Marketing an introduction 12e kotler 1

www.freebookslides.com Marketing  An Introduction For these Global Editions, the editorial team at Pearson has collaborated with educators across the world to address a wide range of subjects and requirements, equipping students with the best possible learning tools This Global Edition preserves the cutting-edge approach and pedagogy of the original, but also features alterations, customization and adaptation from the North American version Global edition Global edition Global edition TWELFTH edition Marketing An Introduction TWELFTH edition Armstrong • Kotler Gary Armstrong • Philip Kotler This is a special edition of an established title widely used by colleges and universities throughout the world Pearson published this exclusive edition for the benefit of students outside the United States and Canada If you purchased this book within the United States or Canada you should be aware that it has been imported without the approval of the Publisher or Author Pearson Global Edition Armstrong_1292016787_mech.indd 07/04/14 9:16 PM www.freebookslides.com Marketing An Introduction Twelfth Edition Global Edition Gary Armstrong University of North Carolina Philip Kotler Northwestern University Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo A01_ARMS1276_12_SE_FM.indd # 149127   Cust: Pearson   Au: Armstrong  Pg No Title: Marketing: An Introduction 12/e    Server: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 11/04/14 2:37 PM www.freebookslides.com Editor in Chief: Stephanie Wall Acquisitions Editor: Mark Gaffney Program Manager Team Lead: Ashley Santora Program Manager: Jennifer M Collins Editorial Assistant: Daniel Petrino Director of Marketing: Maggie Moylan Executive Marketing Manager: Anne Fahlgren Project Management Lead: Judy Leale Senior Project Manager: Jacqueline A Martin Senior Acquisitions Editor, Global Edition: Steven Jackson Project Editor, Global Edition: Arundati Dandapani Marketing Manager, Global Edition: Kristin Borgert Cover Designer, Global Edition: Karen Salzbach Senior Manufacturing Controller, Production, Global Edition: Trudy Kimber Procurement Specialist: Nancy Maneri Creative Director: Blair Brown Senior Art Director: Janet Slowik VP, Director of Digital Strategy & Assessment: Paul Gentile Digital Editor: Brian Surette Digital Development Manager: Robin Lazrus Digital Project Manager: Alana Coles MyLab Product Manager: Joan Waxman Digital Production Project Manager: Lisa Rinaldi Full-Service Project Management: Roxanne Klaas,   S4Carlisle Publishing Services Cover Printer: Courier Kendallville Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsonglobaleditions.com © Pearson Education Limited 2015 The rights of Gary Armstrong and Philip Kotler to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988 Authorized adaptation from the United States edition, entitled Marketing: An Introduction, 12th edition, ISBN 978-0-13-345127-6 by Gary Armstrong and Philip Kotler, published by Pearson Education © 2015 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 either the prior written permission of the publisher or a license permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS All trademarks used herein are the property of their respective owners.The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on the appropriate page within the text Microsoft and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published as part of the services for any purpose All such documents and related graphics are provided “as is” without warranty of any kind Microsoft and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all warranties and conditions of merchantability, whether express, implied or statutory, fitness for a particular purpose, title and non-infringement In no event shall Microsoft and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from the services The documents and related graphics contained herein could include technical inaccuracies or typographical errors Changes are periodically added to the information herein Microsoft and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time Partial screen shots may be viewed in full within the software version specified Microsoft® and Windows® are registered trademarks of the Microsoft Corporation in the U.S.A and other countries This book is not sponsored or endorsed by or affiliated with the Microsoft Corporation ISBN 10: 1-292-01678-7 ISBN 13: 978-1-292-01678-8 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library 10 9 8 7 6 5 4 3 2 1 14 13 12 11 10 Typeset in 10/12 Times LT Standard by S4Carlisle Publishing Services Printed and bound by Courier Kendallville in The United States of America # 149127   Cust: Pearson   Au: Armstrong  Pg No Marketing: An Introduction 12/e    Server: A01_ARMS1276_12_SE_FM.indd Title: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 11/04/14 2:37 PM www.freebookslides.com To Kathy, Betty, KC, Keri, Mandy, Matt, Delaney, Molly, Macy, and Ben; Nancy, Melissa, and Jessica A01_ARMS1276_12_SE_FM.indd # 149127   Cust: Pearson   Au: Armstrong  Pg No Title: Marketing: An Introduction 12/e    Server: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 11/04/14 2:37 PM www.freebookslides.com # 149127   Cust: Pearson   Au: Armstrong  Pg No Marketing: An Introduction 12/e    Server: A01_ARMS1276_12_SE_FM.indd Title: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 11/04/14 2:37 PM www.freebookslides.com About the Authors As a team, Gary Armstrong and Philip Kotler provide a blend of skills uniquely suited to writing an introductory marketing text Professor Armstrong is an award-winning teacher of undergraduate business students Professor Kotler is one of the world’s leading authorities on marketing Together they make the complex world of marketing practical, approachable, and enjoyable Gary Armstrong is Crist W Blackwell Distinguished Professor Emeritus of ­ ndergraduate Education in the Kenan-Flagler Business School at the University of North U Carolina at Chapel Hill He holds an undergraduate degree and a master’s degree in business from Wayne State University in Detroit, and he received his Ph.D 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 marketing research, sales management, and marketing strategy But Professor Armstrong’s first love has always been teaching 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 administration of Kenan-Flagler’s undergraduate program His administrative 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 campus-wide and Business School teaching awards He is the only repeat recipient of the school’s highly regarded Award for Excellence in Undergraduate Teaching, 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 by the 16-campus University of North Carolina system Philip Kotler is S C Johnson & Son Distinguished Professor of International Marketing at the Kellogg School of Management, Northwestern University He received his master’s degree at the University of Chicago and his Ph.D at M.I.T., both in economics Dr Kotler is author of Marketing Management (Pearson Prentice Hall), now in its 14th edition and the world’s most widely used marketing textbook in graduate schools of business worldwide He has authored dozens of other successful books and has written more than 100 articles in leading 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 Scholarship and Practice His numerous other major honors include the Sales and Marketing Executives International Marketing Educator of the Year Award; the ­European ­Association of Marketing Consultants and Trainers Marketing Excellence Award; the Charles Coolidge Parlin Marketing Research Award; and the Paul D Converse Award, given by the ­American Marketing Association to honor “outstanding contributions to s­cience in marketing.” 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 influential business writer/guru” of the twenty-first century Dr Kotler has served as chairman of the College on Marketing of the Institute of ­Management Sciences, a director of the American Marketing Association, and a trustee A01_ARMS1276_12_SE_FM.indd # 149127   Cust: Pearson   Au: Armstrong  Pg No Title: Marketing: An Introduction 12/e    Server: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 11/04/14 2:38 PM www.freebookslides.com About the Authors of the Marketing 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 marketing He has traveled and lectured extensively throughout Europe, Asia, and South America, advising companies and governments about global marketing practices and opportunities # 149127   Cust: Pearson   Au: Armstrong  Pg No Marketing: An Introduction 12/e    Server: A01_ARMS1276_12_SE_FM.indd Title: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 11/04/14 2:38 PM www.freebookslides.com Brief Contents PART DEFINING MARKETING AND THE MARKETING PROCESS   30 PART Company and Marketing Strategy: Partnering to Build Customer Value and Relationships   64 UNDERSTANDING THE MARKETPLACE AND CUSTOMER VALUE   92 PART Analyzing the Marketing Environment   92 Managing Marketing Information to Gain Customer Insights   124 Understanding Consumer and Business Buyer Behavior   158 DESIGNING A CUSTOMER VALUE–DRIVEN STRATEGY AND MIX   196 10 11 12 13 14 PART Customer-Driven Marketing Strategy: Creating Value for Target Customers   196 Products, Services, and Brands: Building Customer Value   228 New Product Development and Product Life-Cycle Strategies   264 Pricing: Understanding and Capturing Customer Value   292 Marketing Channels: Delivering Customer Value   330 Retailing and Wholesaling  362 Engaging Consumers and Communicating Customer Value: Advertising and Public Relations   394 Personal Selling and Sales Promotion   430 Direct, Online, Social Media, and Mobile Marketing   462 EXTENDING MARKETING  494 15 16 Marketing: Creating and Capturing Customer Value   30 Appendix Appendix Appendix The Global Marketplace   494 Sustainable Marketing: Social Responsibility and Ethics   522 Company Cases  551 Marketing Plan  585 Marketing by the Numbers   597 Glossary  615 References  625 Index  651 A01_ARMS1276_12_SE_FM.indd # 149127   Cust: Pearson   Au: Armstrong  Pg No Title: Marketing: An Introduction 12/e    Server: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 11/04/14 2:39 PM www.freebookslides.com # 149127   Cust: Pearson   Au: Armstrong  Pg No Marketing: An Introduction 12/e    Server: A01_ARMS1276_12_SE_FM.indd Title: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 11/04/14 2:39 PM www.freebookslides.com Contents Preface 19 Acknowledgments 27 PART DEFINING MARKETING AND THE MARKETING PROCESS  30 Marketing: Creating and Capturing Customer Value 30 CHAPTER ROAD MAP  30 Objective Outline  30  •  Previewing the Concepts  30  •  First Stop  31 What Is Marketing?  32 Marketing Defined  33  •  The Marketing Process  33 Understanding the Marketplace and Customer Needs  34 Customer Needs, Wants, and Demands  34  •  Market Offerings—Products, Services, and Experiences  34  •  Customer Value and Satisfaction  35  •  Exchanges and Relationships  35  •  Markets  36 Designing a Customer-Driven Marketing Strategy  37 Selecting Customers to Serve  37  •  Choosing a Value Proposition  37  •  Marketing Management Orientations 37 Preparing an Integrated Marketing Plan and Program  40 Building Customer Relationships  41 Customer Relationship Management  41 Marketing at Work 1.1:  Toyota Japan: The Customer Always Comes First  43 Engaging Customers  45 Marketing at Work 1.2:  British Airways: Customer Orientation at Its Peak  47 Partner Relationship Management  49 Capturing Value from Customers  49 Creating Customer Loyalty and Retention  49  •  Growing Share of Customer  50  •  Building Customer Equity 50 The Changing Marketing Landscape  52 The Digital Age: Online, Mobile, and Social Media Marketing  52  •  The Changing Economic Environment  54  •  The Growth of Not-for-Profit Marketing  55  •  Rapid Globalization  56  •  Sustainable Marketing—The Call for More Environmental and Social Responsibility  56 So, What Is Marketing?: Pulling It All Together  57 END OF CHAPTER: REVIEWING THE CONCEPTS  59 CHAPTER REVIEW AND KEY TERMS  •  Objectives Review  59  •  Key Terms  60  •  DISCUSSION AND CRITICAL THINKING  •  Discussion Questions  61  •  Critical Thinking Exercises  61  •  MINICASES AND APPLICATIONS  •  Online, Mobile, and Social Media Marketing  61  • Marketing Ethics  62  •  Marketing by the Numbers  62  •  Video Case  62  •  Company Cases  63 A01_ARMS1276_12_SE_FM.indd # 149127   Cust: Pearson   Au: Armstrong  Pg No Title: Marketing: An Introduction 12/e    Server: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 11/04/14 2:39 PM www.freebookslides.com Chapter 2: Company and Marketing Strategy 85 inventory levels, and with finance about funding and cash flows They also connect with outside people, such as advertising agencies to plan ad campaigns and the news media to obtain publicity support The sales force works closely with automobile manufacturers and supports independent Michelin dealers and large retailers like Walmart in their efforts to convince buyers of all types and sizes of tires that “The right tire changes everything.” Marketing Department Organization The company must design a marketing organization that can carry out marketing strategies and plans If the company is very small, one person might all the research, selling, advertising, customer service, and other marketing work As the company expands, however, a marketing department emerges to plan and carry out marketing activities In large companies, this department contains many specialists—product and market managers, sales managers and salespeople, market researchers, and advertising experts, among others To head up such large marketing organizations, many companies have now created a chief marketing officer (or CMO) position This person heads up the company’s entire marketing operation and represents marketing on the company’s top management team The CMO position puts marketing on equal footing with other “C-level” executives, such as the chief operating officer (COO) and the chief financial officer (CFO) As a member of top management, the CMO’s role is to champion the customer’s cause—to be the “chief customer officer.”16   Marketing implementation: At Michelin, marketing implementation Modern marketing departments can be arranged in several requires that thousands of people inside and outside the company work ways The most common form of marketing organization is together to convince customers that “The right tire changes everything.” the functional organization Under this organization, different Michelin North America marketing activities are headed by a functional specialist—a sales manager, an advertising manager, a marketing research manager, a customer service manager, or a new product manager A company that sells across the country or internationally often uses a geographic organization Its sales and marketing people are assigned to specific countries, regions, and districts Geographic organization allows salespeople to settle into a territory, get to know their customers, and work with a minimum of travel time and cost Companies with many very different products or brands often create a product management organization Using this approach, a product manager develops and implements a complete strategy and marketing program for a specific product or brand For companies that sell one product line to many different types of markets and customers who have different needs and preferences, a market or customer management organization might be best A market management organization is similar to the product management organization Market managers are responsible for developing marketing strategies and plans for their specific markets or customers This system’s main advantage is that the company is organized around the needs of specific customer segments Many companies develop special organizations to manage their relationships with large customers For example, companies such as P&G and Stanley Black & Decker have created large teams, or even whole divisions, to serve large customers, such as Walmart, Target, Safeway, or Home Depot Large companies that produce many different products flowing into many different geographic and customer markets usually employ some combination of the functional, geographic, product, and market organization forms Marketing organization has become an increasingly important issue in recent years More and more, companies are shifting their brand management focus toward customer management—moving away from managing only product or brand profitability and M02_ARMS6788_12_SE_CH02.indd 85 # 149127   Cust: Pearson   Au: Armstrong  Pg No 85 Title: Marketing: An Introduction 12/e    Server: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:29 PM www.freebookslides.com 86 Part 1: Defining Marketing and the Marketing Process toward managing customer profitability and customer equity They think of themselves not as managing portfolios of brands but as managing portfolios of customers And rather than managing the fortunes of a brand, they see themselves as managing customer– brand engagement, experiences, and relationships Marketing Control Because many surprises occur during the implementation of marketing plans, marketers must practice constant marketing control—evaluating the results of marketing strategies and plans and taking corrective action to ensure that the objectives are attained Marketing control involves four steps Management first sets specific marketing goals It then measures its performance in the marketplace and evaluates the causes   Marketers must continually plan their analysis, implementation, and of any differences between expected and actual perforcontrol activities mance Finally, management takes corrective action to © Yuri Arcurs/Shutterstock close the gaps between goals and performance This may require changing the action programs or even changing the goals Operating control involves checking ongoing performance against the annual plan and taking corrective action when necessary Its purpose is to ensure that the company achieves Marketing control the sales, profits, and other goals set out in its annual plan It also involves determining Measuring and evaluating the results the profitability of different products, territories, markets, and channels Strategic control of marketing strategies and plans and taking corrective action to ensure that involves looking at whether the company’s basic strategies are well matched to its opportuthe objectives are achieved nities Marketing strategies and programs can quickly become outdated, and each company should periodically reassess its overall approach to the marketplace Author Comment Measuring marketing return on investment has become a major emphasis But it can be difficult For example, a Super Bowl ad reaches more than 100 million consumers but may cost $4 million for 30 seconds of airtime How you measure the return on such an investment in terms of sales, profits, and building customer engagement and relationships? We’ll look at this question again in Chapter 12 Marketing return on investment (or marketing ROI) The net return from a marketing investment divided by the costs of the marketing investment Measuring and Managing Return on Marketing Investment Marketing managers must ensure that their marketing dollars are being well spent In the past, many marketers spent freely on big, expensive marketing programs and flashy advertising campaigns, often without thinking carefully about the financial returns on their spending Their goal was often a general one—to “build brands and consumer preference.” They believed that marketing produces intangible creative outcomes, which not lend themselves readily to measures of productivity or return In today’s leaner economic times, however, all that has changed The free-spending days have been replaced by a new era of marketing measurement and accountability More than ever, today’s marketers are being held accountable for linking their strategies and tactics to measurable marketing performance outcomes One important marketing performance measure is marketing return on investment (or marketing ROI) Marketing ROI is the net return from a marketing investment divided by the costs of the marketing investment It measures the profits generated by investments in marketing activities In one recent survey, 64 percent of senior marketers rated accountability as a top concern, well ahead of the 50 percent rating the hot topic of integrated marketing communications as a top concern However, another survey found that only 45 percent of organizations were satisfied with their measurement of marketing ROI A startling 57 percent of CMOs don’t take ROI measures into account when setting their marketing budgets, and an evenmore startling 28 percent said they base their marketing budgets on “gut instinct.” Clearly, marketers must think more strategically about the marketing performance returns of their marketing spending.17 # 149127   Cust: Pearson   Au: Armstrong  Pg No 86 Marketing: An Introduction 12/e    Server: M02_ARMS6788_12_SE_CH02.indd Title: 86 C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:29 PM www.freebookslides.com Chapter 2: Company and Marketing Strategy 87 Marketing ROI can be difficult to measure In measuring financial ROI, both the R and the I are uniformly measured in dollars For example, when buying a piece of equipment, the productivity gains resulting from the purchase are fairly straightforward As of yet, however, there is no consistent definition of marketing ROI For instance, returns such as advertising and brand-building impact aren’t easily put into dollar returns A company can assess marketing ROI in terms of standard marketing performance measures, such as brand awareness, sales, or market share Many companies are assembling such measures into marketing dashboards—meaningful sets of marketing performance measures in a single display used to monitor strategic marketing performance Just as automobile dashboards present drivers with details on how their cars are performing, the marketing dashboard gives marketers the detailed measures they need to assess and adjust their marketing strategies For example, VF Corporation uses a marketing dashboard to track the performance of its more than 30 lifestyle apparel brands—including Wrangler, Lee, The North Face, Vans, Nautica, For All Mankind, Timberland, and others VF’s marketing dashboard tracks brand equity and trends, share of voice, market share, online sentiment, and marketing ROI in key markets worldwide, not only for VF brands but also for competing brands.18 Increasingly, however, beyond standard performance measures, marketers are using customer-centered measures of marketing impact, such as customer acquisition, customer engagement, customer retention, customer lifetime value, and customer equity These measures capture not only current marketing performance but also future performance resulting from stronger customer relationships  Figure 2.8 views marketing expenditures as investments that produce returns in the form of more profitable customer relationships.19 Marketing investments result in improved customer value, engagement, and satisfaction, which in turn increases customer attraction and retention This increases individual customer lifetime values and the firm’s overall customer equity Increased customer equity, in relation to the cost of the marketing investments, determines return on marketing investment Regardless of how it’s defined or measured, the marketing ROI concept is here to stay In good times or bad, marketers will be increasingly accountable for the performance outcomes of their activities As one marketer puts it, marketers “have got to know how to count.”20   Figure 2.8  Marketing Return on Investment Marketing investments Source: Adapted from Roland T Rust, Katherine N Lemon, and Valerie A Zeithaml, “Return on Marketing: Using Consumer Equity to Focus ­Marketing Strategy,” Journal of Marketing, January 2004, p 112 Used with permission Marketing returns Improved customer value and engagement Beyond measuring marketing return on investment in terms of standard performance measures such as sales or market share, many companies are using customer relationship measures, such as customer satisfaction, engagement, retention, and equity These are more difficult to measure but capture both current and future performance Increased customer attraction Increased customer retention Cost of marketing investment Increased customer lifetime values and customer equity Marketing return on investment M02_ARMS6788_12_SE_CH02.indd 87 # 149127   Cust: Pearson   Au: Armstrong  Pg No 87 Title: Marketing: An Introduction 12/e    Server: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:29 PM www.freebookslides.com 88 Part 1: Defining Marketing and the Marketing Process MyMarketingLab Go to www.pearsonglobaleditions.com/mymarketinglab to complete the problems marked with this icon End of Chapter Reviewing the Concepts Chapter Review and Key Terms Objectives Review In Chapter 1, we defined marketing and outlined the steps in the marketing process In this chapter, we examined company-wide strategic planning and marketing’s role in the organization Then we looked more deeply into marketing strategy and the marketing mix and reviewed the major marketing management functions So you’ve now had a pretty good overview of the fundamentals of modern marketing OBJECTIVE 1  Explain company-wide strategic planning and its four steps (pp 66–70) Strategic planning sets the stage for the rest of the company’s planning Marketing contributes to strategic planning, and the overall plan defines marketing’s role in the company Strategic planning involves developing a strategy for longrun survival and growth It consists of four steps: (1) defining the company’s mission, (2) setting objectives and goals, (3)  designing a business portfolio, and (4) developing functional plans The company’s mission should be market oriented, realistic, specific, motivating, and consistent with the market environment The mission is then transformed into detailed supporting goals and objectives, which in turn guide decisions about the business portfolio Then each business and product unit must develop detailed marketing plans in line with the companywide plan OBJECTIVE 2  Discuss how to design business portfolios and develop growth strategies (pp 70–74) Guided by the company’s mission statement and objectives, management plans its business portfolio, or the collection of businesses and products that make up the company The firm wants to produce a business portfolio that best fits its strengths and weaknesses to opportunities in the environment To this, it must analyze and adjust its current business portfolio and develop growth and downsizing strategies for adjusting the future portfolio The company might use a formal portfolioplanning method But many companies are now designing more-­customized portfolio-planning approaches that better suit their unique situations # 149127   Cust: Pearson   Au: Armstrong  Pg No 88 Marketing: An Introduction 12/e    Server: M02_ARMS6788_12_SE_CH02.indd Title: 88 OBJECTIVE 3  Explain marketing’s role in strategic planning and how marketing works with its partners to create and deliver customer value (pp 74–76) Under the strategic plan, the major functional departments—­ marketing, finance, accounting, purchasing, operations, information systems, human resources, and others—must work together to accomplish strategic objectives Marketing plays a key role in the company’s strategic planning by providing a marketing concept philosophy and inputs regarding attractive market opportunities Within individual business units, marketing designs strategies for reaching the unit’s objectives and helps to carry them out profitably Marketers alone cannot produce superior value for customers Marketers must practice partner relationship management, working closely with partners in other departments to form an effective value chain that serves the customer And they must also partner effectively with other companies in the marketing system to form a competitively superior value delivery network OBJECTIVE 4  Describe the elements of a customerdriven marketing strategy and mix and the forces that influence it (pp 76–82) Customer value and relationships are at the center of marketing strategy and programs Through market segmentation, targeting, differentiation, and positioning, the company divides the total market into smaller segments, selects segments it can best serve, and decides how it wants to bring value to target consumers in the selected segments It then designs an integrated marketing mix to produce the response it wants in the target market The marketing mix consists of product, price, place, and promotion decisions (the four Ps) OBJECTIVE 5  List the marketing management functions, including the elements of a marketing plan, and discuss the importance of measuring and managing marketing return on investment (pp 82–87) To find the best strategy and mix and to put them into action, the company engages in marketing analysis, planning, implementation, and control The main components of a marketing plan are C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:29 PM www.freebookslides.com Chapter 2: Company and Marketing Strategy 89 the executive summary, the current marketing situation, threats and opportunities, objectives and issues, marketing strategies, action programs, budgets, and controls Planning good strategies is often easier than carrying them out To be successful, companies must also be effective at implementation—turning marketing strategies into marketing actions Marketing departments can be organized in one way or a combination of ways: functional marketing organization, geographic organization, product management organization, or market management organization In this age of customer relationships, more and more companies are now changing their organizational focus from product or territory management to customer relationship management Marketing organizations carry out marketing control, both operating control and strategic control More than ever, marketing accountability is the top marketing concern Marketing managers must ensure that their marketing dollars are being well spent In a tighter economy, today’s marketers face growing pressures to show that they are adding value in line with their costs In response, marketers are developing better measures of marketing return on investment Increasingly, they are using customer-centered measures of marketing impact as a key input into their strategic decision making Key Terms Objective Strategic planning (p 66) Mission statement (p 67) Objective Business portfolio (p 70) Portfolio analysis (p 71) Growth-share matrix (p 71) Product/market expansion grid (p 73) Market penetration (p 73) Market development (p 74) Product development (p 74) Diversification (p 74) Objective Value chain (p 75) Value delivery network (p 76) Objective Marketing strategy (p 76) Market segmentation (p 77) Market segment (p 77) Market targeting (p 78) Positioning (p 78) Differentiation (p 80) Marketing mix (p 80) Objective SWOT analysis (p 82) Marketing implementation (p 83) Marketing control (p 86) Marketing return on investment (marketing ROI) (p 86) Discussion and Critical Thinking Discussion Questions 2-1 Define strategic planning and briefly describe the four steps that lead managers and the firm through the strategic planning process Discuss the role marketing plays in this process (AACSB: Written and Oral Communication) 2-2 What is a SWOT analysis? How is this analysis useful in developing and implementing marketing strategies? (AACSB: Written and Oral Communication) 2-3 Explain the roles of market segmentation, market targeting, differentiation, and positioning in implementing an effective marketing strategy (AACSB: Written and Oral Communication) 2-4 Define each of the four Ps What insights might a firm gain by considering the four Cs rather than the four Ps? (AACSB: Written and Oral Communication; Reflective Thinking) 2-5 The organization of marketing departments can differ Find two examples from your country illustrating department organization and featuring specific adaptations related to culture or media mix (AACSB: Written and Oral Communication, Reflective Thinking) 2-6 Discuss the four marketing management functions (AACSB: Written and Oral Communication) Critical Thinking Exercises 2-7 In a small group, research a company and construct a growth-share matrix of the company’s products, brands, or strategic business units Recommend a strategy for each unit in the matrix (AACSB: Written and Oral Communication; Reflective Thinking) M02_ARMS6788_12_SE_CH02.indd 89 2-8 Find the mission statements of two for-profit and two not-for-profit organizations Evaluate these mission statements with respect to their market orientations (AACSB: Written and Oral Communication; Reflective Thinking) # 149127   Cust: Pearson   Au: Armstrong  Pg No 89 Title: Marketing: An Introduction 12/e    Server: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:29 PM www.freebookslides.com 90 Part 1: Defining Marketing and the Marketing Process Mini Cases and Applications Online, Mobile, and Social Media Marketing  The PC-osaurus In 2011, Hewlett-Packard CEO Leo Apothekar made the strategic decision to exit the personal computer (PC) business, but he got fired and incoming CEO Meg Wittman reversed that decision However, sales of PCs have plummeted since the introduction of post-PC devices such as tablets, e-readers, and smartphones In the first quarter of 2013 alone, total PC shipments fell almost 14 percent, and no one felt that more than leading PC-maker HP The company’s PC sales fell 23.7 percent that quarter Now, PC-makers are dropping prices—some more than 50 percent— on laptops and some are offering touchscreens to compete with tablets and mobile devices in an attempt to gain back market share HP’s former CEO wanted to shift strategic focus more toward offering software to business markets Maybe he had read the future correctly and was on the right strategic path With the game-changing introduction of tablets, mobile technology, and social media, the future is not what it used to be 2-9 Explain which product/market expansion grid strategy PC-makers are currently pursuing to deal with the threat of post-PC devices Is this a smart strategy? (AACSB: Written and Oral Communication; Reflective Thinking) Marketing Ethics  Predicting the Future Back in 1966, Time magazine made a prediction of the retail world in 2000 It confidently predicted that remote shopping, although feasible, would never be likely to catch on Time made this prediction based on the reasoning that women, in particular, like to handle merchandise before they purchase it Not only was the prediction hugely inaccurate, it was chauvinistic as well Global online sales are now in excess of $500 billion It is not only men who spend massive sums online, but also women, in direct contradiction of the Time prediction In contrast to this poor prediction, there are cases of articles in the press correctly predicting digital trends in the future, but many predictions still fall short of reality For example, Robert Metcalf, the inventor of the ethernet, made a prediction in 1995 that, within a year, the Internet would spectacularly collapse In 2007, the New York Times predicted that Twitter would never be any more relevant to modern-day communication than an old-fashioned short-wave radio Tuning into predictions can be dangerous, but should they really be ignored? 2-10 In some cases, short-term predictions are far more ­reliable than longer-term ones To what extent should businesses base their long-term planning on the views of “experts”? (AACSB: Written and Oral Communication; Ethical Understanding and Reasoning) 2-11 Business Monitor International is one of several organizations that seek to predict future trends in sectors, countries, and financial markets How are these services sold to businesses as legitimate business planning tools? (AACSB: Written and Oral Communication; Reflective Thinking) Marketing by the Numbers  Apple vs Samsung The two giants of the smartphone and tablet markets, Apple and Samsung, lock horns across the globe Amid accusations of patent stealing, the two companies vie for dominance in markets with increasingly bitter words Each company has its devotees; each company has a host of new ideas, gadgets, and applications Each time one company gains a temporary advantage, the other strikes back with something new Is there room on the global stage for both of them? Appendix 3, Marketing by the Numbers, discusses other marketing profitability measures beyond the return on marketing investment (marketing ROI) measure described in this chapter Review Appendix to answer the questions using the following information from Apple’s and Samsung’s income statements (all numbers are in millions): # 149127   Cust: Pearson   Au: Armstrong  Pg No 90 Marketing: An Introduction 12/e    Server: M02_ARMS6788_12_SE_CH02.indd Title: 90   Apple Samsung Sales Gross Profit Marketing Expenses Net Income (Profit) $170,910 $ 64,304 $  8,122.5 $ 50,155 $189,680 $ 70,228 $ 23,396 $ 18,986 2-12 Calculate profit margin, net marketing contribution, marketing return on sales (or marketing ROS), and marketing return on investment (or marketing ROI) for both companies Which company is performing better? (AACSB: Written and Oral Communication; Information ­Technology; Analytical Thinking) C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:29 PM www.freebookslides.com Chapter 2: Company and Marketing Strategy 91 2-13 Find the income statements for two other competing companies in your region of the world Perform the same analysis for these companies that you performed in the previous question Which company is doing better overall and with respect to marketing? For marketing expenses, use 75 percent of the company’s reported “Selling General and Administrative” expenses, as not all of the expenses in that category are marketing expenses (AACSB: Written and Oral Communication; Analytical Thinking; Reflective Thinking) Video Case  OXO You might know OXO for its well-designed, ergonomic kitchen gadgets But OXO’s expertise at creating handheld tools that look great and work well has promoted the company to expand into products for bathrooms, garages, offices, babies’ rooms, and even medicine cabinets In the past, this award-winning manufacturer has managed to move its products into almost every home in the United States by relying on a consistent, sometimes nontraditional marketing strategy However, in a highly competitive and turbulent market, OXO has focused on evaluating and modifying its marketing strategy in order to grow the brand This video demonstrates how OXO is using strategic planning to ensure that its marketing strategy results in the best marketing mix for the best and most profitable customers After viewing the video featuring OXO, answer the following questions: 2-14 What is OXO’s mission? 2-15 What are some of the market conditions that have led OXO to reevaluate its marketing strategy? 2-16 How has OXO modified its marketing mix? Are these changes in line with its mission? Company Cases  Dyson America / In-N-Out Burger / Xerox See Appendix for cases appropriate for this chapter Case 2, Dyson: Solving Customer Problems in Ways They Never Imagined Dyson focuses on ho-hum product lines that haven’t changed in decades, infusing them with technology that solves consumers’ long-accepted problems Case 1, In-N-Out Burger: Customer Value the Old-Fashioned Way In-N-Out Burger provides value to customers by giving them exactly what they want, and never changing a thing Case 3, Xerox: Adapting to the Turbulent Marketing Environment When the marketing environment changed and photocopying began to decline, Xerox created a new strategy that would allow it to succeed MyMarketingLab Go to www.pearsonglobaleditions.com/mymarketinglab for the following Assisted-graded writing questions: 2-17 Marketers are increasingly held accountable for demonstrating marketing success Research the various marketing metrics, in addition to those described in the chapter and Appendix 3, used by marketers to measure marketing performance Write a brief report of your findings (AACSB: Written and Oral Communication; Reflective Thinking) 2-18 Discuss how companies such as HP and other PC-makers can adapt to and capitalize on new online, mobile, or social media technologies (AACSB: ­Written and Oral Communication; Reflective Thinking) 2-19 MyMarketingLab Only—comprehensive writing assignment for this chapter M02_ARMS6788_12_SE_CH02.indd 91 # 149127   Cust: Pearson   Au: Armstrong  Pg No 91 Title: Marketing: An Introduction 12/e    Server: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:29 PM www.freebookslides.com Part 1: Defining Marketing and the Marketing Process (Chapters 1–2) Part 2: Understanding the Marketplace and Customer Value (Chapters 3–5) Part 3: Designing a Customer Value–Driven Strategy and Mix (Chapters 6–14) Part 4: Extending Marketing (Chapters 15–16) Analyzing the Marketing Environment Chapter Road Map Objective Outline OBJECTIVE 1  Describe the environmental forces that OBJECTIVE 4  Explain the key changes in the political affect the company’s ability to serve its customers The Microenvironment 95–98; The Macroenvironment 98–100 and cultural environments The Political and Social Environment 112–115; The Cultural Environment 115–118 OBJECTIVE 2  Explain how changes in the demographic and economic environments affect marketing decisions The Demographic Environment 100–107; The Economic Environment 107–109 OBJECTIVE 5  Discuss how companies can react to the marketing environment Responding to the Marketing Environment 118–120 OBJECTIVE 3  Identify the major trends in the firm’s natural and technological environments The Natural Environment 109–110; The Technological Environment 110–111 Previewing the Concepts MyMarketingLab™ Improve Your Grade!* So far, you’ve learned about the basic concepts of marketing and the steps in the marketing process for engaging and building profitable relationships with targeted consumers Next, we’ll begin digging deeper into the first step of the marketing process—understanding the marketplace and customer needs and wants In this chapter, you’ll see that marketing operates in a complex and changing environment Other actors in this environment—suppliers, intermediaries, customers, competitors, publics, and others—may work with or against the company Major environmental forces—demographic, economic, natural, technological, political, and cultural— shape marketing opportunities, pose threats, and affect the company’s ability to build customer relationships To develop effective marketing strategies, a company must first understand the environment in which marketing operates To start, let’s look at Microsoft, the technology giant that dominated the computer software world throughout the 1990s and much of the 2000s With the recent decline in standalone personal computers and the surge in digitally connected devices—everything from smartphones and tablets to Internet-connected *Over 10 million students improved their results using the Pearson MyLabs Visit www.pearsonglobaleditions.com/mymarketinglab for simulations, tutorials, and end-of-chapter problems # 149127   Cust: Pearson   Au: Armstrong  Pg No 92 Marketing: An Introduction 12/e    Server: M03_ARMS6788_12_SE_CH03.indd Title: 92 C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:41 PM www.freebookslides.com TVs—mighty Microsoft has struggled a bit ­recently to find its place in a fast-changing ­digital marketing environment Now, however, the tech giant is making fresh moves to reestablish itself as a relevant brand that consumers can’t live without in the post-PC world First Stop Microsoft: Adapting to the Fast-Changing Digital Marketing Environment Just a dozen years ago, talking high tech meant talking about the almighty personal computer Intel provided the PC microprocessors, and manufacturers such as Dell and HP   In the fast-changing digital marketing environment, mighty Microsoft is making built and marketed the machines But it was fresh moves to reestablish itself as a brand that consumers can’t live without in the Microsoft that really drove the PC industry—it post-PC world made the operating systems that made most Getty Images PCs go As the dominant software developer, Microsoft put its Windows operating system and Office productivity suite on almost every computer sold The huge success of Windows drove Microsoft’s revenues, profits, and stock price to dizzying heights By the start of 2000, the total value of Microsoft’s stock had hit a record $618.9 billion, making it the most valuable company in history In those heady days, no company was more relevant than Microsoft But moving into the new millennium, the high-tech marketing environment took a turn PC sales growth flattened as the world fell in love with a rush of alluring new digital devices and technologies It started with iPods and smartphones, and evolved rapidly into a full complement of digital devices—from e-readers, tablets, and sleek new laptops to Internet-connected TVs and game consoles These devices are connected and mobile, not stationary standalones like the PC Microsoft is They link users to an ever-on, head-spinning new world of undergoing a dramatic information, entertainment, and socialization options transformation to better align And, for the most part, these new devices don’t use the itself with the new digital world old ­Microsoft products Increasingly, even the trusty order in the post-PC era More old PC has become a digital-­connection device—a than just making the software that gateway to the Web, social media, and cloud commakes PCs run, Microsoft wants to be puting And these days, much of that can be done a full digital devices and services without once-indispensable ­Microsoft software company that connects people to In this new digitally connected world, Microsoft communication, productivity, found itself lagging behind more-glamorous competientertainment, and one tors such as Google, Apple, Samsung, and even Amazon another and Facebook, which seemed to provide all things digital— the smart devices, the connecting technologies, and even the digital destinations Over the past decade, although still financially strong and still the world’s dominant PC software provider with 1.3  billion Windows users around the world, ­Microsoft has lost some of its luster In the year 2000—due largely to the collapse of the stock market technology bubble—Microsoft’s value plummeted by 60 percent And whereas other tech stocks recovered, Microsoft’s share price and profits have languished at 2000’s levels for the past dozen years or more But recently, Microsoft has begun a dramatic transformation in its vision and direction to better align itself with the new digital world order Today, rather than just creating the software that makes PCs run, Microsoft wants to be a full-line digital devices and services company that delivers “delightful, seamless technology experiences” that connect people to communication, 93 M03_ARMS6788_12_SE_CH03.indd 93 # 149127   Cust: Pearson   Au: Armstrong  Pg No 93 Title: Marketing: An Introduction 12/e    Server: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:41 PM www.freebookslides.com productivity, entertainment, and one another Its mission is to help people and businesses realize their full professional and personal potential To make this mission a reality, over the past few years, ­Microsoft has unleashed a flurry of new, improved, or acquired digital products and services Over one short span, it introduced a new version of Windows that serves not just computers but also tablets and smartphones; a next-generation Xbox console; a music and movie service to rival iTunes and Google Play; an upgraded version of Skype ­(acquired in 2011); a SkyDrive cloud storage solution; and even an innovative new tablet—the Microsoft Surface—that will give it a firmer footing in digital devices Also rumored to be in the works is an Xbox TV device for TV streaming And the company recently acquired Yammer, a Web-services provider and hip maker of business social networking tools—a sort of Facebook for businesses In its boldest expansion move yet, Microsoft recently paid more than $7 billion dollars to acquire Nokia’s smartphone business More important than the individual new devices, software, and services is the way that they all work together to deliver a full digital experience It all starts with Windows 8, a dramatic digitalage metamorphosis from previous Windows versions Windows employs large, colorful, interactive tiles and touchscreen navigation, making it feel lively and interactive It works seamlessly across desktops and laptops, tablets, phones, and even Xbox, providing the cloud-based connectivity that today’s users crave Using Windows software and apps with Windows-based devices and cloud computing s­ ervices, you can select a movie from a tablet, start playing it on the TV, and finish watching it on your phone, pausing to call or text a friend using Skype What you on one Windows device is automatically updated on other devices Playlists created or songs and TV programs purchased from a mobile device will be waiting for you on your home PC And Windows is a social creature; for example, it updates contacts automatically with tweets and photos from friends The latest version of Office has also been transformed for the connected age Using t­ ouchscreen interfaces, you can use an Office app and share files across PCs, Windows tablets, Windows phones, and even Macs via the SkyDrive cloud Or you can tap into a continuously u­ pdated, online-only version of Office from almost any device In fact, Microsoft views Office as a service, not ­software It plans to sell the service by subscription: $100 per year will get you Office, Marketing environment The actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers 20 gigabytes of SkyDrive storage, and 60 minutes of free Skype calls per month “It embraces the notion of social,” says Microsoft CEO Steve Ballmer “You stay connected and share information with the people you care about.” Perhaps Microsoft’s biggest about-face is the development of its own hardware devices In the past, the company has relied on partners like Dell, HP, and Nokia to develop the PCs, tablets, and phones that run its software But to gain better control in today’s superheated digital and m ­ obile markets, Microsoft is now doing its own hardware development For starters, it developed the ­cutting-edge Surface tablet The Surface not only employs the ­Windows interface and connectivity, it sports a nifty kickstand and thin detachable keyboard that also serves as a cover, making the Surface a unique combination of tablet and mini-laptop The Surface, plus Xbox and the Nokia smartphone acquisition, will give Microsoft better control of access to three important new digital screens beyond the PC—tablets, TVs, and phones Thus, Microsoft’s sweeping transformation is well under way The company is putting a w ­ hopping $1.5 billion of marketing support behind its revamped mission and all its new software, hardware, and services Still, Microsoft has a long way to go Although Windows 8, the Surface tablet, and other initiatives appear off to a decent start, many tentative customers are playing wait-and-see Many still see Microsoft as mostly a PC software company It will take a sustained effort to change both customer and company thinking Some skeptics think that Microsoft may still be to too tightly wedded to the olds ways “Just having the Windows name still around captures the problems of this company,” says one technology forecaster “In their heads, they know the personal computer revolution is over and that they have to move on, but in their hearts they can’t it If ­Microsoft is around in 100 years, they will try and sell us a Windows teleporter.” But Microsoft seems to be making all the right moves to stay with or ahead of the times ­Microsoft’s sales have trended upward over the past few years, and the company is confident that it’s now on the right track “It truly is a new era at Microsoft—an era of incredible opportunity for us  .  and for the people and businesses using our products to reach their full potential,” says CEO Balmer “Although we still have a lot of hard work ahead, our products are generating excitement And when I pause to reflect on how far we’ve come over the past few years and how much further we’ll go in the next [few], I couldn’t be more excited and optimistic.”1 company’s marketing environment consists of the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers Like Microsoft, companies constantly watch and adapt to the changing environment—or, in many cases, lead those changes More than any other group in the company, marketers must be environmental trend trackers and opportunity seekers Although every manager in an organization should watch the outside environment, marketers have two special aptitudes They have disciplined methods—marketing research and marketing intelligence—for collecting information ­ about the marketing environment They also spend more time in customer and competitor environments By carefully studying the environment, marketers can adapt their strategies to meet new marketplace challenges and opportunities A 94 # 149127   Cust: Pearson   Au: Armstrong  Pg No 94 Marketing: An Introduction 12/e    Server: M03_ARMS6788_12_SE_CH03.indd Title: 94 C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:41 PM www.freebookslides.com Chapter 3: Analyzing the Marketing Environment 95 The marketing environment consists of a microenvironment and a macroenvironment The microenvironment consists of the actors close to the company that affect its ability to serve its customers—the company, suppliers, marketing intermediaries, customer markets, competitors, and publics The macroenvironment consists of the larger societal forces that affect the microenvironment—demographic, economic, natural, technological, political, and cultural forces We look first at the company’s microenvironment Author Comment The microenvironment includes all the actors close to the company that affect, positively or negatively, its ability to create value for and relationships with customers The Microenvironment Marketing management’s job is to build relationships with customers by creating customer value and satisfaction However, marketing managers cannot this alone  Figure 3.1 shows the major actors in the marketer’s microenvironment Marketing success requires building relationships with other company departments, suppliers, marketing intermediaries, competitors, various publics, and customers, which combine to make up the company’s value delivery network The Company Microenvironment The actors close to the company that affect its ability to serve its customers—the company, suppliers, marketing intermediaries, customer markets, competitors, and publics Macroenvironment The larger societal forces that affect the microenvironment—demographic, economic, natural, technological, political, and cultural forces In designing marketing plans, marketing management takes other company groups into account—groups such as top management, finance, research and development (R&D), ­purchasing, operations, and accounting All of these interrelated groups form the internal environment Top management sets the company’s mission, objectives, broad strategies, and policies Marketing managers make decisions within these broader strategies and plans Then, as we discussed in Chapter 2, marketing managers must work closely with other company departments With marketing taking the lead, all departments—from manufacturing and finance to legal and human resources—share the responsibility for ­understanding customer needs and creating customer value Suppliers Suppliers form an important link in the company’s overall customer value delivery ­network They provide the resources needed by the company to produce its goods and services S ­ upplier problems can seriously affect marketing Marketing managers must watch supply availability and costs Supply shortages or delays, labor strikes, natural disasters, and other events can cost sales in the short run and damage customer satisfaction in the long run Rising supply costs may force price increases that can harm the company’s sales volume Most marketers today treat their suppliers as partners in creating and delivering customer value For example, giant Swedish furniture retailer IKEA doesn’t just buy from its   Figure 3.1  Actors in the Microenvironment M03_ARMS6788_12_SE_CH03.indd 95 Th e C o m pan y rs Compe titor s Pu b Marketing # 149127   Cust: Pearson   Au: Armstrong  Pg No 95 Title: Marketing: An Introduction 12/e    Server: ers stom Cu Marketers must work in harmony with other company departments to create customer value and relationships lie keting Mar diaries m r e inte s lic Su pp In creating value for customers, marketers must partner with other firms in the company’s value delivery network C/M/Y/K Short / Normal Customers are the most important actors in the company’s microenvironment The aim of the entire value delivery system is to serve target customers and create strong relationships with them DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:41 PM www.freebookslides.com 96 Part 2: Understanding the Marketplace and Customer Value suppliers  It involves them deeply in the process of delivering a stylish and affordable lifestyle to IKEA’s customers:2 IKEA, the world’s largest furniture retailer, is the quintessential global cult brand Each year, customers from Beijing to Moscow to Middletown, Ohio, flock to the Scandinavian retailer’s more than 300 huge stores in 40  countries, snapping up more than $28 billion worth of IKEA’s trendy but simple and practical furniture at affordable prices But IKEA’s biggest obstacle to growth isn’t opening new stores and attracting customers Rather, it’s finding enough of the right kinds of suppliers to help design and make all the products that customers will carry out of its stores IKEA currently relies on more than 2,000 suppliers in 50 countries to stock its shelves IKEA can’t just hope to find spot suppliers who might be available when needed Instead, it must systematically develop a robust network of supplier-partners that reliably provide the more than 12,000 items it stocks IKEA’s designers start with a basic customer value proposition Then they find and work closely with key suppliers to bring that proposition to market Thus, IKEA does more than just buy from suppliers It involves them deeply in questions of quality, design, and price to create the kinds of products that keep customers coming back Marketing Intermediaries Marketing intermediaries help the company promote, sell, and distribute its products to final buyers They include resellers, physical distribution firms, marketing services agencies, and financial intermediaries Resellers are distribution channel firms that help the company find customers or make sales to them These include wholesalers and retailers that buy and resell merchandise Selecting and partnering with resellers is not easy No longer manufacturers have many small, independent resellers from which to choose They now face large and growing reseller organizations, such as Walmart, Target, Home Depot, Costco, and Best Buy These organizations frequently have enough power to dictate terms or even shut smaller manufacturers out of large markets Physical distribution firms help the company stock and move goods from their points of origin to their destinations Marketing services agencies are the marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its products to the right markets Financial intermediaries include banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods Like suppliers, marketing intermediaries form an important component of the company’s overall value delivery network In its quest to create satisfying customer relationships, the company must more than just optimize its own performance It must partner effectively with marketing intermediaries to optimize the performance of the entire system Thus, today’s marketers recognize the importance of working with their intermediaries as partners rather than simply as channels through which they sell their products For example, when Coca-Cola signs on as the exclusive beverage provider for a fast-food chain, such as McDonald’s, Wendy’s, or Subway, it provides much more than just soft drinks It also pledges powerful marketing support:3  Giant Swedish furniture manufacturer IKEA doesn’t just buy from suppliers It involves them deeply in the process of delivering a stylish and affordable lifestyle ­ to its customers worldwide Used with the permission of Inter IKEA Systems B.V Marketing intermediaries Firms that help the company to promote, sell, and distribute its goods to final buyers Coca-Cola assigns cross-functional teams dedicated to understanding the finer points of each retail partner’s business It conducts a staggering amount of research on beverage consumers and shares these insights with its partners It analyzes the demographics of U.S zip code areas and helps partners determine which Coke brands are preferred in their areas Coca-Cola has even studied the design of drive-through menu boards to better understand which layouts, fonts, letter sizes, colors, and visuals induce consumers to order more food and drink Based on such insights, the Coca-Cola Food Service group develops marketing programs and merchandising tools that help its retail partners improve their beverage sales and profits Its Web site, # 149127   Cust: Pearson   Au: Armstrong  Pg No 96 Marketing: An Introduction 12/e    Server: M03_ARMS6788_12_SE_CH03.indd Title: 96 C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:41 PM www.freebookslides.com Chapter 3: Analyzing the Marketing Environment 97 www.CokeSolutions.com, provides retailers with a wealth of information, business solutions, merchandising tips, and techniques on how to go green “We know that you’re passionate about delighting guests and enhancing their real experiences on every level,” says Coca-Cola to its retail partners “As your partner, we want to help in any way we can.” Such intense partnering has made Coca-Cola a runaway leader in the U.S fountain-soft-drink market Competitors The marketing concept states that, to be successful, a company must provide greater customer value and satisfaction than its competitors Thus, marketers must more than simply adapt to the needs of target consumers They also must gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers No single competitive marketing strategy is best for all companies Each firm should consider its own size and industry position compared to those of its competitors Large firms with dominant positions in an industry can use certain strategies that smaller firms cannot afford But being large is not enough There are winning strategies for large firms, but there are also losing ones And small firms can develop strategies that give them better rates of return than large firms enjoy Publics Public Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives The company’s marketing environment also includes various publics A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives We can identify seven types of publics: Financial publics:  This group influences the company’s ability to obtain funds Banks, investment analysts, and stockholders are the major financial publics ● Media publics:  This group carries news, features, editorial opinions, and other content It includes television stations, newspapers, magazines, and blogs and other social media ● Government publics:  Management must take government developments into account Marketers must often consult the company’s lawyers on issues of product safety, truth in advertising, and other matters ● Citizen-action publics:  A company’s marketing decisions may be questioned by consumer organizations, environmental groups, minority groups, and others Its public relations department can help it stay in touch with consumer and citizen groups ● Local publics:  This group includes neighborhood residents and community organizations Large companies usually create departments and programs that deal with local community issues and provide community support  For example, the Life is good company recognizes the importance of community publics in helping accomplish the brand’s “spread optimism” mission (remember the Chapter Life is good story in Marketing at Work 1.2?) Its Life is good Playmakers program promotes the philosophy that “Life can hurt, play   Publics: The Life is good company recognizes the importance of can heal.” It provides training and support for community publics Its Life is good Playmakers program provides training child-care professionals to use the power of play to and support for child-care professionals in cities around the world to use help children overcome challenges ranging from the power of play to help children overcome challenges ranging from violence and illness to extreme poverty in cities violence and illness to extreme poverty around the world, from Danbury, Connecticut, to The Life is good Company ● M03_ARMS6788_12_SE_CH03.indd 97 # 149127   Cust: Pearson   Au: Armstrong  Pg No 97 Title: Marketing: An Introduction 12/e    Server: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:41 PM www.freebookslides.com 98 Part 2: Understanding the Marketplace and Customer Value ● ● Port-au-Prince, Haiti So far, the organization has raised more than $9 million to benefit children.4 General public:  A company needs to be concerned about the general public’s attitude toward its products and activities The public’s image of the company affects its buying behavior Internal publics:  This group includes workers, managers, volunteers, and the board of directors Large companies use newsletters and other means to inform and motivate their internal publics When employees feel good about the companies they work for, this positive attitude spills over to the external publics A company can prepare marketing plans for these major publics as well as for its customer markets Suppose the company wants a specific response from a particular public, such as goodwill, favorable word of mouth and social sharing, or donations of time or money The company would have to design an offer to this public that is attractive enough to produce the desired response Customers Customers are the most important actors in the company’s microenvironment The aim of the entire value delivery network is to serve target customers and create strong relationships with them The company might target any or all of five types of customer markets Consumer markets consist of individuals and households that buy goods and services for personal consumption Business markets buy goods and services for further processing or use in their production processes, whereas reseller markets buy goods and services to resell at a profit Government markets consist of government agencies that buy goods and services to produce public services or transfer the goods and services to others who need them Finally, international markets consist of these buyers in other countries, including consumers, producers, resellers, and governments Each market type has special characteristics that call for careful study by the seller Author Comment The macroenvironment consists of broader forces that affect the actors in the microenvironment The Macroenvironment The company and all of the other actors operate in a larger macroenvironment of forces that shape opportunities and pose threats to the company  Figure 3.2 shows the six major forces in the company’s macroenvironment Even the most dominant companies can be vulnerable to the often turbulent and changing forces in the marketing environment Some of these forces are unforeseeable and uncontrollable Others can be predicted and handled through skillful management Companies that understand and adapt well to their environments can thrive Those that don’t can face difficult times One-time dominant market leaders such as Xerox, Sears, and Sony have learned this lesson the hard way (see Marketing at Work 3.1) In the remaining sections of this chapter, we examine these forces and show how they affect marketing plans   Figure 3.2  Major Forces in the Company’s Macroenvironment Concern for the natural environment has spawned a so-called green movement For example, last year HP recovered and recycled 800 jumbo jets worth of electronics globally Ec on Po li ic Company C/M/Y/K Short / Normal ural Demog raph i Cult # 149127   Cust: Pearson   Au: Armstrong  Pg No 98 Marketing: An Introduction 12/e    Server: M03_ARMS6788_12_SE_CH03.indd Title: 98 ogic al c om Techno l al ti c Changing demographics mean changes in markets and marketing strategies For example, Merrill Lynch targets aging baby boomers to help them overcome the hurdles to retirement planning ral Natu Marketers also want to be socially responsible citizens in their markets and communities For example, shoe brand TOMS was founded on a cause: “No complicated formulas It’s simple,” says the company’s founder “You buy a pair of TOMS and I give a pair to a child on your behalf.” DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:41 PM www.freebookslides.com Chapter 3: Analyzing the Marketing Environment 99 Marketing at Work 3.1 Sony: Battling the Marketing Environment’s “Perfect Storm” After a decade of struggle, the year 2011 was supposed to Today, however, although still a $78 billion company, Sony be a comeback year for Sony The consumer electronics and is more a relic than a rock star, lost in the shadows of high-fliers entertainment giant had one its best batches of new products such as Apple, Samsung, and Microsoft Samsung overtook ever heading for store shelves Even more important, Sony was Sony as the world’s largest consumer electronics maker nearly a heading back into the digital big leagues with the launch of an decade ago Samsung’s sales last year more than tripled Sony’s, iTunes-like global digital network that would combine Sony’s and Samsung’s profits surged as Sony’s losses still mounted strengths in movies, music, and video games for all its televiLikewise, Apple has pounded Sony with one new product sions, PCs, phones, game consoles, and tablets Analysts fore­after another “When I was young, I had to have a Sony prodcasted a $2 billion profit “I really and truly believed that I was uct,” summarizes one analyst, “but for the younger generation going to have a year to remember,” says Sony’s chairman Sir ­today it’s Apple.” All of this has turned Sony’s current “Make Howard Stringer “And I did, but in the wrong way.” ­Believe.” brand promise into more of a “make-believe” one Instead of a banner year, 2011 produced a near-perfect How did Sony fall so hard so fast? It fell behind in technolstorm of environmental calamities for Sony For starters, in ogy Sony built its once-mighty empire based on the innovaMarch 2011, eastern Japan was devastated by a mammoth tive engineering and design of standalone electronics—TVs, earthquake and tsunami The disaster forced Sony to shutter CD players, and video-game consoles As the Internet and digi10 plants, disrupting operations and the flow of Sony products tal technologies surged, however, creating a more connected worldwide In April, a hacking attack on the company’s Inand mobile world, standalone hardware was rapidly replaced ternet entertainment services—the second-largest online data by new connecting technologies, media, and content As our enbreach in U.S history—forced the company to shut down its tertainment lives swirled toward digital downloads and shared PlayStation Network Only four months later, fires set by riotcontent accessed through PCs, iPods, smartphones, tablets, and ers in London destroyed a Sony warehouse and an estimated Internet-ready TVs, Sony was late to adapt 25 million CDs and DVDs, gutting an inventory of 150 indeBehaving as though its market leadership could never be pendent labels To round out the year, floods in Thailand shut challenged, an arrogant Sony clung to successful old technolodown component plants there gies rather than embracing new ones For example, prior to the When the rubble was cleared, Sony’s projected $2 billion launch of Apple’s first iPod in 2001, Sony had already develprofit ended up as a $6.4 billion loss—the company’s largest oped devices that would download and play digital music files ever That loss marked a three-year streak of losses that had Sony had everything it needed to create an iPod/iTunes-type begun with yet another environmental upheaval—the Great world, including its own recording company But it passed on ­Recession and global financial meltdown of 2008 By mid-2013, a shell-shocked Sony was still looking for a return to profitability There’s no doubt that environmental unforeseeables have dealt Sony some heavy blows But not all the blame for Sony’s woes goes to uncontrollable environmental forces Sony’s current difficulties began long before the recent string of events More to blame than any natural disaster has been Sony’s longer-term inability to adapt to one of the most powerful environmental forces of our time—dramatic changes in digital technology Interestingly, it was Sony’s magical touch with technology that first built the company into a global powerhouse Only a dozen years ago, Sony was a high-tech rock star, a veritable merchant of cool Not only was it the world’s largest consumer electronics company, its history of innovative products—such as Trinitron TVs, Walkman portable music players, Handycam video recorders, and PlayStation video-game consoles—had   The marketing environment: Environmental unforeseeables have dealt revolutionized entire industries Sony’s innovations Sony some heavy blows But the company’s inability to adapt to the changing drove pop culture, earned the adoration of the masses, technological environment has turned Sony’s current “Make Believe.” brand promise into more of a “make-believe” one and made money for the company The Sony brand Bloomberg via Getty Images stood for innovation, style, and high quality M03_ARMS6788_12_SE_CH03.indd 99 # 149127   Cust: Pearson   Au: Armstrong  Pg No 99 Title: Marketing: An Introduction 12/e    Server: C/M/Y/K Short / Normal DESIGN SERVICES OF S4carlisle Publishing Services 04/04/14 2:41 PM ... 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