Marketing Communications

Digital, Social & Integrated

Lecture 4
Organising for Advertising and
Promotion

The Role of Ad Agencies and

Other Marketing Communication
organisations
 Organising Internally for Advertising and Promotion
organisational Options For Clients
• Centralized System

– Advertising and promotion placed alongside other marketing

functions such as sales, research and product planning. The
advertising manager is responsible for all promotions
activities except sales

• Decentralized System

– Separate marketing, sales, advertising and promotion

departments for various product lines or businesses of the
company e.g Unilever. Often use product or brand
management system

• In-House Agencies

– Advertising agency set up within the company and is

owned and operated internally
Reasons for using an Outside Agency
(Why Firms turn to Full-Service Agencies)
• Breath of knowledge & experience
(Best professionals in the advertising business)

– Obtain services of highly skilled specialists

– Artists
– Writers
– Media analysts
– Researchers
– Others with specific skills

• Advertising agencies often specialize in specific industries

• Cost Savings
The client might lose from operating an in house agency

• Obtain an objective/independent/bias free point of view

– Free of internal policy constraints and biases
– Broad range of experience, having worked with:
• Diverse marketing problems
• Various types of clients
 Advertising Agency
• Definition:

An advertising agency is an organisation of creative people

and businesspeople that specialize in developing and
preparing plans, advertisements, and other promotional tools

• It also arranges or contracts for the purchase of advertising

space and time in the various media. It does all these on
behalf of different advertisers, or sellers – its’ clients – in an
effort to find customers for the client’s goods and services

• A commission/fee is generally taken by the agency which

tends to be taken from the media purchases of the client
organisation

• More transparent means of payment are becoming more

popular, with some agencies being paid-by-results
 The Role of the Ad Agency

• Study the client’s product for inherent strengths and

• weaknesses in relation to its competition
• Analyse the product’s present and potential market for
• both new and existing products
• Familiarise themselves with the product’s factors of
• distribution and sales volumes
• Be familiar with all available media
•
•
• Formulate a plan to carry the message to consumers,
wholesalers, dealers or contractors and present this plan
to the client
•
Execute the plan by:
1. Writing, designing, illustrating and producing the
advertisement,
2. Researching, negotiating, arranging, Contracting for
commercial space and time with print, electronic and
digital media, purchasing advertising space and time in
various media on behalf of their clients auditing and
billing for the service, media space and preparation.
The Role of the Ad Agency

Agencies employ a diverse combination of business and creative people,

including administrators, accountants, marketing executives, researchers,
marketing and media analysts, writers and artists but also have day-to-day
•
contact with outside professional suppliers

Offer expert, objective and creative counsel to ensure that they are the
“guardians
• of their brands” (Sinclair et al., 1995)

•
Agencies have moral, ethical, financial and legal obligations to their
clients, which implies that they must track the results of the campaign, and
recommend modification where necessary, maintain a tight budget control,
and act in an advisory capacity with regard to advertising legislation
•
The agency also collaborates with client’s marketing staff to enhance
the advertisement’s effectiveness through package design, sales research
and training and the production of sales literature
 Main Functions of Agencies

• Planning

– Researching about customers, products and markets to better

develop ads
– Developing creative and media strategies from the outcome of
research
– Working out campaign expenditures (E.g Production & Media
Budgets)

• Preparing

– Writing, designing & producing Ads

• Placing

– Contracting for media time & space

– Delivering the ads in appropriate formats to the media
– Verifying insertions
– Auditing and billing clients
– Paying the media
 Types of agencies

• Full-service agency
• A la carte agency
• Specialist agency

– A full-service agency will take on the whole project or campaign

– An a la carte agency will offer some aspects of a campaign such

as media buying, rather like buying items from a menu

– A specialist agency tends to be small and more focused on a

specific aspect of marketing communications and/or a specific
market such as Internet Marketing
 Full-Services Agencies
• Offer Full Range of Marketing, Communication and
Promotion services
– Planning, creating, producing advertising
– Performing research
– Selecting and purchasing media

• Also offer Non-Advertising Services

– Strategic market planning
– Sales promotion
– Internet and interactive
– Public relations and publicity
– Production of trade show materials
– Package design
 Typical Full-Service Agency organisation

• Account management • Traffic and production

• Creative • Account planning

• Media
 Account management

• Account managers/executives work for an agency with

the client (an agency's customers are called 'clients').
• They will spend a lot of time with the client working as
part of their marketing team.
• This is one way in which an agency works closely with its
client and why the 'chemistry' between a client and its
agency needs to be right.
• The account manager makes sure that the correct
information is passed from the client to the other
members of the agency.
• He or she is a co-ordinator and time manager. The
account planner will work on a brief that is fed back to
the agency team.
 Creative Team
• The first internal team members to see the brief tend to
be the creatives and the media planners

• The brief *contains a 'proposition' that the client wishes

to communicate to the target audience

• The creative team will transform the proposition into

something exciting and attractive to the target audience

• The creative team decide upon the 'creative concept.'

This will be a motivational idea.
 Creative Team

• The words used to express the creative concept are

called 'copy.'

• The images, pictures and diagrams are created i.e. the

'design' or 'layout.'

• This is done by 'designers' and 'copywriters.' Beware

some creatives! Creatives tend to be artistic and
innovative.
 Traffic and Production Team
• The traffic and media team are in charge of the
production of the physical and artistic output, i.e. the
marketing communication

• In the case of a TV advert, they would commission

scripts, recruit actors (mainly via agents), film crews and
supporting activities (such as costumes and catering)

• In the case of print advertising, the traffic and

production team would commission and sign-off all
printed advertising material such as direct marketing
materials, magazine ads or posters.
 Account Planning Team
• The account planning team work on the 'customer's'
perspective, and take an outward look at the world

• They support the creative teams by supplying data and

opinion on what is actually occurring in the market in
which advertising is to be placed

• They tend to use secondary data to support decisions,

and would rarely commission original research

• Account Planning Team use material supplied by

organisations such as Mori, Datamonitor, ACORN, and
other to help the creatives build the image of the
segment
 Media Team

• The media team will organise the timing and scheduling

of the marketing communications campaign

• They will look at the range of media to be exploited, and

then look at the best slots in which to run advertising

• They will help a client to decide upon the duration of and

individual slot, and how many of them to run

• Here the expense and return to the client are key factors
that influence decision-making
 Media Team

• The three main skills of the media team are

media analyzing, media planning and media
buying
– Media analysts are people who are keeping in touch
with the latest trends in media world

• Today there is a wealth of data on which media buying

can be based

• There is software for planning and simulation

 Selection of an Agency
(It’s also a checklist for evaluating an Agency)
• Creativity
(Personnel creative abilities)

• Growth

• Experience

• Account History
(Average age of service to its client & account
turnover)

• Manpower
(Depth of experience)

• Experience in campaign planning

 Selection of an Agency

• Media planning
(Extent of media research)

• Merchandising capabilities
(To make all forms of selling pay off at Point of purchase)

• Degree of Research
• (Copy research, Package research etc)

• Contact availability of agency personnel for personal

contact
(With the frequency required, the convenience and speed of contact for both
regular and emergence purposes)
 How Agencies Gain Clients

• Personal contact with top management

• Public Relations - Networking and community relations

• Referrals

• Soliciting and advertising for new business

• Trade advertisements and direct mail

• Presentations at prospects’ premises

• Publicity on recent campaigns

• Image and General Reputation

– Awards competitions are a way for agencies to build their

reputation
 Factors Affecting the Client/Agency
Relationship
There are four basic factors that affect the success or otherwise
of the client agency relationship, which are known as the four
C’s (Sinclair, et al, 1995).

• The chemistry between the client and agency staff

– The majority of agency firings are based on people-related issues,

personal relationships and the personality fit between the employees of
the advertiser and the agency.
• The communication in the partnership

– Agencies must continually advise their clients on new and interesting

ideas that optimise the achievement of the account objectives

– Communication is the only way that agencies can understand what the
client’s needs are
–
The absence of communication or the wrong type of communication
causes misunderstandings about relationship objectives, strategies,
roles, expectations and the ultimate consequence is poor advertising
 Factors Affecting the Client/Agency
Relationship
• The conduct of either party

(conduct includes what everyone in the relationship does)

Because of the high involvement in the client/agency relationship, role

definition is difficult and role overlap may lead to frustration

Dissatisfaction with agency performance is one of the most

common reasons for agency switches, so an agency’s conduct must meet
the initial expectation set by the agency

The product or service may have moved on in its lifecycle, so that the way
the agency handled the account in the past may not be appropriate for
today. On the other side of the coin, clients must also give timely, accurate
information, appreciate good work, and not treat the agency as a vendor
 Factors Affecting the Client/Agency
Relationship

• Any changes which occur within the relationship

Change is inevitable in any relationship, and some may

damage the agency/client partnership

Change may come in the form of policy or management

adjustments in either party, the client’s market position may
shift or agencies may lose their key staff

Client conflict might occur where one agency buys another

that handles competing accounts
 Why Agencies Lose Clients

• Poor performance • Conflict of interests

• Poor communication • Changes in strategy
• Unrealistic demands • Declining sales
• Personality conflicts • Payment conflicts
• Personnel changes • Policy changes
• Changes in size
 Agency Compensation

• The Commission System

– Agency usually receives 15 percent (Negotiable)

– Commissions are paid by the media
– Commission system is controversial
• Two agencies may require the same amount of effort to create and produce an ad.
However, one client may spend $200,000 on commissionable media, which results in a
$30,000 agency income, while the other spends $2 million, generating $300,000 in
commissions.
– System is becoming less common
Advantages

– it is easy to administer and it keeps the emphasis in agency competition on nonprice

factors such as the quality of the advertising developed
Disadvantages

– it provides an incentive for agencies to do the wrong thing, such as recommending

mass-media advertising when other forms of communication such as direct
marketing or public relations might do a better job
– the commission system is outdated and must be changed
 Agency Compensation

• Fee Arrangements
– 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

– Fee-commission method
• The media commissions received by the agency are credited against the
fee. If the commissions are less than the agreed-on fee, the client must
make up the difference. If the agency does much work for the client in
noncommissionable media, the fee may be charged over and above the
commissions received
 Agency Compensation
• Cost-Plus Agreements
– 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)

Note: Fee agreements and cost-plus systems are commonly used in

conjunction with a commission system .
• 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
• Percentage Charges
– Another way to compensate an agency is by adding a markup of percentage
charges to various services the agency purchases from outside providers.
– Markups usually range from 17.65 to 20 percent and are added to the client’s
overall bill
 Agency Evaluation Process

• Financial Audit – focuses on how the agency conducts

its business and includes verification of costs, expenses,
number of personnel hours charged to an account and
payments to suppliers and media

• Qualitative audit – focuses on the agency’s efforts in

planning, developing, and implementing the client’s
advertising and promotion program and the results
achieved
Other Types of Agencies
&
Services
 Creative Boutiques
• Many small agencies assist their clients with a variety of limited
services.

• In the early 90’s the trend towards specialization blossomed giving

impetus to many of the small agency-type groups called:
– creative boutiques and;
– other specialty businesses such as media buying services

• Creative Agencies/Boutiques:
• Provide only creative services - They are not interested in many of
the services provided by a full-service agency

• They concentrate their skills and resources into the production of

adverts, developing creative static campaigns, providing
creative ideas to marketers
 Media Buying Agencies/Services

• These agencies do not produce advertising

• They provide their customers (both ad agencies and clients) with a detailed
analysis of the media selection

• The media buying agency can negotiate a special discount with the media
and then re-sell these spaces or spots to the agency or client

• In sum, they specialize in analyzing and buying media, especially broadcast

time

• Agencies and clients may develop media strategy but Media buying
organisations implement the strategy and buy time and space
 Direct Response Agencies

Services include:

• Database Management
• Direct Mail Programs
• Research
• Media Services
• Creative
• Production

• Agencies that specialize in providing direct marketing

services to their clients
 Sales Promotion Specialists
• Agencies that specialize in developing and administering sales
promotion programs
Services include:
– Promotion Planning
– Creative
– Research
– Design and Production
– Contests/sweepstakes
– Refunds and rebates
– Sampling and incentive programs
 Public Relations Firms

Firms that develop and implement programs to manage an

organisation’s publicity, image and affairs with consumers
and publics

• Strategy Development • Public Affairs

• Program Planning • Image Portrayal

• Generating Publicity • Damage Control

• Lobbying
 Interactive Agencies

• Agencies that specialize in the development and strategic use

of various interactive marketing tools
Services include:
• Development of strategy for Internet and other interactive
marketing tools
• Interactive media creation
– Web sites
– Web banner ads
– Digitized content (audio, video, animation)
– CD-ROMs
– Kiosks
 Collateral Services

• Marketing Research Firms

• Package Design Firms

• Video Production Companies

• Photographers

• Printers

• Event Marketing Companies