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IMC perspective 2-2 discusses the differences between millennials and gen Z. Discuss some of the ways these cohorts differ and how they are also the same. Cite some implications for marketers.
Discuss the difference between a push and a pull strategy. How do these strategies differ in advertising and promotional strategies?
Responding to:“Do you think one is more effective than the other for a certain Gen?” – Ms. JamesI believe you are referring to push pull strategies, so I will speak about that.  As a future social media marketer, I strongly believe Gen Z’ers are more in tune with the pull strategy. The young generation is much more in tuned with, “keeping it real” and “to the point” when it comes to product/service information; if a Gen Z’er wants information, they would prefer to seek it out themselves organically, rather than having it blasted constantly in their faces like the “push” method. In this aspect of the “pull” strategy, works because the “pull” method is used in SEO’s, social media content, and customer reviews. In addition, the “pull” approach allows companies to be much more interactive with their customer base, allowing for conversations on the product to be had and increase customer retention. Bump, P. (2021, June 10). Millennials VS Gen Z: Why Marketers Need To Know The Difference: Hub Spot.com    Furthermore, because social media plays such a major role in Gen Z’ers decision making, this means using the “pull” method with content-specific information is right up the young cohorts alley. After all, the younger generation is known for having a short attention span because they want instant gratification with the information they receive, so with this, it only makes sense that they would like Tik Tok, Snapchat, and Instagram, their prefer means of information gathering. So as a marketer, common sense would tell me to use the “pull” strategy on this generation in things like short videos via You Tube, or have them watch someone like an influencer using the product via Tik Tok, rather than seeing it on a commercial ad; doing so “pulls” them in all on their own. Macura, Alex. (2022 November 29). Marketing to Gen Z: How To Do It The Right Way:SearchEngineJournal.com  Gen Z’ers appreciate seeing the authenticity of a product or service, rather than a gimmick used to sell a product; transparency is important to them, and they hold businesses that are not accountable for it, which is much easy to do today via the internet. Macura, Alex. (2022 November 29). Marketing to Gen Z: How To Do It The Right Way:SearchEngineJournal.com  All these characteristics are those used by the younger generation, but they also fall under the very definition of what the pull strategy means; organically found, self-sought information, that can quickly and readily found, aka “to the point of the matter.” With the next generation already feeling contemptuous and conspicuous regarding the world of marketing, branding has to come through in a more subtle way, which is why “pull” marketing is so help full with the younger age group. Gen Z’ers need brands who are well depicted online and know how to converse with them, to draw them in and bring interest to the business; any other way, will be considered “overly aggressive” and a turn off for the population. No Author. (No Date). How To Speak Gen Z: Brandignity.comWord Count: 484References:Bump, P. (2021, June 10). Millennials VS Gen Z: Why Marketers Need To Know The Difference: Hub Spot.com    https://blog.hubspot.com/marketing/millennials-vs-gen-zMacura, Alex. (2022 November 29). Marketing to Gen Z: How To Do It The Right Way:SearchEngineJournal.com  https://www.searchenginejournal.com/marketing-to-gen-z/471784/No Author. (No Date). How To Speak Gen Z: Brandignity.com https://www.brandignity.com/2015/10/how-to-speak-to-generation-z/
1. IMC perspective 2-2 explores the unique characteristics of millennials and gen Z and how marketers can effectively communicate with these distinct cohorts. Millennials are often described as technology-savvy, value-driven, and financially cautious. Gen Z, on the other hand, is known for being even more technologically advanced, diverse, and focused on social justice. Despite their differences, both generations prioritize authenticity, personalization, and social responsibility in the brands they support. They also share a preference for mobile devices and social media, making it crucial for marketers to develop strategies that cater to these platforms. Also, The objectives of integrated marketing communications are to enhance brand recognition and broaden the scope of the target audience. Although implementing multichannel or omnichannel marketing can yield some returns, adopting an IMC approach can yield superior long-term outcomes. Although this tactic is particularly beneficial for managing strong sales teams, small businesses can also reap considerable benefits from it(Joshua, 2021). 2. A push strategy involves a company actively promoting a product to its target audience through direct communication and sales tactics, such as cold calling, trade shows, and email marketing. In contrast, a pull strategy involves creating demand for a product through advertising and promotional efforts aimed at creating awareness and generating interest among consumers. In a pull strategy, the goal is to entice consumers to seek out the product on their own. Advertising and content marketing are key elements of a pull strategy. The main difference between push and pull strategies is the approach to reaching the target audience. A push strategy is more direct and active, while a pull strategy is more passive and focused on creating demand through effective advertising and promotional campaigns.
Reference:Joshua Lyons Marketing. (2021, September 22). The importance of having integrated marketing communications. Joshua Lyons Marketing. Retrieved March 6, 2023, from https://jjlyonsmarketing.com/resources/the-importance-of-having-integrated-marketing-communications-imc/Because learning changes everything.®
Chapter 2
The Role of IMC in the Marketing Process
© 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw Hill.
Learning Objectives
LO1
Describe the role of advertising and promotion in an
organization’s integrated marketing program.
LO2
Define target marketing.
LO3
Discuss the role of market segmentation in an IMC
program.
LO4
Describe positioning and repositioning strategies.
LO5
Identify the marketing-mix decisions that influence
advertising and promotional strategy.
© McGraw Hill
2
Figure 2-1 Marketing and Promotions Process Model
Access the text alternative for slide images.
© McGraw Hill
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Marketing Strategy and Analysis 1
Strategic Marketing Plan
• Guides allocation of organization’s resources.
• Guides specific marketing programs and policies.
• Evolves from organization’s overall corporate strategy.
• Allows for understanding of market opportunities, competition, and
market segments.
• Market segments: Distinct consumer groups within a market who have
common needs.
LO2-1
© McGraw Hill
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Marketing Strategy and Analysis 2
Opportunity Analysis
• Market opportunities are areas where:
• There are favorable demand trends.
• Customers’ needs and opportunities are not being satisfied.
• Firm can compete effectively.
• Steps to identify market opportunities:
• Examine the marketplace.
• Observe demand trends and competition in various market segments.
© McGraw Hill
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Exhibit 2-1
The Milk Processor Education
Program saw the growing
demand for sports drinks and
seized on that market
opportunity. Chocolate milk is
a natural option for athletes to
“Bounce Back” after a hard
workout.
Source: America’s Milk Companies
© McGraw Hill
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Marketing Strategy and Analysis 3
Competitive Analysis
• Analyzing competition in the marketplace and searching for
competitive advantage.
• Competitive advantage: Attributes that give a firm an edge over
competitors.
• Better quality products.
• Superior customer service.
• Low production costs and lower prices.
• Dominating channels of distribution.
• Advertising.
© McGraw Hill
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Marketing Strategy and Analysis 4
Target Market Selection
• Done after evaluating market opportunities and doing a competitive
analysis.
• Can select one or more target markets.
• Has direct implications on firm’s advertising and promotional efforts.
© McGraw Hill
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Figure 2-2 The Target Marketing Process
LO2-2
Access the text alternative for slide images.
© McGraw Hill
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The Target Marketing Process 1
Identifying Markets
• Marketer identifies specific needs of groups of people (or segments).
• Selects one or more of these segments as a target.
• Isolates consumers with similar lifestyles, needs, and the like.
• Increases marketer’s knowledge of consumers’ specific requirements.
© McGraw Hill
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The Target Marketing Process 2
Market Segmentation
• Dividing a market into distinct groups with common needs, who
respond similarly to a marketing situation.
• Bases for segmentation:
• Geographic: Dividing market on basis of region, city size, metropolitan
area, and/or density.
• Demographic: Dividing market on basis of age, sex, family size, marital
status, etc.
• Psychographic: Dividing market on basis of personality, lifecycles, and/or
lifestyles.
LO2-3
© McGraw Hill
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Exhibit 2-9
AARP, The Magazine
dominates their
competitors in the 50+
age segment. They are
synonymous with this
demographic.
© McGraw Hill
Source: AARP
12
The Target Marketing Process 3
Market Segmentation continued
• Behavioristic segmentation:
• Dividing consumers into groups according to usage, loyalties, or buying
responses to a product.
• 80 to 20 rule: 20 percent of buyers account for 80 percent of sales
volume.
• Benefit segmentation:
• Grouping of consumers on basis of attributes sought in a product.
© McGraw Hill
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The Target Marketing Process 4
Market Segmentation continued
• The process of segmenting a market.
• Marketers determine as much as they can about the segment.
• Companies offer research services to define markets and develop
strategies targeting them.
• Clusters consumer households into distinct “microgeographic”
segments.
© McGraw Hill
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Exhibit 2-11 Cluster Profiles
Source: Nielsen Claritas
Nielsen Claritas provides cluster profiles for marketers.
Access the text alternative for slide images.
© McGraw Hill
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The Target Marketing Process 5
Selecting a Target Market
• Determine how many segments to enter.
• Undifferentiated marketing: Offering just one product or service to entire
market.
• Differentiated marketing: Developing separate marketing strategies for
different segments.
• Concentrated marketing: Attempting to capture a large share of one
market segment.
© McGraw Hill
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The Target Marketing Process 6
Selecting a Target Market continued
• Determine which segments offer potential.
• Select most attractive segment through:
• Sales potential of segment.
• Opportunities for growth.
• Competition analysis.
• Ability to compete.
• Ability to market to this group.
© McGraw Hill
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The Target Marketing Process 7
Market Positioning
• Positioning: Fitting product or service to one or more segments of a
broad market to make it unique within the marketplace.
• Approaches:
• Focus on consumer: Linking product with benefits consumer will derive.
• Focus on competition: Positioning product by comparing benefit it offers to
the competition.
LO2-4
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Developing a Positioning Strategy 1
Positioning by Product Attributes and Benefits
• Sets brand apart from competitors on basis of specific characteristics
or benefits offered.
• Salient attributes: Important to consumers and are basis for making a
purchase decision.
5-hour ENERGY positions itself
as an energy shot; by promoting
its vitamins, nutrients, zero sugar,
and low-calories it sets itself
apart from its competitors.
© McGraw Hill
Source: Living Essentials Marketing, LLC.
19
Developing a Positioning Strategy 2
Positioning by Price/Quality
•
Cost is secondary to quality.
•
Quality or value at a very competitive price.
© McGraw Hill
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Developing a Positioning Strategy 3
Positioning by Use or
Application
• Used to enter market or
expand usage.
Arm & Hammer baking soda
demonstrates numerous product uses.
© McGraw Hill
Source: ZikG/Shutterstock
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Developing a Positioning Strategy 4
Positioning by Product Class
Positioning by Product User
In this ad, how does the California
Avocado Commission use
positioning to effectively market
California Avocados?
© McGraw Hill
Source: California Avocado Commission
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Developing a Positioning Strategy 5
Positioning by Competitor
Positioning by Cultural
Symbols
• Makes the brand easily identifiable
and differentiated from others.
Tony the Tiger has become a
cultural symbol.
© McGraw Hill
Source: Sheila Fitzgerald/Shutterstock
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Developing a Positioning Strategy 6
Repositioning
• Altering a product’s or brand’s position due to:
• Declining or stagnant sales.
• Anticipated opportunities in other market positions.
• Difficult to accomplish because of entrenched perceptions and
attitudes toward the product or brand.
© McGraw Hill
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Developing the Marketing Planning Program 1
Product Decisions
• Product symbolism:
• What a product or brand means to consumers.
• What consumers experience in purchasing and using a product.
LO2-5
© McGraw Hill
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Developing the Marketing Planning Program 2
Product Decisions continued
• Branding
• Builds and maintains brand awareness and interest.
• Develops and enhances attitudes toward the company or product.
• Builds relationships between consumer and brand.
• Brand identity:
• Combination of name, logo, symbols, design, packaging, image, and
associations held by consumers.
• Brand equity:
• Intangible asset of added value.
© McGraw Hill
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Developing the Marketing Planning Program 3
Product Decisions continued
• Packaging
• Traditionally provided functional benefits—economy, protection, and
storage.
• Role and function have changed due to:
• Self-service emphases of many stores.
• More buying decisions at point of purchase.
• Used to communicate with consumers and create an impression of the
brand.
© McGraw Hill
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Packaging
Many companies view the
package as an important
way to communicate with
consumers and create an
impression of the brand in
their minds. This Dior
perfume packaging creates
a product image.
© McGraw Hill
Source; kimmyjelly.th/Shutterstock
28
Developing the Marketing Planning Program 4
Price Decisions
• Price variable: What consumer has to give in exchange for purchase.
• Factors that determine price:
• Costs.
• Demand factors.
• Competition.
• Perceived value.
• Product quality.
• Advertising.
© McGraw Hill
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Developing the Marketing Planning Program 5
Distribution Channel Decisions
• Marketing channels: Interdependent organizations involved in
making a product or service available for use.
• Direct channels: Directly deal with customers.
• Driven by direct-response ads, telemarketing, Internet.
• Used when selling expensive and complex products.
• Indirect channels: Network of wholesalers and/or retailers.
© McGraw Hill
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Developing the Marketing Planning Program 6
Promotional Push Strategy
• Programs designed to persuade resellers to stock, merchandise, and
promote a manufacturer’s products.
• Trade advertising: Used to motivate wholesalers and retailers to
purchase products for resale.
© McGraw Hill
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Developing the Marketing Planning Program 7
Promotional Pull Strategy
• Spending money on advertising and sales promotion efforts directed
toward the ultimate consumer.
• Goals:
• Create demand among consumers.
• Encourage consumers to request product from retailer.
© McGraw Hill
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Because learning changes everything.
www.mheducation.com
© 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw Hill.
®
Because learning changes everything.®
Chapter 3
Organizing for Advertising and Promotion: The
Role of Ad Agencies and Other Marketing
Communication Organizations
© 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw Hill.
Learning Objectives
LO1
Describe how companies organize for advertising and
integrated marketing communications functions.
LO2
Compare the advantages and disadvantages of different
ways to organize for advertising and promotion.
LO3
Identify the types of advertising agencies and the roles they
play.
LO4
Explain how to select, compensate, and evaluate
advertising agencies.
LO5
Identify the role and functions of specialized marketing
communication organizations.
LO6
Compare the pros and cons of using an integrated
marketing services agency.
© McGraw Hill
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Figure 3-1 Participants in the Integrated Marketing
Communications Process
Access the text alternative for slide images.
© McGraw Hill
3
Participants in the Integrated Marketing
Communications Process: An Overview 1
Advertisers or Clients
•
Have the products, services, or causes to be marketed.
•
Provide the funds that pay for advertising and promotions.
•
Responsible for developing marketing program.
Advertising Agency
•
Specializes in creation, production, and/or placement of
communications messages.
•
May facilitate integrated marketing communications process.
© McGraw Hill
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Participants in the Integrated Marketing
Communications Process: An Overview 2
Media Organizations
•
Provide information, entertainment, or environment for firm’s
marketing communications message.
Specialized Marketing Communication Services
•
Direct-marketing agencies.
•
Sales promotion agencies.
•
Digital/interactive agencies.
•
Public relations firms.
© McGraw Hill
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Participants in the Integrated Marketing
Communications Process: An Overview 3
Collateral Services
Organizations
•
Support functions used by
advertisers, agencies,
media organizations, and
specialized marketing
communication firms.
National Geographic promotes
the various ways marketers
can use its media platforms to
connect with consumers.
Source: National Geographic Partners, LLC
© McGraw Hill
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Organizing for Advertising and Promotion in the Firm:
The Client’s Role 1
Factors Affecting How Companies Organize for IMC
•
Size of organization.
•
Number of products it markets.
•
Role of advertising and promotion in the marketing mix.
•
Allocated budget.
•
Marketing organization structure.
LO3-1
© McGraw Hill
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Figure 3-2 The Advertising Department under a
Centralized System
Access the text alternative for slide images.
© McGraw Hill
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Organizing for Advertising and Promotion in the Firm:
The Client’s Role 2
The Centralized System
•
Marketing activities are divided along functional lines.
•
Advertising manager is responsible for:
• Administration and execution.
• Coordination with other departments.
• Coordination with outside agencies and services.
LO3-2
© McGraw Hill
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Figure 3-3 A Decentralized Brand Management System
Access the text alternative for slide images.
© McGraw Hill
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Organizing for Advertising and Promotion in the Firm:
The Client’s Role 3
The Decentralized System
•
Used by firms with multiple divisions and many different products.
•
Each product or brand is assigned to a brand manager.
• Brand manager: Responsible for total management of the brand,
including planning, budgeting, sales, and profit performance.
• Category management system: Additional layer of management above
brand managers.
© McGraw Hill
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Organizing for Advertising and Promotion in the Firm:
The Client’s Role 4
In-House Agencies
•
Advertising agency that is set up, owned, and operated by the
advertiser.
• Reduces advertising and promotion costs.
• Allows companies to maintain tighter control.
• Critics worry about experience and objectivity.
© McGraw Hill
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Figure 3-4 Comparison of Advertising Organizational
Systems
Organizational
System
Advantages
Disadvantages
Centralized
• Facilitated communications
• Fewer personnel required
• Continuity in staff
• Allows for more topmanagement involvement
• Less involvement with and
understanding of overall marketing
goals
• Longer response time
• Inability to handle multiple product
lines
Decentralized
• Concentrated managerial
attention
• Rapid response to problems
and opportunities
• Increased flexibility
• Ineffective decision making
• Internal conflicts
• Misallocation of funds
• Lack of authority
• Internal rather than external focus
In-house
agencies
• Cost savings
• More control
• Increased coordination
• Stability
• Access to top management
• Less experience
• Less objectivity
• Less flexibility
• Less access to top creative talent
© McGraw Hill
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Advertising Agencies 1
Ad Agency
•
Service organization that specializes in planning and executing
advertising programs for its clients.
Agency Consolidation
•
Superagencies: Large agencies that merged with or acquired other
agencies and support organizations.
•
Have evolved into 4 major agency holding companies.
• Account for more than half of U.S. agency revenue.
LO3-3
© McGraw Hill
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Figure 3-5 Top 10 U.S. Advertising Agencies, 2018
Rank
Agency
Headquarters
U.S. Revenue
(millions)
1.
Cognizant Interactive
New York, NY
$3,672
2.
Accenture Interactive
New York, NY
3,526
3.
Deloitte Digital
New York, NY
2,812
4.
PwC Digital Services
New York, NY
2,490
5.
Epsilon-Conversant
Irving, TX
1,873
6.
IBM iX
Armonk, NY
1,751
7.
Advantage Marketing Partners
Irvine, CA
1,287
8.
RRD Marketing Solutions
Chicago, IL
1,181
9.
Publicis Sapient
Boston, MA
1,101
10.
Wunderman Thompson
New York, NY
1,035
© McGraw Hill
Source: Advertising Age, Agency Report 2019, April 29, 2019, p. 31.
15
Advertising Agencies 2
The Ad Agency’s Role
•
Reasons for using an
agency:
• Highly skilled specialists.
• Specialization in particular
industries.
• Objective viewpoint of
market.
• Broad range of experience.
Source: The Lambesis Agency
The Lambesis Agency specializes in
creating strong brands for its clients. Iconic
brands they have developed include Dasani,
Nordstrom, and Hard Rock Hotel.
© McGraw Hill
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Advertising Agencies 3
Types of Ad Agencies
•
Full-service agencies:
• Marketing, communications, and promotions services.
• Nonadvertising services.
•
Account services:
• Link between ad agency and its clients.
• Account executive: Understands advertiser’s marketing and promotion
needs and interprets them to agency personnel.
© McGraw Hill
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Figure 3-6 Full-Service Agency Organizational Chart
Access the text alternative for slide images.
© McGraw Hill
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Advertising Agencies 4
Types of Ad Agencies continued
•
Marketing services:
• Research department: Gathers, analyzes, and interprets useful
information.
• Account planners: Gather information that is relevant to client’s product
or service.
• Media department: Analyzes, selects, and contracts for space or time in
the media.
© McGraw Hill
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Advertising Agencies 5
Types of Ad Agencies continued
•
Creative services:
• Responsible for creation and execution of advertisements.
• Copywriters: Conceive ideas for ads and write headlines, subheads, and
body copy.
• Art department: Responsible for how the ad looks.
• Traffic department: Coordinates all phases of production.
© McGraw Hill
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Advertising Agencies 6
Types of Ad Agencies continued
•
Management and finance:
• Basic operating and administrative functions such as accounting, finance,
and human resources.
•
Agency organization and structure:
• Departmental system: All agency functions are set up as a separate
department.
• Group system: Individuals from each department work together in groups
to service particular accounts.
© McGraw Hill
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Advertising Agencies 7
Other Types of Agencies and Services
•
Creative boutiques:
• Small ad agencies that provide only creative services.
• Advantages:
• Turn out inventive creative work quickly.
• Provide more attention and better access to creative talent.
© McGraw Hill
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Advertising Agencies 8
Other Types of Agencies and Services continued
•
Media specialist companies:
• Specialize in buying media.
• Agencies and clients develop media strategy.
• Media buying organizations implement strategies and buy time and space.
• Rapid growth of programmatic buying:
• Wide range of technologies that automate the buying, placement, and
optimization of advertising media.
© McGraw Hill
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Exhibit 3-9
Source: Initiative
Initiative, the media buying arm of the advertising agency Interpublic Group,
promotes its services. Partnerships with clients such as Lego, Revlon, and LG
have made them one of the leading media specialist companies in the industry.
Access the text alternative for slide images.
© McGraw Hill
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Agency Compensation 1
Compensation Methods
•
Commissions from media.
•
Fee, cost, and incentive-based systems.
•
Percentage charges.
LO3-4
© McGraw Hill
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Agency Compensation 2
Commissions from Media
•
Commission system:
• Receiving specified commission from media on any advertising time or
space purchased for the client.
•
Negotiated commission system:
• Based on a sliding scale that becomes lower as clients’ media
expenditures increase.
© McGraw Hill
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Agency Compensation 3
Fee, Cost, and Incentive-Based Systems
•
Fee arrangement.
• Fixed-fee method: Basic monthly fee charged for services provided and
media commissions earned are given to client.
• Fee-commission combination: Media commissions received are
credited against the fee.
© McGraw Hill
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Agency Compensation 4
Fee, Cost, and Incentive-Based Systems continued
•
Cost-plus system:
• Agency pays a fee based on costs of its work plus some agreed-on profit
margin.
•
Incentive-based compensation:
• Agencies compensated above their basic costs, if they achieve or exceed
results as measured by agreed-upon metrics.
© McGraw Hill
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Figure 3-8 Performance Criteria Used for Incentive Plans
Criteria
Percentage
Basis for Incentives
Percentage
Performance reviews
82%
Agency performance
27%
Sales goals
53
Company performances
13
Brand/ad awareness
51
Both agency and company 53
Achieve project objectives
44
Brand perceptions
33
Copy test results
24
Market share goals
24
Profit goals
24
Other criteria
13
© McGraw Hill
Source: Association of National Advertisers, Trends in Agency Compensation, 14th ed., 2007.
29
Agency Compensation 5
Percentage Charges
•
Adding a markup of percentage charges to various services
purchased from outside providers.
•
Markups—usually ranging from 17.65 to 20 percent—are added to
client’s bill.
© McGraw Hill
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Agency Compensation 6
The Future of Agency Compensation
•
Decreased use of traditional media.
•
Reduction of budgets all around.
•
Agencies held more accountable for fees they charge.
•
Increased emphasis on procurement-driven cost cutting.
• Media rebates.
© McGraw Hill
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Evaluating Agencies 1
Financial Audit
Qualitative Audit
•
Cost and expenses.
•
•
Personnel hours billed.
Planning, developing, and
implementing program.
•
Results achieved.
•
Payments to media.
•
Payments to outside suppliers.
© McGraw Hill
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Figure 3-9 How Agencies Add Value to a Client’s
Business
1. Developing and producing creative ideas that are fresh and appropriate.
2. Ensuring that agency disciplines and functions are integrated and that agency
teams and divisions collaborate well on behalf of the client.
3. Working in a collaborative way with the client by creating an environment of
low egos and high mutual respect.
4. Developing ideas and programs that can be integrated into multiple
communication channels.
5. Assigning its best people to the client’s business and making its top
executives available when needed.
6. Evaluating brand drivers like awareness, consideration, and purchase intent.
7. Providing guidance and solutions in new media and technologies.
Source: “Report on the Agency– Advertiser Value Survey,” American Association of Advertising Agencies and Association
of National Advertisers, August 2007.
© McGraw Hill
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Evaluating Agencies 2
Gaining and Losing Clients
•
Why agencies lose clients:
• Poor performance or service.
• Poor communication.
• Unrealistic demands by the client.
• Personality conflicts.
• Personnel changes.
• Changes in size of the client or agency.
• Conflicts of interest.
© McGraw Hill
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Evaluating Agencies 3
Gaining and Losing Clients continued
•
Why agencies lose clients continued
• Changes in the client’s corporate and/or marketing strategy.
• Declining sales.
• Conflicting compensation philosophies.
• Changes in policies.
• Disagreements over marketing and/or creative strategy.
• Lack of integrated marketing capabilities.
© McGraw Hill
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Evaluating Agencies 4
Gaining and Losing Clients continued
•
How agencies gain clients:
• Referrals.
• Solicitations.
• Presentations.
• Public relations.
• Image and reputation.
Cashmere was recognized by Advertising
Age as the 2019 Multicultural Agency of
the Year. Promoting this award on their
website helps to gain new clients.
© McGraw Hill
Source: Cashmere
36
Specialized Services 1
Direct-Marketing Agencies
•
Provide a variety of services:
• Database analytics and management.
• Direct mail.
• Research.
• Media services.
• Creative and production capabilities.
•
Three main departments:
• Account management.
• Creative.
• Media.
© McGraw Hill
LO3-5
37
Specialized Services 2
Sales Promotion Agencies
•
Develop and manage sales promotion programs.
•
Provide a variety of services:
• Promotional planning.
• Creative research.
• Tie-in coordination.
• Fulfillment.
• Premium design and manufacturing.
• Catalog production.
• Contest/sweepstakes management.
© McGraw Hill
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Exhibit 3-13
Source: Don Jagoda Associates, Inc.
Don Jagoda Associates successfully administers sweepstakes, contests, rebates,
and loyalty programs for clients such as FedEx, General Mills, and Staples. Their
skills have made them one of the leading promotional agencies in the industry.
© McGraw Hill
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Specialized Services 3
Public Relations Firms
•
Develops and implements programs to manage organization’s:
• Publicity.
• Image.
• Affairs with consumers and other relevant publics:
• Employees, suppliers, stockholders, government, labor groups, citizen
action groups, and general public.
© McGraw Hill
40
Specialized Services 4
Public Relations Firms continued
•
Performs a variety of services:
• Planning the PR strategy and program.
• Generating publicity.
• Lobbying and public affairs efforts.
• Community activities and events.
• News releases, other communications.
• Research.
• Special events.
• Managing crises.
© McGraw Hill
41
Specialized Services 5
Digital Agencies
•
Development and strategic use of various digital marketing tools:
• Website design and development.
• Apps.
• Search engine optimization (SEO).
• Banner ads.
• Video.
• Mobile marketing.
• Social media campaigns.
© McGraw Hill
42
Collateral Services
Collateral Services
•
Marketing research.
•
Package design.
•
Consultants.
•
Photographers.
•
Graphic designers.
•
Talent agencies.
Source: Marketing Technology Media, LLC
•
Video production.
•
Event marketing.
© McGraw Hill
The Marketing Technology Landscape,
shown in this super-graphic from Chief
Marketing Technologist, has become very
complex. This 2019 chart includes more than
7,000 marketing technology solutions.
43
Integrated Marketing Communications Services 1
Pros and Cons of Integrated Services
•
Pros:
• Greater synergy.
• Convenience.
• Single image for product or service.
•
Cons:
• Budget politics.
• Poor communication.
• No synergy.
LO3-6
© McGraw Hill
44
Integrated Marketing Communications Services 2
Responsibility for IMC: Agency versus Client
•
Key obstacles to IMC implementation:
• Lack of people with a broad perspective and skills to make it work.
• Internal turf battles.
• Agency egos.
• Fear of budget reductions.
•
Some agencies adding to resources, while others seek specialization.
© McGraw Hill
45
Integrated Marketing Communications Services 3
Preparing for the Future
•
Traditional advertising agencies competing against:
• Specialist companies, particularly in digital marketing and information
technology.
• Clients who are bringing IMC functions in-house.
•
Agencies must prove their value to clients and provide solutions, not
just services.
•
Foundations of the 2020 agency.
© McGraw Hill
46
Figure 3-10 Foundations of the 2020 Agency 1
Areas
Foundational Elements
Accountability
• Responsibility for outcomes, not just outputs
• Attention to success metrics vs. just cost of service
• Measuring what matters: results for clients instead of agency time
Agility
• Agile philosophy applied to work flow
• Prototyping and minimum viable products
• Interdisciplinary teams vs. departments
Collaboration
• Culture that values collaboration over managing hours
• Teams of givers, not just takers
• Agency partners as peaceful competitors
Digital Fitness
• Individuals with high digital IQ
• Digital as competency across agency, not just a department
• Deep understanding of data and personalization
Effectiveness
• Provider of solutions, not just services
• True project management vs. tracking of hours
• Focus on effectiveness for clients, not just efficiency for agency
© McGraw Hill
47
Figure 3-10 Foundations of the 2020 Agency 2
Areas
Foundational Elements
Expertise
• Knowledge of specific markets or audiences
• Best-in-class business model vs. full service
• Centers of excellence and best practices
Innovation
• Revenue streams from intellectual property, not just work for hire
• Labs as independent business units
• Marketing invention business, not just service business
Pricing
• Pricing as a core competency versus costing
• Aligning the economic incentives of both client and agency
• Professional sellers negotiating with professional buyers
© McGraw Hill
48
Because learning changes everything.
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© 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw Hill.
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Description IMC perspective 2-2 discusses the differences between millennials and gen Z. Discuss some of the ways these cohorts differ and how they are also the same. Cite some implications for marketers. Discuss the difference between a push and a pull strategy. How do these strategies differ in advertising and promotional strategies? Responding to:“Do you think one is more effective than the other for a certain Gen?” – Ms. JamesI believe you are referring to push pull strategies, so I will speak about that.  As a future social media marketer, I strongly believe Gen Z’ers are more in tune with the pull strategy. The young generation is much more in tuned with, “keeping it real” and “to the point” when it comes to product/service information; if a Gen Z’er wants information, they would prefer to seek it out themselves organically, rather than having it blasted constantly in their faces like the “push” method. In this aspect of the “pull” strategy, works because the “pull” method is used in SEO’s, social media content, and customer reviews. In addition, the “pull” approach allows companies to be much more interactive with their customer base, allowing for conversations on the product to be had and increase customer retention. Bump, P. (2021, June 10). Millennials VS Gen Z: Why Marketers Need To Know The Difference: Hub Spot.com    Furthermore, because social media plays such a major role in Gen Z’ers decision making, this means using the “pull” method with content-specific information is right up the young cohorts alley. After all, the younger generation is known for having a short attention span because they want instant gratification with the information they receive, so with this, it only makes sense that they would like Tik Tok, Snapchat, and Instagram, their prefer means of information gathering. So as a marketer, common sense would tell me to use the “pull” strategy on this generation in things like short videos via You Tube, or have them watch someone like an influencer using the product via Tik Tok, rather than seeing it on a commercial ad; doing so “pulls” them in all on their own. Macura, Alex. (2022 November 29). Marketing to Gen Z: How To Do It The Right Way:SearchEngineJournal.com  Gen Z’ers appreciate seeing the authenticity of a product or service, rather than a gimmick used to sell a product; transparency is important to them, and they hold businesses that are not accountable for it, which is much easy to do today via the internet. Macura, Alex. (2022 November 29). Marketing to Gen Z: How To Do It The Right Way:SearchEngineJournal.com  All these characteristics are those used by the younger generation, but they also fall under the very definition of what the pull strategy means; organically found, self-sought information, that can quickly and readily found, aka “to the point of the matter.” With the next generation already feeling contemptuous and conspicuous regarding the world of marketing, branding has to come through in a more subtle way, which is why “pull” marketing is so help full with the younger age group. Gen Z’ers need brands who are well depicted online and know how to converse with them, to draw them in and bring interest to the business; any other way, will be considered “overly aggressive” and a turn off for the population. No Author. (No Date). How To Speak Gen Z: Brandignity.comWord Count: 484References:Bump, P. (2021, June 10). Millennials VS Gen Z: Why Marketers Need To Know The Difference: Hub Spot.com    https://blog.hubspot.com/marketing/millennials-vs-gen-zMacura, Alex. (2022 November 29). Marketing to Gen Z: How To Do It The Right Way:SearchEngineJournal.com  https://www.searchenginejournal.com/marketing-to-gen-z/471784/No Author. (No Date). How To Speak Gen Z: Brandignity.com https://www.brandignity.com/2015/10/how-to-speak-to-generation-z/ 1. IMC perspective 2-2 explores the unique characteristics of millennials and gen Z and how marketers can effectively communicate with these distinct cohorts. Millennials are often described as technology-savvy, value-driven, and financially cautious. Gen Z, on the other hand, is known for being even more technologically advanced, diverse, and focused on social justice. Despite their differences, both generations prioritize authenticity, personalization, and social responsibility in the brands they support. They also share a preference for mobile devices and social media, making it crucial for marketers to develop strategies that cater to these platforms. Also, The objectives of integrated marketing communications are to enhance brand recognition and broaden the scope of the target audience. Although implementing multichannel or omnichannel marketing can yield some returns, adopting an IMC approach can yield superior long-term outcomes. Although this tactic is particularly beneficial for managing strong sales teams, small businesses can also reap considerable benefits from it(Joshua, 2021). 2. A push strategy involves a company actively promoting a product to its target audience through direct communication and sales tactics, such as cold calling, trade shows, and email marketing. In contrast, a pull strategy involves creating demand for a product through advertising and promotional efforts aimed at creating awareness and generating interest among consumers. In a pull strategy, the goal is to entice consumers to seek out the product on their own. Advertising and content marketing are key elements of a pull strategy. The main difference between push and pull strategies is the approach to reaching the target audience. A push strategy is more direct and active, while a pull strategy is more passive and focused on creating demand through effective advertising and promotional campaigns. Reference:Joshua Lyons Marketing. (2021, September 22). The importance of having integrated marketing communications. Joshua Lyons Marketing. Retrieved March 6, 2023, from https://jjlyonsmarketing.com/resources/the-importance-of-having-integrated-marketing-communications-imc/Because learning changes everything.® Chapter 2 The Role of IMC in the Marketing Process © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill. Learning Objectives LO1 Describe the role of advertising and promotion in an organization’s integrated marketing program. LO2 Define target marketing. LO3 Discuss the role of market segmentation in an IMC program. LO4 Describe positioning and repositioning strategies. LO5 Identify the marketing-mix decisions that influence advertising and promotional strategy. © McGraw Hill 2 Figure 2-1 Marketing and Promotions Process Model Access the text alternative for slide images. © McGraw Hill 3 Marketing Strategy and Analysis 1 Strategic Marketing Plan • Guides allocation of organization’s resources. • Guides specific marketing programs and policies. • Evolves from organization’s overall corporate strategy. • Allows for understanding of market opportunities, competition, and market segments. • Market segments: Distinct consumer groups within a market who have common needs. LO2-1 © McGraw Hill 4 Marketing Strategy and Analysis 2 Opportunity Analysis • Market opportunities are areas where: • There are favorable demand trends. • Customers’ needs and opportunities are not being satisfied. • Firm can compete effectively. • Steps to identify market opportunities: • Examine the marketplace. • Observe demand trends and competition in various market segments. © McGraw Hill 5 Exhibit 2-1 The Milk Processor Education Program saw the growing demand for sports drinks and seized on that market opportunity. Chocolate milk is a natural option for athletes to “Bounce Back” after a hard workout. Source: America’s Milk Companies © McGraw Hill 6 Marketing Strategy and Analysis 3 Competitive Analysis • Analyzing competition in the marketplace and searching for competitive advantage. • Competitive advantage: Attributes that give a firm an edge over competitors. • Better quality products. • Superior customer service. • Low production costs and lower prices. • Dominating channels of distribution. • Advertising. © McGraw Hill 7 Marketing Strategy and Analysis 4 Target Market Selection • Done after evaluating market opportunities and doing a competitive analysis. • Can select one or more target markets. • Has direct implications on firm’s advertising and promotional efforts. © McGraw Hill 8 Figure 2-2 The Target Marketing Process LO2-2 Access the text alternative for slide images. © McGraw Hill 9 The Target Marketing Process 1 Identifying Markets • Marketer identifies specific needs of groups of people (or segments). • Selects one or more of these segments as a target. • Isolates consumers with similar lifestyles, needs, and the like. • Increases marketer’s knowledge of consumers’ specific requirements. © McGraw Hill 10 The Target Marketing Process 2 Market Segmentation • Dividing a market into distinct groups with common needs, who respond similarly to a marketing situation. • Bases for segmentation: • Geographic: Dividing market on basis of region, city size, metropolitan area, and/or density. • Demographic: Dividing market on basis of age, sex, family size, marital status, etc. • Psychographic: Dividing market on basis of personality, lifecycles, and/or lifestyles. LO2-3 © McGraw Hill 11 Exhibit 2-9 AARP, The Magazine dominates their competitors in the 50+ age segment. They are synonymous with this demographic. © McGraw Hill Source: AARP 12 The Target Marketing Process 3 Market Segmentation continued • Behavioristic segmentation: • Dividing consumers into groups according to usage, loyalties, or buying responses to a product. • 80 to 20 rule: 20 percent of buyers account for 80 percent of sales volume. • Benefit segmentation: • Grouping of consumers on basis of attributes sought in a product. © McGraw Hill 13 The Target Marketing Process 4 Market Segmentation continued • The process of segmenting a market. • Marketers determine as much as they can about the segment. • Companies offer research services to define markets and develop strategies targeting them. • Clusters consumer households into distinct “microgeographic” segments. © McGraw Hill 14 Exhibit 2-11 Cluster Profiles Source: Nielsen Claritas Nielsen Claritas provides cluster profiles for marketers. Access the text alternative for slide images. © McGraw Hill 15 The Target Marketing Process 5 Selecting a Target Market • Determine how many segments to enter. • Undifferentiated marketing: Offering just one product or service to entire market. • Differentiated marketing: Developing separate marketing strategies for different segments. • Concentrated marketing: Attempting to capture a large share of one market segment. © McGraw Hill 16 The Target Marketing Process 6 Selecting a Target Market continued • Determine which segments offer potential. • Select most attractive segment through: • Sales potential of segment. • Opportunities for growth. • Competition analysis. • Ability to compete. • Ability to market to this group. © McGraw Hill 17 The Target Marketing Process 7 Market Positioning • Positioning: Fitting product or service to one or more segments of a broad market to make it unique within the marketplace. • Approaches: • Focus on consumer: Linking product with benefits consumer will derive. • Focus on competition: Positioning product by comparing benefit it offers to the competition. LO2-4 © McGraw Hill 18 Developing a Positioning Strategy 1 Positioning by Product Attributes and Benefits • Sets brand apart from competitors on basis of specific characteristics or benefits offered. • Salient attributes: Important to consumers and are basis for making a purchase decision. 5-hour ENERGY positions itself as an energy shot; by promoting its vitamins, nutrients, zero sugar, and low-calories it sets itself apart from its competitors. © McGraw Hill Source: Living Essentials Marketing, LLC. 19 Developing a Positioning Strategy 2 Positioning by Price/Quality • Cost is secondary to quality. • Quality or value at a very competitive price. © McGraw Hill 20 Developing a Positioning Strategy 3 Positioning by Use or Application • Used to enter market or expand usage. Arm & Hammer baking soda demonstrates numerous product uses. © McGraw Hill Source: ZikG/Shutterstock 21 Developing a Positioning Strategy 4 Positioning by Product Class Positioning by Product User In this ad, how does the California Avocado Commission use positioning to effectively market California Avocados? © McGraw Hill Source: California Avocado Commission 22 Developing a Positioning Strategy 5 Positioning by Competitor Positioning by Cultural Symbols • Makes the brand easily identifiable and differentiated from others. Tony the Tiger has become a cultural symbol. © McGraw Hill Source: Sheila Fitzgerald/Shutterstock 23 Developing a Positioning Strategy 6 Repositioning • Altering a product’s or brand’s position due to: • Declining or stagnant sales. • Anticipated opportunities in other market positions. • Difficult to accomplish because of entrenched perceptions and attitudes toward the product or brand. © McGraw Hill 24 Developing the Marketing Planning Program 1 Product Decisions • Product symbolism: • What a product or brand means to consumers. • What consumers experience in purchasing and using a product. LO2-5 © McGraw Hill 25 Developing the Marketing Planning Program 2 Product Decisions continued • Branding • Builds and maintains brand awareness and interest. • Develops and enhances attitudes toward the company or product. • Builds relationships between consumer and brand. • Brand identity: • Combination of name, logo, symbols, design, packaging, image, and associations held by consumers. • Brand equity: • Intangible asset of added value. © McGraw Hill 26 Developing the Marketing Planning Program 3 Product Decisions continued • Packaging • Traditionally provided functional benefits—economy, protection, and storage. • Role and function have changed due to: • Self-service emphases of many stores. • More buying decisions at point of purchase. • Used to communicate with consumers and create an impression of the brand. © McGraw Hill 27 Packaging Many companies view the package as an important way to communicate with consumers and create an impression of the brand in their minds. This Dior perfume packaging creates a product image. © McGraw Hill Source; kimmyjelly.th/Shutterstock 28 Developing the Marketing Planning Program 4 Price Decisions • Price variable: What consumer has to give in exchange for purchase. • Factors that determine price: • Costs. • Demand factors. • Competition. • Perceived value. • Product quality. • Advertising. © McGraw Hill 29 Developing the Marketing Planning Program 5 Distribution Channel Decisions • Marketing channels: Interdependent organizations involved in making a product or service available for use. • Direct channels: Directly deal with customers. • Driven by direct-response ads, telemarketing, Internet. • Used when selling expensive and complex products. • Indirect channels: Network of wholesalers and/or retailers. © McGraw Hill 30 Developing the Marketing Planning Program 6 Promotional Push Strategy • Programs designed to persuade resellers to stock, merchandise, and promote a manufacturer’s products. • Trade advertising: Used to motivate wholesalers and retailers to purchase products for resale. © McGraw Hill 31 Developing the Marketing Planning Program 7 Promotional Pull Strategy • Spending money on advertising and sales promotion efforts directed toward the ultimate consumer. • Goals: • Create demand among consumers. • Encourage consumers to request product from retailer. © McGraw Hill 32 Because learning changes everything. www.mheducation.com © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill. ® Because learning changes everything.® Chapter 3 Organizing for Advertising and Promotion: The Role of Ad Agencies and Other Marketing Communication Organizations © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill. Learning Objectives LO1 Describe how companies organize for advertising and integrated marketing communications functions. LO2 Compare the advantages and disadvantages of different ways to organize for advertising and promotion. LO3 Identify the types of advertising agencies and the roles they play. LO4 Explain how to select, compensate, and evaluate advertising agencies. LO5 Identify the role and functions of specialized marketing communication organizations. LO6 Compare the pros and cons of using an integrated marketing services agency. © McGraw Hill 2 Figure 3-1 Participants in the Integrated Marketing Communications Process Access the text alternative for slide images. © McGraw Hill 3 Participants in the Integrated Marketing Communications Process: An Overview 1 Advertisers or Clients • Have the products, services, or causes to be marketed. • Provide the funds that pay for advertising and promotions. • Responsible for developing marketing program. Advertising Agency • Specializes in creation, production, and/or placement of communications messages. • May facilitate integrated marketing communications process. © McGraw Hill 4 Participants in the Integrated Marketing Communications Process: An Overview 2 Media Organizations • Provide information, entertainment, or environment for firm’s marketing communications message. Specialized Marketing Communication Services • Direct-marketing agencies. • Sales promotion agencies. • Digital/interactive agencies. • Public relations firms. © McGraw Hill 5 Participants in the Integrated Marketing Communications Process: An Overview 3 Collateral Services Organizations • Support functions used by advertisers, agencies, media organizations, and specialized marketing communication firms. National Geographic promotes the various ways marketers can use its media platforms to connect with consumers. Source: National Geographic Partners, LLC © McGraw Hill 6 Organizing for Advertising and Promotion in the Firm: The Client’s Role 1 Factors Affecting How Companies Organize for IMC • Size of organization. • Number of products it markets. • Role of advertising and promotion in the marketing mix. • Allocated budget. • Marketing organization structure. LO3-1 © McGraw Hill 7 Figure 3-2 The Advertising Department under a Centralized System Access the text alternative for slide images. © McGraw Hill 8 Organizing for Advertising and Promotion in the Firm: The Client’s Role 2 The Centralized System • Marketing activities are divided along functional lines. • Advertising manager is responsible for: • Administration and execution. • Coordination with other departments. • Coordination with outside agencies and services. LO3-2 © McGraw Hill 9 Figure 3-3 A Decentralized Brand Management System Access the text alternative for slide images. © McGraw Hill 10 Organizing for Advertising and Promotion in the Firm: The Client’s Role 3 The Decentralized System • Used by firms with multiple divisions and many different products. • Each product or brand is assigned to a brand manager. • Brand manager: Responsible for total management of the brand, including planning, budgeting, sales, and profit performance. • Category management system: Additional layer of management above brand managers. © McGraw Hill 11 Organizing for Advertising and Promotion in the Firm: The Client’s Role 4 In-House Agencies • Advertising agency that is set up, owned, and operated by the advertiser. • Reduces advertising and promotion costs. • Allows companies to maintain tighter control. • Critics worry about experience and objectivity. © McGraw Hill 12 Figure 3-4 Comparison of Advertising Organizational Systems Organizational System Advantages Disadvantages Centralized • Facilitated communications • Fewer personnel required • Continuity in staff • Allows for more topmanagement involvement • Less involvement with and understanding of overall marketing goals • Longer response time • Inability to handle multiple product lines Decentralized • Concentrated managerial attention • Rapid response to problems and opportunities • Increased flexibility • Ineffective decision making • Internal conflicts • Misallocation of funds • Lack of authority • Internal rather than external focus In-house agencies • Cost savings • More control • Increased coordination • Stability • Access to top management • Less experience • Less objectivity • Less flexibility • Less access to top creative talent © McGraw Hill 13 Advertising Agencies 1 Ad Agency • Service organization that specializes in planning and executing advertising programs for its clients. Agency Consolidation • Superagencies: Large agencies that merged with or acquired other agencies and support organizations. • Have evolved into 4 major agency holding companies. • Account for more than half of U.S. agency revenue. LO3-3 © McGraw Hill 14 Figure 3-5 Top 10 U.S. Advertising Agencies, 2018 Rank Agency Headquarters U.S. Revenue (millions) 1. Cognizant Interactive New York, NY $3,672 2. Accenture Interactive New York, NY 3,526 3. Deloitte Digital New York, NY 2,812 4. PwC Digital Services New York, NY 2,490 5. Epsilon-Conversant Irving, TX 1,873 6. IBM iX Armonk, NY 1,751 7. Advantage Marketing Partners Irvine, CA 1,287 8. RRD Marketing Solutions Chicago, IL 1,181 9. Publicis Sapient Boston, MA 1,101 10. Wunderman Thompson New York, NY 1,035 © McGraw Hill Source: Advertising Age, Agency Report 2019, April 29, 2019, p. 31. 15 Advertising Agencies 2 The Ad Agency’s Role • Reasons for using an agency: • Highly skilled specialists. • Specialization in particular industries. • Objective viewpoint of market. • Broad range of experience. Source: The Lambesis Agency The Lambesis Agency specializes in creating strong brands for its clients. Iconic brands they have developed include Dasani, Nordstrom, and Hard Rock Hotel. © McGraw Hill 16 Advertising Agencies 3 Types of Ad Agencies • Full-service agencies: • Marketing, communications, and promotions services. • Nonadvertising services. • Account services: • Link between ad agency and its clients. • Account executive: Understands advertiser’s marketing and promotion needs and interprets them to agency personnel. © McGraw Hill 17 Figure 3-6 Full-Service Agency Organizational Chart Access the text alternative for slide images. © McGraw Hill 18 Advertising Agencies 4 Types of Ad Agencies continued • Marketing services: • Research department: Gathers, analyzes, and interprets useful information. • Account planners: Gather information that is relevant to client’s product or service. • Media department: Analyzes, selects, and contracts for space or time in the media. © McGraw Hill 19 Advertising Agencies 5 Types of Ad Agencies continued • Creative services: • Responsible for creation and execution of advertisements. • Copywriters: Conceive ideas for ads and write headlines, subheads, and body copy. • Art department: Responsible for how the ad looks. • Traffic department: Coordinates all phases of production. © McGraw Hill 20 Advertising Agencies 6 Types of Ad Agencies continued • Management and finance: • Basic operating and administrative functions such as accounting, finance, and human resources. • Agency organization and structure: • Departmental system: All agency functions are set up as a separate department. • Group system: Individuals from each department work together in groups to service particular accounts. © McGraw Hill 21 Advertising Agencies 7 Other Types of Agencies and Services • Creative boutiques: • Small ad agencies that provide only creative services. • Advantages: • Turn out inventive creative work quickly. • Provide more attention and better access to creative talent. © McGraw Hill 22 Advertising Agencies 8 Other Types of Agencies and Services continued • Media specialist companies: • Specialize in buying media. • Agencies and clients develop media strategy. • Media buying organizations implement strategies and buy time and space. • Rapid growth of programmatic buying: • Wide range of technologies that automate the buying, placement, and optimization of advertising media. © McGraw Hill 23 Exhibit 3-9 Source: Initiative Initiative, the media buying arm of the advertising agency Interpublic Group, promotes its services. Partnerships with clients such as Lego, Revlon, and LG have made them one of the leading media specialist companies in the industry. Access the text alternative for slide images. © McGraw Hill 24 Agency Compensation 1 Compensation Methods • Commissions from media. • Fee, cost, and incentive-based systems. • Percentage charges. LO3-4 © McGraw Hill 25 Agency Compensation 2 Commissions from Media • Commission system: • Receiving specified commission from media on any advertising time or space purchased for the client. • Negotiated commission system: • Based on a sliding scale that becomes lower as clients’ media expenditures increase. © McGraw Hill 26 Agency Compensation 3 Fee, Cost, and Incentive-Based Systems • Fee arrangement. • Fixed-fee method: Basic monthly fee charged for services provided and media commissions earned are given to client. • Fee-commission combination: Media commissions received are credited against the fee. © McGraw Hill 27 Agency Compensation 4 Fee, Cost, and Incentive-Based Systems continued • Cost-plus system: • Agency pays a fee based on costs of its work plus some agreed-on profit margin. • Incentive-based compensation: • Agencies compensated above their basic costs, if they achieve or exceed results as measured by agreed-upon metrics. © McGraw Hill 28 Figure 3-8 Performance Criteria Used for Incentive Plans Criteria Percentage Basis for Incentives Percentage Performance reviews 82% Agency performance 27% Sales goals 53 Company performances 13 Brand/ad awareness 51 Both agency and company 53 Achieve project objectives 44 Brand perceptions 33 Copy test results 24 Market share goals 24 Profit goals 24 Other criteria 13 © McGraw Hill Source: Association of National Advertisers, Trends in Agency Compensation, 14th ed., 2007. 29 Agency Compensation 5 Percentage Charges • Adding a markup of percentage charges to various services purchased from outside providers. • Markups—usually ranging from 17.65 to 20 percent—are added to client’s bill. © McGraw Hill 30 Agency Compensation 6 The Future of Agency Compensation • Decreased use of traditional media. • Reduction of budgets all around. • Agencies held more accountable for fees they charge. • Increased emphasis on procurement-driven cost cutting. • Media rebates. © McGraw Hill 31 Evaluating Agencies 1 Financial Audit Qualitative Audit • Cost and expenses. • • Personnel hours billed. Planning, developing, and implementing program. • Results achieved. • Payments to media. • Payments to outside suppliers. © McGraw Hill 32 Figure 3-9 How Agencies Add Value to a Client’s Business 1. Developing and producing creative ideas that are fresh and appropriate. 2. Ensuring that agency disciplines and functions are integrated and that agency teams and divisions collaborate well on behalf of the client. 3. Working in a collaborative way with the client by creating an environment of low egos and high mutual respect. 4. Developing ideas and programs that can be integrated into multiple communication channels. 5. Assigning its best people to the client’s business and making its top executives available when needed. 6. Evaluating brand drivers like awareness, consideration, and purchase intent. 7. Providing guidance and solutions in new media and technologies. Source: “Report on the Agency– Advertiser Value Survey,” American Association of Advertising Agencies and Association of National Advertisers, August 2007. © McGraw Hill 33 Evaluating Agencies 2 Gaining and Losing Clients • Why agencies lose clients: • Poor performance or service. • Poor communication. • Unrealistic demands by the client. • Personality conflicts. • Personnel changes. • Changes in size of the client or agency. • Conflicts of interest. © McGraw Hill 34 Evaluating Agencies 3 Gaining and Losing Clients continued • Why agencies lose clients continued • Changes in the client’s corporate and/or marketing strategy. • Declining sales. • Conflicting compensation philosophies. • Changes in policies. • Disagreements over marketing and/or creative strategy. • Lack of integrated marketing capabilities. © McGraw Hill 35 Evaluating Agencies 4 Gaining and Losing Clients continued • How agencies gain clients: • Referrals. • Solicitations. • Presentations. • Public relations. • Image and reputation. Cashmere was recognized by Advertising Age as the 2019 Multicultural Agency of the Year. Promoting this award on their website helps to gain new clients. © McGraw Hill Source: Cashmere 36 Specialized Services 1 Direct-Marketing Agencies • Provide a variety of services: • Database analytics and management. • Direct mail. • Research. • Media services. • Creative and production capabilities. • Three main departments: • Account management. • Creative. • Media. © McGraw Hill LO3-5 37 Specialized Services 2 Sales Promotion Agencies • Develop and manage sales promotion programs. • Provide a variety of services: • Promotional planning. • Creative research. • Tie-in coordination. • Fulfillment. • Premium design and manufacturing. • Catalog production. • Contest/sweepstakes management. © McGraw Hill 38 Exhibit 3-13 Source: Don Jagoda Associates, Inc. Don Jagoda Associates successfully administers sweepstakes, contests, rebates, and loyalty programs for clients such as FedEx, General Mills, and Staples. Their skills have made them one of the leading promotional agencies in the industry. © McGraw Hill 39 Specialized Services 3 Public Relations Firms • Develops and implements programs to manage organization’s: • Publicity. • Image. • Affairs with consumers and other relevant publics: • Employees, suppliers, stockholders, government, labor groups, citizen action groups, and general public. © McGraw Hill 40 Specialized Services 4 Public Relations Firms continued • Performs a variety of services: • Planning the PR strategy and program. • Generating publicity. • Lobbying and public affairs efforts. • Community activities and events. • News releases, other communications. • Research. • Special events. • Managing crises. © McGraw Hill 41 Specialized Services 5 Digital Agencies • Development and strategic use of various digital marketing tools: • Website design and development. • Apps. • Search engine optimization (SEO). • Banner ads. • Video. • Mobile marketing. • Social media campaigns. © McGraw Hill 42 Collateral Services Collateral Services • Marketing research. • Package design. • Consultants. • Photographers. • Graphic designers. • Talent agencies. Source: Marketing Technology Media, LLC • Video production. • Event marketing. © McGraw Hill The Marketing Technology Landscape, shown in this super-graphic from Chief Marketing Technologist, has become very complex. This 2019 chart includes more than 7,000 marketing technology solutions. 43 Integrated Marketing Communications Services 1 Pros and Cons of Integrated Services • Pros: • Greater synergy. • Convenience. • Single image for product or service. • Cons: • Budget politics. • Poor communication. • No synergy. LO3-6 © McGraw Hill 44 Integrated Marketing Communications Services 2 Responsibility for IMC: Agency versus Client • Key obstacles to IMC implementation: • Lack of people with a broad perspective and skills to make it work. • Internal turf battles. • Agency egos. • Fear of budget reductions. • Some agencies adding to resources, while others seek specialization. © McGraw Hill 45 Integrated Marketing Communications Services 3 Preparing for the Future • Traditional advertising agencies competing against: • Specialist companies, particularly in digital marketing and information technology. • Clients who are bringing IMC functions in-house. • Agencies must prove their value to clients and provide solutions, not just services. • Foundations of the 2020 agency. © McGraw Hill 46 Figure 3-10 Foundations of the 2020 Agency 1 Areas Foundational Elements Accountability • Responsibility for outcomes, not just outputs • Attention to success metrics vs. just cost of service • Measuring what matters: results for clients instead of agency time Agility • Agile philosophy applied to work flow • Prototyping and minimum viable products • Interdisciplinary teams vs. departments Collaboration • Culture that values collaboration over managing hours • Teams of givers, not just takers • Agency partners as peaceful competitors Digital Fitness • Individuals with high digital IQ • Digital as competency across agency, not just a department • Deep understanding of data and personalization Effectiveness • Provider of solutions, not just services • True project management vs. tracking of hours • Focus on effectiveness for clients, not just efficiency for agency © McGraw Hill 47 Figure 3-10 Foundations of the 2020 Agency 2 Areas Foundational Elements Expertise • Knowledge of specific markets or audiences • Best-in-class business model vs. full service • Centers of excellence and best practices Innovation • Revenue streams from intellectual property, not just work for hire • Labs as independent business units • Marketing invention business, not just service business Pricing • Pricing as a core competency versus costing • Aligning the economic incentives of both client and agency • Professional sellers negotiating with professional buyers © McGraw Hill 48 Because learning changes everything. www.mheducation.com © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill. ® Purchase answer to see full attachment

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