The Business of Advertising

Chapter 03

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives

• LO1 List the various groups in the advertising business and explain their relationship to one another.

• LO2 Discuss the differences between local, national, and transnational advertisers.

• LO3 Explain how advertisers organize themselves to manage their advertising both here and abroad.

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Learning Objectives

• LO4 Define the main types of advertising agencies.

• LO5 Explain the range of tasks people perform in an ad agency and an in-house advertising department.

• LO6 Discuss how agencies get new clients and how they make money

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The Advertising Industry

• The advertising Industry has four distinct groups– Advertisers

• companies that sponsor advertising

– Advertising Agencies• organizations that specialize in advertising

– Suppliers• those who supply photography, design, etc

– Media• newspapers, TV & radio stations, etc

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Advertisers

Differences between Local & National AdvertisersNational Local

Focus BrandMarket ShareStrategiesMarkets

LocationVolumeTacticsConsumers

Time Long-Term campaigns Short-Term ads

Resources $5-$10 million +Many specialists

Less than $1 millionA few generalists

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Advertisers

• How large companies manage their advertising– Centralized• single department often located at corporate HQ

– Decentralized• separate departments for different brands, products, etc• separate departments by region

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Agencies

• Geographic Scope of Agencies– Local Agencies– Regional Agencies– National Agencies– International

AgenciesMcDonald’s helps to celebrate an Islamic observance. Sensitivity to the diversity of worldwide cultures &beliefs is important for a global advertiser’s success

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Agencies

• Types of Agencies– Full Service Agencies• provide advertising & non-advertising IMC services

– General Consumer Agencies• focuses on consumer accounts• Includes agency groups and entrepreneurial agencies

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Agencies

• Types of Agencies– Business-to-Business Agencies

• focus on clients in the B2B market

– Creative Boutiques• creative specialists that work for advertisers and agencies

– Media Buying• specialize in purchasing and packaging radio & TV time

– Interactive Agencies• specialize in advertising in digital interactive media

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Agencies

• What People do in an Agency– Creative Concepts & Advertising Production

• Turning the creative concepts into visual, verbal and written communication that help deliver the advertising message

– Traffic Management• Ensuring deadlines is met and project management works

smoothly

– Additional Services• in full-service agencies: PR, sales promotions, etc

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Agencies

• In-House Agencies– Agency owned by an advertiser as a subsidiary• Saves money• more control over advertising• faster turnaround• may be less creative• potential loss of objectivity

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Suppliers

• Suppliers– Art Studios & Web Designers– Printers – Film & Video Houses– Research Companies

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Media

• Media– The medium carries an advertiser’s message.

– It’s a vital connection between advertiser and consumer

– Media refers to both the channels of advertising communication & other communication vehicles.

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Media

• 6 Categories of Media– Print– Electronic– Digital interactive– Out-of-home– Direct mail– Other media

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The Advertising Industry

• Current Trends– Industry Consolidation– Changes in Compensation– New Media– Economic Issues– Category Overlap

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