Section One
The Role of Marketing in Developing Successful Business StrategiesC HAPTER O NE
The Marketing Management Process
Samsung—Building a Global Brand 1
SAMSUNG ELECTRONICS is the largest component of South Korea’s largest chaebol —one of the giant family-controlled conglomerates that have been instrumental in building the country’s economy over the past half century. Samsung’s electronics unit started out in 1970 making cheap 12-inch television sets under the Sanyo label. Over time it morphedinto a technically innovative company, capturing the number one position in the global memory chip market and pioneering the development of flat-screen displays ,plasma TVs, multifunction cellphones, and other digital devices. But until the mid-1990s, Samsung Electronics competed primarily by ( a ) producing technical components or low-cost manufactured products for firms with better-known brands, like Dell,Hewlett-Packard, and General Electric; and ( b ) selling me-too consumer products—like TVs and microwave ovens—under the Samsung brand through discount
chains like Wal-Mart at very low prices.
Samsung Electronics’ cost-driven competitive strategy worked well until 1996, but then several shocks in its market and competitive environments forced a major reevaluation. First, the global memory
chip market went into a tailspin due to slackening demand and excess capacity. At about the same
time, sales and profits of Samsung’s branded products were also softening. As Yun Jong-yong—a company
veteran who was brought in as CEO of the electronics unit in 1996—complained, Samsung could build
a TV that was technically just as good as one made by Sony, but because of the low-price, down-market
image of the Samsung brand its sets sat at the back of the store or piled up in discount chains. Finally, the
Asian financial crisis in 1997 made a major strategic shift essential for survival. The company was losing
170 billion won per month, and Mr. Yun admits, “Our capital was almost completely eroded.” Kun-Hee Lee,the chairman of the Samsung Group and son of its founder, exhorted Mr. Yun to, “Change everything
except your spouse and children.”
New Competitive and Marketing Strategies
Mr. Yun’s decided on an ambitious new competitive strategy aimed at developing and marketing technically
superior products while building an image of Samsung as a stylish, high-quality brand commanding
a premium price. The objective was to establish a unique competitive position using technical innovation
and design to appeal to younger and relatively up-scale customer segments around the world. “If we were to continue competing only on price,” admitted one executive, “the Chinese would slaughter us.”
Technical Innovation and R&D Obviously, one crucial element necessary for successful implementation of the new strategy was innovative product development. Mr. Yun decided that Samsung had to control its own technical destiny, not just copy others. Dissecting the emerging products of the new Digital Age, a group of company managers identified core technologies common to them all: semiconductors, large-area LCDs, display drivers and chip sets, and mobile telephony. By focusing mainly on these digital
technologies, Mr. Yun believed, the firm could gain an advantage over its competitors. While Sony and other
rivals had a huge head start in consumer electronics, that lead was rooted in the analog world. The digital
world required new skills and innovations. Consequently, Samsung began shifting substantial resources into technical research and development. As of this writing, no other tech company in the world spends a higher percentage of revenue on R&D: about 8.5 percent—amounting to over $6 billion—in the 2006 fiscal year. Twenty-six percent of the company’s entire workforce—some 36,000 people—are engaged in research and development activities in 42 research facilities around the world.
New Product Development and Design But
cutting-edge technology alone does not necessarily
lead to market success. That technology must be
incorporated into products that deliver functions and
benefits that at least some segment of consumers will
consider to be worth the price. And some of those
perceived benefits may be subjective—attractive styling,
say, or a cool image. Therefore, the development
of most new products at Samsung involves a team of
product designers who collaborate closely with the
firm’s engineers, manufacturing people, marketers,
and market researchers. To ensure they stay in touch
with customers in different countries, the firm’s 450
designers are assigned to seven design centers in cities
like London, Tokyo, Shanghai, and San Francisco.
Also, the company’s market researchers constantly
run focus groups and study product users around the
world to ascertain consumer tastes and preferences.
Marketing Programs to Build the Samsung
Brand Samsung’s marketing managers and market
researchers have played an important role in
developing the company’s new generation of digital
consumer products, but they were even more instrumental
in designing strategic marketing programs to
build customer awareness of those products, ensure
their availability, service customers after a sale, and
build the image of the Samsung brand by communicating
its essential values and attributes around the
world. Revamping the firm’s marketing efforts was
critical to its success because even the most technically
sophisticated and well-designed products are
likely to fail unless potential customers know they
exist, can acquire them easily, and think they’re worth
the money.
In 1999, Eric Kim was recruited from outside the
firm to head a global marketing effort for Samsung
Electronics. One of his first moves was to reorganize
the firm’s distribution channels, particularly in
developed markets like Europe and the United States.
Consistent with the strategic objective of establishing
Samsung as a high-quality brand worthy of a
premium price, most Samsung products were pulled
out of low-price discount chains like Wal-Mart and
Carrefour and distributed through quality-oriented
electronics specialty stores—such as Best Buy and
Circuit City—instead.
In order to insure consistency in Samsung’s marketing
communications across world markets, Mr.
Kim consolidated the firm’s roster of advertising
agencies from 55 down to a single global advertising
group, British-based WPP. Samsung then launched
its first major brand-building advertising campaign in
2001. While competitors emphasized product features
and functionality, Samsung’s fashion-forward TV
commercials showed off the company’s cool sense
of style. They pictured Samsung products launching
users into a dreamworld of good times where “design
awakens all your senses.”
More recently, the firm’s promotional efforts have
adopted a more emotional tone. According to the
company’s Web site,
The core value of Samsung Electronics involves
benefiting people’s lives through emotional and innovative
technologies and design. We are getting this
4 Section One The Role of Marketing in Developing Successful Business Strategies
message out via multifaceted advertising campaigns
in 60 countries. . . . The campaign presents lifestyle
stories in which mainstay Samsung products play the
hero. The goal is to emphasize the emotional aspects
of the product and the brand.
The firm also makes extensive use of more contemporary
promotional tools, such as product placements,
sponsorships, and Internet advertising. For instance,
Samsung provides both financial and technical support
to a variety of sporting and cultural events in each
major region of the world. It is a sponsor of the Olympics,
Asian Games, and other international events, but
it also supports regional and local events—such as the
Montreal Jazz festival and the Chelsea Football Club
in the United Kingdom—as means of staying close to
local consumers.
The Results
Samsung Electronics’ revamped competitive strategy,
and the marketing programs designed to implement
it, have been a smashing success so far. According to
studies done by Interbrand (a brand consultancy), the
global value of Samsung’s brand increased more than
200 percent from 2000 to 2007, and it has overtaken
Sony as the most valuable consumer electronics brand.
As a result, Samsung’s sales grew to 85 trillion won
(about $90 billion) in the fiscal year ending in December
2006, operating profit reached 7.9 trillion won
($8 billion), and return on equity topped 17.7 percent.
Of course, Samsung faces many challenges in the
days ahead. Allegations that top executives in the parent
chaebol have bribed politicians, judges, and the
press may tarnish the Samsung brand, particularly in
its domestic market. Increased competition from other
Asian nations is cutting into Samsung’s profit margins
on some core products, such as flash memory chips.
And despite the great progress made so far, the firm
still has some marketing challenges to overcome.
As Jan Lindermann, Interbrand’s head of brand
valuation, points out, Samsung “is not yet a brand
that can live without the product.” The next step is to
encourage customers to think of the Samsung brand
before they start shopping, rather than being led to the
brand by an interesting device. To get to that iconic
level, the firm’s marketing efforts must generate an
even “cooler” image for Samsung.
Marketing Challenges Addressed in Chapter 1
The activities of Samsung’s managers as they worked to redefine the company’s brand
image and supporting marketing plan demonstrate that marketing involves decisions crucial
to the success of every organization, whether large or small, profit or nonprofit, manufacturer,
retailer, or service firm. The CEO of a high-tech firm like Samsung must decide
what technologies to pursue, what goods or services to sell, to whom, with what features
and benefits, at what price, and so on. A chief financial officer for a large multinational
corporation must market the merits of the company to the capital markets to obtain the
resources needed for continued growth. The executive director of a nonprofit community
agency must pursue the resources necessary for the agency to achieve its mission, whether
those resources come from fees for the services it delivers or from grants and contributions.
And all of those managers must market their ideas for improving their organizations’
prospects and performance to their colleagues inside the firm as well as to customers, suppliers,
strategic partners, and prospective employees. Thus, most managers engage in tasks
involving marketing decisions virtually every day.
This book provides prospective managers and entrepreneurs with the marketing tools,
perspectives, and analytical frameworks they’ll need to play an effective role in the marketing
life and overall strategic development of their organizations, regardless of whether
or not they occupy formal marketing jobs. Chapter 1 addresses a number of broad but
important questions all managers must resolve in their own minds: Are marketing decisions
important? Does marketing create value for customers and shareholders? What constitutes
effective marketing practice? Who does what in marketing and how much does
Chapter One The Marketing Management Process 5
it cost? And finally, what decisions go into the development of a strategic marketing
program for a particular good or service and how can those decisions be summarized in
an action plan?
Why Are Marketing Decisions Important?
The improved performance of Samsung Electronics following the retooling of its strategic
marketing plan illustrates the importance of good marketing decisions in today’s business
organizations. And according to many managers and expert observers around the world, a
strong customer focus and well-conceived and executed marketing strategies will be even
more crucial for the success of most organizations as the global marketplace becomes
more crowded and competitive. 2
The importance of marketing in a company’s ongoing success can be better appreciated
when you consider the activities marketing embraces. Marketing attempts to measure and
anticipate the needs and wants of a group of customers and respond with a flow of needsatisfying
goods and services. Accomplishing this requires the firm to
● Target those customer groups whose needs are most consistent with the firm’s resources and
capabilities.
● Develop products and/or services that meet the needs of the target market better than
competitors.
● Make its products and services readily available to potential customers.
● Develop customer awareness and appreciation of the value provided by the company’s
offerings.
● Obtain feedback from the market as a basis for continuing improvement in the firm’s
offerings.
● Work to build long-term relationships with satisfied and loyal customers.
The most important characteristic of marketing as a business function is its focus on customers
and their needs. This is a focus that all managers—not just marketers—need to
adopt to ensure their organizations can build and sustain a healthy “top line.”
The Importance of the Top Line
In the financial markets it is a company’s bottom line—its profitability—that is most
important. In the long run, all firms must make a profit to survive. But as the managers
at Samsung are well aware, there can never be a positive bottom line—nor financing,
employees, or anything else—without the ability to build and sustain a healthy top
line: sales revenue. As a wise observer once said, nothing happens until somebody
sells something. Or to paraphrase management guru Peter Drucker, everything a company
does internally is a cost center. The only profit center is a customer whose check
doesn’t bounce.
That is why the customer focus inherent in the marketing function is
important. When properly implemented, a customer focus enables firms
to enjoy success by exploiting changes in the marketplace, by developing
products and services that have superiority over what is currently
available, and by taking a more focused and integrated cross-functional
approach to their overall operations, as Samsung has done in its productdevelopment
process.
A customer focus enables firms to enjoy
success by exploiting changes in the
marketplace, by developing products and
services that have superiority over what is
currently available, and by taking a more
focused and integrated cross-functional
approach to their overall operations.
Key Observation
6 Section One The Role of Marketing in Developing Successful Business Strategies
Marketing Creates Value by Facilitating Exchange
Relationships
While we have described marketing activities from an individual organization’s perspective,
marketing also plays an important role in the broader context of the global economy.
It helps facilitate exchange relationships among people, organizations, and nations.
Marketing is a social process involving the activities necessary to enable individuals and
organizations to obtain what they need and want through exchanges with others and to develop
ongoing exchange relationships. 3
Increased division and specialization of labor are some of the most important
changes that occur as societies move from a primitive economy toward higher levels of
economic development. But while increased specialization helps improve a society’s
overall standard of living, it leads to a different problem: Specialists are no longer selfsufficient.
Artisans who specialize in making pots become very skilled and efficient at
pot making, producing a surplus of pots, but they do not make any of the many other
goods and services they need to survive and to improve their lifestyle. A society cannot
reap the full benefits of specialization until it develops the means to facilitate the trade
and exchange of surpluses among its members. Similarly, a nation cannot partake of
the full range of goods and services available around the world or penetrate all potential
markets for the economic output of its citizens unless exchanges can occur across
national boundaries.
What Factors Are Necessary for a Successful
Exchange Relationship?
Many exchanges are necessary for people and organizations to reap the benefits of the
increased specialization and productivity that accompany economic development. But
such exchanges do not happen automatically, nor does every exchange necessarily lead
to a mutually satisfying long-term relationship. The conditions for a successful exchange
transaction can be met only after the parties themselves—or marketing intermediaries such
as a wholesale distributor or a retailer—have performed several tasks. These include identifying
potential exchange partners, developing offerings, communicating information,
delivering products, and collecting payments. This is what marketing is all about. Before
we take a closer look at specific marketing activities and how they are planned and implemented
by marketing managers, we will discuss some terms and concepts in our definition
of marketing and the conditions necessary for exchange. Let’s examine the following
questions:
1. Who are the parties involved in exchange relationships? Which organizations and people
market things, and who are their customers?
2. Which needs and wants do parties try to satisfy through exchange, and what is the difference
between the two?
3. What is exchanged?
4. How does exchange create value? Why is a buyer better off and more satisfied following an
exchange?
5. How do potential exchange partners become a market for a particular good or service?
Chapter One The Marketing Management Process 7
1. Who Markets and Who Buys?
The Parties in an Exchange
Virtually every organization and individual with a surplus of anything engages in marketing
activities to identify, communicate, and negotiate with potential exchange partners.
Some are more aggressive—and perhaps more effective—in their efforts than others. When
considering extensive marketing efforts aimed at stimulating and facilitating exchange, we
think first of the activities of goods manufacturers (Intel, BMW, Samsung), service producers
(Air France, McDonald’s, 20th Century Fox), and large retailers (Zara, Marks &
Spencer, Wal-Mart).
However, museums, hospitals, theaters, universities, and other social institutions—
whether for profit or nonprofit—also carry out marketing activities to attract customers,
students, and donors. In the past, their marketing efforts were not very extensive or well
organized. Now, increasing competition, changing customer attitudes and demographics,
and rising costs have caused many nonprofit organizations to look to more extensive
marketing efforts to solve their problems. 4 For example, some U.S. churches are using
marketing techniques to address social problems, as well as to increase church attendance.
But as discussed in Ethical Perspective 1.1 , such efforts can also raise ethical questions.
Customers Both individuals and organizations seek goods and services obtained
through exchange transactions. Ultimate customers buy goods and services for their own
personal use or the use of others in their immediate household. These are called consumer
goods and services. Organizational customers buy goods and services (1) for resale (as
when TESCO buys several gross of Jeans for resale to individual consumers); (2) as inputs
to the production of other goods or services (as when Toyota buys sheet steel to be stamped
into car body parts); or (3) for use in the day-to-day operations of the organization (as
when a university buys paper and printer cartridges). These are called industrial goods and
services. Throughout this book we examine differences in the buying behavior of these two
types of customers and the marketing strategies and programs relevant for each. 5
2. Customer Needs and Wants
Needs are the basic forces that drive customers to take action and engage in exchanges.
An unsatisfied need is a gap between a person’s actual and desired states on some physical
or psychological dimension. We all have basic physical needs critical to our survival,
such as food, drink, warmth, shelter, and sleep. We also have social and emotional needs
critical to our psychological well-being, such as security, belonging, love, esteem, and selffulfillment.
Those needs that motivate the consumption behavior of individuals are few and
basic. They are not created by marketers or other social forces; they flow from our basic
biological and psychological makeup as human beings.
Organizations also must satisfy needs to assure their survival and well-being. Shaped
by the organization’s strategic objectives, these needs relate to the resource inputs, capital
equipment, supplies, and services necessary to meet those objectives.
Wants reflect a person’s desires or preferences for specific ways of satisfying a basic
need. Thus, a person wants particular products, brands, or services to satisfy a need. A person
is thirsty and wants a Coke. A company needs office space and its top executives want
an office at a prestigious address in midtown Manhattan.
Basic needs are relatively few, but people’s many wants are shaped by social influences,
their past history, and consumption experiences. Different people may have very
different wants to satisfy the same need. Everyone needs to keep warm on cold winter
8 Section One The Role of Marketing in Developing Successful Business Strategies
nights, for instance. But some people want electric blankets, while others prefer oldfashioned
down comforters.
This distinction between needs and wants helps put into perspective the charge that
“marketers create needs,” or that “marketers make people want things they don’t need.”
Neither marketers nor any other single social force can create needs deriving from the
biological and emotional imperatives of human nature. On the other hand, marketers—and
many other social forces—influence people’s wants. A major part of a marketer’s job is to
develop a new product or service and then to stimulate customer wants for it by convincing
people it can help them better satisfy one or more of their needs.
Do Customers Always Know What They Want? Some managers—particularly
in high-tech firms—question whether a strong focus on customer needs and wants is
always a good thing. They argue that customers cannot always articulate their needs and
wants, in part because they do not know what kinds of products or services are technically
possible. As Akio Morita, the late visionary CEO of Sony, once said:
Our plan is to lead the public with new products rather than ask them what kind of products
they want. The public does not know what is possible, but we do. So instead of doing a lot of
Ethical Perspective 1.1
Marketing Goes to Church
in the United States
What’s old-time religion to do? At a time when the
search for spiritual guidance is on the rise, angels,
crystals, and shamans are more engaging to some
people than organized religion.
Amid the competition for a piece of America’s
soul, denominations such as the Southern Baptists,
Lutherans, and Roman Catholics are searching for
ways to reach baby boomers—without seeming too
evangelical. Those religions, along with the Mormon
Church, which is starting its 50th advertising campaign,
have introduced national public-service campaigns
focused on children and families. They are
also producing cable and network television specials
that incorporate Christian themes in their story lines,
and studying how best to use the Internet to get
their spiritual message across.
The Lutheran Hour Ministries, which spends about
half of its $20 million budget on marketing, produced
an advertising campaign with themes about family,
instead of specific religious messages. A print, radio,
and TV campaign that appeared in Chicago shows
two children with the words “Drugs. Violence. Peer
Pressure. The world is tough. Being a kid shouldn’t
be.” The rest of the text includes a toll-free number
to call to receive a free audio cassette and booklet on
how to “talk with your kids about today’s issues and
the Christian values they need in today’s world.”
Some observers have expressed doubts about the
ethics of the Lutheran Hour approach, fearing that
it may be just a well-disguised attempt to identify
prospects for recruiting new church members. It is
true that a person who calls the toll-free number can
request a visit from members of a local Lutheran
church. But “there’s no hit made [to recruit]. It’s not
a bait-and-switch,” says Dr. Dale Meyer, speaker for
the Lutheran Hour Ministries.
However, other denominations—particularly evangelical
congregations like California’s Saddleback
Valley Community Church, one of the biggest religious
institutions in America—have recently been
much more aggressive in using marketing techniques
to recruit new converts as well as raise money for
social projects like fighting poverty in Africa. Those
techniques focus not only on media advertising, but
also on Internet ads, blogs, Web sites, and a variety
of “product enhancements” such as the formation of
interest and lifestyle groups within the congregation
and the addition of church coffee shops and cafeterias.
But these techniques can also provoke some negative
reactions among segments of the church-going population.
For instance, a recent study suggests that while
baby boomers largely approve of these contemporary
approaches to religion, “the younger generation sees
the megachurches as too production-oriented, too
precise. . . . They want a more traditional understanding
of religion and faith.”
Sources: Fara Warner, “Churches Develop Marketing Campaigns,”
The Wall Street Journal, April 17, 1995, p. B4; Marc Gunther, “Will
Success Spoil Rich Warren?” Fortune, October 31, 2005, pp. 100–120;
William C. Symonds, “Earthly Empires,” BusinessWeek, May 23, 2005,
pp. 78–88; and Fara Warner, “Prepare Thee for Some Serious Marketing,”
The New York Times, October 22, 2006, Section 3, pp. 1–4.
Chapter One The Marketing Management Process 9
marketing research, we refine our thinking on a product and its use and try to create a market
for it by educating and communicating with the public. 6
Others have pointed out that some very successful new products, such as the Chrysler
minivan and Compaq’s pioneering PC network server, were developed with little or no
market research. On the other hand, some famous duds, like Ford’s Edsel, New Coke, and
McDonald’s McLean low-fat hamburger, were developed with a great deal of customer
input. 7
The laws of probability dictate that some new products will succeed and more will fail
regardless of how much is spent on marketing research. But the critics of a strong customer
focus argue that paying too much attention to customer needs and wants can stifle innovation
and lead firms to produce nothing but marginal improvements or line extensions of
products and services that already exist. How do marketers respond to this charge?
While many consumers may lack the technical sophistication necessary to articulate
their needs or wants for cutting-edge technical innovations, the same is not true for industrial
purchasers. About half of all manufactured goods in most countries are sold to other
organizations rather than individual consumers. Many high-tech industrial products are
initiated at the urging of one or more major customers, developed with their cooperation
(perhaps in the form of an alliance or partnership), and refined at customer beta sites.
As for consumer markets, one way to resolve the conflict between the views of technologists
and marketers is to consider the two components of R&D. First there is basic research
and then there is development—the conversion of technical concepts into actual salable
products or services. Most consumers have little knowledge of scientific advancements
and emerging technologies. Therefore, they usually don’t—and probably shouldn’t—play
a role in influencing how firms like Samsung allocate their basic research dollars.
However, a customer focus is critical to development. Someone—or some development
team—within the organization must have either the insight and market experience
or the substantial customer input necessary to decide what product to develop from a new
technology, what benefits it will offer to customers, and whether customers will value
those benefits sufficiently to make the product a commercial success. Iomega’s experiences
in developing the Zip drive into a commercially successful product—as described in
Exhibit 1.1 —illustrate this point.
Often, as was the case with the Zip drive, a new technology must be developed into a
concrete product concept before consumers can react to it and its commercial potential
can be assessed. In other cases, consumers can express their needs or wants for specific
benefits even though they do not know what is technically feasible. They can tell you what
problems they are having with current products and services and what additional benefits
they would like from new ones. For instance, before Apple introduced the i-Pod, few consumers
would have asked for such a product because they were unfamiliar with the possibilities
of digitization and miniaturization in the electronics industry. But if someone had
asked whether they would buy a product smaller than a Sony Walkman that could store
and play thousands of songs they could download from their computer without messing
with cassette tapes or CDs, many probably would have said, “Sure!”
A strong customer focus is not inconsistent with the development of technically innovative
products, nor does it condemn a firm to concentrate on satisfying only current, articulated customer
wants. More important, while firms can sometimes succeed in the short run even though
they ignore customer desires, a strong customer focus usually pays big dividends in terms of
market share and profit over the long haul, 8 as we’ll see in the next chapter. As Iomega’s CEO
pointed out, “I don’t know how else you can sell in a consumer marketplace without understanding
product design and usage. You have to know what the end user wants.” 9
10 Section One The Role of Marketing in Developing Successful Business Strategies
In the late 1980s Iomega Corporation pioneered a
nifty technological innovation. The Bernoulli Box
was a portable, add-on storage unit for personal
computers (PCs). Resembling a gray shoebox with a
hole in the front, it could hold 150 megabytes of data
on one disk—the equivalent of 107 floppy disks.
But by late 1993 the product was in trouble. Its
$600 unit price and $100 disk price had proven too
high to attract many individual PC users, the 52-page
user’s manual was hard for customers to decipher,
and a competitor had already introduced a cheaper,
faster alternative. Consequently, the firm reported an
$18 million loss for the year and its stock price was
at an all-time low.
The struggling company brought in a new CEO
whose first priority was to convert the Bernoulli Box
technology into a product line that would succeed
in the marketplace. He appointed a cross-functional
development team with representatives from engineering,
marketing, operations, and other areas. The
team, together with designers from Fitch PLC, an
industrial design firm, started by interviewing more
than 1,000 people who used computers in large companies,
small organizations, or at home. Based on
the information gathered, they created several generations
of prototype products, which were further
refined in response to reactions from additional samples
of potential customers.
Based on the extensive customer feedback received,
the development team streamlined the old Bernoulli
Box, reducing its weight to about a pound so it could
fit in a briefcase. To appeal to different segments of
individual and business users, the team designed three
Exhibit 1.1 Iomega Zip Drive—Helping Customers Store Their “Stuff”
3. What Gets Exchanged? Products and Services
Products and services help satisfy a customer’s need when they are acquired, used, or
consumed. Products are essentially tangible physical objects (such as cars, watches, and
computers) that provide a benefit. For example, a car provides transportation; a watch tells
the time. Services are less tangible and, in addition to being provided by physical objects,
can be provided by people (doctors, lawyers, architects), institutions (the Roman Catholic
Church, the United Way), places (Walt Disney World, Paris), and activities (a contest or a
stop-smoking program).
4. How Exchanges Create Value
Customers Buy Benefits, Not Products As argued earlier, when people buy
products to satisfy their needs, they are really buying the benefits they believe the products
models with different storage capacities and prices.
All three were given bright colors to make them stand
out from their environment and to signal that they
were different from the “gray” competition. The most
basic model—the Zip drive—held 100 megabytes and
was initially priced at $200 per unit and $20 per disk
(prices that have fallen substantially since) to appeal
to individual PC owners for their personal use. Finally,
a promotional campaign was crafted around the theme
that Zip could help people organize their “stuff” to
make it more accessible and portable.
Within three years of its introduction, more than 3
million Zip drives were sold. Consequently, Iomega’s
share price soared from $2 to $150 (before stock
splits), and the firm made it to the top 50 of Fortune’s
list of fastest-growing companies.
Unfortunately, the Zip drive also provides an
excellent illustration of how advancing technology
can shorten the life cycle of even the hottest product.
Within five years of its introduction, a variety of read/
write CD—and eventually DVD—players were being
offered either as external add-ons or built-in components
by the PC makers. Given that CDs offered much
more functionality and storage capacity at a lower
price, the market for Zip drives quickly dried up.
Source: “The Right Stuff.” @issue: The Journal of Business and
Design, vol. 2, no. 2 (FaIl 1996), pp. 6–11. Published by Corporate
Design Foundation and sponsored by Sappi Fine Paper; “America’s
Fastest Growing Companies,” Fortune, October 14, 1996, pp. 90–104.
Paul Eng, “What to Do When You Need More Space,” BusinessWeek,
November 4, 1996.” For more examples, see “Inside Innovation,”
BusinessWeek, June 19, 2006, pp. IN3–IN32.
Exhibit 1.2
Customers Buy Benefits, Not Products
Need
Product/service features
Brand/supplier chosen
Benefits sought
Choice criteria
Chapter One The Marketing Management Process 11
provide, rather than the products per se. For instance, you buy headache relief, not aspirin.
The specific benefits sought vary among customers depending on the needs to be satisfied
and the situations where products are used. Because different customers seek different
benefits, they use different choice criteria and attach different importance to product features
when choosing models and brands within a product category. (This is diagrammed in
Exhibit 1.2 .) For example, a car buyer with strong needs for social acceptance and esteem
might seek a socially prestigious automobile. Such a buyer would be likely to attach great
importance to criteria relating to social image and engineering sophistication such as a
high-powered motor, European-road-car styling, all-leather interior, and a state-of-the-art
sound system.
Keep in mind, too, that services offered by the seller can also create benefits for customers
by helping them reduce their costs, obtain desired products more quickly, or use those
products more effectively. Such services are particularly important for satisfying organizational
buyers. For example, a few years ago the Massachusetts Institute of Technology
discovered that it was doing business with about 20,000 vendors of office and laboratory
supplies each year. To improve the efficiency of its purchasing system, MIT developed a
computerized catalog that staff members can access via the school’s intranet. It then formed
alliances with two main suppliers—Office Depot Inc. and VWR Corp.—who won the bulk
of MIT’s business by promising to deliver superior service. Both firms deliver purchases
within a day or two right to the purchaser’s desk rather than to a building’s stockroom. 10
Product Benefits, Service, and Price Determine Value A customer’s estimate
of a product’s or service’s benefits and capacity to satisfy specific needs and wants determines
the value he or she will attach to it. Generally, after comparing alternative products,
brands, or suppliers, customers choose those they think provide the most need-satisfying
benefits per dollar. Thus, value is a function of intrinsic product features, service, and
price, and it means different things to different people. 11
Customers’ estimates of products’ benefits and value are not always accurate. For
example, after buying an air-conditioning installation for its premises, a company may find
that the product’s cost of operation is higher than expected, its response time to changes in
12 Section One The Role of Marketing in Developing Successful Business Strategies
the outside temperature is slow, and the blower is not strong enough to heat or cool remote
areas in the building.
A customer’s ultimate satisfaction with a purchase, then, depends on whether the product
actually lives up to expectations and delivers the anticipated benefits. This is why
customer services—particularly those occurring after a sale, such as delivery, installation,
operating instruction, and repair—are often critical for maintaining satisfied customers.
Also, it is essential that companies handle customer complaints effectively. The average
business never hears from 96 percent of its dissatisfied customers. This is unfortunate, for
50 percent of those who complain would do business with the company again if their complaints
were handled satisfactorily—95 percent if the complaints were resolved quickly. 12
The Value of Long-Term Customer Relationships Firms have traditionally
focused on the individual transaction with a customer as the fruition of their marketing
efforts. But as global markets have become increasingly competitive and volatile, many
firms have turned their attention to building a continuing long-term
relationship between the organization and the customer as the ultimate
objective of a successful marketing strategy. They are taking action to
increase lifetime customer value —the present value of a stream of revenue
that can be produced by a customer over time. For an automobile
manufacturer, for instance, the lifetime value of a first-time car buyer
who can be kept satisfied and loyal to the manufacturer—buying all future new cars from
the same company—is well over a million dollars.
Throughout this book we will discuss marketing decisions and activities geared to
increasing the satisfaction and loyalty—and therefore the lifetime value—of customers.
While such activities can add to a company’s marketing costs, they can also produce big
dividends, not only in terms of long-term revenues and market share, but also in terms of
profitability. The reason is simple: It costs more to attract a new customer than to keep
an existing one. 13 To persuade a customer to leave a competitor and buy your product or
service instead usually takes either a financial inducement (a lower price or special promotional
deal) or an extensive and convincing communication program (advertising or
sales force effort), all of which are costly. Consequently, the increased loyalty that comes
through developing long-term customer relationship translates into higher profits.
Brand Equity The assets—including customers’ perceptions of a product’s benefits
and value, their positive past experiences, and their loyalty over time—linked to a brand’s
name and symbol constitute the brand’s equity. 14 Brand equity reflects the value of the
brand name and logo as promotional tools for attracting future buyers and building market
share and profitability. That is why Samsung’s recent marketing efforts have concentrated
on building the equity of the Samsung brand in global markets by incorporating innovative
technologies and stylish design in the firm’s offerings and advertising them as appropriate
products for modern lifestyles. Ultimately, in other words, a brand’s value to the company
depends on how much value customers think the brand provides for them; value creation
cuts both ways.
5. Defining a Market
A market consists of ( a ) individuals and organizations who ( b ) are interested and willing
to buy a particular product to obtain benefits that will satisfy a specific need or want, and
who ( c ) have the resources ( time, money ) to engage in such a transaction. Some markets
are sufficiently homogeneous that a company can practice undifferentiated marketing in
them. That is, the company attempts to market a line of products using a single marketing
Many firms have turned their attention
to building a continuing long-term
relationship between the organization and
the customer as the ultimate objective of
a successful marketing strategy.
Key Observation
Chapter One The Marketing Management Process 13
Exhibit 1.3 Haier—A Chinese Manufacturer Pursues Segments
of the Appliance Market
Haier, the rapidly growing Chinese manufacturer
of washing machines, refrigerators,
and other household appliances,
uses extensive market research to modify
product designs and marketing programs to fit the
unique needs and preferences of a variety of geographic,
socioeconomic, and lifestyle segments. For
instance, customer surveys discovered that people in
Saudi Arabia desired extra-large washing machines
to hold the flowing robes that are commonly worn
there. Consequently, Haier developed a machine
with a 26-pound capacity—more than double that of
program. But because people have different needs, wants, and resources, the entire population
of a society is seldom a viable market for a single product or service. Also, people or
organizations often seek different benefits to satisfy needs and wants from the same type
of product (e.g., one car buyer may seek social status and prestige while someone else
wants economical basic transportation).
The total market for a given product category thus is often fragmented into several
distinct market segments. Each segment contains people who are relatively homogeneous
in their needs, their wants, and the product benefits they seek. Also, each segment seeks a
different set of benefits from the same product category.
Strategic marketing management involves a seller trying to determine the following
points in an effort to define the target market:
1. Which customer needs and wants are currently not being satisfied by competitive product
offerings.
2. How desired benefits and choice criteria vary among potential customers and how to identify
the resulting segments by demographic variables such as age, sex, lifestyle, or some other
characteristics.
3. Which segments to target, and which product offerings and marketing programs appeal most
to customers in those segments.
4. How to position the product to differentiate it from competitors’ offerings and give the firm a
sustainable competitive advantage.
Exhibit 1.3 provides an example of a Chinese firm that has been very successful in
segmenting the household appliances market, targeting precisely defined niches within
that market, and positioning its products and services to appeal to the customers in these
target segments.
What Does Effective Marketing Practice Look Like?
Exchange transactions—and particularly long-term relationships—do not happen automatically.
They are the result of many decisions that must be planned and carried out
by somebody. Sometimes a single organization has the necessary resources to plan and
the average washer. The product was a hit, selling
more than 10,000 units in its first year. At the other
extreme, the firm also offers a miniwasher, aimed at
developing economies, that costs only $38. Another
washing machine, designed to handle fluctuations in
voltage and pick up where it left off if the power
goes out, is marketed in rural areas of Asia where
the power supply is not always reliable.
Source: David Rocks, “China Design,” BusinessWeek, November
21, 2005, pp. 56–62.
14 Section One The Role of Marketing in Developing Successful Business Strategies
execute an entire marketing strategy by itself. Usually, though, a firm’s marketing program
involves cooperative efforts from a network of more specialized institutions: suppliers,
wholesalers, retailers, advertising agencies, and the like. In some cases, major customers
may be involved in shaping and executing parts of a firm’s marketing program, such as
new product development and testing.
Regardless of who is involved, we refer to the entire sequence of analyses, decisions, and
activities involved in planning, carrying out, and evaluating a strategic marketing program
as the marketing management process. We take a more detailed look at this process—and
at the roles of different functional managers and marketing institutions in planning and
executing the activities involved—next.
Marketing Management—A Definition
Our discussion suggests that marketing management occurs whenever one party has something
it would like to exchange with another. Marketing management is the process that
helps make such exchanges happen. More specifically,
marketing management is the process of analyzing, planning, implementing, coordinating,
and controlling programs involving the conception, pricing, promotion, and distribution of
products, services, and ideas designed to create and maintain beneficial exchanges with target
markets for the purpose of achieving organizational objectives.
Exhibit 1.4 diagrams the major decisions and activities involved in the marketing management
process, and it also serves as the organizational framework for the rest of this
book. For that reason, it is important to note the basic focus of this framework and the
sequence of events within it.
A Decision-Making Focus The framework has a distinct decision-making focus.
Planning and executing an effective marketing program involves many interrelated decisions
about what to do, when to do it, and how. Those decisions are the major focus of the
rest of this book. Every chapter details decisions that must be made and actions taken with
respect to a specific piece of a strategic marketing program and provides the analytical
tools and frameworks you’ll need to make those decisions intelligently.
Analyzing the 4Cs A substantial amount of analysis of customers, competitors, and
the company itself occurs before decisions are made concerning specific components of
the marketing program. This reflects our view that successful marketing management
decisions usually rest on an objective, detailed, and evidence-based understanding of the
market and the environmental context. Of course, most marketing strategies never get
implemented in quite the same way as they were drawn on paper. Adjustments are made
and new activities undertaken in response to rapid changes in customer demands, competitive
actions, or shifting economic conditions. But a thorough and ongoing analysis of the
market and the broader environment enables managers to make such adjustments in a wellreasoned
and consistent way rather than by the seat of the pants.
The analysis necessary to provide the foundation for a good strategic marketing plan
should focus on four elements of the overall environment that may influence a given strategy’s
appropriateness and ultimate success: (1) the company’s internal resources, capabilities,
and strategies; (2) the environmental context —such as broad social, economic, and
technology trends—in which the firm will compete; (3) the needs, wants, and characteristics
of current and potential customers; and (4) the relative strengths and weaknesses of
competitors and trends in the competitive environment. Marketers refer to these elements
as the 4Cs, and they are described in more detail below.
Exhibit 1.4
The Marketing Management Process
External environment Marketing’s role in strategy development
• Corporate and business-unit objectives and strategies (Chapter 2)
Strategic marketing programs for selected situations
Market opportunity analysis
(The 4 Cs: company, context, customers, and competitors)
Developing strategic marketing programs
(The 4 Ps: product, price, place, and promotion)
• Understanding market opportunities (Chapter 3)
• Customer behavior (Chapters 4 and 5)
• Marketing research and forecasting (Chapter 6)
• Market segmentation and targeting (Chapter 7)
• Positioning decisions (Chapter 8)
• Business strategies and marketing program decisions (Chapter 9)
• Product and service decisions (Chapter 10)
• Pricing decisions (Chapter 11)
• Distribution decisions (Chapter 12)
• Promotion decisions (Chapter 13)
• Strategies for the new economy (Chapter 14)
• Strategies for new and growing markets (Chapter 15)
• Strategies for mature and declining markets (Chapter 16)
Implementing and managing marketing programs
• Organizing and planning for implementation (Chapter 17)
• Measuring and motivating marketing performance (Chapter 18)
Chapter One The Marketing Management Process 15
Integrating Marketing Plans with the Company’s
Strategies and Resources
Many firms—particularly larger organizations with multiple divisions or business units—
develop a hierarchy of interdependent strategies. Each strategy is formulated at varying
levels within the firm and deals with a different set of issues. For example, as we’ll see
in the next chapter, IBM has reduced its focus and the proportion of resources it devotes
to its traditional computer hardware businesses. Instead, it is seeking future growth and
profits by investing heavily in developing information engineering, software, and business
consulting services. This change in emphasis reflects IBM’s new corporate strategy. This
level of strategy reflects the company’s mission and provides direction for decisions about
what businesses it should pursue, how it should allocate its available resources, and its
growth policies.
16 Section One The Role of Marketing in Developing Successful Business Strategies
Samsung’s heavy investment in R&D, consumer research, and product design to develop
a new generation of technically superior, attractively designed digital electronics products
represents part of a business-level (or competitive) strategy that addresses how the business
intends to compete in its industry. Samsung seeks to gain a competitive advantage by
offering cutting-edge technology, innovative design, and superior customer value.
Finally, interrelated decisions about market segments, product line, advertising appeals
and media, prices, and partnerships with suppliers, distributors, retailers, and other agencies
all reflect a firm’s marketing strategy. This is the company’s plan for pursuing its
objectives within a particular product-market. In the case of smaller companies or start-ups
with only a single product line, however, business-level competitive strategy and marketing
strategy substantially overlap.
A major part of the marketing manager’s job is to monitor and analyze customers’
needs and wants and the emerging opportunities and threats posed by competitors and
trends in the external environment. Therefore, because all levels of strategy must consider
such factors, marketers often play a major role in providing inputs to—and influencing
the development of—corporate and business strategies. Conversely, general managers and
senior managers in other functions need a solid understanding of marketing in order to
craft effective organizational strategies.
Marketing managers also bear the primary responsibility for formulating and implementing
strategic marketing plans for individual product-market entries or product lines.
But as the above discussion suggests, such strategic marketing programs
are not created in a vacuum. Instead, the marketing objectives and strategy
for a particular product-market entry must be achievable with the
company’s available resources and capabilities and consistent with the
direction and allocation of resources inherent in the firm’s corporate and
business-level strategies. In other words, there should be a good fit—or
internal consistency—among the elements of all three levels of strategy.
Chapter 2 describes in more detail the components of corporate and business
strategies and the roles marketers and other functional managers play in shaping the
strategic direction of their organizations and business units.
Market Opportunity Analysis
A major factor in the success or failure of strategies at all three levels is whether the strategy
elements are consistent with the realities of the firm’s external environment. Thus, the
next step in developing a strategic marketing plan is to monitor and analyze the opportunities
and threats posed by factors outside the organization. This is an ongoing responsibility
for marketing managers.
Understanding Market Opportunities Understanding the nature and attractiveness
of any opportunity requires an examination of the external environment, including
the markets to be served and the industry of which the firm is a part. In turn, this examination
involves a look at broad macro issues like environmental trends that are driving or
constraining market demand and the structural characteristics of the industry as a whole,
as well as specific aspects of the firm and what it brings to the party. It is also necessary
to examine the management team that will be charged with implementing whatever marketing
strategy is developed to determine if they have what it takes to get the job done.
Chapter 3 provides a framework for examining these issues, and dramatizes how different
the attractiveness of one’s market and one’s industry can be; an insight that is easily (and
often) overlooked.
The marketing objectives and strategy for
a particular product-market entry must be
achievable with the company’s available
resources and capabilities and consistent
with the direction and allocation of
resources inherent in the firm’s corporate
and business-level strategies.
Key Observation
Chapter One The Marketing Management Process 17
Customer Analysis The primary purpose of marketing activities is to facilitate and
encourage exchange transactions with potential customers. One of a marketing manager’s
major responsibilities is to analyze the motivations and behavior of present and potential
customers. What are their needs and wants? How do those needs and wants affect the product
benefits they seek and the criteria they use in choosing products and brands? Where do
they shop? How are they likely to react to specific price, promotion, and service policies?
To answer such questions, a marketing manager must have some notion of the mental
processes customers go through when making purchase decisions and of the psychological
and social factors that influence those processes. Chapter 4 discusses the processes and
influences that shape consumers’ buying behavior. Because some aspects of the purchase
process differ for organizations, Chapter 5 examines the buying behavior of institutional
customers.
Marketing Research and Forecasting Marketing managers must obtain objective
information about potential customers, the satisfaction and loyalty of current customers,
the firm’s wholesale and retail partners, and the strengths and weaknesses of competitors.
Consequently, even relatively small organizations often expend substantial financial and
personnel resources studying the needs and preferences of potential customers, developing
new products, and tracking the sales patterns and satisfaction of existing customers and
channel members.
If managers are to make informed decisions, however, research information must be converted
into estimates of the sales volume and profit the firm might reasonably expect a particular
marketing program to generate within a given market segment. Chapter 6 discusses
techniques and methods for collecting and analyzing marketing research information and for
forecasting the market potential and likely sales volumes of particular market segments. The
specific research methods that marketing managers use to make decisions about elements of
a marketing program—such as what price to charge or which advertising media to use—will
be examined in more detail in chapters dealing with each of these program decisions.
Market Segmentation, Targeting, and Positioning Decisions Not all customers
with similar needs seek the same products or services to satisfy those needs. Their
purchase decisions may be influenced by individual preferences, personal characteristics,
social circumstances, and so forth. On the other hand, customers who do purchase the same
product may be motivated by different needs, seek different benefits from the product, rely
on different sources of information about products, and obtain the product from different
distribution channels. Thus, one of the manager’s most crucial tasks is to divide customers
into market segments —distinct subsets of people with similar needs, circumstances, and
characteristics that lead them to respond in a similar way to a particular product or service
offering or to a particular strategic marketing program. Chapter 7 examines dimensions for
measurement and analytical techniques that can help managers identify and define market
segments in both consumer and organizational markets.
After defining market segments and exploring customer needs and the firm’s competitive
strengths and weaknesses within segments, the manager must decide which segments
represent attractive and viable opportunities for the company; that is, on which segments
to focus a strategic marketing program. Chapter 7 discusses some of the considerations in
selecting a target segment.
Finally, the manager must decide how to position the product or service offering and its
brand within a target segment; that is, to design the product and its marketing program so
as to emphasize attributes and benefits that appeal to customers in the target segment and
at once distinguish the company’s brand from those of competitors. Issues and analytical
techniques involved in marketing positioning decisions are discussed in Chapter 8.
18 Section One The Role of Marketing in Developing Successful Business Strategies
Formulating Strategic Marketing Programs
Designing an effective strategic marketing program for a product-market entry involves
three interrelated sets of decisions:
1. The manager must set specific objectives to be accomplished within the target market, such
as sales volume, market share, and profitability goals. Those objectives must be consistent
with the firm’s corporate and business-unit strategic objectives, yet specific enough to enable
management to monitor and evaluate the product-market entry’s performance over time.
2. The manager must decide on an overall marketing strategy to appeal to customers—and to
gain a competitive advantage—in the target market. The strategy must be consistent with
the firm’s capabilities, its corporate and business-unit strategies, and the product-market
objectives.
3. The manager must then make decisions about each element of the tactical marketing program
used to carry out the strategy. These decisions must be internally consistent and integrated
across all elements of the marketing program.
Specifying Marketing Objectives and Strategies The first step in developing
a strategic marketing program is to specify the objectives and the overall marketing strategy
of each target market. As we’ve mentioned, these are partly dictated by corporate and
business-level objectives, strategies, and resources. For instance, the nature of Samsung’s
product line, its pricing and distribution policies, and its advertising appeals and promotion
efforts are all influenced by the firm’s competitive strategy of offering technically innovative
and stylish electronics products at premium prices. Chapter 9 describes a number of
generic business-level competitive strategies and examines the way such strategies influence
decisions about marketing objectives and programs, as well as the role other functional
managers play in implementing those marketing programs.
Marketing Program Components Dozens of specific tactical decisions must be
made in designing a strategic marketing program for a product-market entry. These decisions
fall into four categories of major marketing variables that a manager has some ability
to control over the short term. Often called the 4 Ps, the controllable elements of a marketing
program are the product offering (including the breadth of the product line, quality
levels, and customer services); price; promotion (advertising, sales promotion, and
salesforce decisions); and place (or distribution). Because decisions about each element
should be consistent and integrated with decisions concerning the other three, the four
components are often referred to as the marketing mix.
The marketing mix is the combination of controllable marketing variables that a manager uses
to carry out a marketing strategy in pursuit of the firm’s objectives in a given target market.
Exhibit 1.5 outlines some of the decisions that must be made within each of the four elements
of the marketing mix. Chapters 10 through 13 discuss in more detail the various
methods and criteria for making decisions about each of these program components.
Formulating Strategic Marketing Programs
for Specific Situations
The strategic marketing program for a product should reflect market demand and the competitive
situation within the target market. But demand and competitive conditions change
over time as a product moves through its life cycle. Therefore, different marketing strategies
are typically more appropriate and successful for different market conditions and at
Exhibit 1.5
Decisions Within the Four Elements of the Marketing MixProduct
• Quality
• Features
• Style
• Options
• Brand name
• Packaging
• Guarantees/
warranties
• Services
The target market
• List price
• Discounts
• Allowances
• Credit terms
• Payment period
• Rental/lease
Place
• Numbers and
types of
middlemen
• Locations/
availability
• Inventory
levels
Promotion
• Advertising
• Personal selling
• Sales promotion
• Point-of-purchase
materials
• Publicity
Price
Chapter One The Marketing Management Process 19
different life-cycle stages. Chapter 14 explores marketing strategies for the rapidly evolving
conditions being created by e-commerce and the new economy. Chapter 15 examines
marketing strategies for introducing new entries and for strengthening a product’s competitive
position as its market grows. Chapter 16 then discusses the marketing strategies a
firm might adopt in mature and declining product-markets.
Implementation and Control
of the Marketing Program
A final critical determinant of a strategy’s success is the firm’s ability to implement it
effectively. And this depends on whether the strategy is consistent with the resources, the
organizational structure, the coordination and control systems, and the skills and experience
of company personnel. 15 Managers must design a strategy to fit the company’s existing
resources, competencies, and procedures—or try to construct new structures and systems
to fit the chosen strategy. For example, Samsung’s brand building program would not be
so successful without its substantial investments in R&D, marketing research, and product
design, and a team structure that encourages communication and cooperation across
functional areas throughout the development process. Chapter 17 discusses the structural
variables, planning and coordination processes, and personnel and corporate culture characteristics
related to the successful implementation of various marketing strategies.
The final tasks in the marketing management process are determining whether the
strategic marketing program is meeting objectives and adjusting the program when performance
is disappointing. This measurement and control process provides feedback to
20 Section One The Role of Marketing in Developing Successful Business Strategies
managers and serves as a basis for a market opportunity analysis in the next planning
period. Chapter 18 examines ways to evaluate marketing performance and develop contingency
plans when things go wrong.
The Marketing Plan—A Blueprint for ActionThe results of the various analyses and marketing program decisions discussed above
should be summarized periodically in a detailed formal marketing plan. 16
A marketing plan is a written document detailing the current situation with respect to customers,
competitors, and the external environment and providing guidelines for objectives,
marketing actions, and resource allocations over the planning period for either an existing or
a proposed product or service.
While some firms—particularly smaller ones—do not bother to write their marketing
plans, most organizations believe that “unless all the key elements of a plan are written
down . . . there will always be loopholes for ambiguity or misunderstanding of strategies
and objectives, or of assigned responsibilities for taking action.” 17 This suggests that
even small organizations with limited resources can benefit from preparing a written plan,
however brief. Written plans also provide a concrete history of a product’s strategies and
performance over time, which aids institutional memory and helps educate new managers
assigned to the product. Written plans are necessary in most larger organizations because
a marketing manager’s proposals must usually be reviewed and approved at higher levels
of management and because the approved plan provides the benchmark against which the
manager’s performance will be judged. Finally, the discipline involved in producing a
formal plan helps ensure that the proposed objectives, strategy, and marketing actions are
based on rigorous analysis of the 4Cs and sound reasoning.
Because a written marketing plan is such an important tool for communicating and
coordinating expectations and responsibilities throughout the firm, we will say more about
it in Chapter 17 when we discuss the implementation of marketing programs in detail. But
because the written plan attempts to summarize and communicate an overview of the marketing
management process we have been examining, it is worthwhile to briefly examine
the contents of such plans here.
Marketing plans vary in timing, content, and organization across companies. In general,
marketing plans are developed annually; though planning periods for some big-ticket
industrial products, such as commercial aircraft, may be longer, and in some highly volatile
industries, such as telecommunications or electronics, they can be shorter. Plans typically
follow a format similar to that outlined in Exhibit 1.6 .
There are three major parts to the plan. First, the marketing manager details his or her
assessment of the current situation. This is the homework portion of the plan where the
manager summarizes the results of his or her analysis of current and potential customers,
the company’s relative strengths and weaknesses, the competitive situation, the major
trends in the broader environment that may affect the product and, for existing products,
past performance outcomes. This section typically also includes forecasts, estimates of
sales potential, and other assumptions underlying the plan, which are especially important
for proposed new products or services. Based on these analyses, the manager may also call
attention to several key issues—major opportunities or threats that should be dealt with
during the planning period.
The second part of the plan details the strategy for the coming period. This part usually
starts by specifying the objectives (e.g., sales volume, market share, profits, customer
satisfaction levels) to be achieved by the product or service during the planning
Exhibit 1.6
Contents of a Marketing PlanSection Content
I. Executive summary Presents a short overview of the issues, objectives, strategy, and actions incorporated in the
plan and their expected outcomes for quick management review.
II. Current situation
and trends
Summarizes relevant background information on the market, competition, and the
macroenvironment, and trends therein, including size and growth rates for the overall market
and key segments.
III. Performance review
(for an existing product
or service only)
Examines the past performance of the product and the elements of its marketing program
(e.g., distribution, promotions).
IV. Key issues Identifies the main opportunities and threats to the product that the plan must deal with in
the coming year, and the relative strengths and weaknesses of the product and business unit
that must be taken into account in facing those issues.
V. Objectives Specifies the goals to be accomplished in terms of sales volume, market share, and profit.
VI. Marketing strategy Summarizes the overall strategic approach that will be used to meet the plan’s objectives.
VII. Action plans This is the most critical section of the annual plan for helping to ensure effective
implementation and coordination of activities across functional departments. It specifies
● The target market to be pursued.
● What specific actions are to be taken with respect to each of the 4 Ps.
● Who is responsible for each action.
● When the action will be engaged in.
● How much will be budgeted for each action.
VIII. Projected profit-andloss
statement
Presents the expected financial payoff from the plan.
IX. Controls Discusses how the plan’s progress will be monitored; may present contingency plans to be
used if performance falls below expectations or the situation changes.
X. Contingency plans Describes actions to be taken if specific threats or opportunities materialize during the
planning period.
Chapter One The Marketing Management Process 21
period. It then outlines the overall marketing strategy, the actions associated with each
of the 4 Ps necessary to implement the strategy, and the timing and locus of responsibility
for each action.
Finally, the plan details the financial and resource implications of the strategy and
the controls to be employed to monitor the plan’s implementation and progress over the
period. Some plans also specify some contingencies: how the plan will be modified if certain
changes occur in the market, competitive, or external environments.
Who Does What?
Marketing Institutions
A strategic marketing program involves a large number of activities aimed at encouraging
and facilitating exchanges and building relationships with customers. And all of those
activities must be performed by somebody for exchanges to happen. One of the few eternal
Exhibit 1.7
What Must Change Hands to Complete an Exchange Between a Buyer and a Seller?
Information about the Market
and
Customer Needs and Wants
Information about the Product
and
the Offer
Physical Product or Service
Money or Something Else of Value Seller Buyer
22 Section One The Role of Marketing in Developing Successful Business Strategies
truths in marketing is that “you can eliminate the middlemen, but you can’t eliminate their
functions.” Somebody has to gather information or feedback from customers concerning
their needs and wants; use that information to design product or service offerings that
will provide valued benefits; communicate the existence and benefits of the offering to
the market; perform the storage, order fulfillment, and transportation activities necessary
to make the product conveniently available to customers; finance purchases; collect payment;
and resolve customer problems or complaints after the sale. The major flows of the
physical product, payment, and information that occur during an exchange are summarized
in Exhibit 1.7 .
In a few cases, nearly all these activities are performed by a single organization and its
employees. Such internal control of the full range of marketing functions and activities
is referred to as vertical integration. Dell Computer’s reliance on the Internet to attract
customers and process orders together with a flexible manufacturing system that produces
computers to order and minimizes finished inventories, and Canon’s reliance on its own
factories, salesforce, and distribution facilities to produce and market its copiers and printers
are examples of highly integrated marketing organizations.
The majority of goods and services in most developed economies, however, are marketed
through alliances or networks involving multiple institutions or middlemen. These
networks are commonly referred to as marketing channels or channels of distribution.
Each institution within the channel specializes in performing only a part of the activities or
functions necessary to conduct exchanges with the end user. We will examine these institutions
and the nature of their interactions with one another in more detail in Chapter 12.
Marketing institutions fall into one of the following categories:
● Merchant wholesalers take title to the goods they sell and sell primarily to other resellers
(retailers), industrial, and commercial customers, rather than to individual consumers.
● Agent middlemen, such as manufacturers’ representatives and brokers, also sell to other
resellers and industrial or commercial customers, but they do not take title to the goods they
sell. They usually specialize in the selling function and represent client manufacturers on a
commission basis.
● Retailers sell goods and services directly to final consumers for their personal, nonbusiness use.
● Facilitating agencies, such as advertising agencies, marketing research firms, collection
agencies, railroads, and Web portals, specialize in one or more marketing functions on
a fee-for-service basis to help their clients perform those functions more effectively and
efficiently.
Chapter One The Marketing Management Process 23
Who Pays the Cost of Marketing Activities—And
Are They Worth It?
The final selling price of the product reflects the costs of performing the activities necessary
for exchange transactions. Those costs vary widely across different products and
customers. They account for a relatively high proportion of the price of frequently purchased
consumer package goods such as cereals and cosmetics. Extensive transportation,
storage, and promotion activities facilitate the millions of consumer purchases that occur
every year. In developed economies, on average, roughly 50 percent of the retail price of
such products is made up of marketing and distribution costs; one-half represents retailer
margins, and the other half the marketing expenses of the manufacturer and wholesale
middlemen. 18 On the other hand, marketing costs for nontechnical industrial goods, such
as sheet steel or basic chemicals, are much lower because they are sold in large quantities
directly to a small number of regular customers.
Though both individual and organizational customers pay for the marketing activities
of manufacturers and their middlemen, they are still usually better off than if they were
to undertake all the functions themselves. This is true for two reasons: First, the purchasing,
storage, promotion, and selling activities of wholesalers and retailers allow customers
to buy a wide variety of goods from a single source in one transaction, thereby increasing
transactional efficiency. For example, a consumer may buy a week’s groceries on
a single trip to the supermarket (or perhaps even over the Internet from a home-delivery
service) rather than engage in separate transactions with a butcher, a baker, and a variety
of farmers or food processors. Thus, the number of exchanges necessary for a consumer to
acquire a desired assortment of goods and services is reduced and efficiency is increased
when middlemen are added to an economic system.
A second benefit of an extensive marketing system is that specialization of labor and
economies of scale lead to functional efficiency. Manufacturers and their agents can
perform the exchange activities more cheaply than can individual customers. A railroad,
for instance, can ship a load of new tires from a plant in Akron to a wholesaler in Tucson
more cheaply than an individual consumer in Arizona could transport them in the family
minivan.
From the customer’s viewpoint, then, the increased transactional and functional efficiency
of exchange produced by members of the marketing system increases the value—
the utility/price relationship—of goods and services. A product has greater utility for a
potential customer when it can be purchased with a minimum of risk and shopping time
( possession utility ), at a convenient location ( place utility ), and at the time the customer
is ready to use the product ( time utility ).
Room for Improvement in Marketing EfficiencyWhile the existence of specialized institutions in our economy’s marketing system has
greatly increased the efficiency and value of most exchange transactions from the customer’s
point of view, that does not mean the current system is nearly as efficient as it could
be. Marketing is one of the few functional areas of business whose efficiency has not
substantially improved in recent years. Two authorities estimate that, on average, manufacturing
costs have declined from about 50 percent of total corporate costs after World
War II to about 30 percent today through automation, flexible manufacturing systems,
product redesign for manufacturing, just-in-time approaches, and so on. Similarly, they
argue that the average costs of “management”—defined to include finance, accounting,
human resources, and support functions like R&D—have fallen from about 30 percent
24 Section One The Role of Marketing in Developing Successful Business Strategies
to 20 percent as the result of downsizing, outsourcing, and process reengineering. On the
other hand, they estimate that the percentage of corporate costs accounted for by marketing
activities actually went up over the same period. 19
Of course, there are some good reasons why marketing costs have increased in recent
years, including the greater intensity of global competition, the rapid pace of technological
change, the fragmentation of the communications media, and many other factors. However,
at least part of the problem can be attributed to marketers themselves. Marketing
managers have been slow to develop accurate measures and metrics of marketing performance
and, therefore, slow to understand the effectiveness of various marketing actions
relative to their costs, and thus their impact on a firm’s bottom line. In a recent survey of
over 100 marketing executives in global companies in the United States, United Kingdom,
and Germany, for instance, nearly all respondents agreed that improving the effectiveness
of their marketing investments was one of their corporation’s top three business priorities.
But 84 percent of those respondents admitted that marketing return on investment (MROI)
is not well understood in their businesses, and only 54 percent said they measured any of
their marketing activities consistently. 20
We will focus throughout this book on ways marketers are attempting to improve operational
efficiency through (1) more effective use of telecommunications and information
technologies, such as Internet ads, product placements, event sponsorships, company blogs,
and the like; (2) the development of cooperative alliances with suppliers, middlemen, and
ultimate customers; and (3) the search for new measurement and budgeting methods that
are more clearly focused on improving cash flows and adding economic value. 21
The Role of the Marketing Decision Maker
The title marketing manager is necessarily and intentionally vague because many people
are directly involved with an organization’s marketing activities. This can include people
not formally located in a marketing or sales department or even within the company. The
exact nature of the marketing manager’s job will vary widely depending on the industry
involved, the organization’s structure, and its position in the managerial hierarchy.
While the marketing manager bears the primary responsibility for formulating and
implementing a strategic marketing program for a product or service, a single marketing
manager (1) seldom does all the analysis or makes all the decisions involved in such plans
all alone and (2) almost never has the formal authority to demand that all the activities
specified in the plan be carried out by subordinates exactly as they are written down.
Many marketing activities are usually contracted out to independent middlemen or
facilitating agencies or are performed in concert with a firm’s suppliers, major customers,
or other organizational partners. A marketing manager has no formal authority over these
outsiders. Thus, the development and nurturing of long-term relationships with suppliers,
channel members, and major customers can do more than simply improve marketing efficiency;
they can provide the information, advice, and cooperation necessary to devise and
carry out successful marketing strategies.
Even those marketing activities that are performed in-house are seldom all within the
domain of the marketing department or under the authority of a single marketing executive.
Implementing a marketing plan requires cooperation and coordination across many
specialized functional areas. Marketing is—or should be—everybody’s
business. After all, delivering superior value to customers is the key to
business success, and that superior value flows from a combination of
well-designed products or services, produced with high quality; efficient
operations that enable low costs and competitive prices; and reliable
Creating value is a cross-functional
endeavor, and marketing and nonmarketing
executives alike must operate with a clear
customer focus to make it happen.
Key ObservationChapter One The Marketing Management Process 25
customer service. Creating value is a cross-functional endeavor, and marketing and nonmarketing
executives alike must operate with a clear customer focus to make it happen.
Some Recent Developments Affecting Marketing
ManagementWhile many of the basic tasks involved in developing and implementing strategic
marketing programs have remained unchanged for decades, recent developments in
our economy and around the world have greatly changed the context in which those
tasks are carried out and the information and tools that marketers have at their disposal.
These developments include (1) the increased globalization of markets and competition,
(2) the growth of the service sector of the economy and the importance of service in
maintaining customer satisfaction and loyalty, (3) the rapid development of new information
and communications technologies, and (4) the growing importance of relationships
for improved coordination and increased efficiency of marketing programs and for
capturing a larger portion of customers’ lifetime value. Some recent impacts of these
four developments on marketing management are briefly summarized below and will be
continuing themes throughout this book.
GlobalizationInternational markets account for a large and growing portion of the sales of many organizations.
But while global markets represent promising opportunities for additional sales
growth and profits, differences in market and competitive conditions across country boundaries
can require firms to adapt their competitive strategies and marketing programs to be
successful. Even when similar marketing strategies are appropriate for multiple countries,
international differences in infrastructure, culture, legal systems, and the like, often mean
that one or more elements of the marketing program—such as product features, promotional
appeals, or distribution channels—must be tailored to local conditions for the strategy
to be effective.
Increased Importance of ServiceA service can be defined as “any activity or benefit that one party can offer another that is
essentially intangible and that does not result in the ownership of anything. Its production
may or may not be tied to a physical product.” 23 Service businesses such as airlines, hotels,
restaurants, and consulting firms account for roughly two-thirds of all economic activity
in the United States, and services are the fastest-growing sector of most other developed
economies around the world. While many of the decisions and activities involved
in marketing services are essentially the same as those for marketing physical goods, the
intangible nature of many services can create unique challenges for marketers. We will
discuss these challenges—and the tools and techniques firms have developed to deal with
them—throughout this book.
As the definition suggests, services such as financing, delivery, installation, user training
and assistance, and maintenance are often provided in conjunction with a physical
product. Such ancillary services have become more critical to firms’ continued sales and
financial success in many product-markets. As markets have become crowded with global
competitors offering similar products at ever-lower prices, the creative design and effective
delivery of supplemental services has become a crucial means by which a company
26 Section One The Role of Marketing in Developing Successful Business Strategies
may differentiate its offering and generate additional benefits and value for customers.
Those additional benefits, in turn, can justify higher prices and margins in the short term
and help improve customer satisfaction, retention, and loyalty over the long term. 24
Of course, lousy customer service can have the opposite effect. This is especially a
danger when intense price competition pushes a firm to cut costs by reducing or outsourcing
customer service and support. For instance, in recent years Dell attempted to maintain
its long-standing low-cost position in the personal computer industry by—among other
things—reducing the number of technicians in its customer call centers and limiting each
technician’s training to only a few specialized problem areas. As a result, increasing numbers
of customers spent 30 minutes or more on hold when they called Dell for help, and
45 percent were transferred at least once before they found a technician with the expertise
to solve their problem. Consequently, Dell’s customer satisfaction rating in the United
States fell by more then 6 percentage points in 2005, and despite expensive attempts to
improve service—including the use of independent retail outlets to sell and service Dell
equipment—the firm’s sales, profits, and stock price were all still suffering at the beginning
of the 2008 fiscal year. 25
Information Technology
The computer revolution and related technological developments are changing the nature
of marketing management in two important ways. First, new technologies are making it
possible for firms to collect and analyze more detailed information about potential customers
and their needs, preferences, and buying habits. Thus, it is now possible for many firms
to identify and target smaller and more precisely defined market segments—sometimes
segments consisting of only one or a few customers—and to customize product features,
promotional appeals, prices, and financing arrangements to fit such segments. 26
A second impact of information technology has been to open new channels for communications
and transactions between suppliers and customers. As Exhibit 1.8 suggests,
one simple way of categorizing these new channels is based on whether the suppliers and
customers involved are organizations or individual consumers.
Global sales over the Internet are growing so fast that solid estimates of their volume
are hard to come by. However, Internet revenues of manufacturers, wholesalers, retailers,
and selected service firms (not including travel) amounted to nearly $3 trillion in the
United States in 2005 (the most recent census data available at the time of this writing) and
worldwide volume of $5.5 to $6.5 trillion seems a reasonable guess for 2008. 27 Growth in
both the global and U.S. markets has averaged about 18 to 25 percent annually for the past
several years, and is likely to continue at about the same pace.
Roughly 80 percent of those sales were business-to-business transactions, such as those
in the upper-left quadrant of Exhibit 1.8 . Many high-tech firms like Oracle Corp. and Cisco
Systems, and even some more traditional companies such as DaimlerChrysler conduct all
or a large portion of their purchasing activities over the Web. And many firms rely on their
Web sites to communicate product information to potential customers, make sales, and
deal with customer problems.
Perhaps even more important, though, new information and communications technologies
are enabling firms to forge more cooperative and efficient relationships with their
suppliers and distribution channel partners. For example, Procter & Gamble and 3M have
formed alliances with major retailers—such as Kroger and Wal-Mart—to develop automatic
restocking systems. Sales information from the retailer’s checkout scanners is sent
directly to the supplier’s computers, which figure out automatically when to replenish
each product and schedule deliveries direct to each of the retailer’s stores. Such paperless
Business Consumer
Business-to-Business (B2B) Business-to-Consumer (B2C)
Examples: Examples:
Business ● Purchasing sites of Ford, Oracle, Cisco
● Supply chain networks linking producers
and distribution channel members, such
as 3M and Wal-Mart
● E-tailers, such as E*Trade, Amazon
● Producers’ direct sales sites, such as
Dell, Ryanair, Sofitel Hotels
● Web sites of traditional retailers, such
as Sears, Lands’ End, Marks & Spencer
Consumer-to-Business (C2B) Consumer-to-Consumer (C2C)
Examples: Examples:
Consumer ● Sites that enable consumers to bid on
unsold airline tickets and other goods
and services, such as Priceline
● Auction sites, such as eBay, QXL
Source: Adapted from “A Survey of E-Commerce: Shopping Around the Web,” The Economist,
February 26, 2000, p. 11.
Exhibit 1.8
Categories of E-commerce
Chapter One The Marketing Management Process 27
exchanges reduce mistakes and billbacks, minimize inventory levels, improve cash flow,
and increase customer satisfaction and loyalty.
In contrast, Internet sales from businesses to consumers (the upper-right quadrant in
Exhibit 1.8 ) accounted for only about $135 billion (excluding travel) in the United States in
2007, less than 3.5 percent of the country’s total retail sales. 28 However, sales volumes of
firms such as Amazon, Dell Computer, and iTunes are expanding rapidly, and many traditional
retailers are expanding their marketing efforts on the Web as well. And information
available over the Internet is affecting consumer purchase patterns even when the purchases
are made in traditional retail outlets. For instance, recent studies indicate that 69 percent of
U.S. consumers research products online before making a purchase, 62 percent have looked at
least once at an online customer review before making a purchase, 39 percent have compared
product features and prices across retail outlets online before buying, and 9 percent have
used a cell phone to text-message a friend or relative about a product while shopping. 29
Clearly, the Web is presenting marketers with new strategic options—as well as new
competitive threats and opportunities—regardless of what or to whom they are selling.
Therefore, we will devote all of Chapter 14 to marketing strategies for e-commerce, and
discuss specific examples and their implications in every chapter.
Relationships across Functions and Firms
New information technologies and the ongoing search for greater marketing efficiency and
customer value in the face of increasing competition are changing the nature of exchange
between companies. Instead of engaging in a discrete series of arm’s-length, adversarial
exchanges with customers, channel members, and suppliers on the open market, more firms
are trying to develop and nurture long-term relationships and alliances, such as the one
between 3M and Wal-Mart. Such cooperative relationships are thought to improve each
partner’s ability to adapt quickly to environmental changes or threats, to gain greater benefits
at lower costs from its exchanges, and to increase the lifetime value of its customers. 30
28 Section One The Role of Marketing in Developing Successful Business Strategies
Similar kinds of cooperative relationships are emerging inside companies as firms seek
mechanisms for more effectively and efficiently coordinating across functional departments
the various activities necessary to identify, attract, service, and satisfy customers. In
many firms, the planning and execution that used to be the responsibility of a product or
marketing manager are now coordinated and carried out by cross-functional teams. Thus,
the boundaries between functional areas are beginning to blur, and marketing programs
are increasingly a group activity. Regardless of who is responsible or who carries out the
work, however, the decisions and activities involved in such marketing programs remain
the same. They are the focus of the rest of this book.
1. Marketing is pervasive. It is a social process involving
the activities that facilitate exchanges of goods and
services among individuals and organizations.
2. Customers buy benefits, not products. The benefits a
customer receives from a firm’s offering, less the costs
he or she must bear to receive those benefits, determine
the offering’s value to that customer.
3. Delivering superior value to one’s customers is the
essence of business success. Because delivering superior
value is a multifunctional endeavor, both marketing and
nonmarketing managers must adopt a strong focus on the
customer and coordinate their efforts to make it happen.
4. A focus on satisfying customer needs and wants is not
inconsistent with being technologically innovative.
5. The marketing management process requires an
understanding of the 4Cs: the company and its mission,
strategies, and resources; the macroenvironmental
context in which it operates; customers and their needs
and wants; and competitors. Obtaining an objective,
detailed, evidence-based understanding of these factors
is critical to effective marketing decision making.
6. Marketing decisions—such as choices about what
goods or services to sell, to whom, and with what
strategy—are made or approved at the highest levels
in most firms, whether large or small. Therefore,
managers who occupy or aspire to strategic positions
in their organizations need marketing perspectives and
analytical skills.
Self-diagnostic questions to test your ability to apply
the concepts in this chapter to marketing decision
making may be found at this book’s Web site at
www.mhhe.com/mullins6e.
T ake-aways
1. This case example is based on information found in “Samsung’s Lessons
in Design,” @issue: The Journal of Business and Design, Volume 9, No.1
(Fall 2003), pp. 25–31; “As Good as It Gets? Special Report: Samsung Electronics,”
The Economist, January 15, 2005, pp. 64–66; Patricia O’Connell,
“Samsung’s Goal: Be Like BMW,” BusinessWeek Online, August 1, 2005;
Peter Lewis, “A Perpetual Crisis Machine,” Fortune, September 19, 2005,
pp.58–76; Moon Ihlwan, “Samsung’s Rise in Digital TV,” BusinessWeek
Online, October 4, 2007; “Losing Its Shine,” The Economist, February 9,
2008, p.71; and the company’s Web site at www.samsung.com.
2. For example, see Christine Moorman and Roland T. Rust, “The Role
of Marketing,” Journal of Marketing 63 (Special Issue 1999), pp. 180–97;
Frederick E. Webster, Jr., “Marketing Management in Changing Times,”
Marketing Management, January–February 2002, pp. 18–23; and David
Kiley and Burt Helm, “The Short Life of the Chief Marketing Officer,” BusinessWeek,
December 10, 2007, pp. 63–65.
3. The American Marketing Association offers a similar, though more
detailed, definition of marketing, as follows: “Marketing is the process of
planning and executing the conception, pricing, promotion, and distributing
of ideas, goods, and services to create exchanges that satisfy individual and
organizational objectives.”
4. For more examples, see Philip Kotler and Alan R. Andreasen, Strategic
Marketing for Nonprofit Organizations, 7th ed. (Englewood Cliffs, NJ:
Prentice Hall, 2008).
5. Some evidence indicates that differences between organizational and
individual consumers account for more of the variation in the performance
of a given business strategy across firms than any other environmental or
organizational variable. See Donald C. Hambrick and David Lei, “Toward
an Empirical Prioritization of Contingency Variables for Business Strategy,”
Academy of Management Journal 28 (1985), pp. 763–88.
6. Quoted in Gary Hamel and C. K. Prahalad, Competing for the Future
(Cambridge, MA: Harvard Business School Press, 1994).
7. Justin Martin, “Ignore Your Customer,” Fortune, May 1, 1995, pp. 121–26.
8. For empirical evidence, see John C. Narver and Stanley F. Slater, “The
Effect of a Market Orientation on Business Profitability,” Journal of Marketing
54 (April 1990), pp. 1–18; Stanley F. Slater and John C. Narver, “Market
Orientation, Performance, and the Moderating Influence of Competitive Environment,”
Journal of Marketing 58 (January 1994), pp. 46–55; and Ahmet H.
Kirca, Satish Jayachandran, and William O. Bearden, “Market Orientation:
A Meta-Analytic Review and Assessment of Its Antecedents and Impact on
Performance, Journal of Marketing 69 (April 2005), pp. 24–41.
E ndnotes
Chapter One The Marketing Management Process 29
9. “The Right Stuff,” Journal of Business and Design 2 (Fall 1996), p. 11.
10. John W. Verity, “Revolution in the Supply Closet,” BusinessWeek, June
10, 1996, p. 112.
11. Rahul Jacob, “Beyond Quality and Value,” Fortune, Special Issue,
Autumn–Winter 1993, p. 10.
12. Patricia Sellers, “How to Handle Customers’ Gripes,” Fortune, October
24, 1988, p. 88.
13. Patricia Sellers, “Keeping the Customers You Already Have,” Fortune,
Special Issue, Autumn–Winter 1993, p. 57. See also, Frederick F. Reicheld,
“Loyalty and the Renaissance of Marketing,” Marketing Management 2 (1994),
pp. 10–21.
14. For a more detailed discussion of brand equity, see David A. Aaker,
Brand Equity (New York: Free Press, 1991); and David A. Aaker, Building
Strong Brands (New York: Free Press, 1996).
15. C. K. Prahalad and Gary Hamel, “The Core Competence of the Corporation,”
Harvard Business Review 68 (May–June 1990), pp. 79–91; and George
S. Day, “The Capabilities of Market-Driven Organizations,” Journal of
Marketing 58 (October 1994), pp. 37–52.
16. For a more detailed discussion of formal marketing plans, see Donald
R. Lehmann and Russell S. Winer, Analysis for Marketing Planning, 4th ed.
(New York: Irwin/McGraw-Hill, 1997).
17. David S. Hopkins, The Marketing Plan (New York: The Conference
Board, 1981), p. 2.
18. Jagdish N. Sheth and Rajendra S. Sisodia, “Feeling the Heat,” Marketing
Management 4 (Fall 1995), p. 10.
19. Ibid.
20. “Prophet’s ‘State of Marketing’ Study Finds Marketers Challenged to
Measure Up,” www.prophet.com/newsevents, February 28, 2008.
21. Rajendra K. Srivastava, Tasadduq A. Shervani, and Liam Fahey, “Marketing,
Business Processes, and Shareholder Value: An Organizationally
Embedded View of Marketing Activities and the Discipline of Marketing,”
Journal of Marketing 63 (Special Issue 1999), pp. 168–79; Roland T. Rust,
Katherine N. Lemon, and Valarie Zeithaml, “Return on Marketing: Using
Customer Equity to Focus Marketing Strategy,” Journal of Marketing 68
(January 2004), pp. 109–27; Roland T. Rust, T. Ambler, G. Carpenter, V.
Kumar, and R. Srivastava, “Measuring Marketing Productivity: Current
Knowledge and Future Directions,” Journal of Marketing 68 (October 2004),
pp. 76–89; and Tim Munoz and Shailendra Kumar, “Brand Metrics: Gauging
and Linking Brands with Business Performance,” Brand Management 11
(May 2004), pp. 381–87.
22. Ravi S. Achrol and Philip Kotler, “Marketing in the Network Economy,”
Journal of Marketing 63 (Special Issue 1999), pp. 146–63.
23. Philip Kotler and Gary Armstrong, Principles of Marketing (Englewood
Cliffs, NJ: Prentice Hall, 1989), p. 575.
24. For examples, see Terry G. Vavra, Aftermarketing (Burr Ridge, IL:
Richard D. Irwin, 1995).
25. Brian Hindo, “Satisfaction Not Guaranteed,” BusinessWeek, June 19,
2006, pp. 32–36; and Arik Hesseldahl, “Dell’s Disappointing Quarter,”
www.businessweek.com/technology, February 28, 2008.
26. For examples, see Faith Keenan, Stanley Holmes, Jay Greene, and
Roger O. Crockett, “A Mass Market of One,” BusinessWeek, December 2,
2002, pp. 68–72; and Anthony Bianco, “The Vanishing Mass Market,” BusinessWeek,
July 12, 2004, pp. 61–72.
27. “2005 E-commerce Multi-sector Report, May 25, 2007” on the U.S.
Census Bureau Web site at www.census.gov. See also Timothy J. Mullaney,
“E-Biz Strikes Again,” BusinessWeek, May 10, 2004, pp. 80–90.
28. “Pass the Parcel,” The Economist, February 11, 2006, p. 61; and
“Estimated Quarterly U.S. Retail Sales: Total and E-commerce” on the U.S.
Census Bureau Web site at www.census.gov, Revised February 15, 2008.
29. Nanette Byrnes, “More Clicks at the Bricks,” BusinessWeek, December
17, 2007, pp. 50–52.
30. Achrol and Kotler, “Marketing in the Network Economy.”
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