MARKETING MANAGEMENT

A STRATEGIC DECISION-MAKING APPROACH

EIGHTH EDITION

JOHN W. MULLINS
Associate Professor of Management Practice in Marketing
and Entrepreneurship
London Business School

O R V I L L E C. W A L K E R , JR.
James D. Watkins Professor of Marketing, Emeritus
University of Minnesota

Connect

I)'
Me Learn
Graw Succeed"
Hill
f
£• • II SW\ fAlT'-i P
S I k^ 1 i 1 ^ r S
I
1
1
PREFACE xvi
SECTION ONE
THE ROLE OF MARKETING IN DEVELOPING
SUCCESSFUL BUSINESS STRATEGIES 1 Room for Improvement in Marketing
1 The Marketing Management
Process 2
Samsung—Building a Global Brand 2 Management 24
New Competitive and Marketing Strategies
The Results 3
Marketing Challenges Addressed in Chapter 1 3
Why Are Marketing Decisions Important? 4
The Importance of the Top Line 5
Marketing Creates Value by Facilitating Exchange
Relationships 5
What Factors Are Necessary for a Successful
Exchange Relationship? 5
1. Who Markets and Who Buys? The Parties
in an Exchange 6
2. Customer Needs and Wants 7
3. What Gets Exchanged? Products
and Services 10
4. How Exchanges Create Value 10
5. Defining a Market 12
What Does Effective Marketing Practice
Look Like? 13
Marketing Management—A Definition 13
Integrating Marketing Plans with the Company's
Strategies and Resources 15
Market Opportunity Analysis 16
Formulating Strategic Marketing Programs 17
Formulating Strategic Marketing Programs
for Specific Situations 18
Implementation and Control of the Marketing
Program 19
The Marketing Plan—A Blueprint
for Action 19
" •*
Who Does What? 21
Marketing Institutions 21
Who Pays the Cost of Marketing Activities—
And Are They Worth It? 22
Efficiency 23
The Role of the Marketing Decision Maker 23
Some Recent Developments Affecting Marketing
2 Globalization 24
Increased Importance of Service 25
Information Technology 25
Relationships across Functions and Firms 27
Take-aways 27
Endnotes 28
2 The Marketing Implications of Corporate
and Business Strategies 30
IBM Switches Strategies 30
Technology Changes and Competitor Actions
Require a Shift in Strategy 30
A New Corporate Strategy 31
New Business and Marketing^Strategies 31
The Bottom Line 32
Marketing Challenges Addressed in Chapter 2 32
What Is Marketing's Role in Formulating and
Implementing Strategies? 33
Market-Oriented Management 35
Does Being Market-Oriented Pay? 35
Factors That Mediate Marketing's Strategic
Role 36
Three Levels of Strategy: Similar Components,
but Different Issues 39
Strategy: A Definition 39
The Components of Strategy 39
The Hierarchy of Strategies 40
Corporate Strategy 40
vii
VIII
Business-Level Strategy 42
Marketing Strategy 42
The Marketing Implications of Corporate Strategy
Decisions 42
Corporate Scope—Defining the Firm's
Mission 42
Corporate Objectives 47
Corporate Sources of Competitive
Advantage 49
Corporate Growth Strategies 49 ,
Allocating Corporate Resources 52
Limitations of the Growth-Share Matrix 54
Sources of Synergy 57
The Marketing Implications of Business-Unit
Strategy Decisions 58
How Should Strategic Business Units
Be Designed? 59
The Business Unit's Objectives 59
The Business Unit's Competitive
Strategy 60
Take-aways 62
Endnotes 62
SECTION TWO
MARKET OPPORTUNITY ANALYSIS 67
3 Understanding Market
Opportunities 68
The Cellular Telephone Business: Increasing
Competition in a Growing Market 68
The Mobile Telephony Market 68
Cell Phone Manufacturing 68
Cell Phone Service Providers 69
Network Equipment Down, Too 69
Marketing Challenges Addressed in Chapter 3
Markets and Industries: What's the Difference?
Assessing Market and Industry Attractiveness 71
Macro Trend Analysis: A Framework for Assessing
Market Attractiveness, Macro Level 72
The Demographic Environment 72
The Sociocultural Environment 75
The Economic Environment 76
The Regulatory Environment 77
The Technological Environment 78
The Natural Environment 79
CONTENTS
Your Market Is Attractive: What about Your
Industry? 80
Porter's Five Competitive Forces 80
A Five Forces Analysis of the Cellular Phone
Service Industry 83
Challenges in Macro-Level Market and Industry
Analysis 84
Information Sources for Macro-Level
Analyses 85 <-,
Understanding Markets at the Micro Level 86
Understanding Industries at the Micro Level 88
The Team Domains: The Key to the Pursuit of
Attractive Opportunities 89
Mission, Aspirations, and Risk Propensity 89
Ability to Execute on the Industry's Critical
Success Factors 90
It's Who You Know, Not What You Know 90
Putting the Seven Domains to Work 91
Anticipating and Responding to Environmental
Change 91
Impact and Timing of Event 92
Swimming Upstream or Downstream:
An Important Strategic Choice 93
Take-aways 93
Endnotes 94
4 Understanding Consumer Buying
Behavior 96
Cruise Ships—Not Just for Grandma and Grandpa
Anymore 96
Savvy Marketing Helped Fuel Industry
70 Growth 96
70 Future Challenges 97
Marketing Challenges Addressed in Chapter 4 98
The Psychological Importance of the Purchase
Affects the Decision-Making Process 99
How Do Consumers Make High-Involvement
Purchase Decisions? 99
Low-Involvement Purchase Decisions 107
Understanding the Target Consumer's Level
of Involvement Enables Better Marketing
Decisions 107
CONTENTS IX

Why People Buy Different Things: Part 1— Installations 142

The Marketing Implications of Psychological Accessory Equipment 142
and Personal Influences 111 Operating Supplies 143
Perception and Memory 111 Business Services 143
Needs and Attitudes 112 Take-aways 144
Demographics, Personality, and Lifestyle 115 Endnotes 144
Why People Buy Different Things: Part 2—The
Marketing Implications of Social Influences 117
6 Measuring Market Opportunities:
Culture 117
Forecasting and Market
Social Class 118
Reference Groups 118 Knowledge 146
The Family 119 Intel's Secret Weapon 146
Take-aways 120 Beh" s Charter at Intel 146
Endnotes 120 How Do Anthropology and Ethnography
Work? 147
What Is Bell Learning about Generation X? 147
5 Understanding Organizational Markets
Can Bell's Work Make a Difference? 147
and Buying Behavior 122
DHL Supply Chain: Building Long-Term Marketing Challenges Addressed in Chapter 6 148
Relationships with Organizational Buyers 122 Every Forecast Is Wrong! 148
Building Long-Term Relationships with A Forecaster's Tool Kit: A Tool for Every
Customers 122 Forecasting Setting 149
Long-Term Relationships Enhance Long-Term Statistical and Other Quantitative Methods 150
Performance 123 Observation 151
Marketing Challenges Addressed in Chapter 5 123 Surveys or Focus Groups 151
Analogy 153
Who Is the Customer? 124 Judgment 153
A Comparison of Organizational versus Market Tests 154
Consumer Markets 124 Psychological Biases in Forecasting 154
What Do the Unique Characteristics of Mathematics Entailed in Forecasting 154
Organizational Markets Imply for Marketing Rate of Diffusion of Innovations: Another
Programs? 126 Perspective on Forecasting 156
The Organizational Customer Is Usually a Group
of Individuals 126 The Adoption Process and Rate of
Adoption 156
How Organizational Members Make Purchase Adopter Categories 157
Decisions 129 Implications of Diffusion of Innovation
Types of Buying Situations 129 Theory for Forecasting Sales of New Products
The Purchase Decision-Making Process 130 and New Firms 157
The Marketing Implications of Different Cautions and Caveats in Forecasting 159
Organizational Purchasing Situations 136
Purchasing Processes in Government Keys to Good Forecasting 159
Markets 138 Common Sources of Error in Forecasting 160

Selling Different Kinds of Goods and Services Why Data? Why Marketing Research? 160
to Organizations Requires Different Marketing Customer Relationship Management: Charting a Path
Programs 139 toward Competitive Advantage 162
Raw Materials 139 Internal Records Systems 162
Component Materials and Parts 141 Marketing Databases Make CRM Possible 163

Why CRM Efforts Fail 166
Client Contact Systems 166
Competitive Intelligence Systems 167
Marketing Research: A Foundation for Marketing
Decision Making 167
Step 1: Identify the Managerial Problem
and Establish Research Objectives 168
Step 2: Determine the Data Sources
and Types of Data Required 169
Step 3: Design the Research 171
Step 4: Collect the Data 174
Step 5: Analyze the Data 174
Step 6: Report the Results to the Decision
Maker 175
What Users of Marketing Research
Should Ask 175
Rudimentary Competence: Are We
There Yet? 175
Take-aways 176
Endnotes 176
7 Targeting Attractive Market
Segments 178
The Developing World's Emerging Middle Class
The New Middle Class: Who and How ,
Large? 178
Targeting India's New Middle Class 179
Targeting: One Ingredient in Marketing
Success 179
Marketing Challenges Addressed in Chapter 7
Do Market Segmentation and Target Marketing
Make Sense in Today's Global Economy? 180
Most Markets Are Heterogeneous 181
Today's Market Realities Often Make
S egmentation Imperative 181
How Are Market Segments Best Defined?
Who They Are: Segmenting
Demographically 183
Where They Are: Segmenting
Geographically 185
Geodemographic Segmentation 185
How They Behave: Behavioral
Segmentation 186
Innovative Segmentation: A Key to Marketing
Breakthroughs 189
CONTENTS
Choosing Attractive Market Segments: A Five-Step
Process 189
Step 1: Select Market-Attractiveness
and Competitive-Position Factors 190
Step 2: Weight Each Factor 193
Step 3: Rate Segments on Each Factor, Plot
Results on Matrices 193
Step 4: Project Future Position for Each
Segment 195
Step 5: Choose Segments to Target, Allocate
Resources 195
Different Targeting Strategies Suit Different
Opportunities 196
Niche-Market Strategy 197
Mass-Market Strategy 197
Growth-Market Strategy 198
Global Market Segmentation 198
Take-aways 199
Endnotes 200
8 Differentiation and Brand
Positioning 202
Fast Food Turns Healthy 202
178 The Jared Diet 202
Repositioning Fuels Subway's Growth 202
Value: A Second Dimension to Subway's
Positioning 203
Marketing Challenges Addressed
in Chapter 8 203
180 Differentiation: One Key to Customer Preference
and Competitive Advantage 204
Differentiation among Competing Brands 205
Physical Positioning 205
Limitations of Physical Positioning 206
Perceptual Positioning 206
182
Levers Marketers Can Use to Establish Brand
Positioning 207
Preparing the Foundation for Marketing Strategies:
The Brand Positioning Process 208
Step 1: Identify a Relevant Set of Competitive
Products 209
Step 2: Identify Determinant Attributes 210
Step 3: Collect Data about Customers' Perceptions
for Brands in the Competitive Set 212
CONTENTS XI

Step 4: Analyze the Current Positions of Brands Appropriate Conditions for a Prospector
in the Competitive Set 212 Strategy 238
Step 5: Determine Customers' Most Preferred Appropriate Conditions for an Analyzer
Combination of Attributes 216 Strategy 240
Step 6: Consider Fit of Possible Positions Appropriate Conditions for a Defender
with Customer Needs and Segment Strategy 240
Attractiveness 218 How Different Business Strategies Influence
Step 7: Write Positioning Statement or Value Marketing Decisions 242
Proposition to Guide Development of Marketing
Strategy 218 Product Policies 243
Pricing Policies 245
The Outcome of Effective Positioning: Building Distribution Policies 245
Brand Equity 221 Promotion Policies 245
Managing Brand Equity 222 What If the Best Marketing Program for a
Some Caveats in Positioning Decision-Making 223 Product Does Not Fit the Business's Competitive
Take-aways 224 Strategy? 246
Endnotes 224 Take-aways 248
Endnotes 248
SECTION THREE
DEVELOPING STRATEGIC MARKETING io Product Decisions 250
PROGRAMS 225 Product Decisions in a Services Business 250
9 Business Strategies: A Foundation for Marketing Challenges Addressed in Chapter 10 251
Marketing Program Decisions 226 Product Design Decisions for Competitive
Business Strategies and Marketing Advantage 252
Programs at 3M 226 Goods and Services: Are the Product Decisions
Marketing Challenges Addressed in Chapter 9 228 the Same? 253
Product Quality and Features Decisions 253
How Do Businesses Compete? 229 Branding Decisions 255
Generic Business-Level Competitive Packaging Decisions 258
Strategies 229 Services Decisions and Warranties 258
Do the Same Competitive Strategies Work Managing Product Lines for Customer Appeal
for Single-Business Firms and Start-ups? 232 and Profit Performance 259
Do the Same Competitive Strategies Work
Product Systems 260
for Service Businesses? 232
Do the Same Competitive Strategies Work New Product Development Process Decisions 261
for Global Competitors? 234 The Importance of New Products to Long-Term
Will the Internet Change Everything? 234 Profitability 261
How Do Competitive Strategies Differ from New Product Success and Failure 261
One Another? 235 Organizing for New Product Development 262
Differences in Scope 235 Key Decisions in the New Product Development
Differences in Goals and Objectives 237 Process 263
Differences in Resource Deployments 237 Limitations of Stage Gate Thinking and
Differences in Sources of Synergy 238 Processes 270

Deciding When a Strategy Is Appropriate: Product Decisions over the Product Life Cycle 271
The Fit between Business Strategies and the Market and Competitive Implications of Product
Environment 238 Life Cycle Stages 272
XII CONTENTS

Strategic Implications of the Product Life Designing Distribution Channels: What Kinds
Cycle 277 of Institutions Might Be Included? 315
Limitations of the Product Life Cycle Merchant Wholesalers 315
Framework 278 Agent Middlemen 315
Take-aways 278 Retailers 316
Nonstore Retailing 317
Endnotes 278
Channel Design Alternatives 318
11 Pricing Decisions 280 Alternative Consumer Goods Channels 319
Ryanair: Low Prices, High Profits—But Increasing Alternative Industrial Goods Channels 320
Costs 280 Which Alternative Is Best? It Depends on the Firm's
Marketing Challenges Addressed in Chapter 11 281 Objectives and Resources 320

A Process for Making Pricing Decisions 282
Strategic Pricing Objectives 283
Estimating Demand and Perceived Value
Estimating Costs 289
Analyzing Competitors' Costs and Prices
Methods Managers Use to Determine an Appropriate
Price Level 291
Cost-Oriented Methods 291
Competition-Oriented Methods 293
Customer-Oriented Methods 295
Deciding on a Price Structure: Adapting Prices to
Market Variations 299
Availability and the Satisfaction of Customer
Service Requirements 321
Promotional Effort, Market Information,
286 and Postsale Service Objectives 323
Cost-Effectiveness 324
290 Flexibility 326
Multichannel Distribution 326 .
Channel Design for Global Markets 327
Market Entry Strategies 327
Channel Alternatives 328
Channel Design for Services 330
Channel Management Decisions 331

Geographic Adjustments 299 Vertical Marketing Systems 331

Global Adjustments 300 Sources of Channel Power 334
Discounts and Allowances 301 Channel Control Strategies 334
Differential Pricing 303 Trade Promotions—Incentives for Motivating
Product-Line Pricing Adjustments 305 Channel Members 335
Channel Conflicts and Resolution
Take-aways 306
Strategies 338
Endnotes 306
Take-aways 339
Endnotes 340
12 Distribution Channel Decisions 308
Selling Soft Drinks in Africa—Coke Builds 13 Integrated Promotion Decisions 342
a Distribution System 308
Nano Goes Nowhere 342
Marketing Challenges Addressed in Chapter 12 309
Marketing Missteps 342
Why Do Multifirm Marketing Channels Exist? 310 Tata Responds 343
Designing Distribution Channels: What Are the Marketing Challenges Addressed in.Chapter 13 343
Objectives to Be Accomplished? 311
The Promotion Mix: A Communication Tool Kit 344
Product Availability 311
Meeting Customers' Service Requirements 313 Developing an Integrated Marketing Communications
Promotional Effort 314 Plan 345
Market Information 314 Step 1: Define the Audience(s) to Be Targeted 345
Cost-Effectiveness 314 Step 2: Set the Promotional Objectives 346
Flexibility 314 Step 3: Set the Promotion Budget 347
CONTENTS
Step 4: Design the Promotion Mix 348
Step 5: Evaluate the Results 350
The Nitty-Gritty of Promotional Decision
Making 351
Making Advertising Decisions 351
Making Personal Selling Decisions 362
Making Sales Promotion Decisions 367
Making Public Relations Decisions 368
. . . And All the Rest 369
Take-aways 370
Endnotes 370
SECTION FOUR
STRATEGIC MARKETING PROGRAMS
FOR SELECTED SITUATIONS 373
14 Marketing Strategies for a Digitally
Networked World 374
Opportunities in the App Economy 374
Games as Apps 374
More than Games 374
Business Models 375
Is It Real, or Is It a Bubble? 375
Marketing Challenges Addressed in Chapter 14 375
Does Every Company Need a Social Media
Strategy? 376
Threats or Opportunities? The Inherent Advantages
and Disadvantages of the Digital World for
Marketers 378
The Syndication of Information 378
Increasing Returns to Scale of Network
Products 379
The Ability to Efficiently Personalize
and Customize Market Offerings 380
Disintermediation and Restructuring of
Distribution Channels 380
Global Reach, 24/7 Access, and Instantaneous
Delivery 382
Are These Digital World Attributes
Opportunities or Threats? 382
First-Mover Advantage: Fact or Fiction? 384
Developing a Strategy for a Digitally Networked
World 385
Marketing Applications for a Digitally
Networked World 385
XIII
Developing Digital World Marketing Strategies:
The Critical Questions 391
Managing Digitally Networked Strategies:
The Talent Gap 395
Developing Strategies to Serve Digital World ,
Markets 396
Serving the Dot-Com Markets of Tomorrow 397
Take-aways 398
Endnotes 398
15 Strategies for New and Growing
Markets 400
Canon, Inc.—Success That Is Hard to Copy 400
Marketing Challenges Addressed in Chapter 15 401
How New Is New? 402
Market Entry Strategies: Is It Better to Be a Pioneer
or a Follower? 404
Pioneer Strategy 404
Not All Pioneers Capitalize on Their Potential
Advantages 406
Follower Strategy 407
Determinants of Success for Pioneers
and Followers 408
Strategic Marketing Programs for Pioneers 410
Mass-Market Penetration 410
Niche Penetration 410
Skimming and Early Withdrawal 412
Marketing Program Components for a
Mass-Market Penetration Strategy 412
Marketing Program Components for a Niche
Penetration Strategy 415
Marketing Program Components for
a Skimming Strategy 417
Growth-Market Strategies for Market Leaders 417
Marketing Objectives for Share Leaders 418
Marketing Actions and Strategies to Achieve
Share-Maintenance Objectives 418
Fortress, or Position Defense, Strategy 420
Flanker Strategy 423
Confrontation Strategy 423
Market Expansion 424
Contraction or Strategic Withdrawal 425
Share-Growth Strategies for Followers 425
Marketing Objectives for Followers 425
xiv CONTENTS

Marketing Actions and Strategies to Achieve SECTION FIVE

Share Growth 425
Frontal Attack Strategy 426 IMPLEMENTING AND CONTROLLING
Leapfrog Strategy 430 MARKETING PROGRAMS 465
Flanking and Encirclement Strategies 430
17 Organizing and Planning for Effective
Supporting Evidence 431
Implementation 466
Take-aways 432
Electrolux—Organizing to Rule the World of
Endnotes 433 Household Appliances 466
Too Many Brands, Too Little Coordination 466
A New Structure to Implement the New
16 Strategies for Mature and Declining Strategy 467
Markets 436 Preliminary Results 467

Johnson Controls—Making Money in Mature Marketing Challenges Addressed in Chapter 17 468

Markets 436 Designing Appropriate Administrative Relationships
Marketing Challenges Addressed for the Implementation of Different Competitive
in Chapter 16 437 Strategies 469

Challenges in Mature Markets 438 Business-Unit Autonomy 469

Challenges in Declining Markets 438
Strategic Choices in Mature Markets 438
Strategies for Maintaining Competitive
Advantage 439
Methods of Differentiation 440
Are the Dimensions the Same for Service
Quality on the Internet? 443
Methods of Maintaining a Low-Cost
Position 445
Customers' Satisfaction and Loyalty
Are Crucial for Maximizing Their Lifetime
Value 447
Marketing Strategies for Mature Markets
Strategies for Maintaining Current Market
Share 449
Strategies for Extending Volume
Growth 451
Strategies for Declining Markets 457
Relative Attractiveness of Declining
Markets 457
Divestment or Liquidation 460
Marketing Strategies for Remaining
Competitors 460
Take-aways 463
Endnotes 464
Shared Programs and Facilities 471
Evaluation and Reward Systems 472
Designing Appropriate Organizational Structures
and Processes for Implementing Different
Strategies 472
Functional Competencies and Resource
Allocation 472
Additional Considerations for Service
Organizations 474
Organizational Structures 475
Recent Trends in Organizational Design 480
Organizational Adjustments as Firms Grow
and Markets Change 481
449 Organizational Designs for Selling in Global
Markets 482
Marketing Plans: The Foundation for Implementing
Marketing Actions 483
The Situational Analysis 487
Key Issues 488
Objectives 489
Marketing Strategy 489
Action Plans 489
Projected Profit-and-Loss Statement 490
Contingency Plans 490
Take-aways 490
Endnotes 490
CONTENTS xv

18 Measuring and Delivering Marketing When and How Often Is the Information
Performance 492 Needed? 510
In What Media and in What Format(s) or Levels
Metrics Pay for Walmart 492 of Aggregation Should the Information Be
Changing Metrics for a Changing Strategy 493 Provided? 511
Can Walmart's Overseas Stores Plug Does Your System of Marketing Metrics '
the Gap? 493 Measure Up? 511
Marketing Challenges Addressed in Chapter 18 493 What Contingencies Should Be
Planned For? 512
Designing Marketing Metrics Step by Step 495 Global Marketing Monitoring 514
Setting Standards of Performance 496 A Tool for Periodic Assessment of Marketing
Specifying and Obtaining Feedback Data 501 Performance: The Marketing Audit 515
Evaluating Feedback Data 501
Taking Corrective Action 502 Types of Audits 515
Design Decisions for Strategic Monitoring Measuring and Delivering Marketing
Systems 503 Performance 516
Identifying Key Variables 503 Take-aways 518
Tracking and Monitoring 504 Endnotes 518
Strategy Reassessment 504
Design Decisions for Marketing Metrics 504 INDEX 519
Who Needs What Information? 505
SEO and SEM Analysis 509