Euro~mn Mana<~cment journal Vol. 12, No.

4, pp 353-361, 1Y94
Copyright (~1 1994 Elsevier Saence Ltd
Pergamon Printed in Great Britain. All rights reserved
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Reconceptualizing
Marketing:
An Interviewwith
Philip Kotler
PHILIP KOTLER, S.C. Johnson and Son Distinguished Professor of International Marketing,
J.1. Kellogg Graduate School of Management, Northwestern University

Philip Kotler is a name synonymous with the private brands. Other trends to watch are an
development of marketing as an academic emphasis on value marketing and the growth of
discipline and operational practice over the last third-world middle-class markets. Such changes to
three decades. He has published not only the marketing and the market place have educational
classical texts on the subject, like Marketing implications for new generations of business school
Management, but in recent times has added radical students and Philip Kotler spells out four major
new interpretations, like social marketing. In this lessons to be learned.
interview in London with EMJ’s editor, Paul
Stonham, he recounts some of the major new Editor: Professor Kotler, you are well-known for your
concepts he has introduced to make the subject a many and diverse contributions to marketing theory and
more comprehensive and powerful business tool, practice. Before your work appeared, many people
reviews the current state of marketing, sometimes thought of marketing as strictly a commercial subject.
said to be in a ‘mid-life crisis’, and makes some Furthermore, they considered it to be essentially about
hard forecasts about the subject and the direction selling and advertising. In your best known book,
in which its practitioners are going. Marketing Management: Analysis, Planning, implementation
and Control (published first in 1967 and now in its 8th
Kotler makes the point that ‘marketing’ has at least edition), you broadened commercial marketing to deal
four meanings. It is important to be clear. Kotler with everything affecting the customer. You saw
himself has broadened marketing thinking marketing as a company philosophy calling upon the
considerably to include non-profit organizations, by whole company to be customer- and market-centered.
searching for the fundamental concept underlying Right?
the subject. He goes on to explain some of his new
ideas, societal marketing, demarketing, and Kotler: The term ‘marketing means different things to
megamarketing, as steps in this direction of different people. There are at least four meanings. Some
reconceptualizing marketing. business people think of marketing as the company’s
promotion and distribution function. They see marketing
The future for marketing is exciting and full of occurring after the products have been designed and
potential change. It must certainly involve market- produced. Marketing’s job is to promote, distribute and
oriented strategic planning, specifically STP: sell the products. To these people, I can only remind
‘segmentation, targeting and positioning’. them of Peter Drucker’s wise observation: ‘The aim of
Subsegmentation is another firm trend. Future marketing is to make selling unnecessary’.
marketing will be assisted by greater scientific
analysis like geodemographics. Kotler sees A second group thinks that marketing describes a
marketing’s so-called ‘mid-life crisis’ as a strength company department that handles both strategic and
not a weakness - since it is involving a re- tactical activities: marketing research, marketing
examination of our ideas. strategy, marketing mix. The marketing department
may or may not include the sales department (although
He considers the corporate organizational aspects of it should).
revitalizing marketing, as well as the rapid growth
of megaretailers and its associated tidal wave of A third group thinks of marketing as a company-wide

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AN INTERVIEW WITH PHILIP KOTLER

philosophy holding that the only way to serve the the benefits of holding on to the money, or applying
company’s interest is to serve the customers’ interest. the same money to the purchase of any other object.
if the company employees are not thinking customer, When two parties are willing to engage in a voluntary
they are not thinking. If the company doesn’t meet, or exchange, they obviously both think they will be better
indeed exceed, customer expectations, someone else off. They get more than they give up.
will. The company’s job is to create customers, not just
products. And the smartest companies don’t just Companies that want to market some good or service
guarantee their products . . . they guarantee the must therefore understand what the customer needs,
customers’ satisfaction. perceives and values. Unless the company can offer an
appealing value package, there is no exchange.
A fourth group uses the term marketing to describe a Exchange is the most democratic way to acquire goods.
specific process. The marketing process involves It beats obtaining them by force, begging, or threat.
researching a market, identifying the segments making
up the market, targeting the segments that the company Editor: But you also apply exchange to cases where
can serve in a superior way, positioning the firm so that there is no apparent transaction, such as giving money
customers have a reason to prefer the firm’s offers, to a charity. That’s a transfer, not a transaction.
developing the right marketing mix of product, price,
place, and promotion, implementing the marketing Kotler: No, I count that as a transaction. I donate money
plan, and then evaluating and revising marketing as to a charity precisely because I do get something back.
experience is gained. It might be feeling good, getting the respect of others,
or enjoying the smile on the face of someone who says
Therefore, people can talk about marketing and really thank you. If I gave money to a cause, and the recipients
be talking about different things until they make these scorned me, how long would I engage in this
distinctions. transaction!

Editor: What is the major mistake that companies make Editor: You are famous for introducing some other
in not understanding marketing? concepts into marketing thinking, such as social
marketing, societal marketing, demarketing,
Kotler: Too many companies are inside-out thinkers, megamarketing, and place marketing. For example, you
not outside-in thinkers. They are product-centered, not wrote a book entitled Social Marketing: Strategies for
market-centered. General Motors designed cars that Changing Public Behavior. What is social marketing?
they thought people should have. They thought that
marketing’s job was to sell these cars, not help design Kotler: I recognized that marketing deals not only with
them. Many companies today, especially technology- exchanges of products and services, but also deals with
driven companies, still think that the lab designs all the marketing ideas, persons, places, and organizations. For
products. I would counter that good products are example, take social marketing. Many social organiza-
designed in the market place. Companies need to tions aim to market ideas or behavioral changes to
research customer needs and check customer prefer- others. The Indian government has been marketing
ences for alternative product concepts. I would go family planning, with the concept ‘If you have two, that
further and say that the customers should have a major will do’. Other causes include ‘say no to drugs’, ‘save
role in designing the products! the whales’, ‘eat less fat’, ‘exercise more’, ‘don’t litter’,
etc. These organizations unfortunately saw the chal-
Outside-in companies take their clues from the market- lenge as one of advertising primarily, The Advertising
place. They spot unmet needs and transiate them into Council of America basically puts out ‘do good’ ads. But
business opportunities. They define target groups and this is an insufficient thrust at the problem. First, we
develop a value-delivery system that is superior to need to study how the target consumers perceive their
competitors who are serving the same market. own behavior and how they would perceive the new
behavior, before we can create the right ad. Second, we
Editor: One of your major contributions was to broaden need to think of different strokes for different folks.
marketing even beyond business marketing. You Clearly our effort to convince teenage girls not to smoke
showed that marketing thinking applies to nonprofit would use a different approach than to try to help an
organizations, to social cause organizations, to political habitual smoker of 20 years with emphysema to stop
organizations. You extended the marketing concept into smoking. Third, ads are not enough. Marketers must
areas which had previously been considered unthink- design channels and products to help consumers carry
able, What led to this broadened concept of marketing? out the desired behavior. Someone might want to stop
smoking but needs to know where to go for help, where
Kotler: I began to search for the fundamental concept to take a ‘stop-smoking’ class, where to get a quit-
underlying marketing thinking. It is not selling nor smoking kit, etc.
advertising. The fundamental concept is ‘exchange’.
You don’t buy a television set because you want to give Social marketing is the application of the principles
away your money to a store. You buy it because you found in commercial marketing to help people adopt
think that the benefits of owning a television set exceed practices which are in their Iong term interest or in

354 EUROPEAN MANAGEMENT JOURNAL Vol 12 No 4 December 1994

 AN INTERVIEW WITH PHILIP KOTLER

society’s long term interest. To some, however, social product or service. Both involve marketing tools and
marketing sounds like the opposite of marketing. concepts. In fact, my broad definition of marketing’s
Marketing aims to meet someone’s need, not change task is ‘to influence the level, timing, and composition
their need. But the fact is that many people who smoke, of demand to meet the company’s objectives’. The
take drugs, or get drunk, are conflicted. They want to marketer’s job is to shape the demand facing the
smoke and they also want to be healthy. We try to help company, just as the production people’s job is to shape
them make a choice that’s in their long-term interest. the supply.

I w‘ls gratified when the World Bank invited me to make Editor: What about megamarketing?
a presentation on social marketing to their staff. They
ha\,e begun to use the term and technology of ‘social Kotler: In my consulting activity, I encountered several
marketing’ as have so many health promotion and cases where companies were blocked from making an
family planning organizations. otherwise attractive product offer to a set of potential
customers. For example, a pharmaceutical company
Editor: Social marketing sounds like your other term, tried to market an important drug in a developing
societal marketing. What’s the difference? country. Yet the Minister of Health ruled against letting
the drug into the country. The Minister might have
Kotler: I use societal marketing to describe companies doubted the drug’s efficacy, might have wanted the
that aim not only to satisfy customers’ immediate wants price to be lowered, or might have wanted a bribe. What
but also to help serve society’s long run interests. struck me is that the company had a good 4P offer, that
Societal marketing underpins the success of Anita is, product, price, place, and promotion were all
Roddick’s Body Shop which now operates 900 outlets positive. But in cases of protected markets, companies
around the world. Customers are partly attracted to the need more than the 4Ps. Companies must also show
Body Shop’s product, and many are attracted by Anita skill in politics and public relations, two more Ps. The
Roddick’s support of widely respected social causes, pharmaceutical company might seek the support of
such as saving the rainforests, ending animal testing, legislators (politics) or physicians (public relations) to
helping the homeless, etc. put pressure on the minister to permit the drug to enter
the country. I became convinced that marketing is an
In 1992, the book Shopping for a Better World gave even broader process than simply putting together an
consumers information about which companies stand attractive offer, and that companies, especially interna-
high on social responsibility. Companies were rated on tional companies, must learn how to be megamarketers.
10 issues, such as charitable giving, women’s
ad\ ancement, minority advancement, the environment, Editor: Is your concept of place marketing different from
etc. Among the top rated US firms were Kellogg, Proctor megamarketing?
and Gamble (P&G), Upjohn, and General Mills.
Although only a minority of consumers today choose Kotler: Yes. My recent book, Marketing Places: Strategies
their brands based on the company’s social for Attracting Industry, lnuestment and Tourism to Cities,
responsibility record, this may increase in the future. States and Nations, describes the theory and practice used
by governments and business groups to build their
Editor: What is demarketing? economy by attracting needed resources. For example,
Ireland has carried out extremely sophisticated place
Kotler: Demarketing is an important concept in social marketing. Ireland has attracted hundreds of foreign
and commercial marketing. Demarketing is the use of companies to open factories in Ireland. They have
marketing tools to reduce, rather than increase, the increased the flow of tourists to Ireland, and they have
demand for something. California, for example, promoted Irish exports successfully. In fact, Ireland
occasionally experiences a water drought. People are created three separate ministries to handle these three
then urged to use less water: ‘don’t water your lawns’, place marketing objectives.
‘don’t wash your cars’, ‘take a shower with a friend’,
and other advice. Or a toy manufacturer may have a Editor: Having brought us up-to-date, I would like to
runaway success with a new toy, and want to ‘cool’ the ask you about the future. How do you see marketing
demand. In both cases, marketing tools are used in changing as an academic discipline?
reverse. Instead of lowering price to increase demand,
price is raised to reduce demand. Instead of advertising Kotler: Marketing is changing in many ways. The
the toy’s merits, the company suspends all advertising original model of marketing was rooted in mass produc-
until demand ‘cools’. Instead of making the product tion thinking. As industrializing economies moved from
more accessible, it could be made less accessible, more a craft and cottage industry model toward a large scale,
difficult to acquire. assembly-line production model, the investment in
these facilities could only be recouped through mass
Demarketing is instigated when some product falls marketing, namely the use of mass advertising and mass
temporarily into short supply and demand must be distribution. Some new products were so appealing -
curbed. It shouldn’t be confused with ‘unselling’ which automobiles, kitchen appliances, radios, television sets
is an attempt to get people to permanently eschew a - that the manufacturers didn’t have to even segment

EUROPEAN MANAGEMENT JOURNAL Vol 12 No 4 December 1994 355

AN INTERVIEW WITH PHILIP KOTLER

the market. Or their segmentation was very crude: the a fine car consists of many different buyers depending
upper class bought Cadillacs, the middle class bought upon how they define a fine car, the level of their
Buicks, and the lower class bought Fords. discretionary income, and other factors. Today’s
marketers are moving from segments to subsegments to
Later, when the explosion of demand slowed down for niches to micromarkets to segments-of-one.
many products, companies were forced to examine
customer needs and preferences more closely. A niche, for example, is a group of customers whose
Companies discovered ‘segmentation’, not only along needs are very specific. Consider high income car buyers
income lines, but along age, ethnic, geodemographic, who want a car that will seat only two people, drive 150
lifestyle, behavioural, and other lines. Companies miles an hour, have anti-lock brakes, a large fuel
reali7,ed that trying to please everyone with one product capacity, and two airbags. I don’t know how many such
was doomed as a formula. If Coca Cola had not put out buyers there are, but if there are enough, some car
a diet version, a caffeine-free version, a cherry coke manufacturer could own this market.
version, its market share would have shrunk severely
as its competitors introduced these alternatives. A ~~ljcr~m~rket is a geo~aphicall~-based group of
customers who have their own distinctive requirements,
Segmentation is about recognizing the different groups When we say that a supermarket chain is doing
making up a market. It must be followed by targeting, micromarketing, we mean that it is shipping different
where a company chooses the groups that it can serve food items and brands to its neighbourhood stores to
in a superior way, Usually only a few sellers will make meet their varying income levels and preferences.
profits in serving a par&x&w segment; retailers will drop
the weaker brands, and their manufacturers will A growing number of companies are even contem-
probably go into private brand production. plating how to meet the needs of segments-of-one; they
call it mass customizutiorr. The seller makes available a
Targeting must be followed by exceptional ‘positioning’. jlexib[e market offering. Burger King, the fast food chain,
The company must estabiish a distinct and valued core declares to its customers ‘Have It Your Way‘! some
difference from its competitors. The company or brand restaurants set up a salad bar, so that their guests can
may claim to be best in quality, service, safety, or some mix the ingredients of their choice. A womenfs bathing
other benefit. Smart companies seek to own a position suit company today offers to customize a bathing suit
in their target customers’ minds. IBM owns the ‘service’ for each woman.
position, Apple owns the ‘innovative’ position, Volvo
owns the ‘safety’ position. Can smail markets be profitable? It all depends.
Customers in a niche market often pay a good premium
Editor: But is this marketing or strategic planning that over cost to get exactly what they want. So niching firms
you are talking about? operate on a high margin. But their volume is low,
However, if the same company runs several niched
Kotler: I’m talking about market-oriented strategic businesses, it will enjoy high margins and a high total
planning. Too much strategic planning is financially- volume. This seems to be the secret of companies such
sriented and driven. Strategic marketing is the as Johnson & Johnson and EG&G.
homework that a company must do before it estaMishes
:he marketing mix. Companies must carry out STP: Editor: I want to ask whether you think that the
‘segmentation, targeting, and positioning’. Toyota did marketing discipline has advanced much toward being
:his beautifully with its development of its Lexus a science?
automobile. It aimed at a high income segment that
wanted fine cars. It subsegmented and targeted Kotler: Marketers have made great strides in recent
orofessionals aged 35-55 who would have liked to own years in deepening their understanding of buyer
; Mercedes but thought that it was overpriced. It behavior and in having better tools for decision making.
positioned the car as a Mercedes for half the price. Then
they developed the automobile and the 4Ps. They For example, marketers no longer lump people into a
designed an excellent vehicle, priced it as a great value, few social classes. Using a tool known as
set up extraordinary distribution through new ~~~~~~~~~rff~~~cs~we now classify households into 40
showrooms and saiespeople who matched the lifestyle groups bearing such picturesque names as
expectations of high income buyers, and promoted the ‘money and brains’, ‘fur coats and station wagons’, and
Lexus through great ads and direct mail targeted to high ‘shotguns and pickup trucks‘. We know a lot about each
ncome buyers. group: what products they buy, brands they prefer,
magazines they read, TV shows they watch, stores they
Editor: You mentioned subsegment&ion. How small shop at. We also know where to find them, in so far
zan a target market be and still remain profitable? as each group’s density in a census tract is known.
Marketers can target much more accurately with this
Kotler; Today’s marketers have moved considerably data.
beyond segmentation. Segments are gross cuts of the
market. The segment of high income buyers who want Con@n! a&r@ is another promising tool. In designing

356 EUROPEAN MANAGEMENT JOURNAL V&12 No 4 December 19%

 AN INTERVIEW WITH PHILIP KOTLER

a new product, such as a kitchen appliance, an force, the flow of work between departments, and so
insurance policy, or a new hotel, we can create many on. Consider the following:
alternative concepts, ask target consumers to rank them
on their respective desirability, and decompose their
Tony O’Reilly, Heinz’ CEO, is planning to drop
preferences to learn about the importance of each
commercial TV in the UK, and instead concentrate
attribute to the target buyers. This tool can help
companies put together a better set of features and on direct marketing. His company will send
benefits when they design new products. discount vouchers directly to heavy user homes.
This marks a radical departure from mass
These are only two scientific advances. My book marketing thinking.
Marketing Models runs to 800 pages and describes Compaq’s CEO, Eckhard Pfeiffer, cut Compaq’s
additional models and tools that today’s marketers can salesforce from 359 to 224, thereby reducing sales
use to improve their marketing performance. Each year, and general and administrative expense from 22
Marketing News (published by the American Marketing to 12 per cent of revenues. All 224 salespeople now
Association) lists over 500 new and current marketing work out of their homes, thus saving Compaq con-
software packages to help companies get more value out siderable office rent, and saving the salespeople
of their salesforce, marketing research, advertising the commuting time they formerly spent going to
expenditures, and the like. and from their office. Compaq’s salespeople are
in continuous contact with Compaq and their
Editor: A recent article in the McKinsey Quarterly (No. customers through laptop computers, pagers,
2. 1993) was entitled ‘Marketing’s Mid-Life Crisis’. It E-mail, Voice-mail, fax machines and other
was argued that marketing is simply not picking up the equipment in their homes and cars.
right signals anymore from a dramatically-changed IBM is reorganizing is 40,000-person salesforce
consumer environment - recession, private labels, and from being based in geographical offices to being
increasingly sophisticated supermarket retailers. Do you industry-organized. IBM sees industries changing
agree? so fast that it needs specialized salespersons who
know each industry. IBM will focus on fourteen
Kotler: Yes, marketing is in a mid-life crisis. The good industry segments, including communications,
news is that mid-life implies that there is another half- finance, distribution, health, and manufacturing.
life left. But today, every business function is in a mid-
Ed Artz, P&G’s CEO, is reorganizing time-
life crisis. Look at how our ideas about manufacturing
honored P&G marketing practices so that the
have changed. Who would have believed some years
company can introduce new products faster
ago that we could talk seriously about changing the
throughout the world. No longer can P&G afford
product for every customer and carrying zero-
to do time-consuming market testing before
inventories and taking zero-time to make a setup
launching its new products. It is partly switching
change. Look at finance. We used to talk about
to ‘Ready, Fire, Aim’, rather than ‘Ready, Aim,
maximizing the firm’s profits, then its return on
Fire‘.
investment, now its shareholder value.
Quaker Oats recently laid off some hundred
As for marketing, yes, CEO’s have been telling me of employees in their package design and
their disappointment with the performance of their promotions area. The company has decentralized
marketing group. They budget more money for some of these services into the divisions and is
marketing every year and seem to get less for it. In some outsourcing the rest.
cases, the CEO’s have a faulty understanding of Dial Corporation is reducing its national sales force
marketing and its role. Many CEO’s still think of by 20 per cent, dropping most national TV
marketing as sales and advertising. Simply increasing advertising, and instead sponsoring more
promotion expenditures won‘t work if the product isn’t promotional events such as Beach Boys concert
right, if the price isn’t right, if the competitors also tours, etc.
increase their promotion expenditures, and so on.
Unilever has merged its marketing and sales
people into business groups focusing on consumer
The question of whether marketing is doing a good job
research, product development, and customer
does not lie in marketing’s short-run results, which are
development.
affected by many factors. The answer lies in whether
marketing is laying a solid long-run foundation for Pillsbury has replaced its brand managers with
company prosperity, by identifying the company’s best multi-disciplinary teams each gathered around a
opportunities, designing excellent products and services product group, such as pizza snacks. Each team
for these opportunity markets, targeting more carefully, involves managers from production, sales and
and investing to strengthen brand and customer equity. marketing.
Wal-Mart is pressuring its consumer packaged
Some CEOs have raised profound questions about how goods suppliers to reorganize along category
to use the company’s marketing resources. They are management lines. Wal-Mart doesn’t want to
questioning the value of advertising, the role of the sales waste time dealing with individual brand

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AN INTERVIEW WITH PHILIP KOTLER

managers. It wants to negotiate deals involving company’s customer manufacturing department, and
suppliers’ whole categories. relationship marketing is the key.

My colleague Don Schultz recently wrote an article with Editor: We have all heard a lot about marketing
the headline: ‘Traditional Marketers Have Become databases. But can large global consumer goods
Obsolete’. Don thinks that mass marketing is dying and companies expect to keep data on every customer and
integrated direct marketing is taking its place. tailor specific offers to these customers?

Editor: Why are these changes taking place now? Why Kotler: Clearly Iarge companies can keep data records
didn’t they happen earlier? on millions of customers. Heinz has built a database of
5.6 million homes in the UK that are heavy users of its
Kotler: Marketing practice has to change when the products. Mars knows the names of most families in
marketplace changes. And the changes in demo- Germany that own a cat, along with the cat’s name and
graphics, economics, technology, distribution, and birthday (they send a birthday card to the cat on the cat’s
global competition have been enormous. The population birthday). Fingerhut has rich individual data on over 14
is ageing in many Western industrial countries, incomes million customers.
are tight, and customers are more discriminating.
Today’s customers are more demanding than ever. They The question is only whether the companies will find
are more educated and less influenced by hype. They it worth doing. Catalogue companies will find it
want products of superior quality, customized to their worthwhile. In fact, they use search and sort routines
needs, supplied with great convenience, at the lowest to pull out of their database high prospects for any offer,
prices, with added free services. Jack Welch, GE’s CEO, Then they ean tell who bought what, and improve their
recently said: ‘The value decade is upon us. If you can’t targeting further. Whether large consumer packaged
sell a top-quality product at the world’s lowest price, goods companies will find direct marketing to be more
you’re going to be out of the game’. effective than mass advertising remains an open
question.
Technology is changing so rapidly that Kodak has had
to transform from a film company to a magnetic tape Editor: There seems to be much rhetoric spoken about
company (from a chemically-based company to an treating marketing as a process rather than as a
electronics-based company). Henkel, Unilever, and department in a corporation. Instead of marketing,
P&G have to worry about whether ultrasonic washing sales, and production, it is said that businesses should
machines will become effective enough to destroy the be organized by core processes. Do you think such an
detergent market. organizational reform would be beneficial?

Then there is global competition. We live in an age of Kotler: Yes. More companies are recognizing today that
hypercompetition from which no company, large or departments set up walls that slow down and often
small, is safe. Companies in low cost countries are perversely affect company actions to meet customer
invading the market sanctuaries of companies producing needs. Departments make decisions in their own
in high cost countries. interest, not the company’s interest.

Power is shifting from producers to mega-retailers who What’s the answer? Some companies see the answer as
are issuing their own private brands at a lower price but lying in continuous quality improvement (CQI) and total
not at a lower quality. Consumers are transferring their quality management, namely ‘everyone improving
loyalty from the brand to the store. everything all the time’. Other companies favour a
radical approach, namely reengineering the company’s
Underlying the hypercompetition is the revolutionary processes. They ask: how would the company’s core
speedup of information processing and communication. business processes be conducted if they could be
Information travels instantly from one corner of the redesigned from scratch? These companies are looking
globe to the next. This means that strategic plans become not for a 10 per cent improvement but an improvement
obsolete very quickly. Companies are forced to move in productivity by a factor of ten,
from strategic planning to sfrufegic jmprov~s~~g. They
accomplish this by empowering frontline people to I believe that marketing and sales departments need
make more of the decisions, subject, of course, to certain radical revision. Not only does marketing/sales not
parameters. always work smoothly with R&D, manufacturing, and
other functions, but too often the marketing and sales
The recent recession started many companies down the departments are warring with each other.
road to rethinking their marketing strategy. Companies
shifted their focus from customer attraction to customer The key need is to recognize the core processes which
retention. Customer retention requires knowing much make up marketing’s responsibility. They are analysing
more about a customer, as might be captured in a the market, designing market strategies, developing new
marketing database. The company’s task is not to make products, developing and managing brand equity, securing
a sale but to build loyal customers. Marketing is the sales, managing order delivery, and retaining customers.

358 EUROPEAN MANAGEMENT JOURNAL Vol 12 No 4 December 1994

 AN INTERVIEW WITH PHILIP KOTLER

Each process should be handled by a multi-discipline Today’s retailing picture also shows an explosive growth
team. For example, new product development requires of deep-price discounters, warehouse membership
a skill mix from R&D, marketing, sales, manufacturing, clubs, and factory outlet malls.
purchasing, and pricing. Each process that I listed
requires teamwork with nonmarketing personnel. Second, the store-based mega-retailers have to worry
about the rapid growth of non-store based retailing,
This begs the question of what happens to the marketing such as direct mail, catalogues, home TV shopping,
department if people are reorganized into multi- computer retailing, party selling, door-to-door, office-
discipline teams. If marketers work more outside of the to-office, and multi-level marketing. Eventually, people
marketing department than in it, does the company still may even buy their automobiles by phone instead of
need a marketing department? I think yes. Marketing going to a showroom, especially if car buyers continue
Morks only if there is a clear market objective, a sound to say they would rather go to the dentist than do
market strategy, and excellent marketing coordination. business with a car dealer.
Some unit in the company must provide this leadership.
Editor: Can I pick out ‘private labels’ as an aspect of the
Editor: You said in one of your writings that a company dynamism of retailing? Do you think they are a strongly
can have the greatest marketing department and still fail growing force in the future of retailing?
at marketing? How is this possible?
Kotler: Absolutely. Private labels are a tidal wave. In
Kotler: Perhaps David Packard of Hewlett-Packard said the beginning, stores used to carry only national brands
it better: ‘Marketing is far too important to leave to the plus a few low-price store brands to appeal to more
marketing department’! Today’s companies are economical buyers. The price was less and the quality
beginning to understand that the whole company must was less. Smaller manufacturers supplied these retailers
be a sales department. The personnel in all departments while top national brands refused to supply products
must be customer-focused and customer-caring. When for a store brand.
I was consulting with IBM, John Akers asked me what
Mould be the signs of how much each IBM department Then a shift occurred. Giant retailers began to represent
is customer-focused. I answered the question by creating the interests of the consumers rather than acting as the
an instrument. I developed about five indicators for each agents of the suppliers. Competition forced the retailers
department that would clue management as to whether to outperform each other in trying to attract and satisfy
that department thought much about customers. For customers. Sainsbury and other stores started to intro-
example, for R&D, the positive indicators are: ‘They duce a second private brand that was commensurate in
spend time meeting customers and listening to their quality, but still lower in cost, than the top national
problems. They welcome the involvement of marketing, brands. Loblaw’s, one of Canada’s major supermarket
manufacturing, and other departments on each new chains, introduced a few years ago its store brand called
product. They benchmark competitors’ products and ‘President’s Choice’. They offered President’s Choice
seek “best-of-class” solutions. They solicit customer cola, President’s Choice chocolate cookies, etc. Their
reactions and suggestions as the project progresses. store brand included a guarantee that if the consumer
They continuously improve and refine the product on was not completely satisfied, the store would replace
the basis of market feedback’. If the company’s R&D the store brand with the consumer’s choice of a national
department meets all five indicators, it is in good shape brand. Hardly any customer has asked for a
from the marketing point of view. replacement!

Editor: Will a stronger market orientation help con- Today, even the top manufacturers are setting aside
sumer goods companies do any better against the some production for private brands. In doing so, they
growing power of the mega-retailers? try to supply a little less quality than is found in their
national brand. But mega-retailers won’t hear of this and
Kotler: They will perform better but it won’t provide insist on the same quality that is present in the national
any full answer. It won’t stop the shift of power to the brand. This sounds like the retailers are inviting the
mega-retailers. The mega-retailers are the one who will manufacturers to commit suicide.
have to become marketing strategists, not just retailers.
For they, too, face a number of challenges. First, Editor: With the growth of store brands, is there not a
the mega-retailers must worry about each other - danger of loss of consumer choice if more of us buy store
Sainsbury has to worry about Tesco and both have to brands?
worry about Aldi. Small retailers have to worry about
‘category killers’, companies such as Toys ‘R Us (toys Kotler: There is a general tendency toward super-
and games), Ikea (furniture), Home Depot (home markets carrying fewer national brands. The store may
improvement), and Staples (office supplies). These offer the top two national brands and two store brands.
category killers offer the largest assortment, the lowest But whoever said that when consumers could choose
prices, and in some cases, the most knowledgeable among 10 brands, they were getting 10 authentic choices
salespeople. was mistaken. Many brands were virtually identical.

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AN INTERVIEW WITH PHILIP KOTLER

Editor: What is great marketing? Is it giving the countries, indicating that it is in the interest of advanced
consumer what he wants or introducing the consumer industrial nations to help Third World nations get on
to new possibilities that he never imagined? their feet. Some would say that Third World nations,
with their much lower costs, are a threat to advanced
Kotler: There are three levels of marketing competence. industrial nations.
The first is to respond to customer’s expressed needs
and wants. Let’s call this ‘responsive marketing’, and Kotler: Third World nations will inevitably take over
it is the kind we most associate with the marketing labour-intensive manufacturing industries, such as
concept. It is baseline marketing. The second is textiles, shoes, etc. And they should. Industrial
‘anticipatory marketing’, and constitutes even better countries should not hold on to less efficient industries.
marketing thinking. An example would be when The good news is that as Third World nations improve
someone recognizes that more homes are acquiring their economies, they become huge markets for more
information/communication products and proceeds to advanced goods from the West. For example, out of
develop office furniture to accommodate computers, India’s 900 million people, about 150 million are middle
telephones, fax machines, and copier machines in the class. Where else can you find such a large middle class
home. The third and highest level of marketing market? Consider what they would like to consume and
competence is ‘creative marketing’, where the company own. The West can keep busy for generations supplying
creates something that no one explicitly asked for, or these needs. The same applies to Russia, Eastern
even imagined. Akio Morita, Chairman of Sony, is very European countries, and China. Some way must be
clear about his concept of marketing. He says in his found to start a growth dynamic in these countries. The
book, bide in ~~~~~: ‘I don’t sell products. I create West will ultimately benefit.
markets’. Clearly, he has created many products that
no one ever asked for - Betamax, Walkman, Editor: Finally, because marketing and the marketplace
Watchman, camcorder, VCR, hard discs - all of which are undergoing the major changes that you mentioned,
have changed our lives. I should like to ask you what advice you would give
business schools about teaching marketing and training
a new generation of professional marketers.
Another example of a creative marketer is the Harley
Davidson company, which almost went broke a decade
Kotler: First, our courses in the marketing area must
ago. Today, they are not only leading again in the
introduce the new themes such as customer value
motorcycle business, but also in the lifestyle business.
analysis, relationship marketing, integrated marketing
They have opened up retail stores where one can buy
communications, database marketing, harmonized
appropriate clothing (black leather jackets and boots),
marketing channels, services marketing, and decision
fake tatoos, and various appliances. Harley fans can also
modefling.
drink Harley’s beer, and dine in a New York City
restaurant called Harleys.
Second, our marketing must be taught not in isolation
from the other functions but in conjunction with them.
Editor: One phrase I have picked up from your recent We need to emphasize how marketing relates to
writings is ‘value marketing’. Can you be more explicit? manufac~ring, purchasing, finance, logistics, R&D, and
human resources development. This can be accom-
Kotler: People buy value. They compare the benefits of plished by co-teaching courses with professors in the
an offer to the costs (the costs go beyond the price). other disciplines and using cases that raise broad
Marketing’s job is to enlarge the benefits and reduce the business questions.
customers’ costs. This is not to say that every customer
perceives value in the same way. Swedish people like Third, marketing courses must stimulate creative
functional furniture while Italians value colour and style thinking about ways to build superior value delivery
more. That’s why marketers must research the deter- systems. Students must think about the potential of
minants of value in the mind of each customer or cooperative moves with allies and not just competitive
customer group. Thus fleet truck buyers put different moves against rivals.
values on durability, driver comfort, fuel efficiency, and
so on. Customer value assessment, i.e., valuegraphics, Fourth, marketing must be taught in the context of
is the key to successful product development and global forces. Students normally think ethnocentrically.
marketing communication. They must be exposed to how different cultures perceive
and value goods, services and personal relationships.
Editor: You wrote an article on your views of the They must learn the subtle art of adapting marketing
relationship between industrialized and Third World ideas and products to fit vastly different target markets.

360 EUROPEAN MANAGEMENT JOURNAL Vol 12 No 4 December 1994

 AN INTERVIEW WITH PHILIP KOTLER

PHILIP KOTLER, 1.L.

Kellogg Graduate School of
Management, Northwestern
University, Leverone Hall,
2001 Sheridan Road,
Evanston, Illinois
60208-2008, USA
Philip Kotler is the S.C.
Johnson and Son
Distinguished Professor of
International Marketing at
the 1. L. Kellogg Graduate School of Management,
Northwestern University.
Dr Kotler is author of Marketing Management:
Analysis, Planning and Control @‘rentice-Hall,
1994, 8th edition), the most widely-used marketing
book in graduate business schools; Principles of
Marketing (Prentice-Hall, 1994, 6th edition);
Marketing Models (Prentice-Hall, 1992, 3rd
edition); and Strategic Marketing for Non-profit
Organizations (Prentice-Hall, 2992, 4th edition)
among several other major books. He has published
over 90 articles in leading journals, several of which
have received best-article awards. His books have
been translated into twenty languages.
He has received many awards, including being
the first to receive the Distinguished Marketing
Educator Award, American Marketing Association,
1985, and the Charles Coolidge Parlin National
Marketing Award, 1989. He has consulted for
many companies in marketing strategy and
planning, marketing organization and international
marketing, and is a member of numerous governing
bodies in marketing, education, the arts and
corporations.

EUROPEAN MANAGEMENT JOURNAL Vol12 No 4 December 1994 361