Chapter 2

INTERGRATED
MARKETING
COMMUNICATIONS
PROGRAM
SITUATION
ANALYSIS

1
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 Learning Objectives

▪ To examine methods for selecting,

compensating, and evaluating advertising
agencies
▪ To explain the role and functions of
specialized marketing communication
organizations
▪ To examine various perspectives on the use
of integrated services and responsibilities of
advertisers versus agencies
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 Content
1. Organizing for Advertising and
Promotion
2. Perspectives on
Consumer Behavior

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Part 1

2.1 Organizing for

Advertising and
Promotion
 2.1.1 Participants in the Integrated
Marketing Communications Process

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 the creation, production, and/or placement of
the communications message
• Facilitates the integrated marketing communications proess?
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 2.1.1Participants in the Integrated
Marketing Communications Process

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 the creation, production, and/or placement of
the communications message
• Facilitates the integrated marketing communications proess?
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 2.1.1Participants in the Integrated
Marketing Communications Process

Media organizations
• Provide information, entertainment, or an environment for a firm’s
marketing communications message
Specialized marketing communication services organizations
• Direct-marketing agencies
• Sales promotion agencies
• Digital/Interactive agencies
• Public relations firms

Collateral services organizations

• Collateral services: Support functions used by advertisers, agencies, media
organizations, and specialized marketing communication firms
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 Factors Affecting How
Companies Organize for IMC
▪ Size of the organization
▪ Number of products it markets
▪ Role of advertising and promotion in
the marketing mix
▪ Allocated budget
▪ Marketing organization structure

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 The Advertising Department under a
Centralized System

Figure 2.1 - The Advertising Department under a Centralized

System

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 Centralized System
▪ Marketing activities are divided
along functional lines
▪ Advertising manager: Responsible
for:
▪ Planning and budgeting
▪ Administration and execution
▪ Coordination with other departments
▪ Coordination with outside agencies
and services
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 Figure 2.2 - Decentralized Brand
Management System

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 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
the total management of the brand,
including planning, budgeting, sales,
and profit performance
▪ Category management system:
Additional layer of management
above the brand
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 In-House Agencies

Advertising agency that is set up, owned, and

operated by the advertiser

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 Figure 2.3 - Comparison of Advertising
Organizational Systems

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 Advertising Agencies
▪ Service organizations that specialize
in planning and executing
advertising programs for its clients
▪ Superagencies: Large agencies
that merged with or acquired other
agencies and support organizations
▪ Have now evolved into 4 major
agency holding companies?

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 Reasons for Using an Ad Agency

Highly skilled specialists

Specialization in a particular industry

Objective viewpoint of the market

Broad range of experience

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 Full-Service Agencies
Planning Performing
Full range of advertising research
marketing
communication Creating
Selecting media
advertising
and promotion
services Producing
advertising

Strategic market Interactive

planning capabilities
Nonadvertising
services Sales
Package design
promotions

Direct Public relations

marketing and publicity
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 Figure 2.4 - Full-Service Agency
Organization Chart

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 Account Services
▪ Link between the ad agency and its
clients
▪ Account executive: Understands
the advertiser’s marketing and
promotion needs and interprets
them to agency personnel
▪ Presents agency recommendations
and obtains client approval

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 Marketing Services
▪ Research department - Gathers,
analyzes, and interprets useful
information
▪ Account planners: Gather
information that is relevant to the
client’s product or service
▪ Media department - Analyzes,
selects, and contracts for space or
time in the media

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 Creative Services
▪ Responsible for the creation and
execution of advertisements
▪ Copywriters: Conceive ideas for
the ads and write the headlines,
subheads, and body copy
▪ Art department - Responsible for
how the ad looks
▪ Traffic department - Coordinates all
phases of production
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 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

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 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

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 Media Specialist Companies
▪ Specialize in the buying of media
▪ Agencies and clients develop media
strategy
▪ Media buying organizations
implement strategies, and buy time
and space

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 Direct-Marketing Agencies
▪ Provide a variety of services
▪ Database analytics and management
▪ Direct mail
▪ Research and media services
▪ Creative and production capabilities
▪ Has following departments
▪ Account management
▪ Creative
▪ Media
▪ Database development/management

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 Sales Promotion Agency
▪ Involved with the developing and
managing of sales promotion
programs
▪ Provide following services
▪ Promotional planning, creative
research, and tie-in coordination
▪ Fulfillment
▪ Premium design and manufacturing
▪ Catalog production
▪ Contest/sweepstakes management

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 Public Relations Firm
▪ 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 the general public

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 Functions Performed by Public
Relations Firms

Strategy Generating
Lobbying
development publicity

Public News releases,

Research
affairs communication

Coordination
Managing Special
w/promotional
crisis events
areas
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 Digital/Interactive Agencies
▪ Specialize in the development and
strategic use of various digital
marketing tools
▪ Websites for the Internet
▪ Banner ads
▪ Search engine optimization
▪ Mobile marketing
▪ Social media campaigns

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 Collateral Services
Marketing research

Package design

Consultants

Photographers

Printers

Video production

Event marketing

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 Pros and Cons of Integrated Services

Pros Cons
▪ Greater synergy ▪ Budget politics
▪ Convenience ▪ Poor communication
▪ Single image for product ▪ No synergy
or service

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 Responsibility for IMC: Agency
versus Client
▪ Key Obstacles
▪ Lack of people with a broad
perspective and the skills to make it
work
▪ Internal turf battles
▪ Agency egos
▪ Fear of budget reductions
▪ Ensuring consistent execution
▪ Measuring success
▪ Compensation
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 2.1.2 Agency Compensation
Methods

Fee, cost, and

Commissions
incentive-based
from media
systems

Percentage
charges

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 Commission System
▪ Receiving specified commission
from the media on any advertising
time or space purchased for the
client
▪ Negotiated commission system
▪ Based on a sliding scale that
becomes lower as the clients’ media
expenditures increase

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 Fee, Cost, and Incentive-Based
Systems
▪ Fee arrangement
▪ Fixed-fee method: Basic monthly
fee is charged for services provided
and media commissions earned are
given to the client
▪ Fee-commission combination:
Media commissions received are
credited against the fee

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 Fee, Cost, and Incentive-Based
Systems

Cost-plus system

• Agency is paid a fee based on the costs of its work plus some
agreed-on profit margin

Incentive-based system

• Agencies are compensated above their basic costs, if they

achieve or exceed results as measured by agreed-upon
metrics
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 Percentage Charges
▪ Adding a markup of percentage
charges to various services
purchased from outside providers
▪ Market research
▪ Artwork
▪ Printing
▪ Photography
▪ Other services or materials

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 Evaluating Agencies

Financial audit Qualitative audit

Costs, expenses Planning

Personnel hours billed Program development

Payments to media Implementation

Payments to suppliers Results achieved

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 Figure 2.5 - How Agencies Add Value
to Client’s Business

Source: “Report on the Agency–Advertiser Value Survey,” American Association of Advertising Agencies and Association of National Advertisers, August
2007

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 2.1.3 Evaluating Agencies

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
▪ Changes in the client’s
corporate and/or marketing
strategy
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▪ Conflicts of interest
▪ Declining sales
▪ Conflicting compensation
philosophies
▪ Changes in policies
▪ Disagreements over
marketing and/or creative
strategy
▪ Lack of integrated
marketing capabilities
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 How Agencies Gain Clients

Solicitations

Referrals

Presentations

Public relations

Image and reputation

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 Perspectives on
Consumer Behavior

Part 2
 2.2.1 The consumer Decision -
Making Process

• Consumer Behavior
Process and activities people engage in with
relation to products and services to satisfy their
needs and desires
‒ Searching and selecting
‒ Purchasing and using
‒ Evaluating
‒ Disposing

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Figure 2.6 - A Basic Model of
Consumer Decision Making
 Problem Recognition
▪ Consumer perceives a need and gets
motivated to solve the problem
▪ Caused by a difference between
consumer’s ideal state and actual state
▪ Sources
▪ Out of stock
▪ Dissatisfaction, new needs or wants
▪ New products, related products or
purchases
▪ Marketer-induced problem recognition
 Information Search
▪ Internal search: Information retrieval
that involves recalling:
▪ Past experiences
▪ Information regarding various purchase
alternatives
▪ External search: Seeking information
from external sources
▪ Internet, personal, and public sources
▪ Marketer-controlled sources
▪ Personal experience
 Information Search
▪ Extent of external source to be used
depends on the:
▪ Importance of the purchase decision
▪ Effort needed to acquire information
▪ Amount of past experience relevant
▪ Degree of perceived risk associated
with the purchase
▪ Time available
 Perception
▪ Receiving, selecting, organizing,
and interpreting information to
create a meaningful picture of the
world
▪ Depends on:
▪ Internal factors
▪ Characteristics of a stimulus
 Attitudes
▪ Learned predispositions to respond
to an object
▪ Theoretically summarize a
consumer’s evaluation of an object
▪ Represent positive or negative
feelings and behavioral tendencies
 Integration Processes and
Decision Rules
Integration processes

• Combining product knowledge, meanings, and beliefs to

evaluate alternatives
Decision rules - Strategies used to decide among
alternatives
• Heuristics: Simplified decision rules customers use for
purchase decisions
• Affect referral decision rule: Selection is made on the basis of:
•Overall impression or summary evaluation of the various
alternatives under consideration
 Purchase Decision
▪ Purchase intention
▪ Predisposition to buy a certain
brand by matching purchase
motives with attributes of brands
considered
▪ Brand loyalty
▪ Preference for a particular brand
that results in its repeated purchase
 Postpurchase Evaluation
▪ Satisfaction - Consumer’s
expectations are met or exceeded
▪ Dissatisfaction - Product
performance is below expectations
▪ Cognitive dissonance:
Psychological tension experienced
after a difficult purchase choice
 Behavioral Learning Theory
▪ Based on the stimulus–response
orientation (S–R)
▪ Learning occurs as a result of
responses to external stimuli in the
environment
▪ Classical conditioning: Learning is
an associative process with existing
relationship between a stimulus and
a response
Figure 2.7 - The Classical
Conditioning Process
 Operant Conditioning
▪ Learning occurs when individual
actively operates or acts on some
aspect of the environment
▪ Reinforcement: Reward or
favorable consequence associated
with a particular response
▪ Reinforced behavior strengthens the
bond between stimulus and
response
Figure 2.8 - Instrumental
Conditioning in Marketing
 Schedules of Reinforcement
▪ Continuous - Learning occurs
rapidly and every response is
rewarded
▪ Behavior is likely to cease when
reinforcement stops
▪ Partial or intermittent - Learning
occurs more slowly but lasts longer
▪ Only some responses are rewarded
▪ Shaping: Reinforcement of
successive acts that lead to a
desired behavior pattern or
 Figure 2.9 - Application of
Shaping Procedures in Marketing
 2.2.2 The consumer Learning
Process

Figure 2.10 - The Cognitive Learning

Process
 Environmental Influences on
Consumer Behavior
Culture
• Complexity of learned meanings, values, norms, and customs
shared by members of a society

Subcultures
• Smaller segments within a culture, whose beliefs, values, norms,
and patterns of behavior set them apart from the larger cultural
mainstream

Social class
• Homogeneous divisions in a society into which people sharing
similar lifestyles, values, norms, interests, and behaviors can be
grouped
 Environmental Influences on
Consumer Behavior

Reference group
• Group whose presumed perspectives or values are
being used by an individual as the basis for his or her
judgments, opinions, and actions

Situational determinants
• Specific situation in which consumers plan to use the
product or brand directly affects their perceptions,
preferences, and purchase behaviors
• Types - Usage, purchase, and communications situation
 Alternative Approaches to
Consumer Behavior
▪ New methodologies
▪ Qualitative methods
▪ Linguistic or historical perspective of
communications
▪ Examining the symbolic meanings of
advertising and the facets of consumption
▪ Leads to better understanding of:
▪ Cultural significance of advertising
messages
▪ Influence of advertising images on society
 Group discuss
▪ Case study : Video clip or document

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