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Philip Kotler

Good companies will meet needs; great companies will create markets. Philip Kotler American academic Born 1931

Breakthrough ideas
Recognition of marketing as a central business function

Key book
Marketing Management The Ultimate Business Guru Book 116 Philip Kotler (b. 1931) is a Chicagoan whose influence on the subject of marketing is matched only by his productiveness. The author of countless books, translated into over 20 languages, he is also the author of over 100 articles. While championing the role of marketing over 30 years, Kotler has coined phrases such as mega marketing, demarketing and social marketing. His books include the definitive textbook on the subject, Marketing Management (now in its eighth edition). Kotler was a student at DePaul University from 1948 until 1950. Subsequently, he received his Masters degree in economics from the University of Chicago and a PhD from MIT. At Chicago he was taught by Milton Friedman and at MIT by Paul Samuelson I concluded that if those two great minds couldnt agree on economic issues, I probably wasnt going to make a difference in that field, says Kotler. At the same time, I was attracted to very tangible problems that economists don t deal with, such as: how much do you spend on advertising? Whats a sensibly sized sales force? How do you really set prices intelligently? I got into the mindset of a market.1 Kotler did his postdoctoral work in mathematics at Harvard University and in behavioral science at the University of Chicago. Kotler worked as an analyst for Westinghouse in Pittsburgh and was then an assistant professor at Chicago s Roosevelt University from 1957 until 1961. He then joined Northwestern University becoming professor of marketing in 1969. He has a penchant for useful definitions. When I am asked to define marketing in the briefest possible way I say marketing is meeting needs profitably. A lot of us meet needs but businesses are set up to do it profitably. Marketing is the homework that you do to hit the mark that satisfies those needs exactly. When you do that job, there isnt much selling work to do because the word gets out from delighted customers that this is a wonderful solution to our problems.2 Elsewhere, Kotler has defined marketing as a social and managerial process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products of value with others . He went on to explain the concept of a market as consisting of all the potential customers sharing a particular Philip Kotler 117 need or want who might be willing and able to engage in exchange to satisfy that need or want. Marketing management therefore is the process of planning and executing the conception, pricing, promotion, and distribution of goods, services, and ideas to create exchanges with target groups that satisfy customer and organizational objectives. Kotler also provides a useful definition of a product as anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. He says that a product has five levels: the core benefit ( Marketers must see themselves as benefit providers); the generic product; the expected

product (the normal expectations the customer has of the product); the augmented product (the additional services or benefits added to the product) and, finally, the potential product (all of the augmentations and transformations that this product might ultimately undergo in the future ). He has also explored what he labels customer delivered value defined as the difference between total customer value and total customer cost. And total customer value is the bundle of benefits customers expect from a given product or service. Total customer value is made up of product value, service value, personnel value and image value. Total customer cost is made up of monetary price, time cost, energy cost and psychic cost. The two are combined to produce customer delivered value. (Satisfying is silent. When you satisfy the customer you haven t created any noise, any dedication, any devotion so now we say, you have to try and delight the customer. You dont just do it, you enjoy it, says Kotler.) Among Kotlers innovations have been demarketing which Kotler coined with Sydney J. Levy. Ibis is the idea that an element of marketing is to dissuade customers from desiring a particular product or service. In the 1970s, Kotler also originated social marketing with Gerald Zaltman. This explained the use of marketing in the dissemination of socially useful ideas. But Kotlers most enduring achievement is to have marketed his chosen subject so successfully. Before he came on the scene, marketing writing and teaching was largely a matter of describing marketing functions, Kotler brought to marketing thinking and writing an analytical orientation and made it an acceptable academic discipline, says Warwick Universitys Peter Doyle.3 The Ultimate Business Guru Book 118 Kotler has also written the marketing bible, Marketing Management, which celebrates and redefines marketing with each new edition. The marketing discipline is redeveloping its assumptions, concepts, skills, tools, and systems for making sound business decisions, writes Kotler in the most recent edition. Marketers must know when to cultivate large markets and when to niche; when to launch new brands and when to extend existing brand names; when to push products through distribution and when to pull them through distribution; when to protect the domestic market and when to penetrate aggressively into foreign markets; when to add more benefits to the offer and when to reduce the price; and when to expand and when to contract their budgets for salesforce, advertising, and other marketing tools. The central shift that Kotler has described is from transaction oriented marketing to relationship marketing. Good customers are an asset which, when well managed and served, will return a handsome lifetime income stream to the company. In the intensely competitive marketplace, the companys first order of business is to retain customer loyalty through continually satisfying their needs in a superior way, says Kotler. In order to become marketing-oriented, Kotler believes organizations encounter three common hurdles: 1. Organized resistance entrenched functional behavior tends to oppose increased emphasis on marketing as it is seen as undermining functional power bases. 2. Slow learning most companies are only capable of slowly embracing the marketing concept. In the banking industry, Kotler says that marketing has passed through five stages. In the first marketing was regarded as sales promotion and publicity. Then it was taken to be smiling and providing a friendly atmosphere. Banks moved on to segmentation and innovation, and then regarded marketing as positioning. Finally, they came to see marketing as marketing analysis, planning and control. 3. Fast forgetting companies which embrace marketing concepts tend, over time, to lose touch with core marketing principles. Various US companies have sought to establish their products in Europe with little knowledge of the differences in the marketplace.

Philip Kotler 119 Yet these obstacles must be overcome. Kotler regards marketing as the essence of business and more. Good companies will meet needs; great companies will create markets, he writes. Market leadership is gained by envisioning new products, services, lifestyles, and ways to raise living standards. There is a vast difference between companies that offer me-too products and those that create new product and service values not even imagined by the marketplace. Ultimately, marketing at its best is about value creation and raising the worlds living standards.