WEBVTT 00:00:07.416 --> 00:00:10.768 On behalf of our President and CEO, Greg Case, 00:00:10.768 --> 00:00:13.695 and our chief marketing officer, Phil Clement, 00:00:13.695 --> 00:00:19.723 it's a real honor for Aon to be the sponsor of this event today. 00:00:19.723 --> 00:00:22.625 And for many of you, you might know that Aon 00:00:22.625 --> 00:00:28.239 is now a UK-based company, but it's also important for you to know 00:00:28.239 --> 00:00:32.556 that the Aon Foundation, for the past 25 years, 00:00:32.556 --> 00:00:36.290 has made it a priority to support educational activities and 00:00:36.290 --> 00:00:39.963 cultural institutions like the Chicago Humanities Festival 00:00:39.963 --> 00:00:43.841 and the Charter Humanist Circle, that does so much to enrich 00:00:43.841 --> 00:00:48.775 the lives of all of us in this room and everybody in Chicago. 00:00:48.775 --> 00:00:53.174 And even though we're now in the UK, I want everybody in this room to know 00:00:53.174 --> 00:00:57.919 that we intend to continue this commitment, 00:00:57.919 --> 00:01:00.845 and it will remain high on our priority list for the things we do 00:01:00.845 --> 00:01:03.682 to support the community of Chicago for many years to come. 00:01:05.534 --> 00:01:11.113 [applause] 00:01:11.123 --> 00:01:14.504 On behalf of my colleagues at Aon, I want to thank 00:01:14.504 --> 00:01:18.810 the Charter Humanist Circle and its members 00:01:18.810 --> 00:01:22.485 for their very valuable support, and I also want to thank 00:01:22.485 --> 00:01:26.442 Northwestern University Law School for allowing us to use 00:01:26.442 --> 00:01:29.505 the auditorium today. 00:01:30.645 --> 00:01:34.797 At Aon, we believe in the mantra "If we can't measure it, 00:01:34.797 --> 00:01:37.145 we don't do it." 00:01:37.145 --> 00:01:40.334 And because of that, it's a real honor for us 00:01:40.334 --> 00:01:46.401 to be here supporting and introducing Dr. Philip Kotler. 00:01:46.401 --> 00:01:51.524 Dr. Kotler has defined marketing as "the science and art 00:01:51.524 --> 00:01:57.793 of exploring, creating, and delivering value to satisfy 00:01:57.793 --> 00:02:02.743 the needs of a target market at a profit." 00:02:02.743 --> 00:02:06.667 He is recognized around the world as one of the foremost experts 00:02:06.667 --> 00:02:10.905 on business, of marketing, and for his insights on 00:02:10.905 --> 00:02:16.574 how exemplary marketing has the creativity and the power 00:02:16.574 --> 00:02:20.944 to influence global consumers every day. 00:02:22.124 --> 00:02:26.908 In that spirit, I hope you'll join me in welcoming Dr. Philip Kotler. 00:02:26.908 --> 00:02:39.671 [applause] 00:02:39.671 --> 00:02:44.025 Now before I turn the microphone over to Dr. Kotler, 00:02:44.025 --> 00:02:48.732 in the spirit of marketing, maybe many of you in this room know 00:02:48.732 --> 00:02:52.486 that Aon does a great many things globally, but one of the things 00:02:52.486 --> 00:02:55.564 that we've done that has created tremendous brand awareness 00:02:55.564 --> 00:03:01.123 for our firm is our sponsorship of Manchester United football team, 00:03:01.123 --> 00:03:03.746 which by today won 2 to 1 versus Arsenal 00:03:03.746 --> 00:03:05.190 [applause] 00:03:05.190 --> 00:03:07.112 We're at-- Right now we're 00:03:07.112 --> 00:03:08.774 at the top of the premiere league. 00:03:08.774 --> 00:03:12.675 So in that spirit, [laughter] 00:03:12.675 --> 00:03:20.145 I would like to present Dr. Kotler with his very own, personalized 00:03:20.145 --> 00:03:25.967 Manchester United shirt. [applause] 00:03:25.967 --> 00:03:30.679 [Kolter]: Thank you. 00:03:30.679 --> 00:03:33.560 David, thank you very much. 00:03:33.560 --> 00:03:37.095 And I will wear this, in a fantasy way. 00:03:37.095 --> 00:03:38.636 [laughter] 00:03:38.636 --> 00:03:41.758 May I say, I really appreciate your introduction. 00:03:41.758 --> 00:03:45.348 Of all the introductions I've received, yours is the most recent. 00:03:45.348 --> 00:03:49.601 [laughter] 00:03:50.591 --> 00:03:53.968 Nation, nation... 00:03:53.968 --> 00:03:56.017 Oh, you may know of Steven Colbert, 00:03:56.017 --> 00:03:59.056 so I can't pull it off the same way. 00:03:59.056 --> 00:04:04.113 There will be two groups, with respect to marketing. 00:04:04.113 --> 00:04:08.039 There will be a group that doesn't like marketing, 00:04:08.039 --> 00:04:11.330 and I'm going to give you why they don't like marketing 00:04:11.330 --> 00:04:15.036 and the justifications. I will also tell you 00:04:15.036 --> 00:04:19.661 there's another group who loves marketing, so before we're through, 00:04:19.661 --> 00:04:25.138 you will be totally confused, or at least opinionated. 00:04:25.138 --> 00:04:31.272 So, what I want to do is tell you that-- 00:04:31.272 --> 00:04:34.019 These are called confessions of a marketer. 00:04:34.019 --> 00:04:36.883 That's, by the way, borrowed from David Ogilvy, 00:04:36.883 --> 00:04:41.038 who wrote a wonderful book called "Confessions of an Advertising Man." 00:04:41.038 --> 00:04:45.109 And let me move on and say why is marketing a topic 00:04:45.109 --> 00:04:47.676 for the humanities? 00:04:47.676 --> 00:04:52.163 And we would say that there's a couple of reasons. 00:04:52.163 --> 00:04:56.619 One: I regard marketing as a humanistic subject 00:04:56.619 --> 00:05:01.147 because marketing has affected our lifestyles; 00:05:01.147 --> 00:05:06.296 has created, not only affected a lifestyle, but created lifestyles, 00:05:06.296 --> 00:05:09.212 and we should be, from a point of view of popular interest, 00:05:09.212 --> 00:05:11.257 interested in that. 00:05:11.257 --> 00:05:14.324 And it really-- 00:05:14.324 --> 00:05:18.067 I want to say that marketing is very American, 00:05:18.067 --> 00:05:21.201 that it's beginnings are very American. 00:05:21.201 --> 00:05:25.297 That doesn't mean there weren't manifestations of marketing earlier, 00:05:25.297 --> 00:05:28.438 and as a matter of fact, I'd like to give you a very short history 00:05:28.438 --> 00:05:32.972 of marketing, so that you understand what we mean by the word. 00:05:32.972 --> 00:05:37.951 As a matter of fact, if you took a dictionary, a Webster's dictionary, 00:05:37.951 --> 00:05:41.732 in the year 1900, and looked up the word marketing, 00:05:41.732 --> 00:05:44.570 you would not find it in the dictionary. 00:05:44.570 --> 00:05:48.888 Yes, you would find the word market, but not the word marketing. 00:05:48.888 --> 00:05:54.736 If you then picked a dictionary... 1910. You would find the word 00:05:54.736 --> 00:05:59.374 marketing in it, because marketing is about 100 years old. 00:05:59.374 --> 00:06:03.868 And it's much more than selling. So let me show you... 00:06:05.658 --> 00:06:08.917 Let's start... Let's start biblically. 00:06:08.917 --> 00:06:12.796 [laughter] Let's start biblically. 00:06:12.796 --> 00:06:16.724 Who is the marketer in this picture? 00:06:16.724 --> 00:06:24.137 This is the biblical narrative. Who was the first marketer in the world? 00:06:24.137 --> 00:06:27.045 I hear Eve... 00:06:27.045 --> 00:06:29.068 The snake. 00:06:29.068 --> 00:06:32.911 I hate to admit it, because snake sounds like sneaky, and so on 00:06:32.911 --> 00:06:34.140 and so forth. 00:06:34.140 --> 00:06:38.783 But the fact is that it was the snake who sold Eve 00:06:38.783 --> 00:06:43.165 on getting Adam to eat an apple. So it goes way back. 00:06:43.165 --> 00:06:47.917 At least selling goes way back. Now let's go further. 00:06:47.917 --> 00:06:51.861 Here is the father of marketing. 00:06:51.861 --> 00:06:55.292 Wow, what an insult to him! [laughter] 00:06:55.292 --> 00:06:57.742 I mean, that's Aristotle. 00:06:57.742 --> 00:07:01.704 Recently I was at a group, little party, and we were speculating 00:07:01.704 --> 00:07:05.902 who we would like to meet most if we had an hour with such a person, 00:07:05.902 --> 00:07:11.371 and it boiled down to Plato, Socrates, or Aristotle. 00:07:11.371 --> 00:07:13.132 That's a hard one. 00:07:13.132 --> 00:07:17.669 It turns out that my vote went for Aristotle. 00:07:17.669 --> 00:07:24.358 Aristotle was Google, at the time. He knew more about everything 00:07:24.358 --> 00:07:29.231 than anyone in the world. He wrote on science, politics, 00:07:29.231 --> 00:07:35.099 economics, rhetoric, art, and everything. 00:07:35.099 --> 00:07:40.768 Now, why do I say that he had some marketing impact? 00:07:40.768 --> 00:07:48.120 Let me read the definition of rhetoric. He's not the founder of rhetoric, 00:07:48.120 --> 00:07:53.489 by the way. The founders were the sophists, around 600 B.C. 00:07:53.489 --> 00:07:59.009 They were a group who wanted to use selling and speech and persuasion 00:07:59.009 --> 00:08:04.609 for their own devious ends. But Aristotle put the i-- 00:08:04.609 --> 00:08:08.422 the discipline of rhetoric on its feet. 00:08:08.422 --> 00:08:13.728 Rhetoric is the art that aims to improve the facility of speakers or writers 00:08:13.728 --> 00:08:19.100 who attempt to inform, persuade, or motivate particular audiences 00:08:19.100 --> 00:08:24.368 in specific situations. It is the faculty of the observing, 00:08:24.368 --> 00:08:28.471 in any given case, the available means of persuasion. 00:08:28.471 --> 00:08:34.592 So, in a sense, he could be the father of selling. 00:08:34.592 --> 00:08:40.070 The idea of getting someone to do something that they might 00:08:40.070 --> 00:08:44.431 not have done otherwise. So, let's move on, about other 00:08:44.431 --> 00:08:50.049 early manifestations of marketing. I know many of you cannot necessarily 00:08:50.049 --> 00:08:54.987 read this, so I will read it, but the first department store 00:08:54.987 --> 00:08:59.295 opened when, and in what country? Normally if you're in France 00:08:59.295 --> 00:09:01.695 and you ask the question, they would say of course 00:09:01.695 --> 00:09:06.777 we invented the department store. It was about 1845. 00:09:06.777 --> 00:09:09.826 The same time we invented paperweights and some other things. 00:09:09.826 --> 00:09:15.848 But it turns out that the first department store was in Japan. 00:09:15.848 --> 00:09:19.786 Mitsui company, which is still alive and well. 00:09:19.786 --> 00:09:24.246 So that's where one of our retailing forms started. 00:09:24.246 --> 00:09:29.715 The next one is the first newspaper that carried an ad. 00:09:29.715 --> 00:09:34.277 There were newspapers early, but the first ad appeared in England, 00:09:34.277 --> 00:09:41.877 in 1652, and it advertised coffee. And then, the first ad agency 00:09:41.877 --> 00:09:47.876 started a little later. Well, much later. 00:09:47.876 --> 00:09:53.386 N.W. Ayer, which is still a prosperous advertising agency. 00:09:53.386 --> 00:09:59.127 First time a brand was put on a commodity, the commodity being soap, 00:09:59.127 --> 00:10:03.677 the brand name was Pear's soap. 00:10:03.677 --> 00:10:06.774 And then the first packaging appeared a little later, 00:10:06.774 --> 00:10:11.106 and finally we had a marketing research department formed. 00:10:11.106 --> 00:10:17.147 So, now the word markets has been around all these years. 00:10:17.147 --> 00:10:19.707 The Middle Ages had markets. In fact, whenever-- 00:10:19.707 --> 00:10:23.658 I would even say the agora, in ancient Greece-- 00:10:23.658 --> 00:10:28.015 that means the marketplace-- In ancient Greece, 00:10:28.015 --> 00:10:32.217 people would come on a particular day to sell things. 00:10:32.217 --> 00:10:35.705 In the Middle Ages, there were market days. 00:10:35.705 --> 00:10:39.006 The word marketing wasn't there. It was just market. 00:10:39.006 --> 00:10:42.707 And trade was always there, because trade, through history, 00:10:42.707 --> 00:10:48.047 has taken place between people and regions and countries. 00:10:48.047 --> 00:10:55.976 So all that is there, and it was in the decade of the 1900s 00:10:55.976 --> 00:11:01.081 that marketing books first appeared. And the interesting thing is 00:11:01.081 --> 00:11:05.080 who wrote those first marketing books. Were they sociologists? 00:11:05.080 --> 00:11:10.662 What was the discipline of the people who wrote the first marketing books? 00:11:10.662 --> 00:11:13.067 Any guesses? 00:11:13.067 --> 00:11:16.224 They weren't physicists or chemists. 00:11:16.224 --> 00:11:17.726 They were economists. 00:11:17.726 --> 00:11:22.005 So why would economists start a subject called marketing? 00:11:22.005 --> 00:11:25.356 And the answer is: they were disillusioned economists. 00:11:25.356 --> 00:11:27.726 [laughter] 00:11:27.726 --> 00:11:32.517 They couldn't find any mention of advertising in the discourse 00:11:32.517 --> 00:11:36.226 of economists. In other words, never did Adam Smith, 00:11:36.226 --> 00:11:44.356 Thomas Malthus, David Ricardo, even Alfred Marshall, and so on, 00:11:44.356 --> 00:11:48.610 they rarely talked about other forces that shaped demand. 00:11:48.610 --> 00:11:52.778 The only force that shaped demand in their mind was price. 00:11:52.778 --> 00:11:56.800 You know the famous curve. Raise the price, demand will go down, 00:11:56.800 --> 00:12:00.108 lower the price, you can sell more. Price was the only thing 00:12:00.108 --> 00:12:02.924 that affected demand. So these economists, 00:12:02.924 --> 00:12:07.936 or institutional economists, said "Hey, you've got to factor in advertising." 00:12:07.936 --> 00:12:14.106 You've got to factor in retail stores, whole sales, jobbers, agents. 00:12:14.106 --> 00:12:17.784 And it was the neglect of the classical economists 00:12:17.784 --> 00:12:22.416 to not really texture the marketplace and the way an economy worked 00:12:22.416 --> 00:12:24.945 that led to marketing. So marketing is technically 00:12:24.945 --> 00:12:27.324 a branch of economics. 00:12:27.324 --> 00:12:32.696 Now who helped developed this field of marketing? 00:12:32.696 --> 00:12:37.396 Now, probably you don't recognize maybe anyone here. 00:12:37.396 --> 00:12:39.710 There's one person you might recognize. 00:12:39.710 --> 00:12:42.726 I don't know if you can see some of these faces, 00:12:42.726 --> 00:12:45.635 but someone recognize anyone there? 00:12:45.635 --> 00:12:47.064 Yeah. 00:12:47.064 --> 00:12:50.635 Dale Carnegie. Dale Carnegie is here, 00:12:50.635 --> 00:12:54.536 and his book was "How to Win Friends and Influence People," 00:12:54.536 --> 00:12:57.076 because in doing this, I wanted to find out 00:12:57.076 --> 00:13:00.364 who was the exemplar of the selling method. 00:13:00.364 --> 00:13:02.466 "How to Win Friends and Influence People" 00:13:02.466 --> 00:13:06.255 But let me give you the whole picture. 00:13:06.255 --> 00:13:09.325 Ernest Dichter. Some of you may know of. 00:13:09.325 --> 00:13:14.965 He was a motivational psychologist, and he could explain why people 00:13:14.965 --> 00:13:22.626 didn't like to eat prunes, why cigars were offending some people, 00:13:22.626 --> 00:13:26.057 and all kinds of things. And his book called 00:13:26.057 --> 00:13:29.286 "The Study of Desire." He apparently studied with 00:13:29.286 --> 00:13:35.115 Sigmund Freud, and he brought that kind of mind to marketing. 00:13:35.115 --> 00:13:38.937 But he had an opponent named Alfred Pollitz, who was not 00:13:38.937 --> 00:13:46.948 a head shrinker--We call him a... a nose counter. 00:13:46.948 --> 00:13:51.106 The expressions we would use if you were very psychological, 00:13:51.106 --> 00:13:55.642 you were a head shrinker, and otherwise, you were a nose counter. 00:13:55.642 --> 00:14:00.188 Namely, a surveyor. You surveyed-- You found out what percentage 00:14:00.188 --> 00:14:05.415 of people were of a certain age and why did they buy a particular product. 00:14:05.415 --> 00:14:10.976 Julius Rosenwald was very much behind the formation of 00:14:10.976 --> 00:14:13.877 the Sears company, which was a important episode in 00:14:13.877 --> 00:14:17.331 the development of our retail chains. 00:14:17.331 --> 00:14:21.099 Lester Wunderman deserves credit as exemplifying the use 00:14:21.099 --> 00:14:25.980 of direct mail and catalogs. That you can sell more directly. 00:14:25.980 --> 00:14:30.066 You don't have to be in the store. You can get people to order goods 00:14:30.066 --> 00:14:33.077 by mail and phone. 00:14:33.077 --> 00:14:37.727 David Ogilvy is the exemplar advertising person, 00:14:37.727 --> 00:14:41.016 then Stanley Marcus, of Neiman Marcus, 00:14:41.016 --> 00:14:45.679 was a fella who could walk into any retail store and give them 00:14:45.679 --> 00:14:49.836 100 suggestions on how to improve the layout, the size of the aisles, 00:14:49.836 --> 00:14:55.208 and make a difference in the voulme of business. 00:14:55.208 --> 00:14:59.846 Edward Bernays is the father of public relations in the United States. 00:14:59.846 --> 00:15:03.087 His name has sort of become obscure, but he really was 00:15:03.087 --> 00:15:06.235 a very important person. The word propaganda 00:15:06.235 --> 00:15:11.085 was often used in connection with his work, because people thought it was 00:15:11.085 --> 00:15:17.196 a model to motivate you to feel a certain way about anything, 00:15:17.196 --> 00:15:21.924 regardless of the standards involved. And then there's Dale Carnegie. 00:15:21.924 --> 00:15:26.409 In any case, how did marketing get its start? 00:15:26.409 --> 00:15:29.686 Marketing got its start in sales departments. 00:15:29.686 --> 00:15:36.091 Every company has a sales group. And the sales people really want 00:15:36.091 --> 00:15:39.664 to be in the office of a customer, because that's the only way 00:15:39.664 --> 00:15:43.875 something happens. So they don't want to do a lot of homework. 00:15:43.875 --> 00:15:46.166 For example, three things they didn't want to do. 00:15:46.166 --> 00:15:49.727 They didn't want to do consumer research in a systematic way, 00:15:49.727 --> 00:15:53.534 because that's taking their time away from selling to customers. 00:15:53.534 --> 00:15:58.611 Secondly, they would've liked someone else to find leads. 00:15:58.611 --> 00:16:02.084 Now a lead means a prospect. In fact, we distinguish between 00:16:02.084 --> 00:16:07.056 a hot lead: "Oh boy, he's ready to buy. He even called us to buy." 00:16:07.056 --> 00:16:11.418 a warm lead, a cold lead, so on. Someone else should do that 00:16:11.418 --> 00:16:15.726 for the sales people, so they don't waste their time making calls. 00:16:15.726 --> 00:16:19.089 And the third thing was someone had to prepare 00:16:19.089 --> 00:16:23.568 brochures and ads. And the salesman is not skilled. 00:16:23.568 --> 00:16:27.425 The salesperson isn't skilled at communicating through advertising 00:16:27.425 --> 00:16:32.495 and brochures. So sales departments added three people, or hired them 00:16:32.495 --> 00:16:37.454 from time to time. Later on, it exploded 00:16:37.454 --> 00:16:42.949 to the day today, when we have multinationals running-- 00:16:42.949 --> 00:16:46.466 with marketing-- In other words, marketing-- 00:16:46.466 --> 00:16:50.616 Those three people split from sales and became big enough to become 00:16:50.616 --> 00:16:53.296 its own department. And so, some people 00:16:53.296 --> 00:16:57.798 in the audience here may be a chief marketing officer. 00:16:57.798 --> 00:17:01.246 The old name was Vice President of marketing, but I like the name 00:17:01.246 --> 00:17:06.148 chief marketing officer because that person now is part of 00:17:06.148 --> 00:17:09.740 the chief officers. Chief information officer, chief financial officer, 00:17:09.740 --> 00:17:15.797 chief innovation officer, and the status has moved up. 00:17:15.797 --> 00:17:20.997 Some of you may be brand managers, may have been in your past experience. 00:17:20.997 --> 00:17:24.366 Category managers, market segment managers, 00:17:24.366 --> 00:17:29.336 managing distribution channels, like retail or wholesale things, 00:17:29.336 --> 00:17:34.369 pricing manager, communication manager, database manager, 00:17:34.369 --> 00:17:36.996 direct marketers, internet people, and so on. 00:17:36.996 --> 00:17:41.097 So, marketing is well-established. 00:17:41.097 --> 00:17:46.205 Now, the character of a marketing department depends very much 00:17:46.205 --> 00:17:50.829 on what the CEO thinks of marketing. 00:17:50.829 --> 00:17:57.770 So, the 1P CEO is a person who took over a company, 00:17:57.770 --> 00:18:03.566 and he says, "I don't like marketing, but I know I need it, 00:18:03.566 --> 00:18:06.984 and all I want from marketing is some communications. 00:18:06.984 --> 00:18:12.068 I just want someone to broadcast and promote us." 00:18:12.068 --> 00:18:15.515 So, that person is missing a lot of other things 00:18:15.515 --> 00:18:20.858 made up by other CEOs, who are 4P CEOs. 00:18:20.858 --> 00:18:25.365 Now a 4P CEO says, "I need a marketing plan." 00:18:25.365 --> 00:18:29.636 And the plan has to mention product--that's the first P. 00:18:29.636 --> 00:18:32.926 What about our product? What's good about it? What are the features? 00:18:32.926 --> 00:18:37.395 Price: what should it be priced at? Place: where should it be 00:18:37.395 --> 00:18:41.137 made accessible? Online, offline, in stores? 00:18:41.137 --> 00:18:43.166 And finally promotion. 00:18:43.166 --> 00:18:47.642 So that's a more educated view of the potential of marketing. 00:18:47.642 --> 00:18:52.287 But there's even a better view, and that's called the CEO who says, 00:18:52.287 --> 00:18:56.497 "No! I don't want to start with 4 Ps, I want to start with the fact 00:18:56.497 --> 00:19:00.437 the market is complex." There's a lot of segments. 00:19:00.437 --> 00:19:06.415 Each segment deserves its own plan. In fact, one thing we've learned 00:19:06.415 --> 00:19:09.764 that if you just have one value proposition for the whole market, 00:19:09.764 --> 00:19:14.621 it really doesn't trigger anything in many parts of the market. 00:19:14.621 --> 00:19:19.918 So that CEO says, "What segment should we go after? 00:19:19.918 --> 00:19:23.488 And what position should we take with each segment? 00:19:23.488 --> 00:19:27.369 What should we say about ourselves, in how we can satisfy their needs?" 00:19:27.369 --> 00:19:34.100 Now there's even a higher type CEO, which is exemplified by A.G. Lafley, 00:19:34.100 --> 00:19:37.824 who ran Procter & Gamble, who recently retired. 00:19:37.824 --> 00:19:42.648 When you ask A.G. Lafley what's marketing, what's your picture, 00:19:42.648 --> 00:19:46.719 he says, "Well, what do you mean? Marketing is everything." 00:19:46.719 --> 00:19:47.980 [laughter] 00:19:47.980 --> 00:19:50.139 Now, marketing is everything. What he means is 00:19:50.139 --> 00:19:53.710 everything starts with the customer. No customers, no business. 00:19:53.710 --> 00:19:58.346 And I think he's making that point very much. 00:19:58.346 --> 00:20:04.157 Now, moving on, there's a lot of things that a chief marketing officer does, 00:20:04.157 --> 00:20:08.828 and I won't go into any detail, but there's a lot of tasks, 00:20:08.828 --> 00:20:14.365 and the sad fact is that sometimes the chief marketing officer only lasts 00:20:14.365 --> 00:20:18.507 on the average of two years. In other words, does a job, 00:20:18.507 --> 00:20:24.942 and maybe the CEO is not feeling that it really brought in enough new business 00:20:24.942 --> 00:20:31.518 that the cost of the CMO exceeds what the value of the CMO is. 00:20:31.518 --> 00:20:36.498 There's a lot to go into about why CMOs on the average 00:20:36.498 --> 00:20:40.088 hold on to their job for two years. By the way, some of them 00:20:40.088 --> 00:20:43.718 get a better job after two years. They become something higher 00:20:43.718 --> 00:20:47.329 than the chief marketing officer. Some of them actually are pirated away 00:20:47.329 --> 00:20:52.006 because they're so good, they go to another company to be the CEO. 00:20:52.006 --> 00:20:55.996 But in any case, marketing-- commercial marketing, 00:20:55.996 --> 00:21:01.148 which I've been talking about, could've stayed only commercial, 00:21:01.148 --> 00:21:05.947 and then I got involved in-- with Professor Sid Levy at Northwestern 00:21:05.947 --> 00:21:09.716 We started the idea of broadening marketing, 00:21:09.716 --> 00:21:15.499 because the set of tools that we use to address consumers could be used 00:21:15.499 --> 00:21:18.496 in other areas. So we have a thing 00:21:18.496 --> 00:21:22.676 called place marketing. I will get a call from a city, let's say, 00:21:22.676 --> 00:21:27.037 and a city says, "We're not getting enough tourists. We don't have 00:21:27.037 --> 00:21:32.048 any attractions for them to come and see. I would like to get a factory 00:21:32.048 --> 00:21:38.969 located here. We would like some digital people to move here, who know digital-- 00:21:38.969 --> 00:21:42.016 We want to start a Silicon Valley." So that's place marketing. 00:21:42.016 --> 00:21:45.936 The marketing of a place. How do you dress it up and make it attractive? 00:21:45.936 --> 00:21:48.952 Against all of the other competitive places. 00:21:48.952 --> 00:21:53.433 The second-- Person marketing. 00:21:53.433 --> 00:21:58.005 There's an agency called William Morris, and a young singer might go to 00:21:58.005 --> 00:22:02.516 William Morris and say, "look, I want to get ahead. I want to appear 00:22:02.523 --> 00:22:10.423 on Jay Leno's show. I want to-- I want to move up to being noticed. 00:22:10.423 --> 00:22:14.541 I want high visibility." I wrote a book with the title 00:22:14.541 --> 00:22:17.619 "High Visibility." How do you get that visibility. 00:22:17.619 --> 00:22:21.921 So, William Morris will look at her and her performance 00:22:21.921 --> 00:22:24.721 and maybe say, "You know, in a sense-- 00:22:24.721 --> 00:22:30.044 Don't be offended, but we can make you into a better product." 00:22:30.044 --> 00:22:33.996 That's sort of the language. You know, do your hair differently, 00:22:33.996 --> 00:22:42.318 walk a little-- dress differently. Actually, we're going to use you to 00:22:42.318 --> 00:22:49.035 reignite the archetype of Joan Baez. You know, Joan Baez, the folk singer. 00:22:49.035 --> 00:22:52.981 Well, we need a new Joan Baez. And so, we can recast you 00:22:52.981 --> 00:22:59.678 and form you into the kind of person we all miss, and so on. 00:22:59.678 --> 00:23:04.358 Now, social marketing is another branch. 00:23:04.358 --> 00:23:10.386 Today there are 2,000 social marketers around the world, trying to help people 00:23:10.386 --> 00:23:17.593 eat better, exercise more, say no to drugs, stop smoking cigar-- 00:23:17.593 --> 00:23:22.235 get off of tobacco, say no to a number of things. 00:23:22.235 --> 00:23:26.305 Positive behaviors and negative behaviors. 00:23:26.305 --> 00:23:30.677 By the way, my memory is that Sweden was one of the first countries 00:23:30.677 --> 00:23:39.167 to want to raise a nation of nonsmokers, non-drinkers, all the vices. 00:23:39.167 --> 00:23:45.124 And it starts at the primary school level, that you could technically raise people 00:23:45.124 --> 00:23:51.753 to avoid those vices, if that was thought to be good public policy. 00:23:51.753 --> 00:23:54.375 So that's social marketing. Now, political marketing, 00:23:54.375 --> 00:24:00.502 we're saturated with. And I think it's degenerated, 00:24:00.502 --> 00:24:05.502 but that's another thing. Fundraising is part of marketing. 00:24:05.502 --> 00:24:10.825 I mean, fundraising is an odd form, because you're not exchanging. 00:24:10.825 --> 00:24:16.294 Everything else is sort of an exchange of values. Fundraising seems to be 00:24:16.294 --> 00:24:19.076 a one-way transfer. Here's some money 00:24:19.076 --> 00:24:22.746 for the museum. But any fundraiser knows 00:24:22.746 --> 00:24:27.199 there's something that should come back to the person who is the donor 00:24:27.199 --> 00:24:31.139 and supporter of a museum, and working that way is important. 00:24:31.139 --> 00:24:37.545 So these are offshoots. Now all of us do marketing. 00:24:37.545 --> 00:24:42.226 If you read the list, we all do marketing. Did you ever compete for a job when 00:24:42.226 --> 00:24:45.944 you knew there were other applicants? Didn't you dress up as well as you could 00:24:45.944 --> 00:24:50.380 and even prepare what you're going to say, and so on? 00:24:50.380 --> 00:24:54.060 Did you compete for a desirable apartment which was scarce? 00:24:54.060 --> 00:24:58.893 Or a member of the opposite sex, if you wanted to court someone. 00:24:58.893 --> 00:25:05.910 So, in a sense, we're human animals who know how to make an impression 00:25:05.910 --> 00:25:10.898 and market ourselves, to some extent. 00:25:10.898 --> 00:25:14.818 What do we dislike about marketing? 00:25:14.818 --> 00:25:19.262 Well, there's a long list. It's a rather long list. 00:25:19.262 --> 00:25:26.166 Intrusion, interruption, exaggeration, and so on and so forth. 00:25:26.166 --> 00:25:32.067 And I really made a list that's a little separate from that. 00:25:32.067 --> 00:25:37.262 Here are some of the criticisms. Marketers get consumers to want 00:25:37.262 --> 00:25:40.636 and spend more than they can afford. 00:25:40.636 --> 00:25:46.856 And we know that from the financial disaster that people were buying homes 00:25:46.856 --> 00:25:51.707 with maybe nothing down. Marketers are skilled at 00:25:51.707 --> 00:25:55.389 creating grand differentiation where it shouldn't exist. 00:25:55.389 --> 00:25:59.000 Like with commodities, you know, a chicken is a chicken, cement is cement. 00:25:59.000 --> 00:26:02.632 So they spend a lot of time trying to tell you their cement is really better, 00:26:02.632 --> 00:26:06.967 their salt is really better, and so on. Marketers want to produce and sell 00:26:06.967 --> 00:26:12.091 more goods without considering the resource and environmental costs 00:26:12.091 --> 00:26:16.472 of producing the goods. The planet Earth is affected 00:26:16.472 --> 00:26:21.720 by the amount of production and the care with which it's done. 00:26:21.720 --> 00:26:26.391 Marketers had not paid sufficient attention to product safety. 00:26:26.391 --> 00:26:31.403 We know that because Ralph Nader made his career, basically, car-- 00:26:31.403 --> 00:26:35.671 the unsafety in cars, and then we got lead poisoning, 00:26:35.671 --> 00:26:38.804 we got asbestos problems, and so on. 00:26:38.804 --> 00:26:43.003 Here's a serious criticism. Marketers-- and this is not all marketers-- 00:26:43.003 --> 00:26:46.963 these are some particular companies, and so on. 00:26:46.963 --> 00:26:51.423 Marketers favor giving the public what it wants, whether its good or not for them. 00:26:51.423 --> 00:26:58.011 Sure, I'll sell you cigarettes. I'll sell you anything that will make money. 00:26:58.011 --> 00:27:03.422 Therefore marketing promotes a materialistic mindset, 00:27:03.422 --> 00:27:09.923 that-- we get turned on to more of a materialistic world, 00:27:09.923 --> 00:27:14.811 a world of ever-changing products and services and keeping up with the Jones 00:27:14.811 --> 00:27:16.792 and some of that. 00:27:16.792 --> 00:27:22.231 Marketers rarely talk about sane consumption. 00:27:22.231 --> 00:27:26.945 Yeah, some beer companies say, "Please enjoy our beer, but don't 00:27:26.945 --> 00:27:33.961 drink too much." That's nice that they-- No one listens to that, and you still 00:27:33.961 --> 00:27:39.014 have binge-drinking, but they're trying to do what they can 00:27:39.014 --> 00:27:43.175 and so on and so forth. Now, let me just say 00:27:43.175 --> 00:27:46.537 there's another side. This is important too, 00:27:46.537 --> 00:27:53.488 because it's not a simple picture. The other side of it is 00:27:53.488 --> 00:27:58.635 Marketing has undoubtedly raised the standard of living 00:27:58.635 --> 00:28:02.241 in the United States. People don't naturally 00:28:02.241 --> 00:28:07.423 buy new things. In other words, do you know, people used to keep 00:28:07.423 --> 00:28:10.433 their refrigerators, which weren't refrigerators at the time, 00:28:10.433 --> 00:28:15.412 they were ice boxes and they would keep going out and getting some ice 00:28:15.412 --> 00:28:20.483 and putting it in the box, and so on. And even the washing machines 00:28:20.483 --> 00:28:24.364 were very slow to take-- In other words, people-- 00:28:24.364 --> 00:28:26.922 It would be very expensive to buy a new appliance, 00:28:26.922 --> 00:28:30.231 but marketers persisted in saying your life will be better with 00:28:30.231 --> 00:28:33.701 new appliances, and that's one of its jobs. 00:28:33.701 --> 00:28:39.015 I would even go so far as to say that marketing is so connected 00:28:39.015 --> 00:28:43.924 to the idea of the middle class. We're talking about preserving 00:28:43.924 --> 00:28:48.211 and building the middle class, and the lifestyle that goes with it, 00:28:48.211 --> 00:28:53.733 and marketing is an essential definer of what it is to be--and want-- 00:28:53.733 --> 00:28:58.021 what it is to want, as a member of the middle class. 00:28:58.021 --> 00:29:03.213 Marketing in the form of social marketing has helped improve 00:29:03.213 --> 00:29:06.082 a lot of things. You know, one of the first causes 00:29:06.082 --> 00:29:09.722 that marketing turned to was the environment and waste 00:29:09.722 --> 00:29:15.412 and the ill-effects of some products, and so on. 00:29:15.412 --> 00:29:18.303 Preserving the environment was one of the first things that 00:29:18.303 --> 00:29:21.201 social marketers got into. 00:29:21.201 --> 00:29:25.741 Now they're into obesity as a problem, littering as a problem, 00:29:25.741 --> 00:29:29.465 and other problems. 00:29:29.465 --> 00:29:33.469 Marketing is very important to the cultural world. 00:29:33.469 --> 00:29:37.600 Museums, performing arts, and one of the big problems 00:29:37.600 --> 00:29:43.971 that cultural institutions are facing, especially in the performing arts, 00:29:43.971 --> 00:29:50.079 is the aging of audiences. How do you get people 00:29:50.079 --> 00:29:56.131 who are in their forties to go to opera, to go to ballet, and so on. 00:29:56.131 --> 00:29:59.770 It's called the graying of the audiences, and maybe that problem has 00:29:59.770 --> 00:30:04.272 been with us for a long time, but marketers are at work 00:30:04.272 --> 00:30:07.862 doing segmentation, targeting, positioning, in order to 00:30:07.862 --> 00:30:14.217 make sure that all seats are filled in the theater, and also the museums 00:30:14.217 --> 00:30:19.998 are very busy, as marketing institutions, because they have to get visitors, 00:30:19.998 --> 00:30:23.750 they have to get donors, they have to get government grants, 00:30:23.750 --> 00:30:30.362 so marketing is almost an intrinsic function today that's going on. 00:30:30.362 --> 00:30:33.410 But let me-- 00:30:33.410 --> 00:30:37.619 This is not time to take a vote. Do you like marketing 00:30:37.619 --> 00:30:41.960 or you don't like marketing. But let me show you that 00:30:41.960 --> 00:30:48.621 the feeling-- the negative feelings about marketing came up from these people. 00:30:48.621 --> 00:30:54.612 The attackers. They attacked marketing. Do you recognize anyone? 00:30:54.612 --> 00:31:00.110 You see Ralph Nader? I don't... There he is. Yeah. 00:31:00.110 --> 00:31:03.418 Who else? 00:31:07.158 --> 00:31:11.150 Well, it is Ralph Nader. "Unsafe at Any Speed." 00:31:11.150 --> 00:31:14.588 Rachel Carson, by the way, deserves so much more credit 00:31:14.588 --> 00:31:18.566 than we've given to her for her book on the Silent Spring, which was about 00:31:18.566 --> 00:31:23.399 the chemical pollution, the pesticides that were getting into our spring water, 00:31:23.399 --> 00:31:26.780 and so on. Vance Packard, who popularized the idea 00:31:26.780 --> 00:31:30.797 that we are hidden persuaders. That when you go into a movie theater, 00:31:30.797 --> 00:31:35.396 you don't know this but an ad is sort of flashing to go and get some popcorn 00:31:35.396 --> 00:31:38.623 before you sit down. Subliminal advertising, 00:31:38.623 --> 00:31:42.068 which never did happen, but the hidden persuaders. 00:31:42.068 --> 00:31:46.878 And then John Kenneth Galbraith, who pointed out that while we spend 00:31:46.878 --> 00:31:51.818 so much money in making enough deodorants for any type of interest 00:31:51.818 --> 00:31:56.003 you have in deodorants, in the public sector-- 00:31:56.003 --> 00:31:58.876 In the public sector, you've got streets that are littered, 00:31:58.876 --> 00:32:01.686 and there's some garbage, and there's slow traffic, and-- 00:32:01.686 --> 00:32:07.143 And so we have a good private sector, but we can't enjoy it because 00:32:07.143 --> 00:32:12.944 the public sector doesn't have the public good that would facilitate things. 00:32:12.944 --> 00:32:16.898 You've got Naomi Klein, who's probably the prototype 00:32:16.898 --> 00:32:22.070 person now for attacking branding. Brands, brands, they're awful. 00:32:22.070 --> 00:32:26.037 You're paying more than you need to pay. 00:32:26.037 --> 00:32:30.508 The book is called "No Logo," logo being another name for brand. 00:32:30.508 --> 00:32:35.878 And Michael Sandel is-- has this new book out, which is really interesting 00:32:35.878 --> 00:32:39.997 and worth reading. He's the fella who ran a course on justice, 00:32:39.997 --> 00:32:47.437 and would ask groups about this size at Harvard, "What is the just thing to do 00:32:47.437 --> 00:32:50.301 in each situation?" But his new book is called 00:32:50.301 --> 00:32:53.668 "What Money Can't Buy: The Moral Limits of Marketing" 00:32:53.668 --> 00:32:57.049 where he points out that if you're in jail in California 00:32:57.049 --> 00:33:02.407 and you don't like the cell, you can pay for a better cell. 00:33:02.407 --> 00:33:05.897 You know, maybe one with a computer if you want a computer, and so on. 00:33:05.897 --> 00:33:12.037 But he's also-- he thinks today our culture divides people 00:33:12.037 --> 00:33:16.543 in social classes more clearly. We used to go to ball games; 00:33:16.543 --> 00:33:19.835 I would sit next to someone who was rich and someone who was poor. 00:33:19.835 --> 00:33:22.647 We'd all stand in the same line for hot dogs. 00:33:22.647 --> 00:33:26.726 Today, the guys who are rich are up in the sky box, 00:33:26.726 --> 00:33:31.847 and he calls it the sky box-ification of the United States. The sky box-ification. 00:33:31.847 --> 00:33:37.328 They're eating filet mignon and we peasants are down there having-- 00:33:37.328 --> 00:33:42.028 standing in line for our hot dog. So we are not meeting each other 00:33:42.028 --> 00:33:48.349 as we used to, in the older days. It's a very interesting treatment. 00:33:48.349 --> 00:33:54.812 I like to quote Will Rogers with this remark: "If advertisers spent 00:33:54.812 --> 00:33:59.381 the same amount of money that they-- on improving the product 00:33:59.381 --> 00:34:03.563 as they do on advertising, they wouldn't have to advertise it. And that's-- 00:34:03.563 --> 00:34:07.572 By the way, that's a very profound observation, because in the age 00:34:07.572 --> 00:34:15.164 of the internet, it's so much easier to talk about a product you like 00:34:15.164 --> 00:34:19.552 to others and also about a product you don't like. 00:34:19.552 --> 00:34:24.383 And in a sense, if this goes far enough, there will be no bad companies 00:34:24.383 --> 00:34:30.645 anymore. It would be not possible for a company to be a bad company, 00:34:30.645 --> 00:34:35.724 because the word of mouth will sink it. 00:34:35.724 --> 00:34:43.583 So he's sort of touching on that point. Make-- Do a good job, and don't-- 00:34:43.583 --> 00:34:47.652 and others will advertise the good job you did. 00:34:47.652 --> 00:34:53.091 Now, I want to add another group, and this is a group of visionaries, 00:34:53.091 --> 00:34:56.452 and I'd like to call them our best marketers. 00:34:56.452 --> 00:35:01.654 But they're not necessarily the chief marketing officer, 00:35:01.654 --> 00:35:06.253 they're CEOs. But what-- Their contribution has been 00:35:06.253 --> 00:35:10.290 the kind you want from your chief marketing officers. 00:35:10.290 --> 00:35:13.179 So who do you see here? Do you know any of those people? 00:35:13.179 --> 00:35:15.683 [audience murmuring] 00:35:15.683 --> 00:35:18.903 Yeah. You've got to know some of them. But you probably don't know 00:35:18.903 --> 00:35:27.879 the first one. Ingvar Kamprad. It's very even hard to remember 00:35:27.879 --> 00:35:34.731 his name, but he's that Swedish person who invented IKEA, 00:35:34.731 --> 00:35:39.011 who said, "I must bring down the cost of furniture, and I can do that by 00:35:39.011 --> 00:35:43.612 taking the air out of it and just selling knocked down furniture, 00:35:43.612 --> 00:35:48.819 and now people can afford to have some nice things in their home. 00:35:48.819 --> 00:35:54.658 Richard Branson is phenomenal. He's a-- not only in self-promotion. 00:35:54.658 --> 00:35:58.058 He's one of the best self-promoters possible. I don't know if you know 00:35:58.058 --> 00:36:00.970 that he was in Times Square some years ago 00:36:00.970 --> 00:36:04.993 to introduce his new cell phone, the Virgin cell phone, 00:36:04.993 --> 00:36:10.314 and he said he was going to drop off of a building, a 30-story building, 00:36:10.314 --> 00:36:14.202 and-- not wearing any clothes or something, so everyone showed up. 00:36:14.202 --> 00:36:17.282 I don't know why they would want to show up, but they showed up 00:36:17.282 --> 00:36:22.073 in Times Square, and sure, he did jump down, but it was on a rope 00:36:22.073 --> 00:36:26.221 and he's carrying a huge version of his new cell phone. 00:36:26.221 --> 00:36:31.591 And so everyone--not just in Times Square--the reporters 00:36:31.591 --> 00:36:35.714 were covering it. All of New York knew about the new-- there was 00:36:35.714 --> 00:36:39.972 a new Virgin cell phone. So he's very good at that. 00:36:39.972 --> 00:36:44.970 But right now, he told me something I couldn't believe. I was in Dubai, 00:36:44.970 --> 00:36:48.714 and he gave a speech, and we were just chatting, and he said, 00:36:48.714 --> 00:36:52.281 "Where are you from?" I said Chicago, and he says, "You know, there will be 00:36:52.281 --> 00:36:57.894 a time when you can go from Dubai to Chicago in half an hour." 00:36:57.894 --> 00:37:00.855 What is it-- Is this a time machine you're inventing? 00:37:00.855 --> 00:37:04.821 He says, "No, it's just a rocket ship." So the rocket ship takes off from 00:37:04.821 --> 00:37:08.183 Dubai, it just goes right up in the air and lands in Chicago. 00:37:08.183 --> 00:37:13.982 So he's working with some people on the new spaceships, basically. 00:37:13.982 --> 00:37:18.532 And you want to watch him. Of course, Walt Disney. 00:37:18.532 --> 00:37:21.950 Great, great visionary. 00:37:21.950 --> 00:37:25.920 Herb Kelleher. Thanks to him, we have Southwest Airlines, 00:37:25.920 --> 00:37:29.791 which started a whole class of low-cost airlines. 00:37:29.791 --> 00:37:34.122 And then we've got Anita Roddick, who ran The Body Shop, where she said 00:37:34.122 --> 00:37:40.670 "I'm not selling hope, I'm selling good skin lotion. All the others sell hope." 00:37:40.670 --> 00:37:45.051 That was a famous remark by Revlon, "In the factory we make lipstick, 00:37:45.051 --> 00:37:50.784 in the store we sell hope." But she wrestled with that one. 00:37:50.784 --> 00:37:55.690 Then you've got Bill Gates, Steve Jobs, and Jeff Bezos. 00:37:55.690 --> 00:37:58.896 And Jeff-- Let's see, we've gotta make sure he gets in there. 00:37:58.896 --> 00:38:01.442 [laughter] Jeff is extraordinary. 00:38:01.442 --> 00:38:05.441 If there's anyone who has consumer thinking in his mind, 00:38:05.441 --> 00:38:12.354 wanting to facilitate the consumer to really order or re-order or return 00:38:12.354 --> 00:38:16.659 or anything like that. And then to buy more than books, to buy electronics, 00:38:16.659 --> 00:38:23.786 to buy clothes. He's done a marvelous job. He's very exemplary in that sense. 00:38:23.786 --> 00:38:27.102 We're running out of time and I'm going to want some questions from you, 00:38:27.102 --> 00:38:30.179 but let me just refer to a few more things. 00:38:30.179 --> 00:38:33.804 This is a chart I use in the book, "Marketing 3.0," 00:38:33.804 --> 00:38:38.932 basically to say that every company should define its mission, it's vision 00:38:38.932 --> 00:38:43.414 for the future, and its values-- what it really cares about, 00:38:43.414 --> 00:38:47.883 and if you're a 1.0 marketer, it's a good job you're doing. 00:38:47.883 --> 00:38:52.800 I mean, of course you're trying to deliver satisfaction, make a profit, 00:38:52.800 --> 00:38:58.571 and make a good product. Be better. If you're a 2.0 marketer, you want to 00:38:58.571 --> 00:39:03.161 help people realize their aspirations. You want to deliver things that 00:39:03.161 --> 00:39:08.650 they might aspire to have. They will return frequently to buy more, 00:39:08.650 --> 00:39:12.490 and your product is different than the others. Not only better, but different. 00:39:12.490 --> 00:39:17.449 And suddenly, you move from mind to heart to spirit. 00:39:17.449 --> 00:39:20.726 What's spirit? It's that small set of companies that say 00:39:20.726 --> 00:39:24.153 "We're compassionate. We have compassion for the state of the world. 00:39:24.153 --> 00:39:28.304 We want to get involved. We want the companies to be a machine 00:39:28.304 --> 00:39:32.822 for improving the lives of people." You could say-- you could reduce that 00:39:32.822 --> 00:39:37.366 to just some charity work they're doing. Or it could be a real, fundamental 00:39:37.366 --> 00:39:42.370 strain in the way they do their business. We can name some companies that 00:39:42.370 --> 00:39:46.476 really have felt that they want to help reshape the world 00:39:46.476 --> 00:39:50.251 into being a better world. So that is-- 00:39:50.251 --> 00:39:55.588 Here's one of my favorite companies that illustrate the cells in that picture. 00:39:55.588 --> 00:39:58.591 The SC Johnson company in Racine, Wisconsin 00:39:58.591 --> 00:40:03.733 whose products are shown over here. You probably have purchased some 00:40:03.733 --> 00:40:07.928 of their waxes or some of their insect repellent or other things, 00:40:07.928 --> 00:40:14.653 but they're just winning awards for being a very caring company. 00:40:14.653 --> 00:40:18.832 Incidentally, a book that you might want to read is called 00:40:18.832 --> 00:40:23.884 "Firms of Endearment," which is a fancy way to say 00:40:23.884 --> 00:40:27.085 companies we love. Firms of Endearment. 00:40:27.085 --> 00:40:30.201 And I love the subtitle, "How World-Class Companies 00:40:30.201 --> 00:40:39.112 Profit from Passion and Purpose." And it's based on asking audiences-- 00:40:39.112 --> 00:40:44.862 random meeting of people--is there any company that you like? 00:40:44.862 --> 00:40:49.201 That you like a lot? Now, let me ask that question. 00:40:49.201 --> 00:40:53.502 Name a company that you would dearly miss if it disappeared, vanished. 00:40:53.502 --> 00:40:57.212 [audience murmurs] Apple! See, always Apple. 00:40:57.212 --> 00:41:00.042 I thought you were going to say Harley Davidson, but that's 00:41:00.042 --> 00:41:04.086 another one. Amazon. I would miss Amazon. 00:41:04.086 --> 00:41:07.184 I really would. I would even subsidize it to continue. 00:41:07.184 --> 00:41:09.880 [laughter] Which one? 00:41:09.880 --> 00:41:13.942 Costco. Of course. I'm with you on Costco. 00:41:13.942 --> 00:41:17.711 Nike. Okay, well you see what happens is, 00:41:17.711 --> 00:41:22.504 these are the names of the companies that came up again and again. 00:41:22.504 --> 00:41:27.690 I don't think there's any surprises there. I've asked other countries to do this too. 00:41:27.690 --> 00:41:31.732 Because it would be a different mix of companies that would come up. 00:41:31.732 --> 00:41:35.822 But the main thing is, these firms of endearment are so much 00:41:35.822 --> 00:41:41.732 more profitable than the ones that have not been dear to us. 00:41:41.732 --> 00:41:48.453 One of the things is that they-- They're either 9 or 10 times 00:41:48.453 --> 00:41:52.703 as profitable, but let's see why, and without going through 00:41:52.703 --> 00:41:58.453 everything here, look at the last one. These are the attributes 00:41:58.453 --> 00:42:02.945 of that set of companies. And the last attribute is that 00:42:02.945 --> 00:42:07.264 they spend less on marketing than rather more. 00:42:07.264 --> 00:42:11.522 I bet you thought that the companies that were going to be dear to us 00:42:11.522 --> 00:42:15.071 are the ones who are just advertising all the time. 00:42:15.071 --> 00:42:17.705 They're so familiar. We see Coca-Cola 00:42:17.705 --> 00:42:21.442 all the time. All the time. No! They spend less on advertising, 00:42:21.442 --> 00:42:26.012 so who's doing the advertising? The customer. You guys are. 00:42:26.012 --> 00:42:29.012 So that's where you should put your money. 00:42:29.012 --> 00:42:33.759 Create a love affair. Create fans with others. 00:42:33.759 --> 00:42:40.321 Now I'm going to end with two slides. This is on a downer, a little bit. 00:42:40.321 --> 00:42:44.862 "The End of Work" This is Jeremy Rifkin's book. 00:42:44.862 --> 00:42:50.349 It's now about 9 or 10 years old. And he says because of the slow down 00:42:50.349 --> 00:42:57.392 in population growth, automation of factories and computers, robotics, 00:42:57.392 --> 00:43:02.721 3D printing, can the nation create enough jobs? Can the world create 00:43:02.721 --> 00:43:06.575 enough jobs for the population, and so on. 00:43:06.575 --> 00:43:11.072 And it raises a question about marketing's role. 00:43:11.072 --> 00:43:15.605 Marketing's role normally is seen as to sell you some things. 00:43:15.605 --> 00:43:19.682 The basic role of marketing is to create jobs. 00:43:19.682 --> 00:43:25.993 It is the job creator. Namely, it gets you to want something 00:43:25.993 --> 00:43:32.731 that someone has to produce. So there's a basic question: 00:43:32.731 --> 00:43:37.797 Does marketing really create new jobs or does it only 00:43:37.797 --> 00:43:44.022 create shifts in the shares? Like if I switch from brand X 00:43:44.022 --> 00:43:48.727 to brand Y, that's not creating-- Brand X loses a job and brand Y 00:43:48.727 --> 00:43:56.897 gets a job. So, but it is true that if we're talking a new product, 00:43:56.897 --> 00:44:03.419 marketing will help accelerate it's recognition, the awareness of it, 00:44:03.419 --> 00:44:09.878 and intensify the drive to purchase it. In other words, we buy our iPads 00:44:09.878 --> 00:44:15.110 and other things that come along partly because they're wanted, 00:44:15.110 --> 00:44:19.574 they are desired objects, and marketing accelerates 00:44:19.574 --> 00:44:23.580 the rate at which growth takes place with those new products. 00:44:23.580 --> 00:44:30.399 The other book, and I'll end with this, is another downer. 00:44:30.399 --> 00:44:36.929 "The Death of Demand" 00:44:36.929 --> 00:44:40.321 And what is the relationship between marketing and demand? 00:44:40.321 --> 00:44:46.129 And is-- he uses a term saturated-- finding growth in a saturated 00:44:46.129 --> 00:44:49.411 global economy. 00:44:49.411 --> 00:44:56.819 I've been wrestling with that problem, and growth is the issue today. 00:44:56.819 --> 00:45:01.823 Growth is the issue. Growth means jobs, and so on. 00:45:01.823 --> 00:45:07.638 And the fact is, there are 8 ways to grow a business. 00:45:07.638 --> 00:45:10.740 So the title of the book is "Market Your Way to Grow: 00:45:10.740 --> 00:45:14.181 8 Ways to Win." And you know all of them. 00:45:14.181 --> 00:45:17.548 You know that we can go to places where there is growth. 00:45:17.548 --> 00:45:21.630 We can sell in China, even if it's a low growth here. 00:45:21.630 --> 00:45:26.330 Or Brazil. We know we can grow by acquiring other firms. 00:45:26.330 --> 00:45:31.108 We know we can grow by innovating. Inventing something new. 00:45:31.108 --> 00:45:34.679 We know we can grow by taking business away from someone else, 00:45:34.679 --> 00:45:37.368 and so on and so forth. So one of the things 00:45:37.368 --> 00:45:40.479 we're wrestling with is how do you, as a firm, grow? 00:45:40.479 --> 00:45:45.646 And by coincidence, another colleague of mine at 00:45:45.646 --> 00:45:54.126 the Kelogg School of Management, Tim-- He just wrote a book called 00:45:54.126 --> 00:45:59.327 "Defending Your Business," and it's so nice that his book came out 00:45:59.327 --> 00:46:04.248 with mine, because the first job is always defend what you've got. 00:46:04.248 --> 00:46:07.808 Hold on to the customers you have, then you start worrying about 00:46:09.467 --> 00:46:13.867 some more growth. So we both, as members 00:46:13.867 --> 00:46:19.436 of the department, are wrestling with how to ignore these books 00:46:19.436 --> 00:46:23.088 and say they're wrong, and that there is a bright future ahead. 00:46:23.088 --> 00:46:24.831 [laughter] So let me stop here 00:46:24.831 --> 00:46:27.177 and take any questions you might have. 00:46:27.177 --> 00:46:32.926 [applause] 00:46:32.926 --> 00:46:36.827 Thank you. 00:46:36.827 --> 00:46:41.218 [Moderator]: Okay, we have time for a few questions for Professor Kotler. 00:46:41.218 --> 00:46:43.559 Is there anyone on this side of the auditorium that would like 00:46:43.559 --> 00:46:46.763 to ask a question? 00:46:46.763 --> 00:46:50.958 [Kotler]: Yes. I see-- I see you over there. 00:46:50.958 --> 00:46:55.058 Now a microphone will magically come down here. 00:46:55.058 --> 00:46:59.138 [Moderator]: Susan will bring you a microphone. 00:46:59.138 --> 00:47:02.833 [Kotler]: And if there's any other people-- and there's a person over there 00:47:02.833 --> 00:47:04.868 Would you introduce yourself, please? 00:47:04.868 --> 00:47:08.477 [Audience member]: My name is Iris Witkowski and I've been 00:47:08.477 --> 00:47:11.489 coming to the Humanities Festival as long as it exists, and I very much 00:47:11.489 --> 00:47:14.018 appreciate your talk today. [Kotler]: Thank you. 00:47:14.018 --> 00:47:16.960 [Audience member]: My-- I'm making a statement. 00:47:16.960 --> 00:47:21.500 What really drives me nuts, as far as saturation is concerned, 00:47:21.500 --> 00:47:25.346 is the placement of products on television programs. 00:47:25.346 --> 00:47:30.672 It used to be that in a movie you'd say "Oh, I saw that brand." 00:47:30.672 --> 00:47:34.108 It seemed to be accidental. Now it's all over. 00:47:34.108 --> 00:47:37.461 Even the anchormen have L.L. Bean jackets on. 00:47:37.461 --> 00:47:40.866 [Kotler]: You know, that's the field called product placement, 00:47:40.866 --> 00:47:45.026 and we first got conscious of it with the James Bond films, 00:47:45.026 --> 00:47:48.520 where each time there was a different car, he drove an Audi or he drove 00:47:48.520 --> 00:47:53.635 something else, because it was a matter of what car company would pay 00:47:53.635 --> 00:47:56.337 the most for the next film to feature that car, and now, 00:47:56.337 --> 00:48:01.405 does the person speaking pick up a Coke bottle or a Pepsi bottle? 00:48:01.405 --> 00:48:07.167 And things like that. Most of us don't notice it. It's not yet that intrusive, 00:48:07.167 --> 00:48:12.638 but it has been discovered as a way to get some visibility for certain products. 00:48:12.638 --> 00:48:16.548 Product placement. 00:48:16.548 --> 00:48:18.916 [Audience member]: I'm Cody Hagle. I'm a Charter Humanist. 00:48:18.916 --> 00:48:22.558 Again, thank you. On the evening national news, 75 to 80 percent 00:48:22.558 --> 00:48:27.079 of the ads are for pharmaceuticals. [Kotler]: And they say awful things 00:48:27.079 --> 00:48:29.549 about each one! [laughter] 00:48:29.549 --> 00:48:34.157 [Audience member]: And I believe there was a change in legal 00:48:34.157 --> 00:48:37.458 requirements some years ago. What are your thoughts about that, 00:48:37.458 --> 00:48:40.899 because clearly that advertising is driving demand, which is driving 00:48:40.899 --> 00:48:42.818 costs, etcetera, etcetera. [Koterl]: Yeah. 00:48:42.818 --> 00:48:47.227 It's called over-the-counter advertising, too. 00:48:47.227 --> 00:48:54.481 But maybe it's also prescription. But basically, you can make a case 00:48:54.481 --> 00:49:00.477 for it by saying consumers should know what they might think would be 00:49:00.477 --> 00:49:03.258 the right thing for them, otherwise the only one who could tell them 00:49:03.258 --> 00:49:10.378 what's right is the doctor. And the doctors don't like it, of course. 00:49:10.378 --> 00:49:13.830 The doctors in some cases are offended by-- 00:49:13.830 --> 00:49:22.479 by the patient saying what he wants as a prescription. 00:49:22.479 --> 00:49:23.468 But, you know, this has happened with lawyers who are advertising now. 00:49:23.468 --> 00:49:26.929 Doctors are advertising themselves, even if they don't like that. 00:49:26.929 --> 00:49:31.155 The expert is Prabha Sinha, who runs a firm called ZS 00:49:31.155 --> 00:49:36.150 and he's always working with the doctors and pharmaceutical people, 00:49:36.150 --> 00:49:36.649 and could help answer that. 00:49:36.649 --> 00:49:36.899 Any other things that bother you about advertising? 00:49:36.899 --> 00:49:44.737 [Audience member]: Hi, my name is Bob Michaelson. 00:49:44.737 --> 00:49:47.526 Thank you, Professor Kotler. It is a pleasure to hear you in person. 00:49:47.526 --> 00:49:51.985 You've been a big influence to so many people, myself in particular, 00:49:51.985 --> 00:49:54.167 for so many years. My question-- [Kotler]: One second. 00:49:54.167 --> 00:49:58.127 How many of you have read any of my books? Any hands? 00:49:58.127 --> 00:50:00.287 Thank you-- I owe thanks to you! 00:50:00.287 --> 00:50:03.252 [laughter] Please proceed. 00:50:03.252 --> 00:50:06.237 [Audience member]: My question is in regards to social media, 00:50:06.237 --> 00:50:09.546 and you started off your presentation talking about so much of marketing 00:50:09.546 --> 00:50:14.067 was defined at the beginning of the 20th century. We're 100 years into it. 00:50:14.067 --> 00:50:19.227 As you look at social media, do you see across a continuum of marketing 00:50:19.227 --> 00:50:24.336 this thing a short-term phenomena or radical change in as we do marketing 00:50:24.336 --> 00:50:29.387 for the next century. That's part 1. And part 2: Do you see the ability 00:50:29.387 --> 00:50:32.128 to apply an ROI to social media? 00:50:32.128 --> 00:50:34.096 [Kotler]: Yeah. Those are excellent questions. 00:50:34.096 --> 00:50:39.703 I-- This is not a fad. We are in the digital age. We've passed analog, 00:50:39.703 --> 00:50:43.529 and there's no turning back. That means that-- 00:50:43.529 --> 00:50:50.298 I see the following happening. Every company I talk to says 00:50:50.298 --> 00:50:54.629 "We're gonna go digital too, but slowly. We're gonna rely 00:50:54.629 --> 00:51:00.667 on our tradition," which is newspapers-- which are disappearing, by the way-- 00:51:00.667 --> 00:51:04.718 radio, TV, billboards, and magazines. 00:51:04.718 --> 00:51:10.286 So, at best, they will say this, "Let's turn 10% of our next budget 00:51:10.286 --> 00:51:16.358 over to digital," which means Facebook, Twitter, and YouTube 00:51:16.358 --> 00:51:21.568 and so on. And let's see what happens. Let's hire a 12-year-old 00:51:21.568 --> 00:51:25.939 [laughter] --give them a budget, 00:51:25.939 --> 00:51:30.480 and hope they come back saying, "Look what I did with Facebook! 00:51:30.480 --> 00:51:32.697 Look at how many mentions!" And so on. 00:51:32.697 --> 00:51:36.690 Now, that goes to your second question. How do we measure the impact 00:51:36.690 --> 00:51:40.369 of using Facebook or something like that? 00:51:40.369 --> 00:51:43.088 Progress is being made. But remember, we never 00:51:43.088 --> 00:51:48.456 measured advertising right either! I mean, traditional advertising was a-- 00:51:48.456 --> 00:51:54.839 was-- first of all, the basic notion of traditional advertising is 00:51:54.839 --> 00:51:58.870 you know that half the people will never see the-- what did Wanamaker say? 00:51:58.870 --> 00:52:01.760 I know that half of the money I spent on advertising is wasted, 00:52:01.760 --> 00:52:05.142 it's just that I don't know which half! [laughter] 00:52:05.142 --> 00:52:12.090 Basically, we judge things by how many people were, in principle, 00:52:12.090 --> 00:52:16.439 exposed--cost per thousand people exposed-- 00:52:16.439 --> 00:52:19.388 when we make an advertising budget, and frankly many of them were 00:52:19.388 --> 00:52:22.679 in the bathroom or the kitchen when the ad appeared. 00:52:22.679 --> 00:52:29.897 So... and increasingly, people are more on their TVs-- 00:52:29.897 --> 00:52:31.278 on their computer screens than they are necessarily watching ads. 00:52:31.278 --> 00:52:34.536 And I think the advertising industry is making the mistake of sa-- 00:52:34.536 --> 00:52:39.804 putting too many ads now. I mean, there's little content left 00:52:39.804 --> 00:52:42.170 on some programs, with the number of ads that flash by. 00:52:42.170 --> 00:52:48.898 They're all 30-second things. 00:52:48.898 --> 00:52:52.138 So, now about measuring. If you read Advertising Age, 00:52:52.138 --> 00:52:53.207 you'll see a lot of statements and claims that there is 00:52:53.207 --> 00:52:59.968 measurement going on. One thing I would say is this: 00:52:59.968 --> 00:53:06.607 Don't take your ad budget and take 50% and switch it to digital, 00:53:06.607 --> 00:53:12.107 which one firm did, and it was a terrible result. 00:53:12.107 --> 00:53:18.257 Because until you know what each social medium does, 00:53:18.257 --> 00:53:21.819 what you want is 10% of your budget going that way, and then when there's 00:53:21.819 --> 00:53:23.960 some proof, you put in another 5 or 10 percent 00:53:23.960 --> 00:53:27.647 into that particular use of the social media. 00:53:27.647 --> 00:53:29.999 [Moderator]: Okay, we've got time for just one more question. 00:53:29.999 --> 00:53:32.679 I know a lot of our attendees are going to other events, 00:53:32.679 --> 00:53:35.679 so we have one right here [Kotler]: Oh, okay. 00:53:35.679 --> 00:53:39.099 [Audience member]: Mark Ruen is my name. I've been in 00:53:39.099 --> 00:53:42.718 direct marketing my entire career, and so it's interesting that I should 00:53:42.718 --> 00:53:46.828 follow up a question about measurement in advertising 00:53:46.828 --> 00:53:50.768 because I've lived by my metrics. Now, my question is this: 00:53:50.768 --> 00:53:55.260 I've always guided my marketing decisions according to the so-called 00:53:55.260 --> 00:53:58.968 4 Ps or 5 Ps, depending on where you're coming from, 00:53:58.968 --> 00:54:01.989 and in terms of the P of the placement, I mean, the internet 00:54:01.989 --> 00:54:05.477 certainly flattened the world, and our distribution channels 00:54:05.790 --> 00:54:11.790 have changed. But how do you see the other Ps in this digital age? 00:54:11.790 --> 00:54:15.870 [Kotler]: Okay. First of all, let me say, I'm so glad you're in direct marketing. 00:54:15.870 --> 00:54:21.148 Direct marketing people are much more accountable for the results. 00:54:21.148 --> 00:54:24.730 They could actually experiment with trying to release different 00:54:24.730 --> 00:54:29.491 direct messages and seeing-- and testing, and then going with the one 00:54:29.491 --> 00:54:34.200 and knowing what it costs to do the campaign, what the sales were, 00:54:34.200 --> 00:54:37.760 and it's just a pure P and L kind of exercise, 00:54:37.760 --> 00:54:42.590 which we couldn't do with just the normal commercials on TV. 00:54:42.590 --> 00:54:47.345 Now, are you asking where the other three Ps are going, in a sense? 00:54:47.345 --> 00:54:49.304 Like, what's happening to product thinking and pricing and place? 00:54:52.148 --> 00:54:55.566 See, there will be new distribution channels all the time. 00:54:55.566 --> 00:55:00.884 I've been asked this question when I wrote the book "Marketing 3.0," 00:55:00.884 --> 00:55:03.401 which is really the case that some companies should be 00:55:03.401 --> 00:55:07.343 socially responsible as well. Someone would ask me, 00:55:07.343 --> 00:55:08.508 "When are you gonna come up with 4.0?" 00:55:10.474 --> 00:55:13.306 And I don't really have an answer, because when 00:55:13.306 --> 00:55:16.711 you go from the mind to the heart to the spirit, 00:55:16.711 --> 00:55:20.385 I don't know how much farther you could go, 00:55:20.385 --> 00:55:24.915 but I am thinking that 4.0's gonna describe companies 00:55:24.915 --> 00:55:29.436 in the future that are building ecosystems and platforms 00:55:29.436 --> 00:55:32.501 where we get involved with them in such a way that 00:55:32.501 --> 00:55:35.951 everything is being supplied that we want, as an individual. 00:55:35.951 --> 00:55:41.460 Think of iTunes, think of the iPhone, iTunes, the whole setup 00:55:41.460 --> 00:55:46.142 of cre-- think of Harley Davidson. If I buy a Harley Davidson, 00:55:46.142 --> 00:55:53.661 I'm a member of-- they call them the Harley... the hogs! I'm a hog. 00:55:53.661 --> 00:55:59.122 Harley owner... owner groupie. [laughter] 00:55:59.122 --> 00:56:03.134 and not only that. I can take my motorcycle 00:56:03.134 --> 00:56:07.375 and just go and meet people I don't know. Some have beards. 00:56:07.375 --> 00:56:08.642 Others have beads, but they're fake. 00:56:09.310 --> 00:56:11.301 [laughter] 00:56:11.301 --> 00:56:14.589 They're wearing leather jackets. These are business people. 00:56:14.589 --> 00:56:19.878 They may be chief financial officers, but they want to be macho, 00:56:19.878 --> 00:56:25.411 so they supply a whole system to fit into that more and more companies might 00:56:25.411 --> 00:56:29.419 sort of begin to think about that. Now, let's take-- what's the one 00:56:29.419 --> 00:56:32.389 who's making shoes now? Is it Tom's shoes or the other one? 00:56:32.389 --> 00:56:35.899 Zappos? They're creating a system that's going to go 00:56:35.899 --> 00:56:39.708 beyond the shoes that you buy. It's going to go into clothing. 00:56:39.708 --> 00:56:43.692 So some companies, as one evolution for certain companies-- 00:56:43.692 --> 00:56:45.861 by the way, it's not different in business to business, 00:56:45.861 --> 00:56:50.487 where a company that supplies-- Boeing supplies 747s and other planes. 00:56:50.487 --> 00:56:54.644 They have to create a whole system so you can't even leave it. 00:56:54.644 --> 00:56:59.189 You know, once you get involved-- Once you get with IBM, 00:56:59.189 --> 00:57:02.279 you're not gonna leave for Honeywell or something like that. 00:57:02.279 --> 00:57:05.801 So this is maybe what 4.0 thinking will do. 00:57:05.801 --> 00:57:07.870 In other words, it won't be product-centered, it will be 00:57:07.870 --> 00:57:11.870 system-centered. A whole system. I think we're out of time. 00:57:11.870 --> 00:57:17.190 Thank you very much. [applause]