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advertising agencies
the first advertising agents
 1843 volney palmer
   agent for media, not advertisers
 1864 - george p. rowell
  “the johnny appleseed
  of advertising”
  Rowell’s American
  Newspaper Directory
  space wholesaler
  shared his “secret”
  1888 - “Printer’s Ink”
the first advertising agency
 n.w. ayer & son
   founded in 1864 by
  francis w. ayer, 20
   “& son” made the
  business seem more
  established
   worked for advertiser
   slogan - “keeping
  everlastingly at it
  brings success.”
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,
   Interactive
major types of agency:
 mega-agency groups
 independent agencies
  national, regional, and local
 specialized/niche agencies
  agency service suppliers
  media buying, creative services
mega-agency groups
 prompted by mergers and
    client globalization
 financial pressures
 service multinational
    accounts
 subsidiaries provide
“IMC” (integrated marketing
communication) services
Some mega-agency groups:

OmniCom Group       $4.15 billion
WPP Group           $3.64 billion
Interpublic Group   $3.38 billion
Dentsu (Japan)      $1.98 billion
Young & Rubicam     $1.49 billion
mega-agency groups:

 WPP Group             $6.69 billion
 (including Y&R)
 Omnicom Group         5.74 billion
 Interpublic Group     $5.08 billion
 Havas                 $2.39 billion
 Publicis              $2.17 billion
 (including Saatchi)
mega-agency pros & cons
 positives:            negatives:
 larger talent pool     people vs. profit
 negotiating clout      creativity vs. size
 financial rewards      conflict of
 account security      interests
 competitive edge       people business
 strong partnerships
 more services
 international link
national, regional & local

 these are independent agencies
  there are now fewer national
 agencies which are not part of
 mega-agency groups
  regional and local agencies work
 with smaller clients who are usually
 located nearby
Famous ad agencies
1. J. Walter Thompson
2. Leo Burnett Worldwide
3. McCann-Erickson Worldwide
4. BBDO Worldwide
5. Grey Advertising
6. DDB Worldwide
7. Ogilvy & Mather Worldwide
8. FCB Worldwide
9. Y&R Advertising
10. Publicis Worldwide
specialized/niche agencies
 industry specialists
 ethnic agencies
 internet agencies
 business-to-business agencies
 creative boutiques and
   design houses
other suppliers
 provide “unbundled” services
   one part of what an agency does
 media buying services
 freelancers & consultants
 production companies
 in-house or “house” agencies
   agencies owned by clients
in-house agencies
 advantages & disadvantages
in-house agencies
 advantages & disadvantages
  familiarity
  specialization
  fast service
  cost savings
  confidentiality
in-house agencies
 advantages & disadvantages
  familiarity        objectivity
  specialization     resources
  fast service       fresh ideas
  cost savings       extra cost and
  confidentiality   overhead
2 primary roles of agencies

    idea generation
    brand-building
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...
brand-building
 “The agency’s 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.”
 Let’s look at some examples...
brand-building
 Marlboro
  Leo Burnett
brand-building
 McDonald’s
  DDB Needham
brand-building
 Pepsi
  BBDO
brand-building
 Nike
  Wieden + Kennedy



                         QuickTime™ and a
                 Sorenson Video 3 decompressor
                  are needed to see this picture.
brand-building
 American Express
  Ogilvy & Mather
brand-building
 Apple
  Chiat/Day
brand-building
means integration
  more and more, agencies are being
 involved in all areas of marketers’
 brand-building activities
  today, it’s more than advertising
  it’s integrated marketing
 communications (IMC)
integrated marketing communication
the imc promotion mix
  advertising
  public relations
  direct response
  sales promotion
  personal selling
structure & organization


   what agencies do.
and how they’re organized
         to do it.
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
4 functions of full-service agencies

    account management
    creative
    media planning and placement
    research
agency organization chart
                                   B a do
                                     or   f
                                   D et r
                                     i co s
                                      r
                                [ h i mnC O
                                 C ar a / E ]


                                  Pe i e t
                                   r sd n
                                   [ O ]
                                    C O


         O e Mr e i g
          t r a k tn
           h                      Sr t g
                                   t ae y            O i eMn g mn
                                                      f c
                                                       f     a ae e t
         C m u i ai n
          o m nc t o s          Rve B a d
                                 ei w or                 [ e s n e,
                                                          Pr o n l
            Sr i e
              e vc s            [ a a mn
                                 Mn g e t                Ac u t n ,
                                                          c o ni g
            [ R e c]
             P , t.             Cm i t e
                                  o m e]
                                      t                  L g l e c]
                                                          e a, t .


Ac u t Mm
 co n   g t.                Ce t v
                             r ai e             Rs a c
                                                 ee r h              M i Dp.
                                                                      e a e t
                                                                       d
  D et r
   i co
    r                       Ee C
                             xc D               D et r
                                                 i co
                                                  r                   D et r
                                                                       i co
                                                                        r


 Mn g mn
  a ae e t                  As ca e
                             soi t              P oe t
                                                 rjc                  As cae
                                                                       soi t
 S pr i o
  u e vs r                  Ce t v
                             r ai e             Mn g r
                                                 a aes                 M i
                                                                         e a
                                                                          d
                            D et r
                             i co
                              r                                       D et r
                                                                       i co
                                                                        r


  Ac u t
    co n                    Ce t v
                             r ai e             Rs a c
                                                 ee r h                M i
                                                                         e a
                                                                          d
  E e ui e
   x c tv                   Go p
                              ru:               As s a t
                                                 s i t ns            S pr i o
                                                                      u e vs r


As . Ac u t
 st   co n      Cp S v . &
                 o y pr            At S p r i o
                                    r u e vs r              M ie a
                                                                d                M i
                                                                                  e a
                                                                                   d
 E e ui e
  x c tv        C p wi e s
                  o y rt r         & r D et r
                                    At i c o s
                                         r                  Pa n r
                                                             l ne                Byr
                                                                                  ue


                    Broadcast             Print                      Analysts
                   Production           Production



               Traffic
account management

 liaison between agency and client
 responsible for understanding...
  the client’s business
  the client’s marketing needs
  strategy development
representing client point of view
within the agency
account management
             A c c o u n t M g m t.
                   D ir e c to r
                                                     account management
                                                     director
               M a n a g e m en t.
                S u p e r v is o r
                                                     management supervisor
                   A ccount
                 S u p e r v is o r                  account supervisors
                   A ccount                          account executives
                  E x e c u tiv e

                                                     assistant account execs
A sst. A c c o u n t              A ccoun t
   E x e c u tiv e             C o o r d in a to r
                                                     account coordinators
                       Traffic
                                                     traffic
creative department
 responsibility
    the creative department is responsible
  for creating and producing the print and
  broadcast advertising
 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
creative department
                       S tr a te g y
                        R e v ie w
                         B oard
                                                             executive & group creative
                    E x e c u tiv e
                                                             directors
                                                             creative director
                     C r e a tiv e
               D ir e c to r (E C D )


                     C r e a tiv e
                D ir e c to r (C D )                         associate creative director
                     A s s o c ia te
                      C r e a tiv e
               D ir e c to r (A C D )
                                                             copywriters
                       C r e a tiv e
                                                             art directors
                        G roup:


C opy Spvr. &                     A r t S u p e r v is o r
                                                             broadcast producers
                                                             print production managers
 C o p y w r ite r s             & A r t D ir e c to r s

        Broadcast                        Print
       Production                      Production


                        Traffic
                                                             traffic coordinators
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.
media department
                                 media director
           M e d ia
         D ir e c to r


        A s s o c ia te
           M e d ia
                                 associate media directors
         D ir e c to r
                                 media supervisors
           M e d ia

                                 media planners
       S u p e r v is o r
                                                     Media
 M e d ia             M e d ia                       Plan
P la n n e r          B uyer     media buyers
          Analysts
                                 media analysts
big changes in the
media department
 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
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      Research
  strategic goals             Report
 help find solutions
research department
R esea rch
D ir e c to r      research director
 P r o je c t
M anagers          research project managers

 R esea rch        research assistants
A s s is ta n ts
                                       Research
  Outside          outside research     Report
 Research
 Suppliers         specialists
auxiliary agency functions

 account planning
 strategy/creative review board
 office management
   human resources
   legal services
   accounting
   recruitment
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
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
4 types of fee systems

    fixed fee (retainer)
    cost-plus fee
    performance fee
    hybrid fee &
   commission
beyond 2000

advertising
agency trends
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
agency trends
 managing technology
  interactive marketing
  e-mail, web sites
 improving internal systems
  account planning
  re-engineering agency organization
  improving delivery of imc services
in conclusion...

as long as marketers need
ideas to build their brands,
they’re going to need
advertising agencies
Agency types

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Agency types

  • 2. the first advertising agents 1843 volney palmer agent for media, not advertisers 1864 - george p. rowell “the johnny appleseed of advertising” Rowell’s American Newspaper Directory space wholesaler shared his “secret” 1888 - “Printer’s Ink”
  • 3. the first advertising agency n.w. ayer & son founded in 1864 by francis w. ayer, 20 “& son” made the business seem more established worked for advertiser slogan - “keeping everlastingly at it brings success.”
  • 4. 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, Interactive
  • 5. major types of agency: mega-agency groups independent agencies national, regional, and local specialized/niche agencies agency service suppliers media buying, creative services
  • 6. mega-agency groups prompted by mergers and client globalization financial pressures service multinational accounts subsidiaries provide “IMC” (integrated marketing communication) services
  • 7. Some mega-agency groups: OmniCom Group $4.15 billion WPP Group $3.64 billion Interpublic Group $3.38 billion Dentsu (Japan) $1.98 billion Young & Rubicam $1.49 billion
  • 8. mega-agency groups: WPP Group $6.69 billion (including Y&R) Omnicom Group 5.74 billion Interpublic Group $5.08 billion Havas $2.39 billion Publicis $2.17 billion (including Saatchi)
  • 9. mega-agency pros & cons positives: negatives: larger talent pool people vs. profit negotiating clout creativity vs. size financial rewards conflict of account security interests competitive edge people business strong partnerships more services international link
  • 10. national, regional & local these are independent agencies there are now fewer national agencies which are not part of mega-agency groups regional and local agencies work with smaller clients who are usually located nearby
  • 11. Famous ad agencies 1. J. Walter Thompson 2. Leo Burnett Worldwide 3. McCann-Erickson Worldwide 4. BBDO Worldwide 5. Grey Advertising 6. DDB Worldwide 7. Ogilvy & Mather Worldwide 8. FCB Worldwide 9. Y&R Advertising 10. Publicis Worldwide
  • 12. specialized/niche agencies industry specialists ethnic agencies internet agencies business-to-business agencies creative boutiques and design houses
  • 13. other suppliers provide “unbundled” services one part of what an agency does media buying services freelancers & consultants production companies in-house or “house” agencies agencies owned by clients
  • 14. in-house agencies advantages & disadvantages
  • 15. in-house agencies advantages & disadvantages familiarity specialization fast service cost savings confidentiality
  • 16. in-house agencies advantages & disadvantages familiarity objectivity specialization resources fast service fresh ideas cost savings extra cost and confidentiality overhead
  • 17. 2 primary roles of agencies idea generation brand-building
  • 18. 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...
  • 19. brand-building “The agency’s 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.” Let’s look at some examples...
  • 20. brand-building Marlboro Leo Burnett
  • 23. brand-building Nike Wieden + Kennedy QuickTime™ and a Sorenson Video 3 decompressor are needed to see this picture.
  • 25. brand-building Apple Chiat/Day
  • 26. brand-building means integration more and more, agencies are being involved in all areas of marketers’ brand-building activities today, it’s more than advertising it’s integrated marketing communications (IMC)
  • 27. integrated marketing communication the imc promotion mix advertising public relations direct response sales promotion personal selling
  • 28. structure & organization what agencies do. and how they’re organized to do it.
  • 29. 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
  • 30. 4 functions of full-service agencies account management creative media planning and placement research
  • 31. agency organization chart B a do or f D et r i co s r [ h i mnC O C ar a / E ] Pe i e t r sd n [ O ] C O O e Mr e i g t r a k tn h Sr t g t ae y O i eMn g mn f c f a ae e t C m u i ai n o m nc t o s Rve B a d ei w or [ e s n e, Pr o n l Sr i e e vc s [ a a mn Mn g e t Ac u t n , c o ni g [ R e c] P , t. Cm i t e o m e] t L g l e c] e a, t . Ac u t Mm co n g t. Ce t v r ai e Rs a c ee r h M i Dp. e a e t d D et r i co r Ee C xc D D et r i co r D et r i co r Mn g mn a ae e t As ca e soi t P oe t rjc As cae soi t S pr i o u e vs r Ce t v r ai e Mn g r a aes M i e a d D et r i co r D et r i co r Ac u t co n Ce t v r ai e Rs a c ee r h M i e a d E e ui e x c tv Go p ru: As s a t s i t ns S pr i o u e vs r As . Ac u t st co n Cp S v . & o y pr At S p r i o r u e vs r M ie a d M i e a d E e ui e x c tv C p wi e s o y rt r & r D et r At i c o s r Pa n r l ne Byr ue Broadcast Print Analysts Production Production Traffic
  • 32. account management liaison between agency and client responsible for understanding... the client’s business the client’s marketing needs strategy development representing client point of view within the agency
  • 33. account management A c c o u n t M g m t. D ir e c to r account management director M a n a g e m en t. S u p e r v is o r management supervisor A ccount S u p e r v is o r account supervisors A ccount account executives E x e c u tiv e assistant account execs A sst. A c c o u n t A ccoun t E x e c u tiv e C o o r d in a to r account coordinators Traffic traffic
  • 34. creative department responsibility the creative department is responsible for creating and producing the print and broadcast advertising 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
  • 35. creative department S tr a te g y R e v ie w B oard executive & group creative E x e c u tiv e directors creative director C r e a tiv e D ir e c to r (E C D ) C r e a tiv e D ir e c to r (C D ) associate creative director A s s o c ia te C r e a tiv e D ir e c to r (A C D ) copywriters C r e a tiv e art directors G roup: C opy Spvr. & A r t S u p e r v is o r broadcast producers print production managers C o p y w r ite r s & A r t D ir e c to r s Broadcast Print Production Production Traffic traffic coordinators
  • 36. 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.
  • 37. media department media director M e d ia D ir e c to r A s s o c ia te M e d ia associate media directors D ir e c to r media supervisors M e d ia media planners S u p e r v is o r Media M e d ia M e d ia Plan P la n n e r B uyer media buyers Analysts media analysts
  • 38. big changes in the media department 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
  • 39. 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 Research strategic goals Report help find solutions
  • 40. research department R esea rch D ir e c to r research director P r o je c t M anagers research project managers R esea rch research assistants A s s is ta n ts Research Outside outside research Report Research Suppliers specialists
  • 41. auxiliary agency functions account planning strategy/creative review board office management human resources legal services accounting recruitment
  • 42. 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
  • 43. 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
  • 44. 4 types of fee systems fixed fee (retainer) cost-plus fee performance fee hybrid fee & commission
  • 46. 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
  • 47. agency trends managing technology interactive marketing e-mail, web sites improving internal systems account planning re-engineering agency organization improving delivery of imc services
  • 48. in conclusion... as long as marketers need ideas to build their brands, they’re going to need advertising agencies