i Marketing Communications ii THIS PAGE IS INTENTIONALLY LEFT BLANK iii FIFTH EDITION Marketing Communications Integrating ofline and online with social media PR Smith & Ze Zook iv Publisher’s note Every possible effort has been made to ensure that the information contained in this book is accurate at the time of going to press, and the publishers and authors cannot accept responsibility for any errors or omissions, however caused. No responsibility for loss or damage occasioned to any person acting, or refraining from action, as a result of the material in this publication can be accepted by the editor, the publisher or any of the authors. First published by Kogan Page Limited in 1993 Second edition published in 1998 Third edition published in 2002 Fourth edition published in 2004 Fifth edition published in 2011 Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licences issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned addresses: 120 Pentonville Road London N1 9JN United Kingdom www.koganpage.com 1518 Walnut Street, Suite 1100 Philadelphia PA 19102 USA 4737/23 Ansari Road Daryaganj New Delhi 110002 India © P R Smith 1993, 1998, 2002, 2004, 2011 The right of P R Smith and Z Zook to be identified as the authors of this work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. ISBN 978 0 7494 6193 5 E-ISBN 978 0 7494 6194 2 British Library Cataloguing-in-Publication Data A CIP record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Smith, P. R. (Paul Russell), 1957Marketing communications : integrating offline and online with social media / Paul R Smith, Ze Zook. – 5th ed. p. cm. Includes index. ISBN 978-0-7494-6193-5 – ISBN 978-0-7494-6194-2 1. Communication in marketing. I. Zook, Ze. II. Title. HF5415.123.S65 2011 658.8′02–dc22 2010045798 Typeset by Graphicraft Ltd, Hong Kong Print production managed by Jellyfish Printed and bound in Great Britain by Ashford Colour Press v Dedicated to the memory of Chris Berry Chris had the courage of his convictions and was champion of the underdog. He was generous in every conceivable way – the kindest man I ever knew. A genius in writing, teaching and marketing, a gentleman and a true friend. There’ll never again be anyone quite like Christopher Granville Berry. Pa u l S m I T H vi THIS PAGE IS INTENTIONALLY LEFT BLANK vii CO N T E N T S Foreword xii Acknowledgements xiii About the authors xv How to use this book xvi Pa R T O N E Communications Background and Theories 01 New marketing communications 3 The revolution has started 4 Marketing utopia has arrived 10 The ladder of engagement 17 The race is on 22 References and further reading 28 Further information 29 02 Branding 31 Introduction to branding 32 Brand components 37 The branding process 41 Brand summary and the challenges ahead 55 Conclusion 58 References and further reading 58 03 Customer relationship management 61 Introduction to CRM 62 CRM components required 68 CRM creation and maintenance 80 CRM summary and challenges 84 References and further reading 86 Further information 87 04 Customer psychology and buyer behaviour 89 Introduction to understanding customer buying behaviour 90 Models of buyer behaviour 97 The intervening psychological variables 103 Summary and conclusion 112 Appendix 4.1: Hofacker’s online information processing 114 Appendix 4.2: The post-PC customer 115 1 viii Contents References and further reading 116 Further information 117 05 Customer communications theory 119 Introduction to communications theory 120 Communications models 123 Future communications models 131 References and further reading 134 Further information 135 06 Marketing communications research 137 Introduction to market research 138 Types of research 141 The market research process 151 In conclusion 158 References and further reading 158 Further information 159 07 Media buying and planning 161 Introduction – the challenge of the media mix 162 Which medium? 168 Which media and which vehicle? 170 Summary 179 References and further reading 179 Further information 180 08 Marketing communications agencies 181 Agency types 182 Agency structure 184 Agency remuneration 187 Agency relationships – selection and retention 189 References and further reading 202 Further information 203 09 International marketing communications The globalization of markets 206 International dificulties 210 International mistakes 214 Strategic global options 215 In conclusion 222 References and further reading 222 205 Contents 10 The marketing communications plan ix 225 Outline marketing communications plan: the SOSTAC® planning system 226 Situation analysis 229 Objectives 233 Strategy 235 Tactics 237 Action 237 Control 240 References and further reading 244 Further information 244 11 The changing communications environment 245 Introduction 246 Politics (regulations and laws) 246 Economics 251 Social change 253 Technology 256 Summary 259 References and further reading 260 Further information 261 Pa R T T WO Communications Tools 12 Selling, sales management and key account management Introduction 266 Managing the sales force 270 Extending the sales force 273 Advantages and disadvantages 278 Summary 278 References and further reading 279 Further information 279 13 263 Advertising online and ofline 281 Introduction 282 New advertising 283 Managing an advertising campaign 289 Case study 13.1: T-Mobile 300 Case study 13.2: HEA drug education 304 Advantages and disadvantages 308 References and further reading 308 Further information 309 265 x Contents 14 Publicity and public relations – online and ofline 311 Introduction 312 New and old PR tools 317 Advantages and disadvantages of PR 328 Case study 14.1: Virgin Mobile’s new tariff 334 Case study 14.2: Meet the Stars in a Muzu.TV intimate environment 337 Advantages and disadvantages summary 338 References and further reading 339 Further information 339 15 Sponsorship – online and ofline 341 Introduction 342 New and old sponsorship tools 343 Managing a sponsorship programme 345 Advantages and disadvantages of sponsorship 349 Case study 15.1: TSB’s Roy of the Rovers 352 Advantages and disadvantages summary 353 References and further reading 354 Further information 355 16 Sales promotions – online and ofline 357 Introduction 358 New sales promotions 361 Managing a sales promotion 364 Case study 16.1: The V&A digital art promotion 370 Case study 16.2: Rap anti-knife campaign 371 Case study 16.3: Muzu.TV ilm soundtrack promotion 374 Advantages and disadvantages 376 References and further reading 377 Further information 377 17 Direct mail – online and ofline 379 Introduction to direct mail (and e-mail) 380 Opt-in e-mail and mobile messaging 383 Managing a direct mail campaign 386 Case study 17.1: Acronis automated marketing campaign 392 Advantages and disadvantages 398 References and further reading 399 Further information 399 18 Exhibitions – online and ofline 401 Introduction 402 Managing exhibitions 402 12 reasons for poor performance 410 Contents Case study 18.1: Sedgwick at RIMS Monte Carlo 410 Advantages and disadvantages 412 References and further reading 413 Further information 413 19 Merchandising and point of sale 415 Introduction 416 Merchandising tools 417 Retail strategies 419 Measuring merchandising effectiveness 421 Case study 19.1: Thomson Tours 422 Advantages and disadvantages 423 References and further reading 424 Further information 424 20 Packaging 425 Introduction 426 The designer’s tools 429 The packaging design process 435 Case study 20.1: Brand range development in India 438 Advantages and disadvantages 441 References and further reading 442 Further information 442 21 Websites and social media 443 Successful websites 444 Case study 21.1: Times Online microsite – Brian Clough, The Damned United 452 Case study 21.2: American Greetings e-cards – the LiveBall system 454 Successful social media 457 Case study 21.3: Using social media (and UGC movies) to help 11- to 15-year-olds to stop smoking 461 Case study 21.4: Minime – a new social networking app to reduce cancer from sun bed abuse 464 Advantages and disadvantages 467 Conclusion 468 References and further reading 468 Further information 469 Index 471 xi xii F O r E WO r D M arketing, and Marketing Communications in particular, has changed forever. And it has all happened since the last edition of this book – the 4th edition – written way back in 2005. What’s changed? Two things essentially: irst, Social Media arrived and changed the communications model, the budget allocation, worklows and even the deinition of media, communications and customer experience as they morphed together. Second, marketing standards have slipped backwards as customer service got sloppier; whether due to arduous automated telephone queuing systems, sloppy websites or de-motivated staff suffering incessant corporate culls. The good news is that marketers are now effectively presented with a major opportunity to be outstanding by just doing the basics right. In fact, they can become world-class players if they layer on top some creativity, disciplined processes and constant improvement. Marketers have also got the opportunity of getting back into the boardroom as social media positions marketing at the centre of the business; listening to customers, extending the brand experience and reaching out and collaborating with stakeholders in previously entirely unimaginable ways, compared with just a few years ago. Social Media – if fully integrated – draws marketers into Product Portfolio Planning; New Product Development; Customer Engagement; Customer Relationship Management; Lifetime Values. In fact, social media has created a new Marketing Utopia – listening and engaging and effectively inviting customers to shape the future of the business (explored in Chapter 1). This requires new skills, which have been explored throughout the book. This 5th edition also has a subtle theme of creativity integrated throughout. Creativity – with structured processes and worklows behind it, combined with Social Media – can deliver signiicant results. Do alert us about any examples of creative marketing that delivers results offline or online at www. Facebook.com/PRSmithMarketing. What’s new in this 5th edition? Emerging creative marketing talent, Ze Zook, has co-authored this edition, which incorporates new chapters on Branding, Relationship Marketing and of course, Social Media (and websites). In Part 2, the ten communications tools all have online and social media integrated with the offline communications tools. In addition to the complete set of new mini cases, KAM (Key Account Management) has been added to the Sales Management chapter, Rational Emotional dichotomy to the Advertising chapter, and New Laws/ Regulations and emerging ethics in the Changing Communications Environment. There is also a swathe of online support materials including video clips on www.PRSmith.org. xiii A C k N OW l E D g E M E N T S S pecial thanks to Jonathon Taylor, co-author on previous editions. Kristina Allen, ion interactive Peter ‘Magic’ Johnston, MediaZoo Studios Warren Allot, Photographer Nigel Jones, Herdman Jones Associates Ltd Zaid Al-Zaidy, Saint Digital Isobel Kerr-Newell, SweeneyVesty Jeremy Baker Gary Leyden, Vrising Riccardo Benzo, Managing Expectations Chris Lake, Econsultancy Michael Bland, Author mailto:chris@econsultancy.com Sarah Botterill, European Interactive Advertising Association Mike Langford, BT Adrian Brady, Eulogy Jez Lysaght, HD&M Creative JoAnna Brandi, The Customer Care Coach® Toby Marsden, Survival International Alan Briefel, StratCom Scott Brinker, ion international Steve Martin, M&C Saatchi Sport & Entertainment Ged Carroll, Ruder Finn Ian Maynard, Northstar Research Partners Dr Dave Chaffey, Smart Insights Davy McDonald, davymac.com Mary Pat Clark, Pew Research Center Paul McFarland, Goldhawk Alistair Clay, Plan UK Gerry McGovern, Gerry McGovern Amelia Collins, Photographer Sharon McLaughlin, McLaughlin Gibson Communications Keith Curley, Muzu.TV Jenny Ellery, Saatchi mailto: jenny.ellery@saatchi.co.uk & Saatchi Basil Long, Kroner Consultants Claire Mitchell, Natural History Museum Ian Morton, Happy Tuesdays Annie Fong, Mischief PR Jorian Murray, DDB London Stuart Fowkes, Oxfam Orson Nava, Director/ Content Producer Rob Gotlieb, Muzu.TV Julia O’Brien, Moonshine Media Jonathan Grant, Grenadier Advertising Brian O’Neill, Freshideas.ie Ltd Gavin Grimes, McBoom Paul O’Sullivan, Dublin Institute of Technology Craig Hannah Econsultancy Marie Page, Musicademy.com Dr Hansen, Hansen Hina Patel, Creating Results From Vision Ltd Chloe Haynes, Cadbury Alexandra Phelan, Paddy Power Neil Hegarty, BMP Optimum Ben Queenborough, Photographer John Horsley, Ace-A-metric.com Suresh Raj, Borkowski http://ace-a-metric.com/ Martin Hutchins, Cambridge Professional Academy Charles Randall, SAS Solutions Mark Read, Photographer Josh Rex, This Is Open xiv Acknowledgements Kevin Roberts, Saatchi & Saatchi Rex Sweetman, Muscutt Sweetman Dennis Sandler, PACE University Dr Peter Tan, World Financial Group Heather Sewell, ICE Jamie Tosh, Kick4change Adam Sharp, CleverTouch Jon Twomey, Student Support Group Joel Simon, Flickerpix Animations Ltd Neil Verlander, Friends of the Earth Graeme Slattery, Slattery Communications Gian Walker, Network Co-op Ltd Merlin Stone, The Customer Framework Steve Wellington, Havavision Records Ze’s particular thanks: I dedicate this work to my wife, Revital and daughter, Nessa, for their patience and understanding and to my mother and father for their acceptance and nourishment of my being. Paul’s particular thanks to Aran, Cian and Lily and the ever patient, lovely, Beverley. And lastly, a very special thanks to Owen Palmer (RIP) who gave me my irst break in UK Academia and never ceased to inspire and encourage me even long after he had retired. xv A B O u T T h E Au T h O r S Pr Smith Paul is a marketing consultant, best-selling business author and inspirational speaker. Paul has helped hundreds of businesses to boost their results with better marketing, including innovative start-ups such as ‘short game golf’ in China and established blue chip companies like IBM in the United States. He integrates social media with all marketing activities. He manages the social media for a start-up renewable energy company who have achieved market capitalization of over US $500 million in 18 months. He also advises UK Trade & Investment and Business Links. Paul’s books, DVDs and renowned SOSTAC® Planning system are used in over 60 countries. The Chartered Institute of Marketing (CIM) describe Paul’s best-selling Marketing Communications as a “Marketing Major”. His eMarketing eXcellence book is CIM’s recommended text. His Great Answers To Tough Marketing Questions is translated into seven languages and his Strategic Marketing Communications breaks new ground. A Fellow of CIM, Paul’s own personal passion is his social media campaign to get sportsmanship back on the agenda with an inspirational book and blog called www. GreatMomentsOfSportsmanship.com. Paul enjoys public speaking, and whether conferences, workshops, webinars or virtual events, his presentations are engaging, entertaining and carefully structured to embed immediate improvements. Visit www.PRSmith.org or www.Facebook.com/PRSmithMarketing. Ze Zook Ze Zook is an up and coming integrated marketing author, lecturer and consultant specializing in the creative industries. He has worked with ballet, ilm and music, working with sponsors such as Sainsbury’s and The Prince’s Trust. He has also worked with PR Smith for over 20 years on projects ranging from an award-winning, innovative, 3 screen PR Training video to the Chartered Institute of Marketing’s online eLearning programmes developed with PR Smith’s eLearning company to writing and researching innovative marketing projects. Having started as a video/digital media producer and photographer, Ze developed a unique creative perspective on integrated marketing. He helps creative businesses to fulil both their missions and their business goals, and he has written on media and digital marketing for Cambridge Marketing College. His consultancy, lecturing and writing, harness creativity in a fast-changing digital age. Visit http:// www.linkedin.com/in/zzook. xvi h OW TO u S E T h I S B O O k T his book should not be read from cover to cover but rather it should be used as a reference when addressing a particular aspect of marketing communications. The integrated nature of the subject does, however, refer the reader to other chapters and sections that are relevant to the particular area of interest. The anecdotal style, examples, case studies, questions, key points and sections have been carefully structured so that the reader can dip into an area of interest, absorb the information and crossrefer if required. This allows the reader to extract speciic answers quickly and easily. This book is designed to entertain as well as inform and so it is hoped that when dipping into a particular area, the reader will be lured into reading more. Part 1 (see Figure 0.1) introduces new marketing communications (largely driven by social media), branding, customer relationship management, buyer behaviour and communications theory. Part 1 continues to build a background to marketing communications by looking at what information market research can and cannot provide, how to work with agencies and consultancies of all types, understanding the media, moving with the changing business environment, international marketing and ultimately shows how to write a marketing communications plan using the simple SOSTAC® Planning System. Part 2 covers speciic marketing communication tools that marketing professionals have to manage at some time or other. These include selling and sales management (and Key Account Management), advertising, PR, sponsorship, sales promotion, direct mail, exhibitions (all online and offline), packaging, and inally, websites that work and social media that wins. The case studies at the end of each chapter in Part 2 have been carefully selected to show a range of different types and sizes of organizations using various communications tools across a range of different industries and markets. Materials are drawn from both small organizations with small budgets and larger businesses with multi-billion dollar budgets. This book should prove useful to anyone interested, or working, in marketing. The reader will discover that all of the communication tools can and should integrate with each other, as shown in Figure 0.2 and explained at the end of Chapter 1. It is therefore sometimes dificult to separate and categorize an activity as being one type of tool or another. For example, direct marketing and sales promotions should probably be called ‘direct promotions’ since they both more than likely involve each other. The chapters are not listed in order of importance. Selling and sales management is not always included in a marketing communications budget but the sales force is a potent form of communication and generally they (or the sales manager) report to the marketing manager. In fact it has been put to the top of the list because all the other chapters thereafter tend to lead into each other. The successful application of the marketing communications mix is helped by an understanding of communication theory and buyer behaviour theory. Marketing research can provide some practical and speciic answers to the questions that the theories generate. This provides the building blocks for the marketing communications plan, which draws upon an understanding of how agencies operate and how different media work. The details of the plan are worked out within the sometimes complex, but always integrated, web of the marketing communications mix (see Figure 0.2). The changing marketing communications environment and international opportunities/threats constantly affect the whole marketing communications mix. The world has moved on since the 4th edition. Different organizations allocate the same communication tools to different departments/budgets, eg exhibitions may be seen to be part of public relations, although the sales team will man the stand and beneit from extra sales. Sponsorship is considered by some to be an extension of advertising, while others consider it to be part of PR. And no one is too sure about whose budget covers the website. Regardless of classiications, ownership and responsibilities, each tool must integrate with many others. how to use this Book We are always looking to update the material within the book and our readers are invited to contact us with any ideas, suggestions and contributions to the next edition. As our subject of marketing communications is ever changing, we are keen to keep the content fresh and lively. Please post your examples of excellent marketing communications to us at www.Facebook.com/PRSmithMarketing. F I g u R E 0 .1 xvii All lecturers who use this ifth edition can obtain instructor support materials from Kogan Page. Visit http://www.koganpage.com/ resources/books/marketingcommunications and use the password MC0389. Part One: Background to the communications process Th gin han ec g commu nications e nv i r onm en t New marketing communications mix CRM Marketing communications plan Communications theory Buyer behaviour theory Market research Media Th Agencies International markets ng communications en angi vir o e ch n me Th nt munications envi ronm g com n i g ent han c e Branding ging han ec Th communications e n v i ron me n t how to use this Book xviii Part Two: The marketing communications mix M er ch an ns tio bi hi Ex di si ng Packaging F I g u R E 0 .2 ial Media Soc les g & Sa Sellin ment ge Mana Spons orship The marketing communications mix and ns s Web Site Ad ve tio c bli la Re rtis ing arke ct M Dire n otio rom es P Sal ting Pu 1 PART One Communications Background and Theories 2 THIS PAGE IS INTENTIONALLY LEFT BLANK 3 01 New marketing communications lEaRNINg ObjEcTIvES By the end of this chapter you will be able to: ●● Understand why this is the beginning of a new era in marketing ●● Grasp the importance of social media ●● Consider applying the ladder of engagement ●● Present a case for the marketing director to sit on the board The revolution has started 4 Identifying engaged customers The colouring department is dead 4 Communications morphing with experiences 5 Accelerated change and Social media 18 Collaborative co-creation 19 The customer service time bomb 6 hyper-competition The ladder of engagement 17 The race is on 22 Cut through the clutter 22 Be there, be relevant and be 7 creative 9 23 Open and integrate your new Marketing utopia has arrived 10 toolkit 23 Why social media works 10 The creative age is here How social media works 10 enter the boardroom Social networks nightmare on Banking Street 13 Social media cultural shift 14 The social media process 27 28 references and further reading 28 15 The ladder of engagement 17 Customer engagement creates stronger brands and more advocates 23 17 Further information 29 4 Part 1 Communications Background and Theories The revolution has started A new marketing era, long overdue, was heralded in when social media emerged as a real game changer. Social media put customers back at the centre of the organization and gave marketers a new set of tools to listen to them and to encourage them to engage with the brand. A golden opportunity has emerged as organizations realize the possibilities of engaging with customers in new ways so they can become partners driving the business forward. The ladder of engagement makes it easy to nurture customers up to higher levels of involvement. ‘Joined-up marketing’ brings the old ‘outbound marketing’ (eg advertising, direct mail, telemarketing, etc, sending out messages) together with inbound marketing (where social media brings conversations to the organization). Integrating inbound and outbound with online and ofline communications delivers higher impact and more cost-effective ‘joined-up marketing’. Marketing communications have to be integrated for two reasons. Firstly, unintegrated databases cause many problems and complications, as there is no single picture of the customer. Secondly, as communications morph into customer experiences, all communications need to be integrated to deliver a consistent experience. Amidst hyper-competition this ladder helps to build a ring fence of protection around the precious customer. It also encourages customers, and even non-customers, to collaborate and create anything from better promotions to better processes to better products. This marketing utopia is the beginning of a new creative age in marketing. It is also a new era of collaborative co-creation, which moves marketing into a strategic position and earns its seat at the board. There is a golden opportunity for marketers to create stronger brands and sustainable competitive advantage and ultimately to build better businesses (or organizations). There has never been a better time to be involved in marketing. The colouring department is dead A lot of ‘old’ marketing has had too much emphasis on just marketing communications. This is a weakness. Once upon a time this worked, as customers had far fewer communication channels and therefore it was easier to get a customer’s attention if marketers had the budget. And the big budget brands often announced ‘as seen on TV’ on their packaging, at point-of-sale and in their press advertisements. Being on TV gave the brand a level of credibility, perhaps because customers unconsciously assumed that being on TV meant that the company was a big company and big companies were trustworthy. Or perhaps customers trusted TV and the authorities that regulate the advertisements that are allowed on TV. This may have led to communications strategies that told customers about product beneits. Today, marketing strategies ask ‘How will customers engage with us and each other?’ This leads to the bigger question ‘What kind of customer experience are marketers creating?’ This in turn brings marketers back to the quintessential marketing question: ‘How do we help customers?’ This is, for example, the ultimate reason why any company has a website. Yet many, if not most, marketers answer this question incorrectly. Ask around and see. In fact, helping customers is the only reason a company exists, as American guru Peter Drucker used to say. These kinds of questions move marketers beyond communications, into customer experiences, customer relations, new product development processes, service processes and, of course, brand evaluation, which affects market capitalization. This, ultimately, invites marketers back into the boardroom, hopefully speaking the language of the board. Social media and the ladder of engagement, in particular, have opened the door to the boardroom for marketers. The colouring department ‘Not so long ago I was invited into a major global bank and given the brief: “To stop the board from referring to the marketing department as the colouring department.” ’ P R Smith When real marketing percolates up through the organization, real competitive advantage emerges. Consider National Semiconductor in the United States. They make chips for mobiles and DVD players. Their target market was design engineers and purchasing agents. Their enlightened CEO asked that quintessential marketing question: ‘How can the Chapter 1 website help engineers more?’ A truly inquisitive mind forced them to understand how design engineers work and whether any online tools could help. They explored customer scenarios and discovered that the design process of choosing a part was to create a design, analyse the design, build a prototype, test, etc. Now the engineer logs on and is prompted to specify the overall parameters and key components. The system auto-generates possible designs and technical specs, parts list, prices and cost beneit analysis. Engineers reine it and share it with colleagues. They test and reine it. Result engineers can do in two hours what previously took two months. By the end of the irst year they had 31,000 visitors generating 3,000 orders or referrals every day. One integrated socket with Nokia was worth 40 million units. This site helps customers so well that it creates sustainable competitive advantage whilst delivering a highly engaging brand experience. The change was made in 2000. It is time for marketing to move beyond communications, permeate the boardroom and help to build more sustainable businesses amidst a rapidly changing marketplace. Why marketing was marginalized ‘And seeing marketing as a series of distinct activities has been the reason that marketing has become more marginalised over the last 15 years because it has been positioned as managing communications rather than managing the whole business orientation.’ Jenkinson (2004) Communications morphing with experiences Marketing communications are morphing with customer experiences and product development and distribution, as the impact of digital media is hugely enhanced by social media. This has not gone unnoticed by the world’s best marketers. Take Unilever, which moved its digital marketing out of the media mix and into the marketing mix in 2007 (WARC, 2007). It realized that its digital budget was part of New Marketing Communications 5 the overall marketing mix, rather than part of its media spend/marketing communications mix ‘in recognition that successful digital campaigns are based more on producing engaging content than paying for media time and space’ (Financial Times, 25 June 2007). Engaging content enhances the customer experience. The search for added value is now relentless, whether through new features or more likely through enhanced web experiences, social media sharing or simply the addition of features to a product or service never dreamt possible before the arrival of the iPhone apps, eg Gibson Guitar’s app includes a guitar tuner, a metronome and a chord chart, all of which are extremely useful for any guitarist. Kraft’s iFood Assistant delivers recipes and a feature that creates a shopping list that automatically includes the ingredients for the chosen recipes. It even identiies the locations of nearby grocery stores and which aisles stock the items. In fact Kraft Foods’ continued creative approach seems to have scored a hit for its Lacta chocolate bar in Greece by showing a long form of a longform ad – a 27-minute branded-entertainment ilm about love, made by many customers (see ‘The ladder of engagement’, page 18). Nike’s search to help customers led it to the Nike+ – a joint venture with Apple’s iPod that enables joggers to access a jogging community website, log their runs and connect with and compare to other joggers by using their iPods (or their iPhones) and a Nike+ branded transmitter that can be itted into some specially designed Nike shoes or attached to other running shoes. This is a far cry from just marketing communications, but it is all about helping customers and strengthening the brand and growing revenues. Word-of-mouth marketing has become an ‘over-riding industry preoccupation for marketers as it provides a good measure of success (if customers endorse brands to their peers). Nike’s initiative has generated impressive results with Nike’s director of digital and content claiming “97 per cent of Nike+ users said they would recommend the service to a friend. That igure is unheard of” ’ (Grande, 2007). Think of ‘4Es instead of 4Ps’ (Rothery, 2008) from the old marketing mix. A product is an experience (including online), place becomes everyplace, price becomes exchange and promotion becomes evangelism. Alternatively, promotion is morphing with product as communications seek to engage customers with experiences. Part 1 6 Communications Background and Theories Marketing’s antithesis All of the above is the ‘antithesis of the “compared to Brand X” or “now 10 per cent better” approaches’ (Beck, 2010). Although it does mean some ‘show and tell’ communications, it heavily depends on discovering what current customers really like about the product or service and how else the company could help the customer, and then ensuring every other contact point consistently relects these highly relevant added values, whereas marketing used to be largely about creating messages for a passive audience with little choice and less empowerment, where the most active element was the decision whether to notice or ignore an advertisement. The once passive audience has been unshackled and empowered by technology. As marketers stalk rapidly changing markets, they face a brave new world, one that has changed for ever, offering new opportunities to those who seize them. Social media opens up new channels of communication that give marketers direct access to customers and opinion formers. Web 2.0, and soon Web 3.0, facilitates a dialogue; some call it a ‘trialogue’ (Earls, 2002), as opinion formers and customers and the brand owners engage in conversations. Some of these conversations are within the brand’s oficial online space, and some occur way beyond the brand’s space and are just amongst customers without any corporate inluence. What will happen? ‘What will happen when consumer experiences [created by consumers] are much more interesting and accurate than anything an organization’s marketers upload?’ Hoffman (2009) Utopia? The more enlightened companies build information architecture and business processes around social media: processes that pick up comments about the brand wherever they occur; systems that respond (sometimes auto-responses and sometimes individual human responses); and systems that categorize the discussions. The dialogue generates valuable feedback that is often quicker and cheaper than focus groups. This research needs to be fed to the right people in marketing. Social media allows us to learn a lot more about customers very quickly – if the systems and processes are in place. The key is to use this information to make better decisions. Other levels of engagement invite customers as stakeholders to engage at a higher level by creating user-generated content or fully blown collaborative co-creation to deliver new products and solutions. See page 19 for more. Social media is more than just communications; it is a new way of working that requires new information lows. They affect more than just communications, but feed into new product development, distribution channels and even pricing. Marketing is being forced out of the communications silo and back into full-blown marketing courtesy of social media. This new opportunity to excel as marketers is increased by the decline of marketing, and customer service in particular. The customer service time bomb Continual culling of employees and general cost cutting combined with sloppy marketing execution has put marketers on the cusp of a customer revolution. Many organizations’ efforts to continuously cut costs and cull employees have inally delivered a threshold of ineficiency, leaving in their wake an overburdened, over-anxious and, frankly, less caring staff. Customer surveys reveal that many customers are angry, irritated, impatient and ready to switch to another brand as soon as something better becomes available. In a word, they are dissatisied. This is a real marketing problem, or opportunity, depending which way the CEO and CMO see it. We have gone backwards in marketing. Look around. You will see falling satisfaction scores, sloppy websites, telephone queues, customer service people who can’t answer questions and others who simply don’t really care. Have salespeople lost their vocation, their passion and their deep product knowledge? How many bad experiences do customers suffer whilst seeking service from a utility, a phone company or a bank either on the phone or on a website? Why are there so many sloppy websites? Chapter 1 The manager’s online banking system: a foreign country he rarely visited ‘Recently, I had problems with online banking. After lots of frustration with technical support, I rang my bank manager. In the past, whenever I had a problem he had been extremely helpful and made sure it was resolved immediately. This time around, things were different. “I’m not technical,” he told me. He began to talk about his bank’s online banking service as if it were a foreign country he had rarely visited. He was behaving like a typical senior manager when it came to IT. He wanted to wash his hands of responsibility. It was not his domain. IT, it seems, is not the responsibility of senior managers or CEOs. They have much more important things to do, obviously.’ McGovern (2010) Look at the stats. Look at the surveys – even the UK National Customer Satisfaction Index shows falling satisfaction scores amongst the top-performing brands. One recent customer service conference speaker showed falling customer satisfaction scores across a range of industries. When asked if this meant that we were getting worse at marketing, the speaker said ‘No, it’s the customers’ rising expectations combined with lower tolerance levels that have changed.’ So it is the customers’ fault? New Marketing Communications 7 rerouteing or, if they are lucky, after queuing and rerouting getting to speak to someone whom they cannot understand, or to someone who cannot solve the problem, who then puts them back into a queuing system? We have gone backwards in marketing. How many people have had bad experiences online with websites that are confusing, have dead ends or just don’t work, sites that waste precious time and cause irritation? And all the time advertising budgets are wasted driving customers to these sites. Why are there so many sloppy websites? They forget the basics – regular usability testing. This is basic stuff, which many brands are ignoring. Check the website to see it works all right on-screen and across different browsers also. Harvard’s Ram Charan and business CEO Larry Bossidy wrote a book called Execution: The dis­ cipline of getting things done (2002), where they claimed that the ability to execute better than the competition was the last source of real sustainable competitive advantage. Even though it was written in 2002, it is now more appropriate than ever before as major organizations damage their brands day after day with dead-end websites and atrocious, systemized but sloppy customer care. It is relatively easy to be better than most if the basics are executed professionally. So have companies got worse at marketing? If yes, this creates a huge opportunity for those organizations that know how to listen to their customers, continually improve and stay relevant. There are no secrets ‘I was at a conference recently where a speaker asked an audience of some 600 intranet professionals to raise their hands if their organizations used SAP. About 60 percent of the audience put their hands up. Then the speaker asked the audience: “How many of you like using SAP?” Not a single hand went up. Not one.’ McGovern (2010) Lower tolerance levels: perhaps customers have simply become angrier. And, if so, why so? Perhaps anxiety is on the rise. Don’t customers like endless automated telephone queuing systems, robotic ‘The networked market knows more than companies do about their own products. And whether the news is good or bad, they tell everyone.’ Levine et al (2000) Accelerated change and hyper-competition We are experiencing accelerated change. Take accelerated brand creation. Once upon a time it took two generations to build a major brand; now it 8 Part 1 Communications Background and Theories takes just a year or two if you get it right. Look at Amazon, Facebook and Hotmail. Once upon a time it took several generations to acquire 50 million users. Facebook did it in less than one (in fact Facebook acquired 100 million in one year). This simply could never have happened 10 years ago. Radio took almost 40 years to reach 50 million users, while TV took 13 years, the Internet four years, the iPod three years, Facebook one year and the iPhone less than a year to get 100 million users. And now we’ve got accelerated brand power as global boundaries fall. Perhaps a seminal moment in marketing occurred when the Financial Times journalist Winston Fletcher acknowledged the power of the brand and ergo the power and importance of marketing when he asked: ‘What gives brands their power to inluence, if not quite control, people’s purchasing decisions and thus their power to inluence, if not quite control, modern economies?’ And then China’s President Hu visited the United States. His irst appointment was with a brand, Microsoft, and his second appointment was with President Bush. Another seminal moment occurred in 2000, as for the irst time 50 per cent of the world’s largest economic entities were companies (brands) and not countries. Global boundaries are falling; the Iron Curtain has been swept aside, the Berlin Wall torn down and the Chinese gates lung open partly by political movement, partly by aggressive businesses seeking growth overseas and partly by the internet giving instant global access driven by customers who are ready to buy from anywhere in the world whenever they want. And, all the time, category-less competitors quietly step across old borders. Once upon a time, supermarkets sold groceries and petrol stations sold petrol. Now petrol stations sell DVDs, fresh coffee, groceries, gambling and a lot more, while grocery stores sell petrol, garden furniture, car insurance and soon legal advice (including DIY divorce kits), as well as groceries. Powerful category-less brands take more ‘share of wallet’. Customers trust some brands suficiently to try other products from the same brand name. The Tesco brand is so strong it could probably sell customers anything (as long as it meets reasonable quality standards). This is ‘share of wallet’. Growth for most US companies was forecasted to come from share of wallet rather than growth from inding new customers. Enlightened boardrooms understand the power of the brand, its access to ‘share of wallet’ and its impact on the balance sheet. Combine category-less, fast-moving competitors with borderless markets and you get hypercompetition. No market or business is safe. The need to wholeheartedly adapt to and embrace change is akin to the need for frogs to stay out of the kitchen. If you take a frog and put it into a boiling pot of water, it will jump out somewhat blistered, but it will survive. If, on the other hand, you put a frog in a cold pan of water and slowly raise the temperature it will boil to death. Business is similar. No one will change your environment so rapidly that you have to change your behaviour immediately. It just changes continually. Amidst this hyper-competition some CEOs wake up in the middle of the night in a cold sweat worried about their value chain and wondering who is unpicking the lock on their value chain. Teams of analysts and MBAs from Boston to Beijing analyse industry after industry, sector by sector, to ind businesses with a weak link in their value chain that would beneit from a third-party supplier fulilling a piece of the value chain. Most CEOs know some parts of their value chain, whether production, logistics or after-sales, are more proitable than other parts. When they get an offer to replace the weakest link with a higher-quality link (or service) at lower cost and seamlessly linked by web technology, many CEOs ind this a very attractive proposition. ‘We have only two sources of competitive advantage: the ability to learn more about our customers faster than the competition; the ability to turn that learning into action faster than the competition.’ Former GE CEO Jack Welch As the company moves from a value chain to a seamlessly connected value network, CEOs are forced to consider the most basic of questions: ‘What business are we in?’ This can only be answered by asking a very basic question: ‘What do customers want now and in the future and what is our sustainable competitive advantage (SCA)?’ When I ask CEOs what is their SCA, I usually get answers that include patents, product differentiation, Chapter 1 cost eficiencies, and sometimes distribution channels. Most of these can be, and are being, attacked. Two major sources of SCA, if managed carefully, are the brand and customer relationships – inseparable, you may say. However, many companies damage these two critical assets. Sloppy customer service and negative customer relationship management (CRM) destroy brands. (See Chapters 2, 3 and 21.) Despite the importance of CRM, many companies are still sitting on a customer service time bomb. And it’s ticking. Those who ignore it will be left behind, in the same way that those who ignore the golden opportunity presented by social media will also be left behind. Those who embrace it, seize the opportunity, develop rigorous processes around the new technologies and continually strive to ind and satisfy customer needs will survive and thrive. Who are the survivors? ‘It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.’ Charles Darwin Social media – the biggest change since the industrial revolution ‘Social Media is the biggest change since the industrial revolution.’ Business Week said this as far back as 2005. A month later the Economist magazine went further and simply said: ‘companies that don’t understand digital communities will die’. Social media has now become the centre of many marketing strategies. Customers have discovered a whole new way to ind out about products and services. Product review sites, ratings, discussion groups, Facebook petitions, blogs, mobile price comparison applications (apps), YouTube demonstrations (positive and negative videos) and Flickr photos: these are social media tools. And customers, not companies, are controlling the low of marketing information as they shut out interruption marketing and use, instead, social media to ind products, ratings and reviews. New Marketing Communications 9 Outbound marketing (the old interruption marketing model of advertising, direct mail and telesales) has suffered as audiences switch channels or fast-forward through TV ads, turn on ad blockers on their browsers, stop e-mails with aggressive spam blockers and use caller ID to bar unwanted phone calls. Some outbound marketing does get through but not as much as a few years ago. While channels fragment (eg TV has approximately 500 channels, while 20 years ago it had ive channels), the sources of trust are shifting. Which of these has the biggest inluence on your customers: The Times, BBC, Sky or Google? Social media has arrived and customers love it. Social media gives customers control. Marketing has been democratized courtesy of the internet and social media. And within the mass of customers lie the new opinion formers and opinion leaders: bloggers and twitterers. Marketers have a choice: join the conversation or fail to communicate. Old mass communications interruption models like TV advertising have simply got to be a lot more creative to cut through the clutter and grab the eye of the busy consumer. They also use social media to spread the message (if the content is good enough). Any social media content has not only to be more creative but also highly relevant to the target audience. Suddenly the marketing of a refrigerator has become so creative that it becomes compulsive viewing. And all of this amidst the white heat of hyper-competition. Social media is not just a marketing tool. It is, effectively, a new way of running a business. It requires a new company culture, which in turn requires company-wide support, systems and incentives. It requires a new mindset: more listening, less shouting. Think relationships and not just sales or transactional marketing. Hasn’t this been said before? Yes, it has. It is basic old-school marketing, except that social media allows marketers to listen to customers more easily and more cost-effectively. Social media also relies on a ‘sharing’ culture, which means sharing information and being helpful. This, in turn, nurtures relationships, which again is the essence of good marketing – developing and strengthening relationships. Social media is not about making short-term sales. It is about sharing and listening and channelling information into systems that alert certain staff to negative discussions, positive discussions, suggestions, complaints, and ideas for new products, new ads, new promotions and new discussions. 10 Part 1 Communications Background and Theories Harnessing all these conversations requires new skill sets and new organizational structures. In turn this helps marketers to create a marketing utopia where customers drive the business while marketers lend a helping hand. There is a new opportunity to use these new technologies to improve marketing in a radically different way – in fact, one so profound that social media has delivered a marketing utopia. Marketing utopia has arrived Why social media works Social media fulils a fundamental human need: to communicate. We are social animals. We like to communicate with each other. Social media facilitates this by helping us to communicate more easily, to more people, whenever we want. That is why social networks like Myspace, Facebook, YouTube and blogs are so successful. Social media is huge because it simply lets customers communicate with each other and organizations communicate with customers (this includes listening). This new business environment allows marketers to listen to customers and opinion formers (and other stakeholders), channel their feedback into suggestions and new product ideas, and even test out new concepts and brand names, while all the time engaging customers, developing higher levels of customer loyalty and nurturing brand ambassadors. It’s a marketer’s utopia. Web 2.0 is a participatory platform. Organizations that tap into that willingness to participate can do very well. Think beyond the old one-way communications and even beyond a basic dialogue between customer and brand and instead consider a trialogue amongst customers, opinion formers and the brand. Brands can reinterpret themselves as facilitators. Think about creating branded content, services, and even applications and widgets that give real beneits to customers (and that boost their engagement with the brand). Think about social networks. Become part of them. Exist inside them. Create a proile. Embrace these social platforms, whether photo sharing, music sharing, video sharing, or interest sharing platforms such as bookmarking. Enabling rating of content and online services – services such as Delicious and comments on blogs – supports this. Think engagement. Marketers are searching not only for ways to connect brands to customers, but also for ways to connect those customers to each other – with the brand simply facilitating the discussion. The brand can be a place where the community can congregate and discuss and collaborate. From customer feedback, to product ratings, recommendations and discussions, through to prosumers (customers who help to create, or produce, the next product): this is collaborative co-creation (see ‘The ladder of engagement’, page 18, for more). Customers are encouraged to be part of an organization’s product/service design system and production system. Many customers feel their favourite brand is engaging with them, and they feel some reciprocity as the organization demonstrates that it is listening and consequently taking action. This inherently deepens brand loyalty, purchasing and advocacy. Many customers like to have a meaningful input into the products and services they consume. Some don’t, but many inluential ones do. Getting private previews or input into shaping what is yet to come creates a sense of being an insider as opposed to being just another external customer sitting on a ‘customer service time bomb’. ‘If you’re paying attention, you get the answers to questions you didn’t even think to ask.’ Schlack (2008) Social media makes it easy for both customers and organizations to communicate with each other. They allow everyone to get to know each other better, understand each other’s needs and issues, nurture relationships and collaborate, sometimes in highly destructive ways and sometimes in highly creative ways. How social media works Consider the basics – blogs, Twitter, YouTube, Flickr, Wikipedia, Google Maps, Google Earth, virtual worlds and augmented reality (AR). All of these Chapter 1 help to spread or share useful information with potentially vast online audiences. By posting articles and comments on to blogs, photographs on to Flickr and videos on to YouTube, you allow other people to see your messages and, if they like them, share them with their friends, who in turn can share them with their friends’ networks. Social media simply widens an organization’s net by spreading its branded content (and web links) out to a potentially vast audience. These social assets are picked up by search engines when people search for certain phrases. Search engines like Google do a universal search, which now includes websites, videos, photos and a lot more, so broadening an organization’s social assets simply widens an organization’s net, which may consequently catch more prospects who are searching for speciic terms if these terms or key phrases have been added as tags (or labels) to the various assets. All social media can be optimized, eg blogs and websites can be optimized (search engine optimization – SEO) so that critical key phrases are used in the copy, headings, links to other pages or other sites (this is called ‘anchor text’), page title tags (labels), photo tags (labels) and video tags (labels). Most importantly, Google also measures key phrase frequency of use, recency of postings and, of course, inbound links. These inbound links from venerable sites improve Google rankings, as Google treats it as a vote of conidence in the site if venerable organizations are linking to the site. The website and/or blog can become a unique platform of expertise or entertainment or whatever the desired goal. It may also become a hub of discussions on whatever subscribers want. When other relevant bloggers link to a blog it widens the net again. Multiple social bookmarking facilities on the blog allow readers to bookmark it (or make it a favourite), post it to their own Facebook proile or send the link via e-mail to a friend. It is just one click away. Then other people look at their network members’ bookmarks to see what their network of friends or business colleagues are reading and recommending. The net widens. Simultaneously, an RSS feed automatically feeds the new blog posts directly into a person’s RSS reader, so instead of having to visit 10 favourite websites the person can get all the updates from the reader. New Marketing Communications 11 Twitter is the hugely popular 140-character microblogging network. It is a river of short messages usually with links to interesting content on a blog, a website or YouTube. The twitterer’s messages (tweets) appear in the stream of messages (or updates) shared by the network of followers. Just like Facebook and LinkedIn, Twitter allows networks to see who is saying what (or doing what). Your tweets can also be found if key phrases that are being searched for also appear in the tweet. Organizations search and track all Twitter conversations for references to their brands, companies and staff – particularly during conference time, when twitterers tweet comments about companies. The ‘retweet’ facility allows twitterers to pass someone else’s tweet to their own network of followers with just one click of a button. Certain messages can spread like wildire on Twitter. Twitter can widen an organization’s net. It can also be used for customer service, as is proved by easyJet, which inds it to be a useful tool to give quick responses. The Irish Bus Company (Bus Eireann) sells thousands of euros’ worth of special-offer bus tickets every week to its network of mostly students. Dell says Twitter has helped to sell millions of dollars of kit. See Chapter 21 for more. Videos can be posted on all the current popular video-sharing sites, including YouTube, via a video aggregator called TubeMogul, and photos can be posted on Flickr. YouTube and Flickr can be seamlessly embedded in the blog or website, so they appear on the website but also appear in YouTube if someone searches for certain keywords. Each of these social platform attracts its own audience towards key phrases and similar videos, photos or audios. All of these assets are publicly searchable, so once again tagging (labelling) is critical. It is easy to create your own channel on YouTube. Social bookmarking, sharing and favourites extend videos’ reach even further into the net. Wikipedia is a growing fountain of knowledge. Over time organizations can build their own proile by adding relevant factual articles (complete with links). This further spreads the net and may embrace other experts to participate in collaborating on certain articles. Google Maps and Google Earth complete the net at this stage. Ofice locations, addresses, phone numbers, directions and web addresses can all be uploaded into Google Earth and Google Maps. Photographs of buildings can be added. Videos can 12 Part 1 Communications Background and Theories be uploaded also. All of this can be shared with peers and visitors. Data created in Google Earth are also available in Google Maps. Again this spreads your net by extending your presence. If the locations have visually interesting material for different audiences, visitors can view ofices, factories, stores, building sites or any projects in 360-degree virtual reality photos from different viewpoints (and, if relevant, with time-lapse photos showing development stages). All data are tagged (labelled) and linked so that the net widens while the visitor experience is enhanced (eg each ofice and/or project can have a map for directions, a photograph of the building to recognize it, a video tour in advance or a greeting from the MD, or anything that brings it to life and helps the user, plus spreads the net). Three-dimensional models (eg turbines on a wind farm) can also be added. Although data can be seen in both, the Google Earth display is much richer (3D aspects can be shown) than that in Google Maps. All Google Maps display can have a button ‘View this in Google Earth’. If someone has not got Google Earth installed it will still show the core data and displays as shown in Google Maps. F I g u R E 1.1 The real-world presentation F I g u R E 1.2 The virtual-world presentation Virtual reality Marketing adaptability requires an inquisitive mind and some experimentation to ind what works and what doesn’t. Although somewhat criticized, virtual worlds are worth exploring. One of the most popular virtual worlds, Second Life, is reported to be having a ‘second life’ as its population starts to grow again. Massively multiplayer online games (MMOGs) are forecasted by their owners to reach 1 billion customers in less than 10 years. As initial suggestions are that Web 3.0 will be more 3D and virtual world orientated, it is worth exploring virtual worlds. They cannot be ignored. In 2007, the author held a parallel launch of Northern Ireland’s creative digital hub in Second Life. The Minister for Enterprise’s avatar addressed a virtual audience (of avatars), with the virtual world presentation simultaneously beamed into the ‘real-world’ audience in Belfast. More and more customer service avatars (interactive cartoon characters) are appearing on websites, particularly in the customer care sectors, where they offer themselves as ‘your assistant’. Virtual immersion in a non-real world has been around for some time and has crept into people’s living rooms in the form of Wii games. These popular virtual games convert a living room instantaneously into a gymnasium, a tennis court, a boxing ring, a dance studio, a keep-it studio or even a golf course, and players play happily in their virtual worlds. It will become a lot more sophisticated. Have a look at the GE Renewables Smart Grid website, which allows viewers to blow at their PCs and make the virtual turbines turn faster. The University of Tokyo already has perfect virtual rain that looks like and probably feels like water dropping on to a surface. It may well be that Web 3.0, the semantic web, may combine virtual worlds with intelligent systems, creating whole new opportunities for those who embrace the technology. Chapter 1 Augmented reality allows users to see additional information, eg text or photographs, by pointing a mobile phone and reading any hyper-data posted, eg a building site might contain AR information on the site and what it will look like when inished. Through use of AR software like Layar or other apps from the iStore, the horizon expands as augmented reality emerges. To summarize, it is not surprising that social media has grown so quickly (the Facebook population now equals that of the fourth-largest country in the world), because social media taps into something deep inside us all – the need to communicate, talk, share and be part of a community. This is fundamental to us as social animals, and satisies a deep need that is profoundly embedded into our genetic structure. The old push marketing model (of interrupting audiences and pushing ads at them) with ‘sell, sell, sell’ is being replaced by ‘listen, listen, listen’ to the conversations and ‘share, share, share’. It is easy to see why social media is now so powerful. The next section reveals why and also proves the power of social media by explaining the maths behind it. Social networks – herds or individuals? Consider a target audience of 20 people. Here’s how Lilley (2007) calculates how many messages can spread around depending on what media is being used. Broadcast network is based on a ‘one to many’ model (eg old TV advertising). It is called a Sarnoff network (after David Sarnoff, the broadcasting legend). A hypothetical Sarnoff network with 20 viewers has a score of 20. The network score is simply the number of nodes (audience members) = 20 Telephone and e-mail network is based on a ‘many to each other’ model. It is called a Metcalf network (after Bob Metcalf, one of the inventors of the Ethernet). This communications model allows everyone to contact each other. Because everyone can call each other, the total possible number of calls or e-mails is 20 squared, or 400. This is potentially much more powerful for communicating messages among people than a Sarnoff network. The network = 400 score is node to the power of 2 or 202 New Marketing Communications 13 Social network is an ‘immensely more powerful category of network’ based on a ‘many belong to numerous networks’ model. It is called a Reed network (after David Reed, who observed that people in social situations belong to more than just one network). The possible value of a Reed network is 2 to the power of the number of nodes on the network. Take the same group of 20 people in a social situation, whether virtual or real. A Reed network generates a score of 2 the power of the node. This = 1,000,000 generates a network score of 220 Moving from a broadcast network to a telephone/ e-mail network, even if only 10 per cent of the people pass the message (maybe a special offer, or perhaps a criticism), it still means that 40 messages will be sent around. This is twice as powerful as the TV network, which only had a possible total of 20 messages being received. Moving on to the Reed network (social media network), if 10 per cent spread the message, that generates 100,000 possible messages that can be received. Or, even if only onetenth of 1 per cent pass the message on, it would still generate 1,000 messages, which is 50 times more powerful than the old TV model with just 20 messages. Now consider just one social network, LinkedIn, which is sometimes referred to as Facebook for businesspeople. It is a powerful tool. Once registered (which is free), businesspeople start connecting with other businesspeople, effectively building their own networks. If an individual has 170 connections (contacts), LinkedIn calculates how the individual becomes part of a network of approximately 3 million people. Figure 1.3 shows how LinkedIn calculates the size of anyone’s network. The maths in the table is taken directly from LinkedIn. networks, herds or individuals Group behaviour is well documented in social studies. Marketers understand the natural impulse to follow the crowd. Some sociologists believe humans are just copying machines, basically. Because humans are social animals, a large percentage of an individual’s brainpower is devoted to interacting with others, watching their behaviour and wondering what they think of us. We carry this legacy with us every time we buy a particular brand of washing powder or choose what movie to watch in the cinema. We have learnt or evolved to be animals that are good at copying. Part 1 14 F I g u R E 1.3 Communications Background and Theories Your network of trusted professionals You have 170 connections and are at the centre of your network. Your connections can introduce you to 2,727,600+ professionals – here’s how your network breaks down: 1 Your connections Your trusted friends and colleagues 170 2 Two degrees away Friends of friends; each connected to one of your connections 3 32,900+ Three degrees away Reach these users through a friend and one of their friends 2,694,600+ Total users you can contact through an introduction 2,727,600+ Think caveman If everyone is running away you don’t ask why; you just run. Copying means you don’t have to learn everything from scratch, and you can defend or protect yourself more easily because you react to things more quickly, so it makes sense from a survival viewpoint. manifests or provides the mechanics for what we are naturally programmed to do. If someone stands staring at the sky and pointing, that person is bound to get strange looks from passers-by, but get six or seven people standing together staring and pointing at the invisible spaceship and the crowd will swell. Harnessing the knowledge of the herd has greater potential when it comes to building brand loyalty. Social media cultural shift In the 1960s the sales of domestic air conditioning were followed and mapped for years. Findings showed that the best way to predict who would buy air conditioning came down to whether a person’s neighbour had it. People had to see it to be likely to copy it. The Mexican wave – why? Because everyone in the crowd can see everyone else and is aware of the group behaviour. The Mexican wave cannot be re-created in a shopping centre, because people can’t see each other, nor can they see the group behaviour. Facebook, on the other hand, is like a digital version of the Mexican wave, because people can see what all their friends are doing. They can not only see if their friends are online but also what their friends are currently doing and what they have been up to in the past. If someone gets an invite to Facebook and joins, that person in turn sends invites to his or her friends. Wherever the herd moves next, people follow. The internet just Organizations that are not looking out for and listening to online conversations about their brand are missing a major opportunity. If someone attacks a brand there is an opportunity to address any criticisms and rectify the issues before rumours spread out of control. Conversations cannot be controlled like advertising messages, but organizations can feed accurate information as well as being seen to listen and care. In addition to collecting crucial feedback, ideas and public comments from the marketplace, marketers are provided with a welcome platform to get their message across if it is relevant. This also grows a brand’s presence wherever the market congregates online. Ignoring these conversations leaves an organization on the outside and soon to be replaced by another brand that does want to be a part of the conversation. Social media provides a platform to: ●● reach out to increasingly dificult-to-contact customers; Chapter 1 ●● help customers by sharing expertise (and therefore branding) with audiences rather than trying to use it for direct sales; ●● listen to the vocal elements within a market. This requires a cultural and organizational shift and more of a listening and sharing culture than a selling culture. It requires a real customer orientation, which drives the marketing utopia. After the listening and sharing, relationships can blossom. After this warm awareness and affection, all things being equal, sales will eventually follow when the customer is ready (as opposed to when the organization wants to sell). Develop a systematic listening team and a system to use the information Who monitors what? Who compiles the analysis and the reports? Who responds to comments on blogs and in group discussions on LinkedIn? Who analyses the comments, complaints, suggestions, worries, issues and opportunities? What happens to all this highly useful information? What systems channel which information to whom? If embarking on the highest level of customer engagement, collaborative co-creation (see page 19), who manages the channelling of new ideas into new product development processes? Who handles the responses back to the original contributor? These are some of the questions that need to be addressed. More and more organizations are using third-party organizations or their software to scan for any online comments, discussions or tweets regarding their brand, their company, their customers or their competitors. Develop knowledge assets (which can be used to lure traffic) Most organizations have a lot of assets already, assuming colleagues speak at conferences, do interviews, write white papers, commission market research or even answer customer e-mails and develop answers to frequently asked questions (FAQs). Even writing a book review is a knowledge asset, if it is written by an expert or perhaps the CEO. These are knowledge assets that can be repackaged and offered to customers. Record all the organization’s speeches on video. Knowledge assets include videos, New Marketing Communications 15 PowerPoint presentations, decks, articles, blog posts, commissioned research, white papers, e-books, expert insights and helpful customer tips. Sometimes these knowledge assets are buried in customer e-mail responses, which can be categorized and used to generate FAQs for your website and also can be used as the ‘10 most popular questions’, ‘10 questions you’ve got to answer’, ‘10 reasons why’ or ‘10 things you’ve got to know’. These can be converted into quizzes with multiple answers, or self-assessment widgets. These knowledge assets can be used as ‘link bait’ or as a lure to entice an audience of Twitter followers or members of a discussion on a blog or on LinkedIn to visit your website. Other lures that work are provocative questions or statements or a discussion topic supported by a reasoned argument generated over 2,000 carefully thought-out responses. These responses are engaging with individuals and their brands. How do we share? How do we collaborate? ‘Open source technology – we need to drive Twitter and all these other open source tools deeper inside the organization – drive use of said collaboration technology inside the firewall – social cast, yammer etc.’ Brogan (2009) The social media process – 10 steps 1 Start monitoring and listening. A social media audit establishes an organization’s reputation (and your competitors’ reputations). Develop a comprehensive monitoring strategy to discover: – the issues: what can have an impact on your brand; – the inluencers in your marketplace; – the platforms or places where your customers (and inluencers) congregate (the inluential networks, including blogs, discussion groups and other social networks); 16 Part 1 Communications Background and Theories – the opinions customers have about your product, your company and the competition. If your brand or industry discussions are focused on one or two platforms, this makes it easier to concentrate your efforts. 2 Set priorities and goals, and don’t try to cover all social media outlets. It is not possible to engage in all conversations everywhere. Pick the more important ones initially. Not all online conversations have the same impact. Identify the more important ones. Learn when and when not to engage. Have clearly deined objectives and know exactly what you are trying to achieve with social media (eg reposition the company, develop relationships, establish the brand as credible, grow awareness, etc). 3 Agree key messages. Have crystal-clear messages. Be ready to engage with the target audience in a meaningful way (give them what’s relevant and important to them). What topics and key phrases does the organization want to be associated with? Prepare canned messages for a range of issues or situations so that they can be tailored easily. Show the team how to create links, back-links and retweets. Share guidelines for what is and is not appropriate. 4 Develop good content – help and share. Your content has to be valuable; otherwise you’re just shouting or ‘making noise’. You have to be prepared to help and share good content. Do not sell primarily. Sales may follow good content. Social media is not a direct marketing tool. Share articles, presentations and videos that are relevant – these can be yours or someone else’s (as long you credit them and link to them). Only add comments to other discussions if you are being helpful and relevant. ‘The more valuable your content, the more valuable you become, the more your audience will grow.’ Source unknown 5 Recruit and train the team of spokespeople. Whether a blog or a Twitter account or a YouTube channel, you need to identify who is in the team, ie who has permission to write a blog post or a tweet or upload a video. Who handles responses? Is it certain people for certain issues? Is it one spokesperson or several? Equally, who monitors what? Who reports to whom? Once you have your team trained, brief the rest of the organization. Share the strategy with the whole organization. 6 Commit time and resources. You need a consistent stream of useful content. Don’t just dabble. This requires clear brieings, training and motivation, which in turn requires resources. Monitoring requires resources also, whether you use an outside agency or do it in-house. Once you start proving the value of social media, you should ind it easier to allocate resources to it. 7 Constantly promote social media. Just as all organizations now promote their websites in everything they do, so too should social media be promoted. Announce your Twitter handle (name), Facebook page or LinkedIn proile at every opportunity. Add it to all the company’s e-mail signatures and collateral. Announce it at conferences and news releases. Add the details to slides, news releases and the letterhead. List it on your website. Post all presentations on your social media sites. In fact, all ofline communications should be integrated with social media, eg Twitter, blog and Facebook announcements about an upcoming conference. Videos and photos of the event and speeches can be uploaded to YouTube and Flickr respectively. 8 Integrate online and ofline events. The online social media team or consultancy needs to work more closely with the ofline team, as it needs to know what marketing events are happening in advance. As the website is a conduit, it can get more bang for its buck if it is integrated, eg brief video production companies and photographers as to what formats and style are needed for web use. A shared schedule of events or an outline Chapter 1 plan to allow integration and leverage of various marketing assets on to social media platforms (like ads, promotions, videos, etc) is essential. 9 Plan for success. Although it may take some time to build up your networks and followers, be prepared for a sudden inlux of comments, visitors and enquiries. This is a nice problem to have. However, if the organization cannot handle the incoming web trafic with its comments and enquiries, it could end up generating a lot of negative PR. Develop credibility before raising visibility. 10 Measure, measure, measure. Don’t play Russian roulette by (up)loading your message, pushing or spinning it out and then closing your eyes and hoping for the best. Watch the analytics. See if trafic has spikes as a result of any particular posting. What posts generate a buzz? One new discussion on an e-marketing group in LinkedIn generated over 2,000 responses. It was called ‘Social media is crap’, and had a detailed post of why the person felt it didn’t work. Watch what generates visitors, conversions and good comments (as opposed to negative comments). How do you measure social media? Some companies use a formula (the PR industry has used formulas for years) to generate a score each week on editorial coverage, allowing for brand name mentions, whether they are positive, negative or neutral, and the importance of the outlet to the brand. Although ‘sentiment tracking’ is in its infancy, marketing professionals need to spend time monitoring (and acting upon) what is being said about their brands, their people, their organization and their industry across blogs, micro-blogs (Twitter), forums, social networks and online news media. not everything comes down to ROI ‘What’s the ROI for putting on your pants every morning? But it’s still important to your business.’ Scott Monty, Digital Communications Manager, Ford New Marketing Communications 17 Social media is not for the pure mercenary business. They are for organizations that are truly customer orientated. Social media, for them, is a godsend. Customers segment themselves into interest groups that generate more inside information in the minds of customers than any focus group ever could, because everyone shares information, tips, suggestions, ideas, examples, and details of what upsets them and what excites them. Social media helps to build relationships with customers and prospects rather than shouting and broadcasting messages at them. Finally, remember to have an exit strategy if, for example, participation rates are too low and therefore do not justify the resources required. How would you stop a blog or a discussion? What reason would you give? Where would you send the group? Some brands transfer their audiences to other relevant sites or groups. The ladder of engagement Customer engagement creates stronger brands and more advocates Marketers who understand and inluence customer engagement better than their competitors are more likely to develop stronger brands and more loyal customers. Engaged customers are more likely to become brand zealots. Therefore it is important to identify engaged customers and start a brand ambassador programme to further strengthen the relationship and energize their word of mouth. The ideal customer, or most valuable customer, does not have to be someone who buys a lot. The ideal customer could be an inluencer who is a small irregular buyer but who posts ratings and reviews, as the reviews could inluence another 100 people. Identifying engaged customers Monitoring the quantity and frequency of blog posts, comments, forum discussions, reviews and proile updates helps to identify opportunities and also acts as an early warning system to any future problems. Consider targeting brand evangelists rather than just 18 Part 1 Communications Background and Theories purchasers. Some companies ask customers to give a product rating or even post a product review as a standard part of their after-sales contact strategy. This way the more engaged customers identify themselves by their own self-selection. A customer who doesn’t care about the product is likely to be less committed or less emotionally attached to the brand. On the other hand, a customer who is engaging is likely to be more emotionally connected to the brand. Marketers need to know about the sentiment, opinion and afinity a person has towards a brand. This is often expressed through repeat visits, purchases, product ratings, reviews, blogs, discussion forums and, ultimately, their likelihood to recommend a friend. Product reviewers want to engage more ‘70% of customers who left reviews for products wanted to help improve those products and they purchased more products, more often than non-reviewers did.’ Aarons, Edwards and Lanier (2009) Is customer engagement measured? Does this identify the engaged customers and use their feedback to improve your promotion and products? It is possible to increase some customers’ level of engagement by moving them up from giving a product rating, to writing a product review, to joining a discussion, to suggesting ideas, to screening ideas, to testing ideas and eventually to buying the ideas when they become products or services. Many of these will become brand champions, evangelists or brand ambassadors. This is why moving some customers up the ‘ladder of engagement’ is valuable. The lower half of the ladder encourages customers to engage via product ratings, reviews and discussions. The upper half of the ladder is usergenerated content (UGC), which encourages customers to become co-creators of content for the organization. This is sometimes referred to as crowdsourcing. The highest level of co-creation occurs when customers co-create the products that they subsequently buy (see examples in ‘Collaborative co-creation’ below). Not everyone will rise to the top of the ladder. In fact, Nielsen suggest only 1 per cent of website visitors will; 90 per cent lurk, 9 per cent occasionally contribute and 1 per cent regularly contribute. They call it the 90–9–1 rule. But those 1 per cent are important: hence the importance of identifying engaged customers. While moving customers and other stakeholders up the ladder of engagement strengthens brand loyalty and boosts sales, it does require careful planning, systems and resources. This is a long-term strategic decision. Beginning of a beautiful relationship Remember the second visit to a website is the beginning of a relationship. Therefore it is always worth asking the question: What is a brand doing to bring relevant visitors back to the site? At the highest end of the ladder, the virtual circle completes itself. It is a self-fulilling system. As the F I g u R E 1.4 Strategic ladder of engagement Products The ladder of engagement Moving customers up the ladder of engagement creates brand loyalty, unleashes brand zealots, and can help improve an organization’s processes, products and services. This can also create sustainable competitive advantage for an organization as customers become more engaged and more loyal to the brand that they feel a part of. Collaborative CoCreation Brands ↑ ↑ Ads ↑ Processes Ideas ↑ Discussions ↑ Reviews Ratings ↑ Chapter 1 F I g u R E 1.5 New Marketing Communications 19 Collaborative co-creation Collaborative co-creation Now consider the higher levels of engagement, a kind of marketing nirvana – when customers help an organization to create products, promotions and advertisements. This is collaborative co-creation. There are many levels of co-creation, including ideas, product concepts, product screening, product components, product upgrades and updates, and even complete products, as well as creating advertisements, brand names and, ultimately, the products themselves. Products Brands Ads Ideas Discussions Reviews Ratings customers create the product, they create their own demand. However cutting-edge this is, it does require basic business skills of systems of communications, registration, processing, feedback, rewarding and putting into action. So back to basics – developing systems that work requires careful planning and rigorous testing. Here are some examples of how companies use the different steps on the ladder of engagement. Discussions – passionate stories: great sporting moments Ratings and reviews: Amazon Collaborative co-creation Amazon will try to engage customers by asking for a product rating, which takes just a few seconds. They then invite you to write a product review, which takes a few minutes. As mentioned, some companies make ratings and reviewing a standard part of their after-sales contact strategy. Customers value reviews from their peers. This shows that consumers are able to apply their own ilters and, effectively, rate the ratings. There is a hierarchy of trust online, which starts with personal friends. Discussions – ask and answer: the Home Depot One level of discussions is ‘ask and answer’, where customers throw out questions and other customers answer them. US DIY chain the Home Depot invites customers to ask DIY questions and eventually get other customers to answer the questions. Issues of liability for any careless advice obviously need to be addressed, and real experts may be preferred to casual customer experts. Another level of discussions is where customers discuss the product or, in the case of the sporting book, they passionately discuss sporting stories. They also reveal themselves as potential brand ambassadors. Those who do engage in discussions are usually passionate about the brand or product. Ideas Dell’s Ideastorm (www.ideastorm.com) generates ideas on how to improve the business and uses systemized suggestion boxes. Customers, and even non-customers, can suggest new products and features, as well as better ways of running the business, eg improvements in their processes. Dell have earned $10 million from the early stages of Ideastorm. This may seem tiny to a company of Dell’s size but, remember, this is brand engagement, a form of brand promotion to the brand zealots, and it also contributes something to the bottom line. TV advertisement Co-creating ads is more common in the United States, where customers are asked to generate ads. In 2008, Chrysler’s Tahoe supplied graphics, music, photos and video clips and asked its audience to make an ad. The best one would be shown during the Superbowl, the most sought-after TV spot in 20 Part 1 Communications Background and Theories F I g u R E 1.6 Collaborative co-creation: products Collaborative co-creation: products Now consider the highest level of engagement, the marketing nirvana or the marketing utopia mentioned earlier, where customers co-create products. This is when customers actually create an organization’s products and services. Brands Ads Ideas This is where social media facilitates an atmosphere and systems where customer ideas flourish and the next generation of product modifications or new products is created by the customers for the customers. This is a real marketing orientation model. the world. It generated a huge response. It also discovered some user-generated discontent (UGD), with several negative ads posted on YouTube. It took the brave decision to allow both positive and negative ads to be created – a classic double-sided argument, which generated more discussions and a lot of press coverage. By the time the Superbowl came, the PR surrounding the user-generated ad campaign had boosted anticipation of the ads, and an enthralled audience watched with great intrigue. More recently, Kraft Foods in Greece scored a hit with a user-generated 27-minute long-form ad for its Lacta chocolate bar. The crowd sourced the story and the casting, and some of the crowd even appeared as extras. The Love in Action campaign started using traditional TV advertisements to invite people to send in their love stories. Thirteen hundred love stories and one month later (it took a month to sift through the stories), the winning story was selected. Online polls voted for and selected the cast (full screen tests were put up online), the characters’ names and even their costumes. Updates were posted on Facebook and Kraft’s blog, which was followed by over 11,000 registered voters and 20,000 fans and eventually watched over 150,000 times. It created such a buzz that Greece’s leading TV station, MEGA Channel, offered to screen it free of charge on 14 February as part of its Valentine’s Day programming, which attracted a 12 per cent share of viewers and was seen by more than 335,000 people. Lacta sales are also up in a declining market (Hall, 2010). For a full case study on Products Discussions Reviews Ratings collaborative advertising see the T-Mobile case (Case study 13.1). Brand names Co-creation can go way beyond ads and promotions; it can even generate brand names, if the basic systems are in place. Boeing created a buzz around the launch of the new 787, the Dreamliner, by inviting input from potential customers and passengers online. Indeed it was the community that named the aircraft the Dreamliner, with some 500,000 votes cast online from 160 countries (O’Dea, 2008). Products and services Some say that UGC has been used ofline for many years now. MTV has been getting users to screen or research products through user text votes, and reality TV has been using the UGC formula for far too long in my opinion. The X Factor attracts UGC to create new product concepts, new product screening and new product testing. Why is UGC so successful? Back to the online world, Peugeot invited their online audience to submit new product concepts, ie submit car designs. This attracted 4 million page views. Peugeot built a demonstration model of the winning design to exhibit at marketing events. It also partnered with software developers to put it into a video game. Another online company where users generate the complete product is Constant Comedy.com, an online comedy site where users upload their jokes Chapter 1 on video. Audiences watch them and then vote them on or off. The best ones are voted to the top, and new careers take off. Take product variations and product components. Great Moments of Sportsmanship is a book about sportsmanship. Customers send in their sportsmanship stories for further discussion in the blog and possible inclusion in the next edition. The goal is to have future editions totally user generated. In addition, more UGC is added as YouTube videos that match the stories in the book are added to the site. In the area of careers, there is a highly engaging UGC company whose product is 100 per cent user generated. Called pods4jobs, it is an online careers advice site with a difference – videos only and all created by the target market, ie mostly teenagers interviewing people at work, revealing a ‘warts and all’ insight into different careers. Here, kids interview their parents, aunts, uncles, grandparents, neighbours or anyone who has a career. Students shoot their own video, upload it and, if it is accepted, get a certiicate of achievement. And they are not alone. Another very important collaborative co-creation project is the Myelin Repair Foundation (MRF), which is a closed group of researchers from ive universities who aim to develop a drug that will treat multiple sclerosis (MS) in 10 years. After a couple of years they have identiied 10 targets and three therapeutic candidates, developed 11 tools to study myelin, and published nearly 20 scientiic articles. Half of any royalties go back into the foundation to inance future projects. An IP agreement allows MRF to license discoveries to pharmaceutical companies. Occasionally B2B is mixed with B2C, as in the case of the InnoCentive site, which allows 180,000 freelance scientists, engineers, entrepreneurs, students and academics to work on problems posed by industry, creating and selling solutions in return for cash rewards. Major players, including P&G, are involved. One outstanding UGC website is called Threadless.com, whose loyal community of graphic designers, artists and generally creative people send in designs for new T-shirts. The community votes for the best one; they then produce it and sell it back to the community. The retail trade has spotted these high-quality and unusual T-shirts and now orders signiicant quantities of their limited-edition, highquality products. New Marketing Communications 21 Remember, UGC is not always B2C, as almost always many of the best online examples are actually B2B. Consider MMOGs, where dozens, hundreds and even thousands of players around the world participate in an online game. Now imagine dozens, hundreds and even thousands of scientists collaborating on and creating new products. The Atlas particle detector, which measures subatomic particles in high-energy physics, involved 2,000 scientists disaggregated across 165 working groups who then found a successful solution online. IBM has adopted Linux for some of its computer products and systems. Linux is continually improved by a huge global community of software developers, mostly non IBM-ers. Sun Microsystem developed the Solaris operating system with a global community of software developers. Some call it ‘crowdsourcing’; others call it ‘open innovation’. It is interesting to note that Apple netted some $1 billion in app sales in the irst year, and shares 70 per cent of revenues with the 125,000-strong developer community in the iPhone developer programme (Kennedy, 2009). IBM also uses open innovation for its Big Green Innovations unit. Likewise, P&G revamped its innovation model by adopting open innovation a few years ago. From Intel to Xerox, NASA to Novell and Vodafone to Virgin, more and more organizations are unleashing the collective brainpower of people outside their organization. Ofline, LEGO have been collaborating with customers for years, asking children to suggest, create and screen new product ideas. They then inancially reward ‘those whose ideas go to market’. Successful UGC and even the lower levels of engagement are dependent on a vibrant, responsive audience and one of marketing’s often forgotten fundamentals – systems and processes that work, and basic marketing principles of testing interfaces and back-ofice systems. Usability testing is a prerequisite. UGC is in search results ‘25% of search results for the world’s top 20 largest brands are links to user-generated content.’ Qualman (2009) 22 Part 1 Communications Background and Theories Remember, websites are fun, but back ofice means business. All of these UGC systems draw from the basics of perfect marketing processes and the passionate attention to detail required if user-generated systems are to work successfully. Ask: ‘How well are we measuring the engagement of our different online audiences and then closing the loop by using the data to identify the advocates and deliver more relevant communications?’ Collaborative co-creation has been extended into management. Results to date are inconclusive as to how successful this can be. Consider MyFootballClub.co.uk, which is a group of approximately 50,000 football-obsessed internet users who pooled resources and bought a minor English football club. Members paid £35 and acquired a majority stake in Ebbsleet United, which plays ive divisions below the premiership. Members vote on transfers, player selection and all major decisions affecting the club. Since then it has won the FA Trophy at Wembley – the club’s greatest achievement since it was founded in 1890. Now it is aiming for promotion to the football league proper. This has been done before. In June 2006, minor league baseball team Schaumburg Flyers from Chicago let fans co-manage the second half of the season by voting via the website on managerial moves such as setting up the roster. It lopped, going from a 31–17 record in the irst half of the season to the 15–33 worst record in the league. A similar thing was also done pre-internet, way back in 1951, when the St Louis Browns major BBC Radio northern Ireland take UGC to a new level Co-creation and user-generated content have been around for a long time, as is the case with radio show phone-ins, whereby the audience’s input and opinions are a key part of the programme. However, BBC Radio Northern Ireland took it to a new level a few years ago when they felt that the audience input was so funny that they should make an animated TV show from it. They even kept, with permission, the callers’ actual voices and dubbed them into the animation. Called On the Air by FlickrPix, some of the series is still on YouTube. league baseball team gave control to the fans by issuing ‘yes’ and ‘no’ placards. Although it was a publicity stunt, the Grandstand Managers’ Day involved thousands of fans directing the club to a 5–3 win over Philadelphia Athletics. Now that’s engagement. F I g u R E 1.7 On the Air ‘We’ve moved from “The Attention Economy (push)” to “The Attraction Economy (pull)” to “The Participation Economy (share)”.’ Roberts (2010) The race is on Cut through the clutter Amidst the hyper-competition and a vast sea of communications, whether outbound, inbound, online or ofline, the race is on to somehow break through the clutter, engage with customers (and other stakeholders) and ultimately nurture lifetime loyalty. Once a real dialogue is established and is used to continually improve and service the customers’ continually changing needs, a platform of loyalty begins to emerge. This builds a wall against other competitors. In many ways, the irst organizations that get it right are likely to prevail and win in the longer term as they strengthen customer relationships and secure loyalty. The social media revolution started quietly long ago. The race is on to win and keep customers Chapter 1 before the competition does. Customers’ attention has to be attracted and then engaged in meaningful, helpful, added-value ways that some of us would never have even dreamt of 10 years ago. Marketers have to add new ways to engage customers and move them up the ladder of engagement. Attracting attention and generating website trafic is dependent on being creative enough to catch the attention and then being relevant when using communications tools, including social media and the more traditional web tools (‘tradigital tools’). Be there, be relevant and be creative A brand needs to be wherever its customers are. Be wherever customers might have a need. Find out what they really want and give it to them. Find out where customers go (ofline and online) and when they go there. Be creative with messages and media. Find creative partnerships that take the brand’s message and products to its target audience in a completely different environment (wherever the target market is) and perhaps just when they need help (as they leave a venue or as they start a search). Be where customers go online and ofline. There may be ways of reaching them through collaborative partnerships with parallel non-competitive suppliers both ofline and online. Field marketing or the slightly more elaborate experiential marketing partnerships may occur, eg a rugby book sold at the grounds of a rugby stadium, or new iPods being sold at a concert. And help customers tell their friends about you. Be relevant to their needs – if a brand gives customers useful, relevant information at just the right time, it strengthens the brand relationship. Being creative always helps. But being relevant is even more important, as customers only want and listen to whatever is relevant to their needs. Constant monitoring of their changing needs is critical. Whether it is at the lowest levels of interaction, ie product ratings, reviewing products or creating user-generated content, engagement helps to keep customer attention and to nurture stronger relationships. Be creative. Experiment with different media, different messages, and live demonstrations in different places, videoed on camera and posted to YouTube. Use permanent media (buildings, walls and gates, or laser your logo on to the moon) and New Marketing Communications 23 product placement (in other productions). Think hard about what would make someone buy a brand, and then see if this reason can be translated into a stunningly creative message. Test it and try it. Open and integrate your new toolkit Trafic is also generated by the traditional collection of 11 communications tools (see Table 1.1), which include what the US marketers consider to be the Big 5 tools: advertising, PR (plus sponsorship), sales promotion, direct mail and the sales force. There are also the three 3D tools, which include packaging, point-of-sale (merchandising), and exhibitions and conferences, and inally the 2Ws – your website and the most potent of all communications tools, word of mouth. Social media has catapulted the power of word of mouth. All 11 tools are replicated online. The creative age is here Creativity and marketing will help to break through the clutter of noise and hyper-competition that is out there. As Kevin Roberts (2009), CEO Saatchi & Saatchi Worldwide, said, this is the dawning of a new creative age in marketing. In fact, it is the dawning of a new age of creativity both inside and outside the whole organization – as witnessed by the collaborative co-creation models already discussed. Even advertisements are going to have to be a lot more creative. User-generated long-form ads are here, and so is the one-second ad. As Eric Schmidt, CEO Google, said: ‘Despite this need for creativity in business, many organizations feel uncomfortable with acknowledging and unleashing the power of creativity’ Manyika (2008) Harvard Business School professor John Kao (1997) summed this up when he said ‘I know: In many business people’s lexicon, “creativity” is right up there with “nice” in the mushy-word category. Such people had better revise their lexicons.’ Look at the more successful companies out there: they nurture creativity. It is not accidental. The importance of creativity is recognized, encouraged and nurtured. Listen to what some of these organizations say: ●● ‘Either you’ll learn to acquire and cultivate [creative people] or you’ll be eaten alive’ (Leon Royer, Executive Director, 3M). 24 Part 1 Communications Background and Theories Ta b l E 1.1 Communications tools Offline tools Online outbound tools 1. Advertising Interactive TV ads Pay-per-click ads and banner ads Intelligent media units 2. PR Online optimized PR Viral marketing 3. Sponsorship Online sponsorship – communities, pages, sites, events 4. Sales promotion Incentives and calls to action online in e-mails and websites 5. Direct mail Opt-in e-mail (viral marketing) 6. Sales force Affiliate marketing Digital body language (on a website) 7. Packaging Pack images on the website 8. Point of sale Website – your online POS; particularly calls to action; product photos and product users’ photos 9. Retail store design or commercial offices Website – design, online value proposition (OVP), search engine optimization (SEO) 10. Exhibitions and conferences Virtual exhibitions, virtual worlds like Second Life 11. Word of mouth Social media – inbound marketing Blogs: Microblogs (eg Twitter) Social networking sites: Facebook MySpace LinkedIn Social content sites: YouTube Flickr Wikis Social recommendation sites: Digg StumbleUpon Social bookmarking sites: Delicious Article marketing Google Maps Google Earth Virtual worlds Chapter 1 ●● ‘My job is to listen to, search for, think of, and spread ideas, to expose people to good ideas and role models’ (Jack Welch, former CEO, GE). ●● ‘The irst step in the creative process is “hiring the best of the best”. This is how HP maintains an environment that “crackles with creativity and intellectual spirit”’ (Mary Patterson, former Director of Corporate Engineering, Hewlett-Packard). ●● ‘To make money in a disinlationary period takes real innovation and creativity at all levels of the corporation’ (Michael Fradette, Manufacturing Consultant, Deloitte & Touche). The reality is that creativity is hard work. And managing creativity is, as Kao (1997) says: if anything, even harder work. It has nothing to do with inding a nice safe place for people to goof off. Managing creativity is much more dificult. It means inding an appropriate place for people to contend and collaborate – even if they don’t particularly want to. It means scrounging from always-limited resources. It means controlling the uncontrollable, or at least unpredictable, process. Creativity, for many, is a blood sport. But, as Albert Einstein said, ‘Anyone who has never made a mistake has never tried anything new.’ Creativity will fuel growth in the future ‘The search for value has led companies to seek efficiency through: downsizing; rationalizing; right-sizing approaches that eventually result in a diminishing level of return. But what will fuel growth in the future? Growth will come through mastering the skills of creativity and making creativity actionable.’ John Kao, Harvard Business School Former President of McKinsey’s Japan and highly respected author Kenichi Ohmae, in an interview with the author, was asked if he could sense if a company was going to be successful. Was there something he could smell or sense when he was in an organization that suggested this company was New Marketing Communications 25 going to be a winner? He said ‘yes’ and went on to explain that, ‘if a company is not afraid to ask questions, if everyone asks questions from the CEO down to the ofice boy, if they ask questions like “Why do we do it this way?” then this company will succeed’ (Ohmae, 1996). So the inquisitive mind is an essential ingredient for future success. This is echoed by Susan Greenield of the University of Oxford when speaking at the Third European Futurists Convention in Lucerne in 2007. She conirmed the need for creativity and the need to challenge old dogma: ‘So creativity, this eureka connection (neuronal connection) that triggers a new insight in yourself and others, is all about forging connections and so providing environments that will foster a challenging of dogma, of old stale connections, a forging of new ones that trigger even more connections that give a meaning and an insight to both yourself and others’ (Greenield, 2007). edison – a genius who combined creativity with marketing The United States’ greatest inventor, Thomas Edison, was a creative genius, but it was not until he discovered some of the principles of marketing that he found increased success. One of his irst inventions was, although much needed, a lop. In 1869, he created and patented an electronic vote recorder, which tallied the votes in the Massachusetts state legislature faster than the chamber’s old hand-tab system. ‘To Edison’s astonishment, it lopped. Edison had not taken into account legislators’ habits. They don’t like to vote quickly and eficiently. They do like to lobby their fellow legislators as voting takes place. Edison had a great idea, but he completely misunderstood the needs of his customers’ (Caldicott, 2010). He learnt from his failure the relationship between invention and marketing. Edison learnt that marketing and invention must be integrated. ‘Anything that won’t sell, I don’t want to invent,’ he said. ‘Its sale is proof of utility, and utility is success.’ He realized he needed to put the customers’ needs irst and tailor his thinking accordingly, despite any temptation to invent for invention’s sake. His change of mindset led to tremendous success (Caldicott, 2010). Edison made market research a fundamental part of the creative process: He literally went to homes and places of work and analyzed what people did in order to gain 26 Part 1 Communications Background and Theories Creativity + marketing = success ‘Anything that won’t sell, I don’t want to invent,’ said Thomas Edison, best known for the light bulb. He was a prolific inventor, registering an extraordinary 1,093 US patents and 1,293 international patents. The six industries he pioneered between 1873 and 1905 – and their offshoots – are estimated to be worth more than $1 trillion today. He was one of the world’s first market researchers. Caldicott (2010) insight to invent products that could help them do it better and faster. He looked irst for unmet needs and then applied science and creativity to ill them. The irst example of Edison’s success using a ‘needs-irst’ approach to invention is one we seldom associate with him: Document duplication. Post-Civil War newspaper accounts of the re-building of the South and the tremendous demand it created for insurance policies led him to think that the insurance business could use some eficiencies. Edison got permission from insurance agents to watch their clerks at work. He saw that most of their day was spent hand-copying documents for each party to the insurance sale instead of selling insurance. Edison realized that if he could invent something that would save both the insurance clerks’ and agents’ time writing, they could all make more money. Caldicott (2010) But customers do not understand their own needs – particularly innovations However valuable market research is, signiicant creative leaps can sometimes be too dificult for customers to grasp. Therefore negative customer feedback for discontinuous innovations (signiicant innovations) can sometimes be misleading. In some cases, ‘Listening too much to customer input is a recipe for a disaster’ (Christensen, 2003). ‘If I’d listened to my customers, I would have invented a faster horse,’ said Henry Ford. Whoever could have imagined that a device created for engineers to communicate with each other would one day become a global necessity for all young people – text messaging? Whoever could have imagined that one day people would walk around with record players or DVD players on their heads (headphones)? Whoever could have imagined a nation seemingly talking loudly to themselves (hands-free mobile phones)? Here are some classic quotations that demonstrate how not just customers but even experts in their ield could not see the beneit of a signiicant innovation that subsequently went on to become a massive global success: ●● ‘This “telephone” has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us’ (Western Union, internal memo, 1876). ●● ‘The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?’ (David Sarnoff’s associates in response to his urgings for investment in the radio in the 1920s). ●● ‘Who the hell wants to hear actors talk?’ (Harry M. Warner, Warner Bros, 1927). ●● ‘TV will never be a serious competitor to radio because people must sit and keep their eyes glued on a screen. The average American family doesn’t have time for it’ (New York Times, 1939). ●● ‘I think there is a world market for maybe ive computers’ (Thomas Watson, Chairman of IBM, 1943). ●● ‘There is no demand for guitar bands’ (Decca Records turning down the Beatles, 1962). ●● ‘There is no reason for any individuals to have a computer in their home’ (Ken Olsen, President, Chairman and Founder of Digital Equipment Corp, 1977). Looking back on it, there are many innovations in common use now, the need for which simply did not exist 5 or 10 years ago. This applies to both B2C and B2B markets. ‘Customers want to know what to do with their call centres, how to integrate them with the internet, issues of security, what mobility means, what sort of networks they should have... These business needs simply did not exist 10 years ago’ (Garvey, 2002). Chapter 1 As organizations, and marketers in particular, embrace creative thinking, new solutions will emerge and contribute to continued success once we learn to think ‘outside the box’. For organizations seeking to deine creativity and inspire it, perhaps Susan Greenield’s (2007) deinition may help: It’s seeing one thing in terms of something else. That eureka moment. You don’t have to be a brilliant novelist or painter or musician... it can be about some private matter. It can be about economics. It can be while you are reading a novel, you suddenly make a connection that suddenly gives you an insight that no one else has had. Someone deined science as ‘seeing what everyone else can see but thinking what no one else has thought’. Doesn’t it feel great when you have that eureka moment. My own view is that this could be what we should be aiming for, because this gives you both individuality and a sense of fulilment, and, incidentally, it is useful to society. Enter the boardroom The missed opportunity Marketers can and should demonstrate to any board of directors how marketing can create two sources of sustainable competitive advantage by creating two assets – one on the balance sheet, the other off the balance sheet. Brands appear as an asset on the balance sheet, and a well-maintained, integrated customer database does not appear as an asset on the balance sheet. A well-integrated website helps to grow a database of customers and prospects, as well as boosting a brand’s value as more and more relevant ‘services’ and ‘sizzle’ are added to the customer experience. Well-managed databases create a mini-monopoly of customers and prospects, and can be used with a variety of channels to communicate intimately with customers (e-mail, snail mail, telephone calls and personal visits). Although the value of a database can be quantiied by estimating lifetime values, it still does not appear on the balance sheet. Marketers missed their chance to enter the boardroom when the web irst emerged in the early 1990s. The internet, and websites in particular, presented a whole new way for businesses to exploit the 5Ss (sell more, serve better, save money, speak New Marketing Communications 27 with customers, and sizzle or create some magic around the brand by doing things that simply could not be done ofline). Three of these Ss will attract the ears of the inancial director and the CEO: sell, save and sizzle. ‘Sell’ means revenue, and any promise to boost revenues is taken seriously. ‘Save’ is of interest, and any proposal that offers to make 99 per cent savings will demand attention, as there is no other aspect of business that can attain such massive savings as that of well-designed, self-service websites. Some inancial directors and CEOs will appreciate the importance of brands on the balance sheet, in fact the necessity to have them on the balance sheet if in an acquisition or merger situation. Hence brands, and ‘sizzle’ that enhances a brand’s value, will be of renewed interest to the CEO and CFO. However, the moment was missed by marketers, and it seems that websites became the responsibility of other departments, eg IT, corporate PR and sales. The beneits were diluted and the cohesive marketing argument lost. One other opportunity was missed also. As businesses move from the linear value chain to the weblinked value network, boards have to ask themselves ‘What business are we in?’ Whilst the web created a golden opportunity to re-evaluate brands (what added value they could give and ultimately what they represent), the internet created a golden opportunity to re-evaluate ‘What business are we in?’ As businesses outsourced chunks of the value chain, the business effectively became a ‘box of contracts’. The opportunity knocks twice More than 10 years later, the opportunity for marketers to get back in the boardroom appears as social media changes all the business models and sweep aside the old thinking about marketing just being the ‘colouring department’. The biggest change since the industrial revolution falls into the marketer’s court. As all marketers are becoming experts in social media, it follows that this expertise is required in the boardroom as businesses revamp their organizational cultures and change their modus operandi. A McKinsey survey (2009) supported this by reporting that marketing and sales and IT derive most beneits from social media (as opposed to procurement and inance). In their words, ‘Social media engages customers, deepens relations, generates extra sales, faster time to market, better NPD [new 28 Part 1 Communications Background and Theories product development] and lowers the cost of doing business.’ Social media and the opportunity it gives organizations to create sustainable competitive advantages cannot be left to IT departments or production departments, as these by deinition are production orientated. Social media is driven by the marketplace and is therefore the centre of a marketingdriven business. So social media, the ladder of engagement, integrated marketing and creativity offer marketers another golden opportunity to get back into the boardroom and inluence the strategic directions of a business in such a way that the business becomes a truly market-orientated business, primed and ready to satisfy customers and enjoy continued success. Nightmare on Banking Street – the author’s own experience I hadn’t physically visited a bank in years. However, when I was doing a favour for a friend, I walked into a well-known high street branch in London on a Saturday afternoon to be greeted almost immediately by a friendly-faced customer service clerk, who pleasantly informed me that the queue in front of me would take 40 minutes. I thought I had stepped into a time warp. What amazed me was that other customers seemed prepared to queue. Was it always like this? Then I thought about online banking and also about lovely shiny ATMs that cannot make your day any worse, whilst standing in the rain, trying to block prying eyes and hidden cameras from stealing your pin numbers, whilst hoping the muggers around the corner have not spotted you yet. Fear has increased in many people’s lives. But that’s out there on the street. What about in the comfort of your own home? I received two letters recently – both from high street banks. One told me that my account had received a certain sum of money, it had been credited to me at a certain exchange rate and I had been charged a certain amount of commission charges. Now I never accept money unless I know who is giving it to me and why. The letter didn’t tell me, so I had to ind out. I made a call, met a robot, queued, gave an account number, answered a string of security questions and eventually, after eight minutes, got the answer. My whole point is: Why couldn’t the system generate this information for me? Didn’t anyone think that customers might like to know where money is coming from? Did they test it? I opened the statement from the second bank and it told me some good news. I had overpaid them and was now in credit to the tune of £12. I looked at the letter. It was a ‘notice of variation’. What is a notice of variation? Now, I know this is anecdotal evidence, but is this good customer service? Is this good marketing? Is it getting better or worse? Is there an opportunity to be outstandingly good? key points from Chapter 1 ●● This is the beginning of a new era in marketing amidst hyper-competition. ●● The ladder of engagement can create competitive advantage. ●● Social media is here to stay. ●● There is an opportunity for marketers to take a seat on the board and drive a marketing culture. references and further reading Aarons, C, Edwards, A and Lanier, X (2009) Turning blogs and user-generated content into search engine results, Marketing Vox and Nielsen BuzzMetrics SES Magazine, 8 June Beck, S (2010) Make your product work for your brand: Why what you’re selling has become your primary advertising channel, Financial Times, 4 May Bird, Drayton (2008) Commonsense Direct and Digital Marketing, 5th edn, Kogan Page, London Chapter 1 Brogan, C (2009) The serendipity engine, www.delicious.com/chrisbrogan/casestudy Caldicott, S (2010) Invention and marketing: Joined at the hip, Media Week, 28 April Chaffey, D and Smith, P R (2008) eMarketing eXcellence, 3rd edn, Butterworth-Heinemann, Oxford Charan, R and Bossidy, L (2002) Execution: The discipline of getting things done, Crown Business, New York Christensen, C (2003) The Innovator’s Dilemma, Harper Business Essentials, New York Earls, M (2002) Welcome to the Creative Age: Bananas, business and the death of marketing, Wiley, Chichester Fletcher, W (2010) author, lecturer and former chairman of the Royal Institution in conversation with PR Smith Garvey, D (2002) BT Ignite, Marketing Business, March Grande, C (2007) Cannes diary: Six of the best by Carlos Grande, Financial Times, 24 June Greenield, S (2007) The future of brain – the brain of the future, Third European Futurists Convention, Lucerne Hall, E (2010) In Greece, Kraft scores a hit for Lacta chocolate with crowdsourced ilm, Advertising Age, 24 March Hoffman, D (2009) Managing beyond Web 2.0, McKinsey Quarterly, July Jenkinson, A (2004) The bigger picture, Marketing Business, March Kao, J (1997) Jamming: The art and discipline of business creativity, HarperCollins, New York Kennedy, J (2009) App-fab, Marketing Age, November Levine, R et al (2000) The Cluetrain Manifesto, FT.com, London Lilley, A (2007) Why Web 2.0 adds up to a revolution for our industry, Media Guardian, 1 October New Marketing Communications Manyika, J (2008) Google’s view on the future of business: An interview with CEO Eric Schmidt, The McKinsey Quarterly, September McGovern, G (2010) Time is (still) money: Increasing employee productivity (Part 1), 9 May, www.gerrymcgovern.com McKinsey (2009) How companies are beneiting from Web 2.0: McKinsey Global Survey Results, National Customer Satisfaction Scores, Technology Ofice, McKinsey Quarterly, September O’Dea, A (2008) Innovation, Marketing Age, September/October Ohmae, K (1996) Video interview with P R Smith, The Marketing CDs, P R Smith Qualman, E (2009) Statistics show social media is bigger than you think, Socialnomics [Online] http://socialnomics.net/2009/08/11/statisticsshow-social-media-is-bigger-than-you-think/ Roberts, K (2009) in conversation with PR Smith, The Worshipful Company of Marketors, The Great Hall at Barts, St Bartholomew’s Great Hall, 17 November Roberts, K (2010) Video interview with P R Smith, www.prsmith.org Rothery, G (2008) The matchmaker, Marketing Age, November/December Ryan, D and Jones, C (2009) Understanding Digital Marketing, Kogan Page, London Safco, L and Brake, D (2009) The Social Media Bible, Wiley, Hoboken, NJ Schlack, W (2008) Open for innovation, Business & Leadership, [Online] http://www.businessand leadership.com/marketing/item/11417-openfor-innovation Scott, D (2009) The New Rules of Marketing and PR, Wiley, Hoboken, NJ WARC (2007) Unilever changes online focus, 25 June Further information Advertising Association 7th Floor North Artillery House 11–19 Artillery Row London SW1P 1RT Tel: +44 (0)20 7340 1100 www.adassoc.org.uk 29 Chartered Institute of Marketing Moor Hall Cookham Maidenhead Berkshire SL6 9QH Tel: +44 (0)1628 427120 Fax: +44 (0)1628 427499 www.cim.co.uk 30 Part 1 Communications Background and Theories CIPR 52–53 Russell Square London WC1B 4HP Tel: +44 (0)20 7631 6900 www.cipr.co.uk Communications Advertising and Marketing Education Foundation Limited (CAM Foundation) Moor Hall Cookham Maidenhead Berkshire SL6 9QH Tel: +44 (0)1628 427120 Fax: +44 (0)1628 427158 www.camfoundation.com Incorporated Society of British Advertisers ISBA Langham House 1b Portland Place London W1B 1PN Tel: +44 (0)20 7291 9020 Fax: +44 (0)20 7291 9030 www.isba.org.uk Institute of Promotional Marketing Ltd 70 Margaret Street London W1W 8SS Tel: +44 (0)20 7291 7730 Fax: +44 (0)20 7291 7731 www.isp.org.uk International Organization for Standardization (ISO) 1 ch de la Voie-Creuse Case postale 56 CH-1211 Geneva 20 Switzerland Tel: +41 22 749 01 11 Fax: +41 22 733 34 30 www.iso.org Marketing Society 1 Park Road Teddington Middlesex TW11 0AR Tel: +44 (0)20 8973 1700 Fax: +44 (0)20 8973 1701 www.marketing-society.org.uk Public Relations Consultants Association Willow House Willow Place London SW1P 1JH Tel: +44 (0)20 7233 6026 Fax: +44 (0)20 7828 4797 www.prca.org.uk 31 02 Branding lEaRNINg ObjEcTIvES By the end of this chapter you will be able to: ●● Appreciate the importance of branding and why it is a strategic issue ●● List the stages in building a brand process ●● Avoid the classical branding mistakes ●● Understand why brands need to be maintained Introduction to branding Concept generation and 32 What is a brand? 32 development 45 The power of branding 32 Roll-out/delivery 48 Company beneits from branding 32 Brand maintenance 49 Customers beneit from brands Brand expansion/strategy 54 Business disadvantages of weak brands 35 Brand self-destruction 36 34 Brand summary challenges ahead 55 The rise of the anti-brand 55 Brand components 37 The rise of the own brand 56 What exactly is a brand? 37 Short-term sales versus long-term A brand’s rational and emotional appeals 38 brand building 56 Brands – the bridge between The emotional connection 38 marketing, inance and The brand components 38 the boardroom 57 The branding process Research 42 The brief 44 41 Conclusion 58 references and further reading 58 32 Part 1 Communications Background and Theories Introduction to branding What is a brand? A brand is an intangible, legally protectable, valuable asset. It is how a company or product is perceived by customers (or the target audience). It is the image, associations and inherent value customers put on your product and services. Brands include intangible attributes and values. For a brand to be successful, its components have to be coherent, appropriate, and appealing to consumers. A brand is a promise to the customer. A brand also embraces vision, values and personality (see ‘Brand components’ below). A brand is far more than just a logo or a name (this is just brand identity). It is the complete customer experience (the integrated sum of all the marketing mix and the communications mix from products to customer service, from packaging to advertising, from rumour to discussion). The last two components are less controllable, from a brand management perspective, but they are nevertheless inluenceable, as good brand management participates wholeheartedly in social media also. So a brand is everything a customer (or stakeholder) sees, feels and experiences about a product or service (or organization). A brand is the ‘magical’ difference between many competing products and services. A (favourable) consensus of subjectivity ‘Because brand reputations exist only in the minds of their observers – and all observers are different… the strongest brands are those that enjoy what’s been called “a (favourable) consensus of subjectivity”. And that’s when their brand managers, in the widest sense of that phrase, should be most warmly congratulated. They didn’t build those brands themselves; but they fed such enticing titbits to their audience that their audience gratefully did the rest.’ Millward Brown Optimor BrandZ survey (2010) The power of branding How do brands become so powerful that they control economies, determine corporate takeovers, or make customers pay almost 1,000 per cent price premiums? How do brands become the most valuable asset in a company, which determine the whole inancial value of a company and drive corporate takeovers? How do brands create sustainable competitive advantage? What makes people all around the world hand over their hard-earned cash for the same brand whether in Taiwan or Tokyo, Kashmir or Carlisle? Today, the power of branding is such that brands defend organizations from competitors, nurture customer relationships, and boost sales, proits and balance sheet assets. Company beneits from branding Brands create sustainable competitive advantage from hyper-competition, boost relationships, boost sales, boost proits and boost balance sheets. Why would any managers not nurture their brand very carefully? The truth is that many do not (see ‘The customer service time bomb’, Chapter 1). However, consider these individual beneits of nurturing strong brands. Brands create sustainable competitive advantage Brands will be, for many organizations, the critical success factor in the hyper-competitive 21st-century marketplace. Strong brands create sustainable competitive advantage. For the irst time in the history of business, the most powerful barriers to competition are no longer controlled by companies but by customers. The old barriers are falling. Factories and even access to inance are not as powerful barriers as the barriers erected inside customers’ minds. Only a few chosen winners are allowed inside. These are the successful brands with which customers have relationships. Successful brands build differentiators. The CEO of one of the world’s greatest brands, Coca-Cola, reputedly once said: ‘They can take everything we have, our machinery, our plants, our distribution – as long as they don’t take our brand – and we will be able to rebuild our organization in six months.’ For many years now more people in Britain have trusted top brands than trust the church. In fact Heinz and Nescafé are trusted more than the church, the police and Members of Parliament (Croft [1998], Chapter 2 Branding in Reynolds, Cuthbertson and Bell, 2004). How come British people give their credit card details over the internet to an unknown, invisible American on the other side of the Atlantic? How come Americans pour down their throats water from someone they don’t know from an unknown source in France? Brand trust in Amazon and Evian is strong. Brands control people and brands control economies ‘What gives brands their power to influence – if not quite control – people’s purchasing decisions and thus their power to influence – if not quite control – modern economies?’ Winston Fletcher (2010) Brands differentiate a company’s products or services and help them to stand out from a crowd. Brands are often the primary source of competitive advantage and a company’s most valuable strategic asset. All markets tend towards commodities (as patents run out and the competition catches up and copies others). Brands protect and defend a business from competition, as they differentiate the product by adding perceived value. This creates barriers to entry for potential new competitors that are constantly tempted to enter the new borderless and category-less market space. Some years ago it was suggested that two-thirds of the stock market capitalization of US companies was attributable to intellectual assets (brands, Chinese president visits a brand before visiting the president When visiting the United States, President Hu Jintao of China chose Microsoft’s Bill Gates as his first visit, followed the next day by a visit to US President Bush. The International Herald Tribune headline read ‘Chinese president’s itinerary for U.S. visit: Gates first, Bush later’. Yeong and Yu (2006) 33 patents and know-how). That’s a massive $4.5 trillion. One-third of global wealth is accounted for by brands (Clifton, 2004). Brands boost relationships Brands create (mostly unconscious) relationships between the user and the brand. Brands add a subtle meaning to the act of consumption. We allow these brands into our homes and ofices and into our lives because they generally mean something to us all. They represent something. At the heart of any successful brand proposition there is a human dimension. That’s why brands have personality, values and associations. Brands used to be just a seal of quality. Today brands have emotional connections that differentiate them. Brands provide reassurance to customers and differentiation from competitors. Brands save customers time by being easily recognizable and providing a reassuring sense of order in an increasingly destabilized and chaotic world. Brands inspire loyalty, trust and continuity. Brands are built upon a platform of reliable quality. As in any relationship, a brand’s promise must never be broken. Brands are even used to pigeonhole people: ‘He drives a Porsche and drinks Pimm’s.’ A person’s entire life can be effectively categorized by his or her use of brands. Some brands are even deinitive, eg ‘He is the Rolls-Royce of hosts.’ ‘Coca-Cola sells more because our love of a particular brand is as important as our love of a flavour.’ Ronay (2004) Brands boost sales Brands help customers by making their purchasing process easier. Brands are easier to recognize and to associate with quality; it is easier to understand their beneits, and they are less risky than unknown commodities. Brands encourage repeat purchases and brand relationships, which in turn boost sales. Strong brands are easily recognizable and build single-minded awareness, ensuring they have a greater chance of being included in the customer’s ‘considered set’ of possible purchases or, better still, Part 1 34 Communications Background and Theories ‘preferred purchases’. Brands build relationships and inspire loyalty, trust and most importantly continuity, providing a reassuring sense of order in an increasingly chaotic, insecure and fast-changing world. Established brands also provide a platform from which to launch other products under the same brand names, thereby increasing share of wallet. Brands boost profits Brands, rightly or wrongly, can command premium prices, which results in increased proits, which consequently allows more money to be spent on better (relevant and tested) communications with clearer messages – which continually strengthens the brand. For example, in the same store, Coca-Cola charges a price premium of almost 1,000 per cent with its 2-litre bottle priced at £1.25 (compared to Asda’s 2-litre bottle at £0.15). Incidentally, Coca-Cola knows the long-term power of its brand and invests in it accordingly (eg investing $65 million in 12 years’ Olympic sponsorship until 2012). Proits are also boosted by repeat purchase customers, who generate on average ive times more proits than sales to new customers. In online sales, this igure rises to 10 times more proitability (Eltvedt and Flores, 2005). Strong brands also boost margins, as strong brands increase bargaining power with the trade. Brands boost balance sheets As well as affecting politics and economics, brands affect company valuations. Brands can indicate future proit trends and assist decisions and investor relations. Today, brands are recognized as assets, and more companies are putting brand values on to their balance sheets. Below is a list of brand values taken from the Millward Brown Optimor BrandZ survey (2010), which reveals the world’s irst $100 billion brand – Google. Google IBM Apple Microsoft Coca-Cola McDonald’s Marlboro China Mobile GE Vodafone $114 billion $87 billion $83 billion $76 billion $70 billion $66 billion $57 billion $53 billion $45 billion $44 billion There are now seven Chinese brands in the world’s top 100 brands. The best known in the West is probably Baidu, the Chinese search engine. Samsung and Baidu are the fastest-growing brands (Millward Brown Optimor, 2010). There is no doubt that brands add value to the balance sheet, grow the value of the business (market capitalization) and therefore boost the sale price of a business if looking to exit. New accounting rules worldwide require companies to value their intangible assets – such as brands – on their balance sheets when they are acquired (IAS 38). When these assets are judged to have an indeinite life, which is often the case with a brand, they will be subject to annual review for impairment. This means that the difference between the price paid and the current value will be calculated. Any resulting write-downs can often have major implications as seen in 2002 when AOL Time Warner (formerly known as) had to write off $54 billion for the value lost when AOL acquired Time Warner at the end of the dotcom boom in 2000. You have the factory and staf; I’ll have the brand ‘If we split the business tomorrow, you kept all the factories and staff and I kept the brand name, within two years I would be a multimillionaire and you would be bankrupt.’ CEO, Quaker Foods Customers beneit from brands So we know how brands help businesses, but how do they help customers? What do they do for customers? Brands save customers time, reduce their perceived risk and fulil their aspirations. Now consider each beneit. Brands save customers time Brands help customers’ busy lives by saving them time through helping them to ind goods and services quickly. Imagine trying to buy books or DVDs on the internet if you couldn’t remember the name of Chapter 2 Branding Amazon or CD WOW. Or it could be beans in the supermarket or mortgages on the high street. Unilever’s chairman, Niall FitzGerald, calls a brand ‘a storehouse of trust which matters more and more as choices multiply’ and we face what David Ogilvy once called ‘the misery of choice’. People want to simplify their lives, simplify their decision making and get on with the rest of their busy lives. 35 Consider the magic marketing formula: identify needs; relect them; deliver/satisfy them. Remember, brands need to continually do this. Think about what needs Coca-Cola advertising relects. It relects people’s own aspirations, so that when they buy a can or a case of Coca-Cola they actually buy a slice of their own aspirations (and a product whose promise of refreshing cola is consistently delivered anywhere in the world). Brands reduce perceived risk A strong brand is an implicit guarantee or promise of consistent quality, image and style. A brand is built on trust. Customers trust the promise made in the advertisement and on the pack. Customers form relationships with brands. Brands, in turn, provide a reassuring sense of order. Brands provide a safe and trusted option. Would you buy from someone you didn’t know? Customers would prefer to reduce the amount of time and energy involved in decision making. That’s one of the reasons why brand extensions are valuable. The brand is an implicit guarantee or promise. Customers trust the promise made in the advertisement and on the pack. Brands satisfy aspirations Brands give status and recognition. Brands relect aspirations, images and associations that are carefully gleaned from in-depth customer motivation research. This is compounded by our search for identity and beliefs. ‘In an irreligious world, brands provide us with beliefs’, says Wally Olins of Wolff Olins. Some brands unconsciously create a sense of belonging from their cultish quality. In a way, buying and consuming brands actually deines who we are. Brands signal our afiliations. ‘You are what you shop.’ Brands relect aspirations and act as a badge of self-image or desired self-image. Do brands ill the vacuum left by the decline of organized religion? ‘In the developed world, they [brands] are seen by some to have expanded into the vacuum left by the decline of organized religion.’ Economist (2001) Business disadvantages of weak brands If a product or service does not have a single strong unifying brand, its presence becomes diluted, seen differently by different people. A diluted brand is less recognizable, therefore less known, therefore less trusted and ultimately a more risky purchase. Without a strong uniied brand, products and services become buried in a busy world of other, stronger brands. If a product or service has no real strong brand, it may be symptomatic that the management team are themselves not sure of what the brand really is, what it is really good at, what distinguishes it, what needs it meets and what emotions it connects with. Without a strong brand most of the marketing efforts fragment, splinter and disappear. no brand, no cattle The term ‘brand’ comes from the old Norse verb brandr, which meant to burn, which eventually became a noun and adjective in medieval English. The noun brand meant flame, fire or torch, and brand the adjective meant burning, hence ‘brand hot’. Animals were marked with red-hot branding irons as a mark of ownership and an easy way to identify particular cattle. So strong brands beat weak brands. But, despite creating protection against competition and boosting relationships, sales, proits and balance sheets, brands are continually damaged and weakened. Why do so many marketers allow so many 36 Part 1 Communications Background and Theories brands to press their own self-destruct button? Read on. Brand self-destruction The brand relationship is always fragile. Constant sloppy service or a single moment of disaster, such as contamination or a misplaced word (eg Ratners; see ‘Uncontrollable publicity – any publicity is good publicity?’, Chapter 14), can destroy the customer’s trust. And customers are changing. They’re becoming more demanding. Not only do they talk back, but they now shout back and even bite back if brands break their promise. Today’s customers have unlocked ‘brand control’ from marketers and set up their own brand discussions. Although they are still time pressed and information fatigued, they have found a new energy, fuelled by Web 2.0, which allows them to fulil their age-old desire to communicate about what interests or concerns them. Customers now have a platform to raise their voices, and some of them can’t stop shouting! Customers have been abused by businesses that dump sloppy service on them, again and again. Surveys reveal that marketers have, in fact, got worse at marketing over the last 10 years. And customers are angry. They are also impatient. The clock is ticking. We are sitting on a customer service time bomb. Sloppy marketing and self-destructing brands go hand in hand. Lousy marketing Surprisingly, we’ve got worse at marketing. We are in an era of declining marketing skills, measured by falling customer satisfaction scores in market after market. Meanwhile automated customer service telephone queuing systems and unworkable websites continue to insult and frustrate customers. Robotic answer machines with self-service menus dump all the work on the information-fatigued, time-poor customer. Add websites that don’t work, with dead ends, error messages, complicated navigation and, if you have the patience to struggle through all of that, electronic shopping carts that crash. The customer service time bomb is ticking (see Chapter 1 for more). Some angry customers publicize their feelings on the many blogs and hate sites attacking brands. These can fuel an exponential spreading of negative word of mouth (or ‘word of mouse’). Angry customers Research shows that today’s customers are less tolerant of bad service, with 80 per cent of consumers saying they will never go back to an organization after a bad customer experience, up from 68 per cent in 2006 (Harris Interactive, 2006). Add in customers who talk back and who talk to each other via Web 2.0 social media facilities. The goal posts have moved for many marketers. Social network sites facilitate customer discussions about all sorts of brand-related content, eg Coca-Cola never asked for rockets, but it just happened that customers discovered that mixing Coke and Mentos mints caused an explosive reaction and they started posting videos of this phenomenon. Customers talk with text and video, some because they want to share opinions, others because they are hungry for fame and others because they want to meet new friends or, simply, transcend their everyday lives. Unlocking control with Web 2.0 Customers have unlocked ‘control’ from companies, with Web 2.0 facilitating user-generated content (UGC). Not surprisingly, UGC is not totally controllable. Online social networks are here to stay. They will continue to grow in line with the very human need for social contact. Customers have been mobilized by blogs, social network sites and invitations to create their own UGC, whether comments and feedback or conversations, joint research or creating advertisements, services or even products. Customers are no longer slovenly couch potatoes, and some are active co-creators who produce discussions, advertisements or even products: hence the term ‘prosumer’ (see ‘The ladder of engagement’, Chapter 1). We are possibly on the cusp of a customer revolution bringing an end to accepting sloppy service and, also, an end to the mass dumbed-down customer. Online digital markets facilitate obscure niche markets as easily as mass markets. In the online world, the ‘Long Tail’ (Anderson 2006) suggests it can be as proitable to serve 100 customers spread across the world with 100 different digital products as it is to serve 100 local customers with one standardized product. This opens a gate to discrete consumer taste, which effectively moves markets away from the mass market and its tyranny of the lowest dumbed-down denominator. Instead of a handful of powerful marketers recommending, and often Chapter 2 Branding determining, what is in and what is out, there are now mobilized niche customers, alerting their own networks about their own niche preferences. 37 for a list of names that damage the brand when used in some international markets. The internet’s new business dynamics Death of the dumbed-down customer? ‘For too long we’ve been suffering the tyranny of lowest-common-denominator fare, subjected to brain-dead summer blockbusters and manufactured pop. Many of our assumptions about popular taste are actually artifacts of poor supply-and-demand matching – a market response to inefficient distribution.’ Anderson (2006) Global niches Although spread across the world, customers with similar interests can communicate and share thoughts through images, audio, video and text anywhere in the world. This means that clusters of customers with similar tastes and interests are connecting with each other to form new global niches and segments. Global markets are here, eg Manchester United Football Club have an estimated 70 million fans around the world, and Al Jazeera’s English-language TV news service has 100 million people in its audience worldwide. As media follow markets, media consumption may go global; therefore marketers must remember that brands with international ambitions must have a consistent global image – production should be international in mind, and content rights should be global. True brand masters also ‘think global and act local’ by paying attention to local market needs and having the nous to express this in local terms. Creating content that users can pass on via their social networks is an increasingly important channel of communication. But, as Universal McCann (2007) suggests, ‘when using these channels it is fundamental that brands and media organizations think global’. Multiple local and conlicting brand identities fragment the brand. In addition, localized brand names can often exclude brands from international sales. Some brand names restrict international sales or global brand ambitions. See Chapter 9, page 214 The internet, and broadband in particular, has changed business dynamics. It has created a level playing ield for the smaller niche brands to compete with the established global players. Small brands have access to bigger, global markets and can communicate directly with customers across the world in new and more meaningful ways – ways never dreamt of 10 years ago. Power will be prised away from those major brands that are not prepared to change. Maybe it will be the database holders that take control. Imagine consumers opening a fridge and as they take the last can of Guinness the fridge asks ‘Would you like a new delivery of beer, but this time at a special price from a different brand?’ Here, it is the database holder that knows who drinks what beer, when and where, as it records the last beer’s bar code when the beer is taken out of the fridge. The key to accessing the customers’ databases embedded in fridges, microwaves, cars, phones and PDAs is not the hardware but the intelligence (or software system) to know exactly when customers might like to replace something. The invasion of the infomediary starts here. So marketers who ignore new trends and real customer needs and, worse still, deliver sloppy service are simply pressing a self-destruct button that damages and ultimately destroys a very valuable brand. Before exploring the right way to nurture a brand (ie the branding process), consider exactly what a brand is and what its component parts are. Brand components What exactly is a brand? A brand is far more than just a name, term, design or symbol that identiies and distinguishes a product or service from that of other competitors. A brand is still a badge of origin, a promise of performance and a point of differentiation. Today, a brand is a holistic experience that stretches beyond the physical and into the psychological. It is the sum of the 38 Part 1 Communications Background and Theories real product or service experience and the perceived values, images, associations and promises made through marketing communications. ‘Brand’ is both a verb and a noun. It is a verb, as it is a continual process, and a set of skills is required to create and nurture brands. Branding is a core competency for serious marketers. ‘Brand’ is also a noun, as it is an asset on the balance sheet and something people buy. Some commentators deine brands as simply the difference between a bottle of sugared, lavoured, izzy water and a bottle of Coca-Cola. ‘Harley-Davidson does not sell motorcycles. Starbucks do not sell coffee. Club Med does not sell vacations. And Guinness does not sell beer. Think about it.’ Peters (2003) A brand’s rational and emotional appeals A brand is a cluster of rational or functional and emotional aspects that match customers’ rational and emotional needs. Strong brands are designed to trigger speciic emotional responses in the minds of customers. Nike promises ‘personal achievement’, while Coca-Cola promises ‘carefree fun’. What we buy says more about a person than he or she might want to admit. It reveals our inner, often unconscious desires and aspirations. If the brand gets it right (understands a customer’s deep needs and relects these through a range of communications) then buyers are simply buying some of their own aspirations. They are, in fact, buying a slice of their ideal self. Brands, therefore, have both rational and emotional beneits, eg Red Bull’s physical (rational) beneit is that it keeps you awake (physical stimulation), and its emotional beneit is that you feel you can do more (feel stimulated). Natural food drinks’ functional beneit is ‘pure fruit juice’, and their emotional beneit is ‘feel healthy/feel good’. Kellogg’s Corn Flakes’ physical beneit is ‘breakfast nutrition’, and the emotional beneit is ‘a great start to the day’. As a brand develops, it should elicit an emotional connection from customers. Some authors, like Kapferer (2008), see strong brands as a deeply held belief or ‘an attitude knitted into consumers’ hearts. This attitude goes from emotional resonance to liking, to belonging to the evoked set (or consideration set), to preference, attachment, advocacy, to fanaticism.’ Some customers are really attached to their brands and simply will not buy anything else. The emotional connection Once upon a time brands used to be all about trust and a seal of quality. Today quality is taken for granted. Now brands ight for an emotional connection as a way of differentiation. Another platform for brands to slug it out is corporate values. Who is the brand, or the corporation behind the brand? Is it socially responsible, environmentally friendly, an animal tester, politically neutral, charitable, or good for its community? The founders of some of the world’s strongest brands, like Guinness, Cadbury and Boots, had huge commitments to their employees’ and communities’ lives, ranging from building spacious towns, to better schools, hospitals, libraries and parks. Today’s brands also need a platform of social responsibility. There’s never been so much emotion in business ‘What will happen is based on emotional drives. That’s why you can’t predict the future. If people worked on pure economic logic, I could predict the future, but I can’t.’ Sir John Browne, BP (in Jones, 2001) The brand components include brand equity, brand identity, brand positioning, brand promise, brand personality, brand values, brand association and, last but not least, the customer experience. They must all integrate with each other. Here is an explanation of each component. The brand components Brand equity Brand equity is the total awareness and perceived value of the brand in the mind of customers. Badly managed brands can result in negative brand equity. Brand equity components include the brand identity (brand name, symbols, jingles, colours, associations Chapter 2 Branding and any sensory features such as unique smells or tactile experiences) and reputation. Brand awareness, brand preferences and brand loyalty are also part of the brand equity. Above all, actual brand experiences contribute to brand equity. Brand essence Brand essence is the brand’s soul and spiritual centre, which draws on its core value(s). It is the brand’s mission statement (how it will help the world) that motivates customers (and employees). The brand essence is the primary functional and emotional beneits, eg Apple Computer’s essence might be ‘artful technology’, while Amazon’s might be ‘unparalleled breadth of selection’ and Hallmark’s might be ‘helping people deine and express themselves’. The brand essence must have 100 per cent recall amongst the whole business team and inluence every decision they make. It starts with what the brand excels at and then connects to an important cultural truth or trend, eg Apple: the world would be a better place if people had the technology to unleash their potential. 39 Brand personality People have relationships with brands just as they do with people. That’s why marketers deine the brand personality carefully. Some brands have subtle, and often unconscious, relationships with customers. A brand’s personality has those human personality traits. What kind of person would the brand be if it were human? Think of brands as actual people. How would the brand talk, dress and walk? What kind of clothes would it wear? What kind of car would it drive? What kind of parties would it go to? For example, the Marlboro Cowboy and the Singapore Girl have very different but welldeined personalities. ‘Hello Gorgeous’ Virgin’s website greets you with ‘Hello Gorgeous’. This is part of the whole brand experience and is consistent with the brand values and slightly naughty brand personality. Brand experience Brand experience is what the customers feel or experience when actually consuming a product or service. This includes all touchpoints of the brand (see below). Somehow this seems to be forgotten by many companies. The actual experience customers enjoy, or suffer, directly affects the brand image. Brand moments are all those moments of contact between the brand and the customer. This includes the website, e-mail responses, telephone responses, handling enquiries, the actual consumption of the product or service, and handling complaints and after-sales, as well as all the marketing communications contacts with the customer. These are critical brand moments. Brand identity Brand identity is part of brand equity. Identity is how the brand looks and is sometimes called the ‘visual narrative’, ie logo, colours and graphics. Brand image, on the other hand, is perception, ie how consumers see the brand based on identity plus all other communications, discussions and experiences. Identity is reality. Image is perception. Identity precedes image. Identity helps customers to remember a brand, recognize it and eventually build associations with the brand values, personality and promise promoted through all communications tools. Brand positioning Brand positioning is how the brand is speciically perceived by customers in the marketplace vis-à-vis the competition, using only two (or sometimes a maximum of three) criteria. Brand positioning is all about perception – how the brand is to be seen, or perceived, by customers using just one or two key variables. For example, a certain drink could be positioned as a young sick person’s drink or a healthy adult’s drink. A positioning statement identiies the best space for a brand to be positioned in the minds of customers. As markets change (customers’ attitudes and needs change) so too brands change to meet customer need. Positioning studies identify what is important to customers, where competitors are positioned (or what they are seen as by customers) and if there are any gaps for a brand to ill or take over. This is brand strategy and absolutely critical to success. Choosing a positioning 1 Is it important to our target customers (will it drive their buying behaviour)? 2 Is it distinctive and speciic? Part 1 40 Communications Background and Theories 3 Is it sustainable or can the competition copy it? 4 Can the brand deliver it? of personal best, of being part of a community of athletes. The brand allows people to reconnect with an Olympic ethos that sits somewhere deep inside the psyche. Brand promise Brand promise or proposition is what the brand offers the customer. For example, Perrier might be a premium-priced carbonated mineral water with unique packaging, etc. It is quite product related as opposed to consumer beneit related. Another brand of water might be the healthiest water for your body. The actual proposition lows from the positioning. ‘Do not relax until you have identified the irreducible core of a brand – what drives its connection with consumers. This will mean getting inside consumers’ heads, and understanding deep-seated motivations and thought processes. Braun (2004) Brand role What role does this brand play in target customer lives? The brand role is an extension of brand personality or lifestyle, or as a social facilitator. Where does it it in the life of the customer? Is the brand a champion, a chum, a comforter, a confessor, a conscience, an enabler, an expert, a friend, a guide, a guru, etc? For example, Red Bull might be a ‘portable comforter for tired people’ or Ryanair possibly enables people to access Europe. Brand values Brand values are not necessarily seen, as they are declared internally. Imagine the brand as a person. What does your brand believe in? What does it stand for. What standards does it attain? How should it behave? Brand values are a belief system or a way of working and communicating. Mose (2003) asks: Which values are so inherent in your company that, if they disappeared, your company would cease to exist as it is? Thousands of companies disappear every year. So why has your company survived? Why are investors still investing in your company? Why do your customers still buy your product? Why do people come to work for your company? Why do you still work for your company? These questions can help determine your company’s true core values. Brand vision Brand vision is what the brand should be. In Virgin’s case it might be to provide a service that is ‘the people’s champion and which shakes up the status quo’. In Nike’s case the vision is one of achievement, Sensory branding may become more of the brand experience, as trademark regulations in almost all countries are accepting applications for registering components of the brand that incorporate all ive senses. Lindstrom (2005) reported that: decades ago, Texas developed the Texas touch, albeit on their calculators. Texas was one of the irst companies to actually trademark the speciic ‘clicks’ – the feel of the number pad on their calculators. The interesting fact is that users of the product may not recognize Texas’s logo, but they still recognize the ‘touch’. Singapore Airlines currently has 9 patents including a patent on the Stephan Florida Smell – the characteristic ‘Singapore Airline smell’ of the hot towels served onboard. Kellogg’s invested in the power of auditory stimulus, testing the crunching of cereals in a Danish sound lab to upgrade their product’s ‘sound quality’. We all recognize Intel’s jingle even in other brands’ advertisements. Brand touchpoints are sometimes called ‘brand moments’ or ‘customer touchpoints’. Touchpoints are anywhere the brand touches the customer, eg packaging, advertisements, websites, telephonists, sponsorship, events, etc. While customers are waiting on the phone, what brand experience do they experience? While they are receiving a bill, letter, fax or e-mail, what experience do they have? These are part of the brand experience. Marketers need to pinpoint the relevant attributes that distinguish the brand and the touchpoints that can deliver these (in order of importance). This requires input from everyone – from CEO, MD, marketing, operations and sales teams to advertising people and webmasters. Chapter 2 Branding One of the ultimate touchpoints for a brand is experiential marketing – traditionally live events ofline where customers get to interact with the brand in a new and immersive environment. ‘Great marketers do not sell products. They evoke emotion.’ Scott Farrell (2008) here are the four main steps in the process: brief, concept generation, concept development and rollout/delivery. Figure 2.1 shows the process required to create and maintain strong brands. A clear brief covers details of the target market, required brand role, personality, values, positioning, etc. Concepts or ideas are generated. One or two are selected and developed, and inally one is rolled out as the new brand. What’s missing in this process? Research is missing. Research is required before and after each stage. So now the brand development process reads: The branding process A big prize awaits brands that can develop deeper and longer-lasting brands with their customers. Marketers should treat the word ‘brand’ as a verb and not a noun, as branding is a continual process. Brand building and brand maintenance are, in fact, a core competency. Outstanding marketers use a development process when creating an advertising campaign, an exhibition, a website or an actual brand. They also use it when reviewing and updating a brand, since brands have to be redeined for a new era (otherwise markets can move away from old, outdated brands). The best brand stewards or brand guardians have an inbuilt review process to ensure the brand is kept fresh. They ensure the brand does not allow obsolescence to creep into it and tweak it if necessary. So, whether you are creating a brand new brand or maintaining an existing brand, F I g u R E 2 .1 The brand development process 41 F I g u R E 2 . 2 The brand development process including research Research BRIEF Research CONCEPT GENERATION Research BRIEF CONCEPT DEVELOPMENT CONCEPT GENERATION Research CONCEPT DEVELOPMENT ROLL OUT/DELIVERY ROLL OUT/ DELIVERY Research Part 1 42 F I g u R E 2 .3 Communications Background and Theories The complete brand development process Research BRIEF Research CONCEPT GENERATION Research CONCEPT DEVELOPMENT Identify long-term customers, their needs (including aspects of a brand that drive behaviour) and key brand moments or touchpoints. Identify brand personality, values, associations and promise. Identify competitors and trends. Take all the preceding research and summarize it into a one-page brief highlighting target markets, brand personality, positioning, values, etc. More market research to identify ideal brand personality, values and promise – sometimes carried out by the agency or design team. Generate several creative ideas or concepts. Concept research, eg focus groups to discuss initial concepts, identify the best concepts and identify other questions or issues for further research. Take the chosen concept and develop it into finished artwork. Research Final concept testing, eg hall tests and test market – often easier to do with advertising concepts than brand concepts. ROLL OUT/ DELIVERY The biggest cost of any brand development is its establishment on all stationery, buildings, cars, etc. Staff buy-in, training and motivation. Research Measure and improve: tracking studies (eg independent brand popularity rankings or studies). Measure staff performance and customer satisfaction. Research In order to explore the brand opportunity, research is used at the early stage of a brand’s development (way before any brand names, logos and colours). Target markets are analysed, buyer behaviour drivers explored, brand personalities deined and the most cost-effective brand moments identiied. Successful brands use a platform of information to help to nurture the brand. Initial exploratory research is used to: ●● ●● ●● ●● ●● ●● identify long-term proitable customers; develop a deep understanding of the customer; identify aspects of a brand that drive behaviour; identify the emotions that drive brand behaviour; identify personality, values, associations and the promise; identify critical brand moments – or critical touchpoints; Chapter 2 Branding ●● identify the most cost-effective, high-impact brand moments. 43 Invite a brand into your life Let’s consider each of these. Identify long-term profitable customers Do not invest branding efforts in unproitable segments (particularly those with weak long-term potential). The proit potential of each segment needs to be measured. Also watch out for trends that may affect the relevance of the traditional segmentation approach (eg size, income, age, ethnicity, consumption patterns, loyalty, locations, lifestyles, needs and attitudes), eg the business traveller hotel segments may be changing from service-oriented business travelling to value-driven business travelling and luxury-driven business travelling. The latter may split into ‘fashion seeker’ segments (who see their hotels as a way of expressing who they are) and ‘escape seeker’ segments (who want to feel pampered and far from the pressures of business). Identified trends are a marketer’s friend. Develop a deep understanding of the customer Who, what, why, where, when and how were Rudyard Kipling’s six wise old friends (questions). Outstanding marketers can answer all of these questions about their customer segments. The most dificult is ‘why’ – why do customers buy? (See also Chapter 4.) Excellent marketers know their customers better than they know themselves. A deep understanding of the customers is required, eg a hotel might uncover that the core need underlying the desire for comfort is to ‘feel as though I’m at home while I’m away’. As desires change, trends must be watched continuously to ensure the right offers are made, eg some retail sectors have discovered that speed is now far more important to customers than credit card facilities and accordingly offer cash-only transactions. An airline may have to prioritize between easier upgrades, more onboard services, faster check-in, a bigger baggage allowance and more frequent-lyer miles. Getting the proposition right is critical when building brands. ‘Marketers need a deeper understanding of what makes people invite certain brands and propositions into their lives and what makes them reject others.’ Fauconnier (2006) Identify aspects of the brand that drive behaviour A brand’s speciic features may clearly distinguish the brand from competitors but not be important to customers. This is what McKinsey’s refer to as the ‘fool’s gold of branding’. Different but non-important features are irrelevant if they do not drive customer behaviour. Without knowing which features really do affect customer behaviour, an organization can squander limited resources promoting unwanted aspects of the brand. It’s a little bit like getting high satisfaction scores but wondering why customers are leaving in droves. You’re probably measuring the non-important features that were important in previous years. Customer desires change, and so trend spotting and brand adjusting are required to keep brands up to date and out of the great brand graveyard in the sky. Branding requires a deep understanding of human psychology ‘The new marketing approach is to build a brand not a product – to sell a lifestyle or a personality to appeal to emotions. But this requires a far greater understanding of human psychology. It is a much harder task than describing the virtues of a product.’ Economist (2001) Identify the emotions that drive brand behaviour A brand is much more than a product. It is a lifestyle or a personality that appeals to the emotions as well 44 Part 1 Communications Background and Theories as the rational, thinking side of the brain. Emotions are very important. Branding is about creating and maintaining emotional ties. Marketers must probe and discover their customers’ emotions, since they often drive behaviour. Le Pla, Davis and Parker (2003) identiied three triggers to create an emotional tie that ultimately strengthens brand loyalty: 1) congruence with deeply rooted life themes (values); 2) helping the accomplishment of life projects; 3) resolution of current concerns. ‘If all three triggers can occur through the customer’s personal relationship with the brand then it is likely that the customer will see the brand as a friend or partner, or see the brand at the heart of a community of users – where the community becomes a signiicant part of the customer’s life.’ In the US car market, the Mini created huge sales and high brand loyalty when it appealed to the emotions of drivers. The advertisements declared ‘opposition to bigness’ and promised to ‘wage war on SUVs’. The Mini ‘celebrated the joy of motoring’ as opposed to ‘the lobotomized, cruise control movement of most car-transport on America’s highways and streets’. GM’s Saturn also used emotion in car advertisements that said very little about the car but lots about the company’s ideology. The car wasn’t even shown in the advertisements, but the ordinary people who made it were. The ad explained GM’s beliefs and values. The car became the topselling small car two years after launch, with a community built around the brand (some 45,000 customers and families turned up at a factory to meet each other and the company at its open day, which had barbecues, bands and a factory tour). ‘We don’t know how to sell on performance. Everything we sell, we sell on image.’ Robert Gouezeta, ex-CEO, Coca-Cola Identify personality, values, associations and promise Identify the kind of brand personality that relects the ideal personality that the target market aspires to or admires. Build in the values and associations that matter to the target market. Make a very clear simple promise and stick to it – never break it. Identify critical brand moments – or touchpoints These are the places, often beyond the consumption of the actual product or service, where a large part of the total brand experience is really delivered. This is where the customer has a large emotional investment, eg a phone call to customer service to make a complaint. This includes anywhere that customers interact with the brand (phone, store and web, as well as ads and events, etc). Identify the most cost-effective, high-impact brand moments Channel creativity and resources into these highimpact areas. This is where the brand will be enhanced or destroyed. Remember, a beautifully designed logo and clever brand name mean nothing if the website doesn’t work or the customer service person cannot solve the problem. Equally, a wonderful product can be destroyed if it is delivered uncaringly. Service training or website redesign? Which is the priority? Creating a new customer service training programme or redesigning a website? Answer: find the high-impact touchpoints and allocate resources that have the biggest effect on these high-impact touchpoints. Equipped with answers to all of the research questions, we now know what we want and what is the priority. Having completed the research, we can now write the brief. The brief The starting point for any branding initiative is to ask what its objectives are: what is it trying to achieve in the customers’ minds? The brief should include the brand promise, personality, values, associations and positioning (as well as the 3Ms: men/ women, money and minutes – who is responsible for what, how much budget is allocated to creating Chapter 2 Branding this brand, and how much time there is before the launch, testing and concept development stages). Brand logos and clever names come later. A good brief should be written and agreed or signed off by all the key decision makers. As well as deining the target market, the brief includes the brand’s promise to customers. What makes it different? What needs is it fulilling? In addition to target markets, distribution channels and regulatory guidelines, the brief should include brand vision, values, role, personality, positioning, promise or proposition, and essence. An example of promise is Volkswagen promising the most reliable car. Volvo promise the safest. The brand’s personality (the tone, manner and style of how you speak to customers, what you look like and how your staff behave) gives guidelines both for marketing communications and for staff behaviour. Virgin’s personality is consistently irreverent, eg Virgin’s airport luggage-size signs state ‘The size of your bag has a limit – but the size of your ego can’t be too large!’ Brand values are included, as they inluence how you work, your beliefs and your standards of behaviour. The brand’s positioning must be crystal clear. This summarizes all the other questions and is key to marketing strategy. Positioning deines how your brand’s distinctive beneits should be perceived by customers alongside competitive offers. Two important aspects for any brand brief are relevance and differentiation. The proposition must make customers an offer, irstly, that its their needs and, secondly, that the competition cannot (easily) offer. Relevance and difference increase the likelihood of success. But, remember, relevant product differentiators may change over time. A useful aide­mémoire for any brief is SOS + 3Ms, which is taken from the marketing planning system called SOSTAC®. The SOS brief provides a useful framework, as it includes situation analysis (where are we now?), objectives (where are we going?) and strategy (how do we get there?); the 3Ms are men/women (the brand manager and team who decide), money (budget) and minutes (timescale). For more on SOSTAC®, see Chapter 10. A brand that does not stand for something stands for nothing. 45 Concept generation and development The answers to questions about the brand’s promise, personality, values, associations, and positioning give clear guidance to any creative ideas. A good brief saves a lot of time, as it steers creative thinking in the right direction and avoids generating timeconsuming concepts that do not fulil the brand prerequisites. However, once the brief has been signed off, some additional research may be carried out into customers, distributors and even competitors. On the basis of a clear brief and any additional research required, brand names and brand logos can be generated and then researched, with the best one(s) being selected for reinement or development. The inished brand name and logo are then tested once more. Early-stage research should include global use, ie whether the name or the logo has any strange meaning in other key languages, and whether it is protectable. Let us look at brand name development and brand logo development. Brand name development Developing brand names is a specialized business in itself. A brand name should be distinctive and easy to say, spell and remember. It should also be relevant, brief (maximum four syllables) and legally protectable (ie not generic) and lend itself to advertising and promotion. Lastly, a really good name can be used almost globally. Three different approaches to brand name development are: product function; classic names (Latin or Greek); and beneit based. Product function (eg International Business Machines (now IBM) is dificult to protect. The classic approach is more protectable, eg Nike is a Greek name, which relates to the speciic cultural values of the Olympic Games and the gloriication of the human body. Thirdly, beneit-based names are less directly associated with a product or service’s functions and closer to a name that evokes product beneit or even a certain state of mind, eg Nectar for a ‘reward points’ programme. And there are always exceptions to the rule. Richard Branson claims to have named his brand Virgin because he was a virgin when it came to business. Tech giant Cisco’s name comes from the last ive letters of San Francisco, reportedly chosen when the founders were inspired by a drive past the Part 1 46 Communications Background and Theories Golden Gate Bridge en route to register the company. Aldi supermarket’s founder, Albrecht, supposedly combined his name with ‘Discount’. Names need to be distinctive and protectable (to register them as trademarks). Functional or descriptive names are dificult to register, as they may be deemed to be generic words commonly used by others (and therefore owned by everyone). Once a short list of names has been generated, a name search is carried out in the target market (and potential target markets) to check to see if anyone has registered these names already in the same business sector. After that, some simple concept testing in each target market reveals whether the brand name has any negative meanings in different languages, as Coca-Cola discovered in China (see Chapter 9). Without these checks, subsequent opportunities for global expansion are curtailed without an expensive and time-consuming rebranding exercise. Horlicks and Birds eye Fish Fingers – strange but true Nomen est omen – a name is an omen. A brand name therefore is often linked to its intentions, eg Nike. IBM came from International Business Machines, and Microsoft has obvious roots in microcomputers, chips and software. However, Horlicks and Birds Eye Fish Fingers are, perhaps, an indication of the irrational nature of brands as to how their names ever became brands. ing. The acid test for a logo is: distinctive, easily recognizable, memorable and reducible (can work when reduced on to a business card or postage stamp). It should work in black and white as well as colour, since many corporate images appear in black and white in the press. Ideally, the logo should also be symbolic, or relevant to the business, but this is rarely the case. With the growth of the internet it is increasingly important that it works well on-screen, as well as in its more traditional applications. Logos are an important part of the brand identity and often are described as a key component of brand equity, eg Nike’s swoosh and McDonald’s Golden Arches help audiences and customers to recognize the brand instantly and also help to differentiate the brand. A logo also acts as a stamp or guarantee. It should, ideally, relect the values of the brand. Logos can protect a trademark when combined with generic words (as generic words themselves are usually not protectable on their own, but the combination of the word with the logo may be). Good logos (unique, easily recognizable, relevant and well maintained) become icons, and not only are they recognizable but even parts of them are recognizable, such as the Heinz chevron or the ‘M’ in Marlboro. Don King’s hair World boxing promoter Don King’s elevated hairstyle (brushed up 6 inches or more into the air) makes him stand out in a crowded post-fight boxing ring. His unique visual symbol helps to ensure that he is easily recognized and seen to be involved with the big fights. Brand logos The cruciix, the hammer and sickle, the swastika, the red cross or a national lag immediately arouse emotions, feelings, images or interpretations of some kind. Logos are a language (sometimes international) of emotional response. Symbols, shapes and colour all have conscious and unconscious meanings. Visual symbols or devices can also be powerful as a means of increasing awareness by facilitating easy recognition. A logo can act as a focal point to summarize or encapsulate an organization, although it should not be too complex. If an identity needs too much explaining, then it isn’t work- Colour also plays an important part. Colours instantly access our emotions (think of what the colour red does to a bull). Colour also affects our physiological state and propensity to make a decision. Logo development The process of developing a logo is similar to the process of developing any aspect of marketing communications: brief, concept generation (and selection), concept development and inally launch or roll-out. In between each stage, research gives Chapter 2 Branding crucial feedback. This helps to select the best concept, which when guided by feedback (research) is developed into the inal logo design. It does get one last check with more research before roll-out (launch). One UK design consultancy developed a new logo for Saudi Arabian Airlines that looked, to the uninitiated, distinctive, unique and easily recognizable. The logo contained golden palm trees, crossed Arabian swords and a crescent moon and appeared to be suitably upmarket and regal. It contained four major errors: 47 popular anyway). Bovis construction company chose a humming bird, which again itted the above criteria. Others suggest that there was a trend towards humanizing logos, since organizations are all about people. FIguRE 2.4 The Prudential logo 1 the wrong type of palm tree – Saudi Arabia is the number two producer of dates, but the palm tree shown was not a date palm tree; 2 the wrong type of sword – the traditional Saudi sword is a ighting sword, but the sword shown in the logo looked weak, old and ceremonial; 3 the wrong moon – the crescent of the new moon used by Saudi Arabia represents a new beginning, but the proposed crescent was that of an old moon, suggesting ‘the end’; 4 the wrong colour – the old green colour was replaced by cream, which represents hot, barren sand in the desert when Saudi Arabia was trying to irrigate the kingdom and make it green. This conirms the need for designers to invest in detailed research before attempting to develop any design concepts. Designers who neither budget nor plan for research (or several stages of research) vastly increase the likelihood of problems. Worse still, if problems occur after implementation of a new design, the costs immediately spin out of control, and there is a highly embarrassed management team. Research is also carried out into logo trends. In the 1970s, corporate images hardened. The 1980s saw them becoming soft and decorative. Some cynics say that, if you wanted to make an abstract organization look purposeful in the late 1980s, you gave it a face – preferably a neoclassical one. The Woolworths group, on the other hand, changed its name, logo and total identity to Kingisher, which was certainly distinctive, easily recognizable, memorable, and symbolic of its progressive leadership expansion and growth potential (although some argued that the bird had a life expectancy of only one year and that robins and blue tits were more More recently, there has been a trend towards purely graphic devices (in other words, away from igurative symbols). This has been driven by a number of factors. On the one hand, it is part of a general trend towards more direct communications, which has resulted in a stripping out of superluous elements. On the other, the internet has become a more important channel of communication for many organizations. As Mark Wilson of identity specialists Bamber Forsyth says, ‘The lower resolution of the internet and digital television has driven us towards simpler, highly graphic identity elements that are seen smaller, and in more places, than ever before’, eg Google and Amazon. Shanks & McEwan, a waste management business, updated its identity at the turn of the millennium, simplifying its name and adopting a straightforward graphic logo. When introducing the new identity to staff, the company said: We’re linking the phrase ‘waste solutions’ to our name in order to emphasize that we are a problem-solving company. We’re also using the ‘s’ as our symbol to make the new identity more distinctive and memorable. The full stops within the logotype and after the ‘s’ symbol are important. This is our way of saying that we’re the last word in waste management. FIguRE 2.5 The Shanks logo Part 1 48 Communications Background and Theories The logo can be literal (eg Shell), a logotype (a stylized treatment of the company name with no additional symbol, eg Kellogg’s), wordmarks that integrate a graphic element into the name (eg BHS), company initials (eg IBM) or purely abstract. Whichever type of logo is chosen, it is essential to research the choice carefully, particularly in global markets where symbols, colours and words can have very different meanings. end of logos? ‘A logo today has turned out to be a warning sign of a commercial message. The trend is that it will disappear and be replaced by other non-conscious signals – everything from iPod’s whiter ear plugs, to Tiffany’s blue packaging, to the United Colors of Benetton photos or whatever you are imaging. ‘If you look at Formula 1 today, you’ll see that most of the Ferrari cars have these funny red coloured bar codes. That is the secret logo from Marlboro. There’s no logo, there’s no name on it.’ Martin Lindstrom, in Rothery (2009) Roll-out/delivery The roll-out of a brand requires far more than just press launches and lavish branding events. The rolling out of a new brand (or a revamped brand) starts internally. The whole organization needs to be mobilized. The whole organization must live and breathe the brand. This starts with the CEO acting as brand champion and cascades down through the organization by: ●● living the brand; ●● linking operational targets to brand ratings; ●● linking rewards to customer satisfaction and brands ratings; ●● putting brand values in job speciications. Living the brand means internalizing the brand and living its values. What a business does reveals its personality and values far more than any amount of advertising. Any signiicant disconnection between what an organization says about itself and what it actually does will seriously undermine people’s relationship with the brand. Living the brand occurs when employees actively and enthusiastically deliver the brand promise day in, day out. It helps if the brand and brand responsibilities are written into the job description of every member of the team. This is where marketing and HR work closely together. The brand effectively becomes everybody’s business. ‘When you develop a brand the primary audience for it is the employees.’ Ken Morris, Siehel+Gale Do all employees know (and memorize) what the brand promise and brand values are? Do they know what the business stands for? Are they able to tell the brand story in a compelling way to different stakeholder audiences including shareholders, employees, customers and vendors? To ensure that a brand comes to life throughout the organization, ask whether you need structural or departmental changes. It is that important. Consider every aspect of the organization from employee behaviour to premises. Inject the brand DNA into your organization structure. Motivate and train staff Develop operational targets to build the brand. Try linking customer satisfaction scores and brand ratings to operational targets. (You should measure criteria that are important to customers, not those you think are important.) All staff are brand ambassadors. Brand consistency stops a brand from splintering, diluting and ebbing away. Crystal-clear brand guidelines can include templates for all marketing collateral so that brochures, websites and signage are all consistently produced anywhere in the world. The brand guidelines also include the Pantone colours, Logos – an international language ‘Logos, by the force of ubiquity, have become the closest thing we have to an international language, recognized and understood in many more places than English.’ Klein (2000) Chapter 2 Branding size and layout of logos and straplines for a range of different uses, online and ofline, as well as above the line and below the line. At irst a new logo has little or no value because it has no franchise. First it must be associated with the right kind of images, and then its recognition levels can be developed (eg Lloyds Bank’s black horse). This takes time, since initial reaction to change or anything new is often quite negative. Sometimes the initial reaction is one of upset, dislike or disgust, as the new logo does not it in with the previous set of cognitions (and thereby creates ‘cognitive dissonance’ and possibly tension). The value of the logo eventually starts to increase as the years roll by and it becomes better understood. However, it helps enormously if internal marketing carefully brings staff on board throughout the development and ultimately before the launch. Whether the logo trend is towards simplicity, swooshes or sharp-edged internationally understood symbols, the corporate identity demands careful management across all the points of public contact. targets can be linked to building and maintaining the brand (such as measuring relevant customer satisfaction). The brand needs to be embedded into the DNA of the business. This, in turn, helps the company to live the brand, ensuring that all those crucial ‘brand moments’ (when the business interacts with the customer) actually relect the brand. The primary audience for a brand is the employees – as they need to be mobilized to support the brand. Then come the channel partners (distributors). Brand managers need to ensure that the brand is never compromised or tarnished on its journey to the end customer. A fatal mistake some marketers make is an over-focus on external marketing communications (developing advertising campaigns, direct mail campaigns, websites and opt-in SMS campaigns to boost cross-selling and up-selling), rather than ensuring all customer touchpoints are consistently executed. Instigate brand policing Brand managers are brand guardians who need to ensure the brand is consistently used in all touchpoints. Brand maintenance Creating a brand is relatively easy. The dificult part is maintaining a brand. Great brand managers constantly develop or reinvigorate the brand so that it is constantly seen as relevant (not ‘hip’ nor necessarily modern, but deinitely always relevant to the target market). Remember, target markets move and change. The classic Lucozade drink once upon a time was positioned as a sick child’s drink. As the market demographics moved on from a disproportionately large number of children in the 1960s to a disproportionately large number of young adults in the 1980s, Lucozade repositioned itself as a healthy adult’s drink. Today it has moved on again, twisting and tweaking itself to stay relevant to its key target market. Maintaining a brand requires vision, system, determination and people. Mobilize staff and channel partners The brand requires a system that mobilizes the entire organization. Bringing a brand to life requires a completely integrated approach beyond marketing. Operations and HR must develop a system that inspires and motivates all staff to support the brand. Ideally, job descriptions should explain the responsibilities that staff have to ‘live the brand’. Operational 49 Air travel worries? Attention to detailed design management can subconsciously influence air travellers. The same logo, typeface, primary and secondary colours and trim on all visual points of contact help to reassure the traveller, while reinforcing the airline’s identity. The check-in desk logo, signs, colours and trims should be coordinated with the uniform (and badge), ticket holder, baggage tag and departure lounge carpets, right through to the plane’s exterior graphics, interior carpet and even the trim on the china and linen. Without this coordinated corporate identity, cognitive dissonance can set in. There is a subconscious unease or discomfort created by the inconsistent messages. A coordinated identity reduces this often unconscious tension, which in turn creates a more satisfied passenger. The cohesive identity does not make the traveller leap off the plane and scream for joy on arrival, but it might make the subconscious difference next time around when choosing between two airline companies if one airline offers a reassuring sense of order. 50 Part 1 Communications Background and Theories Brand policing is important. If an organization’s identity is not coordinated or managed precisely, confusing signals about the organization go out to different audiences around the world. A splintered identity fragments the corporate image, which in turn dilutes the corporate presence among key audiences. The potential asset (corporate brand) depreciates to the point where it becomes a liability. The organization dilutes its presence and has an uncoordinated image. This sends out disorganized messages that weaken the initial or inal impression left by the organization. A logo displayed prominently in an ofice or on a letterhead makes a good strong statement, but it is the consistent ‘echoing’ of the logo, its exact primary and secondary colours, the speciic typeface and the overall design style on the ‘secondary format’ of products, packages, business forms and employee uniforms, that provides the all-important, if subtle, consistent reinforcement. There is a need to think it through in detail and then to police the usage of all visual points of contact. This is where a design manual guides managers in different buildings and in different countries to specify, in a consistent manner, the exact graphic requirement for every point of visual contact. Sweaty identity In corporate identity terms, attention to detail needs to spread beyond just graphics. The classic 1990 US Hall of Shame reported the following: ‘To upgrade its image in 1982 AT&T told its repair people to wear dress shirts and ties, gave them attaché cases for their tools, and renamed them “system technicians”. But Ma Bell didn’t install air conditioning in its cars. So during the summer the technicians arrived on the job looking like they had just stepped out of a sauna. Said a union official, “It’s hard to have corporate appeal if your shirt is wringing wet.”’ Nash and Zull Products (1989) The importance of consistency applies right across the communications spectrum. In John Murphy’s book Branding (1991), Klaus Morwind Henkel points to consumer research that ‘has indicated that a lack of consistency between the brand name, the packaging and the advertising is subconsciously recognized by the consumer and leads to a feeling of detachment, ultimately resulting in brandswitching’. So it is important to be consistent and to reinforce identity through all the appropriate points of public contact. This should include advertising and all elements of the communications mix, which includes permanent media like corporate headquarters. The logo is just the tip of the iceberg. It is often the most visible part of an organization. A corporate identity scheme may have a logo at its heart, but it will generally include a whole array of other elements, often referred to as ‘visual language’. This may include typefaces, a colour palette, the use of photography and illustrations, a layout style for using these items and even a particular style of written language, as well as briefs for interior design and exteriors of buildings (plus, today, eco-friendly building requirements). The Intel, Oracle, Microsoft and IBM oices ‘Intel’s blue fortress in San Jose is about power and control. Oracle’s shining towers on Redwood Shore are brash testimony to the showmanship of its founder, Larry Ellison. The scattered low-rise blocks at Microsoft’s Redmond campus imply a laid-back informality, but the intense figures trotting along ordered paths suggest a restless insecurity. IBM’s new headquarters at Armonk in New York state is so discreetly tucked into a valley that it cannot be seen until you are almost upon it. It politely curves in an S-shape around the trees and rocks that could have easily been blasted away. For a company that employs 270,000 people and earned revenues of nearly $80 billion last year, it is implausibly tiny. Inside, it is light, open-plan, discreetly high tech, and very, very calm. It is a stealth headquarters, the antithesis of the swaggering IBM buildings from before “The Fall”.’ Economist (1998) A good corporate brand can help sales and boost employee relationships, inancial relationships and media relationships during a crisis. Corporate Chapter 2 Branding branding, however, requires a lot more than just a corporate identity. The impact of a corporate identity programme goes far beyond a logo or a lick of paint. It inluences almost every manifestation of an organization, its corporate headquarters, its staff and even the way they work. All of the components need to be in place. A new logo raises stakeholder expectations. Boards, doors, logos and skunks ‘A new letterhead and a new logo is no substitute for a new board of directors.’ Rodney Fitch (2003) ‘Painting the lavatory door won’t cure the plumbing.’ Bernstein (1984) ‘If you take a lousy low-profile company and give it a major corporate revamp, you end up with a lousy high-profile company.’ Wally Olins (1989) ‘Even if you paint out a skunk’s stripes it will still smell extremely nasty.’ Source unknown Corporate brands and sub-brands An umbrella brand, such as the Virgin brand, can have various sub-brands, such as Virgin Atlantic, Virgin Cola and Virgin Trains. A corporate brand, such as GlaxoSmithKline (GSK), Unilever or Procter & Gamble (P&G), on the other hand, remains in the background and offers an endorsement, while a mainstream brand like Persil can have sub-brands such as Persil washing-up liquid and Persil powder. Invest in the brand asset Constant investment is also required to maintain a brand’s proile to avoid getting buried in the communications clutter. Some companies take the longterm, brand investment view, eg Coke is investing $65 million in sponsoring the Olympics from 2009 to 2021. Constant reviews of brands, and in particular large portfolios of brands, can result in a major 51 strategic consolidation of the brand portfolio, as in the case of Unilever when it cut its portfolio of 1,600 brands down to 400. Brands are under increased challenges today. Brands fade as tastes change, unless of course they are maintained and nurtured carefully to meet the new market conditions. Even in steady-state markets where there are no great trends pulling the market away from the brand, marketers still need to ensure that the brand is policed carefully, particularly as a brand grows globally. Rigorous use of brand guidelines is required here to ensure that exactly the same brand features appear correctly any time and anywhere. Review the brand Brands require constant reviews and investment of energies and money. Brands often need to be reinvented or reinvigorated to avoid being left behind by a fast-changing marketplace. A constant low of market research ensures the brand really addresses customers’ deep needs, which change over time. Otherwise brands fade as tastes change. Constant market research also reveals how the brand is positioned against existing competition and new competitors. As Olins (1989) says, ‘In a complex and changing company the corporate identity [for an overall company] bears a great strain, twisting and turning to it every new requirement. But a good corporate identity should last a generation.’ When does a brand identity become out of date? Can the business environment change and move away from the organization and its values, leaving behind the obsolete, irrelevant and even damaging corporate identity? When do the staff and other audiences get tired of it? Mergers and acquisitions sometimes necessitate a new corporate identity. Occasionally, legal reasons force a change. Sometimes overseas ambitions are restricted by the use of a home-grown logo (eg BT’s old logo clashed with that of overseas companies). Shell reviews and updates its corporate identity. The shell device has served it well, despite its being a petrol company with a ‘high explosive’ name. Global markets are constantly moving and changing, so much so that some organizations fear they are being left behind by the global update. A review and redesign help an organization to keep abreast of trends and avoid being left isolated by a redundant identity. Part 1 52 F I g u R E 2 .6 Communications Background and Theories The Shell logo and its redesigns Aggressive hand-held torch of learning gets the chop The National Union of Teachers’ 25-year-old ‘hand-held torch of learning’ was considered to have become ‘too strident, aggressive and uncaring, with none too desirable connotations of the Conservative party and the Greek fascist party’. Although it was designed in the 1960s, it had a 1930s look. It appeared that the time was right to move the logo on but keep it relevant and maintain the link with the union’s heritage. The updated design shows an outstretched hand embraced by the spelt-out words of the NUT, tying the symbol together as one cohesive form, either male or female, adult or child, to avoid alienation. F I g u R E 2 .7 Hand-held torch of learning Sometimes new brand identities are developed simply because old management wants to say something new or a new CEO wants to announce he or she has arrived. This is a dangerous game, as a new brand identity or a new corporate identity raises expectations that the organization has new ways of working, new customer beneits or new customer experiences. Lipstick on a pig ‘Long before the phrase “lipstick on a pig” became an election issue, I had warned of the dangers of putting “lipstick on a bulldog” – that is, making superficial cosmetic change in organizations rather than looking at the real underlying problems. The problem with putting lipstick on a bulldog is that it is hard to wrestle the bulldog to the ground long enough to do it and then doesn’t change the nature of the beast . . . ‘George Orwell warned of the evils of lipstickclad bulldogs that co-opt words and distort their meaning. In his book 1984, the war department was called “The Ministry of Peace”.’ Kanter (2009) Chapter 2 Branding Constant watch: the customer experience Brand maintenance also requires careful attention to the customer experience (which as we’ve seen is often very poor). Poor product quality and sloppy service destroy brands more quickly than any large advertising budget can build them. Poor product or service quality, complicated order forms, late delivery, incomprehensible customer service agents and error-laden websites all destroy a brand. Slow e-mail responses damage the brand. Non-responses can kill it. Attention to the customer experience ofline and online is important. Online brands still deliver offline (eg Amazon books); hence marketers monitor the ofline aspects carefully also. And all brands (online and ofline) have opportunities to extend the brand experience online by layering in new and exciting value-adding beneits. They add some ‘sizzle’. Embellishing and extending the brand experience online can be achieved with ‘sizzle’, which cannot be found ofline. Nurturing brands can include lavishing wonderful brand experiences on customers, otherwise known as experiential marketing. Nurturing brands also includes engaging customers and moving them up into higher levels of brand engagement (see Chapter 1, ‘The ladder of engagement’). Finally there is the experience – the quality of the experience, both online and ofline, directly affects the brand and its image. Remember, sloppy websites, unanswered e-mails and comments, unpleasant receptionists and any other touchpoints can damage the brand, if not managed carefully. Many marketers now see the online opportunity to build both the brand image and the overall company value. In just a few seconds sloppy websites destroy brands that took years to build. Social media now engages the customer in new ways (as discussed in Chapter 1). The brand’s own website can add deeper, richer brand experiences by adding some ‘sizzle’ (Chaffey and Smith, 2008). Ask ‘What experience could a website deliver that would really wow customers?’ 53 What experience could a website deliver that would really add value for customers, be truly unique and be representative of the brand? Ultimately ask ‘How can my website help my customers (or other stakeholders)?’ Here are a few examples: ●● ●● ●● ●● ●● A camera company can help customers to take better photographs by simulating taking photographs with different settings and allowing customers to compare and contrast the results (and can also give tips on how to maintain cameras and protect ilms and photos, and can invite customers to send their best photos in for a competition). A travel company can give you a ‘virtual friend’. After you tell the company what your interests are (via an online questionnaire), the ‘friend’ can suggest ideas for things you would like to do in the cities you choose to explore. Cosmetic companies offer online games, screensavers, viral e-mails, video clips and soundtracks to help customers use the products. Food companies online offer printable recipes, video demonstrations and discussion forums, as well ‘ask the expert’ sessions. Chocolate companies generate ideas for desserts (using the chocolates), dinner party games and designs for table layouts. Create customer engagement If marketers understand customer engagement better than their competitors, then this helps them develop brand loyalty. How else can the ideal customer engage with the brand? The ideal customer, or most valuable customer, does not have to be someone who buys a lot. The ideal customer could be an inluencer who may be a small irregular buyer who posts ratings and reviews. The reviews can inluence another 100 people. ‘Engaged customers’ are probably going to become brand zealots if they are kept engaged. Marketers can easily monitor the type, quantity and frequency of blog posts, forum discussions, reviews, proile updates, etc. This identiies opportunities and also acts as an early warning system to any possible future problems. Consider targeting brand evangelists rather than just purchasers. Part 1 54 Communications Background and Theories A customer who doesn’t care about the product or service is likely to be less committed or less emotionally attached to the irm supplying the product or service. On the other hand, a customer who is engaging is likely to be more emotionally connected to the brand. Marketers need to know about the sentiment, opinion and afinity a person has towards a brand. This is often expressed through repeat visits, purchases, product ratings, reviews, blogs and discussion forums and, ultimately, the person’s likelihood to recommend a friend. Ask ‘How well are we measuring engagement amongst different online audiences?’ and then close the loop by using the data to identify the advocates and deliver more relevant communications. Engaged customers = customer engagement = stronger brands. Brand expansion/strategy Brand extensions and the brand portfolio There are few single-product companies. Many companies start up as single-product companies, but they soon develop other products as the company grows and markets fragment. A product line is a string of products grouped together for marketing or technical reasons. Guinness started as a singleproduct company. Since then Guinness has extended the product line to ill market needs as they emerged. It has also expanded beyond the basic product line of beers. It also offers whiskeys, soft drinks and more: different lines of product. Add all the product lines together and you get the product mix. Finding the right product mix is a subtle balancing act. How far should a product line be extended? How many different lines should be in the product group? Advantages ‘Brand (or line) extension is attractive but dangerous’ (Smith 2003).There are advantages and disadvantages lurking behind this apparently easy option. It is one of many different ways of increasing sales by extending an existing brand name on to a new product. Some feel that this reduces the risk of launching an unknown brand. Using a recognized brand name on a new product can give the new product immediate presence in the marketplace – customers can recognize, trust and try the new product more easily. This also creates savings in advertising and other promotions, so as the original product brand matures the extended brand ensures some continuity and survival of the brand in the longer run. Generally, brand extensions work if the new product actually satisies a real relevant need amongst customers and they like the idea. Ultimately the new product should enhance the promise of the original brand as opposed to cannibalizing it. Careful consideration must be given to what happens if the extension fails. Brand extension is a tempting option, as it uses the same sales team with the same distribution channels and often the same customers. It can also ill or occupy any unoccupied positions in the market, which might otherwise invite unwanted competitors into the market. Finally, a full product line builds the image of the complete player, a big player, which in turn suggests reliability. Disadvantages But there are disadvantages lurking behind brand extensions and line extensions. A low-quality product will damage the original brand’s reputation. A really good new product can also cannibalize the original product if the new product merely takes sales away from the old product. When contemplating Failed extensions ‘Unfortunately, the hard truth is that many brand extensions don’t work. Each brand has its own special positioning. The extension won’t succeed if it works against that. Any time a brand is extended, its focus gets blurred in the minds of consumers. When the image is unclear, the original promise is broken. When the promise is broken, the brand loses value and me.’ Jacobson and Knapp (2008) Chapter 2 Branding brand extension, ask how much of the ‘extra sales’ actually replace existing sales of the original product. Constant brand extensions may dilute the brand’s strength and its unique positioning, particularly if the extensions are not appropriate to the central brand. When easyJet extended into easyInternetcafes it was reported to have lost £75 million (Taylor, 2004), whereas easyJet Holidays appears to be a better it. Although Virgin is another successful company and has enjoyed a variety of brand extensions, some of its brand extensions have failed, including Virgin Vodka, Virgin Jeans, Virgin Brides, Virgin Balloons and Virgin Cosmetics. In a sense, product deletion should be a standard activity, as companies constantly replace old products with improved ones. Some corporations like to balance the product portfolio by ensuring they have a minimum of 30 per cent of ‘new products’ (products developed in the last ive years). Phasing out and deleting products that have had their day is a delicate task. They have to be withdrawn carefully and gracefully without damaging employee morale or upsetting small groups of customers who may still want spare parts or simply to continue consuming the product. Interestingly, one of the world’s best marketing companies, Unilever, chopped its product portfolio from 1,600 to 400 in 2004. Although criticized by some, the Boston Matrix can help to balance the product portfolio, as it helps managers identify which products generate surplus cash, which need extra marketing resources to support them and which need a lot of resources. ‘Cash cows’ (high market share in a low-growth market) generate the surplus cash that in turn funds other products, such as the high-growth ‘star’ products. Low-growth (and low-market-share) ‘dogs’ often absorb a disproportionate amount of management resources. This analysis is from a cash low perspective as opposed to the customers’ perspective. Riezebos (2003) on the other hand analyses a brand portfolio from a competitor perspective. Different types of brands have different roles to play within the brand portfolio. Bastion brands are the key brands, usually the most proitable, with a large market share. Their success attracts competitors. Some companies expand their portfolios to protect their brands by introducing ‘lanker brands’ and ‘ighter brands’. The lanker brand may be priced differently or have a different set of attributes and 55 tends to fend off any new competitors that are considering occupying that space. Fighter brands are lower priced and compete with existing or potential competitors trying to occupy lower price points (the quality perceptions need to be shifted downwards so as not to dilute the bastion brand). Many organizations prefer to lose some premium-priced brand sales to an internal less proitable brand than to lose the sales to competitors. However, today many companies of a certain size reject brands that will not become star performers, as they prefer to direct their limited resources to major winners. The tasks of product extinction and extension require rigorous analysis of customers, competitors and overall trends. The marketer’s task of being the guardian of the brand is a challenging one. Brand summary and the challenges ahead Twenty-irst-century brands face new challenges, including hyper-competitive markets, unknown competitors (category-less and borderless), shortened product life cycles, more demanding, time-pressed and information-fatigued customers, media fragmentation and message clutter, anti-brand pressure groups, own brands and two other internal challenges – short-termism and fear of the boardroom. The rise of the anti-brand A direct challenge to brands are the ‘ethical antibranders’, who attack premium priced branded training shoes (allegedly made in sweatshops in the Far East). Various anti-brand feelings have been aroused by many publications, ranging from Vance Packard’s 1957 classic The Hidden Persuaders to Eric Schlosser’s Fast Food Nation (2002) to Robert Frank’s Luxury Fever (2000) to The World Is Not for Sale (2001) by José Bové (a French farmer who is best known for vandalizing a McDonald’s restaurant) and François Dufour. Brands are vulnerable to a rising tide of antipathy to branding and marketing. The demise of major corporations like Enron has further fuelled a cynicism towards big business. However, Naomi Klein’s No Logo: Taking aim at the brand bullies (2000) articulated a certain kind 56 Part 1 Communications Background and Theories of brand frustration where global brands represent, in her words, ‘a fascist state where we all salute the logo and have little opportunity for criticism because our newspapers, TV stations, internet servers, street and retail spaces are all controlled by multinational corporate interests’. The ubiquitous global brand bullies effectively reduce the colourful variety of choice and force a grey cultural homogeneity on customers instead of an array of interesting local alternatives. Even the Economist magazine back in 2001 pointed the inger at today’s global businesses: ‘So companies are switching from producing products to marketing aspirations, images and lifestyles. They are trying to become weightless, shedding physical assets by shifting production from their own factories in the irst world to other people’s in the third.’ This provides all the more reasons for brands and the businesses behind them to behave ethically and to demonstrate publicly their social responsibility. This includes environmental policies (and actions), supporting charitable endeavours and local communities, racial integration, not supplying or contributing to military regimes, and political donations. (See Chapter 11.) And of course there are the brand haters who create anti-brand websites dedicated to venting their frustrations and anger about certain brands, usually resulting from alleged poor customer service, eg www.aolsucks.com, sometimes even without consuming the brand and simply because they don’t like the brand, eg www.ihatemanunited.com. As Dell has demonstrated by listening to these criticisms, addressing the reasonable issues and ixing them can strengthen a brand and grow its relations and sales. The rise of the own brand As major retailers lex their muscles and demand that suppliers also create and deliver the retailers’ own brand in almost every category, it is easy to understand why brand owners are concerned, particularly when they have to deliver a constantly high-quality own brand also. Many retailers’ brands are so strong that customers are happy to give them more and more share of their wallets. Look at Tesco: what can’t they sell to customers now that customers trust the brand to deliver a consistent quality at reasonable prices? The brands do, however, have a source of continual competitive advantage, and that is continuous innovation. Although own brands are getting smarter and smarter, Saatchi & Saatchi CEO Kevin Roberts (2009) says: The game has changed. Own labels deliver quality. They are as strong in many categories as traditional consumer brands. Own label tend to deliver quality now. But will they deliver innovation? No. This is where real marketing comes into play. A big retailer cannot possibly develop the innovation in a category that a P&G, Unilever or a Nestlé can. So as long as those companies continue to keep their core, their focus on innovation, they will continue to develop new value in this reclaimed world. Short-term sales versus long-term brand building Brands are not for the short term. They are strategic assets that need to be nurtured and grown over the long term. Think of them like people. They need to grow and be nurtured. After that, relationships can last a lifetime and beyond, as some brands are handed down from generation to generation (if the brands manage to stay relevant to the needs of the next generation). There is a constant tension between sales and marketing and, for that matter, inance and marketing. Quarterly-results-driven businesses require quarterly results, which usually means seeing quarterly growth in sales and proits. Brands do not deliver quick returns, particularly new brands and repositioned brands. They take time to research and develop. They take time to build relationships. Although some brands have developed in one or two years, these are exceptional. Certainly brands emerging within a quarter is, even today, highly unlikely. The impatience of the CFO or the board or the shareholders may jeopardize the long-term work of the brand builder. This also manifests itself in the advertising debate: whether a campaign is sales or brand building. Ad campaigns can of course do either, but rarely can do both really well. One usually takes priority. Yes, campaigns can deliver sales and grow a brand, but each objective has different priorities. Brands are for the long term and can secure higher sales, higher prices and higher proits. These are some of the factors that can bring the marketer back into the boardroom. Chapter 2 Branding Brands – the bridge between marketing, inance and the boardroom Marketers may have slipped from the potential heroes of the boardroom when back in the 1980s brands were suddenly touted as a ‘sureire means of differentiation in the face of increased competitive pressures and rampant product proliferation activities. They were secret weapons of sorts: legallyprotectable assets that brought unrivalled powers to the irms that developed them’ (Madden, Fehle and Fournier, 2002). A study revealed that shareholders should insist on systematic performance feedback on branding. It actually suggested systematic performance feedback on all key items in the balance sheet including branding. However, it suggested that very few companies had this optimal balance between inancial performance and branding (Ohnemus, 2009). The report went on to say that ‘the board of directors should systematically assess and monitor the strategic branding position of their company and how their branding investments are performing against key competitors’. Board directors acknowledge the value of brands but do not understand how brands are built and sustained and, in particular, how marketing makes this happen. What has marketing got to do with brand building? ‘To quote David Bell, Chairman of the Financial Times: “The value of brands as shareholder assets has been widely recognized, but the crucial role of marketing and advertising in building this brand equity and so enhancing these assets now on the balance sheet is still not fully recognized.”’ Beenstock (1998) The irony of it all is that, now that brands appear on the balance sheet, they are recognized as a inancial asset of the business, yet budgets required to grow them are considered to be ‘expenses rather than investments’ (Ohnemus, 2009). When Harvard’s Madden, Fehle and Fournier (2002) suggested that ‘the demonstration of brand 57 value to stockholders would prove most useful in reconceptualizing marketing from expense to investment’, an opportunity knocked for marketers. But the lingering, unanswered question remains to this day, ‘Do brand-building investments really pay off? Lacking conclusive evidence concerning branding and the bottom line, brand “investments” remain “expenses,” and the promise of the brand remains unfulilled.’ Marketers must learn the language of inance and apply it to marketing. Marketing language and jargon have been charged as ‘inaccessible and disconnected from the inancial metrics by which irms are ultimately steered’ (Davis, 2001). If there is no common language, there is no communication and with that comes no understanding of marketing’s crucial role in brand building. The adversarial relationship between inance and marketing ‘Most companies and CFOs will tell you that there is an adversarial relationship between finance and marketing. The CFO is viewed as the person who wants to cut the marketing budget, and marketing fails to effectively explain the return on investment for communications. The result is a wall between the two departments, and no connections between.’ CFO of Ekco Group Inc (in Banham, 1998) In the words of the late great Peter Doyle (2000): Marketing managers rarely see the necessity of linking marketing spending to the inancial value of the business. Given today’s enormous pressure on top managers to generate higher returns to shareholders, it is hardly surprising that the voice of marketing gets disregarded. The situation will never be resolved until marketing professionals learn to justify marketing strategies in relevant inancial terms. If managers can show that marketing will increase returns to shareholders, marketing will obtain a much more pre-eminent role in the boardrooms of industry. The discipline itself will also obtain more respect for its rigor and direction. 58 Part 1 Communications Background and Theories Marketers have much internal marketing work to do. But, with some work, the doors of the boardroom will be lung wide open for marketers so they can secure funds to develop great brands and, in return, deliver dividends back to shareholders. Conclusion research is carried out before and after each step. Brand maintenance focuses on the customer experience, extending it online and considering customer engagement as a way to move customers up the ladder of engagement towards brand zealots. Experiential marketing is also considered. Finally, brand expansion/strategy has both advantages and disadvantages. The strategic corporate brand is also explored. Brands are being challenged. However, brands are powerful assets that generate many beneits to both an organization and its customers. Surprisingly, many brands allow themselves to self-destruct with sloppy service and inconsistent brand applications. Brand components include name, logo, colours, positioning, promise, personality, values, association and experience. Brand creation is a process that starts with a brief and goes through concept generation, concept development and roll-out. Copious Strong brands survive through careful management It is no accident that these brands have been around for over 100 years: Bass, Coke, Kellogg’s Corn Flakes, Guinness, Pears Soap. key points from Chapter 2 ●● Brands help customers and the organizations behind them. ●● There is a disciplined approach to the brandbuilding process. ●● Branding and why is a strategic issue and can create competitive advantage. ●● Brands, like any other asset, need to be maintained and require resources. references and further reading Anderson, C (2006) The Long Tail: Why the future of business is selling less of more, Hyperion Books, New York Atkin, D (2004) New priests for the new religion, Marketer, September Aufreiter, N, Elzinga, D and Gordon, J (2003) Better brands, McKinsey Quarterly, 4 Banham, Russ (1998) Making your mark: Time for inance to play a role in brand management, CFO: The magazine for senior inancial executives, 14 (3), 1 March Bayley, S and Mavity, R (2008) Life’s a Pitch, Corgi Books, London Beenstock, S (1998) Raising brands’ stock in the City, Marketing, 26 November Bernstein, D (1984) Company Image and Reality: A critique of corporate communications, Holt, Rinehart and Winston, London Bové, J and Dufour, F (2001) The World Is Not for Sale, Verso Books, London Braun, T (2004) The Philosophy of Branding, Kogan Page, London Chaffey, D and Smith, P R (2008) eMarketing eXcellence, 3rd edn, Kogan Page, London Clifton, R (2004) The big debate, Marketer, July/August Davis, S (2001) Taking control of your brand’s destiny, Brandweek, 15 October Doyle, P (2000) Value­Based Marketing, Wiley, Chichester Economist (1998) The rebirth of IBM – blue is the colour, 6 June Economist (2001) Who’s wearing the trousers? 6 September Eltvedt, H and Flores, L (2005) Beyond online advertising – lessons about the power of brand Chapter 2 Branding websites to build and expand brands, ESOMAR Online Conference, Montreal, June Farrell, S (2008) A million dollar branding secret, How-to Internet Marketing Network Fauconnier, C (2006) Humanising the marketplace: A manifesto for brand growth, Admap, 471, April Fitch, R (2003) in Balmer, J and Greyser, S (2003) Revealing the Corporation: Perspectives on identity image reputation, Routledge, London Fletcher, W (2010) author, lecturer and former chairman of the Royal Institution in conversation with PR Smith Frank, R H (2000) Luxury Fever: Money and happiness in an era of excess, Princeton University Press, Princeton, NJ Harris Interactive (2006) Second annual Customer Experience Impact Report Hooker, S (1991) Applying psychology to market research: The theory of raised expectations, Market Research Society Newsletter, January Jacobson, T and Knapp, K (2008) Brand extensions, Vistage chief executive organization online papers Jenkins, N (1991) The Business of Image, Kogan Page, London Jones, B (2001) The Big Idea, HarperCollins, London Kanter, R (2009) The downsides of branding, 23 July, http://blogs.hbr.org/kanter/2009/07/ the-downsides-of-branding.html Kapferer, J (2008) The New Strategic Brand Management, 4th edn, Kogan Page, London Klein, N (2000) No Logo: Taking aim at the brand bullies, Flamingo, London Le Pla, F J, Davis, S and Parker, L (2003) Brand Driven: The route to integrated branding through great leadership, Kogan Page, London Lindstrom, M (2005) Brand Sense, Kogan Page, London Madden, T, Fehle, F and Fournier, S (2002) Brands matter: An empirical investigation of brandbuilding activities and the creation of shareholder value, Working paper, Harvard Business School, Boston, MA Millward Brown Optimor (2010) BrandZ Top 100 Most Valuable Global Brands, Millward Brown Optimor, New York Mose, M (2003) United We Brand: How to create a cohesive brand that’s seen, heard, and remembered, Harvard Business School Publishing, Boston, MA Murphy, J (ed) (1991) Branding: A key marketing tool, Macmillan, London Nash and Zull Products (1989) 1990 US Hall of Shame, Universal Press Syndicate, Kansas City 59 Neumeier, M (2007) Zag, New Riders, Berkeley, CA Ohmae, K (1994) Interview with P R Smith, Marketing CDs, P R Smith Ohnemus, L (2009) B2B Branding: A inancial burden for shareholders?Business Horizons, 52 (2), pp 159–66 Olins, W (1989) Corporate Identity: Making business strategy visible through design, Thames & Hudson, London Olins, W (1996) The New Guide to Identity, Gower, Aldershot Olins, W (2003) On Brand, Thames & Hudson, London Packard, V ([1957] 1960) The Hidden Persuaders, Penguin Books, Harmondsworth Peters, T (2003) Re­imagine, Dorling Kindersley, London PRTV (1993) Corporate Image Video, PRTV, London Reynolds, J, Cuthbertson, C and Bell, R (2004) Retail Strategy: The view from the bridge, Elsevier Butterworth-Heinemann, Oxford Riezebos, R (2003) Brand Management: A theoretical and practical approach, Pearson, Harlow Roberts, K (2009) Short cuts (part 2), 6 July, http://www.saatchikevin.com/sisomo/ Speeches_Ideas/KR_Short_Cuts_part_2/ Ronay, A (2004) Emotional brands, Marketer, 5, September Rothery, G (2009) All in the mind, Marketing Age, 3 (6), November Schlosser, E (2002) Fast Food Nation, Penguin Books, Harmondsworth Smilansky, S (2008) Experiential Marketing, Kogan Page, London Smith, P R (2003) Great Answers to Tough Marketing Questions, Kogan Page, London Taylor, D (2004) More bangers for your bucks, Marketer, 5, September Universal McCann (2007) Power to the people: Tracking the impact of social media wave, 2.0, May Valentine, V (1988) Signs and Symbols, Survey, Market Research Society, London Yeong, C L and Yu, H-y (2006) Chinese president’s itinerary for U.S. visit: Gates irst, Bush later, International Herald Tribune, 13 April See Kenichi Ohmae in the video browser in P R Smith, Marketing CD, No. 6: Product decisions, talking about obsoleting strategies. The section on the product portfolio considers how to balance product lines and mixes, old and new. He also talks about how he reduces the axes of risk. 60 THIS PAGE IS INTENTIONALLY LEFT BLANK 61 03 Customer relationship management lEaRNINg ObjEcTIvES By the end of this chapter you will be able to: ●● Discuss the importance of relationship marketing and how CRM creates competitive advantage ●● Outline the CRM planning process ●● Understand the beneits and resources required by CRM ●● Identify and avoid the classic CRM errors ●● Present the case of long-term brand building vs short-term sales growth Introduction to CrM 62 What is CRM? 62 The power of CRM 62 Company beneits 63 Resources required 63 CRM failure 64 CRM success 66 Personalization and tailored ofers 77 Credibility and trust 79 CrM creation and maintenance 80 Writing a CRM brief 80 CRM system creation, development, testing and roll-out 81 CrM components required 68 CRM maintenance 82 IT architecture 68 Control issues 83 Human architecture 69 Database 69 Data analytics 70 Processes: general 74 Processes: detailed contact strategies 75 CrM summary and challenges 84 references and further reading 86 Further information 87 62 Part 1 Communications Background and Theories Introduction to CrM What is CRM? Some call it customer relationship management (CRM); others call it customer experience management (CEM); others call it customer managed relationships (CMR). Carefully managed brands help customers develop relationships with brands (see Chapter 2). There is a direct overlap between nurturing a brand and nurturing customer relationships. CRM is a set of processes, usually linked to a database, that help an organization keep in contact with customers and deal with their requests, complaints, suggestions and purchases. Think about how personal relationships grow stronger and stronger: listening, understanding, responding and communicating; understanding what is important and what makes a difference; delivering it regularly; never breaking the promise; occasionally surprising or even delighting the other person; caring about the person; helping the person when things go wrong; always being there for the person. The same applies to customer relationships. It is not rocket science. Even remembering someone’s name makes a difference. People generally like it when their names are remembered, particularly when their preferences and needs are remembered. How nice is it when a waiter or receptionist remembers a customer’s name? ‘Your name is the most important sound in the world’ say the classic sales training programmes. Remembering names and needs (and satisfying them) helps to build relationships. This applies to a restaurant with 50 customers or a website with millions of customers. Remembering a customer’s particular needs and providing the right response is rarely the result of guesswork. In the case of a company with a small number of customers, it requires a good memory, good interpretive skills and attention to detail. In the case of an organization with many customers on a database, it is largely dependent on accurate analysis of customers and building up valuable insights. As customers are more demanding and have more channels of communication, organizations simply have to be able to respond to them continuously – wherever, whenever and however required. The higher the relevance, the greater the value – it’s a continuum ‘If you want to protect and enhance the value of your brand, your offer must be valuable.’ ‘Customers get what they want; your margins are protected; everyone’s a winner.’ dunnhumby (2006) Business is entering the post-‘ad loyalty era’, where the power of advertising is waning as other communication tools, particularly WOMWeb (word of mouth accelerated by Web 2.0 or social networking tools), generate fast high attitudinal shifts. The old loyalty model used advertising primarily to build brand awareness and, ultimately, to build a lasting bond with customers. Securing loyalty today is a never-ending process requiring outstanding CRM and ongoing customer engagement. The power of CRM CRM builds a protective wall around customers, in the same way as a brand does. In fact they are one and the same. Excellent CRM enhances the relationship with the brand. As the relationship strengthens, loyalty keeps a customer from the inevitable onslaught of competition. Relationships built on price simply don’t last. Relationships built on relevant excellent service are more enduring. Regardless of what it is called, managing customer relationships is critical to an organization’s future. Nurturing excellent customer relationships builds this defensive wall around a business that most competitors struggle to break down. Customer relationships also boost sales and proits and add value to the brand, which boosts the balance sheet assets. Your best defence ‘Customer relationships are the only thing that cannot be replicated by a competitor.’ Hochman (2008) Chapter 3 Company beneits Customer relationship Management 63 customer proiles and discounting back to today’s net present value. Boost sales Good customer relations boost sales, as they simply make it easy for customers to repeat-buy during their ‘customer lifetime’, as well as buy other products and services as they increase their share-of-wallet spend with the same trusted brand (look at how customers buy almost any product or service from Tesco). Good relations also help to recruit new customers, as happy customers talk to, and even recruit, new customers. Excellent CRM systems can predict customer preferences and prompt customers with tempting offers when they are ready to buy or sometimes just before they are ready to buy. Equally good CRM systems can identify potential defectors (customers who are about to leave), pre-empt them and trigger win-back programmes for any potential defectors who might otherwise have slipped through the net. Strengthen the brand Stronger relations create stronger brands. This builds brand loyalty, which effectively builds a defensive wall around the customer, protecting the customer from the inevitable onslaught of hypercompetition as it advances across this ‘borderless and category-less’ marketplace (see Chapter 1). Good relations also boost the brand image and consequently the brand value, which is eventually relected on the balance sheet. Boost profits Marketing to both existing customers and referred customers costs a lot less than marketing to new customers. Estimates suggest it is six times more proitable selling to existing customers, hence the importance of customer retention over customer acquisition. Keeping existing customers happy boosts proits. Create a database asset One other advantage that CRM creates is a quality database. This is an asset and, although not shown on the balance sheet, it is a very real asset to a company. Some companies quantify the value of their databases by calculating lifetime values of different One per cent customer satisfaction = $500 million Some years ago IBM calculated that each percentage point improvement in customer satisfaction translates into $500 million more revenue over five years. Resources required CRM is a strategic decision and has a long-term impact on how a business is run. However, CRM programmes cost resources, the 3Ms: men/women (commitment, including the CEO’s support, an expert project director and teams of trained people to carry out the service); money (to pay for the software, outside consultants, installation, testing, training and motivation programmes); and minutes (the time required to develop a major CRM project can be several years, and even the training can take months). An excellent CRM system often requires a cultural change, which may be a challenge for many organizations. CRM fails without senior management support cascading right down throughout the organization. CRM implementation is disruptive, expensive and time-consuming and requires extra resources, training and motivation programmes. Return on investment (ROI) can also be dificult for some companies to measure. Overambitious CRM system suppliers sometimes recommend a ‘rip and replace implementation’. Here CRM suppliers convince the client company to dump their existing systems and start again from scratch. This can then be compounded by the classic disaster scenarios, including scope creep and lack of training and motivation, where the system is delayed, late, over budget and inally resisted by staff, as they have not bought into the new approach. We will explain how to avoid these classic errors later. Integrating customer interactions and data across a range of channels from website to mobile to Part 1 64 Communications Background and Theories telephone to sales rep to e-mail still presents major challenges, particularly when trying to integrate the legacy (old) database with the new channels of customer interaction. Finally, maintaining a database and managing a CRM system continuously cost time, money and expertise, all of which can be in short supply. It is a continuous process and requires constant resources. Blame storming ‘Companies who do not appreciate the importance of an effective complaint handling system risk internal friction (passing on the blame). This may lead to a vicious circle, as internal friction generates poor motivation and cynicism, staff disloyalty and worse service. This is why customer loyalty and staff loyalty are closely linked.’ Merlin Stone, Neil Woodcock CRM failure Organizations are sitting on a customer service time bomb. Customers are more demanding, and marketers are not delivering. Yes, many products have got better (eg rustproof cars), but service and CRM are generally going backward, as witnessed by the declining customer satisfaction scores and customer defections (even when they do give a ‘satisfactory’ score). Customers are not happy. They are ready to swap suppliers. They are bombarded with competitive offers. They have less time but more demands. And marketers are not delivering, perhaps because marketers are not in control of the CRM, eg IT may have hijacked the process (Mahoney, 2002). Regardless of the reasons, the stats do not seem to get any better over time. Here are the reported CRM failure rates identiied by Michael Krigsman (2009): ●● 2001, Gartner Group: 50 per cent; ●● 2002, Butler Group: 70 per cent; ●● 2002, Selling Power, CSO Forum: 69.3 per cent; ●● 2005, AMR Research: 18 per cent; ●● 2006, AMR Research: 31 per cent; ●● 2007, AMR Research: 29 per cent; ●● 2007, Economist Intelligence Unit: 56 per cent; ●● 2009, Forrester Research: 47 per cent. Although different measurement criteria from different research companies make these comparisons less accurate, there is no denying a lack of skill in managing CRM. Gartner’s Trip Report (2009) conirms that more than 55 per cent of CRM projects deliver unacceptable results. Another report (Forrester Research, 2009) conirms that ‘More than 50 per cent of CRM projects fail to fully meet expectations.’ The Gartner report (2009) continues to paint a picture of sloppy CRM: CRM success continues to elude most companies. 86% of survey respondents say that CRM will be important to their companies over the next three years. Despite this, more than 40% of respondents do not have a formal CRM strategy in place. Of those who do, 44% say that they have seen only ‘acceptable’ results from their efforts. Working the maths here suggests that of the 60 per cent of companies that do have a formal CRM strategy only 44 per cent have seen acceptable results, ie 26 per cent of companies (60 per cent ×฀ 44 per cent) have seen acceptable results. This means 74 per cent of companies have either no CRM strategy or unacceptable results. ‘80% of companies believe they deliver a superior customer experience, but only 8% of their customers agree.’ Allen, Reichheld and Hamilton (2005) Harvard’s Allen, Reichheld and Hamilton (2005) think the CRM problems have something to do with growth. They call it ‘the dominance trap’ and explain it as follows: The larger a company’s market share, the greater the risk it will take its customers for granted. As the money lows in, management begins confusing customer proitability with customer loyalty, Chapter 3 never realizing that the most lucrative buyers may also be the angriest and most alienated. Worse, traditional market research may lead the irm to view customers as statistics. Managers can become so focused on the data that they stop hearing the real voices of their customers. Customer relationship Management nightmare continues. Researchers established that companies continued to: ●● Ignore customer e­mails. Thirty-eight per cent of major UK companies ignored incoming customer e-mails, despite the number of e-mails increasing. Retailers had the best track record, responding to 70 per cent of e-mails, but telecoms had the worst – 58 per cent of e-mails were simply ignored (Egain, 2007). ●● Fail to get to know customers. Fifty per cent of the FTSE 1000 did not know who their customers were. Even when they had the raw data collected and safely stored, they still could not proile their own customers (MORI, 2003). Has it improved since? ●● Fail to satisfy customers. Of all calls to Fujitsu call centres, 50–70 per cent were for value restoration (ixing a problem, eg late delivery, wrong delivery or poor product quality) rather than value creation, eg adding value with helpful advice over the phone (Mitchell, 2004). How many inbound or outbound calls today are for value creation rather than value restoration? Some years earlier, another Harvard Business School professor, Susan Fournier (in an interview with Manda Mahoney, 2002), suggested that IT was hijacking CRM projects: Most customer relationship management technology (CRM) programs are failing. Why? CRM programs are expensive and take a long time to install. One consequence is that IT has ‘hijacked’ the process. In emphasizing technology decisions over marketing decisions, we’ve lost the opportunity to build better relationships with customers. To get back in balance, marketers have to help design CRM systems from the get-go. Given that 74 per cent of IT projects fail (Tranield and Braganza, 2007), there is a natural concern over IT driving CRM. Incidentally, this 74 per cent failure rate is surprisingly the same percentage as found in the survey by Standish Group and Gartner Group back in 1980 (IBM, 2004). More CRM failures ‘More than 55% of CRM projects deliver unacceptable results.’ Forrester Research (2009) As with websites, social media and databases, marketers have simply got to be involved in the development and management of any CRM systems. Effectively, marketers need to take control of CRM to ensure a cohesive, integrated system is embraced by all departments. A fragmented approach, with different departments running different CRM systems or, as mentioned earlier, IT hijacking CRM, loses the critical usefulness that CRM should provide to customers. They don’t want to be passed from department to department. Nor do they want to fall through the cracks left by an unintegrated and poorly managed CRM system. The customer 65 ‘Customer satisfaction is declining in just about every market I’ve looked at over the last 15 years.’ M Earls (2002) Has it got better since these gloomy words were written? The next section explores why CRM is failing, what goes wrong and how to avoid these classic errors. Meanwhile customers are angry. They understand how to use publicity, and now they use social networks to spread messages like wildire. Why CRM failure? Organizations have steadily got worse at CRM because of the lack of a customer-driven culture (failed leadership), poor CRM project management skills (in particular scope creep, lack of training and lack of motivation programmes) and constant cost cutting. 66 Part 1 Communications Background and Theories Militant complainers – smashing your car The chairman of a Chinese wildlife park destroyed his $60,000 SLK230 Mercedes sports car as a protest because he was unhappy about the warranty. With an astute understanding of the media, he ‘intended to cause maximum embarrassment’ to Mercedes-Benz by inviting hundreds of spectators and journalists to watch five workers with sticks smash the car. After that he attached ropes to the wreck and got several bulls to tow it through the city. Compensation negotiations resumed immediately but progressed too slowly, so Mr Wang (who wanted a full refund) asked a friend to also destroy his Mercedes. The friend obliged and drove his white S320 1,000 miles from Beijing to Wuhan. ‘In another public event, six men armed with batons smashed the windows and doors.’ Mercedes-Benz claimed that Mr Wang had ‘used the wrong fuel and had subsequently refused a complimentary cleaning of the engine’. August (2002) Motivation and training programmes are required to bring people on board. This was recognized as a problem a few years ago when a BusinessEurope. com survey (2004) revealed that 25 per cent of marketing professionals record customer details incorrectly and 40 per cent of marketing professionals do not share customer contacts with colleagues. Training and motivation are critical components in any CRM programme. Last but not least, constant cost cutting and operational failings have shifted the emphasis of many CRM programmes from value creation to value restoration. Overburdened staff may also be struggling with a work overload. In addition, as mentioned in eMarketing eXcel­ lence (Chaffey and Smith, 2008), ‘Old CRM systems were effectively automated selling systems that took little or no account of what customers actually want. Danger bells should start ringing when an IT consultant offers a front end automated solution that cuts costs and streamlines operations and processes because this does not necessarily make marketing more effective.’ Wanted: strong marketing managers Many CEOs fail because they lack an understanding about the development and implementation of customer-driven marketing. Many marketers fail because they have not mastered CRM systems, managed to integrate the culture across the organization, or helped the CEO to understand the importance of CRM. Poor project management skills stop CRM systems from being implemented on time and within budget. CRM projects are relatively large to any organization. Failings like scope creep (constantly adding extra and late requirements into the brief), unnecessary and often poor system design, and with an over-dominant IT department also wreck potential CRM programmes. One possible reason why 74 per cent of IT projects fail is because they are called IT projects (IT is a service that supports business functions, not an end in itself). IT simply uses information technology processes to help run a business. As with any changes introduced to an organization, they need to be supported by training and motivation programmes. Many CRM projects lack buy-in from staff who both fear and resist change. ‘But new technologies are being implemented with the overriding aim of driving efficiencies and cost savings rather than enhancing the customer service. A strong marketing director who is respected throughout the organisation can, at worst, ensure that the customer is not adversely affected by a new IT investment, and, at best, ensure that the investment delivers tangible customer benefits.’ Wright (2007) CRM success The good news is that poor CRM presents a golden opportunity to create competitive advantage by developing an integrated CRM system that creates value or adds value to customers’ experiences, brings them closer to the organization, listens to them, collects data and serves their needs better than ever before. This grows sales from both repeat Chapter 3 sales (lifetime customers) and share of wallet (what else does the customer need that the company can supply?). Organizations like McKinsey forecast the after-sales market (after-sales service, consultancy and training) to be where many companies will ind new growth. This emphasizes the critical importance of CRM systems that actually work. The CRM philosophy Building a customer-driven business requires a speciic corporate culture where the organization, at all levels, recognizes the need for customer service and customer focus. A real CRM philosophy sees customers at the centre of the universe. This customer focus requires a longer-term, strategic view of the business as opposed to a short-term ‘transactional marketing’ approach that focuses on quarterly sales results. The CRM philosophy is one where the organization continually seeks to learn about customer needs and preferences, in order to deliver excellent relevant services, and how to satisfy customer needs in better ways. The organization must also continually measure the right criteria. Ultimately, a CRM philosophy seeks to move customers up the ladder of loyalty from suspect to advocate. The ladder of loyalty was devised by Considine and Raphel (1981) and is now widely used. Organizations seek to move prospects up the ladder of loyalty from suspects to devoted loyal customers who advocate an organization’s product or service. There is some overlap with moving customers up the brand engagement ladder (discussed in Chapter 1), where customers engage more and more with the F I g u R E 3 .1 The ladder of loyalty Advocates Clients Customers Prospects Suspects Customer relationship Management 67 brand and ultimately become advocates. In fact, some relationship marketing works so well that the seller is not seen as a vendor but as a friendly helper who knows the customers and helps them with their lives. never sell to a stranger ‘Think of the old corner shop. If the shopkeeper ordered a new type of pickle, he wouldn’t expect strangers to flock in and buy it. He’d recommend it to his regular pickle buyers and to people buying cheese and pork. You wouldn’t call that hard sell. You’d call it personal service, based on the shopkeeper remembering the preferences of individual customers and using this knowledge to anticipate their needs. No matter what the size and character of your marketplace, direct marketing now lets you offer that personal service to every customer.’ Young (nd) This customer-sensitive culture is based on permissionbased marketing as deined by Seth Godin in 1999. Marketers gain permission to speak to customers irstly; then they develop trust and, ultimately, loyalty. The irst step is to get customer’s permission for future communications, whether by mail, e-mail, RSS feed, etc. Although incentives are often used when gaining permission, relevance is key. The next step is collaborative, where marketers help customers to buy and customers help marketers to sell (customer forums and testimonials). The third step is dialogue between the organization and the customers and trialogue between the organization and customers and customers amongst themselves. A trialogue can low via blogs, discussion forums, focus groups, feedback forms or even real meetings between customers and sales reps, as well as amongst customers themselves. When customers ‘opt in’ for further e-mail, they give their permission to be e-mailed. This is a irst step in using their permission to develop the relationship. Do not abuse this permission by passing customers’ data on or contacting them too frequently. Ensure future contact with customers always adds Part 1 68 Communications Background and Theories value. It is a moral and legal requirement (in B2C markets) to offer the customer the option to ‘opt out’ every time you contact them. The number of existing customers who opt out from further contact is the ‘churn rate’. Marketers watch the churn rate closely and try to understand why it varies. All of these approaches are dependent on an overall customer philosophy that is more strategic than tactical, with customers being nurtured over the medium to long term rather than by a one-off transactional sale approach. This strategic approach requires several components to be in place, including an IT architecture and a human architecture, which depends on a customer culture (see ‘CRM components required’ below). These take time and require an investment of the three key resources, the 3Ms: men/women, money (budgets) and minutes (time). Permission can be speciic – ask customers exactly what they prefer ●● Content – news, products, offers, events. ●● Frequency – weekly, monthly, quarterly or alerts. ●● Channel – e-mail, direct mail, phone or SMS. ●● Format – text vs HTML. CrM components required There are several components required for CRM success. Without all of these components in place, the system will fail. In addition to the overall strategic attitudinal shift towards a customer culture, organizations also need: ●● CRM architecture (both IT and human); ●● processes: – proiling; – tailored contact strategies; – database management; ●● credibility factors. IT architecture Technology has been both a curse and an important enabler to CRM/CEM. Ill-conceived websites that damaged brand values and the appalling experience of many call centres have created a need for more technology to monitor and improve the customer experience. In essence, CRM needs an integrated enterprise architecture; much of the software that will enable better CRM delivery in future does not go under the CRM banner. Software applications likely to be needed for CRM/CEM include: ●● knowledge management; ●● content and collaboration, eg instant messaging, community support on websites; ●● business information and analysis; ●● experience feedback; ●● enterprise process management; ●● portals and self-service; ●● applications that turn call centres into interactive contact centres. The ways of providing the technology are also growing, with hosted, outsourced and web-service solutions becoming increasingly available from service suppliers. Organizations should make the most of these. In highly competitive markets – markets with no categories, no boundaries and no borders – differentiation is important. What difference is perceived between Visa and MasterCard, or L’Oréal and Clairol? In such a situation, how can favourable WOM be generated? Brands should be distinct from the competition. They need a ‘personality’ that can be promoted and brought to life at touchpoints; then they are easier to talk about. Brand promotion gives the promise; CEM is the physical delivery of that promise. This can be achieved by: ●● basing brand values on what customers want; ●● involving employees in developing the values; ●● linking the values to the main brand promise; ●● encouraging staff to align their behaviour with the values; ●● rewarding employees for delivering the brand values. Chapter 3 Customer relationship Management 69 Human architecture ●● Benchmark current culture with staff via story techniques about customers, their work and CRM. Establish the problem areas and use the information for internal brand alignment through change programmes. ●● Spread customer insight among staff and ensure they can use it in their work. Link knowledge of management processes to customer interaction processes for greater collaboration and learning. The big mistake of previous process re-engineering was not doing this. Good customer experience depends on the learning and support that staff give each other as a natural part of everyday life. ●● Establish the new skills required and ‘cast’ staff into the new roles. Develop skills through continuous coaching in delivering the brand values. ●● Redesign organizational structures to support new ways of working. Put lexible delivery teams together, pulled from ‘communities of practice’ (ie similar skill pools) as and when required. CRM and CEM challenge old structures because of the need for: – a segmented approach to customers; – non-siloed thinking and working; – new and scarce skills. ●● Link key performance indicators through performance management to staff incentives; banish incentives that misdirect activity. The right incentives are vital. Do not focus just on ‘what’ is being delivered in terms of inancial targets. Focus also on the ‘how’ of good performance delivery. The CEO needs to develop a real customer culture where staff really care about customers. This is no easy task. It’s a mindset. It is more an attitude than simply a set of processes. This affects the whole organization, as everyone is responsible – not just customer services, marketing or sales departments. It’s everyone’s job, from the delivery driver to the receptionist to accounts and inance. Everyone can use every customer experience to create a strategic advantage over the competition. 150 rules are not as good as one simple value statement ‘I know an organisation whose number one value is To conduct our business with integrity and professionalism. The MD just keeps asking the question “Do you think that sale/meeting/task was completed in a professional way?”’ Butler (2004) Database A database gives an organization access to its own private marketplace. The database is at the heart of CRM. A database can contain a lot of information about customers depending on how many ‘ields’ or variables they want to capture. It contains customer names and addresses, enquiries, purchasing patterns, preferences, areas of interest, incentives and a lot more depending on how many ‘ields’ are kept and what kind of analytics are used. A good database contains highly relevant and up-to-date customer data. It is a valuable repository of information on prospects and customers from all sources and channels, including websites, interactive TV, sales reps and customer service staff. Organizations with properly managed databases enjoy a competitive advantage over competitors without databases. A good database is a powerful asset. There are two types of information kept: historical data and predictive data. Historical data (‘transactional data’ or ‘back data’) include name, address, recency and frequency of purchases, responses to offers and value of purchases. Predictive data identify which groups or subgroups are more likely to respond to a speciic offer. This is done through statistical scoring: customer attributes (eg lifestyle, house type, past behaviour, etc) are given scores that help to indicate the customers’ future behaviour. The database can identify best (‘ideal’) customers and worst customers. The worst customers have ‘negative value’: these are customers who are bad debtors or who buy only when special offers are available. 70 Part 1 Communications Background and Theories Database opens up new sales Rothmans cigarettes’ sales promotion built a powerful database by offering their customers a free pack of cigarettes when they collected 10 coupons and returned them with a completed form. They generated 750,000 names within 18 months; 500,000 of this new customer database were subsequently offered an FGF promotion (friend get a friend). The database members were entered into a free competition after sending in their own name and the address of any friends who were over 18 years old and who smoked a competitor’s brand. There were 250,000 smokers of competitors’ brands named. Follow-up market research showed that 90 per cent were genuine. This database would be offered a stream of tempting offers to switch brands. The lifetime value of a smoker is £73,000 (for an average 20-a-day smoker). If only 10 per cent convert, this generates over £2 billion sales (if all 250,000 convert, this generates over £18 billion worth of sales). So the database is a powerful asset containing a lot of personal information (in the case of consumer databases) and possibly sensitive information (in the case of B2B databases). Directors are legally responsible to ensure data are backed up and stored safely and securely. Now consider the processes required to deliver excellent customer service. Data analytics Data analytics improves customer intelligence, which in turn improves targeted marketing, which in turn improves campaign management and, most importantly, customer relationship management. Forget how this boosts proitability for a moment, and just consider how more relevant beneits make customers happier, and happy customers generate more business and more word-of-mouth referrals. It’s a virtuous circle that starts with a bunch of processes: identifying customer needs, delivering more relevant products, services and incentives in a timely and cost-eficient manner and, ultimately, boosting customer satisfaction. ROI improves. The deep analytic tools can now also be applied to online social media as well as the more traditional scenarios. First, consider how data mining works to build better customer proiles and contact strategies while exploiting purchasing cycles with automated marketing. Profiling Fifty per cent of the FTSE 1000 do not know who their customers are. They cannot describe how their ideal customers are different to their negative-value customers (ones that cost the organization money). They cannot proile them. They may have their names and addresses, etc, but they cannot build useful proiles describing them. If an organization doesn’t know its customer proiles (identities, needs and preferences), how can it, irstly, give them relevant offers that satisfy them better and, secondly, ind other customers like them? It is like searching for a needle in a haystack if customers are not proiled. Chaffey and Smith (2008) explain how proiling can combine explicit data (customer information collected from registrations and surveys) and implicit data (behavioural information gleaned from the back end, ie through the recorded actions of customers on a website). Valuable proiles combine both implicit and explicit data continually. This provides a real picture (or proile) of the target markets, the characteristics that deine each segment and how to serve each segment. For example, certain car buyers might have different demographic proiles, show an interest in particular features (pages) of a car and request a test drive. If this group of visitors (or segment) its the ideal customer proile then they may get a DVD and an immediate incentive to buy now, whereas another group, or segment, of visitors with a less likely proile may only get an e-newsletter once a month. Website visitors are observed as they leave an audit trail of what they did, what they looked at and for how long. Cookies enable marketers to track which pages they access, what they are interested in (pages visited, times, duration spent there) and what they buy, which then helps to build their proile. Drill down deeper to see how well different segments respond to different offers or features in a newsletter. Proiling helps to identify who the most proitable customers are and whether they have any similar characteristics (eg whether they respond to certain mailshots, came from a certain type of Chapter 3 site or search engine, searched using a particular key phrase, or spent a certain amount of time on particular pages). Build proiles of both customers and enquirers and then segment them according to their different interests, enquiries, requirements or purchases. Marketers can build sophisticated consumer proiles based on previous purchasing decisions and even identify the consumer hierarchy of criteria, whether quality, speed of delivery, level of service, etc. This enables tightly targeted tailored offers that match the speciic needs of each segment or proile type. Get this right and this ‘virtuous cycle’ delivers superior service and simultaneously creates competitive advantage that protects customers from the inevitable, new, competitive offers looming on the horizon. The better the proiling, the better the results, because the more accurate the targeting, the less resources are wasted. Different customers have different needs. It is actually easier to satisfy them by dividing them into groups sharing similar needs (segments) and then treating each segment differently (different contact strategies for each). Proiling is a continuous activity, which includes continually collecting customer information, mining it and using it to proile and target more successfully. For example, Grattan’s ladies’ fashion mail-order company decided to experiment with a new product, a grandfather clock. They guessed the likely target proile would be something like middle-aged, welloff ABs living in ACORN types J35 (villages with wealthy older commuters) and J36 (detached houses, exclusive suburbs). They then asked their computer to print out names and addresses that itted this Catch the at-risk customer defectors Existing customers cannot and should not be ignored, as they are on average six times more profitable than new customers. It is surprising how many major brands do not have any alarm systems to highlight customers who are about to switch to a competitor. They can be easily identified or profiled by their behaviour (or lack of behaviour/spending). At-risk (of defecting) customers or even recently ‘churned’ customers need to be contacted (if they fit the ideal long-term customer profile). Customer relationship Management 71 proile. The subsequent mailing produced 60 orders at £1,000. They then analysed those 60 orders with a view to identifying any hidden characteristic that could be added to the proile and fed into the database again to produce a different, more accurate target list. When they mailed this list they sold every one of the 1,000 limited-edition clocks. Data mining Data mining and segmentation can identify those customers who are potential long-term, loyal customers as opposed to other customers who are promiscuous ‘bonus seekers’ (short-term shoppers who grab sales promotions and then switch when another brand offers a new sales promotion). The latter are costly and increase the ‘churn rate’ (customers who leave). Since these long-term loyal customers are far more proitable and the promiscuous customers are loss making, every business needs to know where each of these segments comes from, ie which channels and incentives work best. Within channels, businesses need to know which ofline advertising, online advertising, direct mail (online or ofline) and social media (speciically which ones) are generating the right trafic or conversions and the wrong trafic or conversions. Intelligent miner saves Safeway’s top customer Before Safeway delisted a particular cheese product, ranked 209th in sales, an intelligent miner discovered that this cheese was frequently purchased by its ideal customer profile – the top-spending 25 per cent of customers, the last clientele Safeway would want to disappoint. Under conventional analytical principles, the product would have been delisted; in actual fact, the item was quite important. DB2 (1997) Databases have to be stored securely. Large databases require large warehouses. Data mining drills down into these data warehouses to discover patterns and relationships previously hidden in the data. Data mining applies advanced statistical analysis Part 1 72 Communications Background and Theories and modelling techniques to data to ind useful patterns and relationships. It can, for example, explore each and every transaction of millions of customers and how they relate to each other. Data mining can ind correlations that are beyond human conceptual capability (see the seafood bikers and cellist DIYers in the ‘Unexpected relationships’ box below). A range of statistical tools is used, including regression analysis, time-series forecasting, clustering, associations, logistic regression, discriminant analysis, neural nets and decision trees. A sequence-discovery function detects frequently occurring purchasing patterns over time. This information can then be layered with demographic data (from the main database) so that a company can tailor its mailings on each household’s vulnerability or propensity to buy certain items at certain times. Unexpected relationships Unexpected database connections revealed that 82 per cent of motorcycle owners buy frozen seafood and 62 per cent of amateur cellists buy power tools. It can be mathematically interesting to see these techniques in action. However, it is also important that a manager knows roughly what the purpose and possible benefits are of any such data-mining analysis. The ability to ask a good question or write a good data-mining brief is a relatively new skill for today’s marketing manager. Building a profile with fields of data So what kind of data, or ‘ields’, should be captured? In addition to a customer’s name and address, there Ta b l E 3 .1 are obviously other ields of data worth capturing for either a B2C business or a B2B business. FRAC is a useful mnemonic. It stands for: frequency (of purchase/visit), recency (of purchase/visit), amount (of money spent on purchases) and category of purchase. Chaffey and Smith (2008) show how some CRM systems use RFM (recency, frequency, monetary value) analysis for targeting e-mails according to how a customer interacts with a website. Values could be assigned to each customer as shown in Table 3.1. Customers can be combined in different categories and then appropriate message treatments sent to encourage purchase. There are many approaches here; for example, a theatre group uses nine categories to tailor its direct marketing for customers who have attended once, twice or more over the last year, previous year, etc. Other companies will have hundreds of segments with very tailored offerings. There are a lot of other useful data worth collecting also, such as promotions history or responses to speciic promotions, share of wallet or customer share (potential spend), timing of spend and more. In B2B, we are interested in business type (standard industrial classiication (SIC) codes), size of business, holding companies and subsidiaries, competitive products bought, etc. Customers can be segmented by their activity or responsiveness levels, and then strategies to engage them can be developed. For example, Novo (2004) recommends the use of hurdle rates, which are the percentage of customers in a group (or segment) who have completed an action. Hurdle rates can then be used to compare the engagement of different groups or to set targets to increase engagement with online channels, as the examples of hurdle rates below show: ●● 60 per cent of registrants have logged on to the system in the past year; Using RFM analysis Recency Frequency Monetary value 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Over 12 months Within last 12 months Within last 6 months Within last 3 months Within last 1 month More than once every 6 months Every 6 months Every 3 months Every 2 months Monthly Less than £10 £10–£50 £50–£100 £100–£200 More than £200 Chapter 3 ●● 30 per cent have clicked through on e-mail in the past year; ●● 20 per cent of customers have visited in the past six months; ●● 5 per cent of customers have made three or more purchases in the past year. When marketers identify their customers’ purchasing cycles, they can increase sales signiicantly, by targeting customers with attractive offers just before they start their next search. Delaying this by a month or a week reduces the probability of purchase because, once they start searching, customers explore competitive offers. Data mining reveals the average purchasing cycle and subsequently identiies those customer segments that are about to start their buying process again. The database can then automatically trigger an e-mail or direct mail or telephone call to a customer (once certain sets of rules are applied). For example, a computer company mined its database to identify individual purchasing cycles, to identify how frequently different types of customers replaced their PCs. Once the frequency was identiied, the company started sending catalogues and discount offers inside the buying frame, with a 95 per cent conidence level, ie 95 per cent of the prospects were just about to start searching for a new PC. Sales jumped up. Data analytics treble conversion ratios Wolters Kluwer UK provides publications such as Croner’s information and consulting services that help businesses and professionals comply with constantly changing laws in key areas including tax and accountancy, health and safety, and human resources. The company has annual revenues of around €3.7 billion and employs over 19,000 people. After the company installed and employed SAS Analytics, ROI on marketing spend increased threefold; customer retention rates increased from 75 to 83 per cent; improved efficiency and targeting meant reduced marketing headcount and costs; in customer acquisition, sales conversion rates improved from 1 in 33 (3 per cent conversion) to 1 in 11 (9 per cent conversion). The overall project ROI ratio was 2.25:1. Customer relationship Management 73 Predictive analytics Data mining can also be used to analyse buying behaviour to identify clues for cross-selling and up-selling. For example, a bank that monitors its customers’ spending may identify a segment of customers buying products from Mothercare, which suggests the customers have young children. This can be combined with typical proile information such as age and marital status to further identify a cluster, or segment, of the bank’s customers who might be likely to consider buying a bigger car (as their family is growing). The bank’s subsequent offers of a car loan might receive a 30 per cent conversion rate (request more information, call the bank, register an interest or take out an actual loan). Internet gaming company Victor Chandler uses SAS to do a behavioural analysis to predict lifetime values of new customers. For example, if a new customer comes in and bets on casinos (instead of poker tables), the company can predict whether that customer is more likely to become a long-term customer or a short-term, expensive, loss-making customer. The predictive analysis suggests which customers are worth investing in (with regular contact and regular incentives) and which are not worth investing in – those loss-making ‘bonus seeker’ customers, whose proile is: young male, tight betting (as opposed to betting all of their stash), declining betting frequency, infrequent betting, and middleaged female. If visitors display these characteristics, they’ll stay three weeks and leave and therefore do not warrant any relationship-building efforts (ie no regular contact or incentives). The other customers are worth investing in, and it is worth developing ‘retention activity’ (a regular attractive incentivized contact strategy) for them. Predictive analytics use historical data to highlight and optimize marketing messages that work better for certain social networks. Deleting older home dwellers – a less scientiic proile building In the absence of completely reliable data, a less scientiic analysis is sometimes used to separate or take out names that do not it the target proile. For example, Rediffusion cable services felt that older home dwellers did not it their ideal prospects’ proile, so they took out older-generation Christian names such as Albert, Alfred, Alice, Amelia, Arthur, Bertram, Constance, Part 1 74 Communications Background and Theories London Fire Brigade data analytics predict ires Database mining can even be used for nonmarketing purposes, such as fire prevention. Take the London Fire Brigade. It carries out 65,000 home safety visits each year, but with over 3 million homes in London it would take over 50 years to cover everyone. More than 60 different data elements are fed into the model, including census data and population demographics, broken down into 649 geographical areas (ward level), plus type of land use, data on deprivation, Mosaic lifestyle data, historical incidents and past prevention activity. The model predicts where fires are most likely to occur. London Fire Brigade use the information to predict where there is a high risk of fire, eg in a small estate of houses or industrial buildings, so they can then send in an assessor to investigate and perhaps circulate information, set up some advisory services and ultimately reduce the number of fires. Grace, Harold, May, Mildred, Rose, Sabena, Samuel, Victor, Violet and Winifred. Costs Projects range from several hundred thousand customer records to several million (or in some cases 40 million records). A data integration, data-mining campaign optimization and a full direct marketing suite from companies like SAS range from £500,000 to £5 million, with social media customer link analysis starting at around £250,000. Processes: general How does the organization manage complaints, money-back requests, queries, compliments, suggestions, and requests for additional services? How does it handle a sale, a cancellation, a complaint or a customer defection? Are there processes or systems in place? After a sale, do you send out an order acknowledgement, followed by a delivery alert, followed by a post-sales service satisfaction questionnaire or score sheet or feedback request? What happens with this information? Who decides to act on a particular customer suggestion? Who tells the staff? Who tells the customer? How many times should a customer be contacted? If customers have outstanding issues, it is not the time to sell them something else. Should different types of customers get different types of offers? Who decides? Who implements this? Processes are important. Does everyone know how to process an order or a complaint? What happens if someone phones with an unusual enquiry? Who deals with it? How many times are customers left hanging on the phone, being passed around from department to department? Some companies value customer feedback. They encourage it with 0800 numbers, feedback buttons on websites, questionnaires, rating cards and even outbound telemarketing to collect customer feedback. Listening is just the beginning. It is vital to have a system, or process, that enables a listening process as well as a constructive response. Maximize the customer’s opportunity to complain Companies can set up suggestion boxes and other feedback systems to maximize the customer’s opportunity to complain, compliment, create or engage with the brand. Feedback (even negative) is food and drink to marketers. However, only 1 in every 24 dissatisied customers bothers to complain, according to E-Satisfy Ltd (formerly TARP). Rather than facing an unknown enemy of bitter, disappointed and dissatisied customers, an organization, through its complaints process, can offer a chance to sort out previously unknown problems. It also gives the organization the opportunity to ind the enemy within (internal problems such as quality control or demotivated staff). One company chairman takes time to listen to taped telephone complaints while driving home in his car. Many services companies actually ask their customers to ill in a form about levels of satisfaction or dissatisfaction. Solutions are relatively easy. Identifying the problem is the dificult part. Complaints are generally helpful. Welcome complaints. Chapter 3 Customer relationship Management Complaints help innovation The 1–10–100 rule 3M claims that over two-thirds of its innovation ideas come from listening to customer complaints. Federal Express’s 1–10–100 rule is: For every pound your company might spend on preventing a quality problem, it will spend 10 to inspect and correct the mistake after it occurs. In the worst case, the quality failure goes unanswered or unnoticed until after your customer has taken delivery. To fix the problem at this stage, you probably pay about 100 times what you could have paid to prevent it from happening at all. Some organizations have systems and processes that stop complaints before they happen. Compared to ixing a complaint, telemarketing (or even an e-mail) can provide a low-cost method of ensuring customer satisfaction. For example, some customers may have a question that does not merit them making a telephone call, but nevertheless they would like it answered. If left unanswered, the question can fester into a source of dissatisfaction, so regular outbound telephone contact (the company calls the customer) picks up any issues or problems before they become major ones. This is more cost-effective than ixing problems. Inbound (0800 and freephone) customer service lines can also reassure customers if they are made aware of the facility. ICL computer company has a team of telephone diagnosticians who handle fault reports from customers. Linked to a sophisticated computerized diagnostic kit, they can identify whether the fault really exists or not. Many problems arise from the user’s lack of knowledge, which means many potential problems or frustrations can be sorted out over the phone. If a fault is identiied, the diagnosis informs the engineer in advance so that he or she arrives with the right spare part. Stew Leonard’s US retail chain’s listening process There are monthly focus groups and a daily suggestion box. Suggestions are typed up by 10 am the next day, and store managers either act or call the customers about the complaints or suggestions. The chain averages approximately 100 comments per day – they are the pulse of the store. By actively listening to customers (and their complaints), companies can save, rather than spend, money. 75 Processes: detailed contact strategies Too much contact can wear out a relationship. As in personal relationships, you can become a bore, a nuisance or irrelevant. On the other hand, too little may close the relationship-building opportunity. The key to building the best relationship is to have the right number of contacts of the right type at the right time for speciic types of customers. This is a contact strategy. It speciies which kinds of customers and enquirers get which sequence of contacts and incentives and from what method (e-mail, mail, telephone, personal call, etc). Some organizations ask their customers how they prefer to be updated about special offers, reminders and announcements (including, if e-mail, whether text or HTML is preferred). The database stores their preferred media and ensures that they are contacted in the preferred manner. So organizations vary their contact strategy depending on how customers (and prospects) react. Some garages maintain contact with their customers via e-mail or SMS, sending them reminders when their car is due for a service. If no response is generated then this triggers a prompt for staff to make a phone call to see whether the customer still wants to receive reminders (maintaining permission). A contact strategy deines an initial welcome strategy when the prospect is irst added to the database based on the best interval and sequence of messages. The contact strategy should then be extended for later stages in the customer life cycle, with messages designed to convert customers to purchase, encourage repeat purchases, encourage customers to try new products or reactivate customers when Part 1 76 Communications Background and Theories their interest wanes. Here are three steps to a contact strategy from Chaffey and Smith (2008): 1 Develop a welcome programme where over the irst three to six months targeted auto-triggered e-mails are sent to educate subscribers about the brand and its beneits and deliver targeted offers. For example, the Renault B2C welcome strategy has a container or content pod within its e-newsletter to deliver personalized information about the brand and model of car in which a prospect is interested. This is updated each month as the customer gets to know the brand better and the brand gets to know the customer better! 2 Segment list members by activity (responsiveness) and age on the list. Assess the level of e-mail list activity (ask what percentage of list members haven’t clicked within the last three to six months – if they haven’t, they are inactive and should be treated differently, either by reducing frequency or by using more ofline media). 3 Some customers become less responsive. A speciic contact strategy is required to reactivate waning customers. Here is how Tesco, arguably the world’s most sophisticated relationship marketer, develops different contact strategies relevant to different customer types and customer relationship stages, eg new website visitor, irst-time customer, repeat customer, lapsed customer. Tesco monitors customer actions during the customer life cycle. Different customer actions trigger different automatic responses (ARs) by e-mail: ●● ●● Trigger event 1. The customer irst registers on the site (but does not buy). – AR1: Two days after registration, an e-mail is sent offering phone assistance and a £5 discount off the irst purchase to encourage a trial. Trigger event 2. The customer irst purchases online. – AR1: An immediate order conirmation is sent. – AR2: Five days after purchase, an e-mail is sent with a link to an online customer satisfaction survey asking about the quality of service from the driver and picker (eg item quality and substitutions). – AR3: Two weeks after the irst purchase, a direct mail approach offers tips on how to use the service and a £5 discount on the next purchase intended to encourage reuse of online services. – AR4: A generic monthly e-newsletter with online exclusive offers. – AR5: A bi-weekly alert with personalized offers for the customer. ●● – AR6: After 2 months, a £5 discount for the next shop. – AR7: A quarterly mailing of coupons. Trigger event 3. The customer does not purchase for an extended period. – AR1: The dormancy is detected, and a reactivation e-mail is sent with a survey of how the customer is inding the service (to identify any problems) and a £5 incentive. – AR2: A further discount incentive is used in order to encourage continued usage after a break. Remember, markets are conversations. Listen to what customers say or watch what they click on and use this information to tailor relevant added value with every contact you make. Then ask customers how often they want contact and what type of information or offers they would like. This increases relevancy – a key success factor. Defectors’ process All organizations lose customers. It’s called ‘churn’. Some customers change job, leave the country, grow old or die, and some switch to a competitor. Organizations need a process for following up any lost customers. Essentially the organization needs to listen carefully, ind out why customers have defected, clarify what can be done to win back the business, and ask for the business (sometimes with an added incentive). All of this has to be recorded on to the database for review (particularly why customers are leaving). Patience is required, as the defecting customer may have just bought a competitor’s product or service and the organization has to wait for the next purchase cycle to start again. So be patient. Keep Chapter 3 in touch. Make it easy to come back to the organization. When defectors actually do return, the organization has to go out and win their business every day. Marketers must know what aspect of the organization’s procedures, customer care and customer experience causes customers to leave. Marketers must also know which types of customers are defecting. If it is a disproportionate number of highvalue customers, then alarm bells ring. Customer relationship Management 77 Relationships with an unknown lady Research into senior business executives who travel with BA revealed that most of them felt they had a personal relationship with the lady who wrote the BA executive newsletter – in so far as, if they ever had a travel problem, they could ask her to sort it out for them. Marketing automation Marketing automation (MA) can improve campaign results, as it generates automatic tailored communications triggered by proiles and events (such as purchases). It is all rules based, using variables including transaction history and cost history (call centre returns, order volumes and order frequency). It delivers a single customer view and identiies which media (including social media tools) work best using propensity models (propensity or likelihood to open, propensity to buy, etc). Marketing optimization analyses all contact history to identify what communications mix generates the best return on investment. It identiies which channels (or tactical tools) generate the best results, whether e-mail, direct mail (snail mail), call centre, search engine trafic (resulting from SEO campaigns), social media or any other sources of customer acquisition (or retention). Personalization and tailored ofers The most important sound in the world is . . . your own name! It’s personal. It’s a compliment – an expression of respect. Marketers depend on a good database to remember customer names, needs, interests and preferences. Specialized software combined with an up-to-date and well-cleaned database allows marketers to personalize communications such as e-mails, voicemails (voice-activated e-mails), snail mails (traditional direct mail), SMS text messages (for mobiles) and, most interestingly, websites – personalized websites. Personalization can help to build relationships. When someone remembers your name and, even more importantly, your interests, it demonstrates that the person cares about you. Similarly, an organization that remembers your name and your interests is, at least, trying to do a good job. There are three distinct approaches to personalization as explained by Chaffey and Smith (2008): customization, individualization and group characterization. Customization is the easiest to see in action: it allows visitors to select and set up their speciic preferences. Individualization goes beyond this ixed setting and uses patterns of a visitor’s own behaviour (and not any other user’s – it is known that it’s a particular customer because of the log-in and password choices) to deliver speciic content to the visitor that follows his or her patterns of contact. In group characterization, visitors receive recommendations based on the preferences of people like them, using approaches based on collaborative iltering and case-based reasoning. Mass customization is where a different product, service or content is produced for different segments – sometimes hundreds of different segments. Personalization is different. It is truly one to one, particularly when not only the website and communications are personalized but also the product or service. Another way of thinking about the many options for online personalization is suggested by the Gartner Group (ranging from simple to complex): ●● Addressing customers personally: – Address customers or prospects by name in print communication. – Address customers or prospects by name in electronic communication. ●● Real­time personalization: – Keyword query to change content. – Clickstream data to dynamically change website content. – Collaborative iltering to classify visitors and serve content. Part 1 78 ●● Communications Background and Theories Customer proile personalization: Personalization challenges – Geographic personalization to tailor messages in traditional media. Many personalized sites require users to log in with a password, which can be frustrating when customers forget. Many visitors give up and leave the site. The use of cookies here can avoid the need for passwords and log-ins. However, privacy laws now require e-marketers to ask permission before placing a cookie on a user’s PC (and also explain the use of cookies within the privacy policy). Here are some other personalization problems. Although personalization is important, it is possible to overpersonalize. American Express once tried too hard to be too personal and upset customers. UK Online for Business reported that American Express call centres discovered that customers resented being greeted in person until the customers had actually declared who they were, even although a powerful database can recognize an incoming phone number and reveal the caller’s name, address, purchases, issues, etc. The practice of immediate personalized greeting was swiftly discontinued. – Demographic personalization to tailor messages in traditional media. – Geographic personalization to tailor online messages. – Demographic personalization to tailor online messages. – Give website visitors control over content from set preferences. – Registration data to change website content. There are other interesting options for tailored offers and ads, including ‘content interested in’ (pages visited) combined with other live data such as a bank account balance. For example, when HSBC Bank International wanted to move customers into more valuable segments, it tested personalized banner ads on its own website. New Media Age (2007) reported that this was a challenge: since ‘60% of total weekly visitors to offshore.hsbc.com log on to the internet banking service, HSBC wanted to market to them effectively while they were engaged in this task, disrupting their banking experience without infuriating them’. HSBC developed some rules to serve different offers dependent on the type of content accessed and the level of balance in the customer’s account. The personalized approach worked, with new banners having an 87.5 per cent higher click-through rate than non-personalized banners (6.88 per cent versus 3.67 per cent); savings accounts opened via internet banking increased by 30 per cent (based on the six months pre- and post-launch); and non-premier customers upgrading to premier accounts (requiring a balance of £60,000 or more) increased by 86 per cent (based on the four weeks pre- and post-launch of the targeted banners). Personalization enhances relationships. Personalized web pages help to give customers a sense of ownership – not the marketer owning the customer, but the customer owning (or controlling) the site. When you make customers feel that their home page is truly theirs, then the offers you make available to them are the customers’, the information they access is put together just for them, and you allow the customers to own you. Dear Rich Fat Bastard Security becomes even more important when personalized information is collected. A credit card company once had a direct mailshot to 30,000 of its best customers (its gold card holders) intercepted by a disenchanted employee. He changed the salutation in each of the personalized letters to ‘Dear Rich Fat Bastard’. Nike’s website once offered customers the opportunity to personalize their own shoes by stitching on their own personal logo. One customer illed out the online form, sent the $50 and chose ‘sweatshop’ as a personal logo. Nike refused. The publicity soared. Automated personalized systems can present challenges. However, listening to feedback, ensuring security measures are in place and motivating staff to spot issues (eg Nike) are all simply best practice. Now let’s consider a key component that customers expect – credibility and trust. Chapter 3 Credibility and trust Develop credibility before raising visibility. If you don’t do this you will waste an awful lot of money annoying customers. Many organizations spend a lot of money on advertising and generating trafic to their websites (raising visibility) before they have established their credibility. Effectively, all they have done is to take a poor low-proile company and Ta b l E 3 .2 Customer relationship Management 79 make it a poor high-proile company. What is the point of that? Yet how often do you see this? So how do you develop credibility and trust on a website? Firstly, ensure that your product or service has suficient quality to match the promises made in advertising and other communications. Use customer 20 ways to develop credibility, boost online trust and drive repeat visits Yes/No 1 Privacy statement 2 Security icons 3 Guarantees 4 Memberships of professional bodies 5 Credible third-party endorsements 6 Customer endorsements 7 Customer lists 8 Awards won 9 Demonstrate expertise 10 Real people in the About us/Contact us section 11 Community links 12 Ethical policies (corporate citizenship) 13 Text-only version 14 Full address and contact information 15 Proof everything – typo free? 16 Reliable systems Four factors that drive repeat visits: 17 High-quality content 18 Ease of use 19 Quick download 20 Updated frequently Score out of 20 Part 1 80 Communications Background and Theories feedback regularly and rigorously. Then check your website works all right (usability testing). These days, all marketing communications carry the organization’s website address. Use the 20 credibility factors listed in Table 3.2 to ensure you do not damage your credibility but in fact strengthen it. Make sure you tick them all before you start to raise your web proile. CrM creation and maintenance Writing a CRM brief Careful thought and considerable advice are needed in setting up a CRM system. It requires vision, strong leadership, CRM experience, integrated skills and an integrated team. When choosing a CRM system, you need to consider the current and future requirements. This involves: ●● objective; ●● scenarios; ●● contact strategies; ●● communications tools. Objective means purpose. What are you trying to achieve with a new CRM system (customer retention, customer win-back, customer acquisition, complaint processing or customer feedback)? How can it help customers? Then how can it help you and your team? What kind of scenarios does this involve (customer feedback, suggestions, complaints, enquiries, sales – all of these can be online and offline, or on a telephone line)? Is the system designed to facilitate ‘welcome cycles’ (welcome letters and new member offers), up-selling (moving the customer on to higher quality levels), cross-selling (other products or services) and reactivation (of previous customers), all of which help to nurture the relationship? What kind of contact strategies might this involve? What kind of marketing tools will generate the data, eg e-mail, snail mail, outbound telemarketing, inbound telemarketing, sales teams and website dialogue? Customer data are collected from website registration, guarantee forms, sales promotions’ telemarketing, customer service teams on the phone, and salespeople either face to face or over the phone. Often the best source of data lies dormant, thrown in the bottom of a drawer or a customer ile somewhere in an organization. Every customer and his or her purchasing pattern, every enquiry and every complaint, comment or item of feedback can be stored in a database. The database can build up a detailed customer’s proile, identifying issues, preferences, incentives that work and the buying cycle. This facilitates sequence selling, where interest is aroused and relevant tempting offers are made through a series of communications (contact strategy) rather than going for an immediate straight sale. The system should accommodate and develop a dialogue or a two-way low of information between the customer and the organization. Does it prompt three-way communication (‘trialogue’) by sharing engaged customers’ opinions, scores, ratings and reviews with other prospects? Every time customers respond, they can be encouraged to give information about their needs and situation (eg whether they want to opt out or stay on the database). Remember, input is one thing, but retrieval in a sensible format is another. The art lies in the retrieval of the data in an appropriate format, eg a list of ‘all enquirers for product x from the south-west in the past six months’, a list of a particular category of business customer (SIC code), a list of ‘customers who have bought all product x but not product y’, and so on. Scale is important too. Will the database grow? How many sources of data might there be? How many scenarios might exist? A marketing lead from an interdisciplinary team is required in creating and developing a CRM system. A strong CRM project leader is also required. The project team comprises different users of the system, analysts to understand their requirements, technical staff to create the system and a project manager with suficient time to devote to the job. You’ve got to involve all departments that may use the CRM system, from customer services, sales and marketing to inance (invoicing), admin, production and quality control. And don’t forget IT, but I strongly recommend that marketers must take control, not IT – IT simply supplies the service expertise. It rarely has a customer focus. Remember, the primary reason is to help customers to do business with you. This is not a technology-driven project. It has to be a customer-driven project with measurable Chapter 3 customer criteria, such as increased sales, satisfaction, referrals, etc. Using SOS 3Ms in a brief Taken from SOSTAC® marketing planning (see Chapter 10), SOS + 3Ms helps brieings. SOS stands for situation (what kind of CRM do we have now and why does it need improving?), objectives (what are we trying to achieve with the new CRM system?) and strategy (how does CRM integrate with all the company’s operations?): ●● Situation (where are we now with CRM?). ●● Objectives (what do we want to achieve?). ●● Strategy (how will we get there?) This is why the brief is critical, as it should be clear about contact strategies and scenarios (including how it can now and in the future integrate with other systems, such as invoicing and debt collection). 3Ms include money (the budgets required for software licences plus training and motivation schemes to ensure staff buy into the new system), minutes (the timescales required to specify the brief, source it, test it, modify it, train the team and roll out the system), and men/women (who will champion the project, do the work and be involved in data capture, analysis and use). Every brief must have these. When should the new system be tested, staff training take place and the system eventually go live? Beware of scope creep Scope creep destroys projects. Finally, when you’ve done your research, discussed everything, written up a detailed brief, got it signed off by the key people and issued it to a supplier or several suppliers, some member of staffs thinks of something really quite helpful and asks for it to be included in the brief. This is scope creep. It delays projects, allows suppliers to be late with delivery (‘you changed the brief’) and allows suppliers to charge a lot more money. Although it’s tempting to keep adding extra ideas, a CRM project manager has got to be strong and comprehensive in the initial exploratory discussions and ensure everyone knows that this is the last chance to discuss the brief before it goes out to tender, because once it goes out it stays out. Systems development should follow a structured approach, going through several stages. Note though Customer relationship Management 81 that, just as for website development, prototyping is the most effective approach, since it enables the system to be tailored through users’ experience of early versions of the system. Ultimately, CRM is an attitude as much as a system. Success depends on a customer culture where all staff always ask ‘How can we help the customer?’ Marketers need to improve IT skill sets. They need to get better at speaking the language of IT and develop a greater understanding of how technology can translate into improved customer knowledge and ultimately an improved customer experience. As Wright (2007) says, ‘IT people use scary language, and marketers step back from it. But if marketers constantly brought conversations back to the beneits for the customer, that would help build a common language around the customer and put technology back in its place.’ CRM system creation, development, testing and roll-out Systems development should follow a structured approach, going through several stages (see Figure 3.2). Prior to developing a brief and system design, marketers need to improve their IT skill sets. Marketers need to understand and speak the language of IT and develop a greater understanding of how technology can be used to improve customer knowledge and ultimately an improved customer experience. FIguRE 3.2 CRM development process Brief System Design System Development Roll-Out 82 Part 1 Communications Background and Theories Prior to each stage there is research or testing. Prior to drawing up a brief, a lot of research goes into reviewing what each department requires and how it all integrates. After the brief is issued several supplier tenders are reviewed and researched. These may be off-the-shelf solutions, tailor-made solutions or a mixture, ie an off-the-shelf system tweaked to suit the organization’s speciic requirements. When a system is selected and developed it is then tested before being rolled out. System development involves prototyping and reining the prototype. This enables the system to be tailored through users’ experience of early versions of the system. However, beware of ‘scope creep’. Ultimately, CRM is an attitude as much as a process or system. Success depends on a customer culture where all staff always ask CRM designers and developers and consultants ‘How does this help the customer?’ Roll-out requires an investment of the 3Ms into training and motivation. Training ensures all staff are fully familiar with the system, how it works, how it can make their lives easier, how it will help the customer and how it will help the business. Front end is fun, back end is business Marketers are reasonably good at developing websites (front end) but we have to become experts with the database and the e-CRM systems (back end) required to build continual success. CRM maintenance Although it does not appear on the balance sheet, the database is an asset. Like any asset it deteriorates or depreciates over time if it is not properly maintained. In the same way that a physical asset, like a building, needs to be maintained to avoid it becoming run down and eventually become a liability (if tiles fall off the roof or a wall collapses), a database asset needs to be cleaned and maintained to stop it deteriorating and eventually becoming a liability, eg sending out direct mail to people who have died naturally upsets the relatives. Careful management of the database is required. Managing the database The database is at the heart of the CRM system. The database manager has many responsibilities in addition to the database design (which allows relevant customer data to be accessed rapidly and queries performed): ●● Data quality – ensuring data are accurate, relevant and kept up to date. ●● Data security – ensuring data cannot be compromised by attacks from inside or outside the organization. ●● Data coordination or user coordination speciies exactly who has access to data retrieval and who has access to data input. Too many uncontrolled inputs may result in iles being deleted or changed by too many different people. The database spins out of control. ●● Data back-up and recovery – ensuring that data can be restored when there are the almost inevitable system failures or attacks. The manager also monitors performance, particularly checking the system is coping as either the database grows or the number of interactions grows (driven by the contact strategies). Costs and timescales When it comes to the crunch question of ‘How much does it all cost?’ there are many variables to consider: ●● the set-up costs of the system; ●● the type of system; ●● the scope of the system; ●● the size of the system; ●● the choice made about the database management system; ●● the maintenance programme; ●● where the physical database management system is geographically located. It is a complex job but, once all these variables are taken into consideration, a task breakdown can be performed, and analysis, design, set-up, maintenance and running costs can be calculated. What’s missing is customer service staff, who are a key component, particularly when they are Chapter 3 handling wide-ranging, non-standard requests or complaints. Here’s a crucial question: how many customer service staff are required? The other key question is: how long does it take to set up a CRM system? The variables are similar to those for cost: ●● time allowed for the investigative stage; ●● time allowed for design; ●● time for writing programmes; ●● time for data capture, reassessment and input; ●● time for trials, piloting, testing and debugging. A strong project manager An effective CRM programme needs a strong project manager who can unite the business and technical team members. A defined database administrator is also required who will champion the system and own it to ensure appropriate data quality, security and performance. Planning using the systems development life cycle provides a framework for costing, scheduling and monitoring the project. Remember also that CRM programmes never end; they evolve. Control issues One of the toughest jobs is to know which data matter most – especially where there are conlicting data. Some customers will give incorrect information, consciously or unconsciously. Some staff input data incorrectly. Other staff leave data ields empty. Marketers and data managers have to come up with ways to acquire the correct and relevant information in the irst place and then make it useful to the organization. The issue of the invasion of privacy is a dificult one. Laws, ethics and codes of practice come into play. Ethics have a role, but the main arbiters of ‘How much contact is too much contact?’ are the customers themselves. They reveal how ready they are to be communicated with by their response (or lack of response). Permission to contact customers is only temporary. Organizations have to continually Customer relationship Management 83 win it by delivering relevant added-value communications continuously. Asking for information is a delicate affair. Marketers can be too greedy. Beyond the basic information, you may need to offer incentives for more information or simply wait for the relationship to develop and permission to ask for more. But remember that customers value their privacy. All organizations’ privacy policies should be clearly posted on the website and any other access points customers may have with you. Measuring customer satisfaction Call centre agents’ performance is often measured by number of calls taken. This ignores customer satisfaction, although customer service is a stated aim of many companies. Many marketing managers view call centres as a means of gathering customer data as opposed to a highly inluential brand-building ‘brand moment’. Those marketers who do measure customer care also need to tread cautiously, as it can be misleading. For example, an increasingly high customer care score (say up from 84 per cent to 92 per cent) may seem good, but it ignores two critical elements. Firstly, which service components are very important The customer cube One-dimensional customer surveys usually rate product quality, after-sales service, maybe price, etc with 1 extremely dissatisfied, 2 dissatisfied, 3 neutral, 4 satisfied, 5 completely satisfied. This ignores how the customer ranks the importance of each variable. Two-dimensional customer surveys weight these satisfaction factors according to how important they are to the customer: 1 not important, 2 of minor importance, 3 fairly important, 4 very important, 5 essential. However, this ignores how customers compare the brand to those of the other competitors. Three-dimensional customer surveys also ask customers to rate the organization versus the competition for each customer service component: 1 significantly worse, 2 somewhat worse, 3 about the same, 4 somewhat better, 5 significantly better. 84 Part 1 Communications Background and Theories to customers? The ultimate goal is to score 5 out of 5 ratings for all those customer service components given an importance rating of 5 by the customer. Secondly, how do customers rate the experience in comparison to that from competitors? Some authors are even suspicious of threedimensional customer satisfaction scores, as they believe conventional customer satisfaction scores ‘typically only draw responses from the bored, the lonely and the seriously aggrieved’ (Reichheld and Allen, 2006). The key, they suggest, is to ask customers one simple question: ‘How likely is it that you would recommend us to a friend or a colleague?’ Companies like GE focus on one statistic that nets the percentage of unhappy customers (scoring 0–6) from the percentage who are very happy customers known as ‘loyal promoters’ (scoring 9 or 10). This net promoter score provides a crystal-clear single number that is as actionable as net proit or net worth. Accountants cannot distinguish between good and bad proits ‘Business measures success based on profits but accountants cannot distinguish between a dollar of bad, customer abusive, growth stifling profits and a dollar of good, loyalty enhancing, growth accelerating profits.’ Reichheld and Allen (2006) CrM summary and challenges CRM is a strategic issue requiring a long-term perspective. Winning a sale is short-term transactional marketing. Building a relationship where the customer comes back again and again is long-term strategy. Building good customer relations requires a cultural shift in the organization to ensure that the whole organization wants to help customers. Some CRM projects take several years to research, develop, test and launch. There will always be some tension between the pressure to hit the short-term monthly and quarterly sales (and proit) targets versus the longer-term customer relations scores. Marketers need to educate boards about how CRM, in the long term, grows quarterly sales and proit results. The shift to a relationship-building organization can start with a website or even the fundamental products and services themselves. Ask how the organization or the brand can help customers even more than it does now (see the discussion of National Semiconductor in ‘The colouring department is dead’, Chapter 1). Some years ago Unilever made a major strategic decision to move Persil from a product-centric portal (a lot of product information) to a customer-centric portal. The new website had two main sections: ‘Time in’ and ‘Time out’, including lifestyle and time for ‘yourself’, which meant relaxation, minding your skin, diet and children, time with the children, tips for a happy family, and getting creative with the children. In addition, the subsequent brand engagement strategy and contact strategy have to be worked out carefully, as discussed in the previous sections. ROI of customer satisfaction ‘In fact, when we looked at the top 100 e-retailers, we saw that increasing satisfaction by just one point drove over $112 million in additional sales.’ Atchinson (2008) Table 3.3 is an interesting way to end the chapter – a nice simple survey to get a feel for an organization’s approach to CRM. Chapter 3 Ta b l E 3 .3 Customer relationship Management 85 Customer sensitivity quotient Are your customers getting the service they deserve? Answer the following questions ‘yes’ or ‘no’ to find out how your organization is doing. Yes/No 1 Do you know what percentage of customers you keep each year? 2 Do you know what percentage of customers you lose each year? 3 Do you know the top three reasons your customers leave? 4 Do you know your customers’ number one service expectation? 5 In the past three months, have you personally contacted 10 former customers to find out why they left? 6 Do you (and everyone else in your company) understand the lifetime value of a customer? 7 Do you have written customer service quality standards (that your people helped you develop, so they own them)? 8 Do you articulate your quality standards in understandable and measurable terms? 9 In the past six months, have you checked to see if any of your customers’ expectations have changed? 10 Do you know how many members of your staff serve internal versus external customers? 11 Are your customer service performance standards tied to any incentives? 12 Is everyone in your company required to take a minimum number of hours of customer care training programmes each year? If you scored... 12 10–11 7–9 4–6 Below 4 You are... A CSQ legend! A CSQ star! Jo(e) Average A benchwarmer In the penalty box © JoAnna Brandi key points from Chapter 3 ●● Relationship marketing (and CRM) can create competitive advantage. ●● CRM requires resources and a disciplined set of processes. ●● CRM is all about long-term brand building vs short-term sales growth. ●● ●● There is a disciplined approach to the CRM planning process. Many organizations allow scope creep and lack of training and motivation to destroy their CRM. 86 Part 1 Communications Background and Theories references and further reading Allen, J, Reichheld, F and Hamilton, B (2005) The three ‘Ds’ of customer experience, Harvard Business School Working Knowledge Atchinson, S (2008) The ROI of customer satisfaction, Interview with Larry Freed, President and CEO of ForeSee Results, ClickZ, 24 July August, A (2002) Smashing time for Chinese consumers, Times, 14 March Bird, D (1989) Commonsense Direct Marketing, 2nd edn, Kogan Page, London Brann, C (1984) Cost­Effective Direct Marketing: By mail, telephone and direct response advertising, Collectors’ Books, Cirencester BusinessEurope.com (2004) BusinessEurope News Feed, 4 February Butler, J (2004) Developing a customer culture, Successful Entrepreneurial Management Chaffey, D and Smith, P R (2008) eMarketing eXcellence, 3rd edn, Kogan Page, London Considine, R and Raphel, M (1981) The Great Brain Robbery, The Great Brain Robbery, Pasadena, CA DB2 (1997) IBM Developer Works Direct Marketing Centre (1992) The Practitioner Guide to Direct Marketing, Direct Marketing Centre, London dunnhumby (2006) The dunnhumby Way, dunnhumby, London Earls, K (2002) Welcome to the Creative Age, Wiley, Chichester Egain’s State of Customer Service (2007) New Media Age, 31 May Exhibition Venues Association (2000) UK Exhibition Facts, Vol. 12, Exhibition Venues Association, Mayield, East Sussex Forrester Research (2009) Answers to Five Frequently Asked Questions about CRM Projects, Forrester Research, Cambridge, MA Gartner (2009) Trip Report: Gartner customer relationship management summit 2009, Gartner, Stamford, CT Godin, S (1999) Permission Marketing, Simon and Schuster, New York Hochman, L (2008) Guide to customer loyalty, Marketing Age Howard, M (1989) Telephone marketing vs direct sales force costs, Commissioned by Datapoint (UK) Ltd, London IBM (2004) Reported by Mike Devlin, CEO, IBM and Paul Levy, CEO, Rational Software and the New Business Economy, 9 March 2004, Developer Works, IBM [online] http://www.ibm.com/ developerworks/rational/library/3771.html Krigsman, M (2009) CRM failure rates: 2001–2009, ZDNet, 3 August, http://www.zdnet.com/blog/ projectfailures/crm-failure-rates-2001-2009/4967 McCorkell, G (1997) Direct and Database Marketing, Kogan Page, London Mahoney, M (2002) ‘Putting the R back in CRM’: It’s time to reinstall the ‘R’ in your customer relationship, Interview with Susan Fournier, Harvard Business School Working Knowledge, 7 January, http://hbswk.hbs.edu/archive/3000.html Mitchell, A (2004) Heart of the matter, The Markets, 3 June MORI (2003) Managing your customer insight capability and the drivers for change – client managed, cosourced, insourced or outsourced – a survey of UK FTSE 1000 organisations, Commissioned by Detica Moriarty, R and Moran, U (1990) Managing hybrid systems, Harvard Business Review, November–December Moriarty, R and Swartz, G (1989) Automation to boost sales and marketing, Harvard Business Review, January–February New Media Age (2007) Impulse buying, by Emma Rubach, New Media Age, 30 August, www.nma.org.uk Novo, J (2004) Drilling Down: Turning customer data into proits with a spreadsheet, 3rd edn, published by Jim Novo Reichheld, F and Allen, J (2006) How companies can end the cycle of customer abuse, Financial Times, 23 March Royal Mail (1991) The Royal Mail Guide to Successful Direct Mail, Royal Mail, London Stevens, M (1991) The Handbook of Telemarketing, Kogan Page, London Tapp, A (2001) Principles of Direct and Database Marketing, 2nd edn, Financial Times/ Prentice Hall, Englewood Cliffs, NJ Tofler, A (1980) The Third Wave, Collins, London Tranield, D and Braganza, A (2007) Business Leadership of Technological Change – Five key challenges facing CEOs, Chartered Management Institute Watson, J (1989) The direct marketing guide, Marketing Magazine, 9 February Wright, H (2007) Reclaiming the customer high ground, Marketer, July/August Young, M (nd) Never sell to a stranger, Ogilvy & Mather Direct Chapter 3 Customer relationship Management Further information British Quality Foundation 32–34 Great Peter Street London SW1P 2QX Tel: +44 (0)20 7654 5000 www.quality-foundation.co.uk British Standards Institution 389 Chiswick High Road London W4 4AL Tel: +44 (0)20 8996 9001 Fax: +44 (0)20 8996 7001 www.bsi-global.com Institute of Customer Care 2 Castle Court St Peter’s Street Colchester CO1 1EW Tel: +44 (0)1206 571716 www.instituteofcustomerservice.com 87 88 THIS PAGE IS INTENTIONALLY LEFT BLANK 89 04 Customer psychology and buyer behaviour lEaRNINg ObjEcTIvES By the end of this chapter you will be able to: ●● Appreciate the complexity of buying behaviour ●● Understand the critical nature of a continual feed of information on customer behaviour ●● Appreciate the emotional inluences in decision making ●● Compare and contrast various approaches to buying models ●● Apply the psychology of marketing by exploring different intervening variables understanding buying behaviour 90 Psychological variables 103 Who is the customer? 91 Perception 103 Decision-making units Learning 105 Why do they buy? 92 Motivation 93 The rational–emotional Attitudes 110 dichotomy 93 Group inluence Brain science 94 Models of buyer behaviour The buying process 97 97 Response hierarchy models 99 Black-box models 100 Personal-variable models 101 102 110 Summary and conclusion How do they buy? 96 Complex models 107 112 Appendix 4.1: hofacker’s online information processing 114 Appendix 4.2: The post-PC customer 115 references and further reading 116 Further information 117 90 Part 1 Communications Background and Theories Introduction to understanding customer buying behaviour The irst step in formulating a marketing communications strategy is to identify, analyse and ultimately understand the target market and its buying behaviour. This chapter considers some of the theories and models that the marketing professional can use to help to communicate with and inluence the buyer at various stages before, during and after purchasing. Buying behaviour is often more complex than it appears. Individuals are generally not very predictable, but, in the aggregate, groups of customers (or percentages of markets) can be more predictable. Whether in the industrial or consumer market, or whether they are buying products or services, buyers respond in different ways to the barrage of marketing communications that are constantly aimed at them. Theoretical frameworks borrowed from psychology, sociology, social psychology, cultural anthropology and economics are now added to by both commercial and academic market research into consumer and industrial buyer behaviour. All of this contributes to a better understanding of buyer behaviour. It is this understanding that helps to reveal what kind of marketing communications work best. This chapter can provide only an outline of the vast amount of work written in this area. The complex burger buyer example is used to open up some of the types of question that need to be considered. The chapter then looks at types of purchases and the buying process (including some buying models) and then considers how the ‘intervening variables’ of perception, motivation, learning, memory, attitudes, beliefs, personality and group inluence can inluence the communication process and, ultimately, buying behaviour. Three key questions There are three key groups of questions that have to be answered before any marketing communications can be carried out: 1 Who is the buyer (target market proiles and decision-making units)? 2 Why do they buy (or not buy) a particular brand or product? 3 How, when and where do they buy? The second question, ‘Why do they buy?’, is the most dificult to answer. It requires qualitative rather than quantitative data (which generally answers the other questions). Products and services are bought for a range of different reasons or beneits, some conscious, others unconscious, some rational, others emotional. Many buyers buy for a mixture of reasons. Consider a simple hamburger. The complex burger buyer Why buy a burger? The answer might be as simple as ‘Because I was hungry – so I bought a Big Mac.’ The real reason, however, may be quite different. Perhaps the buyer was in a receptive state for food because of the time of the day. In the same way that a stimulus such as a bell for Pavlov’s dog (see ‘Learning’, page 105) can cause a dog to salivate, the highly visible yellow McDonald’s logo can act as a stimulus to customers to remind them of food and arouse feelings of hunger – even salivation. Perhaps the yellow logo also acts as a cue, by triggering memories of the happy advertising images that are learned and stored in memory banks. A teenage burger buyer may prefer McDonald’s because friends hang out there and it feels nice to be in with the in-crowd (Maslow’s need to be accepted or loved; see ‘Motivation’, page 107). Maybe the friendly image and the quick service simultaneously satisfy two basic needs – love and hunger. Many convenience purchases today are, in fact, about purchasing time, ie buying a time-saving product or service releases free time to do something else, to satisfy another need. It is likely that buyers have many different reasons with different orders of importance. Different segments can seek many different reasons with different orders of importance. But why don’t they go into a Wimpy restaurant or a ish and chip shop instead of a McDonald’s? Choice is often inluenced by familiarity with the brand, or sometimes the level of trust in a brand name. Familiarity can be generated by actual experience and/or increased awareness boosted by advertising. If one brand can get into the front of an individual’s mind (‘front-of-mind awareness’) through advertising, etc, then it will stand a better Chapter 4 Customer Psychology and Buyer Behaviour chance of being chosen in a simple buying situation like this, unless of course the buyer has a preferred set of fast-food restaurants that speciically exclude a particular brand. In this case the buyer is usually prepared to search a little harder (even cross the road) before satisfying the aroused need. The choice of another group of burger buyers can be determined simply by location – offering the right goods or services in the right place at the right time at the right prices. Assuming this is all supported by the right image (eg clean and friendly, nutritious, fast service, socially responsible), then the marketing mix has succeeded in capturing this segment of non-loyal burger buyers who have no strong preferred set of fast-food outlets. More health-conscious buyers may prefer a nice warm cup of soup. Why? What motivates them? Health? A desire to live longer? A fear of death? A desire to be it, stay slim, look good (esteem) or just feel healthy and feel good (self-actualization; see Figure 4.8)? Or perhaps it’s cheaper than a burger? Or is it because everyone else in the ofice recommends the local delicatessen’s soup (pressure to conform to group norms, desire to be accepted by a group – again, the need to be loved)? There are other possibilities that lie in the dark depths of our vast information storage chambers, otherwise known as our unconscious. For example, in 1957 Vance Packard suggested that ‘the deepest roots of our liking for warm, nutritious and plentiful soup may lie in the comfortable and secure unconscious prenatal sensations of being surrounded by the amniotic luid in our mother’s womb’. Impulse buying and repeat purchasing of lowcost fast food obviously differ from the buying behaviour involved in the purchase of, say, a new audio system, a house, a holiday or a leet of new cars for the company. It is likely that more ‘information search’ will occur than in the simple stimulus– response buying model (McDonald’s yellow logo stimulates the senses and arouses hunger, which generates the response – buy a Big Mac). Regular low-cost purchases are known as ‘routinized response behaviour’ and therefore have a different buying process than a high-cost, high-risk, irregular purchase, which is known as a ‘high-involvement purchase’. Some basic buying models help to explain the different types of purchases and the types of buying process involved. These will be considered later in this chapter. 91 Who is the customer? So many organizations do not know who their customers are. This means they have no real idea who they are trying to target. This is high-risk marketing, something akin to trying to ind a needle in a haystack. In fact there is more chance of inding the needle, because at least we can describe what a needle looks like. But in marketing if we cannot describe (or proile) who the ideal customer is then the organization is almost totally dependent on luck. The few outstanding marketing companies out there really do spend a lot of time and effort constantly researching and analysing exactly who is their target market (in great detail), the needs of the target market (why they buy) and how they buy. It can be more dificult online. Some people behave differently online than ofline. They assume different pseudonyms and personalities. Sometimes it’s hard to know who’s who online. As they say, ‘Who knows you’re a dog online?’ Diferent personalities below the surface A 25-year-old New York stockbroker had an online fling with a 21-year-old blue-eyed blonde Miami beauty. They arranged to meet at JFK airport with red roses. The young New Yorker was horrified to see a 70-year-old man sitting in a wheelchair, wearing a red rose and roaring with laughter at him. Knowing who is the customer is not as easy as it seems. As discussed in Chapter 3, 50 per cent of British companies did not know who their customers were. Despite having large databases, they did not know how to put proiles on their customers. Without this information, companies are shooting blind and just hoping for the best. This is high-risk marketing. For example, a European battery supplier noticed that its highest-margin, high-tech batteries were frequently sold out in one of its most powerful retailers. As it wanted to boost sales at this retailer, it invested in a new point-of-sale. It assumed the high-tech batteries were bought by high-tech users. It designed a prominent new display rack describing Part 1 92 Communications Background and Theories the batteries’ beneits for digital services. Sales fell. Research revealed that ordinary (non-high-tech) users were buying the batteries, as they perceived the hi-tech batteries would simply last longer (a fact not emphasized in the displays). The company returned to the original displays, and sales went up by 20 per cent (Forsyth, Galante and Guild, 2006). Decision-making units As mentioned previously, there are often several individuals involved in any one person’s decision to purchase either consumer or industrial products and services. The choice of a family car may be inluenced by parents, children, aunts, uncles, neighbours, friends, the Automobile Association and so on. Each may play a different role in the buying process. Similarly, the purchase of a new factory machine may have been instigated by a safety inspector, selected by a team of engineers, supervisors, shop steward and production manager, agreed by the board, bought or ordered by the purchasing director and paid for by the inancial director or company secretary. PAGES is a simple acronym that helps to build a marketing communications decision-making unit (DMU) checklist: Purchaser Adviser Gatekeeper End user Starter The person who orders the goods or services Someone who is knowledgeable in the ield A secretary, receptionist or assistant who wants to protect his or her boss from being besieged by marketing messages Sometimes called ‘the customer’ The instigator or initiator The actual decision maker is sometimes separate from the purchaser and/or the user. The payer (cheque authorizer) may be different to the purchaser in the B2B environment. One other, non-human, inluencer that needs to be added to the DMU is the intelligent shopping bot. Some are here already. They can take many different forms. One form is the futuristic 3D loating holograms that appear beside the customer when the customer is in the buying mode, giving advice, or even haggling with the salesperson (if buying ofline). Another form is the intelligent fridge (referred to in Chapter 2), which can offer the customer a tempting online voucher to replace the last can of Guinness with an alternative brand. Another form is the mobile phone. My iPhone has various apps: one identiies the prices at all petrol stations near my location, and another scans in bar codes and compares prices locally. As mobile phones become smarter, with predictive contextual devices delivering real-time contextualized and personalized services and information, the device knows, through the aggregated ilters of our location, our timeline and our social graph, what we did just before and what we are expected to want or do later on (courtesy of our online calendar, contacts database, web search history and geo-location information). Very soon, context-based technology will predict our needs and desires. It is ‘aware’ because it holds a complete record of our past actions and habits and of our future intentions – where we are heading and who we will meet via calendar entries, contacts, web/search history, etc (Frank, 2010). It’s only a matter of time before your mobile device knows your every want and need ‘I am on a business trip to Madrid, have just finished my meetings and have three hours until my flight back to New York. My device “senses” I started moving and ‘knows’ my schedule, therefore it asks me if I prefer to get a taxi to the airport, or if I prefer to stay in the city since the drive to the airport takes about 15 minutes. I choose the second option, slide the “ambient media streams” all the way from “privacy please” to “hit me with everything you’ve got,” and the device offers me all the tourist attractions around me, even a nearby coffee shop that has received exceptionally high ratings (I love coffee). I choose the coffee shop, and as I am drinking my second cup, the device alerts me that my flight has been delayed by an hour and will board through gate E32. I drink another cup of coffee and read from my device the history of Madrid until the next alert updates me that I should call a taxi – immediately providing me with an application that directly books one.’ Frank (2010) Chapter 4 Customer Psychology and Buyer Behaviour Why do they buy? Marketing people really do need to know the reasons why buyers buy. More often than not, customers do not even know the real reasons they buy (they like to think that they are rational decision makers). There is a range of conscious and unconscious reasons underlying why people buy what they buy. Some reasons are more important than others to a particular segment. Some reasons are rational, and some are emotional. The split between the two is called the ‘emotional–rational dichotomy’. The late Robert Gouezeta, former CEO of Coca-Cola, once said, ‘We sell on image. We don’t know how to sell on performance. Everything we sell, we sell on image.’ Rational shoppers? ‘Typically, shoppers give the correct price of only 50 per cent of what they have just put in their trolley. Consumers remain loyal to brands even when better products are available. Consumers rarely complain to suppliers when dissatisfied about a product. Is this a time-efficient way of dealing with repetitive purchases, or emotional madness?’ East et al (2008) The rational–emotional dichotomy This rational and emotional quagmire is not restricted to consumer purchasing but applies also to supposedly hard-nosed rational professional buying behaviour. Take small businesses selling to other businesses: they don’t have the option of scale, price or bulk orders to gain an edge over the competition; they have to have a story or relationship, and need to cultivate that ‘unreasonable loyalty’ (Roberts, 2010b). And B2B buyers do buy into relationships built on reliability, trust and personality, as B2C buyers buy on emotion. In fact, as noted in Chapter 2, Harley-Davidson does not sell motorcycles, Starbucks do not sell coffee, Club Med does not sell vacations, and Guinness does not sell beer. Coke doesn’t sell cola. Porsche buyers (many of them) don’t buy a transport vehicle; they buy it because they ‘simply want to prove to themselves that they 93 have the ability to buy such a car’ (Kapferer, 2004). (See the box ‘The invisible badge: motivation beyond conspicuous consumption’ on page 109.) Perhaps Professor East was conservative when, in fact, many UK customers are prepared to pay 800 per cent more for the ‘the real thing’ than for an own-brand cola from Asda. A 2-litre bottle of CocaCola may sell at £1.20 while on the same shelf an Asda own-label 2-litre cola was selling for £0.15. John Roberts (in Egan, 2007) believes that CocaCola’s ‘core concept is product engagement, how warm customers feel towards the brand, how engaged and intimate their relationship has become through the events. You’ll never see a Coke ad with just one person.’ And, for this intimate privilege that relects our deep desires (the magic formula), we are prepared to pay an 800 per cent price premium. As one of the masters of the magic marketing formula, Kevin Roberts, CEO of Saatchi & Saatchi Worldwide, acknowledges, 80 per cent of decisions are emotional. Yet 80 per cent of marketing communications (marcomms) are rational. Rational decision making equals conclusion, whereas emotional decision making equals action. Hence master marketers search for emotional beneits as well, eg the back pain medication rational approach is ‘This medication solves the problem’, whereas the emotional approach shows the joy of movement. That’s why Roberts says: ‘Let emotion rip!’ The diference between emotion and reason ‘You spend three seconds. You do not think about every benefit, every attribute, every demonstration. There’s an emotional connection through the packaging, through the advertising and through your memory that you make. And then you decide. Neurologist Donald Khan says the difference between emotion and reason is: “Reason leads to conclusions – emotion leads to action.” Most of the research asks: “Do you remember it? Do you get the brand benefits?”, whereas the only question you need to ask in research is: “Do you want to see it again? Does this connect with you?”’ Roberts (2006a) 94 Part 1 Communications Background and Theories The bottom line is that marketing managers have constantly to ask the question: ‘Why are they buying or not buying our products or services?’ Customers need to be probed deeply to ind the answers to questions like: ‘How do you feel about the brand? Does the brand connect with you? How? How much emotional connection have you got with the brand?’ The answers are not static, one-off pieces of research indings but a constant low of information. Rational reasons need to be understood also. And remember: reasons change; people change; markets change; competition and technology change. A valid reason for buying a particular product yesterday may become obsolete tomorrow. Likewise, an apparently irrelevant feature yesterday may become a key reason for buying tomorrow. A company executive might buy one brand of a computer rather than another simply because of a distant fear of being ired. This is further complicated by the fact that some customers buy the same product for different reasons. For example, Americans may buy iPods because they enable them to listen to their favourite music without being disturbed by others, while Japanese buy iPods to listen to their favourite music without disturbing others. Even an apparently simple product like toothpaste presents a complex web of reasons for buying. The toothpaste manufacturers respond by supplying The toothpaste test Why do you buy toothpaste? ‘To keep teeth clean.’ ‘To stop cavities and visits to dentist.’ ‘To keep a full set of beautiful shining teeth.’ Some people will admit that ‘it is habit’ or that ‘my parents taught me always to clean my teeth’. All of these answers suggest different benefits that different groups or segments want from their toothpaste, and so the toothpaste suppliers oblige by positioning certain brands as those that deliver a particular benefit. But when do you brush your teeth? First thing in the morning? If people were serious about seeking the benefits they would carry a small portable brush and use it after each meal. Why do most people brush first thing in the morning? To avoid bad breath (which destroys one’s confidence). Yet many people do not like admitting it. The real reason is often hidden beneath the surface reasons. different images of different beneits of different types of toothpaste to different segments who have different reasons (needs or motives) for brushing their teeth. The following toothpaste test explains. The now classic Colgate ‘ring of conidence’ was one of the UK’s best-known toothpaste advertisements. It was basically selling a tube of social conidence. This need to be accepted is relatively obvious although not always admitted initially. There are, however, deeper feelings, emotions, memories, moods, thoughts, beliefs and attitudes locked up inside the dark depths of our unconscious. Sigmund Freud suggested that the mind was like an iceberg in so far as the tip represents the conscious part of the mind while the greater submerged part is the unconscious. Even long-forgotten childhood experiences can affect buying behaviour, including that of hard-nosed US industrial buyers (see ‘Mommy’s never coming back’, page 144). Some theories of motivation are discussed further in this chapter (‘Motivation’, page 107). In the UK many organizations use in-depth research, eg Guinness carries out in-depth research to tap into drinkers’ deeply ingrained feelings about the product. Individuals are asked to express their (often unconscious) feelings through clay modelling, picture completion and cartoon completion techniques. This kind of research has revealed that people associate natural goodness and quasi-mystical qualities with the brand. The section ‘Motivation’ (page 107) looks at in-depth feelings. Bloatware – emotional wins over rational Forty-five per cent of software features are never used, 19 per cent are rarely used, and 16 per cent are sometimes used, so some software suppliers launched ‘liteware’ with fewer functions and lower prices. It flopped. Why? Because people didn’t want to be without features that other people had – so bloatware prevails. Brain science There is no doubt that conscious reasoning accounts for only a small part of our thinking. David Penn (2005) talks about how brain science helps to throw Chapter 4 Customer Psychology and Buyer Behaviour some light on the dark depths of emotion and consciousness: By reuniting psychology with philosophy and biology, it shifts the scientiic focus back onto the mysteries of consciousness and emotion. Increasingly, we’ve come to understand that unlocking the mystery of consciousness actually depends on iguring out the unconscious functions of the brain. Not Freud’s unconscious – a repository for repressed memories – but rather the many things the brain does that are not available to consciousness. Unconscious processes include most of what the brain does – we can often be aware of what we’re doing when these things happen, but much of the time consciousness is informed after the fact through the cognitive unconscious. The area that’s generating hottest debate is emotion, and its operation through the so-called emotional unconscious, and it’s here that the fusion of biology and psychology is changing the whole way we understand human behaviour. The unconscious explains most of what we feel, think and do. Conscious reasoning accounts for only a small part of our ‘thinking’. Penn warns of the dangers of overemphasizing the importance of brand awareness when he says: ‘It is clear that if we only base an assessment of effectiveness [advertising effectiveness] on conscious recall, we potentially miss out on those [customers] who are positively affected yet have no conscious recall of having seen it [an ad or a product].’ Penn highlights the four big ideas in brain science: 1 Unconscious processes (either cognitive or emotional) account for most of what we think, feel and do. 2 Conscious reasoning may account for only a small part of our ‘thinking’, with most taking place in the cognitive unconscious. 3 Emotion precedes our conscious feelings and works in tandem with rational thinking to help us make (better) decisions. 4 The interconnectedness of the thinking and feeling parts of the brain facilitates the interaction of rationality and emotion in decision making. Each one of these has fundamental implications for marketing and research. Marketers must tread with caution and measure the emotional aspects – some of which are often unconscious emotional 95 connections. Now consider the different types of buying situations in which customers have different approaches to choosing products and services. Goethe and the magic marketing formula ‘Behaviour is a mirror in which everyone displays his own image.’ Goethe, Elective Affinities, 1809 (quoted in Schifman and Kaunk, 1991) Marketers sometimes say ‘We are what we shop.’ Effectively, marketers have to know their customers better than the customers know themselves. This involves deep customer insights, sometimes generated by intense psychoanalysis, sometimes by employing anthropologists and sometimes by cleverly looking at customers through several lenses to get a deeper insight. Here is how Tesco varies its research techniques to generate customer insights that they then apply to their marketing immediately. Tesco is reported to have spent 20 years watching the US market before launching its Fresh & Easy chain. A team of 20 executives was dispatched to the United States to carry out in-depth research and to visit every rival. The company hired a team of anthropologists to live with consumers for two weeks and analyse what they bought and why. It also built a mock store and asked selected customers to try it. Tesco discovered that US consumers were less bothered by the selection of wines on offer, but wanted better-quality meat than UK consumers (Jones, 2008). In the UK, Tesco combined loyalty card data on what customers were buying at Tesco with survey research on what customers were not buying. This revealed that, ‘in some formats, young mothers bought fewer baby products in its stores because they trusted pharmacies more. So Tesco launched Baby Club to provide expert advice and targeted coupons. Its share of baby product sales in the UK grew from 16% to 24% over 3 years’ (Forsyth, Galante and Guild, 2006). The better marketers look at customers through a variety of lenses. Take Walmart in the United States: it integrates shopper research, point-of-sale data, and demographic analysis to ind out who its customers are, ie what the proile of their local customers is. 96 Part 1 Communications Background and Theories Tesco varies the individual store’s format to relect the needs of its local customers (the magic marketing formula). For example, ‘stores located near large concentrations of afluent male professionals, for example, offer more high end home theatre equipment, specialized inancing and same day delivery while stores closer to soccer moms feature softer colours, personal shopping assistants, and kids oriented technology sections. Sales surged by 7 per cent and gross proit by 50 basis points’ (Forsyth, Galante and Guild, 2006). So knowing your customers really does pay dividends. Know your customers intimately – their hopes, dreams, fears and aspirations ‘The job now is to be so intimate with consumers, so empathetic with their hopes and their dreams, their aspirations and their fears that we can develop revelations which we then put into creative departments and from great revelations awesome ideas will come, eg T-Mobile UK – revelation – life is for sharing, the power of tribes, the power of communities, and the power of all this social stuff.’ Roberts (2009b) See the full case study in Chapter 13. How do they buy? Types of buying situation The amount of time and effort that a buyer is prepared to put into any particular purchase depends on the level of expenditure, the frequency of purchase and the perceived risk involved. Relatively larger expenditure usually warrants greater deliberation during the search and evaluation phases. In consumer markets this buying process is classiied as ‘extensive problem solving’ (EPS) if the buyer has no previous product experience and the purchase is infrequent, expensive and/or risky. The situation is different where the buyer has some knowledge and experience of, and familiarity with, a particular product or service. This is called ‘limited problem solving’ (LPS). In the case of strong brand loyalty for a habitually purchased product, routinized response behaviour (RRB) can be identiied by the repeat brand purchasing of convenience products like baked beans. The buyer chooses quickly and has a low involvement with the purchase. EPS requires high involvement from the buyer, which means that the buyer spends time and effort before actually deciding to buy a particular product or brand. This can be complicated by further advisers and inluencers who form part of the decision-making unit. LPS requires lower levels of involvement than EPS but more than RRB. Industrial buying is even more clearly inluenced by decision-making units, particularly when the purchase is considered large, infrequent or risky. As in consumer buying, types of purchase situation also vary in industrial markets. A ‘new task’ buying situation means what it says – the organization has no experience of the product or service and is buying it for the irst time. A ‘modiied rebuy’ situation is where the industrial buyer has some experience of the product or service, while a ‘straight rebuy’ is where the buyer, or purchasing department, buys on a regular basis. new currencies required: privacy, trust and time In the online world, privacy, trust and time are new currencies that have a very high value in customers’ minds. Customers are cautious about giving up private information. They are also busy and don’t like wasting time (if you can save your customers time, they will like you even more). They expect their privacy to be protected (hence privacy statements are de rigueur for every website). Equally, customers resent being asked for too much information or being asked for information when they haven’t yet established any relationship – so much so that many customers just lie when illing in online forms. Trust is increasingly important, as online customers live in a dangerous environment of privacy invasion and identity theft. Surprisingly many customers trust a website more than a person. People trust well-known and well-respected brands. Why else would customers give an unknown American their credit card details, home address and money? Trust. In the UK, several major brands score higher in trust than the church and the police. Wellmanaged brands are trusted as long as their promise is never broken. How does it feel when a website remembers your name? And when it remembers your preferences? It seems customers are happy to Chapter 4 Customer Psychology and Buyer Behaviour have unconscious relationships with brands, robots and machines as well as people. Enlightened companies remember information for customers, not just about them. This builds trust in the relationship. Ask: what is a website that might attract a visitor to come back a second time and, ultimately, regularly revisit the site and develop a relationship? Remember, the second visit is the start of the relationship. Models of buyer behaviour There are many different models that attempt to model the buyer’s behaviour. Figure 4.1 shows how a buyer in either an EPS or an LPS situation moves through the purchasing cycle or purchasing continuum. The basic model can be borrowed and used in industrial markets also. It highlights some of the stages through which a potential buyer passes. Sources and channels of information plus buying criteria can also be identiied, which in turn provide a checklist for the marketing plan, whether online, ofline or integrated. This is when waves of worry, doubt or ‘postpurchase dissonance’ arise. This may be addressed by reassuring the buyer (with a congratulatory note, additional advertising, after-sales service and, most of all, a product or service that lives up to the promise made in the advertising). And, if the product matches the promise, then both repeat business and word-of-mouth referrals are more likely to occur over the longer run. The simple buying model shown in Figure 4.1 serves as a useful checklist to see whether you are illing in all the communication gaps in the buying process. Interestingly, many websites now use this as a checklist to ensure that the site helps different customers to move through different stages of their F I g u R E 4 . 1 A simple model of the buying process for a high-involvement purchase Problem recognition The buying process We can demonstrate this simple buying model by considering, say, the purchase of a new compact disc player. Somewhere, somebody or something makes the customer aware that he or she needs an in-home theatre system. This is known as problem recognition, which is followed by ‘information search’. This may involve ads and editorial in magazines, visits to stores, discussion among friends, etc. Next comes evaluation. Lealets, catalogues, ads and discussions are amassed, and a set of criteria is further reined. This may include size, shape, colour, delivery, guarantee, etc. Performance is really dificult to assess, since few of us can read sound graphs, let alone decipher a good sound in a shop full of other speakers. However, customers do check other people’s opinions online before buying almost any type of product or service today. Customer comments on the oficial site and on other sites inluence customers. Finally, a decision is made to choose a particular model. It isn’t over yet. The chosen brand may be out of stock (in which case the communications mix has worked but the marketing mix has failed, since distribution has not got the product on the shelf). Another brand is eventually purchased. 97 Information search Evaluation Decision Buy Post-purchase dissonance Dissatisfaction = Brand rejection Satisfaction = Loyalty = Repeat purchase 98 Part 1 Communications Background and Theories buying process. The model should not be hierarchical, since in reality there are loops, eg between information and evaluation, as the buyer learns about new criteria not previously considered. This model is more relevant for a high-involvement purchase, whether extensive problem solving (consumer) or new task (industrial). A routinized response situation, like buying a beer, is low-involvement, and therefore it would not involve any lengthy decisionmaking process. Low-involvement purchases can sometimes appear to be thoughtless (impulsive) responses (purchases) to stimuli (point-of-sale displays or well-designed packs). If attention can be grabbed, then some brands can be bought, apparently, without much considered thought processing. Basically, if you see the brand, you try it, and if you like it you rebuy it. Some advertising aims to remind customers and reinforce the beneits of the brand. Advertising can also reassure existing customers that they have bought the right brand. This defensive advertising (defending market share) reduces any post-purchase dissonance (or worries) and also keeps the brand on the buyer’s shopping list (or repertoire of brands). In contrast with attitudes towards high-involvement purchases, attitudes towards low-involvement brands can be formed after the brand experience and not before. In the more considered, high-involvement purchases attitudes are formed after awareness but before any purchasing behaviour actually occurs. The attitude may subsequently be reinforced by, irst, the real experience of buying and using the brand and, second, any subsequent advertising or word-of-mouth communications. Ehrenberg’s 1974 awareness trial reinforcement (ATR) model suggested that consumers become aware of a brand, try it (buy it) and then are exposed to reinforcement by advertising (or even the actual brand experience). Trial can occur many months after an advertisement has created awareness. Advertising here is also seen as defensive, in so far as it reassures existing buyers that they have made the right choice, as opposed to advertising that might make them run out and buy the advertised brand immediately. Ehrenberg acknowledges that some advertising actually does prompt (or ‘nudge’) buyers to buy, as demonstrated with his more explicit 1997 awareness trial reinforcement plus occasional nudging (ATR + N) model. Ehrenberg’s speciic views differ FIguRE 4.2 The ATR model Awareness Trial Reinforcement from many other approaches highlighted in this chapter, yet his research indings are used by top blue-chip companies around the world. Many other academics believe that different buying situations (high- and low-involvement) require different thought processes and timescales. Even within the same product sector, different processes can occur. Take grocery shopping. Australian academics Rossiter and Percy (1996) have identiied differences in thought processes within the grocery sector. They suggest that most grocery brands (65 per cent) need recognition at the point of purchase, since buyers tend to see the brand irst and then realize they want it. Less than 10 seconds elapse between recognition and putting the product into the trolley. The other 35 per cent of groceries are chosen in advance, so brand awareness (before purchase) is important for these. It does not stop there. There are more differences depending on whether the purchase is a relief purchase (to solve a problem such as dirty clothes) or a reward purchase (to provide gratiication, like ice cream). The relief purchases require a more rational approach and the reward purchases a more emotional approach. So each market and each brand needs to be carefully analysed. Robert Shaw (1997/98) points out that ‘many different measures such as brand knowledge, esteem, relevance or perceived quality may need to be monitored’. Any marketing manager, whether industrial or consumer, product or service, has constantly to watch the market, its segments and how it is fragmenting. Marketers need to understand their customers’ buying process, whether online, ofline or a mixture of both. Dulux paints found that its brand share is Chapter 4 Customer Psychology and Buyer Behaviour 11 per cent higher when customers choose their paint colour at home rather than in-store. But 75 per cent of colour decisions are made in the store. It therefore tried to lock people into a Dulux purchase before they visit a shop by creating a valueadded online experience whereby users can decorate a virtual room (with colour coordination suggestions) and receive free swatches delivered free to their home with directions to their nearest Dulux retailer. now you have it, now you don’t – Oasis CD The music band Oasis fully understand their customers’ buying process and their desire to hear the songs before they are officially released. So, to satisfy the hunger for previews and reduce the number of illegal downloads from the internet, Oasis released four trial tracks seven days prior to the release of their Heathen Chemistry CD. The tracks were offered to readers of the Sunday Times as a free cover-mounted CD that was encrypted so it could only be played four times. After that, the CD was automatically wiped and the user was directed to HMV.co.uk to buy the album. In addition, HMV donated 50p (for each CD sold) to the Prince’s Trust charity. Response hierarchy models Although the ultimate objective for most marketing managers is to build repeat purchases from proitable customers, there are many stages between creating problem recognition or need arousal and purchase (as shown in Figure 4.1). The communication models in Figure 4.3 show what are thought to be the sequence of mental stages through which buyers pass on their journey towards a purchase. These models are sometimes called ‘message models’ or ‘response hierarchy models’, since they help to prioritize the communication objectives by determining whether a cognitive, affective or behavioural response is required, ie whether the organization wants to create awareness in the target audience’s mind, or to change an attitude, or to act in some way (buy, vote, participate, etc). (See ‘Attitudes’ on page 110 for a more detailed explanation of the 99 cognitive, affective and behavioural/conative elements of an attitude.) Message models are helpful but not conclusive, since 1) not all buyers go through all stages, 2) the stages do not necessarily occur in a hierarchical sequence, and 3) impulse purchases contract the process. Although expanding repeat purchase (loyal behaviour) from proitable customers is the ultimate marketing goal, a PR campaign, advertisement or sales promotion may have a tactical objective focusing on a particular stage in the above models, eg increasing awareness, changing an attitude or generating trial. In fact, Hofacker’s (2001) online information processing model shows how online messages from banner ads and websites are processed (see Appendix 4.1 for more detail). These hierarchical communication models identify the stages through which buyers generally pass. An understanding of these stages helps to plan appropriate marketing communications. DAGMAR (deining advertising goals for measuring advertising results) was created to encourage measurable objectives for each stage of the communications continuum. Some of the stages can sometimes occur simultaneously and/or instantaneously, as in the case of an impulse purchase. Buyers can also avoid moving in a straight line or hierarchy of stages when making a more considered purchase (extended problem solving). For example, during the evaluation stage a potential buyer may go back to the information stage to obtain more information before making a decision to buy. Each hierarchical model really requires a loop from the ‘last’ stage up to the irst stage – to show that the sale (action) is not the end stage, but rather the beginning of an ongoing dialogue that nurtures a relationship and a report buying process. Ideally, these models should allow for these and other loops caused by ‘message decay’ (or forgetting), changes in attitudes, competitive distractions, etc. The models also ignore the mind’s ‘intervening variables’, some of which are identiied in both the ‘personal-variable models’ of Fishbein (1975) and the ‘complex models’ of Howard and Sheth (1969) and Engel, Blackwell and Kollatt (1978). The complex models, do, in fact, allow for both loops and the complexities of the intervening variables (see page 102). Three types of model, ‘black-box’, ‘personalvariable’ and ‘complex’, will now be considered Part 1 100 F I g u R E 4 .3 Stage Communications Background and Theories Response hierarchy models AIDA Lavidge & Steiner Adoption DAGMAR Howard & Sheth (excerpt) Online information processing Exposure Unawareness Awareness Cognitive Awareness Attention Attention Awareness Attention Knowledge Comprehension Comprehension Comprehension and perception Interest Liking Interest Preference Affective Desire Conviction Evaluation Conviction Trial Behaviour Attitude Yielding and acceptance Intention Action Purchase Adoption Action Purchase Retention E K Strong L&S E M Rogers R H Colley H & S* Hofacker (1925) (1961) (1961) (1961) (1969) (2001) *The Howard and Sheth excerpt is taken from the full model shown on page 000 briely. Black-box models consider external variables that act as stimuli (such as price, shops, merchandise, advertisements, promotions and the social environment, including families and friends) and responses such as sales. Personal-variable models focus on some of the internal psychological variables such as attitudes and beliefs. The complex models attempt to include both the internal and the external variables in one grand model. To some this proves impossible. As Gordon Foxall (1992) pointed out, ‘No one model can capture human nature in its entirety; nor can a handful of theoretical perspectives embrace the scope of human interaction.’ Black-box models The behaviourist school of psychology concentrates on how people respond to stimuli. It is not concerned with the complex range of internal and external factors that affect the behaviour. The complexities of the mind are left locked up in a ‘black box’. The resulting stimulus–response models ignore the complexities of the mind (including the intervening variables such as perception, motivation, attitudes, etc) and focus on the input or stimulus, eg advertising, and the output, eg purchase behaviour. A classical approach to stimulus–response models is Chapter 4 Customer Psychology and Buyer Behaviour F I g u R E 4.4 Black-box model Stimulus variables (inputs) F I g u R E 4.5 101 Intervening variables (black box) Response variables (outputs) An enlarged black-box model Inputs/stimuli Product Price Place Promotion: Advertising Selling Sales promotion Publicity Packaging Point-of-sale Merchandising Exhibitions Corporate identity Sponsorship Sales literature Direct marketing Word-of-mouth Processor Outputs/behaviour Product purchase Brand purchase Buyer considered in ‘Learning’ on page 105. Figure 4.4 shows a black-box model. As Williams (1989) says: ‘Black box models treat the individual and his physiological and psychological make-up as an impenetrable black box.’ Only the inputs and outputs are measured. Any internal mental processes (the intervening processes) that cannot be measured are ignored. The model in Figure 4.5 shows some examples of ‘input’ and ‘output’. The black-box approach considers only the inputs and outputs. Careful analysis under controlled tests (using reasonably sophisticated computer models) can reveal the optimum price, the optimum level of advertising and so on. Personal-variable models These models take a glimpse inside the black box of the mind. The models only involve a few personal variables such as beliefs, attitudes and intentions. These kinds of model are sometimes used within more complex models. Three types of personal-variable Brand loyalty/ repeat purchase Size of purchase Frequency of purchase models, ‘linear additive’, ‘threshold’ and ‘trade-off’, are briely considered below. Linear additive models Linear additive models like that of Fishbein are based on the number of attributes a particular product or service has, multiplied by the score each attribute is perceived to have, multiplied by the weighting which each attribute is deemed to have. This model opens up attitudes by indicating which attributes are considered to be important to the customer and how each attribute is scored by the customer. Attitudes are not always translated into purchasing behaviour. Even intentions are not always translated into action. Nevertheless, marketing strategies can be built around changing beliefs about attributes, and altering their evaluation or scores. Threshold models Most purchases have cut-off points or thresholds beyond which the buyer will not venture. It may be Part 1 102 F I g u R E 4 .6 Communications Background and Theories A simpliied version of Howard and Sheth’s model Exogenous variables Stimuli F I g u R E 4 .7 Perception Learning Responses The complete Howard and Sheth model Inputs Stimulus display Significative a. Quality b. Price c. Distinctiveness d. Service e. Availability Symbolic a. Quality b. Price c. Distinctiveness d. Service e. Availability Perceptual constructs Learning constructs Outputs Intention Overt search Purchase Confidence Intention Attitude Stimulus ambiguity Attitude Brand comprehension Social a. Family b. Reference groups c. Social class Motives Attention Choice criteria Perceptual bias Brand comprehension Attention Satisfaction SOurCE: Howard and Sheth (1969) © Copyright (1969) John Wiley & Sons. Reprinted by permission of John Wiley & Sons Inc price or some particular feature that a product or service must have (or must not have in the case of some environmentally damaging ingredients) if it is to be considered at all. Here, the buyer has a selection process that screens and accepts those products or services within the threshold for either further analysis or immediate purchase. Those beyond the threshold are rejected and will not be considered any further. that is lacking in one attribute but strong in another. A sort of compensatory mechanism emerges. When someone is buying a car, engine size and price can be traded off against each other, eg a bigger engine means a worse price (higher price). A number of combinations of price and engine size can be researched to ind the value or ‘utility’ for different prices and engine sizes. Trade-off models Complex models Buyers generally have a wide array of choices, many with different types and amounts of attributes. A trade-off occurs when the buyer accepts a product The cognitive school attempts to open the lid and look inside the mind’s black box. Here more complex buying models, like that of Howard and Sheth Chapter 4 Customer Psychology and Buyer Behaviour (1969), try to incorporate into the hierarchical communication models the intervening variables of perception, motivation, learning, memory, attitudes, beliefs, group inluence, etc – in fact, almost everything inside the mind. Howard and Sheth A simpliied version of Howard and Sheth’s complex model divides the black box into perceptual constructs and learning constructs, as shown in Figure 4.6. The exogenous variables are external to this model and include personality traits, social class, inancial status, the social/organizational setting and even the importance of the purchase to the individual. The complete complex model in Figure 4.7 includes perception, learning, attitudes and motivation. Stimulus ambiguity implies inadequate information to make a decision. Perceptual bias (see ‘Perception’ below) basically means that there is a certain amount of distortion in the way that an individual perceives a stimulus. This complex model has been criticized for lacking a clear deinition of the relationships between some of the variables and for a lack of distinction between the endogenous variables (within the model) and exogenous variables (external to the model). The model is, for many readers, dificult to understand and, for many practitioners, impossible to use. Nevertheless it does provide a useful insight into the possible workings of the mind. The remainder of this chapter looks at some of the inluencing variables such as perception, learning, motivation, values, attitudes and lifestyles, and considers how an understanding of them helps to make more effective marketing communications. The intervening psychological variables Perception Perception means the way stimuli, such as commercial messages, advertisements, packaging, shops, uniforms, etc, are interpreted. Messages and images are not always perceived in the manner intended by the advertiser. As Chisnall (1985) says: ‘Our perceptual system has a tendency to organize, modify 103 and distort information reaching it.’ Perception is selective. We see what we want to see. Here’s a simple test. Ask smokers to recall exactly what the health warning says on the side of their packet of cigarettes. Few will be able to tell you the exact words. This is because we all selectively screen out messages or stimuli that may cause discomfort, tension or ‘cognitive dissonance’. Imagine that smokers allow the message (warning) to be perceived. This will cause discomfort every time a cigarette is taken, since the box will give the smokers an unpleasant message. In order to reduce this tension, the smokers have two options: 1) change behaviour (stop smoking) or 2) screen out the message and continue the behaviour (smoking). Many stimuli are screened out by the perceptual system, which, it is estimated, is hit by between 500 and 1,500 different advertisements a day. The example in the box shows how preferences and motivations affect perception. The infamous Brian O’Driscoll incident The captain, and some say potential match winner, of the British and Irish Lions rugby team, Brian O’Driscoll, was spear-tackled by two players, off the ball, in the first minute of the first test match in New Zealand. O’Driscoll’s shoulder was shattered and his test series over. He was lucky not to have broken his neck, as a spear tackle involves lifting and throwing a player head first to the ground. It can result in a broken neck. It is extremely dangerous and totally illegal. The Lions’ manager, Sir Clive Woodward, called for a citing and disciplinary action. It never happened. Here’s the interesting bit about perceptions. The author interviewed over 100 New Zealand fans, and every one of them saw no problem with the incident. Ask Lions fans, and every one will say it was an absolute disgrace. Everyone saw the same thing, but the two groups saw (perceived) something different. Perception is selective and biased by motivation. So perceptions are biased by our underlying motivations. Take this example from Hong Kong, where in 1997 China regained control over this former 104 Part 1 Communications Background and Theories British colony. The committee responsible for celebrating the resumption of Chinese sovereignty chose the white dolphin as its symbol. A British newspaper, the Independent, pointed out that this was a species threatened with extinction in Chinese waters. The committee also chose to place it alongside the new symbol for the future special administrative region of Hong Kong, the Bauhinia lower, which, reported the newspaper, was a sterile hybrid that produces no seed. The newspaper perceived Hong Kong to be marching into the future under the symbols of an endangered species and sterility. The Hong Kong committee saw the friendly dolphin as appealing to everybody, especially children: ‘Its leaping movement symbolizes Hong Kong’s vibrancy.’ They differed vastly even over the same symbol or stimulus. Perceptions can vary even within the same region. A UK TV advertisement for Unilever’s Persil washing powder showed a Dalmatian shaking off its black spots, a white horse breaking away from black horses and a skater dressed in white beating other skaters dressed in black. The advertisement was perceived by some as being racist. Despite the advertisements having been tested with Afro-Caribbean women before going on air, the Independent Television Commission (ITC) received 32 complaints. Before perception occurs, attention has to be gained by, say, the advertiser. As Williams (1989) says, interests, needs and motives determine ‘not only what will arouse attention, but also what will hold it’. For example, advertisements for a new house are ignored by the mass population. But there is a sector of the population that is actively looking for a house. This sector has a need for a new house, and it is therefore receptive to any of these advertisements. Individuals from this sector positively select information relevant to their needs. This is known as ‘selective attention’. There are also certain physical properties that increase the likelihood of a message gaining attention: intensity and size; position; sound; colour; contrast; and movement (eyes are involuntarily attracted to movement because of the body’s instinctive defence mechanism). Given that an individual’s attention is constantly called upon by new stimuli, repetition can enhance the likelihood of a message getting through. Novelty can also be used to jar expectations and grab attention. Perceived differences in brands are not necessarily dependent on real product differences (in either function or form). As Chisnall (1985) says, ‘Consumers evaluate products against the background of their experiences, expectations and associations. Perception is seldom an objective, scientiic assessment of the comparative values of competing brands.’ Colour afects our perception ‘Red is a colour that makes food smell better.’ Kanner (1989) Perceptions are delicate and need to be managed carefully. Take Google: it is loved by everyone, but could easily be feared by all if it was perceived to be too powerful (as perhaps Microsoft experienced). Kennedy (2009) suggested: ‘One of the main hurdles Google faces in its quest to manage the world’s information, becoming a virtual library of books, movies, music, maps, tools, news, communication even our very voices, is that it also becomes a igure of suspicion. How safe is that information, are they reading our every email, do they know too much about us?’ Google CEO Eric Schmidt admits these are real fears, and he says: Trust means there is a sacred line the company must never cross. In fact, it’s greatest strength is, in truth, its Achilles heel. If it crosses that line it can never go back. Privacy and trust are sacrosanct. There’s a lot of things we could do that would upset our users so there’s a line you can’t cross. We try very hard to stay very much on the side of the consumer (Manyika, 2008). Even if the company stays on the right side of the line, it still has to manage customer perceptions very carefully. An understanding of the way our perceptual system organizes information has helped some brand advertisers to exploit perceptual systems through an understanding of gestalt psychology. Gestalt means ‘total iguration’. One of the four basic perceptual organizing techniques from the gestalt school is ‘closure’. Individuals strive to make sense of incomplete messages by illing in the gaps or shaping the image so that it can it comfortably into their cognitive set (or set of knowledge). Marlboro’s ‘MARL’ advertisements and Kit-Kat’s ‘Kit’ Chapter 4 Customer Psychology and Buyer Behaviour advertisements play on the need to ill in these gaps. This may happen so fast that viewers are not aware of what is going on inside their heads. Effectively, the mind momentarily becomes the medium, since the complete image is visible only inside the head, while the external advertisement shows the incomplete image. In a sense, a giant billboard inside the forehead is switched on by an incomplete stimulus. The natural perceptual tendency towards ‘closure’ completes the advertisement’s image inside the audience’s mind. Perception is also inextricably linked with past experiences, motivation, beliefs, attitudes and the ability to learn. everybody is scared ‘Everybody is scared; everybody is insecure; everybody is nervous. Nobody knows what’s coming next. Nobody. So people are looking for intimacy. They’re looking for brands that understand them. They’re looking for services that deliver for them in their new environment. I think most brands and most companies are operating in a time lag and a time warp. Consumers are way ahead of us. Their insecurities are much more to the surface... The challenge is to get more intimate with her fears, her needs, her desires. Let’s face it: she needs to enjoy her life today – because there’s not a lot of it coming her way. So she will still use brands. She will still find some pleasure in shopping. What we’ve got to do is provide that pleasure, provide that joy, that delight so that we can delight her in her new environment through being very intimate in her current situation.’ Kevin Roberts, CEO, Saatchi & Saatchi Worldwide (2009c) Learning Marketers obviously want customers to learn about, irst, the existence of their brand or company and, second, its merits. A knowledge of the learning process is therefore useful in understanding how customers acquire, store and retrieve messages about products, brands and companies. How are attitudes about companies, products and brands developed (or learnt)? Advertising and sales promotions can 105 help customers learn in different ways (see ‘classical conditioning’ and ‘operant conditioning’ in ‘Connectionist learning theories’ below). In addition, how many times (frequency) should an advertisement be shown before it is remembered or, alternatively, before it causes irritation? Should it be repeated regularly once a week for a year (a ‘drip’ strategy) or concentrated into 12 times a week for four weeks only (a ‘burst’ strategy)? Differing levels of intelligence, memory capacity, motivations, perceptual systems, associations and rewards (reinforcement) affect the learning process. The party When introduced to someone at a party, do you ever forget the person’s name? An inability to learn and remember names can create embarrassment. Perhaps the host should increase the frequency of the branding process by repeating the individual’s name three times during the introduction? Or would this be irritating? Perhaps it would be better if the individual’s name was inserted in a ‘drip’ strategy rather than a ‘burst’ strategy, ie occasionally the host would pass by, casually drop the individual’s name into the conversation and move on. Connectionist learning theories Simple connectionist theory suggests that associations can be made between messages, or stimuli, and responses, hence the term ‘stimulus–response model’. In the late 1890s the Russian physiologist Ivan Pavlov demonstrated how ‘classical conditioning’, or involuntary conditioning, worked on dogs. By regularly hearing the ringing of a bell before being presented with food, a dog learnt to associate (or connect) the bell with food. After a period of conditioning the dog would salivate (respond) upon hearing the bell (stimulus) without any food arriving. As Williams (1989) says, ‘It is the idea of association that underlines the concept of branding in modern marketing.’ Constant repetition can build associations between needs, products and brands, eg if you are thinking of beans, think Heinz: ‘Beanz Meanz Heinz’. Associations can also be built by linking celebrities with the brand. For example, 106 Part 1 Communications Background and Theories Coca-Cola GB has signed the Hollywood actress Kim Basinger as part of a three-year plan to ‘link Diet Coke with movies and glamour’. Humans conditioned by music learning ‘High tempo music may be appropriate in fast food restaurants because it encourages faster knife and fork activity, leading to quicker table turnover. Customers buy more expensive wines in a retail environment playing classical music rather than pop music. French wine significantly outsold German wine in a store when stereotypical French accordion music was played. Marketers frequently match the volume of music in different time zones of their store to the age band of the target market... younger shoppers spend more in a retail environment playing loud music, while shoppers aged 50 and over spend more in an environment with quiet background music.’ Oakes (2008) ‘London Underground started piping “uncool” classical music in the booking hall of tube stations in December 2005 to deter youths from loitering, resulting in a 33 per cent drop in abuse against staff.’ Marketer (2010) ‘Operant conditioning’, on the other hand, is voluntary in so far as the participant actively searches for solutions. The Skinner box was devised by Dr Skinner in the United States during the 1930s. By placing a hungry rat in a box where food only arrived once the rat pressed a lever, Skinner observed that the rat would search, investigate and, eventually, press the lever accidentally. Food then arrived. Over a period of time the rat, when aroused by the hunger motive, learned to press the lever for food. An association or connection was made between the lever pressing and the drive to satisfy the hunger need. This approach to building associations through voluntary participation suggests that sales promotions can actively invite the buyer to participate, be rewarded, and eventually connect a particular product or service with a particular stimulated need. Stimulus–response Connectionist theories of learning highlight the importance of, irst, timing and, second, frequency of marketing communications. The establishment of a connection or association between a stimulus and a response is fundamental to the conditioning process. Advertising jingles, pictures and even smells are some of the stimuli that can arouse emotional or behavioural responses. Some people still feel good when they hear the Coca-Cola jingle ‘I’d like to teach the world to sing...’; others are aroused and excited when they hear the sound of a sports commentator’s voice with crowd sound effects in the background. Ice cream van jingles arouse children. McDonald’s large, highly visible yellow ‘M’ logo can trigger a response, particularly if an individual is involved in goal-oriented behaviour (is hungry and is ready to consider eating food). Could this yellow logo be the equivalent of Pavlov’s bell? Do some humans salivate just at the sight of the logo? Cyber-logo makes customers salivate ‘Seeing your logo on the net made me hungry’ (feedback from a McDonald’s website visitor, demonstrating classical conditioning). Smith, Berry and Pulford (1999) Certainly the release of certain aromas can stimulate immediate responses. For example, as customers leave a pub and walk down the street they are often greeted by the wafting smell of frying chips, which can stimulate or arouse the need for food, and lead to an immediate purchase. Lunn Poly created a full sensory holiday environment in its stores using a coconut aroma, fresh coffee in the Parisian-style café area, holiday music, travel images and a variety of ilm footage. Reinforcement and reward enhance the learning process. In other words, good-quality products and services reward the buyer every time. This consistent level of quality reinforces the brand’s positive relationship with the buyer. On the other hand, if the quality is poor, there is no reward (the response does not satisfy the need), and the response (to buy Chapter 4 Customer Psychology and Buyer Behaviour a particular brand or visit a particular shop) will not be repeated. Positive reinforcement helps the learning process (or helps the buyer to remember the brand or shop). It is possible to ‘unlearn’ or forget (‘message decay’), so many advertisers seek to remind customers of their products, their names and their beneits. Some advertisements seek to remind buyers what a good choice they have already made by frequently repeating messages. The connectionist approach ignores all the other complex and inluential variables involved in learning and, ultimately, buying. Arguably, it oversimpliies a complex process. Packaging design can also act as a cue to arouse momentarily the happy images conveyed in the previously seen and unconsciously stored advertising images. This is where a ‘pack shot’ of the product and pack in the advertisement (usually at the end) aids recall of the brand, the advertisement and its image when the consumer is shopping or just browsing along shelves full of different brands. All brand managers would like to have their brand chosen automatically every time. Some brands achieve this through an unconsciously learned response. How? By building a presence through frequency of advertising and maximum shelf facings (amount of units displayed on shelves – see Chapter 19) and, most importantly, by supplying an appropriate level of reinforcement (an appropriate level of quality in the product or service itself ). Chapter 3 emphasizes the importance of quality in the long-term repeat-buying success strategies of today and tomorrow. Cognitive learning Cognitive learning focuses on what happens in between the stimulus and the response. It embraces the intervening mental processes. Insight, meaning, perception, knowledge and problem solving are all considered relevant concepts. Cognitive learning is not dependent on trial and error. It depends on an ability to think, sometimes conceptually, and to perceive relationships and ‘what if’ scenarios. It is not dependent on an immediate reward to reinforce the learning process; in fact, ‘latent learning’ occurs in the absence of reward and without any immediate action. Of course, an individual has to be suitably motivated to achieve this kind of learning. The next intervening variable – motivation – will now be considered. 107 China learns about Coca-Cola, Pepsi and Starbucks Just as they helped the Europeans to learn to eat with their hands (McDonald’s) and drink ice-cold beer (Budweiser), mostly through classical advertising, Coca-Cola, Pepsi and Starbucks are conditioning a massive market to learn a new way of satisfying their needs, especially young Chinese. These brands are turning a tide in tastes. Tea houses in China already are being replaced by coffee houses and Starbucks. Motivation Motivation is deined as the drive to satisfy a need. Some motives are socially learnt (eg wanting to get married), and others are instinctive (eg wanting to eat when hungry). Sigmund Freud suggested that an individual is motivated by conscious and unconscious forces. Many motives are unconscious but active in that they inluence everyday buying behaviour. Brands carry covert messages that are leetingly understood at a subconscious level. As the Market Research Society said in its 1996 conference paper, ‘It is often this deeper meaning which is what is exchanged for money. These deep underlying feelings are often the real reason why people buy products or services.’ Freud’s psychoanalytical approach broke the personality into the id (instinctive drives and urges, eg to eat food or grab food), the ego (the social learning process that allows the individual to interact with the environment, eg to ask politely for food or pay for food) and the superego, which provides a conscience or ethical/moral referee between the id and the ego. Freud suggested that all actions are the results of antecedent conditions (see how childhood experiences might affect industrial buying behaviour some 30 or 40 years later in ‘Mommy’s never coming back’, page 144). Occasionally these unconscious stirrings manifest themselves in dreams, responses to ambiguous stimuli and slips of the tongue (Freudian slips). Clinical psychology uses thematic apperception tests, Rorschach tests and word association tests to help it to analyse the underlying and sometimes Part 1 108 Communications Background and Theories unconscious personality traits and motivations of an individual. In-depth market researchers (qualitative researchers) use metaphors, picture completion and montages in an attempt to throw the interviewee’s ego off guard and dip into the real underlying feelings that interviewees ind dificult both to become aware of and to express in an articulate manner. In the 1950s, Vance Packard was concerned about how in-depth researchers like Ernest Dichter were attempting to extract buyers’ unconscious feelings, aspirations and motivations, which were then subtly relected through advertising imagery, which in turn manipulated buyers unconsciously. Although discredited by some and criticized by others, Dichter’s Handbook of Consumer Motiva­ tions (1964) is an extremely thought-provoking and entertaining read. Here are some other well-known, in-depth research indings from the 1950s that supposedly reveal the deep underlying motivations that drive certain forms of behaviour, including buying behaviour: ●● A woman is very serious when she bakes a cake, because unconsciously she is going through the act of birth. ●● Soon after the trial period, housewives who used a new improved cake mix (no egg needed, just add water) stopped buying it. The new improved cake mix provoked a sense of guilt, as the cooking role of the housewife was reduced. ●● A man buys a convertible car as a substitute mistress. ●● Smoking represents an infantile pleasure of sucking. ●● Men want their cigars to be odoriferous in order to prove that they (the men) are masculine. ●● Shaving for some men is the daily act of cutting off this symbol of manliness (stubble). It is therefore a kind of daily castration. This is all arguably outdated now. Humans are rational animals and are not concerned with such psychoanalytic interpretations of everyday, ordinary and, supposedly, common-sense behaviour. Consider ‘A close shave?’ opposite. A close shave? There is a simple test that has been used in lectures with different groups. A question is posed, with a request for male respondents only. The question is ‘How many of you find shaving a hassle?’ Usually a unanimous show of hands emerges. ‘How many of you would like to be able to dispense with the aggravation of shaving?’ Slightly fewer hands emerge. ‘Well, here is a cream that will solve your problem. This cream closes your hair follicles so that hair will never grow there again. It is medically approved and cleared for a market launch next year. Who would like to try some right now?’ All the hands are gone. The question ‘Why not?’ is usually answered faintly with ‘Freedom to choose to have a beard later in life’ and so on. Or is there something deeper here? Dichter would have said ‘Yes’. Abraham Maslow’s (1954) hierarchy of needs provides a simple but useful explanation of the way an individual’s needs work. Essentially he showed that one is driven or motivated initially to satisfy the lower-level needs and then, when satisied, move up to the next level of need. This theory also implies that motivation can be cyclical, in so far as buying a house may be motivated initially by the lower-level survival needs and subsequently by the higher-level need of esteem. Figure 4.8 shows Maslow’s hierarchy of needs. Cars transport people from A to B. Sometimes the need to buy a car is a basic survival need (eg to get to work, to earn money to buy food). Sometimes it can provide a cocoon (or shelter) from the mass of bodies scrambling for the public transport system. Sometimes it can provide freedom to explore the countryside, visit friends or do what you want (self-actualize). Cars can also act as status symbols (esteem). Some cars position their beneits (power, speed, safety, environmental, etc) so that they dominate the ad and appeal to the predominant need of a particular segment. Sometimes customers simply do not understand the new beneits delivered by innovative products and services. For example, research originally rejected Chapter 4 Customer Psychology and Buyer Behaviour F I g u R E 4 .8 109 Maslow’s hierarchy of needs Self-actualization needs (self-development and realization, accomplishment, fun, freedom, relaxation) Esteem needs (self-esteem, recognition, status, prestige, success) Social needs (sense of belonging, love, affections, affiliations and identification) Safety needs (security, protection, order, stability, physical well-being) Physiological needs (hunger, thirst) The invisible badge: motivation beyond conspicuous consumption In 1899 Thorstein Veblen introduced ‘conspicuous consumption’, which suggested consumers buy products to impress other people, with his example of the man who parades down Main Street in ‘stainless’ linen, with a superfluous walking stick. These items told a story and provided ‘evidence of leisure’ – to an audience of strangers. Today’s customers also wear badges (Guinness is a badge that tells everyone that the drinker is a discerning beer drinker). Even hybrid cars are said to be eco-status markers (or signals) that show ‘conspicuous concern’ about the environment. According to Walker (2008), conspicuous consumption ATMs, with typical comments like ‘I wouldn’t feel safe withdrawing money on the street.’ Interestingly, the wheel is turning full circle, as customers are once again becoming nervous about cash withdrawals on crime-ridden streets. Different people (or groups of people) extract different beneits from the same product. Some people want to drive a Porsche because it gives is no longer valid: ‘There is a better idea – the invisible badge. What the Joneses might think is, really, beside the point. Because what you are really doing is telling that story to yourself. In other words, yes, a fancy “product” really is a badge in the sense that it’s a symbolic confirmation or expression of identity (an identity that we may wish for rather than actually embody – aspirational rather than authentic). But the fact that hardly anyone sees it, let alone accepts the meaning it supposedly projects, hardly matters. In fact, if the real audience is us, the badge may as well be invisible.’ them power; others want to because they see it as a symbol of success (good for the ego and esteem); others just want the thrill of driving very fast (selfactualization, as in the case of the driver’s last wish in Nevil Shute’s On the Beach); others again may simply want a very fast, reliable car that allows them to get from A to B (around Europe) without delay (see the iPod example on page 5). Markets Part 1 110 Communications Background and Theories What motivates Sears’ best customers? Which of the following benefits motivates customers of the US department store Sears? ●● Priority repair service. ●● Special zero financing. ●● Free special catalogue. ●● Private sale events. ●● Money-saving certificates. ●● Personal recognition. Answer: Personal recognition – customers love it when staff call over the store manager to meet the VIP customer. You can see how this fits with Maslow’s hierarchy of needs. can be broken up into ‘beneit segments’ so that communications can be tailored to develop the ideal positioning for a particular segment. In some cases beneit segmentation demands different products for different segments, as in the case of the toothpaste market (page 94). Attitudes Attitudes affect buying behaviour. Attitudes are learnt, and they tend to stick; they can be changed, but not very quickly. As Williams (1989) says: ‘If a marketer is able to identify the attitudes held by different market segments towards his product, and also to measure changes in those attitudes, he will be well placed to plan his marketing strategy.’ An attitude is a predisposition towards a person, a brand, a product, a company or a place. An interesting question is ‘Which came irst, the attitude or the behaviour?’ Are attitudes formed prior to purchase or post-purchase? Can attitudes be formed without any experience? The answer is ‘yes’ to both. Attitudes are sometimes formed without direct experience and, equally, products are often bought without any prior attitude. In the latter case, however, it is likely that an attitude will form as a result of word of mouth, or an engaging advertisement. Attitudes can be broken down into three components, which are often explained as ‘think’, feel’ and ‘do’ or ‘cognitive’, ‘affective’ and ‘conative’. The cognitive element is the awareness or knowledge of, say, a brand. The affective element is the positive or negative feeling associated with the brand. The conative element is the intention to purchase. It can be important to measure all three components, since an isolated element can be misleading. For example, Rolls-Royce scores highly on the cognitive and affective elements of the attitude, but few of those who express awareness of and liking towards a Rolls-Royce will actually buy one. Identifying the levels of each attitudinal element helps to set tighter communication objectives. For example, the creative strategy for increasing brand awareness would be different from the strategy required to change the target market’s feelings (or reposition the brand). A different communications strategy (perhaps an emphasis on sales promotions) would be required if the objective was to convert high awareness and positive feelings into trial purchases. Attitudes can be changed, but it does take time. There are several options: 1 Change the beliefs held about the product or service (or its attributes and features). 2 Change the importance ratings (or weightings) of various attributes. 3 Introduce another attribute. 4 Change the association of a particular product or service with the others. 5 Change the perception of competitors’ products or services. Groups also inluence attitudes: hence the importance of opinion formers and opinion leaders. Now consider group inluence in the buying process. Group inluence Much of human behaviour, and buyer behaviour in particular, is shaped by group inluence. Whether cultural, religious, political, socio-economic, lifestyle, special interest groups or just family, social groups affect an individual’s behaviour patterns. Watch explicit group inluence occur as thousands of people perform a Mexican wave at football matches, the Olympics, etc. Chapter 4 Customer Psychology and Buyer Behaviour The effects of group influence are often seen in a queue or waiting area where charity collectors are attempting to collect money. Success or failure is often determined by the reaction of the first encounter, ie if the first person acknowledges the collector and makes a contribution, the next person is more likely to do so too. We have often seen a whole platform generously giving money after a successful start. Equally, we have seen almost total rejection by a whole queue once the initial contact has refused to donate. This is a bizarre or perverse form of charity giving and seems to be about peer group pressure. In a sense, a donation buys some relief from guilt or embarrassment. Most individuals are members of some kind of group, whether formal (eg committees) or informal (eg friends), primary (where face-to-face communications can occur, eg family) or secondary (eg the Chartered Institute of Marketing). Groups develop their own norms or standards that become acceptable within a particular group. For example, normal dress among a group of yacht club members differs considerably from the norm or type of clothes worn by a group of clubbers. Yet both groups adhere to the rules (mostly unwritten) of their own group. Both groups also go through some sort of purchasing process. Roles are played by different members within a group. An individual may also have to play different roles at different stages of the same day, eg a loving mother, tough manager, loyal employee, client entertainer, happy wife and, perhaps, sensuous lover. In the online world the same person can adopt different roles and even multiple personalities (see ‘Different personalities below the surface’, page 91). Activities, interests and opinions can form useful segmentation criteria. Roles within groups help to target decision makers and inluencers in the decision-making units. Roles are also identiiable from the family life cycle, which shows how an individual moves from single to newly wed to full nest 1 (youngest child under six) to full nest 2 (youngest child six or over) to full nest 3 (dependent children) to empty nest 1 (children moved out) to empty nest 2 (retirement) or solitary survivor 1 (still working) to solitary survivor 2 (retired). The income levels, 111 needs and spending patterns are often predictable as the income earner moves through various family life cycle roles. Spending patterns, inluenced by changing roles, can be monitored and forecast before communicating any marketing messages. For example, direct mail companies often mail new mothers within a few days of the arrival of their baby. Like everything else, roles are changing. Men aged 25–39 are experiencing a massive role change, and some ind it hard to cope. ‘Generation Y and X men expect to balance work and family, whereas their parents didn’t’ (Kimmel, 2008). Perhaps this is something women have been doing for some time. And perhaps this multitasking, multi-role life is more alien to young men, as Harold, a 39-year-old Swede, says in the Discovery Channel survey into the male species: ‘Men of my age have to be successful in their jobs and take care of the house, kids, cook, ix the car and be a great lover’ (Discovery Channel, 2008). Many young men today even see their home as having a different role to that of their parents’ home. For many, home is a ‘refuge from an uncertain world’ and a ‘haven from the stresses of life’. In addition to being a long-term inancial investment, a home can also be a hub of technology that ‘connects a guy with his sense of self through a variety of media experiences’. Absenteeism out, ‘presentee-ism’ in ‘Men have to work harder than ever before to make themselves indispensable, to the point where we are now seeing “presentee-ism”, which occurs when men feel that they have to get to work earlier and leave later to show their commitment. This is having a detrimental effect on their home lives.’ Coopere (2008) Finally, the mix of communications tools helps move customers through the stages of a buying model from unawareness to reassurance. Each tool can affect different stages. Although there is always some vagueness at exactly where the effectiveness starts and stops, Figure 4.9 is arguably an oversimpliied graphic that may help in understanding which tools do what. Part 1 112 F I g u R E 4 .9 Communications Background and Theories Which communications tools do what Unawareness Awareness Acceptance Preference Insistence/buy now Reassurance Advertising PR Sponsorship Direct mail Selling Packaging Point of sale Exhibitions Sales promo Website Social media CRM/WOM Summary and conclusion The marketing professional must understand the target market’s buying behaviour before, during and after the actual purchase. Even the apparently simple act of purchasing a hamburger can reveal a host of hidden motives. In-depth research reveals some deep and unconscious reasons that demonstrate some of the complexities of buying behaviour. The time and effort spent in the buying process depend on the type of buying situation. Decisionmaking units affect the process. Buying models highlight some of the stages through which the buyer passes, offering a kind of checklist for marketing communications to ensure that they carry the buyer through each stage successfully. The behaviourist school differs from the cognitive school of more complex buying models. Motivation, perception, learning, values, attitudes and lifestyles all interact and inluence the buying process. Once marketing professionals are equipped with a clearer understanding of both the motives for buying and the buying process itself, a marketing communications strategy can be developed to ensure that it covers as many avenues to the mind of the buyer as resources allow. Reasons and motives range from the rational to the bizarre. Motives are, however, only one variable among many other intervening variables that integrate and inluence buying behaviour. For example, beliefs and attitudes affect motives, which in turn affect the way an individual sees or perceives things (images, ads, products, shops, etc). We learn these opinions, attitudes and beliefs partly from groups (such as friends and colleagues), partly from commercial messages carefully aimed at us through advertising, sales promotion, etc, and partly from real experiences of products or services. All these inluences interact with commercial stimuli such as advertisements. The effects are ultimately relected in our behaviour (or lack of behaviour in some circumstances). In consumer markets, buying behaviour is affected by the complex web of mostly internal intervening variables (motivation, perception, attitudes, learning, memory, lifestyle, personality and groups). Sex, Chapter 4 Customer Psychology and Buyer Behaviour age, income and even an individual’s face or body affect their behaviour. Other external variables such as laws and regulations, the weather, opening hours, an out-of-stock situation or an emergency can all change buying behaviour. An industrial buyer is also inluenced by internal variables, including the organization’s objectives, policies, procedures, structure and systems, and variables external to the organization such as the state of the economy, the level of demand and competition, the cost of money, etc. Some argue that it is impossible, as Foxall (1992) says, to ‘capture human nature in its entirety’ because of the complexity of the decision-making process. This complexity is created by the web of rational and Perhaps Oscar Wilde was too generous when he said that ‘man is a rational animal except when asked to act within the dictates of reason’. 113 emotional factors that are generated from internal processes and guided by external inluences. Marketing communications can change a nation’s behaviour. Marcomms do affect aggregate buying behaviour, as evidenced by changed behaviour patterns after the National Lottery integrated campaign, which stimulated some 65 per cent of the British adult population into shops to buy lottery tickets on a regular basis. The same changes in buyer behaviour are evident in China and across Europe, where marketers really do change customer behaviour patterns. It is no accident. It is never the result of guesswork. It is, as dunnhumby (Tesco’s database agency) says, ‘largely dependent on accurate analysis of customers and building up valuable insight. If you want to protect and enhance the value of your brand, your offer must be valuable. The higher the relevance, the greater the value – it’s a continuum. Customers get what they want, your margins are protected. Everyone’s a winner’ (Humby, 2008). The magic marketing formula works. key points from Chapter 4 ●● Buying behaviour is complex. ●● ●● There are many different approaches to buying models. Emotional inluences in decision making are still dominant in B2C and exist in B2B markets. ●● Marketers must understand how the intervening psychological variables inluence buyer behaviour. ●● Marketers need a continual feed of information on customer behaviour. Part 1 114 Communications Background and Theories Appendix 4.1: hofacker’s online information processing One approach to online information processing is Charles Hofacker’s ive stages of on-site information processing. 1 Exposure. 2 Attention. 3 Comprehension and perception. 4 Yielding and acceptance. 5 Retention. Each stage acts as a hurdle, since if the site design or content is too dificult to process, the customer cannot progress to the next stage. The e-marketer fails. The best website designs take into account how customers process information. Good e-marketers are aware of how the messages are processed by the customer and of corresponding steps we can take to ensure that the correct message is received. The irst stage is exposure. This is straightforward. If the content is not present for long enough, customers will not be able to process it. Think of splash pages, banner ads or Shockwave animations: if these change too rapidly the message will not be received. The second stage is attention. The human mind has limited capacity to pick out the main messages from a screen full of single-column format text without headings or graphics. Movement, text size and colour help to gain attention for key messages. Note though that studies show that the eye is immediately drawn to content, not the headings in the navigation systems. Of course, we need to be careful about using garish colours and animations, as these can look amateurish and distract from the main message. Comprehension and perception are the third of Hofacker’s stages. They refer to how the customer interprets the combination of graphics, text and multimedia on a website. If the design uses familiar standards or metaphors, it will be most effective, since the customer will interpret them based on previous experience and memory. Once relevant information is found, visitors sometimes want to dig deeper for more information. Changing the layout of a website will be as popular with customers as a supermarket changing its store layout every six months! Metaphors are another approach to aid comprehension of ecommerce sites; a shopping basket metaphor is used to help comprehension. Fourthly, yielding and acceptance refers to whether the information you present is accepted by the customer. Different tactics need to be used to convince different types of people. Classically a US audience is more convinced by features rather than beneits, while the reverse is true for a European audience. Some customers will respond to emotive appeals, perhaps reinforced by images, while others will make a more clinical evaluation based on the text. This gives us the dificult task of combining text, graphics and copy to convince each customer segment. Finally, retention – how well the customer can recall their experience. A clear, distinctive site design will be retained in the customer’s mind, perhaps prompting a repeat visit when the customer thinks, ‘Where did I see that information?’ and then recalls the layout of the site. A clear site design will also be implanted in the customer’s memory as a mental map and they will be able to draw on it when returning to the site, increasing their low experience. To summarize, understanding how customers process information through the stages of exposure, attention, comprehension and perception, yielding and acceptance, and retention can help us design sites that really help us get our message across and deliver memorable messages and superior customer service. Chapter 4 Customer Psychology and Buyer Behaviour 115 Appendix 4.2: The post-PC customer The post-PC customer may occasionally accept payment to view some ads. The rest are screened out by both sophisticated browser software and little ‘TiVo-type’ boxes attached to wall-to-wall screen TVs. Neither governments nor society permit oldstyle intrusive advertising any more. No more intrusive evening telephone calls from script-reading intelligent agents. It is also illegal to litter anyone’s doorstep or house with mailshots and inserts. Heavy ines stopped all that a long time ago. The only ads that do get inside are carried by the many millions of private media owners who rent out their cars, bikes and bodies as billboards. The tedious task of shopping for distress purchases like petrol, electricity or memory storage is delegated completely to embedded shopping bots. Non-embedded bots spun out of control some years ago when they irst appeared in threedimensional hovering holograms – always at your side, always double-checking the best price for hire cars, hotels, even drinks at the bar. Some are programmed to be polite, aggressive or even abusive. All are programmed to be intrusive whenever anything is being bought. Delays on buses and trafic jams regularly occurred when argumentative bots engaged in lengthy negotiations. Frustration broke out. Bots attacked bots, people attacked bots and bot owners. Eventually bots were banned from buses, planes, trains and several ‘peaceful supermarkets’. Next came the great worm wars: programming bots so they only buy your brand – for life. But, unlike humans, bots can be reprogrammed by a competitor. The advertising agent worm was born. Agent eaters soon followed. Despite being information fatigued and time compressed, the post-PC customer lives a lot longer than many bots. And certainly longer than most of the new brands that seem to come and go. The 150-year-old person has already been born. Meanwhile, back at the ranch, microwaves insist on offering suggestions of ideal wines to go with your meal, offering instant delivery from the neighbourhood’s wired-up 24-hour roving delivery van. Your fridge offers special incentives to buy Pepsi when you run out of Coke (or whichever brand owns or Live longer Humans may develop smaller ears (from constant use of headphones) and better body organs, replaced as a result of early-warning systems carried by miniature submarines constantly patrolling in the bloodstream. These wireless database-driven devices identify wearing parts and organs, check cloned stock availability, reserve beds and preferred surgeons and estimate time before breakdown replacement is required. Discounts for early bookings into leisure hospitals are also negotiated automatically. hires the fridge-linked database). Children happily play chess and interact with their opponents on the giant vertical screens, called refrigerators. Voiceoperated computers are considered noisy and old fashioned as discreet, upmarket, thought-operated computers operate silently, but extremely effectively. And all the time blue-tooth type technology facilitates ubiquitous communications, which allows constant interaction between machines. Man and machine integrate into a vast database. We have more IT power in today’s average luxury car than the rocket that went to the moon. Yes, Moore’s law suggests the tectonic shift will continue. Yes, marketing will continue in a new guise (probably not even called marketing but just common sense). Time-compressed, information-fatigued and disloyal, the post-PC customer seeks relationships not from brands themselves but from databases that know, understand and seemingly care about them. Witness the virtual girlfriend relationships in Japan, relationships with shops and vending machines, oh, and relationships with people, real, quaint, touchy, feely, physical people. And all the time the technology, if truly mastered, can free up time to do the important things in life, to give the post-PC customer a genuinely higher quality of life both at work and at home with family and friends. 116 Part 1 Communications Background and Theories references and further reading Chisnall, P (1985) Marketing: A behavioural analysis, McGraw-Hill, Maidenhead Colley, R H (1961) Deining Advertising Goals and Measuring Advertising Results, Association of National Advertisers, New York Coopere, G (2008) Species – a user’s guide to young men, Discovery Channel, Discovery Communications Europe Dichter, E (1964) Handbook of Consumer Motivations: The psychology of the world of objects, McGraw-Hill, New York Discovery Channel (2008) Species – a user’s guide to young men, Discovery Channel, Discovery Communications Europe East, R, Wright, M and Vanhuele, M (2008) Consumer Behaviour: Applications in Marketing, Sage, London Egan, J (2007) Marketing Communications, Case study 4.1, Thomson Learning, London Ehrenberg, A (1974) Repetitive advertising and consumer awareness, Journal of Advertising Research, 14, pp 25–34 Ehrenberg, A (1997) How can consumers buy a new brand?, Admap, March, pp 20–27 Engel, J F, Blackwell, R D and Kollatt, D T (1978) Consumer Behaviour, 3rd edn, Dryden Press, Hinsdale, IL Engel, J F, Kinnear, T C and Warshaw, M R (1994) Promotional Strategy: Managing the marketing communications process, 7th edn, Irwin Shaw, Homewood, IL Fishbein, M (1975) Attitude, attitude change and behaviour: A theoretical overview, in P Levine (ed), Attitude Research Bridges the Atlantic, American Marketing Association, Chicago Forsyth, J, Galante, N and Guild, T (2006) Capitalizing on customer insights, McKinsey Quarterly, 3 Foxall, G (1992) Consumer Psychology in Behavioural Perspective, Routledge, London Frank, O (2010) Goodbye, smartphone; hello, predictive context device, Advertising Age, 25 June Hofacker, C (2001) Internet Marketing, 3rd edn, Wiley, New York Howard, J A and Sheth, J N (1969) The Theory of Buyer Behavior, Wiley, New York Humby, C (2008) Brand is Dead, Long Live the Customer, Dunnhumby Jones, H (2008) How to tackle foreign markets, Marketer, 8 September Kanner, B (1989) Colour scheme, New York Magazine, 3 April Kapferer, J (2004) The New Strategic Brand Management, Kogan Page, London Kennedy, J (2009) A wave of optimism, Interview with Eric Schmidt, Marketing Age, November Kimmel, M (2008) Species – a user’s guide to young men, Discovery Channel, Discovery Communications Europe Kotler, P (1998) Practice of Marketing, Prentice Hall, Englewood Cliffs, NJ Lavidge, R and Steiner, G (1961) A model for predictive measurements of advertising effectiveness, Journal of Marketing, October, p 61 McGovern, G (2010) The rise of the anti brand – Ryanair, http://tinyurl.com/ydwk943 Manyika, J (2008) Google’s view on the future of business: an interview with CEO Eric Schmidt, The McKinsey Quarterly, September Marketer (2010) Facts and stats, Marketer, March Market Research Society (MRS) (1996) Research is good for you – the contribution of research to Guinness advertising, Conference papers, MRS, London Maslow, A (1954) Motivation and Personality, Harper & Row, New York Oakes, S (2008) Mood maker – music to set your till ringing, Marketer, September Packard, V (1957) The Hidden Persuaders, Penguin Books, Harmondsworth Penn, D (2005) Brain science, that’s interesting, but what do I do about it?, Market Research Society Conference Peters, T (2003) Re­imagine, Dorling Kindersley, London Roberts, K (2006a) Except from a Saatchi & Saatchi presentation, Madrid, 8 June, http://www. saatchikevin.com/sisomo/Speeches_Ideas/ Emotion_not_Reason/ Roberts, K (2006b) Saatchi & Saatchi presentation, Madrid, 8 June, http://www.saatchikevin.com/ sisomo/Speeches_Ideas/KR_Short_Cuts_ part_5/ Roberts, K (2009a) Short cuts (part 1), 6 July, http://www.saatchikevin.com/sisomo/ Speeches_Ideas/KR_Short_Cuts_part_1/ Roberts, K. (2009b) Short cuts (part 5), 6 July, http://www.saatchikevin.com/sisomo/ Speeches_Ideas/KR_Short_Cuts_part_5/ Chapter 4 Customer Psychology and Buyer Behaviour Roberts, K (2009c) Annual City Lecture to the Worshipful Company of Marketors, 6 November Roberts, K (2010a) Creativity, 21 January, KRconnecttoblogspot.com Roberts, K (2010b) Spreading the love, Marketer, February Rogers, E M (1961) Diffusion of Innovations, 1st edn, Free Press, New York Rossiter, J and Percy, L (1996) Advertising Communications and Promotion Management, 2nd edn, McGraw Hill, New York Schifman, L G and Kaunk, L L (1991) Consumer Behaviour, 4th edn, Prentice Hall International, London Shaw, R (1997/98) Appreciating assets, Marketing Business, December/January Smith, P R (1996) Video interview with Kenichi Ohmae Smith, P R (2001) Online eMarketing Course: eCustomers, Multimedia Marketing.com, London Smith, P R (2010) Video interview with Kevin Roberts, CEO, Saatchi & Saatchi Worldwide Smith, P, Berry, C and Pulford, A (1999) Strategic Marketing Communications, Kogan Page, London Strong, E K (1925) The Psychology of Selling, McGraw-Hill, New York Veblen, T (1899) The Theory of the Leisure Class Walker, R (2008) The invisible badge: Moving past conspicuous consumption, ChangeThis.com, 47.01 Williams, K C (1989) Behavioural Aspects of Marketing, Heinemann, Oxford Williams, T G (1982) Consumer Behavior, West Publishing, St Paul, MN Further information Market Research Society (MRS) 15 Northburgh Street London EC1V 0JR Tel: +44 (0)20 7490 4911 www.mrs.org.uk Ofcom Riverside House 2a Southwark Bridge Road London SE1 9HA Tel: +44 (0)300 123 3000 Fax: +44 (0)20 7981 3333 www.ofcom.org.uk Semiotic Solutions 1 Manor Cottages Kenninghall Road Garboldisham Norfolk IP22 2SJ Tel: +44 (0) 1953 681012 www.semioticsolutions.com 117 118 THIS PAGE IS INTENTIONALLY LEFT BLANK 119 05 Customer communications theory lEaRNINg ObjEcTIvES By the end of this chapter you will be able to: ●● Understand that communication involves a two-way low of information ●● Appreciate the subtle variables involved in communications ●● Apply communication theories to practical marketing situations ●● Exploit contemporary models to ensure successful innovations ●● Explain why new models are required to meet the changing communications landscape ●● Understand why new skills are required to match new communications models Intro to communications theory 120 non-verbal and non-symbolic communications 120 Symbolic and semiotic communications 121 Source credibility 121 Opinion formers, opinion leaders and connectors 122 Multi-step non-linear communications models 127 Classic and contemporary communications models 128 Future communications models 131 The end of the traditional marcomms funnel model? 131 Communications models 123 Make way for the semantic web A single-step communications model 123 new marketing communications skills A two-step linear communications model 124 Multi-step linear communications models 126 132 required 133 references and further reading 134 Further information 135 120 Part 1 Communications Background and Theories Introduction to communications theory A dictionary deinition of ‘communications’ is as follows: ‘communication n. 1. a transmitting 2. a) giving or exchange of information, etc by talk, writing b) the information so given 3. a means of communicating 4. the science of transmitting information’. What is interesting is the exchange of information. Communication is not a one-way low of information. Talking at or to someone does not imply successful communication. This only occurs when the receiver actually receives the message that the sender intended to send. Message rejection, misinterpretation and misunderstanding are the opposite of effective communication. Millions die from inefective communications ‘There is evidence that a mistake in translating a message sent by the Japanese government near the end of World War II may have triggered the bombing of Hiroshima, and thus ushered in atomic warfare. The word “mokusatsu” used by Japan in response to the US surrender ultimatum was translated by Domei as “ignore”, instead of its correct meaning, “withhold comment until a decision has been made”.’ Cutlip, Center and Broom (2004) This is an extreme and tragic example of communications gone wrong. Communication errors in marketing generally do not cost lives but can, if allowed to continue unchecked, cost market share, company survival and jobs. On the other hand, good marketing communications help an organization to thrive by getting its messages across in a focused and cost-effective way. Good marketing communications is not as simple as it may appear. Even David Ogilvy, the advertising guru, was once reported to have used the word ‘obsolete’ in an advertisement only to discover that (at the time) 43 per cent of US women had no idea what it meant. The delicacy and dificulty of creating effective communications to target audiences can be explained by Douglas Smallbone’s analogy of radio communication. Perfect transmitting conditions might exist if there were no noise (extraneous factors that distract or distort the message, such as other advertisements, poor reception, a lashing light, a door bell or an ambulance). Without noise, perfect transmitting conditions would exist. In reality, there is almost always noise, so perfect transmitting conditions do not exist. Cinemas may be the exception, where a captive audience is in an attentive state and receptive to, say, a well-produced X-rated advertisement. But even when the target audience is seemingly tuned in (watching, listening to or looking at a particular organization’s package, promotion, advertisement, etc) it may not be on the same wavelength because of the hidden internal psychological processes that may be reshaping or distorting the message to suit the audience’s own method of interpretation. The human receiver is in fact equipped with ive distinct means of receiving messages or information or marketing communications – the ive senses of hearing, sight, touch, taste and smell. Marketing communications tools can address many senses simultaneously (eg packaging). The human radio ‘Given good transmitting conditions and receiver and transmitter tuned to the same wavelength, perfect reception can be effected.’ Smallbone (1969) Non-verbal and non-symbolic communications Although verbal and visual communications gain a lot of conscious attention, there are non-verbal and non-symbolic ways of communicating, such as space, time and kinetics. Crowded areas, or lack of space, send messages to the brain that, in turn, can stimulate a different set of thoughts and a different behavioural response. The opposite is also true: a spacious ofice or living room conveys different images. In Western cultures the use of time creates images, eg a busy but organized person gives an impression of authority. ‘Thanks for your time’ Chapter 5 immediately conveys a respect for and an appreciation of a seemingly important person’s time. A busy diary can project an image of importance. ‘I can squeeze you in on Friday at . . .’ implies seniority in the relationship. In the UK, the term ‘window’ is now used for free time or space in a busy diary. Some advertisements sell products and services primarily on time-saving and convenience beneits. In fact, banks are really time machines that allow an individual to move forward in time by buying, say, a house that would not normally be affordable for 30 years. Finally, kinetics communicate. Gestures and movements send messages. Even the simple, swift clicking of a briefcase, entering or leaving a room or closing or not closing a door can communicate (in China sitting opposite the door means you are paying for the meal). Most of all, body language and facial gestures are powerful communicators. An understanding of body language allows an individual to learn more about what another person is really feeling. A smile, for example, communicates immediately, effectively and directly. (More smiling, please.) Symbolic and semiotic communications The ield of semiotics (or semiology) opens up a rich discussion of how symbols and signs are used in communications, particularly advertising. Audiences often unconsciously perceive images stimulated by certain symbols. Engel, Warshaw and Kinnear (1994) demonstrated how Lever’s fabric softener Snuggle used a cuddly teddy bear in its advertising. It has been suggested by some psychologists that ‘the bear is an ancient symbol of aggression, but when you create a teddy bear, you provide a softer, nurturant side to that aggression. As a symbol of tamed aggression, the teddy bear is the perfect image for a fabric softener that tames the rough of clothing.’ Engel, Warshaw and Kinnear (1994) comment: ‘The key point here is that if marketing communicators are not aware of the subtle meanings of symbols, then they are liable to communicate the wrong message.’ Carol Moog’s advice to Pierre Cardin on its men’s fragrance advertisement, which was designed to show men who are ‘aggressive and in control’ splashing on fragrance, was accepted but rejected! Moog Customer Communications Theory 121 saw ‘cologne gushing out of a phallic-shaped bottle’ creating a conlict of images, since it ‘symbolized male ejaculation and lack of control’. Pierre Cardin acknowledged that she was probably right, but decided to keep the shot, as it was ‘a beautiful product shot plus it encourages men to use our fragrance liberally’. Source credibility The success or failure of an advertisement, or any message, is partially determined by whether it is a credible message in the irst place. This, in turn, is inluenced by the credibility of the source of the message, the deliverer of the message and the chosen media vehicle. The perceived credibility of the message source is inluenced by trustworthiness and expertise. These are key factors that organizations must constantly prove so that they have a platform of credibility (‘Develop credibility before raising visibility’: see Chapter 3). Endorsements from customers and venerable bodies, published papers, conference speeches, awards won, memberships and of course the perceived quality of the brand itself all help to establish trustworthiness and expertise, ie source credibility. In addition to the credibility of the brand, the message credibility is also inluenced by the individual delivering the message, such as the presenter in an advertisement. For example, some brands in the UK stopped using supermodel Kate Moss when her public behaviour was deemed to be ‘unsuitable’. On the other hand, a highly credible presenter adds credibility to a brand. The media vehicle affects the credibility, eg a message that ‘using a PC damages your fertility’ would have less credibility if it came from the Sun newspaper than it would have if it came from the FT, or even more credibility if it came from a learned medical journal rather than a newspaper survey. The media vehicle’s perceived expertise, prestige and editorial tone (style, eg upmarket or mass-market, and other content, eg sex and violence) all affect the credibility of a message. Kelman (1961) suggested that the message source has three variables: 1) perceived source expertise and neutrality (or objectivity); 2) perceived source attractiveness (if it is deemed attractive, the recipients may be more likely to develop a similar opinion or position); and 3) perceived power to reward or 122 Part 1 Communications Background and Theories punish message receivers (eg a teacher or perhaps an owner of a social media group). In summary, a great message delivered from a source with low ‘source credibility’ will not be as effective as the same message coming from a source with high ‘source credibility’. unleash an epidemic of demand for products and services’ (Marsden, 2004). Connectors, opinion leaders, style leaders, innovators, early adopters, inluential individuals and opinion formers: call them what you want, they spread messages. Message likeability Connectors know a lot of people This is about how much an individual likes an advertisement. It is determined by how interesting, meaningful, relevant and enjoyable an advertisement is deemed to be. When researching advertisements, and in particular, how much customers like an advertisement, ‘likeability is deemed to have four elements: entertainment, relevance, clarity and pleasantness.’ ‘They are the kind of people who know everyone. All of us know someone like this. But I don’t think we spend a lot of time thinking about the importance of these people. I’m not even sure that most of us really believe that the kind of person who knows everyone really knows everyone. But they do.’ Gladwell (2000) Opinion formers, opinion leaders and connectors Opinion formers and opinion leaders include journalists, judges, consultants, lecturers, religious leaders and group leaders. Today they also include bloggers, Facebook fan page owners, Facebook group owners, LinkedIn group owners and many more online group leaders. Oficially, opinion formers are formally paid to give their opinions (eg journalists), while opinion leaders are not paid for their opinions (eg many bloggers). Identifying inluencers is important, and high-proile bloggers can be easily identiied, as can group leaders, whether on Facebook or LinkedIn. Indeed LinkedIn now has a feature that identiies the top inluencers in a group and not just the group owners. Malcolm Gladwell’s fascinating The Tipping Point (2000) explores how to create an epidemic of demand for a product or service or idea. He calls opinion leaders ‘socially contagious connectors’ and suggests that, instead of pandering to the massmarket herd, marketers should focus on satisfying the connectors’ needs. Connectors are estimated to be 10 per cent of a target audience (Keller and Berry, 2002). It is worth identifying and partnering with the ‘infectious few’ so that organizations can focus on the ‘consumers that count, who have the power to Marketers recognize that in each market there are smaller target markets of opinion leaders who inluence other members in the marketplace. Major brands can maintain their credibility by talking (advertising) speciically to these leaders, as well as talking to the mass through other media channels (sometimes with messages tailored for the two groups). Whether marketers are advertising hi-is, fashion, tennis rackets or social issues, multi-step communications can be employed. In the world of fashion, the leaders are called ‘style leaders’. Even cult fashion products can be mass-marketed by carefully splitting the messages between style leaders and the mass. While the leaders want to set themselves apart from the rest, the mass market consciously and/or unconsciously looks to the leaders for suggestions about what to buy. The dificulty lies with success – as the mass market buys more, the leaders lose interest unless they are reinforced with brand values that preserve the brand’s credibility among the cognoscenti. This is important because, if the leaders move away today, the mass sales will eventually start falling away next year or the year after. So, in addition to the mass advertising, some brands use small-audience, targeted, opinionleader media to send the ‘right’ messages to reinforce the leaders’ relationship with the brand. Hi-i trendsetters need a different kind of advertising than just colour supplements with glossy Chapter 5 brand images. These innovators and early adopters read additional magazines and look for more detailed technical information in music magazines or specialist hi-i magazines, buyers’ guides, etc. Less knowledgeable buyers often refer to a friend who is a bit of a music buff (innovator or adopter) for an opinion on a brand of hi-i before deciding to buy. Just getting the product into the hands of the opinion leaders can help a brand competing in a large market. US marketing guru Philip Kotler (2000) suggests that special offers to opinion formers can work wonders: ‘A new tennis racquet may be offered initially to members of the high-school tennis teams at a special low price. The company would hope that these star high-school tennis players (or inluential individuals) would “talk up” their new racquet to other high schoolers.’ An understanding of multi-phase communication processes can contribute something to the development of social issue campaigns, such as that concerning AIDS. The initial stages of the campaign were temporarily restricted by inaccurate editorial coverage. Some tabloid journalists were feeding conlicting messages to the same mass that the advertising was addressing. The factual advertising was switched into the press so that opinion formers (journalists) could not write any more conlicting and inaccurate reports. The power of inluential individuals and inluential organizations can also be seen in industrial markets. An entire industry may follow a well-respected and highly successful company that makes an early decision to buy. Expert sales teams focus on these kinds of companies initially. Marketers in consumer markets can also focus on the people who are the irst to buy new ideas. Better information today can provide a focused approach through database marketing (see page 69), while the imagery used can relect the lifestyles, attitudes and aspirations of these innovators and early adopters of fresh ideas. Who are these early adopters of new products and services? Are they different from the other potential customers in the same market? How do they F I g u R E 5 .1 A simple communications model Sender Message Receiver Customer Communications Theory 123 ‘adopt’ new products or services? Is there a particular type of process through which they pass? Communications models No simple diagram can relect all the nuances and complexities of the communication process. This section considers some basic theories and models. A single-step communications model There are three fundamental elements in communication: the sender (or source), the message and the receiver, as shown in Figure 5.1. This basic model assumes that the sender is active, the receiver is inactive or passive and the message is comprehended properly. In reality this is rarely the case. Chapter 4 demonstrates how we see what we want to see and not necessarily what is sent. An understanding of the target receiver or audience helps to identify what is important to the audience and how symbols, signs and language are interpreted. The message is ‘dressed up’ or ‘coded’ in an appropriate way, sent through a media channel and, if it gets through all the other noise, inally ‘decoded’ by the receiver. Guinness advertisements basically ask their target audience to drink Guinness, but they are very carefully coded. For example, ‘It’s not easy being a dolphin’ were the only words uttered in one of their television advertisements. The audience decodes the message (correctly or incorrectly) and ultimately rejects, accepts, stores or decides whether to include Guinness in its ‘considered set of brands’ or not. Correct decoding does not always work, eg an anti-drink ad campaign backired by inadvertently glamorizing the habit (see the box ‘Decoding drunken messages’ below). Amidst the careful coding and decoding there is noise, the extraneous factors that distract or distort the coded messages; Figure 5.2 demonstrates this. The sender monitors feedback (eg whether the receivers change their behaviour, facial expression, beliefs or attitudes) so that the message (and/or the channel in which it is sent) can be modiied or changed. With so many other advertisements out there it is easy to understand why so little communication actually gets through and works on the target market. Part 1 124 F I g u R E 5 .2 Communications Background and Theories The communication process (based on Schramm’s 1955 model) Noise Sender Encoding Message Decoding Receiver Feedback Decoding drunken messages ‘Drinks manufacturer Diageo’s “The Choice Is Yours” campaign implied that being very drunk with friends carries a penalty of social disapproval. However for many young people the opposite is often the case. University of Bath research team found adverts which show drunken incidents – such as being thrown out of a nightclub, or passing out in a doorway – are often seen by young people as being typical of a “fun” night out, rather than as a cautionary tale. Lead researcher Professor Christine Griffin said: “Extreme inebriation is often seen as a source of personal esteem and social affirmation amongst young people.”’ BBC News Channel (2007) Despite the attractions of one-to-one marketing, mass communications such as television advertising are still considered attractive because they can reach a large audience quickly and cheaply (when comparing the cost per thousand individuals contacted – see page 170). In fact, although TV channels are fragmenting, TV viewing is increasing year on year in most of Europe and the United States (see Chapter 7). Having said that, much of this kind of mass advertising is often ignored or distorted by an individual’s information processing system. However, there is usually, within the mass audience, a percentage who are either actively looking for the particular product type or who are in a receptive state for this type of message (see the inancial services example in the box ‘Floating targets’ on page 232). Mass communication is therefore of interest to many marketing communicators. It is not the singlestep process it was considered to be in the early mass communications model shown in Figure 5.3. This kind of inaccurate model of mass communication suggests that the sender has the potential to inluence an unthinking and non-interacting crowd. Audiences (receivers) are active in that they process information selectively and often in a distorted manner (‘We see what we want to see’). Receivers (the audience) talk to each other. Opinion formers and opinion leaders also inluence the communications process. Today’s communications models are more sophisticated. A two-step linear communications model Katz and Lazarsfeld’s two-step hypothesis (1955) helped to reduce fears of mass indoctrination by the FIguRE 5.3 One-step communications model Sender Message Receivers Chapter 5 all-powerful media. It assumed that mass messages iltered through opinion leaders to the mass audience. Figure 5.4 shows how messages are iltered through opinion leaders, as well as going directly to some members of the target audience. When opinion formers (OF) are added in, the communications model becomes a little bit more interesting. Opinion formers can be separated from opinion leaders, as shown in Figure 5.5. Opinion formers are formal experts whose opinion has inluence, eg journalists, analysts, critics, judges or members of a governing body. People seek their opinions, and they provide advice. Opinion leaders, on the other hand, are harder to identify – they are F I g u R E 5 .4 Customer Communications Theory 125 not formal experts and do not necessarily provide advice, but other buyers are inluenced by them. Other customers look toward them. Opinion leaders often enjoy higher social status (than their immediate peer group), are more gregarious and have more conidence to try new products and services. Endorsements from both opinion formers and opinion leaders are valuable. The opinion formers are often quoted in promotional literature and advertisements, while the style leaders are often seen with the brand through clever editorial exposure engineered by public relations professionals. This can be generated by collecting third-party endorsements, creating events around Two-step communications with opinion leaders R R R O.L Sender Message R R O.L R R R R F I g u R E 5 .5 Two-step communications model with opinion leaders and opinion formers R O.L R R O.F R Sender R Message R R O.F R R O.L R 126 F I g u R E 5 .6 Part 1 Communications Background and Theories Multi-step communications model (a) R O.L R R O.F R R Sender Message R R O.F R R O.L R celebrities and ‘placing’ products alongside celebrities (eg branded mineral water on the top table at press conferences or actual product placement in ilms). In B2B markets, blue-chip customers are opinion leaders and are much sought after, as their presence on a customer list inluences other customers. Both opinion formers and opinion leaders can contribute towards credibility. ‘Credibility before visibility’ means that a solid platform of credibility should be developed before raising visibility with any high-proile activities. Multi-step linear communications models Communication is in fact a multifaceted, multi-step and multi-directional process. Opinion leaders talk to each other. Opinion leaders talk to their listeners. Listeners talk to each other (increasingly with discussion groups and internet groups) and subsequently feed back to opinion leaders, as shown in Figure 5.6. Some listeners or readers receive the message directly. Noise, channels and feedback can be added to the multi-step model to make it more realistic, as shown in Figure 5.7. The process of communicating with groups is fascinating. Group roles (leaders, opinion formers/ leaders and followers), group norms and group attitudes are considered in ‘Group inluence’ (page 110). In fact, all the intervening psychological variables can be added into the communications models to show how perception, selection, motivation, learning, attitudes and group roles all affect the communication process. The intervening variables and some more complex models of buyer behaviour are considered in more detail in Chapter 4. James Bond – opinion leader Product placement does not always have to be expensive. In 1997 European Telecom touted their new piece of mobile technology (a car fax) to all the major product placement agencies that act on behalf of the film company giants. They had no budget for any deals or link-ups with any film, but they had a visually interesting piece of technology. To their surprise and delight, the placement agency handling the James Bond film Tomorrow Never Dies requested two working prototypes, which were duly delivered and demonstrated at Pinewood Studios. The product was shown as Moneypenny receives a fax from the clearly branded prototype, and hands it to Bond, who is sitting alongside M in the back of the Daimler. An additional car fax is also clearly seen alongside Bond in the back of the car. Now the PR team can really milk the opportunity. After all, ‘a portable fax that is approved by James Bond surely has more cachet than one that isn’t’. (Lucas, 1997). Chapter 5 F I g u R E 5 .7 Customer Communications Theory 127 Multi-step communications model (b) R R R R Noise O.L R O.F R Sender Message Channel R O.F R O.L R Feedback R R R Winning over opinion leaders can be key to any marketing communications campaign, whether B2B or B2C. Take B2B: IBM linked up with the Marketing Society, as its 3,500 members represented key movers and shakers in the business world. Consider B2C: KangaROOS trainers targeted opinion-leading celebrities such as Cat Deeley, Edith Bowman and children’s TV show presenters by giving them free shoes. P&G, Unilever and Microsoft trial products with hundreds of thousands (see page 131). Multi-step non-linear communications models Let’s take this a stage further and consider today’s new web communications models, which revolve around the brand instead of simply being sent to the masses by the brand owner. Markets are conversations. The ladder of engagement in Chapter 1 is an example of this. Word of mouth works much more quickly online than ofline. With the internet came the easier facilitation of customer communities, where customers can talk, irst, to each other (C2C) and, secondly, back to the company (C2B). The low of communications eventually becomes like a web of communications between customers and opinion leaders – all built around the brand. See Figure 5.8. The company facilitates these conversations. In doing so, it keeps close to customers, as it can look and listen to what’s being said. It can also communicate easily with the customers and ultimately develop strong relations with them. Newsgroups and discussion rooms hosted by the brand discuss the brand, its applications, problems, issues, ideas, improvements and a broader array of topics linked with some of the brand values. In a sense, a web of conversations is spinning around the brand. Customers talk to each other. For example, more than half of eBay’s customers come from referrals (Reichield and Schafter, 2000). The marketing team also monitors the blogosphere (including Twitter) and user group sites it does not host; some of the truths may be painful but extremely useful. C2C communications can be negative. Remember the Pentium chip problem? It spread like wildire as the worry spread online. C2C communications can also be fuelled by some customer groups who set up fake sites and hate sites that Part 1 128 Communications Background and Theories F I g u R E 5 .8 Simple web communications model C C FIguRE 5.9 Advanced web communications model C C C C C O.L O.L C C C C Sender O.L O.L C C C C C C C C C C Sender O.L C C C C C O.L C C C O.L C O.L C C C C C C C C C O.L C C = Customer = Opinion leader are devoted to spreading negative messages about brands. One type of C2C that is positive – and in fact generates a lot of business – is referrals, where happy customers become advocates and recommend other customers. Another positive form of C2C and P2P is viral, where customers pass the message on. This is accelerated word of mouth. Clever, creative messages with interesting ideas, amazing ideas, special offers, announcements and invitations are good for viral marketing, where messages are passed between customers and from opinion leaders to customers and from opinion leaders to opinion leaders and, of course, from the brand also. See Figure 5.9. Afiliate marketing also spreads awareness of a brand among a community of relevant customers, who in turn talk to each other and can spread ordinary or clever viral messages among their own communities. Implicit in all of these communications models is permission-based marketing. In this timecompressed, information-cluttered world, customers resent unsolicited spam. Marketers must win permission to send future messages. If the customer agrees, a message is inally sent. Individuals do talk to each other (at least 500 million on the internet and billions on the phone), particularly when sharing personal product experiences. In fact, dissatisied customers tell up to another 11 people about their bad experience, whereas satisied customers tell only three or four. As marketing guru Philip Kotler says, ‘Bad news travels faster than good news’. Although this is not in the realm of mass communications, it does demonstrate how everything an organization does communicates something to someone somewhere. Chapters 2 and 3 looks at this whole process in a lot more detail. Sufice to say, at this stage, that many advertisers use teaser, surreal and puzzle advertising (by sending incomplete or obscure messages) to arouse involvement and discussion among target audiences. Classic and contemporary communications models Adoption model Several different hierarchical message models are considered in Chapter 4. The adoption model (Rogers, Chapter 5 Customer Communications Theory F I g u R E 5 . 10 129 The adoption model Chewing gum hysteria Rumours spread in Egyptian university town Al-Mansura that after chewing certain brands of gum female students experienced uncontrollable passion for their male peers. Time magazine reported that ‘in a society where girls are expected to remain virgins until marriage the news has generated considerable anxiety. Suspicion of who might be spiking the gum with aphrodisiacs fell on the usual suspect, Israel, frequently accused of supplying the Egyptian black market with pornography. However, laboratory analysis showed that some gum samples actually lowered the libido.’ Scientific fact may not be relevant. For once a rumour gets going, ‘the suggestibility factor can be so strong that it can greatly affect one’s mind and actions without there being a scientific explanation’, says sociologist Madiha El Safty. Time magazine (1996) 1962) is such a model. As shown in Figure 5.10, it attempts to map the mental process through which individuals pass on their journey towards purchasing, and ultimately adopting (or regularly purchasing), a new product or service. This somewhat simplistic hierarchical model is nevertheless useful for identifying, irst, communication objectives and, second, the appropriate communications tools. For example, television advertising may create awareness, while a well-trained salesperson, expertly designed brochure or product comparison website (or iPhone app) may help individuals in the evaluation stage. In reality, the process is not simply hierarchical. Some individuals move directly from awareness to trial, while others loop backwards from the later stages by never actually getting around to trying the new idea, subsequently forgetting it and then having to go through being made aware of it again. The diffusion of innovations Rogers was also interested in how a new idea spreads or diffuses through a social system or market. He deined diffusion as ‘the spread of a new idea from its source of invention or creation to its Awareness Interest Evaluation Trial Adoption Guinness – an individual’s adoption process Although it is not a new product, Guinness has adapted the adoption process. They researched the adoption process for a pint of Guinness because high increases in consumption among young session drinkers resulting from the previous Guinness campaign were not sustained. This prompted the questions: How does one adopt a pint of Guinness? How many pints, sessions or weeks does it take before becoming a regular, fully converted, loyal Guinness drinker? The answers to these questions were carefully collected before the commencement of the campaign. ultimate users or adopters’. Several groups who moved towards adoption – at different rates – were identiied. The irst group to try a new product were called ‘innovators’. They represent approximately 2.5 per cent of all of the buyers who will eventually adopt the new product. Their proile was very different from those who were last to try a new idea (the ‘laggards’). Opinion leader characteristics Part 1 130 Communications Background and Theories were part of the innovators. The key to successful marketing of innovations is to identify, isolate and target resources at the innovators rather than everyone (84 per cent will not buy the product until they see the innovators and early adopters with it irst). The ‘early adopters’ are the second group to adopt a new idea (they represent 13.5 per cent of the total market), followed by the ‘early majority’ (34 per cent), the ‘late majority’ (34 per cent) and the ‘laggards’ (16 per cent). (See Figure 5.11.) Each group has a different proile, encompassing income, attitudes, social integration, etc in a B2C market. Innovators are venturesome and socially mobile, and they like to try things that are new. The early adopters tend to be opinion leaders who carefully adopt new ideas early. In the retail sector, Nielsen identiied early adopters as multiple card holders (among other things), who are very different from single card holders in that they are signiicantly more promiscuous in their card usage. The early majority adopt earlier than the majority of the market, and they are even more careful, almost deliberate, in their buying process. The late majority adopt only after they have seen the majority of people try it. They tend to be sceptical. The laggards are self-explanatory – tradition bound and the last to adopt. Crossing the diffusion chasms particular, technology innovation. Although he gave different names to the segments, the principle was the same: focus and ind the innovators and early adopters irst. When they have been penetrated and are happily using the product or service, the next segments can be approached. The key point is that there are gaps between the segments – vast gaps so big that they are like chasms into which many companies fall and never climb back out. (See Figure 5.12.) The gap between early adopters and the early majority is massive. Whereas the former seek innovative products, like exploring how they work and accept some teething problems, the latter group (the early majority) will accept only a tried-and-tested fully functional solution with zero risk. They will also seek a different package. In the e-learning market, whilst early adopters like IBM were happy to buy CDs and make them integrate with their training programmes, the early-majority customers like BT needed a different solution: CDs, workbooks, textbooks, workshops and accredited training programmes. This was a completely different solution (to the same problem), albeit a much more lucrative sale. So many other e-learning companies did not understand the difference between the two types of customers and the subtle but deep chasm between them. Many threw millions of dollars at the elearning market and it all fell into the chasm. Casualties followed. Geoffrey Moore (1999) adopted the diffusion of innovations and applied it to the B2B sector and, in F I g u R E 5 .11 The difusion of innovations (Rogers, 1962) F I g u R E 5 . 1 2 Difusion of innovations: the chasm between the segments (Moore, 1999) 40 40 35 35 30 30 25 25 20 20 15 15 10 10 5 5 0 Innovators Early Early adopters majority Late Laggards majority 0 Innovators Early Early adopters majority Late Laggards majority Chapter 5 The same principle applies: identifying and targeting the innovators and then moving on sequentially through the other segments. In addition, however, marketers must recognize that the different segments are different, ie they have different needs. Offering exactly the same solution to the total marketplace will fail. Matching the proposition (and the actual solution delivered) to the needs of each segment will generate success. It is the magic marketing formula once again (identify needs, relect and deliver). Accelerating diffusion – the tipping point Malcolm Gladwell’s The Tipping Point (2000) applies to both B2B and B2C. It explores that moment when ideas, products, trends and social behaviour cross a certain threshold and spread like wildire. In his book, Gladwell suggests three key initiatives that release the viral potential of new ideas, products or services: 1 The law of the few. A relatively small group of adventurous inluencers are powerful. Marketers need to identify these gregarious and socially active ‘connectors’ and then develop relationships with this small group of ‘socially infectious early-adopters’ or connectors (Gladwell, 2000). 2 The stickiness factor. The product, service, idea or message has to be intrinsically infectious. Marketers need to systematically ‘tweak and test’ or reine and improve against diffusion criteria. ‘By tinkering with the presentation of information we can signiicantly increase stickiness’ (Gladwell, 2000). 3 The power of context. Ideas and innovations spread quickly when they it the context or are relevant to the group or its environment. You can exploit the bonds of memory and peer pressure in groups of 150 or less. ‘In order to create one contagious movement, you often have to create many small movements irst’ (Gladwell, 2000). That’s why many small, tightly targeted movements are better than one large movement. Customer Communications Theory 131 Many organizations, including giants like P&G, Unilever, Diageo and Microsoft, started their tipping point initiatives several years ago. P&G set up its ‘connector panel’ in 2002 in the United States with 200,000 infectious teen connectors used to research and seed new products. Prior to that, Microsoft recruited 450,000 early adopters to trial Windows 95 in 1995 (‘ensuring that one in every 189 PC users had a pre-release copy’), enabling Microsoft to ‘capture critical pre-launch feedback for the mass market launch whilst giving the consumers that count a unique preview of their product that would generate word of mouth’ (Marsden, 2004). Future communications models The end of the traditional marcomms funnel model? Marketers aim to reach customers at the moments that most inluence their purchasing decisions. The old ‘funnel’ communications model started with creating awareness (the wide end of the funnel with many brands) and then familiarity, followed by consideration followed by purchasing a single brand (followed by repeat purchasing of the same brand, ie loyalty, where only one brand is chosen). The number of brands is reduced as customers move through the funnel and inally end up with a single brand. McKinsey’s David Court et al (2009) suggest the funnel is out of date: ‘Today, the funnel concept fails to capture all the touch points and key buying factors resulting from the explosion of product choices and digital channels, coupled with the emergence of an increasingly discerning, well-informed consumer.’ The old funnel is dead – change your model ‘Consumers are moving outside the purchasing funnel – changing the way they research and buy your products. If your marketing hasn’t changed in response, it should.’ Court et al (2009) 132 Part 1 Communications Background and Theories A more sophisticated model is required to help marketers plan their marketing communications. The old linear funnel model misses many of the new touchpoints, which can occur late in the buying process, eg a customer is looking at buying brand X, but just before clicking the ‘buy’ button checks for customer comments and ratings both on the same site and on other sites, effectively going back to the ‘evaluation’ stage of other buying models despite being apparently at the ‘decision’ stage. Marketers need to be where these points of inluence occur, whether at the ofline point-of-sale or merchandising point or the online point-of-sale, or in the ofline and online word-of-mouth discussion. For the latter, marketers monitor discussions about their brand (and their competitors’ brands), whether on Twitter, forums or blogs, and automatically post their messages (some ‘canned’ or pre-prepared) into the conversation, with links to videos, demonstrations, testimonials or the brand itself. This can be done manually or as part of automated marketing (scanning, identifying and rules-based selection of responses). Late deciders wait until inside the store ‘Consumers want to look at a product in action and are highly influenced by the visual dimension: up to 40 percent of them change their minds because of something they see, learn, or do at this point – say, packaging, placement, or interactions with salespeople.’ Court et al (2009) Marketers need to increase relevancy, ie more tightly targeted ads (the magic marketing formula: identify needs, relect them and deliver the product or service). Today, marketers can create dozens or hundreds of variations of an advertisement to relect the context of the past browsing behaviour of customers (and also match what an organization wants to promote according to stock levels or trials of new product variations). ‘Many airlines manage and relentlessly optimize thousands of combinations of offers, prices, creative content, and formats to ensure that potential travelers see the most relevant opportunities’ (Court et al, 2009). Marketers now have the tools to do this. Integrated marketing communications are more important than ever. CMOs now have a broader role, which realigns marketing communications with the new realities of customer decision making. Firstly, they have to manage the usual marcomms, product development, market research and now data management. Interestingly, McKinsey recognizes the importance of marketing: ‘It’s hard but necessary to unify these activities, and the CMO is the natural candidate to do so’ (Court et al, 2009). Make way for the semantic web – new models required The semantic web is the next phase of the web’s development. Essentially, it enables any piece of data to communicate with other data. It will integrate web-based connectivity into any pieces of data (not just web pages) ‘so that it can communicate with other information’ (Richards, 2008). It will give access to structured collections of information as well as sets of inference rules that can be used to conduct automated reasoning, eg if the phone rings and music is playing in a the same room, as soon as the phone is answered the phone automatically sends a message to all of the music audio devices to instantaneously lower the music volume while the phone conversation is taking place. The iPod already does this when taking a call: it automatically lowers the music volume. Customers will probably enjoy much more sophisticated applications than anything on the ‘traditional’ web. This semantic web may change communications models, as clever technology will serve up extremely relevant messages that will help satisfy needs even before they emerge into the customers’ conscious stream of thoughts. Berners-Lee (the inventor of the World Wide Web), Hendler and Lassila explained in 2001 that: The Semantic Web is not a separate Web but an extension of the current one, in which information is given well-deined meaning, better enabling computers and people to work in cooperation. The irst steps in weaving the Semantic Web into the structure of the existing Web are already under way. In the near future, these developments will usher in signiicant new functionality as machines become much better able to process Chapter 5 and ‘understand’ the data that they merely display at present. Seven years later Tim Berners-Lee (2008) believes that the semantic web could wipe out Facebook and Myspace. The semantic web wipes out Facebook and Myspace ‘Facebook and Myspace will eventually be superseded by networks that connect all manner of things – not just people. Using the semantic web, you can build applications that are much more powerful than anything on the regular web. Imagine if two completely separate things – your bank statements and your calendar – spoke the same language and could share information with one another. You could drag one on top of the other and a whole bunch of dots would appear showing you when you spent your money. If you still weren’t sure of where you were when you made a particular transaction, you could then drag your photo album on top of the calendar, and be reminded that you used your credit card at the same time you were taking pictures of your kids at a theme park.’ Berners-Lee (2008) John Markoff of the New York Times coined the phrase ‘Web 3.0’ when he referred to the next generation of internet-based services in 2006. Merlin Stone (2009) suggests that these new services constitute ‘the intelligent Web’, using semantic web, microformats, natural language search, data mining, machine learning, recommendation agents, and artiicial intelligence technologies. These technologies emphasize machine-facilitated understanding of information to provide a more productive and intuitive user experience. Stone feels that the main characteristics of Web 3.0 seem to be an open, intelligent, seamless, interoperable, access-anywhere-by-anychannel, distributed system where software is a service. Perhaps customers’ lives are about to get a little easier, with the semantic web communicating and helping to satisfy their needs. New communications models are required. Customer Communications Theory 133 Information-smart marketers or just traditional marcomms marketers? ‘Marketing is increasingly split between people who are information smart and those who are involved in more traditional marcomms functions… knowing where your competitors are moving in terms of the market place will have a far greater impact than doing a focus group or logo… New marketers are going to have to be much more IT savvy.’ Regis McKenna, in Rothery (2008) Instead of watching ads, building brand relationships over time and eventually buying a particular product or service, customers can now speak into their phone and ask it to get a certain product or service. It duly obliges, as Google Voice searches carefully and delivers useful suggestions for purchase. A high Google ranking, for some, acts as an endorsement of quality (or at least relevance). Another phone app compares prices (by just swiping the phone screen over the bar code or just keying in the brand name). An ability to work with this rapidly changing marketing environment is now essential for marketers. New skills are required. New marketing communications skills required Scott Brinker (2009) suggests marketers need ive new skills: 1 Analytical pattern skills. Mastering the low of data from social media feedback, web analytics, transaction histories, behavioural proiles and industry aggregates. 2 Agile project management. As tactical campaigns fragment into more granular, relevant, niche-like propositions, each one targeted at dozens, hundreds or even thousands of different contexts, fast-moving, multiple project management skills are required. 3 Experimental curiosity and rigour. As marketers seek constant improvement on 134 Part 1 Communications Background and Theories their marketing ROI, marketers manage a constant low of tests, testing new alternatives, exploring new creative executions and monitoring changes in response rates to identify immediate opportunities and threats. 4 Systems thinking. Marketing is a set of processes. This means connecting all the parts. Who gets customer comments, summaries and key issues arising from social media conversations? Which decisions does it inluence? Who else needs this information (eg salespeople, PR people, the board of directors) and what decisions can it affect? 5 Mashable software luency. Those marketers who understand the mashable web – a world of mash-ups, widgets and application programming interfaces (APIs) – will have competitive advantage. For example, it is possible to connect and integrate a website’s content management system with site search, RSS feeds, e-mail alerts and e-newsletters, all serving very relevant content. Rose (2006) deines mashable in terms of a ‘Web page or application that uses and combines data, presentation or functionality from two or more sources to create new services’. Many of the previously discussed models offer some insight into the communication process but, almost invariably, they distort or oversimplify the process of communication. Chapter 4 draws on some of the communication models discussed here and looks at buying models, the buying process and the intervening psychological variables. How do we buy? Why do we buy? What inluences our choices? Are there unconscious motives playing havoc with our dayto-day shopping behaviour? Chapter 6 attempts to look inside the customer’s mind and answer some of these questions. key points from Chapter 5 ●● Communication involves a two-way low of information. ●● Communication theories can be applied to practical marketing situations. ●● New models are required to meet the changing communications landscape. references and further reading BBC News Channel (2007) Warning on anti-drinking adverts, 10 December Berners-Lee, T (2008) Google could be superseded, says web inventor, Times Online, 12 March Berners-Lee, T, Hendler, J and Lassila, O (2001) The semantic web, Scientiic American, May Brinker, S (2009) 5 new skills for the future of marketing, Chief Marketing Technologist (blog), 23 February Carroll, G (2010) CoJargon watch: Delinkiication, Renaissance Chambara (blog), 5 June Court, D et al (2009) The consumer decision journey, McKinsey Quarterly, June Cutlip, S, Center, A and Broom, G (2004) Effective Public Relations, international edn, Prentice Hall International, Englewood Cliffs, NJ Ehrenberg, A (1988) Repeat Buying, 2nd edn, Charles Grifin, London Engel, J, Warshaw, M and Kinnear, T (1994) Promotional Strategy: Managing the marketing communications process, 8th edn, McGraw-Hill Education, Homewood, IL Floch, J-M (2001) Semiotics, Marketing and Communication, Palgrave, Basingstoke Gladwell, M (2000) The Tipping Point, Little, Brown, New York Godin, S (1999) Permission Marketing, Simon & Schuster, Hemel Hempstead Guirdham, M (1999) Communicating across Cultures, Palgrave, Basingstoke Katz, E and Lazarsfeld, P (1955) Personal Inluence: The part played by people in the low of mass communications, Free Press, New York Keller, E and Berry, J (2002) The Inluentials: One American in ten tells the other nine how to vote, Chapter 5 where to eat, and what to buy, Simon & Schuster, New York Kelman, H (1961) Process of opinion change, Public Opinion Quarterly, 25, Spring Kotler, P (2000) Marketing Management: Analysis, planning, implementation and control, international edn, 11th edn, Prentice Hall, Englewood Cliffs, NJ Lucas, Jeff (1997) License to sell, Marketing Director International, October Markoff, J (2006) Entrepreneurs see a web guided by common sense, New York Times, 12 November Marsden, P (2004) Tipping point marketing, Brand Strategy, 1 April Moore, G (1999) Crossing the Chasm, 2nd edn, Capstone, Oxford Reichield, F and Schafter, P (2000) Eloyalty: Your secret weapon on the web, Harvard Business Review, July–August Richards, J (2008) Google could be superseded, says web inventor, Times Online, 12 March Rogers, E (1962) Diffusions of Innovations, Free Press, New York Customer Communications Theory Rose, B (2006) Marketing mashup tools, iMedia Connection (blog), 27 June Rothery, G (2008) The real deal, Interview with R McKenna, Marketing Age, February Schramm, W (1955) The Process and Effects of Mass Communications, University of Illinois Press, Urbana Smallbone, D (1969) The Practice of Marketing, Staples Press, London Smith, P R (2001) Online eMarketing Course: eCustomers, Multimedia Marketing.com, London Smith, P R and Chaffey, D (2001) eMarketing eXcellence, Butterworth-Heinemann, Oxford Stone, M (2009) Staying customer-focused and trusted: Web 2.0 and Customer 2.0 in inancial services, Journal of Database Marketing and Customer Strategy Management, 16, June Time magazine (1996) Chewing gum hysteria, 22 July Tuck, M (1976) How Do We Choose? A study in consumer behaviour, Methuen, London Further information Greg Rowland Semiotics 172 Court Lane London SE21 7ED Tel: +44 (0)20 8693 1413 www.semiotic.co.uk Nielsen Company BV Ceylonpoort 5–25 2037 AA Haarlem The Netherlands Tel: +31 2354 63000 http://en-us.nielsen.com 135 Ofcom Riverside House 2a Southwark Bridge Road London SE1 9HA Tel: +44 (0)300 123 3000 Fax: +44 (0)20 7981 3333 www.ofcom.org.uk 136 THIS PAGE IS INTENTIONALLY LEFT BLANK 137 06 Marketing communications research lEaRNINg ObjEcTIvES By the end of this chapter you will be able to: ●● Understand how market research reduces risk and improves decision making ●● List and explain the different types of research tools available ●● Apply the marketing research process ●● Appreciate the advantages and disadvantages between online and ofline research ●● Identify and avoid the potential problems Introduction to market research 138 Home audits 149 Relevant information reduces risk 138 Social media audits 149 Relevant information increases power 138 Opinion-forming panels Relevant information improves decision neuroscience 150 making 139 Think ‘secondary’ irst Information overload 139 Information prioritization 150 151 The market research process 140 151 Deine what you need to know 151 Types of research 141 Online vs oline research Summary of types 142 The market research process Qualitative research Briefs, proposals and agency selection 142 152 153 153 Focus groups 144 Research problems and challenges 155 Concept research 144 Marketing intelligence and information Quantitative research Geodemographics 145 147 system 156 In conclusion 158 Test marketing 147 Tracking studies 148 references and further reading 158 Retail audits Further information 159 149 138 Part 1 Communications Background and Theories Introduction to market research Relevant information reduces risk, increases power and creates competitive advantage if used correctly. Today’s marketers have to be ruthless with their information needs and know exactly what it is they need to know, prioritize that, collect it, digest it and then make better decisions equipped with this information. One of the ultimate users of market research is Simon Cowell and the TV phenomenon The X Factor. He researches various products (singers) by testing them with customers (audiences at home and at the theatre). The customers provide free market research, revealing which product they prefer. The customers also pay for this privilege (as they vote by phone). He then reines the product concepts (trains them and adds some production effects) and repeats the market research exercise (all the time making money from the research). The inal product testing is done with a chosen song, which has already been recorded by each inalist. This inal layer of market research almost guarantees the success of the new product (a pop star). The inalists present their version of the song. The market research respondents (audience) complete the ‘survey’ via a text message (whilst paying for this privilege and simultaneously being highly engaged with the X Factor brand). The most popular product is identiied (most votes). The product (star) is launched and usually becomes a chart-topping product. Relevant information reduces risk As more and more relevant information became available, the risk was eventually reduced to zero and a certainty emerged. The young woman could pick the ace as soon as she knew what the other three cards were. Market research (information) also reduces risk. So why not use research to reduce all risks? There are three reasons: it costs men/ women, money and minutes – the three key resources (the 3Ms). First, knowing exactly what information is required and how to gather it (whether commissioning a research agency or handling the research in-house) is a relatively rare management skill; second, research costs money; and third, it takes time to deine and write a brief, carry out The card trick An Oxford Street card trick man places four cards face down on a portable table. As the crowd gathers, he shouts, ‘£10 to anyone who picks the ace.’ Embarrassment, scepticism and even mistrust run through the crowd. No one responds to the offer of a simple £1 bet to win £10. As the card man leans forward to show the crowd a crisp £10 note, a grinning young man leans behind the card man and sneaks a look at the outside card. It’s a jack of diamonds. Word quickly spreads through the crowd that the outside card is not the ace. Prompted by the fund (and the improving odds) someone shouts, ‘That’s not a real tenner.’ The card man responds by stepping into the crowd to allow a closer inspection of the £10 note. A second stranger boldly leans across and briefly turns the other outside card over. It’s a two of hearts. The card man returns. ‘Come on now. Who wants to win £10?’ A well-spoken young woman replies, ‘If you show me one of the two middle cards, I will place a £2 bet against your £10.’ The card man accepts. What has happened here? the ieldwork, analyse the data, write and read a report and, ultimately, act upon the information. The ieldwork (asking the questions and collecting the answers) can also give competitors an early warning of intended activities. In a sense, it can give them time to respond. Relevant information increases power In both military and marketing strategies, information creates power. If an organization knows what its customers really want, and its competitors do not, then it has a powerful advantage. If the organization knows what a competitor’s next move is before it makes it, then the organization is in a stronger position to react or even pre-empt the move. In negotiations, if one party knows more about the other party, then the information holder carries a hidden advantage. The classic salesperson versus buyer situation emphasizes how sales and proits can be increased as a direct result of information: Chapter 6 Marketing Communications research the salesperson desperately wants an order and is prepared to cut prices to get the business. The buyer desperately needs to buy the salesperson’s product because all the buying company’s existing stocks were destroyed the night before in a ire in one of its factories and the salesperson’s company is the only company that can supply the goods immediately. If the buyer knows how desperate the salesperson is, then a low price will be negotiated by the buyer. On the other hand, the salesperson seizes control over the negotiations (power) if he or she has been informed about the buyer’s desperate situation. In addition, the salesperson takes total control if the buyer does not know how desperate the salesperson is for the order. In this situation the salesperson will make the sale, probably at a higher price. Information is power. Notice how senior managers always seem to ask questions that are potentially embarrassing (because sometimes you don’t know the answers). When they ask the question, you might think, ‘I wish I’d thought of that.’ Questions are indicators of ability and seniority, or potential seniority. The ability to ask the right question is a precious skill that usually takes time and practice to develop. The ability to ask the right question is the precursor to providing the right answer. This is becoming increasingly important as too much information becomes available and the potential for information overload and information fatigue grows. Information advantage: world chess championship To avoid giving his competitor too much information, Bobby Fischer wore a green visor to stop Spassky, the challenger, from looking into his eyes during an alternative world chess championship. Relevant information improves decision making The best marketing managers always ask whether they have enough information to make a good decision. They deine what information they need to 139 make their decision making easier. They get this information, digest it and then, and only then, do they make a decision. This is an informed decision. The alternative is guesswork, which relies on luck, which is usually an unnecessary, high-risk activity. On the other hand, proprietary relevant information (or knowledge) effectively creates competitive advantage, eg if an organization has unearthed some deep customer insights that no one else has. Research is an aid to decision making and not a decision in itself. Information overload By the end of today, another 4,000 books and another 7 million new web pages will have been published around the world. Billions of e-mails are sloshing around and increasing in number. Do you ind it increasingly dificult to ind the ones you really need to read? Never before in history has the human being had such an ability to create information. Never before have we been faced with so much information. It’s not faster computers. It’s not bigger hard drives. It’s information literacy we need. We need to create less information of a higher quality. We need to be able to manage information much, much better, getting rid of the junk and out-of-date stuff. We need skills that help us search better, and to be able to judge better and faster the quality of the stuff we ind. (McGovern, 2000) It has been said that information is the principal source of competitive advantage. University of California at Berkeley professors Varian and Lyman (2000) note that our ability to create information has far outpaced our ability to search, organize and publish it: ‘Information management – at the individual, organizational, and even societal level – may turn out to be one of the key challenges we face.’ Marketing managers must learn to manage information pollution; otherwise they will make illinformed decisions and may well end up suffering from ‘information fatigue syndrome’. Reuters reported that information overload combined with analysis paralysis and poor quality of life reveals that ‘one in four people admit to suffering ill health as a result of the amount of information they now handle’ Reuters (2009). Out of 1,300 managers, two-thirds said that their social life was affected by having too much information to process at work. Part 1 140 Communications Background and Theories In the UK’s top 200 companies, staff spend 30 minutes every working day looking for lost information: ●● 60 per cent of staff waste 15 minutes looking for info on their PCs; ●● 15 per cent waste 30 minutes each day; ●● 7 per cent waste 60 minutes each day. ‘In a 1,000-person company there are 33 people permanently looking for information’ (Lynch and Manchester, 1999). This was written in 1999; how much worse is it now? Knowledge workers spend 25 per cent of their time looking for information, according to the brain trust firms such as IDC and Delphi Group. Enterprise search: the Holy Grail of KM? (Moole, 2004) Not often considered, however, is one simple way of dealing with stress. Laugh, as it cures stress by pumping adrenalin and endorphins into the bloodstream. It reduces muscular tension, improves breathing and regulates the heartbeat (Nurden, 1997). This is much required in today’s hyper-competitive marketplace. Information prioritization There is an unlimited amount of information available to all marketing managers. There is more information available and obtainable than any manager can absorb, let alone pay for, in any one period. So the key is to deine what the problem is and outline the kind of information that might help. An experienced market researcher (whether in-house or from an agency) can guide the marketing manager towards deining speciically what kind of information is needed. Since the research budget is usually limited, the manager may then have to prioritize which kinds of information are more important than others. Ask for ambiguous information and a lot of ambiguous answers will be delivered. A certain amount of discipline is needed to focus on relevant issues and not become sidetracked by indulging in ‘interesting’ bits of information. When brieing a market researcher as to the kind of information that is required, it is often tempting to add extra, ‘interesting’ questions. Before adding extra Information junkies Other reports reveal that a growing proportion of internet users find themselves addicted to information on the internet. Over 50 per cent of managers were accumulating information they didn’t have the capacity to assimilate; rather they were overwhelmed by it. Over half the respondents pronounced themselves information junkies who got ‘cravings’ for new information, especially from the internet. information requests, check that the following questions are answered satisfactorily: ●● What will I do with this information? ●● How will it affect my strategy or tactics? ●● What action or withdrawal may result from this information? ●● How much is the information worth? ●● How much will it cost? ●● Can I afford it? ●● When do I need it? ●● Have I checked all secondary sources? (See Table 6.1 below.) Do not forget common sense. For example, the highly successful ice cream manufacturer Ben & Jerry’s observed an increase in complaints from buyers of Cherry Garcia ice cream. Many customers were upset because they felt that the product had too few cherries. What would you do? What extra information would you collect? This is what they did – they asked the following questions. First, was it only a regional problem? They checked by matching shipment records with complaints. Second, did the problem arise from the manufacturing process – was the quality not up to scratch? But the ingredients turned out to be normal. After questioning almost every aspect, they inally found the source of the problem. The photograph on the ice cream carton was not of ice cream but of frozen yogurt, which appeared laden with cherries in comparison with the paler pink ice cream. They simply changed the image on the carton and the complaints melted away. Chapter 6 Marketing Communications research Types of research There are basically two types of research sources: primary and secondary. Primary data are gathered speciically for and commissioned by an organization for a particular purpose (eg a research survey to ind out about attitudes towards a company’s brand). Secondary data, on the other hand, already exist and have been gathered by someone else for some other reason (eg government statistics, newspaper features or published reports). Desk research can be carried out in a library or ofice, since it requires researching secondary sources. It is worth doing some desk research before embarking on the more expensive primary research. There are essentially two types of research: quantitative and qualitative. Quantitative research uses surveys based on a representative sample of the population or target group. Qualitative research involves an in-depth, unstructured exploration with either small groups of individuals (group discussions or focus groups) or individuals on a one-to-one basis (depth interviews). Research can provide the marketing professional with information on just about anything from markets to distributors, to customers, to competition, to new products, new packs, new promotions, new advertisements, new prices and so on. Different types of research can reveal information about customers, where they are located, what they buy, read and watch on TV, how they spend their holiday time, which competitors they prefer and so on. Ideas on new or modiied products, packs, brand names or advertisements can be discussed initially in focus groups (six to eight people), which generate information explaining how people feel about a concept. This kind of concept testing can be used to reduce a number of ideas to only one or two for further testing, or can be used to give feedback to the creative people so that they can reine a particular concept. These qualitative interviews open up and identify areas that may need further investigation on a larger scale (a quantitative survey) to ind out how important certain aspects are among a statistically valid sample (minimum 400 in the sample). In the case of a new advertising concept, or a new pack or brand name concept, the reined concept can then be shown in a hall test (where respondents are invited into a hall to make comments). The packs and brand name concepts can 141 be shown as mock-up artwork, and the advertisements might be shown as either a storyboard or an animatic (video cartoon). A new product (concept) can be tested by using in-home trials or hall tests. Some data sources, such as the Target Group Index (see ‘The Target Group Index’ below), are often used in the early research stages of consumer campaigns to identify buying behaviour, socio-economic groups, lifestyles, locations and appropriate media channels. After all this, a new pack or brand name (or product) can be test-marketed. This reduces the risk by holding back from national or international rollout until the advertising campaign (or pack or name or product) can be tested within a representative test area. Owing to the high cost of test marketing, and the increasing dificulty in the UK of truly isolating the test market area (especially in terms of distribution, where the national retail chains do not want to limit stocks to certain parts of the country), companies often prefer to conduct a simulated market test instead of carrying out a test marketing exercise. The main research companies in the ield are Burke (BASES test), Nielsen (QUARTZ model) and Research International (MICROTEST). These models use information from the concept test or product test, simulate an expected level of distribution penetration (percentage of stores that will stock the product), assume a certain level of advertising spend required to generate certain levels of awareness, and then assume competitive activity, prices and other factors to predict the likely sales of a new product with an accuracy of +/–20 per cent. Since television advertisements are so expensive, many companies prefer to do all the careful checking and testing through focus groups and hall tests instead of testing the advertisement in a speciic test region. They can, and do, however, test the weight of advertising in different regions and measure the incremental sales to help them to ind the most cost-effective levels (frequency and timing) of advertising expenditure. If a product is launched nationally or regionally, its launch can be monitored in several ways. Its usage (user proiles, frequency of purchase, etc) can then be monitored through consumer panels. Retail audits provide information about distribution penetration and how the product is moving off which shop shelves. It is also likely that tracking studies will monitor the immediate reactions and effects of the launch advertising. Pre- and post-quantitative surveys can monitor the levels of branded awareness before and after a 142 Part 1 Communications Background and Theories new campaign breaks, and can then be used again to measure the effect of the advertising and the product’s development in the marketplace. Summary of types Table 6.1 summarizes some of the many different types of research information that are readily available. The cost igures give only a very rough indication of the budget requirements. They have been included to give some idea of the costs involved. Anything can be researched and tested, including sales promotion ideas (concepts), mailshots and even press releases and journalists’ attitudes to particular companies and brands. A new and exciting area of research is that of websites, which can be tested before, during and after development. Media research and planning are discussed in Chapter 7. Ta b l E 6 .1 Qualitative research An in-depth interview with an individual provides a lot of qualitative information. There is usually a series of individuals interviewed on a one-to-one basis. This type of research attempts to reveal what customers sometimes don’t even know about themselves by delving deep into their unconscious motivations. In-depth interviews can reveal deep customer insights. How young men retain their youth (unconsciously) Amongst the most popular destinations from the stresses of life are the worlds of the computer game: ‘One way that men retain their youthfulness is by spending large amounts of time playing video games.’ Kimmel (2008) Types of research or information available Information on Type of research or information Sources Approximate costs Markets Mintel Jordans Keynotes £750–£2,500 Syndicated £1,000–£15,000 FT and trade magazines £1 Market reports (analysing market size, structure, market shares and trends, prices, key players, etc) Distributors Retail audit (analysing a brand’s penetration into various retailer store categories, average stocks bought, held and sold per period, retail prices) Nielsen £15,000–£50,000* Customers’ attitudes and awareness Surveys – recommended minimum of 200 interviews; preferably a minimum of 500 interviews Quantitative market research agencies £10,000–£60,000 Omnibus surveys £750 per question £10–£100 per person interviewed** Customers’ motivations and perceptions In-depth research, sometimes using projective techniques, children’s groups, supergroups Qualitative market research agencies £650 per individual, £1,950 per group of eight Customers’ future lifestyles Social forecasting, futurology, etc Future forecasting £1,500–£5,000 annual subscription Chapter 6 Marketing Communications research Ta b l E 6 .1 143 Continued Information on Type of research or information Sources Approximate costs Customers’ buying behaviour and trends over time Who’s buying what, when and from where; how buyers respond over time to various marketing activities, eg special offers, new ads and competitor activities Consumer panels, eg AGB’s Super £15,000–£40,000 Customers’ penetration Penetration of production into percentage of homes and frequency of usage Omnibus survey £500 per yes/no question; £1,500 per multiple answer/ranking Competition As for markets, distribution and customers, if the budgets are available. The sales force and marketing departments’ ‘ear to the market’ can also provide much competitive information As for markets, distribution and customers As for markets, distribution and customers Simulated test market Total mix test of product, brand name, price, positioning Nielsen Research International; RSGB £25,000–£100,000 Test market Running a new product or variation of its mix in a test area Sales analysis – Product New product concepts can be researched (‘concept research’) Focus groups £1,950 per group of eight Packs New pack design concepts can be discussed Focus groups £1,950 per group of eight Hall tests £5,000+ New advertisement concepts can be researched before going to expensive production. Pre- and post-advertising research measures levels of awareness before and after a campaign (tracking studies) Focus groups £1,950 per group of eight Hall tests £1,000+ Quantitative survey £20–£40 per person Online tests £1,500–£3,000 Stand design, memorability, number of passers-by, number who stopped and looked, number who visited, percentage of total exhibition visitors Exhibition surveys Advertisements Exhibitions * Prices can vary enormously, eg a single brand retail price check might be carried out for as little as £750, while a fullblown retail audit for multiple products can run into hundreds of thousands of pounds. ** depending on location and methodology plus set-up plus analysis costs. 144 Part 1 Communications Background and Theories As Gordon (1991) says, ‘Consumers are often unaware as to why they do or don’t use/buy/choose a particular brand. Asking for this kind of information in a direct way is like shouting at a foreigner in the belief that he will then understand English more easily.’ So in-depth researchers employ a range of techniques designed to throw the ego off guard and reveal real answers. Work and family aren’t the only important things in life ‘As time pressures increase on young men, so does their value of “me time”. There’s more of an “I deserve it” attitude towards leisure activities. What’s more, leisure can enrich and reconnect a young guy with his sense of self.’ Discovery Channel (2008) In-depth researchers employ a variety of techniques (including psycho-drawings, word associations, metaphors, collages, picture completion, clay modelling and role playing) that throw the ego off guard and allow the subconscious feelings to be expressed. Chapter 4 considers the underlying motivations and complex information processes through which buyers pass on their journey towards a purchase. Focus groups Group discussions can be a more cost-effective way of collecting information that is perhaps less in-depth but nevertheless useful in understanding why and how people (in the target market) feel about certain brands, advertisements or just new ideas (concepts). A variety of creative stimuli materials are used within these groups, including cartoons, pictures, words and brand maps. One of the most common types is the collage or mood board, which is made up from scrap art taken from a wide variety of magazines and newspapers. It is used to explore a variety of themes, such as user lifestyles, occasion usage and abstract concepts such as freshness or vitality. Two examples of collage boards are featured here and have been developed by The Collage Shop for use in focus groups. Figure 6.1 is a simple mood board showing different eating experiences or occasions. Figure 6.2 is more complex, exploring concept pack themes for a shower gel. Some companies, like MTV, use online discussions and discussion groups as online focus groups – ‘a yearlong focus group’. But all of this is wasted if the right questions are not asked (see the box below). If the Russian president were a tree Mommy’s never coming back In-depth research for a US manufacturer of security doors revealed deeply ingrained unconscious fears of being trapped inside, or abandoned, when doors are closed. The report suggested that a young child’s first experience of a door is when its mother puts it to bed and closes the door behind her as she leaves. The child fears that it may never see its mother again. Many years later, the adult’s unconscious mind can react to the sight of a closed door with an ‘underlying feeling of discomfort and anxiety’. The Simpson Timber Company was reported as having gained a significant increase in its market share when they changed their advertisements to show partly open security doors rather than their traditional images of securely closed doors. Knave (1991) During the final stages of the 1996 Russian election campaign, focus group operators were asking respondents, ‘If Yeltsin were a tree what kind of tree would he be?’ in a standard approach to throw the respondents’ egos off guard and extract real answers. US consultants came in and cancelled these questions, since they urgently ‘needed to know whether voters would move to Yeltsin if he adopted a particular policy’, and not whether he was a tree or not. Knave (1996) Concept research Concept testing helps every element of the communications mix. Whether it is an advertisement, new sales promotion, new piece of packaging, new Chapter 6 Marketing Communications research F I g u R E 6 .1 145 Eating experiences and occasions SOurCE: Collage provided by The Collage Shop direct mail lealet or even a product or service, the concept should be researched and discussed at least among colleagues and customers and, ideally, among unattached, unbiased focus groups that are representative of the target audience or customer. Advertising concept testing measures responses to advertisements before they are fully produced. Storyboards, and key frames (see Chapter 13, the Hovis campaign concept) or animatics are made up and shown to focus groups. This kind of group discussion is used to identify the best idea from a range of different concepts, to iron out any glaring problems with a chosen concept or simply to help to reine the concept itself. Qualitative research is also used to deine parameters or types of questions that should be asked in future quantitative research. For example, focus group or qualitative research into newspapers may have revealed that some readers feel mentally un- comfortable if they don’t read all of their newspaper before throwing it out. This is obviously a problem if part of the paper’s advertising proposition is ‘the newspaper you can digest on the way to work’. So quantitative research will seek to substantiate the variables or issues revealed during the initial qualitative stage. The quantitative stage may be carried out by surveying several hundred or a thousand respondents. The interviewer’s questionnaire might ask, ‘Which papers on this list do you ind a quick and easy read [or long, dificult, etc]?’ Quantitative research Whereas qualitative research asks individuals and small groups of customers dificult questions like ‘Why do you buy [or like] something?’, quantitative research asks larger panels or surveys numerical 146 F I g u R E 6 .2 Part 1 Communications Background and Theories Concepts for shower gel packs SOurCE: Collage provided by The Collage Shop questions like ‘Who?’, ‘What?’, ‘How?’, ‘Where?’ and ‘When?’ – who buys this (what percentage of different types of buyers buy it or saw the ad), where do they buy, when do they buy it, etc. The Target Group Index The Target Group Index (TGI) collects and compiles information on consumer brands and the proiles of heavy, medium and light users, and nonusers, in a vast range of product categories and subcategories. This is all cross-referenced to types of papers read, TV programmes viewed, and lifestyle or attitude statements. It can even classify ‘light users’ according to whether they buy a brand exclusively (‘solus users’), whether they prefer it to another brand also used (‘most often users’) or whether they are more casual in their use (‘minor users’), again cross-referenced to demographic data, lifestyles and media used. Advertisers use the TGI to ind out who the users of a particular brand are and what they read, watch and listen to. The same information is available on competitors and their brands. Elsewhere the index also gives lifestyle data, eg ‘heavy drinkers of low-alcohol lager’. This gives an insight into what motivates them. The excerpt in Figure 6.3 shows that they are keen pub-goers and have a propensity to try new drinks. They are highly image conscious, aiming to keep abreast of new fashions. They appear to be fairly ‘lash with the cash’ and admit to being no good at saving money. In spite of, or maybe because of, this, they show a strong tendency to seek the advice of a inancial consultant. They see their holidays as a way of achieving total relaxation, not wishing to do anything but eat, drink and lie in the sun. Just about anything can be cross-referenced with any other variable. For example, the index can Chapter 6 Marketing Communications research F I g u R E 6 .3 147 An example of lifestyle data from the TGI Base: NEW 18+ Pop: 20699 Private Eye Target: HEAVY DRINKERS OF LOW ALCOHOL BEER AND LAGER Pop: 1155(000) X of Base: 5.57 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 INDEX UNWTD RESP PRJ (000) VERT (%) HORZ (%) 176 183 366 31.68 9.83 165 53 121 10.47 9.20 165 75 158 13.67 9.18 161 105 238 20.60 8.96 160 65 141 12.20 8.96 157 88 190 16.45 8.76 155 78 179 15.49 8.65 155 146 70 164 143 345 12.38 29.87 8.65 8.12 142 58 148 12.81 7.92 138 138 87 62 190 114 16.45 9.87 7.72 7.68 137 104 247 21.38 7.65 135 60 116 10.04 7.55 134 70 130 11.25 7.50 D8 DRINK LAGER RATHER THAN BEER THESE DAYS PA9 I LIKE TO KEEP UP WITH LATEST FASHION T7 HOLIDAY-ONLY WANT TO EAT, DRINK, SUNBATHE PA15 MEN’S FASHION MORE EXCITING NOWADAYS F7 I TEND TO SPEND MONEY WITHOUT THINKING SP3 CO’S/PRESTIGE SPONSOR ART/SPORT DH6 HEALTH FOODS ONLY BOUGHT BY FANATICS D9 I LIKE TO TRY NEW DRINKS D12 I REALLY ENJOY A NIGHT OUT AT THE PUB P4 I WOULD LIKE TO BUY A HOME COMPUTER F4 I AM NO GOOD AT SAVING MONEY F15 USUALLY CONSULT FINANCIAL ADVISOR PA2 IT’S IMPORTANT TO LOOK WELL DRESSED T11 TRY TO TAKE ONE+ HOLIDAY ABROAD A YEAR PA13 I REALLY ENJOY SHOPPING FOR CLOTHES identify Heinz beans users and what kind of cars they drive. Another package, called ‘trender’, can be used to track product, brand, attitudinal, demographic or media trends. The index can also link into various online geodemographic packages. Geodemographics Geodemographics mixes geographical population data together with basic demographic data. It uses neighbourhood types to predict the kind of people who live within them and thus their behaviour as consumers. If a brand is found to appeal to certain geodemographic groups, their locations can be mapped and the subsequent communications can be targeted at the geographical areas that offer the greatest potential. ACORN (a classiication of residential neighbourhoods) uses postcodes to identify different types of houses and generally gives useful indica- tions about buying behaviour. Other UK online demographic analyses can be cross-referenced, eg PINPOINT, which uses 60 different neighbourhood classiications. MOSAIC has 58 neighbourhood categories linked with inancial information. SUPER PROFILES uses 150 neighbourhood types. Test marketing Test marketing refers to new packs, new brands and new products that are marketed only in a limited test region or geographical area, eg the Yorkshire TV area. A full marketing drive (distribution and advertising, etc) is released in the test area only. This gives the company a chance to spot any last-minute problems that previous research has not identiied. If the test market proves to be positive, then the marketing campaign can be extended nationally. As mentioned, everything can be tested. A new advertising campaign, a new sales promotion or Part 1 148 F I g u R E 6 .4 Communications Background and Theories Awareness questionnaire Spontaneous Brand Awareness Q1 Which makes or brands of yoghurt can you think of? Probe: Which others can you think of? Q2 And which brands of areness Brand Aw Prompted d) (Showcar seen or have you yoghurt f o s d n a oned? r dy menti kes or b ve alrea these ma a h f o u o h y c i g any Q1 Wh includin before, heard of s? ny other Probe: A ess e h t se waren A hich of w d g n A n 2 Q si ard or he verti d a n l A e e h e t s s n i u aneou ) ve yo Spont arhdere? rt ha u h r g toewrc w o t y a h m n o f s o t ( see sns's nds e a o r u d b e? o e or . It en her e y makes r w hav ently Awar c h e e c t t r i h g at ur Q1 W g for sin t m ogh tisin rrtsi? sn' f y e e o e o h v t adver d s od en? t nd ic dh A he eat Wt , i bra : y u e ? l o p r b o t y o m Pr Pro ers en e es oth rec hav mak y r t n r o e A f hu hes even a direct mail campaign can be tested among a few thousand names on a mailing list (in direct mail, some companies test right down to whether differentcoloured signatures affect direct mail response levels). Some organizations do not, however, testmarket because of the associated problems of security, timing, costs and seasonality. Some tests are considered to create security problems since they can alert the competition with an early warning about, say, an intended new brand. Testing also costs time and money, which may not be available as launch deadlines loom closer. The limited time period of a test often restricts the accuracy of the measured results, since additional time may be required to monitor whether repeat purchases continue beyond the ‘trial period’. That is, do customers keep buying, or still remember a particular advertisement, after the impact of the initial launch has died down? Seasonal products and services are further complicated, since they may need to be tested 12 months in advance. Testing, of course, costs money, which needs to be budgeted for at the beginning of the planning period. Both freak results and results manipulated by competitors can also invalidate certain tests. If this kind of inaccurate information is used to decide whether to launch or not, or to ind out how much advertising spend is required nationally, etc, then the results could be disastrous. As mentioned in Chapter 5, Microsoft has 450,000 early adopters who trial its software, and P&G has 200,000 on its ‘connector panel’ who research (test) and seed new products. Tracking studies Advertising tracking involves pre- and postadvertising research that aims to measure levels of awareness and brand recognition before and after an advertising campaign. It can also be used to measure the series of mental stages through which a customer moves: unawareness, awareness, comprehension, conviction and action. These are the stages identiied in DAGMAR (deining advertising goals for measuring advertising results). It is worth remembering that some elements of the communications mix, such as sales promotions, packaging and point-of-sale, can be more effective Chapter 6 Marketing Communications research than advertising when pushing the customer through the inal stage of ‘action’ or buying. An analysis of the sales igures can identify an advertising campaign’s effect on overall sales. Home audit panel data like SuperPanel can reveal information on what is happening within the total sales igures, such as who is switching brands, who are the heavy users, etc. Quantitative techniques involving street surveys, in-home interviews or telephone surveys (obviously not used if prompting respondents with visual prompt material, eg storyboard, press or poster ad) can measure the other DAGMAR stages listed above. The percentage of respondents with spontaneous awareness (which brands of beer can you remember seeing an advertisement for this week?) is always lower than those with prompted awareness (since the interviewer prompts the respondent by showing a list of brand names or a storyboard of the ad). See Marketing Magazine’s weekly brand awareness results for an example of who is leading the awareness tables. Incidentally, telephone surveys cannot currently be used for measuring prompted awareness of a TV campaign (they can be used to research a radio campaign) since prompt materials such as storyboards, press advertisements or lists of brands can only be shown to a misrepresentative sample (homes with videophones). Verbal prompts can be made, but this is obviously not the ideal situation. This situation may change as more homes begin to use videophones (ie as penetration increases and ‘the diffusion of innovations’ occurs). Although awareness is of interest, ‘salience’ is, as Gordon (1991) points out, ‘a far more valuable tool for understanding what a brand means than brand awareness’. Retail audits Retail audits monitor share of shelf space, prices and turnover of particular brands (including competitors’) in a large and representative sample of retailers. It is worth noting that Boots, Sainsbury’s and Marks & Spencer do not allow auditors to come into their stores. This means that the audit results have to be weighted and adjusted. Where auditors are allowed access, they check shelves, facings, prices and stock levels. Most FMCG companies buy these audits, since they provide a picture of what is happening at the retail level. Bar codes 149 and laser scanning can provide much of this information online directly to the user. Sales out of shops do not necessarily relect actual customer usage. Home audits (see below) can provide customer purchase information. Home audits Instead of, or in addition to, retail store research, home audits research the customer directly. The retail audit data can be backed up with customer usage data. Representative families (sample size: 8,500) are recruited and asked to log all their purchases using a bar code recorder. The device asks for the name of the store and the price paid per brand, etc. Non-bar-coded items are recorded on paper. Analysis of this wealth of data over time shows consumers’ repertoire of brands, the effects of sales promotions on purchases, frequency of purchase, etc. This is automatically cross-referenced with the household’s demographic data already held. Diaries and dedicated dustbins used to be used to collect this type of information. Today the automated online bar code system is preferred. Social media audits Look before you leap. It is essential to carry out an audit before jumping into the blogosphere. As always, the brand and the organization need to check that it is credible and ready to become more transparent, as social media can probe into many previously protected areas of the business. A social media audit explores how an organization (and /or its brands and high-proile staff) and its competitors are seen in relevant online communities: what is being discussed, what is required, whether the organization has existing assets (contents, eg speeches) and how ready the organization is (includes training, systems and processes and generating content and participating in discussions). The audit also looks at current presence, whether blog, Twitter, Flickr or YouTube, and the levels of engagement and trafic or followers. The audit explores the organization’s social media goals (eg a direct channel with customers, to gather research, to improve customer service, to reach out to new audiences or markets, to add value to existing customers, etc), as well as its resources and restrictions (policy issues about content or trade secrets, any legal or political 150 Part 1 Communications Background and Theories constraints or any internal issues about sensitive information). You don’t have to research social media unless your audience is on there ‘The “groundswell effect” of digital and social media solutions is raising the expectation that they will inevitably now form part of any communications strategy. This not the case! Whilst it’s certainly true that these techniques can be very effective in supporting and moving the behaviour of targeted audience groups as part of a social marketing strategy, it’s important to recognise that this type of intervention will only work if our research and insight tells us that a specific audience prefers it or is already using this media to communicate.’ Rothery (2009) Opinion-forming panels Chapter 5 highlighted companies that use opinionforming panels, including Microsoft (450,000 early adopters), Procter & Gamble (nearly 200,000 recruited respondents in its ‘connector panel’). Post-it notes fail test Post-it notes failed in concept testing, prototype testing and a test launch. Although a great product, consumers, when researched, simply did not like it. ‘Just before pulling the plug on this potential new product, 3M focused on “highly connected CEO secretaries”. These respondents were given boxes of the 3M Post-it notes, invited to share them with their colleagues and gather any feedback re possible uses. The goodwill, engagement and word of mouth generated pushed this product beyond the Tipping Point to become the 5th largest office supply.’ Marsden (2004) ‘Connector panels’ are used to research and seed new products. Note: In the UK market, research cannot be blended with selling (it’s called ‘sugging’ – selling under the guise of research). Not only are these testers giving very valuable feedback, but they are also taking ownership of the product and the brand as they become more and more engaged. Neuroscience Neuromarketing and biometrics have received a lot of publicity as marketing research tools. Whether it is about mapping eye movement or measuring heart rate, sweat response or any neurological activity, many marketers are sceptical, yet companies like Google, Microsoft and Mercedes-Benz use neuromarketing to improve their marketing communications (Rothery, 2009). ‘I don’t like it’ really means ‘I do like it’ – neuroscience digs below the surface TV show Quizmania invites viewers to call in and win money if they guess the answer. Before the show was released in the United States, the concept testing (people watched it and filled out questionnaires) revealed that people clearly didn’t like the programme. ‘But when we scanned their brains, it showed they loved it. They didn’t like the show because from a rational point of view it’s ridiculous. However, the emotional part of the brain is so engaged that you keep watching it’ (Martin Lindstrom, in Rothery, 2009). When the show was finally broadcast, the ratings matched the predictions from neuroscience research. Specialist companies such as Mindlab, Innerscope, Eyetracker, NeuroFocus and Neurosense all use slightly different approaches, and each one is more likely to be associated with hospitals or university laboratories rather than ‘normal’ marketing approaches. Chapter 6 Marketing Communications research Think ‘secondary’ irst All communications plans should be based on sound research. Expensive primary data should be used only when all possible secondary data sources have been checked. Why pay £25,000 for a market research report analysing your industry when it may be possible to subscribe for less to a syndicated survey carried out speciically for a group of companies in an industry sector (eg air travel or car manufacturers)? Alternatively, some markets are researched regularly by market report companies such as Mintel, Keynotes and Jordans. These reports can be purchased by anyone for a few hundred pounds. Academic institutes often publish reports on various markets or aspects of the marketing process within a particular industry. Sometimes these are available at not much more than the cost of duplication and dispatch. A newspaper like the Financial Times may have done its own analysis or survey, which costs less than £2. Other research reports are available free of charge, as the commissioning companies see published surveys as a useful marketing tool to generate free media coverage. It also gives them something to talk to clients 151 and prospective clients about. On the other hand, some free survey results may be biased in favour of the organization that commissioned the research in the irst place, particularly if they have a vested interest in revealing certain positive results or trends. In addition, some surveys can be hijacked or manipulated. The market research process Deine what you need to know Before going through the steps of the market research process, it is worth emphasizing the importance of deining exactly what information you need and which decisions it will affect. Otherwise you get information creep, delays and confusion. Rushing into research will probably deliver sloppy market research or well-structured research indings but miss some key information. Bank misses key information Same secondary source – completely diferent ‘factual’ reports about David Beckham ‘Gaultier-saronged, posh-spiced, cool Britannia, look-at-me, what-a-lad, loadsamoney, sex and shopping, fame-schooled, day-time-TV, overquaffed twerp’. Daily Telegraph, June 1998, after Beckham was sent off in the World Cup ‘Elegantly-dressed, charmingly-espoused, golden-jubilees, self-effacing, paternally perfect, deservedly-rich, superbly tasteful, uniquely tele-visual, gloriously-maned hero’. Daily Telegraph, June 2002, after Beckham captained England in the World Cup Even the Telegraph recognized the vagaries of newspaper reporting, as it reprinted both paragraphs side by side in June 2002. A major bank tracked performance by product group (eg credit cards, mortgages) and by channel (branches, phones, online, e-mail). It went on and compared sales, costs, profits, attrition rates, cross-sell penetration, and customer satisfaction across products and channels. It missed some crucial information, which made the research worthless. What did it miss? ‘It didn’t link performance in individual customer segments – such as investors, retirees, home owners, renters and students with aggregate financial results objectives and results. Management therefore couldn’t pinpoint how strategies to improve customer acquisition, increase penetration, and lower attrition across the bank’s key segments were related to the bank’s sales and profit goals.’ Collins, Dahlstrom and Singer (2006) It is important to identify speciic segments and what information is required from each segment. 152 Part 1 Communications Background and Theories A one-size-its-all survey will not yield the quality of market research indings that a carefully reined and tailored survey will. Although ‘most companies lack the roles, processes, and integrated customer metrics needed to create unique customer experiences for select segments or to respond quickly to shifts in a segment’s value’ (Collins, Dahlstrom and Singer, 2006), the few that do really must ensure their research is tailored to different segments. (See the box ‘Flawed research – males and females all the same’, page 156.) This applies to any kind of research online or ofline. There has been an increase in the amount of research carried out online. It is worth considering the advantages and disadvantages of online vs ofline research. 3 Researchers can observe passively as people interact with each other very naturally online. Online vs oline research 7 Respondents can upload videos and share photos and online diaries and use these as stimuli. Qualitative research such as in-depth interviews and focus group discussions gives insights into the real reasons why customers buy or don’t buy, or what they think about new ad or pack design. A lot of this can be done online. In addition, accessing real-time discussions and layering them with shared uploads such as photos and videos adds a richness to research. These insights shape marketing strategies, product development and ad campaigns. Marketers can now carry out a lot of qualitative research online. With more anecdotal information accessible than ever before, how does a marketer choose between online and ofline research? The Guardian’s Robert Gray (2010) believes the digital revolution has been both a blessing and a burden for market research: ‘A wave of new research techniques has emerged in recent years, bringing immense opportunities for heightened understanding, but also making it harder than ever for those commissioning research to decide on the right method.’ So should online research be part of the research mix? Online advantages 1 Access – it is easier (and cheaper) to get respondents online than to drag them out of the ofice. 2 Researchers can observe consumers in their own community (without taking them somewhere else). 4 It is quicker – online dialogue and feedback are immediate and in some cases within minutes of something happening, as opposed to face-to-face surveys, which might take days, weeks or months, which gives people time to think, forget or get confused. 5 It allows for more longitudinal studies – instead of an intense one-hour dialogue, online can encourage conversation over months or years, which can yield very different insights to traditional face-to-face. 6 There is a wider spread of respondents, as online focus groups can recruit from across geographical and social boundaries. 8 It is cheaper than ofline equivalents. Online disadvantages 1 Too much information generated by too many social media conversations means marketers potentially face ‘an overload of untargeted data that is costly to analyse and requires speciic expertise and resource’ (Gray, 2010). 2 There is less control. As the discussions reside within their own online communities, the role of a focus group moderator has become more passive and observational, with less control over the direction of the discussion. This can open up new, previously unknown aspects, but can also make it harder to get feedback on speciic questions. Facebook research platform Restaurant chain Nando’s asked its Facebook fans for their thoughts on a possible new product. Overnight, more than 500 fans clicked their ‘like’ button, and there were 657 comments for marketing to analyse. Chapter 6 Marketing Communications research Ta b l E 6 .2 153 The market research process Step Actions 1 Problem definition Decide clearly what information is needed and why it is needed. Is it qualitative and/or quantitative? What will be done with it? 2 Research plan Agency briefing. Data sources: secondary/primary. Research techniques: observation, survey, experiment, focus group. Sample: size and type. Degree of confidence. Fieldwork: face-to-face, phone or post. Questionnaire design. Cost and timing. 3 Fieldwork Actual interviews/data collection and supervision. 4 Data analysis Coding, editing, weighting, summing, consistency/check questions, extracting trends and correlations, if any. 5 Report presentation The interpretation of the figures, summary, and sometimes conclusions. 6 Action taken/not taken If the information is not used, then perhaps it wasn’t worth collecting in the first place. Websites and research Websites can help identify customer needs: ●● Identify what customers are interested in (the most popular web pages). ●● See what customers really want by looking at key phrases used to arrive at the site and within the site (seeing what phrases are keyed into the onsite search engines). ●● Employ polling for brand names, straplines, packaging design concepts or any concepts. ●● Use questionnaires sparingly, as they can cause people to leave a site, particularly if the questionnaire is on the home page. Every click potentially captures data, building a better proile about visitors and their interest. Chat rooms offer a wonderful opportunity to listen, free of charge, to customers discussing your product or service. And more sophisticated data-mining software can drill down into data mines and build proiles that help companies to understand their customers better. The market research process The key to using information eficiently lies in the ability to deine exactly what information is required. This is a valuable management skill. Deining the problem or deining the research objectives is the irst step in the market research process (see Table 6.2). Briefs, proposals and agency selection Research brief Depending on the type of research, the brief can include SOS from SOSTAC® plus 3Ms (see pages 229–37): Part 1 154 Communications Background and Theories ●● Summary. ●● Situation analysis (including target and marketing mix). ●● Objectives of the research (problem deinition – what information is required and what decisions should be made as a result of the research inding?). ●● Strategy (why the information is required and how the research indings may affect the communications strategies). ●● Men/women (who will liaise with the agency?). ●● Money (how much is the research budget?). ●● Minutes (timing – when is the information needed?). Note that some clients prefer not to divulge too much strategic or tactical information for security reasons. On the other hand, the more the research agency knows, the more useful the contribution to the success of the project will be. Research proposal If an external research agency has been briefed, its research proposal should incorporate a research plan (step 2 in Table 6.2). You will also want to look at the agency’s credentials. Subcontract research but not understanding ‘There are certain research functions, marketing research functions, that are sometimes provided by outside firms that are specialists in doing nothing but research. But the core aspect of marketing, which is understanding our customer and having a close bond with the customer, that should never be turned over to anybody else.’ Kanter (1996, 2000) Agency selection If the organization is not handling the research in-house, a market research agency will be chosen. Some of the usual agency selection procedures will apply (see ‘Agency selection process overview’, page 189). A shortlist of agencies can be developed from personal recommendations from colleagues and advertising agencies, and from the organization’s own observation of research agencies and their advertisements or editorial coverage. Agency size, specialism or expertise, reputation, location and whether the agency works for any competitors can be used as shortlisting criteria. The agencies that ‘pitch’ or make a presentation will then be judged by the quality of their research proposal, security of data, cost, and spin-offs (like free training). Even small details can make an impression – for example, the number of bound reports that will be delivered when the research indings are eventually presented, or e-mailing presentations and providing client access to extranets, so that clients can monitor project progress. The personal chemistry or relationship between the client and the agency presenter is often the key variable that swings the choice of agency one way or another. It is also important to ind out who will be handling the project and, if it is a junior member of staff, the degree of supervision that will be offered. The Interviewer Quality Control Scheme (IQCS) follows rigid procedures to supervise and check the quality of the information. Some agencies demonstrate great care about the security of the data they hold. Computer hackers pose a problem to any computer stored My girlfriend ‘About 10 years ago my girlfriend used to work for a well-known market research agency in London. On Fridays, I would go in and collect her before going to the pub. Whenever I was late I would dash through the main front door, past the security guard and go up in the lift. Occasionally I jumped out at the wrong floor and found myself wandering through empty offices full of live, unattended, expensive (and competitor-sensitive) research projects. Such a situation would not be allowed to happen today, and the particular agency has since changed its security procedures.’ Anonymous Chapter 6 Marketing Communications research Market researchers as drunks ‘Market research, to paraphrase a witty adage, is frequently used like a drunk uses a lamp post: for support rather than illumination.’ Gray (2010) data. Product test samples need to be controlled carefully and securely. All samples, mock-ups and concept boards need to be returned by the interviewers, and logged as returned once they are received by the research agency. Samples, mock-ups and concept boards can then be kept under lock and key. Research problems and challenges There are many challenges associated with getting good market research. These include: researching new ideas, sloppy briefs, sloppy interviews and much more. Researching new ideas How can answers to questions about anything that is new, unseen or previously untried be valid? The irst commercially produced electric car, the Sinclair C5, had the beneit of some product research, but how can research ask people about something they cannot experience? Driving a C5 in a hall is very different from driving one along a coast road or a busy, wet and windy dual carriageway with a 40foot truck trying to overtake. Here lies one of the dificulties with researching a new idea: how can the reality of some markets and product usage be no one asked for a burger – until they were invented ‘Consumers can’t be expected to embrace previously unseen solutions. Let us not forget that no one had asked for a hamburger until they were invented.’ Murray (1997) 155 simulated? Another problem lies with the dificulty in taking the novelty factor out. When presented with something new, buyers may be prepared to give it a try, but can the marketing people sustain the marketing effort after the excitement of the initial launch? The same applies to advertising. Most advertisements try to be new, different and refreshing. So how can research help produce something that is radically different to people’s existing levels of expectancy? One of the UK’s most successful advertising campaigns, ‘Heineken refreshes the parts other beers cannot reach’, had the normal focus groups and concept research carried out. It ‘researched poorly’, ie the results said, ‘This is rubbish. We don’t understand this type of ad. Don’t do it.’ Sir Frank Lowe (chairman of the advertising agency Lowe Group) tells the story of how he had to tell the client (Heineken) about the negative concept research indings on their radically different advertising concept. ‘He [the client] took a very brave decision and placed the research report document in the bin. He said, “We had best leave that alone and get on with the ad!”’ Expensive and carefully prepared market research indings are sometimes ignored. Expensive research also gets it wrong if it fails to ask the right question. Even world-class companies can ask the wrong question and make huge mistakes. Take Coca-Cola – although it researched the taste of the new Coke, its 1985 lop occurred because it failed to research how consumers felt about dropping the old Coke. Here is Philip Kotler (2000): Blind comparisons which took no account of the total product… name, history, packaging, cultural heritage, image – a rich mix of the tangible and the intangible. To many people Coke stands beside baseball, hotdogs and apple pie as an American institution. It represents the fabric of America. The company failed to measure these deep emotional ties, but Coke’s symbolic meaning was more important to many consumers than its taste. More complete concept testing would have detected these strong emotions. Real innovations are dificult to research because both customers and experts struggle to visualize their beneits. Henry Ford once said: ‘If I’d listened to my customers, I would have invented a faster horse.’ This is echoed by Clayton Christensen (2003) 156 Part 1 Communications Background and Theories Flawed research: Coke lop ‘Sometimes research gets it wrong because it fails to understand that people can only buy a complete brand. People don’t buy products; they don’t buy packages; they don’t buy brand names. They most certainly don’t buy advertising. They buy the sum total of all those things. At one point the Coca-Cola company thought they could improve Coke and invented a new Coke. They had thousands of consumers in the US blind-test new Coke vs old Coke without telling them what it was. New Coke won. So the Coca-Cola Company launched new Coke. It failed miserably. When the company researched new Coke versus old Coke they missed the understanding that the brand Coca-Cola was far more than just a product. It’s the sum total of all elements of the brand.’ Bradt (1996, 2000) in The Innovator’s Dilemma: ‘Listening too much to customer input is a recipe for a disaster.’ Listening to experts in the ield can also be a recipe for disaster, as demonstrated by the, now classic, quotations regarding innovations from so-called industry experts (see Chapter 1, page 26). Dangers to guard against Here are some of the areas where problems can occur in market research: 1 ambiguous deinition of the problem; 2 ambiguous questions; 3 misinterpretation of the written question by the interviewer; 4 misinterpretation of the question by the interviewee; 5 misinterpretation of the answer by the interviewer; 6 interviewer bias (street interviewers may select only attractive-looking respondents and exclude anyone else from the sample); 7 interviewee inaccuracies (trying to be rational, pleasant, offensive, disruptive, knowledgeable when ignorant, etc); 8 interviewer fraud (falsely illing in questionnaires); 9 non-response (a refusal to answer questions); 10 wrong sample frame, type or size; 11 incorrect analysis; 12 freak clustering or result (an inherent danger of sampling); 13 timing (researching seasonal products out of season). Marketing intelligence and information system Every organization should have a marketing intelligence and information system (MIIS) that lists secondary data sources. The system can be a useful starting point. An MIIS should be built and constantly reined as new sources become available and old ones become redundant. Internal igures, such as sales, percentage of sales expenditures (of say advertising), response levels, Flawed research – males and females all the same Recent testing on both sexes [of rats] has revealed variations in pain thresholds and quite different responses between male and female rats to the same medicines… [This implies that the] body of drugs research has been built on a false premise, “one size fits all”. Women today influence 80% of consumer decisions. 1 Women’s sensory perception levels are higher on all five counts… more sensitive to sales environments. 2 Women use the internet and shop online differently. 3 Women talk more about their experiences – word of mouth and referral rates are higher. 4 Women buy differently at every stage of the buying cycle. Dunkley (2008) Chapter 6 Marketing Communications research cost per order or enquiry, etc, can and should be compared with external industry averages or competitor activities. Not all the information is readily available immediately, but competitors’ sales igures (of grocery products and some other large markets) are available from companies such as Nielsen Retail Audits. Information on levels of advertising is available from Nielsen Media Research. In an ideal marketing department, competitors’ products, lealets and advertisements should be iled, monitored and counted (so as to estimate the competitors’ advertising spend), but busy marketing departments sometimes ind this too timeconsuming. Certain monitoring companies offer to collect competitors’ press clippings and published advertisements. They will also estimate a competitor’s advertising spend, if this is not available from MIIS. Again, this costs money and therefore it may be deemed to be outside the budget, particularly if it was never included in the annual marketing budget in the irst place. Estimating a competitor’s advertising spend can also be done by collecting all the competitor’s press ads and calculating the spend from rate card costs less bulk discounts. A marketing log iling previous marketing activities, advertisements, mailshots, editorial clippings, etc should be tagged with ‘cost, objective and result’. Comparing internal sales igures with external igures (eg total market size) gives you market share igures, which can also be used to calculate your competitors’ market share and, more importantly, whether it is growing. Figures in isolation are relatively useless. Figures have to be pushed backwards and across. Backwards gives you the trend over, say, the past ive-year period, and across gives you a comparison across your market (including your competitors). The sales force can, if trained, provide the most up-to-date and relevant information from the MIIS. They are closest to the marketplace and in touch with what is happening. They need to be encouraged to collect relevant information. Staff members throughout an organization can be trained or briefed as to what type of information is considered important. Different members of the team can identify their choice of newspapers and/or trade journals. They can then scan them for anything relevant. Alternatively, a press clipping agency (eg Romeike & Curtice) can be hired to do this 157 The intelligent rep In the United States one particular chain of stores that sold Christmas crackers held buying days when their buyers would see visiting sales representatives. Appointments were not accepted and, once they had registered with the receptionist for the appropriate buyer, reps proceeded to queue in a waiting room on a first-come, first-served basis. The room had rows of desks with telephones, where the reps sat down quietly filling in order forms, drafting letters, completing call sheets and making phone calls. Although it was only 7.30 am, a dozen registered reps were already busily working away. By 8.05 am the room was packed. The large chap beside me was on the phone at 8.00 am reporting some hot information he had come across during another breakfast appointment earlier that day. He told his boss how the competition had offered the other buyer a new buyer-incentive scheme which would commence next month, followed by a new consumer-incentive programme scheduled four months down the road. They had now four months to react or pre-empt the competition! Today’s reps should be asking buyers what words and phrases they use to search for the sales reps’ products and services. The answers need to be regularly and systematically sent back to the marketing team to be added to the key phrase inventory for SEO and pay per click ( PPC) PR Smith (nd) purposes. work. An online database like Textline accepts keywords, companies, products, people or issues. Once you have keyed in what period of time (3, 6, 12 months, etc), what area (UK, Europe, United States, etc) and what types of journals or magazines, the screen will register how many references there are and ask you if you would like to read or print the headlines, read or print all the abstracts, or reine the deinition or choice of keyword if too many references are recorded. Some of this information can then be used in a SWOT analysis (strengths, weaknesses, opportunities and threats). This is particularly useful in monitoring uncontrollable external opportunities and 158 Part 1 Communications Background and Theories threats (OT) variables such as political, economic, social and technical (PEST) factors. PEST developments can be dificult to forecast, but the portents cannot be ignored (see Chapter 11). Many forecasting companies specialize in certain aspects such as social forecasting, and they will also carry out econometric forecasting, which correlates the likely sales effect resulting from a change in pricing or advertising expenditures (price elasticity or advertising elasticity). In conclusion Research is valuable but, as can be seen, it does require experienced advice and strict control if the data are to be usefully applied. ‘Dodgy data is worse than no data!’ Having said that, good data can make the difference between winning and losing. Asking good questions is a great skill. It is important to know what you need to know, as demonstrated by the following poem: There is something I don’t know that I am supposed to know. I don’t know what it is I don’t know, and yet am supposed to know, and I feel I look stupid if I seem both not to know it and not know what it is I don’t know. Therefore I pretend to know it. This is nerve racking since I don’t know what I must pretend to know. Therefore I pretend to know everything. I feel you know what I am supposed to know but you can’t tell me what it is because you don’t know that I don’t know what it is. You may know what I don’t know, but not that I don’t know it, and I can’t tell you. So you will have to tell me everything. Source: A poem about information from R D Laing’s Knots. Reproduced by kind permission of Tavistock Publications. key points from Chapter 6 ●● Budgets allowing, research can reveal anything required. ●● Always check secondary sources before commissioning expensive primary research. ●● Consider carefully exactly what information is required, because there is too much information out there. ●● Consider online as well as ofline research. ●● Set up a marketing intelligence and information system. references and further reading Birn, R (ed) (2003) The Handbook of Market Research Techniques, Kogan Page, London Bradt, G (1996, 2000) Online Marketing Course 5: Marketing research, Multimedia Marketing.com, London Cerha, J (1970) Inventing products to it the future market, Paper given at ESOMAR, Neu-Isenburg, November Christensen, C. (2003) The Innovator’s Dilemma, Harper Business Essentials, New York Collins, S, Dahlstrom, P and Singer, M (2006) Managing your business as if customer segments matter, McKinsey Quarterly, August Crimp, M (2000) The Marketing Research Process, 5th edn, FT Prentice Hall, Englewood Cliffs, NJ Crouch, S, Housden, M and Wright, L T (2003) Marketing Research for Managers, Butterworth-Heinemann, Oxford Discovery Channel (2008) Species – a user’s guide to young men, Discovery Communications Europe Douglas, T (1984) The Complete Guide to Advertising, Papermac, London Dunkley, C (2008) Gender psychology – differentiate to accumulate, Marketer, October Chapter 6 Marketing Communications research Gordon, W (1991) Accessing the brand through research, in Understanding Brands, ed D Cowley, Kogan Page, London, pp 31–56 Gordon, W (1999) Goodthinking, Admap, Oxford Gray, R (2010) How to do ‘qual’ research, Marketer, June Holder, S (1999) Talking to the right consumer, Design Week, May Holder, S and Young, D (1995a) A journey beyond imagination, Paper given at ESOMAR, Berlin, February Holder, S and Young, D (1995b) Managing change: Moving towards a leaner future, Paper given at Business Industry Group, May Holder, S and Young, D (1997) Researching the future in the present, Paper given at ESOMAR, Edinburgh, September Holder, S and Young, D (2000) Getting to the future irst, Paper given at AEMRI, Paris, June Kanter, R (1996, 2000) Online Marketing Research Course 5: Marketing research, Multimedia Marketing.com, London Kimmel, M (2008) Species – a user’s guide to young men, Discovery Channel, Discovery Communications Europe Knave, M (1991) Unlocking deepseated reactions makes ads more sympathetic, in Marketing Breakthroughs, ed Bruce Whitehall, December 1991, p 9 Knave, M (1996) Rescuing Boris, Time magazine, 15 July Kotler, P (2000) Marketing Management: Analysis, planning, implementation and control, millennium edn, Prentice Hall International, London 159 Lynch, M with Manchester, P (1999) How to uncover knowledge and make it available, Financial Times, 10 November McGovern, G (2000) Information overload – the sequel, New Thinking, 23 October McNally, F (2002) Wolfe Tones’ rebel ballad beats off Bollywood classic to be top choice, Irish Times, 21 December Marketing guide 6: Market research (1989) Marketing Magazine, Haymarket Publishing, 13 April Market Research Society (1986) Research is good for you: The contribution of research to Guinness advertising, Conference papers, MRS, London Marsden, P (2004) Tipping point marketing, Brand Strategy, 1 April Moore, A (2004) Enterprise search: the Holy Grail of KM?, KM World, 1 January Murray, R (1997) Clone zone, Creative Review, November Nurden, R (1997) Managers pay price for ofice pressures, European, 27 November Reuters (2009) Information overload, 15 August Rothery, G (2009) All in the mind, Interview with M Lindstrom, Marketing Age, 3 (6), November Smith, PR (nd) Personal anecdote from the 1980s when the author was marketing Christmas crackers in the USA Varian, H and Lyman, P (2000) How Much Information?, UC Berkeley School of Information Management of Systems Wurman, R (1996) Information anxiety, system overload, Time, 9 December Further information British Market Research Association (BMRA) (formerly known as Association of British Market Research Companies – ABMRC) Devonshire House 60 Goswell Road London EC1M 7AD Tel: +44 (0)20 7566 3636 www.businessmagnet.co.uk European Society for Opinion and Market Research (ESOMAR) Eurocenter 2 11th loor Barbara Strozzilaan 384 1083 HN Amsterdam The Netherlands Tel: +31 20 589 7800 Fax: +31 20 589 7885 www.esomar.org 160 Part 1 Communications Background and Theories Market Research Society 15 Northburgh Street London EC1V 0JR Tel: +44 (0)20 7490 4911 www.mrs.org.uk Millward Brown (London) 24–28 Bloomsbury Way London WC1A 2PX Tel: +44 (0)20 7126 5000 (Dale Beaton) Fax: +44 (0)20 7126 5001 www.millwardbrown.com Nielsen Media Research (formerly known as Media Monitoring Services) Atrium Court The Ring Bracknell Berkshire RG12 1BZ Tel: +44 (0)1865 742742 Fax: +44 (0)1865 732461 www.nielsenmedia.co.uk 161 07 Media buying and planning lEaRNINg ObjEcTIvES By the end of this chapter you will be able to: ●● Appreciate the importance of media planning and buying ●● Discuss media choice ●● Understand the advantages and disadvantages of various media ●● Embrace media language ●● Evaluate media options according to consistent criteria Introduction – the challenge of the media mix Changing media consumption Is old advertising media out? 166 162 166 when? 171 Media buying 171 Media research 171 Is apps the ‘new media’? 167 Media research bureaux Print Media jargon and vocabulary 168 The internet 168 Is ambient media the new Media selection Summary 176 177 179 references and further reading 179 media? 168 Which medium? 170 How much space, how often and 162 Is mixed media in? Which media, which vehicle? 168 169 Further information 180 162 Part 1 Communications Background and Theories Introduction – the challenge of the media mix The media mix is where the big money is traditionally spent. A £10 million TV ad campaign may spend £1 million on producing the TV ad, but it spends £9 million on media, ie nine times more on the media. It follows, in this case, that nine times more time and effort should be spent on choosing the right media mix. And the mix has got a lot bigger. Some marketing managers and agency media people consider that media include communications tools such as sponsorship, direct mail and point-ofsale, as well as the mainstream media such as TV, cinema, radio and the press. Buildings, they would say, are permanent media, which, planning permission allowing, can be used to carry a message. For the purposes of this chapter, ‘media’ means the more traditional advertising media (press, TV, cinema, radio and posters), as well as new media such as web radio, interactive television, mobile messaging and websites. Although good media planners also consider media outside the traditional advertising realm, this chapter focuses on the mainstream advertising media, while other communications tools are addressed separately in their respective chapters in Part Two. Deciding to include advertising in the communications mix is a relatively easy decision compared to deciding which media and which media vehicles (eg the speciic magazine title) to use. Should the press, TV, radio, cinema and/or posters be used, online and ofline? If so, how much of each? Should they be mixed together (the media mix)? If press advertising is chosen, which publications should be used – national dailies, Sunday newspapers, evening newspapers, daily or weekly regional papers, or magazines? How many times should the audience see or hear the ad (optimum frequency)? When should it happen? On which page? Even a great advertisement will not work if 1) it is in the wrong place, 2) it is placed at the wrong time or 3) it is in the right place at the right time but not seen enough times (insuficient frequency). Today it gets even more complicated, as changing media consumption patterns show more and more online media consumption, yet TV viewing in most markets is also at an all-time high. What about when TV audiences watch their programmes on their mobiles, iPads and plain old PCs? Media mashing means audiences are multitasking (watching TV and being on the internet). The media planners’ and buyers’ job has become even more complicated, with a plethora of channels, social media sites, apps and more. All of these are considered later in this chapter. Since most of the advertising budget gets spent on the media, careful attention to detailed media planning and razor-sharp negotiating skills is important. Expert media planners and buyers get the best out of advertising by inding the right spaces or places for an ad campaign at the lowest cost. Media planning is both a science and an art. Traditionally it has been based on number-crunching media analysis and the application of complex computer models. Today media planners are also interested in the qualitative side, which tells them how audiences actually use (and feel about) different media. First, consider the changing media consumption patterns. Changing media consumption Media consumption is continually changing. Newspapers and radio are down. Online and TV are up, when measuring where audiences go to gather their news, although both newspapers and radio are consumed via the internet. This research is from the United States, as many European media consumption patterns follow the US trend. TV viewing is at an all-time high in many countries around the world (Nielsen Wire, 2009). Media meshing or multitasking (watching TV and using the internet simultaneously) is growing (EIAA, 2010). For advertisers, combining TV and online increases positive brand perception and signiicantly increases the likelihood of purchase (IAB and Thinkbox, 2008). Internet usage is growing. In some countries internet usage is bigger than TV consumption, eg Canada (IPSOS Reid, 2010). In some demographic segments, eg Millennials (born between 1981 and 2001), internet usage is three times greater than TV usage (Markiewicz, Sherman and Jaworski, 2008). And YouTube just keeps on growing. In fact, more video has been uploaded to YouTube in the last two months than if ABC, NBC and CNN had been airing new content continuously since 1948 (which was when ABC started broadcasting) (XPLANE, 2009). Chapter 7 Media Buying and Planning F I g u R E 7.1 163 Media source by generation Newspaper “Yesterday” Online for News “Yesterday” 65 53 48 38 38 31 26 21 22 1998 2000 2002 2004 2006 2008 1998 Radio News “Yesterday” 54 49 44 2000 2002 2004 2002 2006 33 14 14 2004 28 2006 2008 TV News “Yesterday” 74 73 56 52 61 54 41 38 30 29 28 1998 2000 29 28 25 2008 43 1998 2000 2002 2004 42 2006 2008 Silent/Greatest Boomer Gen X Gen Y Silent/Greatest born before 1946 Boomer born 1946–1964 Gen X born 1965–1976 Gen Y born 1977– (incl. Millennials 1981–2001) TV being at an all-time high may be because of multiple sets, more channels to watch or TiVo technology, and perhaps the recession means some audience members have more time to watch TV. The average American watches 38 hours per week, up from 36 hours per week the previous year (Nielsen Wire, 2009). And, surprisingly, TV viewing amongst children is almost ive times greater than watching DVDs and almost 20 times greater than using games consoles (Nielsen Wire, 2009). Invisible kids Time spent by the average child watching television: 1,491 minutes per week or almost 25 hours per week. Nielsen Wire (2009) Parents’ time spent in meaningful conversation with their children: 3.5 minutes per week. TV Free America (2010) 164 F I g u R E 7.2 Hours spent per week using media Q5ai–Q5aiii. In a typical seven day week, approximately how many hours do you tend to spend using each media? 2004 % Media Share 39% 28% 14.5 15.314.2 14.8 13.0 14.8 24% 13.2 12.4 8.8 2006 2008 21% 11.312.0 12.3 2010 2% %Media Share 39% 3% 5.3 5.2 4.9 4.7 4.5 4.0 3.9 3.8 11.8 6.4 10 Countries Watch television Listen to the Radio (not through (not through Internet) Internet) 7% Use the Internet (total) Use the Internet (PC) 27% 24% 21% 12.1 12.1 11.6 Use the Internet Read Newspapers (Mobile) 3% Read Magazines 7% 3% 4.8 4.1 Read Newspapers Read Magazines 15.9 6.4 15 Countries Listen to the Watch television (not through Radio (not Internet) through Internet) Use the Internet (total) Use the Internet (PC) Use the Internet (Mobile) [Base: All Europe (10) using each type of media – TV (n = 7143) Nsp (n = 5473) Mgz (n = 4003) Rad (n = 5833) Int via PC (n = 4969) Int via Mob (n = 874) All Int (n = 5011)] [Base: All Europe (15) using each type of media – TV (n = 11902) Nsp (n = 8454) Mgz (n = 5879) Rad (n = 8351) Int via PC (n = 6823) Int via Mob (n = 1699) All Int (n = 7162)] Mediascope Europe 1 Chapter 7 Media Buying and Planning Research into what media people use to get news revealed that printed newspaper consumption is, not surprisingly, falling across all demographic groups. Radio is falling also, except for Generation Y (born after 1977). Whilst TV is still generally growing across most age groups in the United States, there is one exception, and that is Generation Y. Online news is growing right across all segments, including ‘the Silents’ – those born before 1946 (Pew Research, 2009). For European media consumption statistics, the European Interactive Advertising Association (EIAA) (2010) reveal similar patterns. Over a ive-year period to January 2010, TV is up, radio is down (excluding internet access to radio), newspapers are down and internet usage is up. Both TV and online have an identiiable effect on purchase and response, eg TV is stronger at: ●● telling people about a new brand they haven’t heard of before (74 per cent); ●● sparking interest in a brand (74 per cent); ●● giving new information about a brand people are already aware of (72 per cent); ●● persuading people to try a brand or product (59 per cent). Online advertising also has these effects, but performs relatively better at: ●● helping people decide which brands are relevant (50 per cent); ●● causing a re-evaluation of a brand (41 per cent); ●● giving enough information to make a purchase decision (41 per cent). IAB and Thinkbox (2008) In 2008 the internet was still being used primarily for research/inding information (75 per cent) and communication (66 per cent), while TV was mainly used for entertainment (80 per cent) and relaxation (73 per cent) (IAB and Thinkbox, 2008). However, this has been changing, as more and more internet usage is for entertainment (including iPlayers, streaming radio and even newspapers online). As faster and more reliable broadband rolls out, the popularity of watching selected TV programmes will grow. With hundreds of channels, television has moved from broadcasting to narrowcasting, from broad 165 or mass audiences to smaller and more distinct target audiences. The new, wider choice means that audiences are fragmenting into many smaller interest groups fed by sports channels, kitchen channels, children’s channels, educational channels, religious channels, music channels, etc. Different channels attract different audience proiles or different psychographic and demographic segments. This gives marketers access to more distinct and tighter target audiences. However, audiences will continue to migrate online away from the traditional TV viewing model as TV is watched on other devices (eg mobiles, iPads and car TVs). Demand for measurable ROI will keep taking marketing budgets away from TV and direct channels and on to the internet. The marketers’ dilemma of whether to use ads for brand building or making sales may be beginning to blur as ‘engagement’ becomes the burning issue. How can advertisements or any marketing communications engage customers so that they are aware of the brand, embrace it and engage with it to ensure stronger brand relationships and, ultimately, better lifetime sales? And before the debate broadens to the new challenges and opportunities presented by social media, marketers have a new arsenal of advertising tools, including: ●● transactional banners (see below); ●● contextual ads (serving ads relevant to whatever a visitor is searching for); ●● geolocation ads (serving ads relevant to your location); ●● mobile ads (new mobile ad models emerging); ●● gaming ads (ads placed in games); ●● one-second ads (Miller Beer in the United States); ●● long-form ads (see Chapter 1, p 20, on the 27-minute ad); ●● intelligent media units (banner-sized panels with useful widgets and streams); ●● PPC vs PPA (pay-per-click ads vs pay-percustomer acquisition); ●● apps (see page 166); ●● virals (a natural extension of many TV ads). Transactional ads let users purchase items by interacting with the banner instead of having to click 166 Part 1 Communications Background and Theories through to another page or website, helping impulse buyers buy immediately. (See Chapter 13.) more on creating bigger and better programmes. The days of just selling ad space are over. Marketers need media owners to think creatively about using the media for reaching out and building stronger relations, as well as selling more products. Free cofee if you watch my ad Apex Japanese vending machine company developed a dispenser that gives free coffee in return for watching a 30-second video advertisement while it prepares and pours the coffee. Marketer (2008) Is old advertising media out? There is a shift in vision and philosophy amongst advertisers. Media owners now have to think differently. Consider Facebook: although it primarily earns revenues from selling engagement ads that drive people to brand pages, ‘marketers and agencies want it to focus less on selling media and more on helping them solve problems and create big ideas’ (Learmonth, 2010). Big marketers like Unilever, with its $7.4 billion advertising budget, have been visiting the Googles, Facebooks and Hulus (and lesser-known up-and-coming start-ups) of Silicon Valley for years, to understand ‘new’ concepts like social media, search-contextual advertising and geolocation advertising. It has been suggested that Silicon Valley companies could be incentivized less on ad sales and The internet creates bigger interactive relationships and not just ads ‘But marketers have realized the internet isn’t just a place for ads but a means to create bigger interactive relationships with consumers. For savvy digital players such as Unilever, the digital tour (of major social media owners) wasn’t about CPMs or page views; rather, it’s about learning how to interact with consumers who spend more and more of their time online, and to discover new social tools to participate in what’s going on there.’ Learmonth (2010) Is mixed media – mobile and apps with TV – in? Apps (or mobile phone applications) can put brands back on screens that are currently ‘stealing attention from TV viewership’. Mobile could bring back some of those lost ad revenues to those TV networks if they bundle mobile and TV into new advertising packages for brand owners. Although apps are not yet a prerequisite for a successful TV series, they do ‘create context for its shows and let the network interact with viewers while simultaneously laying the foundation for additional revenue streams’ (Patel, 2010). Here is how Fox TV network’s app for Glee (the musical comedy series) works. It costs £0.59 to download, and within a few weeks it had several hundred thousand users. These customers are engaging beyond the show, as they get extra information about the show, or they sing karaoke to songs performed in the show and then share their work of art by posting their recordings to social networks. Of the irst 200,000 subscribers, some 60,000 have been published. Thirty per cent high-level engagement like this is powerful (see ‘The ladder of engagement’, Chapter 1). Users can also buy additional songs. On average, the app is used once or twice per week at 8- to 10-minute sessions, mostly when the show is off-air. Is this an ad or a product extension or both? The app helps to restore a sense of being in an audience or in a group, particularly if the app allows the audience to share their thoughts, feelings and, in this case, songs with each other. Apps that integrate with social media help get a brand quickly discussed. Social TV and its supporting apps extend a brand’s reach, enhance the customer experience, deepen the engagement and the brand relationship and simultaneously earn a new revenue stream from subscriptions. Such ‘walled garden’ experiences mean more ‘marketing utopia’ (see Chapter 1) – it’s a great time to be a marketer. Additional revenue streams may follow if additional brand advertising is added to the app. The Chapter 7 Media Buying and Planning Glee app developers are actively talking to brands about sponsorship opportunities, such as providing free songs to users. Apple TV beats cable TV? ‘Widget or APP-based TV is just rolling out, and will be built into the majority of flat-screen TVs sold during the holiday season. Early adopters in the US are pulling their cable and dish now and downloading the shows they want to watch on their computers and Apple TV. When that occurs, networks will directly distribute their content to a large portion of their customers, who will pick and choose all programming they watch, when they want to watch it – sort of like it has evolved to now with DVRs and on-demand, but with much greater control by the viewer, who will buy or subscribe to the programmes they watch without having to buy bundled purchase packages. When any part of the old TV spectrum is released to transmit the internet, speeds will accelerate to the point instant real-time on-demand viewing will take place with minimal need for downloading.’ Rodney Mason, CMO, Moosylvania Marketing (2010) brand loyalty. If a brand can ind something of value and something of relevance to its target market then users can continue engaging with the brand long after the ad campaign is over. Building social media like Twitter and Facebook into an app is potentially very powerful. Other ‘walled garden’ experiences, such as the Xbox, are developing social media aspects to their games so that players can keep in touch with their friends and compare scores, etc, as they lean over the ‘wall’ into the social media networks. Others are also using apps as an added-value extension of the brand experience. Few brands as yet appear to be using apps as revenue generators (fees for downloads or additional brand advertisements). Here are some early apps highlighted by Kennedy (2009): ●● Zippo. The US lighter manufacturer created an app that replicates an image of a typical Zippo lame. Five million people downloaded it, many of whom don’t even smoke. It is now popular at gigs. ●● Kraft Foods iFood Assistant is a sticky iPhone app with 50 per cent of downloaders continuing to engage with it three months after irst downloading it. This builds ongoing brand loyalty. ●● Public transport app. The Avego app gives updates on public transport and is used in 60 countries. The app gives personalized information for bus passengers, tailored maps and online payment ‘on the go’. Silicon Valley’s San Jose Mercury News referred to it as ‘one of the most innovative companies’. ●● House­buying app. Irish Times-owned MyHome.ie partners with Phoneware to show home buyers listings, loor plans, photos and agent contacts, all linked to Google Maps to see what schools, parks and motorways are nearby. Filters allow searchers to explore it by price, number of bedrooms and property type. ●● Afiliate charity contribution app. Vodafone is mixing afiliate marketing with a clever app. If a local club signs up a Vodafone user, the club receives a percentage of the contract. The app lets the club representative see how much Vodafone is giving back to local clubs. Are apps the ‘new media’? An app is simply a piece of software for an iPhone or iPad that can do anything from keeping up with the sports news, to following a favourite team or player, playing a game, reading free books, analysing a golf swing, taking better photographs, learning to speak French, inding the lowest prices, managing the household bills, Skyping the family, Twittering with friends, making rude noises, stopping snoring, consuming a mobile version of a media brand or consuming a new experience for any brand. ‘Some companies are using the App Store as a form of advertising. Developers can create gadgets or widgets that can push their client names onto millions of devices worldwide’ (Kennedy, 2009). BBC, Time and Sky News are all available on iTunes, because they know that having their brand name (and services) on a screen that customers carry with them everywhere extends their reach and builds 167 Part 1 168 Communications Background and Theories Print Which medium? Technology today allows low-cost entry into the world of publishing. This has reduced the publishing industry’s traditional high-investment barrier to entry. In effect, this means that we are seeing new magazines, journals and newsletters appearing alongside multi-edition, tailor-made magazines such as the US Farmers’ Journal (which produces over 1,000 different editions of each month’s publication targeted at over 1,000 different types of farmer). The result? More accurately targeted media that allow advertisers and PR people to target their messages more effectively. Should the press and/or radio be used? How should a client or an agency choose which medium to use? Which TV stations and/or publications should be used? Which vehicles within a particular medium (eg the Guardian or The Times)? The press includes national dailies, Sunday newspapers, evening newspapers, daily and weekly regional papers, and magazines. Television, radio, cinema and posters are considered. The key points are as follows: ●● The internet The internet offers a whole gamut of communications opportunities, including two-way communications, ie listening as well as talking, and collecting as well as sending information. Banner advertising (eg placing an approved advertisement on other websites) is just one form of advertising available on the internet. Is ambient media the new media? Beyond TV, radio, cinema, posters, the press and the internet, there are many other advertising media, ranging from scented posters, mirrored posters and grafitied posters, to loor posters, from heated bus stops, painted train platforms, tunnel entrances, taxis, buses, trains and planes, to banners in space visible from earth, to aerial balloons, to the bottoms of beer glasses, to lottery balls, to screen savers, to the back of stamps (and around the front edge of stamps in the United States), to cutting ields into patterns (crop circles), to free bookmarks at the checkouts of bookstores. The misery of choice David Ogilvy once described the increasing array of choice as ‘the misery of choice’. It applies to media planners and buyers today also. ●● ●● ●● Audience size (reach or penetration). Some media cannot carry national brands because they cannot offer national coverage. Media such as the regional press are generally considered to be local media, since they talk to the community. Television can get to large audiences quickly. Audience type (eg 15- to 24-year-olds don’t watch much TV but do go to the cinema; on the other hand, not many over 45-year-olds watch the music station MTV). Budget (production cost, media cost and cost per thousand – CPT). Message objective: – Response required: is action required after the ad (eg illing in a coupon or phoning an 0800 number)? – Creative scope: are colour, sound and movement needed (eg TV’s movement can show impulsive purchases)? – Demonstration: product usage is often best shown on TV, but all media can show product beneits. – Technical detail: TV is not good; the press is better. – Urgency: TV, radio and national papers can be topical and announce urgent commercial news. – Compatibility, ‘rub-off’ or image effect of media and vehicle on the product itself. For example, would Harrods advertise in the Sun? TV puts a product or company alongside the major players and therefore enhances the image, since many viewers think they must be good if they’re on national TV. – TV adds credibility: ‘as seen on TV’. Chapter 7 Media Buying and Planning ●● Ease of booking: – Lead times for space: magazines, TV and cinema have long lead times or notice of booking. – Lead times for production: some press can be knocked out overnight, whereas a cinema production takes months. ●● Restrictions. Some products, eg cigarettes, are totally excluded from all advertising, and certain media restrict the promotion of some products, eg alcohol in children’s programmes. ●● Competitive activity. Advertisers watch, copy and sometimes avoid the places where their competitors advertise. Media selection Audience size TV allows commercial messages to ‘reach’ large numbers of people on a national or regional level. TV used to be known as a mass medium, but, as the number of stations increases, more niche channels are emerging on cable, satellite and mainstream terrestrial TV, which means that TV is becoming less of a mass medium. Radio attracts smaller regional audiences, although it can offer national coverage. Cinema attracts small audiences and can offer slow national coverage among younger audiences, but can be great for 15- to 35-year-olds. The national and regional press deliver what they say – national and regional audiences respectively. Because posters can prove dificult to coordinate on a national scale, there are poster-buying specialists. Direct mail can address large national and international audiences, but because of its high cost per thousand the target audiences are likely to be tightly deined and targeted. Finally, TV’s audience size is seasonally inluenced, with the audience increasing in winter and reducing in summer. Audience type Generally, 15- to 24-year-olds are busy doing other things and don’t have time to watch TV, whereas cinema can attract this target group. Radio is popular with housewives and commuters. The national daily newspapers tend to target speciic socio-economic groups and political sympathizers, 169 while magazines reach targeted groups deined by their lifestyles, income levels, ages and sex. Posters can target commuters who travel by car, bus and train. Audience state of mind Audience state of mind or receptivity to messages varies across the media spectrum. TV audiences can be relaxed and passive, sometimes viewing in a trance-like manner (the ‘couch-potato syndrome’). TV and its ads can become a form of visual wallpaper, sometimes used as company and sometimes to ‘warm up’ a room. Radio can also be used in the background, but listeners do tend to work with the radio, as they create visual images from verbal messages. The cinema delivers a captive audience that is happy to be involved in the suspension of disbelief and will not leave the room to make a cup of tea. In fact, many viewers thoroughly enjoy the special cinema ads. The national press is deliberately read, as information is sought. Some research reveals unconscious feelings of guilt (waste and/or inadequacy of knowledge) if a newspaper is left uninished. Magazines are absorbed in a more relaxed mood. Cost of production The cost of producing a TV ad can range from £5,000 to £5 million, depending on the length, complexity and actors involved, whereas radio has a lower cost of production ranging from £500 to £20,000. Stationary pictures with a voice-over promoting the local Indian restaurant can cost just a few hundred pounds, while a more lavish 90-second full-production cinema advertisement could cost up to £1 million or more. Radio and the press sometimes provide free help with basic productions. Posters can be produced for as little as £125 for a 6-sheet (1.83 × 1.2 metre) poster or £11,000 for a backlit 96-sheet (12 × 3 metre) poster campaign for two weeks. Direct mail can be as cheap as the cost of a letter, but if a four-colour brochure is specially designed and produced then the costs can be anywhere from several hundred to several thousand pounds for design and artwork alone. Minimum cost of space Advertising space is rarely bought in single units. A single ad is unlikely to achieve as much as a 170 Part 1 Communications Background and Theories campaign or a series of ads would. Ads are generally scheduled and bought over a period of time rather than as one-offs. The cost of space is relatively high on TV compared to radio; a single off-peak 30second spot on a regional radio station could be as little as £20, compared to £500 for TV. A national 30-second spot in the middle of Coronation Street could cost up to £100,000. A one-off, full-page, four-colour ad in the Sun or the Financial Times costs £45,386 and £50,151 respectively. Smaller space can be bought, right down to the square column centimetre (approximately £205 and £190 for the Sun and Financial Times respectively). Cost per thousand Within a particular medium, say the press, there is a wide range of media vehicles available, from Amateur Gardening to The Economist. The CPT varies vastly across different media vehicles (eg from approximately £5 in the Sun to £70 in the FT) and across different countries (eg 70 cents in Bulgaria to $19 in Norway for 30-second peak-time viewing). Although CPT varies greatly, the actual selection of a particular medium (say, the press versus television) and a speciic media vehicle (say, Amateur Gardening versus The Economist) is inluenced by the quality of the media as well as the relative cost. Message TV has sight, sound, colour and movement, which makes it an ideal medium for product demonstrations and impulse purchases, but the time constraint and viewing mode make detailed messages almost impossible. It is time constrained (whereas a press ad is not). Ads are viewed serially, whereas press ads compete with other ads and editorial, often on the same page. Remote control channel zapping has made TV more vulnerable as an advertising medium. TV, radio and cinema are highly transitory, in that the viewer cannot refer back to an ad once it has been shown (unless it is taped). On the other hand, the audience can refer back to press ads, posters and direct mail. TV’s leeting messages leave no room for detail but can grab attention, create awareness and arouse interest. More and more ads across the media spectrum, including TV, are tying in with direct response mechanisms (0800 numbers, web addresses or coupons to ill in) so that more detailed information can subsequently be delivered to the audience. ease of media buying Some popular TV programmes (and magazines) require long lead times for booking space. Advertisements are still pre-emptable (they can be outbid and kicked off a particular spot on the day they were booked to be broadcast). Big agencies generally do not get pre-empted. Different rates or prices can be bid; the top rate guarantees the spot, but agencies and clients want to avoid paying these extremely high rates, so they make bids at prices lower down the scales (giving various amounts of notice about pre-emption). Clearcast pre-approves most British television advertising. Clearcast is now owned by seven UK commercial broadcasters. Clearcast replaced the Broadcast Advertising Clearance Centre (BACC) in 2008. This takes time. Cinema can have longer lead booking times but shorter clearance time from the Cinema Advertising Association. Radio is the most lexible of all, with same-day clearance and short lead booking times. The national dailies tend to have lexible positions and size and short lead times, while magazines have longer lead times. Certain positions cannot be booked in the short term, eg one-year lead time. TV and radio can offer a higher frequency, since an advertisement could theoretically go out every half-hour all day. The lack of national network coverage makes the regional press a tough task for media planners and buyers involved in national campaigns. Which media and which vehicle? Does the impact of a double-page spread (DPS) justify the cost? Would the reach be increased by placing two single-page advertisements in two different magazines instead? Should TV be supplemented by radio, by posters or by both? Is a personal media network worth creating so that the target audience is hit with a brand’s message irst thing in the morning on the radio, on posters in the neighbourhood area, in the appropriate paper on the way to work, on TV that evening, in the cinema that night and inally on the radio in the car coming home from the cinema? Media buyers’ computers churn out cost-ranking analyses that list the publications in order of their cost per thousand, with the lowest at the top. CPT Chapter 7 Media Buying and Planning 171 offers a quantitative criterion, but does it reveal heavy-user information? Perhaps a high CPT conceals within it a large chunk of the heavy users, which may make the advertisement more effective? Qualitative criteria (audience size and how they use the media, targetability, message type, ease of booking, restrictions and competitive activity) all affect the choice. In the end, experience, judgement and a little bit of creative lair inluence the decision to buy space. Denmark allow very little negotiation with media owners. Media buyers and media planners or schedulers need to work closely together. A global new-media planning resource was launched in early 2001. World Online Rate and Data (WORD) will provide media planners with a database that can be used to plan domestic and global online campaigns. It is available both in print and online (www.wordonline.net). How much space, how often and when? Media research Having selected the media type, and speciic vehicles within each media type, the next question is how much space and/or airtime should be booked. In what season, month, week, day or hour should the advertisement appear? How many times should the ad be seen? How many times is too many times? Can the audience become irritated? Frequency? This last question becomes more dificult when a campaign uses several different advertisements, particularly when each new ad builds on the last one. The creative side of the campaign can sell itself to the client, but the media schedule often requires much more detailed justiication. Once the media schedule has been agreed, it can be passed on to the media buyer to start booking the space (within booking deadlines). Media schedule The media strategy is then reined into the tactical details specifying exactly what space should be booked where. Figure 7.3 shows the proposed media schedule for an Orange campaign. Media buying It pays to plan carefully. Plan irst; then buy. A skilled media buyer can save enormous sums by playing one media owner off against another. After all, there are many different routes (or media vehicles) to the minds of the target audience. There are series discounts (10 inserts or ads for the price of 9), and volume discounts if you spend over a certain amount. Many agencies pool their media buying together to gain the maximum discounts. Negotiating and discounting vary from country to country. Countries such as Austria and Media research basically tells the media buyer and scheduler which publications are read by what type of people, how many and what type of people are likely to watch a particular television programme, who listens to what on the radio, which kinds of ilms attract what kind of audience, which poster sites are passed by most people, etc. Media buyers can then decide if the particular media vehicle’s audience proile matches their target market, and if the audience size proves to be cost-effective in terms of cost per thousand, coverage, frequency, opportunities to see (OTSs), TV rating points (TVRs) (see pages 177–79), etc. How many people watch Neighbours or the ITV News? How many listen to Capital Radio’s breakfast radio show? How many people read the Sun? Advertisers are even more interested in what type of people are in the audience and whether they are heavy, medium or light users of the product type or even the speciic brand. Although the Sun is considered to be a working man’s paper, 31 per cent of its readership are ABC1s. So some strange anomalies do exist, and media buyers must tread cautiously. Information concerning socio-economic groups, product usage types and lifestyle data all help to build a proile, which the advertiser can then use to target the most relevant audience. An initial search into the British Rate and Data (BRAD) directory reveals a limited amount of information regarding circulation and audience type (socioeconomic groups). This can be cross-referenced (or cross-tabulated) with the Target Group Index (see page 146) to reveal, for example, types of audience according to lifestyles and typical product purchases, in addition to the usual demographic information. The qualitative data explain how the media are used by target audiences – the role the media play in people’s lives. Some advertising agencies use focus 172 Ta b l E 7.1 Summary of media characteristics TV Radio Cinema Daily and Sunday press Evening and regional press Magazines Posters Direct mail Internet Some wastage, large and national, new niche opportunities National coverage now available National coverage Large and mostly national Small, some networks Mostly national (and international) National coverage can be difficult Large national and international Rapidly growing national and international audience Audience type Few 15- to 24-year-olds, high 55+ Many housewives, commuters Young, upmarket Socioeconomic Geographic segments Lifestyle/ demographic Commuters, car drivers, etc Any target available Targeted by site type – any target available Audience state of mind Moving towards active viewers with interactive potential Often active audience – background/ audio wallpaper Captive audience, willing suspension of disbelief Deliberately read Deliberately read Relaxed and involved with magazine High Low High Low– medium Low Low– medium Medium Low 10–30% of the cost of media High (for peak time national exposure) Low High Medium Low Low– medium Low– medium High but can experiment in small quantities Generally no minimum Large portals require £1,000 minimum spend AUDIENCE Audience size COST Cost of production Minimum cost of space Active, inquisitive TV Radio Cinema Daily and Sunday press Evening and regional press Magazines Average cost per thousand Low (£7.80) Very low (less than £2.50) £55 Low– medium (£8) Medium (£30) Medium (£12–£70) Extra advantages Adds credibility to product or company, rapid, high coverage, interactive capability Transportable medium High impact and captive audience Quick coverage build Location specific Quality and low wastage Sight, sound, colour, movement, time constraint Sound and time constraint Big impact, enhanced sight and sound Now mostly colour with some black and white Black and white with some colour 4-colour Viewed serially, no competition from other ads or editorial but zapping prevalent Serially, less zapping Serially and no zapping Must compete with other ads and editorial on same page Slow coverage build with monthly mags MESSAGE Variable/sense Serial ad sequence Posters Direct mail Internet High (£500) Banners = £15, pop-ups = £30, other rich = £35+ 173 Generates fully accountable direct response and dialogue with audience 4-colour, big impact 4-colour and 3-D possibility Infinite colour, 3-D, sound, interactive Non-linear medium, can jump back and forward 174 Ta b l E 7.1 Continued TV Radio Cinema Daily and Sunday press Evening and regional press Magazines Posters Direct mail Internet Transitory Highly transitory since you cannot refer back to ad once shown (unless taped, or with interactive ads that can be bookmarked) Can keep clippings or refer back if desired Can refer back, walk Can refer back/keep back or drive past Can refer until coupon campaign ends Demonstration Idea for usage and impulse purchases Difficult Yes Benefits or results can be shown but not product usage Only short image benefit Yes Yes Detail/ technical Viewer cannot absorb detail Urgency and topical Visual and audio Yes Yes Yes No Yes Yes Urgency/ topicality Difficult to adapt ads to daily events, high level of recall Unique immediacy, urgency and topicality No Yes Yes Magazine image spills on to ad Cut image? Yes Inflexible Flexible Flexible Flexible Flexible Inflexible Flexible Timing flexible, rates negotiable Short / medium Short Short Short Medium Long Long Short Medium 3–10 days, depending on richness of media EASE OF MEDIA BUYING Complicated Lead times Long TV Radio Cinema Daily and Sunday press Evening and regional press Magazines Posters Direct mail Internet 175 Clearance Script (1 week), finished film (1 week), Clearcast Same day clearance, Clearcast One week clearance, CAA Code of advertising practice (clearance is not compulsory) Audience research* BARB and TGI RAJAR and TGI CAVIAR, TGI and EDI NRS, QRS, TGI and BMRC JICREG and TGI NRS (and ABC), QRS and TGI Postar and TGI TGI ABCE, Nielsen Net Ratings High-frequency facility Yes Yes No Yes Daily and weekly Weekly/ monthly Yes Yes Yes National coverage Expert’s job but network exists and international cable/ satellite National network through NNR Yes Yes No national network but all major conurbations covered Yes Yes Yes Nearly half all adult UK population covered London/ South-East of England bias *Audience research: see ‘Further information’, page 180 SOurCE: Media Planning Group Generally required for editorially driven content and where advertiser is potential competitor 176 F I g u R E 7.3 Part 1 Communications Background and Theories Proposed media schedule for an Orange campaign groups to research the obscure media used by a particular group of opinion leaders or to investigate how an audience uses the media. Media research bureaux TV audiences are measured by the Broadcast Audience Research Bureau (BARB), which monitors a sample of 4,500 homes through its people meter. The meter records what stations are turned on, and the hand-held remote control unit inputs data about who is watching the TV. Radio audiences are measured by Radio Joint Audience Research (RAJAR). In 1992 RAJAR replaced the Joint Industry Council for Radio Audience Research (JICRAR). Chapter 7 Media Buying and Planning Cinema uses Cinema and Video Industry Audience Research (CAVIAR) to measure cinema and video audience size and proiles. Admissions are also measured by Gallup/EDI. Newspaper and magazine readership is measured by National Readership Survey (NRS), which carries out 35,000 in-home interviews each year. The Audit Bureau of Circulation (ABC) audits the sales or circulation of over 2,000 different publications, including the nationals. ABC also audits and veriies website trafic. Freesheets or local newspapers use the Veriied Free Distribution (VFD) system. Posters use Poster Audience Research (Postar) and the Poster Audit Bureau (PAB). British Rate and Data (BRAD) is the media buyer’s reference book, because it lists all the circulation or audience igures, as well as the costs (rate card costs). It also gives detailed information on deadlines, mechanical data and commissions on 2,706 newspapers, 3,130 consumer publications, 5,208 business publications, 1,838 new media, radio and TV networks, and much more. The monthly book, which contains over 1,200 pages, costs £600 for a single copy or £970 for an annual subscription. The information is also available online for the same price, or as part of planning version BRADnet for £2,120. Media jargon and vocabulary Cover and reach ‘Coverage’ is the percentage of the target audience reached by the advertising. If, for example, ITV News reaches 5 million viewers, 16 per cent of whom are ABC1 male, then an ad placed during the break will reach 0.8 million ABC1 males (16 per cent of 5 million viewers). If ABC1 men are the target audience and there are, in fact, 10.6 million ABC1 men in the UK, then although the advertisement reaches 0.8 million ABC1 men the coverage is only 8 per cent (0.8 million as a percentage of the total target market of 10.6 million). Frequency This is the number of times an ad is shown or placed in a particular period of time. How many times should an ad be shown and seen? Between four and six times? The optimum frequency is often really 177 unknown. Should it be concentrated over a short period (a ‘burst strategy’) or spread steadily over a longer period (a ‘drip strategy’)? For example, an advertising frequency of 60 can be built up by either 1) having the same advertisement shown before, during and after ITV News every weekday for four weeks, or 2) having one advertisement every six days throughout the year. Opportunities to see (OTSs) OTSs are the number of exposures or opportunities that a particular audience has to see a particular advertisement. In the previous example there would have been 5 million OTSs for adults and 0.8 million for ABC1 men. If the ad went out every night for ive nights during the ITV News break, the total number of ABC1 men OTSs would be 5 × 0.8 million = 4 million OTSs. Cost per thousand (CPT) CPT calculates the average cost of reaching 1,000 of the population. If it costs, say, £100,000 to place a 30-second spot (advertisement) on national TV with a peak-time audience of, say, 10 million, then the cost per thousand or the cost of reaching each or any group of 1,000 people within the audience is £100,000 divided by 10,000 (10 million = 10,000 groups of 1,000 people). The cost per thousand here is £10. CPT allows cross-comparisons across different media types and media vehicles (although quality of media must also be analysed). For example, if a full-page advertisement in the Sun reaches, say, 9.5 million (bought by 3.5 million but read by 9.5 million) and costs, say, £45,000, then the CPT is £45,000 divided by 9,500 (9.5 million = 9,500 lots of 1,000 people), which gives a cost of £4.74 per thousand. CPM (cost per mille/thousand) is the same as CPT and is commonly used in the United States. Ideally, cost per enquiry or order generated gives a truer picture, but this can only be measured after the advertisement has run (and if the advertisement was designed to achieve these kinds of responses rather than, say, increase awareness or change attitudes). Experience and knowledge provide useful insights into media scheduling and buying. CPT varies according to the actual selection of a particular medium (say, the press versus television) and a speciic media vehicle (say, Amateur Gardening versus The Economist). The quality of the media affects 178 Part 1 Communications Background and Theories CPT, as does the quality of the audience, ie advertising to high-income earners will cost more per thousand than reaching a larger, middle-income audience. this creates a bigger impact but only for a shorter period of time. Continuous patterns TV rating points (TVRs) TV rating points are referred to as gross rating points (GRPs) in the United States and overseas. GRPs can be used across different media, whereas TVRs refer to TV in the UK. One TV rating point is 1 per cent of the target audience. The percentage of the target audience viewing a spot (‘reach’) multiplied by the average number of opportunities to see gives the TVR. Television companies will sell packages of guaranteed TVRs. For example, a target of 240 TVRs means that 60 per cent of the target audience will have, on average, 4 OTSs. It could also mean that 40 per cent have seen it six times. Reference to the media schedule quickly identiies the frequency. Four hundred TVRs (80 per cent seeing the message ive times) is considered an average-sized one-month campaign. Eight hundred TVRs in one month is a big campaign. It has been suggested that some confectionery and record companies run a lightweight campaign and buy 100 TVRs so that they can tell the retail trade that they are running a television advertising campaign (the ‘pull’ helps the ‘push’). Impacts Impacts refer more to TV than the press. Impacts measure the total number of people who saw the ad multiplied by the number of times they saw it. In the ITV News case it would be 0.8 million × 5 = 4 million impacts (for ABC1 men). To make more sense of impacts, divide them by the universe (number of people within the target market) to get TVRs (television rating). Impacts are more useful when converted to TVRs. Drip Drip means spreading relatively small amounts of advertising over the whole campaign period. A ‘steady drip’ of advertising creates presence over a longer period of time. Continuous patterns of advertising are a regular and uniform presentation of the message to the target audience. A rising pattern is where the ads are increased up to a particular event. A fading pattern is where the ads are slowly reduced after the event (or after a product launch). Flighting patterns Flighting patterns are where the advertiser spreads the ads over a longer period of time. It can mean boosting advertising at certain times to match seasonal demand, match a competitor’s ad campaign, support a particular sales promotion, respond to adverse publicity or simply seize a one-off market opportunity. Pulsing Pulsing supposedly combines both continuous patterns and lighting patterns, ie to incur high levels of ad spend when required but also to maintain some advertising in between times so that the target audience does not forget the brand. This ‘safe option’ is an expensive option. Pulsing is also known as the ‘long tail approach’. In conjunction with econometric modelling it can actually prove better value. Pulsing can save money A radio ad campaign in the Irish Republic found that the campaign caused an uplift in awareness for three weeks after it was broadcast. As a result the agency recommended to the client to move from a bi-weekly burst to a three-weekly burst. This retained the impact of the campaign, saved a lot of money and allowed the campaign to run longer in a ‘long tail’ format. NB: This is not the same as the niche market long tail concept. Burst Position Burst is the opposite to drip. Here the ads are concentrated into a shorter period of time. Effectively Position refers to the place where the ad is shown. Back pages, inside cover pages, right-hand pages, Chapter 7 Media Buying and Planning TV pages and so on have greater readership and more impact than other pages (eg the third righthand page has a bigger impact than the irst lefthand page). Similarly, some positions on a page are more effective than others. Media buyers are aware of this and so are the media owners, since their rate cards (prices) relect the value of, and demand for, certain positions. Boddingtons beer media strategy was built around position, ie it concentrated its advertisements on the back page of glossy magazines to the extent that it ‘owned’ the back pages for a period of time. 179 environment The environment or context in which an ad is exposed affects the message itself. The types of features or editorial, and other advertisements, that run alongside an advertisement affect the likely effectiveness of that advertisement. An advertiser can lose credibility if the programme is a parody of the product being advertised, for example the ilm Airplane with an airline ad in the break. Summary Media consumption patterns are changing, as are media. Great care is required in developing the right media mix and vehicle mix, as well as timing and pulsing, since this is arguably marketing’s single biggest spend. Small savings here can free larger budgets for elsewhere (eg social media campaigns). key points from Chapter 7 ●● Media choice is growing continually. ●● ●● Media planning and buying have more of an impact on the bottom line than producing an ad. Different media have different advantages and disadvantages – careful planning is required. ●● Evaluate media options according to consistent criteria. references and further reading Account Planning Group (1987) How to Plan Advertising, ed D Cowley, Cassell, London Davies, M (1992) The Effective Use of Advertising Media, 4th edn, Business Books, London Douglas, T (1984) The Complete Guide to Advertising, Papermac, London EIAA (European Interactive Advertising Association) (2010) Multi­Screeners Report 2010 Engel, J, Warshaw, M and Kinnear, T (1991) Promotional Strategy: Managing the marketing communications process, Irwin, Homewood, Ill IAB and Thinkbox (2008) Combine TV and online to boost brand perception, Brand Republic, 10 June IPSOS Canadian Interactive Reid report (2010) 2010 Fact Guide Kennedy, J (2009) App-fab, Marketing Age, November Kohler, E (2007) Hyperlocal is more about ads than news, Technology Evangelist, 9 August Learmonth, M (2010) Top marketers to Silicon Valley: Help us get ahead of consumer. Through visits to tech hub, big advertisers getting more than sales pitches, Ad Age, 17 May Marketer (2008) Watching the coffee channel, May Markiewicz, P, Sherman, N and Jaworski, D (2008) Millennials and the Digital Entertainment Age: A sourcebook for consumer marketers, Digital Media Wire, West Hollywood, CA Mason, R (2010) Moosylvania Marketing, Advertising Age, 4 November Media International, Reed Publishing Services, London 180 Part 1 Communications Background and Theories Media Week, EMAP Business Publications, London Nielsen Wire (2009) TV viewing among kids at an eight-year high, 26 October Patel, K (2010) Will growing crop of TV apps engage viewers, advertisers?, Ad Age, 17 May Pew Research (2009) Newspapers face a challenging calculus, 26 February TV free America (2010) Invisible Children blog 2010, TV’s ugly stats XPLANE (2009) Did you know? YouTube video, Fall Further information Audit Bureau of Circulation (ABC) Saxon House 211 High Street Berkhamsted Herts HP4 1AD Tel: +44 (0)1442 870800 www.abc.org.uk National Readership Survey Ltd (NRS) 40 Parker Street London WC2B 5PQ Tel: +44 (0)20 7242 8111 Fax: +44 (0)20 7242 8303 www.nrs.co.uk British Audience Research Bureau (BARB) 18 Dering Street London W1R 9AF Tel: +44 (0)20 7591 9610 www.barb.co.uk Postar Ltd Summit House 27 Sale Place London W2 1YR Tel: +44 (0)20 7479 9700 www.postar.co.uk British Rate and Data (BRAD) Brad Insight Greater London House Hampstead Road London NW1 7EJ Tel: +44 (0)20 7728 4315 www.brad.co.uk Radio Joint Audience Research (RAJAR) 2nd Floor 5 Golden Square London W1F 9BS Tel: +44 (0)20 7292 9040 Fax: +44 (0)20 7292 9041 www.rajar.co.uk Cinema and Video Industry Audience Research (CAVIAR) Digital Cinema Media 12 Golden Square London W1F 9JE Tel: +44 (0)20 7534 6363 Fax: +44 (0)20 7534 6464 www.carltonscreen.com Veriied Free Distribution (VFD) – contact the Audit Bureau of Circulation (ABC) Saxon House 211 High Street Berkhamsted Herts HP4 1AD Tel: +44 (0)1442 870800 www.abc.org.uk Joint Industry for Regional Press Research (JICREG) c/o The Newspaper Society 8th Floor St Andrew’s House St Andrew Street London EC4A 3AY Tel: +44 (0)20 7632 7400 www.jicreg.co.uk 181 08 Marketing communications agencies lEaRNINg ObjEcTIvES By the end of this chapter you will be able to: ●● Understand the range of different types of agencies ●● Draw the structure of a large agency and modify it with new marketing tools ●● Discuss different methods of remunerating agencies ●● Set up a selection process ●● Nurture relationships between agency and client Agency types Agency relationships 182 Introduction 182 Agency selection process overview DIY, full-service or specialist 182 Agency structure 184 The account executive 185 Planning department 185 Creative department Media department 185 186 Production department 186 Traic department 189 187 The account management team 187 The three key components 187 Pool list 189 Credentials pitch 190 Issuing the brief 190 Pre-pitch agency eforts 191 Pre-pitch feelings The pitch 192 193 Analysing the agency Choosing an agency After the pitch Agency rejection After the pitch 194 195 195 195 199 Agency remuneration 187 Firing the agency 199 Commission Firing the client 200 187 Commission rebating Fees 187 188 Pay-by-results (PBR) 188 189 references and further reading 202 Further information 203 182 Part 1 Communications Background and Theories Agency types Introduction This chapter covers agencies, types of agencies, their structure, fees and working relationships, from shortlisting to brieing, selecting, hiring and iring. There are many types of agencies, including advertising, sales promotion, direct mail, PR, corporate identity design, web design and more. Some call themselves agencies and others, consultancies. Regardless of title, the barriers created by the separate disciplines are falling. Corporate identity design consultants’ services are spreading into advertising campaigns (to launch the new identities); sales promotion consultants are tempted into direct mail, as this communications tool requires a constant low of incentives, premiums and sales promotions; advertising agencies are dropping the word ‘advertising’ and PR consultants are dropping ‘PR’, as these terms restrict them from developing and delivering the integrated marketing communications services their clients require. The overall approach by, and structures of, advertising agencies is changing. Most agencies have moved their total focus beyond the one-way ‘tell’ medium of traditional broadcasting, with its limited levels of interactive responsiveness. These agencies are now integrating more closely with the ‘responsive disciplines’, such as direct mail, sales promotions and social media. Moving from ‘tell campaigns’ to ‘listening campaigns’ requires a constant customer dialogue nurtured and integrated across many media. Some agencies see new structures as an exciting challenge for the agency world. ‘At the very least, the shaking up of structures and processes that predate the new technology by about 100 years can’t fail to have a liberating effect that should be greatly to the beneit of clients’, says Sir Martin Sorrell (1996), Chairman, WPP Group. Other agencies feel that the required changes in agency structure require not just new structures but new language. ‘Impact’ is being replaced by ‘dialogue’ (and even ‘trialogue’), ‘poster advertising’ by ‘street dialogue’. Perhaps ‘direct mail and radio’ should change to ‘kitchen dialogue’. ‘Engagement’ has become the new mantra, replacing ‘response’. The process of change among agencies is being driven partly by unsettled clients, visionary agency directors, the media explosion and new types of competition emerging. Agency opportunity ‘Many brands today are dying. Not the natural death of absence but the slow, painful death of sales and margin erosion. The managers of these brands are not complacent – in fact, they are constantly tweaking the advertising, pricing and cost of their brands. At the heart of the problem is a more fundamental issue: can the original promise of the brand be recreated and a new spark lit with today’s consumers? We believe it can. Most brands can be reinvented through brand renaissance.’ Excerpt from a Boston Consulting Group brochure Although advertising agencies are under siege from aggressive management consultants, young, hungry integrated agencies, expert SEO and viral marketing specialists, social media consultants and disgruntled marketing clients, the advertising agency’s structure is still used here, as it offers a broad base upon which other agencies and consultancies often develop their structures. One of the best-known ad agencies in the world, Saatchi & Saatchi, dropped the word ‘Advertising’ from its title. It is now just plain Saatchi & Saatchi, the Lovemarks company. It describes itself as a ‘full service, integrated communications network’. It even commissioned a short video called ‘The last ad agency on earth’ (see YouTube) to conirm that the old agency concept was no longer its concept. DIY, full-service or specialist As ‘ad agencies’ are by far the biggest type of agency, TV consumption is still going up and ofline budgets are still far greater than online budgets (across the board), ‘advertising agencies’ will be used here (despite their restructuring into new forms of agency). The larger ad agencies offer a full service, including creative, research and planning, media planning and buying, and production and now social media planning. Some full-service agencies also have departments specializing in forecasting, market intelligence and business planning, together with support services for the advertising campaign, including point-of-sale design, sales literature, sales Chapter 8 Marketing Communications Agencies Ta b l E 8 .1 183 The pros and cons of diferent working relationships Aspect Full services (under one roof) Specialist services In-house Management and control Easier, since it is all under one roof More work (coordinating) Total control, but more work involved Security Limited risk – sensitive information is shared with agency More risk – more people have access to information Minimal risk – no outsiders Speed/response Reasonably good Possible problems if à la carte = more coordination Fast, since all decision makers are available Cost Expensive, high overheads, but lower media costs with agency buying power Cheaper, fewer overheads Cheaper, but less media buying power Fresh views Yes Yes No Expertise Yes (jack of all trades, master of none?) Yes (fill in gaps in client’s skills) No (lack of specialized knowledge) Stress Less pressure/workload Delegate some workload More stress – more work conferences and other below-the-line activities such as sales promotion, PR and direct mail. The agency, like any other business, also has other departments that are of little interest to the client, such as accounting and inance, personnel, administration, etc. (See Table 8.1.) Advertisers can choose to use only their own in-house staff to run a campaign. Do-it-yourself or in-house advertising also varies, as some advertisers prefer to contract out some of their requirements to specialist services such as a specialist media scheduling and buying agency known as a ‘media independent’. Similarly, the creative work can be put out to a ‘hot shop’ or ‘creative shop’. Saatchi & Saatchi started as a creative shop. Alternatively, the advertiser can go à la carte by picking and choosing separate agencies with specialist services for different parts of the process, eg using four different agencies for the research, creative, production and media planning/buying stages. There are other types of specialist agencies that focus on a particular industry sector. A recent discrete development in the à la carte option is the agreement of a large, well-known, full-service advertising agency to subcontract the large agency’s creative services to a small communications consultancy on an ad hoc basis. This may last only as long as the agency has spare capacity or is searching for extra revenue. Some clients demand that their full-service agencies work alongside the client’s separate choice of media independents. Some full-service agencies get only a portion of the full job. A recession can force some clients to cut back their own in-house advertising department and operate a less costly and more lexible ad hoc project arrangement with various agencies. Part 1 184 Communications Background and Theories Agency structure Different types and sizes of agencies have different structures. The structure of a large advertising agency is shown in Figure 8.1, which illustrates the many different departments, people and skills that have to work together to create an advertisement. Companies that have their own in-house advertising departments, and smaller, external agencies, will subcontract (or hire) any of the departments they do not have. Many of the bigger agencies also hire, or subcontract, directors, producers, camera people, photographers, ilm companies, print and production facilities. Any other agent, agency, consultant or consultancy – whether public relations, direct mail, sales promotion or corporate identity – also relies on the ability to bring together many different skill sets and departments, as shown in Figure 8.1. Although pure ad agencies are growing into integrated agencies offering an additional suite of social F I g u R E 8 .1 media services, TV advertising is not going away and still takes a disproportionately large chunk of any brand’s budget. Therefore the original ad agency structure is still worth exploring. Agencies are evolving from ‘pushing advertising campaigns to nurturing communities of consumers and matchmaking them with brands’ (Farey-Jones, 2008). There is a new breed of agencies with greater data analytics and planning skills emerging. It is possible that, instead of pitching for a brand’s business, agencies may offer a new service – selling access to groups of consumers’ groups with similar interests that they have nurtured (eg a Facebook group or a LinkedIn group). Successful agencies will probably connect themselves with clearly deined communities of consumers and ‘cultivate insights into their behaviour’ (Farey-Jones, 2008). These communities can be online and ofline, eg an agency funding a community hall. So many new skills and new departments need to be added to Figure 8.1, eg social community creators, developers and nurturers. Structure of a large advertising agency New media Other communication tools Other communication tools Sponsorship Others Database marketing Sales promotion Others Creative (concepts and developments) Production (film, print and websites) Traffic (progress dispatch) Art and copy Make the actual ads Ad at right place at the right time Account management Planners (research and strategy) Media (planning and buying) Market research + strategic direction + creative beliefs Press, TV, posters, cinema, new media Chapter 8 Marketing Communications Agencies The account executive Sometimes also called an account representative, the account executive is dedicated to a particular client. The account executive wears two hats – the client’s when talking to the agency and the agency’s when talking to the client. Responsibilities include: attendance at all client meetings, writing up ‘contact reports’ and general liaising between the many different members of the agency’s team and the client. Many agencies write up contact reports (after each meeting), because they conirm and clarify all key points discussed, conclusions reached and any actions to be taken. This cuts out the opportunity for any misinterpretation further down the road when the client says ‘I never said that’ or ‘I never asked for that.’ When agreed by the client, vital documents, such as a summary of the agency’s interpretation of the client’s brief, or concept proposals, are sometimes required to be signed by the client as ‘approved’. This keeps communication clear, reduces ambiguities and, if a row does break out over a particular strategic direction or over the details of copy (the words in the advertisement), the agency can pull out a signed ‘approved by’ copy. This is particularly helpful when a manager leaves a client company, because it conirms the stage-by-stage approval of the development of a campaign. Account execs – new community managers? Account people will evolve into ‘community managers’, who will help the community sell itself to certain brands. ‘The agency would know which brand would be best to let in, which brands should be kept out, and what information can be shared and with whom it can be shared.’ Kemp and Kim (2008) Planning department Planners are more than gloriied researchers. They have to know the right kind of questions to ask in the research, commission the research and interpret the results at two different levels. First, they have 185 to absorb, summarize and translate large market research reports into simple lay terms for inclusion in the creative brief that they, in conjunction with the account manager, give to the creative team. Second, the information has to be interpreted at a strategic and tactical level for discussion with the account executive, account manager, account director and often the client. Planners provide an objective voice, unhindered both by the account executive, who sometimes wants to ‘sell’ an advertising concept to the client simply because the creative director wants to get on with it, and by clients, who sometimes want to get on with it by quickly running some advertisements to satisfy the sales force, who are anxiously waiting for news on the new campaign. Joint planning required ‘Decisions about where to run ads and the nature of those ads need to be planned by the same person. I urged marketing departments to call for a joint planning approach in order to achieve a better return on investment for their advertising.’ Stengel (2006) Planners are experts in making sense of market research data and condensing the information into creative briefs. Marketing clients may also want more analysis and insights from customer communities and groups. Research into top marketers from Coca-Cola, Procter & Gamble and HSBC as well as agency bosses from WPP Group, Publicis Groupe and Omnicom revealed that clients will value the importance of passing on information on selected brands which will, in turn, ‘boost agency demand for specialists in data analytics and insight’ (Kemp and Kim, 2008). Creative department It is unfair to stereotype creative people as coming in late, lying around and dreaming up the big ideas and concepts that drive all advertising campaigns. They can work long hours under extreme pressure to deliver unique, creative ideas that grab attention, 186 Part 1 Communications Background and Theories build brands and win customers. They constantly search for the big idea that has to it the singleminded strategy presented in the creative brief that is developed by the planning department. Creative people usually work in pairs, covering words and pictures, ie a copywriter (or wordsmith) and an art director. Creative people – an appreciation ‘Somebody finally has to get out an ad, often after hours. Somebody has to stare at a blank piece of paper. Probably nothing was ever more bleak. This is probably the very height of lonesomeness. He is one person and he is alone – all by himself – alone. Out of the recesses of his mind must come words which interest, words which persuade, words which inspire, words which sell. Magic words.’ Leo Burnett, Founder, Leo Burnett Company Creatives will work more on content required for generating ongoing dialogues with individuals and less on one-way campaigns to a mass audience. Outsourcing will include user-generated content (see Chapter 1), harnessing champions and brand advocates as user-generated content becomes more important. Creatives’ role will change Creatives will still be important, but will work less on one-way campaigns to a mass audience than on ‘ongoing dialogues’ with individuals. Kemp and Kim (2008) Media department The media department basically plans and buys the space where the advertisements are eventually placed (press, posters, TV, radio, cinema, etc). Media planners or schedulers are sometimes separate from media buyers, who negotiate and ultimately buy the space from the media owners. Both media planners and media buyers can be further separated into those who specialize in TV, press or new media, etc. The emergence of cable and satellite TV, low-cost print technology and thousands of new websites increases the range of media available to media buyers. As markets fragment and media explode into many more magazines, TV stations and websites, large audiences become more dificult to buy. Despite this, the media explosion presents new opportunities for schedulers and buyers, as these new media vehicles have access to more tightly deined target markets. The media department now analyses the appropriateness and cost-effectiveness of much more media than ever before. This is quite a responsibility, as the bulk of the advertising spend is in media and not production (eg a £20 million campaign might have a £19 million media budget and a £1 million production budget). On top of this, media departments can deliver highly creative media strategies that ind new ways of delivering advertisements to target audiences. See Chapter 13 for examples. You think you are overworked – try the media department The explosion of blogs and other social media has opened new media channels which reach various target groups. If this is where significant numbers of the target audience spend time (consuming this media experience), then surely media buyers and planners now have an awful lot more work to do. Production department The production department actually makes the advertisement. Many agencies subcontract various parts of the production, eg hiring a studio, camera crew or photographer, director, editing suites, etc. This can involve long pre-production meetings inalizing all the minute details, lying around the world to shoot some ilm, and the less glamorous, lonely post-production – working around the clock in a dark and dingy editing suite. Chapter 8 Marketing Communications Agencies 187 Commission Creating games, funny virals and some ads Production departments (and outsourced production companies) will be full of clever people, some of whom can create great 60-second movies (and longer-form ads – see Chapter 13), as well as online games and of course contagious virals. Traic department Dispatch, or trafic, is responsible for getting the right artwork or ilm to the right magazine or TV network at the right time. This becomes complicated where posters, cinema, radio and magazine inserts are included in the media strategy. Multiply this by several different campaigns for a range of different clients, and the need for a trafic manager becomes self-evident. Add in games and virals, and life is going to get busier. The account management team In a large agency this can involve an account director, account manager, account executive, planner, creative director, copywriter, art director, TV producer, media director, TV media scheduler, TV airtime buyer, press planner and press buyer. The three key components The three key components of the agency are: 1 planning and strategy; 2 creative; 3 media. Although this has changed drastically, historically media owners have given recognized agencies a 15 per cent discount off the rate card price. Thus, in the case of a £10 million TV advertising campaign, the agency gets invoiced by the TV station at rate card £10 million less 15 per cent, ie £8.5 million. The client then gets invoiced by the agency at the full rate card price, ie £10 million (this can be checked with British Rate and Data (BRAD) or the media owner’s published rate card). The 15 per cent commission really represents a 17.65 per cent mark-up, ie the £1.5 million commission is the mark-up which the agency adds on to its media cost of £8.5 million: Agency invoiced by TV station less 15 per cent Agency invoices client at full rate card Agency mark-up Agency mark-up £8.5 million £10.0 million £1.5 million 17.65 per cent The agency will also apply its agreed mark-up to other services that it subcontracts, such as market research and so on. Thus a piece of research that costs the agency £10,000 would be charged to the client (+17.65 per cent) at £11,765. One of the problems with the commission system is that it can tempt agencies to get clients to spend, spend, spend. Incidentally, the commission system does not necessarily cover all production costs, so production costs are often separately invoiced directly to the client by the agency. Over the past 10 years the number of clients using this method has declined signiicantly, in favour of a combination of the payment methods outlined below. In fact the 15 per cent commission has been slashed in half by some media owners. Back in 2006, Yahoo announced that it would pay 10 per cent commission to agencies that spend £80,000+ per month on search marketing, 5 per cent to those spending £20,000+ and nothing to agencies that spend less than that. Commission rebating Agency remuneration Agencies have three basic methods of calculating their remuneration: commission, fees and pay-byresults (PBR). Specialist media-buying companies – with much lower overheads – can work with commissions as low as 2 or 3 per cent. Some clients insist that the full-service agency only takes a smaller commission, say 10 per cent, with the balancing 5 per cent going 188 Part 1 Communications Background and Theories back to the client. Commission rebating occurs when an agency passes on some of its commission to the client. There is no actual refund or rebate. The agencies simply invoice the client at rate card costs less the level of rebate, in this case 5 per cent. Commission rebating opens the door to agencies competing on price instead of on quality of service, as they have done traditionally. Most industries dislike price wars, and advertising is no exception. In 1984, Allen, Brady & Marsh (ABM) resigned its £3.5 million B&Q account after a request for rebates. It also took a large advertisement in the advertising trade press explaining that the 15 per cent commission left most agencies with 2 per cent proits after tax and any reduction would affect the quality of advertising. It fought against the tide of change, and refused to become involved in commission rebating. ABM was a fantastic agency generating some classic advertising campaigns, but, sadly, it no longer exists. Many clients today are moving towards fees instead of solely commission-based remuneration. Fees Smaller clients with smaller media spends do not generate suficient commission, so a fee will generally be agreed. Larger clients are also moving towards fees – an annual, quarterly or monthly retainer or, alternatively, a project fee. No commission means no media bias, since the agency is then free to recommend, say, direct mail, without losing any of its income (which would have been generated through commissions). Many agencies receive a fee along with some level of commission, and/or some level of pay-by-results. The agency’s remuneration essentially depends on how much work is involved and how much the client is likely to spend (on media). The trend, particularly with larger clients, appears to be moving towards a fee basis or a mixture of fees, commissions and results. Pay-by-results can be mutually beneicial. It is sometimes disliked because of the lack of control that the agency may have over its own destiny. Pay-by-results (PBR) Not so long ago, major agencies would dabble in some PBR, while the newer agencies, hungry for business, were prepared to put their heads on the block and offer most of their services on a pay-byresults basis. Today PBR has become the norm rather than the exception, with the majority of British advertisers remunerating their creative advertising agencies according to the results they achieved. Media agencies had an even bigger majority, with 60 per cent being paid subject to PBR factors (ISBA, 2010). Media owners like Google offer another form of PBR: CPC (cost per click) and CPA (cost per action). If no one clicks on the sponsored phrase or no one buys (if that is the goal) then Google do not get paid a penny. The problem with PBR is that some results are beyond the agency’s inluence, eg poor product quality control, late delivery or inadequate distribution, a price change, a strike at the factory or competitor activities such as doubling advertising and cutting prices. So if sales form the main criterion for payment then the agencies are vulnerable by the very nature of their dependency on so many uncontrollable variables. If, on the other hand, the payment is linked to results directly inluenced by advertising, say level of awareness or a shift in image or positioning, then the agency has more control over its own destiny. Results, of course, have to be measured through market research. One area where PBR is relatively easy to manage is direct mail campaigns that deliver a certain number of enquiries, orders or customers. Similarly, an SEO campaign can be linked to number of visitors generated by SEO. Another area where results are easily measured and are directly related to the agency’s input is media buying. If an agency achieves media buying at a price that is better than average, then the saving can be shared between client and agency. For example, if the average advertising cost per thousand to reach, say, housewives with children is £3.50, and if the agency gets this for 10 per cent less, then the saving might be split 8 per cent to the client and 2 per cent to the agency. (Note: quality of the media is also taken into account.) Some agencies, like BBH, prefer a ixed bid with shared risk system. For example, if an advertisement is produced under budget, the production company keeps a percentage and the client receives a percentage. If the advertisement is 10 per cent over budget, the client pays; anything over 10 per cent and the production company pays. PBR extends beyond advertising into other disciplines as far away as design. This can apply to new Chapter 8 Marketing Communications Agencies product design (as a royalty) or even packaging design, when the packaging design consultancy bases its fee (or a portion of its fees) on the client’s increase in sales occurring after the launch of the newly designed pack. Although PBR appears attractive to the client, it can generate extra administrative work, as exact results have to be measured, royalties and contributions calculated, invoices requested and cheques raised for each agreed accounting period. The method of agency reimbursement is fundamental to the client–agency relationship (both working and contractual). An agency’s range of reimbursement packages can inluence the client’s selection process. 189 primarily wants maximum media coverage for its relatively straightforward black-and-white product information advertisements. Another client may be looking for a radically fresh approach and have a bias towards agencies with abundant creative talent. Either way, a clear brief should be prepared to identify exactly what – in marketing and advertising terms – the new advertising campaign is trying to achieve (see Chapter 2, ‘The brief’). The agency selection procedure is as follows: 1 Deine requirements. 2 Develop a pool list of attractive agencies. 3 Credentials pitch (by the agencies). 4 Issue brief to shortlisted agencies. 5 Full agency presentation or pitch. Agency relationships – selection and retention The coordination of any campaign’s development, launch and measurements requires time and management skills. Powerful personalities in agencies need to be managed. The ability to ask the right question is a valuable management skill. The fatigue factor in negotiations or discussions can also cause rash decisions to be made. Marketing people tend to be energetic, enthusiastic, action-oriented achievers. Sometimes steely patience needs to be exercised. Perhaps a decision has to be delayed until further research can answer some emerging questions. Painstaking attention to detail may sometimes seem irksome to the advertising agency, but it is often the mark of a true professional. On the other hand, a key resource, time, may be running out. More research reduces the risk but costs time and money. Can deadlines be moved? Is there money left for more research? Is there time before the competition launches its new offer? A decision made in haste is rarely the best one. Agency selection process overview Deining exactly what is required is the irst stage of agency selection. This is because an appropriate choice is partly determined by a speciic requirement. Some furniture retail chains may consider the strength of the media department the key criterion when choosing an agency, particularly if the store 6 Analysis of pitch. 7 Select winner. 8 Agree contract details. 9 Announce winner. Some clients prefer to get on with it by issuing a full brief to the shortlist of, say, six agencies without going through the agency credentials presentation. Other clients prefer to restrict the valuable research indings and strategic thinking to as few agencies as possible, because the unsuccessful agencies are free to work for the competition at any time in the future. Pool list Most advertising managers and marketing managers observe various campaigns by watching advertising and noting any particularly attractive campaigns. Agencies working for the competition need to be excluded or treated with extreme caution. Some desk research, both online and ofline, can reveal the agencies behind the brands by reference to organizations such as Nielsen Media Research or Adforum.com, which allow advertisers to look for agencies using sensible criteria. Advertisers can create shortlists, preview creative work and explore an agency’s proile, online and free of charge. Many marketing managers have a fair idea of who is doing what advertising in their sector by constantly reading the trade press. Other managers simply increase their advertising dosage by spending a few weeks watching more advertising than normal. Some 190 Part 1 Communications Background and Theories clients sift through the agency portfolio videos, which can be bought from Campaign Portfolio or Marketing Week Portfolio for a few hundred pounds (the agencies pay a lot more to acquire this advertising space in the irst place). In these videos, agency after agency present themselves in a sometimes surprisingly tedious fashion. Some clients prefer to do their own screening and request an agency reel (video) or an agency information pack directly from a particular agency so that they can view the agency’s best work. Try some online sources (eg www.adforum.com and www.mindadvertising. com) initially, where you can get some agency info, preview some of their creative work (peruse some ads) and sometimes see some interesting updates and communications articles and news alerts. Remember, selecting agencies is hard work and requires rigorous attention to detail. Bad selections are very expensive. Another way of building a pool list is through the professional associations. Upon receipt of information about a potential client’s basic requirements, professional bodies or trade associations such as the Institute of Practitioners in Advertising (IPA), the Incorporated Society of British Advertisers (ISBA) and the Advertising Association (AA) all offer to provide lists of agencies that they feel are suitable to handle a speciic type and size of business. Similar services are offered by the relevant professional institutes of other service sectors such as public relations, sales promotion, design, direct mail, etc (see ‘Further information’ at the end of each chapter). This service is normally free, and the associations are extremely helpful to the uninitiated. There are also agency assessors, such as the Advertising Agency Register, and intermediaries whose business is agency selection. They can handle the development of the pool list, pitch list, pitch analysis, agency selection and even performance assessment of the agency when it starts working for the client. Probably fewer than 10 per cent of agency hires in the UK are through intermediaries (Bashford, 2008). The assessor services are popular with international clients that need help in all aspects of their quest for the right agency. Similar services are available for PR, direct mail, sales promotion and corporate identity. Intermediaries can help agencies ind new business by producing daily reports identifying potential new opportunities, eg when a new marketing or PR director is appointed, which could suggest the need for extra services. Some agencies interview any new senior decision makers, to explore their communications plans and then relay this information back to their clients. Retainer fees can vary, from single-user fees starting at £950 per annum to £60,000 per annum, which then provides an entire outsourced new business function from identifying opportunities to acting on them. Credentials pitch Some clients, before issuing a full brief, prefer to ask the pool of agencies to present their credentials. This includes examples of current and previous work, team members’ proiles, and company history, structure and facilities. It is worth visiting the agency, and sometimes at short notice, as this gives the client a feel for the potential agency, and its atmosphere, organization, professionalism, etc. From this a inal shortlist is selected and issued with a detailed brief. Long shortlist Some years ago, Westminster City Council invited 10 agencies to pitch for its communications work. A long shortlist creates an unnecessary amount of unpaid work for everyone concerned. Brieing, pitching and selecting take time and skills. Apart from creating a lot of work, a large pitch list sometimes leaves sensitive marketing information with many different people. Some cynics see it as an opportunity to get free strategic and tactical ideas from the best brains in each agency. Issuing the brief Briefs vary in size, structure and level of detail. Some clients may summarize on to a single A4 sheet of paper; others issue a much more detailed brieing document (one Guinness brief was 100 pages). Essentially, the brief should incorporate at least the situation, objectives and strategy (SOS) and the 3Ms (men/women, money and minutes), part of the SOSTAC® planning system explained in Chapter 10. Chapter 8 Marketing Communications Agencies The brief tends to be brief, while a marketing communications plan has much more detail. Since the brief usually goes out to several agencies pitching for the business (only one of which will get the business), a dificult dilemma emerges. How much conidential and strategic information should be revealed in the brief, given that the majority of the recipients will not work for you and may one day work for your competition? Food for thought. At the bare minimum, the brief will usually include the following: 1 Situation – where you are now, including the market, channels, segments, target markets, trends, competition, market share, position, current and previous campaigns, strengths and weaknesses, unique selling propositions (USPs), features and beneits of the brand and the organization. 2 Objectives – where you want to go: marketing objectives and communications objectives (see page 233 for examples) plus speciically deining exactly what is the problem (or opportunity). Include the required positioning and tone of voice. Ensure also that effectiveness criteria and evaluation methodology are clearly speciied. 3 Strategy – how you are going to get there (including how the marketing strategy its in with the overall corporate strategy). This may also include a campaign strategy if this is already worked out. 4 Control – how you will know when you’ve arrived. Both the agency and the client should agree on what success and failure will look like. What are the key criteria, and how will they be measured? 5 3Ms: – Men/women: who makes the inal decision, members of the team, who reports to whom, contacts for additional questions. – Money: key question for the agency – what is the budget? – Minutes: timescale and deadlines for pitch, agency selection and eventual campaign launch. Control is sometimes included, as it outlines how the campaign will be measured, which in turn motivates 191 the team to get it right. A smaller client may prefer to replace the advertising and/or marketing objectives with a statement of the problem and subsequently ask the agency to present a complete promotional plan. It is likely that the agency’s irst question will be: ‘How much do you have to spend?’ As mentioned, there are obvious dangers of releasing strategic information to several agencies, the majority of whom will never work for you (since there is usually only one winner or single agency selected). The corollary is that too little information reduces the quality (and possibly strategic direction) of the proposals. For that reason, it can be helpful to show examples of the kinds of ads that are preferred: this can help creatives to get a feel for what you want. So start collecting ads, sales promotions, web pages, packaging, etc now. It is important to get the brief correct and concise. If there are speciic requirements, spell them out, eg ‘It must be clearly legible from 8 feet away’ or the ‘The brand name must stand out from the crowd’, etc. You must work hard at stating your positioning and of course beneits, USPs, etc. Remember, a casual brief will probably generate casual concepts followed by frustrations and accusations. Get the relationship off to a good start with a clear, concise, yet comprehensive, brief. Pre-pitch agency eforts The shortlisted agencies are invited to make a full presentation or sales pitch. This usually involves several members of the agency staff and is viewed by several members of the client company. The cost of a major pitch varies from £10,000 to £50,000 (up to six agency people involved for six weeks, £36,000, plus £10,000 for materials plus £4,000 research). Preparation for a pitch is usually an intensive affair and can include researching the client’s market, media, company structure and individual personalities (prior knowledge of who will attend the pitch and hopefully some background information on their personalities and interests), strategic planning, brainstorming, concept development (advertising ideas), slide shows, videos, rehearsals and even meditation. Without doubt, new business pitches increase the adrenalin low inside agencies. US-owned McCann Erickson is reported to draft in a professional teacher of meditation and Part 1 192 Ta b l E 8 .2 Communications Background and Theories Pre-pitch agency initiatives Client Agency Stunt Kiss FM Radio BBDO Delivered a framed poster to the Kiss MD bearing the legend ‘We’ll put your name on everyone’s lips’* Kiss FM Radio Saatchi Covered Kiss HQ with pink balloons on Valentine’s Day Guardian Publicis Booked a 96-sheet (40′ × 10′ poster) site opposite the newspaper’s offices during the week of the pitch and ran flattering ads that changed each day* Financial services company Publicis Sent a safe containing the agency’s credentials Toyota Saatchi Three Toyota cars suspended above Charlotte Street, hanging out of the agency’s offices* * Won the account relaxation techniques before every pitch. JWT practises its pressure presentation techniques with bizarre scenarios like asking its teams to imagine that they discover one of their art directors pushing cocaine and that, as they prepare to ire him, they discover his wife is dying of cancer and in need of private medical treatment. Real empathy, sound strategy, exciting creative work and reasonable costs are often considered to be the key factors during a pitch, but some agencies take initiatives before the actual pitch, as Table 8.2 shows. Pre-pitch feelings – a client’s view? Other potential or prospective clients would deny any such self-imposed pressure. They may see the pitch as an exciting and stimulating process full of fresh ideas and strategic thinking presented by clever, articulate (and sometimes entertaining) people. Client egos are massaged, and generally the prospect is treated as a revered guest. Other prospective clients see pitches as a more tedious affair, since they have to repeat their brief in detail several times over and then sit through the inevitable credentials bit before they get to the heart of the matter – the agency proposals. Will they love me? ‘Our research has shown that, generally speaking, clients are not happy about changing agencies. Such events are usually a signal that they are unable to sustain a productive relationship with other people, which is something that none of us is pleased to accept, however difficult the other people might be… the prospect [potential client] is under pressure from his boss to get it right quickly… so when he steps from the bustle and stress of his own trade into the palm-fringed oasis of Berkeley Square or Charlotte Street or Covent Garden it is possible that he has two questions in his mind: “Will they love me?” and “Can they save my neck?”’ Brian Johnson, New Business Director, JWT Most selling situations, including pitches, are about the removal of uncertainty. So understanding the problem, and identifying clear solutions with enthusiasm and conviction, is a winning formula. Chapter 8 Marketing Communications Agencies The pitch After weeks of intensive preparation of exciting creative ideas, ingenious media plans and pitch rehearsals, copies of the proposal or pitch document are laser-printed, bound and made ready for client distribution after the main presentation. The pitch itself is where an advertising agency has the opportunity to advertise or sell itself. Given that most campaigns try to be different, grab attention and make an impression, it is understandable that some agencies should regard a pitch as a creative opportunity also. There are many stories of daring pitch techniques, some of which work and some of which do not. Here are a few. Legendary 1980s agency ABM created the classic British Rail pitch, which purposely created client tension when the top executives from British Rail were kept waiting in a smoke-illed reception area while the receptionist ignored them throughout her gossip-illed telephone conversation. Eventually a space was cleared among the empty cans and orange peels, and the executives were invited to wait, as the agency people were ‘busy’. After some minutes the British Rail executives had had enough. As they got up to leave, the agency chairman, Peter Marsh, clad in full BR uniform (complete with cap, whistle and lag), burst in and said, ‘You don’t like it. Why should your passengers?’ He then invited them to listen to how he and his colleagues were going to solve their problems. Don White, formerly of Benton & Bowles, is reported to have dressed up as a Butlins redcoat for a Butlins pitch. The client took one look, said ‘Anyone dressed like that isn’t suitable for my business’ and left. David Abbott of Abbott Mead Vickers is reported to have greeted Metropolitan Police Commissioner Sir Robert Mark with a high-pitched nasal ‘Hello, hello, hello’ as he arrived to hear the agency pitch. Not amused, Sir Robert left the building and was never heard of again. Agencies pitching for the Weetabix breakfast cereal account were invited to make their pitches in a hotel. As ABM was the last agency to pitch on the inal morning, it decided to redecorate the function room in the ABM colours. This required an overnight painting and carpeting exercise. A stage was built, and a special chair was delivered to the function room for Mr Robinson, the arthritic and ageing Weetabix chairman. As the Weetabix panel seated themselves the next morning, the lights 193 dimmed until they were all immersed in an enthralling darkness. A spotlight burst a stream of light on to the stage, where Peter Marsh knelt as he opened his pitch with: ‘As one of Britain’s few remaining wholly owned independent advertising agencies, it gives me great pleasure to present to you, Mr Robinson, as chairman of one of Britain’s few wholly owned cereal manufacturers...’ ABM won the account. One inal ABM classic pitch was for Honda. ABM hired the 60-piece Scots Guards bagpipe band to play the Honda jingle ‘Believe in freedom, believe in Honda’, while marching up and down London’s Norwich Street (where ABM was making its pitch). Again, ABM picked up the account. Another agency, AMV, had Hollywood hero Bob Hoskins at its pitch for BT (which it won). Strict adherence to the time and type of presentation (speciied by the client) is essential. When Burkitt Weinreich Bryant was pitching for Littlewoods, it was asked to make a ‘short and sweet’ inal pitch, since the then 92-year-old chairman, the late Sir John Moores, would be in attendance. The trade press reported that ‘after over 30 minutes managing director Hugh Burkitt was asked to inish as it became obvious that Sir John’s interest and attention was waning’. A row broke out as Hugh Burkitt persisted and a senior Littlewoods executive tried to stop the pitch. In 1992, when British Airways moved from Saatchi & Saatchi to Maurice and Charles Saatchi’s new outit, M&C Saatchi, all the agencies involved threw everything at this prestigious £30 million account. In an attempt to dramatize BA’s global reach, Saatchi & Saatchi did the pitch in different rooms for different stages. Each room had been completely redecorated in the styles, natural habitat and climate of particular parts of the world – tropical rainforests, etc. When Bartle Bogle Hegarty (BBH) got its chance, it reassured BA about BBH’s ability to create extremely satisied clients by providing ready-made testimonials after the presentation – a wall went back and BA were surrounded by the key decision makers of every one of BBH’s clients, who then had lunch with them. When M&C Saatchi got its chance, Maurice Saatchi stood up and talked about the importance of music to the BA brand, explaining that they had commissioned their own composer to create a unique blend of popular classical music that BA could own. A growing murmur of approval was heard. He went on to say that they 194 Part 1 Communications Background and Theories would like the client to meet the composer, at which point in walked Andrew Lloyd Webber. Dropping your guard During an intense, high-profile, multimillion-pound pitch, the client called for a 10-minute break. Unfortunately for the agency (which will remain unnamed), a senior agency member had forgotten to remove his scribbled notes, which the client accidentally read. ‘Watch out for the — in the glasses’, it said at one point. Not surprisingly, the agency lost the pitch. Some time later, the same agency was pitching for another piece of the business and, as the agency opened its pitch, all of the client team simultaneously donned pairs of glasses! The agency coped and went on to win this separate piece of business. Pitches, like presentations for major campaigns, are now an ongoing process where effort is concentrated on developing a relationship (relationship marketing) with the client before the inal presentation. This can sometimes involve client exposure to the strategy and even the advertisements before D-Day. One UK agency, Howell Henry Chaldecott Lury, has tried to appropriate this process on its own with what it calls ‘tissue groups’, ie a series of build-up meetings with the client. In the United States the most notable exponent, Chiat Day, has been doing this for a long time. Without doubt there is a cultural shift to ongoing pitches rather than a big inale. An online pitch The British Interactive Media Association accepted pitches only via Facebook and Twitter. ‘We read about BIMA’s agency trawl in PR Week, so one of our consultants became a follower of the BIMA Chair, Paul Walsh. Within minutes he came back to us with a brief and we started on the pitch’, said Jennifer Janson from Six Degrees, the agency that eventually won the pitch. Williams (2008) Analysing the agency As Nigel Bogle, CEO of Bartle Bogle Hegarty, says: ‘The key questions today are less about an agency’s ability to execute brilliantly and more about visionary strategic thinking, razor-sharp positioning, pinpoint targeting and ingenious media solutions.’ The order of importance of the following questions can vary, depending on what the prospective client really wants. Some clients may consider the agency’s location and car parking facilities relevant, whereas other clients would discount this as trivial and irrelevant to good advertising. Here are the 20 most vital questions to help choose the right agency: 1 Does the agency really have a feel for my product and market? Does it really understand my brand’s situation and potential? 2 Has it got strong research and planning capability? 3 Does it know the best media to use? Will its media-buying skills make my budget go a long way? 4 Has it got creative lair? Does it win awards? Does it suggest new ideas? 5 Is it full-service, or does everything get subcontracted out? Can it handle a pack redesign, public relations, sales promotion and direct mail if called upon? 6 How much integration experience with above-, through- and below-the-line as well as online does it have? 7 Is it international? Can its headquarters force it to resign the account should it decide to seek business in the same industry overseas? Alternatively, can it take on a lot of our coordination work through its own international management network? 8 What will it charge? And on what basis? How much time will it spend on the account? 9 How does it allocate resources in the planning, testing and evaluation process? 10 Does it display cost-consciousness? 11 How will it measure its effectiveness? 12 Are we a small ish in a big pond? Is it too small or too big for us? Do we have contact Chapter 8 Marketing Communications Agencies with the principal partners? Will it ire us if a competitor offers it a bigger account (should we insist on a ive-year contract)? 13 Who will work on the account? Are we likely to get on together (chemistry)? Will the pitch team be involved? How stable will our account team be? Are the people who worked on the case histories still with the agency? (This is a crucial question.) 14 Does it have a good track record? Do clients stick with it and place repeat business with the agency? If not, why not? 15 How is my investment going to be returned? (This should feature prominently in the agency’s pitch.) 16 How much experience does the agency have in marketing integration (particularly with the internet)? 17 What is the agency process (not just a bunch of arrows in a fancy PowerPoint slide)? Ask how it intends to allocate resources (time and people) to particular aspects of the campaign, including planning, concept development, testing and evaluation, etc. This helps in making interesting comparisons with other agencies. If an agency is unclear about this, then perhaps it is running an ineficient business (which might cost you money). 18 Ask how much time it will devote to your account. 19 Also, what are the agency retention rates? 20 Check its references. References of past clients can also be requested. Choosing an agency – an assessment form The assessment form shown in Figure 8.2 can be weighted and scored as appropriate for each client’s needs. A rating scale of 1–6 can be used. Agencies should be assessed using the same criteria. Few agencies perform so outstandingly that they remove all doubt in the client’s mind as to which agency it should choose. The criteria should be agreed in advance by the team involved in the selection process. The assessment form in Figure 8.2 shows one approach that attempts to formalize the selection 195 by using consistent criteria. Each company obviously tailors its own approach. And some agencies add a little extra hook, sometimes proprietary applications, widgets or iApps, eg a South Africa multimedia agency won the UK Tourism account when it presented a digital worklow system that enabled regional ofices to remotely customize English-language campaigns to their speciic needs. Called Dynamic Positioning Mode, it was a new system of proiling consumers and generating consumer relationships using digital marketing tools. The pitch is never over After making a good pitch, a well-known agency kindly offered a chauffeur-driven car to take the clients to the next agency on the pitch list. During the journey the client team analysed the previous pitch and commented that the media strategy appeared ‘off-brief’. The next day the agency found a way of representing the media strategy – and it won the business. The limo driver was an account man at the agency. Ethical or not, it’s reality. After the pitch – the agency awaits the decision Post-pitch tension is agonizing. Awaiting the outcome of a pitch is a tense and worrying time. When the phone eventually rings and it turns out to be the prospect, everyone holds their breath. Rejection means total failure. All the brilliant ideas, the careful research, the buzz of excitement, the long hours – all down the drain. Selection means total success. The postpitch wait makes the mind wander. Were there any clues as to what the client thought of the pitch? Len Weinreich, advertising guru, gives a nervous insight in ‘Scratching an indecent living’ (see Figure 8.3 on page 197) and an almost unbearable wait in ‘No news is bad news’ (see Figure 8.4 on page 198). Agency rejection A rejected agency’s managing director has the dificult job of picking up the shattered team and building up the agency morale again. The rejected 196 AGENCY F I g u R E 8 .2 1 2 3 4 5 Understand our product and company? Choosing an agency – an assessment form Commitment to our project? Research, planning & strategic thinking Media planning and buying Creative Size, in-house resources, full service International Location Fee/cost Will we get on? Opinion of existing clients Chapter 8 Marketing Communications Agencies F I g u R E 8 .3 Reproduced by kind permission of Haymarket Marketing Publications Ltd and Len Weinreich SOurCE: Marketing 197 Part 1 198 Communications Background and Theories F I g u R E 8 .4 Reproduced by kind permission of Haymarket Marketing Publications Ltd and Len Weinreich SOurCE: Marketing agencies usually ask the prospect for some feedback for future reference. Here are some answers that rejected agencies have recorded upon asking why they had failed: ●● ‘I just didn’t like you.’ ●● ‘I’m afraid you are not European.’ ●● ‘You’re too small.’ ●● ●● ●● ●● ‘They [the other agency] have more experience of this sector.’ ‘You have too much experience in this sector. We’re looking for a fresh approach.’ ‘If it wasn’t for the other agency you would have come irst.’ ‘The inal decision was evenly split and you lost 8–7.’ Chapter 8 Marketing Communications Agencies ●● ‘Although we preferred your creative work, the other agency does have a place to park in London on Saturdays – and it’s terribly handy for the shops.’ As managing directors are never told that their pitches are terrible and come last, having always been narrowly beaten into second place, there is a plea from the advertising industry to clients that they should tell it like it really is! After the pitch – the agency still waits Occasionally the prospect client actually helps the agency by giving an answer that identiies where they saw a real weakness. The agency can then eradicate the weakness before the next pitch. Similarly, a successful agency will be interested to ind out why it was chosen, so that it can capitalize on its strengths. Skip the pitch – marketing clients meet media owners directly ‘Yahoo and Google established agency-relations teams to build relationships and teach agencies the peculiarities of online display and search. Since then, Google focused its agency relations on building its display business and promoting YouTube; Yahoo on moving offline dollars to digital. AOL’s agency-relations team was rebuilt by ex-Google execs now running the company. Microsoft launched its agency-relations team in May of last year.’ Learmonth (2010b) In 2010 Unilever had an intense week-long series of media meetings including Google, Yahoo, Facebook, Fox Interactive, Amazon, Microsoft, Vevo, LinkedIn, Formspring, Millennial Media, several venture capital firms and, of course, Huddler. Firing the agency Campaign magazine survey identiied the following reasons for sacking an agency (in order of clients’ importance): 199 1 receiving no fresh input; 2 account conlict at the agency; 3 a new marketing director arriving; 4 a change of client’s policy; 5 other accounts leaving the agency. A derivative of number 2, conlict of interests, arises with mergers and acquisitions. After acquiring Gillette for $57 billion, P&G sacked Gillette’s agency, Mindshare (part of the WPP Group). Gillette explained that it was removing its $800 million global media planning and buying business. Mindshare already works for Unilever, P&G’s arch rival (WARC, 2005c). An example of number 3 above is when BA appointed its new CEO Willie Walsh. After 23 years, M&C Saatchi lost its prized BA account worth £60 million (and estimated to be between 6 and 7 per cent of Saatchi’s turnover). Prior to that, Saatchi’s had only one pitch, 10 years previously, when it retained the business by the skin of its teeth after Bartle Bogle Hegarty prematurely broke out the champagne (WARC, 2005a). In the international arena, business relationships (including agency relationships) are even more delicate, as WPP discovered when it was ired by China’s largest advertising conglomerate (Citic and its Beijing Guoan Advertising arm). Citic’s vicechairman, Yan Gang, claimed that WPP’s CEO, Sir Martin Sorrell, had treated him ‘very rudely’ What’s straining the agency–marketer relationship today? ‘Too many agencies are wondering, “Am I going to have a job six months from now? What does my client really think?” When the agency doesn’t know where it stands or if the client believes in it, it becomes dysfunctional. That’s the biggest thing that’s missing. If the client’s not happy, get on with it. Tell them what’s wrong and what they need to do. Marketers also shouldn’t be afraid to challenge their agencies. The best teams ask outrageous questions of their agencies. And agencies love that. And when you answer those, you get great work.’ Stengel (2010) 200 Part 1 Communications Background and Theories during an April meeting in London to discuss management problems at the joint venture (WARC, 2006). Although over a decade old, Campaign magazine’s ‘13 ways to be a loser’ article identiies many recurring reasons why agencies still get ired: 1 Control of brand’s advertising switches to rival of client: Gold Greenlees Trott lost Fosters when Elders IXL and its Courage division took over control of marketing Fosters from Watneys, a GGT client. 2 Agency produces irrelevant or inappropriate advertising: Lowe Howard-Spink lost some of its prized Mobil account after its ‘breakthrough’ Dan Dare campaign failed. Insuficient planning was cited as a reason behind the iasco. 3 Client is unsettled over too many changes at agency: Foote Cone and Belding lost £22 million worth of business – including Heinz and Cadbury – because of management upheaval. 4 Client unhappy over excess negative publicity surrounding its agency: IBM is uncomfortable over the widely reported lawsuits involving its agency and breakaway Lord Einstein O’Neill and Partners. Could result in IBM choosing neither and picking a new shop. 5 Takeover of agency infuriates client: Goodyear, Philips, Pilsbury said goodbye to JWT after it was taken over by WPP. Most cite ‘disruption’ as a reason for leaving. Are agency managers egotistical? McCann chiefs are said to have reacted with disbelief and anger at Ben Langdon’s suggestion that the London agency be rechristened McCann Langdon, followed by the names of the agency’s other principals. It appears that his suggestion helped to convince McCann’s worldwide chairman and chief executive, John Dooner, that it was time for Langdon to step down. Bosses of the Interpublic-owned network are jealous guardians of one of the most famous brands in US advertising and opposed to anything that might dilute it. 6 Client rationalizes its agency roster: Toyota chose its dealer agency Brunnings over its main agency Lintas London after a creative shoot-out. British Telecom reviewed its entire account and picked three main agencies – BBH, Abbott Mead and JWT. 7 Total breakdown in agency–client relationship: GGT resigns the Daily Express after repeated clashes and an inability to work with title’s marketing staff. 8 Agency fails to come to terms with account: BMP got the sack by Comet, its irst major retail client. Former vice-chairman Paul Leeves said BMP won the business ‘one year too soon’. 9 Lack of solution creatively: Abbot Mead couldn’t crack the Daily Telegraph. Later the agency admitted to producing tasteless series of press ads which aroused the ire of women, among others. 10 New client arrives: Allen Brady & Marsh’s long-standing Milk account was reviewed after new NDC chief Richard Pears joined. 11 Agency can’t master the client’s politics: JWT lost British Rail. Agency was allied to the central advertising body while the chairman, Bob Reid, was committed to devolution. Network SouthEast chief Chris Green was not keen on JWT after it produced two poor ads, one in which it was in legal hot water with the Monty Python people. 12 Agency merges with another, producing conlict and massive disruption: Dificulties surrounding the merger of Reeves Robertshaw Needham and Doyle Dane Bernbach resulted in massive client fall-out. 13 Client is subject of a merger or takeover: Fast becoming a major reason for account moves. Reproduced by kind permission of Haymarket Marketing Publications Limited and Laurie Ludwick Firing the client Agencies sometimes resign accounts, particularly if a larger competing account is offered to them. Occasionally, they are obliged to resign if an agency Chapter 8 Marketing Communications Agencies takeover or merger brings in some competing accounts and thereby creates a conlict of interest. New demands by a client sometimes become so dificult that the account becomes unproitable or, as in the case of ABM, a reduced commission is considered unsatisfactory. Arrogance and egos Some years ago, a continually critical senior marketing manager commented at the end of yet another long, unsatisfactory meeting, ‘If this were my company [which it wasn’t; he was an employee], I would ire the agency.’ The long-suffering creative director responded, ‘If this were my agency, which it is, I would ire the client, which I am.’ He left the room, with the marketing manager knowing he now had to face colleagues and break How to upset the client and get sent to jail – overcharge them Thomas Early (former senior partner and finance director) and Shona Seifert (former president) at Ogilvy & Mather (O&M) New York were both reported by WARC to have been found guilty in 2005 of fraudulently overbilling the White House Office of National Drug Control Policy in 1999 and 2000. The guilty pair were allegedly responding to the anger of O&M North America’s co-president Bill Gray at the loss of anticipated income. Gray was not among the accused. Early got a 14-month prison sentence and $10,000 fine. Seifert got an 18-months prison sentence and $125,000 fine (she was also ordered to write a code of advertising industry ethics). O&M extricated itself (but not its employees) from the affair with a $1.8 million settlement in 2002. WARC (2005b) 201 the news that there was no campaign ready to roll out, no agency, and an agonizing new pitch process required. How to ensure good agency relationships 1 Agree a system of remuneration – fees, commissions, mark-ups, time, expenses and method of billing – in writing. Remember, it is better to argue over a quote than an invoice. 2 Trust the agency team (share research and information with them, and involve them). 3 Make them become part of the marketing team. Use their expertise. 4 Ask relevant questions. Listen carefully to the answers. Do not be intimidated by strong agency characters. All propositions should be justiiable. The inal decision is the client’s. 5 Explain to the agency who makes what decisions, ie who has authority for which decisions. 6 Sign or approve in writing each stage from brief to concepts – inished artwork, running proofs and so on. 7 Keep briefs short and unambiguous. 8 Regular reviews help to plug any gaps in performance, whether creative, strategic or personal. 9 Write an occasional thank-you note to the team. 10 A stable relationship builds a real team, since the agency gets to know the client, the team, the company and the market inside out. In addition, the client does not have to worry about unfriendly, discarded agencies that have previously had access to sensitive information. 202 Part 1 Communications Background and Theories key points from Chapter 8 ●● Clear communications between client and agency are important if the right messages are going to be successfully communicated to target audiences. ●● Agencies, consultancies and consultants can become more than just suppliers of marketing services; they can become strategic partners of the client. ●● Careful selection is crucial to ensure the development of a mutually beneicial long-term relationship. references and further reading Bashford, S (2008) The rise of the intermediary, PR Week, 4 July Burnett, L (nd) Quote bank, WARC (World Advertising Research Centre) Cowley, D (ed) (1989) How to Plan Advertising, Thomson Learning, London Farey-Jones, D (2008) Consumer relationships key to future agency success, Brand Republic, 8 February IPA(2003) The Client Brief: A best practice guide to brieing communications agencies, Joint industry guidelines for young marketing professionals in working effectively with agencies, IPA, ISBA, MCCA, PRCA, London ISBA (2010) in conjunction with the Advertising Research Consortium, Paying for Advertising 5, ISBA, London Kemp, M and Kim, P (2008) The connected agency, Forrester report Learmonth, M (2010a) Do you know the ABCs of DSPs? Agency-relations teams pitch in, Ad Age, 26 April Learmonth, M (2010b) Top marketers to Silicon Valley: Help us get ahead of consumer, Ad Age, 17 May Rijkens, R (1993) European Advertising Strategies, Thomson Learning, London Sorrell, M (1996) Beans and pearls, D&AD president’s lecture Stengel, J (2006) Top P&G marketer urges agencies to integrate planning, WARC, 7 February Stengel, J (2010) How to save the troubled agency– marketer relationship, Ad Age, 26 April WARC (2005a) British Airways ditches Saatchi Brothers after 23 years, 10 November WARC (2005b) O&M’s Early jailed for ONDCP fraud, 14 July WARC (2005c) WPP’s ‘Chinese walls’ fail to reassure P&G, 6 October WARC (2006) Chinese ad giant drops WPP pact in favor of Omnicom, Data sourced from AdAge. com, Additional content by WARC staff, 16 June 2006 Weinreich, L (2000) Seven Steps to Brand Heaven, Kogan Page, London Williams, H (2008) Six Degrees lands BIMA retained brief, PR Week, 29 August Admap, NTC Publications, Henley-on-Thames Advertising Age, Crain Publications, Detroit, MI Campaign, Haymarket Marketing Publications Ltd, London Marketing, Haymarket Marketing Publications Ltd, London Marketing Business, Chartered Institute of Marketing and Maxwell Publications, London Marketing Week, Centaur Communications, London Media Week, EMAP Business Publications, London Chapter 8 Marketing Communications Agencies Further information AdForum MayDream SA 18–20 rue Jacques Dulud 92521 Neuilly-sur-Seine CEDEX France Tel: +33 (0)1 41 43 71 93 Fax: +33 (0)1 46 37 33 82 www.adforum.com British Rate and Data (BRAD) Brad Insight Greater London House Hampstead Road London NW1 7EJ Tel: +44 (0)20 7728 4315 www.brad.co.uk Advertising Agency Registrar Services AAR Group 26 Market Place London W1W 8AN Tel +44 (0)20 7612 1200 www.aargroup.co.uk Incorporated Society of British Advertisers (ISBA) Langham House 1b Portland Place London W1B 1PN Tel: +44 (0)20 7291 9020 Fax: +44 (0)20 7291 9030 www.isba.org.uk Advertising Association 7th Floor North Artillery House 11–19 Artillery Row London SW1P 1RT Tel: +44 (0)20 7340 1100 www.adassoc.org.uk Agency Assessments International 100 Pall Mall London SW1Y 5NQ Tel: +44 (0)20 7321 3828 www.agencyassessments.com Institute of Practitioners in Advertising (IPA) 44 Belgrave Square London SW1X 8QS Tel: +44 (0)20 7235 7020 Fax: +44 (0)20 7245 9904 www.ipa.co.uk 203 204 THIS PAGE IS INTENTIONALLY LEFT BLANK 205 09 International marketing communications lEaRNINg ObjEcTIvES By the end of this chapter you will be able to: ●● Understand the globalization of markets and the international opportunities arising ●● List and explore the international challenges arising in international markets ●● Avoid the classic errors in international markets ●● Discuss the strategic global options available to marketers interested in growing on a global scale The globalization of markets 206 The global opportunity 206 Respecting global complexity 206 Touching a global nerve 208 Forces driving globalization 208 The elite global players 209 Below-the-surface similarities 209 International diiculties 210 Language 211 Literacy 211 Colour 211 Gestures 211 Culture 212 Original national identity 212 Media availability 212 Media overlap 213 Lack of media data 213 Lack of media credibility 213 Varying media characteristics 213 Diferent media usage 213 Diferent media standards 213 Diferent cost structures 213 Legal restrictions 213 Competition 213 International mistakes Wrong names 214 Wrong strapline 214 Wrong product 215 The global web 215 214 Strategic global options 215 Global marketing strategy 216 Global advertising strategy 216 Four global advertising strategies 217 Central strategy and production 217 Decentralized strategy and production 218 Central strategy and local production 218 Central strategy with both central and local production 218 Advantages of central strategy and production 218 Disadvantages of central strategy and production 219 Agencies in the international arena 220 International agency or independent local agency? 220 Advantages of using an international agency 220 Disadvantages of using an international agency 221 The key to successful central communications 221 In conclusion 222 references and further reading 222 206 Part 1 Communications Background and Theories The globalization of markets This chapter examines opportunities and the dificulties, strategic options and actual implications for implementation of international marketing communications, in particular global communications. The global opportunity – is it really happening? Look around you. Yogurt, pizza, spaghetti, rice, kebabs, Indian cuisine, Chinese meals, Mexican food and American burgers are popular and also easily available in many countries around the world. Not too long ago they were considered sophisticated luxuries. The Rolling Stones and Shakespeare also have a universal appeal. There are more people learning English in China than speak it in the United States. Back in 1985 approximately 1 billion people from different time zones across the world watched the Live Aid charity concert simultaneously. In 2002 over 2 billion people watched football’s World Cup inal. The London to Brussels train is quicker than that from London to Newcastle. Perhaps clichés like ‘The world is getting smaller’ are nothing more than oversimpliied generalizations cast upon a culturally complex world? ‘70% of search worldwide is not in English.’ Oban Multilingual Translation Services Global markets are here. For example, Manchester United Football Club has an estimated 70 million fans around the world, and Al Jazeera’s Englishlanguage TV news service has a 100 million audience worldwide. As media follow markets, media consumption may go global; therefore marketers must remember that brands with international ambitions must have a consistent global image – production should be international in mind, and content rights should be global. Creating content that users can pass on via their networks is an increasingly important channel of communication. But, as the Universal McCann (2007) report suggests, ‘when using these channels it is fundamental that brands and media organizations think global. Multiple local and conlicting brand identities will not work.’ We are global – the internet says so. Although spread across the world, customers with similar interests can communicate and share thoughts through images, audio, video and text anywhere in the world: This means that clusters of customers with similar tastes and interests are connecting with each other to form new global niches and segments. The Internet and broadband, in particular, has changed business dynamics. It has created a level playing ield for the smaller niche brands to compete with the established global players. Small brands have access to bigger, global, markets and can communicate directly with customers across the world in new and more meaningful ways – ways never dreamt of 10 years ago. Chaffey and Smith (2008) Some say that human beings have more things that bind them together than separate them; others argue that market differences are greater than market similarities. There are, in fact, what Young & Rubicam creative agency calls ‘cross-cultural consumer characteristics’. These identify the common ground. The person living in a smart apartment block in London’s Knightsbridge probably has more in common with his or her counterpart living in a smart apartment block off New York’s Central Park than with someone living in a drab south London suburb. There are indeed some common denominators and some common sets of needs and aspirations that can be identiied, particularly in similarities of lifestyle. Respecting global complexity The total global concept suggests that the big global marketing players can accelerate the globalization process by transcending cultural boundaries and bringing their messages, goods, services and traditions to the markets they choose. There are some cultural norms that suggest that the total global concept will not happen everywhere, at least not in the next few generations. Lailan Young (1987) reported that the Barusho bride in the Himalayas has a tough time on her wedding night, as she has to share the bridal bed with her mother-in-law until the marriage is consummated. Chapter 9 International Marketing Communications Post-natal male exhaustion In the southern Indian state of Kerala, Puyala women return to the fields to tend the crops after the birth of their babies, while the husband goes to bed. The rest of the family ministers to his needs until he recovers. In the Andaman Islands especially anxious husbands will stay in bed for anything up to six months. Young (1987) The lost kingdom of the Minaros was ‘discovered’ in a mountain hideaway 16,000 feet up in the Himalayas by a French explorer in 1984. The Amazonlike women totally dominate their men, marrying several at a time and keeping them in line by brute force. The former Kwakiutl of Vancouver Island demonstrate what is almost a parody of industrial civilization: the chief motive of this tribe was rivalry, which was not concerned with the usual concerns of providing for a family or owning goods, but rather aimed to outdo and shame neighbours and rivals by means of conspicuous consumption. At their potlatch ceremonies the people competed with each other in burning and destroying their valuable possessions and money. This is in contrast to the Dobu of north-west Melanesia. This culture is reported to encourage malignant hatred and animosity. Treacherous conduct unmitigated by any concept of mercy or kindness and directed against neighbours and friends is expected. The Zuni (a branch of the Pueblos of New Mexico) are a people whose life is centred on religious ceremonial, being prosperous but without interest in economic advancement. They admire most those men who are friendly, make no trouble and have no aspirations, detesting, on the other hand, those who wish to become leaders. Hence tribal leaders have to be compelled by threats to accept their position and are regarded with contempt and resentment once they have achieved it. Even cultures that are relatively better known have their own intricacies over something as simple as a handshake, eye contact and the use of colours. For example, brown and grey are disapproved of in Nicaragua; and white, purple and black are the colours of death for Japan, Latin America and Britain respectively. 207 Understanding other cultures – the oppressed male The Kagba women of North Colombia practise not only free love but free rape, and few men are safe. Young (1987) If this is deemed to be strange, consider how other cultures might view the seemingly bizarre behaviour patterns of the tea-drinking, nose-blowing, ballroomdancing and kissing population of Europe. nose blowing ‘Where most North Americans are repulsed by an Indonesian who blows his nose on to the street, the Indonesian is repulsed by the North American who blows his nose in a handkerchief and then carries it around for the rest of the day in his pocket.’ Ferraro (2001) The reader may be surprised to know of a tribe where it is not uncommon for the men of the tribe to behave in a promiscuous manner with other men’s wives and daughters in public. It is so popular it is even broadcast on their television networks. The country: the UK. The practice: ballroom dancing. Here is a description of this behaviour: It is common in such dancing for the front of the bodies to be in constant contact – and they do this in public. In spite of the close physical touching involved in this type of dancing (a form of bodily contact not unlike that assumed in sexual intercourse), our society has deined it as almost totally asexual. Although ballroom dancing can involve high levels of intimacy, it is equally possible that there is no sexual content whatsoever. Many adult men in the United States have danced in this fashion with their mothers, their sisters, the wives of the ministers at church socials without anyone raising an eyebrow. Yet many non-American cultures view this type of 208 Part 1 Communications Background and Theories dancing as the height of promiscuity and bad taste. It is interesting to note that many of those nonAmericans for whom our dancing is a source of embarrassment are the very people we consider to be promiscuous, sex-crazed savages because their women do not cover their breasts. Ferraro (2001) Cannibalistic disease: kissing ‘A whole lot of people think kissing is not at all natural. It is not something that everybody does, or would like to do. On the contrary, it is a deplorable habit, unnatural, unhygienic, bordering on the nasty and even definitely repulsive. When we come to look into the matter, we shall find that there is a geographical distribution of kissing; and if some enterprising ethnologist were to prepare a “map of kissing” it would show a surprisingly large amount of blank space. Most of the so-called primitive races of mankind such as the New Zealanders (Maoris), the Australian Aborigines, the Pauans, Tahitians, and other South Sea islanders, and the Esquimaux of the frozen north, were ignorant of kissing until they were taught the technique by the white men… The Chinese have been wont to consider kissing as vulgar and all too suggestive of cannibalism… the Japanese have no word for it in their vocabulary.’ Pike (1966) The international marketer embraces other cultures, researching and respecting the local culture as being right and proper and perhaps adopts Geertz’s (1983) insight: the world… does not divide into the pious and the superstitious… there are sculptures in jungles and paintings in deserts… political order is possible without centralized power and principled justice without codiied rules; the norms of reason were not ixed in Greece, the evolution of morality not consummated in England… We have, with no little success, sought to keep the world off balance, pulling out rugs, upsetting tea tables, setting off ire crackers. It has been the ofice of others to reassure; ours to unsettle. Touching a global nerve Despite the complexities of cultural idiosyncrasies, there are many common needs that manifest themselves into common wants and purchasing patterns, particularly where there are similar levels of economic wealth. It follows that, if a manufacturer or service supplier targets roughly the same socio-demographic groups in different countries and touches a common nerve within these target markets, then the same product or service can be packaged and promoted in a uniform manner. The pricing and distribution may vary, but the branding, packaging and even advertising can be the same. The manufacturers of world brands can therefore position their products in a similar manner in the minds of millions across many different cultures. This is the result of careful analysis and planning by expert marketing professionals rather than a trial-and-error approach to market extension. The next challenge lies in moving the rest of the communications mix in a uniform manner so that not just advertising and packaging but also sales promotions, direct mail, sponsorship, etc, reap the beneits of a global approach. This globalization issue has revealed itself through the increased use of the internet. Even local irms going on to the net attract customers from all over the world. A web presence can deliver a global presence. However, this does present challenges, as Pepsi discovered, with its European blue can being seen by its US customers, who much prefer the traditional red can. Similarly, Tia Maria, although it is consumed around the world, has different age segments in different countries, eg in the UK Tia Maria is about girl power, targeted at 18- to 24-year-olds, while in the Netherlands it’s drunk neat by pensioners. Now this ‘common nerve’ presents a positioning challenge. Despite these dificulties, Coke and computers have proved that large, lucrative global markets do exist. Forces driving globalization It is not just a product-orientated corporate push for growth but more of a market-orientated reaction to the emergence of common global lifestyles and needs. These are emerging as cheap travel, combined with higher disposable incomes, allows travellers to leap across borders, visit other cultures and return home with a little bit of that culture’s soul in their own. Television itself has brought into the sitting Chapter 9 International Marketing Communications rooms of Europe’s homes pictures and images of the United States’ Sopranos, Australia’s Neighbours, Africa’s famines and atrocities, and Tiananmen Square’s students. It has also brought stunning scenes from the depths of the oceans, the balmy beaches of the Caribbean, the rugged beauty of the bush and the once rich and fertile Amazon rainforest. This global awareness is exploited by the corporate push for growth, which has forced many suppliers from saturated local markets to venture into overseas markets. Improved production, distribution and marketing techniques have accelerated the movement of products and services from all around the world into local markets. Professional buyers now scour the world in pursuit of new suppliers. The internet gives immediate access to a world of new sources. Political barriers are falling in China and the eastern bloc and, of course, Europe’s own internal political barriers are being dismantled also. The doors of the world’s markets are opening. The key, it seems, is to identify core beneits that are common to different cultures, along with any relevant cultural idiosyncrasies. The elite global players The signiicant beneits derived from a global brand and a global communications strategy are currently reserved for a relatively small number of players. This elite brand of players recognize the right conditions and apply thorough research and planning to exploit the brand’s assets on a global scale. Although Rein Rijkens (1993) has identiied a ‘trend towards greater internationalization and centralization’, it should be remembered that a single communications strategy (incorporating everything from branding to the complete range of communications tools) rarely works for all the players operating in international markets. The desire to harness the global opportunity is natural, because international markets offer huge rewards. They also present intricate problems. Careful cultural homework needs to be included in the detailed research and planning that go below the surface. Below-the-surface similarities Similar buying behaviour and buying patterns do not necessarily mean a uniform market with uniform needs, uniform communications channels, uniform 209 decision-making processes, uniform decision-making units, or even uniform reasons for buying. Take the case of buying premium-priced water. In a Khartoum slum an impoverished family pays 20 times the price paid by families with water main connections, while half a world away a middle-class family buys bottles of mineral water. This demonstrates ‘unreal similarities’. The buyers appear to behave similarly by purchasing expensive water. They are, however, very different; in fact, they are from totally dissimilar groups with different aspirations, motivations, lifestyles and attitudes, not to mention disposable income. On the surface there is a market for private water in both countries, but the distribution channels, communications channels, advertising messages and levels of disposable income are poles apart. An analysis that goes below the surface (or below the sales results) will reveal a range of different motives, aspirations, lifestyles and attitudes to the same product. Surface information can create a false sense of simplicity. International markets can also suggest surface solutions that ignore the cultural complexities and intricacies of distant markets. As Sir John Harvey-Jones once warned (1988): Operating in this milieu requires much greater sensitivity to national differences than we are accustomed to having. The mere fact that one stays in the same sort of hotel almost anywhere in the world, that one arrives in the same sort of car, that it is now possible to call by telephone or telex directly from almost anywhere in the world, all gives a supericial feeling of sameness which is desperately misleading and must never be taken for granted. South Korea – ‘Would you like plastic with your credit?’ A completely different mindset applies to customers in other countries. In South Korea, the Visa credit card company will ask you on a new Visa card approval on the phone ‘Do you want plastic with the credit?’, as the credit card functionality will automatically be enabled on your cell phone and the old-fashioned plastic card for your wallet is a free optional extra, only really needed if you travel outside South Korea. Ahonen and Moore (2007) 210 Part 1 Communications Background and Theories Globalization, intertwined with cultural idiosyncrasies, is emerging in many markets around the world. The marketing maxim ‘Think global, act local’ remains valid. Although the late great Professor Theodore Levitt’s ‘globalization of markets’ is still criticized by some academics, it is happening and it does offer huge rewards for those who seize the opportunity. Below-the-surface external differences There are, of course, many differences below the surface also. In practice, the European Union is splintered by different levels of economic development (north and south), culture, attitudes and lifestyles, languages, retail trends, direct mail trends, sources of information, time taken to make a decision, and so on. Different marketing mixes and communication mixes are required for different European countries. For example, in the Netherlands, dentists derive 40 per cent of their turnover from the sale of products such as toothbrushes. In Germany, supermarkets are expected to sell only cheap, utilitarian brushes, while the pharmacies handle the premium brands. In Italy, a premium brush has to carry a fashionable, exclusive label. This makes any above-the-line campaigns dificult. The communications mix was built around direct mail to dentists supported by point-of-sale and product literature, packaging design and sales presenters. Below-the-surface internal differences The marketer’s challenge goes beyond communicating with new international customers and into working with international partners whose idiosyncrasies and languages pose many problems. To some, overcoming local customers’ idiosyncrasies may seem relatively easy compared to overcoming local partners’ working practices. Whether the local partners are suppliers, distributors, sales agents, advertising agents, strategic partners or prospects, it is essential for success to understand and work with very different approaches to business. Take nomenclature for a moment. The French normally refer to advertising as publicité, which can cause some confusion, while the Yugoslavian word for advertising is propaganda. Other cultures have dificulty translating ‘marketing’, ‘marketing communications’ and ‘advertising’, as they have not yet created such words. Southern europeans work to live and northern europeans live to work ‘Somewhere in the world there are people who think the Germans are messy and unpunctual. (The chances are they are in Switzerland.) There are countries where Greece is regarded as a model of efficiency. There are countries in which French bosses would seem absurdly egalitarian and others where Italian company life would seem oppressively regulated.’ Mole (1998) International diiculties International markets are riddled with hidden cultural differences that make global advertising an intriguing challenge even for the most capable international marketing expert. Here are some of the intricacies that contribute towards the dificulty of global marketing: ●● language; ●● literacy; ●● colour; ●● gestures; ●● culture; ●● original national identity; ●● media availability; ●● media overlap; ●● lack of media data; ●● lack of media credibility; ●● varying media characteristics; ●● different media usage; ●● different media standards; ●● different cost structures; ●● legal restrictions; ●● competition; ●● non-global names. Chapter 9 International Marketing Communications Language Language obviously requires careful translating, whether it is straplines, product descriptions or instructions. There are exceptions to the rule (where the language relects beneicial cultural aspects of the product, eg Audi’s Vorsprung durch Technik strapline). And some brand names simply don’t work when used in foreign languages and thus restrict the brand’s international growth potential or dilute the brand’s presence through the need to have two brand names. Language barriers can be expensive Even the same language can have different meaning in different markets, eg a ‘boot’ refers to the rear of a car (in the UK) as well as a shoe. In the United States, the rear section of a car is called a ‘trunk’. This is relatively minor, but how about exactly the same word having radically different business meanings? Take a trillion. In the United States and France a trillion is 1 followed by 12 zeros: 1,000,000,000,000 New English Dictionary (1932) In the UK and Germany, a trillion is 1 followed by 18 zeros: 1,000,000,000,000,000,000 Collins Pocket Dictionary (1992) Be careful also with a billion, as it has different meanings – in the United States and France a billion is 1 followed by 9 zeros, and in the UK and Germany it is 1 followed by 12 zeros. In the United States and France, it is a thousand million: 1,000,000,000; in the UK and Germany, it is a million million: 1,000,000,000,000. Literacy In many developing countries literacy is low (Dudley, 1989). This limits the amount of explanation in advertising. Even with high literacy, the reading of translated Western-style advertisements still causes 211 problems, eg before-and-after toothpaste advertisements if they are not adjusted for Arabic readers, who read from right to left. In other low-literacy countries, pictures may be used to explain the contents. When Gerber irst sold baby food in Africa it put a picture of a Caucasian baby on the label and didn’t realize that, in Africa, companies routinely put pictures on the label to show what’s inside, as there is a high rate of illiteracy. Colour Colour has a direct access to our emotions. Watch how red is commonly used in advertising in the West. Colour, however, does not have uniform meaning across the world. Asians associate red with prosperity and good luck. Consider a inancial services website: if Asians see no red, they will leave; if Westerners see red, they might leave. Never wrap a gift in red in Finland, as it is associated with Russian aggression during the Second World War. Blue in Iran means immorality. White in Japan means death (hence McDonald’s white-faced Ronald McDonald has problems). Black means death, unlucky or morbid in some countries. Websites designed with black backgrounds may be seen as ‘hip’ in the West, but can suffer lack of trafic from China and Hong Kong. Gestures When greeting or bidding farewell, physical contact beyond a handshake in South America, southern Europe and many Arab countries is a sign of warmth and friendship, but in Asia it can be considered an invasion of privacy. After a meal in Egypt it is considered rude not to leave something on your plate, while in Norway and Malaysia leaving anything on your plate would be considered rude. Basic body gestures are not global. In some parts of India, Sri Lanka and Bulgaria, shaking the head from left to right means ‘yes’. Touching the lower eyelid may be just an itch, but it also suggests to a South American woman that a man is making a pass, or to a Saudi man that he is stupid. Scratching an earlobe has ive different meanings in ive Mediterranean countries: ‘You’re a sponger’ (Spain), ‘You’d better watch it’ (Greece), ‘You’re a sneaky little…’ (Malta), ‘Get lost, you pansy!’ (Italy), while a Portuguese will feel really pleased. The A-OK gesture (thumb and index 212 Part 1 Communications Background and Theories inger in a circle with the rest of the ingers open) means money to a Japanese, zero in France, ‘OK’ in the United States, a rude gesture in Brazil and ‘I’ll kill you’ in Tunisia. Even the thumbs-up sign is deemed to be a devastatingly obscene gesture to a Sardinian woman and insulting in Iran. Thrusting your palms towards someone’s face may be meant to be endearing, but to a Greek there is no greater insult, since this gesture is called a moutza and comes from the Byzantine custom of smearing ilth from the gutter in the face of condemned criminals. Culture Culture creates a quagmire of marketing problems: religion, sex, eating, greeting, habits, lifestyles, the role of women – the list is endless. Ferraro (2001) points out nine critical dimensions that contrast the United States with the rest of the world’s cultures. She says that US culture places a high value on 1) individualism, 2) a precise reckoning of time, 3) a future orientation, 4) work and achievement, 5) control over the natural environment, 6) youthfulness, 7) informality, 8) competition and 9) relative equality of the sexes. As always, the web complicates matters. For example, Scandinavians are reluctant to use credit cards, the currency of the internet; the French dislike revealing personal information; the Germans prefer to pay with a cheque, after delivery of the goods. In meetings, the Dutch and the Germans want to get straight to the point in business dealings, whereas in countries like Spain, Brazil and Hong Kong some general chat is the most important part. In France, family is private and not part of business discussions. In Hong Kong, expressing an interest in family, general health, and observations of the country help to nurture good relations. Even protocol for follow-ups to a meeting vary from country to country, as some countries place more importance on the written word than the spoken word, and vice versa. As Julian (2009) points out: ‘In Spain for instance, it’s important to followup an email with a phone call, but in Germany you must do the opposite and put your phone conversations into writing.’ As for humour, use it sparingly, if at all. In Germany, humour is generally considered inappropriate in business. It is essential to take advice from expert export advisory services such as UK Trade & Investment in the UK. Christmas in other cultures Taking advantage of the Christmas opportunity requires an understanding of each international market. For example, in Brazil and Spain the celebration continues until 6 January (when festivities end). In Russia the celebrations start on 7 January. In India Christmas Day is called Bada Din (Big Day) in Hindi, and it is a national holiday that allows people from all religions to celebrate with their Christian friends. In China the main celebration occurs at the end of January (the Chinese New Year or the Spring Festival). In other countries Christmas does not happen (in fact the word is illegal in some countries). Original national identity National identity can be an asset or a liability. For example, Dudley (1989) reported that Marathon Oil makes a point of stressing its US association in Italy, where US high technology is beneicial, but in Germany Marathon avoids the issue of its US parentage because of the German concern over US control in the German energy industry. Media availability Television is sometimes unavailable, since 1) developing countries do not have a high penetration of televisions in domestic households, 2) some countries do not have commercial TV stations, and 3) others do but they restrict the amount of advertising time. Unilever and BAT make their own medium available in East Africa by running their own mobile cinemas. TV helps The further away from a TV screen, however, the more difficult many experts say it becomes to create and to deliver a pan-European message. Mead (1993) Chapter 9 International Marketing Communications 213 Media overlap Diferent cost structures Television, radio and the internet from one market can spill over into other markets, eg half the Canadian population has access to US television. The Republic of Ireland receives the UK’s BBC and ITV channels. In mainland Europe local TV is received by neighbouring countries. Different countries have different forms of negotiation and bartering. The Americans and the Japanese are poles apart. In less developed countries cash may not be available, but barter, or counter-trading, can offer an acceptable alternative. Lack of media data Great Britain and Ireland have well-structured and categorized media analysis data (audited data). Without reliable media data the optimum cost and effectiveness of the overall campaign are unlikely to be achieved. Properly structured media markets are easier to work in. Lack of media credibility Unregulated or poorly regulated media in some countries may lout the principles of legality, decency, honesty and truth, which in turn may make these media untrustworthy or create audience scepticism about the particular source of information. Varying media characteristics Coverage, cost and reproduction qualities can and do vary from country to country. Some countries are technically more advanced than others, eg they may have massive penetration of high-speed broadband, while other countries do not even have many cinemas. Diferent media usage Kahler and Kramer (1977) suggest that the British tend to see TV as a visual medium, while TV to the Americans is a visual accompaniment to words. Diferent media standards A lack of uniformity of standards means that different types of both ilm and artwork may be required for different markets, eg the United States and the UK have different standard page sizes that may require different artwork, which increases cost. Legal restrictions Whether voluntary codes or actual law, there is as yet no harmonized set of laws or regulations. For example, Lands’ End’s website in Germany cannot mention its unconditional refund policy, because German retailers successfully sued in court. (They normally do not allow returns after 14 days.) This presents the advertiser with different problems in different countries. In Sweden, misdemeanours by advertisers may be charged under the criminal law, with severe penalties. Competition Different markets have different key players using different strengths. For example, Ford’s position of ‘safety engineering’ worked in many countries, but not in Sweden, where, of course, Volvo occupied the position. Competition may react in different ways in different markets. Language, literacy and logic Combine these three in the international arena and a new challenge emerges – writing instructions. It is a skill in one language, and attempting to translate instructions is a complex skill. This is an extract from the instructions for assembling a ‘knapsack’: 1 Lead for hind leg in an opened position. 2 Lead the frame of the sack support up. 3 Insert the blushing for blocking in the proper split, push it deeply and wheel in an anti-time sense till it stops. Part 1 214 Communications Background and Theories International mistakes Here is a selection of global misses or international mistakes made by brands attempting to sell into international markets. It includes wrong brand names, wrong advertising slogans or, worse still, a fundamentally unsuitable product for a particular international market. Some marketers carefully choose names that work for their local domestic market but never consider that one day the successful brand could sell into several markets. This insular perspective more than likely restricts any future growth opportunities into international markets and almost certainly restricts the brand from developing into a global brand. Wrong names Here are a few examples: ●● Sic (French soft drink); ●● Pschitt (French soft drink); ●● Lillet (French aperitif wine); ●● Creap (Japanese coffee creamer); ●● Irish Mist (in Germany ‘mist’ means manure); ●● Bum (Spanish potato crisp); ●● Bonka (Spanish coffee); ●● Trim Pecker Trouser (Japanese germ bread); ●● Gorilla Balls (American protein supplement); ●● My Dung (restaurant); ●● Cul toothpaste (cul means anus in France); ●● Scratch (German non-abrasive bath cleaner); ●● Super-Piss (Finnish car lock anti-freeze); ●● Spunk (jelly-baby sweet from Iceland); ●● the Big John product range was translated as Gros Jos (slang for ‘big breasts’) for French-speaking Canada. Even sophisticated marketers get it wrong. General Motors discovered that Nova meant ‘it won’t go’ (no va) in South America. Ford launched the Pinto in Brazil and soon realized that it was slang for ‘tiny male genitals’. Coca-Cola’s phonetic translation in China meant ‘Bite the wax tadpole’. After launching into English-speaking markets, Japan’s second-largest tourist agency was surprised to receive a steady inlux of enquiries for sex tours. The Kinki Nippon Tourist Company soon changed its name. These translation problems are not insurmountable. For example, Curtis shampoo changed its name from ‘Everynight’ to ‘Everyday’ for the Swedish market, since the Swedes wash their hair in the mornings. Mars changed its well-known ‘Marathon Bar’ to ‘Snickers’ to it in with the worldwide brand name communications strategy. Wrong strapline The New York Tourist Board found ‘I love New York’ dificult to translate into Norwegian, since there are only two Norwegian verbs that come close: one translation is ‘I enjoy New York’, which lacks something, and the other is ‘I have a sexual relationship with New York’. Scandinavian vacuum cleaner manufacturer Electrolux used this in a US campaign: ‘Nothing sucks like an Electrolux’. When Parker Pens marketed its ballpoint pen in Mexico, its advertisements were supposed to read: ‘It won’t leak in your pocket and embarrass you’. Unfortunately, embarazar does not mean embarrass. It means impregnate, so the slogan had an entirely inappropriate meaning. The Mitsubishi Pajero had problems, since pajero in some parts of the Spanish-speaking world means a liar, in others a plumber and in others something much worse. Other expressions that have been imprecisely translated include US cigarettes with low asphalt (tar), computer underwear (softwear) and wet sheep (hydraulic rams). Attention to detail is required when translating, as even the smallest error, such as missing out an accent on a letter, can drastically change the meaning. For example, in the United States, a bilingual banner celebrated ‘100 ano of municipal history’. In Mexican Spanish, año is year but ano is anus. I saw the potato During the Pope’s visit to Miami it was reported that some T-shirts were printed supposedly saying ‘I saw the Pope’. However, the translation was ‘I saw the potato’, because Papa with a capital P means Pope, whereas papa with a small P means potato. Chapter 9 International Marketing Communications Wrong product In the attempt to get the packaging, advertising and branding right, global marketers can sometimes forget the fundamental product and whether it is suitable for the market in the irst place, leading to campaign failure. Here are some examples of international product failures arising from the basic product itself: Christmas puddings in Saudi Arabia (where the word ‘Christmas’ is illegal and 50,000 of the Anglo-Saxon population go on leave during Christmas anyway); and toothpaste to combat betel nut stains (stained teeth imply wealth in some cultures, as does being overweight in others). General Foods’ packaged cake mixes found the Japanese market too small for them (3 per cent of homes had ovens). Coca-Cola had to withdraw its 2-litre bottle from Spain, because few Spaniards owned refrigerators with large enough compartments. Tennent’s Caledonian, a successful Scottish lager, lopped initially in the UK because it came in 24-packs rather than six-packs. Philips had to change the size of its coffee makers to it into the smaller Japanese kitchens and its shavers to it smaller Japanese hands. The global web Like it or not, once you’re on the World Wide Web you’re global. This presents great opportunities but also new challenges. Web positioning on a global scale is not easy. Apart from language, literacy, colour, gestures and culture, marketers now have to try to think how global audiences search for information – what words, what search engines, etc. Even if you do translate correctly, you probably have to redesign your web pages, as many other Microsoft pays dear for insults through ignorance ‘Insensitive computer programmers with little knowledge of geography have cost the giant Microsoft company hundreds of millions of dollars in lost business and led hapless company employees to be arrested by offended governments.’ Brown (2004) 215 languages require more words and more space to deliver the same message. Even the major global players can get it totally wrong. Microsoft was reported (Brown, 2004) to have released its colour-coded world map with time zones showing the disputed Jammu and Kashmir region as not being in India. Under Indian law, this is an offence. Result: the Windows 95 operating system was banned, with hundreds of millions of dollars in lost sales. Ofice 97 was subsequently launched without colour coding. Microsoft employees were arrested in Turkey when Kurdistan was shown as a separate entity, so Kurdistan was subsequently removed from all maps. ‘Of course we offended the Kurds by doing this but we had offended the Turks more and they were a much more important market for our products. It was a hard commercial decision, not political’ (Tom Edwards, Microsoft’s senior geopolitical strategist quoted in Brown, 2004). Another mistake that caused catastrophic offence was a game called Kakuto Chojin, a ighting-styled computer game with a rhythmic chant from the Koran. Despite being alerted by a Muslim staff member as to this insult to Islam, Microsoft still launched the game in the United States on the assumption that it would not be noticed. After a formal protest by the Saudi Arabian government, Microsoft withdrew the product worldwide. The list goes on. China, Korea, Spain and Uruguay have all been upset by various Microsoft products. In Korea its software showed the Korean lag in reverse and prompted government objections. In Spain, hembra means woman, but in Nicaragua and some other Central American countries it means bitch. In China, when Microsoft referred to Taiwan as a country, the police moved in and questioned staff. In Uruguay, a proud republic, Microsoft’s Outlook referred to 30 April as ‘the Queen’s birthday’, which offended the government. Strategic global options More and more businesses have to compete in the global arena. For many companies there is nowhere left to hide. Those that do not move into the global market will probably ind that the global market will come to them, as new international competitors target their once-safe local market. There is a need 216 Part 1 Communications Background and Theories to be proactive rather than reactive. Those that ignore this small part of the globalization process may not be around in 50 years. A defensive strategy (eg consolidating the existing customer base, staying native, and blocking competition from entering with, for example, a series of lexible distributor promotions) may safeguard the company, at least in the short term. Offensive strategies are required if a company is seeking entry into new markets, eg increasing promotional spend in key national markets, supported by a lexible operations system. Strategic alliances and joint ventures offer a lower-cost, lower-risk (and possibly lower-margin) method of entry into these new, large and increasingly competitive markets. Global competition has even prompted global cooperation in the marketing communications industries. Advertising and PR independent networks are popping up alongside the global agencies that have expanded to meet their clients’ global requirements. Global marketing strategy Keegan and Schlegelmilch (2001) identiied ive marketing (product/communication) strategies for multinational marketing. These were determined by the state of the various international markets, analysed by 1) whether the need (or product function) was the same as in other markets, 2) whether the conditions of product use were the same as in other markets, and 3) whether the customer had the ability to buy the product: 1 Same product/same communications. This applies to markets where the need and use are similar to those of the home market, eg Coca-Cola, with its centrally produced advertisements that incorporate local differences in language. 2 Same product/different communications. This applies to markets where the need or function is different but the conditions of product use are the same, eg bicycles in Europe and bicycles in Africa (recreation and transport, respectively). 3 Different product/same communications. This applies to markets with the same product function or need but with different conditions of product use, eg different petrol formulae but the same advertising image (eg Esso’s tiger). 4 Different product/different communications. This applies to markets with different needs and different product use, eg greeting cards and clothes are held to be ‘culture bound’, but it should be noted that some clothing companies (like Levi’s) use the same, centrally produced, wordless advertisements internationally. 5 New product (invention)/new communications. This applies, for example, in the case of a hand-powered washing machine. It is highly unlikely that the complete communications mix can be standardized by centrally controlling and producing everything from advertising to sales promotions to point-of-sale to PR to direct mail, etc, because of, irst, the differences in regulations and laws, which vary from country to country, and, second, the array of differences highlighted above. There are of course exceptions to the rule. IBM’s Aptiva ran a ‘win tickets to the 1996 Olympics’ campaign across 12 European countries, while a new point-of-sale campaign rolled out to 15 European countries. Mars also developed a pack speciically for the Euro 96 football championships, featuring a green colour base with white netting effect, which appeared in shops in the UK, France and Germany. not a totally pan-european approach All promotional ideas for Snickers’ sponsorship of Euro 96 were shared with each European office, and the individual brand managers then assessed the viability for their marketplace. Language barriers will often dictate the feasibility of an individual promotion. For example, the ‘Snickers – tackles your hunger in a BIG way’ strapline was not utilized in any country other than the UK, owing to language interpretation difficulties. Gordon Storey, Mars external relations manager Global advertising strategy The question of whether at least the advertising can be standardized (same communication) is a source of great discussion. Kahler and Kramer (1977) suggest Chapter 9 International Marketing Communications that successful standardization is dependent on the similarity of the motivations for purchase and the similarity of use conditions. For culture-free products such as industrial goods and some consumer durables, the purchase motivations are similar enough to permit high degrees of standardization. Culturebound products, in contrast, require adaptation. Customs, habits and tastes vary for these products, and customer reaction depends on receiving information consonant with these factors. It has been argued that ‘buying proposals’ (the beneits proposed in the advertisement) have a good chance of being accepted across large geographical areas, whereas the ‘creative presentation’ (creative treatment) does not. Essentially, if the international market had a similar set of needs and interests (to the established market), then a successful adaptation of the advertising message was more likely (as in the case of pattern advertisements – see ‘Central strategy and local production (pattern advertisements)’ below). Simon Majaro (1993) observed that the gap between the time a product reaches its decline stage in the most advanced market and the introduction stage in the slowest market is narrowing. If this trend continues, the point will be reached where the pattern of the life cycle in a domestic market will become identical with the pattern in the foreign markets. This will of course have a tremendous impact on the communications strategy of irms operating internationally. It would mean that in time it would become possible for the communications objectives of such irms to become more and more homogeneous, thus allowing for a larger measure of standardization. In other words, if the trend continues, it should become possible for the same campaign, subject to the manipulation necessitated by linguistic and cultural variations, to be undertaken in all markets. This is indeed the kind of standardization that Coca-Cola has achieved in world markets. This strategy stems in the main from the fact that the product life cycle proit of CocaCola is pretty homogeneous throughout the world. Rijkens (1993) conirmed the trend towards ‘greater internationalization and centralization’, where basic creative ideas are centrally produced for international use. Kahler and Kramer (1977) felt that transferability of advertising was dependent on the possibility of a more homogeneous consumer, who might, for example, evolve out of the ever-integrating European community. If the European consumer 217 showed a willingness to accept the products of countries within the community, and if that consumer was motivated similarly to consumers in other countries, a common promotional approach would be practical; but if national identities prevailed, separate campaigns would be more likely to succeed. Four global advertising strategies The four basic strategies available for global marketing communications are: 1 central strategy and production; 2 decentralized strategy and production; 3 central strategy and local production (pattern advertisements); 4 central strategy with both central and local production. Central strategy and production Advertisements are controlled and produced by the head ofice (or its agency). This includes message modiication, such as translations and tailor-made editions for various markets. Examples of centrally controlled and centrally produced advertisements include Coca-Cola’s emotion-packed ‘General Assembly’ advertisement showing the world’s children singing happily and harmoniously together, which was similar to their 1971 ‘I’d like to teach the world to sing’ (McCann) in that it was packed with emotion and carried a universal theme. The 21 language editions of this advertisement opened with ‘I am the future of the world, the future of my nation’ and ended with the tag line ‘a message of hope from the people who make Coca-Cola’. Each country then edited in its own end shot of the appropriate child’s face. Incidentally, the German edition was dubbed slightly out of synchronization, since Germans associate quality ilms with dubbed (slightly out of sync) US and British ilms. Scottie’s nappies save production costs by omitting any dialogue and just using a different voice-over for each country. Levi’s does not bother with voice-overs, dubbings or translations, as there is no dialogue – just music by Steve Miller. Its uniied logo and brand image does away with the need for different pack shots (close-ups of the pack/label) for each country, 218 Part 1 Communications Background and Theories so its commercials, produced by the London agency BBH, are used throughout Europe. Decentralized strategy and production Advertisements are controlled and produced by each local subsidiary and its agency speciically for the local market. This approach generates lots of different advertisements by the same company. Each division or subsidiary works with its own local agency to produce tailor-made advertisements for the local market. As well as being an expensive approach, it can destroy uniformity and a consistent global presence, but it does allow more creativity to suit the speciic needs of the local market. Different positionings in different markets do require different campaigns, sponsorship and retail strategies. For example, if Rolex epitomizes ‘achievement’ in New York and ‘trendiness’ in Tokyo, it must implement two of everything: two product lines (one stately, one lashy), two ad campaigns, two sponsorship series and two retail strategies (Doctoroff, 2005). Central strategy and local production (pattern advertisements) The pattern provides uniformity in direction but not in detail, which allows the advertisements to be locally produced but within the central strategic guidelines. This is where head ofice guides the strategic direction of the advertisements but allows local production. These advertisements work to a formula, or pattern. In the Blue Band margarine advertisements, whether in Scandinavia or Africa, the appropriate happy mother could be seen spreading margarine on bread with her happy family sitting around eating it. Impulse fragrance used a ‘boy chases girl’ formula across Europe, but still allowed for cultural idiosyncrasies like eye contact, sex appeal and law-abiding citizens to be tailored into each country’s different production. Renault’s panEuropean strategy was to ‘endow the car with its own personality’. In France the car was shown with eyes. In Germany the car talked back. In the UK the end line was ‘What’s yours called?’ Central strategy with both central and local production Centrally produced non-verbal commercials are used to build a uniied identity, while local productions supplement this platform. This is demonstrated by the Levi’s example given below. Although ‘standardized’ generally refers to production, it can also include centrally controlled media strategies, planning and buying. The centralized or standardized global campaign problems are discussed below. As Rijkens (1993) says: As far as advertising is concerned, the company will continue its policy of central production of non-verbal commercials and cinema ilms, to be shown throughout Europe and intended to establish a uniform identity for Levi Strauss as a business and for its products. Advertising produced locally by the Levi Strauss subsidiaries will respond to local circumstances and to the local competitive scene. This formula, also applied by other companies marketing a uniform product and using one advertising strategy on an international scale, has proved successful and may well be further developed once the single market really comes about. Advantages of central strategy and central production 1 Consistent image. A consistent image (and positioning) is presented around the world, allowing consumer awareness and familiarity to prosper. 2 Consolidated global position. It leaves the brand in a stronger position to protect itself from any attack. 3 Exploits transnational opportunities. It reduces message confusion arising when advertising in one country spills over to another (eg boundary-bouncing satellite TV) or when migrants and tourists physically travel to another geographical area (geographical segment). 4 Saves costs. Economies are enjoyed by not having several different creative teams (and production teams if central production) working on the brand around the world Chapter 9 International Marketing Communications (saves reinventing the wheel). There is the possibility of centrally produced (or at least centrally designed) point-of-sale material also. Levi’s has found that it saves £1.5 million by shooting a single TV ad to span six European countries (at £300,000 production cost per each one-minute TV ad). 5 Releases management time. It may also reduce the size of the marketing department, which might otherwise be tied up brieing creative teams, approving creative concepts, supervising productions, etc. It may even save time invested with packaging designers, sales promotion agencies, etc, if pack designs and promotions are run from a central ofice. 6 Facilitates transfer of skills. It does this within the company and around the world, since in theory it is the same job anywhere around the world. It also stimulates crossfertilization of company ideas if staff are moving around internationally. 2 3 4 5 7 Easier to manage. It is easier to manage centrally, since there is in total a smaller number of decisions and projects to manage: – One creative decision facilitates harmonization of creative treatments, particularly in areas of media overlap. 6 – Media policies – manage the media overlap between countries to maximize effectiveness and recommend preferred media choice in speciic territories. 7 – Budgets – determine local budgets for each product in each market so that the method of allocating resources is balanced. – Agree an activity programme and a speciic reporting system to facilitate easier management. 8 9 Disadvantages of central strategy and central production 1 Stiles creativity. It stops local creative contributions from both company staff and the local advertising agency (whether part of an international group or an independent agency). The account may be considered by the local agency staff to be dull and boring, 10 219 and the supposed ‘best brains’ (from the creative department) may avoid being involved with it. Frustrated local management. Although the local ofice may be accountable for its performance, it does not have control over its own destiny, since advertisements are centrally produced or directed. This may lead to a sense of frustration. Minimal effort from the local agency (if using an international agency with its network of overseas branches). The high global advertising spend may put the brand high on the agency’s head ofice list, but the local agencies may ind it is uneconomic to spend too much time and top brains on it. Lost opportunities. The opportunity to react quickly to changes in the local market is lost. Different product life cycles. Different markets may be at different stages of their life cycle, which may make the standardized approach unsuitable. It may, however, still be possible to standardize each stage of the brand’s development, eg Boots launch of Nurofen in the UK and northern Europe. Wrong idea. Some central advertising concepts may simply not work as well as a locally created original idea. Sales therefore perform below their potential. Dificult translation. Some ideas just do not lend themselves to translation, eg Pepsi’s ‘Come alive’ was translated in some countries as ‘Come from the dead’ or ‘Come out of the grave’. False savings. Local language adaptation or modiication costs may negate the cost savings generated by the centrally controlled creative work. Market complexities. The many other local market differences (eg variations in consumer protection regulations and media availability) may make a standardized message extremely dificult. Inexperienced staff. A lack of suitably qualiied expert staff who can manage the coordination of transnational standardized campaigns may make the whole centrally controlled advertising concept too risky. Part 1 220 Communications Background and Theories Rudyard Kipling’s advice to McDonald’s ‘Asia is not going to be civilized under the methods of the west. There is too much Asia and she is too old.’ Rudyard Kipling (1891) McDonald’s India now offers tailored products for the Indian market – mutton, chicken, fish and vegetable products, not beef, pork or their by-products. The Big Mac is called the Maharaja Mac. Agencies in the international arena There are several different types of agency from which an international advertiser can choose: ●● international agencies (multinationals); ●● independent networks, associations or confederations of agencies; ●● local independent agencies; ●● house agencies. In addition to deciding whether to centralize control over advertising (and effectively standardize it), the international marketing manager must decide whether to put all international advertising in the hands of one international agency or hand it out to local independent agencies. Many local independent agencies have grouped themselves into networks or associations, which means that they have a readymade network of contacts with the other network member agencies in the various international regions. A fourth and less common option is for the client to set up its own house agency speciically to handle its own worldwide advertising. Two options will now be considered: whether to choose a single international agency or several independent local agencies. Choosing an international agency or independent local agency This question is linked to whether the communications should be controlled centrally or left to run autonomously. Should the marketing team at headquarters work with just one large multinational advertising agency or should it allow a range of independent agencies to use its unique skills on a local basis? A coordinated message can be developed in either situation. For example, centrally produced advertisements (with local modiications, translations, etc) and pattern advertisements (formula advertising) can work under either system. Although a centrally produced advertisement is more likely to be handled by a large international agency, there are exceptions where local independent agencies with local media buying and production skills (if pattern advertisements are required) may be preferred. It is possible to choose to work with a range of independent local agencies while adhering to centralized policies. These policies can help the client to manage the whole advertising process by giving speciic guidance on creative directions, media strategies, budgets and activity programmes. As Majaro (1993) says, ‘Obviously where the product proile justiies communications standardization, it may be advisable to use the services of an international agency with ofices in all markets.’ Majaro continues: ‘Hoping to attain the same results by using a host of local agencies with no international expertise is a formula for waste in worldwide marketing.’ Advantages of using an international agency Compared to local agencies, the international advertising agency claims the following advantages: ●● Full service – because of the international agency’s size, it can offer a full range of services, including research, planning and translation, under one roof. ●● Quality – some clients feel reassured by the quality feeling of a large international agency (as opposed to taking a chance with a smaller local agency). Quality and standards should, in theory, be universal. ●● Broad base of experience – training and transferring personnel is common among the international agencies. ●● Presence in major advertising centres – the agency branches are located at the centre of most major cities or marketing territories. Chapter 9 International Marketing Communications ●● Cost saving – less duplication in areas of communication, creative and production departments. ●● Easier to manage – a single central contact point combined with the points listed in ‘Advantages of central strategy and central production’ on page 218. Disadvantages of using an international agency It is arguably easier for a single international agency to standardize the message. The disadvantages of standardization (see page 219) therefore apply where central control moves in. In addition, the overseas subsidiary may lack enthusiasm if the account was won elsewhere. It is as if, by necessity, various branches of the international agency are brought in. The lack of excitement may be compounded, particularly where all the creative work has been handled by head ofice. In a sense, the branch’s job is relegated to media scheduling and planning. The key to successful central communications ‘If Shakespeare and the Rolling Stones can do it, so can advertising.’ Maurice Saatchi Rather than engaging in high-risk new product development many corporations prefer to consider the lower-risk new market development approach. Harmonization of brand strategy across different markets has been on the agenda for years. Making it actually happen is another thing altogether. Take advertising: although more and more advertising is used in more than one country, only some of it works successfully. Understanding the disadvantages in addition to the advantages is the irst step towards implementing centralized communications. Identifying the barriers reveals the levels of resistance among distant marketing managers. It follows that internal marketing skills are also required. Before international 221 communications are standardized (centralized), management thinking must irst be harmonized internationally. Diminishing local autonomy without diminishing local responsibility requires skilful management handling. Indeed, maintaining management motivation requires people skills, particularly when their responsibilities for advertising budgets are being slashed. Many local managers will perceive the central advertising campaign to be dull and disappointing because it is based on the lowest global common denominator – those common cross-cultural characteristics that somehow ind commonality across borders that can result in dull ideas. Inspiring managers to continue to excel under a blanket of apparently bland advertising is a challenging job. It becomes more challenging the longer internal communications are delayed. Global cross-fertilization Reckitt Benckiser (RB) may have low corporate brand recognition, but its 17 ‘powerbrands’ include the well-known Dettol, Clearasil, Nurofen, Vanish and Strepsil. ‘RB has grown faster than its competitors – P&G, Unilever and Colgate – in the last few years, despite the recession. The most distinctive aspects of the company are its people and culture: it has spent 10 years building up a culture of global mobility amongst its employees. For example, an Indian runs its Chinese business, while a Frenchman heads up its Russian organization. This means that many of its products – 35% to 40% in the last three years – are the result of global cross-fertilization.’ Becht (2010) International marketing communications require even more attention to detail than domestic marketing communications. But, even closer to home, care is required to ensure the correct translation processes are in place. A process is required to ensure copy is sent off for translating, translated, double-checked and then uploaded into the correct section of the foreign language site. This is particularly needed when using free machine translations 222 Part 1 Communications Background and Theories Swansea Council translation process gone wrong A sign that read ‘No entry for heavy goods vehicles. Residential site only’ was sent, by e-mail, for translation into Welsh. As the translator was not in the office, an auto-response e-mail was returned to the sender saying: ‘Nid wyf un y swyddfa ar hyn o bryd. Anfonwch unrhyw wiath i’w gyfieithu’, which means ‘I am not in the office at the moment. Please send any work to be translated.’ Since the original message had two sentences, it was assumed the Welsh message was the translation, and the sign was duly printed and erected. like Google Translate. For example, the word ‘home’ is automatically translated into maison, the French for ‘a home to live in’ (as opposed to ‘home page’). In Italy, machine translation for the word ‘hi-i’ generates a machine translation of ciao­i. Ciao means hi or hello. In conclusion International markets present many challenges and many rewards. There are many similarities amongst customers around the world, but there are also many differences lurking below the surface. Even more attention to detail is required in international markets, as the opportunities for errors increase. Systems, processes and teams have to be harnessed to make it all work successfully. key points from Chapter 9 ●● The globalization of markets is ongoing. ●● There are, however, cultural idiosyncrasies that need to be accommodated. ●● There are many other challenges that arise in international markets beyond just culture, including language, media, laws (or lack of them) and much more. ●● The classic errors are made even by the big established brands. They can be avoided by checking and researching. references and further reading Ahonen, T and Moore, A (2007) Communities Dominate Brands, Future Text, London Anholt, S (2001) Another One Bites the Grass, Wiley, Chichester Becht, B (2010) How I did it: Building a company without borders, Harvard Business Review: The Magazine, April Brown, P (2004) Microsoft pays dear for insults through ignorance, Guardian, 19 August Chaffey, D and Smith, P R (2008) eMarketing eXcellence, Butterworth-Heinemann, Oxford Doctoroff, T (2005) Billions: Selling to the New Chinese Consumer, Palgrave Macmillan, New York Dudley, J (1989) Strategies for the Single Market, Kogan Page, London Ferraro, G P (2001) The Cultural Dimension of International Business, 4th edn, Prentice Hall, Englewood Cliffs, NJ Geertz, C (1983) The Interpretation of Cultures: Selected essays, Hutchinson, London Harvey-Jones, J (1988) Making It Happen: Relections on leadership, Collins, London Inskip, I (1997) Marketing international brands in Asia needs fresh thinking, Marketing Business, May Julian (2009) The ‘lucky seven’ tips when collecting payments from overseas companies, Octempo: RM Blog, 18 December Kahler, R and Kramer, R (1977) International Marketing, South-Western Publishing, Cincinnati, OH Kashani, K (1989) Pathways and pitfalls of global marketing, Marketing Business, June Keegan, W J and Schlegelmilch, B B (2001) Global Marketing Management: A European perspective, Financial Times/Prentice Hall, Englewood Cliffs, NJ Chapter 9 International Marketing Communications Kotler, P (2002) Marketing Management: Analysis, planning, implementation and control, 11th edn, Prentice Hall, Englewood Cliffs, NJ Majaro, S (1993) International Marketing, 2nd edn, Allen & Unwin, London Mazur, L (1997) Successfully managing cultural differences, Marketing Business, September Mead, G (1993) A universal message, Financial Times, 2 May Mole, J (1998) Mind Your Manners, Nicholas Brealey Publishing, London Morris, D (1988) Watch your body language, Observer, 23 October 223 Pike, K (1966) Language in Relation to a Uniied Theory of the Structure of Human Behavior, Mouton, The Hague Rijkens, R (1993) European Advertising Strategies, Cassell, London Universal McCann (2007) Power to the people: Tracking the impact of social media wave, 2.0, May Usunier, J C (2000) Marketing across Cultures, Financial Times/Prentice Hall, Englewood Cliffs, NJ Winick, C (1961) Anthropology’s contribution to marketing, Journal of Marketing, 25 Young, L (1987) Love around the World, 2nd edn, Hodder & Stoughton, London 224 THIS PAGE IS INTENTIONALLY LEFT BLANK 225 10 The marketing communications plan lEaRNINg ObjEcTIvES By the end of this chapter you will be able to: ●● Write an outline marketing communications plan ●● Understand the importance of gathering intelligence and research for the situation analysis before writing the rest of the plan ●● Explore strategy, knowing that it is an area of weakness for most organizations ●● Establish control systems The SOSTAC® planning system The 3Ms 226 Budget setting Action 229 Control Segmentation and target marketing Decision-making units 237 240 and recommendation score 231 231 B2B (industrial) segments 232 Segmentation requires careful 232 (social media monitoring) 242 Return on investment 243 references and further reading 244 Further information 244 Objectives 233 Marketing objectives 233 Communications objectives 242 Reputation/social conversation scores 231 B2C (consumer) segments analysis 235 net promoter score, satisfaction score 229 Global segments Strategy Tactics 237 227 Situation analysis 226 234 Part 1 226 Communications Background and Theories Outline marketing communications plan: the SOSTAC® planning system There are many different approaches to building a marketing plan or, more speciically, a marketing communications plan. There is no single common approach, but there are essential elements that every plan must have. SOSTAC® (P R Smith, 1998) is a simple aide-mémoire that helps managers to recall the key components of a marketing communications plan. SOSTAC® can in fact be applied to any kind of plan – a corporate plan, marketing plan, marketing communications plan, social media plan, direct mail plan or even personal plan. S – Situation analysis (where are we now?). O – Objectives (where do we want to go?). S – Strategy (how do we get there?). T – Tactics (the details of the strategy). A – Action (or implementation – putting the plans to work). C – Control (measurement, monitoring, reviewing and modifying). SOSTAC®’s simple structure is applicable at different levels and in different situations. In each chapter in Part Two, SOSTAC® is applied at a lower level for each of the communications tools, an advertising plan, a direct mail plan, etc. SOSTAC® can also be used to check other plans to see if they are comprehensive and cover the key items that every plan needs. You don’t have to use the same terminology, or even the same sequence, but SOSTAC® should help the development of a logical structure combined with the key elements of a plan. SOSTAC® has been adopted as a planning system by literally thousands of managers worldwide, including: ●● Sam Howe, Director of CATV Marketing, Southwestern Bell: ‘SOSTAC® is a great approach for anyone going ahead and building a marketing plan.’ ●● David Solomon, Marketing Director, TVX: ‘It appears that we are following the principles of SOSTAC®.’ ●● John Leftwick, Marketing Director, Microsoft UK: ‘We use SOSTAC® within our own marketing planning.’ ●● Peter Liney, BA Marketing Manager: ‘I think SOSTAC® is very good in terms of identifying, if you like, major component parts of what you’re doing in marketing.’ Philip Kotler acknowledged the simplicity and usefulness of this approach to planning when he said: ‘SOSTAC® is a system for going through the steps and building a marketing plan’ (Kotler, 2001; Smith, 2004). SOSTAC® provides an outline or a structure upon which a comprehensive plan can be built. A real plan requires much more detail, and the irst component, the situation analysis, is often considered so important that it can take up half of the total plan. Objectives and strategies should be written in a concise manner, while the tactics and action plans can require a lot of detailed planning. Control, feedback and monitoring mechanisms should be built into the plan so that managers know if the plan is succeeding or failing early on rather than at the end of the year, when it is too late to change. So SOSTAC® and the 3Ms (the three key resources) provide a simple approach for building a marketing plan (and marketing communications plans in particular). The 3Ms Every plan must include the three key resources, the 3Ms: 1 men/women (the human resources); 2 money (budgets); 3 minutes (time). Men/women are the human resources: who is required to do what? It means professional men and women skilled and capable of handling speciic activities. Some can be drawn from within the organization; others have to be brought in from an agency or consultancy or recruited as full-time members of staff. Many organizations may not have this calibre of person or, if they do, these people may be kept so busy that they cannot do any additional tasks. Is it worth asking over-busy people to give half their attention to a project or asking under-qualiied and underutilized people to have a go? Perhaps the Chapter 10 marketing communications task is too important to be casual? There is no doubt about the importance and limited supply of the human resource. Minutes, the third M, is the most limited resource – time. Is there enough time to do the job, to carry out the research, to develop a new pack, to prepare properly for a good mailshot, etc? Timescales are fundamental. Without them any plan becomes uncontrollable, because there are no time-related milestones. Timescales for objectives, and deadlines for each activity (eg proposals, concept development, concept testing, regional testing, national roll-out, European launch), are required. How much lead time do you need if you want to launch a new toy at Christmas? When should the product be ready? In February, if it is going to make the New York Toy Show, when major US retailers place their orders. How long would a new pack take to create? Six to nine months. So, even if you allow four months to develop a mailshot and simultaneously four months for a TV advertisement, you still need a total of 18 months for the pack and exhibitions. Managers have to manage teams of people who have different attitudes to deadlines. Time is a precious commodity and deserves careful attention. Some consider it now to be the currency of competitive advantage. Whooshing deadlines ‘I love deadlines. I like the whooshing sound they make as they fly by.’ The late Douglas Adams Money means budgets, and senior management will tend to scan budgets irst and foremost. There are many different ways of setting marketing communications budgets, and there is not a generally agreed methodology but rather a whole range of approaches that can be described as either scientiic or heuristic. Managers tasked with setting a budget ask themselves a series of ‘What if?’ questions about what would happen if a particular strategy and series of tactics are pursued. A combination of judgement, experience and rational evaluation is applied to develop an appropriate budgeting method for organizations. The Marketing Communications Plan 227 Budget setting Outlined below are the most common forms of budgeting: 1 Objective and task – identifying the overall objectives and then breaking these down into speciic tasks and calculating the budget accordingly. For example, to sell x million cans of Coke would require x per cent levels of awareness, which would require x number of impressions, which would require x amount of advertising, which would cost £x. This is sometimes called the ‘ideal’ or ‘task’ approach. 2 Modelling involves the use of a variety of econometric and simulation techniques to determine how various budget levels may affect performance (eg sales). An example of this is Unilever’s AMTES area market-testing model. 3 Proit optimization tries to ind the optimum marketing spend that would generate the most proit. It is based on ensuring that the marginal revenue derived from each marketing communications activity exceeds the marginal cost. 4 Percentage of sales is a crude but quick way of calculating a budget. For example, taking 5 per cent of £1 million forecasted sales means the marketing budget is £50,000. In B2B markets, the percentage ranges from 0.5 to 2 per cent, and in B2C markets it ranges from 5 to 20 per cent. 5 Competitive parity analyses competitors’ marketing communications spends. Basically, it suggests that if an organization wants to match a competitor it should spend the same amount as that competitor. 6 Affordability is usually driven by accountants, who draw up business plans, work out proitability and then allocate some budget to marketing based on what is left over or affordable. This is the opposite of the objective and task method. It is based upon what is affordable after talking all costs and an amount of proit away from sales. 7 Payback period is the time taken for an integrated campaign to pay back the costs (or budget) of the marketing communications. 228 Part 1 Communications Background and Theories 8 Arbitration requires a senior member of staff to arbitrate between different views of the marketing team and the rest of the business. Some academics categorize these different budgeting approaches as scientiic and heuristic. Scientiic planning approaches include: objective and task; modelling; payback period; and proit optimization. Heuristic planning approaches include: percentage of sales; competitive parity; affordability; and arbitration. Marketers inevitably have to justify to the inancial director the actual return on investment (ROI) of the marketing communications investment. ROI calculates the proit (created from the extra sales generated from the integrated marketing communications campaigns) as a percentage of the investment. This can be done for the whole mix or, more easily, for a speciic marketing communications tool such as an advertising campaign or even a tool such as exhibitions (see ‘costs’ on page 408). The usefulness of ROI is debated in the section ‘Control’ below. In reality several budgeting approaches are used. Although a manager might use the ideal task approach, the review panel (of senior management) will immediately convert it into a percentage igure, compare it with the competition’s spend and ask ‘Can we really afford it?’ and ‘Does it deliver the required level of proits?’ It is not unusual to ind the initial budget request cut back by senior management as other divisions and departments compete internally for limited funds for the following year’s marketing. Few companies have sophisticated optimum proit models that attempt to identify the optimum spend. Allocating budget between online and offline marketing The answer lies in where customers are spending their time consuming media, interacting with colleagues and engaging with particular types of brands. This determines where the budget should be allocated, eg if a particular audience spends 50 per cent of its time on online then 50 per cent of that target market’s budget should go online. However, Forrester Research (2009) forecasts that by 2014 only approximately 21 per cent of total marketing budgets will be allocated to interactive marketing (search marketing, display advertising, e-mail marketing, social media and mobile marketing). It is likely that search and mobile will take a larger portion of the budget. Allocating budget between customer retention and customer acquisition Another interesting question is how to split the budget between customer retention and customer acquisition. If selling to existing customers is supposed to be on average six times more proitable than selling to new customers, there is a school of thought that suggests that marketers should spend at least equal resources on 1) keeping customers happy (eg CRM) and 2) acquiring new customers. Businesses like Amazon reportedly pay £50 to acquire a customer, and Virgin pays up to £150 (a free laptop), while Reichield (2006) estimated the Dell average customer to be worth $210 (iveyear net present value), with a detractor (someone speaking negatively about Dell) costing $57 and a promoter generating $328. In the world of online marketing it is increasingly easy to calculate the cost of customer acquisition. See the section ‘Control’ at the end of the chapter. Allocating budgets to social media A burning question emerging across all markets is ‘How much resource should we allocate to social media?’ It really depends on the strategy and how active an organization wants to be. At a minimum, any marketer needs to have someone listening to conversations, participating in discussions and ultimately driving the discussions. Beth Kanter (2008) suggests 55–75 hours per week for a nonproit-making organization: ●● Listen to Google alerts, Technorati, Twitter, and RSS readers. The key skill is pattern analysis. (5 hours per week) ●● Participate. Join the conversation direct or via other bloggers. (10 hours per week) ●● Generate buzz. Buzz tools include FriendFeed, Twitter, StumbleUpon and Digg. (10–15 hours per week) ●● Share your story – blog, podcast, Flickr, YouTube and social networks. (10–15 hours per week) Chapter 10 ●● Community building and social networking. Nurture a community – Ning and LinkedIn. (20 hours per week) So SOSTAC® + 3Ms works for any type of product or service in both consumer and business-to-business markets, as demonstrated in the short case studies used in this book. Although the case studies provide only an outline plan, they show how easily SOSTAC® can be applied to either planning the overall marketing communications or just planning a campaign for a single communications tool such as direct mail. In reality, the plan would cover a lot more detail. Consider now each SOSTAC® component in more detail. Situation analysis The situation analysis needs to be comprehensive. Over 2,000 years ago Sun Tzu wrote The Art of War (Wing, 1989), which has become a classic read, particularly for some enlightened marketing managers. Here is an excerpt: Those who triumph, Compute at their headquarters A great number of factors Prior to a challenge. Those who are defeated, Compute at their headquarters A small number of factors Prior to a challenge. Much computation brings triumph. Little computation brings defeat. How much more so with no computation at all. By observing only this, I can see triumph or defeat. The analysis should include a review of the performance (sales, market share and proitability) during the most recent period. Comparisons with previous years reveal any trends, and comparisons against competitors reveal relative performance. The analysis should include a summary review of the overall marketing performance, the marketplace, the competition, and strengths and weaknesses. The marketing communications plan does not require a full SWOT analysis, which is usually found in the full marketing plan. The situation analysis in the The Marketing Communications Plan 229 marketing communications plan must keep the focus on communications aspects such as performance (identifying which elements of the communications mix work best), target markets and positioning. It should certainly include an explanation of the product or service’s positioning – how the product is perceived in the minds of the target market. Lucozade was positioned as a sick child’s drink until the marketing people saw a bigger opportunity and repositioned it as a healthy adult’s drink. Perceptual maps plot where different brands and product types are positioned on certain criteria, as shown in Figure 10.1. The situation analysis can include a PEST analysis speciically relevant to communications, eg political (what new laws or regulations affect communications); how economic luctuations might affect media and messages; social trends and changes in attitudes and media usage; and technology’s fastchanging impact on communications. A vital part of any analysis is the market and its structure. How is it segmented? What are the most suitable segments that can become target markets? Are the target markets big enough? Are they proitable enough? Are they vulnerable to competition? Do the existing distribution and communications channels serve them properly? Are customers satisied in each target market? Do they intend to repurchase? Who is involved in the decision-making unit (DMU)? Do the key opinion leaders and opinion formers support the brand? Segmentation and target marketing Segmentation and target marketing are so important that they appear almost everywhere in a marketing plan: in the situation analysis in detail, in the objectives briely and in the strategy (as a fundamental component); they are also referred to in all tactical campaigns and events. Target marketing involves the division of a large market into smaller market segments. Each segment has its own distinct needs and/or its patterns of response to varying marketing mixes. The most attractive segments are targeted according to the organization’s resources. Attractive target markets are those that will generally be more proitable, eg segments located closer to the organization, or loyal customer groups, or heavy users of a particular Part 1 230 Communications Background and Theories F I g u R E 10.1 A perceptual map showing Lucozade’s classic repositioning from a sick child’s drink (when the UK had a disproportionately large child population) to a ‘healthy adult’s drink (when the UK demographic shifted to a disproportionately large young adult population) Adults � Sick Healthy � Children product or service. Targeting reduces wastage of resources (eg money spent on mass advertising) and, ultimately, it increases sales, since better-prospect customers are contacted. Segmentation and target marketing are absolutely fundamental approaches to marketing. Some communication channels are more wasteful than others, eg TV, but the Target Group Index (TGI) (see Chapter 6) helps to identify what kind of brands people buy, the papers they read, the programmes they watch, etc. As mass markets fragment and splinter into mini-markets or segments, and technology provides more tailored communications, there is less requirement for mass marketing and mass communications. The ability to segment a market accurately is a key skill that marketers need to spend time on again and again, revisiting their marketplace and thinking about how it can be broken into segments. ●● Accessible. Can this group be contacted? Can they be isolated or separated from other non-targeted markets? Are there speciic media and distribution channels that provide access to them? ●● Relevant. The beneits of the product or service being offered must be relevant to the target. There is no point picking measurable, accessible and substantial segments if they have no interest in what is being offered in the irst place. Know your own customers. Knowing the ideal customer’s proile is fundamental to success. Some database companies actually carry out ‘proiling’ or an analysis of an organization’s own customers into groups with distinctive proiles. This helps in targeting the appropriate message through the appropriate medium. Segment criteria Ideally, segments should satisfy the following criteria: ●● ●● Measurable. Is it quantiiable? Can buyers who fall into this category or segment be identiied? Substantial. How many buyers fall into this segment? Is there a suficient number of buyers in the segment to warrant special attention and targeting? £50 Rembrandt A Rembrandt probably would not sell (even for £50) in the wrong target market, whereas in the right target market it would fetch several million pounds. Chapter 10 Some segments are obvious. Cat food is bought by cat owners, petrol is bought by motorists, and heavy-duty cranes are bought by both large construction companies and leasing companies. Other segments are less obvious. Expensive cars are bought by high-income groups, while cheaper cars are bought by both high-income groups (as a second or third car) and low-income groups. Who are the heavy users, eg who are the 9 per cent of the UK adult population who drink 65 per cent of the lager consumed? Who are the buyers? Gift boxes of chocolates are bought for women by men. Who are the deciders? Cola drinkers may tend to be young, but who does the buying, who makes the decision, who inluences and who pays? This is where segmentation focuses on the decision-making unit. Decision-making units The DMU is made up of inluencers, advisers, deciders, users, buyers and payers. It applies to all types of markets (industrial, consumer, products and services). A baby’s pram may be used by mother and child, bought by the mother and father, inluenced by the grandmother, and decided on by the whole family. Similarly, the purchase of a new photocopier may have been instigated by a secretary who keeps complaining to the boss about the old machine breaking down. The end user may be several secretaries; the decider may be the inancial director; the buyer may be the organization’s professional buyer or the managing director. In some organizations the DMU may be a committee. In other organizations there is a central decision maker, or there may be a decentralized approach with each branch or region making its own decisions. The acronym SPADE (starter, payer, adviser, decider, end user) helps to identify some of the different members of the decision-making unit. The DMU can consist of several people or committees, or it can sometimes be just one person. There is one other inluential member of a businessto-business or industrial DMU, and that is the ‘gatekeeper’, who acts as a screen and sorts out unsolicited sales pitches from more important incoming communications. The gatekeeper is often a secretary or personal assistant, who may decide whether to interrupt a manager with a phone call or allow a direct mailshot to land on the manager’s desk. The Marketing Communications Plan 231 Global segments Segments do not always have to be localized or deined on a geographic basis. Values, attitudes and lifestyles (VALs) can be used to identify crosscultural common characteristics. For example, the advertising agency Euro RSCG identiied the four main European psychographic segments as follows: 1 modern materialists: 117 million (acquire goods and services); 2 new radicals: 50 million (concerned with change and reform); 3 get what you deserve: 110 million (more conservative and resistant to change); 4 bygones: 83 million (oldest, most moralistic group, threatened by consumerism). Global idiosyncrasies complicate the supposedly simple global segments. Chapter 9 looks at the international arena in more detail. Global convergence ‘So tastes are converging and to discover that all you have to do is talk to my teenage son. I have taken him with me on trips all over the world and I keep introducing him to a local boy who he can spend the day with to learn something about the life in those countries. And in every country he’s visited, whether it is Jakarta, Indonesia; São Paulo, Brazil; Manila in the Philippines or a small town in The Netherlands, he has spent the day exactly the same way. They have gone to a local shopping mall, played video games and eaten a McDonald’s hamburger.’ Kanter (2001) B2C (consumer) segments Segmenting markets into groups of buyers and targeting those groups that are more likely to be the best customers are absolutely vital if marketing communications are to be both effective and eficient. Markets can be broken into segments using many different criteria. Here are some typical consumer criteria: Part 1 232 ●● Communications Background and Theories demographics: – age; – job type (socio-economic groupings); ●● geodemographics: geographical location, type of neighbourhood and demographic data; ●● psychographics; ●● lifestyle: see Chapter 6, ‘The Target Group Index’; ●● attitudes, beliefs and intentions (as above); ●● beneits sought: see Chapter 4, ‘The toothpaste test’. Floating targets Many markets have a floating percentage who move in and out of the market. Take insurance. Like most financial services, it is considered to be so dull and off-putting that most people rather not think about it. So, if customers reluctantly review, say, their insurance suppliers every 4 years, then you have only got 25 per cent of the market active each year. Divide this by 12 months and you have only got approximately 2 per cent of the market active in any particular month. That’s why there is no point advertising specific product benefits when the ‘active’ market is so small. Instead, many brands just want to maintain awareness levels, so that they are at least considered when the customer becomes ready to buy. B2B (industrial) segments In industrial markets and business-to-business markets, segmentation criteria are different but nonetheless vital. Here are some commonly used segmentation criteria for industrial markets: ●● ●● ●● ●● ●● ●● ●● ●● type of company (Standard Industrial Code – SIC); size of company; structure of company (autocratic vs centralized); location or geographical area; heavy or light users; existing suppliers; beneits sought; title or position of key decision makers. Most airlines target at least two different segments on each plane: the business traveller and the leisure traveller. These segments can be further segmented, eg the business traveller may be divided into club class, executive class and so on. These can be further divided into different beneit segments, eg those who want a fast check-in, those who want frequent lights, those who want top-class in-light service, those who want a reasonable price, and those who want ‘seamless travel’ (connections for the next light, cars and hotels all booked for them). Most travellers want all of these beneits, but usually consider some more important than others, so much so that they choose one airline over another because of a particular key beneit. If this type of lier proves to be signiicant in number, then it is a valid segment. The organization then decides if it has the resources and sustainable advantages suitable to target this segment. To continue the airline example, Transavia Airlines segmented various companies that might have had some connection with the Netherlands (and therefore might have had a need for its services) into ive different target groups of business liers and travel agents. As shown in Figure 10.2, a different communications strategy was developed for each segment. A gift/food hamper and a boxed presentation were delivered personally by the sales manager to those accounts (customers) that warranted this kind of attention (resources). Lighter users had a smaller mailing. Top travel agents got a boxed mailing, while other travel agents just got a mailing. Segmentation requires careful analysis In reality, all the target customers rarely fall neatly into one single segment, eg 67 per cent of the Sun’s customers might be C2DEs and 33 per cent ABC1s. As mentioned, not all buyers of small cars are in lower- to middle-income groups. Many small cars are bought by mid- to higher-income groups as a second or third car in the family. There is, however, usually a core target made up of heavy users or easily convertible prospects, eg Lyons Tetley’s Quickbrew tea is targeted at women aged 35+ (core C1C2D). Some markets have several people involved in the decision making (DMUs). For example, the advertising campaign promoting Shell’s free miniature Chapter 10 F I g u R E 10 .2 The Marketing Communications Plan 233 Business traveller segments and communications mixes 50+ trips per annum 5–50 trips per annum <5 trips per annum Top travel agents Other travel agents Hamper and boxed mailing Boxed mailing Mailing Boxed mailing Mailing Telephone and reps visit Telephone and reps visit Telephone follow-up Telephone and reps visit Telephone follow-up classic sports car collection was aimed at ABC1 fathers aged between 25 and 64 with children aged three to nine; within this they also had to ensure high coverage of high-mileage drivers (heavy users). Other markets have customers who drift into the marketplace and then out again, as in the case of inancial services. However, sophisticated technology can help the marketer today by adding new segmentation variables on top of the traditional variables. For example, it will be possible to segment buyers by their brand purchases and their stockholding (in the fridge) as well as the usual age, income and geographic criteria. Infomediaries (owners of information), such as manufacturers of fridge-freezers with inbuilt online capacity to reorder automatically when products are taken out of the fridge, hold valuable data about customers’ stock levels. If consumers agree to share this information with other third parties, this opens up interesting segmentation opportunities. For example, Pepsi might like to make a special offer to a ripe segment like Coca-Cola consumers who are out of stock. It’s worth considering how this might apply in the B2B sector, eg ofice stationery or software supplied by an intermediary. Objectives After analysing the situation through secondary and primary sources (see Chapter 6), a clear picture of ‘where we are now’ emerges. The next step is to deine as speciically as possible ‘Where do we want to go?’ Ideally objectives should be quantiied in terms of success or failure criteria. Timescales should also be set. Clearly deined objectives make the management task of control much easier. Drawing up objectives for the irst time is a dificult task. In future years, the previous year’s objectives and corresponding results will help to make the planning job a little easier, as everyone has a better idea of what is realistic and what is not. Establishing clear objectives is necessary to give a focus to the organization or division. Clear objectives also give direction to subsequent creative efforts. Some marketing managers and agencies break objectives into many different types; other marketers use just one set of objectives (and sometimes without quantiication or numbers attached). As a discipline it is useful to break up objectives so that performance can be measured more accurately. Objectives should be SMART: S – speciic M – measurable A – actionable R – realistic T – time speciic Two types of objectives are examined here: marketing objectives and communications objectives. Marketing objectives Typical marketing objectives refer to sales, market share, distribution penetration, launching a number Part 1 234 Communications Background and Theories of new products, and so on. For example, marketing objectives might be: ●● to increase unit sales of product/brand X by 10 per cent over the next 12 months; ●● to increase market share by 5 per cent over the next 12 months; ●● to generate 500 new enquiries each month; ●● to increase distribution penetration from 25 per cent to 50 per cent within 12 months; ●● to establish a network of distributors covering Germany, France, The Netherlands and Italy during the irst six months, followed by Switzerland, Austria, Belgium and Luxembourg in the second six months. It is worth noting that not all marketing objectives are growth oriented. In Denmark, electricity boards no longer pride themselves on how much electricity they sell but on how little. Product withdrawals are another example where objectives are not attached to year-on-year growth. In very competitive mature markets, with new entrants appearing on the market, maintaining market share and consolidating sales might be more appropriate than expecting big growth. Given that marketing is shifting towards retention of proitable customers and deselection of unproitable customers (see page 63), the emphasis in some companies has moved from growth in turnover or sales to growth in proit or ROI. DAGMAR Unawareness Awareness Comprehension Conviction Action Here are some examples of communications objectives: ●● to increase awareness from 35 per cent to 50 per cent within eight weeks of the campaign launch among 25- to 45-year-old ABC1 women; ●● to position the service as the friendliest on the market within a 12-month period among 70 per cent of heavy chocolate users; ●● to reposition Guinness from an old, unfashionable, older man’s drink to a fashionable younger person’s drink over two years among all 25- to 45-year-old male drinkers; ●● to maintain brand X as the preferred brand (or number one brand) of photocopiers among at least 50 per cent of current UK buyers in companies with 1,000-plus employees; ●● to include Bulgarian wines in the repertoire of possible wine purchases among 20 per cent of ABC1 wine buyers within 12 months; ●● to support the launch of a new shop by generating 50 per cent awareness in the immediate community one week before the launch; ●● to announce a sale and create 70 per cent awareness one day before the sale starts; ●● to reposition the European as an upmarket business paper (from a general mid-market newspaper) (see Figure 10.3). Communications objectives These typically refer to how the communications should affect the mind of the target audience, eg generate awareness, attitudes, interest or trial. Again, these tend to be most useful when quantiied. DAGMAR (deining advertising goals for measuring advertising responses) and AIDA (attention, interest, desire, action) provide yardsticks for communications objectives by trying to separate the various mental stages a buyer goes through before buying. (The response hierarchy models are discussed in Chapter 4.) The mental stages suggested by DAGMAR and AIDA are as follows: AIDA – Attention Interest Desire Action The European newspaper positioned itself in new market space, where the management saw a gap in the market. But was there a market in the gap? No other paper was offering a high-quality, European business newspaper. Was there a real need for a weekly European newspaper at that time? The European has now ceased publication. Chapter 10 The Marketing Communications Plan 235 F I g u R E 10 .3 Repositioning the European newspaper from a medium-quality newspaper to an upmarket European business newspaper European business news � Low-quality mass market High-quality upmarket � General European news Objectives can cover a variety of goals. It is useful to separate marketing objectives from marketing communications objectives. Detailed, speciic objectives ensure that the subsequent choice of strategy is clearly focused. Marketing communications strategies are hard to ind. Often the strategy is retrospective in so far as the tactics are planned and then a strategy is created to make sense of the tactics. This is far from ideal. One aide-mémoire for the components of marketing communications strategy is STOP & SIT: Segmentation (how is the market broken up?) Strategy Strategy summarizes ‘how we get there’ – how the objectives will be achieved. Strategy drives tactics in the same direction. Strategy summarizes tactics. Communications strategy helps to harmonize and integrate all of the tactical communications tools. Communications strategy can include selection of target markets, positioning, selection of communications tools, sequence of communications tools (are different tools used at different stages?), and more. Most of us are afraid of strategy... ‘. . . because we don’t feel confident outlining one unless we’re sure it’s going to work.’ Godin (2009) Target markets (what target markets are chosen plus who is the ‘ideal customer’?) Objectives (strategy must fulil objectives) Positioning (of the product or service, which also drives the overall proposition) and Stages (is there a sequence or series of stages?) Integration (does it all integrate smoothly, perhaps through a database?) Tools (TV, opt-in e-mail, PPC or social media, etc? Or, if you are considering using a social media strategy, you should state clearly whether you build your own network or use someone else’s) Ideally the communications strategy should succinctly answer all of these questions. Objectives, by the way, don’t have to be regurgitated, but do keep an 236 Part 1 Communications Background and Theories eye on them, as any strategy that ignores objectives is a waste of time. Razor-sharp strategies are required now more than ever before. A lot of people work very long hours, and they are very loyal and committed people, but if the strategy is wrong all that hard tactical work is wasted. sales, generate revenues and justify their existence. So seemingly self-indulgent navel gazing such as strategic contemplation may not always appear worthwhile – in the immediate term. But, beyond the immediate term, a good strategy will reap many beneits. Smith, Berry and Pulford (1999) ‘There’s no point rowing harder if you’re rowing in the wrong direction.’ Ohmae (2000) Here are ive examples of marketing communications strategy taken from Smith, Berry and Pulford’s Strategic Marketing Communications (1999), each demonstrating a very different approach: ●● Tupperware marketing communications strategy. ‘A multimillion-dollar directresponse campaign… the company maintained its personal selling approach but modiied its party format to accommodate the increasing limitations for working women… installed a toll-free number to link customers to a local dealer… catalogues were originally available only for dealers, hosts and hostesses, they were made accessible to everyone and reached 30 million people’ (adapted from Engel, Warshaw and Kinnear, 1994). ●● IBM insurance marketing communications strategy. Position the business as a solution provider that fully understands client needs and is easily able to provide complete and successful solutions. All communications reinforce the company’s unique capability, which combines marketing and IT in an integrated manner. The key target group is ‘European insurers with medium to large customer bases (usually over 1 million)’. All communications are below the line, editorially driven, and drawn from sound research into leading-edge solutions. The published papers are used across a series of public conferences, own conferences and training awareness days, along with a constant media relations campaign. ●● ETC human resource company’s marketing communications strategy. A client relationship strategy focusing on a few key sectors (industry, health, local government and inancial services) instead of the previous machine-gun (broad advertising) approach. Direct mailings and seminar events aimed at key opinion formers developed through Positioning is strategic. Careful analysis is required to ind a positioning that is actually needed by customers, that is not delivered by the competition and ideally that the organization can genuinely deliver better than competitors. Some brands may be strategically positioned to ill different gaps in the marketplace. Getting it wrong can destroy a business, and getting it right can save a business. Radical repositioning strategy: Reebok reposition from fashion to action Adidas repositioned Reebok from ‘fashion’ to ‘action’. It’s previous positioning as street-cred fashion with endorsements by rappers like Jay-Z and 50 Cent is being changed to ‘sports performance’. WARC (2006) Developing good marketing communications strategies requires careful consideration. Although occasionally frustrating, it is worthwhile because: developing marketing communications strategies delivers many beneits. It is important to remember this because developing and agreeing strategic decisions costs time, money and energy. Many marketers have an inner urge to get on with the job, get creative, develop wonderful advertising campaigns, wacky sales promotions, delightful new sales literature, sensational exhibition stands and more. Other marketers are under pressure to get out and talk to customers, bring in some Chapter 10 targeted mailings create a tightly focused database for future presentations and high-value mailings. ●● Daewoo marketing communications strategy. Position Daewoo as the most customer-focused car company in the UK. Car buyers are happy with the cars but unhappy with the dealers. Daewoo must own customer service. This differentiates Daewoo. – Stage 1: Build corporate credibility through TV and motoring press. – Stage 2: Develop Daewoo dialogue, collecting information about likes and dislikes about car ownership. – Stage 3: Launch brand. This necessitates integration throughout the marketing communications and operational implementation. Advertising will build brand awareness and direct people into Daewoo’s telemarketing database. The complete mix includes retail design, interactive point-ofsale, sales promotion, direct marketing, database construction and management, PR and advertising. ●● Telewest communications strategy. Create/ educate the market (get consumers to a point where they are predisposed to consider cable from Telewest Communications); build the brand (by teaching customers to value most what Telewest does best); stimulate acquisition (through three big sales promotion ideas); build and manage relationships (through good service and constant database dialogue). There is no one single approach to building marketing communications strategies. In fact many companies do not put them together at all. A good communications strategy helps to keep all the subsequent tactical communications tools integrated and moving in the same direction, delivering bigger impacts and reducing costs. A simple way to practise writing marketing communications strategies is to generate several alternative strategies, so that strategic options can be considered. Try generating a bad strategic option so that you can begin to see, irst, that there is always more than one strategy available to choose from and, second, that some strategies are better than others. The Marketing Communications Plan 237 Few social media strategies MarketingSherpa’s US study (December 2008) found that the vast majority of those surveyed rated social media marketing effective at influencing brand reputation, increasing awareness and improving search rankings and site traffic. Although many organizations have a corporate blog or Facebook page, few have strategies in place and even fewer have written social media policies. In fact, only 33 per cent of larger firms had a written policy to manage brand communications, and a mere 13 per cent of smaller businesses had a written policy. eMarketer.com (2009) Tactics Tactics are the details of strategy. In marketing, communications tactics are the communications tools such as advertising, PR, direct mail, etc. The tactics in the marketing communications plan list what happens when and for how much. They are often best expressed as a Gantt chart, as shown in Figure 10.4. Action The action stage reveals the details of tactics. Detailed project plans are required in order to implement the tactics. Detailed action plans bring the tactics to life. Actions implement the tactics. This is the not-so-glossy side of marketing, which requires attention to detail, good project planning skills, time management, prioritizing, people management skills, and an ability to handle pressure and to get things done. In reality the action/implementation of the marketing communications tactics requires an ability to get other people (staff, agencies, printers, etc) to deliver on time and within budget. It also requires an ability to plan for contingencies, because things do go wrong (eg advertisements fall down). Part 1 238 F I g u R E 10.4 Communications Background and Theories Tactical timings of diferent communication tools Jan Feb Mar Apr May Jun Jul Aug £ Advertising – TV – Press – PPC Social media – Blog – YouTube – Facebook Website – SEO – Inbound links Sales promotion – Sample drop – Competition – Collection Direct marketing – Mailshot – Telesales Publicity (and public relations) Sponsorship Exhibitions Packaging Point-of-sale and merchandising Internet Word of mouth – Viral marketing – CRM NGN This is just a shortlist of some of the tactical tools employed by an organization. Any kind of project planning can be used here, whether critical path or just a Gantt chart. A detailed project plan is required for each tactical communications tool. For example, the production of a mailshot can be as shown in Figure 10.5. This is just for one mailing. More detailed planning is required if there is a series of mailings. The response handling also needs to be planned carefully. With hybrid and automated marketing systems (see Chapter 17), the responses can be routed to an inbound telesales team, who ilter respondents, rank them in terms of urgency, size and location, and pass the enquiry to a relevant salesperson or dispatch further information and update the database for future activities. All of this requires careful planning to ensure suficient resources are available to make the strategies and tactics actually happen. Chapter 10 F I g u R E 10 .5 The Marketing Communications Plan 239 An action plan for one communication tool – a mailshot Wk 1 Creative brief List brief Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Wk 8 Wk 9 Wk 10 Wk 11 X X List proposal X Visual concepts X Visuals approved X List order X Final copy/design X Artwork brief X Print quotes X Set artwork proofs X Receive lists X Data preparation X Finished artwork X Printer brief X Printer proofs X Merge purge lists X Print X Computer bureau output files X Live laser proofs X Mail house brief X Print delivery X Laser print letter X Mail house delivery X Mail house sort/enclose X Mail Wk 12 X Part 1 240 Communications Background and Theories Control Plans should include control systems – how performance will be monitored, measured and controlled. Managers need to know at an early stage (rather than when it’s too late) how a campaign is running and whether it is an advertising campaign or a mailshot. If it is not working, it should be stopped. Control systems need to be in place to help monitor any campaigns or activities (see Figure 10.6). This is where clear objectives can once again help, since the objectives can usually be broken down into more detailed objectives covering shorter periods of time. Once marketers are armed with clearly deined, precise objectives, money can be spent on measuring performance against the objectives (whether deined as sales, enquiries, awareness, enquiries, sales, or return on investment, etc). Marketers can now measure and compare all activities: inbound (social media campaigns) and outbound marketing (ad campaigns), online and ofline. If a campaign is focused on boosting brand awareness or repositioning a brand in the mind of the target audience, this can be measured separately through surveys. If the campaign is focused on engagement and/or sales, this can be easily measured by identifying if visitors, enquirers or customers are emerging from each communications tool – assuming the campaign is focused on generating engagement F I g u R E 10.6 Quantified objectives State each quantified objective and its time period at some level, eg interaction on a website or Facebook page (posting a comment or voting), registering for a newsletter, taking a trial or making a purchase. The web analytics reveal where visitors are coming from, and telesales, reception and sales staff should also always log where new enquiries are coming from (how visitors heard about the business and what key phrases they used to ind the website). Cost per order, cost per enquiry and cost per visitor can be easily calculated. Other variables need to be closely monitored, including: ●● ●● ●● ●● cost per order and cost per customer acquisition; net promoter score, satisfaction score and recommendation score; reputation/social conversation scores (social media monitoring); return on investment. Note that the igures in Figure 10.7 are not real. Over time, professional marketers learn what are realistic conversion ratios of enquirers or website visitors to customers. For example, in Figure 10.7, 1 per cent of visitors generated by search engine optimization (SEO) convert to customers, while only half of 1 per cent of visitors from a viral marketing campaign convert to customers. The igure would probably be higher for visitors generated from PPC campaigns. Control systems Means of measuring Sales analysis; number of responses; surveys Frequency of measurement Daily; weekly; monthly; quarterly; annually? Accountability Who does it? Cost How much does it cost to measure? Action? Who needs to be alerted if significant variances are found? 241 F I g u R E 10 .7 Cost per order/cost per customer acquisition Volume of people/ size of audience Total cost CPT/CPM (cost per thousand people reached) Percentage CTR (clickthrough rate/visit website/ enquiry) Unique visitors Cost per visitor/ lead Conversion rate of visitors to customers Number of orders/ customers Cost per order n/a £20,000 n/a n/a 20,000 £1.00 1% 200 £100 20,000,000 £30,000 £1.50 10% 2,000,000 £0.15 0.5 of 1% 10,000 £3 n/a £20,000 n/a n/a 10,000 100,000 £1,000 £10 1% 1,000 n/a n/a n/a n/a n/a Opt-in e-mail 10,000 £2,000 £200 2% Online sponsorship 50,000 £5,000 £1,000 1% E-zine/e-newsletter 1,000 £10,000 £10,000 5% 1,000,000 £5,000 £5.00 1/100th of 1% Direct mail List A 10,000 £5,000 £500 2% Telemarketing – outbound 5,000 £20,000 £4,000 10% Exhibition B 6,000 £18,000 £3,000 n/a SEO Viral A Blog Banner ad PPC ad Press ad 242 Part 1 Communications Background and Theories Consider SEO. In Figure 10.7, it generates 20,000 visitors and costs £20,000. This gives a cost per visitor of £1 (£20,000 divided by 20,000 visitors). If the site converts 1 per cent of these visitors into customers, then the SEO generates 200 new customers (1 per cent of 20,000 visitors). The cost per order (CPO) generated by SEO is £100 (£20,000 divided by 200 orders). If a viral marketing piece costs £30,000 (to create and seed) and it generates 20 million players of which 10 per cent click through to the website, this generates 2 million visitors. Say only half of 1 per cent convert, because many of them are from international markets not relevant to this service. This generates 10,000 customer ‘uniques’ (unique visitors). Feel free to ill in the rest of the igures yourself. The table in Figure 10.7 can be extended. You can create your own, more accurate, analysis by adding another column for percentage of visitors that convert to enquirers (and a percentage of them eventually convert to customers, and a percentage of them convert to repeat customers, at which point the costs decline signiicantly and large proit margins emerge). A longer list of tactical communications tools can be added, including different exhibition events, different e-mail campaigns, different virals, etc, so that the marketer can see what works best and ultimately do more of what works and stop what doesn’t. The lifetime value of potential repeat sales of a customer can give a truer picture of the real value of a customer. Remember, lifetime value can include ‘share of wallet’: other products or services that a customer might be prepared to buy from the same organization. You also need a rigorous structured approach to measuring relative satisfaction (compared to competitors) for each stage of the online experience – product search, evaluation, enquiring, purchases, post-purchase communications, after-sales support, etc. You need this more than once a year. Net promoter score, satisfaction score and recommendation score It is important to monitor satisfaction scores (though remember that the satisfaction criteria can change and leave an old system irrelevant if not updated). Some blue-chip marketing directors like to keep a simple system monitoring just what percentage of customers would recommend the organization. Other marketers take advocacy and ‘detractors’ (customers who feel negatively about the organization or brand) and develop reporting systems that combine both variables to highlight a net promoter score (Reichheld, 2006). Reputation/social conversation scores (social media monitoring) Marketers need to keep abreast of what is being said about their brands, their organizations and their staff (as well as the competition) in the vast array of conversations in social media platforms around the world. Marketers need to know about the quantity and intensity of commentary about brand or product. In addition to the free services of Google Alert, there are other social monitoring Social media control myth ‘One of the most common fears I focus on defeating among executives and brand managers is that in new media brands lose control by publishing content and engaging in social networks. The general sentiment is that by sharing information and creating presences within public communities that they, by the nature of democratized participation, invite negative responses in addition to potentially positive and neutral interaction. By not fully embracing the social Web, many believe that they retain a semblance of control. The idea is that if brands abstain from providing a forum for hosting potentially disparaging commentary, it will prevent it from earning an audience – in this case, an audience that can impact the business and the reputation of the brand. However, retaining control, following the socialization of the Web, is nothing more than pure legend. While many companies retain control during the stages of defining and shaping messages, control is relinquished at the point of distribution. Once messages are published, they are at the mercy of consumers, peers, and influencers online and offline.’ Solis (2010) Chapter 10 The Marketing Communications Plan tools, including Google Blog Search, Icerocket, Twitter Search, Yahoo Pipes, BlogPulse, BoardReader and BoardTracker. There are also some more comprehensive licence fee systems with their own scoring systems, which include Radian6, Market Sentinel and Precise Media. So I continue to ask: if a conversation takes place online and you’re not there to hear it, did it actually happen? ROI is not the only measure ‘Despite all evidence to the contrary, the belief that a single number can be used to assess marketing performance is persistent. Some say that top management can only handle a single number, or silver metric, so we must choose the least bad one. Others believe that ROI is so standard as not to be worth challenging. Others again claim modernity for customer concepts such as customer equity, customer lifetime value and Peppers and Rogers’ new ‘Return on Customer’. Yes, they are new and, yes, they have value, but these measures are not the silver metrics their promoters claim them to be.’ Ambler (2006) Return on investment As mentioned in Chapter 1, marketers must learn to speak the language of the boardroom. This includes ROI on marketing expenditure. Can marketers demonstrate rigorous professional discipline and track what communications campaigns deliver a better ROI than others? Can marketers convince the board that the return from investment in marketing is better than the return generated by investing the money elsewhere (eg in a high-interest deposit account)? It is possible to calculate the cost per order, proit per order and cumulative proit from a campaign. Ambler (2006) explored four measurement mechanisms – return on investment (ROI), or return on marketing investment (ROMI), or return on marketing expenditure (ROME), discounted cash low (DCF), return on customer, and net advocates (Reichheld, 2006) – and concluded that no single metric does it all. In fact, a combination of metrics is required. Control includes various areas of market research and testing, so measurement systems need to be built into the plan. Planning is really an iterative process. A manager puts together a plan and a budget. Senior management agree it or reduce it by way of budgets. The 243 manager revises the plan in the light of the resources available. The plan is then rolled out, results watched carefully and action taken to change the plan if necessary (ie if it is not working). If something is not right, it is better to ind out why, make corrections and move on – hence the importance of control mechanisms. They provide a manager with useful feedback as to whether the plan is working or not. Everything a manager does is a learning process since, assuming the desire for constant improvement, a manager is monitoring what works best and what doesn’t. Each year, as experience is gained, improvements can be made through this longerterm iterative process. Procter & Gamble asks its managers to build on their ‘learnings’ (what they have learnt from the marketplace). They constantly learn from the marketplace and then incorporate those ‘learnings’ in their next marketing plan. key points from Chapter 10 ●● SOSTAC® provides a very effective structure for any plan. ●● Market research and intelligence create a winning platform. It is essential to gather key information before making any decisions about strategy or tactics. ●● STOP and SIT are the key components for writing a strategy. Write several options before choosing the best one. ●● Build control systems into the plan. 244 Part 1 Communications Background and Theories references and further reading Ambler, T (2006) Use a dashboard when driving your marketing, Market Leader, 33, Summer Doyle, P (2001) Marketing Management Strategy, 3rd edn, FT Prentice Hall, Hemel Hempstead Doyle, P, Saunders, J and Wright, L (1987) A comparative study of US and Japanese marketing strategies in the British market, Warwick University report eMarketer.com (2009) Social media best practices, 29 July Engel, J, Warshaw, M and Kinnear, T (1994) Promotional Strategy: Managing the marketing communications process, Irwin, Boston, MA Forrester Research (2009) US Interactive Marketing Forecast, 2009 to 2014, Forrester Research, Cambridge, MA Godin, S (2009) When tactics drown out strategy, Seth Godin’s Blog, 7 August Kanter, B (2008) How much time does it take to do social media?, Beth’s Blog, 1 October Kanter, R M (2000) Marketing CD 2: Segmentation, positioning and the marketing mix, www.prsmith.org Kanter, R M (2001) On­line Marketing Course 2: Segmentation, positioning and the marketing mix, 2nd edn, www.prsmith.org Kotler, P (2001) In conversation with Paul Smith Kotler, P et al (2000) Marketing CD 3: Marketing planning, www.prsmith.org Ohmae, K (2000) Marketing CD 2: Segmentation, positioning and the marketing mix, www.prsmith.org Reichheld, F (2006) The Ultimate Question: Driving good proits and true growth, Harvard Business School Publishing, Boston, MA Smith, P R (1998) Marketing Communication: an integrated approach, 2nd edition, Kogan Page, London Smith, P R (2003) Marketing Planning Toolkit, www.prsmith.org Smith, P R (2004) SOSTAC Marketing Plans (CD) Smith, P, Berry, C and Pulford, A (1999) Strategic Marketing Communications, Kogan Page, London Solis, B (2010) The myth of control in new media, Brian Solis, 25 January WARC (2006) Adidas to reposition Reebok from fashion to action, 26 January Wing, R L (1989) The Art of Strategy (translation of Sun Tzu, The Art of War), Aquarian Press, Wellingborough Further information Euro RSCG Havas Media Privacy Ofice Dr Fleming 17 08017 Barcelona Spain Tel: +44 (0)20 7257 6077 www.eurorscg.co.uk International Organization for Standardization (ISO) 1 ch de la Voie-Creuse Case postale 56 CH-1211 Geneva 20 Switzerland Tel: +41 22 749 01 11 Fax: +41 22 733 34 30 www.iso.org National Readership Survey Ltd (NRS) 40 Parker Street London WC2B 5PQ Tel: +44 (0)20 7242 8111 Fax: +44 (0)20 7242 8303 www.nrs.co.uk Target Group Index (TGI) Ealing Gateway 26–30 Uxbridge Road Ealing London W5 2AU Tel: +44 (0)20 8433 4000 www.kantarmedia-tgigb.com 245 11 The changing communications environment lEaRNINg ObjEcTIvES By the end of this chapter you will be able to: ●● Embrace the constant nature of change in markets and ergo marketing communications and recognize the opportunity offered to marketers ●● Be aware of the importance of checking the laws and regulations relevant to marcomms ●● Consider building risk assessment into marketing plans, particularly including economic risks ●● Accept the need to understand social change and integrate this change into marcomms to relect changing social norms, values and roles ●● Dispel any fears of technology and embrace technological changes as aids to marketing Introduction Economics 246 Politics (regs and laws) 246 Self-regulation: codes of practice 249 economic efects on markets and communications 252 Recession-induced psychological Press and print advertisements and the ASA/CAP 251 250 Television advertisements and Ofcom 250 Direct marketing 251 Macro-political efects on business and communications 251 change 252 Social change 253 ethics 254 Demographics 255 Technology 256 Summary 259 references and further reading 260 Further information 261 246 Part 1 Communications Background and Theories Introduction We are children of change. Right now business is going through ‘the biggest change since the industrial revolution’ (see Chapter 1), and with this comes radical change for marketing communications. This chapter looks at how marketing communications are affected by the rapidly changing business environment and its many uncontrollable factors. Markets are pulled and pushed in different directions by forces that are outside an organization’s immediate control. New laws, changing regulations, luctuating economic cycles, demographic shifts, new social values, attitudes and cultural norms, fastchanging technology, and aggressive, borderless and category-less competitors are some of the key factors that constantly move markets away from the status quo. As a result, yesterday’s marketing communications strategy can soon become obsolete. This means that the marketing intelligence and information system (MIIS) should constantly feed back information on patterns, trends or sudden changes in any of these uncontrollable forces. This requires, in turn, a constant alertness and preparedness to change products, services, advertisements, images, communications and even an organization’s attitudes or culture. The ‘SW’ part of a SWOT (strengths, weaknesses, opportunities and threats) analysis monitors the external opportunities and threats that emerge in the business environment. The PEST acronym provides a useful starting point to scan the business environment for any of these change factors that directly or indirectly affect a business and how it communicates: Political (including legal and regulatory) Economic (global economic shifts and cycles of recession and boom) Social (new values, attitudes, lifestyles, ethics and demographics) Technological (the internet, databases, digital TV and much more) Competition could also be added as a key factor operating in an organization’s environment. For the purposes of this chapter, the focus will be on the PEST factors. Any of these change factors could ultimately push a business into extinction if the changes are constantly ignored. There is a tendency to resist change, perhaps because of the insecurities it heaps upon an individual. Some organizations wait until the last moment before changing. Others see an advantage in being proactive rather than reactive. We will now consider how these PEST factors affect the organization’s marketing activities, and its communications in particular. new borderless, category-less competitors changing the marketplace It is a rapidly changing market: Microsoft is following Google and Yahoo into the telco market. The BBC works with Google’s video-sharing service and with YouTube. Meanwhile the UK telco company BT now offers TV. And on it goes – this is the borderless, category-less merry-go-round continually changing the structure of markets. Politics (regulations and laws) UK business legislation provides laws that essentially support the principles of being honest and truthful. There is also a host of self-regulatory professional codes that draw on the same set of basic business principles, ie that marketing professionals should conduct their business in a legal, decent, honest and truthful manner. Before looking at the laws, it is worth mentioning that short-term, dishonest deals that slip through any regulatory systems generate only short-term gains and do not tend to generate long-term sales, since repeat business does not come back. The ‘everlasting customer’ or the ‘lifetime customer’ concept is a long-term winning strategy, since the marketing perspective focuses on selling 10 cars, 10 fridges, thousands of cans of food or beer, or 50 years of ofice cleaning to one customer over a long period of time instead of grabbing a one-off, short-term sale. It costs ive times as much to sell to a new customer as it does to sell to an existing customer. Fooling a customer is myopic. You can only cheat a customer once. Flouting the law or regulations restricts a business to a short-term vision. Incidentally, Japanese management guru Kenichi Ohmae claims that the most fundamental difference between Eastern and Western business strategies is the time horizon. Japanese companies build long-term strategies, while Western companies plan short-term proits. Chapter 11 The Changing Communications Environment EU directives are subsequently adopted into local laws by each country independently. In the UK a statute is a law, also called an Act, that has to be voted in by Parliament. Acts are the primary legislation. Regulations are reinements of an Act, and they are brought into force by the Secretary of State (minister). Regulations form part of the law in the UK. UK television advertising alone has approximately 150 statutes and regulations that affect it. The Unfair Commercial Practices Directive 2005 harmonizes unfair trading laws across the European Union and prohibits businesses from treating consumers unfairly. The directive was implemented through the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). ●● Unusual trademark applications ●● Trademark applications include the sound of a dog barking (Dulux paint), the musical jingle for Mister Softee’s ice cream, car tyres that smell of roses (a Japanese company), Microsoft’s catchphrase ‘Where do you want to go today?’ and ‘Ooh aah Cantona’ (Eric Cantona). ●● The Trade Descriptions Act 1968 effectively stopped false claims and will be amended or replaced by the CPRs. ●● The Sale of Goods Act 1979 demands that goods sold match their description. ●● The Trade Marks Act 1994 adapted UK trademark law to it with European legislation. This means that a wider range of products and service attributes can now be registered as trademarks. ●● The Control of Misleading Advertisements Regulations 1988 provide legislation in respect of advertisements. ●● The Data Protection and Privacy Regulations 1999 emerged from the Data Protection Act 1998. ●● The Communications Act 2003 was driven by the Electronic Commerce (EC Directive) Regulations 2002. ●● The Enterprise Act 2002 ensures fair competition. ●● ●● ●● 247 The Consumer Protection (Distance Selling) Regulations 2000, sometimes referred to as the Distance Selling Regulations, protect consumers by insisting marketers supply, in writing, full details of the goods or services offered, delivery arrangements and payment, suppliers’ details and the consumers’ cancellation right before they buy (known as ‘prior information’). This information must also be provided in writing. Consumers can cancel the order during the cooling-off period of seven working days. These regulations apply when selling via the internet, TV, mail order, phone or fax. The EU Directive on Privacy and Electronic Communications Regulations (PECR) came into force in 2003. The Consumer Protection from Unfair Trading Regulations 2008 seek to tackle unfair sales and marketing. The Business Protection from Misleading Marketing Regulations 2008 combined with CPR also provide protection for businesses. The Digital Economy Act came into force in 2010, regulates digital media and offers new protection against copyright infringement. The overall guiding principles are the same in law as in voluntary regulations: simply be legal, decent, honest and truthful. If all else fails, the Ofice of Fair Trading (OFT) provides a safety net, and complaints about marketing communications (advertising, shop-window displays, etc) can be referred to the OFT for scrutiny. International Financial Reporting Standards cost $54 billion International Financial Reporting Standards require companies to value their intangible assets (eg brands) on their balance sheets, subject to annual review for impairment, which means that the difference between the price paid and the current value of an acquired brand must be calculated. Any resulting write-downs can have a significant impact, as AOL Time Warner discovered in 2002. It had to write off $54 billion for the value lost when AOL acquired Time Warner at the end of the dotcom boom in 2000. Part 1 248 Communications Background and Theories London Olympics 2012 vs ambush marketers The London Olympic Games and Paralympic Games Act 2006 and the Olympic Symbol etc (Protection) Act 1995 protects sponsors’ rights by attempting to prevent ambush marketing and to protect exclusivity of official sponsors, which effectively means that only official sponsors, suppliers and licensees are allowed to use the Olympic marks, while the law prohibits non-official advertisers from the unauthorized use of: ●● logos: the Olympic marks, such as the London 2012 logo, the Olympic rings or any other logo that can be confusingly similar to the Olympic marks; ●● images: such as the Olympic torch, Olympic flames, athletic images and the colour combinations of the Olympic rings; ●● mottoes: the Olympic and Paralympic mottoes; ●● words: ‘Olympic’, ‘Olympiad’, Olympian’, ‘Olympix’ and similar words; ●● word combinations and phrases that falsely suggest an association between a business, its goods or services and the Games; ●● sounds, designs, images and marks: advertising, marketing material, sales promotions, goods with words (spoken or written), sounds, designs, images and marks associated with the Games. There are, as mentioned, many other laws and regulations, both national and international, that affect a business and its marketing communications. For example, the EU Telecommunications Data Protection Directive (enforced by the Data Protection Registrar) makes it illegal for companies to fax homes or businesses that have opted out. (See Fax Preference Service details on page 261.) Some of the legislation may not appear to affect the marketing communications directly, eg product liability laws, but caution, coupled with expert advice, is required, particularly in the international arena. Product liability puts an increasing onus of responsibility on manufacturers, distributors and retailers to make sure that the products they market are safe and sound. It also affects marketing communications (and it even affects the instructions on a pack, as shown in the box below). The ‘borderless world’ knows few barriers when it comes to liability. Bloggers and twitterers take note (libel cases and breach of trade secrets cases will emerge). Sparkling wine shooting The 20-year-old case of a US consumer suing a UK paint company (for alleged injurious effects of a lead-based paint) strikes fear into the heart of many potential exporters. According to Pohl (1991), a growing awareness that a manufacturer carries a heavy and detailed obligation to warn potential users about any dangers that might lurk in the use of its products has prompted some sparkling wine manufacturers to print disclaimers on the packaging warning against possible risks involved in uncorking their products. Breach of privacy regulations costs money and brand image A television company in the US has been ined £3 million for louting the Do Not Call laws. Five telemarketers allegedly called on behalf of Direct TV, contacting consumers registered on the Do Not Call database. One of the irms did not put the required live salesperson on the line within two seconds of the consumer answering the phone (Precision Marketing, 2006). Nationwide was ined £980,000 when an employee’s laptop containing conidential customer information was stolen from the employee’s house in August 2006. The FSA’s action is based solely on Nationwide’s breach of the FSA’s Principles for Businesses, Principle 3: Management and control: ‘A irm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems’ (Anning, 2007). An individual recipient of an unsolicited e-mail, Gordon Dick, sued online IT product vendor Transcom in respect of a single e-mail, which it said Chapter 11 The Changing Communications Environment it sent out once a year to customers and those who had contacted Transcom about its services. Dick denied ever being in either category and threatened to sue Transcom unless it ‘treated for peace and made him an offer’. He won over £1,000 (Anning, 2007). Adult site Nortycams sent salacious unsolicited e-mails to UK recipients who had not opted in to receive them. The ISP, Microsoft, claimed its image as a service provider was being damaged, and Nortycams settled for a combined damages and costs igure of £45,000 (Anning, 2007). Data security disasters cost a million pounds. Most advertisers want to stand out from the crowd. To do this they sometimes have to be daring, bold and controversial. The advertiser’s dilemma here is whether 1) to be so controversial that the advertisement teeters on the brink of being pulled off the air or 2) to play safe with a less controversial creative treatment. Although marketing communications must adhere to the laws of the land (ie one cannot misrepresent or blatantly mislead), the voluntary codes are both cheaper and quicker to apply should any complaints or claims be made. The codes also offer useful guidance to the marketer, so that most problems are ironed out before an advertisement goes out on air or is published in the press. Essentially, advertisements should: Memory sticks, discs, laptops, and files lost or stolen from homes or cars or left behind on a train included information about the following: ●● be legal, decent, honest and truthful; ●● show responsibility to the customer and society; ●● 10,000 prolific offenders – profiles and other information; ●● follow the basic business principles of fair competition. ●● 84,000 prisoners – profiles and other information; ●● 30,000 people with six or more convictions in the last year; ●● 100,000 personal details about members of the armed forces; ●● 600,000 people interested in, or who had applied to join, the Royal Navy, Royal Marines and RAF; ●● 25,000,000 child benefit claimants; ●● Gulf War invasion plans stored on a computer stolen from an RAF officer’s car in 1990. BBC News Online (2008a, 2008b) Self-regulation: codes of practice Various professional bodies draw up their own codes of practice to which their members must adhere. Failure to do so may result in expulsion and sometimes negative publicity, along with a form of blacklisting. In the case of advertising or a sales promotion, a breach of a code can also result in the withdrawal of an advertisement or sales promotion, etc. This can be expensive, as the development of any campaign costs money. The risks are arguably higher in television, where a 60-second advertisement can easily 249 Professional bodies need to be vigilant in order to maintain the credibility of their profession. This is particularly true in advertising, where the consumer’s scepticism and resistance to advertising are heightened or lowered according to the credibility of the advertising industry. This credibility is founded upon the industry’s reputation and determination to maintain standards of legality, decency, honesty and truthfulness. Regardless of legislation and regulations, common sense and good ethics dictate that marketing professionals should adhere to permission-based marketing. This means that all e-mail campaigns and all telemarketing campaigns should be built around ‘opt-in’ lists or databases. These are lists or databases of customers or prospects who have readily given their permission for further contact by ‘opting in’. These lists are of a much higher quality in terms of response than are ‘opt-out’ lists, where the customer or prospect has to consciously make the effort to tick a box to ensure there will be no further contact. ‘Opt-in’, by contrast, ensures that customers or prospects consciously make an effort (eg tick a box) to request further communications from the marketer. There is increasing resistance to intrusive online marketing (including SMS messaging). Arguably, this resistance is also spreading to ofline marketing, including direct mail. Therefore it follows that best practice should be permission-based marketing. 250 Part 1 Communications Background and Theories In addition, marketers need to tread carefully when using new technologies. There is the well-publicized ine handed to a Leeds company, Moby Monkey, for an SMS promotion. This came about as the result of a mass SMS broadcast to hundreds of thousands of randomly generated numbers – it was inevitable that many of these included mobile phones owned or used by children (Murphy, 2003). Then, in late 2002, the Australian high court made history (in Gutnick v Dow Jones) by declaring that anyone publishing information on the internet could face legal proceedings anywhere in the world (Keegan, 2002). So, although caution is required, common sense and good ethics should prevail and act as useful guidelines for marketers. Press and print advertisements and the ASA/CAP Press and print mean all non-broadcast media, ie the press, posters, lealets, direct mail, video cassette commercials, teletext and cinema advertising. In the UK, the Committee of Advertising Practice (CAP) is the custodian of the British code of advertising practice. It provides a rulebook for all advertising except radio, TV and cable (which is covered by the ITC). The code offers guidelines as to what is acceptable and what is not. If any member of the public objects to a published advertisement he or she can contact the Advertising Standards Authority (ASA) and complain in writing. The ASA is the customer side of the CAP; the CAP deals with the trade or the advertisers directly. Complaints are analysed to determine whether they are worth further investigation. If the complaint is deemed to be reasonable, and the association consequently upholds the complaint, then the advertiser is asked to withdraw the advertisement immediately. The ASA is not a legal body and therefore has non-statutory powers. Some advertisers may choose to ignore a request to withdraw an advertisement. The ASA will then issue a media warning to all CAP member organizations (including media owners). This effectively blacklists the advertisement. The result is that the advertiser will ind very few media owners prepared to sell it any advertising space. The media may implement their terms and conditions of business, which require adherence to the codes. Agencies that persistently breach the codes jeopardize their membership of professional and trade organizations. This means trading privileges and inancial incentives may be forfeited, and potential new clients may exclude agencies that are not members of recognized professional bodies. If all else fails, the association can invoke the inal legal backstop of the Control of Misleading Advertisements Regulations 1988. Although rarely needed, these empower the Director General of Fair Trading to obtain an injunction against the advertiser. It is worth checking with the CAP before printing a mailshot or publishing an advertisement. However, many campaigns are published without prior CAP approval and run the relevant risk. It has been suggested that some of the more controversial short campaigns seek to gain free editorial coverage by being banned. There are, of course, risks associated with this kind of exposure. Television advertisements and Ofcom TV advertisements, on the other hand, must gain approval before broadcasting. Ofcom came into being in 2003, having been created by the Telecommunications Act 2003, and for the irst time a single entity regulated what traditionally had been seen as disparate forms of media. Ofcom combines the role of ive bodies into one powerful organization. The Independent Television Commission (ITC), the Radio Authority (RA), the Radio Communications Agency (RCA), Oftel and the Broadcast Standards Commission all now come under the control of Ofcom, operating from its headquarters in London. Initial scripts are approved by Clearcast, and a clearance certiicate is issued. However, this does not guarantee that the inished production will also be acceptable, as the ilm’s treatment is sometimes dificult to envisage from a script or storyboard, and so it is also screened for inal approval by Clearcast before broadcasting. Even after an advertisement is cleared for broadcasting, it can still be pulled off the air if the ITC requests it. Its attention can be aroused by complaints from the public. If, after it has examined the material and considered the complaint, it feels that the complaint should be upheld, it can then pull the advertisement off the air. In addition to advertising, other marketing services have their own regulations and codes. For example, the Code of Sales Promotion Practice is also published by the CAP and basically provides guidelines for sales promotion activities. The Institute of Practitioners Chapter 11 The Changing Communications Environment in Advertising (IPA), Chartered Institute of Public Relations (CIPR), Public Relations Consultants Association (PRCA), Institute of Sales Promotion (ISP) and other professional bodies all have codes of practice to which their members must adhere. Any breach of the code can result in a member being warned or ultimately struck off the institute or association member list. This may have some short-term negative publicity plus, in the medium to longer term, exclusion of that member from pitch lists. Some clients refer to the appropriate institution or association when choosing a new agent or consultant. Direct marketing Since 1992 the ASA/CAP has had the responsibility of regulating the direct marketing industry. Essentially this is to ensure that consumers receive as much or as little direct mail as they want. The CAP’s rules require direct marketing campaigns to: 1 give consumers a choice before transferring their names to other companies; 2 remove names from lists on request; 3 correct personal details immediately upon notiication. The direct marketing industry is currently under scrutiny from the EU. The European Advertising Standards Alliance (EASA) consists of the organizations in Europe that already operate self-regulatory codes of advertising practice. It hopes to coordinate the disparate activities and act as the focal point for pan-European consultation. Whether voluntary codes of practice will be preferred to centralized legislation remains to be seen. This will affect all direct marketing activities, including telemarketing. At present there is little EU harmony in either regulations or legislation, eg cold calling is banned in Germany. It is also banned in some US states. Equally, sales promotions, incentives, premiums and free gifts are generally unacceptable in Germany and also cause problems in France. The EASA may provide a platform for promoting self-regulation and harmony across Europe. Macro-political efects on business and communications We now move from national and international regulations and legislation, which affect marketing communications, to international political negotiations, 251 which affect the world economy. It should be remembered that the larger international trading companies need to monitor the results of worldwide political agreements. Plans are prepared to meet a range of scenarios built around possible results from, say, the current major economic disputes. Fortune magazine describes two scenarios used by an oil company. Scenario 1, sustainable world and global mercantilism, assumes that all the major international economic disputes are solved, there is European unity, the United States and Japan agree trading terms (and avoid a trade war), free trade prevails across the globe, and stable growth is maintained. As a consequence, environmental issues receive more attention. The implications for Shell are new emission restrictions and a reconiguration of the energy industry in which less oil and more natural gas are used. Scenario 2, global mercantilism, this assumes a gloomier world where regional conlicts basically destabilize the world, trade wars and recessions rage, trading blocs form, and consensus on environmental issues is never achieved. This scenario implies less regulation, a piecemeal approach to environmental issues and much more oil consumption. Worldwide political agreements not only affect product portfolios (the range and types of products or services), but they also affect the social agenda, which determines what are considered to be the most important social issues in the minds of customers. This, in turn, affects the organization’s social responsibility policies and subsequent communications programmes. The social factors examined in ‘Social change’ below also indicate how the agenda can change over relatively short periods of time. First, we will consider how the national economy affects organizations and their marketing communications. Economics Economic changes affect markets and, in turn, a marketer’s choice of marketing messages. Economies move in cycles, but few can forecast exact economic trends across different regions. Some market economies are more risky than others, particularly at certain periods or stages in their cycles. Marketers must be in tune with economic trends. Since 2005, UK company reports must, by law, include a description of the principal risks and uncertainties facing the company (as well as a description of the resources 252 Part 1 Communications Background and Theories available to the company and a statement of the business’s objectives and the strategies of the company). Businesses now need marketers to analyse the risks of various markets and the risk of particular strategies. In the United States, the Sarbanes–Oxley corporate governance legislation requires a risk management approach to business. Interestingly, the 2004 Enterprise Risk Management Integrated Framework mentions the word ‘customer’ 71 times and the word ‘marketing’ 11 times. Marketers are well positioned to analyse risk and integrate at board level. Shift to the east ‘The dominance of the US and the dominance of Europe – particularly Western Europe – is eclipsed. What we’re witnessing is a sharp shift in wealth in a relatively short period of time from West to East.’ Martin Sorrell, WPP, at the 2006 World Economic Forum, Davos Economic efects on markets and communications Industrial and consumer markets are directly and indirectly affected by the state of the economy. The global shift in economic power from West to East is affecting many markets. Exchange rates, interest rates, unemployment, levels of disposable income, etc all affect how much money is around, how much will be spent and, in a sense, the size of many markets or industries. During a recession almost everyone cuts back on spending. Consumers spend less. Companies spend less. Many organizations cut back on all types of spending, including marketing (although there are exceptions, such as Procter & Gamble, which, according to Bill MacNamara (1991), ex-Asda divisional marketing director, ‘automatically raise their marketing expenditure in a recession’). A classic fall in derived demand emerges: as primary consumer demand falls, the secondary demand (for the commercial products and services required to make and market the consumer products) also falls. This reduces growth in the marketing service industries like advertising and design. It becomes a buyer’s market as prices tumble and better deals are demanded by clients. Several agencies and clients go into liquidation. There is therefore an increased need to check the inancial stability of any agency, partner, supplier or customer. Meanwhile, advertisers have to address the dificulty of encouraging people to buy during a serious recession. See how advertisers ight the enemy of recession by using its own images. During a recession many buyers search for better deals, which include price cuts, extended terms and value-for-money sales promotions. These promotions do not necessarily increase brand loyalty. The scars of an economic recession may be permanently expressed in terms of buying patterns, attitudes, values and, ultimately, the advertising imagery, which relect the changing norms, roles and values of a culture. Recession-induced psychological change Even a phenomenally strong economic recovery may not bring back the consumer spending patterns of the 1980s. Values, attitudes and lifestyles may combine to create lower levels of consumption, new buying processes and an overall pattern of trading down (away from premium-price brands). The worldwide recession brought job cuts and qualityof-life worries out of the headlines and into millions of homes. Some feel that consumer markets have changed because of a recession-induced psychological change that moved people away from the self-indulgence and excess of the ‘me, mine, more’ mentality of the pre-millennium to the ‘learning to live with limitations’ of the post-millennium. This could affect buying behaviour and the supporting advertising messages, for example a move away from images of personal achievement to images about personal relationships, or even a move away from advertising that is built around the user imagery (from where ‘the user is the hero’ to where ‘the product is hero’). This suggests that advertising will have to provide more hard information as consumers buy more carefully, seeking out the best deal, and display a price consciousness that rejects premiumprice brands for better-value products that provide relevant beneits and excellent performance. Marketing messages change to match the mood created by the state of the economy. Equally, marketers must monitor the overall business environment for high-impact Chapter 11 The Changing Communications Environment events such as a recession or banking crisis, to be ready to react and, ultimately, to relect the changing set of needs that people acquire as their circumstances change. Companies that ignore Black Swan events will go under ‘Black Swan events are almost impossible to predict. Instead of perpetuating the illusion that we can anticipate the future, risk management should try to reduce the impact of the threats we don’t understand. We don’t live in the world for which conventional risk-management textbooks prepare us. No forecasting model predicted the impact of the current economic crisis, and its consequences continue to take establishment economists and business academics by surprise. Moreover, as we all know, the crisis has been compounded by the banks’ so-called risk-management models, which increased their exposure to risk instead of limiting it and rendered the global economic system more fragile than ever. ‘Low-probability, high-impact events that are almost impossible to forecast – we call them Black Swan events – are increasingly dominating the environment. Because of the internet and globalization, the world has become a complex system, made up of a tangled web of relationships and other interdependent factors. Complexity not only increases the incidence of Black Swan events but also makes forecasting even ordinary events impossible. All we can predict is that companies that ignore Black Swan events will go under. ‘Instead of trying to anticipate low-probability, high-impact events, we should reduce our vulnerability to them. Risk management, we believe, should be about lessening the impact of what we don’t understand – not a futile attempt to develop sophisticated techniques and stories that perpetuate our illusions of being able to understand and predict the social and economic environment.’ Taleb, Goldstein, and Spitznagel (2009) 253 Social change Norms, values and roles change. Today, fathers change nappies, cook dinners and shop in supermarkets. Many women earn more than their male partners. Roles are becoming less clearly deined. It is no longer abnormal to have two working parents. Children are growing old younger, and many adults feel fatigue beyond their years as they suffer ‘information fatigue syndrome’ (too much information), which weakens the effectiveness of marketing communications, as audiences simply cannot digest all the information being thrown at them. Meanwhile roles continue to change. ‘Metrosexuals’– straight urban men who enjoy such things as shopping and using beauty products – are emerging. However, young men ind a lot of pressure out there and are not sure what their role is (see Chapter 4 for more). Global research from Millward Brown reveals that children are growing old younger. This is substantiated by the following statement: ‘Corporate brands are starting to replace character brands. Kids are starting to grow up at an earlier age and so move away from characters and into brands sooner. Their pocket money is spent on items such as mobile phones and branded merchandise’ (Levy, 2003). Young people also prefer to text rather than to talk when using their mobiles. They also see grammatically correct sentences in ads, on television or the internet, as outdated (Lindstrom, 2003). Tweens (8- to 14-year-olds) around the world revealed they had common fears, including terrorism and family breakdown. Their view of the world around them is changing. Marketers must relect these changes in their messages. Changing world – no longer black or white Who would have thought the world’s favourite golfer would be a black man and the world’s favourite rapper would be a white man? Tiger Woods and Eminem are still top of their respective charts. 254 Part 1 Communications Background and Theories Adults are growing old faster than kids! This means the world’s population is ageing. This has signiicant social and economic implications, as Harvard’s Farrell, Ghai and Shavers (2005) observed: The world’s population is aging, and as it gets even grayer, bank balances will stop growing and living standards, which have improved steadily since the industrial revolution, could stagnate. The reason is that the populations of Japan, the United States, and Western Europe, where the vast majority of the world’s wealth is created and held, are aging rapidly. During the next two decades, the median age in Italy will rise to 51, from 42, and in Japan to 50, from 43. Since people save less after they retire and younger generations in their prime earning years are less frugal than their elders were, savings rates are set to fall dramatically. And older people’s needs are changing too. They may lex their muscles with grey power votes or just demand younger lifestyles; for example, senior citizens considering retirement lifestyles and homes want Pilates, Chinese chicken salad and wireless-ready housing. Meatloaf, bingo and chair exercises are not required. ‘In the past it was about healthcare and the nursing staff, but this group is saying I am not ready for that. I want Pilates, a lap pool, gourmet dinner and I want to lead my own life with lexible choices’ (Dwight, 2007). Adults are changing too. An Accenture research report carried out in 2001 found that people were fed up with marketing communications. Eighty per cent of a target audience could be reached with one 30-second off-peak TV spot in the early 1980s. At the beginning of the 21st century, reaching that same audience required 200–300 primetime spots. ‘It’s getting worse every day… unsolicited interruptions are unwanted – in all media… People are fed up. They’re overloaded with information. Their time and attention is being wasted… people no longer respond the way they used to’ (Brøndmo, 2003). Impatience and intolerance of irrelevant information continue to grow today as customers juggle multiple tasks in their busy lives. This is partially why Google is so successful. It its a need: to ind information quickly. Google is ‘in the business of revolutionizing the nature of knowledge; search has become integral in the way we think and act’ (Andrew Keen, in Smith, 2008). Attitudes towards issues change. Once environmentalists were considered to be hippies, communists, OK, Google, now igure out my life, please ‘We cannot even answer the most basic questions about you because we don’t know enough about you. The goal is to enable Google users to be able to ask questions like “What shall I do tomorrow?” and “What job should I take?” This is the most important aspect of Google’s expansion.’ Smith (2008) anarchists or outcasts because of their lack of conformity with other people’s beliefs, values and attitudes. Today, most political parties and major corporations recognize the importance of environmental groups. Ethics Social consciousness among buyers is important. However, the degree of importance can change over time. Perhaps it is linked to economic cycles; for example, during economic downturns does ethics fall down the ladder of importance? However, many customers want to know more about products and their producers. Do the products or producers damage the environment? What do the producers do in the community? Do they donate political funds? Do the organizations disclose information, and so on? Many buyers are becoming aware that the supermarket is the economic ballot box of the future. And investors also are becoming increasingly interested in the corporate citizenship of organizations that they might consider funding. Banks are becoming weary of lending funds to higher-risk, environmentally poor companies. Insurance premiums will also relect the higher risk of non-green companies. The corporate responsibility record is now a criterion in joint ventures. For example, who wants to invest time and money in an organization that has a poor environmental record? To put it another way, who wants to inherit a green time bomb? Some estimates suggest that a ‘green screen’, or false green claims by corporations, will last only a short period, since probing pressure groups, investigative journalists, scrutinizing inancial analysts and Chapter 11 The Changing Communications Environment information-hungry customers will eventually reveal a much bigger problem than that which was originally hidden. This implies that the marketing people have a vested interest in ensuring that an organization operates in a socially responsible manner. Corporate attitudes towards altruism and ethics are changing, as are personal religious beliefs. Finally, one extraneous factor that affects the business environment is the environment itself. If the world continues to heat up, northern European attitudes, emotions and feelings about different stimuli (particularly colour) may change. This would affect almost all forms of marketing communications, and possibly even radio. Demographics The statistical analysis (or division) of a population or audience by age, sex and social status helps marketers to segment and target markets. This can be combined with location or geography (hence the term ‘geodemographics’) and contextual or behavioural information (see Chapter 13). In addition, there are demographic cycles, trends and movements that can help an organization to learn about its market many years in advance. Some years ago, forecasts (Gwyer, 1992) revealed that by 2030 the UK population would start to shrink and deaths would exceed births. The period total fertility rate (PTFR) is now at 1.8 children per family, which is below the replacement level of 2.1. By 2030 the over-80s market will expand to 3.4 million (3.5 times more than in 1961). Demographic shifts affect markets and consequently marketing communications. For example, the demographic shift during the 1980s pulled the market away from Guinness, as a disproportionately large number of younger drinkers (20-year-olds) emerged after the 1960s baby boom. Guinness was positioned as an older, unfashionable drink. To chase the moving market, Guinness and the now extinct but then brilliant advertising agency Allen, Brady and Marsh repositioned the product as a younger and more fashionable drink. The 1990s saw the demographic bulge move on to create a disproportionately large number of 30-year-olds. Guinness chased this swell by using a maturing blond-haired man to help to position the drink appropriately. During the early 2010s Guinness might decide to reposition itself as a 50year-olds’ drink. The beer market will shrink, since 255 volume customers are the younger session-drinkers who seem intent on pouring a lot of alcohol down their necks on Friday and Saturday nights. In-home drinking of wine and beer is another social trend, which marketers relect in their special offers for cases of beers. Perhaps the ozone layer will completely crumble and the weather will warm up, followed by increased liquid consumption, including beers. Or will there be another baby boom (as fewer women use the pill because of cancer scares), creating a vast 18- to 25-year-old market by the early 2030s? Or then again perhaps an even bigger health trend will curtail all regular drinking behaviour. Or will the EU ban all alcohol advertising and ‘promotion’? Maybe real estate companies will force pubs to increase their prices and thereby push drinkers back into their homes to consume canned draught beers. Or perhaps the decline of Western civilization will follow the decline of the Roman and Greek empires with over-indulgence and decadent lifestyles, including heavy drinking, and thereby create a short- or medium-term boost in the beer market before a major slump. What are the implications of an ageing UK population? Bigger typefaces and print to help older eyes read commercial messages? Many products and services repositioned as the more mature person’s choice? There will still be youth markets, but they may not be as attractive, since they will shrink in size and competition may become quite ferocious. Then again, AIDS may yet wipe out a whole middle generation, leaving behind a polarized society of very old and very young. The falling marriage rate, the increasing divorce rate and the increasing number of births outside marriage contribute towards the sad term ‘disintegrating family’. In addition, the number of singleperson households is expected to increase. The traditional happy-family advertising formula is becoming obsolete, and marketing campaigns have been relecting this for years. Oxo ads have shown the husband cooking the family lunch while the wife is out at play. Persil ads also relect the changing demographics and roles, eg one ad shows a friendly grandchild who helps his grandmother to wash up with a top brand of washing-up liquid. The traditional ‘housewife’ (woman) shopper is no longer the sole key decision maker. Just take a look around a local supermarket on a Saturday morning, where you will see male shoppers buying Fairy Liquid, Ariel and Palmolive soap. 256 Part 1 Communications Background and Theories Decision-making units (DMUs) are changing (see Chapter 10, ‘Segmentation and target marketing’). Over 60 per cent of mothers in the UK work either part time or full time, compared with 10 per cent in the 1930s and 20 per cent in the 1950s. Incidentally, it has been suggested that guilt-ridden working mothers may ease their discomfort by buying the ‘best’ brands for their families instead of buying the store’s less expensive own brand. A Gallup poll suggested that 90 per cent of working mothers suffer some psychological discomfort in combining the roles of mother and worker. The effects of the changing structure of DMUs apply to a broad sweep of products and services and not just FMCGs. Insurance, health care and double glazing target both partners instead of the head of the household or the main income earner. Many telesales phone calls ix an appointment to visit only when both partners or spouses are available for a sales presentation. In 1990 futurologist Alvin Tofler forecasted that technology could facilitate vast demographic shifts as populations migrate from the cities to work in their own electronic cottages (complete with phone, fax and computer). Although there has been some movement, the vast demographic shift has not yet occurred. Technology, meanwhile, has relentlessly marched on into new realms of marketing. Hanging out at the oxygen bar Here is an IBM future vision from many years ago: oxygen bars offering ‘nutraceuticals’ (staple foods packed with vitamins and minerals) and gas for the jet-set hyperactive executives and fun lovers. Memory drugs, male birth control pills and remote-control surgery might all affect markets, their structure, the communications channels and communications tools. Technology Technology keeps changing the face of marketing communications. Web 2.0 (social media) has had a huge impact on marketing (see Chapter 1), and Web 3.0 (the semantic web) is emerging. Social change and technology change are driving new business models and new marketing models. It is a wonderful time for marketing, as these new opportunities allow marketing-driven business models to satisfy customers in new ways, deepen brand loyalty, spread messages and improve overall business operations. This takes marketers into new territories and into the boardroom. Think of customer care announcements, automatic bank dispensing tills, robot-operated compact disc stores, and outbound and inbound telesales voice machines. Home computer shopping in the United States allows customers to move their home computer’s mouse to scan aisles, pick up products, examine them in three dimensions and put them into an electronic basket. Payment is by credit card, and delivery comes the next day. Point-of-sale technology, ranging from robots to light-sensitive supermarket displays, reacts when triggered by a passing customer. Shopping cart video screens promote ‘today’s special offer’ as the customer passes various sensors, which trigger new relevant ads. Pepsi can page groups of its customers with brand bleepers already supplied. In fact, bleepers and other items with computer chips can be triggered by simply moving within a certain range of a pack or product. Today, location-based marketing means that mobile phones can alert customers to special offers as they enter the vicinity of the retail outlet. The Massachusetts Institute of Technology (MIT) has used ‘hot badges’ that lash when two like-minded people come within range of each other at a party. Packaging technology has, for many years now, provided self-heating tins and special Coca-Cola cans for use in US spaceships. And spaceships themselves are available for advertising purposes. Technology permeates every aspect of marketing and marketing communications. Print technology allows magazines to run liquidilled ads, heat-sensitive ads, double-image ads (which create the effect of movement), 3D ads, scratch-andsniff ads, perfumed ads and, of course, singing and speaking press ads and mailshots. There is also projection technology – perhaps we will soon see brand logos projected on to the moon. Push technology means that speciic relevant messages can be pushed out and delivered on a oneto-one basis through the internet. The internet also provides virtual meeting places, virtual discussion groups, virtual greetings cards, Chapter 11 The Changing Communications Environment Moore’s law Fast-forward to the semantic web Every 18 months, processing power doubles, while costs hold constant. ‘Gordon Moore, founder of Intel, observed that each new generation of computer chips (semiconductors) doubled in power every 18 months. This has been valid for 30 years and is predicted to continue for the next 30 years… has held since the 1960s, and recent developments in so called “molecular electronics” – arranging molecules in electronic circuits – suggest improvements are likely to continue for another 30 years.’ Krugman (2000) ‘Now, fast forward a few years. You’re still happily employed as a software consultant, and today you’re taking a working lunch with one of your biggest clients. Her company has an emergency project at its San Francisco branch for which they need you to consult for two weeks, and she asks you to get to San Francisco as soon as possible to begin work. You take out your hand held computer, activate its Semantic Web agent, and instruct it to book a non-stop flight to San Francisco that leaves before 10 AM the next day. You want an aisle seat if it’s available. Once your agent finds an acceptable flight with an available aisle seat, it books it using your American Express card and assigns the charges to your client’s account in your accounting application. It also warns you that you’ll be missing a dentist appointment back home during your trip and adds a note to your calendar reminding you to reschedule. Next, you specify that you want a car service to the client’s site, so your agent scans the availability of limos with “very good” or higher service ratings and books an appointment to have you picked up 30 minutes after your flight lands. Your agent also books you at your favourite hotel in San Francisco, automatically securing the lowest rate using your rewards card number. Finally, the agent updates your calendar and your manager’s calendar with your trip information and prints out your confirmation documents back at your office. ‘With just a few clicks your Semantic Web agent found and booked your flight, hotel, and car service, then updated your accounting system and calendars automatically. It even compared your itinerary to your calendar and detected the scheduling conflict with your dentist appointment. To do all this, the agent had to find, interpret, combine, and act on information from multiple sources. This example, of course, is a long-term vision for applying the Semantic Web. It’s one that may or may not come to fruition, and only the future will tell. However, the vision itself is important for understanding the potential of Semantic Web technologies.’ Altova (2010) This means that in just over 30 years computer chips will be 1 million times more powerful than today. Note: Today’s modern luxury car has more computer power than the first human spaceflight craft that landed on the moon. virtual gifts and virtual exhibitions. Invisible computers will be in everything that uses electricity, and 3D environments and avatars will increase – both in virtual worlds (see Figure 11.2) and in traditional web environments. Virtual reality and augmented reality draw from a mash-up of data, allowing even richer and more relevant customer experiences. Bar codes and information-collecting technology have increased in diversity and accuracy, so companies like Tesco can continually increase the relevancy of their tailored offers to customers. Behind technology’s physical manifestations, more subtle technology advances are occurring. Witness Digital body language ‘Marketers who continue to pursue their mission with a disconnected set of communication tools and non integrated data set of communication tools and non integrated data sets cannot gain the multi-perspective visibility into their prospects that is required to understand and leverage their digital body language.’ Woods (2009) 257 258 Part 1 Communications Background and Theories F I g u R E 11.1 Years taken to achieve 25 per cent market penetration, showing the ever-accelerating speed with which new ideas are adopted 35 35 30 Years taken 26 25 20 15 15 13 10 7 5 rn te In ll Ce Te l et e ph on PC TV ep ho ne 0 Technology marriages between technologies such as geographic information systems, analytical modelling market analysis and data mining. (See the box below, and Chapter 12, ‘Digital body language reports’ and ‘Digital body language and joined-up marketing’.) Google Alert and Google News can even do a lot of a manager’s reading by scanning journals, newspapers and trade magazines for relevant material and printing out headlines, summary abstracts or complete articles. Robots make our lives easier. The semantic web will make life even easier. Software will talk to software, documents and a lot more. Tim Berners-Lee, the British inventor of the World Wide Web, deines the semantic web as ‘a web of data that can be processed directly and indirectly by machines’. Data can be processed independently of application, platform or domain; in fact, data become part of the web. The increasing pace of change There is no doubt that change will continue to affect organizations. Those who ignore signiicant trends do so at their peril. However, marketers must develop their ability to recognize and separate signiicant trends from insigniicant fads. Today’s must-have may be forgotten tomorrow ‘I can confidently predict that every month for the next 100 years there will be a new “Must Have” application, portal or community that one of your employees will discover, and then try to convince you that your company will implode if you don’t immediately join, link, or retweet. In five years, all but three of these ideas will probably be forgotten.’ Byron, Kievman and Schrum (2010) Chapter 11 The Changing Communications Environment 259 Summary An open mind helps in exploiting trends and emerging opportunities more quickly than a closed mind. Change is constant. It churns up new opportunities and threats in all markets. The only certainty is that all markets constantly pull away from the status quo, fuelled by an ever-increasing array of variables easily categorized under the PEST factors. It is every marketer’s responsibility to observe, analyse and anticipate future developments in the marketplace and, in particular, in the changing communications environment. key points from Chapter 11 ●● The constant nature of change in markets presents a constant low of opportunities and threats. ●● Building risk assessment into marketing plans (particularly including economic risks) makes sense. ●● The laws and regulations change also. Ignoring them can be a costly affair. ●● Mapping social change is critical as marketers aim to relect customers’ social feelings, values, roles and norms. F I g u R E 11.2 Virtual worlds can, and do, co-exist alongside the real world 260 Part 1 Communications Background and Theories references and further reading Adams, R, Carruthers, J and Hamil, S (1992) Shopping for a Better World, Kogan Page, London Altova (2010) What is the Semantic Web?, Altova Library, www.altova.com Anning, P (2007) FSA helps ICO with £980K data ine as Halifax could be next, Osborne Clarke BBC News Online (2008a) Company loses data on criminals, 21 August BBC News Online (2008b) Previous cases of missing data, 25 May Brinker, S (2008) Marketing in the Semantic Web, Chief Marketing Technologist, 2 March Brøndmo, H (2003) Save the customer attention ecosystem, ClickZ, 14 July Byron, D, Kievman, N and Schrum, R (2010) Why executives hate social media: An executive’s guide to social media, Deming Hill Central Statistical Ofice, Social Trends (annual) (gives demographic breakdowns and forecasts) Cetron, M and Davies, O (1992) The Futurist (World Future Society), summarized in Crystal Globe: The haves and the have­nots of the new world order, St Martin’s Press, New York Chartered Institute of Management (CIM) (2010) Fact File: Marketing and the law, CIM, Maidenhead Doyle, P (1992) What are excellent companies? Journal of Marketing Management, 8, pp 101–16 Dwight, M (2007) Lifestyle stories, Services, PE.com, March Economist (2003) Real men get waxed, 3 July Enterprise Risk Management Integrated Framework (2004) COSO (Committee Of Sponsoring Organisations of the Treadway Commission) Farrell, D, Ghai, S and Shavers, T (2005) The demographic deicit – how aging will reduce global wealth, McKinsey Quarterly, web exclusive, March Grey International Advertising (1992) The Post­ Recession Marketplace: Life in the slow lane, Grey International Advertising, New York Gwyer, M (1992) Britain bracing for the age bomb, Independent on Sunday, 29 March Keegan, V (2002) The web needs its own police, Guardian, 19 December Knowlton, C (1991) Shell gets rich by beating risk, Fortune, 26 August, pp 51–53 Krugman, P (2000) Unleash after 100 years of trial and error, Fortune, 6 March Levy, A (2003) Unlock the equity in your brand, Marketing, 24 April Lindstrom, M (2003) Brandchild, Kogan Page, London MacNamara, W (1991) A new discipline, Marketing Week, 6 December, pp 34–37 Murphy, D (2003) Stopping careless texting to children, Marketing, 3 April Ohmae, K (1983) The Mind of the Strategist, PenguinBusiness Library, London Ohmae, K (1999) The Borderless World, rev edn, Collins, London Ohmae, K (2002) Triad Power: The coming shape of global competition, 2nd edn, Free Press, New York Pohl, M (1991) UK unaware of legal pitfalls in US, Marketing Week, 13 September Precision Marketing (2006) Privacy: Do Not Call means business, 6 January Rijkens, R (1992) European Advertising Strategies, Cassell, London Smith, D (2008) Google, 10 years in: Big, friendly giant or a greedy Goliath?, Observer, 17 August Taleb, N, Goldstein, D and Spitznagel, M (2009) The six mistakes executives make in risk management, Harvard Business Review, guest edn, The Magazine, October Tofler, A (1990) The Third Wave, Bantum edn, Bantum Books Woods, S (2009) Digital Body Language, New Year Publishing, Danville, CA Chapter 11 The Changing Communications Environment Further information Advertising Standards Authority Mid City Place 71 High Holborn London WC1V 6QT Tel: +44 (0)20 7492 2222 www.asa.org.uk Institute of Practitioners in Advertising (IPA) 44 Belgrave Square London SW1X 8QS Tel: +44 (0)20 7235 7020 Fax: +44 (0)20 7245 9904 www.ipa.co.uk CIPR Public Relations Centre 52–53 Russell Square London WC1B 4HP Tel: +44 (0)20 7631 6900 www.cipr.co.uk Institute of Promotional Marketing Arena House 66–68 Pentonville Road London N1 9HS Tel: +44 (0)20 7837 5340 www.theipm.org.uk Department for Business, Innovation and Skills (BIS) Victoria Street London SW1H 0ET Tel: +44 (0)20 7215 5000 www.bis.gov.uk Institute of Public Relations The Old Trading House 15 Northburgh Street London EC1V 0PR Tel: +44 (0)20 7253 5151 www.ipr.org.uk European Association of Communication Agencies (EACA) EACA Secretariat 152 Boulevard Brand Whitlock B-1200 Brussels Belgium Tel: 00 32 2 740 07 10 Fax: 00 32 2 740 07 17 www.eaca.be ITV Consumer Limited (ITV plc) ITV Network Centre 200 Gray’s Inn Road London WC1X 8HF Tel: +44 (0)20 7156 6000 www.itv.com European Marketing Confederation (EMC) Pl Chasseurs Ardennais 20 1030 Brussels Belgium Tel. +32 2 742 17 80 Fax +32 2 742 17 85 www.emc.be Fax Preference Service (FPS) DMA House 70 Margaret Street London W1W 8SS Tel: +44 (0)20 7291 3300 Fax: +44 (0)20 7323 4426 www.dma.org.uk Ofcom Riverside House 2a Southwark Bridge Road London SE1 9HA Tel: +44 (0)300 123 3000 Fax: +44 (0)20 7981 3333 www.ofcom.org.uk Public Relations Consultants Association (PRCA) Willow House Willow Place London SW1P 1JH Tel: +44 (0)20 7233 6026 Fax: +44 (0)20 7828 4797 www.prca.org.uk 261 262 THIS PAGE IS INTENTIONALLY LEFT BLANK 263 PART TWO Communications Tools 264 THIS PAGE IS INTENTIONALLY LEFT BLANK 265 12 Selling, sales management and key account management lEaRNINg ObjEcTIvES By the end of this chapter you will be able to: ●● Understand the purposes of different types of sales teams ●● Map out the key stages and skills required of key account management ●● Begin to manage the sales force ●● Identify different ways of extending your sales force Introduction Extending the sales force 273 266 Functions of selling 267 Types of sales force Consultative selling 267 Own sales force 274 Key account management Field marketing 274 (KAM) 267 Telemarketing 274 Integrating the sales force with the communications mix 269 Managing the sales force 273 270 Multi-level marketing 275 Ailiate marketing 275 Distributors’ sales assistants 277 Types of salespeople 270 Advantages and disadvantages 278 Recruiting Advantages Training 270 270 Motivating 271 Controlling 272 278 Disadvantages Summary 278 278 references and further reading 279 Further information 279 266 Part 2 Communications Tools Introduction The word ‘sales’ is conspicuous by its absence in job titles on business cards. ‘New business development’, ‘Account manager’, ‘Key account manager’, ‘Relationship manager’ and ‘Marketing executive’ are often preferred, yet selling’s impact on most markets at some stage is vital. The ‘selling’ stigma is surprising, given the size and importance of selling. A study called Balancing the Selling Equation (Abberton Associates, 1997) indicates that there are approximately 470,000 professional salespeople in the UK alone. The London Business School’s Associate Professor of Marketing, P J S Law, cites selling as a vital ingredient: ‘I cannot think of a product or service which has not, at some stage on its journey from producer to customer, been the subject of face-to-face negotiations between buyer and seller.’ The sales force budget allocation varies according to industry type, but generally, in B2B markets, more budget is spent on selling than on advertising or PR. B2B markets depend on personal selling more than others. Winning an order for, say, a heavy industrial machine cannot be done by advertising, direct mail or telesales (telephone selling). This kind of selling requires a top-level sales professional. Consumer goods, on the other hand, rarely use personal selling to the end user or consumer because of the high cost per visit (ranging from £27 to £500, depending on the seniority of the salesperson, the frequency and length of the visit, etc). Nevertheless, consumer products need salespeople to sell or ‘push’ the product in the retail chains (and wholesalers). There was an era when selling was all about short-term tactics, quick sales, in–out and on to the next unsuspecting prospect. This is short-term transactional marketing, which in the long run reduces sales and proits. It is probably best summarized by the well-known Heaven and Hell story. Today, selling has moved away from the shortterm, quick-sale scenario. Combative salespeople are being transformed into ‘customer servants’. Selling today is more about ‘partnering’ and relationship building: ‘You don’t sell to people; you partner with them.’ This is particularly true with key account management (KAM), which requires a more strategic approach to selling. Today selling is about building durable relationships that are dependent on satisfying the customer constantly. A dead prospect A man dies and arrives at the Pearly Gates, where St Peter tells him he cannot enter until Hell has been given an equal opportunity. Although the man knows he wants to go to Heaven, St Peter insists that he checks out Hell first. To his amazement, the man discovers that Hell is a party town, with free-flowing drink, good music, lots of friendly supermodel lookalikes everywhere, perfect weather, immaculate golf courses, football pitches, internet connections and white sandy beaches. Best of all, everyone is friendly and concerned that the man feels comfortable in his new surroundings. St Peter appears and asks the man for a decision, upon which the man says, ‘Hell’s for me!’ When he returns the next day, all he sees is bodies, scorched, burning and screaming. ‘But this isn’t the same place’, he shouts at St Peter in the distance. ‘Oh, yes, it is’, St Peter replies. ‘Yesterday you were a prospect. Today you are a customer.’ IBM today is following a growing trend towards paying the sales force salaries partly on customer satisfaction. Many companies are now measuring success not just by units sold but also by the far more rigorous yardstick of customer satisfaction. Selling has moved beyond the marketing and sales departments as companies realize that in today’s heated competitive markets the whole company must sell. The changing salesperson ‘I sold systems that people didn’t want, didn’t need and couldn’t afford.’ Bill Gardner, IBM veteran with 23 years’ service, now retired ‘Forty-five per cent of the variable component of my pay cheque depends on how Jon Gorney at National City Corporation rates me.’ Don Parker, IBM salesperson Chapter 12 Selling, Sales Management and key Account Management Functions of selling The purpose of selling is not just to sell. Master salespeople gather intelligence and build relationships (which can, in turn, create competitive advantage). Research suggests that as little as 10 per cent of a salesperson’s time is in fact spent actually ‘selling’. In addition to prospecting, appointment setting, letter writing, travelling, training and administration, many salespeople are also responsible for some customer care, post-sales service, entertaining, intelligence gathering, forecasting, understanding customers, developing customized solutions, team selling, etc. Some managers say that ‘Customers seek longer-term relationships with fewer suppliers than formerly, and in return for security of business ask their suppliers to do more for them.’ Forecasts suggest that there will be a concentration of key accounts (large customers) and they will need suppliers who work with them as strategic partners instead of adversaries (see ‘Consultative selling’ and ‘Key account management (KAM)’ below). Team selling may become more popular as research and development, production, distribution, sales, marketing and even legal and inancial people work with the customer. The best salespeople are expert listeners. They ask intelligent questions and listen carefully. The best salespeople are masters at capturing data. Since the sales force is in the front line of the market, it provides a fast and accurate feedback mechanism. Competitor activity, customer needs, and new opportunities and threats can and should be picked up by the sales force and fed back, without delay, to the sales manager or marketing manager. Reasons why an old customer is lost or a new customer is won should also be fed back immediately. Consultative selling Looking at customers as partners with whom a company wishes to develop a long-term, repeat-business relationship requires a shift in the business paradigm from ‘selling to them’ to ‘working with them’. B2B selling is no longer just converting features into beneits. Selling is more to do with problem solving and strategy fulilment (for the customer). ‘What is your requirement and how can we fulil it?’ is not enough. Salespeople have to understand customers’ business strategies and then see how 267 they can help. GE asked its largest customers what they expected from the GE sales team. Customers revealed: ‘The number one thing we expect is excellent knowledge of our company, our industry and the environment in which we do business.’ Offering expert advice and consultancy demands an attitude shift where the customer is seen as a partner rather than just a sales target. The shortterm ‘win–lose’ scenario (the seller gains at the customer’s expense) is replaced by the longer-term strategic partnership ‘win–win’ scenario. This builds customer retention through enhanced customer satisfaction, which in turn creates a sustainable marketing advantage. These new partnerships may involve joint development programmes that might not bear fruit for ive or more years. This may seem ineficient in the short term but highly effective in the medium to long term. This is a strategic shift towards KAM. 25 per cent lose money and 50 per cent only break even Half of all collaborative sellers enjoy only modest benefits from their efforts, and a quarter actually lose money in those relationships, according to a recent McKinsey survey of more than 200 sales executives at Fortune 1000 companies. Hancock, John and Wojcik (2005) Key account management (KAM) Key account management means managing the most important customer relationships. It is strategically important and requires highly skilled senior salespeople or senior management. In addition to salespeople being able to sell on a personal level, KAM requires many other time-consuming skills, including: ●● Solutions selling and collaborative selling, which generate tailored products or services, including ensuring customer retention, growing lifetime value and share of wallet. It is all about value creation for the client or partner. The initial sale (demonstration, pitch, handling objections, building trust, Part 2 268 Communications Tools ●● Negotiating skills (to nurture the long-term relationship and deal with a large decision-making unit). ●● Legal skills (an understanding of legal issues and contracts). Master salespeople Master salespeople are masters at gathering information. They are equipped with ‘must know’, ‘useful to know’ and ‘nice to know’ questions before every meeting. 10 Steps to KAM McDonald and Woodburn (2007) identiied 10 steps towards developing KAM within an organization: presenting proposals, closing the sale and after-sales service) is just the beginning. Intense collaboration is a complex, time-consuming joint effort. KAM must help the client to identify unique sources of value. Collaborative selling is a high level of customer engagement and generates collaborative co-creation ofline (see Chapter 1 for the online version). ●● ●● ●● Project management skills (to ensure tailored products and services are delivered on time and within budget). Relationship building at many complex levels right across the decision-making unit (this requires the ability to analyse clients’ internal structures, systems and overall organization and continually widen relevant contacts). Research and intelligence gathering (and sharing information). Ta b l E 1 2 .1 1 Select the right accounts. 2 Categorize them for their sales and proit potential. 3 Analyse their needs. 4 Develop strategic plans for (and with) each of them. 5 Get buy-in from all functions about their role in delivering the agreed value proposition (to the key account). 6 Get the right organization to serve the selected key accounts’ needs. 7 Get the right people and skill sets in the key account team. 8 Implement the plans on an annual basis. 9 Measure success, particularly in respect of whether they create shareholder value added. 10 Reward individuals and teams for their success. Stages of KAM Stage Activity Pre-KAM Identify potential accounts (select the best clients – who’s the perfect client?). Understand how they make decisions; key criteria; key players. Early KAM Tentative agreements and probing; identifying how the organization can help the client. Mid-KAM Account review and senior management involvement. Partnership KAM Joint problem solving and sharing sensitive information. Synergistic KAM Synergy of shared values and one-entity perspective. Uncoupling KAM A positive move recognizing that there is no further value in the relationship. Chapter 12 Selling, Sales Management and key Account Management An alternative approach to seeing how KAM evolves through the following stages was developed by Millman and Wilson (1995). This overlaps with the above but also goes beyond it by including the ‘uncoupling’ stage when the partnership ends. Digital body language reports Digital body language analysis can deliver a weekly alert to each global account manager and summarize all visitors’ activity from an existing key account (or a major new prospect), whether a brief visit or a deeper investigation of a particular new product. This helps salespeople gain deeper insights into, irst, what is of interest to their prospects and, second, what buying stage they are moving towards. Alternatively, reports can analyse prospect interest levels by both region and product, allowing marketers to identify areas in need of additional focus and resources. These reports can save a lot of time and effort and build stronger rapport between the sales and marketing teams, as sales teams really appreciate these valuable insights. Marketers can also instantaneously see which campaigns are generating better visits and conversions. This helps to improve resource allocations to optimize ROI. See the next section for a brief perspective on digital body language, or Chapter 21 for more detail. Integrating the sales force with the communications mix An organization’s own sales force, or a distributor’s or agent’s sales force, has to be kept abreast of any new advertising, sales promotions or social media campaigns. Its product knowledge has to be kept up to scratch. Some advertisements are wasted when they succeed in pulling customers into stores only for the customers to ind out that the sales staff behind the counter are not familiar with either the advertisement or the particular offer being made. Equally, salespeople may spend considerable time ensuring that wholesaler and retailer point-of-sale materials are professionally coordinated with a national advertising campaign. The amount and type of personal selling required change as a product or service moves through its life cycle (see ‘Types of salespeople’ below). Using a sales force to create awareness is expensive (and slow). The 269 salesperson has more impact in the inal stages of attention, interest, desire and action (AIDA), eg a salesperson in a retail store. Equally, salespeople can ask buyers what phrases they use when searching for the salesperson’s products or services. This key phrase inventory should be fed back regularly to the marketing team who are optimizing the websites and any social media. Another level of integration is between the web analytics and the sales team (see the next section). Digital body language and joined-up marketing Buyers increasingly source and purchase products and services online. The opportunities for a salesperson to get to meet the prospect are reducing. Once upon a time a salesperson could gauge prospects’ reactions and, ultimately, their readiness to purchase by listening carefully to their questions and comments and watching their body language. Today, marketers can, instead, watch prospects’, or website visitors’, digital body language (Woods, 2009) to determine how close the prospects are to buying and how they can help the prospects to make a purchase. If, for example, a prospect has returned several times to the site and downloaded three white papers, and some colleagues from the same company have visited the site, this might indicate the visitor is at an advanced ‘information collection’ stage in the buying process. This could prompt an on-screen message, a virtual assistant, an e-mail or a phone call offering help. Chapter 21 looks at digital body language in more detail. Most prospects are ignored ‘The tragedy is that most prospects fall through the cracks in the floor boards. 80% of B2B leads are not followed up. Of the 20% that do get followed up, sales reps reject 70% too quickly (even though the majority of these prospects eventually buy within 24 months and often from a competitor). Effectively, only 6% of a business’s hard earned leads get followed up.’ Woods (2009) 270 Part 2 Communications Tools Managing the sales force Types of salespeople Some sales reps are excellent at winning new business (‘order getters’) and ind the servicing of regular accounts to be dreadfully tedious compared to the exciting buzz of new business. Other reps are meticulous professionals who service an account (‘order takers’) with such professionalism, pride and affection that they create barriers for competition by building a ‘wall of warmth’ around their customers. In reality, most reps have to do a bit of both jobs. Shiv Mathur (1981) wrote an intriguing paper about ‘transaction shifts’, which suggested that different types of marketing managers (and salespeople) were required as a product passes through its life cycle, since the product requires different levels of service support at various stages. In an increasingly impersonal world of faceless faxes and voicemail, face-to-face communications or personal selling can provide a reassuring, personal touch. In addition, the salesperson can respond immediately to a buyer’s changing needs and moods. The salesperson can also provide instant feedback from the customer or marketplace (see Chapter 6, ‘The intelligent rep’). On the other hand, a sales force can be expensive in terms of cost per thousand contacts, and sometimes it can prove to be uneconomical on a cost-per-order basis. This largely depends on the size and proitability of the order, the distance travelled to get it, the number of meetings required, etc. The primary responsibilities of the sales force manager include recruitment, training, motivating, controlling and collecting feedback. I perform better as a salesperson now ‘I used to have a territory where I was a free agent… today the computer recommends which calls I should make… my sales aids remind me what to ask and say… my manager knows where I am and I spend half my time on training courses… but I do sell 30 per cent more per annum.’ A domestic appliance executive Recruiting Determining the right size and structure of the sales force is vital. What is the optimum call frequency? Who should service the account? As an organization changes or grows, so too the sales force and its responsibilities must change. Sales force attrition is a fact of life. Some salespeople move to new companies; some are promoted; others retire or are ired. This means that recruitment is a continual process that demands skills, cash and time. Recruiting the right salesperson is a resourcesconsuming management activity. The New York Sales and Marketing Association (2002) revealed that 71 per cent of customers buy from a salesperson simply because they like and trust the salesperson. Two out of three customers change suppliers because of a salesperson’s lack of interest, attention or communication. Recruit the wrong people and sales can actually be reduced instead of increased. Keeping the right sales team together is largely determined by levels of training, motivation, control and feedback. Making noises like farm animals – sales training Imagine a group of people walking around a room, making farm animal noises and trying to form a circle with their eyes closed. This is part of a rigorous selection process of a field marketing team whose job is to help major marketing player Unilever to launch new varieties of an established snack product. Top marketing companies recognize that the more time they invest in selection and training, the better the result. Preparation is rigorous, including dealing with hecklers. As mystery shoppers check on the team, nothing is left to chance. Training Training is an ongoing affair, not a one-off activity. It is a continuous process. Like thinking, it requires practice. Tony Buzan’s classic books (1988, 1989, 2003) emphasize that thinking is a skill that needs development and exercise. Basically, the sales force Chapter 12 Selling, Sales Management and key Account Management has to acquire and maintain three pieces of knowledge and one set of skills – selling skills. The three pieces of knowledge that the professional salesperson must have are: 1 product knowledge (marketing mix, features and beneits, and unique selling propositions – USPs); 2 market knowledge (customers and competitors); 3 company knowledge (history, structure, etc). 271 reason to act. In fact, most major sales in large B2B situations involve a huge needs analysis. This involves analysing the customer’s situation and includes needs, beneits, barriers and ways forward. The decision-making unit is analysed in great detail to ensure that all key decision inluencers are addressed at the appropriate stage in the selling process. The customer’s inancial position, access to funds and decision-making units are also carefully studied. Eventually a risk analysis will be completed, identifying potential problems, their sources and their likely impacts. The 7 P approach to selling skills There are several different stages involved in selling. The 7P sequential approach identiies areas for skill improvement. The seven stages are: 1 prospecting (looking for potential customers); 2 preparation (objective setting, continual customer research, etc); 3 presentation (demonstration, discussion); 4 possible problems (handling objections); 5 ‘Please give me the order’ (closing the sale or getting the order); 6 pen to paper (recording accurately all relevant details); 7 post-sales service (developing the relationship). Increasingly today, more and more sales come from past customers and through growing the share of wallet of existing customers. Both employees and past employees can help to prospect for new business. For example, McKinsey Consultants harnesses a network of its ex-employees – recognizing that the alumni can help to generate new business. Similarly, PwC discovered that 60 per cent of new business came from ex-employees or via exemployee contacts. Each stage requires a certain amount of training and practice. Training should also include nonselling activities (information-gathering techniques, time-management skills, personal expense control, etc). Preparation is continual and includes an initial analysis of the customer’s business, issues and objectives, clarifying exactly what the customer wants to achieve as well as identifying its compelling Using problems (objections) to close that special sale ‘Julie says: “I don’t like the way you dress, I don’t think you make enough money, and you drive like a maniac.” ’ ‘Frank hears: “I don’t like the way you dress [buying signal ], I don’t think you make enough money [buying signal ], and you drive like a maniac [buying signal ].” ’ ‘Frank’s response: “If I let you pick my suits, if I double my income, and if I promise never to exceed the posted speed limits, will you marry me then?” ’ Frank Pacetta, Xerox sales manager Motivating Maintaining the sales force’s motivation is a vital part of sales management. It can be as easy as publishing the monthly sales igures against targets for each sales rep and circulating the igures among the sales team. This can lead to competition among members, which may inhibit them from sharing ideas, contacts, leads and even closing techniques. On the other hand, it can keep everyone focused on targets, with peer pressure as a source of motivation. It is the sales manager’s job to build a team feeling and get everyone working together, sharing ideas rather than hiding them from each other. ‘Psychic income’ is often a stronger motivator than inancial income, yet it does not need to 272 Part 2 Communications Tools cost the company any more money than the traditional inancial incentive. Psychic income offers rewards aimed at the higher levels of need, such as being valued, recognized, rewarded and challenged (see Chapter 4, ‘Motivation’, Maslow’s hierarchy of needs). This is how it works. A bonus cheque for £1,000 tends to get spent on dull and boring things like reducing the overdraft or paying the mortgage. On the other hand, the same £1,000 spent on a holiday for two or a spectacular piece of Waterford glass acts as a constant reminder of a job well done. Even a clap on the back, a thank-you note, a presentation ceremony or a photograph in the newsletter (or in the annual report) can arouse feelings that satisfy the higher levels of Maslow’s hierarchy of needs. This contrasts with the £1,000 used to satisfy the dull, boring and soon forgotten lower levels of need. The reward itself is soon forgotten here, whereas the psychic income reward tends to linger longer and therefore offer better motivational potential. Psychic income – two holes of golf with Jack nicklaus The Maritz Corporation specializes in psychic income packages. They even give out pyramidshaped paperweights that list Maslow’s needs. They tailor their awards so that individuals are offered an appropriate range of stimulating options. Some of their choices have offered trips to the moon, ballooning across the wine fields of Burgundy or two holes of golf with Jack Nicklaus. As you approach the 18th green there is an 80-piece orchestra perched on scaffolding, playing the tune of your choice. The annual sales conference should be a motivator and act as a forum for sharing ideas (‘how I made a sale’ contest), identifying and solving problems, improving techniques, and recognizing and rewarding achievements. The conference should also provide a pleasant environment that reinforces feelings of being glad to work with the company. Controlling Controlling the sales force involves analysing sales: ●● by product; ●● by market or region; ●● by salesperson. Sales can also be analysed by proitability or the ‘contribution’ each order makes towards the overall proitability of the organization. This encourages the salesperson to sell higher-margin products or services rather than succumbing to the temptation of 1) giving discounts and 2) pushing easier, lowmargin items. The bottom line tends to be turnover or sales, number of new accounts (customers) won and old accounts lost, and the quality of those accounts (size and creditworthiness). Further analysis reveals number of orders (and average order size), callsto-orders ratios, etc. Even miles driven give some indication as to whether reps are chasing their tails or leaving room for improvement. Good planning helps control. Good sales forecasting provides targets and yardsticks for measurement. Sales forecasts can be drawn up by sales reps for each customer for each month and eventually put together to form an overall sales rep forecast. This can be modiied to allow for low forecasts that reduce target sales igures, thereby reducing pressure on the reps and making it easier for them to attain their daily, weekly, monthly, quarterly and annual targets. There are also more sophisticated forecasting models that take into account a host of factors, including prices, competitors, state of the economy, etc. Typical quantitative standards are as follows: ●● sales volume as a percentage of sales potential; ●● selling expense as a percentage of sales generated; ●● number of customers as a percentage of the total number of potential customers in the territory; ●● call frequency ratio, or total calls made divided by total number of customers and prospects who are called (or visited) by the salesperson. Chapter 12 Selling, Sales Management and key Account Management 273 The extinguisher There is always room for creativity in marketing, and particularly in selling. Whether it is a new form of presentation, a new way of prospecting or a new way of showing determination to win the business, the list is endless. The extinguisher’s creative approach below is not to be recommended. This story is recalled from a marketing magazine of many years ago. Having recognized the weary tread of a door-todoor salesman coming up the stairs, the giggling office staff scrambled behind doors and under desks to avoid the approaching salesman’s eye contact. I only realized that a salesman was looming when I noticed Time – the scarce resource The average salesperson spends less than 10 per cent of his or her time actually engaged in face-to-face selling (Abberton Associates, 1997). The rest of the time is spent illing in report forms, travelling, setting up appointments, attending internal meetings, etc. Is this the optimum use of a key resource? Deinitely not, so some companies use other communication tools (eg direct response advertisement or a mailshot) to generate enquiries and then categorize or qualify the quality of the enquiry or lead into ‘hot, medium or cold’ prospects. An online form or an ofline telesales team can then further qualify the lead by determining how urgent, immediate or serious the enquiry is (see Chapter 17 for further examples). They can even set up appointments in a way that minimizes the travel between appointments. ‘The extinguisher’ (in the box above) is an extreme example, where the salesman seizes the relatively rare face-to-face opportunity and makes a sale every time (although he may also soon be locked up!). Servicing existing customers with a mixture of telephone calls and personal visits, instead of visits only, allows sales reps to become more eficient by reducing the frequency of their visits but maintaining the frequency of contact or service by phone. There is obviously a ine line between the less personal telephone call and the more personal visit. Some buyers may prefer to avoid the interruption the sniggering bodies scattered behind the furniture. Too late. I turned around to see a shabby little man with a greasy raincoat and coffee-stained briefcase move towards me. Before I knew it he had opened his briefcase and poured a jar of petrol over himself. Out of his inside pocket he drew a lighter and set fire to himself. Then, while standing in the classic salesperson pose (right arm holding out a spray can and left arm pointing to the label), he said ‘And this, ladies and gentlemen, is the FlameZapper miniature fire extinguisher.’ As he proceeded to spray himself, he continued, ‘You can carry it anywhere.’ He left several cans lighter and several pounds heavier. of a sales visit and appreciate a courtesy call (‘just checking to see if everything is all right or if there is anything you need’). This minimizes time wastage (for both parties) while maintaining the customer service facility. Getting the balance between calls and visits is vital, since the competition is also out there, every day, knocking on the same doors. Optimum call frequencies need to be carefully planned. Extending the sales force Types of sales force The three key resources, the 3Ms (men/women, money and minutes), are limited. Selling soaks up all three resources. There are various combinations of types of sales force. An organization’s ield sales force can be supported by an in-house telesales team who do the prospecting and appointment setting, thereby freeing the ield salespeople to do what they are best at – selling. Resources can also be invested in agents, distributors, wholesalers, retailers and their reps so that they become an extension of the sales force. Alternatively, a temporary sales team can be contracted in to screen prospects and make appointments (telesales teams) or to go out and sell or give free samples away (see ‘Field marketing’ below). There is no single correct sales force mix, eg within the commercial tyre market one company 274 Part 2 Communications Tools achieves 200 calls per executive per annum, while its largest competitor achieves over 1,600. The former company has focused on large accounts and uses agents to service the independent trade. The latter sells direct to customers of all sizes. Both companies are highly proitable, and both have highly eficient sales organizations. The correct approach is, of course, to monitor constantly the effectiveness of each sales force mix (customer satisfaction, sales, market share and profitability) and the eficiency (number of calls, cost per call, conversion rates of enquirers to customers, etc). There is always room for improvement. Own sales force Although a sales force creates a large overhead, it does allow direct control over recruiting, training and motivating. The section ‘Managing the sales force’ (page 270) explores the processes involved in getting the best out of this key resource. First consider alternative extensions of the sales force, both online and ofline, including ield marketing, multi-level marketing, afiliate marketing and distributors’ sales assistants. 2 merchandising and display – arranging stocks and literature in retail stores and other outlets, eg 25,000 newsagents and doctors’ surgeries had the Department of Social Security’s Family Credit information point-of-sale material placed in them within 14 days; 3 sampling and promotions – providing teams (eg the Pepsi Challenge) in shopping precincts and superstores and at national events and exhibitions; 4 market research into shelf facings, stocking levels and positions in store (including number of shelf facings or number of units that can be seen); 5 monitoring customer care and service – with mystery shoppers who are employed to observe service and report back details of the speciic levels of in-store service and customer care. Field marketing’s main advantages are widening the reach without acquiring the overhead of a fulltime sales team. The disadvantages, in addition to the fees, are that training, motivation and constant monitoring and feedback are required to get the best out of the ield sales team. Field marketing It is possible to hire lexible sales forces for ad hoc tactical activities or regular repeat activities. Reduced cost, lexibility and direct measurability make a contract sales force or ield marketing team attractive compared to a full-time, in-house ield sales team. Cost can be further reduced by using a syndicated or shared team as opposed to a dedicated team devoted to one particular product only. There are, of course, risks, particularly if the salespeople have a tendency for hard selling, misrepresentation or even rudeness. Careful scrutiny and supervision can usually identify these potential problems before they develop into a fullblown crisis. Field marketing tends to be used by FMCG or impulse goods manufacturers, but can be used by a wider range of organizations. Typical ield marketing activities include: 1 selling into independent retail outlets, eg ield sales teams sold Christmas charity cards to almost 18,000 outlets during January, February and March; Telemarketing In addition to direct selling, telemarketing (telephone marketing) is used for appointment setting, lead generation, list building or cleaning, market research, customer care and even shareholder communications. An outbound campaign requires telemarketing professionals to make the calls, as opposed to an inbound campaign, which receives calls generated from 0800, freephone, local phone, standard phone or premium-rate phone (which act as ‘selfliquidating’, ie generating revenues that pay for other costs) numbers listed in direct response advertisements, mailshots or websites. Telemarketing is a lexible tool. Depending on the previous day’s results, a telesales campaign can change on a daily basis, with the telesales script being rewritten overnight and tested the following day. Telemarketing can be part of a contact strategy that includes mailshots (letters, brochures and vouchers), e-mails, visits and calls. Equally, telemarketing can qualify prospects to determine which Chapter 12 Selling, Sales Management and key Account Management particular contact strategy is best, eg prospects with less immediate needs might be mailed a brochure, while telemarketing contacts the more immediate buyers with a view to setting up an appointment. Another stage will emerge when the not-so-urgent prospects who received the brochure start to mature into the buying mode. The database can prompt some telesales action, and so on. Detailed objectives for the campaign, such as total number of calls, number of calls per person per hour, conversion rates, minimum amount of information to be collected, etc, must be agreed. Once again, sales and marketing need to work closely together, eg the telemarketing manager needs to know when the mailings go out or when the sales team are available for appointments. Script development draws on the features, beneits and USPs. It will also include open-question, presentation, objection-handling and closing techniques. The telemarketing team can then be briefed and trained. Lists, scripts, incentives, prices and timing can all be tested. The results will be carefully monitored and used to develop the optimum combination for the full roll-out of the telemarketing campaign. These results should be analysed to continually build on previous success. Telemarketing is an expensive way to boost awareness on a cost-per-thousand (CPT) basis, but it is lexible and quick and can be cost-effective if targeting the right customer proile. It can also save costs by maintaining customer relationships with telecalls bolstered by fewer actual visits from a sales rep. 275 Several companies have proved that network selling can be a legal and successful method of marketing. Pyramid selling has a bad image because it was exploited unscrupulously, with new distributors being promised fortunes in return for large investments in stock that never sold. In addition, these selling systems tend to exploit personal contacts and networks, which can cause individuals to view all their friends and family (or anyone with whom they come into contact) as sales prospects. This mercenary perspective is sometimes enveloped in a kind of corporate evangelism, which gives this sales and distribution method a poor image, despite the several legitimate and successful systems that thrive in the United States. The Trading Schemes Regulations 1997 allow a maximum initial fee of £200 (within the irst seven days) to be charged for enrolment as a distributor. Goods are then purchased at a discounted wholesale price, which allows newly enrolled distributors to add their own margin of proit when selling the goods to an end user. Goods are returnable (and 90 per cent of the cost recoupable). Any training fees must be clearly stated in the written contract, and training must not be compulsory. The advantage of multi-level marketing is acquiring a vast distribution network with no direct overhead, although margins are reduced as commissions are paid. Disadvantages include that some countries do not accept multi-level marketing and ban any form of ‘pyramid selling’. Ailiate marketing Multi-level marketing Multi-level marketing is a system of selling goods directly to customers through a network of selfemployed salespeople. The manufacturer recruits distributors, who in turn recruit (or sponsor) more distributors, who in turn recruit more distributors, and so on. Each distributor is on a particular level of discounts (depending on the size of stock purchased). Distributors effectively earn income on their own direct sales to the distributors they have recruited. Distributors also earn a percentage of the earnings of all of the other distributors connected through their chain or line of distributors. Multi-level marketing is sometimes called network selling, retail networking or pyramid selling. Although it does not employ salespeople per se, afiliate marketing extends the reach of a brand’s sales potential through a form of multi-level marketing online. Afiliates generate sales on a commission-only basis. Afiliate partners usually have access to speciic communities or target markets. The afiliates basically refer visitors to the brand’s website, and every time the referred visitors buy the brand the afiliate gets paid a commission. The afiliates use banner ads (usually supplied by the brand), e-mail and PPC ad campaigns. The relatively risk-free concept is straightforward: ●● Afiliate networks generate trafic to the client’s website via banner ads, PPC and e-mail. Part 2 276 Communications Tools ●● Afiliate networks track this trafic closely (via tracking codes) and supply reports. ●● Commission is paid against whatever the agreed goals are: trafic, leads or enquiries, or actual sales, eg if sales conversions are the goal and no sales are generated then no commission is paid. ●● The only investment a marketer needs is 1) the copy about the company or product to attract afiliates and 2) the banner adverts for afiliates to use on their sites. The original form of afiliate marketing was selling through clubs, associations and networks, whether online or ofline. Members within networks, clubs or associations tend to trust relevant offers from within the group. For example, an insurance company might ask a football club to encourage its members to buy its credit card. Each time a football fan buys a card, the club gets a commission and the member gets a discount or a gift instead (eg a club baseball cap that costs £2 could have much greater value, as a club baseball cap is so relevant). The insurance company can do the same online, except on a potentially much bigger scale and with multiple clubs, associations and communities online. As well as boosting sales, this also increases brand awareness. In fact, afiliate marketing can get a brand’s ad carried by hundreds if not thousands of websites, eg Marriott Hotels use Commission Junction to reach into over 700 highly relevant websites with a range of banner ads and special offers. Amazon has an estimated 400,000 afiliates or ‘associates’ who offer Amazon books to their networks, eg a horse-riding website can have a book about horse riding promoted on the website in an Amazon banner that takes the buyer directly to Amazon. Everyone wins. The customer is offered very relevant books only. The website owner adds value to its website by adding highly relevant books and subsequently earning a revenue or commission on each book sold. There is no risk to the website owner, as no stockholding investment is required, and no resources are required for logistical operations (dispatch, post and packaging, and invoicing), as this is all handled by Amazon. Advantages and disadvantages Essentially afiliate marketing extends a brand’s reach across hundreds and sometimes thousands of websites (and search engines), generating extra sales on a commission basis (30 per cent approximately). However, the afiliate may be competing for the same trafic that the brand’s own website wants (or it may reach way beyond the brand’s own reach). Heavy use of PPC ad words (including the brand name) by afiliates can push up bid prices for the brand itself. Some brands have strict guidelines about the use (even restrict the use) of their brand name by afiliate PPC campaigns. Brands need to check out the quality of the afiliate’s website and how it portrays the brand to ensure no damage to the brand. There are two types of afiliate programmes: in-house afiliate programmes and afiliate network programmes. Ask how the brand is being portrayed and whether the brand is effectively competing with afiliates to attract the same visitor. In-house affiliate programmes Some brands like to have their own afiliate networks. Amazon has over 400,000 partners who place highly relevant Amazon banner ads on their own sites, delivering visitors who buy and simultaneously earning a steady stream of revenue for themselves. Many major brands list their afiliate programmes on their websites under ‘Afiliate programme’, ‘Associate programme’, ‘Referral programme’ or ‘Partner programme’, which gives a full explanation of how it works, including log-in, tracking, banners available and frequency of commission payments. Commissions range from 5 per cent to 30 per cent. Affiliate network programme A network is a collection of companies that have afiliate programmes but are managed by one company, eg Commission Junction, Afiliate Future, Trade Doubler or UK Afiliates. A lot of companies want afiliate programmes but they don’t want to manage them (commissions, payments and queries), which can be costly in terms of time, money and systems. An afiliate network company like Commission Junction recruits relevant new publishers (websites), checks the quality of each new afiliate, activates existing publishers, and motivates them to boost performance and ultimately grow sales. Some afiliate networks have a set-up fee (up to £2,000) and a monthly management fee, and all have a commission override, Chapter 12 F I g u R E 1 2 .1 Selling, Sales Management and key Account Management In-house ailiate programme Customers Customers Customers Customers Customers Customers Customers Affiliate Affiliate Brand Affiliate F I g u R E 1 2 .2 Ailiate network programme Customers Customers Customers Customers Customers Customers Customers Affiliate Brand 277 Affiliate network company Affiliate Affiliate on top of the commission paid to the afiliate (say 20 per cent of the afiliate commission). For example, if an item sells for £100 with an afiliate commission of 30 per cent, £30 goes to the afiliate and £6 goes to the network (20 per cent of the £30 commission), so the brand pays a total of £36 from the £100 sale. There are three parties involved: the merchant (eg a brand owner), a publisher (afiliate, eg a website owner) and the afiliate network (eg Commission Junction). Consider the retailer Argos (‘the merchant’) using Commission Junction (‘the afiliate network’) to reach different target markets via different publishers, eg it could target cheap furniture into its network of student sites (publishers) and camping equipment into its network of festival sites (publishers) from Commission Junction’s 16,000 afiliate publishers that are in Commission Junction’s network. often carries many different product lines supplied by several competing suppliers. The mindshare concept aims to develop the distributor’s sales force into an extension of the supplier’s sales force. All suppliers would obviously like to have the distributor’s sales force recommend, select or push their particular brand to the end user. Mindshare can be won by creating and maintaining a partnership approach that develops a mutually beneicial business relationship. This means the manufacturer must supply: ●● ●● Distributors’ sales assistants In both B2B and B2C markets, most brands sell to distributors, who in turn sell to wholesalers and/or end users (ultimate customers). Winning the battle for the distributor’s ‘mindshare’ (or share of mind) can be an important part of sales force management. Mindshare means the amount of attention and effort that a distributor’s sales force gives to a particular manufacturer’s product. A distributor ●● ●● ●● ●● a reasonable quality of product (and price and delivery); creative and frequent sales promotions (eg a distributor sales rep club where the top distributor’s reps are presented with awards, in front of the distributor’s own management, once they attain a certain level of sales; there might be a silver, gold and platinum club for 50-, 100- and 200-unit salespeople, respectively); product training; joint visits (the manufacturer and distributor visit the end user together); cooperative advertising (where the manufacturer shares the cost of the distributor’s advertising when it promotes both the parties); merchandising and display services. 278 Part 2 Communications Tools Mindshare requires a longer-term approach to selling, since the sales reps’ efforts do not necessarily result in an immediate order. But mindshare will contribute to longer-term sales. It is therefore management’s responsibility to develop a suitable time horizon and a mindshare strategy that works. A US marketing consultancy, the Richmark Group, claims that a mindshare strategy has been found to be more powerful than strategies based on product differentiation and other more traditional market strategies. Manufacturers who successfully implement this strategy can build a market position that it is almost impossible for competitors to duplicate. Mindshare can make a competitor’s marketing communications totally ineffective. Imagine the manufacturer makes electrical cable Z100, the distributor is an electrical wholesaler and the end user is the electrical contractor who will buy and install the cable under the loorboards of a new house. An end user (electrical contractor) customer asks a distributor’s sales rep (electrical wholesaler’s rep) for a competing brand, say brand A1000. The distributor’s rep recommends and offers the Z100 cable instead. The end user seeks advice in selecting a speciic brand. The distributor’s rep recommends the manufacturer’s brand Z100. The distributor’s rep effectively becomes part of the Z100 brand ‘unoficial’ sales force. The advantage of mindshare is spreading the sales force wider without acquiring the ixed overhead of the additional resource. The disadvantages are, once again, that training, motivation and constant monitoring are required. Note that organizations must pay heed to the new Bribery Act 2011. Advantages and disadvantages Here are some of the advantages and disadvantages to consider when deciding whether to increase or reduce the communications tool. Advantages Salespeople are great (when trained and motivated) at getting key messages across to buyers. Messages can also be changed (though it requires some training) in a relatively short lead time. If the product or service requires a personalized presentation then investing in salespeople rather than just advertising makes sense. B2B markets invest more in sales teams than advertising. Sales people are also great at collecting intelligence and market research, as well as building relationships and, of course, getting sales. Disadvantages A sales force cannot spread a message as quickly and as widely as advertising, sponsorship, PR or perhaps a piece of viral marketing. Sales teams require investment in training, motivation and monitoring. It is important to spend time carefully recruiting salespeople, as they are the organization’s brand ambassadors. On a CPT basis, sales teams do not compete with advertising, sponsorship or PR, but on a cost-per-order basis they may very well do better than other promotional tools. Summary The sales force is a key marketing resource that can determine the success or otherwise of any organization. Sales teams and marketing people need to work together more closely to share intelligence and leads in a systematic process. Managing the sales resource requires clear management skills. There are many different options to extend the sales force: through its own sales team or using ield marketing, multi-level marketing, afiliate marketing or mindshare through distributors’ sales teams. Chapter 12 Selling, Sales Management and key Account Management 279 key points from Chapter 12 ●● There are different types of sales teams, including in-house, telemarketing, multi-level marketing, afiliate marketing and distributors’ sales assistants. ●● KAM requires a variety of management skills, including consultative selling. ●● Managing a sales forces requires recruitment, training, motivation and monitoring. references and further reading Abberton Associates (1997) Balancing the Selling Equation, CPM Field Marketing, Thame Buzan, T (1988) Make the Most of Your Mind, Pan Books, London Buzan, T (1989) Use Your Head, rev edn, Pan Books, London Buzan, T (2003) How to Mindmap, Thorson Publications, London Constable, J and McCormack, R (1987) The Making of British Managers, CBI/BIM, London Denny, R (2000) Selling to Win, Kogan Page, London Francis, K (1998) What is KAM?, Winning Business, January–March Hancock, M, John, R and Wojcik, P (2005) Better B2B selling, McKinsey Quarterly, 16 June Jobber, D and Lancaster, G (2000) Selling and Sales Management, Financial Times/Prentice Hall, Harlow Further information Institute of Sales and Marketing Management Harrier Court Lower Woodside Bedfordshire LU1 4DQ Tel: +44 (0)1582 840001 Fax: +44 (0)1582 849142 www.ismm.co.uk Mathur, S (1981) Strategic industrial marketing: Transaction shifts and competitive response, City University Working Paper 33, City University, London McDonald, M and Woodburn, D (2007) Key Account Management, the Deinitive Guide, 2nd edn, Butterworth Heinemann, Oxford Millman, T and Wilson, K (1995) From key account selling to key account management, Journal of Marketing Practice: Applied marketing science, 1 (1), pp 9–21 New York Sales and Marketing Association (2002) Tips and advice in selling, Sense and Sensibility, 22 April Woods, S (2009) Digital Body Language, New Year Publishing, Danville, CA 280 THIS PAGE IS INTENTIONALLY LEFT BLANK 281 13 Advertising online and ofline lEaRNINg ObjEcTIvES By the end of this chapter you will be able to: ●● Understand the evolutionary nature of advertising ●● Explore cutting-edge new advertising tools ●● Appreciate the potential for integrations with social media and other marketing communications tools ●● Know how to plan the stages of an ad campaign Introduction 282 The end of advertising? 282 New advertising 283 Contextual advertising and behavioural advertising 283 Location-based advertising 283 User-generated ads 284 Long-form ads 285 Short-form ads 285 Objectives 290 Strategy 292 Message development (tactics) 292 Action 296 Control 296 The stages of media planning 296 Case study 13.1: T-Mobile 300 Case study 13.2: hEA drug education 304 Sponsored TV 286 Apps 286 Advantages and disadvantages 308 Integrated mobile, apps, Advantages 308 TV and social TV 286 Disadvantages 308 Postmodern ads 287 references and further reading 308 Managing a campaign 289 Further information 309 The situation 289 282 Part 2 Communications Tools Introduction Advertising is changing all the time, and in the last ive years it has seen some massive changes that challenge the nature of advertising itself. It is morphing into dialogues, social media, user-generated content and a myriad of wonderful new ways of communicating with customers. These include contextual advertising, behavioural advertising, location-based advertising, user-generated ads, long-form and shortform ads, apps, social TV, postmodern ads and of course good old contentious ads. This chapter explores these and uses two cases to demonstrate how a basic TV ad campaign and a social-media-driven TV ad campaign are developed. The end of advertising? Many current critics believe advertising is on its way out, eg Regis McKenna (1991) announced that we are ‘witnessing the oblivion of advertising’. More recently, some other marketers have said that locationbased services remove the need for advertising. The fortunes of advertising have grown alongside the growth of the mass media. Now that this growth has stopped, questions are being asked. The mass media have fragmented (200 TV stations, millions of websites and an explosion of new magazines and radio stations). Martin Sorrell (1996) of WPP said: ‘Massive audiences become more and more dificult to buy.’ It is therefore suggested that the current lavish advertising productions, which depend on mass audiences to make them cost-effective, will decline as well. ‘Advertising [is] one of the most fundamental ways to sort out information. And that’s the gift of advertising: to connect with people in a human way, to make the kind of emotional connections that are at the core of storytelling.’ ‘Advertisements are now so numerous that they are very negligently perused.’ Which of these statements is the more recent? One is by Google’s CEO, and the other by Samuel Johnson 250 years earlier. Eric Schmidt (2009), CEO of Google, said the former and Johnson the latter (in the Idler, 1759). So some feel advertising is a maturing industry. Although advertising does have a unique ability to simplify and condense a complicated selling message into an emotionally charged 30-second piece of ilm, media proliferation has meant that the traditional 30-second TV advertisement is no longer the answer to everything. But brilliant advertising, particularly if it integrates with social media, still has a role to play. Customers will consume them if they cut through the clutter and are relevant. More TV and radio stations, newspapers and cinemas still need advertisements to ill them. But the days of media owners just selling ad space are over. ‘Marketers need media owners to think creatively about using the media for reaching out and also building stronger relations, as well as selling more product X.’ Learmonth (2010) refers to this in more detail (see Chapter 7). There is a shift in vision and philosophy amongst ‘advertisers’. Interruption marketing (ads shouting at customers) has less of a role today. Marketing campaigns are no longer just about cost per thousand (CPT) and page views and more about learning how to interact with customers and participate in their activities as they spend more time online. Customers want to be engaged with relevant added-value content. They want to ind relevant information only when they want it and share it with whomever they desire. Despite the hype, advertising is not going away. It’s just reinventing itself to meet the needs of social media demands. Contextual advertising, behavioural targeting and location-based advertising are clear examples of advertising reinventing itself. Media owners and advertisers are thinking more creatively and, in some cases, thinking way ‘outside Half of my advertising is wasted The days are over when clients politely smiled as Lord Leverhulme’s legacy echoed: ‘I know half my advertising is wasted. I just don’t know which half.’ Today, better-disciplined clients demand more measurement, more integration and more dialogue from all of their communications. Chapter 13 Advertising Online and Ofline the box’. They understand customers’ needs for interaction and involvement and are developing strategies to maximize them. This is demonstrated in the integrating social media, new variants of advertising (see below) and radical rethinking by companies like Coca-Cola, which is shaking up its view of marketing by not relying on traditional advertising and, instead, investing serious money into ideas that bring entertainment value to brands. It is developing content and partnerships with media companies, as it sees its brands such as Coca-Cola as ‘portals’ offering a ‘network’ or means of distribution in their own right. This concept has been dubbed ‘brand entertainment’, and companies such as Coca-Cola, Nike, Orange and Mercedes-Benz are busy integrating brands into such varied areas as sport, entertainment, music, travel and gaming. New advertising Customers still want relevant advertising to inform them, entertain them and challenge them just as it always has. After all, advertising does inform, persuade and remind. It can still, very quickly, help to build brands, raise awareness and nurture brand relationships, and all in a relatively controlled environment (compared to the vagaries and uncontrollable nature of editorial exposure generated by PR, sponsorship and social media campaigns – see Chapter 14, ‘Lack of control’). So, although it will not be the same as before, there is a future for integrated advertising. This means that managers will still have to be able to manage the development of an advertising campaign, which will be explored after considering the new forms of advertising: ●● contextual advertising and behavioural advertising; ●● location-based advertising; ●● user-generated ads; ●● long-form ads; ●● short-form ads; ●● sponsored TV; ●● apps – the new ads; ●● integrated mobile, apps, TV and social TV; ●● postmodern ads; ●● creative ads. 283 Contextual advertising and behavioural advertising Marketers are now free from the limitation of segmenting and targeting customers with ‘monochrome’ classiications such as 18- to 25-year-old ABC1s. In addition to age and sex, location, workplace and college, today marketers can target customers according to their actual behaviour, interests and passions (by keywords used). As each targeting criterion is selected, Facebook displays the approximate number of users that it the proile. Other online organizations, such as newspapers, can now serve very speciic ads to readers online determined by the words on the pages they read, the number of pages they read and how often they read these pages. Ads can be selected according to a customer’s changing status or status updates on Facebook. For example, a man who announces to his network of friends that he is getting married or updates his status with ‘I’m getting married’ or ‘I’ve just got engaged’ will ind that he is subsequently served ads about wedding photographers, suit hire, limousines, romantic honeymoon holidays and maybe even wild stag venues. This is contextual advertising. It is also called behavioural targeting. For example, if a 23-year-old male living in a major city is online comparing car prices, Microsoft can serve (or target) him with an ad for a Mini Cooper, while a 40-year-old suburban businessman with children might be served an ad for a people carrier. It gets more interesting. Ads can be made even more relevant according to the geographic location of the customer. This is location-based advertising (LBA). Location-based advertising For some time now, it has been possible for ads tailored to geographic areas to be served online by Google, Facebook and other platforms. This is called geo-targeting, which basically serves ads tailored to where website users are geographically located (recognized by either the locations of their internet service providers or the registration details, which include their home or ofice address). Location-based advertising, on the other hand, uses location tracking technology in mobiles to target customers with speciic ads relevant to their actual location as they travel around. There are many types 284 Part 2 Communications Tools of LBA ads, such as a text message display ad. Pushbased ads are sent by a media company once the customer 1) has opted in to receive relevant ads (often opting in while signing up for a mobile phone service) and 2) is in a particular location. Cinema goers may be offered free soft drinks, trailers to download or two for the price of one as they walk past a cinema. The LBA push approach serves ads to a customer when the customer is in a speciic location. An 18- to 25-year-old male who likes Guinness may be offered a free pint in speciic pubs within a certain area. Seth Goldstein, co-founder of SocialMedia.com, in an interview with Kohler (2007), said: ‘People talk about location-based advertising, but location removes the need for advertising. If you know where the consumer is, and that she is physically touching your brand, then you do not need to rely upon traditional mass-media channels to reach her.’ A restaurant, pub or night club may incentivize customers to share a special offer whilst sharing their location with friends to attract their friends into the venue. Other customers might value knowing that a friend is having a coffee around the corner – as long as they are happy for all their network to see what they are doing and with whom. Sharing of location information with your network may become as common as sharing your status update with your network. A simpliied variation of LBA can also be released with other vehicles. For example, if a local newspaper collects postcodes as part of its registration process and has, say, 10,000 readers in a certain postcode area, it could serve local restaurant ads and special offers to just those 10,000 customers who live near those particular restaurants. The paper can still cover national and international and local news whilst delivering very relevant local ads. As Kohler (2007) says, ‘It’s not about hyper local news, it’s about hyper local ads.’ Interestingly, many banner ads are now ‘transactional banners’ or, alternatively, branded applications (apps), which means customers can buy directly from the banner without being taken away from their preferred platform to a website. Customers on Facebook can order a pizza delivery while on Facebook. Targeting speciic customer types can be much tighter. It can also be more lexible, as it can be on cost per click (CPC) or impressions or cost per thousand (that can see the ad). Coca-Cola’s Twitter ad campaign Coca-Cola had 86 million ‘impressions’ or views of the ads in 24 hours, and an engagement rate of 6 per cent, compared with the approximately 0.02 per cent of people who click on a regular online advertisement. Bradshaw (2010) The creative age is here McDonald’s location-based functionality ‘McDonald’s is building a location-based functionality with Facebook that will allow users to ‘check in’ at restaurants and share menu items with friends. That campaign is expected to be rolled out sometime after the consumer launch, when Facebook integrates brands into the system. ‘The social impact of including a physical location in a virtual sharing app is immense; so is the marketing application as brands are then able to turn their physical locations into media channels connected to real people across Facebook’s social graph.’ Kohler (2007) There is no doubt that more creative thinking is required to cut through the clutter, engage customers and nurture communities. Chapter 1 discusses the need for creativity. More user-generated ads will emerge (as mentioned in Chapter 1), and more apps, games, virtual worlds, massively multiplayer online role-playing games (MMORPG), intelligent media units, long-form ads and short-form (one-second) ads, as well as postmodern ads and plain old contentious advertising. Let’s explore these. User-generated ads The ladder of engagement in Chapter 1 explained how UGC added a dimension to customer engagement. Chevrolet’s Tahoe opened up the concept by Chapter 13 Advertising Online and Ofline Google’s perfect ad ‘I’ve always argued that the correct ad in YouTube is itself a YouTube story. Once you start watching, it’s so good you can’t stop – don’t have a 30 second limit in principle – and the best ads may be an ad about a refrigerator that is so compelling you will drop everything in your life and drive at full speed to get to the refrigerator store. That’s the job of advertising companies: to come up with that narrative that will get you to really want that refrigerator. That’s what they compete over; our job is to host them.’ Eric Schmidt, in Kennedy (2009b) placing the winning user-generated TV ad during the Superbowl. It is increasingly popular, arguably because it employs the magic formula (identify needs, relect them and deliver them). Users (customers, prospects and sometimes even non-prospects) are invited to create an ad, whether TV or press. The PR machine works hard behind the scenes helping to spread the word of mouth as the inal selections are narrowed down to a winner. Social media communities ideally buy into it and spread the word even further. Naturally, there are some disadvantages, as negative ads can be created and posted for public viewing. It can be moderated, but as with most aspects of social media it is best to be transparent. Another interesting development of UGC ads is UGC ilms or UGC long-form ads. Long-form ads Long form ads can help a brand stand out from the clutter and do not necessarily cost more than a traditional 30-second or 60-second ad, as, irstly, they can be repurposed and, secondly, there is less need to buy media space. Nike created a three-minute ad about the art of dropping beats using sneakers. Waitrose’s mini-cooking show with celebrity chefs giving cooking tips used the whole three-and-a-halfminute ad break. Absolut Vodka created a 15minute documentary commercial featuring Jay-Z called NY-Z; Kraft Foods Greek chocolate brand Lacta created a 27-minute user-generated branded 285 movie initially for online consumption but eventually seen on local TV (free), as it generated so much buzz. An extension of long-form ads is sponsored TV programmes (when major soap powder brands sponsored TV dramas, the ‘soap opera’ was born). Lady Gaga’s nine-minute ad and product placement Lady Gaga’s nine-minute video included product placement for Virgin Mobiles, Wonder Bread (unpaid) and Miracle Whip (paid). It has had ‘28 million views on YouTube, been watched on MTV.com nearly 500,000 times and shared on Facebook and tweeted directly from the pop star’s site some 150,000 times’. ‘Featured throughout “Telephone” are shots of a Virgin Mobile cellphone, a nod given to the mobile sponsor of Gaga’s Monster Ball tour, as well as a Polaroid camera and photo booth as part of Gaga’s new role as the camera company’s creative director. Several characters are also seen listening to music on Heartbeats by Gaga headphones from Interscope Music and surfing the internet on the “Beats” laptop from Hewlett Packard, all of which were unpaid extensions of Gaga’s marketing partnerships. ‘Online, music-video site Vevo bought a slot on the YouTube home page that referred users to the “Telephone” page on Vevo.com, which crashed the morning of the clip’s premiere. The video broke all Vevo single-day traffic records and had already generated close to 4 million views on YouTube in less than 24 hours.’ Hampp and Bryson York (2010) Short-form ads Somebody had to do it sooner or later, and Miller beer did it – a one-second TV spot during the Superbowl 2009 (the American football inal). The ad cost a fraction of the $3 million normally charged for 30-second spots during the Superbowl. The ad, played by actor Windell Middlebrooks, gave one second of inspiration and reminded viewers that ‘High Life is common sense in a bottle’. 286 Part 2 Communications Tools Sponsored TV As already mentioned, a natural extension of longform TV ads is sponsored TV programmes, including soap operas, sport and entertainment. Interestingly, BBC (a non-commercial broadcaster) now only considers commissioning new TV programmes that satisfy their ‘Find, Play, Search’ criteria. This includes inding the programmes or user-generated content related to it across several social media platforms, sharing them with friends, drilling down to new depths of knowledge, and encouraging user-generated creativity in everything from apps and widgets to more traditional user-generated content. New-styled sponsored TV programmes, like ‘Bud House’ (see the box below), draw on social media and UGC. Budweiser experiment with World Cup sponsored reality TV and social media Budweiser created a World Cup online reality TV show and social media integrated web series with 32 fans from 32 countries living, eating, breathing and watching World Cup matches together. Fans were grouped together in rooms based on the actual World Cup groups of countries. Fans were sent home as their teams were eliminated. The last-standing fan presented the Man of the Match trophy to the final team’s most valuable player after the last game of the World Cup. New episodes were uploaded to the Bud United channel on YouTube several times a day. Viewers kept in touch and shared content with their favourite ‘Bud House’ fans via Facebook and Twitter. Viewers also influenced events in the house via the ‘You Decide’ polling tube on Bud United’s YouTube channel. Apps – the new ads ‘Apps’ are useful software applications that provide, or allow users to do, just about anything from a mobile phone, eg calculator, petrol prices locator, music identiier (point the phone at a radio and it lists the name of the track, the album and the band), sports news, weather forecasts, golf swing analysis, stock market feeds, managing bills, learning a language, and ‘On this day’ (famous people’s birthdays). Kraft Foods iFood app offers help and reinforces the brand value. One of the most popular is Zippo’s app, which displays a lickering lame (popular at concerts). Skype, Twitter and Facebook all have apps that allow customers to use their services even more frequently. Some brands commission their own relevant apps; other apps are created by developers and sold to organizations that ind them useful for their customers and, ideally, relevant to their brands. Few brands are actually using their apps as revenue generators (see the Glee exception below). Apps or widgets (used on websites), by extending brand usage, add value to customer experiences, brand awareness and brand afinity. Apps or widgets can effectively put a brand name on to millions of devices worldwide. Each time they are used they boost awareness, eg 50 per cent of those who downloaded the Kraft Foods app continue to engage with it three months after irst downloading it (Kennedy, 2009a). Apps are putting brands back on screens (mobile phones) that were previously stealing attention from TV viewership. Screen wars hyper-competition As mobiles steal audiences from TV, Apple TV also challenges cable TV (Chapter 1), and now the United States’ CNN TV sees Facebook as its major threat, as its US president, Jonathan Klein, suggests: ‘although rival Fox is currently winning the ratings war in the US, their real threat comes from Facebook’. Whatmough (2010) Integrating mobile, apps, TV and social TV Apps extend the user experience beyond the TV with a much wider array of engagement activities and, although the TV programme may be over, prolong the sense of being in an audience or group, thereby adding value, extending the customer experience, deepening engagement and boosting satisfaction levels, awareness levels and, ideally, recommendation levels (see Chapter 10, ‘Net promoter score, satisfaction score and recommendation score’). Chapter 13 Advertising Online and Ofline Fox TV network’s app for Glee (the musical comedy series) is a good example. It costs £0.59 to download and within a few weeks it had several hundred thousand users. Customers use the app once or twice per week for 8- to 10-minute sessions, usually when the show is off-air. The app combines karaoke and social singing. Sing to the app, and the pitch indicator tells customers if they are on the note or if they’re sharp or lat. The app corrects the pitch and optionally adds harmony. Saved recordings can be uploaded and used to create a band of like-minded ‘gleeks’ who follow customers’ tracks and share them via Facebook, Twitter or Myspace feeds. The ‘Broadcast’ button allows users to add their performance to Glee’s global sing-along, which also allows other users to add their own voices on to another user’s – effectively extending the virtual glee club. Glee has several other apps such as ‘Unoficial Glee Trivia’ and ‘Unoficial Glee Facts’, both selling on iTunes for £0.59. Postmodern ads A new style of advertising, postmodern advertising, may at irst seem a little abstract, and certainly F I g u R E 13 .1 287 Social singing: singers wanted – no talent required ‘ “The thrill begins once you start singing into this app. You cannot sound bad. Period.” – David Pogue, NY Times. Sing your favourite songs with friends, strangers or the cast. Glee will enhance your pitch and harmonize your voice while you sing. Share your top songs with friends to get Gleeks and earn more free songs, like just added “Bohemian Rhapsody”!’ The official App Store unconventional, as neither the user nor the product is the hero. Old-fashioned ad people ind it dificult to understand how an ad that doesn’t appear to address a brand’s values or have any apparent link to the brand can work. Perhaps this is best explained by Cadbury’s drum-playing gorilla ad. This postmodern ad has no apparent link to the brand, as drums, music, gorillas and animals are not part of the brand equity. However, there is a link between Cadbury’s drum-playing gorilla 288 Part 2 Communications Tools the brand and the ad – it is fun and enjoyment. It is ‘feeling good’, which is how people feel when they eat chocolate. What engages people better than a gorilla sitting behind a set of drums waiting as a really well-known piece of rock music builds up to the climax, where the drums come blasting in and the gorilla thumps perfect drums? The ad didn’t tell people to feel good; it simply made them feel good. Results: 2 million hits on YouTube; 100 Facebook groups; bloggers who tried to identify why they liked the ad so much and whether the gorilla was Phil Collins (the singer) in a gorilla suit; and a 9 per cent sales increase year on year. In addition, all ive variants were back in growth for the irst time since the beginning of 2005. Creative ads Marketers need even more creativity. Some websites can be information heavy, and therefore a quick creative ad can be a quick pleasurable experience. As Saatchi CEO Kevin Roberts’s (2010) blog says, ‘Marketers bring optimism and joy amidst doom and gloom. Marketers need to bring optimism Postmodern ad brief ‘People feel uplifted when they eat it [Cadbury’s chocolate]. One of the things I believe passionately is that the advertising should be as enjoyable as the product. The brief was not to tell people to feel good, it was to make them feel good and the “gorilla execution” is an expression of that.’ Phil Rumbol, former Marketing Director, Cadbury, in Jones (2008) and joy to people. We’ve 60m unemployed in the world. This is the Age Of The Idea… Invest in unreasonable power of creativity. If we’ve got a great idea, people will tell it. Humour, love, emotion and music.’ So marketers have to be relevant and increasingly creative, challenging and sometimes contentious to break through the clutter. The Paddy Power ad in Figure 13.2 certainly cuts through the clutter. F I g u R E 1 3 .2 This six-week outdoor campaign broke through the clutter but received consumer complaints via the Advertising Standards Authority towards the end of the campaign; the ads were subsequently withdrawn slightly earlier than expected Chapter 13 Advertising Online and Ofline Managing an advertising campaign This chapter focuses on how an advertising campaign is planned and managed. SOSTAC® + 3Ms (discussed in detail in Chapter 10) is a lexible system that can be adapted to any plan, whether a full marketing plan, an advertising plan or an integrated social media plan. A general approach to each stage will be considered, and then it will be applied to two case studies: 1) T-Mobile’s integrated social media and TV ad campaign and 2) a drug education TV ad campaign. First, consider what each SOSTAC® stage contains: ●● Where are you now? (Situation – S) ●● Where do you want to go? (Objectives – O) ●● How will you get there? (Strategy – S) The advertising campaign planning process incorporates an analysis of the current situation (research) and a clear deinition of the overall communications objectives, as well as the speciic advertising objectives. Only then can the advertising strategy be devised. The strategy summarizes broadly what to say (message), how to say it (execution, tone or creative strategy), who to say it to (target audience), where to say it (media choice or media strategy), when to say it (timing) and, sometimes, how much it will cost (budget). Strategy can also guide the integration or links between advertising and all of the other communications tools. hidden beneath apparently rational buying behaviour. What are the current features and beneits of your product or service? A feature is translated into a beneit by using three words: ‘which means that’. For example, ‘This car has a crush loading of over 5 tons, which means that it can roll over without the roof caving in.’ Many advertising campaigns can demonstrate beneits without having to use words (in fact, wordless advertisements like Levi’s may become more popular as satellite television grows – see Chapter 9), but it is the application of this threeword formula that helps to identify real beneits that can then be demonstrated. Spending time ‘interrogating the product’ is a good investment. Product interrogation In addition to the previous question, further questions, or product interrogation, can sometimes reveal hidden beneits, which advertising can subsequently highlight. Is there anything unique about the product (a unique selling proposition – USP)? Product (or service) interrogation explores and examines every angle, including product characteristics, user characteristics, ways of using, beneits of using, disadvantages of non-usage, competitor comparisons, product heritage, customer cases, newsworthiness and more. How does it compare against the competition’s features and beneits both in people’s imaginations and in reality? The cunning K Shoes lady The situation There is a lot of research to be done before any exciting creative work can be started. What are the current sales trend, market share trend and overall market trend? Are there any regions or segments that buy more than others? How big are the competition’s sales (per region and per distribution channel)? What is the proile of the customer and of the non-customers who might be converted? Who is the target market now and in the future? Who are the heavy users? When do they buy? Where do they buy? How is the brand positioned in the minds of various target markets? Why do people use or not use the brand? This can be the most dificult question to answer, because real reasons are often deeply 289 Some years ago shoe manufacturer K Shoes and its agency BBH discovered a hidden USP. This was that the quality of the leather in the shoes was such that the shoes did not creak or squeak. This subsequently opened up the opportunity of dramatizing the benefits of squeak-free shoes. One of the TV advertisements showed a lady wearing K Shoes quietly entering an apartment in which her lover was dining with another woman. The K Shoes lady proceeded to dump a bowlful of slimy noodles on the head of the two-timing man. The K Shoes lady turned silently and walked confidently out of the apartment. BBH 290 Part 2 Communications Tools How does the product or service compare with competitors’ products or services in the minds of customers (how is it positioned)? Or have they even heard of it? (What percentage are spontaneously aware of your product or service? Is it top of the mind or front of mind, ie do customers include it in the irst three brands they think of when considering your product type?) What is important to the target customers? Or perhaps there is a high level of awareness but a low level of preference, possibly because of a poor product or poor image. What do customers consider to be the most important factors (key buying criteria) when making a choice? What is their ideal product? Social media potential Most campaigns today will be mindful of what arouses discussions and chatter in social media when it comes to ad campaigns. Topicality and trends will be monitored from a discussions perspective to see what is hot and generating a lot of buzz. Are there aspects of certain types of campaigns that lend themselves more to social media and usergenerated content? Some social media tools can be used to identify hot topics, phrases and even words (eg Google Zeitgeist and Google Trends). Trend identification What new values, trends, attitudes, lifestyles or business styles are emerging that may affect the organization’s product or service? Individualism, self-exploration, materialism, environmentalism, ageism, sexism, interaction: once the advertisers identify a relevant trend, they can then relect it through advertising imagery. Review of past advertisements An analysis of competitor advertising campaigns can trigger ideas and, more importantly, provide some insights into competitor strategies, thereby helping the strategic thoughts of the advertising for the brand in question. Even the brand’s past campaigns can give some guidance as to how they relect the state of the market, what the objectives are, and what works and what does not. Answers to all of the questions raised in the situation analysis and review are required before setting advertising or communications objectives. In a sense, researching the current situation reveals the objectives Consumer research and trend identiication Another major exercise was embarked upon to understand the consumer environment that the new advertising executions would have to operate in. The central thesis was quite simply that in the early and mid-1980s consumers felt most comfortable following the crowd and feeling a collective sense of involvement. In this context advertising that showed session drinking in the pub (men making wisecracks) was quite appropriate. Brands in the main lager arena prospered. The role these brands occupied was to lubricate the session drinking of the male-dominated pub. In the late 1980s this climate changed, and the process of change continues. Now consumers wish to stand out from the crowd and express their individuality much more. They do this by demonstrating their discernment in the clothes they wear and the brands they choose. The implications for the advertising were fundamental: a more sophisticated audience, a change in the pub environment, less session-drinking orientation and a different attitude to premium brands. Indeed, it presented a significant opportunity for draught Guinness, which was already moving in the more fashionable image arena, to catch the crest of this wave and exploit it fully. In order for it to do so, this social change needed to be confirmed and understood in some detail. Ogilvy & Mather for the campaign. Good research makes objective setting easier. Research, however, costs time and money (and people), so it needs to be budgeted for or, ideally, built into a continual system of information gathering (see Chapter 6, ‘Marketing intelligence and information system’) to help both objective setting and subsequent measurement of the campaign’s effectiveness. Objectives After you have analysed the situation through primary and secondary research sources (see Chapter 6), a clear picture of where you are emerges. The next Chapter 13 Advertising Online and Ofline step is to deine exactly where you want to be. ‘If you don’t know where you’re going, any road will take you there.’ Ideally, objectives should be quantiied in terms of success or failure and timescale. This makes control easier, since actual results can be measured against quantiied objectives. The previous year’s objectives, and corresponding results, help to make the planning job a little easier, as experience provides a better idea of what are realistic objectives for the future. Objectives should be SMART: Speciic Measurable Actionable Realistic Time speciic A clear strategy (how to get there) is not possible without clearly deined objectives (where you want to go). Without a clear strategy, a loose set of tactics, lacking cohesion (and sometimes pulling in different directions), is likely to emerge. Establishing clear objectives is necessary to give a focus to the organization. Clear objectives also give direction to the subsequent creative efforts. Some marketing managers and agencies break objectives into many different types. We focus on just two types here: 1) marketing objectives; and 2) communications objectives. 291 Marketing objectives Typical marketing objectives refer to sales, market share, distribution penetration, launching a number of new products, and so on. See Chapter 10, ‘Objectives’. Communications objectives You will ind examples of these in Chapter 10, ‘Communications objectives’. As mentioned in Chapter 10, communications objectives typically refer to how the communication should affect the mind of the target audience, eg generate awareness, attitudes, interest or trial. The deining advertising goals for measuring advertising results (DAGMAR) and awareness, interest, desire and action (AIDA) hierarchical models reveal some of the mental stages many buyers have to move through before buying. Again, these objectives (eg ‘to increase awareness’) are more useful when quantiied (‘to increase awareness from 35 per cent to 45 per cent within a six-week period’). Another way of looking at communications objectives in a competitive market for, say, the purchase of a car is that shown in Figure 13.3. A particular campaign’s objective may be to move a signiicant number of prospects from one set to the next. Some advertisements go further by seeking to reinforce or reassure existing buyers. F I g u R E 1 3 .3 A way of looking at communications objectives in a competitive market for the purchase of a car Total set Vauxhall Ford Nissan Volvo Toyota Volkswagen Renault Fiat Skoda Lada Canto Awareness set Vauxhall Ford Nissan Volvo Toyota Volkswagen Renault Fiat Skoda Consideration set Vauxhall Ford Nissan Volvo Toyota Choice set Vauxhall Ford Nissan Decision Nissan 292 Part 2 Communications Tools Strategy Once the situation has been fully researched and clear objectives identiied, the campaign or advertising strategy can be developed. It will include positioning, objectives, target audience, key beneits, secondary beneits and often a statement of what kind of media will be used. The strategy will not get bogged down in detailed tactics or any speciic creative messages. It should offer strategic direction to the client and agency team. Some clients will work with the agencies to develop this key statement. Other agencies do all the work and present the campaign strategy to the client for approval. The campaign strategy forms the foundation for the more detailed planning and development of the actual message (or the advertisement itself) and the selection of the media. Figure 13.4 illustrates how the initial situation, objectives and strategy (SOS) form the basis for the subsequent development of the message and media plan. Message development (tactics) Creative briefs With the review complete, objectives set and strategy agreed, the creative team can inally be called in and briefed. The creative brief is a key document. Each agency has its own style (see top advertising agency BMP DDB’s style in Figure 13.5). It is here where all the volumes of research indings and weeks of discussions have to be concentrated into a single-page creative brief that translates the details and research jargon into relatively simple lay terms that explain exactly what the advertisement should do. This is the brief that the planner or account manager gives to the creative team. It succinctly covers all the key information, such as: the target audience and its perceptions, motivations and buying criteria; advertising objectives, proposition, tone and how the audience should feel after the advertisement; and constraints and choice of media. It is an important document and should be signed (or approved) by an account director before being passed to the creative team. Sometimes the client wants to approve it also. Both the agency and the client need to have a clear focus on exactly what the advertising should say or what it should achieve. Many creative people don’t want too much detail (‘Just tell me exactly what you want!’). They will then set about delivering a creative idea or concept. Figure 13.5 shows the summary creative brief that BMP DDB used for the award-winning Hovis campaign. Concepts Ideas or concepts are roughly designed into ‘roughs’ or ‘scamps’, which can be developed into a storyboard (Figure 13.6). The idea can then be further developed into better-quality visuals known as key frames (see Figure 13.7). These, in turn, can be shot on video to create an animatic (moving cartoon of the advertisement complete with music, voice-over and sound effects). Any of these visual presentations of the advertising concept (concept board, storyboard, key frames and animatics) are discussed and/or researched before the idea is allowed to go on to the expensive production stages and eventually to the even more expensive media stage (buying space and actually advertising). If the concept ‘researches well’, ie gets good feedback from the focus groups, it can be taken forward for further reinement and eventual production. Even with poor research indings (ie the focus groups do not like the concept), some clients and agencies sometimes pursue an idea regardless. For example, Heineken’s long-running ‘refreshes the parts other beers cannot reach’ campaign did not research well but was, nevertheless, produced. It eventually went on to become a successful campaign. Advertising agency BMP DDB’s rough concept idea for the Hovis campaign (Figure 13.6) was developed from the initial creative brief (shown in Figure 13.5). Client approval Concepts have to be justiied or explained to clients. Agencies support their concepts with a message emotional decisions ‘Let emotion rip. 80% decisions are emotional. Yet 80% marcomms are rational. Rational decision making equals a conclusion. Emotional pitch: back pain solution delivers the joy of movement.’ Roberts (2010) Chapter 13 Advertising Online and Ofline F I g u R E 13.4 293 The remaining stages of the campaign planning and execution Situation Objectives Strategy Creative brief Media brief (see Figure 13.9) Concepts Client approval Concept research (focus group) Concept approval by Clearcast/CAP* *Contact with Clearcast/CAP (see Chapters 7 and 11) may occur earlier Production Approval/clearance by BACC/CAP Testing Roll-out Tracking/monitoring rationale, which basically explains why the concept is brilliant and guaranteed to achieve outstanding results! The concept is developed into key frames, which are then presented along with the message rationale to the client. The key frames can also be shown during focus group research. Figure 13.7 shows a Hovis key frame. Part 2 294 C R E A T I V E B R I E F F I g u R E 1 3 .5 CLIENT PRODUCT JOB NO. Communications Tools BMP DDB Needham’s creative brief for Hovis British Bakeries Hovis INTERIM REVIEW FINAL REVIEW PRESENTATION What is the advertising required to do? To convince Mums that their family will love Hovis MEDIA BUDGET PRODUCTION BUDGET REQUIREMENTS (Please select by formatting requirements in bold) One off ads Ad in existing campaign New Campaign TV Cinema Press Size/ Timelength: Radio Poster Any possible links between media channel and message? What is the single most important thing we want to say? Hovis is the one good thing you can do for your family everyday Why should people believe this? People believe that Hovis is full of goodness – more so than other brands of bread. Its name even means ‘strength of man’ and, even though we are talking white bread, its brown bread credentials help give it a healthy feel. Hovis has always been associated, via its advertising, with things being done properly in an idealised world. Hovis today still does things properly (they still make their bread in essentially the same way) but the reality of the world in which it is operating has changed & these idyllic images are becoming increasingly irrelevant to today’s bread buyers. What tone of voice should we use? Down to earth, honest, of the people. Hovis might take bread seriously, but it shouldn’t take itself too seriously What are the mandatory requirements? Campaign must be able to work across the Hovis product range. Who are we talking to? Almost everyone eats bread & Hovis is a mass market brand, so our idea must have broad appeal. Primarily, however, our audience is Mums with kids (0–10). They get through a loaf a day on sandwiches for packed lunches, toast when the kids come home from school etc. Kids prefer white bread. Mums have all heard of Hovis & it is one of the first brands of bread that they think of. However, recently it has become more distant – a bread for other people. Kingsmill has taken over as the best bread for families. D D B As a group, Mums share a common trait, they all believe that looking after the family is roller coaster of positive and negatives and that looking after the family is harder today than ever before. Anything they can rely on for a spot of ‘goodness’ is appreciated. Our secondary audience are the kids themselves – whatever our idea, it must have playground currency. If Mum can see that the kids like the ads it will go a long way in giving her the confidence to start buying Hovis What do we want them to think or feel having seen the advertising? If I buy Hovis for my family, then, whatever else might happen, at least I know I’ve given them a damn good start. And my kids will enjoy eating Hovis. What is the cleverest bit of thinking on this brief? This is really about owning a category generic. Despite not having any tangible reasons to believe, there is much in people’s emotional associations & beliefs in the Hovis brand to allow Hovis to credibly own this territory. B M P Issued by Date Signatures: Client BAD Olivia Johnson DOC Chapter 13 Advertising Online and Ofline F I g u R E 1 3 .6 Hovis ‘roughs’ of new characters FIguRE 13.7 Hovis key frame 295 Part 2 296 Communications Tools Where to put your key point: at the beginning or the end – recency vs primacy Recency suggests that placing the most important points at the end of an advertisement tends to work best. Primacy, on the other hand, suggests advertisements with the most important messages at the beginning work in two situations: 1) where the audience has a low level of involvement and therefore its attention needs to be grabbed with a strong message at the beginning; 2) where the target audience’s opinion is contrary to the brand’s message. In this case a weak point at the start may lead to a lot of counter-argument. Action Production The production of an advertisement requires time and careful attention to detail. It may involve overseas locations, casting, contracts, rehearsals, special effects, weeks or months of sophisticated computer graphics, studio shoots, editing and more. often steal the initiative. Although both strong and weak theories have some validity, some marketing professionals simply ask three questions about success criteria to determine if an advertising campaign will work or not: 1 Do I want to see it again? 2 Do I want to pass it on? 3 Do I want to add something to it? Roll-out After rigorous testing the inished ad (eg Figure 13.8) can be released, or rolled out, across its whole market. Tracking The advertising campaign can and should be monitored, or tracked, to see how it is working, eg what level of awareness it is generating or whether it is affecting attitudes or even sales. This allows any problems to be corrected sooner rather than later. While the advertising messages are being developed, the media planners are busy devising media strategies and plans to ensure that the advertisements get the optimum exposure. The stages of media planning Control Clearance The inished advertisements should be checked before publication. In the case of press advertising it is optional (see full explanation of CAP in Chapter 11). For TV it is compulsory (see Clearcast in Chapter 7). Testing With the production stage completed, some clients or agencies test the inished advertisement in a hall test (see Chapter 6). Others will test the advertisements in a geographical region (eg the Anglia TV or Ulster TV region) before rolling them out nationally or internationally. Other clients put their advertisements out without testing because of time constraints. The ‘irst to market’ with a new product or idea can More money is spent on media than on the production of the advertisement itself. It is here that large savings can be made. Media planning is becoming increasingly scientiic as press and TV proliferate. Although media buying, some argue, is an art in itself, some media planners understand the qualitative side of the media as well as the quantitative side and can therefore use media in a creative manner. The media awards in Media Week give an insight into the creative use of media. Expert media planning and buying can also save vast sums of money, which can be either redeployed to buy more advertising space or saved and used elsewhere in the communications mix. There is, of course, the temptation to keep the saving and add it on to the bottom-line proits (by taking it away from the bottom-line expenses). Figure 13.9 shows the process of media planning. Chapter 13 Advertising Online and Ofline F I g u R E 1 3 .8 Finished Hovis commercial CONVERSATION Harry: Pooh. Alfie: Bra. Harry: Bogies. Alfie: Er ... FVO: FVO: give them a break with peanut butter and banana in fresh White Hovis. Harry: Mmm. Alfie: FVO: Mmm. Things’ll soon start to pick up again. Alfie: Belly button. Harry: Pants. MVO: White Hovis. Get something good inside. When the witty conversation starts to drag ... 297 Part 2 298 F I g u R E 1 3 .9 Communications Tools The media planning process Situation Objectives Strategy Creative brief Media brief (see Figure 13.5) Media strategy/section Vehicle selection Proposed schedule Client approval Media buyer/buys Ad rolls out Tracking/monitoring Media selection Media people should not be briefed to book space after the advertisement has been created. They need to be involved early on, as their creative media input can inluence the inished creative message. Carat Research shows that placing advertisements in unexpected positions can boost the likelihood of seeing them. From ads appearing upside down, to perfume ads in inance pages, to a McDonald’s ad in Vogue magazine, to buying all the back pages of speciic colour supplements for a year (Boddingtons), to buying an entire newspaper for one day (Microsoft and The Times), to an entire 3½-minute commercial break (Waitrose’s mini-cooking show), the media Chapter 13 Advertising Online and Ofline planners have plenty of creative scope. And they have plenty of new media to play with, from video vans (with large computer screens and mobile billboards) to loor posters, to laser-beamed buildings (see Chapter 7, ‘Are ambient media the new media?’), to long-form ads, to user-generated ads and right through to social media. Message development is crucial. Eric Meyer some years ago reported that up to 30 per cent of US ads actually damage the brand. Today, perhaps some marketers get distracted by the exciting allure of highly ambient opportunities and technology interactivities rather than irst checking the quality, relevance and context of the message. For example, is putting your logo on a rubbish bin appropriate for a brand like Rolex? Even if the message says something like ‘Bin your old watch and buy a Rolex’, it is simply not appropriate. Here are some additional examples of how media selection can work creatively and effectively. HäagenDazs ice cream used the weekend press to allow the advertisements to be savoured and enjoyed at leisure, while ‘the intimacy of the experience could be hinted at better through the personal communication of the press’. Part of Guinness’s media strategy was to use black-and-white ‘fractionals’ (ads within a small space) in newspapers, which, as the Media Week awards explain, meant that they ‘effectively dominated the mono newspaper world with fresh and extensive copy rotations, so that no reader would see any one execution more than once over a period of seven months’. Chapter 7 looks at media research, planning and scheduling. Media schedules In addition to the creative use of the media, careful analysis can identify the optimum media schedules. A media plan is then developed and presented to the client. This plan shows the types of places where the advertisement could be used. The space is then negotiated and bought. (See Chapter 7.) 299 ultimate proof of strength is where advertising can persuade customers to buy something they have never bought before. This is challenged today, as it assumes that customers are passive and unable to process information properly. Andrew Ehrenberg (1974) challenged this and proposed the weak theory of advertising, which suggested that customers are driven by habit and that advertising reinforces rather than drives initial sales. Advertising could, he suggested, increase the frequency of purchases, as it could stimulate habitual buyers into more frequent choice of the advertised brands against a repertoire of considered brands. He developed the awareness– trial–reinforcement (ATR) model (see Chapter 4). He maintained that advertising could increase or maintain awareness and improve the customer’s knowledge, but only for those brands that customers were already buying (or at least had some prior knowledge of). Some academics went further and suggested that advertising could not convert customers who had reasonably strong beliefs that contradicted the messages in the advertisements. The truth is that no one is 100 per cent sure of exactly how every aspect of advertising works. The same applies for every aspect of marketing. The winners will be those who have inquisitive minds and a willingness to continually learn how marketing communications work. Coca-Cola continually learning ‘“When it’s something new, it’s hard for publishers to know what the value is,” she said. “We didn’t know how it would work out but we wanted to learn in that space. It could have completely flopped. They [Twitter] also wanted to learn with us.” Carol Kruse, Vice-President for Global Interactive Marketing at Coca-Cola, which is an official sponsor of the football tournament, in Bradshaw (2010) Does advertising really work – the strong and weak theories of advertising The strong theory of advertising suggests that basically advertising works. It suggests that advertising helps to move customers through a series of hierarchical stages towards purchase (see Chapter 4). The Now consider two interesting ad campaigns, one for a mobile phone campaign and one for a drugs education campaign. 300 Part 2 c a S E S T u Dy 13.1 Communications Tools T-Mobile T-Mobile: life’s for sharing This is an intriguing example of an organic and trusting relationship between client and agency. It demonstrates how integrated organic campaigns work well, reacting to, nurturing and developing each stage of a campaign according to consumer reactions. Each stage (or chapter) was a progression from the last, building on the excitement and interest in the brand, increasingly handing more control of the campaign to fans of the brand for them to contribute to and play with. So this case just uses SOS from SOSTAC for the initial phase and then explores SOSTAC fully with phase 3 of the campaign. were moving from a ‘me’ to a ‘we’ society. Generosity was emerging as the new spirit of the age, a welcome reprieve from the previous 15 years of selfish capitalism. This insight gave rise to a radical approach to brand communications. Rather than traditional advertising, the focus was real events dramatic enough to create a reaction from the general public, TV journalists, press journalists, bloggers, radio call-ins, copycats and online tributes. The events would get the nation sharing, becoming a physical manifestation of T-Mobile’s beliefs and capabilities. The brand might create the events, but in the end the events would create the brand. Situation analysis The oversupplied UK telecoms market is one of the toughest in Europe. Over the last 10 years, the ‘big four’ (O2, Orange, Vodafone and T-Mobile) have been fighting a brutal price war, flooding the market with margin-eroding offers. Against this backdrop, T-Mobile was lagging in fourth spot, with a decidedly static market share. Desperately, it chased customers with bold price promises and great value offers. But this only made matters worse: it attracted price-sensitive deal chasers who cared little for long-term relationships. By late 2008, T-Mobile had the lowest market share and the highest customer churn rate of the big four. The agency, Saatchi & Saatchi, had to go back to basics and explore. It found that, while people might take mobile brands for granted, mobile phones were changing human behaviour, encouraging a new era of connection and openness. In countless ways, mobile phones enable people to share. The tapping of keypads has become an incessant cultural chatter: the silent language of people sharing their lives through calls, texts, photos, snippets of film and Facebook updates. Mobile telephony was changing how people related to one another. Younger generations were collectively living their lives in the present tense, regardless of time or geography. Spontaneous gatherings and get-togethers were becoming the norm. Mobile telephony meant sharing was no longer closed (between friends and family) but increasingly open (between strangers and community). The boundary between the personal and collective was dissolving – we Objectives The main objective was to establish an emotional brand promise for T-Mobi