JOMC 170 Advertising Agencies 05AdAgencies.ppt

the first advertising agents n 1843 Volney Palmer l agent for media, not advertisers n George P. Rowell n 1843 Volney Palmer l agent for media, not advertisers n George P. Rowell l “the johnny appleseed of advertising” l Rowell’s American Newspaper Directory l space wholesaler l shared his “secret” l “Printer’s Ink” l “the johnny appleseed of advertising” l Rowell’s American Newspaper Directory l space wholesaler l shared his “secret” l “Printer’s Ink”

l founded in 1864 by Francis W. Ayer, 20 the first advertising agency l “& son” made the business seem more established l worked for advertiser l slogan - “keeping everlastingly at it brings success.” l “& son” made the business seem more established l worked for advertiser l slogan - “keeping everlastingly at it brings success.” n N.W. Ayer & Son

4 full-service agency functions: n today, “full-service” agencies provide the following: l account management l creative l media planning and media placement (media buying) l research l account management l creative l media planning and media placement (media buying) l research n many adding “below the line” services - PR, sales promotion, Interactive

U.S. agency business today n over $285.1 billion in media billings ( n over 5,000 agencies n over 243,000 people employed n New York and Chicago dominate n over $285.1 billion in media billings ( n over 5,000 agencies n over 243,000 people employed n New York and Chicago dominate

agency billing by city/state CityBillings 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 (Source: Ad Age, 2001 )

major types of agency: n mega-agency groups n independent agencies l national, regional, and local n specialized/niche agencies n agency service suppliers l media buying, creative services n mega-agency groups n independent agencies l national, regional, and local n specialized/niche agencies n agency service suppliers l media buying, creative services

mega-agency groups n prompted by mergers and client globalization n financial pressures n prompted by mergers and client globalization n financial pressures martin sorrell, chairman WPP n service multinational accounts n subsidiaries provide “IMC” (integrated marketing communication) services n service multinational accounts n subsidiaries provide “IMC” (integrated marketing communication) services

5 top mega-agency groups:

Omnicom Group$8.62 billion WPP Group 6.76 billion Interpublic (IPG) Interpublic (IPG) 5.86 billion Publicis 4.41 billion (Including Leo Burnett) Dentsu (Japan) 2.55 billion Havas Advertising 1.88 billion

5 top mega-agency groups: Omnicom Group$10.48 billion WPP Group (with Grey) billion Interpublic Interpublic 6.27 billion Publicis 5.11 billion Dentsu (Japan) 2.89 billion Havas Advertising 1.81 billion

5 top mega-agency groups: Source: Ad Age 2004 nTogether, the five international mega- agencies are now 75% of worldwide billings

mega-agency pros & cons n positives: n larger talent pool n negotiating clout n financial rewards n account security n competitive edge n strong partnerships n more services n international link n positives: n larger talent pool n negotiating clout n financial rewards n account security n competitive edge n strong partnerships n more services n international link n negatives: n people vs. profit n creativity vs. size n conflict of interests n people business

national, regional & local n these are independent agencies n there are now fewer national agencies which are not part of mega-agency groups n regional and local agencies work with smaller clients who are usually located nearby n these are independent agencies n there are now fewer national agencies which are not part of mega-agency groups n regional and local agencies work with smaller clients who are usually located nearby

10top U.S. ad agencies

Top independent U.S. agencies

specialized/niche agencies n industry specialists

specialized/niche agencies n industry specialists n ethnic agencies n industry specialists n ethnic agencies

specialized/niche agencies n industry specialists n ethnic agencies n industry specialists n ethnic agencies n internet agencies

specialized/niche agencies n industry specialists n ethnic agencies n industry specialists n ethnic agencies n internet agencies n business-to-business agencies n creative boutiques and design houses

other suppliers n provide “unbundled” services l one part of what an agency does n media buying services n freelancers & consultants n production companies n in-house or “house” agencies l agencies owned by clients n provide “unbundled” services l one part of what an agency does n media buying services n freelancers & consultants n production companies n in-house or “house” agencies l agencies owned by clients

in-house agencies n advantages & disadvantages from the gap’s “house agency” from the gap’s “house agency”

in-house agencies n advantages & disadvantages from the gap’s “house agency” from the gap’s “house agency” l familiarity l specialization l fast service l cost savings l confidentiality l familiarity l specialization l fast service l cost savings l confidentiality

in-house agencies n advantages & disadvantages l familiarity l specialization l fast service l cost savings l confidentiality n advantages & disadvantages l familiarity l specialization l fast service l cost savings l confidentiality l objectivity l resources l fresh ideas l extra cost and overhead l objectivity l resources l fresh ideas l extra cost and overhead

2 primary roles of agencies n idea generation n brand-building n idea generation n brand-building

idea generation n manufacture ideas l ideas are lifeblood of the agency n create intellectual capital n create and sell different kinds of ideas l marketing strategies l promotional opportunities l even new product ideas... l ideas are lifeblood of the agency n create intellectual capital n create and sell different kinds of ideas l marketing strategies l promotional opportunities l even new product ideas...

brand-buildingbrand-building n “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.” n Let’s look at some examples... n “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.” n Let’s look at some examples...

brand-buildingbrand-building n Marlboro l Leo Burnett n Marlboro l Leo Burnett

brand-buildingbrand-building n McDonald’s l DDB Needham n McDonald’s l DDB Needham

brand-buildingbrand-building n Pepsi l BBDO n Pepsi l BBDO

brand-buildingbrand-building n Nike l Wieden + Kennedy n Nike l Wieden + Kennedy

brand-buildingbrand-building n American Express l Ogilvy & Mather n American Express l Ogilvy & Mather

brand-buildingbrand-building n Apple l Chiat/Day n Apple l Chiat/Day

brand-buildingbrand-building n more and more, agencies are being involved in all areas of marketers’ brand-building activities n today, it’s more than advertising n it’s integrated marketing communications (IMC) n more and more, agencies are being involved in all areas of marketers’ brand-building activities n today, it’s more than advertising n it’s integrated marketing communications (IMC) means integration

integrated marketing communication n more and more, agencies are becoming the integrators of the whole range of brand-building activities... n “done right, IMC is the planning and implementation of the various communications disciplines as a single, overall communications system -- making all the channels work.”

integrated marketing communication n advertising n public relations n direct response n sales promotion n personal selling n advertising n public relations n direct response n sales promotion n personal selling the imc promotion mix

what agencies do. structure & organization and how they’re organized to do it.

7 primary services: n complete a marketing analysis n develop an advertising plan n prepare a creative strategy n create advertising executions n develop and implement a media plan n handle billing and payments n integrate other marketing communications n complete a marketing analysis n develop an advertising plan n prepare a creative strategy n create advertising executions n develop and implement a media plan n handle billing and payments n integrate other marketing communications

4 functions of full-service agencies n account management n creative n media planning and placement n research

agency organization chart

n liaison between agency and client n responsible for understanding... l the client’s business l the client’s marketing needs l strategy development n representing client point of view within the agency n liaison between agency and client n responsible for understanding... l the client’s business l the client’s marketing needs l strategy development n representing client point of view within the agency account management

n account management director n management supervisor n account supervisors n account executives n assistant account execs n account coordinators n traffic n account management director n management supervisor n account supervisors n account executives n assistant account execs n account coordinators n traffic account management

n responsibility l the creative department is responsible for creating and producing the print and broadcast advertising n strategy is key l good creative work is always guided by a creative strategy that sets forth goals to be accomplished and key message points to be relayed l the creative department is responsible for creating and producing the print and broadcast advertising n strategy is key l 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

n executive & group creative directors n creative director n associate creative director n copywriters n art directors n broadcast producers n print production managers n traffic coordinators n executive & group creative directors n creative director n associate creative director n copywriters n art directors n broadcast producers n print production managers n traffic coordinators

media department n The media department has two main functions - planning and buying. n The planning group handles more strategic marketing and media issues. n The buying group handles media negotiations and implementation. n The planning group handles more strategic marketing and media issues. n The buying group handles media negotiations and implementation.

n media director n associate media directors n media supervisors n media planners n media buyers n media analysts n media director n associate media directors n media supervisors n media planners n media buyers n media analysts MediaPlan media department

n mega-agency media departments have now become profit centers n agencies have set up their media departments as free-standing units n many large clients now look at media as a separate service n mega-agency media departments have now become profit centers n agencies have set up their media departments as free-standing units n many large clients now look at media as a separate service big changes in the media department

research department n interpret market environment l gather and analyze research data. l primary and secondary techniques n determine consumer needs/perceptions l understand problems n advise how ads can meet strategic goals l help find solutions n interpret market environment l gather and analyze research data. l primary and secondary techniques n determine consumer needs/perceptions l understand problems n advise how ads can meet strategic goals l help find solutions ResearchReport

n research director n research project managers n research assistants n outside research specialists n research director n research project managers n research assistants n outside research specialists research department ResearchReport

auxiliary agency functions n account planning n strategy/creative review board n office management l human resources l legal services l accounting l recruitment

3 ways agencies make money n commissions l usually 15% of gross costs n fees l usually based on negotiated hourly rate n incentives l still relatively new and problematic l usually based on performance goals n commissions l usually 15% of gross costs n fees l usually based on negotiated hourly rate n incentives l still relatively new and problematic l usually based on performance goals

agency commissions n media commission system l 15% media commission n adjustable commission rates l negotiate to match client budget l sliding scale n markups-production & service l add a percentage markup to costs l 17.65% of net = 15% of gross n media commission system l 15% media commission n adjustable commission rates l negotiate to match client budget l sliding scale n markups-production & service l add a percentage markup to costs l 17.65% of net = 15% of gross

4 types of fee systems n fixed fee (retainer) n cost-plus fee n performance fee n hybrid fee & commission n fixed fee (retainer) n cost-plus fee n performance fee n hybrid fee & commission

incentivesincentives n in theory, a good way to work n get paid based on how well you do, not how much you bill n in practice, difficult to implement n if client makes final decision (instead of agency), how can agency be responsible for final results? n results based on many factors, such as competitive efforts, not just advertising n in theory, a good way to work n get paid based on how well you do, not how much you bill n in practice, difficult to implement n if client makes final decision (instead of agency), how can agency be responsible for final results? n results based on many factors, such as competitive efforts, not just advertising

new business n three primary sources l build existing client’s business l add and sell new IMC services l solicit new accounts n two ongoing problems l “spec” work l teams “walking” with accounts n three primary sources l build existing client’s business l add and sell new IMC services l solicit new accounts n two ongoing problems l “spec” work l teams “walking” with accounts “ The critical objective and role of any ad agency is gaining new business.”

beyond 2007 advertising agency trends advertising agency trends

agency trends nclutter, overload, “overchoice” l increased media options l increasing audience fragmentation l more messages everywhere n doing more with less l economic pressures, “downsizing” l ongoing client budget pressures n managing size l more mergers and mega-agencies nclutter, overload, “overchoice” l increased media options l increasing audience fragmentation l more messages everywhere n doing more with less l economic pressures, “downsizing” l ongoing client budget pressures n managing size l more mergers and mega-agencies

agency trends n managing technology l interactive marketing l , web sites n improving internal systems l account planning l re-engineering agency organization l improving delivery of imc services n managing technology l interactive marketing l , web sites n improving internal systems l account planning l re-engineering agency organization l improving delivery of imc services

as long as marketers need ideas to build their brands, they’re going to need in conclusion... advertising agencies