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P

R I N C

L E S

Vlarketinq
Global Edition
PHILIP KOTLER
Northwestern University

GARY ARMSTRONG
University of North Carolina

Upper Saddle River Boston Columbus San Francisco New York


Indianapolis London Toronto Sydney Singapore Tokyo Montreal
Dubai Madrid Hong Kong Mexico City Munich Paris Amsterdam Cape Town

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Contents
Marketing Strategy and the Marketing Mix 72
Customer-Driven Marketing Strategy 72 j Developing an
Integrated Marketing Mix 76

Managing the Marketing Effort 77

9V
Marketing: Creating and Capturing
Customer Value 26
I What Is Marketing? 28
.i

Marketing Defined 29 | The Marketing Process 29

Understanding the Marketplace and Customer


Needs 30
Customer Needs, Wants, and Demands 30 j Market Offerings
Products, Services, and Experiences 30 | Customer Value and
Satisfaction 31 | Exchanges and Relationships 31 | Markets 31

Designing a Customer-Driven Marketing Strategy 32


Selecting Customers to Serve 32 j Choosing a Value
Proposition 33 | Marketing Management Orientations 33

Preparing an Integrated Marketing Plan and


Program 36
Building Customer Relationships 36
Customer Relationship Management 37 | The Changing
Nature of Customer Relationships 40 | Partner Relationship
Management 43
/

Capturing Value from Customers 45


Creating Customer Loyalty and Retention 45 ! Growing Share
of Customer 46 | Building Customer Equity 47

Marketing Analysis 77 j Marketing Planning 78 | Marketing


Implementation 79 j Marketing Department Organization 80
Marketing Control 81

Measuring and Managing Return on Marketing


Investment 81
Reviewing Objectives and Key Terms 83 | Key Terms 84 |
Discussing & Applying the Concepts 84 | Focus on
Technology 85 | Focus on Ethics 85 | Marketing by the
Numbers 85
Video Case: Live Nation- 86
C o m p a n y Case: Bahrain Bay: Building Customer Relations for
the Future 86

0-3
Analyzing the Marketing
Environment 88
The Company's Microenvironment 90
Chapter 3

The Company 91 | Suppliers 91 | Marketing


Intermediaries 91 | Competitors 92 j Publics 93
Customers 93

The Company's Macroenvironment 94

The Changing Marketing Landscape 49


The Digital Age 49 | Rapid Globalization 50 j The Call for
More Ethics and Social Responsibility 51 j The Growth of
Not-for-Prof it Marketing 52
" '

Demographic Environment 94 | Economic Environment 103


Natural Environment 105 j Technological Environment 106 |
Political and Social Environment 108 | Cultural Environment 111

So, What is Marketing? Pulling It All Together 53

Responding to the Marketing Environment 115

Reviewing Objectives and Key Terms 54 | Key Terms 56 |


Discussing & Applying the Concepts 56 | Focus on
Technology 56 | Focus on Ethics 57 | Marketing by the
Numbers 57
Video Case: Harley-Davidson 57
Company Case: Build-A-Bear: Build-A-Memory 58

Reviewing Objectives and Key Terms 117 | Key Terms 118 |


Discussing & Applying the Concepts 118 | Focus on
Technology 119 | Focus on Ethics 119 | Marketing by the
Numbers 119
Video Case: TOMS Shoes 119
C o m p a n y Case: Prius: Leading a Wave of Hybrids 120

Chapter 2

Company and Marketing Strategy:


Partnering to Build Customer
Relationships 60
Companywide Strategic Planning: Defining
Marketing's Role 62
Defining a Market-Oriented Mission 63 | Setting Company
Objectives and Goals 64 j Designing the Business Portfolio 65

Planning Marketing: Partnering to Build Customer


Relationships 70
Partnering with Other Company Departments 70
with Others in the Marketing System 71

Partnering

Chapter 4

Managing Marketing Information


to Gain Customer Insights 122
Marketing Information and Customer Insights 123
Assessing Marketing Information Needs 126
Developing Marketing Information 126
Internal Data 126 j Marketing Intelligence 127

Marketing Research 129


Defining the Problem and Research Objectives 129 [ Developing
the Research Plan 130 | Gathering Secondary Data 131 ;
Primary Data Collection 133 j Implementing the Research
Plan 143 j Interpreting and Reporting the Findings 143

11

12

Contents

Analyzing and Using Marketing Information 144


Customer Relationship Management (CRM) 144 | Distributing
and Using Marketing Information 146
Other Marketing Information Considerations 146
Marketing Research in Small Businesses and Nonprofit
Organizations 146 j International Marketing Research 148
Public Policy and Ethics in Marketing Research 149
Reviewing Objectives and Key Terms 153 | Key Terms 154
Discussing & Applying the Concepts 154 | Focus on
Technology 154 | Focus on Ethics 155 | Marketing by the
Numbers 155
Video Case: ZIBA 155
C o m p a n y Case: Enterprise Rent-A-Car: Measuring Service
Quality 156
Chapter 5

Consumer Markets and Consumer


Buyer Behavior 158

Model of Consumer Behavior 160


Characteristics Affecting Consumer Behavior 161
Cultural Factors 161 | Social Factors 164 Personal
Factors 170 | Psychological Factors 172
Types of Buying Decision Behavior 176
Complex Buying Behavior 176 | Dissonance-Reducing Buying
Behavior 176 | Habitual Buying Behavior 176 |
Variety-Seeking Buying Behavior 177
The Buyer Decision Process 177
Need Recognition 178 | information Search 178 j Evaluation
of Alternatives 178 | Purchase Decision 179 | Postpurchase
Behavior 179
The Buyer Decision Process for New Products 181
Stages in the Adoption Process 182 j Individual Differences
in Innovativeness 182 j Influence of Product Characteristics
on Rate of Adoption 183 | Reviewing Objectives and Key
Terms 183 | Key Terms 184 | Discussing & Applying the
Concepts 185 | Focus on Technology 185 | Focus on
Ethics 186 | Marketing by the Numbers 186
Video Case: Wild Planet 186
C o m p a n y Case: Arabic Blackberry: Adapting to the
Language of the Market 187

Business Markets and Business


Buyer Behavior 190
Business Markets 192
Chapter 6

Market Structure and Demand 193 j Nature of the Buying


Unit 194 | Types of Decisions and the Decision Process 194
Business Buyer Behavior 196
Major Types of Buying Situations 197 j Participants in the
Business Buying Process 198 | Major Influences on Business
Buyers 199 | The Business Buying Process 200 |
E-Procurement: Buying on the Internet 204
Institutional and Government Markets 205
Institutional Markets 205 | Government Markets 206 j
Reviewing Objectives and Key Terms 208 | Key Terms 209 |
Discussing & Applying the Concepts 209 | Focus on
Technology 210 | Focus on Ethics 210 | Marketing by the
Numbers 210
Video Case: Eaton 211
C o m p a n y Case: Boeing: Selling a Dream(liner) 211

Chapter 7

Customer-Driven Marketing
Strategy: Creating Value
for Target Customers 214

Market Segmentation 216


Segmenting Consumer Markets 216 | Segmenting Business
Markets 222 j Segmenting International Markets 223 |
Requirements for Effective Segmentation 224
Market Targeting 225
Evaluating Market Segments 225 ; Selecting Target Market
Segments 225 j Socially Responsible Target Marketing 232
Differentiation and Positioning 233
Positioning Maps 233 | Choosing a Differentiation and
Positioning Strategy 234 j Communicating and Delivering
the Chosen Position 241 | Reviewing Objectives and Key
Terms 241 | Key Terms 242 | Discussing & Applying the
Concepts 242 | Focus on Technology 243 | Focus on
Ethics 243 | Marketing by the Numbers 243 |
Video Case: Meredith 244
Company Case: Sport England: Segmenting the British Sports
Market 244
Chapter 8

Products, Services, and Brands:


Building Customer Value 246

What Is a Product? 248


Products, Services, and Experiences 248 | Levels of Product
and Services 249 | Product and Service Classifications 250
Product and Service Decisions 253
Individual Product and Service Decisions 253 | Product Line
Decisions 258 | Product Mix Decisions 258
Branding Strategy: Building Strong Brands 259
Brand Equity 260 j Building Strong Brands 262 | Managing
Brands 268
Services Marketing 268
Nature and Characteristics of a Service 268 j Marketing
Strategies for Service Firms 270 ! Reviewing Objectives and
Key Terms 275 | Key Terms 276 | Discussing & Applying
the Concepts 276 | Focus on Technology 277 | Focus on
Ethics 277 | Marketing by the Numbers 277
Video Case: Swiss Army Brands 278
Company Case: Britvic: Creating a Brand Flavor 278
Chapter 9

New-Product Development and


Product Life-Cycle Strategies 280

New-Product Development Strategy 282


The New-Product Development Process 283
Idea Generation 283 | Idea Screening 286 | Concept
Development and Testing 286 j Marketing Strategy
Development 287 | Business Analysis 288
Product
Development 288 j Test Marketing 289
Commercialization 292

Contents
Managing New-Product Development 292
Customer-Centered New-Product Development 293
Team-Based New-Product Development 293 j Systematic
New-Product Development 295

Product Life-Cycle Strategies 296


Introduction Stage 300 ; Growth Stage 300 | Maturity
Stage 301 | Decline Stage 302

Additional Product and Service Considerations 304


Product Decisions and Social Responsibility 304 | International
Product and Services Marketing 304 | Reviewing Objectives
and Key Terms 306 | Key Terms 307 | Discussing &
Applying the Concepts 307 | Focus on Technology 308
Focus on Ethics 308 | Marketing by the Numbers 308
Video Case: Electrolux 309
Company Case: Nintendo: Reviving a Company, Transforming
a Market 309

13

Marketing Channels: Delivering


Customer Value 360
Supply Chains and the Value Delivery Network 361
The Nature and Importance of Marketing
Channels 363
Chapter 12

How Channel Members Add Value 363 j Number of Channel


Levels 365

Channel Behavior and Organization 366


Channel Behavior 366 | Vertical Marketing Systems 367 |
Horizontal Marketing Systems 369 | Multichannel Distribution
Systems 370 I Changing Channel Organization 371

Channel Design Decisions 372


Analyzing Consumer Needs 373 | Setting Channel Objectives
374 | Identifying Major Alternatives 374 | Evaluating the
Major Alternatives 375 | Designing International Distribution
Channels 376

Channel Management Decisions 376


Chapter 10

Pricing: Understanding and


Capturing Customer Value 312

Selecting Channel Members 376 | Managing and Motivating


Channel Members 377 [ Evaluating Channel Members 378

What Is a Price? 314


Factors to Consider When Setting Prices 315

Public Policy and Distribution Decisions 379


Marketing Logistics and Supply Chain
Management 380

Customer Perceptions of Value 315 ; Company and Product


Costs 319 | Other Internal and External Considerations
Affecting Price Decisions 323 j Reviewing Objectives and
Key Terms 330 | Key Terms 331 | Discussing & Applying
the Concepts 331 | Focus on Technology 331 | Focus on
Ethics 331 | Marketing by the Numbers 332
Video Case: IKEA 332
Company Case: easyjet: Staying Ahead in the Pricing
Game 332
/

Nature and Importance of Marketing Logistics 380 j Goals of


the Logistics System 381 | Major Logistics Functions 382 |
Integrated Logistics Management 385 Reviewing Objectives
and Key Terms 387
Key Terms 388 Discussing &
Applying the Concepts 388 | Focus on Technology 389 |
Focus on Ethics 389 [ Marketing by the Numbers 389
V i d e o Case: Progressive 390
C o m p a n y Case: Zara: The Technology Giant of the Fashion
World 390

Chapter 11

Pricing Strategies 334


New-Product Pricing Strategies 336
Market-Skimming Pricing 336 j Market-Penetration
Pricing 337

Product Mix Pricing Strategies 337


Product Line Pricing 337 | Optional-Product Pricing 338 j
Captive-Product Pricing 338 | By-Product Pricing 339 !
Product Bundle Pricing 339

Price-Adjustment Strategies 339


Discount and Allowance Pricing 339 | Segmented Pricing 340
Psychological Pricing 341 | Promotional Pricing 344 |
Geographical Pricing 344 j Dynamic Pricing 346 |
International Pricing 347

Chapter 13

Retailing and Wholesaling 392

Retailing 394
Types of Retailers 394 j Retailer Marketing Decisions 402 |
The Future of Retailing 408

Wholesaling 413
Types of Wholesalers 414 \ Wholesaler Marketing
Decisions 414 j Trends in Wholesaling 417 | Reviewing
Objectives and Key Terms 419 | Key Terms 419 |
Discussing & Applying the Concepts 420 | Focus on
Technology 420 | Focus on Ethics 420 | Marketing by the
Numbers 421
V i d e o Case: Wellbeing 421
C o m p a n y Case: Whole Foods: A Whole-istic Strategy 421

Price Changes 324


Initiating Price Changes 348 | Responding to Price
Changes 350

Public Policy and Pricing 351


Pricing Within Channel Levels 352 j Pricing Across Channel
Levels 354 | Reviewing Objectives and Key Terms 355 |
Key Terms 355 | Discussing & Applying the Concepts 356 |
Focus on Technology 356 | Focus on Ethics 356 | Marketing
by the Numbers 357
Video Case: General Electric 357
Company Case: Payless ShoeSource: Paying Less for
Fashion 357

Chapter 14

Communicating Customer Value:


Integrated Marketing
Communications Strategy 424
The Promotion Mix 426
Integrated Marketing Communications 427
The New Marketing Communications Landscape 427 ] The
Shifting Marketing Communications Model 428 | The Need for
Integrated Marketing Communications 429

A View of the Communication Process 431

14

Contents

Steps in Developing Effective Marketing


Communication 433
Identifying the Target Audience 433 j Determining the
Communication Objectives 433 ] Designing a Message 434 |
Choosing Media 436 | Selecting the Message Source 438
Collecting Feedback 438
Setting the Total Promotion Budget and Mix 439
Setting the Total Promotion Budget 439 | Shaping the Overall
Promotion Mix 440 j Integrating the Promotion Mix 444
Socially Responsible Marketing
Communication 445
Advertising and Sales Promotion 445 ; Personal Selling 446
Reviewing Objectives and Key Terms 446 | Key Terms 447 |
Discussing & Applying the Concepts 447 | Focus on
Technology 448 | Focus on Ethics 448 | Marketing by the
Numbers 448
Video Case: Crispin Porter + Bogusky 449
Company Case: Burger King: Promoting a Food Fight 449

Chapter 15

Advertising and Public


Relations 452

Advertising 454
Setting Advertising Objectives 455 Setting the Advertising
Budget 456 | Developing Advertising Strategy 457
Evaluating Advertising Effectiveness and Return on Advertising
Investment 467 Other Advertising Considerations 468
Public Relations 472*
The Role and Impact of Public Relations 472 | Major Public
Relations Tools 474 | Reviewing Objectives and Key
Terms 475 | Key Terms 476 | Discussing & Applying the
Concepts 476 | Focus on Technology 477 | Focus on
Ethics 477 | Marketing by the Numbers 477
Video Case: ETRADE 478
Company Case: Coca-Cola: Another Advertising Hit 478

Chapter 16

Personal Selling and Sales


Promotion 480

Personal Selling 482


The Nature of Personal Selling 482 | The Role of the Sales
Force 483
Managing the Sales Force 485
Designing Sales Force Strategy and Structure 485 j Recruiting
and Selecting Salespeople 490 | Training Salespeople 491 j
Compensating Salespeople 492 j Supervising and Motivating
Salespeople 493 | Evaluating Salespeople and Sales Force
Performance 495
The Personal Selling Process 496
Steps in the Selling Process 496 j Personal Selling and
Managing Customer Relationships 499
Sales Promotion 499
Rapid Growth of Sales Promotion 501 | Sales Promotion
Objectives 502 | Major Sales Promotion Tools 503 I
Developing the Sales Promotion Program 506 j Reviewing
Objectives and Key Terms 507 | Key Terms 508

Discussing & Applying the Concepts 508 | Focus on


Technology 508 | Focus on Ethics 509 | Marketing by the
Numbers 509
Video Case: The Principal Financial Group 509
C o m p a n y Case: Procter & Gamble: Selling Through Customer
Business Development 510
Chapter 17

Direct and Online Marketing:


Building Direct Customer
Relationships 512

The New Direct Marketing Model 514


Growth and Benefits of Direct Marketing 515
Benefits to Buyers 516 | Benefits to Sellers 516
Customer Databases and Direct Marketing 517
Forms of Direct Marketing 519
Direct-Mail Marketing 519 ] Catalog Marketing 520
Telephone Marketing 521 i Direct-Response Television
Marketing 523 j Kiosk Marketing 525 | New Digital Direct
Marketing Technologies 525
Online Marketing 528
Marketing and the Internet 528- j Online Marketing
Domains 529 | Setting Up an Online Marketing Presence 532 |
The Promise and Challenges of Online Marketing 540
Public Policy Issues in Direct Marketing 541
Irritation, Unfairness, Deception, and Fraud 541 | Invasion of
Privacy 542 j A Need for Action 543 j Reviewing Objectives
and Key Terms 544 | Key Terms 545 | Discussing & Applying
the Concepts 545 | Focus on Technology 545 | Focus on
Ethics 546 | Marketing by the Numbers 546
Video Case: Google 546
C o m p a n y Case: Viagogo: Online Ticket Reselling Wars Begin in
Europe 547

J
Creating Competitive
Advantage 550
Competitor Analysis 552
Chapter 18

Identifying Competitors 552 | Assessing Competitors 554


Selecting Competitors to Attack and Avoid 555 | Designing a
Competitive Intelligence System 558
Competitive Strategies 558
Approaches to Marketing Strategy 558 j Basic Competitive
Strategies 560 | Competitive Positions 561 | Market Leader
Strategies 563 | Market Challenger Strategies 566 | Market
Follower Strategies 567 | Market Nicher Strategies 567
Balancing Customer and Competitor
Orientations 570
Reviewing Objectives and Key Terms 571 | Key Terms 571
Discussing & Applying the Concepts 571 | Focus on
Technology 572 | Focus on Ethics 572 | Marketing by the
Numbers 572
Video Case: Umpqua Bank 573
C o m p a n y Case: Bose: Competing by Being Truly Different 573

Contents
Chapter 19 The Global Marketplace 576
Global Marketing Today 578
Looking at the Global Marketing Environment 580
The International Trade System 580 j Economic
Environment 582 ; Political-Legal Environment 583 j
Cultural Environment 584

Deciding Whether to Go Global 587


Deciding Which Markets to Enter 588
Deciding How to Enter the Market 590
Exporting 590 j Joint Venturing 590 j Direct Investment 592

Deciding on the Global Marketing Program 592


Product 593 | Promotion 595 j Price 596 | Distribution
Channels 598

Deciding on the Global Marketing


Organization 599
Reviewing Objectives and Key Terms 600 | Key Terms 601 |
Discussing & Applying the Concepts 601 | Focus on
Technology 602 | Focus on Ethics 602 | Marketing by the
Numbers 602
Video Case: Nivea 603
Company Case: Nokia: Envisioning a Connected World 603

Chapter 20

Sustainable Marketing: Social


Responsibility and Ethics 606

Sustainable Marketing 608

15

Social Criticisms of Marketing 610


Marketing's Impact on Individual Consumers 610 !
Marketing's Impact on Society as a Whole 615 | Marketing's
Impact on Other Businesses 618

Consumer Actions to Promote Sustainable


Marketing 619
Consumerism 619 | Environmentalism 620 ! Public Actions
to Regulate Marketing 623

Business Actions Toward Sustainable Marketing 626


Sustainable Marketing Principles 626 | Marketing Ethics 629 j
The Sustainable Company 632 Reviewing Objectives and Key
Terms 633 Key Terms 634 Discussing & Applying the
Concepts 634 | Focus on Technology 634 | Focus on
Ethics 635 | Marketing by the Numbers 635
V i d e o Case: Land Rover 635
C o m p a n y Case: ExxonMobil: Social Responsibility in a
Commodity Market 636

Appendix 1: Marketing Plan Al


Appendix 2: Marketing by the Numbers Al 1
Appendix 3: Careers in Marketing A29
References Rl
Glossary Gl
Credits Cl
Index II