chapter 03 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Business of Advertising

3-3 Chapter 3 Objectives Explain how advertisers organize Define the main types of ad agencies Discuss clients and revenue Explain what people do in ad agencies Debate pros and cons of in-house agencies Describe industry changes Describe the various groups in advertising Explain how suppliers and the media help Discuss differences between local and national advertisers

3-4 The Advertising Industry: Organizations Advertisers (Clients) Agencies Media Suppliers

3-5 The Advertising Industry: People Sales Technology Research Accounting Communication Arts Management Law Most are employed by advertisers, not clients

3-6 Advertisers: Local Directed to customers in the same geographic area Independent businesses Govt. & nonprofits Franchisees and dealers Chain retailers

3-7 Advertisers: Local Ad for Rubio’s Baja Grill showcases its unique products Insert photo 4.2, p. 99 Baja Grill Burrito Position = 2.9” horiz., 1.5” vertical Size = 4.6” TALL Resolution = 300 dpi

3-8 Advertisers: Local Department structure for small advertisers with high volumes of work Insert ex. 4-1, p. 100 Department structure for small advertisers Position = 2.9” horiz., 1.5” vertical Size = 4.6” TALL Resolution = 300 dpi

3-9 Create favorable image, increase awareness, foster goodwill Recruit employees, offer services, sell merchandise Regular price-line, sale or clearance Advertisers: Local Types of local advertising Classified Product Institutional

3-10 Advertisers: Local Local ad for Michaels stores

3-11 Advertisers: Cooperative Two key purposes Build manufacturer’s brand image Help distributors, dealers or retailers make more sales

3-12 Advertisers: Regional and National A national ad for Dunkin’ Donuts

3-13 Advertisers: Regional and National Regional: one or several states National: several regions or entire country

3-14 Advertisers: Regional and National Comparison of national and local advertising

3-15 Advertisers: Regional and National Centralized department structure

3-16 Decentralized department structure Advertisers: Regional and National

3-17 Heinz ketchup ad from the Leo Burnett Group, Copenhagen Advertisers: Transnational

3-18 Advertisers: Transnational Decentralized international structure Divisions have ad agencies to handle product lines Brands within a line handled by own managers Category managers for brand in each market

3-19 Advertisers: Global Standardized approach in all countries Extensive research to ensure ad is basic & universal Centralized global structure

3-20 Media Around the World International media Foreign media

3-21 Agencies: Definition Agency roles Develop marketing & ad plans Develop ads & promotions Purchase ad space and time

3-22 Agencies An ad for Strawberry Frog arguing that a different world may justify a different agency Pub: Please

3-23 Agencies: Types Reach Full-Service Specialty BoutiquesMedia Buyers Interactive Consumer BTB LocalNational Regional Internatl

3-24 Account management Research & account planning Creative concepts Traffic control Media buying & planning Production Other services Admin Agencies: People

3-25 Agencies: People Many departments contributed to Honda’s dealer kit

3-26 Agencies: Compensation  Media commissions Ad rate-card price: $100,000 Agency buys ad at 15% discount: $85,000 Agency bills client full ad amount: $100,000 $15,000 difference is kept by the agency

3-27 Agencies: Compensation  Media commissions  Markups Agency buys materials for campaign Materials cost $85,000 Agency bills for materials plus a 17.65% markup Agency bills $100,000 which is costs plus markup

3-28 Agencies: Compensation  Media commissions  Markups  Fees Fee- commission combination Straight-fee (retainer) method Incentive system

3-29 Agencies: In-House Pros May save money Allows tighter control May permit greater attention to the brand Lower creative quality Less experience and talent Loss of objectivity Cons

3-30 Agencies: Client Relationships Referrals Presentations Community relations & networking Soliciting for new business How agencies reach & attract new clients

3-31 Suppliers Art studios & web designers Printers & related specialists Film & video houses Research companies

3-32 Out-of-home Media Digital interactive Electronic Print Direct mail Other media

3-33 Current Trends Industry consolidation Decline of the commission system Changes resulting from new media