“Marketing 4.0: When Online Meets Offline, Style Meets Substance, and Machine-to-Machine Meets Human-to-Human” – Philip Kotler, Hermawan Kartajaya, Iwan Setiawan

May 5, 2018

Marketing 4.0 is the sequel to our widely-recognized concept of Marketing 3.0, which calls for brands to touch the human spirit. Marketing 4.0 is based on intricate observation and analysis of the paradoxes in view of the digital technology boom. We explain how online meets offline, why style must be complemented with substance, and why Machine-to-Machine is incomplete without Human-to-Human.

Digital technology is increasingly moving at the heart of most modern businesses today. As OECD states, digital economy is fast percolating a wide range of industries, from banking, energy and transportation to media and health. No wonder thus how often we hear of the word ‘disruption’ in the context of business.

McKinsey has jotted down 12 major innovations capable of disrupting conventional businesses, including mobile internet, the internet of things (IoT), cloud tech, and 3D printing, among others. All these disruptive technologies are not ground-breaking; for some, their technology life cycles have spanned decades of R&D. But their real, tangible impact on businesses on a commercial scale has increased manifold in recent years, partly as a result of the influx of various supporting technologies.

Inevitably, disruptive tech is closely eyed by businesses world over, imploring companies to revisit their business models, adjust value propositions for their products and services, and reform sales practices and marketing approaches. In the midst of all this, several innovation -related dilemmas face businesses today. Let’s take mobile internet as an example. Handheld smartphone devices have brought about unparalleled connectivity and opened up numerous opportunities for marketers to reach out to their smarter customers. At the same time, the growing concern on smartphone addiction is alarming – a study by Przybylski and Weinstein of the University of Essex shows how mobile phones are increasingly hurting relationships.

As digital economy booms and smartphones become more ingrained in consumers’ lifestyles – deeply influencing their attitudes and behaviors – consumers will increasingly look for the perfect mix of tech that makes their lives easier, complements their goals of self-actualization and nurtures a deeper sense of ‘doing good’. Marketers need to brace up for this transition and adaptation period in the run up to a fast-developing digital economy. They need novel marketing approaches, which would help them anticipate and leverage on these unprecedented disruptive innovations.

Why Marketing 4.0

Our book Marketing 3.0 – From Products to Customers to the Human Spirit (Wiley, 2010) has witnessed phenomenal success. The concept has been widely acclaimed and the book itself has been translated into 24 non-English languages. Over the past five years, marketers, enthusiasts, and readers of the book have inquired about a sequel to Marketing 3.0.

ln that book, we discuss how marketing has undergone a major shift since its early days, from being product-driven (1.0) to customer -centric (2.0) and ultimately, human-centric marketing (3.0). The idea is for marketers to rise above how their products or services will serve consumers and instead focus on consumers’ human spirit – by committing to and working for social, economic, and environmental causes in ways that would touch customers’ spirit.

As the Marketing 3.0 concept stands widely endorsed, we wish to introduce Marketing 4.0 – an approach which more effectively takes into account the convergence of the offline and on line worlds of businesses and customers. The concept focuses on how, in the times of a digital economy boom, offline touch serves as a major differentiation in an increasingly online world. It also encompasses how style blends with substance, in that even as brands need to adopt flexible and adaptive styles in view of fast-changing technological developments, the brand’s core, authentic character is ever more important. Brands need to come across as true to their identity and authentic in their messages – this perceived substance is a valuable asset in an increasingly transparent world. And finally, Marketing 4.0 is about balancing machine-to- machine (M2M) with human-to-human (H2H). As connected devices become more commonplace on the back of artificial intelligence and loT, resulting in greater marketing productivity, they need to go hand-in-hand with human-to-human connectivity in order to strengthen customer engagement.

Moving towards marketing 4.0 requires balancing our use of machines and devices with human contact to strengthen customer engagement.

From Traditional to Digital Marketing

As we move from traditional to digital, marketing has undergone fundamental transformation in the way its various elements are incorporated. Let’s take a look at the four most critical shifts:

►From ‘Segmentation and Targeting’ to ‘Customer Community Confirmation’

The process of traditional marketing begins with segmentation, wherein the market is homogeneously grouped based on geographic, demographic, or psychographic attributes. Then comes targeting which essentially means determining which segment(s) to serve, based on various factors including size, attractiveness, and growth potential, among others.

While segmentation and targeting are critical elements in determining a brand’s market strategy, they also highlight the linear nature of a brand’s relationship with its customers – how brands make their decisions unilaterally, with little or no help from customers whatsoever. Customer input is limited to the insights drawn from traditional methods of market research, typically acting as precursors to the segmentation and targeting processes. The process is vertical.

This under-representation of the customer in the traditional marketing process comes across as a striking flaw when juxtaposed with the reality of today’s digital economy boom. In this era of increased connectivity, socially-connected customers form horizontal webs of communities which represent the new-age segments. Communities are formed by customers on their own accord, which makes them more organic and in1mune to spamming and irrelevant advertising.

For brands to be able to penetrate these com munities and get their messages across effectively, they need to fit in naturally – acting as friends, showing care and genuine concern to address customers’ needs and wants. In essence, the process of segmentation. targeting and positioning is made more transparent.

►From ‘Brand Positioning and Differentiation’ to ‘Brand Characters and Codes’

Brand positioning encompasses all the activities targeted at making a brand occupy a unique position in customers’ minds. The brand, traditionally identified as a name, logo, or tagline with the main purpose of distinguishing a product or service, has lately come to represent the overall experience that a company delivers to its customers.

A clear positioning has long been heralded as a must-do for companies to generate strong brand equity. Positioning is typically a promise defined by brands to win over customers, often fulfilled through a strong differentiation, delivered by companies through their marketing mix – the 4 P’s.

It is inevitable for traditional positioning and differentiation in marketing to also undergo a change in the connected era. Customers today are armed with abundant information, which empowers them to be the best judge of how well a brand fulfills its positioning promise. A brand’s projected positioning will not have the desirable impact if it is not driven by a community-driven consensus.

In this age of digital marketing, a brand needs to be dynamic and versatile in what messages it delivers and how. But what should remain consistent is the brand’s character and codes, regardless of the content of the messages that it delivers. The brand’s character – its raison d’être- is what defines its personality, it is what makes the brand stand true to its core, even if the outer imagery is flexible – think Google (with its ever-changing Doodles) or MTV – how they remain flexible with their varying designs, yet solid as brands.

►From ‘Selling the 4P’s’to ‘Commercializing the 4C’s’

And finally, 4P’s – the classic marketing mix elements which determine what a company offers to its customers and how. Starting with developing a product based on customers’ needs and desires, to fixing a price which is usually calculated through either cost-based, competition-based, or customer value-based pricing methods.

Then come place and promotion – the elements which decide the ‘ how to offer’ part. In selecting the place, companies take care to make the product conveniently accessible to its customers, while promotion is required – in the form of advertising. public relations, and sales promos – to communicate about the product to the desired target audience. The 4P’s should be optimally designed and aligned in order for companies to be able to sell their products more effectively.

In view of greater connectivity in the digital economy, armed with increased customer participation, we reckon the emergence of a new set of marketing mix, the 4C’s – co-creation, currency, communal activation, and conversation.

Co-creation represents the already existing and even increasing customer participation in the process of new product development. Companies are increasingly engaging and inviting customers’ involvement right from ideation stage, allowing the former to become more attuned to the latter’s needs and wants. From tech giant Microsoft to toymaker Lego, there are many examples of successful customer-driven co-creation implemented in product innovation cycles.

By currency, we refer to the fluctuating prices with respect to market demand. In the digital era, many businesses have already adopted dynamic pricing based on market demand and capacity utilization. Ecommerce players. for example, make use of big data analytics to offer dynamic pricing to their users, aided by the massive amount of data collected on their purchasing habits. Dynamic pricing, based on data such as customers’ historical purchase patterns, preferences or even proximity to store location, can help companies achieve optimized profitability by more efficiently balancing supply and demand.

Further, in a connected world, the concept of channel is fast evolving in view of the emerging trends in sharing economy. Peer-to-peer distribution model is rapidly gaining ground, giving customers almost instantaneous access to the products and services they need. This rising preference for instant delivery of products and services calls for a greater need of communal activation, wherein peers in close proximity can serve customers’ needs and demands.

Finally, we reckon how promotion has transformed into conversation – it is no longer a monologue from brands delivering messages to their customers. Social media and other networking platforms have enabled customers to become more vocal in their responses to brands’ messages. Customer review and rating applications, blogging platforms and online forums have become trusted sources for customers to engage in conversations to evaluate products and services from brands.

►From ‘Customer Service Processes’ to ‘Collaborative Customer Care’

Traditional customer service revolves around treating customers as kings, but in the collaborative customer care approach, they are viewed as equals. While customer service would focus solely on addressing their concerns while still attempting to stick to strict guidelines and standard operating procedures, collaborative care would put genuine effort into listening and responding to the customer, consistently following through, on terms agreed upon by both company and customer. In the connected world, this collaborative process is more relevant to customer care wherein customers are invited to participate in the process by using self-service facilities.

Integrating Traditional and Digital Marketing

Industry observers have been debating for a while whether traditional marketing is dead, in view of the rising influence of, and marketing spend in, digital marketing. What we believe however is that digital is not supposed to replace traditional marketing. Both are meant to co-exist and have their own roles to play across the customer journey.

Traditional marketing is still quite effective in building awareness and interest in brands, but digital marketing plays a more prominent role as customers go on to build closer relationships with brands. The goal of digital should be to drive action and advocacy, and in view of greater accountability, the focus should be on driving results, as opposed to traditional marketing where the focus should be on initiating customer interaction. In essence, Marketing 4.0 aims to help marketers identify and prepare for the shifting roles of traditional and digital marketing in building customer engagement and advocacy.

Philip Kotler is the “father of modern marketing.” He is the S.C. Johnson & Son Distinguished Professor of International Marketing at the Kellogg School of Management at Northwestern University. He was voted the first Leader in Marketing Thought by the American Marketing Association and named The Founder of Modern Marketing Management in the Handbook of Management Thinking. Professor Kotler holds major awards including the American Marketing Association’s (AMA) Distinguished Marketing Educator Award and Distinguished Educator Award from The Academy of Marketing Science. The Sales and Marketing Executives International (SMEI) named him Marketer of the Year and the American Marketing Association described him as “the most influential marketer of all time.” He is in the Thinkers50 Hall of Fame, and is featured as a “guru” in the Economist. Sign up for his newsletter >>

Hermawan Kartajaya is the Founder and Chairman of MarkPlus Inc. Indonesia. He is also the co-founder of the Asia Marketing Federation and the current President of the Asia Council for Small Business.

Iwan Setiawan Is the Chief Operating Officer of MarkPlus, Inc. He has co-authored the textbook “Marketing 3.0″ with Philip Kotler and Hermawan Kartajaya.