Principles Of Advertising

The Advertising Business by Muhammad Raheel

What Advertising
People Do
ADVERTISERS OR THE ADVERTISING AGENCIES THEY HIRE MUST
PERFORM CERTAIN BASIC TASKS. THESE INCLUDE PLANNING,
BUDGETING, COORDINATION, AND AD CREATION (SEE ILLUSTRATION
4.1). IN A LARGE FIRM, THE ADVERTISING MANAGER IS THE PERSON
WHO IS IN CHARGE OF ALL THE ADVERTISING TASKS. IN THE
ADVERTISING AGENCY, THE ACCOUNT MANAGER GENERALLY PURSUES
THESE TASKS.
Planning

 Planning is a constant, ongoing process of defining and redefining

goals and objectives, performing advertising research, developing
and scheduling advertisements, and evaluating results.
Budgeting

 The advertising manager, the person who is in charge of all the

advertising tasks, or the account manager (or other personnel)
formulates the annual budget and presents it to top management.
The person then sees that the staff (either the advertiser's or the
agency's) adheres to the budget.
Coordination

 Business activities usually fall into three broad, functional areas:

production, finance, and marketing. Advertising is a marketing
activity. The person in charge of the advertising process must
coordinate advertising activities with other marketing functions
(e.g., sales) as well as with production and finance activities.
Advertising agency personnel also need to coordinate the
advertising activities with other marketing, production, and finance
functions within their client's company.
Creating Advertisements

 The creative tasks consist of three main elements: copywriting, art

direction, and production. The advertising manager or other
personnel need to be sure that the finished advertisements will fulfill
the company's goals.
The Advertisers

 Advertisers hire many people to create advertisements and buy ad

time and space.

 Advertisers may be international, national, regional, or local; they

may be global corporations such as Coca-Cola, or small businesses.


 Large companies may have a separate advertising department
which employs many people and is headed by an advertising
manager who reports to a marketing director or marketing services
manager.

 Smaller companies may have just one person who performs all the
advertising tasks and reports to the top management. In these
smaller companies, this person may also be part of top
management.
The Advertising Agency

 An advertising agency as an independent organization of creative

people and businesspeople who specialize in developing and
preparing advertising plans, advertisements, and other promotional
tools.
 The agency purchases advertising space and time in various media
on behalf of its clients—various advertisers or sellers—to find
customers for the clients' goods and services.
Types of Advertising Agencies

 Full-Service Agencies

A full-service agency performs at least four basic functions for the

clients it represents: research services, creative services, media
services, and account management.

In addition to these functions, some advertising agencies are

expanding their services by offering direct marketing, public relations,
and even sales promotion services in the spirit of becoming Integrated
Marketing Communication agencies.
Specialized-Service Agencies

 Creative boutiques.

 Creative boutiques are limited service advertising agencies. These

relatively small agencies concentrate entirely on preparing the
creative execution of client communications.

 The focus of the organization is entirely on the idea and the creative
product. There is no staff for media, research, strategic planning, or
other services, which a full-service agency can offer.
Health/medical agencies.

 This special type of agency concentrates on advertising for

pharmaceutical companies such as Merck, Pfizer, and Upjohn. The
health/medical agency carries out most of the functions a full-
service agency performs but concentrates on the medical field.
Direct marketing agencies.

 These agencies specialize in strategic planning, creative solutions,

and execution as well as database management for direct-
response advertising.
Agency Compensation

 To survive, an agency must make a profit. Basically, agencies make

money from three sources: media commissions, fees, incentive
payments, and markups.
 The media channel may allow an agency to retain a 15 percent
commission on the time or space purchased for clients.

 For example, a television station bills an agency $10,000 for airing a

commercial. The agency bills the advertiser $10,000. The advertiser
pays the agency in full, and the agency submits $8,500 to the
station, keeping $1,500 (a 15 percent commission).
Labor-Based Fees

 An hourly fee is negotiated between the advertiser and the

agency. The agency then monitors the labor and bills the client on
the time spent. This system is also used for special services the
agency renders for its clients.

 For example, an agency arranges a focus group study for its client.
The client will receive a bill from the agency based on an agreed-
on hourly rate.
Incentive Payments

 Ford initiated a new payment system that began with a base fee for
all the work, followed by payments tied to "specific performance
goals, including the profitability of the Ford unit involved."
Markup

 The agency may need to purchase photographs, illustrations, or

other services from outside suppliers for its clients. The agency pays
these suppliers a set fee and adds a markup, typically 17.65
percent, to the client's bill.

 For example, ABC Advertising Agency purchased illustrations from

XYZ services for $ 1,000. ABC would add $ 176.50 to its client's bill,
which becomes $1,176.50.
Client-Agency Relationships

 Many advertisers employ a combination of the different advertising

options (e.g, in-house agency, boutiques, and outside advertising
agency) rather than using one of them exclusively.

 However, due to intense competition, the recent trend has been for
advertisers to use the services of full-service agencies, moving away
from in-house agencies.

 the agency must also document not just output but outcomes.
The "Total Communications"
Agency
 Agencies now focus more on campaigns that are low in cost but
high on measurable effects by auxiliary use of traditional media and
strategic blending of special events, sponsorships, sales promotion,
direct marketing, targeted radio, and new media
The Merger Boom

 In 1997 "agencies gobbled up one another to the tune of more than

$1.25 billion," according to AdMedia

 One force driving the merger boom is the demand of large

advertisers for greater marketing efficiency, with their global ad
dollars distributed to fewer agencies.
 A drawback of the large agency is that clients do not like to share
their agency with a competitor. To remedy this problem, Britain's
WPP Group created an entirely new company, Intuition Group, out
of its J. Walter Thompson agency.
 A lot of big agencies have subsidiary digital media agencies, BTL
agencies.

 Big agencies subcontract work to smaller production houses and ad

agencies.