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
Marketing
Marketing
communications
communications
specialist
specialist
organizations
organizations
Collateral
Collateral services
services

DirectDirectresponse
response
agencies
agencies

Sales
Sales
promotion
promotion
agencies
agencies

Public
Public
relations
relations
firms
firms

Interactive
Interactive
agencies
agencies

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

Production
Production

Finance
Finance

Marketing
Marketing
research
research

Marketing
Marketing

Advertising
Advertising

Research
Research
and
and
developdevelopment
ment

Sales
Sales

Human
Human
resources
resources

Product
Product
planning
planning

Pros & Cons of a Centralized System

+ Positive

- Negative

Better
Better
communications
communications

Less
Less goal
goal
involvement
involvement

Fewer
Fewer
personnel
personnel
Continuity
Continuity
More
More top
top
management
management
involvement
involvement

The
The
Centralized
Centralized
System
System

Longer
Longer
response
response time
time
Impractical
Impractical for
for
multiple
multiple brands,
brands,
products,
products,
divisions
divisions

Decentralized Advertising System

Corporate
Production

Finance

Sales

Marketing

Product
Management
Brand
Manager
Ad agency
Brand
Manager
Ad agency

Human
Resources

R&D

Marketing
services
Advertising
Dept

Marketing
Research

Sales promotion
Package design
Merchandising

Pros & Cons of Decentralization

+ Positive

- Negative
Ineffective
Ineffective
decision
decision making
making

Concentrated
Concentrated
attention
attention

Rapid
Rapid problem
problem
response
response

Increased
Increased
flexibility
flexibility

The
The
Decentralized
Decentralized
System
System

Internal
Internal conflicts
conflicts
Unequal
Unequal
distribution
distribution
of
of funds
funds
Lack
Lack of
of
Authority
Authority

In-House Agencies

Benettons in-house agency works with

outside agencies to develop ads
8

Pros & Cons of In-House Agencies

+ Positive

- Negative

Cost
Cost
savings
savings

Less
Less
experience
experience

More
More
control
control

Better
Better
coordination
coordination

The
The
In-house
In-house
Agency
Agency

Less
Less
objectivity
objectivity

Less
Less
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

10

Full-Service Agencies
Planning
Planning
advertising
advertising
Creating
Creating
advertising
advertising
Producing
Producing
advertising
advertising

Full
Full range
range of
of
marketing
marketing
communication
communication
and
and promotion
promotion
services
services

Direct
Direct
marketing
marketing

Selecting
Selecting media
media

Interactive
Interactive
capabilities
capabilities

Strategic
Strategic market
market
planning
planning
Sales
Sales
promotions
promotions

Performing
Performing
research
research

Nonadvertising
Nonadvertising
services
services

Package
Package design
design
Public
Public relations
relations
and
and publicity
publicity

11

Typical Full-Service Agency Organization

Board of
directors
President
VP creative
services

VP account
services
Print
production

Writers

Art directors

TV
production

Traffic

VP marketing
services

Media
Account
supervision

VP management
and finance

Sales
Promotion

Research

Office
management

Account
Executive

Finance

Accounting
Personnel

Services Provided by Agencies

Agency
Agency Services
Services
Account
Account
Services
Services

Marketing
Marketing
Services
Services

Creative
Creative
Services
Services

Mgmt
Mgmt &
&
Finance
Finance

The
The link
link
between
between
agency
agencyand
and
client
client
Managed
Managed by
by
the
account
the account
executive
executive

Research
Research
department
department
May
Mayinclude
include
account
account
planners
planners
Media
Media dept.
dept.
obtains
obtains
media
media
space,
space, time
time

Creation,
Creation,
execution
execution of
of
ads
ads
Copywriter
Copywriter
artists,
artists, other
other
specialists
specialists

Accounting
Accounting
Finance
Finance
Human
Human
resources
resources
New
New
business
business
generation
generation

The Role of Creative Boutiques

Creative
Creative
Boutiques
Boutiques

Provide
Provide only
only creative
creative services
services

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
Specialist
Specialist
Companies
Companies

Specialize
Specialize in
in buying
buying media,
media,
especially
especially broadcast
broadcast time
time

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
Compensation
Methods
Methods

Fee,
Fee, cost,
cost, and
and
incentive-based
incentive-based
systems
systems
Percentage
Percentage
charges
charges

Evaluating Agencies

Financial
Audit

Qualitative
Audit

Verify costs, expenses

Planning

Personnel hours charged

Program development

Payments to media

Implementation

Payments to suppliers

Results achieved

Top Agency Value-Add Activities

New media
guidance,
solutions

Brand
driver
evaluation

Talented
people

Integrated
disciplines
& functions
Creative
ideas

Collaboration

Ideas/programs
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
performance

Declining
sales

Personnel
changes

Poor
communications

Payment
conflicts

Changes
in size of client
or agency

Unrealistic
Client demands

Policy Changes

Conflicts of
interest

Policy Changes

Change in
clients strategy

Personality
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

Database
Database
management
management

DirectDirectMarketing
Marketing
Agencies
Agencies

Direct
Direct
mail
mail

Research
Research

Media
Media services
services

Creative
Creative
Database
Database
development,
development,
management
management

Production
Production

Direct-Marketing Agency

Departments in a typical directmarketing 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
development

Generating
publicity

Lobbying

Public
affairs

Special events

News releases,
communication

Managing
crises

Research

Coordination
with promotional
areas

Functions Performed by Interactive Agencies

Web
Web
banner
banner ads
ads
Web
Web sites
sites

CD-ROMs
CD-ROMs

Interactive
Interactive
Media
Media Creation
Creation
Kiosks
Kiosks

Text
Text messages
messages

Search
Search engine
engine
optimization
optimization

Website for the California Milk Advisory Board

Marketing Research Companies

Help
Help clients
clients underunderstand
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
Convenience

Single
Single image
image for
for
product
product or
or service
service

Integrated
Integrated
Services
Services

Poor
Poor
communication
communication

No
No synergy
synergy

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