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

Participants in the IMC Process

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Marketing communications specialist organizations

Media organizations

Advertiser (Client)

Advertising agency

Collateral services

Direct-

response

agencies

Sales

promotion

agencies

Interactive

agencies

Public

relations

firms

Advertising Department UnderCentralized System

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

President

Production Finance Marketing

Research and

develop-ment

Human resources

AdvertisingMarketing research

SalesProduct planning

President

Production Finance Marketing

Research and

develop-ment

Human resources

AdvertisingMarketing research

SalesProduct planning

Fewerpersonnel

Bettercommunications

Continuityof staff

Longerresponse time

Less goalinvolvement

Less goalinvolvement

Longerresponse time

Pros & Cons of Centralization

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TheCentralized

System

+ Positive - Negative

Can’t domultiple product

linesMore top management involvement

Better communications

Fewer personnel

Continuityof staff

More top management involvement

Decentralized Brand Management System

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Production Finance

Sales

Brand

manager

Ad agency

Brand

manager

Ad agency

Product

management

Sales

promotion

Package

design

Merchandising

Advertising

departmentMarketing

research

Marketing

services

MarketingResearch

and

development

Human

resources

Corporate

Internal conflictsInternal conflicts

Ineffective decision making

Ineffective decision making

Rapid problemresponse

Concentratedattention

IncreasedflexibilityIncreasedflexibility

Rapid problemresponse

Concentratedattention

Pros & Cons of Decentralization

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

TheDecentralized

System

+ Positive - Negative

Misallocation of funds

Lack ofAuthority

Misallocation of funds

Test Your Knowledge

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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

Morecontrol

Costsavings

Bettercoordination

Lessobjectivity

Lessexperience

Lessobjectivity

Lessexperience

Bettercoordination

Morecontrol

Costsavings

Pros & Cons of In-House Agencies

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

TheIn-houseAgency

+ Positive - Negative

Lessflexibility

Artists

Ad Agencies Have Skilled Specialists

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Writers Researchers

Photographers Media Analysts Other Skills

Creating advertising

Planning advertising

Producing advertising

Performing research

Selecting media

Sales promotions

Strategic market planning

Direct marketing

Interactive capabilities

Planning advertising

Creating advertising

Producing advertising

Performing research

Selecting media

Strategic market planning

Sales promotions

Direct marketing

Package designPackage design

Full-Services Agencies

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Full range of marketing

communication and promotion

services

Nonadvertising services

Public relations and publicity

Interactive capabilities

Typical Full-Service Agency Organization

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

WritersArt directors

TV

production

Traffic

Print

production

VP creative

services

Account

executive

Account

supervision

VP account

services

Media Research Sales

promotion

VP marketing

services

Personnel

Accounting

FinanceOfficemanagement

VP management

and finance

President

Board of

directors

Services Provided by Agencies

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Agency Services

The link between agency and client

Managed by the account executive

Research department

May include account planners

Media department to obtain media space and time

Creation and execution of ads

Copywriters, artists, other specialists

Marketing Services

Account Service

Creative Services

Marketing Services

Account Service

The Role of Creative Boutiques

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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

Ability to turn out inventive creative work quickly

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

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Media Specialist

Companies

Media buying organizations implement the strategy and

buy time and space

Test Your Knowledge

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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 to use some type of fee or incentive-based system.

B) From the viewpoints of both the client and the agency, the traditional commission system is much superior to negotiated commissions.

C) Since most clients want their agencies to be in total charge of the integrated marketing communications process, they are willing to compensate them based on media commissions.

D) All of the above statements about changes in the way ad agencies are being compensated

are true.

Commissionsfrom media

Fee, cost, and incentive-based

systems

Percentagecharges

Commissionsfrom media

Fee, cost, and incentive-based

systems

Methods of Agency Compensation

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

CompensationMethods

Poorperformance

Poorcommunications

Unrealisticdemands

Personnelchanges

Conflict ofinterests

Changesin strategy

Decliningsales

Policychanges

Poorperformance

Poorcommunications

Unrealisticdemands

Personalityconflicts

Personnelchanges

Changesin size

Changesin strategy

Decliningsales

Paymentconflicts

Why Agencies Lose Clients

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Referrals

How Agencies Gain Clients

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Solicitations

Presentations

Public Relations Image, Reputation

Directmail

Databasemanagement

Research

Creative

Media services

Creative

Media services

Research

Directmail

Databasemanagement

Direct-Marketing Agency Activities

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Direct-MarketingAgencies

Production

Catalog productionsCatalog production

Promotional planning

Creative work and research

Tie-in coordination

Fulfillment

Premium design and manufacturing

Premium design and manufacturing

Fulfillment

Tie-in coordination

Creative work and research

Promotional planning

Contest/sweepstakes management

Activities Performed by Sales Promotion Agencies

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Strategydevelopment

Generatingpublicity

Lobbying

Publicaffairs

Damagecontrol

Imageportrayal

Functions Performed by Public Relations Firms

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Programplanning

Webbanner ads

Search engine optimizationKiosks

Search engine optimization

Functions Performed by Interactive Agencies

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Interactive Media Creation

CD-ROMsCD-ROMs

Web sites Text messagesWeb sites Text messages

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

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Convenience

Greater synergy

Single image for product or service

Poor communication

Budget politics

Poor communication

Budget politics

Single image for product or service

Convenience

Greater synergy

Pros & Cons of Integrated Services

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Integrated Services

+ Positive - Negative

No synergy

Test Your Knowledge

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Surveys of marketing and ad agency executives about integrated marketing communications (IMC) have shown:

A) agency executives do not support the idea of integrated marketing

B) marketers and agency executives have similar opinions regarding who should be in charge of the IMC program

C) internal turf battles, agency egos, and fear of budget reductions are seen as major barriers to successful IMC campaigns

D) marketing executives feel a lack of people with IMC skills is a major obstacle to implementing integrated marketing

Many elements to handle

Internalturf battles

Agency egos

Fear of budget reductions

Consistentexecution

Measuring campaign success

Obstacles to Implementing IMC

© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Compensation