With the publication of the 16th edition of marketing managementwe sat down with Kellogg marketing professors Philip Kotler and Alexander Chernev – co-authors of this issue – to get their insights on how marketing is changing and how it might evolve.
This interview has been edited for length and clarity.
INSIGHT: How is the new way of thinking in marketing reflected in the current issue of the marketing management? What has changed and what has stayed the same over time?
KOTLER: The term “marketing” emerged in the 1900s to describe activities and institutions that took place in markets, and early marketing textbooks largely described these activities and institutions. marketing management, published in 1967, was the first text to take an analytical approach to marketing, incorporating insights from academic studies. The book brought together ideas from economics, behavioral science, organizational science, and mathematics to provide breadth, depth, and rigor in addressing marketing problems.
One of the main key ideas put forward in the very first edition of the book was that the company’s actions must be driven by the customers and their needs. This core principle of customer orientation has remained the guiding principle throughout all editions of the book. The rise of big data, social media, and sophisticated e-commerce hasn’t changed the fact that a primary purpose of any business is to create value for its customers.
Chernev: Value creation is at the heart of our approach for the new edition. Marketing is about understanding, creating, communicating and delivering value. This is the basis of the marketing strategy and has not changed over time. What has changed are the tools that companies use to create value. Data analytics, automation, and artificial intelligence are very powerful tools for managing value, but they are just tools. Without a solid strategy guiding their use, they can become a distraction from a company’s core mission.
However, not all changes are tactical in nature. A major change affecting the business philosophy of many companies is the redefinition of their ultimate purpose. Therefore, more and more companies include the creation of social values in their mission statement. This is an important development that is expected to have a long-term impact on the way these companies operate in the marketplace and conduct their business processes.
INSIGHT: Nice that you addressed that. Central to the marketing strategies of many companies today is that brands are not only profitable, but also have a purpose. How has this idea evolved over the years?
KOTLER: In the past, a brand simply told you what the product is and does, and how it’s priced. But today, a brand is a company’s promise to deliver a specific value that addresses a specific need of its customers. Additionally, many brands’ promise goes beyond functionality and reflects certain aspects of customers’ identities.
Take what Unilever did with Dove soap. Now it’s not just a way to cleanse your skin, it’s a reminder that all women are beautiful. When it really works, a brand takes a higher view of the shopper and tries to make a promise that will help the shopper move forward in some way.
Chernev: As more products become standardized, customers are looking for something useful beyond functionality. It’s no longer just about the product. It’s also about who the company behind that product is and what that company stands for. When companies understand this, they realize that in order to be successful in the marketplace, they may need to reinvent their culture and align it with their customers’ values.
A purpose also helps companies attract and retain employees. When you stand for something, you stand a better chance of getting and keeping the right people, ultimately increasing profitability. This also extends to the partners of a company. For example, companies like Whole Foods prioritize suppliers who employ environmentally friendly and socially responsible business practices.
INSIGHT: What is the impact of social media on marketing theory and practice, and how do you see new opportunities for marketers?
Chernev: At a very basic level, the theory is still the same: the ultimate goal is to create value. But on a tactical level there were many changes. One of these changes is the dissemination of information.
In the past, advertising was the most important tool to inform customers about products. Now customers can get detailed product information from a variety of sources, both from the company and from other customers. And the same goes for companies. The proliferation of social media and advances in data analytics allow businesses to know in real-time not only what customers are doing, but also how they feel about their brands. So the basic goal is still to create value, but the way a company can achieve this has changed.
KOTLER: It’s important to recognize that today’s consumers are different. You are connected to so many people from so many other parts of the world and can find information with a simple click, without needing a vendor or an ad. Anyone looking to buy a car will likely end up seeing a salesperson at the dealership, but most will have done a lot of their own work to research their options. We must acknowledge the existence of such a smart, well-informed consumer, which means companies need to make major changes to their traditional marketing tools. For example, are companies wasting money by having large salespeople? Are they as effective as they were before, when there wasn’t as much knowledge available to consumers?
INSIGHT: What changes do you see for the future of traditional retail?
KOTLER: I wonder what will happen to in-store shopping. It’s conceivable that you can get whatever you want without ever going to a store, so a store has to be special. You have to create a good experience. Then you have to ask yourself: How many branches do we need? What types of deals will be necessary?
Chernev: People tend to shop in brick-and-mortar stores for a variety of reasons. Some leave for purely utilitarian reasons. They appreciate the fact that they can see how the product looks and feels in real life and then buy it immediately and take it home. Others leave for more hedonic reasons; For them, it’s more about the shopping experience. They don’t go to brick-and-mortar stores to save time, they go to spend time. For many it is also an opportunity to socialize with friends and family.
The internet can make the shopping experience more efficient, but it cannot, at least not yet, replace the role of the traditional store as a place for social interaction. As such, more and more brick-and-mortar retail spaces are likely to transform into experiential places where customers spend time interacting with others, grabbing a meal, and ultimately buying a product or two.
INSIGHT: In your opinion, how is the role of marketing changing in organizations? Are there ways that marketing functions could have a larger impact or a different type of impact within organizations?
KOTLER: In the past, marketing was not part of product development. It was only called after the product was made. Then it was the marketers job to sell as much as possible. But now marketing gets involved in product development. Marketers can offer design ideas and features. Engineers are masters of the possible, but it’s marketers who are best at estimating value because they better understand what customers’ criteria for purchasing a product are.
Recently, some companies have ditched the position of chief marketing officer in favor of a chief growth officer or a chief customer officer. But the vast majority of companies appoint a CMO to lead marketing and sit on the boardroom floor with the other executives.
Chernev: A challenge with marketing is that some companies view it too narrowly and limit it to advertising and communication. This creates a problem as marketing is a much broader discipline. It’s really about the science of markets and how to create value. As such, it should be a central function in organizations. Some companies deal with this misperception of marketing by using different labels, be it “Chief Growth Officer” or “Chief Customer Officer”. But these are basically different aspects of what marketing does.
Another big shift is the need for transparency and, more importantly, accountability. As technological developments allow companies to track the impact of their activities, managers are expected to be able to document the return on the company’s marketing investments. This has its advantages and disadvantages. On the plus side, it allows the company to better allocate its marketing resources to areas where they will have the most impact. On the downside, however, this could focus the company’s marketing efforts on activities that have short-term impact, at the expense of activities like brand-building that pay long-term dividends.