Marketing Management Russ Winer Ravi Dhar Fourth Edition ISBN 10: 1-292-02341-4 ISBN 13: 978-1-292-02341-0 Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk © Pearson Education Limited 2014 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affi liation with or endorsement of this book by such owners. ISBN 10: 1-292-02341-4 ISBN 13: 978-1-292-02341-0 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Printed in the United States of America 1111223331470469370471339931975373 P E A R S O N C U S T O M L I B R AR Y Table of Contents Glossary Russell S. Winer/Ravi Dhar 1 1. Marketing and the Job of the Marketing Manager Russell S. Winer/Ravi Dhar 13 2. A Strategic Marketing Framework Russell S. Winer/Ravi Dhar 47 3. Marketing Research Russell S. Winer/Ravi Dhar 73 4. Analyzing Consumer Behavior Russell S. Winer/Ravi Dhar 103 5. Organizational Buying Behavior Russell S. Winer/Ravi Dhar 143 6. Market Structure and Competitor Analysis Russell S. Winer/Ravi Dhar 169 7. Product Decisions Russell S. Winer/Ravi Dhar 199 8. New Product Development Russell S. Winer/Ravi Dhar 233 9. Pricing Russell S. Winer/Ravi Dhar 271 10. Communications and Advertising Strategy Russell S. Winer/Ravi Dhar 309 11. Sales Promotion Russell S. Winer/Ravi Dhar 347 12. Direct Channels of Distribution: Personal Selling and Direct Marketing Russell S. Winer/Ravi Dhar 375 I 444047959 13. Channels of Distribution Russell S. Winer/Ravi Dhar 409 14. Customer Relationship Management Russell S. Winer/Ravi Dhar 445 Index 479 II Glossary From Glossary of Marketing Management, 4/e. Russell S. Winer. Ravi Dhar. Copyright © 2011 by Pearson Education. Published by Prentice Hall. All rights reserved. 1 Glossary acquisition costs the incremental costs involved in obtaining any new customer association/causal methods a sales forecasting method that tries to develop statistical mod- els relating market factors to sales B-to-B (business-to-business) marketing when a product or service is sold to an organization brand equity the value of a brand name in communicating quality or other aspects of a product brand positions customers’ perceptions of one brand in relation to its competitors brands a name, term, sign, symbol, or design (or a combination thereof) intended to identify the goods and services of a seller and differentiate them from the competition breakdown method a major method used to determine the size of the sales force that is based on the forecasted sales level divided by an assumed average sales per salesperson budget competition a level of competition that includes any product, related or unrelated, that could be viewed as substitutable in a budget buy classes a set of descriptor variables used in industrial marketing segmentation that is based on the newness of the purchasing situation buying center a group of individuals collectively involved in a purchase decision cannibalization the amount of sales for a new element of a product line that is taken away from an existing element of the line category management a process that considers product categories to be the business units that should be customized on a store-by-store basis in a way that satisfies customer needs channel power the ability of one channel member to get another channel member to do what it otherwise would not have done channels of distribution the system by which customers have access to a company’s prod- uct or service chasm the large gap that can exist between the early adopters of an innovation and the early majority choiceboards online, interactive systems that allow individual customers to design their own products by choosing from an array of attributes, delivery options and prices co-creation using people outside of the organization to help develop new product ideas cohort analysis an analysis that develops age-related profiles of each generation to segment the market commission a form of compensation based directly on a sale or some other activity community a group of customers who share information between themselves and the com- pany about their experiences with the product or service compatibility an attribute evaluated by customers of new technologically-based innova- tions that refers to the compatibility of the innovation with existing systems, values, and beliefs or previously introduced ideas compensatory model any model in which a low score on one attribute can be compensated for by a higher score on another competitive advantage the strategic development of some basis on which customers will choose a firm’s product or service over its competitors’ competitive pricing a pricing policy in which the objective is to maintain a competitive price by either pricing at the market average or copying a particular brand competitor analysis an analysis in which the strengths and weaknesses of competitors and their current and likely future strategies are examined competitor targets the brands or companies that offer the most likely competition for that customer 2 Glossary complementary pricing an approach to product line pricing that applies to products that are used together when one of the products is a consumable that must be replenished continually complexity one factor of an innovation that is negatively related to its success concept development making further refinements to a new product concept conjoint analysis a popular marketing research method in new product development that uses theoretical profiles or concepts to determine how customers value different levels of product attributes consumer franchise building (CFB) activities that build brand equity, including advertising, sampling, couponing, and product demonstrations consumer-oriented promotions a marketing tool such as a coupon that targets consumers and is intended to generate a short-term change in a product’s sales or market share continuous replenishment program (CRP) a program wherein members of a supply chain partner with supermarkets, working together to attempt to accurately forecast demand, which is then used to generate inventory replenishment data electronically control group in an experiment, a set of respondents or experimental units who receive the normal level of the manipulation and against which the experimental group is compared core strategy designed by the marketing manager, a statement that communicates the reason to buy to a specific customer group correlation method of forecasting an association/causal method of sales forecasting in which a correlation between two variables is used to indicate the strength of the association counting methods sales forecasting methods that rely on customer data couponing a price-oriented promotion that offers a discount off the price of a product and is accompanied by a physical or electronic document indicating the amount of the discount cross-elasticity of demand the percentage of change in one product’s sales caused by a percentage change in a marketing variable for another product customer information file, or CIF a customer database including information on past and current purchasing, contact, response to marketing variables, and monetary value to the company customer relationship management, or CRM develops programs that match the kind of rela- tionship the customer wants with the company, whether it is relational or transactional customer service service that supplements or complements the main product or service purchased customer targets a more specific segment of customers (e.g., income over $40,000, small busi- nesses with revenues under $10 billion), which the marketing manager wants to entice to buy the product or service customer value what a product or service is worth to the customer in monetary terms; also called perceived value customerization a process whereby a company takes a product or service that is widely marketed and perhaps offered in many different configurations and develops a system for customizing (or nearly customizing) it to each customer’s specifications data mining analyzing a customer information file for the best prospects to target decline stage of the product life cycle where product category sales are decreasing Delphi method of forecasting a judgment method of sales forecasting that relies on a jury of experts formed from a diverse population to provide individual estimates of forecasted sales, which then are collated and refined in order to produce a final number descriptors variables that describe customers in terms of their inherent characteristics differential advantage one of the three components of a core strategy, a statement of how a particular product or service is better than the competition differentiation an approach to creating a competitive advantage based on obtaining an observable point of difference that customers will value and for which they will be willing to pay direct channel is one where the product or service remains under the control of the com- pany from production to customer 3 Glossary direct mail marketing a form of direct marketing that involves sending letters or catalogues to potential customers direct marketing any communication form that sends messages direct to a target market with the anticipation of an immediate or very-short-term response; also, any method of distribution that gives the customer access to the firm’s products and services without any other intermediaries direct sales in the context of direct marketing, an approach that involves the use of friends and neighbors as the sales force in reaching potential customers disintermediation the process by which companies are eliminating intermediate channels of distribution through the use of information technology diverters in international marketing, middlemen who purchase products or arrange for their purchase and thereby divert the products away from normal channels Do Not Call Registry gives consumers a choice about whether or not they wish to receive phone calls from particular telemarketers dollarmetric method in estimating customer value, a method used in conjunction with survey- based methods that creates a scale that puts survey responses in monetary terms early adopters one type of adopter in Everett Rogers’s diffusion of innovations framework; buyers who are not the first to purchase an innovation but who follow innovators early majority one type of adopter in Everett Rogers’s diffusion of innovations framework that follows early adopters; buyers who are interested in new technology and gadgets but who wait to see whether an innovative product is just a fad econometric models an association/causal method of sales forecasting that involves the use of large-scale, multiple-equation models most often used to predict the economic perfor- mance of a country or a particularly large business sector economies of scale also called economies of size, the rationale that larger sales mean that fixed costs of operations can be spread over more units, which lowers average unit costs efficient consumer response (ECR) a process seeking to reduce costs throughout the entire distribution system, resulting in lower prices and increased consumer demand emotional appeals an approach to developing advertising copy that strives to tap an under- lying psychological aspect of the purchase decision ethnographic research in-depth study of consumer consumption through interviews and observing behavior evoked or consideration set in consumer behavior, the set of products from which the cus- tomer will choose to purchase executive opinion method of forecasting a judgment method of sales forecasting in which the marketing manager relies on his or her own opinion to predict sales, based on his or her experience and knowledge or consultations with internal or external experts expectation confirmation/disconfirmation model a basic customer satisfaction model that presumes that levels of customer satisfaction with a product or service are determined by how well the product performs compared to what the customer expects expectations are developed based on the information the customer has collected from the prior search activities experience curve the notion that costs fall with cumulative production or delivery of a ser- vice and that, using the first few years of a product’s life as a yardstick, the continued decline in costs is predictable experiences the interactions that a customer has with a company exponential smoothing method of forecasting a time-series method of sales forecasting that relies on historical sales data, like the moving averages method, but also uses exponen- tially declining weights based on past sales values external validity the ability to generalize experimental results to the real world or, more generally, the target population extrapolation extending a line based on existing data outside the range of the data factor analysis a multivariate statistical procedure to reduce a set of variables to a smaller set called factors that retain most of the information of the original set family life cycle the stages of life individuals pass through field experiment an experiment that takes place in a realistic environment flat-rate vs. variable-rate pricing strategy often used in services that offers customers a choice between a fixed price and a variable usage fee 4 Glossary focus group small groups of people, typically recruited through their membership in vari- ous target groups of interest, who are brought together in a room to discuss a topic cho- sen by the marketing manager and led by a professional moderator forecast a prediction of a future quantity such as sales frequency marketing also called loyalty programs, which encourage repeat purchasing through a formal program enrollment process and the distribution of benefits generic competition a level of competition that includes all products or services that the customer views as fulfilling the need requiring satisfaction on a particular purchase or use occasion global marketing a generic term encompassing any marketing activities outside a com- pany’s home market; also a standardization of the strategies used to market a product around the world gray market a market in which trademarked goods are sold through channels of distribu- tion that are not authorized by the holder of the trademark growth phase in the product life cycle, the stage immediately following the introductory phase, in which product category sales are growing, competitors are increasing in num- ber, and market segmentation begins to be a key issue horizontal marketing marketing to different industries with the same product or service house of quality a matrix used in new product development that illustrates how customer needs and engineering characteristics influence one another hybrid system a modification of the multiple-channel system in which members of the channel system perform complementary functions, often for the same customer, thereby allowing for specialization and better levels of performance incentive payments payments monetary awards for special performance indirect channel is an independent party paid by a company to distribute the product; in this case, the channel member and not the company has direct contact with the end user or organization industrial marketing marketing of a product or service to another organization, also called organizational marketing industry a group of products that are close substitutes to buyers, are available to a common group of buyers, and are distant substitutes for all products not included in the industry informational appeals an approach to developing advertising copy that focuses on the functional or practical aspects of the product innovators one type of adopter in Everett Rogers’s diffusion of innovations framework; the first buyers of an innovation inquiry tests track the number of inquiries received from a print advertisement integrated marketing communications (IMC) the concept that all elements of the marketing mix communicate messages that must be coordinated in order to reinforce what each is saying and to avoid customer confusion internal validity the degree to which experimental results are caused by the experimental manipulation introductory phase in the product life cycle, the stage in which the product or service is new; sales volume increases slowly because of a lack of marketing effort and the reluc- tance of customers to buy the product investment pricing also called return on sales, a pricing policy that assumes you can set a price that will deliver the rate of return demanded by senior management; most often used when a product has a monopoly position joint space a perceptual map that contains both brand spatial locations as well as consumer perceptions of their ideal brand judgment methods sales forecasting methods that rely on pure opinion laboratory experiment an experiment run in an artificial environment laggards one type of adopter in Everett Rogers’s diffusion of innovations framework that fol- lows the late majority; buyers who are generally not interested in new technology and are the last customers to buy, if they ever do late majority one type of adopter in Everett Rogers’s diffusion of innovations framework; buyers who are conservative in terms of how much of an industry infrastructure must be built before they will buy an innovative product 5