Basic Marketing

A Marketing Strategy Planning Approach

William D. Perreault, Jr., Ph.D.

UNIVERSITY OF NORTH CAROLINA

Joseph P. Cannon, Ph.D.

COLORADO STATE UNIVERSITY

E. Jerome McCarthy, Ph.D.

MICHIGAN STATE UNIVERSITY

McGraw-Hill
Irwin
Boston Burr Ridge, IL Dubuque, IA New York San Francisco St. Louis
Bangkok Bogota Caracas Kuala Lumpur Lisbon London Madrid Mexico City
Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto

CHAPTER ONE

Marketing's Value to Consumers,

Firms, and Society 2
MarketingWhat's It All About? 4
Marketing Is Important to You 5
How Should We Define Marketing? 6
Macro-Marketing 8

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The Role of Marketing in Economic Systems 11

Marketing's Role Has Changed a Lot over the Years 15
What Does the Marketing Concept Mean? 16
Adoption of the Marketing Concept Has Not Been Easy or
Universal 17
The Marketing Concept and Customer Value 19
The Marketing Concept Applies in Nonprofit Organizations 11
The Marketing Concept, Social Responsibility, and Marketing
Ethics 13
Conclusion 27
Key Terms 27
Questions and Problems 28
Suggested Cases 28
Computer-Aided Problem 28

CHAPTER TWO

CHAPTER THREE

Marketing Strategy Planning 30

Evaluating Opportunities in the

Changing Marketing Environment 58

The Management Job in Marketing 31

What Is a Marketing Strategy? 33
Selecting a Market-Oriented Strategy Is Target
Marketing 34
Developing Marketing Mixes for Target Markets 35
The Marketing Plan Is a Guide to Implementation and
Control 41
The Marketing Program Should Build Customer
Equity 43
The Importance of Marketing Strategy Planning 45
Creative Strategy Planning Needed for Survival 46
What Are Attractive Opportunities? 47
Marketing Strategy Planning Process Highlights

Opportunities 48
Types of Opportunities to Pursue 51
International Opportunities Should Be
Considered 53
Conclusion 54
Key Terms 55
Questions and Problems 55
Creating Marketing Plans 56
Suggested Cases 56
Computer-Aided Problem 56

The Marketing Environment 60

Objectives Should Set Firm's Course 61
Company Resources May Limit Search for
Opportunities 64
Analyzing Competitors and the Competitive
Environment 65
The Economic Environment 69
The Technological Environment 71
The Political Environment 71
The Legal Environment 74
The Cultural and Social Environment 77
Using Screening Criteria to Narrow Down to
Strategies 78
Planning Grids Help Evaluate a Portfolio of
Opportunities 82
Multiproduct Firms Have a Difficult
Strategy-Planning Job 83
Evaluating Opportunities in International
Markets 84
Conclusion 85
Key Terms 86
Questions and Problems 86
Creating Marketing Plans 87
Suggested Cases 87
Computer-Aided Problem 87

Population Trends in the U.S. Consumer Market 119

Income Dimensions of the U.S. Market 135
Spending Varies with Income and Other Demographic
Dimensions 138
Ethnic Dimensions of the U.S. Market 141

CHAPTER FOUR

Focusing Marketing Strategy with

Segmentation and Positioning 88

Conclusion 144
Key Terms 144
Questions and Problems 144
Creating Marketing Plans 145
Suggested Cases 145
Computer-Aided Problem 145

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Search for Opportunities Can Begin by Understanding

Markets 90
Naming Product-Markets and Generic Markets 93
Market Segmentation Defines Possible Tarket
Markets 95
What Dimensions Are Used to Segment Markets? 100
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A Best Practice Approach to Segmenting ProductsMarkets 105

More Sophisticated Techniques May Help in
Segmenting 109

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Differentiation and Positioning Take the Customer

Point of View HI

CHAPTER SIX

Conclusion 115

Final Consumers and

Their Buying Behavior 146

Key Terms 115

Questions and Problem 115

Creating Marketing Plans 116
Suggested Cases 116
Computer-Aided Problem 116

Consumer Behavior: Why Do They Buy What

They Buy? 148
Economic Needs Affect Most Buying Decisions 149
Psychological Influences within an Individual 150
Social Influences Affect Consumer Behavior 160
Individuals Are Affected by the Purchase
Situation 163
The Consumer Decision Process 164
Consumer Behavior in International Markets 167

CHAPTER FIVE

Conclusion 169
Key Terms 169
Questions and Problems 169
Creating Marketing Plans 170
Suggested Cases 170
Computer-Aided Problem 170

Demographic Dimensions of
Global Consumer Markets 118

Target Marketers Focus on the Customer 120

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People with Money Make Markets 121

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CHAPTER SEVEN

CHAPTER EIGHT

Business and Organizational Customers

and Their Buying Behavior 172

Improving Decisions with Marketing

Information 200

Business and Organizational CustomersA Big

Opportunity 174

Effective Marketing Requires Good Information 101

Organizational Customers Are Different 175

Many Different People May Influence a Decision 177
Organizational Buyers Are Problem Solvers 181
Buyer-Seller Relationships in Business Markets 186
Manufacturers Are Important Customers 190
Producers of ServicesSmaller and More Spread
Out 193
Retailers and Wholesalers Buy for Their
Customers 194
The Government Market 195
Conclusion 197
Key Terms 197
Questions and Problems 197
Creating Marketing Plans 198
Suggested Cases 198
Computer-Aided Problem 198

Changes Are Under Way in Marketing Information

Systems 203
The Scientific Method and Marketing Research 107
Five-Step Approach to Marketing Research 208
Defining the ProblemStep 1 108
Analyzing the SituationStep 2 209
Getting Problem-Specific DataStep 3 111
Interpreting the DataStep 4 110
Solving the ProblemStep 5 223
International Marketing Research 224
Conclusion 225
Key Terms 226
Questions and Problems 226
Creating Marketing Plans 227
Suggested Cases 227
Computer-Aided Problem 227

CHAPTER NINE

Elements of Product Planning

for Goods and Services 228
The Product Area Involves Many Strategy
Decisions 130

What Is a Product? 231

Differences in Goods and Services 133
Whole Product Lines Must Be Developed Too 235
Branding Is a Strategy Decision 235
Conditions Favorable to Branding 236
Achieving Brand Familiarity Is Not Easy 137
Protecting Brand Names and Trademarks 240
What Kind of Brand to Use? 140
Who Should Do the Branding? 141
The Strategic Importance of Packaging 141
What Is Socially Responsible Packaging? 144
Warranty Policies Are a Part of Strategy Planning 246
Product Classes Help Plan Marketing Strategies 247
Consumer Product Classes 147
Business Products Are Different 250
Business Product ClassesHow They Are
Defined 251

New-Product Planning 171

An Organized New-Product Development Process Is
Critical 171
New-Product Development: A Total Company
Effort 178
Need for Product Managers 280
Managing Product Quality 181
Conclusion 285
Key Terms 285
Questions and Problems 286
Creating Marketing Plans 286
Suggested Cases 286
Computer-Aided Problem 286

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Conclusion 254
Key Terms 254
Questions and Problems 254
Creating Marketing Plans 256
Suggested Cases 256
Computer-Aided Problem 256

CHAPTER ELEVEN

Place and Development of Channel

Systems 288
Marketing Strategy Planning Decisions for Place 291
Place Decisions Are Guided by "Ideal" Place

CHAPTER TEN

Product Management and NewProduct Development 258

Innovation and Market Changes Create

Opportunities 260
Managing Products Over Their Life Cycles 261
Product Life Cycles Should Be Related to Specific
Markets 263
Product Life Cycles Vary in Length 264
Planning for Different Stages of the Product Life
Cycle 267

Objectives 292
Channel System May Be Direct or Indirect 293
Channel Specialists May Reduce Discrepancies and
Separations 297
Channel Relationship Must Be Managed 298
Vertical Marketing Systems Focus on Final
Customers 301
The Best Channel System Should Achieve Ideal
Market Exposure 304
Channel Systems Can Be Complex 307
Entering International Markets 309
Conclusion 312
Key Terms 312
Questions and Problems 312
Creating Marketing Plans 313
Suggested Cases 313
Computer-Aided Problem 313

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CHAPTER TWELVE

CHAPTERTHIRTEEN

Distribution Customer Service

and Logistics 314

Retailers, Wholesalers, and Their

Strategy Planning 338

PhysicakDistribution Gets It to Customers 316

Physical Distribution Customer Service 317
Physical Distribution Concept Focuses on the Whole
Distribution System 319
Coordinating Logistics Activities among Firms 322
The Transporting Function Adds Value to a Marketing
Strategy 316
Which Transporting Alternative Is Best? 327
The Storing Function and Marketing Strategy 331
Specialized Storing Facilities May Be Required 333
The Distribution CenterA Different Kind of

Retailers and Wholesalers Plan Their Own

Strategies 340
The Nature of Retailing 341
Planning a Retailer's Strategy 342
Conventional RetailersTry to Avoid Price
Competition 344

Warehouse 335
Conclusion 335
Key Terms 336
Questions and Problems 336
Creating Marketing Plans 337
Suggested Cases 337
Computer-Aided Problem 337

Expand Assortment and ServiceTo Compete at a

High Price 345
Evolution of Mass-Merchandising Retailers 345
Some Retailers Focus on Added Convenience 348
Retailing on the Internet 349
Why Retailers Evolve and Change 352
Retailer Size and Profits 354
Differences in Retailing in Different Nations 355
What Is a Wholesaler? 356
Wholesaling Is Changing with the Times 356
Wholesalers Add Value in Different Ways 358
Merchant Wholesalers Are the Most Numerous 359
Agents Are Strong on Selling 361
What Will Happen to Retailers and Wholesalers
in the Future? 363
Conclusion 363
Key Terms 364
Questions and Problems 364
Creating Marketing Plans 365
Suggested Cases 365
Computer-Aided Problem 365

XXXII

CHAPTER FOURTEEN

CHAPTER FIFTEEN

PromotionIntroduction to Integrated
Marketing Communications 366

Personal Selling and

Customer Service 394

Promotion Communicates to Target Markets 368

Several Promotion Methods Are Available 369
Someone Must Plan, Integrate, and Manage the
Promotion Blend 371

The Importance and Role of Personal Selling 396

What Kinds of Personal Selling Are Needed? 399
Order Getters Develop New Business
Relationships 399

Which Methods to Use Depends on Promotion

Objectives 374
Promotion Requires Effective Communication 376

Order Takers Nurture Relationships to Keep the

Business Coming 400
Supporting Sales Force Informs and Promotes in the
Channel 401
Customer Service Promotes the Next Purchase 403
The Right Structure Helps Assign Responsibility 404
Information Technology Provides Tools to Do
the Job 409

Integrated Direct-Response Promotion Is Very

Targeted 378
The Customer May Initiate the Communication
Process 379
How Typical Promotion Plans Are Blended and
Integrated 382
Adoption Processes Can Guide Promotion
Planning 385
Promotion Blends Vary Over the Life Cycle 388
Setting the Promotion Budget 390
Conclusion 391
Key Terms 392
Questions and Problems 392
Creating Marketing Plans 393
Suggested Cases 393
Computer-Aided Problem 393

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Sound Selection and Training to Build a Sales

Force 410
Compensating and Motivating Salespeople 412
Personal Selling TechniquesProspecting and
Presenting 415
Conclusion 419
Key Terms 420
Questions and Problems 420
Creating Marketing Plans 421
Suggested Cases 421
Computer-Aided Problem 421

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CHAPTER SIXTEEN

CHAPTER SEVENTEEN

Advertising and Sales Promotion 422

Pricing Objectives and Policies 454

Advertising, Sales Promotion, and Marketing Strategy

Planning 424

Objectives Should Guide Strategy Planning

Advertising Is Big Business 426

Advertising Objectives Are a Strategy Decision 418
Objectives Determine the Kinds of Advertising
Needed 429
Coordinated Advertising Efforts with Cooperative
Relationships 431
Choosing the "Best" MediumHow to Deliver the
Message 431
Advertising on the InternetNew Opportunities and
New Challenges 435
Planning the "Best" MessageWhat to

Communicate 438
Advertising Agencies Often Do the Work 441
Measuring Advertising Effectiveness Is Not Easy 444
How to Avoid Unfair Advertising 445
Sales PromotionDo Something Different to
Stimulate Change 446
Problems in Managing Sales Promotion 448
Different Types of Sales Promotion for Different
Targets 449
Conclusion 450
Key Terms 451
Questions and Problems 451
Creating Marketing Plans 452
Suggested Cases 452
Computer-Aided Problem 452

Price Has Many Strategy Dimensions 456

for Price 458
Profit-Oriented Objectives 459
Sales-Oriented Objectives 460
Status Quo Pricing Objectives 461
Most Firms Set Specific Pricing PoliciesTo Reach
Objectives 461
Price Flexibility Policies 462
Price-Level PoliciesOver the Product
Life Cycle 464
Most Price Structures Are Built Around List Prices 469
Discount PoliciesReductions from List Prices 469
Allowance PoliciesOff List Prices 471
Some Customers Get Something Extra 472
List Price May Depend on Geographic Pricing
Policies 473
Pricing Policies Combine to Impact Customer
Value 474
Legality of Pricing Policies 478
Conclusion 481
Key Terms 482
Questions and Problems 482
Creating Marketing Plans 483
Suggested Cases 483
Computer-Aided Problem 483

CHAPTER EIGHTEEN

CHAPTER NINETEEN

Price Setting in the

Business World 484

Implementing and Controlling

Marketing Plans: Evolution
and Revolution 514

Price Setting Is a Key Strategy Decision 487

Some Firms Just Use Markups 487
Average-Cost Pricing Is Common and Can Be
Dangerous 491
Marketing Managers Must Consider Various Kinds
of Costs 492
Some Firms Add a Target Return to Cost 496
Break-Even Analysis Can Evaluate Possible Prices 496
Marginal Analysis Considers Both Costs and
Demand 498
Demand-Oriented Approaches for Setting Prices 502
Pricing a Full Line 509
Bid Pricing and Negotiated Pricing Depend Heavily
onCosts 510
Conclusion 512
Key Terms 512
Questions and Problems 512
Creating Marketing Plans 513
Suggested Cases 513
Computer-Aided Problem 513

Good Plans Set the Framework for Implementation

and Control 516
Speed Up Information for Better Implementation and
Control 518
Effective Implementation Means That Plans Work

as Intended 519
Control Provides Feedback to Improve Plans and

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Implementation 522
Sales Analysis Shows What's Happening 523
Performance Analysis Looks for Differences 524
Performance Indexes Simplify Human Analysis 526
A Series of Performance Analyses May Find the
Real Problem 527
Marketing Cost AnalysisControlling Costs Too 530
Planning and Control Combined 535
The Marketing Audit 536
Conclusion 537
Key Terms 537
Questions and Problems 537
Creating Marketing Plans 538
Suggested Cases 538
Computer-Aided Problem 539

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Macro-Marketing Does Not Cost Too Much 571

Marketing Strategy Planning Process Requires Logic
and Creativity 573
The Marketing Plan Brings All the Details

Together 576
Challenges Facing Marketers 577
How Far Should the Marketing Concept Go? 586
Conclusion 586
Questions and Problems 587
Creating Marketing Planss 587
Suggested Cases 587

CHAPTER TWENTY

Managing Marketing's Link with

Other Functional Areas 540
Marketing in the Broader Context 542
The Finance Function: Money to Implement
Marketing Plans 543
Production Must Be Coordinated with the Marketing
Plan 549
Accounting Data Can Help in Understanding Costs
and Profit 555
People Put Plans into Action 559
Conclusion 561
Key Terms 562
Questions and Problems 562
Creating Marketing Plans 563
Suggested Cases 563

Appendix A Economics
Fundamentals 588
Appendix B Marketing Arithmetic 601
Appendix C Career Planning in
Marketing 618
VIDEO CASES 632

1. Chick-fil-A: "Eat Mor Chickin" (Except

on Sunday) 633
2. Bass Pro Shops (Outdoor World) 634
3. Toyota Prius: The Power of Excellence in Product
Innovation and Marketing 635
4. Potbelly Sandwich Works Grows through
"Quirky" Marketing 637
5. Suburban Regional Shopping Malls: Can the
Magic Be Restored? 638
6. Girl Scouts 641
7. The GM HUMMER: Brand Equity, Positioning, and
Development 643

CHAPTER TWENTY-ONE

Ethical Marketing in a ConsumerOriented World: Appraisal and

Challenges 564
How Should Marketing Be Evaluated? 566
Can Consumer Satisfaction Be Measured? 568
Micro-Marketing Often Does Cost Too Much 569

8. Segway Finds Niche Markets for Its Human

Transporter Technology 644

CASES 647
1. McDonald's "Seniors" Restaurant 648
2. Harvest Farm Foods, Inc. 648
3. MANU Soccer Academy 649
4. Trusty Technology Services 650
5. PolyTech Products 651

6. Global Steel Company 652

29. Specialized Castings, Inc. 677

7. Waituiwa Lodge 653

8. Lombardi's Italian Grill 654
9. Sweetest Dreams Inn 655

30.
31.
32.
33.

10. Taffe's Ice Land 656

11. The Next Step 657
12. DrRay.comCustom Vitamins and
Supplements 658
13.
14.
15.
16.

File-It Supplies, Inc. 659

Express Multimedia 660
The Trujillo Group 661
Bunyan Lumber 662

Eden Prairie Mills, Ltd . 678

At-Home Health Services, Inc. 679
Lever, Ltd. 681
Mulligan & Starling 683

34. Innovative Aluminum Products, Inc. 684

35. Mama Rossi's Pizza 686
36. Sorenson Builders 688

Computer-Aided Problems 690

17. Oh So Pure Water, Inc. 664

Notes 695

18. Whisper Valley Volunteer Fire Department 665

19. OurPerfectWedding.com 666

Illustration Credits 755

20. Recreation Supplies Unlimited 668

21. Advanced Materials, Inc. 669
22. Bright Light Innovations: The Starlight Stove 670

Name Index l-i

23. West Side Furniture 671

24. Lone Star Wire, Inc, 671

Company Index l-io

25. United Plastics Mfg., Inc. 673

26. Best Way Canning, Inc. 674
27. Superior Molding, Inc. 675

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Subject Index 1-14

28. Precision Cutting Tools, Inc. 676

Glossary G-i

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