Evalution and growth of advertising advertising. the first advertising agents 1843 volney palmer 1843 volney palmer agent for media, not advertisers agent

Evalution and growth of Evalution and growth of advertising advertising

advertising

the first advertising agentsthe first advertising agents

1843 volney palmer1843 volney palmer agent for agent for mediamedia, not advertisers, not advertisers

1864 - george p. rowell1864 - george p. rowell “the johnny appleseed of

advertising” Rowell’s American

Newspaper Directory space wholesaler shared his “secret” 1888 - “Printer’s Ink”

founded in 1864 by founded in 1864 by francis w. ayer, 20francis w. ayer, 20

the first advertising agencythe first advertising agency

“& son” made the business seem more established

worked for advertiser slogan - “keeping

everlastingly at it brings success.”

n.w. ayer & son

4 full-service agency functions:4 full-service agency functions:

today,today, “full-service” agencies “full-service” agencies provide the followingprovide the following:: account management creative media planning and media

placement (media buying) research

many adding “below the line” services - PR, sales promotion, Interactive

India agency business todayIndia agency business today

over $36 billion in media billings over $36 billion in media billings ((www.mccannerickson.comwww.mccannerickson.com))

over 5,000 agenciesover 5,000 agencies over 143,000 people employedover 143,000 people employed MUMBAI and DELHI dominateMUMBAI and DELHI dominate

agency billing by city/stateagency billing by city/state

CityCity Billings in MillionsBillings in MillionsNew YorkNew York $61,264.4$61,264.4ChicagoChicago 17,739.9 17,739.9Los AngelesLos Angeles 10,545.6 10,545.6DetroitDetroit 7,946.3 7,946.3MinneapolisMinneapolis 6,087.2 6,087.2San FranciscoSan Francisco 5,101.9 5,101.9BostonBoston 3,993.7 3,993.7DallasDallas 3,234.8 3,234.8AtlantaAtlanta 2,620.9 2,620.9PhiladelphiaPhiladelphia 2,379.6 2,379.6

(Source(Source: Ad Age, 2001 )

major types of agency:major types of agency: mega-agency groupsmega-agency groups independent agenciesindependent agencies

national, regional, and local national, regional, and local

specialized/niche agenciesspecialized/niche agencies agency service suppliersagency service suppliers

media buying, creative servicesmedia buying, creative services

mega-agency groupsmega-agency groups prompted by mergers and prompted by mergers and

client globalizationclient globalization financial pressures financial pressures

martin sorrell,chairman WPP

service multinational accounts

subsidiaries provide “IMC” (integrated marketing communication) services

5 top 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

1997


WPP Group(including Y&R)

$6.69 billion

Omnicom Group 5.74 billion


Havas $2.39 billion

Publicis(including Saatchi)

$2.17 billion

1999


WPP Group(including Y&R)

$7.9 billion

Omnicom Group $6.9 billion


Dentsu $3.1 billion

Havas $2.76 billion

2000


2006

Omnicom Group $8.62 billionWPP Group 6.76 billionInterpublic (IPG) 5.86 billionPublicis 4.41 billion

(Including Leo Burnett)

Dentsu (Japan) 2.55 billionHavas Advertising 1.88 billion


Source: Ad Age 2007

Together, the five international mega-agencies are now 75% of worldwide billings

18%17%

25%

6%

18%

16%

OmnicomWPPIPGPublicisOtherHavas

mega-agency pros & consmega-agency pros & cons

positives:positives: larger talent poollarger talent pool negotiating cloutnegotiating clout financial rewardsfinancial rewards account securityaccount security competitive edgecompetitive edge strong partnershipsstrong partnerships more servicesmore services international linkinternational link

negatives:negatives: people vs. profitpeople vs. profit creativity vs. sizecreativity vs. size conflict of conflict of

interestsinterests people businesspeople business

national, regional & localnational, regional & local

these arethese are independent agencies independent agencies

there are nowthere are now fewer national fewer national agencies agencies which are not part of which are not part of mega-agency groupsmega-agency groups

regionalregional and and local agencies local agencies work work with smaller clients who are usually with smaller clients who are usually located nearbylocated nearby

11 top U.S. ad agenciestop U.S. ad agencies

1.1. J. Walter Thompson J. Walter Thompson 2. Leo Burnett Worldwide2. Leo Burnett Worldwide3. 3. McCann-Erickson Worldwide4. BBDO Worldwide 4. BBDO Worldwide 5. Grey Advertising5. Grey Advertising6. DDB Worldwide6. DDB Worldwide7. 7. Ogilvy & Mather Worldwide8. FCB Worldwide8. FCB Worldwide9. Y&R Advertising9. Y&R Advertising10. Publicis Worldwide10. Publicis Worldwide

specialized/niche agenciesspecialized/niche agencies

industry specialistsindustry specialists ethnic agenciesethnic agencies


industry specialistsindustry specialists ethnic agenciesethnic agencies internet agencies


industry specialistsindustry specialists ethnic agenciesethnic agencies internet agencies business-to-business agencies creative boutiques and

design houses

other suppliersother suppliers

provide “unbundled” servicesprovide “unbundled” services one part of what an agency doesone part of what an agency does

media buying servicesmedia buying services freelancers & consultantsfreelancers & consultants production companies production companies in-house or “house” agenciesin-house or “house” agencies

agencies owned by clients agencies owned by clients

in-house agenciesin-house agencies advantagesadvantages && disadvantagesdisadvantages

from the gap’s“house agency”


from the gap’s“house agency”

familiarity specialization fast service cost savings confidentiality


familiarityfamiliarity specializationspecialization fast servicefast service cost savingscost savings confidentialityconfidentiality

objectivity resources fresh ideas extra cost and

overhead

2 primary roles of agencies2 primary roles of agencies

idea generationidea generation brand-buildingbrand-building

idea generationidea generation manufacture ideasmanufacture 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-buildingbrand-building

““The agency’s purpose is to The agency’s purpose is to createcreate and and directdirect communication about a communication about a product or service product or service so that the brand so that the brand is perceived to have a unique is perceived to have a unique value or brand personality.”value or brand personality.”

Let’s look at some examples...Let’s look at some examples...


MarlboroMarlboro Leo Burnett Leo Burnett


McDonald’sMcDonald’s DDB Needham DDB Needham


PepsiPepsi BBDO BBDO


NikeNike Wieden + Kennedy Wieden + Kennedy

QuickTimeª and aSorenson Video 3 decompressorare needed to see this picture.


American ExpressAmerican Express Ogilvy & Mather Ogilvy & Mather


AppleApple Chiat/DayChiat/Day


more and more, agencies are being more and more, agencies are being involved ininvolved in all areasall areas of marketers’of marketers’ brand-building activitiesbrand-building activities

today, it’s more thantoday, it’s more than advertisingadvertising it’sit’s integrated marketing integrated marketing

communicationscommunications (IMC) (IMC)

means integration

integrated marketing communicationintegrated marketing communication

more and more, more and more, agencies are agencies are becoming the becoming the integratorsintegrators of the of the whole range of whole range of brand-building brand-building activities... 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.”

integrated marketing communicationintegrated marketing communication

advertising public relations direct response sales promotion personal selling

the imc promotion mix

what agencies do.what agencies do.

structure & organization

and how they’re organizedto do it.

7 primary services:7 primary services:

complete acomplete a marketing analysis marketing analysis develop andevelop an advertising plan advertising plan prepare aprepare a creative strategy creative strategy create create advertising executionsadvertising executions develop and implement adevelop and implement a media plan media plan handle handle billingbilling and and paymentspayments integrate integrate other marketing other marketing

communicationscommunications

4 functions of full-service agencies

account management creative media planning and placement research

agency organization chartagency organization chart

Print

Traffic

Production ProductionBroadcast Analysts

Other MarketingCommunications

Services[PR, etc.]

Asst. AccountExecutive

AccountExecutive

ManagementSupervisor

Account Mgmt.Director

Copy Spvr. &Copywriters

Art Supervisor& Art Directors

CreativeGroup:

AssociateCreativeDirector

CreativeExec CD

ResearchAssistants

ProjectManagers

ResearchDirector

MediaPlanner

MediaBuyer

MediaSupervisor

AssociateMedia

Director

Media Dept.Director

StrategyReview Board[ManagmentCommittee]

Office Management[Personnel,Accounting,Legal, etc.]

President[COO]

Board ofDirectors

[Chairman/CEO]

liaison between agency and client liaison between agency and client responsible for understanding... responsible for understanding...

the client’s businessthe client’s business the client’s marketing needsthe client’s marketing needs strategy developmentstrategy development

representing client point of view representing client point of view within the agencywithin the agency

account management account management

account management account management directordirector

management supervisormanagement supervisor account supervisorsaccount supervisors account executivesaccount executives assistant account execsassistant account execs account coordinators account coordinators traffictrafficTraffic

Asst. AccountExecutive

AccountCoordinator

AccountExecutive

AccountSupervisor

Management.Supervisor

Account Mgmt.Director

account management account management

responsibilityresponsibility 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 departmentcreative department

creative departmentcreative department

executive & group creative executive & group creative directors directors

creative directorcreative director associate creative directorassociate creative director copywriterscopywriters art directorsart directors broadcast producersbroadcast producers print production managersprint production managers traffic coordinatorstraffic coordinators

Print

Traffic

ProductionBroadcast

Production

Copy Spvr. &Copywriters

Art Supervisor& Art Directors

CreativeGroup:

AssociateCreative

Director (ACD)

CreativeDirector (CD)

ExecutiveCreative

Director (ECD)

StrategyReviewBoard

media departmentmedia department

The The media departmentmedia department has two main has two main functions - functions - planningplanning and and buying.buying.

The planning group handles more strategic marketing and media issues.

The buying group handles media negotiations and implementation.

media directormedia director

associate media directorsassociate media directors

media supervisorsmedia supervisors

media plannersmedia planners

media buyersmedia buyers

media analystsmedia analystsAnalysts

MediaPlanner

MediaBuyer

MediaSupervisor

AssociateMedia

Director

MediaDirector

MediaMediaPlanPlan

media departmentmedia department

mega-agency media departments mega-agency media departments have now becomehave now become profit centersprofit centers

agencies have set up their media agencies have set up their media departments asdepartments as free-standing unitsfree-standing units

many large clients now look at media many large clients now look at media as aas a separate serviceseparate service

big changes in themedia department

research department

interpret market environmentinterpret market environment gather and analyze research data. gather and analyze research data. primary and secondary techniquesprimary and secondary techniques

determine consumer needs/perceptionsdetermine consumer needs/perceptions understand problemsunderstand problems

advise how ads can meet advise how ads can meet strategic goalsstrategic goals help find solutionshelp find solutions

ResearchResearchReportReport

research directorresearch director research project managersresearch project managers research assistantsresearch assistants

outside research outside research specialistsspecialists

research department

ResearchSuppliers

Outside

ResearchAssistants

ProjectManagers

ResearchDirector

ResearchResearchReportReport

auxiliary agency functionsauxiliary agency functions

account planningaccount planning strategy/creative review boardstrategy/creative review board office managementoffice management

human resourceshuman resources legal serviceslegal services accountingaccounting recruitmentrecruitment

3 ways agencies make money3 ways agencies make money

commissionscommissions usually 15% of gross costsusually 15% of gross costs

feesfees usually based on negotiated hourly rateusually based on negotiated hourly rate

incentivesincentives still relatively new and problematicstill relatively new and problematic usually based on performance goalsusually based on performance goals

agency commissionsagency commissions

media commission systemmedia commission system 15% media commission15% media commission

adjustable commission ratesadjustable commission rates negotiate to match client budgetnegotiate to match client budget sliding scalesliding scale

markups-production & servicemarkups-production & service add a percentage markup to costsadd a percentage markup to costs 17.65% of net = 15% of gross17.65% of net = 15% of gross

4 types of fee systems4 types of fee systems

fixed fee (retainer)fixed fee (retainer) cost-plus feecost-plus fee performance feeperformance fee hybrid fee & hybrid fee &

commissioncommission

incentivesincentives

in theory, a good way to workin theory, a good way to work get paid based on how well you do, not get paid based on how well you do, not

how much you billhow much you bill in practice, difficult to implementin practice, difficult to implement if client makes final decision (instead of if client makes final decision (instead of

agency), how can agency be responsible agency), how can agency be responsible for final results?for final results?

results based on many factors, such as results based on many factors, such as competitive efforts, not just advertisingcompetitive efforts, not just advertising

new businessnew business

three primary sourcesthree primary sources build existing client’s businessbuild existing client’s business add and sell new IMC servicesadd and sell new IMC services solicit new accountssolicit new accounts

two ongoing problemstwo ongoing problems “ “spec” workspec” work teams “walking” with accountsteams “walking” with accounts

“The critical objective and role of any ad agency is gaining new

business.”

beyond 2000beyond 2000

advertising advertising agency trendsagency trends

agency trendsagency trends clutter, overloadclutter, overload, , “overchoice”“overchoice”

increasedincreased media options media options increasing increasing audience fragmentationaudience fragmentation more messages more messages everywhereeverywhere

doing more with lessdoing more with less economic pressures, economic pressures, “downsizing”“downsizing” ongoing ongoing client budget pressuresclient budget pressures

managing sizemanaging size more more mergersmergers and and mega-agenciesmega-agencies

agency trendsagency trends managingmanaging technology technology

interactive marketinginteractive marketing e-mail, web sitese-mail, web sites

improving improving internal systems internal systems account planning account planning re-engineeringre-engineering agency organization agency organization improving delivery ofimproving delivery of imc services imc services

as long as marketers need as long as marketers need ideasideas to build their to build their brands,brands, they’re going to needthey’re going to need

in conclusion...

advertising agencies

questions & discussionquestions & discussion

why might you be interested in why might you be interested in going into the agency business?going into the agency business?

what might keep you from choosing what might keep you from choosing a career in the agency business? a career in the agency business?

Documents

Evalution and growth of advertising advertising. the first advertising agents 1843 volney palmer 1843 volney palmer agent for media, not advertisers agent