Advertising Business PDF

AS2003 THE ADVERTISING BUSINESS There is more to an advertising agency than creating ads. The philosophy is that agencies help clients open up networks of d...

AS2003 THE ADVERTISING BUSINESS There is more to an advertising agency than creating ads. The philosophy is that agencies help clients open up networks of distribution and marketing; the agency may create an unlimited partnership with them (Johnson & Lee, 2005). This handout will dig more in-depth on the importance of ad agencies in national and global perspectives. GLOBAL PERSPECTIVE What Advertising People Do All Over the World Globally, the advertising industry has been a separate and established industry where various functions are performed by agencies. Here are the tasks performed in the advertising industry. 1. Planning – planning is a constant, ongoing process of defining and redefining goals and objectives, performing advertising research, developing and scheduling advertisements, and evaluating results. 2. Budgeting – The advertising manager, the person who is in charge of all the advertising tasks, or the account manager, proposes the annual budget to the top management. S/he makes sure that the staff adheres to the budget. 3. Coordination – business activities usually fall into three broad, functional areas: production, finance, and marketing. All vital aspects of advertising and marketing must be well coordinated by the advertisers to make sure that the purposes made for advertising are met. 4. Creating Advertisements – The creative tasks consist of three main elements: copywriting, art direction, and production. The advertising manager makes sure that all parts of the production of advertisements will fulfill the company’s goals. The Agency World Key Players 1. Advertisers – Advertising would always begin with the advertiser. They are the company that sponsors the advertising about its business. An example would be, McDonald’s marketing team hiring an agency to produce an advertisement for the company. McDonald’s serves as the advertiser. 2. Agency – the next key player would be the advertising agency (or other types of marketing communication agencies). They create, produce, and distribute the advertising messages. A strong sense of trust between the agency and the advertiser is a must. But most large advertisers create an in-house agency to oversee the advertising of the company. 3. Media – another important player is the media. The rise of mass media paved the way for advertising messages to reach a wider audience. This refers to all the channels of communication that carry advertising messages from advertisers to consumers. 4. Professional Suppliers and Consultants – this key player includes artists, writers, photographers, directors, producers, printers, freelancers, and consultants. These suppliers play various tasks in putting up together an ad. Not all agencies or advertisers have all the capacity for a specialized job, that is where the suppliers and consultants come into play. Postmodernity The advertising industry today is continuously evolving and has moved away from classical notions of advertising. The “mass” cultural space is considered as one of the driving forces in producing advertising messages. An effective advertising message today relates to the perspective of the consumer to build a quality relationship between advertisers and the market. Most advertising messages like that of Japanese commercials are unconventional and even out of this world, which challenges the norms of modern society. Thus, the formula for successful advertising messages becomes vague, and the basis for effectivity solely relies on the perspective of the market. 02 Handout 1 *Property of STI  [email protected] Page 1 of 3  AS2003 ADVERTISING AGENCIES Types of Agencies Functions Samples 1. Full-Service AgenciesThis includes four (4) primary staff NuWorks Interactive Labs, Inc., functions: Itch Creatives - Account management - Creative services - Media planning - Account planning Basically, full-service agencies are complete with their business functions just like any other company. 2. In-House Agencies These agencies are just like any other Unilever, Procter & Gamble Co., advertising agency except that they are Coca-Cola within the advertiser’s organization. 3. Specialized Agencies Many agencies do not follow the Saga Events Inc., Production traditional full-service agency approach. Village Corporation, Mauve Some agencies specialize only in certain functions, audiences, industries, or markets. 4. Agency Networks and These are large conglomerations of Ogilvy & Mather Worldwide, Holding Companies agencies under central ownership. They BBDO Worldwide, McCann typically perform all the functions needed Worldgroup, Publicis for a full-service agency. Job Organization There are five functional areas within an advertising agency. These are the following functional areas: 1. Account Management – this functions as a liaison between the client and the agency. It ensures that the agency focuses its resources on the needs of the client. Ultimately, the account team summarizes the client’s communication needs and develops the basic “charge to the agency.” The account executive is responsible for interpreting the client’s marketing research and strategy for the rest of the agency. 2. Account Planning and Research – for full-service agencies, a department for planning and research is separate. In this setup, advertising messages are developed in such a way that it focuses on the consumer’s perspective and relationship with the brand. Account planners are strategic specialists who prepare comprehensive information about consumers’ wants, needs, and relationship to the client’s brand. 3. Creative Development and Production – this creative group includes copywriters, art directors, and producers. They execute the ideas from the research, planning, and client brief and turn it into an advertising material. 4. Media Research, Planning, and Buying – the media department of an agency recommends to the clients the most efficient means of delivering the message to the target audience. Since the media world is complex, three functions are necessary to maximize the media to communicate advertising messages. These functions are research, planning, and buying. 5. Internal Operations – the departments that serve the internal operations of an agency comprises of the traffic department, print production, financial services, and human resources departments. 02 Handout 1 *Property of STI  [email protected] Page 2 of 3  AS2003 Agency Compensation To survive, an agency must make a profit. This profit comes from three sources: 1. Media Commissions – media channels allow agencies to retain a 15 percent commission on the time or space purchased for clients. For example, if the media channel bills the agency 1 million pesos for 30-seconder commercial air time in a primetime slot, the advertiser will pay 1 million to the agency, and the agency will pay the media channel. The media channel will only receive 850,000 pesos and will allow the agency to get 150,000 pesos as their commission. 2. Labor-Based Fees – it is one of the bases for paying advertising agencies. An hourly fee is negotiated between the advertiser and the agency. Part of this hourly fee computation is the labor and bills consumed on time spent. 3. Incentive Payments – Ford Motor Co. initiated this payment system in the 1990s. It is the base fee for all the work followed by payments tied to “specific performance goals, including the profitability of the Ford unit involved.” 4. Markups – some agencies do not produce materials on their own, so they have to outsource some suppliers. This setup is one primary consideration of agencies when it comes to billing a client. There is typically about 17-18% markup for the bill to cover the other payments necessary for advertising production. CLIENT–AGENCY RELATIONS The relationship between client and agency is dynamic over the years. Most clients have had in-house agencies, while others rely on full-service agencies or specialized agencies. But changes in the advertising landscape led some clients to rely not only on specific agencies but open their doors to other types of agencies as well. This may be in the form of pitching for an account or outsourcing specific outputs from other specialized agencies besides the agency an advertiser majorly relies on. The client-agency relationship is not anymore solely based on the good and long-term relationship formed over the years but by the documentation of advertising outcomes from an agency. The “Total Communications” Agency There has been a surge of employing integrated marketing communications among businesses, and it affected how agencies work in the advertising industry. Agencies now focus more on campaigns that are low in cost but high on measurable effects by auxiliary use of traditional media and strategic blending of special events, sponsorships, sales promotion, direct marketing, targeted radio, and new media. An example of this is the brand Hawk Bag. This brand does not need to spend millions on TV promotions, but instead, they collaborate with schools and universities in the Philippines by sponsoring their athletes with bags that will serve as the brand’s promotion. The Merger Boom Part of this client-agency relations is the competition among agencies when it comes to pitching for client’s accounts or agencies holding competing brands. This led to some agencies to merge with other agencies and enlarge their capacity for advertising and the accounts they manage. But there are drawbacks to it because some advertisers are reluctant to share the account with merged agencies holding the account of the advertiser’s competitor. Thus, some agencies have to form mini-agencies within the agency and be responsible for their management, profit, and losses to cater to more clients. References De Burgh-Woodman, H. (2018). Advertising in Contemporary Culture. Cham, Switzerland: Palgrave Macmillan. Johnson, C., & Lee, M. (2005). Principles of Advertising A Global Perspective. New York: Routledge. Moriarty, S., Mitchell, N., & Wells, W. (2012). Advertising & IMC Principles & Practice. New Jersey: Pearson. 02 Handout 1 *Property of STI  [email protected] Page 3 of 3