Kevin Lane KELLER
15 Global Edition
1 DEFINING MARKETING FOR THE NEW REALITIES
THE VALUE OF MARKETING
• Financial success often depends on marketing ability.
• Successful marketing builds demand for products and services, which, in turn, creates jobs.
• Marketing builds strong brands and a loyal customer base, intangible assets that contribute heavily to the value of a firm.
• In an Internet-fueled environment where consumers, competition, technology, and economic forces change rapidly and consequences
quickly multiply, marketers must choose features, prices, and markets and decide how much to spend on advertising, sales, and online and
Meanwhile, the economic downturn that began globally in 2008 and the slow recovery since, have brought budget cuts and intense
pressure to make every marketing dollar count.
• There is little margin for error in marketing.
THE SCOPE OF MARKETING
WHAT IS MARKETING?
• Marketing is about identifying and meeting human and social needs.
One of the shortest good definitions of marketing is “meeting needs profitably.”
American Marketing Association (AMA) formal definition:
Marketing is 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.
• Marketing management is the art and science of choosing target markets and getting, keeping, and growing customers
through creating, delivering, and communicating superior customer value.
WHAT IS MARKETED?
Marketers market 10 main types of entities:
Physical goods constitute the bulk of most countries’ production and marketing efforts.
As economies advance, a growing proportion of their activities focuses on the production of services.
Services include the work of airlines, hotels, car rental firms, and accountants, bankers, lawyers, engineers, doctors, software programmers, and
management consultants. Many market offerings mix goods and services, such as a fast-food meal.
Marketers promote time-based events, such as major trade shows, artistic performances, and company anniversaries.
By orchestrating several services and goods, a firm can create, stage, and market experiences.
Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other professionals often get help from marketers.
Cities, states, regions, and whole nations compete to attract tourists, residents, factories, and company headquarters.13 Place marketers include
economic development specialists, real estate agents, commercial banks, local business associations, and advertising and public relations
Properties are intangible rights of ownership to either real property (real estate) or financial property (stocks and bonds). They are bought and
sold, and these exchanges require marketing..
Museums, performing arts organizations, corporations, and nonprofits all use marketing to boost their public images and compete for audiences
Some universities have created chief marketing officer (CMO) positions to better manage their school identity and image.
Information is essentially what books, schools, and universities produce, market, and distribute at a price to parents, students, and communities.
Every market offering includes a basic idea.
A marketer is someone who seeks a response (attention, a purchase, a vote, a donation) from another party, called the prospect.
If two parties are seeking to sell something to each other, we call them both marketers.
Marketers are skilled at stimulating demand for their products, but that’s a limited view of what they do.
They also seek to influence the level, timing, and composition of demand to meet the organization’s objectives.
Eight demand states are possible:
1. Negative demand
Consumers dislike the product and may even pay to avoid it.
2. Nonexistent demand
Consumers may be unaware of or uninterested in the product.
3. Latent demand
Consumers may share a strong need that cannot be satisfied by an existing product.
4. Declining demand
Consumers begin to buy the product less frequently or not at all.
5. Irregular demand
Consumer purchases vary on a seasonal, monthly, weekly, daily, or even hourly basis.
6. Full demand
Consumers are adequately buying all products put into the marketplace.
7. Overfull demand
More consumers would like to buy the product than can be satisfied.
8. Unwholesome demand
Consumers may be attracted to products that have undesirable social consequences.
In each case, marketers must identify the essential cause(s) of the demand state and decide a plan of action to shift demand to a more
desired state. Markets
Market → a collection of buyers and sellers who transact over a particular product or product class.
Five basic markets and their connecting flows are shown in Figure 1.1.
Manufacturers go to resource markets (raw material markets, labor markets, money markets), buy resources and turn them into
goods and services, and sell finished products to intermediaries, who sell them to consumers.
Consumers sell their labor and receive money with which they pay for goods and services.
The government collects tax revenues to buy goods from resource, manufacturer, and intermediary markets and uses
these goods and services to provide public services.
Each nation’s economy, and the global economy, consists of interacting sets of markets linked through exchange processes.
Marketers view sellers as the industry and use the term market to describe customer groups.
They talk about need markets (the diet-seeking market), product markets (the shoe market), demographic markets (the “millennium”
youth market), geographic markets (the Chinese market), or voter markets, labor markets, and donor markets. Figure 1.2 shows how sellers and buyers are connected by four flows.
Sellers send goods and services and communications such as ads and direct mail to the market;
in return they receive money and information such as customer attitudes and sales data.
The inner loop shows an exchange of money for goods and services;
the outer loop shows an exchange of information.
Key customer markets
Consider the following key customer markets:
Companies selling mass consumer goods and services, establish a strong brand image by developing a superior
product or service, ensuring its availability, and backing it with engaging communications and reliable performance.
Companies selling business goods and services often face well-informed professional buyers skilled at evaluating
Companies in the global marketplace navigate cultural, language, legal, and political differences while deciding which
countries to enter, how to enter each, how to adapt product and service features to each country, how to set prices,
and how to communicate in different cultures.
Nonprofit and Governmental Markets
Companies selling to non-profit organizations with limited purchasing power such as churches, universities, charitable
organizations, and government agencies need to price carefully.
Much government purchasing requires bids; buyers often focus on practical solutions and favor the lowest bid, other
CORE MARKETING CONCEPTS
NEEDS, WANTS, AND DEMANDS
Needs: the basic human requirements such as for air, food, water, clothing, and shelter.
Wants: specific objects that might satisfy the need.
Demands: wants for specific products backed by an ability to pay.
Companies must measure not only how many people want their product, but also how many are willing and able to buy it.
Marketers do not create needs: needs pre-exist marketers.
Some customers have needs of which they are not fully conscious or cannot articulate. We can distinguish 5 types of needs:
1. Stated needs
(The customer wants an inexpensive car.)
2. Real needs
(The customer wants a car whose operating cost, not initial price, is low.)
3. Unstated needs
(The customer expects good service from the dealer.)
4. Delight needs
(The customer would like the dealer to include an onboard GPS system.)
5. Secret needs
(The customer wants friends to see him or her as a savvy consumer.)
To gain an edge, companies must help customers learn what they want.
TARGET MARKETS, POSITIONING, AND SEGMENTATION
Marketers identify distinct segments of buyers by identifying demographic, psychographic, and behavioral differences between them.
They then decide which segment(s) present the greatest opportunities.
For each of these target markets, the firm develops a market offering that it positions in target buyers’ minds as delivering
some key benefit(s).
OFFERINGS AND BRANDS
Companies address customer needs by putting forth a value proposition, → a set of benefits that satisfy those needs.
The intangible value proposition is made physical by an offering, which can be a combination of products, services,
information, and experiences.
A brand is an offering from a known source.
MARKETING CHANNELS → To reach a target market, the marketer uses 3 kinds of marketing channels:
Communication channels deliver and receive messages from target buyers and include newspapers, magazines, radio, television, mail,
telephone, smart phone, billboards, posters, fliers, CDs, audiotapes, and the Internet.
Distribution channels help display, sell, or deliver the physical product or service(s) to the buyer or user.
These channels may be direct via the Internet, mail, or mobile phone or telephone or indirect with distributors, wholesalers, retailers, and agents as
To carry out transactions with potential buyers, the marketer also uses service channels that include warehouses, transportation
companies, banks, and insurance companies.
Marketers clearly face a design challenge in choosing the best mix of communication, distribution, and service channels for
PAID, OWNED, AND EARNED MEDIA
The rise of digital media gives marketers a host of new ways to interact with consumers and customers.
Paid media include TV, magazine and display ads, paid search, and sponsorships, all of which allow marketers to show their ad or
brand for a fee.
Owned media are communication channels marketers actually own, like a company or brand brochure, Web site, blog,
Facebook page, or Twitter account.
Earned media are streams in which consumers, the press, or other outsiders voluntarily communicate something about
the brand via word of mouth, buzz, or viral marketing methods.
The emergence of earned media has allowed some companies to reduce paid media expenditures.
IMPRESSIONS AND ENGAGEMENT
Marketers now think of three “screens” or means to reach consumers: TV, Internet, and mobile.
Surprisingly, the rise of digital options did not reduce the amount of TV viewing, in part because 3 of 5 consumers use two screens at once.
Impressions, which occur when consumers view a communication, are a useful metric for tracking the scope or breadth of a
communication’s reach that can also be compared across all communication types.
The downside is that impressions don’t provide any insight into the results of viewing the communication.
Engagement is the extent of a customer’s attention and active involvement with a communication.
It reflects a much more active response than a mere impression and is more likely to create value for the firm.
VALUE AND SATISFACTION
The buyer chooses the offerings he/ she perceives to deliver the most value, the sum of the tangible and intangible benefits and costs.
Value is primarily a combination of quality, service, and price (qsp), called the customer value triad.
Value perceptions increase with quality and service but decrease with price.
We can think of marketing as the identification, creation, communication, delivery, and monitoring of customer value.
Satisfaction reflects a person’s judgment of a product’s perceived performance in relationship to expectations.
If performance falls short of expectations, → the customer is disappointed.
If it matches expectations, → the customer is satisfied. If it exceeds them, → the customer is delighted.
The supply chain is a channel stretching from raw materials to components to finished products carried to final buyers.
Each company in the chain captures only a certain percentage of the total value generated by the supply chain’s value delivery system.
When a company acquires competitors or expands upstream or downstream, its aim is to capture a higher percentage of
supply chain value. Problems with a supply chain can be damaging or even fatal for a business.
Competition includes all the actual and potential rival offerings and substitutes a buyer might consider.
The marketing environment consists of the task environment and the broad environment.
The task environment includes the actors engaged in producing, distributing, and promoting the offering.
These are the company, suppliers, distributors, dealers, and target customers.
In the supplier group are material suppliers and service suppliers, such as marketing research agencies, advertising agencies, banking and
insurance companies, transportation companies, and telecommunications companies. Distributors and dealers include agents, brokers,
manufacturer representatives, and others who facilitate finding and selling to customers.
The broad environment consists of six components: demographic environment, economic environment, social-cultural
environment, natural environment, technological environment, and political-legal environment.
Marketers must pay close attention to the trends and developments in these and adjust their marketing strategies as needed.
New opportunities are constantly emerging that await the right marketing savvy and ingenuity.
THE NEW MARKETING REALITIES
The marketplace is dramatically different from even 10 years ago, with new marketing behaviors, opportunities, and challenges emerging.
With the rapid rise of e-commerce, the mobile Internet, and Web penetration in emerging markets, the Boston Consulting
Group believes brand marketers must enhance their “digital balance sheets.”
Massive amounts of information and data about almost everything are now available to consumers and marketers.
Even traditional marketing activities are profoundly affected by technology.
The world has become a smaller place. New transportation, shipping, and communication technologies have made it easier for
us to know the rest of the world, to travel, to buy and sell anywhere.
By 2025, annual consumption in emerging markets will total $30 trillion and contribute more than 70 percent of global GDP growth.
A staggering 56 percent of global financial services consumption is forecast to come from emerging markets by 2050, up from 18 percent in 2010.
Demographic trends favor developing markets such as India, Pakistan, and Egypt, with populations whose median age is below 25.
In terms of growth of the middle class, defined as earning more than $3,000 per year, the Philippines, China, and Peru are the three fastest-growing
Globalization has made countries increasingly multicultural.
Globalization changes innovation and product development as companies take ideas and lessons from one country and apply
them to another.
3. SOCIAL RESPONSIBILITY
Poverty, pollution, water shortages, climate change, wars, and wealth concentration demand our attention.
The private sector is taking some responsibility for improving living conditions, and firms all over the world have elevated the role of
corporate social responsibility.
The organization’s task is to determine the needs, wants, and interests of target markets and satisfy them more effectively and
efficiently than competitors, while preserving or enhancing consumers’ and society’s long-term well-being.
As goods become more commoditized and consumers grow more socially conscious, some companies incorporate social
responsibility as a way to differentiate themselves from competitors, build consumer preference, and achieve notable sales
and profit gains. A DRAMATICALLY CHANGED MARKETPLACE
These 3 forces (technology, globalization, and social responsibility) have strongly changed the marketplace, bringing consumers and
companies new capabilities.
The marketplace is also being transformed by changes in channel structure and heightened competition.
NEW CONSUMER CAPABILITIES
Social media is an explosive worldwide phenomenon. Empowerment is not just about technology, though.
Consumers are willing to move to another brand if they think they are not being treated right or do not like what they are seeing.
Expanded information, communication, and mobility enable customers to make better choices and share their preferences and opinions
with others around the world.
Consumers can use the internet as a powerful information and purchasing aid
Consumers can search, communicate, and purchase on the move
Consumers can tap into social media to share opinions and express loyalty
Consumers can actively interact with companies
Consumers can reject marketing they find inappropriate
NEW COMPANY CAPABILITIES
Companies can use the internet as a powerful information and sales channel, including for individually differentiated goods