THE ADVERTISING WORLD
Who Are the Key Players?
As we discuss the organization of the industry, consider that all of the key players
also represent job opportunities they may wish to consider. The players include the
advertiser or client, the agency, the media, and suppliers who provide expertise.
The A Matter of Practice feature about ‘1984’ the greatest commercial ever made,
introduced a number of these key payers and illustrated how they all make different
contributions to the final advertising. Another way to get a peek into the field is
through the lens of television, such as the Mad Men show. The A Matter of Principle
feature in this chapter explains how Bruce Vanden Bergh analyzed the cultural
relevance of this popular award-winning drama.
The Advertiser
Advertising begins with the organization behind the promotion message, or the
advertiser. The advertiser is the number one key player. Management of advertising
function usually lies with the organization’s marketing or advertising department.
The list of top advertisers in the United States usually begins with Procter and
Gamble (P&G). Other leaders that appear on that list vary from year to year.
Most advertisers have an executive or a department that initiates the advertising effort
by identifying a marketing problem that advertising can solve. The marketing
executive hires the advertising agency and other marketing communication agencies
as needed. In professional jargon, the advertiser becomes the agency’s client. As the
client, the advertiser is responsible for monitoring the work and paying the agency for
its work on the account.
The marketing team, sometimes including the agency account people, makes the final
decisions about strategy, including the target audience and the size of the advertising
budget. The client team approves the advertising or marketing communication plan,
which contains details outlining the message and media strategies.
Although big companies may have hundreds of agencies working for them, they
normally have an agency-of-record that does most of their business and may even
manage or coordinate the work of other agencies.
The Agency
The second player is the advertising agency (or other types of marketing
communication agencies)that creates, produces and distributes the messages. The
working arrangement is known as the agency-client partnership.An advertiser uses an
outside agency because it believes the agency will be more efficient in creating
advertising messages than the advertiser would be on its own.
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Not all advertising professionals work in agencies. Large advertisers, either
companies or organizations, manage the advertising process either by setting up an
advertising department (sometimes called marketing services) that oversees the
work of agencies or by setting up their own in-house agency, as we see in Figure 1.3.
The Media
The third player in the advertising world is the media. The emergence of mass media
has been a central factor in the development of advertising because mass media offers
a way to reach a widespread audience. In traditional advertising, the term media
refers to all ofthe channels of communication that carry the message from the
advertiser to the audience and from consumers back to the company.
We refer to these media as channels because they deliver messages, but they are also
companies, such as your local newspaper or radio station. Some of those media
conglomerates are huge, such as Time Warner and Viacom. Media vehicles are the
specific programs, such as 60 Minutes or The Simpsons, or magazines such as
Advertising Age or Woman’s Day.
Also, note that media is plural when it refers to various channels, but singular—
medium—when it refers to only one form, such as a newspaper.
Each medium has a department that is responsible for selling ad space or time.
These departments specialize in assisting advertisers in comparing the
effectiveness of various media as they try to select the best mix of media to use.
The primary advantage of advertising’s use of mass media is that the costs to buy
time in broadcast media, space in print media, and time and space in digital media
are spread over the tremendous number of people that these media reach. One of
the biggest advantages of mass-media advertising is that it can reach a lot of
people with a single message in a very cost-efficient form.
Professional Suppliers and Consultants
The fourth player in the world of advertising includes artists, writers, photographers,
directors, producers, and printers as well as self-employed freelancers and
consultants. In addition, there are freelance copywriters and graphic artists,
songwriters, printers, market researchers, direct-mail production houses,
telemarketers, and public relations consultants. The Inside Story feature in this
chapter highlights the career of a freelance creative director.
This array of suppliers mirrors the variety of tasks required to put together an ad.
Why would the other advertising players hire an outside supplier? There are many
reasons. The advertiser or the agency may not have expertise in specialized areas,
their people may be overloaded with work, or they may want a fresh perspective.
In the new world of digital media, another type of supplier has emerged, and this
consumers who supply user–generated content.
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Types of Agencies
We are primarily concerned with advertising agencies in this chapter, but other areas
such as public relations, direct marketing, sales promotion, and the Internet have
agencies that provide specialized promotional help, as well.
The A-List awards by Advertising Age recognize cutting-edge agencies that rank high
in three areas – they are creative, fast growing, and their work is effective. A brief
description of the top ten agencies on the A-List can be found in the textbook.
In addition to agencies that specialize in advertising and other areas of marketing
communication, there are also consulting firms in marketing research and branding
that offer specialized services to other agencies, as well as advertisers.
Full Service Agencies
Afull-service agencyincludesfour major staff functions — account management,
creative services, media planning, and account planning, which includes research. A
full-service advertising agency also has its own finance and accounting department, a
traffic department to handle internal tracking on completion of projects, a
department for broadcast and print production, and a human resources department.
In-House Agencies
An in-house agency produces ads and places them in the media, also. The difference
is that the agency is a part of the advertiser’s organization, rather than an outside
company. Companies that need closer control over their advertising have their own
internal agencies.
Specialized Agencies
Many agencies do not follow the traditional full agency approach. Instead they
specialize in certain functions, audiences, industries, or markets. In addition, some
agencies specialize in other marketing communication areas, such as branding, direct
marketing, sales promotion, public relations, events and sports marketing, packaging,
and point-of-sale promotions.
Creative boutiques. Theseare ad agencies, usually small, that concentrate entirely
on preparing the creative execution of idea, or the creative product. A creative
boutique has one or more writers or artists on staff, but generally no staff for
media, research, or strategic planning. They usually serve companies directly, but
are sometimes retained by full service agencies that are overloaded with work.
Media-buying services. These agencies specialize in the purchase of media for
clients. They are in high demand for many reasons, but three stand out. First,
media has become more complex as the number of choices has grown. Second,
the cost of maintaining a competent media department has escalated. Third,
media-buying services often buy media at a low cost because they can group
several clients’ purchases together to get discounts based on volume.
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Agency Networks and Holding Companies
Agency networks are large conglomerations of agencies under central ownership that
operate under one agency name. Examples include DDB Worldwide and BBDO
Worldwide. Holding companies include one or more advertising agency network, as
well as other types of marketing communication agencies and marketing services
consulting firms.
How Are Agency Jobs Organized?
Agency jobs are broken down into five functional areas:
Account Management
The account management function acts as a liaison between the client and the
agency. The account team summarizes the client’s communication needs and develops
the basic “charge to the agency.” Once the agency and client together establish the
general guidelines for the campaign, the account management team supervises the
day-to-day development of the strategy.
Account management in a major agency typically has three levels: the management
supervisor, who provides leadership on strategic issues and looks for new business
opportunities; the account supervisor, who is the key executive working on a client’s
business and the primary liaison between the client and the agency; and the account
executive, who is responsible for day-to-day activities and operates like a project
manager. A smaller agency will combine some of these levels. The A Day in the
Lifefeature in this chapter highlights the day-to-day job activities of a management
supervisor at an A-list ad agency.
Account Planning and Research
Full service agencies usually have a separate department specifically devoted to
planning and sometimes to research as well. Today, the emphasis in agency research
is on gaining insights into consumer thinking and behaviors in order to develop
messages that focus on the consumer’s perspective and relationship with the brand.
The account planning group gathers all available intelligence on the market and
consumers and acts as the voice of the consumer. Account planners are strategic
specialists who prepare comprehensive information about consumer’s wants, needs,
and relationship to the client’s brand.
Creative Development and Production
A creative group include people who write (copywriters), people who design ideas for
print ads or television commercials (art directors), and people who convert these
ideas into television or radio commercials (producers).
Media Research, Planning and Buying
Agencies that don’t rely on outside media specialists have a media department that
recommends to the client the most efficient means of delivering the message to the
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target audience. That department has three functions: research, planning and buying.
Because the media world is so complex, it is not unusual for some individuals to
become experts in certain markets or types of media.
Internal Operations
The departments that serve the operations within the agency include the traffic
department, print production, as well as financial services and human resources. The
traffic department is the lifeblood of the agency, and its personnel keep track of
everything that happens.
How Are Agencies Paid?
Advertising agencies are big business. Agencies derive their revenues and profits
from three main sources: commissions, fees, retainers, and performance incentives.
For years, a 15 percent commission was the traditional form of compensation. For
those few accounts still using a commission approach, the rate is rarely 15%. It is
more likely lower and subject to negotiation between agency and client.
Many advertisers now use a fee systemeither as the primary compensation tool or in
combination with a commission system. The fee system is comparable to the way
advertisers pay their lawyers or accountants. An agency may also be put on a monthly
or yearly retainer. The amount billed per month is based on the projected amount of
work and the hourly rate charged. This system is most commonly used by public
relations agencies.
A more recent trend in agency compensation is for advertisers to pay agencies on the
basis of performance. One approach to this performance incentive is to pay the
agency either a percentage of the client’s sales or a percentage of the client’s
marketing budget. Another approach is that agencies share in the profits of their
client when they create a successfully campaign, but that also means a greater
financial risk if the advertising does not create the intended impact.
Another innovation in agency compensation is called value billing, which means that
the agency is paid for its creative and strategic ideas, rather than for executions and
media placements.
HOW IS THE PRACTICE OF ADVERTISING CHANGING?
Because of the great recession, things will never quite be the same again within the
industry, according to an industry commentator. But there are still some exciting changes
that open up opportunities for new professionals entering the field.
Consumer in Charge
“The days of pounding people with images and shoving those images down their
eyeballs are over,” according to Procter and Gamble’s former global marketing officer
Jim Stengel. This change is causing some shifts in the way the advertising business
operates.
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User generated content got started as a trend in 2009 when CareerBuilder dismissed
its agency and took its advertising in-house because they wanted ordinary consumers
to create its ads. This move saved the company an estimated 15%-20% of its annual
marketing costs and brought more opportunities for consumer-generated
advertising.
Blurring Lines and Converging Media
One of the biggest changes impacting the advertising industry is the changing media
environment. The big bomb that has fragmented the media world is digital media,
which appear in so many different forms that it’s impossible to keep up with them.
The newspaper industry has been particularly wounded. The new personal media,
such as iPhones, iPods, iPads, BlackBerries, and Kindles are real game-changers.
The line is also blurring between traditional marketing communication functions and
tools.
Accountability and Effectiveness
Efficiency is an advantage in this new marketing communication world. Agencies
that are creative in finding new ways to deliver cost efficiencies have a real advantage
in their client dealings.
There is also a concern about effectiveness. Effective ads are ads that work. That is,
they deliver the message the advertiser intended and consumers respond as the
advertiser had hoped.
The Effie award, named for a shortened form of the word effective, is given by the
New York Chapter of the American Marketing Association to advertising and other
forms of communication that have proven to be not only creative but, more
importantly, effective. That means the campaigns were guided by measurable
objectives and the evaluation after the campaign determined that the effort did, in
fact, meet or exceed the objectives.
Other award shows may focus on other aspects of advertising, such as creative ideas.
Not all award shows focus on effectiveness. The Clios and the Cannes Lions Award
focus on creativity. Awards are also given for media plans, art direction, and other
professional areas such as clever promotional ideas and outstanding public relations
efforts.
Integrated Marketing Communication
Integration is a concept that is discussed throughout this text book. The search for
effective communication has led many companies to focus on the consistency of their
brand communication in order to more efficiently establish a coherent brand. We call
this practice integrated marketing communication (IMC) – the primary tool of brand
communication.
End-of-Chapter Support
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