About the Authors. Gary Armstrong. Philip Kotler

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3 About the Authors As a team, Philip Kotler and Gary Armstrong provide a blend of skills uniquely suited to writing an introductory marketing text. Professor Kotler is one of the world s leading authorities on marketing. Professor Armstrong is an award-winning teacher of undergraduate business students. Together they make the complex world of marketing practical, approachable, and enjoyable. Gary Armstrong is the Crist W. Blackwell Distinguished Professor of Undergraduate Education in the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill. He holds undergraduate and master s degrees in business from Wayne State University in Detroit, and he received his PhD in marketing from Northwestern University. Professor Armstrong has contributed numerous articles to leading business journals. As a consultant and researcher, he has worked with many companies on marketing research, sales management, and marketing strategy. But Professor Armstrong s first love has always been teaching. His Blackwell Distinguished Professorship is the only permanent endowed professorship for distinguished undergraduate teaching at the University of North Carolina at Chapel Hill. He has been very active in the teaching and administration of Kenan-Flagler s undergraduate program. His administrative posts have included Chair of Marketing, Associate Director of the Undergraduate Business Program, Director of the Business Honors Program, and many others. He has worked closely with business student groups and has received several campuswide and Business School teaching awards. He is the only repeat recipient of the school s highly regarded Award for Excellence in Undergraduate Teaching, which he has received three times. Most recently, Professor Armstrong received the UNC Board of Governors Award for Excellence in Teaching, the highest teaching honor bestowed by the 16-campus University of North Carolina system. Philip Kotler is the S. C. Johnson & Son Distinguished Professor of International Marketing at the Kellogg School of Management, Northwestern University. He received his master s degree at the University of Chicago and his PhD at MIT, both in economics. Professor Kotler is the author of Marketing Management (Pearson Prentice Hall), now in its thirteenth edition and the most widely used marketing text book in graduate business schools worldwide. He has authored dozens of other successful books and has written more than 100 articles in leading journals. He is the only three-time winner of the coveted Alpha Kappa Psi award for the best annual article in the Journal of Marketing. Professor Kotler was named the first recipient of two major awards: the Distinguished Marketing Educator of the Year Award, given by the American Marketing Association and the Philip Kotler Award for Excellence in Health Care Marketing, presented by the Academy for Health Care Services Marketing. His numerous other major honors include the Sales and Marketing Executives International Marketing Educator of the Year Award; the European Association of Marketing Consultants and Trainers Marketing Excellence Award ; the Charles Coolidge Parlin Marketing Research Award ; and the Paul D. Converse Award, given by the American Marketing Association to honor outstanding contributions to science in marketing. In a recent Financial Times poll of 1,000 senior executives across the world, Professor Kotler was ranked as the fourth most influential business writer/guru of the twenty-first century. Professor Kotler has served as chairman of the College on Marketing of the Institute of Management Sciences, a director of the American Marketing Association, and a trustee of the Marketing Science Institute. He has consulted with many major U.S. and international companies in the areas of marketing strategy and planning, marketing organization, and international marketing. He has traveled extensively throughout Europe, Asia, and South America, advising companies and governments about global marketing practices and opportunities. v A01_KOTL5681_01_SE_FM.indd v 8/31/11 8:59 PM

4 vi About the Authors Anwar Habib is a faculty member at the Dubai Women s College, Higher Colleges of Technology in United Arab Emirates. He holds an MBA from the University of Dhaka, Bangladesh, and is currently completing his DBA at the Business School Laussane, Switzerland. He has been teaching marketing since Anwar Habib has 20 years of practical marketing experience working for Unilever, Ciba- Geigy and Johnson & Johnson, in South Asia, Australia and the Middle East. He started out as a brand manager at Unilever, and gradually progressed through senior roles in marketing and sales. His last role before teaching was General Manager of Johnson & Johnson Vision Care for the Middle East and North Africa region. Ahmed Tolba is Assistant Professor of Marketing in the School of Business at the American University in Cairo. He is also Director of El-Khazindar Business Research and Case Center (KCC), which is the first center in the MENA region to focus on developing world-class refereed case studies. He was awarded his PhD from the George Washington University in 2006, and his MBA & BSc from the American University in Cairo in 1997 and 2001 respectively. His professional experience includes four years at Procter & Gamble Egypt; he also worked as a marketing consultant for several local firms. His research focuses on brand equity, nation branding, branding strategies, and social marketing. His work has been published and presented in leading academic journals, such as the Journal of Product and Brand Management, the Journal of Technology Marketing, the International Journal of Marketing Studies, and the Journal of International Business and Cultural Studies, and presented at conferences for the American Marketing Association (AMA), the Academy of Marketing Science (AMS), the Society for Marketing Advances, the Academy of Management (SMA), the Thought Leaders International Conference on Brand Management, Frontiers in Services Conference, and the Association for Global Business, among others. A01_KOTL5681_01_SE_FM.indd vi 8/31/11 9:00 PM

5 Brief Contents Features matrix xiv Foreword xvii Preface xviii Acknowledgments xxiii Part 1 Defining Marketing and the Marketing Process 1 1 Marketing: Creating and Capturing Customer Value 2 2 Company and Marketing Strategy: Partnering to Build Customer Relationships 36 Part 2 Understanding the Marketplace and Consumers 65 3 Analyzing the Marketing Environment 66 4 Marketing Research 94 5 Consumer Behavior Business Markets and Business Buyer Behavior 152 Part 3 Designing a Customer-Driven Strategy and Mix Customer-Driven Marketing Strategy: Segmentation, Targeting & Positioning Products, Services, and Brands: Building Customer Value New-Product Development and Product Life-Cycle Strategies Pricing Communicating Customer Value: Integrated Marketing Communications Strategy Promotion Mix Strategies: Advertising and Public Relations Direct and Online Marketing: Building Direct Customer Relationships Managing Marketing Channels 400 Part 4 Extending Marketing Creating Competitive Advantage The Global Marketplace Sustainable Marketing: Social Responsibility and Ethics 494 Appendix 1 Marketing Plan A1 Appendix 2 Marketing by the Numbers A11 Appendix 3 Careers in Marketing A29 References R1 English-Arabic Glossary G1 Index I1 Credits C1 vii A01_KOTL5681_01_SE_FM.indd vii 8/31/11 9:00 PM

6 Contents Part 1 Defining Marketing and the Marketing Process 1 Chapter 1 Marketing: Creating and Capturing Customer Value 2 Chapter Preview 2 Objective Outline 4 What Is Marketing? 4 Marketing Defined 5 The Marketing Process 5 Understanding the Marketplace and Customer Needs 6 Customer Needs, Wants, and Demands 6 Market Offerings Products, Services, and Experiences 7 Customer Value and Satisfaction 7 Exchanges and Relationships 8 Markets 8 Designing a Customer-Driven Marketing Strategy 9 Selecting Customers to Serve 9 Choosing a Value Proposition 10 Marketing Management Orientations 10 Preparing an Integrated Marketing Plan and Program 13 Building Customer Relationships 13 Customer Relationship Management 14 Real Marketing 1.1 Etisalat: Delighting Customers 15 The Changing Nature of Customer Relationships 16 Real Marketing 1.2 Media and Direct Communication Trends in the Arab World 19 Partner Relationship Management 20 Capturing Value from Customers 21 Creating Customer Loyalty and Retention 21 Growing Share of Customer 22 Building Customer Equity 22 The Changing Marketing Landscape 24 The Digital Age 24 Rapid Globalization 26 The Call for More Ethics and Social Responsibility 27 The Growth of Not-for-Profit Marketing 27 So, What is Marketing? Pulling It All Together 28 Reviewing Objectives and Key Terms 30 Key Terms 31 Discussing & Applying the Concepts 32 Focus on Technology 32 Focus on Ethics 32 Marketing by the Numbers 33 Video Case: Harley-Davidson 33 Company Case Diwan: A Tale of Heart Over Matter 33 Chapter 2 Company and Marketing Strategy: Partnering to Build Customer Relationships 36 Chapter Preview 36 Objective Outline 38 Companywide Strategic Planning: Defining Marketing s Role 37 Defining a Market-Oriented Mission 39 Setting Company Objectives and Goals 39 Designing the Business Portfolio 41 Analyzing the Current Business Portfolio 41 Developing Strategies for Growth and Downsizing 43 Real Marketing 2.1 Mo men Sandwich: A Recipe for Success 44 Planning Marketing: Partnering to Build Customer Relationships 46 Partnering with Other Company Departments 46 Partnering with Others in the Marketing System 47 Marketing Strategy and the Marketing Mix 48 Customer-Driven Marketing Strategy 49 Real Marketing 2.2 Niching Voluntourism, A New Way to See the World 51 Developing an Integrated Marketing Mix 52 Managing the Marketing Effort 53 Marketing Analysis 54 Marketing Planning 54 Marketing Implementation 56 Marketing Department Organization 56 Marketing Control 57 Measuring and Managing Return on Marketing Investment 58 Reviewing Objectives and Key Terms 60 Key Terms 61 Discussing and Applying the Concepts 61 Focus on Technology 61 Focus on Ethics 62 Marketing by the Numbers 62 Video Case: Live Nation 62 Company Case Bahrain Bay: Building Customer Relations for the Future 63 Part 2 Understanding the Marketplace and Consumers 65 Chapter 3 Analyzing the Marketing Environment 66 Chapter Preview 66 Objective Outline 68 The Company s Microenvironment 68 The Company 69 Suppliers 69 Marketing Intermediaries 69 Competitors 70 Publics 70 Customers 71 The Company s Macroenvironment 71 Demographic Environment 72 Changing Age Structure of the Population 73 The Changing Arab Family 75 Real Marketing 3.1 Niching: On the Run in Egypt 76 Geographic Shifts in Population 77 Education and Employment 77 Increasing Diversity 78 viii A01_KOTL5681_01_SE_FM.indd viii 8/31/11 9:00 PM

7 Contents ix Economic Environment 79 Changes in Income 79 Changing Consumer Spending Patterns 80 Natural Environment 80 Technological Environment 82 Political and Social Environment 83 Legislation Regulating Business 83 Increased Emphasis on Ethics and Socially Responsible Actions 84 Cultural Environment 85 Persistence of Cultural Values 85 Shifts in Secondary Cultural Values 86 Responding to the Marketing Environment 88 Real Marketing 3.2 First National Bank: Now You Can Be a Movie Star 89 Reviewing Objectives and Key Terms 90 Key Terms 90 Discussing and Applying the Concepts 91 Focus on Technology 91 Focus on Ethics 91 Marketing by the Numbers 92 Video Case: TOMS Shoes 92 Company Case Al Jazirah: The Genius Inventor 92 Chapter 4 Marketing Research 94 Chapter Preview 94 Objective Outline 96 Marketing Information and Customer Insights 95 Assessing Marketing Information Needs 97 Developing Marketing Information 98 Internal Data 98 Marketing Intelligence 99 Marketing Research 100 Defining the Problem and Research Objectives 100 Developing the Research Plan 101 Gathering Secondary Data 101 Primary Data Collection 103 Real Marketing 4.1 Collecting Brand Information in the Arab World 109 Implementing the Research Plan 111 Interpreting and Reporting the Findings 111 Analyzing and Using Marketing Information 112 Customer Relationship Management (CRM) 112 Distributing and Using Marketing Information 113 Other Marketing Information Considerations 114 Marketing Research in Small Businesses and Nonprofit Organizations 114 International Marketing Research 115 Public Policy and Ethics in Marketing Research 116 Real Marketing 4.2 Luxury Brands in the UAE 117 Reviewing Objectives and Key Terms 119 Key Terms 120 Discussing & Applying the Concepts 120 Focus on Technology 120 Focus on Ethics 121 Marketing by the Numbers 121 Company Case Ariel in Egypt: The Value of Consumer Insight 121 Chapter 5 Consumer Behavior 124 Chapter Preview 124 Objective Outline 126 Model of Consumer Behavior 126 Characteristics Affecting Consumer Behavior 127 Cultural Factors 127 Real Marketing 5.1 How McDonald s Markets to the Arab Consumers 129 Social Factors 131 Personal Factors 134 Psychological Factors 136 Types of Buying Decision Behavior 139 Complex Buying Behavior 139 Dissonance-Reducing Buying Behavior 140 Habitual Buying Behavior 140 Variety-Seeking Buying Behavior 140 The Buyer Decision Process 141 Need Recognition 141 Information Search 141 Evaluation of Alternatives 142 Purchase Decision 142 Postpurchase Behavior 143 The Buyer Decision Process for New Products 143 Real Marketing 5.2 Lexus: Delighting Customers After the Sale to Keep Them Coming Back 144 Stages in the Adoption Process 145 Individual Differences in Innovativeness 145 Influence of Product Characteristics on Rate of Adoption 146 Reviewing Objectives and Key Terms 147 Key Terms 148 Discussing & Applying the Concepts 148 Focus on Technology 148 Focus on Ethics 149 Marketing by the Numbers 149 Video Case: Wild Planet 149 Company Case Arabic BlackBerry: Adapting to the Language of the Market 150 Chapter 6 Business Markets and Business Buyer Behavior 152 Chapter Preview 152 Objective Outline 154 Business Markets 154 Market Structure and Demand 154 Nature of the Buying Unit 155 Types of Decisions and the Decision Process 156 Real Marketing 6.1 Aramex Partners with Business Customers 157 Business Buyer Behavior 162 Major Types of Buying Situations 158 Participants in the Business Buying Process 159 Major Influences on Business Buyers 161 The Business Buying Process 162 Problem Recognition 162 General Need Description 163 Product Specification 163 Supplier Search 163 Proposal Solicitation 163 Supplier Selection 163 Real Marketing 6.2 International Marketing Manners: When in Rome, Do as the Romans Do 164 Order-Routine Specification 164 Performance Review 165 E-Procurement: Buying on the Internet 166 Institutional and Government Markets 167 Institutional Markets 167 Government Markets 168 Reviewing Objectives and Key Terms 170 Key Terms 171 Discussing & Applying the Concepts 171 Focus on Technology 171 Focus on Ethics 172 Marketing by the Numbers 172 Video Case: Eaton 172 Company Case Boeing: Selling a Dream(liner) 173 A01_KOTL5681_01_SE_FM.indd ix 8/31/11 9:00 PM

8 x Contents Part 3 Designing a Customer-Driven Strategy and Mix 175 Video Case: Swiss Army Brands 235 Company Case Alshaya: The House of Brands 235 Chapter 7 Customer-Driven Marketing Strategy: Segmentation, Targeting, and Positioning 176 Chapter Preview 176 Objective Outline 178 Market Segmentation 178 Segmenting Consumer Markets 178 Real Marketing 7.1 Ramadan Spirit in the Arab World 183 Segmenting Business Markets 184 Segmenting International Markets 184 Requirements for Effective Segmentation 185 Market Targeting 186 Evaluating Market Segments 186 Selecting Target Market Segments 187 Real Marketing 7.2 Islamic Banking 189 Socially Responsible Target Marketing 191 Differentiation and Positioning 192 Positioning Maps 193 Choosing a Differentiation and Positioning Strategy 193 Communicating and Delivering the Chosen Position 197 Reviewing Objectives and Key Terms 198 Key Terms 199 Discussing & Applying the Concepts 199 Focus on Technology 199 Focus on Ethics 200 Marketing by the Numbers 200 Video Case: Meredith 200 Company Case The Arab Online World Microsoft Maren 200 Chapter 8 Products, Services, and Brands: Building Customer Value 202 Chapter Preview 202 Objective Outline 204 What is a Product? 204 Products, Services, and Experiences 204 Levels of Product and Services 205 Product and Service Classifications 206 Product and Service Decisions 209 Individual Product and Service Decisions 209 Product Line Decisions 213 Product Mix Decisions 214 Branding Strategy: Building Strong Brands 215 Brand Equity 215 Real Marketing 8.1 Breakaway Brands: Connecting with Customers 217 Building Strong Brands 218 Managing Brands 223 International and Regional Branding Decisions 224 Services Marketing 224 Real Marketing 8.2 Fayrouz: An International Brand Built in the Region 225 Nature and Characteristics of a Service 225 Marketing Strategies for Service Firms 227 Real Marketing 8.3 Service Marketing 230 Reviewing Objectives and Key Terms 232 Key Terms 233 Discussing & Applying the Concepts 233 Focus on Technology 233 Focus on Ethics 234 Marketing by the Numbers 234 Chapter 9 New-Product Development and Product Life-Cycle Strategies 238 Chapter Preview 238 Objective Outline 240 New-Product Development Strategy 240 The New-Product Development Process 241 Idea Generation 242 Idea Screening 243 Concept Development and Testing 244 Concept Testing 244 Marketing Strategy Development 245 Business Analysis 246 Product Development 246 Test Marketing 247 Commercialization 249 Managing New-Product Development 250 Customer-Centered New-Product Development 250 Team-Based New-Product Development 251 Systematic New-Product Development 251 Real Marketing 9.1 Nasamat Al Riyadh: TMG s New Product in the Kingdom of Saudi Arabia 252 Product Life-cycle Strategies 253 Introduction Stage 255 Growth Stage 255 Maturity Stage 256 Real Marketing 9.2 Etisalat Challenges Different Stages of the Product Life Cycle 257 Decline Stage 258 Additional Product and Service Considerations 258 Product Decisions and Social Responsibility 258 International Product and Services Marketing 259 Reviewing Objectives and Key Terms 261 Key Terms 262 Discussing & Applying the Concepts 262 Focus on Technology 263 Focus on Ethics 263 Marketing by the Numbers 263 Video Case: Electrolux 264 Company Case Activia in Egypt 264 Chapter 10 Pricing 266 Chapter Preview 266 Objective Outline 268 What is a Price? 267 Factors to Consider When Setting Prices 269 Customer Perceptions of Value 269 Value-Based Pricing 269 Company and Product Costs 271 Types of Costs 271 Real Marketing 10.1 Cheap Chinese Products Flood into Arab Markets 272 Costs at Different Levels of Production 272 Costs as a Function of Production Experience 273 Cost-Plus Pricing 274 Break-Even Analysis and Target Profit Pricing 274 Other Internal and External Considerations Affecting Price Decisions 276 Overall Marketing Strategy, Objectives, and Mix 276 Organizational Considerations 277 The Market and Demand 277 Real Marketing 10.2 The World Wonder, Dubai 278 Other External Factors 282 A01_KOTL5681_01_SE_FM.indd x 8/31/11 9:00 PM

9 Contents xi New-Product Pricing Strategies 283 Market-Skimming Pricing 283 Market-Penetration Pricing 283 Product Mix Pricing Strategies 284 Product Line Pricing 284 Optional-Product Pricing 285 Captive-Product Pricing 285 By-Product Pricing 285 Product Bundle Pricing 286 Price-Adjustment Strategies 286 Discount and Allowance Pricing 286 Segmented Pricing 287 Psychological Pricing 287 Promotional Pricing 288 Geographical Pricing 289 Dynamic Pricing 290 International Pricing 291 Price Changes 292 Initiating Price Changes 292 Responding to Price Changes 293 Reviewing Objectives and Key Terms 295 Key Terms 296 Discussing & Applying the Concepts 296 Focus on Technology 297 Focus on Ethics 297 Marketing by the Numbers 297 Video Case: Ikea 298 Company Case Flydubai Pricing Strategy: Flydubai Enters the Airline Market 298 Chapter 11 Communicating Customer Value: Integrated Marketing Communications Strategy 300 Chapter Preview 300 Objective Outline 302 The Promotion Mix 301 Integrated Marketing Communications 303 The New Marketing Communications Landscape 303 The Shifting Marketing Communications Model 303 The Need for Integrated Marketing Communications 304 Real Marketing 11.1 Economic Slowdown and the Digital Advertising Boom in the Arab World 305 A View of the Communications Process 307 Steps in Developing Effective Marketing Communications 308 Identifying the Target Audienc 308 Determining the Communication Objectives 308 Designing a Message 309 Choosing Media 311 Selecting the Message Source 313 Collecting Feedback 313 Setting the Total Promotion Budget and Mix 314 Setting the Total Promotion Budget 314 Real Marketing 11.2 Qatar Airways 315 Shaping the Overall Promotion Mix 316 Integrating the Promotion Mix 319 Socially Responsible Marketing Communication 319 Advertising and Sales Promotion 319 Personal Selling 320 Reviewing Objectives and Key Terms 320 Key Terms 321 Discussing & Applying the Concepts 321 Focus on Technology 322 Focus on Ethics 322 Marketing by the Numbers 322 Video Case: Crispin Porter + Bogusky 323 Company Case Burger King: Promoting a Food Fight 323 Chapter 12 Promotion Mix Strategies: Advertising and Public Relations 326 Chapter Preview 326 Objective Outline 328 Advertising 328 Setting Advertising Objectives 329 Setting the Advertising Budget 330 Developing Advertising Strategy 331 Evaluating Advertising Effectiveness and Return on Advertising Investment 338 Other Advertising Considerations 338 Real Marketing 12.1 Dove: Championing Real Beauty in the Arab World 340 Public Relations 341 The Role and Impact of Public Relations 342 Major Public Relations Tools 343 Personal Selling 345 The Role of the Sales Force 346 Managing the Sales Force 347 Designing Sales Force Strategy and Structure 348 Recruiting and Selecting Salespeople 350 Training Salespeople 351 Compensating Salespeople 352 Supervising and Motivating Salespeople 352 Evaluating Salespeople and Sales-Force Performance 355 The Personal Selling Process 355 Steps in the Selling Process 355 Personal Selling and Managing Customer Relationships 357 Sales Promotion 358 Rapid Growth of Sales Promotion 358 Real Marketing 12.2 Qatar Automobiles Company 359 Sales Promotion Objectives 359 Major Sales Promotion Tools 360 Developing the Sales Promotion Program 362 Reviewing Objectives and Key Terms 363 Key Terms 365 Discussing & Applying the Concepts 365 Focus on Technology 365 Focus on Ethics 365 Marketing by the Numbers 366 Video Case: The Principal Financial Group 366 Company Case Coca-Cola: Advertising Hits 366 Chapter 13 Direct and Online Marketing: Building Direct Customer Relationships 368 Chapter Preview 368 Objective Outline 370 The New Direct Marketing Model 370 Growth and Benefits of Direct Marketing 371 Benefits to Buyers 371 Benefits to Sellers 372 Customer Databases and Direct Marketing 373 Forms of Direct Marketing 373 Direct-Mail Marketing 374 Telephone Marketing 375 Direct- Response Television Marketing 375 Kiosk Marketing 376 New Digital Direct Marketing Technologies 377 Online Marketing 379 Marketing and the Internet 379 Online Marketing Domains 380 Real Marketing 13.1 Online Business in the Arab World 381 Setting Up An Online Marketing Presence 384 Creating a Website 384 Placing Ads and Promotions Online 386 Creating or Participating in Online Social Networks 387 A01_KOTL5681_01_SE_FM.indd xi 8/31/11 9:00 PM

10 xii Contents Real Marketing 13.2 Social Networks in the Arab World 388 Using 389 The Promise and Challenges of Online Marketing 390 Public Policy Issues in Direct Marketing 390 Irritation, Unfairness, Deception, and Fraud 390 Invasion of Privacy 391 Reviewing Objectives and Key Terms 392 Key Terms 393 Discussing & Applying the Concepts 394 Focus on Technology 394 Focus on Ethics 394 Marketing by the Numbers 395 Video Case: Google 395 Company Case Elsou2.com: The First Online Supermarket in the Arab World 395 Chapter 14 Managing Marketing Channels 400 Chapter Preview 400 Objective Outline 402 Supply Chains and the Value Delivery Network 401 The Nature and Importance of Marketing Channels 403 How Channel Members Add Value 403 Number of Channel Levels 404 Channel Behavior and Organization 405 Channel Behavior 406 Vertical Marketing Systems 407 Horizontal Marketing Systems 409 Multichannel Distribution Systems 409 Changing Channel Organization 410 Channel Design Decisions 411 Analyzing Consumer Needs 411 Setting Channel Objectives 412 Identifying Major Alternatives 412 Evaluating the Major Alternatives 414 Designing International Distribution Channels 414 Channel Management Decisions 415 Selecting Channel Members 415 Managing and Motivating Channel Members 415 Real Marketing 14.1 Toys R Us 416 Public Policy and Distribution Decisions 417 Marketing Logistics and Supply Chain Management 417 Nature and Importance of Marketing Logistics 417 Goals of the Logistics System 419 Major Logistics Functions 419 Integrated Logistics Management 421 Retailing 423 Types of Retailers 424 Retailer Marketing Decisions 427 Segmentation, Targeting, Differentiation, and Positioning Decisions 427 Product Assortment and Services Division 428 Real Marketing 14.2 Orchestrating the Retail Experience 429 Price Decision 430 Promotion Decision 430 Place Decision 430 Wholesaling 431 Agents and Distributors 431 Reviewing Objectives and Key Terms 433 Key Terms 434 Discussing & Applying the Concepts 435 Focus on Technology 435 Focus on Ethics 435 Marketing by the Numbers 436 Video Case: Progressive 436 Company Case Zara: The Technology Giant of the Fashion World 436 Part 4 Extending Marketing 439 Chapter 15 Creating Competitive Advantage 440 Chapter Preview 440 Objective Outline 442 Competitor Analysis 442 Identifying Competitors 442 Assessing Competitors 443 Selecting Competitors to Attack and Avoid 445 Real Marketing 15.1 Middle Eastern Airlines Filling the Market Gaps 448 Designing a Competitive Intelligence System 448 Competitive Strategies 449 Approaches to Marketing Strategy 449 Basic Competitive Strategies 451 Competitive Positions 452 Real Marketing 15.2 Ritz-Carlton: Creating Customer Intimacy 453 Market Leader Strategies 454 Market Challenger Strategies 456 Market Follower Strategies 458 Market Nicher Strategies 458 Balancing Customer and Competitor Orientations 459 Reviewing Objectives and Key Terms 460 Key Terms 461 Discussing & Applying the Concepts 461 Focus on Technology 461 Focus on Ethics 462 Marketing by the Numbers 462 Video Case: Umpqua Bank 462 Company Case Bose: Competing by Being Truly Different 463 Chapter 16 The Global Marketplace 466 Chapter Preview 466 Objective Outline 468 Global Marketing Today 468 Looking at the Global Marketing Environment 470 The International Trade System 470 Economic Environment 472 Political-Legal Environment 473 Cultural Environment 474 Deciding Whether to Go Global 477 Deciding Which Markets to Enter 478 Deciding How to Enter the Market 479 Exporting 480 Joint Venturing 480 Direct Investment 481 Deciding on the Global Marketing Program 482 Real Marketing 16.1 Oreos and Milk, Chinese Style 483 Product 484 Real Marketing 16.2 Desserts in Ramadan 485 Promotion 485 Price 486 Distribution Channels 487 Deciding on the Global Marketing Organization 488 Reviewing Objectives and Key Terms 489 Key Terms 490 Discussing & Applying the Concepts 490 Focus on Technology 490 Focus on Ethics 491 Marketing by the Numbers 491 Video Case: Nivea 491 Company Case B-Tech: A Successful Regional Brand 492 A01_KOTL5681_01_SE_FM.indd xii 8/31/11 9:00 PM

11 Contents xiii Chapter 17 Sustainable Marketing: Social Responsibility and Ethics 494 Chapter Preview 494 Objective Outline 496 Sustainable Marketing 496 Social Criticisms of Marketing 498 Marketing s Impact on Individual Consumers 498 Marketing s Impact on Society as a Whole 503 Marketing s Impact on Other Businesses 505 Consumer Actions to Promote Sustainable Marketing 506 Consumerism 506 Real Marketing 17.1 Improving Society Via Cultural and Islamic Virtues 507 Environmentalism 508 Public Actions to Regulate Marketing 512 Business Actions Toward Sustainable Marketing 513 Sustainable Marketing Principles 513 Real Marketing 17.2 Takaful: A True Customer-Driven Product 514 Marketing Ethics 517 The Sustainable Company 519 Reviewing Objectives and Key Terms 521 Key Terms 522 Discussing & Applying the Concepts 522 Focus on Technology 523 Focus on Ethics 523 Marketing by the Numbers 523 Video Case: Land Rover 524 Company Case ExxonMobil: Social Responsibility in a Commodity Market 524 Appendix 1 Marketing Plan A1 Appendix 2 Marketing by the Numbers A11 Appendix 3 Careers in Marketing A29 References R1 English-Arabic Glossary G1 Index I1 Credits C1 A01_KOTL5681_01_SE_FM.indd xiii 8/31/11 9:00 PM

12 Feature matrix Chapter 1 Chapter opening case BBK, formerly known as The Bank of Bahrain and Regional Kuwait B.S.C. Real Marketing 1.1 Etisalat: Delighting Customers Regional Real Marketing 1.2 Media and Direct Communication Trends in the Regional Arab World Company Case Diwan: A Tale of Heart Over Matter Egypt Chapter 2 Chapter opening case The London Olympics United Kingdom Real Marketing 2.1 Mo men Sandwich: A Recipe for Success Egypt Real Marketing 2.2 Niching: Voluntourism, A New Way to See the World Regional Company Case Bahrain Bay: Building Customer Relations for the Future Bahrain Chapter 3 Chapter opening case The Dubai property market UAE Real Marketing 3.1 Niching: On the Run in Egypt Egypt Real Marketing 3.2 First National Bank: Now You Can Be a Movie Star Lebanon Company Case Al Jazirah: The Genius Inventor Saudi Arabia Chapter 4 Chapter opening case Maktoob Research s Arab Eye website Regional Real Marketing 4.1 Collecting Brand Information in the Arab World Regional Real Marketing 4.2 Luxury Brands in the UAE UAE Company Case Ariel in Egypt: The Value of Consumer Insight Egypt Chapter 5 Chapter opening case Al-Ahli and Zamalek football teams Egypt Real Marketing 5.1 How McDonald s Markets to the Arab Consumers Regional Real Marketing 5.2 Lexus: Delighting Customers After the Sale to Keep UAE Them Coming Back Company Case Arabic BlackBerry: Adapting to the Language of the Market Regional Chapter 6 Chapter opening case Advanced Electronics Company Saudi Arabia Real Marketing 6.1 Aramex Partners with Business Customers Regional Real Marketing 6.2 International Marketing Manners: When in Rome, Global Do as the Romans Do Company Case Boeing: Selling a Dream(Liner) United States Chapter 7 Chapter opening Case Damas Group Regional Real Marketing 7.1 Ramadan Spirit in the Arab World Regional Real Marketing 7.2 Islamic Banking Regional Company Case The Arab Online World Microsoft Maren Regional Chapter 8 Chapter opening case Bahrain Islamic Bank Bahrain Real Marketing 8.1 Breakaway Brands: Connecting with Customers Global Real Marketing 8.2 Fayrouz: An International Brand Built in the Region Egypt Real Marketing 8.3 Service Marketing Global Company Case Alshaya: The House of Brands Regional xiv A01_KOTL5681_01_SE_FM.indd xiv 8/31/11 9:00 PM

13 Feature matrix xv Chapter 9 Chapter opening Case Apple Global Real Marketing 9.1 Nasamat Al Riyadh: TMG s New Product in the Saudi Arabia Kingdom of Saudi Arabia Real Marketing 9.2 Etisalat Challenges Different Stages of the Product Regional Life Cycle Company Case Activia in Egypt Egypt Chapter 10 Chapter opening case Carrefour Regional Real Marketing 10.1 Cheap Chinese Products Flood into Arab Markets Regional Real Marketing 10.2 The World Wonder, Dubai UAE Company Case Flydubai Pricing Strategy UAE Chapter 11 Chapter opening case Unilever Arabia Regional Real Marketing 11.1 Economic Slowdown and the Digital Advertising Regional Boom in the Arab World Real Marketing 11.2 Qatar Airways Qatar Company Case Burger King: Promoting a Food Fight Global Chapter 12 Chapter opening case TBWA\RAAD UAE Real Marketing 12.1 Dove: Championing Real Beauty in the Arab World Regional Real Marketing 12.2 Qatar Automobiles Company Qatar Company Case Coca-Cola: Advertising Hits Regional Chapter 13 Chapter opening case Amazon.com Global Real Marketing 13.1 Online Business in the Arab World Regional Real Marketing 13.2 Social Networks in the Arab World Regional Company Case Elsou2.com: The First Online Supermarket in the Arab World Egypt Chapter 14 Chapter opening case Al Zaytoun Palestine Real Marketing 14.1 Toys R Us Regional Real Marketing 14.2 Orchestrating the Retail Experience Global Company Case Zara: The Technology Giant of the Fashion World Global Chapter 15 Chapter opening case Bahrain Polytechnic Bahrain Real Marketing 15.1 Middle Eastern Airlines Filling the Market Gaps Regional Real Marketing 15.2 Ritz-Carlton: Creating Customer Intimacy Global Company Case Bose: Competing by Being Truly Different Global Chapter 16 Chapter opening case McDonald s Global Real Marketing 16.1 Oreos and Milk, Chinese Style China Real Marketing 16.2 Ramadan Desserts Regional Company Case B-Tech: A Successful Regional Brand Egypt Chapter 17 Chapter opening CSR Middle East Regional case Real Marketing 17.1 Improving Society Via Cultural and Islamic Virtues Regional Real Marketing 17.2 Takaful: A True Customer-Driven Product Regional Company Case ExxonMobil: Social Responsibility in a Commodity Market United States A01_KOTL5681_01_SE_FM.indd xv 8/31/11 9:00 PM

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15 Foreword We are very pleased to see the Arab World Edition of Principles of Marketing. The text was first published for the North America region and has been successfully adopted by hundreds of universities in the Middle East and in other parts of the world. This great edition for the Arab world demonstrates that this textbook, in its scope and depth, effectively meets the demands of educators for a book that offers a comprehensive focus on marketing as a tool for creating valuable customer experiences in various and changing cultural settings. The Arab World Edition brings to the readers the local marketing scenario, perspectives, and practices through case studies and examples. The book provides local insights into the exciting world of marketing in a region that has become a competing arena for increasing numbers of national and multinational corporations. While maintaining the essence of the original U.S. edition, this Arab world version provides students with concepts, approaches, and examples relevant to the Arab culture and its business environment. We are thrilled to see it available for educators and students in the Arab world and hope that they find it useful. Philip Kotler Gary Armstrong xvii A01_KOTL5681_01_SE_FM.indd xvii 8/31/11 9:00 PM

16 Preface The New Arab World Edition! Creating More Value for You! The goal of every marketer is to create more value for customers. So it makes sense that our goal for the new Arab World Edition of Kotler & Armstrong s Principles of Marketing is to continue creating more value for you our customer. Our goal is to introduce you to the fascinating world of modern marketing in an innovative yet practical and enjoyable way, incorporating relevant examples from across the Arab region and across the globe. In this way, the Arab World Edition has the advantage of offering the best of both the regional, as well as the global, worlds of marketing. This Arab World Edition aims to help students in the region to understand and apply the concepts and practices of modern marketing, by relating marketing strategies and theory to students experiences in daily life. We have tried to bring to life global marketing concepts by showcasing and analyzing regional marketing initiatives and practices from all over the Arab world. Of course, we have also retained global examples which demonstrate marketing theory and practice in an international context. In this way, the Arab World Edition has the advantage of offering the best of both the regional, as well as the global, worlds of marketing. Marketing: Creating Customer Value and Relationships A recent survey of top marketers showed that they all share a common goal: putting the consumer at the heart of marketing. Today s marketing is all about creating customer value and building profitable customer relationships. It starts with understanding consumer needs and wants, deciding which target markets the organization can serve best, and developing a compelling value proposition by which the organization can attract, keep, and grow targeted consumers. If the organization does these things well, it will reap the rewards in terms of market share, profits, and customer equity. Five Major Value Themes From beginning to end, the Arab World Edition of Principles of Marketing develops an innovative customer-value and customer-relationships framework that captures the essence of today s marketing. It builds on five major value themes: 1. Creating value for customers in order to capture value from customers in return. Today s marketers must be good at creating customer value and managing customer relationships. Outstanding marketing companies understand the marketplace and customer needs, design value-creating marketing strategies, develop integrated marketing programs that deliver customer value and delight, and build strong customer relationships. In return, they capture value from customers in the form of sales, profits, and customer loyalty. This innovative customer-value framework is introduced at the start of Chapter 1 in a fivestep marketing process model, which details how marketing creates customer value and captures value in return. The framework is carefully explained in the first two chapters and then fully integrated throughout the remainder of the text. 2. Building and managing strong, value-creating brands. Well-positioned brands with strong brand equity provide the basis upon which to build customer value and profitable customer relationships. Today s marketers must position their brands powerfully and manage them well. They must build close brand relationships and experiences with customers. 3. Measuring and managing return on marketing. Marketing managers must ensure that their marketing budgets are being spent wisely. In the past, many marketers spent freely on big, expensive marketing programs, often without thinking carefully about the financial returns on their spending. But that has all been changing in recent years. Marketing xviii A01_KOTL5681_01_SE_FM.indd xviii 8/31/11 9:00 PM

17 Preface xix accountability measuring and managing return on marketing investments has now become an important part of strategic marketing decision making. This emphasis on marketing accountability is addressed throughout this book. 4. Harnessing new marketing technologies. New digital and other high-tech marketing developments are dramatically changing how consumers and marketers relate to one another. The Arab World Edition thoroughly explores the new technologies impacting marketing, from Web 2.0 in Chapter 1 to new-age digital marketing and online technologies in Chapters 12 and 13 to the exploding use of online social networks and customer-generated marketing in Chapters 1, 5, 11, 13, and elsewhere. 5. Sustainable marketing around the globe. As technological developments make the world an increasingly smaller and more fragile place, marketers must be good at marketing their brands globally and in responsible and ethical ways. Material and examples throughout the Arab World Edition emphasize the concept of sustainable marketing meeting the present needs of consumers and businesses while also preserving or enhancing the ability of future generations to meet their needs. Adapted for Students in the Arab World We ve thoroughly adapted Principles of Marketing to meet the needs of students in the Arab region, by including examples which reflect the marketing environment and experience of businesses operating in the Arab region, while still retaining a global perspective overall. We have also included cultural and social insights which will be more familiar and relevant to our audience. We retain Kotler & Armstrong s successful formula: a sharp focus on how to create, communicate and deliver value to customers, and we discuss the major trends and forces impacting marketing in this era of customer value and relationships. Here are just some of the ways in which we ve adapted the book to be ideal for students in the Arab world. Throughout each chapter, Arab businesses and familiar cultural examples are integrated into the text, making the whole book more relevant for our readers. In-depth case studies in each chapter show marketing principles and concepts in practice, at the Chapter Openers, the in-chapter Real Marketing boxes, and end-of-chapter Company Cases. These now feature a well-balanced spread of global examples alongside companies and examples from across the Arab region including Saudi Arabia, the United Arab Emirates, Egypt, Jordan, Palestine, Lebanon, Qatar, Bahrain, Kuwait, Northern Africa, and elsewhere. An English-Arabic Glossary has been added at the end of the book, providing a translation of the key terms found in each chapter. Each chapter has been carefully edited to adapt the English vocabulary to be sympathetic to students whose first language is not English. We have ensured that over-complicated words, sayings or idioms are replaced with straightforward language so that students can focus their energy on understanding the concepts. The book has been reduced in length to 17 focused chapters, to meet the demand for a resource which is easier to handle and cover in the time available. Real Value Through Real Marketing Principles of Marketing features in-depth, real-world examples and stories that show concepts in action and reveal the drama of modern marketing. In the Arab World Edition, every Chapter Opening case study, Real Marketing box and end-of-chapter Company Case has been reviewed for its relevance to you, our Arab world audience. We have replaced many of these case studies throughout the book with examples from the Arab region which will provide familiar, fresh and relevant insights into real marketing practices. We have deliberately retained many other examples from across the world to emphasize the global nature of modern day marketing. A selection of these examples include the following: BBK Bank (formerly The Bank of Bahrain and Kuwait) has grown to become a leading commercial bank in its markets, by focusing on client-driven customer service, employee development and brand building. ( Chapter 1 ) A01_KOTL5681_01_SE_FM.indd xix 8/31/11 9:00 PM

18 xx Preface The voluntourism movement has sprung up to meet the needs of a particular niche we explore voluntourism programmes operating in Jordan, Syria, Lebanon and elsewhere. (Chapter 2 ) Saudi Arabian company Al Jazirah has capitalized on environmental factors in successfully developing and marketing its evaporative coolers. ( Chapter 3 ) Proctor & Gamble launched its Ariel product into Egypt, based on rigorous market research and a solid understanding of the current habits and needs of potential customers. ( Chapter 4 ) The devoted and divided fan bases of the Egyptian football teams Al-Ahly and Zamalek show the importance of social and cultural interests such as football in shaping consumer behavior. (Chapter 5 ) Advanced Electronics Company (AEC), the Saudi-based company, has developed an international client base including Boeing, Lockheed Martin, Rockwell International, Saudi Ministry of Water & Electricity, Aramco, Siemens, Nokia. It has built an approach to business-to-business marketing based on deep relationships with clients, to become a strategic, problem-solving partner. (Chapter 6 ) Damas Group, the jewelry and watch retailer operating across the Arab world and beyond, uses segmentation wisely to target different customer groups. ( Chapter 7 ) Microsoft developed its Maren product, which represented a leap forward in addressing the problem of using Arabic language online and with a QWERTY keyboard, by working to understand customer needs and responses in depth. ( Chapter 7 ) Alshaya understands the importance of brands, and uses this knowledge to operate franchises of many international brands in the Arab world. ( Chapter 8 ) Apple founder Steve Jobs used dazzling customer-driven innovation to first start the company and then to remake it again 20 years later. ( Chapter 9 ) Flydubai used pricing strategy to meet the demand for low cost flights and launch as a new airline in the UAE. (Chapter 10 ) Coca-Cola combines music and advertising to appeal to its customers, with recent campaigns in the Middle East including Nancy Ajram to raise profile. ( Chapter 12 ) Amazon.com has developed industry-leading expertise in using the internet as a tool for delivering customer value. ( Chapter 13 ) Bahrain Polytechnic has created a clear competitive advantage for its target students by distinctly differentiating itself from its competitors. ( Chapter 15 ) McDonald s, the quintessential all-american company, now sells more burgers and fries outside the United States than within. We explore its journey into the Russian market. ( Chapter 16 ) CSR Middle East promotes corporate social responsibility across the region by working closely with a range of businesses, organizations and NGOs. ( Chapter 17 ) Each chapter is packed with countless real, relevant, and timely examples that reinforce key concepts and bring marketing to life. Valuable Learning Aids The Arab World Edition continues the hallmark approach to text design crafted in Principles of Marketing, to inspire students and present everything as clearly as possible. A wealth of chapteropening, in-chapter, and end-of-chapter learning devices help students to learn, link, and apply major concepts: Chapter Preview. As part of an active and integrative chapter-opening design, a brief section at the beginning of each chapter previews chapter concepts, links them with previous chapter concepts, and introduces the chapter-opening story. Chapter-opening marketing stories. Each chapter begins with an engaging, deeply developed, illustrated, and annotated marketing story that introduces the chapter material and sparks student interest. Many relevant and inspiring examples from the Arab world have been added. Objective outline. This chapter-opening feature provides a helpful preview outline of chapter contents and learning objectives. Author comments and figure annotations. Throughout the chapter, author comments ease and enhance student learning by introducing and explaining major chapter sections. There are also comment bubbles on the figures to help explain concepts to students. A01_KOTL5681_01_SE_FM.indd xx 8/31/11 9:00 PM

19 Preface xxi Real Marketing boxes. Each chapter contains two boxed case study features that provide an indepth look at real marketing practices of large and small companies, including a wide range of new examples from the Arab world. Reviewing the Objectives and Key Terms. A summary at the end of each chapter reviews major chapter concepts, chapter objectives, and key terms. Discussing and Applying the Concepts. Each chapter contains a set of discussion questions and application exercises covering major chapter concepts. Focus on Technology. Application exercises at the end of each chapter provide discussion of important and emerging marketing technologies in this digital age. Focus on Ethics. Situation descriptions and questions highlight important issues in marketing ethics at the end of each chapter. Marketing by the Numbers. An exercise at the end of each chapter lets students apply analytical and financial thinking to relevant chapter concepts and links the chapter to Appendix 2 : Marketing by the Numbers. Company Cases. Company cases for class or written discussion are provided at the end of each chapter many of these are now developed specifically for the Arab World Edition. These cases challenge students to apply marketing principles to real companies in real situations. Video Cases. Short cases and discussion questions appear at the end of every chapter, to be used with the set of 4- to 6-minute videos that accompany this edition. Marketing Plan appendix. Appendix 1 contains a sample marketing plan that helps students to apply important marketing planning concepts. Marketing by the Numbers appendix. An innovative Appendix 2 provides students with a comprehensive introduction to the marketing financial analysis that helps to guide, assess, and support marketing decisions. More than ever before, the Arab World Edition of Principles of Marketing creates value for you it gives you all you need to know about marketing in an effective and enjoyable total learning package! A Valuable Learning Package A successful marketing course requires more than a well-written book. A total package of resources extends this edition s emphasis on creating value for you. The following aids support Principles of Marketing. Videos The video library features exciting segments for this edition. All segments are available in mymarketinglab. Here are just a few of the videos offered: Live Nation s Customer Relationships TOMS Shoes Marketing Environment E*TRADE s Advertising and PR Strategies Principle Financial Group s Personal Selling Umpqua Bank s Competitive Advantage mymarketinglab ( ) gives you the opportunity to test yourself on key concepts and skills, track your own progress through the course, and use the personalized study plan activities all to help you achieve success in the classroom. Features include: Personalized study plans Pre- and post-tests with remediation activities directed to help you understand and apply the concepts where you need the most help. Self-assessments Prebuilt self-assessments allow you to test yourself. A01_KOTL5681_01_SE_FM.indd xxi 8/31/11 9:00 PM

20 xxii Preface Interactive elements A wealth of hands-on activities and exercises let you experience and learn firsthand. Whether it is with the online e-book where you can search for specific keywords or page numbers, highlight specific sections, enter notes right on the e-book page, and print reading assignments with notes for later review or with other materials including Real People Real Choices Video Cases, online end-of-chapter activities, Active Flashcards, and much more. iquizzes Study anytime, anywhere iquizzes work on any color-screen ipod and are comprised of a sequence of quiz questions, specifically created for the ipod screen. Find out more at No book is the work only of its authors. We greatly appreciate the valuable contributions of several people who helped make this new edition possible. Anwar Habib: I would like to acknowledge the continuous inspiration and support of my wife Fahmida in writing this text. I would also like to thank Nada Yaghi, my ex-student, for her valuable research and support in selecting appropriate regional examples for the text. Finally I would like to thank all the regional organizations, like MAF group, Unilever, Masafi, and Al Islami Foods, who have supported me with case study materials and other information. I d also like to extend a special thanks to Sarah Wightman for her excellent editorial support. Ahmed Tolba: I would like to dedicate this edition to my wife Nayla and my kids Ismail and Amina. I would also like thank Ahmed El Banhawy for his significant contribution to the completion of this textbook, and my teaching assistants Laila Yassin and Ali El Gendy for their remarkable efforts in finding appropriate regional case studies. Finally, I would like to thank everyone at Pearson for their significant efforts and professional support. Anwar Habib Ahmed Tolba A01_KOTL5681_01_SE_FM.indd xxii 8/31/11 9:01 PM