Acquisitions Editor: Julia Helms Icy Development Editor: Andrew Goss Permissions Manager: Sara Jillings Production Editor: Ian Stoneham Manufacturing Manager: Richard Lamprecht Marketing Manager: Scott Dustan Original eighth edition en titled Principles of Marketing published by Prentice Hall Inc A Simon & Schuster Company Upper Saddle River New Jersey, USA Copyright © 1999 by Prentice Hall Inc First European Edition published 1996 Second European Edition published 1999 by Prentice Hal! Europe Authorised for sale only in Europe, the Middle East and Africa Copyright © Prentice Hall Europe 1996,1999 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form, or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission, in writing, from the publisher Text and cover design: Design Deluxe, Rath, Avon Typeset in lOpt Caslon 224 Book by Goodfellow and Egan, Cambridge Printed and bound in Italy by Rotolito Lombards, Milan British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 0-13-262254-8 0,3 02 01 00 99 Contents Preface xiii Guided Tour xx About the Autfmrf; xxii Part One Marketing and the Marketing Process Summary 32 Key Terms 33 Discussing the Issues 33 Applying the Concepts 34 References 34 Case Amphitrion: Your Ultimate Host in Greece 36 Chapter Chapter Marketing in a Changing World: Satisfying Hitman Needs Chapter Objectives Preview Case Nike Introduction What is Marketing? Needs, Wants and Demands 10 Products and Services 11 Value, Satisfaction and Quality 11 Exchange, Transactions and Relationships 12 Markets 14 Marketing 15 Marketing Management 16 Demand Management 16 Marketing Management Philosophies 17 The Production Concept 17 The Product Concept 18 The Selling Concept 18 The Marketing Concept J9 The Societal Marketing Concept 22 Marketing Challenges into the Next Century 24 Growth of Non-Prof it Marketing 24 The Information Technology Boom 26 Rapid Globalization 28 The Changing World Economy 30 The Call for More Ethics and Social Responsibility 31 The New Marketing Landscape 31 Marketing and Society; Social Responsibility and Marketing Ethics 39 Chapter Objectives 39 Preview Case Brown & Williamson Tobacco: 'Keeping Smokers Addicted' 39 Introduction 42 Social Criticisms of Marketing 43 Marketing's Impact on Individual Consumers 43 Marketing's Impact on Society as a Whole 52 Marketing's Impact on Other Businesses 54 Citizen and Public Actions to Regulate Marketing 55 Consumerism 55 Environmentalism 57 Public Actions to Regulate Marketing 58 Business Actions Towards Socially Responsible Marketing 60 Enlightened Marketing 61 Marketing Ethics 64 Principles for Public Policy Towards Marketing 68 The Principle of Consumer and Producer Freedom 68 The Principle of Curbing Potential Harm 68 The Principle of Meeting Basie Needs 70 The Principle of Economic Efficiency 71 The Principle of Innovation 71 The Principle of Consumer Education and Information 72 The Principle of Consumer Protection 72 Contents Sum mar;7 72 Key Terms 73 Discussing the Issues 73 Applying the Concepts 74 References 75 Case Nestle: Singled Out Again and Again 76 Key Terms 124 Discussing the Issues 124 Applying the Concepts 124 References 125 Cuse Look Out Lipton, Here Comes Oolong! )26 Overview Case One KitKat: Have a Break 131 Chapter Part Two Strategic Marketing Planning 81 Chapter Objectives 81 Preview Case Levi's Strategic Marketing and Planning 81 Introduction 84 Strategic Planning 85 Overview of Planning 85 The Planning Process 86 The Strategic Plan 87 The Mission 87 From Mission to Strategic Objectives 90 Strategic Audit 91 SWOT Analysis 94 The Business Portfolio 96 Developing Growth Strategies 102 Marketing Within Strategic Planning 102 Planning Functional Strategies 102 Marketing's Role in Strategic Planning 103 Marketing and the Other Business Functions 104 Conflict Between Departments 104 The Marketing Process 105 Marketing Strategy 106 Marketing Strategies for Competitive Advantage 109 Developing the Marketing Mix 109 The Marketing Plan 111 Executive Summary 1 Marketing Audit 1 SWOT Analysis 112 Objectives and Issxies 113 Marketing Strategy 113 Marketing Mix 113 Action Programmes 113 Budgets 113 Controls I ] Implementation 115 Marketing Organization 116 Marketing Control 1.18 Implementing Marketing 119 Summary 122 * vii The Marketing Setting 140 Chapter The Marketing Environment 142 Chapter Objectives 142 Preview Case Unilever: Power? 142 Introduction 146 The Company's Mieroenvironment 146 The Company 146 Suppliers 147 Marketing Intermediaries 147 Customers 148 Competitors 149 Publics 149 The Company's Macroenvironment 151 Demographic Environment 151 Economic Environment 158 Natural Environment 162 Technological Environment 165 Political Environment 167 Cultural Environment 169 Responding to the Marketing Environment 173 Summary 173 Key Terms 174 Discussing the Issues 174 Applying the Concepts 175 References 175 Case Shiseido: Rethinking the Future 177 Chapter The Global Marketplace 181 Chapter Objectives 181 Preview Case McDonald's: Breaking into the South African Market 181 viii • Contents Introduction 184 Risks in International Marketing 186 High Foreign Country Debt 186 Exchange Rate Volatility 186 Foreign Government Entry Requirements 186 Costs of Marketing Mix Adaptation 187 Other Problems 187 Analysis of International Market Opportunity 187 Deciding Whether or Not to Go Abroad 187 Understanding the Global Environment 189 Deciding which Markets to Enter 201 Defining International Marketing Objectives and Policies 201 Establishing Market Entry Mode 203 Exporting 203 Joint Venturing 204 Direct Investment 207 Allocating Necessary Resources 208 Developing a Strategic Marketing Plan 209 Standardization or Adaptation for International Markets? 209 Product 212 Promotion 2.13 Price 214 Distribution Channels 215 Organizing an Operational Team and Implementing a Marketing Strategy 216 Export Department 216 International Division 216 Global Organization 217 Evaluation and Control of Operations 218 Summary 218 Key Terms 220 Diseussing the Issues 220 Applying the Concepts 221 References 221 Case Procter & Gamble: Going Global in Cosmetics 222 Chapter Consumer Buyer Behaviour 227 Chapter Objectives 227 Preview Case Sheba: The Pet's St Valentine's Day 227 Introduction 229 Models of Consumer Behaviour 229 Characteristics Affecting Consumer Behaviour 230 Cultural Factors 230 Social Factors 235 Personal Factors 238 Psychological Factors 243 Consumer Decision Process 250 Types of Buying Decision Behaviour 251 Complex Buying Behaviour 251 Dissonance-Reducing Buying Behaviour 252 Habitual Buying Behaviour 252 Variety-Seeking Buying Behaviour 253 The Buyer Decision Process 253 Need Recognition 254 Information Search 254 Evaluation of Alternatives 255 Purchase Decision 258 Postpurcbase Behaviour 258 The Buyer Decision Process for New Products 260 Stages in the Adoption Process 260 Individual Differences in Innovativeness 261 Role of Personal Influence 262 Influence of Product Characteristics on Rate of Adoption 263 Consumer Behaviour Across International Borders 263 Summary 264 Key Terms 265 Discussing the Issues 265 Applying the Concepts 266 References 266 Case Bic Versus Gillette: The Disposable Wars 268 Chapter Business Markets and Business Buyer Behaviour 273 Chapter Objectives 273 Preview Case Selling Business Jets: The Ultimate Executive Toy 273 Introduction 276 Business Markets 277 Characteristics of Business Markets 277 A Model of Business Buyer Behaviour 282 Business Buyer Behaviour 282 What Buying Decisions Do Business Buyers Make? 283 Who Participates in the Business Buying Process? 284 Contents What arc the Main Influences on Business Buyers? 286 How Do Business Buyers Make their Buying Decisions? 292 Institutional and Government Markets 295 Institutional Markets 296 Government Markets 296 Summary 300 Discussing the Issues 357 Applying the Goncepts 357 References 357 Case Act I: Feeling Out the Appliance Controls Market 359 Overview Case Two Ballygowan Springs into New Age Kisqua 363 Key Terms 300 Discussing the Issues 301 Applying the Goncepts 301 References 301 Case Part Three Core Strategy 374 Troll-AEG 303 ChapterS Market Information and Chapter Marketing Kesearch 313 Market Segmentation and Targeting 376 Chapter Objectives 313 Chapter Objectives 376 Preview Case Procter Ik Gamble: How Many is Too Many? 376 Preview Case Qantas: Taking Off in Tomorrow's Market 313 Introduction 316 The Marketing Information System 317 Developing Information 317 Internal Records 318 Marketing Intelligence 318 Marketing Research 320 The Marketing Research Process 320 Demand Estimation 335 Defining the Market 338 Measuring Current Market Demand 340 Estimating Total Market Demand 340 Estimating Area and Market Demand 342 Estimating Actual Sales and Market Shares 344 Forecasting Future Demand 344 Survey of Buyers' Intentions 345 Composite of Sales Force Opinions 346 Expert Opinion 346 Test-Market Method 347 Time-Scries Analysis 347 Leading Indicators 350 Statistical Demand Analysis 350 Information Analysis 351 Distributing Information 351 International Studies 354 Summary 355 Key Terms 356 IX Introduction 379 Market Segmentation 379 Levels of Market Segmentation 379 Segmenting Consumer Markets 385 Segmenting Business Markets 401 Segmenting International Markets 403 Multivariate Segmentation 404 Developing Market Segments 408 Requirements for Effective Segmentation 409 Market Targeting 412 Evaluating Market Segments 412 Segment Strategy 414 Summary 417 Key Terms 418 Discussing the Issues 418 Applying the Concepts 419 References 419 Case Coffee-Mate 420 Chapter W Positioning 431 Chapter Objectives 431 Preview Case Castrol: Liquid Engineering 431 Introduction 434 Contents Differentiation 434 Differentiating Markets 438 What is Market Positioning? 443 Chapter 12 Perceptual Mapping 446 Positioning Strategies 448 Choosing and Implementing a Positioning Strategy 455 Selecting the Right Competitive Advantages 455 Communicating and Delivering the Chosen Position 461 Summary 462 Chapter Objectives 503 Preview Case Federal Express: Losing a Packet in Europe 503 Introduction 506 Competitor Analysis 506 Identifying the Company's Competitors 507 Determining Competitors' Objectives 508 Identifying Competitors' Strategies 509 Assessing Competitors' Strengths and Weaknesses 510 Estimating Competitors' Reaction Patterns 510 Selecting Competitors to Attack and Avoid 511 Designing the Competitive Intelligence System 515 Competitive Strategics 5.15 Competitive Positions 516 Competitive Moves 519 Market-Leader Strategies 520 Market-Challenger Strategies 529 Market-Follower Strategics 532 Market-Nieher Strategies 534 Balancing Customer and Competitor Orientations 538 Summary 539 Key Terms 463 Discussing the Issues 463 Applying the Concepts 463 References 464 Case 10 Schott: Positioning for Success 465 Chapter 11 Building Customer Relationships: Customer Satisfaction, Quality, Value and Service 467 Chapter Objectives 467 Preview Case Rubbermaid: Want to Buy an Expensive Rubber Dustpan? 467 Introduction 471 Satisfying Customer Needs 471 Defining Customer Value and Satisfaction 472 Customer Value 472 Customer Satisfaction 475 Delivering Customer Value and Satisfaction 480 Value Chain 480 Value Delivery System 481 Retaining Customers 482 The Cost of Lost Customers 482 The Need for Customer Retention 483 Relationship Marketing 483 When to Use Relationship Marketing 488 The Ultimate Test; Customer Profitability 489 Creating Competitive Advantages 50,'J Key Terms 540 Discussing the Issues 540 Applying the Concepts 541 References 541 Case 12 BMW: Putting the 'Brrrrum' Back in Bruni 543 Overview Case Three Cadbury's Timeout: Choc Around the Clock 549 Part Four Product 556 Implementing Total Quality Marketing 491 Summary 495 Key Terms 496 Discussing the Issues 496 Applying the Concepts 497 References 497 Case 11 Feinschmeckcr Sauce: Pricey 'n' Spicy 498 Chapter 13 Brands, Products., Packaging and Services 558 Chapter Objectives 558 Contents Preview Case Revlon 558 Introduction 560 What is a Product? 561 Product Classifications 562 Consumer Products 563 Industrial Products 565 Individual Product Decisions 566 Product Attributes 566 Branding 570 Packaging Decisions 583 Labelling Decisions 585 Pro duct-Support Services Decisions 585 Product Line Decisions 588 Product Line-Length Decisions 588 Product-Mix Decisions 591 International Product Decisions 593 Summary 593 Key Terms 595 Discussing the Issues 595 Applying the Concepts 595 References 596 Case 13 Colgate: One Squeeze Too Many? 597 Chapter 14 Product Development and Life-Cycle Strategies 601 Chapter Objectives 601 Preview Case Aerostinctures Ramble 601 Introduction 603 Innovation and New-Product Development 603 Risks and Returns in Innovation 604 Why Do New Products Fail? 604 What Governs New-Product Success? 605 New-Product Development Process 606 New-Product Strategy 607 Idea Generation 607 Idea Screening 611 Concept Development and Testing 612 Marketing Strategy Development 613 Business Analysis 614 Product Development 615 Test Marketing 616 Commercialization 622 Speeding Up New-Product Development 623 Organization for Innovation 625 Product Life-Cycle Strategies 626 Introduction Stage 629 XI Growth Stage 630 Maturity Stage 630 Decline Stage 633 Summary 635 Key Terms 636 Discussing the issues 636 Applying the Concepts 636 References 637 Case 14 The Swatchmobile: Any Colour Combination, Including Black 638 Chapter 15 Marketing Services 643 Chapter Objectives 643 Preview Case Lufthansa: Listening to Customers 643 Introduction 645 Nature and Characteristics of a Service 646 Defining Services 646 Types of Service 646 Service Characteristics 647 Marketing Strategies for Service Firms 654 Managing Differentiation 655 Managing Service Quality 657 Managing Productivity 661 _ International Services Marketing 661 Summary 665 Key Terms 666 Discussing the Issues 666 Applying the Concepts 666 References 667 Case 15 Tibigarden: Is there Life after EuroDisney? 668 Overview Case Four Mattel: Getting it Right is No Child's Play 673 Part Five Price 676 Chapter 16 Pricing Considerations and Approaches 678 Market Segmentation • 381 broad segments that make up a market and adapts its offers to match more closely the needs of one or more segments Thus, BMW has designed specifie models for different income and age groups In fact, it sells models for segments with varied combinations of age and income: for instance, the short wheelbase for young urban drivers Hilton markets to a variety of segments - business travellers, families and others - with packages adapted to their varying needs Segment marketing offers several benefits over mass marketing The company can market more efficiently, targeting its products or services, channels and communications programmes towards only consumers that it can serve best Thfc company can also market mure effectively by fine-tuning its products, prices and programmes to the needs of carefully defined segments And the company may face fewer competitors if tower competitors are focusing on this market segment • Niche Marketing Market segments are normally large identifiable groups within a market - for example, luxury car buyers, performance car buyers, utility car buyers and economy car buyers Niche marketing focuses on subgroups within these segments A niche is a more narrowly defined group, usually identified by dividing a segment into subsegments or by defining a group with a distinctive set of traits who may seek a special combination of benefits For example, the utility vehicles segment might include light trucks and off-the-road vehicles And the off-theroad vehicles subsegment might be further divided into the utilitarian segment (Land Rover), light sports utility vehicles (Suzuki) and luxury sports utility vehicles (Range Rover and Lexus) niches Whereas segments are fairly large and normally attract several competitors, aiches are smaller and normally attract only one or a few competitors Niche marketers presumably understand their niches' needs so well that their customers willingly pay :i price premium For example, Ferrari gets a high price for its cars because its loyal buyers feel that no other automobile comes close to offering the produet-serviee-membership benefits that Ferrari docs Niching offers smaller companies an opportunity to compete by focusing their limited resources on serving niches that may be unimportant to or overlooked by larger competitors For example, Mark Warner succeeds by selling to distinct holiday niches: all-inclusive family water sports holidays in southern Europe to northern Europeans, and no-kids holidays for older people who want some peace and quiet However, large companies also practise niche marketing For example, American Express offers not only its traditional green cards but also gold cards, corporate cards and even platinum cards aimed at a niche consisting of the topspending per cent of its 36 million cardholders.2 And Nike makes athletic gear for basketball, running and soccer, but also for smaller niches such as biking and street hockey In many markets today, niches are the norm As an advertising agency executive observed: 'There will be no market for products that everybody likes a little, only for products that somebody likes a lot.'3 Other experts assert that companies will have to'niche or be niched' • Micro marketing Segment and niche marketers tailor their offers and marketing programmes So meet the needs of various market segments At the same time, however, they not customize their offers to each individual customer Thus, segment marketing and niche marketing fall between the extremes of mass marketing and niche marketing Adapting a company's offerings to more closely match the needs of one or more subsegments