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Sunday, September 24, 2017

Marketing Insights From A to Z
by Philip Kotler, Hoboken, New Jersey: John Wiley & Sons, Inc., 2003.

(page x)
My approach is influenced by Zen. Zen emphasizes learning by means of meditation and direct, intuitive insights. The thoughts in this book are a result of my meditations on these fundamental marketing concepts and principles.

(page xiv)
The good news is that marketing will be around forever. The bad news: It won't be the way you learned it. In the coming decade, marketing will be reengineered from A to Z. I have chosen to highlight 80 of the most critical concepts and ideas that businesspeople need in waging their battles in this hypercompetitive and rapidly changing marketplace.

(page 2)
Ads primarily create product awareness, sometimes product knowledge, less often product preference, and more rarely, product purchase...

What's worse, many ads are not particularly creative. Most are no memorable. Take auto ads. The typical one shows a new car racing 100 miles per hour around mountain bends. But we don't have mountains in Chicago. And 60 miles an hour is the speed limit. And furthermore I can't remember which car the ad featured. Conclusion: Most ads are a waste of the companies' money and my time.

(page 3)
Companies should ask this question before using advertising: Would advertising create more satisfied clients than if our company spent the money on making a better product, improving company service, or creating stronger brand experiences? I with that companies would spend more money and time on designing an exceptional product, and less on trying to psychologically manipulate perceptions through expensive advertising campaigns. The better the product, the less that has to be spent advertising it. The best advertising is done by satisfied customers.

There are legions of people who love advertising whether or not it works…

David Ogilvy cautioned: "Never write a advertisement which you wouldn't want your own family to read. You wouldn't tell a lie to you wife. Don't tell one to mine."1

Ogilvy chided ad makers who seek awards, not sales: "The advertising business…is being pulled down by the people who create it, who don't know how to sell anything, who have never sold anything in their lives…who despise selling, whose mission in life is to be clever show-offs, and con clients into giving them money to display their originality and genius."2

(page 4)
Those who love advertising can point to many cases where it worked brilliantly: Marlboro cigarettes, Absolut vodka, Volvo automobiles. It also worked in the following cases:

A company advertised for a security guard. The next day it was robbed.

If you think advertising doesn't pay - we understand that there are 25 mountains in Colorado higher than Pikes Peak. Can you name one?

Those against too much reliance on advertising are fond of quoting John Wanamaker of department store fame: "I know that half the money I spend on advertising is wasted; but I can never find out which half."

How should you develop your advertising? You have to make decisions on the five Ms of advertising: mission, message, media, money, and measurement.

The ad's mission can be one of four: to inform, persuade, remind, or reinforce a purchase decision. With a new product you want to inform and/or persuade. With an old product, like Coca-Cola, you want to remind. With some products just bought, you want to reassure the purchaser and reinforce the decision.

The message must communicate the brand's distinctive value in words and pictures. Any message should be tested with the target audience using a set of six questions (see box).

Advertisement Message Test
1. What is the main message you get from this ad?
2. What do you think the advertiser wants you to know, believe or do?
3. How likely is it that this ad will influence you to undertake the implied action?
4. What works well in the ad and what works poorly?
5. How does the ad make you fell?
6. Where is the best place to reach you with this message - where would you be most likely to notice it and pay attention to it?

The media must be chosen for their ability to reach the target market cost-effectively. Besides the classic media of newspapers, magazines, radio, television and billboards, there is a flurry of new media, including e-mail, faxes, telemarketers, digital magazines, in-store advertising, and advertising no popping up in skyscraper elevators and bathrooms. Media selection is becoming a major challenge.

A company works with the media department of the ad agency to define how much reach, frequency, and impact the ad campaign should achieve. Suppose you want your advertising campaign to deliver at least one exposure to 60 percent of the target market consisting of 1,000,000 people. This is 600,000 exposures. But you want the average person to see your ad three times during the campaign. That is 1,800,000 exposures. But it might take six exposures to the average person to notice your ad three times. Thus you need 3,600,000 exposures. And suppose you want to use a high-impact media vehicle costing $20 per 1,000 exposures. Then the campaign would cost $72,000 ($20 x 3,600,000/1,000). Notice that your company could use the same budget to reach more people with less frequency or to reach more people with lower-impact media vehicles. There are trade-offs among reach, frequency, and impact.

Next is money. The ad budget is arrived at by pricing the reach-frequency, and impact decisions. This budget must take into account that the company has to pay for the ad production and other costs.

A welcome trend would be that advertisers pay advertising agencies on a pay-for-performance basis. This would be reasonable because the agencies claim that their creative ad campaigns will in crease the companies' sales. So pay the agency an 18 percent commission if sales increase, a normal 15 percent commission if sales remain the same, and a 13 percent commission with a warning if sales have fallen. Of course, the agency will say that other forces caused the drop in sales and even that the drop would have been deeper had it not been for the ad campaign.

Now for measurement. Ad campaigns require pre-measurement and post-measurement. Ad mock-ups can be tested for communication effectiveness using recall, recognition, or persuasion measures. Post-measurements strive to calculate the communication or sales impact of the ad campaign. This is difficult to do, though particularly with image ads.

(page 7)
How much should you spend on advertising? It you spend to little, you are spending too much because no one notices it. A million dollars of TV advertising will hardly be noticed. And if you spend to many millions, your profits will suffer. Most ad agencies push for a "big bang" budget and while this may be noticed, it hardly moves sales.

It is hard to measure something that can't be measured. Stan Rapp and Thomas Collins put their finger on the problem in the book Beyond MaxiMarketing. "We are simply emphasizing that research often goes to great lengths to measure irrelevant things, including people's opinions about advertising or their memories of it rather than their actions as a result of it."

Will mass advertising diminish in its influence and use? I think so. People are increasingly cynical about and increasingly inattentive to advertising. One of its former major spenders, Sergio Zyman, ex-vice president of Coca-Cola, said recently, "Advertising, as you know it is dead." He then redefined advertising: "Advertising is a lot more than just television commercials - it includes branding, packaging, celebrity spokespeople, sponsorships, publicity, customer service, they way you treat your employees, and even the way your secretary answers the phone."4 What he is really doing is defining marketing.

A major limitation of advertising is that in constitutes a monologue. As evidence, most ads do not contain a telephone number or e-mail address to enable customers to respond. What a lost opportunity for the company to learn something from a customer! Marketing consultant Regis McKenna observed: "We are witnessing the obsolescence of advertising. The marketing requires a feedback loop; it is this element that is missing from the monologue of advertising."5

(page 9)
A brand save people time, and this is worth money. Niall Fitzgerald, chairman of Unilever, observed: "A brand is a storehouse of trust that matters more and more as choices multiply. People want to simplify their lives."

(page 10)
Choosing a good brand name helps. A consumer panel was shown the pictures of two beautiful women and asked who was more beautiful. The vote split 50-50. Then the experimenter named one woman Jennifer and the other Gertrude. The woman name Jennifer subsequently received 80 percent of the votes.

Great brands are the only route to sustained, above-average profitability. And great brands present emotional benefits, not just rational benefits.

(page 19)(about communication and promotion)
Even then, there is a question of effectiveness. It is one thing to create awareness, another to draw sustained attention, and still another to trigger action. Attention is to get someone to spend time focusing on something. But whether this leads to buying action is another question.

(page 20) Companies
It has been observed that there are four types of companies:

1. Those that make things happen.
2. Those that watch things happen and respond.
3. Those that watch things happen and don't respond.
4. Those that didn't notice that anything had happened.

No wonder the average company disappears within 20 years. Of the companies listed as best in the Forbes 100 of 1917, only 18 survived to 1987. And only two of them, General Electric and Eastman Kodak, were making good money.

And not all existing companies are truly alive. Companies fool us by merely breathing day to day. General Motors and Sears have been losing shares for years even though their hearts are still ticking. You can enter some companies and tell within 15 minutes whether they are alive or dead, just by looking at the employees' faces.

I no longer know what a large company is. Company size is relative. Boeing, Caterpillar, Ford, General Motors, Kellogg, Eastman Kodak, J.P. Morgan and Sears are giant companies. But in early 2000 Microsoft Corporation achieved a market value that exceeded that of all eight companies combined.

1 David Ogilvy, “Confessions of an Advertising Man,” New York: Atheneum, 1988.
2 Ibid.
3 Stan Rapp and Thomas L. Collins, “Beyond MaxiMarketing: The New Power of Caring and Daring ,” New York: McGraw-Hill, 1994.
4 Sergio Zyman, “The End of Advertising As We know It ,” New York: John Wiley & Sons, Inc., 2003.
5 Regis McKenna, “Total Access: Giving Customers What They Want in an Anytime, Anywhere World ,” Boston: Harvard Business School Press, 2002.