Bruised marketing industry cautiously optimistic in ’03

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Coming off a year that saw a recession, a crisis in corporate confidence and the slashing of marketing spending, b-to-b marketers are facing 2003 with battle-hardened wisdom and cautious optimism.

The lessons learned in 2002 were hard ones. B-to-b ad spending was down roughly 12% compared with 2001, according to the Business Information Network (a joint venture of American Business Media and CMR). Reacting to the poor economy, many companies economized by cutting back on advertising, industry events and other marketing efforts. Smaller marketing budgets and staffs became the rule.

This year, overall ad spending is expected to grow roughly 3%, forecast Gordon Hughes, president-CEO of ABM. And 49% of senior marketing executives said their marketing budgets would be larger in 2003 than in 2002, according to a study by Patrick Marketing Group. (An exclusive survey of b-to-b marketers conducted by BtoB and Patrick Marketing also appears on this page.)

While these signs bode well for b-to-b, marketers are looking at the year ahead as one in which to practice sound, practical business strategies.

Our interviews of marketers, agencies and research companies identified the following 10 trends for b-to-b marketing in 2003.

•Need for integrated ROI measurement

The necessity to prove return on investment will increase in 2003 as companies demand greater accountability for marketing efforts. Marketers will be offered new and improved means of measuring the effectiveness of Internet advertising through advanced tracking technology, and they’ll be forced to re-evaluate the ways they measure the performance of other forms of marketing.

"Today we measure fractured processes," said Eric Meerschaert, managing director of Charter Consulting, a Chicago-based management consulting firm. In many companies, he said, the sales group measures the number of deals closed, regardless of cost of acquisition, and the marketing group measures the number of eyeballs on messages.

Meerschaert said companies need to generate one set of objectives, embraced and tracked by both sales and marketing, and they should treat the delivery of revenue as an integrated process.

Maureen McGuire, VP-integrated marketing communications at IBM Corp., agreed there will be an increased emphasis on return on marketing investment.

"The emphasis will be on metrics and how to measure the overall value of marketing," McGuire said. "This will lead to a re-mixing of the marketing investment. You’ll probably see some movement from advertising into more direct response."

•Growth of direct mail

Despite a significant postal rate increase in 2002, many marketers are finding that direct mail is still one of the most cost-effective ways to reach prospects.

"Direct mail is not a cheap way to market, but if you’ve done your homework, it’s the best way," said Steve Penn, CEO of Penn Garritano Direct Response Marketing. "You’re putting the message in the hands of people who are most likely to respond."

However, Penn said, in order to maximize the effectiveness of direct mail programs, marketers need to clean out their databases and make sure various parts of the companies are talking to one another.

"A garage full of warranty cards doesn’t do you any good unless you use that information," Penn said.

Marc Karasu, VP-advertising at career portal, is pursuing both postal direct mail and e-mail campaigns this year.

"We’re at a point where we’ve built a recognized and trusted brand, so we have some leeway to take some spending out of branding," Karasu said.

Karasu continued: "We need to stay fresh and top of mind, but we can take that money and funnel it into more trackable direct marketing on the corporate side."

•Opt-in e-mail must be relevant

Marketers will continue to use e-mail to reach prospects and customers this year, and the messages will be even more targeted and appropriate.

"When times get tough, it’s important to be more relevant to the customer," said Karen Breen Vogel, exec VP-strategy and client solutions at B2BWorks, a Chicago-based b-to-b marketing communications agency.

Breen Vogel said companies should first gain permission to communicate directly with customers and prospects, and then send relevant information through e-newsletters or e-mail messaging.

Nancy Harris, VP-marketing at start-up company Forgent Networks Inc. in Austin, Texas, said e-mail is particularly effective for companies like hers with limited marketing budgets. Forgent’s budget is less than $1 million. "The advantage of e-mail is that it is very inexpensive, and if you have a high-quality, high-caliber list, you can reach the right people," she said.

However, she said, marketers must first cull through lists to make sure they have the right names in the right target market, and that the leads are high quality. "If they don’t meet those criteria, it’s out with the old and in with the new," Harris said.

•Data quality will improve.

Marketers that want to improve the quality of their data are turning to companies that offer "data cleansing" or "data hygiene" services. Data hygiene companies provide software to identify errors and inconsistencies in data, such as incorrect zip codes.

Other services such as data matching, data appending and data consolidation are being used by marketers to improve the quality and consistency of their prospecting databases.

"We certainly see an increased awareness of the need for data quality solutions for marketing, particularly in the areas of direct marketing and online marketing," said Steve Varsolona, information quality market director at Firstlogic Inc., a data cleansing company based in LaCrosse, Wis.

•Growing role for PR

Many companies are placing a much heavier emphasis on public relations to communicate their messages to core audiences, and they will continue to do so in 2003.

"There has been an increase in PR as the continued reduction of budgets pushes much more valuation on the best use of money," said Gordon Hochhalter, a partner at Mobium Creative Group, Chicago, a b-to-b integrated marketing communications agency.

Hochhalter said some of the most effective PR tactics include defining networks of people that are connected, finding the key people in those networks and taking a viral approach to PR that can be measured.

Harris, of Forgent Networks, said PR is particularly effective for marketers with limited budgets. "It gives an implied third-party endorsement, and it’s not nearly as expensive as traditional marketing tactics," she said. "If you couple a focus on media with a focus on the analyst community, you can get significant coverage that can be used by the sales force and those marketing the company," Harris added.

•Focus on trust and integrity messages

Still shaky from the accounting and corporate scandals of 2002, many companies are focusing on building trust and confidence among their shareholders, clients and other constituents.

From WorldCom Inc.’s "Moving Forward" campaign in business journals to the New York Stock Exchange’s "The world puts its stock in us" TV commercials, marketing messages are carrying themes of trust and accountability.

"Attributes including trust, authenticity and integrity will matter more," said Allison Johnson, senior VP-global brand and communications at Hewlett-Packard Co., which won a shareholder battle to acquire Compaq Computer Corp. in May.

"Particularly in the technology sector, our industry has been guilty of selling futures and hype," she said. "People will want to hear pragmatic, practical voices," Johnson said.

This will translate into campaigns that are straightforward and "from the heart," said Chris Atkins, director of global corporate practice at Ketchum, New York.

•Creation of 'holistic' branding

In an environment in which corporate trust has been elevated to the forefront, companies are concentrating on what their brand represents to investors, customers, employees and other stakeholders.

Sometimes called "holistic branding," "experiential branding" or "brand culturalization," the goal of these efforts is to internalize the brand within marketing organizations and to communicate a brand experience to customers and prospects.

"Because the brand is a reflection of what a company wants to be and how the public sees it, the promise of that brand should direct how an organization behaves toward all of its audiences," said Rick Jacobs, principal of Monigle Associates, a Denver-based brand consulting firm.

"Companies are becoming much more thoughtful and strategic about aligning their brands with their business objectives," he said. "Corporate executives are realizing that successful execution of the brand means a more holistic approach than just approving a new ad campaign."

Jacobs said that in addition to using traditional metrics such as lift in brand awareness, companies should measure a brand’s "emotional intelligence," which is the emotional impact a brand has on stakeholders.

•More focused events marketing

The trade show business, which took a big hit after Sept. 11, 2001, will bounce back in 2003, according to ABM’s Hughes, who predicts a 5% to 6% increase in trade show business this year. However, some marketers say they’re consolidating the number of events they attend, as well as the number of events they host.

"There has been a drop-off in events," IBM’s McGuire said. "People no longer have the marketing budgets to go to four or five marketing events a year." McGuire added that IBM has consolidated many of its own events, hoping its customers will attend one or two pertinent events rather than four or five more general ones.

Mobium’s Hochhalter also pointed to the trend of much more targeted events in 2003. "A lot of the events that were sponsored by several companies are moving more toward corporate events—much more targeted events and industry events held at corporate locations," he said.

•Integration of business systems

A major undertaking for marketing companies this year will be the integration of customer relationship management systems and other technology investments with existing business systems.

"Business integration is one of our clients’ mantras for 2003," said Breen Vogel of B2BWorks. Many of these clients reportedly have invested heavily in CRM systems, as well as in Web site development and marketing, but these efforts are not always integrated.

"You have to tie outbound marketing activity back to the central nervous system," she said. "This all falls under companies looking at their electronic assets and integrating them."

•Continuing growth

Despite the challenges facing them in 2003, marketers say they’re continuing to invest in their businesses with an eye toward growth.

Southwest Airlines is a good example. Even with the dramatic downturn in air travel in 2001 and 2002, the Dallas-based airline is positioning itself to grow its market share.

"We’re anticipating it being a relatively lean and tough year, but we’re going to continue to grow," said Richard Sweet, executive director-sales and marketing at Southwest. The company will retire six planes but take on 17 new ones for the year. It is also adding service to existing destinations.

Southwest Airlines will increase its trade advertising "slightly" in 2003, and will promote, its online booking tool.

Rick Segal, chairman-CEO of HSR Business to Business Inc., Cincinnati, said marketers are starting to be more adventurous after a tough year.

"They’re reinvigorating marketing programs; they’re introducing new products; and they’re exploring new markets," Segal said.

Carol Krol and Sean Callahan contributed to this story.

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