International marketing expert Philip Kotler is in Melbourne this week telling Australian companies how best to position their brands in the face of new global challenges. These challenges include the rise of social media, shorter product life cycles and greater competition.
He has been reassuring business there are still many opportunities for market innovation – whether through manufacturing in Africa, developing new luxury goods for Chinese buyers or targeting the world’s poorest consumers in India.
Professor Kotler spoke to The Conversation about consumer empowerment and the role of social media within traditional marketing.
The Conversation: You published the first edition of your seminal marketing text “Marketing Management” in 1967. What have been some of the biggest turning points for marketers since then?
Philip Kotler: When I wrote the book in 1967 it was a reaction to the existing marketing textbooks, which were not decision-oriented. Most of these books would list the five attributes of a good salesman or the functions of a wholesaler. This meant the books were very good at description but not at analysis.
As an economist coming into the field, I wanted more of a decision focus. I also wanted to be able to answer questions like: what is the right number of salespeople to hire? What is the right amount of money to spend on advertising? How do you set prices correctly?
The 1967 book came out with answers to those questions. We didn’t have a lot of concepts at that time, though. We didn’t have the concept of brand equity, customer equity or digital media.
So over the years I would bring out a new edition that would incorporate the new concepts. Our latest edition is now our 15th and every chapter will incorporate digital marketing rather than confining it to just one chapter. We’re going to say a lot more about how the mind works and neural processing. If you want to get deeper into the psyche of a person we need to know neurologically what’s happening about how people make product choices.
We are doing much more in viewing the market anthropologically. We talk about practices and rituals. There’s a ritual of cleaning your home, a ritual around having dinners.
We are also beginning to use a term called the consumer journey. For the marketer with a new product it is important to know the touch points along the journey. They need to know how to fit the product at the right time, place, price and message for the consumer.
The Conversation: What has sparked that analysis now as opposed to ten years ago?
Philip Kotler: We didn’t conceptionalise the journey. We conceptionalised it as a decision process of buying or not buying a product. However, we are now realising there are a lot of stages to the decision-making process, particularly with costly products.
The Conversation: Is the empowered consumer, armed with an abundance of information from the internet, likely to take longer to buy a product?
Philip Kotler: There is always a class of buyer who is impulsive and others who are deliberative buyers. However, I think now there is more time spent on researching a decision, but once the information is in, the decision is made faster.
The Conversation: You have said that companies are facing unprecedented challenges through hyper-competition and changes to the retail environment driven by the internet, globalisation and social media. What do companies need to do to stay relevant?
Philip Kotler: They should have peripheral vision. They should be aware of the current trends, politics and social movements. They should also be aware of the economic conditions people are facing in respect to borrowing costs as well as new technology.
The Conversation: What are some of the biggest mistakes that companies make?
Philip Kotler: They focus on short-term thinking as opposed to the long-term. It still always happens. For example, let’s say a company is charging a good and profitable price and a competitor comes in and cuts their price by 30%. The short-run marketer will say, “I’ve got to match your price because I am beginning to see an erosion in my market share.” That is a short-run answer.
The long-run approach will look at how to convince customers to pay the higher price because they are getting more. The person charging lower prices is earning less money and is less likely to keep offering quality products. The challenge is to find out how to add something to the product and still maintain the original price.
The Conversation: How do we view established brands in terms of quality assurance now with the advent of internet reviews and social media? Is brand loyalty easier to lose?
Philip Kotler: Yes there is more fluidity. Firstly, people can now see that a brand is available at different prices at different locations. They can force the marketer to reduce their prices.
Prices have to fall eventually because there will be desperate competitors who will cut their price and that is deflationary. The problem with deflation is that it encourages consumers to delay consumption even further.
Branding allows consumers to easily decide on a product. It allows them to fall into a brand that is working. However, social media can disrupt this habit.
The proliferation of information allows people to learn what their friends are buying and how satisfied they are. It opens the consumer up to more options and this makes the job of defending existing brands harder. Many brands coast on habit and convenience rather than actually delivering more value.
The Conversation: Is traditional marketing dead? Can it compete with social media?
Philip Kotler: It would be foolish for any company to go overboard on digital media. Companies should use a mix of social and traditional media to promote products. They can experiment with the amount of digital media that is optimal but it is unlikely that companies will only use digital marketing.
Companies often need a 30-second commercial that gives a big picture of the brand and then use social media on the back of it. Social and traditional media can reinforce each other and work together.