Integrated Marketing Communications and Performance. Mike Reid and Nathan Wakeford, Monash University. Abstract

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1 Integrated Marketing Communications and Performance Mike Reid and Nathan Wakeford, Monash University Abstract As markets become increasingly hostile and competitive, and the associated brand related marketing communications activity more frenetic, the need to understand how to gain better performance related outcomes through the firm s marketing communications efforts is paramount. This paper presents the results of research into the self-reported relationship between integrated marketing communications and brand-related performance in service and consumer goods firms. The paper identifies that IMC has an impact on sales, brand, and customer satisfaction related performance. The papers identifies differences between high, medium, and low performing firms in terms of their level of integration in the management of marketing communications. The research tentatively suggests that firms with higher levels of higher levels of integration in the management of marketing communications also have better brand-related performance. Background The changing marketing communications environment In the context of marketing communications management it is relatively easy to identify a number of global changes impacting on how marketing communications are managed and implemented. Common explanations for the so called diminishing effectiveness of traditional promotions activities, and the search for alternative approaches to the management of marketing communications, include (Clarke, 1996; Duncan and Caywood, 1996; Gronstedt and Thorson, 1996; Kitchen and Wheeler, 1997; Kitchen and Schultz, 1999; Schultz, 1998; Shimp, 1999): 1. Reduced faith in mass marketing 2. Increasing reliance on more highly targeted communications 3. Increased turn over of brand management personnel and loss on brand knowledge 4. Greater demands placed on marketing communications suppliers to be brand custodians 5. Increased efforts to measure/improve communications return on These factors have given rise to investigations into new ways of managing marketing communications. In particular, an emphasis on Integrated Marketing Communications (IMC) as a new paradigm for the future seems to be evident in the literature (eg, Cornelissen, 2000; Cornelissen and Lock, 2000; Hartley and Pickton, 1999; Low 2000; Schultz and Schultz, 1998). IMC and performance Throughout the IMC debate practitioners and academics forward the notion that improvements in the coordination and integration of marketing communications should lead to some level of superior business performance (Kitchen and Schultz, 1999; McArthur and Griffin, 1997; McGoon, 1998). The common explanation is that through IMC, a company can attain synergy between all of its marketing communication activities and decisions. Defined in terms of three constructs consistency, interactivity and mission, synergy ensures that the use of alternate communication tools are mutually reinforcing, leading to a ANZMAC 2002 Conference Proceedings 131

2 level of enhanced productivity and performance (Duncan, 1993; Duncan and Moriarty, 1997; Eagle and Kitchen, 2000; Hines 1999). The implicit assumption of IMC is that through synergy, IMC provides a cost-effective way to maximise the impact of communications by improving marketing decisions through a market-back approach (Duncan and Moriarty, 1997; Kitchen and Schultz, 1999; Low, 2000; Pickton and Hartley, 1998; Stewart, 1996;). Additional efficiencies are derived through improved co-operation between departments and service providers avoiding the duplication of information gathering, or reinventing the wheel in developing communications strategies (Hartley and Pickton, 1999; Linton and Morely, 1995). Other than efficiencies, benefits should also accrue through improved brand communications and positioning bringing about opportunities for more profitable longer-term customer relationships (Duncan and Moriarty, 1997; Keller, 2001) Whilst this link between IMC and performance might be intuitively appealing, there is little empirical evidence in support of this relationship (Cornelissen and Lock, 2000; Low 2000). The few exploratory attempts at understanding the IMC and performance relationship have yet to arrive at a definitive resolve. A study by Low (2000) for example, found many American firms were practising a high level of IMC, and that IMC was strongly related to marketing performance. A further study by Reid et al. (2001) also attempted to examine the IMC-performance link using the Australian Wine Industry and found that such relationships existed. In both cases the authors suggested that unexplained variances exist in the data and that further conceptual development of both IMC and the measurement of the IMCperformance relationship was required. This current research responds to the call for additional empirical studies into IMC and its relationship with brand-related performance (Eagle and Kitchen, 1999; Kitchen and Schultz, 1999; Low, 2000; Schultz and Schultz 1998). Methodology The data for this research were gathered using a self-administered questionnaire that was mailed to managers (responsible for brand communications) in consumer goods and services firms. The sample frame was drawn from a commercially available listing of Australian companies. A total of 169 fully completed fully completed responses were received (96 questionnaires were returned through wrong addresses being supplied or notification of non completion), for an effective response rate of 18.6%. The questionnaire employed the brief Integrated Marketing Audit created by Duncan and Moriarty (1997) in order to investigate the integration of marketing communications related practices and brand performance. This audit views integration across 5 constructs: Organisational infrastructure; Interactivity; Mission marketing; Strategic consistency; Planning and evaluation. Results An analysis of the relationship between perceived performance and the major IMC constructs was undertaken (Table 1). The performance and IMC constructs were subjected to a correlation analysis to determine the direction and strength of the relationship. The measures of performance had a multi-dimensional flavour and employed ten metrics representing three ANZMAC 2002 Conference Proceedings 132

3 basic dimensions (principle components/varimax rotation) and one overall evaluation dimension: Sales-related performance evaluation of market share growth, sales growth, overall profitability, and sales income. Brand strength related performance evaluation of comparative brand awareness, ability to command premium prices, and level of channel support. Customer satisfaction related performance comparative customer satisfaction, and level of customer brand loyalty. Overall performance summation of all self-reported performance measures. There appears to be a relatively positive association between various self-reported performance indicators, and the level of integration of marketing communications achieved by respondents. Further modelling of the data is required to confirm these assertions. Table 1: IMC-Performance Relationship Sales-related Brand Customer Overall IMC Construct Performance Strength Satisfaction Performance Organisation Infrastructure 0.32*** 0.15* *** Interactivity 0.17* *** Mission marketing *** 0.18** Strategic consistency *** 0.20** 0.24*** Planning & evaluation 0.14* 0.18** 0.16** 0.22*** Aggregate IMC 0.23*** 0.21*** 0.20*** 0.30*** 0.01 level*** ; 0.05 level** ; 0.1 level* Table 1 indicates that different individual constructs have potentially stronger effects on different performance dimensions. Sales related performance appears to be driven primarily by organisation infrastructure and to a lesser degree by interactivity and planning and evaluation. Organisation infrastructure measures behaviour related to cross-functional cohesion, managerial competence in utilising all available marketing communication tools, internal marketing to optimise employee productivity and creativity, and the unbiased commitment of resources across synergistic teams (Duncan and Moriarty, 1997). Brand strength related performance is strongly related to strategic consistency and planning and evaluation, and to a lesser extent by organisational infrastructure. The primary relationship, strategic consistency, relates to the importance of ensuring that all communication messages are consistent with the company s positioning. In achieving a degree of strategic consistency it is significantly important for companies to have in place planning and review processes to ensure consistency brand tracking and evaluation mechanisms, customer input mechanisms, zero-based budgeting and planning approaches, cross-functional legitimisation of the communications strategy, amongst others (Duncan and Moriarty 1997). Customer satisfaction related performance is most related to mission marketing and also to a degree to strategic consistency, and planning and evaluation. Mission marketing should communicate the company s purpose for being, and is the foundation from which organisational goals relating to the creation and maintenance of value for stakeholders can be communicated (Duncan and Moriarty 1997; Moriarty, 1994). When embedded in the organisation s communications, this consumer-oriented culture strengthens the company and ANZMAC 2002 Conference Proceedings 133

4 brand image, and demonstrates that the company stands for something beyond just its financial success (Moriarty 1994; Stewart 1996). Overall, it would appear that there is an interesting and positive relationship between IMC, as measured in this research, and brand related performance. Obviously further research and analysis is required to more fully understand this relationship both in design of constructs, in the size and selection of the sample, and in application of modelling such behaviour/performance relationships. Relating firm performance to IMC In order to further examine the proposition that firms who have adopted a higher level of IMC also have better performance, the respondents were categorised into high, medium and low performance groups using K-means cluster analysis on the various performance dimensions - sales, brand, customer satisfaction. ANOVA was then used to examine the relationships between each performance group and to determine if the high performance group had any major differences in the adoption or employment of an IMC approach (Table 2). Table 2: Differences Between Performance Groups IMC Construct Perf Means Differences Sig Cluster Infrastructure High High > Low > Low.001***.055* Low 3.92 Interaction High 4.45 High > Low.093* Low Mission marketing High 4.58 ns Low Strategic Consistency High High > High > Low.017**.009*** Low 4.56 Planning and evaluation High 4.85 High > Low.012** Low Aggregate IMC High High > High > Low.024**.002*** Low level*** ; 0.05 level** ; 0.1 level* It would appear that high performance firms report better performance than both other groups in the areas of Infrastructure and strategic consistency. High performance firms also do better than low performance firms on the two of the other IMC constructs used in this research - interaction and planning and evaluation. It may be surmised that in order to help improve various levels of brand related performance firms should consider how to improve the integration of marketing communications activities and practices. In particular, firms should seek to improve internal communications and ANZMAC 2002 Conference Proceedings 134

5 relationships in order to build a sound understanding of marketing communications strategy. Firms should ensure that individuals charged with the primary responsibility for developing marketing communications are familiar with the relative benefits of each communications tool as it related to their business area. Furthermore, firms need to ensure they undertake strategic planning to connect marketing communications strategy to marketing goals, and that both budgeting for communications and analysis of key target audiences is sufficient to ensure communications can be planned and implemented appropriately. Conclusions As with any new area of research IMC still suffers from the usual emerging paradigm jitters definition problems, lack of empirical research in a number of areas, ownership of the paradigm (marketing vs PR), amongst others. Some authors suggest that IMC and its impact on brand performance will assume such importance that it will become the essence of marketing approaches and competitive advantage in the 21 st century (eg. Kitchen and Schultz 2000), whilst others suggest that it is a management fashion with poor definition and a transient influence upon marketing communications practice (eg, Cornelissen and Lock 2000). The growing level of research activity in the area of IMC suggests however that interest in IMC as an important area of business and academic research is growing (Farrelly et al 2001; Gould 2000). In many respects the emergence of the IMC paradigm and research, parallels that of the emergence of Market Orientation and its research themes debate over definition and measurement, attempts to link market orientation to performance, movement from smallscale projects to large-scale projects, different cultural and industrial contexts, increasing legitimisation of research themes, amongst others. In joining this debate it is argued that competitive advantage is based on creating and employing superior market based assets (Srivastava et al 1998) and that building strong market based assets, and in particular brands, requires marketers to understand how to design, communicate and deliver value to ever more demanding customers. Communicating this value into the market will require a more coordinated and strategic approach to managing marketing communications and making insightful decisions in allocating limited communications budgets and resource IMC perhaps? ANZMAC 2002 Conference Proceedings 135

6 References Cornelissen, J. P., Integration In Communication Management: Conceptual And Methodological Considerations. Journal of Marketing Management, 16, Cornelissen, J.P., and Lock, A.R., Theoretical Concept or Management Fashion? Examining The Significance of IMC. Journal of Advertising Research: Clarke, S., Brand-Building Through Integration Marketing. Haymarket Publishing Ltd: P 27. Duncan, T., and Moriarty, S., Driving Brand Value. New York, Mc Graw Hill. Duncan, T., and Caywood, C., Ed The Concept, Process, And Evolution of Integrated Marketing Communication. Mahwah, N.J., Lawrence Erlbaum Associates. Eagle, L., and Kitchen, P. J., Building Brands or Bolstering Egos? A Comparative Review of The Impact And Measurement of Advertising on Brand Equity. Journal of Marketing Communications, 6, Farrelly, F., Luxton, S., Joy, S., and J. Brace-Govan., Critical Issues To Understanding IMC In The Future- An Academic And Practitioner Developed Integrated Marketing Communications Curriculum For The 21 st Century. Working Paper, Monash University. Gould, S.J., Lerman, D.B., and Grein. A.F., Agency Perceptions And Practices on Global IMC. Journal of Advertising Research, 39 (1), Gronstedt, A., and Thorson, E., Five Approaches To Organise An Integrated Marketing Communications Agency. Journal of Advertising Research: Hartley, B., and Pickton, D., Integrated Marketing Communications Requires A New Way of Thinking. Journal of Marketing Communications, 5: Hines, R., Ins and Outs of Integrated Marketing. Triangle Business Journal, 15 (10): P 25. Keller, K.L., Mastering the Marketing Communications Mix: Micro And Macro Perspectives on Integrated Marketing Communications. Journal of Marketing Management, 17, Kitchen, P. J., and Wheeler, C., Issues Influencing Marcoms In A Global Context Journal of Marketing Communications, 3, Kitchen, P. J., and Schultz, D. E., A Multi-Country Comparison of The Drive For IMC. Journal of Advertising Research, 39 (1), Lannon, J., and Cooper, P., Humanistic Advertising - A Cultural Perspective. International Journal of Advertising. 2, ANZMAC 2002 Conference Proceedings 136

7 Linton, I., and Morely, K., Integrated Marketing Communications. Oxford, Butterworth-Heinemann. Low, G. S., Correlates of Integrated Marketing Communications. Journal of Advertising Research Mc Arthur, D. N., and Griffin, T., A Marketing Management View of Integrated Marketing Communications. Journal Of Advertising Research. 37(5), Mc Goon., C., Cutting-Edge Companies Use Integrated Marketing Communication. Communication World. 16(1), Moriarty, S. E., PR and IMC: The Benefits of Integration. Public Relations Quarterly. 39 (3), Pickton, D., and Hartley, B., Measuring Integration: An Assessment of The Quality of Integrated Marketing Communications. International Journal of Advertising. 17 (4), Reid, M., Johnson, T., Ratcliffe, M., Skrip, K., and Wilson, J., Linking Integrated Marketing Communications To Performance: Comparing The Performance of High Vs. Low Integration Brands In The Australian And New Zealand Wine Industry. International Journal of Advertising. 20(2), Schultz, D. E., Determining How Brand Communication Works In The Short And Long Terms. International Journal of Advertising. 17(4), Schultz, D. E., and Schultz, H.F., Transitioning Marketing Communication Into The 21st Century. Journal of Marketing Communications. 4, Shimp, T. A., Advertising And Promotion: Supplemental Aspects of Integrated Marketing Communications. The Dryden Press, 5 th Edition. Srivastava, R. K., Shervani, T.A., and Fahey, L., Market-Based Assets And Shareholder Value: A Framework For Analysis. Journal of Marketing. 62 (1), Stewart, D. W., Market-Back Approach To The Design of Integrated Communications Programs: A Change In Paradigm And A Focus on Determinants of Success. Journal of Business Research. 37, ANZMAC 2002 Conference Proceedings 137