Tom Duncan & Sandra E. Moriarty

A Communication-Based iVIarketingiViodei for iVianaging Reiationships

The authors propose a communication-based model of relationship marketing and discuss how communication(rather than persuasion) is the foundation of the "new" customer-focused marketing efforts. The authors trace recentparallel shifts in communication and marketing theory and show the intersections between communication and mar-keting. Although communication always has been a critical element in marketing, the authors show how theincrease in interactivity makes communication an even more valuable element of marketing by identifying thosemany points that link the two disciplines. Using the three key points at which the two disciplines intersect—mes-sages, stakeholders, and interactivity—the authors develop a communication-based model of marketing. Theydemonstrate how interactive communication at three levels—corporate, marketing, and marketing communica-tion—leads to the brand relationships that drive brand value.

I n lhe opening session of the 1997 AMA Summer Educa-tors" Conference, the chief executive officer of Harte-Hanks Dutu Technology called tor a new marketing

iiKxicl to guide marketing in the interactive future (Swith-enhank 1997). The communieation-hased marketing modelpresented here provides that type of direction for compa-nies wanting to foeus their efforts better in acquiring,retaining, and growing reiationships with customers andother stakeholders.

The increasing need to manage relationship building basbrougbt fortb a variety of "new generation" marketingapproaches—customer-focused, market-driven, outside-in,one-to-one marketing, data-driven marketing, relationsbipmarketing, integrated marketing, and integrated marketingcommunications (IMC) (Cross and Smith 1995; Day 1992;Parvatiyar and Sbetb 1994; Payne I99.S: Reichheld 1996;Stewart 1995; Webster 1992. 1994; Whiteley 1991).

The increasing importance of communication in market-ing is demonstrated by its ability to differentiate the.se newmarketing approaches from traditional ones. Each approachemphasizes two-way communication through better listen-ing to customers and interactivity and the idea that commu-nication before, during, and after transactions can build ordestroy important brand relationsbips {Duncan and Moriarty1997; McKenna 1991; Peppers and Rogers 1993; Schultz etal. 1993; Zinkhan et al. 1996). In this article, we argue tbatthe new generation marketing is best explained, understood,and accomplished with a communication-ba.sed model ofrelatitmsbip marketing.

We show tbat (I) there are common theoretical roots ofcomniunication theory and marketing theory that paralleland enrich each other; (2) marketing today is more com-munication dependent; (3) brand communication includesmore tban marketing communication; (4) brand communi-cation (both one- and two-way) operates at tbe corporate.

Tom Duncan is an associate professor and founder, and Sandra E. Mori-arty is a professor. Graduate Program of Integrated Marketing Communi-cation. University of Colorado.

marketing, and marketing communication levels; (5) man-aging brand communication must take into considerationstakeholders otber tban just customers—employees, suppli-ers, channel members, the media, government regulators,and tbe community; and most important, (6) communica-tion is the primary integrative element in managing brandrelationships.

Our objective, therefore, is to provide a deeper under-standing of communication theory, so that companies canidentify and manage better the brand comniunication tbatdetermines the quantity and quality of tbeir brand relation-ships, wbich we define as the relationships tbat existbetween a brand or company and its stakcbolders. We lookfirst at communication theory developments that parallelmarketing theory developments and tben review points ofintersection at which communication and marketing theoriesoverlap. We show how a communication-based model ofmarketing addresses tbe needs of relationsbip building bet-ter than does the traditional 4Ps marketing model.

A Review of the Fourth PTo explain the evolution of brand communication, we startwith Borden's (1964) seminal work on the marketing mix,which identified 12 elements—product, pricing, branding,disiribution. personal selling, advertising, promotions, pack-aging, display, .servicing, physical handling, and fact findingand analysis. McCarthy's (1964) 4Ps model—product,price, place, and promotion—simplified tiorden's work andhas been the instructional guideline for most marketingcourses. Over tbe years, various scholars have attempted tomodify McCarthy's work by adding functions to the set(Christopher. Payne, and Ballantyne 1991; Mindak and Pine1981; Rafiq and Ahmed 1995; Shapiro 1985). These modi-fieations, however, continue to perpetuate the functionalapproach to marketing.

Recognizing the need for an approach ihat more realisti-cally rcOects tbe relationships embedded in the marketingmix. Waterschoot and Van den Bulie (1992) concluded ihaia major flaw of tbe 4Ps model is tbat it equates communica-

Journal of MarketingVol. 62 (April 1998), 1-13 Communication-Based Model /1

tion with persuasion. They argue thai all the Ps are persua-sive or at least designed to be. Promotion (i.e., persuasion)is separated from the fourth P and becomes a commondenominator that underlies the four mix categories: productmix, price mix, distribution mix, and communication mix(mass, personal, and publicity). In other words, their modelidentifies promotion/persuasion as a common denominatorof the product (e.g., extra sizes, two-for packaging), pricing(e.g., price deals), distribution (e.g., trade incentives), andcommunication (e.g., premiums, contests, sweepstakes,events).

The Argument for aCommunication Perspective

Although we applaud Waterschoot and Van den Bulte'swork, we have several concems. The first is calling the com-mon denominator persuasion rather than communication.Although we strongly agree that all marketing mix elementssend messages, we disagree that they always are intended tobe persuasive. The notion of persuasion as traditionally usedin short-term, transaction marketing is manipulative (dictio-nary defmitions o^persuasion use such words as urge, influ-ence, entice, impel, and induce—^i.e., winning someone overto a certain course of action or point of view).

The second concern is that persuasion, especially intransaction-based marketing strategies and executions, isprimarily one-way communication. We .suggest there arecommunication roles in relationship building other than per-suasion, such as informing, answering, and listening. Inother words, persuasion is more limited in impact and scopethan communication. Companies interested in being morecustomer focused and in building relationships focus oncommunicalion rather than just persuasion, because com-munication—not persuasion—is the platform on v̂ -hich rela-tionships are built.

Third, we believe that implying that the marketing mixis tbe only or primary source of brand messages is too lim-iting. Everytbing a company does, and sometimes does notdo, can send a brand message with varying impact (Schultzet al. 1993). For example, a company's hiring practices, itsenvironmental polices and behavior, and its fmancial per-formance have communication dimensions that cue or sig-nal important meanings that affect brand relationships.Furthermore, psychologist.s have long recognized that youcannot nor communicate (Watzlawick, Bavelas, and Jackson1967, p. 51), Companies and brands must manage betterwhat they do not say as well as the broad spectrum ofplanned (marketing communication), unplanned (e.g., wordof mouth, media inve.stigations), product (price, distribution,design/performance), and .service messages they deliver.

Fourth, many marketing roles, particularly in services,are fundamentally communication positions that take com-munication deeper into the core of marketing activities.Bankers, for example, have found that their role has shiftedto financial counseling, which involves the processes of lis-tening, aligning, and matching—alt of which require com-munication and active listening skills, as well as persuasion.The fact that more than three-fourths of the gross domesticproduct is now service based, and most business-to-business

and mid- and high-priced consumer goods (e.g., cars, appli-ances, cotnputers) have critical .service componentsincreases the pervasiveness of communication activity.Another example is in sales force automation, in which tbeprimary objective is to manage data to respond to customersfaster and to increase the personalized aspect of presenta-tions and responses. Communication not only is spreadthroughout all marketing activities; it is at the heart of manymarketing functions.

Although persuasion has an important role in marketing,when persuasion is foremost it places undue emphasis ontransactions and the short term. When communication isforemost and listening is given as much importance as .vay-ing, interactive relationships become the focus. The result ofthe latter is that a higher percentage of customers areretained and their value increased.

I

The Centraiity of Communication

Communication is the human activity that links peopletogether and creates relationships. It is at the heart of mean-ing-making activities not only in marketing, but also in awide range of political, social, economic, and psychologicalareas. It serves as a way to develop, organize, and dissemi-nate knowledge.

Admittedly, there is a tendency in tbe study of commu-nication to fall into the communication fallacy, which pro-poses indi.scriminatciy that all human activities arc drivenby conimunication. Althougb that might be true in a theo-retical sense, we acknowledge there are factors otber thancommunication that drive brand value. We argue, bowever,that communication, becau.se of its meaning-making andorganizing functions, plays a unique role in building brandrelationships.

The traditional communication model (Lasswell 1948).which includes a soutve that encodes the message, the chan-nel or medium through which the message is transmitted,noi.se that interferes with the communication processing, areceiver who decodes it, and feedback that sends thereceiver's response back to the source, could be a metaphorfor marketing (.see Figure 1). The source is the company, themessage the product, the channel the distribution system,noise tbe clutter of competitive products and claims, thereceiver the customer, and feedback the informationreceived through customer service, sales, and marketingresearch, ln other words, the connections between market-ing theory and communication theory go beyond the sim-plistics of the communication fallacy. • : i

r/ie Integrative Role of Communication \

From the perspective of communication theory, Water-schoot and Van den Bulte's model, which positions persua-sion as the integrative marketing communication function,reverses the relationship between communication and per-suasion. In most communication models, persuasion is anelement of communication and communication is the inte-grative factor, not the other way around. Schramm(l973,p.46) makes the relationship clear: "Persuasion is primarily acommunication process." Here, and in other models ofcommunication in communication textbooks, persuasion isonly one of tbe traditional areas of study and research.

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FIGURE 1Parallel Communication and Marketing Processes

CommunicationProcess

- ^ Source

Message

Channel

Noise

Receiver

Feedback

MarketingProcess

Company

Product

Distribution

Competition

Customer

Sales, CustomerService, and

Market Research

which also include mass, interpersonal, nonverbal, andorganizational communication.

The notion that communication i.s a central integrativeprocess in marketing is demonstrated in the evolving theo-ries of integrated and relationship marketing. In a specialsession on IMC and relationship marketing at Emory Uni-versity's 1996 relationship marketing conference, Zinkhanand colleagues (1996) argued that these two are comple-mentary metaphors.

There are also important points of intersection betweencommunication and marketing theory that support the argu-ment for a communication-based model of relationsbip mar-keting. When properly done, communication is tbeintegrative element that belps tear down functional silosiiuernally wbile closing tbe distance between the company,its customers, and other stakeholders.

Points of Theory IntersectionBoth miirkctiiig and conimunicatitHi theory are in the midstof fundamental changes that ure similar in origin, impact,and direction. Parallel paradigm shifts move both fieldsfrom n functional, mechanistic, production-oriented modello a more humanistic, rclutionship-based model.

In his introduction to communication studies, Fiske(1990) idenlifies two schools of thought—the functionalistapproach und the newer interpretive approach, whichfocuses on the receiver. Others suggest that the functionalistapproach is giving way to a more humanistic and interpre-tive communicalion model (Jensen 1988; Ncwcotnb 1988).This shift in communication theory was explored in Fer-ment in ihe Field., an inlemationa! symposium held in 1983

(Dervin et al. 1989). As Everett Rogers observed at the lime,there have been two decades of fractious debate in the com-munication community that has produced this paradigmshift.

During the past decade, a similar rethinking took placein marketing. In Webster's (1992) call for a paradigmchange, he suggested that marketing should shift emphasisfrom products and firms to people, organizations, and socialprocesses. He observed that the narrow conceptualization ofmarketing as a short-tcmi profit maximi/.ation functionseems increasingly out of date. He identified ihc cbange asone that focuses on relationship management rather thantransaction management. Similar thinking has led JagdishShelh and his colleagues at Emory University lo refocus thatmarketing program on relationship marketing.

ReiationshipsThe debates in communication studies and in marketinghave arrived at the same conclusion: There should be lessfocus on functionalism and production and more on rela-tionships and meanings. Regarding communication, Planalp(1989) observes that personal and social relationshipsbecame particularly important areas of study during tbe1980s. Schramm (1973, p. 3) notes that the study of com-munication is fundamentally a study of relationships: "Soci-ety is a sum of relationships in which information of somekind is shared." He also slates thai "to understand humancommunication we must understand how people relate toone another." Relationships, in other words, are impossiblewithout communication.

Similarly, as ihe traditional marketing mix elements bavebecome cominoditized, companies are realizing that theirmost valuable assets are relationships with customers andother key stakeholders. This is because the net sum of brandrelationships is a major detentiinant of brand value (Duncanand Moriarty 1997). The importance of reliilionships as mar-ket-based assets tbat ultimately contribute to sb;ireholdervalue is discussed by Srivastava, Shervani, and Fabey (1998).

In Webster's (1992) view, ongoing customer relation-ships are the company's most important business asset. Esti-mates that it costs six to nine times more to acquire a newcustomer than il does to retain a current one demonstrate thevalue of relationships (Peppers and Rogers 1993). In addi-tion, profits per customer increase with customer longevity,because the longer customers are with a company, the morewilling tbey are to pay premium prices, make referrals,demand less hand holding, and spend more money (Reich-held 1994). The more a company can do to strengthen cus-tomer and other stakeholder relationships, the morecost-effective its marketing effort will be.

Relationship marketing literature, however, often fails toinclude the communication process as a critical dimensionin relationship building, focusing instead on elements suchas trust and commitment, which arc products of communi-cation. There is a blurring of functions as well. Gronroos(1990) observes that In the service category it is difficult, ifnol impossible, to separate service operations and deliveryfrom relationship building. This is another reason wby therole of hrand communication musl be recognized to under-stand and manage relationships better.

Communication-Based Modet / 3

Although in their new approaches to marketing, man-agers have moved toward a more humanistic and relation-ship-based model, often they have done so intuitively, notfully understanding the critical role of communication. Inmany cases, companies have not adopted a process for effi-ciently and effectively managing all their interactivity withcustomers and other stakeholders. For example, in a majorcost-cutting move, US WEST reduced its customer servicepersonnel to the point at which customers and potential cus-tomers could not call their phone company because the lineswere always busy. Although this resulted in millions of dol-lars in fmes from public utilities commissions and muchnegative publicity, ironically the company simultaneouslywas spending nearly $50 million on mass media advertising,some of which was for products to improve their customers'customer service (Duncan and Moriarty 1997).

In addition to the shift to a relationship foeus, there areother theoretical concepts that are basic to both communica-tion and marketing, such as transaction and exchange; theconcepts of signals, channels, and feedback; and informa-tion and intormation sharing, Looking at these as additionalpoints of intersection helps identify the mutual conceptdevelopment between the two fields. It also identifies thecritical dimensions of a communication model of relation-ship marketing, as shown subsequently.

Exchange and TransactionThe notion of exchange in tnarketing theory is similar lo thenotion of exchange in communication, Lin (1973, p. 9)defines communication as a field in which "the nature ofhuman symbolic exchange" is studied. Inherent in the mar-keting concept of exchange is a communication element. Aperson cannot exchange money for goods without somecommunication about what is being offered and what isbeing asked for in return. The notion of transaction, bow-ever, connotes different meanings.

In communication, excbange involves two-way commu-nication—a process called tran.sactional communication—which reflects communication scholars" emphasis onconversation and dialogue. As marketing has shifted to arelationship focus (in which a series of transactions define arelationship), it also has become more concemed with thetransactional dimensions of marketing, rather than just thetransactions themselves. The focus of a transactionalapproach to marketing—as opposed to a transactionapproach—is on close, long-term, interactive (two-way)relationships.

We make a distinction here that is not found in mostmarketing literature. Gundlach and colleagues (1995), forexample, discuss the paradigm shift from transactional torelationship marketing. They are not talking, however, abouttwo-way communication but ratber are using transactionalto refer to purchase-focused (sell/buy) strategies. Altboughthis might seem like a semantic nuance, understanding thedistinction between transaction (sell/buy) and transactiona!(two-way communication) can help the development ofmarketing theory by adding the communication notions ofbalance, symmetry, and reciprocity (i.e., interactivity).

The notion of shared understanding, which is the prod-uct of transactional communication, is important to relation-

ship marketing. For example, Hutt, Walker, and Frankwick(1995) identify the lack of a shared understanding as a cen-tral challenge lo strategic change. They include this in a dis-cussion of communication barriers and make the point thaidepartments (employees) must develop a "shared languagethat reflects similarities in members' interpretation, under-standing, and response to information" (p. 23). Theyob.serve that "organizational members unfamiliar witb it |thecode] may distort and misinterpret it and find communica-tion with the departmental members difficult" (p. 23).

The contribution of the communication notion ofexchange is the addition of two-way (or transactional) com-municalion to a model of marketing that has been primarilyone-way and focused on transactions. Sending brand mes-sages is important, but responsiveness and shared under-standing is just as important in relationship marketing.

The Concept of Channeis

In Schramm's basic communication model, informationHows through channels of communication, or media. Chan-nels in marketing studies refer to distribution instead ofcommunicalion, and "flow" is repre.sentcd by the movementof goods. In marketing's value chain, Schramm's .streammetaphor contributes the idea of upstream (suppliers/ven-dors) and downstream (distributors, customers). What iscommon to both is that a channel is a conduit through whicha stream of something (products, information) tlows.

In addition to sharing the channel metaphor, distributionalso has a significant communication component in thephysical and technological handling of a product. Innova-tions such as just-in-time delivery and Wai-Man's Oow-through distribution centers are based as much oninformation innovation as on the physical movement ofgoods. To demonstrate the communication dimensions indistribution, Buzzell and Ortmeyer (1995) analyze distribu-tion in terms of exit and "voice" relationsbips, models thatalso showcase the important role of communication. Stew-art and colleagues (1996) make the argument that a blurringof the distinctions between channel management and com-munication has occurred.

Feedbaci(

An important part of any communication model is feedback,by which the receiver's response is made known to thesender. Schramm (1973, p. 51) describes feedback as a"reversal of the flow, an opportunity for communicators toreact quickly to signs resulting from the signs they have putout." Feedback is central to two-way communication; with-out it there is no dialogue. Even a nonreaction qualifies asfeedback (Windahl and Signitzer 1992. p. 121).

Traditional marketing has used market research studiesas well as sales results to monitor the success of marketingactivities. Although these practices have guided companiesin making changes that made their products more acceptableand improved brand loyalty, the new interactive technolo-gies significantly change the concept of feedback. As mediaand computer technology increasingly converge, feedbackwill be more instantaneous, more far reacbing. and ingreater quantities. In other words, the quantity, quality, andspeed of feedback today is another area that separates rela-

4 / Journal of Marketing, April 1998

tionship marketing from traditional marketing. A goodexample is General Klcctric's Answer Center, which handlesapproximately three million calls each year at a cost of $10million. This interaction builds customer relationships bothdirectly and indirectly by enabling the company lo Iraekneeds, wants, and product performance and to respond to allof Ihese more quickly.

Day's (1992) market sensing concept is a strategicapproach to marketplace feedback that involves four steps:open-minded inquiry, synergistic infomiation distribution,iiiutually Infomietl interpretations, and accessible memories.This model joins infomialion processing with qualitativeand interpretative research. Note that all four steps are com-munication based. In other words. Day emphasizes thatmerely receiving feedback is not enough. Its full value is notrealized until il is distributed, interpreted with mutual under-standing, and retained for future use.

I cedback is also important in organizational communica-tion and in the diffusion of information about new products.Hult, Walker, and Frankwick (1995) argue that signifieanlchanges, such as technological changes, can tax the fonnaland informal communication in any organization, a prohletnthat best can bo monitored through ongoing feedback pro-grams. This problem Is particularly critical for marketing,because of its involvement in new product development andits need for strong internal marketing to employees and salesdepariments. Gilly and Wollinharger (1998) note thatemployees do notice and evaluate their employer's advertis-ing, Furthemiore, there might be gaps between the percep-lions of the employees and the advertising decision makersthat have important managerial implications.

Informationlnfi>rniation—the product of communication—is the tie thatbinds in any relationship, including commercial relation-ships with customers and other stakeholders. Discussion ofinlormation How, informalion processing, and inforniullonsharing are found in both consumer behavior and communi-cation literature. Informalion, described by Schramm (1973.p. 38) as "lhe .stuff of communication," is defincJ more for-mally by him as "whatever content will help people struc-ture or organize some aspects of their environment that arerelevant to a situation in which they must acl." In otherwords, information is something that makes decision mak-ing easier by reducing uncertainly. The centralily of infor-mation processing lo both fields illustrates how imporiantthis concept is to the iwo disciplines.

Information processing ha.s dominated most approachesto marketing communication, which suggests that commu-nication can be managed or controlled. If niarkelers under-stand the complex chain of mental events thul consumers gothrough in making a purchase decision, they can integrateclilfereni ways of communicating their messages to ensurethat the necessary mental events take place in lhe niosleffective infomiation environment (Penrice 1995),

The communication-based model of relationship mar-keting, however, adds the idea that inforniaiii)n sharing alsocan strengthen brand relationships and help integrate orga-nizations and strategies. Day's (1992) market-sensingapproach, which is buili on the notion of close communica-

tion, leads to relationship building through infomialion.sharing. In Menon and Varadarajan's (1992) marketingknowledge model, knowledge utilization plays lhe role of an"infomiation linkage system" within the firm and betweenand among partners and perfomis a critical role in organiza-tional leaming. They observe that there is a general consen-sus that companies could make better use of infomialion "ifmodest reforms were made in the process of communicatingresearch findings" (p. 37).

Both the old paradigm of information processing and lhenewer view of infonnation sharing and sensing are points alwhich communication theory has made important coiuribu-tions to marketing theory. This cross-fertilizaiion hasoccurred both formally—note the communication theoriesand scholars cited in mosi consumer behavior books—andinfomially, with infomialion becoming a critical marketingelement unhinged from its communication roots.

Signs and Signals

Various articles on signaling in marketing literature reflect anew found interest in signs and symbols and how they com-municate (Bagwell and Riordan 1991; Dawar and Parker1994; Kilhstron and Riordan 1984; Milgrom and Roherts1986; Moore 1992; Robertson, FJiashberg, and Rynion1995). In communication studies, these topics appear ininterpretive and cullural studies (Fiske 1989; Jagtom andGardner 1981) and semiotic analysis {Berger 1984; Eco1979; Fry and Fry 1983).

Levy's (1981) seminal 1959 piece "Symbols by WhichWe Buy" introduces interpretive communication methods tomarketing. This tradition continues in the works of Mick(1986, 1988), McCraeken (1989a, b), and others(Hirschman 1990/91; Sherry 1987; Vcrba and Camden1985). In particular, lhe consumer behavior odysseyreported in Highways and Buyways {Be\k 1991) is an impor-tant milestone in lhe more interpretive approach to ihe sludyof consumer behavior. This body of work represents mar-keting and advertising investigations conducted as studies ofsigns and symbols and how they signal meaning to con-sumers. The analysis of shared meanings and interpretationis particularly important in understanding the more subjec-tive dimensions of corporate reputation and hrand image.

Consumer behavior scholars make the point that all con-sumer decisions occur within a constellation of consumptionactivities, situations, social environmenls, and related prod-ucts. In other words, consumers assimilate signals Irummany sources, including pt>pular culture, as they ascribemeaning to their consumption activities (Deighton 1992;Klein and Keman I99I; Solomon and Assael 1987). Thismeaning-constructing process happens through an exchangeof shared signs and symbols; research in this area focuses onthe interpretation of these signs.

Another marketing research siream focuses on signalsby looking specifically al price and advertising and howthey deliver messages that affect competitors as well as cus-tomers. According to Rao and Rtiekert (1994), marketplacesignals deal wilh a problem they identify as "hidden infor-mation" by providing infomiational devices ihat cue certainmeanings. For example, when quality is hidden, signaling isused by referring to such devices as guarantees and war-

Communication-Based Model / 5

ranties. Branding is another signaling concept. Rao andRuekert argue that an important function of hrand names isto give consumers condensed infonnation about a product.

People who write about marketing signals often definethem in terms of their own area of investigation. For exam-ple, Rao and Ruekert (1994) define signals in terms of qual-ity cues. Eliashberg and Robertson (1988), in their article onnew product announcements, define a signal as anannouncement or move that precedes a new product intro-duction. Regardless of the applied nature of this concept, asignal is a sigti that cues or influences some action or inter-pretation by customers, competitors, or other stakeholders,and it is very much a communication function.

Figure 2 visually summarizes the points of intersectiotiwe have discussed. The figure identifies pairs of conceptu-aMy linked intersections. Customers and other stakeholders,for example, connect to an organization through relation-ships. Interactivity is only possihle if there are channels forcommunication and feedback to tum one-way communica-tion into two-way. Messages are signs or signals that arecomposed of information. Figure 2 also depicts how thesepairs intersect with each other on a platform of communica-tion. In Table 1, we summarize these intersections as tbreecritical factors—stakeholders, messages, and interactivity—in a communication-based model of relationship marketing.

The Integration PerspectiveAs explained in Driving Brand Value (Duncan and Moriarty1997). customers and other stakeholders automatically inte-grate brand messages. Marketers must decide wbether toabdicate this integration to customers and stakeholders or tomanage it. A communication-based model of relationshipmarketing underlines the importance of managing all brandcommunications as they collectively create, maintain, orweaken the profitahle stakeholder relationships that drivebrand value.

FIGURE 2Communication and Marketing Intersections

TABLE 1Intersections Among Marketing, Communication,

andIM

Common Elementsin Marketing andCommunication

RelationshipExchange

ChannelsFeedback

InformationSigns/Signals

RelatedKey Factors inIntegrated Marketing

Customers &other stakeholders

Interactivity

Everything sendsa message

Shapiro (1985) notes in his review of marketing mix lit-erature that the marketing mix must be planned as an inte-grated whole by applying sucb ideas as consistency andintegration. He explains (p. 28), "While consistency is acoherent fit, integration is an active harmonious interactionamong the elements of the mi\." Likewise, a concern forbetter coordination among the various marketing mix pro-grams was demonstrated by Texas Instruments when itdevised a turnaround strategy in 1995 that focused on cre-ating internal marketing cooperation (Smith 1995).Solomon and Englis (1994) discuss the important role ofproduct complementarity in integrated communications. Asnoted by Kreutzer (1988), markeling mix integration andstandardization is an even greater challenge in intemationalprograms.

Implied in the phrase "Everything sends a brand mes-sage" is the need (1) for brand messages to be strategicallyconsistent to positively influence the perception of thesemessages, (2) to focus on stakeholders and not just cus-tomers, and (3) to ensure that brand communications are notjust one-way, but interactive. Following is a discussion ofthe integration implications of these three principles andhow they operate at the corporate, marketing, and marketingcommunication levels.

Messages

Brand messages originate at the corporate, marketing, andmarketing communication levels. In other words, all corpo-rate activities, marketing mix activities, and marketing com-munications have communication dimensions.

At the corporate level, messages sent by the company'soverall business practices and philosophies have communi-cation dimensions. For example, its mission, hiring prac-tices, philanthropies, corporate culture, and practice ofresponding or not responding to inquires all send messagesthat reconfirm, strengthen, or weaken brand relationships.

At the marketing level, a communication-driven modelof marketing requires that brand messages sent by otheraspects of the marketing mix also must be managed forconsistency. Product messages, for example, are the onescustomers and otber stakeholders infer from the product'sperformance, appearance, design, pricing, and where andhow it is distributed. Tupperware, the home-party distribu-tion of kitchen and other household containers, found that

6 / Journal of Marketing, April 1998

il was perceived as an old-fashioned company, because theappearance of Its products had not chatiged in years. Tosend a more modern message, tbe company simply changedtbe color of its products, giving them a more contemporaryappearance. Price and distribution send important mes-sages, as can be seen in ibe streets of New York, wbereshoppers are not rushing to buy a Rolex watch for $19.99;the price and distribution points both suggest that thiswatch is not authentic.

Service messages conveyed by distributors, sales staff,customer service representatives, and corporate staff, suchas secretaries and receptionists, also affect brand relation-ships. For example, in an integrated marketing audit we con-ducted for a retail cbain, sales clerks demonstrated goodproduct knowledge and willingness to advise custotiiers iniiiakiiig a purchase. However, when tbese same sales clerkswere approacbed witb a relumed product, they became dis-tant and made little eye contact, communicating displeasureand sending a negative brand message.

Recognizing and managing the indirect, implied, andhidden communicatiim dimensions at all marketing andcorporate-level brand contacts is necessary if a companywants to maximize profitable brand relationships. Forexample, when Moniblanc reorganized its whole marketingoperation in tbe early l9TOs, it eliminated distribution indiscount stores and dropped all modets below a certainprice point. This was done to .send a strong brand messagethat Montblanc pens were upscale, status, bigb-qualitywriting instruments.

At the marketing communication level, a basic premi.seof relationsbip marketing is the need for executional consis-tency among all marketing communication messages, soihiil trust can be built and there is coherence in stakeholderperceptions. At this level, IMC generally bas one voice andone look for eacb target audience, regardless of tbe market-ing communication function (e.g., advertising, public rela-tions, sales promotion) or media being used.

The key to tnanaging the point of perception is to deliverand receive messages on a platform o\' strategic consistency.That docs not mean all messages say tbe same thing. Strate-gic consistency means tbe messages are appropriate for theiraudiences; however, there is consistency in the way corpo-rate values are presented, bow products perform, and howtbe brand is identified and positioned. As brand messagesarc decoded—assuming they arc not inconsistent—tbey aretranslornicd into the stakeholder perceptions that are thebuilding blocks of brand relationships.

Perception is more important than reality in managingmany relationships. The PIMS studies (Iiu/./.cll and Gale1987, p. 103), for example, identify two types of quality—conformancc quality and perception quality. Altbougb con-ibrmance quality, meeting a set of specifications orstandards, is important, perception quality, which calls forviewing quality from the custotner's perspective, is evenmore so. Perception quality drives bebavior and often isintlucnced by tbe hidden or implied comniunicalii)n dimen-sions of tbe corporate philosophy and marketing mix.Although production is responsible for conformance quality,in most companies, marketing is responsible for perceptionquatity.

Stakeholders, Not Just Customers

The review of intersections shows that there are several con-stituencies important to a brand's success other tban cus-tomers. At the organizational level, a company or brand'sstakeholder relationships involve far more than just cus-tomers. Ruth and Simonin (1995) refer to a much broaderset of stakeholders—investors, the financial community,vendors and suppliers, employees, competitors, the media,neighbors and community leaders, special interest groups,and government agencies—tbat are corpt)rate constituencieswho can affect and be affected by a company's marketingprogram.

The marketing level also has a broader set of con-stituents than just customers. Although Webster (1992)believes that ongoing customer relationships are the com-pany's most importanl stakeholder group (he states that cus-tomers are "ftrsl among equals"), he also idenlilies tworelationships that are key to marketing's success—suppliersand resellers. Gilly and Wolfinbarger (1998) focus altentionon the importance of employees. The discussion ofexchange included employees as well as customers; the sig-nal literature includes competitors as well as consumers; thediscussion of cbannels referred to upstream and downstreamstrategies as targeted to suppliers and distributors as well ascustomers. In other words, there is a variety of stakeholdersother than customers who are involved in, and affected by, amarketing program.

The wider stakeholder focus is also true at the marketingcommunication level. Although customers and prospects areprimary targets of most marketing communication efforts,the trade is also imponant. If puhlic relations is included inthe communication mix, then it also manages communica-tion programs for employees, the financial communily andinvestors, govemment and regulators, the local community,and the media. In support of an extended view of marketingconstitueticies, Ogilvy and Mather's "brand stewardship"audit includes not just customers, but all key stakeboldcrs.

Another important integration reality that relates directlylo stakeholder perception is the notion that stakeholdersoverlap; Customers also can be employees, investors, mem-bers of special interest groups, and neighbors in the com-munity. (The extent of the overlap will vary hy industry andcompany.) This means companies must take into considera-tion how the intended target audience will respond not onlyto a brand message, but also wben they wear their otherstakeholder hats.

Webster (1992) notes that there is a blurring of boutid-aries in relationships and that customers can be competiiorsand vendors, as well. In another example, we conducted anintegrated marketing audit of a bank and found thai three-fourths of the employees were also shareholders and morethan 90% were customers. If this bank were to tell share-holders tbut its outlook was extremely positive and ihcn tellemployees that raises would be withheld because of com-petitive pressures, the bank would have a lot of explainingto do, not to mention bow its level of trust would beaffected.

Identifying a broader set of constituencies bas bottom-line implications. Kotler and Heskett (1992) found tbatfirms that emphajiized the interests of tbree constituencies—

Communication-Based Model / 7

customers, employees, and stockholders—outperformedthose that emphasized only one or two. Over an 11-yearperiod, Kotter and Heskett found that the firms focused onalt three groups increased their revenues by an average of682% versus 166% for the groups with a more limited focus.They also increased their stock prices by 901% versus 74%for the others. In these high-pertbmiing companies, Kotterand Heskett found a value system that communicated theimportance of all these constituencies, a commitment thatoften was described by employees as integrity, or "doing theright thing."

InteractivityInteractivity is a hallmark of the paradigm shift in both mar-keting and communication. If relationships are the objec-tive, then impersonal mass communication must besupplemented, especially in business-to-husiness and ser-vice categories, hy personal customized communication thatby definition is interactive.

At the corporate level, interaction is very much in keep-ing with other business practices, such as total quality man-agement, which requires that everyone involved in theprocess be made a partner in its outcome. Guillen (1994)argues that interactive communication is fundamental tosuccessful teamwork, particularly in lean management mod-els of organization.

As interaction is implemented at the marketing level,partnerships with suppliers and distributors become moreimportant. Buzzell and Ortmeyer (1995) acknowledge thatchannel partnerships are based on exchange of infomiationand just-in-time communication technologies, which helplower costs and improve service to the customer. In an inte-gration program, both one- and two-way communicationtools are used strategically to reinforce each other and max-imize interactivity. The role of mass media, for example, isto open more direct forms of communication and encourageprospects to identify themselves. More important, new two-way communication systems are designed to motivate andcapture all pertinent interactions, not just transactions.

At the marketing communication level, interactivity isgenerated through a combination of one-way (e.g., massmedia advertising, publicity) and two-way communication(e.g., personal selling, customer service). Direct marketing,sales promotion, and event marketing use both one- andtwo-way communications. Even packaging can he a mix ofboth if the package contains a customer service number orother response device. More efforts also are being made tointroduce response devices in traditional one-way forms,such as 800 numbers and e-mail addresses in mass mediaadvertising.

A Communication-Based MarketingModei and its iVianageriai

ImplicationsBecause stakeholder relationships are influenced heavily bymessages from and to a company, a brand relationship-building model should consider brand messages from allintemal sources. Figure 3 illustrates this model and showsthe corporate, marketing, and marketing communication

levels. Figure 3 also illustrates the interactivity between thevarious message sources in an organization and the variousstakeholders of the organization.

Because most organizational communication dimen-sions (other than marketing communication) are ignored,not recognized, or taken for granted, brand me.ssages thatoriginate at the corporate and marketing levels often are notmanaged strategically. Even marketing communicationmessages, especially in larger companies that have separatedepartments and agencies for each of the marketing com-munication functions, are often a mixed assortment of mes-sages and images. For example, advertising messages couldpromise quality, sales promotion messages could promisebargains, and product publicity releases could discuss prod-uct safety. Even when a company does manage to achievestrategic consistency at the marketing communication level,these messages might have far less impact than brand me.s-sages coming from other marketing functions and corporateareas, not to mention brand messages originating outside thecompany (from customers, the media, and the competition).For a discussion of the strategic applications of communica-tion-based relationship marketing, see the Appendix.

Because a communication-based model of relationshipmarketing recognizes that everything a company does (andsometimes does not do) sends a message tbat can strengthenor weaken relationships, it has several managerial implica-tions. These implications apply to three areas: corporatefocus, processes, and organizational infrastructure.

Corporate Focus

Because it is more cost-effective to sell to current customersthan new ones, corporate focus should place more emphasison relationships than transactions. Corporate focus alsoshould be on stakebolders rather than just customers, as thishelps companies avoid sending conOicting messages tooverlapping stakeholder/customers, as Gilly and Wolfin-barger (1998) point out. Stakeholder priorities al,so arechanging constantly. During a merger or acquisition, fore.tample, the financial community and employees might bethe two most important stakeholder groups on which tofocus. During a crisis, the media can become the mostimportant group. As these priorities change, the resources ofthe company should be reallocated accordingly.

Processes

A process sbould be in place to facilitate purposeful dia-logue with customers and other stakeholders. This dialogueshould be purposeful for botb the company and the targetaudiences; otherwise brand messages will he seen as "bragand boost" or intrusive. A system al.so is needed to ensurethat all brand messages are strategically consistent. Theresbould be a process for incorporating the mission of thecompany into all operations to continually remind all stake-holders wbat tbe company stands for. Both consistency anda well-regarded mission helps strengthen the trust on whichbrand relaiionships depend.

Finally, there must he a process of zero-based planningfor marketing communication that is driven by prioritizedSWOTs (strengths, weaknesses, opportunities, and threats).Zero-based planning helps identify those marketing com-

8 / Journal of Marketing, April 1998

FIGURE 3A Communication-Based Marketing Model for Managing Relationships

Corporate Level Message Sources

Administration Manufacturing/ Marketing Finance Human LegalOperations ^^ ^ ^ Resources

Cross-Functional Brand Equity flM) Teatn

Marketing Level Message Sources

Product Price Marketing DistributionMix Mix Communication Mix

Mix

Cross-Functional IMC Team

Marketing Communication Level Message Sources

Personal Adver- Sales Direct Public Pack- EventsSales tising Promotion Marketing Relations aging

Interactivity

IBrand Relationships

Brand Vaiue

Other StakeholdersEmployeesInvestorsFinancial CommunityGovernment

Regulators

CustomersDistributorsSuppliersCompetition

ConsumersLocal CommunityMediaInterest Groups

inunication functions that are the most cost-effective waysto leverage critical strengths and opportunities and addresskey weaknesses and threats. For example, a brand with acredibility problem should consider using public relationsrather than more mass media advertising.

Organizational infrastructureIntegration is a systemic process that requires certain orga-nizational support elements. One infrastructure element is toensure that managers have a core competency in integrationthat requires (I) knowing the strengths and weaknesses ofthe company and how their respective area affects these, (2)understanding bow tbe company works and how communi-cation impact Is created at various contact points, and (3)understanding and respecting the strengths of the variousmarketing and marketing communication functions. Therole of core competencies as a necessary factor in marketingmix integration is discussed by Lynch and colleagues(1996).

Another critical part of the infrastructure, especially forcompanies that rely heavily on marketing communication, ispartnering with communication agencies that understandand practice integrated brand communication. These agen-cies also must recognize that keeping and growing cus-

tomers is just as important, if not more so, than acquiringnew ones.

Tbe most imporiani organizational factor, bowever, iscross-functional management. Because relationsbip mar-keting (versus traditional transaction-based marketing) ismore communication intensive at eacb level (e.g., corpo-rate, marketing, marketing communications), cross-func-tional management is needed to plan and monitormessages for strategic consistency and inconsistency. Abrand level cross-functional team must integrate the cor-porate and marketing levels, and a marketing communica-tion cross-functional team must integrate activitiesbetween the marketing and the marketing communicationlevels (see Figure 3), Tbis organizational structure makesit possible to plan and monitor brand messages going toand coming from all divisions.

An appreciation of the need for cross-functional organi-zation must begin at the corporate level. Ambler and Barrow(1996, p. 186). for example, argue that the separate areas ofmarketing and human resources should work more closelytogether: "Strong corporate equity with tbe brand's cus-tomer can improve the return on HR, while al the same timeimproved HR can improve the return on hrand equity fromextemal customers." That will only happen if top manage-

Communication-Based Model / 9

ment is committed to tearing down the walls betweendepartments.

Cross-functional management not oniy breaks downwalls between departments and stakeholder groups but alsohelps institutionalize feedback and leaming. Communica-tion must be managed as a boundary-spanning activity toachieve linkage in a leaming organization. Bohn's (1994)modei for managing technoiogicai knowledge relies heavilyon shared understanding, which is dependent on communi-cation. Integration is discussed specificaiiy as a factor inorganizationai learning by Bharadwaj (1996), and organiza-tional leaming is analyzed as an integrative factor in Olavar-rietaand Friedmann".s (1996) work.

Day (1992. p. 324) observes that market-driven fimis "donot suffer from organizational chimneys, silos, or smoke-stacks which restrict infomiation flow to vertical movementswithin functions." Day's market-sensing concept calls forsynergistic information distribution. Formal informationconnnectedness facilitates the exchange of information andreduces the conllicts thai inhibit communication.

For a cross-functional team to be successful, it musthave the authority to reallocate budgets. Ukrop's, a chain ofretail food stores in the eastem part of the United States,provides an example. When it found that its check-out clerksand haggers had the most influence on customer relation-ships, it moved money from mass media advertising andsales promotion inlo training to maximize the positiveimpact of this intrinsic brand contact point.

Hailmark began using cross-functional teams a fewyears ago to develop new lines of cards. By bringing variousgroups together through a cross-functional team, the com-pany was abie to reduce significantiy the traditionai 25hand-offs, enabiing a new iine to reach the market eightmonths ahead of the normai scheduie. When Griffin andHauser (1992) analyzed marketing, engineering, and manu-facturing activities in the development of new products, theyfound that cross-functional communication was critical forsuccess.

Key customers also can be involved in cross-functionalteams. General Electric, for example, uses cross-companyteams with its customer, Southem Califomia Electric. Theresult of this team'.s ability to communicate more accuratelyand quickly has heen to reduce outage time and costs (due toturbine shutdowns) by 50%. To facilitate the cross-functionalprocess however, requires tracking of customers and the sup-port of a database management system that provides univer-sal customer information and a corporate memory.

SummaryThe social and associational nature of marketing and busi-ness in general depend on relationships. It is our premise,therefore, that understanding the role of communication inestahlishing and maintaining profitahle stakeholder relation-ships is essential. Not only has communication alwaysplayed a role in attracting and keeping customers (and otherstakeholders), hut with advances in new media and com-puter technologies, the benefits of understanding and apply-ing communication theory and strategies to marketing havenever been greater.

Acommunication-hased model of marketing recognizesthat the management of communication that huiids brandvaiue invoives more than traditional marketing communica-tion. Planning toois such as brand message audits, contactpoint anaiysis. and stakeholder maps are needed to identifymessage fractures, ignored stakehoiders, and points of mes-sage confusion.

An appreciation of tbe cotnpiexities of brand cotiiniuni-cation makes it possible to understand the structural changesneeded to faciiitate cross-functionai planning and monitor-ing of ail brand tnessages. When this understanding exists, acompany can apply this communication-based model ofmarketing more easily to deliver more effective relation-ship-building programs.

AppendixStrategic Applications ofCommunication-BasedRelationship Marketing

When the corporate focus, processes, and organizationalinfrastructure required for doing comniunication-hased reia-tionship marketing (CBRM) are in place, a company canbuild the hrand reiationships that drive brand vaiue moreeffectiveiy. Examples of some of the specific appiicationsand benefits of using CBRM are the foiiowing:

"Because controlling or influencing brand messages Is thebasis for managing stakeholder relation.ships, it Ls critical loidentify the origin of these me.ssages (Duncan 1994). Com-municaiion-based relationship marketing will identity whichdepartment, program, or person Is the sources of messagesthat stakeholders are receiving and where they are beingreceived. Thi.s is what makes CBRM a customer-foe used, out-side-in model.

•Although product, pricing, and distrihution messages gener-ally do not involve human communication between customerand company, they can he anticipated and controlled, ihoughthe cost to control can he significant. For example, if market-ing research finds that the design of a motorcycle is sendingnegative messages (e.g., old fashioned, slow, fragile), the costto redesign could be hundreds of thousands of dollars andrequire months or years of work. Prioritizing in terms of mes-sage impact then becomes an important strategic task in cre-ating cost-effective communication.

•Because CBRM lakes a more macro approach to communi-cating with customers, it is not limited hy funclional bound-aries. For example, the 4Ps concept of promotion is nolinclusive enough to describe brand messages Where, forexample, does event marketing or direct marketing tit? Isdirect marketing managed as part of the promotion compo-nent, or is it a distribution respt)nsibility? Likewise, is pack-aging a product feature or a promotion responsibility.' Andwhere does customer service fit? And even more important,how does the 4Ps promolion element take into considerationall the brand messages other than those from markeling com-munication? This model provides a wider framework for themanagement of message impact.

•CBRM enables companies to identify and prioritize brandcontact points, separating the intrin.sic from the created.Intrinsic contacts automatically occur when buying or using aproduct. Forexample, wben taking an airline trip, checking inat the airport is an intrinsic contact point becau.se the productcannot be used otherwise. A created contact point is a planned

10 / Journal of Marketing, Aprii 1998

marketing communication effort and can include product and.service messages as well as the usual marketing communica-tion tools. If an airline's L'heck-in representaiives are surly andinelficienl, ihis should be corrected before investing in adver-tisements that tout the airline's low-cost fares. Contact pointsmust be prioritized, with budget allocations going lo thoseIhat have the ino.st impact on the most customers.

•CBRM helps companies identify points of stakeholder over-lap at which the same person in different roles has the poten-tial to receive reinforcing or conflicting brand messages.

•CBRM views transactions (and other interactions) as relation-ship building blocks. Lexus, for example, maintains a data-base of all critical interactions with customers, so that thecompany has the same "memory" as the customer. When acustomer calls or comes into a dealership, no matter where inthe country it is, the Lexus representative can pull up the cus-

tomer's profile and interaction history, making the customerfeel more importain and tlic itiicraction more efficient.

•Through ihe use of relational dalahases thai are universallyaccessible in a company, all employees who interact with cus-tomers have the same customer infomiation.

•An integrated marketing audit can be used lo identity and ana-lyze all corporate and brand messages being sent to determinestrategic message consistency and whether brand equity isbeing strengthened or weakened at the various points ofcontact.

•Finally, though communication programs are executed sepa-rately, CBRM provides a cross-functional managementprocess for planning and monitoring brand relationships.'

I Adapted from Duncan and Moriarty (1997).

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Marketing Analyst.

Develop plans to increase sales and revenue for Oriental holding corporation.Research market conditions. Provide information to management. Prepare andconduct surveys of customers and consumers. Prepare reports formanagement. Develop plans for future investments. Gather data oncompetitors, costs of production, and consumer desires. Advise on futureexpansion, including planning new business sites or expanding to other typesof business opportunities. Requirements: bachelor's degree in economics,marketing, or business administration with minor in economics or marketing.Fluent in speaking, reading, and writing Chinese. 40 hrs /week: 10:00 a.m. to6:00 p.m, $24,000/year.

• 7 • . 1

Must have proof of legal authority to work in U.S. If you are not a U.S. citizenand qualify for employment, please include the type of authorization in thecover letter or resume. Send your resume to Bernard Childerston, NebraskaDep't of Labor, P. 0. Box 94600, Lincoln, NE 68509. Refer to job order NE0206106. This advertisement is paid for by the employer.

Cotnmunication-Based Model /13