The Advertising Industry

Types of Advertisers

Ad Agencies
Job Functions
Structure
Compensation

Suppliers

Media

July 8, 2015

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Advertising Industry Structure

Advertisers
(Clients)

Agencies

Suppliers

Media
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Advertising & Large Companies

Centralized

Efficiency
Continuity

In-House Agency
Functional Services
Research
Media
Creative

Decentralized

Flexibility
Competition among company brands
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Global Advertising

Standardized

Most companies blend

strategies to fit their
unique situations

Global brands
Efficiency / Recognition

Localized

Based on differences
in each country or culture
Relevance / Understanding
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The Worldwide Advertising

Industry

Global expenditures $425

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Local vs. National Advertisers

National

Local

Focus

Building the Brand

Market Share
Strategy
Markets

Place of Business
Sales
Tactics
Customers

Time

Long-term

Short-term

Resources

$$$$
Many Specialists

$
Few Generalists

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Types of Advertising

Local Advertising (Retail)

Product Advertising
Institutional Advertising
Classified Advertising

Cooperative (Co-op) Advertising

Allowances By The Manufacturer
Pooling Resources

Government and Social Organizations

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Advertising Agency
An independent organization of professionals
who provide creative and business services to clients
related to planning, preparing, and placing advertisements.
Radio and TV Producers
Copywriters
Account Supervisors
Direct-Marketing Specialists
Artists
Researchers
Art Directors
Media Buyers
Public Relations Specialists
Technical Staff
Creative Directors
Marketing Specialists
Sales Promotion and Event Planners

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Advertising Agency
Advertising

Agency: an independent
business, composed of creative and business
people, who develop, prepare, and place
advertising in advertising media for sellers
seeking to find customers for their goods or
services
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

How Agencies Developed

The

Early Age
(Colonial Times to 1917)
Space

Salesmen
Space Wholesalers
The First Rate Directory
The Agency Becomes a Creative Center

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How Agencies Developed

(continued)
The

No-Rebate Age (1918-1956)

Radio
Television
Electronic Data Processing

The

Age of Negotiation (1956-1990)

Consent Decrees

The

Reengineering Age

Integrated Services
Interactive Communications

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Types of Advertising Agencies

Full-Service

Business-to-Business

Creative Boutiques

Media-Buying Services

Interactive

In-House
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What Do Advertising Agencies

Provide?

Account Services

Research and Account Planning

Creative and Production

Media Planning and Buying

Traffic Management

Marketing Services
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Agency Department System

President
Vice President
Account
Services
Account
Supervisor
Account
Executive
Account
Executive

Account
Supervisor

Vice President
Creative
Services

Vice President
Marketing
Services

Vice President
Management
Services

Art / Copy

Media

Accounting

Production

Research

Purchasing

Personnel
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Agency Group System

Agency
Management

Group 1 (Coke Classsic)

Management
Director

Account
Service

Group 2 (Dial Soap)

Management
Director

Creative
Director

Media
Planning

Group 3 (Toyota Camry)

Management
Director

Market
Research

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Agency Compensation Plans

Commissions

Around 15% of airtime fees

Agency Bills Client For $1,000,000

For Television Air Time

Agency Pays Television

$850,000

For Television Air Time

Agency Earns

$150,000

Commission (15%)

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Agency Compensation Plans

Commissions

Around 15% of airtime fees

Markup Charges

Production cost + fixed percent

Agencies add 17.65% to the cost of outside services

Photographer charges $8,500

The Agency adds

$1,500

Client is charged

$10,000

(17.65%)
for photography services
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Agency Compensation Plans

Commissions

Markup Charges

Production cost + fixed percent

Fee Systems

Around 15% of airtime fees

Hourly rates or by project

Incentive Systems

Tightly-specified objectives
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Other Advertising
Services
This

is an
example of
collateral
promotion
material that
agencies
produce for
clients.
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Other Advertising
Services
This

ad is a
continuation
of a concept
developed by
an ad agency.

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

The Media of Advertising

Print
Electronic
Interactive Media
Out-of-Home
Direct Mail
Other Media
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

The Media of Advertising

Print

Newspapers National, State, Local

Magazines Geography and Content

Yellow Pages

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The Media of Advertising

Network, Independent and Cable TV

Network and Local Radio

Electronic

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The Media of Advertising

Online Services
Kiosks
CD-ROM
Homeshopping Broadcasts
Interactive Programming
Internet

Interactive Media

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

The Media of Advertising

Out-of-Home

Outdoor

Billboards

Transit

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The Media of Advertising

Direct Mail
Brochures and Catalogs

Direct Mail

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The Media of Advertising

Premiums
Point of Purchase Displays
Product Placement
Event Sponsorship

Other Media
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Summary
A full-service agency works on many aspects of a
clients marketing problems
Many agencies are organized into four divisions
Some agencies have a domestic network of offices or
affiliates to service their large accounts
Global marketing has led agencies to expand
internationally
Clients usually pay agencies by commission, fees, or
a combination
There are other types of advertising services beside
the traditional advertising agency

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.