8/2/2019 Branding Philip Kotler
1/93
A Strategy DocumentonThe New Marketing Paradigm
Holistic Marketing
Lateral Marketing
High-tech Marketingby
PHILIP KOTLER
Documentation Sponsored by
Canon
8/2/2019 Branding Philip Kotler
2/93
logo unit
8/2/2019 Branding Philip Kotler
3/93
Printed on CANON
Kotler On MarketingHow To Create, Win, and Dominate Markets
Philip Kotler, Ph.D
Kellogg School of
Management Northwestern
University
Indiatimes Mindscape Mumbai and Delhi
October 11, 12, 2004
8/2/2019 Branding Philip Kotler
4/93
Printed on CANON
Two Challenges FacingIndian Companies
1. Will Indian companies be able to defend theirmarket against the growing invasion of foreignglobal brands?
2. Can Indian companies develop strong globalbrands?
8/2/2019 Branding Philip Kotler
5/93
Printed on CANON
Can Indian CompaniesDefend the Domestic Market?
Foreign competitors will not only go after thehigh end market in India. They will target the
middle and eventually the low end.
The main defense for India will be developingstronger skills in innovation, differentiation,
branding, and service. In a word,MARKETING!
8/2/2019 Branding Philip Kotler
6/93
Printed on CANON
But India NeedsStronger Marketing
Confusing marketing with advertising.
Advertising is hard sell.
Sometimes ads appear before the product is in distribution.
Some companies over-spend on advertising and go broke.
Little use of marketing research; cant trust.
Therefore little segmentation of market and poor targeting.
Over focus on winning through low price; neglectingdifferentiation.
Retailers carry the same goods and their service is poor.
8/2/2019 Branding Philip Kotler
7/93
Printed on CANON
Marketing is More Importantthan Production!
The Indian manufacturer of a Hugo Boss shirt gets only $12, or10% of the final price of $120 that is paid by a customer of SaksFifth Avenue. The retailer gets 60% ($72) and the Brand company gets
30%, or $36.
Would you rather be the manufacturer, Brand owner, orretailer?
The Indian manufacturer has no defense if the Brand Ownerwants to switch to another manufacturer to whom he will pay$8 and keep $2 or pass it to the retailer to get more retailsupport.
Yet India pays more attention to the product engineer than themarketing engineer. But Indias future success will requireinvesting in marketing and branding.
8/2/2019 Branding Philip Kotler
8/93
Printed on CANON
The Strategic Trajectoryfor India
Low cost, average quality domestic products.
Low cost, good quality domestic products.
Indian high-end products made for other companies.
Indian branded products (regional).
Indian branded products (global).
Indian dominant brands (global).
8/2/2019 Branding Philip Kotler
9/93
Printed on CANON
Ranbaxy Pharmaceuticals (India)
Originally sold bulk substances to unsophisticatedmarkets but gross margins were too low to coverexport costs.
New CEO, Parvinder Singh, challenged Ranbaxy tobecome a truly global company. He said: Ranbaxycannot change India. What it can do is to create apocket of excellence. Ranbaxy must be an islandwithin India.
The company moved into higher-margin businesseslike selling branded generics in large volume
markets like China and Russia. Ranbaxy then entered the U.S. and Western Europe.
In just five years, more than half of its US$ 250million revenues now come from outside of India.
8/2/2019 Branding Philip Kotler
10/93
Printed on CANON
The Case of HaierHaier developed through three stages.1. Fix quality
(Zhang Ruimin smashed 76 refrigerators).2. Diversify
(Microwaves, toasters, air conditioners,dishwasher, vacuum cleaners, etc.)
3. Globalize(Asia Region, U.S., Europe)
Haier entered with a U.S. partner and ischallenging Whirlpool and GE.
Haiers brand name products are sold in Wal-Mart,Best Buy, Sears, Lowes, Home Depot and Target.
Haier is promoted as a global brand, not a Chineseone. (Many people think it is German).
Puts lower price models in price-only stores andhigher price models in top stores.
8/2/2019 Branding Philip Kotler
11/93
Printed on CANON
Five Cs Favoring India
Capital: India has and can attract capital.
Cost: Another 50 years of low cost production
Capability: Large number of trained workers,engineers, scientists, and business people
Consumers: Immense domestic market
Calm and stability: in a world of turmoil anduncertainty
8/2/2019 Branding Philip Kotler
12/93
Printed on CANON
A Quiz: Who Said This?
The purpose of a company is to create a customerThe onlyprofit center is the customer.
A business has twoand only twobasic functions:marketingand innovation. Marketing and innovation produceresults: all the rest are costs.
The aim of marketing is to make selling unnecessary.
While great devices are invented in the Laboratory, great
products are invented in the Marketing department.
Marketing is too important to be left to the marketingdepartment.
8/2/2019 Branding Philip Kotler
13/93
Printed on CANON
My Message
Marketings performance has beendisappointing.
You must replace your Old Marketing withNew Marketing that is:
holistic,
technology-enabled, and strategic.
8/2/2019 Branding Philip Kotler
14/93
Printed on CANON
Facing the Increasing Pressure forMarketing Accountability
Marketing has become a one P discipline = selling. Marketing involves a great deal of waste.
$2 million for 30 seconds on the Superbowl. Direct mail campaigns with a 1% response rate. Cold sales calls which play the numbers. High rate of new product failure.
Marketing costs are high and rising.
Marketing lacks accountability.
Marketing does not create major new ideas.
Marketing is too involved in short-term thinking.
Marketing doesnt focus on its real assets.
Brands, customers, service quality, stakeholder
relationships, intellectual capital, corporate reputation
8/2/2019 Branding Philip Kotler
15/93
Printed on CANON
Needed:Holistic Marketing
Marketing must become strategic and drive business strategy.
A company needs to take a more holistic view of:
the target customers activities, lifestyle, and social space.
the companys channels and supply chain.
the companys communications.
the companys stakeholders interests.
Holistic marketing will require strong software support.
8/2/2019 Branding Philip Kotler
16/93
Printed on CANON
HOLISTIC RELATIONSHIP MARKETING FRAMEWORK
MARKET
SPACE
POTENTIAL
OPPORTUNITIES
BUSINESS
INVESTMENT
CUSTOMERS CORPORATION COLLABORATORS
CUSTOMER
FOCUS
CORE
COMPETENCIES
COLLABORATIVE
NETWORK
2) How can we define relevant market space?
3) What are the potential opportunities emergingfrom the market space?
4) What business capabilities and infrastructurerequired?
1) Who is involved?
8/2/2019 Branding Philip Kotler
17/93
Printed on CANON
4 COMPETITIVE PLATFORMS
MarketOfferings
COGNITIVESPACE
CUSTOMERVALUE
BUSINESSDOMAIN
COMPETENCYSPACE
BusinessArchitecture
BUSINESSPARTNERS
CRM ERP
RESOURCESPACE
SCM
Marketing
ActivitiesOperational
System
ExploringValue
CreatingValue
DeliveringValue
CustomerFocus
CoreCompetencies
CollaborativeNetwork
8/2/2019 Branding Philip Kotler
18/93
Printed on CANON
Responding to Low Margins and theEconomic Slowdown
Commoditization and rapid imitation leading to shorter productlife cycles.
Competition of cheaper brands from China and elsewhere.
Rising selling and promotion costs and decreasing sales
effectiveness.
Shrinking margins.
Proliferation of sales and media channels.
Power shifting to giant retailers who are demanding lower
prices. Recession: lower incomes and purchasing power.
Mergers, large company bankruptcies.
8/2/2019 Branding Philip Kotler
19/93
Printed on CANON
Improving Marketing
Efficiency and Effectiveness
Improving marketingefficiency buying inputs more efficiently
hunting down excessive communication and sales travelexpenses
closing unproductive sales offices
cutting back on unproven promotion programs and tactics
putting advertising agencies on a pay-for-performance basis
Improving marketing effectiveness
replacing higher cost channels with lower cost channels
shifting advertising money into better uses
reducing the number of brands or skus
Improving supply chain responsiveness
8/2/2019 Branding Philip Kotler
20/93
Printed on CANON
Responding to theEconomic Slowdown
Reevaluate your current resource allocations. Geographical mix Market segment mix Customer mix Product mix
Channel mix Promotion mix
Decide whether to attack to gain market share rather thanretrench.
Be sure to maintain the value proposition promised by yourbrand.
Try to add value instead of cutting the price.
8/2/2019 Branding Philip Kotler
21/93
Printed on CANON
Marketing Strategies Are ShowingDiminishing Returns
Product differentiationis harder toachieve.
Acquisitions and mergershave asmany failures as successes.
Internationalizationis offering lessopportunities because either the good
markets are overcrowded or the poormarkets have no money. New productsunfortunately fail more
times than they succeed. Price cuttingdoesnt work because
competitors will match. Pricing raisingdoesnt work since
there isnt enough differentiation tosupport it.
Cost cuttinghas eliminated much ofthe fat but is now risking cutting themuscles.
8/2/2019 Branding Philip Kotler
22/93
Printed on CANON
Strategies for Firms in Different Market Positions
Jagdish Sheth, Singapore Marketer, 2002
8/2/2019 Branding Philip Kotler
23/93
Printed on CANON
Five Winning Strategies
Cost reduction: (IKEA, Southwest Airlines,Wal-Mart, Enterprise Rent-a-Car).
Improved customer experience(Starbucks,
Harley Davidson)
Innovative business model(Barnes & Noble,Charles Schwab, FedEx, Sony).
Improved product quality(P&G, Toyota).
Niching:(Progressive Insurance, Tetra)
8/2/2019 Branding Philip Kotler
24/93
Printed on CANON
Dual Strategies
Planning for today
Defining the business. Shaping the business to
meet needs of todayscustomers
Improving alignment
between functionalactivities and businessdefinition
Organization mirrorscurrent business
activities
Optimizing currentoperations to achieveexcellence.
Planning for tomorrow
Redefining the business
Reshaping the businessto compete for futurecustomers and markets
Making bold moves awayfrom the existing ways ofdoing business
Reorganizing for future
business challenges Managing change to
create future operationsand processes
I k t th i b f
8/2/2019 Branding Philip Kotler
25/93
Printed on CANON
In many markets, the growing number ofcompetitors in mature markets leadscompanies to target niches of low
profitability.
MarketSize
Number ofcompetitor
s
Averageprofitability
of all
competitorsor players
Y O G U R T S M A R K E T
Time
8/2/2019 Branding Philip Kotler
26/93
Printed on CANON
Some Vertical Marketing Methods
Modulation The juice manufacturer varies the sugar content, fruit
concentrate, with or without vitamins Sizing
Potato chips are offered in sizes 35 grams, 50 grams, 75grams,125 grams, 200 grams, multi-packs
Packaging Nestles Red Box chocolates comes in different containers:
cheap paper box for the grocery trade, premium metal box forthe gift trade Design
BMW designs cars with different styling and features... Complements
Biscuits with sugar spread on it, with cinnamon, with
chocolate, with white chocolate, with black chocolate, filledbiscuits Efforts reduction
Charles Schwab offers different channels for transacting suchas retail stores, telephone, internet.
8/2/2019 Branding Philip Kotler
27/93
Printed on CANON
into
Cereals for breakfast market
Cereal varieties
New category
STREETS =
The case of Cereal Bars
8/2/2019 Branding Philip Kotler
28/93
Printed on CANON
Baby dolls market
Doll varieties
New category
Tofeel
as...
=
Teenager
The case of Barbie
8/2/2019 Branding Philip Kotler
29/93
Printed on CANON
Other Examples of Lateral Marketing
Kinder Surprise = candy + toy.
Seven Eleven = food + depot.
Actimel = yogurt + bacteria protection.
Gas station stores = gas station + food.
Cyber cafes = cafeteria + Internet. Be the godfather of a kid = Donation + adoption.
Huggies Pull-ups = diapers + 3 year olds.
Walkman = audio + portable
Source: Philip Kotler and Fernando Trias de Bes, Lateral Marketing: A NewApproach to Finding Product, Market and Marketing Mix Ideas(Wiley, 2004)
8/2/2019 Branding Philip Kotler
30/93
Printed on CANON
Check Where You Stand Marketing does the marketing -> everyone does the
marketing.
Organizing by product units -> organizing by customersegments. Making everything -> outsourcing more goods and
services. Using many suppliers -> working with fewer suppliers. Emphasizing tangible assets -> emphasizing intangible
assets. Building brands through advertising -> building brands
through integrated communications. Attracting customers to stores -> making products
available on-line. Selling to everyone -> selling to target markets.
Focusing on profitable transactions -> focusing oncustomer lifetime value.
Focusing on market share -> focusing on customer share. Being local -> being glocal. Focusing on the financial scorecard -> focusing on the
marketing scorecard. Focusing on shareholders -> focusing on stakeholders
8/2/2019 Branding Philip Kotler
31/93
Printed on CANON
MARKETING IS THE ART OF BRAND BUILDING
*
IF YOU ARE NOT A BRAND,
YOU ARE A COMMODITY.
*
THEN PRICE IS EVERYTHING
AND THE LOW-COST PRODUCER
IS THE ONLY WINNER!
Building Brand Equity
8/2/2019 Branding Philip Kotler
32/93
Printed on CANON
1. How Important is Branding?
The NUMMI plant in California produces twonearly identical models called the ToyotaCorolla and the Chevrolet Prizm.
Toyota sold 230,000 Corollas compared tosales of 52,000 Prizms.
And Toyotas net price is $650 higher!
8/2/2019 Branding Philip Kotler
33/93
Printed on CANON
A Strong Brand ImprovesDemand and Supply
On the demand side:
higher price
increased sales volume
lower churn
more brand stretching
On the supply side:
greater trade acceptance, more favorable supplier terms,
lower rejection lower staff acquisition and retention costs
lower cost of capital
better scale economics through higher volume
8/2/2019 Branding Philip Kotler
34/93
Printed on CANON
Names are Important in Branding
Donald Trumps family name is Drumpf.But he cant call it Drumpf Towers.
Alan Aldas name was Alphonso
DAbruzzo.
Chinese gooseberry was renamed
kiwifruit.
Paradise Island in the Bahamas used to beHog Island.
8/2/2019 Branding Philip Kotler
35/93
Printed on CANON
A Brand Must be MoreThan a Name
A brand must trigger words or associations (features and
benefits).
A brand should depict a process (McDonalds, Amazon).
A great brand triggers emotions (Harley-Davidson).
A great brand represents a promise of value(Sony).
The ultimate brand builders are your employeesandoperations, i.e., your performance, not your marketing
communications.
8/2/2019 Branding Philip Kotler
36/93
Printed on CANON
Your Companys Brand
1. What word does your brand own?
2. Write down other words triggered by your brand name?
A. Circle the favorable words; square the unfavorable words.B. Underline the words that are favorable but not widely known.
C. Double underline the words that are unique to your company.
3. Are any of the following a source for strengthening your brandspersonality?
A. Founders
B. SpokespersonsC. CharactersD. ObjectsE. Stories and mythologies
8/2/2019 Branding Philip Kotler
37/93
Printed on CANON
2. How Do You Developa Brand Concept?
The brand must be an essence, an ideal, anemotion. It must be supported by beautiful logos,clever tag lines, creative turns, edgy names, ravelaunch parties, big ticket giveaway promotions, andpublicity buzz-making. (Advertising agency view)
The brand should have a target group in mind andbe positioned to solve one of their problems betterthan competitive offerings. Furthermore the brandsreputation is ultimately based on product quality,
customer satisfaction, employee communications,social responsibility, etc. (Kevin Clancy, CEO ofCopernicus)
8/2/2019 Branding Philip Kotler
38/93
Printed on CANON
Branding Components
Name Short, suggestive, memorable, unique, pronounceable
Slogan
Logo and typeface
Colors Music
Themelines (Got Milk!)
Stationery and business cards
Offices Trucks
Dress code
8/2/2019 Branding Philip Kotler
39/93
Printed on CANON
Brand Slogans
BA, The Worlds Favorite Airline American Express, The Natural Choice
AT&T, The Right Choice
Budweiser, King of Beers
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
Lets Make Things Better
8/2/2019 Branding Philip Kotler
40/93
Printed on CANON
There is No Such Thing as a Commodity:Differentiate by Segments
Mobil conducted a study of 2,000 gasoline buyers andidentified five segments:
Road Warriors (always driving)
True Blues (brand or dealer loyal)
Generation F3 (liked convenience store aspect)
Homebodies (fills up at nearest station)
Price Shoppers (20% of all the buyers)
Mobil rolled out Friendly Serve: cleaner property,bathrooms, better lighting, well-stocked stores, and
friendlier personnel. Mobil charged $.02 more and sales increased by 20-25
percent.
8/2/2019 Branding Philip Kotler
41/93
Printed on CANON
3. How Do You Promote a Brand?
How do I justify spending millions oncreating an image. Thats millions mycustomers have to spend when they buy
from us. Tom Parker, CEO of Clarksshoes.
Brands are built by performance, not
advertising.
8/2/2019 Branding Philip Kotler
42/93
Printed on CANON
Dont Overuse Advertisingto Build a Brand
People dont pay that much attention to ads anymore(wallpaper).
Some exceptional TV ads grab attention but do not
provide motivation.
Advertising doesnt have much credibility orbelievability.
The existence of so much advertising makesadvertising less effective. Yet the cost of advertisingkeeps rising.
T l f B ildi B d
8/2/2019 Branding Philip Kotler
43/93
Printed on CANON
Tools for Building Brands
Advertising (e.g.,Absolut Vodka)
Sponsorships (e.g., Kodak and Olympics)
Clubs (e.g. Nestles Casa Buitoni Club)
Company visits (e.g., Cadburys theme park, Hallmarks Museum)
Trade shows
Traveling exhibits
Worldwide web casts of presentations, roundtables, entertainment
Distribution outlets (e.g., Haagen-Dazs)
Public facilities (e.g., Nestle Nestops)
Social causes (e.g., American Express)
High value for the money (e.g. buzz created by Ikea, etc.)
User community building (e.g., Harley-Davidson)
Founders personality (e.g., Colonel Saunders)
Celebrity spokespersons
8/2/2019 Branding Philip Kotler
44/93
Printed on CANON
4. What Makes a Strong Brand?
Strong brand = Product Benefits x DistinctIdentity x Emotional Values
Peter Doyle, Marketing Management & Strategy, 1997
THE Y&R MODEL OF BRAND STRENGTH
8/2/2019 Branding Philip Kotler
45/93
Printed on CANON
THE Y&R MODEL OF BRAND STRENGTH
A successful brand has brand vitalityand brand stature.
Brand vitalityconsists of:
1. Differentiation, the brand is distinct
2. Relevance, the brand is meaningful and personally
appropriate.
Brand statureconsists of:
1. Esteem, the brand is seen to have quality and momentum.
2. Familiarity, the brand is known and understood by many people.
Some conclusions:
1. A brand that has high familiarity but low likeability is a troubled brand.
2. A brand that has high likeability but low familiarity has high advertising
potential.
3. A brand with high vitality but low stature has excellent potential.
4. When a brands differentiation and relevance start slipping, esteem will slip
next, and then familiarity will decline.
8/2/2019 Branding Philip Kotler
46/93
Printed on CANON
Characteristics of Strong Brands
Provides superior delivery of desired benefits.
(Starbucks, FedEx, Amazon)
Maintain innovation and relevance for the brand.
(Gillette, Charles Schwab)
Establish credibility and create appropriate brandpersonality and imagery.
(Apple, Virgin)
Communicate with a consistent voice.
(Coca-Cola, Accenture)
Strategically design and implement a brandhierarchy and portfolio.
(BMW, The Gap)
8/2/2019 Branding Philip Kotler
47/93
Printed on CANON
Strong Brands Supply Use Valueas Well as Purchase Value
Nestle: Sells baby food Provides free dietitian phone line Nestops along the highway
Home Depot: Sells home improvement products, such as paint, electrical
supplies, plumbing Offers free kitchen remodeling design service Offers free workshops on how to paint, fix faucets, etc.
Volvo Teaches safe driving,
Supports lower insurance rates for safe drivers
8/2/2019 Branding Philip Kotler
48/93
Printed on CANON
When Do You Stretcha Brand Name?
Mercedes is putting its name on large, medium andsmall cars.
Gap decided to invent Old Navy in going down andbuying Banana Republic in going up.
8/2/2019 Branding Philip Kotler
49/93
Printed on CANON
How Do You Revitalize a Brand? A dowager brand pioneered the market but now is declining. It will
be hard to reverse the decline and give it new life but the declinecan be slowed down.
Two general approaches: Marketing mix modification
Improve the product, distribution, price, or promotion Market modification
Find new segments, new usage benefits or occasions,more frequent usage, etc.
Find out to whom the dowager brand is losing share: Old peer brands New peer brands Retail store brands Generic brands Elite brands
Find out to whom the dowager brand is losing sales. Interview people who defected to each competitive class and their
dissenting rationales. Determine a counterlogic for each group and direct them to the
groups that can most easily be won back. Source: Dennis W. Rook and Sidney J. Levy, Defending the Dowager:
Communication Strategies for Declining Main Brands.
8/2/2019 Branding Philip Kotler
50/93
Printed on CANON
How Do You RationalizeYour Product Line?
Unilever found that the largest 50 brands accounted for 63% ofits revenues.
Unilever decided to emphasize 400 core brands and dispose,delete or consolidate 1,200 of its marginal brands.
Unilever selected its 400 core brands based on brand scale,brand power (#1or 2), and brand growth potential.
40 brands were designated as core global brands (e.g., Dove,Knorr, Lipton), and 360 as regional core brands.
The core brands would get disproportionate investments inadvertising and promotion, innovation, marketing competenceand management time. The core brands would be extended.
Weak brands had small market shares; poor profitability;negative cash flow; weak channel support; disproportionateconsumption of management time.
The weak brands would be milked, sold, delisted, or theirattribute would be migrated to another brand.
Wh A h M F C
8/2/2019 Branding Philip Kotler
51/93
Printed on CANON
What Are the Most Frequent Causesof Brand Failure?
Failure to live up to the brand promise.
Failure to adequately support the brand.
Failure to adequately control the brand. Failure to properly balance consistency and
change with the brand.
Failure to do brand equity measurement andmanagement.
8/2/2019 Branding Philip Kotler
52/93
Printed on CANON
Building Customer Equity
How customer-centered is your company? Howdo you measure this?
Does your company need to be more customer-centered? To all customers or only the more
important customers? How can you go about becoming more customer-
centered?
How much would this cost you in new technology
and training?
How much would you gain as a result ofbecoming more customer-centered?
8/2/2019 Branding Philip Kotler
53/93
Printed on CANON
Achieving Outcomes in Market Space
Achieving a deep customer focus is not done simply by building acustomer database or customizing your product offerings.
A company must define its marketspace not in terms of products butin terms of customer outcomes. Baxter Healthcare supplies home-recovery enhancement, not just
nursing care or wheelchairs. IHI, a health insurance company, operates in the lifetime health and
personal safety marketspace.
A company then examines the customer activity cycle and the valuegaps.
The company then invests in filling the major value gaps.
The company ends up being favored and grows through doing morethings better for their customers.
Source: Sandra Vandermerwe, Achieving Deep Customer Focus, MIT Sloan ManagementReview, Spring 2004, pp. 26-34
8/2/2019 Branding Philip Kotler
54/93
Printed on CANON
Achieving Deep Customer Focus1. Create strategic excitement.
2. Enlist points of light.
3. Articulate the new market space focused on customer outcomes.
4. Identify the valueopportunities through using the customer activity cycle.
5. Build acompelling case (not through a plan but a story).
6. Size the prize.
7. Modeling the concept with a few chosen customers.
8. Get people working together.
9. Get critical mass.
10. Gather momentum.
Source: Sandra Vandermerwe, Achieving Deep Customer Focus, MITSloan Management Review, Spring 2004, pp. 26-34.
8/2/2019 Branding Philip Kotler
55/93
Printed on CANON
Building Customer Equity
Reduce the rate of defection.
Increase the longevity of the relationship.
Enhance the growth potential of eachcustomer through cross-selling and up-
selling.
Make low-profit customers more profitableor terminate them.
Focus disproportionate effort on highvalue customers.
C t f C t E it
8/2/2019 Branding Philip Kotler
56/93
Printed on CANON
Components of Customer Equity
Customer equity is driven by:
Value equity Brand equity
Relationship equity.
Companies must decide which driver(s) underlieeach equity.
Source: Roland T. Rust, Valerie A. Zeithaml, and Katherine A. Lemon,Driving Customer Equity(New York Free Press 2000).
Transaction Marketing vs.
8/2/2019 Branding Philip Kotler
57/93
Printed on CANON
Transaction Marketing vs.Customer Relationship Marketing
Customer Relationship Marketing (CRM) represents aparadigm shift from Transaction Marketing (TM).
TM companies focus on products and making a sale. CRMcompanies focus on building a long-term relationship thatproduces satisfaction for the customer and profitability forthe company.
TM companies promote everywhere in search of customers.CRM companies promote to a defined customer group andaim to make the right offerat the right timeusing the rightchanneltothe right customer.
All companies must practice a mix of TM and RM. TM will bestronger in companies facing a large number of customers;RM will be stronger in companies facing a small number ofcustomers.
8/2/2019 Branding Philip Kotler
58/93
Printed on CANON
Treat Different Customers Differently
Most profitable customers
Most unprofitable customers
Most growable customers
Most vulnerable customers
8/2/2019 Branding Philip Kotler
59/93
Printed on CANON
Needed:
Technology-Enabled Marketing Technology-enabled marketing (TEM)
combines information technology, analytical
capacities, marketing data, and marketingknowledge, made available to one or moremarketing decision makers to improve thequality of marketing management.
A 5 St M d l f
8/2/2019 Branding Philip Kotler
60/93
Printed on CANON
A 5 Step Model forDatabase Marketing
1. Gather useful data on customers.
2. Classify customers by their needs and by their
value to the firm.
3. Prepare business rules that select the bestprospects.
4. Customize marketing treatments for each prospect
in terms of product offers, service mix, media, and
channel.
5. Set up accountability procedures.
Database Marketing is Expensive!
8/2/2019 Branding Philip Kotler
61/93
Printed on CANON
Database Marketing is Expensive!
Requires a tremendous investment in information gathering
about individual customers and prospects.
Requires constant updating of information.
Some critical information may not be available.
Requires a high investment in hardware and software.
Requires integrating individual customer information from a
variety of sources.
Requires people skilled at data mining.
Requires managing and training employees, dealers, and
suppliers.
8/2/2019 Branding Philip Kotler
62/93
Printed on CANON
Does Every Business Need CRM? No. The following businesses may not benefit from CRM:
Businesses where the CLV is low. Businesses with high churn.
Businesses where there is no direct contact between theseller and ultimate buyer.
Companies that are in the best position to invest in CRM.
Companies that collect a lot of data (banks, insurancecompanies, credit card companies, telephonecompanies).
Companies that can do a lot of cross-selling and up-
selling (GE, Amazon, etc.). Companies whose customers have highly differentiated
needs and are of highly differentiated value to thecompany.
8/2/2019 Branding Philip Kotler
63/93
Printed on CANON
Introduction Growth Mature Decline
Database Management &Warehousing
Historical DatabaseAnalytics
Database-Driven MarketingPerformance Dashboards
Marketing Mix Modeling /
Marketing Management Work-Flow Solutions
Marketing Resource Management
CampaignManagement
Yield-Based PricingOptimum Tools
Marketing Technology Platformson the Market Development Curve
Source: Gary Morris, Adapted from Marketing Advocate, Inc.
Predictive analytics
Precision Marketing
8/2/2019 Branding Philip Kotler
64/93
Printed on CANON
Precision Marketing
Precision marketing is achieved through looking at large
quantities of historic data with the help of data mining toolsthat search for meaningful patterns, and then creatingmathematical equations that represent the underlyingrelationships within the data.
Predictive analytics are used to identify the right offers and
right messages to beam through different channels to narrowcustomer segments, based on the propensity to respond. Theexpected profit of a campaign can be estimated.
Many tactical marketer tasks will be automated and free upmarketers to focus on more strategic decision making.
8/2/2019 Branding Philip Kotler
65/93
Printed on CANON
SALES AUTOMATION
The objective is to empower the salesperson to bean informed salespersonwho virtually has the wholecompanys knowledge at his or her command andcan provide total sales quality.
Marketing Automation
8/2/2019 Branding Philip Kotler
66/93
Printed on CANON
Marketing Automation
Areas Ripe for Marketing Automation:
Selecting names for a direct mail campaign
Deciding who should receive loans or creditextensions
Allocating product lines to shelf space
Selecting media
Customizing letters to individual customers
Targeting coupons and samples
Pricing airline seats and hotel reservations
Marketing Decision Models
8/2/2019 Branding Philip Kotler
67/93
Printed on CANON
Marketing Decision Modelsand Marketing Mix Response Models
BRANDAID
CALLPLAN
DETAILER MEDIAC
PROMOTER
ADCAD
See Kotler, Marketing Models
8/2/2019 Branding Philip Kotler
68/93
Printed on CANON
Marketing Dashboards
Tools dashboard
Processes dashboard
Performance dashboard
8/2/2019 Branding Philip Kotler
69/93
Printed on CANON
Marketing Work-Flow Process Tools
Project management
Product management
New product development
Campaign management
Exploit the Internet!
8/2/2019 Branding Philip Kotler
70/93
Printed on CANON
p
Research a new product on the Internet (panel research, chatrooms).
Create a site to explain how an existing or new product works (ex.,
Tide).
Create a site that consults on a category (Colgate on dentalproblems).
Create a site that consults on the customers profile (ElizabethArden).
Sponsor a chat room around your product category. Answer email questions instantly (Nestle baby care questions).
Send free samples of new products (freesample.com).
Send coupons of new products (coolsavings.com).
Customize your product (Acumin vitamins).
Offer to sell very large orders direct.
Offer valuable information to people who will register on the site.
8/2/2019 Branding Philip Kotler
71/93
Printed on CANON
Is New Technology Enough?
NT + OO = EOO
New Technology + Old Organization =Expensive Old Organization
Technology-Enabled Marketing: Examples
8/2/2019 Branding Philip Kotler
72/93
Printed on CANON
Technology Enabled Marketing: Examples
Royal Bank of Canada
Decision to purchase CRM
Halifax Bank
Teller suggests financial products
Capital One
A credit card for everyone, but with different interest rates, creditlines, and cash advances.
Tesco supermarkets Tesco has identified 5,000 customer needs segments. It sends
out some 300,000 variations of any given offer with redemptionrates of 90%. It has formed clubs such as Baby Club, A World ofWine Club, My Time Club
Kraft
Kraft has the names of 110 million customers and 20 thousandfacts for each household. Kraft launched print magazine, Food &Family, that is delivered to the homes of 2.1 million Kraftcustomers in 32 versions tailored to 32 segments.
10 Earmarks of the New
8/2/2019 Branding Philip Kotler
73/93
Printed on CANON
10 Earmarks of the NewMarketing
1. Recognize growing customer empowerment.
2. Develop a focused offering to the target market
3. Design the marketing from the customer-back.
4. Focus on delivering outcomes, not products.
5. Draw in the customer to co-create value.
6. Use newer ways to reach the customer with a message.
7. Develop metrics and ROI measurement.
8. Develop high-tech marketing.
9. Focus on building long run assets.10. View marketing holistically to regain influence in the company.
1 P&G Recognizes
8/2/2019 Branding Philip Kotler
74/93
Printed on CANON
1. P&G Recognizesthe New Consumer
Consumers want a conversation, to dialogue,to participate, to be more in controlWeregoing from one-dimensional, product-myopicmarketing to three-dimensional marketingthat offers better solutionsmore delightfulexperiences and the opportunity for on-going relationships.
Alan Lafley, CEO, P&G
Do-It-Yourself Marketing
8/2/2019 Branding Philip Kotler
75/93
Printed on CANON
Do It Yourself Marketing
Self-Inform: Customers can research products and issues without relying onexperts (e.g., WebMD, MedlinePlus.com)
Self-evaluate: Customers can compare product features and prices with a fewclicks of a mouse (e.g., PriceGrabber.com, DealTime.com) Self-segment: Customers can design and configure products (e.g., Dell,
Reflect.com) Self-price: Customers can propose prices to sellers (e.g., eBay, PriceLine.com,
Free Markets) Self-support: Customer can resolve problems by searching knowledgeable
bases and discussion forums (e.g., www.remotecentral.com,www.treocentral.com)
Self-program: Customer can define their own media programming (e.g., TiVo,MyYahoo!)
Self-organize: Customers can join communities of interest to discuss productsand issues (e.g., Meetup.org., IVillage)
Self-advertise: Customers can create feedback for their peers (e.g.,Amazon.com, Planet Feeeback, BlogSpot.com)
Self-police: Customers can monitor reputations of manufacturers (e.g., eBay,BizRate.com)
Source: Mohan Sawhney lecture
The Evolution of Marketing
http://www.treocentral.com/http://www.treocentral.com/http://www.treocentral.com/8/2/2019 Branding Philip Kotler
76/93
Printed on CANON
TransactionalMarketing
RelationshipMarketing
CollaborativeMarketing
Time frame 1950s 1980s Beyond 2000
View of value The company offeringin an exchange
The customerrelationship in thelong run
Co-createdexperiences
View of market Place where value isexchanged
Market is wherevarious offeringsappear
Market is a forumwhere value is co-created throughdialogue
Role of customer Passive buyers to betargeted withofferings
Portfolio ofrelationships to becultivated
Prosumers-activeparticipants in valueco-creation
Role of firm Define and create
value for consumers
Attract, develop and
retain profitablecustomers
Engage customers in
defining and co-creating unique value
Nature of customerinteraction
Survey customers toelicit needs andsolicit feedback
Observe customersand learn adaptively
Active dialogue withcustomers andcommunities
Adapted from Prahalad and Ramaswamy 2004
2 Develop a Focused Offering
8/2/2019 Branding Philip Kotler
77/93
Printed on CANON
2. Develop a Focused Offeringto the Target Market
Value customers: Which customer segment(s) do wewant to serve?
Value proposition: Can we create a value proposition
that delivers superior value through dramaticallyhigher benefits or lower costs?
Value network: Can we run a better network orradically redefine the value delivery system for theindustry such as Dell and IKEA have done?
3Vs framework of Nirmalya Kumar
Choose to Serve a Unique Set of
8/2/2019 Branding Philip Kotler
78/93
Printed on CANON
Choose to Serve a Unique Set ofCustomer Values
1. Identify the value expectations of potentialcustomers.
2. Select the values on which to compete. Nike values: Winning, roar of the crowd,
extreme effort, the smell of sweat, physicaldevelopment
New Balance values: Self-improvement, innerharmony, balanced, the smell of nature, spiritualdevelopment
3. Analyze the ability of the organization to deliverthose values.
4. Communicate and sell the value message.
3. Design the Marketing
8/2/2019 Branding Philip Kotler
79/93
Printed on CANON
3. Design the MarketingFrom the Customer-Back
Marketing must be run as a set of value finding,creation, and delivery processes, not 4P functions.The four Ps are seller oriented.
The 4As are buyer oriented. Awareness (A1)
Acceptability (A2)
Affordability (A3)
Accessibility (A4)
Market value potential = A1 x A2 x A3 x A4
If A1=100%, A2=100%, A3=50%, A4=50%, Then
MV=25%
4. Focus on Delivering Outcomes,N t P d t
8/2/2019 Branding Philip Kotler
80/93
Printed on CANON
Not Products.Company Product focus Solutions focus
Akzo Nobel Gallons of paint Painted cars
BP Nutrition-Hendrix
Animal feed Animal weight gain
Cummings Diesel engines Uninterruptible
power
ICI Explosives Explosives Broken rock
Scania Trucks Guaranteed uptime
WW Grainger MRO items Indirect materialsmgt.
Source: Kumar
Visualize a Larger Market
8/2/2019 Branding Philip Kotler
81/93
Printed on CANON
g Nike now defines itself in the sports market rather
than the shoe and clothing market.
The late Roberto Goizueta told his company thatwhile Coca Cola had a 35 percent share of thesoft drink market, it had only a 3 percent share ofthe total beverage market.
Armstrong World Industries moved from floor
coverings to ceilings to total interior surfacedecoration.
Citicorp realized that it only had a small share ofthe total financial market which includes muchmore than banking.
Taco Bell went from selling food in stores tofeeding people everywhere including kiosks,convenience stores, airports, and high schools.
Jack Welch asked product managers to redefine
their market so that they only had a 10% share.
5. Draw in the Customer
8/2/2019 Branding Philip Kotler
82/93
Printed on CANON
to Co-create Value: Two
Approaches1. Offer a wide product line so the customer can choose
something closer to the customers desires. M&M allows customers to special order M&Ms in 21 colors.
Branches Hockey lets players pick from 26 options: lengthof a stick, blade patterns, etc.
2. Stand ready to customize according to the customers wishes. Dell computers are designed by customers Lands End sells tailor-made chinos. P&G on its reflect.com site lets shoppers design everything
from eye moisturize to liquid foundation makeup. Yankee Candle Company will mix colors and scents to
make the candles you want. Other examples: golf clubs, breakfast cereals, credit card
companies
Examples of Collaborative
8/2/2019 Branding Philip Kotler
83/93
Printed on CANON
Examples of CollaborativeMarketing
P&Gs site has a Were Listening section and ShareYour Thoughtssection and Advisory Feedbacksessions.
GM offers an AutoChoiceAdvisory on its website
Cisco runs Customer Forums to improve itsofferings.
A motorcycle in Italy is being designed bycustomers.
6. Use Newer Ways to Reach the
8/2/2019 Branding Philip Kotler
84/93
Printed on CANON
6. Use Newer Ways to Reach theCustomer with Relevant Messages
Make your ads more precise as to who theyreach and more relevant.
Let consumers indicate if they have aninterest or not. Stop pestering them.
Deliver valuable content with each ad, such
as useful information or entertainment.
Reach consumers in newer ways.
Newer Ways to ReachC
8/2/2019 Branding Philip Kotler
85/93
Printed on CANON
Customers
Sponsorships
Mentions on talk shows
Product placement
Street-level promotion
Festivals
Celebrity endorsements
Mobile billboards
Creating Buzz on the Streets
8/2/2019 Branding Philip Kotler
86/93
Printed on CANON
g
Chryslers PT Landcruiser appeared in fashionable areas andcollege tailgate parties. 250,000 prospects requested information
before official ad campaign began in April 2000.
Models drove around Los Angeles on Vespa scooters and chattedwith customers in cafes and bars.
Ford identified 120 people in six key markets and gave them a
Focus to drive for 6 months and promotional material.
Vans builds skateboard parks at malls and sponsors Vans TripleCrown.
Hasbro enlisted cool pre-teens to play the POX game and telltheir friends about it.
Tourist goes into lounge and her telephone rings and picture ofthe caller appears on the phone.
7. Develop Metrics and ROIMeas rement
8/2/2019 Branding Philip Kotler
87/93
Printed on CANON
MeasurementProducts Brands Channels Customer
Segments
Markets
Relativeproductquality
Brandawareness
Channelpenetration
Customersatisfaction
Marketpenetration
Perceivedproductquality
Brandesteem
Channel trust Averagetransactionsize
Market share
Percentageof sales fromnew products
Brand loyalty Channelefficiency
Customercomplaints
Sales growth
Product
profitability
Brand
profitability
Market share
in eachchannel
Customer
acquisitioncosts
Market
profitability
Channelprofitability
Customerretention rate
Source:
Kumar
Customer
profitability
8 D l Hi h T h M k ti
8/2/2019 Branding Philip Kotler
88/93
Printed on CANON
8. Develop High-Tech Marketing
Predictive analytics Sales automation
Marketing automation
Marketing models Process dashboards
Performance dashboards
Campaign management
Project management
New product management
9. Focus on Building
8/2/2019 Branding Philip Kotler
89/93
Printed on CANON
9 ocus o u d gLong-Run Marketing Assets.
Brands and brand equity
Customers and customer equity
Service quality
Stakeholder relationships
Intellectual knowledge
Corporate reputation
10 Vi M k ti g H li ti ll
8/2/2019 Branding Philip Kotler
90/93
Printed on CANON
10. View Marketing Holistically
Marketing must become strategic and drivebusiness strategy.
A company needs to take a more holisticview of:
the target customers activities, lifestyle,and social space.
the companys channels and supply chain. the companys communications.
the companys stakeholders interests.
Two Models of Management
8/2/2019 Branding Philip Kotler
91/93
Printed on CANON
Two Models of Management
Profit-based management Reduce costs
Reduce compensation
Replace people with
technology
Price to extract maximum
value
Sell more products
Acquire lots of customers
Loyalty-based management Invest in marketing assets
Give superior compensation
Leverage people withtechnology
Price to reward customers
Deepen customer value
Acquire customers selectively
Source: Frederick Reichheld, The Loyalty Effect
Conclusions
8/2/2019 Branding Philip Kotler
92/93
Printed on CANON
Co c us o s
Marketing is definitely not filling its potential.
Marketing must become the driver of business strategy. Companies need to adopt a more holistic view of the marketing
challenge.
Companies need lateral marketing thinking to conceive of newproduct and service ideas.
Companies need to choose from five major strategic paths.
Companies need to move from a product focused to a marketand customer focused organization.
Companies need to build, measure and manage brand equityand customer equity.
Companies need to move to technology-enabled marketing to
achieve precision marketing and develop better measures ofROI impact.
8/2/2019 Branding Philip Kotler
93/93
This time like all times is a good one,if we but know what to do with it.
Ralph Waldo Emerson