1. chapter three The Advertising Industry McGraw-Hill/Irwin Essentials of Contemporary Advertising Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

2. 3-2 Objectives_1  Describe the various groups in the advertising business and explain their relationship to one another  Discuss the differences between local and national advertisers  Explain how advertisers organize themselves to manage their advertising both here and abroad  Define the main types of advertising agencies

3. 3-3 Objectives_2  Explain the range of tasks people perform in an ad agency and an in-house advertising department  Discuss how agencies get new clients and how they make money  Debate the pros and cons of an in-house advertising agency  Explain how suppliers and the media help advertisers and agencies

4. 3-4 The Advertising Industry  Advertisers  Advertising agencies  Suppliers  Media

5. 3-5 Types of Local Advertisers  Dealers or local franchises  Stores with branded merchandise  Specialty businesses  Government and non-profit

6. 3-6 Exhibit 3-1 Departmental Structure for Small Advertisers

7. 3-7 Types of Local Advertising  Product advertising  Institutional advertising  Classified advertising

8. 3-8 Cooperative Advertising Seeks to  build the manufacturer’s brand image  help distributors, dealers, or retailers make more sales

9. 3-9 Differences between Local and National Advertisers  National  Focus –Brand –Market share –Strategies –Markets  Long-term time frame  $5-10 million +  Use of many specialists  Local  Focus –Location –Volume –Tactics –Customers  Short-term time frame  < $1 million  Use of few generalists

10. 3-10 Exhibit 3-3 Top 10 Advertisers RankCompanyU.S. Ad Spending (in millions) 1General Motors3,997.4 2Proctor & Gamble3,919.7 3Time Warner3,283.1 4Pfizer2,957.3 5SBC2,686.8 6DaimlerChrysler2,462.1 7Ford Motor Co.2,458.0 8Walt Disney Co.2,241.5 9Verizon2,197.3 10Johnson & Johnson2,175.7

11. 3-11 Large Company Structures Exhibit 3-5 A Centralized Structure

12. 3-12 Large Company Structures Exhibit 3-6 A Decentralized Structure

13. 3-13 Transnational Advertising

14. 3-14 Will a Global Advertising Strategy Work?  Has each country’s market for the product developed in the same way?  Are the targets similar in different nations?  Do consumers share the same wants and needs?

15. 3-15 The Advertising Agency An independent organization of creative people and business people who specialize in 1)developing and preparing marketing and advertising plans, advertisements, and other promotional tools, and 2)purchasing advertising space and time in various media in order to find customers for their clients’ goods and services

16. 3-16 Types of Agencies Geographic Scope Range of Services Specialized Agencies

17. 3-17 Geographic Scope Local Regional National International

18. 3-18 Range of Services Full-service 1)General consumer 2) Business-to-business Specialized 1)Creative boutiques 2)Media-buying services 3)Interactive

19. 3-19 What Agency People Do  Account Management  Research and Account Planning  Creative Concepts  Production  Traffic Management  Agency Administration  Additional Service

20. 3-20 Exhibit 3-7 Agency Structure

21. 3-21 Agency Compensation  Media commissions  Markups  Fees –Fee-commission combination –Straight-fee –Retainer –Incentive system

22. 3-22 In-House Agency Some companies like Benetton prefer to create their ads using their own in- house agency

23. 3-23 Referrals Presentations Networking Soliciting New Business How Agencies Get Clients

24. 3-24 Suppliers in Advertising  Art Studios  Web Designers  Printers  Film/ Video Houses  Research Companies

25. 3-25 Electronic Print Digital Interactive Out-of-Home Direct Other Media

26. 3-26 Key Terms_1  Account executive  Account planning  Account supervisor  Advertiser  Advertising agency  Art directors  Art studios  Brand manager  Business-to-business agency  Centralized department  Classified advertising  Cooperative advertising  Copy  Copywriter  Creative boutique  Creative director  Decentralized system  Departmental system

27. 3-27 Key Terms_2  Fee-commission combination  Foreign media  Full-service agency  General consumer agency  Global marketer  Group system  Incentive system  In-house agency  Institutional advertising  Integrated marketing communications  Interactive agency  International agency  International media  Local advertising  Local agency  Management supervisor  Markup