"Good companies will meet needs; great companies will create markets," says Philip Kotler, the world's pre-eminent marketing thinker. Kotler is S.C. Johnson and Son Distinguished Professor of International Marketing at the J. L. Kellogg Graduate School of Management, Northwestern University.

Kotler's reputation as one of the world's foremost marketing thinkers is substantially based on the classic marketing textbook Marketing Management: Analysis, Planning, Implementation, and Control. However his standing in the marketing world goes far beyond that work.

Since the publication of Marketing Management Kotler has remained one of the most innovative thinkers in his field. He has applied marketing theory to a diverse range of subjects including nonprofit organisations (museums, performing arts, hospitals, colleges, etc.), social causes, places (cities, regions, and nations), and celebrities. He has also coined a number of terms such as "social marketing," "mega marketing," and "demarketing," that have become part of the standard marketing lexicon.

Kotler remains a prolific writer with over 40 books to his name. Three of these were published in 2004, including Marketing Global Biobrands: Taking Biotechnology to Market. He has also written over 100 articles for leading journals such as the Harvard Business Review, the Journal of Marketing and Management Science.

In this interview with Stuart Crainer, Kotler offers his thoughts on why marketing isn't high enough up the boardroom agenda, what place social responsibility has in marketing, and other topical marketing issues.

There is a lot of debate at present about how to move marketing higher up the boardroom agenda. What are your thoughts on this?

Marketing is poorly understood by business leaders and the public. Business leaders largely view marketing as a promotion function. In too many companies, marketers have become 1P marketers, the 1P being Promotion. Their responsibility and control of the other 3Ps, product, price, and place (distribution) has weakened and is handled more actively by others. One factor is that many CEOs view marketing as the marketing budget, which is largely spent on promotion. Persons in other departments work actively on the other Ps: product (R&D), price (finance), and distribution (the sales force).

Where is the unified vision that starts with defining target markets and their needs and carries this all the way to preparing integrated solutions? My view is that marketing must become the driver of business strategy. Businesses that grasp the true role and potential of marketing will use it as the driver of their business strategy, and not simply as a tactical complement. Not only that, but marketing must also gain a seat on the Board, which is too rarely found. Today top management consists largely of people versed in accounting, finance, and law.

That said, marketing cannot be resurrected overnight. In the first place, too many marketers have become so specialised that they don't think in terms of the company's big picture. Marketers typically lack financial and strategic skills. This can be made up by training more marketers in financial and strategic skills. In the second place, marketers won't get more respect until they learn how to deliver more ROI accountability for their expenditures. CEOs want and deserve better metrics for measuring marketing's ROI.

Is CRM living up to its promise?

Customer relationship management (CRM) remains one of the most promising marketing developments in recent years. CRM can be tremendously effective when it is used right. The more a company knows about its customers and prospects, the more effectively it can compete.

However the performance of CRM investments in recent years has been poor, with somewhere between 40-60 percent of companies reporting disappointing results. Too often CRM is imported as a technology before the company has adopted a genuine customer culture. Adding technology to an old organisation only makes it a more expensive old organisation.

So the challenge is to know when CRM is appropriate and how to implement it successfully. CRM makes the most sense in data-rich industries such as banking, credit cards, insurance, and telecommunications. It makes the least sense in mass consumer markets selling low price goods. Coca Cola is not going to benefit by accumulating the names of its 2 billion consumers of Coke.

In deciding whether to invest in an expensive CRM system, consider what the Royal Bank of Canada did. They asked the vendor, the Siebel Company, for four estimates:

1. What will the system cost?
2. How long will it be before the system will be operationally-ready?
3. In how many months will the incremental sales above baseline cover the initial system investment?
4. What is the long-run ROI that we will get from this system?

I like the following quotes about CRM. Steve Silver, the highly respected marketing consultant says, "CRM is not a software package. It's not a database. It's not a call centre or a Web site. It's not a loyalty program, a customer service program, a customer acquisition program or a win-back program. CRM is an entire philosophy." And Edmund Thompson of the Gartner Group says, "A CRM program is typically 45 percent dependent on the right executive leadership, 40 percent on project management implementation and 15 percent on technology." These comments sound right to me.

What kind of impact are the Internet and other advances in communications technology having on marketing?

In the business-to-business area, the Internet is revolutionising business practice and efficiency. Companies have much more information on suppliers and their prices; there is more reliance on auctions and requests for proposals; and many more transactions are taking place over the net.

Other technologies are also finding growing use, among them database marketing and CRM, sales automation, marketing automation, marketing processes dashboards, smart cards, wireless marketing, and others.

My guess is, however, that the average U.S. or European company is only using about 10 percent of the Internet's potential. Most companies think that their Internet potential is achieved when they open up a company website. I would, however, ask the company the following questions:

• Do you use the Internet to test new product and marketing concepts using online focus groups and consumer panels?
• Have you assigned someone to research competitors' strategies, tactics, and resources using the Internet's rich information highway?
• Do you use the Internet to train and communicate with your employees, dealers, and suppliers?
• Do you use your website to recruit new employees? Do you distribute coupons and samples through the Internet?
• Do you monitor chat room discussions to learn how people talk about products, companies and brands related to your business?

I suspect that most companies would not be able to answer yes to many of these questions.

The economist Milton Friedman famously said: "There is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits." What are your thoughts on the social responsibility of marketing?

In the 1970s, I began to distinguish between business marketing, nonprofit marketing, social marketing, and societal marketing. We know what business marketing is. Nonprofit marketing describes the work of nonprofit organisations to attract clients and funds to support social and cultural services such as aid to the needy, museum and theatrical performances, public health initiatives, and so on. I formulated social marketing as a discipline for trying to influence healthy behavior (e.g., healthy eating, daily exercise) and discourage unhealthy behavior (smoking, using hard drugs). Societal marketing focuses on the impact that marketing practices have on the well-being of society. In this case, I said that companies should distinguish between satisfying a person's needs, weighing the impact on the person's well-being, and the impact on the public's well-being. Thus smoking a cigarette meets the person's need, but hurts his health, and increases the public's health costs.

At the present time, Nancy Lee and I are researching Corporate Social Responsibility. We are attempting to help companies answer the following questions:

• Are we giving anything back to the society?
• How much should we give back?
• What social initiatives would create the most good for the company and the social cause?
• How can we measure the impact of our contributions?

We have contacted forty companies that have exhibited high social responsibility-- among them Avon, Kraft, Levi Strauss, Body Shop, Ben & Jerry's, and Procter & Gamble. Their approaches differ and shed light on the variety of ways that a company can contribute to the social good. A company can sponsor a major social cause, or do volunteer work in the community, or give philanthropic gifts, or establish highly ethical business practices. We are learning how they chose their social initiative, what benefits they expected, and what benefits they received. Our aim is to produce a framework that companies can use to determine what kind of social "caring" to give, at what level, and with what expected results on their own business performance and on social welfare.

Let's look at marketing in the future. What do think the biggest challenges facing marketing are?

I would list the following challenges:

Getting better financial measures of the impact of marketing programs. Marketing has been lax in developing marketing metrics to show what particular marketing expenditures have achieved. CEOs no longer are satisfied with communication measures of how much awareness, knowledge or preference has been created by marketing programs. They want to know how much sales, profit and shareholder value has been created. One step in the right direction is at Coca Cola where its marketers must estimate?before and after a campaign--the financial impacts of their programs even if it is guesswork. At least this will produce a financial mindset in Coca Cola's marketers.

Developing more integrated information about important customers. Customers come in contact with a company at various touchpoints: by email, snail mail, phone, in-person, and so on. Yet if these touchpoints are not recorded, the company won't have a 360 degree view of a prospect or customer and therefore is handicapped in developing sound offers or communications with the customer.

Getting marketing to be the company's designer and driver of market strategy. Too much marketing today is 1P marketing, namely, marketing dealing only with promotion, whereas other departments determine the product, the price, and the place. I remember a major European airline where the Vice President of Marketing confessed that he doesn't manage the price or the product conditions (food, staff, d¨¦cor) or the flight schedules but only the advertising and sales force. How can marketing be effective if the 4Ps are not under unified planning and control?

Facing lower cost/higher quality competitors. As China develops economically, firms will face a repeat of the Japanese threat which consisted of competing with Japanese companies able to offer better products at lower costs. This will force more companies to shift production to China and change the face of industry and employment at home.

Coping with the increasing power and demands of mega-distributors. Mega-retailers such as Wal-Mart, Costco, Toys R Us, Office Depot and others are commanding a larger share of the retail marketplace. Many supermarket chains are creating store brands that are equal in quality to national brands and lower in price, thus forcing down manufacturer's margins. National brand companies feel more than ever at the mercy of mega-retailers and are desperately searching for defensive and offensive strategies.

Just before we finish many people view you as the world's leading authority on marketing. Who would you say have been the greatest marketing thinkers and practitioners in business?

My nominations would include: Walt Disney of Disney Enterprises; Ray Kroc of McDonald's; Roberto Goizueta of Coca Cola; Howard Schultz of Starbucks; Ingvar Kamprad of IKEA; Sam Walton of Wal-Mart; Richard Branson of Virgin; Jeff Bezos of Amazon; Fred Smith of FedEx; Anita Roddick of The Body Shop; and Nicolas Hayek of Swatch watches.

 

The article is kindly provided by EFMD (www.efmd.org) and Suntop Media (www.suntopmedia.com).