The New Marketing and Sales Strategies and Tactics      Philip Kotler, Ph.D Kellogg School of Management Northwestern University Kiev, Ukraine May 19, 2006 My Message  Marketing’s performance has been disappointing  You must replace your Old Marketing with New Marketing that is:     Holistic strategic technology-enabled financially-oriented The New Marketplace  Commoditization  Competition of cheaper brands from China  Rising selling and promotion costs  Proliferation of distribution and media channels  Power shifting to giant retailers  Power shifting to increasingly informed customers  Shrinking margins  Mergers, bankruptcies Marketing’s Results Are Embarrassing  TV advertising has lost much of its former efficiency  Sales promotions are mostly wasted  Direct marketing mailings have poor response  Too many sales calls done by the numbers  High rate of new product failure  Marketing focuses too much on the short run  Marketing has become a one P function How Do CEOs See Marketing?  Marketing is Advertising and Selling  Marketing is 4Ps  Marketing is STP and 4Ps (STP: Segmentation, Targeting, Positioning) Overview  Part Improving the Relationship Between Marketing, Sales and Service  Part Applying Holistic Marketing  Part Developing A Winning Strategy  Part Developing New Product Ideas  Part Improving Communications  Part Moving to High-Tech Marketing Sales Precedes Marketing  In the beginning there was sales  Marketing appeared later to help sales people:  By using marketing research to size and segment the market  By using communications to build the brand and develop collateral materials  By finding leads through direct marketing and trade shows  Marketing was originally located in the sales department  Then marketing grew as a separate department responsible for the marketing plan (4Ps) and brand-building Differences in Mindset and Style  Marketing  Sales  Profit oriented Data oriented Analytical Likes planning Team-oriented MBA educated Focused on whole market and market segments  Volume oriented Action oriented Intuitive Prefers doing Individualistic Undergraduate and “street smart” Focused on each customer             Identify the Existing Level of Relationship Hypothesis: The integration of sales and marketing tends to progress through four distinct stages or levels of complexity Undefined Defined Aligned Integrated Caution! The most appropriate stage for a company will depend on many factors More integrated will not always mean more effective Buying Funnel Customer Awareness Brand Awareness Marketing Brand Consideration Brand Preference Purchase Intention Handoff Purchase Sales Loyalty Customer Advocacy THE Y&R MODEL OF BRAND STRENGTH A successful brand has brand vitality and brand stature stature Brand vitality consists of: Differentiation, the brand is distinct Differentiation, Relevance, the brand is meaningful and personally appropriate Brand stature consists of: Esteem, the brand is seen to have quality and momentum Esteem, Familiarity, the brand is known and understood by many people Familiarity, Some conclusions: A brand that has high familiarity but low likeability is a troubled brand A brand that has high likeability but low familiarity has high advertising potential A brand with high vitality but low stature has excellent potential When a brand’s differentiation and relevance start slipping, esteem will slip next, and then familiarity will decline Building Strong Associations Utilize all levels of brand meaning - McDonalds: • Attributes: clean restaurant; consistent food • Benefits: quick service; value price • Values: children’s charity; fun (playground, toys); I’m Lovin’ It • Culture: service culture; where young people enter the workforce • Personality: Ronald McDonald; Golden Arches; McEverything • User: families; young people Part Moving to Technology-Enabled Marketing  Direct marketing and predictive analytics  Marketing metrics  Marketing models  Sales automation and marketing automation systems  Marketing dashboards Needed: Metrics for Measuring Different Marketing Expenditure Categories  Mail campaigns  Telemarketing campaigns  Sales promotions  Managed events  Trade shows  Sponsorships  TV ad campaigns  Corporate image campaigns  Subscription campaigns  Customer win-back campaigns  New product launch campaigns Major Metrics Sales Metrics  Sales growth  Market share  Sales from new products Customer Readiness to Buy Metrics  Awareness  Preference  Purchase intention  Trial rate  Repurchase rate Customer Metrics  Customer complaints  Customer satisfaction  Customer sacrifice  Number of promoters to detractors  Customer acquisition costs  New customer gains  Customer loses  Customer churn  Retention rate  Customer lifetime value  Customer equity  Customer profitability  Return on customer Brand Metrics  Brand strength (perceived relative brand value)  Brand equity *Compiled by Philip Kotler from various sources Distribution Metrics  Number of outlets  Share in shops handling  Weighted distribution  Distribution gains  Average stocks volume (value)  Stocks cover in days  Out of stock frequency  Share of shelf  Average sales per point of sale Communication Metrics  Spontaneous (unaided) brand awareness Top of mind brand awareness  Prompted (aided) brand awareness  Spontaneous (unaided) advertising awareness  Prompted (aided) advertising awareness  Effective reach  Effective frequency  Gross rating points (GRP)  Response rate Sales force metrics  Quality of lead stream  Average lead to proposal  Average close ratio  Cost per inquiry  Cost per lead  Cost per sale  Cost per sales dollar Price and Profitability Metrics  Price sensitivity  Average price change  Contribution margin  ROI  DCF Comments on Some Metrics  Market share  Customer satisfaction Customer sacrifice Number of promoters to detractors           Retention rate Customer lifetime value Customer equity Return on customer Brand strength (perceived relative brand value) Brand equity ROI DCF PR Media effectiveness Brand beliefs Adjacent category Purchase Purchase consideration consideration Reviews In-store and perception Marcom Brand Brand familiarity familiarity Message effectiveness activity Purchase Purchase intention intention Use and satisfaction awareness Build Models of How Your Market Works and Use New Tools Purchase Purchase Revenue Margin Pricing Promotion Marketing Decision Models and Marketing Mix Response Models        BRANDAID CALLPLAN DETAILER MEDIAC PROMOTER ADCAD See Gary Lillien and Philip Kotler, Marketing Models (Prentice-Hall) SALES AUTOMATION  The objective is to empower the salesperson to be an informed salesperson who virtually has the whole company’s knowledge at his command and can provide total sales quality Marketing Automation  Selecting names for a direct mail campaign  Deciding who should receive loans or credit extensions  Allocating product lines to shelf space  Selecting media  Customizing letters to individual customers  Targeting coupons and samples  Pricing airline seats and hotel reservations Marketing Dashboards  Tools dashboard  Processes dashboard  Performance dashboard Exploit the Internet!             Create a web site that brilliantly communicates about your history, products, brands, beliefs and values (BMW) Create a site that consults on a category (Colgate on dental problems) Create a site that consults on the individual customer’s profile (Elizabeth Arden) and sells customized products (Acumin vitamins) Run focus groups with prospects, customers and dealers or send questionnaires Send ads or information to prospects who show an interest Send free samples of new products (freesample.com) Send coupons of new products (coolsavings.com) Invite customers to send e-mails about problems, ideas, etc Use the Internet to research your competitors Facilitate internal communications among employees on a private intranet Use the Internet to improve purchasing, recruiting, and training Use the Internet to compare sellers’ prices and to purchase materials by posting the company’s terms Technology-Enabled Marketing: Examples      Royal Bank of Canada  Decision to purchase CRM Halifax Bank  Teller suggests financial products Capital One  A credit card for everyone, but with different interest rates, credit lines, and cash advances Tesco supermarkets  Tesco has identified 5,000 customer “needs” segments It sends out some 300,000 variations of any given offer with redemption rates of 90% It has formed clubs such as Baby Club, A World of Wine Club, My Time Club Kraft  Kraft has the names of 110 million customers and 20 thousand facts for each household Kraft launched print magazine, Food & Family, that is delivered to the homes of 2.1 million Kraft customers in 32 versions tailored to 32 segments Conclusions         Marketing is not filling its potential Marketing must show more ROI accountability Marketing must become the driver of business strategy Marketing and sales must be more tightly integrated Companies need to adopt a more holistic view of the marketing challenge Companies need lateral marketing thinking to conceive of new product and service ideas Companies need to find new ways to reach customers; the old ways are failing Companies need to move to technology-enabled marketing to achieve precision marketing “This time like all times is a good one, if we but know what to with it.” Ralph Waldo Emerson THANK YOU! ... SPACE Market Offerings Creating Value Business Architecture VALUE PROPOSITION Marketing Activities Operational System Delivering Value CRM BUSINESS PARTNERS BUSINESS MODEL ERP SCM Part Developing... Renewal (Harvard Business School Press, 2002) Holistic Marketing HOLISTIC RELATIONSHIP MARKETING FRAMEWORK 1) Who is involved? CUSTOMERS MARKET SPACE POTENTIAL OPPORTUNITIES BUSINESS INVESTMENT... co-invest and participate in the customer’s business Source: Neil Rackham Part Applying Holistic Marketing  Marketing must become strategic and drive business strategy  A company needs to take