Chapter 16

Organizing for Integrated Marketing Communication

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

To examine methods of selecting, compensating, and evaluating advertising agencies

Chapter 16 : Organizing for IMC

Chapter Objectives
To explain the role and functions of specialized marketing communications organizations To examine various perspectives on the use of integrated services and responsibilities of advertising versus agencies

Chapter 16 : Organizing for IMC

Participants in the IMC Process

Figure 16-1

Chapter 16 : Organizing for IMC

Participants in the IMC Process

Advertiser (Client)
Key participants in the process Have the products, services, or causes to be marketed Provide funds to pay for advertising/promotions

Advertising Agency
An outside firm that that specializes in the creation, production, and/or placement of the communications message

Chapter 16 : Organizing for IMC

Participants in the IMC Process

Media Organizations
Provide an environment for the firms marketing communications message

Specialized Marketing Communications Services

Include direct marketing agencies, sales promotion agencies, interactive agencies, and public relations firms These organizations provides services in their areas of expertise

Chapter 16 : Organizing for IMC

The Centralized System

Figure 16-2

Chapter 16 : Organizing for IMC

The Centralized System

Planning and budgeting Administration and execution Coordination with other departments Coordination with outside agencies and services

Chapter 16 : Organizing for IMC

The Decentralized System

Figure 16-3

Chapter 16 : Organizing for IMC

The Decentralized System

Generally occur in large corporations with multiple divisions and many different products Separate manufacturing, research and development, sales, and marketing departments for various divisions, product lines or businesses

Chapter 16 : Organizing for IMC

The Decentralized System

Responsibilities and functions associated with advertising and promotions are transferred to the brand manger, who works closely with the outside advertising agency and other marketing communications specialists as they develop the promotional program

Chapter 16 : Organizing for IMC

Management Issues of Advertising Agencies

Advertising Agency Decision
In-House Agency Option Advertising Agency Option

Chapter 16 : Organizing for IMC

In-House Agency Option

Reduces advertising and promotion costs Can provide related work (such as sales presentations and public relations) at a lower cost than outside agencies Increases time savings and eliminates potential problems with outside agencies

Chapter 16 : Organizing for IMC

In-House Agency Option

Increases knowledge and understanding of the market that come from working on advertising and promotion

Companies have tighter control over the processes and can coordinate promotions with the firms overall marketing program

Chapter 16 : Organizing for IMC

Advertising Agency Option

Provide clients with service of highly skilled individuals who are specialists in their chosen fields Provide objective viewpoint of the market and its business that is not subject to internal biases or limitations

Provide insight into the industry, and often the competition

Chapter 16 : Organizing for IMC

Canadas Top 20 Marketing Communications Companies

Figure 16-5

Chapter 16 : Organizing for IMC

Full Service Advertising Agencies

Account Services Marketing Services Creative Services Management and Finance Structure

Chapter 16 : Organizing for IMC

Full Service Agency

Figure 16-13

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Account Services
Account services is the link between the ad agency and the client The account executive is responsible for interpreting the advertisers needs to the agency

Chapter 16 : Organizing for IMC

Marketing Services
Research Department
Gather, analyze, and interpret information important in developing advertisements

Media Department
Analyzes, selects, and contracts for space or time in the media selected for the client

Chapter 16 : Organizing for IMC

Account Services
Coordinates agency efforts in planning, creating, and producing ads Presents agency recommendations and obtains client approval

Chapter 16 : Organizing for IMC

Creative Services
Copywriters are responsible for the creation and execution of advertisements May be involved in determining the basic appeal or theme of the campaign The art department is responsible for how the ad looks

Chapter 16 : Organizing for IMC

Creative Services
Coordinating the creative and production processes can often be a major problem A traffic department coordinates all phases of production to ensure all deadlines are met

Chapter 16 : Organizing for IMC

Management and Finance

Advertising agencies must be managed and perform operating functions such as accounting, human resources, etc.

Must generate new business

Bulk of an agencys income goes to salary and benefits for employees

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Structure
Advertising agencies develop an organization structure to meet their clients needs Most medium-size and large agencies are structured under either a departmental system or a group system

Chapter 16 : Organizing for IMC

Department System
Each agency function is set up as a separate department Each department is called on as needed to perform its specialty Some agencies prefer this system because it gives employees the opportunity to develop expertise in servicing a variety of accounts
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Group System
Individuals from each department work in groups to service particular accounts Each group is headed by an account executive or supervisor Many agencies prefer this system because employees become knowledgeable about the clients business Provides continuity in servicing the account

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Other Types Of Agencies and Services

Creative Boutiques Media Buying Services

Chapter 16 : Organizing for IMC

Creative Boutiques
Creative boutiques have developed in response to desires to utilize outside creative talent only Clients may believe extra creative effort is required or its employees do not have sufficient skills

Boutiques usually perform creative functions on a fee basis

Chapter 16 : Organizing for IMC

Media Buying Services

Independent companies that specialize in the buying of media, particularly radio and television Agencies and clients usually develop their own media strategies and hire a buying service to execute them Media buying services have grown in recent years as clients seek alternatives to full-service agency relationships Paid a fee or commission for their work

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Agency Compensation
Commissions from Media Other Compensation Systems
Fee Arrangement Cost-Plus Agreement Incentive-Based Compensation Percentage Charges

Chapter 16 : Organizing for IMC

Commissions from Media

Traditional method is a commission system, where the agency receives a specified commission from the media on any advertising time or space it purchases for its clients

Many advertisers have gone to a negotiated commission system: can be reduced percentage rates, variable commission rates, and commissions with minimum and maximum profit rates
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Example of Commission System Payment

Figure 16-14

Chapter 16 : Organizing for IMC

Fee Arrangement
Fixed-Fee Method
Agency charges a monthly fee for services and credits to the client any media commissions earned

Fee-Commission Combination
Media commissions received by the agency are credited against the fee

Chapter 16 : Organizing for IMC

Cost-Plus Agreement
The client agrees to pay the agency a fee based on the costs of its work plus some agreed-on profit margin, often a percentage of total costs

Direct costs plus an allocation for overhead and a markup for profits determine the amount the agency bills the client

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Incentive-Based Compensation
The agencys ultimate compensation level will depend on how well it meets predetermined performance goals These goals often include objective measures such as sales, and market share Compensation includes media commissions, fees, bonuses, or some combination

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Percentage Charges
Adding a mark up of percentage charges to various services the agency purchases from outside providers These charges may include market research, artwork, printing, and other services Markups range from 17.65 to 20 percent and are added to the clients overall bill

Chapter 16 : Organizing for IMC

Evaluation of Agencies
Financial Audit
Focuses on how the agency conducts its business Designed to verify costs and expenses, personnel hours charged to an account, etc.

Qualitative Audit
Focuses on the agencys efforts in planning, developing, and implementing the clients advertising programs and considers the results achieved

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Gaining and Losing Clients

Poor performance or service Poor communication Unrealistic demands by the client Personality conflicts Personnel changes

Chapter 16 : Organizing for IMC

Gaining and Losing Clients

Changes in the size of the client or agency Conflicts of interest Changes in the clients corporate and/or marketing strategy Declining sales Conflicting compensation philosophies Changes in policies

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Sales Promotion Agencies

Independent companies that specialize in providing services needed to plan, develop, and execute a variety of sales promotion programs

Services provided by large sales promotion agencies include promotional planning, creative, research, tie-in coordination, etc.

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Public Relations Firms

Develop and implement programs to manage the organizations publicity, image, and affairs with consumers and other relevant publics

Activities include planning the PR strategy and program, generating publicity, preparing news releases, managing crises, etc

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Direct-Response Agencies
Provide a variety of services
Database management Direct Mail

Divided into three main departments

Account Management, Creative and Media

Direct-response agencies must solicit new business and be reviewed by existing clients

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Interactive Agencies
Specialize in the development and strategic use of various interactive marketing tools such as websites, banner ads, etc. Range from smaller companies that specialize in website design to full-service interactive agencies that provide all necessary elements for a successful internet marketing program

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Pros of Integrated Service

Advocates of the one-stop shop contend that various individuals in the agencies and subsidiaries are learning to work together More convenient for the client to coordinate all its marketing efforts through one agency An agency with integrated marketing abilities can create a single image for the product or service and address everyone with one voice

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Cons of Integrated Service

Providers become involved in political wrangling over budgets and do not communicate with each other as they should Agencies efforts to control all aspects of the promotional program are nothing more than an attempt to hold onto business Synergy and economies of scale have been difficult to achieve

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Agency versus Client

Marketers and agency executives have different opinions regarding who should be in charge of the IMC process

Marketing executives say the biggest obstacle to implementing IMC is the lack of people with the perspective and skills to make it work

Chapter 16 : Organizing for IMC

Agency versus Client

Many ad agencies are adding more resources to offer their clients a full line of services As companies shift their promotional dollars away from media advertising to other IMC tools, agencies will explore ways to keep these monies under their roofs

Chapter 16 : Organizing for IMC