organization for advertising

8/4/2019 Organization for Advertising

http://slidepdf.com/reader/full/organization-for-advertising 1/29

ORGANIZATION FOR ADVERTISING

THE ADVERTISING AGENCY AND THE CLIENT

Organization for Advertising: TheAdvertising Agency and the Client



I. Overview of Advertising Agency Work

A. Organization of the Advertising Industry

Five players of advertising:

(1) Advertiser (client)—The advertising’ssponsor.

(2) Ad agency—A marketing services firm thatassists adverisers in planning, preparing, and

placing, and evaluating all or portions of theiradvertising programs.

(3) Media—Advertising messagecommunication carrier.

(4) Vendors (suppliers, external facilitatingagencies, collateral services)—Specializedadvertising services firms




Collateral Services/Suppliers(5) Marketing communications specialist

organizations

Art studios &

web designersPrinters &

related specialists

Film & video

housesResearch

companies

Jingle houses

Freelance writers, artists/graphic

designers, directors, photography studios,

etc.



Participants in the IMC Process

**Marketing

communications

specialist

organizations

Media organizations

Advertiser (Client)

Advertising agency

Collateral services

Direct-responseagencies

Salespromotionagencies

Interactiveagencies

Publicrelationsfirms



I. Overview of Advertising Agency Work


The client —Small co’ies might use sales or mktg

dept to do adv. (next slide).o Large co’ies have an advertising dept.

(second slide).

o Large companies have an Advertising director (advertising manager, mktg comm. director

[manager], mktg services manager, chief comm.

officer, etc.)Might use an in-house agency (third slide)



Small Firm: Advertising Department Under Marketing Department

President

Production Finance Marketing Research anddevelop-ment

HR

Marketing

researchAdvertising Sales

Product

planning



Large Firm: Advertising Department Under Marketing

Department




Pros & Cons of In-House Agencies

More

control and

consistency

Costsavings (if strong in-

house resources) and

time savings due to

market familiarity &

proximity

Better coordination,

lower employee

turnover, more

connection to the C-suite

Lessobjectivity/loose

outside perspective

Less

experience and talent

The

In-house

Agency

+ Positive - Negative

Less

Flexibility—more set

in ways

More

Attention to the brand

Lesscreative quality



I. Overview of advertising agency work


The advertising agency bzns: (OHD) Standard Directory of

Advertising Agencies (“Red Book”) (Agency lists)

Perceived as glamorous, but...

Commercial bzns and show bzns

(awards shows) A “people” bzns: teamwork

A “service” (serve us) bzns

A “sales” bzns: clients, client’s customers A “creative” bzns

A young person’s bzns



I. Overview of advertising agency work


B. Structure and work of an advertising agency



Agencies: Defined

AgencyRoles

Strategy: Develop marketing & ad plans

Creative: Develop ads & promotions

Media: Purchase ad space and time



Agencies: Types

Specialty

Boutiques Media Buyers

Interactive

Full ServiceConsumer

B2B

Reach

Local National

Regional

Global

Internatio-

nal



Services Provided by Agencies

Agency Services (e.g., Hill Holiday)

(1) Researchdepartment

May includeaccount planners – Integrate customerresearch into adstrategy

Brand insight &customer insight forproper connection& communication

(2). Media dept.obtains mediaspace & time

2. Marketing

Services

The communicationlink between agencyand client (ad mgr.)

Managed by theaccount executive

(1) Strategic work -planning ad strategy

(2) Project mgt. – Organizing &managing resourcesso project completedon time & w/inbudget

1. Account

Services/Mgt. (“The

suits”)

Creation,execution ofads

Copywriterartists, other

specialists

a. Ideate

b. Create

3. Creative

Services

Accounting

Finance

Humanresources

New bznsgeneration

4. Mgmt &

Finance



Full-Service Agencies

Creating advertising

Planning advertising

Producingadvertising

Performing research

Selecting media

Sales promotions

Strategic marketplanning

Direct marketing

Interactivecapabilities

Package design

Full range of marketingcommunication andpromotion services

Nonadvertising

services (“Marketing

services”)

Public relations and

publicity

T i l F ll S i A O i ti (b th f f ti )



Typical Full-Service Agency Organization (by the four functions)(OHD: VPs Cartoon)

Writers Art directors

TVproduction

Traffic-Liason between creative

sevices & acct. services to me

sure everyone has the info

needed to get the job done on

time. Shepherds creative work

from conception to completion.(OHD: Types of Agencies)

Print

production

AccountExecutive

Accountsupervision

VP account

services

Media

Research

SalesPromotion

VP marketing

services

Personnel

Accounting

Finance Office

management

VP management

and finance

President

Board of

directors

VP creativeservices



The Role of Creative Boutiques

Creative

Boutiques (e.g.,

Mother, Strawberry

Frog)

Provide only creative services

Full-service agencies may subcontract

with creative boutiques, especially

when overloaded

Ability to turn out inventive creative

work quickly



Media Buying Can be Specialized

Specialize in buying media, especially

broadcast time

Agencies and clients develop media

strategy

Media Specialist

Companies

Media buying organizations implement the

strategy and buy time and space. Video: Want A Job in Advertising? (10 min.)

. Video: Crispin Porter + Bogusky (7:40). Video: Strawberry Frog; Inside an Advertising Agency

(12:17)

d d



II. Hiring and Compensating an ad agency


A. Why hire an agency? (Hint: Why outsource in general?)

Objective advice (Analogy: independent auditor)

Outsider perspective (vs. groupthink)Collective experience working wth many different clients

and situations, and training/marketplace and specialtyservices experience (OHD-Make own paper clips? )

People and management skillsSupportive creative environment and account varietyattracts top strategic & creative talent—the best ad ideascome from agencies (e.g., Coke, Pepsi, Apple, McD’s, BK, etc.)

Cost savings (If lack in-house resources, peak periods, asve

on media commissions)Industry connections

Fun to work withVideo: Mad Dogs and Englishmen: Part I: Advertising Foundations and the Environment (8 min.)



Agencies: Compensation

Ad rate

cardprice:

$100,000

Agency

buys ad

at 15%discount:

$85,000

Agency

bills client

full adamount:

$100,000

Agency

keeps

$15,000

Differenceas part of

compensati

on by client

B. Agency compensation

1. Commission (billings based) – In a commission-based compensation system, the

agency is paid a percentage of the media space or

time that it places for a client.



II. Hiring and Compensating an Ad Agency

- Commission Problems:

• Incentive to inflate media expenditures :

- There is a bias toward recommending more expensive media (e.g., network TV

advertising, not local radio).- Bias toward commending high volume/frequency of advertising. Consequenty,there isn’t necessarily a relationship between agency work and compensation (e.g., just run one ad over and over).

. The agency would be taking money out of its own pocket if it everrecommended that the client cut its advertising media expenditures, even thoughthere will be times when cutting one’s advertising budget is the right thing to do.

• If compensation is dictated by ad placements in traditional mass media, this maydiscourage the agency from recommending nontraditional noncommissionablemedia (e.g., event sponsorship or product placements) or promotional outlets.

• There is no incentive to do excellent work—it’s quantity of advertising run, notquality of creative and media strategies.

•

The percentage (traditionally 15%) is arbitrary and has been whittled down byadvertisers in recent years.

• There is no guarantee of agency profits (especially if inexpensive media are used orvolume of ads run is low).




Agencies: Compensation2. Fee – a. Labor-based (hourly rate): Cost

reimbursement for:

(a) staff time

(b) overhead (marked up—cost plus pricing,

see below), plus a fair profit (most common)

b. Project-based: Fixed/flat project fee

Mark ups:

Agencybuys

materials

for

campaign

Materialscost

$85,000

Agency

bills for

materials

plus a

17.65%

markup

Agency

bills$100,000

(cost plus

markup)

B A ti




• Fee Advantage:

- Agency gets paid for their work & can make a

“fair” profit

• Fee Disadvantages:

- Values inputs, not quality of

work/outputs/results

- Incentive to featherbed (build in unnecessary

costs; do slow, inefficient work)





3. Incentive-based (performance based, pay for performance,value based)) – Based on quality of work and achieving

advertising objectives Reasons to prefer performance-based pay over commissions or

fees:

• This system helps align the agency’s objectives with those of

the client, so they can better work as partners (vs. vendormentality)

• It gives the agency less incentive to featherbed orrecommend expensive commissionable media

• It splits commercial risk between the marketer and theagency as well as rewards

• It gives agencies more incentive to do good work since theyhave some “skin in the game”




III. Agencies: Client Relationships

ReferralsPresentations— ”Pitch the bzns”

Community relations

& networking

Solicitation

+ Finding and Attracting New Clients



III. Agency/Client Relationships

A. Agency Reviews (“Pitching the bzns”) www.AdForum.com “Find an agency”

Or www.AgencyPreview.com

+ Typical agency review process: Advertiser sends out RFP with budget constraints andagency hiring criteria. The list of respondees is whittled

to a “short list” of agencies that are invited to make a presentation (“pitch the bzns.” )to the advertiser’s new bzns committee. (OHD Cartoons)

+ How agencies “pitch the bzns”:

1. Standard New bzns Presentation (Credentials Presentation,Capabilities Presentation, Nonspeculative Presentation)

Acquaint the advertiser with the agency’s

history, organization, talent, philosophy, past successes, case

histories, etc.

2. Speculative Presentation (Creative Shootout, Spec Creative) Propose a creative solution to the advertiser's communication problem(usually in rough form) in a presentation to the advertiser, usually basedon a limited amount of marketplace information.

•

- An R&D lab for testing new strategies and ideas.

III A /Cli t R l ti hi

http://www.adforum.com/

http://www.agencypreview.com/

http://www.agencypreview.com/

http://www.adforum.com/




Why are speculative presentations controversial?• Waste of agency resources (time & $$--$50-$100K), whichmust be paid for by somebody (either current clients—adistraction from current accounts—or the agency, althoughthey view it as an investment) (OHD-VW)

• Sometimes unethically used to pick creatives' brains for ideaswithout hiring and paying them.

• Usually done with insufficient situation analysis or client input,and with limited resources.

• Usually based on a rough version of creative work, whichmight not give a good indication of what the finished work willlook like

• Most work that is shown during the pitch ends up not gettingused

• Too much focus is on the creative work .

• Agencies try to please the client, not their customers.




How can we overcome/minimize these problems? If thead agency:

• Reimburse the agency for their time and expenses.• Gives the agency plenty of time so no rush job

• Rely on a credentials presentation instead

•

Provide the ad agency with marketing research andplenty of guidance.

• Have the agency sign a confidentiality agreement

• Have the agency present other strategic work too

(e.g., media plan, budget recommendation, etc.)• Pose an artificial situation far enough removed from

the client’s actual bzns so that ideas couldn’tactually be used/stolen.


III Agency/Client Relationships




B. Criteria to Consider in Selecting an Ad Agency• No account conflicts/current accounts (type and size)

• Size (large [small] clients prefer large [small] agencies)• Creativity that also sells (persuades)

• Quality of agency personnel (skill, talent, expertise, judgment,

reputation)

• Quality of agency research• Cost consciousness/compensation packages

• Quality of agency production work

• Media creativity and efficiency, and relations with the media

• Marketing and strategic planning skills





• "Chemistry" between agency and client

employees (human relations)

• Courage of convictions, i.e., willing tochallenge the advertiser

• Willingness to learn about the client's bzns

• Agency philosophy, policies, and style

• Agency facilities and services

• Capabilities across multiple disciplines (PR, DM, digital, etc.)

• Agency location (less important)

•

Taste, legal, and ethical guidelines• Proven track record of results

• Ability to meet deadlines


organization for advertising

Documents