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Subject: AEJ 99 KimY ADV Impact of brand equity and reputation on revenue
From: [log in to unmask]
Reply-To:AEJMC Conference Papers <[log in to unmask]>
Date:Fri, 1 Oct 1999 05:45:16 EDT
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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

----------------------------------


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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