Kotler On Marketing

Philip Kotler

• Publisher: Simon & Schuster UK
• Year: 2012
• ISBN:
  9781471109560
• Topic: Business
• Subtopic: Business General
• Index: Business

Since 1969, Philip Kotler's marketing text books have been read as the marketing gospel, as he has provided incisive and valuable advice on how to create, win and dominate markets. In KOTLER ON MARKETING, he has combined the expertise of his bestselling textbooks and world renowned seminars into this practical all-in-one book, covering everything there is to know about marketing. In a clear, straightforward style, Kotler covers every area of marketing from assessing what customers want and need in order to build brand equity, to creating loyal long-term customers. For business executives everywhere, KOTLER ON MARKETING will become the outstanding work in the field. The secret of Kotler's success is in the readability, clarity, logic and precision of his prose, which derives from his vigorous scientific training in economics, mathematics and the behavioural sciences. Each point and chapter is plotted sequentially to build, block by block, on the strategic foundation and tactical superstructure of the book.

PART ONE

STRATEGIC
MARKETING

1

Building Profitable Businesses Through World-Class Marketing

There are three kinds of companies: those who make things happen; those who watch things happen; and those who wonder what’s happened.—Anonymous

If we do not change our direction, we are likely to end up where we are headed.—Old Chinese proverb

AS THE WORLD spins into the next millennium, both citizens and businesses wonder what is ahead. There is not only change, but the rate of change is accelerating. A twelve-year-old girl said of her nine-year-old sister, “She is of a different generation.” Her younger sister listens to different music, plays different video games, knows different movie stars, has different heroes.

Companies often fail to recognize that their marketplace changes every few years. The book Value Migration documents how customer requirements and competitive forces have changed significantly every few years in such industries as steel, telecommunications, health care, and entertainment.¹ Last year’s winning strategy may become today’s losing strategy. As someone observed, there are two kinds of companies: those who change and those who disappear.

Today’s economic landscape is being shaped by two powerful forces—technology and globalization. The technological landscape today is dotted with new products that President John Kennedy in the early 1960s would not have seen, such as satellites, VCRs, camcorders, photocopiers, fax machines, answering machines, digital watches, e-mail, cellular phones, and laptop computers. Technology is the ultimate shaper not only of the material substructure of society but also of human thought patterns. As Marshall McLuhan observed, “The medium is the message.”²

One revolutionary technological force is digitalization, where information is being encoded in “bits,” namely series of zeros and ones. The bits are massaged by computers, encoded into music and videos, and sent over phone lines at incredible speed. Nicholas Negroponte, leader of MIT’s famous Media Lab, sees “bits” as replacing “atoms.”³ No longer does a software company need to manufacture a set of floppies, put them into a printed package, and ship them on a truck to various outlets, where consumers would have to go to buy them. All this work can be saved by sending the software over the Internet to be downloaded on the customer’s computer.

Technology drives the second major force, globalization. McLuhan’s vision of a “global village” is now a reality. A Bangkok executive who wants to buy this book can type “www.amazon.com” on his keyboard, enter his credit card number, and receive it in a few days thanks to Federal Express. A Cologne, Germany, florist wholesaler who is short of red roses can order and receive a planeload of red roses the next morning from Tel Aviv.

Besides technology and globalization, other forces are reshaping the economy. Deregulation is occurring in many economies. Protected companies, often monopolies, suddenly confront new competitors. In the United States, long distance telephone companies such as AT&T can now enter local markets; and regional Bell telephone companies have the corresponding right to enter long distance markets. And electrical utilities can now sell and ship their electricity into other communities.

Another strong force is privatization, where former publicly held companies and agencies have been turned over to private ownership and management, in the belief that they would be better managed and more efficient. This happened when British Airways and British Telecom were privatized. Today many public goods and services are being outsourced to private companies, including the building and management of prisons, school systems, and the like.

Yogi Berra, the legendary Yankee catcher, summed it up when he said, “The future ain’t what it used to be.” He might have added: “Do you feel your company is being chased by wild animals. If not, you should!” Markets are pitiless. Jack Welch, chairman of General Electric, would start his management meetings with the admonishment, “Change or die.” Richard Love of Hewlett-Packard observes: “The pace of change is so rapid that the ability to change has now become a competitive advantage.” The ability to change requires an ability to learn. Peter Senge and others have popularized the notion of a “learning organization.”⁴ Not surprisingly, companies such as Coca-Cola, General Electric, and Skandia have appointed vice presidents of knowledge, or learning, or intellectual capital. Those vice presidents have the task of designing knowledge management systems to enable rapid company learning about trends and developments affecting consumers, competitors, distributors, and suppliers.

As the pace of change accelerates, companies can no longer rely on their former business practices to sustain prosperity. Exhibit 1–1 compares business assumptions and practices that were practiced then with the ones being increasingly practiced now. Those in the right column are viewed as more effective contemporary approaches to profitability. Your company can almost tell how much it has adopted contemporary business practices by placing a check in each row on either the left or the right. If most of the checks are on the left, your company is locked in traditional practices.

Are There Winning Marketing Practices?

Besides winning business practices, is there a set of winning marketing practices? One frequently hears of one-liner formulas that promise marketing success. Here are nine of the more prominent one-liners:

1. Win Through Higher Quality

Everyone agrees that poor quality is bad for business. Customers who have been burned with bad quality won’t return and will bad-mouth the company. But what about winning through good quality? There are four problems.

First, quality has a lot of meanings. If an automobile company claims good quality, what does it mean? Do its cars have more starting reliability? Do they accelerate faster? Do the car bodies wear better over time? Customers care about different things, so a quality claim without further definition doesn’t mean much.

Second, people often can’t tell a product’s quality by looking at it. Consider buying a television receiver. You go into Circuit City and see a hundred different sets with the picture on and the sound blaring. You look at a few popular brands that you favor. The picture quality is similar with most receivers. The casings may differ but hardly tell you anything about the set’s reliability. You don’t ask the salesperson to open the back of the set to inspect the quality of the components. In the end, you have at best an image of quality without any evidence.

EXHIBIT 1–1

Business Firms in Transition

Then	Now
Make everything inside the company	Buy more things outside (outsource)
Improve on one’s own	Improve by benchmarking others
Go it alone	Network with other firms, collaborate
Operate with functional departments	Manage business processes with multidiscipline teams
Focus domestically	Focus globally and locally
Be product-centered	Be market- and customer-centered
Make a standard product	Make adapted and/or customized products
Focus on the product	Focus on the value chain
Practice mass marketing	Practice target marketing
Find a sustainable competitive advantage	Keep inventing new advantages
Develop new products slowly and carefully	Speed up the new product development process cycle
Use many suppliers	Use few suppliers
Manage from the top	Manage up and down and across
Operate in the marketplace	Operate also in the marketspace

Third, most companies are catching up to each other in quality in most markets. When that happens, quality is no longer a determinant of brand choice.

Fourth, some companies are known to have the highest quality, such as Motorola when it touts its 6 sigma quality. But are there enough customers who need that quality level and will pay for it? And what were Motorola’s costs of getting to 6 sigma quality? It is possible that getting to the highest quality level costs too much.

2. Win Through Better Service

We all want good service. But customers define it in different ways. Take service in a restaurant. Some customers would like the waiter to appear quickly, take the order accurately, and deliver the food soon. Other customers would feel that this is rushing them on what otherwise should be a leisurely evening out. Every service breaks down into a list of attributes: speed, cordiality, knowledge, problem-solving, and so on. Each person places different weights at different times in different contexts on each of the service attributes. Claiming better service isn’t enough.

3. Win Through Lower Prices

A low price strategy has worked for a number of companies, including the world’s largest furniture retailer, IKEA; the world’s largest general merchandise retailer, Wal-Mart; and one of America’s most profitable airlines, Southwest. Yet low-price leaders must be careful. A lower-price firm might suddenly enter the market. Sears practiced low prices for years, until Wal-Mart beat it on prices. Low price alone is not enough to build a viable business enterprise. The Yugo automobile was low in price; it was also lowest in quality and disappeared. A measure of quality and service must also be present, so that customers feel they are buying on value, not price alone.

4. Win Through High Market Share

Generally speaking, market share leaders make more money than their lamer competitors. They enjoy scale economies and higher brand recognition. There is a “bandwagon effect,” and first-time buyers have more confidence in choosing the company’s products. But many high market share leaders are not that profitable. A & P was America’s largest supermarket chain for many years and yet made pathetic profits. Consider the condition of such giant companies as IBM, Sears, and General Motors in the 1980s, a time when they were doing more poorly than many of their smaller competitors.

5. Win Through...