1、Chapter 03 - The Business of Advertising3-1CHAPTER 03THE BUSINESS OF ADVERTISINGOBJECTIVESThe main objective for this chapter is to introduce the people and groups who create, produce, and run advertising here and abroad. Advertising people may serve in a variety of roles. This chapter discusses the
2、 basic tasks of both the agency and the client, the roles of suppliers and the media, the way agencies acquire clients and are compensated, and the overall relationship between the agency and the client (p. 58).After studying this chapter, your students will be able to:Slides 32, 3-31. Describe the
3、various groups in the advertising business and explain their relationship to one another.2. Explain the differences between local and national advertisers.3. Explain how advertisers organize themselves to manage their advertising both here and abroad.4. Define the main types of advertising agencies.
4、5. Explain the range of tasks people perform in an ad agency and an in-house advertising department.6. Discuss how agencies get new clients and how they make money.7. Debate the pros and cons of an in-house advertising agency.8. Explain how the suppliers and the media help advertisers and agencies.9
5、. Describe changes taking place in the advertising industry.TEACHING TIPS AND STRATEGIESUsing the opening vignette in the classroomThe opening vignette offers instructors a number of topics to introduce and discuss, including: a) the role of an advertising agency, b) the use of a specialty agency li
6、ke Muse Communications, and c) the role of a strategic planner like Shelley Yamane. Consider introducing students to Muse by visiting their Web site, . The site will open with a personal message from Jo Muse himself. You can explore the site with students to look at client rosters and samples of the
7、 work that Muse produces. As of the writing of this book there are excellent examples of ads for Honda, including some in Japanese!Chapter 03 - The Business of Advertising3-2Other tips and strategiesDuring this section of your course take the time to extend an invitation to a local agency or adverti
8、ser professional to be a guest speaker. Nothing contributes to student perceptions of the reality of the profession like an opportunity to hear from someone in the business. It is generally worthwhile to offer specific suggestions to any classroom guest concerning the tone and content of their talk,
9、 the length of the talk, the importance of reserving time for questions and answers, etc. Also give the speaker some sense of how sophisticated students are likely to be about advertising in general. Be sure to work out all audio-visual issues in advance, as the speaker may wish to show ads or use s
10、lides. Since many students in the class are considering jobs in advertising, I usually check the latest Ad Age salary survey to determine what people are making in advertising agencies. I point out that the numbers represent averages, and that salaries can be substantially higher or lower depending
11、on factors such as experience, agency size, and agency location.The goal of this chapter is to convey the role of advertising agencies, client/agency relationship, and local/national advertising. In a former job, I worked for a CBS affiliate television station for over two years. I saw firsthand how
12、 agency relationships work. I will try to give the instructor a brief synopsis of my experiences to share with the class.Advertising agencies I worked with tended to get 15 percent of the total dollars the customer spent on advertising. As the instructor knows, this means that, if an advertiser spen
13、t $100,000 total on advertising, the agency received a commission of $15,000. None of the agencies I worked at were paid on a fee basis. I didnt like this commission structure of the agencies I worked with; regardless of the effectiveness of the advertising, the agency still got paid.One of the bigg
14、est problems I had with local advertisers wasnt a money issue, as I thought it would be. The problem was that they would have set ideas for a commercial, or they would want to see their commercial during their favorite television programs. On the surface, this doesnt seem like a big deal, yet many t
15、imes a clients idea of an effective ad or their favorite television programs were not a good fit for the brand or service they were trying to sell.I remember a furniture store that had their whole family in an ad. There were over 20 family members with a part in one 30-second commercial. This strain
16、ed my relationships with the producers of the commercial, and it also hurt my relationship with the advertiser when the ad failed to be effective. In the end, the agency, not the client, gets blamed for an ineffective ad.One way to get around this with local advertisers is to put one or two spots in
17、 a show they like and then create a media plan that works for the advertiser. Using specialized computer programs such as TVscan, I was able to create effective media plans that were able to calculate target markets.Advertising agencies do earn their money. They help create the concept of an ad, and
18、 work with the client one-on-one to get where they want them to go. The advertising agencies I worked with had a media buyer (responsible for purchasing the TV and radio spots, billboards, magazine ads, etc.). This person usually has several years of experience in determining what type of media plan
19、 works best and puts this knowledge to work for the client.Chapter 03 - The Business of Advertising3-3The biggest challenge for advertising agencies in my opinion is helping the client create an effective commercial. Many times I was challenged by clients who wanted a commercial but had no idea how
20、to tell us what they wanted. One secret I learned from a producer was to generate ideas by first figuring out who the target market is. Then it was easier to convince the client to buy into the idea and give the client credit (ownership) for the idea. This really worked well.One of the biggest lesso
21、ns I learned about advertising is that there is no rock-solid formula to it. To illustrate this point, as a media buyer of a large advertising agency once told me, “we buy everythingtelevision, radio, billboards, magazine adsand at the end of the day, we hope that it works.” I think that sums up adv
22、ertising; what works for one client might not work for the next one and vice versa.Web Resources for Enhancing your Lectures: AAAA http:/www.aaaa.org/eweb/startpage.aspx Advertising Age Advertising Age Data Center http:/ Procter they think in terms of large groups (segments, niches, target markets)
23、and design ads to speak to these markets, getting feedback via customer complaint lines, etc.2.) Local merchantsa.) Carry hundreds of different brands, so the focus is on attracting customers to a particular pointtheir place of business.b.) Compete with many companies for individual customers and sa
24、les volume.c.) Think tactically (Stay open Labor Day? Buy a new sign?).d.) Local advertisers see their customers every day and also interact with them in nonbusiness ways (neighbors, friends, at school), getting feedback every day.b. Time orientation1.) National advertisers: think long-term (five-ye
25、ar plans, etc.)2.) Local advertisers: week-to-week plannersc. Resources1.) National advertisersa.) Biggest budgets (usually over $5 million budget required)b.) Most manpower2.) Local advertisersa.) Smallest budgets ($100,000 annual budget considered huge)b.) Smallest manpower needs (a manager and an
26、 assistant may be all that are needed) Concept Check 32 What are the elements that characterize local, regional, and national advertisers? In what key ways do they differ? (p.64)Local:Chapter 03 - The Business of Advertising3-7- Local advertisers have been using integrated marketing communications (
27、IMC) for a long time. Regional:- Regional advertisers are companies that operate in one part of the country and market exclusively within that region. Typical examples are grocery and department store chains, government bodies (e.g., state lotteries), franchise groups (Southern California Toyota Dea
28、lers), telephone companies (NYNEX), and some banks.National:-National advertisers are companies that sell in several regions and throughout the country. Typically include consumer package-goods manufacturers (Procter creative ideas can be introduced more easily.3.) DrawbackDecentralized departments
29、often concentrate on own budgets, problems, and promotions rather than the good of the firm as a whole. Ads typically lack uniformity, diminishing the power of repetitive corporate advertising. Rivalry among brand managers may escalate into unhealthy competition or deteriorate into secrecy and jealo
30、usy.Chapter 03 - The Business of Advertising3-8 Concept Check 33 What are the advantages and disadvantages of the two ways to organize large company marketing departments? (p.65)- Centralized organization:Gives the greatest control and offers both efficiency and continuity across divisional boundari
31、es. From one location, the marketing services people can handle a wide variety of brands. The drawback to centralized organizations is that they are not flexible.-Decentralized organization:These organizations are more flexible than centralized organizations. Media Schedules can be adjusted faster a
32、nd creative ideas can be introduced more easily. Drawbacks to this type of organization include: inability to focus on the good of the firm as a whole. In addition, there is a lack of uniformity in the ads and often times managers are competing against one another for superiority. D. Transnational A
33、dvertisers (pp. 66)Heinz Ketchup ad from Denmark: “The only American you can hit without being sued.” (p. 68)1. As companies grow and prosper around the world, they may invest directly into many countries to become integrated fully into world markets, and become true multinational corporations.a. Mu
34、ltinational corporations usually exert strong centralized controlb. Multinational corporations that use a “standardized approach” to marketing and advertising in all countries are global marketers. These include companies like: Coca-Cola, British Airways, British Petroleum, Max Factor, FedEx, and Ch
35、iclets.2. Companies must research extensively before attempting global advertising. They must first be able to answer yes to the following questions:a. Has each countrys market for the product developed in the same way?b. Are the targets similar in different nations?c. Do consumers share the same wa
36、nts and needs?3. Advertisers who cannot answer “yes” to the above questions will often take a localized approach and consider differences in product use, economic development, media options, local laws, technology, and customs.Canadian HP ads in English and French (p. 67), Slide 313Slide 314E. Media
37、 Around the World (p. 68)Virtually every country has access to radio, television, newspapers, magazines, outdoor media, and direct mail. However, the legalities of different media forms vary from country to country, including countries where the government controls certain media. Media available to
38、the international advertiser can be categorized as either:1. International Mediaserve several countries, usually without a change in contenthas been limited to newspapers and magazines (Readers Digest is distributed in 126 countries). Television is also a viable international medium and beginning to
39、 see the emergence of global media vehicles, such as CNN.2. Foreign mediathe local media of each country that is used for large campaigns targeted to consumers or businesses within a single country. May have an edition for separate dialects or languages within the country.Chapter 03 - The Business o
40、f Advertising3-9IV. The Advertising Agency (p. 69)Slide 315Slide 316 Strawberry Frog advertising agency ad (p. 69)A. The Role of the Advertising Agency (p. 70)The American Association of Advertising Agencies (AAAA) defines an advertising agency as an independent organization of creative people and b
41、usiness people who specialize in developing and preparing marketing and advertising plans, advertisements, and other promotional tools. This definition offers clues as to why so many advertisers (clients) hire ad agencies:1. Agencies are independent organizations (not owned by the advertiser, the me
42、dia or the suppliers), so they bring an outside, objective viewpoint to the advertisers business.2. Agencies employ a combination of business people and creative people including administrators, accountants, marketing executives, researchers, market and media analysts, writers, and artists.3. The ag
43、ency provides yet another service by researching, negotiating, arranging, and contracting for commercial space and time with the various print and electronic media. Because of its media expertise, the agency saves the client time and money.4. Agencies work for their clients, not for the media or the
44、 suppliers; their moral, ethical, financial, and even legal obligation is to their clients.5. Good agencies serve the needs of a variety of clients because of their daily exposure to a broad spectrum of marketing situations and problems.B. Types of Agencies (p. 70)1. Geographic scope (p.70)Slide 317
45、a. Local agencies offer expert assistance to local advertisers. Local advertising budgets are often so low that local advertisers wont use an agency. Use of an agency isnt warranted, and the agency wont accept the work because the agencys overhead exceeds the advertisers budget.b. Regional and natio
46、nal agencies typically participate in either the 4As (American Association of Advertising Agencies) or a similar trade group such as the Western States Advertising Agency Association (WSAAA). These agencies are named in directories such as the Standard Directory of Advertising Agencies (the Red Book
47、) and listed geographically.c. International agencies have offices and affiliates in every major communications center around the world. They help their clients market internationally or globally as needed.2. Range of services (p.71)Slide 318a. Full-service advertising agencies supply both advertisi
48、ng and nonadvertising services in all areas of communication and promotion. Advertising services include planning, creating, and producing ads, performing research and selecting media. Nonadvertising services include packaging, public relations, sales promotion, annual reports, trade show exhibits,
49、and sales training materials.Chapter 03 - The Business of Advertising3-101.) General consumer agenciesA general consumer agency represents the widest variety of accounts but it concentrates on consumer accountscompanies that make goods purchased chiefly by consumers (soaps, cereals, cars, pet foods, toiletries). Most of the ads are placed in consumer media (TV, radio, billboards, newspapers, and magazines) that pay a commission to the agency. This category may include the large super
