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Evalution and growth of Evalution and growth of advertising advertising
advertising
the first advertising agentsthe first advertising agents
1843 volney palmer1843 volney palmer agent for agent for mediamedia, not advertisers, not advertisers
1864 - george p. rowell1864 - george p. rowell “the johnny appleseed of
advertising” Rowell’s American
Newspaper Directory space wholesaler shared his “secret” 1888 - “Printer’s Ink”
founded in 1864 by founded in 1864 by francis w. ayer, 20francis w. ayer, 20
the first advertising agencythe first advertising agency
“& son” made the business seem more established
worked for advertiser slogan - “keeping
everlastingly at it brings success.”
n.w. ayer & son
4 full-service agency functions:4 full-service agency functions:
today,today, “full-service” agencies “full-service” agencies provide the followingprovide the following:: account management creative media planning and media
placement (media buying) research
many adding “below the line” services - PR, sales promotion, Interactive
India agency business todayIndia agency business today
over $36 billion in media billings over $36 billion in media billings ((www.mccannerickson.comwww.mccannerickson.com))
over 5,000 agenciesover 5,000 agencies over 143,000 people employedover 143,000 people employed MUMBAI and DELHI dominateMUMBAI and DELHI dominate
agency billing by city/stateagency billing by city/state
CityCity Billings in MillionsBillings in MillionsNew YorkNew York $61,264.4$61,264.4ChicagoChicago 17,739.9 17,739.9Los AngelesLos Angeles 10,545.6 10,545.6DetroitDetroit 7,946.3 7,946.3MinneapolisMinneapolis 6,087.2 6,087.2San FranciscoSan Francisco 5,101.9 5,101.9BostonBoston 3,993.7 3,993.7DallasDallas 3,234.8 3,234.8AtlantaAtlanta 2,620.9 2,620.9PhiladelphiaPhiladelphia 2,379.6 2,379.6
(Source(Source: Ad Age, 2001 )
major types of agency:major types of agency: mega-agency groupsmega-agency groups independent agenciesindependent agencies
national, regional, and local national, regional, and local
specialized/niche agenciesspecialized/niche agencies agency service suppliersagency service suppliers
media buying, creative servicesmedia buying, creative services
mega-agency groupsmega-agency groups prompted by mergers and prompted by mergers and
client globalizationclient globalization financial pressures financial pressures
martin sorrell,chairman WPP
service multinational accounts
subsidiaries provide “IMC” (integrated marketing communication) services
5 top mega-agency groups:
OmniCom Group $4.15 billion
WPP Group $3.64 billion
Interpublic Group $3.38 billion
Dentsu (Japan) $1.98 billion
Young & Rubicam $1.49 billion
1997
5 top mega-agency groups:
WPP Group(including Y&R)
$6.69 billion
Omnicom Group 5.74 billion
Interpublic Group $5.08 billion
Havas $2.39 billion
Publicis(including Saatchi)
$2.17 billion
1999
5 top mega-agency groups:
WPP Group(including Y&R)
$7.9 billion
Omnicom Group $6.9 billion
Interpublic Group $6.6 billion
Dentsu $3.1 billion
Havas $2.76 billion
2000
5 top mega-agency groups:
2006
Omnicom Group $8.62 billionWPP Group 6.76 billionInterpublic (IPG) 5.86 billionPublicis 4.41 billion
(Including Leo Burnett)
Dentsu (Japan) 2.55 billionHavas Advertising 1.88 billion
5 top mega-agency groups:
Source: Ad Age 2007
Together, the five international mega-agencies are now 75% of worldwide billings
18%17%
25%
6%
18%
16%
OmnicomWPPIPGPublicisOtherHavas
mega-agency pros & consmega-agency pros & cons
positives:positives: larger talent poollarger talent pool negotiating cloutnegotiating clout financial rewardsfinancial rewards account securityaccount security competitive edgecompetitive edge strong partnershipsstrong partnerships more servicesmore services international linkinternational link
negatives:negatives: people vs. profitpeople vs. profit creativity vs. sizecreativity vs. size conflict of conflict of
interestsinterests people businesspeople business
national, regional & localnational, regional & local
these arethese are independent agencies independent agencies
there are nowthere are now fewer national fewer national agencies agencies which are not part of which are not part of mega-agency groupsmega-agency groups
regionalregional and and local agencies local agencies work work with smaller clients who are usually with smaller clients who are usually located nearbylocated nearby
11 top U.S. ad agenciestop U.S. ad agencies
1.1. J. Walter Thompson J. Walter Thompson 2. Leo Burnett Worldwide2. Leo Burnett Worldwide3. 3. McCann-Erickson Worldwide4. BBDO Worldwide 4. BBDO Worldwide 5. Grey Advertising5. Grey Advertising6. DDB Worldwide6. DDB Worldwide7. 7. Ogilvy & Mather Worldwide8. FCB Worldwide8. FCB Worldwide9. Y&R Advertising9. Y&R Advertising10. Publicis Worldwide10. Publicis Worldwide
specialized/niche agenciesspecialized/niche agencies
industry specialistsindustry specialists ethnic agenciesethnic agencies
specialized/niche agenciesspecialized/niche agencies
industry specialistsindustry specialists ethnic agenciesethnic agencies internet agencies
specialized/niche agenciesspecialized/niche agencies
industry specialistsindustry specialists ethnic agenciesethnic agencies internet agencies business-to-business agencies creative boutiques and
design houses
other suppliersother suppliers
provide “unbundled” servicesprovide “unbundled” services one part of what an agency doesone part of what an agency does
media buying servicesmedia buying services freelancers & consultantsfreelancers & consultants production companies production companies in-house or “house” agenciesin-house or “house” agencies
agencies owned by clients agencies owned by clients
in-house agenciesin-house agencies advantagesadvantages && disadvantagesdisadvantages
from the gap’s“house agency”
in-house agenciesin-house agencies advantagesadvantages && disadvantagesdisadvantages
from the gap’s“house agency”
familiarity specialization fast service cost savings confidentiality
in-house agenciesin-house agencies advantagesadvantages && disadvantagesdisadvantages
familiarityfamiliarity specializationspecialization fast servicefast service cost savingscost savings confidentialityconfidentiality
objectivity resources fresh ideas extra cost and
overhead
2 primary roles of agencies2 primary roles of agencies
idea generationidea generation brand-buildingbrand-building
idea generationidea generation manufacture ideasmanufacture ideas
ideas are lifeblood of the agency
create intellectual capital create and sell different
kinds of ideas marketing strategies promotional opportunities even new product ideas...
brand-buildingbrand-building
““The agency’s purpose is to The agency’s purpose is to createcreate and and directdirect communication about a communication about a product or service product or service so that the brand so that the brand is perceived to have a unique is perceived to have a unique value or brand personality.”value or brand personality.”
Let’s look at some examples...Let’s look at some examples...
brand-buildingbrand-building
MarlboroMarlboro Leo Burnett Leo Burnett
brand-buildingbrand-building
McDonald’sMcDonald’s DDB Needham DDB Needham
brand-buildingbrand-building
PepsiPepsi BBDO BBDO
brand-buildingbrand-building
NikeNike Wieden + Kennedy Wieden + Kennedy
QuickTimeª and aSorenson Video 3 decompressorare needed to see this picture.
brand-buildingbrand-building
American ExpressAmerican Express Ogilvy & Mather Ogilvy & Mather
brand-buildingbrand-building
AppleApple Chiat/DayChiat/Day
brand-buildingbrand-building
more and more, agencies are being more and more, agencies are being involved ininvolved in all areasall areas of marketers’of marketers’ brand-building activitiesbrand-building activities
today, it’s more thantoday, it’s more than advertisingadvertising it’sit’s integrated marketing integrated marketing
communicationscommunications (IMC) (IMC)
means integration
integrated marketing communicationintegrated marketing communication
more and more, more and more, agencies are agencies are becoming the becoming the integratorsintegrators of the of the whole range of whole range of brand-building brand-building activities... activities...
“done right, IMC is the planning and implementation of the various communications disciplines as a single, overall communications system -- making all the channels work.”
integrated marketing communicationintegrated marketing communication
advertising public relations direct response sales promotion personal selling
the imc promotion mix
what agencies do.what agencies do.
structure & organization
and how they’re organizedto do it.
7 primary services:7 primary services:
complete acomplete a marketing analysis marketing analysis develop andevelop an advertising plan advertising plan prepare aprepare a creative strategy creative strategy create create advertising executionsadvertising executions develop and implement adevelop and implement a media plan media plan handle handle billingbilling and and paymentspayments integrate integrate other marketing other marketing
communicationscommunications
4 functions of full-service agencies
account management creative media planning and placement research
agency organization chartagency organization chart
Traffic
Production ProductionBroadcast Analysts
Other MarketingCommunications
Services[PR, etc.]
Asst. AccountExecutive
AccountExecutive
ManagementSupervisor
Account Mgmt.Director
Copy Spvr. &Copywriters
Art Supervisor& Art Directors
CreativeGroup:
AssociateCreativeDirector
CreativeExec CD
ResearchAssistants
ProjectManagers
ResearchDirector
MediaPlanner
MediaBuyer
MediaSupervisor
AssociateMedia
Director
Media Dept.Director
StrategyReview Board[ManagmentCommittee]
Office Management[Personnel,Accounting,Legal, etc.]
President[COO]
Board ofDirectors
[Chairman/CEO]
liaison between agency and client liaison between agency and client responsible for understanding... responsible for understanding...
the client’s businessthe client’s business the client’s marketing needsthe client’s marketing needs strategy developmentstrategy development
representing client point of view representing client point of view within the agencywithin the agency
account management account management
account management account management directordirector
management supervisormanagement supervisor account supervisorsaccount supervisors account executivesaccount executives assistant account execsassistant account execs account coordinators account coordinators traffictrafficTraffic
Asst. AccountExecutive
AccountCoordinator
AccountExecutive
AccountSupervisor
Management.Supervisor
Account Mgmt.Director
account management account management
responsibilityresponsibility the creative department is responsible for
creating and producing the print and broadcast advertising
strategy is key good creative work is always guided by a
creative strategy that sets forth goals to be accomplished and key message points to be relayed
creative departmentcreative department
creative departmentcreative department
executive & group creative executive & group creative directors directors
creative directorcreative director associate creative directorassociate creative director copywriterscopywriters art directorsart directors broadcast producersbroadcast producers print production managersprint production managers traffic coordinatorstraffic coordinators
Traffic
ProductionBroadcast
Production
Copy Spvr. &Copywriters
Art Supervisor& Art Directors
CreativeGroup:
AssociateCreative
Director (ACD)
CreativeDirector (CD)
ExecutiveCreative
Director (ECD)
StrategyReviewBoard
media departmentmedia department
The The media departmentmedia department has two main has two main functions - functions - planningplanning and and buying.buying.
The planning group handles more strategic marketing and media issues.
The buying group handles media negotiations and implementation.
media directormedia director
associate media directorsassociate media directors
media supervisorsmedia supervisors
media plannersmedia planners
media buyersmedia buyers
media analystsmedia analystsAnalysts
MediaPlanner
MediaBuyer
MediaSupervisor
AssociateMedia
Director
MediaDirector
MediaMediaPlanPlan
media departmentmedia department
mega-agency media departments mega-agency media departments have now becomehave now become profit centersprofit centers
agencies have set up their media agencies have set up their media departments asdepartments as free-standing unitsfree-standing units
many large clients now look at media many large clients now look at media as aas a separate serviceseparate service
big changes in themedia department
research department
interpret market environmentinterpret market environment gather and analyze research data. gather and analyze research data. primary and secondary techniquesprimary and secondary techniques
determine consumer needs/perceptionsdetermine consumer needs/perceptions understand problemsunderstand problems
advise how ads can meet advise how ads can meet strategic goalsstrategic goals help find solutionshelp find solutions
ResearchResearchReportReport
research directorresearch director research project managersresearch project managers research assistantsresearch assistants
outside research outside research specialistsspecialists
research department
ResearchSuppliers
Outside
ResearchAssistants
ProjectManagers
ResearchDirector
ResearchResearchReportReport
auxiliary agency functionsauxiliary agency functions
account planningaccount planning strategy/creative review boardstrategy/creative review board office managementoffice management
human resourceshuman resources legal serviceslegal services accountingaccounting recruitmentrecruitment
3 ways agencies make money3 ways agencies make money
commissionscommissions usually 15% of gross costsusually 15% of gross costs
feesfees usually based on negotiated hourly rateusually based on negotiated hourly rate
incentivesincentives still relatively new and problematicstill relatively new and problematic usually based on performance goalsusually based on performance goals
agency commissionsagency commissions
media commission systemmedia commission system 15% media commission15% media commission
adjustable commission ratesadjustable commission rates negotiate to match client budgetnegotiate to match client budget sliding scalesliding scale
markups-production & servicemarkups-production & service add a percentage markup to costsadd a percentage markup to costs 17.65% of net = 15% of gross17.65% of net = 15% of gross
4 types of fee systems4 types of fee systems
fixed fee (retainer)fixed fee (retainer) cost-plus feecost-plus fee performance feeperformance fee hybrid fee & hybrid fee &
commissioncommission
incentivesincentives
in theory, a good way to workin theory, a good way to work get paid based on how well you do, not get paid based on how well you do, not
how much you billhow much you bill in practice, difficult to implementin practice, difficult to implement if client makes final decision (instead of if client makes final decision (instead of
agency), how can agency be responsible agency), how can agency be responsible for final results?for final results?
results based on many factors, such as results based on many factors, such as competitive efforts, not just advertisingcompetitive efforts, not just advertising
new businessnew business
three primary sourcesthree primary sources build existing client’s businessbuild existing client’s business add and sell new IMC servicesadd and sell new IMC services solicit new accountssolicit new accounts
two ongoing problemstwo ongoing problems “ “spec” workspec” work teams “walking” with accountsteams “walking” with accounts
“The critical objective and role of any ad agency is gaining new
business.”
beyond 2000beyond 2000
advertising advertising agency trendsagency trends
agency trendsagency trends clutter, overloadclutter, overload, , “overchoice”“overchoice”
increasedincreased media options media options increasing increasing audience fragmentationaudience fragmentation more messages more messages everywhereeverywhere
doing more with lessdoing more with less economic pressures, economic pressures, “downsizing”“downsizing” ongoing ongoing client budget pressuresclient budget pressures
managing sizemanaging size more more mergersmergers and and mega-agenciesmega-agencies
agency trendsagency trends managingmanaging technology technology
interactive marketinginteractive marketing e-mail, web sitese-mail, web sites
improving improving internal systems internal systems account planning account planning re-engineeringre-engineering agency organization agency organization improving delivery ofimproving delivery of imc services imc services
as long as marketers need as long as marketers need ideasideas to build their to build their brands,brands, they’re going to needthey’re going to need
in conclusion...
advertising agencies
questions & discussionquestions & discussion
why might you be interested in why might you be interested in going into the agency business?going into the agency business?
what might keep you from choosing what might keep you from choosing a career in the agency business? a career in the agency business?