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What do you see as some of the challenges that we will face in global marketing in the years to come?  identify and explain two challenges facing global marketing leaders. Explain the impact and provide at least one strategy to address and tackle each challenge identified.  Discuss the impact of the pandemic on global marketing. A Preface to Marketing Management pet6106x_fm_i-xviii.indd ipet6106x_fm_i-xviii.indd i 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to printer This page intentionally left blank A Preface to Marketing Management Fourteenth Edition J. Paul Peter University of Wisconsin–Madison James H. Donnelly Jr. Gatton College of Business and Economics University of Kentucky pet6106x_fm_i-xviii.indd iiipet6106x_fm_i-xviii.indd iii 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to printer A PREFACE TO MARKETING MANAGEMENT, FOURTEENTH EDITION Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2015 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 20 13, 2011, and 2008. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. 1 2 3 4 5 6 7 8 9 0 DOW/DOW 1 0 9 8 7 6 5 4 ISBN 978-0-07-786106-3 MHID 0-07-786106-X Senior Vice President, Products & Markets: Kurt L. Strand Vice President, General Manager, Products & Markets: Michael Ryan Vice President, Content Production & Technology Services: Kimberly Meriwether David Brand Manager: Sankha Basu Editorial Coordinator: Heather Darr Marketing Manager: Donielle Xu Director, Content Production: Terri Schiesl Lead Content Project Manager: Jane Mohr Buyer: Laura Fuller Cover Designer: Studio Montage, St. Louis, MO. Cover Image: © John Shaw/Getty Images Media Project Manager: Shawn Coenen Compositor: Laserwords Private Limited Typeface: 10/12 Times LT Std. Printer: R. R. Donnelley All credits appearing on page or at the end of the book are considered to be an extension of the copyright page. Library of Congress Cataloging-in-Publication Data Peter, J. Paul. A preface to marketing management / J. Paul Peter, University of Wisconsin-Madison, James H. Donnelly, Jr., Gatton College of Business and Economics, University of Kentucky.–Fourteenth edition. pages cm ISBN 978-0-07-786106-3 (alk. paper) 1. Marketing–Management. I. Donnelly, James H. II. Title. HF5415.13.P388 2013 658.8–dc23 2013046644 The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites. www.mhhe.com pet6106x_fm_i-xviii.indd ivpet6106x_fm_i-xviii.indd iv 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to printer To Rose and Angie J. Paul Peter To Gayla Jim Donnelly pet6106x_fm_i-xviii.indd vpet6106x_fm_i-xviii.indd v 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to printer vi About the Authors J. Paul Peter has been a faculty member at the University of Wisconsin since 1981. He was a member of the faculty at Indiana State, Ohio State, and Washington University before joining the Wisconsin faculty. While at Ohio State, he was named Outstanding Marketing Professor by the students and has won the John R. Larson Teaching Award at Wisconsin. He has taught a variety of courses including Marketing Management, Marketing Strategy, Con- sumer Behavior, Marketing Research, and Marketing Theory, among others. Professor Peter’s research has appeared in the Journal of Marketing, the Journal of Marketing Research, the Journal of Consumer Research, the Journal of Retailing, and the Academy of Management Journal, among others. His article on construct validity won the prestigious William O’Dell Award from the Journal of Marketing Research, and he was a finalist for this award on two other occasions. Recently, he was the recipient of the Churchill Award for Lifetime Achievement in Marketing Research, given by the American Marketing Association and the Gaumnitz Distinguished Faculty Award from the School of Business, University of Wisconsin–Madison. He is an author or editor of over 30 books, including A Preface to Marketing Management, Fourteenth edition; Marketing Management: Knowledge and Skills, ninth edition; Consumer Behavior and Marketing Strategy, ninth edition; Strategic Management: Concepts and Applications, third edition; and Marketing: Creating Value for Customers, second edition. He is one of the most cited authors in the marketing literature. Professor Peter has served on the review boards of the Journal of Marketing, Jour- nal of Marketing Research, Journal of Consumer Research, and Journal of Business Research and was measurement editor for JMR and professional publications editor for the American Marketing Association. He has taught in a variety of executive programs and consulted for several corporations as well as the Federal Trade Commission. James H. Donnelly Jr. has spent his academic career in the Gatton College of Business and Economics at the University of Kentucky. In 1990 he received the first Chancellor’s Award for Outstanding Teaching given at the university. Previously, he had twice received the UK Alumni Associa- tion’s Great Teacher Award, an award one can only be eligible to receive every 10 years. He has also received two Outstanding Teacher awards from Beta Gamma Sigma, national busi- ness honorary. In 1992 he received an Acorn Award recognizing “those who shape the future” from the Kentucky Advocates for Higher Education. In 2001 and 2002 he was selected as “Best University of Kentucky Professor.” In 1995 he became one of six charter members elected to the American Bankers Association’s Bank Marketing Hall of Fame. He has also received a “Distinguished Doctoral Graduate Award” from the University of Maryland. During his career he has published in the Journal of Marketing Research, Journal of Marketing, Journal of Retailing, Administrative Science Quarterly, Academy of Man- agement Journal, Journal of Applied Psychology, Personnel Psychology, Journal of Business Research, and Operations Research among others. He has served on the edito- rial review board of the Journal of Marketing. He is the author of more than  a dozen books, which include widely adopted academic texts as well as professional books. Professor Donnelly is very active in the banking industry where he has served on the board of directors of the Institute of Certified Bankers and the ABA’s Marketing Network. He has also served as academic dean of the ABA’s School of Bank Marketing and Management. pet6106x_fm_i-xviii.indd vipet6106x_fm_i-xviii.indd vi 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to printer vii Preface We are proud to introduce the fourteenth edition of A Preface to Marketing Management. Our plan has always been to deliver a clear and concise presentation of the basic princi- ples of marketing in such a way that the core concepts and ideas are covered in sufficient depth to ensure in-depth understanding. By offering an engaging, clear, and conceptu- ally sound text, our book has been able to maintain its position as a leading marketing management text. Throughout the history of the book, feedback from both students and instructors has suggested that our plan is a good one. Our book has been used in a wide variety of set- tings and is the best-selling book of its kind. We introduce the fourteenth edition knowing that our book and its eight foreign translations have been used around the world whenever courses require an overview of the critical aspects of marketing management. With this edition, we seek to more effectively implement our plan by building on a strong foundation, maintaining the attributes and elements of the book that make it a very teachable text, updating existing content, adding new content, and focusing the presenta- tion. We seek to emphasize quality content and examples and avoid excess verbiage, pic- tures, and description. As usual, each time we revise the book there is an emphasis on responding to feedback from students and instructors. These two constituencies plus our own intuitions drive each revision. Marketing is an exciting and dynamic field of study. We want to capture the sense of excitement and at the same time respect its history. Our book has become known simply as the Preface. We want to believe a major reason it has endured is that because marketing is figuring out how to do a superior job of satisfy- ing customers, we simply try to practice what we preach. Welcome to the Preface. THE PRESENT EDITION Every element of content in our book is designed with one thought in mind: to assist stu- dents in analyzing marketing problems and cases and developing and writing marketing plans. Section I of the book consists of 13 concise chapters that cover the essentials of mar- keting management. We think of it as the “must know” content of the field. It is divided into four parts that focus on strategic planning and marketing planning, understanding tar- get markets, the marketing mix, and marketing in special fields. These 13 chapters should provide students a clear understanding of the terminology, techniques, tools, and strategies for effective marketing management and marketing strategy development. In addition to revising and updating the text chapters, this edition contains new content as well. There are discussions of internal and external secondary data sources, the use of social media monitoring, alternative search in consumer behavior, key characteristics of organiza- tional buyers, e-procurement, global virtual teams, brand equity, using distinctive compe- tencies in new product development, consumer databases, business-to-business databases, mobile marketing, online retailing and multichannel marketing, franchising, the effects of the Internet on pricing, global account managers, and learning about different cultures. In the twelfth edition, we altered two of the text elements. The changes have been well received by instructors and students. First, “Marketing Insights” are included to assist students as they solve marketing problems, analyze marketing cases, and develop marketing plans. Second, we know that our book is often used with case problems, writing assignments, and constructing marketing plans. Accordingly, there is an “Additional Resources” section pet6106x_fm_i-xviii.indd viipet6106x_fm_i-xviii.indd vii 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to printer viii Preface at the end of each chapter. Our purpose is to highlight current resources that students can use in writing assignments and oral presentations. The resources have been selected with students in mind. They include resources accessible to students at various stages of mar- keting education given the wide spectrum of courses in which the book is utilized. NEW FEATURES AND CONTENT CHANGES Chapter 1: Strategic Planning and The Marketing Management Process • Revised basic questions that must be asked when developing a mission statement. • Marketing Insight 1-3 now contains five actual mission statements for firms of varying sizes and industries. It provides students with a better mix of alternatives when com- pleting the exercise in Marketing Insight 1-4. • Updated additional resources. Chapter 2: Marketing Research: Process and Systems for Decision Making • Revised section on secondary data to include both internal and external sources • Added new figure “Common Types of Information Available in a Secondary Data Search” • Added a new Marketing Insight, “Social Media Monitoring for Marketing Insights” • Updated additional resources Chapter 3: Consumer Behavior • Updated discussion of consumer and marketer reactions to recession • Revised and updated discussion of Alternative Search • Updated additional resources Chapter 4: Business, Government, and Institutional Buying • Revised Marketing Insight on “Key Characteristics of Organizational Buying Behavior” • New Marketing Insight, “Organizational Buying on the Internet: E-Procurement” • Revised Discussion of “Organizational Needs” • Updated additional resources Chapter 5: Market Segmentation • New Marketing Insight, “Segmenting the Mobile Phone Market” • Revised and updated discussion of VALS Chapter 6: Product and Brand Strategy • Marketing Insight 6-3 now contains the latest information on the value of the top twenty brands in the world • Contains a new section on branding and brand equity • Revised and updated Marketing Insight 6-6 • Added a new section on global virtual teams • New key terms and concepts • Updated additional resources pet6106x_fm_i-xviii.indd viiipet6106x_fm_i-xviii.indd viii 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to printer Preface ix Chapter 7: New Product Planning and Development • New Marketing Insight 7-4 which focuses on utilizing corporate strengths in the new product development process. It includes eight firms with strengths in either technol- ogy or markets • Updated additional resources Chapter 8: Integrated Marketing Communications • Revised Marketing Insight 8-1 which presents up-to-date information on the top ten websites in Brazil, Portugal and South Korea • Revised section on direct marketing as part of the promotion mix • Revised Marketing Insight 8-6 • New section on direct marketing • New Marketing Insight 8-7 on the contents of a comprehensive database included are both consumer and business-to-business databases • Added new Key Terms and Concepts • Updated additional resources Chapter 9: Personal Selling, Relationship Building, and Sales Management • New Marketing Insight 9-1 which focuses on what a salesperson actually does • A new discussion of an increasingly important customer organization structure, the global account manager • Added new Key Terms and Concepts • Updated additional resources Chapter 10: Distribution Strategy • Added New Marketing Insight, “Advantages and Disadvantages of Franchising” • New section on “Online and Mobile Retailing” • Updated additional resources • New “Key Terms and Concepts”: online retailing, mobile retailing, multichannel marketing Chapter 11: Pricing Strategy • Added a new discussion of the Internet as an external influence on pricing decisions • A new Marketing Insight, “Ten Tips for Managing Pricing Strategy” Chapter 12: The Marketing of Services • The chapter has been significantly revised and has been shortened for this edition • A new section on the importance of all the elements of the marketing mix in the market- ing of services has been added • Updated additional resources Chapter 13: Global Marketing • Marketing Insight 13-1 has been updated with the latest data on selected U.S. companies and their international sales • The section on cultural misunderstanding as a problem in foreign markets has been replaced with an entirely new section pet6106x_fm_i-xviii.indd ixpet6106x_fm_i-xviii.indd ix 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to printer x Preface • Marketing Insight 13-3 has been replaced with a new Marketing Insight which focuses on ways to learn about new cultures • Updated additional resources Section II: Analyzing Marketing Problems and Cases • New Marketing Insight, “Objectives of Case Analysis” • Revised and updated discussion of SWOT analysis • Updated additional resources Section III: Financial Analysis for Marketing Decisions • Updated dates and additional resources Section IV: Developing Marketing Plans • Updated dates and additional resources STUDENT SUPPORT Knowing that our book is used for a variety of course levels, programs, and students, we have assembled several elements that we believe will support students for whatever pur- pose they use our book. Key Terms and Concepts New to the previous edition, we decided to add a section of key terms and concepts at the conclusion of each chapter. There was much debate as to where they should be placed in the book. We decided to place them at the end of the chapter in which they appear. In this way, they are more visible to students than as an appendix at the end of the book. More than a glossary, it also presents key concepts covered in the chapter. Analyzing Marketing P roblems and Cases Section II presents a very practical and comprehensive framework for analyzing, prepar- ing, and presenting case analyses. It includes discussions of what a case is, preparing for the class discussion and written analysis, pitfalls to avoid in case analysis, and preparing to do an oral presentation. It has been praised by both instructors and students. For courses utilizing marketing problems and cases, we encourage students to read this guide before discussing a problem or case. Thus, it could have been placed at the begin- ning of the book, but because it is often referred to throughout the semester, we have placed it after the text chapters. And for those courses that do not utilize cases, the book may be used without reference to this section. Financial Analysis for Marketing Decisions It is absolutely critical for marketing students to understand and appreciate the fact that the ultimate objectives of marketing are usually expressed in financial terms. Section III enables students to assess a company’s financial position. It presents important financial calculations that are useful in evaluating the financial position of a firm and the financial impact of various decisions and strategies. Included are discussions of breakeven analysis, net present value, and ratio analysis. Developing Marketing Plans Given the purpose of this book and the needs of users, Section IV enables students to develop practical planning skills so they are able to construct a quality marketing plan for pet6106x_fm_i-xviii.indd xpet6106x_fm_i-xviii.indd x 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to printer Preface xi any product or service. It provides a complete format for structuring and presenting one, including specific questions to ask in competitive analysis, the development of well-stated objectives, analyzing customers, and implementation and control. As with Section II, we know that this section has become a valuable take-away resource for many students long after their course has been completed. A Value-Added Website We encourage students to view the student section of the Online Learning Center (OLC) at website www.mhhe.com/peterdonnelly14e, which contains a number of useful aids for facilitating learning and supporting student achievement. We believe you will find it a useful resource. INSTRUCTOR SUPPORT The Preface has been used as a resource in college courses and professional development programs that require an overview of the critical “need-to-know” aspects of marketing management and marketing strategy development. It has been used: • As the primary introductory text at the undergraduate level. • At both the undergraduate and MBA level, where several AACSB core curriculum courses are team-taught as one multidisciplinary 9- to 12-hour course. • At the advanced undergraduate and MBA level where it is used as the content founda- tion in courses that utilize marketing cases. • In short courses and executive development programs. The instructor section of www.mhhe.com/peterdonnelly14e includes an instructor’s manual and other support material. It includes two expanded supplements. They were developed in response to instructors’ requests. We offer a test bank of nearly 1,300 multiple-choice, true-false, and brief essay questions. It is available in both print and EZ Test Online. We also offer Power Point slides that highlight key text material. Your McGraw-Hill representative can also assist in the delivery of any additional instructor support material. pet6106x_fm_i-xviii.indd xipet6106x_fm_i-xviii.indd xi 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to printer xii Acknowledgments Our book is based on the works of many academic researchers and marketing practitioners. We want to thank those individuals who contributed their ideas to develop the field of mar- keting throughout the years. Indeed, our book would not be possible without their contri- butions. We would also like to thank our teachers, colleagues, and students for their many contributions to our education. We would also like to publicly acknowledge those individu- als who served as reviewers of this and previous editions. We appreciate their advice and counsel and have done our best to reflect their insightful comments. Roger D. Absmire Sam Houston State University Anna Andriasova University of Maryland University College Catherine Axinn Syracuse University Mike Ballif University of Utah Andrew Bergstein Pennsylvania State University Edward Bond Bradley University Donald Brady Millersville University Tim Carlson Judson University Glenn Chappell Meridith College Newell Chiesl Indiana State University Reid P. Claxton East Carolina University Larry Crowson University of Central Florida Mike Dailey University of Texas, Arlington Linda M. Delene Western Michigan University Gerard DiBartolo Salisbury University Casey Donoho Northern Arizona University James A. Eckert Western Michigan University Matthew Elbeck Troy University Dothan Karen A. Evans Herkimer County Community College R. E. Evans University of Oklahoma Lawrence Feick University of Pittsburgh Robert Finney California State University, Hayward Stephen Goldberg Fordham University David Good Grand Valley State University David Griffith University of Oklahoma Perry Haan Tiffin University Lawrence Hamer DePaul University Harry Harmon Central Missouri Jack Healey Golden State University Betty Jean Hebel Madonna University Catherine Holderness University of North Carolina–Greensboro JoAnne S. Hooper Western Carolina University David Horne Wayne State University Nasim Z. Hosein Northwood University Nicole Howatt UCF Fred Hughes Faulkner University Anupam Jaju GMU Chris Joiner George Mason University pet6106x_fm_i-xviii.indd xiipet6106x_fm_i-xviii.indd xii 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to printer Benoy Joseph Cleveland State University Sol Klein Northeastern University Robert Brock Lawes Chaminade University of Honolulu Eunkyu Lee Syracuse University Tina Lowrey University of Texas at San Antonio Franklyn Manu Morgan State University Edward J. Mayo Western Michigan University Edward M. Mazze University of Rhode Island Donald J. Messmer College of William & Mary Albert Milhomme Texas State University Chip Miller Drake University David L. Moore LeMoyne College Johannah Jones Nolan University of Alabama, Birmingham R. Stephen Parker Southwest Missouri State University Joan Phillips University of Notre Dame Thomas Powers University of Alabama at Birmingham Debu Purohit Duke University John Rayburn University of Tennessee Martha Reeves Duke Gary K. Rhoads Brigham Young University Lee Richardson University of Baltimore Henry Rodkin DePaul University Ritesh Saini George Mason University Matthew H. Sauber Eastern Michigan University Alan Sawyer University of Florida Ronald L. Schill Brigham Young University Mark Spriggs University of St. Thomas Vernon R. Stauble California State Polytechnic University David X. Swenson College of St. Scholastica Ann Marie Thompson Northern Illinois University John R. Thompson Memphis State University Gordon Urquhart Cornell College Sean Valentine University of Wyoming Ana Valenzuela Baruch College, CUNY Stacy Vollmers University of St. Thomas Jacquelyn Warwick Andrews University Kevin Webb Drexel University Kathleen R. Whitney Central Michigan University J. B. Wilkinson University of Akron Dale Wilson Michigan State University It is always easy to work with professionals. That is why working with the profession- als at McGraw-Hill is always enjoyable for us. Sankha Basu, publisher, and Jane Mohr, project manager, support what we do and we are very grateful. Thank you Heather Darr, development editor, and welcome to our team. We also wish to acknowledge Francois Ortalo-Magne, dean of the School of Business at the University of Wisconsin, and David Blackwell, dean of the Gatton College of Business and Economics at the University of Kentucky, who support what we do. J. Paul Peter James H. Donnelly, Jr. pet6106x_fm_i-xviii.indd xiiipet6106x_fm_i-xviii.indd xiii 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to printer xiv Contents SECTION I ESSENTIALS OF MARKETING MANAGEMENT 1 PART A INTRODUCTION 3 Chapter 1 Strategic Planning and the Marketing Man- agement Process 4 The Marketing Concept 4 What Is Marketing? 5 What Is Strategic Planning? 6 Strategic Planning and Marketing Management 6 The Strategic Planning Process 7 The Complete Strategic Plan 16 The Marketing Management Process 16 Situation Analysis 16 Marketing Planning 19 Implementation and Control of the Marketing Plan 20 Marketing Information Systems and Marketing Research 21 The Strategic Plan, the Marketing Plan, and Other Functional Area Plans 21 Marketing’s Role in Cross-Functional Strategic Planning 21 Summary 22 Appendix Portfolio Models 27 PART B MARKETING INFORMATION, RESEARCH, AND UNDERSTANDING THE TARGET MARKET 31 Chapter 2 Marketing Research: Process and Systems for Decision Making 32 The Role of Marketing Research 32 The Marketing Research Process 33 Purpose of the Research 33 Plan of the Research 34 Performance of the Research 37 Processing of Research Data 39 Preparation of the Research Report 40 Limitations of the Research Process 40 Marketing Information Systems 42 Summary 43 Chapter 3 Consumer Behavior 45 Social Influences on Consumer Decision Making 46 Culture and Subculture 46 Social Class 47 Reference Groups and Families 48 Marketing Influences on Consumer Decision Making 48 Product Influences 48 Price Influences 48 Promotion Influences 49 Place Influences 49 Situational Influences on Consumer Decision Making 51 Psychological Influences on Consumer Decision Making 51 Product Knowledge 51 Product Involvement 52 Consumer Decision Making 52 Need Recognition 53 Alternative Search 54 Alternative Evaluation 55 Purchase Decision 55 Postpurchase Evaluation 56 Summary 58 Chapter 4 Business, Government, and Institutional Buying 60 Categories of Organizational Buyers 60 Producers 60 Intermediaries 61 Government Agencies 61 Other Institutions 61 The Organizational Buying Process 61 Purchase-Type Influences on Organizational Buying 62 Straight Rebuy 62 Modified Rebuy 62 New Task Purchase 62 pet6106x_fm_i-xviii.indd xivpet6106x_fm_i-xviii.indd xiv 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to printer Contents xv Structural Influences on Organizational Buying 63 Purchasing Roles 63 Organization-Specific Factors 64 Purchasing Policies and Procedures 65 Behavioral Influences on Organizational Buying 65 Personal Motivations 65 Role Perceptions 66 Stages in the Organizational Buying Process 68 Organizational Need 68 Vendor Analysis 68 Purchase Activities 69 Postpurchase Evaluation 70 Summary 70 Chapter 5 Market Segmentation 72 Delineate the Firm’s Current Situation 72 Determine Consumer Needs and Wants 73 Divide Markets on Relevant Dimensions 73 A Priori versus Post Hoc Segmentation 74 Relevance of Segmentation Dimensions 75 Bases for Segmentation 75 Develop Product Positioning 81 Decide Segmentation Strategy 82 Design Marketing Mix Strategy 84 Summary 84 PART C THE MARKETING MIX 85 Chapter 6 Product and Brand Strategy 86 Basic Issues in Product Management 86 Product Definition 86 Product Classification 87 Product Quality and Value 88 Product Mix and Product Line 89 Branding and Brand Equity 90 Packaging 96 Product Life Cycle 97 Product Adoption and Diffusion 99 The Product Audit 100 Deletions 100 Product Improvement 101 Organizing for Product Management 101 Summary 103 Chapter 7 New Product Planning and Development 105 New Product Strategy 106 New Product Planning and Development Process 108 Idea Generation 108 Idea Screening 110 Project Planning 111 Product Development 112 Test Marketing 112 Commercialization 113 The Importance of Time 113 Some Important New Product Decisions 114 Quality Level 114 Product Features 115 Product Design 116 Product Safety 116 Causes of New …