1. Marketing 3.0: Values-Driven Marketing Philip Kotler Kuwait April 4, 2011

2. Two Recent Books by Professor Kotler

8. An optimist is a person who sees an opportunity in every calamity. A pessimist is a person who sees a calamity in every opportunity. Winston Churchill

15. Tomorrow Will Be Different Source: Clayton Christensen Yesterday Today Tomorrow Ford Toyota Cherry Department stores Wal-Mart Internet retail Digital Equipment Dell RIM Blackberry Delta Southwest, Ryan Air SkyWest, Air taxis IBM Microsoft Linux At&T Cingular Skype Sony DiskMan Apple iPod Cell Phones

21. MUST MARKETING BE RE-INVENTED? MARKETERS are prisoners of an OLD PARADIGM MARKETERS are operating in a TIME WARP Companies aim to maximize profits Company investors are more important than other stakeholders Customers buy rationally to maximize value Customers get most of their information from sellers and don’t talk to each other about products Don’t acknowledge the growing power of the customers Don’t acknowledge the growing power of the channels and other stakeholders Don’t acknowledge the new social media world and their growing social responsibilities WE NEED TO….

22. You Need Two Marketing Departments!! Most marketing departments are engaged in tactical brand-maintenance instead of brand-building. Strategic marketing is missing in many marketing departments. Strategic marketing requires taking a 3-5 year view of the business . Downstream Marketing Upstream Marketing Markets TODAY’s Product Create TOMORROW’s Product SOLUTION

27. MARKETING 1.0 vs 2.0 vs 3.0 Product-centric Marketing Customer-oriented Marketing Value-driven Marketing Objective Enabling Forces How companies see the market Key marketing concept Company marketing guidelines Value propositions Interaction with consumers MARKETING 1.0 MARKETING 2.0 MARKETING 3.0 Sell products Satisfy and retain the consumers Make the world a better place Industrial Revolution Information Technology New Wave Technology Mass Buyers with Physical Needs Smarter Consumer with Mind and Heart Whole Human with Mind, Heart, and Spirit Product development Differentiation Values Product specification Corporate and Product Positioning Corporate , Vision, Values Functional Functional and Emotional Functional, Emotional, and Spiritual One-to-Many Transaction One-to-One Relationship Many-to-Many Collaboration

28. Values-Based Matrix Model

29. S. C. JOHNSON VALUE-BASED MATRIX For SC Johnson, creating sustainable economic value means helping communities prosper while achieving profitable growth for the company. Sustaining Values: SC Johnson Public Report We believe our fundamental strength lies in our people. MIND HEART SPIRIT Promoting reusable shopping bags Base of the Pyramid Mission Contributing to the community well –being as well as sustaining and protecting the environment Vision To be a world leader in delivering innovative solutions to meet human needs through sustainability principles Values Sustainability We create economic value We strive for environmental health We advance social progress

31. Companies Americans Love Amazon, Best Buy, BMW, CarMax, Caterpillar, Commerce Bank, Container Store, Costco, eBay, Google, Harley-Davidson, Honda, IDEO, IKEA, JetBlue Johnson & Johnson, Jordan's Furniture, L L Bean, New Balance, Patagonia, Progressive Insurance, REI, Southwest, Starbucks, Timberland, Toyota, Trader Joe's, UPS, Wegmans, Whole Foods. The researchers found these “firms of endearment” to be highly profitable. They also found eight characteristics common to these firms.

39. Source: Blue Ocean Strategy

42. CUSTOMER RESEARCH Ethnographic Studies In-store Observation Quantitative Surveys Focus Groups/ Consumer Panels NeuroScienceand ZMET In home & shopping trips Orientation & Environment Why do you buy? Awareness, Attitudes, & Behavior Listening for insights & trends Customer Research

44. There are so many brands in some categories that it is difficult to stand out.

45. The brand name may account for more than half of the brand value on the balance sheet . Almost 70% of the market capitalization of such brands as Nike and Prada lie in its intangibles, especially the brand. The former chairman of Quaker Oats said: “If the business were split up, I would take the brands, trademarks, and goodwill, and you could have all the bricks and mortar—and I would fare better than you.”

49. Brand Asset Valuator Model

52. The Brand Within the Brand: “Ingredient Branding“ or InBranding

53. Logos of Ingredient Brands

55. Creating genuine customer value: Progressive Insurance Name Your Price lets customers customize their policy to fit their budget. “ I want an easier way to see how I can meet my insurance needs at a great price.” MyRate rewards lower risk drivers with lower rates. “ I don’t drive a lot of miles, I’m a safe driver, and I’m not usually on the road late at night when accidents are most likely to happen. Since I’m less likely to be in an accident, shouldn’t I pay less for car insurance?”

60. How Will Your Company Be Measured? Indices now measure how well a company performs in the triple bottom line: profit, planet, and people . The AIM : To encourage companies to improve their economic, environmental, and social impact on the society . Company Approach FTSE4Good Index Good companies work toward environmental sustainability, have positive relationship with all stakeholders, protect universal human rights, possess good supply chain labor standards, and counter bribery practices Dow Jones Sustainability Index Corporate sustainability as “a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments.” Goldman Sachs Introduce the GS Sustain Focus List, which includes the list of companies with sustainable practices

61. SUSTAINABILITY AND SHAREHOLDER VALUE There is a link between corporate sustainability and strong share price performance . Companies that put more emphasis on social and environmental impacts reported annual profit growth of 16% and share price growth of 45% while those from companies that did not put a lot of emphasis reported annual profit growth of only 7% and share price growth of only 12% . (Economist Intelligence, 2008) Moreover, executives believe that the concept of sustainability is good for corporations in attracting consumers and employees and improving shareholder value.

62. Selling Sustainability to Investors To convince shareholders, the company needs to provide tangible evidence that the practice of sustainability will improve shareholder value by creating a competitive advantage . The issue is to find a linkage of between sustainability, profitability, and returnability THREE important metrics that can be quantified financially: Improved cost productivity Higher revenue from new market opportunities Higher corporate brand value (For details, see Marketing 3.0). ? Sustainability Profitability Returnability

64. Wal-Mart Turns Green Wal-Mart announced in 2005 that it will be a “good steward to the environment” and will spend $500 million a year to increase fuel efficiency in Wal-Mart’s truck fleet by 25% over three years ; reduce greenhouse gases by 20% in seven years ; reduce energy use at stores by 30% ; and cut solid waste from U.S. stores and Sam’s Clubs by 25% in three years . Critics see Wal-Mart’s move being mainly done for economic purposes —to save energy , save costs , and increase revenue from increasing demand for green products. This describes an “Investor Orientation.”

69. “ Within five years, if you run your business in the same way as you do now, you’re going to be out of business.” Philip Kotler