MARKETING MANAGEMENT

Transcription

1 MARKETING MANAGEMENT A STRATEGIC DECISION-MAKING APPROACH llusirei J^- uu y (fj) 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

2 PREFACE xvi SECTION ONE THE ROLE OF MARKETING IN DEVELOPING SUCCESSFUL BUSINESS STRATEGIES 1 1 The Marketing Management Process 2 ^ Samsung Building a Global Brand "2 New Competitive and Marketing Strategies 2 The Results 4 Chapter 1 4 Why Are Marketing Decisions Important? 5 The Importance^ the Top Cine 5 Marketing Creates Value by Facilitating Exchange Relationships 6 What Factors Are Necessary for a Successful Exchange Relationship? 6 1. Who Markets and Who Buys? The Parties in an Exchange 7 2. Customer Needs and Wants 7 3. What Gets Exchanged? Products and Services How Exchanges Create Value Defining a Market 12 What Does Effective Marketing Practice Look Like? 13 Marketing Management A Definition 14 Integrating Marketing Plans with the Company's Strategies and Resources 15 Market Opportunity Analysis 16 Formulating Strategic Marketing Programs 18 Formulating Strategic Marketing Programs for Specific Situations 18 Implementation and Control of the Marketing Program 19 The Marketing Plan A Blueprint for Action 20 Who Does What? 21 Marketing Institutions 21 Who Pays the Cost of Marketing Activities And Are They Worth It? 23 Room for Improvement in Marketing Efficiency 23 The Role of the Marketing Decision Maker 24 Some Recent Developments Affecting Marketing Management 25 Globalization 25 Increased Importance of Service 25 Information Technology 26 Relationships across Functions and Firms 27 Take-aways 28 Endnotes 28 2 The Marketing Implications of Corporate and Business Strategies 30 IBM Switches Strategies 30 Technology Changes and Competitor Actions Require a Shift in Strategy 30 A New Corporate Strategy 32 New Business and Marketing Strategies 33 The Bottom Line 33 Chapter 2 33 What Is Marketing's Role in Formulating and Implementing Strategies? 34 Market-Oriented Management 36 Does Being Market-Oriented Pay? 36 Factors That Mediate Marketing's Strategic Role 37 Three Levels of Strategy: Similar Components, but Different Issues 40 Strategy: A Definition 40 The Components of Strategy 41 The Hierarchy of Strategies 41 VII

3 viii CONTENTS Corporate Strategy 41 Business-Level Strategy 43 Marketing Strategy 43 The Marketing Implications of Corporate Strategy Decisions 43 Corporate Scope Defining the Firm's Mission 44 Corporate Objectives 48 Corporate Sources of Competitive Advantage 50 Corporate Growth Strategies 50 Allocating Corporate Resources 53 Limitations of the Growth-Share Matrix 55 Sources of Synergy 59 The Marketing Implications of Business-Unit Strategy Decisions 60 How Should Strategic Business Units Be Designed? 61 The Business Unit's Objectives 61 The Business Unit's Competitive Strategy 62 Take-aways 64 Endnotes 65 Appendix 2.1 The American Marketing Association's Code of Ethics 67 SECTION TWO MARKET OPPORTUNITY ANALYSIS 69 3 Understanding Market Opportunities 70 The Cellular Telephone Business: Increasing Competition in a Growing Market 70 The Mobile Telephony Market 70 Cell Phone Manufacturing 71 Cell Phone Service Providers 71 Chapter 3 72 Markets and Industries: What's the Difference? 72 Assessing Market and Industry Attractiveness 73 Macro Trend Analysis: A Framework for Assessing Market Attractiveness, Macro Level 74 The Demographic Environment 74 The Sociocultural Environment 77 The Economic Environment 77 The Regulatory Environment 78 The Technological Environment 79 The Natural Environment 80 Your Market Is Attractive: What about Your Industry? 81 Porter's Five Competitive Forces 82 A Five Forces Analysis of the Cellular Phone Service Industry 85 Challenges in Macro-Level Market and Industry Analysis 86 Information Sources for Macro-Level Analyses 86 Understanding Markets at the Micro Level 88 Understanding Industries at the Micro Level 89 The Team Domains: The Key to the Pursuit of Attractive Opportunities 90 Mission, Aspirations, and Risk Propensity 91 Ability to Execute on the Industry's Critical Success Factors 91 It's Who You Know, Not What You Know 92 Putting the Seven Domains to Work 92 Anticipating and Responding to Environmental Change 93 Impact and Timing of Event 93 Swimming Upstream or Downstream: An Important Strategic Choice 94 Take-aways 94 Endnotes 95 4 Understanding Consumer Buying Behavior 98 Cruise Ships Not Just for Grandma and Grandpa Anymore 98 Savvy Marketing Helped Fuel Industry Growth 98 Future Challenges 100 Chapter The Psychological Importance of the Purchase Affects the Decision-Making Process 101 How Do Consumers Make High-Involvement Purchase Decisions? 101 Low-Involvement Purchase Decisions 109

4 CONTENTS ix Understanding the Target Consumer's Level of Involvement Enables Better Marketing Decisions 109 Why People Buy Different Things: Part 1 The Marketing Implications of Psychological and Personal Influences 113 Perception and Memory 113 Needs and Attitudes 114 Demographics, Personality, and Lifestyle 116 Why People Buy Different Things: Part 2 The Marketing Implications of Social Influences 118 Culture 119 Social Class 120 Reference Groups 120 The Family 120 jfy Take-aways 121 Endnotes Understanding Organizational Markets and Buying Behavior 124 DHL Exel Supply Chain: Building Long-Term Relationships with Organizational Buyers 124 Building Long-Terrri Relationships with Customers 124 Long-Term Relationships Enhance Long-Term Performance 125 Chapter Who Is the Customer? 126 A Comparison of Organizational versus Consumer Markets 126 What Do the Unique Characteristics of Organizational Markets Imply for Marketing Programs? 128 The Organizational Customer Is Usually a Group of Individuals 129 How Organizational Members Make Purchase Decisions 131 Types of Buying Situations 132 The Purchase Decision-Making Process 132 The Marketing Implications of Different Organizational Purchasing Situations 138 Purchasing Processes in Government Markets 140 Selling Different Kinds of Goods and Services to Organizations Requires Different Marketing Programs 141 Raw Materials 141 Component Materials and Parts 142 Installations 143 Accessory Equipment 143 Operating Supplies 144 Business Services 144 Take-aways 145 Endnotes Measuring Market Opportunities: Forecasting and Market Knowledge 148 African Communications Group: Bringing Modern Telecommunications to Tanzania 148 Market Analysis 148 Industry Analysis 149 Consumer Needs and Behavior 149 The Business Idea 149 Determining Market Potential and Preparing a Sales Forecast 150 Chapter Every Forecast Is Wrong! 151 A Forecaster's Tool Kit: A Tool for Every Forecasting Setting 151 Statistical and Other Quantitative Methods 152 Observation 153 Surveys or Focus Groups 153 Analogy 155 Judgment 155 Market Tests 155 Mathematics Entailed in Forecasting 156 Rate of Diffusion of Innovations: Another Perspective on Forecasting 156 The Adoption Process and Rate of Adoption 157 Adopter Categories 158 Implications of Diffusion of Innovation Theory for Forecasting Sales of New Products and New Firms 159 Cautions and Caveats in Forecasting 160 Keys to Good Forecasting 160 Common Sources of Error in Forecasting 161

5 CONTENTS Why Data? Why Marketing Research? 161 Customer Relationship Management and Market Knowledge Systems: Charting a Path toward Competitive Advantage 162 Internal Records Systems 163 Marketing Databases Make CRM Possible 164 Client Contact Systems 167 Competitive Intelligence Systems 168 Marketing Research: A Foundation for Marketing Decision Making 168 Step 1: Identify the Managerial Problem and Establish Research Objectives 169 Step 2: Determine the Data Sources and Types of Data Required 170 Step 3: Design the Research 171 Step 4: Collect the Data 175 Step 5: Analyze the Data 175 Step 6: Report the Results to the Decision Maker 175 What Users of Marketing Research Should Ask 175 Rudimentary Competence: Are We There Yet? 176 Take-aways 176 Endnotes Targeting Attractive Market Segments 178 Blue Ribbon Sports Targets Distance Runners 178 The Unique Needs of Distance Runners 178 The Waffle Revolution 178 Launching and Expanding the Nike Brand 179 World Cup Chapter Do Market Segmentation and Target Marketing Make Sense in Today's Global Economy? 180 Most Markets Are Heterogeneous 180 Today's Market Realities Often Make Segmentation Imperative 181 How Are Market Segments Best Defined? 182 Who They Are: Segmenting Demographically 183 Where They Are: Segmenting Geographically 184 Geodemographic Segmentation 185 How They Behave: Behavioral Segmentation 185 Innovative Segmentation: A Key to Marketing Breakthroughs 188 Choosing Attractive Market Segments: A Five-Step Process 189 Step 1: Select Market-Attractiveness and Competitive-Position Factors 191 Step 2: Weight Each Factor 192 Step 3: Rate Segments on Each Factor, Plot Results on Matrices 193 Step 4: Project Future Position for Each Segment 194 Step 5: Choose Segments to Target, Allocate Resources 195 Different Targeting Strategies Suit Different Opportunities 195 Niche-Market Strategy 195 Mass-Market Strategy 196 Growth-Market Strategy 197 Global Market Segmentation 197 Take-aways 198 Endnotes Differentiation and Brand Positioning 200 Fast Food Turns Healthy 200 The Jared Diet 200 Repositioning Fuels Subway's Growth 200 Chapter Differentiation: One Key to Customer Preference and Competitive Advantage 202 Differentiation among Competing Brands 202 Physical Positioning 203 Limitations of Physical Positioning 203 Perceptual Positioning 204 Levers Marketers Can Use to Establish Brand Positioning 204 Preparing the Foundation for Marketing Strategies: The Brand Positioning Process 206 Step 1: Identify a Relevant Set of Competitive Products 207 Step 2: Identify Determinant Attributes 207 Step 3: Collect Data about Customers' Perceptions for Brands in the Competitive Set 208

6 CONTENTS xi Step 4: Analyze the Current Positions of Brands in the Competitive Set 209 Step 5: Determine Customers' Most Preferred Combination of Attributes 213 Step 6: Consider Fit of Possible Positions with Customer Needs and Segment Attractiveness 213 Step 7: Write Positioning Statement or Value Proposition to Guide Development of Marketing Strategy 215 The Outcome of Effective Positioning: Building Brand Equity 218 Managing Brand Equity 218 Analytical Tools for Positioning Decision Making 219 Some Caveats in Positioning Decision Making 221 Take-aways 221 Endnotes 221 SECTION THREE DEVELOPING STRATEGIC MARKETING PROGRAMS Business Strategies: A Foundation for Marketing Program Decisions 224 Business Strategies and Marketing Programs at 3M 224 Chapter How Do Businesses Compete? 227 Generic Business-Level Competitive Strategies 227 Do the Same Competitive Strategies Work for Single-Business Firms and Start-ups? 230 Do the Same Competitive Strategies Work for Service Businesses? 230 Do the Same Competitive Strategies Work for Global Competitors? 232 Will the Internet Change Everything? 232 How Do Competitive Strategies Differ from One Another? 233 Differences in Scope 233 Differences in Goals and Objectives 234 Differences in Resource Deployments 235 Differences in Sources of Synergy 236 Deciding When a Strategy Is Appropriate: The Fit between Business Strategies and the Environment 236 Appropriate Conditions for a Prospector Strategy 236 Appropriate Conditions for an Analyzer Strategy 238 Appropriate Conditions for a Defender Strategy 238 How Different Business Strategies Influence Marketing Decisions 240 Product Policies 241 Pricing Policies 243 Distribution Policies 243 Promotion Policies 243 What If the Best Marketing Program for a Product Does Not Fit the Business's Competitive Strategy? 244 Take-aways 246 Endnotes 246 io Product Decisions 248 Product Decisions in a Services Business 248 Chapter Product Design Decisions for Competitive Advantage 250 Goods and Services: Are the Product Decisions the Same? 250 Product Quality and Features Decisions 252 Branding Decisions 254 Packaging Decisions 257 Services Decisions and Warranties 257 Managing Product Lines for Customer Appeal and Profit Performance 258 Line Filling 259 Line Stretching 260 Line Extensions 260 Brand Extensions 260 Dropping Products 261 Product Systems 261 New Product Development Process Decisions 261 The Importance of New Products to Long-Term Profitability 262 New Product Success and Failure 262

7 xii CONTENTS Organizing for New Product Development 263 Key Decisions in the New Product Development Process 265 Product Decisions over the Product Life Cycle 272 Market and Competitive Implications of Product Life Cycle Stages 273 Strategic Implications of the Product Life Cycle 277 Limitations of the Product Life Cycle Framework 278 Take-aways 278 Endnotes Pricing Decisions 280 Ryanair: Low Prices, High Profits But Increasing Costs 280 Chapter A Process for Making Pricing Decisions 282 Strategic Pricing Objectives 283 Estimating Demand and Perceived Value 286 Estimating Costs 288 Analyzing Competitors' Costs and Prices 290 Methods Managers Use to Determine an Appropriate Price Level 290 Cost-Oriented Methods 291 Competition-Oriented Methods 293 Customer-Oriented Methods 295 Deciding on a Price Structure: Adapting Prices to Market Variations 298 Geographic Adjustments 299 Global Adjustments 299 Discounts and Allowances 300 Differential Pricing 302 Product-Line Pricing Adjustments 304 Take-aways 305 Endnotes Distribution Channel Decisions 308 Changing Global Retail Trends Send a "Get Well" Greeting to Hallmark 308 Chapter Why Do Multifirm Marketing Channels Exist? 310 Designing Distribution Channels: What Are the Objectives to Be Accomplished? 311 Product Availability 312 Meeting Customers' Service Requirements 313 Promotional Effort 314 Market Information 314 Cost-Effectiveness 314 Flexibility 315 Designing Distribution Channels: What Kinds of Institutions Might Be Included? 315 Merchant Wholesalers 315 Agent Middlemen 315 Retailers 316 Nonstore Retailing 317 Channel Design Alternatives 318 Alternative Consumer Goods Channels 319 Alternative Industrial Goods Channels 320 Which Alternative Is Best? It Depends on the Firm's Objectives and Resources 320 Availability and the Satisfaction of Customer Service Requirements 321 Promotional Effort, Market Information, and Postsale Service Objectives 323 Cost-Effectiveness 324 Flexibility 326 Multichannel Distribution 326 Channel Design for Global Markets 327 Market Entry Strategies 327 Channel Alternatives 328 Channel Design for Services 329 Channel Management Decisions 331 Vertical Marketing Systems 331 Sources of Channel Power 334 Channel Control Strategies 334 Trade Promotions Incentives for Motivating Channel Members 335 Channel Conflicts and Resolution Strategies 338 Take-aways 339 Endnotes Integrated Promotion Decisions 342 Integrated Marketing Communication Takes On Some New Twists 342 Larazade 342 Big Brother 342 What's Next? 343

8 CONTENTS XIII Chapter The Promotion Mix: A Communication Toolkit 344 Developing an Integrated Marketing Communications Plan 345 Step 1: Define the Audience(s) to Be Targeted 345 Step 2: Set the Promotional Objectives 346 Step 3: Set the Promotion Budget 347 Step 4: Design the Promotion Mix 347 Step 5: Evaluate the Results 350 The Nitty-Gritty of Promotional Decision Making 350 Making Advertising Decisions 350 Making Personal Selling Decisions^ 360 Evaluating and Controlling Salesforce Performance to Ensure Delivery of Budgeted Results 365. Making Sales Promotion Decisions 365 Making Public Relations Decisions 367 Take-aways 368 Endnotes 368, v SECTION FOUR STRATEGIC MARKETING PROGRAMS FOR SELECTED SITUATIONS Marketing Strategies for the New Economy 372 Are Virtual Goods the Web's "Next Big Thing"? 372 How to Get a Second Life 372 Is Anyone Buying? 372 Will Virtual Worlds and Their Virtual Goods Fly? 373 Chapter Does Every Company Need a New-Economy Strategy? 374 Threats or Opportunities? The Inherent Advantages and Disadvantages of the New Economy for Marketers 376 The Syndication of Information 376 Increasing Returns to Scale of Network Products 377 The Ability to Efficiently Personalize and Customize Market Offerings 378 Disintermediation and Restructuring of Distribution Channels 379 Global Reach, 24 X 7 Access, and Instantaneous Delivery 381 Are These New-Economy Attributes Opportunities or Threats? 382 First-Mover Advantage: Fact or Fiction? 384 Developing a New-Economy Strategy: A Decision Framework 385 Marketing Applications for New-Economy Tools 385 Developing New-Economy Marketing Strategies: The Critical Questions 394 Managing New^Economy Strategies: The Talent Gap 397 Developing Strategies to Serve New-Economy Markets 398 What Industries Will Be Next to Get the Dot-Com Treatment? 398 Serving the Dot-Com Markets of Tomorrow 399 Take-aways 400 Endnotes Strategies for New and Growing Markets 402 Canon, Inc. Success That Is Hard to Copy 402 Chapter How New Is New? 404 Market Entry Strategies: Is It Better to Be a Pioneer or a Follower? 406 Pioneer Strategy 406 Not All Pioneers Capitalize on Their Potential Advantages 408 Follower Strategy 409 Determinants of Success for Pioneers and Followers 410 Strategic Marketing Programs for Pioneers 411 Mass-Market Penetration 412 Niche Penetration 412 Skimming and Early Withdrawal 414 Marketing Program Components for a Mass-Market Penetration Strategy 414

9 XIV CONTENTS Marketing Program Components for a Niche Penetration Strategy 418 Marketing Program Components for a Skimming Strategy 418 Growth-Market Strategies for Market Leaders 419 Marketing Objectives for Share Leaders 419 Marketing Actions and Strategies to Achieve Share-Maintenance Objectives 420 Fortress, or Position Defense, Strategy 420 Flanker Strategy 424 Confrontation Strategy 425 Market Expansion 426 Contraction or Strategic Withdrawal 426 Share-Growth Strategies for Followers 427 Marketing Objectives for Followers 427 Marketing Actions and Strategies to Achieve Share Growth 427 Frontal Attack Strategy 429 Leapfrog Strategy 431 Flanking and Encirclement Strategies 432 Supporting Evidence 433 Take-aways 434 Endnotes Strategies for Mature and Declining Markets 438 Johnson Controls Making Money in Mature Markets 438 Chapter Challenges in Mature Markets 440 Challenges in Declining Markets 440 Strategic Choices in Mature Markets 440 Strategies for Maintaining Competitive Advantage 441 Methods of Differentiation 442 Are the Dimensions the Same for Service Quality on the Internet? 445 Methods of Maintaining a Low-Cost Position 448 Customers' Satisfaction and Loyalty Are Crucial for Maximizing Their Lifetime Value 449 Marketing Strategies for Mature Markets 452 Strategies for Maintaining Current Market Share 452 Strategies for Extending Volume Growth 453 Strategies for Declining Markets 459 Relative Attractiveness of Declining Markets 459 Divestment or Liquidation 462 Marketing Strategies for Remaining Competitors 462 Take-aways 466 Endnotes 466 SECTION FIVE IMPLEMENTING AND CONTROLLING MARKETING PROGRAMS Organizing and Planning for Effective Implementation 470 Nokia Reorganizing to Accommodate Changing Markets and Technology 470 A Changing Environment Requires'New Strategies and Structures 470 Preliminary Outcomes 472 Chapter Designing Appropriate Administrative Relationships for the Implementation of Different Competitive Strategies 473 Business-Unit Autonomy 474 Shared Programs and Facilities 475 Evaluation and Reward Systems 476 Designing Appropriate Organizational Structures and Processes for Implementing Different Strategies 477 Functional Competencies and Resource Allocation 477 Additional Considerations for Service Organizations 477 Organizational Structures 480 Recent Trends in Organizational Design 484 Organizational Adjustments as Firms Grow and Markets Change 485 Organizational Designs for Selling in Global Markets 486 Marketing Plans: The Foundation for Implementing Marketing Actions 487 The Situational Analysis 491 Key Issues 492

10 CONTENTS xv Objectives 493 Marketing Strategy 493 Action Plans 493 Projected Profit-and-Loss Statement 493 Contingency Plans 494 Take-aways 494 Endnotes Measuring and Delivering Marketing Performance 496 Metrics Pay for Wal-Mart 496 Changing Metrics for a Changing Strategy 497 Chapter Designing Marketing Metrics Step by^step 499 Setting Standards of Performance 500 Specifying and Obtaining Feedback Data 505 Evaluating Feedback Data 506 Taking Corrective Action 506 Design Decisions for Strategic Monitoring Systems 507 Identifying Key Variables 507 Tracking and Monitoring 508 Strategy Reassessment 508 Design Decisions for Marketing Metrics 508 Who Needs What Information? 509 When and How Often Is the Information Needed? 513 In What Media and in What Format(s) or Levels of Aggregation Should the Information Be Provided? 513 Does Your System of Marketing Metrics Measure Up? 514 What Contingencies Should Be Planned For? 514 Global Marketing Control 517 A Tool for Periodic Assessment of Marketing Performance: The Marketing Audit 517 Types of Audits 518 Measuring and Delivering Marketing Performance 519 Take-aways 520 Endnotes 520 INDEX 523