JOMC 170
Advertising
Agencies
05AdAgencies.ppt
the first advertising agents
 1843 Volney Palmer
 agent for media, not advertisers
 1864 - George P. Rowell
 “the johnny appleseed
of advertising”
 Rowell’s American
Newspaper Directory
 space wholesaler
 shared his “secret”
 1888 - “Printer’s Ink”
the first advertising agency
 N.W. Ayer & Son
 founded in 1864 by
Francis W. Ayer, 20
 “& son” made the
business seem more
established
 worked for advertiser
 slogan - “keeping
everlastingly at it
brings success.”
4 full-service agency functions:
 today, “full-service” agencies
provide the following:
 account management
 creative
 media planning and media
placement (media buying)
 research
 many adding “below the line”
services - PR, sales promotion,
Interactive
U.S. agency business today
 over $285.1 billion in media
billings (2006 www.mccann.com)
 over 5,000 agencies
 over 243,000 people employed
 New York and Chicago dominate
agency billing by city/state
City
Billings in Millions
New York
$61,264.4
Chicago
17,739.9
Los Angeles
10,545.6
Detroit
7,946.3
Minneapolis
6,087.2
San Francisco
5,101.9
Boston
3,993.7
Dallas
3,234.8
Atlanta
2,620.9
Philadelphia
2,379.6
(Source: Ad Age, 2001 )
major types of agency:
 mega-agency groups
 independent agencies
 national, regional, and local
 specialized/niche agencies
 agency service suppliers
 media buying, creative services
mega-agency groups
 prompted by mergers and
client globalization
 financial pressures
 service multinational
accounts
martin sorrell,
 subsidiaries provide chairman WPP
“IMC” (integrated marketing
communication) services
5 top mega-agency groups:
OmniCom Group
$4.15 billion
WPP Group
$3.64 billion
Interpublic Group
$3.38 billion
Dentsu (Japan)
$1.98 billion
Young & Rubicam
$1.49 billion
1997
5 top mega-agency groups:
WPP Group
(including Y&R)
Omnicom Group
$6.69 billion
Interpublic Group
$5.08 billion
Havas
$2.39 billion
Publicis
(including Saatchi)
$2.17 billion
5.74 billion
1999
5 top mega-agency groups:
WPP Group
(including Y&R)
Omnicom Group
$7.9 billion
Interpublic Group
$6.6 billion
Dentsu
$3.1 billion
Havas
$2.76 billion
$6.9 billion
2000
5 top mega-agency groups:
Omnicom Group
WPP Group
Interpublic (IPG)
Publicis
$8.62 billion
6.76 billion
5.86 billion
4.41 billion
(Including Leo Burnett)
Dentsu (Japan)
Havas Advertising
2.55 billion
1.88 billion
2003
5 top mega-agency groups:
Omnicom Group
WPP Group
(with Grey)
Interpublic
Publicis
Dentsu (Japan)
Havas Advertising
$10.48 billion
10.03 billion
6.27 billion
5.11 billion
2.89 billion
1.81 billion
2005
5 top mega-agency groups:
Together, the five international megaagencies are now 75% of worldwide
billings
6%
18%
25%
16%
17%
Omnicom
WPP
IPG
Publicis
Other
Havas
18%
Source: Ad Age 2004
mega-agency pros & cons

positives:

negatives:








larger talent pool
negotiating clout
financial rewards
account security
competitive edge
strong partnerships
more services
international link
 people vs. profit
 creativity vs. size
 conflict of
interests
 people business
national, regional & local
 these are independent agencies
 there are now fewer national
agencies which are not part of
mega-agency groups
 regional and local agencies work
with smaller clients who are usually
located nearby
10 top U.S. ad agencies
Top independent U.S. agencies
specialized/niche agencies
 industry specialists
specialized/niche agencies
 industry specialists
 ethnic agencies
specialized/niche agencies
 industry specialists
 ethnic agencies
 internet agencies
specialized/niche agencies
 industry specialists
 ethnic agencies
 internet agencies
 business-to-business agencies
 creative boutiques and
design houses
other suppliers
 provide “unbundled” services
 one part of what an agency does
 media buying services
 freelancers & consultants
 production companies
 in-house or “house” agencies
 agencies owned by clients
in-house agencies
 advantages & disadvantages
from the gap’s
“house agency”
in-house agencies
 advantages & disadvantages
 familiarity
 specialization
 fast service
 cost savings
 confidentiality
from the gap’s
“house agency”
in-house agencies
 advantages & disadvantages
 familiarity
 specialization
 fast service
 cost savings
 confidentiality
 objectivity
 resources
 fresh ideas
 extra cost and
overhead
2 primary roles of agencies
 idea generation
 brand-building
idea generation
 manufacture ideas
 ideas are lifeblood of the agency
 create intellectual capital
 create and sell different
kinds of ideas
 marketing strategies
 promotional opportunities
 even new product ideas...
brand-building
 “The agency’s purpose is to create
and direct communication about a
product or service so that the brand
is perceived to have a unique
value or brand personality.”
 Let’s look at some examples...
brand-building
 Marlboro
 Leo Burnett
brand-building
 McDonald’s
 DDB Needham
brand-building
 Pepsi
 BBDO
brand-building
 Nike
 Wieden + Kennedy
brand-building
 American Express
 Ogilvy & Mather
brand-building
 Apple
 Chiat/Day
brand-building
means integration
 more and more, agencies are being
involved in all areas of marketers’
brand-building activities
 today, it’s more than advertising
 it’s integrated marketing
communications (IMC)
integrated marketing communication
“done
more right,
and more,
IMC is the
planning
agenciesand
are
implementation
becoming the
of
the variousof the
integrators
communications
whole range of
disciplines as a
brand-building
single, overall
activities...
communications
system -- making all
the channels work.”
integrated marketing communication
the imc promotion mix
 advertising
 public relations
 direct response
 sales promotion
 personal selling
structure & organization
what agencies do.
and how they’re organized
to do it.
7 primary services:







complete a marketing analysis
develop an advertising plan
prepare a creative strategy
create advertising executions
develop and implement a media plan
handle billing and payments
integrate other marketing
communications
4 functions of full-service agencies
 account management
 creative
 media planning and placement
 research
agency organization chart
Board of
Directors
[Chairman/CEO]
Pres ident
[COO]
Other Marketing
Communications
Services
[PR, etc.]
Strategy
Review Board
[Managment
Committee]
Office Management
[Personnel,
Accounting,
Legal, etc.]
Account Mgmt.
Director
Creative
Exec CD
Research
Director
Media Dept.
Director
Management
Supervis or
As sociate
Creative
Director
Project
Managers
As sociate
Media
Director
Account
Executive
Creative
Group:
Research
As sistants
Media
Supervis or
As st. Account
Executive
Copy Spvr. &
Copywriters
Broadcast
Production
Traffic
Art Supervisor
& Art Directors
Print
Production
Media
Planner
Media
Buyer
Analys ts
account management
 liaison between agency and client
 responsible for understanding...
 the client’s business
 the client’s marketing needs
 strategy development
 representing client point of view
within the agency
account management
Account Mgmt.
Director
Management.
Supervisor
Account
Supervisor
Account
Executive
Asst. Account
Executive
Account
Coordinator
Traffic
 account management
director
 management supervisor
 account supervisors
 account executives
 assistant account execs
 account coordinators
 traffic
creative department
 responsibility
 the creative department is responsible
for creating and producing the print and
broadcast advertising
 strategy is key
 good creative work is always guided by a
creative strategy that sets forth goals to
be accomplished and key message
points to be relayed
creative department
Strategy
Review
Board
Executive
Creative
Director (ECD)
Creative
Director (CD)
Associate
Creative
Director (ACD)
Creative
Group:
Copy Spvr. &
Copywriters
Art Supervisor
& Art Directors
Broadcast
Production
Traffic
Print
Production
 executive & group creative
directors
 creative director
 associate creative director
 copywriters
 art directors
 broadcast producers
 print production managers
 traffic coordinators
media department
 The media department has two main
functions - planning and buying.
 The planning group handles more
strategic marketing and media issues.
 The buying group handles media
negotiations and implementation.
media department
Media
Director
Associate
Media
Director
Media
Supervisor
Media
Planner
Media
Buyer
Analysts
 media director
 associate media directors
 media supervisors
 media planners
 media buyers
 media analysts
Media
Plan
big changes in the
media department
 mega-agency media departments
have now become profit centers
 agencies have set up their media
departments as free-standing units
 many large clients now look at media
as a separate service
research department
 interpret market environment
 gather and analyze research data.
 primary and secondary techniques
 determine consumer needs/perceptions
 understand problems
 advise how ads can meet
strategic goals
 help find solutions
Research
Report
research department
Research
Director
 research director
Project
Managers
 research project managers
Research
Assistants
Outside
Research
Suppliers
 research assistants
 outside research
specialists
Research
Report
auxiliary agency functions
 account planning
 strategy/creative review board
 office management
 human resources
 legal services
 accounting
 recruitment
3 ways agencies make money
 commissions
 usually 15% of gross costs
 fees
 usually based on negotiated hourly rate
 incentives
 still relatively new and problematic
 usually based on performance goals
agency commissions
 media commission system
 15% media commission
 adjustable commission rates
 negotiate to match client budget
 sliding scale
 markups-production & service
 add a percentage markup to costs
 17.65% of net = 15% of gross
4 types of fee systems
 fixed fee (retainer)
 cost-plus fee
 performance fee
 hybrid fee &
commission
incentives
 in theory, a good way to work
 get paid based on how well you do, not
how much you bill
 in practice, difficult to implement
 if client makes final decision (instead of
agency), how can agency be responsible
for final results?
 results based on many factors, such as
competitive efforts, not just advertising
new business
 three primary sources
“The
critical
objective
and role
build
existing
client’s business
any
adsell
agency
is gaining
of
add
and
new IMC
services
 solicitnew
new business.”
accounts
 two ongoing problems
 “spec” work
 teams “walking” with accounts
beyond 2007
advertising
agency trends
agency trends
clutter, overload, “overchoice”
 increased media options
 increasing audience fragmentation
 more messages everywhere
 doing more with less
 economic pressures, “downsizing”
 ongoing client budget pressures
 managing size
 more mergers and mega-agencies
agency trends
 managing technology
 interactive marketing
 e-mail, web sites
 improving internal systems
 account planning
 re-engineering agency organization
 improving delivery of imc services
in conclusion...
as long as marketers need
ideas to build their brands,
they’re going to need
advertising agencies