Advertising agency and compensation

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  • Project assignment: The client details his business objectives to the account manager, and together they define the role that advertising is expected to play. The account manager collects as much information as possible and briefs the key agency departments – strategic planning, creative, and media. Strategic Development: As a group, the agency team analyzes the assignment – what type of people would use this product? Why would they use it? What would compel someone to purchase it? Research is vital at this stage, and can be conducted among consumers, industry experts or published reference materials. The goal of strategic development is to find a compelling story about the product (referred to as the positioning) and a unique message for the advertising creative (the creative brief). Media Development is typically initiated alongside of strategic development. The media team creates a detailed profile of the target consumer -- how old are they? How much money do they earn? Where do they live? What are their hobbies? A media plan is developed to reach these consumers based on their media consumption habits. The plan is presented to the client and (when approved) is purchased by the media buyers. Creative Development: the creative team develops rough versions of ads. After input by the creative director, the account manager and strategic planner are consulted for further fine-tuning. Creative work is then presented to the client and, when approved, is often tested among consumers. The advertising will be judged a success if it grabs consumer attention and motivates him to try the product – changes may be made if necessary at this point. Once finalized, TV spots are shot, radio spots recorded, and the print ads produced. Campaign Debut: The Traffic Manager sends the advertising where it is needed and ensures it debuts in accordance with the media plan. This can get quite complicated, as each type of ad must be finished at varying times prior to debut - magazine ads will need to arrive as much as a month prior to publication, while TV and Radio spots may be needed by stations just a few days before air. Tracking of an advertising campaign is essential, allowing client and agency to gauge the impact of their efforts and signal changes that might need to be made. Tracking can be done in a variety of ways, depending on the client’s business goals. Product sales are evaluated. Changes in consumer opinion may be measured. Media purchases will checked to ensure they ran as purchased.

Transcript

  • 1. The first ad agencies
    • The first advertising agencies were:
      • Brokers of media space.
      • Staffed by a couple of people
      • Motivated by maximizing profit on transactions like a stock broker.
      • Not interested in the in the adveritising results or the well-being of their customers.
    • The first advertising agencies had no copywriters.
    • They had no art directors
    • They had no account executives either.
  • 2. How the world has changed!
    • Businesses and products have become more complex:
      • Simple products have become multifaceted brands.
      • Manufacturing companies have given way to marketing-driven corporations.
      • And communications have become increasingly vital to their existence.
    • Media has also become an extremely sophisticated world:
      • Consumers have access to hundreds of channels on broadcast TV, cable, and satellite.
      • There are thousands of newspapers and magazines for people to read and millions of web sites to access.
      • Advertising is everywhere and companies more than ever need help identifying the right opportunities.
  • 3. Advertising Agencies filled a valuable need
    • Advertising agencies have grown incredibly:
      • Today, the largest agencies employ thousands of professionals across the globe and manage billions of dollars in business every year.
      • And advertising agencies offer more diverse services than ever, serving as strategic partners with their clients and helping them increase the value of their business.
      • They offer services from creative, to media brokerage, to marketing strategy, to business development and profit sharing.
  • 4. Functions of An Advertising Manager
    • Planning and Budgeting
    • Administration and Execution
    • Coordination with other departments
    • Coordination with outside agencies and services
    • Planning and Budgeting
    Who is handling relations in organization/company ?
  • 5. What is an in-house agency ?
    • Advantages
    • Cost savings
    • More control
    • Better coordination
    • Disadvantages
    • Less experience
    • Less objectivity
    • Less flexibility
  • 6. Reasons for Using an Outside Agency
    • Obtain services of highly skilled specialists
      • Artists
      • Writers
      • Media analysts
      • Researchers
      • Others with specific skills
    • Obtain an objective point of view
      • Free of internal policy constraints and biases
      • Broad range of experience, having worked with:
        • Diverse marketing problems
        • Various types of clients
  • 7. Agency Structure
    • A typical full-service advertising agency typically involves 4 main departments:
      • Account Management
      • Creative Services
      • Media Planning and Buying
      • Research and Account Planning
  • 8. Typical Full-Service Agency Organization
  • 9. Account Management
    • Works closely with the client to map out their communications needs and define the role the agency can play in helping meet their business objectives.
    • Engages agency resources as appropriate and ensures all the work done for the client is suitable for their business and that projects run smoothly.
    • On a day-to-day basis, this means creating agency teams to work on specific projects, communicating the agency opinion in formal points of view, presenting work, and setting timelines and budgets.
    • There are a number of levels within the account management group. The most common positions (starting from the more senior) are as follows:
      • Management Representative
      • Account Supervisor
      • Account Executive
      • Assistant Account Executive
  • 10. Creative Services
    • Advertising can take many forms (TV commercials, radio spots, print ads, and outdoor billboards to name a few), but collectively they are referred to as “the creative.”
    • Development of the creative is typically done in teams of two. A Copywriter (words) and an Art Director (visuals) work together to create rough versions of the ads including: TV storyboards, print layouts, and radio scripts. Creative teams can work successfully together for years -- often hired, fired and promoted together.
    • The Creative Director , who approves all the work before it is shared with the client, has a tremendous influence on all the work an agency develops, ensuring that the work is unique and appealing while strategically on target.
    • Once an idea for a radio or TV ad is ready to be brought to life, a Producer joins the team. The producer coordinates with the outside resources necessary to produce finished ads. He estimates the cost to produce the ads, writes contracts, and coordinates the production from start to finish.
    • The Traffic Manager performs a similar function for print ads, estimating costs and coordinating these jobs from start to finish. In addition, the Traffic Manager is also responsible for getting all ad materials where they need to go.
  • 11. Media Planning and Buying
    • Typically, the largest portion of a marketer’s budget goes towards buying media. This places a huge responsibility on the media planning and buying department.
    • Media Planners determine what combination of TV, Radio, Magazines, etc., would reach as many target consumers as possible at the lowest cost. The result of their research and analysis is the Media Plan, a calendar of scheduled advertising
    • The measurements they use include:
      • Reach: what percentage of the target audience will be exposed to the ad
      • Frequency: how many times the average consumer in the target audience will be exposed to the ad
      • Effective Reach: also referred to as ‘3+ reach,’ quantifies the percentage of the target audience that will be exposed to the ad more than three times
    • Media Buyers take the media plan recommended by the planners and negotiate its purchase as inexpensively as possible.
  • 12. Research and Account Planning
    • Advertising agencies began actively doing research in the 1920s. This research was focused on answering specific business questions about products and consumer preference.
    • Research was typically not an integral part of the creative development process until the introduction of Account Planning.
    • Account Planning began in England during the 1960s. It focuses on consumer attitudes and branding for the goal of creating a unique identity for the client’s brand which is distinct from the competition and compelling to the target consumer.
    • Research centers around focus groups where small groups of consumers tell agencies a lot more about what consumers think and feel than a nationwide survey.
    • Account Planners use this information to weave facts together into compelling stories. These stories can form the basis of a brand positioning, a unique product benefit or perhaps even a commercial storyline.
    • Many agencies have created unique planning processes. For example, J Walter Thompson relies on TTB (Thompson Total Branding), McCann has the Brand Footprint, and Bates offers the Brand Wheel.
  • 13. How Agencies Work
    • Chronology of how most advertising is generally created:
      • Project assignment
      • Strategic Development
      • Media Development
      • Creative Development
      • Campaign Debut
    • The process is collaborative with multiple agency departments involved at key points along the way. This may seem a bit chaotic at times, but the process encourages input from diverse points of view, stimulates healthy debate and allows strong ideas to emerge regardless of the source.
  • 14. Full-Services Agencies
    • Full Range of Marketing, Communication and Promotion services
      • Planning, creating, producing advertising
      • Performing research
      • Selecting and purchasing media
    • Non-Advertising Services
      • Strategic market planning
      • Sales promotion
      • Internet and interactive
      • Public relations and publicity
      • Production of trade show materials
      • Package design
  • 15. Creative Boutiques
    • Provide only creative services
    • Other functions provided by the internal client departments or outside agency such as media buying service
    • Full-service agencies may subcontract with creative boutiques
    Agencies that specialize in the creative process of advertising
  • 16. Media Buying Services
    • Specialize in analyzing and buying media, especially broadcast time
    • Agencies and clients may develop media strategy
    • Media buying organizations implement the strategy and buy time and space
    Independent companies that specialize in the planning and purchasing of media
  • 17. Why Agencies Lose Clients
    • Poor performance
    • Poor communication
    • Unrealistic demands
    • Personality conflicts
    • Personnel changes
    • Changes in size
    • Conflict of interests
    • Changes in strategy
    • Declining sales
    • Payment conflicts
    • Policy changes
  • 18. How Agencies Gain Clients
    • Referrals
    • Solicitations
    • Presentations
    • Public Relations
    • Image and Reputation
  • 19. Agency Compensation
    • The Commission System
      • Agency usually receives 15 percent
      • Commissions are paid by the media
      • Commission system is controversial
      • System is becoming less common
    • Fee Arrangements
      • Fixed fee method
      • Fee-commission method
    • Cost-Plus Agreements
    • Incentive-Based Compensation
    • Percentage Charges
  • 20. Example of the Commission System