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Integrated Marketing Communications:

5 Steps for Delivering Value and Measuring Returns Using Marketing Communication

Spring 2009

Ilchul

Kim, Ph.D.Visiting ProfessorCollege of Mass CommunicationShenzhen University

Notice: The copy right of this slides belongs to Professor Don E. Schultz and Professor Ilchul

Kim. Any part of this could not be reproduced or distributed without official permission of the authors

Who’s the Instructor ?

Ph.D. in marketing communications

at Hanyang

University in Seoul, Korea

Professor – Dongeui University,

Busan. Korea

Korea Air Force –Communication Officer (1st. Lieutenant)

LG Electronics Co.-

Overseas Ad. Manager

Tupperware Korea – MKTG Manager

Rexall Korea – President & CEO

Chair person- Korea IMC Academy

President –Busan Ad & PR Academy

Visiting Professor – Northwestern (US) ,

Beijing (China) University

And who are you ?

Please let us know who you are and what do you want to be in the future in English with 2 slides in 1 minute presentation. (Put your name and ID number on the front page)

Please submit to TA till Sunday by email then, collect all the slides together for presentation.

Syllabus

Course Objectives

Student Learning Objectives

Texts & Readings

Assignments

Grades

Exams

Class Calendar

Miscellaneous: TA, RA, Grouping

Assistants & Grouping

For this IMC class, two voluntary assistants are expected. Teaching assistant (TA) helps me for class-Equipment, Report collection, Coordination with students, Etc. and Research assistant (RA)-Report collection, Coordination with University, Etc.,supports me for administration

Every student should make a group of 5 and each group is responsible for the group assignment. Every group has to have a leader

Class Design

How do you understand IMC?

what do you expect from this class?

What is your next step?

Texts

Don Schultz & Heidi Schultz (2004), IMC: The Next Generation

Richard Nisbett (2003), The Geography of Thought

Gert Hofstede, Paul Pedersen, GeertHofstede (2002), Exploring Culture

Readings

1. Understanding the diffusion of Integrated Marketing Communications (2004), Journal of Advertising Research, Vol.44, No. 1, 31-45

2. Korean PR Practitioners’ Perspective on IMC Implementation (2009), Operant Subjectivity Proceeding

3. Integrated Marketing Communications: Practice Leads Theory? Journal of Advertising Research, 48 (4) 2008, 531-546. ISSN: 0021-8499.

Four Goals of This Seminar:

1.

Understand the evolution and revolution occurring in marketing and marketing communication created by information technology

2.

Discuss the role and value of brand andhow this has been affected the development of IMC

3.

Demonstrate a 5-Step Integrated Marketing Communication planning and implementation process

4.

Develop (or review) IMC programs of a specific organization

Other Topics of Particular Concern or Interest You Would Like to Add?

IMC Prologue

What, Why and How?

((整合整合

營鎖營鎖

㣦㺕㣦㺕

))

What is IMC?

Definition

History

View Points

Development Path

View Points

Nothing New-

Management Fad –Theoretical concept or

management fashion? (Cornelissen & Lock, 2000)

New Marketing Paradigm –A response to

“Theoretical concept or management fashion?” (Schultz & Kitchen, 2000)

Management & CommunicationManagement

Human Resource

Finance & Accounting

Production

Sales & Marketing

Marketing

Product

Price

Place

Promotion

Marketing Communications

Advertising

Public Relation

Sales Promotion

Direct Marketing

Online Media

Personal Selling

Message Effect & Control

High

Low High

Control

Effect

Unplanned(P.R.)

Product

Service

Planned(Advertising)

4P VS. 4C

Industry Information

Product consumer

Place Convenience

Price Cost

promotion Communication

IMC Definition

American Association of Advertising Agencies(1989)A concept of marketing communications planning that recognises

the added value in a program that integrates a variety of strategic disciplines, eg., general advertising, direct response, sales promotion and public relations – and combines these disciplines to provide clarity, consistency and maximum communication impact.

Schultz(1991)The process of managing all sources of information about a product/service to which a customer or prospect is exposed, which behaviorally moves the customer toward a sale and maintains customer loyalty.

Keegan, Moriarty, Duncan(1992)The strategic coordination of all messages and media used by an organisation

to collectively influence its perceived brand value.

Kotler et al.(1999)IMC is the concept under which a company carefully integrates and coordinates its many communications channels to deliver a clear, consistent and compelling message about the organisation

and its products.Duncan2002A cross-functional process for creating and nourishing profitable relationships with customers and other stakeholders by strategically controlling or influencing all messages sent to these groups and encouraging data-driven purposeful dialogue with them.

-Kerr, Schultz, Ilchul(2005)

IMC: Next Generation

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

Schultz & Schultz (2004)

Evolution of IMC

Communication

Marketing

Management

• TQM• BPR• ERP• CRM• 6Sigma

Corporate

1990 1995 2000 Time

Function

DisciplineCommunication

Marketing

Management

• TQM• BPR• ERP• CRM• 6Sigma

1990 1995 2000

Basics of IMC

Achieving customer focus

Developing a closed-loop process

Aligning internal and external activities and elements

Based on investments and returns

History

Late 70s’ in the US

High raise of TV advertising cost

M & A

ROI requirement

Viewpoints

Nothing New:

Management Fashion:

New paradigm:

Your perspective?

The 4 Stages of IMC

Tactical CoordinationStage 1:

Stage 2:Redefining Scope of

Marketing Communication

Stage 3: Application of Information Technology

Stage 4:Financial and

Strategic Integration

Stage 1: Tactical Coordination

Providing a coherent, consistent communication program to customers using consistent communication across all media forms

Focused on a single concept or theme

Delivered consistently by all business units

Synergy from multi-media, multi-dimensional communication efforts

Stage 2: Redefining Scope of Marketing CommunicationSeeing communication from the customer’s point of view

Understanding all points of brand contactFostering feedback through dynamic and interactive communicationCreating dialogue with customers at all relevant points of contact

Combining internal as well as external communication

Stage 3: Application of Information TechnologyHarnessing the power of information technology to shape marketing communication objectives and capabilities

Reliance on behavioral versus attitudinal data

Differentiating customers by unique wants/needs

Sophisticated segmentation/ aggregation concepts based on customer value

Integration of “islands” of customer data

Stage 4: Financial and Strategic IntegrationPro-active, strategic role for marketing and communication

Identifying ROI on marketing and communication activities

Integrating organization around customers

Aligning business practices with brand promises

IMC Driving Forces

Digital Technology:

Branding:

Globalization:

What else?

Source; IMC: The Next Generation(2004)

Why “Integration”?

Conceptual Discussion about

IMC (Integrated Marketing Communications)

from the Socio-Psychological Perspective

Western ViewAdam Smith(1723~1790)

Wealth of Nation(1776)-分業Smith is open misrepresented as a calculating rationalist

espousing the pursuit of self-interest in the market place, regardless of the human cost

Theory of Moral Sentiments(1751)-道德“It may be prudent to follow self-interest in our economic

lives in order to secure the basic necessities, but this is the

only the first step toward the much higher goal of living morally virtuous life”

Lao Tzu

Tao Te Ching

(The Great Integrity)‘In the infancy of the universe, there were no names.

Naming fragments the mysteries of life into ten thousand things and their manifestations’

Jang Tzu 胡

蝶

夢-

Virtual Reality, Cyber-space

The Theory of Moral Sentiments(1751)-道德“It may be prudent to follow self-interest in our economic lives in order to secure the basic necessities, but this is the only the first step toward the much higher goal of living morally virtuous life”

Asian View

Warning to the division

Wealth of Nations,

1776

The Theory of Moral Sentiments,1751

Adam Smith (1723~1790)

http://ko.wikipedia.org/wiki/%EA%B7%B8%EB%A6%BC:AdamSmith.jpg

From Division to Integration

TQC

TQM

BPR

6Sigma

CRM

ERP

IMC

Industrial Society

Quality Driven

Information Society

Consensus Centered

ProductProduct--DrivenDrivenMarketerMarketer

DistributionDistribution--DrivenDrivenMarketerMarketer

CustomerCustomer--DrivenDrivenMarketerMarketer

CustomerCustomer

MediaMedia

ChannelChannel

Brand

Information

CustomerCustomer

Information

Channel

Brand

MediaMedia

CustomerCustomer

ChannelChannel

Information

ChannelChannel

MediaMedia MediaMedia

MediaMedia

Brand Brand Brand Brand Brand

The 10 Critical Goals of An IMC System

1.

Customer knowledge/ understanding

2.

Inside-out planning

3.

Compelling, customer-focused messages

4.

Synergy and consistency between communication efforts

5.

Media-neutral communication planning

6.

Aligned and integrated processes

7.

Customer-centric organizational structure

8.

A relevant compensation system

9.

Closed-loop investment processes

10.

Financial investments and financial returns

The 5-Step Integrated Marketing Communication Process

1.1. Identifying Customers/ Identifying Customers/ ProspectsProspects

2. Valuing of 2. Valuing of Customers/Customers/ProspectsProspects

3. Creating and3. Creating andDelivering Delivering Messages and Messages and IncentivesIncentives

4. Estimating Short4. Estimating Short--termtermReturnReturn--onon-- CustomerCustomer--InvestmentInvestment

5. Estimating 5. Estimating LongLong--TermTermBrand EquityBrand Equity

IMCIMC

IMC 5-Step Process (Cont’d)

Step 2: Valuation

Step 1: Identifying Customers/Prospects

•Customer Data

•Behavioral Aggregation

• Purchase Dynamics & Share of Requirements

• Valuation

• Behavioral Objectives

Income Income FlowsFlows

Product ProductUse Potential





Grow/MigrateRetain

TrialUsage

LoyalCustomer

TrialUsage Switch

SpecialUsage

CompetitiveCompetitiveCustomersCustomers

EmergingEmergingUsersUsers

Present Present CustomersCustomers

Customer/Prospect DataDemographics I Psychographics I Behavior/Usage I Geography

Step 3: Creating/DeliveringMessages and Incentives

• Budget, Allocate Resources

• Execute Plan• Measure Returns

Step 4: Estimating Short-Term ROCI•Timeframe•Forecast Return On Customer Investment

• Brand knowledge

• Objectives

• Mktg. Tools

• Contact Pts.

Messages / IncentivesMessages / Incentives Messages / IncentivesMessages / Incentives Messages / IncentivesMessages / Incentives

Product|Price|Dist.|Comm

DM | ADV | SP | PR |EV

Brand BrandContact Network



Actual ROCI/ROBI Actual ROCI /ROBI Actual ROCI/ROBI

Marcom Program Marcom Program Marcom Program

Business BrandBuilding Building

Estimated ROCI


Estimated ROCI


Estimated ROCI

Step 5: Estimating Long-Term Brand EquityLong-Term /Short-Term

AllocationLong-Term /Short-Term

AllocationLong-Term /Short-Term

Allocation

Product|Price|Dist.|Comm Product|Price|Dist.|Comm

DM | ADV | SP | PR |EV DM | ADV | SP | PR |EV

Step One: Customer Identification From Behavioral Database

Is Your Goal to…..

Acquire new customers?

Maintain or retain present customers?

Grow present customers?

Migrate present customers through your product portfolio?

Customer Identification Depends on How You Define “Customer” or “Prospect”

Traditional Mass Marketing Customer-Volume Assumption

Volume“Marketing to the Middle”

Volume“Marketing to the Middle”

Num

ber o

f Cus

tom

ers

Num

ber o

f Cus

tom

ers

Market Group Aggregation

Segmentation

Market

A B C D

Aggregation

AAA

A

A

B

BBBB BB

C

CCCCCC

DD

DDDD

CustomerChannel

DataSales

Credit/Financial

DataAccounting

Customer End-User

DataMarketing

TraditionalAttitudinal

DataResearch Dept.

Customer Feedback

DataCustomer Service

Product Use/Application

DataTech Support

Customer/ChannelDatabase

The Six Customer Markets

Source: McDonald, Christopher, Payne & Knox

CustomerMarkets

CustomerMarkets

InternalMarketsInternalMarkets

ReferralMarketsReferralMarkets

InfluenceMarkets

InfluenceMarkets

RecruitmentMarkets

RecruitmentMarkets

SupplierMarketsSupplierMarkets

IT

Programs

Logistics

DistributionCorporate

Comm

Investors/Shareholders

Marketing

CustomerBenefits

HR

EmployeeBenefits

Operations

Products

Employee/ Brand “White Space”

Employee/ Brand“White Space”

AchievingRelevanceAchievingRelevance

Purpose of a Database

DevelopProcessDevelopProcess

Build Relationships

Build Relationships

Serve External

Customers

Serve External

Customers

Develop CorporateMemory

Develop CorporateMemory

InvolveInternal

Customers

InvolveInternal

Customers

LearningOrganization

LearningOrganization

Step Two: Identifying and Valuing Customers and Prospects

Goals of Valuation Process:

Estimate value or importance of customers or prospects based on current usage or involvement

Forecast future usage over time

What is the “cost-to-serve” or “cost to support”?

Set behavioral objectives for communication programs – acquire, maintain, grow, migrate or bring back

Determine which customers to invest in -- and how much

What marketing communication tools to use to influence future behaviors

Putting a Value on Behaviors

Emerging Customer

$

Emerging Customer

$

CustomerRetention

$

CustomerRetention

$

Prospect$

Prospect$

CustomerMigration

$

CustomerMigration

$

LapsedCustomer

$

LapsedCustomer

$

Marketing OrganizationMarketing Organization

CustomerGrowth

$

CustomerGrowth

$

% # of Cume # Tot. Cume % of Min Avg.Rank Guests Guests Rev. Rev. Total Spend Spend

($000s) ($000s)

10% 1,942 1,942 $13,501 $13,501 57.5% $2,322 $6,95220% 1,942 3,884 $3,257 $16,758 71.4% $1,248 $1,67730% 1,942 5,826 $1,987 $18,745 79.9% $843 $1,02340% 1,942 7,768 $1,402 $20,148 85.9% $613 $72250% 1,942 9,710 $1,045 $21,192 90.3% $468 $53860% 1,942 11,652 $790 $21,983 93.7% $348 $40770% 1,942 13,594 $602 $22,585 96.3% $278 $31080% 1,942 15,536 $487 $23,072 98.3% $226 $25190% 1,942 17,478 $349 $23,421 99.8% $100 $180

100% 1,942 19,420 $40 $23,460 100.0% $0 $21

19,420 $23,460

30% of Customers = 80%+ of Total Revenue

Resort Hotel Customers Decile

Ranking by Total Revenue

Resort Customers Decile Ranking by Future Profitability

Avg Avg Cume %Cume Future Future Cume of Max

# of % of Profit/ Profit/ Future FutureDecile Cust. Cust. Cust. Decile Profit Profit

1 1,942 10% $200 $388,400 $388,400 45%2 1,942 20% $140 $271,880 $660,280 77%3 1,942 30% $60 $116,520 $776,800 91%4 1,942 40% $30 $58,260 $835,060 98%5 1,942 50% $10 $19,420 $854,480 100%6 1,942 60% ($5) ($9,710) $844,770 99%7 1,942 70% ($25) ($48,550) $796,220 93%8 1,942 80% ($50) ($97,100) $699,120 82%9 1,942 90% ($100) ($194,200) $504,920 59%

10 1,942 100% ($175) ($339,850) $165,070 19%

Total 19,420 100% $165,070

30% of Customers = 92% of Maximum Profit 50% of Customers = 100% of Maximum Profit

Determining Customer or Group

Financial Value

OurOurBrandBrand

CustomersCustomers

PenetrationPenetration

Total Total CustomersCustomers

X

BuyingBuyingRateRate

Annual DemandAnnual Demandper Customerper Customer

$ C-BV = P x BR x SOP x M $ C$ C--BVBV == PP x BR xx BR x SOP xSOP x M M

Contribution Margin

Contribution Contribution MarginMargin

ContributionContributionto Firmto Firm

MarginMargin

XX Brand XBrand X

Brand YBrand Y

ShareShare

Share of Share of PurchasesPurchases(%) in Units(%) in Units

Ink Cartridge Example AssumptionsPenetration (P)

1. Total identified customers in market 100,000

2. Number of Brand X customers 40,000

3. Brand X penetration 40%

Buying Rate (BR)

4. Average printers per customer 2

5. Average refills per printer 12

6. Annual average demand per customer 24

Ink Cartridge Example AssumptionsShare of Purchases (SOP)

7. Brand X Share of Purchases 65%

8. Brand X demand per customer (2 X 12 X.65) 15.60

Margin Contribution to Brand (M)

9. Gross margin per unit sold $6.50

Value of A Customer (P*BR*SOP*M)

10. Avg

Value/Brand X customer (2 X 12 X.65 X 6.50) $101.40

11. Avg

Value/Category customer (2 X 12 X 6.50) $156.00

Growth Levers For Ink Cartridge Marketer

Increase its Penetration of the category60,000 non-users of its brand

Increase its Share of PurchaseCapture the remaining of 35% of purchases from its existing customers

Use its database of customers and prospects to identify those with higher than average usage or potential

Further Analysis Showed Three Levels of Usage

Segment Avg

#

Refills/Year% of

Customers# of Customers

Heavy 34 or more(avg. 42.4)

20% 20,000

Medium 14-33 60% 60,000

Light 13 or Less(avg

7.5)

20% 20,000

Total in Database

100,000

And Three Types of Buying Behavior

Segment Behavior % of Customers

# of Customers

Loyal Give all or most of their SOP to favored

brand

15% 15,000

Switchers Split purchasing between 2-3

preferred brands

50% 60,000

Price Buyers Only buy on sale 35% 20,000

Overview of Customer Universe

Heavy20%

Medium60%

Light20%

Total

Loyal15%

3,000 9,000 3,000 15,000

Switchers50%

10,000 30,000 10,000 50,000

Price Buyers35%

7,000 21,000 7,000 35,000

Total 20,000 60,000 20,000 100,000

Strategy Formulation

Heavy20%

Medium60%

Light20%

Total

Loyal15%

3,000 9,000 3,000 15,000

Switchers50%

10,000 30,000 1,0000 50,000

Price Buyers35%

7,000 21,000 7,000 35,000

Total 20,000 60,000 20,000 100,000

Each customer is potentially worth42 X $6.50 = $273 in profitGoal: Acquire & Retain


Heavy20%

Medium60%

Light20%

Total

Loyal15%

3,000 9,000 3,000 15,000

Switchers50%

10,000 30,000 1,0000 50,000

Price Buyers35%

7,000 21,000 7,000 35,000

Total 20,000 60,000 20,000 100,000

Each customer is potentially worth7.5 X $4.50 = $33.75 in profit (at best)Goal: Retain as cost effectively as possible


Heavy20%

Medium60%

Light20%

Total

Loyal15%

3,000 9,000 3,000 15,000

Switchers50%

10,000 30,000 1,0000 50,000

Price Buyers35%

7,000 21,000 7,000 35,000

Total 20,000 60,000 20,000 100,000

Each customer is potentially worth24 X .65 X $6.50 = $101.40 in profitGoal: Convert to Loyal

Step Three: Developing and Delivering Effective Marketing Messages and Incentives

Most Communication Programs Are Planned Using Accounting Rules Advertising

Direct marketing

Sales

Events

Sales promotion

Determined by which group is charged with the expense or cost of the program

Marketer’s View of

Communication Planning

Product MarketingProduct MarketingProduct Marketing

SalesPromotion

SalesPromotion

Events/Sponsorships

Events/Sponsorships

DirectMail

DirectMail

PublicRelationsPublic

RelationsMedia

AdvertisingMedia

Advertising

Customers Customers

AttitudesAttitudes BehaviorsBehaviors

?

Product DesignProduct Design

PricingPricing

DistributionDistribution

AdvertisingAdvertisingTrade ShowsTrade Shows

Advocates Advocates

Press Press andand

MediaMedia

Customer Customer ServiceService

Customer’s View of

Communication

Information Processing Model

Sensoring RegisterSensoringSensoring RegisterRegister

Short-Term MemoryShortShort--Term MemoryTerm Memory

Long-Term MemoryLongLong--Term MemoryTerm Memory

Incoming InformationIncoming InformationIncoming Information

SignalSignalStrengthStrength RelevanceRelevance

RehearsalRehearsal RetrievalRetrieval

Sender’s Field of

Experience

Receiver’s Field of

Experience

Source/Sender

Encoding M E S S A G E Decoding Receiver

F E

E D

B A

C K

R E

S P

O N

S E

N O I S E

How Communication Works

BrandCultureBrand

Culture

BrandFunctionality

BrandPersonality

Brand Imagery

Product Attributes

ProductCategory

Origin/ Ingredients

UserImagery

CorporateReputation

CoreCompetencies

Business Methods

OrganizationalValues

VisualImagery

Metaphor

Heritage

Quality/Value

PersonalityTraits

PersonalValues

Characters/Spokespeople Brand

CompetitiveContext

CompetitiveContext

DirectCompetitors

IndirectCompetitors

Brand Association Network

UseImagery

Role of Brand Association Networks in Marketing Communication

In order to change (or reinforce) customer behavior, we must change (or reinforce) their brand association networks

Understanding Brand Association Networks helps us know what and how customers feel and think about our brand

Brand Contacts:

Any information bearing experience a customer or prospect has with the brand that can influence their purchase or repurchase decisions

Brand Contacts

Brand Associations

Brand Behavior

ContactPoints

ExpectationAt Each

Message Sent

Experience At Each

PositiveOr Negative

Importance Of Contact

Target For Improvement

Brand Contact Audit Target Segment: ____________

ImportancePoint of Expect- Positive Of Contact Target toBrand ation at Experience Brand or To Brand Reinforce orContact Contact At Contact Message Negative? Judgment Improve?

Saw an ad in a Positive Became These ink Positive High Reinforcemagazine portrayal of interestd in cartridges will

new feaures the brand help me be morein the line productive

Went to Expected to Salesperson Store staff Negative High Improvethe store find on the tried to sell not conveniced

shelf me another of brand's valuebrand

Called Customer Expect to Put on hold Company does Negative High ImproveService get have not think I

my problem am importantsolvedpromptly

Brand Contact AuditTarget Segment: Printer Ink Cartridges

The Insights Gained From Studying Brand Networks and Brand Contacts Helps Us Develop an Integrated Marketing Communication Delivery Plan

We’ll use the 5 Rs of IMC

1.

Relevance

2.

Receptivity

3.

Response

4.

Recognition

5.

Relationship

How can company or product/service use its knowledge of the customer to build a strong and on-going relationship with them?

Step Four: Estimating the Return-on- Investments in IMC (ROI, ROCI and ROBI)

Multi-Year IMC Measurement Process Based on Annual Sales Revenue by Year

1 2 3 4 5 6 7 8 9 10

(A) Short-term Historical Analysis

(C) Long-term Brand Equity Measures

(B)Predictive Year

Analytics

Once The Value of a Customer or Group of Customers Is Determined, the Marketer Can Invest in Them and Estimate Future Returns Through Probability Models

Compet- New &Present itive Emerging

Users Users Users

1 Present Income Flow in Category $ $ $2 Share of Requirements % % %3 Customer Income Flow to Brand $ $ $4 Contribution Margin % % % %5 Contribution Margin $ $ $ $6 Income Flow Without A Brand

Communication Program $ $ $7 Contribution Margin Without A

Brand Communication Program $ $ $8 Income Flow With A Brand

Communication Program $ $ $9 Gross Contribution Margin With A

Brand Communication Program $ $ $10 Brand Communication Investment $ $ $11 Net Contribution Margin $ $ $12 Difference in Contribution Margins With

and Without Brand Communication $ $ $13 Incremental Gain or Loss $ $ $14 Return On Investment % % %

Basic RBasic R--OO--CC--I ProcessI Process

Aggregated New orCustomer Group: Loyals Switchers Emerging Problem

Behavioral Goal: Retain Grow Share Acquire Divest

Category Assumptions1 Historical Category Demand $1,000 $1,000 $1,000 $1,0002 Environmental Changes in Demand 2% 5% 20% -20%3 Demand Adjusted

Environment Change $1,020 $1,050 $1,200 $8004 Impact of Competitive Activities -1% -5% -5% -5%5 Demand Adjusted for Competition $1,010 $998 $1,140 $760

Base Income Flow Assumptions6 Base Share of Requirement 60% 40% 10% 15%7 Base Income Flow to Us $606 $399 $114 $1148 Non-Communication Costs

(i.e Product, Fixed, G&A etc) 75% 80% 80% 90%9 Contribution Margin % 25% 20% 20% 10%

10 Contribution Margin $ $151 $80 $23 $11

RR--OO--CC--I ExampleI ExampleTable # 1Table # 1



Scenario A: No Communications Program Investment

11 Change in Share of Requirement -20% -20% -30% -20%12 Resulting Share of Requirement 48% 32% 7% 12%13 Resulting Customer Income Flow $485 $319 $80 $9114 Less: Non-Communication Costs

(i.e Product, Fixed, G&A etc) ($364) ($255) ($64) ($82)15 Less: Marketing Communication $0 $0 $0 $016 Net Contribution $121 $64 $16 $9




Scenario B: Communications Program Investment

17 Brand Communication Effort A 3.00$ 4.00$ 4.00$ 5.00$ 18 Brand Contact Points N 2 1 1 019 Brand Communication Effort B 2.50$ 3.75$ 3.50$ 4.00$ 20 Brand Contact Points N 2 1 2 021 Brand Communication Effort C 2.00$ 2.50$ 2.75$ 1.00$ 22 Brand Contact Points N 2 2 1 023 Brand Communication Effort D 1.50$ 1.75$ 2.00$ 3.50$ 24 Brand Contact Points N 2 1 1 125 Brand Communication Effort E 1.00$ 1.00$ 1.00$ 1.00$ 26 Brand Contact Points N 0 1 1 127 Total Communications Investment 18.00$ 15.50$ 16.75$ 4.50$

28 Change in Share of Requirement 0% 10% 40% 1%29 Resulting Share of Requirement 60% 44% 14% 15%30 Customer Income Flow to Us $606 $439 $160 $11531 Less: Non-Communication Costs

(Product, Fixed, G&A etc) ($454) ($351) ($128) ($104)32 Less: Marketing Communications ($18) ($16) ($17) ($5)33 Net Contribution $133 $72 $15 $7




ROI Calulcation

34 Net Contribution Scenario "A" $121 $64 $16 $935 Net Contribution Scenario "B" $133 $72 $15 $736 Incremental Gain/Loss vs. "No $12.29 $8.44 ($0.79) ($2.11)

Communication Investment" Scenario37 Incremental ROI 68% 54% -5% -47%


Step Five: Budgeting, Allocation, Evaluation and Recycling

Budgeting, Allocating and Evaluating Integrated Marketing Communication Programs Determining the right amount to invest

Allocating resources among best consumers and prospects

Allocating resources among marketing and communication alternatives

Re-thinking the financial parameters of marketing and communication

Implementing the IMC program

Measure results and recycle

In the IMC Process, Budgeting and Allocation Are…..At the end of the process, not the beginning

Invest to get returns, not to buy communication “stuff”Proper allocation of finite resources

Ability to report value to management

IMC Communication Planning Matrix

BrandBrandMessagesMessages

BrandBrandIncentivesIncentives

Short-Term

(Fiscal Year)

Long-Term

(Future Years)

We Can Determine Our Budget Level Based On…

Steps One and Two of the process

Customer identification

Customer valuation

Customer investment

Estimated customer returns

And, The Behavioral Goals We Set for the Brand Communication Program Customer acquisition

Customer retention

Customer growth

Customer migration

We Summarize Our Investments in Customers By Group…… And, That Determines Our Investment and Return Levels

Customer Investment Process

MeasurableCustomerBehavior-$

MeasurableCustomerBehavior-$

PresentCustomerValue-$

PresentCustomerValue-$

Measurable, Marketer-Controlled Message/Incentive

New Return Measures

UncontrollableMessages From

Environment

Base Measure$ Income Flows

Over The Huddle

Paradigm

Vertical Structure-Asia

Categorization-West

Turf Battle

Cross Functional-Internal

Among Suppliers-External

Methodology

References;

* Gardner, H.(2004),Changing Mind

* Hofstede, G. et al(1989), Culture and Organizations * Hofstede, G. et al(2002),Exploring Culture

* Johansson,J.(2004),In Your Face

* Nisbett, R.(2003),The Geography of Thought

* Smalley,G.(2004),The DNA of Relationship

* Stiglitz, J.(2003),Globalization And Its Discontents

* Surowiecki, J.(2004),The Wisdom of Crowds * Tolle,E.(1999),The Power of Now

* Wind, Y. et al(2004),The Power of Impossible Thinking

* Zonis,M. et al(2003), The Kimchi

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