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C H A P T E R
Defining Marketing
for the Twenty-First
Century
In this chapter, we will address the following questions:
1. Why is marketing important?
2. What is the scope of marketing?
3. What are some fundamental marketing concepts and new marketing realities?
4. What are the tasks necessary for successful marketing management?
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What Is Marketing?
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
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Marketing is about identifying and meeting human and social needs. One of the
shortest good definitions of marketing is meeting needs profitably. When eBay recognized that people were unable to locate some of the items they desired most, it created an online auction clearinghouse. When IKEA noticed that people wanted good
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What Is Marketed?
Marketing people market 10 types of entities: goods, services, experiences, events,
persons, places, properties, organizations, information, and ideas.
Goods. Physical goods constitute the bulk of most countries production and
marketing effort. Each year, U.S. companies alone market billions of fresh, canned,
bagged, and frozen food products and other tangible items. Thanks in part to the
Internet, even individuals can effectively market goods.
Events. Marketers promote time-based events, such as major trade shows, artistic
performances, and company anniversaries. Global sporting events such as the
Olympics and the World Cup are promoted aggressively to both companies and fans.
Experiences. By orchestrating several services and goods, a firm can create, stage, and
market experiences. Walt Disney Worlds Magic Kingdom represents this kind of
experiential marketing, allowing customers to visit a fairy kingdom, a pirate ship, or a
haunted house. There is also a market for customized experiences, such as spending a
few days at a baseball camp playing with retired baseball greats.5
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cians, high-profile lawyers and financiers, and other professionals all get help from
celebrity marketers.6
Places. Cities, states, regions, and whole nations compete to attract tourists, factories,
company headquarters, and new residents.7 Place marketers include economic development specialists, real estate agents, commercial banks, business associations, and
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
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Ideas. Every market offering includes a basic idea. For instance, social marketers
are busy promoting such ideas as Friends Dont Let Friends Drive Drunk and
A Mind Is a Terrible Thing to Waste.
What Is a Market?
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
2008933525
Traditionally, a market was a physical place where buyers and sellers gathered to buy and
sell goods. Economists describe a market as a collection of buyers and sellers who transact over a particular product or product class (such as the housing market). Marketers
often use the term market to cover groupings of customers. They view the sellers as
constituting the industry and buyers as constituting the market. They talk about need
markets (the diet-seeking market), product markets (the shoe market), demographic
markets (the youth market), and geographic markets (the French market); or other types
of markets, such as voter markets, labor markets, and donor markets. Marketers may
serve consumer markets, business markets, global markets, nonprofit markets, government markets, or some combination of these.
Figure 1.1 illustrates the relationship between the industry and the market.
Sellers send goods, services, and communications (ads, direct mail) to the market; in
return they receive money and information (customer attitudes, sales data). The inner
loop shows an exchange of money for goods and services; the outer loop shows an
exchange of information.
The marketplace is physical, such as a store you shop in, whereas the marketspace
is digital, as when you shop on the Internet.11 Mohan Sawhney has proposed the concept of a metamarket to describe a cluster of complementary goods and services that
are closely related in the minds of consumers but are spread across a diverse set of
industries. The automobile metamarket consists of automobile manufacturers, new
car and used car dealers, financing companies, insurance companies, mechanics,
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Goods/Services
Market
(a collection of buyers)
Industry
(a collection of sellers)
Money
Information
spare parts dealers, service shops, auto magazines, classified auto ads in newspapers,
and auto sites on the Internet.
Car buyers can get involved in many parts of this metamarket. This has created
an opportunity for metamediaries to assist buyers to move seamlessly through these
groups, although they are disconnected in physical space. One example is Edmunds
(www.edmunds.com), where buyers can find the features and prices of different vehicles and search for the lowest-price dealer, for financing, for car accessories, and for
used cars at bargain prices. Metamediaries can also serve other metamarkets, such as
the home ownership market and the wedding market.12
Who Markets?
A marketer is someone who seeks a response (attention, a purchase, a vote, a donation) from another party, called the prospect. If two parties are seeking to sell something to each other, both are marketers. Marketers must have diverse quantitative and
qualitative skills, entrepreneurial attitudes, and keen understanding of how marketing
can create value within their organizations.13
The CMO has five key functions: (1) strengthening the brands; (2) measuring
marketing effectiveness; (3) driving new product development based on customer
needs; (4) gathering meaningful customer insights; and (5) utilizing new marketing
technology. Harvards John Quelch and Gail McGovern note that there is tremendous
variability in the responsibilities and job descriptions for CMOs.14 They offer eight
ways to improve CMO success (see Figure 1.2).
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such as product innovation and new business development. In creating a strong marketing organization, marketers must think like executives in other departments, and
executives in other departments must think more like marketers.15
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
2008933525
Needs are the basic human requirements. People need food, air, water, clothing, and
shelter to survive. People also have strong needs for recreation, education, and entertainment. These needs become wants when they are directed to specific objects that
might satisfy the need. An American needs food but may want a hamburger, French
fries, and a soft drink. A person in Mauritius needs food but may want a mango, rice,
lentils, and beans. Wants are shaped by ones society. Demands are wants for specific
products backed by an ability to pay. Many people want a Mercedes; only a few are willing and able to buy one. Companies must measure not only how many people want
their product but also how many would actually be willing and able to buy it.
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Responding only to the stated need may shortchange the customer, because
sometimes consumers do not know what they want in a product, especially breakthrough products such as the first cellular phone. Simply giving customers what they
want isnt enough any moreto gain an edge, companies must help customers learn
what they want.
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Marketing Channels
To reach a target market, the marketer uses three kinds of marketing channels.
Communication channels, which deliver and receive messages from target buyers,
include newspapers, magazines, radio, television, mail, telephone, billboards, posters,
CDs, and the Internet. And, just as people convey messages by facial expressions and
clothing, firms communicate through the look of their stores, the appearance of their
Web sites, and in other ways. Marketers are increasingly adding dialogue channels,
including e-mail and blogs, to familiar monologue channels such as ads.
The marketer uses distribution channels to display, sell, or deliver the physical
product or service(s) to the buyer or user. These include distributors, wholesalers,
retailers, and agents. The marketer also uses service channels such as warehouses,
transportation firms, banks, and insurance companies to carry out transactions with
potential buyers. Marketers clearly face a design problem in choosing the best mix of
communication, distribution, and service channels for their offerings.
Supply Chain
The supply chain is a longer channel stretching from raw materials to components to
final products that are carried to final buyers. The supply chain for womens purses
starts with hides and moves through tanning operations, cutting operations, manufacturing, and the marketing channels bringing products to customers. Each company
captures only a certain percentage of the total value generated by the supply chains
value delivery system. When a company acquires competitors or moves upstream or
downstream, its aim is to capture a higher percentage of supply chain value.
Competition
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
2008933525
Competition includes all the actual and potential rival offerings and substitutes that a
buyer might consider. Suppose an automobile company is planning to buy steel for its
cars. There are several possible levels of competitors. The manufacturer can buy from
U.S. Steel, from a foreign firm in Japan or Korea, or from a mini-mill such as Nucor.
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Marketing Environment
The marketing environment consists of the task environment and the broad environment. The task environment includes the immediate actors involved in producing, distributing, and promoting the offering, such as the company, suppliers, distributors,
dealers, and the target customers. In the supplier group are material suppliers and service suppliers such as marketing research agencies, advertising agencies, banks and
insurance companies, transportation companies, and telecommunications companies.
Distributors and dealers include agents, brokers, manufacturer representatives, and
others who facilitate finding and selling to customers.
The broad environment consists of six components: demographic environment, economic environment, physical environment, technological environment, political-legal
environment, and social-cultural environment. Marketers must pay close attention to the
trends and developments in these environments and make timely adjustments to their
marketing strategies.
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COMPANY ORIENTATION
TOWARD THE MARKETPLACE
What philosophy should guide a companys marketing efforts? Marketers have operated under the production concept, product concept, selling concept, and marketing
concept; increasingly, they are operating under the holistic marketing concept.
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
2008933525
The production concept, one of the oldest concepts in business, holds that consumers
will prefer products that are widely available and inexpensive. Managers of productionoriented businesses concentrate on achieving high production efficiency, low costs,
and mass distribution. This orientation makes sense in developing countries such
as China, where the largest PC manufacturer, Lenovo, takes advantage of the huge
inexpensive labor pool to dominate the market.16 This orientation is also used when a
company wants to expand the market.
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Marketing
Department
Products &
Services
Other
Departments
Communications
Internal
Marketing
Channels
Integrated
Marketing
Holistic
Marketing
Sales Revenue
Brand &
Customer Equity
Relationship
Marketing
Performance
Marketing
Ethics
Community
Environment Legal
Customers
Partners
Channel
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
2008933525
Relationship Marketing Relationship marketing aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their
business.22 Four key constituents for relationship marketing are customers, employees,
marketing partners (channels, suppliers, distributors, dealers, agencies), and members
of the financial community (shareholders, investors, analysts).
The ultimate outcome of relationship marketing is the building of a unique
company asset called a marketing network. A marketing network consists of the
company and its supporting stakeholders (customers, employees, suppliers, distributors, retailers, ad agencies, university scientists, and others) with whom it has built
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Integrated Marketing With integrated marketing, the marketers task is to devise marketing activities and assemble fully integrated marketing programs that create, communicate, and deliver value for consumers. Marketing activities come in all forms.26 McCarthy
classified these activities as marketing mix tools of four broad kinds, which he called the
four Ps of marketing: product, price, place, and promotion (see Figure 1.4).27
The firm can change its price, sales force size, and advertising expenditures in
the short run. It can develop new products and modify its distribution channels only
in the long run. Thus the firm typically makes fewer period-to-period marketingmix changes in the short run than the number of marketing-mix decision variables
might suggest.
The four Ps represent the sellers view of the marketing tools available for influencing buyers. From a buyers point of view, each marketing tool is designed to deliver
a customer benefit. A complementary breakdown of marketing activities has been proposed, centering on the customer questions that the four dimensions (SIVA) are
designed to answer:28
1. Solution: How can I solve my problem?
2. Information: Where can I learn more about it?
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
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Marketing mix
Product
Product variety
Quality
Design
Features
Brand name
Packaging
Sizes
Services
Warranties
Returns
Place
Channels
Coverage
Assortments
Locations
Inventory
Transport
Price
Promotion
List price
Discounts
Allowances
Payment period
Credit terms
Sales promotion
Advertising
Sales force
Public relations
Direct marketing
Two key themes of integrated marketing are that (1) many different marketing
activities communicate and deliver value; and (2) when coordinated, marketing activities maximize their joint effects. In other words, marketers should design and implement any one marketing activity with all other activities in mind.
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
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Championsand this type was 20% more likely to deliver revenue growth and profitability than the other types.31
Performance Marketing Holistic marketing incorporates performance marketing
and understanding the business returns from marketing activities and programs, as
well as addressing broader concerns and their legal, ethical, social, and environmental
effects. Top management is going beyond sales revenue to examine the marketing
scorecard and interpret what is happening to market share, customer loss rate, customer satisfaction, product quality, and other measures.
Financial accountability. Marketers are increasingly asked to justify their investments to top management in financial and profitability terms, as well as in terms of
building the brand and growing the customer base.32 Therefore, theyre using a
variety of financial measures to assess the direct and indirect value of their marketing
efforts. Theyre also recognizing that much of their firms market value comes from
intangible assets such as their brands, customers, employees, and distributor and
supplier relations.
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A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
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Developing marketing strategies and plans. The first task is to identify the organizations potential long-run opportunities, given its market experience and core competencies. Chapter 2 discusses this process in detail.
Connecting with customers. The firm must determine how to best create value for its
Building strong brands. Now marketers need to understand how customers perceive
their brands strengths and weaknessesthe subject of Chapter 8. Because brands
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
2008933525
chosen target markets and how to develop strong, profitable, long-term relationships
with consumers and business customers, as discussed in Chapter 4. Chapters 5 and
Chapter 6 explore the analysis of consumer and business markets. Next, marketers
identify major market segments, evaluate each, and target those that the firm can
serve most effectively, as discussed in Chapter 7.
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Shaping market offerings. At the heart of the marketing program is the product
the firms tangible offering to the market, which includes the product quality, design,
features, and packaging, all explored in Chapter 10. Marketers may also include
services as part of the market offering, as discussed in Chapter 11; in addition,
pricing is a key element, as shown in Chapter 12.
Delivering value. Here, marketers determine how to deliver the offerings value to the
target market by identifying, recruiting, and linking with marketing facilitators such as
retailers, wholesalers, and physical-distribution firms. Marketing channels are examined
in Chapter 13; retailing, wholesaling, and logistics are covered in Chapter 14.
Communicating value. Now the firm must convey the value embodied by the
offering to the target market through an integrated marketing communication
program that maximizes the individual and collective contribution of all communication activities. Chapter 15 discusses the design and management of integrated
marketing communications; Chapter 16 explores mass communications such as
advertising and sales promotions, while Chapter 17 looks at personal communications such as direct marketing and personal selling.
Creating long-term growth. The companys marketing strategy must take into
account changing global opportunities and challenges. Moreover, management must
put in place a marketing organization capable of implementing the marketing plan.
See Chapter 18 for more detail.
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EXECUTIVE SUMMARY
Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in
ways that benefit the organization and its stakeholders. Marketing management is the
art and science of choosing target markets and getting, keeping, and growing customers
through creating, delivering, and communicating superior customer value. Marketers
are involved in marketing 10 types of entities: goods, services, events, experiences, persons, places, properties, organizations, information, and ideas. They operate in four
different customer markets: consumer, business, global, and nonprofit.
Marketers today must attend and respond to a number of significant developments, including major societal forces, new consumer capabilities, and new company
capabilities. Over the years, organizations have operated under the production concept, product concept, selling concept, and marketing concept. Increasingly, they
operate under the holistic marketing concept, based on the development, design, and
implementation of marketing programs, processes, and activities that recognize their
breadth and interdependencies. Four components of holistic marketing are relationship marketing, integrated marketing, internal marketing, and performance marketing (both financial accountability and social responsibility marketing).
Successful marketing managers must accomplish these tasks: develop marketing
strategies and plans, capture marketing insights, connect with customers, build strong
brands, shape the market offerings, deliver value, communicate value, and create successful long-term growth.
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
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NOTES
13. Richard Rawlinson, Beyond Brand Management,
Strategy & Business, Summer 2006.
14. Gail McGovern and John A. Quelch, The Fall and
Rise of the CMO, Strategy+Business, Winter 2004.
15. Constantine von Hoffman, Armed with
Intelligence, Brandweek, May 29, 2006, pp. 1720.
16. Jane Spencer and Geoffrey A. Fowler, Lenovo
Goes for Its Own Olympic Medal, Wall Street
Journal, March 27, 2007, p. B4.
17. Bruce I. Newman, ed., Handbook of Political Marketing
(Thousand Oaks, CA: Sage Publications, 1999); and
Bruce I. Newman, The Mass Marketing of Politics
(Thousand Oaks, CA: Sage Publications, 1999).
18. John B. McKitterick, What Is the Marketing
Management Concept? in Frank M. Bass, ed. The
Frontiers of Marketing Thought and Action (Chicago:
American Marketing Association, 1957), pp. 7182;
Fred J. Borch, The Marketing Philosophy as a Way
of Business Life, The Marketing Concept: Its Meaning
to Management (Marketing series, no. 99)
(New York: American Management Association,
1957), pp. 35; Robert J. Keith, The Marketing
Revolution, Journal of Marketing ( January 1960):
3538.
19. Theodore Levitt, Marketing Myopia, Harvard
Business Review, JulyAugust 1960, p. 50.
20. Ajay K. Kohli and Bernard J. Jaworski, Market
Orientation: The Construct, Research Propositions,
and Managerial Implications, Journal of Marketing
(April 1990): 118; John C. Narver and Stanley F.
Slater, The Effect of a Market Orientation on
Business Profitability, Journal of Marketing
(October 1990): 2035; Stanley F. Slater and John
C. Narver, Market Orientation, Customer Value,
and Superior Performance, Business Horizons
(MarchApril 1994): 2228; A. Pelham and
D. Wilson, A Longitudinal Study of the Impact of
Market Structure, Firm Structure, Strategy and
Market Orientation Culture on Dimensions of
Business Performance, Journal of the Academy of
Marketing Science 24, no. 1 (1996): 2743; Rohit
Deshpande and John U. Farley, Measuring Market
Orientation: Generalization and Synthesis, Journal
of Market-Focused Management 2 (1998): 213232.
21. John C. Narver, Stanley F. Slater, and Douglas L.
MacLachlan, Total Market Orientation, Business
Performance, and Innovation, Working Paper
Series, Journal of Marketing Science Institute,
Report No. 00-116, 2000, pp. 120. See also Ken
Matsuno and John T. Mentzer, The Effects of
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.
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22.
23.
24.
25.
26.
28. Chekitan S. Dev and Don E. Schultz, A CustomerFocused Approach Can Bring the Current
Marketing Mix into the 21st Century, (Marketing
Management 14 (January/February 2005).
29. Christian Homburg, John P. Workman Jr., and
Harley Krohmen, Marketings Influence Within the
Firm, Journal of Marketing ( January 1999): 115.
30. Using Positive Four-Letter Words: Southwest
Airlines Incorporates Myers-Briggs Personality Test
into Training Program, Employee Benefit News,
April 1, 2007; Barney Gimbel, Southwests New
Flight Plan, Fortune, May 16, 2005, pp. 93+; Jane
Lewis, The Leaders Who Changed HR, Personnel
Today, January 22, 2002, pp. 2+.
31. Booz Allen Hamilton/Assn. of National Advertisers
Marketing Profiles, in conjunction with Brandweek,
from Constantine von Hoffman, Armed with
Intelligence, Brandweek, May 29, 2006, pp. 1720.
32. Robert Shaw and David Merrick, Marketing Payback:
Is Your Marketing Profitable? (London, UK: Pearson
Education, 2005).
33. Rajendra Sisodia, David Wolfe, and Jagdish Sheth,
Firms of Endearment: How World Class Companies Profit
from Passion (Upper Saddle River, NJ: Wharton
School Publishing, 2007).
34. John Ehernfield, Feeding the Beast, Fast Company,
December 2006/January 2007, pp. 4143.
35. If choosing to develop a strategic corporate social
responsibility program, see Michael E. Porter and
Mark R. Kramer, Strategy and Society: The Link
between Competitive Advantage and Corporate
Social Responsibility, Harvard Business Review
(December 2006): 7892.
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27.
19
A Framework for Marketing Management, Fourth Edition, by Philip Kotler and Kevin Lane Keller. Published by Prentice Hall.
Copyright 2009 by Pearson Education, Inc.