Marketing Strategy

Marketing

Thursday 22 May 2008

Professor Philip Kotler

Marketing Strategy: A comprehensive view of modern marketing

BFI IMAX, London

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Philip Kotler is the undisputed heavyweight champion of marketing. He's authored or co-authored around 70 books, addressed huge audiences around the world and consulted some of the biggest brands. Three years ago, he was ranked the world's fourth most influential management guru by the Financial Times; this year, the Wall Street Journal ranked him the sixth best business thinker. Not bad for a man born in 1931 - a child of the Great Depression, now 77 years of age.

The London Business Forum gave him a two-hour slot at Waterloo's iMax theatre. Even so, his agenda was ambitious. Kotler wanted to tell the story of marketing from its point of formalisation about 80 years ago to the present day. He wanted to discuss how the relationship between companies and their customers has changed. He wanted to survey the latest thinking on branding. And, finally, he wanted to give us his own advice on how to make the new marketing paradigm work in our own organisations.

"In the beginning, marketing was [just] a fancy word for selling," he said. Then came the "four Ps" of product, price, place and promotion, which got us to think about "integrating the marketing mix".

The third stage of marketing's evolution was about segmentation, targeting and positioning, or STP. Previously, we thought we could mass-market to everyone, like Coca-Cola. Afterwards, we knew that if we chose segments carefully, learned all we could about them and tried to "own them" then we could achieve a much better response.

Next came customer relationship management (CRM), where the ultimate aim was to "own the customer" rather than simply to make a sale. "I wrote my first book, Marketing Management, in 1967," Kotler commented. "The whole point of the book - and I was unconscious of this until afterwards - was how to make a sale, how to get someone to buy the product; I didn't think about getting him or her to buy it again and again and again."

Now, we've entered the era of "co-marketing," in which we invite the customer to join us in designing our products and promotions. Lego has boosted its sales significantly by recruiting fans into its innovation effort; Dell has created popular products thanks to a dedicated website that corrals customer suggestions. "Instead of saying 'We manage our customers,' now we co-manage with our customers," Kotler said. "CIB should be your rallying cry now - Customer Is Boss!"

Of course, this newly empowered customer is harder to impress. "Total Quality Management" is old news, to the point where most industries, especially those in the business-to-consumer sector, have reached a plateau of quality and reliability. So, branding is one of the only ways left to differentiate your company.

You need to be "brand-run," Kotler said. This way, you'll be in the "consideration set" - the handful of brands that a potential customer will automatically consider in a given market before they make a purchasing decision.

Brands of this sort have some common characteristics, he argued. For example: they elicit positive emotions in consumers; they are the result of a formal and documented brand strategy; and their "brand equity" is tracked as a concept. Young & Rubicam, the brand management firm, tracks brand equity through qualitative research, Kotler pointed out, by scoring brands based on questions such as: "How many people know about us?", "How many feel favourably towards us?" and "How much 'momentum' is there in our product?"

So, how could the LBF audience go about strengthening their brands? Kotler advised the following steps:

  1. Dedicate a team or an organisation (internal or external) to brand planning.
  2. Base this planning on the analysis of both external and internal conditions.
  3. Formulate a brand strategy based on careful choices of target market and positioning.
  4. Implement the plan well, with consistency, so that the brand grows strongly.
  5. Audit the process, and your brand's performance, continuously.

It's a process that requires brand standards, brand guarantees and a brand-evaluation system. But most importantly it requires buy-in from the whole company. "The brand is too important to leave to the marketing department," Kotler said. Ideally, it should be "a management tool, used throughout the organisation. It involves convincing your dealers, suppliers, investors and other stakeholders to really respond to the brand, to talk the brand and live the brand. This goes beyond a marketing exercise."

Most business-to-business companies are not brand-led, Kotler said. "They don't think branding applies so much to them." And yet, "you don't buy just a frying pan, you buy the one with Teflon; you don't buy just a strong rope, you buy the one with Kevlar; you don't buy just a carpet, you buy the one with Stainmaster. DuPont has created many great [sub-brand] names."

Similarly, there are many supposedly commoditised industries in which branding has made a real difference for at least one player. "Look what was accomplished by Cemex," Kotler pointed out. "They get 15% more for their cement by creating an advantage for the people who buy it." Cemex found a way to save their customers some money by enabling them to name a half-hour window for delivery, thus reducing the possibility of an idling workforce. Author Sam Hill, in his book How To Brand Sand, summarised the point by reporting that: "It is possible to brand sand, wheat, beef, bricks, metals, concrete, chemicals, corn, grits, bananas, apples and aspirin."

So, how do you make sure that your company takes advantage of the new marketing paradigm? "Marketing must be holistic," Kotler said. It must be directed inward as well as outward. "You need to get other departments to understand the value it could generate, and the senior manager to understand the value it could generate." At the same time, your customer relationship management must be more than simply integrated. "You need to get to know a customer, cultivate the relationship, have an ongoing, mutually profitable relationship." And you must demonstrate continuous improvement in your corporate social responsibility.

If you haven't done so already, you should also create the position of chief marketing officer (CMO), Kotler argued. In most companies there's a vice-president of sales and a vice-president of marketing and the vice-president of sales has more authority. "Yet marketing works on a longer horizon; it's there in part to build up the preference for the products."

He continued: "The worst thing is a marketing plan the sales people don't buy; and remember the sales people are automatically going to want a low price. What often happens when the sales department does not reach its objective is that sales blames marketing and marketing blames sales." By contrast, if a CMO integrates and aligns the two departments then the benefits are enormous. "They both become winners or losers," Kotler said. "That is, the CEO says: 'Look guys, I don't want any finger-pointing, you didn't deliver, let's find out why,'; or, 'You both won and you're both going to get rewarded for it.'"

A good CMO should "represent the voice of the customer to others in the company and champion the development of a strong customer orientation to build loyal customers," Kotler said. "We all have a CFO who always talks to us about finance, so why not have a CMO who always talks to us about our customers? What's happening to them? What are they thinking? What we could do better for them?" Job number two is to "monitor the evolving business landscape and gather customer insights, to help develop new products and services for achieving growth objectives."

The CMO should be the "steward" of the brand, and of brand-building practices in the organisation. This means they they must be on top of the latest potential marketing channels such as on-line social media. They should also "bring insight into the corporate portfolio and its synergies - there may be a lot of products that are dead weight, yesterday's breadwinners," Kotler said. "Your problem products take up more of your attention and time than your opportunity products." Finally, they should take responsibility for "measuring and accounting for marketing's financial performance."

At present, Kotler reported, the US has about 1,200 CMOs. The average longevity of these executives is only two years, which suggests at first glance that "maybe the CEO gets excited about hiring a CMO and, after two years, not enough happens, or maybe what happens has been good enough and there isn't much more he can do." However, he continued, what some of his own research has shown is that many of these CMOs were just headhunted by other companies, or were promoted and took over their own companies.

It's not clear what all this means, he admitted, but it is clear that the number of CMO positions is still rising. More importantly, it's clear that "we can't get away with pedestrian thinking any more." An integrated, holistic and enterprise-wide approach marketing is becoming increasingly vital in the fight for competitive advantage.