Discussion A Preface to Marketing Management pet6106x_fm_i-xviii.indd ipet6106x_fm_i-xviii.indd i 19/12/13 9:19 PM19/12/13 9:19 PM Final PDF to

Discussion A Preface
to Marketing
Management

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A Preface
to Marketing
Management

Fourteenth 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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A PREFACE TO MARKETING MANAGEMENT, FOURTEENTH EDITION

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2015 by McGraw-Hill

Education. All rights reserved. Printed in the United States of America. Previous editions © 20 13, 2011, and

2008. 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 0 DOW/DOW 1 0 9 8 7 6 5 4

ISBN 978-0-07-786106-3

MHID 0-07-786106-X

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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

Peter, J. Paul.

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.–Fourteenth edition.

pages cm

ISBN 978-0-07-786106-3 (alk. paper)

1. Marketing–Management. I. Donnelly, James H. II. Title.

HF5415.13.P388 2013

658.8–dc23

2013046644

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.

www.mhhe.com

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To Rose and Angie

J. Paul Peter

To Gayla

Jim Donnelly

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vi

About the Authors

J. Paul Peter
has been a faculty member at the University of Wisconsin since 1981. He was a member

of the faculty at Indiana State, Ohio State, and Washington University before joining the

Wisconsin faculty. 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, Con-

sumer 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. Recently, 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 over 30 books, including A
Preface to Marketing Management, Fourteenth edition; Marketing Management: Knowledge
and Skills, ninth edition; Consumer Behavior and Marketing Strategy, ninth edition; Strategic
Management: Concepts and Applications, third edition; and Marketing: Creating Value for
Customers, second edition. He is one of the most cited authors in the marketing 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. In 1990 he received the first Chancellor’s Award for Outstanding

Teaching given at the university. Previously, he had twice received the UK Alumni Associa-

tion’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 busi-

ness honorary. In 1992 he received an Acorn Award recognizing “those who shape the future”

from the Kentucky Advocates for Higher Education. In 2001 and 2002 he was selected as

“Best University of Kentucky Professor.” In 1995 he became one of six charter members

elected to the American Bankers Association’s Bank Marketing Hall of Fame. He has also

received a “Distinguished Doctoral Graduate Award” from the University of Maryland.

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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vii

Preface

We are proud to introduce the fourteenth edition of A Preface to Marketing Management.
Our plan has always been to deliver a clear and concise presentation of the basic princi-
ples of marketing in such a way that the core concepts and ideas are covered in sufficient

depth to ensure in-depth understanding. By offering an engaging, clear, and conceptu-

ally sound text, our book has been able to maintain its position as a leading marketing

management text.

Throughout the history of the book, feedback from both students and instructors has

suggested that our plan is a good one. Our book has been used in a wide variety of set-

tings and is the best-selling book of its kind. We introduce the fourteenth edition knowing

that our book and its eight foreign translations have been used around the world whenever

courses require an overview of the critical aspects of marketing management.

With this edition, we seek to more effectively implement our plan by building on a
strong foundation, maintaining the attributes and elements of the book that make it a very

teachable text, updating existing content, adding new content, and focusing the presenta-

tion. We seek to emphasize quality content and examples and avoid excess verbiage, pic-

tures, and description.

As usual, each time we revise the book there is an emphasis on responding to feedback

from students and instructors. These two constituencies plus our own intuitions drive each

revision. Marketing is an exciting and dynamic field of study. We want to capture the

sense of excitement and at the same time respect its history.

Our book has become known simply as the Preface. We want to believe a major reason
it has endured is that because marketing is figuring out how to do a superior job of satisfy-

ing customers, we simply try to practice what we preach. Welcome to the Preface.

THE PRESENT EDITION

Every element of content in our book is designed with one thought in mind: to assist stu-

dents in analyzing marketing problems and cases and developing and writing marketing

plans. Section I of the book consists of 13 concise chapters that cover the essentials of mar-

keting management. We think of it as the “must know” content of the field. It is divided

into four parts that focus on strategic planning and marketing planning, understanding tar-

get markets, the marketing mix, and marketing in special fields. These 13 chapters should

provide students a clear understanding of the terminology, techniques, tools, and strategies

for effective marketing management and marketing strategy development.

In addition to revising and updating the text chapters, this edition contains new content as

well. There are discussions of internal and external secondary data sources, the use of social

media monitoring, alternative search in consumer behavior, key characteristics of organiza-

tional buyers, e-procurement, global virtual teams, brand equity, using distinctive compe-

tencies in new product development, consumer databases, business-to-business databases,

mobile marketing, online retailing and multichannel marketing, franchising, the effects of

the Internet on pricing, global account managers, and learning about different cultures.

In the twelfth edition, we altered two of the text elements. The changes have been well

received by instructors and students. First, “Marketing Insights” are included to assist students

as they solve marketing problems, analyze marketing cases, and develop marketing plans.

Second, we know that our book is often used with case problems, writing assignments,

and constructing marketing plans. Accordingly, there is an “Additional Resources” section

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viii Preface

at the end of each chapter. Our purpose is to highlight current resources that students can

use in writing assignments and oral presentations. The resources have been selected with

students in mind. They include resources accessible to students at various stages of mar-

keting education given the wide spectrum of courses in which the book is utilized.

NEW FEATURES AND CONTENT CHANGES

Chapter 1: Strategic Planning and The Marketing Management
Process

• Revised basic questions that must be asked when developing a mission statement.

• Marketing Insight 1-3 now contains five actual mission statements for firms of varying

sizes and industries. It provides students with a better mix of alternatives when com-

pleting the exercise in Marketing Insight 1-4.

• Updated additional resources.

Chapter 2: Marketing Research: Process and Systems for Decision
Making

• Revised section on secondary data to include both internal and external sources

• Added new figure “Common Types of Information Available in a Secondary Data

Search”

• Added a new Marketing Insight, “Social Media Monitoring for Marketing Insights”

• Updated additional resources

Chapter 3: Consumer Behavior
• Updated discussion of consumer and marketer reactions to recession

• Revised and updated discussion of Alternative Search

• Updated additional resources

Chapter 4: Business, Government, and Institutional Buying
• Revised Marketing Insight on “Key Characteristics of Organizational Buying Behavior”

• New Marketing Insight, “Organizational Buying on the Internet: E-Procurement”

• Revised Discussion of “Organizational Needs”

• Updated additional resources

Chapter 5: Market Segmentation
• New Marketing Insight, “Segmenting the Mobile Phone Market”

• Revised and updated discussion of VALS

Chapter 6: Product and Brand Strategy
• Marketing Insight 6-3 now contains the latest information on the value of the top twenty

brands in the world

• Contains a new section on branding and brand equity

• Revised and updated Marketing Insight 6-6

• Added a new section on global virtual teams

• New key terms and concepts

• Updated additional resources

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Preface ix

Chapter 7: New Product Planning and Development
• New Marketing Insight 7-4 which focuses on utilizing corporate strengths in the new

product development process. It includes eight firms with strengths in either technol-

ogy or markets

• Updated additional resources

Chapter 8: Integrated Marketing Communications
• Revised Marketing Insight 8-1 which presents up-to-date information on the top ten

websites in Brazil, Portugal and South Korea

• Revised section on direct marketing as part of the promotion mix

• Revised Marketing Insight 8-6

• New section on direct marketing

• New Marketing Insight 8-7 on the contents of a comprehensive database included are

both consumer and business-to-business databases

• Added new Key Terms and Concepts

• Updated additional resources

Chapter 9: Personal Selling, Relationship Building, and Sales
Management

• New Marketing Insight 9-1 which focuses on what a salesperson actually does

• A new discussion of an increasingly important customer organization structure, the

global account manager

• Added new Key Terms and Concepts

• Updated additional resources

Chapter 10: Distribution Strategy
• Added New Marketing Insight, “Advantages and Disadvantages of Franchising”

• New section on “Online and Mobile Retailing”

• Updated additional resources

• New “Key Terms and Concepts”: online retailing, mobile retailing, multichannel marketing

Chapter 11: Pricing Strategy
• Added a new discussion of the Internet as an external influence on pricing decisions

• A new Marketing Insight, “Ten Tips for Managing Pricing Strategy”

Chapter 12: The Marketing of Services
• The chapter has been significantly revised and has been shortened for this edition

• A new section on the importance of all the elements of the marketing mix in the market-

ing of services has been added

• Updated additional resources

Chapter 13: Global Marketing
• Marketing Insight 13-1 has been updated with the latest data on selected U.S. companies

and their international sales

• The section on cultural misunderstanding as a problem in foreign markets has been

replaced with an entirely new section

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x Preface

• Marketing Insight 13-3 has been replaced with a new Marketing Insight which focuses

on ways to learn about new cultures

• Updated additional resources

Section II: Analyzing Marketing Problems and Cases
• New Marketing Insight, “Objectives of Case Analysis”

• Revised and updated discussion of SWOT analysis

• Updated additional resources

Section III: Financial Analysis for Marketing Decisions
• Updated dates and additional resources

Section IV: Developing Marketing Plans
• Updated dates and additional resources

STUDENT SUPPORT

Knowing that our book is used for a variety of course levels, programs, and students, we

have assembled several elements that we believe will support students for whatever pur-

pose they use our book.

Key Terms and Concepts
New to the previous edition, we decided to add a section of key terms and concepts at the

conclusion of each chapter. There was much debate as to where they should be placed in

the book. We decided to place them at the end of the chapter in which they appear. In this

way, they are more visible to students than as an appendix at the end of the book. More

than a glossary, it also presents key concepts covered in the chapter.

Analyzing Marketing P roblems and Cases
Section II presents a very practical and comprehensive framework for analyzing, prepar-

ing, and presenting case analyses. It includes discussions of what a case is, preparing for

the class discussion and written analysis, pitfalls to avoid in case analysis, and preparing

to do an oral presentation. It has been praised by both instructors and students.

For courses utilizing marketing problems and cases, we encourage students to read this

guide before discussing a problem or case. Thus, it could have been placed at the begin-

ning of the book, but because it is often referred to throughout the semester, we have

placed it after the text chapters. And for those courses that do not utilize cases, the book

may be used without reference to this section.

Financial Analysis for Marketing Decisions
It is absolutely critical for marketing students to understand and appreciate the fact that

the ultimate objectives of marketing are usually expressed in financial terms. Section III

enables students to assess a company’s financial position. It presents important financial

calculations that are useful in evaluating the financial position of a firm and the financial

impact of various decisions and strategies. Included are discussions of breakeven analysis,

net present value, and ratio analysis.

Developing Marketing Plans
Given the purpose of this book and the needs of users, Section IV enables students to

develop practical planning skills so they are able to construct a quality marketing plan for

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Preface xi

any product or service. It provides a complete format for structuring and presenting one,

including specific questions to ask in competitive analysis, the development of well-stated

objectives, analyzing customers, and implementation and control. As with Section II, we

know that this section has become a valuable take-away resource for many students long

after their course has been completed.

A Value-Added Website
We encourage students to view the student section of the Online Learning Center (OLC)

at website www.mhhe.com/peterdonnelly14e, which contains a number of useful aids for

facilitating learning and supporting student achievement. We believe you will find it a

useful resource.

INSTRUCTOR SUPPORT

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/peterdonnelly14e 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. It is available in both print and

EZ Test Online. We also offer Power Point slides that highlight key text material. Your

McGraw-Hill representative can also assist in the delivery of any additional instructor

support material.

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xii

Acknowledgments

Our book is based on the works of many academic researchers and marketing practitioners.

We want to thank those individuals who contributed their ideas to develop the field of mar-

keting throughout the years. Indeed, our book would not be possible without their contri-

butions. 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 individu-

als 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

Glenn Chappell
Meridith College

Newell Chiesl
Indiana State University

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

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

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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
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

It is always easy to work with professionals. That is why working with the profession-

als at McGraw-Hill is always enjoyable for us. Sankha Basu, publisher, and Jane Mohr,

project manager, support what we do and we are very grateful. Thank you Heather Darr,

development editor, and welcome to our team. We also wish to acknowledge Francois

Ortalo-Magne, dean of the School of Business at the University of Wisconsin, and David

Blackwell, dean of the Gatton College of Business and Economics at the University of

Kentucky, who support what we do.

J. Paul Peter

James H. Donnelly, Jr.

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xiv

Contents

SECTION I
ESSENTIALS OF MARKETING
MANAGEMENT 1

PART A
INTRODUCTION 3

Chapter 1
Strategic Planning and the Marketing Man-
agement 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 27

PART B
MARKETING INFORMATION,
RESEARCH, AND UNDERSTANDING
THE TARGET MARKET 31

Chapter 2
Marketing Research: Process and Systems
for Decision Making 32

The Role of Marketing Research 32

The Marketing Research Process 33

Purpose of the Research 33
Plan of the Research 34
Performance of the Research 37
Processing of Research Data 39

Preparation of the Research Report 40
Limitations of the Research Process 40

Marketing Information Systems 42

Summary 43

Chapter 3
Consumer Behavior 45

Social Influences on Consumer Decision

Making 46

Culture and Subculture 46
Social Class 47
Reference Groups and Families 48

Marketing Influences on Consumer Decision

Making 48

Product Influences 48
Price Influences 48
Promotion Influences 49
Place Influences 49

Situational Influences on Consumer Decision

Making 51

Psychological Influences on Consumer Decision

Making 51

Product Knowledge 51
Product Involvement 52

Consumer Decision Making 52

Need Recognition 53
Alternative Search 54
Alternative Evaluation 55
Purchase Decision 55
Postpurchase Evaluation 56

Summary 58

Chapter 4
Business, Government, and Institutional
Buying 60

Categories of Organizational Buyers 60

Producers 60
Intermediaries 61
Government Agencies 61
Other Institutions 61

The Organizational Buying Process 61

Purchase-Type Influences on Organizational

Buying 62

Straight Rebuy 62
Modified Rebuy 62
New Task Purchase 62

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Contents xv

Structural Influences on Organizational Buying 63

Purchasing Roles 63
Organization-Specific Factors 64
Purchasing Policies and Procedures 65

Behavioral Influences on Organizational Buying 65

Personal Motivations 65
Role Perceptions 66

Stages in the Organizational Buying

Process 68

Organizational Need 68
Vendor Analysis 68
Purchase Activities 69
Postpurchase Evaluation 70

Summary 70

Chapter 5
Market Segmentation 72

Delineate the Firm’s Current

Situation 72

Determine Consumer Needs

and Wants 73

Divide Markets on Relevant Dimensions 73

A Priori versus Post Hoc Segmentation 74
Relevance of Segmentation Dimensions 75
Bases for Segmentation 75

Develop Product Positioning 81

Decide Segmentation Strategy 82

Design Marketing Mix Strategy 84

Summary 84

PART C
THE MARKETING MIX 85

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 96

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 108
Idea Screening 110
Project Planning 111
Product Development 112
Test Marketing 112
Commercialization 113
The Importance of Time 113

Some Important New Product Decisions 114

Quality Level 114
Product Features 115
Product Design 116
Product Safety 116

Causes of New …

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