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PHILIP KOTLER Northwestern University k KEVIN LANE KELLER Dartmouth College Upper Saddle River, New Jersey 07458 Library of Congress Cataloging-in-Publication Data Kotler, Philip. Marketing management / Philip Kotler, Kevin Keller.—Twelfth ed. p. cm. Includes bibliographical references and index. ISBN 0-13-145757-8 1. Marketing—Management. I. Keller, Kevin Lane, 1956- II. Title. HF5415.13.K64 2006 658.8—dc22 2004029595 Acquisitions Editor: Katie Stevens Associate Editor: Wil Mara VP/Editorial Director: Jeff Shelstad Assistant Editor: Melissa Pellerano Editorial Assistant: Rebecca Lembo Developmental Editor: Jeannine Ciliotta Media Project Manager: Peter Snell Marketing Manager: Michelle O'Brien Marketing Assistant: Joanna Sabella Senior Managing Editor (Production): Judy Lealc Production Editor: Theresa Festa Permissions Supervisor: Charles Morris Manufacturing Buyer: Diane Peirano Design Manager: Maria Lange Art Director: Janet Slowik Interior Design: Amanda Kavanagh Cover Design: Amanda Kavanagh Art Studio: ElectraCraphics, Inc. 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This publication is protected by Copyright and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. For information regarding permission(s), write to: Rights and Permissions Department. Pearson Prentice Hall™ is a trademark of Pearson Education, Inc. Pearson® is a registered trademark of Pearson pic Prentice Hall® is a registered trademark of Pearson Education, Inc. Pearson Pearson Pearson Pearson Education LTD. Education Singapore, Pte. Ltd Education, Canada, Ltd Education-Japan Pearson Pearson Pearson Pearson Education Australia PTY, Limited Education North Asia Ltd Educacion de Mexico, S.A. de C.V. Education Malaysia, Pte. Ltd PEARSON ^Prentice Hall 10987654321 ISBN 0-13-145757-8 DEDICATION This book is dedicated friend, Nancy, with to my wife and best love. This book is dedicated to my wife, and my two daughters, Carolyn and with much love and thanks. Punam, Allison, ABOUT THE AUTHORS Philip Kotler is one of the world's leading authorities Johnson & Son Distinguished School of Management, on marketing. Professor of International Northwestern He is the 5. C. at the Kellogg University. He received his master's Marketing degree at the University of Chicago and his Ph.D. at MIT, both in economics. He did postdoctoral work in mathematics at Harvard University and in behavioral science at the University of Chicago. Dr. Kotler is the co-author of Principles of Marketing and Marketing: An Introduction. His Strategic Marketing for Nonprofit Organizations, now in its sixth edition, is the best seller in that specialized area. Dr. Kotler's other books include Marketing Models; The New Competition; Marketing Professional Services; Strategic Marketing for Educational Institutions; Marketing for Health Care Organizations; Marketing Congregations; High Visibility; Social Marketing; Marketing Places; The Marketing of Nations; Marketing for Hospitality and Tourism; Standing Room Only—Strategies for Marketing the Performing Arts; Museum Strategy and Marketing; Marketing Moves; Kotler on Marketing; Lateral Marketing: Ten Deadly Marketing Sins; and Corporate Social Responsibility. In addition, he has published more than one hundred articles in leading jour- nals, including the Harvard Business Review, Sloan Management Review, Business Horizons, California Management Review, the Journal of Marketing, the Journal of Marketing Research, Management Science, the Journal of Business Strategy, and Futurist. He is the only three-time winner of the coveted award for the best annual article published Professor Kotler was the Association's (AMA) Distinguished Marketing European Association of Marketing Consultants their Prize for Marketing Thought first recipient Excellence. by the Academic Members Alpha Kappa Psi in the Journal of Marketing. of the American Educator Award (1985). The and Sales Trainers awarded him He was chosen as the Leader in to marketing. In 1995, the Sales and Marketing (SMEI) named him Marketer Distinguished Educator Award from The Academy degrees from Stockholm Zurich, of Economics University including IBM, General marketing He has been Management organization, Chairman Electric, Science. He has University, Groupe H.E.C. in Paris, the AT&T, Honeywell, Bank of College of com- America, and marketing. of Marketing of the Institute of a Trustee Science Institute, a Director of the MAC Group, a member of the Yankelovich Advisory Board, and a member of the Copernicus Advisory was a member Budapest strategy Sciences, a Director of the American Marketing Association, of the Marketing of the and the University to many major U.S. and foreign and international of the the University, the University Merck, SAS Airlines, Michelin, and others in the areas of marketing planning, International in Vienna. Professor Kotler has been a consultant panies, of Marketing Science and Public Administration, Economics and Business Administration con- Kotler received and Business, DePaul Cracow School of Business and Economics, School of Economic He also his original Executives of the Year. In 2002, Professor received honorary doctoral Athens Marketing of the AM A in a 1975 survey. received the 1978 Paul Converse Award of the AM A, honoring tribution Marketing of the Board of Governors Board. He of the School of the Art Institute of Chicago and a member of the Advisory traveled extensively throughout Board of the Drucker Foundation. turing to many companies about global marketing Kevin Lane Keller is the E. B. Osborn Professor of Marketing Business at Dartmouth Carnegie-Mellon, tive on strategic topic. College. Professor and Duke universities. brand management Keller at the Tuck School of has degrees At Dartmouth, from Cornell, he teaches an MBA elec- and lectures in executive programs Previously, Professor Keller was on the faculty of the Graduate Business at Stanford he has been on the marketing on that School of University, where he also served as the head of the ing group. Additionally, market- faculty at the University of California at Berkeley and the University of North Carolina at Chapel Hill, been a visiting professor Management, at Duke University and the Australian and has two years of industry experience Graduate School as Marketing of Consultant for Bank of America. Professor Keller's general area of expertise cific research interest is in how understanding consumer behavior published in over fifty papers can improve marketing in three is in consumer marketing. theories and concepts strategies. His sperelated to The research has been of the major marketing journals—the Journal of Marketing, the Journal of Marketing Research, and the Journal of Consumer Research. He also has served on the Editorial journals. Review Boards of those His research has been widely cited and has received numerous Professor Keller is acknowledged study of brands, branding, with industry, as one of the international and strategic brand management. he has worked on a host of different He has served as brand confidant cessful brands, including to marketers Accenture, American leaders in the involved types of marketing projects. for some of the world's most sucExpress, Disney, Ford, Intel, Levi with other top companies such as Allstate, Blue Cross Blue Shield, Campbell Mayo Clinic, Nordstrom, academic trustee conducted Soup, General Beiersdorf Mills, Goodyear, addition(Nivea), Kodak, The Shell Oil, Unilever, and Young & Rubicam. He is also an for the Marketing marketing awards. Actively Strauss, Miller Brewing, Procter & Gamble, and Starbucks. He has done al brand consulting Science Institute. seminars and workshops A popular speaker, he has with top executives in a variety of forums. Professor Keller is currently conducting studies that address marketing strate- gies and tactics to build, measure, and manage brand equity. His textbook those subjects, Strategic Brand Management, the second edition published September 2002 by Prentice-Hall, has been heralded on of which was as the "bible of branding." An avid sports, music, and film enthusiast, age and market one of Australia's great in his spare time, he helps to man- rock and roll treasures, The Church. Professor Keller lives in New Hampshire with his wife, Punam (also a Tuck mar- keting professor), Carolyn and and his two daughters, Allison. He has Europe, Asia, and South America, advising and lecopportunities. BRIEF CONTENTS Preface xxix PART 1 Understanding Marketing Management Chapter 1 Chapter 2 Defining Marketing for the 21st Century 3 Developing Marketing Strategies and Plans PART 2 Capturing M a r k e t i n g Insights Chapter 3 Chapter 4 Gathering Information and Scanning the Environment 71 Conducting Marketing Research and Forecasting Demand PART 3 Connecting with Customers Chapter Chapter Chapter Chapter 5 6 7 8 2 35 70 101 138 Creating Customer Value, Satisfaction, and Loyalty Analyzing Consumer Markets 173 Analyzing Business Markets 209 Identifying Market Segments and Targets 239 PART 4 Building Strong Brands Chapter 9 Chapter 10 Chapter 11 Creating Brand Equity 273 Crafting the Brand Positioning 309 Dealing with Competition 341 139 272 PART 5 Shaping t h e Market Offerings Chapter 12 Chapter 13 Chapter 14 Setting Product Strategy 371 Designing and Managing Services 401 Developing Pricing Strategies and Programs PART 6 Delivering Value Chapter 15 Chapter 16 Designing and Managing Value Networks and Channels Managing Retailing, Wholesaling, and Logistics 503 PART 7 C o m m u n i c a t i n g Value Chapter 17 Chapter 18 Designing and Managing Integrated Marketing Communications 535 Managing Mass Communications: Advertising, Sales Promotions, Events, and Public Relations 567 Managing Personal Communications: Direct Marketing and Personal Selling 603 Chapter 19 370 466 PART 8 C r e a t i n g Successful Long-Term G r o w t h Introducing New Market Offerings 633 Tapping into Global Markets 667 Managing a Holistic Marketing Organization Glossary A1 G1 Image Credits Name Index C1 11 Company, Brand, and Organization Index Subject Index 112 467 534 Chapter 20 Chapter 21 Chapter 22 Appendix 431 14 632 695