RTM: We can see clear evidence that marketing is less effective than it once was. Response rates have dropped drastically in direct marketing and in advertising. Why is this?

PK: Marketing, as traditionally practised, is losing some effectiveness.  I have advised clients to curb their TV advertising budgets, especially mass advertising.  Fewer people are watching TV.  Many are zapping commercials. The money is better spent on PR: creating press releases, reaching influentials, creating buzz, using guerrilla tactics.

Falling response rates to direct marketing are the result of inadequate information on prospects and customers.  Companies that have developed good customer databases can achieve higher response rates with fewer mailings through ‘precision marketing’.

RTM: So what do you see as the main mistakes that marketeers are making today?

PK: Marketeers develop a fixed mindset concerning the effectiveness of various marketing tools and make the mistake of continuing with the same media in the next period. If they have always spent 50% of the budget on advertising, they will continue to do this, even when evidence shows that advertising is losing its effectiveness, and that they should transfer half the advertising money to PR or direct mail.  Allocations become frozen, and the Chief Marketing Officer is loath to challenge this because it will change the status of different managers in the organisation. 

And many marketing departments are skilled only in the four traditional marketing activities: market research, advertising, sales promotion, and sales force. In fact, even in these, they may not be skilled!  They have failed to acquire the new marketing skills required in the new economy. Here is a useful checklist:
- Customer relationship management (CRM)
- Partner relationship management (PRM)
- Database marketing and data-mining
- Telemarketing
- PR (including event and sponsorship marketing)
- Brand-building
- Experiential marketing
- Integrated marketing communications
- Profitability analysis by product, segment,
  customer, and channel

People should ask themselves how skilled they are in these areas before writing off marketing.

RTM: The value of brands seems to be declining as own-brands and low-cost retailers start to dominate the landscape.  Why?
 
PK: Brands are brands, whether they are national brands or store-owned brands.  Food retailers no longer put out only a cheap store brand.  Loblaws of Canada has a brand called President’s Choice (cookies, colas, etc.) and this brand is much preferred to some of the national brands. 

The main lesson is that both national brands and store brands can work.  People continue to pay a premium for well-known brands as long as they are priced right.  A well-known brand in the past could usually command a 15%–30% premium over average competitor brands.  Today the brand is lucky to get a 5%–15% premium.  Marlboro priced its cigarettes high and lost share.  And Kellogg drew a lot of new, lower-price cereal brands to compete against its high-price position.  Some brands owe their weakening market position to greed.  They are simply asking for too much money in relation to their perceived value relative to other available brands.

RTM: I suppose that a lot of the time we are talking about a huge loss of confidence.  I know many people are becoming increasingly sceptical.  How can you tell if a marketing plan will work?

PK: My experience is that most are poorly done.  Some are overloaded with past numbers, but lack strategy.  Or the strategy is there, but the tactics are totally unrelated to the strategy.  Or the targets are unrealistic.  Or they ask for an unrealistic budget.  Or the controls are not adequate for feedback and plan revision.  No marketing plan is guaranteed to work, but a poor plan is almost guaranteed to fail. 

RTM: You say in your latest book, Kotler on Marketing, that if the marketing department can’t see any opportunities, you should fire the marketing department.  Yet there is a strong feeling of pessimism today. A sense that marketing budgets are becoming less effective, that consumers don’t want to listen any more. Where is this pessimism coming from? Is it justified?

PK: Marketing doesn’t die during a recession, only marketeers without imagination.

Yes, the number of opportunities varies with the business and technology cycle.  But there are always opportunities!  Any company with a product or service should be able to think of new ways to modify it, offer different sizes or add new features or services.  We need lateral marketing – where we visualise products in new contexts – rather than vertical marketing.

For example, today we buy food at petrol stations, bank in supermarkets, take pictures with mobile phones, chew medical gum to ingest certain medicines into our bodies and eat cereal in the form of a bar. There are plenty of opportunities.  I will be addressing this with a new book in 2003, called Lateral Marketing: A New Approach to Finding Product, Market and Marketing Mix Ideas (co-author Fernando Trias De Bes).