Philip Kotler started out as an economist and studied under Nobel Prize winners Milton Friedman and Paul Samuelson. He then became fascinated with marketing. Seeking out textbooks on the subject, he was disappointed to find them more descriptive than prescriptive. So, he wrote Marketing Management, still the definitive work on marketing and the textbook on every marketing student’s shelves.

Along the way, he has coined phrases like “mega marketing,” “demarketing,” “social marketing,” “place marketing” and “segmentation, targeting, and positioning.” In this interview with us, Kotler surveys the new world of online marketing and offers his insights on marketing in the digital age Now in his seventies, Philip Kotler has over 25 books to his name, including his latest, Marketing Moves, written with Dipak Jain and Suvit Maesincee.

Q. Why is marketing so slow to respond to changes in markets?

A. Markets always change faster than marketing. Companies have ingrained practices and fairly frozen allocations of marketing funds. Each function - advertising, sales promotion, sales force -wants the same or a larger budget each year, independent of whether the function is gaining or losing productivity. It doesn’t matter whether advertising is losing its effectiveness. This is why marketing practice remains out-of-touch with the new marketplace.

Q. What would you say constitutes a holistic approach to marketing?

A. Marketing has too often been treated as a department, one that essentially carries out marketing communications and promotions. In Marketing Moves, we argue that marketing, properly conceived, is a strategic function and should be the driver of company strategy. Peter Drucker noted this with his famous questions put to companies: “What business are you in? Who are your customers? What is value to the customers?” He went on to say: “The two most important functions of a company are marketing and innovation.” Our holistic approach develops this further and calls for marketing to be the architect of the company’s demand and supply chain and its network of collaborators.

Q. Haven’t successful companies always realised that the customer is king?

A. Although the customer is king today, there are exceptions. He is not king in the face of a monopolist. Nor is he king during periods of shortage. Much depends on whether there is a shortage of goods or of customers. When customers are scarce, businesses will have to compete for them and cater to them. That’s today’s situation.

Q. You talk of there being four customer wants - change, participation, freedom and stability. Is this a new concept?

A. No. This only serves as a useful framework for analysing markets and identifying market segments. People differ in the weights they put on change, participation, freedom and stability and these weights change over time and circumstance. Are the four Ps of marketing still relevant? The four Ps of marketing - product, price, place and promotion - serve as useful building blocks for constructing the marketing mix to carry out the firm’s strategy for winning a chosen target market. Each P carries a subset of tools for influencing the level, timing and composition of demand. Thus the product mix, price mix, place mix and promotion mix must be considered carefully when preparing marketing battle plans.

Q. What effect has the advent of the new economy and the Internet had on your thinking and on marketing?

A. I became fascinated with the implications of e-commerce and e-business for business strategy. At first I thought pure click operators such as Amazon and Yahoo would have a tremendous competitive advantage, since they owned few physical assets. My mind changed when I saw how much they had to spend on marketing to build their brand and attract and keep customers. I believe that the Internet will fundamentally change business and marketing practice. I expect that the price transparency of the Internet will put great pressure on prices. I expect the emergence of business-to-business websites will reduce the number of salespeople involved in routine sales work. I expect to see companies increasingly differentiate their services to different tiers of customers according to customer lifetime value.

Q. Where do the main online opportunities for marketers lie?

A. Some companies illustrate the power of online commerce when it is done well. Dell Computer has exploited the Internet as a means of helping customers customise their computers and transact at a lower cost to both the customers and Dell. Amazon offers not only the largest number of available books online but value-added information in the form of editorial and customer reviews. But not everything can be sold online profitably, as many dot.coms have found out. The truth is that the importance of the Internet far exceeds its use as an ecommerce tool.

Q. You call on managers to completely redefine their companies. But isn’t the managerial ability and enthusiasm to do this extremely limited?

A. The scarce resource is creativity, not managerial ability or enthusiasm. Companies can only thrive in today’s hypercompetitive market by continually improving and inventing. Yet so few companies put a premium on new ideas or manage any system to capture them. Companies can only thrive in a hyper-competitive market by continually improving and inventing.

Q. What is the difference between marketplace and marketspace?

A. If I go to a Barnes and Noble bookstore to buy a book, I am transacting in the marketplace. If I go on www.barnesandnoble.com, I am transacting in marketspace (called cyberspace).

Q. How can companies capitalise on the emergence of metamarkets?

A. A metamarket facilitates all of the activities involved in obtaining an item for use or consumption. To buy a car, I must choose the car, finance it and get insurance. Thus Edmunds.com represents an online metamarket where I can get information about all cars, search for the best dealer for the car I want, arrange for a loan and buy insurance. Knots.com represents an online metamarket for obtaining everything connected with preparing a wedding, including gowns, invitation cards, gifts and the like.

Q. Does it still make sense to talk of old and new economies?

A. Today’s economy is a hybrid of an industrial economy (where manufacturing predominates) and a post-industrial economy (marked more by services, finance, globalisation and technology). At best, we can describe today’s economy as a hybrid economy with old and new elements.

Q. Is global marketing becoming more adaptive to the growing markets of Asia and India?

A. Many anticipate that this century will be called the Asian century. Japan made a strong beginning in the 1970s, followed by the five smaller dragons of South Korea, Thailand, Malaysia, Singapore and Hong Kong. They all hit a wall in the late 1990s, but they will come back. China is now showing the most exuberance, growing as one of the world’s leading manufacturing powers. India is less organised but represents huge market potential for investors.

Q. Can and should the United States be marketed? And if so, how?

A. The US is marketed everywhere, everyday, for good or bad, by MacDonald’s, Coca Cola and Hollywood. It advertises its brand of capitalism as one of free markets, free trade and freedom of the press. It attracts admiration, it attracts envy and it attracts censure for many of its ways and outcomes. I think that the US needs a fresh marketing programme that drops some of the old rhetoric and presents a new view of universal values and aspirations and is not limited to the seeming cowboy mentality that its leaders project.

Q. What, in your opinion, is the best marketing job in the world?

A. The most satisfying marketing job is not to sell more Coca Cola or Crest toothpaste but to bring more education and health to people and make a real difference in the quality of their lives.