Integrated Marketing Communications Study, 1st Edition

September 1, 2003

Overview

Most marketers are integrating advertising with other communications tactics, but few are pleased with the overall quality of the combined effort and most still believe that advertising adds the greatest value by far. They find the greatest challenges to integration are their companies' functional silos and implementation across products, divisions and regions of the world.
Further, marketers are less likely to turn to full-service agencies to provide integrated services than they are to combine an advertising agency with separate firms that specialize in promotion, event marketing, direct response, public relations and Internet communications.

These and other findings highlight a major research study by Blueprint Communications, Inc. - a consulting firm for agency searches, compensation, performance evaluation and campaign measurement - with the Association of National Advertisers (ANA) in March 2003. The research was conducted among ANA member companies to deepen understanding the current practices used by advertisers in managing their marketing resources.

Advertisers Diversify Marketing, Agencies Diversify Services

Advertisers are relying more on other forms of marketing communications in addition to traditional advertising. Today, Advertisers are now using direct response, Internet, public relations, sales promotion and event marketing in addition to advertising. Media fragmentation, coupled with changes in consumer lifestyles, has forced advertisers to turn to other forms of marketing communications to reach current and prospective customers more effectively.

Full-service advertising agencies and holding companies have responded to these changes in client needs by adding other types of marketing communications disciplines either through mergers or acquisitions. These "specialty communications services," such as direct response and Internet advertising, have been added to their menu of offerings. They can be purchased a la carte or bundled together ("one stop shopping") depending upon the advertiser's requirements. Both full-service agencies and holding companies view these specialty communications services as opportunities for increased revenues and profits.

Results of Integration Disappointing

ANA members were asked to rate the overall quality of their integrated marketing communications (IMC) programs. Interestingly, only 21percent rated their IMC "excellent or very good" while 45 percent rated their IMC efforts "Good." Slightly over a third rated their efforts as "fair or poor." "There are so many different communications disciplines and lines-of-business that it is difficult to coordinate and pull it together," said a telecommunications-marketing manager.

Sales & ROI Dominate Measurement

ANA members use a variety of measures to determine the effectiveness of their IMC programs including sales, advertising research, brand-tracking studies, market share and return-on-investment (ROI) analysis. When asked, "What do you consider to be the most important measure of IMC effectiveness?" sales results and ROI analysis topped the list of responses. The emergence of ROI analysis confirms the growing use of this measurement tool by advertisers to prove the value and productivity of marketing programs. ROI has been used successfully to measure the effectiveness of other business processes for some time. It is not surprising that marketing communications should also be evaluated on financial metrics like other business processes.

Internal Silos, Implementation Biggest Challenges

ANA members who participated in the survey said the most serious challenges they face in developing and executing IMC programs are the functional silos that exist inside their companies and the difficulty in effectively implementing IMC programs across product lines, company divisions and different countries. The implication is that advertisers need to organize their marketing communications functions to eliminate the inherent bias or preference for one communications discipline over another. It is very difficult for inhouse marketing staffs and advertising agencies to give up their own agendas. "Getting everyone on the same page is a real challenge," said a vice president of marketing services for a materials manufacturer. "Our biggest challenge is to assemble the very best in terms of marketing communications experts and then get them to work effectively together," said the director of marketing for a luxury products company. Another challenge cited by respondents, but to a lesser extent, was the need to achieve strategic consistency across the different communications disciplines used in IMC. In other words, the overarching strategy should be the same no matter what marketing communications discipline is utilized.

Marketing Organizations Need Varied Skills

Advertisers identified the most important skill sets that their marketing organizations must possess to develop and effectively implement IMC programs. These skill sets include:

The ability to translate a brand, product or service message successfully across different
marketing communications disciplines to achieve message consistency.
The ability to set clear measurable integrated marketing communications objectives that
reflect what the program is to achieve. This includes the need to measure the synergistic
effects of IMC; not just the contribution of the individual communications disciplines.
A complete understanding of each marketing communications discipline and how each works together to achieve the strategic objective.
An in-depth understanding of the needs and requirements of the target audience.

Even with Integration, Advertising Still Reins

Marketers rated general-market advertising as delivering five times more value than any other marketing communications discipline. The remaining communications disciplines were rated pretty much the same in terms of value with the exception of Internet advertising, which was rated lowest.

Marketers Prefer Blend of Agencies

ANA members require a high degree of involvement and support from their marketing communications agencies. They consider the "best source" for IMC to be a combination of full-service advertising agency and specialty agencies.

However, the full-service agency is not relied on very heavily for other types of marketing communications services that are outside of traditional advertising. ANA members instead utilize specialty agencies that have the skill sets and experience for specific communications disciplines, such as direct response and Internet. In-house marketing staffs are also an important source for marketing communications services.

Full-Service Agencies Focused on Advertising

ANA members use their full-service agency primarily for general market advertising and maybe some Internet advertising, but very little for other types of marketing communications services. "Very few ad agency people can intelligently talk across all the marketing communications vehicles and disciplines," said a marketing executive for a consumer package goods company. Our research indicates that advertisers believe that the specialty communications agency has a more knowledgeable staff and overall expertise in their "communications specialty" than the full-service agency. While this is a significant benefit to the advertiser, it also increases the number of agencies the advertiser has to manage and coordinate and thus the complexity of managing IMC programs.

Specialty Firms Preferred for Other Services

ANA members use specialty communications agencies for Internet advertising, event marketing, public relations and direct response. Generally, advertisers are not putting all of their different communications needs with one agency. They seek the communications expertise offered by specialty agencies. "Some of our specialty agencies are part of a holding company and some are not. They are chosen because they were "best in class" and any connection to a holding company is irrelevant," explained a marketing executive for a consumer package goods company.

The majority of ANA members who participated in this survey indicate that they use three or more specialty communications agencies for their IMC needs. These specialty agencies are in addition to their full-service agency. The total number of different agencies used by advertisers adds to the complexity of planning, coordinating and implementing IMC programs for various brands, products and services.

Agencies Should Change to Build IMC Effectiveness

ANA member companies participating in this survey believe that agencies can help them maximize the effectiveness of their IMC programs by ensuring that strategic objectives are focused on IMC activities so results can be measured and evaluated. Second, agencies need to be more media neutral in their recommendations and consider a broader range of communications disciplines such as public relations and event marketing and not just traditional advertising. Finally, advertisers want agencies to embrace a compensation structure that eliminates each internal agency department making a profit, which should facilitate IMC planning and execution. Too often, agency departments compete with one another for the client's budget instead of developing the best marketing communications solution.

Labor-Based Fees Preferred for Full-Service Agencies

Advertisers prefer a labor-based fee for compensating their full-service agency. However, a fairly large number of advertisers still compensate their agency on the commission system for their services. The commission system has been declining over the past several years and is no longer the predominate method of agency compensation.

Project Fees Preferred for Specialty Agencies

By comparison, advertisers utilize a project fee for compensating their specialty communications agency. However, there are a significant number of advertisers that compensate their specialty agency on labor-based fee arrangements.

In-House Staff Focused More on PR, Internet

ANA member companies also rely on their in-house marketing staff to provide marketing communications services such as public relations and sales promotion. The in-house staff plays a major "hands-on role" in providing IMC services. In-house marketing staffs may provide marketing communications services internally or contract for them through outside specialty agencies.

Improving IMC Efforts While advertisers struggle on how to best develop and implement IMC programs, they explained what is working to make IMC a more effective discipline.

Companies rely on a combination of full-service agency, specialty agency and their own inhouse marketing staff for the development and execution of IMC programs. While advertisers rely on outside communications agencies for help, the in-house marketing staff plays a vital role as well in delivering communications services such as public relations and sales promotion. Advertisers believe that this combination is the most effective way to deliver marketing communications services and will continue to use all three in the future.
For advertisers to effectively develop and execute IMC programs, they have to eliminate the functional silos in their marketing organizations. These internal functional departments have built in biases for their respective communications specialty making it very difficult to get the best possible combination of marketing communications disciplines to achieve their strategic objectives.
Advertisers clearly drive the IMC process, given the complexity of having to manage a combination of full-service and specialty agencies. The majority of advertisers use three or more specialty agencies for specialized communications services. With this number of different agencies participating in the IMC process, it is extremely difficult for a full-service ad agency to play a leadership role.
Advertisers who consider their IMC programs to be excellent or very good continually focus on the customer's needs and requirements. The customer drives the IMC process. "You need to be clear on who you want to market to before you design the actual message," said a marketing executive for a consumer package goods company.
For advertisers to be effective at IMC, they must be able to translate a brand, product or service effectively across a variety of different marketing communications disciplines. This is the most important skill set marketing organizations must possess with the ability to set clear measurable objectives that measure the output of IMC programs. The most important measures used by advertisers in assessing the impact of their IMC programs are sales results and ROI.
ANA members seek specialty communications agencies that are "best in class." While some advertisers use holding companies for IMC, the prevailing attitude is best expressed by the director of advertising for a large retailer, who said, "you won't get integrated marketing communications through a holding company. I don't believe the various agencies work well together."
Advertisers believe that successful IMC programs are the result of client leadership and direction. "We bring the various communications agencies together for a briefing. We have better results when everybody involved understands the total business plan. The client must lead and facilitate the process," explained the director of marketing for a luxury products company.
ANA companies that rate their IMC efforts very good or excellent have defined processes internally and externally with their agencies with designated levels of authority and responsibility. "You need to design an efficient way of working across the different marketing communications agencies and consistency in execution across multiple agencies," said a marketing executive for a consumer package goods company.
Creating opportunities for open communications internally and externally helps improve the IMC process. "We have bi-weekly telephone conversations with all of our agencies and categorize the work that is being done. We have a culture that encourages openness and this eliminates conflict among the various agencies," said the director of integrated marketing communications for a manufacturer of consumer appliances.
Having complete control over the brand's message is a prerequisite for successful IMC programs. "We have centralized control over the brand message, and we let each country execute the message in a way that is relevant to that specific country," said the director of advertising for a large retailer.

Overall our research findings indicate successful integration requires customer insight, planning processes, executional consistency, and trust to encourage open collaboration.

Research Methodology

This research was undertaken to help better understand:

The key challenges ANA-member companies face in developing and implementing integrated marketing communication (IMC)
How member companies evaluate the effectiveness of IMC programs
How ANA member companies are organized to deliver IMC
Whether ANA member companies prefer full-service or specialty communications agency(ies) for IMC services
How companies compensate their agency for IMC services
How member companies rate the quality of their IMC programs

The research was conducted online and telephone interviews. The ANA sent e-mail to its membership asking them to participate in the survey. Members were directed to Blueprint Communications web site, www.blueprintcom.com to answer a series of question about how they were managing their marketing communications resources. The questionnaire was password protected. A total of 99 surveys were completed which was a three percent response rate.

Since there is no agreed-upon definition of IMC among marketing professionals or the marketing
literature, Blueprint developed a working definition of IMC based upon a content analysis of articles
written on the subject. The following definition was provided to eliminate any confusion over terminology:

"Integrated Marketing Communications is the use of different communications disciplines in combination with one another to support a brand, product or service. IMC is characterized by a common strategic objective and a common communications message across all disciplines."

Respondent Profile

A majority of respondents responding to our online survey were upper middle managers and senior advertising and marketing executives. While we had a good cross section of industries represented, the largest number of completed questionnaires came from consumer package goods and services companies. In terms of marketing communications expenditures, 43 percent of the companies had marketing communications budgets of $50 million dollars or more in 2002.

About the Authors

Dwight Shelton is a brand communications consultant who specializes in the development of positioning strategies, advertising and sales promotion strategies, measurement of advertising effectiveness, and agency selection and relationship management. His marketing communications background includes consulting, advertising agency and client-side experience, including Bell South, McCann Erickson, Long John Silvers and Burger King.

Richard O'Gorman is a brand communications consultant who specializes in agency selection and agency relationship management. He is also an expert in the oversight and management of advertising media programs from initial strategy development through evaluation of implementation performance. His marketing communications background includes consulting and advertising agency experience, such as Saatchi & Saatchi Advertising, Tucker Wayne/Luckie and The Bedford Group.

About Blueprint Communications

Blueprint Communications, Inc. is consulting firm whose mission is to help clients optimize their brand resources through comprehensive processes or "blueprints." Blueprint works with companies nationwide, consulting on agency selection, agency compensation, agency performance evaluation, media performance evaluation, client/agency relationship management and advertising campaign evaluation. The firm's web site is at www.blueprintcom.com.

Source

"Integrated Marketing Communications Study, 1st Edition." Dwight Shelton, Partner, Blueprint Communications, Inc. September 2003.