Case Study Marketing Plan Nivea Brand

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PART I Understanding Marketing Management
C H A P T E R
Defining Marketing
for the Twenty-First
Century
In this chapter, we will address the following questions:
1. Why is marketing important?
2. What is the scope of marketing?
3. What are some fundamental marketing concepts and new marketing realities?
4. What are the tasks necessary for successful marketing management?
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MARKETING MANAGEMENT AT STARBUCKS

Two teenage girls walk into their local Starbucks, which happens to be in Shanghai. While one
orders peppermint latts, the other sits at a table and opens her Lenovo ThinkPad notebook
computer. She quickly connects to the Internet, courtesy of Starbucks deal to provide wireless
access through China Mobile, and uses the Chinese search engine Baidu.com to search for
information about online games from Chinas Shanda Interactive. Her friend returns with the
latts, checks her Motorola cell phone for messages, and settles back to enjoy the chic coffeehouse
ambience. Switch a few of the brand namesT-Mobile provides wireless access in the U.S.
outlets, for exampleand this would be a typical scene in nearly any Starbucks worldwide.
These days, Starbucks is really pouring on the marketing in China, where it sees huge
profit potential. As a luxury brand, Starbucks appeals to status-conscious Chinese customers
who are drawn to its coffee culture image. The company encourages coffee sales in a nation of
tea drinkers by customizing its beverages to local tastes and offering free samples to both
employees and customers. Starbucks already operates 500 coffeehouses in China and plans to
1
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
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Part I Understanding Marketing Management

open hundreds more, with the goal of making its lattes part of the daily routine for tens of
millions of customers throughout the country.1
s Starbucks knows, good marketing has become an increasingly vital ingredient

for business success. It is both an art and a sciencetheres a constant tension
between its formulated side and its creative side. Its easier to learn the formulated side,
which will occupy most of our attention in this book, but we will also describe how real
innovation, creativity, and passion operate in many companies. In this chapter, we lay
the foundation for our study by reviewing a number of important marketing concepts,
tools, frameworks, and issues.
THE IMPORTANCE OF MARKETING

Financial success often depends on marketing ability. Finance, operations, accounting,
and other business functions will not really matter if there isnt sufficient demand for
goods and services so the company can make a profit. There must be a top line for
there to be a bottom line. Many companies have created a Chief Marketing Officer
(CMO) position to put marketing on a more equal footing with other C-level executives such as the Chief Executive Officer (CEO) and Chief Financial Officer (CFO).
Marketing is tricky, however, and it has been the Achilles heel of many formerly
prosperous companies. Large, well-known businesses such as Sears, Levis, Sony,
General Motors, Kodak, and Xerox have confronted newly empowered customers and
new competitors, and have had to rethink their business models. Even market leaders
such as Intel, Microsoft, and Wal-Mart recognize that they cannot afford to relax as
their leadership is challenged.
Xerox, for example, has had to become more than just a copier company. It now
sports the worlds broadest array of imaging products and dominates the market for
high-end printing systems. And its making a huge transition to digital systems and color
printing. Having been slow at one time to respond to the emergence of Canon and the
small copier market, Xerox is doing everything it can to stay ahead of the game.2
The companies at greatest risk are those that fail to carefully monitor their customers and competitors and to continuously improve their value offerings. They take
a short-term, sales-driven view of their business and, ultimately, they fail to satisfy
their stockholders, their employees, their suppliers, and their channel partners.
Skillful marketing is a never-ending pursuit.
THE SCOPE OF MARKETING

To prepare to be a marketer, you need to understand what marketing is, how it works,
what is marketed, and who does the marketing.
What Is Marketing?
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Marketing is about identifying and meeting human and social needs. One of the
shortest good definitions of marketing is meeting needs profitably. When eBay recognized that people were unable to locate some of the items they desired most, it created an online auction clearinghouse. When IKEA noticed that people wanted good
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Chapter 1 Defining Marketing for the Twenty-First Century

furniture at a substantially lower price, it created knock-down furniture. These
two firms demonstrated marketing savvy and turned a private or social need into a
profitable business opportunity.
The American Marketing Association offers the following formal definition:
Marketing is an organizational function and a set of processes for creating, communicating,
and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.3 We see marketing management as the art and
science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value.
Managers sometimes think of marketing as the art of selling products, but selling is not the most important part of marketing. Peter Drucker, a leading management
theorist, says that the aim of marketing is to make selling superfluous. The aim of
marketing is to know and understand the customer so well that the product or service
fits him and sells itself. Ideally, marketing should result in a customer who is ready to
buy. All that should be needed then is to make the product or service available.4
When Apple launched its iPod digital music player and when Toyota introduced its
Prius hybrid automobile, these companies were swamped with orders because they
had designed the right product based on careful marketing homework.
What Is Marketed?
Marketing people market 10 types of entities: goods, services, experiences, events,
persons, places, properties, organizations, information, and ideas.
Goods. Physical goods constitute the bulk of most countries production and
marketing effort. Each year, U.S. companies alone market billions of fresh, canned,
bagged, and frozen food products and other tangible items. Thanks in part to the
Internet, even individuals can effectively market goods.
Services. As economies advance, a growing proportion of their activities are focused on

the production of services. The U.S. economy today consists of a 7030 services-togoods mix. Services include the work of airlines, hotels, car rental firms, barbers and
beauticians, maintenance and repair people, as well as professionals working within or
for companies, such as accountants and programmers. Many market offerings consist of
a variable mix of goods and services, as when a restaurant offers both food and service.
Events. Marketers promote time-based events, such as major trade shows, artistic
performances, and company anniversaries. Global sporting events such as the
Olympics and the World Cup are promoted aggressively to both companies and fans.
Experiences. By orchestrating several services and goods, a firm can create, stage, and
market experiences. Walt Disney Worlds Magic Kingdom represents this kind of
experiential marketing, allowing customers to visit a fairy kingdom, a pirate ship, or a
haunted house. There is also a market for customized experiences, such as spending a
few days at a baseball camp playing with retired baseball greats.5
Persons. Celebrity marketing is a major business. Artists, musicians, CEOs, physi-
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cians, high-profile lawyers and financiers, and other professionals all get help from
celebrity marketers.6
Places. Cities, states, regions, and whole nations compete to attract tourists, factories,
company headquarters, and new residents.7 Place marketers include economic development specialists, real estate agents, commercial banks, business associations, and
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advertising and public relations agencies. For example, the Las Vegas Convention &
Tourism Authority has spent about $80 million on its What Happens Here, Stays
Here ad campaign, with the goal of attracting 43 million visitors by 2009.8
Properties. Properties are intangible rights of ownership of either real property

(real estate) or financial property (stocks and bonds). Properties are bought and sold
through the marketing efforts of real estate agents, investment companies, and banks.
Organizations. Organizations actively work to build a strong, favorable, and unique

image in the minds of their target publics. Tescos Every Little Bit Helps
marketing program has vaulted it to the top of the supermarket chains in the United
Kingdom. Universities, museums, performing arts organizations, and nonprofits use
marketing to boost their public images and compete for audiences and funds.
Information. Schools and universities essentially produce and distribute information

at a price to parents, students, and communities. Books, magazines, and newspapers
also market information. One of our societys major industries is the production,
packaging, and distribution of information.9 Even companies that sell physical
products add value through the use of information. The CEO of Siemens Medical
Systems, for instance, says the firms product is not necessarily an X-ray or an MRI,
but information. Our business is really healthcare information, and our end product
is really an electronic patient record: information on lab tests, pathology, and drugs
as well as voice dictation.10
Ideas. Every market offering includes a basic idea. For instance, social marketers
are busy promoting such ideas as Friends Dont Let Friends Drive Drunk and
A Mind Is a Terrible Thing to Waste.
What Is a Market?
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Traditionally, a market was a physical place where buyers and sellers gathered to buy and
sell goods. Economists describe a market as a collection of buyers and sellers who transact over a particular product or product class (such as the housing market). Marketers
often use the term market to cover groupings of customers. They view the sellers as
constituting the industry and buyers as constituting the market. They talk about need
markets (the diet-seeking market), product markets (the shoe market), demographic
markets (the youth market), and geographic markets (the French market); or other types
of markets, such as voter markets, labor markets, and donor markets. Marketers may
serve consumer markets, business markets, global markets, nonprofit markets, government markets, or some combination of these.
Figure 1.1 illustrates the relationship between the industry and the market.
Sellers send goods, services, and communications (ads, direct mail) to the market; in
return they receive money and information (customer attitudes, sales data). The inner
loop shows an exchange of money for goods and services; the outer loop shows an
exchange of information.
The marketplace is physical, such as a store you shop in, whereas the marketspace
is digital, as when you shop on the Internet.11 Mohan Sawhney has proposed the concept of a metamarket to describe a cluster of complementary goods and services that
are closely related in the minds of consumers but are spread across a diverse set of
industries. The automobile metamarket consists of automobile manufacturers, new
car and used car dealers, financing companies, insurance companies, mechanics,
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FIGURE 1.1
A Simple Marketing System

Communication
Goods/Services
Market
(a collection of buyers)
Industry
(a collection of sellers)
Money
Information
spare parts dealers, service shops, auto magazines, classified auto ads in newspapers,
and auto sites on the Internet.
Car buyers can get involved in many parts of this metamarket. This has created
an opportunity for metamediaries to assist buyers to move seamlessly through these
groups, although they are disconnected in physical space. One example is Edmunds
(www.edmunds.com), where buyers can find the features and prices of different vehicles and search for the lowest-price dealer, for financing, for car accessories, and for
used cars at bargain prices. Metamediaries can also serve other metamarkets, such as
the home ownership market and the wedding market.12
Who Markets?
A marketer is someone who seeks a response (attention, a purchase, a vote, a donation) from another party, called the prospect. If two parties are seeking to sell something to each other, both are marketers. Marketers must have diverse quantitative and
qualitative skills, entrepreneurial attitudes, and keen understanding of how marketing
can create value within their organizations.13
The CMO has five key functions: (1) strengthening the brands; (2) measuring
marketing effectiveness; (3) driving new product development based on customer
needs; (4) gathering meaningful customer insights; and (5) utilizing new marketing
technology. Harvards John Quelch and Gail McGovern note that there is tremendous
variability in the responsibilities and job descriptions for CMOs.14 They offer eight
ways to improve CMO success (see Figure 1.2).
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How Is Marketing Done?

In practice, marketing follows a logical process. The marketing planning process consists of analyzing marketing opportunities; selecting target markets; designing marketing strategies; developing marketing programs; and managing the marketing
effort. In highly competitive marketplaces, marketing planning is more fluid and is
continually refreshed.
Increasingly, marketing is not done only by the marketing department. Marketing
needs to affect every aspect of the customer experience, all possible touch pointsstore
layouts, package designs, product functions, employee training, and shipping and logistics methods. Marketing must also be heavily involved in key management activities
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NOT AVAILABLE FOR

ELECTRONIC VIEWING
such as product innovation and new business development. In creating a strong marketing organization, marketers must think like executives in other departments, and
executives in other departments must think more like marketers.15
CORE MARKETING CONCEPTS

To understand the marketing function, we need to understand the following core
concepts.
Needs, Wants, and Demands
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Needs are the basic human requirements. People need food, air, water, clothing, and
shelter to survive. People also have strong needs for recreation, education, and entertainment. These needs become wants when they are directed to specific objects that
might satisfy the need. An American needs food but may want a hamburger, French
fries, and a soft drink. A person in Mauritius needs food but may want a mango, rice,
lentils, and beans. Wants are shaped by ones society. Demands are wants for specific
products backed by an ability to pay. Many people want a Mercedes; only a few are willing and able to buy one. Companies must measure not only how many people want
their product but also how many would actually be willing and able to buy it.
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These distinctions shed light on the frequent criticism that marketers create
needs or marketers get people to buy things they dont want. Marketers do not
create needs: Needs preexist marketers. Marketers, along with other societal factors, influence wants. Marketers might promote the idea that a Mercedes would
satisfy a persons need for social status. They do not, however, create the need for
social status.
Understanding customer needs and wants is not always simple. Some customers
have needs of which they are not fully conscious, or they cannot articulate these needs,
or they use words that require some interpretation. Consider the customer who says
he wants an inexpensive car. A marketer may distinguish among five types of needs
in this case:
1.
2.
3.
4.
Stated needs: The customer wants an inexpensive car.

Real needs: The customer wants a car with a low operating cost, not a low initial price.
Unstated needs: The customer expects good service from the dealer.
Delight needs: The customer wants the dealer to include an onboard navigation
system.
5. Secret needs: The customer wants to be seen by friends as a savvy consumer.
Responding only to the stated need may shortchange the customer, because
sometimes consumers do not know what they want in a product, especially breakthrough products such as the first cellular phone. Simply giving customers what they
want isnt enough any moreto gain an edge, companies must help customers learn
what they want.
Target Markets, Positioning, and Segmentation

A marketer can rarely satisfy everyone in a market. Not everyone likes the same cereal,
automobile, college, or movie. Therefore, marketers identify and profile distinct
groups of buyers who might prefer or require varying product and service mixes by
examining demographic, psychographic, and behavioral differences among buyers.
The marketer then decides which segments present the greatest opportunitywhich
are its target markets.
For each target market, the firm develops a market offering that it positions in
the minds of the target buyers as delivering some central benefit(s). For example,
Volvo develops its cars for buyers who are concerned about automobile safety.
Volvo, therefore, positions its car as the safest a customer can buy. Companies do
best when they choose their target market(s) carefully and prepare tailored marketing programs.
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Offerings and Brands

Companies address needs by putting forth a value proposition, a set of benefits they
offer to satisfy customers needs. The intangible value proposition is made physical by
an offering, which can be a combination of products, services, information, and experiences. A brand is an offering from a known source. A brand such as McDonalds carries
many associations in peoples minds that make up the brand image: hamburgers, fun,
children, fast food, convenience, and golden arches. All companies strive to build a
strong, favorable, and unique brand image.
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Value and Satisfaction

The offering will be successful if it delivers value and satisfaction to the target buyer.
The buyer chooses between offerings on the basis of which is perceived to deliver the
most value. Value reflects the sum of the perceived tangible and intangible benefits
and costs to customers. Its primarily a combination of quality, service, and price,
called the customer value triad. Value increases with quality and service and
decreases with price, although other factors can also play an important role in
perceptions of value.
Value is a central marketing concept. Marketing can be seen as the identification, creation, communication, delivery, and monitoring of customer value.
Satisfaction reflects a persons comparative judgment of a products perceived performance (or outcome) in relation to expectations. If product performance falls short of
expectations, the customer is dissatisfied and disappointed. If it matches expectations, the customer is satisfiedand if it exceeds expectations, the customer is
delighted.
Marketing Channels
To reach a target market, the marketer uses three kinds of marketing channels.
Communication channels, which deliver and receive messages from target buyers,
include newspapers, magazines, radio, television, mail, telephone, billboards, posters,
CDs, and the Internet. And, just as people convey messages by facial expressions and
clothing, firms communicate through the look of their stores, the appearance of their
Web sites, and in other ways. Marketers are increasingly adding dialogue channels,
including e-mail and blogs, to familiar monologue channels such as ads.
The marketer uses distribution channels to display, sell, or deliver the physical
product or service(s) to the buyer or user. These include distributors, wholesalers,
retailers, and agents. The marketer also uses service channels such as warehouses,
transportation firms, banks, and insurance companies to carry out transactions with
potential buyers. Marketers clearly face a design problem in choosing the best mix of
communication, distribution, and service channels for their offerings.
Supply Chain
The supply chain is a longer channel stretching from raw materials to components to
final products that are carried to final buyers. The supply chain for womens purses
starts with hides and moves through tanning operations, cutting operations, manufacturing, and the marketing channels bringing products to customers. Each company
captures only a certain percentage of the total value generated by the supply chains
value delivery system. When a company acquires competitors or moves upstream or
downstream, its aim is to capture a higher percentage of supply chain value.
Competition
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Competition includes all the actual and potential rival offerings and substitutes that a
buyer might consider. Suppose an automobile company is planning to buy steel for its
cars. There are several possible levels of competitors. The manufacturer can buy from
U.S. Steel, from a foreign firm in Japan or Korea, or from a mini-mill such as Nucor.
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Other alternatives are to buy aluminum for certain parts to lighten the cars weight or
to buy engineered plastics instead of steel for bumpers. Clearly, U.S. Steel would
be thinking too narrowly of competition if it thought only of other integrated steel
companies. In fact, U.S. Steel is more likely to be hurt in the long run by substitute
products than by other steel companies.
Marketing Environment
The marketing environment consists of the task environment and the broad environment. The task environment includes the immediate actors involved in producing, distributing, and promoting the offering, such as the company, suppliers, distributors,
dealers, and the target customers. In the supplier group are material suppliers and service suppliers such as marketing research agencies, advertising agencies, banks and
insurance companies, transportation companies, and telecommunications companies.
Distributors and dealers include agents, brokers, manufacturer representatives, and
others who facilitate finding and selling to customers.
The broad environment consists of six components: demographic environment, economic environment, physical environment, technological environment, political-legal
environment, and social-cultural environment. Marketers must pay close attention to the
trends and developments in these environments and make timely adjustments to their
marketing strategies.
THE NEW MARKETING REALITIES

Marketers today must attend and respond to a number of significant developments,
including major societal forces, new consumer capabilities, and new company
capabilities.
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Major Societal Forces

New behaviors, opportunities, and challenges are emerging as a result of a variety of
major and sometimes interlinking societal forces. Network information technology
promises more accurate levels of production, more targeted communications, and
more relevant pricing. Globalizationspecifically advances in transportation, shipping, and communicationmakes it easier to market in other countries and easier for
consumers to buy from marketers in other countries. Deregulation has increased
competition and growth opportunities in many nations, even as privatization in some
countries has put public firms in private hands.
Brand manufacturers face intense competition from domestic and foreign
brands; at the same time, many strong brands are becoming mega-brands with considerable presence. Industry convergence is increasing as companies discover new opportunities at the intersection of multiple industries. Meanwhile, more consumers are
resisting marketing efforts. Retailing is being transformed as small retailers succumb
to the power of giant retailers and category killers and store-based retailers meet
competition from non-store retailers. Finally, online businesses such as Amazon created disintermediation by intervening in the traditional flow of goods through distribution channels. In response, many firms engaged in reintermediation and added online
services to their existing offerings.
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New Consumer Capabilities

Customers now perceive fewer real product differences and show less brand loyalty,
while becoming more price- and quality-sensitive in their search for value. In fact,
consumers have substantially increased their buying power because of the Internet
and can choose from a greater variety of available goods and services. They have
access to a huge amount of information about practically anythingand they can
more easily interact, place, and receive orders from home, office, or mobile phone.
Social networking sites bring together buyers with a common interest and allow them
to compare notes on offerings. And the Internet gives consumers an amplified voice to
influence peer and public opinion through MySpace, YouTube, and other sites.
New Company Capabilities

New forces are generating a new set of capabilities for companies, starting with the
use of the Internet as a powerful information and sales channel that augments
marketers geographical reach. Researchers can collect fuller and richer data about
markets, customers, prospects, and competitors. Internal communication is faster
and easier with todays technology. Also, companies are facilitating and speeding
communication among customers by creating buzz through brand advocates and
user communities.
Target marketing and two-way communication are easier, thanks to the proliferation of special-interest magazines, TV channels, and Internet technology.
Marketers can now send ads, coupons, samples, and information to customers who
have requested them or given permission to have them sent. Companies can reach
consumers on the move with mobile marketing. Firms can produce individually
differentiated goods because of advances in factory customization, computers, the
Internet, and database software. Managers can improve purchasing, recruiting, training, and internal and external communications. Finally, corporate buyers can save by
comparing sellers prices online and purchasing at auction or posting their own buying terms.
COMPANY ORIENTATION
TOWARD THE MARKETPLACE
What philosophy should guide a companys marketing efforts? Marketers have operated under the production concept, product concept, selling concept, and marketing
concept; increasingly, they are operating under the holistic marketing concept.
The Production Concept
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The production concept, one of the oldest concepts in business, holds that consumers
will prefer products that are widely available and inexpensive. Managers of productionoriented businesses concentrate on achieving high production efficiency, low costs,
and mass distribution. This orientation makes sense in developing countries such
as China, where the largest PC manufacturer, Lenovo, takes advantage of the huge
inexpensive labor pool to dominate the market.16 This orientation is also used when a
company wants to expand the market.
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The Product Concept

The product concept proposes that consumers favor those products that offer the
most quality, performance, or innovative features. Managers in these organizations
focus on making superior products and improving them over time. However, these
managers are sometimes caught up in love affairs with their products. Although they
may believe that a better mousetrap will lead people to beat paths to their doors,
new or improved products will not necessarily be successful unless they are priced,
distributed, advertised, and sold properly.
The Selling Concept

The selling concept holds that consumers and businesses, if left alone, wont buy
enough of the organizations products. The organization must, therefore, undertake
an aggressive selling and promotion effort. As Coca-Colas former vice president,
Sergio Zyman, once observed: The purpose of marketing is to sell more stuff to more
people more often for more money in order to make more profit.17
The selling concept is practiced most aggressively with unsought goods, goods
that buyers normally do not think of buying, such as insurance, encyclopedias, and
funeral plots. Most firms practice the selling concept when they have overcapacity, aiming to sell what they make rather than making what the market wants. However, marketing based on hard selling carries high risks. It assumes that customers who are coaxed
into buying a product will like it; and that if they do not, they not only wont return it or
bad-mouth it or complain to consumer organizations, but they might even buy it again.
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The Marketing Concept

The marketing concept emerged in the mid-1950s when business shifted to a customercentered, sense-and-respond philosophy.18 The job is not to find the right customers
for your products, but to find the right products for your customers. Under the marketing concept, the key to achieving organizational goals is being more effective than competitors in creating, delivering, and communicating superior customer value to your target markets.
Theodore Levitt of Harvard drew a perceptive contrast between the selling and
marketing concepts: Selling focuses on the needs of the seller; marketing on the needs
of the buyer. Selling is preoccupied with the sellers need to convert his or her product
into cash; marketing with the idea of satisfying the needs of the customer by means of
the product and the whole cluster of things associated with creating, delivering and
finally consuming it.19
Several scholars have found that companies that embrace the marketing concept
achieve superior performance.20 This was first demonstrated by companies practicing
a reactive market orientationunderstanding and meeting customers expressed needs.
Some critics say this means companies develop only low-level innovations. Narver and
his colleagues argue that more advanced, high-level innovation is possible if the focus
is on customers latent needs. He calls this a proactive marketing orientation.21
Companies such as 3M, Hewlett-Packard, and Motorola have made a practice of
researching latent needs through a probe-and-learn process. Firms that practice
both reactive and proactive marketing orientations are implementing total market
orientation and are likely to be the most successful.
11
12
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FIGURE 1.3
Marketing
Department
Holistic Marketing Dimensions

Senior
Management
Products &
Services
Other
Departments
Communications
Internal
Marketing
Channels
Integrated
Marketing
Holistic
Marketing
Sales Revenue
Brand &
Customer Equity
Relationship
Marketing
Performance
Marketing
Ethics
Community
Environment Legal
Customers
Partners
Channel
The Holistic Marketing Concept

Todays best marketers recognize the need for a more complete, cohesive approach that
goes beyond traditional applications of the marketing concept. The holistic
marketing concept is based on the development, design, and implementation of marketing programs, processes, and activities that recognize their breadth and interdependencies. Holistic marketing recognizes that everything matters with marketingand
that a broad, integrated perspective is often necessary. Holistic marketing is thus
an approach to marketing that attempts to recognize and reconcile the scope and complexities of marketing activities. Figure 1.3 is a schematic overview of four broad
components characterizing holistic marketing, themes that will appear throughout
this book: relationship marketing, integrated marketing, internal marketing, and performance marketing.
Successful companies apply holistic marketing to keep their programs and
activities changing with the changes in their marketplace and marketspace.
Breakthrough Marketing: Nike shows how the company has done this to maintain
its market leadership over the years.
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Relationship Marketing Relationship marketing aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their
business.22 Four key constituents for relationship marketing are customers, employees,
marketing partners (channels, suppliers, distributors, dealers, agencies), and members
of the financial community (shareholders, investors, analysts).
The ultimate outcome of relationship marketing is the building of a unique
company asset called a marketing network. A marketing network consists of the
company and its supporting stakeholders (customers, employees, suppliers, distributors, retailers, ad agencies, university scientists, and others) with whom it has built
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BREAKTHROUGH MARKETING: NIKE

Nike hit the ground running in 1962. Originally known as Blue Ribbon Sports,
the company focused on high-quality running shoes designed especially for athletes by athletes. Understanding that customer choices are influenced by top athletes preferences and behavior, Nikes marketing has always featured winning
athletes. In 1988, Nike aired the first ads in its landmark Just Do It campaign,
inspiring a generation of athletic enthusiasts to pursue their goals.
As Nike began expanding internationally, however, it found that its ads
were seen as too aggressive overseas. Nike had to authenticate its brand the way
it had in the United States by building credibility and relevance in European
sports, particularly soccer (known outside the United States as football). Nike
began to sponsor youth leagues, local clubs, and national teams. The big break
came in 1994, when the Brazilian team (the only national team for which Nike
had any real sponsorships) won the World Cup. That victory helped Nike succeed in major markets such as China. Moving into new markets and new product
categories has propelled Nike to the top, making it the worlds leading athletic
apparel, footwear, and equipment manufacturer.23
mutually profitable business relationships. The operating principle is simple: Build an
effective network of relationships with key stakeholders, and profits will follow.24
A growing number of companies are also shaping separate offers, services, and
messages for individual customers, based on information about past transactions,
demographics, psychographics, and media and distribution preferences. By focusing
on their most profitable customers, products, and channels, these firms hope to
achieve profitable growth by capturing a larger share of each customers expenditures,
building high loyalty and customer lifetime value. Such activities fall under the
umbrella of customer centricity.25 Note that marketers must conduct partner relationship management as well as customer relationship management.
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Integrated Marketing With integrated marketing, the marketers task is to devise marketing activities and assemble fully integrated marketing programs that create, communicate, and deliver value for consumers. Marketing activities come in all forms.26 McCarthy
classified these activities as marketing mix tools of four broad kinds, which he called the
four Ps of marketing: product, price, place, and promotion (see Figure 1.4).27
The firm can change its price, sales force size, and advertising expenditures in
the short run. It can develop new products and modify its distribution channels only
in the long run. Thus the firm typically makes fewer period-to-period marketingmix changes in the short run than the number of marketing-mix decision variables
might suggest.
The four Ps represent the sellers view of the marketing tools available for influencing buyers. From a buyers point of view, each marketing tool is designed to deliver
a customer benefit. A complementary breakdown of marketing activities has been proposed, centering on the customer questions that the four dimensions (SIVA) are
designed to answer:28
1. Solution: How can I solve my problem?
2. Information: Where can I learn more about it?
13
14
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Page 14

FIGURE 1.4
The Four P Components of the Marketing Mix
Marketing mix
Product
Product variety
Quality
Design
Features
Brand name
Packaging
Sizes
Services
Warranties
Returns
Place
Channels
Coverage
Assortments
Locations
Inventory
Transport
Price
Promotion
List price
Discounts
Allowances
Payment period
Credit terms
Sales promotion
Advertising
Sales force
Public relations
Direct marketing
3. Value: What is my total sacrifice to get this solution?

4. Access: Where can I find it?
Two key themes of integrated marketing are that (1) many different marketing
activities communicate and deliver value; and (2) when coordinated, marketing activities maximize their joint effects. In other words, marketers should design and implement any one marketing activity with all other activities in mind.
2008933525
Internal Marketing Holistic marketing incorporates internal marketing, ensuring

that everyone in the organization embraces appropriate marketing principles, especially senior management. Internal marketing is the task of hiring, training, and
motivating able employees who want to serve customers well. Smart marketers recognize that internal marketing activities can be as important as, or even more important than external marketing activities. It makes no sense to promise excellent service
before the companys staff is ready to provide it (see Marketing Skills: Internal
Marketing).
Internal marketing must take place on two levels. At one level, the various marketing functionssales force, advertising, customer service, product management,
marketing researchmust work together and be coordinated from the customers point
of view. At the second level, other departments must embrace marketing and must
think customer. Marketing is not a department so much as a company orientation.29
The bottom-line importance of internal marketing was highlighted in a recent
study by Booz Allen Hamilton and the Association of National Advertisers, in
conjunction with Brandweek magazine. The researchers identified six types of marketing organizations: Growth Champions, Marketing Masters, Senior Counselors,
Best Practice Advisors, Brand Builders, and Service Providers. Marketing heavily
influenced all aspects of the organization in the most successful type, Growth
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Page 15
MARKETING SKILLS: INTERNAL MARKETING

One of the most valuable skills marketers can have is the ability to select, educate, and rally people inside the organization to build mutually satisfying
long-term relationships with stakeholders. Internal marketing starts with the
selection of managers and employees who have positive attitudes toward the
company, its products, and its customers. The next step is to train, motivate, and
empower the entire staff so that they have the knowledge, tools, and authority to
provide value to customers. After establishing standards for employee performance, the final step is to monitor employee actions, then reward and reinforce
good performance.
Internal marketing is a key strength at Southwest Airlines. Top managers
constantly visit different Southwest facilities, thank staff members for their
efforts, send birthday cards to employees, and share customer comments with
employees. Southwests employees deliver superior service with a smile, and they
are so dedicated that some have worked without pay to keep the airlines costs
down during difficult periods. Clearly, Southwests managers are good role
models for learning the critical skill of internal marketing.30
Championsand this type was 20% more likely to deliver revenue growth and profitability than the other types.31
Performance Marketing Holistic marketing incorporates performance marketing
and understanding the business returns from marketing activities and programs, as
well as addressing broader concerns and their legal, ethical, social, and environmental
effects. Top management is going beyond sales revenue to examine the marketing
scorecard and interpret what is happening to market share, customer loss rate, customer satisfaction, product quality, and other measures.
Financial accountability. Marketers are increasingly asked to justify their investments to top management in financial and profitability terms, as well as in terms of
building the brand and growing the customer base.32 Therefore, theyre using a
variety of financial measures to assess the direct and indirect value of their marketing
efforts. Theyre also recognizing that much of their firms market value comes from
intangible assets such as their brands, customers, employees, and distributor and
supplier relations.
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Social responsibility marketing. Marketers must consider the ethical, environmental,

legal, and social context of their activities. Under the societal marketing concept, the
companys task is to determine the needs, wants, and interests of target markets so it
can satisfy customers more effectively and efficiently than competitors while
preserving or enhancing customers and societys long-term well-being.33 Sustainability
has become a major concern in the face of challenging environmental forces. For
example, McDonalds strives for a socially responsible supply system encompassing
everything from healthy fisheries to redesigned packaging.34 Some firms use social
responsibility to differentiate themselves, build consumer preference, and improve
sales and profits. Table 1.1 displays some different types of corporate social initiatives,
illustrated by McDonalds.35
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NOT AVAILABLE FOR

ELECTRONIC VIEWING
MARKETING MANAGEMENT TASKS

With holistic marketing as a backdrop, we can identify a specific set of tasks that make
up successful marketing management and marketing leadership.
Developing marketing strategies and plans. The first task is to identify the organizations potential long-run opportunities, given its market experience and core competencies. Chapter 2 discusses this process in detail.
Capturing marketing insights. Marketers must understand what is happening inside

and outside the organization by monitoring the marketing environment and
conducting marketing research to assess buyer needs and behavior, as well as actual
and potential market size. Chapter 3 looks at marketing research, demand, and the
marketing environment.
Connecting with customers. The firm must determine how to best create value for its
Building strong brands. Now marketers need to understand how customers perceive
their brands strengths and weaknessesthe subject of Chapter 8. Because brands
2008933525
chosen target markets and how to develop strong, profitable, long-term relationships
with consumers and business customers, as discussed in Chapter 4. Chapters 5 and
Chapter 6 explore the analysis of consumer and business markets. Next, marketers
identify major market segments, evaluate each, and target those that the firm can
serve most effectively, as discussed in Chapter 7.
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Page 17

never exist in a vacuum, marketers must not only deal with the competitive situation,
they must develop and communicate appropriate positioning. Chapter 9 explains
how to do this.
Shaping market offerings. At the heart of the marketing program is the product
the firms tangible offering to the market, which includes the product quality, design,
features, and packaging, all explored in Chapter 10. Marketers may also include
services as part of the market offering, as discussed in Chapter 11; in addition,
pricing is a key element, as shown in Chapter 12.
Delivering value. Here, marketers determine how to deliver the offerings value to the
target market by identifying, recruiting, and linking with marketing facilitators such as
retailers, wholesalers, and physical-distribution firms. Marketing channels are examined
in Chapter 13; retailing, wholesaling, and logistics are covered in Chapter 14.
Communicating value. Now the firm must convey the value embodied by the
offering to the target market through an integrated marketing communication
program that maximizes the individual and collective contribution of all communication activities. Chapter 15 discusses the design and management of integrated
marketing communications; Chapter 16 explores mass communications such as
advertising and sales promotions, while Chapter 17 looks at personal communications such as direct marketing and personal selling.
Creating long-term growth. The companys marketing strategy must take into
account changing global opportunities and challenges. Moreover, management must
put in place a marketing organization capable of implementing the marketing plan.
See Chapter 18 for more detail.
2008933525
EXECUTIVE SUMMARY
Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in
ways that benefit the organization and its stakeholders. Marketing management is the
art and science of choosing target markets and getting, keeping, and growing customers
through creating, delivering, and communicating superior customer value. Marketers
are involved in marketing 10 types of entities: goods, services, events, experiences, persons, places, properties, organizations, information, and ideas. They operate in four
different customer markets: consumer, business, global, and nonprofit.
Marketers today must attend and respond to a number of significant developments, including major societal forces, new consumer capabilities, and new company
capabilities. Over the years, organizations have operated under the production concept, product concept, selling concept, and marketing concept. Increasingly, they
operate under the holistic marketing concept, based on the development, design, and
implementation of marketing programs, processes, and activities that recognize their
breadth and interdependencies. Four components of holistic marketing are relationship marketing, integrated marketing, internal marketing, and performance marketing (both financial accountability and social responsibility marketing).
Successful marketing managers must accomplish these tasks: develop marketing
strategies and plans, capture marketing insights, connect with customers, build strong
brands, shape the market offerings, deliver value, communicate value, and create successful long-term growth.
17
18
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NOTES
13. Richard Rawlinson, Beyond Brand Management,
Strategy & Business, Summer 2006.
14. Gail McGovern and John A. Quelch, The Fall and
Rise of the CMO, Strategy+Business, Winter 2004.
15. Constantine von Hoffman, Armed with
Intelligence, Brandweek, May 29, 2006, pp. 1720.
16. Jane Spencer and Geoffrey A. Fowler, Lenovo
Goes for Its Own Olympic Medal, Wall Street
Journal, March 27, 2007, p. B4.
17. Bruce I. Newman, ed., Handbook of Political Marketing
(Thousand Oaks, CA: Sage Publications, 1999); and
Bruce I. Newman, The Mass Marketing of Politics
(Thousand Oaks, CA: Sage Publications, 1999).
18. John B. McKitterick, What Is the Marketing
Management Concept? in Frank M. Bass, ed. The
Frontiers of Marketing Thought and Action (Chicago:
American Marketing Association, 1957), pp. 7182;
Fred J. Borch, The Marketing Philosophy as a Way
of Business Life, The Marketing Concept: Its Meaning
to Management (Marketing series, no. 99)
(New York: American Management Association,
1957), pp. 35; Robert J. Keith, The Marketing
Revolution, Journal of Marketing ( January 1960):
3538.
19. Theodore Levitt, Marketing Myopia, Harvard
Business Review, JulyAugust 1960, p. 50.
20. Ajay K. Kohli and Bernard J. Jaworski, Market
Orientation: The Construct, Research Propositions,
and Managerial Implications, Journal of Marketing
(April 1990): 118; John C. Narver and Stanley F.
Slater, The Effect of a Market Orientation on
Business Profitability, Journal of Marketing
(October 1990): 2035; Stanley F. Slater and John
C. Narver, Market Orientation, Customer Value,
and Superior Performance, Business Horizons
(MarchApril 1994): 2228; A. Pelham and
D. Wilson, A Longitudinal Study of the Impact of
Market Structure, Firm Structure, Strategy and
Market Orientation Culture on Dimensions of
Business Performance, Journal of the Academy of
Marketing Science 24, no. 1 (1996): 2743; Rohit
Deshpande and John U. Farley, Measuring Market
Orientation: Generalization and Synthesis, Journal
of Market-Focused Management 2 (1998): 213232.
21. John C. Narver, Stanley F. Slater, and Douglas L.
MacLachlan, Total Market Orientation, Business
Performance, and Innovation, Working Paper
Series, Journal of Marketing Science Institute,
Report No. 00-116, 2000, pp. 120. See also Ken
Matsuno and John T. Mentzer, The Effects of
2008933525
1. Starbucks to Rely on China, Shed Trans Fats in

N. America, Nations Restaurant News, May 21,
2007, p. 12; Janet Adamy, Different Brew: Eyeing a
Billion Tea Drinkers, Starbucks Pours It on in China,
Wall Street Journal, November 29, 2006, p. A1.
2. Sandra Ward, Warming up the Copier, Barrons,
May 1, 2006, pp. 19, 21.
3. American Marketing Association, 2004.
4. Peter Drucker, Management: Tasks, Responsibilities,
Practices (New York: Harper and Row, 1973),
pp. 6465.
5. Philip Kotler, Dream Vacations: The Booming
Market for Designed Experiences, The Futurist
(October 1984): 713; B. Joseph Pine II and James
Gilmore, The Experience Economy (Boston: Harvard
Business School Press, 1999); Bernd Schmitt,
Experience Marketing (New York: Free Press, 1999);
Mark Hyman, The Family That Fields Together,
Business Week, February 9, 2004, p. 92.
6. Irving J. Rein, Philip Kotler, and Martin Stoller,
High Visibility (Chicago: NTC Publishers, 1998);
H. Lee Murphy, New Salton Recipe: Celeb Chefs,
Crains Chicago Business, April 4, 2005, p. 4.
7. Philip Kotler, Irving J. Rein, and Donald Haider,
Marketing Places: Attracting Investment, Industry, and
Tourism to Cities, States, and Nations (New York: Free
Press, 1993); Philip Kotler, Christer Asplund, Irving
Rein, and Donald H. Haider, Marketing Places in
Europe (London: Financial Times Prentice-Hall,
1999).
8. Michael McCarthy, Vegas Goes Back to Naughty
Roots, USA Today, April 11, 2005; Julie Dunn,
Vegas Hopes for Payoff with Denverites,
The Denver Post, June 16, 2005; John M. Broder,
The Pied Piper of Las Vegas Seems to
Have Perfect Pitch, The New York Times,
June 4, 2004.
9. Carl Shapiro and Hal R. Varian, Versioning: The
Smart Way to Sell Information, Harvard Business
Review (NovemberDecember 1998): 106114.
10. John R. Brandt, Dare to Be Different, Chief
Executive, May 2003, pp. 3438.
11. Jeffrey Rayport and John Sviokla, Managing in the
Marketspace, Harvard Business Review
(NovemberDecember 1994): 141150. Also see
their Exploring the Virtual Value Chain,
Harvard Business Review (NovemberDecember
1995): 7585.
12. Mohan Sawhney, Seven Steps to Nirvana (New York:
McGraw-Hill, 2001).
1/21/08
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Page 19
22.
23.
24.
25.
26.
28. Chekitan S. Dev and Don E. Schultz, A CustomerFocused Approach Can Bring the Current
Marketing Mix into the 21st Century, (Marketing
Management 14 (January/February 2005).
29. Christian Homburg, John P. Workman Jr., and
Harley Krohmen, Marketings Influence Within the
Firm, Journal of Marketing ( January 1999): 115.
30. Using Positive Four-Letter Words: Southwest
Airlines Incorporates Myers-Briggs Personality Test
into Training Program, Employee Benefit News,
April 1, 2007; Barney Gimbel, Southwests New
Flight Plan, Fortune, May 16, 2005, pp. 93+; Jane
Lewis, The Leaders Who Changed HR, Personnel
Today, January 22, 2002, pp. 2+.
31. Booz Allen Hamilton/Assn. of National Advertisers
Marketing Profiles, in conjunction with Brandweek,
from Constantine von Hoffman, Armed with
Intelligence, Brandweek, May 29, 2006, pp. 1720.
32. Robert Shaw and David Merrick, Marketing Payback:
Is Your Marketing Profitable? (London, UK: Pearson
Education, 2005).
33. Rajendra Sisodia, David Wolfe, and Jagdish Sheth,
Firms of Endearment: How World Class Companies Profit
from Passion (Upper Saddle River, NJ: Wharton
School Publishing, 2007).
34. John Ehernfield, Feeding the Beast, Fast Company,
December 2006/January 2007, pp. 4143.
35. If choosing to develop a strategic corporate social
responsibility program, see Michael E. Porter and
Mark R. Kramer, Strategy and Society: The Link
between Competitive Advantage and Corporate
Social Responsibility, Harvard Business Review
(December 2006): 7892.
2008933525
27.
Strategy Type on the Market

OrientationPerformance Relationship, Journal on
Marketing (October 2000): 116.
Evert Gummesson, Total Relationship Marketing
(Boston: Butterworth-Heinemann, 1999); Regis
McKenna, Relationship Marketing (Reading, MA:
Addison-Wesley, 1991); Martin Christopher,
Adrian Payne, and David Ballantyne, Relationship
Marketing: Bringing Quality, Customer Service, and
Marketing Together (Oxford, U.K.: ButterworthHeinemann, 1991).
Paula L. Stepankowsky, Nike Tries to Catch Up to
Trend, Wall Street Journal, May 29, 2007, p. B3D;
Justin Ewers and Tim Smart, A Designer Swooshes
In, U.S. News & World Report, January 26, 2004,
p. 12; 10 Top Non Traditional Campaigns,
Advertising Age, December 22, 2003, p. 24; Chris
Zook and James Allen, Growth Outside the Core,
Harvard Business Review (December 2003): 66(8).
James C. Anderson, Hakan Hakansson, and Jan
Johanson, Dyadic Business Relationships within a
Business Network Context, Journal of Marketing
(October 15, 1994): 115.
Larry Selden and Yoko S. Selden, Profitable
Customer: The Key to Great Brands, Advertising
Age, July 10, 2006, p. S7.
Neil H. Borden, The Concept of the Marketing
Mix, Journal of Advertising Research 4 ( June 1964):
27. For another framework, see George S. Day,
The Capabilities of Market-Driven Organizations,
Journal of Marketing 58, no. 4 (October 1994): 3752.
E. Jerome McCarthy and William D. Perreault,
Basic Marketing: A Global-Managerial Approach, 14th
ed. (Homewood, IL: McGraw-Hill Irwin, 2002).
19

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M01_KOTL6600_04_SE_M01.

PART I Understanding Marketing Management

MARKETING MANAGEMENT AT STARBUCKS

Part I Understanding Marketing Management

s Starbucks knows, good marketing has become an increasingly vital ingredient

THE IMPORTANCE OF MARKETING

THE SCOPE OF MARKETING

Chapter 1 Defining Marketing for the Twenty-First Century

Services. As economies advance, a growing proportion of their activities are focused on

Persons. Celebrity marketing is a major business. Artists, musicians, CEOs, physi-

Part I Understanding Marketing Management

Properties. Properties are intangible rights of ownership of either real property

Organizations. Organizations actively work to build a strong, favorable, and unique

Information. Schools and universities essentially produce and distribute information

Chapter 1 Defining Marketing for the Twenty-First Century

A Simple Marketing System

How Is Marketing Done?

Part I Understanding Marketing Management

NOT AVAILABLE FOR

CORE MARKETING CONCEPTS

Needs, Wants, and Demands

Chapter 1 Defining Marketing for the Twenty-First Century

Stated needs: The customer wants an inexpensive car.

Target Markets, Positioning, and Segmentation

Offerings and Brands

Part I Understanding Marketing Management

Value and Satisfaction

Chapter 1 Defining Marketing for the Twenty-First Century

THE NEW MARKETING REALITIES

Major Societal Forces

Part I Understanding Marketing Management

New Consumer Capabilities

New Company Capabilities

The Production Concept

Chapter 1 Defining Marketing for the Twenty-First Century

The Product Concept

The Selling Concept

The Marketing Concept

Part I Understanding Marketing Management

Holistic Marketing Dimensions

The Holistic Marketing Concept

Chapter 1 Defining Marketing for the Twenty-First Century

BREAKTHROUGH MARKETING: NIKE

Part I Understanding Marketing Management

The Four P Components of the Marketing Mix

3. Value: What is my total sacrifice to get this solution?

Internal Marketing Holistic marketing incorporates internal marketing, ensuring

Chapter 1 Defining Marketing for the Twenty-First Century

MARKETING SKILLS: INTERNAL MARKETING

Social responsibility marketing. Marketers must consider the ethical, environmental,

Part I Understanding Marketing Management

NOT AVAILABLE FOR

MARKETING MANAGEMENT TASKS

Capturing marketing insights. Marketers must understand what is happening inside

Chapter 1 Defining Marketing for the Twenty-First Century

Part I Understanding Marketing Management

1. Starbucks to Rely on China, Shed Trans Fats in

Chapter 1 Defining Marketing for the Twenty-First Century

Strategy Type on the Market

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