In this new era of continuous innovations, it is very important to deliver the right message to the right group of consumers to generate maximum profit. This is only possible with the use of correct marketing communication strategy delivered in the right mix. According to Kotler et al (2005) "Marketing is building profitable customer relations with the aim to create value for consumers and to capture value in return". With the advancement of technology, a range of marketing tactics are available for businesses to attract consumers. Hence, it is all the more important for businesses to identify the correct strategy and implement it accordingly. This report tends to critically evaluate the research paper "How Marketing communication correlates with business performance" done by Damijan Mumel, Nina Hocevar and Boris Snoj from University of Maribor, Slovenia. In their research, the authors have used the Pearson correlation method to generate research results from the quantitative data collected. The data analysis method used by the authors is a well established method with the least possibility of any errors. However, the research samples used by the authors is only limited to a group of language teaching Slovenian SME's (Small and medium enterprises) and hence, cannot be used as representation of all businesses in general. This report tends to critically analyze the methodology of research undertaken, results obtained and the conclusion derived by the authors. Further, the general contribution by the research to the overall body of the topic has also been discussed here.
Marketing as a concept covers a wide area with the main focus towards building a healthy customer relationship, which in turn would lead to a successful and better business performance. However, gone are the days when simple marketing strategies like price reduction would cause the customers to buy products. Instead the rapid globalization has created a cut throat marketing competition with all companies fighting for their share of the market share. The micro and macro environments for businesses are in a constant dynamic flux which tends to further raise the challenges for the marketing managers. In this marketing war, the businesses have different marketing communication strategies as their weapons at their disposal which need to be used wisely and timely. Manfredi et al (2006) have categorized marketing communication activities into five major groups consisting of Sales promotion, Sponsorship, Direct marketing, Advertising and marketing communication using electronic media and telephone, and, Environmental claims in marketing communication. All these form various areas of marketing which businesses use as per their strategy adopted. Further, the final intention of any such activities would only be to increase the "dime to the dividend", i.e. increase profits that could be passed to the shareholders which in turn would generate further cash for the company. Hence, with so many implications and complications, it is all the more imperative that companies should exactly know the impact of each activity and the results that could be obtained. This report is intended to critically evaluate the research paper "How Marketing communication correlates with business performance" written by Damijen Mumel, Nina Hocevar and Boris Snoj.
In this reports, I tend to analyze the following:
- The hypothesis considered by the authors for the research activity.
- The methodology used, and the data gathering technique employed by researcher.
- The conclusion derived and the implication of research on the general area of topic.
With the above in mind, I tend to research the usefulness of the research results on the various businesses using marketing communications. The fact that these results could be used by marketer for practical implementations has also been analyzed in detail.
As mentioned earlier, a variety of marketing communication activities are available with marketer to increase business prospects. Businesses have the option to either use the same marketing activity repeatedly i.e. increase the frequency of marketing activity or to use different activities i.e. increase the number of marketing activity. Further, business performance also cannot be solely limited to profits, as sometimes marketing activities tend are aimed at increasing market share or for market penetration ,and, so may immediately not turn into profits. The authors have suggested that "the aggregate business performance of a company is defined through 13 variables, net sales, net sales growth, net sales growth index, net profit margins, return on equity, net return on assts, net profit/loss per employee, net business results for the accounting period, customer loyalty, achieved profit vs. planned, achieved net return on investments vs. planned, achieved net sales vs. planned, and, achieved market share vs. planned". These verities have been used by the authors in formulating their research hypothesis. "Hypothesis is a tentative assumption made in order to draw out and test its logical or empirical consequences." (Kothari 2005) The authors have linked the number and frequency of marketing communication activities to the individual as well as aggregate 13 business performance variables. Data has been gathered considering a research sample of 37 language teaching companies in the state of Slovenia. For data analysis purpose, the authors have used the Pearson correlation method which is an excellent method for finding correlation between collected data. Pearson correlation method determines the linear correlation between two variables on a scale of -1 to +1, with -1 suggesting extreme negative correlation and +1 suggesting extreme positive correlation. A time frame of 10 months teaching period was considered while collecting the data. The following were the four hypothesis considered by the authors:
Hypothesis 1: "There is no correlation between the number of marketing communication activities the company uses and its aggregate business performance" - The authors asked businesses the number of marketing activities used during the teaching year and the relative business performance figures during the year. The results obtained indicated that there was no correlation between the number of communication activities used and its aggregate business performance, hence this hypothesis was accepted. Considering the statistical data, there is almost no doubts in the data collected and the results derived. However, when we consider the research sample selected, clearly, the results obtained are not satisfactory. The research sample consist of only language teaching companies in Slovenia, who would not have the necessary resources to carry out prior market research before starting the marketing activities. If we consider, established companies like Coca Cola with a big brand image, this hypothesis would be rejected, as such companies have a guaranteed market share and can easily improve their business performance using various communication activities.
Hypothesis 2: "There is no correlation between the number of marketing communication activity the company uses and business performance variables." - From the results obtained, the authors conclude that there is a significant correlation between the number of marketing communication activities and two particular business performance variables net profit and customer loyalty. Hence, authors have rejected this hypothesis and accepted that there does exist a correlation between the number of marketing communication activity and business performance variable.
This hypothesis can only be researched about in an ideal small scale company which would carry out marketing efforts on a smaller basis and thus are easily accounted for. However, if we consider large scale multinationals like McDonalds or IBM, the same hypothesis cannot be proved here. The only reason being, such giant organizations are split into a large number of smaller business units with each unit having their individual marketing department and indulging in similar marketing activities. Further, it may happen that such promotional activities for one product may increase the overall brand image thus increasing the business performance for the company as a whole. In such scenarios, it would be very difficult to statistically prove or reject the above hypothesis.
Hypothesis 3: "There is no correlation between frequency of using certain marketing communication activity and aggregate business performance variables". - From their research, it was deduced by the authors that there was a significant correlation between two specific marketing activities: contests and printed advertisements on the overall business performance of companies. So, this hypothesis was also rejected.
Considering the research sample and the data analysis method used, there can be no doubts to the validity of these results and so it can be assumed that the hypotheses should be rejected.
Hypothesis 4: "There is no correlation between the frequency of using certain marketing communication activity and individual business performance variable". - The authors found a strong correlation between printed advertisements in newspapers and the net business result for accounting period and so the above hypothesis was also rejected.
The research sample used by the authors were language teaching companies in Slovenia whose target consumers were the newspaper reading general public. If we consider other business area like any e-commerce business, then the results obtained against this hypothesis would be different. For such a business area, the target consumers would also be adapted to internet, and hence the strongest correlation of business performance variable would be online advertisements and absolutely no correlation in case of newspaper advertisements. Still, as a general case the results obtained are fair and hence the results derived for the hypothesis can also be considered true.
Data collection method:
The authors have used a systematic method of data collection with properly defined research sample covering 37 of the 40 registered companies in Slovenia of the target business area. The primary data for some of the companies have been collected through telephone interviews with small business managers while the financial data has been obtained from the web portal GVIN Slovenian business intelligence. This can be also said to be a good reliable method of data collection with the data being collected close to accurate.
Data analysis method:
The data analysis method selected by the authors is Pearson correlation method which is an excellent full proof statistical method which determines the correlation between two variables. Bu the research area calls for more of a qualitative analysis then a quantitative analysis. Hence it is suggested that ANOVA method (Analysis of variance method) could have been used for conducting research. "The ANOVA technique is important in the context of all those situations where we want to compare more than two populations. The essence of ANOVA technique is that the total amount of variation in a set of data is broken down into two types, that amount that can be attributed to chance and that amount that can be attributed to specified clauses". (Kothari 2005).
However, though the authors have systematically researched the data collected, the research sample selected can be said to be quite small. Samples are the subsets of the targeted population. The authors have considered 37 of the 40 language teaching companies in Slovenia which is a fair representation of language teaching companies. But the same sample cannot be considered to represent the general small scale service industry in the world or even in Slovenia. For instance, newspaper advertising would be an effective marketing tool for a language teaching industry, but the same wouldn't be true for other service industry like a garage or a restaurant. Hence, the results derived from this sample can only used in the same business area and cannot be used effectively in other businesses. Instead, authors should have considered a research sample with a wide variety of businesses that would have covered at least all the small scale industries in Slovenia. The results obtained from such a study would definitely have been immensely helpful in understanding consumer behavior and undertaking effective marketing communication activities.
Critical evaluation and analysis of results obtained:
The authors of this research wanted to establish a firm connection between marketing communication activity and business performance variable. From the results obtained the authors were able to successfully prove that there does exist a correlation between two particular business performance variables: Customer loyalty and Net sales and marketing communication activity. Similarly, authors were able to prove that there exists a negative correlation between customer loyalty and number of marketing communication activity - implying that companies with more loyal customers would indulge in lesser marketing activities. The authors also found a positive correlation between frequency of newspaper advertisements and aggregate business performance variable and a negative correlation between frequencies of price reduction with aggregate business performance variable.
Thus from the research, the authors have derived the following results:
- Language teaching companies in Slovenia profit the most from increasing the frequency of giving advertisements in newspapers
- Price reduction does not attract further customers and hence are not successful.
- Companies with greater number of loyal customers would use less number of marketing communication activity.
We can say that the results obtained are more general to specifically language teaching companies or service based companies. Hence, it is not necessary that the same results would be obtained if the research is carried out on any other industry or some large scale multinational firm with a diverse range of business portfolio. However, the results point to the basis relation between marketing activity and business performance, and conclusively prove that marketing communication activities are indeed beneficial for businesses.
The authors have conclusively proved the correlation between the marketing activity and business performance of the entity. Still, as mentioned earlier the sample selected for this research does not represent the various businesses in general and hence are only restricted to language teaching industry. Further, it is felt that a better data analysis technique such as ANOVA could have been used for conducting market research. One of the greatest strength of this research can be said to be the dependence on quantitative data collected by the authors which minimizes the chances of research error. On the whole, the authors have tried their best to conduct a research whose results may be used by business managers for their own businesses. And considering the results obtained, we can say that the authors have succeeded in proving their research objectives.
Contribution of the research report to overall body of topic:
Marketing communication activities are employed with a range of objectives with profit being not only the sole intention. Some businesses may undertake marketing activities to launch a new product or for deeper market penetration in the existing market or even to create a new market. Further, every market is in a constant state of dynamic flux, with the opportunities and threats for the marketer constantly changing. A well defined marketing research would definitely go a long way in making the work of such marketing managers easier and increasing the success for marketing communication activities. The authors have researched considering a brilliant set of hypothesis; taking into consideration even minor details like customer loyalty affecting the company. Such tedious research has resulted into an excellent paper that could be used as a guide by language teaching companies or entities with similar business area. This research paper can be used as a starting point for researching bigger and more complex firms, where the relation between marketing communication activities and the business performance variables could be researched using similar hypothesis.
- Damijen Mumel, Nina Hocevar, Boris Snoj, 2007 "How Marketing communication correlates with business performance", Journal of applied business research Volume23 Number 2
- Gary Armstrong, Philip Kotler, 2005 "Marketing: An introduction", 5th edition, Pearson Prentice Hall, New Jersey pp 5
- John Manfredi, Anders Stenland, Oliver Gray, 2006 "Advertising and Marketing communication practices, Consolidated ICC Code", International chamber of commerce, Paris. (Accessed online on 17.08.09)
- C.R. Kothari 2005, "Research Methodology", 5th edition, New Age International Publishers, New Delhi pp 271-275