Integrated Marketing Communications

Module 2

Topics to be covered
Advertising Agency: Types of Agencies Services offered by various agencies Criteria for selecting the agencies and evaluation

Participants in the Integrated Marketing Communications Process

Advertiser (client)

Advertisin g agency

Media organi zations

Marketing communication specialist organizations Direct marketing agencies Sales promotion agencies Interactive agencies Public relations firms

Collateral services

Advertising Agencies

The advertisers, or clients are the key participants in the process. They have the products, services or causes to be marketed, and they provide the funds that pay for advertising and promotions. Many organizations use an advertising agency, an outside firm that specializes in the creation, production and/or placement of the communications message and that may provide other services to facilitate the marketing and promotions process.

Media organizations are another major participant in the advertising and promotions process. The primary function of most media is to provide information or entertainment to their subscribers, viewers, or readers. But from the perspective of the promotion planner, the purpose of media is to provide an environment for the firms marketing communications message. Specialized marketing communications services provide services in their areas of expertise. Collateral services are the wide range of support functions like marketing research used by advertisers, agencies, media organizations and specialized marketing communications firms.

Advertising Agencies
Many major companies use an advertising agency to assist them in developing, preparing and executing their promotional programs. An ad agency is a service organization that specializes in planning and executing advertising programs for its clients. Top 12 Ad Agencies Ogilvy & Mather Brooke Bond Red Label, Bru, Limca, Lenovo

CADBURY DAIRY MILK SILK

Mudra Communications- Himani Navratan Lite, MagicBricks.com,
Nilon's Pickle

McCann Erickson- Nescafe JWT- Horlicks, 7Up Lemon Bite Lowe Lintas- Tata Tea Rediffusion Y&K LG, MTS, Rasna, Tanishq, Tata Ace, Tata Nano, ING
Vysya Life Insurance Leo Burnett- Bajaj Fans, HDFC, McDonald's McSpicy, Reliance Mobile , Tide, Maaza Grey Worldwide - Dinesh Suitings, Kiwi, Parle-G, Bharti AXA Life Insurance

FCB-Ulka - 99acres.com, Mint-O Fresh, Tata Indicom, HCL

Saatchi & Saatchi Ariel, OLX, Pillsburry Atta R K Swamy BBDO- Sony hi-fi Contract Advertising- Ashok Leyland, Asian Paints, Domino's, Jaypee Group, Spice Jet, Whirlpool, HSBC

1. Samsung Mobile by Cheil Worldwide And by Cheil Communication 2. Appy Fizz by Creativeland Asia 3. Fanta Apple by O&M 4. Horlicks by JWT 5. Pepsi by Taproot India 6. Pepsi by JWT 7. Tata Tea by Lowe Lintas & Partner , India 8. Limca by O&M 9. Acer by BBH Communications India 10. Times of India by Taproot India 11. Star Cricket by Interactive Avenues 12. Radio Mirchi- McCann-Erickson 13. ENO by Ogilivy

Incredible India by Saatchi & Saatchi National Aids Control Organisation by BBC World Service Trust National Egg Coordination Committee by Triton Communications , India JK Tyres by Contract Advertising India Pvt Ltd , India Hyundai I10 by Innocean Worldwide Ford Fiesta by JWT Indica V2 Turbo by FCB Ulka IndusInd Bank by RK Swamy BBDO , New Delhi, India HelpAge India by Bappa Pics

1. Ogilvy and Mather (www.ogilvy.com) With its presence in over100 countries, Ogilvy is one of the top advertising agency in the world. Its Indian operations are headed by Mr. Piyush Pandey. Ogilvy & Mather has given life to India's most successful and renowned brands such as Hutch (Vodafone), Cadbury, Asian Paints and Fevicol. 2. Mudra Communications (www.mudra.com) Headquatered in India, Mudra communications is one of the top advertising agencies in India 2013. Giving tough competition to others, it holds the account of renowned brands like McDonalds, Tourism Australia, Colgate and PolicyBazaar.com.

3. JWT (www.jwt.com) With its six offices in various cities of india, JWT is next in the queue. It has bagged in many awards at cannes india festival. It is behind many famous ad campaigns like Listerine, Good night, and Teach for India.

4. McCann Erickson India (www.mccann.com) Headed by Prasoon Joshi, a revered ad personality in India, McCann Erickson is an award winning global advertising company. Its holds the account of some famous brands like MasterCard, Coca Cola, and Greenlam Laminates. 5. Lowe Lintas (www.lowelintas.in) Lowe Lintas is among the most trusted brands in the country. Its headquarter is in Mumbai along with various offices all over India. Lowe Lintas is responsible for ad campaigns like Idea, ICICI Prudential and Tata Tea. 6. Leo Burnett (leoburnett.co.in) The creative team of Leo Burnett India Pvt. Ltd. has, successfully offered consumers with powerful brand experiences using ads like McDonald's, Heinz, Complan, Bajaj, HDFC and samsung to name a few.Its Indian operations are headed by Arvind Sharma and the company has offices in Gurgaon.

7. Matchboxindia (www.matchboxindia.com) Matchboxindia is growing to be the top advertising agency in India 2013. It is headed by J. B. Sahu. It is well known for its Event Management, Printing - Services, Digital Advertising, and Creative ad creation, Ad promotion in central India. it deals with well known brands. 8. Dentsu India (www.dentsu.in) Dentsu is a Tokyo based advertising agency. It has a number of wholly owned subsidiaries in India, including Dentsu Marcom, Dentsu Creative Impact, Dentsu Media and Dentsu Communications. Its subsidiary also include one of the budding advertising agency i. e. Taproot India. 9. Contract (www.contractindia.co.in)Contract Advertising India Ltd. is successful in delivering great results to its high-profile clientele including Tata Indicom, Religare, Asian Paints, Domino's Pizza, SpiceJet, Samonsite and American Tourister. It is headed by Jagdip Bakshi. 10. Rediffusion DY & R (www.rediffusiondyandr.com) Rediffusion is India's 5th largest advertising company. It focuses primarily on integrated PR services and media relations. Its has set a benchmark in the field of creativity.

Reasons for using an Agency

The main reason outside agencies are used is that they provide the client with the services of highly skilled individuals who are specialists in their chosen fields. An advertising agency staff may include artists, writers, media analysts, researchers and others with specific skills, knowledge and experience who can help market the clients products or services.

Types of Ad Agencies
Full-Service Agencies (MCP-PCAd-R & D) Creative Boutiques Media Specialist Companies Full-Service Agencies Offers its clients a full range of marketing, communications and promotions services, including planning, creating and producing the advertising; performing research; and selecting media A full-service agency may also offer non advertising services such as strategic market planning, sales promotions, direct marketing and interactive capabilities; package design; and public relations and publicity.

Creative Boutiques These are small ad agencies that provide only creative services. These specialized agencies have creative personnel such as writers and artists on staff but do not have media, research or account planning capabilities. Creative boutiques have developed in response to some companies desires to use only the creative services of an outside agency while maintaining control of other marketing communication functions internally. An example of a successful creative boutique in India is Vyas Gianneti Creative, which is a Mumbai based agency whose clients include Aditya Birla Group, TATA Group, Taj Hotels etc.

Boutique agencies do not focus on developing campaigns and studying demographics; their work is creative in nature. They usually have small staffs and may work with contract workers and free lancers to get a specific look and feel for particular projects. Clients approach them when they want high quality creative work. Larger advertising agencies may refer clients to these smaller, creation-focused agencies when it comes to developing the look of advertisements and campaigns.
These agencies can develop print and video advertising, along with copywriting for ad campaigns, and the end result is highly individualized and personalized. Some of the small creative boutique agencies are 1. Kayees 2. Escape 3. Jennifer picards 4. R3 mg 5. Crb group Indian creative agencies 1. The shop , a delhi based company 2. CREATIVE INC. (CI) 3. Eggfirst

Media Specialist Companies Companies that specialize in the buying of media, particularly radio and television time. Media buying services have found a niche by specialising in the analysis and purchase of advertising time and space. Agencies and clients usually develop their own media strategies and hire the buying service to execute them. Some media buying services do help advertisers plan their media strategies. Eg. Initiative is one of the largest media specialist companies.

Functions performed by Ad Agencies

1. Account Services The advertising agency exists for the purpose of advertising for its clients, termed as accounts. The success of any agency depends on the number of advertising accounts it handles. The agency has to identify, locate, maintain and expand the client base for survival and growth. Soliciting new accounts, renewing and expanding the old accounts, is very important for the advertising agency. Often managed by account executives, account supervisors, the account services department of an agency is the vital link between the clients and the agency. Such officers represent the agency to the client and in turn, represent the client within the agency. The account services department should therefore, have a thorough knowledge of their clients business and all operations within the agency.

2. Marketing Services The activities of media, research and sales promotion

of an advertising agency are broadly grouped under marketing services The media section is staffed with analysts, planners and buyers. The analysts keep an account of media coverage, media cost-and advertising spending of competing advertisers. They try to identify the best and appropriate media for each of their clients. The planners, along with the accounts department, plan the scheduling of the advertisement of the clients. The buyers execute the plans.

Most full service agencies maintain a research department whose function is to gather, analyze and interpret information that will be useful in developing advertising for their clients. This can be done through primary research-where a study is designed, executed and interpreted by the research department or through the use of secondary sources of information.
The sales promotion section usually appoints specialists for planning and managing sales promotion of the clients like sampling, couponing, premium, contest and sweepstakes. Trade promotions include trade allowances, cooperative advertising and point of purchase displays.

3. Media buying services- The media department of an agency analyzes, selects and contracts for space or time in the media that will be used to deliver the clients advertising message. Media specialists must know what audiences the media reach, their rates and how well they match the clients target market. They identify the lead TV channels, lead telecast programs, and provide readership for newspaper and magazines.
4. Creative Services The creative services department is responsible for the creation and execution of advertisements. The individuals who conceive the ideas for the ads and write the headlines, subheads and body copy are known as copywriters. They may also be involved in determining the basic appeal or theme of the ad campaign and often prepare a rough initial visual layout of the print ad or television commercial.

While copywriters are responsible for what the message says, the art department is responsible for how the ad looks.For print ads, the art director and graphic designers prepare layouts, which are drawings that show what the ad will look like and from which the final artwork will be produced. Most agencies do not actually produce finished ads; they hire printers, engravers, photographers, typographers and other suppliers to complete the finished product.

5. Management and Finance An advertising agency must be managed and perform basic operating and administrative functions such as accounting, finance and human resources. The bulk of an agencys income goes to salary and benefits for its employees. Thus, an agency must manage its personnel carefully and get maximum productivity from them. 6. Agency Organization and Structure Full-function advertising agencies must develop an organizational structure that will meet their clients needs and serve their own internal requirements. Most medium size and large agencies are structured under either a departmental or a group system. Under the departmental system, each of the agency functions is set up as a separate department and is called on as needed to perform its specialty and serve all of the agencys clients. Ad layout, writing and production are done by the creative department, marketing services is responsible for any research or media selection and purchases, and the account services department handles client contact. Many large agencies use the group system, in which individuals from each department work together in groups to service particular accounts.

OTHER FUNCTIONS PERFORMED BY AD AGENCIES 1. Attracting clients Advertising agency needs clients (advertisers). Without them, it cannot survive. Ad agency always tries to attract clients usually by giving ads in trade journals. It also seeks their attention by offering them various services. It offers expert, cheap and quick services. It maintains good relations with them. It tries to give them full satisfaction. It strives harder to attain their goodwill and customer-loyalty. 2. Research function Advertising agency gathers information related to the client's product. It collects following information about a product under its research function: Features, quality, advantages and limitations of a product, Present and future market possibilities, Competition in the market, Ad agency analyses (studies) all this collected information properly and draws conclusions for its research. It helps in planning an advertising campaign, selecting proper media and creation function.

3. Advertising planning Advertising agency plans the entire ad campaign of its client. Advertising planning is a primary function of an ad agency. It is done when its research function is completed. That is, after analyzing the client's product, its competitors, market conditions, etc. It is done by experts who use their professional experience to make a result-oriented advertising-plan. After making the advertising plan, it is shown to the client. If the client likes and approves it, then the plan is executed (put into action). 4. Creative function Advertising agency put the advertising-plan into action under its creative function. Creation of ads is the most important function of an ad agency. Generally, it involves activities like: Copy writing, Drawing photographs, Making illustrations, layouts, an effective ad message, etc. These jobs are done by experts like copy writers, artists, designers, etc. These people are highly skilled and creative. They make an advertisement more appealing. Attractive ads help to increase the sales of the product. The ad agency must always use fresh ideas for creating ads. It must neither use old tactics nor copy the adcampaign of other products.

5. Media selection Advertising agency helps an advertiser to select a proper media (ad platform) to promote his advertisement effectively. Media selection is a highly specialized function of an ad agency. It must select the most suitable media for its client's ad. It must choose media, which has a potential to give best results for the lowest cost. It must select more than one media for the ad. For example, an advertisement can be put on television, the Internet, newspapers, magazines, etc. After selecting the media, the ad agency must maintain goods contacts with the media. 6. Advertising budget Advertising agency helps an advertiser to prepare his ad budget. It helps him to use his budget economically and make the best use of it. Without a proper advertising budget, there is a risk of client's funds getting wasted or lost. If an advertiser suffers a loss, he may not bring new projects. As a result, there is a possibility of losing a potential client that can bring more business to an ad agency. 7. Coordination Advertising agency brings a good coordination between the advertiser, itself, media and distributors. This is a very important function. If coordination is proper, it will increase the sales of the product.

8. Sales promotion Advertising agency performs sales promotion. It helps an advertiser to introduce sales promotion measures for the dealers and consumers. This helps to increase the sales of the product. 9. Marketing research Advertising agency helps its clients to solve their marketing problems. It does so by conducting a marketing research for them. 10. Non-advertising functions Advertising agency also performs many non-advertising functions: It fixes the prices of the product, It determines the discounts, It designs the product, It also designs its package, trade marks, labels, etc. These non-advertising services help an advertiser to increase its sales. 11. Public relations Advertising agency does the public relations (PR) work for its clients. It increases the goodwill between its clients and other parties like consumers, employees, middlemen, shareholders, etc. It also maintains good relations between the client and media owner.

Agency Compensation
Commissions from Media The agency receives a specified commission (usually 15 percent) from the media on any advertising time or space it purchases for its client. Eg. Of Commission System Payment

Media Bills Agency Costs for magazine space Rs 100000 Less 15% commission Cost of media space Less 2% cash discount Agency pays media 15000 Agency Bills Advertiser Costs for magazine space Less 2% cash discount Advertiser pays agency Rs100,000 1700 98,300

Rs 85000 1700

Rs 83,300

Agency Income

Rs15000

The commission system had many advantage, including: 1. Traditional and well understood. 2. Simple and easy to operate. 3. Inspite of its conceptual imperfections it The commission system was thought to have the following disadvantage: 1. The efforts required by the Agency may bear no relationship to the 15 percent commission. 2. Big account subsidies smaller account. 3. Profitable accounts subsidies less profitable accounts. 4. The need to operate within 15 percent commission may result in substandard work worked well in most cases 5. Agencies are encouraged to pad the work load in order to appear to be earning their keep. 6. There is temptation for an Agency to recommend an increase in advertising budget in order to boost Agency income. 7. The commission system leads to a lack of objectivity in Agency media recommendations and to discriminate against recommending below theline activity. 8. Agencies on the 15 percent commission tend to expand their services as their revenue increases whether or not their clients want extra services, the final result being that many clients are paying for services they do not want.

Fee, Cost and Incentive-Based Systems Many agencies and their clients have developed some type of fee arrangement or cost-plus agreement for agency compensation. Some are using incentivebased compensation, which is a combination of a commission and a fee system. Fee Arrangement There are two basic types of fee arrangement systems. In the straight or fixed fee method, the agency charges a basic monthly fee for all of its services and credits to the client any media commissions earned. Agency and client agree on the specific work to be done and the amount the agency will be paid for it. Sometimes agencies are compensated through a fee-commission combination, in which the media commissions received by the agency are credited against the fee.

Cost-Plus Agreement Under a cost-plus system, the client agrees to pay the agency a fee based on the costs of its work plus some agreed-on profit margin (often a percentage of total costs). This system requires that the agency keep detailed records of the costs it incurs in working on the clients account. This happens

most often with industrial products, new product introductions etc. that require disproportionate amount of agency help in preparing brochures, catalogues and other non- commissionable marketing activities.
Incentive-Based Compensation Many clients these days are demanding more accountability from their agencies and tying agency compensation to performance through some type of incentive-based system. While there are many variations, the basic idea is that the agencys ultimate compensation level will depend on how well it meets predetermined performance goals. These goals often include objective measures such as sales or market share as well as more subjective measures such as evaluations of the quality of the agencys creative work.

Percentage charges Adding a mark-up of percentage charges to various services the agency purchases from outside providers. These may include market research, artwork, printing, photography and other services or materials. Markups usually range from 17.65 to 20 percent and are added to the clients overall bill.

Process of Selection of Ad Agencies Client needs Assessment Prepare Scope of Work (SOW) outlining the work you expect your agencies to perform. SOW is prepared based on past experience and it mentions no. of TV commercials to produce, no of websites to develop, and no of media plans to develop. Agency Screening- List of agencies that fit your criteria. Agency Evaluation Request for information (RFI) is being sent to the agency asking for their credentials and capabilities. Agency Selection Personal visit to agencys office and check their skills, resources and capabilities. Contract Contract is being signed and the compensation mode is being decided, whether it would be performance based fixed or percentage of sales incentive.

Client needs Assessment

Agency Screening

Agency Evaluation

Agency Selection

Contract

Criteria of selection of Ad Agencies

Compatibility The selection of an advertising agency depends on the compatibility of the agency. The needs of the company determine the fitness of the agency. The advertiser visits several agencies and chooses the best agency on the basis of its merits, demerits, accreditation, its methods of handling the accounts and using the available opportunities.

Agency Team This includes management specialists, market researchers, copywriters, media experts, production managers and art directors. Their attitude, thinking, experience and personalities of the team members have positive effects on the selection process. Agency Stability An agency, which has been long in existence generally, performs efficiently and effectively. The greater the investment in the agency, the more vital the contribution of the agency to the advertising activities. The personnel, finance, management and credit are examined before selecting a suitable advertising agency.

Services The services rendered by the agency are evaluated with a view to choosing the best advertising agency. The greater the range of an agencys services, the more fully it can serve the clients needs. The agency can serve the clients by its potential capacity for advertising, sales promotion, media placement, public relations, market research, sales training and distribution channels. Creativity

Creativity is the main element in advertising. If the advertising agency is capable of great creative efforts, it is selected for the purpose. Style, clarity, impact, memorability and actionthese are taken into account while evaluating creativity. Problem-solving approach The agency which has a problem solving approach is considered to be superior and useful. Caliber, compatibility, balanced services, responsiveness, talent an equitable compensation-these are important factors in selecting an advertising agency.

An innovative approach It is developed in Hong Kong, the Strategic Thinking And Response (STAR) technique, involves using a business scenario that several agencies must analyze and respond to. The approach is designed to assess the strategic planning and management capabilities of a few agencies, rather than the creative and research capabilities of several.

Criteria for evaluation of Ad Agencies

The agency evaluation process usually involves two types of assessments : Financial audit Focuses on how the agency conducts its business. It is designed to verify costs and expenses, the number of personnel hours charged to an account, and payments to media and outside suppliers. Qualitative audit Focuses on the agencys efforts in planning, developing and implementing the clients advertising programs and considers the results achieved. The agency evaluation is often done on a subjective, informal basis, particularly in smaller companies where ad budgets are low or advertising is not seen as the most critical factor in the firms marketing performance.