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 Direct- Sales

response promotion
Marketing agencies agencies
communications
specialist
organizations Public
Interactive
relations
agencies
Collateral services 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

Research
and Human
Production Finance Marketing
develop- resources
ment

Marketing Product
Advertising Sales
research planning
 Pros & Cons of a Centralized System

+ Positive - Negative
Better Less goal
communications involvement

Fewer The
personnel Centralized Longer
System response time

Continuity
Impractical for
multiple brands,
More top products,
divisions
management
involvement
 Decentralized Advertising System

Corporate

Production Finance Marketing R&D Human

Resources

Sales Product Marketing

Management services

Brand Advertising Marketing

Manager Dept Research

Ad agency
Sales promotion
Brand
Manager Package design

Ad agency Merchandising
 Pros & Cons of Decentralization

+ Positive - Negative

Ineffective
Concentrated
decision making
attention

Rapid problem The Internal conflicts

response Decentralized
System
Unequal
distribution
Increased
of funds
flexibility

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

Benettons in-house agency works with

outside agencies to develop ads
 Pros & Cons of In-House Agencies

+ Positive - Negative

Cost Less
savings experience

The
More Less
control In-house objectivity
Agency

Better Less
coordination flexibility
 The Ad Agencys 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 Full range of Performing
marketing research
Creating
communication
advertising
and promotion
services Selecting media
Producing
advertising

Strategic market Interactive

planning capabilities

Sales Nonadvertising Package design

promotions services
Direct Public relations
marketing and publicity
 Typical Full-Service Agency Organization

Board of
directors

President

VP creative
VP account VP marketing
services VP management
services services
and finance

Writers Print
Art directors production Sales
Media
Promotion
Account
TV supervision
production
Research Office
management Finance

Traffic Account
Accounting
Executive

Personnel
 Services Provided by Agencies

Agency Services

Account Marketing Creative Mgmt &

Services Services Services Finance

The link Research Creation, Accounting

between department execution of
agency and ads Finance
client May include
account Copywriter Human
Managed planners artists, resources
by the other New
account Media dept. specialists
obtains business
executive generation
media
space, time
 The Role of Creative Boutiques

Creative
Provide only creative services
Boutiques

Full-service agencies may

subcontract with creative
boutiques

Ability to turn out inventive

creative work quickly
 Media Buying Can be Specialized

Media
Specialize in buying media,
Specialist especially broadcast time
Companies

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

Fee, cost, and

Compensation incentive-based
Methods systems

Percentage
charges
 Evaluating Agencies

Financial Qualitative
Audit Audit

Verify costs, expenses Planning

Personnel hours charged Program development

Payments to media Implementation

Payments to suppliers Results achieved

Top Agency Value-Add Activities

Integrated
disciplines
New media & functions
guidance,
Creative
solutions
ideas

Brand
driver
evaluation
Collaboration

Talented Ideas/programs
people 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 Declining Personnel

performance sales changes

Changes
Poor Payment
in size of client
communications conflicts
or agency

Unrealistic Conflicts of
Policy Changes
Client demands interest

Change in
Personality Policy Changes clients strategy
conflicts
 How Agencies Gain Clients

Referrals Presentations

Solicitations

Public Relations Image, Reputation

The Hottest Agency in the Ad Business
 Direct-Marketing Agency Activities

Direct-
Marketing
Database Agencies Media services
management

Direct
Creative
mail
Database
development,
Research management Production
 Direct-Marketing Agency

Departments in a typical direct-

marketing 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 Public
Special events
development affairs

Generating News releases, Managing

publicity communication crises

Coordination
Lobbying Research with promotional
areas
Functions Performed by Interactive Agencies

Web
CD-ROMs
banner ads

Interactive
Web sites Text messages
Media Creation

Search engine
Kiosks optimization
Website for the California Milk Advisory Board
Marketing Research Companies

Help clients under-

stand target audience

Qualitative research

Quantitative studies
 Pros and Cons of Integrated Services

+ Positive - Negative

Greater synergy Budget politics

Convenience Integrated Poor

Services communication

Single image for

No synergy
product or service
 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