Business model innovation: FedEx, Barnes and Noble, Itunes, Mayo Clinic, Zara, Grameen Bank, New to the world: Mobile phone, Starbucks, Google, Apple iPod, Post-It™ Notes, Viagra, Skype, Facebook, Netflix, the Blackberry and Tata’s $2,000 car
The New Role of Marketing in the Global Digital EconomyPhilip Kotler MoscowKellogg School of Management November 12, 2011Northwestern University
Today’s Schedule ScheduleSession 1. The Role of Marketing 3.0 inCompany GrowthSession 2. The Need for Entrepreneurshipand Innovative ThinkingSession 3. The Need for Strong Brandingand Reputation BuildingSession 4. Panel Discussion aboutMarketing in Russia
Session 1The Role of Marketing 3.0 in Company Growth
The Problem and Opportunity Agenda• 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
Three forces moving business away from normal• Business Cycle• Turbulence• Disruptive innovation
Disruptive Innovations Disruptive Technologies OLD NEW • Photographic film • Digital photography • Wired telephones • Mobile telephones • Store retailing • On-line retailing • Classroom education • Distance education • Offset printing • Digital printing • General hospitals • Outpatient clinics • Open surgery • Endoscopic surgery • Cardiac bypass surgery • Angioplasty • Manned fighters • Unmanned aircraft • Full service stock brokerage • On-line stock brokerageSource: Clayton M. Christensen, The Innovator’s Dilemma, p. xxix. ; google.com
Tomorrow Will Be Different Yesterday Today Tomorrow Ford 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 PhonesSource: Clayton Christensen ; gettyimages.com
Most Companies are Short Lived 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?
Arie de GeusCompanies Traits of Long-Living• 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
It is time to become WORLD CLASS! STANDARDS The need to meet the highest standards anywhere in order to compete. CONCEPTS WORLD Access to the best and the latest CLASS knowledge and ideas PEOPLE The growth of a social class defined by its ability to command resources and network beyond borders and across wide territoriesSource : Rosabeth Moss Kanter Page10
World class companies can be local, regional, or globalLocal companies have limited Regional companies have more Global companies have plenty choices. Customer choices. The customer of choices. While customer management, product management should remain management should always be management, and brand local but product and brand local, product management management can only be management can remain local can be local or regional while local. or become regional. brand management can even be global. Page11
Define Your Target Market Consumers who want offerings to have the same attributes and quality that products in developed countries have and are willing to pay global Global prices for them Consumers who demand customized products of near-global Glocal standard and are willing to pay a shade less than global consumers do Consumers are happy with products of local quality and at Local local prices People who can afford only the least expensive Bottom products MARKETSource : Emerging Giants : Building World-Class Companies in Developing Countries. Harvard Business Review October 2006 Page12
The Two-Speed 6/2 World IMF projects the fastest growth among the 18 largest economies IMF Projected Nominal GDP Growth (2009 – 2015) Indonesia 12.8% Russia 12.5% China 12.3% India 11.8% Brazil 10.0% Turkey 9.0% South Korea 8.7% Japan 4.3% USA 4.2% ASEAN (excl. 8.8% Indonesia)Source : Chairul Tanjung, National Economic Council, International Monetary Fund, World Economic Outlook Database, October 2010 Page13
The Strategic Trajectory for afor a Growth The Strategic Trajectory Growth Company 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).
Build an Early Warning System Customers and Competitors and channels complementors Inside the company Emerging Political, legal, technologies and social and Focal Focal area scientific economic area developments forces Influencers and ShapersSource: Peripheral Vision, George S. Day and Paul J.H. Shoemaker
Build a Scenario Planning System Undetectable Detectable Turbulence Turbulence Chaos Early Warning System Unaddressed Chaos impacts Turbulence the Company (Addressed Turbulence) Construction of Key Scenarios Vulnerabilities (Opportunities : Vulnerabilities)Opportunities Latent Latent Scenario 1 Scenario 2 Scenario 3 Strategy Response Strategy Response Strategy Response 1 2 3 Strategy Selection Chaos Source: Chaotics Management System in Kotler and Caslione.
Source: The Beginning of Selling and Marketing
Marketing, however, came about much later Pioneer of marketing Early 1900s person or group in company1st academic courses on marketing
Marketing started because Sales departments needed others to:Conduct consumer Prepare brochures and Find Leads research 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.
The Evolution of Marketing 2000s 1990s 1980s 1970s 1960s 1950s FINANCIALLY-DRIVEN ONE-TO-ONE UNCERTAIN TURBULENT SOARING • ROI Marketing POSTWAR • Brand Equity Marketing • Emotional • Customer Equity • Marketing Marketing Marketing • Targeting Warfare • Experiential • The Four Ps • Social Responsibility • The Marketing • Positioning • Global Marketing Marketing Marketing Mix • Marketing • Local Marketing • Internet and e- • Strategic • Consumer • Product Life Myopia • Mega-marketing business Cycle Marketing Empowerment • Lifestyle • Direct Marketing Marketing • Brand Image • Service • Social Media Marketing Marketing • Customer • Sponsorship • Market Marketing • Tribalism Relationship Marketing Segmentation • The • Authenticity Marketing • Social Marketing Marketing • Marketing Ethics • The Marketing Broadened • Co-creation Marketing Concept • Societal • Internal Concept of Marketing Marketing • The Marketing Marketing Audit • Macro-marketing
Four CEO Views of MarketingThe size and type of department depends on the type ofindustry, 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 ThatYour Office Be Located Next To: 1. CEO office 2. CFO office ? 3. CTO office ? 4. CIO office 5. VPS office
Is Marketing Only A Department? – 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)
The Marketing Management ProcessPlan Manage Execute Measure • Marketing • Marketing • Campaign • Marketing Investment Resource Management Analytics • Demand Management • Lead • Web Modeling Management Analytics • Events Management • Loyalty Management • Media Management
Power isis Shifting to the Customers Power Shifting to the Consumers• 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.
CMOs are Underprepared Marketers Are Underprepared for Operating in theNew World for this Digital 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.
CMOs Need to be More Financially Accountable but Lack the Skills, Tools and Influence on the 4Ps• 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.
Needed Actions by CMOs• 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.
Competency Skills Needed by Today’s Marketers• 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.
Session 2 The Need forEntrepreneurship anInnovative Thinking R
How Does a Company Innovate? Some Thoughts on Innovation "Most innovations fail. And, companies that dont 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
Types ofInnovation Types of Innovation Product and service Marketing incremental innovation innovation Business model New to the world innovation innovationSource: http://2.bp.blogspot.com/_qD9Y8Ncd3I4/Sb6hKKOJkJI/AAAAAAAACDo/fHZHCQbvRe4/s400/BornToInnovate2009.jpg
AA BalancedNew Product Portfolio Balanced New Product Portfolio A Few Big Strategic bets Portfolio of new ventures, prototypes, projects. Many incremental quick wins and continuous Improvements.Source: Rosabeth Moss Kanter
Innovation and Your Company Innovation and Your Company How is theWhere do you How do innovative How are Where is the innovation processfocus your search ideas flow in your innovative ideas innovation managed (formalfor innovation firm (top down or developed (build organization processes or(inside or outside bottom up)? internally or buy)? located? informalof the firm)? processes)?Source: http://www.henkel-cee.com/cee/content_images/36406_72dpi_605W.jpg
Roles inin aCompany’s Innovation Roles a Company’s Innovation Process Process Activators Browsers Creators Developers Executors FinanciersSource: Philip Kotler and Fernando Trias de Bes, Winning at Innovation, 2011.
TheThe Relationship between Relationship between Innovation InnovationMarketing and 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 ?
Session 3The Need for Strong Branding andReputation Building
Examples of Great Missions and Vision Leader Brand Mission and VisionIngvar Kamprad IKEA Make stylish furniture affordableRichard Branson Virgin Bring excitement in boring industries Walt Disney Walt Disney Create magical world for families Herb 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
HYPOTHETICAL STARBUCKS BRAND POSITIONING BULLSEYE Consumer Target Discerning Coffee Contemporary Drinker Consumer Insight Caring Thoughtful ConsumerCoffee and the Takeaway Stock options/ drinking health benefits Starbucks 24 hourexperience is training of or baristas gives me the often Responsible, Fairly baristas Priced richest locally involved unsatisfying possible Brand sensory experience Relaxing, Mantra drinkingConsumer Rich, Rewarding Fresh high rewarding coffee Coffee Experience quality coffee momentsNeed State Triple Totally Varied, exotic Desire for Rich sensory Filtrated integrated consumption Convenient, coffee drinksbetter coffee system experience friendly water and a better service Sirenconsumption logo experience Green & Earth ColorsCompetitiveProduct Set Local cafesFast food &convenience shops
CUSTOMER RESEARCH Focus Groups/ 1. Neuro-Ethnographic In-store Quantitative Consumer marketing Studies Observation Surveys Panels 2. ZMET In home & Orientation & Awareness, Listening forshopping trips Environment Attitudes, & insights & trends Behavior Why do you buy? Customer Research
Neuromarketing1 “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.
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.
Marketing the Missionto… Consumers Employees Channel Partners Shareholders
The Ownership Quotient 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.
Companies Americans LoveAmazon, Apple, Best Buy, BMW,CarMax, Caterpillar, CommerceBank, Container Store, Costco,eBay, Google, Harley-Davidson,Honda, IDEO, IKEA, JetBlueJohnson & Johnson, JordansFurniture, L L Bean, New Balance,Patagonia, Progressive Insurance,REI, Southwest, Starbucks,Timberland, Toyota, Trader Joes,UPS, Wegmans, Whole Foods.These “firms of endearment” werehighly profitable. They outperformedthe market by a 9-to-1 ratio over aten-year period. More fulfilledemployees, happy and loyalcustomers, innovative and profitablesuppliers, environmentally healthycommunities.
Characteristics of “Firms of Endearment” 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.
What are some major social causes that companies adopt? Avon Breast cancer General Mills Better nutrition General Motors Traffic safety Home Depot Habatat for Humanity Kraft Reducing obesity Levi Strauss Preventing AIDS Motorola Reducing solid waste Pepsi Cola Staying active Shell Coastal cleanup Petsmart Animal adoption Aleve Arthritis British Airways Children in need Starbucks Tropical rainforests Best 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.
MOVING TOWARD MARKETING 3.0Marketing 1.0 Marketing 2.0 Marketing 3.0MIND HEART SPIRITPRODUCT- CUSTOMER- VALUES-DRIVENCENTERED ORIENTEDECONOMIC- VALUE PEOPLE-VALUE ENVIRONMENT- VALUEPROFITS SOCIAL PROGRESS HUMAN HAPPINESS•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 youare in now, you’re going to be out of business.”