Integrated marketing communications program overview

¶ … Future of Advertising and Its Impact on Integrated Marketing Communications Programs

The traditional strategies marketers use to attract, sell and serve prospective customers and retain existing ones are going through a systemic, fundamental change today. The long-held beliefs of concentrating on product, pricing, promotional strategies and place or distribution (the 4Ps of marketing) are being challenged by the mercurial nature of customers today and how quickly their preferences are changing.

No longer can a product or service be marketed purely based on its functional value or worse, its features and purely physical attributes. Customers expect excellent experiences from products, augmented by personalization to their tastes and preferences (Ramaswamy, 2008). Marketing services is as much about defining realistic, high expectations as it is about aligning each customer-centered process to delivering a consistently excellent experience. Social media channels are making the task of communicating the experiences customers can expect much easier to accomplish, especially given the rapid adoption of consumer-generated content (CGM) (Bernoff, Li, 2008). Customer referenceability and referential systems that provide prospective customers with insights into the experiences of others are also more in use than ever. Social media is making the tasks of marketers engaging in Integrated Marketing Communications (IMC) more challenging as each component of an integrated strategy must align with specific audiences' interests in a relevant time frame for them (Gonring, 1994).

One of the most valuable lessons learned by marketers using IMC strategies today is how the perception of their products and services, from the basic value delivered to the affiliative and aspirational aspects of their brands, vary so significantly across audiences and market segments (Tsai, 2005). The increasing reliance on digitally-based marketing and selling strategies has given marketers greater insights into these variations by audience and broader segment (LaPointe, 2012). Advertising is going through a revolutionary change today driven by the insights gained from behavioral and predictive analytics. The emergence of Big Data as an area of marketing analytics and predictive modeling will accelerate over the next five years as marketers seek to gain even greater insights into how their prospective and current customers making purchasing decisions and choose which brands to be loyal to. Combining analytics and Big Data is also giving marketers the ability to define psychographic profiles of their customers as well; a strategy WalMart uses extensively (WalMart, 2012).

Advertising in general and IMC strategies specifically are going through a series of disruptive innovations brought on by the steadily dropping costs of digital marketing channels, the ready availability of advanced analytics, and the rapidly changing nature of customers' preferences (Rosenbloom, 2007). The intent of this paper and its analysis is to evaluate the key issues facing advertising today, assessing the future of advertising and evaluating the impact of technological changes on advertising strategies. An assessment of how best to measure IMC programs and strategies, in addition to an analysis of a successful IMC program to Nike is provided in this analysis.

Assessing Current Trends and the Future of Advertising

The disruptive innovations that digital technologies are bringing to advertising are the catalyst of the current trends and are in large part defining its future growth. Of the many trends in advertising today, the most significant revolve around the redefining of the identity of customers and their role in the purchasing process (Beltran-Royo, Zhang, Blanco, Almagro, 2013). Through the use of advanced analytics technologies now available, marketers are increasingly relying on personas, or aggregated definitions of their prospects and customers, to more accurately plan, execute and measure the effectiveness of advertising campaigns (Herskovitz, Malcolm, 2010). Personas have quickly progressed from relatively simplistic definitions using demographics to inclusion of very detailed psychographic data of each buyer audience and broader segment.

WalMart's data-centric culture is a leader in this future trend of integrating psychographic profile data into their personas. Based on an analysis of WalMart's filings with the Securities and Exchange Commission (SEC) filings over the last several years, the following definition of the retailer's personas and customer segments has been created. Figure 1 shows the result of the analysis completed.

Figure 1: WalMart Definition of Personas and Customer Segments by Source: (WalMart Investor Relations, 2012)

The Price Value

Shopper segment is the most loyal to WalMart because the combined effects of advertising, marketing and promotion strategies sent to this segment through traditional and digital strategies stress serving ones family by saving money. WalMart has successfully made this their most profitable segment by using combined effects of highly targeted advertising of specials, effective use of targeted and highly specific promotions and coupons, and pervasive use of social media incouding e-mail to reach members of this segment. The majority of this segment, according to WalMart reports, are female (84%) and are members of families with per capita incomes below $40,000, have children (63%) and are in the 25 to 34-year-old age group (29%) (WalMart Investor Relations, 2012).

WalMart has successfully integrated advertising strategies based on traditional offline approaches including newspaper, direct mail and in-store flyers with digital advertising to send a consistent message to this specific market segment. WalMart has orchestrated these offline and online or digital marketing strategies around the message that they understand the challenges the Price Value Shopper faces and wants to help them by having lower prices. The Low Price Everyday (LPED) value proposition that WalMart is basing its entire marketing strategy on indicates how successful the message of low prices being essential to the Price Value Shopper has become (WalMart Investor Relations, 2012). Through the use of advanced demographic and psychographic analytics, in addition to the extensive amount of pricing analysis and price elasticity by product line, WalMart's management teams have a very good idea of how and where to place specific advertising messages with specific promotional offers, and at which specific price. The ability to gain this level of insights is predicated on one of the most significant trends impacting advertising today and will only grow in the future, which is extensive use of personas combined with analytics.

Another significant trend is the exponential growth of social media in advertising in general and as an essential component of any successful IMC strategy or framework (Bernoff, Li, 2008). The pervasive adoption of social media has completely redefined advertising and will continue to for years to come. Facebook, Foursquare, Twitter and many other social networks are making it possible for customers and marketers to communicate more effectively and openly than has ever been possible before (Burton, Soboleva, 2011). As a result, social networks are revolutionizing the advertising, marketing and IMC strategy of every company today. Customers now have the chance to share their opinions, likes, dislikes and preferences for specific products, unrestrained by previous-generation technologies that didn't give a voice to the customer (Keller, Fay, 2012). Today social media gives the customer an equal or even louder voices than marketers have. Previous generations of marketers had to often create separate programs that were deliberately designed to capture the voice of the customer, with separate and often complex processes designed to bring those insights into even the most fundamental marketing and advertising strategy. The exponential increase in the adoption of social media has made these separate efforts and strategies to create voice of the customers much more streamlined and easier to achieve. The foundational elements of social networks that made this possible were the defining of the Web 2.0 framework and design objectives. The essence of the Web 2.0 framework states that the Web is a platform for open collaboration, communication and the shared creation of customer experiences (O'Reilly, 2006). A Meme Map, or representation of the major design objectives of the Web 2.0 framework in addition to its main attributes, is shown in Figure 2, Web 2.0 Design Objectives Serve as the Foundation of Social Networks Today. Every social network in existence today has used the foundational elements of Web 2.0 to ensure their applications and websites deliver exceptional user and on paying sites, customer experiences. The popularity of Facebook for example is based on how well the very popular social network abides by and makes the most use of these design objectives (Bernoff, Li, 2008). The future of advertising in general and IMC strategy specifically are clear from a Web 2.0 technology perspective, and that is the customer must be given a chance to collaborate and communicate, even in the initial phases of promotional strategies and programs.

Figure 2: Web 2.0 Design Objectives Serve as the Foundation of Social Networks Today Source: (O'Reilly, 2006)

The third-most significant trend affecting advertising today that also shows the potential to completely revolutionize it over the long-term is the increasing precision analytics provide in nearly every aspect of marketing, advertising and promotion. Analytics are extensively used today for monitoring which Web promotions and specials on marketers' websites are the most and least effective, in addition to tracking relative interest levels by product or service area (Hauser, 2007). WalMart uses analytics for evaluating pricing elasticity of products offered on special, and has continually refined the use of pricing elasticity analysis on toys during the year-end holiday season (WalMart, 2012). Behavioral analytics are making it possible for companies to combine personas and social networks, gaining invaluable insights into the performance of promotional programs in real-time. In addition to all of these benefits, analytics will make it possible for marketers to fine-tune each element, offer and even digital channel used in the presentation of a promotional offer to a specific audience. By combining all available sources of analytics, marketers will be able to have a 360-degree view of customers while also aligning their promotional strategies to each phase of the buying process with much greater precision than has ever been possible before (Acker, Grone, Blockus, Bange, 2011).

Impact of the Internet on Advertising

In strategic terms the Internet has made digital marketing, promotion and advertising strategies more precise and measurable. The proliferation of analytics applications, many of them Cloud-based, are revolutionizing how marketers plan and execute their promotional, advertising, and services strategies. The Internet has also completely re-ordered the economics of advertising, reducing the costs of tactical and strategic campaigns (Bernoff, Li, 2008). This is evident in how the Internet in general and company websites specifically are being used as the landing pages or destination point for offline and traditional marketing strategies and platforms. A major part of the economic re-ordering of advertising and IMC strategies is the heavy emphasis marketers put on Search Engine Optimization (SEO). This is a technique to boost relative levels products and services appear in Google, when searches are initiated by prospective customers looking for a given product. Google's algorithms for ranking content rely on specific approaches to organizing keywords within websites, and this area of marketing, called SEO, is gaining in importance and spending over time (Bernoff, Li, 2008). Organic search results are consistently more trusted and acted on compared to paid search. Google has created their AdWords program specifically for enabling the paid search areas of their search engine. AdWords generates on average $300M in any given quarter for Google and is one of their most profitable businesses as marketers are willing to pay for a premium location on the popular search engines' site (Selcuk, Ozluk, 2013).

The role of traditional marketing techniques and methods including brochures, flyers, direct mail, advertising in newspapers and magazines, television and radio are increasingly being orchestrated in IMC strategies that drive prospective customers to the company's website. These traditional forms of marketing have long proven effective in moving prospective customers through the buying process and toward trying a given product or service. The Internet is acting as a consolidator of these traditional marketing methodologies, driving the prospective customer to personalized landing pages and specific offers they show a high probability of accepting and taking action on. The many examples of how analytics is being successfully used for marketing mentioned earlier in this analysis are also used in many companies for measuring the relative contributions of each specific offline, traditional marketing method or strategy (Hair, 2007). Marketers are able to track the relative effectiveness of a given flyer or brochure and its contribution to the buying process. In addition, advanced marketing automation applications including Eloqua and Marketo are being used to track and predict the combinatorial effects of flyers, brochures, direct mail, advertisements on television and radio, and the many forms of external advertising as well. In conclusion, the Internet has made it possible for marketers to precisely understand the contributions of every aspect of their advertising, promotion and public relations strategy to the buying process. And has been shown in the audience and segmentation analysis of Walmart's Price Value Shopper, very precise customer segmentation can also be achieved and measured with analytics that provide insights into psychographics of the audience segment (WalMart Investor Relations, 2012).

The relationship between market share and promotion has also been more clearly defined through the analytics and platforms available online as well. The Internet has made the correlation of promotional spending and market share more predictable for commodity-like products by measuring the impact of price and availability on demand. This has significantly reduce the uncertainly regarding just which promotional strategies to use, when, and what amount of marketing funds needs to be invested in them. The more complex and multifaceted a given product becomes however the greater the corresponding complexity of measuring the effects of promotion on market share. Often with highly complex products that must be tailored for a given customers needs, for example an air conditioning system for a home or the addition of a new room or section of a house. Promotional strategies played a critical role for the air conditioning company in getting the customer, and given the highly tailored nature of their needs, helped to create trust. The same holds true for the contractor given the job of adding a new room or section to a house. Both used promotional strategies to gain trust and eventually a sale. These promotional strategies however were just one of many. The greater the commoditization of a given product the more likely promotional strategies will have a direct effect on market share.

Measuring IMC Strategies' Effectiveness

The most effective marketers using IMC strategies today concentrate on a series of metrics and key performance indicators (KPIs) that span the entire purchasing process for their products and services. The more complex the selling process, the more precise the metrics and KPIs chosen are, with specific attention of providing feedback from a customer experience management standpoint. Measuring IMC strategies often begins with a program analyzed and dashboard that shows the relative contribution of each component or section of the IMC strategy. Marketo is a leader on this area and has created a Program Analyzer which is used for evaluating the performance of each component of an IMC strategy. The following is an example of the Marketo Program Analyzer, specifically designed to measure the relative sales and profit contributions of each element of an IMC strategy.

Figure 3: Measuring IMC Effectiveness and Sales Contribution Using a Program Analyzer

Source: http://www.marketo.com/global-enterprise/marketo-revenue-cycle-analytics/program-analyzer.php

Once an initial analysis of each specific component of an IMC strategy has been completed, the most valuable metrics and KPIs are organized into a dashboard. This is often the type of dashboard marketers use to evaluate the effectiveness of an IMC strategy on a daily basis. The one shown in Figure 4 is based on the Marketo marketing automation system.