Philip Kotler: Marketing

On behalf of our President
and CEO, Greg Case,

and chief marketing officer,
Phil Clement,

it's a real honor for Aon to be
the sponsor of this event today.

And for many of you,
you might know that Aon

is now a UK-based company,
but it's also important for you to know

that the Aon Foundation,
for the past 25 years,

has made it a priority to support
educational activities and

cultural institutions like
the Chicago Humanities Festival

and the Charter Humanist Circle,
that does so much to enrich

the lives of all of us in this room
and everybody in Chicago.

And even though we're now in the UK,
I want everybody in this room to know

that we intend to continue
this commitment,

and it will remain high on our
priority list for the things we do

to support the community of
Chicago for many years to come.

[applause]

On behalf of my colleagues
at Aon, I want to thank

the Charter Humanist Circle
and its members

for their very valuable support,
and I also want to thank

Northwestern University Law
School for allowing us to use

the auditorium today.

At Aon, we believe in the mantra
"If we can't measure it,

we don't do it."

And because of that,
it's a real honor for us

to be here supporting and
introducing Dr. Philip Kotler.

Dr. Kotler has defined marketing
as "the science and art

of exploring, creating, and
delivering value to satisfy

the needs of a target
market at a profit."

He is recognized around the world
as one of the foremost experts

on business, of marketing,
and for his insights on

how exemplary marketing has
the creativity and the power

to influence global
consumers every day.

In that spirit, I hope you'll join
me in welcoming Dr. Philip Kotler.

[applause]

Now before I turn the
microphone over to Dr. Kotler,

in the spirit of marketing, maybe
many of you in this room know

that Aon does a great many
things globally, but one of the things

that we've done that has created
tremendous brand awareness

for our firm is our sponsorship
of Manchester United football team,

which by today won 2 to 1
versus Arsenal

[applause]

We're at--
Right now we're

at the top of the
premiere league.

So in that spirit,
I would like to present

Dr. Kotler with his very own,
personalized Manchester United shirt.

[Kolter]: Thank you.

David, thank you very much.

And I will wear this,
in a fantasy way.

[laughter]

May I say, I really appreciate
your introduction.

Of all the introductions I've received,
yours is the most recent.

[laughter]

Nation, nation...

Oh, you may know of
Steven Colbert,

so I can't pull it off the same way.

There will be two groups,
with respect to marketing.

There will be a group that
doesn't like marketing,

and I'm going to give you
why they don't like marketing

and the justifications.
I will also tell you

there's another group who loves
marketing, so before we're through,

you will be totally confused,
or at least opinionated.

So, what I want to do is
tell you that--

These are called
confessions of a marketer.

That's, by the way, borrowed
from David Ogilvy,

who wrote a wonderful book called
"Confessions of an Advertising Man."

And let me move on and say
why is marketing a topic

for the humanities?

And we would say that
there's a couple of reasons.

One: I regard marketing
as a humanistic subject

because marketing has
affected our lifestyles;

has created, not only affected
a lifestyle, but created lifestyles,

and we should be, from a point
of view of popular interest,

interested in that.

And it really--

I want to say that marketing
is very American,

that it's beginnings are
very American.

That doesn't mean there weren't
manifestations of marketing earlier,

and as a matter of fact, I'd like
to give you a very short history

of marketing, so that you understand
what we mean by the word.

As a matter of fact, if you took a
dictionary, a Webster's dictionary,

in the year 1900, and looked up
the word marketing,

you would not find it in the dictionary.

Yes, you would find the word market,
but not the word marketing.

If you then picked a dictionary...
1910. You would find the word

marketing in it, because marketing
is about 100 years old.

And it's much more than selling.
So let me show you...

Let's start...
Let's start biblically.

[laughter]
Let's start biblically.

Who is the marketer
in this picture?

This is the biblical narrative.
Who was the first marketer in the world?

I hear Eve...
The snake.

I hate to admit it, because snake
sounds like sneaky, and so on

and so forth.

But the fact is that it was
the snake who sold Eve

on getting Adam to eat an apple.
So it goes way back.

At least selling goes way back.
Now let's go further.

Here is the father of marketing.

What an insult to him!
[laughter]

I mean, that's Aristotle.

Recently I was at a group,
little party, and we were speculating

who we would like to meet most
if we had an hour with such a person,

and it boiled down to Plato,
Socrates, or Aristotle.

That's a hard one.

It turns out that my vote
went for Aristotle.

Aristotle was Google, at the time.
He knew more about everything

than anyone in the world.
He wrote on science, politics,

economics, rhetoric, art,
and everything.

Now, why do I say that he had
some marketing impact?

Let me read the definition of rhetoric.
He's not the founder of rhetoric,

by the way. The founders were
the sophists, around 600 B.C.

They were a group who wanted to use
selling and speech and persuasion

for their own devious ends.
But Aristotle put the i--

the discipline of rhetoric on its feet.

Rhetoric is the art that aims to improve
the facility of speakers or writers

who attempt to inform, persuade,
or motivate particular audiences

in specific situations.
It is the faculty of the observing,

in any given case, the available
means of persuasion.

So, in a sense, he could be
the father of selling.

The idea of getting someone
to do something that they might

not have done otherwise.
So, let's move on,

about other manifestations of marketing.
I know many of you cannot necessarily

read this, so I will read it,
but the first department store

opened when, and in what country?
Normally if you're in France

and you ask the question,
they would say of course

we invented the department store.
It was about 1845.

The same time we invented
paperweights and some other things.

But it turns out that the first
department store was in Japan.

Mitsui company, which is still
alive and well.

So that's where one of our
retailing forms started.

The next one is the first
newspaper that carried an ad.

There were newspapers early,
but the first ad appeared in England,

in 1652, and it advertised coffee.
And then, the first ad agency

started a little later.
Well, much later.

N.W. Ayer, which is still a
prosperous advertising agency.

First time a brand was put on a
commodity, the commodity being soap,

the brand name was Pear's soap.

And then the first packaging
appeared a little later,

and finally we had a marketing
research department formed.

So, now the word markets
has been around all these years.

The Middle Ages had markets.
In fact, whenever--

I would even say the agora,
in ancient Greece--

that means the marketplace--
In ancient Greece,

people would come on a particular
day to sell things.

In the Middle Ages,
there were market days.

The word marketing wasn't there.
It was just market.

And trade was always there,
because trade, through history,

has taken place between people
and regions and countries.

So all that is there, and it was
in the decade of the 1900s

that marketing books first appeared.
And the interesting thing is

who wrote those first marketing books.
Were they sociologists?

What was the discipline of the people
who wrote the first marketing books?

Any guesses?

They weren't physicists or chemists.

They were economists.

So why would economists start
a subject called marketing?

And the answer is: they were
disillusioned economists.

[laughter]

They couldn't find any mention
of advertising in the discourse

of economists. In other words,
never did Adam Smith,

Thomas Malthus, David Ricardo,
even Alfred Marshall, and so on,

they rarely talked about other
forces that shaped demand.

The only force that shaped demand
in their mind was price.

You know the famous curve.
Raise the price, demand will go down,

lower the price, you can sell more.
Price was the only thing

that affected demand.
So these economists,

or institutional economists, said "Hey,
you've got to factor in advertising."

You've got to factor in retail stores,
whole sales, jobbers, agents.

And it was the neglect of
the classical economists

to not really texture the marketplace
and the way an economy worked

that led to marketing.
So marketing is technically

a branch of economics.

Now who helped developed
this field of marketing?

Now, probably you don't
recognize maybe anyone here.

There's one person you
might recognize.

I don't know if you can see
some of these faces,

but someone recognize anyone there?

Yeah?

Dale Carnegie.
Dale Carnegie is here,

and his book was "How to
Win Friends and Influence People,"

because in doing this,
I wanted to find out

who was the exemplar
of the selling method.

"How to Win Friends
and Influence People"

But let me give you the whole picture.

Ernest Dichter. Some of
you may know of.

He was a motivational psychologist,
and he could explain why people

didn't like to eat prunes, why cigars
were offending some people,

and all kinds of things.
And his book called

"The Study of Desire."
He apparently studied with

Sigmund Freud, and he brought
that kind of mind to marketing.

But he had an opponent named
Alfred Pollitz, who was not

a head shrinker--We call
him a... a nose counter.

The expressions we would use if
you were very psychological,

you were a head shrinker, and
otherwise, you were a nose counter.

Namely, a surveyor. You surveyed--
You found out what percentage

of people were of a certain age and
why did they buy a particular product.

Julius Rosenwald was very much
behind the formation of

the Sears company, which was
a important episode in

the development of our retail chains.

Lester Wunderman deserves
credit as exemplifying the use

of direct mail and catalogs.
That you can sell more directly.

You don't have to be in the store.
You can get people to order goods

by mail and phone.

David Ogilvy is the exemplar
advertising person,

then Stanley Marcus,
of Neiman Marcus,

was a fella who could walk into
any retail store and give them

100 suggestions on how to improve
the layout, the size of the aisles,

and make a difference in the
voulme of business.

Edward Bernays is the father of
public relations in the United States.

His name has sort of become
obscure, but he really was

a very important person.
The word propaganda

was often used in connection with his
work, because people thought it was

a model to motivate you to feel
a certain way about anything,

regardless of the standards involved.
And then there's Dale Carnegie.

In any case, how did
marketing get its start?

Marketing got its start
in sales departments.

Every company has a sales group.
And the sales people really want

to be in the office of a customer,
because that's the only way

something happens. So they don't
want to do a lot of homework.

For example, three things they
didn't want to do.

They didn't want to do consumer
research in a systematic way,

because that's taking their time
away from selling to customers.

Secondly, they would've liked
someone else to find leads.

Now a lead means a prospect.
In fact, we distinguish between

a hot lead: "Oh boy, he's ready
to buy. He even called us to buy."

a warm lead, a cold lead, so on.
Someone else should do that

for the sales people, so they don't
waste their time making calls.

And the third thing was
someone had to prepare

brochures and ads. And the
salesman is not skilled.

The salesperson isn't skilled at
communicating through advertising

and brochures. So sales departments
added three people, or hired them

from time to time.
Later on, it exploded

to the day today, when we have
multinationals running--

with marketing--
In other words, marketing--

Those three people split from sales
and became big enough to become

its own department.
And so, some people

in the audience here may be
a chief marketing officer.

The old name was Vice President
of marketing, but I like the name

chief marketing officer because
that person now is part of

the chief officers. Chief information
officer, chief financial officer,

chief innovation officer,
and the status has moved up.

Some of you may be brand managers,
may have been in your past experience.

Category managers, market
segment managers,

managing distribution channels,
like retail or wholesale things,

pricing manager, communication
manager, database manager,

direct marketers, internet
people, and so on.

So, marketing is well-established.

Now, the character of a marketing
department depends very much

on what the CEO thinks of marketing.

So, the 1P CEO is a person
who took over a company,

and he says, "I don't like
marketing, but I know I need it,

and all I want from marketing is
some communications.

I just want someone to broadcast
and promote us."

So, that person is missing
a lot of other things

made up by other CEOs,
who are 4P CEOs.

Now a 4P CEO says,
"I need a marketing plan."

And the plan has to mention
product--that's the first P.

What about our product? What's good
about it? What are the features?

Price: what should it be priced at?
Place: where should it be

made accessible? Online,
offline, in stores?

And finally promotion.

So that's a more educated view
of the potential of marketing.

But there's even a better view,
and that's called the CEO who says,

"No! I don't want to start with 4 Ps,
I want to start with the fact

the market is complex."
There's a lot of segments.

Each segment deserves its own plan.
In fact, one thing we've learned

that if you just have one value
proposition for the whole market,

it really doesn't trigger anything
in many parts of the market.

So that CEO says, "What
segment should we go after?

And what position should we
take with each segment?

What should we say about ourselves,
in how we can satisfy their needs?"

Now there's even a higher type CEO,
which is exemplified by A.G. Lafley,

who ran Procter & Gamble,
who recently retired.

When you ask A.G. Lafley what's
marketing, what's your picture,

he says, "Well, what do you mean?
Marketing is everything."

[laughter]

Now, marketing is everything.
What he means is

everything starts with the customer.
No customers, no business.

And I think he's making
that point very much.

Now, moving on, there's a lot of things
that a chief marketing officer does,

and I won't go into any detail,
but there's a lot of tasks,

and the sad fact is that sometimes
the chief marketing officer only lasts

on the average of two years.
In other words, does a job,

and maybe the CEO is not feeling that
it really brought in enough new business

that the cost of the CMO exceeds
what the value of the CMO is.

There's a lot to go into about
why CMOs on the average

hold on to their job for two years.
By the way, some of them

get a better job after two years.
They become something higher

than the chief marketing officer.
Some of them actually are pirated away

because they're so good, they go
to another company to be the CEO.

But in any case, marketing--
commercial marketing,

which I've been talking about,
could've stayed only commercial,

and then I got involved in--
with Professor Sid Levy at Northwestern

We started the idea of
broadening marketing,

because the set of tools that we use
to address consumers could be used

in other areas.
So we have a thing

called place marketing.
I will get a call from a city, let's say,

and a city says, "We're not getting
enough tourists. We don't have

any attractions for them to come
and see. I would like to get a factory

located here. We would like some digital
people to move here, who know digital--

We want to start a Silicon Valley."
So that's place marketing.

The marketing of a place. How do you
dress it up and make it attractive?

Against all of the other
competitive places.

The second--
Person marketing.

There's an agency called William Morris,
and a young singer might go to

William Morris and say, "look, I want
to get ahead. I want to appear

on Jay Leno's show. I want to--
I want to move up to being noticed.

I want high visibility."
I wrote a book with the title

"High Visibility." How do you
get that visibility.

So, William Morris will look
at her and her performance

and maybe say, "You know,
maybe in a sense--

Don't be offended, but we can
make you into a better product."

That's sort of the language.
You know, do your hair differently,

walk a little-- dress differently.
Actually, we're going to use you to

reignite the archetype of Joan Baez.
You know, Joan Baez, the folk singer.

Well, we need a new Joan Baez.
And so, we can recast you

and form you into the kind of
person we all miss, and so on.

Now, social marketing is
another branch.

Today there are 2,000 social marketers
around the world, trying to help people

eat better, exercise more, say no
to drugs, stop smoking cigar--

get off of tobacco, say no to
a number of things.

Positive behaviors and
negative behaviors.

By the way, my memory is that
Sweden was one of the first countries

to want to raise a nation of nonsmokers,
non-drinkers, all the vices.

And it starts at the primary school level,
that you could technically raise people

to avoid those vices, if that was
thought to be good public policy.

So that's social marketing.
Now, political marketing,

we're saturated with.
And I think it's degenerated,

but that's another thing.
Fundraising is part of marketing.

I mean, fundraising is an odd form,
because you're not exchanging.

Everything else is sort of an exchange
of values. Fundraising seems to be

a one-way transfer.
Here's some money

for the museum.
But any fundraiser knows

there's something that should come
back to the person who is the donor

and supporter of a museum,
and working that way is important.

So these are offshoots.
Now all of us do marketing.

If you read the list, we all do marketing.
Did you ever compete for a job when

you knew there were other applicants?
Didn't you dress up as well as you could

and even prepare what you're
going to say, and so on?

Did you compete for a desirable
apartment which was scarce?

Or a member of the opposite sex,
if you wanted to court someone.

So, in a sense, we're human animals
who know how to make an impression

and market ourselves, to some extent.

What do we dislike about marketing?

Well, there's a long list.
It's a rather long list.

Intrusion, interruption, exaggeration,
and so on and so forth.

And I really made a list that's
a little separate from that.

Here are some of the criticisms.
Marketers get consumers to want

and spend more than they can afford.

And we know that from the financial
disaster that people were buying homes

with maybe nothing down.
Marketers are skilled at

creating grand differentiation
where it shouldn't exist.

Like with commodities, you know, a
chicken is a chicken, cement is cement.

So they spend a lot of time trying to
tell you their cement is really better,

their salt is really better, and so on.
Marketers want to produce and sell

more goods without considering
the resource and environmental costs

of producing the goods.
The planet Earth is affected

by the amount of production
and the care with which it's done.

Marketers had not paid enough
attention to product safety.

We know that because Ralph Nader
made his career, basically, car--

the unsafety in cars, and then
we got lead poisoning,

we got asbestos problems,
and so on.

Here's a serious criticism. Marketers--
and this is not all marketers--

these are some particular
companies, and so on.

Marketers favor giving the public what it
wants, whether its good or not for them.

Sure, I'll sell you cigarettes. I'll sell
you anything that will make money.

Therefore marketing promotes
a materialistic mindset,

that-- we get turned on to
more of a materialistic world,

a world of ever-changing products and
services and keeping up with the Jones

and some of that.

Marketers rarely talk about
sane consumption.

Yeah, some beer companies say,
"Please enjoy our beer, but don't

drink too much." That's nice that they--
No one listens to that, and you still

have binge-drinking, but they're
trying to do what they can

and so on and so forth.
Now, let me just say

there's another side.
This is important too,

because it's not a simple picture.
The other side of it is

Marketing has undoubtedly
raised the standard of living

in the United States.
People don't naturally

buy new things. In other words,
do you know, people used to keep

their refrigerators, which
weren't refrigerators at the time,

they were ice boxes and they would
keep going out and getting some ice

and putting it in the box, and so on.
And even the washing machines

were very slow to take--
In other words, people--

It would be very expensive to
buy a new appliance,

but marketers persisted in saying
your life will be better with

new appliances, and
that's one of its jobs.

I would even go so far as to say
that marketing is so connected

to the idea of the middle class.
We're talking about preserving

and building the middle class,
and the lifestyle that goes with it,

and marketing is an essential
definer of what it is to be--and want--

what it is to want, as a member
of the middle class.

Marketing in the form of social
marketing has helped improve

a lot of things. You know,
one of the first causes

that marketing turned to was
the environment and waste

and the ill-effects of some
products, and so on.

Preserving the environment
was one of the first things that

social marketers got into.

Now they're into obesity as a problem,
littering as a problem,

and other problems.

Marketing is very important
to the cultural world.

Museums, performing arts,
and one of the big problems

that cultural institutions are facing,
especially in the performing arts,

is the aging of audiences.
How do you get people

who are in their forties to go to opera,
to go to ballet, and so on.

It's called the graying of the audiences,
and maybe that problem has

been with us for a long time,
but marketers are at work

doing segmentation, targeting,
positioning, in order to

make sure that all seats are filled
in the theater, and also the museums

are very busy, as marketing institutions,
because they have to get visitors,

they have to get donors, they have to
get government grants,

so marketing is almost an intrinsic
function today that's going on.

But let me--

This is not time to take a vote.
Do you like marketing

or you don't like marketing.
But let me show you that

the feeling-- the negative feelings about
marketing came up from these people.

The attackers. They attacked marketing.
Do you recognize anyone?

You see Ralph Nader? I don't...
There he is. Yeah.

Who else?

Well, it is Ralph Nader.
"Unsafe at Any Speed."

Rachel Carson, by the way,
deserves so much more credit

than we've given to her for her book
on the Silent Spring, which was about

the chemical pollution, the pesticides
that were getting into our spring water,

and so on. Vance Packard,
who popularized the idea

that we are hidden persuaders.
That when you go into a movie theater,

you don't know this but an ad is sort of
flashing to go and get some popcorn

before you sit down.
Subliminal advertising,

which never did happen,
but the hidden persuaders.

And then John Kenneth Galbraith,
who pointed out that while we spend

so much money in making enough
deodorants for any type of interest

you have in deodorants,
in the public sector--

In the public sector, you've got
streets that are littered,

and there's some garbage,
and there's slow traffic, and--

And so we have a good private sector,
but we can't enjoy it because

the public sector doesn't have the
public good that would facilitate things.

You've got Naomi Klein,
who's probably the prototype

person now for attacking branding.
Brands, brands, they're awful.

You're paying more than
you need to pay.

The book is called "No Logo,"
logo being another name for brand.

And Michael Sandel is-- has this
new book out, which is really interesting

and worth reading. He's the fella
who ran a course on justice,

and would ask groups about this size
at Harvard, "What is the just thing to do

in each situation?"
But his new book is called

"What Money Can't Buy:
The Moral Limits of Marketing"

where he points out that
if you're in jail in California

and you don't like the cell,
you can pay for a better cell.

You know, maybe one with a computer
if you want a computer, and so on.

But he's also-- he thinks today
our culture divides people

in social classes more clearly.
We used to go to ball games;

I would sit next to someone who was
rich and someone who was poor.

We'd all stand in the
same line for hot dogs.

Today, the guys who are rich
are up in the sky box,

and he calls it the sky box-ification of
the United States. The sky box-ification.

They're eating filet mignon and
we peasants are down there having--

standing in line for our hot dog.
So we are not meeting each other

as we used to, in the older days.
It's a very interesting treatment.

I like to quote Will Rogers with this
remark: "If advertisers spent

the same amount of money that they--
on improving the product

as they do on advertising, they wouldn't
have to advertise it. And that's--

By the way, that's a very profound
observation, because in the age

of the internet, it's so much easier
to talk about a product you like

to others and also about
a product you don't like.

And in a sense, if this goes far enough,
there will be no bad companies

anymore. It would be not possible
for a company to be a bad company,

because the word
of mouth will sink it.

So he's sort of touching on that point.
Make-- Do a good job, and don't--

and others will advertise
the good job you did.

Now, I want to add another group,
and this is a group of visionaries,

and I'd like to call them
our best marketers.

But they're not necessarily the
chief marketing officer,

they're CEOs. But what--
Their contribution has been

the kind you want from your
chief marketing officers.

So who do you see here?
Do you know any of those people?

[audience murmuring]

Yeah. You've got to know some of
them. But you probably don't know

the first one. Ingvar Kamprad.
It's very even hard to remember

his name, but he's that Swedish
person who invented IKEA,

who said, "I must bring down the cost
of furniture, and I can do that by

taking the air out of it and just
selling knocked down furniture,

and now people can afford to have
some nice things in their home.

Richard Branson is phenomenal.