Principles of marketing - Philip Kotler, Gary Armstrong with Marc Oliver Opresnik

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Principles ofMARKETING

B2/E03940

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Principles of

MARKETING

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Marc Oliver Opresnik

St.Gallen Management Institute

DAI HQC NGAN HANG

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Preface 15

Acknowledgments 19

Part 1Defining Marketingandthe Marketing Process 22

1 Marketing: Creating Customer Value and Engagement 22

2 Company and Marketing Strategy: Partnering to Build Customer Engagement,Value, and Relationships 56

Part2UnderstandingtheMarketplaceandConsumer Value 84

3 Analyzing the Marketing Environment 84

4 Managing Marketing Information to Gain Customer Insights 7 765 Consumer Markets and Buyer Behavior 750

6 Business Markets and Business Buyer Behavior 780

Part3 Designing a Customer Value-Driven Strategy andMix 202

7 Customer Value-Driven Marketing Strategy: Creating Value for Target Customers 2028 Products, Services, and Brands: Building Customer Value 232

9 Developing New Products and Managing the Product Life Cycle 26810 Pricing: Understanding and Capturing Customer Value 294

11 Pricing Strategies: Additional Considerations 37612 Marketing Channels: Delivering Customer Value 34213 Retailing and Wholesaling 374

14 Engaging Consumers and Communicating Customer Value: Integrated MarketingCommunications Strategy 408

15 Advertising and Public Relations 43416 Personal Selling and Sales Promotion 462

17 Direct, Online, Social Media, and Mobile Marketing 492 ■

Part 4 Extending Marketing 524

18 Creating Competitive Advantage 52419 The Global Marketplace 550

20 Sustainable Marketing: Social Responsibility and Ethics 580

Appendix 1Appendix 2Appendix 3

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Marketing Defined 25 | The Marketing Process 25

Understanding the Marketplace and Customer Needs 26

Customer Needs, Wants, and Demands 26 | Market Offerings—

Products, Services, and Experiences 27 | Customer Value andSatisfaction 29 | Exchanges and Relationships 29 | Markets 29

Designing a Customer Value-Driven MarketingStrategy and Plan 30

Customer Value-Driven Marketing Strategy 30 | Preparing an

Integrated Marketing Plan and Program 34

Managing Customer Relationships and CapturingCustomer Value 34

Engaging Customers and Managing Customer

Relationships 34 | Capturing Value from Customers 39

The Changing Marketing Landscape 42

The Digital Age: Online, Mobile, and Social Media

Marketing 42 | The Growth of Not-for-Profit Marketing 45 |

Rapid Globalization 46 | Sustainable Marketing: The Call for

More Environmental and Social Responsibility 47 | So, What

Is Marketing? Pulling It All Together 47 | Developing Skills for

Your Career 49

REVIEWING AND EXTENDING THE CONCEPTS 50 | Objectives

Review 501 Key Terms 51 | Discussion Questions 51 | Critical Thinking

Exercises 51 | APPLICATIONS AND CASES 52 | Online, Mobile, and

Social Media Marketing: Fionamania 52 | Marketing Ethics: Exaggeration

and High Pressure 52 | Marketing by the Numbers: Be on the First

Page 52 | Company Case: Argos: Creating Customer Value amid

Change and Turbulence 53

chapter

2Companyand Marketing Strategy:Partneringto Build CustomerEngagement,Value,andRelationships 56

Company-Wide Strategic Planning: Defining Marketing's Role 58

Defining a Market-Oriented Mission 58 | Setting Company

Objectives and Goals 59

Designing the Business Portfolio 62

Analyzing the Current Business Portfolio 63 | The BostonConsulting Group Approach 63 | Developing Strategies for

Growth and Downsizing 65

Planning Marketing: Partnering to BuildCustomer Relationships 66

Partnering with Other Company Departments 67 | Partnering

with Others in the Marketing System 68

Marketing Strategy and the Marketing Mix 68

Customer Value-Driven Marketing Strategy 69 | Developing an

Integrated Marketing Mix 70

Managing the Marketing Effort and MarketingReturn on Investment 73

Managing the Marketing Effort 73 | Measuring and Managing

Marketing Return on Investment 77

REVIEWING AND EXTENDING THE CONCEPTS 79 | Objectives

Review 791 Key Terms 801 Discussion Questions 80 | Critical Thinking

Exercises 801 APPLICATIONS AND CASES 80 | Online, Mobile, and

Social Media Marketing: Lush UK Abandons Social Media 80 | Marketing

Ethics: Creating Value or Distracting Consumers? 81 | Marketing by the

Numbers: Facebook versus Google 81 | Company Case: Dyson: Solving

Customer Problems in Ways They Never Imagined 81

Part2: Understandingthe Marketplace andConsumerValue 84

chapter

3 Analyzing theMarketingEnvironment 84

The Microenvironment and Macroenvironment 86

The Microenvironment 86 | The Macroenvironment 90

The Demographic and Economic Environments 90

The Demographic Environment 901 The Economic Environment 97

The Natural and Technological Environments 98

The Natural Environment 981 The Technological Environment 100

The Political-Social and Cultural Environments 101

The Political and Social Environment 101 | The Cultural

Environment 105

Responding to the Marketing Environment 109

REVIEWING AND EXTENDING THE CONCEPTS 111 i Objectives

Review 111 | Key Terms 1121 Discussion Questions 1121 Critical

Thinking Exercises 112 | APPLICATIONS AND CASES 113 j Onlne.

Mobile, and Social Media Marketing: #MeToo 1131 Marketing Eth.cs:

Automatic Auto Renewals 1131 Marketing by the Numbers: An Aging

America 1131 Company Case: Square: In Re’entiess Rjrsuit cl a k ce

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10 CONTENTS

CHAPTER

4 ManagingMarketingInformationto

Gain Customer Insights 116

Marketing Information and Customer Insights 118

Marketing Information and Today’s “Big Data” 118 | Managing

Marketing Information 119

Assessing Information Needs and Developing Data 120

Assessing Marketing Information Needs 120 | Developing

Marketing Information 121

Marketing Research 123

Traditional Marketing Research in Transition 123 | Defining

the Problem and Research Objectives 124 | Developing the

Research Plan 125 | Gathering Secondary Data 126 |

Primary Data Collection 126 | Implementing the

Research Plan 136 | Interpreting and Reporting the

Findings 136

Analyzing and Using Marketing Information 136

Customer Relationship Management (CRM) 136 | Big Data,

Marketing Analytics, and Artificial Intelligence 137 | Distributing

and Using Marketing Information 138

Other Marketing Information Considerations 140

Marketing Research in Small Businesses and Nonprofit

Organizations 140 | International Marketing Research 141 |

Public Policy and Ethics in Marketing Research 142

REVIEWING AND EXTENDING THE CONCEPTS 145 | Objectives

Revew 1451 Key Terms146(Discussion Questions 146 (CriticalTr-nking Exercises 146 | APPLICATIONS AND CASES 147 (

Online, Mobile, and Sociai Mede Marketing: Creepy Data 147 |

Maketng Eth.es: WeCnat 147 | Marketing by the Numbers: What’s

four Sample? 147 jCompany Case: Bayer: Big Data for CustomerIrsghts 148

chapter

5 Consumer Markets and BuyerBehavior 150

Model of Consumer Behavior 152

Characteristics Affecting Consumer Behavior 153

Cultural Factors 153 I Social Factors 157 | Personal

Factors 160 ; Psychological Factors 162

Buying Decision Behavior and the BuyerDecision Process 167

Types of Buying Decision Behavior 167I The Buyer Decision

Process 169 i The Customer Journey 171

The Buyer Decision Process for New Products 172

Stages in the Adoption Process 172 | Individual Differences in

Innovativeness 173 | Influence of Product Characteristics on

Rate of Adoption 174

REVIEWING AND EXTENDING THE CONCEPTS 175 |

Objectives Review 175' Key Terns 176 (Discussion

Questions 176 | O'* cal Tr> Exercises 176j APPLICATIONSAND CASES 176 (Or/' h, '■Lvj<>. and Social Media Marketing:B ccver'ofa's '75 i/arketirg Ethics: Mate Yourself Feel Good 1771

Marketing by the Numbers: Evaluating Alternatives 177 | Company Case:

Kraft Heinz: Once a Taste Maker Now Struggles as Consumer Tastes

Change 178

chapter

IB Business Marketsand Business

Buyer Behavior180

Business Markets 182

Market Structure and Demand 183 | Nature of the Buying

Unit 183 | Types of Decisions and the Decision Process 184

Business Buyer Behavior 184

Major Types of Buying Situations 185 | Participants in the

Business Buying Process 186 | Major Influences on Business

Buyers 187

The Business Buyer Decision Process 189

Problem Recognition 189 | General Need Description 190 |

Product Specification 190 | Supplier Search 190 | Proposal

Solicitation 190 | Supplier Selection 191 | Order-Routine

Specification 191 | Performance Review 191

Engaging Business Buyers with Digital andSocial Marketing 192

E-procurement and Online Purchasing 192 |

Business-to-Business Digital and Social Media Marketing 192

Institutional and Government Markets 193

Institutional Markets 193 | Government Markets 195

REVIEWING AND EXTENDING THE CONCEPTS 198 | Objectives

Review 1981 Key Terms 198 ( Discussion Questions 199 (Critical

Thinking Exercises 199 | APPLICATIONS AND CASES 199 (Online,

Mobile, and Social Media Marketing: E-procurement and MobileProcurement 1991 Marketing Ethics: Big Tech for Military Activities 2001

Marketing by the Numbers: From Gaming to Public Safety 2001 Company

Case: Shopify: An E-commerce Giant That Doesn’t Sell to End Users 200

Part 3: Designing a Customer Value-DrivenStrategy and Mix 202

chapter

7 Customer Value-DrivenMarketing Strategy: Creating Valuefor

Target Customers 202

Marketing Strategy 204Market Segmentation 205

Segmenting Consumer Markets 205 | Segmenting Business

Markets 211 ( Segmenting International Markets 212 |

Requirements for Effective Segmentation 213

Market Targeting 213

Evaluating Market Segments 213 | Selecting Target Market

Segments 214

Differentiation and Positioning 221

Positioning Maps 221 | Choosing a Differentiation and

Positioning Strategy 222 | Communicating and Delivering the

Chosen Position 226

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CONTENTS 11

REVIEWING AND EXTENDING THE CONCEPTS 227 | ObjectivesReview 227 | Key Terms 2281 Discussion Questions 2281 Critical

Thinking Exercises 228 | APPLICATIONS AND CASES 228 | Online,

Mobile, and Social Media Marketing: Influence Not Accepted as

Payment 228 | Marketing Ethics: Allegiant Airlines: Value Creation or Flying

Public at Risk? 2291 Marketing by the Numbers: See the Clot, Bust the

Clot, Save a Life 229 | Company Case: 5-Hour Energy: Hours of Energy

without the Beverage 230

CHAPTER

8Products,Services,and Brands:Building Customer Value232

What Is a Product? 234

Products, Services, and Experiences 234 | Levels of Product

and Services 235 | Product and Service Classifications 236

Product and Service Decisions 239

Individual Product and Service Decisions 239 | Product Line

Decisions 245 | Product Mix Decisions 246

Services Marketing 247

The Nature and Characteristics of a Service 247 | Market

ing Strategies for Service Firms 249 | The Service Profit

Chain 249

Branding Strategy: Building Strong Brands 252

Brand Equity and Brand Value 252 | Building Strong

Brands 254 | Managing Brands 261

REVIEWING AND EXTENDING THE CONCEPTS 262 | Objectives

Review 262 | Key Terms 2631 Discussion Questions 263 | Critical

Thinking Exercises 263 | APPLICATIONS AND CASES 263| Online,

Mobile, and Social Media Marketing: Engaging Rival Brand Fans 263 |

Marketing Ethics: Cutthroat Prices 264 | Marketing by the Numbers: Diet

Coke with Fiber 264 | Company Case: MINI: Focus on the Essential—

Maximize the Experience 264

chapter

9 Developing New Productsand

Managing the Product LifeCycle268

New Product Development Strategy 270The New Product Development Process 271

Idea Generation 271 | Idea Screening 273 | Concept Development

and Testing 274 | Marketing Strategy Development 2751

Business Analysis 275 | Product Development 276 |

Test Marketing 276 | Commercialization 277 | Managing New

Product Development 278

Product Life-Cycle Strategies 281

Introduction Stage 283 | Growth Stage 283 | Maturity

Stage 285 | Decline Stage 286

Additional Product and Service Considerations 288

Product Decisions and Social Responsibility 288 | International

Product and Services Marketing 288

REVIEWING AND EXTENDING THE CONCEPTS 2891 Objectives

Review 2891 Key Terms 2901 Discussion Questions 2901 Critical

Thinking Exercises 2901 APPLICATIONS AND CASES 291| Online,

Mobile, and Social Media Marketing: Share the Robot Vacuum Love 2911Marketing Ethics: Autonomous Autos 291 | Marketing by the Numbers: Taking

It on the Road 291 | Company Case: Toyota: Developing a Million

New Product Ideas Every Year 292

CHAPTER 1

0 Pricing: Understanding and

Capturing Customer Value294

What Is Price? 296

Major Pricing Strategies 297

Customer Value-Based Pricing 297 | Cost-Based Pricing 301 |

Competition-Based Pricing 304

Other Internal and External ConsiderationsAffecting Price Decisions 306

Overall Marketing Strategy, Objectives, and Mix 306 |

Organizational Considerations 308 | The Market and

Demand 308 | The Economy 310 | Other External Factors 310

REVIEWING AND EXTENDING THE CONCEPTS 311 | Objectives

Review 311 | Key Terms 312 | Discussion Questions 312 | Critical

Thinking Exercises 312 | APPLICATIONS AND CASES 312 | Online,

Mobile, and Social Media Marketing: Sold Out 312 | Marketing

Ethics: Hidden Cities 313 | Marketing by the Numbers: Rock Bottom

Promotional Pricing 313 | Company Case: Gillette: Searching for the

Right Price in a Volatile Market 313

CHAPTER

11 Pricing Strategies:Additional

Considerations 316

New Product Pricing Strategies 318

Market-Skimming Pricing 318 | Market-Penetration

Pricing 319

Product Mix Pricing Strategies 319

Product Line Pricing 319 | Optional-Product Pricing 320 |

Captive-Product Pricing 320 | By-Product Pricing 321 |

Product Bundle Pricing 321

Price Adjustment Strategies 321

Discount and Allowance Pricing 321 | Segmented Pricing 322 |

Psychological Pricing 323 | Promotional Pricing 324 |

Geographical Pricing 325 | Dynamic and Personalized

Pricing 326 | International Pricing 327

Price Changes 330

Initiating Price Changes 330 | Responding to Price Changes 332

Public Policy and Pricing 333

Pricing within Channel Levels 335 | Pricing across Channel

Levels 335

REVIEWING AND EXTENDING THE CONCEPTS 337 | Objectives

Review 337 | Key Terms 3381 Discussicn Questions 33S j Critical

Thinking Exercises 338| APPLICATIONS AND CASES 338 [ Online.

Mobile, and Social Media Marketing: Krazy Coupon Lady 3381

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12 CONTENTS

Customers. Be Better Off? 3391 Company Case: Casper: A Pricing

Strategy That Ripped the Mattress Industry 339

CHAPTER

12 Marketing Channels:DeliveringCustomer Value342

Supply Chains and the Value DeliveryNetwork 344

The Nature and Importance of Marketing Channels 345 | How

Channel Members Add Value 346

Channel Behavior and Organization 348

Channel Behavior 348 | Vertical Marketing Systems 349 |

Horizontal Marketing Systems 351 | Multichannel Distribution

Systems 352 | Changing Channel Organization 353

Channel Design Decisions 355

Analyzing Consumer Needs 355 | Setting ChannelObjectives 356 | Identifying Major Alternatives 356 |

Types of Intermediaries 356 | Evaluating the MajorAlternatives 358 | Designing International Distribution

Channels 358

Channel Management Decisions 359

Selecting Channel Members 359 | Managing and Motivating

Channel Members 359 | Evaluating Channel Members 361 |

Public Policy and Distribution Decisions 361

Marketing Logistics and Supply Chain Management 362

Nature and Importance of Marketing Logistics 362 |

Sustainable Supply Chains 363 I Goals of the Logistics

System 364 | Major Logistics Functions 364 | Integrated

Logistics Management 367

REVIEWING AND EXTENDING THE CONCEPTS 369 I

Cc eztves Re; ew 3591 Key Terms 370 i Discussion

CLestcns 370 ■ Cstce Th nking Exercises 371 j

APPLICATIONS AND CASES 371 , Online, Mobile, and Social

’.'eo a ’.'ave* ng: Petco's Partnership with Shlpt 371 | Ma'keting Ethics:

:a. Sourcrg 37' . Market ng by the Numbers: Drinking from the

Scu'ae 371 ’Company Case: Target: A Serous Contender in the

Sarne-Sa. De .e-y Bus-ess 372

chapter

13RetailingandWholesaling374

Retailing 376

Retailing: Connecting Brands with Consumers 376 | The Shift

ing Retailing Model 377 I Types of Store Retailers 378

Omni-Channel Retailing: Blending In-Store,Online, Mobile, and Social Media Channels 383Retailer Marketing Decisions 385

Segmentation, Targeting. Differentiation, and Positioning

Decisions 3871 Product Assortment and Services Decision 388

Price Decision 3901 Promotion Decision 390 | Place

Decision 391

Retailing Trends and Developments 392

T.ghter Consumer Spending 392 j Nev/ Retail Forms,

Shortening Retail Life Cycles, and Retail Convergence 3931

The Rise of Megaretailers 394 | Growing Importance of RetailTechnology 394 | Green Retailing 395 | Global Expansion of Major

Retailers 397

Wholesaling 398

Types of Wholesalers 399 | Trends in Wholesaling 402

REVIEWING AND EXTENDING THE CONCEPTS 403 | ObjectivesReview 403 | Key Terms 404 | Discussion Questions 404 | Critical

Thinking Exercises 405 | APPLICATIONS AND CASES 405 | Online,Mobile, and Social Media Marketing: Kohl's Courts Millennials with

Merchandise Curated by Social Media Influencers 405 | Marketing

Ethics: Footloose and Tax-Free 405 | Marketing by the Numbers:

Grocery Stores Offering Meal Kits 406 | Company Case: Ulta Beauty:

Where the Experience Is Beautiful 406

chapter

14Engaging Consumers and

CommunicatingCustomer Value: IntegratedMarketing Communications Strategy 408

The Promotion Mix 410

Integrated Marketing Communications 411

The New Marketing Communications Model 411 | The Need

for Integrated Marketing Communications 414

Developing Effective Marketing Communication 416

A View of the Communication Process 416 | Steps in Developing

Effective Marketing Communication 417 | Nonpersonal

Communication Channels 421

Setting the Total Promotion Budget and Mix 422

Setting the Total Promotion Budget 422 | Shaping the Overall

Promotion Mix 423 | Integrating the Promotion Mix 426 |

Socially Responsible Marketing Communication 426

REVIEWING AND EXTENDING THE CONCEPTS 429 | Objectives

Review 429 | Key Terms 430 | Discussion Questions 430 | Critical

Thinking Exercises 4301 APPLICATIONS AND CASES 430 | Online,

Mobile, and Social Media Marketing: Spot the Difference 4301 Marketing

Ethics: Western Stereotypes! 431 | Marketing by the Numbers:

Never-Ending Cola War 431 | Company Case: Nestle: Integrating Marketing

Communication into Daily Operations 432

chapter

15Advertising and PublicRelations434

Advertising 436

Major Advertising Decisions 437

Setting Advertising Objectives 437 | Setting the Advertising

Budget 439 | Developing Advertising Strategy 441 | Evaluating

Advertising Effectiveness and the Return on Advertising

Investment 450 | Other Advertising Considerations 452

Public Relations 454

The Role and Impact of PR 455

Major Public Relations Tools 456

REVIEWING AND EXTENDING THE CONCEPTS 456 | Objectives

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Allstate: Bringing Mayhem to the Auto Insurance Advertising Wars 459

chapter

16PersonalSellingand Sales

Personal Selling 464

The Nature of Personal Selling 464 | The Role of the Sales

Force 465

Managing the Sales Force 466

Designing the Sales Force Strategy and Structure 466 |

Recruiting and Selecting Salespeople 469 | Training Sales

people 470 | Compensating Salespeople 471 | Supervising and

Motivating Salespeople 471 | Evaluating Salespeople and Sales

Force Performance 472 | Social Selling: Online, Mobile, and Social

Media Tools 473

The Personal Selling Process 476

Steps in the Selling Process 476 | Personal Selling and

Managing Customer Relationships 478

Sales Promotion 479

The Rapid Growth of Sales Promotion 480 | Sales PromotionObjectives 480 | Major Sales Promotion Tools 481 |

Developing the Sales Promotion Program 485

REVIEWING AND EXTENDING THE CONCEPTS 486 | Objectives

Review 486 | Key Terms 487 | Discussion Questions 487 | Critical

Thinking Exercises 488 | APPLICATIONS AND CASES 488 |

Online, Mobile, and Social Media Marketing: Innovation Lab at a Trade

Show 488 | Marketing Ethics: Using Pharmaceutical Sales Strategies

to Promote Cost-Effective Drugs 488 | Marketing by the Numbers: Buy

One, Get Something Free! 489 | Company Case: Procter & Gamble:

Selling through Customer Business Development 489

chapter

17 Direct, Online,SocialMedia,and Mobile Marketing 492

Direct and Digital Marketing 494

The New Direct Marketing Model 495 | Rapid Growth of Direct

and Digital Marketing 496 | Benefits of Direct and Digital Mar

keting to Buyers and Sellers 496

Forms of Direct and Digital Marketing 497Marketing in the Digital Age 498

Online Marketing 499

Social Media and Mobile Marketing 503

Social Media Marketing 503 | Mobile Marketing 508

Traditional Direct Marketing Forms 510

Direct-Mail Marketing 511 | Catalog Marketing 511

Telemarketing 512 | Direct-Response Television

Marketing 513 | Kiosk Marketing 514 | Public Policy Issues in

Direct and Digital Marketing 514

REVIEWING AND EXTENDING THE CONCEPTS 518 | ObjectivesReview 518| Key Terms 5191 Discussion Questions 5191 Critical

Thinking Exercises 520 | APPLICATIONS AND CASES 520 | Online,

Mobile, and Social Media Marketing: On the Move 5201 Marketing

Ethics: Home Hub Paranoia 5201 Marketing by the Numbers:

Uniqlo's Digital Marketing Campaigns 521 | Company Case: OfferUp: A

Mobile Solution for the Mobile Era 521

Part 4: Extending Marketing 524

chapter

18 Creating CompetitiveAdvantage 524

Competitor Analysis 526

Identifying Competitors 526 | Assessing Competitors 529

Determining Competitors’ Objectives 529 | Selecting Com

petitors to Attack and Avoid 531 | Designing a CompetitiveIntelligence System 533

Competitive Strategies 533

Approaches to Marketing Strategy 533 | Basic Competitive

Strategies 534 | Competitive Positions 537 | Market Leader

Strategies 538 | Market Challenger Strategies 540 | Market

Follower Strategies 541 | Market Nicher Strategies 542

Balancing Customer and Competitor Orientations 543

REVIEWING AND EXTENDING THE CONCEPTS 545 | Objectives

Review 545 | Key Terms 545| Discussion Questions 5461 Critical

Thinking Exercises 5461 APPLICATIONS AND CASES 5461 Online,

Mobile, and Social Media Marketing: Can Social Media Raise Awareness

of Uniqlo in the United States? 5461 Marketing Ethics: Is Ugly Produce a

True Food Waste Solution? 5471 Marketing by the Numbers: Changing

Numbers in the Smartphone Market 5471 Company Case: TikTok: A

Chinese Social Media App to Watch 547

chapter

19 The Global Marketplace550

Global Marketing Today 552

Elements of the Global Marketing Environment 554 |

Deciding Whether to Go Global 562 | Deciding Which

Markets to Enter 562

Deciding How to Enter the Market 564

Exporting 564 | Joint Venturing 564 | Direct Investment 566

Deciding on the Global Marketing Program 566

Product 568 | Promotion 569 | Price 571 | Distribution

Channels 572

Deciding on the Global Marketing Organization 573

REVIEWING AND EXTENDING THE CONCEPTS 574 | Objectives

Review 574| Key Terms 574 | Discussion Questions 5751 Crittal

Thinking Exercises 575 | APPLICATIONS AND CASES 575I

Online, Mobile, and Social Media Marketing: Tinder Is an International

Sensation 575| Marketing Ethics: Cleaning Up the Chinese

Pharmaceutical Market 575| Marketing by the Numbers: Peloton

Ftedais to the UK 5761 Company Case: Huawei: Running the Global

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14

CONTENTS

CHAPTER

20 Sustainable Marketing: Social

Responsibilityand Ethics580

Sustainable Marketing 582Social Criticisms of Marketing 584

Marketing's Impact on Individual Consumers 584 | Marketing’s

Impact on Society as a Whole 588 | Marketing’s Impact on

Other Businesses 591

Consumer Actions to Promote Sustainable Marketing 592

Consumerism 592 | Environmentalism 593 | Public Actions

to Regulate Marketing 596

Business Actions toward Sustainable Marketing 596

Sustainable Marketing Principles 597

Marketing Ethics and the Sustainable Company 600

Marketing Ethics 600 | The Sustainable Company 603

REVIEWING AND EXTENDING THE CONCEPTS 604 | Objectives

Review 604 | Key Terms 604 | Discussion Questions 605 | Critical

Thinking Exercises 605 | APPLICATIONS AND CASES 605 | Online,

Mobile, and Social Media Marketing: Politically Neutral Social Media 6051Marketing Ethics: Patagonia Rethinks Fleeces for Banker Bros 6051

Marketing by the Numbers: Gouging Their Eyes Out 606 | Company

Case: H&M: Offering Sustainable Fashion and Quality at the BestPrice 606

Appendix 1: Marketing Plan 609

Appendix 2: Marketing by the Numbers 619Appendix 3: Careers in Marketing 637

Glossary 649

Index 703

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New toThisEdition

All That’s New in Marketing

The eighteenth edition of Principles of Marketing reflects the major trends and shifting forces

that impact marketing in this digital age of customer value, engagement, and relationships.Here are just some of the major new and continuing changes you'll find in this edition.

• Customer engagement framework: This eighteenth edition continues to build on itscustomer engagement framework—creating direct and continuous customer involvementin shaping brands, brand conversations, brand experiences, brand advocacy, and brandcommunity. New coverage and fresh examples throughout the text address the latestcustomer engagement tools, practices, and developments.

• Fast-changing marketing trends and topics: This edition adds fresh coverage of both tra

ditional marketing areas and fast-changing topics such as digital, mobile, and socialmedia marketing; customer engagement marketing; the customer journey; big data, artificial intelligence, and new marketing analytics; the major digital transformation inmarketing research; omni-channel marketing and the massive shifts in today's retailing;direct-to-consumer marketing (DTC); real-time customer listening and marketing; marketing content creation and native advertising; B-to-B social media and social selling;online and dynamic pricing; sustainability; global marketing; and much more.

• Online, mobile, social media, and other digital marketing technologies: Keeping up with

digital concepts, technologies, and practices has become a top priority and major challenge for today's marketers. The eighteenth edition of Principles of Marketing providesthoroughly refreshed, up-to-date coverage of these explosive developments in everychapter—from digital, online, mobile, and social media engagement technologies inChapters 1, 5,14, 15, and 17; to "big data," new marketing analytics, the Internet ofThings, and artificial intelligence in Chapters 1,3, and 4; to the massive shift to omni-channel and digital retailing in Chapters 13 and 17; to the increasing use of augmentedand virtual reality in Chapters 4 and 13. A Chapter 1 section on The Digital Age: Online,

Mobile, and Social Media Marketing introduces the exciting new developments in digitaland social media marketing. Then a Chapter 17 section on Direct, Online, Social Media,

and Mobile Marketing digs more deeply into digital marketing tools such as online sites,social media, mobile ads and apps, online video, email, and other digital platforms thatengage consumers anywhere, anytime via their computers, smartphones, tablets, andother digital devices.

• Content marketing and marketing communications: The eighteenth edition continues to

track fast-changing developments in marketing communications and the creation ofbrand content. Marketers no longer simply create advertising and integrated marketing communications programs; they join with customers and media to curate and sharemarketing content in paid, owned, earned, and shared media. You won't find freshercoverage of these important topics in any other marketing text.

New Real-World Brand Stories, Highlights, Cases,and In-Text Examples

The eighteenth edition of Principles of Marketing is loaded with new brand stories, highlightfeatures, cases, in-text examples, and end-of-chapter exercises and features that illustratebrand strategies and contemporary marketing issues and let students apply what they'velearned.

• Chapter-opening stories, Reni Marketing highlights, and in-text examples: The eighteenth edition brings marketing to life with new or heavily revised chapter-opening vignettes,

15

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16 PREFACE

148PARTS I < -

-Company Case BayerBig Datafor Customer Insights

has transformed mfcmutcngathamginto a sng'occntnc and patent-focusedmodel.

customcr-The consumer heath and pharmaceuticals segments are

cocnoctcd to a g'obalphamuccutical montomg system that

includes safetymanagementteams and experts across ous dscplncs. To detect potential safetyconcerns carty on

van-and ident.fy changesinthe nsk-beneft pro*le.such teams mustc.atuato eternal bene'ts,safetydata ma-Xctng studes. cUvcal

frets. external databases,and soentfic pub-'xat'ons. These are

a3 entered into Beer's pharmacox-tglanco database, winch tsusedin moke! researchto test the vututy of new products and

scAtcvs based cnthe responses ctpotentialcustomers The

compart,- ts constantsmvestng in RSD-wftch generates

mtor-maton-but each product must aso comptyw.th the relevant

reguatory cnv/onmect.Diving Deeper for Insights

AtBuyer, internal data is information about customers-cur

rent and pcter.tial-cotoctcd pr.-na.-fy fromfour ma,or sources;sa’es. fnance, humanresources, and marketing.However.gainingtrade insightsfrom eachsegments canbo cha’iengng duo

tolegalreqiixmonts. cspecofy from sourcessuch as patents.

For example.to ccCeotcustomer sotstactxn data,tno companymust foo.vdftaent standa-ds for preserpt-on maicnes and

for non-prcscnpiion medoncs.

Bayer’s makct.ng actv.tss focus cn tho loca' needs cfits

customers, butthese needs canvary s.-gn.feant.’y The party’s customer-focused ma.-ktt.ng octvbes takethsintoaccount Fcr instance, workng together w.th Kansas C-ty-bosed

com-ConsumerOrtxt. Bayer combines thedata it generates w.th thofirm’s databases,resutng inatotal cf63 truon peers of data

that enable Boyerto bu-’d a modes of its customer base and

de-b.-cr talcrodmessages toits customers through the/preferred

ccmm^catons piafrerm.

Hc.-.e-.-er.customer needsmay after rnerefybecause each

country or state has is c.vnset cf rates and lows. The company

must adhere totr.-.S andregutatiansdca_ng with ma-ketng

pracxes; cabal. reg-anal. and loca' industrycodes; customer

pnvacyand pratecXn of consumerinformationanddata;and

recommendation and promoxn only cf la.-.frai uses (for instance.thereshciidbe no eff-labelpromtrenfcr medenoi products'.

Ongc-ng da'ogucs w.th customersenable the corrpar, totake

suchloca'andcountry-specX regubior,frameworks into

sc-count anddcpic, optrabten measures.

Boyer anaVccs customersotsfacxn reportsandcustomer

ccmp^nts to comparethecompany 's pcrterr-oncetn tho

tn-avOuaisegments, cpt-mpa.ts measures, and sa'egua*d itslong-term bus-ness strategy. Vanous msrketng researchtech-

nq-jes ensure accurate cfrecXns for shap-ng and redefin-ng its

mcrkcxg strategy. Fcr instance.by usngAJ-dnven dagnesteandtreatment support tor ndmduol customers n the phar-maceut.cas segmani. the campan; acceleratesthe dscover;

d npA Cugs for heart conaxns whfecombrmgprocessc.gpower wdh theUrgedata sets and ab.onced ana\t.cs o.adbe

tor marketng.-.format-tra Ths aZc.-.s E?,vtoeffer a

perscnal-UEdterrang andtreatment cs we3 as pcsoroLoed onlnemedraul

caresuft-ngthat exammea customers’ L'estyles. heatn, and det

dreetty through a -/rebate.

On June 7. 2218 Boyeracraxred IX percent cf the

out-standr-g shares cf KtcnsantoCcmpam.Bayer s strong pcut.cn

boxed features that highlight relevant companies and marketing issues, and loads of new in-text examples throughoutthat illustrate contemporary marketing practice.

• New company cases and end-of-chapter applications and exercises: The eighteenth edition provides 20 new company casesby which students can apply what they learn to actualcompany situations. End-of-chapter discussion questions,critical thinking exercises, and other applications featuresare also new and revised.

Solving Teachingand

Today’s marketing is all about creating customer value andengagement in a fast-changing, increasingly digital and socialmarketplace. Marketing starts with understanding consumerneeds and wants, determining which target markets the organization can serve best, and developing a compelling valueproposition by which the organization can attract and growvalued consumers. Then, more than just making a sale, today'smarketers want to engage customers and build deep customerrelationships that make their brands a meaningful part of consumers' conversations and lives.

In this digital age, to go along with their tried-and-true traditional marketing methods, marketers have a dazzling set ofnew online, mobile, and social media tools for engaging customers anytime, anyplace to jointly shape brand conversations,experiences, advocacy, and community. If marketers do thesethings well, they will reap the rewards in terms of market share,profits, and customer equity. In the eighteenth edition of Principles of Marketing, studentslearn how customer value and customer engagement drive every good marketing strategy.

Five Major Customer Value and Engagement Themes

The eighteenth edition of Principles of Marketing builds on five major customer value andengagement themes:

• Creating value for customers in order to capture value from customers in return. Today's

marketers must be good at creating customer value, engaging customers, and managing

customer relationships. In return, they capture value from customers in the form of sales,profits, and customer equity. This innovative customer value and engagement frameworkis introduced at the start of Chapter 1 in a unique five-step marketing process model,which details how marketing creates customer value and captures value in return. Theframework is carefully developed in the first two chapters and then fully integratedthroughout the remainder of the text.

Marketing: Engaging Customers to Create and Capture Customer Value

j Understand the

| marketplaceandi customer needsj and v/ants

Create value for customers andbuild customer relationships

Design acustomervalue-driven marketing

Construct anintegratedmarketing program

superior value

Engage customers,

build profitablerelationships, and

• FIGURE 1.1

</div>Trang 15<div class="page_container" data-page="15">

PREFACE 17

• Customer engagement and today's digital and social media. Digital and social mediahave taken today's marketing by storm, dramatically changing how companies andbrands engage consumers and how consumers connect and influence each other's brandbehaviors. The eighteenth edition thoroughly explores the exciting new digital, mobile,and social media technologies that help brands to engage customers more deeply andinteractively. It starts with two major Chapter 1 sections: Customer Engagement and Today's

Digital and Social Media and The Digital Age: Online, Mobile, and Social Media. A refreshed

Chapter 17 on Direct, Online, Social Media, and Mobile Marketing summarizes the latest

developments in digital engagement and relationship-building tools. Everywhere in between, you'll find revised and expanded coverage of the exploding use of digital andsocial marketing tools.

• Building and managing strong, value-creating brands. Well-positioned brands with strong

brand equity provide the basis upon which to build customer value and profitable customerrelationships. Today's marketers must position their brands powerfully and manage themwell to create valued brand experiences. The eighteenth edition provides a deep focus onbrands, anchored by a Chapter 8 section on Branding Strategy: Building Strong Brands.

APPENDIX 2

Marketing by the Numbers

Marketing managers are facing increased accountability (orthefinancial implications of

theiractions Thisappendix provides a basic introduction tomeasuring marketing financial performanceSuch financial analysis guidesmarketers in makingsound marketingdecisions and in assessing theoutcomes of those decisions.

CHAPTER 17 0 red, Onl.no. Social Meda and Mob.lo Marketing 521Marketing by the Numbers Uniqlo’s Digital MarketingCampaigns

Un qte is a Japanese rctal brand that has grown into a global

brand in 15 countries thanks to d;g.ta) marketing campaigns.

FounderTadasni Yamai inheritedacha.nof men’sta-lonngretaistores, so he was no stranger to fashion retaLng. Butho wanted to bnng atfordab'e. fash-onable. casual clothing

to al people,so hocreated Uniqlotn 1984to offer casualclothingforall. The philosophyof thebrand is*UN!QLOclothes are MADE FOR ALL.’ The company focuses on

itssignature innovativeclothinglaws that have names l.koHeatTcch. UV Cut. UfeWear, and AIRism. In 2007, its pioneering ’Uniqiock*v.tal marketing campaignwondozens of

advertising awards, includ-ngthe coveted GrandPrix award

at Cannes. Tho companycontinues to run d.gital marketngcampaigns,and whileawards are nice, results are better.Marketers measure all sorts ofmetrics related to digital cam

paigns. from impressionsand cLck-throughs to purchases.

Consider one ofitsmost recent digital campaigns running intheUnited States to increasebrandawareness andsales of

itsUfeWear Lno ofclothing:

Sh-ppng and handngcosts(per order)SB50

PerformanceMetricEquationCLck-through rate (CTR)

Cost per-tick (CPC)Convtnuon rubo

Cost per comersxnAvcrugo-ordcr-value (AOV)Shoppng cart abandonment rate

(CLck-throughs+ trnpresaons) x 100

Costof campaign + CLck-throughs

(Number of orders + Clck-throughs) x100

Cost of campaign + Number of ordersRevenuegenerated + Number of orders

(Abandoned shopping cart+ CLck-throughs) x 100

14Calculate the performance metrics Lstedinthe preceding table.Based on these metres, evaluate tho cam-pagn.(AACS8: Communcation. Analyte Reasoning;

17-15 Calculate thonot marketing contribution (NMC).

marketing return on sales marketngROS), and

marketingreturn oninvestment (marketng ROl).

Wasthe campagn successful’ Refer to MarketngProf.tab-ty Metrics m Appends 2:Marketng by tho

Numbers to team how to do ths analyse.(AACS8:Communcatcru ReflcctvoThmkrng. Analyte

Company Case OffertJp: A Mobile Solutionfor the MobileEra

When people thnk of buyng andscLng thngs orCno locally.most thnk automatical of Cragslat, thoclas&fed ad market

place that has domnatedthatbusnessfor tiro past two de

cades. But as tho restofthoworldhas gone mob-'e. Cragslsthas not IntactthofamLar but cluttered coTecton of Kue hyper-

Inkshas changed very lute overthoyears. Someentes suggestthat CragsLst has takenitsmonopolytorgranted.Onoindustry

observer retirs to Cragslst as Tho cockroach of tho internetago - an ugy but cftectrvo e commerceplatform thaL. emerged

untcallied from technology thfts that crippledmghttr contemporaries LkoNetscape and Y.ihoo

In tho new Landscapeof tfgtal dsrupton. eno thngseems

certain: What domnatestoday could be under threat tomorrow.That tomorrow may nicady bo tKtetor CragsLst as numerous.moreiKcr-frcndly competitors have emerged to cha'engo tho

classi'-cdad champEnter OffcrUp-a re latvcty new mobte app

tor buyingand sc-'-ngitems that istakingtho dg,ta) marketplace

by storm OtterUp is not only chaltengng Ct.ig.Lt t as tho go-to

platform by wtuh mdvduate and busnesscscel goods and

fetv-cosinlocalmarkets, it's also startingto challenge the Ikes

of eBay and even Amazonby foengits muscles beyondbed

martictboundaries.Unexpectedly. OffuUp now nvXsthe most

poputer social mtxLa app»interms of tme spent by users.

About a decode ago. as tho mob.'o deveo revolut onbeganto explode. Seattleresident Nztk Huzar wasfrustrated astriedto unload unwantedhousehold items in p-rporoten forhs soon to bo-bcm daughter's nursery. Ho ddnh havetime

to post aJthese items cnCragsLst. wtichrequred multpte

steps thatprettymuch requzed a desktop cr laptop top'eto. instead, hewent to Goed.vJ. where he always found

com-a Lno to drop donabons. With asmartphonem hs hand, herecogneed tho pctcntal tor an crLno maketpteco that mode

posting, mcn.tor.ng. and brews-ng items for sale inalocalmarket as s-mp'eas socalmeda mtcract-ons.That led toapartnership w.th trendA’can van Vcclcn and theat mate

launch ot OffcrUp m 2011.A Different Kind of Marketplace

Tho nunthng that otferentates OffcrUpfrom Cralgs-'stand otherIraa-tona! cn‘ ne marketplaceplatforms 13 that it's

Variable costsCosts Vutvary drtctfy with tho k-producton.

Total costsTho am of tho Excdand v.vubtelor any pven kvU of pnxlxton

• Measuring and managing return on marketing. Especially in uneven economictimes, marketing managers must ensurethat their marketing dollars are being wellspent. "Marketing accountability"—measuring and managing marketing return oninvestment—has now become an importantpart of strategic marketing decision making.This emphasis on marketing accountabilityis addressed in Chapter 2, in Appendix 2:

Marketing by the Numbers, and throughout

the eighteenth edition.

• Sustainable marketing around the globe. As

technological developments make the worldan increasingly smaller and more fragile place,marketers must be good at marketing theirbrands globally and in sustainable ways. Newmaterial throughout the eighteenth editionemphasizes the concepts of global marketing and sustainable marketing—meeting thepresent needs of consumers and businesseswhile also preserving or enhancing the abilityof future generations to meet their needs. Theeighteenth edition integrates global marketingand sustainability topics throughout the text. Itthen provides focused coverage on each topicin Chapters 19 and 20, respectively.

In-Text Teaching and LearningFeatures

Principles of Marketing provides a wealth of

chapter-opening, within-chapter, and ter learning features that help students to learn, link,and apply major concepts.

end-of-chap-• Integrated chapter-opening preview sections. The active and integrative chapteropening spread in each chapter starts with an Objectives Outline that provides ahelpful preview of chapter contents and learning objectives, complete with page numbers. Next, a Chapter Preview section briefly previews chapter concepts, links themwith previous chapter concepts, and introduces the chapter-opening story. Finally, a

chapter-opening vignette—an engaging, deeply developed, illustrated, and annotatedmarketing story—introduces the chapter material and sparks student interest.

</div>Trang 16<div class="page_container" data-page="16">

18 PREFACE

• Author comments and figure annotations. Throughout each chapter, author comments

ease and enhance student learning by introducing and explaining major chapter sections and figures.

• Reviewing and extending the concepts. Sections at the end of each chapter summarizekey chapter concepts and provide questions and exercises by which students can review

and apply what they've learned. The Objectives Review section reviews major chapter

concepts and links them to chapter objectives. The Key Terms section provides a helpfullisting of chapter key terms by order of appearance with page numbers that facilitateeasy reference. Discussion Questions and Critical Thinking Exercises sections help studentsto keep track of and apply what they've learned in the chapter.

• Applications and Cases. Completely revised sections at the end of each chapter pro

vide brief Online, Mobile, and Social Media Marketing; Marketing Ethics; and Marketing by

the Numbers applications cases that facilitate discussion of current issues and companysituations in areas such as mobile and social marketing, ethics, and financial marketing analysis. All-new end-of-chapter company cases in each chapter help students applymajor marketing concepts and critical thinking to real company and brand situations.

Developing Employability Skills

Real Marketing features. Each chapter contains two deeply developed Real Marketing highlight features that provide in-depth looks at real brand marketing strategies and contem-

a 1 Enhancing the Shopping Experience

tbe groirroora say. ’You know wha? frts s

too tgro.’ tner swpe you bond to fryanctrer

tent" V.'xrex;.•.smart doesn't hx-e room to

Real Marketing 132 I

CHAPTER4 Msnagrog kfa.’ketng InformationtoGxnCustomerInsights

I

Artificial Intelligence in Marketing: “A BiggerDeal Than Fire or Electricity’

Real Marketing 42

Uskcers use A! te aroess. odoress.

sff-vso.andseitocuaorocro. In tm. Alsan

hero cxsmers manage thcrVres and ther

bir/ng 3 mgrtl&e roqueting a ndatromLyflvacfroi frosebook f.’eaxr.gcrorSack) orloco Ama=n Echo's Ate*a••.tua,’ acros-

tan?Lytt'3 tdtXBOt lets you W* mecurrentlocator cf yoir tfrver along apcrore cf

theiccroe plots andcar model. Or tt myt

be G?Zs Vtoeson c^xrcamputarcom&ng

through vxt amarrod data to inearth

excorner and marketr&gTOathat he© kacero she-pen tnartorgetng. peroenxa

mar-cxemer cngogcrxrro.des-gnnewproducts. and even croftbetter adcr. real t-me.

Today's mxfucsare smart and

oe-'}/ txman.GM'sVVxoon~c kxjuaccuo.

carttfjokes, answer quettens. and *maoengs.

*nctes one oascr.tr"Googe c A can

now readipsbetter than a professoral and

can maxsr zdac gameswtnnhors. i/fTo

A canprcdct actor. on vdac two secondsbefore fl oegns. Tesla's A powers fits]mo-

■.Ore 36?-dr-.tng car*

Ccmporres ixe Amazonhare masteredA. hamexrog rtignta and rtractxxtsthat ctiTdandandand tzrre cusxrwrsAmann'sEsho b-.ngs Aaod A) magd to

next/ 50 mXsrt U.S. hemes.Ecysnd ser.mgasa.rote!tar ttXteS roxn as as.xt.ng raxe-nod apcianoK. centring mxc. keep-ng snopprgkr.ro termingtert messages.and arewerng sjcct-src cr.about any

zj^eet. Echo oraetherAl denc«.

such asGoogleHome. harebecome

voroo-acfrretad peroona) shoppngassetants.

Comparesrangng from PSGand Corox to"-500-Ffcweraare hard stwork pertact-ng

*375 to tap eflo Echo users whovoce-sf-cp

from thecomfort cf thexewn kteherroAt Amasn*s sheppngand vdao rotes.Al pcjren recemmendstoro; that help con-onesdaeda what to tary and whal to

watch,thcreacngiy.aeon wdbe ngyou thngs you ddn't e.en know you

se3-needed because fl has teamed what you IAa

and aremost nclredto buy.*cays an

ana-k/st.Amnsn a sogood at ffe thalfl's erencsnsstenng what fl cats predct.re dei-rery.*sendng consxrersstiAf theyharen't erenordered yet 3 exxmers don't want fl. treywouldjustkeep fl forfree. Aihough such da-

i-zenes may stT cea whie off. Amazon uses

such A predctxxctokeep the rgnt stock nwarehouses cr e.<en on trxxs to support itse.er-more-popular one-daycr ererone-hex

di-.-ery prsr^e

Hostsofrctaiero areempio/ngA tomprere hew they serzee andsefl to thcrcustsrere. For example, hememprs-.re-

mert r.-"_a<r Lzwre s c ewmattr<g wtn

LsweSsts-fre-foct semethrg. *Xy msdo.A powered rocc«jthat roamctcres he'pr.g

/sThe LowcBots detect custom

er: w*<omr^tfneed csostonce and cr.gagothem throrjghncn aa taxhccreensThe

A robots tipstore and extond data to ewen cu-icmer axsbons. offer s^rxro

cn-porary marketing issues. For example, studentslearn how Uniqlo tries to live up to its philosophy"Made for All"; how Netflix uses big data and advanced marketing analytics to personalize eachcustomer's experience; why Apple's products flyoff the shelves despite their premium prices; howSwyp targeted users between the ages of 15 and29 to craft a brand story; how Instagram has madeitself a win-win-win for the company, advertisers,and Instagrammers alike; how Nestle is integrating marketing communication into its operations;why store retailer Best Buy is thriving in the ageof Amazon; how Coca-Cola, long a master of massmarket advertising, has now also mastered digital,mobile, and social media marketing; and how Waitrose presents itself as part of the larger movementworking toward a more sustainable future. Theylearn that artificial intelligence in marketing is now"a bigger deal than fire and electricity," how companies are increasingly using augmented and virtualreality to enhance consumer shopping experiences,and how mobile marketing engages consumers inthe moments that matter. No other text brings marketing to life like the eighteenth edition of Principlesof Marketing.

Marketing Plan appendix. Appendix 1 contains a

detailed sample marketing plan that helps studentsto apply important marketing planning concepts.

Marketing by the Numbers appendix. An in

novative and freshly revised Appendix 2 provides

students with a comprehensive introduction to themarketing financial analysis that helps guide, assess, and support marketing decisions. A new orrevised exercise at the end of each text chapter letsstudents apply analytical and financial thinking tothat chapter's concepts and links the chapter to the

Marketing by the Numbers appendix.

Careers in Marketing. Appendix 3 helps students to explore marketing career paths and laysout a process for landing a marketing job that best matches their special skills and interests.

For more information and resources, visit www.pearsonglobaleditions.com

</div>Trang 17<div class="page_container" data-page="17">

No book is the work only of its authors. We greatly appreciate the valuable contributionsof several people who helped make this new edition possible. As always, we owe extraspecial thanks to Keri Jean Miksza for her dedicated and valuable contributions to all phases of the project and to her husband Pete and daughters Lucy and Mary for all the supportthey provide Keri during this very absorbing project.

We owe substantial thanks to Andy Norman of Drake University for his skillful helpin developing chapter vignettes and highlights, company cases, and the marketing planappendix. This and many previous editions have benefited greatly from Andy's assistance.We also thank Christy Ashley of the University of Rhode Island for her dedicated efforts inpreparing end-of-chapter materials and Laurie Babin for her updates to the Marketing bythe Numbers assignments at the end of each chapter and the Marketing by the NumbersAppendix. Additional thanks go to those who worked to update the Instructor's Manual,PowerPoints, Test Bank, and MyLab Marketing. All of these contributors are greatly appreciated in making the eighteenth edition of Principles of Marketing a robust teaching andlearning system.

Many reviewers at other colleges and universities provided valuable comments andsuggestions for this and previous editions. We are indebted to the following colleagues fortheir thoughtful input: Timothy W. Aurand, Northern Illinois University; Aysen Bakir, IllinoisState University; Leta Beard, University of Washington; Thomas C. Hewett, Kennesaw StateUniversity; Robert M. McMillen, James Madison University; Carlton O'Neal, University of San

Diego; Rebecca Reczek, The Ohio State University; Sandra Robertson, Thomas Nelson Com

munity College; Emily Rosenzweig, Tulane University; Professor Carol Rowey, CommunityCollege of Rhode Island; and Aninda Shome, University of Idaho.

We also owe a great deal to the people at Pearson Education who helped develop thisbook. Content Strategy Manager Lynn Huddon provided guidance and support during therevision. Content Producer Yasmita Hota provided valuable assistance and advice in guiding this complex revision project through development, design, and production. We'd alsolike to thank Director of Content Strategy Lacey Vitetta, Director of Product ManagementEllen Geary, Product Manager Krista Mastroianni, Managing Producer Melissa Feimer, andSenior Product Marketer Nayke Heine for their able assistance along the way. We are proudto be associated with the fine professionals at Pearson. We also owe a mighty debt of gratitude to Senior Project Manager Allison Campbell, Design Manager Emily Friel, and the restof the team at Integra for their fine work on this edition.

Finally, we owe many thanks to our families for all of their support and encouragementalong the way—Kathy, Betty, Mandy, Matt, KC, Keri, Delaney, Molly, Macy, and Ben fromthe Armstrong clan and Nancy, Amy, Melissa, and Jessica from the Kotler family. To them,we dedicate this book.

Philip KotlerGary Armstrong

Global Edition Acknowledgments

For their work on the Global Edition, Pearson would like to thank Ayantunji Gbadamosi,

University of East London; Muneeza Shoaib, Middlesex University Dubai; and Mariusz tanifar, Hanze University of Applied Sciences, Groningen, as well as Hanna van der Stok, HanzeUniversity of Applied Sciences, Groningen; Yong Wooi Keong; Michael Grund, University of

Sol-Applied Sciences in Business Administration Zurich; Stephen Tustain, Glion Institute of Higher

Education; and Jimmy Wong Shiang Yang, Singapore University of Social Sciences, for theirfeedback on the content.

19

</div>Trang 18<div class="page_container" data-page="18">

About theAuthors

As a team, Philip Kotler and Gary Armstrong provide a blend of skills uniquely suitedto writing an introductory marketing text. Professor Kotler is one of the world's leadingauthorities on marketing. Professor Armstrong is an award-winning teacher of undergraduate business students. Together, they make the complex world of marketing practical,approachable, and enjoyable.

Philip Kotler

is S.C. Johnson & Son Distinguished Professorof International Marketing at the Kellogg School of Management, Northwestern University. He received his master's degreeat the University of Chicago and his Ph.D. at M.I.T., both ineconomics. Dr. Kotler is the co-author of Marketing Management(Pearson), now in its fifteenth edition and the most widely usedmarketing textbook in graduate schools of business worldwide.He has authored more than 60 other successful books and haspublished more than 150 articles in leading journals. He is theonly three-time winner of the coveted Alpha Kappa Psi awardfor the best annual article in the Journal of Marketing.

Professor Kotler was named the first recipient of four major awards: the Distinguished Marketing Educator of the YearAward and the William L. Wilkie "Marketing for a Better World"Award, both given by the American Marketing Association; thePhilip Kotler Award for Excellence in Health Care Marketingpresented by the Academy for Health Care Sendees Marketing;and the Sheth Foundation Medal for Exceptional Contribution toMarketing Scholarship and Practice. He is a charter member ofthe Marketing Hall of Fame, was voted the first Leader in Marketing Thought by the American Marketing Association, and wasnamed the Founder of Modem Marketing Management in theHandbook of Management Thinking. His numerous other majorhonors include the Sales and Marketing Executives InternationalMarketing Educator of the Year Award; the European Association of Marketing Consultants and Trainers Marketing ExcellenceAward; the Charles Coolidge Parlin Marketing Research Award;and the Paul D. Converse Award, given by the American Marketing Association to honor "outstanding contributions to science inmarketing." A recent Forbes survey ranks Professor Kotler in thetop 10 of the world's most influential business thinkers. And ina recent Financial Times poll of 1,000 senior executives across theworld, Professor Kotler was ranked as the fourth "most influential business writer/guru" of the twenty-first century.

Dr. Kotler has served as chairman of the College on Marketing of the Institute of Management Sciences, a director of theAmerican Marketing Association, and a trustee of the Marketing Science Institute. He has consulted with many major U.S.and international companies in the areas of marketing strategyand planning, marketing organization, and international marketing. He has traveled and lectured extensively throughoutEurope, Asia, and South America, advising companies and governments about global marketing practices and opportunities.

Gary Armstrong

is Blackwell Distinguished ProfessorEmeritus of Undergraduate Education in the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.He holds undergraduate and master's degrees in business fromWayne State University in Detroit, and he received his Ph.D. inmarketing from Northwestern University. Dr. Armstrong has contributed numerous articles to leading business journals. As a consultant and researcher, he has worked with many companies onmarketing research, sales management, and marketing strategy.

But Professor Armstrong's first love has always been teaching. His long-held Blackwell Distinguished Professorship isthe only permanent endowed professorship for distinguishedundergraduate teaching at the University of North Carolina atChapel Hill. He has been very active in the teaching and administration of Kenan-Flagler's undergraduate program. Hisadministrative posts have included Chair of Marketing, Associate Director of the Undergraduate Business Program, Directorof the Business Honors Program, and many others. Through theyears, he has worked closely with business student groups andhas received several UNC campuswide and Business Schoolteaching awards. He is the only repeat recipient of the school'shighly regarded Award for Excellence in Undergraduate Teaching, w'hich he received three times. Most recently, ProfessorArmstrong received the UNC Board of Governors Award forExcellence in Teaching, the highest teaching honor bestowed bythe 16-campus University of North Carolina system.

Marc Oliver Opresnik

is a Professor of Marketing and Management and Member of the Board of Directors at SGMI St. GallenManagement Institute, a leading international business school. Inaddition, he is Professor of Business Administration at the Tech-nische Hochschule Lubeck as well as a visiting professor to international universities such as the Judge Business School of the University of Cambridge, Regent's University London, and the EastChina University of Science and Technology (ECUST) in Shanghai.He has 10 years of experience working in senior management andmarketing positions for Shell International Petroleum Co. Ltd.

Dr. Opresnik is the author of numerous articles and books.Along with Kevin Keller and Phil Kotler, he is co-author of theGerman edition of Marketing Management, the "Bible of Marketing." In addition, he is co-editor and member of the editorialboard of several international journals such as Transnational Mar

keting Journal, International Journal of New Technologies in Scienceand Engineering, and International Journal of Management & SocialSciences.

In March 2014, he was appointed Chief Research Officerat Kotler Impact Inc., the internationally operating companyof Phil Kotler. In addition, he was appointed chief executiveofficer of the Kotler Business Programme, an initiative toenhance marketing education worldwide via online and offlinelearning with Pearson as global educational partner.

As president of his consulting firm Opresnik ManagementConsulting, he works for numerous institutions, governmentsand international corporations, including Google, Coca-Cola, McDonald's, SAP, Shell International Petroleum Co. Ltd.,Procter & Gamble, Unilever, L'Oreal, Bayer, BASF, and adidas.More than a quarter of a million people have benefited professionally and personally from his insights and learned from himwhen he served as a coach in seminars on marketing, sales andnegotiation, and as a speaker at conferences all over the world,including locations such as St. Gallen, Berlin, Houston, Moscow, Kuala Lumpur, London, Paris, Dubai, and Tokyo.

</div>Trang 19<div class="page_container" data-page="19">

MARKETING

</div>Trang 20<div class="page_container" data-page="20">

PART 1: Defining Marketing and the Marketing Process (Chapters 1-2)

OBJECTIVE 1-2 Explain the importance of understanding the marketplace and customers and identify the five

core marketplace concepts. See: Understanding the Marketplace and Customer Needs (pp 26-30)

OBJECTIVE 1-3 Identify the key elements of a customer value-driven marketing strategy and discuss the

marketing management orientations that guide marketing strategy. See: Designing a Customer Value-DrivenMarketing Strategy and Plan (pp 30-34)

OBJECTIVE 1-4 Discuss customer relationship management and identify strategies for creating value for

customers and capturing value from customers in return. See: Managing Customer Relationships andCapturing Customer Value (pp 34-42)

OBJECTIVE 1-5 Describe the major trends and forces that are changing the marketing landscape in this age of

relationships. See: The Changing Marketing Landscape (pp 42-49)

CHAPTER

Thisfirst chapter introducesyouto thebasic

PREVIEW

concepts ofmarketing. We start with thequestion:What ismarketing? Simply put, marketingis engaging customersand managing profitable customerrelationships. The aim of marketing is to create value for customers in order tocapture value from customers inreturn. Nextwediscuss the fivesteps inthe marketing process—from under

marketing strategies and integrated marketingprograms to buildingcustomer relationships and capturing value forthefirm. Finally,we discuss the major trends and forces affecting marketing in thisnew age of digital, mobile,andsocial media. Understanding these

basic concepts andforming your own ideas about what they reallymeanto youwill provide asolidfoundationfor allthat follows.

Let’sstartwitha goodstory aboutmarketingin action atEmirates, the largestinternational airline in the worldandone ofthebest-known brands on the planet. Emirates’ success resultsfrom much morethan just offering awayto connect people fromPoint A toPoint B.It'sbasedon acustomer-focusedmarketingstrategy by which Emiratescreates customervaluethroughdeepbrand-customer engagement and closebrandcommunitywithand among its customers. You’llseethisthemeof creating customer valueinorder tocapture valuein returnrepeated throughoutthis chapterandthe remainder of the text.

EMIRATES’ CUSTOMER VALUE-DRIVEN MARKETING: EngagingCustomers and Buildinga Brand Community

he Emirates Group operates across six continentsand 155 cities with a 103,363-strong team comprising over 160 nationalities. The Emirates airline,headquartered in Dubai, L’AE, was founded in 1985.The financial year ending March 31, 2016, saw the Group

achieve its 28th consecutive year of profit in a financial year.The company successfully capitalized on its location—asmall city-state strategically located to reach three-fourthsof the world population in a flight of less than eight hours—to build a fast-growing and profitable hub-based business

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CHAPTER 1 Marketing:Creating CustomerValue andEngagement 23

model, making it the fourth largest international airline inthe world.

From the outset, Emirates sought to ensure that it wouldnot only provide high-quality service but also be innovative,modern, and customer-oriented. To that end, the airline haspursued a customer-focused value proposition through a combination of products, services, and experiences, customizedfor each market at each destination. This approach has led toan array of product offerings such as its onboard Information,Communication, and Entertainment (ICE) system—an all-in-one communications device accommodating customer needssuch as surfing the Internet, emailing, or simply calling a landline while in the airplane—as well as exclusive lounges for itsclientele.

The Skywards Program, the airlines' frequent travelerloyalty program, is an important part of Emirates' successin building strong customer relationships. Through thisprogram, the first of its kind in the industry, members earnmiles using four basic inputs: route, fare type, class, and tier,and a "miles accelerator feature" offers bonus miles on specific flights, thereby boosting turnover on flights that are notfull.

Facing increased and fierce competition, Emirates haslaunched a range of customer service initiatives that supportdifferentiation, including Dubai Connect, an incentive forpremium-class passengers that offers free luxury hotel accommodation, including meals, ground transportation, and visacosts in Dubai. Another differentiating element of its customerservice is Chauffeur Drive, a service offered to customers flying first-class or business-class. Emirates chauffeurs collectcustomers from their doorstep or are present to take them totheir final destination when they land. This could be the customer's hotel, their next meeting, their favorite restaurant, oreven the course for a round of golf. This service is available inover 70 cities worldwide.

Most airlines have had to reduce their fares considerably toremain competitive. Not Emirates. The company has maintainedfares while managing healthy yields thanks to its customervalue-driven marketing approach and its service proposition,for which customers are still willing to pay a premium. Wherecompetitors emphasized low prices or well-maintained aircraft,Emirates built customer engagement and relationships. Beyondthe functional benefit of air travel, Emirates marketed its services as "The Emirates Experience," a genuine passion for comfort and attention to detail. Customers didn't just fly Emirates;they experienced it.

Connecting with customersonce required simply outspending competitors on big mediaads and celebrity endorsers whotalk at rather than to customers.In these digital times, however,Emirates is forging a new kind of

Emirates has emphasized customer engagement and relationships, andcustomers are willing to pay a premium for “The Emirates Experience."

lain Masterton/Alamy Stock Photo

customer relationship, a deeper, more personal, more engaging one. Emirates still invests in traditional advertising, butthe brand now spends an increasing amount of its marketingbudget on cutting-edge digital and social media marketingthat interacts with customers to build brand engagement andcommunity.

Emirates uses online, mobile, and social media marketingto connect with their customers. Emirates also creates brand"tribes"—large groups of highly engaged users—with the helpof social media platforms such as Facebook, Twitter, Instagram,YouTube, and Pinterest. For example, the main EmiratesFacebook page has more than 10 million likes. The EmiratesTwitter page adds another 1.17 million; the Emirates Instagrampage has 3.8 million subscribers, making it the largest in theindustry; and the company's Linkedln page has 1.1 million followers, also no. 1 in the airline business. Emirates' social mediapresence engages customers at a high level, gets them talkingwith each other about the brand, and weaves the brand intotheir daily lives through cross-media campaigns that integratedigital media with traditional tools to connect with customers.A compelling example is the company's "Hello Tomorrow"campaign. Launched in 2012 and targeted at travelers seekingnew experiences and cultures, the campaign sought to positionthe airline as a lifestyle choice that would connect people withdifferent cultures worldwide, inspiring new conversations onfood, fashion, art, and music.

Sir Maurice Flanagan, the founding CEO of Emirates andformer executive vice-chairman ofThe Emirates Group, emphasizedthat Emirates is not just offering away to connect people from Point Ato Point B but is the catalyst to connect people's dreams, hopes, andaspirations. He also stated that the

Emirates is not just offering a way toconnect people from Point A to Point Bbut aims to be the catalyst to connectpeople’s dreams, hopes, and aspirations.

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24 PART |Defining Marketing and the Marketing Process

company connects people and cultures, creating relevant andmeaningful experiences that are shaping the world.

The campaign launch featured print, TV, and digital advertising, including iconic billboards in New York's TimesSquare and Milan's central train station. Launched in over 80markets across the world, the new brand platform presentedEmirates' new mindset through communication and engagement that celebrate global travel, conveying Emirates' commitment to connecting with people and helping them realizetheir potential through travel. As it sought to reach a youngeraudience, the "Hello Tomorrow" campaign debuted withvignettes of the TV spots on Emirates' Facebook channel.Moreover, Emirates collaborated with the BBC to developa new series called Collaboration Culture, which followed 14celebrities and luminaries who collaborated across their respective fields in music, food, fashion, and art. With CNN,Emirates created Fusion Journeys, a concept that took artists tojoin fellow artists across the world to learn, teach, and evenperform with them in their own country. Finally, Emirates'created the "Inspired Culture" channel on Yahoo! Globally,

where globalistas can access recommendations, videos, andcontent, engaging with other people and drawing inspirationfrom their creations.

The new global culture reached 43 million viewers across85 countries through the BBC, CNN, and Yahoo. Awarenessof Emirates jumped from 38 percent to 69 percent amongviewers and an impressive 84 percent of viewers exposed tothe content reportedly believed Emirates was a brand thatsought to connect the world and create a "brighter future."Emirates has become the world's 4th most valuable airlinebrand, with an estimated value of $7 billion, according to the2018 Brand Finance Global 500 report; it was also the onlynon-American airline in the top five. As a result of its customer-centric approach and integrated marketing campaigns(such as the Hello Tomorrow initiative), Emirates has demonstrated commitment, authenticity, relevance, and differentiation outside the travel industry. Emirates has successfullychanged the way it reaches out to its customers by movingaway from the product and creating a discourse of globalcustomer engagement.1

TODAY’S SUCCESSFUL COMPANIES have one thing in common: Like Emirates,

they are strongly customer focused and heavily committed to marketing. These companies share a passion for satisfying customer needs in well-defined target markets. Theymotivate everyone in the organization to help build lasting customer relationships basedon creating value.

Customer relationships and value are especially important today. Facing dramatictechnological advances and deep economic, social, and environmental challenges, today'scustomers are reassessing how they engage with brands. New digital, mobile, and socialmedia developments have revolutionized how consumers shop and interact, in turn calling for new marketing strategies and tactics. It's now more important than ever to buildstrong customer engagement, relationships, and advocacy based on real and enduring customer value.

We'll discuss the exciting new challenges facing both customers and marketers later inthe chapter. But first, let's introduce the basics of marketing.

What Is Marketing?

OBJECTIVE 1-1 Define marketing and outline the steps in the marketing process.

Marketing, more than any other business function, deals with customers. Although wewill soon explore more detailed definitions of marketing, perhaps the simplest definition is this one: Marketing is engaging customers and managing profitable customerrelationships. The twofold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering value andsatisfaction.

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CHAPTER 1 Marketing: Creating Customer Valueand Engagement 25

For example, Amazon dominates the online marketplace by creating a world-class online buying experience that helps customers to "find and discover anything they mightwant to buy online." Facebook has attracted more than 2 billion monthly active web andmobile users worldwide by helping them to "connect and share with the people in theirlives." And Starbucks dominates the U.S. out-of-home coffee market by "creating a cultureof warmth and belonging, where everyone is welcome."2

Sound marketing is critical to the success of every organization. Large for-profit firmssuch as Apple, Target, Coca-Cola, Procter & Gamble, and Microsoft use marketing. But sodo not-for-profit organizations, such as colleges, hospitals, museums, symphony orchestras, and even churches.

O Marketing isall aroundyou, in goodoldtraditional forms andin a hostof new forms, from websitesandmobile apps to onlinevideos and social media.

Leung Cho Pan/123RF

You already know a lot about marketing—it's all aroundyou. Marketing comes to you in the good old traditionalforms: You see it in the abundance of products at your nearbyshopping mall and the ads that fill your TV screen, spiceup your magazines, or stuff your mailbox. • But in recentyears, marketers have assembled a host of new marketing approaches, everything from imaginative websites and smartphone apps to online videos and social media. These new approaches do more than just blast out messages to the masses.They reach you directly, personally, and interactively. Today'smarketers want to become a part of your life and enrich yourexperiences with their brands. They want to help you livetheir brands.

At home, at school, where you work, and where you play,you see marketing in almost everything you do. Yet there ismuch more to marketing than meets the consumer's casualeye. Behind it all is a massive network of people, technologies,and activities competing for your attention and purchases.This book will give you a complete introduction to the basicconcepts and practices of today's marketing. In this chapter,we begin by defining marketing and the marketing process.

Theprocess bywhich companiesengage customers,buildstrongcustomer relationships,and createcustomer value in orderto capture valuefromcustomers in return.

What is marketing? Many people think of marketing as only selling and advertising. Weare bombarded every day with TV commercials, online pitches, catalogs, and spiels fromsalespeople. However, selling and advertising are only the tip of the marketing iceberg.

Today, marketing must be understood not in the sense of making a sale—"telling and selling"—but in the sense of satisfying customer needs. If the marketer engages consumers effectively, understands their needs, develops products that provide superior customer value, andprices, distributes, and promotes them well, these products will sell easily. In fact, accordingto management guru Peter Drucker, "The aim of marketing is to make selling unnecessary."3Selling and advertising are only part of a larger marketing mix—a set of marketing tools thatwork together to engage customers, satisfy customer needs, and build customer relationships.

Broadly defined, marketing is a social and managerial process by which individuals and organizations obtain what they need and want through creating andexchanging value with others. In a narrower business context, marketing involvesbuilding profitable, value-laden exchange relationships with customers. Hence,we define marketing as the process by which companies engage customers, buildstrong customer relationships, and create customer value in order to capture valuefrom customers in return.4

The MarketingProcess

• Figure 1.1 presents a simple, five-step model of the marketing process for creatingand capturing customer value. In the first four steps, companies work to understand consumers, create customer value, and build strong customer relationships. In the final step,

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26 PART 1 Defining Marketing and the Marketing Process

Understand themarketplace andcustomer needs

and wantsi _

• FIGURE 1.1

The Marketing Process:Creating and CapturingCustomer Value

Create value for customersand

build customer relationships

Design acustomer value-driven marketing

Construct anintegratedmarketing program

that deliverssuperior value

Engage customers,build profitablerelationships, and

create customerdelight

customersin return

This important figure shows marketing in a nutshell. By crealing value /orcustomers,marketers capture value from customers in return. This tive-step process forms themarketing framework for the rest of the chapter and the remainder of the text.

companies reap the rewards of creating superior customer value. By creating value forconsumers, they in turn capture value from consumers in the form of sales, profits, andlong-term customer equity.

In this chapter and the next, we examine the steps of this simple model of marketing. In this chapter, we review each step but focus more on the customer relationshipsteps—understanding customers, engaging and building relationships with customers,and capturing value from customers. In Chapter 2, we look more deeply into the secondand third steps—designing value-creating marketing strategies and constructing marketing programs.

: Author I Marketing is all aboutComment I creating value for! customers. So, as the first step in

I the marketing process, the company; must fully understand customers and

the marketplace.

OBJECTIVE 1-2 Explain the importance of understanding the marketplace andcustomers and identify the five core marketplace concepts.

As a first step, marketers need to understand customer needs and wants and the marketplace in which they operate. We examine five core customer and marketplace concepts: (1)needs, wants, and demands; (2) market offerings (products, services, and experiences); (3)value and satisfaction; (4) exchanges and relationships; and (5) markets.

States of felt deprivation.

The form human needs take as they

are shaped by culture and individualpersonality.

Human wants that are backed by buyingpower.

Customer Needs, Wants, and Demands

The most basic concept underlying marketing is that of human needs. Human needs arestates of felt deprivation. They include basic physical needs for food, clothing, warmth,and safety; social needs for belonging and affection; and individual needs for knowledgeand self-expression. Marketers did not create these needs; they are a basic part of thehuman makeup.

Wants are the form human needs take as they are shaped by culture and individualpersonality. An American needs food but wants a Big Mac, fries, and a soft drink. A personin Papua, New Guinea, needs food but wants taro, rice, yams, and pork. Wants are shapedby one's society and are described in terms of objects that will satisfy those needs. Whenbacked by buying power, wants become demands. Given their wants and resources,people demand products and services with benefits that add up to the most value andsatisfaction.

Companies go to great lengths to learn about and understand customer needs, wants,and demands. They conduct consumer research, analyze mountains of customer data, andobserve customers as they shop and interact, offline and online. People at all levels of thecompany—including top management—stay close to customers. For example, Amazonfounder and CEO Jeff Bezos still has a customer-facing email address that helps him toidentify customer concerns. "I see most of those emails," says Bezos, "and I forward them,some of them—the ones that catch my eye." • Similarly, to see up close what their customers experience, Airbnb's CEO Brian Chesky and his co-founder Joe Gebbia regularlystay at the company's host locations. When Airbnb first listed rentals back in 2009, Cheskyand Gebbia personally visited all of their New York hosts, staying with them, writing

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CHAPTER 1 I Marketing: Creating Customer Valueand Engagement 27

O Staying close to customers:Airbnb’s CEO Brian Chesky (left) andco-founder Joe Gebbia (center)regularly stayatthe company’s host

locations, helping them shapenew customersolutionsbased onreal user

Jim Wilson/TheNew YorkTimes/Redux

reviews, and making sure they lived up to the company's lofty vision. Such personal visits help the pairto shape new customer solutions based on real userexperience.5

MarketOfferings-Products, Services,and Experiences

Consumers' needs and wants are fulfilled throughmarket offerings—some combination of products, services, information, or experiences offeredto a market to satisfy a need or a want. Market offerings are not limited to physical products. Theyalso include services—activities or benefits offeredfor sale that are essentially intangible and do notresult in the ownership of anything. Examples include banking, airline, hotel, retailing, and home repair services.

More broadly, market offerings also includeother entities, such as persons, places, organizations,information, ideas, and causes. For example, to market the cause of suicide prevention, rapper Logic

Market offerings

Some combination of products, services,information, or experiences offered to amarket to satisfy a need or want.

The mistake of paying more attention tothe specific products a company offersthan to the benefits and experiencesproduced by these products.

worked with the National Suicide Prevention Lifeline (NSPL) to create a seven-minuteonline public service video embedded with his song "1-800-273-8255," the NSPL phonenumber. The results of this lone song and video were staggering. On the day the song andvideo were released, calls to the Lifeline shot up more than 25 percent, and Google searchesfor the number doubled. In the following months, visits to the NSPL website increasedmore than 30 percent.6

Many sellers make the mistake of paying more attention to the specific products theyoffer than to the benefits and experiences produced by these products. These sellers sufferfrom marketing myopia. They are so taken with their products that they focus only onexisting wants and lose sight of underlying customer needs.7 They forget that a productis only a tool to solve a consumer problem. A manufacturer of quarter-inch drill bits maythink that the customer needs a drill bit. But what the customer really needs is a quarterinch hole. These sellers will have trouble if a new product comes along that serves thecustomer's need better or less expensively. The customer will have the same need but will

want the new product.

• Creating customer experiences: More than just selling products,Apple's highlysuccessful retail storescreate engaginglife-feels-good brandexperiences.

Smart marketers look beyond the attributesof the products and services they sell. By orchestrating several services and products, theycreate brand experiences for consumers. For example, Walt Disney World Resort doesn't offerjust amusement park rides, it uses its famedDisney magic to create carefully orchestratedguest experiences that make dreams cometrue (see Real Marketing 1.1). • And Apple'shighly successful retail stores don't just sell thecompany's products. They create an engagingApple brand experience:8

Apple's retail stores are very seductive places,where "life-feels-good"experiences abound. Thestore designis clean, simple, and just oozingwithstyle—much likean Apple iPador afeatherweightMacBook Air.The bustling stores feelmorelikecommunity centers than retail outlets,withcrowdsof customerssampling the goods and buzzing excitedlyaboutall things Apple. The storesencourage a lot of purchasing, to besure. But theyalsoencourage lingering, withtables full of fully functioning Macs, iPads, iPhones, and Apple Watches

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28 PART 1 Defining Marketing and theMarketing Process

Real Marketing 1.1

Eachyear, more than 50 million people flockto The Walt DisneyWorldResort, making itthe world’snumber onetouristattraction.Ona single busy day, more than 300,000 eagerguests might drop by to visitwithMickey andhis friendsat one of theresort’s fourmajortheme parks—the Magic Kingdom, Epcot,Disney’s Hollywood Studios, andDisney’sAnimal Kingdom.

What bringsso many peopleto The WaltDisney World Resort? Part of the answerliesin theresort’smany attractions.Disney Worldis a truefantasyland—more than 40squaremiles(as big asSanFrancisco) brimming withthrill-a-minuteattractions such as ExpeditionEverest,TwilightZoneTower of Terror,SpaceMountain,Soarin’, Toy Story Mania, Piratesof theCaribbean, Kilimanjaro Safaris, and

Disney World doesn'tofferjust amusementpark rides. The real “Disney Magic" lies inhow the resort turns park visits into carefullyorchestrated experiences that make dreamscome true.

The Walt Disney World Resort isobsessedwith makingall aspects of every customer’svisit memorable. Inan increasingly rude, mis

offers warmth, order, andmagicalmoments.From the moment visitorspurchase ticketstothe momentthey leavethe resort, Disneygoes to extremesto create experiences thatmake Disney World “the mostmagical placeon earth."

Each park, attraction, restaurant, andhotelformspart of an enchanted world,

by Disneyimagineers." On EpcotCenter’sTest Track,forexample, visitors don’t justzoomaround a track. They become GMtestengineerstakingaconcept vehicle throughrigorous testing procedures.At the BeOurGuest dining room in theMagic Kingdom,patrons don’t justeat a meal. Theyexperience French-inspired food insideBeast’scastle, a place where it’s always snowinggently cutside, thesuits of armortalk, andthe magic rose glitters in acorner of the forbidden west wing.

Employees atalllevels of Disney World—from executives in the comer office to thepersonscooping ice cream on Main Streetin theMagic Kingdom—are carefully trainedin how to do the hard work of helping peoplehave fun. They 'earn thatthey arein the en-tertainment business andthatthey are “cast

The Walt Disney World Resort: MakingMagical Moments

members” whosejob is tobeenthusiastic,knowledgeable, andprofessional in servingDisney’s"guests.”Each cast member, theylearn, plays a vital role in the DisneyWorld“show,” whether it’s as a“security host” (police), “transportation host"(driver), “custodialhost” (street cleaner), or “food and beveragehost”(restaurantworker).

Before they can receivetheir “theme costumes” and go “on stage,” cast memberslearnhow to deal effectively with guests. In a coursecalled “Traditions,” they leamthe Disney language, history, andculture. They are taught tobe enthusiastic, helpful, and always friendly.They leam todogood deeds, such asoffering to take pictures of guestsso that thewhole family can be in the picture. They aretaughtnevertosay “I don’t know" or“It's not my job.” When a guest asksa question—whether it's “Wherethe nearestrestroom?”or“Whatarethe names of Snow White’s sevendwarves?”—they needtoknowtheanswer. If they see a pieceoftrash onthe ground, they must pick it up.

Disney trains cast memberstoconnect withguestson personalleveltomake them feel special.Castmembers proactivelyseek out opportunities to turn themundane intomagical. For example, cast member who notices a child'sdisappointment might hand out aFastPassridevoucher,confer a coveted specialedition Disney pin, or connect thefamily to just the rightDisney characteratjusttheright moment. OneDisney loyalist recallsjust such a specialpersonal experience: “I was threeand I swearCinderella was waving [tome] from the castle and my brotheryelled, 'Cinderella, my sister wantsto meet you!' Minutes later,I waswhisked away to meet Cinderellain aprivate meetandgreet.”

of help from technology in making personal connections. For ex

RFID-embedded wristbands calledMagicBands that serve as everythingfrom room keys and park passestopayment methods. Combined withthe cloud-based MyMagic+ system,these MagicBands also let castmembersidentify guestsindividually,

greeting themby name and even recognizingcelebratory occasions such as birthdays, anniversaries, or reunions. The MagicBands letDisney customize guest experiencesin otherways as well. For instance, asguestsstrollaround the resort, they might see their namesappear ona nearby screen with a messagelike “Samantha!It’s small world afterall."Photos on park rides might suddenlypopupon their MyDisneyExperience apps. TheMagicBands even letguests engage with rideexperienceswhile waiting in line, creatingdetails that laterbecome part of displays on theride itself.

Thus, you don’t visit TheWalt Disney WorldResort just toride some rides.Instead, youvisit to be partof a carefully choreographed

Marketingexperiences: Youdon’t just visitWaltDisneyWorld Resort; you immerse yourself inacarefullychoreographed experience—a worldwhere dreamscome true andthingsstill workthewaytheyshould.

Sunshlne/Alamy Stock Photo

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CHAPTER Marketing: CreatingCustomer Valueand Engagement 29

wheredreams come true. Disney hasbecomeso highly regardedfor its ability to deliver customer experiences that manyleadingcorporations have sent managersto Disney

Institute to"discover the methodbehind themagic."As one avid DisneyWorld fan putsit, "Walkingdown MainStreetand seeingCinderella's castlefor thefirsttimealwaysmakes myheart jump....No matter whatI'm

goingthrough...suddenly theworldfilledwith magicand wonder and possibilities all overagain and I feel a wave ofhappiness flowoverme and a smile creep backontomy faceeasily,not forced or paintedon. Areal, true smile."9

The actof obtaininga desired objectfrom someone by offering something inreturn.

Customer Value andSatisfaction

Consumers usually face a broad array of products and services that might satisfy agiven need. How do they choose among these many market offerings? Customersform expectations about the value and satisfaction that various market offerings willdeliver and buy accordingly. Satisfied customers buy again and tell others about theirgood experiences. Dissatisfied customers often switch to competitors and disparagethe product to others.

Marketers must be careful to set the right level of expectations. If they set expectations too low, they may satisfy those who buy but fail to attract enough buyers. If they setexpectations too high, buyers will be disappointed. Customer value and customer satisfaction are key building blocks for developing and managing customer relationships. We willrevisit these core concepts later in the chapter.

Exchanges and Relationships

Marketing occurs when people decide to satisfy their needs and wants through exchange relationships. Exchange is the act of obtaining a desired object from someoneby offering something in return. In the broadest sense, the marketer tries to bring abouta response to some market offering. The response may be more than simply buying ortrading products and services. A political candidate, for instance, wants votes; a churchwants membership and participation; an orchestra wants an audience; and a social action group wants idea acceptance.

Marketing consists of actions taken to create, maintain, and grow desirable exchangerelationships with target audiences involving a product, service, idea, or other object.Companies want to build strong relationships by consistently delivering superior customer value. We will expand on the important concept of managing customer relationships later in the chapter.

The concepts of exchange and relationships lead to the concept of a market. A market isthe set of actual and potential buyers of a product or sendee. These buyers share a particular need or want that can be satisfied through exchange relationships.

Marketing means managing markets to bring about profitable customer relationships. However, creating these relationships takes work. Sellers must search for andengage buyers, identify their needs, design good market offerings, set prices for them,promote them, and store and deliver them. Activities such as consumer research,product development, communication, distribution, pricing, and service are core marketing activities.

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30 PART 1 Defining Marketing and the Marketing Process

Although we normally think of marketing as being carried out by sellers, buyers also carryout marketing. Consumers do marketing when they search for products, interact with companies to obtain information, and make their purchases. In fact, today's digital technologies,from websites and smartphone apps to the explosion of social media, have empowered consumers and made marketing a truly two-way affair. Thus, in addition to customer relationshipmanagement, today's marketers must also deal effectively with customer-managed relationships.Marketers are no longer asking only "How can we influence our customers?" but also "Howcan our customers influence us?" and even "How can our customers influence each other?"

• Figure 1.2 shows the main elements in a marketing system. Marketing involves serving a market of final consumers in the face of competitors. The company and competitors research the market and interact with consumers to understand their needs. Then they create andexchange market offerings, messages, and other marketing content with consumers, either directly or through marketing intermediaries. Each party in the system is affected by major environmental forces (demographic, economic, natural, technological, political, and social/cultural).Each party in the system adds value for the next level. The arrows represent relationshipsthat must be developed and managed. Thus, a company's success at engaging customers andbuilding profitable relationships depends not only on its own actions but also on how well theentire system serves the needs of final consumers. Walmart cannot fulfill its promise of lowprices unless its suppliers provide merchandise at low costs. And Ford cannot deliver a high-quality car-ownership experience unless its dealers provide outstanding sales and service.

Authori Once a company; Comment I fully understands its,consumers and the marketplace, it! must decidewhich customers itwilliserve and how it will bring them value.

Strategy and Plan

OBJECTIVE 1-3 Identify the key elements of a customer value-driven marketing strategyand discuss the marketing management orientations that guide marketing strategy.

Marketing management

The art and science of choosingtarget markets and buildingprofitablerelationships withthem.

CustomerValue-Driven Marketing Strategy

Once it fully understands consumers and the marketplace, marketing management candesign a customer value-driven marketing strategy. We define marketing managementas the art and science of choosing target markets and building profitable relationships withthem. The marketing manager's aim is to engage, keep, and grow target customers by creating, delivering, and communicating superior customer value.

To design a winning marketing strategy, the marketing manager must answer two important questions: What customers will we serve (what's our target market)? and How canwe serve these customers best (what's our value proposition)? We will discuss these marketing strategy concepts briefly here and then look at them in more detail in Chapters 2 and 7.

Selecting Customers to Serve

The company must first decide whom it will serve. It does this by dividing the marketinto segments of customers (market segmentation) and selecting which segments it willgo after (target marketing). Some people think of marketing management as finding as

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CHAPTER 1 Marketing: Creating Customer Value and Engagement 31

•Value propositions: Sonos positions itsSonos One withAmazon Alexaas“The smart

many customers as possible and increasing demand. But marketing managers know that they cannot serve all customers in every way. By trying to serveall customers, they may not serve any customers well. Instead, the companywants to select only customers that it can serve well and profitably. For example,Nordstrom profitably targets affluent professionals; Dollar General profitablytargets families with more modest means.

Ultimately, marketing managers must decide which customers they wantto target and the level, timing, and nature of their demand. Simply put, marketing management is customer management and demand management.

Choosing a Value Proposition

The company must also decide how it will serve targeted customers—how it willdifferentiate and position itself in the marketplace. A brand's value proposition isthe set of benefits or values it promises to deliver to consumers to satisfy their needs.JetBlue promises to put "You Above All" by bringing "humanity back to travel."By contrast, Spirit Airlines gives you "Bare Fare" pricing: "Less Money. More Go."Amazon's Echo smart speaker is "Always ready, connected, and fast. Just ask."

• By contrast, the Sonos One with Amazon Alexa is "The smart speaker for musiclovers." It gives you all the advantages of Alexa but with high-quality Sonos sound.Such value propositions differentiate one brand from another. They answerthe customer's question: "Why should I buy your brand rather than a competitor's?" Companies must design strong value propositions that give them thegreatest advantage in their target markets.

speaker formusic lovers.” It gives you all the

advantages ofAlexa but with high-qualitySonos

Marketing Management Orientations

The Advertising Archives/AlamyStock Photo

Marketing management wants to design strategies that will engage targetcustomers and build profitable relationships with them. But what philosophyshould guide these marketing strategies? What weight should be given to theinterests of customers, the organization, and society? Very often, these interests conflict

There are five alternative concepts under which organizations design and carry outtheir marketing strategies: the production, product, selling, marketing, and societal marketing concepts.

Production concept

Theidea that consumers will favorproducts that areavailable andhighlyaffordable; therefore,the organizationshouldfocus on improving productionand distributionefficiency.

The Production Concept. The production concept holds that consumers will favorproducts that are available and highly affordable. Therefore, management should focus onimproving production and distribution efficiency. This concept is one of the oldest orientations that guide sellers.

The production concept is still a useful philosophy in some situations. For example,both personal computer maker Lenovo and home appliance maker Haier dominate thehighly competitive, price-sensitive Chinese market through low labor costs, high production efficiency, and mass distribution. However, although useful in some situations, theproduction concept can lead to marketing myopia. Companies adopting this orientationrun a major risk of focusing too narrowly on their own operations and losing sight of thereal objective—satisfying customer needs and building customer relationships.

Product concept

Theidea that consumerswill favorproducts that offer the most quality,performance, and features;therefore,theorganization should devote itsenergy tomaking continuousproductimprovements.

Selling concept

The idea thatconsumerswill not buyenough ofthe firm’s productsunless thefirm undertakes a large-scaleselling andpromotioneffort.

The Product Concept. The product concept holds that consumers will favor products

that offer the most in quality, performance, and innovative features. Under this concept,marketing strategy focuses on making continuous product improvements.

Product quality and improvement are important parts of most marketing strategies.However, focusing only on the company's products can also lead to marketing myopia.For example, some manufacturers believe that if they can "build a better mousetrap, theworld will beat a path to their doors." But they are often rudely shocked. Buyers may belooking for a better solution to a mouse problem but not necessarily for a better mousetrap.The better solution might be a chemical spray, an exterminating service, a house cat, orsomething else that suits their needs even better than a mousetrap. Furthermore, a bettermousetrap will not sell unless the manufacturer designs, packages, and prices it attractively; places it in convenient distribution channels; brings it to the attention of people whoneed it; and convinces buyers that it is a better product.

The Selling Concept. Many companies follow the selling concept, which holds that consumers will not buy enough of the firm's products unless it undertakes a large-scale selling

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32 PART 1 DefiningMarketing andthe Marketing Process

Marketing concept

A philosophy in which achievingorganizational goals depends onknowing the needs and wants of targetmarkets and delivering the desiredsatisfactions better than competitors do.

Societal marketing concept

The idea that a company’s marketingdecisions should consider consumers’wants, the company’s requirements,

consumers’ long-run interests, andsociety's long-run interests.

and promotion effort. The selling concept is typically practiced with unsought goods—thosethat buyers do not normally think of buying, such as life insurance or blood donations. Theseindustries must be good at tracking down prospects and selling them on a product's benefits.Such aggressive selling, however, carries high risks. It focuses on creating sales transactions rather than on building long-term, profitable customer relationships. The aim oftenis to sell what the company makes rather than to make what the market wants. It assumesthat customers who are coaxed into buying tire product will like it. Or, if they don't likeit, they will possibly forget their disappointment and buy it again later. These are usuallypoor assumptions.

Hie Marketing Concept. The marketing concept holds that achieving organizationalgoals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. Under the marketing concept, customerfocus and value are the paths to sales and profits. Instead of a product-centered make-and-sell philosophy, the marketing concept is a customer-centered sense-and-respond philosophy. The job is not to find the right customers for your product but to find the rightproducts for your customers.

• Figure 1.3 contrasts the selling concept and the marketing concept. The selling concept takes an inside-out perspective. It starts with the factory, focuses on the company's existingproducts, and calls for heavy selling and promotion to obtain profitable sales. It focuses primarily on customer conquest—getting short-term sales with little concern about who buys or why.

In contrast, the marketing concept takes an outside-in perspective. As Herb Kelleher,the colorful founder of Southwest Airlines, once put it, "We don't have a marketing department; we have a customer department." The marketing concept starts with a well-defined market, focuses on customer needs, and integrates all the marketing activities thataffect customers. In turn, it yields profits by creating relationships with the right customersbased on customer value and satisfaction.

Implementing the marketing concept often means more than simply responding tocustomers' stated desires and obvious needs. Customer-driven companies research customers deeply to learn about their desires, gather new product ideas, and test product improvements. Such customer-driven marketing usually works well when a clear need existsand when customers know what they want.

In many cases, however, customers don't know what they want or even what ispossible. As Henry Ford supposedly remarked, "If I'd asked people what they wanted,they would have said faster horses." For example, even 20 years ago, how many consumers would have thought to ask for now-commonplace products such as tabletcomputers, smartphones, digital cameras, 24-hour online buying, digital video andmusic streaming, and all-electric vehicles? Such situations call for customer-drivingmarketing—understanding customer needs even better than customers themselves doand creating products and services that meet both existing and latent needs, now and inthe future. As legendary Apple cofounder Steve Jobs once said, "Our job is to figure outwhat [consumers are] going to want before they do.... Our task is to read things that arenot yet on the page."10

The Societal Marketing Concept. The societal marketing concept questions

whether the pure marketing concept overlooks possible conflicts between consumer run wants and consumer long-run welfare. Is a firm that satisfies the immediate needs andwants of target markets always doing what's best for its consumers in the long run? The

short-• FIGURE 1.3 Starting Focus Means Ends

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CHAPTER Marketing: Creating Customer Valueand Engagement 33

Even more broadly, many leading business and marketing thinkers are now preaching the concept of shared value, which recognizes that societal needs, not just economicneeds, define markets.11 The concept of shared value focuses on creating economic valuein a way that also creates value for society. A growing number of companies knownfor their hard-nosed approaches to business—such as Google, IBM, Johnson & Johnson,Unilever, and Walmart—are rethinking the interactions between society and corporateperformance. They are concerned not just with short-term economic gains but with thewell-being of their customers, the depletion of natural resources needed by their businesses, the welfare of key suppliers, and the economic well-being of the communities inwhich they operate.

As • Figure 1.4 shows, companies should balance three considerations in setting theirmarketing strategies: company profits, consumer wants, and society's interests. Small but fastgrowing Jeni's Splendid Ice Creams operates this way:12

Jeni'sSplendid Ice Creamsmakes and sells really good artisanice cream in its ownscoopshops, with exotic flavors such as Goat Cheese with Red Cherries, WildberryLavender, andRiesling Poached Pear sorbet. ButJeni's does morethan just makeand sell ice cream.It alsodedicates itself to adeeply felt missionof"making better icecreamsand bringing peopletogether. That'swhat gets us out of bed in themorning and keeps usup late at night."Jeni'sfollows what it callsa"fellowship model"—makinggreat icecreams for communities, by

• The societal marketingconcept: Jeni'sSplendid Ice Cream does more

than just make good ice cream. Itmakes “ice creams created in fellowship

with growers, makers,and producersfromaround the world all for the love

Jeni's Splendid Ice Creams, LLC

communities. • Signs in Jeni'sshops proudlyproclaim: "Icecreams created infellowship with growers,makers, and producers from around theworld all forthe loveof you."

To achieve this ambitious mission,Jeni's sources its ingredients carefully, usingwhole fruits and vegetables,milk from localgrass-grazed cows, andwildflowerhoney from nearby farms,alongwith fair-trade vanillaand bean-to-bar direct tradechocolate. Jeni'sbelievesin "buyingdirectly and paying fairly for the ingredients, in having minimal impacton theenvironment,andin building andshaping community." It alsoworksto involve its local communities. "Each time we openastore...wespend time in the neighborhoods; we wantresidents and visitors to be our partners. We think ofour company as a community." Thanks to its societalmission, Jeni's isthriving. In 15 years, thebusiness hasgrown from a pint-sized local operationto 34 scoopshops in10 cities, all with devoted followings.You'llalsofind Jeni's in more 3,000 grocerystores,suggesting that doing goodcan benefit boththe communityand thecompany.

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34 PARTDefining Marketing and the Marketing Process

Preparing anIntegratedMarketing Planand Program

The company's marketing strategy outlines which customers it will serve and how it will createvalue for these customers. Next, tire marketer develops an integrated marketing program thatwill actually deliver tire intended value to target customers. The marketing program builds customer relationships by transforming the marketing strategy into action. It consists of the firm'smarketing mix, the set of marketing tools the firm uses to implement its marketing strategy.

The major marketing mix tools are classified into four broad groups, called the four Psof marketing: product, price, place, and promotion. To deliver on its value proposition, thefirm must first create a need-satisfying market offering (product). It must then decide howmuch it will charge for the offering (price) and how it will make the offering available totarget consumers (place). Finally, it must engage target consumers, communicate about theoffering, and persuade consumers of the offer's merits (promotion). The firm must blendeach marketing mix tool into a comprehensive integrated marketing program that communicates and delivers the intended value to chosen customers. We will explore marketingprograms and the marketing mix in much more detail in later chapters.

| Author I Doing a good job withComment I the first three steps in themarketing process sets the stagefor step four, building and managingcustomer relationships.

Managing Customer Relationships and

Capturing Customer Value

OBJECTIVE 1-4 Discusscustomer relationship management andidentify strategiesfor creating value for customersandcapturing value from customers in return.

Engaging Customers andManaging Customer Relationships

The first three steps in the marketing process—understanding the marketplace andcustomer needs, designing a customer value-driven marketing strategy, and constructinga marketing program—all lead up to the fourth and most important

• Perceived value: Some owners considera Patek Philippewatcha real bargain,even at pricesrangingfrom $20,000to $500,000, “Younever actually own a Patek Philippe,Youmerely look afterit for the nextgeneration.”

step: engaging customers and managing profitable customerrelationships. We first discuss the basics of customer relationshipmanagement. Then we examine how companies go about engagingcustomers on a deeper level in this age of digital and socialmarketing.

Customer Relationship Management

Customer relationship management is perhaps the most importantconcept of modem marketing. In the broadest sense, customerrelationship management is the overall process of building andmaintaining profitable customer relationships by delivering superiorcustomer value and satisfaction. It deals with all aspects of acquiring,engaging, and growing customers.

Relationship Building Blocks: Customer Value andSatisfaction. The key to building lasting customer relationships isto create superior customer value and satisfaction. Satisfied customers are more likely to be loyal customers and give the company alarger share of their business.

Attracting and retaining customers can be a difficult task.Customers often face a bewildering array of products and servicesfrom which to choose. A customer buys from the firm that offers thehighest customer-perceived value—the customer's evaluation ofthe difference between all the benefits and all the costs of a marketoffering relative to those of competing offers. Importantly, customers often do not judge values and costs "accurately" or "objectively."They act on perceived value.

To some consumers, value might mean sensible products at affordable prices. To other consumers, however, value might meanpaying more to get more. • For example, a luxurious Patek Philippecosts a small fortune, ranging in price from $20,000 to $500,000. Butto those who own one, a Patek is a great value: ’

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CHAPTER1 Marketing: Creating Customer Value and Engagement 35

Customer relationshipmanagement

The overall process of building andmaintaining profitable customerrelationships by delivering superiorcustomer value and satisfaction.

The customer's evaluation of thedifference between all the benefits and allthe costs of a marketing offer relative tothose of competing offers.

Listen up here, because I'mabout to tell youwhy certain watch costing $20,000,or even$500,000, isn't actually expensive but isin facta tremendous value. Every Patek Philippewatch is handmade bySwiss watchmakers from the finest materials and can take more thana year tomake. Still not convinced?Beyond keepingprecisetime, Patek Philippe watchesare also good investments. Theycarryhigh prices butretain or even increase their valueover time. Many modelsachievea kindof cult status that makes them themost covetedtimepieces on the planet.

But more important thanjust a means of telling time or a goodinvestment isthe sentimental and emotional valueof possessing a Patek Philippe.Saysthe company'spresident:"Thisis aboutpassion. Imean—it really isa dream. Nobody needs a Patek." These watchesare unique possessions steeped in precious memories, making them treasuredfamily assets.According to the company, "The purchaseof a PatekPhilippeis often relatedto apersonalevent—a professional success, a marriage, or the birth ofachild—and offeringitasa gift is the most eloquent expression of love or affection."APatek Philippe watch ismadenot to last just one lifetime butmany. Says onead: "You never actually own a PatekPhilippe. Youmerely lookafter it for thenextgeneration." That makesitarealbargain,evenattwicethe price.

Customer satisfactionThe extent to which a product'sperceived performance matches abuyer’s expectations.

Customer satisfaction depends on the product's perceived performance relativeto a buyer's expectations. If the product's performance falls short of expectations, the customer is dissatisfied. If performance matches expectations, the customer is satisfied. If performance exceeds expectations, the customer is highly satisfied or delighted.

Outstanding marketing companies go out of their way to keep important customers satisfied. Most studies show that higher levels of customer satisfaction lead to greater customerloyalty, which in turn results in better company performance. Companies aim to delight customers by promising only what they can deliver and then delivering more than they promise.Delighted customers not only make repeat purchases but also become willing brand advocates

• Customer satisfaction: Customerservice championL.L.Bean was founded on a philosophyof completecustomer

satisfaction. “If youare not100% satisfied with oneof our

products, you may return itwithin one year of purchasefor a

Eyal Dayan Photography

and "customer evangelists" who spread the word about their goodexperiences to others.

For companies interested in delighting customers, exceptional value and service become part of the overall companyculture. For example, L.L.Bean—the iconic American outdoorapparel and equipment retailer—was founded on the principlethat keeping customers satisfied is the key to building lastingrelationships.14

Year afteryear, L.L.Bean lands in the top 10 of virtually every listof top service companies, including J.D. Power's most recent list of"customer service champions."The customer-service culture runsdeep atL.L.Bean. Morethan100 years ago, Leon LeonwoodBeanfounded the company on a philosophy ofcompletecustomer satisfaction, expressed in the followingguarantee:"I do not considerasale complete until [the] goodsare wornout and thecustomer[is]still satisfied."•Tothisday,customers can return anyitem, noquestions asked, up to a year after purchase.

The company's customer-service philosophy is perhaps bestsummed up in founder L.L.'sanswer to the question "What is a customer?" His answer still formsthe backboneof thecompany'svalues:"Acustomer isthe most importantperson ever in thiscompany—inperson orby mail. A customerisnot dependent on us, we are dependent on him. A customer is notan interruption ofourwork, he is thepurpose of it.We are not doing a favorby serving him,heis doing usafavor bygiving us theopportunity to doso. A customeris not someonetoargueor match wits with. Nobody everwonan argument withacustomer. A customer is apersonwhobrings us his wants. It is ourjob to handle them profitablyto himand to ourselves."AddsformerL.L.BeanCEOLeon Gorman:"A lotof people havefancy thingsto sayabout customerservice, but it'sjust aday-in,day-out, ongoing,never-ending,persevering, compassionate kind of activity."

Other companies that have become legendary for customerdelight and their service heroics include Amazon.com, Chick-fil-A, Nordstrom department stores, and JetBlue Airways.However, a company does not necessarily need to have over-the-top service to create customer delight. For example, no-frillsgrocery chain ALDI has highly satisfied customers, even though

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36 PART 1| DefiningMarketingand the Marketing Process

they have to bag their own groceries. ALDI's everyday very low pricing on good-qualityproducts delights customers and keeps them coming back. Thus, customers don't needto be wowed. Customer satisfaction comes not just from service heroics but from howwell a company delivers on its basic value proposition and helps customers solve theirbuying problems.

Although a customer-centered firm seeks to deliver high customer satisfactionrelative to competitors, it does not attempt to maximize customer satisfaction. A company can always increase customer satisfaction by lowering its prices or increasingits services. But this may result in lower profits. Thus, the purpose of marketing is togenerate customer value profitably. This requires a very delicate balance: The marketermust continue to generate more customer value and satisfaction but not "give awaythe house."

Customer Relationship Levels and Tools. Companies can build customer relation

ships at many levels, depending on the nature of the target market. At one extreme, acompany with many low-margin customers may seek to develop basic relationships withthem. For example, P&G's Tide detergent does not phone or call on all of its consumers toget to know them personally. Instead, Tide creates engagement and relationships throughproduct experiences, brand-building advertising, websites, and social media. At the otherextreme, in markets with few customers and high margins, sellers want to create full partnerships with key customers. For example, P&G sales representatives work closely withWalmart, Kroger, and other large retailers that sell Tide. In between these two extremes,other levels of customer relationships are appropriate.

Beyond offering consistently high value and satisfaction, marketers can use specificmarketing tools to develop stronger bonds with customers. For example, many companies offer frequency marketing programs that reward customers who buy frequentlyor in large amounts. Airlines offer frequent-flier programs, hotels give room upgradesto frequent guests, and supermarkets give patronage discounts to "very importantcustomers."

Today, almost every brand has a loyalty rewards program. Such programs canenhance and strengthen a customer's brand experience. • For example, Hilton'sHHonors loyalty program allows customers to earn points redeemable for free stays

• Relationshipmarketingtools: TheHHonors smartphoneapppersonalizesand strengthens thecustomer’sbrandexperience, offering aselectionof rooms and on-property

Halil ffiD0foM23rf.com

or upgrades. These points can also be converted into miles forflight bookings. In addition, the member-exclusive HHonorssmartphone app allows travelers to personalize their stay. Itoffers options like an eCheck-in or the selection of on-propertybenefits (such as pillows or snacks) prior to arrival. Travelerscan pick their room of choice before their stay, either from adigital floor plan or by choosing their room's view with GoogleMaps. The app also serves as a digital key, meaning that travelers do not even need to visit the front desk. Additional featuresinclude personalized content reflecting the user's forthcomingtravels, the option to request Uber rides, as well as restaurantrecommendations. For future stays, the app offers the option ofmarking favorite hotels or hotel rooms."15

Significant changes are occurring in the nature of customerbrand relationships. Today's digital technologies—the internetand the surge in online, mobile, and social media—have profoundly changed the ways that people relate to one another. Inturn, these events have had a huge impact on how companies andbrands connect with customers and how customers connect withand influence each other's brand behaviors.

Customer Engagement and Today’s Digital, Mobile, and Social Media

The digital age has spawned a dazzling set of new customer relationship-building tools,from websites, online ads and videos, mobile ads and apps, and blogs to online communities and the'major social media, such as Facebook, Twitter, Instagram, YouTube, andSnapchat.

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CHAPTER 1 Marketing: Creating Customer Value and Engagement 37

Making the brand a meaningful part ofconsumers’ conversations and livesby fostering direct and continuouscustomer involvement in shapingbrand conversations, experiences, andcommunity.

Customer brandadvocacyActions by which satisfied customersinitiate favorable interactions with othersabout a brand.

Yesterday's companies focused mostly on mass marketing to broad segments ofcustomers at arm's length. By contrast, today7s companies are using online, mobile, andsocial media to refine their targeting and to engage customers more deeply and interactively. The old marketing involved marketing brands to consumers. The new marketing is customer-engagement marketing—fostering direct and continuous customerinvolvement in shaping brand conversations, brand experiences, and brand community.Customer-engagement marketing goes beyond just selling a brand to consumers. Its goalis to make the brand a meaningful part of consumers' conversations and lives.

The burgeoning internet and social media have given a huge boost to customerengagement marketing. Today's consumers are better informed, more connected, andmore empowered than ever before. Newly empowered consumers have more information about brands, and they have a wealth of digital platforms for airing and sharingtheir brand views with others. Thus, marketers are now embracing not only customerrelationship management but also customer-managed relationships, in which customersconnect with companies and with each other to help forge and share their own brandexperiences. Beyond building brand loyalty and purchasing, marketers want to createcustomer brand advocacy, by which satisfied customers initiate favorable interactions with others about a brand.

Greater consumer empowerment means that companies can no longer rely on marketing by intrusion. Instead, they must practice marketing by attraction—creating marketofferings and messages that engage consumers rather than interrupt them. Hence, mostmarketers now combine their mass-media marketing efforts with a rich mix of online, mobile, and social media marketing that promotes brand-consumer engagement, brand conversations, and brand advocacy among customers.

For example, companies post their latest ads and videos on social media sites, hoping they'll go viral. They maintain an extensive presence on Facebook, Instagram,Twitter, Snapchat, YouTube, Linkedln and other social media to start conversations withand between customers, address customer service issues, research customer reactions,and drive traffic to relevant articles, web and mobile marketing sites, contests, videos, andother brand activities. They launch their own blogs, mobile apps, brand microsites, andconsumer-generated review systems, all with the aim of engaging customers on a morepersonal, interactive level. Skilled use of social media can get consumers involved with abrand, talking about it, and advocating it to others.

The key to engagement marketing is to find ways to enter targeted consumers'conversations with engaging and relevant brand messages. Simply posting a humorous video, creating a social media page, or hosting a blog isn't enough. Successful engagement marketing means making relevant and genuine contributions to targetedconsumers' lives and interactions. Consider Innocent Drinks, the smoothies and juice

•Engaging customers: Ratherthan usingintrusive, hard-sellproduct pitches, Innocent Drinks interacts with customersinhumorous ways, Inspiring conversations andfosteringrelationships.

AL Robinson/Shutterstock

•Innocent Drinkswas establishedin1998with the aim of becoming "Europe's favorite littlejuicecompany."The company'stiming wascrucial; it capitalized on the trendtoward healthyeatingand living. Rather than usingaggressive,hard-sell product pitches, Innocentinteracts withcustomers inavery humorousand informal way. Through engagement marketing, thecompany fosters averypersonal relationship with itscustomers to make them feelvalued andpart of the brand. This isreflectedinthe way thatpackagingis designed—light-heartedandfun.For example,instead ofdisplaying"useby"on its smoothiebottles,it says "enjoy by." Innocent'ssocial media strategyhas aconversational and often irreverent approach;its poststake on relevanttopics, keywords, andhashtagswith a dry sense of humorbut they never hijack thesetopics totry and sell juiceorsmoothies. Its shared posts areoften reactive; ideasare turned around inabout halfan hour. ForPenguins AwarenessDay for example,thecompany shared a cartoon ofacute penguin on Twitter witha statement thattherewere no penguins in any oftheir products. The textunderneaththepicturecalled for action, saying that the companywasdoing its bit, and asking its customersto tweet about theircontribution to this day. Thus, the company createsconversations

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38 PART 1 Defining Marketingand the Marketing Process

while keeping thebrand's personality in the back of its audience's mind. Innocent's relationalapproach has engaged a substantialfollowing,with more than a quarterof a million fansonTwitteralone. Innocent, inturn, picks up user-producedcontent tofurther deepenthe relationship between the brand andits customers.

Consumer-generatedmarketingBrand exchanges created by consumersthemselves—both invited and

uninvited—by which consumers areplaying an increasing role in shaping theirown brand experiences and those ofother consumers.

SUPER QUICK

TESLAFAN VIDEO!

Consumer-Generated Marketing

One form of customer-engagement marketing is consumer-generated marketing, bywhich consumers themselves play roles in shaping their own brand experiences and thoseof others. This might happen through uninvited consumer-to-consumer exchanges in social media, blogs, online review sites, and other digital forums. But increasingly, companies themselves are inviting consumers to play a more active role in shaping products andbrand content.

Some companies ask consumers for new product and service ideas. For example, Oreorecently ran a #MyOreoCreation contest asking fans to come up with new flavor ideas. Threefinalist flavors hit the stores for two months before fans voted online for a winner, whoreceived $500,000. As another example, at the My Starbucks Idea site, Starbucks collects ideasfrom customers on new products, store changes, and just about anything else that mightmake their Starbucks experience better. "You know better than anyone else what you wantfrom Starbucks," says the company at the website. "So tell us. What's your Starbucks idea?Revolutionary or simple—we want to hear it." The site invites customers to share their ideas,vote on and discuss the ideas of others, and see which ideas Starbucks has implemented.17

Other companies invite consumers to play a role in shaping ads and social mediacontent. For example, all-electric carmaker Tesla held a fan-made ad contest, withthree winning "charmingly low-budget" commercials selected from 10 finalists bypublic voting (via Twitter likes). Tesla posted the finalist ads online simultaneouslywith the launch of its Model 3 sedan, drawing millions of views and sparking interactions among dedicated Tesla fans. • One top-three winner: "Sonja's Super Quick TeslaFan Video" by YouTuber Sonja Jasansky of Minnesota, a super-quick and ultra-quirkyvideo highlighting Tesla specifications and debunking common misconceptions.18

Despite the successes, however, harnessingconsumer-generated content can be a time-consuming andcostly process, and companies may find it difficult to mineeven a little gold from all the content submitted. Moreover,because consumers have so much control over social mediacontent, inviting their input can sometimes backfire. As aclassic example, McDonald's famously launched a Twittercampaign using the hashtag #McDStories, hoping that itwould inspire heartwarming stories about Happy Meals.Instead, the effort was hijacked by Twitter users, whoturned the hashtag into a "bashtag" by posting less-than-appetizing messages about their bad experiences with thefast-food chain. McDonald's pulled the campaign withinonly two hours, but the hashtag was still churning weeks,

. . in

even months later.

As consumers become more connected and empowered and as the boom in digital and social media continues,consumer brand engagement—whether invited by marketers or not—will be an increasingly important marketingforce. Through a profusion of consumer-generated videos,shared reviews, mobile apps, blogs, and websites, consumers are playing a growing role inshaping their own and other consumers' brand experiences. Brands must embrace this increased consumer empowerment and master the digital and social media relationship tools.

•Consumer-generatedmarketing:“Charmingly low-budget”

fan-made Tesla adsdrew millions of onlineviewsand sparked interactions

amongdedicated Tesla fans.Sonja Maria Jasansky

Partner relationship management

Working closely with partners inothercompany departments andoutsidethecompany to jointly bringgreater value to■customers.

Partner Relationship Management

When it comes to creating customer value and building strong customer relationships,today's marketers know that they can't go it alone. They must work closely with a varietyof marketing partners. In addition to being good at customer relationship management,marketers must also be good at partner relationship management—working withothers inside and outside the company to jointly engage and bring more value to theircustomers.

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CHAPTER 1 Marketing: Creating Customer Value andEngagement 39

Traditionally, marketers have been charged with understanding customers and representing customer needs to different company departments. However, in today7s more connected world, every functional area in the organization can interact with customers. Ratherthan letting each department go its own way, firms must link all departments in the causeof creating customer value.

Marketers must also partner with suppliers, channel partners, and others outside thecompany. Marketing channels consist of distributors, retailers, and others who connect thecompany to its buyers. The supply chain describes a longer channel, stretching from rawmaterials to components to final products that are carried to final buyers. Through supplychain management, companies today are strengthening their connections with partners allalong the supply chain. They know that their fortunes rest on how well their entire supplychain performs against competitors' supply chains.

Author I Look back at Figure 1.1.Comment I In the first four steps ofthe marketing process, the companycreates value for target customersand builds engagement and strongrelationships with them. If it doesthat well, it can capture value fromcustomers in return, in the formof loyal customers who buy andadvocate for the company's brands.

Capturing Valuefrom Customers

The first four steps in the marketing process outlined in Figure 1.1 involve engaging customers and building customer relationships by creating and delivering superior customer value.The final step involves capturing value in return in the form of sales, market share, advocacy,and profits. By creating superior customer value, the firm creates satisfied customers whostay loyal, buy more, and advocate the brand to others. This, in turn, means greater long-runreturns for the firm. Here, we discuss the outcomes of creating customer value: customerloyalty and retention, share of market and share of customer, and customer equity.

Customer lifetime value

The value of the entire stream ofpurchases a customer makes over alifetime of patronage.

Creating Customer Loyalty and Retention

Good customer relationship management creates customer satisfaction. In turn, satisfiedcustomers remain loyal and talk favorably to others about the company and its products.Studies show big differences in the loyalty between satisfied and dissatisfied customers.Even slight dissatisfaction can create an enormous drop in loyalty. Thus, the aim of customer relationship management is to create not only customer satisfaction but also customer delight.

Keeping customers loyal makes good economic sense. Loyal customers spend moreand stay around longer. Research also shows that it's five times cheaper to keep an oldcustomer than acquire a new one. Conversely, customer defections can be costly. Losing acustomer means losing more than a single sale. It means losing the entire stream of purchases that the customer would make over a lifetime of patronage. For example, here is aclassic illustration of customer lifetime value:20

• Customer lifetime value: To keep customers coming back, Stew

Leonard’s has created the "Disneyland of dairy stores.” Rule #1: Thecustomer is always right.Rule #2: If the customer isever wrong,rereadRule #1.

Courtesy of Stew Leonard's

Stew Leonard, who operates a highly profitableseven-storesupermarket in Connecticut, NewJersey, and New York,once said that he saw $50,000flying out of his storeeverytime he sawa sulking customer. Why? Becausehis averagecustomerspent about $100aweek,shopped50 weeksa year,and remained in the area for about 10years.If this customerhad anunhappyexperienceand switchedto anothersupermarket, StewLeonard's lost $50,000in lifetime revenue.The loss could bemuch greater if the disappointed customershared the bad experience with other customers andcausedthem to defect.

To keepcustomers comingback, Stew Leonard’s has createdwhat has been calledthe "Disneyland of Dairy Stores," completewith costumed characters, scheduledentertainment,apetting zoo, and animatronics throughout the store.Fromits humble beginnings as a small dairy store in 1969, StewLeonard’shas grown atan amazing pace. It's built 30additions onto the originalstore, which now serves more than300,000 customerseach week. • This legion of loyalshoppers is largelyaresult of thestore's passionate approachtocustomer service. "Rule #1: The customer is alwaysright.Rule #2:If thecustomer is everwrong, rereadrule #1."

Stew Leonard's is not alone in assessing customer lifetime value. Lexus, for example, estimates that a single satisfied

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40 PART 1 Defining Marketingand theMarketing Process

Share of customer

The portion of the customer's purchasingthat a company gets in its productcategories.

and loyal customer is worth more than $600,000 in lifetime sales, and the estimated lifetimevalue of a Starbucks customer is more than $14,000.21 In fact, a company can lose money ona specific transaction but still benefit greatly from a long-term relationship. This means thatcompanies must aim high in building customer relationships. Customer delight creates anemotional relationship with a brand, not just a rational preference. And that relationship keepscustomers coming back.

Growing Share of Customer

Beyond simply retaining good customers to capture customer lifetime value, good customerrelationship management can help marketers increase their share of customer—theshare they get of the customer's purchasing in their product categories. Thus, banks wantto increase "share of wallet." Supermarkets and restaurants want to get more "share ofstomach." Car companies want to increase "share of garage," and airlines want greater"share of travel."

To increase share of customer, firms can offer greater variety to current customers. Orthey can create programs to cross-sell and up-sell to market more products and services toexisting customers. For example, Amazon is highly skilled at leveraging relationships withits more than 310 million customers worldwide to increase its share of each customer'sspending budget:22

Once theylogontoAmazon.com,customersoftenbuy morethanthey intend, and Amazondoes allit can to helpmakethat happen. The online giant continues to broaden its merchandiseassortment,carrying hundreds of millionsof products and creating an ideal spot forone-stop shopping. And based on eachcustomer's purchaseandsearchhistory, the companyrecommends related products thatmight be of interest. This recommendation system influences some 35 percentof allsales. Amazon's ingenious AmazonPrime and Amazon PrimeNow shippingprograms have alsohelpedboost its share ofcustomers' wallets. Accordingtoone analyst,the AmazonPrime "converts casualshoppers,whogorgeon the gratification ofhaving purchasesreliably appear two days [or even two hours] after theorder, into Amazonaddicts." Andthat's justonline. To dig even deeper into customers' wallets, Amazon is nowexpandingrapidly to the brick-and-mortar world, opening physical storesto selleverythingfrom groceriesto consumerelectronics.

Customer equity

The totalcombined customer lifetimevalues of a1!cf the company'scustomers.

Building Customer Equity

We can now see the importance of not only acquiring customers but also keeping andgrowing them. The value of a company comes from the value of its current and futurecustomers. Customer relationship management takes a long-term view. Companies wantto not only create profitable customers but also "own" them for life, earn a greater share oftheir purchases, and capture their customer lifetime value.

What Is Customer Equity? The ultimate aim of customer relationship management

is to produce high customer equity.23 Customer equity is the total combined customerlifetime values of all of the company's current and potential customers. As such, it's ameasure of the future value of the company's customer base. Clearly, the more loyalthe firm's profitable customers, the higher its customer equity. Customer equity may bea better measure of a firm's performance than current sales or market share. Whereassales and market share reflect the past and present, customer equity suggests the future.Consider Cadillac:24

In the 1970sand1980s,Cadillac had someofthemost loyal customersin the industry. To an entiregeneration of car buyers,thename Cadillac defined "The Standard of theWorld." Cadillac'sshare of the luxury car market reached a whopping 51 percentin 1976,and based on marketshareand sales, thebrand's future looked rosy. However, measures of customer equitywouldhave painted a bleakerpicture. Cadillac customerswere getting older (average age 60), andaverage customer lifetime value was falling. Many Cadillac buyers wereon their last cars. Thus,although Cadillac'smarket share was good, itscustomerequity was not.

Comparethis with BMW.Its moreyouthful and vigorous image didn't win BMW theearlymarket share war.However, it didwinBMW youngercustomers (averageage about 40)with highercustomer lifetime values. Theresult: Inthe years thatfollowed, BMW'smarketshare and profits soared while Cadillac's fortunes eroded badly. BMWovertook Cadillac inthe 1980s. Inthe years that followed, Cadillac struggledto make the Caddycoolagain with

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CHAPTER 1 Marketing:Creating Customer Valueand Engagement 41

edgier,high-performance designs thattargetayoungergeneration of consumers.More recently,the brand has emphasized marketing pitchesbased

position it more effectively against the likesof BMWand Audi. •It is focusing on high-design luxurySUVs andcrossovers,and GM recently announcedthat "Cadillac willleadthe company to an all-electricfuture" with itsfirst fully electric vehicle.As a result,although itstill lags otherluxury brands, Cadillac'sshare of theluxury car market has rebounded modestly in recent years.The moral:Marketers shouldcare not just about current sales and marketshare.Customer lifetimevalueandcustomer equityare thenameof thegame.

Building the Right Relationships withthe Right Customers. Companies should

manage customer equity carefully. They should view customers as assets that need tobe managed and maximized. But not all customers, not even all loyal customers, aregood investments. Surprisingly, some loyal customers can be unprofitable, and somedisloyal customers can be profitable. Which customers should the company acquireand retain?

The company can classify customers according to their potential profitability andmanage its relationships with them accordingly. • Figure 1.5 classifies customersinto one of four relationship groups, according to their profitability and projectedloyalty.25 Each group requires a different relationship management strategy. Strangersshow low potential profitability and little projected loyalty. There is little fit betweenthe company's offerings and their needs. The relationship management strategy forthese customers is simple: Don't invest anything in them; make money on everytransaction.

Butterflies are potentially profitable but not loyal. There is a good fit between thecompany's offerings and their needs. However, like real butterflies, we can enjoy themfor only a short while and then they're gone. An example is stock market investors whotrade shares often and in large amounts but who enjoy hunting out the best deals without building a regular relationship with any single brokerage company. Efforts to convertbutterflies into loyal customers are rarely successful. Instead, the company should enjoythe butterflies for the moment. It should create satisfying and profitable transactions withthem, capturing as much of their business as possible in the short time during which theybuy from the company. Then it should move on and cease investing in them until the nexttime around.

•Managing customer equity: To increase customer equity, Cadillac ismaking theclassic car coolagain among younger buyers. For example, saysGM, “Cadillac will lead the company toan all-electric future.”

General Motors

True friends are both profitable and loyal. There is a strong fit between their needsand the company's offerings. The firm wants to make continuous relationship invest-

• FIGURE 1.5

Customer Relationship Groups

ments to delight these customers and engage, nurture, retain, andgrow them. It wants to turn true friends into true believers, whocome back regularly and tell others about their good experienceswith the company.

Barnacles are highly loyal but not very profitable. There is a limited fit between their needs and the company's offerings. An example is smaller bank customers who bank regularly but do not generate enough returns to cover the costs of maintaining their accounts.Like barnacles on the hull of a ship, they create drag. Barnacles areperhaps the most problematic customers. The company might beable to improve their profitability by selling them more, raising theirfees, or reducing service to them. However, if they cannot be madeprofitable, they should be "fired."

For example, Best Buy offers an attractive returns policy but hasfound that a small segment of customers abuses this policy. So ituses an outside firm, Retail Equation, to track and score individualcustomer returns behavior. The system is designed to identify the 1percent of shoppers whose behavior suggests returns fraud or abuse.

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42 PARTDefining Marketingand the Marketing Process

A shopper who exceeds a certain score is informed that future returns will be denied, evenif it means losing the customer. "You could do things that are inside the posted rules, butif you are violating tire intent of the rules, like every item you're purchasing you're usingand then returning, then at a certain point you become not a profitable customer for [BestBuy]," says a Retail Equation executive.26

The point here is an important one: Different types of customers require different engagement and relationship management strategies. The goal is to build the right relationships with the right customers.

f Author I Marketing doesn't takeComment I place in a vacuum. Nowthat we've discussed the five steps inthe marketing precess, let’s look athow the ever-changing marketplaceaffects both consumers and themarketers who serve them. We'll lookmore deeply into these and othermarketing environment factors inChapter 3.

k_______ _______________________J

TheChanging MarketingLandscape

OBJECTIVE 1-5 Describe the major trends andforces that are changing themarketing landscapein this age ofrelationships.

Every' day, dramatic changes are occurring in the marketplace. Richard Love of HP observed, "The pace of change is so rapid that the ability to change has now become a competitive advantage." Yogi Berra, the legendary New York Yankees catcher and manager,summed it up more simply when he said, "The future ain't what it used to be." As themarketplace changes, so must those who serve it.

In this section, we examine the major trends and forces that are changing the marketing landscape and challenging marketing strategy. We look at four major developments:the digital age, the growth of not-for-profit marketing, rapid globalization, and the call forsustainable marketing practices.

Internetof Things (loT)

A global environment where everythingand everyone is digitally connected toeverything and everyone else.

Digital and social mediamarketing

Using digital marketing tools such as'websites, social media, mobile appsand ads, onlinevideo, email, and blogsto engageconsumers anywhere, at anytime, via theirdigital devices.

TheDigitalAge: Online, Mobile, and Social

The explosive growth in digital technology has fundamentally changed the way we live—how we communicate, share information, access entertainment, and shop. Welcome to theage of the Internet of Things (loT), a global environment where everything and everyoneis digitally connected to everything and everyone else. More than 4 billion people—55 percent of the world's population—are now online; almost 80 percent of all American adultsown smartphones. These numbers will only grow as digital technology rockets into thefuture.27

Most consumers are totally smitten with all things digital. For example, accordingto one study, 71 percent of Americans keep their mobile phone next to them when theysleep; 3 percent sleep with phone in hand. Six in 10 young adults in the United States useprimarily online streaming services to watch TV, and 85 percent of U.S. adults get theirnews via mobile devices. Importantly to marketers, 79 percent of smartphone users havemade a purchase online using a mobile device, and an estimated 80 percent of shoppershave used a phone in stores to look up product reviews or compare prices as they shop.28The consumer love affair with digital and mobile technology makes it fertile groundfor marketers trying to engage customers. So it's no surprise that the internet and rapid advances in digital and social media have taken the marketing world by storm. Digital andsocial media marketing involves using digital marketing tools such as websites, socialmedia, mobile ads and apps, online video, email, blogs, and other digital platforms to engage consumers anywhere, anytime via their computers, smartphones, tablets, internetready TVs, and other digital devices. These days, almost every company is reaching out tocustomers with multiple websites, newsy tweets and Facebook pages, Instagram posts andSnapchat stories, viral ads and videos posted on YouTube, rich-media emails, and mobileapps that solve consumer problems and help them shop.

At the most basic level, marketers set up company and brand websites that provideinformation and promote the company's products. Many companies also set up onlinebrand community sites, where customers can congregate and exchange brand-related interests and information. For example, beauty products retailer Sephora's Beauty InsiderCommunity—"the world's largest beauty forum"—is a thriving online communitywhere customers can ask questions, share ideas and reviews, post photos, and get

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Principles of marketing - Philip Kotler, Gary Armstrong with Marc Oliver Opresnik