1. Canadian Advertising in Action
Chapter 2
The Advertising Industry
© 2006 Pearson Education Canada Inc.

2. Learning Objectives Identify organizations in ad industry
Identify & describe advertising management systems
Identify roles & responsibilities of clients
Describe roles, responsibilities, & types of agencies
Discuss relationships between clients & agencies
Outline structure of agencies & functions of personnel
Identify key concepts in managing client’s business
Identify methods of compensation for agencies
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3. Industry Participants
Advertisers
ACA
Agency
ICA
Production Firms
Media
Broadcasters
Print
Out-of-Home
Direct
Internet
The industry is comprised of three main groups:
1. Advertisers - they are represented by the Association of Canadian Advertisers (ACA). The ACA advances the interests of advertisers.
2. Agencies - they are represented by the Institute of Canadian Advertising (ICA). The ICA acts on behalf of agencies as spokesperson, negotiator and defender of advertising.
3. Media - three broad categories: broadcast, print and out-of-home.
There are a host of support service groups including media support services and research and audience measurement companies.
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4. Client Side Management
Brand and Category Management
Regional Management
Global Management
A variety of management systems are used by clients. The most common is the brand management and category management system where a brand manager (category manager) is responsible for all aspects of marketing planning including advertising.
Some firms employ alternate systems (e.g., ad plans are planned nationally with regional plans added into the mix).
Some clients who are global in nature are using advertising strategies devised in other parts of the world. Good ideas should be considered for use in Canada regardless of their point of origin. This occurrence will put additional strain on Canadian agencies and the client-agency relationship.
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5. Client Role and Responsibility
1. Ad planning and budgeting
2. Advertising coordination
3. Monitoring program implementation
4. Evaluation (effectiveness)
5. Liaison with agency
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6. Agency Role and Responsibility
1. Experience / expertise in communications
2. Strategic planning assistance
3. Objectivity in preparing strategy
Clients are not experts in advertising (though they like to think they are). The agency provides the expertise needed to devise and implement a campaign.
The agency also acts as an external consultant who can develop strategies in the best interests of the client without getting bogged down in internal politics of the client organization. Their goal is to present objective campaigns that will satisfy the client’s customers.
© 2006 Pearson Education Canada Inc.

7. Agency - Client Relationships
Key to business success depends on:
A healthy and prosperous client-agency relationship
A partnership that encourages open and honest communications
Trust and respect for each other
The client-agency relationship is more than a business partnership. A better analogy would be a marriage. All of the characteristics of a good marriage are basically the same as those that should be present in a good client-agency relationship.
The nature of the client-agency relationship is changing in today’s marketplace. Long-term relationships are becoming the exception rather than the norm. Clients are seeking out new and different agencies and assigning them specific tasks which are often short-term in nature or one time efforts.
The state of client-agency relationships is a concern to all in the industry.
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8. Account Shifting
Client-agency relationships sour for a variety of reasons:
Quality of ads or service provided
New communications demands not adequately served
Philosophical differences
Lack of team concept
Client consolidates advertising with fewer agencies
Conflict situations
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9. action item Read the ‘action’ item on page 44 of the text.
Visit Marketing Magazine online and prepare to discuss other articles that comment on client-agency relations.
© 2006 Pearson Education Canada Inc.

10. Types of Ad Agencies
Services required by client determine the type of agency they work with.
Full Service
Creative Boutiques
Media Buying Service
Other Specialists: Direct and Interactive
A full-service agency usually provides a broad range of services whereas boutiques and media buying services offer specialization in a particular area.
Have students discuss the merits of generalization versus specialization. Which is better and what factors does it depend upon?
Full-service agencies are trying to offer specialization. Many are diversifying or acquiring smaller agencies that offer the specialization that their clients are looking for.
© 2006 Pearson Education Canada Inc.

11. The Full Service Agency
Account Management
Creative
Media
Research
Direct Response PR
Full
Service
Agency
The key areas of a full service agency are account management,creative and media. Other services may or may not be offered. Very often additional client needs can be met through affiliated or subsidiary agencies.
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12. Functional Areas of the Ad Agency
Account
Management
Creative
Department
Media
Department
Business & Marketing Orientation
Conceptual & Creative Orientation
Analytical & Strategic Orientation
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13. Account Management Account Director Account Supervisor Account
This chart reflects junior, mid, and senior level management positions. Successful college and university graduates should pursue entry level jobs in advertising.
The account executive is the day-to-day contact with the client. His or her job is to motivate agency resources to turn out the best possible work for the client.
Account supervisors are responsible for a roster of clients as well as a group of account executives.
Account
Executive
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14. Creative Department Creative Director Art Copywriter Director
The copywriter prepares a persuasive sales message and is responsible for the verbal components: headline, subheadline, body copy and signature.
The art director develops the visual component (drawing or photograph).
The copywriter and art director work together as a team.
Creative director oversees the team. Team develops creative concept.
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15. Media Department
Media department plans media strategy & places messages with media. A media director heads up the department.
Media Planner
Media Buyer
Media Supervisor
The media department is responsible for planning and placing advertising time and space.
Media planners assess the strengths and weaknesses of the various media in order to develop a media plan.
A media buyer evaluates and makes decisions about competitive claims of the various media in order t make an efficient and effective media buy for clients. The buyer must possess sound negotiating skills to secure the best rates possible.
© 2006 Pearson Education Canada Inc.

16. Managing the Client’s Business
1. Agency Teams
Account Exec / Supervisor
Art Director / Copywriter
Media Planner / Media Buyer
Advertising accounts are managed using a team concept. Typically, the team stays together for an extended period. Familiarization with the client’s business and sound working relationships are the keys to success for both the client and the agency.
In advertising an agency cannot handle accounts which compete with one another. Very often an agency is dismissed because of mergers and acquisitions by advertisers. When brands from two different companies merge conflict situations usually arise. The sensitivity of information and the potential for information to get into the wrong hands are a few reasons to avoid conflicts.
Some clients are reevaluating this practice. They recognize that they often lose valuable agency talent when conflict situations occur.
The agency of record is the agency that is responsible for placing media time and space for clients who use more than one agency.
2. Competing Accounts
3. Agency of Record
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17. The Creative Boutique Creative Boutique Specialist
Creative concept development (message ideas)
Staffed by ex-FSA personnel
Creative
Boutique
The creative boutique is a message specialist. Their only concern is the development of good creative. Typically, they are staffed by experienced copywriters and art directors formerly employed by full-service agencies.
© 2006 Pearson Education Canada Inc.

18. Media Buying Service Media Buying Service Media Planning Media Buying
Media Research
The media buying service offers the necessary experience to develop efficient and effective media plans for their clients. In effect, they are responsible for managing a very scarce resource: money. Their job is the get the most for the least for their clients. They claim they can do so.
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19. The Agency of Record Media Agency B Agency C Agency A (AOR) Client
The Agency of record is the central agency responsible for media negotiation and placement for a multi-product client that uses more than one agency. Typically, a large client will divide its business between several agencies, thus creating a need for an agency of record. It is kind of a competitive situation as each agency used by the client would like to be the agency of record.
Flow of creative information
Flow of media information
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20. Agency Compensation Commissions: Standard Commission Rate (15%)
Reduced Rate Commissions
Agencies are compensated either by some form of commission or fees. Traditionally, the agency commission rate has been 15%. In recent years clients have tightened their belts and are demanding that agencies work for less commission.
Presently, reduced rate commissions are more common than the traditional commission rate. This has placed a strain on agencies who were already operating on a very tight profit margin. In some cases incentives have been included t stimulate stronger agency performance and accountability in the advertising process. In other words, the agency reaps the rewards when the advertising produces the desired results. They earn less if results are not achieved.
© 2006 Pearson Education Canada Inc.

21. Agency Compensation Fee System: Minimum Guarantees Hourly Rates
Costs Plus Profit
A variety of fee systems are available. In comparison to commissions they are harder to keep track of (the system requires significant record keeping). From a client’s perspective however, they are paying only for the actual services they receive from the agency.
In comparison, when a commission system is in effect, agencies are sometimes accused of recommending expensive media like television to their clients, so their actual commissions remain high (e.g., 15% of a television budget may amount to much more than 15% of a print budget).
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22. Agency Compensation Payment by Results:
Usually a reduced rate percentage plus incentives for achieving goals
Typical goals may be brand market share, advertising effectiveness and advertising recall
© 2006 Pearson Education Canada Inc.