Integrated Marketing Communications (IMC) focuses on building brand by creating databases that continuously monitor and respond to market needs as relationships are fostered between practices and customers (e.g., patients, referral sources). The first two articles in this four-part series focused on two aspects of IMC: Customer Relationship Management (CRM) strategies for database mining (Part I) and building brand awareness through strategic messaging to target markets (Part II).
The purpose of IMC is the same as traditional marketing, which is to maximize profitability of a business. IMC is an ongoing, circular process that requires continual communication between an audiology practice and its target markets (Figure 1). This communication dynamic is what distinguishes traditional marketing from IMC: the former works to increase profitable transactions, whereas IMC works to increase profitable relationships. This is not a semantic quibble. The concept of a profitable relationship requires that both parties benefit and "profit," as described by Schultz et al. (1993):
IMC is based on continual exchange between marketer and customer. The former seeks and stores information on each individual customer in a database. The latter, through transactions, surveys, and other methods is encouraged to communicate back. Thus the fields of experience of both become greater and more useful to both parties. (Italics added)IMC strategically searches and selects premium long-term relationships to simultaneously build premium brands and maximize profitability, making it a superior marketing method for acquiring, retaining, and nurturing profitable relationships. In this article, Part III of the IMC series, a handful of Marketing Communication (MC) methods for acquisition and retention of relationships are discussed in the first section. The remainder of the article concentrates on defining and identifying profitable relationships within audiology practices.
Figure 1. IMC process is circular and data driven, using database information to link consistent and continuously refined messaging and dialog with target markets in an accountable manner. IMC can use any mix of MC components (center box), depending on the audiology practice.
Customer Acquisition, Retention and Growth
All businesses, including audiology practices, must acquire new customers by some means while holding onto their established clienteles. IMC is not a solution for these business imperatives, but it does present a new way of thinking about how to accomplish them. IMC replaces the traditional 4Ps of marketing with 4Cs of a customer-centric business approach (Table 1). There are two key points to remember when looking over Table 1 and reading the remainder of this article:
- "Customer" is used because the marketing imperatives apply not only to patients but to other important customers in the database, such as physicians and other referral sources.
- A few popular MC applications are discussed as examples of ways to address the marketing imperatives. Other MC applications are also applicable. IMC does not specify an ideal marketing mix because every business and every practice is unique.
Table 1. The 4Ps of Marketing and the 4Cs of IMC. (Adapted from Schultz et al, 1993)
Acquisition by Direct Response and Event Marketing
New audiology practices often rely heavily on direct response marketing, usually in the form of direct mailings using a purchased list segmented by demographics (zip code, age, household members, household income, etc) or other metrics (e.g., primary care physicians, gerontologists, etc). The more personalized and specific the addressing of the piece, the greater the chance that the marketing effort will reach the targeted consumer and evoke a response.
The verbiage of mail pieces typically creates a sense of urgency by making an offer that is good for a limited time with a motivator to respond. For example, a direct-mail campaign targeted to potential physician referrals may offer a lunch and learn or a hearing screening device in return for time scheduled with the physician and staff within the next month. Larger direct-mail campaigns targeting potential patients usually offer a discount, sales promotion, or coupon. Recipients must make an "observable" response (e.g., request information, make an appointment, or purchase two-for-one) in return for goods or services which the practice must honor in full (e.g., perform a free screening, provide instrumentation at reduced price, free batteries, etc).
Specific examples of direct response marketing, including direct-mail campaigns, can be found by contacting any of the hearing aid manufacturers' marketing departments. Most offer financial incentives to practices that participate in their direct-response marketing offers.* Such campaigns are "direct" because the offer is tailored to your practice and appears to come directly from your practice to a target market that you select. All such campaigns feature the manufacturer, its products, and its representatives prominently, as a quid pro quo for underwriting some of the campaign. From an IMC perspective, there is a risk of brand dilution if recipients view the mailing as a hearing aid promotion rather than a promotion of your practice. Care must be taken to ensure that your practice brand remains primary and the hearing aid brand is auxiliary at all steps in a direct-marketing campaign. As discussed in Part II, direct-response marketing challenges audiology practices to decide whether their marketing dollars go to a quick marketing return on investment (MROI) that diminishes brand but fills the coffers, or sends a message that builds brand but may take longer to realize a return. IMC audiology applications argue against the former, and opt for the latter: a business strategy built on long-term profitable relationships is superior to a strategy that relies on short-term sales that may expose the practice to ethical and legal scrutiny as well as challenging cash flow fluctuations.
Established practices with well-respected brands are always better positioned than new practices for using direct-response mailing and event marketing to get ahead. This is because they can "data mine" their own patient and referral databases, in addition to purchasing lists. Knowing they can generate an audience, established practices often tailor an offer with a reward for responding (e.g., invitation to a breakfast or dinner and educational seminar), without offering free or discounted services or products. Such events often headline the practice's own audiologists as expert speakers which, in effect, build brand associations. In sum, established practices can fulfill their offers to most respondents' satisfaction without diminishing the practices' brands by sending mixed pricing and value messages to their audiences. These attributes can also be expanded in some cases by extending a practice's brand through brand associations and national merchandising (e.g., national branding, buying groups, and professional member groups).
Retention and Growth through Personal Sales
Personal sales are the most important part of relationship-building in an audiology practice. In IMC parlance, we are engaged in "solution selling" - working in collaboration with every patient, developing patient-specific dialogues to extract the most from our brand features to solve as many of the patients' problems as possible and retain the customer within the practice. One of the great strengths of personal selling is that it allows flexibility to each provider as a means to integrate customer needs/wants/demands with the practice's offerings. In her book Hitting the Sweet Spot, Fortini-Campbell (1992) summarizes the process:
"We all want someone to speak to us honestly, not as some statistical model ... but from one living breathing human being to another....You don't persuade people. They persuade themselves."Personal selling, for all its strengths, poses several threats that can damage a practice's brand and profitability. At all times, individual audiologists' actions and promises must be consistent with the IMC goal to support brand integrity.
- Employees are a direct extension of a practice's brand. Patients and referral sources may confuse employees with "the company" and develop relationships with the audiologist instead of the practice. Relationships based on provider loyalty instead of practice loyalty will diminish the practice brand over time.
- IMC's emphasis on long-term relationships instead of individual sales transactions can be a hard sell to employees who earn sales commissions. Audiologists profiting from sales commissions may place the long-term relationship goal secondary to sales, seeking immediate monetary gratification over customer needs.
Profitable Relationships
"While relationship marketing may be the buzzword of the 1990s, IMC is what makes relationship marketing possible" (Schultz et al., 1993).Relationship marketing has received a good deal of audiology press in recent times. Readers are referred to those articles (cf. Kasewurm, 2006a&b) for tactical information on implementing relationship marketing. Relationship marketing is an important part of the IMC process for a number of reasons iterated by Duncan (2002):
- Lost customers typically voice their dissatisfaction to at least nine other people, causing brand erosion and lost revenues.
- Selling to repeat customers costs less than acquiring new customers.
- Relationships allow a practice to recoup its customer acquisition costs over time. For instance, AT&T incurred $125/customer acquisition costs in one promotion, amortizing to $25/month if a customer left after five months, but only $5 if he/she stayed for two years. This is why cell phone providers give us free phones, but requires two-year contracts with high cancellation fees.
- Relationships increase lifetime customer value (LTCV), which estimates how much of the practice's profit is due to a customer's purchases over time. Using available data, we could estimate that a man who is fit to his satisfaction with hearing aids at the age of 72 will purchase two more pairs from the same practice in his lifetime, generating practice revenues of $10,000, not including evaluation and aftermarket revenues. His LTCV is whatever profit the practice extracts from that revenue.
- Because of the LTCV, small increases in customer retention produce large revenue increases.
- Brand loyalty creates pricing opportunities. Loyal customers will pay 7-10% more than non-loyal customers for a retail brand (Garth, 1995).
- Customers benefit from brand relationships by reducing their risk of purchase, having to make fewer decisions, avoiding switching costs, receiving more latitude and special treatment from the practice, and gaining a personal association with the brand ("You should see what MY audiologist can do to help you ....").
"...there are exceptional people out there who are capable of starting epidemics. All you have to do is find them" (Gladwell, 2002).The final bullet of the preceding section highlights another reason that relationships are important to brand: some relationships are more valuable than others. Some of our patients are so loyal, knowledgeable, social, excited, or influential that they are "contagious", spreading a message until it becomes what Gladwell (2002) calls a social epidemic. Such people constitute a tiny sliver market that practices need to discover and capture.
Table 2. Levels of patients' brand loyalty to a practice.
IMC recognizes four levels of brand loyalty and associated brand value: no loyalty, inertial loyalty, latent loyalty, or premium loyalty. With a quick glance at the descriptions of these four loyalty levels in Table 2, you can easily conjure up patients in your own practices that fall into each category. IMC aims to identify all patients in each group and nurture them according to their level of loyalty. Although premium loyalty patients receive the most attention, it is important to direct some IMC towards those in the inertial and latent loyalty groups, who compromise the "long tail" of practices' profitability (Anderson, 2006) and may eventually be converted to a higher loyalty level.
Interestingly, the people in the premium loyalty relationships with your practice may not be who you think they are! Certainly, customers who are frequent and happy purchasers belong in the premium group. But, how do you categorize the patient who visits every day asking questions about hearing aids he bought five years ago? That relationship is strong, frequent, obviously loyal, but is it profitable? What about the patient who attends all your practice events and seems to know everyone, but doesn't often need your services? Is he/she a premium loyal patient or just a party animal? The IMC process makes it imperative to look at everyone in your database with an unbiased eye in order to identify premium customers and lavish communications on them. You can do this in a series of sweeps of your database, as follows:
- Start by analyzing your patients according to purchasing power. Economists and marketers use the Pareto Rule** as a common guideline to look at such data. This "Law of the Few" predicts that 20% of your customers will account for 80% of your revenues, on the defensible principle that many effects are the result of a few causes. You will populate that list fairly quickly and get a little fun out of it by seeing how closely your practice conforms to this rule. You will also want to complete this step for your referral sources, including physicians and any national branding or buying groups with which your practice has affiliations.
- The next step is also easy if you have a well-maintained database. Start by ranking your patients according to how they were referred to you. Something akin to the Pareto Rule is likely to show up: only a small number of your patients are responsible for most of your word-of-mouth referrals. Rather than think this means you have failed with those who are not referring, consider that the small number who do refer represent something special and valuable to your practice. They comprise another group of premium customers: the People Who Spread Ideas. In his book The Tipping Point, Gladwell (2002) calls this group The Connectors, or the "social glue" that spreads messages. He notes that:
Six degrees of separation doesn't mean that everyone is linked to everyone else in just six steps. It means that a very small number of people are linked to everyone else in a few steps, and the rest of us are linked to the world through those special few.
Again, perform this sweep for your referral sources as well, and identify which physicians (or other referrals) are Connectors for your practice. - This step and the following step will likely require that you go through your database by hand the first time, but if you add a few fields to the database as you go, the process can be automated for future use. In this pass, identify the 20% of your polite patients who come in most frequently asking arcane questions, going over the fine print in their warranties, telling you about minute differences in battery life, and (worst of all), comparing your hearing aid prices to Costco and Wal-Mart. We all have such folks: lovely people, but extremely time consuming and definitely not profitable. They may know more than you or your staff about technical topics (Bluetooth and looping systems) and they definitely read their hearing aid instruction manuals more closely than you do!
When we see these people on the daily schedule, our first reaction may be to hide or have the front office handle the interaction. That's an IMC violation. These people are premium customers because they, too, are People Who Spread Ideas. They are a well-researched group known to economists as "market mavens." Mavens*** are distinguished by several features: a) they are walking data banks, obsessed with knowing and remembering things in detail, b) they love to compare and find the best deals, c) they cut across ethnic and socioeconomic boundaries, d) more than half of Americans know at least one (Feick & Price, 1987) and, most importantly, e) they like to share their findings with others without being know-it-alls. Gladwell (2002) summarizes these premium customers:****Mavens have the knowledge and the social skills to start word-of-mouth epidemics. What sets [them] apart, though, is not so much what they know but how they pass it along. The fact that Mavens want to help, for no other reason than because they like to help, turns out to be an awfully effective way to getting someone's attention.
- Once more through your database and you will have captured most of the key patients that comprise your Super-Profitable Relationships group. The purpose of the final search is to identify Persuaders- rare charismatic individuals who gently, and perhaps subliminally, influence others to emulate them (Gladwell, 2002). Some Persuaders are obvious: they are upbeat people, favorites of office staff, they attend all of your functions, and they are good negotiators. But, you may overlook the subtle, but far-reaching influence of quiet Persuaders (witness President Gerald Ford's wide-spread network, which only became apparent upon his death). You can probably do a better job of identifying persuaders in your future database if you incorporate psychological survey tools into your history and intake procedures.*****
Persuaders are an important bridge that can link your practice to Connectors, Mavens, and everyone else who requires convincing in your target markets. An added benefit is that customers converted to your practice by a Persuader are likely to emulate the Persuader's pleasant mannerisms when purchasing services and products from the practice.
Unprofitable Relationships
The final step in identifying relationships in need of nurturing and growth is to recognize that not all patients and customers are profitable to your practice. Every audiology practice has patients who consume more time and complain more than the rest of the practice's patients. In fact, you might say that 20% of your patients create 80% of your practice's problems, which certainly affects your bottom line. The Pareto Rule may work both ways in this case. It is unnecessary, not to mention unethical, to rid your practice of these people. At the same time, it is in your practice's and other patients' best interest to devise messages that deter and deflect the constant trouble makers (Van Vliet, 2006). That, too, is part of the IMC approach.
Conclusion
IMC activities must achieve practice objectives in order to be successful. What are some realistic practice objectives for marketing efforts? We know that marketing cannot control and manipulate markets to significantly and consistently increase sales, regardless of how well the marketing is done. Competition is too fierce, information is too widely available, and consumers' choices are practically unlimited. Practice objectives for marketing must be focused on serving and satisfying the practice's customers with goals of maintaining and growing the database to increase profitability.
Schultz et al. (1993) succinctly state the quantifiable measures that connect marketing and customers: "The customer base really determines the amount of product than can be sold. To a certain extent it also defines the level of profit that might be attainable." Linking customer numbers, product sold, and profitability to marketing activities provides the accountability that is a key ingredient of successful IMC. Marketing efforts directed at acquiring and nurturing customers with whom the practice can develop long-term, profitable relationships is critical for achieving practice objectives.
* IMC describes a general marketing approach that is not specific to a particular market or discipline. As such, IMC is neutral with regard to ethical and legal ramifications, which vary according to application. When applied to audiology practices, individual audiologists must be cognizant of Codes of Ethics to which they have subscribed when they implement marketing strategies. Likewise, audiologists must consider the potential ethical and legal ramifications of accepting any form of remuneration from manufacturers, including marketing dollars, if they participate with federal payers.
** Named after the Italian economist Vilfredo Pareto, the rule also applies to work done by the "vital few" and the "trivial many," which may help you understand your staff more completely (Juran, 1974).
*** From Yiddish, meaning "one who accumulates knowledge" (Gladwell, 2002).
**** Mavens are famously captured by "Maven Traps" using ICM-inspired messaging and database trolling. See Green, 2006, for quick information and links publications.mediapost.com/index.cfm.
***** Such as the Affective Communication Test (ACT), a 13-question survey copyrighted by Dr Howard Friedman (1980). For more information on the ACT, and possible permission for use, go to www.faculty.ucr.edu/~friedman/act.html. In the audiology literature, see Traynor & Holmes (2002) for tools and methods used to assess salesmanship and other personality characteristics in audiologists.
Editor's Note
This article, focusing on acquiring and retaining customers, is the third in a series of four papers examining Integrated Marketing Communications (IMC). The series was written by Dr. Holly Hosford-Dunn, an Audiology Online Contributing Editor in the area of Practice Management. The first article in this series, focused on Customer Relationship Management (CRM), was published in July, 2006 on Audiology Online and can be accessed via the Articles Archive or directly by the following URL: www.audiologyonline.com/articles/article_detail.asp?article_id=1630
The second article was published in December, 2006 on Audiology Online on the topic of strategic messaging to build brand, can be accessed via the Articles Archive or directly by the following URL: www.audiologyonline.com/articles/article_detail.asp?article_id=1732
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