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Marketing 3.0

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Marketing 3.0

Marketing 3.0

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  • 1. Thriving with Marketing 3.0
    Philip Kotler
    Jeddah, Saudi Arabia,
    October 10, 2010
  • 2. Winning in Hard Times
    Session One. How to meet today’s and tomorrow’s challenges with Marketing 3.0.
    Session Two. How to increase your brand power.
    Session Three. How to manage sales and marketing.
  • 3. Session 1.
    Using Marketing 3.0 to Meet the New Challenges
  • 4. On a scale of 1 to 3 (3 = highest), How much is this a challenge to your company?
    Distrust of business
    Globalization
    Economic recession and turbulence
    Technological advances and disruptions
    Environmentalism and climate change
    The new social media
    Political and regulatory changes
  • 5. Is Your Company Going to Fail?Signs to Watch for
    James Collins wrote in How the Mighty Fall :
    Stage 1. Successful companies get arrogant and think they can do many things.
    Stage 2. They pursue aggressively wild growth.
    Stage 3. They ignore early warning signs of failure
    Stage 4. Their failure becomes very public.
    Stage 5. If they don’t reform, they finally go bankrupt.
    Consider General Motors.
  • 6. Economic Recession and Turbulence
    Distinguish between:
    Recession
    Disruption
    Turbulence
    Risk reduction strategies
    Larger reserves
    Shared investments
    Early warning systems
    Scenario planning
    Corporate social responsibility
  • 7. Disruptive Technologies
    OLD
    Photographic film
    Wired telephones
    Store retailing
    Classroom education
    Offset printing
    General hospitals
    Open surgery
    Cardiac bypass surgery
    Manned fighters
    Full service stock brokerage
    NEW
    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.
  • 8. Tomorrow Will Be Different
    Source: Clayton Christensen
  • 9. Consider How Marketing Has Changed
    Old definition of marketing
    “Act or practice of advertising and selling a product” (Random House Webster Dictionary of American English 1997)
    New definition of marketing
    “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)
    Offerings include products, services, experiences, places, persons, ideas, and causes
  • 10. 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 market
    By using communications to build the brand and develop collateral 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 for the marketing plan (4Ps) and brand-building.
  • 11. Stages in the Development of the Marketing Discipline
    Selling stage. (the idea of setting up selling systems involving distribution, sales people and advertising).
    4P stage. (the idea of integrating the marketing tools).
    STP stage. (the idea of refining the market targets and branding).
    Customer Relationship stage. (the idea of building a loyal customer base).
    5. Co-creation stage. (the idea of involving customers in developing products and communications).
  • 12. Marketing Objective, Process, and Philosophy
    CCDVTP
    R -> STP -> MM -> I -> C
    CIB
  • 13. MARKETING’S RECENT LOSS OF EFFECTIVENESS
    MARKETING will be less effective in the next few years
    Marketing budgets will be lower
    Companies will want marketers to do more with less
    DISTRIBUTORS
    TRADITIONAL MEDIA
    COMPETITION
    SOCIAL MEDIA NETWORKS
    PUBLIC
    • DISTRIBUTORS will demand more TRADE PROMOTION. This will leave less money for marketing research, advertising and consumer promotion for brand building and ultimately reduce brand equity.
    • 14. Investors will then downgrade the stock. This will leave the company with fewer resources to prop up demand.
    • 15. This is a VICIOUS CIRCLE
    • 16. Traditional media such as TV 30-second spots, newspapers, etc., are growing LESS EFFECTIVE
    • 17. Categories are so crowded with competitors that heavy price cutting will be UNAVOIDABLE
    • 18. The public, in its wish to spend less, will be less inclined to pay higher prices for top brands where the quality differences are minimal. There is a strong shift to store brands and sub-brands. This means that top brands are overvalued and there may be a brand bubble.
    • 19. Social media networks will play an increasingly influential role in shaping brand evaluations
  • STRATEGIC vs TACTICAL MARKETING
    Most marketing departments are engaged in brand-maintenance instead of brand-building.
    Company marketers spend only 15-30% of their time doing true marketing activities. The rest of the time is spent on forecasting volume, securing approvals on label artwork, checking manufacturing schedules, and doing routine analysis.
    Strategic marketing is missing in many marketing departments. Strategic marketing requires taking a 3-5 year view of the business.
    SOLUTION
    TWO MARKETING DEPARTMENT…!!!
    Downstream Marketing
    Upstream Marketing
    Markets TODAY’s Product
    Create TOMORROW’s Product
  • 20. The Age of Social Media.
    Marketers have Lessening Influence
    in Shaping Their Brand Image
    FOUR POSSIBILITIES
    Person-to-person conversations about many products can exceed the amount of communication under the company’s control.
    Everyone is talking negatively about the company
    There is no talk about the company
    The talk is a mix of good and bad comments
    Thus a brand can be hijacked.
    see Alex Wipperfürth, Brand Hijack: Marketing without Marketing, New York: Portfolio, 2005
    Virtually all the talk is favorable
    Marketing 2.0
    Marketing 3.0
    Managers listened to the consumers’ voices to understand their minds and capture market insights
    Consumers play the key role of creating the value through co-creation of product and service
  • 21. EVOLUTION OF MANAGEMENT THINKING
    Product Management
    Customer Management
    Brand Management
    Value Management
    1950s – 1960s
    1970s – 1980s
    1990s – 2000s
    2010s – 2020s
  • 22. THE FUTURE OF MARKETING
    TODAY’S MARKETING CONCEPT
    FUTURE MARKETING CONCEPTS
    THE DISCIPLINES OF MARKETING
    PRODUCT MANAGEMENT
    The Four Ps
    (Product, Price, Place, Promotion)
    CO-CREATION
    CUSTOMER MANAGEMENT
    The STP
    (Segmentation, Targeting, and Positioning)
    COMMUNITIZATION
    BRAND MANAGEMENT
    Brand Building
    CHARACTER BUILDING
  • 23. CO-CREATION
    Evolution of a company’s relationship to its customers:
    Make a Product
    Refine the Product
    Invite Customers
    with minimal customer testing
    with extensive customer input and testing
    to provide ideas and co-create
    The new ways of creating product and experience through collaboration of companies, consumers, suppliers, and channel partners interconnected in a global network of innovation
    C.K. Prahalad and M.S. Krishnan, The New Age of Innovation: Driving Co-created Value Through Global Networks, New York: McGraw-Hill, 2008
    Three key processes of CO-CREATION:
    Ask for consumer feedback and enrich the platform by incorporating all the customization efforts made by the network of consumers.
    Individual consumers customize the platform to match their own unique identity.
    A company creates a “platform”.
    1
    2
    3
  • 24. MARKETING 1.0vsMARKETING 2.0 vsMARKETING 3.0
    MARKETING 1.0
    MARKETING 2.0
    MARKETING 3.0
    Product-centric Marketing
    Customer-oriented Marketing
    Value-driven Marketing
    Objective
    Satisfy and retain the consumers
    Make the world a better place
    Sell products
    Enabling Forces
    Industrial Revolution
    Information Technology
    Social Media
    How companies see the market
    Mass Buyers with Physical Needs
    Smarter Consumer with Mind and Heart
    Whole Human with Mind, Heart, and Spirit
    Key marketing concept
    Product development
    Differentiation
    Values
    Company marketing guidelines
    Corporate and Product Positioning
    Corporate , Vision, Values
    Product specification
    Value propositions
    Functional and Emotional
    Functional, Emotional, and Spiritual
    Functional
    Interaction with consumers
    One-to-Many Transaction
    One-to-One Relationship
    Many-to-Many Collaboration
  • 25. Values-Based Matrix Model
  • 26. S. C. JOHNSON VALUE-BASED MATRIX
    MIND
    HEART
    SPIRIT
    Mission
    Contributing to the community well –being as well as sustaining and protecting the environment
    Promoting reusable shopping bags
    Base of the Pyramid
    For SC Johnson, creating sustainable economic value means helping communities prosper while achieving profitable growth for the company.
    Sustaining Values:
    SC Johnson Public Report
    Vision
    To be a world leader in delivering innovative solutions to meet human needs through sustainability principles
    Values
    Sustainability
    We create economic value
    We strive for environmental health
    We advance social progress
    We believe our fundamental strength lies in our people.
  • 27. Companies Americans Love
    Amazon, 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.
    The researchers found these “firms of endearment” to be highly profitable.
    They also found eight characteristics common to these firms.
  • 28. 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.
  • 29. Marketing the Mission to…
    Consumers
    Employees
    Channel Partners
    Shareholders
  • 30. MOVING TOWARD MARKETING 3.0
    • Where is your company now?
    • 31. Where do you want it to be?
    • 32. Why?
    • 33. What would steps would you take?
  • The Challenge
    Re-moralize the market
    Re-localize the economy
    Re-capitalize the poor
  • 34. Session 2. Increasing Your Branding Power
  • 35. The brand name may account for more than half of the brand value on the balance sheet.
    Almost 70% of the market capitalization of such brands as Nike and Prada lie in its intangibles, especially the brand.
    The former chairman of Quaker Oats said: “If the business were split up, I would take the brands, trademarks, and goodwill, and you could have all the bricks and mortar—and I would fare better than you.”
  • 36. What’s In a Name? Everything!
    Donald Trump’s family name is
    Dumpf. Drumpf Towers?
    AlphonsoD’Abruzzo renamed
    Alan Alda.
    Chinese gooseberry renamed kiwifruit.
    Hog Island in the Bahamas renamed Paradise Island.
  • 37. Your Brand Needs to Own a Word
    Mercedes - engineering
    BMW - driving
    Disney - family fun entertainment
    Saturn - no hassle car buying
    FedEx - overnight
    Wal-Mart - low prices/good values
    Hallmark - caring
    Nike - performance
    3M - innovation
    Volvo - safety
    Starbuck - best coffee experience
  • 38. A Brand Must be More Than a Name
    A brand must trigger words or associations (features and benefits).
    A brand should depict a process (McDonald’s, Amazon).
    A great brand triggers emotions (Harley-Davidson).
    A great brand represents a promise of value (Sony).
    The ultimate brand builders are your employees and operations, i.e., your performance, not your marketing communications.
  • 39. Brand Asset Valuator Model
  • 40. LEADING B2B BRANDING COMPANIES
  • Find a Way to Brand These Commodities
    Chicken
    Cement
    Bricks
    “It is possible to brand sand, wheat, beef, bricks, metals, concrete, chemicals, corn grits, bananas, apples, aspirin, …”(Sam Hill, How to Brand Sand).
    CAN YOU DESIGN NEW FEATURES FOR AN AUTO INSURANCE POLICY?
  • 55. Creating genuine customer value: Progressive Insurance
    Name Your Price lets customers customize their policy to fit their budget.
    “ I want an easier way to see how I can meet my insurance needs at a great price.”
    MyRate rewards lower risk drivers with lower rates.
    “ I don’t drive a lot of miles, I’m a safe driver, and I’m not usually on the road late at night when accidents are most likely to happen. Since I’m less likely to be in an accident, shouldn’t I pay less for car insurance?”
  • 56. Build a Brand Community!
    Examples: Harley Davidson, Saturn, Porsche, BMW, Apple user groups, Lexus owners, Barnes and Noble bookstores, The Body Shop, Ikea.
    Harley’s Owner Groups:
    HOGs have 250,000 members divided into 800 chapters: VietNam vets, lesbians, born again Christians, Ladies on Harleys.
    Tools include: Rallies, anniversaries, lectures on maintenance and safety, competitions, shows, internet sites.
    The researchers describe Harley as “a religious icon around which an entire ideology of consumption is articulated.”
  • 57. Develop a Memorable Brand Slogan
    BA, “The World’s Favorite Airline”
    American Express, “The Natural Choice”
    AT&T, “The Right Choice”
    Budweiser, “King of Beers”
    WHAT DO YOU THINK OF THESE SLOGANS
    Ford, “Quality is #1 Job”
    Holiday Inn, “No Surprises”
    Lloyds Bank, “The Bank that Likes to Say Yes”
    Philips, “From Sand to Chips”
    “Philips Invents for You”
    “Let’s Make Things Better”
  • 58. BRAND JOURNALISM
    Brand Positioning = Brand Journalism
    “Marketers should communicate different messages to different market segments at different times, as long as they broadly fit within the basic brand image.”
    -Larry Light, former McDonald’s CMO-
    McDonalds is positioned differently in the minds of kids, teens, youngadults, parentsand seniors. It is positioned differently at breakfast, lunch, dinner, snack, weekday, weekend, withkidsor on a businesstrip.
    No one communication alone tells the whole brand story
    Each communication provides a different insight into the brand
  • 59. HYPOTHETICAL STARBUCKS BRAND POSITIONING BULLSEYE
    Values / Personality / Character
    Contemporary
    CONSUMER TARGET
    Discerning Coffee Drinker
    CONSUMER INSIGHT
    Coffee and the drinking experience is often unsatisfying
    Points of
    Difference
    CONSUMER TAKEAWAY
    Starbucks gives me the richest possible sensory experience drinking coffee
    Substantiators
    (RTB)
    Caring
    Thoughtful
    24 hour training of baristas
    Stock option/ health benefits or baristas
    Points of
    Parity
    Responsible, Locally involved
    Fairly Priced
    Brand
    Mantra
    Rich, Rewarding
    Coffee Experience
    Relaxing,
    Rewarding moments
    Fresh, high quality coffee
    Totally integrated system
    Triple Filtrated water
    Executional Properties / Visual Identity
    CONSUMER NEED STATE
    Desire for better coffee and a better consumption experience
    CONSUMER INSIGHT
    Local cafes, Fast food & convenience shops
    Varied, exotic coffee drinks
    Reach sensory consumption experience
    Convenience, Friendly service
    Siren logo
    Green & Earth Colors
  • 60. 40
    The Mercedes-Benz “Enduring Passion”
    “The brand Mercedes-Benz is a brand icon, from its founding day till today.”
  • 61. Measure Your Brand Effectiveness
    Customer perceived value
    Customer satisfaction
    Customer repeat purchase
    Customer advocacy
    Customer co-creation
  • 62. The 3i Model of Branding
  • 63.
  • 64. SUSTAINABILITY AND SHAREHOLDER VALUE
    There is a link between corporate sustainability and strong share price performance.
    Companies that put more emphasis on social and environmental impacts reported annual profit growthof 16% and share price growth of 45% while those from companies that did not put a lot of emphasis reported annual profit growth of only 7%and share price growthof only 12%. (Economist Intelligence, 2008)
    More executives believe that the concept of sustainability is good for corporations in attracting consumers and employees and improvingshareholdervalue.
  • 65. TRACKING SUSTAINABILITY
    Needed: indices that measure how well a company performs in the triple bottom line: profit, planet, and people.
    The AIM:
    To encourage companies to improve their economic, environmental, and social impact on the society.
  • 66. Selling Sustainability to Investors
    To convince shareholders, the company needs to provide tangible evidence that the practice of sustainability will improve shareholder value by creating a competitive advantage.
    Sustainability
    The issue is to find a linkage of between sustainability, profitability, and returnability
    ?
    Profitability
    Returnability
    THREE important metrics that can be quantified financially:
    Improved cost productivity
    Higher revenue from new market opportunities
    Higher corporate brand value
    (For details, see Marketing 3.0).
  • 67. Session 3. Ending the War Between Sales and Marketing
  • 68. Sales and Marketing Complaints
    An Oracle salesperson told us, “Marketing sends us business cards they collect at trade shows from people who don’t need us and don’t want to see us. They call these things “leads”.”
    Marketing says “We generate about 25,000 leads a year for sales. Most of these leads aren’t followed up and go cold.”
    “Marketing,” a senior airline sales manager told us, “are the people who come up with these fancy value propositions that mean nothing to customers but do tell us how out of touch they are with business reality.”
    The Head of Marketing had a different perspective. “We have a value proposition that’s powerful – if only our sales force knew how to sell it.”
  • 69. The Six Key Responsibilities of the CMO
    Gather meaningful customer insights.
    Strengthen the brands.
    Drive new product development based on customer needs.
    Utilize new marketing technology.
    Measure marketing effectiveness.
    Improve marketing’s working relation with the other functions.
    Source: Adapted from a McKinsey study
  • 70. Define the Existing Level of Relationship
    The integration of sales and marketing tends to progress through four distinct stages or levels of complexity.
    Undefined
    Defined
    Aligned
    Integrated
  • 71. Selling Funnel
    Purchase
    Intention
    Customer
    Awareness
    Brand
    Awareness
    Brand
    Consideration
    Brand
    Preference
    Purchase
    Loyalty
    Customer
    Advocacy
    Handoff
    Marketing
    Sales
  • 72. Integrating Customer ManagementInto the Sales Funnel
    Purchase
    Intention
    Purchase
    Loyalty
    Customer
    Advocacy
    Prospecting
    Qualifying
    Defining
    Needs
    Developing
    Solutions
    Proposal
    Preparation/ Presentation
    Revision & Issue Resolution
    Contract
    Negotiation
    Implementation
  • 73. The Alternative Business Model
    • Our mousetrap is one of many ways to kill mice
    • 74. There’s not enough value in the mousetrap to differentiate us from competition
    • 75. So the role of sales is to add value to our mousetrap
    Sales becomes value creation, not value communication
    ©2009 Neil Rackham
  • 76. Two Customer Value Types
    Value= Benefits – Cost
    Consultative Customers
    Transactional Customers
    • Have a problem
    • 77. Value your time
    • 78. Buy on expertise and trust
    • 79. Know what they want
    • 80. Treat you as a commodity
    • 81. Buy on price and convenience
    ©2010 Neil Rackham
  • 82. Five years ago
    10% were consultative
    10% were transactional
    $
    TRANSACTIONAL
    CONSULTATIVE
    Most customers would pay a little extra for some advice
    ©2010 Neil Rackham
  • 88. Customers Today
    More want deeper consultative relationships
    More buy transactionally
    $
    $
    TRANSACTIONAL
    CONSULTATIVE
    $
    The middle is going away.
    ©2010 Neil Rackham
  • 94. Today’s Value Propositions
    ©2010 Neil Rackham
    Today, depending on what they are buying, the value propositions customers want are:
    “We’ll use our expertise to solve your problems and create custom solutions, for which we’ll charge you a premium.”
    OR
    “We’ll offer you cheap and convenient products, but don’t expect extras.”
  • 95. Competencies for Transactional Sales
    ©2010 Neil Rackham
    Direct Marketing
    Branding
    Transactional Sales
    Multi-customer events
    Trade shows
    Advertising
    Campaigns
    Call centers
    Internet
  • 96. Where is Marketing Going?
    More companies are adopting a market and customer orientation
    47% of Fortune 1000 firms have a CMO (80% have a CFO).
    Your CMO should be an active participant in the company’s strategic planning group.
    Decide if you want your company to become market-driven or market-driving.
  • 97. MESSAGE
    Companies need to move from a shareholder to a stakeholder view of the
    enterprise.
    Companies need to practice the Triple Bottom-Line Model: Economic Value, Environmental Health, and Social Progress. Companies must better define
    their corporate social responsibilities.
    Marketers get their clues from how the company defines its mission, vision and values. The marketers then send offerings that touch the customer’s mind, heart, develop and human spirit.
    Marketing can contribute by serving more actively in developing the company’s plans for long run profitable growth.
  • 98. “Within five years, if you run your business in the same way as you do now, you’re going to be out of business.”
    Philip Kotler