1. Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations 3 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Participants in the IMC Process Marketing communications specialist organizations Media organizations Advertiser (Client) Advertising agency Collateral services Direct- response agencies Sales promotion agencies Interactive agencies Public relations firms

3. Organizing for Advertising and Promotion 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

4. Advertising Dept. Under Centralized System President Production Finance Marketing Research and develop- ment Human resources Marketing research Advertising Sales Product planning

5. Pros & Cons of a Centralized System Fewer personnel Fewer personnel Better communications Better communications Continuity Longer response time Longer response time Less goal involvement Less goal involvement The Centralized System The Centralized System + Positive - Negative Impractical for multiple brands, products, divisions Impractical for multiple brands, products, divisions More top management involvement

6. Decentralized Advertising System ProductionFinance Sales Brand Manager Ad agency Product Management Sales promotion Package design Marketing services MarketingR & D Human Resources Corporate Brand Manager Ad agency Advertising Dept Marketing Research Merchandising

7. Pros & Cons of Decentralization Internal conflicts Ineffective decision making Rapid problem response Rapid problem response Concentrated attention Concentrated attention Increased flexibility Increased flexibility The Decentralized System The Decentralized System + Positive - Negative Unequal distribution of funds Lack of Authority Lack of Authority

8. Test Your Knowledge A major reason why some companies choose to use an in-house agency is to: A) Maintain creative freshness B) Reduce advertising and promotions costs C) Better understand how advertising works D) Win advertising awards that will enhance the image of their brands E) Do all of the above

9. In-House Agencies Benettons in-house agency works with outside agencies to develop ads

10. Pros & Cons of In-House Agencies More control More control Cost savings Cost savings Better coordination Better coordination Less objectivity Less objectivity Less experience Less experience The In-house Agency The In-house Agency + Positive - Negative Less flexibility Less flexibility

11. The Ad Agencys Role Reasons for using an ad agency –Highly skilled specialists –Specialization in a particular industry –Objective viewpoint of the market –Broad range of experience

12. Ad Agencies Have Skilled SpecialistsAgenciesSpecialists Artists Writers Researchers Photographers Media Analysts Other Skills

14. Full-Service Agencies Creating advertising Planning advertising Producing advertising Performing research Selecting media Sales promotions Strategic market planning Direct marketing Interactive capabilities Package design Full range of marketing communication and promotion services Nonadvertising services Public relations and publicity

15. Typical Full-Service Agency Organization Writers Art directors TV production Traffic Print production Account Executive Account supervision VP account services Media Research Sales Promotion VP marketing services Personnel Accounting Finance Office management VP management and finance President Board of directors VP creative services

16. Services Provided by Agencies Agency Services Research department May include account planners Media dept. obtains media space, time Research department May include account planners Media dept. obtains media space, time Marketing Services The link between agency and client Managed by the account executive The link between agency and client Managed by the account executive Account Services Creation, execution of ads Copywriter artists, other specialists Creation, execution of ads Copywriter artists, other specialists Creative Services Accounting Finance Human resources New business generation Accounting Finance Human resources New business generation Mgmt & Finance

17. The Role of Creative Boutiques Creative Boutiques Provide only creative services Full-service agencies may subcontract with creative boutiques Ability to turn out inventive creative work quickly

18. Media Buying Can be Specialized Specialize in buying media, especially broadcast time Agencies and clients develop media strategy Media Specialist CompaniesMedia Specialist Media Specialist CompaniesMedia Specialist Media buying organizations implement the strategy and buy time and space

19. 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 their agencies because they prefer fee- or incentive-based systems. B)From the viewpoints of 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.

20. Methods of Agency Compensation Commissions from media Commissions from media Fee, cost, and incentive-based systems Percentage charges Percentage charges Compensation Methods Compensation Methods

21. Evaluating Agencies Financial Audit Qualitative Audit Verify costs, expenses Personnel hours charged Payments to media Payments to suppliers Planning Program development Implementation Results achieved

22. Top Agency Value-Add ActivitiesAgency New media guidance, solutions Integrated disciplines & functions Creative ideas Collaboration Ideas/programs for multi comm. programs Talented people Brand driver evaluation

23. Loyalty to a Single Agency Young & Rubicam has handled the Dr Pepper account for over 30 years

24. Why Agencies Lose Clients Poor performance Poor communications Unrealistic Client demands Personality conflicts Personnel changes Changes in size of client or agency Conflicts of interest Change in clients strategy Declining sales Payment conflicts Policy Changes

25. How Agencies Gain Clients Referrals Solicitations Presentations Public Relations Image, Reputation

26. The Hottest Agency in the Ad BusinessAgency

27. Direct-Marketing Agency ActivitiesAgency Direct mail Direct mail Database management Database management Research Creative Media services Direct- Marketing Agencies Direct- Marketing Agencies Production Database development, management

28. Direct-Marketing Agency Departments in a typical direct- marketing agency –Account management –Creative –Media –Database development and management

29. Sales Promotion AgenciesAgencies Catalog production Promotional planning Creative research Tie-in coordination Fulfillment Premium design and manufacturing Contest/sweepstakes management

30. Functions Performed by Public Relations Firms Strategy development Generating publicity Lobbying Public affairs News releases, communication Research Managing crises Coordination with promotional areas Special events

31. Functions Performed by Interactive Agencies Web banner ads Web banner ads Search engine optimization Kiosks Interactive Media Creation CD-ROMs Web sites Text messages

32. Website for the California Milk Advisory BoardBoard

33. Marketing Research Companies Quantitative studies Qualitative research Help clients under- stand target audience

34. Pros and Cons of Integrated Services Convenience Greater synergy Single image for product or service Poor communication Budget politics Integrated Services + Positive - Negative No synergy

35. 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

36. Obstacles to Implementing IMC Key obstacles –Lack of people with the broad perspective and skills to make it work –Internal turf battles –Agency egos –Fear of budget reductions –Ensuring consistent execution –Measuring success –Compensation