The Philip Kotler interview

Few people have dominated a single business discipline as surely as Philip Kotler has dominated marketing. His book, Marketing Management, is the definitive marketing textbook and has been read by students for the last 40 years.

His most recent book is Chaotics (with John Caslione) which provides a new take on the economic downturn. Philip Kotler talked with Stuart Crainer in London.

I've been gratified that it's adopted in all countries by graduate schools of management. The concern is that if my formulation of the discipline of marketing is wrong, I've set back the world.

So far, many attempts have been made to build another version of marketing and they all have failed. Apparently, I am able to sense the next set of ideas and I put them in just before someone else hits those ideas.

I am trained as an economist and it was what was missing from economics that led me into marketing. I studied under Milton Friedman and became a monetarist and a free market thinker at the University of Chicago and then I went to MIT and I studied under two Keynesians who won Nobel prizes -- Bob Samuelson and Robert Solow.

But I began asking whether economists are in touch with the marketplace? Are they of any help in decisions like, how many salesmen should I have? What should I spend on advertising and what about media mixes and so on? These subjects are not part of the economist's mindset.

I got into thinking that maybe I should look at the books written on marketing. At that time they were very good and all ran to 800 pages but they were primarily descriptive – what is a salesman and what is a wholesaler?

I decided to recast marketing on the basis of what we know about economic theory, organisational theory, consumer psychology and mathematics and those basic disciplines supported a whole new look at the field of marketing.

It really started in the 1910s, the word marketing, because we always had the word market. It went through some interesting stages, in fact, we could read some of the old marketing books and remember things we've forgotten.

For example, there is a very good book by Beckwith back in the forties about credit and how credit should be disciplined because if you are too generous in lending money to people who won't pay it back, you could have a bust. One would find some treasures in some of the old books where they spotted things that we've forgotten about.

I read outside of marketing because some of the best ideas are in quantum physics and look at what we are doing with nano-technology and so on.

One of the things that I am proud of is broadening the concept of marketing. Previously it was only about selling goods or services and I said, my God, we have the tools to sell causes, like say no to drugs and don't smoke, and then we got into marketing personalities, bands, singers who wanted to get high visibility and we could market places that want more tourists, want more industry or factories. Broadening the concept of marketing was one of my pleasures.

Yes. I have a book on museum marketing and strategy, I have a book on educational marketing and a book on performing arts marketing.

I still have to put Peter Drucker at the head because although we think of him as the father of management, I think of him as the grandfather of marketing.

He said that the purpose of a company is to create customers and then he went on to say that the two most important functions of a business are innovation and marketing, all the rest are costs. That influenced a lot of my thinking.

Then within marketing there has been Ted Levitt at Harvard with his marketing myopia, his globalisation article and a number of other things. There have been some very good original thinkers both outside of the field of marketing who gave us some sense of things, like Marshall McLuhan about media, but inside the field there are a lot of great people.

Yes and we have talked about what marketers and businesses should do during hard times when the cycle is in the down phase and usually it's spelled out, cut your budgets and cut everything by 20 per cent.

This, to me, is the biggest mistake because every company is winning through some virtue that it has. One company may be best at service; if you cut 20 per cent of everything in a service-minded company that means we get less service from them, and have less of a reason to prefer them.

We need very selective cunning but the truth is there are some companies that ought to welcome the recession as a time when there is enough dis-equilibrium to make new opportunities.

I love companies that see the opportunity side rather than the danger side of a recession. I think it was Ryanair where they said, finally, a recession, now we can really go after the big guys.

Yes and we distinguish, by the way, between the business cycle phase and turbulence. Turbulence will exist even after the business cycle is over and we want to see turbulence as a set of spikes of varying sizes that are disturbances to a business.

We believe that we are headed for heightened turbulence. With globalisation and digitalisation, businesses will be hit faster by more disruptions and interruptions and so on than ever before. I keep telling CEOs, be reachable wherever you are.

Companies have to know when their strategy has decayed and is not working. There is a concept we have called Strategic Inflection Points. General Motors had one about 15 to 20 years ago. That is to say their strategy was dying and they kept to it and now we know that they failed completely.

That is a major factor in the turbulence we are seeing and experiencing. There are three things, actually. There are business cycles which we can predict. There is secular change where an industry is absolutely changing the rules -- like the way online is taking over our newspapers and other traditional media.

Airlines went through that secular change when we began to get discount airlines. Then there is this third thing: there are more spikes and the question is how companies should prepare for this.

We believe that they need things such as an early warning system, scenario planning and flexible budgeting. Until those processes and systems are put in place their ability to cope with changes, sudden and otherwise, will hurt them.

It actually started with the military because they have to imagine scenarios, but we are at a stage now where the uncertainty level is so great that we also have to imagine some of the things that could happen. We distinguish between undetectable turbulence and detectable turbulence.

The early warning system takes care of things we should have noticed anyway but we have to imagine what is the worst that could happen? What would make us a house of cards so we would just fall apart? We don't know the probabilities, but let's at least loosen our minds and think out of the box, what might hurt us?

We can do the same with opportunities. What is the best that we could imagine? How would we take advantage of it if it happens? I am talking about thought exercises, I am not talking about you choose one scenario and say that is the one we are going to have and we are going to use the response to that scenario.

We don't know which one of them will work but what we learn in the process of trying to build scenarios has been invaluable.

Yes. I think we have bottomed out in some places, in many places, actually. They talk about green sprouts being noticed. I think if I were in Asia I would be more optimistic because what I saw on this last trip was very great resilience in places like Indonesia and China. They are complaining in China that they were expecting a 10 per cent growth rate in GDP and it is 8 per cent. We would love to hit 4 per cent or even 2 per cent.

I think Britain and the US have people with unbelievable creativity and skills so I think we will see an up trend. I think it is going to be slow – I am waiting for 2010 to see if there is a real pick up.

It is a good question because marketing to so many people means advertising or it means hard selling. The imagery is very bad. But when it is practised beautifully…

You have an example of it in Tesco and the way with its club cards it can learn so much more about what different groups of people in its community want and how Tesco could address those different groups. Marks & Spencer picked itself up from a bad situation through good marketing thinking and Richard Branson is always full of new ideas -- the talent pool is incredible.

I have to rewrite my marketing management book every three years because so much new has happened. I told a CEO who wanted me to sign his book that I couldn't do it because he is still working on the first edition of "Marketing Management" and it's well thumbed.

I said, do you like the chapter on the Internet? He says, you're joking. I said, did you use the concepts of brand equity, customer equity and customer lifetimes? He said, that's not in the book, are you trying to sell me a new book? I said, yes, for your sake.

Marketing changes, it's not geometry; geometry hasn't changed for 2,000 years. That's why I keep getting this excited and why I enjoy it.

Share this: 

SOMETHING TO SAY ABOUT THIS? TELL US HERE

• Peter Drucker is certainly head and shoulders above anyone else you'd care to mention. I was fortunate enough to hear him talk about his philosophy of business and management when he was 90.

  He sat in an armchair on a stage in front of about 500 people and held them spellbound for almost an hour. It was unforgettable and nothing i've experienced before or since has ever come close to it.

  Charles Helliwell, London, UK

• Sorry, but anyone who holds up Ryanair as an example of excellence in anything other than demonstrating complete contempt for their customers cannot be taken seriously.

  Ellen