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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 respon- sibility 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 repro- duced, 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 1518 Walnut Street, Suite 1100 4737/23 Ansari Road London N1 9JN Philadelphia PA 19102 Daryaganj United Kingdom USA New Delhi 110002 www.koganpage.com 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), 1957- Marketing 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 1 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 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 205 The globalization of markets 206 International dificulties 210 International mistakes 214 Strategic global options 215 In conclusion 222 References and further reading 222 Contents ix 10 The marketing communications plan 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 263 12 Selling, sales management and key account management 265 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 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 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 xi 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 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 In fact, social media has created a new Marketing Utopia – listening and engaging and effectively in- viting customers to shape the future of the business 4th edition – written way back in 2005. What’s (explored in Chapter 1). This requires new skills, changed? Two things essentially: irst, Social Media which have been explored throughout the book. arrived and changed the communications model, This 5th edition also has a subtle theme of creativity the budget allocation, worklows and even the dei- integrated throughout. Creativity – with structured nition of media, communications and customer processes and worklows behind it, combined with experience as they morphed together. Social Media – can deliver signiicant results. Do Second, marketing standards have slipped back- alert us about any examples of creative marketing wards as customer service got sloppier; whether due that delivers results offline or online at www. to arduous automated telephone queuing systems, Facebook.com/PRSmithMarketing. sloppy websites or de-motivated staff suffering in- cessant corporate culls. The good news is that marketers are now effec- tively presented with a major opportunity to be What’s new in this 5th outstanding by just doing the basics right. In fact, they can become world-class players if they layer edition? on top some creativity, disciplined processes and constant improvement. Emerging creative marketing talent, Ze Zook, has Marketers have also got the opportunity of co-authored this edition, which incorporates new getting back into the boardroom as social media chapters on Branding, Relationship Marketing and positions marketing at the centre of the business; of course, Social Media (and websites). In Part 2, the listening to customers, extending the brand ex- ten communications tools all have online and social perience and reaching out and collaborating with media integrated with the offline communications stakeholders in previously entirely unimaginable tools. In addition to the complete set of new mini ways, compared with just a few years ago. Social cases, KAM (Key Account Management) has been Media – if fully integrated – draws marketers added to the Sales Management chapter, Rational into Product Portfolio Planning; New Product Emotional dichotomy to the Advertising chapter, Development; Customer Engagement; Customer and New Laws/ Regulations and emerging ethics in Relationship Management; Lifetime Values. 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 Mike Langford, BT Association Basil Long, Kroner Consultants Adrian Brady, Eulogy Jez Lysaght, HD&M Creative JoAnna Brandi, The Customer Care Coach® Toby Marsden, Survival International Alan Briefel, StratCom Steve Martin, M&C Saatchi Sport & Scott Brinker, ion international 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 Claire Mitchell, Natural History Museum Jenny Ellery, Saatchi mailto: jenny.ellery@saatchi.co.uk & Saatchi 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/ Charles Randall, SAS Solutions Martin Hutchins, Cambridge Professional Mark Read, Photographer Academy 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 Paul’s particular thanks to Aran, Cian and Lily and the wife, Revital and daughter, Nessa, for their patience ever patient, lovely, Beverley. And lastly, a very special and understanding and to my mother and father for thanks to Owen Palmer (RIP) who gave me my irst their acceptance and nourishment of my being. 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 Ze Zook 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 capi- Ze Zook is an up and coming integrated market- talization of over US $500 million in 18 months. He ing author, lecturer and consultant specializing in also advises UK Trade & Investment and Business the creative industries. He has worked with ballet, Links. Paul’s books, DVDs and renowned SOSTAC® ilm and music, working with sponsors such as Planning system are used in over 60 countries. The Sainsbury’s and The Prince’s Trust. He has also Chartered Institute of Marketing (CIM) describe worked with PR Smith for over 20 years on projects Paul’s best-selling Marketing Communications as ranging from an award-winning, innovative, 3 a “Marketing Major”. His eMarketing eXcellence screen PR Training video to the Chartered Institute book is CIM’s recommended text. His Great Answers of Marketing’s online eLearning programmes devel- To Tough Marketing Questions is translated into oped with PR Smith’s eLearning company to writ- seven languages and his Strategic Marketing Com- ing and researching innovative marketing projects. munications breaks new ground. A Fellow of CIM, Having started as a video/digital media producer Paul’s own personal passion is his social media and photographer, Ze developed a unique creative campaign to get sportsmanship back on the agenda perspective on integrated marketing. He helps crea- with an inspirational book and blog called www. tive businesses to fulil both their missions and their GreatMomentsOfSportsmanship.com. Paul enjoys business goals, and he has written on media and public speaking, and whether conferences, workshops, digital marketing for Cambridge Marketing College. webinars or virtual events, his presentations are en- His consultancy, lecturing and writing, harness gaging, entertaining and carefully structured to embed creativity in a fast-changing digital age. Visit http:// immediate improvements. Visit www.PRSmith.org www.linkedin.com/in/zzook. or www.Facebook.com/PRSmithMarketing. 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 com- The reader will discover that all of the communi- cation tools can and should integrate with each other, as shown in Figure 0.2 and explained at the munications. The integrated nature of the subject end of Chapter 1. does, however, refer the reader to other chapters It is therefore sometimes dificult to separate and and sections that are relevant to the particular area categorize an activity as being one type of tool or of interest. The anecdotal style, examples, case studies, another. For example, direct marketing and sales questions, key points and sections have been care- promotions should probably be called ‘direct pro- fully structured so that the reader can dip into an motions’ since they both more than likely involve area of interest, absorb the information and cross- each other. The chapters are not listed in order of refer if required. This allows the reader to extract importance. Selling and sales management is not speciic answers quickly and easily. This book is always included in a marketing communications designed to entertain as well as inform and so it is budget but the sales force is a potent form of com- hoped that when dipping into a particular area, the munication and generally they (or the sales manager) reader will be lured into reading more. report to the marketing manager. In fact it has been Part 1 (see Figure 0.1) introduces new marketing put to the top of the list because all the other chapters communications (largely driven by social media), thereafter tend to lead into each other. branding, customer relationship management, buyer The successful application of the marketing com- behaviour and communications theory. Part 1 con- munications mix is helped by an understanding of tinues to build a background to marketing commu- communication theory and buyer behaviour theory. nications by looking at what information market Marketing research can provide some practical and research can and cannot provide, how to work with speciic answers to the questions that the theories agencies and consultancies of all types, understand- generate. This provides the building blocks for the ing the media, moving with the changing business marketing communications plan, which draws upon environment, international marketing and ultimately an understanding of how agencies operate and how shows how to write a marketing communications different media work. The details of the plan are plan using the simple SOSTAC® Planning System. worked out within the sometimes complex, but Part 2 covers speciic marketing communication always integrated, web of the marketing commun- tools that marketing professionals have to manage ications mix (see Figure 0.2). The changing market- at some time or other. These include selling and sales ing communications environment and international management (and Key Account Management), adver- opportunities/threats constantly affect the whole tising, PR, sponsorship, sales promotion, direct mail, marketing communications mix. The world has exhibitions (all online and offline), packaging, and moved on since the 4th edition. inally, websites that work and social media that Different organizations allocate the same com- wins. munication tools to different departments/budgets, The case studies at the end of each chapter in Part 2 eg exhibitions may be seen to be part of public rela- have been carefully selected to show a range of dif- tions, although the sales team will man the stand ferent types and sizes of organizations using various and beneit from extra sales. Sponsorship is con- communications tools across a range of different sidered by some to be an extension of advertising, industries and markets. Materials are drawn from while others consider it to be part of PR. And no both small organizations with small budgets and one is too sure about whose budget covers the web- larger businesses with multi-billion dollar budgets. site. Regardless of classiications, ownership and This book should prove useful to anyone inter- responsibilities, each tool must integrate with many ested, or working, in marketing. others. how to use this Book xvii We are always looking to update the material within the book and our readers are invited to contact us All lecturers who use this ifth edition can with any ideas, suggestions and contributions to the obtain instructor support materials from next edition. As our subject of marketing communi- Kogan Page. Visit http://www.koganpage.com/ cations is ever changing, we are keen to keep the resources/books/marketingcommunications content fresh and lively. Please post your examples and use the password MC0389. of excellent marketing communications to us at www.Facebook.com/PRSmithMarketing. F I g u R E 0 .1 Part One: Background to the communications process nications e gin g commu nv i r han onm ec en Th t New marketing communications mix Branding CRM Marketing ent Th communications e ch ronm plan Buyer angi Communications behaviour munications envi theory theory ng communications en Market research Media gi ng com vir han Agencies o n c me e Th nt International markets t n Th ec me han nv i ron ging communications e xviii how to use this Book F I g u R E 0 .2 Part Two: The marketing communications mix Packaging ng si di Ex an hi ch bi er tio M ns ial Media Soc les g & Sa Sellin ment ge Mana Spons orship The marketing communications mix and s Web Site Ad ve ns rtis latio ing c Re bli Pu Sal ting es P arke rom ct M otio Dire n 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 17 The colouring department is dead 4 The ladder of engagement 18 Communications morphing Collaborative co-creation 19 with experiences 5 The race is on 22 The customer service time bomb 6 Cut through the clutter 22 Accelerated change and Be there, be relevant and be hyper-competition 7 creative 23 Social media 9 Open and integrate your new Marketing utopia has arrived 10 toolkit 23 Why social media works 10 The creative age is here 23 How social media works 10 enter the boardroom 27 Social networks 13 nightmare on Banking Street 28 Social media cultural shift 14 references and further reading 28 The social media process 15 Further information 29 The ladder of engagement 17 Customer engagement creates stronger brands and more advocates 17 4 Part 1 Communications Background and Theories it was easier to get a customer’s attention if marketers The revolution has started had the budget. And the big budget brands often announced ‘as seen on TV’ on their packaging, at A new marketing era, long overdue, was heralded in point-of-sale and in their press advertisements. Being when social media emerged as a real game changer. on TV gave the brand a level of credibility, perhaps Social media put customers back at the centre of the because customers unconsciously assumed that being organization and gave marketers a new set of tools on TV meant that the company was a big company to listen to them and to encourage them to engage and big companies were trustworthy. Or perhaps with the brand. A golden opportunity has emerged customers trusted TV and the authorities that regu- as organizations realize the possibilities of engaging late the advertisements that are allowed on TV. with customers in new ways so they can become This may have led to communications strategies partners driving the business forward. The ladder of that told customers about product beneits. Today, engagement makes it easy to nurture customers up marketing strategies ask ‘How will customers engage to higher levels of involvement. with us and each other?’ This leads to the bigger ‘Joined-up marketing’ brings the old ‘outbound question ‘What kind of customer experience are marketing’ (eg advertising, direct mail, telemarket- marketers creating?’ This in turn brings marketers ing, etc, sending out messages) together with inbound back to the quintessential marketing question: ‘How marketing (where social media brings conversa- do we help customers?’ This is, for example, the tions to the organization). Integrating inbound and ultimate reason why any company has a website. outbound with online and ofline communications Yet many, if not most, marketers answer this ques- delivers higher impact and more cost-effective tion incorrectly. Ask around and see. In fact, helping ‘joined-up marketing’. customers is the only reason a company exists, as Marketing communications have to be integrated American guru Peter Drucker used to say. for two reasons. Firstly, unintegrated databases These kinds of questions move marketers beyond cause many problems and complications, as there is communications, into customer experiences, customer no single picture of the customer. Secondly, as com- relations, new product development processes, service munications morph into customer experiences, all processes and, of course, brand evaluation, which communications need to be integrated to deliver a affects market capitalization. This, ultimately, invites consistent experience. marketers back into the boardroom, hopefully speak- Amidst hyper-competition this ladder helps to ing the language of the board. Social media and the build a ring fence of protection around the precious ladder of engagement, in particular, have opened customer. It also encourages customers, and even the door to the boardroom for marketers. 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 The colouring department of collaborative co-creation, which moves market- ing into a strategic position and earns its seat at ‘Not so long ago I was invited into a major global the board. bank and given the brief: “To stop the board from There is a golden opportunity for marketers to referring to the marketing department as the create stronger brands and sustainable competitive colouring department.” ’ advantage and ultimately to build better businesses P R Smith (or organizations). There has never been a better time to be involved in marketing. When real marketing percolates up through the organization, real competitive advantage emerges. The colouring department is dead Consider National Semiconductor in the United A lot of ‘old’ marketing has had too much emphasis States. They make chips for mobiles and DVD players. on just marketing communications. This is a weak- Their target market was design engineers and pur- ness. Once upon a time this worked, as customers chasing agents. Their enlightened CEO asked that had far fewer communication channels and therefore quintessential marketing question: ‘How can the Chapter 1 New Marketing Communications 5 website help engineers more?’ A truly inquisitive the overall marketing mix, rather than part of its mind forced them to understand how design engi- media spend/marketing communications mix ‘in neers work and whether any online tools could recognition that successful digital campaigns are help. They explored customer scenarios and dis- based more on producing engaging content than covered that the design process of choosing a part paying for media time and space’ (Financial Times, was to create a design, analyse the design, build a 25 June 2007). Engaging content enhances the prototype, test, etc. customer experience. Now the engineer logs on and is prompted to The search for added value is now relentless, specify the overall parameters and key components. whether through new features or more likely The system auto-generates possible designs and through enhanced web experiences, social media technical specs, parts list, prices and cost beneit sharing or simply the addition of features to a pro- analysis. Engineers reine it and share it with col- duct or service never dreamt possible before the leagues. They test and reine it. Result engineers can arrival of the iPhone apps, eg Gibson Guitar’s app do in two hours what previously took two months. includes a guitar tuner, a metronome and a chord By the end of the irst year they had 31,000 visitors chart, all of which are extremely useful for any gui- generating 3,000 orders or referrals every day. One tarist. Kraft’s iFood Assistant delivers recipes and a integrated socket with Nokia was worth 40 million feature that creates a shopping list that automatic- units. This site helps customers so well that it creates ally includes the ingredients for the chosen recipes. sustainable competitive advantage whilst delivering It even identiies the locations of nearby grocery a highly engaging brand experience. The change stores and which aisles stock the items. was made in 2000. In fact Kraft Foods’ continued creative approach It is time for marketing to move beyond commu- seems to have scored a hit for its Lacta chocolate nications, permeate the boardroom and help to bar in Greece by showing a long form of a long- build more sustainable businesses amidst a rapidly form ad – a 27-minute branded-entertainment ilm changing marketplace. 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 en- Why marketing was marginalized ables joggers to access a jogging community web- site, log their runs and connect with and compare to ‘And seeing marketing as a series of distinct other joggers by using their iPods (or their iPhones) activities has been the reason that marketing has and a Nike+ branded transmitter that can be itted become more marginalised over the last 15 years into some specially designed Nike shoes or attached because it has been positioned as managing to other running shoes. This is a far cry from just communications rather than managing the whole marketing communications, but it is all about help- business orientation.’ ing customers and strengthening the brand and grow- Jenkinson (2004) ing 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 Communications morphing generated impressive results with Nike’s director of digital and content claiming “97 per cent of Nike+ with experiences users said they would recommend the service to a Marketing communications are morphing with friend. That igure is unheard of” ’ (Grande, 2007). customer experiences and product development and Think of ‘4Es instead of 4Ps’ (Rothery, 2008) from distribution, as the impact of digital media is hugely the old marketing mix. A product is an experience enhanced by social media. This has not gone un- (including online), place becomes everyplace, price noticed by the world’s best marketers. Take Unilever, becomes exchange and promotion becomes evange- which moved its digital marketing out of the media lism. Alternatively, promotion is morphing with pro- mix and into the marketing mix in 2007 (WARC, duct as communications seek to engage customers 2007). It realized that its digital budget was part of with experiences. 6 Part 1 Communications Background and Theories Marketing’s antithesis feedback that is often quicker and cheaper than focus groups. This research needs to be fed to All of the above is the ‘antithesis of the “compared the right people in marketing. Social media allows to Brand X” or “now 10 per cent better” approaches’ us to learn a lot more about customers very (Beck, 2010). Although it does mean some ‘show quickly – if the systems and processes are in place. and tell’ communications, it heavily depends on dis- The key is to use this information to make better covering what current customers really like about decisions. the product or service and how else the company Other levels of engagement invite customers as could help the customer, and then ensuring every stakeholders to engage at a higher level by creating other contact point consistently relects these highly user-generated content or fully blown collaborative relevant added values, whereas marketing used to co-creation to deliver new products and solutions. be largely about creating messages for a passive See page 19 for more. audience with little choice and less empowerment, Social media is more than just communications; where the most active element was the decision it is a new way of working that requires new infor- whether to notice or ignore an advertisement. The mation lows. They affect more than just communi- once passive audience has been unshackled and em- cations, but feed into new product development, powered by technology. As marketers stalk rapidly distribution channels and even pricing. changing markets, they face a brave new world, one Marketing is being forced out of the communica- that has changed for ever, offering new opportunities tions silo and back into full-blown marketing cour- to those who seize them. tesy of social media. This new opportunity to excel Social media opens up new channels of communi- as marketers is increased by the decline of market- cation that give marketers direct access to customers ing, and customer service in particular. 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 The customer service time bomb these conversations are within the brand’s oficial Continual culling of employees and general cost online space, and some occur way beyond the cutting combined with sloppy marketing execution brand’s space and are just amongst customers with- has put marketers on the cusp of a customer revolu- out any corporate inluence. tion. 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 What will happen? caring staff. Customer surveys reveal that many customers are angry, irritated, impatient and ready ‘What will happen when consumer experiences to switch to another brand as soon as something [created by consumers] are much more interesting better becomes available. In a word, they are dis- and accurate than anything an organization’s satisied. This is a real marketing problem, or marketers upload?’ opportunity, depending which way the CEO and Hoffman (2009) CMO see it. We have gone backwards in marketing. Look around. You will see falling satisfaction scores, sloppy websites, telephone queues, customer service Utopia? people who can’t answer questions and others who The more enlightened companies build information simply don’t really care. Have salespeople lost their architecture and business processes around social vocation, their passion and their deep product media: processes that pick up comments about the knowledge? How many bad experiences do cus- brand wherever they occur; systems that respond tomers suffer whilst seeking service from a utility, (sometimes auto-responses and sometimes indivi- a phone company or a bank either on the phone dual human responses); and systems that categorize or on a website? Why are there so many sloppy the discussions. The dialogue generates valuable websites? Chapter 1 New Marketing Communications 7 rerouteing or, if they are lucky, after queuing and The manager’s online banking system: rerouting getting to speak to someone whom they cannot understand, or to someone who cannot a foreign country he rarely visited solve the problem, who then puts them back into a queuing system? We have gone backwards in ‘Recently, I had problems with online banking. marketing. After lots of frustration with technical support, I rang How many people have had bad experiences on- my bank manager. In the past, whenever I had a line with websites that are confusing, have dead problem he had been extremely helpful and made ends or just don’t work, sites that waste precious sure it was resolved immediately. This time around, time and cause irritation? And all the time advertis- things were different. “I’m not technical,” he told ing budgets are wasted driving customers to these me. He began to talk about his bank’s online sites. Why are there so many sloppy websites? They banking service as if it were a foreign country he forget the basics – regular usability testing. This is had rarely visited. He was behaving like a typical basic stuff, which many brands are ignoring. Check senior manager when it came to IT. He wanted to the website to see it works all right on-screen and wash his hands of responsibility. It was not his across different browsers also. domain. IT, it seems, is not the responsibility of Harvard’s Ram Charan and business CEO Larry senior managers or CEOs. They have much more Bossidy wrote a book called Execution: The dis­ important things to do, obviously.’ cipline of getting things done (2002), where they McGovern (2010) 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 Look at the stats. Look at the surveys – even the UK before as major organizations damage their brands National Customer Satisfaction Index shows falling day after day with dead-end websites and atrocious, satisfaction scores amongst the top-performing systemized but sloppy customer care. It is relatively brands. easy to be better than most if the basics are executed One recent customer service conference speaker professionally. showed falling customer satisfaction scores across a So have companies got worse at marketing? range of industries. When asked if this meant that If yes, this creates a huge opportunity for those we were getting worse at marketing, the speaker organizations that know how to listen to their cus- said ‘No, it’s the customers’ rising expectations tomers, continually improve and stay relevant. combined with lower tolerance levels that have changed.’ So it is the customers’ fault? There are no secrets ‘I was at a conference recently where a speaker asked an audience of some 600 intranet ‘The networked market knows more than professionals to raise their hands if their companies do about their own products. organizations used SAP. About 60 percent of the And whether the news is good or bad, they audience put their hands up. Then the speaker tell everyone.’ asked the audience: “How many of you like using Levine et al (2000) SAP?” Not a single hand went up. Not one.’ McGovern (2010) Accelerated change and Lower tolerance levels: perhaps customers have hyper-competition simply become angrier. And, if so, why so? Perhaps We are experiencing accelerated change. Take accel- anxiety is on the rise. Don’t customers like end- erated brand creation. Once upon a time it took less automated telephone queuing systems, robotic 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 customers. Enlightened boardrooms understand the Amazon, Facebook and Hotmail. Once upon a time power of the brand, its access to ‘share of wallet’ it took several generations to acquire 50 million and its impact on the balance sheet. users. Facebook did it in less than one (in fact Combine category-less, fast-moving competi- Facebook acquired 100 million in one year). This tors with borderless markets and you get hyper- simply could never have happened 10 years ago. competition. No market or business is safe. Radio took almost 40 years to reach 50 million The need to wholeheartedly adapt to and em- users, while TV took 13 years, the Internet four brace change is akin to the need for frogs to stay out years, the iPod three years, Facebook one year and of the kitchen. If you take a frog and put it into the iPhone less than a year to get 100 million users. a boiling pot of water, it will jump out somewhat And now we’ve got accelerated brand power as blistered, but it will survive. If, on the other hand, global boundaries fall. Perhaps a seminal moment you put a frog in a cold pan of water and slowly in marketing occurred when the Financial Times raise the temperature it will boil to death. journalist Winston Fletcher acknowledged the power Business is similar. No one will change your en- of the brand and ergo the power and importance of vironment so rapidly that you have to change your marketing when he asked: ‘What gives brands their behaviour immediately. It just changes continually. power to inluence, if not quite control, people’s Amidst this hyper-competition some CEOs wake purchasing decisions and thus their power to inlu- up in the middle of the night in a cold sweat wor- ence, if not quite control, modern economies?’ ried about their value chain and wondering who is And then China’s President Hu visited the United unpicking the lock on their value chain. Teams of States. His irst appointment was with a brand, analysts and MBAs from Boston to Beijing analyse Microsoft, and his second appointment was with industry after industry, sector by sector, to ind busi- President Bush. nesses with a weak link in their value chain that Another seminal moment occurred in 2000, as would beneit from a third-party supplier fulilling for the irst time 50 per cent of the world’s largest a piece of the value chain. Most CEOs know some economic entities were companies (brands) and not parts of their value chain, whether production, countries. logistics or after-sales, are more proitable than other Global boundaries are falling; the Iron Curtain parts. When they get an offer to replace the weakest has been swept aside, the Berlin Wall torn down and link with a higher-quality link (or service) at lower the Chinese gates lung open partly by political cost and seamlessly linked by web technology, many movement, partly by aggressive businesses seeking CEOs ind this a very attractive proposition. 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 ‘We have only two sources of competitive they want. advantage: the ability to learn more about our And, all the time, category-less competitors quietly customers faster than the competition; the ability step across old borders. to turn that learning into action faster than the Once upon a time, supermarkets sold groceries competition.’ and petrol stations sold petrol. Now petrol stations Former GE CEO Jack Welch sell DVDs, fresh coffee, groceries, gambling and a lot more, while grocery stores sell petrol, garden furniture, car insurance and soon legal advice (in- cluding DIY divorce kits), as well as groceries. As the company moves from a value chain to a seam- Powerful category-less brands take more ‘share of lessly connected value network, CEOs are forced to wallet’. Customers trust some brands suficiently consider the most basic of questions: ‘What busi- to try other products from the same brand name. ness are we in?’ This can only be answered by ask- The Tesco brand is so strong it could probably sell ing a very basic question: ‘What do customers want customers anything (as long as it meets reasonable now and in the future and what is our sustainable quality standards). This is ‘share of wallet’. Growth competitive advantage (SCA)?’ for most US companies was forecasted to come from When I ask CEOs what is their SCA, I usually get share of wallet rather than growth from inding new answers that include patents, product differentiation, Chapter 1 New Marketing Communications 9 cost eficiencies, and sometimes distribution channels. Outbound marketing (the old interruption Most of these can be, and are being, attacked. Two marketing model of advertising, direct mail and major sources of SCA, if managed carefully, are the telesales) has suffered as audiences switch channels brand and customer relationships – inseparable, or fast-forward through TV ads, turn on ad blockers you may say. on their browsers, stop e-mails with aggressive spam However, many companies damage these two blockers and use caller ID to bar unwanted phone critical assets. Sloppy customer service and negative calls. Some outbound marketing does get through customer relationship management (CRM) destroy but not as much as a few years ago. brands. (See Chapters 2, 3 and 21.) Despite the im- While channels fragment (eg TV has approxi- portance of CRM, many companies are still sitting mately 500 channels, while 20 years ago it had ive on a customer service time bomb. And it’s ticking. channels), the sources of trust are shifting. Which of Those who ignore it will be left behind, in the same these has the biggest inluence on your customers: way that those who ignore the golden opportunity The Times, BBC, Sky or Google? presented by social media will also be left behind. Social media has arrived and customers love it. Those who embrace it, seize the opportunity, develop Social media gives customers control. Marketing has rigorous processes around the new technologies and been democratized courtesy of the internet and social continually strive to ind and satisfy customer needs media. And within the mass of customers lie the new will survive and thrive. opinion formers and opinion leaders: bloggers and twitterers. Marketers have a choice: join the conver- sation or fail to communicate. Old mass communications interruption models Who are the survivors? like TV advertising have simply got to be a lot more creative to cut through the clutter and grab the eye ‘It is not the strongest of the species that survives, of the busy consumer. They also use social media to nor the most intelligent that survives. It is the one spread the message (if the content is good enough). that is the most adaptable to change.’ Any social media content has not only to be more Charles Darwin creative but also highly relevant to the target audi- ence. Suddenly the marketing of a refrigerator has become so creative that it becomes compulsive viewing. And all of this amidst the white heat of Social media – the biggest change hyper-competition. Social media is not just a marketing tool. It is, since the industrial revolution effectively, a new way of running a business. It re- ‘Social Media is the biggest change since the indus- quires a new company culture, which in turn requires trial revolution.’ Business Week said this as far back company-wide support, systems and incentives. It as 2005. A month later the Economist magazine requires a new mindset: more listening, less shout- went further and simply said: ‘companies that don’t ing. Think relationships and not just sales or trans- understand digital communities will die’. Social actional marketing. Hasn’t this been said before? media has now become the centre of many market- Yes, it has. It is basic old-school marketing, except ing strategies. that social media allows marketers to listen to cus- Customers have discovered a whole new way tomers more easily and more cost-effectively. Social to ind out about products and services. Product media also relies on a ‘sharing’ culture, which means review sites, ratings, discussion groups, Facebook sharing information and being helpful. This, in turn, petitions, blogs, mobile price comparison applica- nurtures relationships, which again is the essence tions (apps), YouTube demonstrations (positive and of good marketing – developing and strengthening negative videos) and Flickr photos: these are social relationships. Social media is not about making media tools. And customers, not companies, are short-term sales. It is about sharing and listening controlling the low of marketing information as and channelling information into systems that alert they shut out interruption marketing and use, in- certain staff to negative discussions, positive discus- stead, social media to ind products, ratings and sions, suggestions, complaints, and ideas for new pro- reviews. ducts, new ads, new promotions and new discussions. 10 Part 1 Communications Background and Theories Harnessing all these conversations requires new Enabling rating of content and online services – skill sets and new organizational structures. In turn services such as Delicious and comments on blogs this helps marketers to create a marketing utopia – supports this. where customers drive the business while marketers Think engagement. Marketers are searching not lend a helping hand. only for ways to connect brands to customers, but There is a new opportunity to use these new also for ways to connect those customers to each technologies to improve marketing in a radically other – with the brand simply facilitating the dis- different way – in fact, one so profound that social cussion. The brand can be a place where the com- media has delivered a marketing utopia. munity can congregate and discuss and collaborate. From customer feedback, to product ratings, recommendations and discussions, through to pro- sumers (customers who help to create, or produce, Marketing utopia the next product): this is collaborative co-creation (see ‘The ladder of engagement’, page 18, for more). has arrived Customers are encouraged to be part of an organi- zation’s product/service design system and produc- tion system. Many customers feel their favourite Why social media works brand is engaging with them, and they feel some Social media fulils a fundamental human need: to reciprocity as the organization demonstrates that communicate. We are social animals. We like to it is listening and consequently taking action. This communicate with each other. Social media facili- inherently deepens brand loyalty, purchasing and tates this by helping us to communicate more easily, advocacy. to more people, whenever we want. That is why Many customers like to have a meaningful input social networks like Myspace, Facebook, YouTube into the products and services they consume. Some and blogs are so successful. Social media is huge don’t, but many inluential ones do. Getting private because it simply lets customers communicate with previews or input into shaping what is yet to come each other and organizations communicate with creates a sense of being an insider as opposed to customers (this includes listening). being just another external customer sitting on a This new business environment allows marketers ‘customer service time bomb’. 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 ‘If you’re paying attention, you get the answers to time engaging customers, developing higher levels of questions you didn’t even think to ask.’ customer loyalty and nurturing brand ambassadors. Schlack (2008) It’s a marketer’s utopia. Web 2.0 is a participatory platform. Organizations that tap into that willingness to participate can do Social media makes it easy for both customers and very well. Think beyond the old one-way communi- organizations to communicate with each other. cations and even beyond a basic dialogue between They allow everyone to get to know each other customer and brand and instead consider a trialogue better, understand each other’s needs and issues, amongst customers, opinion formers and the brand. nurture relationships and collaborate, sometimes Brands can reinterpret themselves as facilitators. in highly destructive ways and sometimes in highly Think about creating branded content, services, creative ways. and even applications and widgets that give real beneits to customers (and that boost their engage- ment with the brand). Think about social networks. Become part of them. Exist inside them. Create a How social media works proile. Embrace these social platforms, whether Consider the basics – blogs, Twitter, YouTube, Flickr, photo sharing, music sharing, video sharing, or Wikipedia, Google Maps, Google Earth, virtual interest sharing platforms such as bookmarking. worlds and augmented reality (AR). All of these Chapter 1 New Marketing Communications 11 help to spread or share useful information with Twitter is the hugely popular 140-character micro- potentially vast online audiences. By posting articles blogging network. It is a river of short messages and comments on to blogs, photographs on to Flickr usually with links to interesting content on a blog, a and videos on to YouTube, you allow other people website or YouTube. The twitterer’s messages (tweets) to see your messages and, if they like them, share appear in the stream of messages (or updates) shared them with their friends, who in turn can share them by the network of followers. Just like Facebook and with their friends’ networks. Social media simply LinkedIn, Twitter allows networks to see who is widens an organization’s net by spreading its saying what (or doing what). branded content (and web links) out to a potentially Your tweets can also be found if key phrases that vast audience. are being searched for also appear in the tweet. These social assets are picked up by search Organizations search and track all Twitter conver- engines when people search for certain phrases. sations for references to their brands, companies Search engines like Google do a universal search, and staff – particularly during conference time, when which now includes websites, videos, photos and a twitterers tweet comments about companies. lot more, so broadening an organization’s social The ‘retweet’ facility allows twitterers to pass assets simply widens an organization’s net, which someone else’s tweet to their own network of may consequently catch more prospects who are followers with just one click of a button. Certain searching for speciic terms if these terms or key messages can spread like wildire on Twitter. Twitter phrases have been added as tags (or labels) to the can widen an organization’s net. It can also be used various assets. for customer service, as is proved by easyJet, which All social media can be optimized, eg blogs inds it to be a useful tool to give quick responses. and websites can be optimized (search engine The Irish Bus Company (Bus Eireann) sells thou- optimization – SEO) so that critical key phrases sands of euros’ worth of special-offer bus tickets are used in the copy, headings, links to other pages every week to its network of mostly students. Dell or other sites (this is called ‘anchor text’), page title says Twitter has helped to sell millions of dollars of tags (labels), photo tags (labels) and video tags kit. See Chapter 21 for more. (labels). Most importantly, Google also measures Videos can be posted on all the current popular key phrase frequency of use, recency of postings video-sharing sites, including YouTube, via a video and, of course, inbound links. These inbound links aggregator called TubeMogul, and photos can be from venerable sites improve Google rankings, as posted on Flickr. YouTube and Flickr can be seam- Google treats it as a vote of conidence in the site if lessly embedded in the blog or website, so they venerable organizations are linking to the site. appear on the website but also appear in YouTube The website and/or blog can become a unique if someone searches for certain keywords. Each of platform of expertise or entertainment or whatever these social platform attracts its own audience the desired goal. It may also become a hub of dis- towards key phrases and similar videos, photos or cussions on whatever subscribers want. When other audios. All of these assets are publicly searchable, so relevant bloggers link to a blog it widens the net once again tagging (labelling) is critical. It is easy to again. create your own channel on YouTube. Social book- Multiple social bookmarking facilities on the marking, sharing and favourites extend videos’ blog allow readers to bookmark it (or make it a reach even further into the net. favourite), post it to their own Facebook proile or Wikipedia is a growing fountain of knowledge. send the link via e-mail to a friend. It is just one Over time organizations can build their own proile click away. Then other people look at their network by adding relevant factual articles (complete with members’ bookmarks to see what their network links). This further spreads the net and may embrace of friends or business colleagues are reading and other experts to participate in collaborating on recommending. The net widens. certain articles. Simultaneously, an RSS feed automatically feeds Google Maps and Google Earth complete the the new blog posts directly into a person’s RSS net at this stage. Ofice locations, addresses, phone reader, so instead of having to visit 10 favourite numbers, directions and web addresses can all be websites the person can get all the updates from uploaded into Google Earth and Google Maps. the reader. 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 F I g u R E 1.1 The real-world presentation 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 F I g u R E 1.2 richer (3D aspects can be shown) than that in The virtual-world presentation 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. 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 cus- tomers 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. games convert a living room instantaneously into a They cannot be ignored. In 2007, the author held a gymnasium, a tennis court, a boxing ring, a dance parallel launch of Northern Ireland’s creative digital studio, a keep-it studio or even a golf course, and hub in Second Life. The Minister for Enterprise’s players play happily in their virtual worlds. It will avatar addressed a virtual audience (of avatars), become a lot more sophisticated. Have a look at the with the virtual world presentation simultaneously GE Renewables Smart Grid website, which allows beamed into the ‘real-world’ audience in Belfast. viewers to blow at their PCs and make the virtual More and more customer service avatars (inter- turbines turn faster. active cartoon characters) are appearing on web- The University of Tokyo already has perfect sites, particularly in the customer care sectors, where virtual rain that looks like and probably feels like they offer themselves as ‘your assistant’. Virtual im- water dropping on to a surface. It may well be that mersion in a non-real world has been around for Web 3.0, the semantic web, may combine virtual some time and has crept into people’s living rooms worlds with intelligent systems, creating whole new in the form of Wii games. These popular virtual opportunities for those who embrace the technology. Chapter 1 New Marketing Communications 13 Augmented reality allows users to see additional Social network is an ‘immensely more powerful information, eg text or photographs, by pointing a category of network’ based on a ‘many belong to mobile phone and reading any hyper-data posted, numerous networks’ model. It is called a Reed net- eg a building site might contain AR information on work (after David Reed, who observed that people the site and what it will look like when inished. in social situations belong to more than just one Through use of AR software like Layar or other network). The possible value of a Reed network is 2 apps from the iStore, the horizon expands as aug- to the power of the number of nodes on the net- mented reality emerges. work. Take the same group of 20 people in a social To summarize, it is not surprising that social situation, whether virtual or real. A Reed network media has grown so quickly (the Facebook popu- generates a score of 2 the power of the node. This lation now equals that of the fourth-largest country generates a network score of 220 = 1,000,000 in the world), because social media taps into some- Moving from a broadcast network to a telephone/ thing deep inside us all – the need to communicate, e-mail network, even if only 10 per cent of the people talk, share and be part of a community. This is pass the message (maybe a special offer, or perhaps fundamental to us as social animals, and satisies a criticism), it still means that 40 messages will be a deep need that is profoundly embedded into our sent around. This is twice as powerful as the TV genetic structure. The old push marketing model network, which only had a possible total of 20 (of interrupting audiences and pushing ads at them) messages being received. Moving on to the Reed with ‘sell, sell, sell’ is being replaced by ‘listen, network (social media network), if 10 per cent listen, listen’ to the conversations and ‘share, share, spread the message, that generates 100,000 possible share’. messages that can be received. Or, even if only one- It is easy to see why social media is now so tenth of 1 per cent pass the message on, it would powerful. The next section reveals why and also still generate 1,000 messages, which is 50 times proves the power of social media by explaining the more powerful than the old TV model with just 20 maths behind it. messages. Now consider just one social network, LinkedIn, which is sometimes referred to as Facebook for Social networks – herds or businesspeople. It is a powerful tool. Once registered (which is free), businesspeople start connecting with individuals? other businesspeople, effectively building their own Consider a target audience of 20 people. Here’s networks. If an individual has 170 connections how Lilley (2007) calculates how many messages (contacts), LinkedIn calculates how the individual can spread around depending on what media is becomes part of a network of approximately 3 being used. million people. Figure 1.3 shows how LinkedIn Broadcast network is based on a ‘one to many’ calculates the size of anyone’s network. The maths model (eg old TV advertising). It is called a Sarnoff in the table is taken directly from LinkedIn. network (after David Sarnoff, the broadcasting legend). A hypothetical Sarnoff network with 20 viewers has a score of 20. The network score is networks, herds or individuals simply the number of nodes (audience members) Group behaviour is well documented in social stud- = 20 ies. Marketers understand the natural impulse to Telephone and e-mail network is based on a follow the crowd. Some sociologists believe humans ‘many to each other’ model. It is called a Metcalf are just copying machines, basically. Because hu- network (after Bob Metcalf, one of the inventors of mans are social animals, a large percentage of an the Ethernet). This communications model allows individual’s brainpower is devoted to interacting everyone to contact each other. Because everyone with others, watching their behaviour and wonder- can call each other, the total possible number of calls ing what they think of us. We carry this legacy with or e-mails is 20 squared, or 400. This is potentially us every time we buy a particular brand of washing much more powerful for communicating messages powder or choose what movie to watch in the among people than a Sarnoff network. The network cinema. We have learnt or evolved to be animals score is node to the power of 2 or 202 = 400 that are good at copying. 14 Part 1 Communications Background and Theories F I g u R E 1.3 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 170 Your trusted friends and colleagues 2 Two degrees away 32,900+ Friends of friends; each connected to one of your connections 3 Three degrees away 2,694,600+ Reach these users through a friend and one of their friends Total users you can contact through an introduction 2,727,600+ manifests or provides the mechanics for what we Think caveman are naturally programmed to do. If someone stands staring at the sky and point- ing, that person is bound to get strange looks from If everyone is running away you don’t ask why; passers-by, but get six or seven people standing you just run. Copying means you don’t have to learn together staring and pointing at the invisible space- everything from scratch, and you can defend or ship and the crowd will swell. protect yourself more easily because you react to Harnessing the knowledge of the herd has greater things more quickly, so it makes sense from a potential when it comes to building brand loyalty. survival viewpoint. Social media cultural shift In the 1960s the sales of domestic air conditioning Organizations that are not looking out for and were followed and mapped for years. Findings listening to online conversations about their brand showed that the best way to predict who would buy are missing a major opportunity. If someone attacks air conditioning came down to whether a person’s a brand there is an opportunity to address any criti- neighbour had it. People had to see it to be likely cisms and rectify the issues before rumours spread to copy it. out of control. Conversations cannot be controlled The Mexican wave – why? Because everyone like advertising messages, but organizations can feed in the crowd can see everyone else and is aware of accurate information as well as being seen to listen the group behaviour. The Mexican wave cannot and care. In addition to collecting crucial feedback, be re-created in a shopping centre, because people ideas and public comments from the marketplace, can’t see each other, nor can they see the group marketers are provided with a welcome platform to behaviour. get their message across if it is relevant. This also Facebook, on the other hand, is like a digital grows a brand’s presence wherever the market con- version of the Mexican wave, because people can gregates online. Ignoring these conversations leaves see what all their friends are doing. They can not an organization on the outside and soon to be re- only see if their friends are online but also what placed by another brand that does want to be a part their friends are currently doing and what they of the conversation. have been up to in the past. If someone gets an Social media provides a platform to: invite to Facebook and joins, that person in turn sends invites to his or her friends. Wherever the ●● reach out to increasingly dificult-to-contact herd moves next, people follow. The internet just customers; Chapter 1 New Marketing Communications 15 ●● help customers by sharing expertise (and PowerPoint presentations, decks, articles, blog posts, therefore branding) with audiences rather commissioned research, white papers, e-books, expert than trying to use it for direct sales; insights and helpful customer tips. ●● listen to the vocal elements within a market. Sometimes these knowledge assets are buried in customer e-mail responses, which can be catego- This requires a cultural and organizational shift and rized and used to generate FAQs for your website more of a listening and sharing culture than a sell- and also can be used as the ‘10 most popular ques- ing culture. It requires a real customer orientation, tions’, ‘10 questions you’ve got to answer’, ‘10 which drives the marketing utopia. After the listen- reasons why’ or ‘10 things you’ve got to know’. ing and sharing, relationships can blossom. After These can be converted into quizzes with multiple this warm awareness and affection, all things being answers, or self-assessment widgets. equal, sales will eventually follow when the cus- These knowledge assets can be used as ‘link bait’ tomer is ready (as opposed to when the organiza- or as a lure to entice an audience of Twitter followers tion wants to sell). or members of a discussion on a blog or on LinkedIn to visit your website. Other lures that work are Develop a systematic listening provocative questions or statements or a discussion topic supported by a reasoned argument generated team and a system to use the over 2,000 carefully thought-out responses. These information responses are engaging with individuals and their Who monitors what? Who compiles the analysis brands. 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 How do we share? to all this highly useful information? What systems How do we collaborate? channel which information to whom? If embark- ing on the highest level of customer engagement, ‘Open source technology – we need to drive Twitter collaborative co-creation (see page 19), who and all these other open source tools deeper inside manages the channelling of new ideas into new the organization – drive use of said collaboration product development processes? Who handles the technology inside the firewall – social cast, responses back to the original contributor? These yammer etc.’ are some of the questions that need to be addressed. Brogan (2009) 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. The social media process – 10 steps 1 Start monitoring and listening. A social Develop knowledge assets (which media audit establishes an organization’s reputation (and your competitors’ can be used to lure traffic) reputations). Develop a comprehensive Most organizations have a lot of assets already, monitoring strategy to discover: assuming colleagues speak at conferences, do inter- – the issues: what can have an impact on views, write white papers, commission market re- your brand; search or even answer customer e-mails and develop answers to frequently asked questions (FAQs). Even – the inluencers in your marketplace; writing a book review is a knowledge asset, if it is – the platforms or places where your written by an expert or perhaps the CEO. These customers (and inluencers) congregate are knowledge assets that can be repackaged and (the inluential networks, including blogs, offered to customers. Record all the organization’s discussion groups and other social speeches on video. Knowledge assets include videos, networks); 16 Part 1 Communications Background and Theories – the opinions customers have about your 5 Recruit and train the team of spokespeople. product, your company and the Whether a blog or a Twitter account or a competition. YouTube channel, you need to identify who is in the team, ie who has permission to write If your brand or industry discussions are a blog post or a tweet or upload a video. focused on one or two platforms, this makes Who handles responses? Is it certain people it easier to concentrate your efforts. for certain issues? Is it one spokesperson or 2 Set priorities and goals, and don’t try to several? Equally, who monitors what? Who cover all social media outlets. It is not reports to whom? Once you have your team possible to engage in all conversations trained, brief the rest of the organization. everywhere. Pick the more important ones Share the strategy with the whole initially. Not all online conversations have organization. the same impact. Identify the more 6 Commit time and resources. You need a important ones. Learn when and when not consistent stream of useful content. Don’t to engage. Have clearly deined objectives just dabble. This requires clear brieings, and know exactly what you are trying to training and motivation, which in turn achieve with social media (eg reposition requires resources. Monitoring requires the company, develop relationships, resources also, whether you use an outside establish the brand as credible, grow agency or do it in-house. Once you start awareness, etc). proving the value of social media, you 3 Agree key messages. Have crystal-clear should ind it easier to allocate resources messages. Be ready to engage with the target to it. audience in a meaningful way (give them what’s relevant and important to them). 7 Constantly promote social media. Just as all What topics and key phrases does the organizations now promote their websites in organization want to be associated with? everything they do, so too should social Prepare canned messages for a range of media be promoted. Announce your Twitter issues or situations so that they can be handle (name), Facebook page or LinkedIn tailored easily. Show the team how to create proile at every opportunity. Add it to all the links, back-links and retweets. Share company’s e-mail signatures and collateral. guidelines for what is and is not appropriate. Announce it at conferences and news releases. Add the details to slides, news 4 Develop good content – help and share. Your releases and the letterhead. List it on your content has to be valuable; otherwise you’re website. Post all presentations on your just shouting or ‘making noise’. You have to social media sites. In fact, all ofline be prepared to help and share good content. communications should be integrated with Do not sell primarily. Sales may follow good social media, eg Twitter, blog and Facebook content. Social media is not a direct announcements about an upcoming marketing tool. Share articles, presentations conference. Videos and photos of the event and videos that are relevant – these can be and speeches can be uploaded to YouTube yours or someone else’s (as long you credit and Flickr respectively. them and link to them). Only add comments to other discussions if you are being helpful 8 Integrate online and ofline events. The and relevant. 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 ‘The more valuable your content, the more website is a conduit, it can get more bang valuable you become, the more your for its buck if it is integrated, eg brief video audience will grow.’ production companies and photographers as Source unknown to what formats and style are needed for web use. A shared schedule of events or an outline Chapter 1 New Marketing Communications 17 plan to allow integration and leverage of Social media is not for the pure mercenary busi- various marketing assets on to social media ness. They are for organizations that are truly platforms (like ads, promotions, videos, etc) customer orientated. Social media, for them, is is essential. a godsend. Customers segment themselves into in- 9 Plan for success. Although it may take some terest groups that generate more inside information time to build up your networks and in the minds of customers than any focus group followers, be prepared for a sudden inlux ever could, because everyone shares information, of comments, visitors and enquiries. This is tips, suggestions, ideas, examples, and details of a nice problem to have. However, if the what upsets them and what excites them. Social organization cannot handle the incoming media helps to build relationships with customers web trafic with its comments and enquiries, and prospects rather than shouting and broadcast- it could end up generating a lot of negative ing messages at them. PR. Develop credibility before raising Finally, remember to have an exit strategy if, for visibility. example, participation rates are too low and there- fore do not justify the resources required. How 10 Measure, measure, measure. Don’t play would you stop a blog or a discussion? What reason Russian roulette by (up)loading your would you give? Where would you send the group? message, pushing or spinning it out and Some brands transfer their audiences to other rele- then closing your eyes and hoping for the vant sites or groups. 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 The ladder of engagement an e-marketing group in LinkedIn generated over 2,000 responses. It was called ‘Social media is crap’, Customer engagement creates and had a detailed post of why the person felt it didn’t work. Watch what generates visitors, conver- stronger brands and more sions and good comments (as opposed to negative advocates comments). Marketers who understand and inluence customer How do you measure social media? Some com- engagement better than their competitors are more panies use a formula (the PR industry has used likely to develop stronger brands and more loyal formulas for years) to generate a score each week on customers. Engaged customers are more likely to editorial coverage, allowing for brand name men- become brand zealots. Therefore it is important tions, whether they are positive, negative or neutral, to identify engaged customers and start a brand and the importance of the outlet to the brand. ambassador programme to further strengthen the Although ‘sentiment tracking’ is in its infancy, relationship and energize their word of mouth. marketing professionals need to spend time moni- The ideal customer, or most valuable customer, toring (and acting upon) what is being said about does not have to be someone who buys a lot. their brands, their people, their organization and The ideal customer could be an inluencer who is their industry across blogs, micro-blogs (Twitter), a small irregular buyer but who posts ratings and forums, social networks and online news media. reviews, as the reviews could inluence another 100 people. not everything comes down to ROI Identifying engaged customers ‘What’s the ROI for putting on your pants every Monitoring the quantity and frequency of blog posts, morning? But it’s still important to your business.’ comments, forum discussions, reviews and proile Scott Monty, updates helps to identify opportunities and also acts Digital Communications Manager, Ford 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 The lower half of the ladder encourages cus- a product rating or even post a product review as a tomers to engage via product ratings, reviews and standard part of their after-sales contact strategy. discussions. The upper half of the ladder is user- This way the more engaged customers identify generated content (UGC), which encourages cus- themselves by their own self-selection. tomers to become co-creators of content for the A customer who doesn’t care about the product organization. This is sometimes referred to as crowd- is likely to be less committed or less emotionally at- sourcing. The highest level of co-creation occurs tached to the brand. On the other hand, a customer when customers co-create the products that they who is engaging is likely to be more emotionally subsequently buy (see examples in ‘Collaborative connected to the brand. Marketers need to know co-creation’ below). about the sentiment, opinion and afinity a person Not everyone will rise to the top of the ladder. has towards a brand. This is often expressed through In fact, Nielsen suggest only 1 per cent of website repeat visits, purchases, product ratings, reviews, visitors will; 90 per cent lurk, 9 per cent occasion- blogs, discussion forums and, ultimately, their likeli- ally contribute and 1 per cent regularly contribute. hood to recommend a friend. They call it the 90–9–1 rule. But those 1 per cent are important: hence the importance of identifying en- gaged customers. While moving customers and other stakeholders Product reviewers want to engage more up the ladder of engagement strengthens brand loyalty and boosts sales, it does require careful ‘70% of customers who left reviews for products planning, systems and resources. This is a long-term strategic decision. wanted to help improve those products and they purchased more products, more often than non-reviewers did.’ Aarons, Edwards and Lanier (2009) Beginning of a beautiful relationship Remember the second visit to a website is the beginning of a relationship. Therefore it is always Is customer engagement measured? Does this identify worth asking the question: What is a brand doing to the engaged customers and use their feedback to im- bring relevant visitors back to the site? prove 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 At the highest end of the ladder, the virtual circle suggesting ideas, to screening ideas, to testing ideas completes itself. It is a self-fulilling system. As the and eventually to buying the ideas when they become products or services. Many of these will become brand champions, evangelists or brand ambassadors. F I g u R E 1.4 This is why moving some customers up the ‘ladder of engagement’ is valuable. Strategic ladder of engagement Products The ladder of engagement Collab- Processes ↑ orative Brands ↑ Moving customers up the ladder of engagement cre- Co- ates brand loyalty, unleashes brand zealots, and can Ads ↑ Creation help improve an organization’s processes, products Ideas ↑ and services. This can also create sustainable com- petitive advantage for an organization as customers Discussions ↑ become more engaged and more loyal to the brand Reviews ↑ that they feel a part of. Ratings Chapter 1 New Marketing Communications 19 F I g u R E 1.5 Collaborative co-creation Collaborative co-creation Products Now consider the higher levels of engagement, a kind of marketing nirvana – when customers help Brands an organization to create products, promotions and advertisements. This is collaborative co-creation. Ads There are many levels of co-creation, including ideas, product concepts, product screening, product Ideas components, product upgrades and updates, and even complete products, as well as creating Discussions advertisements, brand names and, ultimately, the products themselves. Reviews Ratings customers create the product, they create their own Discussions – passionate stories: demand. However cutting-edge this is, it does require basic business skills of systems of communications, great sporting moments registration, processing, feedback, rewarding and Another level of discussions is where customers dis- putting into action. So back to basics – developing cuss the product or, in the case of the sporting book, systems that work requires careful planning and they passionately discuss sporting stories. They also rigorous testing. Here are some examples of how reveal themselves as potential brand ambassadors. companies use the different steps on the ladder of Those who do engage in discussions are usually engagement. passionate about the brand or product. 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. Ideas They then invite you to write a product review, Dell’s Ideastorm (www.ideastorm.com) generates which takes a few minutes. As mentioned, some ideas on how to improve the business and uses companies make ratings and reviewing a standard systemized suggestion boxes. Customers, and even part of their after-sales contact strategy. Customers non-customers, can suggest new products and fea- value reviews from their peers. This shows that tures, as well as better ways of running the business, consumers are able to apply their own ilters and, eg improvements in their processes. Dell have earned effectively, rate the ratings. There is a hierarchy of $10 million from the early stages of Ideastorm. This trust online, which starts with personal friends. may seem tiny to a company of Dell’s size but, re- member, this is brand engagement, a form of brand Discussions – ask and answer: promotion to the brand zealots, and it also contrib- utes something to the bottom line. the Home Depot One level of discussions is ‘ask and answer’, where customers throw out questions and other customers TV advertisement answer them. US DIY chain the Home Depot invites Co-creating ads is more common in the United customers to ask DIY questions and eventually get States, where customers are asked to generate ads. other customers to answer the questions. Issues of In 2008, Chrysler’s Tahoe supplied graphics, music, liability for any careless advice obviously need to be photos and video clips and asked its audience to addressed, and real experts may be preferred to make an ad. The best one would be shown during casual customer experts. 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 Products Now consider the highest level of engagement, the marketing nirvana or the marketing utopia Brands mentioned earlier, where customers co-create products. Ads This is when customers actually create an organization’s products and services. Ideas This is where social media facilitates an atmosphere Discussions and systems where customer ideas flourish and the next generation of product modifications or new Reviews products is created by the customers for the customers. This is a real marketing orientation model. Ratings the world. It generated a huge response. It also collaborative advertising see the T-Mobile case discovered some user-generated discontent (UGD), (Case study 13.1). with several negative ads posted on YouTube. It took the brave decision to allow both positive and Brand names negative ads to be created – a classic double-sided Co-creation can go way beyond ads and promo- argument, which generated more discussions and tions; it can even generate brand names, if the basic a lot of press coverage. By the time the Superbowl systems are in place. Boeing created a buzz around came, the PR surrounding the user-generated ad the launch of the new 787, the Dreamliner, by invit- campaign had boosted anticipation of the ads, and ing input from potential customers and passengers an enthralled audience watched with great intrigue. online. Indeed it was the community that named the More recently, Kraft Foods in Greece scored a hit aircraft the Dreamliner, with some 500,000 votes with a user-generated 27-minute long-form ad for cast online from 160 countries (O’Dea, 2008). its Lacta chocolate bar. The crowd sourced the story and the casting, and some of the crowd even ap- peared as extras. The Love in Action campaign Products and services started using traditional TV advertisements to in- Some say that UGC has been used ofline for many vite people to send in their love stories. Thirteen years now. MTV has been getting users to screen or hundred love stories and one month later (it took a research products through user text votes, and reality month to sift through the stories), the winning story TV has been using the UGC formula for far too long was selected. Online polls voted for and selected in my opinion. The X Factor attracts UGC to create the cast (full screen tests were put up online), the new product concepts, new product screening and characters’ names and even their costumes. Updates new product testing. Why is UGC so successful? were posted on Facebook and Kraft’s blog, which Back to the online world, Peugeot invited their was followed by over 11,000 registered voters and online audience to submit new product concepts, 20,000 fans and eventually watched over 150,000 ie submit car designs. This attracted 4 million page times. It created such a buzz that Greece’s leading views. Peugeot built a demonstration model of the TV station, MEGA Channel, offered to screen it winning design to exhibit at marketing events. It free of charge on 14 February as part of its also partnered with software developers to put it Valentine’s Day programming, which attracted a 12 into a video game. per cent share of viewers and was seen by more than Another online company where users generate 335,000 people. Lacta sales are also up in a declin- the complete product is Constant Comedy.com, an ing market (Hall, 2010). For a full case study on online comedy site where users upload their jokes Chapter 1 New Marketing Communications 21 on video. Audiences watch them and then vote them Remember, UGC is not always B2C, as almost on or off. The best ones are voted to the top, and always many of the best online examples are actu- new careers take off. ally B2B. Consider MMOGs, where dozens, hun- Take product variations and product components. dreds and even thousands of players around the Great Moments of Sportsmanship is a book about world participate in an online game. Now imagine sportsmanship. Customers send in their sportsman- dozens, hundreds and even thousands of scientists ship stories for further discussion in the blog and collaborating on and creating new products. The possible inclusion in the next edition. The goal is to Atlas particle detector, which measures subatomic have future editions totally user generated. In addi- particles in high-energy physics, involved 2,000 tion, more UGC is added as YouTube videos that scientists disaggregated across 165 working groups match the stories in the book are added to the site. who then found a successful solution online. IBM In the area of careers, there is a highly engaging has adopted Linux for some of its computer pro- UGC company whose product is 100 per cent user ducts and systems. Linux is continually improved by generated. Called pods4jobs, it is an online careers a huge global community of software developers, advice site with a difference – videos only and all mostly non IBM-ers. Sun Microsystem developed the created by the target market, ie mostly teenagers Solaris operating system with a global community interviewing people at work, revealing a ‘warts and of software developers. Some call it ‘crowdsourcing’; all’ insight into different careers. Here, kids interview others call it ‘open innovation’. their parents, aunts, uncles, grandparents, neigh- It is interesting to note that Apple netted some bours or anyone who has a career. Students shoot $1 billion in app sales in the irst year, and shares their own video, upload it and, if it is accepted, get 70 per cent of revenues with the 125,000-strong a certiicate of achievement. developer community in the iPhone developer pro- And they are not alone. Another very important gramme (Kennedy, 2009). collaborative co-creation project is the Myelin IBM also uses open innovation for its Big Green Repair Foundation (MRF), which is a closed group Innovations unit. Likewise, P&G revamped its in- of researchers from ive universities who aim to novation model by adopting open innovation a few develop a drug that will treat multiple sclerosis years ago. From Intel to Xerox, NASA to Novell and (MS) in 10 years. After a couple of years they have Vodafone to Virgin, more and more organizations identiied 10 targets and three therapeutic candi- are unleashing the collective brainpower of people dates, developed 11 tools to study myelin, and outside their organization. Ofline, LEGO have published nearly 20 scientiic articles. Half of any been collaborating with customers for years, asking royalties go back into the foundation to inance children to suggest, create and screen new product future projects. An IP agreement allows MRF to ideas. They then inancially reward ‘those whose license discoveries to pharmaceutical companies. ideas go to market’. Occasionally B2B is mixed with B2C, as in the Successful UGC and even the lower levels of en- case of the InnoCentive site, which allows 180,000 gagement are dependent on a vibrant, responsive freelance scientists, engineers, entrepreneurs, students audience and one of marketing’s often forgotten fun- and academics to work on problems posed by in- damentals – systems and processes that work, and dustry, creating and selling solutions in return for basic marketing principles of testing interfaces and cash rewards. Major players, including P&G, are back-ofice systems. Usability testing is a prerequisite. 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 UGC is in search results for the best one; they then produce it and sell it back to the community. The retail trade has spotted these ‘25% of search results for the world’s top 20 largest high-quality and unusual T-shirts and now orders brands are links to user-generated content.’ signiicant quantities of their limited-edition, high- Qualman (2009) quality products. 22 Part 1 Communications Background and Theories Remember, websites are fun, but back ofice means league baseball team gave control to the fans by business. issuing ‘yes’ and ‘no’ placards. Although it was a All of these UGC systems draw from the basics publicity stunt, the Grandstand Managers’ Day of perfect marketing processes and the passionate involved thousands of fans directing the club to attention to detail required if user-generated systems a 5–3 win over Philadelphia Athletics. Now that’s are to work successfully. engagement. 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 F I g u R E 1.7 On the Air 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 MyFootball- Club.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 Schaum- ‘We’ve moved from “The Attention Economy burg Flyers from Chicago let fans co-manage the (push)” to “The Attraction Economy (pull)” to second half of the season by voting via the website on managerial moves such as setting up the roster. “The Participation Economy (share)”.’ It lopped, going from a 31–17 record in the irst Roberts (2010) 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 The race is on Cut through the clutter BBC Radio northern Ireland take UGC to a new level Amidst the hyper-competition and a vast sea of communications, whether outbound, inbound, online or ofline, the race is on to somehow break through Co-creation and user-generated content have been the clutter, engage with customers (and other stake- around for a long time, as is the case with radio holders) and ultimately nurture lifetime loyalty. Once show phone-ins, whereby the audience’s input and a real dialogue is established and is used to con- opinions are a key part of the programme. However, tinually improve and service the customers’ con- BBC Radio Northern Ireland took it to a new level tinually changing needs, a platform of loyalty begins a few years ago when they felt that the audience to emerge. This builds a wall against other competi- input was so funny that they should make an tors. In many ways, the irst organizations that get animated TV show from it. They even kept, with it right are likely to prevail and win in the longer permission, the callers’ actual voices and dubbed term as they strengthen customer relationships and them into the animation. Called On the Air by secure loyalty. FlickrPix, some of the series is still on YouTube. The social media revolution started quietly long ago. The race is on to win and keep customers Chapter 1 New Marketing Communications 23 before the competition does. Customers’ attention product placement (in other productions). Think has to be attracted and then engaged in meaningful, hard about what would make someone buy a brand, helpful, added-value ways that some of us would and then see if this reason can be translated into a never have even dreamt of 10 years ago. Marketers stunningly creative message. Test it and try it. have to add new ways to engage customers and move them up the ladder of engagement. Attracting attention and generating website trafic Open and integrate is dependent on being creative enough to catch the attention and then being relevant when using com- your new toolkit munications tools, including social media and the Trafic is also generated by the traditional collection more traditional web tools (‘tradigital tools’). 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 Be there, be relevant promotion, direct mail and the sales force. There are also the three 3D tools, which include packaging, and be creative point-of-sale (merchandising), and exhibitions and A brand needs to be wherever its customers are. Be conferences, and inally the 2Ws – your website and wherever customers might have a need. Find out the most potent of all communications tools, word what they really want and give it to them. Find out of mouth. Social media has catapulted the power of where customers go (ofline and online) and when word of mouth. All 11 tools are replicated online. 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 The creative age is here completely different environment (wherever the Creativity and marketing will help to break through target market is) and perhaps just when they need the clutter of noise and hyper-competition that is help (as they leave a venue or as they start a search). out there. As Kevin Roberts (2009), CEO Saatchi & Be where customers go online and ofline. There may Saatchi Worldwide, said, this is the dawning of a be ways of reaching them through collaborative new creative age in marketing. In fact, it is the partnerships with parallel non-competitive sup- dawning of a new age of creativity both inside and pliers both ofline and online. Field marketing or outside the whole organization – as witnessed by the slightly more elaborate experiential marketing the collaborative co-creation models already dis- partnerships may occur, eg a rugby book sold at the cussed. Even advertisements are going to have to be grounds of a rugby stadium, or new iPods being a lot more creative. User-generated long-form ads sold at a concert. And help customers tell their are here, and so is the one-second ad. As Eric friends about you. Schmidt, CEO Google, said: ‘Despite this need for Be relevant to their needs – if a brand gives cus- creativity in business, many organizations feel un- tomers useful, relevant information at just the right comfortable with acknowledging and unleashing time, it strengthens the brand relationship. Being the power of creativity’ Manyika (2008) Harvard creative always helps. But being relevant is even Business School professor John Kao (1997) summed more important, as customers only want and listen this up when he said ‘I know: In many business to whatever is relevant to their needs. Constant people’s lexicon, “creativity” is right up there with monitoring of their changing needs is critical. Whether “nice” in the mushy-word category. Such people it is at the lowest levels of interaction, ie product had better revise their lexicons.’ Look at the more ratings, reviewing products or creating user-generated successful companies out there: they nurture content, engagement helps to keep customer atten- creativity. It is not accidental. The importance of tion and to nurture stronger relationships. creativity is recognized, encouraged and nurtured. Be creative. Experiment with different media, Listen to what some of these organizations say: different messages, and live demonstrations in dif- ferent places, videoed on camera and posted to ●● ‘Either you’ll learn to acquire and cultivate YouTube. Use permanent media (buildings, walls [creative people] or you’ll be eaten alive’ and gates, or laser your logo on to the moon) and (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 Website – design, online value proposition (OVP), commercial offices 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 New Marketing Communications 25 ●● ‘My job is to listen to, search for, think of, going to be a winner? He said ‘yes’ and went on to and spread ideas, to expose people to good explain that, ‘if a company is not afraid to ask ques- ideas and role models’ (Jack Welch, former tions, if everyone asks questions from the CEO CEO, GE). down to the ofice boy, if they ask questions like ●● ‘The irst step in the creative process is “Why do we do it this way?” then this company “hiring the best of the best”. This is how will succeed’ (Ohmae, 1996). So the inquisitive mind HP maintains an environment that “crackles is an essential ingredient for future success. This with creativity and intellectual spirit”’ (Mary is echoed by Susan Greenield of the University Patterson, former Director of Corporate of Oxford when speaking at the Third European Engineering, Hewlett-Packard). Futurists Convention in Lucerne in 2007. She conirmed the need for creativity and the need to ●● ‘To make money in a disinlationary period challenge old dogma: ‘So creativity, this eureka takes real innovation and creativity at all connection (neuronal connection) that triggers a levels of the corporation’ (Michael Fradette, new insight in yourself and others, is all about forg- Manufacturing Consultant, Deloitte & ing connections and so providing environments that Touche). will foster a challenging of dogma, of old stale con- The reality is that creativity is hard work. And manag- nections, a forging of new ones that trigger even ing creativity is, as Kao (1997) says: more connections that give a meaning and an insight to both yourself and others’ (Greenield, 2007). 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. edison – a genius who combined It means inding an appropriate place for people to contend and collaborate – even if they don’t creativity with marketing particularly want to. It means scrounging from The United States’ greatest inventor, Thomas Edison, always-limited resources. It means controlling the was a creative genius, but it was not until he dis- uncontrollable, or at least unpredictable, process. covered some of the principles of marketing that he Creativity, for many, is a blood sport. found increased success. One of his irst inventions But, as Albert Einstein said, ‘Anyone who has never was, although much needed, a lop. In 1869, he cre- made a mistake has never tried anything new.’ ated and patented an electronic vote recorder, which tallied the votes in the Massachusetts state legisla- ture faster than the chamber’s old hand-tab system. ‘To Edison’s astonishment, it lopped. Edison had not Creativity will fuel growth in the future taken into account legislators’ habits. They don’t like to vote quickly and eficiently. They do like to ‘The search for value has led companies to seek lobby their fellow legislators as voting takes place. efficiency through: downsizing; rationalizing; Edison had a great idea, but he completely misunder- right-sizing approaches that eventually result in stood the needs of his customers’ (Caldicott, 2010). a diminishing level of return. But what will fuel He learnt from his failure the relationship between growth in the future? Growth will come through invention and marketing. Edison learnt that mar- mastering the skills of creativity and making keting and invention must be integrated. ‘Anything creativity actionable.’ that won’t sell, I don’t want to invent,’ he said. ‘Its John Kao, Harvard Business School sale is proof of utility, and utility is success.’ He real- ized he needed to put the customers’ needs irst and tailor his thinking accordingly, despite any tempta- tion to invent for invention’s sake. His change of Former President of McKinsey’s Japan and highly mindset led to tremendous success (Caldicott, 2010). respected author Kenichi Ohmae, in an interview Edison made market research a fundamental with the author, was asked if he could sense if a part of the creative process: company was going to be successful. Was there something he could smell or sense when he was in He literally went to homes and places of work an organization that suggested this company was and analyzed what people did in order to gain 26 Part 1 Communications Background and Theories global necessity for all young people – text messag- Creativity + marketing = success ing? Whoever could have imagined that one day people would walk around with record players or DVD players on their heads (headphones)? Whoever ‘Anything that won’t sell, I don’t want to invent,’ could have imagined a nation seemingly talking said Thomas Edison, best known for the light bulb. loudly to themselves (hands-free mobile phones)? He was a prolific inventor, registering an Here are some classic quotations that demonstrate extraordinary 1,093 US patents and 1,293 how not just customers but even experts in their international patents. The six industries he ield could not see the beneit of a signiicant inno- pioneered between 1873 and 1905 – and their vation that subsequently went on to become a offshoots – are estimated to be worth more than massive global success: $1 trillion today. He was one of the world’s first market researchers. ●● ‘This “telephone” has too many Caldicott (2010) shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us’ (Western Union, internal memo, 1876). insight to invent products that could help them do it better and faster. He looked irst for unmet ●● ‘The wireless music box has no imaginable needs and then applied science and creativity to commercial value. Who would pay for a ill them. The irst example of Edison’s success message sent to nobody in particular?’ using a ‘needs-irst’ approach to invention is (David Sarnoff’s associates in response to his one we seldom associate with him: Document urgings for investment in the radio in the duplication. Post-Civil War newspaper accounts of 1920s). the re-building of the South and the tremendous ●● ‘Who the hell wants to hear actors talk?’ demand it created for insurance policies led him to (Harry M. Warner, Warner Bros, 1927). think that the insurance business could use some eficiencies. Edison got permission from insurance ●● ‘TV will never be a serious competitor to agents to watch their clerks at work. He saw radio because people must sit and keep their that most of their day was spent hand-copying eyes glued on a screen. The average American documents for each party to the insurance sale family doesn’t have time for it’ (New York instead of selling insurance. Edison realized that if Times, 1939). he could invent something that would save both ●● ‘I think there is a world market for maybe the insurance clerks’ and agents’ time writing, they ive computers’ (Thomas Watson, Chairman could all make more money. of IBM, 1943). Caldicott (2010) ●● ‘There is no demand for guitar bands’ (Decca Records turning down the Beatles, But customers do not understand 1962). their own needs – particularly ●● ‘There is no reason for any individuals to innovations have a computer in their home’ (Ken Olsen, President, Chairman and Founder of Digital However valuable market research is, signiicant Equipment Corp, 1977). creative leaps can sometimes be too dificult for customers to grasp. Therefore negative customer Looking back on it, there are many innovations in feedback for discontinuous innovations (signiicant common use now, the need for which simply did not innovations) can sometimes be misleading. In some exist 5 or 10 years ago. This applies to both B2C cases, ‘Listening too much to customer input is a and B2B markets. ‘Customers want to know what recipe for a disaster’ (Christensen, 2003). ‘If I’d to do with their call centres, how to integrate them listened to my customers, I would have invented a with the internet, issues of security, what mobility faster horse,’ said Henry Ford. Whoever could have means, what sort of networks they should have... imagined that a device created for engineers to com- These business needs simply did not exist 10 years municate with each other would one day become a ago’ (Garvey, 2002). Chapter 1 New Marketing Communications 27 As organizations, and marketers in particular, with customers, and sizzle or create some magic embrace creative thinking, new solutions will around the brand by doing things that simply could emerge and contribute to continued success once not be done ofline). Three of these Ss will attract we learn to think ‘outside the box’. the ears of the inancial director and the CEO: sell, For organizations seeking to deine creativity save and sizzle. and inspire it, perhaps Susan Greenield’s (2007) ‘Sell’ means revenue, and any promise to boost deinition may help: revenues is taken seriously. ‘Save’ is of interest, and any proposal that offers to make 99 per cent savings It’s seeing one thing in terms of something else. will demand attention, as there is no other aspect of That eureka moment. You don’t have to be a brilliant novelist or painter or musician... it can business that can attain such massive savings as that be about some private matter. It can be about of well-designed, self-service websites. Some inan- economics. It can be while you are reading a novel, cial directors and CEOs will appreciate the impor- you suddenly make a connection that suddenly tance of brands on the balance sheet, in fact the gives you an insight that no one else has had. necessity to have them on the balance sheet if in Someone deined science as ‘seeing what everyone an acquisition or merger situation. Hence brands, else can see but thinking what no one else has and ‘sizzle’ that enhances a brand’s value, will be of thought’. renewed interest to the CEO and CFO. Doesn’t it feel great when you have that eureka However, the moment was missed by marketers, moment. My own view is that this could be what and it seems that websites became the responsibility we should be aiming for, because this gives you of other departments, eg IT, corporate PR and sales. both individuality and a sense of fulilment, and, The beneits were diluted and the cohesive market- incidentally, it is useful to society. ing argument lost. One other opportunity was missed also. As busi- nesses move from the linear value chain to the web- Enter the boardroom linked value network, boards have to ask themselves ‘What business are we in?’ Whilst the web created The missed opportunity a golden opportunity to re-evaluate brands (what Marketers can and should demonstrate to any added value they could give and ultimately what board of directors how marketing can create two they represent), the internet created a golden oppor- sources of sustainable competitive advantage by tunity to re-evaluate ‘What business are we in?’ As creating two assets – one on the balance sheet, the businesses outsourced chunks of the value chain, other off the balance sheet. Brands appear as an the business effectively became a ‘box of contracts’. asset on the balance sheet, and a well-maintained, integrated customer database does not appear as an asset on the balance sheet. The opportunity knocks twice A well-integrated website helps to grow a data- More than 10 years later, the opportunity for mar- base of customers and prospects, as well as boosting keters to get back in the boardroom appears as so- a brand’s value as more and more relevant ‘services’ cial media changes all the business models and sweep and ‘sizzle’ are added to the customer experience. aside the old thinking about marketing just being Well-managed databases create a mini-monopoly of the ‘colouring department’. The biggest change since customers and prospects, and can be used with a the industrial revolution falls into the marketer’s variety of channels to communicate intimately with court. As all marketers are becoming experts in customers (e-mail, snail mail, telephone calls and social media, it follows that this expertise is required personal visits). Although the value of a database in the boardroom as businesses revamp their organ- can be quantiied by estimating lifetime values, it izational cultures and change their modus operandi. still does not appear on the balance sheet. A McKinsey survey (2009) supported this by Marketers missed their chance to enter the reporting that marketing and sales and IT derive boardroom when the web irst emerged in the early most beneits from social media (as opposed to pro- 1990s. The internet, and websites in particular, pre- curement and inance). In their words, ‘Social media sented a whole new way for businesses to exploit engages customers, deepens relations, generates the 5Ss (sell more, serve better, save money, speak extra sales, faster time to market, better NPD [new 28 Part 1 Communications Background and Theories product development] and lowers the cost of doing Was it always like this? Then I thought about online business.’ banking and also about lovely shiny ATMs that Social media and the opportunity it gives organ- cannot make your day any worse, whilst standing in izations to create sustainable competitive advan- the rain, trying to block prying eyes and hidden tages cannot be left to IT departments or production cameras from stealing your pin numbers, whilst hop- departments, as these by deinition are production ing the muggers around the corner have not spotted orientated. Social media is driven by the market- you yet. Fear has increased in many people’s lives. place and is therefore the centre of a marketing- But that’s out there on the street. What about driven business. in the comfort of your own home? I received two So social media, the ladder of engagement, letters recently – both from high street banks. integrated marketing and creativity offer marketers One told me that my account had received a another golden opportunity to get back into the certain sum of money, it had been credited to me at boardroom and inluence the strategic directions a certain exchange rate and I had been charged a of a business in such a way that the business be- certain amount of commission charges. Now I never comes a truly market-orientated business, primed accept money unless I know who is giving it to me and ready to satisfy customers and enjoy continued and why. The letter didn’t tell me, so I had to ind success. out. I made a call, met a robot, queued, gave an account number, answered a string of security ques- tions and eventually, after eight minutes, got the Nightmare on Banking Street – answer. My whole point is: Why couldn’t the system generate this information for me? Didn’t the author’s own experience anyone think that customers might like to know I hadn’t physically visited a bank in years. However, where money is coming from? Did they test it? when I was doing a favour for a friend, I walked I opened the statement from the second bank into a well-known high street branch in London on and it told me some good news. I had overpaid them a Saturday afternoon to be greeted almost immedi- and was now in credit to the tune of £12. I looked ately by a friendly-faced customer service clerk, at the letter. It was a ‘notice of variation’. What is a who pleasantly informed me that the queue in front notice of variation? Now, I know this is anecdotal of me would take 40 minutes. I thought I had evidence, but is this good customer service? Is this stepped into a time warp. What amazed me was good marketing? Is it getting better or worse? Is that other customers seemed prepared to queue. there an opportunity to be outstandingly good? key points from Chapter 1 ●● This is the beginning of a new era in marketing ●● The ladder of engagement can create amidst hyper-competition. 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) Beck, S (2010) Make your product work for your Turning blogs and user-generated content into brand: Why what you’re selling has become your search engine results, Marketing Vox and primary advertising channel, Financial Times, 4 May Nielsen BuzzMetrics SES Magazine, Bird, Drayton (2008) Commonsense Direct and 8 June Digital Marketing, 5th edn, Kogan Page, London Chapter 1 New Marketing Communications 29 Brogan, C (2009) The serendipity engine, Manyika, J (2008) Google’s view on the future of www.delicious.com/chrisbrogan/casestudy business: An interview with CEO Eric Schmidt, Caldicott, S (2010) Invention and marketing: Joined The McKinsey Quarterly, September at the hip, Media Week, 28 April McGovern, G (2010) Time is (still) money: Increasing Chaffey, D and Smith, P R (2008) eMarketing employee productivity (Part 1), 9 May, eXcellence, 3rd edn, Butterworth-Heinemann, www.gerrymcgovern.com Oxford McKinsey (2009) How companies are beneiting from Charan, R and Bossidy, L (2002) Execution: The Web 2.0: McKinsey Global Survey Results, discipline of getting things done, Crown Business, National Customer Satisfaction Scores, New York Technology Ofice, McKinsey Quarterly, Christensen, C (2003) The Innovator’s Dilemma, September Harper Business Essentials, New York O’Dea, A (2008) Innovation, Marketing Age, Earls, M (2002) Welcome to the Creative Age: September/October Bananas, business and the death of marketing, Ohmae, K (1996) Video interview with P R Smith, Wiley, Chichester The Marketing CDs, P R Smith Fletcher, W (2010) author, lecturer and former Qualman, E (2009) Statistics show social media is chairman of the Royal Institution in conversation bigger than you think, Socialnomics [Online] with PR Smith http://socialnomics.net/2009/08/11/statistics- Garvey, D (2002) BT Ignite, Marketing Business, March show-social-media-is-bigger-than-you-think/ Grande, C (2007) Cannes diary: Six of the best by Roberts, K (2009) in conversation with PR Smith, Carlos Grande, Financial Times, 24 June The Worshipful Company of Marketors, The Greenield, S (2007) The future of brain – the brain of Great Hall at Barts, St Bartholomew’s Great Hall, the future, Third European Futurists Convention, 17 November Lucerne Roberts, K (2010) Video interview with P R Smith, Hall, E (2010) In Greece, Kraft scores a hit for Lacta www.prsmith.org chocolate with crowdsourced ilm, Advertising Rothery, G (2008) The matchmaker, Marketing Age, Age, 24 March November/December Hoffman, D (2009) Managing beyond Web 2.0, Ryan, D and Jones, C (2009) Understanding Digital McKinsey Quarterly, July Marketing, Kogan Page, London Jenkinson, A (2004) The bigger picture, Marketing Safco, L and Brake, D (2009) The Social Media Bible, Business, March Wiley, Hoboken, NJ Kao, J (1997) Jamming: The art and discipline of Schlack, W (2008) Open for innovation, Business & business creativity, HarperCollins, New York Leadership, [Online] http://www.businessand Kennedy, J (2009) App-fab, Marketing Age, leadership.com/marketing/item/11417-open- November for-innovation Levine, R et al (2000) The Cluetrain Manifesto, Scott, D (2009) The New Rules of Marketing and PR, FT.com, London Wiley, Hoboken, NJ Lilley, A (2007) Why Web 2.0 adds up to a revolution WARC (2007) Unilever changes online focus, for our industry, Media Guardian, 1 October 25 June Further information Advertising Association Chartered Institute of Marketing 7th Floor North Moor Hall Artillery House Cookham 11–19 Artillery Row Maidenhead London SW1P 1RT Berkshire SL6 9QH Tel: +44 (0)20 7340 1100 Tel: +44 (0)1628 427120 www.adassoc.org.uk Fax: +44 (0)1628 427499 www.cim.co.uk 30 Part 1 Communications Background and Theories CIPR International Organization for Standardization (ISO) 52–53 Russell Square 1 ch de la Voie-Creuse London WC1B 4HP Case postale 56 CH-1211 Tel: +44 (0)20 7631 6900 Geneva 20 www.cipr.co.uk Switzerland Tel: +41 22 749 01 11 Communications Advertising and Marketing Fax: +41 22 733 34 30 Education Foundation Limited (CAM Foundation) www.iso.org Moor Hall Cookham Marketing Society Maidenhead 1 Park Road Berkshire SL6 9QH Teddington Tel: +44 (0)1628 427120 Middlesex TW11 0AR Fax: +44 (0)1628 427158 Tel: +44 (0)20 8973 1700 www.camfoundation.com Fax: +44 (0)20 8973 1701 www.marketing-society.org.uk Incorporated Society of British Advertisers ISBA Langham House Public Relations Consultants Association 1b Portland Place Willow House London W1B 1PN Willow Place Tel: +44 (0)20 7291 9020 London SW1P 1JH Fax: +44 (0)20 7291 9030 Tel: +44 (0)20 7233 6026 www.isba.org.uk Fax: +44 (0)20 7828 4797 www.prca.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 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 32 Concept generation and 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 34 Brand expansion/strategy 54 Business disadvantages of weak Brand summary challenges brands 35 ahead 55 Brand self-destruction 36 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 brand building 56 appeals 38 Brands – the bridge between The emotional connection 38 marketing, inance and The brand components 38 the boardroom 57 The branding process 41 Conclusion 58 Research 42 references and further reading 58 The brief 44 32 Part 1 Communications Background and Theories customers pay almost 1,000 per cent price premiums? Introduction to branding How do brands become the most valuable asset in a company, which determine the whole inancial value What is a brand? of a company and drive corporate takeovers? How do brands create sustainable competitive advantage? A brand is an intangible, legally protectable, valuable What makes people all around the world hand over asset. It is how a company or product is perceived their hard-earned cash for the same brand whether by customers (or the target audience). It is the image, in Taiwan or Tokyo, Kashmir or Carlisle? Today, associations and inherent value customers put on the power of branding is such that brands defend your product and services. Brands include intangible organizations from competitors, nurture customer attributes and values. For a brand to be successful, relationships, and boost sales, proits and balance its components have to be coherent, appropriate, sheet assets. 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 Company beneits from branding is just brand identity). It is the complete customer Brands create sustainable competitive advantage experience (the integrated sum of all the marketing from hyper-competition, boost relationships, boost mix and the communications mix from products to sales, boost proits and boost balance sheets. Why customer service, from packaging to advertising, would any managers not nurture their brand very from rumour to discussion). The last two compon- carefully? The truth is that many do not (see ‘The ents are less controllable, from a brand management customer service time bomb’, Chapter 1). However, perspective, but they are nevertheless inluence- consider these individual beneits of nurturing strong able, as good brand management participates brands. wholeheartedly in social media also. So a brand is everything a customer (or stakeholder) sees, feels and experiences about a product or service (or organiza- Brands create sustainable tion). A brand is the ‘magical’ difference between competitive advantage many competing products and services. Brands will be, for many organizations, the critical success factor in the hyper-competitive 21st-century marketplace. Strong brands create sustainable A (favourable) consensus of subjectivity competitive advantage. For the irst time in the history of business, the most powerful barriers to ‘Because brand reputations exist only in the minds competition are no longer controlled by companies of their observers – and all observers are but by customers. The old barriers are falling. different… the strongest brands are those that Factories and even access to inance are not as enjoy what’s been called “a (favourable) consensus powerful barriers as the barriers erected inside of subjectivity”. And that’s when their brand customers’ minds. Only a few chosen winners are managers, in the widest sense of that phrase, allowed inside. These are the successful brands with should be most warmly congratulated. They didn’t which customers have relationships. Successful brands build differentiators. build those brands themselves; but they fed such The CEO of one of the world’s greatest brands, enticing titbits to their audience that their audience Coca-Cola, reputedly once said: ‘They can take gratefully did the rest.’ everything we have, our machinery, our plants, our Millward Brown Optimor BrandZ survey (2010) 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 The power of branding trusted top brands than trust the church. In fact How do brands become so powerful that they control Heinz and Nescafé are trusted more than the church, economies, determine corporate takeovers, or make the police and Members of Parliament (Croft [1998], Chapter 2 Branding 33 in Reynolds, Cuthbertson and Bell, 2004). How patents and know-how). That’s a massive $4.5 trillion. come British people give their credit card details One-third of global wealth is accounted for by brands over the internet to an unknown, invisible American (Clifton, 2004). on the other side of the Atlantic? How come Americans pour down their throats water from Brands boost relationships someone they don’t know from an unknown source in France? Brand trust in Amazon and Evian is Brands create (mostly unconscious) relationships strong. 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. Brands control people and They represent something. At the heart of any suc- brands control economies cessful brand proposition there is a human dimen- sion. That’s why brands have personality, values ‘What gives brands their power to influence – if not and associations. Brands used to be just a seal of quite control – people’s purchasing decisions and quality. Today brands have emotional connections thus their power to influence – if not quite control that differentiate them. Brands provide reassurance to customers and differentiation from competitors. – modern economies?’ Brands save customers time by being easily recog- Winston Fletcher (2010) nizable and providing a reassuring sense of order in an increasingly destabilized and chaotic world. Brands inspire loyalty, trust and continuity. Brands Brands differentiate a company’s products or services are built upon a platform of reliable quality. As and help them to stand out from a crowd. Brands in any relationship, a brand’s promise must never are often the primary source of competitive advan- be broken. tage and a company’s most valuable strategic asset. Brands are even used to pigeonhole people: ‘He All markets tend towards commodities (as patents drives a Porsche and drinks Pimm’s.’ A person’s run out and the competition catches up and copies entire life can be effectively categorized by his or others). Brands protect and defend a business from her use of brands. Some brands are even deinitive, competition, as they differentiate the product by eg ‘He is the Rolls-Royce of hosts.’ adding perceived value. This creates barriers to entry for potential new competitors that are con- stantly tempted to enter the new borderless and ‘Coca-Cola sells more because our love of category-less market space. a particular brand is as important as our love Some years ago it was suggested that two-thirds of a flavour.’ of the stock market capitalization of US companies Ronay (2004) was attributable to intellectual assets (brands, Chinese president visits a brand Brands boost sales before visiting the president Brands help customers by making their purchasing process easier. Brands are easier to recognize and to When visiting the United States, President Hu associate with quality; it is easier to understand Jintao of China chose Microsoft’s Bill Gates as his their beneits, and they are less risky than unknown first visit, followed the next day by a visit to US commodities. Brands encourage repeat purchases President Bush. The International Herald Tribune and brand relationships, which in turn boost sales. headline read ‘Chinese president’s itinerary for U.S. Strong brands are easily recognizable and build visit: Gates first, Bush later’. single-minded awareness, ensuring they have a Yeong and Yu (2006) greater chance of being included in the customer’s ‘considered set’ of possible purchases or, better still, 34 Part 1 Communications Background and Theories ‘preferred purchases’. Brands build relationships There are now seven Chinese brands in the world’s and inspire loyalty, trust and most importantly top 100 brands. The best known in the West is continuity, providing a reassuring sense of order in probably Baidu, the Chinese search engine. Samsung an increasingly chaotic, insecure and fast-changing and Baidu are the fastest-growing brands (Millward world. Established brands also provide a platform Brown Optimor, 2010). from which to launch other products under the same There is no doubt that brands add value to the brand names, thereby increasing share of wallet. balance sheet, grow the value of the business (market capitalization) and therefore boost the sale price of a business if looking to exit. Brands boost profits New accounting rules worldwide require com- Brands, rightly or wrongly, can command premium panies to value their intangible assets – such as brands prices, which results in increased proits, which con- – on their balance sheets when they are acquired sequently allows more money to be spent on better (IAS 38). When these assets are judged to have an (relevant and tested) communications with clearer indeinite life, which is often the case with a brand, messages – which continually strengthens the brand. they will be subject to annual review for impair- For example, in the same store, Coca-Cola charges ment. This means that the difference between the a price premium of almost 1,000 per cent with its price paid and the current value will be calculated. 2-litre bottle priced at £1.25 (compared to Asda’s Any resulting write-downs can often have major 2-litre bottle at £0.15). Incidentally, Coca-Cola implications as seen in 2002 when AOL Time knows the long-term power of its brand and invests Warner (formerly known as) had to write off $54 in it accordingly (eg investing $65 million in 12 years’ billion for the value lost when AOL acquired Olympic sponsorship until 2012). Proits are also Time Warner at the end of the dotcom boom in boosted by repeat purchase customers, who generate 2000. 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 You have the factory and staf; increase bargaining power with the trade. I’ll have the brand Brands boost balance sheets ‘If we split the business tomorrow, you kept all the factories and staff and I kept the brand name, As well as affecting politics and economics, brands within two years I would be a multimillionaire and affect company valuations. Brands can indicate future proit trends and assist decisions and investor you would be bankrupt.’ relations. Today, brands are recognized as assets, CEO, Quaker Foods 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 Customers beneit from brands irst $100 billion brand – Google. So we know how brands help businesses, but how do they help customers? What do they do for customers? Google $114 billion Brands save customers time, reduce their perceived IBM $87 billion risk and fulil their aspirations. Now consider each Apple $83 billion beneit. Microsoft $76 billion Coca-Cola $70 billion McDonald’s $66 billion Brands save customers time Marlboro $57 billion Brands help customers’ busy lives by saving them China Mobile $53 billion time through helping them to ind goods and services GE $45 billion quickly. Imagine trying to buy books or DVDs on Vodafone $44 billion the internet if you couldn’t remember the name of Chapter 2 Branding 35 Amazon or CD WOW. Or it could be beans in the Consider the magic marketing formula: identify supermarket or mortgages on the high street. Unilever’s needs; relect them; deliver/satisfy them. Remember, chairman, Niall FitzGerald, calls a brand ‘a store- brands need to continually do this. Think about house of trust which matters more and more as what needs Coca-Cola advertising relects. It relects choices multiply’ and we face what David Ogilvy people’s own aspirations, so that when they buy once called ‘the misery of choice’. People want to a can or a case of Coca-Cola they actually buy a simplify their lives, simplify their decision making slice of their own aspirations (and a product whose and get on with the rest of their busy lives. promise of refreshing cola is consistently delivered anywhere in the world). Brands reduce perceived risk A strong brand is an implicit guarantee or promise Business disadvantages of consistent quality, image and style. A brand is built on trust. Customers trust the promise made of weak brands in the advertisement and on the pack. Customers If a product or service does not have a single strong form relationships with brands. Brands, in turn, unifying brand, its presence becomes diluted, seen provide a reassuring sense of order. Brands pro- differently by different people. A diluted brand is vide a safe and trusted option. Would you buy from less recognizable, therefore less known, therefore someone you didn’t know? Customers would less trusted and ultimately a more risky purchase. prefer to reduce the amount of time and energy in- Without a strong uniied brand, products and volved in decision making. That’s one of the reasons services become buried in a busy world of other, why brand extensions are valuable. The brand is stronger brands. If a product or service has no an implicit guarantee or promise. Customers trust real strong brand, it may be symptomatic that the promise made in the advertisement and on the the management team are themselves not sure of pack. what the brand really is, what it is really good at, what distinguishes it, what needs it meets and what Brands satisfy aspirations emotions it connects with. Without a strong brand Brands give status and recognition. Brands relect most of the marketing efforts fragment, splinter and aspirations, images and associations that are care- disappear. fully 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 no brand, no cattle Olins. Some brands unconsciously create a sense of belonging from their cultish quality. In a way, The term ‘brand’ comes from the old Norse verb buying and consuming brands actually deines who brandr, which meant to burn, which eventually we are. Brands signal our afiliations. ‘You are what became a noun and adjective in medieval English. you shop.’ Brands relect aspirations and act as a The noun brand meant flame, fire or torch, and badge of self-image or desired self-image. 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. Do brands ill the vacuum left by the decline of organized religion? ‘In the developed world, they [brands] are seen by So strong brands beat weak brands. But, despite some to have expanded into the vacuum left by the creating protection against competition and decline of organized religion.’ boosting relationships, sales, proits and balance Economist (2001) 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? Angry customers Read on. Research shows that today’s customers are less tol- erant of bad service, with 80 per cent of consumers saying they will never go back to an organization Brand self-destruction after a bad customer experience, up from 68 per The brand relationship is always fragile. Constant cent in 2006 (Harris Interactive, 2006). Add in sloppy service or a single moment of disaster, such customers who talk back and who talk to each as contamination or a misplaced word (eg Ratners; other via Web 2.0 social media facilities. The goal see ‘Uncontrollable publicity – any publicity is good posts have moved for many marketers. Social net- publicity?’, Chapter 14), can destroy the customer’s work sites facilitate customer discussions about all trust. And customers are changing. They’re becom- sorts of brand-related content, eg Coca-Cola never ing more demanding. asked for rockets, but it just happened that cus- Not only do they talk back, but they now shout tomers discovered that mixing Coke and Mentos back and even bite back if brands break their promise. mints caused an explosive reaction and they started Today’s customers have unlocked ‘brand control’ posting videos of this phenomenon. Customers talk from marketers and set up their own brand discus- with text and video, some because they want to sions. Although they are still time pressed and infor- share opinions, others because they are hungry for mation fatigued, they have found a new energy, fame and others because they want to meet new fuelled by Web 2.0, which allows them to fulil their friends or, simply, transcend their everyday lives. age-old desire to communicate about what interests or concerns them. Customers now have a platform Unlocking control with Web 2.0 to raise their voices, and some of them can’t stop Customers have unlocked ‘control’ from companies, shouting! with Web 2.0 facilitating user-generated content Customers have been abused by businesses that (UGC). Not surprisingly, UGC is not totally con- dump sloppy service on them, again and again. trollable. Online social networks are here to stay. Surveys reveal that marketers have, in fact, got They will continue to grow in line with the very worse at marketing over the last 10 years. And human need for social contact. Customers have customers are angry. They are also impatient. The been mobilized by blogs, social network sites and clock is ticking. We are sitting on a customer service invitations to create their own UGC, whether com- time bomb. Sloppy marketing and self-destructing ments and feedback or conversations, joint research brands go hand in hand. or creating advertisements, services or even pro- ducts. Customers are no longer slovenly couch Lousy marketing potatoes, and some are active co-creators who pro- Surprisingly, we’ve got worse at marketing. We are duce discussions, advertisements or even products: in an era of declining marketing skills, measured by hence the term ‘prosumer’ (see ‘The ladder of engage- falling customer satisfaction scores in market after ment’, Chapter 1). market. Meanwhile automated customer service We are possibly on the cusp of a customer revolu- telephone queuing systems and unworkable websites tion bringing an end to accepting sloppy service and, continue to insult and frustrate customers. Robotic also, an end to the mass dumbed-down customer. answer machines with self-service menus dump all Online digital markets facilitate obscure niche mar- the work on the information-fatigued, time-poor kets as easily as mass markets. In the online world, customer. Add websites that don’t work, with dead the ‘Long Tail’ (Anderson 2006) suggests it can be ends, error messages, complicated navigation and, if as proitable to serve 100 customers spread across you have the patience to struggle through all of that, the world with 100 different digital products as it is electronic shopping carts that crash. The customer to serve 100 local customers with one standardized service time bomb is ticking (see Chapter 1 for product. This opens a gate to discrete consumer more). Some angry customers publicize their feel- taste, which effectively moves markets away from ings on the many blogs and hate sites attacking the mass market and its tyranny of the lowest brands. These can fuel an exponential spreading of dumbed-down denominator. Instead of a handful negative word of mouth (or ‘word of mouse’). of powerful marketers recommending, and often Chapter 2 Branding 37 determining, what is in and what is out, there are for a list of names that damage the brand when used now mobilized niche customers, alerting their own in some international markets. networks about their own niche preferences. The internet’s new business dynamics Death of the dumbed-down customer? The internet, and broadband in particular, has changed business dynamics. It has created a level ‘For too long we’ve been suffering the tyranny of playing ield for the smaller niche brands to lowest-common-denominator fare, subjected to compete with the established global players. Small brain-dead summer blockbusters and manufactured brands have access to bigger, global markets and pop. Many of our assumptions about popular taste can communicate directly with customers across are actually artifacts of poor supply-and-demand the world in new and more meaningful ways – ways matching – a market response to inefficient never dreamt of 10 years ago. distribution.’ Power will be prised away from those major Anderson (2006) 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 Global niches special price from a different brand?’ Here, it is the Although spread across the world, customers with database holder that knows who drinks what beer, similar interests can communicate and share thoughts when and where, as it records the last beer’s bar through images, audio, video and text anywhere in code when the beer is taken out of the fridge. the world. This means that clusters of customers with The key to accessing the customers’ databases similar tastes and interests are connecting with each embedded in fridges, microwaves, cars, phones and other to form new global niches and segments. Global PDAs is not the hardware but the intelligence (or markets are here, eg Manchester United Football software system) to know exactly when customers Club have an estimated 70 million fans around might like to replace something. The invasion of the world, and Al Jazeera’s English-language TV the infomediary starts here. news service has 100 million people in its audience So marketers who ignore new trends and real cus- worldwide. As media follow markets, media con- tomer needs and, worse still, deliver sloppy service are sumption may go global; therefore marketers must simply pressing a self-destruct button that damages remember that brands with international ambitions and ultimately destroys a very valuable brand. must have a consistent global image – production Before exploring the right way to nurture a brand should be international in mind, and content rights (ie the branding process), consider exactly what a should be global. True brand masters also ‘think brand is and what its component parts are. 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 Brand components social networks is an increasingly important channel of communication. But, as Universal McCann (2007) suggests, ‘when using these channels it is fundamental What exactly is a brand? that brands and media organizations think global’. A brand is far more than just a name, term, design Multiple local and conlicting brand identities or symbol that identiies and distinguishes a product fragment the brand. In addition, localized brand or service from that of other competitors. A brand names can often exclude brands from international is still a badge of origin, a promise of performance sales. and a point of differentiation. Today, a brand is a Some brand names restrict international sales holistic experience that stretches beyond the physical or global brand ambitions. See Chapter 9, page 214 and into the psychological. It is the sum of the 38 Part 1 Communications Background and Theories real product or service experience and the per- evoked set (or consideration set), to preference, at- ceived values, images, associations and promises tachment, advocacy, to fanaticism.’ Some customers made through marketing communications. are really attached to their brands and simply will ‘Brand’ is both a verb and a noun. It is a verb, as it not buy anything else. 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 The emotional connection noun, as it is an asset on the balance sheet and some- Once upon a time brands used to be all about trust thing people buy. Some commentators deine brands and a seal of quality. Today quality is taken for granted. as simply the difference between a bottle of sugared, Now brands ight for an emotional connection as a lavoured, izzy water and a bottle of Coca-Cola. 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 ‘Harley-Davidson does not sell motorcycles. responsible, environmentally friendly, an animal Starbucks do not sell coffee. Club Med does not tester, politically neutral, charitable, or good for its sell vacations. And Guinness does not sell beer. community? The founders of some of the world’s Think about it.’ strongest brands, like Guinness, Cadbury and Boots, Peters (2003) 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 A brand’s rational and responsibility. emotional appeals A brand is a cluster of rational or functional and emotional aspects that match customers’ rational There’s never been so much and emotional needs. Strong brands are designed to emotion in business trigger speciic emotional responses in the minds of customers. Nike promises ‘personal achievement’, ‘What will happen is based on emotional drives. while Coca-Cola promises ‘carefree fun’. What we buy That’s why you can’t predict the future. If people says more about a person than he or she might want worked on pure economic logic, I could predict to admit. It reveals our inner, often unconscious the future, but I can’t.’ desires and aspirations. If the brand gets it right Sir John Browne, BP (in Jones, 2001) (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. The brand components include brand equity, brand Brands, therefore, have both rational and emo- identity, brand positioning, brand promise, brand tional beneits, eg Red Bull’s physical (rational) bene- personality, brand values, brand association and, it is that it keeps you awake (physical stimulation), last but not least, the customer experience. They and its emotional beneit is that you feel you can do must all integrate with each other. Here is an explan- more (feel stimulated). Natural food drinks’ func- ation of each component. tional 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 brand components the emotional beneit is ‘a great start to the day’. As a brand develops, it should elicit an emotional Brand equity connection from customers. Brand equity is the total awareness and perceived Some authors, like Kapferer (2008), see strong value of the brand in the mind of customers. Badly brands as a deeply held belief or ‘an attitude knitted managed brands can result in negative brand equity. into consumers’ hearts. This attitude goes from Brand equity components include the brand identity emotional resonance to liking, to belonging to the (brand name, symbols, jingles, colours, associations Chapter 2 Branding 39 and any sensory features such as unique smells or Brand personality tactile experiences) and reputation. Brand aware- People have relationships with brands just as they ness, brand preferences and brand loyalty are also do with people. That’s why marketers deine the part of the brand equity. Above all, actual brand brand personality carefully. Some brands have experiences contribute to brand equity. subtle, and often unconscious, relationships with customers. A brand’s personality has those human Brand essence personality traits. What kind of person would the Brand essence is the brand’s soul and spiritual centre, brand be if it were human? Think of brands as which draws on its core value(s). It is the brand’s actual people. How would the brand talk, dress and mission statement (how it will help the world) that walk? What kind of clothes would it wear? What motivates customers (and employees). The brand kind of car would it drive? What kind of parties essence is the primary functional and emotional would it go to? For example, the Marlboro Cowboy beneits, eg Apple Computer’s essence might be ‘artful and the Singapore Girl have very different but well- technology’, while Amazon’s might be ‘unparalleled deined personalities. 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 ‘Hello Gorgeous’ they make. It starts with what the brand excels at and then connects to an important cultural truth or trend, Virgin’s website greets you with ‘Hello Gorgeous’. eg Apple: the world would be a better place if people This is part of the whole brand experience and is had the technology to unleash their potential. consistent with the brand values and slightly naughty brand personality. Brand experience Brand experience is what the customers feel or experi- ence when actually consuming a product or service. This includes all touchpoints of the brand (see below). Brand positioning Somehow this seems to be forgotten by many com- Brand positioning is how the brand is speciically panies. The actual experience customers enjoy, perceived by customers in the marketplace vis-à-vis or suffer, directly affects the brand image. Brand the competition, using only two (or sometimes a moments are all those moments of contact between maximum of three) criteria. Brand positioning is all the brand and the customer. This includes the web- about perception – how the brand is to be seen, or site, e-mail responses, telephone responses, handling perceived, by customers using just one or two key enquiries, the actual consumption of the product or variables. For example, a certain drink could be posi- service, and handling complaints and after-sales, as tioned as a young sick person’s drink or a healthy well as all the marketing communications contacts adult’s drink. A positioning statement identiies the with the customer. These are critical brand moments. best space for a brand to be positioned in the minds of customers. As markets change (customers’ atti- tudes and needs change) so too brands change to Brand identity meet customer need. Positioning studies identify Brand identity is part of brand equity. Identity is how what is important to customers, where competitors the brand looks and is sometimes called the ‘visual are positioned (or what they are seen as by custom- narrative’, ie logo, colours and graphics. Brand image, ers) and if there are any gaps for a brand to ill on the other hand, is perception, ie how consumers or take over. This is brand strategy and absolutely see the brand based on identity plus all other com- critical to success. munications, discussions and experiences. Identity is reality. Image is perception. Identity precedes image. Choosing a positioning Identity helps customers to remember a brand, re- cognize it and eventually build associations with 1 Is it important to our target customers the brand values, personality and promise promoted (will it drive their buying behaviour)? through all communications tools. 2 Is it distinctive and speciic? 40 Part 1 Communications Background and Theories 3 Is it sustainable or can the competition of personal best, of being part of a community of copy it? athletes. The brand allows people to reconnect with 4 Can the brand deliver it? 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 ‘Do not relax until you have identified the a premium-priced carbonated mineral water with irreducible core of a brand – what drives its unique packaging, etc. It is quite product related connection with consumers. This will mean getting as opposed to consumer beneit related. Another inside consumers’ heads, and understanding brand of water might be the healthiest water for deep-seated motivations and thought processes. your body. The actual proposition lows from the Braun (2004) positioning. Brand role What role does this brand play in target customer Sensory branding may become more of the brand lives? The brand role is an extension of brand per- experience, as trademark regulations in almost all sonality or lifestyle, or as a social facilitator. Where countries are accepting applications for registering does it it in the life of the customer? Is the brand components of the brand that incorporate all ive a champion, a chum, a comforter, a confessor, a senses. Lindstrom (2005) reported that: conscience, an enabler, an expert, a friend, a guide, decades ago, Texas developed the Texas touch, a guru, etc? For example, Red Bull might be a ‘port- albeit on their calculators. Texas was one of able comforter for tired people’ or Ryanair possibly the irst companies to actually trademark the enables people to access Europe. speciic ‘clicks’ – the feel of the number pad on their calculators. The interesting fact is that users Brand values of the product may not recognize Texas’s logo, Brand values are not necessarily seen, as they are but they still recognize the ‘touch’. Singapore Airlines currently has 9 patents including a patent declared internally. Imagine the brand as a person. on the Stephan Florida Smell – the characteristic What does your brand believe in? What does it ‘Singapore Airline smell’ of the hot towels served stand for. What standards does it attain? How onboard. Kellogg’s invested in the power of should it behave? Brand values are a belief system auditory stimulus, testing the crunching of or a way of working and communicating. Mose cereals in a Danish sound lab to upgrade their (2003) asks: product’s ‘sound quality’. We all recognize Which values are so inherent in your company Intel’s jingle even in other brands’ that, if they disappeared, your company would advertisements. cease to exist as it is? Thousands of companies Brand touchpoints are sometimes called ‘brand disappear every year. So why has your company moments’ or ‘customer touchpoints’. Touchpoints survived? Why are investors still investing in are anywhere the brand touches the customer, your company? Why do your customers still eg packaging, advertisements, websites, telephonists, buy your product? Why do people come to work sponsorship, events, etc. While customers are waiting for your company? Why do you still work for your company? These questions can help determine on the phone, what brand experience do they ex- your company’s true core values. perience? 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 Brand vision the relevant attributes that distinguish the brand Brand vision is what the brand should be. In Virgin’s and the touchpoints that can deliver these (in order case it might be to provide a service that is ‘the of importance). This requires input from everyone people’s champion and which shakes up the status – from CEO, MD, marketing, operations and sales quo’. In Nike’s case the vision is one of achievement, teams to advertising people and webmasters. Chapter 2 Branding 41 One of the ultimate touchpoints for a brand is here are the four main steps in the process: brief, experiential marketing – traditionally live events concept generation, concept development and roll- ofline where customers get to interact with the out/delivery. Figure 2.1 shows the process required brand in a new and immersive environment. 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 ‘Great marketers do not sell products. selected and developed, and inally one is rolled out They evoke emotion.’ as the new brand. Scott Farrell (2008) What’s missing in this process? Research is miss- ing. 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 F I g u R E 2 . 2 The brand development and longer-lasting brands with their customers. process including research 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, Research 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 updat- BRIEF ing 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 Research 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 CONCEPT brand new brand or maintaining an existing brand, GENERATION F I g u R E 2 .1 Research The brand development process CONCEPT BRIEF DEVELOPMENT CONCEPT Research GENERATION CONCEPT ROLL OUT/DELIVERY DEVELOPMENT ROLL OUT/ Research DELIVERY 42 Part 1 Communications Background and Theories F I g u R E 2 .3 The complete brand development process Identify long-term customers, their needs (including aspects of a brand that Research 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 BRIEF highlighting target markets, brand personality, positioning, values, etc. More market research to identify ideal brand personality, values and promise Research – sometimes carried out by the agency or design team. CONCEPT Generate several creative ideas or concepts. GENERATION Concept research, eg focus groups to discuss initial concepts, identify Research the best concepts and identify other questions or issues for further research. CONCEPT Take the chosen concept and develop it into finished artwork. DEVELOPMENT Final concept testing, eg hall tests and test market – often easier to do Research with advertising concepts than brand concepts. ROLL OUT/ The biggest cost of any brand development is its establishment on all DELIVERY stationery, buildings, cars, etc. Staff buy-in, training and motivation. Measure and improve: tracking studies (eg independent brand popularity Research rankings or studies). Measure staff performance and customer satisfaction. Research ●● identify long-term proitable customers; ●● develop a deep understanding of the customer; In order to explore the brand opportunity, research ●● identify aspects of a brand that drive is used at the early stage of a brand’s development behaviour; (way before any brand names, logos and colours). Target markets are analysed, buyer behaviour ●● identify the emotions that drive brand drivers explored, brand personalities deined and behaviour; the most cost-effective brand moments identiied. ●● identify personality, values, associations and Successful brands use a platform of information the promise; to help to nurture the brand. Initial exploratory ●● identify critical brand moments – or critical research is used to: touchpoints; Chapter 2 Branding 43 ●● identify the most cost-effective, high-impact brand moments. Invite a brand into your life Let’s consider each of these. ‘Marketers need a deeper understanding of what makes people invite certain brands and Identify long-term profitable propositions into their lives and what makes them customers reject others.’ Do not invest branding efforts in unproitable Fauconnier (2006) 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 seg- Identify aspects of the brand that mentation approach (eg size, income, age, ethnicity, consumption patterns, loyalty, locations, lifestyles, drive behaviour needs and attitudes), eg the business traveller hotel A brand’s speciic features may clearly distinguish segments may be changing from service-oriented the brand from competitors but not be important to business travelling to value-driven business travel- customers. This is what McKinsey’s refer to as the ling and luxury-driven business travelling. The latter ‘fool’s gold of branding’. Different but non-important may split into ‘fashion seeker’ segments (who see features are irrelevant if they do not drive customer their hotels as a way of expressing who they are) behaviour. Without knowing which features really and ‘escape seeker’ segments (who want to feel do affect customer behaviour, an organization can pampered and far from the pressures of business). 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 Identified trends are a marketer’s friend. the non-important features that were important in previous years. Customer desires change, and so trend spotting and brand adjusting are required to Develop a deep understanding keep brands up to date and out of the great brand graveyard in the sky. 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 ques- Branding requires a deep tions about their customer segments. The most understanding of human psychology dificult is ‘why’ – why do customers buy? (See also Chapter 4.) Excellent marketers know their custom- ‘The new marketing approach is to build a brand ers better than they know themselves. A deep under- not a product – to sell a lifestyle or a personality to standing of the customers is required, eg a hotel appeal to emotions. But this requires a far greater might uncover that the core need underlying the understanding of human psychology. It is a much desire for comfort is to ‘feel as though I’m at home harder task than describing the virtues of while I’m away’. As desires change, trends must be watched continuously to ensure the right offers are a product.’ made, eg some retail sectors have discovered that Economist (2001) speed is now far more important to customers than credit card facilities and accordingly offer cash-only transactions. An airline may have to prioritize be- Identify the emotions that drive tween easier upgrades, more onboard services, faster check-in, a bigger baggage allowance and more brand behaviour frequent-lyer miles. Getting the proposition right is A brand is much more than a product. It is a lifestyle critical when building brands. 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 Identify critical brand moments – are very important. Branding is about creating and maintaining emotional ties. Marketers must probe or touchpoints and discover their customers’ emotions, since they These are the places, often beyond the consumption often drive behaviour. of the actual product or service, where a large part Le Pla, Davis and Parker (2003) identiied three of the total brand experience is really delivered. triggers to create an emotional tie that ultimately This is where the customer has a large emotional strengthens brand loyalty: 1) congruence with investment, eg a phone call to customer service to deeply rooted life themes (values); 2) helping the make a complaint. This includes anywhere that accomplishment of life projects; 3) resolution of cur- customers interact with the brand (phone, store and rent concerns. ‘If all three triggers can occur through web, as well as ads and events, etc). the customer’s personal relationship with the brand then it is likely that the customer will see the brand Identify the most cost-effective, as a friend or partner, or see the brand at the heart of a community of users – where the community high-impact brand moments becomes a signiicant part of the customer’s life.’ Channel creativity and resources into these high- In the US car market, the Mini created huge sales impact areas. This is where the brand will be and high brand loyalty when it appealed to the enhanced or destroyed. Remember, a beautifully emotions of drivers. The advertisements declared designed logo and clever brand name mean nothing ‘opposition to bigness’ and promised to ‘wage war if the website doesn’t work or the customer service on SUVs’. The Mini ‘celebrated the joy of motoring’ person cannot solve the problem. Equally, a won- as opposed to ‘the lobotomized, cruise control derful product can be destroyed if it is delivered movement of most car-transport on America’s high- uncaringly. ways 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 Service training or website redesign? ordinary people who made it were. The ad explained GM’s beliefs and values. The car became the top- Which is the priority? Creating a new customer selling small car two years after launch, with a service training programme or redesigning a community built around the brand (some 45,000 website? Answer: find the high-impact touchpoints customers and families turned up at a factory to and allocate resources that have the biggest effect meet each other and the company at its open day, on these high-impact touchpoints. which had barbecues, bands and a factory tour). ‘We don’t know how to sell on performance. Equipped with answers to all of the research ques- Everything we sell, we sell on image.’ tions, we now know what we want and what is the Robert Gouezeta, ex-CEO, Coca-Cola priority. Having completed the research, we can now write the brief. The brief Identify personality, values, The starting point for any branding initiative is to associations and promise ask what its objectives are: what is it trying to Identify the kind of brand personality that relects achieve in the customers’ minds? The brief should the ideal personality that the target market aspires include the brand promise, personality, values, as- to or admires. Build in the values and associations sociations and positioning (as well as the 3Ms: men/ that matter to the target market. Make a very clear women, money and minutes – who is responsible simple promise and stick to it – never break it. for what, how much budget is allocated to creating Chapter 2 Branding 45 this brand, and how much time there is before the Concept generation and launch, testing and concept development stages). Brand logos and clever names come later. A good development brief should be written and agreed or signed off by The answers to questions about the brand’s promise, all the key decision makers. personality, values, associations, and positioning As well as deining the target market, the brief give clear guidance to any creative ideas. A good includes the brand’s promise to customers. What brief saves a lot of time, as it steers creative thinking makes it different? What needs is it fulilling? In in the right direction and avoids generating time- addition to target markets, distribution channels consuming concepts that do not fulil the brand and regulatory guidelines, the brief should include prerequisites. brand vision, values, role, personality, positioning, However, once the brief has been signed off, promise or proposition, and essence. some additional research may be carried out into An example of promise is Volkswagen promising customers, distributors and even competitors. On the most reliable car. Volvo promise the safest. The the basis of a clear brief and any additional research brand’s personality (the tone, manner and style of required, brand names and brand logos can be gen- how you speak to customers, what you look like erated and then researched, with the best one(s) and how your staff behave) gives guidelines both being selected for reinement or development. The for marketing communications and for staff behavi- inished brand name and logo are then tested once our. Virgin’s personality is consistently irreverent, more. Early-stage research should include global eg Virgin’s airport luggage-size signs state ‘The size use, ie whether the name or the logo has any strange of your bag has a limit – but the size of your ego meaning in other key languages, and whether it is can’t be too large!’ Brand values are included, as protectable. Let us look at brand name development they inluence how you work, your beliefs and your and brand logo development. standards of behaviour. The brand’s positioning must be crystal clear. This summarizes all the other questions and is key to marketing strategy. Brand name development Positioning deines how your brand’s distinctive Developing brand names is a specialized business in beneits should be perceived by customers alongside itself. A brand name should be distinctive and easy competitive offers. to say, spell and remember. It should also be relevant, Two important aspects for any brand brief are brief (maximum four syllables) and legally protect- relevance and differentiation. The proposition must able (ie not generic) and lend itself to advertising make customers an offer, irstly, that its their needs and promotion. Lastly, a really good name can be and, secondly, that the competition cannot (easily) used almost globally. offer. Relevance and difference increase the likeli- Three different approaches to brand name devel- hood of success. But, remember, relevant product opment are: product function; classic names (Latin differentiators may change over time. or Greek); and beneit based. Product function A useful aide­mémoire for any brief is SOS + (eg International Business Machines (now IBM) is 3Ms, which is taken from the marketing planning dificult to protect. The classic approach is more system called SOSTAC®. The SOS brief provides a protectable, eg Nike is a Greek name, which relates useful framework, as it includes situation analysis to the speciic cultural values of the Olympic Games (where are we now?), objectives (where are we and the gloriication of the human body. Thirdly, going?) and strategy (how do we get there?); the beneit-based names are less directly associated with 3Ms are men/women (the brand manager and team a product or service’s functions and closer to a name who decide), money (budget) and minutes (time- that evokes product beneit or even a certain state of scale). For more on SOSTAC®, see Chapter 10. 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 A brand that does not stand for something stands business. Tech giant Cisco’s name comes from the for nothing. last ive letters of San Francisco, reportedly chosen when the founders were inspired by a drive past the 46 Part 1 Communications Background and Theories Golden Gate Bridge en route to register the com- ing. The acid test for a logo is: distinctive, easily pany. Aldi supermarket’s founder, Albrecht, sup- recognizable, memorable and reducible (can work posedly combined his name with ‘Discount’. when reduced on to a business card or postage Names need to be distinctive and protectable (to stamp). It should work in black and white as well as register them as trademarks). Functional or descrip- colour, since many corporate images appear in black tive names are dificult to register, as they may be and white in the press. Ideally, the logo should also deemed to be generic words commonly used by be symbolic, or relevant to the business, but this is others (and therefore owned by everyone). rarely the case. With the growth of the internet it is Once a short list of names has been generated, a increasingly important that it works well on-screen, name search is carried out in the target market (and as well as in its more traditional applications. potential target markets) to check to see if anyone Logos are an important part of the brand iden- has registered these names already in the same tity and often are described as a key component of business sector. After that, some simple concept brand equity, eg Nike’s swoosh and McDonald’s testing in each target market reveals whether the Golden Arches help audiences and customers to brand name has any negative meanings in different recognize the brand instantly and also help to dif- languages, as Coca-Cola discovered in China (see ferentiate the brand. A logo also acts as a stamp or Chapter 9). Without these checks, subsequent op- guarantee. It should, ideally, relect the values of portunities for global expansion are curtailed with- the brand. Logos can protect a trademark when out an expensive and time-consuming rebranding combined with generic words (as generic words exercise. 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 Horlicks and Birds eye Fish Fingers – not only are they recognizable but even parts of strange but true them are recognizable, such as the Heinz chevron or the ‘M’ in Marlboro. 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 Don King’s hair Machines, and Microsoft has obvious roots in microcomputers, chips and software. However, World boxing promoter Don King’s elevated Horlicks and Birds Eye Fish Fingers are, perhaps, hairstyle (brushed up 6 inches or more into the air) an indication of the irrational nature of brands as makes him stand out in a crowded post-fight boxing to how their names ever became brands. 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, Colour also plays an important part. Colours instantly the red cross or a national lag immediately arouse access our emotions (think of what the colour red emotions, feelings, images or interpretations of does to a bull). Colour also affects our physiological some kind. Logos are a language (sometimes inter- state and propensity to make a decision. national) of emotional response. Symbols, shapes and colour all have conscious and unconscious meanings. Visual symbols or devices can also be Logo development powerful as a means of increasing awareness by The process of developing a logo is similar to the facilitating easy recognition. A logo can act as a focal process of developing any aspect of marketing point to summarize or encapsulate an organization, communications: brief, concept generation (and although it should not be too complex. If an iden- selection), concept development and inally launch tity needs too much explaining, then it isn’t work- or roll-out. In between each stage, research gives Chapter 2 Branding 47 crucial feedback. This helps to select the best con- popular anyway). Bovis construction company cept, which when guided by feedback (research) is chose a humming bird, which again itted the above developed into the inal logo design. It does get criteria. Others suggest that there was a trend to- one last check with more research before roll-out wards humanizing logos, since organizations are (launch). all about people. One UK design consultancy developed a new logo for Saudi Arabian Airlines that looked, to the uninitiated, distinctive, unique and easily recogniz- FIguRE 2.4 The Prudential logo able. 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: 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 More recently, there has been a trend towards sword shown in the logo looked weak, old purely graphic devices (in other words, away from and ceremonial; igurative symbols). This has been driven by a 3 the wrong moon – the crescent of the new number of factors. On the one hand, it is part of a moon used by Saudi Arabia represents a new general trend towards more direct communications, beginning, but the proposed crescent was which has resulted in a stripping out of superluous that of an old moon, suggesting ‘the end’; elements. On the other, the internet has become 4 the wrong colour – the old green colour was a more important channel of communication for replaced by cream, which represents hot, many organizations. As Mark Wilson of identity barren sand in the desert when Saudi Arabia specialists Bamber Forsyth says, ‘The lower resolu- was trying to irrigate the kingdom and make tion of the internet and digital television has driven it green. us towards simpler, highly graphic identity elements that are seen smaller, and in more places, than ever This conirms the need for designers to invest in before’, eg Google and Amazon. detailed research before attempting to develop any Shanks & McEwan, a waste management business, design concepts. Designers who neither budget nor updated its identity at the turn of the millennium, plan for research (or several stages of research) vastly simplifying its name and adopting a straightforward increase the likelihood of problems. Worse still, if graphic logo. When introducing the new identity to problems occur after implementation of a new de- staff, the company said: sign, the costs immediately spin out of control, and there is a highly embarrassed management team. We’re linking the phrase ‘waste solutions’ to Research is also carried out into logo trends. In our name in order to emphasize that we are the 1970s, corporate images hardened. The 1980s a problem-solving company. We’re also using saw them becoming soft and decorative. Some the ‘s’ as our symbol to make the new identity cynics say that, if you wanted to make an abstract more distinctive and memorable. The full stops organization look purposeful in the late 1980s, you within the logotype and after the ‘s’ symbol are gave it a face – preferably a neoclassical one. The important. This is our way of saying that we’re the last word in waste management. Woolworths group, on the other hand, changed its name, logo and total identity to Kingisher, which was certainly distinctive, easily recognizable, memor- FIguRE 2.5 The Shanks logo able, 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 48 Part 1 Communications Background and Theories The logo can be literal (eg Shell), a logotype (a Living the brand occurs when employees actively stylized treatment of the company name with no and enthusiastically deliver the brand promise day additional symbol, eg Kellogg’s), wordmarks that in, day out. It helps if the brand and brand respon- integrate a graphic element into the name (eg BHS), sibilities are written into the job description of every company initials (eg IBM) or purely abstract. member of the team. This is where marketing and Whichever type of logo is chosen, it is essential to HR work closely together. The brand effectively research the choice carefully, particularly in global becomes everybody’s business. markets where symbols, colours and words can have very different meanings. ‘When you develop a brand the primary audience for it is the employees.’ end of logos? Ken Morris, Siehel+Gale ‘A logo today has turned out to be a warning sign of a commercial message. The trend is that it will Do all employees know (and memorize) what the disappear and be replaced by other non-conscious brand promise and brand values are? Do they know signals – everything from iPod’s whiter ear plugs, what the business stands for? Are they able to tell to Tiffany’s blue packaging, to the United Colors the brand story in a compelling way to different of Benetton photos or whatever you are imaging. stakeholder audiences including shareholders, ‘If you look at Formula 1 today, you’ll see that employees, customers and vendors? To ensure that most of the Ferrari cars have these funny red a brand comes to life throughout the organization, coloured bar codes. That is the secret logo from ask whether you need structural or departmental Marlboro. There’s no logo, there’s no name on it.’ changes. It is that important. Consider every aspect Martin Lindstrom, in Rothery (2009) of the organization from employee behaviour to premises. Inject the brand DNA into your organiza- tion structure. Roll-out/delivery Motivate and train staff The roll-out of a brand requires far more than just Develop operational targets to build the brand. Try press launches and lavish branding events. The roll- linking customer satisfaction scores and brand ratings ing out of a new brand (or a revamped brand) starts to operational targets. (You should measure criteria internally. The whole organization needs to be that are important to customers, not those you think mobilized. The whole organization must live and are important.) All staff are brand ambassadors. breathe the brand. This starts with the CEO acting Brand consistency stops a brand from splinter- as brand champion and cascades down through the ing, diluting and ebbing away. Crystal-clear brand organization by: guidelines can include templates for all marketing collateral so that brochures, websites and signage ●● living the brand; are all consistently produced anywhere in the world. ●● linking operational targets to brand ratings; The brand guidelines also include the Pantone colours, ●● linking rewards to customer satisfaction and brands ratings; ●● putting brand values in job speciications. Logos – an international language Living the brand means internalizing the brand and living its values. What a business does reveals its ‘Logos, by the force of ubiquity, have become the personality and values far more than any amount of closest thing we have to an international language, advertising. Any signiicant disconnection between recognized and understood in many more places what an organization says about itself and what than English.’ it actually does will seriously undermine people’s Klein (2000) relationship with the brand. Chapter 2 Branding 49 size and layout of logos and straplines for a range of targets can be linked to building and maintaining different uses, online and ofline, as well as above the brand (such as measuring relevant customer the line and below the line. satisfaction). The brand needs to be embedded into At irst a new logo has little or no value because the DNA of the business. it has no franchise. First it must be associated with This, in turn, helps the company to live the brand, the right kind of images, and then its recognition ensuring that all those crucial ‘brand moments’ levels can be developed (eg Lloyds Bank’s black (when the business interacts with the customer) horse). This takes time, since initial reaction to change actually relect the brand. The primary audience for or anything new is often quite negative. Sometimes a brand is the employees – as they need to be mobi- the initial reaction is one of upset, dislike or disgust, lized to support the brand. Then come the channel as the new logo does not it in with the previous set partners (distributors). Brand managers need to of cognitions (and thereby creates ‘cognitive disson- ensure that the brand is never compromised or ance’ and possibly tension). The value of the logo tarnished on its journey to the end customer. eventually starts to increase as the years roll by and A fatal mistake some marketers make is an it becomes better understood. However, it helps over-focus on external marketing communications enormously if internal marketing carefully brings (developing advertising campaigns, direct mail cam- staff on board throughout the development and paigns, websites and opt-in SMS campaigns to boost ultimately before the launch. cross-selling and up-selling), rather than ensuring Whether the logo trend is towards simplicity, all customer touchpoints are consistently executed. swooshes or sharp-edged internationally understood symbols, the corporate identity demands careful Instigate brand policing management across all the points of public contact. 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 Air travel worries? constantly develop or reinvigorate the brand so that it is constantly seen as relevant (not ‘hip’ nor neces- Attention to detailed design management can sarily modern, but deinitely always relevant to the subconsciously influence air travellers. The same target market). Remember, target markets move logo, typeface, primary and secondary colours and and change. The classic Lucozade drink once upon trim on all visual points of contact help to reassure a time was positioned as a sick child’s drink. As the the traveller, while reinforcing the airline’s identity. market demographics moved on from a dispropor- The check-in desk logo, signs, colours and trims tionately large number of children in the 1960s to a should be coordinated with the uniform (and disproportionately large number of young adults in badge), ticket holder, baggage tag and departure the 1980s, Lucozade repositioned itself as a healthy lounge carpets, right through to the plane’s exterior adult’s drink. Today it has moved on again, twisting graphics, interior carpet and even the trim on the and tweaking itself to stay relevant to its key target china and linen. Without this coordinated corporate market. Maintaining a brand requires vision, system, identity, cognitive dissonance can set in. There is determination and people. a subconscious unease or discomfort created by the inconsistent messages. A coordinated identity Mobilize staff and channel partners reduces this often unconscious tension, which in The brand requires a system that mobilizes the turn creates a more satisfied passenger. The entire organization. Bringing a brand to life requires cohesive identity does not make the traveller leap a completely integrated approach beyond marketing. off the plane and scream for joy on arrival, but it might Operations and HR must develop a system that make the subconscious difference next time around inspires and motivates all staff to support the brand. when choosing between two airline companies if Ideally, job descriptions should explain the respon- one airline offers a reassuring sense of order. sibilities that staff have to ‘live the brand’. Operational 50 Part 1 Communications Background and Theories Brand policing is important. If an organization’s a lack of consistency between the brand name, the identity is not coordinated or managed precisely, packaging and the advertising is subconsciously confusing signals about the organization go out to recognized by the consumer and leads to a feeling of different audiences around the world. A splintered detachment, ultimately resulting in brandswitching’. identity fragments the corporate image, which in turn So it is important to be consistent and to reinforce dilutes the corporate presence among key audiences. identity through all the appropriate points of public The potential asset (corporate brand) depreciates to contact. This should include advertising and all the point where it becomes a liability. The organiza- elements of the communications mix, which includes tion dilutes its presence and has an uncoordinated permanent media like corporate headquarters. image. This sends out disorganized messages that The logo is just the tip of the iceberg. It is often weaken the initial or inal impression left by the the most visible part of an organization. A cor- organization. porate identity scheme may have a logo at its heart, A logo displayed prominently in an ofice or on but it will generally include a whole array of other a letterhead makes a good strong statement, but elements, often referred to as ‘visual language’. This it is the consistent ‘echoing’ of the logo, its exact may include typefaces, a colour palette, the use of primary and secondary colours, the speciic typeface photography and illustrations, a layout style for and the overall design style on the ‘secondary format’ using these items and even a particular style of of products, packages, business forms and employee written language, as well as briefs for interior design uniforms, that provides the all-important, if subtle, and exteriors of buildings (plus, today, eco-friendly consistent reinforcement. building requirements). There is a need to think it through in detail and then to police the usage of all visual points of con- tact. This is where a design manual guides managers The Intel, Oracle, Microsoft and in different buildings and in different countries to specify, in a consistent manner, the exact graphic IBM oices requirement for every point of visual contact. ‘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 Sweaty identity founder, Larry Ellison. The scattered low-rise blocks at Microsoft’s Redmond campus imply a In corporate identity terms, attention to detail laid-back informality, but the intense figures trotting needs to spread beyond just graphics. The classic along ordered paths suggest a restless insecurity. 1990 US Hall of Shame reported the following: IBM’s new headquarters at Armonk in New York ‘To upgrade its image in 1982 AT&T told its repair state is so discreetly tucked into a valley that it people to wear dress shirts and ties, gave them cannot be seen until you are almost upon it. It attaché cases for their tools, and renamed them politely curves in an S-shape around the trees and “system technicians”. But Ma Bell didn’t install air rocks that could have easily been blasted away. conditioning in its cars. So during the summer the For a company that employs 270,000 people and technicians arrived on the job looking like they had earned revenues of nearly $80 billion last year, just stepped out of a sauna. Said a union official, it is implausibly tiny. Inside, it is light, open-plan, “It’s hard to have corporate appeal if your shirt is discreetly high tech, and very, very calm. It is wringing wet.”’ a stealth headquarters, the antithesis of the Nash and Zull Products (1989) swaggering IBM buildings from before “The Fall”.’ Economist (1998) The importance of consistency applies right across the communications spectrum. In John Murphy’s A good corporate brand can help sales and boost book Branding (1991), Klaus Morwind Henkel employee relationships, inancial relationships points to consumer research that ‘has indicated that and media relationships during a crisis. Corporate Chapter 2 Branding 51 branding, however, requires a lot more than just a strategic consolidation of the brand portfolio, as corporate identity. The impact of a corporate iden- in the case of Unilever when it cut its portfolio of tity programme goes far beyond a logo or a lick of 1,600 brands down to 400. Brands are under in- paint. It inluences almost every manifestation of creased challenges today. an organization, its corporate headquarters, its staff Brands fade as tastes change, unless of course and even the way they work. All of the components they are maintained and nurtured carefully to meet need to be in place. A new logo raises stakeholder the new market conditions. Even in steady-state expectations. 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, particu- larly as a brand grows globally. Rigorous use of Boards, doors, logos and skunks brand guidelines is required here to ensure that exactly the same brand features appear correctly ‘A new letterhead and a new logo is no substitute any time and anywhere. for a new board of directors.’ Rodney Fitch (2003) Review the brand ‘Painting the lavatory door won’t cure the Brands require constant reviews and investment plumbing.’ of energies and money. Brands often need to be re- Bernstein (1984) invented or reinvigorated to avoid being left behind ‘If you take a lousy low-profile company and give it by a fast-changing marketplace. A constant low of a major corporate revamp, you end up with a lousy market research ensures the brand really addresses high-profile company.’ customers’ deep needs, which change over time. Wally Olins (1989) Otherwise brands fade as tastes change. Constant market research also reveals how the brand is ‘Even if you paint out a skunk’s stripes it will still positioned against existing competition and new smell extremely nasty.’ competitors. As Olins (1989) says, ‘In a complex and Source unknown 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.’ Corporate brands and sub-brands When does a brand identity become out of date? An umbrella brand, such as the Virgin brand, can Can the business environment change and move have various sub-brands, such as Virgin Atlantic, away from the organization and its values, leaving Virgin Cola and Virgin Trains. A corporate brand, behind the obsolete, irrelevant and even damaging such as GlaxoSmithKline (GSK), Unilever or Procter corporate identity? When do the staff and other & Gamble (P&G), on the other hand, remains in audiences get tired of it? Mergers and acquisitions the background and offers an endorsement, while sometimes necessitate a new corporate identity. a mainstream brand like Persil can have sub-brands Occasionally, legal reasons force a change. Some- such as Persil washing-up liquid and Persil powder. times overseas ambitions are restricted by the use of a home-grown logo (eg BT’s old logo clashed with that of overseas companies). Invest in the brand asset Shell reviews and updates its corporate identity. Constant investment is also required to maintain a The shell device has served it well, despite its being brand’s proile to avoid getting buried in the com- a petrol company with a ‘high explosive’ name. munications clutter. Some companies take the long- Global markets are constantly moving and term, brand investment view, eg Coke is investing changing, so much so that some organizations fear $65 million in sponsoring the Olympics from 2009 they are being left behind by the global update. to 2021. A review and redesign help an organization to keep Constant reviews of brands, and in particular abreast of trends and avoid being left isolated by large portfolios of brands, can result in a major a redundant identity. 52 Part 1 Communications Background and Theories F I g u R E 2 .6 The Shell logo and its redesigns Sometimes new brand identities are developed Aggressive hand-held torch of simply because old management wants to say some- thing new or a new CEO wants to announce he or learning gets the chop she has arrived. This is a dangerous game, as a new brand identity or a new corporate identity raises The National Union of Teachers’ 25-year-old expectations that the organization has new ways of ‘hand-held torch of learning’ was considered to working, new customer beneits or new customer have become ‘too strident, aggressive and experiences. 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 Lipstick on a pig move the logo on but keep it relevant and maintain the link with the union’s heritage. The updated ‘Long before the phrase “lipstick on a pig” became design shows an outstretched hand embraced by an election issue, I had warned of the dangers the spelt-out words of the NUT, tying the symbol of putting “lipstick on a bulldog” – that is, making together as one cohesive form, either male or superficial cosmetic change in organizations rather female, adult or child, to avoid alienation. than looking at the real underlying problems. The problem with putting lipstick on a bulldog is that it F I g u R E 2 .7 is hard to wrestle the bulldog to the ground long enough to do it and then doesn’t change the nature Hand-held torch of learning of the beast . . . ‘George Orwell warned of the evils of lipstick- clad 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 53 Constant watch: the customer What experience could a website deliver that would really add value for customers, be truly unique experience and be representative of the brand? Ultimately ask Brand maintenance also requires careful attention to ‘How can my website help my customers (or other the customer experience (which as we’ve seen is often stakeholders)?’ Here are a few examples: very poor). Poor product quality and sloppy service destroy brands more quickly than any large advertis- ●● A camera company can help customers ing budget can build them. Poor product or service to take better photographs by simulating quality, complicated order forms, late delivery, incom- taking photographs with different settings prehensible customer service agents and error-laden and allowing customers to compare and websites all destroy a brand. Slow e-mail responses contrast the results (and can also give damage the brand. Non-responses can kill it. tips on how to maintain cameras and Attention to the customer experience ofline and protect ilms and photos, and can invite online is important. Online brands still deliver off- customers to send their best photos in for line (eg Amazon books); hence marketers monitor a competition). the ofline aspects carefully also. And all brands ●● A travel company can give you a ‘virtual (online and ofline) have opportunities to extend friend’. After you tell the company what your the brand experience online by layering in new and interests are (via an online questionnaire), exciting value-adding beneits. They add some ‘sizzle’. the ‘friend’ can suggest ideas for things you Embellishing and extending the brand experience would like to do in the cities you choose online can be achieved with ‘sizzle’, which cannot to explore. be found ofline. ●● Cosmetic companies offer online games, Nurturing brands can include lavishing wonderful screensavers, viral e-mails, video clips and brand experiences on customers, otherwise known soundtracks to help customers use the as experiential marketing. Nurturing brands also products. includes engaging customers and moving them up ●● Food companies online offer printable into higher levels of brand engagement (see Chapter 1, recipes, video demonstrations and ‘The ladder of engagement’). discussion forums, as well ‘ask the expert’ Finally there is the experience – the quality of the sessions. experience, both online and ofline, directly affects ●● Chocolate companies generate ideas for the brand and its image. Remember, sloppy websites, desserts (using the chocolates), dinner party unanswered e-mails and comments, unpleasant games and designs for table layouts. receptionists and any other touchpoints can damage the brand, if not managed carefully. Many marketers now see the online opportunity to build both the Create customer engagement brand image and the overall company value. If marketers understand customer engagement better than their competitors, then this helps them develop brand loyalty. How else can the ideal customer engage In just a few seconds sloppy websites destroy with the brand? The ideal customer, or most valu- brands that took years to build. able customer, does not have to be someone who buys a lot. The ideal customer could be an inlu- encer who may be a small irregular buyer who posts ratings and reviews. The reviews can inluence an- Social media now engages the customer in new ways other 100 people. ‘Engaged customers’ are probably (as discussed in Chapter 1). The brand’s own web- going to become brand zealots if they are kept site can add deeper, richer brand experiences by engaged. adding some ‘sizzle’ (Chaffey and Smith, 2008). Marketers can easily monitor the type, quantity and frequency of blog posts, forum discussions, reviews, proile updates, etc. This identiies oppor- Ask ‘What experience could a website deliver that tunities and also acts as an early warning system to would really wow customers?’ any possible future problems. Consider targeting brand evangelists rather than just purchasers. 54 Part 1 Communications Background and Theories A customer who doesn’t care about the pro- It is one of many different ways of increasing sales duct or service is likely to be less committed or less by extending an existing brand name on to a new emotionally attached to the irm supplying the product. Some feel that this reduces the risk of product or service. On the other hand, a customer launching an unknown brand. Using a recognized who is engaging is likely to be more emotionally brand name on a new product can give the new connected to the brand. Marketers need to know product immediate presence in the marketplace – about the sentiment, opinion and afinity a person customers can recognize, trust and try the new has towards a brand. This is often expressed product more easily. This also creates savings in through repeat visits, purchases, product ratings, advertising and other promotions, so as the original reviews, blogs and discussion forums and, ultim- product brand matures the extended brand ensures ately, the person’s likelihood to recommend a some continuity and survival of the brand in the friend. longer run. Generally, brand extensions work if the Ask ‘How well are we measuring engagement new product actually satisies a real relevant need amongst different online audiences?’ and then close amongst customers and they like the idea. Ultimately the loop by using the data to identify the advocates the new product should enhance the promise of and deliver more relevant communications. the original brand as opposed to cannibalizing it. Careful consideration must be given to what hap- pens if the extension fails. Brand extension is a tempting option, as it uses Engaged customers = customer engagement = the same sales team with the same distribution stronger brands. 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 Brand expansion/strategy line builds the image of the complete player, a big player, which in turn suggests reliability. Brand extensions and the brand portfolio Disadvantages There are few single-product companies. Many But there are disadvantages lurking behind brand companies start up as single-product companies, extensions and line extensions. A low-quality pro- but they soon develop other products as the com- duct will damage the original brand’s reputation. pany grows and markets fragment. A product line is A really good new product can also cannibalize the a string of products grouped together for marketing original product if the new product merely takes sales or technical reasons. Guinness started as a single- away from the old product. When contemplating product 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. Failed extensions Add all the product lines together and you get the product mix. Finding the right product mix is a ‘Unfortunately, the hard truth is that many brand subtle balancing act. How far should a product line extensions don’t work. Each brand has its own be extended? How many different lines should be in special positioning. The extension won’t succeed if the product group? 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 Advantages broken. When the promise is broken, the brand ‘Brand (or line) extension is attractive but dangerous’ loses value and me.’ (Smith 2003).There are advantages and disadvan- Jacobson and Knapp (2008) tages lurking behind this apparently easy option. Chapter 2 Branding 55 brand extension, ask how much of the ‘extra tends to fend off any new competitors that are sales’ actually replace existing sales of the original considering occupying that space. Fighter brands are product. Constant brand extensions may dilute the lower priced and compete with existing or potential brand’s strength and its unique positioning, particu- competitors trying to occupy lower price points (the larly if the extensions are not appropriate to the quality perceptions need to be shifted downwards central brand. When easyJet extended into easy- so as not to dilute the bastion brand). Many organ- Internetcafes it was reported to have lost £75 million izations prefer to lose some premium-priced brand (Taylor, 2004), whereas easyJet Holidays appears to sales to an internal less proitable brand than to lose be a better it. Although Virgin is another successful the sales to competitors. However, today many company and has enjoyed a variety of brand exten- companies of a certain size reject brands that will sions, some of its brand extensions have failed, not become star performers, as they prefer to direct including Virgin Vodka, Virgin Jeans, Virgin Brides, their limited resources to major winners. The tasks Virgin Balloons and Virgin Cosmetics. of product extinction and extension require rigor- In a sense, product deletion should be a stand- ous analysis of customers, competitors and overall ard activity, as companies constantly replace old trends. The marketer’s task of being the guardian of products with improved ones. Some corporations the brand is a challenging one. like to balance the product portfolio by ensuring they have a minimum of 30 per cent of ‘new pro- ducts’ (products developed in the last ive years). Phasing out and deleting products that have had Brand summary and their day is a delicate task. They have to be with- drawn carefully and gracefully without damaging the challenges ahead employee morale or upsetting small groups of cus- Twenty-irst-century brands face new challenges, tomers who may still want spare parts or simply including hyper-competitive markets, unknown com- to continue consuming the product. Interestingly, petitors (category-less and borderless), shortened one of the world’s best marketing companies, product life cycles, more demanding, time-pressed Unilever, chopped its product portfolio from 1,600 and information-fatigued customers, media frag- to 400 in 2004. mentation and message clutter, anti-brand pressure Although criticized by some, the Boston Matrix groups, own brands and two other internal chal- can help to balance the product portfolio, as it lenges – short-termism and fear of the boardroom. 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 The rise of the anti-brand market) generate the surplus cash that in turn A direct challenge to brands are the ‘ethical anti- funds other products, such as the high-growth ‘star’ branders’, who attack premium priced branded products. Low-growth (and low-market-share) training shoes (allegedly made in sweatshops in the ‘dogs’ often absorb a disproportionate amount of Far East). management resources. This analysis is from a Various anti-brand feelings have been aroused cash low perspective as opposed to the customers’ by many publications, ranging from Vance Packard’s perspective. 1957 classic The Hidden Persuaders to Eric Schlosser’s Riezebos (2003) on the other hand analyses a Fast Food Nation (2002) to Robert Frank’s Luxury brand portfolio from a competitor perspective. Fever (2000) to The World Is Not for Sale (2001) by Different types of brands have different roles to play José Bové (a French farmer who is best known for within the brand portfolio. Bastion brands are the vandalizing a McDonald’s restaurant) and François key brands, usually the most proitable, with a large Dufour. Brands are vulnerable to a rising tide of market share. Their success attracts competitors. antipathy to branding and marketing. Some companies expand their portfolios to protect The demise of major corporations like Enron has their brands by introducing ‘lanker brands’ and further fuelled a cynicism towards big business. ‘ighter brands’. The lanker brand may be priced However, Naomi Klein’s No Logo: Taking aim at differently or have a different set of attributes and the brand bullies (2000) articulated a certain kind 56 Part 1 Communications Background and Theories of brand frustration where global brands represent, The brands do, however, have a source of con- in her words, ‘a fascist state where we all salute tinual competitive advantage, and that is continu- the logo and have little opportunity for criticism ous innovation. Although own brands are getting because our newspapers, TV stations, internet smarter and smarter, Saatchi & Saatchi CEO Kevin servers, street and retail spaces are all controlled by Roberts (2009) says: multinational corporate interests’. The ubiquitous The game has changed. Own labels deliver global brand bullies effectively reduce the colourful quality. They are as strong in many categories variety of choice and force a grey cultural homogen- as traditional consumer brands. Own label tend eity on customers instead of an array of interesting to deliver quality now. But will they deliver local alternatives. Even the Economist magazine innovation? No. This is where real marketing back in 2001 pointed the inger at today’s global comes into play. A big retailer cannot possibly businesses: ‘So companies are switching from pro- develop the innovation in a category that a P&G, ducing products to marketing aspirations, images Unilever or a Nestlé can. So as long as those and lifestyles. They are trying to become weightless, companies continue to keep their core, their focus shedding physical assets by shifting production on innovation, they will continue to develop new from their own factories in the irst world to other value in this reclaimed world. people’s in the third.’ This provides all the more reasons for brands and the businesses behind them to behave ethically Short-term sales versus long-term and to demonstrate publicly their social responsi- bility. This includes environmental policies (and brand building actions), supporting charitable endeavours and local Brands are not for the short term. They are strategic communities, racial integration, not supplying or assets that need to be nurtured and grown over the contributing to military regimes, and political dona- long term. Think of them like people. They need to tions. (See Chapter 11.) grow and be nurtured. After that, relationships can And of course there are the brand haters who last a lifetime and beyond, as some brands are handed create anti-brand websites dedicated to venting down from generation to generation (if the brands their frustrations and anger about certain brands, manage to stay relevant to the needs of the next usually resulting from alleged poor customer service, generation). There is a constant tension between eg www.aolsucks.com, sometimes even without sales and marketing and, for that matter, inance consuming the brand and simply because they and marketing. Quarterly-results-driven businesses don’t like the brand, eg www.ihatemanunited.com. require quarterly results, which usually means seeing As Dell has demonstrated by listening to these quarterly growth in sales and proits. Brands do criticisms, addressing the reasonable issues and not deliver quick returns, particularly new brands ixing them can strengthen a brand and grow its and repositioned brands. They take time to research relations and sales. and develop. They take time to build relationships. Although some brands have developed in one or two years, these are exceptional. Certainly brands emer- ging within a quarter is, even today, highly unlikely. The rise of the own brand The impatience of the CFO or the board or the As major retailers lex their muscles and demand shareholders may jeopardize the long-term work of that suppliers also create and deliver the retailers’ the brand builder. This also manifests itself in the own brand in almost every category, it is easy advertising debate: whether a campaign is sales or to understand why brand owners are concerned, brand building. Ad campaigns can of course do particularly when they have to deliver a constantly either, but rarely can do both really well. One high-quality own brand also. Many retailers’ brands usually takes priority. Yes, campaigns can deliver are so strong that customers are happy to give sales and grow a brand, but each objective has them more and more share of their wallets. Look at different priorities. Brands are for the long term Tesco: what can’t they sell to customers now that and can secure higher sales, higher prices and higher customers trust the brand to deliver a consistent proits. These are some of the factors that can bring quality at reasonable prices? the marketer back into the boardroom. Chapter 2 Branding 57 Brands – the bridge between value to stockholders would prove most useful in reconceptualizing marketing from expense to marketing, inance and investment’, an opportunity knocked for marketers. the boardroom But the lingering, unanswered question remains to this day, ‘Do brand-building investments really Marketers may have slipped from the potential pay off? Lacking conclusive evidence concerning heroes of the boardroom when back in the 1980s branding and the bottom line, brand “investments” brands were suddenly touted as a ‘sureire means remain “expenses,” and the promise of the brand of differentiation in the face of increased competi- remains unfulilled.’ tive pressures and rampant product proliferation Marketers must learn the language of inance activities. They were secret weapons of sorts: legally- and apply it to marketing. Marketing language protectable assets that brought unrivalled powers and jargon have been charged as ‘inaccessible and to the irms that developed them’ (Madden, Fehle disconnected from the inancial metrics by which and Fournier, 2002). irms are ultimately steered’ (Davis, 2001). If there A study revealed that shareholders should insist is no common language, there is no communication on systematic performance feedback on branding. and with that comes no understanding of marketing’s It actually suggested systematic performance feed- crucial role in brand building. back on all key items in the balance sheet including branding. However, it suggested that very few com- panies had this optimal balance between inancial performance and branding (Ohnemus, 2009). The The adversarial relationship report went on to say that ‘the board of directors between inance and marketing should systematically assess and monitor the stra- tegic branding position of their company and how ‘Most companies and CFOs will tell you that there their branding investments are performing against is an adversarial relationship between finance and key competitors’. Board directors acknowledge marketing. The CFO is viewed as the person who the value of brands but do not understand how wants to cut the marketing budget, and marketing brands are built and sustained and, in particular, fails to effectively explain the return on investment how marketing makes this happen. for communications. The result is a wall between the two departments, and no connections between.’ What has marketing got to do CFO of Ekco Group Inc (in Banham, 1998) with brand building? ‘To quote David Bell, Chairman of the Financial Times: “The value of brands as shareholder assets In the words of the late great Peter Doyle (2000): has been widely recognized, but the crucial role Marketing managers rarely see the necessity of of marketing and advertising in building this brand linking marketing spending to the inancial value equity and so enhancing these assets now on of the business. Given today’s enormous pressure the balance sheet is still not fully recognized.”’ on top managers to generate higher returns to Beenstock (1998) 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 The irony of it all is that, now that brands appear on inancial terms. the balance sheet, they are recognized as a inancial If managers can show that marketing will asset of the business, yet budgets required to grow increase returns to shareholders, marketing will them are considered to be ‘expenses rather than obtain a much more pre-eminent role in the investments’ (Ohnemus, 2009). boardrooms of industry. The discipline itself will When Harvard’s Madden, Fehle and Fournier also obtain more respect for its rigor and (2002) suggested that ‘the demonstration of brand direction. 58 Part 1 Communications Background and Theories Marketers have much internal marketing work to research is carried out before and after each step. do. But, with some work, the doors of the board- Brand maintenance focuses on the customer experi- room will be lung wide open for marketers so they ence, extending it online and considering customer can secure funds to develop great brands and, in engagement as a way to move customers up the return, deliver dividends back to shareholders. 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 Conclusion explored. Brands are being challenged. However, brands are powerful assets that generate many beneits to both an organization and its customers. Surprisingly, Strong brands survive through many brands allow themselves to self-destruct with sloppy service and inconsistent brand applications. careful management Brand components include name, logo, colours, positioning, promise, personality, values, associa- It is no accident that these brands have been tion and experience. Brand creation is a process around for over 100 years: Bass, Coke, Kellogg’s that starts with a brief and goes through concept Corn Flakes, Guinness, Pears Soap. generation, concept development and roll-out. Copious key points from Chapter 2 ●● Brands help customers and the organizations ●● There is a disciplined approach to the brand- behind them. building process. ●● Branding and why is a strategic issue and can ●● Brands, like any other asset, need to be create competitive advantage. maintained and require resources. references and further reading Anderson, C (2006) The Long Tail: Why the future Bové, J and Dufour, F (2001) The World Is Not for of business is selling less of more, Hyperion Books, Sale, Verso Books, London New York Braun, T (2004) The Philosophy of Branding, Kogan Atkin, D (2004) New priests for the new religion, Page, London Marketer, September Chaffey, D and Smith, P R (2008) eMarketing Aufreiter, N, Elzinga, D and Gordon, J (2003) Better eXcellence, 3rd edn, Kogan Page, London brands, McKinsey Quarterly, 4 Clifton, R (2004) The big debate, Marketer, Banham, Russ (1998) Making your mark: Time for July/August inance to play a role in brand management, CFO: Davis, S (2001) Taking control of your brand’s The magazine for senior inancial executives, destiny, Brandweek, 15 October 14 (3), 1 March Doyle, P (2000) Value­Based Marketing, Wiley, Bayley, S and Mavity, R (2008) Life’s a Pitch, Corgi Chichester Books, London Economist (1998) The rebirth of IBM – blue is the Beenstock, S (1998) Raising brands’ stock in the City, colour, 6 June Marketing, 26 November Economist (2001) Who’s wearing the trousers? Bernstein, D (1984) Company Image and Reality: 6 September A critique of corporate communications, Holt, Eltvedt, H and Flores, L (2005) Beyond online Rinehart and Winston, London advertising – lessons about the power of brand Chapter 2 Branding 59 websites to build and expand brands, ESOMAR Neumeier, M (2007) Zag, New Riders, Berkeley, CA Online Conference, Montreal, June Ohmae, K (1994) Interview with P R Smith, Farrell, S (2008) A million dollar branding secret, Marketing CDs, P R Smith How-to Internet Marketing Network Ohnemus, L (2009) B2B Branding: A inancial burden Fauconnier, C (2006) Humanising the marketplace: for shareholders?Business Horizons, 52 (2), A manifesto for brand growth, Admap, 471, April pp 159–66 Fitch, R (2003) in Balmer, J and Greyser, S (2003) Olins, W (1989) Corporate Identity: Making business Revealing the Corporation: Perspectives on strategy visible through design, Thames & identity image reputation, Routledge, London Hudson, London Fletcher, W (2010) author, lecturer and former Olins, W (1996) The New Guide to Identity, Gower, chairman of the Royal Institution in conversation Aldershot with PR Smith Olins, W (2003) On Brand, Thames & Hudson, Frank, R H (2000) Luxury Fever: Money and London happiness in an era of excess, Princeton University Packard, V ([1957] 1960) The Hidden Persuaders, Press, Princeton, NJ Penguin Books, Harmondsworth Harris Interactive (2006) Second annual Customer Peters, T (2003) Re­imagine, Dorling Kindersley, Experience Impact Report London Hooker, S (1991) Applying psychology to market PRTV (1993) Corporate Image Video, PRTV, London research: The theory of raised expectations, Reynolds, J, Cuthbertson, C and Bell, R (2004) Retail Market Research Society Newsletter, January Strategy: The view from the bridge, Elsevier Jacobson, T and Knapp, K (2008) Brand extensions, Butterworth-Heinemann, Oxford Vistage chief executive organization online papers Riezebos, R (2003) Brand Management: A theoretical Jenkins, N (1991) The Business of Image, Kogan and practical approach, Pearson, Harlow Page, London Roberts, K (2009) Short cuts (part 2), 6 July, Jones, B (2001) The Big Idea, HarperCollins, http://www.saatchikevin.com/sisomo/ London Speeches_Ideas/KR_Short_Cuts_part_2/ Kanter, R (2009) The downsides of branding, 23 July, Ronay, A (2004) Emotional brands, Marketer, 5, http://blogs.hbr.org/kanter/2009/07/ September the-downsides-of-branding.html Rothery, G (2009) All in the mind, Marketing Age, 3 Kapferer, J (2008) The New Strategic Brand (6), November Management, 4th edn, Kogan Page, London Schlosser, E (2002) Fast Food Nation, Penguin Books, Klein, N (2000) No Logo: Taking aim at the brand Harmondsworth bullies, Flamingo, London Smilansky, S (2008) Experiential Marketing, Kogan Le Pla, F J, Davis, S and Parker, L (2003) Brand Page, London Driven: The route to integrated branding through Smith, P R (2003) Great Answers to Tough Marketing great leadership, Kogan Page, London Questions, Kogan Page, London Lindstrom, M (2005) Brand Sense, Kogan Page, Taylor, D (2004) More bangers for your bucks, London Marketer, 5, September Madden, T, Fehle, F and Fournier, S (2002) Brands Universal McCann (2007) Power to the people: matter: An empirical investigation of brand- Tracking the impact of social media wave, building activities and the creation of shareholder 2.0, May value, Working paper, Harvard Business School, Valentine, V (1988) Signs and Symbols, Survey, Boston, MA Market Research Society, London Millward Brown Optimor (2010) BrandZ Top 100 Yeong, C L and Yu, H-y (2006) Chinese president’s Most Valuable Global Brands, Millward Brown itinerary for U.S. visit: Gates irst, Bush later, Optimor, New York International Herald Tribune, 13 April Mose, M (2003) United We Brand: How to create a cohesive brand that’s seen, heard, and remembered, See Kenichi Ohmae in the video browser in P R Smith, Harvard Business School Publishing, Boston, MA Marketing CD, No. 6: Product decisions, talking about Murphy, J (ed) (1991) Branding: A key marketing obsoleting strategies. The section on the product port- tool, Macmillan, London folio considers how to balance product lines and mixes, Nash and Zull Products (1989) 1990 US Hall of old and new. He also talks about how he reduces the Shame, Universal Press Syndicate, Kansas City 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 Personalization and tailored What is CRM? 62 ofers 77 The power of CRM 62 Credibility and trust 79 Company beneits 63 CrM creation and maintenance 80 Resources required 63 Writing a CRM brief 80 CRM failure 64 CRM system creation, development, CRM success 66 testing and roll-out 81 CrM components required 68 CRM maintenance 82 IT architecture 68 Control issues 83 Human architecture 69 CrM summary and challenges 84 Database 69 Data analytics 70 references and further reading 86 Processes: general 74 Further information 87 Processes: detailed contact strategies 75 62 Part 1 Communications Background and Theories Introduction to CrM The higher the relevance, the greater the value – it’s a continuum What is CRM? ‘If you want to protect and enhance the value of Some call it customer relationship management your brand, your offer must be valuable.’ (CRM); others call it customer experience manage- ‘Customers get what they want; your margins ment (CEM); others call it customer managed rela- tionships (CMR). Carefully managed brands help are protected; everyone’s a winner.’ customers develop relationships with brands (see dunnhumby (2006) Chapter 2). There is a direct overlap between nur- turing a brand and nurturing customer relation- ships. CRM is a set of processes, usually linked to a Business is entering the post-‘ad loyalty era’, where database, that help an organization keep in contact the power of advertising is waning as other com- with customers and deal with their requests, com- munication tools, particularly WOMWeb (word of plaints, suggestions and purchases. mouth accelerated by Web 2.0 or social networking Think about how personal relationships grow tools), generate fast high attitudinal shifts. The old stronger and stronger: listening, understanding, re- loyalty model used advertising primarily to build sponding and communicating; understanding what brand awareness and, ultimately, to build a lasting is important and what makes a difference; delivering bond with customers. Securing loyalty today is a it regularly; never breaking the promise; occasion- never-ending process requiring outstanding CRM ally surprising or even delighting the other person; and ongoing customer engagement. 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 The power of CRM rocket science. Even remembering someone’s name makes a CRM builds a protective wall around customers, difference. People generally like it when their names in the same way as a brand does. In fact they are are remembered, particularly when their preferences one and the same. Excellent CRM enhances the and needs are remembered. How nice is it when relationship with the brand. As the relationship a waiter or receptionist remembers a customer’s strengthens, loyalty keeps a customer from the name? ‘Your name is the most important sound in inevitable onslaught of competition. Relationships the world’ say the classic sales training programmes. built on price simply don’t last. Relationships built Remembering names and needs (and satisfying on relevant excellent service are more enduring. them) helps to build relationships. This applies to Regardless of what it is called, managing cus- a restaurant with 50 customers or a website with tomer relationships is critical to an organization’s millions of customers. future. Nurturing excellent customer relationships Remembering a customer’s particular needs and builds this defensive wall around a business that providing the right response is rarely the result of most competitors struggle to break down. Customer guesswork. In the case of a company with a small relationships also boost sales and proits and add number of customers, it requires a good memory, value to the brand, which boosts the balance sheet good interpretive skills and attention to detail. In assets. the case of an organization with many customers on a database, it is largely dependent on accurate analysis of customers and building up valuable Your best defence insights. As customers are more demanding and have more channels of communication, organiza- ‘Customer relationships are the only thing that tions simply have to be able to respond to them cannot be replicated by a competitor.’ continuously – wherever, whenever and however Hochman (2008) required. Chapter 3 Customer relationship Management 63 Company beneits 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 One per cent customer satisfaction = and services as they increase their share-of-wallet $500 million spend with the same trusted brand (look at how customers buy almost any product or service from Some years ago IBM calculated that each Tesco). Good relations also help to recruit new percentage point improvement in customer customers, as happy customers talk to, and even satisfaction translates into $500 million more recruit, new customers. revenue over five years. 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 poten- Resources required tial defectors (customers who are about to leave), CRM is a strategic decision and has a long-term pre-empt them and trigger win-back programmes impact on how a business is run. However, CRM for any potential defectors who might otherwise programmes cost resources, the 3Ms: men/women have slipped through the net. (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 Strengthen the brand software, outside consultants, installation, testing, Stronger relations create stronger brands. This training and motivation programmes); and minutes builds brand loyalty, which effectively builds a (the time required to develop a major CRM project defensive wall around the customer, protecting the can be several years, and even the training can take customer from the inevitable onslaught of hyper- months). An excellent CRM system often requires a competition as it advances across this ‘borderless cultural change, which may be a challenge for many and category-less’ marketplace (see Chapter 1). organizations. Good relations also boost the brand image and CRM fails without senior management support consequently the brand value, which is eventually cascading right down throughout the organization. relected on the balance sheet. CRM implementation is disruptive, expensive and time-consuming and requires extra resources, train- Boost profits ing and motivation programmes. Return on invest- Marketing to both existing customers and referred ment (ROI) can also be dificult for some companies customers costs a lot less than marketing to new to measure. customers. Estimates suggest it is six times more Overambitious CRM system suppliers sometimes proitable selling to existing customers, hence the recommend a ‘rip and replace implementation’. importance of customer retention over customer Here CRM suppliers convince the client company acquisition. Keeping existing customers happy to dump their existing systems and start again from boosts proits. scratch. This can then be compounded by the classic disaster scenarios, including scope creep and lack of training and motivation, where the system is Create a database asset delayed, late, over budget and inally resisted by One other advantage that CRM creates is a quality staff, as they have not bought into the new ap- database. This is an asset and, although not shown proach. We will explain how to avoid these classic on the balance sheet, it is a very real asset to a com- errors later. pany. Some companies quantify the value of their Integrating customer interactions and data across databases by calculating lifetime values of different a range of channels from website to mobile to 64 Part 1 Communications Background and Theories telephone to sales rep to e-mail still presents major ●● 2006, AMR Research: 31 per cent; challenges, particularly when trying to integrate ●● 2007, AMR Research: 29 per cent; the legacy (old) database with the new channels of ●● 2007, Economist Intelligence Unit: customer interaction. 56 per cent; Finally, maintaining a database and managing a CRM system continuously cost time, money and ●● 2009, Forrester Research: 47 per cent. expertise, all of which can be in short supply. It is a Although different measurement criteria from dif- continuous process and requires constant resources. ferent 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 Blame storming projects deliver unacceptable results. Another re- port (Forrester Research, 2009) conirms that ‘More than 50 per cent of CRM projects fail to fully meet ‘Companies who do not appreciate the importance expectations.’ of an effective complaint handling system risk The Gartner report (2009) continues to paint a internal friction (passing on the blame). This may picture of sloppy CRM: lead to a vicious circle, as internal friction generates poor motivation and cynicism, staff CRM success continues to elude most companies. disloyalty and worse service. This is why customer 86% of survey respondents say that CRM will be loyalty and staff loyalty are closely linked.’ important to their companies over the next three Merlin Stone, Neil Woodcock 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 CRM failure cent of companies that do have a formal CRM strategy only 44 per cent have seen acceptable Organizations are sitting on a customer service results, ie 26 per cent of companies (60 per cent time bomb. Customers are more demanding, and ×฀ 44 per cent) have seen acceptable results. This marketers are not delivering. Yes, many products means 74 per cent of companies have either no have got better (eg rustproof cars), but service and CRM strategy or unacceptable results. 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 ‘80% of companies believe they deliver a superior are ready to swap suppliers. They are bombarded customer experience, but only 8% of their with competitive offers. They have less time but customers agree.’ more demands. And marketers are not delivering, Allen, Reichheld and Hamilton (2005) 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 Harvard’s Allen, Reichheld and Hamilton (2005) by Michael Krigsman (2009): think the CRM problems have something to do with growth. They call it ‘the dominance trap’ and ●● 2001, Gartner Group: 50 per cent; explain it as follows: ●● 2002, Butler Group: 70 per cent; The larger a company’s market share, the greater ●● 2002, Selling Power, CSO Forum: the risk it will take its customers for granted. As 69.3 per cent; the money lows in, management begins confusing ●● 2005, AMR Research: 18 per cent; customer proitability with customer loyalty, Chapter 3 Customer relationship Management 65 never realizing that the most lucrative buyers may nightmare continues. Researchers established that also be the angriest and most alienated. Worse, companies continued to: traditional market research may lead the irm to view customers as statistics. Managers can become ●● Ignore customer e­mails. Thirty-eight per so focused on the data that they stop hearing the cent of major UK companies ignored real voices of their customers. incoming customer e-mails, despite the number of e-mails increasing. Retailers had Some years earlier, another Harvard Business School the best track record, responding to 70 per professor, Susan Fournier (in an interview with cent of e-mails, but telecoms had the worst – Manda Mahoney, 2002), suggested that IT was 58 per cent of e-mails were simply ignored hijacking CRM projects: (Egain, 2007). Most customer relationship management ●● Fail to get to know customers. Fifty per cent technology (CRM) programs are failing. Why? of the FTSE 1000 did not know who their CRM programs are expensive and take a long customers were. Even when they had the raw time to install. One consequence is that IT has data collected and safely stored, they still ‘hijacked’ the process. In emphasizing technology could not proile their own customers decisions over marketing decisions, we’ve lost (MORI, 2003). Has it improved since? the opportunity to build better relationships with ●● Fail to satisfy customers. Of all calls to customers. To get back in balance, marketers have to help design CRM systems from the get-go. Fujitsu call centres, 50–70 per cent were for value restoration (ixing a problem, eg late Given that 74 per cent of IT projects fail (Tranield delivery, wrong delivery or poor product and Braganza, 2007), there is a natural concern quality) rather than value creation, eg adding over IT driving CRM. Incidentally, this 74 per cent value with helpful advice over the phone failure rate is surprisingly the same percentage as (Mitchell, 2004). How many inbound or found in the survey by Standish Group and Gartner outbound calls today are for value creation Group back in 1980 (IBM, 2004). rather than value restoration? ‘Customer satisfaction is declining in just about More CRM failures every market I’ve looked at over the last 15 years.’ M Earls (2002) ‘More than 55% of CRM projects deliver unacceptable results.’ Has it got better since these gloomy words were Forrester Research (2009) written? The next section explores why CRM is failing, what As with websites, social media and databases, mar- goes wrong and how to avoid these classic errors. keters have simply got to be involved in the devel- Meanwhile customers are angry. They understand opment and management of any CRM systems. how to use publicity, and now they use social net- Effectively, marketers need to take control of CRM works to spread messages like wildire. to ensure a cohesive, integrated system is embraced by all departments. A fragmented approach, with different departments running different CRM sys- Why CRM failure? tems or, as mentioned earlier, IT hijacking CRM, Organizations have steadily got worse at CRM loses the critical usefulness that CRM should because of the lack of a customer-driven culture provide to customers. They don’t want to be passed (failed leadership), poor CRM project management from department to department. Nor do they want skills (in particular scope creep, lack of training to fall through the cracks left by an unintegrated and lack of motivation programmes) and constant and poorly managed CRM system. The customer cost cutting. 66 Part 1 Communications Background and Theories Motivation and training programmes are required Militant complainers – smashing your car to bring people on board. This was recognized as a problem a few years ago when a BusinessEurope. The chairman of a Chinese wildlife park destroyed com survey (2004) revealed that 25 per cent of marketing professionals record customer details in- his $60,000 SLK230 Mercedes sports car as correctly and 40 per cent of marketing professionals a protest because he was unhappy about do not share customer contacts with colleagues. the warranty. With an astute understanding of Training and motivation are critical components in the media, he ‘intended to cause maximum any CRM programme. embarrassment’ to Mercedes-Benz by inviting Last but not least, constant cost cutting and hundreds of spectators and journalists to watch operational failings have shifted the emphasis of five workers with sticks smash the car. After that many CRM programmes from value creation to he attached ropes to the wreck and got several value restoration. Overburdened staff may also be bulls to tow it through the city. Compensation struggling with a work overload. negotiations resumed immediately but progressed In addition, as mentioned in eMarketing eXcel­ too slowly, so Mr Wang (who wanted a full refund) lence (Chaffey and Smith, 2008), ‘Old CRM systems asked a friend to also destroy his Mercedes. The were effectively automated selling systems that took friend obliged and drove his white S320 1,000 miles little or no account of what customers actually from Beijing to Wuhan. ‘In another public event, want. Danger bells should start ringing when an IT six men armed with batons smashed the windows consultant offers a front end automated solution that and doors.’ Mercedes-Benz claimed that Mr Wang cuts costs and streamlines operations and processes had ‘used the wrong fuel and had subsequently because this does not necessarily make marketing refused a complimentary cleaning of the engine’. more effective.’ August (2002) Wanted: strong marketing managers Many CEOs fail because they lack an understand- ing about the development and implementation ‘But new technologies are being implemented with of customer-driven marketing. Many marketers fail the overriding aim of driving efficiencies and cost because they have not mastered CRM systems, savings rather than enhancing the customer managed to integrate the culture across the organ- service. A strong marketing director who is ization, or helped the CEO to understand the import- respected throughout the organisation can, at ance of CRM. worst, ensure that the customer is not adversely Poor project management skills stop CRM sys- affected by a new IT investment, and, at best, tems from being implemented on time and within ensure that the investment delivers tangible budget. CRM projects are relatively large to any customer benefits.’ organization. Failings like scope creep (constantly Wright (2007) 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 CRM success business functions, not an end in itself). IT simply The good news is that poor CRM presents a golden uses information technology processes to help run opportunity to create competitive advantage by a business. developing an integrated CRM system that creates As with any changes introduced to an organiza- value or adds value to customers’ experiences, tion, they need to be supported by training and brings them closer to the organization, listens to motivation programmes. Many CRM projects lack them, collects data and serves their needs better buy-in from staff who both fear and resist change. than ever before. This grows sales from both repeat Chapter 3 Customer relationship Management 67 sales (lifetime customers) and share of wallet (what brand and ultimately become advocates. In fact, else does the customer need that the company can some relationship marketing works so well that supply?). Organizations like McKinsey forecast the the seller is not seen as a vendor but as a friendly after-sales market (after-sales service, consultancy helper who knows the customers and helps them and training) to be where many companies will ind with their lives. new growth. This emphasizes the critical import- ance of CRM systems that actually work. The CRM philosophy never sell to a stranger Building a customer-driven business requires a spe- ‘Think of the old corner shop. If the shopkeeper ciic corporate culture where the organization, at all ordered a new type of pickle, he wouldn’t expect levels, recognizes the need for customer service and customer focus. A real CRM philosophy sees cus- strangers to flock in and buy it. He’d recommend it tomers at the centre of the universe. This customer to his regular pickle buyers and to people buying focus requires a longer-term, strategic view of the cheese and pork. You wouldn’t call that hard sell. business as opposed to a short-term ‘transactional You’d call it personal service, based on the marketing’ approach that focuses on quarterly sales shopkeeper remembering the preferences of results. individual customers and using this knowledge The CRM philosophy is one where the organiza- to anticipate their needs. No matter what the size tion continually seeks to learn about customer needs and character of your marketplace, direct and preferences, in order to deliver excellent rele- marketing now lets you offer that personal service vant services, and how to satisfy customer needs in to every customer.’ better ways. The organization must also continually Young (nd) measure the right criteria. Ultimately, a CRM phi- losophy seeks to move customers up the ladder of loyalty from suspect to advocate. The ladder of loyalty was devised by Considine This customer-sensitive culture is based on permission- and Raphel (1981) and is now widely used. Organiza- based marketing as deined by Seth Godin in 1999. tions seek to move prospects up the ladder of Marketers gain permission to speak to customers loyalty from suspects to devoted loyal customers irstly; then they develop trust and, ultimately, who advocate an organization’s product or service. loyalty. The irst step is to get customer’s permission There is some overlap with moving customers up the for future communications, whether by mail, e-mail, brand engagement ladder (discussed in Chapter 1), RSS feed, etc. Although incentives are often used where customers engage more and more with the 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 F I g u R E 3 .1 The ladder of loyalty 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, Advocates focus groups, feedback forms or even real meetings Clients between customers and sales reps, as well as amongst customers themselves. Customers When customers ‘opt in’ for further e-mail, they Prospects give their permission to be e-mailed. This is a irst step in using their permission to develop the rela- Suspects tionship. Do not abuse this permission by passing customers’ data on or contacting them too frequently. Ensure future contact with customers always adds 68 Part 1 Communications Background and Theories value. It is a moral and legal requirement (in B2C IT architecture markets) to offer the customer the option to ‘opt out’ every time you contact them. The number of Technology has been both a curse and an important existing customers who opt out from further con- enabler to CRM/CEM. Ill-conceived websites that tact is the ‘churn rate’. Marketers watch the churn damaged brand values and the appalling experience rate closely and try to understand why it varies. of many call centres have created a need for more All of these approaches are dependent on an technology to monitor and improve the customer overall customer philosophy that is more strategic experience. In essence, CRM needs an integrated than tactical, with customers being nurtured over enterprise architecture; much of the software that the medium to long term rather than by a one-off will enable better CRM delivery in future does not transactional sale approach. This strategic approach go under the CRM banner. Software applications requires several components to be in place, includ- likely to be needed for CRM/CEM include: ing an IT architecture and a human architecture, ●● knowledge management; which depends on a customer culture (see ‘CRM components required’ below). These take time and ●● content and collaboration, eg instant require an investment of the three key resources, the messaging, community support on websites; 3Ms: men/women, money (budgets) and minutes ●● business information and analysis; (time). ●● experience feedback; ●● enterprise process management; ●● portals and self-service; Permission can be speciic – ask ●● applications that turn call centres into interactive contact centres. customers exactly what they prefer The ways of providing the technology are also ●● Content – news, products, offers, events. growing, with hosted, outsourced and web-service solutions becoming increasingly available from ●● Frequency – weekly, monthly, quarterly service suppliers. Organizations should make the or alerts. most of these. ●● Channel – e-mail, direct mail, phone or SMS. In highly competitive markets – markets with no categories, no boundaries and no borders – ●● Format – text vs HTML. 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 CrM components required can be promoted and brought to life at touchpoints; then they are easier to talk about. Brand promotion There are several components required for CRM gives the promise; CEM is the physical delivery of success. Without all of these components in place, that promise. This can be achieved by: the system will fail. In addition to the overall strate- gic attitudinal shift towards a customer culture, ●● basing brand values on what customers organizations also need: want; ●● involving employees in developing the ●● CRM architecture (both IT and human); values; ●● processes: ●● linking the values to the main brand promise; – proiling; ●● encouraging staff to align their behaviour – tailored contact strategies; with the values; – database management; ●● rewarding employees for delivering the ●● credibility factors. brand values. Chapter 3 Customer relationship Management 69 Human architecture 150 rules are not as good as one ●● Benchmark current culture with staff via story techniques about customers, their work simple value statement and CRM. Establish the problem areas and use the information for internal brand ‘I know an organisation whose number one alignment through change programmes. value is To conduct our business with integrity and professionalism. The MD just keeps asking ●● Spread customer insight among staff and the question “Do you think that sale/meeting/task ensure they can use it in their work. Link knowledge of management processes to was completed in a professional way?”’ customer interaction processes for greater Butler (2004) 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. Database ●● Establish the new skills required and ‘cast’ A database gives an organization access to its own staff into the new roles. Develop skills private marketplace. The database is at the heart of through continuous coaching in delivering CRM. A database can contain a lot of information the brand values. about customers depending on how many ‘ields’ or ●● Redesign organizational structures to variables they want to capture. It contains customer support new ways of working. Put lexible names and addresses, enquiries, purchasing patterns, delivery teams together, pulled from preferences, areas of interest, incentives and a lot ‘communities of practice’ (ie similar skill more depending on how many ‘ields’ are kept and pools) as and when required. CRM and what kind of analytics are used. A good database CEM challenge old structures because of the contains highly relevant and up-to-date customer need for: data. It is a valuable repository of information – a segmented approach to customers; on prospects and customers from all sources and – non-siloed thinking and working; channels, including websites, interactive TV, sales reps and customer service staff. Organizations with – new and scarce skills. properly managed databases enjoy a competitive ●● Link key performance indicators through advantage over competitors without databases. A performance management to staff incentives; good database is a powerful asset. banish incentives that misdirect activity. The There are two types of information kept: historical right incentives are vital. Do not focus just data and predictive data. Historical data (‘transac- on ‘what’ is being delivered in terms of tional data’ or ‘back data’) include name, address, inancial targets. Focus also on the ‘how’ recency and frequency of purchases, responses to of good performance delivery. offers and value of purchases. Predictive data iden- The CEO needs to develop a real customer culture tify which groups or subgroups are more likely where staff really care about customers. This is no to respond to a speciic offer. This is done through easy task. It’s a mindset. It is more an attitude than statistical scoring: customer attributes (eg lifestyle, simply a set of processes. This affects the whole house type, past behaviour, etc) are given scores that organization, as everyone is responsible – not just help to indicate the customers’ future behaviour. customer services, marketing or sales departments. The database can identify best (‘ideal’) customers It’s everyone’s job, from the delivery driver to the and worst customers. The worst customers have receptionist to accounts and inance. Everyone can ‘negative value’: these are customers who are bad use every customer experience to create a strategic debtors or who buy only when special offers are advantage over the competition. available. 70 Part 1 Communications Background and Theories deep analytic tools can now also be applied to Database opens up new sales online social media as well as the more traditional scenarios. First, consider how data mining works to build better customer proiles and contact strategies Rothmans cigarettes’ sales promotion built a while exploiting purchasing cycles with automated powerful database by offering their customers marketing. 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; Profiling 500,000 of this new customer database were Fifty per cent of the FTSE 1000 do not know who subsequently offered an FGF promotion (friend get their customers are. They cannot describe how their a friend). The database members were entered into ideal customers are different to their negative-value a free competition after sending in their own name customers (ones that cost the organization money). and the address of any friends who were over They cannot proile them. They may have their 18 years old and who smoked a competitor’s brand. names and addresses, etc, but they cannot build There were 250,000 smokers of competitors’ brands useful proiles describing them. If an organization named. Follow-up market research showed that doesn’t know its customer proiles (identities, needs 90 per cent were genuine. This database would and preferences), how can it, irstly, give them rele- be offered a stream of tempting offers to switch vant offers that satisfy them better and, secondly, ind brands. The lifetime value of a smoker is £73,000 other customers like them? It is like searching for a (for an average 20-a-day smoker). If only 10 per needle in a haystack if customers are not proiled. cent convert, this generates over £2 billion sales Chaffey and Smith (2008) explain how proiling (if all 250,000 convert, this generates over can combine explicit data (customer information £18 billion worth of sales). collected from registrations and surveys) and im- plicit 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 pro- So the database is a powerful asset containing a lot vides a real picture (or proile) of the target markets, of personal information (in the case of consumer the characteristics that deine each segment and databases) and possibly sensitive information (in how to serve each segment. For example, certain car the case of B2B databases). Directors are legally buyers might have different demographic proiles, responsible to ensure data are backed up and stored show an interest in particular features (pages) of safely and securely. Now consider the processes a car and request a test drive. If this group of visitors required to deliver excellent customer service. (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 Data analytics with a less likely proile may only get an e-newsletter Data analytics improves customer intelligence, once a month. which in turn improves targeted marketing, which Website visitors are observed as they leave an in turn improves campaign management and, most audit trail of what they did, what they looked at importantly, customer relationship management. and for how long. Cookies enable marketers to Forget how this boosts proitability for a moment, track which pages they access, what they are inter- and just consider how more relevant beneits make ested in (pages visited, times, duration spent there) customers happier, and happy customers generate and what they buy, which then helps to build their more business and more word-of-mouth referrals. proile. Drill down deeper to see how well different It’s a virtuous circle that starts with a bunch of segments respond to different offers or features in processes: identifying customer needs, delivering a newsletter. Proiling helps to identify who the most more relevant products, services and incentives in a proitable customers are and whether they have timely and cost-eficient manner and, ultimately, any similar characteristics (eg whether they respond boosting customer satisfaction. ROI improves. The to certain mailshots, came from a certain type of Chapter 3 Customer relationship Management 71 site or search engine, searched using a particular proile. The subsequent mailing produced 60 orders key phrase, or spent a certain amount of time on at £1,000. They then analysed those 60 orders with particular pages). a view to identifying any hidden characteristic that Build proiles of both customers and enquirers could be added to the proile and fed into the data- and then segment them according to their differ- base again to produce a different, more accurate ent interests, enquiries, requirements or purchases. target list. When they mailed this list they sold every Marketers can build sophisticated consumer pro- one of the 1,000 limited-edition clocks. iles based on previous purchasing decisions and even identify the consumer hierarchy of criteria, Data mining whether quality, speed of delivery, level of service, etc. This enables tightly targeted tailored offers that Data mining and segmentation can identify those match the speciic needs of each segment or proile customers who are potential long-term, loyal cus- type. Get this right and this ‘virtuous cycle’ delivers tomers as opposed to other customers who are superior service and simultaneously creates com- promiscuous ‘bonus seekers’ (short-term shoppers petitive advantage that protects customers from the who grab sales promotions and then switch when inevitable, new, competitive offers looming on the another brand offers a new sales promotion). horizon. The latter are costly and increase the ‘churn rate’ The better the proiling, the better the results, (customers who leave). Since these long-term loyal because the more accurate the targeting, the less customers are far more proitable and the promis- resources are wasted. Different customers have cuous customers are loss making, every business different needs. It is actually easier to satisfy them needs to know where each of these segments comes by dividing them into groups sharing similar needs from, ie which channels and incentives work best. (segments) and then treating each segment differ- Within channels, businesses need to know which ently (different contact strategies for each). ofline advertising, online advertising, direct mail Proiling is a continuous activity, which includes (online or ofline) and social media (speciically continually collecting customer information, mining which ones) are generating the right trafic or con- it and using it to proile and target more successfully. versions and the wrong trafic or conversions. For example, Grattan’s ladies’ fashion mail-order company decided to experiment with a new product, a grandfather clock. They guessed the likely target Intelligent miner saves Safeway’s proile would be something like middle-aged, well- off ABs living in ACORN types J35 (villages with top customer wealthy older commuters) and J36 (detached houses, exclusive suburbs). They then asked their computer Before Safeway delisted a particular cheese to print out names and addresses that itted this 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 Catch the at-risk customer defectors clientele Safeway would want to disappoint. Under conventional analytical principles, the Existing customers cannot and should not be product would have been delisted; in actual fact, ignored, as they are on average six times more the item was quite important. profitable than new customers. It is surprising how DB2 (1997) 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). Databases have to be stored securely. Large data- At-risk (of defecting) customers or even recently bases require large warehouses. Data mining drills ‘churned’ customers need to be contacted (if they down into these data warehouses to discover patterns fit the ideal long-term customer profile). and relationships previously hidden in the data. Data mining applies advanced statistical analysis 72 Part 1 Communications Background and Theories and modelling techniques to data to ind useful pat- are obviously other ields of data worth capturing terns and relationships. It can, for example, explore for either a B2C business or a B2B business. FRAC each and every transaction of millions of customers is a useful mnemonic. It stands for: frequency (of and how they relate to each other. Data mining can purchase/visit), recency (of purchase/visit), amount ind correlations that are beyond human conceptual (of money spent on purchases) and category of capability (see the seafood bikers and cellist DIYers purchase. in the ‘Unexpected relationships’ box below). A Chaffey and Smith (2008) show how some CRM range of statistical tools is used, including regres- systems use RFM (recency, frequency, monetary sion analysis, time-series forecasting, clustering, as- value) analysis for targeting e-mails according to sociations, logistic regression, discriminant analysis, how a customer interacts with a website. Values neural nets and decision trees. A sequence-discovery could be assigned to each customer as shown in function detects frequently occurring purchasing Table 3.1. patterns over time. This information can then be Customers can be combined in different cat- layered with demographic data (from the main egories and then appropriate message treatments sent database) so that a company can tailor its mailings to encourage purchase. There are many approaches on each household’s vulnerability or propensity to here; for example, a theatre group uses nine cat- buy certain items at certain times. egories 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. Unexpected relationships There are a lot of other useful data worth collect- ing also, such as promotions history or responses to Unexpected database connections revealed that 82 speciic promotions, share of wallet or customer per cent of motorcycle owners buy frozen seafood share (potential spend), timing of spend and more. and 62 per cent of amateur cellists buy power tools. In B2B, we are interested in business type (standard It can be mathematically interesting to see these industrial classiication (SIC) codes), size of business, techniques in action. However, it is also important holding companies and subsidiaries, competitive that a manager knows roughly what the purpose products bought, etc. Customers can be segmented by their activity or responsiveness levels, and then and possible benefits are of any such data-mining strategies to engage them can be developed. For analysis. The ability to ask a good question or write example, Novo (2004) recommends the use of hurdle a good data-mining brief is a relatively new skill for rates, which are the percentage of customers in a today’s marketing manager. 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 Building a profile with fields of data examples of hurdle rates below show: So what kind of data, or ‘ields’, should be captured? ●● 60 per cent of registrants have logged on to In addition to a customer’s name and address, there the system in the past year; Ta b l E 3 .1 Using RFM analysis Recency Frequency Monetary value 1 Over 12 months 1 More than once every 6 months 1 Less than £10 2 Within last 12 months 2 Every 6 months 2 £10–£50 3 Within last 6 months 3 Every 3 months 3 £50–£100 4 Within last 3 months 4 Every 2 months 4 £100–£200 5 Within last 1 month 5 Monthly 5 More than £200 Chapter 3 Customer relationship Management 73 ●● 30 per cent have clicked through on e-mail in Predictive analytics the past year; Data mining can also be used to analyse buying ●● 20 per cent of customers have visited in the behaviour to identify clues for cross-selling and past six months; up-selling. For example, a bank that monitors its ●● 5 per cent of customers have made three or customers’ spending may identify a segment of more purchases in the past year. customers buying products from Mothercare, which suggests the customers have young children. This When marketers identify their customers’ purchas- can be combined with typical proile information ing cycles, they can increase sales signiicantly, by such as age and marital status to further identify targeting customers with attractive offers just be- a cluster, or segment, of the bank’s customers who fore they start their next search. Delaying this by might be likely to consider buying a bigger car a month or a week reduces the probability of pur- (as their family is growing). The bank’s subsequent chase because, once they start searching, customers offers of a car loan might receive a 30 per cent explore competitive offers. Data mining reveals the conversion rate (request more information, call average purchasing cycle and subsequently iden- the bank, register an interest or take out an actual tiies those customer segments that are about to loan). start their buying process again. The database can Internet gaming company Victor Chandler uses then automatically trigger an e-mail or direct mail SAS to do a behavioural analysis to predict lifetime or telephone call to a customer (once certain sets of values of new customers. For example, if a new rules are applied). For example, a computer com- customer comes in and bets on casinos (instead pany mined its database to identify individual pur- of poker tables), the company can predict whether chasing cycles, to identify how frequently different that customer is more likely to become a long-term types of customers replaced their PCs. Once the customer or a short-term, expensive, loss-making frequency was identiied, the company started send- customer. The predictive analysis suggests which cus- ing catalogues and discount offers inside the buying tomers are worth investing in (with regular contact frame, with a 95 per cent conidence level, ie 95 per and regular incentives) and which are not worth cent of the prospects were just about to start search- investing in – those loss-making ‘bonus seeker’ cus- ing for a new PC. Sales jumped up. tomers, whose proile is: young male, tight betting (as opposed to betting all of their stash), declining betting frequency, infrequent betting, and middle- aged female. If visitors display these characteristics, Data analytics treble conversion ratios they’ll stay three weeks and leave and therefore do not warrant any relationship-building efforts (ie no Wolters Kluwer UK provides publications such as regular contact or incentives). The other customers Croner’s information and consulting services that are worth investing in, and it is worth developing help businesses and professionals comply with ‘retention activity’ (a regular attractive incentivized constantly changing laws in key areas including tax contact strategy) for them. Predictive analytics and accountancy, health and safety, and human use historical data to highlight and optimize mar- resources. The company has annual revenues of keting messages that work better for certain social around €3.7 billion and employs over 19,000 people. networks. After the company installed and employed SAS Analytics, ROI on marketing spend increased Deleting older home dwellers – a less scientiic threefold; customer retention rates increased from proile building In the absence of completely 75 to 83 per cent; improved efficiency and targeting reliable data, a less scientiic analysis is sometimes meant reduced marketing headcount and costs; used to separate or take out names that do not it in customer acquisition, sales conversion rates the target proile. For example, Rediffusion cable improved from 1 in 33 (3 per cent conversion) to services felt that older home dwellers did not it 1 in 11 (9 per cent conversion). The overall project their ideal prospects’ proile, so they took out ROI ratio was 2.25:1. older-generation Christian names such as Albert, Alfred, Alice, Amelia, Arthur, Bertram, Constance, 74 Part 1 Communications Background and Theories What happens with this information? Who decides London Fire Brigade data analytics to act on a particular customer suggestion? Who tells the staff? Who tells the customer? How many predict ires times should a customer be contacted? If customers have outstanding issues, it is not the time to sell Database mining can even be used for non- them something else. Should different types of cus- marketing purposes, such as fire prevention. tomers get different types of offers? Who decides? Take the London Fire Brigade. It carries out 65,000 Who implements this? Processes are important. home safety visits each year, but with over 3 million Does everyone know how to process an order or homes in London it would take over 50 years to cover a complaint? What happens if someone phones with everyone. More than 60 different data elements an unusual enquiry? Who deals with it? How many are fed into the model, including census data and times are customers left hanging on the phone, being population demographics, broken down into 649 passed around from department to department? geographical areas (ward level), plus type of land Some companies value customer feedback. They use, data on deprivation, Mosaic lifestyle data, encourage it with 0800 numbers, feedback buttons historical incidents and past prevention activity. on websites, questionnaires, rating cards and even The model predicts where fires are most likely to outbound telemarketing to collect customer feed- occur. London Fire Brigade use the information to back. Listening is just the beginning. It is vital to predict where there is a high risk of fire, eg in a small have a system, or process, that enables a listening estate of houses or industrial buildings, so they can process as well as a constructive response. then send in an assessor to investigate and perhaps circulate information, set up some advisory services and ultimately reduce the number of fires. Maximize the customer’s opportunity to complain Companies can set up suggestion boxes and other Grace, Harold, May, Mildred, Rose, Sabena, feedback systems to maximize the customer’s Samuel, Victor, Violet and Winifred. opportunity to complain, compliment, create or engage with the brand. Costs Projects range from several hundred thousand cus- tomer records to several million (or in some cases Feedback (even negative) is food and drink to 40 million records). A data integration, data-mining marketers. However, only 1 in every 24 dissatisied campaign optimization and a full direct marketing customers bothers to complain, according to suite from companies like SAS range from £500,000 E-Satisfy Ltd (formerly TARP). Rather than facing to £5 million, with social media customer link analysis an unknown enemy of bitter, disappointed and starting at around £250,000. dissatisied customers, an organization, through its complaints process, can offer a chance to sort out previously unknown problems. It also gives the Processes: general organization the opportunity to ind the enemy How does the organization manage complaints, within (internal problems such as quality control or money-back requests, queries, compliments, sugges- demotivated staff). One company chairman takes tions, and requests for additional services? How time to listen to taped telephone complaints while does it handle a sale, a cancellation, a complaint driving home in his car. Many services companies or a customer defection? Are there processes or actually ask their customers to ill in a form about systems in place? After a sale, do you send out levels of satisfaction or dissatisfaction. Solutions an order acknowledgement, followed by a delivery are relatively easy. Identifying the problem is the alert, followed by a post-sales service satisfaction dificult part. Complaints are generally helpful. questionnaire or score sheet or feedback request? Welcome complaints. Chapter 3 Customer relationship Management 75 Complaints help innovation The 1–10–100 rule 3M claims that over two-thirds of its innovation Federal Express’s 1–10–100 rule is: For every pound ideas come from listening to customer complaints. 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 Some organizations have systems and processes that after your customer has taken delivery. To fix the stop complaints before they happen. Compared to ixing a complaint, telemarketing (or even an problem at this stage, you probably pay about 100 e-mail) can provide a low-cost method of ensuring times what you could have paid to prevent it from customer satisfaction. For example, some customers happening at all. 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 Processes: detailed outbound telephone contact (the company calls the customer) picks up any issues or problems before contact strategies they become major ones. This is more cost-effective Too much contact can wear out a relationship. As in than ixing problems. Inbound (0800 and freephone) personal relationships, you can become a bore, a customer service lines can also reassure customers nuisance or irrelevant. On the other hand, too little if they are made aware of the facility. ICL computer may close the relationship-building opportunity. company has a team of telephone diagnosticians The key to building the best relationship is to have who handle fault reports from customers. Linked to the right number of contacts of the right type at the a sophisticated computerized diagnostic kit, they right time for speciic types of customers. This is a can identify whether the fault really exists or not. contact strategy. It speciies which kinds of customers Many problems arise from the user’s lack of know- and enquirers get which sequence of contacts and ledge, which means many potential problems or incentives and from what method (e-mail, mail, frustrations can be sorted out over the phone. If a telephone, personal call, etc). Some organizations fault is identiied, the diagnosis informs the engineer ask their customers how they prefer to be updated in advance so that he or she arrives with the right about special offers, reminders and announcements spare part. (including, if e-mail, whether text or HTML is pre- ferred). The database stores their preferred media and ensures that they are contacted in the preferred manner. So organizations vary their contact strategy Stew Leonard’s US retail chain’s depending on how customers (and prospects) react. listening process Some garages maintain contact with their cus- tomers via e-mail or SMS, sending them reminders There are monthly focus groups and a daily when their car is due for a service. If no response is suggestion box. Suggestions are typed up by 10 am generated then this triggers a prompt for staff to the next day, and store managers either act or call make a phone call to see whether the customer still the customers about the complaints or suggestions. wants to receive reminders (maintaining permission). The chain averages approximately 100 comments A contact strategy deines an initial welcome per day – they are the pulse of the store. 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 ex- tended for later stages in the customer life cycle, with By actively listening to customers (and their com- messages designed to convert customers to purchase, plaints), companies can save, rather than spend, encourage repeat purchases, encourage customers money. to try new products or reactivate customers when 76 Part 1 Communications Background and Theories their interest wanes. Here are three steps to a contact quality of service from the driver and strategy from Chaffey and Smith (2008): picker (eg item quality and substitutions). 1 Develop a welcome programme where over – AR3: Two weeks after the irst purchase, the irst three to six months targeted a direct mail approach offers tips on how auto-triggered e-mails are sent to educate to use the service and a £5 discount on subscribers about the brand and its beneits the next purchase intended to encourage and deliver targeted offers. For example, reuse of online services. the Renault B2C welcome strategy has – AR4: A generic monthly e-newsletter with a container or content pod within its online exclusive offers. e-newsletter to deliver personalized – AR5: A bi-weekly alert with personalized information about the brand and model of offers for the customer. car in which a prospect is interested. This is – AR6: After 2 months, a £5 discount for updated each month as the customer gets to the next shop. know the brand better and the brand gets to know the customer better! – AR7: A quarterly mailing of coupons. 2 Segment list members by activity ●● Trigger event 3. The customer does not (responsiveness) and age on the list. Assess purchase for an extended period. the level of e-mail list activity (ask what – AR1: The dormancy is detected, and a percentage of list members haven’t clicked reactivation e-mail is sent with a survey within the last three to six months – if they of how the customer is inding the haven’t, they are inactive and should be service (to identify any problems) and treated differently, either by reducing a £5 incentive. frequency or by using more ofline media). – AR2: A further discount incentive is used 3 Some customers become less responsive. in order to encourage continued usage A speciic contact strategy is required to after a break. reactivate waning customers. Remember, markets are conversations. Listen to Here is how Tesco, arguably the world’s most so- what customers say or watch what they click on phisticated relationship marketer, develops different and use this information to tailor relevant added contact strategies relevant to different customer value with every contact you make. Then ask types and customer relationship stages, eg new customers how often they want contact and what website visitor, irst-time customer, repeat customer, type of information or offers they would like. This lapsed customer. Tesco monitors customer actions increases relevancy – a key success factor. during the customer life cycle. Different customer actions trigger different automatic responses (ARs) Defectors’ process by e-mail: All organizations lose customers. It’s called ‘churn’. ●● Trigger event 1. The customer irst registers Some customers change job, leave the country, on the site (but does not buy). grow old or die, and some switch to a competitor. – AR1: Two days after registration, Organizations need a process for following up any an e-mail is sent offering phone assistance lost customers. Essentially the organization needs and a £5 discount off the irst purchase to to listen carefully, ind out why customers have encourage a trial. defected, clarify what can be done to win back the business, and ask for the business (sometimes with ●● Trigger event 2. The customer irst purchases an added incentive). All of this has to be recorded online. on to the database for review (particularly why – AR1: An immediate order conirmation customers are leaving). is sent. Patience is required, as the defecting customer – AR2: Five days after purchase, an e-mail may have just bought a competitor’s product or is sent with a link to an online customer service and the organization has to wait for the next satisfaction survey asking about the purchase cycle to start again. So be patient. Keep Chapter 3 Customer relationship Management 77 in touch. Make it easy to come back to the organ- ization. When defectors actually do return, the Relationships with an unknown lady organization has to go out and win their business every day. Research into senior business executives who Marketers must know what aspect of the organ- travel with BA revealed that most of them felt they ization’s procedures, customer care and customer had a personal relationship with the lady who experience causes customers to leave. Marketers wrote the BA executive newsletter – in so far as, must also know which types of customers are if they ever had a travel problem, they could ask her defecting. If it is a disproportionate number of high- value customers, then alarm bells ring. to sort it out for them. Marketing automation Marketing automation (MA) can improve campaign There are three distinct approaches to personaliza- results, as it generates automatic tailored communi- tion as explained by Chaffey and Smith (2008): cations triggered by proiles and events (such as customization, individualization and group charac- purchases). It is all rules based, using variables terization. Customization is the easiest to see in including transaction history and cost history (call action: it allows visitors to select and set up their centre returns, order volumes and order frequency). speciic preferences. Individualization goes beyond It delivers a single customer view and identiies this ixed setting and uses patterns of a visitor’s which media (including social media tools) work own behaviour (and not any other user’s – it is best using propensity models (propensity or likeli- known that it’s a particular customer because of hood to open, propensity to buy, etc). the log-in and password choices) to deliver speciic Marketing optimization analyses all contact his- content to the visitor that follows his or her pat- tory to identify what communications mix generates terns of contact. In group characterization, visitors the best return on investment. It identiies which receive recommendations based on the preferences channels (or tactical tools) generate the best results, of people like them, using approaches based on whether e-mail, direct mail (snail mail), call centre, collaborative iltering and case-based reasoning. search engine trafic (resulting from SEO cam- Mass customization is where a different product, paigns), social media or any other sources of cus- service or content is produced for different seg- tomer acquisition (or retention). ments – sometimes hundreds of different segments. Personalization is different. It is truly one to one, particularly when not only the website and com- Personalization and tailored ofers munications are personalized but also the product The most important sound in the world is . . . your or service. own name! It’s personal. It’s a compliment – an Another way of thinking about the many options expression of respect. Marketers depend on a good for online personalization is suggested by the Gartner database to remember customer names, needs, Group (ranging from simple to complex): interests and preferences. Specialized software com- ●● Addressing customers personally: bined with an up-to-date and well-cleaned database allows marketers to personalize communications – Address customers or prospects by name such as e-mails, voicemails (voice-activated e-mails), in print communication. snail mails (traditional direct mail), SMS text mes- – Address customers or prospects by name sages (for mobiles) and, most interestingly, websites in electronic communication. – personalized websites. ●● Real­time personalization: Personalization can help to build relationships. – Keyword query to change content. When someone remembers your name and, even more importantly, your interests, it demonstrates – Clickstream data to dynamically change that the person cares about you. Similarly, an website content. organization that remembers your name and your – Collaborative iltering to classify visitors interests is, at least, trying to do a good job. and serve content. 78 Part 1 Communications Background and Theories ●● Customer proile personalization: Personalization challenges – Geographic personalization to tailor Many personalized sites require users to log in messages in traditional media. with a password, which can be frustrating when – Demographic personalization to tailor customers forget. Many visitors give up and leave messages in traditional media. the site. The use of cookies here can avoid the need – Geographic personalization to tailor for passwords and log-ins. However, privacy laws online messages. now require e-marketers to ask permission before placing a cookie on a user’s PC (and also explain the – Demographic personalization to tailor use of cookies within the privacy policy). Here are online messages. some other personalization problems. – Give website visitors control over content Although personalization is important, it is from set preferences. possible to overpersonalize. American Express – Registration data to change website once tried too hard to be too personal and upset content. customers. UK Online for Business reported that American Express call centres discovered that cus- There are other interesting options for tailored tomers resented being greeted in person until the offers and ads, including ‘content interested in’ customers had actually declared who they were, (pages visited) combined with other live data such as even although a powerful database can recognize a bank account balance. For example, when HSBC an incoming phone number and reveal the caller’s Bank International wanted to move customers name, address, purchases, issues, etc. The practice into more valuable segments, it tested personalized of immediate personalized greeting was swiftly banner ads on its own website. New Media Age discontinued. (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 Dear Rich Fat Bastard in this task, disrupting their banking experience without infuriating them’. HSBC developed some Security becomes even more important when rules to serve different offers dependent on the type personalized information is collected. A credit card of content accessed and the level of balance in the company once had a direct mailshot to 30,000 of its customer’s account. The personalized approach best customers (its gold card holders) intercepted worked, with new banners having an 87.5 per cent by a disenchanted employee. He changed the higher click-through rate than non-personalized ban- salutation in each of the personalized letters to ners (6.88 per cent versus 3.67 per cent); savings accounts opened via internet banking increased ‘Dear Rich Fat Bastard’. by 30 per cent (based on the six months pre- and post-launch); and non-premier customers upgrad- ing to premier accounts (requiring a balance of £60,000 or more) increased by 86 per cent (based Nike’s website once offered customers the oppor- on the four weeks pre- and post-launch of the tunity to personalize their own shoes by stitching targeted banners). on their own personal logo. One customer illed Personalization enhances relationships. Personal- out the online form, sent the $50 and chose ‘sweat- ized web pages help to give customers a sense of shop’ as a personal logo. Nike refused. The publicity ownership – not the marketer owning the customer, soared. but the customer owning (or controlling) the site. Automated personalized systems can present When you make customers feel that their home challenges. However, listening to feedback, ensuring page is truly theirs, then the offers you make avail- security measures are in place and motivating staff able to them are the customers’, the information to spot issues (eg Nike) are all simply best practice. they access is put together just for them, and you Now let’s consider a key component that customers allow the customers to own you. expect – credibility and trust. Chapter 3 Customer relationship Management 79 Credibility and trust make it a poor high-proile company. What is the point of that? Yet how often do you see this? Develop credibility before raising visibility. If you don’t do this you will waste an awful lot of money So how do you develop credibility annoying customers. Many organizations spend a lot of money on advertising and generating trafic and trust on a website? to their websites (raising visibility) before they have Firstly, ensure that your product or service has established their credibility. Effectively, all they have suficient quality to match the promises made in ad- done is to take a poor low-proile company and vertising and other communications. Use customer Ta b l E 3 .2 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 80 Part 1 Communications Background and Theories feedback regularly and rigorously. Then check your and salespeople either face to face or over the phone. website works all right (usability testing). Often the best source of data lies dormant, thrown These days, all marketing communications carry in the bottom of a drawer or a customer ile some- the organization’s website address. Use the 20 where in an organization. Every customer and his credibility factors listed in Table 3.2 to ensure you or her purchasing pattern, every enquiry and every do not damage your credibility but in fact strengthen complaint, comment or item of feedback can be it. Make sure you tick them all before you start to stored in a database. The database can build up a raise your web proile. detailed customer’s proile, identifying issues, pre- ferences, incentives that work and the buying cycle. This facilitates sequence selling, where interest is aroused and relevant tempting offers are made CrM creation and through a series of communications (contact strategy) rather than going for an immediate straight maintenance sale. The system should accommodate and develop a Writing a CRM brief dialogue or a two-way low of information between the customer and the organization. Does it prompt Careful thought and considerable advice are needed three-way communication (‘trialogue’) by sharing in setting up a CRM system. It requires vision, engaged customers’ opinions, scores, ratings and strong leadership, CRM experience, integrated skills reviews with other prospects? Every time customers and an integrated team. When choosing a CRM respond, they can be encouraged to give informa- system, you need to consider the current and future tion about their needs and situation (eg whether requirements. This involves: they want to opt out or stay on the database). ●● objective; Remember, input is one thing, but retrieval in a sensible format is another. The art lies in the re- ●● scenarios; trieval of the data in an appropriate format, eg a list ●● contact strategies; of ‘all enquirers for product x from the south-west ●● communications tools. in the past six months’, a list of a particular cat- egory of business customer (SIC code), a list of Objective means purpose. What are you trying ‘customers who have bought all product x but not to achieve with a new CRM system (customer re- product y’, and so on. tention, customer win-back, customer acquisition, Scale is important too. Will the database grow? complaint processing or customer feedback)? How How many sources of data might there be? How can it help customers? Then how can it help you many scenarios might exist? and your team? What kind of scenarios does this A marketing lead from an interdisciplinary team is involve (customer feedback, suggestions, complaints, required in creating and developing a CRM system. enquiries, sales – all of these can be online and off- A strong CRM project leader is also required. line, or on a telephone line)? Is the system designed The project team comprises different users of the to facilitate ‘welcome cycles’ (welcome letters and system, analysts to understand their requirements, new member offers), up-selling (moving the customer technical staff to create the system and a project on to higher quality levels), cross-selling (other manager with suficient time to devote to the job. products or services) and reactivation (of previous You’ve got to involve all departments that may use customers), all of which help to nurture the rela- the CRM system, from customer services, sales and tionship? What kind of contact strategies might this marketing to inance (invoicing), admin, production involve? What kind of marketing tools will generate and quality control. And don’t forget IT, but I the data, eg e-mail, snail mail, outbound telemarket- strongly recommend that marketers must take con- ing, inbound telemarketing, sales teams and website trol, not IT – IT simply supplies the service expertise. dialogue? It rarely has a customer focus. Remember, the Customer data are collected from website regis- primary reason is to help customers to do business tration, guarantee forms, sales promotions’ tele- with you. This is not a technology-driven project. It marketing, customer service teams on the phone, has to be a customer-driven project with measurable Chapter 3 Customer relationship Management 81 customer criteria, such as increased sales, satisfac- that, just as for website development, prototyping tion, referrals, etc. 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 Using SOS 3Ms in a brief attitude as much as a system. Success depends on a Taken from SOSTAC® marketing planning (see customer culture where all staff always ask ‘How Chapter 10), SOS + 3Ms helps brieings. SOS stands can we help the customer?’ for situation (what kind of CRM do we have now Marketers need to improve IT skill sets. They and why does it need improving?), objectives (what need to get better at speaking the language of are we trying to achieve with the new CRM system?) IT and develop a greater understanding of how and strategy (how does CRM integrate with all the technology can translate into improved customer company’s operations?): knowledge and ultimately an improved customer ●● Situation (where are we now with CRM?). experience. As Wright (2007) says, ‘IT people use scary language, and marketers step back from it. ●● Objectives (what do we want to achieve?). But if marketers constantly brought conversations ●● Strategy (how will we get there?) This is why back to the beneits for the customer, that would the brief is critical, as it should be clear help build a common language around the customer about contact strategies and scenarios and put technology back in its place.’ (including how it can now and in the future integrate with other systems, such as invoicing and debt collection). CRM system creation, 3Ms include money (the budgets required for soft- development, testing and roll-out ware licences plus training and motivation schemes to ensure staff buy into the new system), minutes Systems development should follow a structured ap- (the timescales required to specify the brief, source proach, going through several stages (see Figure 3.2). it, test it, modify it, train the team and roll out the Prior to developing a brief and system design, system), and men/women (who will champion the marketers need to improve their IT skill sets. Marke- project, do the work and be involved in data capture, ters need to understand and speak the language of IT analysis and use). Every brief must have these. When and develop a greater understanding of how tech- should the new system be tested, staff training take nology can be used to improve customer knowledge place and the system eventually go live? and ultimately an improved customer experience. Beware of scope creep FIguRE 3.2 Scope creep destroys projects. Finally, when you’ve CRM development process 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, Brief 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 System brief’) and allows suppliers to charge a lot more Design 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 discus- System Development sions 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 Roll-Out approach, going through several stages. Note though 82 Part 1 Communications Background and Theories Prior to each stage there is research or testing. Prior Managing the database to drawing up a brief, a lot of research goes into The database is at the heart of the CRM system. reviewing what each department requires and how The database manager has many responsibilities it all integrates. After the brief is issued several sup- in addition to the database design (which allows plier tenders are reviewed and researched. These relevant customer data to be accessed rapidly and may be off-the-shelf solutions, tailor-made solutions queries performed): or a mixture, ie an off-the-shelf system tweaked to suit the organization’s speciic requirements. When ●● Data quality – ensuring data are accurate, a system is selected and developed it is then tested relevant and kept up to date. before being rolled out. ●● Data security – ensuring data cannot be System development involves prototyping and compromised by attacks from inside or reining the prototype. This enables the system to be outside the organization. tailored through users’ experience of early versions of the system. However, beware of ‘scope creep’. ●● Data coordination or user coordination Ultimately, CRM is an attitude as much as a process speciies exactly who has access to data or system. Success depends on a customer culture retrieval and who has access to data input. where all staff always ask CRM designers and Too many uncontrolled inputs may result developers and consultants ‘How does this help the in iles being deleted or changed by too customer?’ many different people. The database spins Roll-out requires an investment of the 3Ms into out of control. training and motivation. Training ensures all staff ●● Data back-up and recovery – ensuring that are fully familiar with the system, how it works, data can be restored when there are the how it can make their lives easier, how it will help almost inevitable system failures or attacks. the customer and how it will help the business. The manager also monitors performance, particu- larly checking the system is coping as either the database grows or the number of interactions grows (driven by the contact strategies). Front end is fun, back end is business Marketers are reasonably good at developing Costs and timescales websites (front end) but we have to become When it comes to the crunch question of ‘How experts with the database and the e-CRM systems much does it all cost?’ there are many variables to (back end) required to build continual success. consider: ●● the set-up costs of the system; ●● the type of system; ●● the scope of the system; CRM maintenance ●● the size of the system; Although it does not appear on the balance sheet, ●● the choice made about the database the database is an asset. Like any asset it deterior- management system; ates or depreciates over time if it is not properly ●● the maintenance programme; maintained. In the same way that a physical asset, ●● where the physical database management like a building, needs to be maintained to avoid system is geographically located. it becoming run down and eventually become a liability (if tiles fall off the roof or a wall collapses), It is a complex job but, once all these variables are a database asset needs to be cleaned and maintained taken into consideration, a task breakdown can be to stop it deteriorating and eventually becoming performed, and analysis, design, set-up, mainten- a liability, eg sending out direct mail to people who ance and running costs can be calculated. have died naturally upsets the relatives. Careful What’s missing is customer service staff, who management of the database is required. are a key component, particularly when they are Chapter 3 Customer relationship Management 83 handling wide-ranging, non-standard requests or win it by delivering relevant added-value communi- complaints. Here’s a crucial question: how many cations continuously. customer service staff are required? Asking for information is a delicate affair. Mar- The other key question is: how long does it take keters can be too greedy. Beyond the basic informa- to set up a CRM system? The variables are similar tion, you may need to offer incentives for more to those for cost: information or simply wait for the relationship to develop and permission to ask for more. But ●● time allowed for the investigative stage; remember that customers value their privacy. All ●● time allowed for design; organizations’ privacy policies should be clearly ●● time for writing programmes; posted on the website and any other access points ●● time for data capture, reassessment and customers may have with you. input; ●● time for trials, piloting, testing and Measuring customer satisfaction debugging. 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 A strong project manager call centres as a means of gathering customer data as opposed to a highly inluential brand-building An effective CRM programme needs a strong ‘brand moment’. project manager who can unite the business and Those marketers who do measure customer technical team members. A defined database care also need to tread cautiously, as it can be mis- administrator is also required who will champion leading. For example, an increasingly high customer the system and own it to ensure appropriate data care score (say up from 84 per cent to 92 per cent) quality, security and performance. Planning using may seem good, but it ignores two critical elements. the systems development life cycle provides a Firstly, which service components are very important framework for costing, scheduling and monitoring the project. Remember also that CRM programmes never end; they evolve. The customer cube One-dimensional customer surveys usually rate Control issues product quality, after-sales service, maybe price, etc with 1 extremely dissatisfied, 2 dissatisfied, One of the toughest jobs is to know which data 3 neutral, 4 satisfied, 5 completely satisfied. This matter most – especially where there are conlicting ignores how the customer ranks the importance of data. Some customers will give incorrect informa- each variable. tion, consciously or unconsciously. Some staff input Two-dimensional customer surveys weight data incorrectly. Other staff leave data ields empty. these satisfaction factors according to how Marketers and data managers have to come up with important they are to the customer: 1 not important, ways to acquire the correct and relevant informa- 2 of minor importance, 3 fairly important, 4 very tion in the irst place and then make it useful to the organization. important, 5 essential. However, this ignores how The issue of the invasion of privacy is a dificult customers compare the brand to those of the other one. Laws, ethics and codes of practice come into competitors. play. Ethics have a role, but the main arbiters of Three-dimensional customer surveys also ask ‘How much contact is too much contact?’ are the customers to rate the organization versus the customers themselves. They reveal how ready they competition for each customer service component: are to be communicated with by their response (or 1 significantly worse, 2 somewhat worse, 3 about lack of response). Permission to contact customers the same, 4 somewhat better, 5 significantly better. is only temporary. Organizations have to continually 84 Part 1 Communications Background and Theories to customers? The ultimate goal is to score 5 out of strategy. Building good customer relations requires 5 ratings for all those customer service components a cultural shift in the organization to ensure that given an importance rating of 5 by the customer. the whole organization wants to help customers. Secondly, how do customers rate the experience in Some CRM projects take several years to research, comparison to that from competitors? develop, test and launch. There will always be some Some authors are even suspicious of three- tension between the pressure to hit the short-term dimensional customer satisfaction scores, as they monthly and quarterly sales (and proit) targets believe conventional customer satisfaction scores versus the longer-term customer relations scores. ‘typically only draw responses from the bored, the Marketers need to educate boards about how CRM, lonely and the seriously aggrieved’ (Reichheld and in the long term, grows quarterly sales and proit Allen, 2006). The key, they suggest, is to ask cus- results. tomers one simple question: ‘How likely is it that you The shift to a relationship-building organization would recommend us to a friend or a colleague?’ can start with a website or even the fundamental Companies like GE focus on one statistic that products and services themselves. Ask how the nets the percentage of unhappy customers (scoring organization or the brand can help customers 0–6) from the percentage who are very happy even more than it does now (see the discussion of customers known as ‘loyal promoters’ (scoring 9 or National Semiconductor in ‘The colouring depart- 10). This net promoter score provides a crystal-clear ment is dead’, Chapter 1). Some years ago Unilever single number that is as actionable as net proit or made a major strategic decision to move Persil net worth. 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’, Accountants cannot distinguish which meant relaxation, minding your skin, diet between good and bad proits and children, time with the children, tips for a happy family, and getting creative with the children. In ‘Business measures success based on profits but addition, the subsequent brand engagement strategy and contact strategy have to be worked out care- accountants cannot distinguish between a dollar of fully, as discussed in the previous sections. bad, customer abusive, growth stifling profits and a dollar of good, loyalty enhancing, growth accelerating profits.’ Reichheld and Allen (2006) ROI of customer satisfaction ‘In fact, when we looked at the top 100 e-retailers, we saw that increasing satisfaction by just one CrM summary and point drove over $112 million in additional sales.’ Atchinson (2008) challenges CRM is a strategic issue requiring a long-term per- spective. Winning a sale is short-term transactional Table 3.3 is an interesting way to end the chapter – marketing. Building a relationship where the cus- a nice simple survey to get a feel for an organiza- tomer comes back again and again is long-term tion’s approach to CRM. Chapter 3 Customer relationship Management 85 Ta b l E 3 .3 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... You are... 12 A CSQ legend! 10–11 A CSQ star! 7–9 Jo(e) Average 4–6 A benchwarmer Below 4 In the penalty box © JoAnna Brandi key points from Chapter 3 ●● Relationship marketing (and CRM) can create ●● CRM requires resources and a disciplined set of competitive advantage. processes. ●● CRM is all about long-term brand building vs ●● Many organizations allow scope creep and lack short-term sales growth. of training and motivation to destroy their ●● There is a disciplined approach to the CRM CRM. planning process. 86 Part 1 Communications Background and Theories references and further reading Allen, J, Reichheld, F and Hamilton, B (2005) Works, IBM [online] http://www.ibm.com/ The three ‘Ds’ of customer experience, Harvard developerworks/rational/library/3771.html Business School Working Knowledge Krigsman, M (2009) CRM failure rates: 2001–2009, Atchinson, S (2008) The ROI of customer ZDNet, 3 August, http://www.zdnet.com/blog/ satisfaction, Interview with Larry Freed, President projectfailures/crm-failure-rates-2001-2009/4967 and CEO of ForeSee Results, ClickZ, 24 July McCorkell, G (1997) Direct and Database Marketing, August, A (2002) Smashing time for Chinese Kogan Page, London consumers, Times, 14 March Mahoney, M (2002) ‘Putting the R back in CRM’: Bird, D (1989) Commonsense Direct Marketing, It’s time to reinstall the ‘R’ in your customer 2nd edn, Kogan Page, London relationship, Interview with Susan Fournier, Harvard Brann, C (1984) Cost­Effective Direct Marketing: Business School Working Knowledge, 7 January, By mail, telephone and direct response advertising, http://hbswk.hbs.edu/archive/3000.html Collectors’ Books, Cirencester Mitchell, A (2004) Heart of the matter, The Markets, BusinessEurope.com (2004) BusinessEurope News 3 June Feed, 4 February MORI (2003) Managing your customer insight Butler, J (2004) Developing a customer culture, capability and the drivers for change – client Successful Entrepreneurial Management managed, cosourced, insourced or outsourced Chaffey, D and Smith, P R (2008) eMarketing – a survey of UK FTSE 1000 organisations, eXcellence, 3rd edn, Kogan Page, London Commissioned by Detica Considine, R and Raphel, M (1981) The Great Moriarty, R and Moran, U (1990) Managing Brain Robbery, The Great Brain Robbery, hybrid systems, Harvard Business Review, Pasadena, CA November–December DB2 (1997) IBM Developer Works Moriarty, R and Swartz, G (1989) Automation to Direct Marketing Centre (1992) The Practitioner boost sales and marketing, Harvard Business Guide to Direct Marketing, Direct Marketing Review, January–February Centre, London New Media Age (2007) Impulse buying, by dunnhumby (2006) The dunnhumby Way, Emma Rubach, New Media Age, 30 August, dunnhumby, London www.nma.org.uk Earls, K (2002) Welcome to the Creative Age, Wiley, Novo, J (2004) Drilling Down: Turning customer Chichester data into proits with a spreadsheet, 3rd edn, Egain’s State of Customer Service (2007) New Media published by Jim Novo Age, 31 May Reichheld, F and Allen, J (2006) How companies can Exhibition Venues Association (2000) UK Exhibition end the cycle of customer abuse, Financial Times, Facts, Vol. 12, Exhibition Venues Association, 23 March Mayield, East Sussex Royal Mail (1991) The Royal Mail Guide to Forrester Research (2009) Answers to Five Frequently Successful Direct Mail, Royal Mail, London Asked Questions about CRM Projects, Forrester Stevens, M (1991) The Handbook of Telemarketing, Research, Cambridge, MA Kogan Page, London Gartner (2009) Trip Report: Gartner customer Tapp, A (2001) Principles of Direct and Database relationship management summit 2009, Gartner, Marketing, 2nd edn, Financial Times/ Prentice Stamford, CT Hall, Englewood Cliffs, NJ Godin, S (1999) Permission Marketing, Simon and Tofler, A (1980) The Third Wave, Collins, London Schuster, New York Tranield, D and Braganza, A (2007) Business Leadership Hochman, L (2008) Guide to customer loyalty, of Technological Change – Five key challenges Marketing Age facing CEOs, Chartered Management Institute Howard, M (1989) Telephone marketing vs direct Watson, J (1989) The direct marketing guide, sales force costs, Commissioned by Datapoint Marketing Magazine, 9 February (UK) Ltd, London Wright, H (2007) Reclaiming the customer high IBM (2004) Reported by Mike Devlin, CEO, IBM ground, Marketer, July/August and Paul Levy, CEO, Rational Software and the Young, M (nd) Never sell to a stranger, Ogilvy & New Business Economy, 9 March 2004, Developer Mather Direct Chapter 3 Customer relationship Management 87 Further information British Quality Foundation Institute of Customer Care 32–34 Great Peter Street 2 Castle Court London SW1P 2QX St Peter’s Street Tel: +44 (0)20 7654 5000 Colchester CO1 1EW www.quality-foundation.co.uk Tel: +44 (0)1206 571716 www.instituteofcustomerservice.com 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 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 92 Learning 105 Why do they buy? 93 Motivation 107 The rational–emotional Attitudes 110 dichotomy 93 Group inluence 110 Brain science 94 Summary and conclusion 112 How do they buy? 96 Appendix 4.1: hofacker’s online Models of buyer behaviour 97 information processing 114 The buying process 97 Response hierarchy models 99 Appendix 4.2: The post-PC Black-box models 100 customer 115 Personal-variable models 101 references and further reading 116 Complex models 102 Further information 117 90 Part 1 Communications Background and Theories 2 Why do they buy (or not buy) a particular Introduction to brand or product? understanding customer 3 How, when and where do they buy? buying behaviour The second question, ‘Why do they buy?’, is the most dificult to answer. It requires qualitative rather The irst step in formulating a marketing communi- than quantitative data (which generally answers the cations strategy is to identify, analyse and ultimately other questions). Products and services are bought understand the target market and its buying behavi- for a range of different reasons or beneits, some our. This chapter considers some of the theories conscious, others unconscious, some rational, others and models that the marketing professional can emotional. Many buyers buy for a mixture of reasons. use to help to communicate with and inluence the Consider a simple hamburger. buyer at various stages before, during and after purchasing. Buying behaviour is often more com- plex than it appears. Individuals are generally not The complex burger buyer very predictable, but, in the aggregate, groups of Why buy a burger? The answer might be as simple customers (or percentages of markets) can be more as ‘Because I was hungry – so I bought a Big Mac.’ predictable. The real reason, however, may be quite different. Whether in the industrial or consumer market, Perhaps the buyer was in a receptive state for food or whether they are buying products or services, because of the time of the day. In the same way that buyers respond in different ways to the barrage of a stimulus such as a bell for Pavlov’s dog (see marketing communications that are constantly ‘Learning’, page 105) can cause a dog to salivate, aimed at them. Theoretical frameworks borrowed the highly visible yellow McDonald’s logo can act from psychology, sociology, social psychology, cul- as a stimulus to customers to remind them of food tural anthropology and economics are now added to and arouse feelings of hunger – even salivation. by both commercial and academic market research Perhaps the yellow logo also acts as a cue, by trigger- into consumer and industrial buyer behaviour. ing memories of the happy advertising images that All of this contributes to a better understanding are learned and stored in memory banks. of buyer behaviour. It is this understanding that A teenage burger buyer may prefer McDonald’s helps to reveal what kind of marketing communica- because friends hang out there and it feels nice to be tions work best. in with the in-crowd (Maslow’s need to be accepted This chapter can provide only an outline of the or loved; see ‘Motivation’, page 107). Maybe the vast amount of work written in this area. The com- friendly image and the quick service simultaneously plex burger buyer example is used to open up some satisfy two basic needs – love and hunger. Many of the types of question that need to be considered. convenience purchases today are, in fact, about The chapter then looks at types of purchases and purchasing time, ie buying a time-saving product or the buying process (including some buying models) service releases free time to do something else, to and then considers how the ‘intervening variables’ satisfy another need. It is likely that buyers have of perception, motivation, learning, memory, atti- many different reasons with different orders of tudes, beliefs, personality and group inluence can importance. Different segments can seek many dif- inluence the communication process and, ultimately, ferent reasons with different orders of importance. buying behaviour. But why don’t they go into a Wimpy restaurant or a ish and chip shop instead of a McDonald’s? Three key questions Choice is often inluenced by familiarity with the brand, or sometimes the level of trust in a brand There are three key groups of questions that have to name. Familiarity can be generated by actual ex- be answered before any marketing communications perience and/or increased awareness boosted by can be carried out: advertising. If one brand can get into the front of 1 Who is the buyer (target market proiles and an individual’s mind (‘front-of-mind awareness’) decision-making units)? through advertising, etc, then it will stand a better Chapter 4 Customer Psychology and Buyer Behaviour 91 chance of being chosen in a simple buying situation Who is the customer? like this, unless of course the buyer has a preferred set of fast-food restaurants that speciically exclude So many organizations do not know who their cus- a particular brand. In this case the buyer is usually tomers are. This means they have no real idea who prepared to search a little harder (even cross the they are trying to target. This is high-risk market- road) before satisfying the aroused need. ing, something akin to trying to ind a needle in a The choice of another group of burger buyers haystack. In fact there is more chance of inding the can be determined simply by location – offering the needle, because at least we can describe what a right goods or services in the right place at the right needle looks like. But in marketing if we cannot time at the right prices. Assuming this is all sup- describe (or proile) who the ideal customer is then ported by the right image (eg clean and friendly, the organization is almost totally dependent on luck. nutritious, fast service, socially responsible), then The few outstanding marketing companies out there the marketing mix has succeeded in capturing this really do spend a lot of time and effort constantly segment of non-loyal burger buyers who have no researching and analysing exactly who is their tar- strong preferred set of fast-food outlets. get market (in great detail), the needs of the target More health-conscious buyers may prefer a nice market (why they buy) and how they buy. warm cup of soup. Why? What motivates them? It can be more dificult online. Some people Health? A desire to live longer? A fear of death? A behave differently online than ofline. They assume desire to be it, stay slim, look good (esteem) or just different pseudonyms and personalities. Sometimes feel healthy and feel good (self-actualization; see it’s hard to know who’s who online. As they say, Figure 4.8)? Or perhaps it’s cheaper than a burger? ‘Who knows you’re a dog online?’ Or is it because everyone else in the ofice recom- mends the local delicatessen’s soup (pressure to conform to group norms, desire to be accepted by a group – again, the need to be loved)? Diferent personalities below the surface There are other possibilities that lie in the dark A 25-year-old New York stockbroker had an online depths of our vast information storage chambers, otherwise known as our unconscious. For example, fling with a 21-year-old blue-eyed blonde Miami in 1957 Vance Packard suggested that ‘the deepest beauty. They arranged to meet at JFK airport with roots of our liking for warm, nutritious and plenti- red roses. The young New Yorker was horrified to ful soup may lie in the comfortable and secure un- see a 70-year-old man sitting in a wheelchair, conscious prenatal sensations of being surrounded wearing a red rose and roaring with laughter by the amniotic luid in our mother’s womb’. at him. Impulse buying and repeat purchasing of low- cost 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 Knowing who is the customer is not as easy as it cars for the company. It is likely that more ‘informa- seems. As discussed in Chapter 3, 50 per cent of tion search’ will occur than in the simple stimulus– British companies did not know who their customers response buying model (McDonald’s yellow logo were. Despite having large databases, they did not stimulates the senses and arouses hunger, which know how to put proiles on their customers. Without generates the response – buy a Big Mac). Regular this information, companies are shooting blind and low-cost purchases are known as ‘routinized re- just hoping for the best. This is high-risk marketing. sponse behaviour’ and therefore have a different For example, a European battery supplier noticed buying process than a high-cost, high-risk, irregular that its highest-margin, high-tech batteries were purchase, which is known as a ‘high-involvement frequently sold out in one of its most powerful purchase’. Some basic buying models help to ex- retailers. As it wanted to boost sales at this retailer, plain the different types of purchases and the types it invested in a new point-of-sale. It assumed the of buying process involved. These will be consid- high-tech batteries were bought by high-tech users. ered later in this chapter. It designed a prominent new display rack describing 92 Part 1 Communications Background and Theories the batteries’ beneits for digital services. Sales fell. (referred to in Chapter 2), which can offer the Research revealed that ordinary (non-high-tech) customer a tempting online voucher to replace the users were buying the batteries, as they perceived last can of Guinness with an alternative brand. the hi-tech batteries would simply last longer (a fact Another form is the mobile phone. My iPhone has not emphasized in the displays). The company re- various apps: one identiies the prices at all petrol turned to the original displays, and sales went up by stations near my location, and another scans in bar 20 per cent (Forsyth, Galante and Guild, 2006). codes and compares prices locally. As mobile phones become smarter, with predictive contextual devices delivering real-time contextualized and personalized Decision-making units services and information, the device knows, through As mentioned previously, there are often several the aggregated ilters of our location, our timeline individuals involved in any one person’s decision to and our social graph, what we did just before and purchase either consumer or industrial products what we are expected to want or do later on (cour- and services. The choice of a family car may be tesy of our online calendar, contacts database, web inluenced by parents, children, aunts, uncles, neigh- search history and geo-location information). Very bours, friends, the Automobile Association and so soon, context-based technology will predict our on. Each may play a different role in the buying needs and desires. It is ‘aware’ because it holds a process. Similarly, the purchase of a new factory complete record of our past actions and habits and machine may have been instigated by a safety in- of our future intentions – where we are heading and spector, selected by a team of engineers, supervisors, who we will meet via calendar entries, contacts, shop steward and production manager, agreed by web/search history, etc (Frank, 2010). the board, bought or ordered by the purchasing director and paid for by the inancial director or company secretary. It’s only a matter of time before PAGES is a simple acronym that helps to build a marketing communications decision-making unit your mobile device knows your every (DMU) checklist: want and need Purchaser The person who orders the goods ‘I am on a business trip to Madrid, have just or services finished my meetings and have three hours until Adviser Someone who is knowledgeable in my flight back to New York. My device “senses” the ield I started moving and ‘knows’ my schedule, therefore Gatekeeper A secretary, receptionist or it asks me if I prefer to get a taxi to the airport, or if assistant who wants to protect his I prefer to stay in the city since the drive to the or her boss from being besieged airport takes about 15 minutes. I choose the second by marketing messages option, slide the “ambient media streams” all the End user Sometimes called ‘the customer’ way from “privacy please” to “hit me with everything Starter The instigator or initiator you’ve got,” and the device offers me all the tourist attractions around me, even a nearby coffee shop The actual decision maker is sometimes separate that has received exceptionally high ratings (I love from the purchaser and/or the user. The payer (cheque authorizer) may be different to the purchaser in the coffee). I choose the coffee shop, and as I am B2B environment. drinking my second cup, the device alerts me that One other, non-human, inluencer that needs to my flight has been delayed by an hour and will be added to the DMU is the intelligent shopping board through gate E32. I drink another cup of bot. Some are here already. They can take many dif- coffee and read from my device the history of ferent forms. One form is the futuristic 3D loating Madrid until the next alert updates me that I should holograms that appear beside the customer when call a taxi – immediately providing me with an the customer is in the buying mode, giving advice, application that directly books one.’ or even haggling with the salesperson (if buying Frank (2010) ofline). Another form is the intelligent fridge Chapter 4 Customer Psychology and Buyer Behaviour 93 Why do they buy? have the ability to buy such a car’ (Kapferer, 2004). (See the box ‘The invisible badge: motivation Marketing people really do need to know the reasons beyond conspicuous consumption’ on page 109.) why buyers buy. More often than not, customers Perhaps Professor East was conservative when, do not even know the real reasons they buy (they in fact, many UK customers are prepared to pay like to think that they are rational decision makers). 800 per cent more for the ‘the real thing’ than for an There is a range of conscious and unconscious own-brand cola from Asda. A 2-litre bottle of Coca- reasons underlying why people buy what they buy. Cola may sell at £1.20 while on the same shelf an Some reasons are more important than others to a Asda own-label 2-litre cola was selling for £0.15. particular segment. Some reasons are rational, and John Roberts (in Egan, 2007) believes that Coca- some are emotional. The split between the two is Cola’s ‘core concept is product engagement, how called the ‘emotional–rational dichotomy’. The late warm customers feel towards the brand, how en- Robert Gouezeta, former CEO of Coca-Cola, once gaged and intimate their relationship has become said, ‘We sell on image. We don’t know how to sell on through the events. You’ll never see a Coke ad with performance. Everything we sell, we sell on image.’ 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 Rational shoppers? formula, Kevin Roberts, CEO of Saatchi & Saatchi Worldwide, acknowledges, 80 per cent of decisions ‘Typically, shoppers give the correct price of only are emotional. Yet 80 per cent of marketing com- 50 per cent of what they have just put in their munications (marcomms) are rational. Rational trolley. Consumers remain loyal to brands even decision making equals conclusion, whereas emo- when better products are available. Consumers tional decision making equals action. Hence master rarely complain to suppliers when dissatisfied marketers search for emotional beneits as well, about a product. Is this a time-efficient way of eg the back pain medication rational approach is dealing with repetitive purchases, or emotional ‘This medication solves the problem’, whereas the madness?’ emotional approach shows the joy of movement. East et al (2008) That’s why Roberts says: ‘Let emotion rip!’ The rational–emotional dichotomy The diference between emotion and reason This rational and emotional quagmire is not re- stricted to consumer purchasing but applies also to ‘You spend three seconds. You do not think about supposedly hard-nosed rational professional buying every benefit, every attribute, every demonstration. behaviour. Take small businesses selling to other There’s an emotional connection through the businesses: they don’t have the option of scale, price packaging, through the advertising and through or bulk orders to gain an edge over the competition; your memory that you make. And then you decide. they have to have a story or relationship, and need Neurologist Donald Khan says the difference to cultivate that ‘unreasonable loyalty’ (Roberts, between emotion and reason is: “Reason leads to 2010b). And B2B buyers do buy into relationships built on reliability, trust and personality, as B2C conclusions – emotion leads to action.” buyers buy on emotion. In fact, as noted in Chapter Most of the research asks: “Do you remember 2, Harley-Davidson does not sell motorcycles, it? Do you get the brand benefits?”, whereas the Starbucks do not sell coffee, Club Med does not sell only question you need to ask in research is: vacations, and Guinness does not sell beer. Coke “Do you want to see it again? Does this connect doesn’t sell cola. Porsche buyers (many of them) with you?”’ don’t buy a transport vehicle; they buy it because Roberts (2006a) they ‘simply want to prove to themselves that they 94 Part 1 Communications Background and Theories The bottom line is that marketing managers have different images of different beneits of different constantly to ask the question: ‘Why are they buying types of toothpaste to different segments who have or not buying our products or services?’ Customers different reasons (needs or motives) for brushing need to be probed deeply to ind the answers to their teeth. The following toothpaste test explains. questions like: ‘How do you feel about the brand? The now classic Colgate ‘ring of conidence’ was Does the brand connect with you? How? How one of the UK’s best-known toothpaste advertise- much emotional connection have you got with the ments. It was basically selling a tube of social brand?’ The answers are not static, one-off pieces of conidence. This need to be accepted is relatively research indings but a constant low of information. obvious although not always admitted initially. There Rational reasons need to be understood also. And are, however, deeper feelings, emotions, memories, remember: reasons change; people change; markets moods, thoughts, beliefs and attitudes locked up change; competition and technology change. A valid inside the dark depths of our unconscious. Sigmund reason for buying a particular product yesterday Freud suggested that the mind was like an iceberg may become obsolete tomorrow. Likewise, an ap- in so far as the tip represents the conscious part of parently irrelevant feature yesterday may become the mind while the greater submerged part is the a key reason for buying tomorrow. unconscious. Even long-forgotten childhood experi- A company executive might buy one brand of ences can affect buying behaviour, including that of a computer rather than another simply because hard-nosed US industrial buyers (see ‘Mommy’s of a distant fear of being ired. This is further never coming back’, page 144). Some theories of complicated by the fact that some customers buy motivation are discussed further in this chapter the same product for different reasons. For example, (‘Motivation’, page 107). Americans may buy iPods because they enable them In the UK many organizations use in-depth re- to listen to their favourite music without being dis- search, eg Guinness carries out in-depth research to turbed by others, while Japanese buy iPods to listen tap into drinkers’ deeply ingrained feelings about to their favourite music without disturbing others. the product. Individuals are asked to express their Even an apparently simple product like toothpaste (often unconscious) feelings through clay modelling, presents a complex web of reasons for buying. The picture completion and cartoon completion tech- toothpaste manufacturers respond by supplying niques. This kind of research has revealed that people associate natural goodness and quasi-mystical qualities with the brand. The section ‘Motivation’ The toothpaste test (page 107) looks at in-depth feelings. Why do you buy toothpaste? ‘To keep teeth clean.’ ‘To stop cavities and visits to dentist.’ ‘To keep a full Bloatware – emotional wins over rational set of beautiful shining teeth.’ Some people will admit that ‘it is habit’ or that ‘my parents taught me Forty-five per cent of software features are never always to clean my teeth’. All of these answers used, 19 per cent are rarely used, and 16 per cent suggest different benefits that different groups or are sometimes used, so some software suppliers segments want from their toothpaste, and so the launched ‘liteware’ with fewer functions and lower toothpaste suppliers oblige by positioning certain prices. It flopped. Why? Because people didn’t brands as those that deliver a particular benefit. want to be without features that other people had But when do you brush your teeth? First thing in the – so bloatware prevails. 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 Brain science people do not like admitting it. The real reason is There is no doubt that conscious reasoning accounts often hidden beneath the surface reasons. 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 95 some light on the dark depths of emotion and con- connections. Now consider the different types of sciousness: buying situations in which customers have different approaches to choosing products and services. 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 Goethe and the magic marketing formula unlocking the mystery of consciousness actually depends on iguring out the unconscious functions ‘Behaviour is a mirror in which everyone displays of the brain. Not Freud’s unconscious – a his own image.’ repository for repressed memories – but rather the many things the brain does that are not available Goethe, Elective Affinities, 1809 (quoted in to consciousness. Unconscious processes include Schifman and Kaunk, 1991) most of what the brain does – we can often be Marketers sometimes say ‘We are what we shop.’ 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 Effectively, marketers have to know their customers debate is emotion, and its operation through the better than the customers know themselves. This in- so-called emotional unconscious, and it’s here that volves deep customer insights, sometimes generated the fusion of biology and psychology is changing by intense psychoanalysis, sometimes by employing the whole way we understand human behaviour. anthropologists and sometimes by cleverly looking The unconscious explains most of what we feel, at customers through several lenses to get a deeper think and do. Conscious reasoning accounts for insight. Here is how Tesco varies its research tech- only a small part of our ‘thinking’. niques to generate customer insights that they then Penn warns of the dangers of overemphasizing the apply to their marketing immediately. Tesco is importance of brand awareness when he says: ‘It is reported to have spent 20 years watching the US clear that if we only base an assessment of effective- market before launching its Fresh & Easy chain. ness [advertising effectiveness] on conscious recall, A team of 20 executives was dispatched to the we potentially miss out on those [customers] who United States to carry out in-depth research and are positively affected yet have no conscious recall to visit every rival. The company hired a team of of having seen it [an ad or a product].’ anthropologists to live with consumers for two Penn highlights the four big ideas in brain science: weeks and analyse what they bought and why. It also built a mock store and asked selected custom- 1 Unconscious processes (either cognitive or ers to try it. Tesco discovered that US consumers emotional) account for most of what we were less bothered by the selection of wines on offer, think, feel and do. but wanted better-quality meat than UK consumers 2 Conscious reasoning may account for only (Jones, 2008). In the UK, Tesco combined loyalty a small part of our ‘thinking’, with most card data on what customers were buying at Tesco taking place in the cognitive unconscious. with survey research on what customers were not 3 Emotion precedes our conscious feelings buying. This revealed that, ‘in some formats, young and works in tandem with rational thinking mothers bought fewer baby products in its stores to help us make (better) decisions. because they trusted pharmacies more. So Tesco 4 The interconnectedness of the thinking and launched Baby Club to provide expert advice and feeling parts of the brain facilitates the targeted coupons. Its share of baby product sales interaction of rationality and emotion in in the UK grew from 16% to 24% over 3 years’ decision making. (Forsyth, Galante and Guild, 2006). The better marketers look at customers through a variety of Each one of these has fundamental implications lenses. Take Walmart in the United States: it inte- for marketing and research. Marketers must tread grates shopper research, point-of-sale data, and with caution and measure the emotional aspects – demographic analysis to ind out who its customers some of which are often unconscious emotional 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 brand purchasing of convenience products like relect the needs of its local customers (the magic baked beans. The buyer chooses quickly and has a marketing formula). For example, ‘stores located low involvement with the purchase. EPS requires near large concentrations of afluent male profes- high involvement from the buyer, which means that sionals, for example, offer more high end home the buyer spends time and effort before actually theatre equipment, specialized inancing and same deciding to buy a particular product or brand. day delivery while stores closer to soccer moms This can be complicated by further advisers and feature softer colours, personal shopping assistants, inluencers who form part of the decision-making and kids oriented technology sections. Sales surged unit. LPS requires lower levels of involvement than by 7 per cent and gross proit by 50 basis points’ EPS but more than RRB. (Forsyth, Galante and Guild, 2006). So knowing Industrial buying is even more clearly inluenced your customers really does pay dividends. 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 Know your customers intimately – their situation means what it says – the organization has hopes, dreams, fears and aspirations no experience of the product or service and is buying it for the irst time. A ‘modiied rebuy’ situation is ‘The job now is to be so intimate with consumers, where the industrial buyer has some experience of so empathetic with their hopes and their dreams, the product or service, while a ‘straight rebuy’ is their aspirations and their fears that we can where the buyer, or purchasing department, buys on develop revelations which we then put into creative a regular basis. departments and from great revelations awesome ideas will come, eg T-Mobile UK – revelation – life new currencies required: privacy, is for sharing, the power of tribes, the power of communities, and the power of all this social stuff.’ trust and time Roberts (2009b) In the online world, privacy, trust and time are new currencies that have a very high value in customers’ See the full case study in Chapter 13. 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 How do they buy? privacy to be protected (hence privacy statements are de rigueur for every website). Equally, customers Types of buying situation resent being asked for too much information or The amount of time and effort that a buyer is pre- being asked for information when they haven’t yet pared to put into any particular purchase depends established any relationship – so much so that many on the level of expenditure, the frequency of purchase customers just lie when illing in online forms. and the perceived risk involved. Relatively larger Trust is increasingly important, as online cus- expenditure usually warrants greater deliberation tomers live in a dangerous environment of privacy during the search and evaluation phases. In con- invasion and identity theft. Surprisingly many cus- sumer markets this buying process is classiied as tomers trust a website more than a person. People ‘extensive problem solving’ (EPS) if the buyer has trust well-known and well-respected brands. Why no previous product experience and the purchase is else would customers give an unknown American infrequent, expensive and/or risky. The situation is their credit card details, home address and money? different where the buyer has some knowledge and Trust. In the UK, several major brands score higher experience of, and familiarity with, a particular in trust than the church and the police. Well- product or service. This is called ‘limited problem managed brands are trusted as long as their promise solving’ (LPS). In the case of strong brand loyalty for is never broken. How does it feel when a website a habitually purchased product, routinized response remembers your name? And when it remembers behaviour (RRB) can be identiied by the repeat your preferences? It seems customers are happy to Chapter 4 Customer Psychology and Buyer Behaviour 97 have unconscious relationships with brands, robots This is when waves of worry, doubt or ‘post- and machines as well as people. Enlightened com- purchase dissonance’ arise. This may be addressed panies remember information for customers, not just by reassuring the buyer (with a congratulatory note, about them. This builds trust in the relationship. additional advertising, after-sales service and, most Ask: what is a website that might attract a visitor to of all, a product or service that lives up to the prom- come back a second time and, ultimately, regularly ise made in the advertising). And, if the product revisit the site and develop a relationship? Remember, matches the promise, then both repeat business and the second visit is the start of the relationship. 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 Models of buyer behaviour illing in all the communication gaps in the buying process. Interestingly, many websites now use this There are many different models that attempt to as a checklist to ensure that the site helps different model the buyer’s behaviour. Figure 4.1 shows how customers to move through different stages of their a buyer in either an EPS or an LPS situation moves through the purchasing cycle or purchasing con- tinuum. The basic model can be borrowed and used F I g u R E 4 . 1 A simple model of the in industrial markets also. It highlights some of buying process for a high-involvement the stages through which a potential buyer passes. Sources and channels of information plus buying purchase criteria can also be identiied, which in turn provide a checklist for the marketing plan, whether online, ofline or integrated. Problem recognition The buying process We can demonstrate this simple buying model by Information search considering, say, the purchase of a new compact disc player. Somewhere, somebody or something makes the customer aware that he or she needs an Evaluation in-home theatre system. This is known as problem recognition, which is followed by ‘information search’. This may involve ads and editorial in maga- zines, visits to stores, discussion among friends, etc. Next comes evaluation. Lealets, catalogues, ads and discussions are amassed, and a set of criteria is Decision 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 Buy other speakers. However, customers do check other people’s opinions online before buying almost any type of product or service today. Customer com- Post-purchase ments on the oficial site and on other sites inluence dissonance 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 communica- tions mix has worked but the marketing mix has Dissatisfaction = Satisfaction = Loyalty failed, since distribution has not got the product on Brand rejection = Repeat purchase the shelf). Another brand is eventually purchased. 98 Part 1 Communications Background and Theories buying process. The model should not be hierarchical, FIguRE 4.2 The ATR model since in reality there are loops, eg between informa- tion and evaluation, as the buyer learns about new criteria not previously considered. This model is more relevant for a high-involvement Awareness purchase, whether extensive problem solving (con- sumer) or new task (industrial). A routinized response situation, like buying a beer, is low-involvement, and therefore it would not involve any lengthy decision- Trial making process. Low-involvement purchases can sometimes appear to be thoughtless (impulsive) responses (purchases) Reinforcement 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. from many other approaches highlighted in this Some advertising aims to remind customers and chapter, yet his research indings are used by top reinforce the beneits of the brand. blue-chip companies around the world. Advertising can also reassure existing customers Many other academics believe that different buy- that they have bought the right brand. This defen- ing situations (high- and low-involvement) require sive advertising (defending market share) reduces different thought processes and timescales. Even any post-purchase dissonance (or worries) and also within the same product sector, different processes keeps the brand on the buyer’s shopping list (or can occur. Take grocery shopping. Australian aca- repertoire of brands). demics Rossiter and Percy (1996) have identiied In contrast with attitudes towards high-involvement differences in thought processes within the grocery purchases, attitudes towards low-involvement brands sector. They suggest that most grocery brands (65 can be formed after the brand experience and not per cent) need recognition at the point of purchase, before. In the more considered, high-involvement since buyers tend to see the brand irst and then purchases attitudes are formed after awareness but realize they want it. Less than 10 seconds elapse before any purchasing behaviour actually occurs. between recognition and putting the product into the The attitude may subsequently be reinforced by, trolley. The other 35 per cent of groceries are chosen irst, the real experience of buying and using the in advance, so brand awareness (before purchase) is brand and, second, any subsequent advertising or important for these. word-of-mouth communications. It does not stop there. There are more differences Ehrenberg’s 1974 awareness trial reinforcement depending on whether the purchase is a relief pur- (ATR) model suggested that consumers become chase (to solve a problem such as dirty clothes) aware of a brand, try it (buy it) and then are exposed or a reward purchase (to provide gratiication, like to reinforcement by advertising (or even the actual ice cream). The relief purchases require a more brand experience). rational approach and the reward purchases a more Trial can occur many months after an advertise- emotional approach. So each market and each ment has created awareness. Advertising here is also brand needs to be carefully analysed. Robert Shaw seen as defensive, in so far as it reassures existing (1997/98) points out that ‘many different measures buyers that they have made the right choice, as such as brand knowledge, esteem, relevance or opposed to advertising that might make them run perceived quality may need to be monitored’. Any out and buy the advertised brand immediately. marketing manager, whether industrial or consumer, Ehrenberg acknowledges that some advertising product or service, has constantly to watch the actually does prompt (or ‘nudge’) buyers to buy, market, its segments and how it is fragmenting. as demonstrated with his more explicit 1997 aware- Marketers need to understand their customers’ ness trial reinforcement plus occasional nudging buying process, whether online, ofline or a mixture (ATR + N) model. Ehrenberg’s speciic views differ of both. Dulux paints found that its brand share is Chapter 4 Customer Psychology and Buyer Behaviour 99 11 per cent higher when customers choose their cognitive, affective and behavioural/conative ele- paint colour at home rather than in-store. But 75 ments of an attitude.) Message models are helpful per cent of colour decisions are made in the store. but not conclusive, since 1) not all buyers go through It therefore tried to lock people into a Dulux pur- all stages, 2) the stages do not necessarily occur in chase before they visit a shop by creating a value- a hierarchical sequence, and 3) impulse purchases added online experience whereby users can decorate contract the process. a virtual room (with colour coordination sugges- Although expanding repeat purchase (loyal be- tions) and receive free swatches delivered free to haviour) from proitable customers is the ultimate their home with directions to their nearest Dulux marketing goal, a PR campaign, advertisement retailer. 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 now you have it, now you don’t – Oasis CD information processing model shows how online messages from banner ads and websites are pro- The music band Oasis fully understand their cessed (see Appendix 4.1 for more detail). customers’ buying process and their desire to These hierarchical communication models iden- hear the songs before they are officially released. tify the stages through which buyers generally pass. So, to satisfy the hunger for previews and reduce An understanding of these stages helps to plan the number of illegal downloads from the internet, appropriate marketing communications. DAGMAR Oasis released four trial tracks seven days prior (deining advertising goals for measuring advertis- to the release of their Heathen Chemistry CD. The ing results) was created to encourage measurable tracks were offered to readers of the Sunday Times objectives for each stage of the communications as a free cover-mounted CD that was encrypted so continuum. it could only be played four times. After that, the CD Some of the stages can sometimes occur simul- was automatically wiped and the user was directed taneously and/or instantaneously, as in the case of an to HMV.co.uk to buy the album. In addition, HMV impulse purchase. Buyers can also avoid moving in donated 50p (for each CD sold) to the Prince’s a straight line or hierarchy of stages when making Trust charity. 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 Response hierarchy models requires a loop from the ‘last’ stage up to the irst Although the ultimate objective for most marketing stage – to show that the sale (action) is not the managers is to build repeat purchases from proitable end stage, but rather the beginning of an ongoing customers, there are many stages between creating dialogue that nurtures a relationship and a report problem recognition or need arousal and purchase buying process. (as shown in Figure 4.1). The communication models Ideally, these models should allow for these and in Figure 4.3 show what are thought to be the other loops caused by ‘message decay’ (or forgetting), sequence of mental stages through which buyers changes in attitudes, competitive distractions, etc. pass on their journey towards a purchase. The models also ignore the mind’s ‘intervening These models are sometimes called ‘message variables’, some of which are identiied in both the models’ or ‘response hierarchy models’, since they ‘personal-variable models’ of Fishbein (1975) and help to prioritize the communication objectives by the ‘complex models’ of Howard and Sheth (1969) determining whether a cognitive, affective or behav- and Engel, Blackwell and Kollatt (1978). The ioural response is required, ie whether the organ- complex models, do, in fact, allow for both loops ization wants to create awareness in the target and the complexities of the intervening variables audience’s mind, or to change an attitude, or to act in (see page 102). some way (buy, vote, participate, etc). (See ‘Attitudes’ Three types of model, ‘black-box’, ‘personal- on page 110 for a more detailed explanation of the variable’ and ‘complex’, will now be considered 100 Part 1 Communications Background and Theories F I g u R E 4 .3 Response hierarchy models Howard & Online Lavidge Stage AIDA Adoption DAGMAR Sheth information & Steiner (excerpt) processing Exposure Unawareness Attention Attention Awareness Awareness Awareness Cognitive Attention Knowledge Comprehension Comprehension Comprehension and perception Interest Liking Interest Affective Preference Desire Conviction Evaluation Conviction Attitude Yielding and acceptance Trial Intention Behaviour 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 Black-box models that act as stimuli (such as price, shops, merchandise, advertisements, promotions and the social environ- The behaviourist school of psychology concentrates ment, including families and friends) and responses on how people respond to stimuli. It is not con- such as sales. Personal-variable models focus on cerned with the complex range of internal and some of the internal psychological variables such as external factors that affect the behaviour. The com- attitudes and beliefs. The complex models attempt plexities of the mind are left locked up in a ‘black to include both the internal and the external variables box’. The resulting stimulus–response models ignore in one grand model. To some this proves impossible. the complexities of the mind (including the inter- As Gordon Foxall (1992) pointed out, ‘No one vening variables such as perception, motivation, model can capture human nature in its entirety; nor attitudes, etc) and focus on the input or stimulus, eg can a handful of theoretical perspectives embrace advertising, and the output, eg purchase behaviour. the scope of human interaction.’ A classical approach to stimulus–response models is Chapter 4 Customer Psychology and Buyer Behaviour 101 F I g u R E 4.4 Black-box model Stimulus variables Intervening variables Response variables (inputs) (black box) (outputs) F I g u R E 4.5 An enlarged black-box model Inputs/stimuli Processor Outputs/behaviour Product Price Place Promotion: Advertising Product purchase Selling Sales promotion Publicity Brand purchase Packaging Buyer Point-of-sale Merchandising Brand loyalty/ Exhibitions repeat purchase Corporate identity Sponsorship Sales literature Size of purchase Direct marketing Word-of-mouth Frequency of purchase considered in ‘Learning’ on page 105. Figure 4.4 models, ‘linear additive’, ‘threshold’ and ‘trade-off’, shows a black-box model. are briely considered below. As Williams (1989) says: ‘Black box models treat the individual and his physiological and psycholog- Linear additive models ical make-up as an impenetrable black box.’ Only the inputs and outputs are measured. Any internal mental Linear additive models like that of Fishbein are based processes (the intervening processes) that cannot be on the number of attributes a particular product measured are ignored. The model in Figure 4.5 or service has, multiplied by the score each attribute shows some examples of ‘input’ and ‘output’. is perceived to have, multiplied by the weighting The black-box approach considers only the in- which each attribute is deemed to have. This model puts and outputs. Careful analysis under controlled opens up attitudes by indicating which attributes tests (using reasonably sophisticated computer are considered to be important to the customer models) can reveal the optimum price, the optimum and how each attribute is scored by the customer. level of advertising and so on. Attitudes are not always translated into purchasing behaviour. Even intentions are not always translated into action. Nevertheless, marketing strategies can Personal-variable models be built around changing beliefs about attributes, and altering their evaluation or scores. 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. Threshold models These kinds of model are sometimes used within more Most purchases have cut-off points or thresholds complex models. Three types of personal-variable beyond which the buyer will not venture. It may be 102 Part 1 Communications Background and Theories F I g u R E 4 .6 A simpliied version of Howard and Sheth’s model Exogenous variables Stimuli Perception Learning Responses F I g u R E 4 .7 The complete Howard and Sheth model Inputs Stimulus display Perceptual constructs Learning constructs Outputs Significative a. Quality b. Price Intention Purchase c. Distinctiveness d. Service Overt Confidence e. Availability search Intention Symbolic a. Quality Attitude b. Price c. Distinctiveness Stimulus Attitude d. Service ambiguity e. Availability Brand comprehension Social a. Family Choice Brand Motives b. Reference groups criteria comprehension Attention c. Social class Attention Perceptual Satisfaction bias 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 that is lacking in one attribute but strong in another. service must have (or must not have in the case of A sort of compensatory mechanism emerges. When some environmentally damaging ingredients) if it is someone is buying a car, engine size and price can to be considered at all. Here, the buyer has a selec- be traded off against each other, eg a bigger engine tion process that screens and accepts those products means a worse price (higher price). A number of or services within the threshold for either further combinations of price and engine size can be re- analysis or immediate purchase. Those beyond the searched to ind the value or ‘utility’ for different threshold are rejected and will not be considered prices and engine sizes. any further. Trade-off models Complex models Buyers generally have a wide array of choices, many The cognitive school attempts to open the lid and with different types and amounts of attributes. A look inside the mind’s black box. Here more com- trade-off occurs when the buyer accepts a product plex buying models, like that of Howard and Sheth Chapter 4 Customer Psychology and Buyer Behaviour 103 (1969), try to incorporate into the hierarchical and distort information reaching it.’ Perception is communication models the intervening variables of selective. We see what we want to see. perception, motivation, learning, memory, attitudes, Here’s a simple test. Ask smokers to recall beliefs, group inluence, etc – in fact, almost every- exactly what the health warning says on the side thing inside the mind. of their packet of cigarettes. Few will be able to tell you the exact words. This is because we all Howard and Sheth selectively screen out messages or stimuli that may cause discomfort, tension or ‘cognitive dissonance’. A simpliied version of Howard and Sheth’s com- Imagine that smokers allow the message (warning) plex model divides the black box into perceptual to be perceived. This will cause discomfort every constructs and learning constructs, as shown in time a cigarette is taken, since the box will give the Figure 4.6. The exogenous variables are external smokers an unpleasant message. In order to reduce to this model and include personality traits, social this tension, the smokers have two options: 1) class, inancial status, the social/organizational set- change behaviour (stop smoking) or 2) screen out ting and even the importance of the purchase to the the message and continue the behaviour (smoking). individual. Many stimuli are screened out by the perceptual The complete complex model in Figure 4.7 system, which, it is estimated, is hit by between includes perception, learning, attitudes and motiva- 500 and 1,500 different advertisements a day. The tion. Stimulus ambiguity implies inadequate infor- example in the box shows how preferences and mation to make a decision. Perceptual bias (see motivations affect perception. ‘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 lack- The infamous Brian O’Driscoll incident ing a clear deinition of the relationships between some of the variables and for a lack of distinction The captain, and some say potential match winner, between the endogenous variables (within the model) of the British and Irish Lions rugby team, Brian and exogenous variables (external to the model). O’Driscoll, was spear-tackled by two players, off The model is, for many readers, dificult to under- the ball, in the first minute of the first test match in stand and, for many practitioners, impossible to New Zealand. O’Driscoll’s shoulder was shattered use. Nevertheless it does provide a useful insight and his test series over. He was lucky not to have into the possible workings of the mind. broken his neck, as a spear tackle involves lifting The remainder of this chapter looks at some of and throwing a player head first to the ground. the inluencing variables such as perception, learn- It can result in a broken neck. It is extremely ing, motivation, values, attitudes and lifestyles, and dangerous and totally illegal. The Lions’ manager, considers how an understanding of them helps to Sir Clive Woodward, called for a citing and make more effective marketing communications. disciplinary action. It never happened. Here’s the interesting bit about perceptions. The author interviewed over 100 New Zealand fans, and every The intervening one of them saw no problem with the incident. Ask Lions fans, and every one will say it was an psychological variables absolute disgrace. Everyone saw the same thing, but the two groups saw (perceived) something Perception different. Perception is selective and biased by motivation. Perception means the way stimuli, such as com- mercial messages, advertisements, packaging, shops, uniforms, etc, are interpreted. Messages and images are not always perceived in the manner intended So perceptions are biased by our underlying motiva- by the advertiser. As Chisnall (1985) says: ‘Our per- tions. Take this example from Hong Kong, where ceptual system has a tendency to organize, modify in 1997 China regained control over this former 104 Part 1 Communications Background and Theories British colony. The committee responsible for cele- function or form). As Chisnall (1985) says, ‘Con- brating the resumption of Chinese sovereignty chose sumers evaluate products against the background the white dolphin as its symbol. A British newspaper, of their experiences, expectations and associations. the Independent, pointed out that this was a species Perception is seldom an objective, scientiic assessment threatened with extinction in Chinese waters. The of the comparative values of competing brands.’ 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 Colour afects our perception no seed. The newspaper perceived Hong Kong to be marching into the future under the symbols of an ‘Red is a colour that makes food smell better.’ endangered species and sterility. The Hong Kong Kanner (1989) 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 are delicate and need to be managed Perceptions can vary even within the same re- carefully. Take Google: it is loved by everyone, but gion. A UK TV advertisement for Unilever’s Persil could easily be feared by all if it was perceived to be washing powder showed a Dalmatian shaking too powerful (as perhaps Microsoft experienced). off its black spots, a white horse breaking away Kennedy (2009) suggested: ‘One of the main hurdles from black horses and a skater dressed in white Google faces in its quest to manage the world’s beating other skaters dressed in black. The adver- information, becoming a virtual library of books, tisement was perceived by some as being racist. movies, music, maps, tools, news, communication Despite the advertisements having been tested with even our very voices, is that it also becomes a igure Afro-Caribbean women before going on air, the of suspicion. How safe is that information, are they Independent Television Commission (ITC) received reading our every email, do they know too much 32 complaints. about us?’ Google CEO Eric Schmidt admits these Before perception occurs, attention has to be are real fears, and he says: gained by, say, the advertiser. As Williams (1989) says, interests, needs and motives determine ‘not Trust means there is a sacred line the company only what will arouse attention, but also what will must never cross. In fact, it’s greatest strength is, hold it’. For example, advertisements for a new in truth, its Achilles heel. If it crosses that line house are ignored by the mass population. But there it can never go back. Privacy and trust are sacrosanct. There’s a lot of things we could do is a sector of the population that is actively looking that would upset our users so there’s a line you for a house. This sector has a need for a new house, can’t cross. We try very hard to stay very much and it is therefore receptive to any of these adver- on the side of the consumer (Manyika, 2008). tisements. Individuals from this sector positively select information relevant to their needs. This is Even if the company stays on the right side of the known as ‘selective attention’. line, it still has to manage customer perceptions very There are also certain physical properties that carefully. increase the likelihood of a message gaining atten- An understanding of the way our perceptual tion: intensity and size; position; sound; colour; system organizes information has helped some brand contrast; and movement (eyes are involuntarily advertisers to exploit perceptual systems through attracted to movement because of the body’s in- an understanding of gestalt psychology. Gestalt stinctive defence mechanism). Given that an indi- means ‘total iguration’. One of the four basic vidual’s attention is constantly called upon by new perceptual organizing techniques from the gestalt stimuli, repetition can enhance the likelihood of a school is ‘closure’. Individuals strive to make sense message getting through. Novelty can also be used of incomplete messages by illing in the gaps or to jar expectations and grab attention. shaping the image so that it can it comfortably Perceived differences in brands are not necessarily into their cognitive set (or set of knowledge). Marl- dependent on real product differences (in either boro’s ‘MARL’ advertisements and Kit-Kat’s ‘Kit’ Chapter 4 Customer Psychology and Buyer Behaviour 105 advertisements play on the need to ill in these gaps. help customers learn in different ways (see ‘classical This may happen so fast that viewers are not aware conditioning’ and ‘operant conditioning’ in ‘Con- of what is going on inside their heads. Effectively, nectionist learning theories’ below). In addition, the mind momentarily becomes the medium, since how many times (frequency) should an advertise- the complete image is visible only inside the head, ment be shown before it is remembered or, alter- while the external advertisement shows the incom- natively, before it causes irritation? Should it be plete image. In a sense, a giant billboard inside the repeated regularly once a week for a year (a ‘drip’ forehead is switched on by an incomplete stimulus. strategy) or concentrated into 12 times a week for The natural perceptual tendency towards ‘closure’ four weeks only (a ‘burst’ strategy)? Differing completes the advertisement’s image inside the audi- levels of intelligence, memory capacity, motivations, ence’s mind. Perception is also inextricably linked perceptual systems, associations and rewards (rein- with past experiences, motivation, beliefs, attitudes forcement) affect the learning process. and the ability to learn. The party everybody is scared When introduced to someone at a party, do you ‘Everybody is scared; everybody is insecure; ever forget the person’s name? An inability to learn everybody is nervous. Nobody knows what’s and remember names can create embarrassment. coming next. Nobody. So people are looking Perhaps the host should increase the frequency of for intimacy. They’re looking for brands that the branding process by repeating the individual’s understand them. They’re looking for services that name three times during the introduction? Or would deliver for them in their new environment. I think this be irritating? Perhaps it would be better if the most brands and most companies are operating individual’s name was inserted in a ‘drip’ strategy in a time lag and a time warp. Consumers are way rather than a ‘burst’ strategy, ie occasionally the ahead of us. Their insecurities are much more to host would pass by, casually drop the individual’s the surface... The challenge is to get more intimate name into the conversation and move on. 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 Connectionist learning theories shopping. What we’ve got to do is provide that pleasure, provide that joy, that delight so that we Simple connectionist theory suggests that associa- can delight her in her new environment through tions can be made between messages, or stimuli, and responses, hence the term ‘stimulus–response being very intimate in her current situation.’ model’. In the late 1890s the Russian physiologist Kevin Roberts, CEO, Saatchi & Ivan Pavlov demonstrated how ‘classical condition- Saatchi Worldwide (2009c) ing’, 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 Learning conditioning the dog would salivate (respond) upon Marketers obviously want customers to learn about, hearing the bell (stimulus) without any food arriv- irst, the existence of their brand or company and, ing. As Williams (1989) says, ‘It is the idea of asso- second, its merits. A knowledge of the learning ciation that underlines the concept of branding in process is therefore useful in understanding how modern marketing.’ Constant repetition can build customers acquire, store and retrieve messages about associations between needs, products and brands, products, brands and companies. How are attitudes eg if you are thinking of beans, think Heinz: ‘Beanz about companies, products and brands developed Meanz Heinz’. Associations can also be built by (or learnt)? Advertising and sales promotions can linking celebrities with the brand. For example, 106 Part 1 Communications Background and Theories Coca-Cola GB has signed the Hollywood actress Stimulus–response Kim Basinger as part of a three-year plan to ‘link Connectionist theories of learning highlight the Diet Coke with movies and glamour’. importance of, irst, timing and, second, frequency of marketing communications. The establishment of a connection or association between a stimulus Humans conditioned by music learning and a response is fundamental to the conditioning process. Advertising jingles, pictures and even smells ‘High tempo music may be appropriate in fast food are some of the stimuli that can arouse emotional restaurants because it encourages faster knife and or behavioural responses. Some people still feel fork activity, leading to quicker table turnover. good when they hear the Coca-Cola jingle ‘I’d like Customers buy more expensive wines in a retail to teach the world to sing...’; others are aroused environment playing classical music rather than and excited when they hear the sound of a sports commentator’s voice with crowd sound effects pop music. French wine significantly outsold in the background. Ice cream van jingles arouse German wine in a store when stereotypical French children. McDonald’s large, highly visible yellow accordion music was played. Marketers frequently ‘M’ logo can trigger a response, particularly if an match the volume of music in different time zones individual is involved in goal-oriented behaviour of their store to the age band of the target (is hungry and is ready to consider eating food). market... younger shoppers spend more in Could this yellow logo be the equivalent of Pavlov’s a retail environment playing loud music, while bell? Do some humans salivate just at the sight of shoppers aged 50 and over spend more in an the logo? environment with quiet background music.’ Oakes (2008) ‘London Underground started piping “uncool” classical music in the booking hall of tube Cyber-logo makes customers salivate stations in December 2005 to deter youths from ‘Seeing your logo on the net made me hungry’ loitering, resulting in a 33 per cent drop in abuse (feedback from a McDonald’s website visitor, against staff.’ demonstrating classical conditioning). Marketer (2010) Smith, Berry and Pulford (1999) ‘Operant conditioning’, on the other hand, is vol- untary in so far as the participant actively searches Certainly the release of certain aromas can stimulate for solutions. The Skinner box was devised by immediate responses. For example, as customers Dr Skinner in the United States during the 1930s. leave a pub and walk down the street they are often By placing a hungry rat in a box where food only greeted by the wafting smell of frying chips, which arrived once the rat pressed a lever, Skinner observed can stimulate or arouse the need for food, and lead that the rat would search, investigate and, eventu- to an immediate purchase. ally, press the lever accidentally. Food then arrived. Lunn Poly created a full sensory holiday environ- Over a period of time the rat, when aroused by ment in its stores using a coconut aroma, fresh the hunger motive, learned to press the lever for coffee in the Parisian-style café area, holiday music, food. An association or connection was made be- travel images and a variety of ilm footage. tween the lever pressing and the drive to satisfy the Reinforcement and reward enhance the learning hunger need. This approach to building associa- process. In other words, good-quality products and tions through voluntary participation suggests that services reward the buyer every time. This consistent sales promotions can actively invite the buyer to level of quality reinforces the brand’s positive rela- participate, be rewarded, and eventually connect tionship with the buyer. On the other hand, if the a particular product or service with a particular quality is poor, there is no reward (the response stimulated need. does not satisfy the need), and the response (to buy Chapter 4 Customer Psychology and Buyer Behaviour 107 a particular brand or visit a particular shop) will not be repeated. China learns about Coca-Cola, Positive reinforcement helps the learning process (or helps the buyer to remember the brand or shop). Pepsi and Starbucks It is possible to ‘unlearn’ or forget (‘message decay’), so many advertisers seek to remind customers of Just as they helped the Europeans to learn to eat their products, their names and their beneits. Some with their hands (McDonald’s) and drink ice-cold advertisements seek to remind buyers what a good beer (Budweiser), mostly through classical choice they have already made by frequently repeat- advertising, Coca-Cola, Pepsi and Starbucks are ing messages. The connectionist approach ignores conditioning a massive market to learn a new way all the other complex and inluential variables in- of satisfying their needs, especially young Chinese. volved in learning and, ultimately, buying. Arguably, These brands are turning a tide in tastes. Tea it oversimpliies a complex process. houses in China already are being replaced by Packaging design can also act as a cue to arouse coffee houses and Starbucks. momentarily the happy images conveyed in the pre- viously 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 Motivation when the consumer is shopping or just browsing Motivation is deined as the drive to satisfy a need. along shelves full of different brands. Some motives are socially learnt (eg wanting to get All brand managers would like to have their brand married), and others are instinctive (eg wanting to chosen automatically every time. Some brands eat when hungry). Sigmund Freud suggested that achieve this through an unconsciously learned an individual is motivated by conscious and un- response. How? By building a presence through conscious forces. Many motives are unconscious frequency of advertising and maximum shelf fac- but active in that they inluence everyday buying ings (amount of units displayed on shelves – see behaviour. Brands carry covert messages that are Chapter 19) and, most importantly, by supplying an leetingly understood at a subconscious level. As appropriate level of reinforcement (an appropriate the Market Research Society said in its 1996 con- level of quality in the product or service itself ). ference paper, ‘It is often this deeper meaning which Chapter 3 emphasizes the importance of quality in is what is exchanged for money. These deep under- the long-term repeat-buying success strategies of lying feelings are often the real reason why people today and tomorrow. buy products or services.’ Freud’s psychoanalytical approach broke the personality into the id (instinctive drives and urges, Cognitive learning eg to eat food or grab food), the ego (the social Cognitive learning focuses on what happens in be- learning process that allows the individual to inter- tween the stimulus and the response. It embraces act with the environment, eg to ask politely for food the intervening mental processes. or pay for food) and the superego, which provides a Insight, meaning, perception, knowledge and conscience or ethical/moral referee between the id problem solving are all considered relevant con- and the ego. Freud suggested that all actions are the cepts. Cognitive learning is not dependent on trial results of antecedent conditions (see how childhood and error. It depends on an ability to think, some- experiences might affect industrial buying behavi- times conceptually, and to perceive relationships our some 30 or 40 years later in ‘Mommy’s never and ‘what if’ scenarios. It is not dependent on an coming back’, page 144). Occasionally these un- immediate reward to reinforce the learning process; conscious stirrings manifest themselves in dreams, in fact, ‘latent learning’ occurs in the absence of re- responses to ambiguous stimuli and slips of the ward and without any immediate action. Of course, tongue (Freudian slips). an individual has to be suitably motivated to achieve Clinical psychology uses thematic apperception this kind of learning. The next intervening variable tests, Rorschach tests and word association tests to – motivation – will now be considered. help it to analyse the underlying and sometimes 108 Part 1 Communications Background and Theories unconscious personality traits and motivations of an individual. In-depth market researchers (qualita- A close shave? tive researchers) use metaphors, picture completion and montages in an attempt to throw the inter- There is a simple test that has been used in viewee’s ego off guard and dip into the real under- lectures with different groups. A question is posed, lying feelings that interviewees ind dificult both to with a request for male respondents only. The become aware of and to express in an articulate question is ‘How many of you find shaving manner. a hassle?’ Usually a unanimous show of hands In the 1950s, Vance Packard was concerned about how in-depth researchers like Ernest Dichter emerges. ‘How many of you would like to be able to were attempting to extract buyers’ unconscious dispense with the aggravation of shaving?’ Slightly feelings, aspirations and motivations, which were fewer hands emerge. ‘Well, here is a cream that then subtly relected through advertising imagery, will solve your problem. This cream closes your which in turn manipulated buyers unconsciously. hair follicles so that hair will never grow there Although discredited by some and criticized by again. It is medically approved and cleared for others, Dichter’s Handbook of Consumer Motiva­ a market launch next year. Who would like to try tions (1964) is an extremely thought-provoking and some right now?’ All the hands are gone. The entertaining read. question ‘Why not?’ is usually answered faintly Here are some other well-known, in-depth research with ‘Freedom to choose to have a beard later in indings from the 1950s that supposedly reveal the life’ and so on. Or is there something deeper here? deep underlying motivations that drive certain forms Dichter would have said ‘Yes’. of behaviour, including buying behaviour: ●● A woman is very serious when she bakes a cake, because unconsciously she is going Abraham Maslow’s (1954) hierarchy of needs pro- through the act of birth. vides a simple but useful explanation of the way an ●● Soon after the trial period, housewives who individual’s needs work. Essentially he showed that used a new improved cake mix (no egg one is driven or motivated initially to satisfy the needed, just add water) stopped buying it. lower-level needs and then, when satisied, move up The new improved cake mix provoked to the next level of need. This theory also implies a sense of guilt, as the cooking role of the that motivation can be cyclical, in so far as buying a housewife was reduced. house may be motivated initially by the lower-level ●● A man buys a convertible car as a substitute survival needs and subsequently by the higher-level mistress. need of esteem. Figure 4.8 shows Maslow’s hier- archy of needs. ●● Smoking represents an infantile pleasure Cars transport people from A to B. Sometimes of sucking. the need to buy a car is a basic survival need (eg to ●● Men want their cigars to be odoriferous get to work, to earn money to buy food). Sometimes in order to prove that they (the men) are it can provide a cocoon (or shelter) from the mass masculine. of bodies scrambling for the public transport sys- ●● Shaving for some men is the daily act of tem. Sometimes it can provide freedom to explore cutting off this symbol of manliness the countryside, visit friends or do what you want (stubble). It is therefore a kind of daily (self-actualize). Cars can also act as status symbols castration. (esteem). Some cars position their beneits (power, speed, safety, environmental, etc) so that they domin- This is all arguably outdated now. Humans are ate the ad and appeal to the predominant need of rational animals and are not concerned with such a particular segment. psychoanalytic interpretations of everyday, ordinary Sometimes customers simply do not understand and, supposedly, common-sense behaviour. Consider the new beneits delivered by innovative products and ‘A close shave?’ opposite. services. For example, research originally rejected Chapter 4 Customer Psychology and Buyer Behaviour 109 F I g u R E 4 .8 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 is no longer valid: ‘There is a better idea – the invisible consumption’, which suggested consumers buy badge. What the Joneses might think is, really, beside products to impress other people, with his example of the point. Because what you are really doing is telling the man who parades down Main Street in ‘stainless’ that story to yourself. In other words, yes, a fancy linen, with a superfluous walking stick. These items told “product” really is a badge in the sense that it’s a a story and provided ‘evidence of leisure’ – to an symbolic confirmation or expression of identity (an audience of strangers. Today’s customers also wear identity that we may wish for rather than actually badges (Guinness is a badge that tells everyone that embody – aspirational rather than authentic). But the the drinker is a discerning beer drinker). Even hybrid fact that hardly anyone sees it, let alone accepts the cars are said to be eco-status markers (or signals) that meaning it supposedly projects, hardly matters. In fact, show ‘conspicuous concern’ about the environment. if the real audience is us, the badge may as well be According to Walker (2008), conspicuous consumption invisible.’ ATMs, with typical comments like ‘I wouldn’t feel them power; others want to because they see it as a safe withdrawing money on the street.’ Interestingly, symbol of success (good for the ego and esteem); the wheel is turning full circle, as customers are others just want the thrill of driving very fast (self- once again becoming nervous about cash with- actualization, as in the case of the driver’s last wish drawals on crime-ridden streets. in Nevil Shute’s On the Beach); others again may Different people (or groups of people) extract simply want a very fast, reliable car that allows different beneits from the same product. Some them to get from A to B (around Europe) without people want to drive a Porsche because it gives delay (see the iPod example on page 5). Markets 110 Part 1 Communications Background and Theories Attitudes can be broken down into three com- What motivates Sears’ best customers? ponents, which are often explained as ‘think’, feel’ and ‘do’ or ‘cognitive’, ‘affective’ and ‘conative’. The cognitive element is the awareness or knowledge of, Which of the following benefits motivates say, a brand. The affective element is the positive or customers of the US department store Sears? negative feeling associated with the brand. The ●● Priority repair service. conative element is the intention to purchase. It can be important to measure all three components, since ●● Special zero financing. an isolated element can be misleading. For example, ●● Free special catalogue. Rolls-Royce scores highly on the cognitive and affective elements of the attitude, but few of those ●● Private sale events. who express awareness of and liking towards a ●● Money-saving certificates. Rolls-Royce will actually buy one. Identifying the levels of each attitudinal element helps to set tighter ●● Personal recognition. communication objectives. For example, the cre- Answer: Personal recognition – customers love ative strategy for increasing brand awareness would be different from the strategy required to change it when staff call over the store manager to meet the target market’s feelings (or reposition the brand). the VIP customer. You can see how this fits with A different communications strategy (perhaps an Maslow’s hierarchy of needs. 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. can be broken up into ‘beneit segments’ so that There are several options: communications can be tailored to develop the ideal positioning for a particular segment. In some cases 1 Change the beliefs held about the beneit segmentation demands different products product or service (or its attributes and for different segments, as in the case of the tooth- features). paste market (page 94). 2 Change the importance ratings (or weightings) of various attributes. Attitudes 3 Introduce another attribute. 4 Change the association of a particular Attitudes affect buying behaviour. Attitudes are product or service with the others. learnt, and they tend to stick; they can be changed, but not very quickly. As Williams (1989) says: ‘If a 5 Change the perception of competitors’ marketer is able to identify the attitudes held by products or services. different market segments towards his product, and Groups also inluence attitudes: hence the import- also to measure changes in those attitudes, he will ance of opinion formers and opinion leaders. Now be well placed to plan his marketing strategy.’ An consider group inluence in the buying process. 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 Group inluence prior to purchase or post-purchase? Can attitudes Much of human behaviour, and buyer behaviour in be formed without any experience? The answer is particular, is shaped by group inluence. Whether ‘yes’ to both. Attitudes are sometimes formed with- cultural, religious, political, socio-economic, life- out direct experience and, equally, products are style, special interest groups or just family, social often bought without any prior attitude. In the groups affect an individual’s behaviour patterns. latter case, however, it is likely that an attitude will Watch explicit group inluence occur as thousands form as a result of word of mouth, or an engaging of people perform a Mexican wave at football advertisement. matches, the Olympics, etc. Chapter 4 Customer Psychology and Buyer Behaviour 111 needs and spending patterns are often predictable The effects of group influence are often seen in as the income earner moves through various family a queue or waiting area where charity collectors life cycle roles. Spending patterns, inluenced by are attempting to collect money. Success or failure changing roles, can be monitored and forecast before is often determined by the reaction of the first communicating any marketing messages. For ex- encounter, ie if the first person acknowledges the ample, direct mail companies often mail new mothers collector and makes a contribution, the next person within a few days of the arrival of their baby. is more likely to do so too. We have often seen Like everything else, roles are changing. Men a whole platform generously giving money after aged 25–39 are experiencing a massive role change, a successful start. Equally, we have seen almost and some ind it hard to cope. ‘Generation Y and X total rejection by a whole queue once the initial men expect to balance work and family, whereas their parents didn’t’ (Kimmel, 2008). Perhaps this is contact has refused to donate. This is a bizarre or something women have been doing for some time. perverse form of charity giving and seems to be And perhaps this multitasking, multi-role life is about peer group pressure. In a sense, a donation more alien to young men, as Harold, a 39-year-old buys some relief from guilt or embarrassment. 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, Most individuals are members of some kind of 2008). group, whether formal (eg committees) or informal Many young men today even see their home as (eg friends), primary (where face-to-face communica- having a different role to that of their parents’ home. tions can occur, eg family) or secondary (eg the For many, home is a ‘refuge from an uncertain Chartered Institute of Marketing). Groups develop world’ and a ‘haven from the stresses of life’. In their own norms or standards that become accept- addition to being a long-term inancial investment, able within a particular group. For example, normal a home can also be a hub of technology that ‘con- dress among a group of yacht club members differs nects a guy with his sense of self through a variety considerably from the norm or type of clothes worn of media experiences’. 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 purchas- ing process. Absenteeism out, ‘presentee-ism’ in Roles are played by different members within a group. An individual may also have to play different ‘Men have to work harder than ever before to roles at different stages of the same day, eg a loving make themselves indispensable, to the point where mother, tough manager, loyal employee, client enter- we are now seeing “presentee-ism”, which occurs tainer, happy wife and, perhaps, sensuous lover. In the when men feel that they have to get to work earlier online world the same person can adopt different and leave later to show their commitment. This is roles and even multiple personalities (see ‘Different having a detrimental effect on their home lives.’ personalities below the surface’, page 91). Coopere (2008) 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 Finally, the mix of communications tools helps from the family life cycle, which shows how an in- move customers through the stages of a buying dividual moves from single to newly wed to full nest model from unawareness to reassurance. Each tool 1 (youngest child under six) to full nest 2 (youngest can affect different stages. Although there is always child six or over) to full nest 3 (dependent children) some vagueness at exactly where the effectiveness to empty nest 1 (children moved out) to empty nest starts and stops, Figure 4.9 is arguably an over- 2 (retirement) or solitary survivor 1 (still working) simpliied graphic that may help in understanding to solitary survivor 2 (retired). The income levels, which tools do what. 112 Part 1 Communications Background and Theories F I g u R E 4 .9 Which communications tools do what Unawareness Awareness Acceptance Preference Insistence/buy Reassurance now 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 ensure that it covers as many avenues to the mind of target market’s buying behaviour before, during the buyer as resources allow. and after the actual purchase. Even the apparently Reasons and motives range from the rational to simple act of purchasing a hamburger can reveal a the bizarre. Motives are, however, only one variable host of hidden motives. In-depth research reveals among many other intervening variables that inte- some deep and unconscious reasons that demon- grate and inluence buying behaviour. For example, strate some of the complexities of buying behaviour. beliefs and attitudes affect motives, which in turn The time and effort spent in the buying process affect the way an individual sees or perceives things depend on the type of buying situation. Decision- (images, ads, products, shops, etc). We learn these making units affect the process. Buying models opinions, attitudes and beliefs partly from groups highlight some of the stages through which the (such as friends and colleagues), partly from com- buyer passes, offering a kind of checklist for mar- mercial messages carefully aimed at us through keting communications to ensure that they carry advertising, sales promotion, etc, and partly from the buyer through each stage successfully. The be- real experiences of products or services. haviourist school differs from the cognitive school All these inluences interact with commercial of more complex buying models. Motivation, per- stimuli such as advertisements. The effects are ception, learning, values, attitudes and lifestyles all ultimately relected in our behaviour (or lack of interact and inluence the buying process. behaviour in some circumstances). Once marketing professionals are equipped with In consumer markets, buying behaviour is affected a clearer understanding of both the motives for by the complex web of mostly internal intervening buying and the buying process itself, a marketing variables (motivation, perception, attitudes, learn- communications strategy can be developed to ing, memory, lifestyle, personality and groups). Sex, Chapter 4 Customer Psychology and Buyer Behaviour 113 age, income and even an individual’s face or body emotional factors that are generated from internal affect their behaviour. Other external variables such processes and guided by external inluences. as laws and regulations, the weather, opening hours, Marketing communications can change a nation’s an out-of-stock situation or an emergency can all behaviour. Marcomms do affect aggregate buying change buying behaviour. behaviour, as evidenced by changed behaviour An industrial buyer is also inluenced by internal patterns after the National Lottery integrated cam- variables, including the organization’s objectives, paign, which stimulated some 65 per cent of the policies, procedures, structure and systems, and British adult population into shops to buy lottery variables external to the organization such as the tickets on a regular basis. The same changes in buyer state of the economy, the level of demand and com- behaviour are evident in China and across Europe, petition, the cost of money, etc. where marketers really do change customer behav- Some argue that it is impossible, as Foxall (1992) iour patterns. It is no accident. It is never the result says, to ‘capture human nature in its entirety’ because of guesswork. It is, as dunnhumby (Tesco’s database of the complexity of the decision-making process. agency) says, ‘largely dependent on accurate analysis This complexity is created by the web of rational and 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 Perhaps Oscar Wilde was too generous when he relevance, the greater the value – it’s a continuum. said that ‘man is a rational animal except when Customers get what they want, your margins are asked to act within the dictates of reason’. protected. Everyone’s a winner’ (Humby, 2008). The magic marketing formula works. key points from Chapter 4 ●● Buying behaviour is complex. ●● Emotional inluences in decision making are still ●● There are many different approaches to buying dominant in B2C and exist in B2B markets. models. ●● Marketers must understand how the intervening ●● Marketers need a continual feed of information psychological variables inluence buyer on customer behaviour. behaviour. 114 Part 1 Communications Background and Theories Appendix 4.1: hofacker’s online information processing One approach to online information processing is standards or metaphors, it will be most effective, Charles Hofacker’s ive stages of on-site informa- since the customer will interpret them based on tion processing. previous experience and memory. Once relevant information is found, visitors sometimes want to 1 Exposure. dig deeper for more information. 2 Attention. Changing the layout of a website will be as 3 Comprehension and perception. popular with customers as a supermarket changing 4 Yielding and acceptance. its store layout every six months! Metaphors are another approach to aid comprehension of e- 5 Retention. commerce sites; a shopping basket metaphor is used Each stage acts as a hurdle, since if the site design or to help comprehension. content is too dificult to process, the customer can- Fourthly, yielding and acceptance refers to not progress to the next stage. The e-marketer fails. whether the information you present is accepted by The best website designs take into account how the customer. Different tactics need to be used to customers process information. Good e-marketers convince different types of people. Classically a US are aware of how the messages are processed by the audience is more convinced by features rather than customer and of corresponding steps we can take to beneits, while the reverse is true for a European ensure that the correct message is received. audience. Some customers will respond to emotive The irst stage is exposure. This is straightfor- appeals, perhaps reinforced by images, while others ward. If the content is not present for long enough, will make a more clinical evaluation based on the customers will not be able to process it. Think of text. This gives us the dificult task of combining splash pages, banner ads or Shockwave animations: text, graphics and copy to convince each customer if these change too rapidly the message will not be segment. received. Finally, retention – how well the customer can The second stage is attention. The human mind recall their experience. A clear, distinctive site design has limited capacity to pick out the main messages will be retained in the customer’s mind, perhaps from a screen full of single-column format text prompting a repeat visit when the customer thinks, without headings or graphics. Movement, text size ‘Where did I see that information?’ and then recalls and colour help to gain attention for key messages. the layout of the site. A clear site design will also be Note though that studies show that the eye is im- implanted in the customer’s memory as a mental mediately drawn to content, not the headings in the map and they will be able to draw on it when re- navigation systems. Of course, we need to be careful turning to the site, increasing their low experience. about using garish colours and animations, as these To summarize, understanding how customers can look amateurish and distract from the main process information through the stages of exposure, message. attention, comprehension and perception, yielding Comprehension and perception are the third of and acceptance, and retention can help us design Hofacker’s stages. They refer to how the customer sites that really help us get our message across and interprets the combination of graphics, text and deliver memorable messages and superior customer multimedia on a website. If the design uses familiar service. Chapter 4 Customer Psychology and Buyer Behaviour 115 Appendix 4.2: The post-PC customer The post-PC customer may occasionally accept pay- ment to view some ads. The rest are screened out Live longer by both sophisticated browser software and little ‘TiVo-type’ boxes attached to wall-to-wall screen Humans may develop smaller ears (from constant TVs. Neither governments nor society permit old- use of headphones) and better body organs, style intrusive advertising any more. No more intru- replaced as a result of early-warning systems sive evening telephone calls from script-reading carried by miniature submarines constantly intelligent agents. It is also illegal to litter anyone’s patrolling in the bloodstream. These wireless doorstep or house with mailshots and inserts. Heavy ines stopped all that a long time ago. The only ads database-driven devices identify wearing parts and that do get inside are carried by the many millions organs, check cloned stock availability, reserve of private media owners who rent out their cars, beds and preferred surgeons and estimate time bikes and bodies as billboards. before breakdown replacement is required. The tedious task of shopping for distress pur- Discounts for early bookings into leisure hospitals chases like petrol, electricity or memory storage is are also negotiated automatically. delegated completely to embedded shopping bots. Non-embedded bots spun out of control some years ago when they irst appeared in three- hires the fridge-linked database). Children happily dimensional hovering holograms – always at your play chess and interact with their opponents on the side, always double-checking the best price for giant vertical screens, called refrigerators. Voice- hire cars, hotels, even drinks at the bar. Some are pro- operated computers are considered noisy and old grammed to be polite, aggressive or even abusive. All fashioned as discreet, upmarket, thought-operated are programmed to be intrusive whenever anything computers operate silently, but extremely effectively. is being bought. Delays on buses and trafic jams And all the time blue-tooth type technology fa- regularly occurred when argumentative bots engaged cilitates ubiquitous communications, which allows in lengthy negotiations. Frustration broke out. Bots constant interaction between machines. Man and attacked bots, people attacked bots and bot owners. machine integrate into a vast database. We have Eventually bots were banned from buses, planes, more IT power in today’s average luxury car than trains and several ‘peaceful supermarkets’. the rocket that went to the moon. Yes, Moore’s law Next came the great worm wars: programming suggests the tectonic shift will continue. Yes, mar- bots so they only buy your brand – for life. But, keting will continue in a new guise (probably not unlike humans, bots can be reprogrammed by a even called marketing but just common sense). competitor. The advertising agent worm was born. Time-compressed, information-fatigued and dis- Agent eaters soon followed. Despite being informa- loyal, the post-PC customer seeks relationships tion fatigued and time compressed, the post-PC not from brands themselves but from databases customer lives a lot longer than many bots. And that know, understand and seemingly care about certainly longer than most of the new brands that them. Witness the virtual girlfriend relationships seem to come and go. The 150-year-old person has in Japan, relationships with shops and vending already been born. machines, oh, and relationships with people, real, Meanwhile, back at the ranch, microwaves insist quaint, touchy, feely, physical people. on offering suggestions of ideal wines to go with your And all the time the technology, if truly mastered, meal, offering instant delivery from the neighbour- can free up time to do the important things in life, hood’s wired-up 24-hour roving delivery van. Your to give the post-PC customer a genuinely higher fridge offers special incentives to buy Pepsi when quality of life both at work and at home with family you run out of Coke (or whichever brand owns or and friends. 116 Part 1 Communications Background and Theories references and further reading Chisnall, P (1985) Marketing: A behavioural analysis, Kanner, B (1989) Colour scheme, New York McGraw-Hill, Maidenhead Magazine, 3 April Colley, R H (1961) Deining Advertising Goals and Kapferer, J (2004) The New Strategic Brand Measuring Advertising Results, Association of Management, Kogan Page, London National Advertisers, New York Kennedy, J (2009) A wave of optimism, Interview Coopere, G (2008) Species – a user’s guide to young with Eric Schmidt, Marketing Age, November men, Discovery Channel, Discovery Kimmel, M (2008) Species – a user’s guide to young Communications Europe men, Discovery Channel, Discovery Dichter, E (1964) Handbook of Consumer Communications Europe Motivations: The psychology of the world of Kotler, P (1998) Practice of Marketing, Prentice Hall, objects, McGraw-Hill, New York Englewood Cliffs, NJ Discovery Channel (2008) Species – a user’s guide to Lavidge, R and Steiner, G (1961) A model for young men, Discovery Channel, Discovery predictive measurements of advertising Communications Europe effectiveness, Journal of Marketing, East, R, Wright, M and Vanhuele, M (2008) October, p 61 Consumer Behaviour: Applications in Marketing, McGovern, G (2010) The rise of the anti brand – Sage, London Ryanair, http://tinyurl.com/ydwk943 Egan, J (2007) Marketing Communications, Manyika, J (2008) Google’s view on the future of Case study 4.1, Thomson Learning, London business: an interview with CEO Eric Schmidt, Ehrenberg, A (1974) Repetitive advertising and The McKinsey Quarterly, September consumer awareness, Journal of Advertising Marketer (2010) Facts and stats, Marketer, March Research, 14, pp 25–34 Market Research Society (MRS) (1996) Research is Ehrenberg, A (1997) How can consumers buy a new good for you – the contribution of research to brand?, Admap, March, pp 20–27 Guinness advertising, Conference papers, MRS, Engel, J F, Blackwell, R D and Kollatt, D T (1978) London Consumer Behaviour, 3rd edn, Dryden Press, Maslow, A (1954) Motivation and Personality, Hinsdale, IL Harper & Row, New York Engel, J F, Kinnear, T C and Warshaw, M R (1994) Oakes, S (2008) Mood maker – music to set your till Promotional Strategy: Managing the marketing ringing, Marketer, September communications process, 7th edn, Irwin Shaw, Packard, V (1957) The Hidden Persuaders, Penguin Homewood, IL Books, Harmondsworth Fishbein, M (1975) Attitude, attitude change and Penn, D (2005) Brain science, that’s interesting, but behaviour: A theoretical overview, in P Levine (ed), what do I do about it?, Market Research Society Attitude Research Bridges the Atlantic, American Conference Marketing Association, Chicago Peters, T (2003) Re­imagine, Dorling Kindersley, Forsyth, J, Galante, N and Guild, T (2006) Capitaliz- London ing on customer insights, McKinsey Quarterly, 3 Roberts, K (2006a) Except from a Saatchi & Saatchi Foxall, G (1992) Consumer Psychology in presentation, Madrid, 8 June, http://www. Behavioural Perspective, Routledge, London saatchikevin.com/sisomo/Speeches_Ideas/ Frank, O (2010) Goodbye, smartphone; hello, Emotion_not_Reason/ predictive context device, Advertising Age, Roberts, K (2006b) Saatchi & Saatchi presentation, 25 June Madrid, 8 June, http://www.saatchikevin.com/ Hofacker, C (2001) Internet Marketing, 3rd edn, sisomo/Speeches_Ideas/KR_Short_Cuts_ Wiley, New York part_5/ Howard, J A and Sheth, J N (1969) The Theory of Roberts, K (2009a) Short cuts (part 1), 6 July, Buyer Behavior, Wiley, New York http://www.saatchikevin.com/sisomo/ Humby, C (2008) Brand is Dead, Long Live the Speeches_Ideas/KR_Short_Cuts_part_1/ Customer, Dunnhumby Roberts, K. (2009b) Short cuts (part 5), 6 July, Jones, H (2008) How to tackle foreign markets, http://www.saatchikevin.com/sisomo/ Marketer, 8 September Speeches_Ideas/KR_Short_Cuts_part_5/ Chapter 4 Customer Psychology and Buyer Behaviour 117 Roberts, K (2009c) Annual City Lecture to the Smith, P R (2001) Online eMarketing Course: Worshipful Company of Marketors, 6 November eCustomers, Multimedia Marketing.com, Roberts, K (2010a) Creativity, 21 January, London KRconnecttoblogspot.com Smith, P R (2010) Video interview with Kevin Roberts, K (2010b) Spreading the love, Marketer, Roberts, CEO, Saatchi & Saatchi Worldwide February Smith, P, Berry, C and Pulford, A (1999) Strategic Rogers, E M (1961) Diffusion of Innovations, Marketing Communications, Kogan Page, 1st edn, Free Press, New York London Rossiter, J and Percy, L (1996) Advertising Strong, E K (1925) The Psychology of Selling, Communications and Promotion Management, McGraw-Hill, New York 2nd edn, McGraw Hill, New York Veblen, T (1899) The Theory of the Leisure Class Schifman, L G and Kaunk, L L (1991) Consumer Walker, R (2008) The invisible badge: Moving past Behaviour, 4th edn, Prentice Hall International, conspicuous consumption, ChangeThis.com, London 47.01 Shaw, R (1997/98) Appreciating assets, Marketing Williams, K C (1989) Behavioural Aspects of Business, December/January Marketing, Heinemann, Oxford Smith, P R (1996) Video interview with Kenichi Williams, T G (1982) Consumer Behavior, West Ohmae Publishing, St Paul, MN Further information Market Research Society (MRS) Semiotic Solutions 15 Northburgh Street 1 Manor Cottages London EC1V 0JR Kenninghall Road Tel: +44 (0)20 7490 4911 Garboldisham www.mrs.org.uk Norfolk IP22 2SJ Tel: +44 (0) 1953 681012 Ofcom www.semioticsolutions.com 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 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 Multi-step non-linear communications non-verbal and non-symbolic models 127 communications 120 Classic and contemporary communications Symbolic and semiotic communications 121 models 128 Source credibility 121 Future communications models 131 Opinion formers, opinion leaders The end of the traditional marcomms funnel and connectors 122 model? 131 Communications models 123 Make way for the semantic web 132 A single-step communications model 123 new marketing communications skills A two-step linear communications required 133 model 124 references and further reading 134 Multi-step linear communications models 126 Further information 135 120 Part 1 Communications Background and Theories audiences can be explained by Douglas Smallbone’s Introduction to analogy of radio communication. communications theory Perfect transmitting conditions might exist if there were no noise (extraneous factors that distract A dictionary deinition of ‘communications’ is as or distort the message, such as other advertisements, follows: ‘communication n. 1. a transmitting 2. a) giv- poor reception, a lashing light, a door bell or an ing or exchange of information, etc by talk, writing ambulance). Without noise, perfect transmitting b) the information so given 3. a means of communi- conditions would exist. In reality, there is almost cating 4. the science of transmitting information’. always noise, so perfect transmitting conditions do What is interesting is the exchange of informa- not exist. Cinemas may be the exception, where a tion. Communication is not a one-way low of in- captive audience is in an attentive state and receptive formation. Talking at or to someone does not imply to, say, a well-produced X-rated advertisement. But successful communication. This only occurs when even when the target audience is seemingly tuned the receiver actually receives the message that the in (watching, listening to or looking at a particular sender intended to send. Message rejection, misinter- organization’s package, promotion, advertisement, pretation and misunderstanding are the opposite of etc) it may not be on the same wavelength because effective communication. 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 Millions die from inefective distinct means of receiving messages or information communications or marketing communications – the ive senses of hearing, sight, touch, taste and smell. Marketing ‘There is evidence that a mistake in translating communications tools can address many senses a message sent by the Japanese government near simultaneously (eg packaging). 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 The human radio response to the US surrender ultimatum was translated by Domei as “ignore”, instead of its ‘Given good transmitting conditions and receiver correct meaning, “withhold comment until and transmitter tuned to the same wavelength, a decision has been made”.’ perfect reception can be effected.’ Cutlip, Center and Broom (2004) Smallbone (1969) This is an extreme and tragic example of communi- cations gone wrong. Communication errors in Non-verbal and non-symbolic marketing generally do not cost lives but can, if allowed to continue unchecked, cost market share, communications company survival and jobs. On the other hand, Although verbal and visual communications gain good marketing communications help an organiza- a lot of conscious attention, there are non-verbal tion to thrive by getting its messages across in a and non-symbolic ways of communicating, such as focused and cost-effective way. space, time and kinetics. Crowded areas, or lack of Good marketing communications is not as space, send messages to the brain that, in turn, can simple as it may appear. Even David Ogilvy, the stimulate a different set of thoughts and a different advertising guru, was once reported to have used behavioural response. The opposite is also true: a the word ‘obsolete’ in an advertisement only to spacious ofice or living room conveys different discover that (at the time) 43 per cent of US women images. In Western cultures the use of time creates had no idea what it meant. The delicacy and difi- images, eg a busy but organized person gives an culty of creating effective communications to target impression of authority. ‘Thanks for your time’ Chapter 5 Customer Communications Theory 121 immediately conveys a respect for and an apprecia- saw ‘cologne gushing out of a phallic-shaped bottle’ tion of a seemingly important person’s time. A busy creating a conlict of images, since it ‘symbolized diary can project an image of importance. ‘I can male ejaculation and lack of control’. Pierre Cardin squeeze you in on Friday at . . .’ implies seniority in acknowledged that she was probably right, but the relationship. In the UK, the term ‘window’ is decided to keep the shot, as it was ‘a beautiful prod- now used for free time or space in a busy diary. uct shot plus it encourages men to use our fragrance Some advertisements sell products and services liberally’. 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 Source credibility for 30 years. Finally, kinetics communicate. Gestures The success or failure of an advertisement, or any and movements send messages. Even the simple, swift message, is partially determined by whether it is a clicking of a briefcase, entering or leaving a room credible message in the irst place. This, in turn, is or closing or not closing a door can communicate inluenced by the credibility of the source of the (in China sitting opposite the door means you are message, the deliverer of the message and the chosen paying for the meal). Most of all, body language media vehicle. and facial gestures are powerful communicators. The perceived credibility of the message source is An understanding of body language allows an indi- inluenced by trustworthiness and expertise. These vidual to learn more about what another person is are key factors that organizations must constantly really feeling. A smile, for example, communicates prove so that they have a platform of credibility immediately, effectively and directly. (More smiling, (‘Develop credibility before raising visibility’: see please.) Chapter 3). Endorsements from customers and vener- able bodies, published papers, conference speeches, awards won, memberships and of course the per- Symbolic and semiotic ceived quality of the brand itself all help to establish trustworthiness and expertise, ie source credibility. communications In addition to the credibility of the brand, the mes- The ield of semiotics (or semiology) opens up a rich sage credibility is also inluenced by the individual discussion of how symbols and signs are used in delivering the message, such as the presenter in an communications, particularly advertising. Audiences advertisement. For example, some brands in the UK often unconsciously perceive images stimulated by stopped using supermodel Kate Moss when her certain symbols. public behaviour was deemed to be ‘unsuitable’. Engel, Warshaw and Kinnear (1994) demon- On the other hand, a highly credible presenter adds strated how Lever’s fabric softener Snuggle used credibility to a brand. a cuddly teddy bear in its advertising. It has been The media vehicle affects the credibility, eg a suggested by some psychologists that ‘the bear is an message that ‘using a PC damages your fertility’ ancient symbol of aggression, but when you create would have less credibility if it came from the Sun a teddy bear, you provide a softer, nurturant side to newspaper than it would have if it came from the that aggression. As a symbol of tamed aggression, FT, or even more credibility if it came from a learned the teddy bear is the perfect image for a fabric medical journal rather than a newspaper survey. softener that tames the rough of clothing.’ The media vehicle’s perceived expertise, prestige and Engel, Warshaw and Kinnear (1994) comment: editorial tone (style, eg upmarket or mass-market, ‘The key point here is that if marketing communi- and other content, eg sex and violence) all affect the cators are not aware of the subtle meanings of sym- credibility of a message. bols, then they are liable to communicate the wrong Kelman (1961) suggested that the message source message.’ has three variables: 1) perceived source expertise Carol Moog’s advice to Pierre Cardin on its men’s and neutrality (or objectivity); 2) perceived source fragrance advertisement, which was designed to attractiveness (if it is deemed attractive, the recipi- show men who are ‘aggressive and in control’ splash- ents may be more likely to develop a similar opinion ing on fragrance, was accepted but rejected! Moog or position); and 3) perceived power to reward or 122 Part 1 Communications Background and Theories punish message receivers (eg a teacher or perhaps unleash an epidemic of demand for products and an owner of a social media group). In summary, services’ (Marsden, 2004). a great message delivered from a source with low Connectors, opinion leaders, style leaders, inno- ‘source credibility’ will not be as effective as the vators, early adopters, inluential individuals and same message coming from a source with high opinion formers: call them what you want, they ‘source credibility’. spread messages. Message likeability Connectors know a lot of people This is about how much an individual likes an ‘They are the kind of people who know everyone. advertisement. It is determined by how interesting, All of us know someone like this. But I don’t meaningful, relevant and enjoyable an think we spend a lot of time thinking about the advertisement is deemed to be. When researching importance of these people. I’m not even sure that advertisements, and in particular, how much most of us really believe that the kind of person customers like an advertisement, ‘likeability is who knows everyone really knows everyone. deemed to have four elements: entertainment, But they do.’ relevance, clarity and pleasantness.’ Gladwell (2000) Opinion formers, opinion leaders Marketers recognize that in each market there are smaller target markets of opinion leaders who and connectors inluence other members in the marketplace. Major Opinion formers and opinion leaders include jour- brands can maintain their credibility by talking nalists, judges, consultants, lecturers, religious (advertising) speciically to these leaders, as well as leaders and group leaders. Today they also include talking to the mass through other media channels bloggers, Facebook fan page owners, Facebook (sometimes with messages tailored for the two group owners, LinkedIn group owners and many groups). Whether marketers are advertising hi-is, more online group leaders. Oficially, opinion fashion, tennis rackets or social issues, multi-step formers are formally paid to give their opinions communications can be employed. (eg journalists), while opinion leaders are not paid In the world of fashion, the leaders are called for their opinions (eg many bloggers). Identifying ‘style leaders’. Even cult fashion products can be inluencers is important, and high-proile bloggers mass-marketed by carefully splitting the messages can be easily identiied, as can group leaders, whether between style leaders and the mass. While the leaders on Facebook or LinkedIn. Indeed LinkedIn now want to set themselves apart from the rest, the mass has a feature that identiies the top inluencers in a market consciously and/or unconsciously looks to group and not just the group owners. the leaders for suggestions about what to buy. The Malcolm Gladwell’s fascinating The Tipping dificulty lies with success – as the mass market buys Point (2000) explores how to create an epidemic more, the leaders lose interest unless they are rein- of demand for a product or service or idea. He calls forced with brand values that preserve the brand’s opinion leaders ‘socially contagious connectors’ credibility among the cognoscenti. This is important and suggests that, instead of pandering to the mass- because, if the leaders move away today, the mass market herd, marketers should focus on satisfying sales will eventually start falling away next year or the connectors’ needs. Connectors are estimated the year after. So, in addition to the mass advertising, to be 10 per cent of a target audience (Keller and some brands use small-audience, targeted, opinion- Berry, 2002). leader media to send the ‘right’ messages to rein- It is worth identifying and partnering with the force the leaders’ relationship with the brand. ‘infectious few’ so that organizations can focus on Hi-i trendsetters need a different kind of adver- the ‘consumers that count, who have the power to tising than just colour supplements with glossy Chapter 5 Customer Communications Theory 123 brand images. These innovators and early adopters ‘adopt’ new products or services? Is there a particu- read additional magazines and look for more de- lar type of process through which they pass? tailed 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 Communications models an opinion on a brand of hi-i before deciding to buy. No simple diagram can relect all the nuances and Just getting the product into the hands of the complexities of the communication process. This opinion leaders can help a brand competing in a section considers some basic theories and models. large market. US marketing guru Philip Kotler (2000) suggests that special offers to opinion form- ers can work wonders: ‘A new tennis racquet may A single-step communications be offered initially to members of the high-school model tennis teams at a special low price. The company would hope that these star high-school tennis play- There are three fundamental elements in communi- ers (or inluential individuals) would “talk up” their cation: the sender (or source), the message and the new racquet to other high schoolers.’ receiver, as shown in Figure 5.1. An understanding of multi-phase communica- This basic model assumes that the sender is tion processes can contribute something to the active, the receiver is inactive or passive and the development of social issue campaigns, such as that message is comprehended properly. In reality this is concerning AIDS. The initial stages of the campaign rarely the case. Chapter 4 demonstrates how we see were temporarily restricted by inaccurate editorial what we want to see and not necessarily what is coverage. Some tabloid journalists were feeding sent. An understanding of the target receiver or conlicting messages to the same mass that the audience helps to identify what is important to the advertising was addressing. The factual advertising audience and how symbols, signs and language are was switched into the press so that opinion formers interpreted. The message is ‘dressed up’ or ‘coded’ in (journalists) could not write any more conlicting an appropriate way, sent through a media channel and inaccurate reports. and, if it gets through all the other noise, inally The power of inluential individuals and inluen- ‘decoded’ by the receiver. Guinness advertisements tial organizations can also be seen in industrial mar- basically ask their target audience to drink Guinness, kets. An entire industry may follow a well-respected but they are very carefully coded. For example, and highly successful company that makes an early ‘It’s not easy being a dolphin’ were the only words decision to buy. Expert sales teams focus on these uttered in one of their television advertisements. kinds of companies initially. Marketers in consumer The audience decodes the message (correctly or markets can also focus on the people who are the incorrectly) and ultimately rejects, accepts, stores irst to buy new ideas. Better information today can or decides whether to include Guinness in its ‘con- provide a focused approach through database mar- sidered set of brands’ or not. Correct decoding keting (see page 69), while the imagery used can does not always work, eg an anti-drink ad campaign relect the lifestyles, attitudes and aspirations of backired by inadvertently glamorizing the habit these innovators and early adopters of fresh ideas. (see the box ‘Decoding drunken messages’ below). Who are these early adopters of new products Amidst the careful coding and decoding there is and services? Are they different from the other po- noise, the extraneous factors that distract or distort tential customers in the same market? How do they the coded messages; Figure 5.2 demonstrates this. The sender monitors feedback (eg whether the receivers change their behaviour, facial expression, F I g u R E 5 .1 beliefs or attitudes) so that the message (and/or the A simple communications model 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 actu- Sender Message Receiver ally gets through and works on the target market. 124 Part 1 Communications Background and Theories F I g u R E 5 .2 The communication process (based on Schramm’s 1955 model) Noise Sender Encoding Message Decoding Receiver Feedback Mass communication is therefore of interest to Decoding drunken messages many marketing communicators. It is not the single- step process it was considered to be in the early ‘Drinks manufacturer Diageo’s “The Choice Is mass communications model shown in Figure 5.3. This kind of inaccurate model of mass communi- Yours” campaign implied that being very drunk with cation suggests that the sender has the potential to friends carries a penalty of social disapproval. inluence an unthinking and non-interacting crowd. However for many young people the opposite is Audiences (receivers) are active in that they process often the case. University of Bath research team information selectively and often in a distorted found adverts which show drunken incidents – manner (‘We see what we want to see’). Receivers such as being thrown out of a nightclub, or passing (the audience) talk to each other. Opinion formers out in a doorway – are often seen by young people and opinion leaders also inluence the communica- as being typical of a “fun” night out, rather than as tions process. Today’s communications models are a cautionary tale. Lead researcher Professor more sophisticated. Christine Griffin said: “Extreme inebriation is often seen as a source of personal esteem and social affirmation amongst young people.”’ A two-step linear BBC News Channel (2007) communications model Katz and Lazarsfeld’s two-step hypothesis (1955) Despite the attractions of one-to-one marketing, helped to reduce fears of mass indoctrination by the mass communications such as television advertising are still considered attractive because they can reach a large audience quickly and cheaply (when com- paring the cost per thousand individuals contacted FIguRE 5.3 – see page 170). In fact, although TV channels are One-step communications model 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. Sender Message 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). Receivers Chapter 5 Customer Communications Theory 125 all-powerful media. It assumed that mass messages not formal experts and do not necessarily provide iltered through opinion leaders to the mass audi- advice, but other buyers are inluenced by them. ence. Figure 5.4 shows how messages are iltered Other customers look toward them. Opinion leaders through opinion leaders, as well as going directly to often enjoy higher social status (than their immedi- some members of the target audience. ate peer group), are more gregarious and have When opinion formers (OF) are added in, the more conidence to try new products and services. communications model becomes a little bit more Endorsements from both opinion formers and interesting. Opinion formers can be separated from opinion leaders are valuable. opinion leaders, as shown in Figure 5.5. Opinion The opinion formers are often quoted in promo- formers are formal experts whose opinion has tional literature and advertisements, while the style inluence, eg journalists, analysts, critics, judges or leaders are often seen with the brand through clever members of a governing body. People seek their editorial exposure engineered by public relations opinions, and they provide advice. Opinion leaders, professionals. This can be generated by collecting on the other hand, are harder to identify – they are third-party endorsements, creating events around F I g u R E 5 .4 Two-step communications with opinion leaders R R R O.L R Sender Message 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 R Sender Message R R O.F R R O.L R 126 Part 1 Communications Background and Theories F I g u R E 5 .6 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 cele- models to show how perception, selection, motiva- brities (eg branded mineral water on the top table tion, learning, attitudes and group roles all affect at press conferences or actual product placement the communication process. The intervening vari- in ilms). In B2B markets, blue-chip customers are ables and some more complex models of buyer be- opinion leaders and are much sought after, as their haviour are considered in more detail in Chapter 4. presence on a customer list inluences other custom- ers. Both opinion formers and opinion leaders can contribute towards credibility. ‘Credibility before visibility’ means that a solid platform of credibility James Bond – opinion leader should be developed before raising visibility with any high-proile activities. 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 Multi-step linear major product placement agencies that act on communications models behalf of the film company giants. They had no budget for any deals or link-ups with any film, but Communication is in fact a multifaceted, multi-step they had a visually interesting piece of technology. and multi-directional process. Opinion leaders talk To their surprise and delight, the placement agency to each other. Opinion leaders talk to their listen- handling the James Bond film Tomorrow Never ers. Listeners talk to each other (increasingly with Dies requested two working prototypes, which discussion groups and internet groups) and subse- were duly delivered and demonstrated at Pinewood quently feed back to opinion leaders, as shown in Studios. The product was shown as Moneypenny Figure 5.6. Some listeners or readers receive the receives a fax from the clearly branded prototype, message directly. Noise, channels and feedback can be added to and hands it to Bond, who is sitting alongside M in the multi-step model to make it more realistic, as the back of the Daimler. An additional car fax is shown in Figure 5.7. also clearly seen alongside Bond in the back of The process of communicating with groups is the car. Now the PR team can really milk the fascinating. Group roles (leaders, opinion formers/ opportunity. After all, ‘a portable fax that is leaders and followers), group norms and group approved by James Bond surely has more cachet attitudes are considered in ‘Group inluence’ (page than one that isn’t’. 110). In fact, all the intervening psychological (Lucas, 1997). variables can be added into the communications Chapter 5 Customer Communications Theory 127 F I g u R E 5 .7 Multi-step communications model (b) R R R R Noise O.L R O.F R Sender Message Channel O.F R R O.L R Feedback R R R Winning over opinion leaders can be key to secondly, back to the company (C2B). The low of any marketing communications campaign, whether communications eventually becomes like a web of B2B or B2C. Take B2B: IBM linked up with the communications between customers and opinion Marketing Society, as its 3,500 members repre- leaders – all built around the brand. See Figure 5.8. sented key movers and shakers in the business The company facilitates these conversations. In world. Consider B2C: KangaROOS trainers tar- doing so, it keeps close to customers, as it can look geted opinion-leading celebrities such as Cat Deeley, and listen to what’s being said. It can also com- Edith Bowman and children’s TV show presenters municate easily with the customers and ultimately by giving them free shoes. P&G, Unilever and develop strong relations with them. Newsgroups Microsoft trial products with hundreds of thou- and discussion rooms hosted by the brand discuss sands (see page 131). 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 Multi-step non-linear of conversations is spinning around the brand. Customers talk to each other. For example, more communications models than half of eBay’s customers come from referrals Let’s take this a stage further and consider today’s new (Reichield and Schafter, 2000). web communications models, which revolve around The marketing team also monitors the blogosphere the brand instead of simply being sent to the masses (including Twitter) and user group sites it does by the brand owner. Markets are conversations. The not host; some of the truths may be painful but ladder of engagement in Chapter 1 is an example extremely useful. C2C communications can be nega- of this. Word of mouth works much more quickly tive. Remember the Pentium chip problem? It spread online than ofline. With the internet came the like wildire as the worry spread online. C2C com- easier facilitation of customer communities, where munications can also be fuelled by some customer customers can talk, irst, to each other (C2C) and, groups who set up fake sites and hate sites that 128 Part 1 Communications Background and Theories F I g u R E 5 .8 FIguRE 5.9 Simple web communications model Advanced web communications model C C C C C C C C C C O.L O.L C C C C C C C C C O.L Sender O.L C C O.L Sender O.L C C C C C C C C C O.L O.L C C C C C C C C C C C = Customer O.L = Opinion leader are devoted to spreading negative messages about Individuals do talk to each other (at least 500 million brands. One type of C2C that is positive – and in on the internet and billions on the phone), particu- fact generates a lot of business – is referrals, where larly when sharing personal product experiences. In happy customers become advocates and recommend fact, dissatisied customers tell up to another 11 other customers. Another positive form of C2C and people about their bad experience, whereas satisied P2P is viral, where customers pass the message on. customers tell only three or four. As marketing guru This is accelerated word of mouth. Clever, creative Philip Kotler says, ‘Bad news travels faster than messages with interesting ideas, amazing ideas, good news’. Although this is not in the realm of special offers, announcements and invitations are mass communications, it does demonstrate how good for viral marketing, where messages are passed everything an organization does communicates between customers and from opinion leaders to something to someone somewhere. Chapters 2 and 3 customers and from opinion leaders to opinion looks at this whole process in a lot more detail. leaders and, of course, from the brand also. See Sufice to say, at this stage, that many advertisers use Figure 5.9. teaser, surreal and puzzle advertising (by sending Afiliate marketing also spreads awareness of a incomplete or obscure messages) to arouse involve- brand among a community of relevant customers, ment and discussion among target audiences. 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 Classic and contemporary models is permission-based marketing. In this time- communications models compressed, information-cluttered world, customers resent unsolicited spam. Marketers must win permis- Adoption model sion to send future messages. If the customer agrees, Several different hierarchical message models are a message is inally sent. considered in Chapter 4. The adoption model (Rogers, Chapter 5 Customer Communications Theory 129 F I g u R E 5 . 10 The adoption model Chewing gum hysteria Rumours spread in Egyptian university town Awareness 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 Interest to remain virgins until marriage the news has generated considerable anxiety. Suspicion of who might be spiking the gum with aphrodisiacs fell on Evaluation 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.’ Trial 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 Adoption explanation’, says sociologist Madiha El Safty. Time magazine (1996) Guinness – an individual’s 1962) is such a model. As shown in Figure 5.10, it adoption process attempts to map the mental process through which individuals pass on their journey towards purchas- Although it is not a new product, Guinness has ing, and ultimately adopting (or regularly purchasing), adapted the adoption process. They researched a new product or service. This somewhat simplistic the adoption process for a pint of Guinness because hierarchical model is nevertheless useful for iden- high increases in consumption among young tifying, irst, communication objectives and, second, session drinkers resulting from the previous the appropriate communications tools. Guinness campaign were not sustained. This For example, television advertising may create prompted the questions: How does one adopt a pint awareness, while a well-trained salesperson, ex- of Guinness? How many pints, sessions or weeks pertly designed brochure or product comparison does it take before becoming a regular, fully website (or iPhone app) may help individuals in the evaluation stage. In reality, the process is not converted, loyal Guinness drinker? The answers to simply hierarchical. Some individuals move directly these questions were carefully collected before the from awareness to trial, while others loop back- commencement of the campaign. wards from the later stages by never actually getting around to trying the new idea, subsequently forget- ting it and then having to go through being made ultimate users or adopters’. Several groups who aware of it again. moved towards adoption – at different rates – were identiied. The irst group to try a new product were The diffusion of innovations called ‘innovators’. They represent approximately Rogers was also interested in how a new idea 2.5 per cent of all of the buyers who will eventually spreads or diffuses through a social system or mar- adopt the new product. Their proile was very ket. He deined diffusion as ‘the spread of a new different from those who were last to try a new idea from its source of invention or creation to its idea (the ‘laggards’). Opinion leader characteristics 130 Part 1 Communications Background and Theories were part of the innovators. The key to successful particular, technology innovation. Although he gave marketing of innovations is to identify, isolate and different names to the segments, the principle was target resources at the innovators rather than every- the same: focus and ind the innovators and early one (84 per cent will not buy the product until they adopters irst. When they have been penetrated and see the innovators and early adopters with it irst). are happily using the product or service, the next The ‘early adopters’ are the second group to adopt segments can be approached. The key point is that a new idea (they represent 13.5 per cent of the total there are gaps between the segments – vast gaps market), followed by the ‘early majority’ (34 per cent), so big that they are like chasms into which many the ‘late majority’ (34 per cent) and the ‘laggards’ companies fall and never climb back out. (See Figure (16 per cent). (See Figure 5.11.) 5.12.) The gap between early adopters and the early Each group has a different proile, encompassing majority is massive. Whereas the former seek inno- income, attitudes, social integration, etc in a B2C vative products, like exploring how they work and market. Innovators are venturesome and socially accept some teething problems, the latter group (the mobile, and they like to try things that are new. The early majority) will accept only a tried-and-tested early adopters tend to be opinion leaders who care- fully functional solution with zero risk. They will also fully adopt new ideas early. In the retail sector, seek a different package. In the e-learning market, Nielsen identiied early adopters as multiple card whilst early adopters like IBM were happy to buy holders (among other things), who are very different CDs and make them integrate with their training from single card holders in that they are signii- programmes, the early-majority customers like BT cantly more promiscuous in their card usage. The needed a different solution: CDs, workbooks, text- early majority adopt earlier than the majority of the books, workshops and accredited training pro- market, and they are even more careful, almost grammes. This was a completely different solution deliberate, in their buying process. The late majority (to the same problem), albeit a much more lucrative adopt only after they have seen the majority of sale. So many other e-learning companies did not people try it. They tend to be sceptical. The laggards understand the difference between the two types of are self-explanatory – tradition bound and the last customers and the subtle but deep chasm between to adopt. them. Many threw millions of dollars at the e- learning market and it all fell into the chasm. Crossing the diffusion chasms 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 . 1 2 Difusion of innovations: F I g u R E 5 .11 the chasm between the segments The difusion of innovations (Rogers, 1962) (Moore, 1999) 40 40 35 35 30 30 25 25 20 20 15 15 10 10 5 5 0 0 Innovators Early Early Late Laggards Innovators Early Early Late Laggards adopters majority majority adopters majority majority Chapter 5 Customer Communications Theory 131 The same principle applies: identifying and target- Many organizations, including giants like P&G, ing the innovators and then moving on sequentially Unilever, Diageo and Microsoft, started their tipping through the other segments. In addition, however, point initiatives several years ago. P&G set up its marketers must recognize that the different seg- ‘connector panel’ in 2002 in the United States with ments are different, ie they have different needs. 200,000 infectious teen connectors used to research Offering exactly the same solution to the total and seed new products. Prior to that, Microsoft marketplace will fail. Matching the proposition recruited 450,000 early adopters to trial Windows (and the actual solution delivered) to the needs of 95 in 1995 (‘ensuring that one in every 189 PC users each segment will generate success. It is the magic had a pre-release copy’), enabling Microsoft to marketing formula once again (identify needs, relect ‘capture critical pre-launch feedback for the mass and deliver). market launch whilst giving the consumers that count a unique preview of their product that would generate word of mouth’ (Marsden, 2004). Accelerating diffusion – the tipping point Malcolm Gladwell’s The Tipping Point (2000) applies Future communications to both B2B and B2C. It explores that moment when ideas, products, trends and social behaviour models cross a certain threshold and spread like wildire. In his book, Gladwell suggests three key initiatives The end of the traditional that release the viral potential of new ideas, prod- ucts or services: marcomms funnel model? 1 The law of the few. A relatively small Marketers aim to reach customers at the moments group of adventurous inluencers are that most inluence their purchasing decisions. The old powerful. Marketers need to identify ‘funnel’ communications model started with creating these gregarious and socially active awareness (the wide end of the funnel with many ‘connectors’ and then develop relationships brands) and then familiarity, followed by consider- with this small group of ‘socially ation followed by purchasing a single brand (followed infectious early-adopters’ or connectors by repeat purchasing of the same brand, ie loyalty, (Gladwell, 2000). where only one brand is chosen). The number of brands is reduced as customers move through the 2 The stickiness factor. The product, service, funnel and inally end up with a single brand. idea or message has to be intrinsically McKinsey’s David Court et al (2009) suggest the infectious. Marketers need to systematically funnel is out of date: ‘Today, the funnel concept fails ‘tweak and test’ or reine and improve to capture all the touch points and key buying factors against diffusion criteria. ‘By tinkering resulting from the explosion of product choices and with the presentation of information we digital channels, coupled with the emergence of an can signiicantly increase stickiness’ increasingly discerning, well-informed consumer.’ (Gladwell, 2000). 3 The power of context. Ideas and innovations spread quickly when they it the context The old funnel is dead – or are relevant to the group or its environment. You can exploit the bonds of change your model memory and peer pressure in groups of 150 or less. ‘In order to create one contagious ‘Consumers are moving outside the purchasing movement, you often have to create many funnel – changing the way they research and buy small movements irst’ (Gladwell, 2000). your products. If your marketing hasn’t changed in That’s why many small, tightly targeted response, it should.’ movements are better than one large Court et al (2009) movement. 132 Part 1 Communications Background and Theories A more sophisticated model is required to help relevant opportunities’ (Court et al, 2009). Marketers marketers plan their marketing communications. now have the tools to do this. The old linear funnel model misses many of the new Integrated marketing communications are more touchpoints, which can occur late in the buying important than ever. CMOs now have a broader process, eg a customer is looking at buying brand X, role, which realigns marketing communications but just before clicking the ‘buy’ button checks for with the new realities of customer decision making. customer comments and ratings both on the same Firstly, they have to manage the usual marcomms, site and on other sites, effectively going back to the product development, market research and now ‘evaluation’ stage of other buying models despite data management. Interestingly, McKinsey recog- being apparently at the ‘decision’ stage. nizes the importance of marketing: ‘It’s hard but Marketers need to be where these points of inlu- necessary to unify these activities, and the CMO is ence occur, whether at the ofline point-of-sale or the natural candidate to do so’ (Court et al, 2009). 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 Make way for the semantic web – their brand (and their competitors’ brands), whether new models required on Twitter, forums or blogs, and automatically post their messages (some ‘canned’ or pre-prepared) into The semantic web is the next phase of the web’s the conversation, with links to videos, demonstra- development. Essentially, it enables any piece of tions, testimonials or the brand itself. This can be data to communicate with other data. It will inte- done manually or as part of automated marketing grate web-based connectivity into any pieces of data (scanning, identifying and rules-based selection of (not just web pages) ‘so that it can communicate responses). 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 Late deciders wait until inside the store the phone is answered the phone automatically sends a message to all of the music audio devices ‘Consumers want to look at a product in action and to instantaneously lower the music volume while are highly influenced by the visual dimension: up to the phone conversation is taking place. The iPod 40 percent of them change their minds because of already does this when taking a call: it automati- something they see, learn, or do at this point – say, cally lowers the music volume. Customers will packaging, placement, or interactions with probably enjoy much more sophisticated applica- salespeople.’ tions than anything on the ‘traditional’ web. This Court et al (2009) semantic web may change communications models, as clever technology will serve up extremely rele- vant messages that will help satisfy needs even before they emerge into the customers’ conscious Marketers need to increase relevancy, ie more stream of thoughts. tightly targeted ads (the magic marketing formula: Berners-Lee (the inventor of the World Wide identify needs, relect them and deliver the product Web), Hendler and Lassila explained in 2001 that: or service). Today, marketers can create dozens or The Semantic Web is not a separate Web but an hundreds of variations of an advertisement to re- extension of the current one, in which information lect the context of the past browsing behaviour of is given well-deined meaning, better enabling customers (and also match what an organization computers and people to work in cooperation. wants to promote according to stock levels or trials The irst steps in weaving the Semantic Web into of new product variations). ‘Many airlines manage the structure of the existing Web are already and relentlessly optimize thousands of combina- under way. In the near future, these developments tions of offers, prices, creative content, and formats will usher in signiicant new functionality as to ensure that potential travelers see the most machines become much better able to process Chapter 5 Customer Communications Theory 133 and ‘understand’ the data that they merely display at present. Information-smart marketers or just Seven years later Tim Berners-Lee (2008) believes traditional marcomms marketers? that the semantic web could wipe out Facebook and Myspace. ‘Marketing is increasingly split between people who are information smart and those who are involved in more traditional marcomms functions… The semantic web wipes out Facebook knowing where your competitors are moving in terms of the market place will have a far greater and Myspace impact than doing a focus group or logo… New marketers are going to have to be much ‘Facebook and Myspace will eventually be more IT savvy.’ superseded by networks that connect all manner of Regis McKenna, in Rothery (2008) 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 Instead of watching ads, building brand relation- statements and your calendar – spoke the same ships over time and eventually buying a particular language and could share information with one product or service, customers can now speak into another. You could drag one on top of the other and their phone and ask it to get a certain product or a whole bunch of dots would appear showing you service. It duly obliges, as Google Voice searches when you spent your money. If you still weren’t carefully and delivers useful suggestions for pur- sure of where you were when you made a chase. A high Google ranking, for some, acts as particular transaction, you could then drag your an endorsement of quality (or at least relevance). photo album on top of the calendar, and be Another phone app compares prices (by just swiping reminded that you used your credit card at the the phone screen over the bar code or just keying same time you were taking pictures of your kids at in the brand name). An ability to work with this a theme park.’ rapidly changing marketing environment is now Berners-Lee (2008) essential for marketers. New skills are required. New marketing communications John Markoff of the New York Times coined the phrase ‘Web 3.0’ when he referred to the next gen- skills required eration of internet-based services in 2006. Merlin Scott Brinker (2009) suggests marketers need ive Stone (2009) suggests that these new services con- new skills: stitute ‘the intelligent Web’, using semantic web, 1 Analytical pattern skills. Mastering the low microformats, natural language search, data mining, of data from social media feedback, web machine learning, recommendation agents, and arti- analytics, transaction histories, behavioural icial intelligence technologies. These technologies proiles and industry aggregates. emphasize machine-facilitated understanding of information to provide a more productive and intui- 2 Agile project management. As tactical tive user experience. Stone feels that the main char- campaigns fragment into more granular, acteristics of Web 3.0 seem to be an open, intelligent, relevant, niche-like propositions, each one seamless, interoperable, access-anywhere-by-any- targeted at dozens, hundreds or even channel, distributed system where software is a thousands of different contexts, fast-moving, service. Perhaps customers’ lives are about to get a multiple project management skills are little easier, with the semantic web communicating required. and helping to satisfy their needs. New communica- 3 Experimental curiosity and rigour. As tions models are required. marketers seek constant improvement on 134 Part 1 Communications Background and Theories their marketing ROI, marketers manage content management system with site a constant low of tests, testing new search, RSS feeds, e-mail alerts and alternatives, exploring new creative e-newsletters, all serving very relevant executions and monitoring changes in content. Rose (2006) deines mashable in response rates to identify immediate terms of a ‘Web page or application that opportunities and threats. uses and combines data, presentation or 4 Systems thinking. Marketing is a set of functionality from two or more sources to processes. This means connecting all the create new services’. parts. Who gets customer comments, Many of the previously discussed models offer some summaries and key issues arising from social insight into the communication process but, almost media conversations? Which decisions does invariably, they distort or oversimplify the process it inluence? Who else needs this information of communication. Chapter 4 draws on some of the (eg salespeople, PR people, the board of communication models discussed here and looks at directors) and what decisions can it affect? buying models, the buying process and the interven- 5 Mashable software luency. Those marketers ing psychological variables. How do we buy? Why who understand the mashable web – a world do we buy? What inluences our choices? Are there of mash-ups, widgets and application unconscious motives playing havoc with our day- programming interfaces (APIs) – will have to-day shopping behaviour? Chapter 6 attempts to competitive advantage. For example, it is look inside the customer’s mind and answer some of possible to connect and integrate a website’s these questions. key points from Chapter 5 ●● Communication involves a two-way low of ●● New models are required to meet the changing information. communications landscape. ●● Communication theories can be applied to practical marketing situations. references and further reading BBC News Channel (2007) Warning on anti-drinking Engel, J, Warshaw, M and Kinnear, T (1994) adverts, 10 December Promotional Strategy: Managing the marketing Berners-Lee, T (2008) Google could be superseded, communications process, 8th edn, McGraw-Hill says web inventor, Times Online, 12 March Education, Homewood, IL Berners-Lee, T, Hendler, J and Lassila, O (2001) Floch, J-M (2001) Semiotics, Marketing and The semantic web, Scientiic American, May Communication, Palgrave, Basingstoke Brinker, S (2009) 5 new skills for the future of Gladwell, M (2000) The Tipping Point, Little, Brown, marketing, Chief Marketing Technologist (blog), New York 23 February Godin, S (1999) Permission Marketing, Simon & Carroll, G (2010) CoJargon watch: Delinkiication, Schuster, Hemel Hempstead Renaissance Chambara (blog), 5 June Guirdham, M (1999) Communicating across Court, D et al (2009) The consumer decision journey, Cultures, Palgrave, Basingstoke McKinsey Quarterly, June Katz, E and Lazarsfeld, P (1955) Personal Cutlip, S, Center, A and Broom, G (2004) Effective Inluence: The part played by people in the Public Relations, international edn, Prentice Hall low of mass communications, Free Press, International, Englewood Cliffs, NJ New York Ehrenberg, A (1988) Repeat Buying, 2nd edn, Charles Keller, E and Berry, J (2002) The Inluentials: One Grifin, London American in ten tells the other nine how to vote, Chapter 5 Customer Communications Theory 135 where to eat, and what to buy, Simon & Schuster, Rose, B (2006) Marketing mashup tools, iMedia New York Connection (blog), 27 June Kelman, H (1961) Process of opinion change, Public Rothery, G (2008) The real deal, Interview with Opinion Quarterly, 25, Spring R McKenna, Marketing Age, February Kotler, P (2000) Marketing Management: Analysis, Schramm, W (1955) The Process and Effects of Mass planning, implementation and control, Communications, University of Illinois Press, international edn, 11th edn, Prentice Hall, Urbana Englewood Cliffs, NJ Smallbone, D (1969) The Practice of Marketing, Lucas, Jeff (1997) License to sell, Marketing Director Staples Press, London International, October Smith, P R (2001) Online eMarketing Course: Markoff, J (2006) Entrepreneurs see a web guided by eCustomers, Multimedia Marketing.com, common sense, New York Times, 12 November London Marsden, P (2004) Tipping point marketing, Brand Smith, P R and Chaffey, D (2001) eMarketing Strategy, 1 April eXcellence, Butterworth-Heinemann, Oxford Moore, G (1999) Crossing the Chasm, 2nd edn, Stone, M (2009) Staying customer-focused and Capstone, Oxford trusted: Web 2.0 and Customer 2.0 in inancial Reichield, F and Schafter, P (2000) Eloyalty: Your services, Journal of Database Marketing and secret weapon on the web, Harvard Business Customer Strategy Management, 16, June Review, July–August Time magazine (1996) Chewing gum hysteria, Richards, J (2008) Google could be superseded, says 22 July web inventor, Times Online, 12 March Tuck, M (1976) How Do We Choose? A study in Rogers, E (1962) Diffusions of Innovations, consumer behaviour, Methuen, London Free Press, New York Further information Greg Rowland Semiotics Ofcom 172 Court Lane Riverside House London SE21 7ED 2a Southwark Bridge Road Tel: +44 (0)20 8693 1413 London SE1 9HA www.semiotic.co.uk Tel: +44 (0)300 123 3000 Fax: +44 (0)20 7981 3333 Nielsen Company BV www.ofcom.org.uk Ceylonpoort 5–25 2037 AA Haarlem The Netherlands Tel: +31 2354 63000 http://en-us.nielsen.com 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 150 Relevant information improves decision neuroscience 150 making 139 Think ‘secondary’ irst 151 Information overload 139 The market research process 151 Information prioritization 140 Deine what you need to know 151 Types of research 141 Online vs oline research 152 Summary of types 142 The market research process 153 Qualitative research 142 Briefs, proposals and agency selection 153 Focus groups 144 Research problems and challenges 155 Concept research 144 Marketing intelligence and information Quantitative research 145 system 156 Geodemographics 147 In conclusion 158 Test marketing 147 Tracking studies 148 references and further reading 158 Retail audits 149 Further information 159 138 Part 1 Communications Background and Theories Introduction to market The card trick research An Oxford Street card trick man places four cards Relevant information reduces risk, increases power face down on a portable table. As the crowd and creates competitive advantage if used correctly. gathers, he shouts, ‘£10 to anyone who picks the Today’s marketers have to be ruthless with their ace.’ Embarrassment, scepticism and even mistrust information needs and know exactly what it is they run through the crowd. No one responds to the need to know, prioritize that, collect it, digest it offer of a simple £1 bet to win £10. As the card man and then make better decisions equipped with this leans forward to show the crowd a crisp £10 note, information. One of the ultimate users of market a grinning young man leans behind the card man research is Simon Cowell and the TV phenomenon and sneaks a look at the outside card. It’s a jack of The X Factor. He researches various products (singers) diamonds. Word quickly spreads through the crowd by testing them with customers (audiences at home and at the theatre). The customers provide free that the outside card is not the ace. Prompted by market research, revealing which product they prefer. the fund (and the improving odds) someone shouts, The customers also pay for this privilege (as they ‘That’s not a real tenner.’ The card man responds by vote by phone). He then reines the product concepts stepping into the crowd to allow a closer inspection (trains them and adds some production effects) and of the £10 note. A second stranger boldly leans repeats the market research exercise (all the time across and briefly turns the other outside card over. making money from the research). The inal pro- It’s a two of hearts. The card man returns. ‘Come on duct testing is done with a chosen song, which has now. Who wants to win £10?’ A well-spoken young already been recorded by each inalist. This inal woman replies, ‘If you show me one of the two layer of market research almost guarantees the middle cards, I will place a £2 bet against your £10.’ success of the new product (a pop star). The inalists The card man accepts. What has happened here? present their version of the song. The market re- search respondents (audience) complete the ‘survey’ via a text message (whilst paying for this privilege and simultaneously being highly engaged with the the ieldwork, analyse the data, write and read a X Factor brand). The most popular product is iden- report and, ultimately, act upon the information. tiied (most votes). The product (star) is launched The ieldwork (asking the questions and collecting and usually becomes a chart-topping product. the answers) can also give competitors an early warning of intended activities. In a sense, it can give them time to respond. Relevant information reduces risk Relevant information As more and more relevant information became available, the risk was eventually reduced to zero increases power and a certainty emerged. The young woman could In both military and marketing strategies, informa- pick the ace as soon as she knew what the other tion creates power. If an organization knows what three cards were. Market research (information) its customers really want, and its competitors do also reduces risk. So why not use research to reduce not, then it has a powerful advantage. If the organ- all risks? There are three reasons: it costs men/ ization knows what a competitor’s next move is women, money and minutes – the three key re- before it makes it, then the organization is in a sources (the 3Ms). First, knowing exactly what in- stronger position to react or even pre-empt the move. formation is required and how to gather it (whether In negotiations, if one party knows more about the commissioning a research agency or handling the other party, then the information holder carries a research in-house) is a relatively rare management hidden advantage. The classic salesperson versus skill; second, research costs money; and third, it buyer situation emphasizes how sales and proits takes time to deine and write a brief, carry out can be increased as a direct result of information: Chapter 6 Marketing Communications research 139 the salesperson desperately wants an order and is make their decision making easier. They get this in- prepared to cut prices to get the business. The buyer formation, digest it and then, and only then, do they desperately needs to buy the salesperson’s product make a decision. This is an informed decision. The because all the buying company’s existing stocks alternative is guesswork, which relies on luck, which were destroyed the night before in a ire in one of its is usually an unnecessary, high-risk activity. On the factories and the salesperson’s company is the only other hand, proprietary relevant information (or company that can supply the goods immediately. If knowledge) effectively creates competitive advan- the buyer knows how desperate the salesperson is, tage, eg if an organization has unearthed some deep then a low price will be negotiated by the buyer. customer insights that no one else has. Research is an On the other hand, the salesperson seizes control aid to decision making and not a decision in itself. 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 Information overload buyer does not know how desperate the salesperson By the end of today, another 4,000 books and is for the order. In this situation the salesperson will another 7 million new web pages will have been make the sale, probably at a higher price. Information published around the world. Billions of e-mails are is power. sloshing around and increasing in number. Do you Notice how senior managers always seem to ask ind it increasingly dificult to ind the ones you questions that are potentially embarrassing (because really need to read? sometimes you don’t know the answers). When they ask the question, you might think, ‘I wish I’d thought Never before in history has the human being had of that.’ Questions are indicators of ability and such an ability to create information. Never before seniority, or potential seniority. The ability to ask have we been faced with so much information. the right question is a precious skill that usually It’s not faster computers. It’s not bigger hard takes time and practice to develop. The ability to drives. It’s information literacy we need. We need ask the right question is the precursor to providing to create less information of a higher quality. the right answer. This is becoming increasingly im- We need to be able to manage information much, portant as too much information becomes available much better, getting rid of the junk and out-of-date stuff. We need skills that help us search better, and and the potential for information overload and in- to be able to judge better and faster the quality of formation fatigue grows. the stuff we ind. (McGovern, 2000) It has been said that information is the principal Information advantage: source of competitive advantage. University of world chess championship California at Berkeley professors Varian and Lyman (2000) note that our ability to create information To avoid giving his competitor too much has far outpaced our ability to search, organize and information, Bobby Fischer wore a green visor to publish it: ‘Information management – at the indi- stop Spassky, the challenger, from looking into his vidual, organizational, and even societal level – may eyes during an alternative world chess turn out to be one of the key challenges we face.’ Marketing managers must learn to manage infor- championship. mation pollution; otherwise they will make ill- informed decisions and may well end up suffering from ‘information fatigue syndrome’. Reuters re- ported that information overload combined with Relevant information improves analysis paralysis and poor quality of life reveals that ‘one in four people admit to suffering ill health decision making as a result of the amount of information they now The best marketing managers always ask whether handle’ Reuters (2009). Out of 1,300 managers, they have enough information to make a good deci- two-thirds said that their social life was affected by sion. They deine what information they need to having too much information to process at work. 140 Part 1 Communications Background and Theories In the UK’s top 200 companies, staff spend 30 minutes Information junkies every working day looking for lost information: ●● 60 per cent of staff waste 15 minutes looking for Other reports reveal that a growing proportion info on their PCs; of internet users find themselves addicted to information on the internet. Over 50 per cent of ●● 15 per cent waste 30 minutes each day; managers were accumulating information they ●● 7 per cent waste 60 minutes each day. didn’t have the capacity to assimilate; rather they were overwhelmed by it. Over half the respondents ‘In a 1,000-person company there are 33 people pronounced themselves information junkies who permanently looking for information’ (Lynch and got ‘cravings’ for new information, especially from Manchester, 1999). This was written in 1999; how much the internet. 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? information requests, check that the following ques- (Moole, 2004) tions are answered satisfactorily: ●● What will I do with this information? ●● How will it affect my strategy or tactics? Not often considered, however, is one simple way of dealing with stress. Laugh, as it cures stress by ●● What action or withdrawal may result from pumping adrenalin and endorphins into the blood- this information? stream. It reduces muscular tension, improves breath- ●● How much is the information worth? ing and regulates the heartbeat (Nurden, 1997). ●● How much will it cost? This is much required in today’s hyper-competitive ●● Can I afford it? marketplace. ●● When do I need it? ●● Have I checked all secondary sources? Information prioritization (See Table 6.1 below.) There is an unlimited amount of information avail- Do not forget common sense. For example, the highly able to all marketing managers. There is more infor- successful ice cream manufacturer Ben & Jerry’s mation available and obtainable than any manager observed an increase in complaints from buyers can absorb, let alone pay for, in any one period. So of Cherry Garcia ice cream. Many customers were the key is to deine what the problem is and outline upset because they felt that the product had too few the kind of information that might help. An experi- cherries. What would you do? What extra informa- enced market researcher (whether in-house or from tion would you collect? This is what they did – they an agency) can guide the marketing manager towards asked the following questions. First, was it only a deining speciically what kind of information is regional problem? They checked by matching ship- needed. Since the research budget is usually limited, ment records with complaints. Second, did the the manager may then have to prioritize which kinds problem arise from the manufacturing process – of information are more important than others. Ask was the quality not up to scratch? But the ingredi- for ambiguous information and a lot of ambiguous ents turned out to be normal. After questioning answers will be delivered. almost every aspect, they inally found the source A certain amount of discipline is needed to focus of the problem. The photograph on the ice cream on relevant issues and not become sidetracked by carton was not of ice cream but of frozen yogurt, indulging in ‘interesting’ bits of information. When which appeared laden with cherries in comparison brieing a market researcher as to the kind of infor- with the paler pink ice cream. They simply changed mation that is required, it is often tempting to add the image on the carton and the complaints melted extra, ‘interesting’ questions. Before adding extra away. Chapter 6 Marketing Communications research 141 be shown as mock-up artwork, and the advertise- Types of research ments might be shown as either a storyboard or an animatic (video cartoon). A new product (concept) There are basically two types of research sources: can be tested by using in-home trials or hall tests. primary and secondary. Primary data are gathered Some data sources, such as the Target Group Index speciically for and commissioned by an organiza- (see ‘The Target Group Index’ below), are often used tion for a particular purpose (eg a research survey in the early research stages of consumer campaigns to ind out about attitudes towards a company’s to identify buying behaviour, socio-economic groups, brand). Secondary data, on the other hand, already lifestyles, locations and appropriate media channels. exist and have been gathered by someone else for After all this, a new pack or brand name (or some other reason (eg government statistics, news- product) can be test-marketed. This reduces the risk paper features or published reports). Desk research by holding back from national or international roll- can be carried out in a library or ofice, since it out until the advertising campaign (or pack or name requires researching secondary sources. It is worth or product) can be tested within a representative doing some desk research before embarking on the test area. Owing to the high cost of test marketing, more expensive primary research. and the increasing dificulty in the UK of truly There are essentially two types of research: isolating the test market area (especially in terms of quantitative and qualitative. Quantitative research distribution, where the national retail chains do not uses surveys based on a representative sample of the want to limit stocks to certain parts of the country), population or target group. Qualitative research companies often prefer to conduct a simulated involves an in-depth, unstructured exploration with market test instead of carrying out a test marketing either small groups of individuals (group discussions exercise. The main research companies in the ield or focus groups) or individuals on a one-to-one are Burke (BASES test), Nielsen (QUARTZ model) basis (depth interviews). and Research International (MICROTEST). These Research can provide the marketing profes- models use information from the concept test or sional with information on just about anything from product test, simulate an expected level of distribu- markets to distributors, to customers, to competi- tion penetration (percentage of stores that will stock tion, to new products, new packs, new promotions, the product), assume a certain level of advertising new advertisements, new prices and so on. Different spend required to generate certain levels of aware- types of research can reveal information about cus- ness, and then assume competitive activity, prices tomers, where they are located, what they buy, read and other factors to predict the likely sales of a new and watch on TV, how they spend their holiday product with an accuracy of +/–20 per cent. time, which competitors they prefer and so on. Since television advertisements are so expensive, Ideas on new or modiied products, packs, brand many companies prefer to do all the careful check- names or advertisements can be discussed initially ing and testing through focus groups and hall tests in focus groups (six to eight people), which generate instead of testing the advertisement in a speciic test information explaining how people feel about a region. They can, and do, however, test the weight concept. This kind of concept testing can be used to of advertising in different regions and measure reduce a number of ideas to only one or two for the incremental sales to help them to ind the most further testing, or can be used to give feedback cost-effective levels (frequency and timing) of ad- to the creative people so that they can reine a par- vertising expenditure. ticular concept. These qualitative interviews open If a product is launched nationally or regionally, up and identify areas that may need further investi- its launch can be monitored in several ways. Its usage gation on a larger scale (a quantitative survey) to (user proiles, frequency of purchase, etc) can then be ind out how important certain aspects are among monitored through consumer panels. Retail audits a statistically valid sample (minimum 400 in the provide information about distribution penetration sample). In the case of a new advertising concept, and how the product is moving off which shop shelves. or a new pack or brand name concept, the reined It is also likely that tracking studies will monitor the concept can then be shown in a hall test (where immediate reactions and effects of the launch adver- respondents are invited into a hall to make com- tising. Pre- and post-quantitative surveys can monitor ments). The packs and brand name concepts can 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 Qualitative research to measure the effect of the advertising and the product’s development in the marketplace. 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 Summary of types type of research attempts to reveal what customers sometimes don’t even know about themselves by delv- Table 6.1 summarizes some of the many different ing deep into their unconscious motivations. In-depth types of research information that are readily avail- interviews can reveal deep customer insights. able. The cost igures give only a very rough indica- tion of the budget requirements. They have been included to give some idea of the costs involved. Anything can be researched and tested, includ- How young men retain their youth ing sales promotion ideas (concepts), mailshots (unconsciously) and even press releases and journalists’ attitudes to particular companies and brands. A new and Amongst the most popular destinations from the exciting area of research is that of websites, which stresses of life are the worlds of the computer game: can be tested before, during and after development. ‘One way that men retain their youthfulness is by Media research and planning are discussed in spending large amounts of time playing video games.’ Chapter 7. Kimmel (2008) Ta b l E 6 .1 Types of research or information available Information on Type of research or information Sources Approximate costs Markets Market reports (analysing market size, Mintel £750–£2,500 structure, market shares and trends, Jordans prices, key players, etc) Keynotes Syndicated £1,000–£15,000 FT and trade £1 magazines Distributors Retail audit (analysing a brand’s Nielsen £15,000–£50,000* penetration into various retailer store categories, average stocks bought, held and sold per period, retail prices) Customers’ Surveys – recommended minimum of Quantitative £10,000–£60,000 attitudes and 200 interviews; preferably a minimum of market research £10–£100 per person awareness 500 interviews agencies interviewed** Omnibus surveys £750 per question Customers’ In-depth research, sometimes using Qualitative market £650 per individual, motivations and projective techniques, children’s groups, research agencies £1,950 per group of perceptions supergroups eight Customers’ Social forecasting, futurology, etc Future forecasting £1,500–£5,000 future lifestyles annual subscription Chapter 6 Marketing Communications research 143 Ta b l E 6 .1 Continued Information on Type of research or information Sources Approximate costs Customers’ Who’s buying what, when and from Consumer panels, £15,000–£40,000 buying behaviour where; how buyers respond over time to eg AGB’s Super and trends over various marketing activities, eg special time offers, new ads and competitor activities Customers’ Penetration of production into percentage Omnibus survey £500 per yes/no penetration of homes and frequency of usage question; £1,500 per multiple answer/ranking Competition As for markets, distribution and As for markets, As for markets, customers, if the budgets are available. distribution and distribution and The sales force and marketing customers customers departments’ ‘ear to the market’ can also provide much competitive information Simulated test Total mix test of product, brand name, Nielsen Research £25,000–£100,000 market price, positioning International; RSGB Test market Running a new product or variation of its Sales analysis – mix in a test area Product New product concepts can be researched Focus groups £1,950 per group of (‘concept research’) eight Packs New pack design concepts can be Focus groups £1,950 per group of discussed eight Hall tests £5,000+ Advertisements New advertisement concepts can be Focus groups £1,950 per group of researched before going to expensive eight production. Pre- and post-advertising Hall tests £1,000+ research measures levels of awareness Quantitative £20–£40 per person before and after a campaign (tracking survey studies) Online tests £1,500–£3,000 Exhibitions Stand design, memorability, number of Exhibition surveys passers-by, number who stopped and looked, number who visited, percentage of total exhibition visitors * Prices can vary enormously, eg a single brand retail price check might be carried out for as little as £750, while a full- blown 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 Focus groups as to why they do or don’t use/buy/choose a particular brand. Asking for this kind of information in a direct Group discussions can be a more cost-effective way is like shouting at a foreigner in the belief that he way of collecting information that is perhaps less will then understand English more easily.’ So in-depth in-depth but nevertheless useful in understanding researchers employ a range of techniques designed why and how people (in the target market) feel to throw the ego off guard and reveal real answers. about certain brands, advertisements or just new ideas (concepts). A variety of creative stimuli materials are used Work and family aren’t the only within these groups, including cartoons, pictures, words and brand maps. One of the most common important things in life types is the collage or mood board, which is made up from scrap art taken from a wide variety of ‘As time pressures increase on young men, magazines and newspapers. It is used to explore a so does their value of “me time”. There’s more of variety of themes, such as user lifestyles, occasion an “I deserve it” attitude towards leisure activities. usage and abstract concepts such as freshness or What’s more, leisure can enrich and reconnect vitality. Two examples of collage boards are fea- a young guy with his sense of self.’ tured here and have been developed by The Collage Discovery Channel (2008) 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 In-depth researchers employ a variety of techniques concept pack themes for a shower gel. (including psycho-drawings, word associations, meta- Some companies, like MTV, use online discus- phors, collages, picture completion, clay modelling sions and discussion groups as online focus groups and role playing) that throw the ego off guard and – ‘a yearlong focus group’. But all of this is wasted allow the subconscious feelings to be expressed. if the right questions are not asked (see the box Chapter 4 considers the underlying motivations and below). complex information processes through which buyers pass on their journey towards a purchase. If the Russian president were a tree Mommy’s never coming back During the final stages of the 1996 Russian election In-depth research for a US manufacturer of security campaign, focus group operators were asking doors revealed deeply ingrained unconscious fears respondents, ‘If Yeltsin were a tree what kind of of being trapped inside, or abandoned, when doors tree would he be?’ in a standard approach to throw are closed. The report suggested that a young child’s the respondents’ egos off guard and extract real first experience of a door is when its mother puts it answers. US consultants came in and cancelled to bed and closes the door behind her as she leaves. these questions, since they urgently ‘needed to The child fears that it may never see its mother know whether voters would move to Yeltsin if he again. Many years later, the adult’s unconscious adopted a particular policy’, and not whether he mind can react to the sight of a closed door with an was a tree or not. ‘underlying feeling of discomfort and anxiety’. The Knave (1996) 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 Concept research traditional images of securely closed doors. Concept testing helps every element of the com- Knave (1991) munications mix. Whether it is an advertisement, new sales promotion, new piece of packaging, new Chapter 6 Marketing Communications research 145 F I g u R E 6 .1 Eating experiences and occasions SOurCE: Collage provided by The Collage Shop direct mail lealet or even a product or service, the comfortable if they don’t read all of their newspaper concept should be researched and discussed at least before throwing it out. This is obviously a problem among colleagues and customers and, ideally, among if part of the paper’s advertising proposition is ‘the unattached, unbiased focus groups that are repre- newspaper you can digest on the way to work’. sentative of the target audience or customer. So quantitative research will seek to substantiate Advertising concept testing measures responses the variables or issues revealed during the initial to advertisements before they are fully produced. qualitative stage. The quantitative stage may be Storyboards, and key frames (see Chapter 13, the carried out by surveying several hundred or a thou- Hovis campaign concept) or animatics are made sand respondents. The interviewer’s questionnaire up and shown to focus groups. This kind of group might ask, ‘Which papers on this list do you ind a discussion is used to identify the best idea from a quick and easy read [or long, dificult, etc]?’ 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 para- Quantitative research meters or types of questions that should be asked Whereas qualitative research asks individuals and in future quantitative research. For example, focus small groups of customers dificult questions like group or qualitative research into newspapers may ‘Why do you buy [or like] something?’, quantitative have revealed that some readers feel mentally un- research asks larger panels or surveys numerical 146 Part 1 Communications Background and Theories F I g u R E 6 .2 Concepts for shower gel packs SOurCE: Collage provided by The Collage Shop questions like ‘Who?’, ‘What?’, ‘How?’, ‘Where?’ media used. Advertisers use the TGI to ind out who and ‘When?’ – who buys this (what percentage of the users of a particular brand are and what they different types of buyers buy it or saw the ad), where read, watch and listen to. The same information is do they buy, when do they buy it, etc. available on competitors and their brands. Elsewhere the index also gives lifestyle data, eg ‘heavy drinkers of low-alcohol lager’. This gives The Target Group Index an insight into what motivates them. The excerpt The Target Group Index (TGI) collects and com- in Figure 6.3 shows that they are keen pub-goers piles information on consumer brands and the and have a propensity to try new drinks. They are proiles of heavy, medium and light users, and non- highly image conscious, aiming to keep abreast of users, in a vast range of product categories and new fashions. They appear to be fairly ‘lash with subcategories. This is all cross-referenced to types of the cash’ and admit to being no good at saving papers read, TV programmes viewed, and lifestyle or money. In spite of, or maybe because of, this, they attitude statements. It can even classify ‘light users’ show a strong tendency to seek the advice of a according to whether they buy a brand exclusively inancial consultant. They see their holidays as a (‘solus users’), whether they prefer it to another way of achieving total relaxation, not wishing to brand also used (‘most often users’) or whether they do anything but eat, drink and lie in the sun. are more casual in their use (‘minor users’), again Just about anything can be cross-referenced cross-referenced to demographic data, lifestyles and with any other variable. For example, the index can Chapter 6 Marketing Communications research 147 F I g u R E 6 .3 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 UNWTD PRJ VERT HORZ INDEX RESP (000) (%) (%) 1 D8 DRINK LAGER RATHER THAN 176 183 366 31.68 9.83 BEER THESE DAYS 2 PA9 I LIKE TO KEEP UP WITH 165 53 121 10.47 9.20 LATEST FASHION 3 T7 HOLIDAY-ONLY WANT TO 165 75 158 13.67 9.18 EAT, DRINK, SUNBATHE 4 PA15 MEN’S FASHION MORE 161 105 238 20.60 8.96 EXCITING NOWADAYS 5 F7 I TEND TO SPEND MONEY 160 65 141 12.20 8.96 WITHOUT THINKING 6 SP3 CO’S/PRESTIGE SPONSOR 157 88 190 16.45 8.76 ART/SPORT 7 DH6 HEALTH FOODS ONLY BOUGHT 155 78 179 15.49 8.65 BY FANATICS 8 D9 I LIKE TO TRY NEW DRINKS 155 70 143 12.38 8.65 9 D12 I REALLY ENJOY A NIGHT 146 164 345 29.87 8.12 OUT AT THE PUB 10 P4 I WOULD LIKE TO BUY A 142 58 148 12.81 7.92 HOME COMPUTER 11 F4 I AM NO GOOD AT SAVING MONEY 138 87 190 16.45 7.72 12 F15 USUALLY CONSULT FINANCIAL 138 62 114 9.87 7.68 ADVISOR 13 PA2 IT’S IMPORTANT TO LOOK 137 104 247 21.38 7.65 WELL DRESSED 14 T11 TRY TO TAKE ONE+ HOLIDAY 135 60 116 10.04 7.55 ABROAD A YEAR 15 PA13 I REALLY ENJOY SHOPPING 134 70 130 11.25 7.50 FOR CLOTHES identify Heinz beans users and what kind of cars tions about buying behaviour. Other UK online they drive. Another package, called ‘trender’, can demographic analyses can be cross-referenced, eg be used to track product, brand, attitudinal, demo- PINPOINT, which uses 60 different neighbourhood graphic or media trends. The index can also link classiications. MOSAIC has 58 neighbourhood into various online geodemographic packages. categories linked with inancial information. SUPER PROFILES uses 150 neighbourhood types. Geodemographics Geodemographics mixes geographical population Test marketing data together with basic demographic data. It uses Test marketing refers to new packs, new brands and neighbourhood types to predict the kind of people new products that are marketed only in a limited who live within them and thus their behaviour test region or geographical area, eg the Yorkshire as consumers. If a brand is found to appeal to TV area. A full marketing drive (distribution and certain geodemographic groups, their locations can advertising, etc) is released in the test area only. This be mapped and the subsequent communications gives the company a chance to spot any last-minute can be targeted at the geographical areas that offer problems that previous research has not identiied. the greatest potential. If the test market proves to be positive, then the ACORN (a classiication of residential neigh- marketing campaign can be extended nationally. bourhoods) uses postcodes to identify different As mentioned, everything can be tested. A new types of houses and generally gives useful indica- advertising campaign, a new sales promotion or 148 Part 1 Communications Background and Theories F I g u R E 6 .4 Awareness questionnaire Spontaneous Brand Awareness Q1 Which makes or brands of yoghurt can you think of? Probe: Which others can you think of? d) (Showcar Q2 And which brands of areness Brand Aw Prompted seen or have you o f yoghurt r a n d s oned? kes or b dy menti i c h o f these ma y o u h a ve alrea Q1 Wh g any includin before, heard of s? ny other Probe: A ess A n d w hich of t se h e n g A waren Q 2 si ard t h e l a s A d verti e e n or he s aneou i n u Spont ve yo ) rt ha arhdere? f y o g h u m a s t h toewrc w n o r nds o sns'st ( see b r a d o e e o u e? or . It en e y her i c h makes r e c ently Awar t hav t e r w Q1 W h g for g ur at tisin sin ogh t m adver v eerrtsi? o f y o e sn' dh A odt h nd s t d en? e : Wtheic bra y , i u eat o b Pr Pro m p o r en t l e y o ers ? es rec hav oth e mak o r r t n y hes f hu A even a direct mail campaign can be tested among a can also invalidate certain tests. If this kind of in- few thousand names on a mailing list (in direct mail, accurate information is used to decide whether to some companies test right down to whether different- launch or not, or to ind out how much advertising coloured signatures affect direct mail response spend is required nationally, etc, then the results levels). Some organizations do not, however, test- could be disastrous. As mentioned in Chapter 5, market because of the associated problems of Microsoft has 450,000 early adopters who trial its security, timing, costs and seasonality. software, and P&G has 200,000 on its ‘connector Some tests are considered to create security pro- panel’ who research (test) and seed new products. blems 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 Tracking studies limited time period of a test often restricts the Advertising tracking involves pre- and post- accuracy of the measured results, since additional advertising research that aims to measure levels of time may be required to monitor whether repeat awareness and brand recognition before and after purchases continue beyond the ‘trial period’. That an advertising campaign. It can also be used to is, do customers keep buying, or still remember measure the series of mental stages through which a particular advertisement, after the impact of the a customer moves: unawareness, awareness, com- initial launch has died down? Seasonal products prehension, conviction and action. These are the and services are further complicated, since they may stages identiied in DAGMAR (deining advertis- need to be tested 12 months in advance. Testing, ing goals for measuring advertising results). It of course, costs money, which needs to be budgeted is worth remembering that some elements of the for at the beginning of the planning period. Both communications mix, such as sales promotions, freak results and results manipulated by competitors packaging and point-of-sale, can be more effective Chapter 6 Marketing Communications research 149 than advertising when pushing the customer through and laser scanning can provide much of this infor- the inal stage of ‘action’ or buying. mation online directly to the user. Sales out of shops An analysis of the sales igures can identify an do not necessarily relect actual customer usage. advertising campaign’s effect on overall sales. Home Home audits (see below) can provide customer audit panel data like SuperPanel can reveal infor- purchase information. mation on what is happening within the total sales igures, such as who is switching brands, who are the heavy users, etc. Quantitative techniques involv- Home audits ing street surveys, in-home interviews or telephone Instead of, or in addition to, retail store research, surveys (obviously not used if prompting respon- home audits research the customer directly. The dents with visual prompt material, eg storyboard, retail audit data can be backed up with customer press or poster ad) can measure the other DAGMAR usage data. Representative families (sample size: stages listed above. 8,500) are recruited and asked to log all their The percentage of respondents with spontaneous purchases using a bar code recorder. The device awareness (which brands of beer can you remember asks for the name of the store and the price paid seeing an advertisement for this week?) is always per brand, etc. Non-bar-coded items are recorded lower than those with prompted awareness (since on paper. Analysis of this wealth of data over time the interviewer prompts the respondent by showing shows consumers’ repertoire of brands, the effects a list of brand names or a storyboard of the ad). of sales promotions on purchases, frequency of pur- See Marketing Magazine’s weekly brand awareness chase, etc. This is automatically cross-referenced results for an example of who is leading the aware- with the household’s demographic data already ness tables. Incidentally, telephone surveys cannot held. Diaries and dedicated dustbins used to be currently be used for measuring prompted aware- used to collect this type of information. Today the ness of a TV campaign (they can be used to research automated online bar code system is preferred. 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 Social media audits made, but this is obviously not the ideal situation. Look before you leap. It is essential to carry out This situation may change as more homes begin to an audit before jumping into the blogosphere. As use videophones (ie as penetration increases and always, the brand and the organization need to ‘the diffusion of innovations’ occurs). check that it is credible and ready to become more Although awareness is of interest, ‘salience’ is, as transparent, as social media can probe into many Gordon (1991) points out, ‘a far more valuable tool previously protected areas of the business. A social for understanding what a brand means than brand media audit explores how an organization (and /or awareness’. its brands and high-proile staff) and its competitors are seen in relevant online communities: what is being discussed, what is required, whether the or- ganization has existing assets (contents, eg speeches) Retail audits and how ready the organization is (includes train- Retail audits monitor share of shelf space, prices ing, systems and processes and generating content and turnover of particular brands (including com- and participating in discussions). The audit also petitors’) in a large and representative sample of looks at current presence, whether blog, Twitter, retailers. It is worth noting that Boots, Sainsbury’s Flickr or YouTube, and the levels of engagement and Marks & Spencer do not allow auditors to and trafic or followers. The audit explores the or- come into their stores. This means that the audit ganization’s social media goals (eg a direct channel results have to be weighted and adjusted. Where with customers, to gather research, to improve auditors are allowed access, they check shelves, customer service, to reach out to new audiences or facings, prices and stock levels. Most FMCG com- markets, to add value to existing customers, etc), as panies buy these audits, since they provide a picture well as its resources and restrictions (policy issues of what is happening at the retail level. Bar codes about content or trade secrets, any legal or political 150 Part 1 Communications Background and Theories constraints or any internal issues about sensitive ‘Connector panels’ are used to research and seed information). 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, You don’t have to research social media but they are also taking ownership of the product unless your audience is on there and the brand as they become more and more engaged. ‘The “groundswell effect” of digital and social media solutions is raising the expectation that Neuroscience they will inevitably now form part of any communications strategy. This not the case! Whilst Neuromarketing and biometrics have received a lot it’s certainly true that these techniques can be very of publicity as marketing research tools. Whether it effective in supporting and moving the behaviour of is about mapping eye movement or measuring heart targeted audience groups as part of a social rate, sweat response or any neurological activity, marketing strategy, it’s important to recognise that many marketers are sceptical, yet companies like Google, Microsoft and Mercedes-Benz use neuro- this type of intervention will only work if our marketing to improve their marketing communica- research and insight tells us that a specific tions (Rothery, 2009). audience prefers it or is already using this media to communicate.’ Rothery (2009) ‘I don’t like it’ really means ‘I do like it’ – neuroscience digs below the surface Opinion-forming panels Chapter 5 highlighted companies that use opinion- TV show Quizmania invites viewers to call in and forming panels, including Microsoft (450,000 win money if they guess the answer. Before the early adopters), Procter & Gamble (nearly 200,000 show was released in the United States, the recruited respondents in its ‘connector panel’). 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 Post-it notes fail test like the show because from a rational point of view it’s ridiculous. However, the emotional part Post-it notes failed in concept testing, prototype of the brain is so engaged that you keep watching testing and a test launch. Although a great product, it’ (Martin Lindstrom, in Rothery, 2009). When consumers, when researched, simply did not like it. the show was finally broadcast, the ratings ‘Just before pulling the plug on this potential new matched the predictions from neuroscience product, 3M focused on “highly connected CEO research. 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 Specialist companies such as Mindlab, Inners- of mouth generated pushed this product beyond cope, Eyetracker, NeuroFocus and Neurosense all the Tipping Point to become the 5th largest office use slightly different approaches, and each one is supply.’ more likely to be associated with hospitals or uni- Marsden (2004) versity laboratories rather than ‘normal’ marketing approaches. Chapter 6 Marketing Communications research 151 Think ‘secondary’ irst and prospective clients about. On the other hand, some free survey results may be biased in favour of All communications plans should be based on sound the organization that commissioned the research research. Expensive primary data should be used in the irst place, particularly if they have a vested only when all possible secondary data sources interest in revealing certain positive results or trends. have been checked. Why pay £25,000 for a market In addition, some surveys can be hijacked or research report analysing your industry when it manipulated. may be possible to subscribe for less to a syndicated survey carried out speciically for a group of com- panies in an industry sector (eg air travel or car manufacturers)? Alternatively, some markets are The market research process researched regularly by market report companies such as Mintel, Keynotes and Jordans. These reports can be purchased by anyone for a few hundred Deine what you need to know pounds. Academic institutes often publish reports Before going through the steps of the market on various markets or aspects of the marketing research process, it is worth emphasizing the process within a particular industry. Sometimes importance of deining exactly what information these are available at not much more than the you need and which decisions it will affect. Other- cost of duplication and dispatch. A newspaper like wise you get information creep, delays and con- the Financial Times may have done its own analysis fusion. Rushing into research will probably deliver or survey, which costs less than £2. Other research sloppy market research or well-structured research reports are available free of charge, as the com- indings but miss some key information. missioning companies see published surveys as a useful marketing tool to generate free media cover- age. It also gives them something to talk to clients Bank misses key information A major bank tracked performance by product group (eg credit cards, mortgages) and by channel Same secondary source – completely (branches, phones, online, e-mail). It went on and diferent ‘factual’ reports about compared sales, costs, profits, attrition rates, David Beckham cross-sell penetration, and customer satisfaction across products and channels. It missed some ‘Gaultier-saronged, posh-spiced, cool Britannia, crucial information, which made the research look-at-me, what-a-lad, loadsamoney, sex and worthless. What did it miss? ‘It didn’t link shopping, fame-schooled, day-time-TV, over- performance in individual customer segments – quaffed twerp’. such as investors, retirees, home owners, renters Daily Telegraph, June 1998, after Beckham and students with aggregate financial results was sent off in the World Cup objectives and results. Management therefore ‘Elegantly-dressed, charmingly-espoused, couldn’t pinpoint how strategies to improve golden-jubilees, self-effacing, paternally perfect, customer acquisition, increase penetration, deservedly-rich, superbly tasteful, uniquely and lower attrition across the bank’s key tele-visual, gloriously-maned hero’. segments were related to the bank’s sales and Daily Telegraph, June 2002, after Beckham profit goals.’ captained England in the World Cup Collins, Dahlstrom and Singer (2006) Even the Telegraph recognized the vagaries of newspaper reporting, as it reprinted both paragraphs side by side in June 2002. 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 3 Researchers can observe passively as people of market research indings that a carefully reined interact with each other very naturally and tailored survey will. Although ‘most companies online. lack the roles, processes, and integrated customer 4 It is quicker – online dialogue and feedback metrics needed to create unique customer experi- are immediate and in some cases within ences for select segments or to respond quickly minutes of something happening, as opposed to shifts in a segment’s value’ (Collins, Dahlstrom to face-to-face surveys, which might take and Singer, 2006), the few that do really must days, weeks or months, which gives people ensure their research is tailored to different seg- time to think, forget or get confused. ments. (See the box ‘Flawed research – males and 5 It allows for more longitudinal studies – females all the same’, page 156.) instead of an intense one-hour dialogue, This applies to any kind of research online or online can encourage conversation over ofline. There has been an increase in the amount of months or years, which can yield very research carried out online. It is worth considering different insights to traditional face-to-face. the advantages and disadvantages of online vs ofline research. 6 There is a wider spread of respondents, as online focus groups can recruit from across geographical and social boundaries. Online vs oline research 7 Respondents can upload videos and share photos and online diaries and use these as Qualitative research such as in-depth interviews stimuli. and focus group discussions gives insights into the 8 It is cheaper than ofline equivalents. 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 Online disadvantages real-time discussions and layering them with shared 1 Too much information generated by too uploads such as photos and videos adds a richness many social media conversations means to research. These insights shape marketing stra- marketers potentially face ‘an overload of tegies, product development and ad campaigns. untargeted data that is costly to analyse and Marketers can now carry out a lot of qualitative requires speciic expertise and resource’ research online. With more anecdotal information (Gray, 2010). accessible than ever before, how does a marketer 2 There is less control. As the discussions choose between online and ofline research? reside within their own online communities, The Guardian’s Robert Gray (2010) believes the the role of a focus group moderator has digital revolution has been both a blessing and become more passive and observational, a burden for market research: ‘A wave of new with less control over the direction of the research techniques has emerged in recent years, discussion. This can open up new, bringing immense opportunities for heightened previously unknown aspects, but can also understanding, but also making it harder than ever make it harder to get feedback on speciic for those commissioning research to decide on the questions. right method.’ So should online research be part of the research mix? Facebook research platform Online advantages 1 Access – it is easier (and cheaper) to get Restaurant chain Nando’s asked its Facebook fans respondents online than to drag them out of for their thoughts on a possible new product. the ofice. Overnight, more than 500 fans clicked their ‘like’ 2 Researchers can observe consumers in their button, and there were 657 comments for marketing own community (without taking them to analyse. somewhere else). Chapter 6 Marketing Communications research 153 Ta b l E 6 .2 The market research process Step Actions 1 Problem Decide clearly what information is needed and why it is needed. definition 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 The interpretation of the figures, summary, and sometimes presentation conclusions. 6 Action taken/not If the information is not used, then perhaps it wasn’t worth collecting in taken the first place. proiles that help companies to understand their Websites and research customers better. Websites can help identify customer needs: ●● Identify what customers are interested in (the most popular web pages). The market research process ●● See what customers really want by looking The key to using information eficiently lies in at key phrases used to arrive at the site and the ability to deine exactly what information is within the site (seeing what phrases are required. This is a valuable management skill. keyed into the onsite search engines). Deining the problem or deining the research objec- ●● Employ polling for brand names, straplines, tives is the irst step in the market research process packaging design concepts or any concepts. (see Table 6.2). ●● Use questionnaires sparingly, as they can cause people to leave a site, particularly if the questionnaire is on the home page. Briefs, proposals and agency Every click potentially captures data, building a selection better proile about visitors and their interest. Chat rooms offer a wonderful opportunity to listen, free Research brief of charge, to customers discussing your product Depending on the type of research, the brief can or service. And more sophisticated data-mining include SOS from SOSTAC® plus 3Ms (see pages software can drill down into data mines and build 229–37): 154 Part 1 Communications Background and Theories ●● Summary. will apply (see ‘Agency selection process overview’, ●● Situation analysis (including target and page 189). marketing mix). A shortlist of agencies can be developed from personal recommendations from colleagues and ●● Objectives of the research (problem advertising agencies, and from the organization’s deinition – what information is required and own observation of research agencies and their what decisions should be made as a result of advertisements or editorial coverage. Agency size, the research inding?). specialism or expertise, reputation, location and ●● Strategy (why the information is required whether the agency works for any competitors and how the research indings may affect the can be used as shortlisting criteria. The agencies communications strategies). that ‘pitch’ or make a presentation will then be ●● Men/women (who will liaise with the judged by the quality of their research proposal, agency?). security of data, cost, and spin-offs (like free train- ●● Money (how much is the research budget?). ing). Even small details can make an impression – for example, the number of bound reports that ●● Minutes (timing – when is the information will be delivered when the research indings are needed?). eventually presented, or e-mailing presentations Note that some clients prefer not to divulge too and providing client access to extranets, so that much strategic or tactical information for security clients can monitor project progress. The personal reasons. On the other hand, the more the research chemistry or relationship between the client and the agency knows, the more useful the contribution to agency presenter is often the key variable that the success of the project will be. 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 Research proposal degree of supervision that will be offered. The If an external research agency has been briefed, its Interviewer Quality Control Scheme (IQCS) follows research proposal should incorporate a research rigid procedures to supervise and check the quality plan (step 2 in Table 6.2). You will also want to of the information. look at the agency’s credentials. Some agencies demonstrate great care about the security of the data they hold. Computer hackers pose a problem to any computer stored Subcontract research but not understanding My girlfriend ‘There are certain research functions, marketing research functions, that are sometimes provided by ‘About 10 years ago my girlfriend used to work for outside firms that are specialists in doing nothing a well-known market research agency in London. but research. But the core aspect of marketing, On Fridays, I would go in and collect her before which is understanding our customer and having going to the pub. Whenever I was late I would a close bond with the customer, that should never dash through the main front door, past the security be turned over to anybody else.’ guard and go up in the lift. Occasionally I jumped Kanter (1996, 2000) 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 Agency selection changed its security procedures.’ If the organization is not handling the research Anonymous in-house, a market research agency will be chosen. Some of the usual agency selection procedures Chapter 6 Marketing Communications research 155 simulated? Another problem lies with the dificulty Market researchers as drunks 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 ‘Market research, to paraphrase a witty adage, the marketing effort after the excitement of the is frequently used like a drunk uses a lamp post: initial launch? for support rather than illumination.’ The same applies to advertising. Most advertise- Gray (2010) ments 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 ad- data. Product test samples need to be controlled vertising campaigns, ‘Heineken refreshes the parts carefully and securely. All samples, mock-ups and other beers cannot reach’, had the normal focus concept boards need to be returned by the inter- groups and concept research carried out. It ‘re- viewers, and logged as returned once they are searched poorly’, ie the results said, ‘This is rubbish. received by the research agency. Samples, mock-ups We don’t understand this type of ad. Don’t do it.’ and concept boards can then be kept under lock Sir Frank Lowe (chairman of the advertising agency and key. Lowe Group) tells the story of how he had to tell the client (Heineken) about the negative concept research indings on their radically different adver- Research problems and challenges tising concept. ‘He [the client] took a very brave There are many challenges associated with getting decision and placed the research report document good market research. These include: researching in the bin. He said, “We had best leave that alone new ideas, sloppy briefs, sloppy interviews and and get on with the ad!”’ Expensive and carefully much more. prepared market research indings are sometimes ignored. Expensive research also gets it wrong if it fails Researching new ideas to ask the right question. Even world-class com- How can answers to questions about anything that panies can ask the wrong question and make huge is new, unseen or previously untried be valid? The mistakes. Take Coca-Cola – although it researched irst commercially produced electric car, the Sinclair the taste of the new Coke, its 1985 lop occurred C5, had the beneit of some product research, but because it failed to research how consumers felt how can research ask people about something they about dropping the old Coke. Here is Philip Kotler cannot experience? Driving a C5 in a hall is very (2000): different from driving one along a coast road or a busy, wet and windy dual carriageway with a 40- Blind comparisons which took no account of the foot truck trying to overtake. Here lies one of the total product… name, history, packaging, cultural dificulties with researching a new idea: how can heritage, image – a rich mix of the tangible and the reality of some markets and product usage be 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 no one asked for a burger – emotional ties, but Coke’s symbolic meaning until they were invented was more important to many consumers than its taste. More complete concept testing would have detected these strong emotions. ‘Consumers can’t be expected to embrace previously unseen solutions. Let us not forget that Real innovations are dificult to research because no one had asked for a hamburger until they were both customers and experts struggle to visualize invented.’ their beneits. Henry Ford once said: ‘If I’d listened Murray (1997) to my customers, I would have invented a faster horse.’ This is echoed by Clayton Christensen (2003) 156 Part 1 Communications Background and Theories 8 interviewer fraud (falsely illing in Flawed research: Coke lop questionnaires); 9 non-response (a refusal to answer ‘Sometimes research gets it wrong because it fails questions); to understand that people can only buy a complete 10 wrong sample frame, type or size; brand. People don’t buy products; they don’t buy 11 incorrect analysis; packages; they don’t buy brand names. They most 12 freak clustering or result (an inherent certainly don’t buy advertising. They buy the sum danger of sampling); total of all those things. At one point the Coca-Cola company thought they could improve Coke and 13 timing (researching seasonal products out invented a new Coke. They had thousands of of season). 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 Marketing intelligence and Coke. It failed miserably. When the company information system researched new Coke versus old Coke they missed Every organization should have a marketing intel- the understanding that the brand Coca-Cola was ligence and information system (MIIS) that lists far more than just a product. It’s the sum total of all secondary data sources. The system can be a useful elements of the brand.’ starting point. An MIIS should be built and con- Bradt (1996, 2000) stantly 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, in The Innovator’s Dilemma: ‘Listening too much to customer input is a recipe for a disaster.’ Listen- ing to experts in the ield can also be a recipe for disaster, as demonstrated by the, now classic, Flawed research – males and quotations regarding innovations from so-called females all the same industry experts (see Chapter 1, page 26). Recent testing on both sexes [of rats] has revealed Dangers to guard against variations in pain thresholds and quite different Here are some of the areas where problems can responses between male and female rats to the occur in market research: same medicines… [This implies that the] body of drugs research has been built on a false premise, 1 ambiguous deinition of the problem; “one size fits all”. 2 ambiguous questions; Women today influence 80% of consumer 3 misinterpretation of the written question by decisions. the interviewer; 1 Women’s sensory perception levels are higher 4 misinterpretation of the question by the on all five counts… more sensitive to sales interviewee; environments. 5 misinterpretation of the answer by the 2 Women use the internet and shop online interviewer; differently. 6 interviewer bias (street interviewers may select only attractive-looking respondents 3 Women talk more about their experiences – and exclude anyone else from the sample); word of mouth and referral rates are higher. 7 interviewee inaccuracies (trying to be 4 Women buy differently at every stage of the rational, pleasant, offensive, disruptive, buying cycle. knowledgeable when ignorant, etc); Dunkley (2008) Chapter 6 Marketing Communications research 157 cost per order or enquiry, etc, can and should be compared with external industry averages or com- The intelligent rep petitor activities. Not all the information is readily available immediately, but competitors’ sales igures In the United States one particular chain of stores (of grocery products and some other large markets) that sold Christmas crackers held buying days are available from companies such as Nielsen Retail when their buyers would see visiting sales Audits. Information on levels of advertising is avail- representatives. Appointments were not accepted able from Nielsen Media Research. and, once they had registered with the receptionist In an ideal marketing department, competitors’ for the appropriate buyer, reps proceeded to queue products, lealets and advertisements should be iled, monitored and counted (so as to estimate the in a waiting room on a first-come, first-served competitors’ advertising spend), but busy market- basis. The room had rows of desks with telephones, ing departments sometimes ind this too time- where the reps sat down quietly filling in order consuming. Certain monitoring companies offer to forms, drafting letters, completing call sheets and collect competitors’ press clippings and published making phone calls. Although it was only 7.30 am, advertisements. They will also estimate a com- a dozen registered reps were already busily petitor’s advertising spend, if this is not available working away. By 8.05 am the room was packed. from MIIS. Again, this costs money and therefore The large chap beside me was on the phone it may be deemed to be outside the budget, parti- at 8.00 am reporting some hot information he had cularly if it was never included in the annual come across during another breakfast appointment marketing budget in the irst place. Estimating earlier that day. He told his boss how the competition a competitor’s advertising spend can also be done had offered the other buyer a new buyer-incentive by collecting all the competitor’s press ads and scheme which would commence next month, calculating the spend from rate card costs less bulk followed by a new consumer-incentive programme discounts. scheduled four months down the road. They had now A marketing log iling previous marketing ac- four months to react or pre-empt the competition! tivities, advertisements, mailshots, editorial clip- Today’s reps should be asking buyers what pings, etc should be tagged with ‘cost, objective words and phrases they use to search for the sales and result’. reps’ products and services. The answers need to Comparing internal sales igures with external be regularly and systematically sent back to the igures (eg total market size) gives you market share marketing team to be added to the key phrase igures, which can also be used to calculate your inventory for SEO and pay per click ( PPC) PR Smith competitors’ market share and, more importantly, (nd) purposes. whether it is growing. Figures in isolation are rela- tively 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 work. An online database like Textline accepts key- competitors). words, companies, products, people or issues. Once The sales force can, if trained, provide the most you have keyed in what period of time (3, 6, 12 up-to-date and relevant information from the MIIS. months, etc), what area (UK, Europe, United States, They are closest to the marketplace and in touch etc) and what types of journals or magazines, the with what is happening. They need to be encour- screen will register how many references there are aged to collect relevant information. and ask you if you would like to read or print the Staff members throughout an organization can headlines, read or print all the abstracts, or reine be trained or briefed as to what type of information the deinition or choice of keyword if too many is considered important. Different members of the references are recorded. team can identify their choice of newspapers and/or Some of this information can then be used in a trade journals. They can then scan them for any- SWOT analysis (strengths, weaknesses, opportunities thing relevant. Alternatively, a press clipping agency and threats). This is particularly useful in monit- (eg Romeike & Curtice) can be hired to do this oring uncontrollable external opportunities and 158 Part 1 Communications Background and Theories threats (OT) variables such as political, economic, social forecasting, and they will also carry out social and technical (PEST) factors. PEST develop- econometric forecasting, which correlates the likely ments can be dificult to forecast, but the portents sales effect resulting from a change in pricing or ad- cannot be ignored (see Chapter 11). Many forecast- vertising expenditures (price elasticity or advertis- ing companies specialize in certain aspects such as ing elasticity). In conclusion Research is valuable but, as can be seen, it does This is nerve racking require experienced advice and strict control if the since I don’t know what I must pretend to data are to be usefully applied. ‘Dodgy data is worse know. than no data!’ Having said that, good data can Therefore I pretend to know everything. make the difference between winning and losing. I feel you know what I am supposed to know Asking good questions is a great skill. It is impor- but you can’t tell me what it is tant to know what you need to know, as demon- because you don’t know that I don’t know strated by the following poem: what it is. There is something I don’t know You may know what I don’t know, but not that I am supposed to know. that I don’t know it, I don’t know what it is I don’t know, and I can’t tell you. So you will have to tell and yet am supposed to know, me everything. and I feel I look stupid if I seem both not to know it Source: A poem about information from R D Laing’s and not know what it is I don’t know. Knots. Reproduced by kind permission of Tavistock Therefore I pretend to know it. Publications. key points from Chapter 6 ●● Budgets allowing, research can reveal anything ●● Always check secondary sources before required. commissioning expensive primary research. ●● Consider carefully exactly what information is ●● Consider online as well as ofline research. required, because there is too much information ●● Set up a marketing intelligence and information out there. system. references and further reading Birn, R (ed) (2003) The Handbook of Market Research Crimp, M (2000) The Marketing Research Techniques, Kogan Page, London Process, 5th edn, FT Prentice Hall, Englewood Bradt, G (1996, 2000) Online Marketing Course 5: Cliffs, NJ Marketing research, Multimedia Marketing.com, Crouch, S, Housden, M and Wright, L T (2003) London Marketing Research for Managers, Cerha, J (1970) Inventing products to it the future Butterworth-Heinemann, Oxford market, Paper given at ESOMAR, Neu-Isenburg, Discovery Channel (2008) Species – a user’s guide November to young men, Discovery Communications Christensen, C. (2003) The Innovator’s Dilemma, Europe Harper Business Essentials, New York Douglas, T (1984) The Complete Guide to Collins, S, Dahlstrom, P and Singer, M (2006) Advertising, Papermac, London Managing your business as if customer segments Dunkley, C (2008) Gender psychology – differentiate matter, McKinsey Quarterly, August to accumulate, Marketer, October Chapter 6 Marketing Communications research 159 Gordon, W (1991) Accessing the brand through Lynch, M with Manchester, P (1999) How to uncover research, in Understanding Brands, ed D Cowley, knowledge and make it available, Financial Times, Kogan Page, London, pp 31–56 10 November Gordon, W (1999) Goodthinking, Admap, Oxford McGovern, G (2000) Information overload – the Gray, R (2010) How to do ‘qual’ research, Marketer, June sequel, New Thinking, 23 October Holder, S (1999) Talking to the right consumer, McNally, F (2002) Wolfe Tones’ rebel ballad beats off Design Week, May Bollywood classic to be top choice, Irish Times, 21 Holder, S and Young, D (1995a) A journey beyond December imagination, Paper given at ESOMAR, Berlin, Marketing guide 6: Market research (1989) February Marketing Magazine, Haymarket Publishing, Holder, S and Young, D (1995b) Managing change: 13 April Moving towards a leaner future, Paper given at Market Research Society (1986) Research is good for Business Industry Group, May you: The contribution of research to Guinness Holder, S and Young, D (1997) Researching the advertising, Conference papers, MRS, London future in the present, Paper given at ESOMAR, Marsden, P (2004) Tipping point marketing, Brand Edinburgh, September Strategy, 1 April Holder, S and Young, D (2000) Getting to the future Moore, A (2004) Enterprise search: the Holy Grail of irst, Paper given at AEMRI, Paris, June KM?, KM World, 1 January Kanter, R (1996, 2000) Online Marketing Research Murray, R (1997) Clone zone, Creative Review, Course 5: Marketing research, Multimedia November Marketing.com, London Nurden, R (1997) Managers pay price for ofice Kimmel, M (2008) Species – a user’s guide to young pressures, European, 27 November men, Discovery Channel, Discovery Reuters (2009) Information overload, 15 August Communications Europe Rothery, G (2009) All in the mind, Interview with Knave, M (1991) Unlocking deepseated reactions M Lindstrom, Marketing Age, 3 (6), November makes ads more sympathetic, in Marketing Smith, PR (nd) Personal anecdote from the 1980s Breakthroughs, ed Bruce Whitehall, December when the author was marketing Christmas 1991, p 9 crackers in the USA Knave, M (1996) Rescuing Boris, Time magazine, Varian, H and Lyman, P (2000) How Much 15 July Information?, UC Berkeley School of Information Kotler, P (2000) Marketing Management: Analysis, Management of Systems planning, implementation and control, millennium Wurman, R (1996) Information anxiety, system edn, Prentice Hall International, London overload, Time, 9 December Further information British Market Research Association (BMRA) European Society for Opinion and Market Research (formerly known as Association of British Market (ESOMAR) Research Companies – ABMRC) Eurocenter 2 Devonshire House 11th loor 60 Goswell Road Barbara Strozzilaan 384 London EC1M 7AD 1083 HN Amsterdam Tel: +44 (0)20 7566 3636 The Netherlands www.businessmagnet.co.uk Tel: +31 20 589 7800 Fax: +31 20 589 7885 www.esomar.org 160 Part 1 Communications Background and Theories Market Research Society Nielsen Media Research (formerly known as Media 15 Northburgh Street Monitoring Services) London EC1V 0JR Atrium Court Tel: +44 (0)20 7490 4911 The Ring www.mrs.org.uk Bracknell Berkshire RG12 1BZ Millward Brown (London) Tel: +44 (0)1865 742742 24–28 Bloomsbury Way Fax: +44 (0)1865 732461 London WC1A 2PX www.nielsenmedia.co.uk Tel: +44 (0)20 7126 5000 (Dale Beaton) Fax: +44 (0)20 7126 5001 www.millwardbrown.com 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 Which media, which vehicle? 170 media mix 162 How much space, how often and Changing media consumption 162 when? 171 Is old advertising media out? 166 Media buying 171 Is mixed media in? 166 Media research 171 Is apps the ‘new media’? 167 Media research bureaux 176 Print 168 Media jargon and vocabulary 177 The internet 168 Summary 179 Is ambient media the new media? 168 references and further reading 179 Which medium? 168 Further information 180 Media selection 169 162 Part 1 Communications Background and Theories their mobiles, iPads and plain old PCs? Media Introduction – the challenge mashing means audiences are multitasking (watch- of the media mix ing TV and being on the internet). The media planners’ and buyers’ job has become even more The media mix is where the big money is tradition- complicated, with a plethora of channels, social ally spent. A £10 million TV ad campaign may media sites, apps and more. All of these are con- spend £1 million on producing the TV ad, but it sidered later in this chapter. spends £9 million on media, ie nine times more on Since most of the advertising budget gets spent the media. It follows, in this case, that nine times on the media, careful attention to detailed media more time and effort should be spent on choosing planning and razor-sharp negotiating skills is im- the right media mix. And the mix has got a lot portant. Expert media planners and buyers get bigger. the best out of advertising by inding the right Some marketing managers and agency media spaces or places for an ad campaign at the lowest people consider that media include communications cost. Media planning is both a science and an art. tools such as sponsorship, direct mail and point-of- Traditionally it has been based on number-crunching sale, as well as the mainstream media such as TV, media analysis and the application of complex cinema, radio and the press. Buildings, they would computer models. Today media planners are also say, are permanent media, which, planning permis- interested in the qualitative side, which tells them sion allowing, can be used to carry a message. For how audiences actually use (and feel about) dif- the purposes of this chapter, ‘media’ means the more ferent media. First, consider the changing media traditional advertising media (press, TV, cinema, consumption patterns. radio and posters), as well as new media such as web radio, interactive television, mobile messaging and websites. Although good media planners also Changing media consumption consider media outside the traditional advertising Media consumption is continually changing. News- realm, this chapter focuses on the mainstream ad- papers and radio are down. Online and TV are up, vertising media, while other communications tools when measuring where audiences go to gather their are addressed separately in their respective chapters news, although both newspapers and radio are in Part Two. consumed via the internet. This research is from the Deciding to include advertising in the communi- United States, as many European media consump- cations mix is a relatively easy decision compared tion patterns follow the US trend. to deciding which media and which media vehicles TV viewing is at an all-time high in many coun- (eg the speciic magazine title) to use. Should the tries around the world (Nielsen Wire, 2009). Media press, TV, radio, cinema and/or posters be used, meshing or multitasking (watching TV and using online and ofline? If so, how much of each? Should the internet simultaneously) is growing (EIAA, they be mixed together (the media mix)? If press 2010). For advertisers, combining TV and online advertising is chosen, which publications should be increases positive brand perception and signii- used – national dailies, Sunday newspapers, evening cantly increases the likelihood of purchase (IAB and newspapers, daily or weekly regional papers, or Thinkbox, 2008). magazines? How many times should the audience Internet usage is growing. In some countries see or hear the ad (optimum frequency)? When internet usage is bigger than TV consumption, eg should it happen? On which page? Even a great Canada (IPSOS Reid, 2010). In some demographic advertisement will not work if 1) it is in the wrong segments, eg Millennials (born between 1981 and place, 2) it is placed at the wrong time or 3) it is 2001), internet usage is three times greater than TV in the right place at the right time but not seen usage (Markiewicz, Sherman and Jaworski, 2008). enough times (insuficient frequency). And YouTube just keeps on growing. In fact, Today it gets even more complicated, as chang- more video has been uploaded to YouTube in the ing media consumption patterns show more and last two months than if ABC, NBC and CNN had more online media consumption, yet TV viewing in been airing new content continuously since 1948 most markets is also at an all-time high. What about (which was when ABC started broadcasting) when TV audiences watch their programmes on (XPLANE, 2009). Chapter 7 Media Buying and Planning 163 F I g u R E 7.1 Media source by generation Newspaper “Yesterday” Online for News “Yesterday” 65 53 48 38 38 31 29 33 28 26 25 28 22 21 14 14 1998 2000 2002 2004 2006 2008 1998 2000 2002 2004 2006 2008 Radio News “Yesterday” TV News “Yesterday” 74 73 56 61 54 54 49 52 44 41 43 42 38 30 28 29 1998 2000 2002 2004 2006 2008 1998 2000 2002 2004 2006 2008 Silent/Greatest Boomer Gen X Gen Y Silent/Greatest Boomer Gen X Gen Y born before 1946 born 1946–1964 born 1965–1976 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 Invisible kids technology, and perhaps the recession means some audience members have more time to watch Time spent by the average child watching television: TV. The average American watches 38 hours per 1,491 minutes per week or almost 25 hours per week. week, up from 36 hours per week the previous Nielsen Wire (2009) year (Nielsen Wire, 2009). And, surprisingly, TV viewing amongst children is almost ive times Parents’ time spent in meaningful conversation greater than watching DVDs and almost 20 times with their children: 3.5 minutes per week. greater than using games consoles (Nielsen Wire, TV Free America (2010) 2009). 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 2006 2008 2010 % Media 39% 28% 24% 21% 2% 7% 3% Share 14.5 15.314.2 14.8 13.0 14.8 13.2 12.4 11.312.0 12.3 11.8 8.8 6.4 5.3 5.2 4.9 4.7 10 4.5 4.0 3.9 3.8 Countries Watch television Listen to the Radio Use the Internet Use the Internet Use the Internet Read Newspapers Read Magazines (not through (not through (total) (PC) (Mobile) Internet) Internet) %Media 39% 27% 24% 21% 3% 7% 3% Share 15.9 12.1 12.1 11.6 6.4 15 4.8 4.1 Countries Watch television Listen to the Use the Internet Use the Internet Use the Internet Read Read (not through Radio (not (total) (PC) (Mobile) Newspapers Magazines Internet) through Internet) [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 165 Research into what media people use to get news or mass audiences to smaller and more distinct revealed that printed newspaper consumption is, target audiences. The new, wider choice means not surprisingly, falling across all demographic that audiences are fragmenting into many smaller groups. Radio is falling also, except for Generation interest groups fed by sports channels, kitchen Y (born after 1977). Whilst TV is still generally channels, children’s channels, educational channels, growing across most age groups in the United States, religious channels, music channels, etc. Different there is one exception, and that is Generation Y. channels attract different audience proiles or dif- Online news is growing right across all segments, ferent psychographic and demographic segments. including ‘the Silents’ – those born before 1946 This gives marketers access to more distinct and (Pew Research, 2009). tighter target audiences. For European media consumption statistics, the However, audiences will continue to migrate European Interactive Advertising Association (EIAA) online away from the traditional TV viewing model (2010) reveal similar patterns. Over a ive-year as TV is watched on other devices (eg mobiles, iPads period to January 2010, TV is up, radio is down and car TVs). Demand for measurable ROI will (excluding internet access to radio), newspapers are keep taking marketing budgets away from TV and down and internet usage is up. direct channels and on to the internet. The marketers’ Both TV and online have an identiiable effect on dilemma of whether to use ads for brand building purchase and response, eg TV is stronger at: or making sales may be beginning to blur as ‘en- gagement’ becomes the burning issue. How can ●● telling people about a new brand they advertisements or any marketing communications haven’t heard of before (74 per cent); engage customers so that they are aware of the ●● sparking interest in a brand (74 per cent); brand, embrace it and engage with it to ensure ●● giving new information about a brand stronger brand relationships and, ultimately, better people are already aware of (72 per cent); lifetime sales? And before the debate broadens to ●● persuading people to try a brand or product the new challenges and opportunities presented (59 per cent). by social media, marketers have a new arsenal of advertising tools, including: Online advertising also has these effects, but per- forms relatively better at: ●● transactional banners (see below); ●● contextual ads (serving ads relevant to ●● helping people decide which brands are whatever a visitor is searching for); relevant (50 per cent); ●● geolocation ads (serving ads relevant to your ●● causing a re-evaluation of a brand location); (41 per cent); ●● mobile ads (new mobile ad models ●● giving enough information to make emerging); a purchase decision (41 per cent). ●● gaming ads (ads placed in games); IAB and Thinkbox (2008) ●● one-second ads (Miller Beer in the United In 2008 the internet was still being used primarily States); for research/inding information (75 per cent) and ●● long-form ads (see Chapter 1, p 20, on the communication (66 per cent), while TV was mainly 27-minute ad); used for entertainment (80 per cent) and relaxation ●● intelligent media units (banner-sized panels (73 per cent) (IAB and Thinkbox, 2008). However, with useful widgets and streams); this has been changing, as more and more internet usage is for entertainment (including iPlayers, ●● PPC vs PPA (pay-per-click ads vs pay-per- streaming radio and even newspapers online). As customer acquisition); faster and more reliable broadband rolls out, the ●● apps (see page 166); popularity of watching selected TV programmes ●● virals (a natural extension of many TV ads). will grow. With hundreds of channels, television has moved Transactional ads let users purchase items by inter- from broadcasting to narrowcasting, from broad acting with the banner instead of having to click 166 Part 1 Communications Background and Theories through to another page or website, helping impulse more on creating bigger and better programmes. buyers buy immediately. (See Chapter 13.) 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 Is mixed media – mobile and apps developed a dispenser that gives free coffee in with TV – in? return for watching a 30-second video advertisement Apps (or mobile phone applications) can put brands while it prepares and pours the coffee. back on screens that are currently ‘stealing atten- Marketer (2008) tion 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 Is old advertising media out? yet a prerequisite for a successful TV series, they do There is a shift in vision and philosophy amongst ‘create context for its shows and let the network advertisers. Media owners now have to think dif- interact with viewers while simultaneously laying ferently. Consider Facebook: although it primarily the foundation for additional revenue streams’ earns revenues from selling engagement ads that (Patel, 2010). drive people to brand pages, ‘marketers and agen- Here is how Fox TV network’s app for Glee (the cies want it to focus less on selling media and musical comedy series) works. It costs £0.59 to down- more on helping them solve problems and create load, and within a few weeks it had several hundred big ideas’ (Learmonth, 2010). Big marketers like thousand users. These customers are engaging be- Unilever, with its $7.4 billion advertising budget, yond the show, as they get extra information about have been visiting the Googles, Facebooks and the show, or they sing karaoke to songs performed Hulus (and lesser-known up-and-coming start-ups) in the show and then share their work of art by of Silicon Valley for years, to understand ‘new’ con- posting their recordings to social networks. Of the cepts like social media, search-contextual advertis- irst 200,000 subscribers, some 60,000 have been ing and geolocation advertising. published. Thirty per cent high-level engagement It has been suggested that Silicon Valley com- like this is powerful (see ‘The ladder of engagement’, panies could be incentivized less on ad sales and 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 internet creates bigger interactive The app helps to restore a sense of being in an audience or in a group, particularly if the relationships and not just ads app allows the audience to share their thoughts, feelings and, in this case, songs with each other. ‘But marketers have realized the internet isn’t just Apps that integrate with social media help get a a place for ads but a means to create bigger brand quickly discussed. interactive relationships with consumers. For savvy Social TV and its supporting apps extend a digital players such as Unilever, the digital tour (of brand’s reach, enhance the customer experience, major social media owners) wasn’t about CPMs or deepen the engagement and the brand relationship page views; rather, it’s about learning how to and simultaneously earn a new revenue stream from interact with consumers who spend more and more subscriptions. Such ‘walled garden’ experiences of their time online, and to discover new social mean more ‘marketing utopia’ (see Chapter 1) – it’s tools to participate in what’s going on there.’ a great time to be a marketer. Learmonth (2010) Additional revenue streams may follow if addi- tional brand advertising is added to the app. The Chapter 7 Media Buying and Planning 167 Glee app developers are actively talking to brands brand loyalty. If a brand can ind something of value about sponsorship opportunities, such as providing and something of relevance to its target market then free songs to users. 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 Apple TV beats cable TV? ‘walled garden’ experiences, such as the Xbox, are developing social media aspects to their games so ‘Widget or APP-based TV is just rolling out, and that players can keep in touch with their friends will be built into the majority of flat-screen TVs and compare scores, etc, as they lean over the ‘wall’ sold during the holiday season. Early adopters in into the social media networks. Others are also the US are pulling their cable and dish now and using apps as an added-value extension of the brand downloading the shows they want to watch on experience. Few brands as yet appear to be using their computers and Apple TV. When that occurs, apps as revenue generators (fees for downloads or networks will directly distribute their content to additional brand advertisements). a large portion of their customers, who will pick Here are some early apps highlighted by Kennedy and choose all programming they watch, when they (2009): want to watch it – sort of like it has evolved to now ●● Zippo. The US lighter manufacturer created with DVRs and on-demand, but with much greater an app that replicates an image of a typical control by the viewer, who will buy or subscribe to Zippo lame. Five million people the programmes they watch without having to buy downloaded it, many of whom don’t even bundled purchase packages. When any part of the smoke. It is now popular at gigs. old TV spectrum is released to transmit the internet, ●● Kraft Foods iFood Assistant is a sticky speeds will accelerate to the point instant real-time iPhone app with 50 per cent of downloaders on-demand viewing will take place with minimal continuing to engage with it three months need for downloading.’ after irst downloading it. This builds Rodney Mason, CMO, Moosylvania Marketing (2010) ongoing brand loyalty. ●● Public transport app. The Avego app gives updates on public transport and is used in Are apps the ‘new media’? 60 countries. The app gives personalized information for bus passengers, tailored An app is simply a piece of software for an iPhone maps and online payment ‘on the go’. or iPad that can do anything from keeping up Silicon Valley’s San Jose Mercury News with the sports news, to following a favourite team referred to it as ‘one of the most innovative or player, playing a game, reading free books, ana- companies’. lysing a golf swing, taking better photographs, learning to speak French, inding the lowest prices, ●● House­buying app. Irish Times-owned managing the household bills, Skyping the family, MyHome.ie partners with Phoneware to Twittering with friends, making rude noises, stop- show home buyers listings, loor plans, ping snoring, consuming a mobile version of a photos and agent contacts, all linked to media brand or consuming a new experience for Google Maps to see what schools, parks any brand. and motorways are nearby. Filters allow ‘Some companies are using the App Store as a searchers to explore it by price, number form of advertising. Developers can create gadgets of bedrooms and property type. or widgets that can push their client names onto ●● Afiliate charity contribution app. Vodafone millions of devices worldwide’ (Kennedy, 2009). is mixing afiliate marketing with a clever BBC, Time and Sky News are all available on iTunes, app. If a local club signs up a Vodafone user, because they know that having their brand name the club receives a percentage of the contract. (and services) on a screen that customers carry with The app lets the club representative see how them everywhere extends their reach and builds much Vodafone is giving back to local clubs. 168 Part 1 Communications Background and Theories Print Which medium? Technology today allows low-cost entry into the world of publishing. This has reduced the publish- Should the press and/or radio be used? How should ing industry’s traditional high-investment barrier a client or an agency choose which medium to use? to entry. In effect, this means that we are seeing Which TV stations and/or publications should be new magazines, journals and newsletters appearing used? Which vehicles within a particular medium alongside multi-edition, tailor-made magazines such (eg the Guardian or The Times)? The press includes as the US Farmers’ Journal (which produces over national dailies, Sunday newspapers, evening news- 1,000 different editions of each month’s publication papers, daily and weekly regional papers, and maga- targeted at over 1,000 different types of farmer). zines. Television, radio, cinema and posters are The result? More accurately targeted media that considered. The key points are as follows: allow advertisers and PR people to target their ●● Audience size (reach or penetration). Some messages more effectively. media cannot carry national brands because they cannot offer national coverage. Media such as the regional press are generally The internet considered to be local media, since they talk The internet offers a whole gamut of communica- to the community. Television can get to large tions opportunities, including two-way communi- audiences quickly. cations, ie listening as well as talking, and collecting ●● Audience type (eg 15- to 24-year-olds don’t as well as sending information. Banner advertising watch much TV but do go to the cinema; on (eg placing an approved advertisement on other the other hand, not many over 45-year-olds websites) is just one form of advertising available watch the music station MTV). on the internet. ●● Budget (production cost, media cost and cost per thousand – CPT). ●● Message objective: Is ambient media the new – Response required: is action required after media? the ad (eg illing in a coupon or phoning an 0800 number)? Beyond TV, radio, cinema, posters, the press and the internet, there are many other advertising media, – Creative scope: are colour, sound and ranging from scented posters, mirrored posters and movement needed (eg TV’s movement can grafitied posters, to loor posters, from heated bus show impulsive purchases)? stops, painted train platforms, tunnel entrances, – Demonstration: product usage is often taxis, buses, trains and planes, to banners in space best shown on TV, but all media can show visible from earth, to aerial balloons, to the bottoms product beneits. of beer glasses, to lottery balls, to screen savers, to – Technical detail: TV is not good; the press the back of stamps (and around the front edge of is better. stamps in the United States), to cutting ields into – Urgency: TV, radio and national papers patterns (crop circles), to free bookmarks at the can be topical and announce urgent checkouts of bookstores. commercial news. – Compatibility, ‘rub-off’ or image effect of media and vehicle on the product itself. For example, would Harrods advertise in The misery of choice the Sun? TV puts a product or company alongside the major players and therefore David Ogilvy once described the increasing array of enhances the image, since many viewers choice as ‘the misery of choice’. It applies to media think they must be good if they’re on planners and buyers today also. national TV. – TV adds credibility: ‘as seen on TV’. Chapter 7 Media Buying and Planning 169 ●● Ease of booking: while magazines reach targeted groups deined by – Lead times for space: magazines, TV and their lifestyles, income levels, ages and sex. Posters cinema have long lead times or notice of can target commuters who travel by car, bus booking. and train. – Lead times for production: some press can be knocked out overnight, whereas a Audience state of mind cinema production takes months. Audience state of mind or receptivity to messages ●● Restrictions. Some products, eg cigarettes, varies across the media spectrum. TV audiences can are totally excluded from all advertising, and be relaxed and passive, sometimes viewing in a certain media restrict the promotion of some trance-like manner (the ‘couch-potato syndrome’). products, eg alcohol in children’s TV and its ads can become a form of visual wall- programmes. paper, sometimes used as company and sometimes ●● Competitive activity. Advertisers watch, copy to ‘warm up’ a room. Radio can also be used in the and sometimes avoid the places where their background, but listeners do tend to work with competitors advertise. 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 Media selection of tea. In fact, many viewers thoroughly enjoy the Audience size special cinema ads. The national press is deliber- ately read, as information is sought. Some research TV allows commercial messages to ‘reach’ large reveals unconscious feelings of guilt (waste and/or numbers of people on a national or regional level. inadequacy of knowledge) if a newspaper is left TV used to be known as a mass medium, but, as the uninished. Magazines are absorbed in a more number of stations increases, more niche channels relaxed mood. are emerging on cable, satellite and mainstream terrestrial TV, which means that TV is becoming less of a mass medium. Radio attracts smaller re- Cost of production gional audiences, although it can offer national The cost of producing a TV ad can range from coverage. Cinema attracts small audiences and can £5,000 to £5 million, depending on the length, offer slow national coverage among younger audi- complexity and actors involved, whereas radio has ences, but can be great for 15- to 35-year-olds. The a lower cost of production ranging from £500 to national and regional press deliver what they say – £20,000. Stationary pictures with a voice-over pro- national and regional audiences respectively. Because moting the local Indian restaurant can cost just a posters can prove dificult to coordinate on a few hundred pounds, while a more lavish 90-second national scale, there are poster-buying specialists. full-production cinema advertisement could cost up Direct mail can address large national and interna- to £1 million or more. Radio and the press some- tional audiences, but because of its high cost per times provide free help with basic productions. thousand the target audiences are likely to be tightly Posters can be produced for as little as £125 for a deined and targeted. Finally, TV’s audience size is 6-sheet (1.83 × 1.2 metre) poster or £11,000 for a seasonally inluenced, with the audience increasing backlit 96-sheet (12 × 3 metre) poster campaign for in winter and reducing in summer. 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 any- Audience type where from several hundred to several thousand Generally, 15- to 24-year-olds are busy doing other pounds for design and artwork alone. things and don’t have time to watch TV, whereas cinema can attract this target group. Radio is popular with housewives and commuters. The Minimum cost of space national daily newspapers tend to target speciic Advertising space is rarely bought in single units. socio-economic groups and political sympathizers, 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 ease of media buying scheduled and bought over a period of time rather Some popular TV programmes (and magazines) than as one-offs. The cost of space is relatively high require long lead times for booking space. Advertise- on TV compared to radio; a single off-peak 30- ments are still pre-emptable (they can be outbid second spot on a regional radio station could be as and kicked off a particular spot on the day they little as £20, compared to £500 for TV. A national were booked to be broadcast). Big agencies gener- 30-second spot in the middle of Coronation Street ally do not get pre-empted. Different rates or prices could cost up to £100,000. A one-off, full-page, can be bid; the top rate guarantees the spot, but four-colour ad in the Sun or the Financial Times agencies and clients want to avoid paying these costs £45,386 and £50,151 respectively. Smaller extremely high rates, so they make bids at prices space can be bought, right down to the square col- lower down the scales (giving various amounts of umn centimetre (approximately £205 and £190 for notice about pre-emption). Clearcast pre-approves the Sun and Financial Times respectively). most British television advertising. Clearcast is now owned by seven UK commercial broadcasters. Cost per thousand Clearcast replaced the Broadcast Advertising Within a particular medium, say the press, there Clearance Centre (BACC) in 2008. This takes time. is a wide range of media vehicles available, from Cinema can have longer lead booking times but Amateur Gardening to The Economist. The CPT shorter clearance time from the Cinema Advertising varies vastly across different media vehicles (eg from Association. Radio is the most lexible of all, with approximately £5 in the Sun to £70 in the FT) and same-day clearance and short lead booking times. across different countries (eg 70 cents in Bulgaria to The national dailies tend to have lexible positions $19 in Norway for 30-second peak-time viewing). and size and short lead times, while magazines have Although CPT varies greatly, the actual selection longer lead times. Certain positions cannot be booked of a particular medium (say, the press versus tele- in the short term, eg one-year lead time. TV and vision) and a speciic media vehicle (say, Amateur radio can offer a higher frequency, since an advertise- Gardening versus The Economist) is inluenced by ment could theoretically go out every half-hour all the quality of the media as well as the relative cost. day. The lack of national network coverage makes the regional press a tough task for media planners Message and buyers involved in national campaigns. TV has sight, sound, colour and movement, which makes it an ideal medium for product demonstra- tions and impulse purchases, but the time constraint and viewing mode make detailed messages almost Which media and impossible. It is time constrained (whereas a press which vehicle? ad is not). Ads are viewed serially, whereas press ads compete with other ads and editorial, often Does the impact of a double-page spread (DPS) on the same page. Remote control channel zapping justify the cost? Would the reach be increased by has made TV more vulnerable as an advertising placing two single-page advertisements in two medium. TV, radio and cinema are highly transitory, different magazines instead? Should TV be supple- in that the viewer cannot refer back to an ad once mented by radio, by posters or by both? Is a it has been shown (unless it is taped). On the other personal media network worth creating so that the hand, the audience can refer back to press ads, target audience is hit with a brand’s message irst posters and direct mail. TV’s leeting messages leave thing in the morning on the radio, on posters in the no room for detail but can grab attention, create neighbourhood area, in the appropriate paper on awareness and arouse interest. More and more ads the way to work, on TV that evening, in the cinema across the media spectrum, including TV, are tying that night and inally on the radio in the car coming in with direct response mechanisms (0800 numbers, home from the cinema? web addresses or coupons to ill in) so that more Media buyers’ computers churn out cost-ranking detailed information can subsequently be delivered analyses that list the publications in order of their to the audience. 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 Denmark allow very little negotiation with media heavy-user information? Perhaps a high CPT conceals owners. Media buyers and media planners or within it a large chunk of the heavy users, which may schedulers need to work closely together. A global make the advertisement more effective? Qualitative new-media planning resource was launched in criteria (audience size and how they use the media, early 2001. World Online Rate and Data (WORD) targetability, message type, ease of booking, restric- will provide media planners with a database that tions and competitive activity) all affect the choice. can be used to plan domestic and global online In the end, experience, judgement and a little bit of campaigns. It is available both in print and online creative lair inluence the decision to buy space. (www.wordonline.net). How much space, how often Media research and when? Media research basically tells the media buyer and Having selected the media type, and speciic vehicles scheduler which publications are read by what type within each media type, the next question is how of people, how many and what type of people are much space and/or airtime should be booked. In likely to watch a particular television programme, what season, month, week, day or hour should the who listens to what on the radio, which kinds of advertisement appear? How many times should the ilms attract what kind of audience, which poster ad be seen? How many times is too many times? sites are passed by most people, etc. Media buyers Can the audience become irritated? Frequency? can then decide if the particular media vehicle’s This last question becomes more dificult when a audience proile matches their target market, and if campaign uses several different advertisements, par- the audience size proves to be cost-effective in terms ticularly when each new ad builds on the last one. of cost per thousand, coverage, frequency, oppor- The creative side of the campaign can sell itself to tunities to see (OTSs), TV rating points (TVRs) (see the client, but the media schedule often requires pages 177–79), etc. much more detailed justiication. Once the media How many people watch Neighbours or the ITV schedule has been agreed, it can be passed on to the News? How many listen to Capital Radio’s break- media buyer to start booking the space (within fast radio show? How many people read the Sun? booking deadlines). Advertisers are even more interested in what type of people are in the audience and whether they are Media schedule heavy, medium or light users of the product type or even the speciic brand. Although the Sun is con- The media strategy is then reined into the tactical sidered to be a working man’s paper, 31 per cent details specifying exactly what space should be of its readership are ABC1s. So some strange ano- booked where. Figure 7.3 shows the proposed media malies do exist, and media buyers must tread schedule for an Orange campaign. cautiously. Information concerning socio-economic groups, product usage types and lifestyle data all help to build a proile, which the advertiser can then Media buying use to target the most relevant audience. It pays to plan carefully. Plan irst; then buy. A An initial search into the British Rate and Data skilled media buyer can save enormous sums by (BRAD) directory reveals a limited amount of infor- playing one media owner off against another. After mation regarding circulation and audience type (socio- all, there are many different routes (or media economic groups). This can be cross-referenced (or vehicles) to the minds of the target audience. cross-tabulated) with the Target Group Index (see There are series discounts (10 inserts or ads page 146) to reveal, for example, types of audience for the price of 9), and volume discounts if you according to lifestyles and typical product purchases, spend over a certain amount. Many agencies pool in addition to the usual demographic information. their media buying together to gain the maximum The qualitative data explain how the media are discounts. Negotiating and discounting vary from used by target audiences – the role the media play in country to country. Countries such as Austria and people’s lives. Some advertising agencies use focus 172 Ta b l E 7.1 Summary of media characteristics TV Radio Cinema Daily and Evening Magazines Posters Direct Internet Sunday and mail press regional press AUDIENCE Audience size Some National National Large and Small, some Mostly National Large Rapidly wastage, coverage coverage mostly networks national (and coverage national and growing large and now available national international) can be international national and national, difficult international new niche audience opportunities Audience type Few 15- to Many Young, Socio- Geographic Lifestyle/ Commuters, Any target Targeted by 24-year-olds, housewives, upmarket economic segments demographic car drivers, available site type – high 55+ commuters etc any target available Audience state Moving Often active Captive Deliberately Deliberately Relaxed and Active, of mind towards audience – audience, read read involved with inquisitive active background/ willing magazine viewers with audio suspension interactive wallpaper of disbelief potential COST Cost of High Low High Low– Low Low– Medium Low 10–30% of production medium medium the cost of media Minimum cost High (for Low High Medium Low Low– Low– High but Generally of space peak time medium medium can no national experiment minimum exposure) in small Large quantities portals require £1,000 minimum spend TV Radio Cinema Daily and Evening Magazines Posters Direct Internet Sunday and mail 173 press regional press Average cost Low (£7.80) Very low £55 Low– Medium Medium High (£500) Banners = per thousand (less than medium (£30) (£12–£70) £15, £2.50) (£8) pop-ups = £30, other rich = £35+ Extra Adds Transportable High Quick Location Quality and Generates advantages credibility to medium impact and coverage specific low wastage fully product or captive build accountable company, audience direct rapid, high response coverage, and interactive dialogue capability with audience MESSAGE Variable/sense Sight, sound, Sound and Big impact, Now Black and 4-colour 4-colour, big 4-colour and Infinite colour, time enhanced mostly white with impact 3-D colour, 3-D, movement, constraint sight and colour with some colour possibility sound, time sound some black interactive constraint and white Serial ad Viewed Serially, less Serially and Must compete with other Non-linear sequence serially, no zapping no zapping ads and editorial on same medium, competition page can jump from other Slow coverage build with back and ads or monthly mags forward editorial but zapping prevalent 174 Ta b l E 7.1 Continued TV Radio Cinema Daily and Evening Magazines Posters Direct Internet Sunday and mail press regional press Transitory Highly transitory since you Can keep clippings or refer back if Can refer Can refer Can refer cannot refer back to ad once desired back, walk back/keep until coupon shown (unless taped, or with back or drive campaign interactive ads that can be past ends bookmarked) Demonstration Idea for Difficult Yes Benefits or results can be Only short Yes Yes usage and shown but not product image impulse usage benefit purchases Detail/ Viewer Urgency and Visual and Yes Yes Yes No Yes Yes technical cannot topical audio absorb detail Urgency/ Difficult to Unique No Yes Yes Magazine Cut image? Yes topicality adapt ads to immediacy, image spills daily events, urgency and on to ad high level of topicality recall EASE OF MEDIA BUYING Complicated Inflexible Flexible Flexible Flexible Flexible Inflexible Flexible Timing flexible, rates negotiable Lead times Long Short / Short Short Short Medium Long Short 3–10 days, medium Long Medium depending on richness of media TV Radio Cinema Daily and Evening Magazines Posters Direct Internet Sunday and mail 175 press regional press Clearance Script (1 Same day One week Code of advertising practice (clearance is not compulsory) Generally week), clearance, clearance, required for finished film Clearcast CAA editorially (1 week), driven Clearcast content and where advertiser is potential competitor Audience BARB and RAJAR and CAVIAR, NRS, QRS, JICREG and NRS (and Postar and TGI ABCE, research* TGI TGI TGI and TGI and TGI ABC), QRS TGI Nielsen Net EDI BMRC and TGI Ratings High-frequency Yes Yes No Yes Daily and Weekly/ Yes Yes Yes facility weekly monthly National Expert’s job National Yes Yes No national Yes Yes Yes Nearly half coverage but network network network but all adult UK exists and through NNR all major population international conurbations covered cable/ covered London/ satellite South-East of England bias *Audience research: see ‘Further information’, page 180 SOurCE: Media Planning Group 176 Part 1 Communications Background and Theories F I g u R E 7.3 Proposed media schedule for an Orange campaign groups to research the obscure media used by a par- sample of 4,500 homes through its people meter. ticular group of opinion leaders or to investigate The meter records what stations are turned on, and how an audience uses the media. the hand-held remote control unit inputs data about who is watching the TV. Radio audiences are measured by Radio Joint Media research bureaux Audience Research (RAJAR). In 1992 RAJAR re- TV audiences are measured by the Broadcast Audi- placed the Joint Industry Council for Radio ence Research Bureau (BARB), which monitors a Audience Research (JICRAR). Chapter 7 Media Buying and Planning 177 Cinema uses Cinema and Video Industry Audience unknown. Should it be concentrated over a short Research (CAVIAR) to measure cinema and video period (a ‘burst strategy’) or spread steadily over audience size and proiles. Admissions are also a longer period (a ‘drip strategy’)? For example, measured by Gallup/EDI. an advertising frequency of 60 can be built up by Newspaper and magazine readership is mea- either 1) having the same advertisement shown sured by National Readership Survey (NRS), which before, during and after ITV News every weekday carries out 35,000 in-home interviews each year. for four weeks, or 2) having one advertisement The Audit Bureau of Circulation (ABC) audits the every six days throughout the year. sales or circulation of over 2,000 different publica- tions, including the nationals. ABC also audits and Opportunities to see (OTSs) veriies website trafic. OTSs are the number of exposures or opportunities Freesheets or local newspapers use the Veriied that a particular audience has to see a particular Free Distribution (VFD) system. advertisement. In the previous example there would Posters use Poster Audience Research (Postar) have been 5 million OTSs for adults and 0.8 million and the Poster Audit Bureau (PAB). for ABC1 men. If the ad went out every night British Rate and Data (BRAD) is the media for ive nights during the ITV News break, the buyer’s reference book, because it lists all the circu- total number of ABC1 men OTSs would be 5 × 0.8 lation or audience igures, as well as the costs (rate million = 4 million OTSs. card costs). It also gives detailed information on deadlines, mechanical data and commissions on 2,706 newspapers, 3,130 consumer publications, Cost per thousand (CPT) 5,208 business publications, 1,838 new media, radio CPT calculates the average cost of reaching 1,000 and TV networks, and much more. The monthly of the population. If it costs, say, £100,000 to place book, which contains over 1,200 pages, costs £600 a 30-second spot (advertisement) on national TV for a single copy or £970 for an annual subscrip- with a peak-time audience of, say, 10 million, then tion. The information is also available online for the the cost per thousand or the cost of reaching each same price, or as part of planning version BRADnet or any group of 1,000 people within the audience is for £2,120. £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 dif- Media jargon and vocabulary ferent media types and media vehicles (although quality of media must also be analysed). For ex- Cover and reach ample, if a full-page advertisement in the Sun ‘Coverage’ is the percentage of the target audience reaches, say, 9.5 million (bought by 3.5 million but reached by the advertising. If, for example, ITV read by 9.5 million) and costs, say, £45,000, then News reaches 5 million viewers, 16 per cent of whom the CPT is £45,000 divided by 9,500 (9.5 million = are ABC1 male, then an ad placed during the break 9,500 lots of 1,000 people), which gives a cost of will reach 0.8 million ABC1 males (16 per cent of £4.74 per thousand. CPM (cost per mille/thousand) 5 million viewers). If ABC1 men are the target is the same as CPT and is commonly used in the audience and there are, in fact, 10.6 million ABC1 United States. men in the UK, then although the advertisement Ideally, cost per enquiry or order generated gives reaches 0.8 million ABC1 men the coverage is only a truer picture, but this can only be measured after 8 per cent (0.8 million as a percentage of the total the advertisement has run (and if the advertisement target market of 10.6 million). was designed to achieve these kinds of responses rather than, say, increase awareness or change attitudes). Experience and knowledge provide useful Frequency insights into media scheduling and buying. CPT This is the number of times an ad is shown or placed varies according to the actual selection of a particular in a particular period of time. How many times medium (say, the press versus television) and a speci- should an ad be shown and seen? Between four and ic media vehicle (say, Amateur Gardening versus six times? The optimum frequency is often really The Economist). The quality of the media affects 178 Part 1 Communications Background and Theories CPT, as does the quality of the audience, ie advertis- this creates a bigger impact but only for a shorter ing to high-income earners will cost more per thou- period of time. sand than reaching a larger, middle-income audience. Continuous patterns TV rating points (TVRs) Continuous patterns of advertising are a regular TV rating points are referred to as gross rating and uniform presentation of the message to the points (GRPs) in the United States and overseas. target audience. A rising pattern is where the ads GRPs can be used across different media, whereas are increased up to a particular event. A fading TVRs refer to TV in the UK. One TV rating point is pattern is where the ads are slowly reduced after 1 per cent of the target audience. The percentage the event (or after a product launch). of the target audience viewing a spot (‘reach’) multiplied by the average number of opportunities Flighting patterns to see gives the TVR. Television companies will Flighting patterns are where the advertiser spreads sell packages of guaranteed TVRs. For example, a the ads over a longer period of time. It can mean target of 240 TVRs means that 60 per cent of the boosting advertising at certain times to match sea- target audience will have, on average, 4 OTSs. It sonal demand, match a competitor’s ad campaign, could also mean that 40 per cent have seen it six support a particular sales promotion, respond to times. Reference to the media schedule quickly iden- adverse publicity or simply seize a one-off market tiies the frequency. Four hundred TVRs (80 per cent opportunity. 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 Pulsing suggested that some confectionery and record Pulsing supposedly combines both continuous pat- companies run a lightweight campaign and buy 100 terns and lighting patterns, ie to incur high levels of TVRs so that they can tell the retail trade that they ad spend when required but also to maintain some are running a television advertising campaign (the advertising in between times so that the target audi- ‘pull’ helps the ‘push’). ence does not forget the brand. This ‘safe option’ is an expensive option. Pulsing is also known as the ‘long tail approach’. In conjunction with econo- Impacts metric modelling it can actually prove better value. 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 = Pulsing can save money 4 million impacts (for ABC1 men). To make more sense of impacts, divide them by the universe A radio ad campaign in the Irish Republic found (number of people within the target market) to get that the campaign caused an uplift in awareness TVRs (television rating). Impacts are more useful for three weeks after it was broadcast. As a result when converted to TVRs. the agency recommended to the client to move from a bi-weekly burst to a three-weekly burst. This Drip retained the impact of the campaign, saved a lot of money and allowed the campaign to run longer in Drip means spreading relatively small amounts of a ‘long tail’ format. NB: This is not the same as the advertising over the whole campaign period. A niche market long tail concept. ‘steady drip’ of advertising creates presence over a longer period of time. Burst Position Burst is the opposite to drip. Here the ads are con- Position refers to the place where the ad is shown. centrated into a shorter period of time. Effectively Back pages, inside cover pages, right-hand pages, Chapter 7 Media Buying and Planning 179 TV pages and so on have greater readership and environment more impact than other pages (eg the third right- The environment or context in which an ad is hand page has a bigger impact than the irst left- exposed affects the message itself. The types of hand page). Similarly, some positions on a page features or editorial, and other advertisements, that are more effective than others. Media buyers are run alongside an advertisement affect the likely aware of this and so are the media owners, since effectiveness of that advertisement. An advertiser their rate cards (prices) relect the value of, and can lose credibility if the programme is a parody demand for, certain positions. Boddingtons beer of the product being advertised, for example the media strategy was built around position, ie it ilm Airplane with an airline ad in the break. concentrated its advertisements on the back page of glossy magazines to the extent that it ‘owned’ the back pages for a period of time. Summary Media consumption patterns are changing, as are pulsing, since this is arguably marketing’s single media. Great care is required in developing the right biggest spend. Small savings here can free larger media mix and vehicle mix, as well as timing and budgets for elsewhere (eg social media campaigns). key points from Chapter 7 ●● Media choice is growing continually. ●● Different media have different advantages and ●● Media planning and buying have more of disadvantages – careful planning is required. an impact on the bottom line than producing ●● Evaluate media options according to consistent an ad. criteria. references and further reading Account Planning Group (1987) How to Plan Kennedy, J (2009) App-fab, Marketing Age, November Advertising, ed D Cowley, Cassell, London Kohler, E (2007) Hyperlocal is more about ads than Davies, M (1992) The Effective Use of Advertising news, Technology Evangelist, 9 August Media, 4th edn, Business Books, London Learmonth, M (2010) Top marketers to Silicon Douglas, T (1984) The Complete Guide to Valley: Help us get ahead of consumer. Through Advertising, Papermac, London visits to tech hub, big advertisers getting more than EIAA (European Interactive Advertising Association) sales pitches, Ad Age, 17 May (2010) Multi­Screeners Report 2010 Marketer (2008) Watching the coffee channel, May Engel, J, Warshaw, M and Kinnear, T (1991) Markiewicz, P, Sherman, N and Jaworski, D (2008) Promotional Strategy: Managing the marketing Millennials and the Digital Entertainment Age: communications process, Irwin, Homewood, Ill A sourcebook for consumer marketers, Digital IAB and Thinkbox (2008) Combine TV and online Media Wire, West Hollywood, CA to boost brand perception, Brand Republic, Mason, R (2010) Moosylvania Marketing, 10 June Advertising Age, 4 November IPSOS Canadian Interactive Reid report (2010) 2010 Media International, Reed Publishing Services, Fact Guide London 180 Part 1 Communications Background and Theories Media Week, EMAP Business Publications, London Pew Research (2009) Newspapers face a challenging Nielsen Wire (2009) TV viewing among kids at an calculus, 26 February eight-year high, 26 October TV free America (2010) Invisible Children blog 2010, Patel, K (2010) Will growing crop of TV apps engage TV’s ugly stats viewers, advertisers?, Ad Age, 17 May XPLANE (2009) Did you know? YouTube video, Fall Further information Audit Bureau of Circulation (ABC) National Readership Survey Ltd (NRS) Saxon House 40 Parker Street 211 High Street London WC2B 5PQ Berkhamsted Tel: +44 (0)20 7242 8111 Herts HP4 1AD Fax: +44 (0)20 7242 8303 Tel: +44 (0)1442 870800 www.nrs.co.uk www.abc.org.uk Postar Ltd British Audience Research Bureau (BARB) Summit House 18 Dering Street 27 Sale Place London W1R 9AF London W2 1YR Tel: +44 (0)20 7591 9610 Tel: +44 (0)20 7479 9700 www.barb.co.uk www.postar.co.uk British Rate and Data (BRAD) Radio Joint Audience Research (RAJAR) Brad Insight 2nd Floor Greater London House 5 Golden Square Hampstead Road London W1F 9BS London NW1 7EJ Tel: +44 (0)20 7292 9040 Tel: +44 (0)20 7728 4315 Fax: +44 (0)20 7292 9041 www.brad.co.uk www.rajar.co.uk Cinema and Video Industry Audience Research Veriied Free Distribution (VFD) – contact the Audit (CAVIAR) Bureau of Circulation (ABC) Digital Cinema Media Saxon House 12 Golden Square 211 High Street London W1F 9JE Berkhamsted Tel: +44 (0)20 7534 6363 Herts HP4 1AD Fax: +44 (0)20 7534 6464 Tel: +44 (0)1442 870800 www.carltonscreen.com 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 182 Agency relationships 189 Introduction 182 Agency selection process overview 189 DIY, full-service or specialist 182 Pool list 189 Credentials pitch 190 Agency structure 184 Issuing the brief 190 The account executive 185 Pre-pitch agency eforts 191 Planning department 185 Pre-pitch feelings 192 Creative department 185 The pitch 193 Media department 186 Analysing the agency 194 Production department 186 Choosing an agency 195 Traic department 187 After the pitch 195 The account management team 187 Agency rejection 195 The three key components 187 After the pitch 199 Agency remuneration 187 Firing the agency 199 Commission 187 Firing the client 200 Commission rebating 187 references and further reading 202 Fees 188 Pay-by-results (PBR) 188 Further information 203 182 Part 1 Communications Background and Theories Agency types Agency opportunity Introduction ‘Many brands today are dying. Not the natural This chapter covers agencies, types of agencies, their death of absence but the slow, painful death of structure, fees and working relationships, from sales and margin erosion. The managers of these shortlisting to brieing, selecting, hiring and iring. brands are not complacent – in fact, they are There are many types of agencies, including constantly tweaking the advertising, pricing and advertising, sales promotion, direct mail, PR, corp- cost of their brands. At the heart of the problem is orate identity design, web design and more. Some a more fundamental issue: can the original promise call themselves agencies and others, consultancies. of the brand be recreated and a new spark lit with Regardless of title, the barriers created by the separate today’s consumers? We believe it can. Most brands disciplines are falling. Corporate identity design can be reinvented through brand renaissance.’ consultants’ services are spreading into advertising Excerpt from a Boston Consulting Group brochure campaigns (to launch the new identities); sales pro- motion consultants are tempted into direct mail, as this communications tool requires a constant low of incentives, premiums and sales promotions; advertis- Although advertising agencies are under siege from ing agencies are dropping the word ‘advertising’ aggressive management consultants, young, hungry and PR consultants are dropping ‘PR’, as these integrated agencies, expert SEO and viral marketing terms restrict them from developing and delivering specialists, social media consultants and disgruntled the integrated marketing communications services marketing clients, the advertising agency’s structure their clients require. The overall approach by, and is still used here, as it offers a broad base upon structures of, advertising agencies is changing. Most which other agencies and consultancies often de- agencies have moved their total focus beyond the velop their structures. one-way ‘tell’ medium of traditional broadcasting, One of the best-known ad agencies in the world, with its limited levels of interactive responsiveness. Saatchi & Saatchi, dropped the word ‘Advertising’ These agencies are now integrating more closely from its title. It is now just plain Saatchi & Saatchi, with the ‘responsive disciplines’, such as direct mail, the Lovemarks company. It describes itself as a ‘full sales promotions and social media. Moving from service, integrated communications network’. It ‘tell campaigns’ to ‘listening campaigns’ requires a even commissioned a short video called ‘The last constant customer dialogue nurtured and integrated ad agency on earth’ (see YouTube) to conirm that across many media. the old agency concept was no longer its concept. 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 pre- date the new technology by about 100 years can’t DIY, full-service or specialist fail to have a liberating effect that should be greatly As ‘ad agencies’ are by far the biggest type of agency, to the beneit of clients’, says Sir Martin Sorrell TV consumption is still going up and ofline budgets (1996), Chairman, WPP Group. Other agencies are still far greater than online budgets (across feel that the required changes in agency structure the board), ‘advertising agencies’ will be used here require not just new structures but new language. (despite their restructuring into new forms of ‘Impact’ is being replaced by ‘dialogue’ (and even agency). The larger ad agencies offer a full service, ‘trialogue’), ‘poster advertising’ by ‘street dialogue’. including creative, research and planning, media Perhaps ‘direct mail and radio’ should change to planning and buying, and production and now ‘kitchen dialogue’. ‘Engagement’ has become the social media planning. Some full-service agencies new mantra, replacing ‘response’. The process of also have departments specializing in forecasting, change among agencies is being driven partly by un- market intelligence and business planning, together settled clients, visionary agency directors, the media with support services for the advertising campaign, explosion and new types of competition emerging. including point-of-sale design, sales literature, sales Chapter 8 Marketing Communications Agencies 183 Ta b l E 8 .1 The pros and cons of diferent working relationships Aspect Full services Specialist services In-house (under one roof) Management Easier, since it is all under More work (coordinating) Total control, but and control one roof more work involved Security Limited risk – sensitive More risk – more people Minimal risk – no information is shared with have access to information outsiders agency Speed/response Reasonably good Possible problems if à la Fast, since all decision carte = more coordination makers are available Cost Expensive, high overheads, Cheaper, Cheaper, but less but lower media costs with fewer overheads media buying power agency buying power Fresh views Yes Yes No Expertise Yes (jack of all trades, Yes (fill in gaps in client’s No (lack of specialized master of none?) skills) knowledge) Stress Less pressure/workload Delegate some workload More stress – more work conferences and other below-the-line activities such agencies for the research, creative, production and as sales promotion, PR and direct mail. The agency, media planning/buying stages. There are other types like any other business, also has other departments of specialist agencies that focus on a particular that are of little interest to the client, such as ac- industry sector. counting and inance, personnel, administration, A recent discrete development in the à la carte etc. (See Table 8.1.) option is the agreement of a large, well-known, Advertisers can choose to use only their own full-service advertising agency to subcontract the in-house staff to run a campaign. Do-it-yourself or large agency’s creative services to a small communi- in-house advertising also varies, as some advertisers cations consultancy on an ad hoc basis. This may prefer to contract out some of their requirements to last only as long as the agency has spare capacity or specialist services such as a specialist media schedu- is searching for extra revenue. Some clients demand ling and buying agency known as a ‘media inde- that their full-service agencies work alongside the pendent’. Similarly, the creative work can be put out client’s separate choice of media independents. to a ‘hot shop’ or ‘creative shop’. Saatchi & Saatchi Some full-service agencies get only a portion of the started as a creative shop. Alternatively, the adver- full job. A recession can force some clients to cut tiser can go à la carte by picking and choosing back their own in-house advertising department separate agencies with specialist services for differ- and operate a less costly and more lexible ad hoc ent parts of the process, eg using four different project arrangement with various agencies. 184 Part 1 Communications Background and Theories media services, TV advertising is not going away Agency structure and still takes a disproportionately large chunk of any brand’s budget. Therefore the original ad agency Different types and sizes of agencies have different structure is still worth exploring. structures. The structure of a large advertising Agencies are evolving from ‘pushing advertising agency is shown in Figure 8.1, which illustrates the campaigns to nurturing communities of consumers many different departments, people and skills that and matchmaking them with brands’ (Farey-Jones, have to work together to create an advertisement. 2008). There is a new breed of agencies with greater Companies that have their own in-house advertis- data analytics and planning skills emerging. It is ing departments, and smaller, external agencies, will possible that, instead of pitching for a brand’s subcontract (or hire) any of the departments they business, agencies may offer a new service – selling do not have. Many of the bigger agencies also hire, access to groups of consumers’ groups with similar or subcontract, directors, producers, camera people, interests that they have nurtured (eg a Facebook photographers, ilm companies, print and produc- group or a LinkedIn group). Successful agencies will tion facilities. Any other agent, agency, consultant probably connect themselves with clearly deined or consultancy – whether public relations, direct communities of consumers and ‘cultivate insights mail, sales promotion or corporate identity – also into their behaviour’ (Farey-Jones, 2008). These com- relies on the ability to bring together many different munities can be online and ofline, eg an agency skill sets and departments, as shown in Figure 8.1. funding a community hall. So many new skills and Although pure ad agencies are growing into inte- new departments need to be added to Figure 8.1, eg grated agencies offering an additional suite of social social community creators, developers and nurturers. F I g u R E 8 .1 Structure of a large advertising agency Other Other New media communication communication Sponsorship tools tools Others Database Sales Others marketing promotion Account management Planners Creative Production Traffic (research and Media (concepts and (film, print and (progress strategy) developments) websites) dispatch) (planning and buying) Market research + Press, TV, Ad at right strategic direction + posters, cinema, Art and copy Make the place at the creative beliefs new media actual ads right time Chapter 8 Marketing Communications Agencies 185 The account executive to absorb, summarize and translate large market research reports into simple lay terms for inclusion Sometimes also called an account representative, in the creative brief that they, in conjunction with the account executive is dedicated to a particular the account manager, give to the creative team. client. The account executive wears two hats – the Second, the information has to be interpreted at client’s when talking to the agency and the agency’s a strategic and tactical level for discussion with when talking to the client. Responsibilities include: the account executive, account manager, account attendance at all client meetings, writing up ‘contact director and often the client. Planners provide an reports’ and general liaising between the many dif- objective voice, unhindered both by the account ferent members of the agency’s team and the client. executive, who sometimes wants to ‘sell’ an adver- Many agencies write up contact reports (after each tising concept to the client simply because the meeting), because they conirm and clarify all key creative director wants to get on with it, and by points discussed, conclusions reached and any ac- clients, who sometimes want to get on with it by tions to be taken. This cuts out the opportunity for quickly running some advertisements to satisfy the any misinterpretation further down the road when sales force, who are anxiously waiting for news on the client says ‘I never said that’ or ‘I never asked for the new campaign. 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 some- times required to be signed by the client as ‘approved’. Joint planning required This keeps communication clear, reduces ambigui- ties and, if a row does break out over a particular ‘Decisions about where to run ads and the nature strategic direction or over the details of copy (the of those ads need to be planned by the same words in the advertisement), the agency can pull out person. I urged marketing departments to call for a a signed ‘approved by’ copy. This is particularly joint planning approach in order to achieve a better helpful when a manager leaves a client company, return on investment for their advertising.’ because it conirms the stage-by-stage approval of Stengel (2006) the development of a campaign. Planners are experts in making sense of market Account execs – new community research data and condensing the information into managers? creative briefs. Marketing clients may also want more analysis and insights from customer commu- Account people will evolve into ‘community nities and groups. Research into top marketers from managers’, who will help the community sell itself Coca-Cola, Procter & Gamble and HSBC as well as to certain brands. ‘The agency would know which agency bosses from WPP Group, Publicis Groupe brand would be best to let in, which brands should and Omnicom revealed that clients will value the be kept out, and what information can be shared importance of passing on information on selected and with whom it can be shared.’ brands which will, in turn, ‘boost agency demand Kemp and Kim (2008) for specialists in data analytics and insight’ (Kemp and Kim, 2008). Creative department Planning department It is unfair to stereotype creative people as coming Planners are more than gloriied researchers. They in late, lying around and dreaming up the big ideas have to know the right kind of questions to ask in and concepts that drive all advertising campaigns. the research, commission the research and interpret They can work long hours under extreme pressure the results at two different levels. First, they have to deliver unique, creative ideas that grab attention, 186 Part 1 Communications Background and Theories build brands and win customers. They constantly space from the media owners. Both media planners search for the big idea that has to it the single- and media buyers can be further separated into minded strategy presented in the creative brief that those who specialize in TV, press or new media, etc. is developed by the planning department. Creative The emergence of cable and satellite TV, low-cost people usually work in pairs, covering words and print technology and thousands of new websites pictures, ie a copywriter (or wordsmith) and an art increases the range of media available to media director. buyers. As markets fragment and media explode into many more magazines, TV stations and web- sites, large audiences become more dificult to buy. Despite this, the media explosion presents new Creative people – an appreciation opportunities for schedulers and buyers, as these new media vehicles have access to more tightly ‘Somebody finally has to get out an ad, often after deined target markets. The media department now hours. Somebody has to stare at a blank piece of analyses the appropriateness and cost-effectiveness paper. Probably nothing was ever more bleak. This of much more media than ever before. This is quite is probably the very height of lonesomeness. He is a responsibility, as the bulk of the advertising spend one person and he is alone – all by himself – alone. is in media and not production (eg a £20 million Out of the recesses of his mind must come words campaign might have a £19 million media budget which interest, words which persuade, words and a £1 million production budget). On top of this, media departments can deliver highly creative which inspire, words which sell. Magic words.’ media strategies that ind new ways of delivering Leo Burnett, Founder, Leo Burnett Company advertisements to target audiences. See Chapter 13 for examples. Creatives will work more on content required for generating ongoing dialogues with individuals and less on one-way campaigns to a mass audience. You think you are overworked – Outsourcing will include user-generated content try the media department (see Chapter 1), harnessing champions and brand advocates as user-generated content becomes more The explosion of blogs and other social media has important. 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 Creatives’ role will change planners now have an awful lot more work to do. 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) Production department The production department actually makes the advertisement. Many agencies subcontract various parts of the production, eg hiring a studio, camera Media department crew or photographer, director, editing suites, etc. The media department basically plans and buys This can involve long pre-production meetings the space where the advertisements are eventually inalizing all the minute details, lying around the placed (press, posters, TV, radio, cinema, etc). Media world to shoot some ilm, and the less glamorous, planners or schedulers are sometimes separate from lonely post-production – working around the clock media buyers, who negotiate and ultimately buy the in a dark and dingy editing suite. Chapter 8 Marketing Communications Agencies 187 Commission Creating games, funny virals Although this has changed drastically, historically and some ads media owners have given recognized agencies a 15 per cent discount off the rate card price. Thus, in the Production departments (and outsourced case of a £10 million TV advertising campaign, the production companies) will be full of clever agency gets invoiced by the TV station at rate card people, some of whom can create great £10 million less 15 per cent, ie £8.5 million. The 60-second movies (and longer-form ads – see client then gets invoiced by the agency at the full Chapter 13), as well as online games and of rate card price, ie £10 million (this can be checked course contagious virals. with British Rate and Data (BRAD) or the media owner’s published rate card). The 15 per cent com- mission 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: Traic department Agency invoiced by TV station £8.5 million Dispatch, or trafic, is responsible for getting the less 15 per cent right artwork or ilm to the right magazine or TV Agency invoices client at full £10.0 million network at the right time. This becomes compli- rate card cated where posters, cinema, radio and magazine Agency mark-up £1.5 million inserts are included in the media strategy. Multiply Agency mark-up 17.65 per cent this by several different campaigns for a range of The agency will also apply its agreed mark-up to different clients, and the need for a trafic manager other services that it subcontracts, such as market becomes self-evident. Add in games and virals, and research and so on. Thus a piece of research that life is going to get busier. 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 The account management team tempt agencies to get clients to spend, spend, spend. In a large agency this can involve an account direc- Incidentally, the commission system does not neces- tor, account manager, account executive, planner, sarily cover all production costs, so production creative director, copywriter, art director, TV pro- costs are often separately invoiced directly to the ducer, media director, TV media scheduler, TV client by the agency. Over the past 10 years the airtime buyer, press planner and press buyer. number of clients using this method has declined signiicantly, in favour of a combination of the pay- ment methods outlined below. In fact the 15 per The three key components cent commission has been slashed in half by some media owners. Back in 2006, Yahoo announced The three key components of the agency are: that it would pay 10 per cent commission to agen- 1 planning and strategy; cies that spend £80,000+ per month on search mar- 2 creative; keting, 5 per cent to those spending £20,000+ and nothing to agencies that spend less than that. 3 media. Commission rebating Agency remuneration Specialist media-buying companies – with much lower overheads – can work with commissions as Agencies have three basic methods of calculating low as 2 or 3 per cent. Some clients insist that the their remuneration: commission, fees and pay-by- full-service agency only takes a smaller commission, results (PBR). 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 business, were prepared to put their heads on the when an agency passes on some of its commission block and offer most of their services on a pay-by- to the client. There is no actual refund or rebate. results basis. Today PBR has become the norm rather The agencies simply invoice the client at rate card than the exception, with the majority of British costs less the level of rebate, in this case 5 per cent. advertisers remunerating their creative advertising Commission rebating opens the door to agencies agencies according to the results they achieved. competing on price instead of on quality of service, Media agencies had an even bigger majority, with as they have done traditionally. Most industries 60 per cent being paid subject to PBR factors (ISBA, dislike price wars, and advertising is no exception. 2010). Media owners like Google offer another In 1984, Allen, Brady & Marsh (ABM) resigned form of PBR: CPC (cost per click) and CPA (cost its £3.5 million B&Q account after a request for per action). If no one clicks on the sponsored phrase rebates. It also took a large advertisement in the or no one buys (if that is the goal) then Google do advertising trade press explaining that the 15 per not get paid a penny. cent commission left most agencies with 2 per cent The problem with PBR is that some results are proits after tax and any reduction would affect the beyond the agency’s inluence, eg poor product quality of advertising. It fought against the tide of quality control, late delivery or inadequate distribu- change, and refused to become involved in commis- tion, a price change, a strike at the factory or com- sion rebating. ABM was a fantastic agency generat- petitor activities such as doubling advertising and ing some classic advertising campaigns, but, sadly, cutting prices. So if sales form the main criterion it no longer exists. for payment then the agencies are vulnerable by the Many clients today are moving towards fees in- very nature of their dependency on so many uncon- stead of solely commission-based remuneration. trollable variables. If, on the other hand, the payment is linked to results directly inluenced by advertising, say level Fees of awareness or a shift in image or positioning, then the agency has more control over its own destiny. Smaller clients with smaller media spends do not Results, of course, have to be measured through generate suficient commission, so a fee will generally market research. One area where PBR is relatively be agreed. Larger clients are also moving towards easy to manage is direct mail campaigns that deliver fees – an annual, quarterly or monthly retainer or, a certain number of enquiries, orders or customers. alternatively, a project fee. No commission means Similarly, an SEO campaign can be linked to number no media bias, since the agency is then free to rec- of visitors generated by SEO. Another area where ommend, say, direct mail, without losing any of its results are easily measured and are directly related income (which would have been generated through to the agency’s input is media buying. If an agency commissions). achieves media buying at a price that is better than Many agencies receive a fee along with some level average, then the saving can be shared between of commission, and/or some level of pay-by-results. client and agency. For example, if the average ad- The agency’s remuneration essentially depends on vertising cost per thousand to reach, say, housewives how much work is involved and how much the with children is £3.50, and if the agency gets this for client is likely to spend (on media). The trend, par- 10 per cent less, then the saving might be split 8 per ticularly with larger clients, appears to be moving cent to the client and 2 per cent to the agency. (Note: towards a fee basis or a mixture of fees, commis- quality of the media is also taken into account.) sions and results. Some agencies, like BBH, prefer a ixed bid with Pay-by-results can be mutually beneicial. It is shared risk system. For example, if an advertise- sometimes disliked because of the lack of control ment is produced under budget, the production that the agency may have over its own destiny. 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 Pay-by-results (PBR) cent and the production company pays. Not so long ago, major agencies would dabble in PBR extends beyond advertising into other dis- some PBR, while the newer agencies, hungry for ciplines as far away as design. This can apply to new Chapter 8 Marketing Communications Agencies 189 product design (as a royalty) or even packaging primarily wants maximum media coverage for its design, when the packaging design consultancy relatively straightforward black-and-white product bases its fee (or a portion of its fees) on the client’s information advertisements. Another client may be increase in sales occurring after the launch of the looking for a radically fresh approach and have a newly designed pack. Although PBR appears attrac- bias towards agencies with abundant creative tal- tive to the client, it can generate extra administra- ent. Either way, a clear brief should be prepared to tive work, as exact results have to be measured, identify exactly what – in marketing and advertis- royalties and contributions calculated, invoices ing terms – the new advertising campaign is trying requested and cheques raised for each agreed ac- to achieve (see Chapter 2, ‘The brief’). counting period. The agency selection procedure is as follows: The method of agency reimbursement is funda- mental to the client–agency relationship (both working 1 Deine requirements. and contractual). An agency’s range of reimburse- 2 Develop a pool list of attractive agencies. ment packages can inluence the client’s selection 3 Credentials pitch (by the agencies). process. 4 Issue brief to shortlisted agencies. 5 Full agency presentation or pitch. 6 Analysis of pitch. Agency relationships – 7 Select winner. selection and retention 8 Agree contract details. 9 Announce winner. The coordination of any campaign’s development, launch and measurements requires time and man- Some clients prefer to get on with it by issuing a full agement skills. Powerful personalities in agencies brief to the shortlist of, say, six agencies without need to be managed. The ability to ask the right going through the agency credentials presentation. question is a valuable management skill. The fatigue Other clients prefer to restrict the valuable research factor in negotiations or discussions can also cause indings and strategic thinking to as few agencies rash decisions to be made. Marketing people tend as possible, because the unsuccessful agencies are to be energetic, enthusiastic, action-oriented achiev- free to work for the competition at any time in the ers. Sometimes steely patience needs to be exercised. future. Perhaps a decision has to be delayed until further research can answer some emerging questions. Painstaking attention to detail may sometimes seem Pool list irksome to the advertising agency, but it is often the Most advertising managers and marketing managers mark of a true professional. On the other hand, observe various campaigns by watching advertising a key resource, time, may be running out. More and noting any particularly attractive campaigns. research reduces the risk but costs time and money. Agencies working for the competition need to be Can deadlines be moved? Is there money left for excluded or treated with extreme caution. Some more research? Is there time before the competition desk research, both online and ofline, can reveal launches its new offer? A decision made in haste is the agencies behind the brands by reference to rarely the best one. organizations such as Nielsen Media Research or Adforum.com, which allow advertisers to look for agencies using sensible criteria. Advertisers can cre- Agency selection process overview ate shortlists, preview creative work and explore an Deining exactly what is required is the irst stage of agency’s proile, online and free of charge. Many agency selection. This is because an appropriate marketing managers have a fair idea of who is doing choice is partly determined by a speciic require- what advertising in their sector by constantly read- ment. Some furniture retail chains may consider the ing the trade press. Other managers simply increase strength of the media department the key criterion their advertising dosage by spending a few weeks when choosing an agency, particularly if the store watching more advertising than normal. Some 190 Part 1 Communications Background and Theories clients sift through the agency portfolio videos, suggest the need for extra services. Some agencies which can be bought from Campaign Portfolio or interview any new senior decision makers, to ex- Marketing Week Portfolio for a few hundred pounds plore their communications plans and then relay (the agencies pay a lot more to acquire this advertis- this information back to their clients. Retainer fees ing space in the irst place). In these videos, agency can vary, from single-user fees starting at £950 per after agency present themselves in a sometimes annum to £60,000 per annum, which then provides surprisingly tedious fashion. Some clients prefer to an entire outsourced new business function from do their own screening and request an agency identifying opportunities to acting on them. 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 Credentials pitch www.adforum.com and www.mindadvertising. Some clients, before issuing a full brief, prefer to ask com) initially, where you can get some agency info, the pool of agencies to present their credentials. preview some of their creative work (peruse some This includes examples of current and previous ads) and sometimes see some interesting updates work, team members’ proiles, and company his- and communications articles and news alerts. tory, structure and facilities. It is worth visiting Remember, selecting agencies is hard work and the agency, and sometimes at short notice, as this requires rigorous attention to detail. Bad selections gives the client a feel for the potential agency, and are very expensive. its atmosphere, organization, professionalism, etc. Another way of building a pool list is through From this a inal shortlist is selected and issued with the professional associations. Upon receipt of infor- a detailed brief. mation 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 Long shortlist provide lists of agencies that they feel are suitable to handle a speciic type and size of business. Similar Some years ago, Westminster City Council invited services are offered by the relevant professional 10 agencies to pitch for its communications work. institutes of other service sectors such as public re- A long shortlist creates an unnecessary amount of lations, sales promotion, design, direct mail, etc (see unpaid work for everyone concerned. ‘Further information’ at the end of each chapter). This service is normally free, and the associations are extremely helpful to the uninitiated. Brieing, pitching and selecting take time and skills. There are also agency assessors, such as the Apart from creating a lot of work, a large pitch list Advertising Agency Register, and intermediaries sometimes leaves sensitive marketing information whose business is agency selection. They can handle with many different people. Some cynics see it as an the development of the pool list, pitch list, pitch opportunity to get free strategic and tactical ideas analysis, agency selection and even performance from the best brains in each agency. 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, Issuing the brief 2008). The assessor services are popular with inter- Briefs vary in size, structure and level of detail. Some national clients that need help in all aspects of clients may summarize on to a single A4 sheet of their quest for the right agency. Similar services are paper; others issue a much more detailed brieing available for PR, direct mail, sales promotion and document (one Guinness brief was 100 pages). corporate identity. Intermediaries can help agencies Essentially, the brief should incorporate at least ind new business by producing daily reports identi- the situation, objectives and strategy (SOS) and the fying potential new opportunities, eg when a new 3Ms (men/women, money and minutes), part of the marketing or PR director is appointed, which could SOSTAC® planning system explained in Chapter 10. Chapter 8 Marketing Communications Agencies 191 The brief tends to be brief, while a marketing the team to get it right. A smaller client may prefer to communications plan has much more detail. Since replace the advertising and/or marketing objectives the brief usually goes out to several agencies pitch- with a statement of the problem and subsequently ing for the business (only one of which will get the ask the agency to present a complete promotional business), a dificult dilemma emerges. How much plan. It is likely that the agency’s irst question conidential and strategic information should be will be: ‘How much do you have to spend?’ As revealed in the brief, given that the majority of the mentioned, there are obvious dangers of releasing recipients will not work for you and may one day strategic information to several agencies, the majority work for your competition? Food for thought. At of whom will never work for you (since there is the bare minimum, the brief will usually include the usually only one winner or single agency selected). following: The corollary is that too little information reduces the quality (and possibly strategic direction) of the 1 Situation – where you are now, including the proposals. For that reason, it can be helpful to show market, channels, segments, target markets, examples of the kinds of ads that are preferred: this trends, competition, market share, position, can help creatives to get a feel for what you want. current and previous campaigns, strengths So start collecting ads, sales promotions, web pages, and weaknesses, unique selling propositions packaging, etc now. (USPs), features and beneits of the brand It is important to get the brief correct and con- and the organization. cise. If there are speciic requirements, spell them 2 Objectives – where you want to go: out, eg ‘It must be clearly legible from 8 feet marketing objectives and communications away’ or the ‘The brand name must stand out from objectives (see page 233 for examples) plus the crowd’, etc. You must work hard at stating speciically deining exactly what is the your positioning and of course beneits, USPs, etc. problem (or opportunity). Include the Remember, a casual brief will probably generate required positioning and tone of voice. casual concepts followed by frustrations and accu- Ensure also that effectiveness criteria and sations. Get the relationship off to a good start with evaluation methodology are clearly speciied. a clear, concise, yet comprehensive, brief. 3 Strategy – how you are going to get there (including how the marketing strategy its in with the overall corporate strategy). This Pre-pitch agency eforts may also include a campaign strategy if this is already worked out. The shortlisted agencies are invited to make a full 4 Control – how you will know when you’ve presentation or sales pitch. This usually involves arrived. Both the agency and the client several members of the agency staff and is viewed should agree on what success and failure by several members of the client company. The cost will look like. What are the key criteria, of a major pitch varies from £10,000 to £50,000 and how will they be measured? (up to six agency people involved for six weeks, £36,000, plus £10,000 for materials plus £4,000 5 3Ms: research). Preparation for a pitch is usually an – Men/women: who makes the inal intensive affair and can include researching the decision, members of the team, who client’s market, media, company structure and reports to whom, contacts for additional individual personalities (prior knowledge of who questions. will attend the pitch and hopefully some back- – Money: key question for the agency – ground information on their personalities and inter- what is the budget? ests), strategic planning, brainstorming, concept development (advertising ideas), slide shows, videos, – Minutes: timescale and deadlines for rehearsals and even meditation. Without doubt, new pitch, agency selection and eventual business pitches increase the adrenalin low inside campaign launch. agencies. Control is sometimes included, as it outlines how the US-owned McCann Erickson is reported to campaign will be measured, which in turn motivates draft in a professional teacher of meditation and 192 Part 1 Communications Background and Theories Ta b l E 8 .2 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 Will they love me? bizarre scenarios like asking its teams to imagine that they discover one of their art directors pushing ‘Our research has shown that, generally speaking, cocaine and that, as they prepare to ire him, they clients are not happy about changing agencies. discover his wife is dying of cancer and in need of Such events are usually a signal that they are private medical treatment. unable to sustain a productive relationship with Real empathy, sound strategy, exciting creative work and reasonable costs are often considered to other people, which is something that none of us is be the key factors during a pitch, but some agencies pleased to accept, however difficult the other take initiatives before the actual pitch, as Table 8.2 people might be… the prospect [potential client] is shows. 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 Pre-pitch feelings – a client’s view? of Berkeley Square or Charlotte Street or Covent Garden it is possible that he has two questions in Other potential or prospective clients would deny his mind: “Will they love me?” and “Can they save any such self-imposed pressure. They may see the my neck?”’ pitch as an exciting and stimulating process full Brian Johnson, New Business Director, JWT 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 pro- spective clients see pitches as a more tedious affair, Most selling situations, including pitches, are since they have to repeat their brief in detail several about the removal of uncertainty. So understand- times over and then sit through the inevitable ing the problem, and identifying clear solutions credentials bit before they get to the heart of the with enthusiasm and conviction, is a winning matter – the agency proposals. formula. Chapter 8 Marketing Communications Agencies 193 The pitch dimmed until they were all immersed in an enthral- ling darkness. A spotlight burst a stream of light on After weeks of intensive preparation of exciting to the stage, where Peter Marsh knelt as he opened creative ideas, ingenious media plans and pitch his pitch with: ‘As one of Britain’s few remaining rehearsals, copies of the proposal or pitch document wholly owned independent advertising agencies, are laser-printed, bound and made ready for client it gives me great pleasure to present to you, distribution after the main presentation. The pitch Mr Robinson, as chairman of one of Britain’s few itself is where an advertising agency has the oppor- wholly owned cereal manufacturers...’ ABM won tunity to advertise or sell itself. Given that most the account. campaigns try to be different, grab attention and One inal ABM classic pitch was for Honda. make an impression, it is understandable that ABM hired the 60-piece Scots Guards bagpipe band some agencies should regard a pitch as a creative to play the Honda jingle ‘Believe in freedom, believe opportunity also. There are many stories of daring in Honda’, while marching up and down London’s pitch techniques, some of which work and some of Norwich Street (where ABM was making its pitch). which do not. Here are a few. Again, ABM picked up the account. Another agency, Legendary 1980s agency ABM created the classic AMV, had Hollywood hero Bob Hoskins at its pitch British Rail pitch, which purposely created client for BT (which it won). tension when the top executives from British Rail Strict adherence to the time and type of presenta- were kept waiting in a smoke-illed reception area tion (speciied by the client) is essential. When Burkitt while the receptionist ignored them throughout Weinreich Bryant was pitching for Littlewoods, it her gossip-illed telephone conversation. Eventually was asked to make a ‘short and sweet’ inal pitch, a space was cleared among the empty cans and since the then 92-year-old chairman, the late Sir orange peels, and the executives were invited to John Moores, would be in attendance. The trade wait, as the agency people were ‘busy’. After some press reported that ‘after over 30 minutes managing minutes the British Rail executives had had enough. director Hugh Burkitt was asked to inish as it As they got up to leave, the agency chairman, Peter became obvious that Sir John’s interest and atten- Marsh, clad in full BR uniform (complete with cap, tion was waning’. A row broke out as Hugh Burkitt whistle and lag), burst in and said, ‘You don’t like persisted and a senior Littlewoods executive tried to it. Why should your passengers?’ He then invited stop the pitch. them to listen to how he and his colleagues were In 1992, when British Airways moved from going to solve their problems. Saatchi & Saatchi to Maurice and Charles Saatchi’s Don White, formerly of Benton & Bowles, is re- new outit, M&C Saatchi, all the agencies involved ported to have dressed up as a Butlins redcoat for a threw everything at this prestigious £30 million Butlins pitch. The client took one look, said ‘Anyone account. In an attempt to dramatize BA’s global dressed like that isn’t suitable for my business’ reach, Saatchi & Saatchi did the pitch in different and left. David Abbott of Abbott Mead Vickers rooms for different stages. Each room had been is reported to have greeted Metropolitan Police completely redecorated in the styles, natural habitat Commissioner Sir Robert Mark with a high-pitched and climate of particular parts of the world – tropical nasal ‘Hello, hello, hello’ as he arrived to hear rainforests, etc. When Bartle Bogle Hegarty (BBH) the agency pitch. Not amused, Sir Robert left the got its chance, it reassured BA about BBH’s ability building and was never heard of again. to create extremely satisied clients by providing Agencies pitching for the Weetabix breakfast ready-made testimonials after the presentation – a cereal account were invited to make their pitches wall went back and BA were surrounded by the key in a hotel. As ABM was the last agency to pitch on decision makers of every one of BBH’s clients, who the inal morning, it decided to redecorate the func- then had lunch with them. When M&C Saatchi got tion room in the ABM colours. This required an its chance, Maurice Saatchi stood up and talked overnight painting and carpeting exercise. A stage about the importance of music to the BA brand, was built, and a special chair was delivered to the explaining that they had commissioned their own function room for Mr Robinson, the arthritic and composer to create a unique blend of popular clas- ageing Weetabix chairman. As the Weetabix panel sical music that BA could own. A growing murmur seated themselves the next morning, the lights 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 Analysing the agency point in walked Andrew Lloyd Webber. 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 Dropping your guard strategic thinking, razor-sharp positioning, pinpoint targeting and ingenious media solutions.’ During an intense, high-profile, multimillion-pound The order of importance of the following ques- pitch, the client called for a 10-minute break. tions can vary, depending on what the prospective Unfortunately for the agency (which will remain client really wants. Some clients may consider the unnamed), a senior agency member had forgotten agency’s location and car parking facilities relevant, to remove his scribbled notes, which the client whereas other clients would discount this as trivial accidentally read. ‘Watch out for the — in the and irrelevant to good advertising. Here are the 20 glasses’, it said at one point. most vital questions to help choose the right agency: Not surprisingly, the agency lost the pitch. Some time later, the same agency was pitching 1 Does the agency really have a feel for for another piece of the business and, as the my product and market? Does it really agency opened its pitch, all of the client team understand my brand’s situation and simultaneously donned pairs of glasses! The potential? agency coped and went on to win this separate 2 Has it got strong research and planning piece of business. capability? 3 Does it know the best media to use? Will its media-buying skills make my budget go Pitches, like presentations for major campaigns, are a long way? now an ongoing process where effort is concentrated 4 Has it got creative lair? Does it win on developing a relationship (relationship marketing) awards? Does it suggest new ideas? with the client before the inal presentation. This can 5 Is it full-service, or does everything get sometimes involve client exposure to the strategy subcontracted out? Can it handle a pack and even the advertisements before D-Day. One UK redesign, public relations, sales promotion agency, Howell Henry Chaldecott Lury, has tried to and direct mail if called upon? appropriate this process on its own with what it calls ‘tissue groups’, ie a series of build-up meetings 6 How much integration experience with with the client. In the United States the most notable above-, through- and below-the-line as exponent, Chiat Day, has been doing this for a long well as online does it have? time. Without doubt there is a cultural shift to 7 Is it international? Can its headquarters ongoing pitches rather than a big inale. force it to resign the account should it decide to seek business in the same industry overseas? Alternatively, can it take on a lot An online pitch of our coordination work through its own international management network? The British Interactive Media Association accepted 8 What will it charge? And on what basis? pitches only via Facebook and Twitter. ‘We read How much time will it spend on the about BIMA’s agency trawl in PR Week, so one of account? our consultants became a follower of the BIMA 9 How does it allocate resources in the Chair, Paul Walsh. Within minutes he came back to planning, testing and evaluation process? us with a brief and we started on the pitch’, said 10 Does it display cost-consciousness? Jennifer Janson from Six Degrees, the agency that eventually won the pitch. 11 How will it measure its effectiveness? Williams (2008) 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 195 with the principal partners? Will it ire us if by using consistent criteria. Each company obvi- a competitor offers it a bigger account ously tailors its own approach. (should we insist on a ive-year contract)? And some agencies add a little extra hook, some- 13 Who will work on the account? Are we times proprietary applications, widgets or iApps, eg a likely to get on together (chemistry)? Will South Africa multimedia agency won the UK Tourism the pitch team be involved? How stable will account when it presented a digital worklow system our account team be? Are the people who that enabled regional ofices to remotely customize worked on the case histories still with the English-language campaigns to their speciic needs. agency? (This is a crucial question.) Called Dynamic Positioning Mode, it was a new sys- tem of proiling consumers and generating consumer 14 Does it have a good track record? Do relationships using digital marketing tools. 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 The pitch is never over in the agency’s pitch.) 16 How much experience does the agency have After making a good pitch, a well-known agency in marketing integration (particularly with kindly offered a chauffeur-driven car to take the the internet)? clients to the next agency on the pitch list. During 17 What is the agency process (not just a the journey the client team analysed the previous bunch of arrows in a fancy PowerPoint pitch and commented that the media strategy slide)? Ask how it intends to allocate appeared ‘off-brief’. The next day the agency found resources (time and people) to particular a way of representing the media strategy – and it aspects of the campaign, including won the business. The limo driver was an account planning, concept development, testing man at the agency. Ethical or not, it’s reality. 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 After the pitch – the agency awaits (which might cost you money). 18 Ask how much time it will devote to your the decision account. Post-pitch tension is agonizing. Awaiting the outcome 19 Also, what are the agency retention rates? of a pitch is a tense and worrying time. When the phone eventually rings and it turns out to be the prospect, 20 Check its references. References of past everyone holds their breath. Rejection means total clients can also be requested. failure. All the brilliant ideas, the careful research, the buzz of excitement, the long hours – all down the drain. Selection means total success. The post- Choosing an agency – an pitch wait makes the mind wander. Were there any assessment form clues as to what the client thought of the pitch? Len Weinreich, advertising guru, gives a nervous insight The assessment form shown in Figure 8.2 can be in ‘Scratching an indecent living’ (see Figure 8.3 on weighted and scored as appropriate for each client’s page 197) and an almost unbearable wait in ‘No needs. A rating scale of 1–6 can be used. Agencies news is bad news’ (see Figure 8.4 on page 198). 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 Agency rejection advance by the team involved in the selection pro- A rejected agency’s managing director has the cess. The assessment form in Figure 8.2 shows one dificult job of picking up the shattered team and approach that attempts to formalize the selection building up the agency morale again. The rejected 196 F I g u R E 8 .2 Choosing an agency – an assessment form Understand Commitment Research, Media Creative Size, International Location Fee/cost Will we Opinion AGENCY our product to our planning & planning in-house get on? of and project? strategic and resources, existing company? thinking buying full service clients 1 2 3 4 5 Chapter 8 Marketing Communications Agencies 197 F I g u R E 8 .3 Reproduced by kind permission of Haymarket Marketing Publications Ltd and Len Weinreich SOurCE: Marketing 198 Part 1 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 ●● ‘They [the other agency] have more for future reference. Here are some answers that re- experience of this sector.’ jected agencies have recorded upon asking why they ●● ‘You have too much experience in this sector. had failed: We’re looking for a fresh approach.’ ●● ‘If it wasn’t for the other agency you would ●● ‘I just didn’t like you.’ have come irst.’ ●● ‘I’m afraid you are not European.’ ●● ‘The inal decision was evenly split and you ●● ‘You’re too small.’ lost 8–7.’ Chapter 8 Marketing Communications Agencies 199 ●● ‘Although we preferred your creative work, 1 receiving no fresh input; the other agency does have a place to park 2 account conlict at the agency; in London on Saturdays – and it’s terribly 3 a new marketing director arriving; handy for the shops.’ 4 a change of client’s policy; As managing directors are never told that their 5 other accounts leaving the agency. pitches are terrible and come last, having always been narrowly beaten into second place, there is a A derivative of number 2, conlict of interests, plea from the advertising industry to clients that arises with mergers and acquisitions. After acquir- they should tell it like it really is! ing 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 After the pitch – the agency still global media planning and buying business. waits Mindshare already works for Unilever, P&G’s arch rival (WARC, 2005c). Occasionally the prospect client actually helps the An example of number 3 above is when BA ap- agency by giving an answer that identiies where they pointed its new CEO Willie Walsh. After 23 years, saw a real weakness. The agency can then eradicate M&C Saatchi lost its prized BA account worth £60 the weakness before the next pitch. Similarly, a suc- million (and estimated to be between 6 and 7 per cessful agency will be interested to ind out why it was cent of Saatchi’s turnover). Prior to that, Saatchi’s chosen, so that it can capitalize on its strengths. 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). Skip the pitch – marketing clients In the international arena, business relationships meet media owners directly (including agency relationships) are even more delicate, as WPP discovered when it was ired by ‘Yahoo and Google established agency-relations China’s largest advertising conglomerate (Citic and teams to build relationships and teach agencies its Beijing Guoan Advertising arm). Citic’s vice- the peculiarities of online display and search. chairman, Yan Gang, claimed that WPP’s CEO, Since then, Google focused its agency relations Sir Martin Sorrell, had treated him ‘very rudely’ 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. What’s straining the agency–marketer Microsoft launched its agency-relations team in May of last year.’ relationship today? Learmonth (2010b) ‘Too many agencies are wondering, “Am I going to In 2010 Unilever had an intense week-long series have a job six months from now? What does my of media meetings including Google, Yahoo, client really think?” When the agency doesn’t know Facebook, Fox Interactive, Amazon, Microsoft, Vevo, where it stands or if the client believes in it, it LinkedIn, Formspring, Millennial Media, several becomes dysfunctional. That’s the biggest thing venture capital firms and, of course, Huddler. 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 Firing the agency questions of their agencies. And agencies love that. Campaign magazine survey identiied the following And when you answer those, you get great work.’ reasons for sacking an agency (in order of clients’ Stengel (2010) importance): 200 Part 1 Communications Background and Theories during an April meeting in London to discuss manage- 6 Client rationalizes its agency roster: Toyota ment problems at the joint venture (WARC, 2006). chose its dealer agency Brunnings over its Although over a decade old, Campaign maga- main agency Lintas London after a creative zine’s ‘13 ways to be a loser’ article identiies many shoot-out. British Telecom reviewed its recurring reasons why agencies still get ired: entire account and picked three main agencies – BBH, Abbott Mead and JWT. 1 Control of brand’s advertising switches to rival of client: Gold Greenlees Trott lost 7 Total breakdown in agency–client Fosters when Elders IXL and its Courage relationship: GGT resigns the Daily Express division took over control of marketing after repeated clashes and an inability to Fosters from Watneys, a GGT client. work with title’s marketing staff. 2 Agency produces irrelevant or inappropriate 8 Agency fails to come to terms with account: advertising: Lowe Howard-Spink lost some BMP got the sack by Comet, its irst major of its prized Mobil account after its retail client. Former vice-chairman Paul ‘breakthrough’ Dan Dare campaign failed. Leeves said BMP won the business ‘one year Insuficient planning was cited as a reason too soon’. behind the iasco. 9 Lack of solution creatively: Abbot Mead 3 Client is unsettled over too many changes at couldn’t crack the Daily Telegraph. Later agency: Foote Cone and Belding lost £22 the agency admitted to producing tasteless million worth of business – including Heinz series of press ads which aroused the ire of and Cadbury – because of management women, among others. upheaval. 10 New client arrives: Allen Brady & Marsh’s 4 Client unhappy over excess negative long-standing Milk account was reviewed publicity surrounding its agency: IBM is after new NDC chief Richard Pears joined. uncomfortable over the widely reported 11 Agency can’t master the client’s politics: JWT lawsuits involving its agency and lost British Rail. Agency was allied to the breakaway Lord Einstein O’Neill and central advertising body while the chairman, Partners. Could result in IBM choosing Bob Reid, was committed to devolution. neither and picking a new shop. Network SouthEast chief Chris Green was not keen on JWT after it produced two 5 Takeover of agency infuriates client: poor ads, one in which it was in legal hot Goodyear, Philips, Pilsbury said goodbye to water with the Monty Python people. JWT after it was taken over by WPP. Most cite ‘disruption’ as a reason for leaving. 12 Agency merges with another, producing conlict and massive disruption: Dificulties surrounding the merger of Reeves Robertshaw Needham and Doyle Dane Are agency managers egotistical? Bernbach resulted in massive client fall-out. McCann chiefs are said to have reacted with 13 Client is subject of a merger or takeover: disbelief and anger at Ben Langdon’s suggestion Fast becoming a major reason for account that the London agency be rechristened McCann moves. Langdon, followed by the names of the agency’s Reproduced by kind permission of other principals. It appears that his suggestion Haymarket Marketing Publications Limited and helped to convince McCann’s worldwide chairman Laurie Ludwick and chief executive, John Dooner, that it was time for Langdon to step down. Bosses of the Interpublic-owned network are jealous guardians Firing the client of one of the most famous brands in US advertising Agencies sometimes resign accounts, particularly if and opposed to anything that might dilute it. a larger competing account is offered to them. Occasionally, they are obliged to resign if an agency Chapter 8 Marketing Communications Agencies 201 takeover or merger brings in some competing the news that there was no campaign ready to roll accounts and thereby creates a conlict of interest. out, no agency, and an agonizing new pitch process New demands by a client sometimes become so required. dificult that the account becomes unproitable or, as in the case of ABM, a reduced commission is How to ensure good agency considered unsatisfactory. relationships Arrogance and egos 1 Agree a system of remuneration – fees, commissions, mark-ups, time, expenses and Some years ago, a continually critical senior mar- method of billing – in writing. Remember, keting manager commented at the end of yet an- it is better to argue over a quote than an other long, unsatisfactory meeting, ‘If this were my invoice. company [which it wasn’t; he was an employee], I would ire the agency.’ The long-suffering creative 2 Trust the agency team (share research director responded, ‘If this were my agency, which it and information with them, and involve is, I would ire the client, which I am.’ them). He left the room, with the marketing manager 3 Make them become part of the marketing knowing he now had to face colleagues and break 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 How to upset the client and get sent the client’s. to jail – overcharge them 5 Explain to the agency who makes what decisions, ie who has authority for which Thomas Early (former senior partner and finance decisions. director) and Shona Seifert (former president) at Ogilvy & Mather (O&M) New York were both 6 Sign or approve in writing each stage from reported by WARC to have been found guilty in 2005 brief to concepts – inished artwork, running proofs and so on. of fraudulently overbilling the White House Office of National Drug Control Policy in 1999 and 2000. 7 Keep briefs short and unambiguous. The guilty pair were allegedly responding to the 8 Regular reviews help to plug any gaps in anger of O&M North America’s co-president Bill performance, whether creative, strategic or Gray at the loss of anticipated income. Gray was personal. not among the accused. Early got a 14-month 9 Write an occasional thank-you note to the prison sentence and $10,000 fine. Seifert got an team. 18-months prison sentence and $125,000 fine (she 10 A stable relationship builds a real team, was also ordered to write a code of advertising since the agency gets to know the client, the industry ethics). O&M extricated itself (but not its team, the company and the market inside employees) from the affair with a $1.8 million out. In addition, the client does not have to settlement in 2002. worry about unfriendly, discarded agencies WARC (2005b) 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 ●● Careful selection is crucial to ensure the agency are important if the right messages are development of a mutually beneicial long-term going to be successfully communicated to target relationship. audiences. ●● Agencies, consultancies and consultants can become more than just suppliers of marketing services; they can become strategic partners of the client. references and further reading Bashford, S (2008) The rise of the intermediary, PR Stengel, J (2006) Top P&G marketer urges agencies to Week, 4 July integrate planning, WARC, 7 February Burnett, L (nd) Quote bank, WARC (World Stengel, J (2010) How to save the troubled agency– Advertising Research Centre) marketer relationship, Ad Age, 26 April Cowley, D (ed) (1989) How to Plan Advertising, WARC (2005a) British Airways ditches Saatchi Thomson Learning, London Brothers after 23 years, 10 November Farey-Jones, D (2008) Consumer relationships key to WARC (2005b) O&M’s Early jailed for ONDCP future agency success, Brand Republic, 8 February fraud, 14 July IPA(2003) The Client Brief: A best practice guide to WARC (2005c) WPP’s ‘Chinese walls’ fail to reassure brieing communications agencies, Joint industry P&G, 6 October guidelines for young marketing professionals in WARC (2006) Chinese ad giant drops WPP pact in working effectively with agencies, IPA, ISBA, favor of Omnicom, Data sourced from AdAge. MCCA, PRCA, London com, Additional content by WARC staff, 16 June ISBA (2010) in conjunction with the Advertising 2006 Research Consortium, Paying for Advertising 5, Weinreich, L (2000) Seven Steps to Brand Heaven, ISBA, London Kogan Page, London Kemp, M and Kim, P (2008) The connected agency, Williams, H (2008) Six Degrees lands BIMA retained Forrester report brief, PR Week, 29 August Learmonth, M (2010a) Do you know the ABCs of Admap, NTC Publications, Henley-on-Thames DSPs? Agency-relations teams pitch in, Ad Age, Advertising Age, Crain Publications, Detroit, MI 26 April Campaign, Haymarket Marketing Publications Ltd, Learmonth, M (2010b) Top marketers to Silicon London Valley: Help us get ahead of consumer, Ad Age, Marketing, Haymarket Marketing Publications Ltd, 17 May London Rijkens, R (1993) European Advertising Strategies, Marketing Business, Chartered Institute of Marketing Thomson Learning, London and Maxwell Publications, London Sorrell, M (1996) Beans and pearls, D&AD Marketing Week, Centaur Communications, London president’s lecture Media Week, EMAP Business Publications, London Chapter 8 Marketing Communications Agencies 203 Further information AdForum MayDream SA British Rate and Data (BRAD) 18–20 rue Jacques Dulud Brad Insight 92521 Neuilly-sur-Seine CEDEX Greater London House France Hampstead Road Tel: +33 (0)1 41 43 71 93 London NW1 7EJ Fax: +33 (0)1 46 37 33 82 Tel: +44 (0)20 7728 4315 www.adforum.com www.brad.co.uk Advertising Agency Registrar Services Incorporated Society of British Advertisers (ISBA) AAR Group Langham House 26 Market Place 1b Portland Place London W1W 8AN London W1B 1PN Tel +44 (0)20 7612 1200 Tel: +44 (0)20 7291 9020 www.aargroup.co.uk Fax: +44 (0)20 7291 9030 www.isba.org.uk Advertising Association 7th Floor North Institute of Practitioners in Advertising (IPA) Artillery House 44 Belgrave Square 11–19 Artillery Row London SW1X 8QS London SW1P 1RT Tel: +44 (0)20 7235 7020 Tel: +44 (0)20 7340 1100 Fax: +44 (0)20 7245 9904 www.adassoc.org.uk www.ipa.co.uk Agency Assessments International 100 Pall Mall London SW1Y 5NQ Tel: +44 (0)20 7321 3828 www.agencyassessments.com 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 International mistakes 214 The global opportunity 206 Wrong names 214 Respecting global complexity 206 Wrong strapline 214 Touching a global nerve 208 Wrong product 215 Forces driving globalization 208 The global web 215 The elite global players 209 Below-the-surface similarities 209 Strategic global options 215 Global marketing strategy 216 International diiculties 210 Global advertising strategy 216 Language 211 Four global advertising strategies 217 Literacy 211 Central strategy and production 217 Colour 211 Decentralized strategy and production 218 Gestures 211 Central strategy and local production 218 Culture 212 Central strategy with both central and local Original national identity 212 production 218 Media availability 212 Advantages of central strategy and production 218 Media overlap 213 Disadvantages of central strategy and production 219 Lack of media data 213 Agencies in the international arena 220 Lack of media credibility 213 International agency or independent local agency? 220 Varying media characteristics 213 Advantages of using an international agency 220 Diferent media usage 213 Disadvantages of using an international agency 221 Diferent media standards 213 The key to successful central communications 221 Diferent cost structures 213 Legal restrictions 213 In conclusion 222 Competition 213 references and further reading 222 206 Part 1 Communications Background and Theories Global markets are here. For example, Manchester The globalization of markets United Football Club has an estimated 70 million fans around the world, and Al Jazeera’s English- This chapter examines opportunities and the difi- language TV news service has a 100 million audi- culties, strategic options and actual implications ence worldwide. As media follow markets, media for implementation of international marketing com- consumption may go global; therefore marketers munications, in particular global communications. must remember that brands with international ambitions must have a consistent global image – production should be international in mind, and The global opportunity – is it really content rights should be global. Creating content happening? that users can pass on via their networks is an increasingly important channel of communication. Look around you. Yogurt, pizza, spaghetti, rice, But, as the Universal McCann (2007) report sug- kebabs, Indian cuisine, Chinese meals, Mexican food gests, ‘when using these channels it is fundamental and American burgers are popular and also easily that brands and media organizations think global. available in many countries around the world. Not Multiple local and conlicting brand identities will too long ago they were considered sophisticated not work.’ luxuries. The Rolling Stones and Shakespeare also We are global – the internet says so. Although have a universal appeal. There are more people spread across the world, customers with similar learning English in China than speak it in the United interests can communicate and share thoughts States. Back in 1985 approximately 1 billion people through images, audio, video and text anywhere in from different time zones across the world watched the world: the Live Aid charity concert simultaneously. In 2002 over 2 billion people watched football’s World Cup This means that clusters of customers with similar inal. The London to Brussels train is quicker than tastes and interests are connecting with each that from London to Newcastle. Perhaps clichés other to form new global niches and segments. like ‘The world is getting smaller’ are nothing more The Internet and broadband, in particular, has than oversimpliied generalizations cast upon a changed business dynamics. It has created a level culturally complex world? 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 ‘70% of search worldwide is not in English.’ customers across the world in new and more Oban Multilingual Translation Services 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 Respecting global complexity similarities. There are, in fact, what Young & The total global concept suggests that the big global Rubicam creative agency calls ‘cross-cultural con- marketing players can accelerate the globalization sumer characteristics’. These identify the common process by transcending cultural boundaries and ground. The person living in a smart apartment bringing their messages, goods, services and tradi- block in London’s Knightsbridge probably has more tions to the markets they choose. There are some in common with his or her counterpart living in cultural norms that suggest that the total global a smart apartment block off New York’s Central concept will not happen everywhere, at least not Park than with someone living in a drab south in the next few generations. Lailan Young (1987) London suburb. There are indeed some common reported that the Barusho bride in the Himalayas denominators and some common sets of needs and has a tough time on her wedding night, as she has to aspirations that can be identiied, particularly in share the bridal bed with her mother-in-law until similarities of lifestyle. the marriage is consummated. Chapter 9 International Marketing Communications 207 Post-natal male exhaustion Understanding other cultures – the oppressed male In the southern Indian state of Kerala, Puyala women return to the fields to tend the crops after The Kagba women of North Colombia practise not the birth of their babies, while the husband goes to only free love but free rape, and few men are safe. bed. The rest of the family ministers to his needs Young (1987) until he recovers. In the Andaman Islands especially anxious husbands will stay in bed for anything up to six months. 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, ballroom- dancing and kissing population of Europe. 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 Amazon- like women totally dominate their men, marrying several at a time and keeping them in line by brute nose blowing force. The former Kwakiutl of Vancouver Island demonstrate what is almost a parody of industrial ‘Where most North Americans are repulsed by an civilization: the chief motive of this tribe was rivalry, Indonesian who blows his nose on to the street, the which was not concerned with the usual concerns Indonesian is repulsed by the North American who of providing for a family or owning goods, but blows his nose in a handkerchief and then carries it rather aimed to outdo and shame neighbours and around for the rest of the day in his pocket.’ rivals by means of conspicuous consumption. At Ferraro (2001) 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 re- The reader may be surprised to know of a tribe ported to encourage malignant hatred and animosity. where it is not uncommon for the men of the tribe Treacherous conduct unmitigated by any concept of to behave in a promiscuous manner with other men’s mercy or kindness and directed against neighbours wives and daughters in public. It is so popular it is and friends is expected. The Zuni (a branch of the even broadcast on their television networks. The Pueblos of New Mexico) are a people whose life is country: the UK. The practice: ballroom dancing. centred on religious ceremonial, being prosperous Here is a description of this behaviour: but without interest in economic advancement. They It is common in such dancing for the front of admire most those men who are friendly, make no the bodies to be in constant contact – and they trouble and have no aspirations, detesting, on the do this in public. In spite of the close physical other hand, those who wish to become leaders. Hence touching involved in this type of dancing (a tribal leaders have to be compelled by threats to form of bodily contact not unlike that assumed accept their position and are regarded with con- in sexual intercourse), our society has deined tempt and resentment once they have achieved it. it as almost totally asexual. Although ballroom Even cultures that are relatively better known have dancing can involve high levels of intimacy, it is their own intricacies over something as simple as equally possible that there is no sexual content a handshake, eye contact and the use of colours. For whatsoever. Many adult men in the United States example, brown and grey are disapproved of in have danced in this fashion with their mothers, Nicaragua; and white, purple and black are the their sisters, the wives of the ministers at church colours of death for Japan, Latin America and socials without anyone raising an eyebrow. Yet Britain respectively. 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 non- Touching a global nerve Americans for whom our dancing is a source of Despite the complexities of cultural idiosyncrasies, embarrassment are the very people we consider to there are many common needs that manifest them- be promiscuous, sex-crazed savages because their selves into common wants and purchasing patterns, women do not cover their breasts. particularly where there are similar levels of economic Ferraro (2001) 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 Cannibalistic disease: kissing product or service can be packaged and promoted in a uniform manner. The pricing and distribution ‘A whole lot of people think kissing is not at all may vary, but the branding, packaging and even natural. It is not something that everybody does, or advertising can be the same. The manufacturers of would like to do. On the contrary, it is a deplorable world brands can therefore position their products habit, unnatural, unhygienic, bordering on the nasty in a similar manner in the minds of millions across and even definitely repulsive. When we come to many different cultures. This is the result of careful look into the matter, we shall find that there is a analysis and planning by expert marketing profes- geographical distribution of kissing; and if some sionals rather than a trial-and-error approach to enterprising ethnologist were to prepare a “map of market extension. kissing” it would show a surprisingly large amount The next challenge lies in moving the rest of the of blank space. Most of the so-called primitive communications mix in a uniform manner so that races of mankind such as the New Zealanders not just advertising and packaging but also sales (Maoris), the Australian Aborigines, the Pauans, promotions, direct mail, sponsorship, etc, reap the Tahitians, and other South Sea islanders, and the beneits of a global approach. This globalization issue has revealed itself through the increased use of Esquimaux of the frozen north, were ignorant of the internet. Even local irms going on to the net kissing until they were taught the technique by the attract customers from all over the world. A web white men… The Chinese have been wont to presence can deliver a global presence. However, consider kissing as vulgar and all too suggestive this does present challenges, as Pepsi discovered, of cannibalism… the Japanese have no word for with its European blue can being seen by its US it in their vocabulary.’ customers, who much prefer the traditional red can. Pike (1966) 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 The international marketer embraces other cultures, Netherlands it’s drunk neat by pensioners. Now this researching and respecting the local culture as being ‘common nerve’ presents a positioning challenge. right and proper and perhaps adopts Geertz’s (1983) Despite these dificulties, Coke and computers have insight: proved that large, lucrative global markets do exist. the world… does not divide into the pious and the superstitious… there are sculptures in jungles Forces driving globalization and paintings in deserts… political order is possible without centralized power and principled It is not just a product-orientated corporate push justice without codiied rules; the norms of reason for growth but more of a market-orientated reaction were not ixed in Greece, the evolution of morality to the emergence of common global lifestyles and not consummated in England… We have, with no needs. These are emerging as cheap travel, combined little success, sought to keep the world off balance, with higher disposable incomes, allows travellers to pulling out rugs, upsetting tea tables, setting off leap across borders, visit other cultures and return ire crackers. It has been the ofice of others to home with a little bit of that culture’s soul in their reassure; ours to unsettle. own. Television itself has brought into the sitting Chapter 9 International Marketing Communications 209 rooms of Europe’s homes pictures and images of the decision-making processes, uniform decision-making United States’ Sopranos, Australia’s Neighbours, units, or even uniform reasons for buying. Take the Africa’s famines and atrocities, and Tiananmen case of buying premium-priced water. In a Khartoum Square’s students. It has also brought stunning slum an impoverished family pays 20 times the scenes from the depths of the oceans, the balmy price paid by families with water main connections, beaches of the Caribbean, the rugged beauty of the while half a world away a middle-class family buys bush and the once rich and fertile Amazon rainforest. bottles of mineral water. This demonstrates ‘unreal This global awareness is exploited by the corporate similarities’. The buyers appear to behave similarly push for growth, which has forced many suppliers by purchasing expensive water. They are, however, from saturated local markets to venture into over- very different; in fact, they are from totally dissimi- seas markets. Improved production, distribution lar groups with different aspirations, motivations, and marketing techniques have accelerated the lifestyles and attitudes, not to mention disposable movement of products and services from all around income. On the surface there is a market for private the world into local markets. Professional buyers water in both countries, but the distribution channels, now scour the world in pursuit of new suppliers. communications channels, advertising messages and The internet gives immediate access to a world of levels of disposable income are poles apart. new sources. Political barriers are falling in China An analysis that goes below the surface (or below and the eastern bloc and, of course, Europe’s own the sales results) will reveal a range of different internal political barriers are being dismantled also. motives, aspirations, lifestyles and attitudes to the The doors of the world’s markets are opening. same product. Surface information can create a false The key, it seems, is to identify core beneits that sense of simplicity. International markets can also are common to different cultures, along with any suggest surface solutions that ignore the cultural relevant cultural idiosyncrasies. complexities and intricacies of distant markets. As Sir John Harvey-Jones once warned (1988): Operating in this milieu requires much greater The elite global players sensitivity to national differences than we are The signiicant beneits derived from a global brand accustomed to having. The mere fact that one and a global communications strategy are currently stays in the same sort of hotel almost anywhere reserved for a relatively small number of players. in the world, that one arrives in the same sort of This elite brand of players recognize the right condi- car, that it is now possible to call by telephone or tions and apply thorough research and planning to telex directly from almost anywhere in the world, exploit the brand’s assets on a global scale. Although all gives a supericial feeling of sameness which is Rein Rijkens (1993) has identiied a ‘trend towards desperately misleading and must never be taken for granted. greater internationalization and centralization’, it should be remembered that a single communications strategy (incorporating everything from branding to the complete range of communications tools) South Korea – ‘Would you like rarely works for all the players operating in inter- plastic with your credit?’ national markets. The desire to harness the global opportunity is natural, because international markets A completely different mindset applies to offer huge rewards. They also present intricate customers in other countries. In South Korea, problems. Careful cultural homework needs to be the Visa credit card company will ask you on a new included in the detailed research and planning that Visa card approval on the phone ‘Do you want go below the surface. plastic with the credit?’, as the credit card functionality will automatically be enabled on your cell phone and the old-fashioned plastic card for Below-the-surface similarities your wallet is a free optional extra, only really Similar buying behaviour and buying patterns do not needed if you travel outside South Korea. necessarily mean a uniform market with uniform Ahonen and Moore (2007) needs, uniform communications channels, uniform 210 Part 1 Communications Background and Theories Globalization, intertwined with cultural idiosyncra- dificulty translating ‘marketing’, ‘marketing com- sies, is emerging in many markets around the world. munications’ and ‘advertising’, as they have not yet The marketing maxim ‘Think global, act local’ created such words. remains valid. Although the late great Professor Theodore Levitt’s ‘globalization of markets’ is still criticized by some academics, it is happening and Southern europeans work to live and it does offer huge rewards for those who seize the opportunity. northern europeans live to work ‘Somewhere in the world there are people who Below-the-surface external think the Germans are messy and unpunctual. differences (The chances are they are in Switzerland.) There There are, of course, many differences below the are countries where Greece is regarded as a model surface also. In practice, the European Union is of efficiency. There are countries in which French splintered by different levels of economic develop- bosses would seem absurdly egalitarian and others ment (north and south), culture, attitudes and life- where Italian company life would seem styles, languages, retail trends, direct mail trends, oppressively regulated.’ sources of information, time taken to make a deci- Mole (1998) sion, 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 International diiculties Germany, supermarkets are expected to sell only International markets are riddled with hidden cul- cheap, utilitarian brushes, while the pharmacies tural differences that make global advertising an handle the premium brands. In Italy, a premium intriguing challenge even for the most capable inter- brush has to carry a fashionable, exclusive label. national marketing expert. Here are some of the This makes any above-the-line campaigns dificult. intricacies that contribute towards the dificulty of The communications mix was built around direct global marketing: mail to dentists supported by point-of-sale and product literature, packaging design and sales ●● language; presenters. ●● literacy; ●● colour; Below-the-surface internal ●● gestures; differences ●● culture; The marketer’s challenge goes beyond communicat- ●● original national identity; ing with new international customers and into ●● media availability; working with international partners whose idio- syncrasies and languages pose many problems. ●● media overlap; To some, overcoming local customers’ idio- ●● lack of media data; syncrasies may seem relatively easy compared to over- ●● lack of media credibility; coming local partners’ working practices. Whether ●● varying media characteristics; the local partners are suppliers, distributors, sales agents, advertising agents, strategic partners or ●● different media usage; prospects, it is essential for success to understand ●● different media standards; and work with very different approaches to busi- ●● different cost structures; ness. Take nomenclature for a moment. The French ●● legal restrictions; normally refer to advertising as publicité, which can cause some confusion, while the Yugoslavian word ●● competition; for advertising is propaganda. Other cultures have ●● non-global names. Chapter 9 International Marketing Communications 211 Language problems, eg before-and-after toothpaste advertise- ments if they are not adjusted for Arabic readers, Language obviously requires careful translating, who read from right to left. In other low-literacy whether it is straplines, product descriptions or countries, pictures may be used to explain the con- instructions. There are exceptions to the rule (where tents. When Gerber irst sold baby food in Africa it the language relects beneicial cultural aspects of put a picture of a Caucasian baby on the label and the product, eg Audi’s Vorsprung durch Technik didn’t realize that, in Africa, companies routinely strapline). And some brand names simply don’t put pictures on the label to show what’s inside, as work when used in foreign languages and thus re- there is a high rate of illiteracy. strict the brand’s international growth potential or dilute the brand’s presence through the need to have two brand names. 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 Language barriers can be expensive meaning across the world. Asians associate red with prosperity and good luck. Consider a inancial ser- Even the same language can have different vices website: if Asians see no red, they will leave; if meaning in different markets, eg a ‘boot’ refers Westerners see red, they might leave. Never wrap a to the rear of a car (in the UK) as well as a shoe. In gift in red in Finland, as it is associated with Russian the United States, the rear section of a car is called aggression during the Second World War. Blue in a ‘trunk’. This is relatively minor, but how about Iran means immorality. White in Japan means death exactly the same word having radically different (hence McDonald’s white-faced Ronald McDonald business meanings? Take a trillion. In the has problems). Black means death, unlucky or mor- United States and France a trillion is 1 followed bid in some countries. Websites designed with black by 12 zeros: backgrounds may be seen as ‘hip’ in the West, but can suffer lack of trafic from China and Hong 1,000,000,000,000 Kong. New English Dictionary (1932) In the UK and Germany, a trillion is 1 followed by 18 zeros: Gestures 1,000,000,000,000,000,000 When greeting or bidding farewell, physical contact Collins Pocket Dictionary (1992) beyond a handshake in South America, southern Europe and many Arab countries is a sign of warmth Be careful also with a billion, as it has different and friendship, but in Asia it can be considered an meanings – in the United States and France invasion of privacy. After a meal in Egypt it is con- a billion is 1 followed by 9 zeros, and in the UK sidered rude not to leave something on your plate, and Germany it is 1 followed by 12 zeros. In the while in Norway and Malaysia leaving anything on United States and France, it is a thousand million: your plate would be considered rude. Basic body 1,000,000,000; in the UK and Germany, it is gestures are not global. In some parts of India, Sri a million million: 1,000,000,000,000. 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 Literacy different meanings in ive Mediterranean countries: In many developing countries literacy is low (Dudley, ‘You’re a sponger’ (Spain), ‘You’d better watch it’ 1989). This limits the amount of explanation in (Greece), ‘You’re a sneaky little…’ (Malta), ‘Get advertising. Even with high literacy, the reading of lost, you pansy!’ (Italy), while a Portuguese will feel translated Western-style advertisements still causes 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 Christmas in other cultures the United States, a rude gesture in Brazil and ‘I’ll kill you’ in Tunisia. Even the thumbs-up sign is Taking advantage of the Christmas opportunity deemed to be a devastatingly obscene gesture to a requires an understanding of each international Sardinian woman and insulting in Iran. Thrusting market. For example, in Brazil and Spain the your palms towards someone’s face may be meant celebration continues until 6 January (when to be endearing, but to a Greek there is no greater festivities end). In Russia the celebrations start on insult, since this gesture is called a moutza and comes from the Byzantine custom of smearing ilth 7 January. In India Christmas Day is called Bada Din from the gutter in the face of condemned criminals. (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 Culture (the Chinese New Year or the Spring Festival). Culture creates a quagmire of marketing problems: In other countries Christmas does not happen religion, sex, eating, greeting, habits, lifestyles, the (in fact the word is illegal in some countries). 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 Original national identity future orientation, 4) work and achievement, 5) National identity can be an asset or a liability. For control over the natural environment, 6) youthful- example, Dudley (1989) reported that Marathon ness, 7) informality, 8) competition and 9) relative Oil makes a point of stressing its US association in equality of the sexes. Italy, where US high technology is beneicial, but As always, the web complicates matters. For ex- in Germany Marathon avoids the issue of its US ample, Scandinavians are reluctant to use credit parentage because of the German concern over US cards, the currency of the internet; the French dis- control in the German energy industry. like revealing personal information; the Germans prefer to pay with a cheque, after delivery of the goods. In meetings, the Dutch and the Germans Media availability want to get straight to the point in business deal- Television is sometimes unavailable, since 1) devel- ings, whereas in countries like Spain, Brazil and oping countries do not have a high penetration of Hong Kong some general chat is the most impor- televisions in domestic households, 2) some coun- tant part. In France, family is private and not part of tries do not have commercial TV stations, and 3) business discussions. In Hong Kong, expressing an others do but they restrict the amount of advertis- interest in family, general health, and observations ing time. Unilever and BAT make their own medium of the country help to nurture good relations. available in East Africa by running their own mo- Even protocol for follow-ups to a meeting vary bile cinemas. from country to country, as some countries place more importance on the written word than the spo- ken word, and vice versa. As Julian (2009) points out: ‘In Spain for instance, it’s important to follow- up an email with a phone call, but in Germany you TV helps must do the opposite and put your phone conversa- tions into writing.’ As for humour, use it sparingly, The further away from a TV screen, however, if at all. In Germany, humour is generally considered the more difficult many experts say it becomes to inappropriate in business. It is essential to take create and to deliver a pan-European message. advice from expert export advisory services such as Mead (1993) UK Trade & Investment in the UK. Chapter 9 International Marketing Communications 213 Media overlap Diferent cost structures Television, radio and the internet from one market Different countries have different forms of negotia- can spill over into other markets, eg half the tion and bartering. The Americans and the Japanese Canadian population has access to US television. are poles apart. In less developed countries cash The Republic of Ireland receives the UK’s BBC may not be available, but barter, or counter-trading, and ITV channels. In mainland Europe local TV is can offer an acceptable alternative. received by neighbouring countries. Legal restrictions Lack of media data Whether voluntary codes or actual law, there is as Great Britain and Ireland have well-structured and yet no harmonized set of laws or regulations. For categorized media analysis data (audited data). example, Lands’ End’s website in Germany cannot Without reliable media data the optimum cost and mention its unconditional refund policy, because effectiveness of the overall campaign are unlikely to German retailers successfully sued in court. (They be achieved. Properly structured media markets are normally do not allow returns after 14 days.) This easier to work in. presents the advertiser with different problems in different countries. In Sweden, misdemeanours by advertisers may be charged under the criminal law, Lack of media credibility with severe penalties. Unregulated or poorly regulated media in some countries may lout the principles of legality, de- cency, honesty and truth, which in turn may make Competition these media untrustworthy or create audience scep- Different markets have different key players using ticism about the particular source of information. different strengths. For example, Ford’s position of ‘safety engineering’ worked in many countries, but not in Sweden, where, of course, Volvo occupied the Varying media characteristics position. Competition may react in different ways Coverage, cost and reproduction qualities can and in different markets. do vary from country to country. Some countries are technically more advanced than others, eg they may have massive penetration of high-speed broad- band, while other countries do not even have many cinemas. Language, literacy and logic Combine these three in the international arena and Diferent media usage a new challenge emerges – writing instructions. It is a skill in one language, and attempting to Kahler and Kramer (1977) suggest that the British translate instructions is a complex skill. This is tend to see TV as a visual medium, while TV to the an extract from the instructions for assembling Americans is a visual accompaniment to words. a ‘knapsack’: 1 Lead for hind leg in an opened position. Diferent media standards 2 Lead the frame of the sack support up. A lack of uniformity of standards means that differ- ent types of both ilm and artwork may be required 3 Insert the blushing for blocking in the proper for different markets, eg the United States and the split, push it deeply and wheel in an anti-time UK have different standard page sizes that may sense till it stops. require different artwork, which increases cost. 214 Part 1 Communications Background and Theories tourist agency was surprised to receive a steady in- International mistakes lux of enquiries for sex tours. The Kinki Nippon Tourist Company soon changed its name. Here is a selection of global misses or international These translation problems are not insurmount- mistakes made by brands attempting to sell into able. For example, Curtis shampoo changed its name international markets. It includes wrong brand from ‘Everynight’ to ‘Everyday’ for the Swedish names, wrong advertising slogans or, worse still, a market, since the Swedes wash their hair in the fundamentally unsuitable product for a particular mornings. Mars changed its well-known ‘Marathon international market. Bar’ to ‘Snickers’ to it in with the worldwide brand Some marketers carefully choose names that name communications strategy. work for their local domestic market but never con- sider that one day the successful brand could sell into several markets. This insular perspective more Wrong strapline than likely restricts any future growth opportunities into international markets and almost certainly The New York Tourist Board found ‘I love New York’ restricts the brand from developing into a global dificult to translate into Norwegian, since there brand. 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 Wrong names relationship with New York’. Scandinavian vacuum cleaner manufacturer Electrolux used this in a US Here are a few examples: campaign: ‘Nothing sucks like an Electrolux’. When ●● Sic (French soft drink); Parker Pens marketed its ballpoint pen in Mexico, its advertisements were supposed to read: ‘It won’t ●● Pschitt (French soft drink); leak in your pocket and embarrass you’. Unfortunately, ●● Lillet (French aperitif wine); embarazar does not mean embarrass. It means im- ●● Creap (Japanese coffee creamer); pregnate, so the slogan had an entirely inappropriate ●● Irish Mist (in Germany ‘mist’ means meaning. The Mitsubishi Pajero had problems, since manure); pajero in some parts of the Spanish-speaking world means a liar, in others a plumber and in others ●● Bum (Spanish potato crisp); something much worse. Other expressions that have ●● Bonka (Spanish coffee); been imprecisely translated include US cigarettes ●● Trim Pecker Trouser (Japanese germ bread); with low asphalt (tar), computer underwear (soft- wear) and wet sheep (hydraulic rams). Attention ●● Gorilla Balls (American protein supplement); to detail is required when translating, as even the ●● My Dung (restaurant); smallest error, such as missing out an accent on ●● Cul toothpaste (cul means anus in France); a letter, can drastically change the meaning. For ●● Scratch (German non-abrasive bath cleaner); example, in the United States, a bilingual banner celebrated ‘100 ano of municipal history’. In Mexican ●● Super-Piss (Finnish car lock anti-freeze); Spanish, año is year but ano is anus. ●● Spunk (jelly-baby sweet from Iceland); ●● the Big John product range was translated as Gros Jos (slang for ‘big breasts’) for French-speaking Canada. I saw the potato Even sophisticated marketers get it wrong. General Motors discovered that Nova meant ‘it won’t go’ During the Pope’s visit to Miami it was reported (no va) in South America. Ford launched the Pinto that some T-shirts were printed supposedly saying in Brazil and soon realized that it was slang for ‘tiny ‘I saw the Pope’. However, the translation was ‘I saw male genitals’. Coca-Cola’s phonetic translation in the potato’, because Papa with a capital P means China meant ‘Bite the wax tadpole’. After launching Pope, whereas papa with a small P means potato. into English-speaking markets, Japan’s second-largest Chapter 9 International Marketing Communications 215 Wrong product languages require more words and more space to deliver the same message. In the attempt to get the packaging, advertising Even the major global players can get it totally and branding right, global marketers can sometimes wrong. Microsoft was reported (Brown, 2004) to forget the fundamental product and whether it is have released its colour-coded world map with time suitable for the market in the irst place, leading to zones showing the disputed Jammu and Kashmir campaign failure. Here are some examples of inter- region as not being in India. Under Indian law, this national product failures arising from the basic is an offence. Result: the Windows 95 operating product itself: Christmas puddings in Saudi Arabia system was banned, with hundreds of millions of (where the word ‘Christmas’ is illegal and 50,000 of dollars in lost sales. Ofice 97 was subsequently the Anglo-Saxon population go on leave during launched without colour coding. Christmas anyway); and toothpaste to combat betel Microsoft employees were arrested in Turkey nut stains (stained teeth imply wealth in some cul- when Kurdistan was shown as a separate entity, so tures, as does being overweight in others). General Kurdistan was subsequently removed from all maps. Foods’ packaged cake mixes found the Japanese ‘Of course we offended the Kurds by doing this but market too small for them (3 per cent of homes had we had offended the Turks more and they were a ovens). Coca-Cola had to withdraw its 2-litre bottle much more important market for our products. It from Spain, because few Spaniards owned refrigera- was a hard commercial decision, not political’ (Tom tors with large enough compartments. Tennent’s Edwards, Microsoft’s senior geopolitical strategist Caledonian, a successful Scottish lager, lopped ini- quoted in Brown, 2004). tially in the UK because it came in 24-packs rather Another mistake that caused catastrophic offence than six-packs. Philips had to change the size of its was a game called Kakuto Chojin, a ighting-styled coffee makers to it into the smaller Japanese kitchens computer game with a rhythmic chant from the and its shavers to it smaller Japanese hands. 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 The global web assumption that it would not be noticed. After a Like it or not, once you’re on the World Wide Web formal protest by the Saudi Arabian government, you’re global. This presents great opportunities but Microsoft withdrew the product worldwide. The also new challenges. Web positioning on a global list goes on. China, Korea, Spain and Uruguay have scale is not easy. Apart from language, literacy, all been upset by various Microsoft products. In colour, gestures and culture, marketers now have to Korea its software showed the Korean lag in re- try to think how global audiences search for infor- verse and prompted government objections. In Spain, mation – what words, what search engines, etc. hembra means woman, but in Nicaragua and some Even if you do translate correctly, you probably other Central American countries it means bitch. have to redesign your web pages, as many other 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 Microsoft pays dear for insults offended the government. through ignorance ‘Insensitive computer programmers with little Strategic global options knowledge of geography have cost the giant Microsoft company hundreds of millions of dollars More and more businesses have to compete in the in lost business and led hapless company global arena. For many companies there is nowhere employees to be arrested by offended left to hide. Those that do not move into the global governments.’ market will probably ind that the global market Brown (2004) 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 4 Different product/different communications. ignore this small part of the globalization process This applies to markets with different needs may not be around in 50 years. and different product use, eg greeting cards A defensive strategy (eg consolidating the exist- and clothes are held to be ‘culture bound’, ing customer base, staying native, and blocking but it should be noted that some clothing competition from entering with, for example, a companies (like Levi’s) use the same, series of lexible distributor promotions) may centrally produced, wordless advertisements safeguard the company, at least in the short term. internationally. Offensive strategies are required if a company is 5 New product (invention)/new seeking entry into new markets, eg increasing pro- communications. This applies, for example, motional spend in key national markets, supported in the case of a hand-powered washing by a lexible operations system. Strategic alliances machine. and joint ventures offer a lower-cost, lower-risk (and possibly lower-margin) method of entry into these It is highly unlikely that the complete communica- new, large and increasingly competitive markets. tions mix can be standardized by centrally controlling Global competition has even prompted global co- and producing everything from advertising to sales operation in the marketing communications indus- promotions to point-of-sale to PR to direct mail, tries. Advertising and PR independent networks are etc, because of, irst, the differences in regulations popping up alongside the global agencies that have and laws, which vary from country to country, and, expanded to meet their clients’ global requirements. 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’ Global marketing strategy campaign across 12 European countries, while a new point-of-sale campaign rolled out to 15 European Keegan and Schlegelmilch (2001) identiied ive countries. Mars also developed a pack speciically marketing (product/communication) strategies for for the Euro 96 football championships, featuring a multinational marketing. These were determined green colour base with white netting effect, which by the state of the various international markets, appeared in shops in the UK, France and Germany. analysed by 1) whether the need (or product func- tion) 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 not a totally pan-european approach ability to buy the product: All promotional ideas for Snickers’ sponsorship of 1 Same product/same communications. This Euro 96 were shared with each European office, applies to markets where the need and use and the individual brand managers then assessed are similar to those of the home market, the viability for their marketplace. Language eg Coca-Cola, with its centrally produced barriers will often dictate the feasibility of an advertisements that incorporate local individual promotion. For example, the ‘Snickers differences in language. – tackles your hunger in a BIG way’ strapline was 2 Same product/different communications. not utilized in any country other than the UK, owing This applies to markets where the need or to language interpretation difficulties. function is different but the conditions of Gordon Storey, Mars external relations manager 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 Global advertising strategy function or need but with different conditions The question of whether at least the advertising can of product use, eg different petrol formulae be standardized (same communication) is a source of but the same advertising image (e