1. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Advertising Industry August 10, 2015  Types of Advertisers  Ad Agencies  Job Functions  Structure  Compensation  Suppliers  Media

2. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. $ Advertisers (Clients) Suppliers Advertising Industry Structure Media Agencies

3. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Advertising & Large Companies  Centralized  Decentralized  Efficiency  Continuity In-House Agency Functional Services CreativeMediaResearch  Flexibility  Competition among company brands

4. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Global Advertising  Standardized  Localized  Global brands  Efficiency / Recognition Most companies blend strategies to fit their unique situations  Based on differences in each country or culture  Relevance / Understanding

5. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Global expenditures $425 billion The Worldwide Advertising Industry

6. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Focus Time Resources Local vs. National Advertisers NationalLocal Long-termShort-term $$$$$ Many SpecialistsFew Generalists Building the BrandPlace of Business Market ShareSales StrategyTactics MarketsCustomers

7. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.  Product Advertising  Institutional Advertising  Classified Advertising  Cooperative (Co-op) Advertising  Allowances By The Manufacturer  Pooling Resources  Government and Social Organizations Types of Advertising  Local Advertising (Retail)

8. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. An independent organization of professionals who provide creative and business services to clients related to planning, preparing, and placing advertisements. Account Supervisors Art Directors Creative Directors Copywriters Radio and TV Producers Researchers Artists Technical Staff Marketing Specialists Media Buyers Public Relations Specialists Sales Promotion and Event Planners Direct-Marketing Specialists Advertising Agency

9. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Advertising Agency  Advertising Agency: an independent business, composed of creative and business people, who develop, prepare, and place advertising in advertising media for sellers seeking to find customers for their goods or services

10. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. How Agencies Developed  The Early Age (Colonial Times to 1917)  Space Salesmen  Space Wholesalers  The First Rate Directory  The Agency Becomes a Creative Center

11. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. How Agencies Developed (continued)  The No-Rebate Age (1918-1956)  Radio  Television  Electronic Data Processing  The Age of Negotiation (1956-1990)  Consent Decrees  The Reengineering Age  Integrated Services  Interactive Communications

12. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.  Full-Service  Business-to-Business  Creative Boutiques  Media-Buying Services  Interactive  In-House Types of Advertising Agencies

13. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.  Account Services  Research and Account Planning  Creative and Production  Media Planning and Buying  Traffic Management  Marketing Services What Do Advertising Agencies Provide?

14. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. President Account Supervisor Account Supervisor Account Supervisor Account Supervisor Account Executive Account Executive Account Executive Account Executive Art / Copy Production Vice President Account Services Vice President Account Services Vice President Creative Services Vice President Creative Services Vice President Management Services Vice President Management Services Vice President Marketing Services Vice President Marketing Services Media Research Accounting Purchasing Personnel Agency Department System

15. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Group 2 (Dial Soap) Management Director Group 2 (Dial Soap) Management Director Group 1 (Coke Classsic) Management Director Group 1 (Coke Classsic) Management Director Group 3 (Toyota Camry) Management Director Group 3 (Toyota Camry) Management Director Account Service Account Service Creative Director Creative Director Media Planning Media Planning Market Research Market Research Agency Management Agency Management Agency Group System

16. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.  Commissions  Around 15% of airtime fees Agency Bills Client For Agency Pays Television Agency Earns For Television Air Time Commission (15%) $1,000,000 $850,000 $150,000 Agency Compensation Plans

17. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.  Commissions  Around 15% of airtime fees  Markup Charges Agency Compensation Plans  Production cost + fixed percent  Agencies add 17.65% to the cost of outside services Photographer charges $8,500 The Agency adds$1,500(17.65%) Client is charged $10,000for photography services

18. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.  Commissions  Around 15% of airtime fees  Markup Charges  Production cost + fixed percent  Fee Systems  Hourly rates or by project Agency Compensation Plans  Commissions  Around 15% of airtime fees  Markup Charges  Production cost + fixed percent  Fee Systems  Hourly rates or by project  Incentive Systems  Tightly-specified objectives

19. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Other Advertising Services  This is an example of collateral promotion material that agencies produce for clients.

20. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Other Advertising Services  This ad is a continuation of a concept developed by an ad agency.

21. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. ElectronicPrintInteractive MediaOut-of-HomeDirect Mail The Media of Advertising Other Media

22. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.  Newspapers – National, State, Local  Magazines – Geography and Content The Media of Advertising Print  Yellow Pages

23. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Media of Advertising Electronic  Network, Independent and Cable TV  Network and Local Radio

24. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Media of Advertising Interactive Media  Online Services  Kiosks  CD-ROM  Homeshopping Broadcasts  Interactive Programming  Internet

25. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Media of Advertising Out-of-Home  Transit  Outdoor  Billboards

26. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Media of Advertising  Direct Mail  Brochures and Catalogs Direct Mail

27. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Media of Advertising  Premiums  Point of Purchase Displays  Product Placement  Event Sponsorship Other Media

28. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Summary  A full-service agency works on many aspects of a client’s marketing problems  Many agencies are organized into four divisions  Some agencies have a domestic network of offices or affiliates to service their large accounts  Global marketing has led agencies to expand internationally  Clients usually pay agencies by commission, fees, or a combination  There are other types of advertising services beside the traditional advertising agency