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The New Role of Marketing in the Global Digital Economy
MoscowNovember 12, 2011
Philip KotlerKellogg School of ManagementNorthwestern University
ScheduleToday’s Schedule
Session 1. The Role of Marketing 3.0 in Company Growth
Session 2. The Need for Entrepreneurship and Innovative Thinking
Session 3. The Need for Strong Branding and Reputation Building
Session 4. Panel Discussion about Marketing in Russia
Session 1
The Role of Marketing 3.0 in Company Growth
• Globalization and Chindia• Regionalization • Deregulation and
privatization• Internet• Hyper-competition• Shorter product life cycles• Commoditization • Media proliferation• Retail transformation• Environmental concerns• Consumer empowerment• Recession and turbulence
The Problem and Opportunity Agenda
• Business Cycle
• Turbulence
• Disruptive innovation
Three forces moving business away from normal
Disruptive Technologies
• Photographic film• Wired telephones• Store retailing• Classroom education• Offset printing• General hospitals• Open surgery• Cardiac bypass surgery• Manned fighters• Full service stock brokerage
• Digital photography• Mobile telephones• On-line retailing• Distance education• Digital printing• Outpatient clinics• Endoscopic surgery• Angioplasty• Unmanned aircraft• On-line stock brokerage
Source: Clayton M. Christensen, The Innovator’s Dilemma, p. xxix. ; google.com
OLD NEW
Disruptive Innovations
Tomorrow Will Be Different
Source: Clayton Christensen ; gettyimages.com
Yesterday Today TomorrowFord Toyota Cherry
Department stores Wal-Mart Internet retail
Digital Equipment Dell RIM Blackberry
Delta Southwest, Ryan Air SkyWest, Air taxis
IBM Microsoft Linux
At&T Cingular Skype
Sony DiskMan Apple iPod Cell Phones
Most Companies are Short Lived
• Average company may last from 10-20 years.– Hypercompetition– Changing buyer wants and budgets– Lack of an innovation culture– Short term focus and failure to invest in a longer term
performance
• Yet some companies have last for hundreds of years. • What are their secrets?
Most Companies are Short Lived
Arie de Geus
• In Living Companies, Arie de Geus found that 30 companies have been around at least 100 years, including DuPont, W.R. Grace, Kodak, Mitsui, Sumitomo, and Siemens.
• Four traits of Living Companies:– Conservatism in financing– Sensitivity to the world around them– Awareness of their identity– Tolerance of new ideas
• Four priorities:– Valuing people, not assets– Loosening steering and control– Organizing for learning– Shaping the human community
Traits of Long-Living Companies
It is time to become WORLD CLASS!
Source : Rosabeth Moss Kanter
WORLDCLASS
STANDARDSThe need to meet the highest
standards anywhere in order to compete.
CONCEPTSAccess to the best and the latest
knowledge and ideas
PEOPLEThe growth of a social class
defined by its ability to command resources and
network beyond borders and across wide territories
Page10
Page11
World class companies can be local, regional, or global
Local companies have limited choices. Customer
management, product management, and brand management can only be
local.
Regional companies have more choices. The
customer management should remain local but
product and brand management can remain local or become regional.
Global companies have plenty of choices. While customer management should always be local,
product management can be local or regional while brand management can
even be global.
Define Your Target Market
MARKET
Global
Glocal
Local
Bottom
Consumers who want offerings to have the same attributes and quality that products in developed countries have and are willing to pay global prices for them
Consumers who demand customized products of near-global standard and are willing to pay a shade less than global consumers do
Consumers are happy with products of local quality and at local prices
People who can afford only the least expensive products
Source : Emerging Giants : Building World-Class Companies in Developing Countries. Harvard Business Review October 2006 Page12
The Two-Speed 6/2 World
IMF Projected Nominal GDP Growth (2009 – 2015)
12.8%
12.5%
12.3%
11.8%
10.0%
9.0%
8.7%
4.3%
4.2%
8.8%
Indonesia
Russia
China
India
Brazil
Turkey
South Korea
Japan
USA
ASEAN (excl. Indonesia)
IMF projects the fastest growth among the 18 largest economies
Source : Chairul Tanjung, National Economic Council, International Monetary Fund, World Economic Outlook Database, October 2010 Page13
The Strategic Trajectory for a Growth Country
• Low cost, average quality domestic products.
• Low cost, average quality domestic products exported.
• Low cost, good quality products exported.
• High-end products made for other companies.
• Branded products (regional).
• Branded products (global).
• Dominant brands (global).
The Strategic Trajectory for a Growth Company
Focal areaFocal area
Insidethe company
Customers and channels
Competitors and complementors
Political, legal, social and economic
forces
Emerging technologies and
scientific developments
Influencers and Shapers
Build an Early Warning System
Source: Peripheral Vision, George S. Day and Paul J.H. Shoemaker
Late
nt
Opp
ortu
nitie
sLatent
Vulnerabilities
Chaos
Strategy Selection
Chaos
Strategy Response 1
Strategy Response 2
Strategy Response 3
Scenario 1 Scenario 2 Scenario 3
Chaos impacts the Company
UndetectableTurbulence
Construction of Key Scenarios(Opportunities : Vulnerabilities)
Unaddressed Turbulence
Early Warning System
(AddressedTurbulence)
Detectable Turbulence
Source: Chaotics Management System in Kotler and Caslione.
Build a Scenario Planning System
The Beginning of Selling and Marketing
Source:
Marketing, however, came about much later
Early 1900s
1st academic courses on marketing
Pioneer of marketing
person or group in company
Marketing started because Sales departments needed others to:
Conduct consumer research Find Leads Prepare brochures and
other promotions
Job Positions in Today’s Marketing Organization
• Chief Marketing Officer (CMO) or Marketing Vice President
• Brand managers• Category managers• Market segment managers• Distribution channel managers• Pricing managers• Marketing communication managers• Database managers• Direct marketers• Internet and social media managers• Etc.
POSTWARSOARING
TURBULENTUNCERTAIN
ONE-TO-ONE
FINANCIALLY-DRIVEN1950s1960s
1970s
1980s
1990s
2000s
• The Marketing Mix
• Product Life Cycle
• Brand Image• Market
Segmentation• The Marketing
Concept• The Marketing
Audit
• The Four Ps
• Marketing Myopia
• Lifestyle Marketing
• The Broadened Concept of Marketing
• Targeting
• Positioning
• Strategic Marketing
• Service Marketing
• Social Marketing
• Societal Marketing
• Macro-marketing
• Marketing Warfare
• Global Marketing• Local Marketing• Mega-marketing• Direct Marketing• Customer
Relationship Marketing
• Internal Marketing
• Emotional Marketing
• Experiential Marketing
• Internet and e-business Marketing
• Sponsorship Marketing
• Marketing Ethics
• ROI Marketing• Brand Equity Marketing• Customer Equity
Marketing• Social Responsibility
Marketing• Consumer
Empowerment• Social Media Marketing• Tribalism• Authenticity Marketing• Co-creation Marketing
The Evolution of Marketing
Four CEO Views of Marketing
The size and type of department depends on the type of industry, size of company, nature of buying, and other factors.
Much depends on the CEO’s view of marketing.
• 1P CEO• 4P CEO• STP CEO• ME CEO
What are the 6 Tasks of the CMO?
1. Represent the voice of the customer (VOC) to others in the company and champion the development of a strong customer-orientation to build loyal customers.
2. Monitor the evolving business landscape and gather customer insights to help develop new products and services for achieving growth objectives.
3. Be the steward of the corporate brand and brand-building practice.
4. Upgrade marketing technology and skills in the company.
5. Bring insight into the corporate portfolio and synergies.
6. Measure and account for marketing financial performance and contain media and other service costs.
If You Are Appointed CMO, You Prefer That Your Office Be Located Next To:
1. CEO office
2. CFO office
3. CTO office
4. CIO office
5. VPS office
??
Holistic Marketing
– This means that marketing is a cost center whose costs should be charged to each internal client.
– Marketers should measure the incremental revenue created by their activities to see if these activities were profitable.
There are others who believe that marketing should be a leading player in developing the future growth plan of the company.
– Marketing is in the best position to detect business opportunities, calibrate their size and estimate their likely profitability.
– Marketing manages important intangible assets (brands, customer relationship, networks, market position, market information)
Is Marketing Only A Department?
EVOLUTION OF MANAGEMENT THINKING
Product Management
1950s – 1960s
Customer Management
1970s – 1980s
Brand Management
1990s – 2000s
Value Management
2010s – 2020s
Five shifts
• Creating Marketing Strategies1st Shift
• Controlling the message2nd Shift
• Incremental improvement3rd Shift
• Managing marketing investment4th Shift
• Operational Focus5th Shift
Driving business Impact
Galvanizing your network
Pervasive innovation
Inspiring marketing excellence
Relentless customer focus
The Marketing Management Process
Plan• Marketing
Investment• Demand
Modeling
Manage• Marketing
Resource Management
Execute• Campaign
Management• Lead
Management• Events
Management• Loyalty
Management• Media
Management
Measure• Marketing
Analytics• Web Analytics
Although some of the vendors play in more than one category, this summary is intended to classify software providers by their predominant solution feature.
9) Yield-Based Pricing
Opt. Tools
8)Personal-
ization Platforms
7)Marketing Comm. / Content Mgmt. Tools6) MRM
5) Mktg. Mgmt.
Work-Flow Solutions
4)Campaign
Mgmt.
3)Marketing
Mix Modeling/ Predictive Analytics
2)Business
Intelligence & Analytics
1)Database Mgmt. &
Ware-housing
9) Yield-Based Pricing
Opt. Tools
8)Personal-
ization Platforms
7)Marketing Comm. / Content Mgmt. Tools6) MRM
5) Mktg. Mgmt.
Work-Flow Solutions
4)Campaign
Mgmt.
3)Marketing
Mix Modeling/ Predictive Analytics
2)Business
Intelligence & Analytics
1)Database Mgmt. &
Ware-housing
Examples of Vendors that Play in Each of these Spaces
Power is Shifting to the Customers• As a result of technological advances – computers, the Internet, social media, YouTube,
smart phones and tablets - power is shifting from the marketers to the customers.
• Today customers can consult their friends and peers, independent experts and rating systems to accumulate information and experiences about product and brand standings.
• Consumers have now become the Brand Influencers – they are publishers, broadcasters and critics of different products and brands.
• The result is a data explosion. – 90 percent of the world’s data today has been created in the last two years. – Facebook has more than 750 million active users, Twitter users send 140 million
tweets a day. – YouTube’s 490 million users upload more video content every two months more
than the three major U.S. TV networks created in 60 years.– Mobile commerce is showing an annual growth rate of 40 percent.– There will be a growth from 70 million tablets worldwide today to 300 million by
2015.
Source: The 2001 IBM Global CMO Study of 1,734 CMOs in 19 industries and 64 countries, November 2011.
Power is Shifting to the Consumers
CMOs are Underprepared for this New World
• Only 26 percent of CMOs are tracking blogs, 42 percent are tracking third part reviews and 48 percent are tracking consumer reviews. Yet tracking these sources could provide insight into what customers want and buy.
• 80 percent of CMOs are still focusing primarily on traditional sources of information such as market research and competitive benchmarking. 68 percent rely on sales campaign analysis.
• They don’t understand the younger generation in the U.S. and the emerging middle class in developing countries. Marketers in India have been focusing on affluent Indian consumers rather than on the Indian emerging middle class.
Source: The 2001 IBM Global CMO Study of 1,734 CMOs in 19 industries and 64 countries, November 2011.
Marketers Are Underprepared for Operating in the Digital World
• CMOs Need to be More Financially Accountable but Lack the Skills, Tools and Influence on the 4Ps
• 63 percent of CMOs believe ROMI will be the most important measure of marketing performance by 2015, but only 44 percent feel prepared to deliver this measure.
• CMOs recognize that they will need more digital, technological and financial proficiency in the coming years.
• CMOs recognize that they have a strong influence over promotional activities like advertising, external communications and social media initiatives but CMOs play a smaller role in shaping the other 3Ps.– Less than half have much sway over key parts of the pricing process.– Less than half have much impact on new product development or channel selection.
• Source: The 2001 IBM Global CMO Study of 1,734 CMOs in 19 industries and 64 countries, November 2011.
CMOs Need to be More Financially Accountable but Lack the Skills, Tools and Influence on the 4Ps
• CMOs must increase their use to social media to engage with their customers and must monitor social talk about their brand, looking for customer insights.
• CMOs must combine the analysis of data from social networks with their analysis of sales and transactional data to uncover insights and trends.
• CMOs must increasingly listen to the voice of consumers in real-time and apply social media analytics – in contrast to solely depending on slower marketing feedback from field surveys.
• Source: The 2001 IBM Global CMO Study of 1,734 CMOs in 19 industries and 64 countries, November 2011.
Needed Actions by CMOs
• Brand asset management.• Customer relationship management (CRM) and database
marketing, telemarketing.• Partner relationship management (PRM).• Integrated marketing communications.• Internet and social media.• Public relations marketing (including event and sponsorship
marketing).• Service and experiential marketing.• Profitability analysis by segment, customer, product, channel.
Competency Skills Needed by Today’s Marketers
R
Session 2
The Need for Entrepreneurship an Innovative Thinking
How Does a Company Innovate?
"Most innovations fail. And, companies that don't innovate die.“ (Henry Chesbrough)
“A business has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results: all the rest are costs.”(Peter Drucker )
“While great devices are invented in the laboratory, great products are invented in the Marketing Department.” (William H. Davidow)
Source : google.com; http://blogbusinessworld.blogspot.com
Some Thoughts on Innovation
Types of Innovation
Product and service
incremental innovation
Business model innovation
Marketing innovation
New to the world innovation
Source: http://2.bp.blogspot.com/_qD9Y8Ncd3I4/Sb6hKKOJkJI/AAAAAAAACDo/fHZHCQbvRe4/s400/BornToInnovate2009.jpg
Types of Innovation
A Balanced New Product Portfolio
Source: Rosabeth Moss Kanter
AFew Big
Strategic bets
Portfolio of new ventures, prototypes, projects.
Many incremental quick wins and continuous Improvements.
A Balanced New Product Portfolio
Innovation and Your Company
How are innovative ideas developed (build internally or buy)?
How do innovative ideas flow in your firm (top down or bottom up)?
Where do you focus your search for innovation (inside or outside of the firm)?
How is the innovation process managed (formal processes or informal processes)?
Where is the innovation organization located?
Source: http://www.henkel-cee.com/cee/content_images/36406_72dpi_605W.jpg
Innovation and Your Company
Roles in a Company’s Innovation Process
BrowsersActivators Creators
ExecutorsDevelopers Financiers
Source: Philip Kotler and Fernando Trias de Bes, Winning at Innovation, 2011.
Roles in a Company’s Innovation Process
The Relationship between Innovation and Marketing
• How do the mindsets of Development and Marketing differ, and what are their potential biases?– Development: Masters of the Possible– Marketing: Masters of the Valuable
• What are the reported levels of engagement between Development and Marketing?
• What are the potential contributions of marketing to the stages of the innovation process?
• What steps can a company take to improve the working relationship between Development and Marketing ?
The Relationship between Innovation and Marketing
Session 3
The Need for Strong Branding and Reputation
Building
Leader Brand Mission and VisionIngvar Kamprad IKEA Make stylish furniture affordable
Richard Branson Virgin Bring excitement in boring industries
Walt Disney Walt Disney Create magical world for familiesHerb Kelleher Southwest Airlines Make flying possible for many
people
Anita Roddick The Body Shop Embed social activism in business
Bill Gates Microsoft Realize ubiquitous computing
Steve Jobs Apple Transform how people enjoy technology
Jeff Bezos Amazon.com Provide the biggest selection of knowledge delivered conveniently
Examples of Great Missions and Vision
HYPOTHETICAL STARBUCKS BRAND POSITIONING BULLSEYE
Consumer Target
DiscerningCoffeeDrinker
Consumer Insight
Coffee and the drinking
experience is often
unsatisfying
ConsumerNeed State
Desire for better coffee and a better
consumption experience
CompetitiveProduct Set
Local cafesFast food & convenience
shops
ConsumerTakeawayStarbucks
gives me the richest
possible sensory
experience drinking coffee
BrandMantra
Rich, RewardingCoffee Experience
FairlyPriced
Relaxing, rewarding moments
Responsible, locally involved
Rich sensory consumption experience
Varied, exotic coffee drinks
Fresh high quality coffee
24 hour training of
baristas
Green & Earth Colors
Siren logo
Caring
Contemporary
Thoughtful
Convenient, friendly service
Triple Filtrated
water
Totallyintegrated
system
Stock options/ health benefits
or baristas
CUSTOMER RESEARCH
Ethnographic Studies
In-store Observation
Quantitative Surveys
Focus Groups/ Consumer
Panels
1. Neuro-marketing2. ZMET
In home & shopping trips
Orientation & Environment
Why do you buy?
Awareness, Attitudes, & Behavior
Listening for insights & trends
Customer Research
Neuromarketing
1 “The member is exposed to a series of visual and sonic stimuli aimed to stimulate . . . a brainwave response to a definite recognition of the stimulus shown”
2 When a part of the brain becomes active, the brightness of the images changes. By analysing the images using sophisticated computer programs, we can quantify and localise brain activity in areas involved in emotion, attention, memory and decision-making.”
Zaltman ZMET Technique
• Gerald Zaltman dismisses focus groups and questionnaires as a “waste of time.”
• Zaltman wants to bypass the verbal left brain and dip into the right brain and unconscious
• A researcher from ZMET (Zaltman Metaphor Elicitation Technique) asks individual consumers to collect pictures, creates collages, and discuss these in an interview.
• Zmet searches for deep metaphors underlie our thinking.
• ZMET claims to achieve insight into product themes and concerns that do not emerge through verbal research.
Deep Metaphors
In B2B, To Whom Do You Sell?Who is in the Buying Center?
1.Initiators. 2.Users. 3.Influencers. 4.Deciders. 5.Approvers. 6.Buyers. 7.Gatekeepers.
Emotions Work in B2B Marketing
• Security: The brand gives customers a feeling of safety, comfort, and self-assurance so that customers do not experience worry or concerns.
• Social approval: The brand results in customers having positive feelings or satisfaction about the reactions of others to themselves.
• Self-respect: The brand makes customers feel better about themselves; customers feel a sense of pride, accomplishment, or fulfillment.
Two Customer Value Types
©2010 Neil Rackham
Value = Benefits – Cost
Consultative Customers
Transactional Customers
• Know what they want
• Treat you as a commodity
• Buy on price and convenience
• Have a problem
• Value your time
• Buy on expertise and trust
©2010 Neil Rackham
Five years ago
TRANSACTIONAL CONSULTATIVE
• Advice focus• Expertise decision• Want meetings
10% were transactional
10% were consultative
Most customers would pay a little extra for some advice
• Cost focus• Convenience Decision• Don’t want to meet
©2010 Neil Rackham
Customers Today
TRANSACTIONAL CONSULTATIVE
• Advice focus• Expertise decision• Want meetings
More buy transactionally
The middle is going away.
• Cost focus• Convenience Decision• Don’t want to meet
More want deeper consultative
relationships
Today’s Competing Value Propositions
©2010 Neil Rackham
“We’ll use our expertise to solve your problems and create custom solutions, for which we’ll charge you a premium.”
“We’ll offer you cheap and convenient
products, but don’t expect extras.”
OR
Consumers
Employees
Channel Partners
Shareholders
Marketing the Mission to…
A customer owner is one who tries a
product or service, is so satisfied that she returns to buy more, states a
willingness to tell others of her
experiences, actually convinces others to buy, provides constructive criticism of existing offerings, and even
suggests or helps test new products or ideas.
The Ownership Quotient
Employee owners exhibit their sense of ownership through loyalty, referrals of other high-potential employees, and
suggestions for improving the quality of processes and work life as well as the organization’s overall effectiveness in serving customers.
A company’s OQ is the proportion of all customers and employees who meet this description.
The higher the OQ, the higher the company’s
performance and profits.
The Ownership Quotient
Comparison of Marketing 1.0, 2.0, and 3.0
INDIVIDUALCO
MPA
NY
Mind Heart Spirit
DeliverSATISFACTION
RealizeASPIRATION
PractiseCOMPASSION
Profit Ability Return Ability Sustain Ability
Be BETTER DIFFERENTIATEMake a
DIFFERENCE
MIS
SIO
N(W
hy)
VISI
ON
(Wha
t)VA
LUES
(How
)
Values-Based Matrix (VBM) Model
Values-Based Matrix of S.C. Johnson
The 3i of S.C. Johnson
Companies Americans Love
Amazon, Apple, Best Buy, BMW, CarMax, Caterpillar, Commerce Bank, Container Store, Costco, eBay, Google, Harley-Davidson, Honda, IDEO, IKEA, JetBlue Johnson & Johnson, Jordan's Furniture, L L Bean, New Balance, Patagonia, Progressive Insurance, REI, Southwest, Starbucks, Timberland, Toyota, Trader Joe's, UPS, Wegmans, Whole Foods.
These “firms of endearment” were highly profitable. They outperformed the market by a 9-to-1 ratio over a ten-year period. More fulfilled employees, happy and loyal customers, innovative and profitable suppliers, environmentally healthy communities.
Characteristics of “Firms of Endearment”
• They align the interests of all stakeholder groups • Their executive salaries are relatively modest• They operate an open door policy to reach top management• Their employee compensation and benefits are high for the
category; their employee training is longer; and their employee turnover is lower
• They hire people who are passionate about customers• They view suppliers as true partners who collaborate in improving
productivity and quality and lowering costs• They believe that their corporate culture is their greatest asset and
primary source of competitive advantage.• Their marketing costs are much lower than their peers while
customer satisfaction and retention is much higher.
Characteristics of Firms of Endearment
What are some major social causes that companies adopt? Avon Breast cancerGeneral Mills Better nutritionGeneral Motors Traffic safetyHome Depot Habatat for HumanityKraft Reducing obesityLevi Strauss Preventing AIDSMotorola Reducing solid wastePepsi Cola Staying activeShell Coastal cleanupPetsmart Animal adoptionAleve ArthritisBritish Airways Children in needStarbucks Tropical rainforestsBest Buy Recycle used electronics
See Philip Kotler and Nancy Lee, Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause, Wiley 2005.
What is the Relationship between Business and Society?
• Old philosophy: “What is good for business is good for society!” The simple act of profit maximization is good enough.
• New philosophy: “What is good for society is good for business.” (GE)– Every company should figure out not only how to improve
its output but also its outcomes. A food company should improve nutrition; an energy company should improve energy; a bank should improve sound savings.
Michael Porter and Michael Kramer, “The Big Idea: Creating Shared Value,” Harvard Business Review, January/February 2011.
Marketing 1.0 Marketing 2.0 Marketing 3.0
MIND HEART SPIRIT
PRODUCT-CENTERED
CUSTOMER-ORIENTED
VALUES-DRIVEN
ECONOMIC- VALUE PEOPLE-VALUE ENVIRONMENT- VALUE
PROFITS SOCIAL PROGRESS HUMAN HAPPINESS
MOVING TOWARD MARKETING 3.0
• Where is your company now?• Where do you want it to be?• Why?• What would steps would you take?
“Within five years. If you’re in the same business you are in now, you’re going to be out of business.”
Session 4
Panel Discussion