 496 |

Company Case: Allstate: Bringing Mayhem to the Auto Insurance

Advertising Wars 496

Personal Selling and Sales

Promotion 500

Personal Selling 502

The Nature of Personal Selling 502 | The Role

of the Sales Force 503

Managing the Sales Force 504

Designing the Sales Force Strategy and Structure 505 |

Recruiting and Selecting Salespeople 508 | Training

Salespeople 509 | Compensating Salespeople 510 |

Supervising and Motivating Salespeople 510 | Evaluating

Salespeople and Sales Force Performance 512

Social Selling: Online, Mobile, and Social Media Tools 512

The Personal Selling Process 515

Steps in the Selling Process 515 | Personal Selling

and Managing Customer Relationships 517

Sales Promotion 518

The Rapid Growth of Sales Promotion 519 | Sales Promotion

Objectives 519 | Major Sales Promotion Tools 520 |

Developing the Sales Promotion Program 524

APPLICATIONS 527 | Online, Mobile, and Social Media Marketing: Sales

Promotions 527 | Marketing Ethics: Drug Dealing 527 | Marketing by the

Numbers: Salesforce Analysis 528 | Video Case: MedTronic 528 |

Company Case: SunGard: Building Sustained Growth by Selling the

SunGard Way 528

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Direct, Online, Social Media,

and Mobile Marketing 532

Direct and Digital Marketing 534

The New Direct Marketing Model 535 | Rapid Growth of Direct

and Digital Marketing 535 | Benefits of Direct and Digital

Marketing to Buyers and Sellers 536

Forms of Direct and Digital Marketing 536

Digital and Social Media Marketing 538

Marketing, the Internet, and the Digital Age 539 | Online

Marketing 540 | Social Media Marketing 544 | Mobile

Marketing 547

Traditional Direct Marketing Forms 550

Direct-Mail Marketing 550 | Catalog Marketing 551 |

Telemarketing 552 | Direct-Response Television

Marketing 553 | Kiosk Marketing 554

Public Policy Issues in Direct and Digital Marketing 554

Irritation, Unfairness, Deception, and Fraud 554 | Consumer

Privacy 555 | A Need for Action 556

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Part 4: Extending Marketing 566

Creating Competitive Advantage 566

Competitor Analysis 569

Identifying Competitors 569 | Assessing Competitors 571 | Selecting Competitors to Attack and Avoid 573 | Designing a Competitive Intelligence System 575

Competitive Strategies 575

Balancing Customer and Competitor Orientations 585

My Hat 588 | Marketing Ethics: Corporate Spying against Nonprofits 588 | Marketing by the Numbers: Market Share 588 | Video Case: Umpqua Bank 589 | Company Case: L.L.Bean: A Customer-Centric Icon Focuses Inward 589

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The Global Marketplace 592

Global Marketing Today 594Looking at the Global Marketing Environment 596

The International Trade System 596 | Economic Environment 598 | Political-Legal Environment 599 | Cultural Environment 600

Deciding Whether to Go Global 602Deciding Which Markets to Enter 603Deciding How to Enter the Market 604

Exporting 604 | Joint Venturing 605 | Direct Investment 606

Deciding on the Global Marketing Program 607

Product 609 | Promotion 611 | Price 613 | Distribution Channels 614

Deciding on the Global Marketing Organization 615

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APPLICATIONS 618 | Online, Mobile, and Social Media Marketing: Russian

E-Commerce 618 | Marketing Ethics: Cleaning Up the Chinese Pharmaceutical

Market 618 | Marketing by the Numbers: Attracting Alternative Markets 618 |

Video Case: The U.S Film Industry 619 | Company Case: IKEA: Making Life

Better for the World’s Many People 619

20 Social Responsibility and Ethics 624

Sustainable Marketing 627

Social Criticisms of Marketing 628

Marketing’s Impact on Individual Consumers 628 |

Marketing’s Impact on Society as a Whole 632 | Marketing’s

Impact on Other Businesses 634

Consumer Actions to Promote Sustainable Marketing 635

Consumerism 635 | Environmentalism 636 | Public Actions

to Regulate Marketing 641

Business Actions toward Sustainable Marketing 641

Sustainable Marketing Principles 641 | Marketing Ethics 645 | The Sustainable Company 648

Appendix 1: Marketing Plan 655Appendix 2: Marketing by the Numbers 665Appendix 3: Careers in Marketing 681

Glossary 691 Index 699

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The Sixteenth Edition of Kotler/Armstrong’s Principles

of Marketing! The World Standard in Undergraduate

Marketing Education

Across five continents, in more than 40 countries, and in 24 languages, students and

pro-fessors rely on Kotler/Armstrong’s Principles of Marketing as the most-trusted source for

teaching and learning basic marketing concepts and practices More than ever, the sixteenth edition introduces new marketing students to the fascinating world of modern marketing

in an innovative, complete, and authoritative yet fresh, practical, and enjoyable way In this sixteenth edition, we’ve once again added substantial new content and poured over every page, table, figure, fact, and example in order to keep this the best text from which to learn about and teach marketing Enhanced by MyMarketingLab, our online homework and per-

sonalized study tool, the sixteenth edition of Principles of Marketing remains the world

stan-dard in introductory marketing education

Marketing: Creating Customer Value and Engagement

in the Digital and Social Age

Top marketers share a common goal: putting the consumer at the heart of marketing Today’s marketing is all about creating customer value and engagement in a fast-changing, increasingly digital and social marketplace

Marketing starts with understanding consumer needs and wants, determining which target markets the organization can serve best, and developing a compelling value proposi-tion by which the organization can attract and grow valued consumers Then, more than

just making a sale, today’s marketers want to engage customers and build deep customer

relationships that make their brands a meaningful part of consumers’ conversations and lives In this digital age, to go along with their tried-and-true traditional marketing meth-ods, marketers have a dazzling set of new customer relationship-building tools—from the Internet, smartphones, and tablets to online, mobile, and social media—for engaging customers anytime, anyplace to shape brand conversations, experiences, and community

If marketers do these things well, they will reap the rewards in terms of market share,

profits, and customer equity In the sixteenth edition of Principles of Marketing, you’ll learn how customer value and customer engagement drive every good marketing strategy.

What’s New in the Sixteenth Edition?

We’ve thoroughly revised the sixteenth edition of Principles of Marketing to reflect the major

trends and forces impacting marketing in this digital age of customer value, engagement, and relationships Here are just some of the major and continuing changes you’ll find in this edition

• More than any other developments, sweeping new online, social media, mobile, and

other digital technologies are now affecting how marketers, brands, and customers engage each other The sixteenth edition features new and revised discussions and

examples of the explosive impact of exciting new digital marketing technologies

shap-ing marketshap-ing strategy and practice—from online, mobile, and social media ment technologies discussed in Chapters 1, 5, 13, 14, 15, and 17; to “real-time listening” and “big data” research tools in Chapter 4, online influence and brand communities

engage-PREFACE

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in Chapter 5, and location-based marketing in Chapter 7; to the use of social media and social selling in business-to-business marketing in Chapters 6 and 16; to consumer Web, social media, mobile marketing, and other new communications technologies in Chapters 1, 5, 14, 15, 17, and throughout the text.

A new Chapter 1 section on The Digital Age: Online, Mobile, and Social Media

Market-ing introduces the exciting new developments in digital and social media marketing

A completely revised Chapter 17 on Direct, Online, Social Media, and Mobile Marketing

digs deeply into digital marketing tools such as online sites, social media, mobile ads and apps, online video, e-mail, blogs, and other digital platforms that engage consumers anywhere, anytime via their computers, smartphones, tablets, Internet-ready TVs, and other digital devices The sixteenth edition is packed with new stories and examples illustrating how companies employ digital technology to gain competitive advantage—from traditional marketing all-stars such as Nike, P&G, Coca-Cola, Walmart, IBM, and McDonald’s to new-age digital competitors such as Google, Amazon, Apple, Netflix, Pinterest, and Facebook

• The sixteenth edition features completely new and revised coverage of the emerging

trend toward customer engagement marketing—building direct and continuous

cus-tomer involvement in shaping brands, brand conversations, brand experiences, and brand community The burgeoning Internet and social media have created better in-formed, more connected, and more empowered consumers Thus, today’s marketers

must now engage consumers rather than interrupt them Marketers are augmenting

their mass-media marketing efforts with a rich mix of online, mobile, and social media marketing that promote deep consumer involvement and a sense of customer com-

munity surrounding their brands Today’s new customer engagement-building tools

include everything from online sites, blogs, in-person events, and video sharing to line communities and social media such as Facebook, YouTube, Pinterest, Vine, Twitter,

on-or a company’s own social netwon-orking sites

In all, today’s more engaged consumers are giving as much as they get in the form of two-way brand relationships The sixteenth edition contains substantial new

material on customer engagement and related developments such as consumer

empowerment, crowdsourcing, customer co-creation, consumer-generated marketing,

and real-time marketing A new Chapter 1 section—Engaging Customers—introduces

customer engagement marketing This and other related customer engagement

top-ics are presented in Chapter 1 (new or revised sections on Customer Engagement and

Today’s Digital and Social Media and Consumer-Generated Marketing); Chapter 4 (big data

and real-time research to gain deeper customer insights); Chapter 5 (managing line influence and customer community through digital and social media marketing); Chapter 13 (online, social media, and digitized retailing); Chapter 9 (crowdsourcing and customer-driven new-product development); Chapters 14 and 15 (the new, more

on-engaging marketing communications model and content marketing); and Chapter 17

(direct digital, online, social media, and mobile marketing)

• The sixteenth edition continues to build on and extend the innovative customer-value

framework from previous editions The customer value and engagement model sented in the first chapter is fully integrated throughout the remainder of the book No other marketing text presents such a clear and compelling customer-value approach

pre-• The sixteenth edition provides revised and expanded coverage of developments in the

fast-changing area of integrated marketing communications It tells how marketers are blending traditional media with new digital and social media tools—everything

from Internet and mobile marketing to blogs, viral videos, and social media—to create more targeted, personal, and engaging customer relationships Marketers are no longer

simply creating integrated promotion programs; they are practicing content

market-ing in paid, owned, earned, and shared media No other text provides more current or encompassing coverage of these exciting developments

• New material throughout the sixteenth edition highlights the increasing importance

of sustainable marketing The discussion begins in Chapter 1 and ends in Chapter 20,

which pulls marketing together under a sustainable marketing framework In between, frequent discussions and examples show how sustainable marketing calls for socially and environmentally responsible actions that meet both the immediate and the future needs of customers, companies, and society as a whole

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• The sixteenth edition provides new discussions and examples of the growth in global

marketing As the world becomes a smaller, more competitive place, marketers face new global marketing challenges and opportunities, especially in fast-growing emerg-ing markets such as China, India, Brazil, Africa, and others You’ll find much new coverage of global marketing throughout the text, starting in Chapter 1; the topic is discussed fully in Chapter 19

• The sixteenth edition continues its emphasis on measuring and managing return on

marketing, including many new end-of-chapter financial and quantitative marketing exercises that let students apply analytical thinking to relevant concepts in each chap-ter and link chapter concepts to the text’s innovative and comprehensive Appendix 2:

Marketing by the Numbers

• The sixteenth edition continues to improve on its innovative learning design The text’s

active and integrative presentation includes learning enhancements such as annotated chapter-opening stories, a chapter-opening objective outline, and explanatory author comments on major chapter sections and figures The chapter-opening layout helps to preview and position the chapter and its key concepts Figures annotated with author comments help students to simplify and organize chapter material End-of-chapter fea-tures help to summarize important chapter concepts and highlight important themes,

such as digital and social media marketing, marketing ethics, and financial

market-ing analysis This innovative learning design facilitates student understanding and eases learning

• The sixteenth edition provides 20 new or revised end-of-chapter company cases by which students can apply what they learn to actual company situations The sixteenth edition also features 20 video cases, with brief end-of-chapter summaries and discus-sion questions Finally, all of the chapter-opening stories and Real Marketing highlights

in the sixteenth edition are either new or revised to maintain currency

Five Major Customer Value and Engagement Themes

The sixteenth edition of Principles of Marketing builds on five major value and customer

This innovative customer-value and engagement framework is introduced at the start

of Chapter 1 in a five-step marketing process model, which details how marketing

cre-ates customer value and captures value in return The framework is carefully developed

in the first two chapters and then fully integrated throughout the remainder of the text

2 Customer engagement and today’s digital and social media New digital and social media

have taken today’s marketing by storm, dramatically changing how companies and brands engage consumers, as well as how consumers connect and influence each oth-er’s brand behaviors The sixteenth edition introduces and thoroughly explores the

contemporary concept of customer engagement marketing and the exciting new digital

and social media technologies that help brands to engage customers more deeply and

interactively It starts with two major new Chapter 1 sections: Customer Engagement

and Today’s Digital and Social Media and The Digital Age: Online, Mobile, and Social Media

Marketing A completely revised Chapter 17 on Direct, Online, Social Media, and Mobile

Marketing summarizes the latest developments in digital engagement and building tools Everywhere in-between, you’ll find revised and expanded coverage of the exploding use of digital and social tools to create customer engagement and build brand community

3 Building and managing strong, value-creating brands Well-positioned brands with strong

brand equity provide the basis upon which to build customer value and profitable customer relationships Today’s marketers must position their brands powerfully and

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manage them well to create valued brand experiences The sixteenth edition provides

a deep focus on brands, anchored by a Chapter 8 section on Branding Strategy: Building

Strong Brands

4 Measuring and managing return on marketing Especially in uneven economic times,

marketing managers must ensure that their marketing dollars are being well spent

In the past, many marketers spent freely on big, expensive marketing programs, often without thinking carefully about the financial returns on their spending But all that has changed rapidly “Marketing accountability”—measuring and managing market-ing return on investment—has now become an important part of strategic marketing decision making This emphasis on marketing accountability is addressed in Chapter 2,

Appendix 2: Marketing by the Numbers, and throughout the sixteenth edition.

5 Sustainable marketing around the globe As technological developments make the world

an increasingly smaller and more fragile place, marketers must be good at marketing their brands globally and in sustainable ways New material throughout the sixteenth edition emphasizes the concepts of global marketing and sustainable marketing—meeting the present needs of consumers and businesses while also preserving or en-hancing the ability of future generations to meet their needs The sixteenth edition integrates global marketing and sustainability topics throughout the text It then pro-vides focused coverage on each topic in Chapters 19 and 20, respectively

An Emphasis on Real Marketing and Bringing Marketing to Life

Principles of Marketing, sixteenth edition, takes a practical marketing-management proach, providing countless in-depth, real-life examples and stories that engage students with marketing concepts and bring modern marketing to life In the sixteenth edition, every

ap-chapter includes an engaging opening story plus Real Marketing highlights that provide

fresh insights into real marketing practices Learn how:

• Nike’s outstanding success results from more than just making and selling good sports gear It’s based on a customer-focused strategy through which Nike creates brand en-gagement and close brand community with and among its customers

• At T-shirt and apparel maker Life is good, engagement and social media are about building meaningful customer engagement, measured by the depth of consumer com-menting and community that surround the brand

• Chipotle’s sustainability mission isn’t an add-on, created just to position the company

as “socially responsible”—doing good is ingrained in everything the company does

• Sony’s dizzying fall from market leadership provides a cautionary tale of what can happen when a company—even a dominant marketing leader—fails to adapt to its changing environment

• Netflix uses “big data” to personalize each customer’s viewing experience; while Netflix

subscribers are busy watching videos, Netflix is busy watching them—very, very closely.

• Giant social network Facebook promises to become one of the world’s most powerful and profitable digital marketers—but it’s just getting started

• Wildly innovative Google has become an incredibly successful new product shot factory,” unleashing a seemingly unending flurry of diverse products, most of which are market leaders in their categories

“moon-• Retail giants Walmart and Amazon are fighting it out in a pitched price war for online supremacy

• Direct marketing insurance giant GEICO has gone from bit player to behemoth thanks

to a big-budget advertising campaign featuring a smooth-talking gecko and an ing “15 minutes could save you 15 percent” tagline

endur-• The explosion of the Internet, social media, mobile devices, and other technologies has some marketers asking: “Who needs face-to-face selling anymore?”

• Under its “Conscious Consumption” mission, outdoor apparel and gear maker

Patago-nia takes sustainability to new extremes by telling consumers to buy less.

Beyond such features, each chapter is packed with countless real, engaging, and timely examples that reinforce key concepts No other text brings marketing to life like the six-

teenth edition of Principles of Marketing.

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Learning Aids That Create Value and Engagement

A wealth of chapter-opening, within-chapter, and end-of-chapter learning devices help dents to learn, link, and apply major concepts:

stu-• Integrated chapter-opening preview sections The active and integrative chapter-opening spread in each chapter starts with a Chapter Preview, which briefly previews chapter con-

cepts, links them with previous chapter concepts, and introduces the chapter- opening story This leads to a chapter-opening vignette—an engaging, deeply developed, illus-trated, and annotated marketing story that introduces the chapter material and sparks

student interest Finally, an Objective Outline provides a helpful preview of chapter

contents and learning objectives, complete with page numbers

• Real Marketing highlights Each chapter contains two carefully developed highlight features

that provide an in-depth look at real marketing practices of large and small companies

• Author comments and figure annotations Throughout each chapter, author comments

ease and enhance student learning by introducing and explaining major text sections and organizing figures

• Objectives Review and Key Terms A summary at the end of each chapter reviews major

chapter concepts, chapter objectives, and key terms

• Discussion Questions and Critical Thinking Exercises Sections at the end of each chapter

help students to keep track of and apply what they’ve learned in the chapter

• Applications and Cases Brief Online, Mobile, and Social Media Marketing; Marketing Ethics; and Marketing by the Numbers sections at the end of each chapter provide short applica-

tion cases that facilitate discussion of current issues and company situations in areas

such as mobile and social marketing, ethics, and financial marketing analysis A Video

Case section contains short vignettes with discussion questions to be used with a set of

4- to 7-minute videos that accompany the sixteenth edition End-of-chapter Company

Case sections provide all-new or revised company cases that help students to apply major marketing concepts to real company and brand situations

• Marketing Plan appendix Appendix 1 contains a sample marketing plan that helps

stu-dents to apply important marketing planning concepts

• Marketing by the Numbers appendix The innovative Appendix 2 provides students with

a comprehensive introduction to the marketing financial analysis that helps to guide, assess, and support marketing decisions An exercise at the end of each chapter lets students apply analytical and financial thinking to relevant chapter concepts and links

the chapter to the Marketing by the Numbers appendix.

More than ever before, the sixteenth edition of Principles of Marketing creates value and

en-gagement for you—it gives you all you need to know about marketing in an effective and enjoyable total learning package!

A Total Teaching and Learning Package

A successful marketing course requires more than a well-written book Today’s classroom requires a dedicated teacher, well-prepared students, and a fully integrated teaching sys-tem A total package of teaching and learning supplements extends this edition’s emphasis

on creating value and engagement for both the student and instructor The following aids

support Principles of Marketing, sixteenth edition.

Instructor Resources

At the Instructor Resource Center, www.pearsonglobaleditions.com/Kotler, instructors can easily register to gain access to a variety of instructor resources available with this text in downloadable format If assistance is needed, a dedicated technical support team is ready

to help with the media supplements that accompany the text Visit http://247.pearsoned com for answers to frequently asked questions and toll-free user support phone numbers.The following supplements are available with this text:

• Instructor’s Resource Manual

• Test Bank

• TestGen® Computerized Test Bank

• PowerPoint Presentation

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ACKNOWLEDGMENTS

Sucheta Ahlawat, Kean University

Darrell E Bartholomew, Rider University

Leta Beard, University of Washington

Christopher P Blocker, Colorado State University

Kathryn Boys, Virginia Tech

Christina Chung, Ramapo College of New Jersey

Ed Chung, Elizabethtown College

Marianne Collins, Winona State University

Deborah L Cowles, Virginia Commonwealth University

Patti Diggin, West Chester University of Pennsylvania

Frank Franzak, Virginia Commonwealth University

George J Gannage Jr., Embry Riddle Aeronautical University

David A Gilliam, University of Arkansas at Little Rock

Deborah M Gray, Central Michigan University

Amy Handlin, Monmouth University

James Heyman, University of St ThomasKen Knox, Eastern Gateway Community CollegeAnn T Kuzma, Minnesota State University, MankatoGeoffrey P Lantos, Stonehill College

Yun Jung Lee, Adelphi UniversityCarolyn A Massiah, University of Central Florida

Ed Petkus Jr., Ramapo College of New JerseyJames Sawhill, Washington University–MissouriMid Semple, SUNY Broome

Shweta Singh, Kean UniversityMichaeline Skiba, Monmouth UniversityJoseph G Slifko Jr., Pennsylvania Highlands Community College

Susan D Williams, New Jersey City UniversityPoh-Lin Yeoh, Bentley University

Sixteenth Edition Reviewers

No book is the work only of its authors We greatly appreciate the valuable contributions of several people who helped make this new edition possible As always, we owe very special

thanks to Keri Jean Miksza for her dedicated and valuable help in all phases of the project,

and to her husband Pete and daughters Lucy and Mary for all the support they provided Keri during this very absorbing project

We owe substantial thanks to Andy Norman of Drake University for his skillful help in developing chapter vignettes and highlights, company and video cases, and the Marketing Plan appendix This edition, as well as the previous editions, have benefited greatly from Andy’s assistance We also thank Laurie Babin of the University of Louisiana at Monroe for her dedicated efforts in preparing end-of-chapter materials and for keeping our Mar-keting by the Numbers appendix fresh Additional thanks go to Carol Davis at California State University Monterey Bay for her work in updating the Instructor’s Manual and Test Item File, and to Douglas Martin at Forsyth Technical Community College for updating the PowerPoint slides Finally, we’d like to thank the professors who assisted with our work on MyMarketingLab: George D Deitz, The University of Memphis; Barbara S Faries, Mission College, Santa Clara; Todd Korol, Monroe Community College; Lori Olson, San Diego State University; and Julia Wells, University of San Diego All of these contributors are greatly

appreciated in making the sixteenth edition of Principles of Marketing a robust teaching and

learning system

Many reviewers at other colleges and universities provided valuable comments and suggestions for this and previous editions We are indebted to the following colleagues for their thoughtful input:

Greg Black, Metropolitan State University of Denver

Rod Carveth, Naugatuck Valley Community College

Linda Morable, Richland College

Randy Moser, Elon University

Fifteenth Edition Reviewers

David Murphy, Madisonville Community CollegeDonna Waldron, Manchester Community CollegeDouglas Witt, Brigham Young University

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Rod Carveth, Naugatuck Valley Community College

Anindja Chatterjee, Slippery Rock University of Pennsylvania

Mary Conran, Temple University

Eloise Coupey, Virginia Tech

Alan Dick, University of Buffalo

Karen Gore, Ivy Tech Community College, Evansville Campus

Charles Lee, Chestnut Hill College

Samuel McNeely, Murray State University

Chip Miller, Drake University

David Murphy, Madisonville Community College

Jon Sutherland, writer, UK

Diane Sutherland, writer, UK

Geoff Fripp, University of Sydney

Hamed M Shamma, The American University in Cairo

Dimple Mirpuri, CCCU City University of Hong Kong

Ronan Jouan de Kervenoael, Aston Business School

Johnny Chiu Sik Leung, Hong Kong Institute of Vocational

Education (Tsing Yi)

Patrick Poon, Lingnan University

Esther Page-Wood, Western Michigan UniversityTim Reisenwitz, Valdosta State UniversityMary Ellen Rosetti, Hudson Valley Community CollegeWilliam Ryan, University of Connecticut

Roberta Schultz, Western Michigan University

J Alexander Smith, Oklahoma City UniversityDeb Utter, Boston University

Donna Waldron, Manchester Community CollegeWendel Weaver, Oklahoma Wesleyan University

Serdar Sayman, Koç UniversityGert-Jan Hospers, University of Twente & Radboud University Sophie Yang, Coventry University

Aykan Candemir, Ege University

Jie Liu, Manchester Metropolitan UniversityAyantunji Gbadamosi, University of East LondonYim Frederick H K, Hong Kong Baptist UniversityLailani L Alcantara, Ritsumeikan Asia Pacific University

Fourteenth Edition Reviewers

Sixteen Edition Contributors

Sixteen Edition Reviewers

We also owe a great deal to the people at Pearson Education who helped develop this book Senior Acquisitions Editor Mark Gaffney provided fresh ideas and support during the re-vision Senior Project Manager Jacqueline Martin and Program Manager Jennifer Collins provided valuable assistance and advice in guiding this complex revision project through development, design, and production We’d also like to thank Stephanie Wall, Judy Leale, Anne Fahlgren, Erin Gardner, Lenny Ann Raper, and Daniel Petrino for their able assistance along the way We are proud to be associated with the fine professionals at Pearson

We also owe a mighty debt of gratitude to Project Manager Roxanne Klaas and the fine team

at S4Carlisle Publishing Services

Finally, we owe many thanks to our families for all of their support and encouragement— Kathy, Betty, Mandy, Matt, KC, Keri, Delaney, Molly, Macy, and Ben from the Armstrong clan and Nancy, Amy, Melissa, and Jessica from the Kotler family We dedicate this book

to them

Gary Armstrong Philip Kotler

Pearson gratefully acknowledges and thanks the following people for their work on the Global Edition:

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Principles of Marketing

Global Edition

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Chapter Preview This chapter introduces you

to the basic concepts of keting We start with the question: What is marketing? Simply

mar-put, marketing is engaging customers and managing profitable

customer relationships The aim of marketing is to create value

for customers in order to capture value from customers in

re-turn Next we discuss the five steps in the marketing process—

from understanding customer needs, to designing customer

value-driven marketing strategies and integrated marketing

programs, to building customer relationships and capturing

value for the firm Finally, we discuss the major trends and forces

affecting marketing in this new age of digital, mobile, and social

media Understanding these basic concepts and forming your own ideas about what they really mean to you will provide a solid foundation for all that follows

Let’s start with a good story about marketing in action at Amazon.com, by far the world’s leading online and digital mar-keter The secret to Amazon’s success? It’s really no secret at all Amazon is flat-out customer obsessed It has a deep-down passion for creating customer engagement, value, and relation-ships In return, customers reward Amazon with their buying dollars and loyalty You’ll see this theme of creating customer value in order to capture value in return repeated throughout this chapter and the remainder of the text

AMAZON.COM: Obsessed with Creating Customer Value and Relationships

PART 3: Designing a Customer Value-Driven Strategy and Mix (Chapters 7–17)

PART 4: Extending Marketing (Chapters 18–20)

Amazon.com’s deep-down passion for creating customer engagement, value, and relationships has made it the world’s leading online retailer Amazon has become the model for companies that are obsessively and successfully focused on delivering customer value.

Marketing Creating Customer Value and Engagement 1

W hen you think of shopping online, chances are good

that you think first of Amazon The online pioneer

first opened its virtual doors in 1995, selling books

out of founder Jeff Bezos’s garage in suburban

Seat-tle Amazon still sells books—lots and lots of books But it now

sells just about everything else as well, from music, electronics,

tools, housewares, apparel, and groceries to fashions, loose

dia-monds, and Maine lobsters

From the start, Amazon has grown explosively Its

an-nual sales have rocketed from a modest $150 million in 1997

to more than $74 billion today During just the past three

years, Amazon’s revenues have more than doubled This past

Cyber Monday alone, Amazon.com sold 37 million items to its

237 million active customers worldwide—that’s 428 items per

second Amazon’s revenues will likely reach $100 billion within

the next year, faster to that mark than any other

company in history (it took Walmart 34 years)

That would make it the nation’s second-largest

retailer, trailing only Walmart

What has made Amazon such an

amaz-ing success story? Founder and CEO Bezos

puts it in three simple words: “Obsess over

customers.” To its core, the company is relentlessly customer driven “The thing that drives everything is creating genuine value for customers,” says Bezos Amazon believes that if it does what’s good for customers, profits will follow So the com-pany starts with the customer and works backward Rather than asking what it can do with its current capabilities, Amazon first asks: Who are our customers? What do they need? Then, it develops whatever capabilities are required to meet those cus-tomer needs

At Amazon, every decision is made with an eye toward proving the Amazon.com customer experience In fact, at many Amazon meetings, the most influential figure in the room is “the empty chair”—literally an empty chair at the table that repre-sents the all-important customer At times, the empty chair isn’t empty, but is occupied by a “Customer Experience Bar Raiser,”

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im-Amazon.com does much more than just sell goods online It creates satisfying online customer experiences “The thing that drives everything is creating genuine value for customers,” says Amazon founder and CEO Jeff Bezos, shown above.

Contour by Getty Images

“We see our customers as invited guests to a party, and

we are the hosts It’s our job every day to make every

important aspect of the customer experience a little better.” – Jeff Bezos

an employee who is specially trained to represent customers’

interests To give the empty chair a loud, clear voice, Amazon

relentlessly tracks performance against nearly 400 measurable

customer-related goals

Amazon’s obsession with serving the needs of its

custom-ers drives the company to take risks and innovate in ways that

other companies don’t For example, when it noted that its

book-buying customers needed better access to e-books and other

digital content, Amazon developed the Kindle e-reader, its

first-ever original product The Kindle took more than four years

and a whole new set of skills to develop But Amazon’s

start-with-the-customer thinking paid off handsomely The Kindle is

one of the company’s best-selling products, and Amazon.com

now sells more e-books than hardcovers and paperbacks

com-bined What’s more, the company’s growing line of Kindle Fire

tablets now leads the market for low-priced tablet computers

Thus, what started as an effort to improve the customer

experi-ence now gives Amazon a powerful presexperi-ence in the burgeoning

world of digital, mobile, and social media Not only does the

Kindle allow access to e-books, music, videos, and apps sold by

Amazon, it makes interacting with the online giant easier than

ever Customers use their Kindles to shop at Amazon.com and

interact with the company on its blogs and social media pages

Perhaps more important than what Amazon sells is how it

sells Amazon wants to deliver a special experience to every

cus-tomer Most Amazon.com regulars feel a surprisingly strong

rela-tionship with the company, especially given the almost complete

lack of actual human interaction Amazon obsesses over making

each customer’s experience uniquely personal For example, the

Amazon.com site greets customers with their very own home

pages, complete with personalized recommendations Amazon

was the first company to sift through each customer’s past

pur-chases and browsing histories and the purchasing patterns of

customers with similar profiles to come up with personalized

site content Amazon wants to personalize the shopping

experi-ence for each individual customer If it has 237 million

custom-ers, it reasons, it should have 237 million stores

Visitors to Amazon.com receive a unique blend of benefits:

huge selection, good value, low prices, and convenience But it’s

the “discovery” factor that makes the buying experience really

special Once on the Amazon.com site, you’re compelled to stay

for a while—looking, learning, and discovering Amazon.com

has become a kind of online community in which customers

can browse for products, research purchase alternatives, share

opinions and reviews with other visitors, and chat online with

authors and experts In this way, Amazon does much more than

just sell goods online It engages customers and creates direct,

personalized customer relationships and satisfying online

expe-riences Year after year, Amazon places at or near the top of

al-most every customer satisfaction ranking, regardless of industry

Based on its powerful growth, many analysts have

specu-lated that Amazon will become the Walmart of the Web In

fact, some argue, it already is Although Walmart’s total sales

of $469 billion dwarf Amazon’s $74 billion in sales, Amazon’s online sales are more than seven times greater than Walmart’s

So online, it’s Walmart that’s chasing Amazon Put another way, Walmart wants to become the Amazon of the Web, not the other way around However, despite its mammoth pro-portions, to catch Amazon online, Walmart will have to match the superb Amazon.com customer experience, and that won’t

be easy

Whatever the eventual outcome, Amazon has become the poster child for companies that are obsessively and successfully focused on delivering customer value Jeff Bezos has known from the very start that if Amazon creates superior value for customers, it will earn their business and loyalty, and success will follow in terms of company sales and returns As Bezos puts it, “When things get complicated, we simplify them by asking, ‘What’s best for the customer?’ We believe that if we do that, things will work out in the long term.”1

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Objective Outline

OBJECTIVE 1 Define marketing and outline the steps in the marketing process.

What Is Marketing? (pp 29–30)

OBJECTIVE 2 Explain the importance of understanding the marketplace and customers and identify the

five core marketplace concepts.

Understanding the Marketplace and Customer Needs (pp 30–33)

OBJECTIVE 3 Identify the key elements of a customer-driven marketing strategy and discuss the marketing

management orientations that guide marketing strategy.

Designing a Customer-Driven Marketing Strategy (pp 33–37)

Preparing an Integrated Marketing Plan and Program (p 37)

OBJECTIVE 4 Discuss customer relationship management and identify strategies for creating value for

customers and capturing value from customers in return.

Building Customer Relationships (pp 37–45)

Capturing Value from Customers (pp 46–48)

OBJECTIVE 5 Describe the major trends and forces that are changing the marketing landscape in this age

of relationships.

The Changing Marketing Landscape (pp 48–53)

Today’s successful companies have one thing in common: Like Amazon, they are strongly customer focused and heavily committed to marketing These companies share a passion for understanding and satisfying customer needs in well-defined target markets They motivate everyone in the organization to help build lasting customer relationships based on creating value

Customer relationships and value are especially important today Facing dramatic technological advances and deep economic, social, and environmental challenges, to-day’s customers are relating digitally with companies and each other, spending more carefully, and reassessing how they engage with brands New digital, mobile, and social media developments have revolutionized how consumers shop and interact, in turn call-ing for new marketing strategies and tactics In these fast-changing times, it’s now more important than ever to build strong customer relationships based on real and enduring customer value

We’ll discuss the exciting new challenges facing both customers and marketers later in the chapter But first, let’s introduce the basics of marketing

My Marketing Lab ™

Improve Your Grade!

Over 10 million students improved their results using the Pearson MyLabs

Visit mymktlab.com for simulations, tutorials, and end-of-chapter problems.

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What Is Marketing?

Marketing, more than any other business function, deals with customers Although we will soon explore more-detailed definitions of marketing, perhaps the simplest definition is this

one: Marketing is engaging customers and managing profitable customer relationships The

two-fold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering satisfaction

For example, McDonald’s fulfills its “i’m lovin’ it” motto by being “our customers’ favorite place and way to eat” the world over, giving it nearly as much market share as its nearest four competitors combined Walmart has become the world’s largest retailer—

and the world’s largest company—by delivering on its promise, “Save Money Live Better.”

Facebook has attracted more than a billion active Web and mobile users worldwide by ing them to “connect and share with the people in their lives.”

help-Sound marketing is critical to the success of every organization Large for-profit firms, such as Google, Target, Procter & Gamble, Coca-Cola, and Microsoft, use marketing But so

do not-for-profit organizations, such as colleges, hospitals, museums, symphony tras, and even churches

orches-You already know a lot about marketing—it’s all around you Marketing comes to you in the good old tradi-tional forms: You see it in the abundance of products at your nearby shopping mall and the ads that fill your TV screen, spice up your magazines, or stuff your mailbox But in re-cent years, marketers have assembled a host of new market-ing approaches, everything from imaginative Web sites and mobile phone apps to blogs, online videos, and social media These new approaches do more than just blast out messages

to the masses They reach you directly, personally, and actively Today’s marketers want to become a part of your life and enrich your experiences with their brands—to help

inter-you live their brands.

At home, at school, where you work, and where you play, you see marketing in almost everything you do Yet, there is much more to marketing than meets the consumer’s casual eye Behind it all is a massive network of people, tech-nologies, and activities competing for your attention and purchases This book will give you a complete introduction

to the basic concepts and practices of today’s marketing In this chapter, we begin by ing marketing and the marketing process

defin-Marketing Defined

What is marketing? Many people think of marketing as only selling and advertising We are

bombarded every day with TV commercials, catalogs, spiels from salespeople, and online pitches However, selling and advertising are only the tip of the marketing iceberg

Today, marketing must be understood not in the old sense of making a sale—“telling

and selling”—but in the new sense of satisfying customer needs If the marketer engages

con-sumers effectively, understands their needs, develops products that provide superior tomer value, and prices, distributes, and promotes them well, these products will sell easily

cus-In fact, according to management guru Peter Drucker, “The aim of marketing is to make selling unnecessary.”2 Selling and advertising are only part of a larger marketing mix—a set

of marketing tools that work together to engage customers, satisfy customer needs, and build customer relationships

Broadly defined, marketing is a social and managerial process by which individuals and organizations obtain what they need and want through creating and exchanging value with others In a narrower business context, marketing involves building profitable, value-laden exchange relationships with customers Hence, we define marketing as the process

by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.3

Marketing is all around you, in good old traditional forms and in a

host of new forms, from Web sites and mobile phone apps to videos

and online social media.

Justin Lewis

Pause here and think about

how you’d answer this

question before studying marketing Then

see how your answer changes as you read

the chapter

Author

Comment

Marketing

The process by which companies create

value for customers and build strong

customer relationships in order to capture

value from customers in return

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The Marketing Process

Figure 1.1 presents a simple, five-step model of the marketing process for creating and capturing customer value In the first four steps, companies work to understand consumers, create customer value, and build strong customer relationships In the final step, companies

reap the rewards of creating superior customer value By creating value for consumers, they in turn capture value from consumers in the form of sales, profits, and long-term customer equity.

In this chapter and the next, we will examine the steps of this simple model of keting In this chapter, we review each step but focus more on the customer relationship steps—understanding customers, engaging and building relationships with customers, and capturing value from customers In Chapter 2, we look more deeply into the second and third steps—designing value-creating marketing strategies and constructing marketing programs

mar-Understanding the Marketplace and Customer Needs

As a first step, marketers need to understand customer needs and wants and the place in which they operate We examine five core customer and marketplace concepts:

market-(1) needs, wants, and demands; (2) market offerings (products, services, and experiences); (3) value

and satisfaction ; (4) exchanges and relationships; and (5) markets.

Customer Needs, Wants, and Demands

The most basic concept underlying marketing is that of human needs Human needs are

states of felt deprivation They include basic physical needs for food, clothing, warmth, and safety; social needs for belonging and affection; and individual needs for knowledge and self-

expression Marketers did not create these needs; they are a basic part of the human makeup

per-sonality An American needs food but wants a Big Mac, french fries, and a soft drink A person

in Papua, New Guinea, needs food but wants taro, rice, yams, and pork Wants are shaped

by one’s society and are described in terms of objects that will satisfy those needs When backed by buying power, wants become demands Given their wants and resources, people demand products and services with benefits that add up to the most value and satisfaction.Outstanding marketing companies go to great lengths to learn about and understand their customers’ needs, wants, and demands They conduct consumer research, analyze mountains of customer data, and observe customers as they shop and interact, offline and online People at all levels of the company—including top management—stay close to customers:4

Walmart president and CEO Michael Duke and his entire tive team make regular store and in-home visits with customers

execu-to get execu-to know them and understand their needs Top ald’s marketers hold frequent Twitter chats, connecting directly with McDonald’s Twitter followers, both fans and critics, to learn their thoughts about topics ranging from nutrition and

Bos-ton Market CEO George Michel makes frequent visits to pany restaurants, working in the dining room and engaging customers to learn about “the good, the bad, and the ugly.” He also stays connected by reading customer messages on the Bos-ton Market Web site and has even cold-called customers for in-sights “Being close to the customer is critically important,” says Michel “I get to learn what they value, what they appreciate.”

com-Market Offerings—Products, Services, and Experiences

Consumers’ needs and wants are fulfilled through market

infor-mation, or experiences offered to a market to satisfy a need or

a want Market offerings are not limited to physical products They also include services—activities or benefits offered for

Staying close to customers: Boston Market CEO George Michel

frequently visits the company’s restaurants, working in the dining

room and engaging customers to learn about “the good, the bad,

and the ugly.”

Invision for Boston Market

Needs

States of felt deprivation

Wants

The form human needs take as they

are shaped by culture and individual

personality

Demands

Human wants that are backed by buying

power

Marketing is all about creating

value for customers So, as

the first step in the marketing process,

the company must fully understand

consumers and the marketplace in which

it operates

Author

Comment

Trang 32

sale that are essentially intangible and do not result in the ownership of anything Examples include banking, airline, hotel, retailing, and home repair services.

More broadly, market offerings also include other entities, such as persons, places,

orga-nizations , information, and ideas For example, the “Pure Michigan” campaign markets the

state of Michigan as a tourism destination that “lets unspoiled nature and authentic ter revive your spirits.” And the Ad Council and the National Highway Traffic Safety Ad-ministration created a “Stop the Texts Stop the Wrecks.” campaign that markets the idea of eliminating texting while driving The campaign points out that a texting driver is 23 times more likely to get into a crash than a non-texting driver.5

charac-Many sellers make the mistake of paying more attention to the specific products they offer than to the benefits and experiences produced by these products These sellers suffer from marketing myopia They are so taken with their products that they focus only on existing wants and lose sight of underlying customer needs.6 They forget that a product

is only a tool to solve a consumer problem A manufacturer of quarter-inch drill bits may

think that the customer needs a drill bit But what the customer really needs is a

quarter-inch hole These sellers will have trouble if a new product comes along that serves the

customer’s need better or less expensively The customer will have the same need but will

want the new product

Smart marketers look beyond the attributes of the products and services they sell By

orchestrating several services and products, they create brand experiences for consumers For

example, you don’t just visit Walt Disney World Resort; you immerse yourself and your family in a world of wonder, a world where dreams come true and things still work the way they should “Let the magic begin!” says Disney

Similarly, Angry Birds is much more than just a mobile game app To more than 200 million fans a month in 116 countries, it’s a deeply involving experi-ence As one observer puts it: “Angry Birds land is a state of mind—a digital immersion in addictively cheerful de-struction, a refuge from the boredom of subway commutes and doctors’ waiting rooms, where the fine art of sling-shot-ting tiny brightly hued birds at wooden fortresses to vanquish pigs taking shel-ter inside makes eminent sense and is immensely satisfying.” So far, in all its forms, Angry Birds has been downloaded more than two billion times The game’s creator, Rovio, plans to expand the Angry Birds experience through everything from

animated short videos (called Angry Birds

Toons) and three-dimensional animated movies to a growing list of new games, licensed toys, apparel, yard art, and even Angry Birds–branded playgrounds, ac-tivity parks, and theme parks.7

FIGURE | 1.1

The Marketing Process: Creating and Capturing Customer Value

Create value for customers and build customer relationships Capture value from

customers in return

Capture value from customers to create profits and customer equity

Build profitablerelationships andcreate customerdelight

Construct anintegrated marketing programthat deliverssuperior value

Understand the

marketplace and

customer needs

and wants

This important figure shows marketing in

a nutshell By creating value for customers,

marketers capture value from customers in

return This five-step process forms the

marketing framework for the rest of the

chapter and the remainder of the text.

Design acustomer value-driven marketingstrategy

Market offerings

Some combination of products, services,

information, or experiences offered to a

market to satisfy a need or want

Marketing myopia

The mistake of paying more attention to

the specific products a company offers

than to the benefits and experiences

produced by these products

Marketing experiences: More than just a mobile game app, Angry Birds is “a digital

immersion in addictively cheerful destruction.” Creator Rovio plans to expand the Angry

Birds experience through animated videos, licensed products, and even Angry

Birds-branded playgrounds and activity parks.

Archivo CEET GDA Photo Service/Newscom

Trang 33

Customer Value and Satisfaction

Consumers usually face a broad array of products and services that might satisfy a given need How do they choose among these many market offerings? Customers form expec-tations about the value and satisfaction that various market offerings will deliver and buy accordingly Satisfied customers buy again and tell others about their good expe-riences Dissatisfied customers often switch to competitors and disparage the product

to others

Marketers must be careful to set the right level of expectations If they set expectations too low, they may satisfy those who buy but fail to attract enough buyers If they set expec-tations too high, buyers will be disappointed Customer value and customer satisfaction are key building blocks for developing and managing customer relationships We will revisit these core concepts later in the chapter

Exchanges and Relationships

Marketing occurs when people decide to satisfy their needs and wants through exchange relationships Exchange is the act of obtaining a desired object from someone by offering something in return In the broadest sense, the marketer tries to bring about a response to some market offering The response may be more than simply buying or trading products and services A political candidate, for instance, wants votes; a church wants membership;

an orchestra wants an audience; and a social action group wants idea acceptance

Marketing consists of actions taken to create, maintain, and grow desirable exchange

relationships with target audiences involving a product, service, idea, or other object panies want to build strong relationships by consistently delivering superior customer value We will expand on the important concept of managing customer relationships later

Com-in the chapter

Markets

The concepts of exchange and relationships lead to the concept of a market A market is the set of actual and potential buyers of a product or service These buyers share a particular need or want that can be satisfied through exchange relationships

Marketing means managing markets to bring about profitable customer ships However, creating these relationships takes work Sellers must search for and engage buyers, identify their needs, design good market offerings, set prices for them, promote them, and store and deliver them Activities such as consumer research, prod-uct development, communication, distribution, pricing, and service are core marketing activities

relation-Although we normally think of marketing as being carried out by sellers, buyers also carry out marketing Consumers market when they search for products, interact with com-panies to obtain information, and make their purchases In fact, today’s digital technologies, from online sites and smartphone apps to the explosion of social media, have empowered consumers and made marketing a truly two-way affair Thus, in addition to customer rela-

tionship management, today’s marketers must also deal effectively with customer-managed

relationships Marketers are no longer asking only “How can we influence our customers?” but also “How can our customers influence us?” and even “How can our customers influ-ence each other?”

Figure 1.2 shows the main elements in a marketing system Marketing involves serving a market of final consumers in the face of competitors The company and com-petitors research the market and interact with consumers to understand their needs Then they create and exchange market offerings, messages, and other marketing content with consumers, either directly or through marketing intermediaries Each party in the system

is affected by major environmental forces (demographic, economic, natural, technological, political, and social/cultural)

Each party in the system adds value for the next level The arrows represent ships that must be developed and managed Thus, a company’s success at engaging cus-tomers and building profitable relationships depends not only on its own actions but also

relation-on how well the entire system serves the needs of final crelation-onsumers Walmart cannot fulfill its promise of low prices unless its suppliers provide merchandise at low costs And Ford cannot deliver a high-quality car-ownership experience unless its dealers provide outstand-ing sales and service

Exchange

The act of obtaining a desired object from

someone by offering something in return

Market

The set of all actual and potential buyers

of a product or service

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Designing a Customer Value-Driven Marketing Strategy

Once it fully understands consumers and the marketplace, marketing management can sign a customer value-driven marketing strategy We define marketing management as the art and science of choosing target markets and building profitable relationships with them The marketing manager’s aim is to find, engage, keep, and grow target customers by creating, delivering, and communicating superior customer value

de-To design a winning marketing strategy, the marketing manager must answer two

im-portant questions: What customers will we serve (what’s our target market)? and How can we

serve these customers best (what’s our value proposition)? We will discuss these marketing egy concepts briefly here and then look at them in more detail in Chapters 2 and 6

strat-Selecting Customers to Serve

The company must first decide whom it will serve It does this by dividing the market into segments of customers (market segmentation) and selecting which segments it will go after (target marketing) Some people think of marketing management as finding as many custom-

ers as possible and increasing demand But marketing managers know that they cannot serve all customers in every way By trying to serve all customers, they may not serve any customers well Instead, the company wants to select only customers that it can serve well and profitably For example, Nordstrom profitably targets affluent professionals; Dollar General profitably targets families with more modest means

Ultimately, marketing managers must decide which customers they want to target and on the level, timing, and nature of their demand Simply put, marketing man-

agement is customer management and demand management.

Choosing a Value Proposition

The company must also decide how it will serve targeted

customers—how it will differentiate and position itself in the marketplace A brand’s value proposition is the set of benefits

or values it promises to deliver to consumers to satisfy their needs BMW promises “the ultimate driving machine,” whereas the Nissan Leaf electric car is “100% electric Zero gas Zero tailpipe.” New Balance’s Minimus shoes are “like barefoot only better”; and with Vibram FiveFingers shoes,

“You are the technology.” Facebook helps you “connect and share with the people in your life,” whereas YouTube

“provides a place for people to connect, inform, and inspire others across the globe.” And Twitter’s Vine app gives you “the best way to see and share life in motion” through

“short, beautiful, looping videos in a simple and fun way for your friends and family to see.”8

Once a company fully

understands its consumers

and the marketplace, it must decide which

customers it will serve and how it will

bring them value

Author

Comment

FIGURE | 1.2

A Modern Marketing System

Major environmental forces

Each party in the system adds value Walmart

cannot fulfill its promise of low prices unless

its suppliers provide low costs Ford cannot

deliver a high-quality car-ownership

experience unless its dealers provide

outstanding service.

MarketingintermediariesCompetitors

Marketing management

The art and science of choosing

target markets and building profitable

relationships with them

Value propositions: Vine gives you “the best way to see and share

life in motion” through “short, beautiful, looping videos in a simple and

fun way for your friends and family to see.”

Twitter, Inc.

Trang 35

Such value propositions differentiate one brand from another They answer the tomer’s question, “Why should I buy your brand rather than a competitor’s?” Companies must design strong value propositions that give them the greatest advantage in their target markets For example, Vibram FiveFingers shoes promise the best of two worlds—running with shoes and without “You get all the health and performance benefits of barefoot run-ning combined with a Vibram sole that protects you from elements and obstacles in your path.” With Vibram FiveFingers shoes, “The more it looks like a foot, the more it acts like

cus-a foot.”

Marketing Management Orientations

Marketing management wants to design strategies that will engage target customers and

build profitable relationships with them But what philosophy should guide these marketing

strategies? What weight should be given to the interests of customers, the organization, and society? Very often, these interests conflict

There are five alternative concepts under which organizations design and carry out

their marketing strategies: the production, product, selling, marketing, and societal marketing

concepts.

The Production Concept

highly affordable Therefore, management should focus on improving production and tribution efficiency This concept is one of the oldest orientations that guides sellers.The production concept is still a useful philosophy in some situations For example, both personal computer maker Lenovo and home appliance maker Haier dominate the highly competitive, price-sensitive Chinese market through low labor costs, high produc-tion efficiency, and mass distribution However, although useful in some situations, the production concept can lead to marketing myopia Companies adopting this orientation run a major risk of focusing too narrowly on their own operations and losing sight of the real objective—satisfying customer needs and building customer relationships

dis-The Product Concept

quality, performance, and innovative features Under this concept, marketing strategy cuses on making continuous product improvements

fo-Product quality and improvement are important parts of most marketing strategies

However, focusing only on the company’s products can also lead to marketing myopia For

example, some manufacturers believe that if they can “build a better mousetrap, the world will beat a path to their doors.” But they are often rudely shocked Buyers may be looking for a better solution to a mouse problem but not necessarily for a better mousetrap The bet-ter solution might be a chemical spray, an exterminating service, a housecat, or something else that suits their needs even better than a mousetrap Furthermore, a better mousetrap will not sell unless the manufacturer designs, packages, and prices it attractively; places it

in convenient distribution channels; brings it to the attention of people who need it; and convinces buyers that it is a better product

The Selling Concept

Many companies follow the selling concept, which holds that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and pro-motion effort The selling concept is typically practiced with unsought goods—those that buyers do not normally think of buying, such as life insurance or blood donations These industries must be good at tracking down prospects and selling them on a prod-uct’s benefits

Such aggressive selling, however, carries high risks It focuses on creating sales tions rather than on building long-term, profitable customer relationships The aim often

transac-is to sell what the company makes rather than making what the market wants It assumes that customers who are coaxed into buying the product will like it Or, if they don’t like it, they will possibly forget their disappointment and buy it again later These are usually poor assumptions

Production concept

The idea that consumers will favor

products that are available and highly

affordable; therefore, the organization

should focus on improving production

and distribution efficiency

Product concept

The idea that consumers will favor

products that offer the most quality,

performance, and features; therefore,

the organization should devote its

energy to making continuous product

improvements

Selling concept

The idea that consumers will not buy

enough of the firm’s products unless the

firm undertakes a large-scale selling and

promotion effort

Trang 36

The Marketing Concept

the needs and wants of target markets and delivering the desired satisfactions better than

competitors do Under the marketing concept, customer focus and value are the paths to sales and profits Instead of a product-centered make-and-sell philosophy, the marketing concept is a customer-centered sense-and-respond philosophy The job is not to find the right

customers for your product but to find the right products for your customers

Figure 1.3 contrasts the selling concept and the marketing concept The selling

concept takes an inside-out perspective It starts with the factory, focuses on the company’s

existing products, and calls for heavy selling and promotion to obtain profitable sales It focuses primarily on customer conquest—getting short-term sales with little concern about who buys or why

In contrast, the marketing concept takes an outside-in perspective As Herb Kelleher,

the colorful founder of Southwest Airlines, once put it, “We don’t have a marketing ment; we have a customer department.” The marketing concept starts with a well-defined market, focuses on customer needs, and integrates all the marketing activities that affect customers In turn, it yields profits by creating relationships with the right customers based

depart-on customer value and satisfactidepart-on

Implementing the marketing concept often means more than simply responding to

customers’ stated desires and obvious needs Customer-driven companies research

custom-ers deeply to learn about their desires, gather new product ideas, and test product ments Such customer-driven marketing usually works well when a clear need exists and when customers know what they want

improve-In many cases, however, customers don’t know what they want or even what is possible

As Henry Ford once remarked, “If I’d asked people what they wanted, they would have said faster horses.”9 For example, even 20 years ago, how many consumers would have thought to ask for now-commonplace products such as tablet computers, smartphones, digital cameras, 24-hour online buying, video sharing services, and GPS systems in their

cars and phones? Such situations call for customer-driving marketing—understanding

cus-tomer needs even better than cuscus-tomers themselves do and creating products and services that meet both existing and latent needs, now and in the future As an executive at 3M put

it, “Our goal is to lead customers where they want to go before they know where they want

to go.”

The Societal Marketing Concept

over-looks possible conflicts between consumer short-run wants and consumer long-run welfare

Is a firm that satisfies the immediate needs and wants of target markets always doing what’s best for its consumers in the long run? The societal marketing concept holds that marketing strategy should deliver value to customers in a way that maintains or improves

both the consumer’s and society’s well-being It calls for sustainable marketing, socially and

environmentally responsible marketing that meets the present needs of consumers and businesses while also preserving or enhancing the ability of future generations to meet their needs

FIGURE | 1.3

Selling and Marketing Concepts

Contrasted Startingpoint Focus Means Ends

The selling

concept

Profits through customer satisfaction Market Customerneeds Integratedmarketing

The marketing

concept

Sellingandpromoting

Factory productsExisting Profits through sales volume

The selling concept takes an

inside-out view that focuses on

existing products and heavy

selling The aim is to sell what

the company makes rather than

making what the customer wants.

The marketing concept takes an outside-in view that focuses on satisfying customer needs as a path to profits As Southwest Airlines’ colorful founder puts it, “We don’t have a marketing department, we have a customer department.”

Marketing concept

A philosophy in which achieving

organizational goals depends on knowing

the needs and wants of target markets

and delivering the desired satisfactions

better than competitors do

Societal marketing concept

The idea that a company’s marketing

decisions should consider consumers’

wants, the company’s requirements,

consumers’ long-run interests, and

society’s long-run interests

Trang 37

Even more broadly, many leading business and marketing thinkers are now preaching

the concept of shared value, which recognizes that societal needs, not just economic needs,

define markets.10 The concept of shared value focuses on creating economic value in a way that also creates value for society A growing number of companies known for their hard-nosed approaches to business—such as GE, Dow, Google, IBM, Intel, Johnson & Johnson, Nestlé, Unilever, and Walmart—are rethinking the interactions between society and corpo-rate performance They are concerned not just with short-term economic gains, but with the well-being of their customers, the depletion of natural resources vital to their businesses, the viability of key suppliers, and the economic well-being of the communities in which they produce and sell

One prominent marketer calls this Marketing 3.0 “Marketing 3.0 organizations are

values-driven,” he says “I’m not talking about being value-driven I’m talking about ues’ plural, where values amount to caring about the state of the world.” Another marketer calls it purpose-driven marketing “The future of profit is purpose,” he says.11

‘val-As Figure 1.4 shows, companies should balance three considerations in setting their mar-keting strategies: company profits, consumer

wants, and society’s interests British-based cosmetics retailer Lush operates this way:12

Lush is known for “Fresh Handmade Cosmetics” — premium beauty products made by hand from the freshest possible natural ingredients It sells products with evocative names such as Flying Fox shower gel, Angels on Bareskin cleanser, and Honey I Washed the Kids soap But Lush does much more than just make and sell body care products for profit It also dedicates itself

to doing right by customers, employees, the environment, and society Its do-good mission

is spelled out in a seven-point statement titled,

“A Lush Life: We Believe .” For example, the company believes in inventing and making its own products from fresh organic fruits and vegetables using little or no preservatives or packaging Lush has strict policy against ani-mal testing and supports Fair Trade and Com-munity Trade efforts Each year, the company invests heavily in sustainable initiatives and support of grassroots charities Lush takes care

of its employees—“We believe in happy people making happy soap . . . ” In fact, Lush seems to wish well to everyone, everywhere—“We be-lieve in long candlelit baths, sharing showers, massage, filling the world with perfume, and the right to make mistakes, lose everything, and start again.” Only in its final belief does Lush

FIGURE | 1.4

Three Considerations Underlying

the Societal Marketing Concept

Societal marketing concept

Consumers

(Profits)

Society

both consumers and the company Social responsibility “isn’t just good for the planet,” says the company “It’s good for business.”

The societal marketing concept: Cosmetics retailer Lush does more than just

make and sell premium body care products for profit It also dedicates itself to

doing right by customers, employees, the environment, and society.

Lush Fresh Handmade Cosmetics

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mention profits—“We believe our products are good value, that we should make a profit, and that the customer is always right.” Thanks to its societal mission, Lush is thriving like fresh flow-ers in springtime It now operates stores in 50 countries, with e-commerce sites in 27 countries Its sales have nearly doubled in just the past three years, suggesting that doing good can benefit both the planet and the company.

Preparing an Integrated Marketing Plan and Program

The company’s marketing strategy outlines which customers it will serve and how it will create value for these customers Next, the marketer develops an integrated marketing pro-gram that will actually deliver the intended value to target customers The marketing pro-gram builds customer relationships by transforming the marketing strategy into action It

consists of the firm’s marketing mix, the set of marketing tools the firm uses to implement

its marketing strategy

The major marketing mix tools are classified into four broad groups, called the four Ps

of marketing: product, price, place, and promotion To deliver on its value proposition, the firm must first create a need-satisfying market offering (product) It must then decide how much it will charge for the offering (price) and how it will make the offering available to target consumers (place) Finally, it must engage target consumers, communicate about the offering, and persuade consumers of the offer’s merits (promotion) The firm must blend each marketing mix tool into a comprehensive integrated marketing program that com-municates and delivers the intended value to chosen customers We will explore marketing programs and the marketing mix in much more detail in later chapters

Building Customer Relationships

The first three steps in the marketing process—understanding the marketplace and tomer needs, designing a customer value-driven marketing strategy, and constructing a marketing program—all lead up to the fourth and most important step: building and man-aging profitable customer relationships We first discuss the basics of customer relationship management Then, we examine how companies go about engaging customers on a deeper level in this age of digital and social marketing

cus-Customer Relationship Management

Customer relationship management is perhaps the most important concept of modern marketing

In the broadest sense, customer relationship management is the overall process of ing and maintaining profitable customer relationships by delivering superior customer value and satisfaction It deals with all aspects of acquiring, engaging, and growing customers

build-Relationship Building Blocks: Customer Value and Satisfaction

The key to building lasting customer relationships is to create superior customer value and satisfaction Satisfied customers are more likely to be loyal customers and give the company

a larger share of their business

Customer Value Attracting and retaining customers can be a difficult task Customers often face a bewildering array of products and services from which to choose A customer buys from the firm that offers the highest customer- perceived value—the customer’s evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers Importantly, customers often do not judge values and

costs “accurately” or “objectively.” They act on perceived value.

To some consumers, value might mean sensible products at affordable prices To other consumers, however, value might mean paying more to get more For example, what’s a cooler worth—one of those insulated containers you take camping or haul to a picnic or tail-gate party? If it’s a YETI cooler, you can expect to pay from $229 to as much as $1,300 for the top-of-the-line Tundra model However, despite their high prices and spare, boxy designs, YETI coolers have achieved an almost cult status among the field-and-stream set, or on con-struction sites, ranches, or even military bases The company’s slogan: “YETI Coolers—Wildly Stronger Keeps Ice Longer!” suggests the reasons why Devoted users will tell you that a YETI

The customer value-driven

marketing strategy discussed

in the previous section outlines which

customers the company will serve (the

target market) and how it will serve them

(positioning and the value proposition)

Now, the company develops marketing

plans and programs—a marketing mix—

that will actually deliver the intended

customer value

Author

Comment

Doing a good job with

the first three steps in the

marketing process sets the stage for step

four, building and managing customer

The overall process of building and

maintaining profitable customer

relationships by delivering superior

customer value and satisfaction

Customer-perceived value

The customer’s evaluation of the

difference between all the benefits and all

the costs of a marketing offer relative to

those of competing offers

Trang 39

does keep things cooler—with a FatWall design (with twice the insulation of competitors) and an interlocking lid system with

a gasket that keeps the cold in And rugged YETI coolers are made to last—no more busted hinges, failed latches, or caved

in lids They’re even certified as Grizzly bear-resistant by the Interagency Grizzly Bear Committee One reporter de-scribes a YETI as “a cooler fit for the apocalypse,” and the company claims it’s “The cooler you’ve always wanted The last cooler you’ll ever need.” So, is a YETI cooler worth the pre-mium price compared to less expensive coolers made by Igloo

or Rubbermaid? To many consumers, the answer is no But to YETI’s target buyers, the answer is a resounding yes.13

Customer Satisfaction Customer satisfaction depends

on the product’s perceived performance relative to a buyer’s expectations If the product’s performance falls short of expec-tations, the customer is dissatisfied If performance matches expectations, the customer is satisfied If performance exceeds expectations, the customer is highly satisfied or delighted.Outstanding marketing companies go out of their way

to keep important customers satisfied Most studies show that higher levels of customer satisfaction lead to greater customer loyalty, which in turn results in better company performance Smart companies aim to delight customers by promising only what they can deliver and then delivering more than they promise Delighted customers not only make repeat purchases but also become willing marketing partners and “customer evangelists” who spread the word about their good experiences to others

For companies interested in delighting customers, exceptional value and service become part of the overall company culture For example, year after year, Ritz-Carlton ranks at or near the top of the hospitality industry in terms of customer satisfaction Its passion for satisfying customers is summed up in the company’s credo, which promises that its luxury hotels will deliver a truly memorable experience—one that

“enlivens the senses, instills well-being, and fulfills even the unexpressed wishes and needs of our guests.”14

Check into any Ritz-Carlton hotel around the world, and you’ll be amazed by the pany’s fervent dedication to anticipating even your slightest need Without ever asking, they seem to know that you’re allergic to peanuts and want a king-size bed, a nonaller-genic pillow, extra body gel, the blinds open when you arrive, and breakfast with decaf-feinated coffee in your room Each day, hotel staffers—from those at the front desk to those in maintenance and housekeeping— discreetly observe and record even the small-est guest preferences Then, every morning, each hotel reviews the files of all new arriv-als who have previously stayed at a Ritz-Carlton and prepares a list of suggested extra touches that might delight each guest For example, according to one Ritz-Carlton man-ager, if the chain gets hold of a picture of a guest’s pet, it will make a copy, have it framed, and display it in the guest’s room in whatever Ritz-Carlton the guest visits

com-Once they identify a special customer need, Ritz-Carlton employees go to legendary extremes to meet it For instance, to serve the needs of a guest whose son had food aller-gies, a Ritz-Carlton chef in Bali located special eggs and milk in a small grocery store in another country and had them delivered to the hotel In another case, when a business-man attending a conference at the Ritz-Carlton Orlando ordered his favorite soda during

a dinner in a hotel ballroom, his banquet server told him that the hotel didn’t serve that beverage but he would see what he could do To no one’s surprise, the server quickly returned with the requested beverage, and for the rest of the week he had the drink wait-ing for the guest But here’s the best part A year later when the guest returned for the conference, as he sat in the ballroom waiting for dinner the first night, the same server walked up with his favorite drink in hand As a result of such customer service heroics, an amazing 95 percent of departing guests report that their stay has been a truly memorable experience More than 90 percent of Ritz-Carlton’s delighted customers return

Other companies that have become legendary for customer delight and their vice heroics include Zappos.com, Amazon.com, Nordstrom department stores, and

Customer satisfaction: Ritz-Carlton

hotels deliver a truly memorable experience

that fulfills even the unexpressed wishes

and needs of its guests.

Toronto Star via Getty Images

Perceived value: Is a YETI cooler worth its premium price? To

devoted YETI users, the answer is a resounding “yes.” The “Wildly

Stronger Keeps Ice Longer!” coolers are even certified as Grizzly

bear-resistant by the Interagency Grizzly Bear Committee.

YETI Coolers and the Interagency Grizzly Bear Committee (IGBC)

Trang 40

JetBlue Airways (see Real Marketing 1.1) However, a company doesn’t need to have the-top service to create customer delight For example, no-frills grocery chain ALDI has highly satisfied customers, even though they have to bag their own groceries and can’t use credit cards ALDI’s everyday very low pricing on good-quality products delights custom-ers and keeps them coming back Thus, customer satisfaction comes not just from service heroics, but from how well a company delivers on its basic value proposition and helps customers solve their buying problems “Most customers don’t want to be ‘wowed,’” says one marketing consultant “They [just] want an effortless experience.”15

over-Although a customer-centered firm seeks to deliver high customer satisfaction relative

to competitors, it does not attempt to maximize customer satisfaction A company can

al-ways increase customer satisfaction by lowering its prices or increasing its services But this may result in lower profits Thus, the purpose of marketing is to generate customer value profitably This requires a very delicate balance: The marketer must continue to generate more customer value and satisfaction but not “give away the house.”

Customer Relationship Levels and Tools

Companies can build customer relationships at many levels, depending on the nature of the target market At one extreme, a company with many low-margin customers may seek

to develop basic relationships with them For example, Procter & Gamble’s Tide detergent

does not phone or call on all of its consumers to get to know them personally Instead, Tide creates engagement and relationships through brand-building advertising, Web sites, and social media presence At the other extreme, in markets with few customers

and high margins, sellers want to create full partnerships with key customers For example,

P&G sales representatives work closely with Walmart, Kroger, and other large retailers that sell Tide In between these two extremes, other levels of customer relationships are appropriate

Beyond offering consistently high value and satisfaction, marketers can use specific marketing tools to develop stronger bonds with customers For example, many companies

offer frequency marketing programs that reward customers who buy frequently or in large

amounts Airlines offer frequent-flyer programs, hotels give room upgrades to frequent guests, and supermarkets give patronage discounts to “very important customers.” These days almost every brand has a loyalty rewards program However, some innovative loyalty programs go a step beyond the usual Consider Walgreens:16

Members of Walgreens’ Balance Rewards program earn points for in-store or online product purchases, redeemable for pur-chases in Walgreens stores or online And members receive surprise offers and give-aways, everything from free movie passes

to gift cards But in line with the chain’s mission “to keep our community happy and healthy,” the unique Walgreens Bal-ance Rewards program goes beyond just points for purchases It also includes programs that reward customers for tak-ing steps toward a happy, healthy, well- balanced life The program has included giving members points for every mile they walk or run, every daily weigh-in as they track their weight, and every prescription and immunization Walgreens even pro-vides online and mobile tools that help members set healthy goals and track their progress, celebrating their achievements with milestone badges Thus, the Wal-greens Balance Rewards program builds stronger customer relationships and helps the brand by helping customers, befitting the chain’s slogan: “Walgreens: At the cor-ner of happy & healthy.”

Customer satisfaction

The extent to which a product’s perceived

performance matches a buyer’s

expectations

Relationship marketing tools: The innovative Walgreens Balance Rewards program

builds stronger customer relationships and helps the brand by helping customers,

befitting the chain’s slogan: “Walgreens: At the corner of happy & healthy.”

Used with permission of Walgreen Co Walgreens Balance ® Rewards and “At the corner of healthy & happy ® ” are registered

trademarks of Walgreen Co.

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