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ADVERTISING BUSINESS



• Advertising is a management function.

• While advertising is the event, advertising management is

the whole process

• A function of marketing starting from market researchcontinuing through advertising leading to actual sales or

achievement of objective.

• It goes further in regard to evaluation of the whole cost-benefits that were involved in the whole exercise.

• Advertising management program is the process ofpreparing and integrating a company’s advertising effortswith the overall IMC message that already exists



Elements of Advertising program

AdvertisingDesign

Advertising strategy Media selection

Appeals

Message strategy Executional framework



• An effective program consists of four activities

1) Review the company’s activities in light of advertising

management

2) Select an in house or external advertising agency

3) Develop an advertising campaign managementstrategy

4) Complete a creative brief

The major principle guiding these four efforts is consistency



The Advertising Industry

• The advertising industry has THREE mainplayers :

ADVERTISERS - who spend money on advertising

AGENCIES - who think up campaigns for theirclients, and who select the media in which theywill appear.(In-house agency & External agencies)

MEDIA OWNERS - who run the mediaorganizations (papers, TV stations, postercompanies etc.) which carry the adverts toconsumers



Institutions & Factors involved in advertisingmanagement

AdvertiserControl Institutions

Government

Competition

Facilitating Institutions

Advertising agency

Media

Research suppliers

Markets and Consumer Behavior



Advertisers

• Core institution of the field of advertising management

• Wide range of organizations from local store to MNC’s seek

benefit of advertising

• Different Types of advertisers

• Manufacturers and Service Firms

• Trade Resellers

• Government and Social Organizations



• Manufacturers and Service Firms

• Large National manufacturers of consumer products and

services are the most prominent users of promotion• HUL, P&G, Godrej, etc

• The Use of advertising, particularly mass media

advertising is essential to create brand awareness

• Regional and local producers of household goods andservices also rely heavily on advertising

• These firms often use ads placed in newspapers andregional editions of magazines, cable network



• Firms that produce business goods and services alsouse advertising on a global, national, regional, and localbasis. Wipro, Infosys, IBM etc

• Trade Resellers• The term Trade reseller is simply a general description

for all organizations in a marketing channel ofdistribution.

• Wholesalers, retailers, distributors

• They deal with both household consumers and businessto business buyers

• At local level, small retail shops of all sorts rely onnewspaper, radio, cable TV, and special promotionalevents



• Wholesalers and Distributors have little need for massmedia advertising rather they use trade promotions

• Government and Social Organizations

• Government carries out promotion of various products andservices

• For recruitments in Armed Forces & various public sectors,

& social issues like Polio

• Other big promotion expenses for government is theirpublications

• State government also invest money to promote statelotteries and tourism



• Social Organization• Advertising by social organizations at the national, state,

and local level is common.• E.g. NACO, CRY, Helpage India

• Advertising Agencies:• Is an organization of professionals who provide creative

and business services to clients in planning, preparing &placing advertisements

• Professionals are present with very specialized talent,experience and expertise



• Advertising Agencies :• Full service agencies• Creative Boutiques

• Interactive agencies• In house agencies

• Media Buying services

• Promotion Agencies:

• Direct marketing and database agencies• E-Commerce agencies

• Sales promotion agencies• Event Planning agencies• Design Firms• Public relations firms



• Agency Services• Account services

• Creative Research and Development

• Creative and production services• Marketing Services

• Media planning, research, and buying services

• Public relations

• Direct marketing and promotion services

• Administrative services

• Agency Compensation

• Commission

• Markup charges

• Fee system

• Pay for results



• External Facilitators• Marketing and advertising research firms

• Consultants• Information intermediators

• Software firms

• Other communications organizations

• Media Organizations• Broadcast media

• Print media• Interactive media

• Internet portals



Advertising Agencies

• Full service agencies:

• Includes an group of advertising professionals to meet all thepromotional needs of clients

• Advertising services encompass planning, creating, and producing

advertising campaigns

• Advertising functions:

• Account planning,

• Research,• Creative services,

• Media planning,

• Production of advertising



• Non advertising functions:

Public relations,

Making corporate identity plans,

Packaging, Organizing fairs,

Exhibitions,

Training material

• Some agencies are involved in their clients marketing processes,e.g. distribution and suggesting marketing strategies for theirproducts

• Benefit of a full service agency Attracts and holds the very best talent,

provides numerous services which may require an inter relatedapproach

Provides an objective examination of concepts



• Specialized Full service agencies

• General Consumer Agency

• Represents consumer goods soaps, detergents, cereals,oils etc

• Advertisements are placed generally in TV, Radio,

outdoor and print.

• Industrial Agency (Goods to be sold to other businesses)

• Computer hardware, furnaces, turbines, x-rayequipments are few examples

• Trade magazines, business publications are generallyused



• Creative Boutiques

• Emphasizes creative concept development, copywriting,and artistic services to clients

• Order according to choice

• Interactive agencies

• Help advertisers prepare communications for new media

such as Internet, interactive kiosks, CD-ROMS, andinteractive television

• Focus on banner ads and web site development



• In House Agencies

• Advertising department in a firm

• Takes responsibility for the planning and preparation ofadvertising materials

• Has the advantage of greater coordination and control in allphases of advertising and promotion process

• Firm can essentially keep all the profits from commissionsan external agency would have earned

• With Time, these agencies may start doing outside workalso.

(e.g. Lintas of HUL, Mudra communications of Reliance)



• Media Buying services

• Technically not an agency, is an independent organization

that specializes in buying media time and space

• Offers media planning advice as a service to advertisingagencies and advertisers

• It buys media in large quantities,

• It often acquires media time at a much lower cost than anagency or advertiser



Promotion agencies

• Many specialized agencies provides promotionalservices referred as promotion agencies

• Promotion agencies can handle everything fromsampling to event promotions to in school promotionstie-ins



• Direct marketing and database agencies

• Provide a variety of direct marketing services.

• These firms maintain and manage large databases ofmailing lists as one of their services.

• These firms can design direct marketing campaignseither through the mail, telemarketing, or direct responsecampaigns using all forms of media.

• These agencies help advertisers construct databases oftarget customers, merge databases, developpromotional materials, and then execute the campaign.



• Many of these agencies are set up to provide creativeand production services to clients.

• These firms will design and help execute direct responseadvertising campaigns using traditional media such as

Television,

Magazines,

Newspapers, Radio



• E-commerce Agencies.

• Handle a variety of planning and execution activitiesrelated to promotions using electronic commerce.

• These agencies are different from the interactiveagencies.

• They do not create Web sites or banner ads, but ratherhelp firms conduct all forms of promotion throughelectronic media particularly the Internet.

• They can issue coupons, help in sampling, and do directresponse campaigns.



• Provides services related to

• Internet advertising,

• Targeting technology,

• Complete advertising management software solutions,

• Direct response Internet advertising,

• Internet advertising developed for regional and localbusinesses



• Sales Promotion Agencies.

• These specialists design and then operate contests,

special displays, or coupon campaigns for advertisers.

• It is important to recognize that these agencies canspecialize in consumer sales promotions and willfocus on price-off deals, coupons, sampling, rebates,

and premiums.

• Other firms will specialize in trade sales promotionsdesigned to help advertisers use promotions aimed atwholesalers, retailers, vendors, and trade resellers.

• These agencies are experts in designing incentiveprograms, trade shows, sales force contests, in-storemerchandising, and point of purchase materials.



• Event-Planning Agencies.• Event sponsorship can also be targeted to household

consumers or the trade market.

• Event-planning agencies and organizers are experts in Finding locations,

Securing dates,

Putting together a "team" of people

• For promotional event celebrity participants,

audio/visual people,

caterers, security experts,

entertainers, or

whoever is necessary to make the event come about.



• The event planning organization will also often take overthe task of advertising the event and making sure thepress provides coverage (publicity) of the event.

• Design Firms.

• Designers and graphics specialists do not get nearlyenough credit in the advertising and promotion process.

• In the most basic sense, designers help a firm create alogo, graphic mark that identifies a company

• Other visual representations that promote an identity fora firm.

• This mark will appear on everything from advertising topackaging to the company stationery, business cards,

and signage.



• Beyond the logo, graphic designers will also design

coupons,

phonecards,

in-store displays,

brochures,

outdoor banners for events,newsletters, and

direct mail pieces.

• They are key, although somewhat anonymous,participants in the process.

P bli R l ti Fi



• Public Relations Firms.

• Manage an organization's relationships with the media,the local community, competitors, industry associations,and government organizations.

• The tools of public relations include press releases,feature stories, lobbying, spokespersons, and companynewsletters.

• Most advertisers do not like to handle their own publicrelations tasks for two reasons.

• First, public relations take highly specialized skills andtalent not normally found in a firm.

• Second, managers are too close to public relationsproblems and may not be capable of handling a situation



• Particularly a negative situation with measured publicresponses.

• For these reasons, advertisers, and even advertisingagencies, turn to outside public relations firms.

• In keeping with the movement to incorporate the Internetacross all forms of promotion, there are even

organizations that will handle putting all of a firm's newsreleases online.



• Agency Services

• Advertising and promotion agencies offer a wide rangeof services.

• The advertiser may need a large, global, full serviceadvertising agency to plan, prepare, and execute itsadvertising.

• On the other hand, a creative boutique may offer theright combination of services.

• Similarly, a large promotions firm might be needed to

manage events and promotions while a design firm isenlisted for design work, but nothing else.

• The most important issue, however, is for the advertiserand the agency to negotiate and reach agreement on the

services being provided before any agency is hired.



• Account Services.

• Account services includes managers who have titlessuch as account executive, account supervisor, oraccount manager,

• Work with clients to determine how the brand can benefitmost from promotion.

• Account services at the same time identify its target

audiences, and the best competitive positioning, andthen developing a complete promotion plan.



• Account services managers also work with the client intranslating cultural and consumer values into advertisingand promotional messages through the creative servicesin the agency.

• Finally, they work with media services to develop aneffective media strategy for determining the best vehicles

for reaching the targeted audiences.

• One of the primary tasks in account services is to keepthe various agency teams like creative, production,

media on schedule and within budget.

M k i R h S i



• Marketing Research Services.

• Research conducted by an agency for a client usuallyconsists of the agency locating studies

• The research group will help the client interpret theresearch and communicate these interpretations to thecreative and media people

• Creative and Production Services.

• The creative services group in an agency comes up withthe concepts that express the value of a company'sbrand in interesting and memorable ways.

• In simple terms, the creative services groupdevelops the message that will be delivered thoughadvertising, sales promotion, direct marketing, eventsponsorship, or public relations.

P d i i i l d d ( d i



• Production services include producers (and sometimesdirectors) who take creative ideas and turn them intoadvertisements, direct mail pieces, or events materials.

• Producers generally manage and oversee the endlessdetails of production of the finished advertisement orother promotion material.

• Advertising agencies maintain the largest and mostsophisticated creative and production staffs.

Ad ti i i th l id di



• Advertising agencies themselves provide mediaplanning and buying services similar to those of thespecialized agencies.

• The central challenge is to determine how a client'smessage can most effectively and efficiently reach thetarget audience.

• Media planners and buyers examine an enormous

number of options to put together an effective mediaplan within the client's budget.

• Media planning and buying is much more than simplybuying ad space, timing a coupon distribution, or

scheduling an event.

• A wide range of media strategies can be implemented toenhance the impact of the message.



• Administrative Services • Like other business, 'agencies’ have to manage their business

affairs.

• Agencies have personnel departments, accounting and billingdepartments, and sales staffs that go out and sell the agency toclients.

• Most important to clients is the traffic department, which has the

responsibility of monitoring projects to be sure that deadlines aremet.

• Traffic managers make sure the creative group and media servicesare coordinated so that deadlines for getting promotional materialsto printers and media organizations are met.

• The job requires tremendous organizational skills and is critical todelivering the other services to clients.

Agency compensation



Agency compensation

• The four most prevalent agency compensation methods

• Commissions,

• Markup charges,

• Fee systems,

• Pay for results

C i i



• Commissions.

• The traditional method of agency compensation is the

commission system, which is based on the amount ofmoney the advertiser spends on media.

• Under this method, 15 percent of the total amount billedby a media organization is retained by the advertising orpromotion agency (as compensation for all costs increating advertising/promotion for the advertiser).

• The only variation is that the rate typically changes to 16

2/3 percent for outdoor media.



• Markup Charges.

• Addition of a percentage markup charge to a variety of servicesthe agency purchases from outside suppliers.

• In many cases, an agency will turn to outside contractors for art,illustration, photography, printing, research, and production.

• The agency then, in agreement with the client, adds a markupcharge to these services.

• The reason markup charges became prevalent in the industry is thatmany promotion agencies were providing services that did not usetraditional media.

• Since the traditional commission method was based on mediacharges, there was no way for these agencies to receive paymentfor their work.

• This being the case, the markup system was developed



• Fee Systems.

• A fee system is much like that used by consultants or attorneys,whereby the advertiser and the agency agree on an hourly rate for

different services provided.

• The hourly rate can be based on average salaries withindepartments or on some agreed upon hourly rate across allservices.

• This is the most common method for promotion agencies to getcompensated

• Recently agencies have been busy with requests from dot.com

companies to prepare campaigns

• As a result, have initiated a fee system that requires an "up-front"payment for anticipated expenses plus a "fair profit margin.

• Another version of the fee system is a fixed fee or



• Another version of the fee system is a fixed fee, orcontract, set for a project between the client and theagency.

• Pay-for-Results.

• The agency's fee is based on the achievement of agreedupon results.

• Compensation to a previously agreed upon achievementof specified objectives.

• An agency may agree to be compensated based on• achievement of sales levels,

• communications objectives such as awareness, brandidentification, or brand feature knowledge among target

audiences



External Facilitators

• Marketing and Advertising Research firms.

• Many firms rely on outside assistance during theplanning phase of advertising.

• Research firms perform original research for advertisersusing focus groups, surveys, or experiments

• To assist in understanding the potential market or

consumer perceptions of a product or services.

• Other research firms, routinely collect data and have

these data available for a fee.



• Consultants.

• A variety of consultants specialize in areas related to the

promotional process.

• Advertisers can seek out marketing consultants for assistance in theplanning stage.

• Creative and communications consultants provide insight on issuesrelated to message strategy and message themes.

• Consultants in event planning and sponsorships offer their expertiseto both advertisers and agencies.

• Public relations consultants often work with top management.

• Media experts can help an advertiser determine the proper mediamix and efficient media placement.

• Production Facilitators



• Production Facilitators

• External production facilitators offer essential services both during andafter the production process.

• Production is the area where advertisers and their agencies rely mostheavily on external facilitators.

• All forms of media advertising require special expertise that even thelargest full service agency, much less an advertiser, typically does notretain on staff.

• In broadcast production, directors, production managers, songwriters,camera operators, audio and lighting technicians, and performers are allessential to preparing a professional, high quality radio or television ad.

• Production houses can provide the physical facilities, including sets,stages, equipment, and crews, needed for broadcast production.



• In preparing print advertising, brochures, and direct mailpieces, graphic artists, photographers, models, directors,

and producers may be hired from outside the advertisingagency or firm

• In store promotions is another area where designing andproducing materials requires the skills of a specialtyorganization



• Information Intermediators.

• This form of external facilitator has emerged as a result of newtechnology and

• The desire on the part of advertisers to target audiences moreprecisely.

• An information intermediator collects customer purchase transactionhistories.

• It allows an advertiser to merge information about important targetsegments

• what they buy, when they buy, and how they buy.

• With this information, both message themes and media placementcan be more effectively and efficiently developed.



• Software Firms.

• An interesting and complex new category of facilitator inadvertising and promotion is composed of softwarefirms.

• Some of these firms are well established and wellknown, such as Microsoft, Novell, and Oracle.

• These firms provide software ranging from

• The gathering and analysis of Web surfer behavior• To broadband streaming audio and video

• To managing relationships with trade partners.

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