Lecture notes on fundamentals of Marketing

fundamentals of integrated marketing communications and fundamentals of industrial marketing, fundamentals of marketing management-multiple choice questions
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4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page i (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page i (PANTONE 201 CVU plate) FUNDAMENTALS OF MARKETING Fundamentals of Marketing provides a sound appreciation of the fundamentals of the theory and practice of marketing. It critically evaluates the effectiveness of different marketing strategies and approaches using case studies drawn from a cross section of sectors. Case studies include:  Coke’s distinct image in Trinidad  Role of guanxi in Chinese buying negotiations  Technology development: Apple Mac to iMac and iPod  Brand personality: image of FCUK  Virgin’s use of direct sales in financial services  New product global success of dumpy bottles  Rebranding New Zealand merino wool  Online retail pricing  Changing image of Dyson cleaner  Dyno-Rod franchising  Charity shop achievements  Introducing Stoats Porridge Bars  Internet competition with traditional channels: Amazon.com versus Barnes & Noble Featuring a website to run alongside the text providing student and lecturer resources, this text conveys the main principles of marketing in a challenging yet accessible manner and provides the reader with insights into the workings of marketing today. Marilyn A. Stone is Senior Lecturer and Director of the International Management degree at Heriot-Watt University, Edinburgh. John Desmond is Reader in Management at St Andrews University, Scotland.4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page ii (PANTONE 201 CVU plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page ii (Black/Process Black plate)4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page iii (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page iii (PANTONE 201 CVU plate) FUNDAMENTALS OF MARKETING Marilyn A. Stone and John Desmond With a contribution by J.B. (Ian) McCall4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page iv (PANTONE 201 CVU plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page iv (Black/Process Black plate) First published 2007 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Ave, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group, an informa business This edition published in the Taylor & Francis e-Library, 2006. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © 2007 Marilyn A. Stone and John Desmond All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Stone, Marilyn A. Fundamentals of marketing/Marilyn A. Stone and John Desmond. p. cm. Includes bibliographical references and index. 1. Marketing. I. Desmond, John, 1952–. II. Title. HF5415.S872 2006 658.8–dc22 2006015003 ISBN 0-203-03078-8 Master e-book ISBN ISBN10: 0–415–37096–5 (hbk) ISBN10: 0–415–37097–3 (pbk) ISBN10: 0–203–03078–8 (ebk) ISBN13: 978–0–415–37096–7 (hbk) ISBN13: 978–0–415–37097–4 (pbk) ISBN13: 978–0–203–03078–3 (ebk)4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page v (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page v (PANTONE 201 CVU plate) Marilyn Stone dedicates her contribution of this work to her family, Phil, Juliette and Anthony, and to her parents, Nuala and Robert, in recognition of all the support that they have given to her in pursuit of an appreciation of international marketing. She also wishes to acknowledge gratefully all those at the Western General Hospital, Edinburgh whose efforts enabled the book to be completed. John Desmond dedicates his contribution to his wife, Fiona, to thank her for her patience and encouragement.4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page vi (PANTONE 201 CVU plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page vi (Black/Process Black plate)4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page vii (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page vii (PANTONE 201 CVU plate) CONTENTS     List of illustrations xi List of tables xiii List of case studies xv Preface xvii Acknowledgements xviii List of abbreviations xix Introduction xxiii 1 Marketing: development and scope of the subject 1 Introduction 2 The study of marketing 2 A managerial approach 3 Developments in marketing theory 8 Conclusion 18 2 Strategic marketing and the planning process 20 Introduction 21 The marketing environment 21 Conclusion 41 3 Consumer buyer behaviour 43 Introduction 44 Economic theory 44 Freud and psychoanalysis 46 Freud’s legacy: changing social characters 53 Gender identity 57 Behaviourism 61 Cognitive Information Processing 76 Consumer involvement 87 The behaviourist explanation of involvement 94 Conclusion 964683 FUND MARKET-PT/bp 30/11/06 9:23 am Page viii (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page viii (PANTONE 201 CVU plate) CONTENTS     4 Industrial buyer behaviour 98 Introduction 99 Types of organizational markets 99 The organizational buying centre 101 The B-to-B buying process 102 Comparison between B-to-B and consumer buyer behaviour 106 New approaches to B-to-B buying behaviour 107 Strategic use of technology in buying: intranets and extranets 108 Conclusion 113 5 Marketing research 114 Introduction 115 The structure of the marketing research industry 120 The marketing research process 125 Marketing research methodology 125 Sampling methods 142 Questionnaire design 147 Attitude, beliefs and behaviour 147 Definition of the marketing mix 156 Marketing research industry controls 166 Conclusion 169 6 Segmentation, targeting and positioning 172 Introduction 173 Market segmentation 174 Selecting target markets 190 Positioning 195 Conclusion 200 7 Branding 201 Introduction 202 Brief modern history of branding 202 Brand decisions 205 Mainstream explanation of branding 206 Behaviourist view 219 Brand loyalty 221 Conclusion 224 8 Product 225 Introduction 226 Characteristics of the product life cycle and their marketing implications 229    viii4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page ix (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page ix (PANTONE 201 CVU plate)     CONTENTS Facets of the PLC 236 New product development (NPD) 239 The market diffusion process 258 Organizing for new product development 259 Conclusion 263 9 Pricing 265 Introduction 266 Price and the marketing mix 267 Pricing objectives 268 Factors affecting pricing decisions 269 Setting a price 271 Pricing industrial goods 279 Pricing and information technology 281 Conclusion 289 10 Promotion 290 Introduction 291 Relations between corporate and marketing communications 291 The communications process 291 The marketing communications process 302 Planning marketing communications campaigns 308 Communications contact techniques 322 IT influence on advertising media 332 Conclusion 335 11 Place: channels of distribution 337 Introduction 338 Channel constraints 338 The structure of channels of distribution 344 Intermediaries within channels of distribution 348 Types of retail franchise agreements 349 Developments in retailing 352 Development in information technology 359 International expansion of the retail industry 364 Conclusion 366 12 Virtual marketing 369 Introduction 370 The Internet 370 The World Wide Web 371 Consumer behaviour on the Web 374 ix   4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page x (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page x (PANTONE 201 CVU plate) CONTENTS     Marketing and the Internet 378 Other issues relating to promotion 388 Conclusion 392 13 Marketing planning and implementation 394 Introduction 395 Setting out the mission, aims and objectives 399 Conclusion 415 Notes 417 Answers to review questions 419 References 446 Index 460    x4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xi (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xi (PANTONE 201 CVU plate) ILLUSTRATIONS     1 The structure of the book xxiv 2.1 The firm (organism) in relation to its environment 21 2.2 Trends in urbanization 25 2.3 Population aged 65+ 25 2.4 Gross domestic product per capita 30 2.5 Carbon emissions per capita 31 2.6 The marketing planning process 32 2.7 SWOT: creating a fit between organization and environment 33 3.1 Relations between key terms in later Freudian theory 51 3.2 Summary of classical, operant and cognitive learning processes 62 3.3 Example of ‘reason why’ copy 64 3.4 Example of anxiety appeal 66 3.5 Foxall’s behavioural perspective model 72 3.6 Contingencies of consumer choice 74 3.7 Simplified cognitive information system 79 3.8 The theory of reasoned action 83 3.9 Cognitive model of the consumer buyer decision process 84 3.10 The relationship between involvement and complexity 91 3.11 The purchase decision process: high involvement 92 3.12 Decision making for brand-loyal customers 92 4.1 The decision process for choice of supplier 102 5.1 Marketing information system 116 5.2 The marketing research process 126 5.3 Decomposition of Joe’s hierarchy of beliefs about the Seychelles 150 5.4 Decomposition of Joe’s hierarchy of beliefs, indicating strength of belief 151 6.1 The VALS segmentation system 182 6.2 Process of target market selection 194 6.3 Target market selection 194 6.4 Perceptual map of financial services 196 7.1 Differences in brand personality 207 7.2 Referent system for perfume products 213 7.3 Brand from drawer of meaning to brand as signifier of meaning 215 7.4 Marketing and the brand community 217 8.1 The Product mix, Procter & Gamble 228 xi   4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xii (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xii (PANTONE 201 CVU plate) ILLUSTRATIONS     8.2 The product life cycle model 230 8.3 The product life cycle for established products 238 8.4 The product life cycle for fad-type products 238 8.5 Stages in new product development 240 9.1 Approaches to price setting 272 10.1 Simple model of the mass-communication process 292 10.2 Development of the model of the mass-communication process 294 10.3 Industry structure: marketing communications 303 10.4 Planning the process for integrated marketing communications 311 10.5 ‘Push’ and ‘pull’ strategies 314 10.6 The Foote Cone & Belding grid 315 10.7 The creative brief 324 10.8 Social advertising 333 11.1 Consumer and industrial channels of distribution 345 12.1 Internet penetration 372 12.2 Primary uses of the Web 375 12.3 Traditional marketing communications 386 12.4 Internet-based communications 386 13.1 An example of a Gantt chart used in marketing planning 398 13.2 Stoats Porridge Bars mobile unit 406 13.3 Summary of Stoats Porridge Bars’ website visitors 411    xii4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xiii (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xiii (PANTONE 201 CVU plate) TABLES     1.1 Marketing orientation 6 1.2 Relations between efficiency and effectiveness 7 2.1 One hundred technical innovations likely in the next thirty years 23 2.2 Marketing strategy process: problem-solving process 32 3.1 Key relations between different explanations 44 3.2 Mean involvement profile 88 3.3 Differences between low and high-involvement styles 89 5.1 Top global research organizations, 2003–2004 122 5.2 World marketing research expenditure, 2002 122 5.3 Top ten marketing research markets in Europe, Asia Pacific and Latin America, 2002 123 5.4 UK marketing research agency turnover, 2003 124 5.5 Research methods used by UK marketing research agencies, 2002 125 5.6 Decomposition of Joe’s hierarchy of beliefs for level 1 151 5.7 Decomposition of Joe’s hierarchy of beliefs for level 2 152 5.8 Example of Osgood scale 155 6.1 The ACORN consumer targeting classification 176 6.2 Mean equivalent income of age group as proposition of overall mean, selected countries, mid-1980s 177 6.3 Socio-economic classification (JICNARS) 181 6.4 Typical market segments visiting a UK supermarket 185 8.1 Top world’s most valuable brands, 2004 234 8.2 Top ten ranked brands in the UK, 2004 235 8.3 Marketing responses to the product life cycle 236 8.4 Idea-screening criteria 242 8.5 Approaches to new product development 259 8.6 Top ten toys, 1988–1997 261 9.1 Stages of the product life cycle 271 9.2 Computation for each projection combination 278 10.1 Denotation and Connotation 293 10.2 Meanings of the colour red 295 10.3 The world’s top ten core advertising agency brands, 2002 327 xiii   4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xiv (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xiv (PANTONE 201 CVU plate) TABLES     10.4 UK total advertising expenditure by medium, 2003 327 10.5 Top ten advertisers in the UK, 2003 328 10.6 Advertising expenditure by medium in selected European countries, 2003 329 11.1 UK franchise operations, 2003 350 11.2 Top ten gobal retailers, 2004 352 11.3 Top ten UK retailers, 2004 353 11.4 The structure of the retail grocery trade in Great Britain, 2002 355 11.5 Concentration of turnover among the retail grocery trade in Great Britain, 2002 355 11.6 Grocery retailer market share in the UK, 2005 356 11.7 Top twenty European retailers, ranked by turnover, 2003 357 12.1 Differences between traditional and multimedia communications 381 13.1 Summary of Stoats Porridge Bars’ website visitors, August to December 2005 410 13.2 Festivals and events attended, June 2005 to January 2006 412    xiv4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xv (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xv (PANTONE 201 CVU plate) CASE STUDIES      Marketing within the sex industry 14  Who held back the stone? 16  Drinking Coke in Trinidad 26  The role of guanxi in Chinese buying negotiations 37  Apple computer: from Mac to iMac and iPod 38  Buying a computer system for a hospital 110  Baxi looks to Europe for expansion 112  Developments in qualitative research methods 132  Developments in television audience rating measurement 159  Marketing research’s strategic contribution to the expansion of carbonated soft drinks markets in emerging economies 160  Segmentation applied to the Tiberias Hotel 198  Shaping brand congruity: Midland Bank brands 208  Brand cult: who needs enemies? 218  Brand personality: FCUKed? 223  Virgin’s approach to direct sales in financial services 231  Crayola crayons 232  Butlin’s holiday camps 233  Test marketing chocolate 252  Successful innovation in the flat glass process 256  Feeding the Furby fad 260  Dumpy bottles for baby prove a world beater 262  Product rebranding related to merino wool in New Zealand 262  Pricing the Ford Mustang 274  The price of vodka 276 Online retailing pricing 282   The dust is settling on the Dyson market clean-up 283  Car price war looms in China as Shanghai Volkswagen cuts prices 285  Rover drivers and dealers face substantial losses in the value of their cars and related financing 286  The role of pricing in the cashmere knitwear industry 287  BAE Systems sells defence subsidiary at knock-down price due to national security 288  Madame Tussaud’s seeks star partners 321 xv   4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xvi (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xvi (PANTONE 201 CVU plate) CASE STUDIES      Social advertising 333  Franchising for Dyno-Rod 351  Charity shops 358  The Internet competing with traditional channels: Amazon.com versus Barnes & Noble 389  Internet ethics: the Danish consumer ombudsman identifying hidden advertisements on the Net 390  Introducing Stoats Porridge Bars 404    xvi4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xvii (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xvii (PANTONE 201 CVU plate) PREFACE     This book aims to provide a comprehensive introduction to the subject of marketing. While it covers most of the topics found in other texts it also provides a solid theoretical background which can act as a springboard to discuss contemporary issues and controversies within marketing theory and practice. The text is focused on the mainstream functionalist account based on psychological theory, rather than alternative sociological and anthropological texts on offer. As psychology acts as the bedrock of most explanations of consumer behaviour, a range of psychological theories have been examined, with limited discussion of the associated controversies. In this respect Freudian theory, behaviourism and cognitive learning theory are detailed in an early chapter. This preliminary exposition informs the subsequent coverage of involvement and brand loyalty, where different theoretical explanations, such as cognitive and behaviourist theories, are discussed alongside synthetic accounts. The overall aim is to disabuse students of the belief that there is only one way of understanding marketing activities and to enable them to compare and contrast different accounts. While the text is written from a European perspective, reflecting the point of origin of its contributors, it is intended for use by students from any country or background. The text has been developed and written by Marilyn Stone, Heriot-Watt University and John Desmond, St Andrews University, ably supported by J.B. (Ian) McCall and by Sarah Dougan. Although all the others have discussed at length the text, particular responsibility for the individual chapters has been as follows. John Desmond: Chapter 1, ‘Marketing: development and scope of the subject’, Chapter 2, ‘Strategic marketing and the planning process’, Chapter 3, ‘Consumer buyer behaviour’, Chapter 4, ‘Industrial buyer behaviour’ (supported by Marilyn Stone), Chapter 5, ‘Segmentation, targeting and positioning (supported by Sarah Dougan)’, Chapter 6, ‘Branding’, Chapter 7, ‘Product’ (supported by Sarah Dougan and Marilyn Stone), Chapter 9, ‘Promotion’ (supported by Marilyn Stone), and Chapter 11, ‘Virtual Marketing’. Marilyn Stone: Chapter 5, ‘Marketing research’ (supported by John Desmond), Chapter 10, ‘Place: channels of distribution’, and Chapter 13, ‘Marketing planning and implementation’. J.B. (Ian) McCall and Marilyn Stone: Chapter 8, ‘Pricing’. Once the draft chapters were prepared, the authors read each other’s contribution to link the chapters of the text. Examples have been drawn from a range of countries and situations, which it is hoped will help students to relate to the issues being discussed. Marilyn Stone undertook the overall editing of the text. xvii   4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xviii (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xviii (PANTONE 201 CVU plate)  ACKNOWLEDGEMENTS    Much appreciation is given to others who have supported the preparation of the marketing text, including Professor Chris Eynon, Managing Director of TNS (System Three), and Professor John Fernie, Director of Heriot-Watt University, School of Management and Languages. Thanks are due to all the others who encouraged the authors to complete the book. In particular, thanks are due to Francesca Heslop and Emma Joyes for their encouraging editing support. Hazel Loeb gave useful research assistance in the preparation of the initial draft of the distributed learning material. Thanks should also go to our students over the years who, with their enthusiasm, have encouraged and stimulated our interest in teaching marketing in its various guises. Finally, thanks go to our families and friends, who have supported the process of getting the text to press. Despite all the support and effort made to prepare a fair assessment of the topic of marketing as opined by myself, John Desmond and J.B. (Ian) McCall, the ultimate responsibility for what has been written rests with the authors. While it is intended that this should be as accurate as possible, any mistakes or omissions that may have been made are of our own making and not of those others who have supported us in the task. Marilyn A. Stone John Desmond    xviii4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xix (Black/Process Black plate) 4683 FUND MARKET-PT/bp 30/11/06 9:23 am Page xix (PANTONE 201 CVU plate) ABBREVIATIONS     A&R artists and repertoire ABC Audits Bureau of Circulation ABMRC Association of British Market Research Companies ACORN A Classification of Residential Neighbourhoods ACS Association of Charity Shops AGB Audits of Great Britain AIDA Awareness, Interest, Desire and Action model AMSO Association of Market Survey Organizations ARG Argos Retail Group ARS Audience Reaction Service (British Broadcasting Corporation) ATM Automatic teller machines (cash machine) ATR Awareness, Trial and Reinforcement BBC British Broadcasting Corporation BEUC European Consumer Organization BMRA British Market Research Association BMRB British Marketing Research Bureau (market research agency) BRAD British Rate and Data BSA British Sandwich Association BSE bovine spongiform encephalophy CAPI computer-assisted personal interviewing CASI Computer-assisted self-interviewing CATI Computer-assisted telephone interviewing CAWI Computer-assisted Web interviewing CD compact disc CEE Central and Eastern Europe CIM Chartered Institute of Marketing CIP cognitive information processing CIS Commonwealth of Independent States CJMR Carrick James Market Research (market research agency) CME computer-mediated environment CS conditioned stimulus CSD carbonated soft drinks DAGMAR Designing Advertising Goals; Measuring Advertising Response model xix   

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