Ad Agencies

3-2

Define the main types of ad agencies

Discuss clients and revenue

Explain what people do in ad agencies

Debate pros and cons of in-house agencies

Describe industry changes

Explain how suppliers and the media help

Today’s Objectives

3-3

Advertisers (Clients)

Agencies

Media

Suppliers

Organizations in Advertising

3-4

Definition of an Ad Agency

An independent organization of creative people and businesspeople who specialize in developing and preparing marketing and advertising plans, advertisements, and other promotional tools. Agencies also purchase advertising space and time in various media on behalf of different advertisers (clients) to find customers for their goods and services.

- American Association of Advertising Agencies (AAAA)

3-5

Agencyroles

Develop marketing & ad plans

Develop ads & promotions

Purchase ad space and time

Definition of an Ad Agency

3-6

Reach

Full-Service

SpecialtyBoutiques

Media Buyers

Interactive

Consumer

Business-to-Business (B2B)

Local National

Regional International

Types of Ad Agencies

3-7

Full-Service Ad AgenciesCan handle all communication and promotion for clients.

Advertising Services:• Ad planning• Creative approach• Producing ads• Performing research• Selecting, buying media

Non-Advertising Services: • Packaging• Public relations• Sales promotion materials• Annual reports• Trade-show exhibits• Interactive media

Source: ultraentertainment.com

Source: creativerge.com

Source: advertisingftw.tumblr.com

3-8

General Consumer Full-Service AgencyFocus on clients whose goods are purchased, used primarily by consumers.

Example: McCann-Erickson (international agency, subsidiary of Interpublic Group, offices in more than 130 countries)

Source: adpulp.com

3-9

Source: hello.eboy.com

One of McCann-Erickson’s biggest global clients, Coca-Cola

(Ad from Belfast, Ireland)

3-10

Source: adverbox.com

McCann-Erickson ad for Ferrari: Milan, Italy

3-11

Source: effie.org

McCann-Erickson ad for U.S. Army, sponsor of 2009 National HALO 3 Championship

3-12

Business-to-Business Agencies

Focus on clients whose goods are purchased, used primarily by businesses.

Example: Proteus B2B Marketing headquartered in Grand Rapids, MI

Sou

rce

: de

wys

mfg

.co

m

3-13

Source: bostonbranding.com

An ad for Dow Chemical aimed at reaching businesses in the resin market

3-14

Boutique Ad Agencies

Source: thecoca-colacompany.com

http://www.youtube.com/watch?v=SfIbBNuORHU

Creative Artists Agency (CAA), a Hollywood talent agency, created the Coca-Cola polar bears in 1993.

3-15

Types of Ad Agencies

Source: clioawards.com

Media buyers: purchase and package media time & space for clients (agencies & direct customers).

Interactive agencies: specialize in internet, digital market.

https://www.prioritymail.com/simulator.asp

3-16

Accountmanagement

Research & account planning

Creative concepts

Trafficcontrol

Media buying & planning

Production

Other services

Admin

The People of Ad Agencies

3-17

Accountmanagement

Research & account planning

The People of Ad Agencies

Agency team that acts as liaison between clients & internal departments.

Account executive: responsible both for managing all the agency's services for the benefit of the client and for representing the agency's point of view to the client.

Account planning: A hybrid discipline that bridges the gap between traditional research, account management, and creative direction whereby agency people represent the view of the consumer in order to better define and plan the client's advertising program.

3-18

Creative concepts

Media buying & planning

The People of Ad Agencies

Media planning: The process that directs advertising messages to the right people in the right place (media) at the right time.

A creative director leads a team made up of a copywriter and an art director who determine the verbal and visual elements of an ad campaign.

3-19

Production

The People of Ad Agencies

Production: The department in an advertising agency that is responsible for managing the steps that transform creative concepts into finished advertisements and collateral materials. Often work with suppliers to buy type, photos, illustrations, enlist broadcast directors, producers, etc.

The traffic department coordinates all ad production to ensure client and media deadlines are met.

3-20

Agencies might also offer other services, such as these sales promotion materials, to be used by Honda dealerships on-site.

The People of Ad Agencies

Other services

3-21

A Case Study

An oldie, but a goodie. Lowes-Lintas develops a television commercial in 1989 for the brand-new Acuvue disposable contact lens by Johnson & Johnson.

http://www.aef.com/on_campus/classroom/educational_materials/1751

Source: tjoos.com

3-22

Guess Who…

3-23

Guess Who…

Account Executive

3-24

Guess Who…

3-25

Guess Who…

Researcher

3-26

Guess Who…

3-27

Guess Who…

The Client

3-28

Guess Who…

3-29

Guess Who…

Creative Director

3-30

Guess Who…

3-31

Guess Who…

Producer of the commercial (supplier)

3-32

Guess Who…

3-33

Guess Who…

Director of the commercial (supplier)

3-34

Media commissions

Full page print ad

at rate-card price:

$100,000

Agencybuys adat 15%

discount:$85,000

Agencybills client

full ad amount:

$100,000

$15,000difference

is keptby theagency

How ad agencies are paid

3-35

Media commissions Markups

Agencybuys

materialsfor

campaign

Materialscost

$85,000

Agencybills for

materials plus a

17.65%markup

Agency bills $100,000which is

costs plus markup

How ad agencies are paid

3-36

Media commissions Markups Fees

Fee /commissioncombination

Straight-fee(retainer)method

Incentive system

How ad agencies are paid

3-37

Pros

May save money

Allows tighter control

May permit greater attention to the brand

Lower creative quality

Less experience and talent

Loss of objectivity

Cons

In-house ad agencies

3-38

As good as an independent agency?

You decide.

In-house ad agencies

3-39

Referrals

Presentations

Community relations& networking

Soliciting fornew business

How agencies reach & attract new clients

Ad Agencies’ Clients

3-40

Art studios &web designers

Art studios &web designers

Printers &related specialists

Printers &related specialists

Film & videohouses

Film & videohouses

Researchcompanies

Researchcompanies

Suppliers

Design and produce artwork for ads and web sites.

Produce brochures, sales promotion kits, point-of-purchase displays, etc.

Specialize in film, video production or both.

Help agencies with consumer data to formulate campaigns.

3-41

Out-of-home

Digitalinteractive

Electronic

Print

Direct mail

Other media

Media

3-42

Industry consolidation:

Decline of the commission system, because:

Changes resulting from new media:

Current Trends

• Began in 1990’s• Influenced by globalization• Conglomerates cover the spectrum

of specialties, media

• The Big 4: Omnicom, Interpublic Group, WPP, Publicis

• Trend of boutique agencies against mass production, control of groups

• Reward only commissionable media • Focus on budget instead of strategy

• The volume and segmentation of new media have proven challenging for legacy companies

• More than the internet. Also mobile, gaming, video iPods, tablets, GPS, satellite television & radio, podcasts, social media, etc.

3-43

Rank Agency / Group Annual Billings

1 WPP $13.60 billion

2 Omnicom Group $13.36 billion

3 Interpublic Group of Cos. $ 6.96 billion

4 Publicis Group $ 6.90 billion

5 Dentsu $ 3.30 billion

6 Aegis Group $ 2.49 billion

7 Havas $ 2.31 billion

8 Hakuhodu DY Holdings $ 1.56 billion

9 MDC Partners $ 584.6 million

10 Asatsu-DK $ 503.4 million

Top Agencies, 2009

Source: AdAge.com

WPP includes JWT, Ogilvy, Young & Rubicam

Omnicom includes BBDO, DDB Worldwide, GSD&M and Zimmerman

Interpublic Group includes McCann-Erickson, Lowe + Partners Worldwide

Publicis Group includes Leo Burnett, Saatchi & Saatchi, Razorfish