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The Advertising Industry
Types of Advertisers
Ad Agencies
Job Functions
Structure
Compensation
Suppliers
Media
April 8, 2016
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Advertising Industry Structure
$
Advertisers
(Clients)
Agencies
Suppliers
Media
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Advertising & Large Companies
Centralized
Efficiency
Continuity
In-House Agency
Functional Services
Research
Media
Creative
Decentralized
Flexibility
Competition among company brands
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Global Advertising
Standardized
Most companies blend
strategies to fit their
unique situations
Global brands
Efficiency / Recognition
Localized
Based on differences
in each country or culture
Relevance / Understanding
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Worldwide Advertising
Industry
Global expenditures $425
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Local vs. National Advertisers
National
Local
Focus
Building the Brand
Market Share
Strategy
Markets
Place of Business
Sales
Tactics
Customers
Time
Long-term
Short-term
Resources
$$$$
Many Specialists
$
Few Generalists
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Types of Advertising
Local Advertising (Retail)
Product Advertising
Institutional Advertising
Classified Advertising
Cooperative (Co-op) Advertising
Allowances By The Manufacturer
Pooling Resources
Government and Social Organizations
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Advertising Agency
An independent organization of professionals
who provide creative and business services to clients
related to planning, preparing, and placing advertisements.
Radio and TV Producers
Copywriters
Account Supervisors
Direct-Marketing Specialists
Artists
Researchers
Art Directors
Media Buyers
Public Relations Specialists
Technical Staff
Creative Directors
Marketing Specialists
Sales Promotion and Event Planners
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Advertising Agency
Advertising
Agency: an independent
business, composed of creative and business
people, who develop, prepare, and place
advertising in advertising media for sellers
seeking to find customers for their goods or
services
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
How Agencies Developed
The
Early Age
(Colonial Times to 1917)
Space
Salesmen
Space Wholesalers
The First Rate Directory
The Agency Becomes a Creative Center
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
How Agencies Developed
(continued)
The No-Rebate Age (1918-1956)
Radio
Television
Electronic Data Processing
The Age of Negotiation (1956-1990)
Consent Decrees
The Reengineering Age
Integrated Services
Interactive Communications
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Types of Advertising Agencies
Full-Service
Business-to-Business
Creative Boutiques
Media-Buying Services
Interactive
In-House
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What Do Advertising Agencies
Provide?
Account Services
Research and Account Planning
Creative and Production
Media Planning and Buying
Traffic Management
Marketing Services
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Agency Department System
President
Vice President
Account
Services
Account
Supervisor
Account
Executive
Account
Executive
Account
Supervisor
Vice President
Creative
Services
Vice President
Marketing
Services
Vice President
Management
Services
Art / Copy
Media
Accounting
Production
Research
Purchasing
Personnel
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Agency Group System
Agency
Management
Group 1 (Coke Classsic)
Management
Director
Account
Service
Group 2 (Dial Soap)
Management
Director
Creative
Director
Media
Planning
Group 3 (Toyota Camry)
Management
Director
Market
Research
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Agency Compensation Plans
Commissions
Around 15% of airtime fees
Agency Bills Client For $1,000,000
For Television Air Time
Agency Pays Television
$850,000
For Television Air Time
Agency Earns
$150,000
Commission (15%)
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Agency Compensation Plans
Commissions
Around 15% of airtime fees
Markup Charges
Production cost + fixed percent
Agencies add 17.65% to the cost of outside services
Photographer charges $8,500
The Agency adds
$1,500
Client is charged
$10,000
(17.65%)
for photography services
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Agency Compensation Plans
Commissions
Markup Charges
Production cost + fixed percent
Fee Systems
Around 15% of airtime fees
Hourly rates or by project
Incentive Systems
Tightly-specified objectives
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Other Advertising Services
This
is an
example of
collateral
promotion
material that
agencies
produce for
clients.
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Other Advertising Services
This
ad is a
continuation
of a concept
developed by
an ad agency.
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Media of Advertising
Print
Electronic
Interactive Media
Out-of-Home
Direct Mail
Other Media
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Media of Advertising
Print
Newspapers – National, State, Local
Magazines – Geography and Content
Yellow Pages
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Media of Advertising
Network, Independent and Cable TV
Network and Local Radio
Electronic
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The Media of Advertising
Online Services
Kiosks
CD-ROM
Homeshopping Broadcasts
Interactive Programming
Internet
Interactive Media
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Media of Advertising
Out-of-Home
Outdoor
Billboards
Transit
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The Media of Advertising
Direct Mail
Brochures and Catalogs
Direct Mail
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The Media of Advertising
Premiums
Point of Purchase Displays
Product Placement
Event Sponsorship
Other Media
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Summary
A full-service agency works on many aspects of a
client’s marketing problems
Many agencies are organized into four divisions
Some agencies have a domestic network of offices
or affiliates to service their large accounts
Global marketing has led agencies to expand
internationally
Clients usually pay agencies by commission, fees,
or a combination
There are other types of advertising services beside
the traditional advertising agency
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.