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Philip Kotler: Marketing

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On behalf of our President and CEO, Greg Case,

and our chief marketing officer, Phil Clement,

it's a real honor for Aon to be the sponsor of this event today.

And for many of you, you might know that Aon

is now a UK-based company, but it's also important for you to know

that the Aon Foundation, for the past 25 years,

has made it a priority to support educational activities and

cultural institutions like the Chicago Humanities Festival

and the Charter Humanist Circle, that does so much to enrich

the lives of all of us in this room and everybody in Chicago.

And even though we're now in the UK, I want everybody in this room to know

that we intend to continue this commitment,

and it will remain high on our priority list for the things we do

to support the community of Chicago for many years to come.

[applause]

On behalf of my colleagues at Aon, I want to thank

the Charter Humanist Circle and its members

for their very valuable support, and I also want to thank

Northwestern University Law School for allowing us to use

the auditorium today.

At Aon, we believe in the mantra "If we can't measure it,

we don't do it."

And because of that, it's a real honor for us

to be here supporting and introducing Dr. Philip Kotler.

Dr. Kotler has defined marketing as "the science and art

of exploring, creating, and delivering value to satisfy

the needs of a target market at a profit."

He is recognized around the world as one of the foremost experts

on business, of marketing, and for his insights on

how exemplary marketing has the creativity and the power

to influence global consumers every day.

In that spirit, I hope you'll join me in welcoming Dr. Philip Kotler.

[applause]

Now before I turn the microphone over to Dr. Kotler,

in the spirit of marketing, maybe many of you in this room know

that Aon does a great many things globally, but one of the things

that we've done that has created tremendous brand awareness

for our firm is our sponsorship of Manchester United football team,

which by today won 2 to 1 versus Arsenal

[applause]

We're at-- Right now we're

at the top of the premiere league.

So in that spirit, [laughter]

I would like to present Dr. Kotler with his very own, personalized

Manchester United shirt. [applause]

[Kolter]: Thank you.

David, thank you very much.

And I will wear this, in a fantasy way.

[laughter]

May I say, I really appreciate your introduction.

Of all the introductions I've received, yours is the most recent.

[laughter]

Nation, nation...

Oh, you may know of Steven Colbert,

so I can't pull it off the same way.

There will be two groups, with respect to marketing.

There will be a group that doesn't like marketing,

and I'm going to give you why they don't like marketing

and the justifications. I will also tell you

there's another group who loves marketing, so before we're through,

you will be totally confused, or at least opinionated.

So, what I want to do is tell you that--

These are called confessions of a marketer.

That's, by the way, borrowed from David Ogilvy,

who wrote a wonderful book called "Confessions of an Advertising Man."

And let me move on and say why is marketing a topic

for the humanities?

And we would say that there's a couple of reasons.

One: I regard marketing as a humanistic subject

because marketing has affected our lifestyles;

has created, not only affected a lifestyle, but created lifestyles,

and we should be, from a point of view of popular interest,

interested in that.

And it really--

I want to say that marketing is very American,

that it's beginnings are very American.

That doesn't mean there weren't manifestations of marketing earlier,

and as a matter of fact, I'd like to give you a very short history

of marketing, so that you understand what we mean by the word.

As a matter of fact, if you took a dictionary, a Webster's dictionary,

in the year 1900, and looked up the word marketing,

you would not find it in the dictionary.

Yes, you would find the word market, but not the word marketing.

If you then picked a dictionary... 1910. You would find the word

marketing in it, because marketing is about 100 years old.

And it's much more than selling. So let me show you...

Let's start... Let's start biblically.

[laughter] Let's start biblically.

Who is the marketer in this picture?

This is the biblical narrative. Who was the first marketer in the world?

I hear Eve...

The snake.

I hate to admit it, because snake sounds like sneaky, and so on

and so forth.

But the fact is that it was the snake who sold Eve

on getting Adam to eat an apple. So it goes way back.

At least selling goes way back. Now let's go further.

Here is the father of marketing.

Wow, what an insult to him! [laughter]

I mean, that's Aristotle.

Recently I was at a group, little party, and we were speculating

who we would like to meet most if we had an hour with such a person,

and it boiled down to Plato, Socrates, or Aristotle.

That's a hard one.

It turns out that my vote went for Aristotle.

Aristotle was Google, at the time. He knew more about everything

than anyone in the world. He wrote on science, politics,

economics, rhetoric, art, and everything.

Now, why do I say that he had some marketing impact?

Let me read the definition of rhetoric. He's not the founder of rhetoric,

by the way. The founders were the sophists, around 600 B.C.

They were a group who wanted to use selling and speech and persuasion

for their own devious ends. But Aristotle put the i--

the discipline of rhetoric on its feet.

Rhetoric is the art that aims to improve the facility of speakers or writers

who attempt to inform, persuade, or motivate particular audiences

in specific situations. It is the faculty of the observing,

in any given case, the available means of persuasion.

So, in a sense, he could be the father of selling.

The idea of getting someone to do something that they might

not have done otherwise. So, let's move on, about other

early manifestations of marketing. I know many of you cannot necessarily

read this, so I will read it, but the first department store

opened when, and in what country? Normally if you're in France

and you ask the question, they would say of course

we invented the department store. It was about 1845.

The same time we invented paperweights and some other things.

But it turns out that the first department store was in Japan.

Mitsui company, which is still alive and well.

So that's where one of our retailing forms started.

The next one is the first newspaper that carried an ad.

There were newspapers early, but the first ad appeared in England,

in 1652, and it advertised coffee. And then, the first ad agency

started a little later. Well, much later.

N.W. Ayer, which is still a prosperous advertising agency.

First time a brand was put on a commodity, the commodity being soap,

the brand name was Pear's soap.

And then the first packaging appeared a little later,

and finally we had a marketing research department formed.

So, now the word markets has been around all these years.

The Middle Ages had markets. In fact, whenever--

I would even say the agora, in ancient Greece--

that means the marketplace-- In ancient Greece,

people would come on a particular day to sell things.

In the Middle Ages, there were market days.

The word marketing wasn't there. It was just market.

And trade was always there, because trade, through history,

has taken place between people and regions and countries.

So all that is there, and it was in the decade of the 1900s

that marketing books first appeared. And the interesting thing is

who wrote those first marketing books. Were they sociologists?

What was the discipline of the people who wrote the first marketing books?

Any guesses?

They weren't physicists or chemists.

They were economists.

So why would economists start a subject called marketing?

And the answer is: they were disillusioned economists.

[laughter]

They couldn't find any mention of advertising in the discourse

of economists. In other words, never did Adam Smith,

Thomas Malthus, David Ricardo, even Alfred Marshall, and so on,

they rarely talked about other forces that shaped demand.

The only force that shaped demand in their mind was price.

You know the famous curve. Raise the price, demand will go down,

lower the price, you can sell more. Price was the only thing

that affected demand. So these economists,

or institutional economists, said "Hey, you've got to factor in advertising."

You've got to factor in retail stores, whole sales, jobbers, agents.

And it was the neglect of the classical economists

to not really texture the marketplace and the way an economy worked

that led to marketing. So marketing is technically

a branch of economics.

Now who helped developed this field of marketing?

Now, probably you don't recognize maybe anyone here.

There's one person you might recognize.

I don't know if you can see some of these faces,

but someone recognize anyone there?

Yeah.

Dale Carnegie. Dale Carnegie is here,

and his book was "How to Win Friends and Influence People,"

because in doing this, I wanted to find out

who was the exemplar of the selling method.

"How to Win Friends and Influence People"

But let me give you the whole picture.

Ernest Dichter. Some of you may know of.

He was a motivational psychologist, and he could explain why people

didn't like to eat prunes, why cigars were offending some people,

and all kinds of things. And his book called

"The Study of Desire." He apparently studied with

Sigmund Freud, and he brought that kind of mind to marketing.

But he had an opponent named Alfred Pollitz, who was not

a head shrinker--We call him a... a nose counter.

The expressions we would use if you were very psychological,

you were a head shrinker, and otherwise, you were a nose counter.

Namely, a surveyor. You surveyed-- You found out what percentage

of people were of a certain age and why did they buy a particular product.

Julius Rosenwald was very much behind the formation of

the Sears company, which was a important episode in

the development of our retail chains.

Lester Wunderman deserves credit as exemplifying the use

of direct mail and catalogs. That you can sell more directly.

You don't have to be in the store. You can get people to order goods

by mail and phone.

David Ogilvy is the exemplar advertising person,

then Stanley Marcus, of Neiman Marcus,

was a fella who could walk into any retail store and give them

100 suggestions on how to improve the layout, the size of the aisles,

and make a difference in the voulme of business.

Edward Bernays is the father of public relations in the United States.

His name has sort of become obscure, but he really was

a very important person. The word propaganda

was often used in connection with his work, because people thought it was

a model to motivate you to feel a certain way about anything,

regardless of the standards involved. And then there's Dale Carnegie.

In any case, how did marketing get its start?

Marketing got its start in sales departments.

Every company has a sales group. And the sales people really want

to be in the office of a customer, because that's the only way

something happens. So they don't want to do a lot of homework.

For example, three things they didn't want to do.

They didn't want to do consumer research in a systematic way,

because that's taking their time away from selling to customers.

Secondly, they would've liked someone else to find leads.

Now a lead means a prospect. In fact, we distinguish between

a hot lead: "Oh boy, he's ready to buy. He even called us to buy."

a warm lead, a cold lead, so on. Someone else should do that

for the sales people, so they don't waste their time making calls.

And the third thing was someone had to prepare

brochures and ads. And the salesman is not skilled.

The salesperson isn't skilled at communicating through advertising

and brochures. So sales departments added three people, or hired them

from time to time. Later on, it exploded

to the day today, when we have multinationals running--

with marketing-- In other words, marketing--

Those three people split from sales and became big enough to become

its own department. And so, some people

in the audience here may be a chief marketing officer.

The old name was Vice President of marketing, but I like the name

chief marketing officer because that person now is part of

the chief officers. Chief information officer, chief financial officer,

chief innovation officer, and the status has moved up.

Some of you may be brand managers, may have been in your past experience.

Category managers, market segment managers,

managing distribution channels, like retail or wholesale things,

pricing manager, communication manager, database manager,

direct marketers, internet people, and so on.

So, marketing is well-established.

Now, the character of a marketing department depends very much

on what the CEO thinks of marketing.

So, the 1P CEO is a person who took over a company,

and he says, "I don't like marketing, but I know I need it,

and all I want from marketing is some communications.

I just want someone to broadcast and promote us."

So, that person is missing a lot of other things

made up by other CEOs, who are 4P CEOs.

Now a 4P CEO says, "I need a marketing plan."

And the plan has to mention product--that's the first P.

What about our product? What's good about it? What are the features?

Price: what should it be priced at? Place: where should it be

made accessible? Online, offline, in stores?

And finally promotion.

So that's a more educated view of the potential of marketing.

But there's even a better view, and that's called the CEO who says,

"No! I don't want to start with 4 Ps, I want to start with the fact

the market is complex." There's a lot of segments.

Each segment deserves its own plan. In fact, one thing we've learned

that if you just have one value proposition for the whole market,

it really doesn't trigger anything in many parts of the market.

So that CEO says, "What segment should we go after?

And what position should we take with each segment?

What should we say about ourselves, in how we can satisfy their needs?"

Now there's even a higher type CEO, which is exemplified by A.G. Lafley,

who ran Procter & Gamble, who recently retired.

When you ask A.G. Lafley what's marketing, what's your picture,

he says, "Well, what do you mean? Marketing is everything."

[laughter]

Now, marketing is everything. What he means is

everything starts with the customer. No customers, no business.

And I think he's making that point very much.

Now, moving on, there's a lot of things that a chief marketing officer does,

and I won't go into any detail, but there's a lot of tasks,

and the sad fact is that sometimes the chief marketing officer only lasts

on the average of two years. In other words, does a job,

and maybe the CEO is not feeling that it really brought in enough new business

that the cost of the CMO exceeds what the value of the CMO is.

There's a lot to go into about why CMOs on the average

hold on to their job for two years. By the way, some of them

get a better job after two years. They become something higher

than the chief marketing officer. Some of them actually are pirated away

because they're so good, they go to another company to be the CEO.

But in any case, marketing-- commercial marketing,

which I've been talking about, could've stayed only commercial,

and then I got involved in-- with Professor Sid Levy at Northwestern

We started the idea of broadening marketing,

because the set of tools that we use to address consumers could be used

in other areas. So we have a thing

called place marketing. I will get a call from a city, let's say,

and a city says, "We're not getting enough tourists. We don't have

any attractions for them to come and see. I would like to get a factory

located here. We would like some digital people to move here, who know digital--

We want to start a Silicon Valley." So that's place marketing.

The marketing of a place. How do you dress it up and make it attractive?

Against all of the other competitive places.

The second-- Person marketing.

There's an agency called William Morris, and a young singer might go to

William Morris and say, "look, I want to get ahead. I want to appear

on Jay Leno's show. I want to-- I want to move up to being noticed.

I want high visibility." I wrote a book with the title

"High Visibility." How do you get that visibility.

So, William Morris will look at her and her performance

and maybe say, "You know, in a sense--

Don't be offended, but we can make you into a better product."

That's sort of the language. You know, do your hair differently,

walk a little-- dress differently. Actually, we're going to use you to

reignite the archetype of Joan Baez. You know, Joan Baez, the folk singer.

Well, we need a new Joan Baez. And so, we can recast you

and form you into the kind of person we all miss, and so on.

Now, social marketing is another branch.

Today there are 2,000 social marketers around the world, trying to help people

eat better, exercise more, say no to drugs, stop smoking cigar--

get off of tobacco, say no to a number of things.

Positive behaviors and negative behaviors.

By the way, my memory is that Sweden was one of the first countries

to want to raise a nation of nonsmokers, non-drinkers, all the vices.

And it starts at the primary school level, that you could technically raise people

to avoid those vices, if that was thought to be good public policy.

So that's social marketing. Now, political marketing,

we're saturated with. And I think it's degenerated,

but that's another thing. Fundraising is part of marketing.

I mean, fundraising is an odd form, because you're not exchanging.

Everything else is sort of an exchange of values. Fundraising seems to be

a one-way transfer. Here's some money

for the museum. But any fundraiser knows

there's something that should come back to the person who is the donor

and supporter of a museum, and working that way is important.

So these are offshoots. Now all of us do marketing.

If you read the list, we all do marketing. Did you ever compete for a job when

you knew there were other applicants? Didn't you dress up as well as you could

and even prepare what you're going to say, and so on?

Did you compete for a desirable apartment which was scarce?

Or a member of the opposite sex, if you wanted to court someone.

So, in a sense, we're human animals who know how to make an impression

and market ourselves, to some extent.

What do we dislike about marketing?

Well, there's a long list. It's a rather long list.

Intrusion, interruption, exaggeration, and so on and so forth.

And I really made a list that's a little separate from that.

Here are some of the criticisms. Marketers get consumers to want

and spend more than they can afford.

And we know that from the financial disaster that people were buying homes

with maybe nothing down. Marketers are skilled at

creating grand differentiation where it shouldn't exist.

Like with commodities, you know, a chicken is a chicken, cement is cement.

So they spend a lot of time trying to tell you their cement is really better,

their salt is really better, and so on. Marketers want to produce and sell

more goods without considering the resource and environmental costs

of producing the goods. The planet Earth is affected

by the amount of production and the care with which it's done.

Marketers had not paid sufficient attention to product safety.

We know that because Ralph Nader made his career, basically, car--

the unsafety in cars, and then we got lead poisoning,

we got asbestos problems, and so on.

Here's a serious criticism. Marketers-- and this is not all marketers--

these are some particular companies, and so on.

Marketers favor giving the public what it wants, whether its good or not for them.

Sure, I'll sell you cigarettes. I'll sell you anything that will make money.

Therefore marketing promotes a materialistic mindset,

that-- we get turned on to more of a materialistic world,

a world of ever-changing products and services and keeping up with the Jones

and some of that.

Marketers rarely talk about sane consumption.

Yeah, some beer companies say, "Please enjoy our beer, but don't

drink too much." That's nice that they-- No one listens to that, and you still

have binge-drinking, but they're trying to do what they can

and so on and so forth. Now, let me just say

there's another side. This is important too,

because it's not a simple picture. The other side of it is

Marketing has undoubtedly raised the standard of living

in the United States. People don't naturally

buy new things. In other words, do you know, people used to keep

their refrigerators, which weren't refrigerators at the time,

they were ice boxes and they would keep going out and getting some ice

and putting it in the box, and so on. And even the washing machines

were very slow to take-- In other words, people--

It would be very expensive to buy a new appliance,

but marketers persisted in saying your life will be better with

new appliances, and that's one of its jobs.

I would even go so far as to say that marketing is so connected

to the idea of the middle class. We're talking about preserving

and building the middle class, and the lifestyle that goes with it,

and marketing is an essential definer of what it is to be--and want--

what it is to want, as a member of the middle class.

Marketing in the form of social marketing has helped improve

a lot of things. You know, one of the first causes

that marketing turned to was the environment and waste

and the ill-effects of some products, and so on.

Preserving the environment was one of the first things that

social marketers got into.

Now they're into obesity as a problem, littering as a problem,

and other problems.

Marketing is very important to the cultural world.

Museums, performing arts, and one of the big problems

that cultural institutions are facing, especially in the performing arts,

is the aging of audiences. How do you get people

who are in their forties to go to opera, to go to ballet, and so on.

It's called the graying of the audiences, and maybe that problem has

been with us for a long time, but marketers are at work

doing segmentation, targeting, positioning, in order to

make sure that all seats are filled in the theater, and also the museums

are very busy, as marketing institutions, because they have to get visitors,

they have to get donors, they have to get government grants,

so marketing is almost an intrinsic function today that's going on.

But let me--

This is not time to take a vote. Do you like marketing

or you don't like marketing. But let me show you that

the feeling-- the negative feelings about marketing came up from these people.

The attackers. They attacked marketing. Do you recognize anyone?

You see Ralph Nader? I don't... There he is. Yeah.

Who else?

Well, it is Ralph Nader. "Unsafe at Any Speed."

Rachel Carson, by the way, deserves so much more credit

than we've given to her for her book on the Silent Spring, which was about

the chemical pollution, the pesticides that were getting into our spring water,

and so on. Vance Packard, who popularized the idea

that we are hidden persuaders. That when you go into a movie theater,

you don't know this but an ad is sort of flashing to go and get some popcorn

before you sit down. Subliminal advertising,

which never did happen, but the hidden persuaders.

And then John Kenneth Galbraith, who pointed out that while we spend

so much money in making enough deodorants for any type of interest

you have in deodorants, in the public sector--

In the public sector, you've got streets that are littered,

and there's some garbage, and there's slow traffic, and--

And so we have a good private sector, but we can't enjoy it because

the public sector doesn't have the public good that would facilitate things.

You've got Naomi Klein, who's probably the prototype

person now for attacking branding. Brands, brands, they're awful.

You're paying more than you need to pay.

The book is called "No Logo," logo being another name for brand.

And Michael Sandel is-- has this new book out, which is really interesting

and worth reading. He's the fella who ran a course on justice,

and would ask groups about this size at Harvard, "What is the just thing to do

in each situation?" But his new book is called

"What Money Can't Buy: The Moral Limits of Marketing"

where he points out that if you're in jail in California

and you don't like the cell, you can pay for a better cell.

You know, maybe one with a computer if you want a computer, and so on.

But he's also-- he thinks today our culture divides people

in social classes more clearly. We used to go to ball games;

I would sit next to someone who was rich and someone who was poor.

We'd all stand in the same line for hot dogs.

Today, the guys who are rich are up in the sky box,

and he calls it the sky box-ification of the United States. The sky box-ification.

They're eating filet mignon and we peasants are down there having--

standing in line for our hot dog. So we are not meeting each other

as we used to, in the older days. It's a very interesting treatment.

I like to quote Will Rogers with this remark: "If advertisers spent

the same amount of money that they-- on improving the product

as they do on advertising, they wouldn't have to advertise it. And that's--

By the way, that's a very profound observation, because in the age

of the internet, it's so much easier to talk about a product you like

to others and also about a product you don't like.

And in a sense, if this goes far enough, there will be no bad companies

anymore. It would be not possible for a company to be a bad company,

because the word of mouth will sink it.

So he's sort of touching on that point. Make-- Do a good job, and don't--

and others will advertise the good job you did.

Now, I want to add another group, and this is a group of visionaries,

and I'd like to call them our best marketers.

But they're not necessarily the chief marketing officer,

they're CEOs. But what-- Their contribution has been

the kind you want from your chief marketing officers.

So who do you see here? Do you know any of those people?

[audience murmuring]

Yeah. You've got to know some of them. But you probably don't know

the first one. Ingvar Kamprad. It's very even hard to remember

his name, but he's that Swedish person who invented IKEA,

who said, "I must bring down the cost of furniture, and I can do that by

taking the air out of it and just selling knocked down furniture,

and now people can afford to have some nice things in their home.

Richard Branson is phenomenal. He's a-- not only in self-promotion.

He's one of the best self-promoters possible. I don't know if you know

that he was in Times Square some years ago

to introduce his new cell phone, the Virgin cell phone,

and he said he was going to drop off of a building, a 30-story building,

and-- not wearing any clothes or something, so everyone showed up.

I don't know why they would want to show up, but they showed up

in Times Square, and sure, he did jump down, but it was on a rope

and he's carrying a huge version of his new cell phone.

And so everyone--not just in Times Square--the reporters

were covering it. All of New York knew about the new-- there was

a new Virgin cell phone. So he's very good at that.

But right now, he told me something I couldn't believe. I was in Dubai,

and he gave a speech, and we were just chatting, and he said,

"Where are you from?" I said Chicago, and he says, "You know, there will be

a time when you can go from Dubai to Chicago in half an hour."

What is it-- Is this a time machine you're inventing?

He says, "No, it's just a rocket ship." So the rocket ship takes off from

Dubai, it just goes right up in the air and lands in Chicago.

So he's working with some people on the new spaceships, basically.

And you want to watch him. Of course, Walt Disney.

Great, great visionary.

Herb Kelleher. Thanks to him, we have Southwest Airlines,

which started a whole class of low-cost airlines.

And then we've got Anita Roddick, who ran The Body Shop, where she said

"I'm not selling hope, I'm selling good skin lotion. All the others sell hope."

That was a famous remark by Revlon, "In the factory we make lipstick,

in the store we sell hope." But she wrestled with that one.

Then you've got Bill Gates, Steve Jobs, and Jeff Bezos.

And Jeff-- Let's see, we've gotta make sure he gets in there.

[laughter] Jeff is extraordinary.

If there's anyone who has consumer thinking in his mind,

wanting to facilitate the consumer to really order or re-order or return

or anything like that. And then to buy more than books, to buy electronics,

to buy clothes. He's done a marvelous job. He's very exemplary in that sense.

We're running out of time and I'm going to want some questions from you,

but let me just refer to a few more things.

This is a chart I use in the book, "Marketing 3.0,"

basically to say that every company should define its mission, it's vision

for the future, and its values-- what it really cares about,

and if you're a 1.0 marketer, it's a good job you're doing.

I mean, of course you're trying to deliver satisfaction, make a profit,

and make a good product. Be better. If you're a 2.0 marketer, you want to

help people realize their aspirations. You want to deliver things that

they might aspire to have. They will return frequently to buy more,

and your product is different than the others. Not only better, but different.

And suddenly, you move from mind to heart to spirit.

What's spirit? It's that small set of companies that say

"We're compassionate. We have compassion for the state of the world.

We want to get involved. We want the companies to be a machine

for improving the lives of people." You could say-- you could reduce that

to just some charity work they're doing. Or it could be a real, fundamental

strain in the way they do their business. We can name some companies that

really have felt that they want to help reshape the world

into being a better world. So that is--

Here's one of my favorite companies that illustrate the cells in that picture.

The SC Johnson company in Racine, Wisconsin

whose products are shown over here. You probably have purchased some

of their waxes or some of their insect repellent or other things,

but they're just winning awards for being a very caring company.

Incidentally, a book that you might want to read is called

"Firms of Endearment," which is a fancy way to say

companies we love. Firms of Endearment.

And I love the subtitle, "How World-Class Companies

Profit from Passion and Purpose." And it's based on asking audiences--

random meeting of people--is there any company that you like?

That you like a lot? Now, let me ask that question.

Name a company that you would dearly miss if it disappeared, vanished.

[audience murmurs] Apple! See, always Apple.

I thought you were going to say Harley Davidson, but that's

another one. Amazon. I would miss Amazon.

I really would. I would even subsidize it to continue.

[laughter] Which one?

Costco. Of course. I'm with you on Costco.

Nike. Okay, well you see what happens is,

these are the names of the companies that came up again and again.

I don't think there's any surprises there. I've asked other countries to do this too.

Because it would be a different mix of companies that would come up.

But the main thing is, these firms of endearment are so much

more profitable than the ones that have not been dear to us.

One of the things is that they-- They're either 9 or 10 times

as profitable, but let's see why, and without going through

everything here, look at the last one. These are the attributes

of that set of companies. And the last attribute is that

they spend less on marketing than rather more.

I bet you thought that the companies that were going to be dear to us

are the ones who are just advertising all the time.

They're so familiar. We see Coca-Cola

all the time. All the time. No! They spend less on advertising,

so who's doing the advertising? The customer. You guys are.

So that's where you should put your money.

Create a love affair. Create fans with others.

Now I'm going to end with two slides. This is on a downer, a little bit.

"The End of Work" This is Jeremy Rifkin's book.

It's now about 9 or 10 years old. And he says because of the slow down

in population growth, automation of factories and computers, robotics,

3D printing, can the nation create enough jobs? Can the world create

enough jobs for the population, and so on.

And it raises a question about marketing's role.

Marketing's role normally is seen as to sell you some things.

The basic role of marketing is to create jobs.

It is the job creator. Namely, it gets you to want something

that someone has to produce. So there's a basic question:

Does marketing really create new jobs or does it only

create shifts in the shares? Like if I switch from brand X

to brand Y, that's not creating-- Brand X loses a job and brand Y

gets a job. So, but it is true that if we're talking a new product,

marketing will help accelerate it's recognition, the awareness of it,

and intensify the drive to purchase it. In other words, we buy our iPads

and other things that come along partly because they're wanted,

they are desired objects, and marketing accelerates

the rate at which growth takes place with those new products.

The other book, and I'll end with this, is another downer.

"The Death of Demand"

And what is the relationship between marketing and demand?

And is-- he uses a term saturated-- finding growth in a saturated

global economy.

I've been wrestling with that problem, and growth is the issue today.

Growth is the issue. Growth means jobs, and so on.

And the fact is, there are 8 ways to grow a business.

So the title of the book is "Market Your Way to Grow:

8 Ways to Win." And you know all of them.

You know that we can go to places where there is growth.

We can sell in China, even if it's a low growth here.

Or Brazil. We know we can grow by acquiring other firms.

We know we can grow by innovating. Inventing something new.

We know we can grow by taking business away from someone else,

and so on and so forth. So one of the things

we're wrestling with is how do you, as a firm, grow?

And by coincidence, another colleague of mine at

the Kelogg School of Management, Tim-- He just wrote a book called

"Defending Your Business," and it's so nice that his book came out

with mine, because the first job is always defend what you've got.

Hold on to the customers you have, then you start worrying about

some more growth. So we both, as members

of the department, are wrestling with how to ignore these books

and say they're wrong, and that there is a bright future ahead.

[laughter] So let me stop here

and take any questions you might have.

[applause]

Thank you.

[Moderator]: Okay, we have time for a few questions for Professor Kotler.

Is there anyone on this side of the auditorium that would like

to ask a question?

[Kotler]: Yes. I see-- I see you over there.

Now a microphone will magically come down here.

[Moderator]: Susan will bring you a microphone.

[Kotler]: And if there's any other people-- and there's a person over there

Would you introduce yourself, please?

[Audience member]: My name is Iris Witkowski and I've been

coming to the Humanities Festival as long as it exists, and I very much

appreciate your talk today. [Kotler]: Thank you.

[Audience member]: My-- I'm making a statement.

What really drives me nuts, as far as saturation is concerned,

is the placement of products on television programs.

It used to be that in a movie you'd say "Oh, I saw that brand."

It seemed to be accidental. Now it's all over.

Even the anchormen have L.L. Bean jackets on.

[Kotler]: You know, that's the field called product placement,

and we first got conscious of it with the James Bond films,

where each time there was a different car, he drove an Audi or he drove

something else, because it was a matter of what car company would pay

the most for the next film to feature that car, and now,

does the person speaking pick up a Coke bottle or a Pepsi bottle?

And things like that. Most of us don't notice it. It's not yet that intrusive,

but it has been discovered as a way to get some visibility for certain products.

Product placement.

[Audience member]: I'm Cody Hagle. I'm a Charter Humanist.

Again, thank you. On the evening national news, 75 to 80 percent

of the ads are for pharmaceuticals. [Kotler]: And they say awful things

about each one! [laughter]

[Audience member]: And I believe there was a change in legal

requirements some years ago. What are your thoughts about that,

because clearly that advertising is driving demand, which is driving

costs, etcetera, etcetera. [Koterl]: Yeah.

It's called over-the-counter advertising, too.

But maybe it's also prescription. But basically, you can make a case

for it by saying consumers should know what they might think would be

the right thing for them, otherwise the only one who could tell them

what's right is the doctor. And the doctors don't like it, of course.

The doctors in some cases are offended by--

by the patient saying what he wants as a prescription.

But, you know, this has happened with lawyers who are advertising now.

Doctors are advertising themselves, even if they don't like that.

The expert is Prabha Sinha, who runs a firm called ZS

and he's always working with the doctors and pharmaceutical people,

and could help answer that.

Any other things that bother you about advertising?

[Audience member]: Hi, my name is Bob Michaelson.

Thank you, Professor Kotler. It is a pleasure to hear you in person.

You've been a big influence to so many people, myself in particular,

for so many years. My question-- [Kotler]: One second.

How many of you have read any of my books? Any hands?

Thank you-- I owe thanks to you!

[laughter] Please proceed.

[Audience member]: My question is in regards to social media,

and you started off your presentation talking about so much of marketing

was defined at the beginning of the 20th century. We're 100 years into it.

As you look at social media, do you see across a continuum of marketing

this thing a short-term phenomena or radical change in as we do marketing

for the next century. That's part 1. And part 2: Do you see the ability

to apply an ROI to social media?

[Kotler]: Yeah. Those are excellent questions.

I-- This is not a fad. We are in the digital age. We've passed analog,

and there's no turning back. That means that--

I see the following happening. Every company I talk to says

"We're gonna go digital too, but slowly. We're gonna rely

on our tradition," which is newspapers-- which are disappearing, by the way--

radio, TV, billboards, and magazines.

So, at best, they will say this, "Let's turn 10% of our next budget

over to digital," which means Facebook, Twitter, and YouTube

and so on. And let's see what happens. Let's hire a 12-year-old

[laughter] --give them a budget,

and hope they come back saying, "Look what I did with Facebook!

Look at how many mentions!" And so on.

Now, that goes to your second question. How do we measure the impact

of using Facebook or something like that?

Progress is being made. But remember, we never

measured advertising right either! I mean, traditional advertising was a--

was-- first of all, the basic notion of traditional advertising is

you know that half the people will never see the-- what did Wanamaker say?

I know that half of the money I spent on advertising is wasted,

it's just that I don't know which half! [laughter]

Basically, we judge things by how many people were, in principle,

exposed--cost per thousand people exposed--

when we make an advertising budget, and frankly many of them were

in the bathroom or the kitchen when the ad appeared.

So... and increasingly, people are more on their TVs--

on their computer screens than they are necessarily watching ads.

And I think the advertising industry is making the mistake of sa--

putting too many ads now. I mean, there's little content left

on some programs, with the number of ads that flash by.

They're all 30-second things.

So, now about measuring. If you read Advertising Age,

you'll see a lot of statements and claims that there is

measurement going on. One thing I would say is this:

Don't take your ad budget and take 50% and switch it to digital,

which one firm did, and it was a terrible result.

Because until you know what each social medium does,

what you want is 10% of your budget going that way, and then when there's

some proof, you put in another 5 or 10 percent

into that particular use of the social media.

[Moderator]: Okay, we've got time for just one more question.

I know a lot of our attendees are going to other events,

so we have one right here [Kotler]: Oh, okay.

[Audience member]: Mark Ruen is my name. I've been in

direct marketing my entire career, and so it's interesting that I should

follow up a question about measurement in advertising

because I've lived by my metrics. Now, my question is this:

I've always guided my marketing decisions according to the so-called

4 Ps or 5 Ps, depending on where you're coming from,

and in terms of the P of the placement, I mean, the internet

certainly flattened the world, and our distribution channels

have changed. But how do you see the other Ps in this digital age?

[Kotler]: Okay. First of all, let me say, I'm so glad you're in direct marketing.

Direct marketing people are much more accountable for the results.

They could actually experiment with trying to release different

direct messages and seeing-- and testing, and then going with the one

and knowing what it costs to do the campaign, what the sales were,

and it's just a pure P and L kind of exercise,

which we couldn't do with just the normal commercials on TV.

Now, are you asking where the other three Ps are going, in a sense?

Like, what's happening to product thinking and pricing and place?

See, there will be new distribution channels all the time.

I've been asked this question when I wrote the book "Marketing 3.0,"

which is really the case that some companies should be

socially responsible as well. Someone would ask me,

"When are you gonna come up with 4.0?"

And I don't really have an answer, because when

you go from the mind to the heart to the spirit,

I don't know how much farther you could go,

but I am thinking that 4.0's gonna describe companies

in the future that are building ecosystems and platforms

where we get involved with them in such a way that

everything is being supplied that we want, as an individual.

Think of iTunes, think of the iPhone, iTunes, the whole setup

of cre-- think of Harley Davidson. If I buy a Harley Davidson,

I'm a member of-- they call them the Harley... the hogs! I'm a hog.

Harley owner... owner groupie. [laughter]

and not only that. I can take my motorcycle

and just go and meet people I don't know. Some have beards.

Others have beads, but they're fake.

[laughter]

They're wearing leather jackets. These are business people.

They may be chief financial officers, but they want to be macho,

so they supply a whole system to fit into that more and more companies might

sort of begin to think about that. Now, let's take-- what's the one

who's making shoes now? Is it Tom's shoes or the other one?

Zappos? They're creating a system that's going to go

beyond the shoes that you buy. It's going to go into clothing.

So some companies, as one evolution for certain companies--

by the way, it's not different in business to business,

where a company that supplies-- Boeing supplies 747s and other planes.

They have to create a whole system so you can't even leave it.

You know, once you get involved-- Once you get with IBM,

you're not gonna leave for Honeywell or something like that.

So this is maybe what 4.0 thinking will do.

In other words, it won't be product-centered, it will be

system-centered. A whole system. I think we're out of time.

Thank you very much. [applause]

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Philip Kotler: Marketing