Richard Jeans, Philip Kitchen and Gary Howells report on research which shows the stress and complexities facing business-to-business marketers
In November 1996, Carey, Howells, Jeans & Spira (CHJS) and the department of marketing at Strathclyde University carried out a survey to investigate how company executives in business-to-business markets are approaching communications. This survey repeated an earlier, 1995/6 study by CHJS, and where relevant comparative data are presented here.
All respondents were in business-to-business communications, with budgets between £200,000 and £5 million or more, and in businesses ranging from computer hardware to agriculture and legal services. (Exhibit 1)
The research was a postal survey, with respondents having the option of using a web site. A sample of 1,000 achieved a response rate of 8.5 per cent by the cut-off date, giving a sample of comparable size and character to the previous survey. Because this is a new sample, however, there are some differences in the detailed make-up of the two surveys' samples, so that direct comparisons should not be pushed too far. This article summarises the findings, which are available in full from CHJS.
Both surveys show business-to-business marketing departments being pressed to work harder with fewer people, and to manage budgets that have to cover an increasing number of activities. While the leading activities in terms of budget allocation are the 'traditional' priorities - brochures, trade press, PR, direct mail, exhibitions and databases - there is clearly growing interest in new media, and the balance of expenditure is beginning to shift, even though no one seems very sure of the likely return from the newer activities. Exhibitions and seminars, which are highly valued but labour and time-intensive, seem most likely to lose out.
The growing range of activities used by business-to-business marketers (15 different categories of activity are used by at least 50 per cent of the sample) is clearly a factor in the drive towards integrated communications, which is seen as a dominating force by the vast majority. Integration is being driven by a variety of functional and structural considerations, but it is wanted, too, because it is seen to deliver real benefits in control and impact.
This is important to these marketers, because they believe that branding is a vital feature of their marketplaces - even though they are not always convinced that their companies and colleagues necessarily buy into and understand branding as well as they do themselves.
It is clear, however, that they see themselves as able to lead their companies towards a brand-based future. With very few exceptions, they see marketing as at least on a par with other functional departments in their company, with over 40 per cent saying marketing is valued above average.
The 85 respondents included a substantial number of companies in the it field, which - very broadly interpreted - accounted for no less than 62 per cent of the total number of respondents. The spread of communications budgets is shown in the pie chart: while the majority are quite small, over 20 per cent of the sample were spending £2 million or more.
THE STATUS OF MARKETING AND COMMUNICATIONS
Only 15 per cent of the sample felt that marketing was little valued by their senior management. For the vast majority, marketing was rated on a par with (43 per cent) or superior to (also 43 per cent) other functions, with 25 per cent saying that it is seen as critical to success. There has been little change since the previous survey in these figures, but a slight movement in marketing's favour is visible overall.
In spite of this, there seems to have been a decline in numbers employed in the marketing department, with - in particular - an increase from 40 per cent to 50 per cent in those with five or less people in the department. Nonetheless, about a quarter of the sample in each survey have 16 or more marketing employees. The same trend is reflected, too, in the numbers specifically employed on marketing communications. Here, more than three-quarters of the total have five or fewer specialists, and there has been some contraction in larger (ten or more) departments.
BUDGETING FOR COMMUNICATIONS
A significant difference from the 1995/6 survey appears in the description of how the communications budget is set. There seems to have been a marked shift from task or objective-related methods towards more rule-of-thumb budgeting. Both percentage of forecast sales (30 per cent) and last year plus inflation (13 per cent) have increased, while objective/task has fallen back from 60 per cent to 49 per cent. In other words, it looks a little as if, although marketing has retained or even enhanced its importance, the methods it is allowed or encouraged to employ are becoming less sophisticated. This could, however, be an effect simply of structural differences between the two surveys' samples.
In relation to sales, budgets are mostly (68 per cent of responses) between one and two per cent, though one in six spends five per cent or more. Compared with 1995/6, the overall levels look slightly lower.
Respondents were asked to state how their budgets were allocated, in percentage terms, between different categories of audience. Given a wide and diverse spread of answers, the results were translated into rank orders, and weighted to reflect the allocations and budget size. This provides the basis for comparability - and intelligibility. In both surveys, customers, either existing or prospective, are far the most important targets, which is hardly surprising. It looks, however, as if other categories have, overall, become rather less important. This may reflect either an increased focus or the pressure on budgets - or both. Exhibit 2 shows how the various audiences are catered for in these terms.
It looks as if employee communications, historically a Cinderella area, may again be suffering more than most.
HOW THE MONEY IS SPENT
Interpretation of the data on where the money goes is complicated by different questionnaire structures - on a prompted list - between 1995/6 and 1997. In particular, the leading category this year, brochures and literature, was not listed last year, so it is likely to have been 'buried' within other categories, or ignored altogether, in the earlier survey.
Using the same weighting technique as for the target audience, there is less sign of a clear 'winner' among a long and varied list of about 20 items. Five items stand out this year as the most important, some way ahead of the next group. These are: brochures/literature, trade press, PR, direct mail and exhibitions. These five, less brochures and including database marketing, were the top five in 1995/6, though the order was different. In relative terms, it looks as if database, direct mail and exhibitions have all slightly lost ground in importance, while the trade press has clearly gained.
Lower down the list, the business press (defined as the Economist, Financial Times, and so on), sales promotion, distribution support and house journals have all apparently lost ground since 1995/6; while seminars, the Internet, and CD ROMs have all improved their relative standing.
The extended list obscures the overall significance of broad categories, such as media advertising, direct marketing, new media, etc. If we combine these, we get a ranking as shown in Exhibit 3.
A rather different pattern is shown, however, if we look at respondents' expected changes in budgets over the next year. The activities that are most likely to see increases in spend among the majority of respondents are - in order of the balance of increase over decrease - the Internet, database marketing, direct mail, PR and CD ROMs. With the exception of CD ROMs, which are used by only just over half the sample, these are all mainstream activities, used by 80+ per cent of the sample.
Light is shed on these data by respondents' rating of the different activities in terms of their perceived return on investment (ROI), which they were invited to rank on a five-point scale from 'little or no return' to 'excellent return'. The top-ranked activities in terms of perceived ROI are, in descending order: PR, database marketing, direct mail, brochures/literature, and (all equal) seminars, telemarketing and trade press. This rank order has barely changed since the previous survey, suggesting that it embodies some quite widely held conventional wisdom: the only significant difference is that distributor support has slipped down the table, and this may well reflect sample make-up differences. These data sets are summarised in Exhibit 4.
Increase in budget
Return on investment
|1 brochures||1 internet||1 PR|
|2 trade press||2 database mktg||2 database mktg|
|3 PR||3 direct mail||3 direct mail|
|4 direct mail||4 PR||4 brochures|
|5 exhibitions||5 CD ROM||5 seminars|
|6 database mktg||6 distributor support||6 telemarketing|
|7 seminars||7 house journals||7 trade press|
|8 distributor support||8 trade press||8 distributor support|
|9 house journals||9 brochures||9 sales promotion|
|10 national press||10 sales promotion||10 exhibitions|
In general, firms can be seen to be moving budgets in the direction of areas where they perceive higher rates of ROI, together with the enticing but so far unproven, in ROI terms, new media of the Internet and CD ROM. This should lead, over time, to a distinct shift in the balance of budgets. Interestingly, in spite of their perceived good ROI, the 'traditional' but labour-intensive business-to-business activities of exhibitions and seminars, important as they are in marketers' budgets, are the two areas which do least well in terms of net numbers intending to increase spending.
BRANDS, BRANDING AND CUSTOMER CAPTURE
Asked to agree or disagree with a number of statements about the importance and significance of brands to their company and its employees, respondents attributed a high degree of importance to brands in the marketplace. They were, however, a good deal less sure that their companies or their companies' employees understood or were committed to the company's brands or to branding generally (Exhibit 5).
|Having branded components in a product makes it easier to sell|| |
|Strong corporate brands can command a ten per cent price premium for the same product and hold market share|| |
|Branded products are more important than they were three years ago|| |
|Strongly branded existing products have raised barriers to entry for competitors|| |
|There is little agreement within my company about what 'brand equity' means|| |
|Most employees appreciate the impact of our corporate brand on the marketplace|| |
|In five years' time earnings from branded products will be more than new products|| |
|Most employees understand the importance of brand portfolio|| |
|My company spends adequate resources on developing its corporate brand|| |
*(strongly agree/agree) minus (strongly disagree/disagree).
In particular, these marketers were clear that their company's investment in branding was less than it should be.This is reflected in their responses to two further questions. They put product features well ahead of company image as the main challenge they faced in converting prospects into customers; and they rated product quality some way above brand strength as the key reason why the market buys their product. Overall, product quality, brand strength and product features clearly outweighed both price and service/support.
In answer to a direct question, 95 per cent of the sample agreed that business communications should be integrated. A number of factors were suggested as acting to encourage the acceptance and use of integration. The biggest single influence was seen to be the support of marketing management, closely followed by creative synergy and - virtually the same thing - the idea of 'one brand, one voice'. These were all very highly agreed to, with minimal disagreement. The same was true of top management support, but here there was a significant group who neither agreed nor disagreed. There was weaker but positive support for the importance of centrally-controlled budgets, and sales management support, while the least strongly agreed factors were the two agency-related ones: the range of agency services and the fact that the agency had affiliated above and below-the-line services.
Apart from these functional drivers of the trend, there was strong agreement about several of the possible benefits. Integration was seen to deliver communications consistency, greater control over the whole communications activity and - for most - increased impact. Slightly less strongly accepted were easier measurement and evaluation, the possibility of faster solutions, and - weakest of all - reduced costs.
There are, too, some barriers in the way of the development of integration, and these produced a more mixed reaction, with quite a degree of polarisation: for some people, it is one thing to buy into the concept, it is another to get it to work.
No one felt very strongly about any of the factors suggested, and there was a high level of 'neither agree nor disagree', suggesting that there is still room for further experience to aid judgment. The biggest perceived problems lie in organisational structure (presumably within the marketer's company), and lack of specialised expertise. No one saw centralisation as a serious problem - no surprise - and on balance people did not see costs or inflexibility of programmes as barriers to integration. Opinions on ease of measurement, dependence on a single supplier, and the need for more generalists were balanced.
Business-to-business marketing seems to be in quite robust shape, even though faced by the pressures on manpower and budgets that all managements have to wrestle with. Within a complex range of activities, which are becoming increasingly integrated, there are signs of a shift towards 'new media', but the weight of money remains, at present, concentrated on the traditional, proven workhorses. Budgets are evidently being focused increasingly on brand development, though there is an undercurrent to suggest that not all managements, outside the marketing department, are yet completely sold on the value of branding.