Ninth Edition

David W. Cravens
M.j. Neeley School of Business
Texas Christian University

Nigel F. Piercy
Warwick Business School
The University of Warwick

McGraw-frSiBI
irwin
Boston Burr Ridge, IL Dubuque, IA New York San Francisco St. Louis
Bangkok Bogota Caracas Kuala Lumpur. Lisbon London Madrid Mexico City
Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto
Table of Contents
PART ONE
STRATEGIC MARKETING 1 Defining and Analyzing Product-Markets 53
Chapter 1
Imperatives for Market-Driven
Strategy 2
Market-Driven Strategy 3
Characteristics of Market-Driven Strategies 4
Determining Distinctive Capabilities 5
Classifying Capabilities 6
Creating Value for Customers 7
Becoming Market Driven 7
Corporate, Business, and Marketing Strategy 8
Corporate, Business, and Marketing Strategy 10
Components of Corporate Strategy 10
Corporate Strategy Framework 10
Business and Marketing Strategy 12
The Marketing Strategy Process 13 _
Challenges of a New Era for Strategic Marketing
Escalating Globalization 18
Technology Diversity and Uncertainty 19
The Web 2.0 20
Ethical Behavior and Corporate Social
Responsiveness 20
Summary 23
Appendix 1A
Strategic Marketing Planning 27
Cases for Part One 30
Case 1-1 Audi 30
Case 1 -2 The New York Times 34
Case 1-3 Coca-Cola Co. (A) 40
PART TWO
MARKETS, SEGMENTS,
AND CUSTOMER VALUE 47
Chapter 2
Markets and Competitive Space 48
Markets and Strategies 49
Markets and Strategies Are Interlinked 49
Thinking Outside the Competitive Box 50
An Array of Challenges 50
Matching Needs with Product Benefits 52
Forming Product-Markets 55
Illustrative Product-Market Structure 57
Describing and Analyzing End-Users 57
Identifying and Describing Buyers 58
How Buyers Make Choices 59
Environmental Influences 60
Building Customer Profiles 60
Analyzing Competition 61
Defining the Competitive Arena 61
Key Competitor Analysis 64
Anticipating Competitors 'Actions 66
Market Size Estimation 67
Market Potential 67
Sales Forecast 68
Market Share 68
Evaluating Market Opportunity 68
Developing a Strategic Vision About the Future 70
18 Phases of Competition 70
Anticipating the Future 70
Summary 71
Appendix 2A
Financial Analysis for Marketing
Planning and Control 74
Chapter 3
Strategic Marketing Segmentation 83
Levels and Types of Market Segmentation 84
Market-Driven Strategy and Segmentation 86
Market Segmentation, Value Opportunities, and
New-Market Space 86
Market Targeting and Strategic Positioning 87
Activities and Decisions in Market
Segmentation 89
Defining the Market to Be Segmented 89
Identifying Market Segments 90
Segmentation Variables 90
Characteristics of People and Organizations 90
Product Use Situation Segmentation 91
Buyers 'Needs and Preferences 93
Purchase Behavior 94
Forming Market Segments 96
Requirements for Segmentation 96
Approaches to Segment Identification 98

Customer Group Identification 99
Forming Groups Based on Response Differences 102
Finer Segmentation Strategies 104
Logic of Finer Segments 104
Finer Segmentation Strategies 105
Selecting the Segmentation Strategy 106
Deciding How to Segment 106
Strategic Analysis of Market Segments 106
Summary 109
Chapter 4
Strategic Customer Relationship
Management 113
Pivotal Role of Customer Relationship
Management 114
CRM in Perspective 114
CRM and Database Marketing 114
Customer Lifetime Value 115
Developing a CRM Strategy 116
CRM Levels 116
CRM Strategy Development 118
CRM Implementation 119
Value Creation Process" 121
Customer Value 121
Value Received by the Organization 122
CRM and Value Chain Strategy 123
CRM and Strategic Marketing 123
Implementation 123
Performance Metrics 124
Short-Term Versus Long-Term Value 124
Competitive Differentiation 124
Summary 126
Chapter 5
Capabilities for Learning About Customers
and Markets 129
Market-Driven Strategy, Market Sensing,
and Learning Processes 130
Market Sensing Processes 131
Learning Organization 131
Marketing Information and Knowledge Resources 134
Scanning Processes 136
Specific Market Research Studies 138
Internal and External Marketing Information
Resources 138
Existing Marketing Information Sources 141
Creating New Marketing Information 143
Marketing and Management Information Systems 146
Contents xi
Marketing Intelligence and Knowledge
Management 147
Marketing Intelligence 147
Knowledge Management 148
Role of the Chief Knowledge Officer 148
Leveraging Customer Knowledge 148
Ethical Issues in Collecting and Using
Information 149
Invasion of Customer Privacy 149
Information and Ethics 150
Summary 151
Cases for Part Two 156
Case 2-1 Pfizer, Inc. 156
Case 2-2 Ikea 162
Case 2-3 China and India: Opportunities
and Challenges 168
Case 2-4 Johnson & Johnson 177
PART THREE
DESIGNING MARKET-DRIVEN
STRATEGIES 183
Chapter 6
Market Targeting and Strategic
Positioning 184
Market Targeting Strategy 185
Targeting Alternatives 185
Factors Influencing Targeting Decisions 186
Targeting in Different Marketing
Environments 187
Emerging Markets 188
Growth Markets 189
Mature Markets 190
Global Markets 192
Positioning Strategy 193
Selecting the Positioning Concept 195
Developing the Positioning Strategy 196
Scope of Positioning Strategy 197
Marketing Program Decisions 197
Determining Positioning Effectiveness 199
Customer and Competitor Research 200
Test Marketing 200
Analytical Positioning Techniques 201
Determining Positioning Effectiveness 201
Positioning and Targeting Strategies 202
Summary 202
xii Contents

Chapter 7 Product and Process Development 257

Strategic Relationships 206 Product Development Process 25 7
Marketing Strategy and Market Testing 260
The Rationale for Interorganizational Market Strategy Decisions 260
Relationships 207 Market Testing 260
Opportunities to Enhance Value 208 Commercialization 263
Environmental Complexity 209 Th e Marketing Plan 2 63
Competitive Strategy 209 Monitoring and Control 263
Skills and Resource Gaps 209 Variations in the Generic New Product
Evaluating the Potential for Collaboration 213 Planning Process 264
Forms of Organizational Relationships 214 Summary 265
Supplier Relationships 215
Intermediate Customer Relationships 216
End-User Customer Relationships 217 Cases for Part Three 269
Strategic Customers 217 Case 3-1 Walt Disney Co. 269
Strategic Alliances 219 Case 3-2 Intel Corp. 274
Joint Ventures 221 Case 3-3 McDonald's Corp. 281
Internal Partnering 221 Case 3-4 Tesco Pic. 285
Managing Interorganizational Relationships 223
Objective of the Relationship 223
Relationship Management 224 PART FOUR
Partnering Capabilities 225 MARKET-DRIVEN PROGRAM
Control and Evaluation 226 DEVELOPMENT 289
Exiting from Alliance 226
Global Relationships Among Organizations 227 Chapter 9
The Strategic Role ofGovernment 228 Strategic Brand Management 290
Summary 231
Strategic Brand Management 291
Chapter 8 The Strategic Role of Brands 291
Brand Management Challenges 292
Innovation and New Product Strategy 236 Brand Management Responsibility 296
Innovation as a Customer-Driven Process 238 Strategic Brand Management 296 '
Types of Innovations 239 Strategic Brand Analysis 298
Finding Customer Value Opportunities 239 Tracking Brand Performance 299
Finding New Product Opportunities 239 Product Life Cycle Analysis 300
Initiatives of Successful Innovators 242 Product Performance Analysis 300
Recognizing the Realities of Product Brand Positioning Analysis 301
Cannibalization 244 Brand Equity Measurement and Management 301
New-Product Planning 244 Measuring Brand Equity 301
Developing a Culture and Strategy for Innovation 245 Brand Health Reports 301
Developing Effective New-Product Planning Brand Identity Strategy 302
Processes 247 A Iternatives for Brand Identification 302
Responsibility for New-Product Planning 248 Brand Focus 303
Idea Generation 249 Identity Implementation 304
Sources of Ideas 249 Managing Brand Strategy 304
Methods of Generating Ideas 251 Strategies for Improving Product Performance 304
Screening, Evaluating, and Business Analysis 253 Managing the Brand Portfolio 306
Screening 253 Determining Roles of Brands 307
Concept Evaluation 254 Strategies for Brand Strength 307
Business Analysis 255 Strategic Brand Vulnerabilities 308
 Contents xiii

Brand Leveraging Strategy 310 Analyzing the Pricing Situation 353

Line Extension 310 Customer Price Sensitivity 353
Stretching the Brand Vertically 310 Cost Analysis 356
Brand Extension 311 Competitor Analysis 357
Co-Branding 311 Pricing Objectives 359
Licensing 311 Selecting the Pricing Strategy 360
Global Branding 311 How Much Flexibility Exists? 360
Internet Brands 312 Price Positioning and Visibility 362
Brand Theft 313 Illustrative Pricing Strategies 362
Summary 314 Legal and Ethical Considerations 363
Determining Specific Prices and Policies 365
Chapter 10 Determining Specific Prices 365
Value Chain Strategy 318 Establishing Pricing Policy and Structure 367
Pricing Management 367
Strategic Role of Value Chain 319 Summary 369
Distribution Functions 319
Channels for Services 321 Chapter 12
Direct Distribution by Manufacturers 321
Promotion, Advertising, and Sales
Channel Strategy 323
Types of Channels 324
Promotion Strategies 372
Distribution Intensity 327 Promotion Strategy 373
Channel Configuration 328 The Composition of Promotion Strategy 373
Channel Maps >' 329 Designing Promotion Strategy 375
Selecting the Channel Strategy 330 Communication Objectives 376
Changing Channel Strategy 331 Deciding the Role of the Promotion Components 378
Managing the Channel 333 Determining the Promotion Budget 378
Channel Leadership 334 Promotion Component Strategies 380
Management Structure and Systems 334 Integrating and Implementing the Promotion Strategy 380
Physical Distribution Management 334 Effectiveness of Promotion Strategy 381
Channel Relationships 336 Advertising Strategy 3 81
Channel Globalization 336 Setting Advertising Objectives and Budgeting 382
Multichanneling 33 7 Creative Strategy 384
Conflict Resolution 337 Media/Scheduling Decisions 384
Channel Performance 338 Role of the Advertising Agency 386
Legal and Ethical Considerations 338 Implementing the Advertising Strategy and
International Channels 340 Measuring Its Effectiveness 388
Examining International Distribution Patterns 341 Sales Promotion Strategy 389
Factors Affecting Global Channel Selection 342 Nature and Scope of Sales Promotion 389
Global Issues Regarding Multichannel Strategies 342 Sales Promotion Activities 390
Summary 343 Advantages and Limitations of Sales Promotion 392
Sales Promotion Strategy 393
Chapter 11 Summary 393
Pricing Strategy 347
Chapter 13
Strategic Role of Price 348
Sales Force, Internet, and Direct
Price in the Positioning Strategy 349
Pricing Situations 350
Marketing Strategies 396
Roles of Pricing 350 Sales Force Strategy 397
Pricing Strategy 351 The Role of Selling in Promotion Strategy 398
Pricing Objectives 352 Types of Sales Jobs 399
xiv Contents
Defining the Selling Process 400
Sales Channels 401
Designing the Sales Organization 402
Sales Force Evaluation and Control 407
Internet Strategy 408
Strategy Development 409
Deciding Internet Objectives 409
E-Commerce Strategy 410
Value Opportunities and Risks 410
Measuring Internet Effectiveness 411
The Future of the Internet 411
Direct Marketing Strategies 412
Reasons for Using Direct Marketing 412
Direct Marketing Methods 413
Advantages of Direct Marketing 414
Direct Marketing Strategy 415
Summary 415
Cases for Part Four 418
Case 4-1 Microsoft Corp. 418
Case 4-2 Nike Inc. 425
Case 4-3 Dell Inc. 433
Case 4-4 Hewlett-Packard Co. 439
PART FIVE
IMPLEMENTING AND MANAGING
MARKET-DRIVEN STRATEGIES 443
Chapter 14
Designing Market-Driven Organizations 444
Trends in Organization Design 445
The New Organization 445
Managing Organizational Process 449
Organizational Agility and Flexibility 451
Employee Motivation 451
Organizing for Market-Driven Strategy 452
Strategic Marketing and Organization Structure 452
Aligning the Organization with the Market 452
Marketing Functions Versus Marketing Processes 453
Marketing as a Cross-Functional Process 454
Marketing Departments 456
Centralization Versus Decentralization 456
Integration or Diffusion 456
Contingencies for Organizing 457
Evaluating Organization Designs 457
Structuring Marketing Resources 459
Structuring Issues 459
Functional Organizational Design 459
Product-Focused Design 459
Market-Focused Design 461
Matrix Design 461
New Marketing Roles 462
Organizing for Global Marketing and Global
Customers 465
Organizingfor Global Marketing Strategies 466
Organizing for Global Customers 467
Summary 469
Chapter 15
Marketing Strategy Implementation
and Control 473
The Strategy Marketing Planning Process 474
The Marketing Plan Guides Implementation 474
Contents of the Marketing Plan 475
Managing the Planning Process 475
Implementing the Strategic Marketing Plan 477
Implementation Process 477
Building Implementation Effectiveness 478
Internal Marketing 479
A Comprehensive Approach to Improving
Implementation 481
Internal Strategy-Organization Fit 481
Strategic Marketing Evaluation and Control 482
Customer Relationship Management 483
Overview of Control and Evaluation Activities 483
The Strategic Marketing Audit 483
Marketing Performance Measurement 486
The Importance of Marketing Metrics 487
The Use of Marketing Metrics 487
Types of Marketing Metrics 488
Selecting Relevant Metrics 488
Designing a Management Dashboard 489
Interpreting Performance Measurement Results 490
Global Issues for Planning, Implementation,
and Control 493
Global Marketing Planning 493
Implementation Globally 494
Performance Measurement and Control Globally 494
Summary 495
Appendix 15A
Marketing Metrics 499
Cases for Part Five 502
Case 5-1 Verizon Communications Inc. 502
Case 5-2 Home Depot Inc. 507
Case 5-3 Yahoo! Inc. 514
Case 5 -4 Nissan Motor Co. 519

PART SIX
COMPREHENSIVE CASES
Cases for Part Six 525
Case 6-1 Microsoft Corp. (B) 525
Case 6-2 Samsung Electronics Co. 533
Case 6-3 General Electric Appliances 539
Case 6-4 Slendertone 548
Case 6-5 Toyota 559
Case 6-6 Coca-Cola Co. (B) 566
Case 6-7 Keurig Inc. 571
Case 6-8 Dura-plast, Inc. 584
Case 6-9 Wal-Mart 595
Case 6-10 Blair Water Purifiers India 600
Case 6-11 Murphy Brewery Ireland, Limited 612
Case 6-12 Dairyland Seed Company 623
Case 6-13 International Business Machines 633
Contents xv
Case 6-14 L'Oreal Nederland B.V 644
Case 6-15 ESPN 652
Case 6-16 Cowgirl Chocolates 659
Case 6-17 Procter & Gamble Co. 671
Case 6-18 Amazon.com Inc. 679
684
Case 6-19 Nanophase Technologies Corporation
Case 6-20 Cola Wars in China 698
Case 6-21 Smith & Nephew—Innovex 711
Case 6-22 Sun Microsystems 724
Case 6-23 Telus Mobility—What to Do
with Mike 730
Case 6-24 Tri-Cities Community Bank 744
Case 6-25 Cima Mountaineering, Inc. 750
Indexes
Name Index 765
Subject Index 772