Download Live communication produces sustained increase in customer

Live communication produces sustained increase in customer loyalty
Direct dialogue scores high in effectiveness comparison
Enormous potential for effectiveness and efficiency is still to be exploited
through increased use of live communication instruments in brand
communication. Using these instruments also reduces the risk of losing
customers in critical life cycle phases.
By Dagobert Hartmann and Manfred Kirchgeorg
Companies should follow the well-known economic principle of doing the right
things (effectiveness) with limited resources in a very profitable way (efficiency).
Still, for the past two years, not a month has gone by without the topic of
effectiveness and efficiency of brand communication being at top of the list of
conferences, professional magazines and round table discussions.1
The state of efficiency in German companies is the subject of the current
“Uniplan LiveTrends 2004“ study. This was carried out jointly by live
communication agency Uniplan and the Marketing Management chair at the
HHL - Leipzig Graduate School of Management in May 2004.2 The
representative study interviewed 387 marketing and communication managers
about the effectiveness and efficiency of live communication.
Live communication includes all personal communication instruments, such as
trade fairs, showrooms, events, roadshows, promotions and sponsoring.
Whereas impersonal communication is prevalent in traditional communication
methods, instruments of live communication focus on the personal encounter
with people and encourage the target group to actively experience the brand in
a staged and often emotionally appealing environment.
1
2
Cf. e.g. the documented Round Table Discussion of the Marketing Journal on “Die
Effizienzlüge” (“The efficiency lie”) in its May issue, no. 5, 2004, pp 46-51.
Cf. the detailed results of the M. Kirchgeorg and M. Klante study on “Trendbarometer Live
Communication 2003”, published by Uniplan, Kerpen 2003, p. 24 et seq.
2
This article examines the significance of live communication in the
communication mix and its contribution to success. It also shows the superiority
of live communication instruments with regard to establishing and widening
valuable customer relationships.
Successful management of the customer-brand relationship
Brand management is relationship management, now more than ever.
Customers remain loyal to strong brands for a long time. Strong brands can
turn potential new customers into loyal, regular customers. However, only very
few brands succeed in retaining their new customers over all phases of a
customer-brand relationship.
High churn rates in the customer relationship cycle (see fig. 1) are often
incurred in the following two phases: in the transition from brand awareness to
brand familiarity and in securing customer loyalty after a purchase. Traditional
communication instruments reach their limits especially in these two “problem
areas”. This is where live communication can demonstrate its strengths. Live
communication instruments initiate personal dialogue with the customer and
turn the experience of a brand into a memorable event. Given this background,
companies across all sectors are verging towards a strategic re-orientation with
regard to their communication mix.
3
Problem areas in the customer loyalty cycle
Share Target
Group
100%
Awareness
Familiarity
Purchase
Intention
Purchase
Loyalty
Repurchase
Binding Phases
Fig. 1: Problem areas in the customer loyalty cycle
Strategic re-orientation in the communication mix
The current “Uniplan LiveTrends 2004” study proves these points. Figure 2
shows the development of communication instruments in the medium term as
seen by marketing managers.
Problem areas in the customer loyalty cycle
Significance Ranking based on
Budget Share for 2004
Significance Change untill 2004*
Decreasing
Significance
1. Traditional Advertising
2. Trade Fair Engagements
Increasing
Significance
-7,3%
-8,8%
3. Events
34,7%
4. Promotions
17,1%
5. Public Relations
42,9%
6. Internet / Digital Communications
74,9%
7. Direct Marketing
8. Sponsoring
13,7%
-7,0%
2004 nmax = 387
*calculated as a net effect of propotions of increasing and decreasing significance
Fig. 2: Strategic changes in the significance of instruments in the communication mix
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The two most budget-intensive instruments are decreasing considerably in their
significance: traditional advertising is losing its dominant position but remains
the leading strategic instrument. Participation in trade fairs is also showing
strong consolidation in the medium term. According to the respondents, the
main reason for this is the lack of proof of efficiency for the trade fair
instrument. The strongest drivers of the development are the internet and public
relations. Events are also growing in significance. They enable the company to
reach its target group directly and emotionally. Promotional events will be used
much more in future, as short-term special offer sales can be achieved with this
instrument. Sponsoring, on the other hand, is slightly in decline. Here,
respondents are again very critical as far as proof of efficiency is concerned.
Two trends are relevant for future developments: on the one hand, a stronger
orientation towards direct, emotional and trust-inspiring communication is
becoming apparent; on the other hand, the pressure on individual instruments
to achieve high effectiveness and efficiency ratings will increase even further. In
the future, companies will therefore have to embark on a strategic re-orientation
of their communication mix in response to changed priorities regarding
communication instruments and to top management’s increased controlling
requirements.
Effectiveness and efficiency put to the test
In this context, controlling and optimising the communication mix according to
effectiveness and efficiency aspects takes on a new meaning.
The cross-sector evaluation of the individual communication instruments is
shown in the effectiveness/efficiency matrix (fig. 3). The evaluations are based
on success analyses as well as on subjective assessments made by marketing
managers. To ensure that all respondents had the same idea of what is meant
by effectiveness and efficiency, both terms were explained before the interview
took place. In this case, effectiveness should be perceived as “return on
objectives” and efficiency as “return on investment”.
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Effectiveness/efficiency matrix of communication instruments in the overall
evaluation
Ø Efficiency
2
2,5
3
3,5
4
3,5
3
2,5
2
Digital Communications
Public Relations
Events
Direct Marketing
Promotions
Traditional Advertising
Sponsoring
Trade Fair Engagement
4
n = 387; Ø Efficiency = 2,88; Ø Effectiveness = 2,66; 1 = very high Efficiency and Effectiveness respectively; 6 = very low Efficiency and
Effectiveness respectively
Ellipses indicate t he indust ry related scatter when evaluating t he instruments
Fig. 3: Effectiveness/efficiency matrix of communication instruments in the overall evaluation
The upper right-hand quadrant of the matrix shows the particularly successful
instruments. These include the Internet, Public Relations and events.
Sponsoring is one of the “underachievers” (lower left-hand quadrant). A critical
assessment is made of the “mid-field” instruments: promotions and direct
marketing as well as advertising and trade fairs.
Trade fairs in particular have given rise to the question of how efficient it is to
participate in them, given the high budgetary costs involved. The survey shows
that trade fair engagements focus increasingly on leading shows and company
events as well as in-house exhibitions, as opposed to traditional trade fair
participation. Marketing managers regard 65 per cent of all appearances at
trade fairs in their sector as interchangeable. Conventional appearances at
trade fairs are therefore put to the test. Strong trade fairs are “unique”, i.e.
unlike anything else. Only this uniqueness will allow a company to benefit from
the trade fair instrument and to fully exploit its advantages and efficiency
reserves – ordinary, standard appearances at trade fairs can never achieve
this.
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Fig. 3 shows, in the form of ellipses, how the individual live communication
instruments are spread across the sectors. With the exception of the food
industry, events are clearly rated as the most successful form of live
communication across all sectors. Trade fairs, however, show a larger disparity
between the sectors. The automotive, telecom and industrial goods sectors
show the highest success rating for trade fairs, whereas the food, media and
fashion sectors show the lowest.
These results demonstrate the following two points: on the one hand, they
show that live communication still holds enormous potential to increase
effectiveness and efficiency; on the other hand, it becomes apparent that
generalised evaluations regarding effectiveness and efficiency are not very
useful. Two levers are particularly important in order to exploit effectiveness
and efficiency reserves in a targeted way: (1) harmonisation of the live
communication activities with the other instruments in the communication mix
and (2) their targeted use in the customer-relationship cycle.
Live communication is prevalent in the management of customer
relationships
The results of the effectiveness evaluation of live communication instruments in
comparison with traditional advertising in different customer-relationship phases
are shown in fig. 4.
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Effectiveness evaluation of live communication and traditional advertising in
different customer-relationship phases
24,0%
35,0%
62,0%
76,0%
65,0%
38,0%
Awareness
Familiarity
15,0%
52,0%
Preference
51,0%
49,0%
Purchase
29,0%
Loyalty
65,0%
85,0%
48,0%
79,0%
Binding Phases
Automotive
nmax = 30
47,0%
53,0%
Familiarity
Preference
34,0%
38,0%
66,0%
62,0%
Awareness
Purchase
60,0%
40,0%
Familiarity
43,0%
57,0%
75,0%
40,0%
39,0%
28,0%
60,0%
61,0%
Familiarity
Preference
Purchase
21,0%
27,0%
18,0%
Awareness
79,0%
73,0%
Loyalty
21,0%
Familiarity
Preference
Purchase
Loyalty
Familiarity
Preference
Fashion
n max = 38
Binding Phases
Industry
n max = 47
79,0%
43,0%
40,0%
Binding Phases
Awareness
Binding Phases
72,0%
57,0%
60,0%
Food
n max = 55
48,0%
Loyalty
64,0%
Health
nmax = 31
62,0%
Purchase
36,0%
Loyalty
25,0%
52,0%
Preference
82,0%
35,0%
38,0%
16,0%
67,0%
64,0%
Binding Phases
Awareness
21,0%
84,0%
71,0%
33,0%
36,0%
Total
nmax = 387
Binding Phases
Awareness
Purchase
Loyalty
Advantage live communication
Advantage advertising
Fig. 4: Effectiveness evaluation of live communication and traditional advertising in different
customer-relationship phases
To create brand awareness (phase 1), 62 per cent of all decision-makers
favour traditional communication instruments. This result is hardly surprising, as
in practical marketing terms brand awareness is usually “bought” by means of
high media spending, i.e. through sufficient advertising pressure. The
automotive sector is an exception in the effectiveness evaluation. In this sector,
spectacular productions at leading trade fairs are used to draw plenty of
attention effectively to new vehicles and to the entire brand.
During the second and third customer-relationship phases, where the focus is
on creating familiarity and brand preferences, live communication is the
prevailing method. Here, events, promotions, showrooms and appearances at
trade fairs score highly, as they offer opportunities to present brand worlds in
direct contact with the customer in a unique and emotionally charged
atmosphere. The respondents from the automotive and fashion sectors are
particularly convinced of the benefits of these instruments.
With regard to purchase (phase 4), both categories of instruments are given
more or less the same priority. However, a sector-specific examination of the
results is needed in this case too, as in the fashion sector live communication
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instruments are regarded as more beneficial than traditional communication by
61 per cent of the respondents, whereas in the automotive sector this
percentage is as low as 35 per cent.
For the after-purchase phase (phase 5), 71 per cent of the decision-makers
regard live communication as most important with regard to the objectives to be
reached. Contrary to traditional advertising, the personal and interactive
communication channel encourages a particularly lasting and emotional
attachment of customers to the brand. Especially in the very “down-to-earth” Bto-B business, live communication is therefore on the way to becoming the
dominant instrument to be used in customer care and customer retention.
The comments show that live communication instruments play an important
role in the management of customer relationships. Especially in the critical
problem areas of “trust-building” and “customer loyalty” where a company may
lose customers, live communication instruments are gaining a dominant
position over traditional advertising. Using live communication in a well-planned
and targeted way during the entire “customer life cycle” helps to increase
customer value considerably.
Making better use of live communication potential
The “Uniplan LiveTrends 2004” study shows that the potential of effectiveness
and efficiency in brand communication is still far from being fully exploited. A reorientation of the communication mix offers levers to increase communication
success. Marketing managers identified the live communication instruments –
and above all the events instrument – as future value drivers. Possibilities to
increase potential can be found in the systematic management of
communication with the customer within the customer-relationship cycle. In this
area, live communication instruments are starting to play a dominant role –
compared with traditional advertising – in particular in the areas of trust-building
and customer loyalty.
*)
The authors: Dagobert Hartmann (40) is the Director of Consulting and
Research at Uniplan International. Prior to his current position, he worked for a
9
number of agencies, e.g. grey cc and TBWA, in a similar position. Prof. Dr.
Manfred Kirchgeorg (46) holds the Marketing Management chair at the HHL –
Leipzig Graduate School of Management. Apart from live communication, his
research focuses on the areas of integrated brand management, market
research and media and trade fair management.
Annex:
Empirical design of the “Uniplan LiveTrends 2004” study.
The study was carried out jointly by Uniplan International and the Marketing Management chair
at the HHL – Leipzig Graduate School of Management. The field work was conducted in May
2004 by TNS Emnid. In total, 387 decision-makers from the areas of marketing and
communication participated in approx. 20-minute interviews. The following sectors were
included in the study: automotive, finance, health, food, fashion, media, telecommunications,
industrial goods, high-tech, others.
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(2003): Handbuch Messemanagement – Planung, Durchführung und Kontrolle von Messen,
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Kommunikations-Mix – eine Analyse auf Grundlage einer branchenübergreifenden Befragung
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Leipzig.
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