Paula Williams: One of the really great things about a university education, is that everybody that I know that had a good experience at a university is fantastic professors, who explain things in ways that make it so clear and give you great ideas and pull stuff out of you that you didn’t know was there. We had that experience, John and I this week, talking with Professor Waldemar Pfoertsch.
As you know, we have also discussed marketing 4.0, which Philip Kotler, who’s another of the author’s on this book, was involved in. This is one of the great thinkers in the industry. Philip Kotler is the guy that came up with a 4Ps, if you remember that from college days, and if you’ve ever read a marketing text book you have probably read Kotler’s material.
I mean, it’s just absolutely legendary we get to talk with these folks, so that’s kind of cool. He’s one of the authors of H2H Marketing. He was kind enough to drop in on our book club discussion, and do a custom presentation for us. And I could not be more thrilled. There’s a lot of fantastic ideas in here. A lot of things that we’ve always known but have never articulated as well as he does. He’s got such a great sense of humor and a great style of speaking.
I wanted to give you a little bit of background on Professor Waldemar, and why we should listen to him. He holds academic degrees in Business, Administration, and Economics and obtained his doctoral degree in Social Sciences at the Free University of Berlin. He was an adviser to the United Nations Industrial Development Organization, and has been working with International consulting firms for years.
After several professorships, among others is the professor for International Marketing at the University of Villingen-Schwenningen in Germany, a visiting professor at the Kellogg Graduate School of Management at Northwestern University, Lecturer for the Strategic Management at Lake Forest Graduate School of Management. He is currently the professor of International Business at Pforzheim University of Applied Sciences, and visiting professor for the Executive MBA Program at the University of Illinois in Chicago, as well as the ITT Illinois Institute of Technology.
He’s got more fellowships, publications, awards and other kinds of things than I can name here without taking another half hour, and I’d really like to get into our conversation because it was so fascinating and so cool. So let’s jump into it.
Welcome to this month’s episode. We are actually very, very happy to have one of the authors of one of our very favorite marketing books, Waldemar Pfoertsch. And I apologize, if I said that wrong. Did I get close?
Waldemar Pfoerstch: You did pretty close. I’m impressed.
Paula: Tell me how you say it, and I will remember that.
Waldemar: All right. Okay, my name is Waldemar Pfoerstch, that’s the German pronunciation and Waldemar, pronounces with the V, not with the W.
Paula: Got it
Waldemar: It’s Waldemar and Pfoerstch is a P-F, which is not a sound in the American alphabet or an English alphabet, so P-F, PF, you don’t have, so keep the P silent and say Pfoerstch.
Paula: Excellent. All right.
Waldemar: While my student’ll say, Professor.
Paula: That’s probably easier. Let them call you Professor.
Waldemar: Well, Waldemar is also a good way[?]. All right. Let me introduce myself a little bit more, and before we get started I want to share my screen charts, which I’ve prepared, which you will get at the end of the presentation. John and Paula will give them to you. Well, as I just explained my name, it’s a very unusual name, therefore, it is easy to remember. I’m the only guy in the world, so if you Google me, if you Google the name, it’s always me.
Paula: That it’s a rare distinction. I don’t think anyone else I know, are the only one.
Waldemar: Well, I’m born in Germany, but I have listed[?] many places, with more than 10 years in the US. In different stages[?], I’ve lived in China and many more places. Currently, I’m in Cyprus, I’m a professor at the Cyprus International Marketing Institute, which will be soon an International Business School in the National University. I’ve been teaching for the last 20 years. In Germany, I was 10 years in Consulting and 10 years in Industry, I worked for SIEMENS. Some of this field that I’m working was also in the US. I’m publishing books with various oasis[?].
I have published with Philip Kotler, 4 books. This is the fourth one. We have a new book, which is actually the case study book on H2H Marketing. It’s almost done. It will be hopefully published in 2-3 months, so that’s in the pipeline, which will give some more explanation of the new concept, what we have here. What we want to do today is we want to explain you the Genesis of the Human-to-Human Marketing, and when I tell you a few aspects of that book. I’m very happy that you distributed the book and used it. There are still people out, who read physical books, I like that.
There’s a particular strong group in India. Many Indian people are waiting for the expensive books from the West to being shipped, so we ship H2H Marketing to India because they don’t like the digital one. I personally prefer digital now because it’s much easier to work with and much easier to quote, much easier to copy, much easier to use it, which is also a big issue of the new H2H Marketing concept. So, what we are doing today is a small introduction of the new concept from the new ideas, and hopefully, some discussion on the topics around the issue, because what we are proposing here is actually a big shift in the marketing.
The book was developed in through various passes that you mention, Phil Kotler’s work on the marketing 2.0, 3.0, 4.0, 5.0, which puts the digitalization of marketing and in the foreground. It is also built on this other side, on the B2B Marketing Concept, so Industrial Marketing. Together with Phil, I actually wrote, also book on B2B to see[?] from industrial to Industrial to the final consumer. There are certain companies who are doing that. The most famous case is Intel Inside, where the Intel was marketing to the final consumers. A couple of thousand companies are to do similar concept. [inaudible], you probably know, Dolby, other companies.
In that string of research, we figured out that the need of the consumers are changing and the focus need to be adapted. Also, Phil and myself worked on shareholder value as the major driving force in the ’80s and ’90s in the marketing area. You probably also have seen Phil books on these critiques on capitalism, where he has quite some strong opinion about the need for change in this approach. And what we’re doing now, we’re moving away from the shareholder orientation to the stakeholder orientation.
This H2H books tries to incorporate this various streams. It incorporates more, and I’ll explain a little bit more about that. I’m very happy that you picked up this book. This book is now on the market for one and a half years. I mentioned, we have already some international editions. Actually, I have to mention, we also have a German Edition, our last books didn’t have a German editions, so I have it translated into German.
Paula: Oh my goodness.
Waldemar: Originally written in English but we also will have a Chinese Edition, Vietnamese, Malaysian, Indonesian, whatever. Currently in the making is the Spanish and the Greek one, and the Italian we launched a month ago. There are various activities to promote this book because the idea of this book is not an easy one, because it starts, actually, with the bad things in the marketing.
I just took one term, Deceptive Marketing. There are many other terms which characterized the unhappiness of people with the ongoing marketing. Marketing is overused, and marketing is actually, in some cases, taking advantage of its strong position, and maybe they’re not doing good for the whole society and the whole planet. I’m just using the concept of the Deceptive Marketing. There’s a whole art of Deceptive Marketing where people get to know and you see a various industries, who are trying to provoke customers to buy something great, but the reality is sometimes looks very different.
Paula: Right. I have seen that.
Waldemar: The American, I can offer fast food, the American reality. I mean, you can have it. I mean, one of the big things in Europe is telecom services. Their offerings are so great, but the reality is very different. The payments are so high and service are so weak. Well, but there’s only one part of it. Actually, when you look at the younger people, the younger people are very much crystal of what’s going on. It’s not everywhere, but in some pockets, particular outside of the US, they are not amused by the reality of marketing.
Therefore we have to be clear what do you want to do here. Actually, what do we say is that the marketing, what we want, should go back to the basics, should really care about the people, and should provide the things which are necessary to make a better world. And not only a better looking burger.
There are some examples in the airline business too. This is an example from Malaysia, where companies promise something and don’t deliver. But that’s, say, the easiest part of the not so good part of marketing. We could be good[?] much deeper into it. You know about tobacco marketing and petrol marketing and all these kinds of stuff. Well, nevertheless, I think, if we know that, and we make up our mind and say we want to do something different, we could do something different. We could look at the things which are really important, and we will get support by the young people.
Here is the index for checking out the demand for sustainability in certain groups. This is a US analysis, where they ask people, is it extremely or very important for me that companies implement programs to improve the environment? So do you want green products? Very simple question. And guys like myself, we say, yes, right? I’m driving a Tesla, gentle[?] machine which does not that someone exhausted. If the power plant provides you a green energy, it doesn’t do it all the time, but it could happen. So Baby Boomers are willing to do that. The Gen-X are important but most important is the young people, the Millennials, 83. I have not seen so many vegan people than the young ones, right?
Paula. True. Right.
Waldemar: And this vegan people are not only in the US, also in the global. The Millennials are environmentally conscious. Well, but that question was about importance. The more important question is actually, will you change your behavior? Well, the Baby Boomers do and 34% say they will buy the better refrigerator or don’t take the car or whatever. Compared to the 60%, it’s half. Their commitment is not where it is, and they go along with the things that the company offers them. But the young ones, it’s 75. You see that every day, at 73 on the global level, you see that every day. When I go out with my students and I go to the burger with them, to the McDonald, what we’re not doing normally, except in certain situation, but then 50% will not eat meat.
Paula: And these are not that young. I mean, Millennials are 22 years old now.
Waldemar: Yeah, 22, 23, 24. Yeah. But they are acting, they even, the younger ones, I wouldn’t say getting worse but even younger ones are getting more conscious. Particular in the animal area, particularly in the food area, particularly on transportation and stuff like that. Corona actually did its share to it. You can do lots of things online. You don’t have to meet physically, with all these apps and good sides and bad sides. But what the message here is companies watch out. You may lose your customers. Companies like Mercedes, or the Alliance, have to be careful what they offer.
Therefore there’s a need for that, and therefore, there’s a need answer for new marketing concepts. That’s why we brought it in. Because the new marketing orientation could be human to human. It doesn’t have to be. Actually, we think it’s a conscious decision. So, if you have a two dimensional chart, and one is benefit for the customer and one is for the benefit for the marketers. Of course, you don’t want to be down there, it would be a wasteful area. Some governments are doing this, they’re acting right and not the companies.
Some marketing institutions are doing this kind of stuff, where the benefits for the customers are very high. I mean, for some reasons, yeah. But the worst is actually where the companies are, where they take advantage and don’t give the customer [inaudible]. Well, these are conscious decisions. You’re not designing a business model. For example, in the drug business, where you have [inaudible] price increases of thousand percent and stuff like that. Well, it’s a conscious decision, but you also can make other conscious decision. You can make a conscious decision in the other direction, where both parties have benefit from it.
I think that is in the world where we could live, and there we could actually also look at the human aspects with the way we are doing marketing. So what we say is Human-to-Human Marketing is a conscious decision for an orientation of the marketing activities. We have to overcome the situation were we’re in, and we have to make sometimes hard decisions to move forward. It may need additional investment, but the most important, it needs a different mindset. We need to understand first why we’re here. Therefore, I love this picture, so I took it and say, “Okay, read the book and enjoy it.”
Nevertheless, the basis of everything is innovation, because if you have something on the table, which does not do the things when you want to. So, you have to put innovation in every foreground, in every aspect of your activities in the foreground of your activities. Having new products, having new business models, having new communication, having new things is the driving force, you cannot do it with old stuff. And of course, the innovation should start somewhere, it could start on the manufacturing side. Many German companies have done it, for innovation, on the technology side as Japanese and now Chinese companies are doing it, or on the marketing side.
Nevertheless, the orientation should be clear. You should solve a human problem, and not an unnecessary problem. You should find a solution. If you find an innovative solution and with that, you’re serving your customers, and then the new marketing orientation could happen. But it has to be desirable. It must be something what the customer want, it must be viable, it must be work and it must be feasible. Out of that, then you can provide solutions. Having this principle of the Trifecta of Innovation in your mind, can be a starting point of your changes.
Therefore we think, if you would think in marketing new, you need to also think you’re offering new, and that comes with various method. We said, design thinking is the method what we prefer, you can use different one. The nice thing of design thinking, it’s human-oriented. It tries to understand the situation, it observes, it looks at the different points of views, it come up with some ideas, maybe prototype tested, understanding on a different layer, and do the whole thing again. And the Double Diamond gives you an a methodology to develop human-oriented innovations.
Of course, there are other ways of coming up with innovation, but that is just one method. We propose this as a way of doing it. If you know that innovation is so important, you may find the right method for doing it, and we offer Design Thinking. Design Thinking is a way of understanding. I mean, when you look at aviation issues, in many cases, you look at the technical solutions. And as we will learn today, it’s not only the tangible part, there’s also the intangible part, which will be important.
Therefore, we have to understand that, we have to understand more than needs, why do they really want it? Is it only convenient or is it prestige? Or is it efficiency? Whatever it is, you really need to look into that, [crosstalk] and you need to understand the data service orientation needed. Of course, if you have aircraft, you have machines, you have hardware but today we are buying service. Every product has tangible and intangible ones, but the question is, what is your service? What is the thing that you are offering? Are you selling in book? Do you explain it or you show how to implement it? The book may be the basis but the knowledge around it is the service.
You have to look at things, what has been called the Goods-Dominant Logic. The Goods-Dominant Logic is the old thinking, where you look at the offerings from a hardware point of view from an engine point of view, from a technology point of view. Today, we are actually in a world where individualization and dematerialization is working. We’re looking to a service dominant logic, where the service, the knowledge, what we are offering, is more important than the hardware. And that is a big shift from tangibles and standardized products, form selling, and from the main idea that the customer is actually destroying the product when they consume it.
This old principle is history because now we talked about intangibles. I mean, when you book a flight, of course, you need to be transported. But actually, what you need more is, is it on time? Is it comfortable? Can I sleep? Can I interconnect? Can I communicate? All these things, what you need. You may also need individualization. Is it the one one would I want, or do I have to do the things what other people also want? You’re not only looking at operand resources, which are standard, but you look at operant knowledge that you want to really understand and you want to get out of that.
I mean, last week I did a basically tour with my brother, and he gave me his bicycle, but the most important thing, what he gave me was the way to use the bicycle and where to go. I enjoyed being part of his service thinking. The next point is the customer is actually creating value. This is a concept what has not been used before, so the principle of co-creating. Co-creating means I’m offering you a service which is tangibles and intangibles, you are taking the service, and out of the service, you make something special.
I mean, if I rent a helicopter and make a rescue mission, of course, I have to organize all around the rescue mission but the helicopter is a piece of hardware which I need, and then the overall service is the rescue of the people. Then, the people survive and then the people are happy, and by that they create new value for themselves and for others. The co-creation thinking is a complete new one, and with this new one, you have to have a different marketing. So Design Thinking, Service Orientation, and Service-Dominant Logic.
I bring you the example of Lufthansa. I still remember, Lufthansa was categorizing these people into heavy metal, which were the guys who moved the boxes or had the engines, or maintain the engine and all this kind of stuff, to the new one to a networking world. Where they are providing services all around the globe, in whatever form they want. They have the equipment and use it, and the service is actually the thing what makes them different and makes them apply. So that was a big fight. Many years ago, I did a couple of projects within Lufthansa to move away from the technology orientation to the service orientation. And that was 10, 15 years ago. But now we are even a step ahead.
Well, our Individualized Services, SAS, and I flew it. It was really fun. What do we have, the service… There’s another thing which I did, and by the way, do you know the logo on that aircraft? I mean, you see the German flight number, D-EMEO.
Paula: Oh, D-EMEO. I don’t know that.
Waldemar: That’s a German name, so it’s a German registered aircraft.
Waldemar; But it’s actually a Libyan trainer[?].
Paula: Ah, that is the Libyan symbol of red, white. Okay.
Waldemar: After the fall of the thing, my friend bought it. And so we do rescue mission. Actually, we flew to Poland the last couple of months, for bringing medicine, bringing people back from [inaudible].
Waldemar: Yeah. All right. Well, let’s shift from the Goods-Dominant Logic to the Service-Dominant Logic. Make the customers co-producer and co-design of the value proposition, and the transaction gives you the opportunity to put the customer in the position as co-creator and the realization of value in use. So, when we talk aircraft, it doesn’t help us when we have an aircraft sitting on the ground. What we need is an aircraft flying and then, make them operating, and that value in use, creates value for us.
We are transporting people .We are making people happy. We are bringing people together. We are doing all this kinds of stuff, and understanding this concept of value in use is actually very important. If you have this concept in your mind, in the way you think, you actually communicate completely different and you actually design your products very different. And companies will do that. By the way, the big guys, the Google and Amazons and Apple are doing it continuously, then you can see how the difference to the companies who are not doing it, increases and how the system, how these principles are working.
Having this set, I would like to mention a few more aspects to the Digitalization, because the Digitalization is the third pillar of this new concept, and this Digitalization really has changed many things. It has changed the aviation industry, but it also has changed the marketing. I mean, now, every flight is known and every action is visible and every temperature of the oil is recorded. I mean, this is all part of the digitalization game.
But for the marketing, the most important part is here, that we had a mass market in the ’90s up to the ’90s where we had lots of TV commercials and all that kind of stuff. Then, we moved into segments, where we had certain groups which we could cater, let’s say, rich men, whatever. Now, we are looking at individuals. We can make one to one marketing. And you know it when you go, and you probably have an account on Amazon.
Amazon will know what you’ve bought. They recommend you what you should buy, and they ask you why don’t you revive what you already bought 3 years ago, so they really know you inside, out. [inaudible] what’s your journal, your banker, they are all in the individualization of the business. You can do that in Aviation too. But you need certain mechanism, you need certain databases. You need a clear understanding what is your direction. Of course, there are other personal business models but the neutralization is important for Service-Dominant Logic and the Digitalization.
Another important part is the Dematerialization, and it’s actually a very interesting concept. In the Digitalization, of course, we need Metro products. I mean, we need the computer. We need the books to be shipped by Amazon. There is something but most of the books which are shipped today are actually ebooks. The example what I would like to take is the music industry, where you had LPs, you had CDs, you had mp3, and now you have streaming. And this may not be the end.
I mean, I can imagine, when I walk into one room, and music continues, I haven’t done anything. But they will recognise it’s my music, it’s my room, it’s my machine, it’s my whatever, and the temperature and many other aspects. So Dematerialization, which includes the knowledge of the individual, and the knowledge of the situation and the knowledge, how to make it happen. That part is very important. Also in transportation. The next step of Google is to make Google Maps the dominant app in the ecosystem of Google. Because they know where you are, they understand what you have done, they see how you act, they know your friends. They know everything, what you probably don’t want them to know, but they know it.
This could also be applied in airlines. And I have not seen a full Dematerialized application in the private, maybe I haven’t seen it, but it could be there. I mean, my fantasies goes as far as that they actually pick me up or wake me up, ready to go when I need to go. Tesla is moving this direction, and the self driving cars. It’s just one part of the of the Dematerialization through the Digitalization. Okay, so if you understand this impact of these kinds of things, then your marketing will be different.
I also would like to introduce another concept, which is also important. It’s the so called SoLoMo concept, which needs also a different mindset. SoLoMo stands for social, local and mobile. Social means social media, social activity, social interaction. Local means local where you are, it could be multi local. So I’m living in Germany, Cyprus, China, and others. I mean, you have your local contact, your friends, your family, that could be also been replicated digitally. And it is mobile. So far, we still have the mobile phone or the smartphone. In the future, it will be implanted chip, or other devices.
Paula: Right, or watch.
Waldemar: Or watch, whatever it is, many ones. And out of that, of course, your communication will be different. Number one, you know more, you should know more. You should incorporate the weather, the mood, the friends around you and all that kind of stuff. It should be enhance your usability. You don’t want bullshit news, you want the news which make your life better. You want efficiency, and of course, you want convergence of the different systems. It all needs the mindset of always on. Of course you may sleep, but when you sleep, you have the smartwatch monitoring your heartbeat.
Paula: It’s true.
Waldemar: Well, and I want it
Paula: Yeah. It knows not to bother you during that test
Waldemar: It actually can save my life, so I want the always on. What I need is companies who understand that, they cater to that. So far, it’s only a few one. I think in the aviation industry, this is also possible. It is possible in the pharmaceuticals. I mean, when I bring this chart in the pharmaceuticals, they know exactly what to do. Their need is even more higher because many things could happen, during the night and other circumstances, yeah.
I mean, I have the change to the iWatch. Because it has that fall algorithm. When you fall, they call the emergency service. I would want that, because last time I fell, it was in the Albanian mountains, and my friends were a couple of kilometres away. Luckily, I got up. But if I wouldn’t have gotten up, the watch could have saved me. And that kind of convergence is needed. That’s another concept, which then leads to our new marketing concept, which is a theoretical concept. Therefore, it is pretty abstract.
It has the design thinking, which is human centred mindset, which has the marketing experimental. So you find out they have the iterative innovation process, and the marketing based on deep human insights. Using design thinking, we think it’s the right method to really understand what should be done for the future. We also think that the Service-Dominant Logic, that concept of Service-Dominant Logic should be used. We think it’s the conceptual foundation of our thinking. We particularly think that the co-creation part is very important, and we also think that the customer experience part is crucial. There is more written in the book, but I think this major, we should memorize.
On the Digitalization, we have it as technical prerequisite. We couldn’t have that H2H marketing 25 years ago. But we needed the technology improvement, because that gives us the possibility for the Dematerializations. It also has a big issue, which I just want to mentioned, which is the trust issue. I mean, when we deal with people online, how do we know?
I still remember the days where we had early video conferences, and I did no video conferences if I hadn’t have met the people before. Today, you can do it because everything is online. I mean, I have not met you in person, and I don’t know how you want me to [inaudible], or are you already five?
Waldemar: We’re doing now but nevertheless, the trust is the ultimate. I mean, we know about cybercrime, and we know about all that kind of thing, so we need to build on that. And companies need to consider that. This is the basis of the framework. I liked your picture, but it has some additional complications or additional informations[?]. One of them is the mindset, the way I look at it. As I said at the beginning, you can have a different mindset. You can have a profit oriented mindset. But like we said, we are now in a time where we can have a human to human mindset. By the way, it should also be ecological, and it should also consider the animals.
When you look at trees, they cannot run. If we destroy the environment, it’s our responsibility. And they have been here for a couple of more millions and we have been here. I think that kind of mindset is a necessary step and a conscious step. We also need the management to make it happen, and we need the processes in place that this could actually be implemented. So this is our model. It is a thinking model, which means everything what you make out of that, you make out with the way you do it, you make it in your industry, you make it with your ecosystem and around. But we think it’s a model which can guide you in the right direction, and you can adapt it to your requirements.
Short-term thinking is important, but long-term success is actually what we want. We had the last 50 years great grows. We are now a little bit in trouble. On the political side, we have some wars, we have some currency issues. Nevertheless, we are here. In another 200 years and if marketing want to survive, they have to think long-term. We know that there are ways of doing it. One way is if you tell the things what you do to your people and 20% will love it. You share that you support things in 23%, or you make a social position.
Better is when you make a donation, when people see that you do something in the right direction. The same is true for politicians, call out the opposition is rights[?] lobby for the right stuff. But if you encourage for followers to do something, then the judgement of yourself is getting high. There are some insights which can help to make a stand and improve your own thinking and your own activities. So I like that.
For that, you need to understand one concept, which is called by other people, customer journey, calls of customer paths, because he has this 5A’s. So being aware that there is something out, it has to appeal that fits to me, you have to ask for it, can I get it, you have to buy it or use it, and then you should advocate. This customer paths has replaced the funnel. Classical marketing, we had the funnel. We know the funnel could be very inefficient, and the same could be true for here. But if you analyse it more deeply, you actually can be much more resource efficient.
Of course, there’s a physical part of it, and there’s a digital part of it, so that touch points all over. If you understand that, you actually can build a very efficient way of communicating and acting. It could start with public relation. You still can use radio print to get the word out. You may use word of mouth, and that is probably the best thing in the customer to talk about yourself. You do something online, you have your own website, social media, you have a contact center, you have families and friends.
I mean, this is some aspect of interaction along the 5A Customer Paths. It could be different, but it gives you some orientation where it’s possible. You can buy it online, or you can buy it in a store. Then you use it and you serve it and then you advocate. All this gives you a framework. And what I advices is look at the principles here, and make the dots the way it is in your business. Then of course, the important question is, how efficient are these dots? How is that role[?], is it equal or it doesn’t go down? Then you can actually combine ideas which you had used in the funnel, in the customer paths. You can also look for the right datas, and of course you want the conversion, the conversion happening at every stage.
So understanding this gives you another tool, and therefore, create the loyalty. The loyalty really is the ultimate. If you remember that what you want, that somebody who has enjoyed your product, buy again. But actually, what you want, you don’t want to let them go through this 5A process, because the 5A process is expensive. What you want instead, they get away of a new product, and they jump. So that loyalty loop is actually what we really want. We do something great, people know it, you do something better, without checking, comparin, whatever. If you can create that, then you have one.
I mean, you have this iPhone or the iWatch, and you will buy, 5 years later the next one. Just assuming the next one is better. No, I know, the innovation has to be proven.
Paula: Oh, yeah. Of course.
Waldemar: If this is proven, you jump, you don’t check, or fit bit[?] or whatever, yeah?
Waldemar: So that principle needs to be understood and need to be acted. Out of that comes a very important thing, and I think many of the purview know the 4P’s, and Philip Kotler has provided that for many years. It is very useful. The most important part of this one is, and not too many people consider that, this is Outbound Marketing. Outbound Marketing means the company is pushing, the company designed the product. Of course, there’s some input from the customer. Now, but mainly designed, created by the company. They determine the place, the distribution. They determine the promotion or communication. They determine the price. Everything is outbound, which is okay.
But if you have knowledgeable customer, they don’t want that. Right. They actually want to create their own product. They want to design their own software. They want to design their own trip. So the changes are actually so fundamental. When you look at the development of the marketing mix, it was created 1964. I mean, this is stolen[?].
Waldemar: Yeah. And it’s still there. There has been a big shift in the ’90s to the 4Cs, which looks at convenience, cost for the customer. Not price, costs, because you have to get the product. Communication in consumption, so that means it’s an inbound. You look to it. By the way, Coca Cola, and Nestle and Unilever, they’re applying this principle since 20 years, and they do it right. We have many more in between, there have been 5Es, 5Cs. And then I introduced one which is called 5Es, and I would like to explain that, which is an inbound and outbound marketing.
It is dynamic, which means we’re looking at knowledge, not promotion. I give knowledge, and I get knowledge. So we talked about exchange, continuous exchange. I learned today what the customer does, and I build it in. I tell the customer something new when I just opened. You don’t run a commercial for 10 years anymore, it’s not possible, because things change so much. So having an continuous exchange of knowledge.
You have value, you ask for price, you tell the customer what they get out of it. And the customer understands, he actually co-creates the value. So what you want is, you want to expand its value. So when he flies yesterday, and he flies today, the flight today is better than the flight yesterday. Number one, you know more about him. Number two, he knows more about it. And you could reroute, re-whatever, you can change things, whatever, repaint the aircraft, whatever is necessary to expand the value. You look at the solution, you don’t look at the product. You don’t want the machine, you want the service. So evolve the solution.
I’ll give you an extreme example, spare parts. You buy them, you ship them, why don’t you have a 3D printer sitting in your warehouse? From this spare part company? And the stuff which you could 3D print, and by the way, many companies are doing that already today. At Formula One, they don’t ship a new engine, they have engine printed overnight or certain parts. Because there’s another channel, there’s another solution, and other channels way of doing it. Then in the 5Es is all with the brand, in the 4Ps where no brand.
Today the brand is substantial, because we live in such a complex world, and then that complex world, we need orientation, and the brand gives orientation. If you have the emotions out, if you have the customer engaged, if you have continuous engagement, then you have the right marketing mix. The new marketing mix has an outbound aspect to it and it has an inbound aspect. This new marketing mix is very important for companies who are in transition from an old non-digital, from static non-dynamic into the new world.
I think, if you look at H2H Marketing and there are many other concepts, so I picked the marketing mix as one of the important things because I believe companies like yours are, have in need of this kind of concepts. And if you understand the concept, you will offer something better. You will have a competitive advantage over other providers. With this competitive advantage, you can even change the world for the better.
So thank you for giving me the opportunity to explain some of the concepts of H2H Marketing to you. Hopefully, we can connect one day, again. Thank you.
Paula: Thank you, Professor, that was such a gift to have you explain these. When I read the book, they left off the page, because of the very clear visuals and everything else. But it is so cool to have you walk through that with us. That’s not something that happens very often with us, is to have someone who is so clear and so passionate about what applies to our customers so well.
Waldemar: Thank you very much.
Paula: I have one question and that is, or maybe one comment.
Waldemar: Okay, these are the guys who worked it. By the way, Phil is 20 years older than me. I’m 71. Uwe is 10 years younger than me. [crosstalk] That’s the team.
Paula: Oh, good. You have a very diverse team, that’s wonderful.
Waldemar: But they all have bald heads.
Paula: You have that in common.
Waldemar: Thank you. All right, what’s your question?
Paula: Thank you very much. A lot of our clients are reluctant or at least, when I talked with them about some of these concepts, they think, “Oh, well, that’s great for the big companies, but we are a small company. And we don’t have the kind of resources to be doing that sort of thing.” I actually think it is, especially, in the design orientation of the design thinking, it’s an advantage to be a small company, because you can shorten that feedback loop. You don’t have to go through, like when I was working with Wells Fargo, we had to go through 80 people in order to make any kind of a small change to a website. With a very small company, you have 5 people that need to coordinate and buy off on a decision to change a product or something like that.
Waldemar: It’s not only to design thinking, it’s also the service orientation. In large corporation, making service happen is very difficult. Then in addition, the Digitalization brings it down to one person companies. This concept is a concept mainly for smaller companies. It is very difficult to implement in large corporations. They have a heavy load of history, and they have a heavy load of commitments to certain people where they cannot let go. And therefore, I think it makes more sense for medium-sized and small companies.
Actually, I have the hope that the companies, which are small and dynamic, picking up this concept will take away parts of the share of the large corporations. Why cannot somebody develop a smartwatch than somebody else? I mean, we have 20 smartwatches on the market, and 10 of them are from large corporations, and the rest… I mean, you know Pulsar, I know this company, it’s a Finnish company, sticking to their niche, but it’s so difficult for them to make it happen. And when they apply this kind of concept, its much easier. They use social media, they go on the local level. Tthey iterate continuously, they bring variations for the Asian market, for the American market, whatever. And they can apply this concept much easier.
Paula: Excellent. John, did you have anything you wanted to add? I know you really got into this book, probably more than the other [inaudible] this year.
John Williams: When I went to a business school, it was like 19, 20 years ago.
Waldemar: Me too.
John: I knew there was something wrong with the market, but I wasn’t smart enough to know what it was. And what you discussed and pointed out today is exactly… I mean, you should have been teaching 20 years ago with this topic.
Waldemar: I was teaching 20 years ago, and I was teaching different things. I was teaching this stuff that you were hearing. I was at Kellogg, 1990. That was actually 30 years ago, right? That’s where I met Phil, and we had lots of discussions and apply the concept, which we thought was the right concept at that time. It took a couple of years and a couple of crisis to come to these insights. There are so much to change now. Also, because we were so confident that what we told the students is the right stuff. We were sometimes even overconfident. I mean, when you look at consumerism, you have to… I mean, we change the world, we made the people fat. Yes. It’s the responsibility of the companies.
Paula: And the marketers. Yeah.
Waldemar: And the marketers, right?
Paula: John, you were in Kotler’s 4Ps in business school, didn’t you?
Paula: And that was in the 90s.
Waldemar: Yeah, of course.
Paula: Yeah. So and it is good to the extent of as far as it goes, [inaudible], as you mentioned.
Waldemar: We need the 4Ps. We need the 4Ps because that is the starting point. If you don’t tell people that you have something, you’re not there. I mean, of course, it could start with word of mouth. When I have something and I tell somebody and somebody, dadada. This happens once a while. But let me give you an example. The zipper you have. I mean, every pants had a zipper, every jacket have a zipper. Isn’t that a great technology?
Paula: I think so.
Waldemar: Yeah. It’s one of the really fancy, fantastic technologies. So when they need to tell the people when they have an innovation. It will not spread by itself because it’s low interest product.
Paula: Oh, got it. Yeah, because nobody ever thinks about it.
Waldemar: You just buy it, and somebody tells it. And it’s mainly the distribution who determines what they buy. They sell where they have the highest margin.
Paula: Mm-hmm. Super low cost to produce nowadays,
Waldemar: Highly standardized, dadada-dada. And that is where push marketing 4Ps still works. But if the customer thinks that zipper is always in the way, if you would have velcro, it would work, but the velcro is not good enough. So the companies who are producing the Velcro have not innovated enough. There is room for improvement in many ways. There is room for small companies who couldn’t come up with a new solution, who could change the world. The same is true in aviation. I mean, what we see now in aviation is the shift to drones.
Paula: That’s true.
Waldemar: Who is doing it? Who is doing and what extent? Who is experimenting? I mean, there’s so much we can learn from the digital companies and the interaction. I mean, it took so many years to get internet onto the airplanes. What the heck, they had communication all the time. They just wanted to capitalize on it.
Paula: Yeah. In space marketing, the cargo, the charter, I mean, all of that is going to be in space now, to service the GPS, service all of that. Service that other people don’t see as aviation. It is still in the air.
Waldemar: And there’s much more room. I mean, if we would take all our aircraft, which in the air, it’s flying the radio stations, they’re flying transmitting, the WiFi stations, you wouldn’t need Elon Musk’s low flying satellites [crosstalk] because they fly always where people are.
Paula: True. Oh, that’s a fascinating idea. That’s really cool.
Waldemar: We have the same idea for cars, but it needs innovation, it needs activities. There’s so many things where we could do differently, but you have to think about it. You have to start from somewhere. What is the really human need, and don’t look at, what is the structure? What is the hardware?
Paula: Yeah. And how do you make that and this goes back to Kotler’s discussion on capitalism, how do you make that profitable for the right person? So that works in the right way to benefit the world using the capitalist structure. Anyway, we could go on for days, I’m sure.
Waldemar: It’s a big issue and it’s an important question, so I’m very happy that you picked it up. I would love to have a discussion with some of your friends. If they gather, let’s say, on a nice day, I’ll be open for discussions. But this time, I would like to make it differently, they should have read the book and discuss it. And I do this in class too. We call that flipped classrooms, so the people, the students who have not read the book are not allowed to come in. At least, they don’t bring in questions, they don’t speak. And then we have a very hard discussion because we have educated people. This is one downside of the Digitalization. Digitalization of education, it’s so easy now. How can you challenge? So what we do is flip classroom, the knowledge comes with the students.
Paula: From their experience and their ideas, that so much more interesting.
Waldemar: And there are more innovation here in this world. All right.
Paula: Fantastic. Well, thank you so much for sharing that and also sharing how it applies to your teaching. You are applying the evolution to your teaching as well.
John: Thank you very much, Professor. This has been the most outstanding time with you.
Waldemar: Thank you, Paula.
Paula: You’re very welcome.