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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.


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FUNDAMENTALS OF


MARKETING
Marilyn A. Stone
and

John Desmond
With a contribution by

J.B. (Ian) McCall


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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)



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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.


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CONTENTS

1

2

3

List of illustrations
List of tables
List of case studies
Preface
Acknowledgements
List of abbreviations

xi
xiii
xv
xvii
xviii
xix

Introduction

xxiii

Marketing: development and scope of the subject


1

Introduction
The study of marketing
A managerial approach
Developments in marketing theory
Conclusion

2
2
3
8
18

Strategic marketing and the planning process

20

Introduction
The marketing environment
Conclusion

21
21
41

Consumer buyer behaviour

43


Introduction
Economic theory
Freud and psychoanalysis
Freud’s legacy: changing social characters
Gender identity
Behaviourism
Cognitive Information Processing
Consumer involvement
The behaviourist explanation of involvement
Conclusion

44
44
46
53
57
61
76
87
94
96


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CONTENTS ■ ■ ■ ■

4

5

6

7

8

■ ■ ■ viii

Industrial buyer behaviour

98

Introduction
Types of organizational markets
The organizational buying centre
The B-to-B buying process

Comparison between B-to-B and consumer buyer behaviour
New approaches to B-to-B buying behaviour
Strategic use of technology in buying: intranets and extranets
Conclusion

99
99
101
102
106
107
108
113

Marketing research

114

Introduction
The structure of the marketing research industry
The marketing research process
Marketing research methodology
Sampling methods
Questionnaire design
Attitude, beliefs and behaviour
Definition of the marketing mix
Marketing research industry controls
Conclusion

115

120
125
125
142
147
147
156
166
169

Segmentation, targeting and positioning

172

Introduction
Market segmentation
Selecting target markets
Positioning
Conclusion

173
174
190
195
200

Branding

201


Introduction
Brief modern history of branding
Brand decisions
Mainstream explanation of branding
Behaviourist view
Brand loyalty
Conclusion

202
202
205
206
219
221
224

Product

225

Introduction
Characteristics of the product life cycle and their marketing implications

226
229


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■ ■ ■ ■ CONTENTS

9

10

11

12

Facets of the PLC
New product development (NPD)
The market diffusion process
Organizing for new product development
Conclusion

236
239

258
259
263

Pricing

265

Introduction
Price and the marketing mix
Pricing objectives
Factors affecting pricing decisions
Setting a price
Pricing industrial goods
Pricing and information technology
Conclusion

266
267
268
269
271
279
281
289

Promotion

290


Introduction
Relations between corporate and marketing communications
The communications process
The marketing communications process
Planning marketing communications campaigns
Communications contact techniques
IT influence on advertising media
Conclusion

291
291
291
302
308
322
332
335

Place: channels of distribution

337

Introduction
Channel constraints
The structure of channels of distribution
Intermediaries within channels of distribution
Types of retail franchise agreements
Developments in retailing
Development in information technology
International expansion of the retail industry

Conclusion

338
338
344
348
349
352
359
364
366

Virtual marketing

369

Introduction
The Internet
The World Wide Web
Consumer behaviour on the Web

370
370
371
374
ix ■ ■ ■


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CONTENTS ■ ■ ■ ■

13

■■■ x

Marketing and the Internet
Other issues relating to promotion
Conclusion

378
388
392

Marketing planning and implementation

394


Introduction
Setting out the mission, aims and objectives
Conclusion

395
399
415

Notes
Answers to review questions
References
Index

417
419
446
460


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ILLUSTRATIONS

1
2.1
2.2
2.3
2.4
2.5
2.6
2.7
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10

3.11
3.12
4.1
5.1
5.2
5.3
5.4
6.1
6.2
6.3
6.4
7.1
7.2
7.3
7.4
8.1

The structure of the book
The firm (organism) in relation to its environment
Trends in urbanization
Population aged 65+
Gross domestic product per capita
Carbon emissions per capita
The marketing planning process
SWOT: creating a fit between organization and environment
Relations between key terms in later Freudian theory
Summary of classical, operant and cognitive learning processes
Example of ‘reason why’ copy
Example of anxiety appeal
Foxall’s behavioural perspective model

Contingencies of consumer choice
Simplified cognitive information system
The theory of reasoned action
Cognitive model of the consumer buyer decision process
The relationship between involvement and complexity
The purchase decision process: high involvement
Decision making for brand-loyal customers
The decision process for choice of supplier
Marketing information system
The marketing research process
Decomposition of Joe’s hierarchy of beliefs about the Seychelles
Decomposition of Joe’s hierarchy of beliefs, indicating strength of belief
The VALS segmentation system
Process of target market selection
Target market selection
Perceptual map of financial services
Differences in brand personality
Referent system for perfume products
Brand from drawer of meaning to brand as signifier of meaning
Marketing and the brand community
The Product mix, Procter & Gamble

xxiv
21
25
25
30
31
32
33

51
62
64
66
72
74
79
83
84
91
92
92
102
116
126
150
151
182
194
194
196
207
213
215
217
228
xi ■ ■ ■


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ILLUSTRATIONS ■ ■ ■ ■

8.2
8.3
8.4
8.5
9.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
11.1

12.1
12.2
12.3
12.4
13.1
13.2
13.3

■ ■ ■ xii

The product life cycle model
The product life cycle for established products
The product life cycle for fad-type products
Stages in new product development
Approaches to price setting
Simple model of the mass-communication process
Development of the model of the mass-communication process
Industry structure: marketing communications
Planning the process for integrated marketing communications
‘Push’ and ‘pull’ strategies
The Foote Cone & Belding grid
The creative brief
Social advertising
Consumer and industrial channels of distribution
Internet penetration
Primary uses of the Web
Traditional marketing communications
Internet-based communications
An example of a Gantt chart used in marketing planning
Stoats Porridge Bars mobile unit

Summary of Stoats Porridge Bars’ website visitors

230
238
238
240
272
292
294
303
311
314
315
324
333
345
372
375
386
386
398
406
411


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TABLES

1.1
1.2
2.1
2.2
3.1
3.2
3.3
5.1
5.2
5.3
5.4
5.5
5.6

5.7
5.8
6.1
6.2
6.3
6.4
8.1
8.2
8.3
8.4
8.5
8.6
9.1
9.2
10.1
10.2
10.3

Marketing orientation
Relations between efficiency and effectiveness
One hundred technical innovations likely in the next thirty years
Marketing strategy process: problem-solving process
Key relations between different explanations
Mean involvement profile
Differences between low and high-involvement styles
Top global research organizations, 2003–2004
World marketing research expenditure, 2002
Top ten marketing research markets in Europe, Asia Pacific
and Latin America, 2002
UK marketing research agency turnover, 2003

Research methods used by UK marketing research agencies,
2002
Decomposition of Joe’s hierarchy of beliefs for level 1
Decomposition of Joe’s hierarchy of beliefs for level 2
Example of Osgood scale
The ACORN consumer targeting classification
Mean equivalent income of age group as proposition of overall
mean, selected countries, mid-1980s
Socio-economic classification (JICNARS)
Typical market segments visiting a UK supermarket
Top world’s most valuable brands, 2004
Top ten ranked brands in the UK, 2004
Marketing responses to the product life cycle
Idea-screening criteria
Approaches to new product development
Top ten toys, 1988–1997
Stages of the product life cycle
Computation for each projection combination
Denotation and Connotation
Meanings of the colour red
The world’s top ten core advertising agency brands, 2002

6
7
23
32
44
88
89
122

122
123
124
125
151
152
155
176
177
181
185
234
235
236
242
259
261
271
278
293
295
327
xiii ■ ■ ■


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TABLES ■ ■ ■ ■

10.4
10.5
10.6
11.1
11.2
11.3
11.4
11.5
11.6
11.7
12.1
13.1
13.2

■ ■ ■ xiv

UK total advertising expenditure by medium, 2003
Top ten advertisers in the UK, 2003

Advertising expenditure by medium in selected European
countries, 2003
UK franchise operations, 2003
Top ten gobal retailers, 2004
Top ten UK retailers, 2004
The structure of the retail grocery trade in Great Britain, 2002
Concentration of turnover among the retail grocery trade in
Great Britain, 2002
Grocery retailer market share in the UK, 2005
Top twenty European retailers, ranked by turnover, 2003
Differences between traditional and multimedia communications
Summary of Stoats Porridge Bars’ website visitors, August
to December 2005
Festivals and events attended, June 2005 to January 2006

327
328
329
350
352
353
355
355
356
357
381
410
412



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CASE STUDIES


































Marketing within the sex industry
Who held back the stone?
Drinking Coke in Trinidad
The role of guanxi in Chinese buying negotiations
Apple computer: from Mac to iMac and iPod
Buying a computer system for a hospital

Baxi looks to Europe for expansion
Developments in qualitative research methods
Developments in television audience rating measurement
Marketing research’s strategic contribution to the expansion of
carbonated soft drinks markets in emerging economies
Segmentation applied to the Tiberias Hotel
Shaping brand congruity: Midland Bank brands
Brand cult: who needs enemies?
Brand personality: FCUKed?
Virgin’s approach to direct sales in financial services
Crayola crayons
Butlin’s holiday camps
Test marketing chocolate
Successful innovation in the flat glass process
Feeding the Furby fad
Dumpy bottles for baby prove a world beater
Product rebranding related to merino wool in New Zealand
Pricing the Ford Mustang
The price of vodka
Online retailing pricing
The dust is settling on the Dyson market clean-up
Car price war looms in China as Shanghai Volkswagen cuts prices
Rover drivers and dealers face substantial losses in the value of
their cars and related financing
The role of pricing in the cashmere knitwear industry
BAE Systems sells defence subsidiary at knock-down price due
to national security
Madame Tussaud’s seeks star partners

14

16
26
37
38
110
112
132
159
160
198
208
218
223
231
232
233
252
256
260
262
262
274
276
282
283
285
286
287
288
321

xv ■ ■ ■


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CASE STUDIES ■ ■ ■ ■







■ ■ ■ xvi

Social advertising
Franchising for Dyno-Rod

Charity shops
The Internet competing with traditional channels: Amazon.com
versus Barnes & Noble
Internet ethics: the Danish consumer ombudsman identifying hidden
advertisements on the Net
Introducing Stoats Porridge Bars

333
351
358
389
390
404


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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 ■ ■ ■


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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

■ ■ ■ xviii


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ABBREVIATIONS

A&R
ABC
ABMRC
ACORN
ACS
AGB
AIDA
AMSO
ARG
ARS
ATM
ATR
BBC
BEUC
BMRA
BMRB
BRAD

BSA
BSE
CAPI
CASI
CATI
CAWI
CD
CEE
CIM
CIP
CIS
CJMR
CME
CS
CSD
DAGMAR






artists and repertoire
Audits Bureau of Circulation
Association of British Market Research Companies
A Classification of Residential Neighbourhoods
Association of Charity Shops
Audits of Great Britain
Awareness, Interest, Desire and Action model
Association of Market Survey Organizations

Argos Retail Group
Audience Reaction Service (British Broadcasting Corporation)
Automatic teller machines (cash machine)
Awareness, Trial and Reinforcement
British Broadcasting Corporation
European Consumer Organization
British Market Research Association
British Marketing Research Bureau (market research agency)
British Rate and Data
British Sandwich Association
bovine spongiform encephalophy
computer-assisted personal interviewing
Computer-assisted self-interviewing
Computer-assisted telephone interviewing
Computer-assisted Web interviewing
compact disc
Central and Eastern Europe
Chartered Institute of Marketing
cognitive information processing
Commonwealth of Independent States
Carrick James Market Research (market research agency)
computer-mediated environment
conditioned stimulus
carbonated soft drinks
Designing Advertising Goals; Measuring Advertising Response
model
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ABBREVIATIONS ■ ■ ■ ■

DJ
DVD
DVR
ECR
EDI
EDP
EFAMRO
EFTPOS
EPOS
ESOMAR
EST
EU
FCB
FMCG

FRUGGING
FTC
FTP
GB
GCC
GDP
GELS
GI
GRP
GUS
H&M
HBA
HBOS
HERO
HOG
HTML
HTTP
IMRG
INTV
IPA
ISP
ITCA
JICNARS
JICREG
JIT
JND
KFC
LP

■ ■ ■ xx


disc jockey
digital video disc
digital video recorder
effective consumer response
electronic data interchange
electronic data processing
European Federation of Associations of Market Research
Organizations
electronic funds transfer point of sale
electronic point of sale
European Society for Opinion and Market Research
Erhard Seminar Training
European Union
Foote, Cone & Belding (advertising agency)
fast-moving consumer goods
Funding under the guise of marketing research (for charities)
Federal Trade Commission
file transfer protocol.
Great Britain (England, Scotland and Wales)
Gulf Co-operation Council
gross domestic product
General Electric Lighting Division
glycemic index (diet)
gross rating points (of US television)
Great Universal Stores
Hennes & Mauritz (Swedish youth fashion clothes retailer)
Health and Beauty Audit
Halifax and Bank of Scotland
health experience research online (YouGov panel)

Harley-Davidson Owners’ Group
hyper-text markup language
hypertext transfer protocol
Interactive Media in Retail Group
international television research group
Institute of Practitioners in Advertising
internet service provider
Independent Television Companies’ Association
Joint Industry Committee for National Readership Surveys
Joint Industry Committee for Regional Press Readership
just-in-time
just noticeable difference
Kentucky Fried Chicken
long-playing (record)


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■ ■ ■ ■ ABBREVIATIONS

M&S
MEAL
MCIF
MIS
MNC
m.p.h.
MRP I
MRP II
MRS
MUD
NFS
NHS
NOP
NRS
OECD
OFT
P&G
PBG
PCB
PDA
PETV
POS
POSTAR
PR
PSP
PSYBT
R&D

RAJAR
RBS
RDU
ROI
SAFE
SEU
SIC
SMR
SOS
SRI
STAMP
sUGGING
SWOT
TARIS
TNS

Marks & Spencer
Media Expenditure Analysis
marketing customer information files
marketing information system
multinational corporation
miles per hour
materials requirements planning
manufacturing resource planning
Market Research Society
multi-user domain
network file system
National Health Service
National Opinion Poll (market research agency)
National Readership Survey

Organization of Economic Co-operation and Development
Office of Fair Trading
Procter & Gamble
Pepsi Bottling Group
printed circuit board
personal digital assistant
Pan-European Television Research (consortium of cable and
satellite operators) replaced by INTV
point of sale
Poster Audience Research body
public relations
PlayStationPortable
Prince’s Scottish Youth Business Trust
research and development
Radio Audience Joint Advertising Research
Royal Bank of Scotland
remote detection unit
return on investment
Sustainable Agriculture Food and Environment
subjected expected utility
Standard Industrial Classification
Sender–Messenger–Receiver model (communications)
Scottish Omnibus Survey (TNS)
Stanford Research Institute
Satellite Television Audience Measurement Partnership
selling under the guise of marketing research
strength and weaknesses/opportunities and threats (analysis model)
Television Audience Research and Information System
Taylor Nelson Sofres (market research agency)
xxi ■ ■ ■



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ABBREVIATIONS ■ ■ ■ ■

TNS SOS
TVR
UCS
UN
URL
US
USP
VALS
VAT
VF
VOIP

VSS
WAN

■ ■ ■ xxii

TNS Scottish Opinion Survey
television response rate
unconditioned stimulus
United Nations
uniform resource locator
United States (of America)
unique selling proposition
Values and Lifestyles
value added tax
Vanity Fair
voice over Internet protocol.
Veronis Suhker Stevenson (US private equity firm)
wide area network


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INTRODUCTION
A functionalist approach
to marketing






Bell (1966) discusses marketing’s debt to systems theory, in particular to cybernetics, ‘the
science of control and communication in the animal and in the machine’, first developed
by Norbert Wiener. This focuses attention on marketing as part of a social system. Generally,
the approach used in this text is managerialist, focused on the perspective of the firm rather
than that of the customer. Both firms and customers are considered in relation to the
environment in which they seek to survive. The view is that firms can best survive when
they seek to ensure the survival and satisfaction of the customers on whom they depend.
This approach enables the following concepts to be explored:






The role played by marketing in helping firms control and successfully adapt to the
environment by means of a focus on customer needs. Customer orientation plays a

key role in the satisfaction of organizational goals, usually profit.
The behaviour of firms when competition is intense and survival is the goal. A focus
on competitors including the destruction of a competitor may best ensure the continued
existence of the organism (Bell, 1966: 65).
The role of marketing in its wider social and environmental context.

This functionalist approach follows the managerialist focus of the marketing ‘mainstream’
orientation. It helps to understand why marketing has a paradoxical orientation both to the
customer and to warfare; however, it also enables looking outside of the relatively narrow
context to those wider issues which are the concerns of macro-marketing, social marketing
and ‘new’ approaches such as relationship marketing. The approach taken in the text is to
focus on traditional marketing while incorporating aspects of relationship marketing and
internal marketing. Figure 1.1 summarizes some of the relationships between these with
respect to the different types of relationships that can exist between marketers, other
organization members and customers.
This book concentrates on the traditional marketing activities summarized in side 1
of the triangle in Figure 1.
Theme: introduction to marketing theory and practice:
Chapter 1: Marketing development and scope of the subject.
Chapter 2: Strategic marketing and the planning process.




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INTRODUCTION ■ ■ ■ ■
Figure 1

Customer

The structure
of the book.
1 traditional
marketing,
2 relationship
marketing,
3 internal
marketing

1

Marketer


2

3

Organisation

Theme: understanding and analysing customers:

Chapter 3: Consumer buyer behaviour.

Chapter 4: Industrial buyer behaviour.

Chapter 5: Marketing research.
Theme: constructing the offer:

Chapter 6: Segmentation, targeting and positioning.

Chapter 7: Branding.
Following this there are four key chapters, each of which is devoted to one item of the ‘4
Ps’, otherwise known as the marketing mix:





Chapter 8: Product.
Chapter 9: Pricing.
Chapter 10: Promotion.
Chapter 11: Place.


Then there is a chapter on virtual marketing discussing contemporary developments:


Chapter 12: Virtual marketing.

The text concludes with a chapter bringing together the material covered throughout the
text as it relates to marketing planning:


■ ■ ■ xxiv

Chapter 13: Marketing planning and implementation


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