How Social Media Can Wreck Your Company – Philip Kotler

He is acclaimed as the godfather of modern marketing. The marketing maverick, Professor Philip Kotler who has consulted for some of the world’s leading brands is renowned as a global expert on strategic practice of marketing. His definitive book on marketing, Marketing Management is widely acknowledged as the ‘bible’ of marketing. Kotler in this conversation explains the evolution of marketing and the influence of social media on modern marketing. Excerpts:

Q: Tell us a little bit about yourself and why marketing became such a big factor in your life.

I am an economist trained at the University of Chicago (M.A)and MIT (PhD). Three of my professors were Nobel Prize economists – Milton Friedman, Paul Samuelson, and Robert Solow. I had hoped to move along the same path of researching and teaching economics. However, I felt that classical economists neglected several of the major forces shaping demand. Classical economists mainly discussed the role of price in shaping and being shaped by demand and supply. I kept asking: what about the role of Product (features, quality, reliability), Place (wholesalers, retailers, agents), and Promotion (advertising, sales promotion, public relations) in shaping demand and supply. When I participated in a year-long FordFoundation program at Harvard in advanced mathematics, I met some marketing professors and realised that the discipline of marketing was the missing link in economic theory and practice. In 1967, I wrote my first edition of Marketing Management (now in the 14th edition) that was the first marketing textbook to incorporate economic theory, mathematics, social psychology and organization theory in the same book.

After describing how markets work and how consumers, middlemen and producers make decisions, I began to recognise that the tools of marketing apply to more than commercial transactions. I led a movement called the Broadening of the Marketing Concept. I realised that an art museum needs marketing skills if it is to attract visitors, members, private donors, and government grants; a blood bank needs marketing skills if it is to attract enough blood donors; Friends of the Earth needs marketing skills to convince consumers and businesses to protect the fragile environment and planet, a city needs marketing skills if it is to attract tourists, new residents, factories and company headquarters, a new singer who want to be recognized nationally needs to hire a marketer to help her reach new audiences and delight them. I had researched these challenging areas and published on them in such books as Museum Strategy and Marketing, Social Marketing, Marketing of Places, High Visibility, Good Works, and other books.

I find marketing endlessly interesting and challenging. A market is never stationary. Companies like Kodak, Sears, Nokia, Research in Motion (RIM) others failed to identify disruptive forces swirling around them and manage to react in time. Marketers can never sleep at the steering wheel without crashing.

Q : What are the biggest shifts you see happening among consumer attitudes and behaviours right now and is technology influencing this?

There has been a tectonic shift from the days of Mass Marketing to today’s days of Target Marketing. Mass Marketers had it easy: they would develop a 30-second TV commercial, blast it out at prime time, and reach 30 million viewers. The fact that a lot of viewers weren’t interested in the product or had moved to the kitchen or the bathroom at that moment didn’t matter because the metrics showed a low cost per thousand intended exposures. During this time, most consumers knew little about companies or competitors except for what they heard from the advertisers. It was easy to buy a brand that spent a lot of money advertising itself rather than to investigate the category and find the best value.

The Target Marketing world is different, thanks to the emergence of the Internet, Google, Wikipedia, social media, YouTube and the like. Both consumers and producers are better off. Consumers now get information not only from the advertisers but from their friends and acquaintances, from ranking and rating services on the Internet, and from their mobile phones where they can check the price being quoted in the store and check whether the product is cheap- er elsewhere. The producers are better off because they are in a better position to gather Big Data about consumers and mine the data to discover those specific consumers who are more likely to want their product. In addition, producers can learn the media consumption profiles of consumers so that they can reach the right prospects more efficiently.

The bottom line is that the influence of brand advertising is growing smaller in relation to the influence of word-of-mouth communications and Internet information in shaping consumer decision making. The Internet makes it ever more important for producers to promise carefully what they will deliver and to meet that promise. Consumers will hear increasingly about producers who fail to satisfy, and more importantly, will hear from their friends and acquaintances the names of brands that satisfy and delight. A company will not be free to be just soso in the marketplace and this will drive companies to think more innovatively about adding new benefits and values to attract customers.

Q: What do you believe marketing’s role should be, and by extension that of the CMO, in the 21st century and why?

Marketing departments are basically communication and persuasion arms of the company. Their role is to persuade prospects that the company offers the best value. In many cases, the marketing department doesn’t even manage the 4Ps. The Chief Marketing Officer of an airline that I interviewed said that his job is basically to handle advertising and the sales force (the P of Promotion) while the P of Price was handled by the finance department, the P of Product was handled by engineers and designers and P of Place was largely handled by the CIO (Chief Information Officer).

It is true that the marketing department has the responsibility of putting together a plan for each offering that goes further than the promotion plan by inviting the inputs of the other departments. But most of the marketing planning is short-term and tactical. It is my observation that most marketing departments are long on tactics and short on strategy.

The challenge for the 21st century is for companies to build up the strategic side of marketing. A company needs to establish a separate smaller group of strategic marketers who are not responsible for selling more of today’s products. The strategic marketing group has to think about the next three to six years and what the company has to invest in to be a viable player in the next several years. The appointment of Chief Marketing Officers (CMOs) is about moving marketing into the C circle of the company, those senior officers who lead the company’s strategy and policies.

The CMO has to be more than a supplier of communication services and marketing research. The CMO is an excellent position to know the changing consumer landscape and emerging new needs and opportunities. The CMO and the strategic marketing group should be a leading force in driving the company’s growth plans. In companies where CMOs are the equal of CFOs (Chief Financial Officers) and CTOs (Chief Technology Officers) and CIOs (Chief Information Officers), the company will be well-positioned for growth and profitability.

Q: Well-known marketers like Yvon Chouinard, the founder of Patagonia, believe that “traditional advertising is dead.” Is he correct or misled, and why?

I would not write off traditional advertising. The smartest companies are not those that suddenly shift their promotion budgets into heavy social media. One company shifted 50 percent of its budget to social media and it was a disaster, primarily because its marketers didn’t know which social media work well and how to measure it. The smartest companies are those that actively blend traditional media and the new media in a synergistic way. A traditional print ad should mention that more product information is available on the product’s website and there are product reviews to see on YouTube and Facebook. The company should use traditional advertising to paint the big picture and use the new media as the amplifier. I would not write off traditional advertising. The smartest companies are not those that suddenly shift their promotion budgets into heavy social media. One company shifted 50 percent of its budget to social media and it was a disaster, primarily because its marketers didn’t know which social media work well and how to measure it. The smartest companies are those that actively blend traditional media and the new media in a synergistic way. A traditional print ad should mention that more product information is available on the product’s website and there are product reviews to see on YouTube and Facebook. The company should use traditional advertising to paint the big picture and use the new media as the amplifier.

Q: What do you see the role of technology being in the new marketng mix?

Many marketing departments are strong on the “art” side of marketing and weak on the “science” side of marketing. Yet marketing science is making great strides. My book, Marketing Decision Making describes many technical ways to gather and analyse marketing data and build marketing models. I know compa- nies that use marketing mix models to guide their marketing budget allocations. Companies are increasingly using predictive analysis to estimate the probability of purchase of individual prospects. They are using conjoint analysis to choose the product’s features that will optimize profit returns. Companies are using virtual reality and simulation to

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