The age of turbulence

First published over 40 years ago, Marketing Management, now in its 13th edition, is the most widely studied marketing tome in universities and business schools throughout the world. Its author, Philip Kotler, is generally considered to be the father of modern marketing. When I sit down to talk to him in December in London, I’m keen to discern what he makes of the fast-changing world of marketing today, and of course to get his advice on how businesses can deal with the current chaos.

“Turbulence is becoming a routine today,” he begins. “Turbulence itself is a condition where change is accelerating and surprises are increasing – both unpleasant and pleasant ones – and you’ve got to move as a company with these changes.”

The theme of turbulence as “the new normality” is one that is explored in a forthcoming book Kotler has penned with John A Casilone. Chaotics: The Business of Managing and Marketing in the Age of Turbulence is due out in May. It postulates that turbulence, risk and uncertainty are the more normal conditions of industries, markets and companies, and that turbulence has two major effects – vulnerability, against which companies need defensive armour, and opportunity, which they must exploit.

“And, if I’m right that turbulence will be normality, then companies have to set up damage control systems and early warning systems so there are not as many nasty surprises. A smart executive is going to be less surprised than a dumb executive because of having thought through the sorts of things that might happen.”

“One step you can take is to better read what’s actually happening to your customers, your suppliers and your employees, and that itself is the idea of what I call early warning systems – something to catch the flavour of the change that is going on very rapidly now.”

He has some well-thought-out theories of how this might be done, although he is quick to concede that no one has a crystal ball.

“There are some things you’ll never catch. You could imagine them, but they’re not happening yet, such as a Mumbai situation, or a competitor who goes crazy and cuts their prices in half,” he continues.

This is where scenario planning comes in, according to Kotler. “Scenarios can help here. Namely, you can imagine some crazy events and figure out what you would do if they were to happen. That’s sometimes called contingency planning. But contingency planning in the old sense was thinking of just one contingency and what you would do. A scenario is a kind of a complicated picture of an evolving situation with many variables, and then you might ask what you would do about that situation if that takes place. There’s a small difference.”

The problem, he says, is that many companies are not even doing contingency planning, never mind scenario planning. “They’re just sort of exhausted after they do the main plan, and the boss doesn’t even ask for the contingency plan.

“The contingency plan is a step in the right direction, but scenario planning is even more stimulating, where you get your people to have a mindset not only into the present, but into what might happen and what you might do about it.

“Companies will have to have almost routines for damage control. They will have to be building scenarios, and the scenarios will have to address the possible worlds in which they will have to operate.”

Kotler has strong views as to how companies should be dealing with the current recession. The answer, he insists, is not just slashing budgets.

“In a downturn, it can be common for a CEO to put the stoppers on marketing projects that are costing the company, as they want to save money. Along with R&D, marketing is often one of the first things to suffer. This is not the answer. It is better to keep investing, or work smarter.

“You’ve got to work smarter, but that doesn’t mean cutting your budgets by 20pc – that’s the exact opposite of working smarter. Working smarter means that you peel the onion and find all the micromarkets where you’re working – and by micromarkets I mean different geographies, different segments of the market and so on. Then you start re-allocating your money away from weakening situations – not only those that are weakening now but where it’s clear there’s not much future anyway. Drop products, drop segments, even drop certain customers.

“You shift the money to the more promising long-run areas and that’s what I mean by working smarter. Am I saying companies should just increase their marketing budget and sales budget during hard times? Possibly. It depends on the quality of the ideas that come from the marketing group, particularly the VP of marketing or the chief marketing officer.

“The first thing I would do if I was a CEO would be to say to the head of marketing, ‘What should we do? I want your people to get together and talk about which things we could shave money off of, because in the future they’re not so promising. And what opportunities have been generated by the new situation? I want you to even prioritise the opportunities, because I can’t do that homework. You’re too close to the situation. Then I’ll decide what I do with your budget.’

“That’s not like saying, ‘I’m cutting your budget’. I’m saying, ‘You figure it out. I’d like a plan.’ Remember the General Motors people. It was embarrassing. They came to Washington asking for a bailout and it emerged they had no plan! So I want a plan for marketing, and how the marketing team is going to use the money in a very useful way.”

So what advice has Kotler for companies trying to bolster their brand’s value proposition in tougher economic conditions?

“The purpose of communications has in the past generally been to inform, and then to persuade, and remind. Basically, ‘Inform, persuade and remind’ has been the formula. In other words, some of my advertising is to inform of new features, some is to build some preference for what I’m offering and some is to remind people to drink, say, Coca-Cola, because we know what Coca-Cola is, we just need to be reminded.

“That’s a little limp nowadays. It’s more important now to involve, develop and engage in dialogue with customers – to get more of a relationship that goes both ways. The old marketing was a monologue. That doesn’t work today.

“It’s a whole different attitude now, so I think companies have to drop the mindset that we’re going to spend all our money telling you about our products, rather than spending our money on learning about our customers.

“On your website, do you ask your customers to go to your website to ask for more information about your products, for more suggestions about them? Have you asked, ‘How would you challenge our company to make products that you want?’”

Kotler says companies need to wake up and listen to their lead users. “There are customers we call lead users of our products, especially in B2B [business-to-business], who not only buy your products, but they change them altogether. A lead user is one who says, ‘You still have the best products, but they could do better for us’. It’s like a surgeon who says he’s in danger of dropping the scalpel because it’s all metal, and asks can’t we put a rubber around it so he doesn’t keep dropping it to the floor. You need to listen to that.

“In fact, there are some guys who tinker with the MRI scanners that are made by General Electric or Siemens, so they do a better job of looking into the body. These lead users really lead us to the next iteration of our products or services, and show us things we weren’t capable of seeing ourselves. This kind of customer engagement is vital.”

It all goes towards the concept of brand communities, says Kotler. “It’s one thing to have a well-known brand. That does not mean you have a brand community. Let me distinguish. I would say that Apple has a brand community – people who, if I tell you I have an Apple and you tell me you have one too, we’ve got a lot to talk about. If you say you use Crest toothpaste, and I say I do, there is nothing to talk about.

“The companies who have brand communities are Apple, Nike, Lego, Harley Davidson, South West Airlines – companies that I say are dear to us. When we meet someone else who is also a customer of that company there’s a lot to talk about and exchange. That’s when you’ve really arrived, and people want news about you. They even tick that box that says, ‘Would you like to get some announcements that we make?’.”

It all fits in with the concept of co-creation that is going on in truly innovative companies, says Kotler. “It’s like when you say we have a consumer panel and we’re using them in a focus-group way. We tell them, ‘Please get on your computer at 2.30 because we’ve a new product and we’d like to get your opinion’.” It's all about getting focus groups and panels together who 'love' you and want to offer their opinion, says Kotler, from feedback on products to feedback on advertising campaigns. "The companies that are doing that, I'd buy stock in those companies!," he says.

Now in his seventies, and with every accolade he could possibly wish for, one wonders what still drives Kotler. When we meet, he has just given an hour-long presentation at the Leaders in London event, and fielded questions from a packed Westminster Hall. He looks like he could do it all over again.

“I’m in a field that keeps changing. If it were like geometry, I would have quit long ago – that hasn’t changed much in 2,000 years,” he laughs. “I think we haven’t yet become scientific enough, and I’m hoping for further breakthroughs. And just the discipline of every three years wanting to write a new edition, finding so much material, new cases like a Starbucks or an iPhone, keeps me in a learning mode.

“Someone will eventually come along and do some really new things in marketing, and maybe prove that I was all wrong all this time, and I would accept it. I’m still waiting for something better. If I don’t get there myself, I’ll be the first to renounce everything I said – if I find someone with something better.” The race is on.

This article first appeared in Marketing Age magazine.

Photo credit: Felipe Trueba Garcia © UPPA/Photoshot