Chapter 3

Organizing for Advertising and Promotion:The Role of Ad Agencies and Other Marketing Communications Organizations

Last Class

Role of IMC in marketing

Segmentation

Positioning

Competitive Advantage

Pull vs push strategies

Objectives

To understand how firms organize advertising and IMC

To examine methods for selecting, compensating and evaluating Ad Agencies

To explain the role of specialized marketing communications organizations

The Worldwide Advertising Industry

Global expenditures $425 billionIn the UK £19 billion in 2006

Participants in the IMC Process

Marketing Communications Specialist Organization

Media Organizations

Advertiser (Client)

Advertising Agency

Collateral Services

Direct Response Agencies

Sales Promotion Agencies

Interactive Agencies

Public Relations

Firms

The Advertising Industry...Advertisers (clients)

advertise themselves & their productsAdvertising agencies

plan, create, prepare client’s ad campaignsSuppliers

photographers, illustrators, printers, video production houses, color film separators, etc.

Media companies selling electronic & print media

Top 10 Advertisers in U.S.

Rank CompanyAd SpendingGeneral Motors $ 4,040,000,000

Proctor & Gamble $ 2,611,700,000Phillip Morris $ 2,201,600,000Pfizer $ 2,142,400,000AT&T $ 1,950,900,000DaimlerChrysler $ 1,804,100,000Ford Motor Company $ 1,639,800,000Sears Roebuck $ 1,505,200,000PepsiCo $ 1,315,700,000Verizon Communications $ 1,312,700,000

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2002 Top 10 Multinational Advertisers (Ad Age Global Marketing Report Nov 10, 2003) 1. Procter & Gamble Co. US$4,479 million

2. Unilever. US$3,315 million

3. General Motors Corp. US$ 3,218 million

4. Toyota Motor Corp. US$2,405 million

5. Ford Motor Co. US$2,387 million

6. Time Warner. US$2349 million

7. Daimler Chrysler. US$1,800 million

8. L'Oreal. US$1,683 million

9. Nestle SA. US$1,547 million

10. Sony Corp. US$1,513 million

Global Advertising

Standardized

Localized

Global brands Efficiency / Recognition

Based on differences in each country or culture Relevance / Understanding

Most companies blend strategies to fit their unique situations

Local Advertising…

Businesses in a particular city or county targeting customers in that geographic area (50% of all advertising $ are local)

Focus

Time

Resources

Local vs. National Advertisers

National Local

Long-term Short-term

$$$$ $Many Specialists Few Generalists

Building the Brand Place of BusinessMarket Share Sales

Strategy TacticsMarkets Customers

The _____ is an outside firm that specializes in the creation, production, and/or placement of the communications message and that may provide other marketing and promotions related services

Top Ten World Advertising Agencies

Source: http://www.adage.com/international/world_brands, February 12, 2002.

McCann-Erickson Worldwide 58 1348DDB Worldwide 40 721Grey Advertising 45 700Ogilvy & Mather Worldwide 33 672EURO RSCG Worldwide 29 651J.Walter Thompson Co. 27 627BBDO Worldwide 32 597Y & R Advertising 27 517Publicis Communication 23 512D’Arcy Masius Benton & Bowles 21 452

Agency Markets Clients

What Do Advertising Agencies Provide?

Account services

Marketing services

Creative services Media Planning and Buying Traffic Management

FewerPersonnel

BetterCommunications

ContinuityOf Staff

LongerResponse Time

Less GoalInvolvement

BetterCommunications

FewerPersonnel

ContinuityOf Staff

Less GoalInvolvement

LongerResponse Time

Pros & Cons of Centralization

TheCentralized

System

+ Positive+ Positive - Negative- Negative

Can’t DoMultiple Product

Lines

Competition for Resources

Competition for Resources

Lack of Experience

in IMC

Lack of Experience

in IMC

Rapid ProblemResponse

ConcentratedAttention

IncreasedFlexibilityIncreasedFlexibility

Rapid ProblemResponse

ConcentratedAttention

Pros & Cons of Decentralization

TheDecentralized

System

+ Positive+ Positive - Negative- Negative

Lack ofAuthority

MoreControl

CostSavings

BetterCoordination

LessObjectivity

LessExperience

LessObjectivity

LessExperience

BetterCoordination

MoreControl

CostSavings

Pros & Cons of In-House Agencies

TheIn-houseAgency

+ Positive+ Positive - Negative- Negative

LessFlexibility

Most No Fear advertising is done by their in-house agency

+

Cannes Lions Live Advertising Awards Type Of Advertisement: Newspaper

Category: Entertainment & LeisureTitle: PERISCOPE Advertiser: LEGO Product or Service: LEGO CONSTRUCTION BLOCKS Entrant Company: FCB JOHANNESBURGCountry: SOUTH AFRICAAdvertising Agency: FCB JOHANNESBURG Country: SOUTH AFRICA Creative Director: Brett Morris Copywriter: Lance Vining Art Director: Lance Vining/Charles Foley Photographer: Gerard Turnely Typographer: Lance Vining Account Supervisor: Joanne Donald Advertiser's Supervisor: Gavin Mansour

“1984”

More than a good TV commercial

A new way of thinking about advertising

Total Marketing! Marketing Public Relations:

Computer Magazine Reviews, Major Media Coverage

Sales Promotion: In-store materials

New Media Products: MacWorld, MacWeek

And more . . .

Artists

Ad Agencies Have Skilled Specialists

Writers Researchers

Photographers Media Analysts Other Skills

Creating advertising

Planning advertising

Producing advertising

Performing research

Selecting media

Sales promotion and training

Strategic market planning

Trade show materials

Package design

Planning advertisingCreating

advertisingProducing advertising

Performing research

Selecting media

Strategic market planning

Sales promotion and training

Trade show materials

Package design

Full-Services Agencies

Full Range of Marketing

Communication and Promotion

Services

Non-Advertising Services Public relations

and publicity

Typical Full-Service Agency Organization

WritersArt Directors

Traffic

TVProduciton

Traffic

PrintProduction

VP CreativeServices

AccountExecutive

AccountSupervision

VP AccountServices

Media Research SalesPromotion

VP MarketingServices

Personnel Accounting Finance

OfficeManagement

VP Managementand Finance

President

Board ofDirectors

Services Provided by Agencies

Agency Services

The link between agency and client

Managed by the Account Executive

Research department may design and execute research programs

Media department may analyze, select and contract media resources

Creation and execution of ads

Copywriters, artists, other specialists

Marketing Services

Account Service

Creative Services

Marketing Services

Account Service

The Role of Creative Boutiques

CreativeBoutiques Provide Only Creative Services

Full-Service Agencies May Subcontract With Creative

Boutiques

Provide Only Creative Services

Full-Service Agencies May Subcontract With Creative

Boutiques

Other Functions Provided by the Internal Client Departments

Coca Cola’s in-house boutique created this popular spot

+

Specialize in Buying Media, Especially Broadcast Time

Agencies and Clients Develop Media Strategy

Agencies and Clients Develop Media Strategy

Specialize in Buying Media, Especially Broadcast Time

Media Buying Can Be Specialized

Media Buying

Services

Media Buying Organizations Implement the Strategy and

Buy Time and Space

Foote, Cone & Belding was the agency for Levi’s for 68 years

Poorperformance

PoorcommunicationsUnrealistic

demands

Personalityconflicts

Personnelchanges

Changesin size

Conflict ofinterests

Changesin strategy

Decliningsales

Paymentconflicts

Poorperformance

PoorcommunicationsUnrealistic

demands

Personalityconflicts

Personnelchanges

Changesin size

Conflict ofinterests

Changesin strategy

Decliningsales

Paymentconflicts

Why Agencies Lose Clients

Policy changes

Referrals

How Agencies Gain Clients

Solicitations

Presentations

Public Relations Image, Reputation

Gateway Changed Its Advertising After Changing Agencies

A Change in Strategy Led to a Change in Gateway’s Advertising

DirectMail

Data BaseManagement

Research

Creative

Media Services

Creative

Media Services

Research

DirectMail

Data BaseManagement

Direct Response Agency Activities

DirectResponseAgencies

Production

StrategyDevelopment

GeneratingPublicity

LobbyingPublicAffairs

DamageControl

ImagePortrayal

StrategyDevelopment

GeneratingPublicity

LobbyingPublicAffairs

DamageControl

ImagePortrayal

Functions performed by Public Relations Firms

ProgramPlanning

Audio

Special Effects

Video

WebBanner Ads

Kiosks

Web Sites

CD-ROMs

Special Effects

VideoAudio

KiosksCD-ROMs

Web SitesWebBanner Ads

Functions performed by Interactive Agencies

Interactive Media Creation

DigitalContent

Animation

Planning and Implementing

Research Planning and Implementing

Research

Information Application

Analysis and Interpretation

Primary Data Collection

Qualitative & Quantitative

Secondary Data Collection

Primary Data Collection

Qualitative & Quantitative

Analysis and Interpretation

Information Application

Marketing Research Companies

Sum Up

Ad Agency structure Ad Agency Organization Evaluation of Ad Agencies

Next Class

Perspectives on Consumer Behaviour

Read Chapter 4