Chapter 1: Introduction To Managing Marketing: Key Idea Key Idea

CHAPTER 1: INTRODUCTION TO MANAGING MARKETING
WHAT DOES MARKETING MEAN TODAY?

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KEY IDEA
Marketing is a guiding philosophy for the rm as a whole.
KEY IDEA
Marketing is a set of six imperatives the must dos of marketing. Four marketing principles guide execution of the six imperatives.
WHAT IS MARKETING?
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KEY IDEA
The rms major task is to attract, retain, and grow customers by developing and delivering valued offers. The rm enhances shareholder value by successfully attracting, retaining, and growing customers.
KEY IDEA
The rm has two basic functions marketing and innovation.
KEY IDEA
Marketing is critical for a rms success in todays increasingly complex and fastchanging environment.
MARKETING AND SHAREHOLDER VALUE

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KEY IDEA
The shareholder-value perspective is increasingly widespread around the world.
KEY IDEA
Customers are the sole source of rm revenues, and all rm activities are costs. Customers are the rms core assets, yet they do not appear on the balance sheet. Some balance-sheet assets act as strategic liabilities.
KEY IDEA
Customers are the critical source of cash inows.
KEY IDEA
There are two sides to value. When the rm delivers high customer value, it attracts, retains, and grows customers. When the rm attracts, retains, and grows customers, it earns high value for shareholders.
CHAPTER 1
INTRODUCTION TO MANAGING MARKETING
MARKETING AS A PHILOSOPHY: EXTERNAL AND INTERNAL ORIENTATIONS

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External and internal orientations are core concepts for examining the rms basic philosophy.
KEY IDEA
The rm should view marketing expenditures as an investment, not as an expense.
KEY IDEA
An externally oriented rm goes beyond a customer focus. It works hard to understand competitors, markets, and environmental forces in general.
KEY IDEA
Long-run success is difcult for internally oriented rms. Internal orientations often focus on operations, sales, nance, and/or technology.
THE SIX MARKETING IMPERATIVES

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KEY IDEA
Marketing should identify market opportunities and advise top management on potential strategic actions.
KEY IDEA
Marketing must identify market segments groups of customers with similar needs that value similar benets, with similar priority levels.
KEY IDEA
The rm should target those market segments that best use its strengths and exploit competitors weaknesses.
KEY IDEA
Decisions about the rms strategic direction set the stage for designing the marketing offer.
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KEY IDEA
The Marketing Mix comprises: Product Promotion Distribution (or Place) Service Price
KEY IDEA
Marketing must keep the rm focused on customers needs, regardless of current feasibility.
KEY IDEA
Marketing must exercise leadership to encourage cooperation across multiple functions.
KEY IDEA
Marketing must monitor and control the rms actions and performance to keep it on track.
THE FOUR PRINCIPLES OF MARKETING

KEY IDEA
Selectivity focuses on the choice of market or market segment target. Concentration refers to concentrating resources so as to deliver value to that target.
KEY IDEA
The rm earns marketplace success by providing value to customers. The rm develops, produces, and delivers products and services, but customers perceive value only in the benets these products and services provide.
KEY IDEA
To secure a differential advantage, customers must perceive greater value in the rms offer than in competitors offers.
KEY IDEA
The rm achieves integration by agreeing on priorities those involved in designing and implementing the offer must develop close and cooperative working relationships.
CHAPTER 2: THE VALUE OF CUSTOMERS: OPTIMIZING SHAREHOLDER VALUE

OPENING CASE: ROYAL BANK OF CANADA
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KEY IDEA
When the rm creates value for customers, it successfully attracts, retains, and grows those customers. By being attracted, retained, and grown, customers create value for the rm and its shareholders.
KEY IDEA
Customer lifetime value (LTV) is the link between delivering value to customers and creating value for shareholders.
CUSTOMER LIFETIME VALUE (LTV)

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Customer lifetime value depends on just three factors margin, retention rate, and discount rate.
KEY IDEA
The margin multiple is a handy way to calculate customer lifetime value. Increasing customer retention rate has greater leverage on customer lifetime value than reducing the discount rate.
INCREASING CUSTOMER LIFETIME VALUE

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KEY IDEA
The margin the rm earns from a customer tends to increase over time.
KEY IDEA
Small increases in customer retention can dramatically improve protability and customer lifetime value.
CHAPTER 2
T H E VA L U E O F C U S T O M E R S : O P T I M I Z I N G S H A R E H O L D E R VA L U E
ACQUIRING NEW CUSTOMERS

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KEY IDEA
The rm should try to acquire customers if the expected customer lifetime value is greater than the acquisition cost.
ENHANCING CUSTOMER LIFETIME VALUE

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There are three ways to improve customer LTV with current customers improve customer retention, grow customer margins, and delete customers.
KEY IDEA
There are three approaches to improving customer LTV with potential customers retrieve, acquire, and ignore customers.
BEING SELECTIVE ABOUT CUSTOMERS

KEY IDEA
The rm should develop systems for measuring customer protability.
KEY IDEA
At many rms, 20% of customers provide 80% of revenues and 120% of prots. At these same rms, 80% of customers provide 20% of revenues and are responsible for 20% of rm losses.
KEY IDEA
In general, customers are critical rm assets, but some customers may be liabilities and should be red. The rm may have to reject some potential customers on the basis of a detailed protability analysis.
KEY IDEA
Poor protability is not the only reason to reject or re customers.
CHAPTER 3: MARKET INSIGHT

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The rm must secure insight in three broad areas: the market, customers, and competitors, the company, and complementers the M4Cs.
OPENING CASE: NETFLIX

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Market insight comprises four separate aspects market structure, market and product evolution, industry forces, and environmental forces.
KEY IDEA
When rms secure good market insight, they do a better job of identifying opportunities and gaining competitive advantage.
MARKET STRUCTURE
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KEY IDEA
Markets consist of people and organizations that require goods and services to satisfy their needs and are able and willing to pay.
KEY IDEA
We can view any market as being made up of several different areas. The rm avoids marketing myopia by using a broad market denition.
KEY IDEA
A useful way of categorizing products in a market is product class, product form, product line, and product item.
CHAPTER 3
MARKET INSIGHT
MARKET AND PRODUCT EVOLUTION

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KEY IDEA
Critical variables affecting market size include population size, population mix, geographic population shifts, income and income distribution, and age distribution.
KEY IDEA
Markets and products generally evolve in a consistent manner over time. The life-cycle framework is useful for describing market and product evolution.
KEY IDEA
Product-form life-cycle stages have consistent characteristics across products and services.
INDUSTRY FORCES
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KEY IDEA
The rms current direct competitors can change via acquisition, merger, and LBOs.
KEY IDEA
The rm faces many forces current direct competitors, new direct entrants, indirect competitors, suppliers, and buyers that can frustrate its ability to make prots and seize new opportunities.
KEY IDEA
The rm may face new direct competitors from geographic expansion, start-up entry, new sales and distribution channels, strategic alliances, networks, and the rms own employees.
ENVIRONMENTAL FORCES
KEY IDEA
The rm faces a broad set of environmental forces political, economic, sociocultural, technological, legal/regulatory, and environmental (physical) PESTLE.
KEY IDEA
Technological innovation can be sustaining (improving performance of established products) or disruptive (offering new value propositions).
KEY IDEA
Environmental forces are constantly in ux; they also interact with each other.
KEY IDEA
The managerial process environment comprises the intellectual capital for leading and managing a business.
CHAPTER 4: CUSTOMER INSIGHT

OPENING CASE: IKEA
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KEY IDEA
Customer insight requires a deep and unique understanding of customers. Good customer insight requires answers to three questions: Who are the customers? What do they need and want? How do they buy?
IDENTIFYING CUSTOMERS
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KEY IDEA
To secure customer insight, the rm must correctly identify customers.
KEY IDEA
Macro-level customers are organizations; micro-level customers are individuals.
KEY IDEA
Purchase decisions involve many customer roles: decision-maker, inuencer, spoiler, champion, specier, gatekeeper, buyer, information provider, and user.
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KEY IDEA
The rm must pay attention to both its current and potential customers.
KEY IDEA
Indirect customers may be more important than direct customers they are often nal users and ultimately drive product demand.
CHAPTER 4
CUSTOMER INSIGHT
CUSTOMER NEEDS, BENEFITS, AND VALUES

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KEY IDEA
To attract, retain, and grow customers, the rm must: Develop offers of value to satisfy customers needs Communicate the value of those offers to customers.
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KEY IDEA
Customers have recognized needs and latent needs. Recognized needs may be expressed or non-expressed.
KEY IDEA
Maslows approach places a persons needs in an ordered hierarchy.
KEY IDEA
The feature/benet/ value ladder ensures that the rm focuses on providing value to customers, provides options for communication, and broadens the view of competition.
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EVC is the maximum price customers will pay. The rm delivers economic value by reducing customers costs and/or increasing their revenues.
KEY IDEA
The rm must deliver the right combination of functional, psychological, and economic benets and values to those customers it wants to attract, retain, and grow.
KEY IDEA
To gain greater customer insight, the rm must ask: What motivates people in customer roles to behave the way they do?
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Customers receive value from their experiences.
KEY IDEA
The rm must learn the customers decisionmaking process (DMP).
KEY IDEA
Membership in the customers consideration set is crucial for the rm.
KEY IDEA
The rm should try to understand customers evaluation processes. The linear-compensatory approach to evaluation and choice balances the rms performance on the relevant attributes.
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Customers often deviate from rationality in making purchase decisions.
KEY IDEA
There are three categories of purchase decision: routinizedresponse behavior, limited problem-solving, and extended problemsolving.
CUSTOMER INSIGHT
CHAPTER 4
INFLUENCES ON CONSUMER PURCHASE PROCESSES

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KEY IDEA
By identifying sources of inuence in the consumer decisionmaking process, rms formulate better market strategies.
KEY IDEA
A variety of environmental factors affect consumers purchasing decisions culture, social class, other people, family, and the situation.
KEY IDEA
Individual factors that affect purchase decisions include economic resources, time availability, cognitive resources, comfort with technology, life-cycle stage, and lifestyle. The VALS2 Lifestyle framework is a useful approach to understanding lifestyles.
INFLUENCES ON ORGANIZATIONAL PURCHASE PROCESSES

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Important considerations for the organizational purchase-decision process are increased corporate attention to procurement, changes in the procurement process, reducing the number of suppliers, and evolution in buyerseller relationships.
CHAPTER 5: INSIGHT ABOUT COMPETITORS, COMPANY, AND COMPLEMENTERS
Compe t itor s
IDENTIFYING COMPETITORS
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Competitive insight is securing a deep enough understanding of competitors to provide a unique perspective. Competitive insight is crucial for attracting, retaining, and growing customers. The rm must act on competitive insight in its own decision-making.
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The rms most serious competitive threats may be the least obvious.
KEY IDEA
Be aware of potential competition from within your own rm. Be prepared to offer multiple products as customer needs evolve.
DESCRIBING COMPETITORS
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When focusing on competitive data-gathering, the rm should be clear about the level and type of data it requires.
KEY IDEA
The rm can secure timely competitive information from many internal and external sources.
KEY IDEA
The rm should develop formal processes to secure timely and relevant competitive information.
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The rm should not use unethical or illegal processes to collect competitor data. Leaky organizations help the rm secure competitive data. Good counterintelligence procedures prevent proprietary data from leaking.
KEY IDEA
The rm should use a rigorous framework to organize its datagathering.
KEY IDEA
Organizations do not make decisions people in organizations make decisions.
I N S I G H T A B O U T C O M P E T I T O R S , C O M PA N Y, A N D C O M P L E M E N T E R S
CHAPTER 5
EVALUATING COMPETITORS
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PROJECTING THE ACTIONS OF COMPETITORS

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Competitive assessment analysis is a powerful tool for marketers. It maps customer requirements needs, benets, and values into corporate capabilities/resources.
KEY IDEA
Game theory is a structured way of identifying options and evaluating their consequences.
KEY IDEA
A good approach to projecting the competitors future actions is to develop a set of robust scenarios that examine the competitors strategic options.
KEY IDEA
The rm projects the competitors future actions by identifying the most likely scenario from the set of alternative scenarios.
MANAGING COMPETITORS
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The rm may be able to manage its competitors by sending signals. The major signals available to the rm are pre-emptive, warning, and tit-for-tat. The rm may also send competitors misleading information.
Comple me nte r s
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Independent organizations, including customers and suppliers, can be the rms complementers.
KEY IDEA
Competitors can complement the rm in the marketplace or in the back ofce. Competitors can also offer weak complementarity.
KEY IDEA
A rms complementary product activities may be unwelcome by its competitors.
CHAPTER 6: MARKETING RESEARCH

THE MARKETING RESEARCH PROCESS
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CRITICAL DISTINCTIONS IN MARKETING RESEARCH

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The marketing research process contains several well-dened steps that the manager and the researcher should follow.
KEY IDEA
Secondary marketing research uses data relevant to your research needs that have already been collected for some other purpose. Primary market research requires you to collect new data.
KEY IDEA
Qualitative marketing research is not concerned with numbers. Quantitative market research focuses on quantitative analysis.
SECURING QUALITATIVE RESEARCH DATA

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SECURING QUANTITATIVE RESEARCH DATA

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Focus groups, one-onones, and blogs and wikis are alternative means for collecting qualitative data directly from respondents. Projective techniques, observation, and ethnographic research are indirect qualitative data-gathering approaches.
KEY IDEA
When designing a process to collect survey data, the rm must make several important trade-offs, primarily between cost, time, and exibility.
MARKET AND SALES POTENTIALS, MARKET AND SALES FORECASTS

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Market potential is the maximum sales that the rm expects in the market in a given time period. Sales potential is the maximum sales the rm might achieve in a corresponding time period.
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There are several approaches to making market forecasts. One of the most popular uses multiple regression analysis.
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Many rms develop synthetic sales forecasts, using a combination of topdown and bottom-up approaches.
MARKETING RESEARCH
CHAPTER 6
APPENDIX 6.1: ANALYZING QUANTITATIVE RESEARCH DATA

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Cross tabs are a tried and true method for analyzing simple quantitative marketing research data.
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Conjoint analysis is a versatile marketing research technique that can provide signicant insight into many marketing questions.
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Multidimensional scaling is a valuable technique for developing market maps, aka perceptual maps.
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Factor analysis helps the researcher reduce an unwieldy number of variables into a manageable set. Cluster analysis helps the researcher to place many respondents into meaningful groups.
CHAPTER 7: DETERMINE AND RECOMMEND WHICH MARKETS TO ADDRESS

A STRATEGY FOR GROWTH
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A strategy for growth has four components: vision, mission, growth path, and timing of entry.
KEY IDEA
Vision is the description of an ideal future state for a rm or business unit. Vision sets a broad direction for the rm. When developed with employee participation, it can inspire the entire organization for the long run.
KEY IDEA
The rms mission should guide its search for opportunity. The ve approaches to developing mission are: core ingredient or natural resource, technology, product or service, market or market segment, or customer needs. The rms mission can use a single approach or combine approaches. The rm should proactively revise its mission.
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The four fundamental paths to growth are market penetration, product growth, market growth, and product and market diversication. These four paths give rise to nine individual growth paths.
KEY IDEA
The four timing-of-entry options pioneer, follow-the-leader, segmenter, and me-too correspond, respectively, to entry in the introduction, early growth, late growth, and maturity stages of the product life cycle. The rm must match its capabilities to its timing-of-entry strategy. These capabilities must evolve as its markets evolve.
DETERMINE AND RECOMMEND WHICH MARKETS TO ADDRESS
CHAPTER 7
THE VENTURE PORTFOLIO

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A venture portfolio is the set of growth opportunities the rm addresses. The strategy for growth helps the rm develop its venture portfolio. The dening characteristics of the venture portfolio are expected nancial return, timing of contribution to prots, and risk.
SCREENING CRITERIA: EVALUATING OPPORTUNITIES

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The rm should examine each opportunity using four screening criteria: objectives, compatibility (or t), core competence, and synergy.
KEY IDEA
In setting objectives, the rm should strike a balance between revenue and prot growth, risk, stability, and exibility.
KEY IDEA
The three important dimensions of compatibility (or t) are: product-market t, product-company t, and company-market t.
KEY IDEA
The rm should consider four perspectives when evaluating opportunities: objectives, compatibility, core competence, and synergy.
IMPLEMENTING GROWTH STRATEGIES

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Options for implementing a growth strategy include internal development, insourcing, outsourcing, acquisition, strategic alliance, licensing and technology purchase, and equity investment.
CHAPTER 8: MARKET SEGMENTATION AND TARGETING

THE MARKET SEGMENTATION PROCESS
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Market segmentation is a conceptual and analytic process it is critical for developing and implementing an effective market strategy.
KEY IDEA
Four categories of candidate descriptor variables or segmentation variables can dene market segments: geographic, demographic, behavioral, and socio-psychological.
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In any market, customers have different need proles. The market segmentation process identies groups of customers. When segmentation is done well, customers within a segment have similar need proles. Customers in different segments have different need proles.
MARKET SEGMENTS
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KEY IDEA
The best approach for forming market segments is to group customers based on their need proles. The rm should then use descriptor or segmentation variables to identify the different segments.
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The market segmentation process can combine creativity and sophisticated data analysis.
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B2B rms often treat major customers as individual market segments. In B2C markets, many rms are practicing mass customization.
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The rm must continually evolve its segmentation, as customers need proles evolve.
M A R K E T S E G M E N TAT I O N A N D TA R G E T I N G
CHAPTER 8
TARGETING MARKET SEGMENTS

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KEY IDEA
For each segment it targets, the rm should develop a unique offer precisely tailored to the need prole of customers in that segment.
KEY IDEA
In deciding which segments to target, the rm should ask two questions: How attractive is this segment? Does the rm have the business strengths to win in this segment?
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A rm can improve its market segment position by investing in those business strengths that determine success. A rm may identify more attractive market segments by rening its segmentation approach.
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Perceptual maps show how various products serve customers or segment needs. They show market segment sizes and customer ideal points in each segment. These data help the rm make targeting decisions.
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Large rms and small rms each have advantages in targeting market segments. Mis-steps can cause each to lose a strong position.
CHAPTER 9: MARKET STRATEGY THE INTEGRATOR

OPENING CASE: MAYO CLINIC
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KEY IDEA
The goal of market and market-segment strategies is very simple to attract, retain, and grow customers in the face of competitors trying to do the same thing. The market strategy is the rms game plan for addressing the market. It states what the rm is trying to achieve, what it will do and will not do. Notably, it identies those segments the rm targets for effort.
THE PURPOSE OF MARKET AND MARKET-SEGMENT STRATEGIES

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The market strategy requires decisions about results, resources, and actions. Well-developed market and market-segment strategies fulll four purposes for the rm provide strategic direction in the market, state how to secure differential advantage, guide the effective allocation of scarce resources, and achieve cross-functional coordination.
KEY IDEA
Effective market and market-segment strategies show how the rm will secure a differential advantage.
KEY IDEA
An effective market strategy helps the rm allocate its resources. Externally, the rm allocates resources to target market segments, and selects specic resources to secure differential advantage. Internally, the rm allocates resources across internal activities.
M A R K E T S T R AT E G Y T H E I N T E G R AT O R
CHAPTER 9
ELEMENTS OF THE MARKET-SEGMENT STRATEGY

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Inter-functional conict is endemic. Formulating the market strategy should resolve this conict and achieve cross-functional coordination.
PERFORMANCE OBJECTIVES
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The rm must make trade-offs among the three categories of strategic objectives: growth and market share, protability, and cash ow.
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Priorities for strategic objectives evolve during product life-cycle stages.
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Operational objectives provide the numbers to attach to the strategic objectives; they specify how much is needed and by when.
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Managers should explicitly discuss the trade-offs and expectations among strategic objectives before setting operational objectives.
POSITIONING
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The rm competes for customer targets decision-makers or inuencers.
KEY IDEA
The rms competitive target can be current or potential, direct or indirect, or in the supply chain. Sometimes the targeted competitor is not immediately obvious.
KEY IDEA
The value proposition is the rms major competitive weapon for gaining its target customers; it also denes the rms implementation focus. The rm must develop a value proposition for each target customer type.
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Positioning is not what you do to a product: Positioning is what you do to the mind of the prospect.
CHAPTER 9
M A R K E T S T R AT E G Y T H E I N T E G R AT O R
IMPLEMENTATION PROGRAMS
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The marketing mix and other functional programs implement the market strategy.
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Marketing mix programs should support the value proposition, and all elements should support one another.
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The rms functional areas must support the market strategy.
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Together, individual market segment strategies must form a coherent market strategy. The segment strategies must be distinct, yet the rm should seek out positive synergies in implementation programs.
CHAPTER 10: MANAGING THROUGH THE LIFE CYCLE

OPENING CASE: RYANAIR
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DEVELOPING COMPETITIVE STRATEGIC OPTIONS

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Firms failing to act pre-emptively may face signicant opportunity costs.
KEY IDEA
Scenarios help the rm generate competitive strategic options. The main building block for these scenarios is product life-cycle stage. Successful strategies should have a strong creative element. Life cycles are shortening for many products.
BUILDING PRODUCT LIFE-CYCLE SCENARIOS

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Pioneers must be prepared to tap multiple sources to fund losses early in the life cycle.
KEY IDEA
The most common government-imposed barriers are patents. Firms sometimes lobby governments to impose regulations on their competitors.
KEY IDEA
When the rm executes a low-price penetration strategy, it must accept low prot margins for a substantial time period. Continual cost reductions are essential to sustain low prices.
KEY IDEA
A pioneer can sustain rst-mover advantages by producing highquality products. The rm earns a leading reputation and sets the stage for creating a strong brand.
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By the early-growth stage, customers accept the product, and the market leader should be protable.
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Generally, followers in growth markets are unprotable and have negative cash ows. The followers goal is to learn from others and minimize cost and risk.
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Imitation means copying the leader but being more effective in execution. Leapfrogging goes one better than the leader by developing innovative and superior products and/or targeting emerging market segments.
CHAPTER 10
MANAGING THROUGH THE LIFE CYCLE
BUILDING PRODUCT LIFE-CYCLE SCENARIOS
CONTINUED
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KEY IDEA
By late growth, basic customer benets and values are still important but may not enter into customers choice decisions. Customers are more likely to base their purchase decisions on additional benets and values.
KEY IDEA
In late growth, the rm must decide whether to target many segments or just a few.
KEY IDEA
Creative Ways to Drive Growth in the Maturity Stage Increase customers use of the product Improve the product or service Improve physical distribution Reduce price Reposition the brand Enter new markets
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Markets that seem mature may have growth potential waiting to be unlocked via creative approaches.
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Market leaders in mature, concentrated markets should have low costs, decent prots, and positive cash ows.
KEY IDEA
Market leaders in concentrated markets have two major alternatives long-run leadership or harvesting.
KEY IDEA
Followers in mature concentrated markets typically have higher costs and lower prots and are nancially weaker than market leaders. But they may rejuvenate to become a major threat.
KEY IDEA
In mature fragmented markets, no rm has a large market share.
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Firms can make considerable prots in declining markets.
KEY IDEA
In a declining market, the rms options depend on market hospitality and its business strengths.
CHAPTER 11: MANAGING BRANDS

WHAT IS A BRAND?
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BRAND EQUITY AND THE VALUE OF BRANDS

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The brand is a symbol around which the rm and its customers can construct a relationship.
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Brand equity reects the trust established between the brand owner and its customers.
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Brand equity generally builds up slowly over time. A brand can quickly lose value if not managed properly.
MONETIZING BRAND EQUITY

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BUILDING AND SUSTAINING A STRONG BRAND

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Replacement cost and cash ow methods are two internal approaches for calculating rm brand equity.
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The rm earns a contribution to rm brand equity only when a customer purchases the brand.
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Carefully chosen brand identity and consistent execution are critical to developing brand loyalty.
KEY IDEA
Firm brand equity represents the brands balance sheet Brand health checks compare a brands strengths against historic trends and benchmark competing brands.
MANAGING BRAND ARCHITECTURE

KEY IDEA
The rm should carefully manage the evolution of its brand portfolio. Firms adjust their brand portfolios in response to shifting consumer trends, competitive responses, and mergers and acquisitions.
KEY IDEA
There are pros and cons for both multibranding and umbrella branding.
KEY IDEA
Increasingly, global rms make branding decisions at headquarters, rather than in individual countries. Think global, act local! guides many rms. Multinational rms should consider a brand portfolio that includes global, regional, and national brands. Overtime, the geographic scope of some brands may narrow, and other brands may broaden.
KEY IDEA
Firms that leverage brands secure automatic brand awareness for the new product. They avoid new brand introduction costs and may increase prots for little additional investment. For an extension to be viable, the brand must have strong positive associations. The difference between these brand associations and the product extension should not be incongruous.
CHAPTER 11
MANAGING BRANDS
MANAGING BRAND ARCHITECTURE

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CONTINUED
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The rm can conserve brand equity by effective brand migration.
KEY IDEA
The rm can enhance brand equity by effective strategic alliances.
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Three ways to reposition a brand are: address new market segments, change brand associations, and alter the brands competitive target. Continuous innovation pre-empts the need to revitalize a brand.
CHAPTER 12: MANAGING THE PRODUCT LINE

THE PRODUCT PORTFOLIO CONCEPT
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KEY IDEA
The rms products have important resource-related interrelationships. The rm does not optimize its overall prots by maximizing prots from individual products. It must consider the entire product line. Firms with imbalanced portfolios are vulnerable to acquisition.
KEY IDEA
Financial analysis methods rely on forecasts these can be highly uncertain. Financial analysis does not consider strategic issues. Too much reliance on nancial analysis can lead to misallocation of resources across products. Financial analysis methods ignore marketing considerations.
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Portfolio analysis is a systematic, organized, and easily communicated way of assembling, assessing, and integrating important information about product opportunities.
KEY IDEA
Portfolio analysis addresses many problems with nancial analysis.
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Portfolio analysis is best viewed as an additional tool for setting investment priorities not as an alternative to nancial analysis.
KEY IDEA
Long-run market growth and RMS dene the growth-share matrix. The growth-share matrix can be overused and misinterpreted.
KEY IDEA
The rm can use the multifactor matrix (Chapter 8) for resource allocations among products. The growth-share and multifactor matrices have advantages and disadvantages that impact the viability of strategic recommendations that they generate.
CHAPTER 12
MANAGING THE PRODUCT LINE
OTHER IMPORTANT PRODUCT INTERRELATIONSHIPS

page 331 __________________________________________________________
KEY IDEA
Sometimes one product helps another (positive complementarity); sometimes it hurts another (negative complementarity).
KEY IDEA
When making product decisions, the rm should carefully consider current and potential interactions with the rms other products.
PRODUCT LINE BREADTH: PROLIFERATION VERSUS SIMPLIFICATION

page 332_____________________ page 333_____________________ page 334_____________________
KEY IDEA
Firms face conicting pressures for broad versus narrow product lines. ROS and ROI measure very different things.
KEY IDEA
Firms often differentiate individual products by time availability, product performance, and package quantities. Implementing a rewall strategy can lead to product proliferation.
KEY IDEA
Product proliferation refers to product variety. Market segmentation explores differences in customer needs. The rm can develop multiple offers based on a single product, targeted to several segments.
page 336 __________________________________________________________
KEY IDEA
A simplied product line can make the rm more competitive. But the rm should use appropriate criteria for its deletion decisions.
KEY IDEA
Sometimes the rm can successfully resurrect deleted products.
OTHER PRODUCT LINE ISSUES

page 336_____________________
KEY IDEA
Beware deleting products without considering all relevant issues.
CHAPTER 13: DEVELOPING NEW PRODUCTS

OPENING CASE: THOMSON FINANCIAL BOARDLINK
page 347_____________________
KEY IDEA
Successful new products enhance shareholder value.
WHERE AND HOW INNOVATION OCCURS

page 348 __________________________________________________________ page 349_____________________ page 351_____________________
KEY IDEA
Innovation embraces new products, but also processes and technologies. Sustaining innovations improve products and processes on existing performance dimensions. Disruptive innovations offer different value propositions. Leading rms often invest in sustaining versus disruptive innovations.
KEY IDEA
The rm should serve current, especially loyal, customers it must also create new customers.
KEY IDEA
The customerinnovation relationship involves a two-way communication ow.
KEY IDEA
Firms can be Isolates, Followers, Shapers, or Interactors, based on their innovation focus and customer focus.
NEW PRODUCT DEVELOPMENT

page 352_____________________
KEY IDEA
Product development trade-offs include time, risk, and nancial return. Four development approaches are basic technology research, applied technology research, market-focused development, and market tinkering.
CHAPTER 13
DEVELOPING NEW PRODUCTS
THE STAGE-GATE PROCESS FOR NEW PRODUCT DEVELOPMENT

KEY IDEA
The rm should develop clear criteria for a project to pass through each gate.
KEY IDEA
The stage-gate process is a systematic method for new product development. The stages are idea generation, preliminary screening, concept development, business-case analysis, development, product testing, market-factor testing, test marketing, and commercialization. The rm must manage Type I and Type II errors. The cost of failure increases at each stage.
KEY IDEA
The rm should tap multiple sources for new ideas. The best way to get a good idea is to get a lot of ideas.42
KEY IDEA
Preliminary screening aims to form a balanced portfolio of new product ideas. Different types of new product idea require different screening criteria.
page 361_____________________
page 362_____________________
page 365_____________________
page 366_____________________
KEY IDEA
The product concept should appeal to customers and guide development.
KEY IDEA
Business-case analysis assesses the nancial viability of a product concept. Forecasting sales revenues is the most difcult step in business-case analysis.
KEY IDEA
Many rms make very large investments in product development. Multi-functional teams and customer involvement aid the development process. Design is an increasingly important part of the development process.
KEY IDEA
The House of Quality maps customer needs into product design.
DEVELOPING NEW PRODUCTS
CHAPTER 13
page 367 __________________________________________________________
page 368_____________________
page 369_____________________
KEY IDEA
The rm should conduct in-company alpha tests throughout development. It should conduct customer beta tests in the latter phases. Failure to test products sufciently can have serious marketing and nancial consequences.
KEY IDEA
Market-factor testing includes simulated environments and virtual testing. Product testing is insufcient the rm should test the entire marketing offer.
KEY IDEA
In deciding on test marketing, the rm should be aware of several pros and cons.
KEY IDEA
Commercialization is often where rms make their biggest bets.
PRODUCT ADOPTION
page 371_____________________
KEY IDEA
There are several types of new product adopters. The interplay of several factors determines the speed of new product adoption.
CHAPTER 14: INTEGRATED MARKETING COMMUNICATIONS

COMMUNICATIONS: PROCESS AND TOOLS
page 380 ________________________________________________________________________________________________
KEY IDEA
In the communications process, senders send information, and receivers receive information. Miscommunication arises from problems in encoding, distortion, and decoding.
page 381_____________________
KEY IDEA
Personal communication is face-to-face with individuals or groups.
KEY IDEA
Non-personal communication occurs without interpersonal contact between sender and receiver.
page 382_____________________
KEY IDEA
Quasi-personal communications embrace interaction and feedback without human involvement.
KEY IDEA
Word-of-mouth communication occurs among customers and potential customers.
DEVELOPING THE COMMUNICATIONS STRATEGY

KEY IDEA
The rm has two major types of communications targets: those directly related to the rms products and others not directly related.
KEY IDEA
Most rms use either push or pull strategies large rms often use combination push/pull strategies.
KEY IDEA
Firms have many communications targets other than customers.
KEY IDEA
Communications objectives and timelines drive the choice of communication tools.
INTEGRATING COMMUNICATIONS EFFORTS

page 389_____________________
KEY IDEA
Integration ensures maximum communications impact to achieve rm goals.
CHAPTER 15: NON-PERSONAL COMMUNICATION

ADVERTISING
KEY IDEA
Advertising is critical for both market and communications strategies.
KEY IDEA
Hierarchy-of-effects models for high involvement and low involvement products are central to understanding how advertising works.
KEY IDEA
There are two types of advertising objectives output and intermediate. Output objectives are what the rm ultimately wants to achieve. Intermediate objectives relate to hierarchy-ofeffects models and include awareness, knowledge, liking or preference, and trial.
page 408_____________________
KEY IDEA
Creating advertising is an enigma, more art than science, mysterious and unexplainable.
page 402_____________________
page 407_____________________
page 410_____________________
KEY IDEA
Rational-style advertising includes demonstration, comparative, one- and two-sided appeals, refutational, and primacy or recency. Emotional-style advertising includes humor, fear, celebrity endorsement, and storytelling.
KEY IDEA
In setting media objectives, the rm must consider reach, frequency, and gross rating points. The advertising message must appear in the right place at the right time. Major timing options are continuous, ighting, and pulsing.
KEY IDEA
The objective and task method, based on marginal analysis, should underpin the budgeting process. Rule-of-thumb methods can lead to unsatisfactory results.
KEY IDEA
Evaluating advertising effectiveness is a complex task. The rm must choose among various types of tests and measures.
DIRECT MARKETING
page 412_____________________
PUBLICITY AND PUBLIC RELATIONS

page 414_____________________
SALES PROMOTION
page 415 ____________________
THE INTERNET
page 417_____________________
KEY IDEA
Direct marketing offers advantages over mass advertising: exibility, action-oriented customer response, better measurement, predictability, better customer knowledge, ability to tailor the offer, and ability to identify prospects.
KEY IDEA
Sales promotion is a potpourri of techniques, mostly for short-term objectives. Poorly designed sales promotion programs hurt prots and brand image.
KEY IDEA
Only quasi-personal communication taps the webs true potential.
KEY IDEA
Publicity and Public Relations relies on an intermediary, typically the press, to transmit a message to a target audience.
CHAPTER 16: DIRECTING AND MANAGING THE FIELD SALES EFFORT

MARKETINGS ROLE IN THE FIELD SALES EFFORT
page 427_____________________ page 428_____________________ page 429 __________________________________________________________
KEY IDEA
Effectively managing the sales/marketing interface is critical for achieving sales excellence.
KEY IDEA
Firms often group customers into separate tiers like Tier I (platinum), Tier II (gold), and Tier III (bronze) and address each differently.
KEY IDEA
Some customers purchase small volumes but disproportionately consume the rms resources.
KEY IDEA
Tier I customers provide the highest levels of sales and prots. Strategic account managers are responsible for individual accounts. Global account managers are responsible for multinational customers that want to make global purchases.
THE TASKS OF SALES FORCE MANAGEMENT

page 430 __________________________________________________________ page 431 __________________________________________________________
KEY IDEA
Sales objectives are the rms desired results. Achieving sales objectives is the sales forces central task. Sales objectives turned into specic performance requirements are called quotas.
KEY IDEA
Gross sales revenues are the traditional basis for sales objectives. Sometimes rms base objectives on prot or prot contribution.
KEY IDEA
Sales objectives integrate the rms market strategy and sales strategy.
KEY IDEA
The rm should break down sales objectives by control unit sales regions, sales districts, and individual sales territories. It should also calendarize sales objectives quarterly, monthly, and possibly weekly.
page 432_____________________
page 435 __________________________________________________________
KEY IDEA
The rm can set sales objectives related to customer retention, market share, price realization, close rates, and customer satisfaction.
KEY IDEA
Salespeople conduct several activities. In many rms, they spend less than 20 percent of time face-to-face with customers trying to make sales.
KEY IDEA
Guidelines should specify how salespeople must allocate their time.
DIRECTING AND MANAGING THE FIELD SALES EFFORT
CHAPTER 16
page 437 ________________________________________________________________________________________________
KEY IDEA
Selling effort guidelines must mirror the structure of sales objectives. Typically, selling effort is not proportional to sales objectives. The rm must break down selling effort allocations by individual control units like sales regions, sales districts, and sales territories. The rm should allocate selling effort by account category.
KEY IDEA
The value proposition anchors the sales approach the central message the salesperson delivers to customers.
KEY IDEA
The rm should tailor the sales message to different customer targets and design a process to explain the rms benets.
page 439 __________________________________________________________
page 440_____________________
page 442_____________________
KEY IDEA
Selling is a system to facilitate customer buying. Coaching, counseling, and training can improve the selling process.
KEY IDEA
The employee-based or outsourced sales force decision involves control, cost, and exibility trade-offs.
KEY IDEA
Key sales organization design variables are degree of centralization or decentralization, number of management levels, and span of control. Specialization may lead to higher sales but also higher costs. It may also cause problems when several rm salespeople sell to the same customer.
KEY IDEA
The rm should implement sales force reorganizations very carefully.
CHAPTER 16
DIRECTING AND MANAGING THE FIELD SALES EFFORT
THE TASKS OF SALES FORCE MANAGEMENT
CONTINUED
page 443 __________________________________________________________
page 444_____________________
KEY IDEA
Sales territories should have roughly equal sales potential and workloads.
KEY IDEA
The rm should actively engage salespeople in the sales planning process.
KEY IDEA
A pipeline system continually tracks success at different stages in the selling process. Rigorous pipeline analysis leads to better forecasts.
page 446_____________________
page 447_____________________
KEY IDEA
The rms reward system should motivate salesperson behavior. Primary components are nancial incentives, recognition, and promotions. The primary ways to pay salespeople are salary, commission, and bonus.
KEY IDEA
The rm should develop rigorous systems for recruiting, selecting, training, retaining, and replacing salespeople.
APPENDIX 16.1: ILLUSTRATION OF SETTING OBJECTIVE BY PRODUCT AND CUSTOMER

page 452
KEY IDEA
To simplify translating product and segment objectives into sales objectives, the rm can focus on existing versus new products and existing versus new customers.
CHAPTER 17: DISTRIBUTION DECISIONS

DISTRIBUTION SYSTEMS AND THEIR EVOLUTION
page 458_____________________
KEY IDEA
A distribution channel comprises many enterprises, their interrelationships, and the functions they perform. A distribution systems effectiveness changes over time. Distribution arrangements are more difcult to change than other marketing implementation elements.
DEVELOPING A DISTRIBUTION STRATEGY

page 458_____________________ page 460 __________________________________________________________ page 461_____________________
KEY IDEA
Distribution closes gaps in physical location and time between nished products at the factory and consumers and end-user customers.
KEY IDEA
Direct distribution methods, combined with database marketing, are powerful alternatives to indirect distribution.
KEY IDEA
Advantages for wholly owned retail distribution are greater operational control and earning the entire retail margin; disadvantages are capital required for growth, and operating risk.
KEY IDEA
Direct channels: Supplier rms manage the contact with consumers and end users. Indirect channels: intermediaries like distributors, wholesalers, and retailers play a major role in transferring products from suppliers to consumers and end users. Intermediaries offer value-added benets that suppliers cannot. They provide product assortments, shopping experience, market access, and often reduce the costs of conducting various distribution functions.
CHAPTER 17
DISTRIBUTION DECISIONS
DEVELOPING A DISTRIBUTION STRATEGY

page 462_____________________
CONTINUED
page 463_____________________
page 464_____________________
KEY IDEA
For B2B suppliers, conditions typically favor either direct or indirect distribution. In each case, there are several options.
KEY IDEA
Suppliers should select distribution channel(s) that are appropriate for their target segment(s) and perform the required functions. Providing customer benets and values, rather than traditional industry practice, should guide the suppliers distribution choices.
KEY IDEA
Critical distribution strategy decisions include identifying the functions to be performed, deciding on direct versus indirect channels and distribution channel breadth, and setting criteria for intermediaries.
MANAGING DISTRIBUTION CHANNELS

page 466_____________________ page 468_____________________ page 469_____________________
KEY IDEA
A well-designed compensation system can help the supplier direct its distributors efforts.
KEY IDEA
Intermediaries add value by reducing the number of relationships a supplier and end-user customer must have. Intermediaries occupy the nexus between suppliers and end-user customers.
KEY IDEA
Distribution channel members have high conict potential.
page 471_____________________
page 472_____________________
LEGAL ISSUES IN DISTRIBUTION

page 473_____________________
KEY IDEA
When suppliers attempt to improve their power positions, they should try to anticipate the actions of other distribution channel members.
KEY IDEA
The partnership model is an increasingly popular alternative to the power/strategic conict approach. Channel members jointly set goals and work together for greater efciency and effectiveness.
KEY IDEA
Distribution laws vary by industry and geography. What is illegal in the U.S. may be normal business practice in other countries. In the U.S., many antitrust lawsuits involve distribution issues.
CHAPTER 18: MANAGING SERVICES, CUSTOMER SERVICE, AND CUSTOMER RELATIONSHIP MANAGEMENT
PRODUCTS, SERVICES, AND CUSTOMER SERVICE
page 480_____________________ page 481_____________________
KEY IDEA
Customers buy offers or promises of benets and values; the key element may be a product or a service.
KEY IDEA
A service is: any act or performance that one party can offer another that is essentially intangible and does not result in the ownership of anything. Customer service enhances value inherent in the core product or service.
CHARACTERISTICS OF SERVICES
page 482_____________________ page 483 __________________________________________________________
KEY IDEA
Services are over 70 percent of employment and GDP in developed countries. Factors driving services growth are rising incomes, age-related demographic shifts, outsourcing, leveraging core competence, franchising, customer behavior changes, deregulation, technology, and globalization.
KEY IDEA
Moments of truth are opportunities for customer satisfaction or dissatisfaction.
KEY IDEA
Customers often focus on tangible aspects of intangible services service facilities, service equipment, service personnel, and service guarantees. Service guarantees should be unconditional, painless to invoke, and easy and quick to collect. They should also be simple to understand and communicate and meaningfully related to the service being guaranteed.
CHAPTER 18
M A N A G I N G S E R V I C E S , C U S T O M E R S E R V I C E , A N D C U S T O M E R R E L AT I O N S H I P M A N A G E M E N T
CHARACTERISTICS OF SERVICES
CONTINUED
page 484 __________________________________________________________
page 485 __________________________________________________________
KEY IDEA
For services, production and consumption are inseparable. Since the rm cannot inventory services, it must either increase or decrease supply and/or demand.
KEY IDEA
Reducing variability is more difcult for services than for products.
KEY IDEA
Service variability can be positive when human service providers tailor their behavior for individual customers. The rm can reduce human variability through automation.
KEY IDEA
Because they cannot be inventoried, services are perishable.
page 486 ________________________________________________________________________________________________
KEY IDEA
Services are divisible the service blueprint is the sequence of activities that make up the service.
KEY IDEA
People do not acquire services in a physical sense.
KEY IDEA
Fellow customers can inuence the service experience the customer is NOT always right.
SERVICE QUALITY
page 487_____________________ page 488_____________________ page 490 __________________________________________________________
KEY IDEA
Expectations disconrmation is perceived quality less expected quality. SERVQUAL identies ve gaps for diagnosing service quality.
KEY IDEA
Variables inuencing perceived service quality include responsiveness, reliability, assurance, empathy, and tangibles. SERVQUALs related subscale scores provide actionable items for improving service performance.
KEY IDEA
High satisfaction no longer guarantees high customer retention. Firms must delight their customers.
KEY IDEA
All rms experience service failures; how they address them is key.
page 491_____________________
page 492_____________________
KEY IDEA
A drive for service efciency can lead to inexible systems they cannot deal with idiosyncratic customer behavior.
KEY IDEA
Few aggrieved customers complain they just defect. Firms should make complaining easier, then follow up swiftly and aggressively.
M A N A G I N G S E R V I C E S , C U S T O M E R S E R V I C E , A N D C U S T O M E R R E L AT I O N S H I P M A N A G E M E N T
CHAPTER 18
CUSTOMER SERVICE
page 493 __________________________________________________________ page 494_____________________
KEY IDEA
Customer service can be more central than the core product or service.
KEY IDEA
Customer service has eight ower-of-service dimensions.
KEY IDEA
Customer service is different before, during, and after the purchase.
page 495 __________________________________________________________
page 497_____________________
KEY IDEA
Customers requiring similar products and services may have differing needs for customer service, and vice versa.
KEY IDEA
Human capital planning requires special attention to recruitment, selection, training and development, appraisal, recognition, reward, and retention of customer service employees.
KEY IDEA
Customer service infrastructure combines the technological and human resources necessary to deliver high-level customer service.
CUSTOMER RELATIONSHIP MANAGEMENT

KEY IDEA
Customer defection rate is a more valuable performance measure than customer satisfaction. The rm should identify and measure critical elements driving customer satisfaction.
KEY IDEA
CRM is a synthesis of marketing, quality management, and customer service to form mutually benecial relationships with customers. Technology has an important role in CRM, but CRM is not about technology.
KEY IDEA
Superior customer databases are relevant, structured, current, consistent, accurate, accessible, complete, and secure. The customer database should distinguish among customers on loyalty and value to the rm. Customer databases are more valuable when they also contain data about relationships with competitors.
KEY IDEA
The rm should examine its privacy policy for the impact on customer relationships. Customer loyalty programs have many design parameters.
CHAPTER 19: MANAGING PRICE AND VALUE

OPENING CASE: SOUTHWEST AIRLINES
page 509_____________________
KEY IDEA
Price has a larger impact on prots than any other lever. Price changes affect margins, unit volumes, costs, and customer perceptions.
Par t 1: D e veloping Pr ic ing State g y

page 510_____________________
KEY IDEA
In setting prices, the rm should consider perceived customer value, costs, competition, and strategic objectives. Excessive focus on a single element leads to suboptimal pricing decisions.
PERCEIVED CUSTOMER VALUE

page 511 __________________________________________________________ page 515 __________________________________________________________
KEY IDEA
What seems to be a pricing problem may be a perceived value problem.
KEY IDEA
The rm creates value for customers primarily via non-price elements in its offer the marketing mix. Many factors affect the value that customers perceive in the rms offer.
KEY IDEA
Price apportions value some to the rm, some to customers.
KEY IDEA
Pricing at what the market will bear is not useful advice; the market will bear many prices.
page 516_____________________
KEY IDEA
PED helps estimate market demand when price changes.
M A N A G I N G P R I C E A N D VA L U E
CHAPTER 19
COSTS
page 517_____________________ page 518 __________________________________________________________
KEY IDEA
Critical topics in perceived customer value are creating, measuring, and capturing value. Customers price sensitivity is closely related to value.
KEY IDEA
In cost-plus pricing, the rm identies its costs and adds a prot margin. Cost-plus pricing does not consider customer value.
KEY IDEA
Disadvantages of costplus pricing are prot limitations, arbitrary cost measurement, and mismatch with market realities. Firms often determine xed costs per unit arbitrarily by assuming some level of sales or production.
page 519_____________________
page 520_____________________
KEY IDEA
Costs have an important price-setting role for birth control, death control, and prot planning.
KEY IDEA
Customers do not care about the rms costs; they care only about the value they receive. The real purpose of price is not to recover costs but to capture value in the customers mind.
COMPETITION
KEY IDEA
The rm should seek offer superiority, not price superiority.
KEY IDEA
In high xed cost/ low variable cost oligopolies, rms often cut prices to gain extra volume. Prices can spiral downward and prots vanish.
KEY IDEA
Rampant price-cutting is disastrous for all but the low-cost producer.
KEY IDEA
The rm has various price and non-price actions for responding to price competition.
CHAPTER 19
M A N A G I N G P R I C E A N D VA L U E
STRATEGIC OBJECTIVES
page 524 __________________________________________________________
KEY IDEA
The rm should link pricing strategy to its strategic objectives.
KEY IDEA
The rms major options for strategic objectives are: maximize growth in volume and/or market share, maximize prots, or maximize cash ow.
Par t 2: Se tt ing Pr ices

USING PERCEIVED CUSTOMER VALUE, COSTS, COMPETITION, AND STRATEGIC OBJECTIVES
page 530_____________________ page 531_____________________
KEY IDEA
CMU and CMR are critical concepts in price-setting. They allow the rm to calculate breakeven sales volumes for various pricing options.
KEY IDEA
Many rms make a xed offer, then vary the price when under pressure. Firms with a price menu have variable offers with xed prices.
TACTICAL PRICING
page 532_____________________ page 533_____________________
PRICING MANAGEMENT
page 538_____________________
KEY IDEA
Single product prices are rare in the real world. Pricing actions vary between highly visible and opaque.
KEY IDEA
The rm needs good systems to track elements in the pricing toolkit. The pricing toolkit produces the pocket price via the price waterfall. Pricing toolkit elements are differentially important to customers.
KEY IDEA
The rm should develop pricing policies at high levels in the rm. Price-setting can be a strategic capability.
LEGAL AND ETHICAL ISSUES IN PRICING

page 539_____________________
KEY IDEA
Many governments scrutinize prices for illegal activity.
CHAPTER 20: ENSURING THE FIRM IMPLEMENTS THE MARKETING OFFER AS PLANNED
A MODEL FOR DEVELOPING AN EXTERNAL ORIENTATION: THE VALUES STATEMENT
page 552_____________________
KEY IDEA
Organizational values are a common set of beliefs that guide the behavior of the rms members. They are often integral to a rms success. Values statements are worthwhile only if the entire rm embraces them.
TRANSFORMING THE ORGANIZATION TO BECOME EXTERNALLY ORIENTED

page 554_____________________ page 555_____________________
KEY IDEA
For organizational transformation, the rm must address organizational structure, systems and processes, and human resource management.
KEY IDEA
Functional organizations works best when markets and products are homogeneous.
page 561 ________________________________________________________________________________________________
KEY IDEA
The rms organizational structure should support an integrated marketing approach.
KEY IDEA
Systems and processes help produce organizational outputs and provide consistency to customers.
KEY IDEA
Good hard systems improve operational efciency. They also improve marketing effectiveness and help secure differential advantage.
CHAPTER 20
ENSURING THE FIRM IMPLEMENTS THE MARKETING OFFER AS PLANNED
TRANSFORMING THE ORGANIZATION TO BECOME EXTERNALLY ORIENTED

page 562_____________________ page 563_____________________
CONTINUED
page 564 __________________________________________________________
KEY IDEA
Soft systems can also help make rms more externally oriented.
KEY IDEA
HRM gives the rm many opportunities to focus on the customer. If the rm hires the right people and develops and manages them appropriately, an external orientation should follow.
KEY IDEA
Hiring experienced marketers, including those at the highest levels, can play a major role in developing an external orientation. Marketing education can help marketers learn new behaviors that help instill an external perspective.
KEY IDEA
Many rms training courses include customer input and/or participation.
page 565 __________________________________________________________
KEY IDEA
Managers at all functions and levels should have consistent and regular contact with customers.
KEY IDEA
Customer-focused measures put teeth into the external orientation effort.
SUSTAINING AN EXTERNAL ORIENTATION

page 567_____________________
KEY IDEA
Todays success sows the seeds of tomorrows defeat.
CHAPTER 21: MONITORING AND CONTROLLING FIRM PERFORMANCE AND FUNCTIONING

KEY PRINCIPLES OF MONITOR-AND-CONTROL PROCESSES
page 574_____________________ page 575 __________________________________________________________
KEY IDEA
Monitor-and-control processes are the most powerful means of changing individual behavior in rms. Monitor-and-control processes focus on the rms results: Is the rm achieving its planned results? And on rm functioning: Is the rm functioning well?
KEY IDEA
Post-action control means waiting for a preset time before comparing actual results against performance standards.
KEY IDEA
Steering control continually compares the rms actual results to performance standards and allows it to be more market responsive. Feedback cycles the time between the rms actions and the results it measures should not be too short.
page 576 __________________________________________________________
KEY IDEA
The rm should use objective measures for monitor-and-control purposes; if scales are appropriate, these should be validated.
KEY IDEA
The rm should measure performance at multiple organizational levels. Good performance in a unit or sub-unit can hide poor performance elsewhere. The rm must isolate the problem areas.
MONITORING AND CONTROLLING FIRM PERFORMANCE

page 581_____________________ page 583_____________________ page 584 __________________________________________________________
KEY IDEA
The rm should measure both unit sales volume and sales revenues. The rm must ensure its volume measures are accurate and consistently derived.
KEY IDEA
Marketers generally prefer prot contribution and direct product prot measures to bottom-line prot.
KEY IDEA
Most rms measure product protability; fewer rms measure customer protability.
KEY IDEA
Sales volume and protability measures have serious shortcomings; they dont show the rms performance relative to its competitors.
CHAPTER 21
MONITORING AND CONTROLLING FIRM PERFORMANCE AND FUNCTIONING
MONITORING AND CONTROLLING FIRM PERFORMANCE

page 585_____________________ page 586_____________________
CONTINUED
KEY IDEA
Customer satisfaction and attitudes are widely used soft measures. A well-structured, validated, independently administered customer survey provides the best soft data.
KEY IDEA
Success on intermediate measures does not guarantee the rms output performance. But the rm can achieve good output performance only by achieving good intermediate performance. Intermediate objectives are particularly important in long-cycle sales.
MONITORING AND CONTROLLING FIRM FUNCTIONING

page 587_____________________ page 588_____________________ page 589 __________________________________________________________
KEY IDEA
Implementation control: Did the rm implement its planned actions?
KEY IDEA
Strategy control: Is the rms market strategy well conceived and on target? Post-action approaches are generally superior for strategy control.
KEY IDEA
Distinguishing between strategy and implementation problems is crucial.
KEY IDEA
Managerial process control: Are the rms processes the best they can be?
page 590_____________________
KEY IDEA
The marketing audit is a comprehensive process for evaluating the rms marketing practices.
THE BALANCED SCORECARD

page 592_____________________
KEY IDEA
The balanced scorecard reects a steering control philosophy; it balances output, intermediate, and input marketing measures.
APPENDIX: FINANCIAL ANALYSIS FOR MARKETING DECISIONS

SECTION 1: PARTITIONING COSTS FOR MARKETING DECISION-MAKING
page A2 _____________________ page A5 _____________________ page A6 ___________________________________________________________
KEY IDEA
Variable costs increase and decrease as volumes increase and decrease. Fixed costs do not vary with volume over a reasonable range.
KEY IDEA
For marketing decisionmaking, the rm should reclassify its costs as variable and xed. A contribution magin approach makes it easy to calculate the prot impact of volume changes.
page A8 _____________________
KEY IDEA
Contribution margin per unit is contribution on a per unit basis.
KEY IDEA
At the breakeven point contribution margin covers xed costs and prots are zero. Prot is a residual. Its what is left over after contribution margin covers xed costs.
page A7 _____________________
page A10 __________________________________________________________
KEY IDEA
Managers can change programmed xed costs in the short/medium run. Standby xed costs only change in the long run.
KEY IDEA
The rm can use the breakeven approach to calculate the prot impact of changing programmed xed costs.
KEY IDEA
The difference between a direct cost and an indirect cost is simple to gure out. If the product, sales territory, or function were to go away and the cost would also go away, it is a direct cost. If not, it is an indirect cost.
KEY IDEA
When the rm drops a product, other products must carry its indirect cost allocations.
page A13 ____________________
KEY IDEA
Activity-based costing is useful for converting product income statements into customer income statements.
SECTION 2: MARGINS
page A15 __________________________________________________________
SECTION 3: SHAREHOLD VALUE ANALYSIS

page A17 ____________________
KEY IDEA
Retailers typically express margins as a percentage of their selling price.
KEY IDEA
The term margin means different things to different people. When using the term, take the time to identify the true meaning in the specic situation.
KEY IDEA
Shareholder value analysis should be used with care.

Chapter 1: Introduction To Managing Marketing: Key Idea Key Idea

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CHAPTER 1: INTRODUCTION TO MANAGING MARKETING

WHAT DOES MARKETING MEAN TODAY?

MARKETING AND SHAREHOLDER VALUE

INTRODUCTION TO MANAGING MARKETING

MARKETING AS A PHILOSOPHY: EXTERNAL AND INTERNAL ORIENTATIONS

THE SIX MARKETING IMPERATIVES

THE FOUR PRINCIPLES OF MARKETING

CHAPTER 2: THE VALUE OF CUSTOMERS: OPTIMIZING SHAREHOLDER VALUE

CUSTOMER LIFETIME VALUE (LTV)

INCREASING CUSTOMER LIFETIME VALUE

ACQUIRING NEW CUSTOMERS

ENHANCING CUSTOMER LIFETIME VALUE

BEING SELECTIVE ABOUT CUSTOMERS

CHAPTER 3: MARKET INSIGHT

OPENING CASE: NETFLIX

MARKET AND PRODUCT EVOLUTION

CHAPTER 4: CUSTOMER INSIGHT

CUSTOMER NEEDS, BENEFITS, AND VALUES

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INFLUENCES ON CONSUMER PURCHASE PROCESSES

INFLUENCES ON ORGANIZATIONAL PURCHASE PROCESSES

CHAPTER 5: INSIGHT ABOUT COMPETITORS, COMPANY, AND COMPLEMENTERS

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PROJECTING THE ACTIONS OF COMPETITORS

CHAPTER 6: MARKETING RESEARCH

CRITICAL DISTINCTIONS IN MARKETING RESEARCH

SECURING QUALITATIVE RESEARCH DATA

SECURING QUANTITATIVE RESEARCH DATA

MARKET AND SALES POTENTIALS, MARKET AND SALES FORECASTS

APPENDIX 6.1: ANALYZING QUANTITATIVE RESEARCH DATA

CHAPTER 7: DETERMINE AND RECOMMEND WHICH MARKETS TO ADDRESS

DETERMINE AND RECOMMEND WHICH MARKETS TO ADDRESS

THE VENTURE PORTFOLIO

SCREENING CRITERIA: EVALUATING OPPORTUNITIES

IMPLEMENTING GROWTH STRATEGIES

CHAPTER 8: MARKET SEGMENTATION AND TARGETING

TARGETING MARKET SEGMENTS

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CHAPTER 9: MARKET STRATEGY THE INTEGRATOR

THE PURPOSE OF MARKET AND MARKET-SEGMENT STRATEGIES

ELEMENTS OF THE MARKET-SEGMENT STRATEGY

CHAPTER 10: MANAGING THROUGH THE LIFE CYCLE

DEVELOPING COMPETITIVE STRATEGIC OPTIONS

BUILDING PRODUCT LIFE-CYCLE SCENARIOS

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MANAGING THROUGH THE LIFE CYCLE

BUILDING PRODUCT LIFE-CYCLE SCENARIOS

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CHAPTER 11: MANAGING BRANDS

BRAND EQUITY AND THE VALUE OF BRANDS

MONETIZING BRAND EQUITY

BUILDING AND SUSTAINING A STRONG BRAND

MANAGING BRAND ARCHITECTURE

MANAGING BRAND ARCHITECTURE

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CHAPTER 12: MANAGING THE PRODUCT LINE

MANAGING THE PRODUCT LINE

OTHER IMPORTANT PRODUCT INTERRELATIONSHIPS

PRODUCT LINE BREADTH: PROLIFERATION VERSUS SIMPLIFICATION

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OTHER PRODUCT LINE ISSUES