economics to marketing, Philip Kotler and Louis Stern have
rewritten the discipline's rules. Their groundbreaking research
continues to drive the profession and inspire the next generation
of Kellogg faculty to push the field's boundaries
Kellogg School scholars like Philip
Kotler and Louis
Stern turned their prodigious intellects to the matter,
precious little science attached itself to marketing. As the
1960s began, Kotler recalls the dearth of academic resources
addressing marketing in anything other than a superficial
"All the marketing
textbooks were highly descriptive, like 'an effective salesman
has five traits ' and 'a wholesaler does the following,'"
says Kotler, who would go on to remedy the situation with
more than 100 articles and dozens of books, including his
landmark 1967 text, Marketing Management, now in its
12th edition. His seminal 1969 article, "Broadening the Concept
of Marketing," was published to acclaim in the Journal
of Marketing, and engendered a vigorous discourse that
significantly advanced the discipline's theoretical underpinnings,
and its horizons.
area of interest - marketing channels, or the various strategies
and incentives a firm employs to take products to market -
lacked much substantial research, leaving this complex and
fascinating subject stalled at a rudimentary stage until he
began offering his creative scrutiny.
"For years, there
was no theoretical base," says Stern, who earned his doctorate
in marketing at Northwestern University. The discussion rarely
advanced beyond "the benefits of one- versus two-story warehouses,
or how many wholesalers could you fit on the head of a pin."
Stern would help radically change channels research through
a series of scholarly articles and books, including Marketing
Channels (in its seventh edition) and "Distribution Channels
as Political Economies: A Framework for Comparative Analysis,"
published in the Journal of Marketing, in 1980 and
earning that periodical's best paper award for the year.
colleagues have shared a curiosity and passion for pushing
academic boundaries by bringing analytic frameworks to bear
on marketing questions, ones that had never before been fully
people define an entire epoch; even fewer begin the task almost
was Kotler's chance encounter with a Northwestern University
finance professor that convinced the M.I.T. economics doctorate
to turn his mind to marketing.
Jacobs, the future Kellogg School dean, and the two met
in 1960 during an elite one-year program sponsored by the
Ford Foundation at Harvard University. The program hoped to
encourage more mathematical analysis in business, a field
some believed lacked the necessary scientific rigor to address
the emerging management challenges.
"Don told me that
marketing really needed to be fortified," remembers Kotler.
"He said that Northwestern had a good marketing faculty but
needed the scientific aspects advanced."
Though he had not
taught marketing, Kotler was receptive, in part because of
the misgivings he felt about the way economics regarded marketing
activity. "Economists were neglecting two of the main drivers
of sales," he says. "They focused only on price as the main
influence on demand. They neglected the intense amount of
advertising, sales promotion and sales force activity that
drove demand. They were flattening - reducing to one - the
real drivers of demand and output."
In the 1930s, Edward
Chamberlain of Harvard and Joan Robinson of Cambridge University
had attempted to incorporate these drivers of demand but their
work was largely ignored, says Kotler, who joined Kellogg
price-oriented model of the market troubled Kotler. He perceived
a broad dynamic marketplace with several competitors engaged
in complicated interactions and customer relationships, not
simple "buy-sell" transactions. "I saw a whole value-adding
chain of events going from the manufacturer to the wholesalers
to the retailers to the customers, including agents and brokers
and advertising agencies," he says. And supplying the manufacturer
was a whole chain of firms selling their inputs to companies.
"All that drama
was flattened out by economists' wish to incorporate only
the forces that could be mathematically modeled. When they
said, 'Demand and supply determines the price,' my question
was, 'What price? Where? At the manufacturer level, wholesale
level, retail level?'"
Kotler began answering
these questions, drawing upon a theoretical tapestry that
included economics, organizational behavior, decision sciences,
mathematics and social psychology. The frameworks he advanced
built upon "The Four P's," a model that highlighted the importance
of the company putting together an integrated set of decisions
on product, price, place, and promotion.
"I elected to take
a new approach and base marketing on the concept of guiding
optimal decision making," Kotler explains, "regarding such
questions as how much to spend on advertising, to setting
price and discounts, to determining sales force size, territories
and compensation, and many other challenges."
perception of marketers as manipulators only added to the
challenge of revamping the discipline.
"It was the age
of books like The Hidden Persuaders," remembers the
Kellogg professor, referencing the 1957 Vance Packard title.
"It still happens today, with people who see marketing as
creating unnecessary wants and needs," he adds.
"Nobody ever asked
for a Walkman," Kotler says. "But when Sony created it, millions
of people wanted to have one. The same for Apple Computer's
iPod. The same for a $3 cup of coffee from Starbucks."
The public sees
only "the tip of the marketing iceberg," namely commercials
and promotions, leading them to believe that marketing and
selling are synonymous, "but they don't see the homework"
done to identify opportunities, design and test new products
and services, set prices, choose distribution and communication
channels, and "launch their offerings with some good chance
of success," he says.
"Our concept is
that when you do great marketing in the 'homework' stage,
you don't need hard selling," says Kotler, who, among other
distinctions, earned the American Marketing Association's
Paul Converse Award for his contributions to the field, the
AMA's inaugural Distinguished Marketing Educator Award, and
10 honorary degrees from abroad. Kotler says that marketing's
aim is to create high customer value and satisfaction through
solving customer problems.
revelation, expressed in "Broadening the Concept of Marketing"
(co-authored with fellow Kellogg scholar Sidney
Levy), shook the profession too. Contending that "everyone
markets," this research showed how marketing plays a critical
role not only for businesses, but also for nonprofit and government
organizations. Kotler would soon build on this insight to
launch the field of nonprofit organization marketing and social
marketing - marketing ideas, such as "say no to drugs" and
"don't litter." Kotler went on to argue that not only are
goods, services and ideas marketed, but also places and persons
and has written extensively on this.
marketing charted a new course for the field, though not everyone
welcomed the news. "Some wanted to restrict marketing to buy-and-sell
transactions, but we won the debate," says Kotler.
marketing's Four P's, Stern's research has focused most on
"place," the way firms deliver their products. What to the
layperson may initially seem straightforward is anything but.
As a young student,
Stern grew interested in the richness and power dynamics of
of my academic life was really as an undergraduate economics
major at Harvard and especially during a course called Industrial
Organization," explains Stern, who is also an expert on antitrust
and consumer protection issues. The course included discussions
about ideas such as John Kenneth Galbraith's countervailing
power, a theory of political modification of markets by such
entities as trade unions and citizen's groups.
But power struggles
were also part of the dynamics between, say, a manufacturer
and major supplier.
"These kinds of
issues, where there would be power at one end of the chain
and power at the other end, were fascinating to me," recalls
also have significant implications for how organizations bring
goods to market and perfect their chosen channel.
"For example, do
they want to set up their own retail outlets or market through
existing retailers?" says Stern. "Will they have their own
sales force or use independent manufacturers' representatives,
rent a space in a public warehouse or own their own distribution
centers?" And once they make these decisions, how do they
make the structures they construct work effectively and efficiently?
The key questions concern focusing on design and management
issues, explains Stern.
Because no business
today is likely to go to market using only a single channel,
but rather multiple ones, considerable competition can emerge
"There can be a
lot of cross purposes," Stern says. "You have to tailor your
channels so they don't blow up on you. You do this by aligning
incentives and by making sure the system is adaptive enough."
Stern, who among
other honors has been named one of the 12 best teachers in
U.S. business schools by BusinessWeek and has earned
the AMA's Irwin Distinguished Marketing Educator Award and
its Converse Award, has spent much of his career trying to
articulate the complexities of channels.
The subject can
be remarkably subtle.
folk often look for the 'ready, fire, aim' stuff, we say hold
the fort - there are too many interactions going on and you
have to look closely at them," says Stern.
at this complexity, Stern's research has provided a much-needed
unifying framework to an otherwise ad hoc array of analyses.
For instance, "Distribution Channels as Political Economies"
argued convincingly for the need to "encompass both economic
and sociopolitical determinants" of channel member behavior.
And texts such as Marketing Channels, co-authored with
Kellogg Associate Professor Anne
Coughlan, bring a strong theoretic perspective to channel
design and implementation.
"I've drawn upon
all sorts of literatures to do this," says Stern, "but the
main thing has been understanding one of the big primary forces,
which comes out of economics: the 'make or buy' decision.
Do you do things for yourself, or do you go to an open marketplace
and buy the services?"
questions forces one to examine points of power and conflict
- critical issues in the management of distribution.
that political economy perspective, I drew upon a lot of social
psychology and sociology," says Stern.
example and inspiration of Kotler and Stern continues today,
providing direction for other Kellogg School marketing peers.
sense, the marketing field might be divided into two periods:
BK (Before Kotler, along with Sid Levy) and AK (After Kotler),"
Tybout, the Harold T. Martin Professor of Marketing and
chair of the Kellogg Marketing
Department. "Phil and Sid shaped the field by defining
marketing as a strategic activity, and one that was universally
applicable to all situations related to exchange. This was
Tybout also praises
Stern, a person she has known for most of her academic life
and cites his "dauntingly" high standards for performance
and his passionate and disciplined approach to his work. As
a doctoral student at Northwestern when Stern arrived in 1973,
Tybout recalls being inspired by his rigorous theoretical
methodology and has "tried to follow in Lou's footsteps and
pursue a similar strategy in my own work."
Coughlan has also
been influenced by Stern's contributions, although she is
quick to note, "Lou's research has shaped many academics'
work in the field, not just mine."
Coughlan says that
Stern was instrumental in her decision to join the Kellogg
"I have learned
an enormous amount from Lou over the years," she says. "He
has always had a great gift for speaking about channels to
audiences of all sorts, from academics to MBA students and
This drive to carry
forward the mission and possibilities of marketing has most
defined the spirit and contribution of Kotler and Stern, two
champions of the marketing science they helped to create.