Exploring an IMC Evaluation Model
Testing an IMC evaluation model: The impact of
brand equity and the company's reputation on revenues
by
Yungwook Kim, Ph. D.
College of Journalism and Communications
PO Box 118400
University of Florida
Gainesville, FL 32611
(H) 352- 846-5152
[log in to unmask]
Submitted to the Advertising Division
The AEJMC Conference, New Orleans
April 1, 1999
ABSTRACT
Testing an IMC evaluation model: The impact of
brand equity and the company's reputation on revenues
This paper is trying to establish the relationships among variables in
corporate
communications, especially between advertising and public relations, and to
establish an
evaluation model for integrating the effects of communication activities in the
context of
integrated marketing communication (IMC).
For testing, a new approach for integrating the effects of communication
activities was introduced and the IMC evaluation model was specified. The
proposed model was tested with existing secondary data. The outcomes indicated
that both brand equity and the company's reputation have significant impact on
revenues and showed the positive relationship between brand equity and the
company's reputation in the proposed model to justify the need of IMC in
corporate communications.
Introduction
Integrated Marketing Communications (IMC) and Integrated Communications:
Advertising and Public Relations (ICAP) have been buzz-words of the 90s (Miller
& Rose,
1994). Overheated and somewhat malicious debates have caused deeper
misunderstandings and misinterpretations of IMC. [1] A so-called "turf war"
among public
relations, advertising, and marketing scholars has obstructed the productive
discussion of
new trends and the application of new strategic approachs (Duncan, Caywood, &
Newsome, 1991; Ehling, White, & Grunig, 1992; Kotler & Mindak, 1978).
In the advertising literature (Duckworth, 1991), the role of advertising
is clearly said
to manipulate the consumers' perception related to a brand. However, mainly
public
relations scholars strongly negate the function of manipulating the public. They
insist that
manipulation is a one-way communication and only used in the primitive publicity
stage
and the public information stage (Grunig & Hunt, 1984).
In fact, the understanding between advertising and public relations is a
key to the
development of IMC. Advertising and public relations are basically discrepant on
how to
approach the consumer. However, reconciliation becomes possible in the state of
evaluation. Even though strategies and approaches are different, the ultimate
aim of
public relations and advertising is the same for the bottom-line impact.
In reality, both types of practitioners have utilized the new approach
and added
services for clients, rather than adhering to a tradition (Niederquell, 1991;
Strenski, 1991;
Tortorici, 1991; Novelli, 1990). Thus, IMC has become a far-famed word among
practitioners despite of theoretical debates among academicians. This study is
one trial
that aims at the coordination of theory and reality, as well as the search for
the
reconciliation between both sides.
The purpose of this paper is to clarify the relationships among variables
in IMC and
to establish the IMC evaluation model for integrating the effects of corporate
communication activities. This effort, in the long run, may create the much
needed
cooperation between public relations and advertising.
Literature Review
Advertising evaluation research
Problems in previous research. Previous research in economic efficiency
routinely
investigated the direct effect of advertising expenses on sales (Montgomery &
Silk, 1972;
Palda, 1964; Palda, 1964; Simon, 1970; Simon & Arndt, 1980). This early
econometrics
work commonly lacked the consumers' psychological process, and only dealt with
consumers as an aggregate outside the economic meaning.
The mediating variables in advertising effects (Petty & Cacioppo, 1981)
were
disregarded in the advertising-company returns response. The explanation of how
advertising prompts sales was always insufficient.
The long-term purpose of advertising may be increasing sales, however,
the objective
of advertising campaigns usually lies in increasing awareness, recall,
recognition, memory,
attitude, and behavior (Belch & Belch, 1995). All short-term objectives are
widely-used
variables in advertising evaluation and related to increasing brand-related
power. Thus,
increasing brand power against consumer choices should be considered as a
mediating
variable between advertising expenses and sales.
Despite the early attention on the advertising-sales response function
(Simon, 1970;
Telser, 1962; Palda, 1964), research failed to provide any conclusive results
(West, 1985).
Mediating variables and the company's returns. Among possible processing
variables, brand equity was chosen as the most embracing variable in this paper.
Brand
equity has been the focus of marketing research and advertising research (Aaker,
1991;
Aaker & Biel, 1992; Cobb-Walgren, Ruble & Donthu, 1995). Brand equity can be
defined
as the "added value" of a brand to a product.
From the consumer's perspective, brand equity is the cumulative image of
the brand
in view of consumers. The consumer's attitude is affected by many attributes
including the
company image (Biel, 1992). Also, brand equity includes consumers' brand image,
loyalty,
and all nonconventional asset values. Thus the concept of brand equity embraces
consumers' psychological judgment such as willingness to pay for a branded
product and
all image factors (Biel, 1992). In the broad sense, the company's image and
brand image
can go together from the view of the consumer.
Related to psychological proxies for sales, brand equity can be enhanced
through
"brand association, perceived quality, and use experience" by advertising
activities (Simon
& Sullivan, 1993, p. 33). Also, advertising affects consumers' perceptions and
cognition
about product (Hoch & Ha, 1986; Aaker & Shansby, 1982), brand preference (Cobb-
Walgren, Ruble, & Donthu, 1995), attitudes (Farguhar, 1989), and intention to
purchase
(Nelson, 1974; Cobb-Walren, Ruble, & Donthu, 1995). Advertising activities
increase the
value of brand equity through diverse psychological processes.
In his conceptualization of customer-based brand equity, Keller (1993)
emphasized
the effect of brand knowledge on traditional outcome measures such as sales.
Brand
knowledge includes brand awareness and brand image. From the consumers'
perspective,
brand equity as psychological indicators and sales are closely related.
Cobb-Walgren, Ruble, & Donthu (1995) tried to integrate the psychological
and
physical effects of advertising and other information sources using brand
equity. Previous
research related to brand equity has been divided into two methodologies of
measuring
brand equity: financial valuation or consumers' psychological features such as
brand
image, brand association, preference, and attitude (Aaker, 1992).
In Cobb-Walgren et. al. (1995), the advertising expense and the level of
brand equity
showed a positive relationship. However, brand equity was used as a mediating
variable
for measuring brand preference and purchase intention in their study. Their
conceptualization started with the relationship of advertising, brand equity,
and sales, but
did not report the relationship of brand equity-sales in the analysis.
The goal of advertising is to enhance the brand value among consumers or
increase
brand equity (Aaker, 1991; Aaker & Biel, 1992). Also, the direct function
between brand
equity and the company's bottom-line could be established because brand equity
includes
both the psychological and economic meanings.
In clarifying the volume of brand equity, advertising texts insist that
brand equity
usually enhances the effectiveness and efficiency of marketing activities and
provides more
margins due to higher perceived quality and brand royalty as its firm-side
advantages
(Aaker, 1992; Belch & Belch, 1995).
Also, Kim's (1998) model that described the two-way relationships among
advertising expense, brand equity, and the company's returns was tested and
indicated the
positive relationship between brand equity and the company's revenues.
Based on previous discussions, a hypothesis is established (see also
Figure 1):
H1) The level of brand equity has a positive relationship to the company's
returns.
----------------------------------
Insert Figure 1
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Public relations evaluation research
Public relations goals. Hon (1997a) interviewed 32 practitioners and 10
organization heads and revealed the importance of public relations in the
organizational
level. In those interviews, attributes of public relations effectiveness were
defined by risk
management, building relationships, media relations, earning respect, increasing
understanding, goal achievement, affecting legislation, and disseminating
messages.
From the results of Hon's (1997a) interviews, this research considers
building
relationships and earning respect as two major dependent variables for public
relations'
effectiveness. In another study conducted by Hon (1997b), the CEOs believed that
the
ultimate goal in public relations is "communicating the image of the
organization."
Grunig (1993) suggests three dependent variables of public relations
effectiveness:
image of the public, relationship with stakeholders, and satisfaction with
employees.
Because of bad connotative meanings implied in public relations, he replaced
'image' with
'symbolic relationship.' He used symbolic relationship as the object of
micro-level public
relations, and behavioral relationship as the object of macro-level public
relations.
Corporate image represents the summed perception about an organization
(Marken,
1990). Public relations academicians often do not like to use the term 'image'
due to its
manipulative meaning (Grunig, 1993; Cutlip, 1991). Instead, they use
'reputation' as the
better term for corporate image. As one of public relations goals, reputation is
a key
dependent variable of public relations activities (Hon, 1997b: O'Neill, 1984).
The public relations and the organizational goal. L. Grunig, J.
Grunig, and Ehling
(1992) argued communication objectives should be connected to broader
organizational
goals. Other researchers and practitioners also agreed on the importance of that
task
(Bissland, 1990; Hon, 1997b; Newlin, 1991; Webster, 1990). This exploratory
study also
is in line with the emphasis that the public relations goals should be connected
to the
organizational goals to measure the contribution of public relations to the
organization.
In the pilot study of 92 companies in 11 industry categories, Kim (1997)
found a
positive relationship between the company's reputation and returns across all
industries.
Using economic linear and non-linear models, the considerable amount of the
variance in
revenues could be explained by reputation. The most important indication of this
study is
the exhibition of a positive relationship between reputation and revenue.
Assigning an economic value to the company's reputation can be an initial
step for
developing more sophisticated and scientific methodologies of measuring
contributions of
public relations. However, this study is different from the cost-benefit
analysis, which
directly assigns the monetary value of public relations goals. Assigning the
monetary
value, as Grunig (1998) indicated, wholly depends on intersubjective reliability
and is less
than objective. However, coefficients from the economic model testing can
represent the
weighted relationship between the company's reputation (the public relations
goal) and
returns (the organizational goal) in a specific category. These coefficients can
be used in
the next step to assign the monetary value of goal achievement.
The company's revenues are chosen as the organizational goal. The public
relations
goal (reputation) should prove its positive impact on the organization goal.
Thus, the first
hypothesis lies in the relationship between the company's reputation and
revenues.
Based on previous discussions, a hypothesis is established (see also
figure 2).
H2) The level of the company's reputation has a positive relationship to the
company revenue.
--------------------------------
Insert Figure 2 here
--------------------------------
Need of IMC
In the vortex of restructuring and re-engineering, corporate
communications
activities are reevaluated by the standard of accountability and bottom-line
impact
(Gonring, 1994). IMC is a new evolution in the alignment of communication
activities by
maximizing all resources. Even though there are some disagreements about the
function of
public relations in the context of IMC, IMC seems an inevitable trend especially
in
corporate communication activities.
Clients. IMC is needed also from the viewpoint of clients (Novelli,
1989-90).
Competitive clients insist the maximized synergy effect of all communication
activities.
Advertising and public relations practitioners should at least display their
readiness of
integration effort upon clients' requests.
Consumers and publics. IMC is also a need from the viewpoint of consumers
or
publics (Duncan, & Everett, 1993). IMC is reorganizing communication activities
by the
way consumers or publics look at the activity (Schultz, Tannenbaum, &
Lauterborn,
1993). Advertising, public relations, sales promotion, and direct mail can be
called
consumer/public-oriented communication. In fact, consumers or publics see one
whole
picture based on what they feel, see, and hear. In fact, all communication
activities are
already unified in consumers or publics' minds.
Messages. In the context of messages, there are four kinds in IMC:
planned
messages, inferred messages, maintenance messages, and unplanned messages
(Moriarty, 1994). The planned messages are the organization's controlled
messages such
as advertising, public relations, sales promotion, direct mail and other
promotional
activities. However, no one department in the company takes responsibility for
the other
three messages. Instead, IMC integrates all the messages coming out of the
organization.
Those integrated efforts increase the synergy of all messages and resolve
conflicts among
marketing communication messages by the consistency and interactivity (Moriarty,
1994).
The bottom line impact. The companies' current communication activities
are
striving for effectiveness and efficiency (Gonring, 1944). Without applying the
same
criteria applied in other fields, communication activities cannot prove
themselves against
their contribution to organization goals with the resulting impact for the
bottom-line. IMC
brings these perspectives together and displays how to communicate with
consumers and
publics in an integrated way. Thus, IMC evaluation can be more unified for the
company's
bottom-line than the evaluation of each communication activity and can be
measured with
all integrated effects (Gonring, 1994).
The changing role of marketing. The role of marketing has been changed
drastically
from the profit maximization paradigm to strategic partnerships with consumers
(Webster,
1992). The differentiation rule of whether its goal is pursuit of profit or not
between
marketing and public relations has lost its ground. The new marketing activities
emphasize consumer partnership. Relationship and negotiation are definitions,
stemming
from public relations (Grunig and Hunt, 1984). Webster (1992) argued the
changing role
of marketing at three distinct levels: the corporate, business, and functional
or operating
levels. Especially on the corporate level, the role of marketing managers became
close to
that of public relations practitioners.
Social marketing, idea marketing, or cause marketing all represent some
valuable
invisible assets. This trend bolsters the promotional needs of invisible assets
in the
company's communication activities. This is in line with the principles of IMC.
IMC
integrates all communication efforts with consumers to enhance visible and
invisible assets
of the company (Schultz, Tannenbaum, & Lauterborn, 1993).
Visible and invisible assets. The effects of organizational citizenship
behaviors
(OCBs) on the evaluation of sales person's performance was investigated to
establish the
model between OCBs and the evaluation of performance (Mackenzie, Podsakoff, &
Fetter, 1993; Posdakoff & Mackenzie, 1994). However, the effects of OCBs at the
organizational level have not been investigated because the company's invisible
assets
including the company's reputation and relationship with publics were not the
main topic
in marketing research. In fact, OCBs can be enlarged into the overall idea of
public
relations. However, current IMC evaluation has not integrated the effects from
invisible
assets such as OCBs, reputation, and relationships with publics. IMC on the
strategy level
could not be connected to IMC evaluation. An IMC textbook has just recently
focused on
the consumer's behavior or the impact on the behavior of the intended audience
(Schultz,
Tannenbaum, & Lauterborn, 1993).
Integration of Advertising and Public Relations Effects
In the context of organization-level evaluation, the ultimate goal of
public relations
and advertising is identical, that is, the contribution to the company's
returns. The IMC
approach is seriously needed at this stage. If public relations and advertising
effects are
closely related and not independent, each public relations and advertising
evaluation model
should be integrated and analyzed in a concurrent set in the context of IMC.
A nationwide survey showed that a company's reputation and social
responsibility
significantly influences the consumers' decision-making process (Gildea,
1994-95). It also
shows the significant relationship between a company's reputation and employee
satisfaction, reputation and investment decision, and most importantly
reputation and
consumer's buying decision. From the outcomes of this survey, the company's
reputation
is an influential asset for corporate and brand equity together (Gildea,
1994-95). Company
reputation has positive relationships with brand equity and the company's
returns (Gildea,
1994-1995).
Based on previous discussions, a hypothesis is established in the context
of IMC.
H3) Reputation as the public relations goal and brand equity as the advertising
goal have
reciprocal effects between them in the IMC evaluation model.
Other Explanatory Variables
In their meta-analysis of 276 research findings about the market
share-profitability
relationship, Szymansky, Bharadwaj, & Varadarajan (1993) concluded that market
share
had a positive effect on business profitability. However, they emphasized that
the
relationship could be changed by model specification errors, sample
characteristics, and
measurement characteristics.
Most studies about the relationship between market share and
profitability showed
positive relationships (Aaker & Jacobson, 1987; Farris, Parry, and Webster,
1989; Farris
and Reibstein, 1979; Marshall and Buzzell, 1990).
Besides market share as the most important exogenous variable, other
variables also
can be considered. Age of brand, order of entry, current and past advertising
share, and
competitors' marketing activities have been discussed as other factors (Simon &
Sullivan,
1993). However, market share has the sufficient explanatory power for explaining
the
competitive market situation. Market share only was adopted as an explanatory
variable
for the simplicity of the model. A hypothesis related to market share is
established:
H4) The level of market share has a positive relationship to the company's
returns.
Model Specification
To make IMC effective and efficient, clarifying the relationship between
brand assets
(brand equity) and corporate assets (reputation) is the most imminent task. Even
though
IMC is the integrated effort of communication activities, each communication
activity has
its own intermediate goal. Integrating these intermediate goals into the
ultimate goals such
as profitability or revenue that is the company's goal is the essence of IMC
evaluation. To
test all those hypotheses, the IMC evaluation model is specified. The following
is the
proposed model for IMC evaluation (Figure 3).
------------------------------------
Insert Figure 3
------------------------------------
By measuring the impact of public relations and advertising expense to
the public
relations goal (reputation) and the advertising goal (brand equity), we can
finally infer the
comprehensive model of the IMC evaluation. In this study, only the relationship
between
the public relations goal (reputation) and the advertising goal (brand equity)
to the
company's returns (revenues).
The model testing was reduced from the proposed model due to the
difficulty of
getting data related to public relations expense. However, the relationship
between brand
equity and reputation inside the proposed model functions in the same way
described in
the proposed model. Thus, this testing model is a subsidiary of the full IMC
evaluation
model. Public relations expense and advertising expense were not included and
instead
reputation and brand equity that were originally dependent variables were dealt
with as
independent variables (see Figure 4). In the testing model, the relationship
between market
share and reputation was included because the market share data were calculated
from the
company's total revenue, not from the brand's revenue as explained in the
methodology
section.
Tested companies could be categorized into two groups: Group 1 (the
companies
over 50 % brand/sale ratio) and Group 2 (the companies below 50 % brand/sale
ratio).
One criticism that could be suggested in the IMC evaluation model is the
comparability
between the public relations data and the advertising data. It can be assumed
that
companies with the strong dominance of one brand and companies with the weak
dominance of one brand have different interaction between the company's
reputation and
brand equity. For example, Nike (company name: Nike) has closer relationship
between
the company's reputation and brand equity than Tide (company: P & G) has. Based
on
this assumption, further hypotheses were established.
H5) Companies with the strong dominance of one brand (Group 1) will have a
statistically
better fitting model than companies with the weak dominance of one brand
(Group 2).
H6) This IMC evaluation model will follow the same dynamics in the companies
below
50 % brand/sale ratio (Group 2) as in the companies over 50 % brand/sale
ratio
(Group 1).
------------------------------------
Insert Figure 4
------------------------------------
Methodology
Samples. The model was tested with 76 companies and brands. Only 76
companies
and brands equipped with both brand equity and reputation data in 1995. As an
exploratory data analysis, only one year data were used in this study. Among 77
companies and brands, 37 companies and brands had over 50 % brand/company ratios
and 39 companies and brand had below 50 % brand/company ratios.
Operationalization and data collection. All data were collected from
existing
publications. Reputation data was collected from the results of Fortune's annual
corporate reputation survey (Fisher, 1996). For measuring returns to the
organization,
there are two options: profitability and revenue. Revenue is chosen for
measuring the
company's bottom-line impact. For the revenue data, increasing rates compared to
the
previous year's revenue were collected. Revenue data were collected from The
Fortune
500 (1996). Brand equity is measured from the incremental cash flows of the
brand over
nonbranded products. The brand equity data will be collected from the results of
finance
magazine Financial World's annual brand equity research (Badenhausen, 1996).
As an explanatory variable, the market share was chosen. Market shares
were
calculated from The Fortune 500 (1996). As an explanatory variable, the market
share was
chosen. It is impossible to conceptualize all the explanatory variables. Also,
including all
possible explanatory variables is not recommended at all in the modeling (Farris
&
Buzzell, 1979). In the promotional elasticity modeling, market share is the most
common
explanatory variable. This study used Farris and Buzzell's operational
definition of market
share: "market share is the ratio of each business unit's dollar sales to the
total size of its
served market (p. 115)." Szymanski, Bharadwaj, and Varadarajan (1993) divided
the
definition of market share into absolute market share (ratio compared to total
sales in the
served market) and relative market share (the ratio compared to the largest
several firms).
This research is the integration of both methods because the average number of
the one
category was more than nine. Total size and market shares were calculated from
Fortune
(1996).
Data analysis. The data were analyzed using the structural equation
model (SEM)
testing. The essence of the structural equation model is search for the fitting
model which
can explain the variance and covariance of sample data. By using the structural
equation
model, theory testing and establishing causality become possible. For (H5) and
(H6), the
multiple-group method was used because data were categorized into two groups by
the
brand/sale ratio: Group 1 (above 50 % brand/sale ratio) and Group 2 (below 50 %
brand/sale ratio). The multiple-group method in SEM enters two-group data
together and
decides whether the model is applicable to multiple groups by the difference of
Chi-
squares.
Outcomes
In Table 1, the correlations of the overall group, Group1, and Group 2
are reported.
Group 1 indicated the close relationship between brand equity and the company's
reputation. Generally, Group 1 showcased the variables in model are more related
each
other than those in Group 2. Even in Group 2, the relationship between brand
equity and
the company's reputation showed a negative relationship.
---------------------------------------
Insert Table 1 here
---------------------------------------
The proposed model (Table 2) produced a chi-square of 0.059 (df=1,
p=0.808),
indicating a suitable model fit. The model fitting index also indicated the
perfect model
fitting (GFI=1.000, RMSEA=0.000). The modification indices did not show any
improvement by freeing any parameters. And critical difference did not show any
possible
restriction for the model. Squared multiple correlation (SMC) for the company
returns
was 0.243. A dependent variable's SMC is the proportion of its variance that is
explained
by its predictors. Thus, 24.3 % of the company's revenue were accounted for by
this
model.
-------------------------------------
Insert Table 2
-------------------------------------
Based on the model fit, each hypothesis was tested. Hypothesis 1 and 2
was
supported. Table 2 shows the parameter estimates of the proposed model. Brand
equity
also is positively related to revenues (0.281, CR=3.445) and the company's
reputation is
positively related to revenues (3.398, CR=2.997). Both coefficients showed
statistically
significant results. Hypothesis 3 also was supported. The relationship between
brand
equity and the company's reputation showed a positive relationship (0.784,
CR=4.012).
This result justified the IMC argument. Public relations and advertising are
positively
related in the context of corporate communications. However, hypothesis 4 was
rejected.
Market share is negatively related to company returns (-0.199, CR=-2.788).
---------------------------------------
Insert Table 3
---------------------------------------
Hypothesis 5 was supported. As shown in Table 3, both Group 1 (companies
with
over brand/sale ratio) (GFI=0.987, RMSEA=0.000) and Group 2 (companies with
below
brand/sale ratio) (GFI=1.000, RMSEA=0.000) showed the perfect fit. Goodness of
Fit
(GFI) index "1" and RMSEA "0" indicate the perfect fit. As shown in regression
estimates, estimates in Group 1 showed the statistically significant results in
the level of
.05. However, estimates in Group 2 did not show any significant result and even
showed
negative regression estimates. This means the proposed model can explain better
in the
situation of Group 1 than in Group 2. Intuitively, companies with one dominant
brand can
interact effectively to increase the company's revenue by integrating
communication
activities such as advertising and public relations.
---------------------------------------
Insert Table 4
--------------------------------------
Nested SEM models can be statistically compared using the difference of
chi-square
values (34.942, df = 8) (See Table 4). The hypothesis that the constraints
imposed on the
proposed models are valid can be rejected. Model A is a better model than Model
B to
explain the proposed model. This means that the parameters should be estimated
independently and each group has different parameter estimates. Hypothesis 6 was
rejected. This IMC evaluation model did not follow the same dynamics in the
companies
with below 50 % brand/sale ratio as in the companies with over 50 % brand/sale
ratio did.
Conclusion
Generally, the outcomes of testing the proposed SEM was encouraging. The
proposed model showcased an appropriate model fit of the conveniently sampled
data.
The proposed model that integrates public relations and advertising effects
indicated a new
direction for IMC evaluation. However, the companies with below 50 % brand/sale
ratio
did not indicate hypothesized relationships. This result appeared to come from
the data
problem. In fact, the comparability between brand equity and the company's
reputation
can be obtained when brand equity is discussed in the aggregated company level.
When
companies with over 50 % brand/sale ratio were analyzed, this argument could be
satisfied. Companies with below 50% brand/sale ratio could not completely
justify this
comparability demand. However, the perfect fit with companies over 50 %
brand/sale ratio
indicated the feasibility of the proposed model for future study.
This study proposed a methodology for measuring IMC evaluation. In the
organizational level, public relations and advertising effects can be integrated
into the same
goal of contribution to the organizations without much conflict. Integration is
possible
only in view of the organizational goal. Thus, public relations dominance or
advertising
dominance using the IMC concept impairs the full function of effective
communication
activities in the organization. Public relations and advertising have their
independent goals,
reputation and brand equity in this research. When each domain of communication
activities can keep up their original goals, communication activities in the
organization
would be optimized and maximize the bottom line impact. The proposed model
contains
this basic idea in the context of IMC evaluation.
Despite of the practical need of IMC in reality, the integration between
public
relations and advertising should be proceeded in a more cautious way.
Conclusively, the
essence of IMC is to maximize the organizational goal keeping the independence
of each
communication domain such as advertising and public relations. The proposed
model
indicates how to evaluate IMC activities in this regard. The discussion about
organizational structures should be continued to solve the structural problem in
the
organization. Teaming a task force for IMC or horizontal integration could be
alternatives.
In any way, reconciliation among communication domains in the organizational
level will
be the first step for this development.
As limitations of this study, first of all, this results cannot be
generalized into all the
companies in the U.S. As an exploratory study to show the possibility of the
proposed
model, this study only chose only one year data that had existing reputation and
brand
equity data as the sample. The model analysis ignored the longitudinal nature of
the data.
The total effect of advertising and public relations over time (or lagged
effects) and halo
effects (Stone & Duffy, 1993) were not considered in this stage. The data
pooling could
explains this problem to some extent. Thus, future study should be equipped with
more
company data and analyzed over more than one year to increase generalization.
Also, the
development of databases that contain brand equity data in the company level is
essential
for future study. Accumulating reliable data is a prerequisite for the
development of IMC
evaluation.
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Advertising Brand (H1)
Company
expenses (X1) equity (Y1) +
returns (Y2)
Figure 1. A model showing the relationships between advertising expenses,
brand equity, and the company's returns.
Public relations Reputation (H2)
Company
expense
Returns
Figure 2. The process of public relations evaluation in the organizational level
(1 (1
( 1
PR Expense Reputation
Market share
(3
Bottom-line
(2 (2
(3
Advertising Brand (2
Expense Equity
Figure 3. The proposed model for IMC evaluation
Note. ------- : testable relationships.
Reputation E1
(H1)
(H3)
Market share Revenues
(H4)
(H2)
Brand Equity
Figure 4. The simplified model for testing
Table. 1
The sample correlation of overall group, group1 (over 50% brand/sale ratio), and
group2 (below 50% brand/sale ratio)
Overall group Reputation Brand equity Market share
Revenue
Group 1
Group 2
Reputation 1.000
1.000
1.000
Brand equity 0.029 1.000
0.262 1.000
-0.096 1.000
Market share 0.521 -0.028 1.000
0.372 0.163 1.000
0.577 0.024 1.000
Revenue 0.192 0.366 -0.154 1.000
0.375 0.555 -0.172 1.000
0.062 -0.024
-0.101 1.000
Table 2.
The results of the SEM testing with overall companies (n=76)
Parameters Overall
model
Estimates
Critical ratio1
Regression weight
Brand equity ( Revenue 0.281 3.445
Reputation ( Revenue 3.398 2.997
Market share( Revenue -0.199 -2.788
Brand equity ( Reputation 0.784 4.012
Market share ( reputation 12.472 0.446
Variances
Brand equity 211.160 6.124
Reputation 1.508 6.127
Market share 378.388 6.124
Error1 105.386 6.124
Chi-square 0.059
Degree of freedom 1
Probability 0.808
Squared multiple correlation 0.243 (24.3%)
of Revenue
GFI 1.000
AGFI 0.996
RMSEA 0.000
Note. Other possible alternative models such as the relationship between market
share
and brand equity were tested after checking the modification indices
and critical
difference indices. However, no other models showed better model fits
than the
proposed model and those results are not reported here.
1 Critical ratios are calculated by (estimate / Standard deviation).
Normally, critical
ratios bigger than 1.96 are statistically significant in the level of
95%.
Table. 3
The results of the SEM testing with Group 1 (over 50 % brand/sale ratio) and
Group 2 (below 50 % brand/sale ratio)
Parameters
Model A
Group 1 (n=37) Group 2 (n=39)
Regression weight
Brand equity ( Revenue 0.425* -0.002
Reputation ( Revenue 4.119* 1.635
Market share( Revenue -0.455* -0.089
Brand equity ( Reputation 4.167* -1.403
Market share ( reputation 4.900* 14.616
Variances
Brand equity 261.030* 133.216*
Reputation 1.516* 1.217*
Market share 135.381* 524.442*
Error1 87.129* 97.552*
Chi-square 0.967 0.022
Degree of freedom 1 1
Probability 0.325 0.882
Squared multiple correlation 0.527 0.032
of Revenue
GFI 0.987 1.000
AGFI 0.869 0.997
RMSEA 0.000 0.000
Note. * Statistically significant at the 0.05 level.
Table. 4
The multiple-group SEM analysis of Model A1 and Model B2
Estimates Model A
Model B
Chi-square 0.990 35.083
Degree of freedom 2 11
Probability 0.610 0.000
GFI 0.993 0.843
AGFI 0.934 0.715
RMSEA 0.000 0.172
Difference of Chi-square 34.048
Difference of df 9
Note. 1 Model A assumed that Group 1 and Group 2 have different parameter
estimates.
Thus, Group 1 and Group 2 have different parameter estimates as shown
Table 3.
2 Model B assumed that Group 1 and Group 2 have same parameter
estimates.
The parameter estimates indicated the same pattern with the Model A
analysis.
Regression weights and variances of Model B were not reported here.
[1] IMC represents both IMC and ICAP. However, the integration of advertising
and public relations is dealt with mainly in this paper for the simplicity of
model development even though all communication and marketing activities are
mentioned in literature review. Advertising denotes all marketing activities.
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