The ROI of Integrated Marketing

Published by: Forum for People Performance Management and Measurement

• Background
• A Definition of Integrated Marketing
• The Role of Internal Communications in Integration and Its Bottom Line Impact
• Senior Management Sponsorship of Integration
• Consumer Orientation
• Proper Incentives for Employees

During the course of the “ROI of Integrated Marketing” research study, the question arose: If integrated marketing is such an effective strategic business tool, how does an organization motivate its employees to fully embrace it? This white paper highlights four (4) key areas that impact organizational adoption of integrated marketing and motivate employees to think and cooperate beyond their functional silos. Specifically, these areas are:

• The role of internal communications in integration and the bottom line
• Senior management sponsorship of integration as a motivating factor
• Consumer orientation of the entire organization
• Incentives and rewards

Background

When the research team first set out to look at return on investment as it relates to integrated marketing, one of the immediate challenges was to take a larger view of the task at hand. Specifically, it would be relatively easy to calculate ROI based on a brand’s prevailing formula. However, there was a sense that there were macro issues at work that had an impact on the ways in which brands approach integrated marketing. Therefore, it would be a much more useful investigation if two key questions were posed. First, how does a company develop, execute and measure integrated marketing programs? The answers and issues arising from this question are addressed in the overall study. However, the second question—What is the organizational structure in which that process takes place?—enabled the research team to look at issues concerning people performance, incentives and motivation of staff. Based on the study’s findings, it is not a stretch to suggest that a properly incented and motivated staff can have a positive effect on how well the company performs in the marketplace, particularly in the area of marketing communications.

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A Definition of Integrated Marketing

Suffice it to say that for as many people as the research team asked, there were as many definitions of integrated marketing. The one employed both here and in the overall study is as follows:

Integrated marketing communications is a strategic business process used to plan, develop, execute and evaluate coordinated, measurable, persuasive brand communication programs over time with consumers, consumers, prospects and other targeted, relevant external and internal audiences.¹

Further, as posited by the above definition, integrated marketing is much more than the alignment of tactics. In fact, Schultz and Schultz define four (4) levels of integrated marketing evolution within an organization:²

Stage 1: Tactical Coordination

Initial focus on the tactical coordination of diverse marketing, often functionally directed, communication elements, such as advertising, promotion, direct response, public relations and special events. Emphasis is typically on development of overall communication policies and practices and delivering “one sight, one sound” via marketing communication. Additionally, there is attempt to achieve greater consistency and synergy among all program elements.

Stage 2: Redefining Scope of Marketing Communications

Organization begins to examine communication from the customer’s point of view. Marcom planners begin to give consideration to all sources of brand and company contact a customer has with the product or service. Additionally, management broadens scope of communication activities to encompass internal marketing to employees, suppliers and other business partners and align with the existing external communication programs.

Stage 3: Application of Information Technology

Application of empirical data using information technology, especially behavioral data on customers, to provide a basis to identify, value and monitor the impact of integrated internal and external communication programs to key customer segments over time.

Stage 4: Financial and Strategic Integration

The highest level of integration. Emphasis shifts to using the skills and data generated in the earlier stages to drive corporate strategic planning using customer information and insight. Organizations commonly reevaluate their financial information infrastructure to foster creation of "closed-loop” planning and capabilities to evaluate marketing expenditures based on return-on-customer investment measures.

Illustrating and defining the four stages of integrated marketing clearly shows that integrated marketing involves much more than mere tactical coordination. However, for purposes of this discussion, it will be most useful to focus on the first two stages, where the most impact from proper incentives and motivation within an organization is visible.

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The Role of Internal Communications in Integration and Its Bottom Line Impact

As noted earlier, the second stage of integrated marketing evolution within a company entails marketing extending its scope to include all points where consumers may have contact with the organization, including customer service, supply chain, vendors, etc. The fact is there are many opportunities for a company to break its brand promise. One way to guard against that happening is through a robust internal marketing communications program. It should be noted that the goal of such an effort is to ensure that every employee lives the brand mission and is not just following by rote the dictates of senior management.

In fact, a full-scale internal marketing campaign energizes employees because it not only underscores senior management’s commitment to ensuring a consumer-focused organization, it also enables employees to participate in and own the brand mission.

The Centre for Integrated Marketing at the University of Luton (U.K.) chronicled the transformation of British utility company SEEBOARD Energy in a 2002 case study. The Centre found that part of the reason for the company’s turnaround was due to the implementation of a comprehensive internal marketing program that was designed to not only convey information, but also to change the culture of the company.

Effective implementation of any change or innovation typically includes all the involved parties. Integrated Marketing goes further in needing to mobilise everyone towards living the brand mission. This needs hearts and minds and not just compliance, a significant new strategic role for the senior marketing executive.³

What SEEBOARD undertook was not just sending the requisite memos around the company. Rather, the company committed itself to a yearlong process that was holistic in nature and impacted the entire business. A sample of the efforts that were instituted included:

• The recruitment and training process
• Staff retraining (leadership workshops and briefing sessions)
• Innovative communications (quarterly internal magazine; executive question time)
• Reward and recognition system
• Opportunities for employees to be part of the TV spots
• An artwork competition that encouraged staff to visually represent company values and what they mean to them
• Community involvement via fund-raising and volunteerism
• Coaching training for supervisors of consumer-facing staff
• Regularly scheduled times for executives to answer questions from staff on any subject)⁴

According to the case study, the results of this effort “are a testament to the success of investing in people”:

• 99% say they supported the new consumer vision and strategy, and over 90% consistently understood the contribution they could make
• 88% would recommend SEEBOARD Energy as a good place to work to their friends
• 92% felt proud to work at SEEBOARD Energy⁵

In fact, SEEBOARD stands as a strong example of all the elements that are discussed in this paper. It is a company whose senior management committed to integrated marketing, and it drove integration by focusing the entire company on its consumers. Senior management also realized that rewards and incentives had to be aligned with the new consumer focus and strategy. Finally, there was a commitment to ensure that employees could live and believe in the brand mission.

Internal marketing as a factor that determines integration
Statistical analysis was performed on the study’s written survey to determine which factors best predict the degree to which a company has integrated communications. The analysis reveals that, in addition to a firm having a strong focus on its brand, the other key is internal marketing.

Internal marketing refers to the degree to which there is robust internal communication of marketing objectives, the brand promise and active motivation of employees to live the brand mission. This is a composite of such questions in the written survey in which respondents were asked to rate the extent to which:

• Marketing campaign objectives are disseminated at all levels of their organization.
• All departments of their organization such as PR, marketing, sales, etc., work together for the implementation of a marketing campaign.
• Consumer contact employees are well informed of marketing campaign strategy and message.
• The level of integration with other marketing functions/teams is incorporated into the marketing team or employee performance.
• The success of a campaign was due to the coordination of employees.

The model shows that, of these two factors (brand and internal marketing), internal marketing is far more important than anything else in achieving integration. In fact, these factors were four to five times as important as retailers, agencies, consumer orientation and other elements included in the statistical model (note the 0.44 “beta coefficient”), which shows the strength of its correlation to the dependent variable (integration).

Internal marketing as a factor that affects performance
In addition to brand emphasis and agency management, statistical analysis revealed that internal marketing (with its coefficient of 0.23) is a significant determinant of a company’s performance—as defined in the survey in financial terms of both profitability as compared with competitors over the last three years and change in revenue and profits over the same period. Survey questions that focused on internal marketing and coordination between internal and external teams, for example, brought this fact to light:

That companies that place a high emphasis on employees and connect them to strategy perform better financially is a relatively new and important finding.

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Senior Management Sponsorship of Integration

It goes without saying that the most powerful incentive for integration within an organization is having it mandated by senior management. Typically, the adoption of an integrated approach runs counter to ingrained processes within most organizations, where functional silos are the norm. Organizational inertia is, to some extent, understandable, particularly given the number of processes that must take place in order for a company to function. The system of checks and balances that most companies have instituted exist to safeguard them from having any single function or department causing irreparable harm to the organization. However, when there is reason to change, these same systems, approaches and mind-sets do a great deal to slow organizational evolution. Responses to a written survey conducted as part of the study indicated that nearly 70% felt that “resistance to change” was at least “somewhat” of a problem, with nearly 30% of those indicating that as a “significant” problem. Moreover, study findings indicated that over 50% of the respondents to the survey listed “organization structure” as a key factor that hindered integration. People know it’s a problem, but individually, they know that they cannot take on their entire system.

Therefore, a senior management that mandates and supports integration throughout an organization is an important step toward full adoption and implementation. However, more must be done. It is not enough to ensure that marketing talks to sales, which talks to finance, which talks to the IT department. No, senior management sponsorship of integration requires an overall structural change: specifically, orienting the entire organization toward its consumers.

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Consumer Orientation

Most organizations are focused on the production and sales of their goods and services and, at first glance, this seems to be a correct strategy. However, this focus is a holdover, as Schultz and Schultz point out, from the industrial age in which “organizations were structured and designed to produce outputs, not to achieve relevant outcomes.”⁶ More importantly, this structure put the emphasis on what was happening internally, not externally on consumers. An internal focus maintains specialized silos—marketing, finance, R&D, IT, etc.

On the other hand, with a consumer focus, the emphasis is placed externally on the consumer or consumer segments, and cross-functional teams are created to concentrate on the needs that arise therefrom. A cross-functional team might be organized in the following fashion:

In this new structure, there can be a concerted focus on three key areas:

• Consumer acquisition—getting new consumers
• Consumer retention—keeping current consumers
• Consumer upgrade—moving consumers through the product portfolio

More importantly, it is not just marketing that is forced to understand consumer needs and the consumer perspective. All departments must now do so, and they bring their respective expertise to bear on a common, identifiable goal. And, when companies organize around their consumers, it powerfully underscores the senior management commitment to drive integration companywide. This focus relates directly to the bottom line, in that a key component of acquisition, retention and upgrade is knowing the consumers’ financial significance to the company—expressed as customer lifetime value (CLV) or long-term value (LTV)—effectively moving them through the company’s product portfolio and creating value for shareholders.⁷

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Proper Incentives for Employees

Both in the executive interviews and in the focus groups that were conducted, two things were clear:

1. There were no incentives or rewards for integration under current organizational structures.
2. Brand managers, in particular, were rewarded on volume and market share goals and how well they managed their P&L.

As Schultz and Schultz note, under the new organization structure, employees are rewarded for what matters most to the company, namely, acquiring and retaining consumers.⁸ However, this will be a huge change for most companies, particularly those organized around their brands. Many of the marketers who participated in the executive interviews noted that their incentive and bonus compensation was tied to overall company performance and to how well they tracked to their personal work plan goals for the year. Again, the underlying focus tends to be on how much company product was sold, not necessarily on acquiring and retaining consumers. If consumers are to be the company’s focus, the rewards system must be properly aligned.

Trained and motivated employees
More importantly, once an incentive template is in place for the marketing teams, it can be modified and rolled out to all employees. Not only will they need to understand the key promises being made by the brand, they must understand that they are key points of contact for many consumers and that their interactions will figure greatly in terms of how these consumers experience the brand. As is true with the marketing teams, a crucial aspect of employee buy-in is establishing proper metrics and incentives. These may vary by department, but clarity must be established as to what's being measured, its relevance to the company's health and the rewards that will accrue to employees based on their achieving the stated goals.

¹ This definition is taken from the work of Don Schultz and Heidi Schultz in IMC: The Next Generation, page 20 (McGraw-Hill, 2004).

² Source: “Integrated Marketing Communication” Best Practices Report, American Productivity and Quality Center, 1998; Don and Heidi Schultz, Subject Matter Experts.

³ “SEEBOARD Energy: Integrated Marketing transforms the brand fortunes”. This 2002 case study was authored by Angus Jenkinson, Professor of Integrated Marketing, and Branko Sain, Research Fellow, both of Luton University Business School (U.K.). SEEBOARD Energy was honored as the Centre for Integrated Marketing’s Integrated Marketer of the Year in 2002.

⁴ SEEBOARD Energy case study, pages 35, 36.

⁵ SEEBOARD Energy case study, page 43.

⁶ Schultz and Schultz, page 351.

⁷ “Customer lifetime value” is used here because it is a commonly used and accepted term that denotes an individual’s financial significance to an organization. However, Schultz and Schultz tend to use the term “customer” to refer to the individual consumer. This term, particularly as related to packaged goods, is used to refer to a brand’s retail partner. For the sake of consistency with the overall “ROI of Integrated Marketing” study, we will also follow this nomenclature and refer to individuals as “the consumer” or “consumers”.

⁸ Schultz and Schultz, page 359.

A White Paper developed exclusively for the Forum For People Performance Management and Measurement based on results of the PMA/Northwestern University.

ROI of Integrated Marketing Research Project
Research Results Developed by
The PMA Educational Foundation, Inc.
Northwestern University and
The Dudley Group, Inc.
in association with the Forum for People Performance Management and Measurement

© Copyright 2005 by the PMA Educational Foundation, Inc.
All rights reserved

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