CHAPTER 1: INTRODUCTION TO MANAGING MARKETING

WHAT DOES MARKETING MEAN TODAY?

page 5 _______________________

KEY IDEA
 Marketing is a guiding
philosophy for the firm
as a whole.

page 6 _______________________

KEY IDEA
 Marketing is a set of six
imperatives the must
dos of marketing.
 Four marketing principles guide execution of
the six imperatives.

WHAT IS MARKETING?
page 8 __________________________________________________________________________________________________

KEY IDEA
 The firms major task is
to attract, retain, and
grow customers by
developing and delivering valued offers.

KEY IDEA
 The firm has two basic
functions marketing
and innovation.

KEY IDEA
 Marketing is critical for
a firms success in
todays increasingly
complex and fastchanging environment.

 The firm enhances

shareholder value by
successfully attracting,
retaining, and growing
customers.

MARKETING AND SHAREHOLDER VALUE

page 9 _______________________

KEY IDEA
 The shareholder-value
perspective is increasingly widespread
around the world.

page 10 _________________________________________________________________________________________________

KEY IDEA
 Customers are the sole
source of firm revenues, and all firm
activities are costs.
 Customers are the firms
core assets, yet they do
not appear on the
balance sheet.
 Some balance-sheet
assets act as strategic
liabilities.

KEY IDEA
 Customers are the
critical source of
cash inflows.

KEY IDEA
 There are two sides to
value. When the firm
delivers high customer
value, it attracts,
retains, and grows
customers. When the
firm attracts, retains,
and grows customers,
it earns high value for
shareholders.

CHAPTER 1

INTRODUCTION TO MANAGING MARKETING

MARKETING AS A PHILOSOPHY: EXTERNAL AND INTERNAL ORIENTATIONS

page 11 ______________________

KEY IDEA
 External and internal
orientations are core
concepts for examining
the firms basic
philosophy.

page 12 ______________________

KEY IDEA
 The firm should view
marketing expenditures
as an investment, not as
an expense.

page 13 ______________________

KEY IDEA
 An externally oriented
firm goes beyond a
customer focus. It
works hard to understand competitors,
markets, and environmental forces in
general.

page 14 ______________________

KEY IDEA
 Long-run success is
difficult for internally
oriented firms.
 Internal orientations
often focus on operations, sales, finance,
and/or technology.

THE SIX MARKETING IMPERATIVES

page 16 ______________________

KEY IDEA
 Marketing should
identify market opportunities and advise
top management on
potential strategic
actions.

page 19 ______________________

KEY IDEA
The Marketing Mix
comprises:
 Product
 Promotion
 Distribution (or Place)

page 17 ___________________________________________________________

KEY IDEA
 Marketing must identify
market segments
groups of customers
with similar needs that
value similar benefits,
with similar priority
levels.

KEY IDEA
 The firm should target
those market segments
that best use its strengths
and exploit competitors
weaknesses.

page 18 ______________________

KEY IDEA
 Decisions about the
firms strategic direction
set the stage for
designing the marketing
offer.

page 20 _________________________________________________________________________________________________

KEY IDEA
 Marketing must keep
the firm focused on
customers needs,
regardless of current
feasibility.

KEY IDEA

KEY IDEA

 Marketing must
exercise leadership
to encourage cooperation across multiple
functions.

 Marketing must monitor

and control the firms
actions and performance to keep it on track.

page 23 ______________________

page 24 ______________________

 Service
 Price

THE FOUR PRINCIPLES OF MARKETING

page 21 ______________________

KEY IDEA
 Selectivity focuses on
the choice of market or
market segment target.
 Concentration refers
to concentrating
resources so as to
deliver value to that
target.

page 22 ______________________

KEY IDEA
 The firm earns
marketplace success
by providing value to
customers.
 The firm develops,
produces, and delivers
products and services,
but customers perceive
value only in the benefits these products and
services provide.

KEY IDEA
 To secure a differential
advantage, customers
must perceive greater
value in the firms offer
than in competitors
offers.

KEY IDEA
 The firm achieves
integration by agreeing
on priorities those
involved in designing
and implementing the
offer must develop
close and cooperative
working relationships.

CHAPTER 2: THE VALUE OF CUSTOMERS: OPTIMIZING SHAREHOLDER VALUE

OPENING CASE: ROYAL BANK OF CANADA
page 31 ___________________________________________________________

KEY IDEA
 When the firm creates
value for customers, it
successfully attracts,
retains, and grows
those customers.
By being attracted,
retained, and grown,
customers create value
for the firm and its
shareholders.

KEY IDEA
 Customer lifetime
value (LTV) is the link
between delivering
value to customers
and creating value
for shareholders.

CUSTOMER LIFETIME VALUE (LTV)

page 32 ______________________

KEY IDEA
 Customer lifetime
value depends on just
three factors margin,
retention rate, and
discount rate.

page 34 ______________________

KEY IDEA
 The margin multiple is a
handy way to calculate
customer lifetime value.
 Increasing customer
retention rate has
greater leverage on
customer lifetime value
than reducing the
discount rate.

INCREASING CUSTOMER LIFETIME VALUE

page 36 ______________________

KEY IDEA
 The margin the firm
earns from a customer
tends to increase over
time.

page 38 ______________________

KEY IDEA
 Small increases in
customer retention
can dramatically
improve profitability
and customer lifetime
value.

CHAPTER 2

T H E VA L U E O F C U S T O M E R S : O P T I M I Z I N G S H A R E H O L D E R VA L U E

ACQUIRING NEW CUSTOMERS

page 42 ______________________

KEY IDEA
 The firm should try to
acquire customers if
the expected customer
lifetime value is greater
than the acquisition
cost.

ENHANCING CUSTOMER LIFETIME VALUE

page 44 ______________________

KEY IDEA
 There are three ways
to improve customer
LTV with current
customers improve
customer retention,
grow customer margins,
and delete customers.

page 45 ______________________

KEY IDEA
 There are three
approaches to
improving customer
LTV with potential
customers retrieve,
acquire, and ignore
customers.

BEING SELECTIVE ABOUT CUSTOMERS

page 45 ______________________

KEY IDEA
 The firm should develop
systems for measuring
customer profitability.

page 47 ______________________

KEY IDEA
 At many firms, 20%
of customers provide
80% of revenues and
120% of profits.
 At these same firms,
80% of customers provide 20% of revenues
and are responsible for
20% of firm losses.

page 48 ______________________

KEY IDEA
 In general, customers
are critical firm assets,
but some customers
may be liabilities and
should be fired.
 The firm may have to
reject some potential
customers on the basis
of a detailed profitability
analysis.

page 49 ______________________

KEY IDEA
 Poor profitability is
not the only reason to
reject or fire customers.

CHAPTER 3: MARKET INSIGHT

page 58 ______________________

KEY IDEA
 The firm must secure
insight in three broad
areas: the market,
customers, and competitors, the company,
and complementers
the M4Cs.

OPENING CASE: NETFLIX

page 61 ___________________________________________________________

KEY IDEA
 Market insight comprises four separate
aspects market
structure, market and
product evolution,
industry forces, and
environmental forces.

KEY IDEA
 When firms secure
good market insight,
they do a better job of
identifying opportunities
and gaining competitive
advantage.

MARKET STRUCTURE
page 62 ______________________

KEY IDEA
 Markets consist of
people and organizations that require goods
and services to satisfy
their needs and are
able and willing to pay.

page 63 ______________________

KEY IDEA
 We can view any
market as being made
up of several different
areas.
 The firm avoids marketing myopia by using a
broad market definition.

page 64 ______________________

KEY IDEA
 A useful way of categorizing products in a
market is product class,
product form, product
line, and product item.

CHAPTER 3

MARKET INSIGHT

MARKET AND PRODUCT EVOLUTION

page 67 ______________________

KEY IDEA
 Critical variables affecting market size include
population size, population mix, geographic
population shifts,
income and income
distribution, and age
distribution.

page 70 ___________________________________________________________

KEY IDEA
 Markets and products
generally evolve in a
consistent manner over
time.

KEY IDEA
 Product-form life-cycle
stages have consistent
characteristics across
products and services.

 The life-cycle framework is useful for

describing market and
product evolution.

INDUSTRY FORCES
page 72 ___________________________________________________________

KEY IDEA
 The firms current direct
competitors can change
via acquisition, merger,
and LBOs.

KEY IDEA

page 73 ______________________

KEY IDEA

 The firm faces many

forces current direct
competitors, new direct
entrants, indirect competitors, suppliers, and
buyers that can frustrate its ability to make
profits and seize new
opportunities.

 The firm may face new

direct competitors from
geographic expansion,
start-up entry, new
sales and distribution
channels, strategic
alliances, networks,
and the firms own
employees.

page 79 ______________________

page 82 ______________________

ENVIRONMENTAL FORCES
page 75 ______________________

KEY IDEA
 The firm faces a broad
set of environmental
forces political,
economic, sociocultural, technological,
legal/regulatory,
and environmental
(physical) PESTLE.

KEY IDEA
 Technological
innovation can be
sustaining (improving
performance of
established products)
or disruptive
(offering new
value propositions).

KEY IDEA
 Environmental forces
are constantly in flux;
they also interact with
each other.

page 83 ______________________

KEY IDEA
 The managerial process
environment comprises
the intellectual capital
for leading and
managing a business.

CHAPTER 4: CUSTOMER INSIGHT

OPENING CASE: IKEA
page 89 ______________________

KEY IDEA
 Customer insight
requires a deep and
unique understanding of
customers.
 Good customer insight
requires answers to
three questions: Who
are the customers?
What do they need
and want? How do
they buy?

IDENTIFYING CUSTOMERS
page 90 ______________________

KEY IDEA
 To secure customer
insight, the firm must
correctly identify
customers.

page 93 ______________________

KEY IDEA
 The firm must pay
attention to both its
current and potential
customers.

page 91 ______________________

KEY IDEA
 Macro-level customers
are organizations;
micro-level customers
are individuals.

page 94 ______________________

KEY IDEA
 Indirect customers may
be more important than
direct customers
they are often final
users and ultimately
drive product demand.

page 92 ______________________

KEY IDEA
 Purchase decisions
involve many customer
roles: decision-maker,
influencer, spoiler,
champion, specifier,
gatekeeper, buyer,
information provider,
and user.

CHAPTER 4

CUSTOMER INSIGHT

CUSTOMER NEEDS, BENEFITS, AND VALUES

page 94 ___________________________________________________________

KEY IDEA
 To attract, retain, and
grow customers, the
firm must:
Develop offers of
value to satisfy
customers needs
Communicate the
value of those offers
to customers.
page 99 ______________________

KEY IDEA
 EVC is the maximum
price customers will
pay.
 The firm delivers
economic value by
reducing customers
costs and/or increasing
their revenues.

KEY IDEA
 Customers have
recognized needs
and latent needs.
Recognized needs
may be expressed or
non-expressed.

 Customers receive
value from their
experiences.

page 105_____________________

KEY IDEA
 Customers often
deviate from rationality
in making purchase
decisions.

KEY IDEA
 Maslows approach
places a persons needs
in an ordered hierarchy.

page 97 ______________________

KEY IDEA
 The feature/benefit/
value ladder ensures
that the firm focuses
on providing value to
customers, provides
options for communication, and broadens the
view of competition.

page 100 __________________________________________________________

KEY IDEA
 The firm must deliver
the right combination
of functional, psychological, and economic
benefits and values to
those customers it
wants to attract, retain,
and grow.

page 102 __________________________________________________________

KEY IDEA

page 96 ______________________

KEY IDEA
 The firm must learn the
customers decisionmaking process (DMP).

page 106_____________________

KEY IDEA
 There are three
categories of purchase
decision: routinizedresponse behavior,
limited problem-solving,
and extended problemsolving.

KEY IDEA
 To gain greater
customer insight, the
firm must ask: What
motivates people in
customer roles to
behave the way
they do?

page 103_____________________

KEY IDEA
 Membership in the
customers consideration set is crucial for
the firm.

page 104_____________________

KEY IDEA
 The firm should try to
understand customers
evaluation processes.
 The linear-compensatory approach to
evaluation and choice
balances the firms
performance on the
relevant attributes.

CUSTOMER INSIGHT

INFLUENCES ON CONSUMER PURCHASE PROCESSES

page 106_____________________

KEY IDEA
 By identifying sources
of influence in the
consumer decisionmaking process,
firms formulate better
market strategies.

page 108_____________________

KEY IDEA
 A variety of environmental factors affect
consumers purchasing
decisions culture,
social class, other
people, family, and the
situation.

page 109_____________________

KEY IDEA
 Individual factors
that affect purchase
decisions include
economic resources,
time availability,
cognitive resources,
comfort with technology, life-cycle stage,
and lifestyle.
 The VALS2 Lifestyle
framework is a useful
approach to understanding lifestyles.

INFLUENCES ON ORGANIZATIONAL PURCHASE PROCESSES

page 112_____________________

KEY IDEA
 Important considerations for the
organizational
purchase-decision
process are increased
corporate attention to
procurement, changes
in the procurement
process, reducing the
number of suppliers,
and evolution in buyerseller relationships.

CHAPTER 4

CHAPTER 5: INSIGHT ABOUT COMPETITORS, COMPANY, AND COMPLEMENTERS

Compe t itor s
IDENTIFYING COMPETITORS
page 124_____________________

page 125_____________________

KEY IDEA

KEY IDEA

 Competitive insight is
securing a deep enough
understanding of competitors to provide a
unique perspective.

 The firms most serious

competitive threats may
be the least obvious.

page 127_____________________

KEY IDEA
 Be aware of potential
competition from within
your own firm.
 Be prepared to offer
multiple products as
customer needs evolve.

 Competitive insight is
crucial for attracting,
retaining, and growing
customers.
 The firm must act on
competitive insight in its
own decision-making.

DESCRIBING COMPETITORS
page 129_____________________

KEY IDEA
 When focusing on competitive data-gathering,
the firm should be clear
about the level and type
of data it requires.

page 130_____________________

KEY IDEA
 The firm can secure
timely competitive
information from many
internal and external
sources.

page 132 __________________________________________________________

KEY IDEA
 The firm should not use
unethical or illegal
processes to collect
competitor data.
 Leaky organizations
help the firm secure
competitive data.
 Good counterintelligence procedures
prevent proprietary
data from leaking.

KEY IDEA
 The firm should use a
rigorous framework
to organize its datagathering.

page 131_____________________

KEY IDEA
 The firm should develop
formal processes to
secure timely and
relevant competitive
information.

page 133_____________________

KEY IDEA
 Organizations do not
make decisions
people in organizations
make decisions.

I N S I G H T A B O U T C O M P E T I T O R S , C O M PA N Y, A N D C O M P L E M E N T E R S

CHAPTER 5

EVALUATING COMPETITORS

PROJECTING THE ACTIONS OF COMPETITORS

page 135_____________________

page 137_____________________

page 136_____________________

KEY IDEA
 Competitive assessment
analysis is a powerful
tool for marketers.
It maps customer
requirements needs,
benefits, and values
into corporate
capabilities/resources.

KEY IDEA
 Game theory is a
structured way of
identifying options
and evaluating their
consequences.

KEY IDEA
 A good approach to
projecting the competitors future actions
is to develop a set of
robust scenarios that
examine the competitors strategic options.

MANAGING COMPETITORS
page 139_____________________

KEY IDEA
 The firm may be able to
manage its competitors
by sending signals.
 The major signals
available to the firm
are pre-emptive,
warning, and tit-for-tat.
The firm may also send
competitors misleading
information.

Comple me nte r s
page 141_____________________

KEY IDEA
 Independent organizations, including customers and suppliers,
can be the firms
complementers.

page 142 __________________________________________________________

KEY IDEA
 Competitors can complement the firm in the
marketplace or in the
back office. Competitors
can also offer weak
complementarity.

KEY IDEA
 A firms complementary
product activities may
be unwelcome by its
competitors.

page 138_____________________

KEY IDEA
 The firm projects the
competitors future
actions by identifying
the most likely scenario
from the set of alternative scenarios.

CHAPTER 6: MARKETING RESEARCH

THE MARKETING RESEARCH PROCESS

CRITICAL DISTINCTIONS IN MARKETING RESEARCH

page 153_____________________

page 154_____________________

KEY IDEA

KEY IDEA

 The marketing research

process contains
several well-defined
steps that the manager
and the researcher
should follow.

 Secondary marketing
research uses data
relevant to your
research needs that
have already been
collected for some
other purpose. Primary
market research
requires you to
collect new data.

page 155_____________________

KEY IDEA
 Qualitative marketing
research is not concerned with numbers.
Quantitative market
research focuses on
quantitative analysis.

SECURING QUALITATIVE RESEARCH DATA

SECURING QUANTITATIVE RESEARCH DATA

page 158_____________________

page 160_____________________

KEY IDEA

KEY IDEA

 Focus groups, one-onones, and blogs and

wikis are alternative
means for collecting
qualitative data directly
from respondents.
Projective techniques,
observation, and ethnographic research are
indirect qualitative
data-gathering
approaches.

 When designing a
process to collect
survey data, the firm
must make several
important trade-offs,
primarily between cost,
time, and flexibility.

MARKET AND SALES POTENTIALS, MARKET AND SALES FORECASTS

page 163_____________________

KEY IDEA
 Market potential is the
maximum sales that
the firm expects in the
market in a given time
period. Sales potential
is the maximum sales
the firm might achieve
in a corresponding
time period.

page 165_____________________

KEY IDEA
 There are several
approaches to making
market forecasts.
One of the most
popular uses multiple
regression analysis.

page 166_____________________

KEY IDEA
 Many firms develop
synthetic sales
forecasts, using a
combination of topdown and bottom-up
approaches.

MARKETING RESEARCH

APPENDIX 6.1: ANALYZING QUANTITATIVE RESEARCH DATA

page 171_____________________

KEY IDEA
 Cross tabs are a tried
and true method for
analyzing simple
quantitative marketing
research data.

page 176_____________________

KEY IDEA
 Factor analysis helps
the researcher reduce
an unwieldy number
of variables into a
manageable set.
Cluster analysis helps
the researcher to place
many respondents into
meaningful groups.

page 175 __________________________________________________________

KEY IDEA
 Conjoint analysis is a
versatile marketing
research technique
that can provide
significant insight
into many marketing
questions.

KEY IDEA
 Multidimensional
scaling is a valuable
technique for developing market maps,
aka perceptual maps.

CHAPTER 6

CHAPTER 7: DETERMINE AND RECOMMEND WHICH MARKETS TO ADDRESS

A STRATEGY FOR GROWTH
page 186_____________________

KEY IDEA
 A strategy for growth
has four components:
vision, mission, growth
path, and timing of
entry.

page 187_____________________

KEY IDEA
 Vision is the description
of an ideal future state
for a firm or business
unit. Vision sets a broad
direction for the firm.
When developed with
employee participation,
it can inspire the entire
organization for the
long run.

page 188_____________________

KEY IDEA
 The firms mission
should guide its search
for opportunity.
 The five approaches to
developing mission are:
core ingredient or
natural resource,
technology, product
or service, market or
market segment, or
customer needs.
 The firms mission can
use a single approach
or combine approaches.
 The firm should proactively revise its
mission.

page 191_____________________

KEY IDEA
 The four fundamental
paths to growth are
market penetration,
product growth, market
growth, and product
and market diversification. These four paths
give rise to nine individual growth paths.

page 193_____________________

KEY IDEA
 The four timing-of-entry
options pioneer,
follow-the-leader,
segmenter, and
me-too correspond,
respectively, to entry in
the introduction, early
growth, late growth,
and maturity stages of
the product life cycle.
 The firm must match
its capabilities to its
timing-of-entry strategy.
These capabilities must
evolve as its markets
evolve.

DETERMINE AND RECOMMEND WHICH MARKETS TO ADDRESS

CHAPTER 7

THE VENTURE PORTFOLIO

page 195_____________________

KEY IDEA
 A venture portfolio
is the set of growth
opportunities the firm
addresses.
 The strategy for growth
helps the firm develop
its venture portfolio.
 The defining characteristics of the venture
portfolio are expected
financial return, timing
of contribution to
profits, and risk.

SCREENING CRITERIA: EVALUATING OPPORTUNITIES

page 196_____________________

KEY IDEA
 The firm should examine each opportunity
using four screening
criteria: objectives,
compatibility (or fit),
core competence, and
synergy.

page 197_____________________

KEY IDEA
 In setting objectives,
the firm should strike
a balance between
revenue and profit
growth, risk, stability,
and flexibility.

IMPLEMENTING GROWTH STRATEGIES

page 204_____________________

KEY IDEA
 Options for implementing a growth strategy
include internal development, insourcing,
outsourcing, acquisition, strategic alliance,
licensing and technology purchase, and
equity investment.

page 198_____________________

KEY IDEA
 The three important
dimensions of compatibility (or fit) are:
product-market fit,
product-company fit,
and company-market fit.

page 199_____________________

KEY IDEA
 The firm should consider four perspectives
when evaluating opportunities: objectives,
compatibility, core
competence, and
synergy.

CHAPTER 8: MARKET SEGMENTATION AND TARGETING

THE MARKET SEGMENTATION PROCESS
page 213_____________________

KEY IDEA
 Market segmentation
is a conceptual and
analytic process it is
critical for developing
and implementing
an effective market
strategy.

page 216_____________________

KEY IDEA
 Four categories of candidate descriptor variables or segmentation
variables can define
market segments:
geographic, demographic, behavioral, and
socio-psychological.

page 218_____________________

KEY IDEA
 In any market,
customers have
different need profiles.
 The market segmentation process identifies
groups of customers.
When segmentation is
done well, customers
within a segment have
similar need profiles.
Customers in different
segments have different
need profiles.

MARKET SEGMENTS
page 219_____________________

KEY IDEA
 The best approach
for forming market
segments is to group
customers based on
their need profiles. The
firm should then use
descriptor or segmentation variables to identify
the different segments.

page 220_____________________

KEY IDEA
 The market segmentation process can
combine creativity
and sophisticated
data analysis.

page 223 __________________________________________________________

KEY IDEA
 B2B firms often treat
major customers as
individual market segments. In B2C markets,
many firms are practicing mass customization.

KEY IDEA
 The firm must continually evolve its segmentation, as customers
need profiles evolve.

M A R K E T S E G M E N TAT I O N A N D TA R G E T I N G

TARGETING MARKET SEGMENTS

page 225_____________________

KEY IDEA
 For each segment it
targets, the firm should
develop a unique offer
precisely tailored to
the need profile of customers in that segment.

page 226_____________________

KEY IDEA
 In deciding which
segments to target,
the firm should ask
two questions:

 Perceptual maps show

how various products
serve customers or
segment needs. They
show market segment
sizes and customer
ideal points in each
segment. These data
help the firm make
targeting decisions.

KEY IDEA

How attractive is this

segment?

 A firm can improve

its market segment
position by investing
in those business
strengths that
determine success.

Does the firm have

the business
strengths to win
in this segment?

 A firm may identify

more attractive market
segments by refining its
segmentation approach.

page 231 __________________________________________________________

KEY IDEA

page 229_____________________

KEY IDEA
 Large firms and small
firms each have
advantages in targeting
market segments.
Mis-steps can cause
each to lose a strong
position.

CHAPTER 8

CHAPTER 9: MARKET STRATEGY THE INTEGRATOR

OPENING CASE: MAYO CLINIC
page 237_____________________

KEY IDEA
 The goal of market and
market-segment strategies is very simple
to attract, retain, and
grow customers in the
face of competitors
trying to do the same
thing.
 The market strategy is
the firms game plan for
addressing the market.
It states what the firm is
trying to achieve, what
it will do and will not do.
Notably, it identifies
those segments the firm
targets for effort.

THE PURPOSE OF MARKET AND MARKET-SEGMENT STRATEGIES

page 238_____________________

KEY IDEA
 The market strategy
requires decisions
about results, resources, and actions.
 Well-developed market
and market-segment
strategies fulfill four
purposes for the firm
provide strategic
direction in the market,
state how to secure
differential advantage,
guide the effective
allocation of scarce
resources, and achieve
cross-functional
coordination.

page 239_____________________

KEY IDEA
 Effective market and
market-segment strategies show how the firm
will secure a differential
advantage.

page 240_____________________

KEY IDEA
 An effective market
strategy helps the firm
allocate its resources.
Externally, the firm
allocates resources to
target market segments,
and selects specific
resources to secure
differential advantage.
Internally, the firm
allocates resources
across internal
activities.

M A R K E T S T R AT E G Y T H E I N T E G R AT O R

CHAPTER 9

ELEMENTS OF THE MARKET-SEGMENT STRATEGY

page 240_____________________

KEY IDEA
 Inter-functional conflict
is endemic. Formulating
the market strategy
should resolve this
conflict and achieve
cross-functional
coordination.

PERFORMANCE OBJECTIVES
page 242_____________________

KEY IDEA
 The firm must make
trade-offs among the
three categories of
strategic objectives:
growth and market
share, profitability, and
cash flow.

page 243 ________________________________________________________________________________________________

KEY IDEA
 Priorities for strategic
objectives evolve during
product life-cycle
stages.

KEY IDEA
 Operational objectives
provide the numbers to
attach to the strategic
objectives; they specify
how much is needed
and by when.

KEY IDEA
 Managers should
explicitly discuss
the trade-offs and
expectations among
strategic objectives
before setting operational objectives.

POSITIONING
page 251 __________________________________________________________

KEY IDEA
 The firm competes for
customer targets
decision-makers or
influencers.

KEY IDEA
 The firms competitive
target can be current
or potential, direct or
indirect, or in the supply
chain. Sometimes the
targeted competitor
is not immediately
obvious.

page 252_____________________

KEY IDEA
 The value proposition
is the firms major
competitive weapon
for gaining its target
customers; it also
defines the firms
implementation focus.
 The firm must develop
a value proposition for
each target customer
type.

page 253_____________________

KEY IDEA
 Positioning is not what
you do to a product:
Positioning is what you
do to the mind of the
prospect.

CHAPTER 9

M A R K E T S T R AT E G Y T H E I N T E G R AT O R

IMPLEMENTATION PROGRAMS
page 254_____________________

KEY IDEA
 The marketing mix
and other functional
programs implement
the market strategy.

page 255 ________________________________________________________________________________________________

KEY IDEA
 Marketing mix programs should support
the value proposition,
and all elements should
support one another.

KEY IDEA
 The firms functional
areas must support the
market strategy.

KEY IDEA
 Together, individual
market segment
strategies must form
a coherent market
strategy. The segment
strategies must be
distinct, yet the firm
should seek out
positive synergies
in implementation
programs.

CHAPTER 10: MANAGING THROUGH THE LIFE CYCLE

OPENING CASE: RYANAIR

DEVELOPING COMPETITIVE STRATEGIC OPTIONS

page 263_____________________

page 266_____________________

KEY IDEA

KEY IDEA

 Firms failing to act

pre-emptively may
face significant
opportunity costs.

 Scenarios help the firm

generate competitive
strategic options.
 The main building block
for these scenarios is
product life-cycle stage.
 Successful strategies
should have a strong
creative element.
 Life cycles are shortening for many products.

BUILDING PRODUCT LIFE-CYCLE SCENARIOS

page 267 __________________________________________________________

KEY IDEA
 Pioneers must be prepared to tap multiple
sources to fund losses
early in the life cycle.

page 270_____________________

KEY IDEA
 By the early-growth
stage, customers
accept the product,
and the market leader
should be profitable.

KEY IDEA
 The most common
government-imposed
barriers are patents.
 Firms sometimes lobby
governments to impose
regulations on their
competitors.

page 269 __________________________________________________________

KEY IDEA
 When the firm executes
a low-price penetration
strategy, it must accept
low profit margins for a
substantial time period.
Continual cost reductions are essential to
sustain low prices.

page 272 __________________________________________________________

KEY IDEA

KEY IDEA

 Generally, followers in
growth markets are
unprofitable and have
negative cash flows.

 Imitation means
copying the leader
but being more effective in execution.

 The followers goal is

to learn from others and
minimize cost and risk.

 Leapfrogging goes
one better than the
leader by developing
innovative and superior
products and/or targeting emerging market
segments.

KEY IDEA
 A pioneer can sustain
first-mover advantages
by producing highquality products. The
firm earns a leading
reputation and sets the
stage for creating a
strong brand.

CHAPTER 10

MANAGING THROUGH THE LIFE CYCLE

BUILDING PRODUCT LIFE-CYCLE SCENARIOS

CONTINUED

page 274 __________________________________________________________

KEY IDEA

KEY IDEA

page 276_____________________

KEY IDEA

page 277_____________________

KEY IDEA

 By late growth, basic

customer benefits and
values are still important but may not enter
into customers choice
decisions. Customers
are more likely to base
their purchase decisions on additional
benefits and values.

 In late growth, the firm

must decide whether to
target many segments
or just a few.

 Creative Ways to Drive

Growth in the Maturity
Stage
Increase customers
use of the product
Improve the product
or service
Improve physical
distribution
Reduce price
Reposition the brand
Enter new markets

 Markets that seem

mature may have
growth potential waiting
to be unlocked via
creative approaches.

page 278_____________________

page 279_____________________

page 280_____________________

page 282_____________________

KEY IDEA
 Market leaders in
mature, concentrated
markets should have
low costs, decent
profits, and positive
cash flows.

KEY IDEA
 Market leaders in
concentrated markets
have two major
alternatives
long-run leadership
or harvesting.

page 283 __________________________________________________________

KEY IDEA
 Firms can make
considerable profits
in declining markets.

KEY IDEA
 In a declining market,
the firms options
depend on market
hospitality and its
business strengths.

KEY IDEA
 Followers in mature
concentrated markets
typically have higher
costs and lower profits
and are financially
weaker than market
leaders. But they may
rejuvenate to become a
major threat.

KEY IDEA
 In mature fragmented
markets, no firm has a
large market share.

CHAPTER 11: MANAGING BRANDS

WHAT IS A BRAND?

BRAND EQUITY AND THE VALUE OF BRANDS

page 295_____________________

page 298_____________________

KEY IDEA

KEY IDEA

 Brand equity reflects

the trust established
between the brand
owner and its
customers.

 The brand is a symbol

around which the firm
and its customers can
construct a relationship.

page 299_____________________

KEY IDEA
 Brand equity generally
builds up slowly over
time.
 A brand can quickly
lose value if not
managed properly.

MONETIZING BRAND EQUITY

BUILDING AND SUSTAINING A STRONG BRAND

page 300_____________________

page 304_____________________

KEY IDEA
 Replacement cost
and cash flow
methods are two
internal approaches
for calculating firm
brand equity.

page 302_____________________

KEY IDEA
 The firm earns a
contribution to firm
brand equity only when
a customer purchases
the brand.

KEY IDEA

page 305_____________________

KEY IDEA

 Carefully chosen
brand identity and
consistent execution
are critical to developing brand loyalty.

 Firm brand equity

represents the brands
balance sheet

page 309_____________________

page 310_____________________

 Brand health checks

compare a brands
strengths against
historic trends and
benchmark competing
brands.

MANAGING BRAND ARCHITECTURE

page 305_____________________

KEY IDEA
 The firm should carefully manage the evolution
of its brand portfolio.
 Firms adjust their brand
portfolios in response
to shifting consumer
trends, competitive
responses, and mergers
and acquisitions.

page 306_____________________

KEY IDEA
 There are pros and
cons for both multibranding and umbrella
branding.

KEY IDEA
 Increasingly, global
firms make branding
decisions at headquarters, rather than
in individual countries.
 Think global, act local!
guides many firms.
 Multinational firms
should consider a brand
portfolio that includes
global, regional, and
national brands. Overtime, the geographic
scope of some brands
may narrow, and other
brands may broaden.

KEY IDEA
 Firms that leverage
brands secure automatic brand awareness
for the new product.
They avoid new brand
introduction costs and
may increase profits
for little additional
investment.
 For an extension to be
viable, the brand must
have strong positive
associations. The
difference between
these brand associations and the product
extension should not be
incongruous.

CHAPTER 11

MANAGING BRANDS

MANAGING BRAND ARCHITECTURE

page 311_____________________

KEY IDEA
 The firm can conserve
brand equity by effective brand migration.

CONTINUED

page 312 __________________________________________________________

KEY IDEA
 The firm can enhance
brand equity by effective strategic alliances.

KEY IDEA
 Three ways to reposition a brand are:
address new market
segments, change
brand associations,
and alter the brands
competitive target.
 Continuous innovation
pre-empts the need to
revitalize a brand.

CHAPTER 12: MANAGING THE PRODUCT LINE

THE PRODUCT PORTFOLIO CONCEPT
page 322_____________________

KEY IDEA
 The firms products
have important
resource-related
interrelationships.
 The firm does not
optimize its overall
profits by maximizing
profits from individual
products. It must
consider the entire
product line.
 Firms with imbalanced
portfolios are vulnerable to acquisition.

page 325_____________________

KEY IDEA
 Portfolio analysis is
best viewed as an
additional tool for
setting investment
priorities not as an
alternative to financial
analysis.

page 323_____________________

KEY IDEA
 Financial analysis
methods rely on forecasts these can
be highly uncertain.
Financial analysis
does not consider
strategic issues.
 Too much reliance on
financial analysis can
lead to misallocation
of resources across
products.

page 324 __________________________________________________________

KEY IDEA
 Portfolio analysis is a
systematic, organized,
and easily communicated way of assembling, assessing, and
integrating important
information about
product opportunities.

 Financial analysis
methods ignore
marketing
considerations.
page 327_____________________

KEY IDEA
 Long-run market growth
and RMS define the
growth-share matrix.
 The growth-share
matrix can be overused
and misinterpreted.

page 328_____________________

KEY IDEA
 The firm can use the
multifactor matrix
(Chapter 8) for resource
allocations among
products.
 The growth-share and
multifactor matrices
have advantages and
disadvantages that
impact the viability
of strategic
recommendations
that they generate.

KEY IDEA
 Portfolio analysis
addresses many
problems with
financial analysis.

CHAPTER 12

MANAGING THE PRODUCT LINE

OTHER IMPORTANT PRODUCT INTERRELATIONSHIPS

page 331 __________________________________________________________

KEY IDEA
 Sometimes one product
helps another (positive
complementarity);
sometimes it hurts
another (negative
complementarity).

KEY IDEA
 When making product
decisions, the firm
should carefully consider current and potential
interactions with the
firms other products.

PRODUCT LINE BREADTH: PROLIFERATION VERSUS SIMPLIFICATION

page 332_____________________

page 333_____________________

KEY IDEA
 Firms face conflicting
pressures for broad
versus narrow product
lines.
 ROS and ROI measure
very different things.

KEY IDEA
 Firms often differentiate
individual products by
time availability, product performance, and
package quantities.
 Implementing a firewall
strategy can lead to
product proliferation.

page 336 __________________________________________________________

KEY IDEA
 A simplified product
line can make the firm
more competitive. But
the firm should use
appropriate criteria for
its deletion decisions.

KEY IDEA
 Sometimes the firm can
successfully resurrect
deleted products.

OTHER PRODUCT LINE ISSUES

page 336_____________________

KEY IDEA
 Beware deleting products without considering all relevant issues.

page 334_____________________

KEY IDEA
 Product proliferation
refers to product
variety. Market segmentation explores
differences in customer
needs.
 The firm can develop
multiple offers based
on a single product,
targeted to several
segments.

CHAPTER 13: DEVELOPING NEW PRODUCTS

OPENING CASE: THOMSON FINANCIAL BOARDLINK
page 347_____________________

KEY IDEA
 Successful new
products enhance
shareholder value.

WHERE AND HOW INNOVATION OCCURS

page 348 __________________________________________________________

KEY IDEA
 Innovation embraces
new products, but also
processes and technologies.
 Sustaining innovations
improve products and
processes on existing
performance dimensions. Disruptive innovations offer different
value propositions.

KEY IDEA
 The firm should serve
current, especially
loyal, customers it
must also create new
customers.

 Leading firms often

invest in sustaining
versus disruptive
innovations.

NEW PRODUCT DEVELOPMENT

page 352_____________________

KEY IDEA
 Product development
trade-offs include time,
risk, and financial
return. Four development approaches
are basic technology
research, applied
technology research,
market-focused
development, and
market tinkering.

page 349_____________________

KEY IDEA
 The customerinnovation relationship
involves a two-way
communication flow.

page 351_____________________

KEY IDEA
 Firms can be Isolates,
Followers, Shapers, or
Interactors, based on
their innovation focus
and customer focus.

CHAPTER 13

DEVELOPING NEW PRODUCTS

THE STAGE-GATE PROCESS FOR NEW PRODUCT DEVELOPMENT

page 354_____________________

KEY IDEA
 The firm should
develop clear criteria
for a project to pass
through each gate.

page 355_____________________

KEY IDEA
 The stage-gate process
is a systematic method
for new product development. The stages
are idea generation,
preliminary screening,
concept development,
business-case analysis,
development, product
testing, market-factor
testing, test marketing,
and commercialization.

page 359_____________________

KEY IDEA
 The firm should tap
multiple sources for
new ideas.
 The best way to get
a good idea is to get
a lot of ideas.42

page 360_____________________

KEY IDEA
 Preliminary screening
aims to form a balanced
portfolio of new product
ideas.
 Different types of new
product idea require
different screening
criteria.

 The firm must manage

Type I and Type II
errors.
 The cost of failure increases at each stage.
page 361_____________________

KEY IDEA
 The product concept
should appeal to
customers and guide
development.

page 362_____________________

KEY IDEA
 Business-case analysis
assesses the financial
viability of a product
concept.
 Forecasting sales
revenues is the most
difficult step in business-case analysis.

page 365_____________________

KEY IDEA
 Many firms make very
large investments in
product development.
 Multi-functional
teams and customer
involvement aid the
development process.
 Design is an increasingly important part of the
development process.

page 366_____________________

KEY IDEA
 The House of Quality
maps customer needs
into product design.

DEVELOPING NEW PRODUCTS

page 367 __________________________________________________________

KEY IDEA
 The firm should conduct
in-company alpha tests
throughout development. It should conduct
customer beta tests in
the latter phases.
 Failure to test products
sufficiently can have
serious marketing
and financial
consequences.

PRODUCT ADOPTION
page 371_____________________

KEY IDEA
 There are several types
of new product
adopters.
 The interplay of several
factors determines the
speed of new product
adoption.

KEY IDEA
 Market-factor testing
includes simulated
environments and
virtual testing.
 Product testing is
insufficient the firm
should test the entire
marketing offer.

page 368_____________________

KEY IDEA
 In deciding on test
marketing, the firm
should be aware of
several pros and cons.

CHAPTER 13

page 369_____________________

KEY IDEA
 Commercialization is
often where firms make
their biggest bets.

CHAPTER 14: INTEGRATED MARKETING COMMUNICATIONS

COMMUNICATIONS: PROCESS AND TOOLS
page 380 ________________________________________________________________________________________________

KEY IDEA
 In the communications
process, senders send
information, and
receivers receive information.

KEY IDEA
 Personal communication is face-to-face with
individuals or groups.

KEY IDEA
 Non-personal communication occurs without
interpersonal contact
between sender and
receiver.

 Miscommunication
arises from problems in
encoding, distortion,
and decoding.
page 381_____________________

KEY IDEA
 Quasi-personal
communications
embrace interaction
and feedback without
human involvement.

page 382_____________________

KEY IDEA
 Word-of-mouth
communication occurs
among customers and
potential customers.

DEVELOPING THE COMMUNICATIONS STRATEGY

page 383_____________________

KEY IDEA
 The firm has two major
types of communications targets: those
directly related to the
firms products and
others not directly
related.

page 384_____________________

KEY IDEA
 Most firms use either
push or pull strategies
large firms
often use combination
push/pull strategies.

INTEGRATING COMMUNICATIONS EFFORTS

page 389_____________________

KEY IDEA
 Integration ensures
maximum communications impact to achieve
firm goals.

page 385_____________________

KEY IDEA
 Firms have many communications targets
other than customers.

page 387_____________________

KEY IDEA
 Communications
objectives and timelines
drive the choice of
communication tools.

CHAPTER 15: NON-PERSONAL COMMUNICATION

ADVERTISING
page 396_____________________

KEY IDEA
 Advertising is critical
for both market and
communications
strategies.

page 402_____________________

KEY IDEA
 Rational-style advertising includes demonstration, comparative,
one- and two-sided
appeals, refutational,
and primacy or recency.
 Emotional-style advertising includes humor,
fear, celebrity endorsement, and storytelling.

DIRECT MARKETING
page 412_____________________

KEY IDEA

page 397_____________________

KEY IDEA
 Hierarchy-of-effects
models for high
involvement and
low involvement
products are central
to understanding how
advertising works.

page 407_____________________

KEY IDEA
 In setting media objectives, the firm must consider reach, frequency,
and gross rating points.
 The advertising
message must appear
in the right place at
the right time.

page 398_____________________

KEY IDEA
 There are two types
of advertising objectives output and
intermediate.

page 400_____________________

KEY IDEA
 Creating advertising is
an enigma, more art
than science, mysterious and unexplainable.

 Output objectives are

what the firm ultimately
wants to achieve.
Intermediate objectives
relate to hierarchy-ofeffects models and
include awareness,
knowledge, liking or
preference, and trial.
page 408_____________________

KEY IDEA
 The objective and task
method, based on
marginal analysis,
should underpin the
budgeting process.
Rule-of-thumb
methods can lead to
unsatisfactory results.

page 410_____________________

KEY IDEA
 Evaluating advertising
effectiveness is a
complex task. The firm
must choose among
various types of tests
and measures.

 Major timing options

are continuous,
flighting, and pulsing.

PUBLICITY AND
PUBLIC RELATIONS
page 414_____________________

SALES PROMOTION

THE INTERNET

page 415 ____________________

page 417_____________________

KEY IDEA

KEY IDEA

KEY IDEA
 Direct marketing offers
advantages over mass
advertising: flexibility,
action-oriented customer response, better
measurement, predictability, better
customer knowledge,
ability to tailor the offer,
and ability to identify
prospects.

 Publicity and Public

Relations relies on an
intermediary, typically
the press, to transmit
a message to a target
audience.

 Sales promotion is a
potpourri of techniques,
mostly for short-term
objectives.
 Poorly designed sales
promotion programs
hurt profits and brand
image.

 Only quasi-personal
communication taps the
webs true potential.

CHAPTER 16: DIRECTING AND MANAGING THE FIELD SALES EFFORT

MARKETINGS ROLE IN THE FIELD SALES EFFORT
page 427_____________________

KEY IDEA
 Effectively managing
the sales/marketing
interface is critical
for achieving sales
excellence.

page 428_____________________

KEY IDEA
 Firms often group
customers into separate
tiers like Tier I
(platinum), Tier II (gold),
and Tier III (bronze)
and address each
differently.

page 429 __________________________________________________________

KEY IDEA
 Some customers
purchase small volumes
but disproportionately
consume the firms
resources.

KEY IDEA
 Tier I customers provide
the highest levels of
sales and profits.
 Strategic account managers are responsible
for individual accounts.
 Global account managers are responsible
for multinational customers that want to
make global purchases.

THE TASKS OF SALES FORCE MANAGEMENT

page 430 __________________________________________________________

KEY IDEA
 Sales objectives are
the firms desired
results. Achieving
sales objectives is the
sales forces central
task. Sales objectives
turned into specific
performance requirements are called
quotas.

page 432_____________________

KEY IDEA
 The firm can set sales
objectives related to
customer retention,
market share, price
realization, close
rates, and customer
satisfaction.

KEY IDEA
 Gross sales revenues
are the traditional basis
for sales objectives.
Sometimes firms base
objectives on profit or
profit contribution.

page 431 __________________________________________________________

KEY IDEA
 Sales objectives
integrate the firms
market strategy and
sales strategy.

page 435 __________________________________________________________

KEY IDEA
 Salespeople conduct
several activities. In
many firms, they spend
less than 20 percent of
time face-to-face with
customers trying to
make sales.

KEY IDEA
 Guidelines should
specify how salespeople must allocate
their time.

KEY IDEA
 The firm should break
down sales objectives
by control unit sales
regions, sales districts,
and individual sales
territories. It should
also calendarize sales
objectives quarterly,
monthly, and possibly
weekly.

DIRECTING AND MANAGING THE FIELD SALES EFFORT

CHAPTER 16

page 437 ________________________________________________________________________________________________

KEY IDEA
 Selling effort guidelines
must mirror the structure of sales objectives.
 Typically, selling effort
is not proportional to
sales objectives.

KEY IDEA
 The value proposition
anchors the sales
approach the central
message the salesperson delivers to
customers.

KEY IDEA
 The firm should tailor
the sales message to
different customer
targets and design a
process to explain the
firms benefits.

 The firm must break

down selling effort
allocations by individual
control units like sales
regions, sales districts,
and sales territories.
 The firm should allocate
selling effort by account
category.
page 439 __________________________________________________________

KEY IDEA
 Selling is a system to
facilitate customer
buying.
 Coaching, counseling,
and training can
improve the selling
process.

KEY IDEA
 The employee-based or
outsourced sales force
decision involves control, cost, and flexibility
trade-offs.

page 440_____________________

KEY IDEA
 Key sales organization
design variables are
degree of centralization
or decentralization,
number of management
levels, and span of
control.
 Specialization may lead
to higher sales but also
higher costs. It may
also cause problems
when several firm
salespeople sell to the
same customer.

page 442_____________________

KEY IDEA
 The firm should
implement sales force
reorganizations very
carefully.

CHAPTER 16

DIRECTING AND MANAGING THE FIELD SALES EFFORT

THE TASKS OF SALES FORCE MANAGEMENT

CONTINUED

page 443 __________________________________________________________

KEY IDEA

KEY IDEA

 Sales territories should

have roughly equal
sales potential and
workloads.

 The firm should actively

engage salespeople
in the sales planning
process.

page 446_____________________

page 447_____________________

KEY IDEA
 The firms reward
system should motivate
salesperson behavior.
Primary components
are financial incentives,
recognition, and
promotions.

page 444_____________________

KEY IDEA
 A pipeline system continually tracks success
at different stages in
the selling process.
Rigorous pipeline
analysis leads to better
forecasts.

KEY IDEA
 The firm should develop
rigorous systems for
recruiting, selecting,
training, retaining, and
replacing salespeople.

 The primary ways to

pay salespeople are
salary, commission,
and bonus.

APPENDIX 16.1: ILLUSTRATION OF SETTING OBJECTIVE BY PRODUCT AND CUSTOMER

page 452

KEY IDEA
 To simplify translating
product and segment
objectives into sales
objectives, the firm
can focus on existing
versus new products
and existing versus
new customers.

CHAPTER 17: DISTRIBUTION DECISIONS

DISTRIBUTION SYSTEMS AND THEIR EVOLUTION
page 458_____________________

KEY IDEA
 A distribution channel
comprises many enterprises, their interrelationships, and the
functions they perform.
 A distribution systems
effectiveness changes
over time.
 Distribution arrangements are more difficult
to change than other
marketing implementation elements.

DEVELOPING A DISTRIBUTION STRATEGY

page 458_____________________

KEY IDEA
 Distribution closes gaps
in physical location and
time between finished
products at the factory
and consumers and
end-user customers.

page 460 __________________________________________________________

KEY IDEA
 Direct distribution
methods, combined
with database marketing, are powerful alternatives to indirect
distribution.

KEY IDEA
 Advantages for wholly
owned retail distribution
are greater operational
control and earning the
entire retail margin; disadvantages are capital
required for growth,
and operating risk.

page 461_____________________

KEY IDEA
 Direct channels:
Supplier firms manage
the contact with consumers and end users.
Indirect channels:
intermediaries like distributors, wholesalers,
and retailers play a
major role in transferring products from
suppliers to consumers
and end users.
 Intermediaries offer
value-added benefits
that suppliers cannot.
They provide product
assortments, shopping
experience, market
access, and often
reduce the costs of
conducting various
distribution functions.

CHAPTER 17

DISTRIBUTION DECISIONS

DEVELOPING A DISTRIBUTION STRATEGY

page 462_____________________

KEY IDEA
 For B2B suppliers,
conditions typically
favor either direct or
indirect distribution.
In each case, there
are several options.

CONTINUED

page 463_____________________

KEY IDEA
 Suppliers should select
distribution channel(s)
that are appropriate for
their target segment(s)
and perform the
required functions.
 Providing customer
benefits and values,
rather than traditional
industry practice,
should guide the
suppliers distribution
choices.

page 464_____________________

KEY IDEA
 Critical distribution
strategy decisions
include identifying the
functions to be performed, deciding on
direct versus indirect
channels and distribution channel breadth,
and setting criteria for
intermediaries.

MANAGING DISTRIBUTION CHANNELS

page 466_____________________

KEY IDEA
 A well-designed compensation system can
help the supplier direct
its distributors efforts.

page 468_____________________

KEY IDEA
 Intermediaries add
value by reducing the
number of relationships
a supplier and end-user
customer must have.

page 469_____________________

KEY IDEA
 Distribution channel
members have high
conflict potential.

 Intermediaries occupy
the nexus between
suppliers and end-user
customers.

page 471_____________________

KEY IDEA
 When suppliers attempt
to improve their power
positions, they should
try to anticipate the
actions of other
distribution channel
members.

page 472_____________________

KEY IDEA
 The partnership model
is an increasingly
popular alternative to
the power/strategic
conflict approach.
Channel members
jointly set goals and
work together for
greater efficiency
and effectiveness.

LEGAL ISSUES IN DISTRIBUTION

page 473_____________________

KEY IDEA
 Distribution laws vary
by industry and geography. What is illegal in
the U.S. may be normal
business practice in
other countries.
 In the U.S., many
antitrust lawsuits
involve distribution
issues.

CHAPTER 18: MANAGING SERVICES, CUSTOMER SERVICE,

AND CUSTOMER RELATIONSHIP MANAGEMENT
PRODUCTS, SERVICES, AND CUSTOMER SERVICE
page 480_____________________

KEY IDEA
 Customers buy offers or
promises of benefits
and values; the key
element may be a
product or a service.

page 481_____________________

KEY IDEA
 A service is: any act or
performance that one
party can offer another
that is essentially
intangible and does
not result in the
ownership of anything.
 Customer service
enhances value
inherent in the core
product or service.

CHARACTERISTICS OF SERVICES
page 482_____________________

KEY IDEA
 Services are over 70
percent of employment
and GDP in developed
countries.
 Factors driving services
growth are rising
incomes, age-related
demographic shifts,
outsourcing, leveraging
core competence,
franchising, customer
behavior changes,
deregulation, technology, and globalization.

page 483 __________________________________________________________

KEY IDEA
 Moments of truth are
opportunities for
customer satisfaction
or dissatisfaction.

KEY IDEA
 Customers often focus
on tangible aspects of
intangible services
service facilities, service equipment, service
personnel, and service
guarantees.
 Service guarantees
should be unconditional, painless to
invoke, and easy and
quick to collect. They
should also be simple
to understand and
communicate and
meaningfully related
to the service being
guaranteed.

CHAPTER 18

M A N A G I N G S E R V I C E S , C U S T O M E R S E R V I C E , A N D C U S T O M E R R E L AT I O N S H I P M A N A G E M E N T

CHARACTERISTICS OF SERVICES

CONTINUED

page 484 __________________________________________________________

KEY IDEA
 For services, production
and consumption are
inseparable.
 Since the firm cannot
inventory services, it
must either increase or
decrease supply and/or
demand.

KEY IDEA
 Reducing variability
is more difficult for
services than for
products.

page 485 __________________________________________________________

KEY IDEA
 Service variability can
be positive when
human service
providers tailor their
behavior for individual
customers.

KEY IDEA
 Because they cannot
be inventoried, services
are perishable.

 The firm can reduce

human variability
through automation.

page 486 ________________________________________________________________________________________________

KEY IDEA
 Services are divisible
the service blueprint
is the sequence of
activities that make
up the service.

KEY IDEA
 People do not acquire
services in a physical
sense.

KEY IDEA
 Fellow customers can
influence the service
experience the
customer is NOT
always right.

SERVICE QUALITY
page 487_____________________

KEY IDEA
 Expectations
disconfirmation is
perceived quality
less expected quality.
 SERVQUAL identifies
five gaps for diagnosing
service quality.

page 488_____________________

KEY IDEA
 Variables influencing
perceived service
quality include
responsiveness,
reliability, assurance,
empathy, and tangibles.
 SERVQUALs related
subscale scores provide actionable items
for improving service
performance.

page 490 __________________________________________________________

KEY IDEA
 High satisfaction no
longer guarantees high
customer retention.
Firms must delight their
customers.

page 491_____________________

KEY IDEA
 A drive for service
efficiency can lead
to inflexible systems
they cannot deal with
idiosyncratic customer
behavior.

KEY IDEA
 All firms experience
service failures;
how they address
them is key.

page 492_____________________

KEY IDEA
 Few aggrieved
customers complain
they just defect.
Firms should make
complaining easier,
then follow up swiftly
and aggressively.

M A N A G I N G S E R V I C E S , C U S T O M E R S E R V I C E , A N D C U S T O M E R R E L AT I O N S H I P M A N A G E M E N T

CHAPTER 18

CUSTOMER SERVICE
page 493 __________________________________________________________

KEY IDEA
 Customer service can
be more central than
the core product or
service.

KEY IDEA
 Customer service has
eight flower-of-service
dimensions.

page 495 __________________________________________________________

KEY IDEA
 Customers requiring
similar products and
services may have
differing needs for
customer service, and
vice versa.

KEY IDEA
 Human capital planning
requires special
attention to recruitment,
selection, training
and development,
appraisal, recognition,
reward, and retention
of customer service
employees.

page 494_____________________

KEY IDEA
 Customer service is
different before, during,
and after the purchase.

page 497_____________________

KEY IDEA
 Customer service
infrastructure combines
the technological
and human resources
necessary to deliver
high-level customer
service.

CUSTOMER RELATIONSHIP MANAGEMENT

page 497_____________________

KEY IDEA
 Customer defection
rate is a more valuable
performance measure
than customer satisfaction. The firm should
identify and measure
critical elements driving
customer satisfaction.

page 498_____________________

KEY IDEA
 CRM is a synthesis
of marketing, quality
management, and
customer service to
form mutually beneficial relationships with
customers.
 Technology has an
important role in CRM,
but CRM is not about
technology.

page 499_____________________

KEY IDEA
 Superior customer
databases are relevant,
structured, current,
consistent, accurate,
accessible, complete,
and secure.
 The customer database
should distinguish
among customers
on loyalty and value to
the firm.
 Customer databases
are more valuable when
they also contain data
about relationships with
competitors.

page 502_____________________

KEY IDEA
 The firm should examine its privacy policy for
the impact on customer
relationships.
 Customer loyalty
programs have many
design parameters.

CHAPTER 19: MANAGING PRICE AND VALUE

OPENING CASE: SOUTHWEST AIRLINES
page 509_____________________

KEY IDEA
 Price has a larger
impact on profits than
any other lever. Price
changes affect margins,
unit volumes, costs, and
customer perceptions.

Par t 1: D e veloping Pr ic ing State g y

page 510_____________________

KEY IDEA
 In setting prices, the
firm should consider
perceived customer
value, costs, competition, and strategic
objectives. Excessive
focus on a single
element leads to
suboptimal pricing
decisions.

PERCEIVED CUSTOMER VALUE

page 511 __________________________________________________________

KEY IDEA
 What seems to be a
pricing problem may
be a perceived value
problem.

KEY IDEA
 The firm creates value
for customers primarily
via non-price elements
in its offer the
marketing mix.
 Many factors affect the
value that customers
perceive in the firms
offer.

page 515 __________________________________________________________

KEY IDEA
 Price apportions value
some to the firm,
some to customers.

KEY IDEA
 Pricing at what the
market will bear is
not useful advice;
the market will bear
many prices.
page 516_____________________

KEY IDEA
 PED helps estimate
market demand when
price changes.

M A N A G I N G P R I C E A N D VA L U E

CHAPTER 19

COSTS
page 517_____________________

KEY IDEA
 Critical topics in perceived customer value
are creating, measuring, and capturing
value. Customers price
sensitivity is closely
related to value.

page 519_____________________

KEY IDEA
 Costs have an important
price-setting role for
birth control, death
control, and profit
planning.

page 518 __________________________________________________________

KEY IDEA
 In cost-plus pricing,
the firm identifies its
costs and adds a
profit margin.
 Cost-plus pricing
does not consider
customer value.

KEY IDEA
 Disadvantages of costplus pricing are profit
limitations, arbitrary
cost measurement, and
mismatch with market
realities.
 Firms often determine
fixed costs per unit
arbitrarily by assuming
some level of sales
or production.

page 520_____________________

KEY IDEA
 Customers do not care
about the firms costs;
they care only about
the value they receive.
 The real purpose of
price is not to recover
costs but to capture
value in the customers
mind.

COMPETITION
page 520_____________________

KEY IDEA
 The firm should seek
offer superiority, not
price superiority.

page 521_____________________

KEY IDEA
 In high fixed cost/
low variable cost
oligopolies, firms often
cut prices to gain extra
volume. Prices can
spiral downward and
profits vanish.

page 522_____________________

KEY IDEA
 Rampant price-cutting
is disastrous for all but
the low-cost producer.

page 523_____________________

KEY IDEA
 The firm has various
price and non-price
actions for responding
to price competition.

CHAPTER 19

M A N A G I N G P R I C E A N D VA L U E

STRATEGIC OBJECTIVES
page 524 __________________________________________________________

KEY IDEA
 The firm should link
pricing strategy to its
strategic objectives.

KEY IDEA
 The firms major options
for strategic objectives
are: maximize growth in
volume and/or market
share, maximize profits,
or maximize cash flow.

Par t 2: Se tt ing Pr ices

USING PERCEIVED CUSTOMER VALUE, COSTS, COMPETITION, AND STRATEGIC OBJECTIVES
page 530_____________________

KEY IDEA
 CMU and CMR are
critical concepts in
price-setting. They
allow the firm to
calculate breakeven
sales volumes for
various pricing options.

page 531_____________________

KEY IDEA
 Many firms make a
fixed offer, then vary
the price when under
pressure. Firms with
a price menu have
variable offers with
fixed prices.

TACTICAL PRICING
page 532_____________________

KEY IDEA
 Single product prices
are rare in the real
world.
 Pricing actions vary
between highly visible
and opaque.

PRICING MANAGEMENT
page 533_____________________

KEY IDEA
 The firm needs good
systems to track elements in the pricing
toolkit.
 The pricing toolkit produces the pocket price
via the price waterfall.
 Pricing toolkit elements
are differentially important to customers.

page 538_____________________

KEY IDEA
 The firm should develop
pricing policies at high
levels in the firm.
 Price-setting can be a
strategic capability.

LEGAL AND ETHICAL ISSUES IN PRICING

page 539_____________________

KEY IDEA
 Many governments
scrutinize prices for
illegal activity.

CHAPTER 20: ENSURING THE FIRM IMPLEMENTS

THE MARKETING OFFER AS PLANNED
A MODEL FOR DEVELOPING AN EXTERNAL ORIENTATION: THE VALUES STATEMENT
page 552_____________________

KEY IDEA
 Organizational values
are a common set of
beliefs that guide the
behavior of the firms
members. They are
often integral to a
firms success.
 Values statements are
worthwhile only if the
entire firm embraces
them.

TRANSFORMING THE ORGANIZATION TO BECOME EXTERNALLY ORIENTED

page 554_____________________

KEY IDEA
 For organizational
transformation, the
firm must address
organizational structure, systems and
processes, and human
resource management.

page 555_____________________

KEY IDEA
 Functional organizations works best when
markets and products
are homogeneous.

page 561 ________________________________________________________________________________________________

KEY IDEA
 The firms organizational structure should
support an integrated
marketing approach.

KEY IDEA
 Systems and processes
help produce organizational outputs and
provide consistency
to customers.

KEY IDEA
 Good hard systems
improve operational
efficiency. They also
improve marketing
effectiveness and help
secure differential
advantage.

CHAPTER 20

ENSURING THE FIRM IMPLEMENTS THE MARKETING OFFER AS PLANNED

TRANSFORMING THE ORGANIZATION TO BECOME EXTERNALLY ORIENTED

page 562_____________________

KEY IDEA
 Soft systems can also
help make firms more
externally oriented.

page 563_____________________

KEY IDEA
 HRM gives the firm
many opportunities to
focus on the customer.
 If the firm hires the
right people and
develops and manages
them appropriately, an
external orientation
should follow.

page 565 __________________________________________________________

KEY IDEA
 Managers at all
functions and levels
should have consistent
and regular contact
with customers.

KEY IDEA
 Customer-focused
measures put teeth
into the external
orientation effort.

SUSTAINING AN EXTERNAL ORIENTATION

page 567_____________________

KEY IDEA
 Todays success sows
the seeds of tomorrows
defeat.

CONTINUED

page 564 __________________________________________________________

KEY IDEA
 Hiring experienced
marketers, including
those at the highest
levels, can play a major
role in developing an
external orientation.
 Marketing education
can help marketers
learn new behaviors
that help instill an
external perspective.

KEY IDEA
 Many firms training
courses include
customer input and/or
participation.

CHAPTER 21: MONITORING AND CONTROLLING

FIRM PERFORMANCE AND FUNCTIONING
KEY PRINCIPLES OF MONITOR-AND-CONTROL PROCESSES
page 574_____________________

KEY IDEA
 Monitor-and-control
processes are the most
powerful means of
changing individual
behavior in firms.

page 575 __________________________________________________________

KEY IDEA

KEY IDEA

 Post-action control
means waiting for a preset time before comparing actual results against
performance standards.

 Steering control continually compares the

firms actual results to
performance standards
and allows it to be more
market responsive.

 Monitor-and-control
processes focus on the
firms results: Is the firm
achieving its planned
results? And on firm
functioning: Is the firm
functioning well?

 Feedback cycles the

time between the firms
actions and the results
it measures should
not be too short.

page 576 __________________________________________________________

KEY IDEA
 The firm should use
objective measures for
monitor-and-control
purposes; if scales are
appropriate, these
should be validated.

KEY IDEA
 The firm should measure performance at
multiple organizational
levels.
 Good performance in a
unit or sub-unit can
hide poor performance
elsewhere. The firm
must isolate the
problem areas.

MONITORING AND CONTROLLING FIRM PERFORMANCE

page 581_____________________

KEY IDEA
 The firm should
measure both unit
sales volume and
sales revenues.
 The firm must ensure
its volume measures
are accurate and
consistently derived.

page 583_____________________

KEY IDEA
 Marketers generally
prefer profit contribution and direct product
profit measures to
bottom-line profit.

page 584 __________________________________________________________

KEY IDEA
 Most firms measure
product profitability;
fewer firms measure
customer profitability.

KEY IDEA
 Sales volume and
profitability measures
have serious shortcomings; they dont
show the firms
performance relative
to its competitors.

CHAPTER 21

MONITORING AND CONTROLLING FIRM PERFORMANCE AND FUNCTIONING

MONITORING AND CONTROLLING FIRM PERFORMANCE

page 585_____________________

KEY IDEA
 Customer satisfaction
and attitudes are widely
used soft measures.
 A well-structured,
validated, independently administered
customer survey
provides the best
soft data.

CONTINUED

page 586_____________________

KEY IDEA
 Success on intermediate measures
does not guarantee the
firms output performance. But the firm can
achieve good output
performance only by
achieving good intermediate performance.
 Intermediate objectives
are particularly important in long-cycle sales.

MONITORING AND CONTROLLING FIRM FUNCTIONING

page 587_____________________

KEY IDEA
 Implementation control:
Did the firm implement
its planned actions?

page 588_____________________

KEY IDEA
 Strategy control:
Is the firms market
strategy well conceived
and on target?

page 589 __________________________________________________________

KEY IDEA
 Distinguishing
between strategy
and implementation
problems is crucial.

KEY IDEA
 Managerial process
control: Are the firms
processes the best they
can be?

 Post-action approaches
are generally superior
for strategy control.
page 590_____________________

KEY IDEA
 The marketing audit is a
comprehensive process
for evaluating the firms
marketing practices.

THE BALANCED SCORECARD

page 592_____________________

KEY IDEA
 The balanced scorecard reflects a steering
control philosophy;
it balances output,
intermediate, and input
marketing measures.

APPENDIX: FINANCIAL ANALYSIS FOR MARKETING DECISIONS

SECTION 1: PARTITIONING COSTS FOR MARKETING DECISION-MAKING
page A2 _____________________

KEY IDEA

page A5 _____________________

KEY IDEA

 Variable costs increase

and decrease as
volumes increase
and decrease.

 For marketing decisionmaking, the firm should

reclassify its costs as
variable and fixed.

 Fixed costs do not vary

with volume over a
reasonable range.

 A contribution magin
approach makes it easy
to calculate the profit
impact of volume
changes.

page A7 _____________________

page A8 _____________________

KEY IDEA
 Managers can change
programmed fixed costs
in the short/medium
run. Standby fixed
costs only change in
the long run.

KEY IDEA
 The firm can use the
breakeven approach to
calculate the profit
impact of changing
programmed fixed
costs.

page A6 ___________________________________________________________

KEY IDEA
 Contribution margin per
unit is contribution on a
per unit basis.

KEY IDEA
 At the breakeven point
contribution margin
covers fixed costs and
profits are zero.
 Profit is a residual. Its
what is left over after
contribution margin
covers fixed costs.

page A10 __________________________________________________________

KEY IDEA
 The difference between
a direct cost and an
indirect cost is simple
to figure out. If the
product, sales territory,
or function were to go
away and the cost
would also go away,
it is a direct cost. If not,
it is an indirect cost.

KEY IDEA
 When the firm drops a
product, other products
must carry its indirect
cost allocations.

page A13 ____________________

KEY IDEA
 Activity-based costing
is useful for converting
product income statements into customer
income statements.

SECTION 2: MARGINS

SECTION 3: SHAREHOLD VALUE ANALYSIS

page A15 __________________________________________________________

page A17 ____________________

KEY IDEA
 Retailers typically
express margins as a
percentage of their
selling price.

KEY IDEA
 The term margin
means different things
to different people.
When using the term,
take the time to identify
the true meaning in the
specific situation.

KEY IDEA
 Shareholder value
analysis should be
used with care.