The Advertising Industry

Types of Advertisers Ad Agencies

Job Functions Structure Compensation

Media
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Advertising Industry Structure

Advertisers
(Clients)

Agencies

Suppliers

Media
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Advertising & Large Companies

Centralized

In-House Agency
Functional Services Research Media Creative

Efficiency Continuity

Decentralized

Flexibility Competition among company brands

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Global Advertising

Standardized

Global brands Efficiency / Recognition

Most companies blend strategies to fit their unique situations

Localized

Based on differences in each country or culture Relevance / Understanding

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

The Worldwide Advertising Industry

Global expenditures $425

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Local vs. National Advertisers

National
Focus
Building the Brand Market Share Strategy Markets Long-term $$$$ Many Specialists

Local
Place of Business Sales Tactics Customers Short-term $ Few Generalists

Time Resources

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Advertising Agency
An independent organization of professionals who provide creative and business services to clients related to planning, preparing, and placing advertisements.
Radio and TV Producers Copywriters Account Supervisors Direct-Marketing Specialists Artists Researchers Art Directors Media Buyers Public Relations Specialists Technical Staff Creative Directors Marketing Specialists Sales Promotion and Event Planners

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
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

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

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Types of Advertising Agencies

Full-Service Business-to-Business Creative Boutiques Media-Buying Services Interactive

In-House
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

What Do Advertising Agencies Provide?

Account Services

Research and Account Planning

Creative and Production

Media Planning and Buying

Traffic Management

Marketing Services
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Agency Department System

President
Vice President Creative Services Vice President Marketing Services
Vice President Management Services

Vice President Account Services

Account Supervisor Account Executive Account Executive

Account Supervisor

Art / Copy

Media

Accounting

Production

Research

Purchasing

Personnel
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Agency Group System

Agency Management

Group 1 (Coke Classsic) Management Director

Group 2 (Dial Soap) Management Director

Group 3 (Toyota Camry) Management Director

Account Service

Creative Director

Media Planning

Market Research

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Agency Compensation Plans

Commissions

Around 15% of airtime fees

For Television Air Time For Television Air Time Commission (15%)

Agency Bills Client For $1,000,000 Agency Pays Television Agency Earns $850,000 $150,000

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Agency Compensation Plans

Commissions

Around 15% of airtime fees

Markup Charges

Production cost + fixed percent Agencies add 17.65% to the cost of outside services

Photographer charges $8,500 The Agency adds Client is charged $1,500 $10,000 (17.65%) for photography services
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Agency Compensation Plans

Commissions

Around 15% of airtime fees

Markup Charges

Production cost + fixed percent

Hourly rates or by project Tightly-specified objectives
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Fee Systems

Incentive Systems

Other Advertising Services

This

is an example of collateral promotion material that agencies produce for clients.

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.

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

The Media of Advertising

Print

Electronic
Interactive Media Out-of-Home Direct Mail Other Media
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

The Media of Advertising

Print

Yellow Pages

Newspapers National, State, Local Magazines Geography and Content

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

The Media of Advertising

Network, Independent and Cable TV Network and Local Radio

Electronic

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

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

The Media of Advertising

Outdoor

Out-of-Home

Billboards

Transit

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

The Media of Advertising

Direct Mail Brochures and Catalogs

Direct Mail

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
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Summary
A full-service agency works on many aspects of a clients 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

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.