ESTRATEGIAS Philip Kotler

A Strategy Document
on
The New Marketing Paradigm
Holistic Marketing ● Lateral Marketing ● High-tech Marketing
by
PHILIP KOTLER
Kotler On Marketing
How To Create, Win, and Dominate Markets
 Philip Kotler, Ph.D

 Kellogg School of
Management
 Northwestern
University
 2006
Seminario Mercadotecnia
2007
Two Challenges Facing
Mexican Companies
1. Will Mexican companies be able to defend their
market against the growing invasion of foreign
global brands?
2. Can Mexican companies develop strong global

brands?
2007
Can Mexican Companies
Defend the Domestic Market?
 Foreign competitors will not only go after the

high end market in Mexico. They will target
the middle and eventually the low end.
 The main defense for Mexico will be

developing stronger skills in innovation,
differentiation, branding, and service. In a
word, MARKETING!
2007
But Mexico Needs
Stronger Marketing
 Confusing marketing with advertising.
 Advertising is hard sell.
 Sometimes ads appear before the product is in distribution.
 Some companies over-spend on advertising and go broke.
 Little use of marketing research; can’t trust.
 Therefore little segmentation of market and poor targeting.
 Over focus on winning through low price; neglecting
differentiation.
 Retailers carry the same goods and their service is poor.
2007
Marketing is More Important
than Production!
 The Mexican manufacturer of a Hugo Boss shirt gets only $12,
or 10% of the final price of $120 that is paid by a customer of
Saks Fifth Avenue.
 The retailer gets 60% ($72) and the Brand company gets
30%, or $36.
 Would you rather be the manufacturer, Brand owner, or
retailer?
 The Mexican manufacturer has no defense if the Brand Owner

wants to switch to another manufacturer to whom he will pay
$8 and keep $2 or pass it to the retailer to get more retail
support.
 Yet Mexico pays more attention to the product engineer than

the marketing “engineer.” But India’s future success will
require investing in marketing and branding.
2007
The Strategic Trajectory
for Mexico
 Low cost, average quality domestic products.
 Low cost, good quality domestic products.
 Mexican high-end products made for other
companies.
 Mexican branded products (regional).
 Mexican branded products (global).
 Mexican dominant brands (global).
2007
CEMEX,BIMBO, CORONA, SAUZA
(Mexico)
 Originally sold bulk substances to unsophisticated
markets but gross margins were too low to cover
export costs.
 Those corporations become a truly global
companies. “Bimbo cannot change Mexico. What it
can do is to create a pocket of excellence. Bimbo
must be an island within Mexico.”
 The company moved into higher-margin businesses
like selling branded generics in large volume
markets like USA and Western Europe.
 Bimbo then entered the U.S. and Western Europe.
In just five years, more than half of its revenues now
come from outside of Mexico.
2007
The Case of Haier (China)
Haier developed through three stages.
1. Fix quality
(Zhang Ruimin smashed 76 refrigerators).
2. Diversify
(Microwaves, toasters, air conditioners,
dishwasher, vacuum cleaners, etc.)
3. Globalize
(Asia Region, U.S., Europe)
 Haier entered with a U.S. partner and is

challenging Whirlpool and GE.
 Haier’s brand name products are sold in Wal-Mart,
Best Buy, Sears, Lowe’s, Home Depot and Target.
 Haier is promoted as a global brand, not a Chinese
one. (Many people think it is German).
 Puts lower price Seminario
models in price-only stores and
Mercadotecnia
higher price models in 2007top stores.
Five C’s Favoring Mexico
 Capital: Mexico has and can attract capital.
 Cost: Another 50 years of low cost production
 Capability: Large number of trained workers,

engineers, scientists, and business people
 Consumers: Immense domestic market
 Calm and stability: in a world of turmoil and

uncertainty
2007
A Quiz: Who Said This?
 “The purpose of a company is ‘to create a customer…The only

profit center is the customer.’”
 “A business has two—and only two—basic functions:

marketing and innovation. Marketing and innovation produce
results: all the rest are costs.”
 “The aim of marketing is to make selling unnecessary.”
 “While great devices are invented in the Laboratory, great

products are invented in the Marketing department.”
 “Marketing is too important to be left to the marketing

department.”
2007
My Message
 Marketing’s performance has been
disappointing.
 You must replace your Old Marketing with

New Marketing that is:
 holistic,
 technology-enabled,
 and strategic.
2007
Facing the Increasing Pressure for
Marketing Accountability
 Marketing has become a one P discipline = selling.
 Marketing involves a great deal of waste.
 $2 million for 30 seconds on the Superbowl.
 Direct mail campaigns with a 1% response rate.
 Cold sales calls which play the numbers.
 High rate of new product failure.
 Marketing costs are high and rising.

 Marketing lacks accountability.
 Marketing does not create major new ideas.
 Marketing is too involved in short-term thinking.
 Marketing doesn’t focus on its real assets.
 Brands, customers, service quality, stakeholder relationships,
intellectual capital, corporate reputation
2007
Needed:
Holistic Marketing
 Marketing must become strategic and drive business strategy.
 A company needs to take a more holistic view of:

 the target customers’ activities, lifestyle, and social space.
 the company’s channels and supply chain.
 the company’s communications.
 the company’s stakeholders’ interests.
 Holistic marketing will require strong software support.
2007
HOLISTIC RELATIONSHIP MARKETING FRAMEWORK
1) Who is involved?
CUSTOMERS CORPORATION COLLABORATORS
MARKET
SPACE 2) How can we define relevant market space?
3) What are the potential opportunities emerging

POTENTIAL from the market space?
OPPORTUNITIES
4) What business capabilities and infrastructure

BUSINESS
INVESTMENT required?
CUSTOMER CORE COLLABORATIVE

FOCUS COMPETENCIES
Seminario Mercadotecnia NETWORK
2007
4 COMPETITIVE PLATFORMS
Customer Core Collaborative
Focus Competencies Network
COGNITIVE COMPETENCY RESOURCE

Exploring SPACE SPACE SPACE
Value
Market Business
Offerings Architecture
Creating
CUSTOMER BUSINESS BUSINESS
Value VALUE DOMAIN PARTNERS
Marketing Operational
Activities
System
Delivering
Value
CRM ERP SCM
2007
Responding to Low Margins and the
Economic Slowdown
 Commoditization and rapid imitation leading to shorter product
life cycles.
 Competition of cheaper brands from China and elsewhere.
 Rising selling and promotion costs and decreasing sales
effectiveness.
 Shrinking margins.
 Proliferation of sales and media channels.
 Power shifting to giant retailers who are demanding lower
prices.
 Recession: lower incomes and purchasing power.
 Mergers, large company bankruptcies.
2007
Improving Marketing
Efficiency and Effectiveness
 Improving marketing efficiency
 buying inputs more efficiently
 hunting down excessive communication and sales travel
expenses
 closing unproductive sales offices
 cutting back on unproven promotion programs and tactics
 putting advertising agencies on a pay-for-performance basis
 Improving marketing effectiveness
 replacing higher cost channels with lower cost channels
 shifting advertising money into better uses
 reducing the number of brands or sku’s
 Improving supply chain responsiveness
2007
Responding to the
Economic Slowdown
 Reevaluate your current resource allocations.
 Geographical mix
 Market segment mix
 Customer mix
 Product mix
 Channel mix
 Promotion mix
 Decide whether to attack to gain market share rather than

retrench.
 Be sure to maintain the value proposition promised by your

brand.
 Try to add value instead of cutting the price.
2007
Marketing Strategies Are Showing
Diminishing Returns
 Product differentiation is harder to

achieve.
 Acquisitions and mergers have as
many failures as successes.
 Internationalization is offering less
opportunities because either the good
markets are overcrowded or the poor
markets have no money.
 New products unfortunately fail more
times than they succeed.
 Price cutting doesn’t work because
competitors will match.
 Pricing raising doesn’t work since
there isn’t enough differentiation to
support it.
 Cost cutting has eliminated much of
the fat but is now risking cutting the
muscles.
2007
Strategies for Firms in Different Market Positions
Jagdish Sheth, Singapore Marketer, 2002 2007
Five Winning Strategies
 Cost reduction: (IKEA, Southwest Airlines,
Wal-Mart, Enterprise Rent-a-Car).
 Improved customer experience (Starbucks,
Harley Davidson)
 Innovative business model (Barnes & Noble,
Charles Schwab, FedEx, Sony).
 Improved product quality (P&G, Toyota).
 Niching: (Progressive Insurance, Tetra)
2007
Dual Strategies
 Planning for today  Planning for tomorrow
 Defining the business.  Redefining the business
 Shaping the business to  Reshaping the business
meet needs of today’s to compete for future
customers customers and markets
 Improving alignment  Making bold moves away
between functional from the existing ways of
activities and business doing business
definition
 Organization mirrors  Reorganizing for future
current business
business challenges
activities
 Managing change to
 Optimizing current
create future operations
operations to achieve
and processes
excellence.
2007
In many markets, the growing number of
competitors in mature markets leads companies
to target niches of low profitability.
YOGURTS MARKET Number of

competitors
Market
Size
Time
Average
profitability
of all
competitors
2007 or players
Some Vertical Marketing Methods
 Modulation
 The juice manufacturer varies the sugar content, fruit
concentrate, with or without vitamins…
 Sizing
 Potato chips are offered in sizes 35 grams, 50 grams, 75grams,
125 grams, 200 grams, multi-packs…
 Packaging
 Nestle’s Red Box chocolates comes in different containers:
cheap paper box for the grocery trade, premium metal box for
the gift trade…
 Design
 BMW designs cars with different styling and features...
 Complements
 Biscuits with sugar spread on it, with cinnamon, with
chocolate, with white chocolate, with black chocolate, filled
biscuits…
 Efforts reduction
 Charles Schwab offers different channels for transacting such
as retail stores, telephone, internet….
2007
The case of Cereal Bars
Cereals for breakfast market New category
into STREETS
=
Cereal varieties
2007
The case of Barbie
Baby dolls market Teenager New category
To
feel =
as...
Doll varieties
2007
Other Examples of Lateral Marketing
 Kinder Surprise = candy + toy.
 Seven Eleven = food + depot.
 Actimel = yogurt + bacteria protection.
 Gas station stores = gas station + food.
 Cyber cafes = cafeteria + Internet.
 “Be the godfather of a kid” = Donation + adoption.
 Huggies Pull-ups = diapers + 3 year olds.
 Walkman = audio + portable
 Source: Philip Kotler and Fernando Trias de Bes, Lateral Marketing: A New
Approach to Finding Product, Market and Marketing Mix Ideas (Wiley, 2004)
2007
Check Where You Stand
 Marketing does the marketing -> everyone does the marketing.
 Organizing by product units -> organizing by customer
segments.
 Making everything -> outsourcing more goods and services.
 Using many suppliers -> working with fewer suppliers.
 Emphasizing tangible assets -> emphasizing intangible assets.
 Building brands through advertising -> building brands
through integrated communications.
 Attracting customers to stores -> making products available
on-line.
 Selling to everyone -> selling to target markets.
 Focusing on profitable transactions -> focusing on customer
lifetime value.
 Focusing on market share -> focusing on customer share.
 Being local -> being “glocal.
 Focusing on the financial scorecard -> focusing on the
marketing scorecard.
 Focusing on shareholders -> focusing on stakeholders
2007
Building Brand Equity
MARKETING IS THE ART OF BRAND BUILDING
*
IF YOU ARE NOT A BRAND,
YOU ARE A COMMODITY.
*
THEN PRICE IS EVERYTHING
AND THE LOW-COST PRODUCER
IS THE ONLY WINNER!
2007
1. How Important is Branding?
 The NUMMI plant in California produces two

nearly identical models called the Toyota
Corolla and the Chevrolet Prizm.
 Toyota sold 230,000 Corollas compared to

sales of 52,000 Prizms.
 And Toyota’s net price is $650 higher!
2007
A Strong Brand Improves
Demand and Supply
 On the demand side:
 higher price
 increased sales volume
 lower churn
 more brand stretching
 On the supply side:

 greater trade acceptance, more favorable supplier terms,
lower rejection
 lower staff acquisition and retention costs
 lower cost of capital
 better scale economics through higher volume
2007
Names are Important in Branding
 Donald Trump’s family name is Drumpf. But
he can’t call it Drumpf Towers.
 Alan Alda’s name was Alphonso D’Abruzzo.
 Chinese gooseberry was renamed kiwifruit.
 Paradise Island in the Bahamas used to be

Hog Island.
2007
A Brand Must be More
Than a Name
 A brand must trigger words or associations (features and
benefits).
 A brand should depict a process (McDonald’s, Amazon).
 A great brand triggers emotions (Harley-Davidson).
 A great brand represents a promise of value (Sony).
 The ultimate brand builders are your employees and

operations, i.e., your performance, not your marketing
communications.
2007
Your Company’s Brand
1. What word does your brand own?
2. Write down other words triggered by your brand name?
A. Circle the favorable words; square the unfavorable words.

B. Underline the words that are favorable but not widely known.
C. Double underline the words that are unique to your company.
3. Are any of the following a source for strengthening your brand’s

personality?
A. Founders
B. Spokespersons
C. Characters
D. Objects
E. Stories and mythologies
2007
2. How Do You Develop
a Brand Concept?
 “The brand must be an essence, an ideal, an
emotion. ” It must be supported by beautiful logos,
clever tag lines, creative turns, edgy names, rave
launch parties, big ticket giveaway promotions, and
publicity buzz-making. (Advertising agency view)
 “The brand should have a target group in mind and

be positioned to solve one of their problems better
than competitive offerings.” Furthermore the brand’s
reputation is ultimately based on product quality,
customer satisfaction, employee communications,
social responsibility, etc. (Kevin Clancy, CEO of
Copernicus)
2007
Branding Components
 Name
 Short, suggestive, memorable, unique, pronounceable
 Slogan
 Logo and typeface
 Colors
 Music
 Themelines (Got Milk!)
 Stationery and business cards
 Offices
 Trucks
 Dress code
2007
Brand Slogans
 BA, “The World’s Favorite Airline”
 American Express, “The Natural Choice”
 AT&T, “The Right Choice”
 Budweiser, “King of Beers”
 Ford, “Quality is #1 Job”
 Holiday Inn, “No Surprises”
 Lloyds Bank, “The Bank that Likes to Say Yes”
 Philips,
 “From Sand to Chips”
 “Philips Invents for You”
 “Let’s Make Things Better”
2007
There is No Such Thing as a Commodity:
Differentiate by Segments
 Mobil conducted a study of 2,000 gasoline buyers and
identified five segments:
 Road Warriors (always driving)
 True Blues (brand or dealer loyal)
 Generation F3 (liked convenience store aspect)
 Homebodies (fills up at nearest station)
 Price Shoppers (20% of all the buyers)
 Mobil rolled out Friendly Serve: cleaner property,
bathrooms, better lighting, well-stocked stores, and
friendlier personnel.
 Mobil charged $.02 more and sales increased by 20-25
percent.
2007
3. How Do You Promote a Brand?
 “How do I justify spending millions on

creating an image. That’s millions my
customers have to spend when they buy
from us.” Tom Parker, CEO of Clark’s
shoes.
 Brands are built by performance, not

advertising.
2007
Don’t Overuse Advertising
to Build a Brand
 People don’t pay that much attention to ads anymore
(wallpaper).
 Some exceptional TV ads grab attention but do not

provide motivation.
 Advertising doesn’t have much credibility or

believability.
 The existence of so much advertising makes

advertising less effective. Yet the cost of advertising
keeps rising.
2007
Tools for Building Brands
 Advertising (e.g.,Absolut Vodka)
 Sponsorships (e.g., Kodak and Olympics)
 Clubs (e.g. Nestle’s Casa Buitoni Club)
 Company visits (e.g., Cadbury’s theme park, Hallmark’s Museum)
 Trade shows
 Traveling exhibits
 Worldwide web casts of presentations, roundtables, entertainment
 Distribution outlets (e.g., Haagen-Dazs)
 Public facilities (e.g., Nestle Nestops)
 Social causes (e.g., American Express)
 High value for the money (e.g. buzz created by Ikea, etc.)
 User community building (e.g., Harley-Davidson)
 Founder’s personality (e.g., Colonel Saunders)
 Celebrity spokespersons
2007
4. What Makes a Strong Brand?
 Strong brand = Product Benefits x Distinct
Identity x Emotional Values
 Peter Doyle, Marketing Management & Strategy, 1997
2007
THE Y&R MODEL OF BRAND STRENGTH
A successful brand has brand vitality and brand stature.

stature.
Brand vitality consists of:

1. Differentiation, the brand is distinct
2. Relevance, the brand is meaningful and personally
appropriate.
Brand stature consists of:
1. Esteem, the brand is seen to have quality and momentum.
2. Familiarity,
Familiarity, the brand is known and understood by many people.
Some conclusions:
1. A brand that has high familiarity but low likeability is a troubled brand.
2. A brand that has high likeability but low familiarity has high advertising potential.
3. A brand with high vitality but low stature has excellent potential.
4. When a brand’s differentiation and relevance start slipping, esteem will slip next, and then
familiarity will decline.
2007
Characteristics of Strong Brands
 Provides superior delivery of desired benefits.
 (Starbucks, FedEx, Amazon)
 Maintain innovation and relevance for the brand.
 (Gillette, Charles Schwab)
 Establish credibility and create appropriate brand
personality and imagery.
 (Apple, Virgin)
 Communicate with a consistent voice.
 (Coca-Cola, Accenture)
 Strategically design and implement a brand
hierarchy and portfolio.
 (BMW, The Gap)
2007
Strong Brands Supply Use Value
as Well as Purchase Value
Nestle:
 Sells baby food
 Provides free dietitian phone line
 Nestops along the highway
Home Depot:
 Sells home improvement products, such as paint, electrical
supplies, plumbing
 Offers free kitchen remodeling design service
 Offers free workshops on how to paint, fix faucets, etc.
Volvo
 Teaches safe driving,
 Supports lower insurance rates for safe drivers
2007
When Do You Stretch
a Brand Name?
 Mercedes is putting its name on large, medium and

small cars.
 Gap decided to invent Old Navy in going down and

buying Banana Republic in going up.
2007
How Do You Revitalize a Brand?
 A dowager brand pioneered the market but now is declining. It will
be hard to reverse the decline and give it new life but the decline
can be slowed down.
 Two general approaches:
 Marketing mix modification
 Improve the product, distribution, price, or promotion
 Market modification
 Find new segments, new usage benefits or occasions, more
frequent usage, etc.
 Find out to whom the dowager brand is losing share:
 Old peer brands
 New peer brands
 Retail store brands
 Generic brands
 Elite brands
 Find out to whom the dowager brand is losing sales.
 Interview people who defected to each competitive class and their
dissenting rationales.
 Determine a counterlogic for each group and direct them to the
groups that can most easily be won back.
 Source: Dennis W. Rook and Sidney J. Levy, “Defending the Dowager:
Communication Strategies forSeminario Mercadotecnia
Declining Main Brands.”
2007
How Do You Rationalize
Your Product Line?
 Unilever found that the largest 50 brands accounted for 63% of
its revenues.
 Unilever decided to emphasize 400 core brands and dispose,
delete or consolidate 1,200 of its marginal brands.
 Unilever selected its 400 core brands based on brand scale,
brand power (#1or 2), and brand growth potential.
 40 brands were designated as core global brands (e.g., Dove,
Knorr, Lipton), and 360 as regional core brands.
 The core brands would get disproportionate investments in
advertising and promotion, innovation, marketing competence
and management time. The core brands would be extended.
 Weak brands had small market shares; poor profitability;
negative cash flow; weak channel support; disproportionate
consumption of management time.
 The weak brands would be milked, sold, delisted, or their
attribute would be migrated to another brand.
2007
What Are the Most Frequent Causes
of Brand Failure?
 Failure to live up to the brand promise.

 Failure to adequately support the brand.
 Failure to adequately control the brand.
 Failure to properly balance consistency and
change with the brand.
 Failure to do brand equity measurement and
management.
2007
Building Customer Equity
 How customer-centered is your company? How
do you measure this?
 Does your company need to be more customer-
centered? To all customers or only the more
important customers?
 How can you go about becoming more customer-
centered?
 How much would this cost you in new technology
and training?
 How much would you gain as a result of
becoming more customer-centered?
2007
Achieving Outcomes in Market Space
 Achieving a deep customer focus is not done simply by building a
customer database or customizing your product offerings.
 A company must define its marketspace not in terms of products but

in terms of customer outcomes.
 Baxter Healthcare supplies “home-recovery enhancement,” not just
nursing care or wheelchairs.
 IHI, a health insurance company, operates in the “lifetime health and
personal safety” marketspace.
 A company then examines the customer activity cycle and the value
gaps.
 The company then invests in filling the major value gaps.
 The company ends up being favored and grows through doing more
things better for their customers.
 Source: Sandra Vandermerwe, “Achieving Deep Customer Focus,” MIT Sloan

Management Review, Spring 2004, pp. 26-34
2007
Achieving Deep Customer Focus
1. Create strategic excitement.
2. Enlist “points of light.”
3. Articulate the new market space focused on customer outcomes.
4. Identify the value opportunities through using the customer activity cycle.
5. Build a compelling case (not through a plan but a story).
6. Size the prize.
7. Modeling the concept with a few chosen customers.
8. Get people working together.
9. Get critical mass.
10. Gather momentum.
 Source: Sandra Vandermerwe, “Achieving Deep Customer Focus,” MIT Sloan

Management Review, Spring 2004, pp. 26-34.
2007
Building Customer Equity
 Reduce the rate of defection.
 Increase the longevity of the relationship.
 Enhance the growth potential of each
customer through cross-selling and up-
selling.
 Make low-profit customers more profitable
or terminate them.
 Focus disproportionate effort on high
value customers.
2007
Components of Customer Equity
 Customer equity is driven by:
 Value equity
 Brand equity
 Relationship equity.
 Companies must decide which driver(s) underlie

each equity.
 Source: Roland T. Rust, Valerie A. Zeithaml, and Katherine A. Lemon,

Driving Customer Equity (New York Free Press 2000).
2007
Transaction Marketing vs.
Customer Relationship Marketing
 Customer Relationship Marketing (CRM) represents a
paradigm shift from Transaction Marketing (TM).
 TM companies focus on products and making a sale. CRM

companies focus on building a long-term relationship that
produces satisfaction for the customer and profitability for
the company.
 TM companies promote everywhere in search of

customers. CRM companies promote to a defined
customer group and aim to make the right offer at the right
time using the right channel to the right customer.
 All companies must practice a mix of TM and RM. TM will

be stronger in companies facing a large number of
customers; RM will be stronger in companies facing a small
number of customers.
2007
Treat Different Customers Differently
 Most profitable customers
 Most unprofitable customers
 Most growable customers
 Most vulnerable customers
2007
Needed:
Technology-Enabled Marketing
 Technology-enabled marketing (TEM)
combines information technology, analytical
capacities, marketing data, and marketing
knowledge, made available to one or more
marketing decision makers to improve the
quality of marketing management.
2007
A 5 Step Model for
Database Marketing
1. Gather useful data on customers.
2. Classify customers by their needs and by their
value to the firm.
3. Prepare business rules that select the best
prospects.
4. Customize marketing treatments for each prospect
in terms of product offers, service mix, media, and
channel.
5. Set up accountability procedures.
2007
Database Marketing is Expensive!
 Requires a tremendous investment in information gathering
about individual customers and prospects.
 Requires constant updating of information.
 Some critical information may not be available.
 Requires a high investment in hardware and software.
 Requires integrating individual customer information from a
variety of sources.
 Requires people skilled at data mining.
 Requires managing and training employees, dealers, and
suppliers.
2007
Does Every Business Need CRM?
 No. The following businesses may not benefit from CRM:
 Businesses where the CLV is low.
 Businesses with high churn.
 Businesses where there is no direct contact between
the seller and ultimate buyer.
 Companies that are in the best position to invest in CRM.

 Companies that collect a lot of data (banks, insurance
companies, credit card companies, telephone
companies).
 Companies that can do a lot of cross-selling and up-
selling (GE, Amazon, etc.).
 Companies whose customers have highly differentiated
needs and are of highly differentiated value to the
company.
2007
Marketing Technology Platforms
on the Market Development Curve
Campaign Historical Database

Management Analytics
Database Management &

Database-Driven Marketing
Warehousing
Performance Dashboards
Yield-Based Pricing
Optimum Tools
Marketing Mix Modeling /
Predictive analytics
Marketing Resource Management
Marketing Management Work-Flow Solutions
Introduction Growth Mature

Seminario Mercadotecnia Decline
2007
Source: Gary Morris, Adapted from Marketing Advocate,
Precision Marketing
 Precision marketing is achieved through looking at large
quantities of historic data with the help of data mining tools
that search for meaningful patterns, and then creating
mathematical equations that represent the underlying
relationships within the data.
 Predictive analytics are used to identify the right offers and

right messages to beam through different channels to narrow
customer segments, based on the propensity to respond. The
expected profit of a campaign can be estimated.
 Many tactical marketer tasks will be automated and free up

marketers to focus on more strategic decision making.
2007
SALES AUTOMATION
 The objective is to empower the salesperson to be
an informed salesperson who virtually has the whole
company’s knowledge at his or her command and
can provide total sales quality.
2007
Marketing Automation
 Areas Ripe for Marketing Automation:
 Selecting names for a direct mail campaign
 Deciding who should receive loans or credit

extensions
 Allocating product lines to shelf space
 Selecting media
 Customizing letters to individual customers
 Targeting coupons and samples
 Pricing airline seats and hotel reservations
2007
Marketing Decision Models
and Marketing Mix Response Models
 BRANDAID
 CALLPLAN
 DETAILER
 MEDIAC
 PROMOTER
 ADCAD
 See Kotler, Marketing Models

2007
Marketing Dashboards
 Tools dashboard
 Processes dashboard
 Performance dashboard
2007
Marketing Work-Flow Process Tools
 Project management
 Product management
 New product development
 Campaign management
2007
Exploit the Internet!
 Research a new product on the Internet (panel research, chat
rooms).
 Create a site to explain how an existing or new product works (ex.,
Tide).
 Create a site that consults on a category (Colgate on dental
problems).
 Create a site that consults on the customer’s profile (Elizabeth
Arden).
 Sponsor a chat room around your product category.
 Answer email questions instantly (Nestle baby care questions).
 Send free samples of new products (freesample.com).
 Send coupons of new products (coolsavings.com).
 Customize your product (Acumin vitamins).
 Offer to sell very large orders direct.
 Offer valuable information to people who will register on the site.
2007
Is New Technology Enough?
 NT + OO = EOO
 New Technology + Old Organization =

Expensive Old Organization
2007
Technology-Enabled Marketing: Examples
 Royal Bank of Canada

 Decision to purchase CRM
 Halifax Bank
 Teller suggests financial products
 Capital One
 A credit card for everyone, but with different interest rates, credit
lines, and cash advances.
 Tesco supermarkets
 Tesco has identified 5,000 customer “needs” segments. It sends
out some 300,000 variations of any given offer with redemption
rates of 90%. It has formed clubs such as Baby Club, A World of
Wine Club, My Time Club
 Kraft
 Kraft has the names of 110 million customers and 20 thousand
facts for each household. Kraft launched print magazine, Food &
Family, that is delivered to the homes of 2.1 million Kraft
customers in 32 versions tailored to 32 segments.
2007
10 Earmarks of the New
Marketing
1. Recognize growing customer empowerment.
2. Develop a focused offering to the target market
3. Design the marketing from the customer-back.
4. Focus on delivering outcomes, not products.
5. Draw in the customer to co-create value.
6. Use newer ways to reach the customer with a message.
7. Develop metrics and ROI measurement.
8. Develop high-tech marketing.
9. Focus on building long run assets.
10. View marketing holistically to regain influence in the company.
2007
1. P&G Recognizes
the New Consumer
 Consumers want a conversation, to dialogue,
to participate, to be more in control…We’re
going from one-dimensional, product-myopic
marketing to three-dimensional marketing –
that offers better solutions…more delightful
experiences… and the opportunity for on-
going relationships.
Alan Lafley, CEO, P&G
2007
Do-It-Yourself Marketing
 Self-Inform: Customers can research products and issues without relying on
experts (e.g., WebMD, MedlinePlus.com)
 Self-evaluate: Customers can compare product features and prices with a few
clicks of a mouse (e.g., PriceGrabber.com, DealTime.com)
 Self-segment: Customers can design and configure products (e.g., Dell,
Reflect.com)
 Self-price: Customers can propose prices to sellers (e.g., eBay, PriceLine.com,
Free Markets)
 Self-support: Customer can resolve problems by searching knowledgeable
bases and discussion forums (e.g., www.remotecentral.com,
www.treocentral.com)
 Self-program: Customer can define their own media programming (e.g., TiVo,
MyYahoo!)
 Self-organize: Customers can join communities of interest to discuss products
and issues (e.g., Meetup.org., IVillage)
 Self-advertise: Customers can create feedback for their peers (e.g.,
Amazon.com, Planet Feeeback, BlogSpot.com)
 Self-police: Customers can monitor reputations of manufacturers (e.g., eBay,
BizRate.com)
 Source: Mohan Sawhney lecture
2007
The Evolution of Marketing
Transactional Relationship Collaborative
Marketing Marketing Marketing
Time frame 1950s 1980s Beyond 2000

View of value The company offering The customer Co-created
in an exchange relationship in the experiences
long run
View of market Place where value is Market is where Market is a forum

exchanged various offerings where value is co-
appear created through
dialogue
Role of customer Passive buyers to be Portfolio of Prosumers-active

targeted with relationships to be participants in value
offerings cultivated co-creation
Role of firm Define and create Attract, develop and Engage customers in
value for consumers retain profitable defining and co-
customers creating unique value
Nature of customer Survey customers to Observe customers Active dialogue with

interaction elicit needs and and learn adaptively customers and
solicit feedback communities
Adapted from Prahalad and Ramaswamy 2007
2. Develop a Focused Offering
to the Target Market
 Value customers: Which customer segment(s) do we
want to serve?
 Value proposition: Can we create a value proposition

that delivers superior value through dramatically
higher benefits or lower costs?
 Value network: Can we run a better network or

radically redefine the value delivery system for the
industry such as Dell and IKEA have done?
3Vs framework of Nirmalya Kumar

2007
Choose to Serve a Unique Set of
Customer Values
1. Identify the value expectations of potential customers.
2. Select the values on which to compete.

 Nike values: Winning, roar of the crowd, extreme effort, the
smell of sweat, physical development
 New Balance values: Self-improvement, inner harmony,
balanced, the smell of nature, spiritual development
3. Analyze the ability of the organization to deliver those values.
4. Communicate and sell the value message.
5. Deliver the value promised and continuously improve the company's

value model.
See J. Nicholas Debonnis, et. al, Value-Based Marketing for Bottom Line Success: 5 Steps to
Creating Competitive Value (McGraw-Hill, 2004)
2007
3. Design the Marketing
From the Customer-Back
 Marketing must be run as a set of value finding, creation, and
delivery processes, not 4P functions. The four Ps are seller
oriented.
 The 4As are buyer oriented.

 Awareness (A1)
 Acceptability (A2)
 Affordability (A3)
 Accessibility (A4)
 Market value potential = A1 x A2 x A3 x A4

 If A1=100%, A2=100%, A3=50%, A4=50%, Then MV=25%
Source: Jagdish Sheth

2007
4. Focus on Delivering Outcomes,
Not Products.
Company Product focus Solutions focus
Akzo Nobel Gallons of paint Painted cars
BP Nutrition- Animal feed Animal weight gain
Hendrix
Cummings Diesel engines Uninterruptible
power
ICI Explosives Explosives Broken rock
Scania Trucks Guaranteed uptime
WW Grainger MRO items Indirect materials

mgt.
Source: Kumar Seminario Mercadotecnia

2007
Visualize a Larger Market
 Nike now defines itself in the sports market rather than
the shoe and clothing market.
 The late Roberto Goizueta told his company that while
Coca Cola had a 35 percent share of the soft drink market,
it had only a 3 percent share of the total beverage market.
 Armstrong World Industries moved from floor coverings
to ceilings to total interior surface decoration.
 Citicorp realized that it only had a small share of the total
financial market which includes much more than banking.
 Taco Bell went from selling food in stores to “feeding
people everywhere” including kiosks, convenience
stores, airports, and high schools.
 Jack Welch asked product managers to redefine their
market so that they only had a 10% share.
2007
5. Draw in the Customer
to Co-create Value: Two
Approaches
1. Offer a wide product line so the customer can choose
something closer to the customer’s desires.
• M&M allows customers to special order M&Ms in 21 colors.
• Branches Hockey let’s players pick from 26 options: length
of a stick, blade patterns, etc.
2. Stand ready to customize according to the customer’s wishes.

• Dell computers are designed by customers
• Lands’ End sells tailor-made chinos.
• P&G on its reflect.com site lets shoppers design everything
from eye moisturize to liquid foundation makeup.
• Yankee Candle Company will mix colors and scents to
make the candles you want.
• Other examples: golf clubs, breakfast cereals, credit card
companies Seminario Mercadotecnia
2007
Examples of Collaborative
Marketing
 P&G’s site has a We’re Listening section and Share
Your Thoughts section and Advisory Feedback
sessions.
 GM offers an AutoChoiceAdvisory on its website
 Cisco runs Customer Forums to improve its

offerings.
 A motorcycle in Italy is being designed by

customers.
2007
6. Use Newer Ways to Reach the
Customer with Relevant Messages
 Make your ads more precise as to who they
reach and more relevant.
 Let consumers indicate if they have an

interest or not. Stop pestering them.
 Deliver valuable content with each ad, such

as useful information or entertainment.
 Reach consumers in newer ways.

2007
Newer Ways to Reach
Customers
 Sponsorships
 Mentions on talk shows
 Product placement
 Street-level promotion
 Festivals
 Celebrity endorsements
 Mobile billboards
2007
Creating Buzz on the Streets
 Chrysler’s PT Landcruiser appeared in fashionable areas and
college tailgate parties. 250,000 prospects requested information
before official ad campaign began in April 2000.
 Models drove around Los Angeles on Vespa scooters and chatted

with customers in cafes and bars.
 Ford identified 120 people in six key markets and gave them a
Focus to drive for 6 months and promotional material.
 Vans builds skateboard parks at malls and sponsors Vans Triple

Crown.
 Hasbro enlisted “cool” pre-teens to play the POX game and tell
their friends about it.
 Tourist goes into lounge and her telephone rings and picture of
the caller appears on the phone.
2007
7. Develop Metrics and ROI
Measurement
Products Brands Channels Customer Markets
Segments
Relative Brand Channel Customer Market
product awareness penetration satisfaction penetration
quality
Perceived Brand Channel trust Average Market share
product esteem transaction
quality size
Percentage Brand loyalty Channel Customer Sales growth
of sales from efficiency complaints
new products
Product Brand Market share Customer Market
profitability profitability in each acquisition profitability
channel costs
Channel Customer
profitability retention rate
Source: Seminario Mercadotecnia
Customer
Kumar 2007 profitability
8. Develop High-Tech Marketing
 Predictive analytics
 Sales automation
 Marketing automation
 Marketing models
 Process dashboards
 Performance dashboards
 Campaign management
 Project management
 New product management
2007
9. Focus on Building
Long-Run Marketing Assets.
 Brands and brand equity
 Customers and customer equity
 Service quality
 Stakeholder relationships
 Intellectual knowledge
 Corporate reputation
2007
10. View Marketing Holistically
 Marketing must become strategic and drive
business strategy.
 A company needs to take a more holistic

view of:
 the target customers’ activities, lifestyle,
and social space.
 the company’s channels and supply chain.
 the company’s communications.
 the company’s stakeholders’ interests.
2007
Two Models of Management
Profit-based management Loyalty-based management
 Reduce costs  Invest in marketing assets
 Reduce compensation  Give superior compensation
 Replace people with  Leverage people with
technology technology
 Price to extract maximum  Price to reward customers
value  Deepen customer value
 Sell more products  Acquire customers selectively
 Acquire lots of customers
Source: Frederick Reichheld, The Loyalty Effect

2007
Conclusions
 Marketing is definitely not filling its potential.
 Marketing must become the driver of business strategy.
 Companies need to adopt a more holistic view of the marketing
challenge.
 Companies need lateral marketing thinking to conceive of new
product and service ideas.
 Companies need to choose from five major strategic paths.
 Companies need to move from a product focused to a market
and customer focused organization.
 Companies need to build, measure and manage brand equity
and customer equity.
 Companies need to move to technology-enabled marketing to
achieve precision marketing and develop better measures of
ROI impact.
2007
“This time like all times is a good one,
if we but know what to do with it.”
Ralph Waldo Emerson
THANK YOU!
2007

ESTRATEGIAS Philip Kotler

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A Strategy Document

 Philip Kotler, Ph.D

2. Can Mexican companies develop strong global

 Foreign competitors will not only go after the

 The main defense for Mexico will be

 The Mexican manufacturer has no defense if the Brand Owner

 Yet Mexico pays more attention to the product engineer than

 Haier entered with a U.S. partner and is

 Cost: Another 50 years of low cost production

 Capability: Large number of trained workers,

 Consumers: Immense domestic market

 Calm and stability: in a world of turmoil and

 “The purpose of a company is ‘to create a customer…The only

 “A business has two—and only two—basic functions:

 “The aim of marketing is to make selling unnecessary.”

 “While great devices are invented in the Laboratory, great

 “Marketing is too important to be left to the marketing

 You must replace your Old Marketing with

 Marketing costs are high and rising.

 A company needs to take a more holistic view of:

 the company’s channels and supply chain.

 the company’s communications.

 the company’s stakeholders’ interests.

 Holistic marketing will require strong software support.

CUSTOMERS CORPORATION COLLABORATORS

3) What are the potential opportunities emerging

4) What business capabilities and infrastructure

CUSTOMER CORE COLLABORATIVE

COGNITIVE COMPETENCY RESOURCE

 Decide whether to attack to gain market share rather than

 Be sure to maintain the value proposition promised by your

 Try to add value instead of cutting the price.

 Product differentiation is harder to

YOGURTS MARKET Number of

Cereals for breakfast market New category

Baby dolls market Teenager New category

 The NUMMI plant in California produces two

 Toyota sold 230,000 Corollas compared to

 And Toyota’s net price is $650 higher!

 On the supply side:

 Alan Alda’s name was Alphonso D’Abruzzo.

 Chinese gooseberry was renamed kiwifruit.

 Paradise Island in the Bahamas used to be

 A brand should depict a process (McDonald’s, Amazon).

 A great brand triggers emotions (Harley-Davidson).

 A great brand represents a promise of value (Sony).

 The ultimate brand builders are your employees and

2. Write down other words triggered by your brand name?

A. Circle the favorable words; square the unfavorable words.

3. Are any of the following a source for strengthening your brand’s

 “The brand should have a target group in mind and

 “How do I justify spending millions on

 Brands are built by performance, not

 Some exceptional TV ads grab attention but do not

 Advertising doesn’t have much credibility or

 The existence of so much advertising makes

 Peter Doyle, Marketing Management & Strategy, 1997

A successful brand has brand vitality and brand stature.

Brand vitality consists of:

 Mercedes is putting its name on large, medium and

 Gap decided to invent Old Navy in going down and

 Failure to live up to the brand promise.

 A company must define its marketspace not in terms of products but