The book I want to present to you today is one of the key books that I always propose novice marketers start with. It provides a great basis for understanding the customers and their behavior, while also explaining the latest changes in today’s over-connected world.
It’s time to dive into the universe of Marketing 4.0, led by the experienced Philip Kotler. I hope my detailed book notes will save you some reading time and help you get the most important concepts of the book.
Feel free to check out other book notes, too.
The marketing context
In order to understand the need for a new marketing model, we first need to take a look around. Kotler makes the case that the world has changed in subtle but significant ways ever since digital communication became ubiquitous.
Random conversations about brands are now more credible than targeted advertising campaigns. Social circles have become the main source of influence, overtaking external marketing communications, and even personal preference. Customers tend to follow the lead of their peers when deciding which brand to choose. It is as if customers were protecting themselves from false brand claims and campaign trickeries by using their social circles to build a fortress.
Let’s look at the specific changes our world is undergoing.
From exclusive to inclusive offerings
It used to be the case that new and shiny things arrived in advanced economies first and only later got to emerging markets. Now we’re seeing a different trend.
We’re witnessing “reverse innovation” where new products are first developed in emerging markets – think WeChat and the convenience it offers that has still not been replicated in Western platforms.
Additionally, the transparency that comes with digital, means clone businesses marked by local twists in the execution.
From vertical to horizontal markets
High-volume mainstream brands are not as common as they used to be. We’re now seeing a proliferation of low-volume niche ones. These smaller brands actually rely on a much more direct connection with their customers:
Customers should be considered friends and peers of the brand. The brand should reveal its authentic character and be honest of its true value.
From individual to social brand choices
Choosing a brand to use is no longer just about your own personal preferences. With everything about our lives being constantly exposed online, each choice is a significant one. Customers care more about the opinions of others and make choices accordingly.
How connectivity changes everything
Connectivity is changing the world around us in many important ways. It is no longer a new buzzword but a characteristic that permeates our everyday. Its most important role is that of a great leveler. Connectivity reduces costs and lowers the barriers to entering new markets, enables concurrent product development, and shortens the time frame for brand building.
To fully understand connectivity, we need to look at it holistically. We intuitively think of mobile connectivity – the most basic level, where the internet serves only as a communications infrastructure. But today brands must strive for experiential connectivity – using the internet to deliver a superior customer experience in different touchpoints. The end goal would be social connectivity – brands need to form deeper connections with customers and embed themselves or even create connected communities.
Offline vs online interaction
When looking at a digitally connected world, it’s tempting to think online touchpoints will fully replace offline ones. But that’s a false dichotomy. In reality, online is melding with offline, not replacing it.
The online and offline world will eventually coexist and converge. In the digital economy, digital interaction alone is not sufficient. In fact, in an increasingly online world, offline touch represents a strong differentiation.
Informed vs distracted customers
In a connected world, customers hold all the cards. They are in control and can make more logical informed decisions. Right? Wrong. In reality, connectivity is creating new ways to influence purchase decisions. Customers are now:
- influenced by marketing communications in various media;
- persuaded by the opinions of their friends and family;
- taking into account personal knowledge and an attitude about certain brands based on past experiences.
With so many competing sources of information, customer attention becomes scarce. Thus, only brands with WOW! factors will be worthwhile for them to listen to.
Negative vs positive advocacy
Nowadays, customers can freely express their opinions online and reach big audiences. Therefore, others are likely to listen. We now intuitively know that advice from strangers might be more credible than a recommendation from a celebrity brand endorsement.
This makes marketers wary because they can no longer control the conversation. What if someone says something bad about us on the internet?
Actually, some negative advocacy might be necessary to trigger positive advocacy from brand supporters. Brands that have a strong character will almost surely vex someone – and marketers should learn that this is a part of the game and a necessity in order to also breed strong fans.
What these brands should aim to have is the ultimate sales force: an army of lovers who are willing to guard the brand in the digital world.
The new marketing mix: from four Ps to four Cs
Any marketer worth their salt knows the original four Ps of marketing: product, price, place, promotion. The way they are formulated gives the impression that a business is fully in control of the way they interact with the market. If you’ve read so far, you know this is no longer true. So the four Ps are changing in order to also encompass the idea of brands actively engaging their customers.
In a connected world, the concept of marketing mix has evolved to accommodate more customer participation.
From Product to Co-creation
Co-creation is the new product development strategy. Through co-creation and involving customers early in the ideation stage, companies can improve the success rate of new product development. Co-creation also allows customers to customize and personalize products and services, thereby creating superior value propositions.
From Price to Currency
Price is similar to currency, which fluctuates depending on market demand. Think about airline ticket pricing. Dynamic pricing allows businesses to charge different customers in different ways, based on their historical behavior, proximity to store locations, and other information enabled by big data analytics.
From Placement to Communal activation
The most potent distribution concept is peer-to-peer distribution. In the digital world, customers want access to products and services on the dot and this can’t happen through traditional distribution channels. Rather, it can be achieved with peers in close proximity – the essence of communal activation. This concept is most apparent in marketplace platforms like Airbnb, Uber, Deliveroo, and many more.
From Promotion to Conversation
Traditionally, promotion has been very one-sided. Companies talking to audiences. Brands advertising to prospects. Today, social media allows customers to respond to those messages and converse about them with others. This gives rise to customer-powered content on review sites, but also enables brands to participate in and initiate conversations with customers which strengthens the relationships between them.
The new promotion model also means that the roles of marketing channels are changing.
This doesn’t mean that digital marketing is eliminating the need for traditional marketing – it means the two work together. Since digital marketing is more accountable than traditional marketing, its focus is to drive results whereas traditional marketing’s focus is on initiating customer interaction:
The new customer path
I believe the main value of Marketing 4.0 lies in Kotler’s concept of the customer path. It strikes a great balance between the traditional (and flawed) marketing funnel and the nebulous and hard to standardize customer journey framework.
Here’s what it looks like in the most standard “bow-tie” pattern:
The customer path has several distinct stages and there’s a conversion associated with each of these stages that has a separate name. This makes it even clearer that marketers need to work at each stage not just pushing for transactional relations with customers.
The five stages, in turn, include:
- The Aware phase: customers are passively exposed to a long list of brands from past experience, marketing communications, and/or the advocacy of others. This is the gateway to the entire customer path. Customers pass from Aware to Appeal through the Attraction conversion stage.
- The Appeal phase: once they are aware of several brands, customers then process all the messages they are exposed to. They become attracted only to a shortlist of brands – the brands that appeal to them. Customers pass from Appeal to Ask if they reach a Curiosity conversion.
- The Ask phase: customers usually actively research the brands they are attracted to for more information. They usually check with friends and family, go through different media, or might be directly targeted by the brands. Customers pass from Ask to Act through a Commitment conversion.
- The Act phase: if they are convinced by further information in the Ask stage, customers will decide to Act. This does not necessarily include a direct transaction but can be another action beneficial to the business, like a subscription or a trial start. Customers pass from Act to Advocate through an Affinity stage.
- The Advocate phase: over time, customers may develop a sense of strong loyalty to the brand. This is reflected in retention, repurchase, and ultimately advocacy to others. In order to arrive at advocacy, a customer must have a positive brand experience – so marketers need to pay attention to post-purchase communication, too.
I love this concept not just because it focuses on different conversion points, but because Kotler stresses a couple of points:
- it is not necessarily a fixed funnel, customers might not go through all the five A’s;
- it might also be a spiral, in which customers return to previous stages, creating a feedback loop;
- it also varies across industry categories depending on the perceived importance of the categories – as we’ll see later, different industries are characterized by different parts with stronger activity;
- the level of experience that customers have also determines their customer path – for example, a customer who’s already been through the path ones and has done the research might go straight to the Act phase.
This makes the customer path concept very flexible and it can serve many more marketers than rigid funnels.
Sources of influence
Kotler presents the external factors that influence customers during their path through the five A’s. You’ve already seen that he’s a big fan of alliteration so he explains the sources of influences with three O’s:
- own influence – a result of past experience, personal judgment, and individual preference toward the chosen brand(s);
- others’ influence – word of mouth from friends and family or broader communities the customer holds dear;
- outer influence – purposely initiated by brands through advertising, marketing communications, sales outreach, customer service.
Customers are most open to influence during the Ask and Act phases. In Ask, are proactively seeking advice and information. So they can easily be approached by a brand with content that answers their questions. In Act, customers feel they have already formed an opinion of brands and they have an open mindset that can still be influenced.
Customer path archetypes
The customer path you already saw, forming a bow tie, is only a theoretical ideal form. It is almost never seen in practice.
The bow tie pattern reflects the key traits of a perfect brand. In a bow tie category, everyone who is aware of a brand is willing to recommend the brand because of its stellar reputation. Moreover, the brand appeal is so strong that everyone who is attracted to the brand feels the need to research further, reflecting a clear positioning and the right level of curiosity.
However, comparing the bow tie to a real customer path reveals the gaps and opportunities for improvement marketers should focus on.
Actually, Kotler presents four common “path archetypes” that are often seen in the wild.
The Door Knob pattern
The Door Knob archetype is characterized by few people actively advocating for the brands they buy. This is often the case for CPG brands because people are not attached to the brand choices they make. At the same time, few people ask for advice because the category is not too risky and customers decide based on initial appeal and first impressions.
Brands with the door knob customer path may improve their affinity level by building post-purchase engagement programs. This is the challenge faced by many CPG brands amidst overwhelming brand switching.
The Goldfish pattern
The Goldfish archetype is defined by little focus on the Appeal and Advocate phases and a lot of activity in the Ask phase. This is usually the norm for B2B solutions and very complex services where there’s lengthy evaluation.
Brands with a goldfish pattern need not only to improve their commitment and affinity levels but to optimize their curiosity level. Marketers in B2B sectors face this tough challenge because they deal with generally savvy customers.
The Trumpet pattern
The most distinct characteristic of the Trumpet archetype is that very few people actually go through the Act stage – while a lot of customers would gladly Advocate, even without having used the product. This is the case with luxury goods and famous brands.
Brands with the trumpet pattern may improve commitment level by improving affordability and channel accessibility without diluting the brand’s appeal. Luxury and aspirational brands such as Tesla face such challenges.
The Funnel pattern
In Funnel-type industries (like telcos and other complex services brands) customer service and post-purchase experience can make or break a brand. There’s a lot of activity in the Ask stage because customers want to compare brands well enough to be sure of their decision. And few customers Advocate because there’s a lot of negative customer experience.
Brands with a funnel pattern should improve both their commitment and affinity levels. This illustrates the significant challenge faced by durables and services brands to balance between sales and after-sales service.
Each customer path archetype has its own challenges to surmount. The marketer’s job is to invest time in understanding the customer path and to plan marketing activities accordingly.
Building human-centric brands
The final key point in Kotler’s book was the development of human-centric brands. This concept was already part of his previous books, but the need for true customer connection becomes strong in a connected world.
Marketers need to embrace the power of human-centric marketing even more. Brands with a human character will arguably be the most differentiated. Brands need to demonstrate human attributes that can attract customers and build human-to-human connections.
Kotler outlines six human attributes that brands need to cultivate. This will help them “influence customers as friends without overpowering them”, as he puts it.
- Physicality: physically attractive people easily influence others. Attractive brand identities are built with well-designed logos, well-crafted taglines, compelling product design, or a solid customer experience design.
- Intellectuality: smart people understand complex notions and generate ideas. Brands with strong intellectuality are innovative. They launch completely new products and services and effectively solve customers’ problems.
- Sociability: sociable people engage with others and communicate well. Sociable brands are not afraid of having conversations with their customers and engage them through different channels.
- Emotionality: empathetic people who connect with others on an emotional level can influence them well. Brands that evoke emotions have similar influence – through inspirational messages or humor.
- Personability: this characteristic covers self-awareness, admitting what you’re good at and where you can improve. Brands with strong personability have a strong purpose and are not afraid to show their flaws.
- Morality: moral people intuitively know the difference between right and wrong and always do the right thing. Moral brands are values-driven and make business decisions with ethics in mind.
Human centricity is an important concept for brands and I like the fact that Kotler includes it in a seminal book that will reach a lot of up and coming marketers. Hopefully, this will make more brands focus on it in their strategy.
A blueprint for understanding customers
The last few chapters of the book talk about important concepts in digital marketing like content marketing, omnichannel marketing, and engagement marketing. However, if you’ve read anything on digital marketing before, the presentation of these concepts will seem too basic to spend time on it. So I personally only browsed through them and I don’t think there’s a lot of value there.
This is not to diminish the value of the rest of the book, though. Marketing 4.0 is a great theoretical basis – no matter if you’re just starting out in marketing or want to look at your customers’ journey through a new prism. The customer path is an especially useful tool and the focus on human centricity is an important addition that brands need in the digital world.
