3
Organizing for Advertising and
Promotion: The Role of Ad Agencies
and Other Marketing
Communication Organizations
McGraw-Hill/Irwin
Copyright © 2012 McGraw-Hill Companies, Inc., All right reversed
Under Armour Protects Its House
• Successful strategies
• Niche markets
• Expanded product line
• Strong branding, product positioning,
quality, dynamic advertising
• Unique brand identity, “Protect This
House”
• Expansion into athletic shoes
• In-house brand team
3-2
Participants in the IMC Process
3-3
Organizing for Advertising & Promotions
• 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
3-4
Advertising Dept. Under a Centralized System
President
Production
Finance
Marketing
research
Marketing
Advertising
Research
and
development
Sales
Human
resources
Product
planning
3-5
Pros & Cons of a Centralized System
Pros
Better
communications
Fewer
personnel
Cons
Hard to understand
the overall
marketing strategy
Longer
response time
Staff continuity
More top management
involvement
Impractical for
multiple brands,
products, divisions
3-6
Decentralized Advertising System
Corporate
Production
Finance
Sales
Marketing
Product
Management
Brand
Manager
Ad agency
Brand
Manager
Ad agency
R&D
Human
Resources
Marketing
services
Advertising
Dept
Marketing
Research
Sales promotion
Package design
Merchandising
3-7
Pros & Cons of Decentralization
Pros
Cons
Concentrated
managerial attention
Ineffective decision
making
Rapid problem and
opportunity response
Internal conflicts
Increased flexibility
Misallocation of funds
Lack of authority
Internal focus
3-8
Test Your Knowledge
Companies choose to use an in-house agency for all of
the following reasons except:
A) More closely tie the marketing function to
top management
B) Reduce advertising and promotions costs
C) In-house agencies are more stable
D) Tighter control over agency processes
E) To diversify the brand image
3-9
Pros & Cons of In-house Agencies
Pros
Cons
Cost savings
Less experience
More control
Less objectivity
Increased coordination
Less flexibility
Stability
Less access to top
creative talent
Access to top
management
3-10
Under Armour Uses an In-House Agency
3-11
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
3-12
Full-Service Agencies
Full range of
marketing
communication
and promotion
services
Nonadvertising
services
Planning
advertising
Performing
research
Creating
advertising
Selecting media
Producing
advertising
Strategic market
planning
Interactive
capabilities
Sales
promotions
Package design
Direct
marketing
Public relations
and publicity
3-13
Full-Service Agency Organization Chart
3-14
Agency Services
Account
Services
Marketing
Services
Creative
Services
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
Mgmt &
Finance
Finance
New
business
generation
3-15
Creative Boutiques
Creative
Boutiques
Provide only
creative services
May subcontract from
full-service agencies
Strength is turning out
creative work quickly
3-16
Media Buying
Media
Specialist
Companies
Specialize in buying media,
especially broadcast time
Agencies and clients develop
media strategy
Media buying organizations
implement strategies, and
buy time and space
3-17
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 agencies
because they prefer fee- or incentive-based systems.
B) For 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.
3-18
Agency Compensation Methods
Commissions from media
Fee, cost, and incentive-based systems
Percentage charges
3-19
Evaluating Agencies
Financial Audit
Qualitative Audit
Verify costs, expenses
Planning
Personnel hours billed
Program development
Payments to media
Implementation
Payments to suppliers
Results achieved
3-20
Gaining and Losing Clients
• Long-term agency relationships
• GE/BBDO Worldwide… 80 years
• Marlboro/Leo Burnett… 56 years
• McDonald’s/DDB Worldwide… 43 years
• Kellog’s/Leo Burnett… 68 years
• Loyalty to a single agency is becoming
less common
3-21
Why Agencies Lose Clients
Poor performance/service
Conflicts of interest
Poor communication
Strategy change
Unrealistic client demands
Declining sales
Personality conflicts
Compensation conflict
Personnel changes
Policy changes
Client/ agency size change
Marketing/strategy conflict
Lack of integrated marketing capabilities
3-22
How Agencies Gain Clients
Referrals
Presentations
Solicitations
Public Relations
Image, Reputation
3-23
Direct Marketing Agency Activities
Direct-Marketing Agency Services
Database
management
Media services
Direct mail
Creative capabilities
Research
Production
3-24
Direct Marketing Agency Structure
• Departments in a typical directmarketing agency
• Account management
• Creative
• Media
• Database development/management
3-25
Sales Promotion Agencies
Promotional planning
Creative research
Tie-in coordination
Fulfillment
Premium design and
manufacturing
Catalog production
Contest/sweepstakes
management
3-26
Don Jagoda Associates
3-27
Functions Performed by Public Relations Firms
Strategy
development
Public
affairs
Special
events
Generating
publicity
News releases,
communication
Managing
crisis
Research
Coordination
w/promotional
areas
Lobbying
3-28
Functions Performed by Interactive Agencies
Interactive Media Creation
Websites
Banner ads
Search engine optimization
Mobile marketing
Social media campaigns
Digital media
3-29
Campaigns Utilizing Social Media
3-30
Collateral Services
• Typical collateral services
• Marketing research
• Package design
• Consultants
• Photographers
• Printers
• Video production
• Event marketing
3-31
Pros and Cons of Integrated Services
Pros
Cons
Greater synergy
Budget politics
Convenience
Poor communication
Single image for
product or service
No synergy
3-32
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
3-33
Responsibility for IMC: Agency vs. Client
• Key Obstacles
• Lack of people with a broad perspective
and the skills to make it work
• Internal turf battles
• Agency egos
• Fear of budget reductions
• Ensuring consistent execution
• Measuring success
• Compensation
3-34