Could 75% of Companies Perish By 2027?

I say that bankrupt companies don’t know what #makehappybehappy is.

murat ülker

The EWMS (World Marketing Summit) was held online, November 6-8 under the auspices of Philip Kotler, who is considered the father of modern marketing. Famous #marketing practitioners and academics from 80 countries shared their opinions via online for 48hours  in 104 countries. According to what I’ve read from the news, 2.5million people followed the summit at the same time. Huge participation!

Whereas 40 years ago, when technology was the main limitation, maybe it was important to be a sales-oriented company, but marketing was a luxury. While I was trying to make sales forecasts with regression analysis and integral area calculations based on company data when I was a new graduate, a Turkish expat came to the newly established Sales and Marketing R&D Department from abroad. As the first analysis, he made regarding the advertisement which caused the sales to drop, and the advertising had to be ended. As you can imagine, he was just as quickly back to where he came from. Yes, according to the analysis, there were increasing ad spending and falling sales. But the reason why customers' orders had dropped was the uneasiness in the market caused by the September 12 Coup in Turkey and we could only sell goods as substitutes for our advertised products. Anyway, in the ‘90s, we assigned product managers in marketing. Secondary display areas were our target. However, we were faced with the traditional, scholastic denial of sales. In an executive meeting, the General Manager of Sales reproached that these marketers were being indifferent and dreaming. I said, of course, I was paying them to make a dream come true for me, and the business had subsided. In fact, marketing is specific, subject to your product, market, and consumer characteristics. Marketing science; data, statistics, estimation techniques, and best practice applications. I guess it should be made up of this, I always used to get low marks in marketing and even management. This was because the teacher was asking, how a brand would behave if this particular case happened, and my answer would be different from the book. But sometimes this was because I didn't attend to class and sometimes because I didn't agree...

There is no single right solution in business life anyway. You will choose the optimum among many options.

Among the speakers who were from Turkey was the Istanbul Chamber of Commerce Chairman of the Board, Sekib Avdagic. The title of Sekib's speech was "Perception of Business Life during Covid-19, Transformation of Commerce and the Requirement of Reevaluation of the Global Supply Chain According to the New Norm", and he made a very positive and motivating speech. He stated that Turkey is affected by the Covid-19 crisis like other countries; is the world's crossroads as a brand city known worldwide; for commercial and businesspeople from Asia and Europe is very attractive; currently has the most advanced airport in the world and continues to be one of the centers of global trade with its financial players. Stating that innovation should become a vehicle, both in a business and national terms, Mr. Avdagic stated that according to global data, more than 400thousand new products had been introduced to the Turkish markets during the ongoing pandemic process.

I could not watch the speeches in real time as the summit was based on global time. I watched Philip Kotler's speech and then a few speakers from the program that attracted my attention, browsing through the videos. Assistant friends also watched other speeches and summarized them. First of all, let me tell you that you can still download and watch these videos for a fee, and if you really want to follow the agenda of marketing in the world, do not delay, download and watch them all. I have summarized a few of them and linked them to the topic from my weekly agenda: #makehappybehappy

The title of Philip Kotler's speech is “New Marketing in Critical Times”. He said that consumers' reactions to Covid-19 are primarily to stock up food, give up unneeded spending, and use online shopping systems. Kotler said that new consumer behaviors emerged in this process and pointed out that some weak companies, brands, and stores have already disappeared. He said that even the middle class, not the low-income people, are turning to low-cost products. Kotler stated that in this process, most consumers give up on activities such as holidays, entertainment, and concerts, save money on fuel because they do not go to work, but work from home, and therefore save money; and even considering a second wave of pandemics, many people consciously save money. He also emphasized the importance of the concept of "home" as one of the changing habits; He added that because of issues such as cooking at home, having fun at home, working from home, the importance people attach to their homes has increased and they have simplified people's lives.

Speaking of the increased sensitivity of people to social issues (such as Covid-19, climate change, racism, democracy) due to the disaster they have experienced, he divided the new normally emerging consumer types into five:

1.  Life Simplifier: Those who consume less food and drink, oppose saving, rent instead of buying, and strive to minimize their expenses.

2.  Degrowth Activists: Those that are opposed to the expenditures made on unnecessary needs due to the increasing population and the consumption of limited resources. They say that the world population will exceed 9.8billion by 2050 and that world resources are insufficient for this. They believe that advertising and marketing activities pump unnecessary human needs and cause to run out of world resources.

3.  Climate Activists: These are those who work to eliminate their carbon footprint, resist climate change, wastewater usage increase, and are against plastic use.

4.  Sane Food Choosers: Those who do not want animals to be slaughtered, who want to consume vegetable protein and food sources because they think animal proteins are poisonous for the human body, and who adopt a vegan or vegetarian diet. These people try to stay healthy by consuming vegetable sources (vegetables, fruits, and cereals).

5.  Conservation Activist: These people aim to use the products they buy for a long time therefore, they try to extend the duration of their belongings with activities such as repair, maintenance and protection renewal, are not stingy, and not to brand or luxury consumption, but are a consumer who purchases products that they can use for a long time.

Kotler said that in the face of changing consumer and market behavior, companies must answer the following 3 questions: How will they respond to new conditions and constraints? How and when can normalization and full recovery be achieved for countries? How are capitalism and marketing affected by this?

Kotler went on to talk about typical decisions companies should make: “In this period, companies should make a rough estimate of when these troubled times will end and how long it will last, determine the markets to be kept or abandoned, decide which products should be retained and which should be abandoned, put their price level and promotion decisions on the table, guarantee customers (customers who are already customers), analyze the content of the marketing plan." New generation marketing tools determined by Kotler in the new period include Artificial Intelligence systems (social and digital media, algorithms), sensors, AR / VR systems, robotics, NLP (natural language processing applications), telephone integrations (such as Alexa), and chatbots, marketing automation, customer experience mapping systems, touchpoint marketing, content marketing, influencer marketing, neuromarketing, lean marketing of Eric Ries.

Kotler states that after the Covid-19 crisis, he will proceed with a model he calls slow normalization. This will not be done until all the countries of the world return to normal, and even when they do, the return to normal life will be slow and economies will recover slowly". Kotler thinks that antibody, virus test, monitoring systems will be developed and easy to apply, and a reliable and safe vaccine will be found within 1 year. “The state continues to send checks to citizens and companies. The USA starts restructuring programs within 2 years. However, if 2% growth spreads over the 4-year period, none of this will happen and the country will never be able to fully normalize,” he adds. I think these are pure assumptions; if no vaccine or cure is available, nothing will be normalized.

Kotler answers the question of how capitalism will be affected by the process we are going through: “Many countries are now focused on happiness and well-being rather than the GDP. Saying that hard work and loosing their health will not carry people into the future, Kotler said, "How do Scandinavian countries achieve this?" he asks a rhetorical question. “How can only the Scandinavian countries in the world at the moment build a happy and highly productive life? Many Americans have recently realized that productivity does not lead to equality, the huge gap between rich and poor, income inequality, tax inequality does. We must do what has to be done and move on to social capitalism, leaving traditional capitalism.” So he almost says #makehappybehappy.

Sadia Kibria, CEO of WMD Group, in her speech titled "The Next Big Thing", stated, "In January 2020, Microsoft will be 'carbon negative' by 2030, and by 2050 they will eliminate all carbon emissions they have consumed since 1975. A month later, in February 2020, Amazon's boss Jeff Bezos announced that he would save the world through the Bezos World Foundation. In 2018, China announced the transition to electric vehicles that will reduce dependence on oil and penalize all cars that pollute the world. General Motors announced that they will develop 20 models of electric vehicles by 2030. Today, solar cars are being researched and promoted. "Social entrepreneurship" must be the next big thing," he said. ‘First, you must understand the reason," he continues: "In 2019, 800 jewelers closed in the USA. The demand for luxury jewelry is falling in the USA. Tiffany & Co was bought by Louis Vuitton because tourists no longer buy their rings. The new generation (Gen X and Y) buy diamond rings with emotion, not brand name ones. Therefore, new consumers do not want to pay triple for a diamond ring just because it is from Tiffany. Nike is taking action to work with just 40 of its 14,000 retail partners. Because now people shop online. It also has moved its stores online. Sears is closing 150 stores in North America. Nine West is closing its stores and moving to e-commerce. Consumers are changing. And new consumers want emotional communication with brands. The global population is now 8 billion. Generation Y and post-Y are getting older. They will inherit Generation X. And then Z will replace Y, post-Millennials will replace Millennials. The new consumers of the world are Gen Z and Y. So why still do business with Boomer’s logic and Gen X? The new rhythm of the world passes on following Gen Y and Z, namely after Millennial and post-Millennial. 92% of Gen Z and Y generation of these children support companies that support social needs and the environment. 68% choose products that provide social benefits and 73% are willing to pay more for a meaningful brand. Generations are changing. Therefore, while designing brands and services, pay attention to change now”. I think what Kibria is saying is also essentially, #makehappybehappy.

Kozo Takaoka, the former CEO of Nestle Japan, emphasized in his speech titled "Digital Transformation and Innovation": Success in marketing is about focusing on customers and defining their problems. It is important to be able to look at the problems of existing customers, produce solutions for them and create added value with these solutions. However, when we look at these problems, we see two different problems and two different types of solutions. The solution to customer problems that are visibly "defined" is "Renovation" and "Innovation" is the solution to "unidentified" problems that even customers are not aware of. You should examine customers, find solutions for the problems they are not aware of, and remind them that they have problems with these solutions, and make them notice and feel as such. This is the most basic psychological need. In my model, people don't think of an innovation, you have to find it and bring it to them, says Takaoka. And he continues: “The household usually consists of 1 or 2 people. The child is almost absent. However, the number of households has increased from 30 million to 55 million in the last 30 years. And these people either eat outside or consume ready meals. And people prefer single-person instant coffees to consume. Based on this prediction, we created the Nescafe Ambassador. We sell machines at cost or a little more, because these machines work with Nescafe and we wanted to profit from coffee, not from the machine, and that is what happened. Our coffee income increased by 50% and people started to make fast and delicious coffee at home with a single machine. And we offered them good coffee at a cost of $ 0.3. This situation continued during the pandemic period and many businesses continued to make a profit during the pandemic time thanks to this machine we produced. Again, application of #makehappybehappy is seen here.

Australian Business Innovation Specialist Linden Brown talked about the two most important roles of marketing in his speech entitled "The Role of Marketing Leadership in Creating a Customer-Centric Culture", "survival" and "growth" are about marketing all customers in the market, not just part of it, he said. He stated that existing customers determine customer experience and the only concept that determines new customer acquisition is "customer experience". Brand reputation, customer advocacy can only be sustained by having excellent customer experiences and emphasized that: “Heinz ketchups are the world's best-selling ketchup brand, but Heinz has two different product packaging, one in a glass bottle (product-oriented) and the spout cannot be controlled, the other is the plastic bottle (customer-oriented) and the user has the opportunity to consume as much ketchup as he wishes, thanks to the valve on the mouth. The product purchased in a glass bottle is not customer-focused due to the fact that it can not be controlled and spilled, and the part remaining at the bottom can not be used." And he made the final hit with the last sentence: "Many studies show that market-driven companies are 31% more profitable than self-centered companies that plan their strategy according to the information and findings from the market." In other words, if you don't think "let’s make happy" while developing a strategy, if you think only "let's be happy", there is no path to success in any way! So #makehappybehappy!

Kotler has said at the beginning of his speech that they were writing Marketing 5.0 with Indonesian Brand Plus CEO, Iwan Setiawan, with whom they co-wrote 4.0 in his speech entitled "Digital Marketing versus Traditional Marketing", said that they co-wrote the 5.0, which will be released in March 2020, and continued: "Marketing 3.0 was completely traditional marketing work. Marketing 4.0 brought digital and traditional marketing together but was never 100% digital. Marketing 5.0, on the other hand, is discussed in detail from a digital perspective, the technology will be 2020-2030 and the dominant generation Gen Alpha. Marketing between 2010 and 2020 was the dominant generation 'Gen Z' in 4.0, and it was a period where digitalization efforts gained weight and the first level of digitization took place but still it couldn’t completely be one hundred percent digital. In the new period, marketing is affected by digital tools, but it does not continue in this area completely.’

He went on to compare the human characteristics with the machine features:

Later, in the technology development stages, he divided the basic elements of marketing 5.0 into 5, saying that "biotechnology" offers human-inspired solutions:

1. Data-based marketing,

2. Agile marketing

3. Predictive marketing

4. Context marketing

5. Augmented marketing

Data-based marketing is marketing where marketers gain insights and trends based on data and based on making the best decision by grouping data. It is necessary to collect data from all possible data sources. These resources are social, media, web, POS devices, IoT, interaction, and salesperson call center data.

Agile marketing is the quick, rapid and decentralized management of real-time transactions. These groups of 5-8 people, consisting of small and influential people, quickly and effectively transform instant data into processing. They are modular and fast. They have constantly evolving and flexible systems.

Predictive marketing is marketing based on statistical or machine learning model. Three main components are customer management, product management and brand management. It is used to manage customer preferences in different sources with data and to develop them to provide the best option. Netflix, Amazon and Media companies use this form of marketing extensively.

Context marketing is about providing digital experience in the physical space. Sensors are used in this marketing type. Sensors can learn everything from people; gender, body temperature, body posture, etc. and these features blend with artificial intelligence and offer accordingly.

Augmented marketing that is often used in sales and customer service "chat box" (message) boxes. The customer interface works like a message box. This message box application performs a progressive chat to obtain the referral data and tries to provide the most suitable result to the user. The message box feeds / supports the user with educational information. The sales team provides quality guidance in sales as a consultant, negotiates and concludes. In this more personalized, more focused and more specific method, the area is slowly narrowed and the appropriate solution is offered.

Marketing Professor Jagdish Sheth with "Why does good companies fail?" gave the answer to this question. Prof. J. Sheth commenced his speech with these words. “Human is mortal and likewise companies are mortal as well. Globalization, global competition, global existence, competition, natural disasters and Covid-19 etc. The destructive competition that occurs in this environment causes many companies to shut down and many companies to fail. What is the bad habit of good companies?" he asked, and he answered: “It's all about leadership. Many companies that were good in the 80’s didn't exist when they continued on into the 90’s. Why? Many companies used the "From Good to Great" (*) model. However, most of them could not fulfill their level 5.0 leadership studies. By 1983, 1/3 of the 1970 Fortune 500 list had disappeared. In 1958, Standard & Poor's 500 determined the lifetime of 1 company as 61 years, today this figure is under 18 years. McKinsey says 75% of existing companies will disappear by 2027. But why does good companies fail despite this prediction, because they don't want to adapt or change to the changing ecosystem. They continue with their past experiences. For example, GE, Sears, Digital, IBM were left behind not because they weren't good, but because they couldn't keep up with change. Many good companies do not exist today, because these companies have failed to adapt to change and have adopted various bad habits to survive and keep their business.

Later Sheth explained the 7 bad habits as follows: denial, arrogance, complacency, competence dependence, competitive myopia, capacity obsession, and internal power warfare (turf wars).

Denial: This rather dangerous habit is probably the new reality of all companies. Many companies are conservative companies that stick to myths and rituals. These companies are closed to changing habits and consumer behavior as they view their past success as the basis for current success. The 3 realities these companies deny are: disruptive technology integration (Uber), changing organic foods, non-traditional competition (China and India).

Arrogance: It is a bubble of self-importance and superiority. For example, GE was pretty arrogant after 33 years of successful management by Alfred P. Sloan. And it could not sustain its success.

Complacency: These companies try to survive with their past success. They care so much about their past success that they cannot see that they have achieved nothing afterwards. Taxi companies, for example, failed against Uber. These companies forget about how they achieved success in the past, in the monopoly state of the market it is quite easy for all companies to succeed. Some companies are supported by the state because of the unique product they produce, and this can bring them quite valuable success. However, there is no rule that this success will continue under competitive conditions. Marks and Spencer are examples of these companies.

Competence dependency: Some companies depend on someone's competencies to get them. For example, Singer sewing machines were a very important value at home sewing, but now no one sews easily at home. Singer just stayed in our minds as an old machine. Or, Kodak could not continue its success because of the companies that have disappeared since photographic films evolved to digital, because it was unable to adapt its company to digital cameras, because nobody uses old-style cameras and therefore films that need to be developed.

Competitive Myopia: Some companies are so focused on their closest competitors that they are vulnerable to external threats. Coca-Cola and Pepsi, McDonalds and Burger King are companies that have been affected by this myopia.

Capacity Obsession: Some companies think that they are unique in the market and offer more goods to the market than necessary. They think that this will increase their profit margins, but because of other competitors in the market, they sell most of their goods for less than their value and the money spent on sustainability is well above the profit earned. Levi’s is one of these companies. These companies miscalculate the purchasing capacity of the industry. The fact that 5000 people take jeans does not mean that 5000 people will buy Levi's. A similar situation is encountered in automobile companies.

Internal Power Wars (turf wars): Some companies apply quite different methods of in-house authorization, for example, in family companies, many departments interfere with each other. Like an engineer looking at the HR part or the boss trying to identify who will be hired, the engineer getting involved in the marketer's job. In such cases, companies can make wrong decisions and ruin the business because of not knowing the job correctly.

 “These 7 bad habits cause successful companies to fail and go bankrupt over time,” says Prof. Jagdish Sheth. I also say that from what I have been listening to the bankrupt companies don’t know "#makehappybehappy". Companies that intend to survive in 2027 need to heed all these things and tidy themselves up. The speeches at the world marketing summit are very instructive, I have summarized a few of them here in my own way. If you want, I can summarize a few more interesting ones. But if you go and watch it from start to finish, you can be one of the companies that will survive in 2027.

Note: This article, which is open source, can be cited by mentioning the author. Copyright not required.

en.muratulker.com

 (*) He is speaking about Jim Collins’s famous book: Good to Great, Random House Business, 2001.