Integrated Marketing Communications Strategy

Lecture Notes/Annotated Chapter Outline

A.

Integrated Marketing Communications (IMC) The term integrated marketing communications (IMC) is used to describe the combination of all marketing activities that are designed to stimulate demand. These demand-creating activities are referred to as the communications mix.

1.

Communications Theory

Communication is the transmission of messages of various means, and there are a number of theories that help us to understand this process.

a. The communications flowIMC activities involve a forward communications flow (e.g., manufacturer to wholesaler to retailer to consumer, etc.). Backward and horizontal communications flows also exist for feedback and idea exchange.

b. Elements of communicationfour key elements help explain the relationship between communications and IMC.

1. Sourceinitiator of the message.

2. Messageidea being communicated; advertising copy, sales presentation, etc.

3. Mediumvehicle for delivering the message; television show, newspaper, etc.

4. Receiverperson(s) to whom the message is delivered, generally a potential customer but can be an influencer, middleman, etc.

c. Types of communicationsmass communications systems can be very complex and can be described as specific, selective, and mass communications.

(Transparency 11A: Three Types of Communications)

1. Specific communicationsinvolve direct transmission of a message from a single source to a single, specific receiver.

2. Selective communicationsinvolve directing messages through a single medium to a limited number of receivers.

3. Mass communicationsinvolve the use of one or more media to reach large numbers of receivers, exposing every potential buyer to the message.

d. Distortion and noisenot every message reaches its intended receiver or the message is distorted when it arrives.

2.

The Communications Mix

Various elements of IMC make up the communications mix: advertising, salesforce activity, sales promotion, direct marketing, and publicity/public relations.

a.

Advertisingpublic communication of messages to select audiences to inform and influence them; paid for by identified sponsor.

b. Salesforce activityany person-to-person or telephone-based activity by a firms representative to build relationships for the company and make a sale.

c. Sales promotionmay be nonprice- or price-related promotional activities, other than advertising and salesforce activities, to generate short-term sales.

d. Direct marketingnumerous activities designed to reach targeted customers directly without an intermediary organization being involved.

e. Publicity/public relationscommunication of information that is not paid for and does not identify the source of the message; difficult to control.

3.

IMC Objectives

The overall objective of IMC activities is to influence targeted customer groups, with an understanding of specific communications objectives and the stages a customer must go through before making a purchase decision.

(Transparency 11B: Integrated Marketing Communications (IMC): Objectives)

a. Hierarchy of effects modellevels of awareness that customers must go through: from unawareness to awareness, comprehension, conviction, and finally action.

b. Communications goalsset for specific target customers and campaigns.

1. Build brand equityreinforce brands value and identity; encourage strong preference.

2. Provide informationoffer details about the product, its benefits, how to buy it, etc.

3. Manage demand and salesstimulate primary demand (new products/ innovations) or selective demand (e.g., for mature product) or temporarily lessen demand when over capacity.

4. Communicate differentiation and enhance positioningconvey desirable points of differentiation and positioning relative to competitors products.

5. Influence attitudes and behaviorpromote a favorable inclination toward your company and products while encouraging some type of action.

B.

Pull versus Push IMC Strategies IMC efforts are directed at both final customers and channel intermediaries through pull-through and push-through communications, respectively.

(Transparency 11C: Push-Pull Communications Defined) 1. Pull-Through Communications Manufacturers or suppliers of consumer or industrial products use a variety of IMC activities to target final customers directly to create customer pull (or demand) to move goods and services forward in the distribution channels.

2.

Push-Through Communications

A wide array of IMC activities also are targeted at channel intermediaries to motivate resellers to become more aggressive in their customer communications, with the overall objective of increasing reseller support and market coverage.

3.

IMC and Product Lifecycle Stages

Communications tasks and objectives change with the different stages of a products lifecycle (e.g., awareness, comprehension, and interest must be built in the introductory stage, etc.).

C.

Financial Aspects of IMC IMC expenditures can be enormous for many products, and the effectiveness of each IMC program should be evaluated with analytical tools such as the customer response index and/or calculations of communications elasticity and communications carryover.

1.

Calculating the Customer Response Index (CRI)

Customer response is affected by changes in customer awareness of ads, comprehension of content, and interest or conviction as a result of advertising copy. The customer response index is calculated as follows:

CRI = [% Aware x % Comprehend x % Interest x % Intentions x % Purchase]

(Transparency 11D: Customer Response Index (CRI))

2.

Calculating Communications Elasticity This is the change in sales volume per 1% change in IMC effort, calculated as follows:

Sales = [Volume x Communications Elasticity x Price]

(Transparency 11E: Communications Elasticity)

3. Calculating Communications Carryover IMC expenditures made in one time period produce additional sales response in subsequent time periods. This communications carryover can be calculated in terms of coefficients that can range from zero to less than one, with the average carryover coefficient equal to approximately 0.5.

4.

Budgeting IMC

Budgeting is one of the most difficult decisions to make in marketing planning when the goal is the most effective IMC program for the least expenditure. The major budgeting approaches for IMC activities follow.

a. The marginal approachIMC budget is set at a level where theoretically the last dollar spent exactly equals the incremental profit generated by the expenditure.

b. Available funds approachIMC budget is limited to the funds on hand, i.e., whatever the firm can afford.

c. Competitive parity approachIMC budget is set to meet or exceed the amount spent for IMC activities by the firms competitors.

d. Percentage of sales approacheasiest approach to IMC budgeting; allocates a percentage of forecasted sales to IMC activities.

e. Fixed sum per unit approachsimilar to percentage of sales; involves budgeting a specific amount for IMC activities for each unit sold.

f.

Return on investment approachtheoretically advantageous because the IMC budget is considered an investment rather than a current expense; based on revenues and costs for different levels of IMC expenditures as in capital budgeting decisions.

g. Task method approachrecognizes that IMC expenditures must achieve specified objectives much as other budgets in the firm do; involves a four-step process:

1. Conduct research to identify marketing opportunities and targets.

2. Determine IMC objectiveslong- and short-term.

3. Identify IMC tasks (message and media) needed to achieve IMC objectives.

4. Cost the IMC tasksestimate the costs involved in the IMC strategy.