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Drucker on marketing: An interview with Peter Drucker

Article  in  Journal of the Academy of Marketing Science · March 2009

DOI: 10.1007/s11747-008-0111-3

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J. of the Acad. Mark. Sci. (2009) 37:8–11
DOI 10.1007/s11747-008-0111-3
BEST PRACTICES
Drucker on marketing: an interview with Peter Drucker
Jenny Darroch
Received: 10 July 2008 / Accepted: 15 July 2008 / Published online: 5 August 2008
# Academy of Marketing Science 2008
Introduction
This interview was conducted long before the Special Issue
was conceived. In November 2003, I visited the Drucker
School to be interviewed as part of the recruitment process.
Peter was giving his last public address and I was fortunate
enough to hear him speak. Peter was old, 95 in fact. He
arrived at the auditorium, sat on the stage in a large leather
chair, ate a donut, drank a glass of water and, when
finished, allowed the audience to enter the room. I did not
really know what to expect and, to be honest, I was happy
to simply soak up the moment. I have two distinct
memories of the occasion: (1) when Peter recalled historical
facts, it was likely he was talking about people he had met
and events he had witnessed, not just read about—after all,
he had lived almost 100 years; and (2) Peter had a
tremendous ability to tell a story, comprising many parts,
and always pulling the threads of his argument together to
deliver a powerful conclusion.
My next meeting with Peter was soon after I joined
the Drucker School in July 2004. My colleague, Joe
Maciarello, offered to arrange a meeting with Peter. As
Peter was hard of hearing, Joe suggested I fax some
questions ahead of time. We met at the Drucker Institute on
October 1, 2004.
J. Darroch (*)
Peter F. Drucker and Masatoshi Ito Graduate
School of Management, Claremont Graduate University,
1021 N. Dartmouth Ave,
Claremont, CA 91711, USA
e-mail: jenny.darroch@cgu.edu
What you are about to read is a transcript of that
interview. The questions cover a range of issues, some
relate specifically to marketing ideas Drucker wrote about
while other questions were motivated by my own research
or were developed in response to material I was reading at
the time. Had I anticipated the Special Issue back in 2004, I
might have asked different questions with the intention of
comparing Drucker’s answers to those given by Kotler and
Lafley (see the interviews in this Issue). And, I might have
interviewed Peter again in order to better develop some of
the themes Peter covered. The benefits of hindsight! We
decided to include the interview, however, because the
answers he gave are very Peter-like: provocative, interest-
ing and to-the-point. We also believe it is the last interview
Peter gave on marketing. We hope you enjoy it.
You have always talked about the importance
of creating and serving customers through marketing
and innovation processes. Realistically, do you think
companies do both? Would you restate your position
on marketing and innovation differently today? Why
is that?
Would I restate my position on marketing and innovation
differently today? No, I don’t think so. You say companies
do both marketing and innovation. Most companies do
neither. The great majority of businesses, all over the world,
are inwardly focused, partly because they see the inward
people every day and partly because there is a dilemma if
you do not take your product or your service seriously, you
do a poor job. You must believe.
J. of the Acad. Mark. Sci. (2009) 37:8–11
Do you see any differences between non-profit
and for-profit organizations regarding marketing
and innovation?
The greatest marketing challenges are among non-profit
institutions, because they do not know who their customers
are. Or they find it very hard to identify their customers.
What is the most successful institution of the 20th century?
The American College. Easy. In the year 1900 there were
250,000 college students and now there are 15 million,
nobody has grown like this.
Who are their customers? In a business, you can always
say in the end our customers are the ones who pay us. That
is a dangerous thing to say but it is a safe first position.
Who are the customers of my most difficult charity patient,
the American Medical Association? It has been my charity
client for the last 30 years. Who are their customers—
physicians? Yes, the physicians pay their dues but who are
their customers? What are the results? So, non-profit is a lot
more difficult.
Let me give you an example. A very large part of my
practice for the last 25 years has been churches. They have
done exceedingly well if you look at attendance and money.
But there are almost no churchmen today who are
prominent national figures. If you go back 50 years ago,
the most prominent non-governmental figure in America
was the Cardinal Archbishop of New York, Spellman. He
died in 1967, I believe. But there is not one, or very few
churchmen today on the American national scene.
If you look at the churches from the point of view of the
congregation, they have been a phenomenal success, and
are a uniquely American success. In Europe, churchgoing
has come down. In this country it has been going up. A
larger proportion of the population now goes regularly to
church than 50 years ago. And an even larger growth has
been in the fundamentalist side.
So, what’s the bottom line for non-profits? How do you
measure a non-profit? What is meaningful? But, you begin
even more in a non-profit with marketing for a simple
reason: nobody in business would say you are in business to
do good, you are in business to make money. The non-profits
believe in their cause and the less successful they are the
more they think they are needed. Non-profits are afraid of
being successful.
Do you believe organizations should innovate by staying
true to existing core products and customer groups
or by diversifying in order to generate new streams
of revenue? Why is that?
It depends on the organization. Universities, for instance,
need to attract non-traditional groups today partly because
9
there is no more growth from the traditional group. The
demographics are against you pretty heavily with the
traditional group but also because increasingly the future
is continuous learning and continuous learning begins at
age 45. Then you take a course or two but at age 45. That is
when people, middle executives, go back to school. And so,
universities will have to attract non-traditional groups.
On the other hand, when you look at banks, there is
nobody in this country who has not been fully monetized.
There are no additional customers. You can only take them
away from each other. So, you can only grow by adding
new services or new products.
When you look at the traditional supermarket, it can only
take customers away from another supermarket. But you
know, in this area, about five or 6 years ago one of the big
supermarket chains began to add flowers. They made an
80% profit margin. Flowers are unbelievably profitable.
But, if you can’t sell the flowers today, they are gone.
Stephen Brown (1999)1 recently compared Theodore
Levitt and Morris Holbrook. According to Brown,
Levitt contends that the customer is everything where
Holbrook argues that everything is consumption. What
do you think of this comparison?
I don’t know who Stephen Brown is and I don’t know who
Morris Holbrook is, or rather I know but I have never paid
much attention. Look ...I don’t like any absolutes.
A supermarket needs to focus on the customer and
bankers need to focus on services. In this country, where
everybody is basically a customer of bankers, you can only
take them away from each other. The gap between the
interest rates banks pay on deposits and the interest rates
customers pay on loans is barely enough to cover
administrative expenses unless the loan is very big. And
so, the banks are not pushing for new customers, they are
pushing for rapid turnover of their deposits. That makes no
sense for a supermarket, in that sense.
And look at a bookstore, basically, a bookstore loses
money on fast selling books because the markup is very
low. It makes money on slow moving books where the
markup is 70%, enormous, but it has to push the fast selling
books because they bring the customer in and ... you need
to accomplish that balance when running a bookstore.
Basically, there is no real answer.
Now Levitt is absolutely right in pushing, and don’t forget
it’s a long time back, in pushing for customer focus. And, I
1
Brown, Stephen. 1999. “Marketing and literature: The anxiety of
academic influence.” Journal of Marketing, 63 (1) 1–15.
10
said it first and Ted [Levitt] picked it up. The customer
defines the business. But, Holbrook, consumption, yes,
consumption defines the economy but it doesn’t define the
provider. Okay?
In 2004, the American Marketing Association came up
with a new definition of marketing:
Marketing is an organizational function and a set
of processes for creating, communicating and
delivering value to customers and for managing
customer relationships in ways that benefit the
organization and its stakeholders.
In your opinion, does this definition capture the essence
of marketing? Why is that?
It’s much too long; a definition that has more than 5 words.
And by the way, this was written by a psychology
professor, judging by the language. Do you understand it?
I don’t. I don’t understand it.
How would you define marketing?
My definition of marketing is that “marketing is the business
as seen from the customer”. Customers couldn’t care less what
goes on inside an organization. In fact, 99% of institutional
advertising is not focused on the customers but on the inside.
One of the savviest marketing executives I know is John
Bachman of Edward Jones who has built Edward Jones as a
marketing organization, not as a financial organization. And
Bachman, looks at an ad for Edward Jones as directed at the
15,000 people who work for Edward Jones, not at the
customers, basically. He says, bluntly, that nobody reads
ads except our own employees. When they change a
comma in an ad and they get 5,000 letters from employees.
They read and use it. The Edward Jones ad is on Page 2 of
the Wall Street Journal’s money section; you open that page
and on the left hand column is the ad from Edward Jones.
Who reads it? Every Edward Jones employee reads the ad
every morning even though it is the same ad day after day.
They are the audience. And advertising agencies don’t like
to hear that, they would lose their mystique.
The most sophisticated advertiser I ever knew was Leo
Burnett. Do you know whom he tested his ads on? Only on
the wives of the executives. They are the only ones who
have judgment and they were devastating. I once sat in on
one those sessions with about nine ladies who are married
to executives of the company for whom he created the ads.
And one said, I will never forget it, when an ad came up,
“that’s why I am divorcing my husband”.
J. of the Acad. Mark. Sci. (2009) 37:8–11
Do you believe there is a disconnection between
businesses and their customers? Why is that?
A disconnection between businesses and their customers—no.
First, I hope you don’t mind me saying but you make the
mistake to believe that businesses are the American dominant
institution. That was true 100 years ago. Businesses have not
grown more than the economy.
The fastest growing institutions are universities and hospi-
tals and non-profit organizations. The Girl Scouts of the USA,
were founded in 1906, as an imitation of the English. And when
one of our friends, Francis Hesselbein, retired as Chief
Executive Officer of the Girl Scouts in 1991, they had 9
million members, the world’s largest women’s organization by
far. Nothing has grown like that. And if you look, the same is
true of any number of non-profits and especially of associa-
tions. And, there has been no disconnection between the
organization and the customers.
On the contrary, look at the American Medical Associ-
ation, it is very successful and is becoming an incredibly
powerful organization. They make sure that every well-
known physician in the community is active in the
American Medical Association. The same is true of the
Bar Association for lawyers. And when you look at
relationships between the non-profit institutions and their
customers, they have become closer whether that is lawyers
or doctors or what have you.
When a consumer purchases a product, he or she
is more interested in the brand and what the brand
represents. In most cases, consumers have no interest
in or knowledge of what goes on inside an organization.
Do you think managers place enough emphasis
on the role of brands within organizations?
Take Proctor and Gamble, for one simple reason, that I
have known them exceedingly well for 40 years. When the
predecessor succeeded the CEO who had been there for
25 years, he realized that everybody knew Tide and other
brands but no one had heard of Proctor and Gamble, and
that was a very major drawback in its strategy. He thought
that the stock price was very low because people knew Tide
and Ivory soap but nobody knew who made Ivory soap—I
still don’t know whether it is Proctor and Gamble. And he
set about to make Proctor and Gamble known and he was
exceedingly successful. And the stock price, as a result,
went up and so he could make acquisitions, which have
made P and G exceedingly profitable. But that was a
complete reversal of strategy. Previously, the view was that
nobody wants to know a corporation, people want to buy a
brand, well, that worked beautifully up to a point but it had
to be reversed and so you have to look at the situation.
J. of the Acad. Mark. Sci. (2009) 37:8–11
Business, you will still hear quite a bit of argument
from the advertising community, that businesses should be
unknown; you want brands and profits to be known. One
reason for this is that if people buy a company, rather than
a brand, you are stuck with it and can’t resell any brands.
And the advertising community, if you look at them
closely, there is a fairly big debate whether you should
push the product or the company. All our studies show
there is no customer loyalty to a company. None, the
customer loyalty, if there is such a thing, and between you
and me, there isn’t, but, if there is such a thing, it is to a
brand.
Businesses do not necessarily want to have a connection
to their customers. They want the product to have one. Let
me say, I consider institutional advertising is inside
directed. Nobody outside has the slightest interest what
goes on inside GM.
11
What do you believe are the main marketing issues
facing organizations today?
The shrinking of the mass market, the mass market of the
1950s is shrinking. Highly specialized markets are
emerging.
What do you believe are the main issues facing
consumers today?
There is far too much choice and not enough difference and
secondly, the choice between price and service—there ain’t
no service that a 5% price cut can’t overcome and that is
largely true.
Thank you.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

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