Organizing for Advertising and Promotion:
The Role of Ad Agencies and Other Marketing Communication Organizations
3
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Participants in the IMC Process
Marketing communications specialist organizations
Media organizations
Advertiser (Client)
Advertising agency
Collateral services
Direct-
response
agencies
Sales
promotion
agencies
Interactive
agencies
Public
relations
firms
Organizing for Advertising and Promotion
• The way a company (the client) organizes depends on
– Its size
–The number of products it markets
–The role of advertising and promotion in the marketing mix
–The budget
– Its marketing organization structure
Advertising Dept. Under Centralized System
President
Production Finance Marketing
Research and
develop-ment
Human resources
Marketing research
Advertising SalesProduct planning
Pros & Cons of a Centralized System
Fewerpersonnel
Bettercommunications
Continuity
Longerresponse time
Less goalinvolvement
TheCentralized
System
+ Positive - Negative
Impractical formultiple brands,
products, divisions
More top management involvement
Decentralized Advertising System
Production Finance
Sales
Brand
Manager
Ad agency
Product
Management
Sales promotion
Package design
Marketing
services
Marketing R & D Human
Resources
Corporate
Brand
Manager
Ad agency
Advertising
Dept
Marketing
Research
Merchandising
Pros & Cons of Decentralization
Internal conflicts
Ineffective decision making
Rapid problemresponse
Concentratedattention
Increasedflexibility
TheDecentralized
System
+ Positive - Negative
Unequal distribution
of funds
Lack ofAuthority
Test Your Knowledge
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 enhancethe image of their brands
E) Do all of the above
In-House Agencies
Benetton’s in-house agency works with outside agencies to develop ads
Pros & Cons of In-House Agencies
Morecontrol
Costsavings
Bettercoordination
Lessobjectivity
Lessexperience
TheIn-houseAgency
+ Positive - Negative
Lessflexibility
The Ad Agency’s Role
• Reasons for using an ad agency
–Highly skilled specialists
–Specialization in a particular industry
–Objective viewpoint of the market
–Broad range of experience
Ad Agencies Have Skilled Specialists
Artists Writers Researchers
Photographers Media Analysts Other Skills
Full-Service Agencies
Creating advertising
Planning advertising
Producing advertising
Performing research
Selecting media
Sales promotions
Strategic market planning
Direct marketing
Interactive capabilities
Package design
Full range of marketing
communication and promotion
services
Nonadvertising services
Public relations and publicity
Typical Full-Service Agency Organization
WritersArt directors
TV
production
Traffic
production
Account
Executive
Account
supervision
VP account
services
Media
Research
Sales
Promotion
VP marketing
services
Personnel
Accounting
FinanceOffice
management
VP management
and finance
President
Board of
directors
VP creative
services
Services Provided by Agencies
Agency Services
Research department
May include account planners
Media dept. obtains media space, time
Marketing Services
The link between agency and client
Managed by the account executive
Account Services
Creation, execution of ads
Copywriterartists, other specialists
Creative Services
Accounting
Finance
Human resources
New business generation
Mgmt & Finance
The Role of Creative Boutiques
CreativeBoutiques
Provide only creative services
Full-service agencies may subcontract with creative
boutiques
Ability to turn out inventive creative work quickly
Media Buying Can be Specialized
Specialize in buying media, especially broadcast time
Agencies and clients develop media strategy
Media Specialist
Companies
Media buying organizations implement the strategy and
buy time and space
Test Your Knowledge
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 totheir agencies because they prefer fee- or incentive-based systems.
B) From the viewpoints of both the client and the agency,the traditional commission system is superior tonegotiated commissions.
C) Most clients want their agencies to be in total chargeof the integrated marketing communications process,so they prefer to compensate them based on mediacommissions.
D)Statements A, B, and C are all true.
Methods of Agency Compensation
Commissionsfrom media
Fee, cost, and incentive-based
systems
Percentagecharges
CompensationMethods
Evaluating Agencies
Financial Audit
Qualitative Audit
Verify costs, expenses
Personnel hours charged
Payments to media
Payments to suppliers
Planning
Program development
Implementation
Results achieved
Top Agency Value-Add Activities
New media guidance, solutions
Integrated disciplines & functions
Creative ideas
Collaboration
Ideas/programs for multi comm.
programs
Talented people
Brand driver
evaluation
Loyalty to a Single Agency
Young & Rubicam has handled the Dr Pepper account for
over 30 years
Why Agencies Lose Clients
Poorperformance
Poorcommunications
UnrealisticClient demands
Personalityconflicts
Personnelchanges
Changesin size of client
or agency
Conflicts ofinterest
Change in client’s strategy
Decliningsales
Paymentconflicts
Policy Changes
Policy Changes
How Agencies Gain Clients
Referrals
Solicitations
Presentations
Public Relations Image, Reputation
The Hottest Agency in the Ad Business
Direct-Marketing Agency Activities
Directmail
Databasemanagement
Research
Creative
Media services
Direct-MarketingAgencies
Production
Database development, management
Direct-Marketing Agency
• Departments in a typical direct-marketing agency
–Account management
–Creative
–Media
–Database development and management
Sales Promotion Agencies
Catalog production
Promotional planning
Creative research
Tie-in coordination
Fulfillment
Premium design and manufacturing
Contest/sweepstakes management
Functions Performed by Public Relations Firms
Strategydevelopment
Generatingpublicity
Lobbying
Publicaffairs
News releases,communication
Research
Managingcrises
Coordinationwith promotional
areas
Special events
Functions Performed by Interactive Agencies
Webbanner ads
Search engine optimizationKiosks
Interactive Media Creation
CD-ROMs
Web sites Text messages
Website for the California Milk Advisory Board
Marketing Research Companies
Quantitative studies
Qualitative research
Help clients under-stand target audience
Pros and Cons of Integrated Services
Convenience
Greater synergy
Single image for product or service
Poor communication
Budget politics
Integrated Services
+ Positive - Negative
No synergy
Test Your Knowledge
Marketing executives say the biggest obstacle to implementing IMC is:
A) Lack of management support
B) Insufficient budgets
C) Lack of people with the right perspective and skills
D) Inexperienced ad agencies
Obstacles to Implementing IMC
• Key obstacles
– Lack of people with the broad perspective and skills to make it work
– Internal turf battles
–Agency egos
–Fear of budget reductions
–Ensuring consistent execution
–Measuring success
–Compensation
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