Marketing 3.0

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Marketing 3.0
Contemporary trends in
world markets
Mamurjon Rahimov
[email protected]
Marketing 3.0: Values-Driven
Marketing
Philip Kotler
Kuwait
April 4, 2011
Two Recent Books by Professor Kotler
Action-Oriented Knowledge
Session One. How to deal with your company’s
major business challenges and opportunities.
Session Two. How to search for powerful new
ideas.
Session Three. How to develop a superior
company reputation through sustainability
thinking.
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
Times Are Bad
CEO’s 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.
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
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
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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
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 don’t 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.
• Causes
Globalization
– Advances in information, communication, and
transportation now connect the whole world
– Lowering of trade barriers
• Downside
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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
Economic Recession and Turbulence
• Not all companies were hurt by the fiscal meltdown.
• Distinguish between:
– Recession
– Disruption
– Turbulence
• Risk reduction strategies
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Larger reserves
Shared investments
Early warning systems
Scenario planning
Corporate social responsibility
Definition: DISRUPTION
• A radical change in an industry, business
strategy, etc., especially involving the
introduction of a new product or service that
creates a new market:
• E.g. Globalization and the rapid advance of
technology are major causes of business
disruption.
Dictionary.com
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?
Theory of disruptive innovation
• The theory of disruptive innovation was invented by Clayton
Christensen, of Harvard Business School, in his book “The
Innovator’s Dilemma”. Mr Christensen used the term to
describe innovations that create new markets by discovering
new categories of customers. They do this partly by
harnessing new technologies but also by developing new
business models and exploiting old technologies in new ways.
• He contrasted disruptive innovation with sustaining innovation, which
simply improves existing products. Personal computers, for example, were
disruptive innovations because they created a new mass market for
computers; previously, expensive mainframe computers had been sold
only to big companies and research universities.
Disruptive Technologies
• OLD
• NEW
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Photographic film
Wired telephones
Store retailing
Classroom education
Offset printing
General hospitals
Open surgery
Cardiac bypass surgery
Manned fighters
Full service stock brokerage
Digital photography
Mobile telephones
On-line retailing
Distance education
Digital printing
Outpatient clinics
Endoscopic surgery
Angioplasty
Unmanned aircraft
On-line stock brokerage
Source: Clayton M. Christensen, The Innovator’s Dilemma, p. xxix.
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
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.
Customer Empowerment
and the New Social Media
• Who has the most market power?
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Wholesalers
Manufacturers
Retailers
Customers
• What are the best new ways to communicate?
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Blogs
Facebook,
Twitter
Linkedin
YouTube
Chat rooms
Rating systems (Edwards, J. D. Power, Rotten Tomatoes, Craig’s List)
Wikipedia
Political and Regulatory Change
• Growth of social movements
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Unionization
Anti-capitalist groups
Environmental groups
Religious groups
Gay rights groups
• Political party shifts
• Regulatory interventions
– Financial regulation
– Anticompetitive regulation
– Safety and health regulation
MARKETING’S LOSS OF EFFECTIVENESS
MARKETING will be less
effective in the next few
years
DISTRIBUTORS
 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
Traditional media
such as TV 30second spots,
newspapers, etc.,
are growing LESS
EFFECTIVE
Marketing budgets will be
lower
COMPETITION
 Categories are so
crowded with
competitors that
heavy price cutting
will be
UNAVOIDABLE
Companies will want
marketers to do more with
less
PUBLIC
SOCIAL MEDIA
NETWORKS
 The public, in its
 Social media
wish to spend less,
networks will play an
will be less inclined
increasingly
to pay higher
influential role in
prices for top brands
shaping brand
where the quality
evaluations
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.
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
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.
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 company’s 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
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
Sell products
Satisfy and retain the
consumers
Make the world a better
place
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
Product specification
Corporate and Product
Positioning
Corporate , Vision,
Values
Value propositions
Functional
Functional and
Emotional
Functional, Emotional,
and Spiritual
Interaction with
consumers
One-to-Many
Transaction
One-to-One
Relationship
Many-to-Many
Collaboration
Are there any companies that you love or would
deeply miss if they went out of business?
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.
Characteristics of “Firms of Endearment”
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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.
How Are You Planning
to Grow Profitable?
• Efficiency
– Finance and cost control become important (time and motion
studies)
• Acquisition
– Finance becomes important
• Organic growth
– Marketing and sales become important
• Innovation
– R&D and technology become important
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 company’s product problems.
• Strong market-creating innovations have a long life and create
market leadership.
Companies Need an Innovation
Strategy
• There are four major types of innovation in business:
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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.
Business Model Innovations
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Amazon and Kindle
Apple and iTunes
Barnes and Nobles bookstores
Dell computer
Ikea
Starbucks
Marketing Innovations
• Incentive innovations
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Credit cards
Rebates
Zero-interest financing
Gift certificates
Coupons
Guarantees and warranties
Loyalty awards
Subscription selling (Book of the Month Club)
• Retailing innovations
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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
• Producer innovations
– Brand as a platform (Virgin, iTunes)
– Customization
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?
Sources of New Ideas
• Scientists and Engineers
– 3M and Philips
• Employees
– Whirlpool,
– Shell
– Samsung
• Customers
– Problems in present products
– Dream products
– Enthusiasts
• Other partners in the company network
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.
Company
Approach
FTSE4Good Index
Good companies work toward environmental sustainability, have
positive relationship with all stakeholders, protect universal human
rights, possess good supply chain labor standards, and counter
bribery practices
Dow Jones
Sustainability Index
Corporate sustainability as “a business approach that creates longterm shareholder value by embracing opportunities and managing
risks deriving from economic, environmental and social
developments.”
Goldman Sachs
Introduce the GS Sustain Focus List, which includes the list of
companies with sustainable practices
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
company’s 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 customer’s 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.
“Within five years, if you run
your business in the same way
as you do now, you’re going
to be out of business.”
Philip Kotler
THANK YOU FOR YOUR
ATTENTION!

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