Current State of the Marketing
Communications Business
Current State of the Marketing
Communications Business
What Happened and What’s
Happening Now?
•
•
What Happened?
–
–
Smarter and more skeptical consumer
1980’s Agency consolidation
•
•
–
–
–
–
–
Media vehicles explode leaving media
highly splintered.
Media Departments break away to
remain competitive
Agencies try to sell one stop shopping,
clients want the best of each discipline
Traditional Agencies seen as behind
the times
Megabrands losing their way
•
–
–
–
Today, 85% of the world’s advertising
placed by 4 holding companies
3 of top 5 European
E.g. Coca Cola Classic, IBM, Marlboro,
McDonald’s, Ford, GM, etc.
Clients paying their agencies less
Famous “agency expert” over.
Wal-Mart
What’s happening now?
–
–
–
–
–
–
–
–
What is an agency?
Clients desperate to modernize willing
to take risk with newer agencies
Big agencies trying to become relevant.
As the Internet grows in importance,
NYC becomes less important and
Silicon Valley/San Francisco becomes
more important.
Agencies still acting like herd creatures
running from one trend to the next.
Media Planning & Planning becoming
more powerful.
Full Service agency becoming less and
less interesting.
Wal-Mart backlash opening
opportunities for not-Wal-Mart
companies.
Where will this all settle?
Fun Stuff I’ll never ask you on a test
•
•
•
•
•
1704 First newspaper ad
1742 First Magazine ad
1843 Volney Palmer (Philadelphia) first ad agency
1868 NW Ayer (Philadelphia) first successful advertising agency
1877 First ad agency acquisition: J Walter Thompson buys agency for $500 plus
$800 for the furniture.
–
•
•
•
•
•
•
•
•
•
Creates the Account Executive title
1880 First copywriter hired by J. Wanamaker
1882 P&G advertises Ivory Soap with unprecedented $11,000.
1892 NW Ayer hires first copywriter
1893 Coke registers trademark
1988 First Ad slogan “Lest you forget, we say it yet. Uneeda Biscuit” The National
Biscuit Company
1900 NW Ayer opens “Business-Getting Department”
1920 KDKA first radio station in America (Pittsburgh)
1941 First TV spot (Bulova Watches)
1950 Dancer Fitzgerald Sample creates the Soap Opera for Tide (P&G)
Fun Stuff I’ll never ask you on a test
•
•
•
•
•
•
•
•
•
•
•
•
•
1955 Marlboro Man appears
1956 First Pre-recorded TV commercial
1960 first copywriter / art director team DDB
1963 Cola wars begin
1967 First female head of an advertising agency: Mary Wells
1970 Saatchi & Saatchi opens in London
1971 cigarette advertising banned on television
1981 MTV premiers
1986 Omnicom created (First advertising agency holding company)
1986 Saatchi brothers buy Ted Bates then largest advertising agency in the world
(Ted Bates goes out of business in 2004)
1987 Martin Sorrel creates WPP group buying JWT, O&M, Y&R and last year Grey
Worldwide
1993 Birth of the Internet
2005 85% of advertising placed in the world comes from 4 holding companies
2006 There are over 25,000 advertising agencies in the US alone
•
www.adage.com/century/timeline/index.html
•
We’ve been busy for the past 100 years
• 1905
– 1-3 newspapers per
town
– 15 magazines in the US
– 0 radio stations
– 0 TV stations
• 2006
– Hundreds of newspapers
per town, national and
international newspapers
– 5,000 magazines in US
– 12,500 radio stations in
US
– 1,100 commercial TV
stations
– The Internet
Where we came from
•
1843 – 1980 Advertising People WERE
the Client’s Marketing Department.
–
•
We created Media (e.g. The Soap Opera)
1980 – 1990 Some client’s lost faith in us.
–
–
The Saatchi brothers
Bob Jacoby $125 million in 1986
•
1990 – 2000 They split up our business and paid us all less
•
1990 – today. We reorganized and reorganized and reorganized.
•
The new Advertising Agency: Crispin Porter Bogusky, Taxi, Naked, BBH, etc.
•
Bottom Line: They need what we do.
–
And we’re creating media & content again…
What will the Advertising Agency in
the Year 2030 Look Like
So, what is Marketing?
What is Marketing?
• American Marketing Association Definition of Marketing:
Marketing is an organizational function and a set of processes for
creating, communicating, and delivering value to customers and for
managing customer relationships in ways that benefit the
organization and its stakeholders.
• World Marketing Association (WMA): “Marketing is the core
business philosophy which directs the processes of identifying and
fulfilling the needs of individuals and organizations through
exchanges which create superior value for all parties.”
• Chartered Institute of Marketing (CIMU) [United Kingdom]:
“Marketing is the management process for identifying, anticipating
and satisfying customer requirements profitably.”
Where does Advertising Fit?
MARKETING:
The manipulation of the 4 P’s to maximize sales or profitability
Product:
What it is, how it works,
what it looks like,
smells like, tastes like,
how it is packaged, etc.
Price:
How much it costs.
Place:
Where is it sold?
Promotion:
Advertising,
Sales Promotion, PR,
Events, Personal Selling,
History of Marketing:
Why is the USA the #1 marketer in the World?
Why is America #1?
Why is America #1?
History of Marketing:
• After WWII, American businesses thrived.
– Companies generally sold as much as they could make.
– Europe and Asia were rebuilding, America was a manufacturing
economy and was supplying the world.
• US was the only country with a distribution base to
build on.
• US had only communications system that could now be
used to inform and persuade consumers (expanded
during the war).
History of Marketing:
– 1950’s Marketing was born!
• Jerome McCarthy
– Professor at the business school at Michigan State
University published the first marketing textbook titled:
– “ Four P’s of Marketing: Product, Place, Price and
Promotion.”
• The 4 P’s became the tools of Marketing Managers
from the late 1950’s until today.
History of Marketing:
• 1950’s – 1960’s: The
Make it and sell it
Period.
– (Coming out of
Depression and
WWII)
History of Marketing:
– 1950’s – 1960’s: The Make it and sell it Period.
(Coming out of Depression and WWII)
• Mass Production led to Mass Distribution led to Mass
Advertising led to Mass Media.
• Focus was on producing and distributing as much as
possible.
• Baby Boom in US.
• Brought homogenization of culture, taste, products and
services.
History of Marketing:
Mid 1960’s
History of Marketing:
• Mid 1960’s: Competition from Asia and Europe
– Europe higher quality, Asia cheaper (and eventually better).
America caught in the shrinking middle.
– Different Philosophies:
» US Model: Produce as fast as possible, sell as many as
possible, fix it later and make incremental improvements
along the way. Create obsolescence to keep consumers
buying.
» Japanese Model: Make as many as you can make
“perfect,” sell quality products that will last, and R&D ways
to re-invent and make major improvements. Develop better
quality products for happier long-term consumers, brand
loyalty and a global competitive edge.
History of Marketing
• Mid 1970’s: move from product shortage
to surplus. What do you do?
History of Marketing:
• Answer: globalize!
– Baby Boom reached its peak.
» How many refrigerators, cameras, and cars do we need?
– Globalization is the answer!
– Internal US strategy: Price Promotion; lower the price and
consumers will buy.
» Huge growth in price promotions including couponing,
contests, added value sizes,
» Kills brand equity, Kills advertising, Marketing Department
begins losing power to those who can manipulate the
numbers (Finance). Ad agencies who “report” to them suffer
the most.
» Finally once everyone has lowered their prices, profit margins
are gone, demand doesn’t increase. Now what do we do?
History of Marketing:
• 1980’s: Become the Low Cost
Producer: cut costs in
manufacturing.
– E.g. cheese, L’eggs Pantyhose.
» The era of “reengineering,”
closing plants, layoffs, reducing
overheads, outsourcing,
» Marketing pushed to
background.
So, is this stuff even cheese any
longer?
• Ingredients: MILK, WHEY, MILKFAT, MILK PROTEIN
CONCENTRATE, SALT, CALCIUM PHOSPHATE, SODIUM
CITRATE, WHEY PROTEIN CONCENTRATE, SODIUM
PHOSPHATE, SORBIC ACID AS A PRESERVATIVE,
APOCAROTENAL (COLOR), ANNATTO (COLOR), ENZYMES,
VITAMIN D3, CHEESE CULTURE.
He who has the information has the power!
0 - 1980
Manufacturer
Make/sell what
we want.
We know what
sells and doesn’t.
1980-Internet (’93)
Channel
(stores)
Scanners! Now
we know
exactly
what sells and
when so we
decide
what
manufacturer
will make
and how much
we will pay for
it!
Internet forward
Consumer
The Internet!
Now we can
compare
products and
prices and
demand
what we want
when we want
it!
History of Marketing:
• Enter the 1990’s: major power shift from
Manufacturer to Channel
– Introduction of the UPC code moves information from
manufacturer to the store (channel).
– Emergence of Wal-Mart & category killers (Toys-R-Us,
Home Depot, CompUSA.
History of Marketing:
– Channels focus on building up shopper base with
frequent shopper programs, frequent flyers, etc.
– New forms of communication allow better targeting.
» With the control over information came stronger
consumer control over price.
– When channel has power,
» controls which products it will sell,
» how much it is willing to pay for those products,
» how much it will change for those products,
» what types of promotion it demands.
History of Marketing:
• And now? The current power shift: from Channel to
Consumer
– Internet puts information into consumer’s hands. Consumers
determine what they want to buy, search all available sources,
compare prices and alternatives and do this wherever and
whenever they want to.
• Example:
– 1960’s bought a book in a neighborhood book store.
– 1980’s bought book from category killer bookstore like Borders.
– 1990’s on bought that book at any number of on-line shops.
• Amazon used books.
The missing “P”
MARKETING:
The manipulation of the 4 P’s to maximize sales or profitability
Product:
What it is, how it works,
what it looks like,
smells like, tastes like,
how it is packaged, etc.
Price:
How much it costs.
Place:
Where is it sold?
Promotion:
Positioning, Advertising,
Sales Promotion, PR,
Events, Personal Selling,
People:
Who are we making
this product for and
what do they want/need?
Objectives, Strategies & Tactics
– Objective: What you want to accomplish. Broad
goals the organization wants to achieve.
Organizational objectives generally relate to some
financial goal or “scorecard.”
– Strategy: How you want to accomplish your
objectives.
– Tactics: Where you will fulfill the strategies.
Types of Products
• Specialty Goods: Only one brand will do.
– E.g. Teuscher Champagne Truffles
• Convenience Goods: Any brand will do, give me the
cheapest.
– milk
• Shopping Goods: I don’t care if I buy a HP Computer or
a Toshiba; I’ll shop around until I find the best price on
one of them.
– Orange juice, gas, computers, most electronics, CDs, etc.
Four ways Marketing
Organizations Compete
1.
Product Differentiation: Build a better mousetrap and the world will beat a path to
your door.
•
•
Organizational goal: stay ahead of competition through product advantage.
Product Differentiation
–
–
–
–
2.
Distribution Superiority: be ubiquitous (always within arm’s length)
–
–
–
3.
•
top of mind products
ubiquitous
frequent use products
Customer Focus
–
–
–
4.
superior products (real superiority or perceived superiority) or superior prices
generally limited direct competitors
generally greater product technology (i.e. not just anyone can copy it)
Patents
average to high interest products
multiple benefits for different people
high degree of specialization
Marketing Communications: out advertise, & promote
Which is right? Best? Most successful? Answer: all of them.
How do these products compete?
Product, Distribution, Customer focus, Marketing Communications