Marketing Management Knowledge and Skills

Tenth Edition

J. Paul Peter University of Wisconsin-Madison

James H. Donnelly, Jr. /

University of Kentucky

Me Graw Hill

McGraw-Hill Irwin

Contents Processing of Research Data 3 7 Preparation of the Research Report 38 Limitations of the Research Process 38

SECTION 1 ESSENTIALS OF MARKETING MANAGEMENT 1

Marketing Information Systems Conclusion 41

40

PART A INTRODUCTION

Chapter 3 Consumer Behavior

3

Chapter 1 Strategic Planning and the Marketing Management Process 4 The Marketing Concept 4 What Is Marketing? 5 What Is Strategic Planning?

Social Influences on Consumer Decision Making 43 Culture and Subculture 43 Social Class 44 Reference Groups and Families

The Marketing Management Process

6

Product Influences 45 Price Influences 45 Promotion Influences 46 Place Influences 46

16

Situation Analysis 16 '* Marketing Planning 19 Implementation and Control of the Marketing Plan Marketing Information Systems and Marketing Research 21

20

The Strategic Plan, The Marketing Plan, and Other Functional Area Plans 21 Marketing's Role in Cross-Functional Strategic Planning 21

Conclusion 22 Appendix Portfolio Models

25

PART B MARKETING INFORMATION, RESEARCH, AND UNDERSTANDING THE TARGET MARKET 29 Chapter 2 Marketing Research: Process and Systems for Decision Making 30 The Role of Marketing Research 30 The Marketing Research Process 31 Purpose of the Research 31 Plan of the Research 32 Performance of the Research 37 xii

45

Marketing Influences on Consumer Decision Making 45

6

Strategic Planning and Marketing Management The Strategic Planning Process 7 The Complete Strategic Plan 16

42

Situational Influences on Consumer Decision Making 47 Psychological Influences on Consumer Decision Making 47 Product Knowledge 47 Product Involvement 48

Consumer Decision Making

48

Need Recognition 49 • Alternative Search 50 Alternative Evaluation 51 Purchase Decision 51 Postpurchase Evaluation 52

Conclusion

54

Chapter 4 Business, Government, and Institutional Buying 55 Categories of Organizational Buyers

55

Producers 55 Intermediaries 56 Government Agencies 56 Other Institutions 56

The Organizational Buying Process 56 Purchase-Type Influences on Organizational Buying 57 Straight Rebuy

57

Contents Modified Rebuy 57 New Task Purchase 5 7

Structural Influences on Organizational Buying

58

Behavioral Influences on Organizational Buying 60

Stages in the Organizational Buying Process Organizational Need 63 Vendor Analysis 63 Purchase Activities 63 Postpurchase Evaluation 63

Conclusion

66

A Priori versus Post Hoc Segmentation 68 Relevance of Segmentation Dimensions 68 Bases for Segmentation 69

Develop Product Positioning 75 Decide Segmentation Strategy 76 Design Marketing Mix Strategy 77 Conclusion 78

Chapter 6 Product and Brand Strategy Basic Issues in Product Management

80 80

Conclusion

109

109

111

Chapter 8 Integrated Marketing Communications

Objectives ofAdvertising

Advertising Decisions

113

116

116

The Expenditure Question 117 The Allocation Question 120

Sales Promotion

124

Push versus Pull Marketing 124 Trade Sales Promotions 125 Consumer Promotions 126 What Sales Promotion Can and Can't Do

93

93 95

Organizing for Product Management Conclusion 97

Needfor Research

The Promotion Mix 113 Integrated Marketing Communications 114 Advertising: Planning and Strategy 116

90

Deletions 93 Product Improvement

Causes of New Product Failure

Create Awareness 112 Build Positive Images 112 Identify Prospects 112 Build Channel Relationships Retain Customers 113

Product Definition 80 Product Classification 81 Product Quality and Value 82 Product Mix and Product Line 83 Branding and Brand Equity 84 Packaging 88 Product Adoption and Diffusion

107

Strategic Goals of Marketing Communication

PARTC THE MARKETING MIX 79

The Product Audit

Idea Generation 101 Idea Screening 103 Project Planning 104 Product Development 105 Test Marketing 105 Commercialization 106 The Importance of Time 106 Quality Level 107 Product Features 108 Product Design 108 Product Safety 109

Delineate the Firm's Current Situation 66 Determine Consumer Needs and Wants 67 Divide Markets on Relevant Dimensions 67

Product Life Cycle

62

60

Some Important New Product Decisions

65

Chapter 5 Market Segmentation

Chapter 7 New Product Planning and Development 98 New Product Strategy 99 New Product Planning and Development Process 101

Purchasing Roles 58 Organization-Specific Factors 59 Purchasing Policies and Procedures 59 Personal Motivations Role Perceptions 60

xiii

95

126

Public Relations 128 Direct Marketing 128 Conclusion 129 Appendix Major Federal Agencies Involved in Control of Advertising 131

112 112

xiv Contents

Chapter 9

Estimate Costs and Other Price Limitations 170 Analyze Profit Potential 171 Set Initial Price Structure 171 Change Price as Needed 172 Conclusion 172

Personal Selling, Relationship Building, and Sales Management 132 Importance of Personal Selling 132 The Sales Process 133 Objectives of the Sales Force 133 The Sales Relationship-Building Process 134 People Who Support the Sales Force 140 Managing the Sales and Relationship-Building Process 141 The Sales Management Task 141 Controlling the Sales Force 142 Motivating and Compensating Performance 146 Conclusion 146

Chapter 10 Distribution Strategy

PARTD MARKETING IN SPECIAL FIELDS 173 Chapter 12 The Marketing of Services 174 Important Characteristics of Services 176 Intangibility 176 Inseparability 177 Perishability and Fluctuating Demand 178 Client Relationship 178 Customer Effort 179 Uniformity 180 Providing Quality Services 180 Customer Satisfaction Measurement 182 The Importance of Internal Marketing 182 Overcoming the Obstacles in Service Marketing Limited View of Marketing 184 Limited Competition 184 Noncreative Management 185 No Obsolescence 185 The Service Challenge 186 Banking 186 Health Care 186 Insurance 187 Travel 187 Implications for Service Marketers 188 Conclusion 189

148

The Need for Marketing Intermediaries 148 Classification of Marketing Intermediaries and Functions 148 Channels of Distribution 150 Selecting Channels of Distribution 151 Specific Considerations 151 Managing a Channel of Distribution 154 Relationship Marketing in Channels 154 Vertical Marketing Systems 154 Wholesaling 157 Store and Nonstore Retailing 15 8 Store Retailing 158 Nonstore Retailing 159 Conclusion 162

Chapter 11 Pricing Strategy

163

Demand Influences on Pricing Decisions 163 Demographic Factors 163 Psychological Factors 163 Price Elasticity 164 Supply Influences on Pricing Decisions 165 Pricing Objectives 165 Cost Considerations in Pricing 165 Product Considerations in Pricing 167 Environmental Influences on Pricing Decisions Competition 168 Government Regulations 168 A General Pricing Model 169 Set Pricing Objectives 169 Evaluate Product-Price Relationships 169

184

Chapter 13 Global Marketing 190

168

The Competitive Advantage of Nations 191 Organizing for Global Marketing 192 Problems with Entering Foreign Markets 192 Organizing the Multinational Company 195 Programming for Global Marketing 197 Global Marketing Research 197 Global Product Strategy 200 ' Global Distribution Strategy 200 Global Pricing Strategy 201 Global Advertising and Sales Promotion Strategy 201 Entry and Growth Strategies for Global Marketing 202 Conclusion 205

Contents

SECTION 2 ANALYZING MARKETING PROBLEMS AND CASES 207 A Case Analysis Framework 208 1. Analyze and Record the Current Situation 209 2. Analyze and Record Problems and Their Core Elements 213 3. Formulate, Evaluate, and Record Alternative Courses ofAction 214 4. Select and Record the Chosen Alternative and Implementation Details 215 Pitfalls to Avoid in Case Analysis 215 Communicating Case Analyses 218 The Written Report 218 The Oral Presentation 220 Conclusion 220

SECTION 3 FINANCIAL ANALYSIS FOR MARKETING DECISIONS 221 Financial Analysis 222 Break-Even Analysis 222 Net Present Value Analysis 224 Ratio Analysis 226 Conclusion 230

SECTION 4 INTERNET EXERCISES AND SOURCES OF MARKETING INFORMATION 231

xv

Exercise 7 238 Pricing Issues on the Internet 238 Exercise 8 238 Selecting the Internet as a Distribution Channel 238 Exercise 9 239 Internet Advertising 239 Exercise 10 239 The Adaptation of Services to the Internet 239 Exercise 11 240 Marketing Communications Techniques in the Internet Age 240

INTERNET SOURCES OF MARKETING INFORMATION 241 Charles Heath: Eastern Kentucky University Corporate Web Sites 242 Search Engines and Directories 242 Government Sites ' 243 Business Publications 243 Newspapers 244 National Papers 244 Large City Papers 244 International Papers 245 Regional Papers 245 General Business Sites 245 Internet Marketing Reference Sites 246 Compilation Sites 246

5

PART A INTERNET EXERCISES 233 Charles Heath: Eastern Kentucky University

MARKETING MANAGEMENT CASES 247

Exercise 1 234

MARKET OPPORTUNITY ANALYSIS 249

Corporate Web Sites 234 Exercise 2 234 Online versus Offline Retail Experiences 234 Exercise 3 235 Consumer Decision-Making Process 235 Exercise 4 236 Discovering Product Assortments Online 236 Exercise 5 236 Brand Equity on the Internet 236 Exercise 6 237 The Impact of Communities on Marketing 237

Case!

McDonald's Corporation 250 I Paul Peter and Ashish Gokhale: University of Wisconsin-Madison

Case 2

Southwest Airlines 2008

257

Andrew C. Inkpen: Thunderbird School of Global Management

xvi Contents

Case 3 South Delaware Coors, Inc.

CASE GROUPC 271

PROMOTION STRATEGY

James E. Nelson and Eric J. Karson: University of Colorado

Case 12 The Obama Campaign Strategy

Case 4 Ruth's Chris: The High Stakes of International Expansion 280

Case 5 Coach Inc.: Is Its Advantage in Luxury Handbags Sustainable? 287

Case 14 Red Bull

400

Richard R. Johnson, Jordan Mitchell, Paul W. Farris, and Ervin Shames: University of Virginia

302

Arthur A. Thompson: University of Alabama

Case IS "Hips Feel Good"—Dove's Campaign for Real Beauty 414

CASE GROUP B Case 7 Starbucks—Early 2008

Case 13 Mountain Dew: Selecting New Creative 383 Douglas B. Holt: Oxford University

John E. Gamble: University of South Alabama

PRODUCT STRATEGY

374

Dan Tolhurst and Mark Vandenbosch: University of Western Ontario

Allen H. Kupetz and lion Alon: University of Western Ontario

Case 6 Panera Bread Company

373

319

David Wesley: Northeastern University 320

J. Paul Peter: University of Wisconsin-Madison

CASE GROUP D

Case 8 Your Home is a Good Place, Inc.

DISTRIBUTION STRATEGY

429

325

Kevin Coulson and Zane Swanson: University of Western Ontario

Case 16 IKEA's Global Strategy: Furnishing the World 430 .

Case 9 easyCar.com

Paul Kolesa 332

John J. Lawrence: University of Idaho Luis Solis: University of Idaho Instituto de Empresa Case 10 The Launch of the Sony PlayStation 3 David Wesley and Gloria Barczak: Northeastern University Case 11 Snacks to Go

356

JoAnn K. Linrud: Central Michigan University

341

Case 17 Pets.com Inc.: Rise and Decline of a Pet Supply Retailer 438 Omar Merlo: University of Western Ontario Case 18 The Challenges Facing eBay in 2008: Time for a Change in Strategy? 453 Louis Marino: University of Alabama Patrick Kreiser: Ohio University

Contents

Case 19

SECTION 6

Wal-Mart Stores Inc. in 2008: Management's Initiatives to Transform the Company and Curtail Wal-Mart Bashing 479 Arthur A. Thompson: University of Alabama

STRATEGIC MARKETING CASES 587 Case 1

Yum! Brands, Pizza Hut, and KFC

589

Jeffrey A. Krug: Appalachian State University

CASE GROUP E PRICING STRATEGY 519

Case 2

Caterpillar, Inc. 603 Case 20

Sara L. Pitterle and J. Paul Peter: University of Wisconsin-Madison

Schwinn Bicycles 520 J. Paul Peter: University of Wisconsin-Madison

Case 21

Terra Bite Lounge: Pay What You Want Cafe^ 523

Case3 EMR Innovations

615

Kay M. Palan: Iowa State University

Remi Trudell: University of Western Ontario

Case 4

Harley-Davidson, Inc.—Motorcycle Division 626

Case 22

Cowgirl Chocolates

527

John J. Lawrence, Linda J. Morris, and Joseph J. Geiger: University of Idaho

J. Paul Peter: University of Wisconsin-Madison

Case 5

Case 23

Clearwater Technologies7 540

PepsiCo's Diversification Strategy in 2008 639

Susan F. Sieloff and Raymond M. Kinnunen: Northeastern University

John E. Gamble: University of South Alabama

Case 6

CASE GROUP F Social and Ethical Issues in Marketing Management 545 Case 24 E. & J. Gallo Winery (2007)

546

Marion Armstrong, Taylor Green, and A. J. Strickland III: University of Alabama

Expresso Espresso

656

Calvin M. Bacon, Jr.: University of South Alabama

Case? Respironics, Incorporated: Take a Deep Breath 678 Janet L. Rovenpor: Manhattan College Armand Gilinsky, Jr.: Sonoma State University

Case 25 Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel 563

CaseS Research In Motion—Entering a New Era 700

Janet Rovenpor: Manhattan College

Sofy Carayannopoulos: Wilfrid Laurier University

xvii

xviii

Contents

Case 9

Krispy Kreme Doughnuts in 2005: Are the Glory Days Over? 723 Arthur A. Thompson, Jr.: University of Alabama Amit J. Shah: Frostburg State University

Case 10

Dell Inc. in 2008: Can It Overtake Hewlett-Packard as the Worldwide Leader in Personal Computers? 748 Arthur A. Thompson, Jr.: University of Alabama John E. Gamble: University of South Alabama

SECTION 7 Developing Marketing Plans 783 A Marketing Plan Framework Title Page 785 Executive Summary

785

784

Table of Contents 786 Introduction 786 Situational Analysis 786 Marketing Planning 786 Implementation and Control of the Marketing Plan Summary 790 Appendix—Financial Analysis 790 References 793

Conclusion

793

Notes 795 Index 802

788