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

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

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

Participants in the IMC Process

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Marketing communications specialist organizations

Marketing communications specialist organizations

Media organizationsMedia organizations

Advertiser (Client)Advertiser (Client)

Advertising agencyAdvertising agency

Collateral servicesCollateral services

Direct-response agencies

Direct-response agencies

Sales promotion agencies

Sales promotion agencies

Interactive agencies

Interactive agencies

Public relations

firms

Public relations

firms

Advertising Department UnderCentralized System

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PresidentPresident

ProductionProduction FinanceFinance MarketingMarketingResearch

and develop-

ment

Research and

develop-ment

Human resourcesHuman

resources

AdvertisingAdvertising Marketing research

Marketing research SalesSales Product

planningProduct planning

Fewerpersonnel

Fewerpersonnel

Bettercommunications

Bettercommunications

Continuityof staff

Continuityof staff

Longerresponse time

Longerresponse time

Less goalinvolvementLess goal

involvementLess goal

involvementLess goal

involvement

Longerresponse time

Longerresponse time

Pros & Cons of Centralization

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TheCentralized

System

TheCentralized

System

+ Positive+ Positive - Negative- Negative

Can’t domultiple product

lines

Can’t domultiple product

linesMore top management involvement

More top management involvement

Better communications

Better communications

Fewer personnelFewer

personnel

Continuityof staff

Continuityof staff

More top management involvement

More top management involvement

Decentralized Brand Management System

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Production Finance

Sales

Brandmanager

Ad agency

Brandmanager

Ad agency

Productmanagement

Salespromotion

Packagedesign

Merchandising

Advertising department

Marketingresearch

Marketingservices

MarketingResearch

anddevelopment

Humanresources

Corporate

Internal conflicts Internal conflicts Internal conflicts Internal conflicts

Ineffective decision making

Ineffective decision making

Ineffective decision making

Ineffective decision making

Rapid problemresponse

Rapid problemresponse

Concentratedattention

Concentratedattention

Increasedflexibility

IncreasedflexibilityIncreasedflexibility

Increasedflexibility

Rapid problemresponse

Rapid problemresponse

Concentratedattention

Concentratedattention

Pros & Cons of Decentralization

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TheDecentralized

System

TheDecentralized

System

+ Positive+ Positive - Negative- Negative

Misallocation of funds

Misallocation of funds

Lack ofAuthorityLack of

Authority

Misallocation of funds

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

MorecontrolMore

control

CostsavingsCost

savings

Bettercoordination

Bettercoordination

Lessobjectivity

Lessobjectivity

Lessexperience

Lessexperience

Lessobjectivity

Lessobjectivity

Lessexperience

Lessexperience

Bettercoordination

Bettercoordination

MorecontrolMore

control

CostsavingsCost

savings

Pros & Cons of In-House Agencies

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TheIn-houseAgency

TheIn-houseAgency

+ Positive+ Positive - Negative- Negative

Lessflexibility

Lessflexibility

Benetton’s In-House Agency Works With Outside Agencies to Develop Ads

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ArtistsArtists

Ad Agencies Have Skilled Specialists

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WritersWriters ResearchersResearchers

PhotographersPhotographers Media AnalystsMedia Analysts Other SkillsOther Skills

Crispin Porter+Bogusky Found Creative Ways to Advertise the Mini

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Creating advertisingCreating

advertising

Planning advertisingPlanning

advertising

Producing advertisingProducing advertising

Performing research

Performing research

Selecting mediaSelecting media

Sales promotions

Sales promotions

Strategic market planning

Strategic market planning

Direct marketing

Direct marketing

Interactive capabilitiesInteractive capabilities

Planning advertisingPlanning

advertising

Creating advertisingCreating

advertising

Producing advertisingProducing advertising

Performing research

Performing research

Selecting mediaSelecting media

Strategic market planning

Strategic market planning

Sales promotions

Sales promotions

Direct marketing

Direct marketing

Package designPackage designPackage designPackage design

Full-Services Agencies

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Full range of marketing

communication and promotion

services

Full range of marketing

communication and promotion

services

Nonadvertising services

Nonadvertising services

Public relations and publicity

Public relations and publicity

Interactive capabilitiesInteractive capabilities

Typical Full-Service Agency Organization

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WritersArt directors

TVproduction

Traffic

Printproduction

VP creativeservices

Accountexecutive

Accountsupervision

VP accountservices

Media Research Salespromotion

VP marketingservices

Personnel

Accounting

FinanceOfficemanagement

VP managementand finance

President

Board ofdirectors

Services Provided by Agencies

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Agency ServicesAgency 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

Marketing Services

Account Service

Account Service

Creative ServicesCreative Services

Marketing Services

Marketing Services

Account Service

Account Service

The Role of Creative Boutiques

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CreativeBoutiquesCreative

Boutiques Provide only creative servicesProvide only creative services

Full-service agencies may subcontract with creative

boutiques

Full-service agencies may subcontract with creative

boutiques

Provide only creative servicesProvide only creative services

Full-service agencies may subcontract with creative

boutiques

Full-service agencies may subcontract with creative

boutiques

Ability to turn out inventive creative work quickly

Ability to turn out inventive creative work quickly

Specialize in buying media, especially broadcast time

Specialize in buying media, especially broadcast time

Agencies and clients develop media strategy

Agencies and clients develop media strategy

Agencies and clients develop media strategy

Agencies and clients develop media strategy

Specialize in buying media, especially broadcast time

Specialize in buying media, especially broadcast time

Media Buying Can Be Specialized

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Media Specialist Companies

Media Specialist Companies

Media buying organizations implement the strategy and

buy time and space

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

Commissionsfrom media

Fee, cost, and incentive-based

systems

Fee, cost, and incentive-based

systems

Percentagecharges

Percentagecharges

Commissionsfrom media

Commissionsfrom media

Fee, cost, and incentive-based

systems

Fee, cost, and incentive-based

systems

Methods of Agency Compensation

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CompensationMethods

CompensationMethods

Young & Rubicam has handled Dr Pepper for over 30 years

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Foote, Cone & Belding was the agency for Levi’s for 68 years

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Poorperformance

Poorcommunications

Unrealisticdemands

Personalityconflicts

Personnelchanges

Changesin size

Conflict ofinterests

Changesin strategy

Decliningsales

Paymentconflicts

Policychanges

Poorperformance

Poorcommunications

Unrealisticdemands

Personalityconflicts

Personnelchanges

Changesin size

Conflict ofinterests

Changesin strategy

Decliningsales

Paymentconflicts

Why Agencies Lose Clients

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The US Army Changed Advertising Agencies and Campaigns

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ReferralsReferrals

How Agencies Gain Clients

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SolicitationsSolicitations

PresentationsPresentations

Public RelationsPublic Relations Image, ReputationImage, Reputation

A Change in Strategy Led to a Change in Gateway’s Advertising and Agency

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Directmail

Directmail

Databasemanagement

Databasemanagement

ResearchResearch

CreativeCreative

Media servicesMedia services

CreativeCreative

Media servicesMedia services

ResearchResearch

Directmail

Directmail

Databasemanagement

Databasemanagement

Direct-Marketing Agency Activities

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Direct-MarketingAgencies

Direct-MarketingAgencies

ProductionProduction

Catalog productionsCatalog productionsCatalog productionCatalog production

Promotional planningPromotional planning

Creative work and researchCreative work and research

Tie-in coordinationTie-in coordination

FulfillmentFulfillment

Premium design and manufacturing

Premium design and manufacturing

Premium design and manufacturing

Premium design and manufacturing

FulfillmentFulfillment

Tie-in coordination Tie-in coordination

Creative work and researchCreative work and research

Promotional planningPromotional planning

Contest/sweepstakes management

Contest/sweepstakes management

Activities Performed by Sales Promotion Agencies

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Strategydevelopment

Generatingpublicity

Lobbying

Publicaffairs

Damagecontrol

Imageportrayal

Strategydevelopment

Generatingpublicity

Lobbying

Publicaffairs

Damagecontrol

Imageportrayal

Functions Performed by Public Relations Firms

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Programplanning

Webbanner ads

Webbanner ads

Search engine optimization

Search engine optimizationKiosksKiosks Search engine optimization

Search engine optimization

Webbanner ads

Webbanner ads

Functions Performed by Interactive Agencies

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Interactive Media Creation

Interactive Media Creation

CD-ROMsCD-ROMsCD-ROMsCD-ROMs

Web sitesWeb sites Text messagesText messagesWeb sitesWeb sites Text messagesText messages

Planning and implementing

research

Planning and implementing

research

Planning and implementing

research

Planning and implementing

research

Information application

Information application

Analysis and interpretationAnalysis and interpretation

Primary data collection

qualitative & quantitative

Primary data collection

qualitative & quantitative

Secondary data collection

Secondary data collection

Primary data collection

qualitative & quantitative

Primary data collection

qualitative & quantitative

Analysis and interpretationAnalysis and interpretation

Information application

Information application

Marketing Research Companies

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

ConvenienceConvenience

Greater synergyGreater synergy

Single image for product or serviceSingle image for

product or service

Poor communication

Poor communication

Budget politicsBudget politics

Poor communication

Poor communication

Budget politicsBudget politics

Single image for product or serviceSingle image for

product or service

ConvenienceConvenience

Greater synergyGreater synergy

Pros & Cons of Integrated Services

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

Integrated Services

Integrated Services

+ Positive+ Positive - Negative- Negative

No synergyNo 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 elementsto handle

Internalturf battles

Agency egos

Fear of budgetreductions

Consistentexecution

Measuringcampaignsuccess

Many elements to handle

Internalturf battles

Agency egos

Fear of budget reductions

Consistentexecution

Measuring campaign

success

Obstacles to Implementing IMC

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Compensation