PhilipKotler Sofia Lecture 11-14-07

7/31/2019 PhilipKotler Sofia Lecture 11-14-07

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Marketing for Results:

Global Market lace

Philip Kotler, Ph.D Kellogg School of

Management

BGBusiness Ltd.

,

November 14, 2007


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Two Challenges Facing

Your Company

1. Will your company be able to defend your market against the

invasion of foreign global brands?

2. Can your company develop strong local, national, regional or globalbrands?


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Can Your Company

Defend the Domestic Market?

Foreign competitors will not only go after the high end market. They will

target the middle and eventually the low end.

The main defense for your company will be developing stronger skills ininnovation, differentiation, branding, and service. In a word, MARKETING!

The issue is that your company is cutting its expenses when it should bestrengthening its marketing and sales resources.


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But Your Businesses Needs

A Better Understanding of Marketing

Focus first on your customers, second on your employees, third on your partners,

and fourth on your competitors.

Dont think of marketin to bein the same as advertisin and sellin .

Dont over-spend on advertising. The quality of your advertising is more important

than its quantity.

Use market research to guide your strategy. Focus on a part of the market where you can deliver superior value through

differentiation and relevance.

Avoid lowering your price to defend your market share. It is better to increase

benefits.


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The Strategic Trajectory

for a Country

Low cost, average quality domestic products.

ow cos , goo qua y omes c pro uc s.

High-end products made for other companies.

Branded products (regional). Branded products (global).

Branded dominant brands (global).


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1. Improving Marketings Role and Relationships in the

Company

2. Finding New Opportunities

3. Finding New Ways to Communicate

4. Using New Technologies and Measuring Results


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1. Improving Marketings Role and

Relationships in the Company


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Job Positions in Todays

Marketing Organization

Marketing Vice President

Brand managers Category managers

Market segment managers

Distribution channel mana ers

Pricing managers Marketing communication managers

a a ase managers

Direct marketers

Internet managers Marketing public relations manager

Global, regional and local marketing managers

Marketing researchers Marketing intelligence gatherers


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Winning Through

- Jim Collins in Good to Greatdefined great companies by

.

Jag Sheth* and his coauthors defined great companies by

companies they loved) and which companies treated well their fivestakeholder groups: SPICE = society, partners, investors,community, and employees.

The Firms of Endearment were: amazon, Best Buy, BMW, CarMax, Caterpillar, Commerce Bank, Container

ore, os co, e ay, oog e, ar ey- av son, on a, , , e ueJohnson&Johnson, Jordan's Furniture, LLBean, New Balance, Patagonia,Progressive Insurance, REI, Southwest, Starbucks, Timberland, Toyota, Trader

Joe's, UPS, Wegmans, Whole Foods.

Sheth was surprised that these companies financially outperformedthe outstanding performance of Collins companies.

Source: Raj Sisodia, David B. Wolfe, and Jag Sheth, Firms of Endearment: How World-ClassCompanies Profit from Passion and Purpose(Wharton School Publishing, 2007)


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Winning Through

Stakeholder Value Creation - 2

They align the interests of all stakeholder groups

Their executive salaries are relatively modest The o erate an o en door olic to reach to mana ement 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

and quality and lowering costs They believe that their corporate culture is their greatest asset and primarysource of competitive advantage.

satisfaction and retention is much higher.

Their marketing is about: Triggering great word of mouth rather than heavy brand advertising (Google and

Starbucks did no advertising) They do not rely on frequent sales or heavy promotion

Sheth, et al, offers this as a 21st century paradigm for marketing as opposedto the traditional 20th century paradigm which they characterize asaggressive and manipulative.


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What are the main obstacles to connecting

Rank

1 Too few resources to deliver against objectives

3 Lack of trust and credibility with the rest of the organization

4 Unable to communicate a clear, consistent message to theentire organization

5 Lack of innovation in finding new ways to better connectmarketing

7 Marketing does not have a clear strategy platform to

Source: Spencer Stuart


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If You Are Appointed CMO, You Want Your

Office To Be Located Next To:

1. CEO office

2. CFO office

3. CTO office

. o ce

.


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. ,customer (VOC), and champion the development of a strong customer-

orientation to build customer loyalty/retention.

2. Gather customer insights to help develop new products and servicesfor achieving growth objectives.

3. Be the steward of the corporate brand and branding practice.

. .

5. Measure and account for marketing financial performance and contain.

6. Bring insight into the corporate portfolio and synergies.


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at surpr se arter ast most w en e ecame was t at

would interact so much with functions outside of marketing. I didnt

realize it is a holistic assignment. Then I realized I really had tounderstand things like product supply, cost break-evens andaccounting. CMO and later CEO of WalMart.com, Carter Cast

You want to be connecting at the very senior levels of theorganization, and you also want to be connecting in with theeng neers an sc ent sts w o are o ng a ot o t e wor on t e rontlines You have to figure out how pull all those instruments

together in a way thats delivering great marketing accountability andengaging marketing programs. Yahoo CMO Cammie Dunaway


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Sales Precedes Marketing

In the beginning there was sales.

Marketing appeared later to help sales people:

By using marketing research to size and segment the marketcollateral materials

By finding leads through direct marketing and trade shows

Marketing was originally located in the sales department.

Then marketing grew as a separate department responsible forthe marketing plan (4Ps) and brand-building.


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ar et ng

a es

Data oriented

Analytical

Action oriented

Intuitive

Likes planning Team-oriented

Prefers doing Individualistic

e ucate

Focused on whole market and

market se ments

n ergra uate an streetsmart

Focused on each customer


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Perceptions of Each Other

Sales Marketing

Strategy Setting Marketing feels under-appreciated, views

sales as self-serving and short sighted

Sales feel indispensable,

views marketers as ivory

really understand customersor the pressures of selling in adifficult environment

and positioning standards. Underutilizeleads.

generic sales collateral arenthelpful in closing orders.

Leads arent qualified

Market Information Marketing complains about the lack offeedback from sales

Sales believes that marketingdoesnt listen or understandthe complexities of the sales

process


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Identif the Existin Level of Relationshi

Hypothesis:

stages or levels of complexity.

Undefined Defined Aligned Integrated


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Purchase

Intention

Purchase Loyalty Customer

Advocacy

Prospecting Qualifying DefiningNeeds

ContractNegotiation

DevelopingSolutions

ProposalPreparation/Presentation

Revision &IssueResolution

Implemen-tation


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PurchaseIntention

CustomerAwareness

BrandAwareness

BrandConsider-ation

BrandPreference

Purchase Loyalty CustomerAdvocacy

Marketing SalesHandoff


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Eight Ways to Improve

Marketing/Sales Alignment

1. Hold regularly scheduled meetings between marketing and sales.

2. Make it easier for marketing and sales people to communicate witheach other.

3. Arrange for more joint work assignments and job rotation betweenmarketin and sales eo le.

4. Appoint a liason person from marketing to live with the sales forceand help marketers understand sales problems better.

.location to maximize their encounters.

6. Set shared revenue objectives and reward systems.

. e ne more care u y e s eps n e mar e ng sa es unne .

8. Improve sales force feedback.


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2. Findin New O ortunities


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Three Innovation Models

Whirlpool Corporation launched an effort in 2000 to stimulate greater.

functions in a new process of ideation. Since the initiative began,Whirlpool has gone from a handful of product introductions per year to

dozens, including the highly successful Gladiator line of appliances,, .

Shell, in 1996, authorized a team of its employees to allocate $20- .

Any employee can make a 10-minute pitch followed by 15-minute Q&A.Greenlight ideas get an average of $100,000 and up to $600,000. 4teams out of 12 received 6 month funding for next stage development.

, .

Samsung Electronics established the Value Innovation Program (VIP)

Center in 1998. Core cross-functional team members come together todiscuss their strategic projects. In 2003, the center completed eightyprojects. Samsung runs an annual Value Innovation conference andawards are given for the best cases.


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Eight Ways to Get Ideas

From Customers1. serve ow your customers are us ng your pro uct.

2. Ask your customers about their problems with your products.

. .

4. Use a customer advisory board to comment on your companysideas.

5. Use websites for new ideas.6. Form a brand community of enthusiasts who discuss your product.

.product.

8. Let the users manufacture all the content.


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any ca egor es are ecom ng commo ze .

Yet Ted Levitt said that an thin can be differentiated. Chicken (Purdue), bricks (Acme), coffee (Starbucks), cement (Cemex),

vodka (Absolut)

Jack Trout, in his Differentiate or Die: Survival in Our Era of KillerCompetition, describes many ways to differentiate.

Differentiation can be psychological as well as functional (Marlborocigarettes).

Frank Perdues Chicken: Yellow Flesh

Alberto-Culvers Natural Silk Shampoo: Silk


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Using Blue Ocean Strategy Leave the red oceanof intense competition and capture a blue oceanof uncontested marketspace.

The ke is value innovation. This differs from value creation which might be incremental or technological innovation which

leads to a Philips CD-I that could do too much and is difficult to understand. The goal is to find find a way to increase buyer value while reducing costs. It breaks the

value-cost tradeoff. Example: Cirque du Soleil. e va ue nnova on amoun s o a new s ra egy a a ec s e en re sys em o a

companys activities.

Start with a strategy canvas. The horizontal axis captures the range of factors the industrycom etes on and invests in. The vertical axis ca tures the offerin level that bu ers receiveacross all the key competing factors (high to low).

The wine industry has two groups: premium wines and budget wines. The value curves areof the two are different. The problem is that most premium wines are similar in their valuecurves and most budget wines are similar in their value curves.

The challenge is to find a new value curve to escape from the red ocean. Use the four actionframework: What factors to eliminate? (cost goes down) What factors to raise well above the industrys standard? (differentiation goes up) What new factors to add that the industry has never offered? (differentiation goes up)

Source: W. Chan Kim and Renee Mauborgne, Blue Ocean Strategy(Harvard BusinessSchool, 2005).


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Source: Blue Ocean Strategy


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m na e

Star performers

a se

Unique venueAnimal shows

Aisle concession sales

Multiple show arenas

Reduce Create

Fun and humor

Thrill and danger

Theme

Refined environment

u p e pro uc ons

Artistic music and dance

Source: Blue Ocean Strategy, p. 36.


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a Six Paths Framework - 1

1. Look across alternative industries

NetJets (neither commercial or plane ownership) s o o o p one an easy nternet

Home Depot (products and craft advice)

2. Look across strategic groups within industries Curves (health club or home exercise)

Walkman (boom box or transistor radio)

Toyota Lexus (a Mercedes at Cadillac prices)

Ral h Lauren hi h fashion or no fashion Champion Enterprises (pre-fabs vs. on-site developers)


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Source: Blue Ocean Strategy


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-3. Look across the chain of buyers

Change from conventional target user: purchasers, users,

Nova Nordisk (focused on insulin users rather than doctor)

Bloomberg (focused on users rather than IT industry)

Canon (small copiers for homes, not companies)

4. Look across complementary product andservice offerings

Barnes & Noble book stores

Zenecas Salick cancer centers (combine all treatments in oneplace)


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-. oo across unct ona or emot ona appea s to

buyers

Swatch from function to emotion Body Shop (from emotion to function)

QB House (Asian barbershopfrom emotion to function)

emex se ng a ream ns ea o cemen

6. Look across time Study trends that are decisive to your business, irreversible, and

have a clear trajectory.

A le creatin iTunes observin eer ille al file sharin Cisco (solving problem of slow data rates and incompatible

computer networks).


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Ca turin Non-Customers

Callaway Golf noticed that many country club members have not.

invented Big Bertha, a golf club with a large head making it easier tohit the ball. They converted many non-customers.

Pret a Manger, a British fast-food chain, noticed that professionalswent to restaurants for lunch. Some were dissatisfied with the slowservice and wanted healthier food, or decided to bring lunch fromhome. Pret offered restaurant-quality sandwiches made fresh everyday from the finest ingredients and the food is available even faster

.


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The case of Cereal Bars

Cereals for breakfast market New category

Cereal varieties

Th f B bi


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The case of Barbie

Baby dolls market New category

T

Teenager

f eel

. . .

=

Doll varieties


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= + .

= +

Cyber cafes = cafeteria + Internet.

Walkman = audio + portable.

Train + school = classes on the train.


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Old Media New Media

Drum beats and smoke signals Face-to-face sales calls

Writing

Websites Webcasts

Email a

Telephone

anners an pop-ups

Blogs

TV Film

Videocasts

Mobile marketing ponsors ps Direct mail Street level promotion

Festivals

Social network sites Stimulated buzz

Street level romotion Trade fairs Product placement


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Video games

Music

The new James Bond film Casino Royalehas placements for Fordcars, Omega watches, Vaio laptops, Sony-Ericson Mobile Phones,and New Holland Heavy equipment.

Books

The Bulgari Connection en n prons ec ro ux The Sweetest Taboo (mentions Ford Fiesta)


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Online bulletin boards, chat rooms, forums, and discussions

Person-to-person e-mail Blogs (personal Web logs/diaries)

Moblogs (sites where users post or send digital images, photos,

Consumer opinions and reviews on Web sites (amazon, netflix,zagat, planetfeedback, epinions)

Podcasts (audio files that can be downloaded and played on variousdevices)

Wikipedia (encyclopedia) and Flickr (photos)

Instant messages


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ogs are a mo ern vers on o a persona soap ox. w ere one

can spread word-of-mouth. The more visits there are to your blog,

the more prominent you become as a brand. Your pronouncements. - - -street credibility.

There are also blogs runs by companies or company spokespeople.

Blo s mean a loss of messa e control. The otential for branddamage is high. Malcontent stories can spread on the Internet likewildfire.

Your company must monitor blogs for talk about your company andyour competitors. You need a specialist to do this.


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Ste s to Take Re ardin Blo s

Conduct Industry Analysis: Need to find out what a group of consumersthink about your latest widget or market trends? Check out blog sites for the

. . , . .

Take Advantage of Targeted Advertising Opportunities: Identifyblo ers who cover im ortant to ics in our area and find out what thecharge for ads. Marketers can change ads to match the day-to-daychanges in their industry.

ncourage mp oyees o og: ec n ca exper s can scuss e a es

goings on in R&D, while your C-level discusses the future of your business.Your brand can gain quick credibility by offering the chance to haveconversations with executives or experts. Adds a human touch.

Create a Corporate Blog: Your brands blog can broadcast messages toyour external consumers, partners and industry-watchers. The difference is

.are genuinely interested in the content, while brands have a portal forsharing the latest news as it happens.

Make the Blog Authentic, Personal and Compelling. The live individual

behind it should be responsive to comments and inquiries. New entriesmust be posted daily.

Advice about Podcasting


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Advice about Podcasting

Q: Why should marketers consider doing a corporate podcast?Wehr: Podcasts let you build a one-on-one relationship by connecting with

listeners and putting out a message that has an emotional aspect to it.s eners ear a vo ce an assoc a e a vo ce w your company, w c s

a great way to get them coming back again and again.

Wehr: Particularly in the b-to-b market, its important for listeners to hear your

message from upper-level management.

Q: How often should marketers create new podcasts, and how long

should they be?Wehr: The podcasts have to be frequent enough to maintain an audience.

- .for length, we concluded that 15-minute podcastsmake sense. The averagecommute is 30 minutes, so if you can stay in the 15- to 20-minute range,youre good.

Q: How should marketers use e-mail to promote their podcasts?Wehr: You can pull out quotes or information thats contained in the podcast

- . ,you should be doing a summary [of the podcast] and placing it on your site

so search engines can pick it up. You should also refer to previouspodcasts in current podcasts.


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oc a ne wor s cons s o peop e reg s er ng on awebsite such as MySpace or Facebook and describing

themselves and connectin with others.

These social networks do not allow direct marketing toindividuals in the social network.

ou u e s an examp e o peop e ma ng an s ar ngvideos with others. Some youtubers have become very

watching YouTube videos to their more expensive TVprograms.


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WOM is word-of-mouth. WOM is increasin naturall with the Internet and the cell- hone. WOM is more trusted than advertising. WOM is very powerful (iPod, Harley Davidson),

Buzz marketing is meant to generate publicity, excitement and some information about theproduct.

promote Virgins mobile phone service.

Viral marketing aims to manufacture a marketing messagetypically online and in a tangibleformat such as emailthat can spread among consumers quickly and exponentially.

Shill (or stealth) marketing involves people paid to promote a product/service in differentpublic places without revealing their relationship with the company.

Son Ericsson hired actors to walk around and ask eo le to take hotos ofthem.

Genuine word-of-mouth occurs when people talk about products on their own to friends andacquaintances.

BzzAgent is partly contrived, partly genuine. Women are best at Bzz.


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.

of Mercedes owners recommend the brand to others. They are followed by BMW andToyota at 53%.

,reactions in word-of-mouth advertising. The clearest proof that your brand isattractive is when your customers risk their own reputations in order to recommendyour brand.

Fred Reichheld says that the willingness to recommend to a friend is the single mostreliable measure of brand equity. The net promoter score(the number of peoplewilling to recommend your brand minus those who are not willing to do so) provides

.

Word-of-mouse is more powerful than word-of-mouth because it reaches so manymore people.

ne one pro essor oun a aw n n e s new c p an comp a ne an soon n e wasreceiving 25,000 calls a day.

Pete got mad because he bought a hybrid Honda that listed 45 miles per gallon. He only got35 miles per gallon. He complained to Honda but was not answered. He went on a talk showand the press picked it up. Soon he became a scourge to Honda.

One self-appointed movie reviewer can damn a new picture that a company spent $10million to market. (A guy living in a basement can bring the studios to their knees.

C ti B


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Creatin Buzz

Distinguish three types of diffusers

Mavens: they are an expert on a topic. You listen to themclosely. Their motivation is to inform or explain.

.glue. They may mention things to many others but are notseen as experts

a espeop e: ey are persuas ve an e p crea e an

epidemic of interestFrom Malcolm Gladwell, Ti in Point

Get trendsetters in any given community to carry yourmessage:

Physically (being seen with the brand)

er a y r ng ng e ran up n conversa on

Virtually (via the Internet)

The Professionalization of Buzz


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The Professionalization of Buzz

P&Gs Tremor Tremor has identified 200 000 of the most influential teen connectors.

They are sent sample products and can talk about them to fellowstudents if they find the products are quite good.

BZZAgent.com David Balter wrote Grapevine. He started BzzAgent.com and

recru s agen s o eens, sen or c zens, an o er groups.

Bzz only accepts good products to submit to buzz. An agent receives a list of campaigns and chooses campaigns

. They receive the product and a tipsheet on how to use WOM if

they like the product and will talk about it.

product and they get points which turn into rewards.

They are asked to report negative things as well as good things.

Factors Determining the


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Type of product

xc t ng pro ucts oo s, mov es, recor s

Innovative products (Palms)

Personal experience products (hotels, cars) Complex products (software, medl devices)

Expensive products (computers)

Observable products (clothes, jewelry)

In general, high involvement and conversational products.

Type of audience

- -

Younger people talk more about products than older people.

Immigrants rely more on word-of-mouth.

Customer connectivity

The more the connectedness, the more the effectiveness of buzz

4 Using New Technologies and


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4. Using New Technologies and

Measuring Results

Direct marketing and predictiveanalytics

Marketing metrics

Marketing models

Sales automation and marketingautomation systems

Marketing dashboards

Needed: Metrics for Measuring Different


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Needed: Metrics for Measuring Different

Marketing Expenditure Categories

Mail campaigns

Telemarketing campaigns

Managed events

Trade shows

Sponsorships

TV ad campaigns

Subscription campaigns

Customer win-back campaigns New product launch campaigns

Major Metrics


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Sales MetricsDistribution Metrics

a es grow

Market share Sales from new productsCustomer Readiness to Buy Metrics Awareness

Number of outlets

Share in shops handling Weighted distribution Distribution gains

Preference Purchase intention Trial rate Repurchase rate

Stocks cover in days Out of stock frequency Share of shelf

Average sales per point of sale Customer complaints Customer satisfaction Customer sacrifice Number of promoters to detractors

ommun ca on e r cs Spontaneous (unaided) brand awareness Top of

mind brand awareness Prompted (aided) brand awareness Spontaneous (unaided) advertising awareness

us omer acqu s on cos s New customer gains

Customer loses Customer churn Retention rate

Prompted (aided) advertising awareness Effective reach

Effective frequency Gross rating points (GRP) Res onse rate

Customer lifetime value Customer equity Customer profitability Return on customer

Brand Metrics

Sales force metrics Quality of lead stream Average lead to proposal Average close ratio

Brand strength (perceived relative brand value) Brand equity

Cost per lead Cost per sale Cost per sales dollarPrice and Profitability Metrics

*Compiled by Philip Kotler from various sources

r ce sens t v ty Average price change

Contribution margin ROI DCF

Comments on Some Metrics


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Comments on Some Metrics

Market share

Customer satisfaction

Customer sacrifice

Number of promoters to detractors

Retention rate

Customer lifetime value

Customer equity

Return on customer

Brand strength (perceived relative brand value)

Brand equity

DCF

PR

Messageeffectiveness


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PR effectiveness

effectiveness Brand beliefs

and erce tion

In-store

activity

Pricing

Promotion

BrandPurchase PurchaseBrand Purchase Purchase

familiarity consideration intentionfamiliarity consideration intention

Adjacent

category Margin

se an

satisfaction

Reviews

u o e s o ow our ar eWorks and Use New Tools

Marketing Decision Models


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Marketing Decision Models

and Marketing Mix Response Models

BRANDAID

CALLPLAN DETAILER

MEDIAC

ADCAD

See Gary Lillien and Philip Kotler, Marketing Models(Prentice-Hall).


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The objective is to empower the salesperson to be an informedsalespersonwho virtually has the whole companys knowledge athis command and can provide total sales quality.

Marketing Automation


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a et g uto at o

Selecting names for a direct mail campaign

Deciding who should receive loans or credit extensions

Allocating product lines to shelf space Selecting media

Customizing letters to individual customers

Targeting coupons and samples

Pricing airline seats and hotel reservations


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Tools dashboard

Processes dashboard

Exploit the Internet!


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Create a web site that brilliantly communicates about yourhistory, products, brands, beliefs and values (BMW).

rea e a s e a consu s on a ca egory o ga e on en aproblems).

Create a site that consults on the individual customers profile

vitamins). Run focus groups with prospects, customers and dealers or

send uestionnaires. Send ads or information to prospects who show an interest. Send free samples of new products (freesample.com). . . Invite customers to send e-mails about problems, ideas, etc. Use the Internet to research your competitors.

private intranet.

Use the Internet to improve purchasing, recruiting, and training.

materials by posting the companys terms.

Technology-Enabled Marketing: Examples


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Halifax Bank Teller suggests financial products

ap a ne

A credit card for everyone, but with different interest rates, credit lines, and cashadvances.

Tesco su ermarkets Tesco has identified 5,000 customer needs segments. It sends out some

300,000 variations of any given offer with redemption rates of 90%. It hasformed clubs such as Baby Club, A World of Wine Club, My Time Club

ra

Kraft has the names of 110 million customers and 20 thousand facts for eachhousehold. Kraft launched print magazine, Food & Family, that is delivered tothe homes of 2.1 million Kraft customers in 32 versions tailored to 32 se ments.

Take-Aways


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y

Marketing skills must be enhanced in the organization.

ar et ng s scope must e more o st c.

Opportunities always exist and can be found by market segmentation,

differentiation brandin co-develo ment with customers blue oceanthinking and lateral marketing.

Traditional media must be supplemented by newer media such as

mo e p ones, ogs, po cas s, we cas s, soc a ne wor s, an uzz

marketing. Marketing technologies such as marketing models, sales automation,

marketing automation, and marketing dashboards can increase

marketing productivity.

accountability through better campaign and financial metrics.

It is not the strongest of the species that


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g p

survives, nor the most intelligent, but theones most responsive to change.

ar es arw n

PhilipKotler Sofia Lecture 11-14-07

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