Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations McGraw-Hill/Irwin

Participants in the IMC Process Advertiser (Client) Advertising agency Direct-response agencies Sales promotion agencies Media organizations Marketing communications specialist organizations Public relations firms Interactive agencies Collateral services

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 Production Finance Marketing Research and develop-ment Human resources Marketing research Advertising Sales Product planning

Pros & Cons of a Centralized System + Positive - Negative Better communications Less goal involvement The Centralized System Fewer personnel Longer response time Continuity More top management involvement Impractical for multiple brands, products, divisions

Decentralized Advertising System Corporate Human Resources Production Finance Marketing R & D Product Management Marketing services Sales Brand Manager Ad agency Advertising Dept Marketing Research Sales promotion Brand Manager Ad agency Package design Merchandising

Pros & Cons of Decentralization + Positive - Negative Ineffective decision making Concentrated attention Internal conflicts The Decentralized System Rapid problem response Unequal distribution of funds Increased flexibility Lack of Authority

Pros & Cons of In-House Agencies + Positive - Negative Cost savings Less experience The In-house Agency More control Less objectivity Better coordination Less flexibility

Reasons for using an ad agency The Ad Agency’s Role Reasons for using an ad agency Highly skilled specialists Specialization in a particular industry Objective viewpoint of the market Broad range of experience

Ad Agencies Have Skilled Specialists Artists Writers Researchers Photographers Media Analysts Other Skills

Full-Service Agencies Planning advertising Full range of marketing communication and promotion services Performing research Creating advertising Selecting media Producing advertising Interactive capabilities Strategic market planning Nonadvertising services Sales promotions Package design Direct marketing Public relations and publicity

Typical Full-Service Agency Organization Writers Art directors TV production Traffic Print production Account Executive Account supervision VP account services Media Research Sales Promotion VP marketing Personnel Accounting Finance Office management VP management and finance President Board of directors VP creative services

Services Provided by Agencies Agency Services Research department May include account planners Media dept. obtains media space, time Marketing Services The link between agency and client Managed by the account executive Account Services Creation, execution of ads Copywriter artists, other specialists Creative Services Accounting Finance Human resources New business generation Mgmt & Finance

The Role of Creative Boutiques Provide only creative services Full-service agencies may subcontract with creative boutiques Creative boutiques developed in response to some clients’ desire to use only the creative talent of an outside agency while maintaining other functions internally. Clients seek the help of creative boutiques when an extra creative effort is required, or because its own employees do not have sufficient skills. They can be used in these ways: By client companies for creative services only Full service agencies may subcontract for their creative services when busy or when not wanting to add permanent employees Other functions such as advertising planning, research and media buying may be done internally within the company or contracted out Use of slide This slide can be used to explain the role of creative boutiques in planning an IMC program. They usually are hired for their creative talent and are paid on a fee basis. They can be hired directly by a company for their specialized services, or by a full service agency when they are very busy or do not want to hire full-time employees. Ability to turn out inventive creative work quickly

Media Buying Can be Specialized Media Specialist Companies Specialize in buying media, especially broadcast time Agencies and clients develop media strategy The task of purchasing advertising media has grown more complex as specialized media proliferate. Media buying services have found a niche by specializing in the analysis and purchase of advertising time and space. Agencies and clients usually develop their own media strategies and hire independent buying services to execute them. Some of the characteristics of media specialist companies include: They specialize in buying media time, particularly radio and television time Because they purchase large amounts of time and space, they usually receive large discounts and can save the agency/company money on media purchases They are paid a fee or commission for their work The agency or client may often develop the media strategy Media buying organizations may be used to implement the media strategy and buy broadcast time and/or space in print publications Use of slide This slide can be used to show the role of media buying services. Their use is growing as more companies look for ways to get more clout from their advertising budgets. Media buying organizations implement the strategy and buy time and space

Methods of Agency Compensation Commissions from media Compensation Methods Fee, cost, and incentive-based systems Percentage charges

Personnel hours charged Evaluating Agencies Financial Audit Qualitative Audit Verify costs, expenses Personnel hours charged Payments to media Payments to suppliers Planning Program development Implementation Results achieved

Top Agency Value-Add Activities Integrated disciplines & functions New media guidance, solutions Creative ideas Brand driver evaluation Collaboration Talented people Ideas/programs for multi comm. programs

Why Agencies Lose Clients Poor performance communications Unrealistic Client demands Personality conflicts Declining sales Payment conflicts Policy Changes Personnel changes Changes in size of client or agency Conflicts of interest Change in client’s strategy

How Agencies Gain Clients Referrals Presentations Solicitations Public Relations Image, Reputation

Direct-Marketing Agency Activities Agencies Database management Media services Direct mail Creative Database development, management Research Production

Direct-Marketing Agency Departments in a typical direct-marketing agency Account management Creative Media Database development and management

Sales Promotion Agencies Promotional planning Creative research Tie-in coordination Fulfillment Premium design and manufacturing Catalog production Contest/sweepstakes management

Functions Performed by Public Relations Firms Strategy development Generating publicity Lobbying Public affairs News releases, communication Research Managing crises Coordination with promotional areas Special events

Functions Performed by Interactive Agencies Web banner ads CD-ROMs Interactive Media Creation Web sites Text messages Kiosks Search engine optimization

Marketing Research Companies Help clients under- stand target audience Qualitative research Quantitative studies

Pros and Cons of Integrated Services + Positive - Negative Greater synergy Budget politics Integrated Services Convenience Poor communication Single image for product or service No synergy

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