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Table of ContentsExecutive Summary ...................................................................................................................... 1 I. Introduction............................................................................................................................ 2
II. Contents .................................................................................................................................. 3 1. The role of advertising for IBM in general and in Vietnam .................................................. 3 a. Role of advertising ............................................................................................................ 3
b. Advertising campaigns of IBM in globe and in Vietnam ................................................. 5 2. Branding strategy of IBM .................................................................................................... 10 a. b. Overview of branding..................................................................................................... 10 IBM brand management in globe and in Vietnam ......................................................... 12
3. The creative aspects of advertising of IBM ......................................................................... 17 4. Ways of working with advertising agencies ........................................................................ 22 a. b. Advertising agency......................................................................................................... 22 Ways of working with advertising agency of IBM ........................................................ 24
III. Conclusion ............................................................................................................................ 26 Appendix ...................................................................................................................................... 27 References .................................................................................................................................... 32
Executive SummaryThis report is commissioned to examine the importance of advertising towards International Business Machines Corporation (IBM) over the period from 1993 to 2006. The research draws attention to the role of advertising, the aspects of brand management, the importance of creative strategies and the ways of working with advertising agency of IBM through the analysis of 6 major advertising campaigns, including: Solutions for a Small Planet (1995), E-business (1997), ON Demand, The Other IBM (2005), Help Desk (2005) and Innovations That Matters (2006). The report concludes that with its effective advertising strategies, IBM has successfully raised the company profile, balanced its brand name and experienced strong growth in both revenue and profits.
IntroductionInternational Business Machines Corporation (IBM) is an American multinational
technology and consulting corporation, with headquarters in Armonk, New York, United States. UBM manufactures and markets computer hardware and software, and offers infrastructure, hosting and consulting services in areas ranging from mainframe computers to nanotechnology. IBM has 12 research laboratories worldwide and, as of 2012, has held the record for most patents generated by a company for 19 consecutive years. It is the largest technology and consulting employer in the world, with approximately 440,000 employees serving clients in 170 countries. The company operates its business through five segments: Global Technology Services, Global Business Services, Software, Systems & Technology and Global Financing. IBM offers a wide range of technology and consulting services; a broad portfolio of middleware for collaboration, predictive analytics, software development and systems management; and the world's most advanced servers and supercomputers. Utilizing its business consulting, technology and R&D expertise, IBM helps clients become "smarter" as the planet becomes more digitally interconnected. This includes working with organizations and governments to build systems that improve traffic congestion, availability of clean water, and the health and safety of populations. In 2012, Fortune ranked IBM the #2 largest U.S. firm in terms of number of employees (433,362), the #4 largest in terms of market capitalization, the #9 most profitable, and the #19 largest firm in terms of revenue. Globally, the company was ranked the #31 largest in terms of revenue by Forbes for 2011. Other rankings for 2011/2012 include #1 company for leaders (Fortune), #1 green company worldwide (Newsweek), #2 best global brand (Interbrand), #2 most respected company (Barron's), #5 most admired company (Fortune), and #18 most innovative company (Fast Company).
ContentsThe role of advertising for IBM in general and in Vietnam a. Role of advertising Advertising can be defined as any paid form of non-personal promotion transmitted
through a mass medium. The sponsor should be clearly identified and the advertisement may relate to an organization, a product or service (source: Advertising and Promotion, BBP Professional Education). Advertising is a non-personal communication, in that it has to speak to a large number of people, so the message has to be clear for all the target audience to understand. Therefore, before the message is sent, the advertiser must consider how the audience will interpret and respond to it. The following diagram shows the major decisions that need to be taken when developing advertising strategy.
Figure 1 - Developing advertising strategy (Source: Jobber, 2007)3
Principal benefits of advertising: Reach mass audiences quickly Effective targeting Low unit cost Economical, efficient and effective at reaching large audiences Repetition means that a brand positioning concept can be communicated effectively
Advertising is the best-known and most widely discussed form of promotion, probably because of its pervasiveness. There are several reasons why advertising is such an important part of many marketers promotional mixes. Advertising can be used for the following purposes: To help the sales force to open sales To inform: Telling the market about a new product. Suggesting new uses for a product. Informing the market of a price change. Explaining how the product works. Describing available services. Correcting false impressions. Reducing buyers' fears. Building a company image. To persuade: Building brand preference. Encouraging switching to your brand and promoting specific brand. Changing buyer perceptions of product attributes. Persuading buyers to purchase now. Persuading buyers to receive a sales call. To remind: Reminding buyers that the product may lie needed in the near future. Reminding buyers where to buy the product. Keeping the product in buyers' minds during off seasons. Maintaining top-of-mind product awareness. To counteract competitors promotional activities: Often used to counteract a4
possible loss in market share due to a new competitor entering the market.
The nature and purpose of advertising differ from one industry to another and/or across situations. The targets of an organizations advertising efforts often vary, as do advertisings role and function in the marketing program. One advertiser may seek to generate immediate response or action from the customer; another may want to develop awareness or a positive image for its product or service over a longer period. b. Advertising campaigns of IBM in globe and in Vietnam In the 1970s and 80s IBM was one of the most successful companies in the world. However, IBM fell behind in technology and stuck to mainframes during the 90s, its competitors took over the industry. Flexible competitors could offer lower prices, and IBM had developed into inefficient bureaucracy. To overcome the problem, IBM developed 6 major campaigns with different objectives, as following. Campaign Solutions for a Small Planet (January 1995) Marketing tactics and objectives - Communication goal: Delivery message that IBM can manage information anywhere, anytime, for anyone - A video showing people in different parts of the world discussing IBM computers in their own language - Targeted C-level Executives - IBM wanted to be known as the provider of solutions, the goal was to convey that IBM was capable of solving business problems, not just hardware and software issues E-business (1997) - IBM wanted to position itself as the best provider of end to end solutions for e-business - Contained several sub-campaigns: e-culture, e-business people and ebusiness tools. From Dinosaur to E-Commerce Animal: Black & White TV ads, IBMs blue logo, Slice of Business Scenes, Testimonials, Newspaper ads - Umbrella campaign related all communication messages with online relationship ON Demand - Increasing focus on Business Service Market - Red button and Demand Business, ON is about getting your company to5
work better - Acquisition of Price Waterhouse Cooper in 2002 The Other IBM (April 2005) Help Desk (2005) - Designed to reposition company - Used imagery with scenes of King Arthurs Knights of the Round Table - Communication objectives: Show how IBMs on demand computing solves real problems and touches real people Innovation That Matters (March 2006) - Wanted to position IBM as a mean for companies to change how they do business when evaluating ways to grow - Tagline: What make you special?
Exhibit 1 E-business innovators TV in 1999 Regarding to the E-Business campaign, there were clear evidences of IBMs success after launching this campaign. First, the key objective of creating awareness for the term e business was achieved as awareness doubled from fourth quarter 1997 to second quarter 1999, based on IBMs Global Brand Tracking Study among IT decision makers in five major markets (United States, United Kingdom, Germany, Japan and Brazil). They found that the term ebusiness demonstrated exponential growth in usage. This was evidence that the term rapidly became a part of the businesss world vocabulary. Second, at that time research showed that people were four times more likely to associate the term e-business with IBM than its nearest6
competitor, Microsoft. Third, as a result of advertising, preference to do business with IBM increased 45% among IBMs target audiences over the same time period. In 2005, IBM set upon a mission to expand market perception of its brand beyond technology to include business consulting. IBM recognized a market opportunity to transform business processes such as HR, Finance & Administration, and Sales & Marketing, among others, which would help make businesses more efficient and productive. To increase awareness and consideration for its business process capabilities among C-level and senior executives, a global, integrated marketing effort was launched that included television, print, Web, out-ofhome advertising, direct marketing, events, interactive, sales enablement, and internal communications. The Other IBM campaign clearly demonstrated IBMs business acumen, significantly increasing awareness of IBM as a provider of business consulting and gaining credibility for IBM in this area without negatively impacting its strong technology heritage.
Exhibit 2 The other IBM PRINT (Sales and Marketing services)
Exhibit 3 The other IBM PRINT (Innovation Strategy)7
IBMs new integrated marketing campaign illustrates how Innovation That Matters is the key to getting and staying special and why IBM is the company most capable of helping clients create value and competitive advantage through innovation. The advertising campaign provides an opportunity to tell the entire IBM story. It is not only IBMs technology leadership but its business leadership, and the ability to integrate both of those to provide real value to clients.
Exhibit 4 Out-of-home advertisings (Innovation That Matters campaign) One goal of the campaign is to cut through the clutter of innovation messages from other companies because IBMs view is, in fact, quite different. Innovation is very different from product invention. Another goal is to create differentiation for IBM and make it harder for competitors to respond to the capabilities that we have. It is important to understand that the campaign is NOT seeking position IBM as the most innovative company. The entirety of the advertising is about the end result for the customer, and the campaign will feature IBM clients prominently. The advertising stresses that while every company does things differently, there is one thing that can make any company special. It is the one thing that IBM understands better than any other company in the world: Innovation is the key to getting and staying special.8
It can be seen that IBMs advertising campaigns changed too often over the past 11 years. The changes were not made because the campaigns were not working well, but it was an intentional evolution in the advertising message IBM wanted to communicate with its customers. With the help of those advertisement campaigns, IBM was trying to acquire a reputation as the company that others turn to for their technology needs. The transformation of IBM was one of the greatest comebacks in corporate history. In 2005, IBM has more than $91 billion in sales and a profit of nearly $8 billion. In 2006, IBM ranked 3rd most valuable brand in the world with a brand value above $56 billion. IBM established a representative office in Vietnam in 1994 and in 1996 was given a license to operate as a wholly Foreign Owned Enterprise, IBM Vietnam, the first company permitted to do so. The marketing strategy in Vietnam reveals a number of key elements. Broad branding promotion and advertising activities are mostly done on a regional basis. It is more likely to see an advertisement for IBM consultancy and customer network and other solutions on Bloomberg, CNN, and on Korean channel than on local Vietnamese TV. The thinking is that high-level decision makers are watching these TV services, rather than local TV, and regional branding enhances consistency of message and is corporate Head-Office controlled. The focus of marketing and advertising activities within Vietnam is on Customer Relationship Management (CRM) in the areas of likely customers such as banks, State-owned enterprises, government ministries (i.e. the Ministry of Finance), international companies and small and medium enterprises. This is quite different from the earlier days when IBM was also targeting users of desktop and laptop computers. IBM is positioning itself to be a comprehensive service provider in its core business area and also to differentiate itself from its competitors. To achieve this, a number of carefully planned marketing tactics are typically used, such as workshops with CEOs to brief them on trends, innovation and technology developments; and seminars with insurance and bank executives to discuss system solutions. While the CRM focus in Hanoi is often on smaller customer groups, or segment-specific, Ho Chi Minh City marketers are more comfortable to attend mass marketing events. To a large extent it could be said that marketing activities are aimed at converting strategies into sales. Other marketing activities focus on corporate affairs and community relations, handled by a special division located in Hanoi.
In 2008, IBM developed its Smarter Planet Strategy in Vietnam, aimed at energy saving technologies and systems. IBM also created an advertising campaign to support its Smarter Planet agenda. This began with a series of ads with essays about transforming the worlds most important systems such as food, energy, transportation, healthcare, education, and banking. In 2008 and 2009, IBM ran a series of full-page advertisements in newspapers. Each of these "op-ads" featured an essay about a system or industry that IBM claims can be made "smarter" through the application of technology. There was also a game called "RUNTIME" has been installed since 2009, where you could record your own images in the park, and play the game online. 2. Branding strategy of IBM a. Overview of branding Branding is the process by which companies distinguish their offerings from the competition. By developing a distinctive name, packaging and design, a brand is created (source: Advertising and Promotion, BBP Professional Education). A brand is a name, term, sign, symbol, design or a combination of these, which is used to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors (source: Kotler. P, Principle of Marketing). A brand can deliver up to four levels of meaning: Attributes. A brand first brings to mind certain product attributes. Benefits. Customers do not buy attributes, they buy benefits. Values. A brand also says something about the buyers' values. Personality. A brand also projects a personality. Choosing a brand name for a product is important from a promotional perspective because brand names communicate attributes and meaning. Brand identity is a combination of many factors, including the name, logo, symbols, design, packaging, and performance of a product or service as well as the image or type of associations that comes to mind when consumers think about a brand. A good brand name should: Evoke positive association Be easy to pronounce and remember10
Suggest product benefits Be distinctive Use numerals when emphasising technology Not infringe an existing registered brand name A powerful brand has high brand equity. Brand equity is the value of a brand, based on the extent to which it has high brand loyalty, name awareness, perceived quality, strong brand associations, and other assets such as patents, trademarks and channel relationships (source: Kotler. P, Principle of Marketing). Brand equity allows a brand to earn greater sales volume and/or higher margins than it could without the name, providing the company with a competitive advantage. The strong equity position a company and/or its brand enjoys is often reinforced through advertising. The brand acts as a common point of contact between the producer and the consumer, as shown in Figure 2.
Figure 2 - Brands as a contact point (source: Jim, B., Essentials of Marketing, 2005)11
Strong brands are important because they: enhance company value positively affect consumer perceptions and preferences act as a barrier to competition because of their impact on consumer perceptions and
preferences produce high profits through premium prices and high market share provide the foundation for brand extensions act as a form of quality certification, which aids the consumer decision-making
process build trust among consumers
Strong brands can be built by: building quality into the core product creating a unique position in the marketplace based on an analysis of brand domain,
brand heritage, brand values, brand assets, brand personality and brand reflection repositioning to take advantage of new opportunities using well-blended communications to create a clear position in the minds of the
target audience being first into the market with a unique marketing proposition taking a long-term perspective using internal marketing to train staff in essential skills and to communicate brand
strategies so that they understand the company ethos on which the company brand is built There are three main brand name strategies: Family: A single brand name is used for all products. Individual branding: Each product is branded separately. Combination brand names: Combination brand names use both the family brand and
the individual product name. b. IBM brand management in globe and in Vietnam In the late 80s IBM went through a period when brand expression and design decisions were delegated to what were emerging as separate businesses. At the time, the result, very quickly, was a significant erosion of their brand image, brand identity, brand value and visual brand expressions. They had been able to rebuild the brand to be consistent with the new12
corporate strategy that Lou Gerstner spurred when he came to IBM as chairman and CEO. He determined that there would be much better positioned if they leveraged the collective strengths of the corporation and presented a single IBM. In 1993, IBM moved all of its advertising to Ogilvy & Mather whose goal was to keep the IBM brand fresh, interesting and topical. To overcome its brand personality as being "cold and aloof," IBM undertook extensive consumer surveys, consulted its history and culture, and mapped advertising promises in the market to revitalize its brand's image. These efforts resulted in new advertising campaigns portraying IBM's international reputation with the "Solutions for a Small Planet" campaign. These advertisements (ads) were meant to create a unified brand image of IBM around the world, while connecting everyone on this small planet. The campaign drew on the use of English subtitles to draw attention to the force of IBM in unifying the diversity of cultures on planet Earth. By allowing people to speak in their native tongues, the IBM ads suggested a respect and tolerance for diversity, while also claiming to provide the means of unifying ethnic, nationalist identities and language communities through the transnational, global presence of IBM. IBM depicted the process of globalization as linguistically contingent on the articulation of IBM as an "imagined community". The IBM ad elevated the imagined community to the transnational scene where the binding force now includes the 'language' of IBM itself. In this ad, IBM had turned its own advertisement into a space that represents the coming together of a global community. This weaving together of discourse parallels the metaphor of "weaving" people together via a "global web of computers." The technique signified a community of discourse, and it would appear to be a community based not on exclusion, but on universal access to the new means of production - IBM tools. This campaign was very successful, and was a huge step in restoring IBMs image.
Exhibit 5 - Solutions for a Small Planet In the late 90s the introduced the E-Business campaign (with the use of TV ads, magazine ads, newspaper ads and Internet ads). The advertising campaign planned to convince the world that the World Wide Web is a great place to make money and IBM hoped it will help it to shake off its image as a stodgy, but reliable, computer supplier to large corporations. This was a very good move as using the internet in some way is now a part of almost everyones daily activities. This campaign continued to connect the brand with being able to help people with their business needs. At that time, IBM's services business included IT consulting, business transformation, ebusiness, total systems management and strategic outsourcing. IBM also made a smart corporate branding decision as it moved more heavily into computer services. The sub-campaign EBusiness people was designed to showcase this range of capabilities as well as the IBM employees who bring varied skills to the marketplace. The new ads feature selected IBM Global14
Services employees who help companies succeed in fast-changing e-business environments. This was the way they had used to sell the brand inside the company. IBM knew that employees need to hear the same messages that you sent out to the marketplace. By weaving the brand messages into employees everyday experiences, managers can ensure that on-brand behavior becomes instinctive. In 1997, when IBM launched its E-Business campaign (which was widely credited for turning around the companys image), it chose to ignore research that suggested consumers were unprepared to embrace IBM as a leader in e-business. Although to the outside world this looked like an external marketing effort, IBM was also using the campaign align employees around the idea of the internet as the future of technology. The internal campaign changed the way the employees thought about everything they did, from how they named products to how they organized staff to how they approached selling. IBM executives said the e-business strategy brought employees together and made them realize that the company was back on its feet. The campaign was successful largely because it gave employees a sense of direction and purpose, which in turn restored their confidence in IBMs ability to predict the future and lead the technology industry. The type of two-way-branding that IBM did so successfully strengthened both sides of the equation. Internal marketing became stronger because it can draw on the same big idea as advertising. Consumer marketing became stronger because the messages were developed based on employees behavior and attitudes, as well as on the companys strengths and capabilities. After launching the campaign, the IBM brand also gained strength on e-business and Internet specific attributes. IBMs image improved significantly on the following core measures (time period fourth quarter, 1997 to second quarter, 1999): Leader in the development of e-business solutions: +62% IBM enables businesses to collaborate/share information efficiently: + 33% IBM helps companies to securely manage/publish/deliver information: +32% IBM helps companies to utilize the Internet to buy/sell products/services: +30%
Not shortly after IBM moved forward on the e-business campaign, many of their competitors tried to copy them and build upon their success. In addition, IBM segmented the mentions and associated the term with the IT firms mentioned, and found that IBM held a dominant position as well.15
Exhibit 6 Gizmos TV in 2002 In Vietnam, IBM has been practicing effective branding for several years now. For instance, IBM has co-branded with Intel in Vietnam since 2005. Intel is a quality producer of microprocessors. Therefore, IBM decided to develop an ingredient brand campaign: they sell their computers which have the Pentium chips from Intel inside. They believe that their computers would have higher perceived value if they featured Intel in their own marketing. Until now, the strategic alliance between IBM and Intel has continued to be a strong one which is mutual beneficial. In 2008, IBM launched Smarter Planet Strategy. Applying this smart strategy was indeed a tough challenge, as IBMs global branding team had to introduce it in 50 countries, including Vietnam. Smarter Planet expresses three Is: the world is and needs to best leverage the ways it is instrumented, interconnected and intelligent. The company put a lot of effort to implement the new brand strategy. The key idea is that all the IBM local market organizations across the globe are given permissions to create their own sales and public relations communications, provided they meet these three criteria look like, sound like and perform like IBM. In Vietnam, IBM has also developed a Little Blue Brand Book and a Managing the Brand intranet for Vietnamese employees. Since the company is so large and far-flung, its marketing executives believe that all employees need guidance on using IBMs valuable brand16
and its trademarks. They realize that theres a tendency for people to make decision without considering their collective impact. There is also an online Integrated Marketing Communications Solution Center in IBM Vietnam Company which provides information about existing advertising campaigns and a library of IBM photos and images to use in ads and brochures, as well as marketing intelligence on advertising by competitors such as Microsoft, Dell, and Hewlett-Packard. The goal is to keep everyone in tune with IBMs brand vision. IBM Vietnam will continue to transform itself as a leader in innovation, committed to bring value and development to improve its brand name. 3. The creative aspects of advertising of IBM One of the crucial elements in the communication process is the creative stance taken by the advertising agency when designing commercials for television and the artwork for posters and press. The creative aspects may well be the vital ingredient for success. For example, in TV commercial for The Other IBM campaign, they used a creative tactic such as the metaphorical King Arthurs Round Table commercial. They portrayed Arthur (King of Camelot) as a dark-age CEO eliciting advice from his board members (knights) on a series of timeless, but confounding administrative problems.
Exhibit 7 The Other IBM TV17
What do King Arthur and a modern CEO have in common? The first connection between King Arthur and a CEO is that both of them require a highly skilled workforce in order to accomplish their goals. King Arthur needed to recruit the top knights to sit at the Round Table. The CEO needs to recruit top people to sit around the table and develop the products and services that the company requires to be successful. The next is that this character from the mythical vanished past wrangle with the similar issues as 21st Century business, for instance, how do I find the right knight for the right job? Moreover, the print advertisements those were part of The Other IBM campaign were also held to the Camelot theme (see exhibit 8 and 9). The Other IBM positioned IBM away from hardware, software and other equipment sales and reinforces IBMs people.
Exhibit 8 The Other IBM PRINT18
Exhibit 9 The Other IBM poster
Exhibit 10 Help Desk TV (Traffic) Another example is in the Help Desk Campaign, there are a series of TV spots touching on relevant issues in business and society that IBM is helping with. A metaphor for IBM and its ability to help tackle tough problems in business, society, and the world at large with more complex questions about: social concerns, healthcare, banking, education, government dilemmas The creative concept overview is that there was a time when the Help Desk only answered questions about computers. People called about paper jams and software glitches. Questions were answered and problems were solved. However, the questions grew more complex. Soon, people began calling with even bigger questions: social concerns, environmental emergencies, thoughts on new energy, and the problems of humanity. Many of these problems were too big for any one person, organization, or government to solve. Then, something wonderful happened: IBM is the WORLD's Help Desk! They began to provide business19
solutions, helping ordinary companies become extraordinary. Word began to spread. People began calling with answers, available to all, with solutions for everyone. The creative places Help Desks in a large space to assist in conveying the breadth that is IBM. Different "helpists" are at the desks to assist people, communities, governments, and countries who are coming to IBM for help. People are encouraged to explore the expansive space of the Help Desk and learn how extensive IBM's role is in everyday life, today, and in the future. In 2006, IBM announced the start of a massive advertising campaign called "Innovation That Matters". It included TV, print, outdoor and Web advertising aimed at positioning the company as supplying the means for corporations to innovate structurally, financially and operationally.
Exhibit 11 - Website20
The creative work for this campaign was compelling. The website (see exhibit 11) integrated the thematic elements from the television spot (blue flowers, color scheme) and provided solid case studies as well as podcasts and reports for the CEO or business leader looking to spark innovation in company. This site solidly conveyed some of the brand benefits of working with IBM and makes the value proposition clear. The television spot called Anthem itself (see exhibit 11) is another example of very beautiful and creative advertising. The cinematography was exquisite: it opened with a view of a factor that looked like an oil refinery, highlighted against a deep blue sky. As the camera closed in on the factory, people could see blue flowers streaming from the smokestack, falling into the foreground. The sentiment permeated the Anthem ad, in which the flower petals seemed to inspire groups of men and women to sing along with an obscure Kinks song that speaks to the new positioning: "I'm Not Like Everybody Else." The Kinks song was electric and the effect of the lip-synching working masses was chilling. The spot ended with a series of questions that appear on screen in white type: "What makes you DIFFERENT? What makes you UNIQUE? What makes you SPECIAL?". Finally, people could see the IBM logo at the end. As entertainment, this spot grabs people attention and did not let go. People would particularly like the puzzling and mesmerizing effect of the floating blue flowers.
Exhibit 11 - Anthem
Ways of working with advertising agencies a. Advertising agency An advertising agency is a service business dedicated to creating, planning and handling
advertising (and sometimes other forms of promotion) for its clients. Advertising agencies provide a number of services to their clients. Among the major services are advertising plan development, the purchase of media space or air time, and acting as a liaison between a client and outside expert, such as artists, photographers, illustrators, typesetters, sound recorders and others. The agency provides objectivity and experiences for companies, individuals, and organizations wishing to advertise. Since advertising agencies have specialists and experts on staff, they may be better able to select media and create more effective commercials than the advertisers themselves. There are some major types of agency: In-house: an in-house agency is an advertising agency that is set up, owned, and operated by the advertiser. Full Service: provides a full range of services to its clients. Creative Boutiques: provide only creative services to clients. Industrial Agencies: provide advertising functions for industrial customers only; they specialize in trade or business-to-business advertising. Media Buying Services: purchase media for their clients.
Agency selection criteria: Services offered Planning, creative, research, integrated, international? Agency size How many clients, is it part of a group? Quality of work Past and present, any creativity or effectiveness? Relevant experience In market sector and promotional discipline? Competing accounts Are there any current or potential clashes or conflicts of interest? Cost What is the likely cost and method of remuneration? Location Is the agency conveniently located for meeting? Reputation Track record, working relationships and success? The structure of a large advertising agency is shown in Figure 3.
Figure 3 The structure of a large advertising agency (Source: Jobber, Principles and Practice of Marketing, 2001) Advertising agencies generate income in a number of ways. The followings are four of the major ways income is generated. Retainer: A monthly fee based on a pre-determined amount of time. Fees: Used by smaller agencies. Set prices are charged for work performed. The fee
is usually cost plus a profit margin set by the agency. Media Commissions: Recognized agencies are paid 15% commission by the media
for the purchase of advertising time or space. Mark-ups: Added on to the purchase of outside service (e.g., photographers, other agencies). These are approximately 20% above actual hard costs. Recently, the emphasis on agency accountability has increased. Agencies are being evaluated on both financial and qualitative aspects, and some clients are using incentive-based compensation systems that tie agency compensation to performance measures such as sales and market share.
b. Ways of working with advertising agency of IBM IBM decided to consolidate all of its worldwide advertising with the Ogilvy & Mather agency. Consider for a moment the economies of scale enjoyed by IBM. It costs IBM much less to create a single global advertising campaign than it would to create separate campaigns for dozens of markets. Since IBM uses only one agency for all its global advertising, it carries a lot of clout with the agency and can get the most talented people working on its behalf. Next, using only one advertising agency to handle all of its advertising can help the company to maintain tighter control over the process and more easily coordinate promotions with the firms overall marketing program. In addition, it can help to save the business valuable time. Finally, by consolidating all of its advertising with one agency, IBM would be able to present a single brand identity around the world. A global brand also benefits from being driven by a single strategy. However, there are some drawbacks also. Consolidating all advertising into one agency and developing a global advertising theme - often the cornerstone of the effort - can cause problems that outweigh any advantages. Cultural differences may make it hard to pull off a global campaign: even the best agency may have trouble executing it well in all countries. Furthermore, an advertising agency has many clients, and thus, using only one advertising agency, the focus might not always on IBM. The agency could adopt a one-size-fit-all strategy that is hard to adapt to IBMs needs. Limited creative thinking could be another disadvantage. Using more advertising agencies could provide the company more highly skilled individuals who are specialists in their fields with specific knowledge and experience. In Vietnam, a small business may make a different decision about advertising agency than that of IBM. Prior to the consolidation, IBMs advertising was handled by a network of approximately 40 different agencies around the globe. However, Vietnam small businesses, in particular, may not have their own marketing department and so may need the depth of expertise an agency can provide. Next, they may have to think about the likely costs that can occur in order to minimize the costs. Most agencies are given discounts by publishers, and radio and TV stations, so they can get cheaper rates than someone dealing directly. Moreover, IBM is a large company and they usually access to many researchers, artists, writers, film makers and other experts with many types of advertising to reach as many customers as possible. However, Vietnam small businesses with a tighter budget might want to specialize in one particular area of expertise only, such as online advertising, so they may choose a small advertising agency which24
can provide advertising know-how that they can afford to hire for themselves. This also can result in a poor marketing strategy. A small business in Vietnam might do not want to hire an advertising agency, and an alternative to using an agency is to use freelancers. Advertising writers, graphic designers, and other advertising professionals offer their services on a per-project basis. Vietnam small businesses can find these professionals on websites that specialize in representing freelancers. They will not have to pay a retainer, and they can monitor the freelancer's work to make sure it meets their standards.
ConclusionThe report has provided an understanding of the importance of advertising in the case of
IBM. The role of advertising, the branding strategy, the creative aspects of advertising towards IBM and the way it worked with advertising agency have been discussed and evaluated in details. With the effective brand restoration and advertising evolution, the company successfully overcame serious difficulties and made a great comeback story in the history of corporate America.
Big Blue PRINT
Solution for a Small Planet PRINT
ON Demand TV Advertising
ON Demand PRINT30
Help Desk PRINT
Innovation That Matters PRINT31
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