chapter three
The Advertising Industry
McGraw-Hill/IrwinEssentials of Contemporary Advertising Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Objectives_1
Describe the various groups in the advertising business and explain their relationship to one another
Discuss the differences between local and national advertisers
Explain how advertisers organize themselves to manage their advertising both here and abroad
Define the main types of advertising agencies
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Objectives_2
Explain the range of tasks people perform in an ad agency and an in-house advertising department
Discuss how agencies get new clients and how they make money
Debate the pros and cons of an in-house advertising agency
Explain how suppliers and the media help advertisers and agencies
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The Advertising Industry
Advertisers Advertising
agencies Suppliers Media
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Types of Local Advertisers
Dealers or local franchises
Stores with branded merchandise
Specialty businesses
Government and non-profit
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Exhibit 3-1 Departmental Structure for Small Advertisers
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Types of Local Advertising
Product advertising
Institutional advertising
Classified advertising
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Cooperative Advertising
Seeks to
build the manufacturer’s brand image
help distributors, dealers, or retailers make more sales
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Differences between Local and National Advertisers
National Focus
– Brand– Market share– Strategies– Markets
Long-term time frame $5-10 million + Use of many specialists
Local Focus
– Location– Volume– Tactics– Customers
Short-term time frame < $1 million Use of few generalists
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Exhibit 3-3 Top 10 Advertisers
Rank Company U.S. Ad Spending(in millions)
1 General Motors 3,997.4
2 Proctor & Gamble 3,919.7
3 Time Warner 3,283.1
4 Pfizer 2,957.3
5 SBC 2,686.8
6 DaimlerChrysler 2,462.1
7 Ford Motor Co. 2,458.0
8 Walt Disney Co. 2,241.5
9 Verizon 2,197.3
10 Johnson & Johnson 2,175.7
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Large Company Structures
Exhibit 3-5
A Centralized Structure
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Large Company Structures
Exhibit 3-6
A Decentralized Structure
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Transnational Advertising
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Will a Global Advertising Strategy Work?
Has each country’s market for the product developed in the same way?
Are the targets similar in different nations?
Do consumers share the same wants and needs?
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The Advertising Agency
An independent organization of creative people and business people who specialize in
1)developing and preparing marketing and advertising plans, advertisements, and other
promotional tools, and
2)purchasing advertising space and time
in various media in order to find customers for their clients’ goods and services
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Types of Agencies
Geographic Scope
Range of Services
Specialized Agencies
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Geographic Scope
LocalLocal
RegionalRegional
NationalNational
InternationalInternational
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Range of Services
Full-service
1) General consumer2) Business-to-business
Specialized
1) Creative boutiques2) Media-buying services
3) Interactive
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What Agency People Do
Account Management
Research and Account Planning
Creative Concepts
Production Traffic Management Agency
Administration Additional Service
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Exhibit 3-7 Agency Structure
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Agency Compensation
Media commissions Markups Fees
– Fee-commission combination
– Straight-fee– Retainer– Incentive system
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In-House Agency
Some companies like Benetton prefer
to create their ads using their own in-
house agency
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ReferralsReferrals
PresentationsPresentations
NetworkingNetworking
Soliciting New BusinessSoliciting New Business
How Agencies Get Clients
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Suppliers in Advertising
Art Studios Web Designers Printers Film/ Video Houses Research
Companies
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ElectronicElectronic
PrintPrint
Digital InteractiveDigital Interactive
Out-of-HomeOut-of-Home
DirectDirect
OtherOther
Media
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Key Terms_1
Account executive Account planning Account supervisor Advertiser Advertising agency Art directors Art studios Brand manager Business-to-business
agency
Centralized department Classified advertising Cooperative advertising Copy Copywriter Creative boutique Creative director Decentralized system Departmental system
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Key Terms_2
Fee-commission combination
Foreign media Full-service agency General consumer
agency Global marketer Group system Incentive system In-house agency
Institutional advertising Integrated marketing
communications Interactive agency International agency International media Local advertising Local agency Management supervisor Markup
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