Tag: multichannel marketing

Multichannel Marketing and Integrated Marketing Communications

In the introductory chapter of Principles and Practices of Marketing, the marketing text used by 99% of UK marketing undergraduates, David Jobber compares organisational efficiency against strategic effectiveness.  He describes four states:

  1.  Organisations with efficient procedures and effective strategies will likely thrive.
  2. Organisations with inefficient procedures and ineffective strategies will die quickly.
  3. Organisations with inefficient procedures and effective strategies will survive.
  4. Organisations with efficient procedures and ineffective strategies will die slowly.

Many small businesses will fit in one of the latter three categories.  For example, only around 20% of small business start-ups will be operational after five years.  Eighty percent of catering businesses; restaurants, takeaways, etc; go out of business within 12 months.

In the last blog entry we discussed digital marketing and the long-tail statistical distribution.  The search engine optimisation strategies of many small firms will fit into state four above.  The long tail distribution makes it highly unlikely that they will achieve the prominence required to achieve a sufficiently high Page ranking.  Their procedures for search engine optimisation may be efficient but as a promotional strategy SEO will be ineffective.

Small firms pursuing SEO as their primary communications strategy may be inefficient in the use of communications budgets and that money may be more effectively spent elsewhere.

I see lots of small businesses advertising for what I would describe as a marketing all-rounder.  Someone to develop marketing strategies whilst at the same time writing copy, building websites and doing graphic design.  I am surprised that they think such people exist as web design, graphic design and copywriting are distinct skill sets.  I also see lots of small firms who appear to be putting their eggs in one basket, social media.  In many cases these are small local businesses who may be better served with more traditional marketing communications tools.

When I have expressed these views, I am treated as a Luddite with something against digital marketing.  This is a false accusation.  Digital marketing should be part of a wider communications strategy.  What part it plays in your communications strategy will depend on the needs, wants and expectations of your target customer base.  For example, a young fashion brand, such as Ugg boots, will have to be all over digital channels including social media.  I saw an advertisement the other day for an industrial lubricants company wanting someone to manage their twitter account.  I suspect this company would be better placed using their social media budget on improving their direct marketing and sales force.

Digital marketing compliments traditional marketing channels, it does not replace them.  Even digital giants, such as Amazon and Ebay use traditional television and print advertising.  They do not limit themselves to digital channels alone.

Digital should not be treated as a cheap option.  Done properly, digital marketing will cost the same as traditional marketing for a similar return on investment. Digital is not cheap and it is not easy.  it is every bit as costly and complicated as other marketing channels.

Social media marketing often relies on the creation of viral content.  As there are no guarantees as to what type of content will ‘go viral’, this means it can be a very risky strategy.

Even experts in digital marketing communications such as Dave Chaffey advocate the use of a wider multichannel communications strategy.  You must develop an appropriate mix of traditional and digital communications channels; a multichannel marketing strategy.

Stone and Shan (2002) described the goal of marketing communications as, “to manage each channel profitably whilst optimising the attributes of each channel so that value is offered to each type of customer”.

Target customers should have access to products and services in the best way to match their lifestyle and behavioural needs.

When discussing the role of promotion in the marketing mix, many marketers use the acronym DRIP.  This relates to:

  • Differentiate – make your offer distinct and different to that of your competitors
  • Remind – existing and lapsed consumers of your offer
  • Inform – Consumers of the attributes of your offer
  • Persuade – New customers to purchase your offer or to switch from your competitors. Persuade existing customers to buy more or to move up to a more expensive option.

In his book Marketing Communications, Chris Fill goes further and describes the purpose of marketing communications as:

  1.  To create a need
  2. To create, build and maintain you brand image, brand awareness and corporate reputation
  3. To educate
  4. To inform
  5. To provide a response
  6. To reinforce competitive advantage
  7. To influence decision makers
  8. to build relationships
  9. To increase profits (turnover) through up-selling and cross-selling.

Traditional retailers have struggled with the introduction of digital giants such as Amazon and in some respects have been hamstrung with large, expensive property portfolios and limited product offerings.  As a reaction many are trying to develop multichannel marketing strategies.  They are adapting their offers to create greater value.  This could be through the creation of destination stores which are as much about offering entertainment as they are about selling goods.  Customers go for the experience as much as the product or service on offer.

Mercedes have taken this concept one step further.  There is a Mercedes owned café on the Champs-Elysée in Paris.  It doesn’t sell cars.  It offers meals and drinks like any other café.  The purpose of the café is to differentiate the Mercedes brand and to put the brand into people’s’ consciousness away from its traditional frame of reference.

Many traditional retailers now offer in store click and collect facilities.  This allows goods to be ordered over the internet and when consumers come to collect their items, there are opportunities for cross-selling other products.  Click and collect is as much about store footfall as it is about providing a product delivery option.

The idea that you can reach consumers through a single communications channel has long since been rejected.  You have to use a number of channels, a multichannel approach.

Markets and audiences are fragmenting.  Take television.  In the 1980s, and audience of under ten million was seen as poor for a prime time programme.  Doctor Who was cancelled in 1989 with an average audience of over seven million.  Today, with the multiplicity of channels on offer, an audience in the UK of 5 million for a particular show is seen as good.

Although this fragmentation of channels is seen as harming the advertising revenues of channel providers, it means that there are increased opportunities for a brand to touch the consciousness of consumers.  This has meant the restructuring of operations to facilitate the use of multiple channels and to target the preferred ‘touch points’ of your chosen market segments.

To make best use of multiple communication channels, you need to categorise your customer base in terms of account potential and the strength of the relationship you have with them:

  1. A customer with which you have a strong relationship and which offers high account potential should be a strategic investment using communications techniques such as social media, a personal account manager and access to an extranet.
  2. Where there is strong relationship but low account potential, you need to adjust and maintain the relationship accordingly.  This could be through the use of email, telesales or the use of sales representatives.
  3. Where there is a weak relationship but strong potential, you need to select accounts and build on the potential.  This could be through telephone contact or the use of direct mail.
  4. Where there is a weak relationship and low potential, communications should be minimised e.g. the use of email alone.

There are many barriers to effective communication:

  1. Variation of style or tone – for example, you advertising is friendly and informal but your written communications are officious or even threatening.
  2. There is a disconnection between word and deed – You do not do as promised.
  3. Distance – the further apart we are, the less we communicate.
  4. Stereotyping – making assumptions (usually negative).  This can include improperly segmenting a market e.g. categorising all millennials as a single undifferentiated mass.  The over-50s have often been treated in such a way.
  5. Information overload – Offering too much information or too many types of communication.
  6. Target consumers not listening – Being distracted by other topics so message is not heard.  This can also be caused by not listening to your customers.
  7. External ‘Noise’ – today we are bombarded by messages so you must be explicit and clear to catch consumers attention.
  8. Consumers internal filters – We all have prejudices and we filter information to suit those prejudices.

The existence of such barriers have led to many organisations following an integrated communications strategy.  With such a policy all communications an organisation makes with its customers are treated as marketing communications.  There is a consistent style and tone across all forms of communication and at all stages of the customer life cycle.

A failure to integrate communications can make your offer seem clunky and unsophisticated.  It can turn lapsed consumers into actively hostile consumers.

Integrated marketing communications strategies require a strategic focus across all parts of an organisation not just the marketing department.  You need to understand how all parts of your organisation communicate and the impact those communications have.  You must measure the effectiveness of your communications e.g. ROI for advertising or customer satisfaction for customer services.

Integrated marketing communications broadly include:

  1.  Culture and Behaviour – Brand personality, organisational values, how staff behave to each other, interpersonal skills, communication performance, integrity.
  2. Promotional tools and techniques – PR, advertising, other written communications.
  3. Personal selling – the activities of your sales force
  4. The product or service offered
  5. Customer service. (this includes the three additional Ps of the extended marketing mix, Process, people and physical evidence)

The risk of inconsistent integrated marketing communications is inconsistent promise delivery and an inconsistent customer experience.  This can lead to the loss of customers and poor word of mouth.

So, in a world where communications channels are fragmenting and where there is never-ending communications noise, You need to follow a multichannel communications strategy and integrate that strategy across your business activities.

 

Distribution Channels: The Place Element of the Marketing Mix

One definition of marketing is as the process of developing profitable customer relationships.  The process of marketing has a dual role; to attract new customers through promoting superior value; and to retain existing customers by delivering satisfaction.  Marketing is about delivering on your promises to create competitive advantage.

Good distribution channels (now more often described as marketing channels); the place element of the marketing mix; can be a strong contributory factor to the delivery of both competitive advantage and customer value.

We live in a world where it is highly unusual for manufacturers of goods and services to sell directly to their end consumers.

Even SMEs who sell over the internet have to deal with channel intermediaries.  You have to have a relationship with your internet service provider; you may sell through online portals such as Amazon or EBay; you may receive payment through services such as PayPal; and, of course you have to rely on logistics firms such as Yodel and Royal Mail to get your products delivered.

Successful manufacturing companies do not only need to build relationships with consumers; they need to build relationships with the members of your supply and distribution chain.  You need to build upstream relationships with your suppliers (supply chain relationships) as well as downstream relationships with distributors, wholesalers and retailers (your demand chain).

Many organisations have abandoned the terms supply chain and demand chain.  Instead they use the term Value Delivery Network.  This creates a sense that all parties within the network are working to a common goal and are all contributing to the delivery of customer value.

In making products and services readily available to consumers, members of marketing channels often perform key functions.  Without their contribution to the delivery of goods and services, transactions would never be completed.

Channel members provide:

  1. Information – about consumers, competitors and other stakeholders which allows manufacturers to plan and which aids exchange.
  2. Promotion – developing and spreading positive messages about your offer.
  3. Contact – finding and communicating with potential buyers
  4. Matching – shaping offers to meet buyer’s needs including activities such as assembly, packaging and grading.
  5. Negotiation  – reaching agreements with consumers on price and other terms so that ownership and possession of products can be transferred.

These functions are in addition services such as physical distribution and financing.  They also mean that aspects of risk can be spread across the channel.

A conventional marketing channel consists of one or more independent organisations such as suppliers, wholesalers and retailers each of which is a separate business seeking to maximise their profit margins.  Often, the desire of these organisations to maximise their profits overshadows the need for the chain as a whole to be profitable.

In the UK, dairy farmers have had a long dispute with supermarket chains over the price of milk. They argue that the supermarkets are maximising their profits by paying wholesale milk prices which are below the cost of production.  This, argue the farmers, is making dairy-farming unprofitable and is putting their businesses at risk.

Some producers have therefore chosen to set up vertical marketing systems.  A VMS is where Producers, Wholesalers and Retailers work together and act as a unified system. Often the channel is wholly owned by one organisation but a VMS can be contractual or imposed by the power of one participant who can force other channel members to participate.

An example of a vertical marketing system is the franchise opportunities operated by MacDonald’s and other fast food chains.  Many fast food restaurants are independently run businesses badged with the chains identity.  It is MacDonald’s who control virtually all the aspects of the business; from the restaurant layout to the food served. The franchisee takes a share of the profits but has to take much of the business risk.

An example of a wholly owned vertical marketing system is how milk used to be delivered in the UK. Companies such as Associated Dairies used to own the dairy farms, the creameries and controlled the milk floats which delivered the bottles of milk to the doorstep.  Associated Dairies became the supermarket chain Asda.

Macdonald’s franchises are an example of a contractual VMS.

An administered vertical marketing system is where cooperation is achieved through market power.  For example Kraft Foods have enough power in the market they can control where in the supermarket and how their products are displayed. Similarly, cosmetics firms closely control how their goods are displayed in department stores and often don’t allow retailers to restock displays; instead they send in their own staff to undertake that role.

Horizontal marketing systems are where two or more companies join together to follow a new marketing opportunity.  It is the creation of a marketing channel through partnership.

An example of a horizontal marketing system from America is the partnership deal between Wal-Mart and MacDonald’s.  Wal-Mart allowed Macdonald’s to set up express outlets in their supermarkets.  Macdonald’s get to take advantage of Wal-Mart’s high levels of customer foot fall and Wal-Mart get a food outlet to feed hungry shoppers.

Some businesses use multi-channel marketing.  This is where a combination of traditional, vertical and horizontal marketing channels are used in consort.

As we have seen, MacDonald’s are one such company, they own their own restaurants (direct marketing channel);  they offer franchises (a contractual vertical marketing system); and they have a partnership deal with Wal-Mart (a horizontal marketing system).

Many SMEs may be unwittingly using multi-level marketing.  I know of one jewellery designer who sells over the net, runs pop-up shops, attends craft fairs and has a deal with a local family jewellery shop to sell her wares.  She has direct marketing, vertical marketing and horizontal marketing system in place to distribute her goods.

When deciding how you are going to distribute your goods, it is worth planning your marketing channels in a way which maximises value and which offers the most in terms of competitive advantage to your business.