Ad. Agency

Organizing for Advertising and Promotion:The Role of Ad Agencies and Other Marketing Communications Organizations

Whats new1. Viral marketing through social networks

2. Buzz marketing word of mouth marketing

3. Undercover marketing subtle product placement

4. Astroturfing disguising company messaging as an authentic grassroots movement

5. Experiential marketing interaction with product

6. Tissue-pack marketing hand-to-hand marketing

7. Live-in marketing real life product placement

8. Wait marketing when and where consumers are waiting (such as medical offices and gas pumps) and receptive to communications

Chapter Objectives To understand how companies organize for advertising and other aspects of integrated marketing communications.

To examine methods for selecting, compensating, and evaluating advertising agencies.

To explain the role and functions of specialized marketing communications organizations.

To examine various perspectives on the use of integrated services and responsibilities of advertisers versus agencies.

Participants in the IMC Process

This chapter examines the various organizations that participate in the integrated marketing communications process, their roles and responsibilities, and their relationship to one another.

Today, more marketers are looking for agencies that can offer a range of integrated marketing communication capabilities and help them compete in the rapidly changing world of advertising and promotion.

It is particularly important to note that with the movement toward IMC, marketing communication specialist organizations such as direct response agencies, sales promotion agencies, public relations firms, and interactive agencies are playing an increasingly important role in the promotional process.

Participants in the IMC ProcessMarketing Communications Specialist OrganizationMedia OrganizationsAdvertiser (Client)Advertising AgencyCollateral ServicesDirect Response AgenciesSales Promotion AgenciesInteractive AgenciesPublic Relations Firms


Advertiser

The most visible player in the advertising process

The coolest one.Beauty soap of Film stars..Lifes Good.

The advertisers desire to sell something is what drives the entire advertising process.

Once an advertiser agrees to use the services of an ad agency, the advertiser becomes that agencys Client.


Advertising agency

Is an outside firm that specializes in creation, production and placement of thecommunication messages. It may provide other services to facilitate themarketing and promotions process.

Hiring an agency can result in several benefits:

Offers objective advice.Draw on the collective experience and training of its staff.Provide people and management skills to accomplish advertising objectives.Provide supportive environment for professional advertising people.


Media Organizations

Provides information and entertainment to their subscribers, viewers or readers. Provides an environment for the firms markcom messages.Reach their TA and provides messages effectively


Specialized marketing communications

Direct Response Agencies Handle communications with their customers through telemarketing, direct mail and other forms of direct-response advertising. These agencies provide their clients a variety of services including data base development and management.Sales Promotions Agencies There are many companies specializing in the provision of sales promotions such as contests, games, sweepstakes, and refund and rebate offers.Public Relations/Publicity Agencies Public relations firms develop and implement programs to manage an organizations publicity and image, with consumers and other relevant publics including employers, suppliers, stockholders, government, labor and the general public. Interactive Agencies with the rapid growth of the Internet a new type of specialized marketing communication organization has evolvedthe interactive agency. A number of marketers are turning to these firms to develop web sites, banner ads & other forms of interactive advertising.


Vendors

These are the group of service organizations that assist the advertisers, the ad agencies & media.

Are useful when advertisers need expertise (in stuff that is not their core competence)OverloadedFresh perspectiveCost aspect

Members of this group are calledFreelancers ConsultantsSelf employed professionals.

These could be freelance copywriters, graphic artists, photographers, songwriters, printers market researchers, telemarketers etc.

Organizing for Advertising and Promotion in the firm : The clients Role

How a firm organizes for advertising and promotions is a function of a number of factors including (1) the size of the organization, (2) the number of products it markets, (3) the role that advertising and promotion assume in the product mix, (4) the advertising and promotions budget, and (5) the structure of the firm.

Three organizational designs are discussed:

The Centralized System - In this design, marketing activities are organized along functional lines. A common form is to have an advertising manager (or marketing communications manager) responsible for all advertising and promotions activities including

planning and budgeting, administration and execution, and coordination with other departments and outside agencies.

Advertising Department UnderCentralized SystemPresidentProductionFinanceMarketingResearch and Develop-mentHuman ResourcesAdvertisingMarketing ResearchSalesProduct Planning

BetterCommunicationsFewerPersonnelContinuityOf StaffLess GoalInvolvementLongerResponse TimePros & Cons of CentralizationTheCentralizedSystem+ Positive- Negative


The Decentralized System - In this system, individual products or brands are the responsibility of the product manager or brand manager. All advertising and promotion for the brand or product will be this persons responsibility (including responsibilities for working with all external agencies) and s/he will be in charge of all planning, implementation and control for that product or brand.

Decentralized Brand Management SystemProductionFinanceSalesBrandManagerAd agencyBrandManagerAd agencyProductManagementSalesPromotionPackageDesignMerchandisingAdvertisingDepartmentMarketingResearchMarketingServicesMarketingResearchandDevelopmentHumanResourcesCorporateNestle, HUL P & G Category Mgt System

Competition for Resources Lack of Experience in IMC IncreasedFlexibilityRapid ProblemResponseConcentratedAttentionPros & Cons of DecentralizationTheDecentralizedSystem+ Positive- Negative


The In-House Agency - Some companies develop their own internal ad agencies. The design of these agencies may vary from as small as an advertising department to as large as an external agency. In the latter case, the in-house agency will operate as a separate entity and control advertising and promotional expenditures.


Advantages of this system include:

Cost savings - Since media commissions that would go to an outside agency go to the in- house agency More control over the advertising function since it is handled within the company rather than by an outside agency Better coordination of advertising and promotion with the firms other marketing activities

Negative aspects of this system include:

Less advertising experience than is available from an outside agency with has a variety of specialists in various areas of advertising Less objectivity since those working for an in-house agency are part of the company rather than an outside agency Less flexibility as outside agencies can be changed much more easily whereas changes among in-house agency personnel are slower and more disruptive

LessObjectivityLessExperienceBetterCoordinationMoreControlCostSavingsPros & Cons of In-House AgenciesTheIn-houseAgency+ Positive- Negative

Refer to document Top 10 ad agencies Add activities to Scrap book

Advertising Agencies

The Ad Agencys Role

External agencies provide a variety of services to their clients, Advertisers elect to use outside agencies for the following reasons: the skills offered objectivity and experience.

Ad Agencies Have Skilled Specialists

Planning advertisingCreating advertisingProducing advertisingPerforming researchSelecting mediaStrategic market planningSales promotion and trainingTrade show materialsPackage designFull-Services AgenciesFull Range of Marketing Communication and Promotion ServicesNon-Advertising Services

Typical Full-Service Agency OrganizationWritersArt DirectorsTrafficTVProducitonTrafficPrintProductionVP CreativeServicesAccountExecutiveAccountSupervisionVP AccountServicesMediaResearchSalesPromotionVP MarketingServicesPersonnelAccountingFinanceOfficeManagementVP Managementand FinancePresidentBoard ofDirectors

Services Provided by AgenciesAgency ServicesMarketing ServicesAccount Service

Full-Service Agency

There are many activities and many personnel involved in the planning, creating and producing of ads. The coordination of their effort is critical to the success of an IMC program.

Account services this is the link between the agency and its clients. The account executive is the liaison and focal point of the agency-client relationship. The AE is responsible for understanding the advertisers marketing and promotions needs and interpreting them to agency personnel. Marketing services includes marketing research and media planning. Marketing research is growing in importance as advertisers realize they need a good understanding of the target audience if they are to effectively communicate. Media departments analyze, select, and contract media sources. Creative services is responsible for the creation and execution of advertisements. Copywriters and artists are specialists in this department. Additionally there is a production department that coordinates all phases of production of advertising and other creative work.

The Role of Creative Boutiques Creative BoutiquesProvide Only Creative ServicesFull-Service Agencies May Subcontract With Creative Boutiques

The Role of Creative Boutiques

They usually are hired for their creative talent and are paid on a fee basis. They can be hired directly by a company for their specialized services or by a full service agency when they are very busy or do not want to hire full time employees.

Creative boutiques have developed in response to some clients desire to use only the creative talent of an outside agency while maintaining the other functions internally.

Clients seek the help of creative boutiques when an extra creative effort is required or because its own employees do not have sufficient skills in this regard.

They can be used:

By client companies for creative services only Full service agencies may subcontract for their creative services when busy or when not wanting to add permanent employees The client has the expertise for other functions such as advertising planning, research and media buying but not creative work.

Agencies and Clients Develop Media StrategySpecialize in Buying Media, Especially Broadcast TimeMedia Buying Can Be Specialized Media Buying Services

Media Buying Can Be Specialized

Their use is growing as more companies look for ways to get more clout from their advertising budgets.

The task of purchasing advertising media has grown more complex as specialized media proliferate. As such, media buying services have found a niche by specializing in the analysis and purchase of advertising time and space.

Agencies and clients usually develop their own media strategies and hire independent buying services to execute them.

Some of the characteristics of media buying services include:

They specialize in buying media time, particularly radio and television time Because the purchase large amounts of time and space, they usually receive large discounts and can save the agency/company money on media purchases. They are paid a fee or commission for their work. The agency or client may often develop the media strategy Media buying organizations may be used to implement the media strategy and buy broadcast time and/or space in print publications.

CommissionsMethodCost-PlusAgreementsPercentageChargesFeeArrangementsMethods of Agency CompensationCompensationMethods

Methods of Agency Compensation

Because the type and amount of service an agency performs can vary from one client to another, a variety of methods are used to compensate them for their services. Various ways for compensating agencies are shown in this slide and include:

Commission method traditional method whereby the agency receives a specified commission (usually 15%) from the media on any advertising time or space it purchases for its client. Cost-plus agreement the client pays a fee based on the costs of its work plus some agreed-on profit margin (a percentage of total costs). This method requires careful accounting and detailed records of agency costs Percentage Charges adding a markup to the various services the agency purchases from outside providers. These may include market research, artwork, printing, photography, etc. and range from 17.65 to 20 per cent. Fee arrangement the agency charges a basic monthly fee for all of its services. Agency and client agree on work to be done and the amount to be paid. This is the primary method accounting for 68 percent of the compensation plans. Incentive-based fee is based on how well the agency meets its performance goals such as sales or market share. There is a general movement toward the use of this method by many companies.

PoorperformancePoorcommunicationsUnrealisticdemandsPersonalityconflictsPersonnelchangesChangesin sizeConflict ofinterestsChangesin strategyDecliningsalesPaymentconflictsWhy Agencies Lose Clients

How Agencies Gain Clients

CreativeMedia ServicesResearchDirectMailData BaseManagementDirect Response Agency ActivitiesDirect ResponseAgencies

Contest/Sweepstakes DevelopmentPremium DesignCoordination With AdvertisingResearch Creative WorkPromotion PlanningActivities performed by Sales Promotion Agencies 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

StrategyDevelopmentGeneratingPublicityLobbyingPublicAffairsDamageControlImagePortrayalFunctions performed by Public Relations Firms

Special EffectsVideoAudioKiosksCD-ROMsWeb SitesWebBanner AdsFunctions performed by Interactive Agencies Interactive Media CreationDigitalContent

Planning and Implementing Research Primary Data CollectionQualitative & QuantitativeAnalysis and InterpretationInformation ApplicationMarketing Research Companies

*Chapter ThreeOrganizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communications Organizations 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin**The various participants in the IMC process are shown on this slide. These include: Advertiser (client) the company or organization that has the product, service or cause to be marketed and provides the funds to pay for the IMC program Advertising Agency a firm that specializes in the creation, production, and often the placement of the communications messages and may provide other services to facilitate the IMC process Media Organizations companies that provide information and entertainment to subscribers, viewers, listeners and/or readers and in which marketers can purchase time or space to deliver their advertising and promotion messages Marketing Communication Specialist Organizations companies that provide specialized marketing communication services that are used as part of the IMC process. These include Direct response agencies Sales promotion agencies Public Relations Firms Interactive AgenciesCollateral Services companies that provide a wide array of support functions used by advertisers, agencies, media organizations, and specialist organizations such as marketing research, package design, photography, video production and other services**********This slide presents the pros and cons of using a centralized system to organize for advertising and promotion. The positive aspects of this system include: Better communications as developing and coordinating the advertising and promotional program from one central office facilitates communication Fewer personnel are needed as fewer people are involved in advertising and promotion program decisions which facilitates decision making Continuity of staff often results as there may be less turnover and more experience among those involved in managing the advertising and promotion programThe negative aspects of centralization include: Less goal involvement as it may be difficult for the advertising manager to become involved with the marketing strategy and goals for the company or brand Longer response time as the advertising department may be slow in responding to the specific marketing problems or needs of the company or brand Inability to do multiple product lines as the company becomes larger and adds more products, services and/or brands and there is more demand on the department***.*********The slide shows the various services of a full service advertising agency. These agency services consist of:Account services this is the link between the agency and its clients. The account executive is the liaison and focal point of the agency-client relationship. They are responsible for understanding the advertisers marketing and promotions needs and interpreting them to agency personnel. Marketing services includes marketing research and media planning. Marketing research is growing in importance as advertisers realize they need a good understanding of the target audience if they are to effectively communicate. Media departments analyze, select, and contract media sources.Creative services is responsible for the creation and execution of advertisements. Copywriters and artists are specialists in this department. Additionally there is a production department that coordinates all phases of production of advertising and other creative work.

** Creative boutiques have developed in response to some clients desire to use only the creative talent of an outside agency while maintaining the other functions internally. Clients seek the help of creative boutiques when an extra creative effort is required or because its own employees do not have sufficient skills in this regard. They can be used:By client companies for creative services onlyFull service agencies may subcontract for their creative services when busy or when not wanting to add permanent employeesOther functions such as advertising planning, research and media buying may be done internally within the company or contracted out* The various participants in the IMC process are shown on this slide. These include: Advertiser (client) the company or organization that has the product, service or cause to be marketed and provides the funds to pay for the IMC program Advertising Agency a firm that specializes in the creation, production, and often the placement of the communications messages and may provide other services to facilitate the IMC process Media Organizations companies that provide information and entertainment to subscribers, viewers, listeners and/or readers and in which marketers can purchase time or space to deliver their advertising and promotion messages Marketing Communication Specialist Organizations companies that provide specialized marketing communication services that are used as part of the IMC process. These include Direct response agencies Sales promotion agencies Public Relations Firms Interactive AgenciesCollateral Services companies that provide a wide array of support functions used by advertisers, agencies, media organizations, and specialist organizations such as marketing research, package design, photography, video production and other services* The task of purchasing advertising media has grown more complex as specialized media proliferate. As such, media buying services have found a niche by specializing in the analysis and purchase of advertising time and space. Agencies and clients usually develop their own media strategies and hire independent buying services to execute them. Some of the characteristics of media buying services include:They specialize in buying media time, particularly radio and television timeBecause the purchase large amounts of time and space, they usually receive large discounts and can save the agency/company money on media purchases.They are paid a fee or commission for their workThe agency or client may often develop the media strategy Media buying organizations may be used to implement the media strategy and buy broadcast time and/or space in print publications* The various participants in the IMC process are shown on this slide. These include: Advertiser (client) the company or organization that has the product, service or cause to be marketed and provides the funds to pay for the IMC program Advertising Agency a firm that specializes in the creation, production, and often the placement of the communications messages and may provide other services to facilitate the IMC process Media Organizations companies that provide information and entertainment to subscribers, viewers, listeners and/or readers and in which marketers can purchase time or space to deliver their advertising and promotion messages Marketing Communication Specialist Organizations companies that provide specialized marketing communication services that are used as part of the IMC process. These include Direct response agencies Sales promotion agencies Public Relations Firms Interactive AgenciesCollateral Services companies that provide a wide array of support functions used by advertisers, agencies, media organizations, and specialist organizations such as marketing research, package design, photography, video production and other services* Because the type and amount of service an agency performs can vary from one client to another, a variety of methods are used to compensate them for their services. Various ways for compensating agencies are shown in this slide and include:Commission method traditional method whereby the agency receives a specified commission (usually 15%) from the media on any advertising time or space it purchases for its client.Cost-plus agreement the client pays a fee based on the costs of its work plus some agreed-on profit margin (a percentage of total costs). This method requires careful accounting and detailed records of agency costsPercentage Charges adding a markup to the various services the agency purchases from outside providers. These may include market research, artwork, printing, photography, etc. and range from 17.65 to 20 per cent.Fee arrangement the agency charges a basic monthly fee for all of its services. Agency and client agree on work to be done and the amount to be paid. This is the primary method accounting for 68 percent of the compensation plans.Incentive-based fee is based on how well the agency meets its performance goals such as sales or market share. There is a general movement toward the use of this method by many companies. *The various participants in the IMC process are shown on this slide. These include: Advertiser (client) the company or organization that has the product, service or cause to be marketed and provides the funds to pay for the IMC program Advertising Agency a firm that specializes in the creation, production, and often the placement of the communications messages and may provide other services to facilitate the IMC process Media Organizations companies that provide information and entertainment to subscribers, viewers, listeners and/or readers and in which marketers can purchase time or space to deliver their advertising and promotion messages Marketing Communication Specialist Organizations companies that provide specialized marketing communication services that are used as part of the IMC process. These include Direct response agencies Sales promotion agencies Public Relations Firms Interactive AgenciesCollateral Services companies that provide a wide array of support functions used by advertisers, agencies, media organizations, and specialist organizations such as marketing research, package design, photography, video production and other services* While many successful client-agency relationships last for years, long-term relationships are becoming less common. The various reasons an agency might lose clients are shown on this slide. Some of these are avoidable while others may be beyond the agencys control. *Competition for accounts in the agency business is intense. For most large agencies, most new business comes from clients who already have an agency but decide to change their relationships. Thus, agencies must constantly search and compete for new clients. Some of the ways they do this are through Referrals SolicitationsPresentationsPublic relations efforts Image or reputation*One of the fastest growing areas of IMC is direct marketing. As the industry has grown, numerous direct response agencies have evolved that offer companies their specialized skills in both consumer and business markets. This slide shows the various services and departments of a direct response agency. Services include:Database management Direct mailResearch Departments of a direct response agency include:Media services Creative Production*The sales promotion agency is another specialized service used by many marketers. Most companies use sales promotion agencies to develop and administer their sales promotional programs. These firms often work with the clients advertising and/or direct response agencies to coordinate their efforts with the advertising and direct marketing programs. Services provided by sales promotion agencies include:promotion planningcreative work researchcoordination with advertisingpremium designcontest/sweepstakes developmentdatabase marketing*Most large companies use public relations firm. A public relations firm develops and implements programs to manage the organizations publicity, image, and affairs with consumer and other relevant publics. This slide shows the activities of the PR firm. These include: Strategy developmentGenerating publicityLobbyingPublic affairs activitiesDamage controlImage portrayal Program planning* With the rapid growth of the Internet and other forms of interactive media, a new type of specialized marketing communications organizations has evolved, the interactive agency. This various functions performed by an interactive agency are shown on this slide. Interactive agencies specialize in development and strategy of the various interactive tools such as web banner ads, web sites, CD-ROMs, and kiosks. They also have expertise in digital technology elements such as audio, video, special effects and animation.*The final participants in the promotional process are those that provide various collateral services. These services include marketing research, package design firms, photographers, printer, video production houses, and event marketing services companies. The marketing research companies are widely used to help companies understand their target audiences and gather information that will be of value in designing and evaluating their advertising and promotions programs. The activities provided by marketing research companies include:Program implementationInformation applicationAnalysis and interpretationPrimary data collection (qualitative and quantitative)Secondary data collection

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