chapter03

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

The Business of Advertising

3-3

Chapter 3 Objectives

Explain how advertisers organize

Define the main types of ad agencies

Discuss clients and revenue

Explain what people do in ad agencies

Debate pros and cons of in-house agencies

Describe industry changes

Describe the various groups in advertising

Explain how suppliers and the media help

Discuss differences between local and

national advertisers

3-4

The Advertising Industry:Organizations

Advertisers (Clients)

Agencies

Media

Suppliers

3-5

The Advertising Industry:People

SalesTechnology

Research

Accounting

Communication Arts

Management

Law

Most are employed by advertisers, not clients

3-6

Advertisers:Local

Directed to customers in the same geographic area

Independent businesses

Govt. & nonprofits

Franchisees and dealers

Chain retailers

3-7

Advertisers:Local

Ad for Rubio’s Baja Grill showcases its unique products

Insert photo 4.2, p. 99

Baja Grill Burrito

Position = 2.9” horiz., 1.5” vertical

Size = 4.6” TALL

Resolution = 300 dpi

3-8

Advertisers:Local

Department structure for small advertisers with high volumes of work

Insert ex. 4-1, p. 100

Department structure for small advertisers

Position = 2.9” horiz., 1.5” vertical

Size = 4.6” TALL

Resolution = 300 dpi

3-9

Create favorable image, increase

awareness, foster goodwill

Recruit employees, offer

services, sell merchandise

Regular price-line, sale or clearance

Advertisers:Local

Types of local advertising

ClassifiedProduct Institutional

3-10

Advertisers:Local

Local ad for Michaels stores

3-11

Advertisers:Cooperative

Two key purposes

Build manufacturer’s brand image

Help distributors, dealers or retailers make more sales

3-12

Advertisers:Regional and National

A national ad for Dunkin’ Donuts

3-13

Advertisers:Regional and National

Regional: one or several states

National: several regionsor entire country

3-14

Advertisers:Regional and National

Comparison of national and local advertising

3-15

Advertisers:Regional and National

Centralized department structure

3-16

Decentralized department structure

Advertisers:Regional and National

3-17

Heinz ketchup ad from the Leo Burnett Group, Copenhagen

Advertisers:Transnational

3-18

Advertisers:Transnational

Decentralized international structure

Divisions have ad agencies to handle product lines

Brands within a line handled by own managers

Category managers for brand in each market

3-19

Advertisers:Global

Standardized approach in all countries

Extensive research to ensure ad is basic & universal

Centralized global structure

3-20

Media Around the World

International media

Foreign media

3-21

Agencies:Definition

Agencyroles

Develop marketing & ad plans

Develop ads & promotions

Purchase ad space and time

3-22

Agencies

An ad for Strawberry Frog arguing that a different world may justify a different agency

Pub: Please

3-23

Agencies:Types

Reach

Full-Service

SpecialtyBoutiques Media

BuyersInteractive

Consumer

BTB

Local National

Regional Internatl

3-24

Accountmanagement

Research & account planning

Creative concepts

Trafficcontrol

Media buying & planning

Production

Other services

Admin

Agencies:People

3-25

Agencies:People

Many departments contributed to Honda’s dealer kit

3-26

Agencies:Compensation

Media commissions

Ad rate-card

price:$100,000

Agencybuys adat 15%

discount:$85,000

Agencybills client

full ad amount:$100,000

$15,000difference

is keptby theagency

3-27

Agencies:Compensation

Media commissionsMarkups

Agencybuys

materialsfor

campaign

Materialscost

$85,000

Agencybills for

materials plus a

17.65%markup

Agency bills

$100,000which is

costs plus markup

3-28

Agencies:Compensation

Media commissionsMarkupsFees

Fee-commissioncombination

Straight-fee(retainer)method

Incentive system

3-29

Agencies:In-House

Pros

May save money

Allows tighter control

May permit greater attention to the brand

Lower creative quality

Less experience and talent

Loss of objectivity

Cons

3-30

Agencies:Client Relationships

Referrals

Presentations

Community relations& networking

Soliciting fornew business

How agencies reach & attract new clients

3-31

Suppliers

Art studios &web designers

Art studios &web designers

Printers &related specialists

Printers &related specialists

Film & videohouses

Film & videohouses

Researchcompanies

Researchcompanies

3-32

Out-of-home

Media

Digitalinteractive

Electronic

Print

Direct mail

Other media

3-33

Current Trends

Industry consolidation

Decline of the commission system

Changes resulting from new media