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4 Sep, 2020 06:05

If production and consumption continue as now, we’ll bury our planet – ‘father of marketing’

Consumerism – culture and lifestyle for some, a religion for many. But 2020 has changed things. As part of the Synergy Online Forum organised by the Synergy Business School, we’ve talked about this with renowned economist and “father of modern marketing,” Philip Kotler. 

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Sophie Shevardnadze: Philip Kotler, “father of marketing”, professor of international marketing at the Kellogg School of Management at Northwestern University, so great to have you with us.  

Philip Kotler: Thank you, Sophie. 

SS: We've been looking forward to it for the longest time. I wanted to talk to you for the longest time but now that the pandemic has hit, wow, I have so many questions for you. Let's see how many we can get into this program. First of all, you've built up a science of marketing basically from scratch and the books you've written have been the Bible for business around the world for more than 60 years. So marketing is about promoting the selling of goods, of services, right? With the situation of today, with pandemic shedding light on problems with consuming and anti-consumption movement gaining ground, do you think a new set of rules and guidelines is needed? 

PK: Well, the COVID situation is going to change a lot of our lives right now. And then when COVID is finally contained and terminated, we will have quite a different economy. How is COVID affecting us today? Well, first of all, there's a limited opportunity to go into stores where one can catch coronavirus, and so more and more people are using the online approach to buying what they need, and that means that COVID has accelerated the rate at which we become computer- and technology-dependent. And that won't change. I think anyone who does a lot of ordering for the next months, however COVID lasts, are going to continue to save time by ordering things from very good organisations that carry almost everything. We have a company called Amazon, where you can order almost everything and I won't be surprised if they're going to sell a car too in the future. So that's one thing. The whole meaning of a company's brand is changing. If the company continues to just talk about the brand as if there's no COVID situation, it's going to lose control of it because the brand is not made by the company alone. It's made by all the people on Facebook, all the people who talk to each other about the product they experienced, whether they liked it or not. A bad brand can easily be exposed. So companies have to rethink what is their message. The old message doesn't work in today's world. A message that works is caring for the problems that people have. And right now we're saying that more companies have to put a purpose behind their brand. Their brand must be carrying out a purpose that enriches the lives of the customers. I can go on but my brief answer is that marketing has completely changed today because of the coronavirus. 

SS: But talking about reaching out to customers, I realised based on myself that people have changed during the pandemic. During this crisis, many material things that used to seem important don't really matter that much while maybe spiritual things or human contact, they became more important. What is the consumer like in the age of COVID-19 and or in post-COVID age? 

PK: Most companies are much more with a specific type of consumer that they try to deeply understand and in fact, be the best server of that type of consumer. All right, what are the types? I've developed an appreciation of some new types that are coming up and maybe you've seen it before. But some consumers are deciding that they are buying too much stuff. There's no room. In fact, they would like another appliance, but there wouldn't be any place to put it. They could buy a car but some young consumers in some countries are saying, “The car’s going to be idle 90% of the time, why would I tie up my money in a car, I could get an Uber to drive me anywhere for much less than owning a car”. That's called the sharing society. So there's a group called life simplifiers, people who want to simplify what they own, or need to own and so on. There's another group that is worried about the planet and about too much consumption. We're using up our land and we're not taking care of our oceans. And we bet that maybe there's too much overconsumption. Some people have to, especially those who are building yachts and mansions and so on, - can we afford all of that to be happening? There's another group that wants to eat better. They realise they've been buying hotdogs and hamburgers, and that isn't good for your health if you overdo it. So they are sane eaters, they are vegetarians in some cases, or vegans. So that's another group. And some of them are... We call them people who want conservation, they're saying basically, “We've got to make better products that last longer, that we can recycle, we can repair, we could reuse, and we can recirculate it to other people who are poor, and would find these products beneficial”. We call that a circular economy. So look, just in a minute, I mentioned maybe four or five different groups of consumers. And they may altogether not be the average consumer. The average consumer is going to be groping with the situation and trying to be sure they can get access to food and health. And then they have to think about education for their children and others and what to do. 

SS: So, you're saying we're over-consuming, but overconsumption or even just consumption is what keeps the whole capitalist system running, right? Capitalism works well, only when there is a constant increase in consumption. So if the nature of consumption changes and you're saying it should change, and you won't be growing steadily anymore, how will capitalism survive? Or will it survive? 

PK: Yeah, it's an excellent question because marketing is based on the idea of helping companies get the things that would satisfy their needs. Some of the needs, of course, are created by marketing. I have to admit that. And the idea is to help companies sell what they make. And many people normally think this will go on forever, that production and consumption will continue forever against the concern that people have that we're going to bury the planet if we do that. So, marketing is in an identity crisis. There are people who wish we could ban marketing or ban advertising. They’re not found in many places, but they just feel that much of what marketing does is create dissatisfaction with our lives. Because we are shown cars and new phones and other things that we must have. Well, we believe we have to have it, and especially if several of our friends are getting those things and happy with those things we feel discontented with not buying them. So marketing's job is to produce discontent to some extent which can be overcome by buying something. I don't know how to stop that. These are nice people who are marketers and salespeople who are doing their job, which is to supply things that might improve the lives of people if they want to buy these things. So marketing is in a crisis. Is it the cause of the depression of many people, why they're depressed, or is it a factor contributing to that? Marketing has to re-think its basic role in terms of human society. 

SS: But if you're saying that marketing is in crisis, does it automatically mean that capitalism is also in crisis and it needs to rethink its role? 

PK: Well, capitalism is in crisis. I've been writing about that. I wrote a whole book called “Confronting Capitalism” with the fourteen big problems which we all know about. There's a lot of poverty in the world, and there's a lot of low income for workers who are working hard. I'd rather pay a person who collects the city's garbage more than the CEO of a company because he's doing more to sacrifice his life. And I especially think teachers are so underpaid. So the point is that we need to think through how marketing could serve society in a better way. Now, you've raised the question of capitalism. Yes, that's a way of organising ideas and services and products. That's worked pretty well in the sense of creating economic growth. I mean, anyone who is a real capitalist will say, “Well, we have made it possible to have the best output and growth in the world”. Yes, but has it been shared equitably? And the answer is no. The rich get richer, the workers stay at the old pay, and the poor - no one is taken care of. So capitalism deserves criticism, basically, on the inherent inequity of the sharing of the gains. In other words, to me, a company works when it has a team. And the team members include customers, employees, suppliers, distributors, and the communities. And either they all work together and make the company successful or they don't, but if they make the company successful, we got to have a better sharing and not pay the CEOs 300 times what an average hard worker is being paid. So I’d rather save capitalism but put it on a better basis. And the ones who have done that are the Scandinavians. In fact, I wrote an article recently called “Is America Ready for Scandinavian Capitalism?” And the answer I got is yes. And certainly we should pay higher taxes, - not the average worker who is paying enough and can't pay much more, - tax the people who have the money higher. And let's use it and make college education freer, or at least less costly for our people and make the healthcare system care for everyone without paying money every time you get sick or something. So yes, higher taxes make sense and a more Scandinavian capitalism makes sense.  

SS: Okay, that's very interesting, capitalism but Scandinavian-style. So it's the capitalism of the future - Scandinavian style capitalism.  

PK: I think so. 

SS: Okay. Here's a question, maybe a bit of a philosophical question, but I'm sure you thought of it as well. See, in recent years, I've noticed that, and correct me if I'm wrong, there's a shift in people's spending habits. Before people really wanted to buy and own stuff to feel happier, to feel better about themselves. 

PK: Yes. They needed stuff, products.  

SS: Yeah, yeah. To feel established, you needed to have stuff. Now the focus is shifting on buying and living an experience, not stuff, an experience. So instead of buying, let's say, a flat screen, people now book a trip overseas, and instead of a new car, they sign up for a university course, right? Can this new value that's put on the experience help the global economy while the demand for “stuff” is going down? 

PK: I like that idea. It means that we don't have to produce so much physical stuff which requires ruining the Earth basically by taking resources many of which can't be replaced later, and making solid things. So experience... By the way, this also happens with experience if more people want to travel to a distant location as a sightseer, you need an airplane to get you there and you need a busy hotel that also sells food and other things. But there is an observation that it has to do with the service economy. The service economy is growing in relation to the goods economy. And so many things are intangible, you know, services are intangible. You see it and it takes place but it's not anything physical. Going to college, getting a haircut, a bunch of things like that are services. So many capitalists have found that if they can satisfy what we call the intangible ones, not ones for physical goods but intangible ones. And they do a good job of it often and many consumers are doing a trade-off between having a car or using the money for their education or travel or something like that. I don't know. I haven't seen it measured. It's a good question. And maybe it varies country after country, and in a country with lower income, probably stuff, getting physical things is the first order of business, not having experiential spending. 

SS: On the other hand, it is our human nature to like the abundance of choice. I mean, sometimes you just can't help it and we like having new things. We like having beautiful things. And then on the other, purchasing all those new things leads to overconsumption. So here's the thing, because this is like battling the basic human nature, right? Is there a way to balance these two facets of our life: the desire to have broad range of good things, and why shouldn't we if we want to, available to us and also the risk to slip into having too many of these things, thus damaging the planet, like you're saying? What's the key for balancing those two major parts of our life? 

PK: Yeah. Each person has that as an issue in their own lives. It is human nature to respond to good products, to enjoy design and the aesthetics of seeing well-built buildings and nice cars and so on. And if one has the means to consider acquiring these things... It's partly what Thorstein Veblen, the great economist, called conspicuous consumption: we sort of like to send out a message to other people that we are current, we not only value good-looking things, but we want to own them. There's competition for outperforming others by owning more, I'm sure. And that's going to go on. It's also driven by marketing too. Marketing helps introduce awareness of certain products that you could add to your life. And it's easy, if you have the money, to go ahead. The balance - I don't know. Unless there's a movement, a social movement that tries to say, “Please contain your wants for physical things and think about how the planet is going to be hurt by you consuming more than you need to consume. Of course, eat well and enjoy life but don't make your life about just... Make your life about other people, make your life about having a good planet and so on”. So, I don't know. So social movement might contrast to the normal thing of buying whenever you need to buy something you want. 

SS: You know, I've read that after the 2003 SARS outbreak, people were afraid to go to crowded shopping malls and turned to online retail, and this led to the rise of Alibaba and other e-commerce giants. And it's obvious that this pandemic, the COVID-19 pandemic, has boosted online trade just as well. But can it replace offline shopping for good? All those boutiques, shopping malls? Can it transform our life completely in that way? 

PK: Yes. It's interesting. I saw the problem first in my own life because my wife for years stopped shopping in stores. I didn't know if that was general or just with her friends, a few friends. Everything would be ordered online, a package would arrive, she’d open it up, if it was a dress, she would try it out, if it was good, she’d keep it, otherwise she sends it back. So I asked her sometimes, does she miss going into a store for clothing? And she doesn't object to it, there's no reason not to do it. If we're in the shopping area, she'll probably look at the windows and maybe walk into one. So the question is, what's going to happen to retail, what we call in-store retailing? If everything could be ordered that you need, do we need any stores? As a matter of fact, what would that do to employment? Consider the number of people who in shopping centers are clerking in those stores waiting for customers. And we know that many shopping centers during the pandemic are closed down basically. We think they're going to be turned into some other use, but not that shopping centers won't come back. Look, there will still be a Gucci and a Tiffany and something that seems special to some people. Many people will look, stop at those places, maybe not buy anything, just look. And I understand that it was a very important part of life for most people, most women to particularly give a day to some shopping. And it's enjoyable, full of surprises. So, some people will return to that as soon as the pandemic ends, and some people will still be ordering more. I would say that any retailer or retail chain is going to do less than they did before the pandemic. In other words, I expect that profitability, normally to be lower than they had achieved before the pandemic. Now there will be a few exceptions - a few brand new types of in-store experiences and chains and so on that might lead to excitement and so on. But generally speaking, you're not going to make much money running stores. 

SS: Mr. Kotler, thank you so much for this wonderful chat. I really appreciate, I got so many answers to my questions. I really hope like you've said that we will become more aware and take care of more of our planet and we will become more about people and taking care of each other rather than self-centered egoists, you know.  

PK: Yes. 

SS: So on this note, I'll let you go. Your time is precious. Thank you so much. And also would like to thank Synergy Online Forum organised by Synergy Business School for arranging this wonderful chat. Thank you and all the best. 

PK: Sophie, you've been a wonderful moderator.  

SS: Thank you.  

PK: And thank you so much for your wonderful questions. Bless you. 

SS: Thank you so much. Bye-bye.