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Title: Marketing 3.0: Values-Driven Marketing


1
Marketing 3.0 Values-Driven Marketing
Philip Kotler Kuwait April 03 . 2011
2
Two Recent Books by Professor Kotler
3
Action-Oriented Knowledge
  • Session One. How to deal with your companys
    major business challenges and opportunities.
  • Session Two. How to search for powerful new
    ideas and innovate successfully.
  • Session Three. How to improve your branding
    power.
  • Session Four. How to develop a superior company
    reputation through sustainability-driven thinking.

4
Action-Oriented Knowledge
  • Session One. How to deal with your companys
    major business challenges and opportunities.
  • Session Two. How to search for powerful new
    ideas.
  • Session Three. How to improve your branding
    power.
  • Session Four. How to develop a superior company
    reputation through sustainability thinking.

5
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
  • Customer empowerment and the new social media
  • Political conflict and regulatory changes

6
(No Transcript)
7
Times Are Bad
  • CEOs are now playing miniature golf.
  • Obama met with small businesses - Chrysler,
    Citigroup and GM, to discuss the Stimulus
    Package.
  • People in Africa are donating money to Americans.
  • The Mafia is laying off judges.

8
An optimist is a person who sees an opportunity
in every calamity. A pessimist is a person who
sees a calamity in every opportunity. Winston
Churchill
9
Distrust of Business
  • In a 2009 survey, only 16 of respondents respect
    the integrity of business executives. And car
    salesmen and advertising executives were the
    least admired by the public.
  • Causes
  • Business scandals Enron, World Com, Tyco,
    Madoff, Goldman Sachs
  • High pay to the few CEO paid 350 times average
    workers salary
  • Anti-capitalist forces
  • Recession and falling behind
  • Solutions
  • More transparency
  • Better boards and management
  • Investing in corporate social responsibility

10
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 growth too aggressively.
  • Stage 3. They ignore early warning signs of
    failure
  • Stage 4. Their failure becomes very public.
  • Stage 5. If they dont reform, they finally go
    bankrupt.
  • Companies are often blind-sighted by their
    eagerness to build short-term growth and ignore
    the risks.
  • Most companies are short-lived.

11
Globalization
  • Causes
  • Advances in information, communication, and
    transportation now connect the whole world
  • Lowering of trade barriers
  • Downside
  • Globalization hurts as many nations as it helps
  • Globalization increases country inequality
  • Globalization provokes nationalism and
    protectionism
  • Globalization threatens cultural traditions and
    values
  • Upside
  • New market opportunities if we can offer
    something better
  • Question Is your company sufficiently
    globalized?

12
Economic Recession and Turbulence
  • Not all companies were hurt by the fiscal
    meltdown.
  • Distinguish between
  • Recession
  • Disruption
  • Turbulence
  • Risk reduction strategies
  • Larger reserves
  • Shared investments
  • Early warning systems
  • Scenario planning
  • Corporate social responsibility

13
Technological Advances and Disruptions
  • Scientific advances and inventions
  • What is the impact of the birth control pill,
    Genome project , digitalization, cell phones,
    social media, robotics, nanotechnology, biotech,
    bioenergy
  • Creative destruction
  • Can you avoid the fate of the music industry,
    publishing industry (newpapers , magazines,
    books), high cost airlines
  • Theory of disruptive innovation
  • What can happen to your industry or company?

14
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 Innovators
Dilemma, p. xxix.
15
Tomorrow Will Be Different
Source Clayton Christensen
16
Environmentalism and Climate Change
  • Companies need to go green to reduce waste,
    pollution, and water shortage.
  • Those companies that go green early will
    establish a strong reputation and following.
    They will also save money in the long run.

17
Customer Empowerment and the New Social Media
  • Who has the most market power?
  • Wholesalers
  • Manufacturers
  • Retailers
  • Customers
  • What are the best new ways to communicate?
  • Blogs
  • Facebook,
  • Twitter
  • Linkedin
  • YouTube
  • Chat rooms
  • Rating systems (Edwards, J. D. Power, Rotten
    Tomatoes, Craigs List)
  • Wikipedia

18
Political and Regulatory Change
  • Growth of social movements
  • Unionization
  • Anti-capitalist groups
  • Environmental groups
  • Religious groups
  • Gay rights groups
  • Political party shifts
  • Regulatory interventions
  • Financial regulation
  • Anticompetitive regulation
  • Safety and health regulation

19
MARKETINGS 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.
  • Investors will then downgrade the stock. This
    will leave the company with fewer resources to
    prop up demand.
  • This is a VICIOUS CIRCLE
  • Traditional media such as TV 30-second spots,
    newspapers, etc., are growing LESS EFFECTIVE
  • Categories are so crowded with competitors that
    heavy price cutting will be UNAVOIDABLE
  • 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.
  • Social media networks will play an increasingly
    influential role in shaping brand evaluations

20
You Need to Build Stronger Marketing into Your
Company
  • Old definition of marketing
  • Act or practice of adverting 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.

21
MUST MARKETING BE RE-INVENTED?
MARKETERS are prisoners of an OLD PARADIGM
MARKETERS are operating in a TIME WARP
Companies aim to maximize profits
Dont acknowledge the growing power of the
customers
Company investors are more important than other
stakeholders
Dont acknowledge the growing power of the
channels and other stakeholders
Customers buy rationally to maximize value
Dont acknowledge the new social media world and
their growing social responsibilities
Customers get most of their information from
sellers and dont talk to each other about
products
WE NEED TO.
RE-INVENT MARKETING
22
You Need Two Marketing Departments!!
Most marketing departments are engaged in
tactical brand-maintenance instead of
brand-building.
Strategic marketing is missing in many marketing
departments. Strategic marketing requires taking
a 3-5 year view of the business.
TWO MARKETING DEPARTMENT!!!
Downstream Marketing
Upstream Marketing
Markets TODAYs Product
Create TOMORROWs Product
23
  • Five shifts
  • 1st Shift - from creating marketing strategies to
    driving business impact.
  • 2nd Shift - from controlling the message to
    galvanizing your network.
  • 3rd Shift - from incremental improvements to
    pervasive innovation.
  • 4th Shift - from managing marketing investments
    to inspiring marketing excellence.
  • 5th Shift - from an operational focus to a
    relentless customer focus.
  • Company examples
  • GE, Wal-Mart, Charles Schwab, Procter Gamble,
    Burger King, Zappos, Best Buy and Dell

24
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25
Involve Your Customers In Your Planning
  • Four ways to view customers
  • Purchasers of our product
  • Persons from whom we gain insight and with whom
    we can test our planned products
  • Persons who Influence others to buy our product
    (net promotion score NPS)
  • Persons who co-create product and communication
    ideas
  • Company examples of co-creation
  • Lexus invites customers to build their own Lexus
    by going to www.Lexus.com and drawing from a
    complete package of available colors and options
    packages.
  • Lego and Harley Davidson have welcomed their
    respective enthusiasts to participate in
    improving their market offerings.
  • Doritos ran an online promotion urging fans to
    create 30-second spots for Doritos and post them
    for on-line voting to be picked to air in one of
    the three Super Bowl slots. The user-generated ad
    won the top spot at the 21st USA Today Super Bowl
    Ad Meter defeating ads made by professional
    agencies.

26
Market to All Your Stakeholders
  • Our thinking has shifted from maximizing
    shareholder value to maximizing stakeholder
    value.
  • Stakeholders include customers, employees,
    channel members, and investors.
  • Customers They need a feeling of gaining
    superior value from your offering.
  • Employees They need to believe in their
    companys mission, vision and values.
  • Channel members They must believe that they are
    receiving equitable reward for their
    contributions.
  • Investors They need assurance that the company
    has a viable long run plan for growth and
    continued profitability

27
MARKETING 1.0 vs 2.0 vs 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
New Wave Technology
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
28
Values-Based Matrix Model
29
S. C. JOHNSON VALUE-BASED MATRIX
30
Station Break!
  • Are there any companies that you love or would
    deeply miss if they went out of business?

31
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.
32
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.

33
Action-Oriented Knowledge
  • Session One. How to deal with your companys
    major business challenges and opportunities.
  • Session Two. How to search for powerful new
    ideas and innovate successfully.
  • Session Three. How to improve your branding
    power.
  • Session Four. How to develop a superior company
    reputation through sustainability-driven thinking.

34
How Are You Planning to Grow Profitable Revenue?
  • Efficiency
  • Finance and cost control become important (time
    and motion studies)
  • Acquisition
  • Finance becomes important
  • Organic growth
  • Marketing and sales become important
  • Innovation
  • RD and technology become important

35
Innovativeness is a Capability
  • Innovativeness is a capability consider Sony and
    3M.
  • Innovation requires organizing three markets
    within the firm
  • An idea market
  • A capital market
  • A talent market
  • The best innovations provide solutions to
    customer problems, not to the companys product
    problems.
  • Strong market-creating innovations have a long
    life and create market leadership.

36
Companies Need an Innovation Strategy
  • There are four major types of innovation in
    business
  • Product innovation
  • Service innovation
  • Marketing innovation
  • Business model innovation
  • A company first needs to choose an innovation
    strategy.
  • The decision should include building an
    innovation culture and providing funds for
    training, incentivizing, and rewarding.
  • Each approved innovation project must have an
    innovation plan, budget, time line, and deadline.
  • A high level executive manages the innovation
    projects portfolio, updates their status, shares
    with the CEO, and they make further decisions on
    extending or terminating.

37
Business Model Innovations
  • Amazon and Kindle
  • Apple and iTunes
  • Barnes and Nobles bookstores
  • Dell computer
  • Ikea
  • Starbucks

38
Marketing Innovations
  • Incentive innovations
  • Credit cards
  • Rebates
  • Zero-interest financing
  • Gift certificates
  • Coupons
  • Guarantees and warranties
  • Loyalty awards
  • Subscription selling (Book of the Month Club)
  • Retailing innovations
  • Self-service stores
  • Self-checkout
  • Coupon feeds
  • Hypermarkets
  • Category killer stores
  • Differentiated stores with same chain (Best Buy)
  • Exclusive lines of merchandise (Target Michael
    Graves, Martha Stewart)
  • Selling on TV (Home Shopping Network)
  • Selling on the Internet

39
Source Blue Ocean Strategy
40
Station Break!
  • How does your company go about getting new
    product and service ideas? What are the best
    sources of new ideas? Who is responsible for
    collecting new ideas?

41
Sources of New Ideas
  • Scientists and Engineers
  • Motorola and Philips
  • Employees
  • Whirlpool,
  • Shell
  • Samsung
  • Customers
  • Problems in present products
  • Dream products
  • Enthusiasts
  • Other partners in the company network

42
CUSTOMER RESEARCH
Ethnographic Studies
In-store Observation
Quantitative Surveys
Focus Groups/ Consumer Panels
NeuroScienceand ZMET
In home shopping trips
Orientation Environment
Awareness, Attitudes, Behavior
Listening for insights trends
Why do you buy?
Customer Research
43
Action-Oriented Knowledge
  • Session One. How to deal with your companys
    major business challenges and opportunities.
  • Session Two. How to search for powerful new
    ideas and innovate successfully.
  • Session Three. How to improve your branding
    power.
  • Session Four. How to develop a superior company
    reputation through sustainability-driven thinking.

44
There are so many brands in some categories that
it is difficult to stand out.
45
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
mortarand I would fare better than you.
46
Marketers Have Lessening Influence in Shaping
Their Brand Image
  • Person-to-person conversations about many
    products can exceed the amount of communication
    under the companys control.
  • Thus a brand can be hijacked (see Alex
    Wipperfürth, Brand Hijack Marketing without
    Marketing, New York Portfolio, 2005).
  • Four possibilities
  • Everyone is talking negatively about the company.
  • There is no talk about the company
  • The talk is a mix of good and bad comments
  • Virtually all the talk is favorable
  • Marketing 2.0 managers listened to the consumers
    voices to understand their minds and capture
    market insights.
  • Marketing 3.0 is when consumers play the key role
    of creating the value through co-creation of
    product and service.

47
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

48
A Brand Must be More Than 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 employees
    and operations, i.e., your performance, not your
    marketing communications.

49
Brand Asset Valuator Model
50
Score Your Brand (1 to 3)
  • 1 2 3
  • Product Benefits
  • Distinct Identity
  • Emotional Values

51
  • LEADING B2B BRANDING COMPANIES
  • DuPont
  • Siemens
  • Bosch
  • General Electric
  • Saint-Gobain
  • UPS
  • FedEx
  • Tentra Pak
  • Microsoft
  • Caterpillar
  • IBM
  • Daimler
  • Michelin
  • Tata Steel
  • Morgan Stanley

52
The Brand Within the BrandIngredient Branding
or InBranding
53
Logos of Ingredient Brands
54
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 dont drive a lot of miles, Im a
safe driver, and Im not usually on the road late
at night when accidents are most likely to
happen. Since Im less likely to be in an
accident, shouldnt I pay less for car insurance?
56
Develop a Memorable Brand Slogan
  • BA, The Worlds Favorite Airline
  • American Express, The Natural Choice
  • ATT, 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
  • Lets Make Things Better

57
(No Transcript)
58
What Should Your Measure About Your Brands
Standing?
  • Customer perceived value
  • Customer satisfaction
  • Customer loyalty
  • Customer advocacy
  • Customer co-creation

59
Action-Oriented Knowledge
  • Session One. How to deal with your companys
    major business challenges and opportunities.
  • Session Two. How to search for powerful new
    ideas and innovate successfully.
  • Session Three. How to improve your branding
    power.
  • Session Four. How to develop a superior company
    reputation through sustainability-driven thinking.

60
How Will Your Company Be Measured?
Indices now 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.
61
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
growth of 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 growth of only 12. (Economist
Intelligence, 2008)
Moreover, executives believe that the concept of
sustainability is good for corporations in
attracting consumers and employees and improving
shareholder value.
62
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.
The issue is to find a linkage of between
sustainability, profitability, and 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).
63
Serving the Bottom Third
Stretches disposable income by providing goods
and services at lower prices.
1
Unilevers Annapurna provides low price
affordable iodized salt that is better than
cheaper non-iodized salt. House-for-Life
program offering low-cost housing solutions
Expands disposable income by providing goods and
services not previously available for the bottom
of the pyramid
2
Nicholas Negroponte's XO and Nova netPC personal
computers. GlaxoSmithKline and Novo Nordisk
providing new essential medicines.
Increases disposable income by growing the
economic activity of the underserved society.
Grameen Phone illustrates this.
3
Hindustan Levers Project Shakti which employs
thousands of underprivileged women as its sales
force to bring its products to rural consumers
and provides them with significant disposable
income
64
Wal-Mart Turns Green
Wal-Mart announced in 2005 that it will be a
good steward to the environment and will spend
500 million a year to increase fuel efficiency
in Wal-Marts truck fleet by 25 over three
years reduce greenhouse gases by 20 in seven
years reduce energy use at stores by 30 and
cut solid waste from U.S. stores and Sams Clubs
by 25 in three years.
Critics see Wal-Marts move being mainly done for
economic purposesto save energy, save costs, and
increase revenue from increasing demand for green
products. This describes an Investor
Orientation.
65
Timberland has a Green DNA
Timberland is a leader in the design, engineering
and marketing of premium-quality footwear,
apparel and accessories for outdoor consumers.
It believes in doing well by doing good.
In shoes, Timberland uses recycled materials,
non-chemical substances as much as possible, made
in energy-saving factories. The label gives
consumers information about the product they are
purchasing, including where it was manufactured,
how it was produced, and its effect on the
environment. Timberland gives back to
communities. Under the Path of Service program,
its employees have contributed over 200,000 total
hours of service that benefited over 200
community organizations in 13 countries, 26
states and 73 cities. To commemorate Earth Day,
Timberland plants a tree on behalf of each
consumer who spends 150. Timberland has also
done such things as offering 3,000 incentives to
employees who purchase hybrid cars.
Other companies in this category are Patagonia,
Whole Foods Market, Fetzer Vineyards, and Herman
Miller.
66

67
Build a Strong Corporate ReputationWhy Its
Important
  • Financial Community -gt Supports Stock
    Value
  • Employees/Recruits -gt A Great Place to
    Work
  • Communities -gt A Good Neighbor
  • Public Opinion - gt Good Will
  • Public Policy Makers -gt
    Access/Credibility/Influence
  • 95 of CEOs from McKinsey-surveyed global
    companies believe that society has greater
    expectations than it did five years ago that
    companies will assume public responsibilities.

68
The Marketing Mindset
  • Your company and stakeholders need to embrace a
    market and
  • customer-orientation.
  • Your company needs a CMO who participates in
    formulating the companys growth strategy.
  • Your company needs to define its mission, vision
    and values as the starting point for its
    transformation to Marketing 3.0.
  • Your offerings must touch the customers mind,
    heart, and human spirit if they are to win over
    the customer.
  • Your company needs to practice the Triple
    Bottom-Line Economic Value, Environmental
    Health, and Social Progress. This is the key to
    Profitability, Returnability, and Sustainability.

69
Within five years, if you run your business in
the same way as you do now, youre going to be
out of business. Philip Kotler
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