3

Organizing for Advertising

and Promotion:
The Role of Ad Agencies and Other Marketing
Communication Organizations

McGraw-Hill/Irwin Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 Participants in the IMC Process

Advertiser
Advertiser (Client)
(Client)

Advertising
Advertising agency
agency

Media
Media organizations
organizations Direct-
Direct- Sales
Sales
response
response promotion
promotion
Marketing
Marketing agencies
agencies agencies
agencies
communications
communications
specialist
specialist
organizations
organizations Public
Public Interactive
Interactive
relations
relations agencies
agencies
Collateral
Collateral services
services firms
firms
 Organizing for Advertising and Promotion

The way a company (the client)

organizes depends on
Its size
The number of products it markets
The role of advertising and promotion in
the marketing mix
The budget
Its marketing organization structure
Advertising Dept. Under Centralized System

President
President

Research
Research
and
and Human
Human
Production
Production Finance
Finance Marketing
Marketing develop-
develop- resources
resources
ment
ment

Marketing
Marketing Product
Product
Advertising
Advertising Sales
Sales
research
research planning
planning
 Pros & Cons of a Centralized System

+ Positive - Negative
Better
Better Less
Less goal
goal
communications
communications involvement
involvement

Fewer
Fewer The
The
personnel
personnel Centralized
Centralized Longer
Longer
System
System response
response time
time
Continuity
Continuity
Impractical
Impractical for
for
multiple
multiple brands,
brands,
More products,
products,
More top
top
management divisions
divisions
management
involvement
involvement
 Decentralized Advertising System

Corporate

Production Finance Marketing R&D Human

Resources

Sales Product Marketing

Management services

Brand Advertising Marketing

Manager Dept Research

Ad agency
Sales promotion
Brand
Manager Package design

Ad agency Merchandising
 Pros & Cons of Decentralization

+ Positive - Negative

Ineffective
Ineffective
Concentrated
Concentrated decision
decision making
making
attention
attention

Rapid
Rapid problem
problem The
The Internal
Internal conflicts
conflicts
response
response Decentralized
Decentralized
System
System
Unequal
Unequal
distribution
distribution
Increased
Increased of
of funds
funds
flexibility
flexibility

Lack
Lack of
of
Authority
Authority
 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
 In-House Agencies

Benettons in-house agency works with

outside agencies to develop ads
 Pros & Cons of In-House Agencies

+ Positive - Negative

Cost
Cost Less
Less
savings
savings experience
experience

The
The
More
More Less
Less
control
control
In-house
In-house objectivity
objectivity
Agency
Agency

Better
Better Less
Less
coordination
coordination flexibility
flexibility
 The Ad Agencys Role

Reasons for using an ad agency

Highly skilled specialists
Specialization in a particular industry
Objective viewpoint of the market
Broad range of experience
 Ad Agencies Have Skilled Specialists

Artists
Artists Writers
Writers Researchers
Researchers

Photographers
Photographers Media
Media Analysts
Analysts Other
Other Skills
Skills
 Full-Service Agencies

Planning
Planning
advertising Full Performing
advertising Full range
range of
of Performing
marketing research
research
Creating
Creating
marketing
advertising
communication
communication
advertising
and
and promotion
promotion
services Selecting
Selecting media
media
Producing
Producing services
advertising
advertising

Strategic Interactive
Interactive
Strategic market
market
planning capabilities
capabilities
planning

Sales
Sales Nonadvertising
Nonadvertising Package
promotions Package design
design
promotions services
services
Direct
Direct Public
Public relations
relations
marketing
marketing and
and publicity
publicity
 Typical Full-Service Agency Organization

Board of
directors

President

VP creative
VP account VP marketing
services VP management
services services
and finance

Writers Print
Art directors production Sales
Media
Promotion
Account
TV supervision
production
Research Office
management Finance

Traffic Account
Accounting
Executive

Personnel
 Services Provided by Agencies

Agency
Agency Services
Services

Account
Account Marketing
Marketing Creative
Creative Mgmt
Mgmt &&
Services
Services Services
Services Services
Services Finance
Finance

The
The link
link Research
Research Creation,
Creation, Accounting
Accounting
between
between department
department execution
execution ofof
agency Finance
Finance
agencyandand May
ads
ads
client
client Mayinclude
include Human
account
account Copywriter
Copywriter Human
Managed resources
resources
Managed by by planners
planners artists,
artists, other
other
the account
the account specialists
specialists New
New
executive Media
Media dept.
dept.
executive obtains business
business
obtains generation
media
media generation
space,
space, time
time
 The Role of Creative Boutiques

Creative
Creative Provide
Provide only
only creative
creative services
services
Boutiques
Boutiques

Full-service
Full-service agencies
agencies may
may
subcontract
subcontract with
with creative
creative
boutiques
boutiques

Ability
Ability to
to turn
turn out
out inventive
inventive
creative
creative work
work quickly
quickly
 Media Buying Can be Specialized

Media
Media Specialize
Specialize in
in buying
buying media,
media,
Specialist
Specialist especially
especially broadcast
broadcast time
time
Companies
Companies

Agencies
Agencies and
and clients
clients develop
develop
media
media strategy
strategy

Media
Media buying
buying organizations
organizations
implement
implement the
the strategy
strategy and
and
buy
buy time
time and
and space
space
 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 fee- or
incentive-based systems.
B) From the viewpoints of both the client and the agency,
the traditional commission system is superior to
negotiated commissions.
C) Most clients want their agencies to be in total charge
of the integrated marketing communications process,
so they prefer to compensate them based on media
commissions.
D) Statements A, B, and C are all true.
 Methods of Agency Compensation

Commissions
Commissions
from
from media
media

Compensation Fee,
Fee, cost,
cost, and
and
Compensation incentive-based
incentive-based
Methods
Methods systems
systems

Percentage
Percentage
charges
charges
 Evaluating Agencies

Financial Qualitative
Audit Audit

Verify costs, expenses Planning

Personnel hours charged Program development

Payments to media Implementation

Payments to suppliers Results achieved

Top Agency Value-Add Activities

Integrated
disciplines
New media & functions
guidance,
Creative
solutions
ideas

Brand
driver
evaluation
Collaboration

Talented Ideas/programs
people for multi comm.
programs
Loyalty to a Single Agency

Young &
Rubicam has
handled the
Dr Pepper
account for
over 30 years
 Why Agencies Lose Clients

Poor Declining Personnel

performance sales changes

Changes
Poor Payment
in size of client
communications conflicts
or agency

Unrealistic Conflicts of
Policy Changes
Client demands interest

Change in
Personality Policy Changes clients strategy
conflicts
 How Agencies Gain Clients

Referrals
Referrals Presentations
Presentations

Solicitations
Solicitations

Public
Public Relations
Relations Image,
Image, Reputation
Reputation
The Hottest Agency in the Ad Business
 Direct-Marketing Agency Activities

Direct-
Direct-
Marketing
Marketing
Database
Database Agencies
Agencies Media
Media services
services
management
management

Direct
Direct Creative
Creative
mail
mail
Database
Database
development,
development,
Research
Research management
management Production
Production
 Direct-Marketing Agency

Departments in a typical direct-

marketing agency
Account management
Creative
Media
Database development and management
Sales Promotion Agencies

Promotional
Promotional planning
planning

Creative
Creative research
research

Tie-in
Tie-in coordination
coordination

Fulfillment
Fulfillment

Premium
Premium design
design and
and
manufacturing
manufacturing

Catalog
Catalog production
production

Contest/sweepstakes
Contest/sweepstakes
management
management
Functions Performed by Public Relations Firms

Strategy Public
Special events
development affairs

Generating News releases, Managing

publicity communication crises

Coordination
Lobbying Research with promotional
areas
Functions Performed by Interactive Agencies

Web
Web CD-ROMs
CD-ROMs
banner
banner ads
ads

Interactive
Interactive
Web
Web sites
sites Text
Text messages
messages
Media
Media Creation
Creation

Search
Search engine
engine
Kiosks
Kiosks optimization
optimization
Website for the California Milk Advisory Board
Marketing Research Companies

Help
Help clients
clients under-
under-
stand
stand target
target
audience
audience

Qualitative
Qualitative research
research

Quantitative
Quantitative studies
studies
 Pros and Cons of Integrated Services

+ Positive - Negative

Greater
Greater synergy
synergy Budget
Budget politics
politics

Convenience Integrated
Integrated Poor
Poor
Convenience communication
Services
Services communication

Single
Single image
image for
for No
No synergy
synergy
product
product oror service
service
 Test Your Knowledge

Marketing executives say the biggest obstacle to

implementing IMC is:
A) Lack of management support
B) Insufficient budgets
C) Lack of people with the right perspective
and skills
D) Inexperienced ad agencies
 Obstacles to Implementing IMC

Key obstacles
Lack of people with the broad perspective
and skills to make it work
Internal turf battles
Agency egos
Fear of budget reductions
Ensuring consistent execution
Measuring success
Compensation