Author and marketing expert Philip Kotler offers advice for anticipating change, avoiding mistakes and staying close to customers.

Q: In your new book, Chaotics: The Business of Managing and Marketing in The Age of Turbulence, you say that the signs of turbulence are everywhere. Is that disruption due to more than just the current economic downturn?

A: Even if we didn’t have a recession, we would be experiencing an increased level of turbulence. The recession just intensified those levels. Two forces are driving the changes: globalization and technological advancement. With globalization, companies are being encouraged to buy wherever in the world they get the lowest cost and sell wherever they get the highest price. Disturbances in one part of the world affect activities in other parts of the world.

With technological advances, there’s a greater chance of bad news spreading faster. People can tap into social networks and talk about products and services. Bloggers are commenting about businesses, products and brands as well as about personal matters. There are also new distribution channels, new laws and all kinds of new competitors. It’s a world of new opportunities and a world of new pitfalls — and it’s all moving very fast.

Q: How can marketers respond to those forces and adapt to that pace?

A: They need to systematically monitor the key forces that can affect their business. They must go beyond normal business intelligence and develop and manage an early warning system. Monitor the forces that might affect your company positively or negatively: technological change, social change, legal change, economic change.

But you also need to move from contingency planning to scenario planning. Imagine a scenario picturing the worst things that could happen. Imagine a scenario picturing the best things that could happen. How would you respond to each scenario? Make your plans more flexible. The important thing is to be able to respond quickly to any major disturbance or disruption occurring in the marketplace.

Q: How is turbulence affecting consumer behavior right now?

A: In Chaotics, we describe that customers are responding to the current recession in three ways. First, they are shifting to lower-priced offerings. Consumers are showing less loyalty to national and premium brands in favor of store or private brands. Second, they are postponing or eliminating discretionary purchases, especially of big-ticket items. They’re not buying a new automobile or a fancy new washing machine if the old one still works. Third, they’re cutting back on driving and eating out, and spending more time at home. During periods of upheaval, customers retreat to what feels secure — so it’s important for sellers to help customers feel more comfortable about their buying decisions.

Q: So how should marketers respond to those behaviors and to customers’ need for security?

A: Let’s use cars as the example. If the customer says, “I’d like to buy the car, but I’m going to wait just in case the prices go down even more,” you might respond with something like “If the price goes lower within this period of time, we’ll give you a refund — cash back — for the difference.” The other thing people say is “I’d like to buy the car, but I’m afraid I’ll lose my job.” Some car companies respond with the offer “If you lose your job, we’ll reduce your payments or we’ll take the car back.”

Q: What do direct marketers in particular need to know about responding to turbulence?

A: I’ve always thought that direct mail was one of the best concepts for marketing because you can tailor your offering. Rather than send a big blast with the same offer to a million people, you can move into one-to-one marketing — if you have a robust customer database. If you have enough information about the individuals you’re targeting — occupation, income, age and so on — you’ll stop mailing offers to people where there’s no chance of them buying.

Predictive analytics can help you estimate the purchase probability of an offer to a specific customer. Your software can go down a list of customers and assign a probability number to each. You can decide “I’m only going to send this offer to customers who have a 50-percent or higher probability of responding.” This could reduce the size of a mailing from 5,000 people to maybe 500 people. You’ll have a much higher response rate than the usual 1 to 2 percent we get from direct mail because you’ve identified the individuals who are most likely to buy — and your overall mailing cost is greatly reduced.

Q: How should marketers respond if turbulence causes sales of a particular product to drop?

A: You could just reduce the price of the product, but that only launches a price war that nobody wins. It also sends the message that your prices were too high in the first place. Instead, you might ask: “Is this product still the right one for our customers?” It may be that you should have a second, lower-priced product in the line. Or it may be that the best long-term defense would be offering three levels — good, better, best — so that customers can shift to the price/quality offering that best fits their needs.

You could consider keeping the product’s price where it is and adding other benefits that make your total offering better. Start adding value. You might offer free shipping or a longer warranty. You should also work more closely with the distributors and retailers. You’re experiencing lower sales because they’re experiencing lower sales. So your salespeople should work with them to see what they need. Or think about shifting the distribution strategy. Consider new channels for selling your product; for example, moving into the dollar stores. A lot of people are shopping at those stores now, so you might want to make sure that your product gets into those outlets.

Q: What’s the biggest mistake you see marketers making in this new environment?

A: The toughest challenge is what marketers should recommend for the advertising budget. Some marketers will say, “This is the time to increase the advertising budget to convince more people to buy.” But the chief financial officer will say, “Advertising is very expensive and there is little evidence that it is working, so we should cut the advertising budget.” I think part of the answer lies in better marketing research. Is the advertising working? Would we gain more by lowering the price? Should we move some of the budget to improving our product or service? Marketers must not think only of short-run steps to protect the company but should consider the mid-term and long-term consequences of their recommendations.

Q: What kind of marketing research is most important right now?

A: Marketing researchers need to look deeply into the sales and profit numbers. If money needs to be saved, check what products are not performing, what market segments are going nowhere, what geographical areas are losing money, and which customers are unprofitable.

Also, undertake opportunity research. Learn what is happening to your customers, channel partners and competitors. What are the best moves that you can make to improve your market share and standing?