Changes in marketing over the years have been revolutionary, according to world-renowned marketing guru Philip Kotler. Listed by The Wall Street Journal last year as the sixth most influential person in business thinking, Kotler, a professor of marketing at the Kellogg School of Management, will be in Malaysia on May 29 to conduct a marketing masterclass. In a recent email interview with The Edge Financial Daily, Kotler shared some thoughts on marketing.

How far has marketing evolved since your first book, Marketing Management, was published four decades ago? What are the key changes with regard to its status in the boardroom agenda?

As a trained economist from the University of Chicago and Massachusetts Institute of Technology (MIT), I saw marketing as a largely neglected branch of economics. The textbooks on marketing at that time were mostly descriptive and lacking economic theory, organisation theory, consumer theory and mathematics. My first edition of Marketing Management aimed to make up for these deficiencies.

Now that Marketing Management is in the 13th edition, I can tell you that the changes in marketing over the years have been profound, if not revolutionary. Among them:

•     Customers, not products, must now be the central driving focus of the company;

•     Companies must start their marketing with segmentation, targeting and positioning. Only then do they work out the appropriate 4Ps (product, price, place and promotion);

•     Distribution possibilities have multiplied with giant discount stores, boutiques, shopping malls, factory outlet malls and online buying;

•     Traditional advertising media are losing some effectiveness and smart companies are experimenting with the power of new digital media such as blogs, webcasts, podcasts, videocasts, social media, and other new digital platforms and tools; and

•     Consumers are now king and can chat with others on social media, learn a great deal from websites about products and services, and make better-informed buying decisions.

What are the consequences for companies that do not fully integrate the principles of marketing into their corporate direction?
Companies that lack a marketing mindset are apt to suffer from an oversimplified understanding of customers and competitors. They think that their products almost sell themselves, not realising the many subtle forces that operate on customer choice.
They haven’t defined their target segments well enough to construct appropriate 4P plans and strategies.

In your latest book, Chaotics, you and co-author John A Caslione advanced the theory that turbulence is the new normality, rather than a short-lived state. What led you to this conclusion?
Even if the financial crisis had not occurred, companies would experience a growing number of surprises, shocks and disruptions. Globalisation allows new competitors to come from anywhere with better products and lower prices. The technological advances enable word-of-mouth and news to spread faster than ever around the world. Customers can narrowcast or broadcast negative or positive opinions about specific products and brands, and that can spread quickly through cyberspace. Turbulence will be the new normality, the ‘normal’ condition facing any business.

How does this new normality impact the management and marketing processes of corporations? What will happen if they continue as they are?
Andy Grove, ex-CEO of Intel Corporation, wrote a book called Only the Paranoid Survive. He was one of the first CEOs to realise that turbulence is the new normality. He was clear about the need for new processes to anticipate changes and shocks, and have some ready responses.  

Our Chaotics management system arms concerned companies with an early warning system to faster anticipate and spot new threats as well as new opportunities.

The system also calls upon management to move from developing just one plan and instead imagine alternative scenarios and plan for the best responses, should any of these scenarios occur. The system describes how each company department can attain more resilience and flexibility when the market environment suddenly changes. We list departmental activities that can be reduced, kept at the same level, or increased in response to the changes in the market environment.

The Chaotics system for companies involves systems for early warning, scenarios construction and quick response. How should managers best incorporate the Chaotics system? Gradually or as sweeping organisational change?
The first step is for the company to re-evaluate its business intelligence system to make sure it is monitoring the key sources of possible disturbances and opportunities. Early warning systems will monitor demographic changes, social changes, technological changes, political/regulatory changes and, especially, economic changes. The company doesn’t want to be surprised by two men in a garage somewhere inventing a brand new computer or chip or automobile that can have a great impact on their company. My guess is that a company can install an early warning system in a few months.

The company should move to scenarios construction in its next planning period. Instead of just making a modified version of the same plan used last year, management needs to develop some basic scenarios and determine how to respond to each one.  

Is full implementation of the Chaotics system equivalent to companies operating in a constant state of paranoia and defensiveness? Will this result in over-cautiousness in corporations?
No. Don’t forget turbulence creates opportunities as well as threats. We don’t want your company to be only postured for defence. We want it to be postured for offence as well. And remember, companies differ in their appetites for risk. If the company is highly risk-averse, it will bet more on the pessimistic scenario and be overcautious. If it has an appetite for risk, it will gamble on the more optimistic scenario.

In avoiding risk and planning for each scenario, will companies be reluctant to innovate and embrace new methods? Will this stifle creativity?
Only those companies that choose to be overcautious are likely to sacrifice innovativeness and creativity.

What will the long-term impact be for companies that operate with a Chaotics system? Should this system be sustained even in good times?
The Chaotics system will allow companies to be more resilient, responsive and resourceful in good and bad times. We are assuming that turbulence will continue in good times. Any industry or company may be struck with a surprise or shock or new opportunity at any time and must be prepared to anticipate and respond.

Are corporations founded in developing economies, such as Malaysia, better able to cope with a turbulent state of economy than corporations in developed nations with historically more stable economies?
Corporations that operate in less stable economies experience more pressures and challenges. That doesn’t mean they’ve learned how to adapt faster and better. It doesn’t mean that they have developed the equivalent of a Chaotics management system. Nor will companies that have operated in a relatively stable economy be safe without moving towards a Chaotics management system.

What opportunities are there for companies in turbulent times? How can they best identify these opportunities and utilise them?
Alert companies often see crises as presenting the best opportunities. Their competitors are probably cutting their marketing and new product development budgets. They are probably reducing product, service and delivery quality. This is the best chance for an aggressive company to attract the dissatisfied customers of competitors or even acquire weak competitors or their assets.  

Alert companies will know that customers will change in their needs and preferences during hard times. Customers will move towards lower-price products and services. They will postpone discretionary purchases until times get better. The alert company will change its marketing mix to move in the same direction as the customers. It will re-price its products or launch a few less expensive product lines or brands. It will favour lower-cost channels of distribution. It will recast its media mix and messages to reach target customers and prospects more efficiently.

What are the key lessons you hope to impart to marketers and managers in your upcoming marketing masterclass on May 29 in Malaysia?
Here are a few of the lessons. They and others will all be illustrated with company examples:

•     Recognise growing customer empowerment. Customers now can access full information about competitive offerings. They can chat with other consumers about any product or service and even broadcast their opinions on the Internet and in social media;
•     Develop a focused and compelling offering to a well-defined target market;
•     Focus on delivering satisfying experiences and outcomes, not just satisfying products;
•     Draw in the customers to co-create the offerings and messages;
•     Experiment with the new digital media to reach and fine-tune your message to particular customers;
•     Develop metrics and ROI (return on investment) measures of the impact of your marketing expenditures; and
•     Move to more powerful market research techniques and analytical systems.


Philip Kotler will be conducting the “Marketing in turbulent times: Discovering opportunities in a recession with Chaotics management system” marketing masterclass on May 29. For more information, call (603) 2166 8197.



This article appeared on the Media & Marketing page, The Edge Financial Daily, May 5, 2009.