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 Under Centralized System © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin President Production Finance Marketing Research and develop- ment Human resources Advertising Marketing research Sales Product planning President Production Finance Marketing Research and develop- ment Human resources Advertising Marketing research Sales Product planning

Fewer personnel Fewer personnel Better communications Better communications Continuity of staff Continuity of staff Longer response time Longer response time Less goal involvement Less goal involvement Less goal involvement Less goal involvement Longer response time Longer response time Pros & Cons of Centralization © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Centralized System The Centralized System + Positive - Negative Can’t do multiple product lines Can’t do multiple product lines More top management involvement Better communications Fewer personnel Continuity of staff More top management involvement

Decentralized Brand Management System © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin ProductionFinance Sales Brand manager Ad agency Brand manager Ad agency Product management Sales promotion Package design Merchandising Advertising department Marketing research Marketing services Marketing Research and development Human resources Corporate

Internal conflicts Ineffective decision making Rapid problem response Rapid problem response Concentrated attention Concentrated attention Increased flexibility Increased flexibility Increased flexibility Increased flexibility Rapid problem response Rapid problem response Concentrated attention Concentrated attention Pros & Cons of Decentralization © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Decentralized System The Decentralized System + Positive - Negative Misallocation of funds Lack of Authority Lack of Authority 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

More control More control Cost savings Cost savings Better coordination Better coordination Less objectivity Less objectivity Less experience Less experience Less objectivity Less objectivity Less experience Less experience Better coordination Better coordination More control More control Cost savings Cost savings Pros & Cons of In-House Agencies © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The In-house Agency The In-house Agency + Positive - Negative Less flexibility Less flexibility

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 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 Writers Art directors TV production Traffic Print production VP creative services Account executive Account supervision VP account services MediaResearch Sales promotion VP marketing services Personnel Accounting Finance Office management VP management and finance President Board of directors

Services Provided by Agencies © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Agency Services The link between agency and client Managed by the account executive 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 Research department May include account planners Media department to obtain media space and time Creation and execution of ads Copywriters, artists, other specialists 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 Creative Boutiques 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 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.

Commissions from media Commissions from media Fee, cost, and incentive-based systems Percentage charges Percentage charges Commissions from media Commissions from media Fee, cost, and incentive-based systems Methods of Agency Compensation © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Compensation Methods Compensation Methods

Poor performance Poor communications Unrealistic demands Personnel changes Conflict of interests Changes in strategy Declining sales Policy changes Poor performance Poor communications Unrealistic demands Personality conflicts Personnel changes Changes in size Changes in strategy Declining sales Payment conflicts Why Agencies Lose Clients © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Referrals How Agencies Gain Clients © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Solicitations Presentations Public Relations Image, Reputation

Direct mail Direct mail Database management Database management Research Creative Media services Creative Media services Research Direct mail Direct mail Database management Database management Direct-Marketing Agency Activities © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Direct- Marketing Agencies Direct- Marketing Agencies Production

Catalog productions Catalog production Promotional planning Creative work and research Tie-in coordination Fulfillment Premium design and manufacturing Fulfillment Tie-in coordination Creative work and research Promotional planning Contest/sweepstakes management Activities Performed by Sales Promotion Agencies © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Strategy development Generating publicity Lobbying Public affairs Damage control Image portrayal Functions Performed by Public Relations Firms © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Program planning

Web banner ads Web banner ads Search engine optimization Kiosks Search engine optimization Functions Performed by Interactive Agencies © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Interactive Media Creation CD-ROMs Web sites Text messages Web sites Text messages

Planning and implementing research Information application Analysis and interpretation Primary data collection qualitative & quantitative Primary data collection qualitative & quantitative Secondary data collection Primary data collection qualitative & quantitative 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 Internal turf battles Agency egos Fear of budget reductions Consistent execution Measuring campaign success Obstacles to Implementing IMC © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Compensation