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marketing
Fifth Edition

Dhruv Grewal, PhD

Babson College

Michael Levy, PhD

Babson College
 marketing,
fifth edition
SENIOR VICE PRESIDENT, PRODUCTS & MARKETS: KURT L. STRAND
VICE PRESIDENT, GENERAL MANAGER, PRODUCTS & MARKETS: MICHAEL RYAN
VICE PRESIDENT, CONTENT DESIGN & DELIVERY: KIMBERLY MERIWETHER DAVID
MANAGING DIRECTOR: SUSAN GOUIJNSTOOK
BRAND MANAGER: KIM LEISTNER
DIRECTOR, PRODUCT DEVELOPMENT: MEGHAN CAMPBELL
LEAD PRODUCT DEVELOPER: KELLY DELSO
PRODUCT DEVELOPER: LAI MOY
MARKETING MANAGER: ELIZABETH SCHONAGEN
DIRECTOR, CONTENT DESIGN & DELIVERY: TERRI SCHIESL
PROGRAM MANAGER: MARY CONZACHI
CONTENT PROJECT MANAGERS: CHRISTINE VAUGHAN; DANIELLE CLEMENT
BUYER: LAURA M. FULLER
DESIGN: MATT DIAMOND
CONTENT LICENSING SPECIALISTS: MICHELLE D. WHITAKER; DEANNA DAUSENER
ILLUSTRATIONS: LIZ DEFRAIN
STUDENT IMAGE: STUART JENNER/GETTY IMAGES
COMPOSITOR: APTARA®, INC.
TYPEFACE: 10/12 STIX MATHJAX MAIN
PRINTER: R. R. DONNELLEY

M: MARKETING, FIFTH EDITION

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2017 by McGraw-Hill Education. All rights
reserved. Printed in the United States of America. Previous edition © 2015, 2013, 2011 and 2009. No part of this publication may be
reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of
McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for
distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 0 RMN/RMN 1 0 9 8 7 6
ISBN 978-1-259-44629-0
MHID 1-259-44629-8
All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.

Library of Congress Control Number: 2015953831

The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an
endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the
information presented at these sites.

mheducation.com/highered
contents
brief

section one
ASSESSING THE MARKETPLACE
chapter 1 Overview of Marketing 3
chapter 2 Developing Marketing Strategies and a
Marketing Plan 21
chapter 3 Social and Mobile Marketing 47
chapter 4 Marketing Ethics 67
chapter 5 Analyzing the Marketing Environment 83

section two
UNDERSTANDING THE MARKETPLACE
chapter 6 Consumer Behavior 101
chapter 7 Business-to-Business Marketing 127
chapter 8 Global Marketing 145

section three section six

TARGETING THE MARKETPLACE VALUE DELIVERY: DESIGNING THE
chapter 9 Segmentation, Targeting, and CHANNEL AND SUPPLY CHAIN
Positioning 169 chapter 15 Supply Chain and Channel Management 307
chapter 10 Marketing Research 193 chapter 16 Retailing and Omnichannel Marketing 327

section four section seven

VALUE CREATION VALUE COMMUNICATION
chapter 11 Product, Branding, and Packaging chapter 17 Integrated Marketing Communications 349
Decisions 217 chapter 18 Advertising, Public Relations, and Sales
chapter 12 Developing New Products 237 Promotions 371
chapter 13 Services: The Intangible Product 263 chapter 19 Personal Selling and Sales Management 397

Endnotes 417
section five Name Index 441
VALUE CAPTURE Company Index 446
chapter 14 Pricing Concepts for Establishing Value 283 Subject Index 451

iii
contents
section one
ASSESSING THE MARKETPLACE

CHAPTER 1 OVERVIEW OF
MARKETING 3
WHAT IS MARKETING? 5
Marketing Is about Satisfying Customer Needs
and Wants 6
Marketing Entails an Exchange 7
Marketing Requires Product, Price, Place, and
Promotion Decisions 7
Marketing Can Be Performed by Both Individuals
and Organizations 10
SO CIAL AND MOBILE MARKETING 1.1:
Snacks, Team, Players, and Promotions 11
Marketing Affects Various Stakeholders 12
Marketing Helps Create Value 12 ADDING VALUE 2.1: Online Retail Meets Bricks and
Mortar: Tesco’s HomePlus Virtual Stores 35
ADDING VALUE 1.1: Smartphone? Try Smart Glasses,
Smart Monitors, Smart . . . 14 Step 5: Evaluate Performance Using Marketing
Metrics 36
How Do Marketing Firms Become More Value Driven? 15
Marketing Analytics 15 ETHICAL AND SOCIETAL DILEMMA 2.1:
How a Faulty Gearbox Changed Volkswagen’s Entire
MARKETING ANALYTICS 1.1: Location, Location,
Approach to China 38
Analytics: Starbucks’ Use of Data to Place
New Stores 16 MARKETING ANALYTICS 2.1: The First Name in
Predictive Analytics: Google 39
ETHICAL AND SOCIETAL DILEMMA 1.1:
Beckoning Consumers with iBeacon 18 Strategic Planning Is Not Sequential 42
GROWTH STRATEGIES 42
CHAPTER 2 DEVELOPING MARKETING Market Penetration 42
STRATEGIES AND A Market Development 43
MARKETING PLAN 21 Product Development 44
Diversification 44
WHAT IS A MARKETING STRATEGY? 23
Customer Excellence 24
Operational Excellence 25 CHAPTER 3 SOCIAL AND MOBILE
Product Excellence 26 MARKETING 47
Locational Excellence 26
Multiple Sources of Advantage 26 THE 4E FRAMEWORK FOR SOCIAL MEDIA 48
Excite the Customer 49
THE MARKETING PLAN 26
Step 1: Define the Business Mission 28 SOCIAL AND MOBILE MARKETI N G 3.1:
Step 2: Conduct a Situation Analysis 28 Late-Night Laughs to Order 50
Step 3: Identify and Evaluate Opportunities Using STP Educate the Customer 50
(Segmentation, Targeting, and Positioning) 30
ADDING VALUE 3.1: Educating Customers Using
SO CIAL AND MOBILE MARKETING 2.1: HubSpot 51
Truly Mobile Pizza 33 Experience the Product or Service 52
Step 4: Implement Marketing Mix and Allocate Resources 33 Engage the Customer 52

iv
CATEGORIES OF SOCIAL MEDIA 53 CORPORATE SOCIAL RESPONSIBILITY 78
Social Network Sites 53
ADDING VALUE 4.2: Walmart Wants to Be the
ADD ING VALUE 3.2: Effective Friending 54 Corporate “Good Guy” 80
Media-Sharing Sites 55 Sustainability 81
Thought-Sharing Sites 56
GOING MOBILE AND SOCIAL 57
App Pricing Models 59 CHAPTER 5 ANALYZING THE MARKETING
HOW DO FIRMS ENGAGE THEIR CUSTOMERS USING ENVIRONMENT 83
SOCIAL MEDIA? 60 A MARKETING ENVIRONMENT ANALYSIS
Listen 60 FRAMEWORK 84
Analyze 62 THE IMMEDIATE ENVIRONMENT 85
Do 62 Company Capabilities 85
MARK E T ING ANALYTICS 3.1: Finding a Perfect Competitors 85
Match: How eHarmony Leverages Users’ Data to Identify Corporate Partners 86
Dates—and Their Consumption Patterns 63 MACROENVIRONMENTAL FACTORS 86
Culture 86
Demographics 88
CHAPTER 4 MARKETING ETHICS 67
MARK E T ING ANALYTICS 4.1: How Kellogg’s Uses SOCIAL AND MOBILE MARK ETING 5.1:
Analytics to Address GMO Concerns 69 Understanding Connections, Both with and by
Young Consumers 88
THE SCOPE OF MARKETING ETHICS 70
Influence of Personal Ethics 70 ADDING VALUE 5.1: Where Gender Matters—and
Ethics and Corporate Social Responsibility 71 Where It Doesn’t 91
A Framework for Ethical Decision Making 72 Social Trends 92
ADD ING VALUE 4.1: The Barefoot ADDING VALUE 5.2: Transforming Grocery Stores
Entrepreneur 73 into Health Providers 93
INTEGRATING ETHICS INTO MARKETING STRATEGY 75 ETHICAL AND SOCIETAL DI LEMMA 5.1: Green
Planning Phase 76 Cereal? 94
Implementation Phase 76 Technological Advances 95
SOCIAL AND MOBILE MARKETING 4.1: Who Economic Situation 95
Tweeted Me to Buy a Ford Fiesta? 77 MARKETING ANALYTICS 5.1: When the
Control Phase 77 Best Is Good Enough: Netflix’s Stellar Predictive
Analytics 96
Political/Regulatory Environment 97
SOCIAL AND MOBILE MARK ETING 5.2:
The News from This Year’s CES 97
Responding to the Environment 99

section two
UNDERSTANDING THE MARKETPLACE

CHAPTER 6 CONSUMER BEHAVIOR 101

THE CONSUMER DECISION PROCESS 103
Need Recognition 103
Search for Information 105
MARKETING ANALYTICS 6.1: Tax Time Tactics
by H&R Block 105
SOCIAL AND MOBILE MARK ETING 6.1:
The Future of Health Is Mobile 107
Evaluation of Alternatives 108

Contents v
 Stage 5: Order Specification 134
Stage 6: Vendor Performance Assessment Using
Metrics 134
THE BUYING CENTER 135
Organizational Culture 136
ETHICAL AND SOCIETAL DILEMMA 7.1: Is It
Business or Bribery? 137
Building B2B Relationships 138
SOCIAL AND MOBILE MARKE TI N G 7.2:
Making the Most of LinkedIn 139
THE BUYING SITUATION 140
ADDING VALUE 7.1: Getting Out the Message with
ETHICAL AND SOCIETAL DILEMMA 6.1: Inbound Marketing 141
Wearing the “Healthy” Label: Natural and
Organic Foods 110
Purchase and Consumption 111 CHAPTER 8 GLOBAL MARKETING 145
Postpurchase 111 ASSESSING GLOBAL MARKETS 147
FACTORS INFLUENCING THE CONSUMER DECISION Economic Analysis Using Metrics 147
PROCESS 113 Analyzing Infrastructure and Technological
Psychological Factors 114 Capabilities 150
Analyzing Governmental Actions 151
ETHICAL AND SOCIETAL DILEMM A 6.2: Can
Marketing Be Life Threatening? Allegations of ETHICAL AND SOCIETAL DILEMMA 8.1:
Unethical Practices by Pharmaceutical Firms 117 How Chinese Regulations Change Car-Buying
Social Factors 118
Practices 151
Situational Factors 120 Analyzing Sociocultural Factors 153
The Appeal of the BRIC Countries 155
ADDING VALUE 6.1: Doing Everything Right—H-E-B
Supermarkets 121 SOCIAL AND MOBILE MARKE TI N G 8.1:
The Growth of Social Networking—Brazil’s Free
SO CIAL AND MOBILE MARKETING 6.2: Market versus China’s Restrictions 158
Ensuring Mobile Dominance through In-Store
CHOOSING A GLOBAL ENTRY STRATEGY 159
Promotions 123
Exporting 159
INVOLVEMENT AND CONSUMER BUYING DECISIONS 123 Franchising 160
Extended Problem Solving 124 Strategic Alliance 160
Limited Problem Solving 124 Joint Venture 160
Direct Investment 161

CHAPTER 7 BUSINESS–TO–BUSINESS ADDING VALUE 8.1: Tata Starbucks and the

Indian Coffee Culture 161
MARKETING 127
CHOOSING A GLOBAL MARKETING STRATEGY 162
B2B MARKETS 129
Target Market: Segmentation, Targeting, and
Manufacturers and Service Providers 129
Positioning 162
Resellers 130
Institutions 130 ADDING VALUE 8.2: Ponying Up the Latest
MARKETING ANALYTICS 7.1: Clouding over Ford Mustang 163
Computing Power 131
Government 131
SO CIAL AND MOBILE MARKETING 7.1: section three
iPads Go to Work 132 TARGETING THE MARKETPLACE
THE BUSINESS-TO-BUSINESS BUYING PROCESS 132
Stage 1: Need Recognition 133
Stage 2: Product Specification 133
CHAPTER 9 SEGMENTATION, TARGETING,
Stage 3: RFP Process 133 AND POSITIONING 169
Stage 4: Proposal Analysis, Vendor Negotiation, THE SEGMENTATION, TARGETING, AND POSITIONING
and Selection 134 PROCESS 170

vi Contents
 Step 1: Establish the Overall Strategy or PRIMARY DATA COLLECTION TECHNIQUES 206
Objectives 170 Social Media 207
Step 2: Use Segmentation Methods 171 In-Depth Interviews 208
Focus Group Interviews 209
SOCIAL AND MOBILE Survey Research 209
MARKETING 9.1: Panel- and Scanner-Based Research 211
Is Facebook Over? 173 Experimental Research 211
MARKETING AN A LYTICS 9.1: Advantages and Disadvantages of Primary and Secondary
A Complete Ecosystem for Coffee Research 212
Drinkers: The Starbucks Mobile Plan 178 THE ETHICS OF USING CUSTOMER INFORMATION 213

ETHICAL AND SOCIETAL ETHICAL AND SOCIETAL DI LEMMA 10.1:

DILEMMA 9.1: Congressional Oh, Say, Can You See? The Implications of
Hearings and the Ethical Considerations Mannequins That Capture Shoppers’
for Modern Loyalty Programs 180 Demographic Data 213
Step 3: Evaluate Segment
Attractiveness 180

ADDING VA LUE 9.1: section four

Are Baby Boomers Too Old for VALUE CREATION
TV? Some Networks Seem to
Think So 182
Step 4: Select a Target Market 182 CHAPTER 11 PRODUCT, BRANDING, AND
Step 5: Identify and Develop PACKAGING DECISIONS 217
Positioning Strategy 186 COMPLEXITY AND TYPES OF PRODUCTS 218
Positioning Methods 188 Complexity of Products 218
Positioning Using Perceptual Types of Products 219
Mapping 189
PRODUCT MIX AND PRODUCT LINE DECISIONS 220
MARKETING ANALYTICS 11.1: How
CHAPTER 10 MARKETING RESEARCH 193 Macy’s Defines Its Assortment through
THE MARKETING RESEARCH PROCESS 195 Analytics 221
Marketing Research Process Step 1: Defining the Objectives SOCIAL AND MOBILE MARK ETING 11.1:
and Research Needs 196 Axe Brand’s Anarchy Fragrance and Graphic
Marketing Research Process Step 2: Designing the Novel 223
Research 196
BRANDING 224
ADD ING VALUE 10.1: A Key Motivation for Waking Value of Branding for the Customer 224
Teens Early on Weekends Disappears—McDonald’s Brand Equity for the Owner 226
Hints at Breakfast All Day 197
ETHICAL AND SOCIETAL DI LEMMA 11.1:
Marketing Research Process Step 3: Collecting
(Not) Marketing Sugary Drinks to Kids 227
the Data 198
Marketing Research Process Step 4: Analyzing the Data BRANDING STRATEGIES 229
and Developing Insights 198 Brand Ownership 229
Marketing Research Process Step 5: Developing and Naming Brands and Product Lines 230
Implementing an Action Plan 199 Brand and Line Extensions 230
SECONDARY DATA 200 Co-Branding 231
Inexpensive External Secondary Data 201 Brand Licensing 231
Syndicated External Secondary Data 201 Brand Repositioning 232
PACKAGING 232
SOCIAL AND MOBILE MARKETING 10.1:
Nielsen Seeks to Track Viewership, regardless of the ADDING VALUE 11.1:
Media People Use to Watch 202 The Global Appeal and Rebranding Efforts of
Internal Secondary Data 203 American Airlines 233
MARK E T ING ANALYTICS 10.1: Google ETHICAL AND SOCIETAL DI LEMMA 11.2:
Analytics Promises Movie Studios the Ability Calories 0, Vitamins 0: How Much Information Can
to Predict Performance, Weeks Prior to Water Labels Provide? 234
Opening 205 Product Labeling 235

Contents vii
 CHAPTER 12 ADDING VALUE 13.1: Carbonite’s Secure Online
DEVELOPING NEW Backup 267
PRODUCTS 237 Perishable 268
WHY DO FIRMS CREATE NEW PROVIDING GREAT SERVICE: THE GAPS MODEL 268
PRODUCTS? 239 The Knowledge Gap: Understanding Customer
Changing Customer Needs 239 Expectations 270
Market Saturation 240 ADDING VALUE 13.2: The Broadmoor Manages
ADDING VA LUE 12.1: Service Quality for a Five-Star Rating 271
Carmakers Look for an Edge, MARKETING ANALYTICS 13.1: Using Analytics to
above and below the Reduce Wait Time at Kroger 272
Hood 241
The Standards Gap: Setting Service Standards 274
Managing Risk through The Delivery Gap: Delivering Service Quality 275
Diversity 242 The Communications Gap: Communicating the
Fashion Cycles 242 Service Promise 276
Improving Business
Relationships 242 SOCIAL AND MOBILE MARKE TI N G 13.1:
Linking American Express Members to Purchases 277
DIFFUSION OF
INNOVATION 243 ETHICAL AND SOCIETAL DILEMMA 13.1:
Innovators 245 Fake Reviews 278
Early Adopters 245 Service Quality and Customer Satisfaction and Loyalty 279
Early Majority 245
SERVICE RECOVERY 279
Late Majority 246
Listening to the Customers and Involving Them in the
Laggards 246
Service Recovery 280
Using the Diffusion of Innovation
Finding a Fair Solution 280
Theory 246
Resolving Problems Quickly 281
HOW FIRMS DEVELOP NEW PRODUCTS 248
Idea Generation 248
MARKETING ANALYTICS 12.1: Data That Help the section five
Brand and the Customer: GM’s Big Data Use 249 VALUE CAPTURE
SO CIAL AND MOBILE MARKETING 12.1:
When Microsoft Plays Catch-Up 251 CHAPTER 14 PRICING CONCEPTS FOR
Concept Testing 252 ESTABLISHING VALUE 283
Product Development 253
THE FIVE Cs OF PRICING 285
ETHICAL AND SOCIETAL DILEMMA 12.1: Company Objectives 285
Should Firms Test on Animals? 254
ADDING VALUE 14.1: Using Price to Position the
Market Testing 255
Apple Watch 288
Product Launch 255
Evaluation of Results 256 Customers 289
THE PRODUCT LIFE CYCLE 256
Introduction Stage 257
Growth Stage 257
Maturity Stage 258
Decline Stage 259
The Shape of the Product Life Cycle Curve 260
Strategies Based on Product Life Cycle: Some Caveats 260

CHAPTER 13 SERVICES: THE INTANGIBLE

PRODUCT 263
SERVICES MARKETING DIFFERS FROM PRODUCT
MARKETING 265
Intangible 266
Inseparable Production and Consumption 266
Heterogeneous 266

viii Contents
MARK E T ING ANALYTICS 14.1: Airlines
Offer Prices Based on Customers’ Willingness
to Pay 293
Costs 294
Break-Even Analysis and Decision Making 295
Competition 297
Channel Members 299
PRICING STRATEGIES 299
Everyday Low Pricing (EDLP) 299
High/Low Pricing 299
New Product Pricing Strategies 300
ETHICAL AND SOCIETAL DIL EM M A 14.1: Is It
Really 45 Percent Off? 301
LEGAL AND ETHICAL ASPECTS OF PRICING 303
Deceptive or Illegal Price Advertising 303
Predatory Pricing 304
Price Discrimination 304
Price Fixing 304

The Distribution (or Fulfillment) Center 322

Inventory Management through Just-in-Time
section six Inventory Systems 324
VALUE DELIVERY: DESIGNING THE
CHAPTER 16 RETAILING AND OMNICHANNEL
CHANNEL AND SUPPLY CHAIN MARKETING 327
CHOOSING RETAILING PARTNERS 329
CHAPTER 15 SUPPLY CHAIN AND CHANNEL Channel Structure 330
MANAGEMENT 307 Customer Expectations 330
Channel Member Characteristics 331
THE IMPORTANCE OF MARKETING CHANNEL/SUPPLY Distribution Intensity 331
CHAIN MANAGEMENT 309
IDENTIFY TYPES OF RETAILERS 332
ADD ING VALUE 15.1: The Beans May Be Slow Food Retailers 332
Cooked, but the Delivery Is Quick 309 Supermarkets 333
Marketing Channels Add Value 310
ADDING VALUE 16.1: Meet the Captain and
Marketing Channel Management Affects Other Aspects
Visit the Island 334
of Marketing 311
General Merchandise Retailers 335
DESIGNING MARKETING CHANNELS 311 Service Retailers 338
Direct Marketing Channel 312
Indirect Marketing Channel 312 DEVELOPING A RETAIL STRATEGY USING
THE FOUR PS 338
MANAGING THE MARKETING CHANNEL AND Product 338
SUPPLY CHAIN 312
Managing the Marketing Channel and Supply Chain through ADDING VALUE 16.2: The Home Depot—Providing
Vertical Marketing Systems 314 Customers Better Access to Products 339
Managing Marketing Channels and Supply Chains through Price 340
Strategic Relationships 316 Promotion 340
Place 342
ETHICAL AND SOCIETAL DIL EM M A 15.1: Do
Customers Care More about the Newest iPhone or about BENEFITS OF STORES FOR CONSUMERS 343
Working Conditions in China? 318 MARKETING ANALYTICS 16.1: In-Store and Online
MAKING INFORMATION FLOW THROUGH MARKETING Analytics at IKEA 343
CHANNELS 319 BENEFITS OF THE INTERNET AND OMNICHANNEL
Data Warehouse 320 RETAILING 344
MAKING MERCHANDISE FLOW THROUGH MARKETING Deeper and Broader Selection 344
CHANNELS 321 Personalization 344
Distribution Centers versus Direct Store Delivery 321 Expanded Market Presence 345

Contents ix
EFFECTIVE OMNICHANNEL RETAILING 345
Integrated CRM 345
Brand Image 346
Pricing 346
Supply Chain 346

section seven
VALUE COMMUNICATION

CHAPTER 17 INTEGRATED MARKETING

COMMUNICATIONS 349
COMMUNICATING WITH CONSUMERS 351
The Communication Process 351
How Consumers Perceive Communication 353
The AIDA Model 354
SO CIAL AND MOBILE MARKETING 17.1:
Making the Old New by Turning a Classic Campaign
into a Mobile Event 355
ELEMENTS OF AN INTEGRATED MARKETING CHAPTER 18 ADVERTISING, PUBLIC
COMMUNICATIONS STRATEGY 357 RELATIONS, AND SALES
Advertising 357 PROMOTIONS 371
Public Relations 358 STEP 1: IDENTIFY TARGET AUDIENCE 373
E T HICAL AND SOCIETA L STEP 2: SET ADVERTISING OBJECTIVES 374
DILEMMA 17.1: Too Skinny 358 Informative Advertising 375
Sales Promotions 359 Persuasive Advertising 375
Personal Selling 359 Reminder Advertising 375
Direct Marketing 359 Focus of Advertisements 376
Online Marketing 360
ETHICAL AND SOCIETAL DILEMMA 18.1:
ETHICAL A ND SOCIETAL Getting to the Truth 378
DILEMMA 17.2: The STEP 3: DETERMINE THE ADVERTISING BUDGET 378
Consumer Privacy Bill of
Rights 360 STEP 4: CONVEY THE MESSAGE 379
The Message 379
PLANNING FOR AND The Appeal 379
MEASURING IMC
STEP 5: EVALUATE AND SELECT MEDIA 381
SUCCESS 362
Mass and Niche Media 382
Goals 362
Choosing the Right Medium 382
Setting and Allocating the IMC
Determining the Advertising Schedule 382
Budget 362
STEP 6: CREATE ADVERTISEMENTS 383
ADDING VALUE 17.1:
Changing Priceline by Killing SOCIAL AND MOBILE MARKE TI N G 18.1:
Captain Kirk—and Then Bringing Simplicity as a Strength and as a Weakness: Twitter’s
Him Back 363 Advertising Formats and Future Plans 383
Measuring Success Using Marketing ETHICAL AND SOCIETAL DILEMMA 18.2:
Metrics 364 When Makeup Companies Really Do Make Up
Planning, Implementing, and Models’ Faces 385
Evaluating IMC Programs—an
Illustration of Google STEP 7: ASSESS IMPACT USING MARKETING METRICS 386
Advertising 366 REGULATORY AND ETHICAL ISSUES IN ADVERTISING 387
MARKETING ANALYTICS 17.1: PUBLIC RELATIONS 388
Puma’s Use of Google SALES PROMOTION 390
Analytics 366 Types of Sales Promotion 390

x Contents
 SOCIAL AND MOBILE MARK ETING 19.1:
Personal Selling Goes Virtual 400
THE PERSONAL SELLING PROCESS 402
Step 1: Generate and Qualify Leads 402
ADDING VALUE 19.1: College Athletics Turn to the
Pros for Sales Help 403
Step 2: Preapproach and the Use of CRM Systems 404
ADDING VALUE 19.2: Selling in the Cloud: The
Growth and Success of Salesforce.com 405
Step 3: Sales Presentation and Overcoming
Reservations 406
Step 4: Closing the Sale 407
Step 5: Follow-Up 407
MANAGING THE SALES FORCE 408
Sales Force Structure 408
Recruiting and Selecting Salespeople 409
Sales Training 410
Motivating and Compensating Salespeople 411
ETHICAL AND LEGAL ISSUES IN PERSONAL SELLING 413
The Sales Manager and the Sales Force 413
MARK E T ING ANALYTICS 18.1: How CVS Uses The Sales Force and Corporate Policy 413
Loyalty Data to Define Coupons 391 ETHICAL AND SOCIETAL DI LEMMA 19.1: When
Using Sales Promotion Tools 394 Realtors Become Reality Stars 414
The Salesperson and the Customer 414

CHAPTER 19 PERSONAL SELLING AND

Endnotes 417
SALES MANAGEMENT 397
Name Index 441
THE SCOPE AND NATURE OF PERSONAL SELLING 398
Personal Selling as a Career 399 Company Index 446
The Value Added by Personal Selling 399 Subject Index 451

TOC image credits: p. iii: © Bill Hogan/Chicago Tribune/MCT via Getty Images; p. iv: © Jasper White CM/Image Source RF; p. v: © Cal Sport Media/
Alamy; p. vi: © ZUMA Press, Inc/Alamy; p. vii: © John Boud/Alamy; p. viii(left): © Anadolu Agency/Getty Images; p. viii(right): © Ed Aldridge/ZUMA Press/
Newscom; p. ix: © Geoffrey Robinson/Alamy; p. x(left): © priceline.com; p. x(right): © Jochen Tack/Alamy; p. xi: © James Davies/Alamy

Contents xi
marketing
Fifth Edition
© Atlantide Phototravel/Corbis
 one
Section 1

Chapter

S
howing a remarkable flair for un-
derstatement, the chief executive
officer (CEO) of Starbucks, Howard overview of
marketing
Schultz, recently admitted, “We have a lot
going on.”1 Let’s think about all the things
Starbucks is doing at the moment, in its at-
tempt to market itself as an appealing prod- LEARNING OBJECTIVES
uct and service provider for all its customers, After reading this chapter, you should be
able to:
both current and potential.
LO 1-1 Define the role of marketing in
Its ubiquitous stores—from the long- organizations.
standing locations in U.S. cities and towns LO 1-2 Describe how marketers create
to international expansion into a vast range value for a product or service.

of new nations—are easy to locate and

visit. A recent count showed that the chain respond, to make sure it stayed in the lead.

maintains more than 20,000 stores, span- Starbucks’ “coffee war” with Dunkin’ Donuts

ning 66 countries.2 By making sure its is famous in the areas in which they com-

stores, with their familiar siren logo, are pete head-to-head.3 Independent coffee-

easy to find, Starbucks guarantees that houses and smaller regional chains, seen

most people can readily find a place to get by many as being more hip and less com-

their coffee fix. mercial, also continually nip at Starbucks’

Starbucks vigorously competes with the heels.

likes of McDonald’s, Dunkin’ Donuts, and Starbucks continues to innovate and ex-

independent coffeehouses. Not too long pand with a variety of products, making them

ago, McDonald’s was not a true competitor available in various locations beyond its own

in the coffee market because all it sold was stores. Unsatisfied with dominating just the

plain coffee. But when it started promoting coffee market, it added Tazo teas to its prod-

its McCafés, Starbucks was quick to uct line early in its history; more recently it
continued on p. 4

3
© Bill Hogan/Chicago Tribune/MCT via Getty Images

continued from p. 3
There are plenty of jokes about how Starbucks manages to
purchased the Teavana chain of tea stores.4 In addition, it purchased charge upwards of $5 for a jolt of caffeine, but a quick glance at its
the Evolution Fresh line of fresh juices and sells bags of its own brand of marketing methods and strategies helps explain why it can do so.
ground coffee K-Cups, whole beans, as well as coffee-flavored ice The products it sells are appealing to customers and fulfill their
cream in not only its own stores but also in grocery stores. But the ex- needs: they taste good, are available readily and conveniently, and
pansion is not limited to beverages. For example, Starbucks’ latest col- offer the benefit of helping them wake up to start their day (or stay
laboration with Danone, the yogurt company, is developing a new line awake for a long night of studying). Thus the exchange of money for
5
of dairy products called Evolution Fresh to sell in various outlets. coffee—or tea or juice or yogurt or a nice pastry—they regard as a

4 SECTION 1 | Assessing the Marketplace

 marketing An
organizational function
and a set of processes for
continued from p. 4 marketing is not a random activ-
creating, capturing,
ity; it requires thoughtful planning
communicating, and
good value, despite the relatively high cost. The lines outside the with an emphasis on the ethical delivering value to
doors of many Starbucks locations at 8:00 a.m. demonstrate this per- implications of any of those deci- customers and for
sions on society in general. Firms managing customer
ceived value. develop a marketing plan relationships in ways that
Starbucks also connects with fans through social marketing chan- (Chapter 2) that specifies the mar- benefit the organization
keting activities for a specific pe- and its stakeholders.
nels, including its popular My Starbucks Idea site. The site is an inno-
riod of time. The marketing plan
vative approach designed to develop new products. Customers also is broken down into various marketing plan A
written document
share ideas about everything “Starbucks,” from store designs to new components—how the product or
composed of an analysis
service will be conceived or de- of the current marketing
drink recipes. They can also join one of the many discussions in the signed, how much it should cost, situation, opportunities
customer forums. Additionally, the site connects customers to its where and how it will be pro- and threats for the firm,
moted, and how it will get to the marketing objectives and
Twitter and Facebook sites, and also links people to its mobile phone consumer. In any exchange, the strategy specified in terms
applications (apps) that they can use to pay for drinks or other prod- parties to the transaction should of the four Ps, action
be satisfied. In our previous ex- programs, and projected or
ucts in Starbucks stores. pro forma income (and
ample, you should be satisfied or
It’s a lot to be going on, indeed. But by adopting the princi- even delighted with the song you other financial) statements.

ples and methods of marketing that this textbook covers, Star- downloaded, and Apple should be
satisfied with the amount of
bucks has created a market that it continues to dominate, money it received from you. Thus, the core aspects of market-
bringing benefits to the company and its shareholders, as well ing are found in Exhibit 1.1. Let’s see how these core aspects
look in practice.
as to consumers. ■

E X H I B I T 1 .1 Core Aspects of Marketing

LO 1-1 Define the role of marketing in organizations.

Marketing helps
WHAT IS MARKETING? create value.

Unlike other subjects you may have studied, marketing already

is very familiar to you. You start your day by agreeing to do
Marketing is about
the dishes in exchange for a freshly made cup of coffee. Marketing affects satisfying customer
Then you fill up your car with gas. You attend a class that various stakeholders. needs and wants.
you have chosen and paid for. After class, you pick up lunch
(and maybe a frozen dessert) at the cafeteria, which you eat
while reading a book on your iPad. Then you leave campus to
have your hair cut and take in a movie. On your bus ride back to Marketing
school, you pass the time by buying a few songs from Apple’s
iTunes. In each case, you have acted as the buyer and made a
decision about whether you should part with your time and/
or money to receive a particular product or service. If, after Marketing can be
performed by both Marketing entails
you return home, you decide to sell some clothes on eBay individuals and an exchange.
that you don’t wear much anymore, you have become a organizations.
seller. In each of these transactions, you were engaged in
marketing. Marketing
The American Marketing Association states that “market- requires product,
ing is the activity, set of institutions, and processes for creat- price, place, and
promotion
ing, capturing, communicating, delivering, and exchanging decisions.
offerings that have value for customers, clients, partners, and
society at large.”6 What does this definition really mean? Good

CHAPTER 1 | Overview of Marketing 5

 Good marketing is not a random activity; it requires thoughtful
planning with an emphasis on the ethical implications
of any of those decisions on society in general.

Marketing Is about Satisfying Coke or Diet Pepsi; others may opt for bottled water products
like Dasani or Aquafina.
Customer Needs and Wants Although marketers would prefer to sell their products
Understanding the marketplace, and especially consumer needs and services to everyone, it is not practical to do so. Because
and wants, is fundamental to marketing success. In the broadest marketing costs money, good marketers carefully seek out
terms, the marketplace refers to the world of potential customers who have both an in-
trade. More narrowly, however, the market- terest in the product and an ability to buy
place can be segmented or divided into it. For example, most people need some
groups of people who are pertinent to an Although form of transportation, and many people
organization for particular reasons. For ex-
ample, the marketplace for soft drinks may
marketers would probably would like to own the new hy-
brid from Lexus. Starting at more than
include most people in the world, but as prefer to sell their $120,000, the Lexus LS 600h L is one of
Pepsi and Coke battle each other world- the most sophisticated hybrid cars on the
wide, they divide the global population into products and services market. But Lexus is not actually inter-
a host of categories: men versus women, ested in everyone who wants an LS 600h L,
calorie-conscious or not, people who prefer to everyone, it is not because not everyone can afford to spend
carbonated versus noncarbonated drinks,
and multiple categories of flavor prefer-
practical to do so. that much on a car. Instead, Lexus defines
its viable target market as those consum-
ences, among others.7 If you manufacture a ers who want and can afford such a prod-
beverage with zero calories, you want to know for which mar- uct.8 Although not all companies focus on such a specific,
ketplace segments your product is most relevant, then make and wealthy, target, all marketers are interested in finding
sure you build a marketing strategy that targets those groups. the buyers who are most likely to be interested in their
Certain diet- and health-conscious customers may prefer Diet offerings.

Coke and Pepsi have divided the world into two camps: Coke-lovers What type of customer would buy a $120,000 hybrid car?
and Pepsi-lovers. Which are you? © Ian Langsdon/EPA/Newscom
© Carlo Allegri/Reuters/Corbis

6 SECTION 1 | Assessing the Marketplace

 exchange The trade of marketing mix (four
things of value between Ps) Product, price, place,
the buyer and the seller so and promotion—the
that each is better off as a controllable set of activities
result. that a firm uses to respond
to the wants of its target
markets.

song you heard, multiple songs, or the entire new al-

bum. You begin with the song you heard, which you
continue to love after hearing it several times. There-
fore, you go back to iTunes and take advantage of its
offer to complete the album by downloading the rest
of the songs to your iTunes library. Your billing infor-
mation is already in the company’s system, so you do
not have to enter your credit card number or other in-
formation. Furthermore, iTunes creates a record of
your purchase, which it uses, together with your other
purchase trends, to create personalized recommenda-
tions of other albums or songs that you might like.
Thus, Apple uses the valuable information you pro-
You can exchange your money on the iTunes Store for the latest vide to facilitate future exchanges and solidify its re-
Katy Perry album. lationship with you.
© Christie Goodwin/Entertainment/Getty Image

Marketing Requires Product, Price,

Place, and Promotion Decisions
Marketing Entails an Exchange Marketing traditionally has been divided into a set of four inter-
Marketing is about an exchange—the trade of things of related decisions and consequent actions known as the market-
value between the buyer and the seller so that each is better ing mix, or four Ps: product, price, place, and promotion (as
off as a result. As depicted in Exhibit 1.2, sellers provide defined in Exhibit 1.3).9 The four Ps are the controllable set of
products or services, then communicate and facilitate the decisions or activities that the firm uses to respond to the wants
delivery of their offering to consumers. Buyers complete of its target markets. But what does each of these activities in
the exchange by giving money and information to the seller. the marketing mix entail?
Suppose you learn about a new Katy Perry album by hear-
ing one of her songs on SiriusXM Satellite Radio. The same Product: Creating Value Although marketing is a
day, a friend tweets on her Twitter account that she loves multifaceted function, its fundamental purpose is to create
the new album, and you visit the Katy Perry Facebook fan value by developing a variety of offerings, including goods,
page, which is full of recommendations. From there, you services, and ideas, to satisfy customer needs. 10 Take, for ex-
click into the iTunes Store, where you can purchase the ample, a cup of coffee. At one time, people in the United

E X H I B I T 1 . 2 Exchange: The Underpinning of Seller–Buyer Relationships

Communications
and delivery

Goods/services
producers Customers/
(sellers) Money and consumers (buyers)
information

CHAPTER 1 | Overview of Marketing 7

goods Items that can be
physically touched.
States made a pot of coffee at E X H I B I T 1 . 3 The Marketing Mix
home or picked up a cup on the run from a McDonald’s or
Dunkin’ Donuts. Because Starbucks and competitive firms Product
Promotion
realize customers have needs beyond just buying a cup of
joe, they are offering their customers a variety of options.
This variety includes lattes, cappuccinos, macchiatos, Frap-
puccinos, hot chocolates, smoothies, teas, bottled juices, Re-
freshers, and regular brewed coffee, providing customers
with interesting choices for which they are willing to pay a
premium. The experience of watching the coffee being made Communicating Creating
value value
by a barista in a setting that often resembles a quaint café in
Florence, Italy, adds to the perceived value of the product,
and to the price!
Goods are items that you can physically touch. Nike
Delivering Capturing
shoes, Pepsi-Cola, a Frappuccino, Kraft cheese, Tide, an value value
iPad, and countless other products are examples of goods.
As we describe at the start of Chapter 2, Nike primarily
makes shoes but also adds value to its products by, for ex-
ample, offering custom designs under its Nike ID brand that Place Price
increase their fashionable appeal and enlisting popular ce-
lebrities such as Rafael Nadal to add their names to the
designs.

Marketers have transformed coffee from a simple morning drink into an entire experience that adds
value for the customer.
© SeongJoon Cho/Bloomberg via Getty Images

ALTHOUGH MARKETING IS A MULTIFACETED

FUNCTION, ITS FUNDAMENTAL PURPOSE IS TO CREATE
VALUE BY DEVELOPING A VARIETY OF OFFERINGS.
8 SECTION 1 | Assessing the Marketplace
 service Any intangible
offering that involves a
deed, performance, or
Unlike goods, services are intangible customer benefits Price: Capturing Value effort that cannot be
that are produced by people or machines and cannot be sep- Everything has a price, although it physically possessed;
arated from the producer. When people buy tickets— doesn’t always have to be monetary. intangible customer
whether for airline travel, a sporting event, or the Price, therefore, is everything the benefits that are produced
theater—they are paying not for the physical ticket stub but buyer gives up—money, time, by people or machines and
of course for the experience they gain. For people who like and/or energy—in exchange for cannot be separated from
to drink their coffee in a cozy, warm setting, Starbucks of- the product.12 Marketers must the producer.
fers an experience that feels like home but encourages so- ­determine the price of a product
cial interaction. Hotels, insurance agencies, and spas ideas Intellectual
carefully on the basis of the poten- concepts—thoughts,
similarly provide services. Getting money from your bank, tial buyer’s belief about its value. opinions, and philosophies.
whether through an ATM or from a teller, is another exam- For example, United Airlines can
ple of using a service. In this case, cash machines usually take you from New York to Denver.
add value to the banking experience because they are con- The price you pay for that service
veniently located, fast, and easy to use. depends on how far in advance you book the ticket, the time of
Many offerings in the market combine goods and services.11 year, and whether you want to fly coach or business class. If you
When you go to an optical center, you get your eyes examined value the convenience of buying your ticket at the last minute for

When people buy tickets—whether for airline travel, a sporting

event, or the theater—they are paying not for the physical ticket
stub but of course for the experience they gain.

(a service) and purchase new contact lenses (a good). If you a ski trip between Christmas and New Year’s Day and you want to
attend a Bruno Mars concert, you can be enthralled by the fly business class, you can expect to pay four or five times as
world-class performance. To remember the event, you might much as you would for the cheapest available ticket. That is, you
want to pick up a shirt or a souvenir from the concert. With have traded off a lower price for convenience. For marketers, the
these tangible goods, you can relive and remember the enjoy- key to determining prices is figuring out how much customers are
ment of the experience over and over again. willing to pay so that they are satisfied with the purchase and the
Ideas include thoughts, opinions, and philosophies; intel- seller achieves a reasonable profit.
lectual concepts such as these also can be marketed. Groups
promoting bicycle safety go to schools, give talks, and spon- Place: Delivering the Value Proposition The
sor bike helmet poster contests for the members of their pri- third P, place, represents all the activities necessary to get
mary market—children. Then their secondary target market the product to the right customer when that customer
segment, parents and siblings, gets involved through wants it. For Starbucks, that means expanding its storefronts
their interactions with the young contest partic-
ipants. The exchange of value occurs when
the children listen to the sponsors’ pre-
sentation and wear their helmets while
bicycling, which means they have
adopted, or become “purchasers,”
of the safety idea that the group
marketed.

Rafael Nadal plays tennis in

Nike shoes.
© Matthias Hangst/Getty When you attend a Bruno Mars concert you are paying for a service.
Images Sport/Getty Images. © Rich Polk/Getty Images Entertainment/Getty Images for Clear Channel

CHAPTER 1 | Overview of Marketing 9

business-to-
consumer (B2C)
marketing The process constantly and proactively, so elicit a response. Promotion generally can enhance a prod-
in which businesses sell to
that it is easy for caffeine junkies uct’s or service’s value. When the publisher of the well-
consumers.
to find their fix. Creative loca- known Babar books wanted to celebrate the 80th anniversary
business-to- tions, such as kiosks at the bag- of the series, it initiated a $100,000 campaign. Working in
business (B2B) gage claim in airports or small collaboration with toy and bookstores, the campaign did not
marketing The process booths in grocery stores, repre- just suggest people buy the books and read about an elephant
of buying and selling goods sent the chain’s effort to improve king. Instead, it embraced a sense of nostalgia and evoked a
or services to be used in its offering on this dimension of simpler time, in which grandparents might read pleasant sto-
the production of other the marketing mix. ries to their grandchildren.13
goods and services, for
Place more commonly deals Such collaborative promotions can be especially effective
consumption by the buying
specifically with retailing and tactics for marketers, particularly if they can team up with a
organization, or for resale
by wholesalers and marketing channel management, popular sport, as Social and Mobile Marketing 1.1 details.
retailers. also known as supply chain man-
agement. Supply chain manage-
consumer-to- ment is the set of approaches and Marketing Can Be Performed by
consumer (C2C)
marketing The process
techniques that firms employ to Both Individuals and Organizations
efficiently and effectively inte-
in which consumers sell to Imagine how complicated the world would be if you had to buy
grate their suppliers, manufactur-
other consumers. everything you consumed directly from producers or manufac-
ers, warehouses, stores, and other
turers. You would have to go from farm to farm buying your
firms involved in the transaction
food and then from manufacturer to manufacturer to purchase
(e.g., transportation companies) into a seamless value chain in
the table, plates, and utensils you needed to eat that food. For-
which merchandise is produced and distributed in the right
tunately, marketing intermediaries, such as retailers, accumu-
quantities, to the right locations, and at the
late merchandise from producers in large
right time, while minimizing systemwide
costs and satisfying the service levels re- Imagine how amounts and then sell it to you in smaller
amounts. The process by which businesses
quired by the customers. Many marketing
students initially overlook the importance complicated the world sell to consumers is known as business-
to-consumer (B2C) marketing, whereas
of marketing channel management, because
a lot of these activities are behind the
would be if you had to the process of selling merchandise or ser-
vices from one business to another is
scenes. But without a strong and efficient buy everything you called business-to-business (B2B) mar-
marketing channel system, merchandise
isn’t available when customers want it. consumed directly keting. With the advent of various Internet
auction sites (e.g., eBay) and social media,
Then customers are disappointed, and sales
and profits suffer. from producers or consumers have started marketing their
products and services to other consumers.
manufacturers. This third category, in which consumers
Promotion: Communicating sell to other consumers, is consumer-to-
the Value Proposition Even the best products and consumer (C2C) marketing. These marketing transactions
services will go unsold if marketers cannot communicate are illustrated in Exhibit 1.4.
their value to customers. Promotion is communication by a Individuals can also undertake activities to market them-
marketer that informs, persuades, and reminds potential buy- selves. When you apply for a job, for instance, the research you
ers about a product or service to influence their opinions and do about the firm, the résumé and cover letter you submit with

E X H I B I T 1 . 4 Marketing Can Be Performed by Both Individuals and Organizations

Manufacturer Retailer
Consumer A Consumer B
(makes monitors) (sells PCs & monitors)

B2B B2C C2C

10 SECTION 1 | Assessing the Marketplace

 Social & Mobile Marketing 1.1
i
Snacks, Teams, Players, and Promotions

Sponsorships of sports teams are nothing new. Firms have been naming Despite this popularity among children and their infamous soccer
stadiums, providing gear, and calling themselves the “official product of” moms, soccer still struggles in television ratings compared with other
popular sporting events and teams for years. But such promotions can sports. Accordingly, the promotional campaigns associated with the
take on new life and new facets when they bring the power of social sponsorship have very little to do with television. Instead, the focus is on
media marketing to bear on their campaigns. in-store and social media efforts.
Take the example of Mondelēz International and its latest deal in con- In conjunction with its sponsorship of U.S. soccer, Mondelēz has en-
junction with various soccer teams and players. The company maintains tered into a partnership with Twitter to increase its advertising spending
such well-known brands as Chips Ahoy! and Oreo cookies, Wheat Thins and at the site. In return, Twitter will share its real-time marketing expertise,
Ritz crackers, Cadbury candies, and Sour Patch Kids Stride gum. Thus its offer customized marketing research findings, and host various training
product assortment is quite strongly geared toward children and families. programs for the packaged-goods company.
Recent trends suggest that more children today play soccer (17.1 per- This effort represents a continuation of Mondelēz’s already strong
cent of them play at least once a year) than other sports such as baseball social media presence. For example, Oreo has nearly 35 million follow-
(13.4 percent), football (4.5 percent), or hockey (1.1 percent). Mondelēz ers on Facebook. It also won praise for its quick thinking during the
was quick to make the connection and entered into a sponsorship agree- power outage at Super Bowl XLVII, when it immediately tweeted, “You
ment that made it the official snack brand of the U.S. men’s and women’s can still dunk in the dark.” By linking a snack that appeals to children
national soccer teams. Furthermore, it signed individual sponsorship with a sport they love, Mondelēz vastly increases the chances that moms
deals with some stars of the sport, such as Alex Morgan, Omar Gonzalez, will bring the tasty cookies for a postgame celebration with the little
and Clint Dempsey. league team.

Mondelēz is the official snack brand for the U.S. men’s and women’s national soccer teams. To
appeal to its young target market, it uses social media instead of television. Pictured here, wearing
a Sour Patch Kids T-shirt, is U.S. soccer star Alex Morgan giving a “high five.”
© Stephen Brashear/AP Photo for Mondelez International

CHAPTER 1 | Overview of Marketing 11

The “Milk Life” and “Body by Milk” marketing campaigns create a high level of awareness for the milk industry.
Left: Courtesy of Lowe Campbell Ewald and MilkPEP; Right: © Jonathan Ferrey/Getty Images

your application, and the way you dress for an interview and on how drinking milk for breakfast fits in with a healthy life-
conduct yourself during it are all forms of marketing activities. style that helps people maintain their focus, weight, and muscle
Accountants, lawyers, financial planners, physicians, and other mass. Even the industry’s charitable campaigns resonate with
professional service providers also constantly market their ser- this notion: The Milk Drive, run in conjunction with Feeding
vices one way or another. America, seeks to ensure that local food banks are sufficiently
stocked with this nutritious, frequently requested item. Such
Marketing Affects Various campaigns benefit the entire dairy industry and promote the
health benefits of drinking milk to society at large.
Stakeholders
Most people think of marketing as a way to facilitate the sale of Marketing Helps Create Value
products or services to customers or clients. But marketing can
Marketing didn’t get to its current prominence among individu-
also affect several other stakeholders (e.g., supply chain part-
als, corporations, and society at large overnight.15 To understand
ners, society at large). Partners in the supply chain include
how marketing has evolved into its present-day, integral busi-
wholesalers, retailers, or other intermediaries such as transpor-
ness function of creating value, let’s look for a moment at some
tation or warehousing companies. All of these entities are in-
of the milestones in marketing’s short history (see Exhibit 1.5).
volved in marketing to one another. Manufacturers sell
merchandise to retailers, but the retailers often have to convince Production-Oriented Era Around the turn of the 20th
manufacturers to sell to them. After many years of not being century, most firms were production oriented and believed that a
able to purchase products from Ralph Lauren because it sells good product would sell itself. Henry Ford, the founder of Ford
below the manufacturers’ suggested retail price (MSRP), TJX Motor Company, once famously remarked, “Customers can have
Companies, Inc., operators of Marshall’s and TJMaxx, among any color they want so long as it’s black.” Manufacturers were
others, is now Ralph Lauren’s largest customer.14 concerned with product innovation, not with satisfying the needs
Marketing also can aim to benefit an entire industry or soci- of individual consumers, and retail stores typically were consid-
ety at large. The dairy industry targets its “Milk Life” and ered places to hold the merchandise until a consumer wanted it.
“Body by Milk” campaigns at different target segments, includ-
ing parents, their children, and athletes. Through this campaign, Sales-Oriented Era Between 1920 and 1950, produc-
the allied milk producers have created high levels of awareness tion and distribution techniques became more sophisticated and
about the benefits of drinking milk, including the high levels of the Great Depression and World War II conditioned customers
protein, potassium, and calcium it provides. The focus is largely to consume less or manufacture items themselves, so they

12 SECTION 1 | Assessing the Marketplace

 value Reflects the
relationship of benefits
E X H I B I T 1 . 5 Marketing Evolution: Production, Sales, Marketing, and Value to costs, or what the
consumer gets for what he
or she gives.

Turn of the
century 1920 1950 1990

Production Sales Marketing Value-based marketing

Photos (left to right): © Ryan McVay/Getty Images RF; © CMCD/Getty Images RF; © Ted Dayton Photography/Beateworks/
Corbis RF; © Ryan McVay/Getty Images RF; © McGraw-Hill Education/Mark Dierker, photographer

planted victory gardens instead of buying produce. As a result, discovering and providing what consumers wanted and
manufacturers had the capacity to produce more than customers needed; to compete successfully, they would have to give
really wanted or were able to buy. Firms found an answer to their customers greater value than their competitors did.
their overproduction in becoming sales oriented: they depended (The importance of value is appropriately incorporated into
on heavy doses of personal selling and advertising. the AMA definition of marketing discussed earlier.)

Most successful firms today are market oriented.

Market-Oriented Era After World War II, soldiers re- Value reflects the relationship of benefits to costs, or what
turned home, got new jobs, and started families. At the same time, you get for what you give.17 In a marketing context, customers
manufacturers turned from focusing on the war effort toward seek a fair return in goods and/or services for their hard-earned
making consumer products. Suburban communities,
featuring cars in every garage, sprouted up around the
country, and the new suburban fixture, the shopping
center, began to replace cities’ central business districts
as the hub of retail activity and a place to just hang out.
Some products, once in limited supply because of
World War II, became plentiful. And the United States
entered a buyers’ market—the customer became king!
When consumers again had choices, they were able to
make purchasing decisions on the basis of factors such
as quality, convenience, and price. Manufacturers and
retailers thus began to focus on what consumers wanted
and needed before they designed, made, or attempted to
sell their products and services. It was during this pe-
riod that firms discovered marketing.

Value-Based Marketing Era Most suc-

cessful firms today are market oriented.16 That means
they generally have transcended a production or sell-
ing orientation and attempt to discover and satisfy
their customers’ needs and wants. Before the turn of
the 21st century, better marketing firms recognized Gucci provides value to its target customers.
that there was more to good marketing than simply © Tomohiro Ohsumi/Bloomberg/Getty Images

CHAPTER 1 | Overview of Marketing 13

value cocreation
Customers act as
collaborators with a
money and scarce time. They want collaborators to create the product or service. When clients
manufacturer or retailer to
products or services that meet work with their investment advisers, they cocreate their invest-
create the product or service.
their specific needs or wants and ment portfolios; when Nike allows customers to custom design
that are offered at a price that they their sneakers, they are cocreating. Adding Value 1.1 examines
believe is a good value. A good value, however, doesn’t neces- how companies are adding value to smartphones by developing
sarily mean the product or service is inexpensive. If it did, lux- smart accessories.
ury goods manufacturers like Porsche or Gucci would go out of In the next section, we explore the notion of value-based
business. There are customers willing to pay asking prices for marketing further. Specifically, we look at various options for
all types of goods at all price levels because to those individu- attracting customers by providing them with better value than
als, what they get for what they give is a good value. the competition does. Then we discuss how firms compete on
A creative way to provide value to customers is to engage the basis of value. Finally, we examine how firms transform the
in value cocreation.18 In this case, customers can act as value concept into their value-driven activities.

Adding Value 1.1

Smartphone? Try Smart
Glasses, Smart Monitors,
Smart…ii
It may be hard to imagine, but just a few short years ago the idea of be-
ing able to talk to someone while away from home was a massive added
value. Then the value added became being able check e-mail on a
phone. Such offerings seem incredibly basic today. Obviously, the
“smart” market is a dynamic and rapidly changing one in which the defi-
nition of what constitutes value also changes constantly.
Some of the most modern smart gadgets seek to make it easier for
people to engage in their day-to-day activities. An app by Mercedes-Benz
allows car owners to unlock their doors or open the trunk with their
phones. Alternatively, an external device, Hone, attaches to key chains
and allows smartphone users to activate a visual and audio signal so that
they can find their car keys wherever they left them (e.g., in the freezer,
tucked in a drawer).
For exercise fans, the Nike Fit band calculates steps taken, calories
burned, and time spent exercising, then syncs the information gathered
from the wristband with a mobile app that combines all the information in
one place. The UP band, by Jawbone, tracks all this information, as well
as sleep times and food intake. Thus it can tell users how long they took Smartphones and related connected devices/apps, such as Google
Glass, are revolutionizing the marketplace.
to fall asleep and how many hours of deep sleep they actually got. Then © Rex Features via AP Photo
it promises to summarize this information in “Insights,” which suggest
recommendations based on individual trends. If a person sleeps poorly appears likely to change virtually everything (pun intended). However, its
after snacking late in the day, UP will recommend no more eating after rollout has been slow thus far and the company has sought to avoid moving
8:00 p.m., for example. For even more adventurous exercisers, the Crash smartphone apps to Glass. So Google has created guidelines for developing
Sensor, a device made to mount onto a bicycle helmet, alerts emergency “Glassware”: keep the information concise, keep alerts relevant, make
contacts if a crash occurs and provides coordinates so that emergency tasks easy, and make information provision timely.
crews can find a hiker lost in the wilderness. Nearly as ubiquitous as the chatter about the device are the concerns
Other smart tools are a little more forward thinking, moving us into a about it. Critics have questioned how Google Glass might alter social inter-
future world in which connecting to anyone, anywhere doesn’t even require actions, cause accidents by people focused on the web rather than where
our thumbs. Perhaps the most widely talked about version is Google Glass, they are walking, and even rewire our cognitive capacities. The promise of
the technology that puts the web in the corner of users’ vision and allows Google Glass is so intriguing, though, that consumers are lining up to pay
them to connect, using only eye movement. This revolutionary innovation around $1,500 for the potential to mess with their brain matter.

14 SECTION 1 | Assessing the Marketplace

 relational
orientation A method
of building a relationship
Amazon collect massive amounts
with customers based on
check yourself of data about how, when, why,
the philosophy that buyers
where, and what people buy, then and sellers should develop
1. What is the definition of marketing? analyze those data to inform their a long-term relationship.
2. Marketing is about satisfying _________ and _______. choices. In Marketing Analytics 1.1,
3. What are the four components of the marketing mix? we detail just one use of these data customer
by the coffee giant—namely, to de- relationship
4. Who can perform marketing? management
cide where to put its stores.
5. What are the various eras of marketing? (CRM) A business
Balancing Benefits with philosophy and set of
Costs Value-oriented marketers strategies, programs, and
constantly measure the benefits that systems that focus on
LO 1-2  Describe how marketers create value for a product identifying and building
customers perceive against the cost
or service. loyalty among the firm’s
of their offerings. They use available
most valued customers.
customer data to find opportunities
to satisfy their customers’ needs bet-
How Do Marketing Firms Become ter, keep down costs, and develop
long-term loyalties. For example, IKEA does not have highly paid
More Value Driven? salespeople to sell its furniture, but its simple designs mean cus-
Firms become value driven by focusing on four activities. First, tomers can easily choose a product and assemble it themselves.
they share information about their customers and competitors
across their own organization and with other Building Relationships with
firms that help them get the product or ser- Customers During the past couple of
vice to the marketplace, such as manufactur- To build decades, marketers have begun to develop a
ers and transportation companies. Second, relationships, firms focus relational orientation as they have real-
they strive to balance their customers’ bene- ized that they need to think about their cus-
fits and costs. Third, they concentrate on on the lifetime profitability tomers in terms of relationships rather than
building relationships with customers. of the relationship, not transactions.19 To build relationships, firms
Fourth, they need to take advantage of new focus on the lifetime profitability of the re-
technologies and connect with their custom- how much money is made lationship, not how much money is made
ers using social and mobile media. during each transaction. during each transaction. Thus, Apple makes
its innovations compatible with existing
Marketing Analytics products to encourage consumers to maintain a long-term rela-
Modern marketers rely on sophisticated data analytics to define tionship with the company across all their electronic needs.
and refine their approaches to their customers and their markets. This relationship approach uses a process known as
Companies such as Starbucks, CVS, Kroger, Netflix, and customer relationship management (CRM), a business

To balance benefits with costs, IKEA does not offer significant sales
Kroger collects massive amounts of data about how, when, why, assistance, but does showcase products in a simulated home
where, and what people buy, then analyze those data to better serve environment to facilitate decision making. To keep costs low, many
its customers. products are sold unassembled.
© Daniel Acker/Bloomberg via Getty Images © Alex Segre/Alamy.

CHAPTER 1 | Overview of Marketing 15

Marketing Analytics 1.1

Location, Location, Analytics:

Starbucks’ Use of Data to Place
New Storesiii
By now, nearly everyone on the planet recognizes the green mermaid logo
that proudly sits atop every Starbucks sign, poster, and cup. The ubiquitous
coffee giant maintains more than 22,000 locations in over 66 countries. But
its growth has not been without a few stumbles and bumps in the road. For
example, in the last decade, hundreds of newly opened stores had to be
closed because of their poor performance. In analyzing how the company
got to that point, Starbucks’ manager of global market planning Patrick
O’Hagan explained that many of the stores never should have opened. How-
ever, the staff in charge of these location choices had been inundated with
so much data, they were unable to use them to make profitable decisions. Starbucks uses Geographic Information Systems (GIS) technology to
pinpoint ideal locations and determine which kinds of stores to open
Thus, the Starbucks story reveals a great deal about the importance of data in those locations.
analytics. © Bhandol/Alamy
Starbucks began using Esri’s Geographic Information Systems (GIS) tech-
nology as far back as the 1990s. But it has perfected its applications of the through both desktops and mobile devices, location experts in the field also
GIS-provided predictive analytics only recently. Currently, it is using the infor- can combine the high-tech insights with their real-world observations.
mation gleaned from the technology to plan 1,500 new locations. With Not only does the GIS technology help Starbucks determine the ideal lo-
the system’s ArcGIS Online tool, Starbucks obtains a graphical summary of cations for new stores, but it also can enable the company to decide which
the GIS data in map form. These data include both location information and kinds of stores to open. For example, many of the 1,500 planned new stores
demographic details, which the software analyzes according to pertinent will feature drive-through windows; others will be smaller stores, strategi-
criteria. The applications allow Starbucks’ staff to pinpoint ideal locations cally placed to provide the greatest customer convenience. The new ap-
that are likely to attract substantial traffic and thus boost chainwide sales, proach already has been proving effective, according to results that show
such that “ArcGIS allows us to create replicable consumer applications that that the most recent newly opened stores, particularly those in the Americas,
are exactly what they need.” Because the GIS technology is accessible consistently are producing great returns and exceeding hurdle rates.

philosophy and set of strategies, programs, and systems that fo-

cus on identifying and building loyalty among the firm’s most
valued customers.20 Firms that employ CRM systematically
collect information about their customers’ needs and then use
that information to target their best customers with the prod-
ucts, services, and special promotions that appear most import-
ant to them.

Connecting with Customers Using Social

and Mobile Media Marketers are steadily embracing
new technologies, such as social and mobile media, to allow
them to connect better with their customers and thereby serve
their needs more effectively. Businesses take social and mobile
media seriously, including these advanced tools in the develop-
ment of their marketing strategies. In turn, 93 percent of market-
ers assert that they use social media tools for their businesses.21
That’s largely because approximately 4.2 billion people link to
Apple makes its new products compatible with existing ones to some social media sites through their mobile devices.22
maintain a long-term relationship with its customers. Yet even with this astounding penetration, only 10 percent of
© Spencer Platt/Getty Images News/Getty Images the world’s population uses Facebook—which means 90 percent

16 SECTION 1 | Assessing the Marketplace

Exploring the Variety of Random
Documents with Different Content
 Fig. 1
Fig. 2 Fig. 3
Fig. 4 Fig. 5
Fig. 6 Fig. 7 Fig. 8
The House
Accommodates 20
Pigeons; Additional
Stories may be
Added. Fig. 1, Floor
and Ceiling; Fig. 3,
Arrangement of
Compartments; Fig.
8, Lower Story
Fig. 10 Fig. 9
Assembled Ready for
Roof Story; Fig. 10,
Framing of the Roof;
Fig. 11, Side View,
Showing Spacing of
Roof Boards; Fig. 12,
End View, Showing
Trim and Door on
Gable End
Fig. 11 Fig. 12

The post should be sunk into the ground about 2¹⁄₂ ft. and set into
a concrete foundation, if convenient. This will insure a more nearly
permanent as well as a more rigid support. Care should be taken
that the post is set plumb and this can be accomplished if a plumb
bob is used. The post should be braced to keep it vertical,
particularly if a concrete foundation is poured and tamped around it.
The construction should be painted two coats, inside and out, of a
color to harmonize with buildings or other surroundings.
The cost of building the house shown in the illustration was $3.50
and by using tar paper for the roof and discarded wire mesh, hinges,
and other fittings, this may be reduced considerably.

¶In matching molding into corners it is often difficult to make miter

joints. The molding may then be “coped” together by matching the
end of the piece to be joined to it with the curves or surface of the
molding. A coping saw is used in sawing the irregular end.
 Roses Tinged Blue by Chemicals

Roses may be colored without any detrimental effect by placing

their stems in a solution of 100 cubic centimeters of water, 2 grams
of saltpeter, and 2 grams of an aniline dye. A centerpiece of roses
colored to represent the national colors was made in this way and
proved very effective as a table decoration. A convenient way to
color the flowers is to place their stems in a test tube containing the
mixture.—Contributed by Chester Keene, Hoboken, N. J.
 Making Photographic Trays
Serviceable trays for use in developing and printing photographs
may be made quickly of cardboard boxes of suitable sizes. Where
one is unable to transport readily a full photographic equipment
these trays will prove convenient as well as inexpensive. They are
made as follows:
Procure boxes of proper sizes and see that they have no holes or
openings at the corners. Melt paraffin and pour it into the box,
permitting it to cover both outside and inside surfaces. If the paraffin
hardens too rapidly the box may be heated and the work completed.
—Contributed by Paul A. Baumeister, Flushing, N. Y.
 Camp Lantern Made of a Tin Can

Campers, and others who have need of an emergency lantern,

may be interested in the contrivance shown in the sketch, which was
used in preference to other lanterns and made quickly when no light
was at hand. It consists of an ordinary tin can, in the side of which a
candle has been fixed. A ring of holes was punched through the
metal around the candle and wires were placed at the opposite side
for a support. The glistening interior of the can reflects the light
admirably.—Contributed by F. H. Sweet, Waynesboro, Va.
¶Interior woodwork may be made proof against ordinary flame by
coating it with silicate of soda, known as water glass.
 Sidecar for a Parcel-Delivery Bicycle
By P. P. AVERY

Q uick delivery of small packages within a two-mile radius can be

accomplished with a bicycle by a sturdy boy. An ordinary bicycle
is used, preferably one with coaster brake and mudguards. Iron
braces, ¹⁄₄ by 1¹⁄₄ in., are shaped to make the framework, and the
ends are looped to fasten around the frame of the bicycle and the
supporting fork of the third wheel. This wheel is a bicycle front wheel
with a fork. A mudguard on the third wheel is desirable. Make the
iron parts as detailed, and fasten them into place. The body is made
of ⁷⁄₈-in. wood, preferably oak. The upper portion of the body is cut to
receive the top brace, which is not in the way in loading or unloading
the packages. Fasten the box with ¹⁄₄-in. carriage bolts, using a
spring washer under the nut wherever a joint is made between wood
and iron. A canvas cover can be cut to fit the top and secured at one
end only, with three catch knobs on the sides and corresponding
eyelets in the canvas, keeping the dust and rain from the interior of
the body.
 An Ordinary Strong Bicycle can be Made into a Substantial Delivery Car by
the Addition of a Body and a Third Wheel

It is a good plan to stiffen the body with corner braces, using ¹⁄₈ by
³⁄₄-in. band iron. The floor of the body should be strongly fastened,
tongue-and-groove boards being used, and the side corners should
be fitted with iron braces at the bottom. The body may be extended
farther over the rear, if more loading space is required.
One coat of priming and one of paint finishes the box, and with the
name of the merchant on the front and rear, the whole makes a neat
advertising feature. Regarding the selection of a bicycle, since great
speed is not essential, the lower the gearing is, the easier it will be to
propel the load, and for ordinary work, where only small grades are
covered, a gear of about 65 will be found efficient.
 Handy Use for Adhesive Tape
Adhesive tape is useful in the shop and for the home mechanic,
for many purposes: to mend broken handles temporarily; to bind up
a cut finger; to prevent a hammer or ax handle from slipping in the
hands, by applying tape around the handle; for making a ferrule for
an awl, chisel, etc.; around the nail set it will keep that tool from
jarring the hand; around a lead pencil in the vest pocket as a guard.
A Toy Machine Gun That Fires Wooden Bullets
 For use in the mimic battles which most boys like to stage in this
war time, an interesting mechanical toy that a boy can easily make of
materials picked up in the workshop, is a machine gun having a
magazine for wooden bullets, and which can be made as a single or
a double-barrel gun. The construction of the single-barrel
arrangement is detailed in the sketch and the modification for a
double-barrel gun is shown in the smaller diagram. It is a duplicate of
the first type, suitably mounted as shown. The gun is fired by turning
the crank on the wheel and the bullets can be quickly replaced in the
magazine at the top.
The Machine Gun is Fired by Turning the Crank at the Wheel, the Pins on the
Latter Drawing Back the Hammer, Which is Hooked Up with a Rubber Band

The support for the gun is made of wood and braced strongly at
the base. The gun proper is set into the top of the vertical piece, as
shown, and the magazine, which is bent from a piece of tin to the
shape detailed in the sectional view, fits on top of the breach of the
gun. The hammer, which drives the bullets, is made of a piece of stiff
wire bent to the shape shown. The lower curved end is connected to
a small nail set on a block at the shaft of the wheel. To fire the gun,
the hammer is drawn back by contact with the small nails set into the
side of the wheel. As the wheel is turned, the nails grip the hammer
and then suddenly release it, driving out the lowest bullet each time.
The bullets are piled in the magazine, as shown in the detailed view
at the right, where the rear view of the gun barrel is indicated.—
Edward R. Smith, Walla Walla, Washington.
 Using Plate Holder as Printing Frame
A cumbersome part of a commercial photographer’s equipment
when “on the road” is his set of printing frames. Amateur
photographers who have cameras using plates of more than one
size find these frames an expensive part of their outfits. A method
that is practical and inexpensive for these requirements in many
cases, is as follows: Place the sensitized paper in the plate holder
with the emulsion side up. Then put the plate in the holder in the
same way as if about to expose it in a camera, but with the emulsion
side down, so that the sensitized side of the paper and the emulsion
side of the plate are in contact. The paper and plate are thus held in
close contact without the use of springs, as in the regular printing
frames. The plate and paper can be removed by pressing the spring
catch at the bottom of the holder, and the plate is not easily moved
while in place.—Francis W. Clinton, Brooklyn, New York.

¶Leaks in garden hose may be repaired by wrapping several layers

of adhesive tape over the break, lapping the edges carefully.
 Wire Clips Weight Paper in Typewriter
Three wire paper clips linked together make a good weight for
typewriter sheets that keep rolling or blowing back over the carriage,
into the operator’s way, in a breezy office or where a fan is not
properly stationed. They may be quickly applied to the end of the
sheet, or batch of paper and carbon sheets, and removed as easily,
saving time and annoyance.—H. P. Roy, Kansas City, Mo.
 Chain Weight Prevents Whipping of Flag
A length of chain, sewed into a hem at the lower edge of a flag
makes an inconspicuous and effective weight to prevent whipping of
a flag suspended from a horizontal staff. A piece of cord can be
threaded through the links of a chain to prevent it from rattling, if
necessary.
Poultry-Fence Construction Economical of
Netting
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