Transcript Chapter 3
3 Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Participants in the IMC Process Advertiser (Client) Advertising agency Media organizations Marketing communications specialist organizations Collateral services Directresponse agencies Sales promotion agencies Public relations firms Interactive agencies 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 Marketing Advertising Research and development Sales Human resources Product planning Pros & Cons of a Centralized System + Positive - Negative Better communications Less goal involvement Fewer personnel The Centralized System Longer response time Continuity More top management involvement Impractical for multiple brands, products, divisions Decentralized Advertising System Corporate Production Finance Sales Marketing Product Management Brand Manager Ad agency R&D Human Resources Marketing services Advertising Dept Marketing Research Sales promotion Brand Manager Package design Ad agency Merchandising Pros & Cons of Decentralization + Positive - Negative Ineffective decision making Concentrated attention Rapid problem response Increased flexibility The Decentralized System Internal conflicts Unequal distribution of funds Lack of Authority 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 enhance the 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 + Positive - Negative Cost savings Less experience More control Better coordination The In-house Agency Less objectivity Less flexibility 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 Planning advertising Creating advertising Producing advertising Full range of marketing communication and promotion services Direct marketing Selecting media Interactive capabilities Strategic market planning Sales promotions Performing research Nonadvertising services Package design Public relations and publicity Typical Full-Service Agency Organization Board of directors President VP creative services VP account services Print production Writers Art directors TV production Traffic VP marketing services Media Account supervision VP management and finance Sales Promotion Research Office management Account Executive Finance Accounting Personnel Services Provided by Agencies Agency Services Account Services Marketing Services Creative Services Mgmt & Finance The link between agency and client Research department Creation, execution of ads Accounting Copywriter artists, other specialists Human resources Managed by the account executive May include account planners Media dept. obtains media space, time Finance New business generation The Role of Creative Boutiques Creative Boutiques 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 Media Specialist Companies Specialize in buying media, especially broadcast time Agencies and clients develop media strategy 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 to their 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 to negotiated commissions. C) Most clients want their agencies to be in total charge of the integrated marketing communications process, so they prefer to compensate them based on media commissions. D) Statements A, B, and C are all true. Methods of Agency Compensation Commissions from media Compensation Methods Fee, cost, and incentive-based systems Percentage charges Evaluating Agencies Financial Audit Qualitative Audit Verify costs, expenses Planning Personnel hours charged Program development Payments to media Implementation Payments to suppliers Results achieved Top Agency Value-Add Activities New media guidance, solutions Brand driver evaluation Talented people Integrated disciplines & functions Creative ideas Collaboration Ideas/programs for multi comm. programs Loyalty to a Single Agency Young & Rubicam has handled the Dr Pepper account for over 30 years Why Agencies Lose Clients Poor performance Declining sales Personnel changes Poor communications Payment conflicts Changes in size of client or agency Unrealistic Client demands Policy Changes Conflicts of interest Policy Changes Change in client’s strategy Personality conflicts How Agencies Gain Clients Referrals Presentations Solicitations Public Relations Image, Reputation The Hottest Agency in the Ad Business Direct-Marketing Agency Activities Database management DirectMarketing Agencies Direct mail Research Media services Creative Database development, management Production Direct-Marketing Agency • Departments in a typical directmarketing agency – Account management – Creative – Media – Database development and management Sales Promotion Agencies Promotional planning Creative research Tie-in coordination Fulfillment Premium design and manufacturing Catalog production Contest/sweepstakes management Functions Performed by Public Relations Firms Strategy development Generating publicity Lobbying Public affairs Special events News releases, communication Managing crises Research Coordination with promotional areas Functions Performed by Interactive Agencies Web banner ads Web sites CD-ROMs Interactive Media Creation Kiosks Text messages Search engine optimization Website for the California Milk Advisory Board Marketing Research Companies Help clients understand target audience Qualitative research Quantitative studies Pros and Cons of Integrated Services + Positive - Negative Greater synergy Budget politics Convenience Single image for product or service Integrated Services Poor communication 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