Strategic

Marketing
Tenth Edition

David W. Cravens
M.j. Neeley School of Business
Texas Christian University

Nigel F. Piercy
Warwick Business School
The University of Warwick

Me
Grauu
Hill

McGraw-Hill
Irwin

Table of Contents
Preface iv
About the Authors xi
PART ONE

STRATEGIC MARKETING

1
t

Chapter One
New Challenges for Market-Driven
Strategy 2
Market-Driven Strategy 4
Characteristics of Market-Driven Strategies 4
Classifying Capabilities 8
Creating Value for Customers 9
Becoming Customer Driven 9
Corporate, Business, and Marketing Strategy 10
Corporate, Business, and Marketing Strategy 12
Components of Corporate Strategy 12
Corporate Strategy Framework 12
Business and Marketing Strategy 14
The Marketing Strategy Process 16
Challenges of a New Era for
Strategic Marketing 20
Escalating Globalization 20
i
Technology Diversity and Uncertainty 21
Internet Dynamics 22
Ethical Behavior and Corporate Social
Responsiveness 23
Summary 27
Appendix 1A
Strategic Marketing Planning 29

PART T W O

MARKETS, SEGMENTS,
AND CUSTOMER VALUE 33
Chapter Two
Markets and Competitive Space

34

Markets and Strategies 35

Markets and Strategies are Interlinked 35
An Array of Challenges 3 7
Matching Needs with Product Benefits 3 9

Defining and Analyzing Product-Markets 40

Determining Product-Market Boundaries
and Structure 40
Forming Product-Markets 42
Illustrative Product-Market Structure 44
Describing and Analyzing End-Users 45
Identifying and Describing Buyers 45
How Buyers Make Choices 46
Environmental Influences 46
Building Customer Profiles 48
Analyzing Competition 48
Defining the Competitive Arena 48
Key Competitor Analysis 51
Anticipating Competitors 'Actions 53
Market Size Estimation 54
Market Potential 54
Sales Forecast 55
Market Share 56
Evaluating Market Opportunity 56
Developing a Strategic Vision About
the Future 58
Phases of Competition 58
Anticipating the Future 58
Summary 59
Appendix 2A 62
Financial Analysis for Marketing Planning
and Control 62

Chapter Three
Strategic Market Segmentation 71
Levels and Types of Market Segmentation
Market-Driven Strategy and Segmentation
Market Segmentation, Value Opportunities
and New Market Space 75
Market Targeting and Strategic Positioning
Activities and Decisions in Market
Segmentation 77
Defining the Market to Be Segmented 78
Identifying Market Segments 79
Segmentation Variables 79
Characteristics of People and Organizations
Product Use Situation Segmentation 80
Buyers 'Needs and Preferences 82
Purchase Behavior 83
Forming Market Segments 85
Requirements for Segmentation 85

73
74

75

79

xiii

xiv Table of Contents

Approaches to Segment Identification 88

Customer Group Identification 89
Forming Groups Based on Response
Differences 93
Finer Segmentation Strategies 95
Logic of Finer Segments 96
Finer Segmentation Strategies 96
Selecting the Segmentation Strategy 97
Deciding How to Segment 98
Strategic Analysis of Market Segments 98
Summary 102

Chapter Four
Strategic Customer Management:
Systems, Ethics, and Social
Responsibility 104
Pivotal Role of Customer Relationship
Management 105
CRM in Perspective 105
CRM and Database Marketing 106
Customer Lifetime Value 107
Developing a CRM Strategy 108
CRM Levels 108
CRM Strategy Development 109
CRM Implementation 110
Value Creation Process 112
Customer Value 113
Value Received by the Organization 113
CRM and Value Chain Strategy 114
CRM and Strategic Marketing 115
Implementation 115
Performance Metrics 116
Short-Term Versus Long-Term Value 116
Competitive Differentiation 116
Ethics and Social Responsibility in Strategic
Marketing 118
Corporate Reputation 118
Customer Value and Competitive Positioning 127
Summary 130

Chapter Five
Capabilities for Learning About
Customers and Markets 132
Market-Driven Strategy, Market Sensing,
and Learning Processes 134
Market-Sensing Processes 135
Learning Organizations 135

Marketing Information and Knowledge

Resources 140
Scanning Processes 140
Specific Marketing Research Studies 143
Internal and External Marketing Information
Resources 143
Existing Marketing Information Sources 147
Creating New Marketing Information 148
Marketing and Management Information Systems 151
Marketing Intelligence and Knowledge
Management 153
Marketing Intelligence 153
Knowledge Management 154
Role of the Chief Knowledge Officer 154
Leveraging Customer Knowledge 154
Ethical Issues in Collecting and Using
Information 155
Invasion of Customer Privacy 155
Information and Ethics 156
Summary 157

PART THREE
DESIGNING MARKET-DRIVEN
STRATEGIES 161
Chapter Six
Market Targeting and Strategic
Positioning 162
Market Targeting Strategy 163
Targeting Alternatives 163
Factors Influencing Targeting Decisions 165
Targeting in Different Market Environments 165
Emerging Markets 166
Growth Markets 167
Mature Markets 168
Global Markets 170
Positioning Strategy 172
Selecting the Positioning Concept 175
Developing the Positioning Strategy 176
Scope of Positioning Strategy 176
Marketing Program Decisions 177
Determining Positioning Effectiveness 180
Customer and Competitor Research 181
Test Marketing 181
Analytical Positioning Techniques 182
Determining Positioning Effectiveness 182
Position ing and Targeting Strategies 183
Summary 183

Table of Contents xv

Chapter Seven
Strategic Relationships

186

The Rationale for Interorganizational

Relationships 187
Opportunities to Enhance Value 187
Environmental Complexity 189
Competitive Strategy 190
Skills and Resource Gaps 190
Evaluating the Potential for Collaboration 193
Forms of Organizational Relationships 196
Supplier Relationships 197
,
Intermediate Customer Relationships 199
End-User Customer Relationships 199
Strategic Customers 200
Strategic Alliances 202
Joint Ventures 203
Internal Partnering 204
Managing Interorganizational Relationships 205
Objective of the Relationship 205
Relationship Management 206
Partnering Capabilities 208
Control and Evaluation 208
Exiting from Alliance 209
Global Relationships Among Organizations 210
The Global Integrated Enterprise 210
Inter-Nation Collaborations 211
The Strategic Role of Government 211
Summary 215

Chapter Eight
Innovation and New-Product
Strategy 218
Innovation as a Customer-Driven Process 219
Types of Innovations 219
Finding Customer Value Opportunities 220
Finding New-Product Opportunities 221
Initiatives of Successful Innovators 223
Innovation Through Collaboration 225
Recognizing the Realities of Product
Cannibalization 226
New-Product Planning 226
Developing a Culture and Strategy for Innovation 227
Developing Effective New-Product-Planning
Processes 229
Responsibility for New-Product Planning 230
Idea Generation 231
Sources ofIdeas 231
Methods of Generating Ideas 234

Screening, Evaluating, and Business Analysis 235

Screening 235
Concept Evaluation 237
Business Analysis 238
Product and Process Development 240
Product Development Process 240
Marketing Strategy and Market Testing 243
Marketing Strategy Decisions 243
Market Testing 244
Commercialization 247
The Marketing Plan 247
Monitoring and Control 247
Variations in the Generic New-Product-Planning
Process 248
Summary 250

PART FOUR
MARKET-DRIVEN PROGRAM
DEVELOPMENT 253
Chapter Nine
Strategic Brand Management 254
Strategic Brand Management 255
The Strategic Role of Brands 255
Brand Management Challenges 257
Brand Management Responsibility 258
Strategic Brand Management 260
Strategic Brand Analysis 262
Tracking Brand Performance 262
Product Life-Cycle Analysis 264
Product Performance Analysis 264
Brand Positioning Analysis 265
Brand Equity Measurement and Management 265
Measuring Brand Equity 265
Brand Health Reports 265
Brand Identity Strategy 266
Alternatives for Brand Identification 266
Brand Focus 267
Identity Implementation 268
Managing Brand Strategy 268
Strategies for Improving Product Performance 2 70
Managing the Brand Portfolio 271
Determining Roles of Brands 272
Strategies for Brand Strength 2 72
Strategic Brand Vulnerabilities 274
Brand Leveraging Strategy 275
Line Extension 275
Stretching the Brand Vertically 276

xvi Table of Contents

Analyzing the Pricing Situation

Brand Extension 2 76
Co-Branding 277
Licensing 277
Global Branding 277
Internet Brands 279
Brand Theft 280

Summary

Customer Price Sensitivity

Cost Analysis 329
Competitor Analysis 331
Pricing Objectives 332

Selecting the Pricing Strategy

281

Determining Specific Prices and Policies

Determining Specific Prices 339
Establishing Pricing Policy and Structure
Pricing Management 341

285

Distribution Functions 286

Channels for Services 288
Direct Distribution by Manufacturers

Channel Strategy

Global Issues in Pricing

288

290

International Channels

314

Chapter Eleven
Pricing Strategy 317
Strategic Role of Price

318

Price in the Positioning Strategy

Pricing Situations 322
Roles of Pricing 322
Pricing Strategy 323
Pricing Objectives 324

343

346

Promotion Strategy
,

314

350

The Composition of Promotion Strategy 350

Designing Promotion Strategy 353
Communication Objectives 354
Deciding the Role of the Promotion
Components 356
Determining the Promotion Budget 356
Promotion Component Strategies 358
Integrating and Implementing the Promotion
Strategy 358
Effectiveness of Promotion Strategy 359

Advertising Strategy

359

Setting Advertising Objectives and Budgeting

Creative Strategy 362
Media/Scheduling Decisions 363
Role of the Advertising Agency 363
Implementing the Advertising Strategy
and Measuring Its Effectiveness 365

Sales Promotion Strategy

320

341

Chapter Twelve
Promotion, Advertising, and Sales
Promotion Strategies 349

310

Examining International Distribution

Patterns 311
Factors Affecting Global Channel Selection
Global Issues Regarding Multichannel
Strategies 314

Summary

Summary

303

Channel Leadership 303

Management Structure and Systems 303
Physical Distribution Management 303
Channel Relationships 305
Channel Globalization 306
Multichanneling 306
Conflict Resolution 307
Channel Performance 308
Legal and Ethical Considerations 308

338

Pricing Regulation and Restriction in Global

Markets 343
The Impact of Emerging Markets 343
Global Competition from Emerging Market
Multinationals 345

Types of Channels 292

Distribution Intensity 296
Channel Configuration 297
Channel Maps 298
Selecting the Channel Strategy 298
Changing Channel Strategy 300

Managing the Channel

333

. How Much Flexibility Exists? 333

Price Positioning and Visibility 334
Illustrative Pricing Strategies 336
Legal and Ethical Considerations 337

Chapter Ten
Value-Chain Strategy 284
Strategic Role of Value Chain

326

326

366

Nature and Scope of Sales Promotion 367

Sales Promotion Activities 368
Advantages and Limitations of Sales Promotion
Sales Promotion Strategy 3 71

Summary

371

360

3 70

Table of Contents

Chapter Thirteen
Sales, Digital, and Direct Marketing
Strategies 373
Salesforce Strategy 374
Strategic Sales Perspective 3 74
Salesforce Strategy 376
The Role of Selling in Promotion Strategy 377
Types of Sales Jobs 3 78
Defining the Selling Process 380
Sales Channels 381
Designing the Sales Organization 382
Salesforce Evaluation and Control 387
Digital Strategy 389
Strategy Development 391
Deciding Internet Objectives 393
Digital Strategy 394
Value Opportunities and Risks 395
Measuring Internet Effectiveness 395
Direct Marketing Strategies 396
Reasons for Using Direct Marketing 396
Direct Marketing Methods 397
Advantages of Direct Marketing 400
Direct Marketing Strategy 401
Summary 401

PART FIVE
IMPLEMENTING AND MANAGING
MARKET-DRIVEN STRATEGIES 403
Chapter Fourteen
Designing Market-Driven
Organizations 404
Trends in Organization Strategy 405
The New Organization 406
Managing Organizational Process 410
Organizational Agility and Flexibility 411
Employee Motivation 413
Organizing for Market-Driven Strategy 414
Strategic Marketing and Organization
Structure 414
Aligning the Organization With the
Market 414
Marketing Functions Versus Marketing
Processes 416
Marketing as Cross-Functional Process 416
Marketing Departments 418
Centralization Versus Decentralization 420

Integration or Diffusion 420

Contingencies for Organizing 421
Evaluating Organization Designs 423
Structuring Marketing Resources 423
Structuring Issues 423
Functional Organizational Design 424
Product-Focused Design 424
Market-Focused Design 425
Matrix Design 426
New Marketing Roles 42 7
Organizing for Global Marketing and Global
Customers 430
Organizing for Global Marketing Strategies 431
Organizingfor Global Customers 433
Summary 435

Chapter Fifteen
Strategic Marketing Implementation
and Control 437
The Strategic Role of the Chief Marketing
Officer 438
Strategic CMO Capabilities 438 ,
Core CMO Tasks 439
Planning, Implementation, and Accountability 439
The Strategic Marketing Planning Process 439
Marketing Plans Guide Implementation 439
Contents of the Marketing Plan 440
Managing the Planning Process 440
Implementing the Strategic Marketing Plan 443
Implementation Process 443
Building Implementation Effectiveness 443
Internal Marketing 446
A Comprehensive Approach to Improving
Implementation 448
Internal Strategy-Organization Fit 449
Strategic Marketing Evaluation and Control 450
Customer Relationship Management 450
Overview of Control and Evaluation
Activities 451
The Strategic Marketing Audit 451
Marketing Performance Measurement 454
The Importance of Marketing Metrics 455
The Use of Marketing Metrics 455
Types of Marketing Metrics 456
Selecting Relevant Metrics 456
Designing a Marketing Management
Dashboard 458
Interpreting Performance Measurement
Results 459

xvii

xviii

Table of Contents

Global Issues for Planning, Implementation,

and Control 463
Global Marketing Planning 464
Implementation Globally 464
Performance Measurement and Control
Globally 464

Summary 466
Appendix 15A
Marketing Metrics

_
468

PART SIX
COMPREHENSIVE CASES
Cases for Part Six

471

Case 6-1 Facebook 471

Case 6-2 Wentworthindustrial Cleaning
Supplies 475
Case 6-3 General Electric Appliances 486
Case 6-4 China and India: Opportunities and
Challenges 496
Case 6-5 Toyota 505

Case 6-6 Samsung Electronics Co. 511

Case 6-7 Keurig Inc. 519
Case 6-8 Tesco 532
Case 6-9 Supply Chain Management at
Wal-Mart 538
Case 6-10 British Airports Authority 547
Case 6-11 California Credit Life Insurance
Group 555
Case 6-12 Home Depot Inc. 563
Case 6-13 International Business Machines 569
Case 6-14 Rover Automobile 576
Case 6-15 ESPN 581
Case 6-16 Cowgirl Chocolates 588
Case 6-17 Procter & Gamble Co. 600
Case 6-18 Amazon.com Inc. 608
Case 6-19 Nanophase Technologies Corporation 613
Case 6-20 Hong Kong Disneyland 627

Indexes
Name Index 639
Subject Index 647