McGraw-Hill/Irwin Copyright © 2012 McGraw-Hill Companies, Inc., All right reversed

3

Organizing for Advertising and Promotion: The Role of Ad Agencies

and Other Marketing Communication Organizations

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Under Armour Protects Its House

• Successful strategies• Niche markets• Expanded product line• Strong branding, product positioning,

quality, dynamic advertising• Unique brand identity, “Protect This

House”• Expansion into athletic shoes• In-house brand team

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Participants in the IMC Process

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Organizing for Advertising & Promotions

• 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

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Advertising Dept. Under a Centralized System

PresidentPresident

ProductionProduction FinanceFinance MarketingMarketingResearch

and develop-

ment

Research and

develop-ment

Human resourcesHuman

resources

Marketing research

Marketing research AdvertisingAdvertising SalesSales Product

planningProduct planning

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3-6

Pros & Cons of a Centralized System

Longerresponse time

Longerresponse time

Hard to understand the overall

marketing strategy

Hard to understand the overall

marketing strategy

ConsCons

Impractical formultiple brands,

products, divisions

Impractical formultiple brands,

products, divisions

Fewerpersonnel

Fewerpersonnel

Bettercommunications

Bettercommunications

Staff continuityStaff continuity

ProsPros

More top management involvement

More top management involvement

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Decentralized Advertising System

Production Finance

Sales

Brand Manager

Ad agency

ProductManagement

Sales promotion

Package design

Marketingservices

Marketing R & D Human Resources

Corporate

Brand Manager

Ad agency

AdvertisingDept

Marketing Research

MerchandisingSkim this material

3-8

Pros & Cons of Decentralization

Rapid problem and opportunity responseRapid problem and

opportunity response

Concentrated managerial attention

Concentrated managerial attention

Increased flexibilityIncreased flexibility

ProsPros

Internal conflictsInternal conflicts

Ineffective decision making

Ineffective decision making

ConsCons

Misallocation of fundsMisallocation of funds

Lack of authorityLack of authority

Internal focusInternal focusSkim this material

3-9

Pros & Cons of In-house Agencies

Less experienceLess experience

ConsCons

Less objectivityLess objectivity

Less flexibilityLess flexibility

Less access to top creative talent

Less access to top creative talent

More controlMore control

Cost savingsCost savings

Increased coordinationIncreased coordination

ProsPros

StabilityStability

Access to top managementAccess to top management

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Under Armour Uses an In-House Agency

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The Ad Agency’s Role

• Reasons for using an ad agency• Highly skilled specialists• Specialization in a particular industry• Objective viewpoint of the market• Broad range of experience

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Full-Service Agencies

Performing research

Performing research

Selecting mediaSelecting media

Full range of marketing

communication and promotion

services

Full range of marketing

communication and promotion

services

Creating advertisingCreating

advertising

Planning advertisingPlanning

advertising

Producing advertisingProducing advertising

Interactive capabilitiesInteractive capabilities

Package designPackage design

Nonadvertising services

Nonadvertising services

Public relations and publicity

Public relations and publicity

Sales promotions

Sales promotions

Strategic market planning

Strategic market planning

Direct marketing

Direct marketing

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Full-Service Agency Organization Chart

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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

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

Account Services

Creation, execution of ads

Copywriterartists, other specialists

Creation, execution of ads

Copywriterartists, other specialists

Creative Services

Creative Services

Accounting

Finance

Human resources

New business generation

Accounting

Finance

Human resources

New business generation

Mgmt & Finance

Mgmt & Finance

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Creative Boutiques

CreativeBoutiquesCreative

BoutiquesProvide only

creative servicesProvide only

creative services

May subcontract from full-service agencies

May subcontract from full-service agencies

Strength is turning out creative work quickly

Strength is turning out creative work quickly

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Media Buying

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

Media Specialist

Companies

Media Specialist

Companies

Media buying organizations implement strategies, and

buy time and space

Media buying organizations implement strategies, and

buy time and space

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Agency Compensation Methods

Commissions from media

Fee, cost, and incentive-based systems

Percentage charges

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Example of the Commission System

I found this explanation confusing. . .

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100,000

85,000

15,000

CLIENT/ADVERTISER

Ad. Agency MEDIA

P & G BBDO PeopleMagazine

100,000

Commison Model (15%)

Basically, the Ad. Agency gets a volume discounts from the Media Owner (Magazine, Network, etc.)

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Evaluating Agencies

Financial Audit

Verify costs, expenses

Personnel hours billed

Payments to media

Payments to suppliers

Qualitative Audit

Planning

Program development

Implementation

Results achieved

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Gaining and Losing Clients

• Long-term agency relationships• GE/BBDO Worldwide… 80 years• Marlboro/Leo Burnett… 56 years• McDonald’s/DDB Worldwide… 43 years• Kellog’s/Leo Burnett… 68 years

• Loyalty to a single agency is becoming less common

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Why Agencies Lose Clients

Poor communication

Unrealistic client demands

Poor performance/service

Personality conflicts

Personnel changes

Strategy change

Declining sales

Conflicts of interest

Compensation conflict

Policy changes

Lack of integrated marketing capabilities

Client/ agency size change Marketing/strategy conflict

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How Agencies Gain Clients

ReferralsReferrals

SolicitationsSolicitations

PresentationsPresentations

Public RelationsPublic Relations Image, ReputationImage, Reputation

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Direct Marketing Agency Activities

Direct mail

Databasemanagement

Research

Creative capabilities

Media services

Direct-Marketing Agency ServicesDirect-Marketing Agency Services

Production

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Direct Marketing Agency Structure

• Departments in a typical direct-marketing agency• Account management• Creative • Media• Database development/management

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Sales Promotion Agencies

Catalog production

Promotional planning

Creative research

Tie-in coordination

Fulfillment

Premium design and manufacturing

Contest/sweepstakes management

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Don Jagoda Associates

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Functions Performed by Public Relations Firms

Strategydevelopment

Generatingpublicity

Lobbying

Publicaffairs

News releases,communication

Research

Managingcrisis

Coordinationw/promotional

areas

Specialevents

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Functions Performed by Interactive Agencies

Interactive Media Creation

Websites

Banner ads

Search engine optimization

Mobile marketing

Social media campaigns

Digital media

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Campaigns Utilizing Social Media

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Collateral Services

• Typical collateral services• Marketing research• Package design• Consultants• Photographers• Printers• Video production• Event marketing

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Pros and Cons of Integrated Services

Budget politicsBudget politics

ConsCons

Poor communicationPoor communication

No synergy No synergy

ConvenienceConvenience

Greater synergyGreater synergy

Single image for product or serviceSingle image for

product or service

ProsPros

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Responsibility for IMC: Agency vs. Client

• Key Obstacles• Lack of people with a broad perspective

and the skills to make it work• Internal turf battles• Agency egos• Fear of budget reductions• Ensuring consistent execution• Measuring success• Compensation