chapter%20five

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chapter five
advertising agencies
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the first advertising agents

• 1843 volney palmer
• agent for media, not advertisers
• 1864 - george p. rowell

• the johnny appleseed of advertising
• Rowells American Newspaper Directory
• space wholesaler
• shared his secret
• 1888 - Printers Ink

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the first BIG idea

• Cyrus Curtis
• Curtis Publishing
• establishes commission system
• this turns agencies into media
  sales force

4
the first advertising agency

• n.w. ayer son

• founded 1864 by francis w. ayer

• he was only 20 son (his dads initials)
  made the agency seem more established

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the first advertising agency

• n.w. ayer son

• founded 1864 by francis w. ayer

• key concept
• worked for advertiser
• slogan - keeping everlastingly at it brings
  success.
• lasted until 2002

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early advertising effectiveness

• new and improving media vehicles
• growing interest in new products
• food, hygiene, convenience
• services, improved products
• relatively uncluttered media
• fewer ads more interest
• greater cost-effectiveness
• relatively low-cost media

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4 full-service agency functions

• today, full-service agencies provide the
  following

• account management
• creative
• media planning and media placement (media
  buying)
• research

• many adding below the line services - PR,
  sales promotion, digital/interactive

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U.S. agency business today

• 13,248 agencies
• 180,100 paid ad agency employees
• AdAge analysis of Bureau of Labor Statistics
  Data 2012
• highest level since December 2008
• still using interns and low-cost new hires
• New York still dominates
• West Coast growth - LA SF
• imported car brands, high tech
• other unique regionals
• Portland (Nike), Martin Agency (Richmond)

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agencies by metro area

• Metropolitan Area of agencies
• New York 1,983
• Los Angeles 1,004
• Chicago 892
• Miami/Ft. Lauderdale 611
• Dallas/Ft. Worth 409
• Philadelphia 388
• Atlanta 384
• Boston 330
• San Francisco/Oakland 319
• Minneapolis/St. Paul 313
• (source 4As Research Services, 2010)

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major types of agency

• mega-agency groups
• independent agencies
• national, regional, and local
• specialized/niche agencies
• agency service suppliers
• media buying, creative services

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mega-agency groups

• prompted by mergers and client globalization
• financial pressures

• service multinational accounts
• subsidiaries provide IMC (integrated
  marketing communication) services

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mega-agency groups

• lets look at how things can change

sir martin sorrell, asks do you remember what
WPP stands for?
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5 top mega-agency groups
Omnicom Group 4.15 billion WPP Group
3.64 billion Interpublic (IPG) 3.38
billion Dentsu (Japan) 1.98 billion YR
(Young Rubicam) 1.49 billion
1997
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5 top mega-agency groups
WPP Group (w. YR) 6.69 billion Omnicom Group
5.74 billion Interpublic (IPG) 5.08
billion Havas Advertising 2.39
billion Publicis (w. Saatchi) 2.17 billion
1999
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5 top mega-agency groups
WPP Group (w. YR) 7.9 billion Omnicom Group
6.9 billion Interpublic (IPG) 6.6
billion Dentsu (Japan) 3.1 billion Havas
Advertising 2.76 billion
2000
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6 top mega-agency groups
Omnicom Group 8.62 billion WPP Group
6.76 billion Interpublic (IPG) 5.86
billion Publicis (w. Leo Burnett) 4.41
billion Dentsu (Japan) 2.55 billion Havas
Advertising 1.88 billion
2003
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5 top mega-agency groups
Omnicom Group 13.6 billion WPP Group
13.36 billion Interpublic (IPG) 6.96
billion Publicis 6.9 billion Dentsu
(Japan) 3.3 billion
2009
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5 top mega-agency groups

• WPP Group 16.1 billion
• Omnicom Group 13.9 billion
• Publicis Groupe 8.1 billion
• Interpublic (IPG) 7.0 billion
• Dentsu (Japan) 4.1 billion

2012
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mega-agency pros cons

• positives
• larger talent pool
• negotiating clout
• financial rewards
• account security
• competitive edge
• strong partnerships
• more services
• international link

• negatives
• people vs. profit
• creativity vs. size
• conflict of interests
• people business

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national, regional local

• these are independent agencies
• there are fewer national agencies - not part of
  mega-agency groups
• regional and local agencies work with smaller
  clients - usually nearby
• it is still relatively easy to start your own
  small local agency - if you have a client

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independent agencies

• example The Richards Group

• based in Dallas

• grew from small design firm

• accounts Motel 6, Chick fil-A, Orkin

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independent agencies

• example RPA (Rubin Postaer)

• based in Los Angeles

• Omnicom spin-off (client conflict)

• major accounts honda, acura

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independent agencies

• example Cramer-Krasselt

• offices Chicago/Milwaukee/Phoenix

• leader in independent agency networks

• major accounts air-tran, basf, corona,
  careerbuilder, hyatt, porsche, yellowtail

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10 top agency networks
1. Dentsu (Japan) 3.41 billion 2. Young
Rubicam Brands 3.28 billion 3. McCann
Worldgroup 2.92 billion 4. DDB Worldwide
2.60 billion 5. Ogilvy Mather 2.34 billion
6. BBDO Worldwide 2.32 billion 7. TBWA
Worldwide 1.70 billion 8. Publicis Worldwide
1.40 billion 9. DraftFCB 1.40 billion 10.
Havas Worldwide 1.33 billion
2011 worldwide revenue, Ad Age
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specialized/niche agencies

• industry specialists

Quarry Communications - agriculture/high-tech
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specialized/niche agencies

• industry specialists
• ethnic agencies

Burrell advertising
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specialized/niche agencies

• industry specialists
• ethnic agencies

• internet agencies

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specialized/niche agencies

• industry specialists
• ethnic agencies

• internet agencies

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specialized/niche agencies

• industry specialists
• ethnic agencies

• internet agencies

• creative boutiques and design houses
• still a relatively easy way to enter the
  business with your own firm.

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specialized/niche agencies

• Wexley School for Girls (Seattle)
• a new approach
• situational

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other suppliers

• provide unbundled services
• one part of what an agency does
• media buying services
• freelancers consultants
• production companies
• in-house or house agencies
• these are agencies owned by clients
• examples Target, Calvin Klein, Gap

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in-house agencies

• from the gaps house agency

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in-house agencies

• advantages disadvantages

• familiarity
• specialization
• fast service
• cost savings
• confidentiality

from the gaps in-house agency
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in-house agencies

• advantages disadvantages
• familiarity
• specialization
• fast service
• cost savings
• confidentiality

• objectivity
• resources
• fresh ideas
• extra cost and overhead

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2 primary roles of agencies

• idea generation
• brand-building

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idea generation

• manufacture ideas

• ideas are lifeblood of the agency
• create intellectual capital
• create and sell different kinds of ideas
• marketing strategies
• promotional opportunities
• even new product ideas...

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brand-building

• The agencys purpose is to create and direct
  communication about a product or service so that
  the brand is perceived to have a unique value or
  brand personality.
• Lets look at some examples...

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brand-building

• Marlboro
• Leo Burnett

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brand-building

• McDonalds
• DDB

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brand-building

• McDonalds
• In 2003 DDB launched
• Im Lovin It campaign
• (developed by German agency)
• McDonalds reconnected with customers and
  improved the restaurant experience

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brand-building

• Pepsi
• BBDO

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brand-building

• Pepsi
• In 2008 Pepsi switched to TBWA/Chiat/Day (still
  in the Omnicom network)

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brand-building

• Pepsi
• TBWA/Chiat/Day

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brand-building

• Nike
• Wieden Kennedy

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brand-building

• Nike

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brand-building

• American Express
• Ogilvy Mather

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brand-building

• Apple
• Chiat/Day

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brand-building

• Apple
• Chiat/Day

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brand-building

• Geico
• Martin Agency

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brand-building

• Geico
• Martin Agency

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brand-building
means integration

• more and more, agencies are being involved in
  all areas of marketers brand-building activities
• today, its more than advertising
• its integrated marketing communications (IMC)

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integrated marketing communication

• more and more, agencies are becoming the
  integrators of the whole range of brand-building
  activities...

• done right, IMC is the planning and
  implementation of the various
  communications disciplines as a single, overall
  communications system -- making all the channels
  work.

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integrated marketing communication
the imc promotion mix

• advertising
• public relations
• direct response
• sales promotion
• new media
• personal selling

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what agencies do.
structure organization
and how theyre organized
to do it.
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7 primary services

• complete a marketing analysis
• develop an advertising plan
• prepare a creative strategy
• create advertising executions
• develop and implement a media plan
• handle billing and payments
• integrate other marketing communications

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4 functions of full-service agencies

• account management
• creative
• media planning and placement
• research

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agency organization chart
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account management

• liaison between agency and client
• account management is a contact sport.
• responsible for understanding...
• the clients business
• the clients marketing needs
• strategy development
• represent client point of view within the agency

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account management

• account management director
• management supervisor
• account supervisors
• account executives
• assistant account execs
• account coordinators
• traffic

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creative department

• responsibility

• the creative department creates and produces
  print and broadcast advertising
• now adding new media responsibilities
• strategy is key
• good creative work is always guided by a
  creative strategy that sets forth goals to be
  accomplished and key message points to be relayed

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creative department

• executive group creative directors
• creative director
• associate creative director
• copywriters
• art directors
• broadcast producers
• print production managers
• traffic coordinators

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media department

• The media department has two main functions -
  planning and buying.

• The planning group handles more strategic
  marketing and media issues.
• The buying group handles media negotiations and
  implementation.

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media department

• media director
• associate media directors
• media supervisors
• media planners
• media buyers
• media analysts

Media Plan
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• mega-agency media departments have now become
  profit centers
• agencies have set up their media departments as
  free-standing units
• many large clients now look at media as a
  separate service
• many media agencies are hiring.

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media agency rankings

• media agency key clients
• Starcom MediaVest Comcast, Microsoft
• OMD Levis, Virgin Media
• ZenithOptimedia Chase, Travelocity
• Mindshare Universal Pictures, CVS
• Mediacom Pfizer, COI
• Carat Red Bull, Nivea

Source Adbrands.net/MM Global
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research department

• interpret market environment
• gather and analyze research data.
• primary and secondary techniques
• determine consumer needs/perceptions
• understand problems
• advise how ads can meet strategic goals
• help find solutions

Research Report
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research department

• research director
• project managers
• research assistants
• outside specialists

Research Report
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now evolving into

• more and more agency research departments have
  changed into

Research Report
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account planning

• responsibilities include
• creative briefs
• consumer insights
• new business presentations

consumer insight
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account planning

• head of planning
• planners
• assistants
• outside suppliers

consumer insight
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auxiliary agency functions

• strategy/creative review board
• other IMC services
• office management
• human resources
• legal services
• accounting
• recruitment

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3 ways agencies make money

• commissions
• usually 15 of gross costs
• fees
• usually based on negotiated hourly rate
• incentives
• still relatively new and problematic
• usually based on performance goals

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agency commissions

• media commission system
• 15 media commission
• adjustable commission rates
• negotiate to match client budget
• sliding scale
• markups-production service
• add a percentage markup to costs
• 17.65 of net 15 of gross

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4 types of fee systems

• fixed fee (retainer)
• cost-plus fee
• performance fee
• hybrid fee commission

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incentives

• in theory, a good way to work
• get paid based on how well you do (performance),
  not how much you bill
• in practice, difficult to implement
• if client makes final decision (not agency), how
  can agency be responsible for final results?
• results based on many factors, such as
  competitive efforts, not just advertising

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new business

• three primary sources
• build existing clients business
• add and sell new IMC services
• solicit new accounts
• two ongoing problems
• spec work
• teams walking with accounts

The critical objective and role of any ad
agency is gaining new business.
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into the 21st century

• advertising agency trends

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agency trends

• clutter, overload, overchoice
• increased media options
• increasing audience fragmentation
• more messages everywhere
• doing more with less
• economic pressures, downsizing
• ongoing client budget pressures
• managing size
• more mergers and mega-agencies

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agency trends

• managing technology
• interactive marketing
• digital, social media
• improving internal systems
• account planning
• re-engineering agency organization
• improving delivery of imc services

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agency trends

• managing in a down-market
• rein in costs
• maintain margins
• areas of opportunity
• digital media technology
• emerging markets
• new business
• and one more thing

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agency trends

• still hiring entry-level people
• youre less expensive
• you understand new media
• many opportunities for interns
• job hunting challenges
• finding the hot new agencies
• theyre in every market
• often busy and hard-to-find

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as long as marketers need ideas to build their
brands, theyre going to need
in conclusion...
advertising agencies
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questions discussion

• why might you be interested in going into the
  agency business?
• what might keep you from choosing a career in
  the agency business?