Marketing Sixth Edition Dhruv Grewal, PhD Babson College .

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MarketingSixth EditionDhruv Grewal, PhDBabson CollegeMichael Levy, PhDBabson College

table of contentsSECTION 11ASSESSING THE MARKETPLACEOVERVIEW OF MARKETING12WHAT IS MARKETING? 4Marketing Is about Satisfying Customer Needs and Wants 5Marketing Entails an Exchange 5Marketing Requires Product, Price, Place, and Promotion Decisions 6Superior Service 1.1: A Service for Fliers, a Moneymaker for JetBlue Airlines:Wi-Fi-Enabled Shopping in the Air 8Marketing Analytics 1.1: Location, Location, Analytics: Starbucks' Use of Datato Place New Stores 9Marketing Can Be Performed by Individuais and Organization 10Marketing Affects Various Stakeholders 11Marketing Helps Create Value 12Adding Value 1.1: The Meaning of Best Value: Whole Foods' Purpose-BasedMarketing 14How Do Marketing Firms Become More Value Driven? 14Social & Mobile Marketing 1.1: What Comes Around: Marketing Today 16WHY IS MARKETING IMPORTANT? 17 Charley Gallay/Getty ImagesMarketing Expands Firms' Global Presence 18Marketing Is Pervasive across Marketing Channel Members 19Marketing Enriches Society 19Ethical & Societal Dilemma 1.1: Free Fruit for Children: What Could 6oWrong? 20Marketing Can Be Entrepreneurial 21Reviewing Learning Objectives 22Key Terms 23Marketing Digitally 23Marketing Applications 23Quiz Yourself 24Chapter Case Study: Front Beans to Pralines: The Global Chocolate Market242 DEVELOPING MARKETING STRATEGIESAND A MARKETING PLAN 28WHAT ISA MARKETING STRATEGY? 30Customer Excellence 32Superior Service 2.1: Amazon Is about Products, Delivery, Prices,and Now Home Services 33Operational Excellence 34Product Excellence 34Locational Excellence 34Multiple Sources of Advantage 35». , CALEB'5CALEBv Craig Barritt/Getty ImagesXXV

table of ContentsTHE MARKETING PLAN 35Step 1: Define the Business Mission 36Step 2: Conduct a Situation Analysis 37Adding Value 2.1: Small Coke Gans: Are Consumers Paying More forLess, or Are They Just Paying to Get What They Want? 39Step 3: Identify and Evaluate Opportunides Using STP (Segmentation,Targeting, and Positioning) 40Step 4: Implement Marketing Mix and Allocate Resources 41Step 5: Evaluate Performance Using Marketing Metrics 43Social & Mobile Marketing 2.1: Making Snapchat More Strategie: HowCoverGirl Uses Geotargeting to Leverage the Marketing Potential ofa Fun App 44Ethical & Societal Dilemma 2.1: Volkswagens "Dieselgate" Scandal 45Marketing Analytics 2.1: The First Name in Predictive Analytics:Google 47Strategie Flanning Is Not Sequential 50GROWTH STRATEGIES 51Market Penetration 51Market Development 51Product Development 51Diversification 52Reviewing Learning Objectives 52Key Terms 54Marketing Digitally 54Marketing Applications 54Quiz Yourself 55Toolkit SWOT Analysis 55Chapter Case Study: The Coffee Wars 55Appendix 2A: Writing a Marketing Plan 613 SOCIAL AND MOBILE MARKETING80THE 4E FRAMEWORK FOR SOCIAL MEDIA 82Excite the Customer 83Social & Mobile Marketing 3.1: Late-Night Laughsto Order 84Educate the Customer 84Experience the Product or Service 85Adding Value 3.1: Educating Customers Using HubSpot 86Engage the Customer 86THE WHEELOF SOCIAL MEDIA ENGAGEMENT 88The Information Effect 88The Connected Effect 89The Network Effect 90The Dynamic Effect 90The Timeliness Effect 91CATEGORIESOF SOCIAL MEDIA 92

table of ContentsxxviiSocial Network Sites 92Adding Value 3.2: Mercedes-Benz Is Linkedln 94Media-Sharing Sites 95Thought-Sharing Sites 96Ethical & Societal Dilemma 3.1: The Most Powerful and Appealing TargetMarket Might Be . Your Mom? 98GOING MOBILE AND SOCIAL 99App Pricing Models 100HOW DO FIRMS ENGAGE THEIR CUSTOMERS USING SOCIAL MEDIA? 101Listen 102Analyze 103Marketing Analytics 3.1: Rinding a Perfect Match: How eHarmony LeveragesUsers' Data to Identify Dates—and Their Consumption Patterns 104Do 105Marketing Analytics 3.2: Measuring the Coolest Times: A Billboard Chart forthe Popularity of Music-Related Tweets 108Reviewing Learning Objectives 109Key Terms 109Marketing Digitally 109Marketing Applications 110Quiz Yourself 110Chapter Case Study: Images, Sales, Brands: How Red Bull Uses Various Social MediaTechniques to Achieve All Its Objectives 1104 CONSCIOUS MARKETING, CORPORATE SOCIAL RESPONSIBILITY,AND ETHICS 116CONSCIOUS MARKETING 119MARKETINGS GREATER PURPOSE: CORPORATE SOCIAL RESPONSIBILITY AS ANELEMENT OF CONSCIOUS MARKETING 121THE STAKEHOLDERS OF CONSCIOUS MARKETING 122Employees 123Marketing Analytics 4.1: How Kellogg's Uses Analytics to Address GMOOoncerns 124Customers 124Marketplace 125Adding Value 4.1: Walmart Wants to Be the Corporate "Good Guy" 126Society 126Environment 127INTEGRATING CONSCIOUS MARKETING THROUGHOUT THE FIRM: LEADERSHIPAND CULTURE 127Flanning Phase 127Implementation Phase 128Social & Mobile Marketing 4.1: How Mobile Phones and Payments Have a Viable New Market at the Bottom of the Pyramid 129Control Phase 129 jackie ellis/Alamy

xxviiitable of ContentsMARKETING ETHICS AS A CONSCIOUS MARKETING PRINCIPLE 130The Nature of Ethical and Unethical Marketing Decisions 130Ethics and Corporate Social Responsibility 131A Framework for Ethical Decision Making 132Review Learning Objectives 136Key Terms 137Marketing Digitally 137Marketing Applications 138Quiz Yourself 138Chapter Case Study: Is There an App for Good Parenting? 138Appendix 4A: Understanding Ethics Using Scenarios 143ANALYZING THE MARKETING ENVIRONMENT 148 B. O'Kane/AlamyA MARKETING ENVIRONMENT ANALYSIS FRAMEWORK 150THE IMMEDIATE ENVIRONMENT 151Company Capabilities 151Competitors 151Corporate Partners 152MACROENVIRONMENTAL FACTORS 153Culture 153Demographics 155Social & Mobile Marketing 5.1: Understanding Connections,Both with and by Young Consumers 156Social Trends 159Superior Service 5.1: The MinuteClinic Mobile App: The Latest ServiceExpansion by CVS 161Ethical & Societal Dilemma 5.1: Green Cereal? 162Technological Advances 162Marketing Analytics 5.1: When the Best Is Good Enough: Netflix's StellarPredictive Analytics 163Adding Value 5.1: Are We There Yet? Google s Moves to Get Us Closer toDriverless Cars 164Economic Situation 164Political/Regulatory Environment 165Responding to the Environment 166Reviewing Learning Objectives 167Key Terms 168Marketing Digitally 168Marketing Applications 168Quiz Yourself 169Chapter Case Study: A Next-Generation Cleanser 169

xxixtable of ContentsSECTION 2UNDERSTANDING THE MARKETPLACE6 CONSUMER BEHAVIOR173174THE CONSUMER DECISION PROCESS 176Need Recognition 176Marketing Analytics 6.1: Tax Time Tactics by H&R Block 178Search for Information 178Social & Mobile Marketing 6.1: The Future of Health Is Mobile 180Evaluation of Alternatives 181Ethical & Societal Dilemma 6.1: Wearing the "Healthy" Label: Natural andOrganic Foods 183Purchase and Consumption 184Postpurchase 185FACTORS INFLUENCING THE CONSUMER DECISION PROCESS 188Psychological Factors 188Ethical 6 Societal Dilemma 6.2: Can Marketing Be Life Threatening?Allegations of Unethical Practices by Pharmaceutical Firms 191Social Factors 192Situational Factors 194Adding Value 6.1: Döing Everything Right—H-E-B Supermarkets 195Social & Mobile Marketing 6.2: Ensuring Mobile Dominance through In-StorePromotion 197INVOLVEMENT AND CONSUMER BUYING DECISIONS 198Extended Problem Solving 199Limited Problem Solving 199Reviewing Learning Objectives 200Key Terms 201Marketing Digitally 202Marketing Applications 202Quiz Yourself 203Chapter Case Study: The Diet Battie—Weight Watchers, Jenny Craig, and Slim-Fast 2037 BUSINESS-TO-BUSINESS MARKETING208B2B MARKETS 211Manufacturers and Service Providers 211Marketing Analytics 7.1: Clouding over Computing PowerResellers 213213Adding Value 7.1: The "Alfonse Versant" Fashion Show: CreatingExcitement for a New Xerox Printer 214Institutions 214Government 214Social & Mobile Marketing 7.1: iPads Go to Work 215THE BUSINESS-TO-BUSINESS BUYING PROCESS 216Stage 1: Need Recognition 216Stage 2: Product Specification 216Stage 3: RFP Process 217 dpa picture alliance/Alamy

XXXtable of ContentsStage 4: Proposal Analysis, Vendor Negotiation, and Selection 217Stage 5: Order Specification 217Stage 6: Vendor Performance Assessment Using Metrics 218THE BUYING CENTER 219Organizational Culture 220Ethical & Societal Dilemma 7.1: Is It Business or Bribery? 221Building B2B Relationships 223Social & Mobile Marketing 7.2: Making the Most of Linkedln 224THE BUYING SITUATION 225Adding Value 7.2: Getting Out the Message with Inbound Marketing 227Reviewing Learning Objectives 228Key Terms 229Marketing Digitally 229Marketing Applications 230Quiz Yourself 230Chapter Case Study: Staples: The Big Box Retailer That's Really a B2B Powerhouse 2318 GLOBAL MARKETING Pascal Sittler/REA/Redux234ASSESSING GLOBAL MARKETS 237Economic Analysis Using Metrics 237Analyzing Infrastructure and Technological Capabilities 240Analyzing Governmental Actions 240Ethical & Societal Dilemma 8.1: How Chinese Regulations Change Car-BuyingPractices 241Analyzing Sociocultural Factors 244The Appeal of the BRIC Countries 246Social 6 Mobile Marketing 8.1: The Growth of Social Networking—Brazil's FreeMarket versus China s Restriction 249CHOOSINGA GLOBAL ENTRY STRATEGY 250Exporting 250Franchising 251Strategie Alliance 251Joint Venture 251Adding Value 8.1: Tata Starbucks and the Indian Coffee Culture 252Direct Investment 252CHOOSINGA GLOBAL MARKETING STRATEGY 253Target Market: Segmentation, Targeting, and Positioning 253Adding Value 8.2: Ponying Up the Latest Ford Mustang 254Reviewing Learning Objectives 258Key Terms 259Marketing Digitally 259Marketing Applications 259Quiz Yourself 260Chapter Case Study: The Globalization of the Most Ubiquitous of American Cuisines—the Hamburger 260

table of ContentsSECTION 3TARGETING THE MARKETPLACE9 SEGMENTATION, TARGETING, AND POSITIONINGxxxi265266THE SEGMENTATION, TARGETING, AND POSITIONING PROCESS 268Step 1: Establish the Overall Strategy or Objectives 268Step 2: Use Segmentation Methods 270Social & Mobile Marketing 9.1: Is Facebook Over? 272Marketing Analytics 9.1: A Complete Ecosystem for Coffee Drinkers: TheStarbucks Mobile Plan 278Step 3: Evaluate Segment Attractiveness 279 ABC Family/Courtesy Everett CollectionEthical & Societal Dilemma 9.1: Congressional Hearings and the EthicalConsiderations for Modern Loyalty Programs 280Superior Service 9.1: Symbiosis in Your Stay: How Hotels Leverage TheirProximity to Universities 281Step 4: Select a Target Market 283Step 5: Identify and Develop Positioning Strategy 286Positioning Methods 289Positioning Using Perceptual Mapping 291Reviewing Learning Objectives 294Key Terms 295Marketing Digitally 295Marketing Applications 295Quiz Yourself 296Chapter Case Study: Mercedes-Benz 29610 MARKETING RESEARCH300THE MARKETING RESEARCH PROCESS 302Marketing Research Process Step 1: Defining the Objectivesand Research Needs 303Marketing Research Process Step 2: Designing the Research 303Adding Value 10.1: A Key Motivation for Waking Teens Early on WeekendsDisappears: Breakfast All Day at McDonalds 304Marketing Research Process Step 3: Collecting the Data 304Marketing Research Process Step 4: Analyzing the Data andDeveloping Insights 305Superior Service 10.1: Did You Hit the Weights or Swim a Lap Today? YourUniversity Wants to Know—For a Good Reason 307Marketing Research Process Step 5: Developing and ImplementinganActionPlan 308SECONDARYDATA 309Inexpensive External Secondary Data 309Syndicated External Secondary Data 309Social & Mobile Marketing 10.1: Nielsen Seeds to Track Viewership,Regardless of the Media People Use to Watch 311Internal Secondary Data 312Marketing Analytics 10.1: Google Analytics Promises Movie Studiosthe Ability to Predict Performance Weeks Prior to Opening 314 David Paul Morris/Getty Images

xxxiitable of contentsPRIMARYDATACOLLECTIONTECHNIQUES 314Observation 315Social Media 316In-Depth Interviews 317Focus-Group Interviews 318Survey Research 318Panel- and Scanner-Based Research 320Experimental Research 320Advantages and Disadvantages of Primary and Secondary Research 322THE ETHICS OF USING CUSTOMER INFORMATION 323Ethical & Societal Dilemma 10.1: Oh, Say, Can You See? The Implications ofMannequins That Capture Shoppers' Demographic Data 324Reviewing Learning Objectives 325Key Terms 326Marketing Digitally 326Marketing Applications 327Quiz Yourself 327Chapter Case Study: Swim, Lift, Play—But Also Donate: Using Market Research toRedefine the YMCA 328Appendix 10A: Using Secondary Data to Assess Customer Lifetime Value (CLV) 332SECTION 4VALUE CREATION337PRODUCT, BRANDING, AND PACKAGING DECISIONS338COMPLEXITY AND TYPES OF PRODUCTS 340Complexity of Products 340Types of Products 341PRODUCT MIX AND PRODUCT LINE DECISIONS 343Adding Value 11.1: An Entryway to Luxury: The Latest Entry-Level Models fromHigh-End Car Brands 344 Chris McLennan/AlamyMarketing Analytics 11.1: How Macy's Defines Its Assortment throughAnalytics 345BRANDING 346Value of Branding for the Customer 347Brand Equity for the Owner 349Ethical & Societal Dilemma 11.1: (Not) Marketing Sugary Drinks to Kids 350BRANDING STRATEGIES 352Brand Ownership 352Naming Brands and Product Lines 353Brand and Line Extensions 354Co-Branding 356Brand Licensing 357Brand Repositioning 357Adding Value 11.2: The Global Appeal and Rebranding Efferts ofAmerican Airlines 359

table of ContentsxxxiiiPACKAGING 359Product Labeling 361Ethical & Societal Dilemma 11.2: Mars Inc., an Unlikely but PowerfulProponent of Sugar Labeling on Packages 362Reviewing Learning Objectives 363Key Terms 363Marketing Digitally 364Marketing Applications 364Quiz Yourself 364Chapter Case Study: From the Counterculture to the Runway: How Did BirkenstocksBecome Fashionable? 36512 DEVELOPING NEW PRODUCTS368WHY DO FIRMS CREATE NEW PRODUCTS? 371Changing Customer Needs 371Market Saturation 373Managing Risk through Diversity 373Adding Value 12.1: No Fairy Godmother Needed: How Disney Is Leveraging ItsInventory of Animated Films to Develop New Live-Action Products 374Fashion Cycles 374Improving Business Relationships 375DIFFUSION OF INNOVATION 375Innovators 377EarlyAdopters 378Ethical 6 Societal Dilemma 12.1: Drones in the Sky, Questionson the Ground 379Early Majority 380Late Majority 380Laggards 380Using the Diffusion of Innovation Theory 380HOW FIRMS DEVELOP NEW PRODUCTS 382Idea Generation 383Marketing Analytics 12.1: Data That Help the Brand and the Customer:GM's Big Data Use 385Social & Mobile Marketing 12.1: When Microsoft Plays Catch-Up 386ConceptTesting 388Product Development 388Market Testing 389Product Launch 390Evaluation of Results 391THE PRODUCT LIFE CYCLE 391Introduction Stage 393Growth Stage 393Maturity Stage 393Adding Value 12.2: Skinny on Ingredients, Thick on Promise: The Growth ofSkinnyPop Snacks 394Decline Stage 396 Bloomberg/Getty Images

table of ContentsThe Shape of the Product Life Cycle Curve 396Strategies Based on Product Life Cycle: Some Caveats 397Reviewing Learning Objectives 397Key Terms 398Marketing Digitally 398Marketing Applications 398Quiz Yourself 399Chapter Case Study: Is the Glass Half Füll? The Launch, Death Struggles,and Potential Reemergence of Google Glass 39913 SERVICES: THE INTANGIBLE PRODUCT404SERVICES MARKETING DIFFERS FROM PRODUCT MARKETING 407Intangible 407Adding Value 13.1: Kola House Restaurant: Ensuring a Service ExperienceThat Includes Pepsi 409Inseparable Production and Consumption 409Heterogeneous 410Perishable 410PROVIDING GREAT SERVICE: THE GAPS MODEL 411The Knowledge Gap: Understanding Customer Expectations 412Marketing Analytics 13.1: Using Analytics to Reduce Wait Time at Kroger 415The Standards Gap: Setting Service Standards 417The Delivery Gap: DeliveringService Quality 418The Communications Gap: Communicating The Service Promise 420Ethical & Societal Dilemma 13.1: Pake Reviews 421Service Quality and Customer Satisfaction and Loyalty 422SERVICE RECOVERY 423Listening to the Customers and Involving Them in the Service Recovery 423Finding a Fair Solution 424Resolving Problems Quickly 424Reviewing Learning Objectives 425Key Terms 425Marketing Digitally 426Marketing Applications 426Quiz Yourself 426Chapter Case Study: Transportation Network Services: Uber vs. Lyft fs. TaxisSECTION 5VALUE CAPTURE42743114 PRICING CONCEPTS FOR ESTABLISHING VALUE432THE FIVE CS OF PRICING 435Company Objectives 435Customers 438Adding Value 14.1: Changing Once, Changing Twice, Changing 3 Million Times:How Amazon Prices to Win 439

table of ContentsMarketing Analytics 14.1: Airlines Use Price Elasticities to Price Tickets 444Superior Service 14.1: The Increasing Costs of Play: New Offers and Pricing byDisney and Universal Theme Parks 446Costs 446Break-Even Analysis and Decision Making 447Markup and Target Return Pricing 449Competition 450Channel Members 452Reviewing Learning Objectives 453Key Terms 453Marketing Digitally 454Marketing Applications 454Quiz Yourself 455Chapter Case Study: Planet Fitness: Pricing for Success 45515 STRATEGIC PRICING METHODS AND TACTICS458CONSIDERATIONS FOR SETTING PRICE STRATEGIES 460Cost-Based Methods 460Competition-Based Methods 461Value-Based Methods 461Adding Value 15.1: Value at a Premium Price: Moving Consumers Away from aView of Cheap as Valuable 463Adding Value 15.2: Walmart Offers Low-Priced Organic Foods 464PRICING STRATEGIES 464Everyday Low Pricing (EDLP) 464High/Low Pricing 465New Product Pricing Strategies 465PRICING TACTICS 467Pricing Tactics Aimed at Consumers 467Business Pricing Tactics and Discounts 470LEGAL AND ETHICAL ASPECTS OF PRICING 472Deceptive or Illegal Price Advertising 472Predatory Pricing 473Price Discrimination 473Price Fixing 474Ethical & Societal Dilemma 15.1: The Verdict: Apple Conspired toRaise Prices on eBooks 475Ethical & Societal Dilemma 15.2: Impeding the Gray Market forLuxury Goods 476Reviewing Learning Objectives 477Key Terms 477Marketing Digitally 478Marketing Applications 478Quiz Yourself 479Chapter Case Study: Pizza Players, Pizza Prices 479 CuiHao/Getty Images

table of ContentsSECTION 6VALUE DELIVERY: DESIGNING THE CHANNELAND SUPPLY CHAIN 48516 SUPPLY CHAIN AND CHANNEL MANAGEMENT486THE IMPORTANCE OF MARKETING CHANNEL/SUPPLY CHAIN MANAGEMENT 488Adding Value 16.1: The Beans May Be Slow Cooked, but the DeliveryIs Quick 489Marketing Channels Add Value 490Marketing Channel Management Affects Other Aspects of Marketing 491DESIGNING MARKETING CHANNELS 491Direct Marketing Channel 492Indirect Marketing Channel 492MANAGING THE MARKETING CHANNELAND SUPPLY CHAIN 492Marketing Analytics 16.1: Analytics in Support of Anticipatory Shippingby Amazon 493Managing the Marketing Channel and Supply Chain through VerticalMarketing Systems 495Managing Marketing Channels and Supply Chains through StrategieRelationships 499Ethical & Societal Dilemma 16.1: Shrinking the Supply Chain to SupplyOrganic Demand 500MARING INFORMATION FLOW THROUGH MARKETING CHANNELS 501Data Warehouse 503MARING MERCHANDISE FLOW THROUGH MARKETING CHANNELS 504Distribution Centers versus Direct Store Delivery 504Adding Value 16.2: E-Tailing in the United States versus India 505The Distribution (or Fulfillment) Center 506Superior Service 16.1: Who Will Win the Same-Day GroceryWar? 507Customer Store Pick Up 509Inventory Management through Just-in-Time InventorySystems 510Reviewing Learning Objectives 512Key Terms 512Marketing Digitally 513Marketing Applications 513Quiz Yourself 514Chapter Case Study: Zara Delivers Fast Fashion 51417 RETAILING AND OMNICHANNEL MARKETING518CHOOSING RETAIL PARTNERS 521Superior Service 17.1: Removing the Retailer, Burberry Seeks to AccessConsumers Directly 522Channel Structure 522Customer Expectations 523Channel Member Characteristics 524Distribution Intensity 524

table of ContentsxxxviiIDENTIFY TYPES OF RETAILERS 525Food Retailers 525Adding Value 17.1: Meet the Captain and Visit the Island 527Marketing Analytics 17.1: How FreshDirect Figures Out How and WhenCustomers Order 529General Merchandise Retailers 529Service Retailers 532DEVELOPING A RETAIL STRATEGY USING THE FOUR PS 533Product 533Adding Value 17.2: Home Depot—Providing Customers Better Access toProducts 534Price 535P

Dhruv Grewal, PhD Babson College Michael Levy, PhD Babson College . table of contents SECTION 1 ASSESSING THE MARKETPLACE 1 1 OVERVIEW OF MARKETING 2 WHAT IS MARKETING? 4 Marketing Is about Satisfying Customer Needs and Wants 5 Marketing Entails an Exchange 5 Marketing Requires Product, Price, Place, and Promotion Decisions 6 .

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