Editor’s Note: Professor Dr. Philip Kotler is the S.C. Johnson & Son Professor of International Marketing at the Kellogg School of Management, Northwestern University, Evanston, Illinois. He has been honored as one of the world’s Leading Marketing Thinkers. He received his Master’s Degree at the University of Chicago and his PhD Degree at MIT, both in Economics. He did post-doctoral work in Mathematics at Harvard University and in Behavioral Science at the University of Chicago.
Professor Kotler is the author of several bestselling books including Marketing Management: Analysis, Planning, Implementation and Control. It is the most widely used marketing book in graduate business schools worldwide. He has published over one hundred articles in leading journals, several of which have received best-article awards.
He has been a consultant to IBM, General Electric, Sony, AT&T, Bank of America, Merck, Motorola, Ford, and others. The Financial Times included him in its list of the top 10 Business Thinkers.
eTalk’s Niaz Uddin has interviewed Philip Kotler recently to gain insights about his ideas, research and works in the field of marketing and creating better world.
Niaz: Dear Kotler, thank you so much for joining us. We are delighted and honored to have you at eTalks.
Philip Kotler: Niaz, thank you for having me.
Niaz: You are an economist trained at the University of Chicago (M.A.) and MIT (Ph.D.). Three of your Professors were Nobel Prize Economists – Milton Friedman, Paul Samuelson, and Robert Solow. But you have been cited as the world’s foremost expert on the Strategic Practice of Marketing. Can you please tell us a little bit about yourself and why marketing became such a big factor in your life?
Philip Kotler: Throughout my study of economic theory, I was bothered by the absence of discussions of distribution institutions (wholesalers, retailers, agents, jobbers, etc.) and promotional tools (advertising, sales promotion, and salesforce). It seemed to me that the level of market demand and individual company demand are heavily influenced by these institutions and activities as well as price (which absorbed the most attention of economists). When I was offered a position to teach either economics or marketing at the Kellogg School of Management at Northwestern University, I chose to teach marketing so that I could show that it was a branch of economic science.
I moved into the question of what influences the level, composition and timing of customer demand and what are the determinants of individual demand. Classic economics assumes a world of rational buyers and rational producers. I always felt that this grossly oversimplified the understanding of customer behavior and producer behavior. The recent growth of interest in behavioral economics in contrast to classical economics is bringing many missing institutions and activities into economic focus.
Niaz: So how do you define Marketing?
Philip Kotler: The shortest definition of marketing is “Finding needs and filling them profitably.” However, I would rather cite the American Marketing Association’s definition that says “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for consumers, clients, partners, and society at large.” (American Marketing Association, 2008)
Niaz: In this hyper competitive era, what do you think about the Position of Marketing in Total Business Operation? How can marketing change the entire game plan?
Philip Kotler: In spite of the fact that marketing is now headed by a Chief Marketing Officer (CMO) who presumably participates in the company’s strategy development, I find in many companies that the CMO is not invited or expected to be an active participant in strategy development. It’s as if senior management wants the CMO to continue managing the marketing work without interfering with long range strategic planning.
The irony is that the CMO is the person in the company who is closest to the changing marketplace and is in the best position to spot new opportunities for the company. Because the CMO is probably going to have a left brand (analytical) and a right brain (creative), CMOs are more likely to work as game changers during the planning process. We expect CMOs to have a very deep understanding of customers, competitors, distributors, and suppliers.
If I ran a company, I would want my Chief Marketing Officer (CMO) to be modeled on Steve Jobs and come up with big, new ideas and also be modeled on Bill Gates with a deep grasp of business analytics.
Niaz: Your Marketing Management book is in its 14th edition and is used in most MBA Marketing courses worldwide. A certified classic, the book has ranked among the Top 200 Titles on Amazon.com and been named among the 50 Best Business Books of All Time by Financial Times. You published the first edition of this book around 46 years ago. So what are the revolutionary changes has occurred by this time in our society?
Philip Kotler: During this period, I have witnessed a lot of changes in the marketplace and I have managed to portray them in each new edition of Marketing Management, now in the 14th edition. My editions helped emphasize the need to adopt a customer orientation; to precede the 4Ps with segmentation, targeting and positioning (STP); to move into higher mathematics and better marketing metrics to show accountability; to emphasize the social responsibilities of marketing; to broaden marketing to cover the marketing of places, people, and ideas; to recognize the importance of relationship marketing over transaction marketing; and to recognize the revolutionary power of digital and social marketing. My next edition will enlarge on some new trends such as co-creation, crowdsourcing, sustainability, dynamic pricing, digital marketing, marketing automation, and growth strategies.
Niaz: What are the biggest shifts you see happening among consumer attitudes and behaviors right now and how is technology influencing this?
Philip Kotler: Consumers are worried about the future and their ability to keep their job and hopefully earn a good and growing income. They see the high level of unemployment in the U.S. and Europe and see a growing number of industries – music, publishing, movies, retail book stores – being disrupted by online and digital marketing. This leads consumers to save more and spend less which only increases the loss of jobs. And companies see only two ways to compete, either by presenting a lower price to reach the mass market (Wal-Mart) or by presenting a higher price to reach the affluent (Gucci). The middle is gone.
Niaz: How are those shifts affecting Marketing?
Philip Kotler: The big problem facing companies today is how to grow in a low growth market. My answer is that marketers face more opportunities and hidden pockets of growth than they normally recognize. I just published Market Your Way to Growth: Eight Ways to Win. There are eight chapters and each examines a specific pathway to growth. I worry that companies get stuck in one strategy that is now showing diminishing returns and fail to shift in time to any of the other seven pathways to growth.
Niaz: What kind of impact are the Internet, Social Media and other Advances in Communications Technology having on marketing?
Philip Kotler: The Internet is having an impact today that is comparable to what the world felt when Gutenberg introduced the idea of printing. The Internet, social media and new communication technologies are major game changers in marketing. No longer does the company own its brand by having a monopoly on communications about their brands. It is the consumers and their peer-to-peer talk that is shaping our images of brands and what to buy and how much to pay. Furthermore, no company can afford to deceive customers without being quickly exposed on the Internet.
Niaz: Are the ‘four Ps’ still a useful framework?
Philip Kotler: Yes. Please appreciate that the 4Ps are the basis of a marketing plan. Any respectable marketing plan must discuss the company’s decisions on Product, Price, Place and Promotion. If the company wants to add some other things, they are either already implied in the four Ps or could be added. For example, services are part of the product, and sales force is part of promotion. Packaging is part of the product. Recently Professor Jagdish Sheth introduced the four A’s – Availability, Affordability, Acceptability, and Awareness – but I see the 4As not as a competitor but a useful complement that precedes the setting of the 4Ps. The 4As identify the consumer conditions that should be satisfied and it is the job of the 4Ps to follow upon the 4As.
Niaz: What do you see the role of technology being in the new marketing mix?
Philip Kotler: New technologies affect all of the 4Ps. The advent of 3D Printing will help entrepreneurs design new products cheaper and faster. The development of software to do dynamic pricing will allow airlines to change the price of seats depending on the number of seats already sold. The development of new distribution channels such as online selling and eBay are increasing the ease of transacting. The development of social media technologies such as Facebook, Twitter and YouTube are changing our tools for promotion.
Niaz: Well known marketers like Yvon Chouinard, the founder of Patagonia, believe that “traditional advertising is dead.” Is he correct or misled, and why?
Philip Kotler: This statement makes a good headline but it is inaccurate. Traditional advertising will continue in its role as brand builder but it will have to do it with a lower budget. Some percentage of every advertising budget will have to move into digital and social media marketing. Right now this may be 5 percent, then 10 percent, and conceivably in five or more years 50 percent. The more correct statement of Yvon Chouinard would be that traditional advertising will increasingly partner with digital marketing, one supporting the other in a synergistic way.
I will add one more thought about advertising. What is most important in advertising is copy, not media. The best media won’t make up for poor copy. I don’t think advertising agencies come up with exceptional campaigns. Of the last 10 campaigns that you saw, you are unlikely to be impressed with more than one. Most campaigns simply lack originality and punch. I prefer to hire three advertising agencies and pay them for three campaign ideas for the same product and then choose the best campaign idea and hire a separate media agency to develop the best media mix to carry the best of the three campaign ideas to the target audience.
Niaz: Let’s look at marketing in the future. What changes are going to occur within in next couple of decades?
Philip Kotler: Here are four changes out of many:
1. Companies will increasingly invite customers to co-create products with the company.
2. Companies will increasingly resort to crowdsourcing to get ideas for new products, new advertising campaigns, and new sales promotion ideas.
3. Companies will increasingly move to marketing automation where they use artificial intelligence to carry out marketing activities that were formerly done by skilled marketers.
4. Companies will increasingly learn how to produce “lovemarks” with their customers and employees.
Niaz: What are the points that a CMO must remember now before setting marketing plan?
Philip Kotler: The first need is to get each marketing planner to carefully define the target audience and deeply understand their needs and desires and the main triggers to purchase. The aim should be to discover something new about that target audience, some new insight into their psyche that will cause them to want to take the offer.
Niaz: As you know Disruptive Innovation sometimes makes Customer Driven Company obsolete. In addition to giving most priority to customers, companies now need to focus on some other important factors like changing technological trend, innovation, market shifts and so on. Now, what are your suggestions for companies to set marketing plans in order to save their companies from getting obsolete for Disruptive Innovation?
Philip Kotler: Every company and industry is in danger of disruption. The choice facing a company is whether to be disrupted or be the disrupter. I would advise a company to run a meeting ever so often to consider everything that might disrupt the company, whether it is a new technology, a shift in consumer tastes or their pocketbook, etc.
Each possible disruption needs to be assessed for its severity and its probability of happening. A serious probable disruption poses the following choice. Either sell the business now before it loses its value due to the imminent disruption, or invest in the disruption to replace your business and become the disrupter.
Niaz: How can marketing help Startups to survive in front of giant competitors like Google, Facebook, Amazon and Apple?
Philip Kotler: Many entrepreneurs precisely try to take a bite out of a giant competitor. Right now, several companies are trying to hit Google by setting up a more focused search system. Their aim is not to slay Google so much as ironically to sell out to Google. Giant companies are well prepared to buy up any company that carries a disruptive potential and either bury it on the shelf or expand it into another business opportunity.
Niaz: What are the secrets of revolutionary marketing?
Philip Kotler: I don’t use the term revolutionary marketing. You might mean Guerrilla Marketing whereby a small company attacks a giant firm on a hit and miss basis. Or do you mean a company that will create a paradigm change? For example, Tom’s shoes has proven that online selling of shoes works. Tom’s offers to send three different sizes of the same shoe, expecting the customer to buy the best fit and return the other two pairs. In addition, Tom says that it will give a free pair of shoes to a poor person for every pair sold to a customer. This principle is now adopted by a new eye glass company that will send several glass frames by mail from which the customer makes a choice, and in addition the company will supply a free pair of glasses to a poor person who can’t afford to pay.
Niaz: One of your recent books is Chaotics. Can you please give us a brief of ‘Chaotics’?
Philip Kotler: John Caslione and I wrote Chaotics right after the financial crash that took place in 2007 to caution companies against making the wrong responses to the crisis. Most companies wanted to cut their costs and lower their prices. This is not always the most appropriate response in chaotic, turbulent times. Some companies should actually increase their marketing spend and take advantage of the crisis. Consider that some competitors are weakened more than your company and this is the time to attack, not withdraw. This is the time to build your market share which in normal times cannot be moved a few points. We discuss the appropriate decisions that companies in different situations need to make in their marketing, production, finance and other functions to take advantage of the turbulence.
Niaz: You have published the seminal article in 1971 coining the term “Social Marketing” in its original use. Can you please tell us about ‘Social Marketing’?
Philip Kotler: Forty two years ago, Gerald Zaltman and I published “Social Marketing: An Approach to Planned Social Change” in the Journal of Marketing. We felt that marketing science can apply to more than the marketing of goods and services. Marketing can help in designing and promoting solutions to social problems, such as smoking, hard drugs, poverty, hunger, and others. Marketing always starts with a customer analysis of the barriers and benefits that influence customer behavior. In the case of tobacco use, we need to distinguish the different segments of smokers and prepare a different 4P marketing campaign to help facilitate the decision to stop smoking. We could have named this “cause marketing” but we chose to name it “social marketing” to imply that marketing has a social side, not just a commercial side. Today there are thousands of social marketers trained in the basics of marketing and applying marketing to alleviate problems of poverty, hunger, poor nutrition, education, and health. Recently the third World Social Marketing conference was held in Toronto, Canada with 600 attendees.
Niaz: You are the first recipient of the American Marketing Association Foundation’s “Marketing for a Better World” Award. Can you please tell us how can marketing be used to make this world a better place?
Philip Kotler: We can create a better world through marketing in several ways. Commercially, we can improve our products and services and find ways to lower their prices and costs. Socially, we can work on specific social problems and reduce their severity through the application of social marketing. Societally, we can assist companies in defining the areas where they can make charitable contributions and work with others to improve the quality of life.
Niaz: Is there a personal influence or anecdote from your own life that you can share regarding the attention you’ve given to solving social problems?
Philip Kotler: When HIV/AIDs broke out as a major disease and took the lives of so many young adults, I developed a strategy for influencing young adults to avoid situations where they could contract AIDS. It was important to avoid these situations and also get early testing if they might have contracted the disease. I worked with the YMCA and other organizations to help them develop campaigns. I didn’t think that straight education campaigns on the dangers of AIDS would be enough to demotivate certain behaviors. Happily, modern medicines began to appear to help AIDS victims lead a longer life.
Niaz: Why do you think marketing is a great tool to change the world?
Philip Kotler: Marketing’s starting point is with consumer well-being. Marketing is about the maximization of consumer well-being. It also takes into account the well-being of employees, distributors, suppliers, investors and other stakeholders.
Niaz: How does Marketing can help us profoundly to change the world to make it a better place to live?
Philip Kotler: There are at least three types of marketing that will contribute greatly to making the world a better place to live.
1. Commercial marketing, in assisting companies to make better products and services for the poor, the middle class, and the affluent.
2. Social marketing, in assisting governments, nonprofit organizations and “caring” companies to influence more salutary behaviors such as better nutrition, regular exercise, desisting from smoking or using hard drugs, being environmental, etc.
3. Place marketing, in assisting cities, regions and nations to attract tourists and visitors and new residents and factories and retail chains so that life can be improved for all in those places.
Niaz: Thanks you so much for your invaluable time. All the best wishes for your good health and impressive works. We are grateful to have you at eTalks. Your ideas, knowledge and expertise are worth spreading. Thank you once again.
Philip Kotler: You are welcome Niaz. I must compliment you on raising very good questions.
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