CARL McDANIELDepartment of Marketing

University of Texas at Arlington

CHARLES W. LAMBMJ. Neeley School of Business

Texas Christian University

JOSEPH F. HAIR, JR.Department of MarketingKennesaw State University

'% SOUTH-WESTERNi c? CENGAGE Learning-

Australia • Brazil 'Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States

The World of Marketing 1

AN OVERVIEW OF MARKETING 2

What Is Marketing? 3

Marketing Management Philosophies 4Production Orientation 4

Sales Orientation 4

Market Orientation 5

Societal Marketing Orientation 6Differences between Sales andMarket Orientations 7

The Organization's Focus 7

The Firm's Business 11

Those to Whom the Product is Directed 12

The Finn's Primary Goal 13

Tools the Organization Uses to Achieve Its Goals 14

A Word of Caution 14

Why Study Marketing? 14

Marketing Plays an Important Role in Society 15

Marketing Is Important to Business 15

Marketing Offers Outstanding Career Opportunities 15

Marketing Affects Your Life Every Day 15

Review and Applications 16 • Exercises 18 •Case Study 20 • Company Clips 21 •Career Appendix 22

STRATEGIC PLANNING FOR COMPETITIVEADVANTAGE 34

The Nature of Strategic Planning 35What Is a Marketing Plan? 36

Writing the Marketing Plan 37

Defining the Business Mission 37Conducting a Situation Analysis 38Setting Marketing Plan Objectives 39Competitive Advantage 40

Cost Competitive Advantage 40

Product/Service Differentiation Competitive Advantage 41

Niche Competitive Advantage 42

Building Sustainable Competitive Advantage 42

Strategic Directions 43

Strategic Alternatives 43

Selecting a Strategic Alternative 44

Describing the Target Market 46

Target Market Strategy 46

The Marketing Mix 47

Product Strategies 47

Place (Distribution) Strategies 48

Promotion Strategies 48

Pricing Strategies 48

Following Up on the Marketing Plan 48

Implementation 48

Evaluation and Control 49

Effective Strategic Planning 50

Review and Applications 51 • Exercises 54 •Case Study 55 • Company Clips 57 •Marketing Plan Outline: Appendix I 58 •The E-Motion Software Marketing Plan:Appendix II 63

ETHICS AND SOCIAL RESPONSIBILITY 72

Determinants of a Civil Society 73The Concept of Ethical Behavior 74

Ethical Theories 75

Ethical Behavior in Business 78Morality and Business Ethics 78

Ethical Decision Making 79

Ethical Guidelmes and Training 80

Cultural Differences in Ethics 84

Ethical Dilemmas Related toDeveloping Countries 85

Corporate Social Responsibility 86Stakeholders.and Social Responsibility 87

Arguments against and for CorporateSocial Responsibility (CSR) 88

Arguments Against CSR 88

Arguments for Social Responsibility 88

Growth of Social Responsibility 89

The Cost of Ignoring Social Responsibilities 93

Green Marketing 94

Cause-Related Marketing 94Cause-Related Marketing Controversy 95

Review and Applications 96 • Exercises 98Case Study 99 • Company Clips 101

THE MARKETING ENVIRONMENT 102

The External Marketing Environment 103Understanding the External Environment 103

Environmental Management 105

Social Factors 105American Values 105

Personality Traits Vary by Region 106

The Growth of Component Lifestyles 106

The Changing Role of Familiesand Working Women 107

There Is Never Enough Time 107

Demographic Factors 109Population 109

Tweens 110

Teem 110

Generation Y 111

Generation X 112

Baby Boomers—America's Mass Market 113

Growing Ethnic Markets 1 15Marketing to Hispanic Americans 115

Marketing to African Americans 117

Marketing to Asian Americans 118

Ethnic and Cultural Diversity 121

Economic Factors 121Consumers'Incomes 121

Purchasing Power 122

Inflation 122

Recession 123

Technological Factors 1 24Research 125

Global Innovation 125

Innovation Carries to the Bottom Line 126

Political and Legal Factors 127Federal Legislation 128

State Laws 129

Regulatory Agencies 130

The Battle Over Consumer Privacy 130

Competitive Factors . 1 33Competition for Market Share and Profits 133

Global Competition 133

Review and Applications 135 • Exercises 137 •Case Study 139 • Company Clips 140

DEVELOPING A GLOBAL VISION 142

Rewards of Global Marketing 143Importance of Global Marketing to theUnited States 144

• The Fear of Trade and Globalization 145

Benefits of Globalization 146

Multinational Firms 147Blocking Foreign Investment 148

Global Marketing Standardization 148External Environment FacingGlobal Marketers 150

Culture 150

Economic and Technological Development 152

Doing Business in China and India 152

Political Structure and Actions 153

Legal Considerations 154

Uruguay Round, the Failed Doha Round, and BilateralAgreements 155

North American Free Trade Agreement 156

Central America Free Trade Agreement 157

European Union 158

The World Bank and International Monetary Fund 160

Demographic Makeup 160

Natural Resources 161

Global Marketing by the Individual Firm 161Exporting 162

Licensing and Franchising 164

Contract Manufacturing 165

]oint Venture 166

Direct Investment 167

The Global Marketing Mix 168Product and Promotion 169

One Product, One Message 169

Product Invention 171

Product Adaptation 172

Promotion Adaptation 173

Place (Distribution) 174

Pricing 175 •

Exchange Rates 176

Dumping 176

Countertrade 177

The Impact of the Internet 177Review and Applications 1 80 • ExercisesCase Study 1 83 • Company Clips 1 85

182

Analyzing Marketing Opportunities 187

CONSUMER DECISION MAKING 188

The Importance of UnderstandingConsumer Behavior 1 89The Consumer Decision-Making Process 1 89

Need Recognition 190

Information Search 191

Evaluation of Alternatives and Purchase 193

Postpurchase Behavior 195Types of Consumer Buying Decisions andConsumer Involvement 197

Factors Determining the Level of ConsumerInvolvement 198

Marketing Implications of Involvement 199Factors Influencing Consumer BuyingDecisions 199Cultural Influences on ConsumerBuying Decisions 200

Culture and Values 200

Understanding Cultural Differences 202

Subculture 203

Social Class 204

Social Influences on Consumer BuyingDecisions 207

Reference Groups 207

Opinion Leaders 208

Family 210

Individual Influences on ConsumerBuying Decisions 21 1

Gender 212

Age and Family Life-Cycle Stage 212

Personality, Self-Concept, and Lifestyle 214Psychological Influences on Consumer BuyingDecisions 215

Perception 215

Motivation 218

Learning 219

Beliefs and Attitudes 220

Review and Applications 224 • Exercises 226Case Study 227 • Company Clips 229

BUSINESS MARKETING 230

What Is Business Marketing? 231Business Marketing on the Internet 232

Measuring Online Success 233

Trends in B2B Internet Marketing 233Relationship Marketing andStrategic Alliances 234

Strategic Alliances 235

Relationships in Other Cultures 236Major Categories of BusinessCustomers 237

Producers 237

Resellers 237

Governments 238

Institutions 239

The North American Industry ClassificationSystem 239Business versus Consumer Markets 241

Demand 241 —

Purchase Volume 242

Number of Customers 242

Location of Buyers 242

Distribution Structure 242

Nature of Buying 242

Nature of Buying Influence 243

Type of Negotiations 243

Use of Reciprocity 243

Use of Leasing 243

Primary Promotional Method 244

oU VI

Types of Business Products 244Major Equipment 244 •

Accessory Equipment 244

Raw Materials 244

Component Parts 244

Processed Materials 245

Supplies 245

Business Services 246

Business Buying Behavior 246

Buying Centers 246

Evaluative Criteria 248

Buying Situations 248

Business Ethics 249

Customer Service 249

Review and Applications 251 • Exercises 253Case Study 255 • Company Clips 256

SEGMENTING AND TARGETINGMARKETS 258

Market Segmentation 259The Importance of Market Segmentation 260Criteria for Successful Segmentation 261Bases for Segmenting Consumer Markets 262

Geographic Segmentation 262

Demographic Segmentation 263

Psychographic Segmentation 269 .

Benefit Segmentation 270

Usage-Rate Segmentation 271

Bases for Segmenting Business Markets 271

Company Characteristics 271

Buying Processes 272

Steps in Segmenting a Market 272Strategies for Selecting Target Markets 274

Undifferentiated Targeting 274

Concentrated Targeting 275

Multisegment Targeting 277

One-to-One Marketing 278

Positioning 279

Perceptual Mapping 280

Positioning Bases 280

Repositioning 281

Review and Applications 283 • Exercises 285Case Study 286 • Company Clips 288

DECISION SUPPORT SYSTEMS ANDMARKETING RESEARCH 290

Marketing Decision Support Systems 291

The Role of Marketing Research 292

Management Uses of Marketing Research 292

Understanding the Ever-Changing Marketplace 295

Steps in a Marketing Research Project 296

Secondary Data 297

The New Age of Secondary Information: The Internet 298

Marketing Research Aggregators 299

Planning the Research Design and GatheringPrimary Data 299

Survey Research 300

Questionnaire Design 303

Observation Research 305

Ethnographic Research 306

Observation Research and Virtual Shopping 307

Experiments 308

Specifying the Sampling Procedures 308

Collecting the Data 310

Analyzing the Data 310

Preparing and Presenting the Report 312

Following Up 312

The Profound Impact of the Internet on MarketingResearch 31 3

Advantages of Internet Surveys 313

Uses of the Internet by Marketing Researchers 314

Methods of Conducting Online Surveys 314

Online Panel Providers 314

Online Focus Groups 315

Web Community Research 317

The Role of Consumer Generated Media in MarketingResearch 318

Behavioral Targeting 319

Other Uses of the Internet by Marketing Researchers 320

Scanner-Based Research 320

When Should Marketing Research Be Conducted? 321

Competitive Intelligence 321

Sources of Competitive Intelligence 322

Review and Applications 324 • Exercises 327 •Case Study 328 • Company Clips 330

oo

PAtf 3Product and Distribution Decisions 331

g PRODUCT CONCEPTS 332

What Is a Product? 333

Types of Consumer Products 333Convenience Products 334

Shopping Products 334

Specialty Products 335

Unsought Products 335

The Importance of Services 335How Services Differ From Goods 336

Intangibility 336

Inseparability 336

Heterogeneity 337

Perishability 337

Product Items, Lines, and Mixes 337

Adjustments to Product Items, Lines, and Mixes 339

Branding 341Benefits of Branding 341

Branding Strategies 342

Trademarks 345

Packaging 346Packaging Functions 346

Labeling 348

Universal Product Codes 349

Global Issues in Branding and Packaging 349

Branding 349

Packaging 350

Product Warranties 350Review and Applications 353 • Exercises 355Case Study 357 • Company Clips 358

"jl DEVELOPING AND MANAGINGPRODUCTS 360

The Importance of New Products 361Categories of New Products 361

The New-Product Development Process 363

New-Product Strategy 364

Idea Generation 365

Idea Screening 366

Business Analysis 367

Development 367

Test Marketing 368

Commercialization 370

Why Some Products Succeed and Others Fail 370

Global Issues in New-Product Development 372The Spread of New Products 373

Diffusion of Innovation 373

Product Characteristics and the Rate of Adoption 375

Marketing Implications of the Adoption Process 375

Product Life Cycles 376Introductory Stage 377

Growth Stage 378

Maturity Stage 378

Decline Stage 379

Implications for Marketing Management 379

Review and Applications 382 • Exercises 383Case Study 385 • Company Clips 386

1j % MARKETING CHANNELS AND SUPPLYCHAIN MANAGEMENT 388

Marketing Channels 389Providing Specialization and Division of Labor 389

Overcoming Discrepancies 390

Providing Contact Efficiency 391

Channel Intermediaries and Their Functions 392

Channel Functions Performed by Intermediaries 393

Channel Structures 395Channels for Consumer Products 395

Channels for Business and Industrial Products 396

Alternative Channel Arrangements 397

Supply Chains and Supply ChainManagement 399

Benefits of Supply Chain Management 401Making Channel Strategy Decisions 401

Factors Affecting Channel Choice 401

Levels of Distribution Intensity 402

Types of Channel Relationships 405Channel Relationship Types 405

The Logistics Function in the Supply Chain 406Sourcing and Procurement 407

Order Processing 407

Inventory Management and Control 408

Warehousing and Materials-Handling 409

Transportation 410

Trends in Supply Chain Management 41 1

Global Supply Chain Management 412

Advanced Computer Technology 412

Outsourcing Logistics Functions 413

Electronic Distribution 414

Supply Chain Security 415

Green Supply Chain Management 415

Managing Channel Relationships 416

Channel Power, Control, and Leadership 416

Channel Conflict 416

Channel Partnering 418

Channels and Distribution Decisions for GlobalMarkets 419

Developing Global Marketing Channels 419Channels and Distribution Decisionsfor Services 421

Review and Applications 424 • Exercises 428 •Case Study 429 • Company Clips 431

g RETAILING 432

The Role of Retailing 433Classification of Retail Operations 433

Ownership 434

Level of Service 435

Product Assortment 435

Price 435

Major Types of Retail Operations 435Department Stores 436

Specialty Stores 436

Supermarkets 436

Drugstores 437

Convenience Stores 438

Discount Stores 438

Restaurants 441

Nonstore Retailing 442

Automatic Vending 442

Direct Retailing 442

Direct Marketing 443

Electronic Retailing 444

Franchising 446

Retail Marketing Strategy 449

Defining a Target Market 449

Choosing the Retailing Mix 450

New Developments in Retailing 458

Interactivity 458

M-Commerce 458

Pop-Up Shops 459

Review and Applications 462 • Exercises 464Case Study 466 • Company Clips 467

n

Promotion and Pricing Decisions 469

MARKETING COMMUNICATIONS

AND ADVERTISING 470

The Role of Promotion in the Marketing Mix 471Marketing Communication 472

The Communication Process 473

The Impact of Web 2.0 on MarketingCommunication 475

The Goals of Promotion 478

Informing 478

Persuading 478

Reminding 479

The Promotional Mix 479

Advertising 479

Public Relations 480

Personal Selling 480

Sales Promotion 481

The Communication Process and the Promotional Mix 481

Promotional Goals and the AIDA Concept 482

Integrated Marketing Communications 484

Factors Affecting the Promotional Mix 485Nature of the Product 486

Stages in the Product Life Cycle 486

Target Market Characteristics 487

Type of Buying Decision 488

Available Funds 488

Push and Pull Strategies 489

The Effects of Advertising 490

Advertising and Market Share 49 J

The Effects of Advertising on Consumers 49 J

Major Types of Advertising 493

Institutional Advertising 493

Product Advertising 494

Creative Decisions in Advertising 496

Identifying Product Benefits 497

Developing and Evaluating Advertising Appeals 497

Executing the Message 498

Post-Campaign Evaluation 501

Media Decisions in Advertising 501

Media Types 502

Media Selection Considerations 508

Media Scheduling 510

Review and Applications 5 1 4 * Exercises 51 8Case Study 521 • Company Clips 522

£§ PUBLIC RELATIONS, SALES PROMOTION,AND PERSONAL SELLING 524

Public Relations 525Major Public Relations Tools 526

Managing Unfavorable Publicity 529

Sales Promotion 530The Objectives of Sales Promotion 530

Tools for Consumer Sales Promotion 532Coupons and Rebates 532

Premiums 534

Loyalty Marketing Programs 534

Contests and Sweepstakes 536

Sampling 536

Point-of-Purchase Promotion 537

Online Sales Promotion 537

Tools for Trade Sales Promotion 539Personal Selling 540Relationship Selling 542Steps in the Selling Process 543

Generating Leads 544

Qualifying Leads 545

Approaching the Customer and Probing Needs 546

Developing and Proposing Solutions 546

Handling Objections 547'

Closing the Sale 548

Following Up 548

Review and Applications 550 • Exercises 554 •Case Study 555 • Company Clips 556

Pricing Objectives 561

Profit-Oriented Pricing Objectives 561

Sales-Oriented Pricing Objectives 562

Status Quo Pricing Objectives 564

The Demand Determinant of Price 564The Nature of Demand 564

How Demand and Supply Establish Prices 565

Elasticity of Demand 566

The Power of Yield Management Systems andTargeting Technology 569

Behavioral Targeting Technology 570

The Cost Determinant of Price 571Markup Pricing 573

Profit Maximization Pricing 573

Break-Even Pricing 574

Other Determinants of Price 576Stages in the Product Life Cycle 576

The Competition 577

Distribution Strategy 577

The Impact of the Internet 578

Promotion Strategy 580

Guaranteed Price Matching 580

Demands of Large Customers 581

The Relationship of Price to Quality 581

How to Set a Price on a Product or Service 584Establish Pricing Goals 584

Estimate Demand, Costs, and Profits 585

Choose a Price Strategy 585

The Legality and Ethics of Price Strategy 590

Unfair Trade Practices 590

Price Fixing 590

Price Discrimination 592

Predatory Pricing 593

Review and Applications 594 • Exercises 597 •Case Study 599 • Company Clips 601

^ PRICING CONCEPTS 558

The Importance of Price 559What Is Price? 559

The Importance of Price to Marketing Managers 560

Glossary 602End notes 612Index 625