1. The New Role of Marketing in the
Global Digital Economy
Philip Kotler Moscow
Kellogg School of Management November 12, 2011
Northwestern University

2. Today’s Schedule
Schedule
Session 1. The Role of Marketing 3.0 in
Company Growth
Session 2. The Need for Entrepreneurship
and Innovative Thinking
Session 3. The Need for Strong Branding
and Reputation Building
Session 4. Panel Discussion about
Marketing in Russia

3. Session 1
The Role of Marketing 3.0
in Company Growth

4. 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

5. Three forces moving business
away from normal
• Business Cycle
• Turbulence
• Disruptive innovation

6. 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 brokerage
Source: Clayton M. Christensen, The Innovator’s Dilemma, p. xxix. ; google.com

7. 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 Phones
Source: Clayton Christensen ; gettyimages.com

8. 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?

9. 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

10. 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 territories
Source : Rosabeth Moss Kanter Page10

11. World class companies can be local, regional,
or global
Local 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

12. 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
MARKET
Source : Emerging Giants : Building World-Class Companies in Developing Countries. Harvard Business Review October 2006 Page12

13. 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

14. 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).

15. 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
Shapers
Source: Peripheral Vision, George S. Day and Paul J.H. Shoemaker

16. 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.

17. Source:
The Beginning of Selling and Marketing

18. Marketing, however, came about much later
Pioneer of
marketing
Early 1900s person or
group in
company
1st academic courses on
marketing

19. Marketing started because Sales departments
needed others to:
Conduct consumer Prepare brochures and
Find Leads
research other promotions

20. 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.

21. 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

22. Four CEO Views of Marketing
The size and type of department depends on the type of
industry, 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

23. 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.

24. If You Are Appointed CMO, You Prefer That
Your Office Be Located Next To:
1. CEO office
2. CFO office
? 3. CTO office
?
4. CIO office
5. VPS office

25. Holistic Marketing

26. 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)

27. EVOLUTION OF MANAGEMENT THINKING
1950s – 1960s 1970s – 1980s 1990s – 2000s 2010s – 2020s

28. Five shifts
• Creating Marketing Driving business
1st Shift Strategies Impact
• Controlling the Galvanizing
2nd Shift message your network
• Incremental Pervasive
3rd Shift improvement innovation
• Managing marketing Inspiring marketing
4th Shift investment excellence
Relentless
5th Shift • Operational Focus
customer focus

29. The Marketing Management Process
Plan Manage Execute Measure
• Marketing • Marketing • Campaign • Marketing
Investment Resource Management Analytics
• Demand Management • Lead • Web
Modeling Management Analytics
• Events
Management
• Loyalty
Management
• Media
Management

31. 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.

32. 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.

33. 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.

34. 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.

35. 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.

36. Session 2
The Need for
Entrepreneurship an
Innovative Thinking
R

37. How Does a Company Innovate?
Some Thoughts on Innovation
"Most innovations fail. And, companies that don't
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

38. Types ofInnovation
Types of Innovation
Product and
service Marketing
incremental innovation
innovation
Business model New to the world
innovation innovation
Source: http://2.bp.blogspot.com/_qD9Y8Ncd3I4/Sb6hKKOJkJI/AAAAAAAACDo/fHZHCQbvRe4/s400/BornToInnovate2009.jpg

39. 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

40. Innovation and Your Company
Innovation and Your Company
How is the
Where do you How do innovative How are Where is the innovation process
focus your search
ideas flow in your innovative ideas innovation managed (formal
for innovation
firm (top down or developed (build organization processes or
(inside or outside
bottom up)? internally or buy)? located? informal
of the firm)?
processes)?
Source: http://www.henkel-cee.com/cee/content_images/36406_72dpi_605W.jpg

41. Roles inin aCompany’s Innovation
Roles a Company’s Innovation
Process
Process
Activators Browsers Creators
Developers Executors Financiers
Source: Philip Kotler and Fernando Trias de Bes, Winning at Innovation, 2011.

42. 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 ?

43. Session 3
The Need for Strong
Branding and
Reputation Building

44. Examples of Great Missions and Vision
Leader Brand Mission and Vision
Ingvar Kamprad IKEA Make stylish furniture affordable
Richard 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

45. HYPOTHETICAL STARBUCKS BRAND POSITIONING BULLSEYE
Consumer
Target
Discerning
Coffee Contemporary
Drinker
Consumer
Insight Caring Thoughtful Consumer
Coffee and the Takeaway
Stock options/
drinking health benefits Starbucks
24 hour
experience is training of or baristas gives me the
often Responsible, Fairly
baristas Priced richest
locally involved
unsatisfying possible
Brand sensory
experience
Relaxing,
Mantra drinking
Consumer Rich, Rewarding Fresh high
rewarding coffee
Coffee Experience quality coffee
moments
Need State Triple
Totally Varied, exotic
Desire for Rich sensory
Filtrated
integrated consumption Convenient, coffee drinks
better coffee system experience friendly water
and a better service Siren
consumption logo
experience Green &
Earth Colors
Competitive
Product Set
Local cafes
Fast food &
convenience
shops

46. CUSTOMER RESEARCH
Focus Groups/ 1. Neuro-
Ethnographic In-store Quantitative
Consumer marketing
Studies Observation Surveys
Panels 2. ZMET
In home & Orientation & Awareness, Listening for
shopping trips Environment Attitudes, & insights & trends
Behavior
Why do you buy? Customer Research

47. Neuromarketing
1 “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.”

48. 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.

49. Deep Metaphors

51. 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.

52. 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.

53. Two Customer Value Types
Value = Benefits – Cost
Consultative Transactional
Customers Customers
• Have a
problem • Know what
they want
• Value your • Treat you as a
time commodity
• Buy on • Buy on price
expertise and
and trust convenience
©2010 Neil Rackham

54. Five years ago
10% were
10% were
consultative
transactional
TRANSACTIONAL CONSULTATIVE
• Cost focus • Advice focus
• Convenience Decision • Expertise decision
• Don’t want to meet • Want meetings
Most customers would pay a
little extra for some advice
©2010 Neil Rackham

55. Customers Today More want deeper
More buy consultative
transactionally relationships
TRANSACTIONAL CONSULTATIVE
• Cost focus • Advice focus
• Convenience Decision • Expertise decision
• Don’t want to meet • Want meetings
The middle is going away.
©2010 Neil Rackham

56. Today’s Competing Value Propositions
“We’ll use our
expertise to
solve your
OR problems and
“We’ll offer you create custom
cheap and solutions, for
convenient which we’ll
products, but don’t charge you a
expect extras.” premium.”
©2010 Neil Rackham

57. Marketing the Mission
to…
Consumers
Employees
Channel Partners
Shareholders

58. 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.

59. 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.

60. Comparison of Marketing 1.0, 2.0, and 3.0

61. Values-Based Matrix (VBM) Model
INDIVIDUAL
COMPANY
MISSION Mind Heart Spirit
Deliver Realize Practise
(Why)
SATISFACTION ASPIRATION COMPASSION
VISION
(What)
Profit Ability Return Ability Sustain Ability
VALUES
Make a
(How)
Be BETTER DIFFERENTIATE
DIFFERENCE

62. Values-Based Matrix of S.C. Johnson

63. The 3i of S.C. Johnson

64. Companies Americans Love
Amazon, Apple, 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.
These “firms of endearment” were
highly profitable. They outperformed
the market by a 9-to-1 ratio over a
ten-year period. More fulfilled
employees, happy and loyal
customers, innovative and profitable
suppliers, environmentally healthy
communities.

65. 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.

66. 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.

67. 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.

68. thanzyl@markandcomm.com

69. MOVING TOWARD MARKETING 3.0
Marketing 1.0 Marketing 2.0 Marketing 3.0
MIND HEART SPIRIT
PRODUCT- CUSTOMER- VALUES-DRIVEN
CENTERED ORIENTED
ECONOMIC- VALUE PEOPLE-VALUE ENVIRONMENT-
VALUE
PROFITS SOCIAL PROGRESS HUMAN
HAPPINESS
•Where is your company now?
•Where do you want it to be?
•Why?
•What would steps would you take?

70. “Within five years. If you’re in the same business you
are in now, you’re going to be out of business.”

71. Session 4
Panel Discussion