60. The State of Marketing Today

Changes in Latitudes, Changes in Attitudes

Integrated marketing communications (IMC) is the application of multiple integrated communications media to reach customers. Marketing tactics like direct marketing, Internet marketing, social media, telemarketing, and sales promotions are optimized when they are aligned to create a seamless progression of marketing communication and touch points to customers. Consumers don’t think about a brand as a marketing program or campaign. Ongoing, integrated marketing creates consistent branding, positioning, and messaging across all marketing communication and media to produce more impact and recall. But the burning question is, “Where will you reach potential buyers?”

In the past, it was much easier to market and predict consumer behavior than it is today. Here are just a few of the issues that make marketing much more difficult than is was in recent years:

• Consumer trust and confidence in organizations and institutions has declined significantly. Consumers turn to each other—sometimes even complete strangers—for advice and recommendations when making a purchase.

• Digital experiences and customer engagement are the biggest factors influencing consumer purchases and recommendations to others.

• The numbers of digital media choices grow and change every day, making it very difficult for marketers to learn while executing. Marketers must respond by retooling skills and ROI measures.

• Consumers of news and entertainment like the personalization and immediacy of digital media. A whopping 84 percent of consumers now say they rely on the Internet for news or information, 73 percent visit social networking sites on a regular basis, and 76 percent regularly watch video sites like Hulu and YouTube.

One of the biggest changes in recent years is where marketers are choosing to invest marketing funds. The growing use of digital media is driving marketers to invest in communication tactics that are more targeted and measureable. Advertising must reach consumers where they spend the most time, and it is increasingly away from television, newspapers, and other traditional media channels that were depended on for many years to reach the masses.

Media expert Jack Myers predicts that total advertising revenues will decline by 5.9 percent in 2010. This follows a 14 percent decline in 2009 and 5.8 percent decline in 2008, marking the first time in 40 years that advertising budgets will be down for more than three consecutive years. He notes this is historic because even in past recessionary periods, advertising budgets have shifted from advertising to sales, stimulating budget line items like sales promotions and retail allowances. The picture does not get brighter in Myers’ 2011–2012 predictions of traditional advertising media. He estimates there will be further declines in newspapers, magazines, television, and radio advertising. Newspaper advertising is suffering the most, experiencing a 25 percent decline from 2002 to 2008 and a continued decline is forecasted through 2012. Although the age of one-way communication has given way to a new digital era of personal communication, media spending in traditional channels still far outweighs spending in new media alternatives.

Facts, Stats, and Key Trends

The Chief Marketing Officer (CMO) Council conducts a yearly survey among its members who lead marketing across a broad variety of industries around the world. The CMO Outlook Report describes the biggest challenges and concerns of senior marketers and other executives in the organization. This report and several others published by the CMO Council (www.cmocouncil.org) are an excellent barometer of the changing business climate and how marketing professionals are shifting budgets and resources to respond.

The report states that top executives continue to demand that marketers grow market share while improving operational efficiency. In response to this request, marketers say they are focused on strategic cost cutting (not budget slashing) by improving operational efficiency, increasing customer experience and insight, and working with sales to drive revenue growth. This response is positive, however it appears there is still a disconnect between what executives want and where marketing chooses to invest time and resources. Marketers are not investing enough in marketing process improvements and operational systems that provide increased collaboration and marketing automation tools.

With so many evolving media choices, where should businesses invest their marketing budgets? What are the key trends that you need to know about that influence consumers and buyer behavior?

Let’s take a look at several trends and issues that influence decisions of marketing and sales executives, as well as a few highlights that reveal where they are choosing to invest. These figures have been combined with additional industry facts to help you make decisions on a broad number of sales and marketing issues. You will find many other statics and trend information about specific marketing tactics as you read each chapter.

Key Trends Driving Marketing

• 60 percent of marketers say they will fund increases in the company’s interactive marketing budget by shifting money away from traditional marketing.1

• Search marketing, online display advertising, email marketing, social media, and mobile marketing collectively will grow to nearly $55 billion by 2014.2

• CMOs will focus on training and development for their existing staff to sharpen skills in digital media. Sixty-three percent say they will retrain staff versus hiring new talent or outsourcing.3

• Salespeople spend approximately 40 percent of their time preparing customer-facing deliverables while leveraging less than 50 percent of the materials created by marketing.4

• Marketers say they want to improve operations and analytics; however, only 9 percent of marketers say that they plan to create a deeper relationship with their IT department.5

• Customer experience and customer loyalty are critical to business success, yet only 17 percent of marketers oversee customer service and support responsibility.6

• Around the world, marketers estimate that 55 percent of their entire marketing expenditures failed to deliver results.7

John Wanamaker was famous for saying, “I know 50 percent of my advertising is wasted. I just don’t know which 50 percent.” This statement was made over 20 years ago and sadly, the problem continues to be one of the biggest issues plaguing businesses today. The estimated marketing wastage rate (MWR) averages 45 percent for B2B marketers, and where budgets are smaller, strategies are more niche, and campaigns are running via fewer media channels. The estimated MWR rises to 65 percent for B2C marketers, and where budgets are often larger and teams have to take more innovative, riskier, and creative media approaches to find new ways to differentiate their brands.

Let’s see what one of the leading experts in integrated marketing communications and marketing analytics has to say about this subject. Don Shultz was named by Sales and Marketing Magazine as one of the most influential people in sales and marketing in the 21st century. (The list also includes Dale Carnegie, Henry Ford, and Edward Deming.) Shultz is a professor of Integrated Marketing Communication at Northwestern University and the author of nine books that focus on integrated marketing communication and measuring brand communication ROI.

This interview with Shultz that was conducted in 2001, yet as you can see by the figures stated previously, the issue remains as relevant today as it was then.8 He offers insight and advice that every business can apply to improve their marketing effectiveness.

Expert Discusses How to Measure Marketing

Reece: Most of your research and work has been focused around two words that most people don’t normally link when they talk about marketing: measurable marketing. Why have you chosen to become a pioneer in the area of ROI measurement?

Shultz: In the mid ‘70s, we were just beginning to see the complexity of the data from the grocery industry. I was fascinated by the correlation of what was spent, the price, how deals and discounts affected an outcome, and how that drove consumer behavior.

I wrote my dissertation on advertising response functions and for 25 years, I studied marketing analytics, then database marketing and how all these fit together. Integrated marketing communication evolved out of this.

My interest is focused on this: How much should be invested in a brand, how it should be invested, and the ways a company gets its investment back.

Reece: So what is the magic formula? How much should a company spend?

Shultz: It’s how much you invest, not how much to you spend. The key is to figure out how to value a customer and how much to invest in acquiring and maintaining that customer. Advertising is just the surrogate.

Reece: What are the critical elements to evaluate and consider when determining this?

Shultz: First, how much is a customer worth now and what is the income flow from that customer today? Secondly, what are the opportunities in the future? What share do you presently serve? What must be done for maintenance to keep that customer?

Reece: Marketing control is shifting from marketers and manufacturers into the hands of the consumer. What implications does this have for businesses?

Shultz: It changes the whole focus of the organization. Companies need to figure out what to say to customers and the easiest and fastest way to get this message to them. The challenge is to listen to customers. Most companies are good at talking, but not at listening. What they need to do is refocus the organization to have response devices to measure customer response over time.

Most companies have a campaign mentality. They think about communication with a customer in terms of a campaign that runs for 7 or 13 weeks. The problem is the customer is continuously in the market. Companies need to totally flip their way of thinking about marketing to their customers. What do customers want to hear and need to hear? When do they need to hear it and where do they need to get the information?

Reece: In your book, you state that in today’s multi-faceted marketplace, that marketing elements often cannot be measured separately as there is synergy among them. What’s a marketer to do then to accurately measure ROI?

Shultz: It’s very difficult to break out each media and evaluate it on an individual basis. Don’t look just at the specifics of direct mail vs. a newspaper ad. It’s the entire brand communication program. People tend to want to get finite before they have an understanding of whether or not it’s working.

Advertising managers, promotion managers, and public relations directors are all concerned with defending their turf instead of working together to create a greater synergistic outcome.

Reece: What’s new in the area of measuring the ROI for marketing?

Shultz: The recognition that we need marketing metrics. We can no longer spend money and trust it will work. Marketing lately has been driven by dot-coms using old communication methods. The old model was to give the creative department free reign and to spend money on itchy creative. Or it was unrealistic media spending like buying Super Bowl ads. Or it was basing decisions entirely on what worked historically. It’s different now. Companies need to figure out what works now.

Reece: Measuring attitudes and behaviors were once the primary methods for predicting an outcome. What methods do you recommend today?

Shultz: The question is how to integrate behavioral data with attitudinal data. These are typically separate marketing groups today, and they need to work together.

For example, we may know how a customer thinks, but not why. We may know how a customer behaved, but not what caused the behavior. We will move from using attitudes to predict behavior to using attitudinal data to explain behavior. It’s the linkage of attitude and behavioral data that is powerful.

Reece: More than any other area in an organization, marketing is considered to be a mysterious “black hole” where money goes in, yet only a portion of it accounts for a measurable return. Do you believe this will change and, if so, what will be the catalyst?

Shultz: Yes, for two reasons. Marketing companies are creating new methodologies and systems, like demand mapping, to create more accountability. They are unlocking this mysterious black box to enable a greater understanding of brand valuation, customer value, and growth potential.

Accounting guys are insisting on this. When this happens, marketers will become big players. Accountability is something marketing has avoided for many years, and that will need to change.

Copyright, American City Business Journals. Reprinted by permission.

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