Discussion – Marketing Management

Discussion – Marketing Management

Read Chapter 3 from the attached book and

Post a 500-word synopsis of your understanding of the marketing concepts. In your posting, include questions about any marketing concepts that are unclear.

pet51611_fm_i-xiv.indd i 10/24/17 01:04 PM

A Preface to Marketing Management

Fifteenth Edition

J. Paul Peter University of Wisconsin–Madison

James H. Donnelly Jr. Gatton College of Business and Economics University of Kentucky

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Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2019 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2015, 2013, and 2011. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

Some ancillaries, including electronic and print components, may not be available to customers outside the United States.

This book is printed on acid-free paper.

1 2 3 4 5 6 7 8 9 LWI 21 20 19 18

ISBN 978-1-260-15161-9 MHID 1-260-15161-1

Executive Portfolio Manager: Meredith Fossel Lead Product Developer: Laura Hurst Spell Content Project Manager: Melissa M. Leick, Karen Jozefowicz Buyer: Laura Fuller Design: Melissa M. Leick Content Licensing Specialist: Ann Marie Jannette Cover Image: Shutterstock / Rawpixel.com Compositor: SPi Global

All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.

Library of Congress Cataloging-in-Publication Data

Names: Peter, J. Paul, author. | Donnelly, James H., author. Title: A preface to marketing management / J. Paul Peter, University of Wisconsin-Madison, James H. Donnelly, Jr., Gatton College of Business and Economics, University of Kentucky. Description: Fifteenth edition. | New York, NY : McGraw-Hill Education, [2019] Identifiers: LCCN 2017034403 | ISBN 9781260151619 (alk. paper) Subjects: LCSH: Marketing–Management. Classification: LCC HF5415.13.P388 2019 | DDC 658.8—dc23 LC record available at https://lccn.loc. gov/2017034403

The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites.


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To Rose, Angie, and my BFF, Chelsea J. Paul Peter

To Gayla Jim Donnelly

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About the Authors J. Paul Peter is Professor Emeritas at the University of Wisconsin. He was a member of the faculty at Indiana State, Ohio State, and Washington University before joining the Wisconsin fac- ulty. While at Ohio State, he was named Outstanding Marketing Professor by the students and has won the John R. Larson Teaching Award at Wisconsin. He has taught a variety of courses including Marketing Management, Marketing Strategy, Consumer Behavior, Marketing Research, and Marketing Theory, among others.

Professor Peter’s research has appeared in the Journal of Marketing, the Journal of Marketing Research, the Journal of Consumer Research, the Journal of Retailing, and the Academy of Management Journal, among others. His article on construct validity won the prestigious William O’Dell Award from the Journal of Marketing Research, and he was a finalist for this award on two other occasions. He was the recipient of the Churchill Award for Lifetime Achievement in Marketing Research, given by the American Marketing Association and the Gaumnitz Distinguished Faculty Award from the School of Business, University of Wisconsin–Madison. He is an author or editor of 30 books, including A Preface to Marketing Management, Fifteenth edition; Marketing Management: Knowledge and Skills; Consumer Behavior and Marketing Strategy; Strategic Management: Concepts and Applications; and Marketing: Creating Value for Customers. He is one of the most cited authors in the market- ing literature.

Professor Peter has served on the review boards of the Journal of Marketing, Jour- nal of Marketing Research, Journal of Consumer Research, and Journal of Business Research and was measurement editor for JMR and professional publications editor for the American Marketing Association. He has taught in a variety of executive programs and consulted for several corporations as well as the Federal Trade Commission.

James H. Donnelly Jr. has spent his academic career in the Gatton College of Business and Economics at the University of Kentucky. He received the first Chancellor’s Award for Outstanding Teach- ing given at the university. Previously, he had twice received the UK Alumni Association’s Great Teacher Award, an award one can only be eligible to receive every 10 years. He has also received two Outstanding Teacher awards from Beta Gamma Sigma, national business honorary. He received an Acorn Award recognizing “those who shape the future” from the Kentucky Advocates for Higher Education. He was selected as “Best University of Ken- tucky Professor.” He was one of six charter members elected to the American Bankers Asso- ciation’s Bank Marketing Hall of Fame.

During his career he has published in the Journal of Marketing Research, Journal of Marketing, Journal of Retailing, Administrative Science Quarterly, Academy of Man- agement Journal, Journal of Applied Psychology, Personnel Psychology, Journal of Business Research, and Operations Research among others. He has served on the edito- rial review board of the Journal of Marketing. He is the author of more than a dozen books, which include widely adopted academic texts as well as professional books.

Professor Donnelly is very active in the banking industry where he has served on the board of directors of the Institute of Certified Bankers and the ABA’s Marketing Network. He has also served as academic dean of the ABA’s School of Bank Marketing and Management.

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Preface We have always enjoyed writing and revising this book because we believe marketing management is a fascinating field. Not only does it include elements of economics, psy- chology, sociology, and anthropology, but also marketing, finance, and strategic manage- ment, among other disciplines. Our goal has always been to blend these into a clear and concise presentation of the basic principles of marketing management so that the core concepts and ideas are covered sufficiently to ensure an in-depth understanding.

Throughout this book’s history, feedback from both students and instructors supports our goal. Our book has been used in a wide variety of settings and is the best-selling book of its kind. We are proud to introduce the fifteenth edition knowing that our book and its eight foreign translations have been used around the world whenever courses require a concise overview of the critical aspects of marketing management.

In this edition, we have maintained the format and features of the book that make it a teachable text. We have also updated existing content and added new content to better reflect the changes in marketing management and its environment. We present quality content and examples and avoid excessive verbiage, pictures, and descriptions.

Each time we revise this book, there is a strong emphasis on responding to the feedback of students and instructors. We tailored the book to their expressed needs and wants. We believe a major reason the book has reached its fifteenth edition is that the marketing con- cept works.


In addition to providing a clear and concise overview of the basic principles of marketing management, we have designed this book to assist students in analyzing marketing problems and cases and developing and writing marketing plans. The text consists of four sections.

Section I of the book consists of 13 chapters that cover the essentials of marketing management. Each chapter has a set of “Marketing Insights” to provide a deeper under- standing of the chapter material. Each chapter also has a set of key terms and concepts at its conclusion to provide students a quick reference and to facilitate learning. This section is divided into four parts that include (1) strategic planning and marketing management, (2)  understanding target markets, (3) the marketing mix, and (4) marketing in special fields. These 13 chapters are designed to provide students with a clear understanding of the concepts, techniques, tools, and strategies for effective marketing management and marketing strategy development.

Section II of the book provides an approach to solving marketing problems and cases. While cases differ in many ways, this approach provides a starting point in understand- ing the current situation in the case, finding problems, and making recommendations to improve the organization’s situation.

Section III of the book provides an overview of financial analysis for marketing. It includes breakeven analysis, net present value analysis, and ratio analysis. These tools are useful for evaluating strategic alternatives and the overall financial condition of an organization.

Section IV of the book provides a framework for developing marketing plans. It offers students an approach to setting up a marketing plan and insights into key issues to consider at each stage of the development process.

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vi Preface

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Taken collectively, we think these four sections provide a sound foundation for students to develop and improve their strategic marketing skills. In addition to the text material, we also offer students a section of the Online Learning Center (OLC) at www.mhhe.com/ peterdonnelly15e that contains a number of useful aids for facilitating learning.


The following is a summary of updates and changes to this edition. While some of them were designed to improve existing content, others were needed to reflect the dynamic nature of marketing management

Section I Essentials of Marketing Management

Chapter 1 Strategic Planning and the Marketing Management Process ∙ Revised discussion of the marketing concept ∙ New comparison of market and production orientations

Chapter 2 Marketing Research: Process and Systems for Decision Making ∙ Expanded discussion of primary and secondary data ∙ New comparison of quantitative and qualitative data ∙ New discussion of some uses of the Internet for marketing ∙ Revised discussion of marketing information systems

Chapter 3 Consumer Behavior ∙ New comparison of American cultural values ∙ New listing of online buying advantages and disadvantages from the consumer’s point

of view ∙ New discussion of tracking consumer behavior on social media

Chapter 4 Business, Government, and Institutional Buying ∙ New discussion of online organizational buying ∙ New discussion of social media for organizational buyers and sellers

Chapter 5 Market Segmentation ∙ Additional discussion of product positioning ∙ Additional discussion of segmentation bases, including a segmentation of online shoppers

Chapter 6 Product and Brand Strategy ∙ Updated listing of the 20 best global brands ∙ Revised discussion of qualities of a good brand name

Chapter 7 New Product Planning and Development ∙ New discussion of screening new product ideas ∙ Updated discussion of factors associated with new product success ∙ New discussion of new product failures and their causes

Chapter 8 Integrated Marketing Communication ∙ New listing of the largest global and U.S. advertisers ∙ New discussion of online media for integrated marketing communication ∙ Updated discussion of advantages and disadvantages of major advertising media

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Preface vii

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Chapter 9 Personal Selling, Relationship Building, and Sales Management ∙ New listing of factors influencing greater emphasis on personal selling ∙ Expanded discussion of traits of successful salespeople ∙ Expanded list of measures to evaluate salespeople

Chapter 10 Distribution Strategy ∙ Additional discussion of direct sales ∙ New discussion of successful multichannel marketing strategies

Chapter 11 Pricing Strategy ∙ Updated discussion of EDLP and high/low pricing strategies ∙ New discussion of deceptive pricing practices

Chapter 12 The Marketing of Services ∙ New discussion of customer judgments of service quality dimensions ∙ New discussion of the Internet as a service

Chapter 13 Global Marketing ∙ New listing of the top U.S. companies and their international sales ∙ New discussion of tips for entering emerging markets

Section II Analyzing Marketing Problems and Cases ∙ Updated and expanded discussion of the objectives of case analysis ∙ Updated discussion of SWOT analysis

Section III Financial Analysis for Marketing Decisions ∙ New listing of financial and strategic objectives

Section IV Developing Marketing Plans ∙ Updated figures


The Preface has been used as a resource in college courses and professional development programs that require an overview of the critical “need-to-know” aspects of marketing management and marketing strategy development. It has been used:

∙ As the primary introductory text at the undergraduate level. ∙ At both the undergraduate and MBA level, where several AACSB core curriculum

courses are team-taught as one multidisciplinary 9- to 12-hour course. ∙ At the advanced undergraduate and MBA level where it is used as the content founda-

tion in courses that utilize marketing cases. ∙ In short courses and executive development programs.

The instructor section of www.mhhe.com/peterdonnellyl5e includes an instructor’s manual and other support material. It includes two expanded supplements. They were developed in response to instructors’ requests. We offer a test bank of nearly 1,300 multiple-choice, true-false, and brief essay questions. We also offer PowerPoint slides that highlight key text material. Your McGraw-Hill representative can also assist in the deliv- ery of any additional instructor support material.

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Acknowledgments Our book is based on the works of many academic researchers and marketing practitio- ners. We want to thank those individuals who contributed their ideas to develop the field of marketing throughout the years. Indeed, our book would not be possible without their contributions. We would also like to thank our teachers, colleagues, and students for their many contributions to our education. We would also like to publicly acknowledge those individuals who served as reviewers of this and previous editions. We appreciate their advice and counsel and have done our best to reflect their insightful comments.

Roger D. Absmire Sam Houston State University

Anna Andriasova University of Maryland University College

Catherine Axinn Syracuse University

Mike Ballif University of Utah

Andrew Bergstein Pennsylvania State University

Edward Bond Bradley University

Donald Brady Millersville University

Tim Carlson Judson University

Petr G. Chadraba DePaul University

Glenn Chappell Meridith College

Pavan Rao Chennamaneni University of Wisconsin–Whitewater

Newell Chiesl Indiana State University

Irina Chukhlomina SUNY Empire State College

Reid P. Claxton East Carolina University

Larry Crowson University of Central Florida

Mike Dailey University of Texas, Arlington

Linda M. Delene Western Michigan University

Gerard DiBartolo Salisbury University

Casey Donoho Northern Arizona University

James A. Eckert Western Michigan University

Matthew Elbeck Troy University Dothan

Karen A. Evans Herkimer County Community College

R. E. Evans University of Oklahoma

Lawrence Feick University of Pittsburgh

Robert Finney California State University, Hayward

Stephen Goldberg Fordham University

David Good Grand Valley State University

David Griffith University of Oklahoma

Perry Haan Tiffin University

Lawrence Hamer DePaul University

Harry Harmon Central Missouri

Jack Healey Golden State University

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Acknowledgments ix

Betty Jean Hebel Madonna University

Catherine Holderness University of North Carolina–Greensboro

JoAnne S. Hooper Western Carolina University

David Horne Wayne State University

Nasim Z. Hosein Northwood University

Nicole Howatt UCF

Fred Hughes Faulkner University

Anupam Jaju GMU

Chris Joiner George Mason University

Benoy Joseph Cleveland State University

Sol Klein Northeastern University

Robert Brock Lawes Chaminade University of Honolulu

Eunkyu Lee Syracuse University

Tina Lowrey University of Texas at San Antonio

Franklyn Manu Morgan State University

Edward J. Mayo Western Michigan University

Edward M. Mazze University of Rhode Island

Donald J. Messmer College of William & Mary

Albert Milhomme Texas State University

Chip Miller Drake University

David L. Moore LeMoyne College

Johannah Jones Nolan University of Alabama, Birmingham

R. Stephen Parker Southwest Missouri State University

Joan Phillips University of Notre Dame

Thomas Powers University of Alabama at Birmingham

Debu Purohit Duke University

John Rayburn University of Tennessee

Martha Reeves Duke

Gary K. Rhoads Brigham Young University

Lee Richardson University of Baltimore

Henry Rodkin DePaul University

Ritesh Saini George Mason University

Matthew H. Sauber Eastern Michigan University

Alan Sawyer University of Florida

Ronald L. Schill Brigham Young University

Mark Spriggs University of St. Thomas

Vernon R. Stauble California State Polytechnic University

David X. Swenson College of St. Scholastica

Ann Marie Thompson Northern Illinois University

John R. Thompson Memphis State University

Gordon Urquhart Cornell College

Sean Valentine University of Wyoming

Ana Valenzuela Baruch College, CUNY

Stacy Vollmers University of St. Thomas

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x Acknowledgments

It is always easy to work with professionals. That is why working with the professionals at McGraw-Hill is always enjoyable for us. Laura Hurst Spell, Senior Product Developer, and Melissa M. Leick, Senior Content Project Manager, support what we do and we are very grateful. Thank you Marla Sussman, development editor, and welcome to our team.

J. Paul Peter

James H. Donnelly, Jr.

Jacquelyn Warwick Andrews University

Kevin Webb Drexel University

Kathleen R. Whitney Central Michigan University

J. B. Wilkinson University of Akron

Dale Wilson Michigan State University

Jason Q. Zhang Loyola University Maryland

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Chapter 1 Strategic Planning and the Marketing Management Process 4 The Marketing Concept 4 What Is Marketing? 5 What Is Strategic Planning? 6

Strategic Planning and Marketing Management 6

The Strategic Planning Process 7

The Complete Strategic Plan 16

The Marketing Management Process 16 Situation Analysis 16

Marketing Planning 19

Implementation and Control of the Marketing Plan 20

Marketing Information Systems and Marketing

Research 21

The Strategic Plan, the Marketing Plan, and Other Functional Area Plans 21

Marketing’s Role in Cross-Functional Strategic

Planning 21

Summary 22 Appendix Portfolio Models 25


Chapter 2 Marketing Research: Process and Systems for Decision Making 30 The Role of Marketing Research 30 The Marketing Research Process 31

Purpose of the Research 31

Plan of the Research 32

Performance of the Research 35

Processing of Research Data 35

Preparation of the Research Report 37

Limitations of the Research Process 40

Marketing Information Systems 40 Summary 41

Chapter 3 Consumer Behavior 43 Social Influences on Consumer Decision Making 44

Culture and Subculture 44

Social Class 45

Reference Groups and Families 46

Marketing Influences on Consumer Decision Making 46

Product Influences 46

Price Influences 46

Promotion Influences 47

Place Influences 47

Situational Influences on Consumer Decision Making 48 Psychological Influences on Consumer Decision Making 49

Product Knowledge 49

Product Involvement 49

Consumer Decision Making 50 Need Recognition 51

Alternative Search 51

Alternative Evaluation 53

Purchase Decision 54

Postpurchase Evaluation 54

Summary 56

Chapter 4 Business, Government, and Institutional Buying 59 Categories of Organizational Buyers 59

Producers 59

Intermediaries 60

Government Agencies 60

Other Institutions 60

The Organizational Buying Process 60 Purchase-Type Influences on Organizational Buying 61

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Straight Rebuy 61

Modified Rebuy 61

New Task Purchase 61

Structural Influences on Organizational Buying 62 Purchasing Roles 62

Organization-Specific Factors 63

Purchasing Policies and Procedures 64

Behavioral Influences on Organizational Buying 64 Personal Motivations 64

Role Perceptions 65

Stages in the Organizational Buying Process 67

Organizational Need 68

Vendor Analysis 69

Purchase Activities 69

Postpurchase Evaluation 69

Summary 70

Chapter 5 Market Segmentation 71 Delineate the Firm’s Current Situation 71 Determine Consumer Needs and Wants 72 Divide Markets on Relevant Dimensions 72

A Priori versus Post Hoc Segmentation 73

Relevance of Segmentation Dimensions 74

Bases for Segmentation 74

Develop Product Positioning 79 Decide Segmentation Strategy 81 Design Marketing Mix Strategy 82 Summary 83


Chapter 6 Product and Brand Strategy 86 Basic Issues in Product Management 86

Product Definition 86

Product Classification 87

Product Quality and Value 88

Product Mix and Product Line 89

Branding and Brand Equity 90

Packaging 97

Product Life Cycle 97 Product Adoption and Diffusion 99

The Product Audit 100 Deletions 100

Product Improvement 101

Organizing for Product Management 101 Summary 103

Chapter 7 New Product Planning and Development 105 New Product Strategy 106 New Product Planning and Development Process 108

Idea Generation 109

Idea Screening 110

Project Planning 111

Product Development 111

Test Marketing 111

Commercialization 112

The Importance of Time 112

Some Important New Product Decisions 113 Quality Level 113

Product Features 114

Product Design 115

Product Safety 115

Causes of New Product Failure 117 Need for Research 117

Summary 118

Chapter 8 Integrated Marketing Communications 120 Strategic Goals of Marketing Communication 120

Create Awareness 120

Build Positive Images 120

Identify Prospects 120

Build Channel Relationships 122

Retain Customers 122

The Promotion Mix 122 Integrated Marketing Communications 123 Advertising: Planning and Strategy 124

Objectives of Advertising 124

Advertising Decisions 126 The Expenditure Question 127

The Allocation Question 128

Sales Promotion 132 Push versus Pull Marketing 132

Trade Sales Promotions 134

Consumer Promotions 135

What Sales Promotion Can and

Can’t Do 135

Public Relations 136 Direct Marketing 136 Summary 137

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Contents xiii

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Appendix Major Federal Agencies Involved in Control of Advertising 139

Chapter 9 Personal Selling, Relationship Building, and Sales Management 140 Importance of Personal Selling 140 The Sales Process 141

Objectives of the Sales Force 142

The Sales Relationship-Building Process 143

People Who Support the Sales Force 147

Managing the Sales and Relationship-Building Process 148

The Sales Management Task 148

Controlling the Sales Force 149

Motivating and Compensating

Performance 153

Summary 155

Chapter 10 Distribution Strategy 157 The Need for Marketing Intermediaries 157 Classification of Marketing Intermediaries and Functions 157 Channels of Distribution 159 Selecting Channels of Distribution 160

Specific Considerations 160

Managing a Channel of Distribution 163 Relationship Marketing in Channels 163

Vertical Marketing Systems 163

Wholesaling 165 Store and Nonstore Retailing 166

Store Retailing 167

Nonstore Retailing 168

Summary 172

Chapter 11 Pricing Strategy 174 Demand Influences on Pricing Decisions 174

Demographic Factors 174

Psychological Factors 174

Price Elasticity 176

Supply Influences on Pricing Decisions 176 Pricing Objectives 176

Cost Considerations in Pricing 176

Product Considerations in Pricing 178

Environmental Influences on Pricing Decisions 179

The Internet 179

Competition 179

Government Regulations 180

A General Pricing Model 181 Set Pricing Objectives 181

Evaluate Product–Price Relationships 181

Estimate Costs and Other Price Limitations 182

Analyze Profit Potential 183

Set Initial Price Structure 183

Change Price as Needed 183

Summary 184


Chapter 12 The Marketing of Services 188 Important Characteristics of Services 190

Intangibility 190

Inseparability 191

Perishability and Fluctuating Demand 192

Client Relationship 192

Customer Effort 193

Uniformity 193

Providing Quality Services 194 Customer Satisfaction Measurement 195

The Importance of Internal Marketing 196

Overcoming the Obstacles in Service Marketing 197

Limited View of Marketing 197

Limited Competition 198

Noncreative Management 198

No Obsolescence 199

Implications for Service Marketers 200 Summary 200

Chapter 13 Global Marketing 202 The Competitive Advantage of Nations 203 Organizing for Global Marketing 204

Problems with Entering Foreign Markets 204

Organizing the Multinational Company 207

Programming for Global Marketing 209 Global Marketing Research 209

Global Product Strategy 211

Global Distribution Strategy 211

Global Pricing Strategy 212

Global Advertising and Sales Promotion

Strategy 213

Entry and Growth Strategies for Global Marketing 214 Summary 217

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1. Analyze and Record the Current Situation 221

2. Analyze and Record Problems and Their Core

Elements 226

3. Formulate, Evaluate, and Record Alternative Courses

of Action 227

4. Select and Record the Chosen Alternative and

Implementation Details 227

Pitfalls to Avoid in Case Analysis 229 Communicating Case Analyses 230

The Written Report 230

The Oral Presentation 232

Summary 232


Breakeven Analysis 234

Net Present Value Analysis 236

Ratio Analysis 238

Summary 242


Title Page 245

Executive Summary 245

Table of Contents 246

Introduction 246

Situational Analysis 246

Marketing Planning 246

Implementation and Control of the Marketing Plan 248

Summary 250

Appendix—Financial Analysis 250

References 253

Summary 253

Chapter Notes 254 Index 259

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Essentials of Marketing Management



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Introduction A Part

1 Strategic Planning and the Marketing Management Process

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Part A  Introduction

Chapter 1 Strategic Planning and the Marketing Management Process The purpose of this introductory chapter is to present the marketing management process and outline what marketing managers must manage if they are to be effective. In doing so, it will also present a framework around which the remaining chapters are organized. Our first task is to review the organizational philosophy known as the marketing concept, because it under- lies much of the thinking presented in this book. The remainder of this chapter will focus on the process of strategic planning and its relationship to the process of marketing planning.


Simply stated, the marketing concept means that an organization should seek to achieve its goals by serving its customers. For a business organization, this means that it should focus its efforts on determining what customers need and want and then creating and offering products and services that satisfy these needs and wants. By doing so, the business will achieve its goal of making profits.

The purpose of the marketing concept is to rivet the attention of organizations on serving customer needs and wants. This is called a market orientation, and it differs dramatically from a production orientation that focuses on making products and then trying to sell them to customers. Thus, effective marketing starts with the recognition of customer needs and wants and then works backward to create products and services to satisfy them. In this way, organizations can satisfy customers more efficiently in the present and more accurately forecast changes in customers needs and wants in the future. This means that organizations should focus on building long-term customer relationships in which an initial sale is only an early step in the relationship, not an end goal. Long-term relationships between organiza- tions and customers lead to higher levels of profits and higher levels of customer satisfaction.

The principal task of an organization with a market orientation is not to manipulate customers to do what suits its interests but rather to find effective and efficient means to satisfy the interests of customers. This is not to say that all organizations do so. Clearly many are still production oriented. However, effective marketing, as defined in this text, requires that customers come first in organizational decision making.

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One qualification to this statement deals with the question of a conflict between con- sumer wants and societal needs and wants. For example, if society deems clean air and water as necessary for survival, this need may well take precedence over a consumer’s want for goods and services that pollute the environment.


Everyone reading this book has been a customer for most of his or her life. Last evening you stopped at a local supermarket to graze at the salad bar, pick up some bottled water and a bag of Fritos corn chips. While you were there, you snapped a $1.00 coupon for a new flavor salad dressing out of a dispenser and tasted some new breakfast potatoes being cooked in the back of the store. As you sat down at home to eat your salad, you answered the phone and someone suggested that you need to have your carpets cleaned. Later on in the evening you saw TV commercials for tires, soft drinks, athletic shoes, and the dangers of smoking and drinking during pregnancy. Today when you enrolled in a marketing course, you found that the instruc- tor has decided that you must purchase this book. A friend has already purchased the book on the Internet. All of these activities involve marketing. And each of us knows something about marketing because it has been a part of our life since we had our first dollar to spend.

Since we are all involved in marketing, it may seem strange that one of the persistent problems in the field has been its definition. The American Marketing Association defines marketing as “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”1 This definition takes into account all parties involved in the marketing effort: members of the producing organization, resellers of goods and services, and

MARKETING INSIGHT Some Differences between Organizations with a Market versus Product Orientation 1–1

Topic Marketing Orientation Production Orientation

Attitudes toward customers Customer needs determine company plans

They should be glad we exist, trying to cut costs and bringing out better products

Product offering Company makes what it can sell Company sells what it can make

Role of marketing research To determine customer needs and how well company is satisfying them

To determine customer reaction, if used at all

Interest in innovation Focus is on locating new opportunities

Focus is on technology and cost cutting

Customer service Satisfy customers after the sale and they’ll come back again

An activity required to reduce consumer complaints

Focus of advertising Need-satisfying benefits of goods and services

Product features and how prod- ucts are made

Relationship with customer Customer satisfaction before and after sale leads to a profitable long-run relationship

Relationship ends when a sale is made

Costs Eliminate costs that do not give value to customer

Keep costs as low as possible

William D. Perrault Jr., Joseph P. Cannon, and E. Jerome McCarthy, Essentials of Marketing. 15th ed. (New York: McGraw-Hill, 2017), p. 19. Reprinted with permission of McGraw-Hill Education.

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6 Part A Introduction

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customers or clients. While the broadness of the definition allows the inclusion of nonbusi- ness exchange processes, the primary emphasis in this text is on marketing in the business environment. However, this emphasis is not meant to imply that marketing concepts, prin- ciples, and techniques cannot be fruitfully employed in other areas of exchange as is clearly illustrated in Figure 1.1.


Before a production manager, marketing manager, and personnel manager can develop plans for their individual departments, some larger plan or blueprint for the entire or ganization should exist. Otherwise, on what would the individual departmental plans be based?

In other words, there is a larger context for planning activities. Let us assume that we are dealing with a large business organization that has several business divisions and several prod- uct lines within each division (e.g., General Electric, Altria). Before individual divisions or departments can implement any marketing planning, a plan has to be developed for the entire organization.2 This means that senior managers must look toward the future and evaluate their ability to shape their organization’s destiny in the years and decades to come. The output of this process is objectives and strategies designed to give the organization a chance to compete effec- tively in the future. The objectives and strategies established at the top level provide the context for planning in each of the divisions and departments by divisional and departmental managers.

Strategic Planning and Marketing Management Some of the most successful business organizations are here today because many years ago they offered the right product at the right time to a rapidly growing market. The same can also be said for nonprofit and governmental organizations. Many of the critical deci- sions of the past were made without the benefit of strategic thinking or planning. Whether these decisions were based on wisdom or were just luck is not important; they worked for these organizations. However, a worse fate befell countless other organizations. More than three-quarters of the 100 largest U.S. corporations of 70 years ago have fallen from the list. These corporations at one time dominated their markets, controlled vast resources, and had the best-trained workers. In the end, they all made the same critical mistake.

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