Chapter 5

The Advertising Agency, Media

Services,
and Other Services
&
Chapter 6
The Advertiser’s Marketing/
Advertising Operation
What is an Advertising Agency?

• An agency is an independent business

composed of creative people and business
people who develop, prepare, and place
advertising in advertising media for sellers
seeking to find customers for their goods or
services

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How Agencies Developed

The Early Age

The No-Rebate Age

The Age of Negotiation

The Reengineering Age

Media and the Digital Age

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The No-Rebate Age (1918 to 1956)

• Radio
• Television
• Electronic Data Processing

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The Age of Negotiation (1956 to 1990)

• Consent decrees stopped no-rebating

provisions
• 15% commissions remained but total
compensation became an issue

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The Reengineering Age (1990 to 2000)

• Mergers created giant corporations

• Integrated services became a buzz phrase
– Advertising
– Public relations
– Package design
– Web design
– Sponsorship
– And more…

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Media and the Digital Age (Since 2000)

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The Full-Service Agency

• A full-service agency is one that handles

planning, creation, production, and
placement of advertising (and other aspects
of IMC) for its clients.

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The Agency Process for New Clients

Diagnosing the Marketing and Brand Strategy

Setting Objectives and Developing Strategy

Creating the Communication

Notify Trade of Forthcoming Campaign

Billing and Payments

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Creating the Communication

The Media Plan

The Total Plan

The Evaluation Plan

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Exhibit 5.2 Organizational Structure

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Exhibit 5.3 Typical Team Responsibilities

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Jay Chiat on Agency Reengineering…

“We believe the hierarchical structure [of

the traditional agency], if not obsolete at
present, is on its way. The traditional
pyramid is about personal power and
focuses on how to run a business. Most of
the decisions are about the organization’s
needs—fiscal and administrative issues. An
agency is a service organization whose
sole existence depends on satisfying client
needs.”
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Forms of Agency Compensation

• Media commissions
• Production commissions or markups
• Fee arrangements
• Performance fees

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P&G’s Brand Portfolio

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Exhibit 6.1 Simple Organization
Chart for Advertising Department

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Exhibit 6.2a Group-Organized
Marketing Department

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Exhibit 6.2b Specialists-Organized
Marketing Department

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Managers

• In package goods, the product or brand

manager is the person responsible for the
profitability of a product (brand) or product line,
including advertising decisions.

• A category manager is responsible for all

aspects of the brand in a specific product
category for a company; decisions include
research, manufacturing, sales, and
advertising.
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Exhibit 6.3 Example of a Brand Structure

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Exhibit 6.4
Marcom Management

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Exhibit 6.5
Communication Manager

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Goals of IMC Strategy

• Build brand equity

• Provide information
• Communicate differentiation/positioning

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Setting the Budget

Percentage of Sales

Competitive Budgeting

Task Method

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Shifts in the Marketing Environment

• Shift spending to digital media

• Develop formats to promote audience
interactions
• Create new research approaches and metrics
that focus on outcomes
• Combine “above-the-line” and “below-the-line”
approaches in integrated campaigns
• Create their own branded entertainment
• “In-source” new skills and capabilities
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Steps in Selecting an Agency_1

1. Determine what types of service you need in

order of importance
2. Establish a scale to rate each agency’s
attributes
3. Check published sources and select a group
of agencies that fit your needs
4. Check whether there are any apparent
conflicts with existing accounts

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Steps in Selecting an Agency_2

5. Start preliminary discussions

6. Reduce original list to 3-5 agencies
7. Prepare a more specific evaluation list
8. Discuss financial arrangements
9. Evaluate your comfort level with the agency
10. Assess extent of agency capability relative to
global reach of company

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Advertising versus Marketing

• Marketing goals are the overall objectives

that a company wishes to accomplish through
its marketing program.
• Advertising goals are the communication
objectives designed to accomplish certain
tasks within the total marketing program.

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5 Ps of Marketing

Traditional New
• Product • Paradox
• Price • Perspective
• Place • Paradigm
• Promotion • Persuasion
• Prospect • Passion

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Thank You

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