Organizing for Advertising and Promotion:

The Role of Ad Agencies and Other Marketing Communications Organizations

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Participants in the IMC Process

Advertiser (Client) Advertising agency Media organizations Marketing communications specialist organizations Collateral services Directresponse agencies Sales promotion agencies

Public relations firms

Interactive agencies

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Advertising Department Under Centralized System

President

Production

Finance

Marketing

Research and development

Human resources

Advertising

Marketing research

Sales

Product planning

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Pros & Cons of Centralization

+ Positive
Better communications

- Negative
Less goal involvement

Fewer personnel Continuity of staff More top management involvement

The Centralized System

Longer response time

Cant do multiple product lines

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Decentralized Brand Management System

Corporate Research and development Human resources

Production

Finance

Marketing

Sales

Product management Brand manager Brand manager Ad agency

Marketing services

Ad agency

Advertising department

Marketing research

Sales promotion Merchandising

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Package design

Pros & Cons of Decentralization

+ Positive
Concentrated attention

- Negative
Ineffective decision making

Rapid problem response

The Decentralized System

Internal conflicts

Increased flexibility

Misallocation of funds Lack of Authority

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Test Your Knowledge

A major reason why some companies choose to use an in-house agency is to: A) maintain creative freshness B) reduce advertising and promotions costs C) better understand how advertising works D) win advertising awards that will enhance the image of their brands E) do all of the above

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Pros & Cons of In-House Agencies

+ Positive
Cost savings

- Negative
Less experience

More control

The In-house Agency

Less objectivity

Better coordination

Less flexibility

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Benettons In-House Agency Works With Outside Agencies to Develop Ads

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Ad Agencies Have Skilled Specialists

Artists

Writers

Researchers

Photographers

Media Analysts
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Other Skills

Crispin Porter+Bogusky Found Creative Ways to Advertise the Mini

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Full-Services Agencies
Planning advertising Creating advertising Producing advertising Performing research

Full range of marketing communication and promotion services

Selecting media

Strategic market planning Sales promotions Direct marketing

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Interactive capabilities

Nonadvertising services

Package design Public relations and publicity

Typical Full-Service Agency Organization

Board of directors President VP creative services Writers

Art directors

VP account services Account supervision Account executive Media

VP marketing services Research Sales promotion

VP management and finance

TV production

Print production

Traffic

Office management Accounting Personnel

Finance

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Services Provided by Agencies

Agency Services
Account Service
The link between agency and client Managed by the account executive

Marketing Services
Research department May include account planners Media department to obtain media space and time
2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Creative Services
Creation and execution of ads Copywriters, artists, other specialists

The Role of Creative Boutiques

Creative Boutiques

Provide only creative services

Full-service agencies may subcontract with creative boutiques

Ability to turn out inventive creative work quickly

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Media Buying Can Be Specialized

Media Specialist Companies

Specialize in buying media, especially broadcast time

Agencies and clients develop media strategy

Media buying organizations implement the strategy and buy time and space

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Test Your Knowledge

Which of the following statements about changes in the way advertising agencies are being compensated is true? A) Most clients do not pay full commissions to their agencies because they prefer to use some type of fee or incentive-based system. B) From the viewpoints of both the client and the agency, the traditional commission system is much superior to negotiated commissions. C) Since most clients want their agencies to be in total charge of the integrated marketing communications process, they are willing to compensate them based on media commissions. D) All of the above statements about changes in the way ad agencies are being compensated are true.
2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Methods of Agency Compensation

Commissions from media

Compensation Methods

Fee, cost, and incentive-based systems

Percentage charges

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Young & Rubicam has handled Dr Pepper for over 30 years

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Foote, Cone & Belding was the agency for Levis for 68 years

*Click outside of the video screen to advance to the next slide

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Why Agencies Lose Clients

Personnel changes Poor performance Poor communications Changes in size Personality conflicts

Changes in strategy Declining sales

Unrealistic demands

Payment conflicts Policy changes

Conflict of interests

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

The US Army Changed Advertising Agencies and Campaigns

*Click outside of the video screen to advance to the next slide

2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

How Agencies Gain Clients

Referrals

Presentations

Solicitations

Public Relations
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Image, Reputation

A Change in Strategy Led to a Change in Gateways Advertising and Agency

*Click outside of the video screen to advance to the next slide

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Direct-Marketing Agency Activities

Database management Direct mail DirectMarketing Agencies

Media services

Creative

Research

Production

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Activities Performed by Sales Promotion Agencies

Promotional planning Creative work and research Tie-in coordination Fulfillment Premium design and manufacturing Catalog productions Catalog production Contest/sweepstakes management
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Functions Performed by Public Relations Firms

Damage control Strategy development

Generating publicity

Program planning Image portrayal Public affairs

Lobbying

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Functions Performed by Interactive Agencies

Web banner ads Web sites Interactive Media Creation Kiosks

CD-ROMs

Text messages

Search engine optimization

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Marketing Research Companies

Planning and implementing research Information application Analysis and interpretation Primary data collection
qualitative & quantitative

Secondary data collection

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Pros & Cons of Integrated Services

+ Positive
Greater synergy

- Negative
Budget politics

Convenience

Integrated Services

Poor communication

Single image for product or service

No synergy

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Test Your Knowledge

Surveys of marketing and ad agency executives about integrated marketing communications (IMC) have shown: A) agency executives do not support the idea of integrated marketing B) marketers and agency executives have similar opinions regarding who should be in charge of the IMC program C) internal turf battles, agency egos, and fear of budget reductions are seen as major barriers to successful IMC campaigns D) marketing executives feel a lack of people with IMC skills is a major obstacle to implementing integrated marketing
2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Obstacles to Implementing IMC

Consistent Consistent execution execution

Many elements Many elements to handle to handle

Internal Internal turf battles turf battles

Compensation Measuring Measuring campaign campaign success success Fear of budget Fear of budget reductions reductions

Agency egos Agency egos

2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin