1. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Chapter Three
Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communications Organizations
Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communications Organizations
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

2. Participants in the IMC Process
Advertiser (Client)
Advertising agency
Direct-response agencies
Sales promotion agencies
Media organizations
Relation to text This slide relates to material on pp of the text and Figure 3-1.
Summary Overview The various participants in the IMC process are shown on this slide. These include:
Advertiser (client) – the company or organization that has the product, service or cause to be marketed and provides the funds to pay for the IMC program
Advertising Agency – a firm that specializes in the creation, production, and often the placement of the communications messages and may provide other services to facilitate the IMC process
Media Organizations – companies that provide information and entertainment to subscribers, viewers, listeners and/or readers and in which marketers can purchase time or space to deliver their advertising and promotion messages
Marketing Communication Specialist Organizations – companies that provide specialized marketing communication services that are used as part of the IMC process. These include
Direct response agencies
Sales promotion agencies
Public Relations Firms
Interactive Agencies
Collateral Services – companies that provide a wide array of support functions used by advertisers, agencies, media organizations, and specialist organizations such as marketing research, package design, photography, video production and other services
Use of this slide This slide can be used to introduce the various participants in the IMC process and provide a brief overview of their roles. More detailed discussion of the role and responsibilities of each participant will follow.
Marketing communications specialist organizations
Public relations firms
Interactive agencies
Collateral services

3. Advertising Department Under Centralized System
President
Production
Finance
Marketing
Research and develop-ment
Human resources
Relation to text This slide relates to the material on pp of the text and Figure 3-2.
Summary Overview Companies have several options as to how they choose to organize for advertising including the centralized, decentralized and in-house systems. This slide shows how companies often organize for advertising under a centralized system. Under this system various organizational activities are divided along functional lines with marketing being a key area along with production, finance research and development and human resources. Within marketing, activities are also divided along functional lines with advertising placed alongside other areas including marketing research, sales, and product planning.
Use of this slide This slide can be to show how companies often organize under a centralized system whereby an advertising or marketing communications manager assumes responsibility for supervising all promotion activities. The various activities of an advertising or marketing communications manager should be discussed including:
Planning and budgeting
Administration and Execution
Coordination with other departments
Coordination with outside agencies and services
Advertising
Marketing research
Sales
Product planning

4. Pros & Cons of Centralization
+ Positive
- Negative
Better communications
Better
communications
Less goal
involvement
Less goal
involvement
The
Centralized
System
Fewer
personnel
Fewer personnel
Longer
response time
Longer
response time
Relation to text This slide relates to the material on pp of the text and Figure 3-5.
Summary Overview This slide presents the pros and cons of using a centralized system to organize for advertising and promotion.
The positive aspects of this system include:
Better communications as developing and coordinating the advertising and promotional program from one central office facilitates communication
Fewer personnel are needed as fewer people are involved in advertising and promotion program decisions which facilitates decision making
Continuity of staff often results as there may be less turnover and more experience among those involved in managing the advertising and promotion program
Allows for more top management involvement
The negative aspects of centralization include:
Less goal involvement as it may be difficult for the advertising manager to become involved with the marketing strategy and goals for the company or brand
Longer response time as the advertising department may be slow in responding to the specific marketing problems or needs of the company or brand
Inability to do multiple product lines as the company becomes larger and adds more products, services and/or brands and there is more demand on the department
Use of this slide The text discusses the pros and cons of the various systems used to organize for advertising and promotion. This slide summarizes the pros and cons of the centralized system.
Continuity
of staff
Continuity of staff
More top management involvement
Can’t do
multiple product lines
More top management involvement

5. Decentralized Brand Management System
Corporate
Research
Human
Production
Finance
Marketing
and
resources
development
Product
Marketing
Sales
management
services
Relation to text This slide relates to the material on pp of the text and Figure 3-3.
Summary Overview This slide shows how companies often organize for advertising and promotion under a decentralized brand management system, which is often used by large companies with multiple divisions and many different products and brands. Under this system responsibility for responsibility for the various functions associated with IMC are assigned to a product or brand manager who works closely with the outside advertising agency as well as other marketing communication specialists. The brand manager may also work with other areas of marketing within the firm such as sales, marketing research and the advertising/promotion department.
Use of this slide Companies have several options as to how they choose to organize for advertising including the centralized, decentralized and in-house systems. This slide can be to show how companies often organize under a decentralized system whereby a brand manager assumes responsibility for supervising all promotion activities and works closely with the company’s marketing services group as well as an outside advertising agency and other marketing communication specialist organizations.
Brand
Brand
manager
manager
Advertising
Marketing
department
Ad agency
Ad agency
research
Sales
Package
promotion
design
Merchandising

6. Pros & Cons of Decentralization
+ Positive
- Negative
Ineffective decision making
Ineffective decision making
Concentrated
attention
Concentrated
attention
Internal conflicts
Internal conflicts
The
Decentralized
System
Rapid problem
response
Rapid problem
response
Relation to text This slide relates to the material on pp of the text and Figure 3-5.
Summary Overview This slide presents the pros and cons of using a decentralized system to organize for advertising and promotion.
The positive aspects of this system include:
Concentrated managerial attention for a product or brand
Rapid response to problems and opportunities facing a brand
Increased flexibility allowing for adjustments to various aspects of the advertising and promotional program
The negative aspects of decentralization include:
Ineffective decisions since brand managers often lack training and experience in advertising and promotion
Internal conflict as brand managers compete for top management attention and marketing resources
Lack of authority by brand managers over the functions needed to implement and control the plans they develop
Use of this slide The text discusses the pros and cons of the various systems used to organize for advertising and promotion. This slide summarizes the pros and cons of the decentralized brand manger system. Brand management is very common among many large companies and attention should be given to issue involved with the use of this system for effective management of the IMC function.
Misallocation of funds
Increased
flexibility
Misallocation of funds
Increased
flexibility
Lack of
Authority

7. Pros & Cons of In-House Agencies
+ Positive
- Negative
Cost
savings
Cost
savings
Less
experience
Less
experience
The
In-house
Agency
Relation to text This slide relates to the material on pp and Figure 3-5
Summary Overview This slide presents the pros and cons of using an in house agency to organize for and handle a company’s advertising and promotion.
Advantages of this system include:
Cost savings that result since media commissions that would go to an outside agency go to the in- house agency
More control over the advertising function since it is handled within the company rather than by an outside agency
Better coordination of advertising and promotion with the firm’s other marketing activities
Negative aspects of this system include:
Less advertising experience than is available from an outside agency with has a variety of specialists in various areas of advertising
Less objectivity since those working for an in-house agency are part of the company rather than an outside agency
Less flexibility as outside agencies can be changed much more easily whereas changes among in-house agency personnel are slower and more disruptive
Use of this slide The text discusses the pros and cons of the various systems used to organize for advertising and promotion. This slide summarizes the pros and cons of using in-house agencies. Examples of companies that use in-house agencies should be provided such as Calvin Klein and Radio Shack.
More
control
More
control
Less
objectivity
Less
objectivity
Better
coordination
Less
flexibility
Better
coordination

8. Ad Agencies Have Skilled Specialists
Artists
Writers
Researchers
Relation to text This slide relates to material on pp of the text.
Summary Overview One of the main reasons outside advertising agencies are used is that they provide the client with the services of highly skilled individuals who are specialists in their fields. A list of these specialists is provided in the slide and includes:
Artists
Writers
Researchers
Photographers
Media Analysts
Specialists with other skills
Use of this slide This slide can be used to introduce the various services and specialists of an advertising agency. The expertise and skills of outside advertising agencies is only one reason for choosing to use them. Other reasons are they provide a more objective viewpoint and they have a broad range of experience with a variety of products, companies, and industries.
Photographers
Media Analysts
Other Skills

9. Full-Services Agencies
Planning advertising
Planning advertising
Full range of marketing communication and promotion services
Performing research
Performing research
Creating advertising
Creating advertising
Selecting media
Selecting media
Producing advertising
Producing advertising
Relation to text This slide relates to material on p. 82 of the text.
Summary Overview This slide defines and summarizes the activities of a full service advertising agency. A full service agency offers a full range of marketing, communications, and promotions services. These advertising services include:
Planning, creating, and producing advertising campaigns
Performing marketing and advertising research
Selecting media
The non-advertising services performed by a full service agency are:
Strategic market planning
Sales promotion
Direct marketing
Interactive capabilities
Package design
Public relations and publicity
Use of this slide This slide can be used to introduce the wide array of activities performed by a full service advertising agency.
Interactive capabilities
Interactive capabilities
Strategic market planning
Strategic market planning
Nonadvertising services
Sales promotions
Sales promotions
Package design
Package design
Direct marketing
Direct marketing
Public relations and publicity

10. Typical Full-Service Agency Organization
Board of
directors
President
VP creative
VP account
VP marketing
Relation to text This slide relates to Figure 3-7 on p. 83 of the text.
Summary Overview This slide shows how a full service adverting agency is organized. A full service agency is made up of departments that provide the activities needed to perform the various advertising functions and serve the client. These departments are shown in the slide and include creative services, account services, marketing services, and management and finance.
Use of slide This slide can be used to introduce the activities of a full service advertising agency and how it is organized. The activities of these various departments should be discussed.
VP management
services
services
services
and finance
Writers TV
Print
Account
Sales
Media
Research
Art directors
production
production
supervision
promotion
Traffic
Account
executive
Office
Finance
management
Accounting
Personnel

11. Services Provided by Agencies
Agency Services
Account Service
Creative Services
Marketing Services
Account Service
Marketing Services
Relation to text This slide relates to material on pp of the text
Summary Overview The slide shows the various services of a full service advertising agency. These agency services consist of:
Account services – this is the link between the agency and its clients. The account executive is the liaison and focal point of the agency-client relationship. They are responsible for understanding the advertiser’s marketing and promotions needs and interpreting them to agency personnel.
Marketing services – includes marketing research and media planning. Account planners gather information that is relevant to the client’s product or service to be used in the IMC campaign. Media departments analyze, select, and contract media sources.
Creative services – is responsible for the creation and execution of advertisements. Copywriters and artists are specialists in this department. Additionally there is a production department that coordinates all phases of production of advertising and other creative work.
Use of slide This slide can be used to discuss the roles of the various departments in a full service ad agency. There are many activities and many personnel involved in the planning, creating and producing of ads. The coordination of their effort is critical to the success of an IMC program.
The link between agency and client
Managed by the account executive
Research department
May include account planners
Media department to obtain media space and time
Creation and execution of ads
Copywriters, artists, other specialists

12. Other types of agencies and services:
Creative Boutiques
Provide only creative services
Provide only creative services
Full-service agencies may subcontract with creative boutiques
Full-service agencies may subcontract with creative boutiques
Relation to text This slide relates to material on p of the text.
Summary Overview Creative boutiques have developed in response to some client’s desire to use only the creative talent of an outside agency while maintaining the other functions internally. Clients seek the help of creative boutiques when an extra creative effort is required or because its own employees do not have sufficient skills in this regard. They can be used:
By client companies for creative services only
Full service agencies may subcontract for their creative services when busy or when not wanting to add permanent employees
Other functions such as advertising planning, research and media buying may be done internally within the company or contracted out
Use of slide This slide can be used to explain the role of creative boutiques in planning an IMC program. They usually are hired for their creative talent and are paid on a fee basis. They can be hired directly by a company for their specialized services or by a full service agency when they are very busy or do not want to hire full time employees.
Ability to turn out inventive creative work quickly

13. Other types of agencies and services:
Media Specialist Companies
Specialize in buying media, especially broadcast time
Specialize in buying media, especially broadcast time
Agencies and clients develop media strategy
Agencies and clients develop media strategy
Relation to text This slide relates to material on p. 87 of the text.
Summary Overview The task of purchasing advertising media has grown more complex as specialized media proliferate. As such, media buying services have found a niche by specializing in the analysis and purchase of advertising time and space. Agencies and clients usually develop their own media strategies and hire independent buying services to execute them. Some of the characteristics of media specialist companies include:
They specialize in buying media time, particularly radio and television time
Because the purchase large amounts of time and space, they usually receive large discounts and can save the agency/company money on media purchases.
They are paid a fee or commission for their work
The agency or client may often develop the media strategy
Media buying organizations may be used to implement the media strategy and buy broadcast time and/or space in print publications
Use of slide This slide can be used to show the role of media buying services. Their use is growing as more companies look for ways to get more clout from their advertising budgets.
Media buying organizations implement the strategy and buy time and space

14. Methods of Agency Compensation
Commissions
from media
Commissions
from media
Compensation
Methods
Relation to text This slide relates to material on pp of the text.
Summary Overview
Because the type and amount of service an agency performs can vary from one client to another, a variety of methods are used to compensate them for their services. Various ways for compensating agencies are shown in this slide and include:
Commission method – traditional method whereby the agency receives a specified commission (usually 15%) from the media on any advertising time or space it purchases for its client.
Fee, cost, and incentive-based systems:
Fee arrangement – the agency charges a basic monthly fee for all of its services. Agency and client agree on work to be done and the amount to be paid. This is the primary method accounting for 68 percent of the compensation plans.
Cost arrangement – the client pays a fee based on the costs of its work plus some agreed-on profit margin (a percentage of total costs). This method requires careful accounting and detailed records of agency costs.
Incentive-based – fee is based on how well the agency meets its performance goals such as sales or market share. There is a general movement toward the use of this method by many companies.
Percentage Charges – adding a markup to the various services the agency purchases from outside providers. These may include market research, artwork, printing, photography, etc. and range from to 20 per cent.
Use of slide This slide can be used to discuss how advertising agencies are compensated for their work. Changes in the compensation systems have been a result of many companies moving away from traditional mass media in favor of a wider array of marketing tools and an effort to make their agencies more accountable for their work.
Fee, cost, and incentive-based systems
Fee, cost, and incentive-based systems
Percentage
charges

15. Why Agencies Lose Clients
Personnel
changes
Personnel
changes
Changes
in strategy
Changes
in strategy
Poor
performance
Poor
performance
Poor
communications
Poor
communications
Declining
sales
Declining
sales
Unrealistic
demands
Unrealistic
demands
Relation to text This slide relates to material on pp of the text which discusses reasons why agencies lose clients.
Summary Overview While many successful client-agency relationships last for years, long-term relationships are becoming less common. The various reasons an agency might lose clients are shown on this slide. Some of these are avoidable while others may be beyond the agency’s control.
Use of this slide This slide can be used to show reasons why an agency can lose its clients. Understanding these problems can help agencies avoid them.
Changes
in size
Changes
in size
Payment
conflicts
Payment
conflicts
Personality
conflicts
Personality
conflicts
Policy
changes
Conflict of
interests
Conflict of
interests
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

16. How Agencies Gain Clients
Referrals
Presentations
Solicitations
Relation to text This slide relates to material on pp in the text that discusses how agencies gain new clients.
Summary Overview Competition for accounts in the agency business is intense. For most large agencies, most new business comes from clients who already have an agency but decide to change their relationships. Thus, agencies must constantly search and compete for new clients. Some of the ways they do this are through
Referrals
Solicitations
Presentations
Public relations efforts
Image or reputation
Use of this slide Gaining new business is very important to advertising agencies. This slide can be used to show the various ways an agency can gain new business.
Public Relations
Image, Reputation
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

17. Direct-Marketing Agency Activities
Database
management
Database
management
Media services
Media services
Direct-Marketing
Agencies
Direct
mail
Direct
mail
Creative
Creative
Relation to text This slide relates to material on p. 96 of the text, which discusses direct-marketing agencies.
Summary Overview One of the fastest growing areas of IMC is direct marketing. As the industry has grown, numerous direct response agencies have evolved that offer companies their specialized skills in both consumer and business markets. This slide shows the various services and departments of a direct response agency. Services include:
Database management
Direct mail
Research
Departments of a direct response agency include:
Media services
Creative
Production
Use of slide This slide can be used to discuss the role of direct response agencies, the types of services they provide and their role in the development of an IMC program.
Research
Production
Research
© 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

18. Activities Performed by Sales Promotion Agencies
Promotional planning
Promotional planning
Creative work and research
Creative work and research
Tie-in coordination
Tie-in coordination
Relation to text This slide relates to material on pp of the text, which discusses sales promotion agencies
Summary Overview The sales promotion agency is another specialized service used by many marketers. Most companies use sales promotion agencies to develop and administer their sales promotional programs. These firms often work with the client’s advertising and/or direct response agencies to coordinate their efforts with the advertising and direct marketing programs. Services provided by sales promotion agencies include:
promotion planning
creative work and research
tie-in coordination with advertising
fulfillment
premium design and manufacturing
catalog production
contest/sweepstakes development
Use of this slide This slide can be used to discuss the role of sales promotion agencies. These agencies play an important role in the development and implementation of IMC programs, particularly for consumer packaged goods companies that make extensive use of sales promotion.
Fulfillment
Fulfillment
Premium design and manufacturing
Premium design and manufacturing
Catalog productions
Catalog production
Contest/sweepstakes management

19. Functions Performed by Public Relations Firms
Damage
control
Damage
control
Generating
publicity
Generating
publicity
Strategy
development
Strategy
development
Program
planning
Relation to text This slide relates to material on p. 97 of the text, which discusses pubic relations firms.
Summary Overview Most large companies use public relations firm. A public relations firm develops and implements programs to manage the organization’s publicity, image, and affairs with consumer and other relevant publics. This slide shows the activities of the PR firm. These include:
Strategy development
Generating publicity
Lobbying
Public affairs activities
Damage control
Image portrayal
Program planning
Use of slide This slide can be used to show the services provided by public relations firms. As companies adopt an IMC approach to promotional planning, they are coordinating their PR activities with advertising and other promotional areas. They are also integrating PR and publicity into the marketing communications mix to increase message credibility and save media costs.
Image
portrayal
Image
portrayal
Lobbying
Lobbying
Public
affairs
Public
affairs

20. Functions Performed by Interactive Agencies
Web
banner ads
Text messages
Interactive Media Creation
Web sites
Web sites
Relation to text This slide relates to material on pp of the text.
Summary Overview With the rapid growth of the Internet and other forms of interactive media, a new type of specialized marketing communications organizations has evolved, the interactive agency. This various functions performed by an interactive agency are shown on this slide. Interactive agencies specialize in development and strategy of the various interactive tools such as web banner ads, web sites, CD-ROMs, text messages, search engine optimization, and kiosks. They also have expertise in digital technology elements such as audio, video, special effects and animation.
Use of slide This slide can be used as part of a discussion of the role of interactive agencies.
Many companies are using interactive agencies to take advantage of their expertise in designing, managing, and supporting interactive media.
Kiosks
Search engine optimization
Search engine optimization

21. Marketing Research Companies
Planning and implementing research
Planning and implementing research
Information application
Information application
Relation to text This slide relates to material on p. 98 of the text.
Summary Overview The final participants in the promotional process are those that provide various collateral services. These services include marketing research, package design firms, photographers, printer, video production houses, and event marketing services companies. The marketing research companies are widely used to help companies understand their target audiences and gather information that will be of value in designing and evaluating their advertising and promotions programs. The activities provided by marketing research companies include:
Program implementation
Information application
Analysis and interpretation
Primary data collection (qualitative and quantitative)
Secondary data collection
Use of slide This slide can be used to introduce the marketing research agency as a collateral service in the promotional process. The marketing research agency continues to be a valuable resource as companies try to better understand their targeted consumer and how best to meet their needs.
Analysis and interpretation
Analysis and interpretation
Secondary data collection
Primary data collection
qualitative & quantitative
Primary data collection
qualitative & quantitative

22. Pros & Cons of Integrated Services
+ Positive
- Negative
Greater synergy
Greater synergy
Budget politics
Budget politics
Integrated Services
Relation to text This slide relates to material on pp of the text.
Summary Overview This slide presents the pros and cons of using integrated services for advertising and promotion.
The positive aspects of this system include:
Greater synergy among each of the communications program elements
It is more convenient for the client to coordinate all of its marketing efforts
A single image can be created for the product or service and address everyone, from wholesalers to consumers, with one voice
The negative aspects of integrated services include:
Political wrangling over budgets by providers
Poor communication by providers
No synergy
Use of this slide The text discusses the pros and cons of the various services used for advertising and promotion. This slide summarizes the pros and cons of integrated services.
Convenience
Convenience
Poor communication
Poor communication
Single image for product or service
No synergy
Single image for product or service

23. Obstacles to Implementing IMC
Consistent execution
Consistent execution
Internal turf battles
Internal turf battles
Many elements to handle
Many elements to handle
Compensation
Relation to text This slide relates to material on p. 99 of the text.
Summary Overview Marketers and agency executives have very different opinions regarding who should be in charge of the integrated IMC process. Obstacles cited to implementing IMC include:
Agency capability to handle various elements of an integrated campaign
Consistent execution
Internal turf battles
Ability to measure campaign success
Fear of budget reductions
Agency egos
Compensation
Use of slide This slide can be used to show the various obstacles to implementing IMC when discussing if the responsibility for IMC should be with the agency or the client. As companies shift their promotional dollars away from media advertising to other IMC tools, agencies will continue to explore ways to keep these monies under their roofs.
Measuring campaign success
Measuring campaign success
Agency egos
Agency egos
Fear of budget reductions
Fear of budget reductions