Exploring the digital marketing revolution

To create and communicate superior customer value, marketers must now combine traditional advertising with social and digital tools, argues American marketing guru Philip Kotler, in an interview with David Woods-Hale

You’ve written Marketing 4.0? What has changed since Marketing 3.0 was published in 2010?

Marketing is undergoing a digital revolution. We published Marketing 3.0 seven years ago to help companies broaden their view of how computers and the internet impact marketing theory and practice. We stressed the importance of meeting the needs of women, young people, and ‘netizens’ in carrying out company marketing activities. 

Today there is a need to pay attention to the growing role of social and digital media. Social media – such as Facebook, Instagram, Pinterest and Snapchat – create an increasingly connected world and they stimulate greater communications and sales to a wider world. Digital media is enabling artificial intelligence (AI) and the ‘internet of things’ (I0T) and increasing the rate at which robotisation and automation is penetrating business. Our aim in Marketing 4.0 is to illustrate the growing role and impact of digital marketing. I’ve also described this ‘new marketing’ in my 15th edition of Marketing Management

How can Marketing 4.0 help in bringing marketers up to date with the current skills required – from traditional to digital?

In the past, consumers made purchase decisions largely in retail outlets, whether in an auto dealership or in a large department store. Some consumers also used the telephone or mail order catalogues. Today, a growing number of consumers are making more of their purchases online via online retailers. In-store retailing is facing a major decline: witness, in the US, the news of Macy’s closing many stores, clothing store The Limited going out of business and shopping centres in deep trouble. 

Consumers still go into stores to sample and touch the product and then use their smartphone to see if they can a better deal elsewhere. Many retail shops are evolving into ‘showrooms’, partly charged by the company to its advertising budget. Business-to-business transactions are being increasingly conducted with digital media. Most companies list their product catalogues on the internet. Purchasing agents are happy to compare prices on the internet and are less interested in accepting sales calls. All this points to the need for companies to acquire social and digital skills before they are outclassed by more sophisticated digital competitors.

You describe ‘shifting power dynamics’ in the market. Can you explain this in more detail? 

Power has been shifting from the advertising giants who used 30-second commercials to inform and persuade consumers, to savvy consumers – who rely on their friends and acquaintances, plus online product ratings, to make their brand choices. Power has moved from companies to consumers. Companies must now develop fresh pictures of how consumers journey toward making their final purchases. It’s no longer a journey from a 30-second commercial to a purchase but from a stimulus on the internet, or from a friend, to a search for further information, to a purchase. Marketing 4.0 discusses the key steps in consumer journeys and the various touch points that will have an impact on the final purchase decision.

You explain how the rules of marketing regularly change, but this time the very customers have changed – and this is revolutionary – can you talk a bit more about this?

The basic maxim of marketing hasn’t changed. Decide on the consumer need your company wants to meet and the individuals who strongly have this need. Create a solution that meets this consumer need better than any competitor can meet it. See your job as one of creating superior customer value and communicating this value in a superior way.

What is revolutionary is the need for the company to incorporate social and digital tools to carry out this work. Companies need to collect ‘big data’ about individual consumers who have specific needs and apply sophisticated marketing analytics to arrive at consumer insights that can be converted into compelling consumer value propositions.

How do cyclical trends in the economy affect marketers? More specifically, if demand-led growth is on the decline, what single marketing effort is the most important to avoiding a loyal consumer defecting to a competitor?

Buyer behaviour obviously changes in times of market growth versus market decline. When a recession, or a fear of recession, occurs, consumers will intelligently reduce their expenditure and move towards lower-cost products. Every competitor will have a choice: increase the value of the offer, or cut the price of the offer. Normally it makes sense for the company to retain the price and better document and confirm the offer’s superior customer value. If superior value doesn’t exist, the company either has to add more value (for example, free shipment) or cut its price.

Do you think the original elements of the traditional marketing mix will still be relevant in 10 years’ time? 

The marketer’s main toolkit remains the 4Ps (product, price, place, and promotion) and STP (segmentation, targeting, positioning). Each of these elements undergoes modernisation all the time. Product includes packaging, as well as service products. Place is being redefined into omni-channel marketing but it is still place. Promotion is including digital and social communication alongside print and broadcast media. I would welcome a new marketing framework if it promised to address marketing decision problems in a more decisive way. Until then, most companies will use the traditional framework in preparing their marketing plans.

How will creative and media agencies need to evolve over the next five years to keep up with the pace of technology? 

The agency of the future will develop skills in both traditional and digital advertising. This would be better than hiring separate traditional and digital agencies because companies must connect traditional and digital advertising. A 30-second commercial may need to include a digital address showing where viewers can go for more information. The job of the ‘full-service agency’ is to find synergies between the two types of communication, so that 2 + 2 = 5, not 4.

Do you think that the chief marketing officer (CMO) role will be replaced by a combination of chief tech officer and chief analyst, or is this still a viable career path?

I’d like the CMO position to continue to manage the integration of all the elements that will impact on customer demand. The CMO should spend at least 50% of their time working with the other ‘chiefs’ in the company. The real value of the CMO will be realised when he or she is included in all the strategy planning. It would be unwise to confine marketing to designing tactical moves. The CMO is in the best position to foresee where the particular market is going economically and technologically. The CMO’s staff must include an excellent digital person and technology person. 

Do you think marketing and HR may evolve into one business function, as people leadership and organisational branding become increasingly connected, with shared goals and purposes?

I would prefer the heads of marketing and HR to work very closely together but remain separate functions. The CMO is highly interested in seeing that HR hires very service-minded people. In the hotel business, Marriott says that the first job is to hire the right employees and then the customers will come. The CMO should support the HR person to gain a sufficient budget to hire excellent employees, not just average employees. The evidence is strong that excellent employees have a productivity impact that is several times that of average employees.  

Do you think that zero-based budgeting for marketing, based on the Unilever example, will be widely adopted, to make marketing entirely accountable? How can value be measured throughout all channels since tracking is harder offline? 

Zero-based budgeting for marketing means starting each year with no budget allocated to marketing, until marketers propose specific marketing spend – along with the evidence that results will exceed costs. This is in contrast to normal budget setting where the budgets of the past year are the starting point, raised or lowered slightly. We acknowledge that some past marketing expenditures were not productive, and that from time to time, it is worth reviewing each major budget item to decide whether it should be eliminated, decreased or increased. 

The problem with zero-based budgeting for marketing is two-fold. Many campaigns need continuity and they shouldn’t be cut off before they have achieved their full impact. 

Also, it is increasingly difficult to assess the financial impact of a particular digital tool or a particular marketing channel in an increasingly complex and interactive world. 

Zero-based budgeting is a highly impractical tool for yearly budgeting. However, I grant that it could raise marketing efficiency by being introduced every few years.

Do you believe leaders across all disciplines and functions need to change their mindsets to succeed in a volatile world? 

Today’s world is increasingly characterised by volatility, uncertainty, complexity, and ambiguity (VUCA). Donald Trump’s election as US President has greatly contributed to VUCA. If Hillary Clinton had been elected (she won the popular vote by 3 million votes), we would arguably not be in a VUCA world. Events would have taken their normal course and businesses would carry normal expectations. 

But Trump sends out tweets in the middle of the night, many of which attack companies, journalists, judges, pollsters, or the voters themselves. These attacks are a sign of paranoia. Many business leaders have to think twice about any move for fear that the president will call them. Consumers are worried about their health benefits and they are no longer certain about social security and Medicare. They, and businesses, are spending their money more carefully, which slows down economic growth.

My answer to that? Business leaders must change their mindsets, in light of Trump’s erratic behaviour; he issues executive orders almost daily. His behaviour has been copied by populist leaders abroad with the effect of introducing even more instability into the world economy. 

Are there marketing skills that all MBA students and graduates need to thrive in a VUCA business world?

Most Business programmes are training their students in social and digital skills. They are also making students more aware of the effects of climate change. Professors are increasingly criticising shareholder value as the measure of business success and replacing it with stakeholder value as a more comprehensive measure of business performance. Marketing students graduate with a broader view of the factors that affect corporate image and reputation than previous Business School graduates. 

And finally, do you feel optimistic about business adaptability as the
world becomes more uncertain but also more connected? 

Business literature increasingly emphasises company agility and responsiveness to rapidly changing conditions. Companies need to monitor technological trends, political debates, and economic issues. Companies such as Unilever, Starbucks and Amazon show incredible business adaptability. But many companies are still coasting and need a few more shocks to wake up. My hope is that an increasing number of companies recognise that growing income inequality will hurt, not help them, and that they need to take a more expansive customer benefit and welfare view of what makes an economy strong.

Philip Kotler is the SC Johnson & Son Professor of International Marketing at the Kellogg School of Management, Northwestern University, Evanston, Illinois

Professor Kotler received his Master’s Degree at the University of Chicago and his PhD Degree at MIT, both in economics, conducting post-doctoral work in mathematics at Harvard University and in behavioural science at the University of Chicago.

He is the author of 57 books and has published more than 150 articles in leading journals. He was the first recipient of the American Marketing Association’s ‘Distinguished Marketing Educator Award’ (1985) and has received a host of other accolades, being inducted into the Management Hall of Fame in 2013. 

Kotler has consulted for such companies as IBM, General Electric, AT&T, Honeywell, Bank of America, and Merck in marketing strategy and planning, marketing organisation and international marketing. He has travelled throughout Europe, Asia and South America advising companies on applying economic and marketing science principles to increase competitiveness, and governments on developing the skill sets and resources of their companies for global competition.

He has been Chairman of the College of Marketing of the Institute of Management Sciences, Director of the American Marketing Association, is a member of the Board of Governors of the School of the Art Institute of Chicago and of the Advisory Board of the Drucker Foundation. 

He has received a number of honorary doctoral degrees from several international organisations.  

What is the blockchain?

Blockchains are part of the evolving history of internet technology, so we must grasp their potential, writes William Mougayar

If you cannot understand it without an explanation, you cannot understand it with an explanation’ – Haruki Murakami

Understanding blockchains, the technology underlying cryptocurrencies, in the form of a shared digital ledger, is tricky. You need to understand their message before you can appreciate their potential. In addition to their technological capabilities, blockchains carry with them philosophical, cultural, and ideological underpinnings that must also be understood. 

In terms of defining blockchains, they are essentially digital ledgers, in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly, but unless you’re a software developer, blockchains will not be products you just turn on and use. Blockchains will enable other products that you use, though you may not know there is a blockchain behind them.

It is my belief that the knowledge transfer behind understanding the blockchain is easier than the knowledge about knowing where they will fit. It’s like learning how to drive a car. I could teach you how to drive one, but cannot predict where you will take it. Only you know your particular business or situation, and only you will be able to figure out where blockchains fit – after you have learned what they can do. Of course, we will first go together on road tests and racing tracks to give you some ideas.

Visiting Satoshi’s paper

When Tim Berners-Lee created the first World Wide Web page in 1990, he wrote: ‘When we link information in the web, we enable ourselves to discover facts, create ideas, buy and sell things, and forge new relationships at a speed and scale that was unimaginable in the analogue era.’

In that short statement, Berners-Lee predicted search, publishing, e-commerce, email, and social media – all at once, in a single stroke. The Bitcoin equivalent to that type of prescience by someone who just created something spectacular can be found in Satoshi Nakamato’s 2008 paper, Bitcoin: A Peer-to-Peer Electronic Cash System, arguably the root of modern blockchain-based cryptocurrency innovation.

The paper’s abstract depicts Bitcoin’s foundation and explains its first principles:


A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution


A trusted third party is not required to prevent double-spending.


We propose a solution to the double-spending problem using a peer-to-
peer network
.


The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work.


The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of central processing unit (CPU) power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they’ll generate the longest chain and outpace attackers. 


The network itself requires minimal structure. Messages are broadcast on a best-effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone. 

If you are a non-technical reader, and you focus on the italicised parts, you will start to get the gist of it. Please re-read the above points, until you have got to grips with Nakamoto’s sequential logic. 

Seriously. You will need to believe and accept that validating peer-to-peer transactions is entirely possible just by letting the network perform a trust duty, without central interference or hand-holding. 

Paraphrasing Nakamoto’s paper, we should be left with these points:


peer-to-peer electronic transactions and interactions 


without financial institutions 


cryptographic proof instead of central trust 


put trust in the network instead of in a
central institution. 

As it turns out, the blockchain is that technology invention behind Bitcoin, and what makes this possible. With Satoshi’s abstract still in your mind, let us delve deeper with three different, but complementary, definitions of the blockchain: a technical, business, and legal one. 


Technically, the blockchain is a back-end database that maintains a distributed ledger that can be inspected openly.


Business-wise, the blockchain is an exchange network for moving transactions, value, assets between peers, without the assistance
of intermediaries.


Legally speaking, the blockchain validates transactions, replacing
previously trusted entities.

TECHNICAL: back-end database that maintains a distributed ledger, openly

BUSINESS: exchange network for moving value between peers

LEGAL: a transaction-validation mechanism, not requiring intermediary assistance.

Blockchain capabilities = technical + business + legal.

The web, all over again

The past is not an accurate compass to the future, but understanding where we came from helps us gain an enlightened perspective and a better context for where we are going. The blockchain is simply part of the continuation of the history of Internet technology, represented by the web, as it carries on its journey to infiltrate our world, businesses, society, and government, and across the several cycles and phases that often become visible only in the rear-view mirror. 

The internet was first rolled out in 1983, but was the World Wide Web that gave us its watershed evolutionary moment, because it made information and information-based services openly and instantly available to anyone on earth who had access to the web.

In the same way that billions of people around the world are currently connected to the web, millions (and then billions) of people will be connected to blockchains. We should not be surprised if the velocity of blockchain usage propagation surpasses the historical web users growth. 

By mid-2016, 47% of the world’s 7.4 billion population had an internet connection. In 1995, that number was less than 1%. It took until 2005 to reach 1 billion web users. By contrast, cellular phone usage galloped faster, passing the number of landlines in 2002, and surpassing the world’s population in 2013. As for websites, in 2016, their total number hovered at around one billion. Quite possibly, blockchains will evolve into several flavours, and will become as easily configurable as launching a website on WordPress or Squarespace. 

The blockchain’s usage growth has an advantage on the web’s trajectory, because its starting point is amplified along four segments: web users, cellular phone users, website owners, and any ‘thing’ that benefits from being connected, becoming a ‘smart thing’. This means that blockchain usage will ride on these four categories, instead of purely seeking new users – and the possibilities are endless. 

Once you start to imagine blockchains’ possibilities on your own, without continuously thinking about trying to understand them at the same time, you will be able to move forward in terms of how you can exploit them. 

Further reading

Bitcoin: A Peer-to-Peer Electronic Cash System, https://bitcoin .org/en/bitcoin-paper.

This is an edited extract from The Business Blockchain: Promise, Practice, and Application of the Next Internet Technology by William Mougayar (Wiley, 2016). 

WILLIAM MOUGAYAR is general partner at Virtual Capital Ventures, an early stage tech fund. He is on the board of directors of OB1, the OpenBazaar open source protocol that is pioneering decentralised peer-to-peer commerce; a special advisor to the Ethereum Foundation; a member of OMERS Ventures board of advisors; an advisory board member to the Coin Center; and founder of Startup Management.

He has been described as the most sophisticated blockchain business thinker. He is a blockchain industry insider whose work has already shaped and influenced the understanding of blockchain for people around the world, via his generous blogging and rigorous research insights.

Unpicking the strengths myth

The current emphasis on strengths has fundamentally discouraged people from challenging themselves to become better leaders, argue James M Kouzes and Parry Z Posner, authors of Learning Leadership: The Five Fundamentals of Becoming an Exemplary Leader

For millennia, people have been searching for a magic formula or elixir that explains leadership success: from ancient literature on leadership that searched for the individual kissed by the gods (Charisma) to historical ‘great man approaches’ (already limited by gender bias). However, the current fascination is with the concept of ‘strengths’.

Now, there’s nothing inherently wrong with the notion that there are certain skills, knowledge, and attitudes that produce higher levels of performance in a task, whether it’s sales, engineering, nursing, or hospitality. Leadership is required of all professions, and it has its own set of skills and abilities. So far, so good. But the strengths approach has been misapplied to mean that you should only undertake tasks in which you are strong, and avoid wasting your time attending to your weaknesses; in areas where you don’t have natural talent, you or your organisation should assign tasks to other people.

The emphasis on strengths has fundamentally discouraged people from challenging themselves to become better leaders. That’s not to say that people shouldn’t attend to their strengths, nor that they are not happier and more successful when using their strengths at work and in other aspects of their lives. But as it stands, they can just throw up their hands and say ‘well, envisioning the future just isn’t a strength of mine, so I’m not going to become very good at it’ or ‘I’m not very comfortable letting people know how much I appreciate their accomplishments, so I won’t bother’. 

First, ignoring feedback about things you’re not good at is inconsistent with a lot of research on learning. Second, it’s not very motivating to tell people to give up before they even start, or when things don’t go as well as expected the first time they try them. Finally, this thinking is impractical: organisations can’t bring in a new person every time someone makes a mistake or there’s a new challenge that someone initially doesn’t have the skills and abilities to handle.

Over all the years we’ve been researching leadership, we’ve consistently found that adversity and uncertainty characterise every personal-best leadership experience. Typically, they’re challenges people have never previously faced. When confronting things they haven’t done before, people often have to develop new skills and overcome existing weaknesses and limitations. They make mistakes and may even feel incompetent. If people built only on strengths, they would likely not challenge themselves or their organisations. You simply cannot do your best without searching for new experiences, doing things you’ve never done, making mistakes, and learning from them. Challenge is an important stimulus for leadership and for learning.

Learning is the master skill

We have a question for you: ‘Have you ever learned a new game or a new sport?’ Undoubtedly, your answer is ‘yes’. We get that response every time we ask the question in our classes or leadership development programmes. Invariably every hand in the room goes up. 

We then ask ‘and how many of you got it perfect the first day you played it?’ People chuckle. No hands go up. No one ever gets it right the first time.

There was one occasion, however, when Urban Hilger, Jr raised his hand and said that on the very first day he went skiing he got it perfect. Naturally we were surprised and curious, so we asked Urban to tell us about the experience. Here’s what he said:

‘It was the first day of skiing classes. I skied all day long, and I didn’t fall down once. I was so elated. I felt so good. So I skied up to the instructor and I told him of my great day. You know what the ski instructor said? He told me, “personally, Urban, I think you had a lousy day”. I was stunned. “What do you mean lousy day? I thought the objective was to stand up on these boards, not fall down.” The ski instructor looked me straight in the eyes and replied, “Urban, if you’re not falling, you’re not learning”.’ 

Urban’s ski instructor understood that if you can stand up on your skis all day long the first time out, you’re only doing what you already know how to do and are not pushing yourself to try anything new and difficult. By definition, learning is about something you don’t already know. Those who do what they already know how to do may have lots of experience, but after a while they don’t get any better because they’re not learning anything new. 

Research has shown that teachers, for example, improve during their first five years in the field, as measured by student learning, according to University of Virginia psychology professor Daniel Willingham. He goes on to report that after five years their performance curve goes flat, and a teacher with 20 years of experience, on average, is no better or worse than a teacher with 10. ‘It appears that most teachers work on their teaching until it is above some threshold and they are satisfied with their proficiency,’ concludes Willington. The same might be said about many leaders. 

So ask yourself: ‘Are you pushing yourself to learn something new when it comes to leadership every day? Or, are you just doing what you already know how to do? Are you stretching yourself to go beyond your comfort zone — beyond what you do well enough — and engaging in activities that test you and build new skills?

‘Are you learning?’

This is an exclusive edited extract from Learning Leadership:  The Five Fundamentals of Becoming an Exemplary Leader, for Business Impact by James M Kouzes and Parry Z Posner (published by The Leadership Challenge, a Wiley Brand, 2016)

Further Reading

Daniel T Willingham, Why Don’t Students Like School? A Cognitive Scientist Answers Questions About How the Mind Works and What it Means for the Classroom (San Francisco: Jossey-Bass, 2009)

Leaders never stop learning

Andrew Main Wilson, CEO of the Business Graduates Association, launches Business Impact and outlines the mission and vision of the organisation

Thank you for taking the time to read Business Impact, our very first edition of the magazine which will discuss many of the issues that form the DNA of the biggest ever brand launch in our 52-year history – the Business Graduates Association. 

We were originally founded in 1967 as the Business Graduates Association, before rebranding as AMBA – the Association of MBAs – in 1987, to focus more specifically on accrediting the world’s leading MBA and masters in general management Business School programmes, while also providing membership to AMBA Schools’ students and graduates. 

Now, in 2019, we are relaunching this powerful brand name, which will stand out in a business education market full of difficult-to-remember brand name acronyms. 

Our vision is very clear. BGA will champion the crucial importance of lifelong learning, selecting Business Schools as members who clearly demonstrate a passion for practical, entrepreneurial business education and an evident commitment to social responsibility and sustainability, across all their programme modules. 

BGA will focus on providing membership, validation and accreditation across the entire programme portfolios of high-quality Business Schools. We will also offer free individual BGA membership to the students and alumni
of our BGA Schools. 

Geographically, we will encourage membership from some of the world’s most sophisticated Business Schools, through to inspirational Business Schools in some of the world’s poorest countries, who can demonstrate admirable evidence in making a real difference to the future of their countries’ economies.

I have been very fortunate in interviewing some of the world’s greatest business and political leaders, from Bill Gates to Lady Thatcher, to Archbishop Desmond Tutu. They all share at least one common belief: the best way to increase fair wealth distribution and improve the quality of people’s lives worldwide, is through better education. Ultimately in life, whether a country is capitalist or communist, a democracy or a dictatorship, business funds society. So better business education for all is right at the forefront of improving our world. 

This vision is the driving force behind BGA’s launch. We look forward to welcoming you to the BGA family and making a real difference worldwide to the education of our current and future business leaders. 

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