Ninth Edition David W. Cravens Nigel F. Piercy

Ninth Edition David W. Cravens M.j. Neeley School of Business Texas Christian University Nigel F. Piercy ... Global Issues for Planning, Implementatio...

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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

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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

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Matching Needs with Product Benefits 52 Defining and Analyzing Product-Markets 53 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 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

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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

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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

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

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Chapter 7 Strategic Relationships 206 The Rationale for Interorganizational Relationships 207 Opportunities to Enhance Value 208 Environmental Complexity 209 Competitive Strategy 209 Skills and Resource Gaps 209 Evaluating the Potential for Collaboration 213 Forms of Organizational Relationships 214 Supplier Relationships 215 Intermediate Customer Relationships 216 End-User Customer Relationships 217 Strategic Customers 217 Strategic Alliances 219 Joint Ventures 221 Internal Partnering 221 Managing Interorganizational Relationships 223 Objective of the Relationship 223 Relationship Management 224 Partnering Capabilities 225 Control and Evaluation 226 Exiting from Alliance 226 Global Relationships Among Organizations 227 The Strategic Role ofGovernment 228 Summary 231

Chapter 8 Innovation and New Product Strategy 236 Innovation as a Customer-Driven Process 238 Types of Innovations 239 Finding Customer Value Opportunities 239 Finding New Product Opportunities 239 Initiatives of Successful Innovators 242 Recognizing the Realities of Product Cannibalization 244 New-Product Planning 244 Developing a Culture and Strategy for Innovation 245 Developing Effective New-Product Planning Processes 247 Responsibility for New-Product Planning 248 Idea Generation 249 Sources of Ideas 249 Methods of Generating Ideas 251 Screening, Evaluating, and Business Analysis 253 Screening 253 Concept Evaluation 254 Business Analysis 255

Product and Process Development 257 Product Development Process 25 7 Marketing Strategy and Market Testing 260 Market Strategy Decisions 260 Market Testing 260 Commercialization 263 Th e Marketing Plan 2 63 Monitoring and Control 263 Variations in the Generic New Product Planning Process 264 Summary 265

Cases for Part Three 269 Case Case Case Case

3-1 Walt Disney Co. 269 3-2 Intel Corp. 274 3-3 McDonald's Corp. 281 3-4 Tesco Pic. 285

PART FOUR MARKET-DRIVEN PROGRAM DEVELOPMENT 289 Chapter 9 Strategic Brand Management 290 Strategic Brand Management 291 The Strategic Role of Brands 291 Brand Management Challenges 292 Brand Management Responsibility 296 Strategic Brand Management 296 ' Strategic Brand Analysis 298 Tracking Brand Performance 299 Product Life Cycle Analysis 300 Product Performance Analysis 300 Brand Positioning Analysis 301 Brand Equity Measurement and Management 301 Measuring Brand Equity 301 Brand Health Reports 301 Brand Identity Strategy 302 A Iternatives for Brand Identification 302 Brand Focus 303 Identity Implementation 304 Managing Brand Strategy 304 Strategies for Improving Product Performance 304 Managing the Brand Portfolio 306 Determining Roles of Brands 307 Strategies for Brand Strength 307 Strategic Brand Vulnerabilities 308

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Brand Leveraging Strategy 310 Line Extension 310 Stretching the Brand Vertically 310 Brand Extension 311 Co-Branding 311 Licensing 311 Global Branding 311 Internet Brands 312 Brand Theft 313 Summary 314

Chapter 10 Value Chain Strategy 318 Strategic Role of Value Chain 319 Distribution Functions 319 Channels for Services 321 Direct Distribution by Manufacturers 321 Channel Strategy 323 Types of Channels 324 Distribution Intensity 327 Channel Configuration 328 Channel Maps >' 329 Selecting the Channel Strategy 330 Changing Channel Strategy 331 Managing the Channel 333 Channel Leadership 334 Management Structure and Systems 334 Physical Distribution Management 334 Channel Relationships 336 Channel Globalization 336 Multichanneling 33 7 Conflict Resolution 337 Channel Performance 338 Legal and Ethical Considerations 338 International Channels 340 Examining International Distribution Patterns 341 Factors Affecting Global Channel Selection 342 Global Issues Regarding Multichannel Strategies 342 Summary 343

Chapter 11 Pricing Strategy 347 Strategic Role of Price 348 Price in the Positioning Strategy Pricing Situations 350 Roles of Pricing 350 Pricing Strategy 351 Pricing Objectives 352

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Analyzing the Pricing Situation 353 Customer Price Sensitivity 353 Cost Analysis 356 Competitor Analysis 357 Pricing Objectives 359 Selecting the Pricing Strategy 360 How Much Flexibility Exists? 360 Price Positioning and Visibility 362 Illustrative Pricing Strategies 362 Legal and Ethical Considerations 363 Determining Specific Prices and Policies 365 Determining Specific Prices 365 Establishing Pricing Policy and Structure 367 Pricing Management 367 Summary 369

Chapter 12 Promotion, Advertising, and Sales Promotion Strategies 372 Promotion Strategy 373 The Composition of Promotion Strategy 373 Designing Promotion Strategy 375 Communication Objectives 376 Deciding the Role of the Promotion Components 378 Determining the Promotion Budget 378 Promotion Component Strategies 380 Integrating and Implementing the Promotion Strategy 380 Effectiveness of Promotion Strategy 381 Advertising Strategy 3 81 Setting Advertising Objectives and Budgeting 382 Creative Strategy 384 Media/Scheduling Decisions 384 Role of the Advertising Agency 386 Implementing the Advertising Strategy and Measuring Its Effectiveness 388 Sales Promotion Strategy 389 Nature and Scope of Sales Promotion 389 Sales Promotion Activities 390 Advantages and Limitations of Sales Promotion 392 Sales Promotion Strategy 393 Summary 393

Chapter 13 Sales Force, Internet, and Direct Marketing Strategies 396 Sales Force Strategy 397 The Role of Selling in Promotion Strategy Types of Sales Jobs 399

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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 Case 4-2 Case 4-3 Case 4-4

Microsoft Corp. 418 Nike Inc. 425 Dell Inc. 433 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 Case Case Case

5-1 Verizon Communications Inc. 5-2 Home Depot Inc. 507 5-3 Yahoo! Inc. 514 5 -4 Nissan Motor Co. 519

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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

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 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

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