Editor's Note: The 2019 Kotler Future Marketing Summit, hosted by Kotler Consulting Group and co-organized by Yingchuang Academy, concluded successfully in Beijing yesterday. Marketing father Philip Kotler delivered a powerful speech, "The Future of Marketing." Here, we publish the full transcript, reviewed and edited by Professor Zheng Yuhuang, PhD supervisor of Marketing at Tsinghua University and Dean of Yingchuang Academy, as a tribute to the master!

Today I am very honored to stand here. This is a special day, not only for the Kotler Group and myself, but for the whole world.

Earlier today, China and the United States signed a trade agreement. Although it is not yet a complete agreement, it reflects a win-win mindset. The world needs common collaboration. Just look at today's stock market to prove this point—the stock market has already risen 390 points (the Dow Jones Industrial Average).

Why can't the two greatest nations in the world, China and the U.S., be partners? Only then can we create shared prosperity and make the world a better place for everyone.

Three Themes

Today I want to talk about three themes: the history of marketing, marketing today, and the future of marketing.

What will the future of marketing look like? In the future, it is very likely that consumers will become very smart. We may no longer need salespeople, and we may no longer need advertising. The internet has enabled consumers to learn a lot and understand a lot. Not only the internet, but also social platforms like Facebook, without any ads or salespeople, consumers already know a lot.

In the future, what if we no longer need salespeople or advertising? I guess that the most important thing marketing needs to do then is to manage word-of-mouth. The most effective advertising comes from consumers' friends and those who have experienced the product; consumers can trust their experiences and reviews.

For example, suppose I launch a new red wine. I can find out who are the influential people in wine selection. Some people are wine experts with a large wine network. I can give my wine as a gift to such an influencer.

If he likes it, my job is done. I don't need advertising, salespeople, or even pay him, because he is satisfied with the wine and willing to talk about it. So, marketing will change.

The History of Marketing

Let's go back to the past and look at the history of marketing. Marketing is a very young discipline, with a history of no more than 150 years, but the market itself has existed for millions of years. When people had surplus goods to sell, markets emerged.

In ancient Greece, people could buy and sell at such marketplaces, thus creating markets. Selling began with Adam and Eve; since the serpent convinced Eve, and Eve convinced Adam to eat the forbidden fruit, the world has had selling.

But selling is only a part of marketing. Selling is very simple because the product already exists; your job is just to find customers. Marketing is more important: it decides whether to produce the product, what product to produce, what you are good at, what the market needs, and whether you can meet market demand. Once the product is produced, the company certainly needs advertising, salespeople, and pricing.

The Evolution of Marketing

This chart shows that marketing is a constantly changing discipline. There are always new ideas and concepts. You can see marketing theory constantly evolving, with major changes roughly every 10 years.

Why do I revise and update my book "Marketing Management" every three years or so? Because in a short time, new cases, new concepts, and everything about marketing change too much and too fast.

Different Marketing Orientations

The chart above shows some changing marketing concepts. Initially, we thought the most important thing was to produce good products (product orientation) and then promote them.

Later, companies like Procter & Gamble and Unilever found this was not the best practice. The most important thing in marketing is the customer. What do customers need? So marketing shifted from product-centric to customer-centric.

Then marketing entered the brand orientation. For a company to succeed, the brand name must be attractive and have emotion in it. Consumers may have many choices; to make them choose you, your brand must resonate with them.

A brand is usually a value proposition, which is a very important concept. A brand should express the value you create for customers. If you are not sure why customers should choose you, you have a problem.

In fact, a value proposition describes your difference from competitors, your positioning, and your main features. For example, McDonald's value proposition might be good food at affordable prices. Such a value proposition is broad and not precise enough; you need more accurate value propositions for each different customer segment.

For the elderly, McDonald's might mean a very safe place to sit down and have a meal. The elderly may not have a spouse and just need a comfortable environment and affordable food. For young people, a different value proposition is needed to attract them. For mothers with children, another value proposition is needed.

So, for different segments, you need different value propositions. The most important thing is to find your target market. This is brand-oriented marketing: doing target market and value proposition well.

Recently, marketing has undergone a transformation: digitalization. Every company that does not shift to digital marketing is making a mistake. Even a very small retail store: it is not enough to get people to come to your store; you should allow consumers to buy your products without coming to the store, so they can choose your products online.

Take my family as an example: my wife never goes to stores; she buys everything online through Amazon. She receives packages every day. Now, more and more people are too busy to go to malls, so companies need to provide sales channels to consumers through digitalization.

What is True Marketing?

If you define marketing as increasing sales through sales teams and advertising, that is the old definition.

Today's marketing, we call CCDV (Create, Communicate, and Deliver Value): creating, communicating, and delivering value to the target market.

At the same time, the latest view is that marketing is the business principle that drives corporate growth; that is, its function is to promote company growth.

Why can marketing bring more growth than any other function? Because marketing is the only department that truly spends time with customers and wants them to make a purchase. So for the marketing department, if marketers are well-trained and spend time with customers, they will be the first to spot market opportunities.

Also, the marketing department will be the first to notice customer needs that other departments may miss. Additionally, the marketing department can sense threats or obstacles to customers buying your product. For marketers, we must truly touch the market, truly touch customers, and bring back close observations to our company.

The Marketing Framework

So, what is our marketing framework today?

First, Customers, Company, Collaborators, Competitors, and Contexts—this is what we usually call the 5C. Every marketing framework or plan must consider the 5C principles.

Second, we need to describe Products, Pricing, Place, and Promotion—this is the 4P. 4P is a starting point, but you can add another P: Packaging. For example, if you are a perfume company, the packaging is more important than the perfume itself, and how you market and position the product. So packaging is very important.

Also, you might say, what about sales and service? Where are they in the 4P? Don't worry too much. In a marketing plan, 4P is just a starting point. You can add S (Selling or Service) and whatever you need to the 4P framework. This is the extended 4P, including product, service, brand, price, incentives, communication, delivery, etc.

Finally, if you are just starting a business or launching a new product, the marketing strategy process usually starts with Marketing Research (MR), which is the most important.

For market research, companies need to do many surveys and collect a lot of data. After market research, companies find the market is complex, including different segments. So companies need to do market segmentation. Since different segments have different needs, companies need to select target markets, and then do positioning. This is what we usually call STP.

After STP, the company has chosen its target markets (TM). Of course, a company can choose several target markets, but each requires a different marketing strategy. After selecting target markets, the company needs to provide a value proposition (VP) and then build a marketing plan (MP).

Next, the marketing plan moves to implementation, and then monitoring and adjustment (Control). If the company finds sales performance is poor, it should go back through the process and analyze the reasons:

Maybe the marketing strategy was good, but execution was poor, or the team was not good; maybe execution was good, but sales are still poor, then the marketing strategy might be problematic, such as pricing too high, or advertising not good, or target customers not well chosen, e.g., competitors in the target segment are doing much better. Through such monitoring, companies can identify problems and correct them.

4 Types of CEOs' Views on Marketing

Next, let's talk about 4 types of CEOs' views on marketing. Here we must ask: how much does your company's CEO know about marketing?

The first type is the 1P CEO, who thinks price is the most critical and that marketing is just setting the price.

The second type is the 4P CEO, who considers product, pricing, promotion, and place.

The third type is the STP CEO, who not only knows 4P but also knows the company needs market segmentation, targeting, and positioning (STP). Such a CEO is obviously better.

The fourth type is the ME CEO, meaning Marketing Everywhere (ME). They know the company's job is to create value for customers, and marketing is the beginning of all work. This is the best CEO.

How Will Marketing Evolve?

Does marketing need to evolve continuously? Of course. For example, in traditional mass marketing, like an ad inserted in a TV drama, companies spend a lot of money, but it brings a problem: if consumers don't need or are not interested in the product, such ads are annoying. In other words, mass marketing is inefficient and not precise.

Conversely, in today's era of digital precision marketing, is traditional mass marketing still useful? Of course.

Companies first need to use traditional mass marketing to communicate the brand's value proposition (focusing on brand image rather than sales leads), and then use more precise digital marketing tools like Facebook, Google, etc., to further reach target customers and conduct contextual marketing. Therefore, companies must learn to combine traditional mass marketing with new digital marketing to create maximum value for target customers.

The main problem marketing faces now is that consumers are getting smarter; any information about competitors can be obtained online, and sales channels are expanding more and more.

When I go to refuel, I can buy an ice cream on the side. I never thought a gas station could become a food retail store. Also, there are more and more new technologies.

Findings on "Growth"

Regarding growth, I prefer organic growth over growth through mergers and acquisitions. I know some companies are doing well now by acquiring other companies and buying competitors; that is external growth.

But there is much evidence that if a company achieves organic growth, not through M&A, such a company will be better. Organic growth means the company has better marketing capabilities, better leadership, etc. Also, the company's marketing strategy will be more integrated into all departments, and through products and customers, they enhance their value.

I am currently working with a company called Fujifilm. As you know, Kodak no longer exists because consumers don't buy film anymore, so Kodak died.

So why is Fujifilm still alive and even bigger than before? I am writing a new book about how Fujifilm survived. If your industry faces disruptive technology, you should read this book to understand Fujifilm and learn how Fujifilm innovated during crisis.

Ten Characteristics of New Marketing

Here, I have listed the ten main characteristics of new marketing. You can look at your own company and see which of these ten characteristics you do well. If you do all well, the company definitely has potential. If you don't do well on these ten, I think your company should be careful.

Marketing Revolution 4.0: Mapping the Consumer Journey

I want to talk about Marketing Revolution 4.0, which is our recent analysis of marketing, focusing on how digitalization affects various industries. First, we use a concept called the consumer journey.

For example, if buying a car, some consumers have never thought about buying a car, but one day they see a window display with a car, ask the price, think they can afford it, and may quickly buy the new car. This consumer journey is very short. For such consumers, marketing sometimes has no time to react.

Another type of consumer journey may be longer: a consumer wants to buy a car, may first ask friends what cars they bought and like, then go to a 4S store to look, and then test drive. Whether the consumer journey is long, short, or anything in between, companies need to find touchpoints in the consumer journey and conduct effective marketing.

If the company reaches the consumer at a touchpoint, but because salespeople are not well-trained, the customer is lost upon contact, the marketing is not effective. So, during the purchase process, companies must ensure they have touchpoints with consumers and that marketing at each touchpoint is effective to make consumers buy your product.

The 5A Customer Path

The consumer purchase process can be described by the 5A path: 1) The consumer becomes Aware of your product or brand; 2) The consumer is Appeared (attracted) by the company's value proposition; 3) The consumer may then Ask questions; 4) The consumer may then be willing to Act (purchase); 5) If they like your product, they will Act Again (repurchase).

Of course, the best thing is to turn customers into lifelong customers and make them advocates and promoters of your product. If customers particularly like your product, they become your advocates and promoters, telling friends and people around them how good your product is, and getting friends to buy it. We call such customers Customer Advocates or Brand Ambassadors.

Who should be the brand ambassador? First, the company's employees. If employees don't promote the company's products, there must be a problem. Maybe the company pays employees low wages. For example, Walmart at one time had employees working hard and feeling insecure, as if they could be replaced at any time.

Later, Walmart realized the problem and made changes, gradually turning employees into brand ambassadors. Employees not only felt proud of Walmart but also began to smile naturally and work actively with customers. This is what most companies need to learn.

Remember, marketing is not only for customers but also for employees. I learned this from Marriott, the world's largest hotel chain. Marriott says customers come second because employees come first. Without the best employees, you won't have the best customer service.

Hotels are a service industry; they need not only to deliver service but also to deliver an experience. In fact, Experience Marketing is dedicated to this field. Whether a consumer has a good experience when buying a product in a store is very important. If a company has many employees as brand ambassadors, the customer experience will definitely be better, helping the company succeed.

Customer Orientation

Regarding customer orientation, I recommend the book "The Customer Culture Imperative" written by the Brown father and son from Australia. In this book, companies can measure the degree to which they are customer-centric using six dimensions.

The first dimension is Customer Insight. Companies must not only understand customers but also know their feelings and deep needs, like getting inside the customer's mind. That is customer insight.

The second dimension is Customer Foresight. Because customers change, where will tomorrow's customers go? Will they focus more on price? Or more on channel convenience? Or product features?

The third dimension is Competitor Insight. Similar to customer insight, companies also need deep competitive insight into competitors.

The fourth dimension is Competitor Foresight. Companies not only need competitive insight but also need to anticipate competitors. If I change my price, will competitors follow? What changes will competitors make? I don't want any surprises; I need to know what they are doing.

The fifth and sixth dimensions are Environmental Concern and Collaboration. Companies cannot be too narrow, only looking at customers and competitors; they must broaden their horizons to the larger environment, see changes in the environment, and engage in more collaboration. Only then will companies be more likely to succeed.

Discovering Niche Markets and Micro-Segments

Companies need to learn to discover niche markets and micro-segments. A niche market is a small group of customers with similar interests or needs, who particularly need a certain product. Many companies become "hidden champions" by doing well in niche markets.

For example, in France, French people generally like to sit outdoors at restaurants to drink coffee or eat, needing umbrellas for shade. If a company does best in the niche market of sun umbrellas, it can become a hidden champion. Similar niche markets include high-performance military field glasses. You can read Hermann Simon's "Hidden Champions" for more.

I also recommend a book: Mark Penn's "Microtrends." This book talks about many micro-segments, such as retirees who are retired but still work; that is a micro-segment. Also, about one in a thousand people in the world are left-handed, and they may have special needs. By paying attention to such niche markets and micro-segments, companies will find more market opportunities.

Seeking Marketing Innovation

Innovation: I just mentioned Fujifilm; in their business model, innovation never stops. If a company doesn't innovate, it will go bankrupt. Of course, if a company innovates, it may also go bankrupt.

I was talking with a venture capital firm that invests in startups. I asked how many startups succeed. He said only one in ten succeeds. However, even though the probability of success is low, companies must still innovate because if they don't, they will definitely go bankrupt.

The Relationship Between Innovation and Marketing

Therefore, there must be good collaboration between R&D and marketing personnel. If a company's R&D develops a perfect product but never asks marketing, I think it will likely fail. For example, we worked with Philips; they were always inventing better electronic products, but many inventions failed, such as being too intelligent, because they were invented by engineers. Engineers are very smart, but in their eyes, things are black and white.

Philips later realized the core problem: they had innovation and invention but no marketing. So Philips invited a famous consultant to help build the marketing function.

Do you know how that famous consultant was rewarded? He told Philips he didn't want cash compensation but wanted Philips stock. Because he knew that with marketing as an additional wing, Philips would be more profitable, and the stock price would rise. Remember, when you hire consultants, don't hire those who only want cash; hire those who want stock.

In summary, if a company is good at innovation but not marketing, or good at marketing but not innovation, that's not good. The famous management father Peter Drucker emphasized: a company's success depends on two factors: marketing and innovation. Both are key.

The A-F Model in the Company Innovation Process

Companies need six roles in the innovation process, described by the A-F model.

First, Activators: Some employees always have new ideas; they are imaginative and constantly suggest doing this and that, but they don't implement these ideas themselves. These people are innovation activators. Companies should listen to them.

Second, Browsers: The company tells the activators' suggestions to browsers, who check whether competitors have done similar things.

Third, Creators: If it's a worthwhile idea, creators design a prototype, test it, propose improvements, and get feedback.

Fourth, Developers: Based on the creators' design, developers develop the product and produce it in the factory for sale.

Fifth, Executors: These are marketers who execute the marketing plan in the market to make the new product successful.

Sixth, Financers: During the innovation process, especially in the final execution, financial support is needed, such as for advertising.

This model, called the A-F model in my book, helps companies innovate well.

My Advice

I use three boxes to advise companies on how to handle current business and innovation.

First, Manage the Present: Companies must do well in their current main business, cut unprofitable products or segments, improve operations, and appropriately streamline (e.g., car companies still need to produce good gasoline cars).

Second, Selective Forgetting: While doing the main business, companies also need to develop highly feasible new products, seize opportunities, and explore explosive growth (e.g., car companies develop hybrid and other new products).

Third, Create the Future: A major innovation is the future (e.g., car companies develop electric vehicles).

Who Should Lead Marketing?

Who should be responsible for marketing? The traditional Chief Marketing Officer (CMO)? Or new positions like Chief Growth Officer (CGO) or Chief Customer Officer (CCO)?

I personally still think CMO is the most appropriate term because every company has a CMO, and we already have a large CMO community. CGO is a new term without a large community yet, and although CGO sounds good, should we change the word "marketing" to "growth"?

Fujifilm, mentioned earlier, has 12 CMOs because it has 12 independent subsidiaries with completely different businesses. So these 12 CMOs do not have a higher corporate CMO; each CMO is responsible for their own company's marketing.

5 Shifts

Here I also recommend an interesting book: Scott Davis's "The Shift." This book describes five shifts facing companies today:

First shift: From creating marketing strategy to driving business growth. Today, CMOs must not only develop strategy but also ensure business growth.

Second shift: From controlling information to activating value networks. In the internet age, information cannot be controlled; companies have less control. Consumer reviews, whether positive or negative, cannot be controlled, but you need to activate value networks to communicate your message better.

Third shift: From continuous improvement to pervasive innovation. I just returned from Japan. Many Japanese companies like Honda have 75% of employees, including factory workers, each year proposing ideas to make cars better. You can imagine such a culture where everyone believes in making your work better and more meaningful. Japanese companies have very high quality requirements. China also needs to transform from producing cheap products to producing more complex products.

Fourth shift: From managing marketing investment to inspiring marketing excellence.

Fifth shift: From focusing on operations to being customer-centric.

New Business Logic

Traditionally, companies maximize shareholder interests. After maximizing shareholder interests, who gets the profit? Shareholders, of course.

But now, companies must maximize the interests of all stakeholders, not just shareholders.

What are stakeholders? Besides shareholders, they include customers, suppliers, employees, etc. The company's profits are shared with all stakeholders. When every stakeholder becomes better, the company will be better in the future.

If a company focuses only on shareholders after making money, employees might think, "What does the company's profit have to do with me?" Then will employees work hard? Similarly, if a company pollutes the environment for short-term profit, that is suicidal behavior.

What is the Relationship Between Business and Society?

Previously, we talked about Corporate Social Responsibility (CSR). Remember? For example, if a company does well and makes money, it gives back to society by donating to cancer foundations or children's foundations. But now, just doing charity is not enough. If a company damages the environment, it cannot be changed simply by doing charity.

Now, Michael Porter has proposed a new concept: Corporate Shared Value (CSV), meaning companies share the value they create with stakeholders. I also established a concept called Brand Activism.

Brand Activism

For brand activism, your brand may only talk about the company's value proposition, such as highest quality in the market or lowest price among similar products. That's fine, but not enough. The brand also needs to show what the company truly cares about. For example, as a company, what do you value most? Not just making money, but also caring about the environment, etc.

So, brand activism extends from the past value proposition to what the company cares about most now, all of which should be reflected in the brand.

Key Marketing Concepts

Here I list the key marketing concepts I introduced today. For example, brand story is an important marketing concept. Can your brand tell a story? Can the content the brand represents connect with the story you tell? For example, HP's garage brand story and Haier's Zhang Ruimin smashing refrigerators brand story are both very compelling. Your company should also do this: tell a good brand story, and let more people know and accept it.

Conclusion

If your company can do all the points I mentioned above, your marketing will be invincible. Conversely, if your company is still doing business the same way in five years, you are close to closing down. Because the market is constantly changing, but you haven't changed.

Thank you very much for listening to my speech today. I know many companies are competitors of American companies, but I believe only the best companies can survive in the market, whether Chinese or American.

Source: Yingchuang Academy (ID: yingchuangschool)

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