Marketing Management

Knowledge and Skills Tenth Edition J. Paul Peter

University of Wisconsin-Madison

James H. Donnelly, Jr. /

University of Kentucky

Me Graw Hill

McGraw-Hill Irwin

Contents
SECTION 1 ESSENTIALS OF MARKETING MANAGEMENT 1
Processing of Research Data 3 7 Preparation of the Research Report 38 Limitations of the Research Process 38

Marketing Information Systems Conclusion 41

40

PART A
INTRODUCTION 3 Chapter 3 Consumer Behavior 42 Chapter 1 Strategic Planning and the Marketing Management Process 4
The Marketing Concept 4 What Is Marketing? 5 What Is Strategic Planning? Social Influences on Consumer Decision Making 43
Culture and Subculture 43 Social Class 44 Reference Groups and Families 6

45

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

Marketing Influences on Consumer Decision Making 45

Product Influences 45 Price Influences 45 Promotion Influences 46 Place Influences 46 20

The Marketing Management Process

16

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

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

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

Consumer Decision Making

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

48

Conclusion 22 Appendix Portfolio Models

25

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

Conclusion

54

Chapter 4 Business, Government, and Institutional Buying 55

Categories of Organizational Buyers
Producers 55 Intermediaries 56 Government Agencies 56 Other Institutions 56

55

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

Straight Rebuy 57

Contents Modified Rebuy 57 New Task Purchase 5 7

xiii

Structural Influences on Organizational Buying

Purchasing Roles 58 Organization-Specific Factors 59 Purchasing Policies and Procedures 59

58

Chapter 7 New Product Planning and Development 98

New Product Strategy 99 New Product Planning and Development Process 101

Behavioral Influences on Organizational Buying

Personal Motivations Role Perceptions 60 60

60

Stages in the Organizational Buying Process

Organizational Need 63 Vendor Analysis 63 Purchase Activities 63 Postpurchase Evaluation 63

62

Idea Generation 101 Idea Screening 103 Project Planning 104 Product Development 105 Test Marketing 105 Commercialization 106 The Importance of Time 106

Some Important New Product Decisions

Quality Level 107 Product Features 108 Product Design 108 Product Safety 109

107

Conclusion

65

Chapter 5 Market Segmentation

66

Delineate the Firm's Current Situation 66 Determine Consumer Needs and Wants 67 Divide Markets on Relevant Dimensions 67
A Priori versus Post Hoc Segmentation 68 Relevance of Segmentation Dimensions 68 Bases for Segmentation 69

Causes of New Product Failure

Needfor Research 109

109

Conclusion

111

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

Chapter 8 Integrated Marketing Communications

Strategic Goals of Marketing Communication
Create Awareness 112 Build Positive Images 112 Identify Prospects 112 Build Channel Relationships Retain Customers 113

112
112

PARTC THE MARKETING MIX 79 Chapter 6 Product and Brand Strategy

Basic Issues in Product Management
Product Definition 80 Product Classification 81 Product Quality and Value 82 Product Mix and Product Line 83 Branding and Brand Equity 84 Packaging 88

113

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

80
80

Objectives ofAdvertising

116

Advertising Decisions

116

The Expenditure Question 117 The Allocation Question 120

Sales Promotion

124

Product Life Cycle The Product Audit

90
93

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

126

Product Adoption and Diffusion

93
95

Deletions 93 Product Improvement

Organizing for Product Management Conclusion 97

95

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

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Chapter 9
Personal Selling, Relationship Building, and Sales Management 132
Importance of Personal Selling 132 The Sales Process 133 Objectives of the Sales Force 133 The Sales Relationship-Building Process 134 People Who Support the Sales Force 140 Managing the Sales and Relationship-Building Process 141 The Sales Management Task 141 Controlling the Sales Force 142 Motivating and Compensating Performance 146 Conclusion 146

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

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

Chapter 10 Distribution Strategy

148

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

184

Chapter 11 Pricing Strategy

163

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

Chapter 13 Global Marketing 190

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

168

Contents

xv

SECTION 2 ANALYZING MARKETING PROBLEMS AND CASES 207

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

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

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

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

SECTION 4 INTERNET EXERCISES AND SOURCES OF MARKETING INFORMATION 231 PART A INTERNET EXERCISES 233 Charles Heath: Eastern Kentucky University Exercise 1 234
Corporate Web Sites 234 Exercise 2 234 Online versus Offline Retail Experiences 234 Exercise 3 235 Consumer Decision-Making Process 235 Exercise 4 236 Discovering Product Assortments Online 236 Exercise 5 236 Brand Equity on the Internet 236 Exercise 6 237 The Impact of Communities on Marketing 237

5
MARKETING MANAGEMENT CASES 247

MARKET OPPORTUNITY ANALYSIS 249

Case!

McDonald's Corporation 250

I Paul Peter and Ashish Gokhale: University of Wisconsin-Madison

Case 2

Southwest Airlines 2008

257

Andrew C. Inkpen: Thunderbird School of Global Management

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Case 3 South Delaware Coors, Inc.

CASE GROUPC
271 PROMOTION STRATEGY 373

James E. Nelson and Eric J. Karson: University of Colorado Case 4 Ruth's Chris: The High Stakes of International Expansion 280 Allen H. Kupetz and lion Alon: University of Western Ontario Case 5 Coach Inc.: Is Its Advantage in Luxury Handbags Sustainable? 287 John E. Gamble: University of South Alabama Case 6 Panera Bread Company

Case 12 The Obama Campaign Strategy

374

Dan Tolhurst and Mark Vandenbosch: University of Western Ontario Case 13 Mountain Dew: Selecting New Creative 383 Douglas B. Holt: Oxford University Case 14 Red Bull

400

302

Arthur A. Thompson: University of Alabama

Richard R. Johnson, Jordan Mitchell, Paul W. Farris, and Ervin Shames: University of Virginia Case IS "Hips Feel Good"Dove's Campaign for Real Beauty 414 David Wesley: Northeastern University

CASE GROUP B
PRODUCT STRATEGY Case 7 StarbucksEarly 2008 319

320

J. Paul Peter: University of Wisconsin-Madison Case 8 Your Home is a Good Place, Inc.

CASE GROUP D
DISTRIBUTION STRATEGY 429

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

Kevin Coulson and Zane Swanson: University of Western Ontario Case 9 easyCar.com

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

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

341

356

JoAnn K. Linrud: Central Michigan University

Contents

xvii

Case 19

SECTION 6
STRATEGIC MARKETING CASES 587
Case 1

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

Yum! Brands, Pizza Hut, and KFC

589

Jeffrey A. Krug: Appalachian State University

CASE GROUP E
PRICING STRATEGY 519
Case 20 Case 2

Caterpillar, Inc. 603 Schwinn Bicycles 520

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

Case 21

Terra Bite Lounge: Pay What You Want Cafe^ 523

Remi Trudell: University of Western Ontario

Case3 EMR Innovations

615

Kay M. Palan: Iowa State University

Case 4 Case 22

Cowgirl Chocolates

527

Harley-Davidson, Inc.Motorcycle Division 626

J. Paul Peter: University of Wisconsin-Madison

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

Case 23

Case 5

Clearwater Technologies7 540

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

PepsiCo's Diversification Strategy in 2008 639

John E. Gamble: University of South Alabama

Case 6

CASE GROUP F Social and Ethical Issues in Marketing Management 545

Case 24 E. & J. Gallo Winery (2007)

Expresso Espresso

656

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

546

Case? Respironics, Incorporated: Take a Deep Breath 678

Janet L. Rovenpor: Manhattan College Armand Gilinsky, Jr.: Sonoma State University

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

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

CaseS Research In MotionEntering a New Era 700

Sofy Carayannopoulos: Wilfrid Laurier University

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Contents

Case 9

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

Case 10

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

788

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

Conclusion

793

Notes 795 Index 802

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

784