The Structure of the Advertising The Structure of the Advertising Industry: Industry:

Advertisers, Agencies, Media Advertisers, Agencies, Media Companies, and Support Companies, and Support

OrganizationsOrganizations

Marketing 3344

Trends Affecting the Advertising and Promotion Industry

• The “Undoing” of Agency The “Undoing” of Agency Consolidation and Globalization—or Consolidation and Globalization—or notnot

• Media Proliferation, Consolidation, Media Proliferation, Consolidation, and “Multiplatform” Media and “Multiplatform” Media OrganizationsOrganizations

• Media Clutter and FragmentationMedia Clutter and Fragmentation• Consumer Control: Blogs and TiVosConsumer Control: Blogs and TiVos• Web 2.0Web 2.0

Scope of the Advertising Industry

U.S. Advertising SpendingU.S. Advertising Spending >$300 B>$300 B

Worldwide Advertising Worldwide Advertising SpendingSpending >$600B>$600B

Structure of the Advertising Industry

Advertisers

External Facilitators

Advertising and Promotion Agencies

Media Organizations

Target Audience

Advertisers

GovernmentGovernmentFederal, State, LocalFederal, State, Local

Social/Not-for-profit Social/Not-for-profit OrganizationsOrganizations

United Way, Nature ConservancyUnited Way, Nature Conservancy

Manufacturers and Service Manufacturers and Service FirmsFirms

Procter & Gamble, VerizonProcter & Gamble, VerizonTrade ResellersTrade Resellers Sears, McDonald’sSears, McDonald’s

Ad in Context Example

In addition to companies, the government makes extensive use of advertising.

The Role of the Advertiser in IBP

• Describe the value that the firm’s Describe the value that the firm’s brand provides brand provides

• Describe the brand’s position in the Describe the brand’s position in the market market

• Describe the firm’s objectives for the Describe the firm’s objectives for the brand in the near-term and long-termbrand in the near-term and long-term

The Role of the Advertiser in IBP• Identify the target market(s) that are Identify the target market(s) that are

most likely to respond favorable to the most likely to respond favorable to the brandbrand

• Identify and manage the supply Identify and manage the supply chain/distribution system that will most chain/distribution system that will most effectively reach the targetseffectively reach the targets

• Be committed to using advertising and Be committed to using advertising and other promotional tools to grow the other promotional tools to grow the brandbrand

Agencies

• AdvertisingAdvertising Agencies:Agencies:

–Full-ServiceFull-Service–Creative BoutiqueCreative Boutique–InteractiveInteractive–In-House In-House –Media SpecialistsMedia Specialists

• Promotion Promotion Agencies:Agencies: /Direct Marketing/ Direct Marketing־

DatabaseDatabase E-commerce E-commerce־ Sales Promotion Sales Promotion־Event PlanningEvent Planning־Design FirmsDesign Firms־Public RelationsPublic Relations־FirmsFirms

Ad in Context Example

Advertising agencies make extensive use of advertising to acquire new clients.

Full Service Agency Services• Account ServicesAccount Services

• Marketing Research ServicesMarketing Research Services

• Creative and Production ServicesCreative and Production Services

• Media Planning and Buying ServicesMedia Planning and Buying Services

• Administrative ServicesAdministrative Services

Agency Compensation• Commissions:Commissions:

– around 15% of airtime fees—in fluxaround 15% of airtime fees—in flux– 16 2/3 percent for outdoor media16 2/3 percent for outdoor media– web media is all negotiated web media is all negotiated

• Markup Charges:Markup Charges:– production cost + fixed %production cost + fixed %

• Fee Systems:Fee Systems:– hourly rates, or by projecthourly rates, or by project

• Pay-for-Results:Pay-for-Results:– tightly-specified objectivestightly-specified objectives

External Facilitators

• ConsultantsConsultantsCreative, Media, DatabaseCreative, Media, Database

• Production FacilitatorsProduction Facilitators• Software FirmsSoftware Firms

Web tracking, fulfillmentWeb tracking, fulfillment

Media Organizations• BroadcastBroadcast

• TV, radioTV, radio• PrintPrint

• Magazines, direct mail, Magazines, direct mail, • Newspapers, specialtyNewspapers, specialty

• Interactive MediaInteractive Media• Internet, interactive Internet, interactive

broadcast, broadcast, • iPod, Cell PhoneiPod, Cell Phone

• Support MediaSupport Media• Outdoor, directories, Outdoor, directories,

sponsorship, sponsorship, • Point-of-purchase, branded Point-of-purchase, branded

entertainmententertainment• Media ConglomeratesMedia Conglomerates

• Time Warner, Disney, TurnerTime Warner, Disney, Turner

Target Audiences

• Household ConsumersHousehold Consumers• BusinessesBusinesses• ProfessionalsProfessionals• Government OrganizationsGovernment Organizations