Integrated Marketing Needs

PR's Stakeholder Focus

by

Sandra E. Morarity, Ph.D.

University of Colorado

As part of an effort to integrate its marketing effort, AT&T recently named Marilyn Laurie EVP of brand strategy and marketing communications. Previously EVP-public relations and corporate advertising, Laurie's mission is to develop a more unified corporate brand and eliminate fragmentation. Such moves underline a growing recognition that public relations' expertise is a critical element in integrated marketing (IM), which focuses on driving brand value rather than just increasing sales and share.

Ever since PR expert Regis McKenna's landmark book on relationship marketing, marketing managers have been challenged to better use relationship programs and break from image and promotion-driven approaches with their emphasis on pumping quarterly sales figures.

Another advantage of making PR people a part of the integrated marketing team is that they recognize the importance of focusing on more than just customers. They understand that brand value is determined by the quality of relationships, not only with customers, but with all stakeholders-employees, investors, suppliers, resellers, financial analysts, the media, the community, special interest groups, and government and regulators.

This does not mean that marketing should be responsible for managing each stakeholder group, but rather, that there should be cross-functional planning and monitoring of all stakeholder relationship programs in order to maintain strategic consistency and cut down on the fragmentation that so concerns AT&T.

A well-managed IM program identifies all key stakeholder groups and the impact, both positive and negative, that each can have on an organization. As Tom

Duncan and I point out in Driving Brand Value, there are five reasons why all stakeholder groups must be taken into consideration in integrated marketing:

1. A value field of interactions: A company exists within a value field (rather than a linear value chain) of stakeholder interactions. Companies communicate directly with customers and retailers at the same time retailers are talking with customers and customers are talking among themselves. The interactions among suppliers, distributors, and even competitors can affect brand value.

2. Stakeholders overlap: An example of the integrated nature of stakeholder relationships is the employee stakeholder group where a person may also be a customer, an investor, and a voter in the local community. These interacting and overlapping relationships demand that a company be strategically consistent in its basic core values and brand messages. A company can't say one thing to investors, something else to employees, and still another message to customers.

3. Integrity builds trust: Integration means unity of effort or purpose. When an organization becomes more integrated, its interactions become more consistent, its reputation more distinct, and its stakeholders more trustful. Integration produces integrity because an organization seen as working together rather than as a collection of fragmented, autonomous functions is perceived as being more sound and trustworthy-prerequisites for sustaining relationships.

4. Brand equity equals support: Just as brand share is the result of a brand's customer franchise, brand equity is the result of a company's stakeholder franchise. All stakeholders, not just customers, choose to what extent they support a brand or company. People have a choice where they work; investors have a choice of investment opportunities; and customers have an ever increasing choice of what they buy. In other words, people choose to be stakeholders. And when they do, this gives them the right to understand and influence what a company does. A brand exists in people's minds; it is owned by them, as much as by the company.

5. Profitability is the relationship bottom-line: Profits can be improved by increasing revenues and/or decreasing costs. Therefore, all stakeholders can affect the bottom line as their actions can have an impact on costs, as well as revenues. Both can increase or decrease depending on the efforts, attitudes, ideas, and support of all stakeholders. Actions of groups such as the financial community, government regulators, and employees can often affect profits more quickly and significantly than can changes in customer behavior.

Direct marketing has found that current customers are five to ten times less costly to sell to, therefore, what is needed now is a process for tracking and managing profitable brand relationships. Following is a set of six relationship metrics adapted from more traditional marketing and PR measures to help track and manage the profitability of integrated relationship programs:

1. Stakeholder mapping: By mapping the points where key stakeholders overlap, it is possible to better estimate the actual impact of their perceptions. Where is the potential for conflicting messages and how much damage can those messages ultimately have on customer behavior?

2. Profitability segmentation: In most cases, it makes more sense to invest in relationship building with profitable customers or those who have the potential to become profitable. Tracking the customer-profitability ratio can help determine just how successful a company's relationship building program is.

3. Lifetime customer value quintile analysis: By tracking average customer profitability in each quintile segment, it is possible to determine if average retention and profitability per customer are growing. It is also possible to identify the 20 percent who are most loyal and potential brand advocates, even for package goods.

4. Recency index: Direct response has found that the more frequently and more recently people have made a purchase, the more likely they are to buy in the future. In the same way, tracking the average "recency of purchase" can be a good indication of whether customers are becoming more or less loyal.

5. Referral index: Because referrals are one of the key behaviors of brand advocates-the highest level of brand relationships-a higher referral index indicates an increasing number of brand advocates, which signals increased brand value.

6. Share of customer: Because the most profitable customers, especially in packaged goods categories, buy multiple brands, one relationship objective is to get more of those customers' category purchases. Scanner data is helpful in determining this trend.

The unit of value in business today is no longer products but relationships. A company with a warehouse full of products is not nearly as rich as a company with a database full of profitable relationships with customers and other key stakeholders. As PR professionals understand, the corporate focus of integrated marketing must be on relationships and on more audiences than just customers. Only in this way can an organization have a unified brand image and eliminate the fragmentation that can destroy its brand/corporate reputation.



Sandra Moriarty, Ph.D. is a professor of IMC at the University of Colorado and co-author of Driving Brand Value (McGraw-Hill, 1997), from which some of this article is taken.